EQS-News: aap Implantate AG: annual financial statements 2023 characterized by the difficult economic environment and restructuring measures introduced, good operational progress

Financial year 2023 got off to a promising start for aap Implantate AG ("aap" or "Company"). Sales increased in all regions and exceeded the previous year's figures. The initial upswing lost momentum and the outlook in aap's sales markets gradually deteriorated due to financial difficulties in the healthcare sector and uncertainties about further economic development in the various regions. Many distributors reduced their inventories in order to counteract the higher financing costs, extended payment cycles and uncertainties. The planned sales in new markets could not be realised due to delays in approvals caused by the establishment of new health authorities in the respective countries, the replacement of authorities due to accusations of corruption or new requirements. These circumstances led to overall disappointing annual sales at the previous year's level.

2023/2022 - Turnover

In contrast to the markets, a great deal of progress was made in the operational area. The optimisation projects continued in 2022 and 2023 resulted in full delivery capability and timely delivery to our customers. We were also able to reduce electricity consumption by 13% per unit produced by increasing efficiency. The MDD surveillance audit carried out at the end of 2023 together with ISO 13485 recertification was successfully completed. In view of the important transition from the current Medical Device Directive 93/42/EEC (MDD) to the Medical Device Regulation MDR (EU 2017/745), the company was able to drive the process forward with the newly appointed Notified Body for the MDR and is sticking to its plan to have completed the transition by the end of 2024.

Due to the repeated weak sales, aap had to implement a further restructuring programme. This is intended to ensure that the sustained lower level of sales in the operating business no longer results in losses and that the break-even point can be reached within two years in order to ensure the self-financing of the operating business.

For a detailed evaluation of the Management Agenda 2023, aap refers to the consolidated annual financial report 2023 published today.

Key financial figures

EBITDA 2023/2022

EBITDA deteriorated in the 2023 financial year; the originally expected target values for the 2023 financial year of between EUR -2.5 million and EUR -1.7 million could not be achieved.

Recruiting EBITDA 2023/2022

Based on the valuation calculations used to date, recurring EBITDA is within the guidance last communicated in December 2023.

The following developments were decisive for the change in EBITDA:

• Sales level realised below the company's original planning in 2023, mainly in the USA and due to massive delays in new registrations in new markets,
• Restructuring costs,
• High value adjustment of outstanding receivables,
• Negative change in inventories,
• Massive increase in acquisition and audit costs in other costs,
• Cost increase from conducting the human clinical trial for aap's innovative antibacterial silver implant technology by accelerating patient recruitment.

Cash flow

As a result of the developments already mentioned, aap's operating cash flow also deteriorated in the financial year 2023 compared to the previous year.

In the financial area, a number of revaluations and reclassifications had to be carried out as part of the work on the financial statements, which led to delays. Some of these measures resulted in high one-off corrections, some of which had a negative impact on EBITDA. This is reflected in the result of recurring EBITDA, which shows a slight improvement compared to the 2022 financial year.

The fact that the company was threatened with the payment of a six-figure penalty as a result of the delay in the preparation of the financial statements and that the main audit procedures had been completed led to the decision to terminate the audit, accepting a failure note due to an audit impediment. The Executive Board will work with all available resources to eliminate the audit impediment in order to remove it for the 2024 annual and consolidated financial statements.

The adopted annual financial statements and the approved consolidated financial statements including the summarized management report for the individual and consolidated financial statements as well as the report of the Supervisory Board and the explanatory report on the disclosures pursuant to Sections 289a and 315a HGB for the 2023 financial year will be presented respective proposed for resolution together with the resolutions on the discharge of the Executive Board and the Supervisory Board for the 2023 financial year on the agenda of the 2025 Annual General Meeting.

Outlook

aap aims to set positive trends in terms of sales and earnings in financial year 2024. The investments in sales initiated in previous years form the basis for the planned increase in sales in 2024.

