Image credit: Screenshot, Detection Technology Q1 2021 Report
On August 3rd, Detection Technology published its financial results for Q2 2021. As forecast by DT’s management, quarterly group sales returned to growth during the second quarter, driven by accelerating demand for its medical imaging related products. During the quarter, overall sales reached €23.5m, compared with €21.1m in Q2 2020, an increase of approximately +11% year-on-year. This took cumulative sales to €41.9m, compared with €41m in 2020, an increase of approximately +2% year-on-year. On a trailing twelve-month basis (TTM) revenues remained approximately -11% lower.
From Q1 2021 onward, the company began to segment its business into three reportable segments, the industrial business unit (IBU), medical business unit (MBU) and security business unit (SBU). Quarterly revenue growth was driven by higher sales from the MBU (+€3.7m), partially offset by lower sales from the SBU (-€0.9m) and IBU (-€0.4m). Hannu Martola, President and CEO, commented: “Our growth was double-digit, thanks to excellent demand in medical CT applications. The security market remained subdued, although our security sales started to grow at the end of Q2. Industrial demand experienced a normal fluctuation but the overall market remained stable.”
Quarterly sales revenue originating from the MBU reached €13.6m, compared with €9.9 in Q2 2020, an increase of almost +40% year-on-year. This took cumulative revenues to €23.6m, compared with €18.3m in 2020, an increase of approximately +30% year-on-year. On a TTM basis sales revenue was approximately +27% higher and the fourth consecutive quarter of TTM sales growth since the pandemic began.
MBU sales grew strongly due to the same market drivers as in Q1. This included strong demand for medical CT products, particularly from customers based in China. Underlying sales for CT applications was supported by capital investments made into healthcare infrastructure as well as the demand for high-end CT applications. Sales of the company’s X-Tile solution “remained at a good level”. This solution is an industry first, off-the-shelf, tileable CT detector module which is easily scalable, resulting in lower costs and quicker routes to market for CT system OEMs. Sales of the company’s X-Panel series remained subdued although DT anticipates that commercial shipments will accelerate during H2 2021. The X-Panel 2301 is targeted toward dental applications and the X-Panel 1511 toward dynamic imaging in C-arm systems, both of these product segments have been significantly negatively impacted by the pandemic situation. The company reported that demand for dental applications continued to normalise during the quarter, encouraging signs for future growth within this segment.
Launch of Aurora XS product
During the quarter, the company expanded its Aurora product range with the launch of Aurora XS which is designed to “address the cost efficiency and reliability requirements of the urban security screening market”. The product is targeted for line-scan applications used in train and underground stations, public buildings, sports arenas, hotels and other critical infrastructure which require security screening. One of the key features of the Aurora XS is that its design enables dual-energy imaging using a single detector. The innovation is based on a combination of algorithms, application-optimized ASIC and mechanics. The company anticipates sales to start in H2 2021.
Expansion of TDI product portfolio
During the quarter, the company expanded its TDI-based product range by launching new product variants within its X-scan T series of products. The product family is designed for demanding industrial applications and the product launch consisted of 4 new detector sizes to support additional configurations and production belt widths.
The impact of COVID-19 in Q2
- Net sales reduced by approximatley 25% in both Q2 and H1 2021
- Uncertainty around sales revenue from SBU remains elevated
- Risks associated with the procurement of materials and electorinc components have increased
- No direct impact on employee count
- No longer receiving government grants for employee contributions (€0.5m, H1 2020)
In the short term, the company is projecting total net sales to grow by a double-digit in Q3 and H2 2021, reflecting continued sales growth from the medical business combined with recovering sales from the security and industrial market segments. The company anticipates growing demand in medical CT applications with even stronger sales growth in H2 than H1 2021. Double-digit growth is expected in IBU sales in Q3 and H2. SBU sales are estimated to turn for growth in Q3 and experience double-digit growth in H2, but there is some uncertainty in the demand. In the medium-term, the company aims to increase sales by at least 10% per annum and to achieve an operating margin at or above 15% in the medium term.