Sectra’s nine-month interim report: Increase in order bookings paves way for stability and growth

The IT and medical technology company Sectra (http://www.sectra.com/) (STO: SECT
B) increased its order bookings to SEK 549.4 million (256.5) during the third
quarter. For the nine-month period May 2014–January 2015, order bookings
increased 78.8% to SEK 1,181.8 million. Part of the order bookings derived from
a transient effect in the UK, which will not be sustainable during the years
ahead. At the same time, long-term customer contracts, which provide stable
revenues extending over many years, accounted for a large part of the increase.
The order bookings reflect the customers’ confidence in Sectra which, for the
second consecutive year, tops Best in KLAS, the industry’s most important
customer satisfaction survey for IT systems in US healthcare. Sectra was also
ranked highest in the new international survey conducted by KLAS. A high level
of customer satisfaction, a large share of long customer contracts and long-term
investments in products and services that benefit society pave the way for
stability and growth at Sectra.
Nine-month period in figures

  · The Sectra Group’s order bookings increased 78.8% to SEK 1,181.8 million
(661.1).
  · Net sales for the nine-month period rose 18.8% to SEK 693.1 million (583.2).
Sales and licensing of patents in Business Innovation during the first quarter
of the fiscal year had a positive impact of SEK 16.3 million on sales and
operating profit. Excluding this nonrecurring item, net sales increased 16.0% to
SEK 676.8 million.
  · Operating profit rose 46.0% to SEK 107.9 million (73.9), corresponding to an
operating margin of 15.6% (12.7). Excluding sales and licensing of patents,
operating profit increased 24.0% to SEK 91.6 million, corresponding to an
operating margin of 13.5%.
  · Cash flow after changes in working capital amounted to SEK 32.1 million
(104.3). Several major long-term customer projects are in the installation
phase, which is having an adverse impact on cash flow.

Torbjörn Kronander, President and CEO of Sectra AB, comments

“I am truly delighted that for the second consecutive year Sectra has been rated
top of the industry’s most important customer satisfaction survey for IT systems
in healthcare. The survey was performed by KLAS and our system for managing
medical images, Sectra PACS, was ranked highest, both internationally and in the
US. From the comments made in the customer assessments, it is clear that our
employees and also the stability and easy-to-use nature of our system are to
thank for Sectra’s high ratings. The survey responses show that customers have
great confidence in Sectra and that makes me very proud.

“The fact that the customers trust Sectra is also reflected in our sales.
Compared with the preceding year, we doubled our order bookings in the third
quarter. However, order bookings can vary sharply from quarter to quarter due to
a number of very large multiyear customer contracts. Sectra is showing growth in
the US in particular, where we are beginning to note the effects of our high
ranking in the preceding year’s (2013) KLAS survey, and in the UK, where we
nearly tripled our order bookings during the nine-month period. However, the
situation in the UK largely reflects a transient local effect deriving from the
fact that many hospitals feel compelled to acquire new systems or to renew their
agreements before summer 2015. Accordingly, the level of orders we have recently
seen in this market will not be repeated during the years ahead.

“The Secure Communications business area has been a concern for some time.
However, the area showed somewhat better earnings for the third quarter as a
result of higher revenue from customers outside Sweden. This makes me cautiously
positive, but I remain worried about the weak performance of encryption systems
in Sweden.

“The past year’s robust order bookings encompass a large number of new long-term
agreements with major customers, which means that we have many sizeable customer
projects in the installation phase. Initially, these projects are having an
adverse impact on Sectra’s cash flow and operating margin, but when the projects
move into the maintenance and support phase, they will contribute to a stable
trend for the Group. With the great confidence shown by customers, our dedicated
employees and Sectra’s strong financial position, we are working to build
success for our customers, which is what will ultimately make the greatest
contribution to increasing Sectra’s value.”

For further comments and information, see the attached interim report.

Teleconference for presentation of the interim report

with President Torbjörn Kronander and CFO Simo Pykälistö

Time: March 10, 2015, 09:30 a.m.

To participate, call:

Sweden +46 (0)8 856642691

UK +44 (0)2034281400

US +1 855 7532236

The presentation will be held in English and can also be followed online via:
http://media.fronto.com/cloud/sectra/150310/. A recorded version will be
available on Sectra’s website after the conference via: www.sectra.se/irwebcast.

The information in this report is such that Sectra AB (publ) is obligated to
disclose in compliance with the Securities and Clearing Operations Act and/or
the Financial Instruments Trading Act. The information was issued to the media
for publication on March 10, 2015, at 08:00 a.m. (CET).
For further information, please contact:
Dr. Torbjörn Kronander, CEO and President Sectra  AB, +46 (0) 705 23 52 27
Pictures: http://flickr.com/photos/sectramedicalsystems
About the Sectra Group
Sectra was founded in 1978 and has its roots in Linköping University in Sweden.
The company’s business operation includes cutting-edge products and services
within the niche segments of medical IT and secure communication. Sectra has
offices in 12 countries and operates through partners worldwide. Sales in
the 2013/2014 fiscal year totaled SEK 853 million. The Sectra share is quoted on
the NASDAQ OMX Stockholm exchange. For more information, visit www.sectra.com