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Detection Technology Plc financial statements review January-December 2021

Detection Technology Plc company announcement 2 February 2022 at 09:00 (EET)


Detection Technology Q4 2021: Growth accelerated in all businesses, shortage of components has an impact on sales

October-December 2021 highlights

  • Net sales increased by 24.3% to EUR 24.7 million (19.9)
  • Net sales of Industrial Solutions Business Unit (IBU) increased by 21.7% to EUR 3.4 million (2.8)
  • Net sales of Medical Business Unit (MBU) increased by 23.8% to EUR 13.6 million (10.9)
  • Net sales of Security Business Unit (SBU) increased by 26.5% to EUR 7.8 million (6.1)
  • Operating profit (EBIT) excluding non-recurring items (NRI) was EUR 3.0 million (2.3)
  • Operating margin (EBIT-%) excluding NRI was 12.0% of net sales (11.8%)
  • Operating profit (EBIT) was EUR 3.0 million (2.3)
  • Operating margin (EBIT-%) was 12.0% of net sales (11.8%)
  • Earnings per share were EUR 0.19 (0.16)
  • Earnings per share (diluted) were EUR 0.19 (0.16)

January-December 2021 highlights

  • Net sales increased by 10.1% to EUR 89.8 million (81.6)
  • Net sales of IBU increased by 10.1% to EUR 12.8 (11.6)
  • Net sales of MBU increased by 25.1% to EUR 49.1 million (39.3)
  • Net sales of SBU decreased by -9.1% to EUR 27.9 million (30.7)
  • Operating profit (EBIT) excluding NRI was 10.6 EUR million (8.9)
  • Operating margin (EBIT-%) excluding NRI was 11.8% of net sales (10.9%)
  • Operating profit (EBIT) was EUR 10.6 million (8.7)
  • Operating margin (EBIT-%) was 11.8% of net sales (10.7%)
  • Earnings per share were EUR 0.64 (0.47)
  • Earnings per share (diluted) were EUR 0.63 (0.47)
  • Dividend EUR 0.35 per share* (0.28)

UNAUDITED (Figures in parentheses refer to the corresponding period of the previous year.) (*The Board of Directors’ proposal to the AGM.)

President and CEO, Hannu Martola:

”Our sales increased by over 20% in all our businesses in Q4 2021, although the shortage of materials and components curbed some of the growth. Demand in medical and industrial applications remained at a good level, and it was particularly positive to see demand growing in security applications, too. We expect fast growth to continue, even though the supply issues are increasingly limiting growth.

IBU had double-digit sales in Q4, but it still lagged behind our expectations. Demand remained unchanged, but some deliveries had to be postponed to 2022 due to the shortage of components. Despite these challenges, IBU saw record annual sales. In our view, demand for all our main applications will remain at a good level, and we have secured our position in the industrial market. We have also strengthened our position in new areas in line with our “Beyond hardware” principle.

Medical market drivers and strong demand in computed tomography (CT) applications remained unchanged, but the direct and indirect impacts of component shortages were reflected in MBU sales in Q4. MBU sales increased 24% year-on-year, and growth exceeded the figures of the previous review period, but we expected more. Despite fierce price competition, our position in the CT market is stable. We won new customers thanks to our standard solutions, and we developed our competitiveness to meet demand even more effectively. We published the X-ACE product family for value and mainstream CT imaging, and we are now the only supplier that can offer standard solutions for all CT imaging modalities.

Growth in the security market gained speed. Although growth in SBU sales still mainly originated from non-aviation applications, demand in the aviation segment has now taken a positive turn. Our security market sales were less impacted by the material shortage than our other businesses, but risks related to SBU deliveries have increased, too. The so-called Green Channel applications are new and interesting growth drivers in China. China has started a certification procedure for imaging equipment that is used to inspect heavy-duty vehicles for road tolls. The commissioning of the equipment is estimated to take place in H2 of 2022. This business opportunity offers significant sales potential.

Our profitability improved from the comparison period but was slightly below that in Q3 due to increased fixed costs. Investments in product development increased, and there were some one-time costs associated with the ceramic process ramp up at the Wuxi site. Our cashflow took an upward turn despite the increase in stock. Due to preparedness to and because of component shortage, the value of the company’s stock is high.

