Fourth quarter: Strengthened organic growth in Accessibility and strong cash flow; Patient Handling in US remained weak
It's with mixed feelings that I summarize an eventful 2019. On the one hand, growth and Group profit were very disappointing due to the continued challenges faced by Patient Handling in the US, a very weak 2019 for Vehicle Accessibility Denmark and Brexit concerns that affected sales in Stairlifts UK in the third quarter. On the other hand, I'm satisfied with the progress made by Stairlifts, which outgrew the market at sustained profitability. I'm also satisfied with our improvement program which has strengthened the company and built a platform for the future, despite the delay in turning around Patient Handling in the US.
We started the year with the clear aim of laying the foundation for long-term, stable operations and the capacity to reach our financial targets. With the exception of Patient Handling in the US, the improvement program launched in early 2019 resulted in improved sales force effectiveness driven by organizational changes, a new incentive program and increased sales activity and quality. The implementation of the program was delayed in Patient Handling in the US, but after further management changes we've now seen pronounced positive changes. We've also further strengthened our offering by improving product and service quality and broadening the product offering.
Financially, 2019 was a weak year and we didn't reach our target of delivering stable organic growth and improved margins for the Group. Net sales increased marginally and adjusted EBITA was up slightly on 2018. Accessibility delivered organic growth of 5.5% in 2019, and adjusted EBITA was 13.5%. Patient Handling saw another weak year due to continued weak sales in the Institutional Sales division in the US. The Business unit sales decreased by 8.0% and adjusted EBITA was 7.6% for the full year.
Profitable growth for Accessibility in the fourth quarter
Accessibility returned stable organic growth of 4.8% and sales totaled MEUR 48.8 (48.3) in the fourth quarter. Profitability improved in the business area and the adjusted EBITA margin was 12.7% (10.8). Adjusted for the divestment of Vehicle Accessibility Denmark, adjusted EBITA was 13.6%.
The Stairlifts business unit delivered strong organic growth of 6.6% in the quarter. In terms of individual markets, North America delivered growth of 24% according to plan, and the UK returned to growth following Brexit concerns that impacted the third quarter. Most other markets continued to deliver strong organic growth. The success of the Stairlifts business is due to the strong brand and an attractive premium offering. We've also successfully met growing demand and continued to gain market share. The launch of our latest stairlift was a major success and illustrates the importance of product development and innovation. There's still room to improve margins through increased operational efficiency.
Vehicle Accessibility in Norway delivered good organic growth for the full year, although the fourth quarter was comparatively weak as the corresponding period in the previous year was unusually strong.
Continued challenges in Patient Handling in the US in Q4
In contrast to Accessibility, Patient Handling had a weak fourth quarter. Sales decreased organically by 6.0%, totaling MEUR 20.0 (20.9). Improvement measures were effective in the Canadian and European operations, which made stable progress year-on-year. Management in North America was replaced in November, as the program aimed at improving Patient Handling in the US had not been effectively implemented. New management is now in place and has addressed the problems relating to sales to hospitals and other institutional customers (Institutional Sales). Despite the delay in implementing the measures in the US, we're seeing signs of positive progress and the actions are starting to have an effect on ongoing operations. This was evident from increased customer inflows towards the end of the quarter, and we've become better at retaining and developing our existing customer base. The new management in North America are successfully driving sales force effectiveness and we have now implemented changes so that the organization sells our complete offering.
Strategic review continues
The strategic review that began towards the end of October led to the divestment of the shares in Handicare Auto A/S (Vehicle Accessibility Denmark) in the fourth quarter. From a Group perspective, the divestment is positive because it releases management resources and sharpens our focus on developing those Group operations that have the potential to deliver long-term profitable sustainable growth.
In order to increase transparency between business segments, we've divided the Accessibility business into two separate business areas in 2020: Accessibility and Vehicle Accessibility.
The strategic review continues, and we'll provide updates as soon as new material information emerges.
Ready to deliver on long-term goals
Handicare is now stronger with a clear vision and understanding of what's required to achieve it. We're seeing positive signs in the operations, and I would like to thank all our committed and competent employees who work hard to make our customers' everyday lives easier. With their commitment we're building a sharper and more focused Handicare-ready to deliver on our long-term goals.
President and CEO
Auditors' review report
This year-end report has not been reviewed by the company's auditors.
A telephone conference, hosted by Staffan Ternström, President and CEO, and Pernilla Lindén, CFO, will be held at 10:00 a.m. CET on 12 February 2020. To participate, please register in advance using the following link http://emea.directeventreg.com/registration/2854228
A presentation will be available at www.handicaregroup.com/investors.
Dates for financial reports and Annual General Meeting
Interim report January - March 2020 23 April 2020
Annual report w.14 2020
Annual general meeting 6 May 2020
Interim report April - June 2020 17 July 2020
Interim report July - September 2020 5 November 2020
For more information, contact:
Staffan Ternström, CEO, Tel: +46 725 490 029
Pernilla Lindén, CFO & IR, Tel: +46 708 775 832
This information is information that Handicare Group AB (publ) is required to disclose pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 8:00 a.m. CET on 12 February 2020.
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.
Handicare offers solutions to increase the independence of disabled or elderly people, and to facilitate for their care providers and family. The offering encompasses a comprehensive range of curved and straight stairlifts, transfer, lifting and repositioning aids and vehicle adaptations. Handicare is a global company with sales in more than 20 countries and is one of the market leaders in this field. The head office is in Stockholm, Sweden and manufacturing and assembly is located at five sites distributed across North America, Asia and Europe. In the twelve-month period to December 2019, revenue amounted to MEUR 271 and the adjusted EBITA margin was 7.8%. Employees amounted to 1,040 and the share is listed on Nasdaq Stockholm. For more information, www.handicaregroup.com.
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