Five-year overview


Five-year overview
USD million 2020 2019 2018 2017 2016
Net sales 630 686 613 569 521
Gross profit 391  439 387 355 328
Operating expenses (excl. other income) 338  341 304 280 256
EBITDA 93 141 107 97 94
EBITDA adjusted 93 150 115 103 98
EBIT 28 78 79 75 72
Net profit 8 69 80 58 51
Sales growth
Sales growth USD % (8) 12 8 9 8
- Organic growth in LCY % (10) 5 5 5 4
- Currency effect % 0 (4) 1 0 (1)
- Acquired/divested business % 2 11 2 4 5
Balance Sheet
Total assets 1,214 1,091 914 793 746
Equity 577  569 538 500 467
Net interest-bearing debt (NIBD) 381  302 180 121 119
Cash Flow
Cash generated by operations 119 120 92 90 88
Free cash flow 68 63 39 55 42
Key ratios
Gross profit margin % 62 64 63 62 63
EBIT margin % 4 14 13 13 14
EBITDA margin % 15  21 18 17 18
EBITDA margin before special items % 15 22 19 18 19
Equity ratio % 48 52 59 63 63
Net debt to EBITDA 4.1 2.0 1.6 1.2 1.2
Effective tax rate % 38  24 18 16 25
Return on equity % 1 12 15 12 11
CAPEX / Net sales % 3.8 4.6 5.0 3.4 4.7
Full time employees on average 3,505 3,382 2,775 2,948 2,710
Market
Market value of equity 3,380 3,340 2,055 1,871 1582
Number of shares in Millions 423  425 431 437 443
Diluted EPS in US cents 1.9 16.2 18.7 13.3 11.6

In the spotlight

Össur will be Carbon Neutral in 2021

In recognition of our commitment to sustainable development and to commemorate the Company‘s 50th anniversary, Össur will be Carbon Neutral in 2021 for energy and fuel consumption, waste generation, business travel and transportation of goods. This represents direct and indirect emissions (Scope 1 and 2) and selected Scope 3 emissions, according to Greenhouse Gas Protocol.  

Össur has partnered with First Climate, a leading service provider of carbon emissions management, to achieve carbon neutrality. Össur aims to source all electricity from renewable sources and offset emissions through VCS and Gold Standard projects to support the UN Sustainable Development Goals.

Performance in 2020


Financial performance in FY 2020 impacted by the COVID-19 pandemic and M&A activity

  • Sales declined by 8% in local currency in 2020 and by 10% organic. Sales were impacted by measures to control the COVID-19 pandemic but gradually recovered during the year.
  • The prosthetics segment declined by 7% organic in 2020 and the B&S segment declined by 15%.
  • Gross profit margin for 2020 was 62% compared to 64% for 2019.
  • EBITDA margin for 2020 was 15% compared to an EBITDA margin before special items of 22% for 2019. In addition to the impact of COVID-19, EBITDA was impacted by extraordinary items related to acquisitions, divestments, litigation, severance, and government grants.
  • In 2017, Össur announced efficiency initiatives in the areas of Manufacturing, Distribution, and Sourcing. The savings target of USD 10 million in 2020 was reached, corresponding to USD 4 million in additional savings when compared to the previous year.
  • Net profit for 2020 amounted to USD 8 million and 1% of sales as it was impacted by extraordinary items related to divestments, acquisitions, litigation, severance, and government grants in addition to COVID-19.
  • Cash flow was strong in 2020, mainly due to inventory management efforts and lower capital expenditure. Cash generated by operations amounted to USD 118 million or 19% of sales in 2020 compared to USD 120 million or 17% of sales in 2019.
  • Össur’s liquidity position remains strong. Bank balances and cash equivalents in addition to undrawn facilities at the end of 2020 amounted to USD 275 million. NIBD/EBITDA was 4.1x at end of 2020 primarily due to temporarily lower EBITDA in 2020. The current NIBD/EBITDA is above the target ratio of 1.5x-2.5x.
  • Össur purchased 1,295,450 of own shares during the year for USD 9 million. It should be noted that the share buyback program was temporarily put on-hold on 17 March 2020 due to the impact of COVID‐19, as the net interest‐bearing debt to EBITDA ratio is temporarily above the level in the Capital Structure and Dividend policy.
  • In 2020, Össur paid out cash dividends in the amount of USD 9 million, corresponding to DKK 0.15 per share or 13% of net profit in 2019.
  • Össur completed several acquisitions in 2020, including the prosthetics manufacturer College Park Industries, with combined annual sales of USD 59 million (incl. an acquisition in the first week of January 2021).
  • Össur completed the divestment of Gibaud in France and entities focused on B&S sales in the US in 2020. The sold entities generated a total of USD 71 million of sales.
  • The financial guidance for the full year 2021 is 10-15% organic sales growth, 21-23% EBITDA margin before special items, 3-4% CAPEX of sales, and an effective tax rate of 23-24%.

