Hello and welcome to the Agfa-Gevaert NV Q2 2025 results call. Please note this call is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing *1 on your telephone keypad to register your question. If you require assistance at any point, please press *0 and you will be connected to an operator. I will now hand you over to your host, Pascal Juéry, CEO, to begin today's conference. Please go ahead.
Thank you very much, and good morning to everyone, and thank you for attending. I'm here in the room with our CFO, Fiona Lam, with our Investment Relations Director, Viviane Dictus, and members of the Executive Committee. We're going to walk you through the set of the results for Q2 and the first half of the year. I think the first message is on the business. As you've seen, a very contrasting situation between our three businesses, our three main businesses. I mean, a strong HealthCare IT, and I'll come back to that, but the P&L delivery was very good, and we only have positive things to say going forward for HealthCare IT. DPC, disappointing growth, actually a lack of growth, especially in our growth engines area.
There is a trough in the market regarding green hydrogen projects, and digital printing equipment sales were impacted by the market context, but nothing is broken. If anything, we continue to progress in our markets. Of course, regarding the film activity, we have seen, I would say, a faster decline of the medical film market, faster than anticipated. Immediately, I can tell you that this will call for additional restructuring and efforts, not only in product supply, but also in our go-to-market. This is something that we have started, but we will come back with more details in November in the Q3 call. That's for the business. Two events, two very positive events also for the company, I believe. First is the resolution of Agfa Photo, a longstanding case that was resolved in June.
You see the P&L impact today, and you will see the cash impact in Q3, but very positive. As well as the agreement signed on the revolving credit facility for the next three years. These are also positive news. Third, I will also explain to you how we are going to realign the organization of the group due to the, I think, for two reasons. First, we want to have better readability of our results by reporting on growth segments and mature segments, I would say. Also, and more importantly, to have a fully integrated management of all film and chemical activities related to the current situation we're facing in the market that will end a better management of the overall value chain.
Last but not least, I would like to remind you that, as usual, we are a seasonal business and that the second half of the year is always stronger than the first one, and 2025 will be no different. If you remember, I mean, we do a significant portion share of the EBITDA of the year during Q4, and it's going to be exactly the same during 2025. I think that's for everybody also, if you keep that in mind, you see the way our markets are really working. If I go back to this slide and give a little bit more color on everything that I said. First, HealthCare IT, strong P&L delivery on the first half of the year, which is not common. Typically, it's more the second half, but this year was a bit different.
We continue to successfully transition into the cloud, and where I'm also very pleased is behind the very good numbers, actually, that's the performance of North America. North America is our target market, our first priority in terms of market, and we are growing and making progress in this region, and that's exactly what we want to do for the strategy. On order intake, Q2 last year was a record quarter. It was EUR60 million order intake, actually representing almost 40% of the total year. In Q2 this year, it was not as good, but order intake is a bit lumpy. On a 12-month rolling, we are stable, but in fact, we are very confident to end the year with hiking, I would say, growth in order intake. We keep the momentum and we keep adding new customers to our line.
Top-line growth, as you see here, it's interesting to see the impact of the currency. More than, I would say, about two-thirds of our margin comes from North America, is dollar denominated. The first part of the year was positive for us, reported in euros. The second part of the first half was strongly negative. That's what you see here, meaning the growth is a bit understated due to this curve. DPC, some top-line growth, but not in the growth engine. I would say more in the specialty fields and chemical business and more price-oriented than volume-oriented, I would say. While Green Hydrogen Solutions and DPS had, I would say, stable performance over last year, in an overall market, DPC focuses a lot softer.
EBITDA approximately the same as last year, especially when you look at the first half, the full first half, it's in line with last year, and as we'll see, we're still expecting growth. Radiology, the decline of the medical market actually is faster than what everybody would expect. It's mainly in China, which represents more than half, well, represented more than half of the global market. It has also been implemented in other countries in Asia like Vietnam. It's a very fast decline. The reason of decline is too fast for us to be able to evacuate, know our cost at the same rhythm. As you know, we have our EUR50 million program, which is in full swing, and we are implementing this, but all the cost measures are spread over the next months until actually the end of 2026.
