Detection Technology Plc half-yearly report January-June 2020
Detection Technology Plc company announcement 4 August 2020 at 09:00 (EEST)
DETECTION TECHNOLOGY PLC HALF-YEARLY REPORT JANUARY-JUNE 2020
Detection Technology Q2 2020: Strong headwind and some tailwind in the COVID-19 waves
April-June 2020 highlights
- Net sales decreased by -23.2% to EUR 21.1 million (27.5)
- Net sales of Security and Industrial Business Unit (SBU) decreased by -42.1% to EUR 11.2 million (19.4)
- Net sales of Medical Business Unit (MBU) increased by 22.5% to EUR 9.9 million (8.1)
- Operating profit (EBIT) was EUR 2.6 million (4.8)
- Operating margin (EBIT-%) was 12.3% of net sales (17.5%)
January-June 2020 highlights
- Net sales decreased by -18.8% to EUR 41.0 million (50.5)
- Net sales of SBU decreased by -32.8% to EUR 22.8 million (33.9)
- Net sales of MBU increased by 9.7% to EUR 18.3 million (16.6)
- Operating profit (EBIT) was EUR 3.8 million (8.7)
- Operating margin (EBIT-%) was 9.2% of net sales (17.1%)
UNAUDITED (Figures in parentheses refer to the corresponding period of the previous year.)
President and CEO, Hannu Martola:
”The first wave of COVID-19 gained strength outside China during the spring and hit our business. Sales in security applications faced headwinds, whereas winds in medical CT sales were favorable. Despite growth in medical CT sales, the Group’s net sales and results decreased year-on-year. However, we managed to weather the challenging markets and beat our way forward as both our sales and results improved from Q1 and we had a double-digit operating margin.
Due to the turmoil in the global economy and politics, as well as extensive restrictions on travel and gatherings, the global security market was characterized by stagnation. In industrial applications, demand increased only in the food and pharmaceutical industries, but growth remained below usual. Although the global crises escalated during Q2, SBU sales decreased only slightly compared to Q1. When comparing the current and year-on-year figures, it is obvious that the prolonged first wave of COVID-19 hit our security application sales hard.
Radiology plays an important part in the diagnosis and treatment of COVID-19. The demand in medical CT imaging solutions that started at the end of Q1 continued strong. Escalation of the pandemic created a peak in demand of basic CT equipment as healthcare professionals focused on combatting the crisis, and this halted the installations of higher-end CT equipment. Demand in CT applications by product categories is expected to normalize during H2 as sales for higher-end devices is foreseen to increase. The dental market in China showed signs of recovery, but the recovery was slower than expected due to the second wave of COVID-19 in Beijing. Our X-Panel product family reached mass production capability, and we are ready to flexibly increase our flat panel X-ray detector production capacity to meet the demand. MBU growth is expected to be attributed mainly to new CT products, such as X-Tile sales, in H2.
We launched a number of new products during H1. We brought to the market new products in all our market segments, and received encouraging feedback from markets. We were the first in the industry to introduce a standard CT detector product family – branded as Aurora CT – for demanding security and industrial imaging systems. The Aurora CT meets the requirements of the most stringent security standards of the aviation industry, and we have high expectations for sales as soon as the markets start to recover. Another important product launch in terms of both strategy and sales was introduction of the X-Panel 1615 product family for the medical market in June. We expanded our X-Panel product family to surgical and dental applications, where a larger imaging area is required. In addition, we launched the X-Scan C X-ray line camera for demanding industrial environments.
We boosted interaction with our customers, and continued to push our R&D projects forward. New product launches are scheduled also for H2 2020.
The security market is volatile, and our customers request increasingly shorter delivery times. We want to be a reliable partner who is ready to deliver products flexibly both during exceptional times and as soon as the security and industrial markets recover. We have therefore improved our ability to react to changes fast, which has contributed to the increase in our stocks and decrease in cash flow.
