DGAP-News: Turnaround in FY/2021: Significant sales growth (+30%) and substantially improved EBIDTA (+84%) - clear trend towards black zero

- Sales: EUR 12.2 million (+30% yoy) - CER^[1]: +32% yoy; all markets with significant double-digit growth rates

- EBITDA: EUR -0.8 million (+84% yoy); operating cash flow +33% yoy

- Silver: Start of human clinical study in December 2021 - already promising clinical data from individual healing trials beforehand

- Successful refinancing, in particular via shareholder loans and capital increase with significant oversubscription

- After 2 years, unqualified audit opinion again for annual financial statements 2021

- Outlook FY/2022: Sales between EUR 14.0 and 16.0 million (+15% to +31%) as well as positive EBITDA and almost balanced free cash flow planned for first time for entire Company (excl. costs silver, esp. human clinical study); EBITDA entire Company (incl. costs silver) of EUR -1.7 to -0.5 million

aap Implantate AG ("aap" or the "Company") succeeded in turning around sales and earnings in a challenging financial year 2021. Despite the continuing partly massive impact of the COVID-19 pandemic, aap recorded significant sales growth (+30%) to EUR 12.2 million last year (FY/2020: EUR 9.3 million) and consequently achieved a figure within the forecast range of EUR 12.0 to 14.0 million. EBITDA improved substantially (+84%) to EUR -0.8 million (FY/2020: EUR -4.8 million) and was thus at the upper end of the guidance of EUR -2.0 million to EUR -0.7 million raised in September 2021. If one additionally considers the positive development of operating cash flow (+33%), the trend towards a black zero is clearly recognizable.

 

FY/2021 - Key financial figures

Looking at the individual regions, it can be seen that aap was able to realize significant double-digit sales increases in all major markets in financial year 2021. The growth in the EMEA region (= Europe, Middle East, Africa; +26%) is based on a revival of business in the Middle East, new customer acquisition e.g. in Egypt, and a significant recovery of the South African market, where the pre-COVID-19 level has already almost been reached again. On the other hand, aap succeeded in stabilizing sales in its largest single market Spain, which had to struggle noticeably with the adversities of the COVID-19 pandemic. In addition, the Company recorded sales growth in its home market Germany despite the relatively late end of the lockdown in June and was additionally again able to conclude contracts with all purchasing associations, providing a good basis for financial year 2022.
 

In North America, aap remains on a growth track and was able to significantly increase sales (+21%). Decisive for the growth momentum were in particular the contracts concluded with US-wide purchasing associations and networks, which give aap access to a large number of clinics and surgical operation centers and thus also create a promising basis for the months ahead.
 

In Latin America (+90%), aap won new customers in Colombia and Ecuador and also benefited from a noticeable recovery of business in Brazil, Mexico and Puerto Rico. Furthermore, sales increased in the Asia-Pacific region (+20%), where the Company was able to reactivate its business in China, among other things.

EBITDA

With regard to earnings, aap was able to significantly improve EBITDA in financial year 2021. The background to this development is, in addition to the sales growth realized in financial year 2021 and an associated increase in gross margin^[2] in absolute terms (EUR +2.9 million) as a key driver, also a reduced cost level. The positive cost development results on the one hand from the implemented restructuring measures, which are reflected in declining other costs and almost stable personnel expenses, and on the other hand from a significant decrease in one-time effects, which in financial year 2020 were still largely characterized by the restructuring and refinancing as well as the revision of the quality management system. In addition, EBITDA in financial year 2021 were positively impacted by one-time effects from, among other things, the termination of a contract with a former distributor and an increase in other operating income (mainly income from the COVID-19 bridging assistance program III and III+). The improvement in EBITDA thus again visibly reflects the successes realized as part of the restructuring, which can be summarized as follows:
 

- Significant increase in gross margin in absolute terms due to profitable sales growth as key driver of earnings improvement

- Stabilization of personnel expenses at around prior-year level (non-significant increase of +3% vs. FY/2020)

- Declining trend in other costs (-8%) with significantly reduced non-recurring expenses

Excluding one-time effects, recurring EBITDA also improved significantly by +65% to EUR -1.2 million in financial year 2021 (FY/2020: EUR -3.4 million). Overall, this reflects the targeted development: focus on established markets with higher profit margins and sustainable streamlining of the cost structure to improve operating performance. Looking at the development of the pure operating trauma business^[3], aap was additionally able to generate a positive result (EBITDA >EUR 1.0 million) in financial year 2021 for the first time. This is again a confirmation for the implemented restructuring and transformation measures, but also an incentive to build up a sustainably profitable trauma business with further growing sales.
 

Cash flow and balance sheet

Based on a strong improvement in operating profit, operating cash flow also improved significantly by +33% to EUR -2.5 million. The improvement would have been even more pronounced but was reduced due to extremely strong monthly sales in December, the start of the human clinical study in December and the build-up of inventories for the further planned expansion of sales in working capital. With inflows from investing activities of EUR 0.2 million (mainly from the sale of machinery and a plot of land) and from financing activities of EUR 3.5 million (mainly influenced by the successful capital increase), aap had a liquidity balance of EUR 2.1 million at the end of the year.
 