Therefore, we have a bit of a time lag where we are. That's point number one. Most of the initiatives that we're taking will accelerate during SD, as already precised. This being said, given the current market situation, we will do additional restructuring efforts, as I said, continuously with the product supply, and we are already working on a plan that I will come to you with a lot more details in November, but also on the go-to-market where we're going to reveal our setup here. Now, if I turn to the numbers, you see overall pretty stable sales, but very different dynamics according to the business, as usual. EBITDA is strongly retreating versus last year due to the situation in film, especially in medical film.
If I look at this, this is a slide that we're showing right now, is the evolution of our mature business and the evolution of our growth engine. I would say a strong decline of our film exports, as you know, and the growth of our future-oriented business has been a bit more salient for the reasons I explained on the market environment, especially for the film and Digital Printing Solutions. EBITDA, we continue to make progress, of course, overall in the growth engine, but the impact of the film, and especially medical film, is taking stall on the overall business results. Now, we're going to turn to Fiona to comment the bridge, Fiona.
Thank you, Pascal. As Pascal already mentioned, our adjusted EBITDA has been impacted by radiology. You see we are EUR9 million lower versus last year, Q2. This is primarily contributed, as you can see, both gross profit of radiology is down by EUR13 million because of volumes and loadings of the factory. DPC, since the growth engine is not really contributing the growth this quarter, and therefore also together with the good performance of HealthCare IT, we're not able to offset this accelerated decline of the film. On the other hand, you also see a good level of cost control. It contributed a small few millions into the P&L. That is going to all help us, and we will continue this good high cost control as well. If you look at free cash flow, Q2 is a small minus EUR3 million negative free cash flow.
This is a very good improvement, actually. You don't see it from this graph compared to last year Q2 because it's EUR37 million better than last year Q2. Also, for the first half year, it's EUR45 million better than the first half of 2024, if you compare to this year 2025 and 2024 first half. This big improvement, mind it, is not related to Agfa Photo because, as Pascal said, the cash in is in July, so it's not in the first half of the year result. The improvement in our cash flow is mainly linked to very good trending working capital and control of working capital. We have a lot of initiatives running and improving our working capital to the right level of the business, and also provision others related to lease, receivable build-on, and we are collecting those monies.
Having the backing in this cash flow, we're still investing in our future growth. We have invested EUR8 million more in CapEx in the Q2. Basically, I could say we are quite happy with the free cash flow development and evolution in the first half of the year, and I expect the next second half of the year it will be improving further. Next slide, giving a perspective on our net financial debt or the total debt, which is still relatively high because, as we know, the pension debt is very high. It's evolving, of course, in the last many quarters. We are still consuming cash, as you know, even though we have been improving it significantly versus last year. You see, we are still negative on the total net cash flow perspective.
You see the net financial debt, excluding IFRS 16, excluding pension debt, are increasing as normally in Q1 and Q2. We always consume cash in Q3 and Q4. We start to actually improve as well. The net financial debt normally trends down at the end of the year. For the pension, you also see actually a continuous trend of improvements. It's coming down steadily quarter over quarter. Worth already mentioned by Pascal, a three-year revolving credit facility has been renewed and signed August 1, EUR218 million. This is a three-year maturity until August 1, 2028. Thanks for all the financing speakers' support and confidence in our strategy of Agfa-Gevaert NV for the next years to come. Just to explain a little bit also to all of you about the governance of the new revolving credit facility. You see, we have four covenants which will be applicable as of Q3 onwards.