The number of our active customers increased, being 370 at the end of the year. Warm thanks go to our team! The most important events in Q4 2021 were the expansion of our product portfolio with strategically important standard solutions, and the establishment of the new unit in Nanjing, China. The Nanjing unit is profiled as a talent hub for software, algorithm, and electronics engineering, and it will improve our ability to respond to the growing demand in higher-end detector solutions. Other significant events in the review period included the value project in which we redefined our value descriptions and how they translate to behaviors. In addition, we restructured our global R&D structure to better support the management of the competence areas that are critical to us. We also had the pleasure of celebrating virtually the 30th anniversary of our company.

Demand will continue strongly in all our main markets and in each of our three businesses. We expect single-digit growth in medical sales and boosted double-digit growth in the sales of our security and industrial applications both in Q1 and Q2 of 2022. We expect overall double-digit growth for the company in Q1 and Q2 of 2022, although the supply issues are expected to curb some of the growth.

Risks related to the availability of special materials and electronic components have intensified. Challenges in availability and longer delivery times will have an impact on our ability to meet the growing demand. We have intensified our measures to mitigate these risks. We are, for example, taking actions for alternative suppliers and components, and designing modifications to our products.”

Key figures

(EUR 1,000) 10-12/2021 10-12/2020 1-12/2021 1-12/2020
Net sales 24,747 19,909 89,813 81,561
Change in net sales, % 24.3% -20.4% 10.1% -20.4%
Operating profit excluding NRI 2,962 2,349 10,580 8,877
Operating margin excluding NRI, % 12.0% 11.8% 11.8% 10.9%
Non-recurring items (NRI) 0 0 0 163
Operating profit 2,962 2,349 10,580 8,714
Operating margin, % 12.0% 11.8% 11.8% 10.7%
R&D costs 2,924 2,239 10,480 9,827
R&D costs, % of net sales 11.8% 11.2% 11.7% 12.0%
Cash flow from operating activities 3,288 3,429 7,121 7,953
Net interest-bearing debt at end of period -27,633 -19,364 -27,633 -19,364
Investments 664 1,529 1,359 3,226
Return on investment (ROI), % 15.1% 13.6%
Gearing, % -37.6% -33.1% -37.6% -33.1%
Earnings per share, EUR 0.19 0.16 0.64 0.47
Earnings per share (diluted), EUR 0.19 0.16 0.63 0.47
Number of shares at the end of the period 14,655,930 14,375,430 14,655,930 14,375,430

Business outlook

According to Detection Technology’s view, the medical and industrial markets will grow in line with the pre-pandemic estimates by the experts, on average about 5% per year. The market disturbance caused by the pandemic is passing in the security market, as demand has taken an upward turn also in the aviation segment, but the normalization of growth to the pre-pandemic level of 6% will be slow.

According to Detection Technology’s view, demand will continue to be strong in all of the company’s main markets. The company expects double-digit growth in total net sales both in Q1 and Q2 of 2022, although the shortage of materials and components is expected to curb some of the growth.

Due to the pandemic, global economy and the company’s business have faced exceptional and temporary uncertainty. Predictability of the company’s target markets is still lower than usual, and risks related to the availability of materials have increased. The effect of material and component shortage has been acknowledged as a limiting factor in the outlook, however a further degradation in supply chain might affect the business outlook.

Detection Technology aims to increase sales by at least 10% per annum and to achieve an operating margin at or above 15% in the medium term.

Q4 2021 webcast

Hannu Martola, the President and CEO of Detection Technology, will present the Q4 and January–December financial performance and events to analysts, investors, and media at a webcast. The live webcast in English will begin on 2 February 2022 at 13:00 (EET).

A link to the webcast is available on the company’s website at https://www.deetee.com/reports-and-presentations/webcasts/. A recording of the webcast will be available later on the same web address.

This release is a summary of Detection Technology’s financial statements review January-December 2021. The complete report can be found attached to the release and on the company’s website.

Board of Directors, Detection Technology Plc

Further information

President and CEO Hannu Martola will be available for interviews and further information on the release date at 9:00-11:00 (EET).

Hannu Martola, President and CEO
+358 500 449 475, hannu.martola@nulldeetee.com

Nordea is the company’s Certified Advisor under the Nasdaq First North GM rules.

Detection Technology is a global provider of X-ray detector solutions for medical, security, and industrial applications. The company’s solutions range from photodiodes to optimized detector subsystems with ASICs, electronics, mechanics, software, and algorithms. The company has sites in Finland, China, France, and the US. The company’s shares are listed on Nasdaq First North Growth Market Finland under the ticker symbol DETEC.

Distribution: Nasdaq Helsinki, key media, www.deetee.com

Attachments: Detection Technology Plc financial statements review January-December 2021 (pdf)