Interim Report January - June 2000

INTERIM REPORT JANUARY - JUNE 2000 Orders received totalled SEK 2,518.7 million (2,447.5) Net sales totalled SEK 2,419.5 million (2,381.0) The operating profit was SEK 301.3 million (341.7) The profit before tax was SEK 260.7 million (316.7) The acquisitions of Techno-Médic in Canada and Lenken in Ireland underpin Getinge's world leading position Comments on the quarter and outlook The Infection Control business area continues to progress well in North America and in the developing markets, though profitability is not at a satisfactory level. The markets for life science products continue to perform well, while customers within the pharmaceutical industry are requesting fewer products, a situation that experience tells us affects the market during a period of major mergers between pharmaceutical companies. The business area's results are somewhat higher than last year's. The Geriatrics business area has a shorter business cycle and demand continues to be difficult to predict. The lower demand from the health care market in the UK, which was felt in Q1, has remained during Q2. As the business area's gross margins are generally high, the business is volume-sensitive. The pressure sore sector where the gross margins are highest, is the area mainly hit and will not be able to meet expectations. The business area has reason to believe that there is light at the end of the tunnel. The uncertainty that characterised geriatric care activities in the US over the past 18 months as changes to the Medicare system took effect, is now diminishing. Even if it is difficult to see the effects of the promised state aid to the geriatric care sector, customers in this sector have adapted themselves to the new rules. In comparison with last year, 1999's figures for the first six months included a significant one-off order from Beverly Enterprises of the US of around SEK 80 million. This order was concluded during Q2 1999 and will not affect comparisons in Q3 and Q4. We still expect improved results in the Infection Control business area this year. The Geriatrics business area has had a weak introduction to the year on the US market, and continued flat demand for pressure sore products in the UK will mean that the business area will not meet last year's profit levels. Infection Control business area Market developments 2000 1999 Chan 2000 1999 Chan ge ge Orders received per Q2 Q2 H1 H1 market Western Europe 329,2 356,5 - 652,7 677,6 - 7,7% 3,7% USA and Canada 314,7 285,2 10,3 612,5 558,6 9,6% % Asia/Australia 61,7 56,4 9,4% 122,4 99,6 22,9 % Rest of the world 54,5 17,9 204, 108,5 43,0 152, 5% 3% Business area total 760,1 716,0 6,2% 1.496,1 1.378 8,5% ,8 adjusted for 3,0% 6,5% currency flucs.& corp.acqs Demand for the business area's products continued to be generally good during Q2. The number of enquiries in Western Europe remained at a satisfactory level although fewer orders have been completed during the quarter. A number of Western European markets have performed well, such as Sweden, France and the UK. However, orders received in Germany have been unsatisfactory. The North American market continued to progress well during Q2. Activity levels have been high especially for customers in the life science sector. After the period's end the business area has received a number of important orders in this customer segment. The developing markets, with Asia and Latin America at the forefront, maintained good growth in Q2. Results 2000 1999 Chan 2000 1999 Chan 1999 ge ge Q2 Q2 H1 H1 FY Net sales, SEK 757,4 676,6 11,9 1.409,9 1.295 8,8% 2.811,1 Million % ,9 adjusted for 9,0% 6,9% currency flucs.