Ladies and gentlemen, welcome to the Media and Investor Conference Call and live webcast. I'm Andre, the conference 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. 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 Dr. René Lenggenhager, CEO of the Comet Group. Please go ahead.
Thank you very much. Ladies and gentlemen, I want to welcome you warmly to the annual results conference call of the Comet Group. Markus Portmann and I will briefly lead you through the most important developments in 2018. You can follow the presentation after you have registered for the webcast. Alternatively, you can access our call presentation on the Comet Group homepage. I will begin with a quick summary of the big picture and give you an overview of the business performance in 2018. Markus Portmann will go over the financial results in detail for you, after which I will discuss the outlook. After the presentation, we have reserved time for questions. In 2018, the Comet Group managed a demanding year.
After several years of substantial growth and excellent results, the second half of the year 2018 brought a significant market downturn, especially in the semiconductor market for 3D NAND memory. This market downturn coincided with some challenges we had in the X-ray systems and the E-beam business. Despite the cycle change, we were able to generate sales of CHF 436 million, virtually holding the record level of 2017. We rapidly responded internally to the cyclical downturn. We adjusted production capacity at PCT to align it with the changed demand in the semiconductor market. We also divested the loss-making business of large E-beam systems in the USA, we initiated an earnings improvement program at IXS after a disappointing first half year in this division. These measures are completed and, as already announced, will deliver results in 2019.
Excluding the one-time cost of CHF 10.5 million related to the corrective measures, we thus reached an EBITDA operating margin of 11.1%. Net income, excluding one-off effects, was CHF 24.3 million. In our investments in the future, we took an anti-cyclical approach. We invested about 12% of sales in future revenue drivers. For example, in the development of the new RF generator at PCT and the renewal of the product portfolio of IXS. With regards to CapEx, we invested 4% in the equipment and maintenance of our production capacity. Last but not least, we expanded production capacity in Flamatt, and thus created urgently needed space for operational efficiency improvements. We believe that under the circumstances, our performance was more than respectable overall in 2018. We managed the cycle and pulled the right levers for future growth.
For the time being, Comet will have to cope with the downturn in the semiconductor market, but the underlying growth drivers are intact. The so-called data economy is growing. Artificial intelligence will further drive demand for memory chips. Memory chips with ever-increasing capacity and thus demand for more and more plasma processes, in which Comet RF solutions are indispensable. Comet technologies do more than just enable the data economy in the semiconductor market. Comet technologies enable a multitude of key globally relevant megatrends. To name two examples, more and more components are produced using 3D printing. X-rays are the only technology that allows you to look inside, and thus ensure optimum quality and safety. The technology is also increasingly being used as an in-line sensor right in production lines to improve manufacturing processes in real time. Safe food is another urgent issue worldwide.
With our E-beam technology, we support processes like the chemical-free sterilization of packaging and enable significant productivity increases. In fact, the E-beam-based Tetra Pak filling machine produces twice as many packages as a conventional system in the same time. Let's briefly look at how our individual divisions did in 2018. As already mentioned, at PCT, despite the slump in the market, we still achieved sales in line with the previous year's level, thanks to the record high in the first half of the year. The EBITDA margin was at 19.7%. Two factors in particular influenced earnings in 2018. Our product mix changed, and we invested heavily in the development of the new generator portfolio, with which we plan to open up a new market from 2020. Let's have a closer look at what is behind this investment.
PCT is the only manufacturer worldwide to develop and produce all core components of the RF power delivery system in-house. The cornerstone for future growth is the modular, flexible, and high-precision generator we are currently developing. The project is on schedule. What makes this development special? In the semiconductor market, ever smaller chips with ever more functionalities are being produced. This requires higher precision, measurability, and repeatability of the processes. With the new integrated RF system, all components are digitally connected to each other and to the plasma chamber, and are exchanging data. This allows the process to be controlled and optimized in real time. The prerequisite for this is the new generator. In 2018, IXM again proved its qualities as value generator. Under the leadership of Stephan Haferl, the division successfully expanded its position in the core NDT, nondestructive testing, market.
This was primarily due to the brisk high-margin business with portable X-ray tubes for the inspection of pipelines, mainly in the U.S. The investment made in the previous years in the IoT-capable iVario generator paid off. Most customers converted their systems to this new product shortly after the launch. EBITDA increased by a healthy 11% to 24.7%. This was achieved despite one-off costs in connection with the building expansion in Flamatt and productivity losses in prefabrication as a result of the slowdown in business at individual customers. IXM is benefiting from its strengthened product portfolio. It consists of the robust portable X-ray tubes, modular components that are configurable to customer requirements, and intelligent modules on the basis of iVario, the so far only IoT-capable generator to date.
