Ladies and gentlemen, welcome to the Comet Media and Investor Conference Call and live webcast. I'm Sarah, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing Star and One on your telephone. Webcast viewers may submit their questions in writing via the relevant fields. For operator assistance, please press Star and Zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Heinz Kundert, CEO of the Comet Group. Please go ahead, sir.
Good afternoon, everybody, and welcome to the presentation of the first half report 2019. I'm going to start on the slide number four. On slide number four, you can see that the net sales in the first half of 2019 has been CHF 177 million. This is a down of 23%, 23.8% versus the H1 2018. This is a significant reduction of the sales due to the downturn in the industry. It's mainly because of the memory sector, where we are very much engaged, and the memory market has been hit hardest in comparison to the total market. This had a big impact on the EBITDA, which is only 4.8%, and mostly it is driven by the volume. That means lack of volume gives us a much lower EBITDA margin. All the other activities, like the improvements of IXS, could not compensate, of course, for this big loss.
On the other side, the cash flow has been increased from 2% to 8%, thanks to rigorous network and capital management and also CapEx freeze and some other cost-saving activities, especially in the field of central costs. We do have still a very robust financial footing with a 48.8% equity ratio. That means from the balance sheet, we look pretty good. Going into more details on slide five, you can see the four divisions. As I said, PCT, Plasma Control Technologies, with sales of CHF 73.1 million, is 40% down compared to H1 2018 and 17.6% down from H2 2018. In the first half, the sales or the market as such has reached a very low point, and I'm convinced that we have reached the lowest point and from here it should become better in the next couple of months and quarters.
At least this is what also the market researchers and our customers are saying. This had a tremendous impact on the EBITDA with CHF 3.2 million or 4.3%, which is, of course, a very unsatisfactory result. Going to IXM. IXM has a reduction of 10%. This is due to lower business in the field of the security inspection at the airports, which is mainly coming from the freight and large packages. The money in this sector went to the checkpoints. That means the personal checks, which is a market where we are not very active right now. Of course, we want to improve that in the next couple of years. Nevertheless, the EBITDA margin with 21.1% has been pretty high, and this is because this division is in good shape as far as volume standardization is concerned.
We are absolutely positive that IXM makes progress in the next couple of quarters when the business, especially on the airport sector, is coming back. IXS has improved the top line as well as the bottom line compared to last year. Although, of course, with 5.1% of EBITDA, this is not a number where we are satisfied, of course. We believe that with certain activities in this segment, and I come back to that later, it should be possible to get a much higher EBITDA over the next couple of years. EBT is another sector where we had changes. Maybe you remember there was the divestment of Davenport, which was part of EBT here, and the sales have been reduced from CHF 9.6 to CHF 7 million in the first half of 2019. On the other side, the EBITDA has improved because of the divestment of Davenport.
This is the result of the four divisions, and I would like to go to slide number eight. Slide number eight shows you the situation in the market for semiconductors. The market researches, as you can see here on the left side. This is Gartner, Cowen, VLSIresearch, IC Insights, UBS, WSTS. They have a forecast that the market is growing on average by 7.8%. Again, these are the devices, not the systems. The question is how fast and when it really starts. You can see on the right side, some quotes from SIA. SIA is Semiconductor Industry Association. They were surprised of the surprisingly strength of the memory price stabilization. It clearly shifted suddenly from customer depletion of inventory to customer build.
This is a good sign that the memory business, as well as the logic and the foundry business, is coming back again. An interesting slide is on nine. It shows now the direct market. This is the equipment market on the left side, where we deliver our systems as a part of these markets, of this equipment. Clearly, 2018, with the highest value of more than $60 billion revenue. It went down in 2019, as we can see, and is expected to go up again in 2020 as a forecast. That also confirms our opinion that the lowest point in the market has been reached. Of course, we still have some uncertainties, maybe not as far as the market is concerned. It is more the geopolitical situation on tariffs and other factors that makes us a little bit cautious on the interpretation of these numbers.