& corp.acqs Gross profit 271,2 267,0 1,6% 522,7 504,3 3,6% 1.084,6 Gross margin % 35,8% 39,5% - 37,1% 38,9% - 38,6% 3,7% 1,8% Operating cost, SEK -182,7 - 1,1% -365,4 - 4,3% -719,3 Million 180,8 350,2 Operating profit 88,5 86,2 2,7% 157,3 154,1 2,1% 365,4 Operating margin % 11,7% 12,7% - 11,2% 11,9% - 13,0% 1,0% 0,7% The business area reported a smaller improvement in results. The lower gross margin during the quarter is due to sales in North America, where the gross margin is on average lower, making up a larger share of the total. In addition, a number of reference installations for the automatic handling of goods for life science centres were delivered during the quarter and had a negative impact on gross margins. Increased costs in the business have been moderate. Important activities Work on a new generation of health care sterilizers, to be launched in the late autumn, is continuing according to plan. Since its inception, the project's costs have been SEK 8.0 million and in total it is estimated that costs will reach around SEK 20 million. The project, when realised, is expected to generate savings of around SEK 50-60 million per year from 2002. During Q2 the business area completed and installed a system for the automated handling of goods in the life science sector . The system has been well received by the customers in this sector. During Q2 the business area in France also acted as system supplier in the start-up of a sterilization centre. This is a part of an ongoing evaluation of further integration in the customer chain. T-Doc, the Group's IT-based system for monitoring and documenting sterile processors, added one new product during Q2 - T-Doc Label & Lot. The product is a smaller system for a PC environment mainly aimed at small sterilization centres. The launch of T-Doc on new markets has been received very well. Outlook Market conditions for the business area continue to be positive. The order book is looking healthy compared to this time last year. Taken as a whole we estimate the year's operating profit will exceed last year's. Geriatrics business area Market developments 2000 1999 Chan 2000 1999 Chan ge ge Orders received per Q2 Q2 H1 H1 market USA and Canada 187,4 177,0 5,9% 368,7 406,9 - 9,4% Great Britain 104,8 104,3 0,4% 260,5 269,9 - 3,5% Germany 58,2 61,2 - 118,1 118,6 - 4,9% 0,4% Other Western 107,6 98,1 9,7% 211,9 200,2 5,8% Europe Rest of the world 20,8 24,8 - 33,8 40,9 - 16,1 17,4 % % Business area total 478,8 465,4 2,9% 993,0 1.036 - ,5 4,2% adjusted for 0,6% - currency flucs.& 6,4% corp.acqs Demand stabilised during Q2 except for the pressure sore business in the UK. Systematic and consistent focusing on the US market led to growth for the quarter progressing well. Developments within the Hygiene system and Patient Handling product lines on the UK market have been good and market share has strengthened. The pressure sore business in the UK continued to record weak volumes during Q2. Demand on the German market for Hygiene Systems' and Patient Handling's products has risen while volumes in the pressure sore business have fallen. Markets in southern Europe and the Benelux countries have continued to perform well over the period.. Results 2000 1999 Chan 2000 1999 Chan 1999 ge ge Q2 Q2 H1 H1 FY Net sales, SEK 480,5 505,0 - 978,7 1.052 - 2.007,7 Million 4,9% ,0 7,0% adjusted for - - currency flucs.& 7,3% 9,3% corp.acqs Gross profit 230,5 265,0 - 487,0 560,7 - 1.051,6 13,0 13,1 % % Gross margin % 48,0% 52,5% - 49,8% 53,3% - 52,4% 4,5% 3,5% Operating cost, SEK -170,8 - - -346,3 - - -731,2 Million 188,6 9,4% 376,5 8,0% Operating profit 59,7 76,4 - 140,7 184,2 - 320,4 21,9 23,6 % % Operating margin % 12,4% 15,1% - 14,4% 17,5% - 16,0% 2,7% 3,1% The decline in profits for the quarter is mainly due to the lower volumes in the pressure sore business, which, linked with a reduction in large-scale production for the Patient Handling product line, explains the gross margin's decline. The Hygiene Systems product line's gross margin is continuing to progress well. The lower cost levels are a result of the cost rationalisation program carried out in the US and at the pressure sore business in the UK. Important activities During Q2 the business area carried out two important acquisitions; Gestion Techno-Médic in Canada and Lenken Healthcare Ltd in Ireland. Techno-Médic's main product is a unique ceiling-mounted hoist. Coupled with Arjo's sales organisation the products will contribute to a global expansion in the ceiling-mounted hoist sector. It is calculated that the new product range will be launched in the Group's sales organisation at the