Key financials and guidance
USD million 2020 2019 Guidance 2021
Net sales 630 686  
Sales growth, organic (10%) 5% 10-15%
Growth profit margin 62% 64%
EBITDA 93 141
EBITDA margin 15% 21%
EBITDA, before special items 93 150
EBITDA margin, before special items 15% 22% 21-23%
CAPEX as % of sales 4% 5% 3-4%
Effective tax rate* 38% 24% 23-24%

Sales performance

Sales in 2020 amounted to USD 630 million compared to USD 686 million in 2019, corresponding to 10% decline organic, 8% decline including acquisitions/divestments (local currency growth) and 8% decline reported (USD growth).

Currency movements in 2020 impacted sales growth negatively by USD 1 million, with a neutral effect on the reported growth rate.

Össur completed acquisitions and divestments in 2020. Further information can be found in the section “Acquisitions and divestments”.


Sales by Regions
USD million FY 2020 Organic growth Acq. / div. Curr. effect USD growth*
Americas 307 (14%) +8% 0% (6%)
EMEA 267 (9%) -4% 0% (12%)
APAC 55 2% - -1% 1%
Total 630 (10%) +2% 0% 8%
Sales by Segments
USD million FY 20120 Organic growth Acq. / div. Curr. effect USD growth*
Prosthetics 372 (7%) +6% 0% (1%)
Bracing and supports 257 (15%) -2% 0% (16%)
Total 630 (10%) +2% 0% 8%

*growth/(decline)

Operations

Gross profit for 2020 amounted to USD 391 million or 62% of sales compared to USD 439 million or 64% of sales for 2019. During a large part of 2020, manufacturing capacity was reduced due to lower sales in relation to COVID-19, which resulted in a lower gross profit margin. Utilization of manufacturing capacity has been increasing in line with sales recovery.

Operating expenses amounted to USD 363 million or 58% of sales for 2020 compared to USD 341 million or 50% of sales for 2019. Excluding extraordinary items related to acquisitions, divestments, litigation, severance, and government grants, OPEX would have amounted to net USD 334 million or 53% of sales and declined by 2% compared to OPEX excluding special items in 2019. Lower variable cost is a result of less traveling, lower marketing and selling costs, the efficiency initiatives which were announced in 2017, and cost-saving efforts implemented in September 2020.

  • Sales & marketing (S&M) expenses declined by 2% and amounted to 36% of sales compared to 34% of sales in 2019.
  • Research & development (R&D) expenses declined by 1% and amounted to 5% of sales, the same as in 2019.
  • General & administrative (G&A) expenses increased by 2% and amounted to 12% of sales compared to 11% of sales in 2019. Excluding extraordinary items, G&A expenses would have declined.

Management remains focused on managing cost in line with sales recovery with the ultimate objective to maintain and increase profitability as sales normalize.

Efficiency initiatives

In September 2017, Össur announced efficiency initiatives in the areas of distribution, manufacturing, and sourcing, to further increase scalability and profitability. The savings target of USD 10 million in 2020 was reached, corresponding to USD 4 million in additional savings when compared to the previous year.

