Elekta AB (publ)
STO:EKTA B
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
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 |
61.8
87.8794
|
| 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.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Elekta AB (publ)
You don't have any saved screeners yet
Good morning, everyone, and warm welcome to the presentation of Elekta's Q4 and year-end of our fiscal year 2020/2021. My name is Cecilia Ketels, and I'm Head of Investor Relations at Elekta. With me here in Stockholm, I have Elekta's President and CEO, Gustaf Salford; and our CFO, Johan Adeback. Today's agenda will start off by Gustaf presenting highlights of our developments, then Johan will give you details on the financials, and the presentation will end with Gustaf's view on Elekta's outlook. After the presentation, there will, as usual, be time for your questions.But before we start, I want to remind you that some of the information discussed in this call contain forward-looking statements. This can be projections regarding revenue, operating results, cash flow as well as products and product developments. And these statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in the statements. And with that said, I hand over to you, Gustaf.
Thank you, Cecilia, and welcome, everyone, and really thank you for listening into our Q4 call. So to kick off and start, I would like to reiterate really our strategic priorities. That is all about driving precision radiation medicine and helping clinicians to improve patients' lives.And throughout this very special year, we have been successfully focusing on driving resilience initiatives and digitalization across the company. We have also been very much focused on increasing market access to precision radiation medicine globally under very difficult circumstances. And we have also accelerated innovation in our linac family the Unity platform and a lot of software solutions across our portfolio.We have been driving growth, digitalization of the service. And finally, we have focused a lot on building strong partnerships across the cancer care continuum. And we will come back to these priority areas throughout the presentations.And I would also like to share some of my perspectives on the fiscal year of 2021, a year that has been challenging in so many ways, but also filled with opportunities for Elekta, and here are some highlights. Initially in the year, I mentioned it before, but we focus primarily on securing patient treatments and the uptime in our installed base. And our service organization did an absolutely fantastic job in making sure that we have supported our customers and their patients during the pandemic.We also launched products across our portfolio. And I'm very, very pleased to see the interest and the demand for our recently launched solutions, Harmony, Brachy Studio, MOSAIQ 3 and the Lightning software for Leksell Gamma Knife. We are in the second phase of Unity, and it's so inspiring to see the volume of clinical evidence in the MOMENTUM study growing as we continue to advance the knowledge and application of MR guided radiation therapy globally.Throughout the year, we have seen our customer and employee satisfaction scores increase significantly across all our areas and all our geographies. And already in Q2, we returned back to revenue growth, and we have seen strong and stable cash flow throughout the year.In Q4, we have gained market share, and we had a very strong order finish of the year. So if we turn to orders in the quarter, you can see that our orders grew with a strong 18%. That's a true acceleration, resulting in a 6% order growth for the full year. And as mentioned in our Q3 report and during the quarter, installation volumes driving revenue was still impacted by lower access to hospitals and came in at 1% in the quarter and 1% for the full year. However, we saw a recovery in installations in mature markets, but emerging markets are still lagging and expected to gradually improve in the coming quarters.At the end of the period, Elekta had an installed base of approximately 4,750 units of linacs, MR-linacs and Leksell Gamma Knife's, growing with 5% since last year, enabling more cancer patients around the world to get access to radiation therapy.The market situation has improved in all our regions, and all our regions also showed healthy growth. So just to give you a bit of a summary, North and South America orders grew with 13% in the quarter with both North and South America grown. Capital equipment spending is returning and customer access is steadily improving. In South America, the order situation also improved with strong performance in countries like Colombia and Chile. Europe, Middle East and Africa orders grew 7% based on constant currency with strong performance in Middle East Africa and solid development in Europe. So mature European countries are showing signs of recovery from the pandemic with the launch of new public tenders and there was also strong demand for Harmony in the region. The Middle East had a good order intake with strong growth in the United Arab Emirates and in German. And in Africa, the development was also strong. Asia Pacific orders grew with a very strong 46%. The continuing recovery in orders was broad-based with many markets contributing, but mainly driven by very strong performance in China and India. The Chinese public market continues to be the main growth driver in the region. And below, you can see some examples of deals per region in the quarter.I think it's very important to look at our performance on a rolling 12-month basis. And as mentioned, the market situation is improving, and many health care systems and hospitals are starting to recover from the pandemic and investing to manage cancer care needs that are built up during the last year. On the graph, you can see Elekta's order and revenue development before and during the pandemic. And you can see a clear U-shaped recovery. Orders are often more volatile between quarters and leading the way for the revenue development. And during the year, North and South America grew with 23% in orders, Asia Pacific with 5% and EMEA declined with 4%. And we expect installation revenue to improve during next quarters.I have to say a couple of words on China. The Chinese market continues to be a key growth driver for Elekta. And in our fourth quarter, we booked large orders with PLA, the general hospitals of People Liberation Army. And our -- and China has gone from strength to strength and really accelerated out from COVID during the year, and now showing a 25% order growth and 30% revenue increase in the fiscal year. I am very, very proud of our team in China that is enabling this strong market position, and we are well positioned for future growth.I also would like to share a couple of perspectives on Harmony, our new linac. And it's really the latest addition to our family of linacs. And treatment slots can be reduced by up to 25% and enabling our customers, the clinicians to deliver high-quality cancer care to more patients. And I'm very excited about that our first Harmony went live at Ashirbad and Bursa Hospital in Turkey in May 2021. And we have now booked orders in 11 countries in Europe, Asia and Latin America.In relation to the regulatory process, we received CE Mark in November, and the process for getting approval in the U.S. is pending. The Chinese Natural Medical Products Administration approval will be somewhere around the beginning of 2022. And to finalize the first section here. We are celebrating because in the quarter, we booked our 100 system of Unity. It's a true milestone for Elekta. And the order -- the machine was ordered by St. George Hospital in New Zealand. So now Unity is registered in all major markets, and it's very, very encouraging to see the progression of the second phase of the Unity journey. Focus on growth through further market adoption, clinical studies, gradual reimbursement. And to date, we have treated more than 2,500 patients for 50 anatomical areas. And we have also significantly reduced the installation time and been driving cost reduction initiatives throughout the year. So congratulations to the teams and also to our customers for the 100 Unity ordered in the quarter.So with that, I would like to hand it over to Johan.
