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Detection Technology Plc financial statements review January-December 2022

Detection Technology Plc company announcement 2 February 2023 at 09:00 (EET)


Detection Technology Q4 2022: Record net sales, improving profitability

October-December 2022 highlights

  • Net sales increased by 14.1% to EUR 28.2 million (24.7)
  • Net sales of Industrial Solutions Business Unit (IBU) increased by 34.5% to EUR 4.6 million (3.4)
  • Net sales of Medical Business Unit (MBU) decreased by -6.6% to EUR 12.7 million (13.6)
  • Net sales of Security Business Unit (SBU) increased by 41.0% to EUR 10.9 million (7.8)
  • Operating profit (EBIT) was EUR 2.8 million (3.0)
  • Operating margin (EBIT-%) was 9.9% of net sales (12.0%)
  • Earnings per share were EUR 0.16 (0.19)
  • Earnings per share (diluted) were EUR 0.16 (0.19)

January-December 2022 highlights

  • Net sales increased by 9.8% to EUR 98.6 million (89.8)
  • Net sales of IBU increased by 25.8% to EUR 16.1 (12.8)
  • Net sales of MBU decreased by -2.0% to EUR 48.1 million (49.1)
  • Net sales of SBU increased by 23.1% to EUR 34.4 million (27.9)
  • Operating profit (EBIT) excluding NRI was 6.1 EUR million (10.6)
  • Operating margin (EBIT-%) excluding NRI was 6.2% of net sales (11.8%)
  • Operating profit (EBIT) was EUR 5.8 million (10.6)
  • Operating margin (EBIT-%) was 5.9% of net sales (11.8%)
  • Earnings per share were EUR 0.35 (0.64)
  • Earnings per share (diluted) were EUR 0.35 (0.63)
  • Dividend EUR 0.20 per share* (0.35)

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:

”Sales in security and industrial applications increased significantly in Q4 2022. Net sales were record high, although medical sales lagged behind our expectations. Thanks to our strong cross-functional collaboration and teamwork, we were able to complete all deliveries despite COVID-19 lockdowns in China. Our profitability improved quarter-on-quarter, and the positive trend will gain traction as barriers to growth ease off and enablers for operations clear up globally.

Business showed quarter-on-quarter growth throughout the year. Despite this, our annual net sales remained slightly below the EUR 100 million milestone. Component shortages eased toward the end of the year, whilst China has revoked its COVID-19 restrictions. Therefore, 2023 appears to be a more favorable for growth, despite the unsecure market situation.

Thanks to product modifications, our ability to deliver improved and IBU quarterly sales were record high. In addition, the new customers we won during the year had a positive impact on the good development in sales. Demand continued at a good level in all industrial imaging applications.

The longer-term prospects for demand in medical applications are positive, but the markets softened as COVID-19–related challenges continued to destabilize demand dynamics. MBU sales lagged behind expectations due to the softening markets, supply chain effects of lower growth and component shortages. In addition, delays in customer payments at the end of the year postponed some of the MBU deliveries.

Recovery in the security market continued but is still behind pre-pandemic levels; furthermore, we managed to increase our market share in computed tomography (CT) and higher-end line scanner applications. In addition, new customers boosted sales at the end of the year.

In 2022, we strived for improving customer experience and maintaining our existing customer base despite component shortages. We succeeded in winning almost twenty new customers. We had around 390 active customers at the end of the review period.

One-off spot purchases, logistics costs, and the product modification projects required to support the business eroded our profitability in Q4 2022. In addition, due to component shortages, a significant number of deliveries were postponed to December, which increased the need for overtime. Our profitability nevertheless improved compared to Q3 2022, and we are confident that the positive development toward our profitability target will continue.

We aim to achieve a 15% operating margin in the medium term. In 2023, we believe that growth will continue to be good, but expect our profitability to be somewhat below the target level. The growth contributions done during the Corona years, product redesigns and wage inflation are still straining profitability until, thanks to sufficient sales and productivity growth, we reach the target level.

We are actively seeking and creating growth enablers. In Q4 2022 we decided to expand production in Oulu, Finland, in order to be able to offer a wider range of EU Origin products. The expansion work will start in Q2 2023 and will be completed in Q4 2023. In addition, we strengthened our selection of standard solutions in medical CT applications.

Barriers to growth are easing off and we have started 2023 from an even stronger position than before. We expect double-digit growth in all our businesses both in Q1 and H1 2023.”
Key figures

(EUR 1,000) 10-12/2022 10-12/2021 1-12/2022 1-12/2021
Net sales 28,226 24,747 98,580 89,813
Change in net sales, % 14.1% 24.3% 9.8% 10.1%
Operating profit excluding NRI 2,804 2,962 6,135 10,580
Operating margin excluding NRI, % 9.9% 12.0% 6.2% 11.8%
Non-recurring items (NRI) 0 0 335 0
Operating profit 2,804 2,962 5,801 10,580
Operating margin, % 9.9% 12.0% 5.9% 11.8%
R&D costs 3,069 3,038 12,549 10,951
R&D costs, % of net sales 10.9% 12.3% 12.7% 12.2%
Cash flow from operating activities 3,730 3,288 -294 7,121
Net interest-bearing debt at end of period -20,584 -27,633 -20,584 -27,633
Investments 654 664 1,628 1,359
Return on investment (ROI), % 7.5% 15.1% 7.5% 15.1%
Gearing, % -28.4% -37.6% -28.4% -37.6%
Earnings per share, EUR 0.16 0.19 0.35 0.64
Earnings per share (diluted), EUR 0.16 0.19 0.35 0.63
Number of shares at the end of the period 14,655,930 14,655,930 14,655,930 14,655,930
Weighted average number of shares outstanding 14,655,930 14,605,097 14,655,930 14,500,514
Weighted average number of shares outstanding, diluted 14,655,930 14,850,713 14,717,042 14,766,934

Business outlook

According to Detection Technology’s view, demand will continue to be strong in security and industrial X-ray imaging solutions and good in medical. The company expects double-digit growth in total net sales in Q1 and H1 of 2023.

The indirect impacts of the war in Ukraine, inflation, energy crisis, U.S.–China relations and the overall geopolitical situation create uncertainty. In addition, some of the company’s customers have higher inventories. Direct and indirect risks related to the availability of materials have reduced. The impacts of material and component shortage have been acknowledged as a limiting factor in the outlook, however a further degradation in supply chain might affect business outlook.

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

Q4 2022 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 2023 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 2022. 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 and services for medical, security, and industrial applications. The company’s solutions range from sensor components to optimized detector subsystems with ASICs, electronics, mechanics, software, and algorithms. It 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 2022 (pdf)