Ladies and gentlemen, good afternoon. Welcome to the Comet Group Half Year 2018 Results Analyst and Investor Conference Call and live webcast with René Lenggenhager, CEO, and Markus Portmann, CFO. I'm Moira, 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. After the presentation, there will be 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 relative field. Should you need assistance, please press star and zero to call an operator. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to René Lenggenhager, CEO. Please go ahead, sir.
Thank you very much. Dear ladies and gentlemen, I want to welcome you most warmly to the financial results audio webcast of the Comet Group. I will start with a review of the first half year of the group and the divisions. Our CFO, Markus Portmann, will comment on the most important topics of the financial results. Afterwards, I will talk about the outlook and open the floor for questions. Let's start with the review of the first half year. The group continued its growth in the first half of the year, beating a record high first half of 2017. We increased our sales by 4.4% to CHF 232.4 million. Net income, excluding one-time effects, is up slightly to CHF 19 million, surpassing the record year ago level.
Including the one-off effects from the previously announced divestiture of the ebeam systems business, net income is at CHF 14.4 million. The Comet Group remains soundly financed. Despite significant capital investment in the new construction in Flamatt, the group's equity ratio improved by 1.5 percentage points to 53.2%. Markus Portmann will unpack these key figures for you later. Let's look at how our individual divisions fared. As you can see in this overview, the strongest growth in the first six months was achieved by PCT, followed by IXM, our X-ray module business for non-destructive testing markets. We will start with PCT. PCT delivered the strongest growth of all divisions in the first half year at 17.9%, that is no mean feat considering the record sales of the same period one year earlier.
The main driver remained the business with high-end impedance matching networks or our Match boxes in the semiconductor market. Comet also expanded sales of vacuum capacitors for the production of flat panel displays with customers, mainly in China. To round out the product portfolio by developing a modular, flexible, and highly precise RF system solution and create the foundation for growth after 2020, PCT continued to invest in R&D as well as the expansion of the smart lab in Flamatt. The EBITDA margin of 24.4% reflects this intensified investment activity. Besides investments in R&D, the lower EBITDA margin is also explained by increasing marketing and sales activities and the changed product mix. We remain confident for the future in this business area. Despite short-term postponements of projects, the drivers for the future growth are fully intact. Smart data, smart manufacturing, Internet of Things, artificial intelligence are the drivers.
Ajit Manocha, President of SEMI, speaks of a rebirth of the semiconductor industry based on artificial intelligence. All these major trends demand enormous computing and memory of storage power, and hence require prolific RF technology to create all this capacity. Comet is confident that through our work on the new RF system platform for the generators, we will, in the medium term, be able to tap into a new $700 million market segment. We are well on our way. The first prototypes will be tested with customers at the start of next year and are to be launched from 2020 on. Let's turn to the X-ray systems business now. IXS in the first half of the year did not meet our expectations. In local currencies, sales of the division decreased by 14.4% year-over-year to CHF 65 million.
Certainly, the business with systems for the inspection of tires showed a positive trend. However, this was not able to make up for the decline in sales for systems for research and new materials and inspection of castings and wheels. The revenue reduction, coupled with high investment in product portfolio development, led to a negative EBITDA result of minus CHF 0.9 million. A very positive trend was seen in orders for the newly launched Cougar EVO and Cheetah EVO systems for the inspection of electronic components. They were introduced at the end of last year and have been available since the beginning of this year. IXS recorded strong new orders for this that will be reflected in sales in the second half of this year. For the second half of the year, Comet expects sequential sales growth of 10%.
To revitalize the earnings performance of the IXS division, a sweeping profit improvement program has been put in motion that is now being implemented. We have appointed Dr. Matthias Barz as interim head of the business. He is very well-versed in systems businesses and has carried out successful improvement programs in other companies in similar situations. Comet has developed an action plan of measures with Mr. Barz that he is now executing together with his team. The program will run to the end of the year, and we are on track. The measures are as follows. First is the reprioritization and acceleration of projects. This mainly revolves around project control and managing more commercial criteria, and less by technical ones. The goal is to get to market faster while using less resources. Speed up, time to market, time to money are really the focus on this reprioritization. Second, workforce reduction.
