Agfa-Gevaert NV

Hello and welcome to the ACFA Q1 2023 results conference call. Please note, this call is being recorded. For the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star 1 on your telephone keypad. I will now hand you over to Pascal Jouery, CEO, to begin today's conference. Please go ahead.

Thank you very much and good morning, everyone. I'm sitting here in with the executive committee team and Vivian Dictus in charge of investment relation. So we're going to walk you through the Q1 results for AXA. Of course, it's a quarter. We're also going to explain the treatment of the divestment of SET and its impact on the group. But if I first turn to the business, rather a good start of the year for the group overall. Let me start with healthcare IT, and let me start by reminding everyone that healthcare IT is a business that is 50% project-based, that therefore we have quite... some variation in terms of level of activity, mix and project implementation quarter by quarter. So indeed, after a very strong Q4, the Q1 activity was of course more subdued, but it doesn't mean that there is a change whatsoever in our business. Two things. First, we continue to have a very, very dynamic order intake with 25% increase over the last 12 months. And this order intake is also at a good mix, meaning the high value part of what we do is overrepresented in this growth. So there is nothing broken here. On the contrary, we continue to have momentum in the markets. Short term, it's fair to say that yes, I mean, we're impacted by cost inflation, but also by the mix of projects that we've been implementing in Q1. I'll come back to that in the outlook, but I want to stress again that 50% of this business is a project-based business, and therefore, variation quarter to quarter, and especially this year, first semester will be a lot weaker than the second semester. which was already, by the way, the pattern last year, kind of. DPC, very pleased with the strong recovery of the business, basically firing on all cylinders, price, cost actions, and as well, volume growth in our target, in our growth engines, and especially Zircon and digital printing. I'll come back to that. Radiology solution, a rather stable first quarter. In radiology, the first quarter is always a weak quarter, also on the base of a very strong Q4 quarter in 2022. Here, I would say film volumes are quite okay. We've seen the end consumption in China going back to normal now for some time and staying at the at the same level. However, we still have margin pressure in China coming from the inability to increase price, specifically in China. DR actually has been delivering quite well for the quarter, positive trends in sales and profitability. So overall, in the new perimeter of the group, an EBITDA of 13 million euros. Net results very much impacted by, of course, the impact of the offset divestiture. We'll come back to that in more detail. But first, I would like to hand over to Dirk De Man, our CFO, who will walk you through basically what the completion of the sale of offset is impacting the group. Thank you.

Thank you, Pascal, and good morning, everyone. So, indeed, we completed the sale successfully on April 4th, so the closing of the transaction. Now, obviously, that has quite some impact on our reporting, so we are now grouping the activity in a new division called Contractor Operations and Services Form Offset. For short, we'll just call it CONOPS as an acronym. And as of Q2, the CONOPS division will represent all the agreements that we have with the external party and the rebranding of offset is ECO3. The turnover in that division will be the supply agreements with obviously the cost of goods related to those products. But we'll also have a number of support services that will be accounted for as other incomes. and the costs related to those services will be covered in the different GMA lines. Now, as the transaction closed in Q2, we are already reflecting the as-if situation previously. So in Q1, we reflect the financials as if it was already in place, and also the comparative period of Q1 last year has been represented accordingly. There is, however, one key difference to show is that in the stranded costs related to offsets, they have been treated differently in the two years. In the Q1-22, the stranded costs are reported under CONOPS, and then as of Q1-23 and going forward, these are already absorbed by the three remaining business divisions. As Pascal already said, the impact of the offset sale resulted in the remaining impairment on the offset assets, which came in at 47 million, which was at the lower end of the range we gave at the Q4 results. And we do expect the cash impact of the offset transaction to be around 28 million, spread over Q2, being the proceeds, and Q3, the closing balance sheets, and The number is a bit higher, as you may recall, so there is the base price, but there's also the variance in working capital, and the increase to 28 million is related to the working capital that was built up.