On this basis, we are working on exploiting attractive growth opportunities in the NDT market that arise from robotics, automated in-line applications, miniaturization, and additive manufacturing. In the security inspection market, the focus is on products that reflect the increased price sensitivity in this market. Let's move on to IXS, our X-ray systems business. Towards the end of the year, we were able to report the first successes in new products, particularly in the electronics market. In other markets, such as wheels and foundries, IXS recorded a decline in sales due to not yet completed product innovations. This resulted in an overall sales decrease of 4.7% compared to the prior year. Due to the weak results in the first half, we changed the management as reported in August and implemented a comprehensive earnings improvement program.
It comprised a focusing of the R&D projects, a workforce reduction by 50 full-time equivalents, and operational improvements. The program is completed, and in 2019, it will result in an improved EBITDA margin of about 6%. The program entailed one-time costs of CHF 3.9 million. We also continue to invest in product renewal. Both of these are reflected in EBITDA operating earnings. Before one-off costs, EBITDA earnings were at CHF 2.4 million. An important success factor for IXS is the portfolio renewal. We are on track with the launches. The good trend for the FF35 CT systems, with which we were able to achieve new orders 120% higher than the year before, is particularly gratifying. Further releases for the core markets, electronics, automotive, and aerospace, are scheduled for 2019. This will stabilize sales in 2019 and contribute to substantial additional orders from 2020 on.
At EBT, the year's defining development was the realignment. Despite the high investments in the product portfolio and in standardization, sales in the E-beam systems business in the U.S. declined. We therefore divested the E-beam systems activities. Markus Portmann will go into the financial details of this later. Due to the separation from the systems business, the loss from the divested systems business of CHF 14.5 million will no longer be incurred at EBITDA level in 2019, compared with 2018. We are now focusing on the promising components and modules business. This is where our USP is, in the compact sealed E-beam lamp. Our OEM business offers us attractive growth opportunities in the medium term. The aim is to achieve growth through the scaling of existing capabilities in adjacent and in new applications.
Comet works on innovative solutions together with partners such as Tetra Pak, Bühler, and Skan made significant progress in 2018. As an important example, Bühler presented its E-beam-based system to the first customer. Be available to customers this year for the application in the treatment of spices. Comet also achieved gratifying progress in the application involving hatching eggs. Field tests for this application yielded the first positive results. We are currently in negotiations with OEM partners to build an industrial prototype, and with leading end customers to later carry out the tests in a high-throughput environment. With this overview, I would like to hand over to Markus Portmann for the financial results.
Yes, thank you. I would like to welcome all participants of this call from my side as well, and start leading you through the full year financials, starting with an overview on the key figures in the profit and loss statement. As you have already seen, we were able to generate revenues that almost match the record 2017 level. Not only this, on the incoming order side, we can also see significant increases or compared to prior year, which are ultimately then reflected in the increased backlog. The increase in backlog is mainly related to our X-ray systems business. If you go further down the profit and loss statement, you will see the gross profit margin, which decreased compared to the prior year. This is due, on one side, to the lower sales volume, in combination with an underutilization of our capacities.
Roughly 1.2 percentage points are related to this impact. On the other side, you see an impact related to one-time effects. I will go into further details with respect to the one-time effects on the slides to come. Further down in the profit and loss statement, we have the functional cost side. What you can see year-over-year, the increase of CHF 22 million. A large part of that is related to one-time cost again. The rest is directly related to investments in the ongoing business. The next slide is a rather complex slide that will help you understand the influences on the different positions of the profit and loss statement in a year-over-year comparison. Let me start on the very left side and work myself through to the right-hand side. On the very left-hand side, you see the as-reported results for the year 2017 as a starting point.
We have adjusted this first column with a one-time effect of last year. We had a pension fund adjustment in the prior year, which actually brings us to a base of 14.8% with respect to the EBITDA margin. That's an adjusted and normalized result for 2017 to start with. What you see is in the next column, the results as they have happened compared to prior year before the one-time effects and at the constant exchange rates. What you can see there is that with respect to revenue, we have almost CHF 10 million lower sales volume at constant exchange rates and an EBITDA loss of CHF 16 million going with it. The reduced sales volume led to a lower gross profit, driven on one side by lower volumes, but also driven by underutilized fixed costs.
We had an underutilization of which all in all, together with the volume, impacted our gross profit with almost CHF 7 million. On top of that, in the functional cost, we have ongoing investments in projects such as the generator project in the PCT division, but also an increase of resources throughout the year that are in line with our future and ongoing business. Furthermore, we have started the move into the new building. We finished the new building the middle of the year and have now started moving into this new building. This, all in all, leads to an EBITDA margin of 11.4%. If we, in the next column, consider the impact that the foreign exchange rate had in 2018, you can see that this impact is on the EBITDA level at 0.3%, which takes us to an EBITDA margin before one-time cost at 11.1%.
