Detection Technology - Q4 result miss, moderates its financial targets

DT’s Q4 net sales at EUR 25m (-2.5% y/y) vs. EUR 27.7m/27.4m Evli/consensus estimates. SBU sales grew +6% to EUR 16.4m (EUR 19m our expectation) and MBU sales declined -15.4% to EUR 8.6m (EUR 8.7m our expectation). DT’s Q4 EBIT came in at EUR 3.2m vs. our estimates of EUR 5.1m (EUR 4.7m cons). EBIT excluding non-recurring items was EUR 3.9 million (4.9 Q4’18). Dividend proposal is 0.38 (0.38 Evli / 0.39 consensus).

• Group level results: Q4 net sales amounted to EUR 25m (-2.5% y/y) vs. EUR 27.7m/27.4m Evli/consensus estimates. Q4 EBIT was EUR 3.2m (12.8% margin) vs. EUR 5.1m/4.7m Evli/cons. R&D costs amounted to EUR 2.66m or 10.6% of net sales. Dividend proposal is 0.38 (0.38 Evli / 0.39 cons.).

• Security and Industrial Business Unit (SBU) had net sales of EUR 16.4m vs. EUR 19m Evli estimate. SBU sales grew 6% y/y but growth was affected by temporarily lower sales in CT products and delayed deliveries to one key customer.

• Medical Business Unit (MBU) delivered net sales of EUR 8.6m which was in line with our estimate of EUR 8.7m. Net sales of MBU decreased by -15.4% y/y due to softening in the medical CT market and the ramp-down of one key MBU customer’s product.

• Outlook update: DT estimates annual growth to remain at previous 5-6% level in all market segments in 2020, but the indirect impacts of the corona virus epidemic in Asia may have a temporary adverse impact on growth in H1. DT also estimates the temporary slowdown in the global medical CT market to continue in Q1, and the situation to normalize at the end of 2020, but demand may fluctuate significantly.

• New financial targets: DT aims to increase sales by at least 10% per annum and to achieve an operating margin at or above 15% in the medium term. (Previous target: to increase sales by at least 15% p.a. and to achieve an EBIT margin at or above 15% in the medium term)

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