Operating profit

EBITDA in 2020 amounted to USD 93 million or 15% of sales compared to EBITDA before special items of USD 150 million or 22% of sales in 2019. Currency impact on EBITDA margin net of hedge was positive by about 60 basis points for 2020. It should be noted that the EBITDA in 2020 was impacted by extraordinary items in the amount of net USD 11 million.

Financial items, income tax and net profit

Net financial expenses for 2020 amounted to USD 16 million, compared to USD 7 million in 2019.

Income tax amounted to USD 5 million in 2020, corresponding to a 38% effective tax rate. The tax rate is impacted by non-deductible expenses for tax in relation to the divestments. Excluding the impact from these items, the effective tax rate would have amounted to 25% in 2020, compared to 24% in 2019. It should however be noted that the tax rate is further impacted due to the impact that COVID-19 is having on Össur’s operating results. All else equal, as sales and profit return to normalized levels, the effective tax rate is expected to return to levels comparable with 2019.

Net profit in 2020 amounted to USD 8 million compared to USD 69 million profit in 2019. Diluted earnings per share in 2020 amounted to 1.9 US cents compared to 16.2 US cents in 2019. Net profit was impacted by extraordinary items related to divestments, acquisitions, litigation, severance, and government grants, in addition to COVID-19.

Cash flow

Cash flow was strong in 2020 with a primary focus on inventory management and lower capital expenditures. Cash generated by operations amounted to USD 119 million or 19% of sales for 2020 compared to USD 120 million or 17% of sales for 2019.

Capital expenditures for 2020 amounted to USD 24 million or 4% of sales, compared to USD 32 million or 5% of sales for 2019.

Bank balances and cash equivalents amounted to USD 102 million at the end of 2020 and USD 173 million of existing facilities are undrawn. Bank balances and cash equivalents in addition to undrawn credit facilities at the end of 2020, therefore, amounted to USD 275 million.

Capital structure

Net-interest bearing debt

Net interest-bearing debt, including lease liabilities, at year-end 2020 amounted to USD 381 million compared to USD 302 million at year-end 2019. Net interest-bearing debt to EBITDA corresponded to 4.1x at year-end 2020. Due to the impact of COVID-19, the net interest-bearing debt to EBITDA ratio is temporarily above the level in the Capital Structure and Dividend policy (1.5x-2.5x NIBD/EBITDA).

Share buybacks and dividends

During 2020, Össur purchased 1,295,450 of own shares under share buyback programs. The total purchase price was USD 9 million. The purpose of the share buyback programs is to adjust the capital structure in line with a desired capital level of 1.5-2.5x net interest-bearing debt to EBITDA outlined in Össur’s Capital Structure and Dividend Policy. It should be noted that the share buyback program was temporarily put on-hold on 17 March 2020 due to the impact of COVID‐19, as the net interest‐bearing debt to EBITDA ratio is temporarily above the level in the Capital Structure and Dividend policy. At year-end 2020, treasury shares totaled 902,277.

In 2020, Össur paid out cash dividends in the amount of USD 9 million, corresponding to DKK 0.15 per share or 13% of net profit in 2019.

Acquisitions and divestments

Divestment of Gibaud in France

Following the approval from employee representative bodies of Gibaud and Innothera, Össur completed the divestment of Gibaud SAS (Gibaud) in France to Innothera on 30 September. Össur’s bracing & supports business in France has mainly been operating under the brand name of Gibaud, a local leader in the design, production, and distribution of bracing, soft goods, and compression therapy products, with primary focus on the pharmacy channel in France. Gibaud’s sales amounted to USD 51 million in 2019. Gibaud employs around 360 FTEs and operates two production facilities in France. Össur remains committed to servicing its Orthotic & Prosthetics (O&P) customers in France from Össur’s offices in Lyon. As a result of the divestment, Össur’s sales in France will primarily go through the O&P channel which is Össur’s primary sales channel in Europe. Gibaud and Össur will continue to be business partners for a selected B&S product range.

