AddLife AB
STO:ALIF B
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
89.3353
168
|
| Price Target |
|
We'll email you a reminder when the closing price reaches SEK.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
AddLife AB
You don't have any saved screeners yet
So good morning everybody, it seems like it's 10:00 on this rainy and really gray day, in Stockholm at least. We are happy to present our first quarter report for 2020. My name is Kristina Willgård, and I am the CEO of AddLife.
My name is Martin Almgren, and I'm CFO of AddLife. And we have muted all visitors today, and we will open up for questions after the report in the end of the conference call.
Okay. I hear there's a lot of newcomers coming into the call. But nevertheless, let's start.If you look at the highlights for the first quarter, we have a top line that we say we have high demand and a strong profit growth. And I will say that's really the report that we are presenting today. We see that in March, we got a positive impact related to the COVID-19 pandemic. January, February were strong normal months. But in March, we saw an increased, sharply, demand of products related to COVID-19. And actually, some of our companies reported their best results ever in month of March. So sales were strong. It's the first time that we have more than SEK 1 billion in net sales. So sales increased with 25%. We grew EBITA with 51% to SEK 106 million, and the EBITA margin strengthened up to 10%. In the quarter, we also completed acquisition of the Italian company, EuroClone, who works in cell and molecular biology.So I think all of us read, listen and hear and actually, our lives have changed a lot during the last 1.5 months or 2 at this time. It is really a different quarter. The COVID-19 came as a major sudden change, I would say it's an extreme situation in the whole of the world. It has changed the society on lockdown, and we have to realize that we have to do things in a very different way.For us at AddLife, this crisis meant that we, as a supplier, really could fulfill a lot of new demand drive, especially in the health care sector. So I would say we have had the first-hand experience of the effects of the crisis. And we are really trying to help hospitals and health care to really do the utmost to make sure that they need the product -- they get the product that is so well needed to treat all the patients.As I said, high demand in March. It's for, more or less, all products. It's the crucial medical supplies. It's a lot of medtech products. It's a lot of diagnostics and especially a lot of personal protective equipment. As you probably have seen, we have informed that we received a huge order of SEK 100 million in our subsidiary, Mediplast, and that was for personal protective equipment. Those deliveries should be made in the coming 2 quarters to the largest regions of Sweden and Sykehusinnkjöp in Norway, which is the main purchasing organization in Norway.In the quarter, we must say that it has been really challenging to source products and to deliver, transport the products. At the same time, we have seen an increased demand all over the world for similar products simultaneously. And of course, that has pushed a lot to manufacturers and freight companies. We have been working very hard to ensure that all products that we get in meet the regulatory requirements and that the quality standards are according to the needs for medical staff.I would say this situation has also proven to the world that we have a high dependency on Asia and mainly China, and we all saw the problems when the Chinese society closed down for approximately 2 months. But I would say we are thankful that there's a lot of suppliers also that are coming from other parts of the world who has done incredible good work to help us to receive products in these difficult times.What we also see in our organization as well as in most organizations are employees work from home. Very early we asked employees to follow all regulations that came from the different governments in the different countries. So most employees work from home, except for people who work with logistics and warehousing because we see that it's essential that this function has been up and running for the whole time. And we have been able to strengthen our warehousing because people who normally work in sales sometimes have now started to work warehouse just to make sure that we can send all the products that's needed.The working from home has made us use digital tools, which is one way we do today. I would say in AddLife, we work with teams, meeting more or less all day long. But this also limits the meetings with customers, which makes it more difficult to maintain service and, of course, difficult to work with long-term sales. Even if the picture is very bright for AddLife, we have different scenarios in our different companies because we work in different niches. So most companies have an extremely hectic period, but for other companies, it's a little bit more quiet and depending on what niche and especially for the companies working directly into academic research.I must say I'm extremely proud and very humble to see our strong decentralized model in these times. Our MDs and our employees in our subsidiaries have taken full responsibility and acted fantastic in this situation. We see a great commitment, high loyalty and engagement from our colleagues to really help out their customers in these tough times.So more figures, net sales Q1, as I said, strong growth in both business areas totally, 25%. The organic side ended up 12%. What has happened for the COVID-19 sales is that the sales to public customers have not been done through direct procurements. And that is not a normal procedure in most countries. But the reason for that is the need for -- receive products as soon as possible. So normal processes for procurements has been made differently during these times. If you look at year-over-year, we see that the net sales growth is 35% and was 7% organic.If we look at EBITA, as I said, EBITA growth, 51%. So we really strengthened the EBITA during these times and the margin improvement is a little bit due to increased gross margins but mainly due to high sales volume and that our organization has been very cost-efficient during these times. Of course, some parts relates to less traveling, but it's still the normal cost efficiency work that we see in