Agfa-Gevaert comments on its achievements in the second quarter of 2019 - Regulated information – August 28, 2019 - 7:45 a.m. CET
Milestones in the transformation process
·Alliance Lucky HuaGuang Graphics: expansion of common sales platform
·Process to sell part of Agfa HealthCare to be launched in the course of autumn
Financial results
·Top line growth of 3.0%, based on strong performances of growth engines, recovered hardcopy film sales and favorable exchange rates
·Adjusted EBIT at 42 million Euro (including IFRS 16)
·Net profit of 15 million Euro (including IFRS 16)
Mortsel (Belgium), August 28, 2019 - Agfa-Gevaert today commented on its achievements in the second quarter of 2019.
MILESTONES IN THE AGFA-GEVAERT GROUP’S TRANSFORMATION PROCESS
“In the second quarter, we have made further progress with our efforts to transform our Group and to prepare our business for the future. The implementation of the offset alliance with Lucky HuaGuang Graphics is running smoothly. In the past months, we have started to expand the common sales platform into several regions within China. In the second quarter, we saw the first effects of the alliance on the top line of the Offset Solutions division. This top line impact should grow gradually in the quarters to come.
The preparation for the sale of part of the activities of Agfa HealthCare is also progressing according to plan. We expect the sale process to be launched in the course of autumn. As announced in May, the part that is to be sold mainly comprises the Hospital IT and Integrated Care businesses, as well as the Imaging IT business to the extent that this business is tightly integrated into our Hospital IT business. This is the case mainly in the DACH region, France and Brazil.
Furthermore, we have taken further steps in our strategy to terminate our reseller activities in the printing industry in the United States. After having discontinued certain offset-related reseller activities of the Offset Solutions division, we have taken similar steps for our reseller activities related to inkjet media. This decision will have an impact on the top line of the Digital Print & Chemicals division in the coming quarters. The termination of these low-margin activities allows us to fully focus on selling our own offset and inkjet solutions in the highly competitive US market.
Together with the execution of the pension derisking program, the investments in the future of the Group had a significant impact on our net financial debt, which stays nevertheless under control,” said Christian Reinaudo, President and CEO of the Agfa-Gevaert Group.
FINANCIAL RESULTS
“We are pleased with the results we published today. Based on our recent strategic steps and the success of all major growth engines, we were able to return to top line growth for the first time since 2015. Our hardcopy range clearly benefited from the reorganization of the Chinese distribution channels. The challenging conditions in the offset industry continued to weigh on the Offset Solutions division’s business, but we are confident that the smooth implementation of the offset alliance with Lucky HuaGuang Graphics will allow us to progressively improve our competitive position. Furthermore, our efforts to improve our profitability allowed us to report a positive net result of 15 million Euro,” said Christian Reinaudo, President and CEO of the Agfa-Gevaert Group.
Statement on IFRS 16 and 2018 restated profit and loss numbers
Several factors influence the way the Agfa-Gevaert Group reports its financial results as from the first quarter of 2019.
The activities of the Agfa-Gevaert Group have been regrouped into four divisions. To allow for a more accurate assessment of the business performances, some costs of corporate functions at Group level (e.g. Investor Relations, Corporate Finance, Internal Audit, the newly created Innovation Office,…) are no longer attributed to the business divisions. For Q2 2019, these costs amounted to 3.6 million Euro (Q2 2018: 3.6 million Euro). These costs are now grouped under Corporate Services. To allow comparison, the Q2 2018 profit and loss numbers have been restated.
As from 2019, the Agfa-Gevaert Group has adopted the IFRS 16 accounting rules. However, to allow correct comparison with Q2 2018, the tables below present the Q2 2019 profit and loss numbers excluding the impact of IFRS 16.
Agfa-Gevaert Group – Q2 2019
| in million Euro | Q2 2019 (excl. IFRS 16) | Q2 2018 Restated (excl. IFRS 16) | % change (excl. FX effects) |
| Revenue | 576 | 559 | 3.0% (1.6%) |
| Gross profit (*) | 196 | 180 | 8.9% |
| % of revenue | 34.0% | 32.2% | |
| Adjusted EBITDA (*) | 56** | 49 | 14.3% |
| % of revenue | 9.6% | 8.7% | |
| Adjusted EBIT (*) | 42** | 35 | 17.1% |
| % of revenue | 7.2% | 6.3% | |
| Result from operating activities | 31 | 27 | 15.4% |
(*) before restructuring and non-recurring items
(**) Q2 2019 Adjusted EBITDA including IFRS 16: 66 million Euro
Q2 2019 Adjusted EBIT including IFRS 16: 42 million Euro
Continuing the positive evolution of the first three months of the year, the Agfa-Gevaert Group’s top line grew by 3.0% (1.6% excluding exchange rate effects) in the second quarter of 2019. All major growth engines - including the inkjet product range, the direct radiography business and the activities of the HealthCare IT division - contributed to the strong top line performance. Furthermore, the Radiology Solutions division’s hardcopy range clearly benefited from the reorganization of the Chinese distribution channels.
In spite of the negative impact of high aluminum costs, the Group’s gross profit margin increased from 32.2% of revenue in the second quarter of 2018 to 34.0%.
Selling and General Administration expenses remained almost stable at 119 million Euro (20.6% of revenue).
R&D expenses amounted to 35 million Euro (6.1% of revenue), which is in line with the second quarter of 2018.
Excluding the effects of IFRS 16, adjusted EBITDA improved from 8.7% of revenue in the second quarter of 2018 to 9.6%. Adjusted EBIT improved by almost one percentage point to 7.2% of revenue.
Influenced by the Group’s transformation efforts, restructuring and non-recurring items resulted in an expense of 11 million Euro, versus an expense of 9 million Euro in the second quarter of 2018.
The net finance costs (including IFRS 16) amounted to 9 million Euro.
Income tax expenses (including IFRS 16) amounted to 6 million Euro, versus 10 million Euro in 2018 and included some effects of the carve-out of HealthCare IT.
As a result of the elements mentioned above, the Agfa-Gevaert Group posted a net profit of 15 million Euro (including IFRS 16).
Financial position and cash flow (including IFRS 16)
- At the end of June 2019, total assets were 2,426 million Euro (comprising right-of-use assets compliant with the new accounting standard on leases: 113 million Euro at the end of June 2019), compared to 2,367 million Euro at the end of 2018.
- Trade working capital moved from 653 million Euro (29% of sales) at the end of 2018 to 656 million Euro (29% of sales) at the end of June 2019.
- Net financial debt amounted to 311 million Euro, (or 194 million Euro excluding the impact of IFRS 16), versus 144 million Euro at the end of 2018. Net financial debt was impacted by seasonal effects, as well as by the execution of the pension derisking program and the investments in the transformation of the Group.
- Net cash from operating activities amounted to 6 million Euro.
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