Earnings Call: Q3 2020

Oct 22, 2020

Hi, and welcome to Adlife. We are today presenting our 3rd quarter report. My name is Kristina Wilgaard, and I am the CEO of Adlife. My name is Martin Allgemeiern, and I am CFO here at Adlife. I will now talk about the highlights in this Q3. The Q3 is normally our weakest quarter during this year, but this year, 2020, it's actually exceptional. We report really strong sales, and most of that is related to COVID-nineteen. The strong sales growth comes into the 2 business areas, Labtech and Medtech. We report even stronger EBITDA of close to SEK 200,000,000 in the quarter, and the margin ends up on 16.1 percentage, which is actually double margin compared to last year. In this quarter as well as during the period, we report a very strong cash flow. And of course, that is great for the future where we can do continuously investment both in our existing companies but also through acquisitions. After the summer, the activity in our acquisition pipeline accelerated a lot. We restarted a lot of discussions that we had ongoing. So we closed 2 deals in the quarter and on 1st October, 3 new deals. These 5 adds approximately SEK 3 75,000,000 in net sales yearly. Since we have had such good financial figures during the year and we also now see more about the consequences out of the COVID pandemic, the Board has decided that we should pay an extra dividend during the autumn. So we will have an EGM on November 19 to decide upon dividend again for Ad Life. COVID-nineteen is something that really is a major impact of our lives. And we are very proud at Al Life that we can help the health care services throughout the world with products and solution that really helps people's lives. During the quarter, the intensive COVID-nineteen testing has started in most of the markets. So our diagnostics companies has sold a large volume of COVID tests for many certified suppliers. We also sold large volume of medical disposables, medical supplies and among others, personal protective equipment, mostly to Swedish and Norwegian hospitals. During the quarter, it was less patients on the ICU departments in the hospitals, which actually meant that other diagnostics tests were less than in the Q2. It also meant that it was possible for the hospitals to do some stockpiling of, among others, personal protective equipment. Therefore, we see that these sales of personal protective equipment will be less in the coming quarters. Elective surgery has also restarted, but they are not up to normal speed. And I think all of us read about the queues that we have in most countries throughout Europe. Of course, we think there's a potential setback during the autumn because we also read about the infection increases in most countries right now. We have had delays in installation in elderly homes of welfare technology and other aids for elderly people. And that is, of course, due to infection measurements that was in all elderly cares, most in the Nordic countries. Our employees are doing a fantastic job working with digital ways of meeting customers, trying to do new deals because we have still difficulties to have physical meetings, to do service and to install products at site. So I would say approximately 50% of our employees are still working from home. Coming back to the net sales. Net sales in the quarter ended SEK 1 241,000,000,000. It was very strong, totaling 55 percentage growth, of which 48% were organic. There is a very short term focus in the market due to the pandemic, of course. So we see that long term product discussions are still a little bit pending. Year to date, we have sales of approximately SEK 3,500,000,000. It's a strong growth, 42 percentage, of which SEK 33 is organic. We have now summarized what the implications we get from the sales of COVID-nineteen related products for the 1st 9 months during this year, and it summarizes to approximately SEK 800,000,000 in sales. We have also seen during 2020, there are fewer procurements. Most customers prolong existing contracts. So there is a difference in the way that we are doing tendering business still in the market. Looking at the results. The EBITA result in the quarter was, as I said, SEK 199 million. That's an EBITDA growth of 2 0 9 percentage, which is actually fantastic. The margin improved strongly to more than 16%, which is closely to double of the margin we had last year in the same quarter. We have a strong organic marginal improvement, and that is, of course, due to the high sales volumes that we have in our existing companies. Of course, we have less costs in most companies because we cannot travel, we cannot do as much marketing as we normally do. So costs are a little bit lower than normal in most companies. Year to date, we summarize SEK 486,000,000 in EBITDA, which is a growth of 139 percent and EBITA margin ends up to 13.7 percentage. And the rolling EBITDA margin is actually 13 percentage as well. Hello. My name is Peter Simasbakka, and I'm the Business Area Manager for Labtech. Labtech had a record quarter in Q3. Organic growth 49%, strong sales due to the COVID-nineteen pandemic. We also intensive testing for COVID-nineteen and also high demand into research. Sales in the quarter was SEK127 1,000,000 that was an increase of 63% compared to previous year. EBITDA was SEK 131 1,000,000 and that was an increase of plus 2 19% compared to previous year. And the margin was 18.1%, and that was 9.3% last year. As I mentioned before, the diagnostic part was really driven by the COVID-nineteen testing. We saw intensive testing and we also saw too that we was more or less covering all our markets with tests for the COVID-nineteen. We are running PCR tests and probably you heard about different kinds of testing, but the PCR testing is for the analysis and checking that the person is infected by the virus. But there are also other tests like the antibody test that is to see if a person has been infected before. If we look into the Q2, we had very strong sales of blood gas analysis due to the intensive care units, but that was more normalized in the quarter due to the fact that there wasn't that many persons in the ICUs. Looking at the research market, we saw that in Q2 there was lockdowns in many countries for research and academic research, but it's more open up now in Q3 and it's getting back more to normal. We can see increased fundings in the virus research both from the public and the private research grants. We have strong sales both of instruments and reagents. We saw lower