Divestment of B&S sales entities

In 2008 and 2010 Össur acquired companies focused on sales of B&S products primarily in California and Texas. The rationale for the investment was to strengthen market access in these important markets for B&S in the US. As a result of product rationalization in recent years and changes in reimbursement, the focus of these sales entities has gradually shifted away from selling products manufactured by Össur. In addition, Össur has in recent years increased focus on the O&P channel. Össur therefore decided to divest the entities which was completed on 29 December. The sold entities generated USD 20 million of sales in 2020 and in recent years EBIT has been negative. The divested companies and Össur will continue to be business partners for a selected B&S product range.

Acquisitions

Össur made good progress with the external growth strategy through several acquisitions during the year. The combined full year sales amount to around USD 597 million (including an acquisition in January 2021). These acquisitions are in line with Össur’s strategy to invest in companies that strengthen Össur’s position in regional markets.

Impact of acquisitions and divestments

In 2019 and 2020, Össur has made several acquisitions and divestments. Over these two years, acquired sales on a full-year basis amount to USD 80 million while divested sales amount to USD 71 million.

Using 2019 as a reference year, as it is not impacted by COVID-19, and normalizing 2019 for pro-forma figures of acquired and divested companies, Össur’s sales in 2019 (reported figures in brackets) would have amounted to USD 696 million (USD 686 million) and organic growth would have been 6% (5%). Gross profit margin would have been 64% (64%). EBITDA margin before special items would have been 23% (22%). B&S sales would have amounted to 38% (45%) of total sales.

Össur’s sales in 2020 (reported figures in brackets) would have amounted to USD 628 million (USD 630 million) and organic decline would have been 10% (10%). Gross profit margin would have been 62% (62%). EBITDA margin before special items would have been 16% (15%). B&S sales would have amounted to 36% (41%) of total sales.

Sales
630 USD m
EBITDA
93 USD m

Outlook for 2021


Financial guidance for 2021
Guidance FY 2021 Actual FY 2020
Sales growth 10-15% (10)%
EBITDA margin (before special items) 21-23% 15%
CAPEX as % of sales 3-4% 4%
Effective tax rate 23-24% 38%

The financial guidance assumes continued impact from COVID-19 in 1H 2021, mainly in Q1 and gradually subsiding in Q2, while Q3 and Q4 are expected to be largely unaffected with some realized pent-up demand. No major fluctuation of main operating currencies is assumed. It is emphasized that the outlook for 2021 is more uncertain than usual as changes in measures to control the COVID-19 pandemic in Össur’s main markets can have significant implications for financial performance in 2021. It should be noted that quarter one is, and has been historically, seasonally the weakest quarter of the year in terms of sales and profitability.

Acquisitions and divestments in 2019 and 2020 have impacted Össur’s business mix. Further information on the impact can be found in the section “Acquisitions and divestments”.

Given the current situation in Össur’s key markets, the organic sales growth outlook for 2021 is expected to be in the range of 10-15%. Higher end of the guidance assumes continued recovery in sales during the first half of 2021 and a strong recovery in the second half with some realized pent-up demand while the lower end assumes slower recovery in 1H and slower realization of pent-up demand.

EBITDA margin before special items is expected to be in the range of 21-23%. Underlying increase in profitability is expected as sales recover, supported by growth in higher margin products, divestments, and scalability in core operations. Acquisitions are expected to have a slightly negative impact on the EBITDA margin. At current foreign exchange rates, keeping all other variables constant, currency movements are expected to have a positive impact of around 50 basis points in 2021 when compared to 2020.

CAPEX is expected to be in the range of 3-4% of sales. Main CAPEX items include maintenance CAPEX in manufacturing, continuation of the implementation of a new CRM software, investments in computer equipment, software, leasehold improvements, and fixtures.

Based on the current mix of taxable income, the expectation is that the 2021 effective tax rate will be in the range of 23-24%.


Össur 2020 Annual Report