Thank you, Gustaf. I will now go through the financials, starting with net sales and EBITA margin development. In the fourth quarter, total net sales grew 1%, with solutions sales decreasing 2% and service sales increasing with 6%. Solutions sales was negatively impacted by pandemic, especially in emerging markets, where installations took longer than normal. Service sales, however, finished the year strongly. For the full year, sales was hampered by the pandemic. Based on constant currencies, net sales grew 1%, with a decline of 1% in Solutions sales and with Service sales growing a stable 5%.Turning to EBITA margin. We came in at 19.7% for the full year after achieving a 20.3% EBITA margin in the fourth quarter. Our EBIT margin for the full year was 13.9%.Let me continue our sales for the fourth quarter from the regional perspective, starting with North and South America. Sales declined were 2%. North America as well as the U.S. market was unchanged. The South American market declined due to continued negative effects from the pandemic.Turning to Europe, Middle East and Africa. Sales increased 3% on back of a strong performance in Europe. The emerging market part of the region was weaker, with declining sales in Africa and the Middle East.Finally, Asia Pacific, where sales grew in China, India and Japan. But other markets were in general slower, which resulted in unchanged sales in the quarter. Overall, the situation we saw early in the year continued in the fourth quarter with mature markets performing stronger than emerging markets.Gross margin came in at 38.5%, in line with previous quarter, but lower than last year. Higher supply chain and service costs and negative foreign exchange effects, mostly from a weaker U.S. dollar continued to impact gross margin.EBITA margin decreased versus Q4 last year, primarily due to the lower gross margin. Net financial items were higher than normal as we prepaid a USD 50 million loan. This will have a positive effect on financial items in coming quarters.If we summarize the quarters and look at full year numbers, we see that sales in North and South America deeply declined 4% with a relatively flat development in North America, but a significant decline in South America due to the pandemic. Sales in Europe, Middle East and Africa declined 2%, with Europe growing and the emerging market part will be having lower sales, again, driven by the COVID effect. And the third region, Asia Pacific, grew 11%, with China being the main growth driver, but we also saw good performance in Japan this fiscal year. Gross margin for the year was 40.8%, down from last year, mostly from the higher logistics costs and foreign exchange effects already described.EBITA margin for the year was a strong 19.7%, up from 17.3% last year, mostly from lower expenses and a positive net foreign exchange effect. I will go through the foreign exchange effect in more detail later.Finance net for the year was minus SEK 277 million, as we have had unusually high gross debt and cash levels during the year to mitigate potential negative COVID effects. As we have performed very strongly, not least in cash flow, despite the pandemic, we have now decreased gross debt levels and foresee an improved finance net going forward. Our tax rate came in at 23.1%, in line with projections and an improvement from last year's tax rate of 25.4%. Net profit for the year improved with 16% to SEK 1.253 billion, and EPS came in at SEK 3.28, an improvement of 15%.Let's move into expenses for Q4. We continue to do significant parts of both our internal and external activities on digital platforms. But as conditions started to normalize in the quarter, with increases in access to customers and increased travel, expenses also normalized somewhat, resulting in an increase compared to Q3. Main driver of the increase in selling and admin expenses compared to Q3 was a one-off legal cost of SEK 35 million from the successful outcome of the multiyear genetic arbitration. We also saw increased expenses in the quarter from incentives and holiday pay as less holidays was used due to the pandemic. Net R&D expense declined due to increased capitalizations. Our gross R&D expense continued to increase as we invest in innovation. For the full year, gross R&D expenses corresponded to almost 11% of net sales.As I mentioned earlier, our EBITA margin for the full year was 19.7%, and EBITA was SEK 2.709 billion. This bridge illustrates the EBITA growth of SEK 188 million or 7% for the 12-month period. The pandemic had a negative impact on installation volumes with a corresponding negative impact on profitability. The product and project mix during the year also contributed negatively. This was mitigated by lower sales and R&D expenses.Foreign exchange differences had a positive effect on EBITA overall, including the effects on all P&L lines. FX had a positive effect on EBITA of around SEK 135 million. Looking at this foreign exchange effect in some more detail, we have seen large market movements with the Swedish krona appreciating versus most major currencies and with the U.S. dollar weakening overall. As a consequence, we've had a large negative effect on our revenue. This has been mitigated by positive FX effects on our cost base, both on COGS and OpEx and also from hedges. On a net basis, this led to the positive effect of approximately SEK 135 million.Moving to cash flow. We continued the strong performance seen early in the year. Cash flow after continuous investments for the 12-month period came in at SEK 1.706 billion, and we had an operational cash conversion of 82%. This was our strongest cash flow year ever in absolute terms. A key driver of the improvement in cash flow versus last year was a stable net working capital in the year.If we look at net working capital in more detail. We have an improvement in all major underlying working capital items in the fourth quarter. On an annual basis, net working capital increased slightly. However, as a percentage of net sales, its share improved to minus 7%.Our financial position continued to be very strong with a low net debt level, and we ended the year with a net debt-to-EBITDA level of 0.25. We will continue to use our strong balance sheet to support investments, to drive growth and innovation. Based on our strong result and cash flow, the Board has proposed an increase in the dividend from SEK 1.8 to SEK 2.2 per share, in total SEK 840 million, and corresponding to 67% of net income.With that, I hand it back to you, Gustaf.