IXS is cutting 25 positions in Germany, mostly through severance agreements as well as by attrition, and also not filling vacant positions. To a comparable extent, IXS is also suspending non-essential support contracts with external experts. Third, we are boosting our efficiency. IXS is critically reviewing and optimizing its organization and processes in all the organizational units. One example of such an improved process is going forward, Comet will reap the benefits of a strong reduction in throughput times in the production of the Cheetah EVO and Cougar EVO systems. We were already able to cut labor hours by one-fifth. The priority aim for IXS remains portfolio renewal.
We can point to our first success stories on this front in the form of the already mentioned redesigned Cougar EVO and Cheetah EVO products, which soon after their production in the electronics market, helped achieve new orders in this product group in the first half of 2018. Likewise, the launch of the FF85 CT in the first half of the year was a success and already generated the first orders. Our first customer, Siemens, is absolutely delighted by the system's high resolution and its versatility. To accelerate the renewal of the portfolio, we have placed the overall project portfolio on a new foundation, re-evaluated all projects, and set new priorities. In 2019 and 2020, we plan to bring a number of further innovative products to the market. These will stabilize sales in 2019 and are expected to contribute to substantial additional orders from 2020 on.
The rising importance of additive manufacturing and automated processes provides an outstanding opportunity for IXS. Our goal remains to optimally support Industry 4.0 with our smart X-ray solutions. Next up, we'll look at IXM, our X-ray modules business, and a very solid growth contributor for the group. Its sales growth in local currencies was 6% in the first half of the year. The performance was especially positive in the business with the robust Portable Smart Evo X-ray solutions for pipeline inspection, thanks and not least to the investment-friendly climate in the U.S. The investment of the previous years in the innovative iVario generator also did their part. In May, we sold already the 100th iVario unit. The EBITDA margin went up by 7.5 points to 25.1%, driven above all by the volume growth and the favorable product mix. The X-ray modules business is marked by continuous solid growth.
The division's marketing of the new iVario generator is on track. In X-ray tubes, Comet already enjoys a very strong market position today. For the iVario generator, we are confident we will achieve further growth in the coming years, both with the existing X-ray tube customers and new accounts. The chart shows you the very attractive potential we have here. I would now like to discuss ebeam. The performance in the ebeam systems business did not live up to our expectations. Despite the high investment last year in the overhaul of the product portfolio, sales of systems declined by 35.9% year-over-year in the first half of 2018. The resulting EBITDA loss was CHF 7.7 million. As we already announced, we have therefore decided to divest the ebeam systems business. Markus Portmann will go into the financial details on this later.
On this slide, you see an overview of the past business portfolio and the continuing business. As we have said, the operation in Davenport, Iowa, has proven unsuitable for building an attractive, scalable systems business with standardized products. Comet worked on various options and determined that the closure is in the best interest of Comet shareholders. The closing affects about 60 employees and is to be completed by the end of the year. As described in the major release, the closure will reduce the group's net income in the full year 2018 by about CHF 10 million. The benefit gained by this is the elimination of a significant source of losses. We see ebeam's future in the scalable OEM components and modules business with its higher long-term margin potential.
We are thus focusing on the clear strength and USPs, because only Comet is able to make the sealed ebeam lamp with the desired performance and lifespan. With these lamps, industrial processes can be made more eco-friendly and more productive. What is more, the modules can be integrated into the customer's existing value chain, as our OEM partners are already doing today. Here is an update. The ebeam components and modules business is to be further developed in a focused way in close partnership with strong OEM partners. We have made progress in all the projects involved. This overview shows the state of play. Tetra Pak is fully committed to ebeam technology. The work for the product development of the new generation of beverage filling systems is on track as regards ebeam.