demand into veterinary and food, and also lower demand into advanced instrumentation. This year's Nobel Prize in Chemistry goes for the Unetix scissor CRISPR Cas9. The two persons behind that discovery is Emmanuelle Carpentier and Jennifer Doudna. Emmanuelle Carpentier has a connection to the Umea University in Sweden. That's quite nice of us. I'm happy to say that other research companies are distributing products that actually is going into that kind of research like Radiance and also Ensign for CRISPR Cas9. Hi, my name is Uwe Sandin. I'm the Business Area Manager for MedTech. I will present MedTech fantastic results during Q3 and we had a fantastic performance with an organic growth of 47%. The net sales were SEK 514 million, which is 45% up versus last year. The EBITDA was SEK 72,000,000, which is 177 percent up. And EBITDA margin went up from 7.3% last year to 14%, an impressive results. We have delivered large quantities of PPE, personal protective equipment to the hospitals, equipment that creates a safe environment with respect to COVID-nineteen. The demand has been huge, and we have succeeded in securing supply and quality of these products. Now the stocks have been filled and we know that demand will go down. Business not related to COVID-nineteen has been down in our markets. Patients have been hesitant to visit hospitals and resources have allocated to the COVID-nineteen treatment. Elective surgery has been down in all our markets. But at the end of the quarter, we saw an increased sales of products for normal medical care and for elective surgery. Our home care companies had positive sales growth, but we have seen delays in our projects. However, at the end of the quarter, we could deliver bathroom related assistive devices in Sweden, which is a good sign. We have also hoped that in the coming quarter to begin fulfilling several of the municipal contracts in Norway we received earlier regarding welfare technology. Overall, we had a very, very positive quarter, which we are very, very proud of. And we have also done 5 acquisitions added to the MedTech during the quarter, 3 within Hospital and 2 within Home Care. And now a few words about financials and we start with Adlife's long term financial goals. And we have profitability, which should be more than 45%. In the Q3, we ended at 81%, which is the highest amount we have reached since the listing in 2016. And the reason behind Going to the next profit growth, which should be more than 50%, and we reached 113% at the end of September, which, of course, comes from the strong EBITDA result that we have had. Looking at the average since we were listed, we have generated 39% yearly growth, which is well above the 15% that we have. Going to the acquisitions, in the Q3 or in 2020, we have announced 5 acquisitions. We started with EuroClone in Italy in the Q1. We made an acquisition in Australia. We bought a company called Technipropulmomed. The company has a net sales of SEK 13,000,000 5 employee. The company has the same agents as we have had in the Nordics. The name of the agency is Pari and we have had that agency for many years in the Nordics. In the Q3, we also announced that we have signed an agreement to acquire Siad Healthcare, a company in Italy working in the segment Advanced Surgery. SIAD has net sales of SEK85 1,000,000 and 17 employees. The acquisitions need to be approved by the Italian government before we can close the deal and we hope to be able to close it during the Q4. On October 1, we announced that we did an acquisition in Denmark. We bought a company named Rupox, which is producing needs adapted kitchen and bathroom solutions. The company has sales of SEK 95,000,000 73 employees and the company will belong to the business area Medtech. On the 1st October, we also announced the acquisition of the group DACH Medical in Austria. The group consists of 3 companies with sales in Austria, Switzerland and Germany and have sales of SEK 145,000,000 and 23 employees. The company sells products within the segment Specialized or Advanced Surgery and will belong to Business Area Medtech. Finally, on the 1st October, we announced the 3rd acquisition of SafeCare Systems, a a company within the welfare technology in Sweden. The company has net sales of SEK 34,000,000 and 21 employees and will belong to business area Medtech. Looking at the income statement and we're looking at the quarter. The net sales amounted to a little bit more than SEK1.2 billion, which is an increase of 55% compared to last year. The gross margin ended up at 34.6%, which is in the same level as last year. But the gross margin has strengthened in the Q3 compared to the quarter before. And the reason for the increased gross margin is that we have a change in product mix. In the Q3, we have less instrument sales and more of the sales of Reagenses. The EBITDA amounted to SEK 199,000,000 compared to SEK 65,000,000 last year, which is an increase of 2 0 6 percentage. The EBITDA margin amounted to 16.0%. In the Q3, we have succeeded to get the profit for the period to SEK 127,000,000, which is an increase of 3 69% compared to the same period last year. And we see the same trend on the accumulated figures. Looking at the balance sheet, there are only minor changes in the quarter and it's mainly the net debt that has decreased during the quarter and this is due to the strong cash flow that we have had. The financial net liabilities amounted to SEK 814,000,000 and the net debt to equity ratio ended at 0.5%. Equity ratio ended at 49 percentage. So we continue to have a strong balance sheet for future growth. We continue with the cash flow for the Q3. We have a really strong operative cash flow in the Q3 amounted to SEK183 1,000,000 and this is mainly due to the increased profit that we have had in the Q3. Net investments is in the same level as last year and other financial activities is a decrease of loans that we have been able to do in the quarter. Looking at the accumulated figures, we also have strong cash flow from operative activities amounted to SEK391,000,000 compared to SEK225,000,000. Investments are in the same level as last year and we have been able to repay loans of SEK 279,000,000 in 2020. Finally, a few words about key financial indicators. The number of employees amounted to 988 people in the end of the third quarter and our EPS ended at 3.12 percent, which is an increase with 2 44% compared to 31st December 2019. Thank you for listening for our presentation today. And if you have any questions, just contact