Thank you, Johan. And now I would like to turn to a bit information on our new outlook for the mid-term and some comments on the trends and impacts we see here in Q1. But I would like to see what we announced this morning and talk about what we announced this morning, Elekta's mid-term outlook until '24/'25. So based on market growth projection of around 6% to 8% over the coming years, the mid-term period, we are now having a growth view of more than 7% net sales CAGR over the next period. We see an EBIT, when moved from EBITA to EBIT, percentage expansion over the period. And we have also announced that we'll go to more than 50% of annual net profit in dividend, and that's in line with how we have done our dividend the last couple of years. We will, of course, present much more on the drivers and background to the mid-term guidance and outlook in the upcoming Capital Markets Day on June 7, where all of you are, of course, invited.If we turn to the outlook for the coming quarter and a couple of comments around that, we truly see improved overall market situation for orders, as you also saw in this quarter. But you need to be a bit mindful on last Q1, we booked Elekta's largest deal ever with Genesis Care in that quarter.On the revenue side, we see improved access for installations and driving revenue growth over the next couple of quarters. And we also are continuing to accelerate our innovation investments in our linac -- family of linacs in the Unity platform and in our Software Solutions.So just to summarize our Q4. You have seen an accelerated order growth, and we have been gaining market share. We have seen the revenue and gross margins still impacted by the pandemic, but will improve going forward. We booked 100 Unity order, and we saw continued strong cash conversion and we have also presented our new outlook.So with that, thank you for listening, and I would like to hand it over to Cecilia.
Thank you, Gustaf. And as you mentioned earlier, our Capital Markets Day is approaching. And it will be a digital event on June 7, starting at 2:00 p.m. Central European Summertime. And if you have not answered yet, so please register to participate on our website. And even if it's digital, we will, of course, will be possible to ask questions. And we think you will find it interesting as we do some deep dives into the market, the strategy and the drivers behind our mid-term outlook. And with that, we open the lines for your questions. Please, operator. Over to you.
[Operator Instructions] And our first question comes from the line of Annette Lykke from Handelsbanken.
Congrats. You mentioned on this very decent order growth. You mentioned that you are taking market share. So I wonder if you could share a little bit more color on this? You may also highlight that it is mainly Unity and new solutions that are growing. So please, both products and regions share a little bit more on how and where you take market share? Then on your comments on mid-term guidance, saying that we're returning to pre-pandemic growth, assuming 6% to 8% market growth. I think numbers has been a little bit higher, and maybe you think there will be, at least in the short-term, some pent-up demand for this coming year. But also, do you think an ambition of reaching at least 7%, which are on par with market growth is ambitious? Or are your mid-term guidance a little too conservative? And then just a little bit on innovation. Could you make a short comment on Unity or other Solutions in respect to potential use within cardiac radio ablation?
Thank you, Annette. Great questions. So I'll start a bit on the market share, talk a bit market growth and the linkage to our outlook and comments on Unity and ablation. So if you take market shares, yes, I think in the numbers, we see and track in all the different regions. You saw in Q4 a very strong growth, you can say, in all the regions. And we have seen that trend. And when we compare to our competitors over the last couple of quarters that we have been speeding up when I think -- compared to competition and taking shares in most countries and most regions. And it's quite broad when it comes to the product areas as well. So it is linacs. It is Unity, of course. It is Brachy. It is Gamma Knife's that have shown a strong market share gain throughout the last couple of quarters. But you can say, especially here in Q4 with 18% order growth.If you look at the market growth, I would say that -- and I mentioned before, pre-pandemic, the market was growing 10%, 11%, if you just added all the industries order numbers. So it was very strong. In historical comparison, the average growth has been around the 6% to 8%, and sometimes a bit lower, 3% to 5%, also been talking about historically. So that's why when we look ahead, we see, of course, a pent-up demand right now post-COVID that people need to invest in cancer care. But over the longer period, we believe that the 6% to 8% market growth is the best prediction we can give based on all the analysis we have been doing.We are then having our own outlook for revenue, and we're seeing more than 7%. And I think that's important to say as well, and that's the number we will be driving for. So the message there is that we should grow faster than the market. The key drivers for that is, of course, Unity. It is all the software investments we are doing in innovation right now as well as in the linac family. And then, of course, we have very, very strong positions in the Gamma Knife business or the neuro business as well as in the brachytherapy business. So that is the areas that we would drive for growing faster than market.