We also would, of course, disclose the transparency of the four financial indicators. The new covenants which remain the same as the previous facility are the leverage and the interest cover. The definition of the leverage is net financial debt divided over our adjusted EBITDA. These are all calculated excluding IFRS 16 impact, and it's also calculated on a rolling past 12 months. Interest cover is adjusted interest over net interest expense. Again, the same definition applies. They are both tested half year, and you see basically the covenant level on leverage is at mid-year 3 and at year end is 2.75. Year end was slightly decreased according to our strategic planning for the future, going to 2.6 at 2026 and 2.4 at 2027. The interest cover minimum stays with 5. There are two additional covenants being added. One is adjusted minimum EBITDA, excluding IFRS 16 on a rolling basis.
It's also tested half year, and the minimum is EUR13 million. We also have a minimum liquidity being the cash and cash equivalent plus the headrooms, which we have under our facility agreement. This is tested quarterly. This is the only one which will be tested quarterly, and the minimum is EUR13 million. In terms of numbers, you see the numbers were already explained on sales and bottom line. What you can also see a bit here is the gross profits, operating expenses. The gross profits decrease because, of course, the lower volume has a large impact on our loadings and the fixed cost coverage. That's mainly because of the top-line decrease of medical films. We have a mix also in the DPC in terms of, let's say, the growth engines and industrial films. Those mix have a different suboptimality mix for the group. Next slide.
If you look at our net results, we benefited the net results from the Agfa Photo. The P&L impact of the Agfa Photo, you see them in adjusted and retracting expenses, which is booked at EUR38 million. That helped our results to a positive of EUR30 million compared to last year of EUR5 million.
Thank you. Now.
Thank you, Fiona. Now let me turn to HealthCare IT. What are the key messages? As you've seen, strong performance for the first half. We're happy because the geographical mix is very good. That means we grow where we want to grow, meaning in North America. Our successful transition to the cloud continues with several customers that we started in Q2. Overall, very good first half P&L growth versus last year. Here, we just want to give you the real nominal growth, you know, adjusted for currency impacts we see. The recurring revenue, which is important to us, has never been that high for us, 58% of our total Q2 revenue. Twelve months holding order intake, more or less stable versus last year. Again, I want to stress, order intakes can be lumpy by quarter.
Indeed, we are just replacing the strongest quarter ever by a quarter that is a lot more, I would say, normal. I can tell you that knowing what we have coming for Q3 and Q4, we will continue the overall growth. As we said, mid to high clean growth for the full year. I'm also happy to say that we continue to win new logos, new customers. It was about 20% during Q2. It will be probably even a lot more for the rest of the year in Q3. Really, we are pleased with where we are. The trend we are seeing right now is the order you've seen in Q2 cloud was very small in order intake. If you take last twelve months, it was close to 30%. If anything, during the second half, this percentage will increase probably significantly.
Cloud will represent a much higher share of our order intake. I would like to remind you that we are sitting in the top three in the class rankings for all categories and regions we compete in. We are always in the top three. As you know, we have a number of best in class awards. Just looking at the numbers, that's much what I described already. I'm also pleased to see that the gross margins continue to increase year over year. Overall, very happy with the situation in HealthCare IT. DPC, a bit of a different story. DPS, as you know, it's a business that means that it's growing, normally should be growing 10%-1 2% per year. That has been our track record for the past year. The first half of the year was very different. The growth almost came to a halt.
The reason is actually mainly the equipment market, in fact, that was impacted, not especially by the tariff discussion, although it was part of it, but it kind of froze a lot of investment decisions by our customers. We have seen towards the end of the first half an increase in our order taking, and we believe that for SD, therefore, will be rather good. The overall growth we were expecting for the year is probably a bit challenged, even if anything, if nothing is broken in this market. Just to tell you that we are continuing to bring innovation to market, and this is also the reason why, even in the subject market, we are not seeing any decrease so far across the line. Also, very good news for us is actually the sign-off of our first SpeedSet single pass printer.
