AGFA releases Q2 Financial Results

Agfa-Gevaert has commented on its results in the second quarter of 2024.  

“The growth engines of the Digital Print & Chemicals division recorded healthy top line growth. In HealthCare IT, we recorded the highest-ever order intake volume based on our cloud offering and net new customer gains. Furthermore, we saw significant quarter-on-quarter profitability improvement across all business areas. As part of our strategy to optimally manage mature markets for cash, we recently launched a transformation program to improve the competitiveness of our film-related operations. The program aims to structurally reduce the cost base of the film business by 50 million euro by the end of 2027,” said Pascal Juéry, President and CEO of the Agfa-Gevaert Group. 

(*)     before restructuring expenses and non-recurring results

Definitions of non-IFRS financial measures (APMs): see page 7-8.

Agfa-Gevaert Group

(*)     before restructuring expenses and non-recurring results

Second quarter

• Following a seasonally weaker first quarter 2024, the Agfa-Gevaert Group’s revenue remained stable in the second quarter (excluding currency effects) based on the resurgence of sales for the Digital Printing Solutions growth engine. The Green Hydrogen Solutions business continued its top line growth, while HealthCare IT sales started to pick up following the weak first quarter. The traditional film activities continued to be under pressure from the weakness in the electronics market and the new central procurement practices and Agfa’s related reorganization for medical film in China.
• The Group’s gross profit margin improved from 30.2% of revenue in the second quarter of 2023 to 33.5%.
• Adjusted EBITDA increased to 22 million euro (7.9% of revenue).
• Restructuring and non-recurring items resulted in a charge of 5 million euro versus 10 million euro in the second quarter of 2023.
• The net finance costs amounted to 8 million euro.
• Income tax expenses decreased to 0 million euro versus 4 million euro in the previous year.
• The Agfa-Gevaert Group posted a net profit of 5 million euro. 

Financial position and cash flow

• Net financial debt (including IFRS 16) evolved from 47 million euro in Q1 2024 to 99 million euro.
• Working capital (CONOPS included) amounted to 33% in Q2 2024. In absolute numbers, working capital evolved from 381 million euro at the end of Q2 2023 to 369 million euro. Working capital was influenced by the usual seasonal inventory build-up, the freight issues in the Middle East and the silver price impact in inventories.
• In the second quarter of 2024, the Group generated a free cash flow of minus 40 million euro.

Outlook

In 2024, the Agfa-Gevaert Group expects a continuation of the trends seen in the previous year, with continued growth and further profitability improvements for the growth engines. The weakness in Radiology Solutions is expected to continue in the second half of the year, further impacted by higher silver prices.

2024 outlook per division:

• HealthCare IT: A continued progress in profitability is expected, although strong investments in cloud technology are planned. The same pattern as in the previous year is expected. For the full year, the division expects an increase in the 12 months rolling order intake in the mid to high teens %.
• Digital Print & Chemicals: The division expects significant top line and profitability growth, driven by Digital Printing Solutions and Green Hydrogen Solutions.
• Radiology Solutions: The progress in Direct Radiography is expected to continue, but is not expected to offset the negative impact of the film market evolution.

The working capital situation is expected to return back to normal by the end of 2024.

The outstanding receivable in connection with the sale of the Offset Solutions division to Aurelius Group is still partly under discussion. The issue has been submitted to an independent expert, who will have to establish the final purchase price. The conclusion is expected at the earliest in September 2024, the final cash payment is expected in the fourth quarter of 2024.

HealthCare IT

(*) before restructuring expenses and non-recurring results

Second quarter

• The accelerated market momentum in the first half of 2024 contributed to a significant order intake volume (excluding Support/Software Maintenance Agreements) in the second quarter, in fact the highest ever recorded. Mainly based on cloud-related contracts, the division recorded a 22% increase in the 12 months rolling order intake starting from 126 million euro the year before to 153 million euro. 41% of total Q2 order intake is cloud-related. Net new customers represent 35% of total Q2 order intake. In Q2, 58% of total order intake is related project contracts and 42% to recurring revenue contracts.
• With a market demand rapidly shifting to cloud solutions (larger deals, longer term of contract, recurring revenue vs project revenue), the demand for hardware has decreased and the volume of recurring revenue (vs project revenue) has increased. With that, the division’s top line decreased by 6.9% versus the second quarter of 2023 (excluding currency effects). The majority of the sales decline is related to hardware, which is concurring with a shift to cloud technology. As an increasing share of total order intake is related to recurring revenue, the high order intake will not immediately translate in higher sales in the coming quarters.
• Thanks to the increased service contribution and favorable product mix effects, HealthCare IT’s gross profit margin improved from 43.5% in the second quarter of 2023 to 46.6%. The adjusted EBITDA margin improved from 7.3% to 9.7%.
• Following the release of Enterprise Imaging Cloud at RSNA last November, Agfa HealthCare has experienced growing and steady momentum in the healthcare market, translating into an accelerated demand for new Cloud-based Enterprise Imaging contracts.
• Early in June, Agfa HealthCare announced the signing of a significant new deal with Alliance Medical to implement an advanced cloud-based Enterprise Imaging solution at 120 Alliance Medical sites across the UK.
• Later that month, Agfa HealthCare Enterprise Imaging Cloud was selected to serve a 1.4 million patients North American Regional Health System as its medical imaging solution across the entire region for its ability to deliver a turn-key platform, thus, solving infrastructure limitations and providing fast access to medical images.
• Other major Enterprise Imaging contracts were signed with among others St. Vincent’s Private Hospital in Dublin, Ireland and Technoray, a premier radiology center in Jordan.
• Investment towards innovation: expected to amount to 10 million euro in 2024-2025 – will be capitalized and will come on top of the current R&D expenditure.
• The KLAS Research Enterprise Imaging Report 2024 states “Agfa HealthCare Makes Relationship & Delivery Strides”, showcasing the significant steps as an Enterprise Imaging partner Agfa HealthCare has delivered over the past year.

