The Agfa-Gevaert Group in Q3 2022 regulated information

Agfa-Gevaert today commented on its results in the third quarter of 2022.

In these times of exceptional economic and geopolitical instability, we saw strong contrasts between the third quarter performances of our various activities. The HealthCare IT and Offset Solutions divisions performed well, with strong improvements in profitability. The Radiology Solutions and Digital Print & Chemicals divisions continued to struggle with the lockdowns in China, supply chain issues and cost inflation. Several activities also felt the impact of the weakening economic environment, mainly in Europe and China. On top of the current transformation actions regarding our internal IT and financial services, the economic reality requires further measures to adapt the cost structure of the Group.

Our confidence in the strategy we have outlined for our Digital Print & Chemicals division is strengthened by the recognition of the superiority of our systems by the market and by industry experts, exemplified by the Pinnacle Product awards and the essenscia Innovation award we recently won. HealthCare IT's organic growth in sales and order intake validates our growth ambitions.

In August, we signed a share purchase agreement with AURELIUS Group for the sale of our Offset Solutions division. We are on track to complete the transaction in the course of the first quarter of 2023. In the third quarter, we also reached an important milestone in our pension de-risking efforts, as the full pension plan in the UK has now been de-risked, without additional cash contributions,' said Pascal Juery, President and CEO of the Agfa-Gevaert Group.

Financial position and cash flow

Net financial debt (including IFRS 16) evolved from a net cash position of 120 million Euro at the end of Q2 2022 to a net cash position of 98 million Euro.

Impacted by the demand slowdown, trade working capital remained stable at 31% of turnover versus Q2 2022. In absolute numbers, trade working capital evolved from 563 million Euro at the end of Q2 2022 to 571 million Euro.

The Group generated a free cash flow of minus 11 million Euro.

After a first pension buy-in transaction for the UK pension plan in 2021, an additional buy-in transaction has taken place which leads to a full de-risking of the UK pension plan, without additional cash contributions. This additional transaction will be reflected in the remeasurements at year-end.

Outlook

The Agfa-Gevaert Group expects a continuing impact of cost inflation, supply chain issues, COVID lockdowns in China and the uncertain geopolitical and economic situation in the coming quarters. While the raw material cost inflation started to ease, salary cost inflation is expected to remain a concern in the near future.

Overall, the Agfa-Gevaert Group continues to focus on working capital improvements and cost management. The Group expects working capital to go down in the fourth quarter, driven by lower inventories. The ongoing transformation actions are well on track and are expected to bring more agility and to further simplify the operations of the Group. On top of these actions, the economic reality requires additional measures to adapt the Group's cost structure.

The HealthCare IT division expects to deliver strong results in the next quarter. The Radiology Solutions division is expected to show quarter-on-quarter improvement.

The HealthCare IT division's top line increased strongly to 62 million Euro, driven by the revenue recognition from a number of important contracts, mainly in North America, where as an example, a large luminary health system not only renewed, but expanded the scope of their commitment with Agfa HealthCare for the next five years. Business was still influenced by supply chain issues for hardware components. Fluctuations between quarters are normal, as a significant portion of revenues and margins are realized when projects reach key milestones.

Driven by favorable mix effects (more own IP and services), the division's gross profit margin improved to 44.9% of revenue. Although the division stepped up its investments in R&D and commercial resources to grow the business, adjusted EBITDA improved to 5.9 million Euro (9.5% of revenue). Adjusted EBIT increased to 4.0 million Euro (6.5% of revenue).

HealthCare IT's order book remains at a very healthy level. The division recorded a 16% growth in the 12 months rolling order intake versus the year before. The division continues to attract new customers and expand the scope of its solutions at existing customer sites. The new Leadership team in North America is now fully in place. In this region, Agfa HealthCare landed several important wins with its Enterprise Imaging solution across several large consolidated health systems.

In the Kingdom of Saudi Arabia, long-term Agfa HealthCare customer King Abdullah Medical City in Makkah (Mecca), upgraded its former Agfa HealthCare image management system to Enterprise Imaging. In Chile, Agfa HealthCare started the go live of the upgrade project to Enterprise Imaging at UC CHRISTUS Health Network, one of the most important private health care networks in the country.

Recently, the KLAS Research 2022 Europe PACS report named Agfa HealthCare among top performers in terms of customer satisfaction. In the report Agfa HealthCare is confirmed to have one of the most expansive footprints, with strong customer bases.

For the HealthCare IT division, 2022 is a year of consolidation, as the focus is turning towards profitable growth. As shown by the positive development of the order intake, the division's strategy to target customer segments and geographies for which its Enterprise Imaging solution is best fit and to prioritize higher value revenue streams is working. This strategy will ultimately allow the division to reach the targeted growth of EBITDA: starting from a mid-single-digit percentage in 2019 to percentages in the high-teens over the next years.

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