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To Nasdaq Copenhagen A/S and the press
Nørresundby, Denmark, 27 April 2021
Announcement no. 27/2021
INTERIM REPORT FOR Q2 AND H1 2020/21
(the period 01.10.2020 - 31.03.2021)
“As expected in our outlook for the year, also the second quarter of 2020/21 has been challenged on the demand side due to COVID-19. However, the second quarter did see a significant improvement over the first quarter in 2020/21 and it appears that the period with the largest impact of COVID-19 on demand is gradually coming to an end. The second quarter was impacted by supply chain issues from global electronics component scarcity and logistic challenges which has postponed revenue from the second into the third quarter of the financial year. Therefore, revenue decreased by 25% compared to the second quarter of last year. During the second quarter, we delivered the first products of the newest major Enterprise framework agreement and during the third quarter we will deliver further products under this agreement as well as the first products under the newest major ProAudio framework agreement. Looking ahead to the rest of the year, it is expected that the gradual demand improvement will lead to a return to the demand levels of the same quarters in recent years in Q3 and Q4 of 2020/21 and we are maintaining the strategic investments into RTX’s product platforms for our target market segments. On 22 April 2021 we revised the outlook for our financial year 2020/21 due to COVID-19 effects on demand, on supply constraints and knock-on effects.”
Peter Røpke, CEO
HIGHLIGHTS Q2 2020/21 FOR THE RTX GROUP
Net revenue decreased by 21.5% to DKK 88.5 million in Q2 2020/21 (Q2 2019/20: DKK 112.7 million). As expected and as communicated in the outlook for 2020/21, Q2 revenue were significantly impacted by COVID-19 in the Enterprise and ProAudio segments. However, demand and revenue improved over Q1 - revenue in Q2 increased by 44.4% over revenue in Q1. Supply challenges related to component scarcity had an adverse impact on the revenue development in Q2.
Enterprise segment: Revenue decreased 25.1% to DKK 58.6 million. The decrease is seen in most parts (customers, product groups) of the Enterprise segment. Customer orders in the quarter have been negatively impacted by COVID-19 effecting customers’ access to end customer sites for installation of communication systems. Further, revenue has been significantly negatively impacted by component scarcity and supply chain challenges which postpones revenue into Q3.
ProAudio segment: Revenue decreased by 26.0% to DKK 21.6 million. The decline is mainly due to significantly lower revenue from engineering services compared to last year in line with the strategy to focus on creating recurring revenue from product sales and royalties. However, COVID-19 has impacted product sales in the quarter negatively compared to last year especially for products in the intercom market related to live events.
Healthcare segment: Revenue increased by 55.3% to DKK 8.4 million. Revenue growth is driven by the conversion into deliveries of a full ODM product instead of purely modules for part of the deliveries. Supply chain challenges has had a negative effect on revenue in the quarter postponing some revenue into Q3.
In total, the combined effect of the component scarcity and supply chain challenges across all segments have postponed revenue of approx. DKK 30 million from Q2 into Q3.
FX corrected revenue development amounted to a decrease of 14.9% as revenue compared to last year was negatively impacted by the weaker US dollar.
Gross profit decreased by 24.8% to DKK 49.8 million in Q2 2020/21 (Q2 2019/20: DKK 66.3 million). The gross margin decreased to 56.3% (Q2 2019/20: 58.8 %) primarily impacted by the revenue mix with a significantly lower share of revenue from engineering services and secondarily by the specific product mix.
Operating performance was impacted by the lower revenue with EBITDA of DKK -4.0 million in Q2 2020/21 (Q2 2019/20: DKK 11.3 million) and EBIT of DKK -11.3 million in Q2 2020/21 (Q2 2019/20: DKK 5.7 million). Given the global uncertainty created by the COVID-19 pandemic, RTX has continued the cautious management of the cost base and therefore capacity costs is at the same level as Q2 of last year.
