Year-end report 2020/2021. Torbjörn Kronander, CEO and President Sectra AB, comments:
“It is difficult to discuss where we stand as a company after the 2020/2021 fiscal year without mentioning the pandemic. Sectra does all it can to contribute to society by helping customers treat patients, cure diseases, and safeguard society from cybercrime. Our results reflect our success in these areas.”
“During difficult circumstances, we are guided by our corporate culture, our core values and our vision. This is an important reason why things have continued to go well for us during the COVID-19 pandemic. We posted record-breaking order bookings for the fiscal year, which shows that our focus on customer satisfaction is paying off, and we exceeded the Group’s three financial goals. Our operating margin was well over the target of 15%, which is mainly due to the effect of temporarily lower costs for travel and trade fair events due to pandemic restrictions. We expect these effects to gradually decline as society returns to more normal conditions. However, developments after the COVID-19 pandemic are difficult to predict. Even if customers have increasingly accepted new ways of working remotely, we do not consider this year’s level to be sustainable, so the long-term target margin remains unchanged.”
“We are currently adapting our organization, product development and price models to meet the demand for cloud services and to scale our operations efficiently as we grow. The pandemic has accelerated customer acceptance of our new Sectra One subscription model, which was introduced in North America at the beginning of the fiscal year. Payment and subscription models based on per-use invoicing will enable a more even balance between quarters over the long term, but are not expected to have a major effect over the next few years. We will continue to see significant variations in financial outcomes between quarters. This is due in part to the deployment of comprehensive customer projects and project deliveries, but is also a natural consequence of seasonal variations, since many customers want to go live before the relatively calm summer period. Accordingly, it remains important to look more at trends than at the outcome for an individual quarter when assessing Sectra’s development.”
More comments can be found in the year-end report.
Nine-month interim report 2020/2021. Torbjörn Kronander, CEO and President Sectra AB, comments:
“Satisfied customers are the ultimate proof that our employees and solutions deliver substantial value, which helps to improve the efficiency and quality of healthcare and increase cybersecurity in society. Customer value that in turn creates value for our employees and shareholders. Although the products we offer are highly appreciated, customer satisfaction largely comes down to our employees and how we work together within the company and in consultation with our customers. The foundation for our success in this regard lies in our corporate culture. How we listen to customers to ensure we understand and deliver solutions to their problems, and an entrepreneurial spirit that drives us to achieve innovations that increase customer value.”
“Our earnings and sales did not quite reach the levels reported in the comparative quarter. Given that the third quarter of 2019/2020 was a record-breaking quarter and that we are now burdened by a pandemic and a stronger SEK, we are nevertheless pleased with our results.”
“Even if the pandemic results in a temporary decline in demand in some markets and areas, people will still fall ill and society will still need cybersecurity. With long-term initiatives, investments in existing customer offerings and innovation, we create value for our customers. That way, we help make society healthier and safer.”
More comments can be found in the nine-month interim report.
Six-month interim report 2020/2021. Torbjörn Kronander, CEO and President Sectra AB, comments:
“Possibilities for working remotely with the same functionality and security as the workplace, as well as comprehensive consolidation in healthcare to promote higher productivity, are some of the factors that drive the markets for medical IT and cybersecurity. With increased order bookings and profits in the first half of the year, we have shown that our focus on customer satisfaction is paying off. This is how we grow and achieve our goals.”
“In the year-earlier period, we reported record-high order bookings. This trend has continued, and now we are doing it again. After having recovered from a weak start to the fiscal year, we are reporting positive financial performance for the second quarter. This despite the impact of the pandemic, above all in our Business Innovation and Secure Communications operating areas. At the same time, more extensive lockdowns are once again taking place in society, and it appears that a second wave of the pandemic will continue for several months to come. This severely limits the opportunities for visiting customers in the field, and will have an effect on delivery plans for certain projects in the immediate future. The impact on long-term sales activities such as trade fairs and physical meetings with customers will lead to reduced costs over the short term, but could have effects on order bookings over the long term. This applies not only to us, but to other players in our industries as well.”
“The situation for many of our customers is far from ideal, owing to the ongoing pandemic, and we are doing what we can to help. Based on their feedback, we have done well at maintaining a high level of customer satisfaction. This feels fantastic and encourages us to continue to do our utmost to meet our customers’ needs so that they can provide their patients with the best care possible and protect critical infrastructure and communication, where society is at its most vulnerable.”
More comments can be found in the six-month interim report.
