Detection Technology Plc half-yearly report January-June 2023

Detection Technology Q2 2023 shows double-digit growth and measures in place to improve profitability.

President and CEO, Hannu Martola: “Thanks to decent sales in medical and security applications, our net sales experienced double-digit growth despite the softness in our markets. However, our sales lagged behind our expectations in all business segments, and the double-digit growth is attributed to the soft Q2 of 2022. Profitability remained unsatisfactory, and measures are being taken to resolve this.

Sales in industrial applications improved from Q1 but were still lower than expected. Certain key customers continued to reduce their stocks, and demand in China was low, both of which are reflected in sales in Q2 of 2023. Demand normalized at the end of Q2.

Demand drivers in the medical market remained unchanged, but demand softened on all continents. Despite this weakening, our sales grew, driven by computed tomography (CT) applications. The growth rate is mainly explained by the weak comparison period. Increased uncertainty in the markets is expected to continue at least to the end of the year.

Our security application sales grew, but also less than we expected. Lower-than-expected demand was mainly attributed to stagnation in the Chinese market. Although markets in China were slow, it was delightful to see a boost in demand in the Americas and India. In H2, demand will strengthen, especially in China, where we have received new inquiries and orders. Investments in aviation CT equipment are starting in China and will continue in the United States, where investments by the Transportation Security Administration (TSA) are getting more traction.

Lower-than-expected quarterly sales, sales mix, increase in credit loss provision, and the last spot purchases as remnants of the component shortage impacted our profitability. The development of our profitability has been unsatisfactory. In order to improve our profitability, necessary measures are now being taken.

Regarding our other key figures, it is noteworthy that our cash flow has improved significantly thanks to enhanced trade receivables management. The downside is that it has postponed some sales.

The most significant event in H1 was the acquisition of Haobo Imaging, which we completed right after the end of Q2. This strategically important acquisition enhances customer experience by expanding our offerings to all digital X-ray detector technologies, and supports our long-term growth. Thanks to the acquisition, our product portfolio has expanded significantly, which has been enthusiastically welcomed by the markets, and we expect sales of a couple of million euros in H2 of 2023.

Our decision to invest in new facilities in Oulu, Finland, will also be important in terms of improving our competitiveness and risk management. Our operations in Oulu will move into premises that better support production at the beginning of 2024, and we will have about 30% more net square meters. Thanks to the investment of around one million euros, we are able to offer a wider range of EU-origin products and enhanced customer experience.

There have been positive signals particularly in the security market, but increased uncertainty in the medical market. We expect double-digit growth in the sales of security applications and growth in the sales of industrial applications in Q3. Medical sales, on the other hand, are decreasing. Our total net sales will decline in Q3 and grow in H2 of 2023.”

 

Key figures

(EUR 1,000)

4-6/2023

4-6/2022

1-6/2023

1-6/2022

1-12/2022

Net sales

25,219

22,765

47,972

43,078

98,580

Change in net sales, %

10.8%

-3.3%

11.4%

2.9%

9.8%

Operating profit excluding NRI

1,351

1,195

2,827

2,701

6,135

Operating margin excluding NRI, %

5.4%

5.2%

5.9%

6.3%

6.2%

Non-recurring items (NRI)

0

-335

0

-335

-335

Operating profit

1,351

860

2,827

2,366

5,801

Operating margin, %

5.4%

3.8%

5.9%

5.5%

5.9%

R&D costs

3,079

3,208

6,041

6,277

12,549

R&D costs, % of net sales

12.2%

14.1%

12.6%

14.6%

12.7%

Cash flow from operating activities

2,426

-4,194

1,941

-3,528

-294

Net interest-bearing debt at end of period

-18,530

-18,506

-18,530

-18,506

-20,584

Investments

376

606

828

807

1,628

Return on investment (ROI), %

6.5%

13.4%

6.5%

13.4%

7.5%

Gearing, %

-27.2%

-25.8%

-27.2%

-25.8%

-28.3%

Earnings per share, EUR

0.03

0.05

0.09

0.14

0.35

Earnings per share (diluted), EUR

0.03

0.05

0.09

0.14

0.35

Number of shares at the end of the period

14,655,930

14,655,930

14,655,930

14,655,930

14,655,930

Weighted average number of shares outstanding

14,655,930

14,655,930

14,655,930

14,655,930

14,655,930

Weighted average number of shares outstanding, diluted

14,662,206

14,740,064

14,665,894

14,778,155

14,717,042

 

 

Business outlook

According to Detection Technology’s view, demand will be strong in security and good in industrial applications. Demand in medical applications has, however, temporarily softened. The company expects its total net sales to decline in Q3 and to grow in H2 of 2023.

However, the geopolitical situation, U.S.–China relations, global economy, inflation, high inventories of certain customers and indirect impacts of the war in Ukraine create uncertainty.

Detection Technology aims to increase its sales by at least 10% per annum and to achieve an operating margin (EBITA) of 15% in the medium term.

 

Q2 2023 webcast

Hannu Martola, the President and CEO of Detection Technology, will present the Q2 and January–June financial performance and events to analysts, investors, and media at a webcast. The live webcast in English will begin on 3 August 2023 at 13:00 (EEST).

A link to the webcast is available on the company’s website at https://www.deetee.com/reports-and-presentations/webcasts/

 

Detection Technology Plchalf-yearly report