Looking at the balance sheet, the balance sheet total increased to EUR 23.0 million (+16%) and was primarily characterized by the increase in rights of use (EUR +1.5 million), the reporting date-related increase in trade receivables (EUR +1.3 million) and the increase in cash and cash equivalents (EUR +1.2 million). On the liabilities side, current and non-current liabilities increased by EUR 0.8 million, while equity rose by +24% to EUR 12.8 million due to the negative result for the period and the effects of the capital increase. Based on this, the Company shows a solid equity ratio of 56% (+4 PP) as of 31 December 2021.
 

Overall, the turnaround can also be clearly seen here: A healthy balance sheet structure as well as the focus on financing the sales growth of an operationally sustainable basic structure and the promising development projects, whereby the trend towards a black zero is also clearly evident here.
 

Outlook

In financial year 2022, aap intends to grow further in terms of sales and earnings and to press ahead with the human clinical study for its innovative antibacterial silver coating technology that started in December 2021. In addition, a key focus will be on implementing activities as planned to achieve certification under the new EU Medical Device Regulation (MDR 2017/745/EU) within the transition period until 2024.
 

Based on the successfully completed capital increase, a significant portion of the net proceeds raised shall be used to finance the planned sales growth and the execution of the human clinical study for the antibacterial silver coating technology. In order to accelerate further sales growth, extensive investments have already been made in sales structures and teams, particularly in North America and Germany. Overall, all markets shall contribute to the planned sales growth, with a continued focus on North America.
 

The Management Board continues to monitor and assess very closely the global impact of the COVID-19 pandemic and the conflict between Russia and Ukraine on aap's business activities and financial results.
 

Not included in the following forecast statements are:

- A significant tightening of sanctions against Russia or a change in the interpretation of existing sanctions

- An expansion of the conflict situation outside Ukraine

- An additional significant increase in energy and raw material prices due, among other things, to the war in Ukraine or as a result of the associated sanctions

- Further virus mutations (COVID-19 pandemic) leading to a significant deterioration in the infection situation with corresponding lockdown measures or other restrictions in the sales regions relevant to aap or resulting in production stoppages at the Berlin site or at aap's service providers/suppliers

Based on the good developments in financial year 2021 and the investments already made to finance growth, as well as taking into account the recent renewed sharp increase in COVID-19 incidence figures worldwide and certain expected negative macroeconomic effects of the conflict between Russia and Ukraine, the Management Board expects sales between EUR 14.0 and 16.0 million for financial year 2022. In this context, the Management assumes a similar distribution of sales over the individual quarters as in the previous year. With regard to earnings, the Management Board expects EBITDA to be between EUR -1.7 and -0.5 million (incl. costs for the silver coating technology and particularly the human clinical study) in financial year 2022 based on the planned sales growth and further efficiency improvements to be realized. Assuming budgetary development in the current financial year, the Management aims to achieve positive EBITDA and an almost balanced free cash flow for the first time for the entire Company, excluding the costs for the silver coating technology and particularly the human clinical study. After deducting the remaining financing expenses and the costs of the human clinical study, on the other hand, aap will still report a negative cash flow.
 

The Management Board's overriding and long-term goal is to generate a sustainable positive result and thus transform aap into a financially sound and independent growth company.
^[1] CER = Constant Exchange Rates.
^[2] Gross margin = Sales revenue +/- change in inventories of finished goods and work in progress - cost of materials / cost of purchased services.
^[3] aap Group excluding development costs for silver coating and resorbable magnesium implant technologies, non-recurring one-time effects and non-allocable central costs.

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aap Implantate AG (ISIN DE0005066609) - General Standard/Regulated Market - All German stock markets -

About aap Implantate AG
aap Implantate AG is a globally active medical technology company based in Berlin, Germany. The Company develops, manufactures and markets products for trauma. The IP-protected portfolio includes besides the innovative anatomical plating system LOQTEQ(R) a wide range of cannulated screws. In addition, aap Implantate AG has an innovation pipeline with promising development projects such as the antibacterial silver coating technology and magnesium-based implants. These technologies address critical and unmet needs in trauma. In Germany, aap Implantate AG sells its products directly to hospitals, purchasing groups, and hospital groups, while at international level it primarily uses a broad network of distributors in around 25 countries. In the US the Company pursues a hybrid distribution strategy with its subsidiary aap Implants Inc. Distribution is carried out both through distribution agents and partnerships with global orthopedic companies. aap Implantate AG's stock is listed in the General Standard segment of Frankfurt Stock Exchange (XETRA: AAQ.DE). For more information, please visit our website at www.aap.de.

The figures presented in this press release may be subject to technical rounding differences which do not affect the overall presentation.

Forward-looking statement
This release may contain forward-looking statements based on current experience, estimates and projections of the management board and currently available information. They are not guarantees of future performance. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. Many factors could cause the actual results, performance or achievements of aap to be materially different from those that may be expressed or implied by such statements. These factors include those discussed in aap's public reports. Forward-looking statements therefore speak only as of the date they are made. aap does not assume any obligation to update the forward-looking statements contained in this release or to conform them to future events or developments.
For further information please contact: aap Implantate AG; Fabian Franke; Head of Investor Relations; Lorenzweg 5; 12099 Berlin, Germany; Phone: +49 (0)30 75019 - 134; Fax: +49 (0)30 75019 - 290; Email: f.franke@aap.de