Three-month interim report 2020/2021. Torbjörn Kronander, CEO and President Sectra AB, comments:
“Our customers and employees are doing a fantastic job maintaining society’s critical functions and meeting the needs arising during the difficult circumstances brought about by the pandemic. New working methods have been introduced, and on several occasions, we have delivered new functionality that helps customers meet their challenges.”
“The pandemic has not stopped us from expanding the Sectra family with new customers during the quarter. Both Imaging IT Solutions and Secure Communications reported significantly increased order bookings, which contributed to more than doubling the Group’s order bookings compared with the year-earlier quarter. As expected, our sales volume was lower than the comparative period, primarily due to delays caused by the pandemic. Additionally, a stronger Swedish krona led to a weaker outcome. The pandemic and currency fluctuations have had the largest effect on the outcomes in Imaging IT Solutions and Business Innovation, while Secure Communications reported sales growth. However, reduced travel, among other factors, entailed reductions in certain expense items. The Group reported a currency-neutral operating profit on par with the comparative quarter, which we are pleased with given the current situation.”
“Recent customer satisfaction surveys conducted in the US established that Sectra has performed well during the pandemic, further increasing the already-high levels of customer satisfaction. This shows that our corporate culture is strong and that we have fantastic employees. With satisfied customers, a strong balance sheet, a positive cash position and significant recurring revenue, we are relatively well equipped to manage the high level of uncertainty in the world.”
More comments can be found in the three-month interim report.
Annual report and Sustainability report 2019/2020. Torbjörn Kronander, CEO and President Sectra AB, comments:
I continually see proof of the value we are creating for our customers, patients and society. We help protect energy production and distribution from cybercrime that—if successful—could have disastrous consequences. We protect highly confidential information for governments and authorities in many countries as well as for the EU and NATO. Our medical IT systems are used by healthcare providers across the globe, affecting care outcomes for a large number of patients. Approximately 100 million diagnostic imaging examinations a year are conducted using Sectra’s systems. It’s easy to look at just the numbers, but there are a great many people behind it: patients that we help. It makes me happy and proud to see that we enable all this every day, year round.
High customer satisfaction and quality are profitable
We actively maintain close, long-lasting relationships with our customers. Going to work is more enjoyable—for both our employees and myself—when we have satisfied customers. Satisfied customers also generate more business—business with profitability—which is confirmed by the fact that we reported our best year to date in terms of earnings and our performance measures exceeded Sectra’s three financial goals. Our success and our growth are based on high levels of customer satisfaction, long-standing customer relationships, high-quality products and skilled, dedicated employees. These conditions form a stable foundation for our future development and profitability.
Gaining new customers costs more than nurturing and developing existing relationships. Our costs are therefore higher in markets where we are growing by adding new customers. For us, this includes regions such as North America, where our targeted initiatives have resulted in a robust expansion of our customer base in Imaging IT Solutions. It has also resulted over the past five years in us transitioning from being a relatively unknown supplier to being one of the most sought after in our niche in the US. Even though our market share in North America is small as yet, it is growing rapidly, and the US overtook Sweden as Sectra’s largest market during the year.
Getting the right people on board is crucial
I am particularly proud of our employees. It is because of them and the fantastic work they have done that we have such a high level of customer satisfaction today. When customers are satisfied with us, we build trust, which in turn means they are willing and have the confidence to buy more from us. It also increases the likelihood that they will recommend Sectra to their colleagues and friends, which is the ultimate proof of customer satisfaction—and, moreover, is an effective sales and marketing strategy.
Sometimes, people ask me why I also interview every person we recruit to Sectra. The reason is that recruitment is central to a knowledge company like ours, since employees play such an important role in how our customers perceive us as a company. We put a great deal of energy into ensuring that we hire employees who are a match for our corporate culture and who are not afraid to take decisions and to act. We want highly driven individuals who can learn new things and want to improve the lives of others. We then rely on their judgement and on them seeing things with fresh eyes so that they can alert those of us in management when customers are not satisfied, and to tell us what we should do to become even better.
We help drive digitalization in the healthcare sector by broadening and deepening our portfolio in diagnostic imaging where we mainly prioritize illnesses affecting the elderly. We assume full responsibility for all our customers’ medical imaging with a focus on the most image-intense departments: radiology, mammography, pathology and cardiology. One of our growth initiatives is digital pathology. The number of pathology customers in Europe is increasing, and after having obtained FDA clearance during the year we can now concentrate on a broader launch of our digital pathology module for customers in the US. The ongoing digitalization in pathology is significant for the development of cancer diagnostics, creating better, safer healthcare for patients. At the same time, it leads to time-savings and a sharp decrease in the need for transporting tissue samples between hospitals.