What you can also see here, interestingly, is that the majority of the market is reddish means it's Asia. That the U.S. is the dark blue part of the bar that is relatively small. Despite all the issues with the tariffs, the main market is still in Asia and will remain Asia. This year, Taiwan will become the largest market in 2019. China will be the largest market in 2020. Despite all the discussions between the U.S. and China is the dominant player in semiconductor manufacturing in 2020. Going to the financial results. This will be presented by our CFO, Beat Malacarne.
Thank you, Heinz. I would like to explain our financial situation of the first half year, 2019, based on a few slides only. Before I go in, I would like to draw your attention to page number 11. Page number 11 shows you here the first-time application of a new accounting standard, which is IFRS 16, that we, again, as I said before, applied for the first time with effect first of January 2019. As a consequence, when you apply a standard in a business year or in a financial year, you also would have, for comparative reasons, to adjust the previous year, which in our case now is the first half of 2018. You see that here on the right-hand columns. IFRS 16 defines that rents and leasing contracts lasting longer than one year would have to be capitalized.
That means we have to take the assets into our balance sheet and also show the respective liabilities in our balance sheet as well. As a consequence, of course, is that the lease payments and also the rent payments that we have in our balance sheet in different functional costs and in COGS as well, would have to be taken out and be replaced by a depreciation amount and also by a financial, or let's say, an interest amount. In our case, taking out all the lease rents and the rent payments out of our functional costs and COGS, has a positive impact on EBITDA. That's the first line here that you can see here on the right-hand side. It increases our EBITDA by 1.1% from 12.7%, as we have reported last year, to the 13.8%.
Of course, to compensate that, we have an increase in depreciation and we have an increase in financial results, as you can see on the slides here. Of course, 2019, we do not adjust, as we already applied IFRS 16. Down on this page, you see also the impact on total assets and total liabilities. We take in these particular assets as an asset in our balance sheet and also respective liabilities accordingly. With that, I would like to move to page number 12, which is our income statement here. Here I have a few comments. Our net sales, as we already heard from our CEO, went down from CHF 232 to CHF 177, which is a decrease by almost 24%. You know that our biggest division that we have in our business portfolio is PCT, Plasma Control Technologies.
This particular division experienced a downturn of over 40%, to be precise, 41%. That has driven the entire thing here. Whenever we have deviations in our P&L or whatever, this is basically mostly driven by the PCT business. This volume impact has also a negative impact on our gross profit margin, which reduced to 36%, roughly about 36%, from about 40% in previous year, six-month period. That was mainly a volume impact. Looking at the functional costs, which are below the gross profit line, here I would like to make two comments. First, Comet managed to significantly reduce the functional costs. When you look at development expenses and SG&A together, you realize that we have saved about CHF 11 million in functional costs, which is about 40% compared to previous year, the same period.
Having done that, we have not stopped any project, which is an important development projects which will generate future cash flows. There, we continue to spend and have continued to spend, of course, in a way that we secure our cash flow future also for the next years. Other than that, altogether CHF 11 million savings. Below the operating income or the EBT, as you say here as well, is the financial result, which is a little higher. They're a little high because there was higher interest expenses, but also there was a negative impact because of foreign currency developments. Our income expenses became not an expense here in this particular first half year, and it's a positive amount because we are in a loss situation.
As you can see, CHF 3.1 million net income, which is a negative number here, that means a loss, which compares to positive CHF 14.5 last year. Below there is also added the EBITDA. The EBITDA went down from CHF 32.1 million, which was a margin last year of 13.8%. It went down to CHF 8.5 million or a margin to 4.8%. I would like to give you a few explanations on page number 14, which is the waterfall for the EBITDA. Here you see again, the CHF 32 goes down to the CHF 8.5 million. Mostly driven here by the first column, or the first column shows it's mostly driven by the PCT business, where we experienced the EBITDA loss of almost CHF 28 million. When you look at IXS, there you see a positive impact.