Could I -- just before you talk about the ablation ask you. See, for example, in a state where your position within solutions are fairly low, do you also expect to -- that one to increase significantly also within Solutions? Is it main greenfield replacement? Or are you flagging hospitals to?
Sorry, could you take that one and get on it? I didn't get the first part of the question.
In the U.S., are you increasing your market share? Are you planning to increase your market share as well -- in the states where you have a fairly low market position with the Solutions?
We're planning to gain market in all the different regions, of course. But if you take the U.S., it is the market where we, Elekta, has the lowest market share for historical reasons. So it is a very important market for us. We have new products to launch into that market. So yes, we -- our ambition is, of course, to gain market share. And I have often said that in the past that the U.S. market for us, for Elekta, is not really a market -- growth market. It's much more of a market share gain market. So that will be the plan going forward as well. And I think Larry Biscotti and his team are doing a great job in that market.
Okay. And then just short on the radio ablation potential?
Yes. It is an area that we're looking into, of course, in our different innovation projects and R&D projects. So yes, we are looking into it. We have some initiatives there as well. And we are following it both, if you say, on the MR side and on the CT-based side. So we think it's an interesting area.
And our next question comes from the line of Patrick Wood at Bank of America.
I'll keep it to two. The first one, just curious, you'd mentioned the 5% installed base growth, but the Services revenues were down 1%. I mean there's a bunch of different ways mathematically that could happen. Did you have, for example, fewer -- more new systems being placed than usual and fewer replacement systems? Or was it pricing? I'm just curious if there's anything to comment on there. And then for the second question, obviously, the order backlog, partly driven by Unity, is still an incredibly inflated state. And I'm just trying in my head to sort of reconcile that 7% sales CAGR with the very large backlog. So maybe could you give us a little bit of color on the duration of that backlog in terms of -- is that typically coming through in the next 3, 5 years? Just to get a sense of how those 2 things relate the backlog relative to the greater than 7% sales guidance?
Yes, of course. So if we start with the service question, I'll ask Johan to chip in as well. But throughout we saw the 5% growth of the installed base during the pandemic year. And I think that is strong, and that also shows that Elekta is strong in new sites. It's not just about replacement. It's really about getting out of the greenfield areas, taking new share as well. If you take the service revenue growth, that was a strong number in the quarter, an isolated quarter, I think it was 6%. We have seen a bit lower numbers in the previous quarters. And the reason for that, Patrick, was that the service contracts, they generate the revenue stream, recurring, of course. But then on top of that, we had a bit more time and material that is more on a case-by-case basis. And it was more difficult to deliver during COVID. But that's coming back as well. Johan, do you want to add something there?
Yes. I would say, in the quarter, I mean the main driver of the good revenue growth in service was the contract customers. So even though the noncontract improved somewhat, that's still a bit impacted by COVID. But glad to see where the strong service revenue growth in the quarter. I think...
And then if we take the Unity question, my understanding of the question was when will the order backlog on Unity turn to revenue? Was that right, Patrick?
Essentially, it's just you have a very large backlog relative to that 7 -- greater than 7% guidance. I'm just trying to reconcile the backlog versus that guide.
So great trend. I mean, it should be higher than 7%, if I start there. And the Unity backlog, we have had a good year actually of course, with some headwinds from getting our global teams to install the machines. But we have seen a fantastic reduction in the time it takes to install a machine, and we have also been able to do quite a good number of installations. But if you take the average time between order to revenue and Elekta that installation start, on a regular linac, I mentioned 1 year. If you take Gamma Knife or Unity machine, it is more like 1.5 years. And if you take the Brachy business, it's often shorter, it could be down to, say, 6 months. So then you get the indication for the timing. And then, of course, it was impacted compared to the plan we had before COVID on the installation side, but we are quite pleased with the outcome in the year when it comes to Unity installations.
Very helpful. And just to confirm to make sure I've got it right. The Solutions revenues being slightly down in fiscal '21 versus the installed base up is just because you're heading up a lot of new sites and new installations rather than replacement?
Okay. So I think the installed base growth is linked to the new machines were installing adding to the installed base. So I think the indication is that it's the new sites. And I think that's something that's very, very positive, of course, and also the opportunity to up-sell to the installed base, new services, upgrades, after sales, et cetera.
Our next question comes from the line of Veronika Dubajova of Goldman Sachs.
