DGAP-News: aap Implantate AG

aap Implantate AG ("aap") looks back on a successful first year as a pure player in trauma. This is particularly reflected by the pleasing development of trauma sales. Here, the company realized a growth of 20% in financial year 2017 compared to the previous year. Overall, aap achieved its financial objectives in the reporting period. Both sales at EUR 10.9 million (forecast: EUR 10.0 million to EUR 13.0 million) and EBITDA at EUR -6.2 million (forecast: EUR -6.5 million to EUR -4.5 million) were in line with the guidance.
 

2017 - Major results and progress

- Trauma sales: Trauma sales grow by 20% to EUR 10.6 million (FY/2016: EUR 8.9 million)

- Earnings: EBITDA improves despite one-time effects to EUR -6.2 million (FY/2016: EUR -7.9 million); recurring EBITDA in FY/2017 at EUR -4.7 million (FY/2016: EUR -5.6 million)

- Gross margin and costs: Significant increase in gross margin (+15 PP) especially due to trauma sales growth in established markets; reduction in personnel costs (EUR 1.3 million) due to personnel measures implemented in 2016

- Cash flow and balance sheet: Cash need in FY/2017 totalled EUR 7.1 million with positive effects of working capital reduction (EUR 0.1 million); cash holdings of EUR 17.1 million^[1] and a further high equity ratio of 84%

- Focus on established markets: Sales in North America increase by 26% to EUR 3.1 million (FY/2016: EUR 2.4 million) with distribution business as main driver (+70%); extension of customer access in Germany and 3% sales growth

- LOQTEQ(R): Successful completion of development activities of LOQTEQ(R) VA foot and ankle system and other polyaxial LOQTEQ(R) systems

- Silver coating technology: Preparation of human clinical study with focus on coordination of scope and design of the study with authorities; CRO selected and aap development team reinforced with experienced specialist and management staff from leading global companies

- Voluntary public share buyback offer: Purchase of approx. 2.25 million shares followed by withdrawal and capital reduction leads to cash outflow of around EUR 3.4 million

For a detailed evaluation of the Management Agenda 2017 please refer to the consolidated annual financial report for 2017, published today.

2017 - Financials

Sales

In respect of sales development 2017 was a positive financial year which was mainly characterized by the following effects: In North America, which is one of the core markets within the growth strategy, aap increased sales by 26% year-on-year to EUR 3.1 million (FY/2016: EUR 2.4 million). Here, distribution business was the growth driver with a growth of 70% to EUR 2.5 million (FY/2016: EUR 1.5 million). In Germany, aap was able to extend customer access by means of numerous activities and realized year-on-year sales growth of 3%. On the international level the company expanded business with existing customers and gained new customers. At the same time sales in the BRICS and SMIT countries showed a positive trend toward stabilization. As a result, aap realized in the international region a sales growth of 26% in financial year 2017 compared to the previous year to EUR 5.1 million (FY/2016: EUR 4.1 million). Overall, the company increased sales by 4% in financial year 2017 to EUR 10.9 million (FY/2016: EUR 10.5 million) despite the divestments made in 2016 and the consequent loss of sales revenues realized with these companies.

 

EBITDA

*Includes costs of Quality First project, expenses for voluntary product recalls, costs for personnel measures, costs of evaluating strategic options, reduction in value on raw materials, costs of share buyback programme and recertification costs in connection with the disposal of aap Joints GmbH
**Includes pre-operating costs set-up distribution business North America, marketability discounts non-core products, costs for personnel measures, costs of early termination of license agreement and recertification costs in connection with the disposal of aap Joints GmbH
 

EBITDA improved to EUR -6.2 million (FY/2016: EUR -7.9 million) in financial year 2017 in spite of various one-time effects. EBITDA was mainly influenced in the reporting period by the following developments:

- Increase in gross margin (with regard to sales revenues, changes in inventories and cost of materials) from 67% to 82% due to trauma sales growth in established and higher margin markets

- Personnel costs decrease from EUR 8.7 million to EUR 7.4 million, reflecting personnel measures implemented in 2016 in order to adjust the cost structure to future sales streams and the reduced size of the company

- Slight increase in other operating costs due to higher legal advice costs and one-time effects totalling EUR 1.2 million arising from, inter alia, increased consulting expenditure in connection with the company-wide "Quality First" quality management programme, the evaluation of strategic alternatives and one-time costs of voluntary product recalls - in contrast decreasing trend in other cost positions

As EBITDA was burdened both in financial year 2017 and the previous year by significant one-time effects, a comparison based on recurring EBITDA (EBITDA without one-time effects) makes sense. Adjusted for one-time effects, recurring EBITDA improved in financial year 2017 to EUR -4.7 million (FY/2016: EUR -5.6 million).

Outlook for 2018

For financial year 2018 the Management Board anticipates the continuation of the dynamic sales growth and expects sales of EUR 13.0 million to EUR 15.0 million. aap thus aims for growth between about 20% and about 40%, which is significantly higher than the average growth rate of the global trauma market of 4 - 5%^[2]. Regarding EBITDA the company plans an improvement in the current financial year as well and anticipates a value of EUR -5.0 million to EUR -3.4 million.
 

All markets shall contribute to the planned sales growth and earnings improvement, with both distribution business and partnerships with global orthopaedic companies (distribution networks, licensing deals as well as product development and approval projects) especially in North America as their main drivers. Overall, the Management Board expects a more moderate development over the first six months and a more dynamic growth in particular in the second half of the year.
 

This reflects the aimed development: a focus on established markets with higher profit margins and simultaneous a disciplined cost management to improve operational performance. These areas of activity are of central significance for the management in the financial year 2018.
 

The implementation of a human clinical study is a major milestone on the path to the planned CE and FDA approval for aap's innovative antibacterial silver coating technology. The company aims to start this study during the financial year 2018.
 

The Management Board is confident to continue aap's dynamic sales growth by consistently implementing the strategy and to unlock the inherent value of the innovative product and technology base.

^[1] In the consolidated balance sheet of 12/31/2017 EUR 13.3 million is stated as cash and cash equivalents, while cash with banks totalling EUR 3.8 million is shown under current and non-current other financial assets as it was pledged to secure financial liabilities respectively cash payments were made to secure bank guarantees granted to third parties.

^[2] Source: "The Orthopaedic Industry Annual Report 2017" from Orthoworld Inc.

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

About aap Implantate AG
aap Implantate AG is a globally operating medical device company headquartered in Berlin, Germany. The company develops, manufactures and markets trauma products for orthopaedics. The IP protected portfolio includes besides the innovative anatomical plating system LOQTEQ(R) and trauma complementary biomaterials a wide range of cannulated screws as well as standard plates and screws. Furthermore, aap Implantate AG has an innovation pipeline with promising development projects as the antibacterial silver coating technology and magnesium based implants. These technologies address critical problems in surgery that haven't yet been resolved adequately. In German-speaking Europe aap Implantate AG directly sells its products to hospitals, buying syndicates and hospital groups while it uses a broad network of distributors in more than 25 countries at the international level. aap Implantate AG's stock is listed in the Prime Standard segment of Frankfurt Stock Exchange (XETRA: AAQ.DE). For more information, please visit www.aap.de, or download the Company's investor relations app from the Apple's App Store or Google Play.

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 inquiries please contact: aap Implantate AG, Fabian Franke, Investor Relations, Lorenzweg 5, 12099 Berlin, Germany
Tel.: +49 30 7501 9-134, fax: +49 30 7501 9-290, e-mail: f.franke@aap.de