Last year, there was a restructuring in IXS, which results this year in much lower costs at the end of the day. That has a positive CHF 3.1 million. Going further to the right, which is the X-Ray Modules business, there's a negative impact. This is a purely volume-driven thing. We have heard from the CEO before that there was a drop in sales compared to previous year period of roughly about 10%. That, of course, has left its traces also on EBITDA, which is a little bit negative here. Moving further to the right, where we see the EBIT. EBIT here is clearly the sale of the Davenport business. That means the ebeam systems business that we had in the U.S. that took place in 2018, second half.
Of course, there is less costs, less losses with that sale of that business, and that has resulted to a better EBITDA of CHF 4.4 million. That leads now to the 4.8% EBITDA margin. With that, I would like to move to our cash flow statement, which is on page number 17. Despite the difficult situation that we are in with our operating business activities, we have managed to increase our cash flow margin. Our cash flow margin in the current first half year 2019 amounts to roughly about 8%, which compares to about 2% same period last year in 2018. The reason why it came out that good is because of rigorous net working capital management. In the year 2018, we have increased our net working capital, while we decreased our net working capital in 2019.
That, of course, had quite a big impact in the end of the day. It results in a much better cash flow margin, as we see in 2019. Looking at the cash flow used in investing activities, that amount has reduced substantially. There are two reasons leading to that. First of all, we have introduced a CapEx freeze in 2019, early 2019. Secondly, we still spent quite a bit of money in 2018 for the new building in Flamatt. These were the two reasons why we have a much better situation in the investing cash flow than we have had in 2018. As a consequence, out from this rigorous net working capital management and also the CapEx freeze and lower spending in investing activities, we have achieved the free cash flow.
You can see here that our free cash flow is CHF 5.9 million compared to a quite high negative number last year. That in turn also results in lower financing activities, which you see in the line below. That is quite an acceptable cash flow situation, I must say, but always considering in the difficult environment that we are in. I always say that usually a cash flow margin of a normal business should be at least 10%. Between 10% and 12% would be ideal result that we could achieve. In that particular year, acceptable result. With that, I move to page number 18, which our balance sheet. This is actually a nice picture to look at. You already see it in the title. We say it's a robust balance sheet. It's definitely a robust balance sheet. Long-term assets are financed with long-term means.
Short-term assets financed with short-term means. That is always a good situation to be in. Our equity ratio amounts to close to 50%, to be precise, 48.8% here. The best you cannot really read out of these numbers here because they are quite condensed, but we have a good liquidity. I think our liquidity is good and our liquidity reserve is also good, and that definitely gives us some room to breathe. And in a situation that we are in, and we are not quite sure how long it will last. We definitely have a balance sheet which allows us to be in a rather relaxed situation balance sheet-wise. That is a nice picture to look at the end of the financial results, and that's all I have to tell you at this point in time.
With that, I would like to hand back to our CEO, Heinz.
Thank you very much, Beat, for your explanations. Let me talk about the strategic direction. Actually, usually it's not part of the balance sheet conference here, but as I'm here now for three months or let's say 100 days, I feel obliged to give you some kind of thoughts in what direction the company will develop in the next couple of years. On the left side, you see the issues that I have discovered during the last 100 days. This is simply that the state of technology in most areas is still there. We are really competitive on the technology side. We do have highly skilled and motivated people who are eager to outperform. Despite all the shifts we have in the company, they still are fully behind the company, and they want to perform, and they want to go with us in the new direction.
We have long-term partnerships with leading companies. It was one of my first actions to visit them, mainly in the U.S., and to make sure that they go with us and they invest with us and that they give us a chance for more business. I can only say that this is what they said. They said, "Listen, you are the supplier of choice, and we want to go with you into the next couple of years and having success together." It's also clear that RF and X-ray technology are key enablers in the progressive digitalization of society. Without those two technologies, the semiconductor industry would not be able to achieve the ambitious goals that they have for the next couple of years. We also have a high potential in services. Please remember, service is repair and parts. Services is more than that.