I have three, please. I just wanted to kind of push you a bit on the mid-term guidance, and I appreciate we're going to have the CMD in a few days, but I'm slightly confused. If I look back at the mid-term guidance that you had pre-COVID, it was for 8% to 10% growth, for your business. You are now guiding off of a base, which is actually flat to down versus prior year. So the starting point for the guidance is lower, yet your ambition is to grow 7%. I'm just kind of trying to understand what has changed in the market that's making you more cautious? Is it market outlook? Is it your relative competitive position? What is it that has kind of made you more concerned and therefore less constructive on the mid-term outlook for the business, in particular, considering the facts of the base for that guidance? So that's kind of my first question. My second question is also on the mid-term guidance and around sort of the margin picture of it. One, kind of would love to understand the rationale for why you switched to EBIT as opposed to EBITA since that's been historically the KPI that you were focused on. And when you talk about margin improvement, I guess what is the magnitude? And then my third question is, I appreciate the guidance is for 7% plus growth and improvement in margin. But if you can contextualize how you think '22 will compare to that mid-term guidance? In particular, on the margin picture, when I think about things like gross margin, if you can give us some insights into that, given where we are tracking, that would be very helpful? Those are my questions.
Thank you, Veronika. And of course, great questions, all of them. And I think this -- if I start with our view on the mid-term guidance, I think we've done our homework. We have learned the lessons from the past. We have talked to a lot to our larger and long-term shareholders, how they want to see us communicate and what the information they need to take the right decisions? And it is really about the mid-term outlook or value creation for the company. It's not each and every quarter or the annual focus is much more long-term than that. So based on that input and how we've seen it, we developed this mid-term outlook until '24/'25. And you will also see in the Capital Markets Day that it's linked to our strategy. So then we come back to the numbers that -- versus the previous guidance. And I think we are looking ahead, and we're seeing that if you take the historical market growth and you've seen the historical growth of Elekta, this is an acceleration compared to those levels, and we are then growing faster than market. So I think that's the key thing in the communication we're doing right now. And then Elekta is a project-based business. It is global in many challenging markets around the world. So therefore, we much rather focus on the longer term picture. When it comes to the EBIT question, I hand it over to Johan.
Yes. Thank you, Gustaf. So I mean basically, it's -- we want -- we think it's further down in the P&L, and I think it shows more the full performance. It's the underlying reason for going to EBIT. But also, we are getting out of the amortizations we had from the Unity project, so it's more of a normalization there. So it's -- that's really the thinking behind it. It's similar to showing total performance. We don't have any items affecting comparability since a couple of years back as well. So that this is just another step in that direction.
Yes. And then if you take the last margin question into next year, we don't really guide on next year margins. We say margin expansion on average throughout the period. But if we talk about a couple of the drivers, you can see our gross margin has been quite low in the 2 last quarters due to the reasons we talked previously about supply chain costs, servicing costs and, of course, FX. But if you look at Elekta historically, we have been able to deliver quite a good leverage on our SG&A costs throughout the years. And so that's a positive factor that we will continue to drive efficiencies. And we also see good opportunities for efficiencies in service costs and also installation and manufacturing costs going forward as well. So I think we have many levers to work with. And on the top line side, it's also about the investments we have been doing in service and software and of course, new platforms like Harmony and Unity that will drive that as well. So that's a couple of the summer of the drivers that we'd also see in the beginning and throughout the next year.
Johan, Gustaf, that's really helpful. Can I just follow-up? I don't mean to belabor at the point, but I'm slightly confused. So the old guidance was 8% to 10%. The new guidance is 7-plus, off of a lower base. I'm just trying to kind of get to the point of what has changed? Why are you less optimistic today on the growth outlook for the business than you were before? Is it because your assessment of market growth has changed? Or is it because your assessment of your competitive position has changed?
No, I think we're saying over 7%, Veronika. So it can, of course, be higher. And then for the previous guidance, we have -- we're not guiding in that way before. We left it a couple of quarters ago. So this is the new mid-term guidance that we're referring to. And then we've also said that the dividend policy has gone up to 50 -- more than 50%. And that's also where we have been over the last couple of years. So that's the 3 main components, of course, of our mid-term guidance going forward.
Okay. Okay. So your assessment of either market or competitive position hasn't changed?
No. I think what you have seen actually in the last couple of quarters is that we have been accelerating. And our product portfolio is -- has been very much strengthened throughout the year. So we have a very positive outlook on both the underlying demand drivers when it comes to the need for cancer care and our product portfolio, what we're driving right now.
Okay. I'm just -- I mean I'm just surprised that you're not guiding to 8% plus or 9% plus in that context.
Okay.
Our next question comes from the line of Kit Lee at Jefferies.
My first one is just on the EBIT margin guidance. Is it fair to assume that the amortization cost will actually be coming down, so it will actually be supportive to the EBIT margin expansion? And I guess essentially my question is, do you still expect to expand your margin on the EBITA line, please? And my second question is just on the Unity order. If I look back, since you last provided an update to the number of orders, it seems like you've taken maybe 5 Unity systems per quarter. And given that you're now in the second commercial phase, is that run rate of 5 orders doing that for you? Or what are your expectations going forward as the market start reopening again?
