· Further steps in the strategic alliance with Lucky HuaGuang for offset
· Part of Agfa HealthCare to be sold
· Top line stable excluding discontinuation of certain offset-related reseller activities in the United States
· Adjusted EBIT at 20 million Euro (including IFRS 16)
· Net result at minus 3 million Euro (including IFRS 16)
Agfa-Gevaert today commented on its achievements in the first quarter of 2019.
MILESTONES IN THE AGFA-GEVAERT GROUP'S TRANSFORMATION PROCESS
"In 2018, we have taken major steps to transform our Group and to prepare our businesses for future growth. In the first quarter, we have made further progress with several major projects. With regard to the strategically important offset alliance with the Chinese company Lucky HuaGuang Graphics Co. Ltd, we have now finalized the creation of the common sales platform and fully defined the way we will conduct our business in the Chinese market. We have also taken several initiatives to improve our offset position in the emerging markets.
Furthermore, as announced on March 13, 2019, the Board of Directors has decided to further extend the independence of Agfa HealthCare. After careful review, in conjunction with its advisers, the Board has decided to investigate the sale of a part of Agfa HealthCare. That part is expected to primarily comprise 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. Preparations for the sale process have started, which is expected to be launched in the second half of this year. As a consequence, the future Agfa HealthCare will retain the majority of the Imaging IT business and will remain one of the growth engines of the Agfa-Gevaert Group. We are confident that this is the best option to offer all activities the strength and the means to grow," said Christian Reinaudo, President and CEO of the Agfa-Gevaert Group.
"Excluding the effects of the discontinuation of certain offset-related reseller activities in the United States, we were able to stabilize our top line compared to the first quarter of last year. In the Radiology Solutions division, the efforts we did to reorganize the Chinese distribution channels for hardcopy are now clearly paying off, resulting in strong revenue growth for this business. In the Digital Print & Chemicals division, the inkjet activities and several other future-oriented activities also performed well. When we keep in mind that we are comparing with a very strong first quarter of 2018, the HealthCare IT division performed according to expectations. Our continuous focus on further improving the profitability of the healthcare IT activities is clearly starting to bear fruit. The Offset Solutions division continues to struggle with the many challenges in its industry, but we are convinced that the alliance with Lucky and the other strategic measures we have taken will allow the division to improve both its top line and its profitability," 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: Offset Solutions (the offset business of the former Agfa Graphics business group), Digital Print & Chemicals (the inkjet business of the former Agfa Graphics business group and the activities of the former Agfa Specialty Products business group), Radiology Solutions (the imaging activities of the former Agfa HealthCare business group), and HealthCare IT (the IT activities of the former Agfa HealthCare business group). This simplified divisional structure is technology and solutions based and will allow the businesses to seek future partnerships. 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 Q1 2019, these costs amounted to 5 million Euro (Q1 2018: 4 million Euro). These costs are now grouped under Corporate Services. To allow comparison, the Q1 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 Q1 2018, the tables below present the Q1 2019 profit and loss numbers excluding the impact of IFRS 16.
The Agfa-Gevaert Group's top line was stable versus the first quarter of 2018 excluding the impact of the discontinuation of certain offset-related reseller activities in the United States. The inkjet product range performed well and the Radiology Solutions division's hardcopy range clearly started to benefit from the reorganization of the distribution channels in China. The HealthCare IT division performed according to expectations.
Compared to the first quarter of 2018, the Group's gross profit margin remained stable at 32.4% of revenue, in spite of the negative impact of high aluminum costs.
Selling and General Administration expenses increased from 120 million Euro in the first quarter of 2018 to 122 million Euro (22.7% of revenue).
R&D expenses amounted to 37 million Euro, or 6.8% of revenue, which is in line with the first quarter of 2018.
Excluding the effects of IFRS 16, adjusted EBITDA reached 6.1% of revenue, versus 6.8% in the first quarter of 2018. Adjusted EBIT reached 3.6% of revenue.
Restructuring and non-recurring items remained almost stable at an expense of 4 million Euro.
The net finance costs (including IFRS 16) amounted to 11 million Euro.
Income tax expenses (including IFRS 16) amounted to 8 million Euro, versus 3 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 loss of 3 million Euro (including IFRS 16).
Financial position and cash flow (including IFRS 16)
At the end of March 2019, total assets were 2,472 million Euro (comprising right-of-use assets compliant with the new accounting standard on leases: 115 million Euro at the end of March 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 647 million Euro (29% of sales) at the end of March 2019.
Net financial debt amounted to 255 million Euro, (or 137 million Euro excluding the impact of IFRS 16), versus 144 million Euro at the end of 2018.
Net cash from operating activities amounted to 34 million Euro.