Q4 2019 Presentation 12 February 2020 Staffan Ternström, President and CEO Pernilla Lindén, CFO
Summary 2019 • Mixed results, Group revenue and results did not match our expectations for the year • Stairlifts continues to deliver good organic growth of 5.6% (NA: 11.1%) • Vehicle Accessibility Norway reported good organic growth vs last year • Delayed turnaround in PH North America, due to continued struggling for US Institutional. New leadership setup in place in North America and EU/ROW to drive execution • Puls and Vehicle Accessibility Denmark divested • Adjusted EBITA margin slightly above last year • Improved operational capabilities • Developed product pipeline. Launched 1100 • Improved customer experience • Onboarded critical talents for the future • Dividend proposal 0.07 EUR / share ≈ 0.7 SEK / share (increase by 40% vs last year) 2
Summary Q4 2019 • Modest organic growth in the last quarter • Solid growth in Accessibility • Double-digit growth for Stairlift North America • 1100 exceeded expectations on the important US market • UK back to growth after Brexit uncertainties Q3 • Decline in revenue for Patient Handling • US sales still challenging, Staffan Ternström steps in as interim president Handicare North America • EU/ROW revenue stabilized with good growth momentum in key direct markets • Adjusted EBITA margin increased vs last year due to higher gross margin, but H2 (7.1%) was lower than projected • Strong operating cash conversion in the quarter • Leverage 2.6x (excluding IFRS 16) • Strategic review continues • Divestment of Vehicle Accessibility Denmark • New segment reporting 2020 3
Financial highlights – Group October - December January - December Adjusted EBITA bridge MEUR 2019 2018 ∆% 2019 2018 ∆% 2.1 4.8 0.1 Revenue 68.8 69.2 -0.6 % 271.0 269.8 0.5 % -0.1 Organic revenue growth 1.2 % 1.1 % Gross margin 40.6 % 37.5 % 41.5 % 42.0 % 2.8 Adjusted EBITA 4.8 2.8 68.5 % 21.0 20.7 1.9 % MEUR -0.1 Adjusted EBITA margin 7.0 % 4.1 % 7.8 % 7.7 % Adj. EBITA (ex. Veh Acc DK) 4.7 3.0 58.5 % 20.9 20.4 2.7 % Adjusted EBITA margin (ex. Veh Acc DK) 7.2 % 4.7 % 8.3 % 8.2 % Note: All P&L numbers in this report exclude the divested business area Puls. No change to the balance sheet Q4-18 Sales Margin Opex Depreciation Q4-19 Note: Numbers include Vehicle Accessibility Denmark for the period prior the divestment Note: Organic revenue growth exclude Vehicle Accessibility Denmark Revenue Q4: organic growth 1.2% • Accessibility +4.8% • Patient Handling -6.0% EBITA Q4: adjusted margin 7.0% (4.1%) • Gross margin increased to 40.6% (37.5%) driven by low comparison period as a consequence primarily of last years large inventory write down • Operating expenses were basically flat • Group costs 2.7 MEUR (3.3 MEUR) OCF Q4: 5.8 MEUR (9.1) • Other specified items -0.2 MEUR • Cash flow from working capital +2.0 MEUR (7.3 MEUR). • Leverage 2.6x (excluding IFRS 16) Note: From 1 January 2019, the Group applies IFRS 16 Leases. To facilitate comparison between the periods, the performance 4 measures in this presentation are presented excluding the impact from IFRS 16. The transition impacts are set out in Appendix.