Yes. I can start with a Unity question, and Johan, you can take the amortization, capitalization question. So on the Unity side, you're right, it's around 25 orders, if you do that math in the year. So that is what we came in, in the year. And if you look going forward, if you remember, Kit, we have often talked about getting to installation volume around 24 Unity's in the year. We were not really there this year yet, and we mentioned that before. But we see good opportunity to get there very soon. And we've had quarters, we have installed 6 per quarter. So going forward, I would say, no, we want a higher number, of course, than the 5 or the 5 you were referring to or the numbers that we've had in this year going forward. And that's what I expect as well from the market and from our business.And on the link between amortization and capitalization, Johan?
Yes. So I think the question was 2 ways. Amortization going to go down? Yes, they will go down from Unity in the coming years. So we will have some positive impact there. Is that driving the statement why we -- how we see EBIT margin improving over the coming 4 year period? No. I mean that's -- we see an underlying improvement excluding amortizations and capitalizations.
That's great. And then I have a follow-up as well, please. Just on GenesisCare. You booked quite a large order back in Q1 last year. But I think there is still half of the total order that would still be both in the next few quarters. Can you just give us some sense of when the rest of the order will be booked? What was the timing of that, please?
Yes. So I'll take the overall picture. I mean it's good to know, and I think all of you know that Elekta order booking policy is for 3 years for Solutions orders, I would say, and 5 years for Service orders. So if you have a Unity outside that period, then you will wait until 1 year and then book it when it comes into the year. So based on that, we'll continue to book throughout -- with that policy throughout this year as well on those orders we have that this kind of currently longer than 3 than 5 years. And specifically on GenesisCare, Johan?
It's dependent on, as Gustaf say, when the different -- what was outside the -- that period comes into play, and that depends on how the installations and so on go, and that's progressing quite nicely. So -- but I don't have -- we will not disclose an exact number, but we will book some of that order this year as well, yes.
Okay. So is it fair to assume that it will be less lumpy than when you first book the order in Q1 last year?
Yes. Yes. It's much more of a continuous booking as we continue to work off and do the installations and so on. So it's going to be over time.
But it's an -- Kit, it's an important part of the Q1 as well. And as I mentioned in the outlook for the Q1, we will not book as much, of course, in the Q1 because that was the biggest deal we did ever in Q1 last year. So I think just be mindful of that when you look at the numbers going forward.
And our next question comes from the line of Karl Norén of Danske Bank.
A couple of questions from my side. First, can I just confirm that you said that you expect your EBIT...
Try to speak up. Excuse me, we can hardly hear you. Can you try to speak up and closer to the microphone?
Yes. Can you hear me now?
Not much better.
Yes.
Yes, we can hear you.
Okay. Yes. So my first question was just to check what you said on your EBITA margin guidance. Do you still -- do you expect it to increase going forward in your outlook excluding the amortized, excluding the -- or if we look at how you have been accounting right now with your amortizations?
Take -- so I mean the first step is that we go to EBIT because we think it's a better way of guiding further down in the P&L. And we've talked about that for quite a while to go there when we have kind of amortized a big proportion of Unity. And then yes, on the EBIT level, we should see an improvement. So it's EBIT, we will continue to talk about in the coming quarters and years here, Karl.
Yes. But I just wonder if your EBITA margin, do you still expect that to increase from current levels in your guidance?
I think there will be the same drivers because we should get to a better balance between the amortization and capitalization. And I think it's very much to say we are doing large investments in innovation here and now, and they will also be amortized, a lot of those projects later in this guidance period or outlook period as well. So I think we've come to better kind of steady state in the situation between capitalization and amortization if you look in the coming years, sir.
Okay. And then just a question on the installation environment, maybe more short-term, can you say anything what you've been seeing at the end of the quarter or maybe in May month?
Yes. I think it's good progress. We were a bit impacted actually by the -- with the Swiss crisis. We had a couple of machines not getting all the way through the Suez Canal. It was not that many machines. But overall, I think we see better access. We also see that the cancer care systems need more installations to take care of the cancer care need, as mentioned. Some emerging markets still difficult to get access to. But overall, as I mentioned, recovery in many mature markets, China, very, very strong. Some emerging markets still trailing. So I think that's kind of the overall picture. Some disturbances, as you've seen in the industries as well in the logistic chains, but overall an improvement.
Yes. And just the last one on your -- you touched upon it on your, maybe the supply chain on logistics. When can we see this gross margin headwind? When do you expect that to fade and return to more kind of normal cost of goods sold level?
Yes. So I think we need to plan for something. It's, of course, very, very difficult to analyze from our side. But when we talk to our logistics suppliers and so on, it's during and after the summer that's when we believe it will stabilize. And we don't have any main -- at this point in time, we don't have any main shortages in our production supply or anything like that. So a gradual improvement during the summer here and early autumn. And then we expect it to become more to a normal situation later in the autumn. That's the best available information we have.
And our next question comes from the line of Kristofer Liljeberg of Carnegie.