It took us approximately nine months to go to this point at our first customer, Delta Group, in the UK. We are very pleased with this progress, and of course, it's a strong message for the overall market in this area. Now we have a printer that works well commercially. Green hydrogen, where the overall environment on green hydrogen has been rather more than subdued, I would say. We have seen cancellations, delays. This is an area for which we are not expecting any growth for 2025, and we believe we will see probably the trough of the market pretty soon. Not everything is frozen in this market. Actually, we will still have a lot of dynamism in regions like China and India with a lot of projects and probably the Middle East.
It is fair to say that in North America, for the time being, things have been a bit frozen by the changes, I would say, in the regulations introduced by the new administration, as well as in Europe, where the development actually today is very delayed. Overall, it means we are standing our own, but we cannot rely on our main brain to provide significant growth right now. If you look at the numbers, you see that you see what I'm explaining, that for the time being, our growth engines are actually at a very subdued performance in terms of top line, while film is increasing, but that's mainly the reflection of higher price, not really higher volume. The EBITDA close to last year, actually, if you take the first half, it's almost in line with last year. We continue, we continue really, nothing is broken with the strategy.
We're continuing what we're doing in EDPS. We are successful with our market launches, and we have a lot of opportunities going forward. Let me turn to Radiology Solutions, which is, of course, today the main issue in our results. There is a strong decline of the medical film market. Let me just exemplify it for you. I think the market has been divided by three topologies. Actually, it means 25% or between 25% or 30% of the global market, they disappear very quickly due to digital, I would say, application and enforcement in China. That's what they are going through. It goes very fast. It is a loading issue for our pair where we are actually decreasing very quickly. The reason of decrease, you know, we have mainly age-related measures that we have been implementing, and it goes through a calendar.
We are evacuating trips costs as fast as we can, but it cannot go as fast as what we are seeing in the market. I'd like to remind everyone also that I will sign a special agreement only on the January. Actually, all this program could be implemented only from March. Here, it's still just the beginning, and we have a lot more to come. For instance, the shutdown of Bushy Park will be effective only at the end of Q3, actually. We have things in place.
This being said, given the situation, we have launched a new additional program in restructuring to further the efforts in terms of revising the footprint, mainly today in Brussels, but also looking at our go-to-market strategy where we're going to go a lot more from a market-driven approach to an asset-driven approach, and therefore, a more, I would say, lean and mean and global management of the film business. That's really what we're going to implement. If you look at the numbers, you see the very strong impact today of what we are going through in film. Outlook, I think our outlook is, yeah, probably we have a bit SRIC, I would say, goes well. I'm really happy where the business is going. The order intake momentum will continue. I see only positive development.
The only thing that I would mention is the second half will be a lot more cloud projects rather than on-premise projects. As you know, when it is the case, it tends to delay. It delays, you know, the recognition of the revenue and spreading the overall recognition of the margin. Overall, I would say that all the evolution is very positive. We are gaining, as I told you, new logos, and especially in North America, it's very positive. Digital print and chemicals, we probably have a more subdued view of the growth that we had before starting this year. We thought we would be able to continually be DPS growth. That was not the case in the first half. We are still looking at growth in this area, but probably not to the tune that we were doing before.
I told you, we are not expecting any growth for the membrane given the situation in green hydrogen. No delay. Not coming back to radiology, I think I've said it. We expect the current trend to continue. The only response we have is really our cost and restructuring program that is in place. Last but not least, of course, for full year 2025, we are expecting a positive net cash flow at the group level. The cash we received for Agfa Photo is helping a lot. We also believe that we'll be in a position to have resolved the renewal situation by year-end. I will now turn to really what we are doing in terms of new structure. We have announced today that we are reviewing our structure. It does two things.
First, we will have three segments: two growth segments and one mature segment, which will improve the readability of our results and especially the read across our strategic drive. Two segments for growth because one is IT and one is industrial, I would say. A mature segment with imaging and chemicals, which used to be, if you want, the radiology part, with on top of that, we have the group, all industrial film and chemical activities in the same business, so to speak. Improvement of the readability of the results, but also, and more importantly, regrouping film and chemical in a single organization, given the challenges that we're facing, we absolutely need to run the business a lot more in an asset-driven manner, actually, and to have an end-to-end strong leadership to drive the restructuring that has been in the discussion.
