Q3 and 9M/2020: aap restructuring shows clear successes in challenging COVID-19 times
DGAP-News: aap Implantate AG
/ Key word(s): 9 Month figures/Quarter Results
Q3/2020 and 9M/2020 - Key results and progress
- Sales by region: Recovery tendencies in Q3/2020 in Germany (Q3: -5%) and Europe (Q3: +27%) while international business continues to be affected by the effects of the COVID-19 pandemic and is significantly below previous year; sales development in 9M/2020 visibly influenced by COVID-19 and corresponding lockdown measures in H1/2020
- USA: Continued dynamic sales growth in Q3/2020 (Q3: +68%, 9M: +43%); number of weekly operations sustainably increased to a level of up to 50 procedures; contracts with US-wide purchasing associations and networks as basis for planned growth of +30% in FY/2020
- Earnings: EBITDA in Q3/2020 significantly improved and almost balanced at KEUR -48; 9M/2020 EBITDA of EUR -4.4 million (9M/2019: EUR -4.9 million) also improved despite substantial one-time effects from restructuring, refinancing and revision of the QM system; recurring EBITDA adjusted for one-time effects significantly improved in Q3 (+76%) and 9M (+28%) - progress of restructuring clearly visible despite massive Corona-related sales decline
- Gross margin and costs: Gross margin improved to 93% in Q3/2020 and 90% in 9M/2020 due to discontinuation of standard trauma portfolio and dynamically growing and high-margin U.S. business; substantial cost reduction due to significant decrease in personnel expenses (EUR -0.4 million in Q3 and EUR -0.9 million in 9M/2020) and declining other costs (-13% in Q3 and -20% in 9M/2020)
- Cash flow and balance sheet: Cash holdings of EUR 1.7 million and equity ratio at 56%
- Silver Coating Technology: All regulatory requirements for start of study in Germany fulfilled; test coatings for potential first joint development projects completed; ongoing discussions with global medical device companies about potential co-financing of study and other cooperation opportunities
- Resorbable magnesium implant technology: FDA confirmation of probable classification as a particularly innovative "Novel" technology and qualification for faster "De Novo" approval way; results of pilot animal study with Colorado State University show controllable degradation process, good bone growth and thus overall proof of concept of technology; further very promising discussions with technology-oriented investors to finance joint further development of technology ongoing
- Securing financing of Company: Ordinary capital reduction in the ratio of 10:1 implemented; convertible bond issued in a total volume of up to approximately EUR 2.6 million oversubscribed; partial sale of excess capacities of the machinery almost completed; further capital measures currently being evaluated
The sales development in the first nine months of 2020 was visibly influenced by the COVID-19 pandemic and the corresponding lockdown measures of the first half year, which is reflected in significantly lower sales compared to the previous year.
In the U.S., by contrast, aap continues on a dynamic growth course and was able to increase sales significantly year-on-year in both the third quarter (+68%) and the nine-month period (+43%). This is even more remarkable given that the U.S. is the country with the highest number of COVID-19 infections worldwide. Here, the sales momentum of the first half of the year was maintained and the number of weekly surgeries was sustainably increased to a level of up to 50 procedures. In addition, focused efforts to conclude contracts with nationally active companies that give aap access to an U.S.-wide network of clinics and surgical operation centers continue to bear fruit. Overall, aap is aiming for a year-on-year sales increase of at least 30% in the U.S. in the financial year 2020 despite COVID-19.
- Improved gross margin in Q3 and 9M/2020 at 93% and 90%, respectively, especially as a result of the discontinuation of the distribution of the standard trauma portfolio at the end of 2019 while reducing headcount and improving product-customer mix
- Headcount reduced by more than 30% to date compared to December 31, 2019 (December 31, 2019: 149 employees); personnel expenses (excluding restructuring expenses) decreased by EUR 0.4 million in Q3/2020 and by EUR 0.9 million in 9M/2020 when compared to the respective prior year periods
- Declining trend in other costs (excluding restructuring and refinancing costs as well as one-time expenses in connection with the revision of the QM system) by EUR 0.5 million in Q3/2020 and by EUR 1.8 million in 9M/2020
Based on the developments described above, EBITDA for the third quarter of 2020 was KEUR -48 (Q3/2019: EUR -1.7 million) and in the first nine months at EUR -4.4 million (9M/2019: EUR -4.9 million). Excluding one-time effects, recurring EBITDA improved significantly to EUR -0.4 million in the third quarter of 2020 (Q3/2019: EUR -1.7 million) and substantially to EUR -3.3 million in the first nine months (9M/2019: EUR -4.6 million). Overall, this reflects the targeted development: focus on established markets with higher profit margins and sustained streamlining of the cost structure to improve operating performance.
With a view to further restructuring, aap has also virtually completed a partial sale of excess capacities in its machinery that should lead to a reduction in monthly leasing installments of around 30% compared with the end of 2019. In addition, the Company renegotiated the contract with its IT service provider, enabling it to cut fixed costs by around 37% compared with the end of the financial year 2019.
Securing the financing and thus the continued existence of aap is a top priority for the Management Board. In this connection, aap's core shareholders already granted first shareholder loans of EUR 0.4 million in April. In addition, aap issued a convertible bond with a total volume of up to around EUR 2.6 million in August, which was successfully implemented and oversubscribed. As a further component of the refinancing process, the Management Board proposed to aap shareholders at the Annual General Meeting on August 7, 2020, an ordinary capital reduction in the ratio of 10:1, which was approved by a large majority. The capital reduction was entered in the commercial register on October 5, 2020. Together with the complete placement of the convertible bond, two key elements of the financial restructuring and refinancing were thus successfully implemented.
Based on the business development in the first nine months, the Management Board continues to expect sales for the full year 2020 to be in the upper half of the guidance of EUR 8 million to EUR 10 million. Due to the strong improvement in earnings in the third quarter of 2020, the Company has raised its EBITDA forecast. For the financial year 2020 aap now expects EBITDA of EUR -5.9 million to EUR -4.5 million (previously EUR -6.7 million to EUR -5.5 million). It should be noted, however, that the available forecast data is characterized by a high degree of uncertainty. At this point in time, the further course of the worldwide COVID-19 pandemic is very difficult to assess. The adjusted forecast assumes that there will be no comprehensive lockdown measures due to the COVID-19 pandemic in the remaining fiscal year 2020.
Last but not least, the Management Board aims to transfer the platform technologies antibacterial silver coating and resorbable magnesium implants to separate subsidiaries by the end of the year and to manage them independently under the aap holding company umbrella. Based on the visible progress made in restructuring and the successfully implemented first two steps of refinancing, the Company's Management Board is currently evaluating further capital measures (e.g. capital increase or further convertible bonds) to secure the Company's financing in the long term.
For further information please contact:aap Implantate AG; Fabian Franke; Manager Investor Relations; Lorenzweg 5; 12099 Berlin, Germany; Phone: +49/30/750 19 - 134; Fax: +49/30/750 19 - 290; Email: email@example.com
30.10.2020 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.
|Company:||aap Implantate AG|
|Phone:||+49 (0) 30 75 01 90|
|Fax:||+49 (0) 30 75 01 91 11|
|Listed:||Regulated Market in Frankfurt (General Standard); Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Munich, Stuttgart, Tradegate Exchange|
|EQS News ID:||1144347|
|End of News||DGAP News Service|