Services also includes software that we need in order to build entire production systems or integration lines that is not only equipped with a scanner, but also with software. As we heard from Beat, our CFO, we have a very robust financial basis that gives us some room to maneuver. On the right side, you see a kind of action list, what we need to do to improve, because the financial situation is not satisfactory at all. We have to take action to increase our market share, to increase our sales, and also, of course, to increase the bottom line. I would say next couple of years, we should definitely be between 20% and 30% of EBITDA. Basically, it's possible compared to our peers. What are the actions? The biggest issue I have recognized is the complexity of the company.
This has to do with the lack of focus. We did too many things, one-of-a-kind systems, long-term delivery time, low profitability, and we have to completely change that into a focused company that is going for profitable market growth. The second point is we have to invest into more software. When I talk about software, it's not only operating software for a machine, it also includes artificial intelligence, machine learning, and data analysis. In particular, in the X-Ray business, this is extremely important to have a feedback system that controls the process and is not just showing a nice picture where you can see all the defects. The third point is expansion in high volume markets. What I said before, actually, with a high degree of standardization and high probability of remaining or becoming a market leader.
This is the condition to have a higher EBIT margin or EBITDA margin in order to really show good results. The fourth point is operational excellence and the ability to manage the cycles through make or buy decisions. When you compare to other companies in the same sector, I give you an example, VAT, which is my former company, they're in exactly the same cycle. They have components like us. They are still in the 25% EBITDA range, although also being affected by the cycle. I do not see a reason why we cannot do the same, and we are working on that with a high priority. Another issue is expansion of a footprint in Asia. You've seen that most of the equipment are sold or bought by Asian countries. We have to expand our operations and our activities in general in Asia.
These five points are on top of my agenda, and we have already started to work on them. More details will now follow. Looking at the page 21, this just is illustrating again that the market is growing. The CAGR is approximately 7%, and of course, here you cannot see the cyclicity because it's flattened by the CAGR over four years. That shows that despite the ups and downs, these markets are going to grow. Both areas, RF power solutions as well as X-ray solutions, are part of this growth. Without them, this industry, as I said before, is not booming anymore. We are in the middle of this attractive market. Going to slide 22. This is the result of a strategic discussion, what we had, how do we go forward, where to focus.
Our DNA, so to say, in technology, is RF power and X-ray. This is where we are coming from, this is where we have high market shares. In some areas, we are market leader, and this is what we call the core, and the core should be strengthened. They're also expansion in services, what I said before, which is going beyond repair and parts. It's including preventive maintenance and systems control, by artificial intelligence and so forth. You can also see that eBeam is disconnected from the core. Here we are looking to have strategic alternatives, how to reduce the risk to almost zero. We do not want to have risks in this business anymore. Also to eliminate the losses.
We are in discussion with some of the potential candidates. We are quite optimistic that we can find a solution to continue this business, but with a much lower involvement of Comet and of course, without any risks and without any losses for the future. Going to page 23, it shows you a little bit in more details what we intend to do in the RF power business, the PCT division. On the left side, you can see the vacuum capacitors where we are absolute market leader. We are also market leader in matchboxes. Newly we are entering the generator business with a totally new product. This square here, RF power unit, is so-called increased share of wallet.
We have very good positions at large customers and we're going to expand that and hope to finally have up to 100% share of wallet at the big customer. This is possible. VAT has achieved that, and I do not see a reason why Comet cannot achieve that as well. The second box is product innovations. Here we have a new RF power generator, which is unique, which is disruptive, and has been presented to key customers in June 2019 in the U.S. They're very intrigued on that new generator, but it has to be tested, it has to be adapted to the customer's specification, and will take a while to do so, because we need a certification for the product that is going into the machines of our customers. That will take 1-2 years.
We expect to have revenue streams starting from 2021, if everything goes right. We also have to increase the flexibility to buffer cyclical swings more effectively. It's clear that downturns, upturns will come again, sometimes later, and we have to build an operational flexibility that during downturn, we are not losing so much money as we do right now. Also here we have peers which are doing that, and we will build the structures and the necessary measures in order to achieve this high flexibility. I already talked about the focus in Asia. This is an important issue for two reasons. One are tariffs. We have to get away of these obstacles and invest more in Asia, also in operation, not only sales and service, but also in operations. Going to the next slide. This is 24.