beginning of next year. The acquisition will have a positive impact on the Group's profit from 2001. Lenken has been the Group's distributor for over 20 years in Ireland. The company is the leading supplier of products for geriatric care and care of the disabled. Through this acquisition the Group aims to increase its sales and market share in Ireland. The acquisition will have a positive impact on the Group's profit from 2001. Production of a new series of lifts for institutional use has advanced according to plan and the launch is expected to be at the beginning of next year. Outlook After Q2 the business area has made a more positive assessment of developments on the North American markets. The business area expects to see stable demand on the UK market for lifting aids during the remainder of the year. The pressure sore business, which unaltered constitutes one of the Group's strategic growth areas, will focus on improvements and cost control. However demand within the Antidecubitus product line will also not match last year's results in the second half of the year. Taking into consideration the pressure sore business in the UK, coupled with the flat start to the year, the business area's results are expected to be lower than last year's. Medical The independent Medical product line that includes the companies LIC Audio and NeuroMédica reported invoiced sales of SEK 30.8 million (33.1 m). The operating profit was SEK 3.3 million (3.3 m). Surplus funds from SPP SEK 38.9 million of SPP's surplus funds is available for future allocation in the Group and has not been taken up as revenue. Next report The next report from the Getinge Group (Q3) will be published on 19 October 2000. Getinge 10 August 2000 Johan Malmquist President and CEO Tel.no. +46 (0) 3515 55 00 The Group: Income 2000 1999 Chan 2000 1999 Chan 1999 Statements ge ge SEK Million Q2 Q2 H1 H1 FY Net sales 1) 1.251,6 1.197 4,5% 2.419,5 2.381 1,6% 4.884,7 ,9 ,0 Cost of goods sold -745,7 - 12,9 -1.400,2 - 7,3% -2.727,0 2) 660,7 % 1.305 ,2 Gross profit 505,9 537,2 - 1.019,3 1.075 - 2.157,7 5,8% ,8 5,3% Gross margin 40,4% 44,8% - 42,1% 45,2% - 44,2% 4,4% 3,1% Operating cost 2) -356,6 - - -718,0 - - -1.465,5 372,9 4,4% 734,1 2,2% Operating profit 3) 149,3 164,3 - 301,3 341,7 - 692,2 9,1% 11,8 % Operating margin 11,9% 13,7% - 12,5% 14,4% - 14,2% 1,8% 1,9% Interest income 4,0 12,5 8,4 17,1 25,9 Interest expense -25,1 -19,8 -47,5 -39,9 -77,6 Other financial -3,1 -1,1 -1,5 -1,6 -3,3 items Ass.companies' 0,0 -0,3 0,0 -0,6 -1,0 profit/loss Profit before tax 125,1 155,6 - 260,7 316,7 - 636,2 19,6 17,7 % % Tax 4) -31,3 -39,0 -65,2 -79,2 -158,5 Net profit 93,8 116,6 - 195,5 237,5 - 477,7 19,6 17,7 % % 1) Adjusted for currency fluctuations and company acquisitions the net sales' 1,9% - change is 0,4% 2) Due to the reclassification of certain costs, some minor transfers have been made in the comparison from operating cost to cost of goods sold. 3) Operating profit is charged with - amortisation on -16,0 -15,8 -31,1 -30,5 -60,7 goodwill - depr. on other -29,6 -35,1 -62,0 -66,4 -127,5 fixed assets -45,6 -50,9 -93,1 -96,9 -188,2 4) For fiscal 2000, tax is estimated at 25% of the profit before tax. For 1999 the Group's full tax cost was 24.9% of the profit before tax. Quarterly 1998 1998 1998 1999 1999 1999 1999 2000 2000 results SEK Million Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Net sales 1.001 978,3 1.427 1.183 1.197 1.074 1.428 1.167 1.251 ,9 ,6 ,1 ,9 ,8 ,9 ,9 ,6 Cost of goods - - - - - - - - - sold 537,1 542,2 807,2 644,5 660,7 622,2 799,4 654,5 745,7 Gross profit 464,8 436,1 620,4 538,6 537,2 452,6 629,5 513,4 505,9 Operating cost - - - - - - - - - 303,8 314,5 401,5 361,2 372,9 342,7 388,9 361,4 356,6 Operations 3,4 divested Operating 164,4 121,6 218,9 177,4 164,3 109,9 240,6 152,0 149,3 profit Financial net -16,2 -17,4 -18,5 -16,0 -8,4 -17,8 -12,8 -16,4 -24,2 Ass.comp.s' -0,3 -0,1 -0,5 -0,3 -0,3 -0,3 -0,1 0,0 0,0 profit/loss Profit before 147,9 104,1 199,9 161,1 155,6 91,8 227,7 135,6 125,1 tax Tax -30,8 -22,6 -40,7 -40,2 -39,0 -23,0 -56,3 -33,9 -31,3 Net profit 117,1 81,5 159,2 120,9 116,6 68,8 171,4 101,7 93,8 The Group: