Detection Technology Plc company announcement 20 July 2018 at 9:00 (EEST)

DETECTION TECHNOLOGY PLC HALF-YEARLY REPORT JANUARY-JUNE 2018

Detection Technology Q2 2018: Strong growth and result, year-end outlook improved

April-June 2018 highlights

  • Net sales increased by 19.5% to EUR 24.4 million (20.4)
  • Net sales of Security and Industrial Business Unit (SBU) increased by 16.4% to EUR 15.2 million (13.1)
  • Net sales of Medical Business Unit (MBU) increased by 25.0% to EUR 9.1 million (7.3)
  • Operating profit (EBIT) was EUR 5.2 million (4.1)
  • Operating margin (EBIT-%) was 21.4% of net sales (20.3%)

January-June 2018 highlights

  • Net sales increased by 11.3% to EUR 43.7 million (39.2)
  • Net sales of SBU increased by 7.3% to EUR 27.0 million (25.2)
  • Net sales of MBU grew by 18.4% to EUR 16.7 million (14.1)
  • Operating profit (EBIT) was EUR 9.0 million (7.8)
  • Operating margin (EBIT-%) was 20.5% of net sales (19.9%)

UNAUDITED (Figures in parentheses refer to the corresponding period of the previous year.)

President and CEO, Hannu Martola:

"In the second quarter, we managed to grow sales in both of our business units with a double digit growth rate and stronger than the market growth. MBU sales grew by 25% due to the good demand from key customers and the growth in demand in emerging markets. This mainly explains also the significant increase of Asia's share of total net sales. SBU sales increased by 16% from the corresponding period, the growth was driven by all application areas, and it was geographically distributed evenly. Our financial performance was strong despite increased research and development costs, which grew by 30% from the corresponding period last year. Operating profit was EUR 5.2 million, which corresponds to 21% of net sales.

The launch of X-Panel product family in May was a milestone for our company. We made an opening to the CMOS X-ray detector market, whose annual market potential we calculate to be over EUR 100 million. X-Panel 1511 is the first flat panel detector of the new product family. It is optimized to dental applications, and we believe there will also be demand for it in other medical and industrial imaging. It is noteworthy that it takes time to generate revenue from the new product family.

The business outlook for the second half of 2018 has improved from the beginning of year estimation, as in medical applications the production ramp-down of a key customer's system that uses DT's detector will last longer than anticipated. We believe that MBU sales growth will be double-digit in the second half of the year, and we expect single-digit growth for SBU sales.

However, the end of the year will be challenging from a sales growth point of view, especially in the SBU business, which is reflected in Chinese competitors' aggressive price competition globally and a slow down by Chinese authorities in investments locally. We do not believe that US customs tariff increases will have a significant impact on our business in the current year. If needed, we can adjust our business flexibly to meet existing situations. We do, however, consider the possibly increasing and unpredictable trade policies of different countries as a risk to sales growth in the longer term.

We will focus on managing active accounts with first-class service and on winning new customers and projects, in addition we will invest in strengthening our product portfolio and product quality. We will keep our medium-term growth targets unchanged."

Key figures

(EUR 1,000) 4-6/2018 4-6/2017 1-6/2018 1-6/2017 1-12/2017
Net sales 24,350 20,375 43,669 39,239 89,003
Change in net sales, % 19.5% 16.8% 11.3% 19.5% 17.9%
Operating profit 5,213 4,131 8,954 7,821 19,892
Operating margin, % 21.4% 20.3% 20.5% 19.9% 22.3%
R&D costs 2,414 1,856 4,362 3,385 7,157
R&D costs, % of net sales 9.9% 9.1% 10.0% 8.6% 8.0%
Cash flow from operating activities -599 4,376 4,606 5,491 18,625
Net interest-bearing debt at end of period -19,294 -9,489 -19,294 -9,489 -21,774
Capital expenditure 1,261 821 2,221 1,145 1,833
Return on investment (ROI), %     49.9% 43.7% 47.0%
Gearing, % -43.7% -28.9% -43.7% -28.9% -52.3%
Earnings per share, EUR 0.31 0.25 0.52 0.44 1.09
Number of shares at end of period 13,900,595 13,425,775 13,900,595 13,425,775 13,900,595

Business outlook

According to industry estimates, the average growth rate of global medical X-ray imaging market is around 5% per year, 7% in security X-ray equipment market and around 5% in industrial X-ray imaging. Detection Technology estimates that the annual growth rate of the market will remain at the current level in the all segments.

In the second half of 2018, the company expects sales to increase in the both business units as in medical applications the production ramp-down of a key customer's system using a DT detector will last longer than estimated. There is uncertainty regarding demand, and the intensification of competition might be reflected in product prices. The company does not believe that protectionist trade policies pursued by different countries will have a significant impact on the company's business in the second half of 2018, but sees it as a potential risk in the longer term.

Detection Technology's medium-term business outlook is unchanged. Detection Technology aims to increase sales by at least 15% per annum and to achieve an operating margin at or above 15% in the medium term.

This release is a summary of Detection Technology Plc's half-yearly report January-June 2018. The complete report is attached to this release as a pdf-file and can also be downloaded from the company's website.

Detection Technology Plc Board of Directors

For more information: President and CEO Hannu Martola will be available for interviews and further information on the release date at 9:00-11:00 (EEST).

Hannu Martola, President and CEO +358 500 449 475 hannu.martola@deetee.com

Nordea is the company's Certified Advisor under First North rules.

Detection Technology Plc Detection Technology is a global provider of X-ray detector solutions for medical, security and industrial applications. The company's net sales grew 18% to EUR 89 million in 2017. The company has 240 customers in 40 countries. Detection Technology employs over 400 people in Finland, China and the US. The company's shares are listed on the Nasdaq First North Finland marketplace under the ticker symbol DETEC.

DISTRIBUTION: NASDAQ OMX Helsinki Key media www.deetee.com

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