The last two columns are explaining the impact of the two significant one-time effects. The first column with the title EBS Impact is the restructuring, the divestment of our E-beam Systems business in the U.S., in Davenport, in the U.S. We can see an impact on the cost side of CHF 12 million. On the net income, CHF 9 million. The CHF 9 million are in line with what we have already disclosed and forecasted in August last year. On the EBITDA level, we see an impact of now CHF 6.6 million. This is also in line with what we have disclosed at the end of last year in November. All in all, the impact of this divestment sums up to 1.5% on the EBITDA margin level. The second column, that's the restructuring we have had in Germany.
The overall cost is at CHF 3.9 million, which is also lower than what we had originally forecasted with CHF 5 million back in November. Together, the two have an impact of 2.4% on the EBITDA margin, CHF 12 million on the net income, and CHF 10.5 million on the EBITDA level. You will find all these relevant numbers in the media release. The next slide explains the change from prior year's net income to this year's income. You can see that last year we had CHF 35 million in the net income, which this year, especially impacted by one-time effects, is strongly down. The same you can see with the finance expenses, they are slightly up. On the other side, we have much lower taxes that we paid. The finance expenses are mainly related to currency translation losses, split approximately half and half between impact on the EUR and on the USD.
The tax rate is lower than the normalized expected tax rate of 24%. We came out at 18.9%. This is related to the use of tax losses carried forward that were recognized this year, and by a partial tax exemption by the Canton of Fribourg, where we still have a tax holiday till 2023. This takes me to the next slide, which is the cash flow statement. As you can see that even though we had a difficult second half of the year, we were able to generate an operating cash flow of CHF 22 million. In combination with significant investments, partly in the building and partly in the production equipment, this led to a negative free cash flow.
Normalized by the investments in the building, because these are one-timers and will not continue in 2019, we were this year, at the same as last year, able to show a positive free cash flow. Last but not least, we have the financing cash flow, which is mainly related to the dividend payment. This takes me to the next slide, which is the balance sheet. As you can see, we have a very strong balance sheet. We have a high equity ratio of 54%, and you can see also some moves between the different line items from current assets to non-current assets. Those are mainly related to the investments in production equipment and into the building. Liabilities are slightly decreasing. This is related to the slowdown in business in the second half of 2018.
The next slide shows you the leverage ratio, net debt to EBITDA of Comet, which is at the low level of 0.7. The upper part of the chart, the gray bars are showing the EBITDA development over the last few years. The lower part is the net debt situation, which increased this year, directly related to the increase in investments that we had. We do think that the leverage ratio is still low, even though it increased from 0.1 to 0.7. That the planned investment based upon this low net debt, the planned investments in the future businesses can still be financed, especially based upon the normalized EBITDA.
That takes me to the last slide, which is the dividend, which is not on your presentation, but the board decided to follow its payout policy and to distribute to shareholders a dividend of 1.2 CHF per share, which is a payout ratio on a normalized basis of 38%, as in the past. Thank you. I will hand over back to the CEO, René Lenggenhager.
Thank you, Markus, for these explanations. Let's turn to the outlook now. The Comet Group is in a sound position. The corrective measures for IXS and EBT have been completed and will have an impact on profitability in 2019. We are entering fiscal 2019 with a strong balance sheet and low net debt. At the EBITDA level, last year's non-recurring expenses of about CHF 10.5 million are dropping out this year. The same is true for the losses from the divested EBS business. The underlying drivers of business remain intact. We are well-positioned to address attractive market potentially in all our divisions. On this slide, you see our addressable markets with our market shares with the gray bars. For all our businesses, we are in very attractive markets. Let's now move to the outlook in detail per division.
Currently, visibility in the semiconductor market, especially for 3D NAND memory chip, a key market of the Comet Group, remains very low for all market participants. This does not allow projections for fiscal year 2019 at group level. Our guidance is therefore for the individual divisions. PCT, we expect continued weak demand for 3D NAND memory chips and high inventories in the first half of 2019. We thus expect first half year sales to be around 10%-20% below the level of the second half of 2018. No forecast is possible for the second half of 2019. IXS, IXM, and EBT, we keep to what we said already last year. IXS, we anticipate a slight year-over-year increase in sales for the full year 2019, and as announced, an EBITDA margin of about 6%.
At IXM, we are projecting slight growth for 2019 in line with that of 2018. For EBT, we expect sales of about CHF 15 million with an EBITDA loss of not more than CHF 5 million. At this time, I'm going to close the presentation part and open to the Q&A session. We have reserved about a quarter of an hour for questions. May we have the first question, please?
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Okay. I would like to thank you for your interest. We will see some of you at our roadshow in London, Frankfurt, or Geneva. Also looking ahead, we would like to invite you to join us for the first half year result publication August 15 and for our investor day on November 21 of this year. Thank you very much and have a good afternoon.
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