Welcome, thank you for standing by. From this point, all participant lines are placed on listen-only mode until the question-and-answer session towards the end of the call. At that point, if you would like to ask a question, you may press star followed by the number one. As a reminder, today's call will be recorded. If you have any objections, please disconnect at this point. I'll turn the meeting over to your host, Mr. Christian Reinaudo. You may begin, sir.
Good morning, everyone. Christian Reinaudo speaking here. We have a crowded room here in Mortsel because we have three business group presidents with me, also the leaving CFO and the new CFO. The call is about the Q1 results that I will comment rather quickly before I give the floor to questions. On slide two, you see the traditional table of numbers, which can be read in a different way. The top line has declined by 6.7%, which is of course a significant decline. If you look at it with the way we are looking at it in terms of comparison and the evolution of the company, excluding currency exchange rates, this drop is only, I would say, 1.3%, which is to a large extent explained by the drop of our graphics distribution business that we have stopped, as I announced last year.
Basically, the sales of the company are continuing the trend to a diminution of the top-line erosion. I stick to what we said several times. These two years, 2017, 2018, are two years of transition aiming at restoring, in the medium term, the growth of the top line of the company. The results, quarter after quarter so far, are aligned in this trajectory. On the gross profit line, you see that the gross profit has been more or less kept at a constant level to sales. We will see in the comments of the three business groups that there are, of course, big disparities in the evolution of the gross margin of the different business groups. I will come back to that later. SG&A reduced by 6.3%, in line with the top-line decline including currency exchange rates, is basically constant in percentage of sales.
R&D, nothing new compared to what we keep telling. That means the R&D expenses are constant in this company. The recurring EBITDA stands at 6.8%, slightly above the 6.6% of last year, at EUR 37 million for the quarter. I move to slide three and comment the numbers below a bit, we see that, I would say, none of these lines should be a surprise for you. The restructuring and non-recurring at EUR -4 million is very similar to the one of last year and clearly in line with the guidance we give, slightly below, by the way, the guidance we give, there is no major restructuring in the quarter. Non-operating result of EUR -10 million is also in line with the quarter one of last year and reflects the guidance we have given mainly on the pension P&L effect.
Therefore, the profit before tax stands at EUR 10 million, similar to the one of last year at EUR 11 million. The tax are at EUR -3 million, again, similar to the one of last year, and the net result at EUR 7 million is very comparable to the one of last year, and I would say another positive net result. If we exclude the one-off effect of the Q4 EUR 25 million tax regulation changes in Belgium and the U.S., it would have been the 18th quarter in a row that we deliver with a positive net result. On slide four, the traditional slide about the net financial debt, you see that we are basically flat. That means no cash flow evolution in the first quarter, from EUR 18 million debt to EUR 19 million debt at the end of the quarter.
Of course, the cash flow and the financial debt evolution of the company stays under control. Nothing new on this field also. We continue to strive to keep the net financial debt very close to zero in our targets. On slide five, you have here a new slide compared to what you are used to seeing, the working capital figures. As you know, there are some changes in the IFRS definitions, which are applied in the first quarter. This slide, which is a bit busy, shows three columns. One is the Q4 presentation that we have given at the end of last year, showing inventories, trade receivables, and payables, both in terms of million EUR and in terms of days. You see the second column, which is the restated working capital based on the new IFRS definitions.
Basically, to very quickly comment these results into a reduction of our inventory by about EUR 11 million and three days of sales inventory enhanced. You see the trade receivables, which are slightly up by EUR 4 million with no major change in the DSOs, and the trade payables are basically constant in EUR and number of days. At the end of Q1, these numbers are showing an increase of our inventories, which is the traditional seasonal increase of inventory of the first quarter. The ones of you which are tracking this company for long are used to that. Eight days more in the days of inventory enhance. The trade receivables are improving by EUR 27 million, therefore compensating basically the impact on inventories, and the trade payables are up EUR 12 million, therefore improving the working capital in total by about EUR 10 million, flat compared to percentage of sales.
On page six, maybe I can stop a minute on this slide and repeat again what we said. The top line has declined by 1.3%, excluding the exchange rates, which is basically the net effect of what we have done in the focus of graphics outside of the reselling business in the U.S. HealthCare and specialty products are performing well in the first quarter. All the growth engines of these two groups have been really performing well. In HealthCare, we also note an improvement of our film business, which is the consequence of what we have done in the reorganization, in particular in China, of our distribution channels in the last year and a half. I move now to graphics on the slide eight.
