Detection Technology Plc half-yearly report January-June 2022

Detection Technology Plc company announcement 3 August 2022 at 09:00 (EEST)

DETECTION TECHNOLOGY PLC HALF-YEARLY REPORT JANUARY-JUNE 2022

Detection Technology Q2 2022: Demand increased, sales postponed due to an unexpected setback

April-June 2022 highlights

• Net sales decreased by -3.3% to EUR 22.8 million (23.5)
• Net sales of Industrial Solutions Business Unit (IBU) increased by 29.4% to EUR 4.0 million (3.1)
• Net sales of Medical Business Unit (MBU) decreased by -25.2% to EUR 10.1 million (13.6)
• Net sales of Security Business Unit (SBU) increased by 25.4% to EUR 8.6 million (6.9)
• Operating profit (EBIT) excluding non-recurring items (NRI) was EUR 1.2 million (3.0)
• Operating margin (EBIT-%) excluding NRI was 5.2% of net sales (12.6%)
• Operating profit (EBIT) was EUR 0.9 million (3.0)
• Operating margin (EBIT-%) was 3.8% of net sales (12.6%)

January-June 2022 highlights

• Net sales increased by 2.9% to EUR 43.1 million (41.9)
• Net sales of IBU increased by 36.3% to EUR 7.5 million (5.5)
• Net sales of MBU decreased by -12.6% to EUR 20.7 million (23.6)
• Net sales of SBU increased by 17.2% to EUR 14.9 million (12.7)
• Operating profit (EBIT) excluding non-recurring items (NRI) was EUR 2.7 million (4.3)
• Operating margin (EBIT-%) excluding NRI was 6.3% of net sales (10.4%)
• Operating profit (EBIT) was EUR 2.4 million (4.3)
• Operating margin (EBIT-%) was 5.5% of net sales (10.4%)

UNAUDITED (Figures in parentheses refer to the corresponding period of the previous year.)

President and CEO, Hannu Martola:

”Demand increased in all of our main markets and all applications in Q2 of 2022. Our total net sales, however, dropped due to a one-time setback. The shift was, first and foremost, attributed to unexpected technical problems in our medical supply chain. In addition, sales were postponed due to component shortages that affected both us and our customers. Strong growth in IBU and SBU did not sufficiently compensate for the missed medical application sales, and the result was lower than expected.

Strong demand continued in all industrial applications that are important to us, and demand in food industry applications in particular accelerated during the review period. The quarterly sales of the IBU soared despite being hit by challenges in the availability of components and postponed sales.

Demand also increased in the security market, including aviation. SBU sales picked up despite the challenges mentioned above that limited the growth. It is positive to see that sales grew thanks to both our existing and new customers. The review period was characterized by some of our customers starting to purchase higher-end products. It is significant for future growth potential that the standard for computed tomography (CT) imaging devices for the Chinese aviation sector was completed in June.

Demand drivers in the medical market remained unchanged and demand continued strong, but MBU sales were hit particularly by the one-time technical problems of two sub-suppliers, in addition to the direct and indirect challenges in the availability of components. It was positive that technical problems were solved, but sales were nevertheless postponed due to the delays in the supply chain.

The postponed sales, spot purchases, and increasing logistics and product development costs eroded our profitability. We are confident that barriers to growth in sales are easing off, which will result in an upward turn in our profitability.

There are indications in the market that the availability of electronic components will improve toward the end of the year. In addition, we completed the first stage of our product modification project in Q2, and the second stage will be completed at the end of Q3 of 2022. We expect our solutions to replace hard-to-find components will improve our ability and reliability to deliver at the end of Q3.

We invested heavily in removing barriers to growth during the review period, in addition to which we took new, strategically important steps in line with our ‘beyond hardware’ strategy. In June, we launched the myDT+ service portfolio, first and foremost to improve customer experience, but also to better support sustainable development. Our services, unique in our competitive field, have been well welcomed in the markets. We expect our portfolio to have a positive indirect impact on our product sales.

A potential weakening of the global economic growth may affect our business. Otherwise, there were no significant changes in business risks, nor has the setback in Q2 negatively affected our good prospects for the rest of the year. In our view, demand will accelerate in all our main markets, and we have more orders than ever before. We expect double-digit growth in medical and security sales and growth in industrial sales in Q3. Moreover, we expect to see double-digit growth in our total net sales both in Q3 and H2 of 2022, even though component shortages are still expected to limit growth.”

Key figures

(EUR 1,000)	4-6/2022	4-6/2021	1-6/2022	1-6/2021	1-12/2021
Net sales	22,765	23,533	43,078	41,856	89,813
Change in net sales, %	-3.3%	11.5%	2.9%	2.0%	10.1%
Operating profit excluding NRI	1,195	2,954	2,701	4,336	10,580
Operating margin excluding NRI, %	5.2%	12.6%	6.3%	10.4%	11.8%
Non-recurring items (NRI)	-335	0	-335	0	0
Operating profit	860	2,954	2,366	4,336	10,580
Operating margin, %	3.8%	12.6%	5.5%	10.4%	11.8%
R&D costs	3,208	2,681	6,277	5,207	10,951
R&D costs, % of net sales	14.1%	11.4%	14.6%	12.4%	12.2%
Cash flow from operating activities *	-4,194	2,282	-3,528	3,381	7,121
Net interest-bearing debt at end of period	-18,506	-22,869	-18,506	-22,869	-27,633
Investments *	606	248	807	389	1,359
Return on investment (ROI), %	13.4%	14.7%	13.4%	14.7%	16.5%
Gearing, %	-25.8%	-35.9%	-25.8%	-35.9%	-37.6%
Earnings per share, EUR	0.05	0.16	0.14	0.25	0.64
Earnings per share (diluted), EUR	0.05	0.16	0.14	0.24	0.63
Number of shares at the end of the period	14,655,930	14,578,430	14,655,930	14,578,430	14,655,930
Weighted average number of shares outstanding	14,655,930	14,443,097	14,655,930	14,409,264	14,500,514
Weighted average number of shares outstanding, diluted	14,740,064	14,695,191	14,778,155	14,656,188	14,766,934

* Reporting of conversion differences in Group cash flow statement has been changed during the financial year 2021. Material conversion differences have been eliminated from cash flows both in current and comparable reporting period.

Business outlook

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 Q3 and H2 of 2022, although the shortage of materials and components is expected to postpone at least some of the growth in H2.

Whilst the company is confident in the outlook for the remainder of 2022, the company’s businesses face uncertainty due to the war in Ukraine, the pandemic, the energy crisis, and inflation. In addition, direct and indirect risks related to the availability of materials remain elevated. 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 an operating margin at or above 15% in the medium term.

Q2 2022 webcast

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 English will begin on 3 August 2022 at 13:00 (EEST).

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 half-yearly report January–June 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 (EEST).

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 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 half-yearly report January-June 2022 (pdf)