Accessibility Revenue and Q-on-Q organic growth (%)* – Stairlifts NA October - December January - December MEUR 2019 2018 ∆% 2019 2018 ∆% 9% 24% Q-on-Q %* 33% 47% 15% 16% 6% 6% Revenue 48.8 48.3 1.1 % 195.1 189.4 3.0 % Organic revenue growth 4.8 % 5.5 % Adjusted EBITA 6.2 5.2 19.0 % 26.2 25.4 3.3 % Revenue Adjusted EBITA margin 12.7 % 10.8 % 13.5 % 13.4 % (MEUR) Adj. EBITA (ex. Veh Acc DK) 6.2 5.4 14.8 % 26.1 25.1 4.0 % Adjusted EBITA margin (ex. Veh Acc DK) 13.6 % 12.5 % 14.7 % 15.0 % Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Note: Numbers include Auto Denmark for the period prior the divestment. *e.g. Q4 2019 vs Q4 2018 Note: Organic revenue growth exclude Auto Denmark. Revenue Q4: organic growth +4.8% • Stairlifts +6.6% (NA +23.7%), UK back to growth after Brexit uncertainties in Q3. Solid growth in major European markets • Organic decline in Vehicle Accessibility 7.2% due to a tough comparison period. For the full year, Vehicle Accessibility showed an organic increase by 4.4% EBITA Q4: adjusted margin 12.7% (10.8) • Adjusted EBITA margin increase driven by higher gross margin. Last year’s margin was negatively impacted by primarily inventory write-downs. Q4-19 lower than YTD due to unfavourable product mix in Vehicle Accessibility • Operating expenses were higher in absolute terms and in relation to sales due to investments in Sales FTEs 5
Patient Handling PH NA organic revenue in constant FX rates October - December January - December MEUR 2019 2018 ∆% 2019 2018 ∆% 15 14 14 13 13 13 13 Revenue 20.0 20.9 -4.3 % 75.8 80.3 -5.5 % 12 12 Organic revenue growth -6.0 % -8.0 % MEUR Adjusted EBITA 1.3 0.9 38.5 % 5.8 7.1 -18.8 % Adjusted EBITA margin 6.5 % 4.5 % 7.6 % 8.8 % Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Revenue Q4: organic decline -6.0% • PH EU/ROW reported unchanged revenue vs last year, rebounded from a decrease in the third quarter • Decreased revenue in NA vs Q4 last year (-8.8%). The lower revenue was principally due to continued weak sales for US Institutional EBITA Q4: adjusted margin 6.5% (4.5%) • Gross margin increased compared with the weak gross margin last year. • Operating expenses decreased compared to last year, but were basically flat in relation to sales. 6
Update on North America • Focus on 1100 to drive share of wallet with existing customers and to drive new customer acquisition • Elite Dealer program (launched Q3): customer adoption is ahead of plan • New setup of regional sales offices (old Hub:s) • Satisfying order-to-cash metrics and improved inventory control • New leadership and management team in place • Canada institutional delivered solid underlying growth • Results from actions initiated takes longer than expected in the US institutional business • Two new VP of sales deployed and VP of corporate accounts • Focus on getting new sales force “up to speed” • Increased sales call activity and quality • Increased focus on IDN:s and VA to maximize value of existing and new contracts • Increase recurring sales of high margin “below -the- bar” products 7
Strategic review - update • Divestment of Vehicle accessibility Denmark • The divestment is an important step in streamlining Handicare’s core business, focusing on profitable growth • New segments from Q1 2020 • Will increase transparency and comparability • Accessibility divided into Accessibility and Vehicle Accessibility • Strategic review process continues 8
FY20 priorities • Focus on solid organic growth and improved EBITA margins • Commercial excellence: • Patient Handling US Institutional turn around • Drive dealer loyalty programs • Leverage launch of 1100 across all markets • Innovation & products: • Execute on Stairlifts and Patient handling roadmaps • MDR readiness by end of May • Process improvement: • Further develop customer experience • Continue improvement of Supply chain • Finalize strategic review 9
Q&A
Forward-looking statements To the extent this report contains forward-looking statements, these statements are based on the current expectations of Handicare’s Group management. Although management considers the expectations expressed in such forward-looking statements to be reasonable, there is no guarantee that these expectations will prove correct. Accordingly, actual future outcomes may differ significantly from those expressed in the forward- looking statements due to such factors as changed economic, market and competitive conditions, changes in regulatory requirements and other policy measures, and fluctuations in exchange rates. 11
Appendices
An average annual growth of 10 percent, of which 4-6 percent FY 2019 organic: organically, in the medium-term 1.1% An adjusted EBITA margin** exceeding 12 percent in the medium-term FY 2019: 7.8% FINANCIAL TARGETS Leverage of approximately 2.5 times net debt/LTM (last 12 months) 2.6x as at 31 adjusted EBITDA, with flexibility for strategic activities** December 2019 Dividend 2019: 0.07 EUR An annual dividend corresponding to 30-50 percent of the net profit for the per share, 177% of period* the net profit 13 *The pay-out decision will be based on Handicare’s financial position, investment needs, acquisition opportunities and liquidity position. ** Excluding IFRS 16 impacts
Q4 revenue and adjusted EBITA bridges Q4 Revenue bridge by SBU +1.2% 0.6 69.2 68.8 3.4 2.1 65.4 0.0 64.6 -1.3 -5.2 MEUR 5% -6% Organic growth Q4-18 FX Veh. Acc. Q4-18 FX Adj Acc PH Other Q4-19 organic Veh. Acc. Q4-19 DK Q4-18 DK Q4-19 Q4 Adjusted EBITA bridge by component Q4 Adjusted EBITA bridge by SBU 4.8 2.1 4.8 0.6 0.1 0.4 -0.1 1.0 Margin 2.8 2.8 -0.1 n/a 4.1% Growth MEUR 7.0% MEUR 3.1ppts -0.4ppt +0.2ppt 19% 38% 69% Q4-18 Sales Margin Opex Depreciation Q4-19 Q4-18 Acc PH Other Q4-19 14
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