Cash flows from operations (CFFO) amounted to DKK -20.8 million in Q2 2020/21 compared to DKK 23.7 million in Q2 2019/20 as a result of the developments in earnings and of the working capital developments with increasing receivables at the end of the quarter compared to the beginning of the quarter.
SUMMARY H1 2020/21 FOR THE RTX GROUP
Net revenue decreased by 37.8% to DKK 149.8 million in H1 2020/21 (H1 2019/20: DKK 241.0 million). As expected and as communicated in the outlook for 2020/21, H1 revenue were significantly impacted on the demand side by COVID-19 in the Enterprise and ProAudio segments. Also, revenue was adversely impacted by supply chain challenges related to component scarcity. In H1 2020/21, Enterprise segment revenue decreased 43.9% to DKK 94.1 million, ProAudio segment revenue decreased 34.9% to DKK 40.6 million, while Healthcare revenue increased 38.8% to DKK 15.1 million. FX corrected revenue development amounted to a decrease of 32.7% as revenue compared to last year was negatively impacted by the weaker US dollar.
As a result of the lower revenue, earnings decreased with EBITDA of DKK -22.7 million (H1 2019/20: DKK 32.7 million) and EBIT of DKK -36.6 million (H1 2019/20: DKK 22.0 million). Throughout the first six months of 2020/21, RTX has maintained a cautious management of capacity costs which are below the level of last year.
Cash flow from operations (CFFO) amounted to DKK 9.9 million in H1 2020/21 (H1 2019/20: DKK 30.1 million).
OUTLOOK FOR 2020/21 REVISED ON 22 APRIL
As stated when announcing the outlook of RTX for FY 2020/21, uncertainty regarding the actual developments in 2020/21 were higher than in recent years due to the impact of the COVID-19 pandemic. As further stated in the interim report for Q1 2020/21, the uncertainty remained high after the first quarter. As also stated in the interim report for Q1 2020/21, supply chain challenges including global component scarcity further created higher than usual uncertainty regarding 2020/21. With increased knowledge of the impact of COVID-19, supply chain constraints and knock-on effects on FY 2020/21, RTX reduced the expectations regarding revenue and earnings on 22 April 2021 in company announcement 25/2021. The revised outlook for FY 2020/21 is revenue of DKK 450-500 million, EBITDA of DKK 30-55 million and EBIT of DKK 0-25 million.
The lower expected revenue and earnings in FY 2020/21 are caused by larger than originally expected demand impact of COVID-19 on the Enterprise (limitations on customer access to end customer sites for installation of communication systems) and ProAudio (part of market related to live events affected by lockdowns) segments. It is further caused by COVID-19 having made the finalization of development and the production preparation of new products more challenging which has caused postponement of part of the initial deliveries. This is now expected to cause part of the next deliveries, previously expected for the end of this financial year, to move into Q1 of FY 2021/22 instead.
Demand is expected to continue to increase over the second half of the year based on current customer orders and customer forecasts. The global supply chain constraints will likely lead to postponements of some deliveries from Q3 into Q4 of FY 2020/21. The actual revenue and earnings for 2020/21 will depend on the exact timing of delivery of larger orders under framework agreements around the change of financial year (i.e. September/October 2021) and the expectations for the year further assumes that the impact of supply chain constraints on deliveries will remain within the expected levels. Uncertainty in 2020/21 is higher than in recent years due to the impact of COVID-19 on global macroeconomic development, demand patterns and global supply chains and thus uncertainty associated with the outlook for the year is also higher than in recent years.
SHARE BUY-BACK PROGRAMME CONTINUING
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 continues to execute a share buy-back programme for an amount up to DKK 50 million during the period 25 November 2020 to 30 September 2021.
PETER THOSTRUP PETER RØPKE
Chairman President and CEO
Investor and analysts conference call
On Wednesday, 28 April 2021 at 8.30 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 second quarter of 2020/21. To register for the conference call, please e-mail email@example.com.
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