our organization that has made this possible. And if you look at year-over-year, EBITA has been growing 33% and the rolling margin 12 months is now 9.2 percentage. So we are stepping upwards -- we are towards the margin level that we would like to achieve long term.Coming into Labtech. In this quarter as well as last year, 60% of Biomedica is included in the figures for Labtech. In Labtech, we saw the organic growth of 5 percentage, a bit lower than in the group but it's actually double-digit in the part of Diagnostics, but it's weaker in the part where we have research. We see a big impact from COVID-19 for all segments in the month of March. And as I said before, we completed the acquisition of EuroClone in January.And coming back to EuroClone, I would say that EuroClone has delivered according to expectation. Of course, we had all seen how the Italian market looks like, the problems they have in the society in Italy. But EuroClone has achieved really good work during these times. It's open, all employees are still working. But of course, it's a bit challenging and difficult to assess how will this move forward. And that is also difficult to say for many subsidiaries, especially who works in the research field. So summing up Labtech in Q1, we had a net sales of SEK 611 million. EBITA ended up 72%, which was an increase of 39 percentage, and the margin is now at 11.8%.Some more details, as I said, strong organic growth in Diagnostics. We see strong growth in all Nordic countries -- actually, exception for Sweden that is more flat, but other countries is strong, and also Poland and Austria has been really strong in this quarter. There is -- I would say the world is screaming for tests. That's what we hear at least in the Nordic countries. It's not only the COVID-19 tests, but all other tests of patients are used very frequently in [ Diagnostics ] today. So we see high demand for diagnostics last month. Our major supplier in Diagnostics, Radiometer, which you probably recognize since we had them for more than 70 years, and they are a supplier of blood gas analysis. And blood gas is used for checking lung capacities. And that is, of course, used a lot in ICUs and emergency departments during these tough times. If you look at the product mix, we have a high proportion of reagents right now. We, of course, continue with the sales of instruments. But right now, it is reagents that is the main product in the mixture in Diagnostics.Looking into the research, as I said, it was stable demand until the outbreak of COVID-19. Pharma companies are still robust. And the pharma companies that we mainly work with are the Danish ones. We also see that food testing is high still in most markets. But what we have seen is that several academic customers are closed down, [ due to reduced activity ], has decided to close down the universities right now. And as you know, we have 1 subsidiary in the research field that has their own advanced equipment worldwide. And the sharp -- the lockdown of China has really lowered their sales. And China is 30% of the sales in this company.And coming back to that company, which is Biolin Scientific, I also want to present to you that we are very proud that our own products that we have are really strong. And we have, during this quarter, got an award, that is called the Red Dot Award and Best of the Best, which is an award for international design and innovation. And I think it's a German award actually. So we are proud that Biolin in this time has got a fantastic award for their product development.And then looking into Medtech, 40% of Biomedica is included in Medtech, and we here see an organic growth of 22%. And here as well, big impact for COVID-19. And as I said before, we got a huge order in the quarter, but that has not been delivered and will be delivered during the coming 2 quarters. Net sales ended up to SEK 442 million, which is an increase of 30%; EBITA increased with 64 percentage, ending up to SEK 37 million; and the margin increased to 8.2 percentage.In Medtech, we had a really strong growth in the health services. We see strong, strong demand for medical supplies and especially personal protective equipment due to the outbreak of COVID-19. Normally, personal protective equipment is somewhat 10% to 15% of the sales in the hospital area for us. In this quarter, we have now completed the integration also of the Wellspect product portfolio. We have made sure that they meet all the regulatory requirements and [ necessary research ] and now foresee that we will be able to increase margins on the product portfolio that we acquired from Wellspect.What we also see in the health services that it's not that positive is the weak demand for products for nonemergency procedures. I think we all read that in the newspaper that everything today in the hospital are focused to treat the COVID-19 area. And the hospitals have more or less closed down some parts of the surgery areas. But what we see is that they would probably have to open again somewhere in this quarter in May, June because all the patients actually are waiting for their [ clinics ] to go do that during this year. So that will come up again, we think, in the second quarter.Moving into home care. Home care has shown a high demand, which is really according to the trends we see in the market. And the high demand and sales growth is for all assistive equipment. We are very happy that we have had a large installation in Sweden of products, bathroom aids, that origins from our Finnish subsidiaries. And I would say that really shows the sales synergies that we now get between our [ different ] companies. And the high demand for assistive equipment has really proven so that we now see the customer starts to ask for earlier deliveries after the pandemic outbreak. So we will start to deliver to the Oslo municipality already before the summer instead of after the summer. We have in the quarter also received several new contracts for welfare technology in Finland.So just to give you a short update on AddLife, on a total, we have changed a lot the last year. One year ago, say, the Nordic was approximately 90% of our sales. But now it's actually 70%, so 30% of our sales goes to markets outside of the Nordics. And of course, that is of increased importance. But all trends that we discussed and see in the Nordic markets is proving to be the same in the markets that we entered during 2019.