Digital Print & Chemicals

(*) before restructuring expenses and non-recurring results

Second quarter

Digital Printing Solutions

• The Digital Printing Solutions business’ top line grew by 8% versus the second quarter of 2023.
• Ink top line grew by 24%, driven by higher sales across all segments as well as the ongoing program to convert former Inca customers to Agfa’s ink sets.
• First effects of recent product launches and of the global strategic partnership between Agfa and EFI for digital printing equipment. Based on these elements, Agfa expects to build further momentum with its digital printing portfolio in the second half of the year.
• In the UK, the 1st SpeedSet Orca installation at Delta Display has progressed well with print production becoming a reality.
• Agfa received two prestigious European Digital Press Association (EDP) Awards for two of its recently introduced inkjet innovations:
  • Anapurna Ciervo H3200 – Category: Flatbed/Hybrid printer <150 m²/h
  • SpeedSet Orca 1060 – Category: Folding Carton, Digital/Hybrid
• The Delta Group – one of the largest printers of point of sales materials and display graphics in the UK – invested in two Tauro wide-format print engines. Earlier this year, The Delta Group became the first official customer site for Agfa’s SpeedSet Orca 1060 single-pass inkjet press.

Green Hydrogen Solutions

• ZIRFON sales grew by 62% versus the second quarter of 2023, driven by the promising green hydrogen market. Establishment of new industrial-scale ZIRFON production plant in Mortsel, Belgium is on track. Continued manufacturing efficiency improvement.
• Market developments have been growing slower globally in the last 12 months due to delaying of Final Investment Decisions at customers. However, these delayed implementations have been taken into account in Agfa’s business plan, for which the company has taken a cautious approach.
• Overall market momentum is improving with increasing interest in alkaline water electrolysis projects for green hydrogen in North America, India and the Middle East; as well as important investments expected to be launched in Europe on the back of new IPCEI and Hydrogen Bank funded projects.

Division performance

• The Digital Print & Chemicals division’s top line grew by 8.4% (excluding currency effects).
• Continued growth for Green Hydrogen Solutions, with considerable profitability progress thanks to improved manufacturing efficiency.
• Digital Printing Solutions’ top line grew by 8%. Ink sales grew by 24% versus Q2 2023, partly due to the ongoing program to convert former Inca customers to Agfa’s ink sets. Printing equipment sales started to pick up following new product releases and the partnership with EFI.
• The weakness in the electronics industry continued to impact volumes of the ORGACON conductive materials and the products for the production of printed circuit boards.
• The division’s gross profit margin improved strongly from 24.1% of revenue in the second quarter of 2023 to 31.9%, partly due to improved manufacturing efficiencies.
• The division’s recurring EBITDA margin increased from 2.6% in the second quarter of 2023 to 10.4%.

Radiology Solutions

(*) before restructuring expenses and non-recurring results

Second quarter

• The gradual implementation of new centralized procurement practices in China continued to impact the medical film business. Agfa continued to reorganize its go-to-market approach in that country. Recently, a new President for Radiology Solutions in Greater China was appointed and a new sales organization was installed.
• The Direct Radiography business posted a mid-single digit top line increase, partly driven by the pick-up of the business in North America. In Europe, consolidation exercises in healthcare groups are leading to postponed investment plans, while a further trend toward big tenders is increasing the fluctuations between quarters.
• At the UKIO 2024 event, Agfa showcased its innovative DensityScan tool, powered by the Bone Health software of IBEX Innovations Ltd. DensityScan can turn an ordinary X-ray exam into an opportunity to identify patients at risk of osteoporosis who might benefit from a bone density scan.
• The division’s second quarter profitability was negatively impacted by the volume decrease. This was partly offset by measures to control costs and to streamline the business. The division’s gross profit margin decreased slightly from 32.5% of revenue in the second quarter of 2023 to 32.0%. In Q1 2024, the margin was at 26.3%. The adjusted EBITDA margin decreased from 9.6% of revenue in Q2 2023 to 7.2% (minus 0.8% in Q1 2024.).
• Benefits from the above mentioned program to structurally reduce the cost base of Agfa’s film business are expected to show as from 2025.

Contractor Operations and Services – former Offset

(*) before restructuring expenses and non-recurring results

• Early April 2023, the Agfa-Gevaert Group completed the sale of its Offset Solutions division to Aurelius Group. The division contains results related to supply and manufacturing agreements that the Agfa-Gevaert Group signed with its former division, now rebranded as ECO3.

• ds and services delivered and revenue recognized at a single point in time. Examples include: Perpetual Licenses, Implementation services, Hardware.