The traditional pie chart, which of course shows a clear evolution of the business with an increase of the part of inkjet, software and services, and a decline of the analog pre-press. To be noted that the analog pre-press decline is not reducing. We notice a significant reduction of this film business, mainly in graphics, as expected, I would say, and which explains also a significant part of the pre-press reduction in total. If I move to slide nine, I would like to spend a minute on this slide to make sure that we have a good understanding of these numbers. Of course, the top-line, gross top-line decline is 13.7%. First of all, it hides a significant currency effect, which, as you see, is more than 6%. Excluding currency exchange rates, the decline of this business is 7.4%.
There are two events that we have to comment. First is that in the first quarter, our inkjet business has performed reasonably well but not at the level of the 10% expectations. Therefore, we have a little bit of a gap in the first quarter on the inkjet business. I immediately reassure you this is not the trend for the year. That means we continue to anticipate the growth of our inkjet business in the year 2018 in the range of the double-digit growth that we have committed for. In the first quarter, it waits a little bit. The second part, of course, is that for the first quarter, we have acknowledged a reduction of our reselling business in the U.S., decision that we have taken last year, and I commented.
I just remind you the numbers that we quoted already, which is that on the full year, we expect a EUR 60 million reduction of this top-line because of this decision. Of course, in the first quarter, we have the first part of it. Excluding all these kind of things, the pre-press business decline would have been basically what we expected, means what we have seen in the previous quarters, which is in the range of 5% decline, which is a combination of a strong decline of the analog pre-press and a decline a bit lower of the digital pre-press. In the digital pre-press part of it, of course, there is still the same comments to make. The first one being that the volume is under pressure.
I would say a bit less than what we have seen previously, but I'm very cautious on this comment before I make it a trend. The price erosion has also been a little bit easing compared to what we have seen before, probably because the vendors are more and more concerned about the increase of the aluminum price. That's basically the comments I wanted to make on the sales. On the gross profit, you see that we have almost 3% reduction of the margin. This is a mixed effect of different things, of which, of course, currency, raw materials are part of it. Primarily in this case, it's a mixed effect of our products and regional mix. To be very clear, the growth pockets of this business are in countries which are developing countries, where the prices and the margins are more complicated to keep.
Our value selling program, which is mainly aiming at showing the customers the value they can grab out of the full solution we offer, and in particular our ECO3 system, which is a mix of ecology, economy, and efficiency of the operation, is clearly picking up in the mature market, but we still have to develop it in the emerging markets. That's the explanation for the drop of the gross profit. On the rest, I will not comment too much. You see, of course, that the top-line erosion is weighing on the percentage of SG&A, in spite of a good reduction of the cost of the SG&A to EUR 60 million compared to EUR 66 million.
R&D efforts are constant in this company, and of course, the EBITDA, because of the, in particular, the drop of the gross profit is declining by 3.4%, down to 3.2% of sales, EUR 8 million in the quarter. To be clear, this is not new. This quarter was somewhat expected in the picture. Of course, we are not staying still in front of this situation. We have seen this kind of complex transition period in this market when you have the raw materials which are increasing, when you have changes in the pictures and in the different regional pattern. We have seen that in 2009, we have seen that in 2014, and therefore, every time we have been able to react, but it takes a little bit of time before we can really show and demonstrate the results of the reactions.
We are acting on that, and we will comment in the next quarters the actions we are taking. If I move to slide 10. I think I commented most of the elements of this slide, and I propose that we maybe just focus on the two business highlights at the bottom of this slide. The introduction of a new Anapurna machine equipped with LED systems and the new Adamas plate, which is a full ecological printing plate on which we have, of course, big expectations for the development of the future business of eco-friendly prepress. Moving to HealthCare on page 12. We clearly see here also the trends that we have anticipated.
That means for the first time, I think ever, we have an IT HealthCare business, which is more than half of the sales of HealthCare at 51%, showing a clear improvement of the HIS/CIS part of it, which is now 20% of the total sales. The imaging IT at 31% is also showing improvements. I will come back to that in a minute. The classic radiology at 6% is continuing its decline. The hardcopy 23%. Of course, the percentage compared to the rest is not increasing. Mainly because the growth engines, which are not the hardcopy film, as you know, are growing pretty steeply in the first quarter. The hardcopy film volumes are improving, compared to where they were in the first quarter last year, showing the success of our decisions to reorganize the distribution channels, in particular in China.
