|Operating expenses (excl. other income)||338||341||304||280||256|
|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|
|Net interest-bearing debt (NIBD)||381||302||180||121||119|
|Cash generated by operations||119||120||92||90||88|
|Free cash flow||68||63||39||55||42|
|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 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
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.
|Key financials and guidance|
|USD million||2020||2019||Guidance 2021|
|Sales growth, organic||(10%)||5%||10-15%|
|Growth profit margin||62%||64%|
|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 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*|
|Sales by Segments|
|USD million||FY 20120||Organic growth||Acq. / div.||Curr. effect||USD growth*|
|Bracing and supports||257||(15%)||-2%||0%||(16%)|
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.
Management remains focused on managing cost in line with sales recovery with the ultimate objective to maintain and increase profitability as sales normalize.
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.
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.
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 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.
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).
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.
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.
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.
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.
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.
|Financial guidance for 2021|
|Guidance FY 2021||Actual FY 2020|
|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%.