This is really, for me, the key takeaways for the new organization structure in terms of people. I think it's pretty much, as you see, the continuity because HealthCare IT, of course, is led by Nathalie McCaughley. Industrial Solutions is led by Vincent Wille. I take over the imaging and chemicals part. Quite continuity, but a different setup, in fact. In a nutshell, what's the takeaways is HealthCare IT and the strategies implemented, everything goes quite well. DPC, temporary slowdown of the growth, I would say, for market reasons and not performance of expert, because if anything, I think we're doing quite well compared to market. A film situation that calls for a lot more for additional restructuring and cost takeouts to come back to restore the overall profitability of the value chain, which is our intent. I'm going to stop here and take the analyst questions, operator.
Thank you. As a reminder, if you would like to ask questions on today's call, please press star one on your telephone keypad. We'll take our first questions from Alexander Craeymeersch from Kepler Cheuvreux. Your line is open. Please go ahead.
Hello, Alexander from Kepler Cheuvreux here. Thank you for taking my questions. It's nice to see that you're catching up in HealthCare IT. I'm just wondering, how much more top line can you still process on the short term with the same employees? Considering the growth you're foreseeing, do you plan to have some new employees in this area? Also on this topic, do you foresee that the current margins are sustainable going forward? Thank you. I'll take them one by one. Thank you.
On HealthCare IT, you know, not only are we growing, we have new logos, but we are also, in a way, in a change of model by which we go from traditional on-premise projects to cloud-based and cloud-enabled projects. To your question, do we need a lot more people to ensure the growth, and can we ensure good top-line growth? A couple of considerations. Do we need more people? I don't think so, because actually, the SaaS delivery is more efficient than the traditional model. I wouldn't believe we need to add more people, on the contrary, but we need to go through this transition. On the top-line growth, what we need to look at in this growth is really the growth of recurring revenue. This is really the sign, the KPI, if you want, of a transformation to a subscription model versus a project model.
As I said, the fact that we are going to more cloud projects will have a deflationary impact on the top line at some time. Why? Because, again, the project is not invoiced in the same way. It's invoiced over five years instead of being invoiced 80% during the year of implementation. That will have an impact on the growth rate. It's a transition period. Again, we are transforming project revenue into subscription revenue, which are a lot more stable. You have a lot more upside. You benefit from the growth and whatnot. Overall, the top-line growth will be impacted by this move to the cloud. The delivery system of the cloud means we can probably absorb a double-digit order intake growth without adding a lot of resources.
Thank you. My second question would be that this was going to be back-end loaded. I'm just wondering if there are any subsidy numbers in the first half of this year.
Subsidy numbers? No, we do not. We do not. We will, on the ZIRFON plant, the second phase of the subsidy will be received only when we demonstrate and in a full industrial production, which we are doing right now, by the way. We're working on that. We're expecting this cash inflow of subsidies to be in rather at the end of the year. We have not received it in the first half.
Okay. The last question would be, it's basically on the P&L on page 10 on the report. You mentioned the profit from continuing operations of EUR31 million, corresponding to an EPS of continued operations of EUR0.20. Quite a lot, of course. Could you clarify how much of this relates to Agfa Photo? Maybe it's a case that dates back to 2004, and maybe what was the reasoning to include this in the continuing operations? I don't see it as continuing.
I'm sure not.
Agfa Photo itself in the adjustment restructuring is EUR38 million. The finance cost, you know, net finance cost is EUR7 million, so a total of EUR45 million. Why is it not in the discontinued operation? Because we actually have it accounting-wise accounted for as non-recurrent. You can see it as in the part of the non-recurrent. Also, of course, the legal fee, and because the EUR45 million is actually the compensation of all the fees and expenses that Agfa-Gevaert NV have encountered in the last, I don't know how many years before my time, those were also in the normal business. It's been never classified as a discontinued operation.