The technology development and feasibility stage of the specialized ebeam lamp is now almost complete, and we are making preparations for the next phase. As to Uteco, in May at the Print4All trade show, our partner launched the upgraded GAIA printing system with four times greater speed, more colors, and higher resolution. Bühler presented its ebeam-based machine concept, Laatu, to selected customers as one of five big innovations in May. The machine helps to reduce microorganisms on granular dry food. The machine is approved for the treatment of spices. The process is ongoing to get further applications approved in European Union and in U.S. The first sales contracts are expected by Bühler in Q4 2018. Compelling progress was made in the project with Spelt. The first tests for the disinfection of hatching eggs yielded promising results and are being continued.
This is about treating hatching eggs with ebeam instead of the conventional formaldehyde treatment, and thus achieving better hatching results, a higher hatching rate, and healthier chicks. Comet will continue to invest in the ebeam business. The plan for the medium term is to develop new applications. Let me now hand over to Markus Portmann for more details on our financial results.
Thank you very much. I would like to give a warm welcome to all participants from my side as well. I will now lead you through the financials of the first half year of 2018, starting with the income statement. I'd like to make you aware before I start that the numbers of 2017 are all restated according to the IFRS 15 regulation. Now, if we look at this income statement, what you see, besides the fact that we have increased our revenue, you can also see in the first line on the new orders that we have much higher orders compared to the prior period, and accordingly, also a higher backlog of 7% compared to the prior year. What I would like you to look at is also the increased gross profit margin in absolute and relative terms.
We were able to increase our gross profit compared to the prior period. This is on one side driven by volume and the mix, whereas the business, the strongly growing business of PCT has strongly contributed to the relative gross profit margin on one side. On the other side, we also have our operational initiatives that are now starting. We have seen first positive impacts from the lead buying initiative on one side, and into the next year, once our new plant in Switzerland is fully productive, we will see more positive impacts from the lean automation initiative, quality improvements, and global logistic initiatives. Included in the improved gross profit is furthermore the impairment of intangible assets. CHF 2.2 million were booked into the cost of goods sold.
Despite the negative impact of the foreign exchange rates, we were able to show this strong improvement in the gross profit margin. Not only gross profit has increased, also our functional costs have increased. According to our growth strategy, we have on a continuous basis increased the number of headcounts. For example, in the R&T environment, where we, in the meantime, have up to 19% of our employees working for R&T. I'd like to mention here initiatives in the PCT environment with the new generators, but also the fact that we are strongly now working on new products for IXS. The same time, we have also increased our headcounts in the marketing and sales environment, where we have different initiatives that will help us sell the new products. On the bottom line, you can see the improved results, the financial result, and income taxes.
I will give more details on the slides to come. Moving to the next slide, you will see what the impact is and how Comet is positioned with respect to foreign currencies. The left column is showing you revenues split up by the different currencies, and on the right-hand side, you see the split of all costs of Comet for the different currencies. What you can immediately see is that most currencies are naturally hedged, with the exception of the U.S. dollar. It's also the U.S. dollar that has or had an impact of CHF 2.1 million to our EBIT in the first half of 2018.
In order to give you an overview what the sensitivity is of that U.S. dollar exposure to the Swiss franc, I have added a comment under the third bullet saying that on a yearly basis, the change by CHF 0.01 Swiss franc to the U.S. dollar has an impact on sales by approximately CHF 1.5 million and an impact on the EBITDA margin by 0.2% to two percentage points. This takes me to the next slide, where I would like to show the results as they were reported, but on a comparable basis. Starting with the blue column on the right-hand side, these are the results as reported as per June 2018. On the left-hand side, you see the results as they were reported for June 2017. Now, if we do make them comparable, we take the IAS 19 one-off impact related to a change in our pension fund.