Two questions sort of. First, when it comes to Unity, could you comment what the installed base of Unity machines are now? And related to that, how soon do you think you will average 2 installations per month, i.e. 24 installations per year? My second question comes to what assumptions you have done for the gross margin in the new margin guidance? Yes, that's it.
Thank you, Kristofer. So the first question was Unity installed base and then was the gross margin assumption. And the third one was, sorry, I missed that.
Out 2.
2. Okay. If we then start with...
No problem.
So installed base, if I start with that one, you'll get more of an update in more detail at the Capital Markets Day. But I think the installations are going well, and we are somewhere around -- more than 40 installed machines. But you will get more updates in the Capital Markets Day from Lionel and Tice from the business line. So I think that's -- when it comes to the 2 per month that we have been talking a long time, I think in next year, we should be able to be there. And we've shown that we can be on a month-by-month or quarter-by-quarter basis, but we need to get to that important milestone as well, but somewhere in next year, I would say.
And do you see -- if you look at the backlog you have now of products, do you see customers also being ready to take installations? Because if I remember correctly, that was sort of an issue the first few years.
Yes, the readiness is, of course, much better, and we have now many more discussions around it. That has not been easy during COVID, of course, because it is a significant installation. So I think that has actually gone better than we expected throughout the COVID situation. And we also have a lot of those discussions with our customers to confirm the installation dates. And we haven't had any cancellations. I think that's important to say as well. So yes, a lot of these -- the discussions are going on to confirm the dates when we start installations on the Unity side. So I have a positive outlook there. And that discussion is also stabilizing.
On gross margin, I mean we have a Capital Markets Day in a bit more than a week. So I would like to postpone that question until that. We will go through the drivers as we stated for the outlook at the Capital Markets Day.
But don't expect the gross margin guidance. I think we will focus on EBIT.
And it's just the fact that you started -- or the first half of this fiscal year, you have this amazing gross margin, and then second half has been weaker than normal. And at the same time, I think that the starting point for the EBIT margin of 13.9% is, of course, also inflated by currencies this year. So it's -- maybe that's also something you could comment on. You don't have to do it now, but at the CMD how you think about it?
No. I think it's an important point. And that's why, I mean in this presentation, we talked quite a lot about currency because it is such a significant currency swings for Elekta with the Swedish krona, the euro and the dollar in the quarter, and you have more of that information also in the PowerPoint. And we will give more comments and views on that in the Capital Markets Day as well. But we try to guide and help you when it comes to currencies going forward with our revenue splits and so on.
And our next question comes from the line of Michael Jungling of Morgan Stanley.
I'd like to ask 3 questions. Firstly, on the mid-term sales growth, CAGR, the guidance of more than 7%. I would like to get a sense of what you're assuming with respect to the Siemens and Varian combination in terms of the guidance about trying to capture market share from you as a result of the bundling of imaging with linacs? I'd like to get a sense of how much of a threat that is in that mid-term guidance? Question number two is on Unity. Can you talk about the quality of the clinical data that you've been able to accumulate? And how close you are to using that in applying for incremental reimbursement in the United States? And then the third question is on EMEA when it comes to the order book momentum. Adjusted for comps, it looked quite weak. And I would like to know how you would describe the prospects of pent-up demand over the next 12 months in the major countries? And also perhaps you could make a comment about the prospects between the government hospitals and the private hospital operators? That's all.
Thank you. I could probably talk about that for 2 hours, those questions, but I'll try to give a summary. So in terms of the competitive situation in the view of our outlook, I think our view is that we should take share. And of course, our competition is saying that as well. But we will continue to drive and accelerate and be focused in what we do and what we did develop in the precision radiation medicine or the radiation therapy area. Of course, we need to have strong partnerships when it comes to larger deals with other players in the cancer care ecosystem. So -- and that's not the new situation for Elekta. As you know, that has been a part of Elekta's success always and part of how we do our business, but we will be focused on precision radiation medicine. And we see most of the business is actually to the radiation therapy clinic currently.How much of synergies? Or -- I mean it's more the synergies is something they talk about. I mean on our side, we are driving our agenda and our growth and our products. So that's what we are focusing on the mid-term guidance that we just presented.Unity, we have the MOMENTUM study, as you know. It is progressing very well, and we have a big meetings right now, actually, with our consortium members and our members around the world, presenting data, discussing the data and so on, and it's very, very fascinating and encouraging to see what our users can do with the machine and how they can treat patients that you couldn't treat before those cases. So that's building up. And that's also an area we'll have more updates on during the Capital Markets Day, the reimbursement process and so on. But that's progressing well. And as you mentioned, we will, of course, focus a lot on the U.S. initially.EMEA. If you take EMEA, it is really about 2 different, say, regions. It is about the more mature European -- Western European countries, North, South. That has recovered quite nicely. And then it's been a bit more struggling in the emerging markets. I think we have shown a great performance taking market share. But overall, the market has been not growing or sometimes also contracting compared to previous years. So I think that's what you see in the numbers. Did I miss something, David (sic) [ Michael ]?
