CellaVision AB: Continued growth and acquisition of RAL Diagnostics

2019-10-23T08:20:00 CEST - English


The information was submitted for publication at 08.20 CET on October 23, 2019

Juli 1–September 30, 2019
Net sales increased by 13 % to SEK 95.6 million (84.3).
Sales grew organically by 8% (33).
Operating profit increased to SEK 21.9 million (21.0).
The operating margin was 22.9% (24.9).
Profit before tax increased to SEK 21.5 million (20.7).
Earnings per share before and after dilution were SEK 0.72 (0.70).
Cash flow from operating activities increased SEK 32.5 million (26.1).

January 1–September 30, 2019
Net sales increased by 23 % to SEK 311.9 million (253.8).
Sales grew organically by 18% (6).
Operating profit increased to SEK 94.8 million (75.8).
The operating margin increased to 30.4 % (29.9).
Profit before tax increased to SEK 94.2 million (76.1).
Earnings per share before and after dilution were SEK 3.14 (2.48).
Cash flow from operating activities was SEK 101.0 million (61.3).

Significant events after the period close
On October 1, CellaVision completed the acquisition of RAL Diagnostics (RAL) for a purchase price of SEK 268 million on a cash and debt-free basis. RAL develops and sells high quality products for sample preparation in hematology, microbiology, cytology and pathology. CellaVision and RAL together create an increased customer value in digital morphology by offering a complete and integrated solution for the hematology laboratory.


CEO’s comments
The third quarter of 2019 was a stable quarter for CellaVision, given the strong quarter in 2018, with organic growth of eight percent. Sales were SEK 95.6 million (84.3). There was strong development in APAC, where sales grew by 54 percent and the Americas also reported a good quarter, with growth of 16 percent. EMEA was weaker, with negative growth of 18 percent.

Profitability was good during the quarter, with an operating profit of SEK 21.9 million (21.0), corresponding to an operating margin of 22.9 percent (24.9). The profitability is a result of CellaVision's effective indirect business model and good gross margins. Cash flow from operating activities for the quarter was SEK 32.5 million (26.1). The first nine months’ cash flow from operating activities was SEK 101.0 million (61.3).

On October 1, CellaVision acquired the France-based company RAL Diagnostics (RAL). RAL operates in high-quality sample preparation in hematology, microbiology, pathology and cytology.

Cash flow progressed well in the quarter and was SEK 27.7 million (22.2), thus increasing net cash to SEK 218.2 million (164.4). A large part of the net cash will be used in the acquisition of RAL.

Market development
The Americas developed well in the quarter and sales grew by 16 percent to SEK 46.4 million (40.1). In the USA and Canada positive growth continues, with an increasing number of installations at end customers despite the relatively well-penetrated market. We also see improved sales of applications and software. Brazil, where we established our own organization for local market support in 2017, is now also reporting rising sales. For the first nine months of the year growth in the region is 29 percent.

EMEA reported a weaker quarter, with 18 percent negative growth, after having sales rising for six consecutive quarters. In the past 18 months we have considerably increased our activities in this region by establishing our own organizations for market support in the Middle East, France, the German-speaking countries of Europe, the United Kingdom/Ireland, Spain/Portugal and Italy. These teams are now fully operational and the growth for the first nine months of the year was 16 percent.

APAC reported a strong quarter, with 54 percent growth. We conduct most of our marketing activities in all our markets, not least China, Japan and Australia, and continue to see growing interest in CellaVision's products and solutions. For the first nine months of the year growth in the region was 16 percent.

Segment expansion - the acquisition of RAL is a natural step in CellaVision's strategy
The acquisition of RAL was completed on October 1, 2019 and since then is part of CellaVision.

RAL`s products in sample preparation are turning to an already developed market with other players in competition, unlike CellaVision's market before the acquisition, where traditional microscopy is replaced by digital microscopy in hematology. With products in sample preparation, CellaVision gets a future recurring revenue stream and the opportunity to improve sample preparation quality, which is of great importance for the final results of blood analysis.

We have started a series of activities to develop the opportunities this acquisition provides for realizing synergies. The now integrated product range and potential to standardize workflows at laboratories the world over means an increase in CellaVision's addressable market in hematology to a total of about six billion SEK.

RAL holds a strong position in EMEA, but has a selective presence in the Americas and APAC markets, where CellaVision has established a strong position in recent years. Consequently, there is a sound basis for effective sales expansion of RAL’s solutions globally through CellaVision's market support organization and partnership.

The acquisition of RAL also supplies CellaVision with considerable experience and knowledge in microbiology, cytology and pathology, which opens up new future opportunities to apply CellaVision's technology beyond hematology.

Geographical expansion
Geographical expansion is crucial to CellaVision's growth. In the third quarter of the year we did not establish any new organizations for local market support, and we are now fully operative in our latest establishments. We will strengthen the organization in some of our current markets to meet growing demand. Altogether CellaVision now has 17 local organizations offering market support in more than 30 countries.

Innovation
The CellaVision® DC-1, our new product for small and mid-size laboratories, was CE marked in February. The reception from our various distribution partners has been positive and most of them have now launched the CellaVision® DC-1 in their own sales channels. Step by step, we are now increasing production and delivery volumes. There will be full industrial production from 2020 onwards.

In 2019 we achieved commercial approval for the CellaVision® DC-1 in a number of important markets in addition to the EU countries. Examples are Canada, Australia, Japan, India, Korea, Brazil and several more countries. We have also initiated the action required to take the next step in the application process for sales approval of the CellaVision® DC-1 in the USA and China in 2020.

Compared with the previous year we have grown the organization in innovation by 33 percent and the cost of research and development reduces profit for the quarter by SEK 15.8 million (10.9). Going forward, we will continue to increase our investments, including recruiting talent in research and development, to secure our future innovation power and our growth opportunities in the short and long term.

Zlatko Rihter, President and CEO


Key Ratios

(MSEK)Jul-Sep 2019Jul-Sep 2018Jan-Sep 2019Jan-Sep 2018Jan-Dec 2018
Net sales95,684,3311,9253,8364,8
Gross profit72,862,2236,9188,9270,9
EBITDA25,622,5105,281,1118,4
Operating profit21,921,094,875,8111,6
Operating margin, %22,924,930,429,930,6
Profit/loss before tax21,520,794,276,1112,1
Total cash flow27,722,248,910,114,4
Equity ratio, %74,778,774,778,777,9


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 its own leading systems for routine analysis of blood and other body fluids in health care services. The 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 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 17 local market support organizations covering 32 countries. In 2018, sales were SEK 365 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 and the Swedish Securities Markets Act. The information was submitted for publication at 8:20 a.m. CET on October 23, 2019.

Attachment

PDF version: CellaVision Interim report Q3 2019

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