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CellaVision AB: Good profitability despite negative COVID-19-effect

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The information was submitted for publication at 08.20 CET on July 16, 2020

1 April -30 June 2020

  • Net sales increased by 5% to SEK 118.0 million (112.4).
  • Sales decreased organically by 15% (+18).
  • EBITDA amounted to SEK 36.2 million (41.3).
  • EBITDA margin amounted to 31% (37).
  • Profit before tax amounted to SEK 34.4 million (37.9).
  • Earnings per share before and after dilution were SEK 1.14 (1.27).
  • Cash flow from operating activities amounted to SEK 34.1 million (17.3).

1 January-30 June 2020

  • Net sales increased by 17% to SEK 252.5 million (216.3).
  • Sales decreased organically by 8% (+24).
  • EBITDA amounted to SEK 77.4 million (79,6). 
  • EBITDA margin amounted to 31% (37).
  • Profit before tax amounted to SEK 59.8 million (72.8).
  • Earnings per share before and after dilution were SEK 1.99 (2.42).
  • Cash flow from operating activities amounted to SEK 49.5 million (68.4).

Significant events related to COVID-19

  • The company expects the COVID-19 pandemic to have a significant negative impact on CellaVision's sales and earnings for a number of months to come.
  • The Annual General Meeting resolved that no dividend for the 2019 financial year be paid.
  • Several measures on the cost side were implemented resulting in good profitability despite negative organic growth in the quarter.

“The development of the ongoing pandemic is difficult to predict. The negative effects of the pandemic in Americas is currently our biggest challenge. We initiated measures on the cost side early on to secure CellaVision's opportunities to accelerate as soon as the world situation normalizes.” Zlatko Rihter, CEO

CEO comment´s

Sales in the second quarter of 2020 amounted to SEK 118.0 million (112.4), corresponding to negative organic growth of 15 percent (+18). Including sales of RAL Diagnostics (RAL) products, growth amounted to five percent. Sales varied considerably between our different regions. EMEA grew by seven percent excluding sales of RAL’s products, including RAL, which has about 90 per cent of its sales in EMEA, growth amounted to 89 percent. Americas had a weak development in the wake of the COVID-19 pandemic with negative growth of 57 percent. APAC's development was the reverse with growth of 106 percent. Currency effects were negative by three percent in the quarter.

CellaVision responded early to the COVID-19 pandemic and implemented a series of cost-related measures that had a major impact in the quarter. The Annual General Meeting followed the Board's proposal and decided that no dividend should be paid for 2019, which secured liquidity in the company. The impact on the Group's total cash flow for the quarter was strong and increased to SEK 18.1 million (-23.8).

Furthermore, we have prioritized our efforts and thus managed to maintain good profitability in the quarter despite negative organic growth. EBITDA amounted to SEK 36.2 million (41.3) in the quarter, corresponding to an EBITDA margin of 31 percent (37). The EBITDA margin is slightly lower than before, but given the current situation, we are satisfied with the outcome and our ability to quickly reposition the business to meet current challenges. With the measures taken we are well equipped for the future and can accelerate when the situation in the world normalizes.

Effects of the COVID-19 pandemic

Our end-customers in the Americas and EMEA were heavily affected by the extensive lockdowns in the quarter, and very few installations have been carried out in the USA and France in the last three months. In countries such as China and Korea, which were hit early by restrictions due to the COVID-19 pandemic, the situation has improved during the quarter and the markets are now on the path to a more normalized situation.   

CellaVision has not implemented any short-time work or laid off any staff due to the COVID-19 pandemic, but as part of the cost-cutting measures, we have postponed planned recruitments.

Market development

Americas was heavily affected by the COVID-19 pandemic in the second quarter of the year with a growth amounting to negative 57 percent. Americas is normally CellaVision's largest region, but during the second quarter of the year, Americas was the region with the lowest sales. Sales amounted to SEK 28.8 million (66.7). The lockdown in the region has resulted in limited possibilities to install, which also affected our distribution partners. The focus for CellaVision has instead been on conducting training and marketing through digital channels, which has increased significantly. We have developed a new methodology to reach our customers in the wake of the pandemic that we will benefit from in the future.

EMEA grew with seven percent excluding structural effect from the acquisition of RAL. Including sales of RAL's reagents, growth amounted to 89 percent. Although the possibility of installations was clearly limited due to the COVID-19 pandemic, sales of large systems were relatively good. Just like in North America we have become a standard in large parts of Western Europe, meaning that when a laboratory replaces its instruments and systems, CellaVision's solutions are included in the installation. This means that we will see a normalization of sales as soon as hematology installations can be resumed. CellaVision DC-1 has been launched in most European markets, but the restrictions caused by the pandemic have meant that many smaller laboratories have been closed, which has significantly delayed the commercialization process.