As I said several times, this transition is a long transition, therefore, we see an improvement. We have seen that in Q4 last year. We see that in Q1 this year, that we must be careful and make sure that we execute on the plan, which is a smooth transition between our current distributors and our own sales organization. That would be a continuous point of focus in the next quarters. So far, things are doing well. Finally, the CR modality business, which is 20%, basically follows the improvement of the top line of this HealthCare group. This is due to the reaction of the DR business in Q1, which has been clearly growing at the double-digit target growth that we expect, showing an improvement compared to the situation of the last year. That's for the pie chart. Moving to slide 13 and the numbers.
You see that the business is flat, if you take into account the currency exchange impact. Of course, if you exclude these currency exchange rates, HealthCare would have been growing by almost 5%, mainly driven, as I said, by the IT business, the DR, which are the growth engines, and the recovery in the field. The gross profit improves. Again, driven by these different elements on the top line. SG&A and R&D are kept at a constant level, therefore showing an improvement in percentage to sales. The EBITDA at 9.7% is clearly showing an improvement of 3% basically compared to sales, which is the impact of the gross profit plus the efficiency of the cost control. To summarize in this chart, a good quarter for HealthCare, which is clearly in line with everything we have guided for in the previous quarters.
Moving to slide 14, where I think I've commented most of the first three bullets. The last ones, business highlights. We have signed a good agreement with Premier in the U.S. Premier is one of these central of purchasing, which is purchasing goods for the different hospitals. This is, I think, one of the big contracts we signed with Premier for our imaging IT. For Enterprise Imaging IT, is part now of the product portfolio that we sell through this big distributor. ORBIS. You know that the strategy of ORBIS has been for years to concentrate on the German-speaking part of Europe and French market. We said several times that we will try to penetrate the U.K. market, which could be a market where the margins might be a bit higher. It's a long process.
Penetrating a market which is not very well-known and which is very specific, takes time. We are happy to announce that we have been for the first time live. That means we have a hospital in Derby Teaching Hospital, which is part of the NHS, which is using ORBIS now in real life in the hospital. Finally, a significant element in particular in our strategy to move to more IT, artificial intelligence, and use better IT to support the diagnostic of our doctors customers. We've done a first demonstration in Dubai that we could have an artificial intelligence algorithm in radiology which is supporting very well the diagnostic of the radiologist. I will not comment too much. Maybe Luc can comment a bit later if you have questions about this element. Moving to Specialty on slide 16. What to say? This group is performing well.
Aligning quarter after quarter now of growth. You see that we are at EUR 61 million in the quarter. The gross profit is also increasing at 28% of gross margin. SG&A and R&D are clearly under control. The result is that the EBITDA is at 13.1%, basically doubling compared to the Q1 EBITDA of last year. On slide 17, you see a few explanations for that. If I can make a high-level view of this group, which as you know, is basically two-fold. It is on the one side, a film activity, which is the activity not related to the graphics and the HealthCare business. Here, we have reached a point where the film we continue to manufacture for this group has basically reached a point where the markets which are still using films are pretty strong and resisting.
This is mainly the non-destructive testing films that we sell through our agreement with General Electric and the film we sell to the electronic industry. These two components of our film activity are pretty robust in terms of resistance to decline. Of course, the strategy of investing in new activities that we call the growth engines of specialty, primarily in the field of electronics inks, like Orgacon, and in the field of synthetic paper and the way we can use our foils in these different domains. This is paying off, and this is why at the end of the day, we have a group which is now growing this top line in profitable manner. Highlights for this business group.
We have introduced a foldable version of our synthetic paper, SYNAPS, which was one of the limiting property of the material to extend the scope of activity and the scope of usage of this synthetic paper. We assigned an exclusive distributorship agreement with Vervent for the European market for our back panel of photovoltaic panels, UNIQOAT. That is in a nutshell the quarter one. To summarize, clearly a market which is showing sign of weakness in the prepress business, but we are working on it, and if it is one conclusion we can drive from this quarter one is that we were right to force the business group to focus on its core business and in particular the prepress business. We continue to invest in the technology, and you see that we have a new plate at Adamas.