Yes. Could you just comment on the demand prospects here between the government hospital systems and the private hospital operators for the demand of linacs over the next 12 months?
Globally or...
Europe. Europe, please EMEA.
Europe. Europe. So what we've seen is that the public tender activities has been accelerating. The private initiatives, we have also seen that throughout the pandemic, but a bit more now in the end. But I think if I would highlight 1 factor, it would be the public procurement or tender increases throughout the last couple of months, and that's what we expect going forward as well. But there is a lot of private interest because I think a lot of more financial players, more commercial payers see cancer care and radiation therapy as an area with good reimbursement and also a good perspective growth going forward, especially in emerging markets.
Okay. And just a yes or no, please, on my Unity question about filing for incremental reimbursement. Are you in a position with the MOMENTUM study to do it this calendar year in the U.S.?
Let's -- we will give you an update on the Capital Markets Day.
And our next question comes from the line of Scott Bardo at Berenberg.
Some questions, please. So I think this is the first time that Elekta issues a mid-term guidance without having the prospective year guidance in place. So I'd like to understand the rationale for not providing the 2022 guidance given your commentary about the visibility of installation and so forth this year? Related question, please. I think historically, Gustaf, you said the market was growing 10% prior to the crisis, and you would expect it to bounce back in a similar magnitude given pent-up demand. Is it fair to say then that 2022, in your opinion, should track at or above your mid-term margin -- your mid-term growth expectation? So I'd just like to understand that in the context of your previous comments. And last question, please. The group previously highlighted an ambition to have 200 basis points of EBITA margin expansion towards the end of the period. I know you've now changed your metric. But when you refer to improving EBIT margin expansion, are you thinking of a similar magnitude?
Thank you, Scott. So if we start with the first question on the next year guidance, so to say. We have decided, based on all the input, as I mentioned previously as well, that we have been collecting from shareholders, from both long-term large shareholders from -- within Elekta. And we come to the conclusion that for Elekta is better to have a mid-term focus. We are a product-based company. We are in volatile markets. But over a long period of time, if you look at historically as well, we've been able to show strong sales growth and also margin expansion. So that is what we'll continue to focus on going forward. And that's also the reason why we haven't then presented a 1-year outlook. However, we talk more about the quarter. And you see that in our presentations that we tried to give some highlights on the coming quarters, also to guide investors and analysts. On -- then coming back to growth, I think we showed 18% growth in the quarter. And I agree, before the pandemic, the overall market was up 10%, 11%. But if you take a longer perspective there, Scott, and look at the listed companies order numbers, you'll get to order growth historically of around 6% to 8%. So if you take a longer perspective going forward, that's how we expect the market to grow, and then we are saying we should grow faster than the market.On the mid-term, the previous guidance, the guidance that is not valid anymore. We talked about the 200 basis points, but now we're talking about the margin expansion on EBIT level, but we have not disclosed any quantified number, how that will develop over time going forward? But it should be an expansion.
Okay. Just a follow-up then, please. I'm sorry, Gustaf, to push you on this. So yes, your order book growth looks very good indeed in the fourth quarter. Is the signal then that in 2022, your revenue growth should be above your mid-term framework? If you could be explicit on that, please? And furthermore, on the margin side of the equation, is there any -- in your previous guidance, you had efficiencies and growth driving margin expansion. Has anything changed to the negative with respect to the sort of flow through in dynamic of margin progression?
I think on the first question, you're asking me to guide for next year, Scott. And we're not guiding for next year when it comes to a specific number. What I can say about, and as presented in the presentation, you have seen a great order recovery. And in this -- using -- the recovery scenario, we expect revenue to follow in the coming quarters. So that's how much I can say on that topic. And sorry, the second question was...
The underlying drivers for the improvement in margin. I think they are...
Yes. And I think I mentioned that earlier in the call as well. So I mean on top line, we drive a lot of software, service and new platform initiatives. We also drive excellence initiatives on COGS reduction and also the time it takes to produce and install our machines, and that has impact above gross margin. And then, of course, you have leverage on SG&A expenses that we have shown in the past as well. So I would say that on a high level, that is some of the drivers. Thanks.
And we are running out of time, but we would try to take the following question as well but please try to state not that many, and we will try to give short answer from now, I'm sorry. Please, operator continue.
The next question comes from the line of Victor Forssell of ABG.
I'll limit myself to one. And it's looking at your service margins at the moment, obviously, you had some tailwinds in the beginning of the year and now some headwinds towards the latter part. So just curious how that progressed when comparing that on a year-on-year basis? And perhaps also the last couple of years' trajectory that you've had on Service margins and also what you see for the future?
Thank you, Victor. I think as you -- as we stated, we've had higher service costs towards the end of the year. So that's had a some negative impact on service margins in the last quarter. Over time, Service margins have been stable. So no major differences or changes in the last quarters and years.
So it's fair to assume that it was rather flat on a year-on-year basis in this fiscal year?
Yes, I would say that.
And there are no further questions in the queue at this time.
Okay. Then we thank you very much all for participating today, here from Stockholm, and wish you a remaining nice day.
Thank you.