Here we have a tremendous change in the repositioning of the X-Ray Systems business. Up to now, we had seven markets that we served. Some of these market serves are not really attractive, and we decided to focus on electronics, semiconductors, this is one, then aerospace and automotive. We see in those three areas, the highest potential to profitability grow further, and to increase our EBIT margin substantially. That also includes, as I mentioned before, artificial intelligence, machine learning, data analysis. This is part of the concept.
I must say, at the moment, these skills do not exist sufficiently in our company, and we will have to look to get resources, be that a strategic collaboration, be it that we buy a company or be it that we buy teams with the capability to bring these kind of skills into the scanners and sell it as a complete solution. With those measures, we are sure that if we do that right, and we're going to produce or achieve the volumes with standardized systems. We have a plan to have just one standard system with additional modules similar to the car industry, which has maybe two or three platforms that have hundreds of variations. We do the same. With such a system, we should be able to achieve an EBITDA within the next three years, of more than 20%.
Here we have peers who are doing this, and no reason why we cannot do it as well. The third one is X-Ray Modules and components. Here we have actually a very good business model based on volume, based on standardization. This is also one of the reason why this division is also making decent EBITDA margins, which is more than 20%, last year was even 26%. We do not have a radical change here. We just do more of the same. Increase the addressable market from CHF 100 million market to a CHF 300 million market where we have still room to grow in the area of inline CT, computed tomography, security, 3D printing, and miniaturization. We also move some components, which are right now in Hamburg at Yxlon back to Flamatt because it belongs to components and makes the whole process less complex. The outlook.
As a summary, we can say that the fundamental growth drivers are fully intact. We also believe that there's a moderate recovery of the semi market expected in 2020. Could be more than that, but we have to be careful because there's so many factors which could kick in and make the life much harder. From a technical point of view, from a market point of view, should be possible to start growing again in the next year. We have strong financial footing. We mentioned that before. The strategic focus is based on plasma control and X-ray, repositioning X-Ray Systems, and evaluation of strategic options for the eBeam technology. All these activities are in the middle of the transition, and we hope that by November, when we have the strategic day in Flamatt, we can tell you more about the current status at that time.
We also have measures to considerably increase efficiency ongoing, and we will also continuously report on these successes. Come to the last slide on 28, the summary of the outlook. We tend to say that the net sales in Swiss francs will be between CHF 350 million-CHF 370 million. This should be achievable by an EBITDA margin of 7.0%-8.5%. We believe this is doable. Of course, always under the condition that there is no geopolitical event or shift that makes our life much, much harder. We firmly believe that the lowest point of the semiconductor industry has been reached, and from now on, it will continuously go up in the next couple of years. With that, I conclude my presentation here and give back to the moderator.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one at this time. As a reminder, for questions from the phone, please press star and one. We have no questions from the phone, but we have a question from the webcast coming from Simon Mountain, which is asking: What is the typical time from the IXM order to sales recognition? What was the IXM order intake in 19H1 versus 18H1? How are IXM sales expected to develop in 19H1 versus 19H2?
It's a very tough question. The problem here is when it's really a component that is standardized or is something special. In case of IXM, order to sales should be relatively months. The second part of the question was the IXM order intake in first half year versus 2018. The order intake of IXM in the first half year was about our sales amount, pretty much in line. That was about the same also for last year. It's a pretty much stable situation here. How are IXM sales expected to develop in first half year versus second half year two? We clearly believe that the slight shortfall that we see in the security business and also in the NDT business, oil and gas, will gradually recover and come back. This is just a fluctuation that we see, a certain volatility.
We believe that the business drivers are intact and that the business will come back gradually in 2019.
Once again, if you wish to register for a question, please press star one. Gentlemen, there are no further questions from the phone nor from the webcast. Would you like to conclude the call?
No. In that sense, thank you very much for joining the meeting today, and we're looking forward to have you on the phone or personally in front of us in the next couple of months. Thank you.
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