APAC had a strong quarter with sales of SEK 32.6 million (15.8), corresponding to an increase of 106 percent. The COVID-19 situation in APAC is more mixed than in other regions. China performed well in the quarter, in Korea we see a more normalized situation, while other countries such as Japan, Australia and India have been completely closed down during parts of the second quarter.

RAL/Reagents

The acquisition of RAL was formally completed on October 1, 2019 and RAL has since been part of CellaVision. Sales of reagents developed well during the quarter and contributed to sales growth, primarily in EMEA. We continue to launch reagents in new markets while advancing the important work of optimizing the so-called staining protocols. The acquisition has implied that CellaVision now has a wider product range and a larger market. Reagents become an integral part of the customer offering and complement previous capital goods with consumables. We work intensively to expand sample preparation products in hematology to new markets through CellaVision's comprehensive organization for local market support. In the long term, we also expect the acquisition of RAL to enable us to expand to adjacent analysis areas outside hematology.

Geographic expansion

During the quarter we became operational in Russia. Overall, CellaVision now has 18 local organizations that offer market support in more than 40 countries. We will wait for further establishments until the COVID-19 pandemic has subsided.

In addition, a global agreement was established during the quarter for CellaVision's instruments for the veterinary market as well as a global agreement for reagents with one of our distribution partners.

Innovation

CellaVision DC-1 has now entered full-scale series production after a step-by-step ramping up of production in 2019. As an effect of the ongoing pandemic, demand for CellaVision DC-1 has been limited during the second quarter of the year.

During the first quarter of the year, we submitted our application to the FDA (510k) for market clearance in the US for CellaVision DC-1 and preparations for the launch in 2021 are in full swing. The process of market approval in China for CellaVision DC-1, initiated in the first quarter of the year, is also proceeding according to plan.

The new software for the veterinary market was completed and released to the market during the quarter. The software makes it possible to run the veterinary application on CellaVision DC-1 Vet and Sysmex DI-60. A unique function for CellaVision DC-1 Vet included in the software, is the ability to also classify avian blood. This feature is expected to open up new business opportunities. In addition, the software will also contain workflow improvements for all systems.

Our long-term strategy remains

Geographic expansion and innovation are CellaVision´s core areas and we continue to increase investment to secure our future position in our market segment and maintain strong growth as soon as the effects of COVID-19 subside and the world returns to a more normalized state.

In May, I informed the Board of Directors that I wish to leave CellaVision. The recruitment process to find my successor is initiated and I will continue in my current role during the notice period and leave on November 28, 2020 at the latest. The decision to leave CellaVision was difficult on many levels. CellaVision is a fantastic company, in a very strong momentum, with a strong international marketing organization, a gradually expanded development organization and an experienced and skilled management team.

Zlatko Rihter,
President and CEO

Key Ratios Apr-JunJan-JunJan-Dec
(MSEK)20202019202020192019
Net sales118,0112,4252,5216,3461,8
Gross profit77,987,1170,2164,1336,7
EBITDA36,241,377,479,6146,7
EBITDA margin, %3137313732
Profit/loss before tax34,437,959,872,8129,2
Total cash flow18,1-23,812,921,2-67,3
Equity ratio, %6074607454

Questions concerning the interim report can be addressed to:
Zlatko Rihter, VD, CellaVision AB, Tel: 0733-62 11 06,
E-mail: zlatko.rihter@cellavision.se

Magnus Blixt, CFO, CellaVision AB, Tel: 0708-33 81 68
E-mail: magnus.blixt@cellavision.se

About CellaVision
CellaVision is an innovative, global medical technology company that develops and sells products for sample preparation and systems for routine analysis of blood and other body fluids in health care services. The analyzes form an important basis for rapid and correct disease diagnoses, for example in the case of infections and serious cancers. CellaVision's products replace manual laboratory work, and secure and support effective workflows and skills development within and between hospitals. The company has leading-edge expertise in sample preparation, image analysis, artificial intelligence and automated microscopy. Sales are via global partners with support from the parent company in Lund and by the company´s 18 local market support organizations covering more than 40 countries. In 2019, sales were SEK 462 million and the company's growth target is 15% per year over an economic cycle. CellaVision's registered office is in Lund, Sweden. The share is listed on the Nasdaq Stockholm, Mid Cap list. Read more at www.cellavision.com

Publication
This information constitutes information that CellaVision AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication at 8:20 a.m. CET on July 16, 2020.

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