During the quarter, we have repurchased 125,000 own shares. And the reason for this repurchase is to cover the ongoing incentive programs that we have in AddLife but also to make it possible to pay with own shares in future acquisitions. We have also signed new credit agreements with Handelsbanken and Danske Bank, and we have increased our credit limits with another SEK 200 million. The Board has proposed to make a split of the AddLife share 4:1, and that was to indicate the notice to the AGM. The Board has also proposed to withdraw the payment of the dividend in the connection to the AGM. And the Board see a possibility to have an extra AGM later in 2020 to have a new decision.If we look at the acquisitions, as Kristina said, we have made 1 acquisition during the first quarter, and that is EuroClone in Italy. EuroClone is a leading supplier of instruments and consumables in the field of cell and molecular biology in Italy. And today, we have these kind of products in the Nordics, and we sell them through our BioNordika companies in the Nordics. So it's not -- it's a new geography for these kind of products but that's a well-proven segment for us.If we continue to the income statement, as Kristina said, we have a good growth on net sales of 25%. And we have been able to keep the gross margins and even strengthen them a little bit. So we have been really, really cost-efficient during the quarter. And all these together has come down to an EBITA of SEK 106 million and the EBITA margin of 10.1%. And what is really good to see is that we are able to keep the profit growth all the way down to the profit for the period in this quarter, which increased with 53%.Looking at the balance sheet. We have, in this quarter, included EuroClone in our balance sheet, of course. And that's why the goodwill and intangible assets has increased and also the interest-bearing liabilities. During the quarter, as I said, we had repurchased own shares for SEK 31 million, and the share price was SEK 248 per share. The impact from IFRS 16 on the balance sheet is now SEK 235 million, and that is on the interest-bearing liabilities side. We continue to have a strong balance sheet with net debt-to-equity ratio is 0.7 and the equity ratio ended up at 42%.Looking at the cash flow. And the operating cash flow in the first quarter was SEK 80 million, that's a little bit lower than last year. The main reason for this decrease in operating cash flow was related to working capital changes. And it's mainly the accounts receivable that we see that have increased in working capital, and that's due to the higher sales in March. We also see that prepayments to suppliers has increased in the late part of March, and that is prepayments to suppliers in Asia to be able to deliver the products that we need, especially in the hospital side.Finally, some financial key ratios. And the profit growth on EBITA was 33% for the rolling 12-month period, which is well above our financial goal of 15%. Return on working capital ended up at 54%, which is also well above the financial goal of 45%. And finally, we are now 1,003 employees at AddLife end of March.So we now open up for questions.
[Operator Instructions]
So please everybody, if you have any questions, we are happy to answer them. Queue them up.
This is Charles Weston from RBC. Can you hear me okay?
Yes, we can hear you.
First of all, what is the proportion of your Medtech sales that are specifically related to elective nonurgent procedures?
I don't have the percentage rate, but actually, it's a smaller part of the Medtech segment. So it's not so huge. I don't have it, but it really is less than 30%, I would say, 30%.
Sorry, I'm struggling to hear you, the prepared remarks are much clearer.
Yes. I don't have the exact percentage, but I would say less than 30 percentage.
Okay. And then obviously, it's a very strong Q1. Could you just comment, perhaps qualitatively, on what you've seen in April so far, excluding the large PPE order? Are the trends the same? Are they more extreme?
We never -- we don't have a prognosis for the future. But I think we [ all really see here, obviously, it's still early ], it's not over yet. Still a lot of people in ICUs, still a lot of [ people to test ] right now. And of course, the testing is continuous in the diagnostics and the need for different medical [ device ] continues. What we also see is that probably some research companies will open up a little bit more now coming out from April and May.
Sorry, I'll try one more question, but I'm struggling to hear your answers.
I actually understand that because there's a lot of noise.
Why don't we save the answers, and then we'll [ dial in ] with you again.
Sorry, I'm afraid I can't hear you very well, maybe I'll follow up.
Thank you.
It's [ Roger Hedberg with PM ]. Can you hear me?
Yes, we can hear you.
On pricing, could you please comment on the pricing environment in general now once the demand is extremely high? And more specifically on Mediplast, they received orders of some SEK 100 million outside the ordinary agreements, right, I would assume maybe that you could receive better prices outside the agreement, is that correct? If you could comment on the pricing, please.
We tried to mute everybody so that you probably can hear us a little bit better. Yes, the pricing right now is extreme, I would say. The need in the world for the same suppliers increased a lot. So the price increase, we see from a lot of suppliers. And unfortunately, that also means that we have to raise the prices to our customers. And we are very transparent in this discussion. So all the customers, they actually know the normal price. And now when we see the price increase in the world, we have to inform them and say that the prices that -- for some [ easy ] products, I could say prices before the COVID-19 was SEK 1 each has now increased to somewhat SEK 8 to SEK 10 each. So it's 8x normal prices on some categories. And unfortunately, that, we have to take out from the customer. We do not expect any extremely higher margins because we think at these times, the most important is that we actually help out hospitals, et cetera. So we try to be very transparent with our customers. They had to, of course, take part of this high price rise that we see. And it's not only price on products that rises, it's also the price on getting [ quotation ], that has come up tremendously during these times. But again, we are very open to discuss that with our customers. So yes, we take out higher prices because we have to. Otherwise, our margins will be totally disrupted right now.
Do we have more questions?
Okay. All right. It seems like we don't have any questions, and I realize it's a bit difficult to hear. So if you have any questions, do not hesitate to call me or Martin and we will try to answer your questions as soon as possible. Send a mail or call us, we are here the whole day for you. Thank you for listening in and have a good day.
Thank you.