Product migration to the Wuxi site have progressed as planned, and the new production and service site will make its mark in terms of productivity and cost efficiency. The key projects of the multi-energy (ME) product line have progressed as planned, and the company’s operations in France will move to new premises in the fall.
COVID spring turned into COVID summer. We are now expecting COVID fall, because the first wave of COVID-19 is still pushing forward headstrong, particularly in the Americas, and a second wave is looming in the horizon. Visibility is still extremely poor, and we are navigating in thick fog, in particular in the security markets. We do not expect the security market to return to a growth path this year. Demand in the security segment will continue at a lower level, and in the industrial segment, it will increase slightly. SBU net sales are thus expected to decrease in Q3 year-on-year, and start to improve towards the end of the year. In MBU, we expect the sales growth to continue in the second half driven by the demand in CT applications.
Although the COVID-19 consequences do not seem to be passing by quickly, visibility is limited and our business has been hit by exceptionally high – albeit temporary – levels of uncertainty, we keep our medium-term targets unchanged. Our company has a solid financial standing and growth drivers are in the right place. We will continue our operative business determinedly and vigorously develop our business in line with the DT-2025 strategy.”
|Change in net sales, %||-23.2%||12.8%||-18.8%||15.7%||9.1%|
|Operating margin, %||12.3%||17.5%||9.2%||17.1%||16.6%|
|R&D costs, % of net sales||12.7%||10.7%||12.9%||10.8%||10.4%|
|Cash flow from operating activities||-1,218||-5,136||2,169||-88||11,599|
|Net interest-bearing debt at end of period||-16,082||-11,332||-16,082||-11,332||-20,385|
|Return on investment (ROI), %||20.5%||35.9%||28.5%|
|Earnings per share, EUR||0.12||0.22||0.19||0.47||0.87|
|Number of shares at end of period||14,375,430||14,375,430||14,375,430||14,375,430||14,375,430|
Prior to the outbreak of the COVID-19 pandemic, industry experts estimated that the global medical X-ray imaging equipment market was growing at an average rate of about 5% per annum, the security segment by 6% and the industrial sector by about 5%. In Detection Technology’s view, the market disruption caused by the pandemic will continue until at least the end of 2020, and the annual growth rate in all segments, with the exception of medical CT imaging, will be lower than the aforementioned estimates in 2020.
Demand in the security segment will continue at a lower level, and SBU sales is expected to decrease in Q3. The company estimates demand in the security segment to decrease at least until the end of the year and industrial segment demand to increase, but growth is likely to fall short of the 5% forecast for the industry. As a result, the company expects SBU sales to decrease in 2020. Whereas demand in medical CT applications will continue at a good level, and MBU sales are expected to grow in Q3. The company expects demand in medical CT applications to continue at a good level in H2, and MBU sales to increase in 2020.
The COVID-19 pandemic creates extraordinary uncertainty for the global economy and the company’s business, and the predictability of the market is still lower than usual. 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.
Webcast on half-yearly report
Hannu Martola, the President and CEO of Detection Technology, will present the Q2 and January–June financial performance and events to analysts, investors and media at a webcast. The live webcast in Finnish will begin on 4 August 2020 at 13:00 EEST.
A link to the webcast is available on the company’s website at https://www.deetee.com/investors/reports-and-presentations/webcasts/. A recording of the webcast will be available later on the same web address. Analysts following the company are invited to the webcast on site to the address A Grid, Otakaari 5A, Espoo.
This release is a summary of Detection Technology’s half-yearly report January-June 2020. The complete report can be found attached to the release and on the company’s website.
Board of Directors, Detection Technology Plc
President and CEO Hannu Martola will be available for interviews and further information on the release date at 9:00-11:00 (EEST).
Hannu Martola, President and CEO
+358 500 449 475, email@example.com
Nordea is the company’s Certified Advisor under the Nasdaq First North GM rules.
Detection Technology Plc
Detection Technology is a global provider of X-ray detector solutions for medical, security, and industrial applications. The company’s net sales totaled EUR 102 million in 2019. The company has 280 customers in 40 countries. Detection Technology employs around 500 people 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