We continue to work hard on the way we can participate to the consolidation of this market, which is going to happen. Of course, we are taking measures to combat the erosion of our gross margin. On the HealthCare side, blue sky in the quarter one. Blue sky in the direction that we expected. That means we start to deliver the backlog of our Imaging IT. We continue to do very well in the hospital systems. We continue to see an evolution towards the integrated care and a few initiatives related to what we can do with our software in terms of intelligence in the support to diagnostics. The film start to recover after the difficult two years that we have been through in this reorganization of sales channels. Specialty performing according to plans, therefore, there is no reason why we should change our guidance.
The 10% EBITDA on the long term. The fact that our top line will continue to improve, even if it is not growth for the time being, if we speak about limitation of the erosion of the top line. Finally, for 2018, we must stay cautious. As I said, we don't expect the EBITDA of the year to be above the EBITDA of last year in terms of percentage of sales. That's in a nutshell the quarter one, I open the floor to your questions from now on.
Okay, for the participants over the phone, if you'd like to ask a question, you may press star followed by the number 1. Please record your name clearly and slowly when prompted. Your names are required to introduce the question. To cancel them, you may press star followed by the number 2. Now we have the first question over the phone, it comes from the line of Mr. Guy Sips of KBC Securities. Your line is open.
Yes, this is Guy Sips from KBC Securities. I have two questions. First is on this continuation of the prepress related reseller activities in the U.S. Is that spread over the four quarters quite evenly, or will it be back end or front end loaded? The second question is related to the aluminum. We saw quite recently, some spikes in the aluminum prices. Did you change anything to your aluminum hedging? The base question is actually can you restate the impact of, let's say, a EUR 100 aluminum increase on your EBIT, what is the time lag? Thank you.
Okay. Good morning, Guy. Reseller activity stop in the U.S. On the full year, it will be in the range of EUR 60 million, as I said, but it's ramping up because in the first quarter, we still have the tail of the inventory that we used to have before. Therefore, the first quarter has a limited impact compared to what you will see in Q3, Q4. The total will be EUR 60 million. On the aluminum hedging strategy, we have not changed anything because the experience has demonstrated that we must stay calm in front of this kind of situation. You know, we buy forward and therefore at the end of Q1, being already at the beginning of May, there is nothing major that we could expect from the spike.
If it stays as a spike, of course, if the aluminum stays at a higher level, there will be a minimum impact in the last half of the year. Basically, we are not changing anything at this stage compared to what you know. You also have to understand very clearly that we speak about a spike in the aluminum cost expressed in dollars, but the dollar is weaker compared to the euro. There is a complex equation to follow with a lot of parameters. Basically, we stick to what we told you. Take into account the difference, you should be pretty close to the reality of what we are going to live.
Okay. A last question also because today is the AGM. Is there special comments that you will make on the, let's say, the HealthCare IT spin-outs? Can you give us an update on the status on this one?
Sure. Related to the AGM. The AGM is related to 2017. Basically, I will not say anything new in the AGM compared to what we've told you in the past. Therefore, nothing new at this stage to tell you. Basically, we continue our work, what I call the technical bit of the company. We execute wave after wave and country after country, the proper split of our people, our legal units, our information systems, to make sure that we have the right structure of the company. We stick to what we said before. That means this is a program which will take the major part of the year 2018, and we execute on it, we are exactly on our plan. We have made a significant wave of countries, during the Easter weekend at the beginning of April. We continue to execute on our plans.
In parallel with that, as I told you several times, and I said to the market, we are reflecting on the global strategy of the two future units. IT company on one side, for which the strategy has been expressed several times, product here. On the other side, we are looking at the way we can optimize the remaining part of the business, which will be further focused on the key strengths of the traditional businesses of Agfa. At this stage, I will not comment in particular at the AGM of the group.
Okay. Thank you.
Thank you. The next question will come from the line of Mr. Stefaan Genoe of Degroof Petercam. Your line is open.
Yes, good morning. I've got three questions still, actually. First, on Graphics, where you indicated that the reselling activity in the U.S. that has been stopped, we do not see this really reflected in gross margin or in margins. Can you indicate the or give some more color what are the different items at play there? Second question on Inkjet, where sales are down about 10%, I think. You indicate that volumes are increasing. Does this imply that prices are down? I don't believe the 10% decline is explained fully by currency. Is there something else that's playing a role? Last question on HealthCare. You indicate in the press release that hard copy has supported to the gross margin increase.
If you look at hard copy, its sales are slightly down, I think, while Healthcare sales are more or less stable. Can you explain the reason why hard copy in this quarter supports the gross margin? Thank you.