It is for consistency reasons. We incurred during many years of legal expenses that were all in non-recurring, but in continued operation. Now that we are getting reimbursed for these fees, it's also non-recurring, of course, but continuing operation. That's the logic, Alexander.
Okay, thank you very much.
To your point on HealthCare IT, I should add, you know, where I'm really happy today is that today we are winning deals, including versus Sectra. That's also, I would say, new for us to win new logos versus Sectra as well. That's also what gives us a lot of confidence.
Yeah, congratulations with that.
Thank you. We are now taking our next questions from Laura Roba from Degroof Petercam. Your line is open. Please go ahead.
Thank you. Good morning, and thank you for taking my questions. First of all, on H2, we know that H2 is usually better than H1 at Agfa-Gevaert NV. How do you look at that this year? Can we foresee any improvements in Digital Printing Solutions and also in HealthCare IT? You mentioned that in H2, there will be more subscription revenue models. Does it mean that we should expect a more subdued revenue growth? A second question, still on HealthCare IT, you mentioned the transition from the project to the subscription model. How long do you think this transition will take? Do you have any visibility on this? The last one on Radiology Solutions and the program to adjust the cost base. The first saving will materialize in H2. Can you give us an order of magnitude, please? Thank you.
Okay. On the H2, thank you, Laura, for the questions. On H2, it's a normal seasonality pattern. Typically, I would like to remind you that last year, more than 40% of the yearly EBITDA was in Q4. That's also, you know, we kind of installed more than 40% of printing equipment in Q4 as well. That's the same in Digital Radiography. Along almost all our HealthCare IT, of course, it's always a stronger quarter. This is the way the business is designed, and it will be no different this year. Yes, the S2 will be a lot stronger than S1, and the normal, I would say, seasonality will apply. That's what we are seeing, and this is exactly what we have in our plan and forecast. That I confirm.
Regarding your question on SaaS model, the P&L delivery will depend on how many cloud projects we will install in S2 versus on-premise projects. Yes, depending on this mix, that will have an impact on the short-term P&L of the business as well. What we are seeing today is we had a first half where we did relatively a good number of on-premise traditional projects, where we see S2, where we have a lot more, I would say, cloud-based SaaS projects. Okay? Mechanically, do we expect a little bit more subdued in S2? That might be the case due to this impact, but it's not really, it's not going to be super material. What goes against us as well is the currency, because we are pretty much more and more a dollar business in HealthCare IT, and that translates into less euros.
Again, overall, I mean, I'm very positive about these developments. Even if there is a short-term impact on the top line for HealthCare IT, it's still a very positive development. Your third question was about, sorry?
It was about the cost-based adjustment on the readers.
Your question more precisely is how much are we expecting?
Yeah, could you give an order of magnitude of what we can expect in H2?
What can we expect in H2 regarding the recurring savings of our project? We have not commented so much on the calendarization, but all this is cumulative, and every month we are making more progress to evacuate cost. The overall impact on the second half is probably going to be around $10 million, something like that between.
Okay.
That's what I'm doing.
Okay. Very clear. Thank you.
Okay. Thank you very much, Laura.
Thank you. As a reminder, if you would like to ask a question, please signal by pressing star one on your telephone keypad. It appears there are no further questions.
Thank you.
I would like to turn the conference back to Pascal Juéry for any additional or closing remarks. Please go ahead, sir.
Thank you, operator. Thank you, everyone, for attending this call. Again, I repeat, growth engines, HealthCare IT performing very well. Digital Printing Solutions for the time being a bit impacted by market conditions, but should recover quite well, actually. And ZIRFON, a question mark on the hydrogen project. Again, it's a question of time. In the meantime, we are taking all necessary measures to address the situation in film. As you've seen, we are also paying a lot of attention to our cash management and especially the management of working capital, but not only in order to make sure that we keep our liquidity level. Thanks very much, everyone. Thank you.
Thank you for joining today's call. You may now disconnect.