We take that away. We also make the currencies compatible by showing the results of 2018 at exchange 2017 in order to get two comparable results. Those are the gray columns. In the gray columns, you can now see that revenues increased by CHF 9 million year-over-year on a comparable basis, that the EBIT is down by CHF 5.3 million, mainly related to the additional costs that we have added, the functional costs related to our growth strategy. On a comparable basis, results on the EBITDA margin level were down by 2.7%. If we now add back the impact of the foreign exchange rates, you will see that there is CHF 0.7 million related to foreign exchange rates on the top line, and that we have the before mentioned CHF 2.1 million negative impact on the EBIT level related to the foreign exchange rate.
This has an overall impact of 0.9% on the EBITDA margin. This is what you can see on the bottom of that column. The last column titled EBS Impact shows you what the impact was of the divestment for EBS in the first half of 2018. We have so far, and as per June 2018, impaired all intangible assets, where we have impaired CHF 2.2 million in the cost of goods sold and the rest in the functional cost.
This adjustment, this impairment had no impact on the EBITDA margin. This takes me to the next slide where we show the change in net income on a yearly basis. At first sight, income goes down from CHF 18.7 million to CHF 14.4 million. If you adjust that by the one-time impact of CHF 4.6 million, you can see that the adjusted net income was CHF 19 million, slightly above prior years.
What you can also see is that we have positive impacts first on the Net financing expenses, and second, as well on the income tax expenses. Let me first talk about the net financing expenses. There were two major impacts. The first one is that we do show lower interest expenses. They decreased year-over-year as a result of the increased capitalization of interest related to the facility expansion in Flamatt. The second one is the currency translation impact. The EUR year-over-year increased by 9%, approximately the USD went down by 3%, and all in all, that more or less netted out so that we have only very limited loss recorded in the income statement amounting to CHF 0.1 million.
As you know, we have, besides the US dollar, a natural hedge on all foreign exchange positions, and that net exposure in the US dollar is partly hedged by forward exchange contracts, which is limiting the risk of losses. If I now move to the income tax explanation, you will see that we have a tax rate, which is temporarily down to 14%. If we would apply the expected group tax rate of 24%, that would lead us to an expected tax expense of CHF 4 million. The actual tax expense as reported is at CHF 2.3 million only. The difference of CHF 1.7 million from the expected tax expense is mainly the result of the impairment of assets in the eBeam Systems business in Davenport. On one side and on the other side, it is also related to a loss in Germany, where we have capitalized, as a deferred tax asset, those losses.
In addition to the above, we also have a positive impact due to the U.S. corporate tax reduction in the U.S. This Tax Cuts and Jobs Act, which leads to a positive impact of CHF 0.5 million for Comet. We expect the effective tax rate for the full year 2018 to end up at roughly 18%. Let me now move on to the balance sheet. The total balance sheet is more or less unchanged at about CHF 390 million. As you can see, we have an ongoing strong balance sheet and very strong balance sheet ratios. Let me shortly go into the different sections of the balance sheet, starting with the current assets. Current assets went down, mainly driven by a reduction of the cash position. In the detailed presentation in the handout, you will see that we have an increase in inventories.
This increase was done on one side in order to be ready for future shipments. On the other side, it's a seasonal impact, where usually in the systems business, we have higher inventory in the first half of the year. The last one is the fact that we are about to move in Flamatt from the current facility building partly to the new building, and during this time, we will not be able to use full production capacity in Flamatt. Therefore, we have pre-produced and put on stock part of our goods. Moving on to the non-current assets or the fixed assets. The explanation is, and you can see here a slight increase of 4% compared to the prior period, is that we are strongly investing in the new building. We have invested almost CHF 10 million in the first half of 2018.
Overall investment sums now up to CHF 47 million. We expect to further invest in the second half of 2018 to end up at roughly CHF 55 million all in all. At the same time, we have now started to invest in production equipment for this new facility. Depreciations are on an ordinary level, roughly between 2%-3% of our revenues, and we have a one-time impact of the impairment of the intangible assets that totaled CHF 6 million in the first half of 2018. Moving on to the equity side of the balance sheet. I'd like to focus on the equity ratio. Equity ratio increased to 53%, and also in absolute terms, we have an increase in equity driven by profitability. This is what you can see in the comprehensive income.