The human clinical trial for the innovative antibacterial silver implant technology, which was continued in 2023 with the modified study protocol, was able to recruit more than one hundred patients by the end of 2023; as of today, there are already 203 patients. Under the leadership of the University Hospital Regensburg, Prof. Dr Alt, fifteen study centers were involved. The change in the study protocol achieved the desired effect of accelerating patient recruitment and generating the necessary data. An above-average success rate was achieved by the end of 2023, which should lead to a reduction in patient recruitment (a corresponding application has been submitted). This means that phase 2 of development could be completed in the course of 2024 and aap will be able to start phase 3 (approval). For this and for the industrialization of the technology, aap will have to raise the necessary funding. Financing can also be provided both through additional funding and through development partnerships with companies from application areas outside traumatology.

In addition, a key focus will be on the planned implementation of activities to achieve certification in accordance with the new EU Medical Device Regulation (MDR 2017/745/EU) within the transition period until 2024.

Not included in the following forecast statements:

• A significant tightening of sanctions against Russia or a modified interpretation of existing sanctions for other markets,
• An expansion of the conflict situation outside Ukraine,
• Financial risks due to recession-related measures in various markets and their impact on public finances in the healthcare sector.

Depending on the economic development of aap and the further macroeconomic development, the Management Board is evaluating various options for financing further activities.

The Executive Board is forecasting sales of between EUR 11.5 million and EUR 13.5 million for the 2024 financial year and is on track with the sales of EUR 6.4 million achieved in the first half of 2024. With regard to earnings, the Executive Board is sticking to the EBITDA of between EUR -2.5 million and EUR -1.4 million communicated for the 2024 financial year. Even though the EBITDA result was exceeded in the first half of 2024, the Management Board will initially monitor the further project costs for the implementation of the human clinical trial of its antibacterial implant technology and the associated further activities and re-evaluate the guidance at a later date.

----------------------------------------------------------------

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

About aap Implantate AG

aap Implantate AG is a globally active medical technology company based in Berlin, Germany. The company develops, produces and markets products for traumatology. In addition to the innovative LOQTEQ® anatomical plate system, the IP-protected portfolio includes a wide range of cannulated screws. In addition, aap Implantate AG has an innovation pipeline with promising development projects such as antibacterial silver coating technology and magnesium-based implants. These technologies address critical problems in traumatology that have not yet been adequately solved. In Germany, aap Implantate AG sells its products directly to hospitals, purchasing groups and group clinics, while internationally it primarily utilises a broad network of distributors in around 25 countries. In the USA, the company utilises a hybrid sales strategy through its subsidiary aap Implants Inc. Sales are conducted both via distribution agents and through partnerships with global orthopaedic companies. The aap Implantate AG share is listed in the General Standard segment of the Frankfurt Stock Exchange (XETRA: AAQ.DE). For further information, please visit our website at www.aap.de.

There may be technical rounding differences in the figures presented in this press release that do not affect the overall statement. All key financial figures with reference to the balance sheet date of 31 December 2023 in the published consolidated interim report as at 30 June 2024 are preliminary and unaudited. The business figures for 2023 will be confirmed at a later date with the publication of the 2023 annual financial statements.  

Forward-looking statements

This release may contain forward-looking statements that are based on the current expectations, assumptions and forecasts of the Executive Board and information currently available to it. The forward-looking statements are not to be understood as guarantees of the future developments and results mentioned therein. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual results, financial situation, development or performance of the company and the estimates given here. These factors include those that aap has described in published reports. Forward-looking statements therefore only apply on the date on which they are made. We assume no obligation to update the forward-looking statements made in this release or to adapt them to future events or developments.

If you have any queries, please contact: aap Implantate AG; Rubino Di Girolamo, Chairman of the Management Board/ CEO, Lorenzweg 5; 12099 Berlin

Phone: +49 (0)30 75019 - 170; Fax: +49 (0)30 75019 - 290; Email: r.digirolamo@aap.de