RTX Q1 challenged by COVID-19
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To Nasdaq Copenhagen A/S and the press
Nørresundby, Denmark, 28 January 2021
Announcement no. 05/2021
Interim report for Q1 2020/21
(the period 01.10.2020 - 31.12.2020)
“As expected and communicated in the outlook for the year, our first quarter of 2020/21 has been challenged on the demand side. Our customers have placed low orders due to COVID-19, and this has caused revenues to decline by 52% compared to the record Q1 of last year. COVID-19 impacts the ability of customers in the Enterprise segment to access the sites of their customers for installation of communication systems, and it impacts part of the ProAudio segment due to the lockdown of live events. Therefore, customer inventory replenishment, and therefore their orders to RTX, has been at a low level in Q1. However, our customers continue their product development activities with us, and we continue to see our business model as fundamentally strong. During Q2 and Q3 of this financial year we will launch the first products to the two newest major framework agreements announced at the end of 2018/19 – one framework agreement in the Enterprise segment and one in the ProAudio segment.”
Peter Røpke, CEO
HIGHLIGHTS Q1 2020/21 FOR THE RTX GROUP
- Net revenue decreased by 52.2% to DKK 61.3 million in Q1 2020/21 (Q1 2019/20: DKK 128.3 million). A significant decrease in Q1 was expected and communicated in the outlook for 2020/21 as part of the 2019/20 Annual Report. The decrease is driven by COVID-19 affecting customer orders in the Enterprise and ProAudio segments and by FX effects due to the weakening of the US dollar compared to last year.
- Enterprise segment: Revenue decreased 60.4% to DKK 35.5 million. The decrease is seen in most parts (customers, product groups) of the Enterprise segment. Customer orders in the quarter have been low as customers’ replenishment of their inventories have been very cautious due to COVID-19 affecting customers’ access to end customer sites for installation of communication systems.
- ProAudio segment: Revenue decreased by 42.8% to DKK 19.1 million. Recurring revenue from product sales and royalties in the segment is on the same level as last year with underlying growth from the strategy to focus on productization, however, the growth is weakened by COVID-19 impacting some customers in the segment. Therefore, recurring revenue development cannot compensate for declining revenue from engineering services compared to last year.
- Healthcare segment: Revenue increased by 22.6% to DKK 6.8 million. Revenue growth is driven by the conversion into deliveries of a full ODM product instead of purely modules for part of the deliveries.
FX corrected revenue development amounted to a decrease of 48.3% as revenue compared to last year was negatively affected by the weakening of the US dollar.
- Gross profit decreased by 59.7% to DKK 30.5 million in Q1 2020/21 (Q1 2019/20: DKK 75.5 million). The gross margin decreased to 49.7% (Q1 2019/20: 58.9%) primarily impacted by the revenue mix with a significantly lower share of revenues from engineering services and secondarily by the specific product mix.
- Operating performance was impacted by the significantly lower revenue with EBITDA of DKK -18.8 million in Q1 2020/21 (Q1 2019/20: DKK 21.4 million) and EBIT of DKK -25.3 million in Q1 2020/21 (Q1 2019/20: DKK 16.3 million). EBITDA and EBIT were both aided by lower capacity costs compared to last year as the cautious management of the cost base continued considering the global uncertainty caused by the COVID-19 pandemic.
- Cash flows from operating activities (CFFO) increased to DKK 30.7 million in Q1 2020/21 compared to DKK 6.5 million in Q1 2019/20 primarily driven by working capital developments with lower receivables at the end of the quarter.
OUTLOOK FOR 2020/21 MAINTAINED
- As stated in the annual report for 2019/20 regarding the outlook for 2020/21, due to the COVID-19 pandemic uncertainty regarding actual developments in 2020/21 is higher than in recent years. After Q1 2020/21 and with the continued global impact of COVID-19 the uncertainty regarding the outlook remains high. With the current knowledge and visibility RTX maintains the expectations for revenue between DKK 545-600 million. EBITDA between DKK 95-120 million and EBIT between DKK 63-90 million for the financial year 2020/21. As also stated in the annual report for 2019/20, it is expected that the revenue and earnings distribution over 2020/21 will be significantly backloaded towards the second half of the year. The outlook assumes that the impact of COVID-19 on global markets will gradually decrease over the financial year and thus that any extensive lockdowns affecting major European and North American markets cease during Q2 of 2020/21. Also, the outlook is based on continued stable supply chains and global flows of goods (see below).
- Supply chains are challenged by a global scarcity of certain components driven by higher global demand for consumer electronics. In addition to the impact from COVID-19, the technology trade disagreements especially between USA and China has an adverse effect on global supply chains for electronics. Specifically, it creates a temporary global scarcity for semiconductors as manufacturers of semiconductors reconfigure their supply chains. This is causing increasing lead times and is expected to especially impact Q2 of 2020/21 and to likely cause postponements of deliveries especially from Q2 to Q3 in 2020/21 and to a lesser degree from Q3 to Q4 2020/21. Thus, the component scarcity also creates higher than usual uncertainty regarding 2020/21.
NEW SHARE BUY-BACK PROGRAMME ONGOING AS ANNOUNCED
- In line with the updated policy on capital structure communicated in the annual report for 2019/20 and as announced in company announcement 38/2020, RTX has initiated a new share buy-back programme for an amount up to DKK 50 million. The programme is being executed during the period 25 November 2020 to 30 September 2021 and is thus ongoing.
PETER THOSTRUP PETER RØPKE
Chairman President and CEO
Investor and analysts conference call
On Friday, 29 January 2021 at 9.00 am, RTX will hold a conference call for investors and analysts hosted by Danske Bank. In this conference call, the Company’s management will comment on the interim report for the first quarter of 2020/21. To register for the conference call, please e-mail firstname.lastname@example.org.
Enquiries and further information:
CEO Peter Røpke, tel +45 96 32 23 00
CFO Morten Axel Petersen, tel +45 96 32 23 00
RTX’s homepage: www.rtx.dk
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