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Preliminary results for Q3 2021/22, ongoing negotiations (July) and launch of the cost reduction program. Revision of forecasts for the full year 2021/22

  • Preliminary Q3 organic revenue growth was 8%. Visualization organic growth was 0%, Anesthesia organic growth was 14%, and Patient Monitoring and Diagnostics (PMD) organic growth was 20%.
  • Current trading in July, the first month of the last quarter of fiscal year 2021/22, showed organic revenue growth of 6%, significantly below expectations.
  • Decision to launch a cost reduction program which should result in annualized savings of DKK 250 million from financial year 2022/23. One-time expenses related to the cost reduction program of DKK 150 million, the majority of which will be recognized as special items in the fourth quarter of 2021/22, including an inventory write-down of DKK 45 million related to Ambu® aScope™ Duodeno 1.5.
  • Guidance for FY21/22 revised to organic revenue growth of at least 4% (previously 13%+) with EBIT margin before special items of at least 2% (previously EBIT margin 5%+).

Ambu CEO Britt Meelby Jensen says:

“Ambu is a large company with leading capabilities in single-use endoscopy and a comprehensive, high-quality product portfolio. We have had great successes, but also challenges. I have assessed the situation with the management team, and it is clear that single-use remains very attractive, but also that the penetration of certain segments such as duodenoscopy is taking longer than expected. To strengthen our financial situation and our flexibility, we decided to launch a cost reduction program. We will take a more focused approach to innovation and sales execution, while remaining deeply committed to both. We will also adapt to work in a more structured way and refine our processes. Following the decision to implement these changes, and with a difficult business environment in July, we are unfortunately reducing our forecast for the year 2021/22 considerably. We remain confident in the potential to build a strong, sustainable, high-growth business that is valued to our customers, the patients we serve and our shareholders.


PRELIMINARY HIGHLIGHTS OF Q3 2021/22

Comparative figures for last year are shown in parentheses.

  • Revenue was DKK 1,128 million (DKK 973 million) based on organic growth by 8% (7%). Reported growth was 16% (3%). Over the first nine months of the year, organic growth was 5% (16%), with published growth of 10% (11%).
  • Turnover in North America organic growth of 16% (32%) and in Europe by 4% (-10%), while Rest of the world decline of -4% (7%). For the first nine months of the year, the organic growth rates were: North America 15% (16%), Europe -3% (16%) and Rest of the world -2% (11%).
  • Organic growth in Visualization was 0% (0%). Over the first nine months of the year, organic growth in Visualization was 0% (29%). This was driven by continued strong growth in our cystoscopy and ENT businesses, offset by a decline in bronchoscopy due to high covid comparables, increased competition in the US and lower ICU admissions. Additionally, we are seeing slow and continued adoption of Ambu® aScope™ Duodeno 1.5.
  • Unit sales of single-use endoscopes reached 400,000 and 1,263,000 units in total for the first nine months of the year, corresponding to sales volume growth of 4% and 11%, respectively, compared to last year.
  • Organic growth in Anesthesia was 14% (-1%) and 20% (44%) in Patient Monitoring and Diagnosis (PMD). For the first nine months of the year, organic growth in Anesthesia and PMD was 7% (0%) and 14% (7%) respectively.
  • Gross margin for the quarter was 55.8% (62.5%). For the first nine months of the year, the gross margin was 58.2% (63.4%). The decline in gross margin is due to inflationary effects on input prices in our production facilities, the ramp-up of production facilities in Mexico, changes in the product mix and the write-off of inventory from Ambu® VivaSight™ 2 DLT.
  • OPEX totaled DKK 587 million (DKK 520 million), corresponding to an increase of 13% due to higher freight costs, depreciation and currency translation effects, mainly due to the appreciation of the USD /DKK compared to last year.
  • EBIT before special items was at 42 million DKK (88 million DKK), with a EBIT margin before special items 3.7% (9.0%). For the first nine months of the year, EBIT before exceptional items was DKK 129 million (DKK 336 million) with an EBIT margin before exceptional items of 3.9% (11.2%).
  • Special items include a one-time cost of DKK 13 million (DKK 0 million) associated with the CEO change in May. For special items since the beginning of the year, it amounted to DKK 13 million (DKK 0 million).
  • EBIT after special items for the quarter was DKK 29 million (DKK 88 million) with an EBIT margin of 2.6% (9.0%), and for the year to date EBIT was 116 million (336 million of DKK) with an EBIT margin of 3.5% (11.2%).
  • Total interest-bearing net debt (NIBD) was DKK 1,423 million (DKK 638 million), corresponding to a leverage ratio of 3.5x (1.1x) 12 months of EBITDA before exceptional items.