Good morning, Stefaan. ECO3 reselling activities, gross margin impact. As I said, in the first quarter, we have an impact, which is still limited in terms of the impact of stopping the reselling activity. As I said, the gross margin of ECO3 has to be taken as a sum of different elements. We are working hard on that to attack the different parts. The major element is this mix of, in particular, the regional mix of our sales in the first quarter. Don't worry too much about the gross margin impact on reselling activity, et cetera. The reselling activity will have an impact of EUR 60 million on the top line and a marginal effect, if any, on the EBITDA of the company. That's the two lines that I'm looking at.
Of course, the first quarter is starting to be impacted by that, it's not a domain on which you should focus your attention at this stage. I'm surprised by what you said about Inkjet because we don't have a 10% reduction of Inkjet. Inkjet this quarter has been slightly up. The Inkjet business, mainly driven by the ink sales as opposed to the equipment, but the equipment order book is filling up. If you refer to the pie chart, we have a mix in this part of the pie chart, which is software, services, and Inkjet. Of course, when the Inkjet is not growing the 10% that we normally have, and the software and part of the service is somewhat impacted, of course, because the last part of the service is linked to the prepress business. That's the first thing.
The other element is don't forget that we have a currency impact now, the numbers which are given, the growth numbers, are always to be taken with the impact of currencies. If you sell in particular in the U.S. and in countries which are dollar-based, the impact might be higher. That's what we see, for example, in the Enterprise Imaging business of HealthCare. That's what we see on the Inkjet business. Now on the hard copy gross margin of HealthCare. Part of what we wanted to do in the hard copy business, was to eliminate layers of distribution. The target at the end is to improve our gross margin by reducing the number of layers in the distribution system.
Volume being slightly up. Of course, the gross margins are improving in this business, that's the reason why we did this complex exercise, which has polluted our numbers in the last two years, to harvest the fruit of these changes. Indeed, the recovery of the hard copy business in Q1 that we start to see is playing favorably on the gross margin of HealthCare. The other element is, of course, the positive evolution of the IT business, which has, by essence, a gross margin which is stronger.
Okay, that's clear. Perhaps two follow-ups. Could you remind us the breakdown between software services and inkjet in the industrial inkjet business, if possible? Another follow-up. You indicated that in Graphics, you're looking for more value approach towards customers, and you manage this in the more mature countries, but not in the emerging markets. Emerging markets, of course, are the bulk of your business in a large part of the Graphics business. How convinced are you will be able to manage this in the entire emerging market spectrum, and do you have any idea about timing throughout the year? Thank you.
All these growth engines, they are associated to technologies which are, I would say, more digitized or more based on IT and software. That's why the adoption is primarily and first in the mature markets. The traditional markets and the emerging markets are taking longer to the traditional businesses, but the evolution of technology will follow. Therefore, we see the same kind of model that we have seen in other domains, where the inkjet evolution is depending on the maturity in terms of digitization of the society, of the different places. I have no doubt that the reason why this technology is going to penetrate more and more markets would be the same in the emerging markets as opposed to the mature markets.
There could be even some applications which are related to the performance of emerging markets in terms of manufacturing, for example, where this kind of applications could penetrate even faster. For example, if you look at where the flooring systems are done, you will see that there is a weight which is a bit bigger than the average in the countries where we manufacture a lot. Therefore, I hope that the printing on this kind of products, which are related to buildings, to wood, to these kind of applications, will be developing pretty fast in some emerging markets. Again, this is something we need to track because we are at the beginning of the age of inkjet, I would say, if you exclude the sign and display market.
In terms of evolution, I think we will see the same kind of evolution that we have seen in other domains, basically. The split of inkjet service and software, we actually do not provide it normally. What I say when I have these kind of questions in general terms is that if you take roughly two third of this part of the pie chart for inkjet, you are in the right order of magnitude.
Okay. All right. Thank you.
Thank you. Once again, participants over the phone, if you'd like to ask a question, you may press star followed by the number 1. To cancel them, let me press star followed by the number 2. Okay, sir, as of this time, we have no further questions over the phone. You may proceed.
Okay. By the way, I believe that we have received the questions that were supposed to be asked. I propose that we close the call at this stage. Thank you very much, everyone, and I give you an appointment at the end of August for the quarter 2 results. Bye-bye.
Thank you. That concludes today's conference call. Thank you all for joining. You may now disconnect.