We have added CHF 14 million in net income, and we have a cash out of roughly CHF 12 million for dividend payments. At the same time, we have an actuarial gain on defined benefit plans, which have added CHF 1.3 million to the equity. This takes me to the last slide, where we discuss the financial risk management of Comet. We are not just looking at the equity ratio only. We are strongly also focusing on the net debt to EBITDA ratio. What you can see is that we have an increase to 0.6 in the first half of 2018.
The reason is, we are looking at it on a 12-month rolling basis, is that the EBITDA on a 12-month rolling basis is slightly below the prior year's result on one side and on the other side, net debt has increased, and this in relation to the actual investments in our property, plant, and equipment. We do expect that ratio to slightly go up towards the year-end and improve from there on in 2019 again. That's it for the financials, I hand over to René Lenggenhager again for the outlook.
Thank you, Markus, for this insight. On to the outlook now. In a word, the outlook for the Comet Group is positive. PCT in the medium term remains an important driver for growth going forward, despite short-term project postponements in 2018. Amid the worldwide need for data processing and storage memory capacity, as well as the initiative for accessing the RF generator market. IXM is maintaining its solid and stable contribution to the business. At IXS and EBT, Comet has put in place key prerequisites for future profitable growth. In IXS, we have launched a comprehensive profit improvement program and are on track. We have realigned EBT and are making progress in all development projects. The building expansion in Flamatt has been completed. It creates urgently needed space for the further development and growth of the business and for enhancing the efficiency of production processes.
Management and the board reiterate the recently revised guidance for 2018 of CHF 440 million-CHF 460 million in sales and an EBITDA margin of 10%-12%. This assumed exchange rates you see on the slide. At the division level, this is the respective picture compared to last year. PCT, due to the unexpected short-term postponement of some projects, PCT now expects sales for the full year 2018 to be in line with the strong prior year. Medium to long term, Comet sees the growth drivers for the business with semiconductor technology as intact. The continued investments in combination with lower sales lead to a decrease in EBITDA margin versus the full year 2017. For IXS for the second half of the year, the division is projecting sales growth of approximately 10% compared to the first six months.
For the full year 2018 as a whole, we project sales in line with 2017. As mentioned, the profit improvement measures will get traction in 2019. EBITDA in 2018 is expected to come in below that of the prior year. For IXM for the second half of the year, the division predicts a solid, profitable performance and anticipates sales slightly above the level of the first half, as well as slightly above one year earlier. Thanks to the higher sales volume and further cost optimization, we expect an increase in EBITDA margin from the year ago level. EBT, with the closure of Davenport site in the U.S., Comet expects ebeam sales and the EBITDA margin to decline year-over-year. The continuing business includes the compact ebeam engines. Here, Comet continues to work with partners such as Bühler and Tetra Pak and intends to develop new applications.
Organizationally speaking, this is our current structure. The search for new division presidents for ebeam and the X-Ray Systems business is underway. With Matthias Barz as an interim manager, we have a very good solution for rigorously implementing the planned profit improvement. The ebeam business is under my leadership. Operationally, I am supported by a strong management team. At this point, I am going to close the presentation part and open the Q&A session.
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 the 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. Webcast viewers may submit their questions in writing via the relative field. Anyone who has a question may press star and one at this time. Once again, to ask a question, please press star and one on your telephone. There are no questions from the phone at the moment.
I have a question here on the screen. The question is: Where are you regarding a suitable head of ebeam? Let me answer this question. Based on the new setup that we have, we have made a short break in the search of this new head for ebeam, but we have resumed that, and we are well underway with evaluating appropriate candidates.
Once again, to ask a question, please press star and one on your telephone.
Okay, I would like to thank you for your interest. One more thing, looking ahead, we would like to invite to join us, whoever is capable to participate at our Investor Day on November 13th. Thank you very much for your participation.
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