CURRENT TRADING (JULY PERFORMANCE)
Current trading for July showed organic revenue growth of 6%, significantly below our expectations for a rapid acceleration in Q4, as communicated with Q2 results.

COST REDUCTION PROGRAM AND ADJUSTMENT OF PRICING PRACTICES
In order to strengthen free cash flow and improve profitability to support future growth, it has been decided that a cost reduction program will be implemented with immediate effect. We will reduce our sales force in certain markets and reduce levels of investment in innovation, where we will adopt a more targeted approach. Sales force reductions will reflect slower-than-expected adoption of Ambu® aScope™ Duodeno 1.5 but maintain our ability to commercialize our entire GI pipeline. On innovation, we will continue to develop and launch our previously announced visualization pipeline, in line with our ambition to be the world leader in single-use endoscopy, but we will reduce some investments in future technologies and developments new products within anesthesia and PMD.

The cost reduction program is expected to result in an annualized impact of DKK 250 million in pre-tax savings (of which approximately DKK 165 million CapEx) from fiscal year 2022/23.

The actions announced today will correspond to a reduction of approximately 200 employees from our global workforce, subject to consultation procedures in countries where necessary.

As part of the cost reduction program, Ambu expects to record one-time pre-tax charges of DKK 150 million, which will be treated as special items. The majority of charges are expected to be recorded in the fourth quarter of 2021/22. Charges include DKK 50 million related to severance pay, DKK 55 million write-offs of assets related to ongoing development projects and a DKK 45 million impairment of Ambu® aScope™ Duodeno 1.5 inventory. The depreciation of inventories is linked to the decision not to launch into other markets for the time being.

Ambu also announces that it is adjusting its pricing practices, to reduce the level of discounts and rebates. This is expected to result in a one-time negative impact on sales equal to approximately 1 percentage point on full-year growth in 2021/22, expected in the fourth quarter of 2021/22.

REVISED GUIDELINES FOR FY 2021/22

As a result of the above, the guidance for the 2021/22 financial year is revised as follows:

  • Organic revenue growth of no less than 4% (previously 13%+)
  • EBIT margin before special items of at least 2% (previously EBIT margin of 5% and above)

These forecasts should include single-digit organic growth in the combined anesthesia and PMD businesses and over 700,000 combined ENT and cystoscope units.

A conference call takes place on Thursday, August 4, 2022, at 08:15 (CEST). The conference is broadcast live via https://live.axion.dk/ambu/220804/zGgsu82h.html. To ask questions during the Q&A session, please call one of the numbers below five minutes before the start of the call and enter the following access code: 75723.

  • Denmark (freephone): +45 80886270
  • Denmark (toll): +45 78774197
  • UK: +44 0‑808‑101‑1183
  • USA (toll free): +1 800‑343‑1703
  • USA (toll): +1 203-518-9859

The presentation can be downloaded after the conference at Ambu.com/presentations.


CONTACT INFORMATION

Investor Relations
Nicolai Thomsen, Director, Investor Relations and Strategic Financial Planning, nith@ambu.com / +45 2620 8047

Media
Tine Bjørn Schmidt, Corporate Communications Manager, tisc@ambu.com / +45 2264 0697

Ambu A/S, Baltorpbakken 13, 2750 Ballerup, Denmark, Tel. +45 7225 2000 / CVR number: 63 64 49 19 / www.Ambu.com

  • Announcement-company-no-12-2021_22

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