Balance Sheets Assets SEKMillion 30 June 30 June 31 Dec 1999 2000 1999 Goodwill 1.002,7 1.027,8 1.012,7 Fixed assets 881,1 728,8 815,6 Stock-in-trade 891,8 826,5 765,3 Receivables 1.625,4 1.578,4 1.625,1 Liquid assets 225,9 221,3 158,8 Total assets 4.626,9 4.382,8 4.377,5 Shareholders' equity & Liabilities Shareholders' equity 1.604,5 1.320,2 1.560,8 Interest bearing 2.017,3 1.894,9 1.673,7 liabilities Non-interest bearing 1.005,1 1.167,7 1.143,0 liabilities Total Equity & 4.626,9 4.382,8 4.377,5 Liabilities The Group: Cash flow 2000 1999 2000 1999 1999 SEK Million Q2 Q2 H1 H1 FY Operations Operating profit 149,3 164,3 301,3 341,7 692,2 Depreciation 45,6 50,9 93,1 96,9 188,2 Financial items -24,2 -8,4 -40,6 -24,4 -55,0 Share in ass. companies' 0,0 -0,3 0,0 -0,6 -1,0 profit/loss Taxes paid -27,7 -14,0 -57,7 -51,2 -100,3 Cash flow before changes in working capital 143,0 192,5 296,1 362,4 724,1 Changes in working capital Stock-in-trade -23,8 11,0 -126,1 -55,8 7,8 Rental equipment -3,6 -17,0 -7,9 -9,0 -15,7 Current receivables -79,5 -10,5 0,2 127,3 40,7 Current operating -62,0 -36,6 -107,9 -75,7 -33,6 liabilities Restructuring reserves, -17,0 -30,2 -32,5 -39,9 -118,8 utilised Cash flow before -42,9 109,2 21,9 309,3 604,5 investments Direct net investments in machinery, equipment and buildings -38,5 -30,1 -60,9 -81,6 -167,4 Operating cash flow -81,4 79,1 -39,0 227,7 437,1 Net impact of company acquisitions and disposal of operations -10,0 0,4 -15,6 -18,3 -35,4 Change in long-term -55,7 0,1 -57,4 1,1 15,8 receivables Change in deferred tax 1,9 -3,3 -7,3 -7,5 -43,2 Dividend paid -159,0 -147,6 -159,0 -147,6 -147,6 Translation differences 5,7 17,4 1,8 -6,6 -19,2 Decrease +/Increase - in -298,5 -53,9 -276,5 48,8 207,5 net debt 2000 1999 Chan Adj 2000 1999 Chan Adj 1999 Orders ge f ge f received acq' acq' s s per product Q2 Q2 & H1 H1 & FY line curr curr .flu .flu ct's ct's Sterilization 514,7 494,3 4,1% - 1.039, 937,6 10,8 7,7% 1.942,6 0,2% 2 % Disinfection 245,4 221,7 10,7 10,2 456,8 441,2 3,5% 3,9% 941,9 % % Hygiene 208,7 190,7 9,4% 8,8% 416,7 393,7 5,8% 5,2% 790,3 Systems Patient 174,7 160,3 9,0% 7,2% 365,9 401,0 - - 745,1 Handling 8,8% 10,6 % Antidecubitus 95,5 114,2 - - 210,3 241,6 - - 446,2 16,4 22,5 13,0 18,3 % % % % Medical 13,3 15,7 - - 29,7 32,2 - - 66,1 15,3 15,3 7,8% 7,8% % % 1.252, 1.196 4,6% 1,9% 2.518, 2.447 2,9% 0,8% 4.932,2 3 ,9 7 ,5 Net sales 2000 1999 Chan Adj 2000 1999 Chan Adj 1999 ge f ge f acq' acq' s s per product Q 2 Q 2 & HY 1 HY 1 & FY line curr curr .flu .flu ct's ct's Sterilization 522,3 463,4 12,7 8,8% 960,8 881,6 9,0% 6,2% 1.902,7 % Disinfection 235,1 213,2 10,3 9,4% 449,1 414,2 8,4% 8,3% 908,4 % Hygiene 212,2 208,0 2,0% 0,9% 400,9 404,6 - - 814,4 Systems 0,9% 1,9% Patient 169,6 187,2 - - 363,4 412,0 - - 749,1 Handling 9,4% 10,8 11,8 13,7 % % % Antidecubitus 98,8 110,0 - - 214,5 235,4 - - 444,2 10,2 16,8 8,9% 14,4 % % % Medical 13,6 16,1 - - 30,8 33,1 - - 65,9 15,5 15,5 6,9% 6,9% % % 1.251, 1.197 4,5% 1,9% 2.419, 2.381 1,6% - 4.884,7 6 ,9 5 ,0 0,4% Key figures 2000 H1 1999 H1 Change 1999 Orders received, SEK Million 2.518,7 2.447,5 2,9% 4.932,2 adjusted for currency flucs.& 0,8% corp.acqs Net sales, SEK Million 2.419,5 2.381,0 1,6% 4.884,7 adjusted for currency flucs.& -0,4% corp.acqs Financial net -40,6 -24,4 66,4% -55,0 Profit before tax, SEK Million 260,7 316,7 -17,7% 636,2 Net profit, SEK Million 195,5 237,5 -17,6% 477,7 Earnings per share after full 4,30 5,23 -17,6% 10,52 tax, SEK Capital employed, SEK Million 3.118,2 2.782,7 12,2% 2.988,2 Return on capital employed, per 20,9% 24,5% -3,6% 23,2% cent Net debt/equtiy ratio, multiple 1,12 1,27 -0,15 0,97 Equity/assets ratio, per cent 34,7% 30,1% 4,6% 35,7% Equity per share, SEK 35,32 29,07 21,5% 34,36 Cash flow before investments, 21,9 309,3 604,5 SEK Million Net investments in fixed assets, 60,9 81,6 167,4 SEK Million Number of employees at the 3.770 3.766 3.812 period's end This report has not been subject to an official audit. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.bit.se/bitonline/2001/06/27/20010627BIT00780/bit0001.doc http://www.bit.se/bitonline/2001/06/27/20010627BIT00780/bit0001.pdf