In Imaging IT Solutions, we have been working on changing how we sell and are paid for software licenses. This led to the launch of a new subscription model in May 2020. By driving the transition to subscription-based models, we can offer our customers increased flexibility. This type of subscription is common on the consumer market, but we now see that healthcare providers also increasingly appreciate this type of delivery.
Our operations in Business Innovation are relatively small but represent exciting possibilities. In orthopaedics, for example, more customers are using our new product, Sectra Implant Movement Analysis, to decide whether or not a patient with an implant requires revision surgery. Each such surgery avoided provides great value for the patient and saves enormous amounts of money for the healthcare sector. Our orthopaedics products also provide us with competitive advantages in sales of systems for medical imaging. We also see that we are paving the way with our solutions for modern medical education and distance education—a need that has become of immediate interest in conjunction with COVID-19.
Historically, a large part of our work in cybersecurity has dealt with extremely advanced security. There has been particular focus on mobile communications, and our Sectra Tiger series of secure mobile telephones. Because of the high level of quality and security approval, our customers are mainly found in defense and government agencies in the EU. Our operations are now being focused on secure mobile workplaces, where customers need to be able to work securely, outside of the office or at home as well. This is also an area where the COVID-19 pandemic has led to increased demand for our solutions.
For the past few years, we have also been focusing on IT security for critical infrastructure, especially energy production and distribution, which is another part of society that must be defended against attacks. We are also seeing increasing synergies between cybersecurity and medical IT, though from a low level.
How the pandemic affects us, and our customers
Sectra’s customers play a key role in society, and this is also the case during the ongoing pandemic that is affecting the world. Accordingly, our highest priority is ensuring that their operations continue to function despite a dramatic increase in workload in certain cases.
To reduce the spread of COVID-19, many operations are being run from employees’ home offices. For customers handling classified information, this places increased demand on data security from their home workspaces. In the field of healthcare, home workspaces—in pathology and radiology, for example—require that customers are supplementing existing installations with new functions specifically aimed at online collaboration. For Sectra, this has led to an upswing in demand for mobile crypto solutions and for IT systems that permit radiologists and pathologists to review and collaborate on cases remotely, and also for solutions that enable education for medical students to continue remotely when universities are closed.
We are experiencing continued demand for our product offerings. In certain cases, however, customer prioritization of the most necessary measures at the moment has led to the postponement of planned projects or to purchasing departments putting ongoing procurements on hold. Though this entails delays in many projects, we also have projects that are progressing more rapidly than planned. In addition, the sharp downturn in elective healthcare in certain cases has led to a drastic loss of revenue for customers, primarily in privately run hospitals, which is something that also impacts their long-term ability to invest. Certain healthcare providers have temporarily suspended investments. This promotes greater uncertainty than normal, and means that currently it is difficult to predict what effects COVID-19 will have on Sectra going forward.
Despite the great tragedy society is currently experiencing owing to COVID-19, the long-term changes mean possibilities for enhancing efficiency and business development. Both we and our customers are acquiring know-how concerning new ways of working remotely, and much of this will lead to changed and more efficient approaches after COVID-19 as well. This is something that could ultimately create opportunities for an agile company like Sectra.
The future—more value for our customers
Our future is an exciting one. Technological developments are providing us opportunities to add new value for our customers, and we operate in industries where the underlying societal trends are driving growth. These trends mean that society must both solve the problems of healthcare for a continually aging population, and must be protected against cybercriminality that threatens its foundations and human survival. What happens with crypto when quantum computers become a functional reality? Can we use AI to learn what we should do fora new patient from historical patient data, and what possibilities then open up? And how can we provide tools to improve the results for orthopaedic surgery, one of the most common surgical procedures for older people that is rapidly growing? How can we help healthcare personnel manage patients, providing them with the best possible treatment in a world where the rate at which medical knowledge doubles is measured in months instead of human lifetimes? These are areas where Sectra can help. But entirely new areas will also emerge, as well as problems where we can solve and translate our customers’ needs into new products.
Our stable development and positive underlying cash flows and profitability give me every reason to remain optimistic. We have a number of exciting projects in the pipeline as well as completely new geographic markets that could eventually become significant. Our possibilities for growth are strong in all operating areas for the foreseeable future, even if COVID-19 will likely mean temporarily dampened demand in certain markets. With our work and investments in the field, and innovation that has the potential to increase customer value, we are creating value for our customers and are thus helping to make society healthier and safer. This customer value is the foundation of our success, and also determines how we successfully create shareholder value and returns for our owners.