Ottobock exceeds one billion in sales for the first time in 2019
Leading manufacturer of wearable human bionics* grows by 8% in its anniversary year, with a higher than average increase in the operating result / Impact of coronavirus pandemic felt in 2020
Ottobock, a medical technology company which operates on an international scale, maintained its growth course in the 2019 financial year. With a nominal increase of 8 per cent, sales grew to EUR 1,003 million (prior year: EUR 927 million) and exceeded the threshold of one billion euros for the first time. Thanks to higher sales and consistent steps to improve efficiency, the adjusted operating profit before special items (underlying EBITDA) increased at a higher than average rate, by 10 per cent to EUR 191 million (prior year: EUR 174 million).
"We are proud to have set new records in both our sales and operating results last year – which was Ottobock's 100-year anniversary. Our Executive Board has succeeded in combining dynamic growth with greater profitability," says Professor Hans Georg Näder, owner, President and Chairman of the Board for Ottobock SE & Co. KGaA.
In the O&P segment, which encompasses the prosthetics, orthotics and component business along with Patient Care, Ottobock's sales grew organically by 6 per cent to total EUR 876 million. One key success factor lies in the increasing number of patients receiving treatment with technologically sophisticated microprocessor-controlled prostheses. Examples of these include the Genium Bionic Prosthetic solution and the intuitive Myo Plus control, which allows users to move myoelectric hands smoothly via artificial intelligence and pattern recognition. Overall, Ottobock maintained its clear technological and economic lead on the world's prosthesis market.
Further growth potential in the O&P segment is offered by the C-Brace, a unique neuro-orthosis solution that helps people with paralysis of the legs to walk and stand safely once again. Ottobock introduced the second generation of the C-Brace in 2019. Fortunately, the healthcare systems in German and Japan have recently issued formal funding approval, thereby establishing the necessary basis for high-quality patient care.
"We view ourselves as a vertically integrated solution provider, combining innovative products with patient care in an integrated approach to improve people's mobility. This balance in our business model – as global market leader for prosthetics on the one hand, and maintaining close proximity to our users on the other – is unique in the world of medical technology," says Philipp Schulte-Noelle, CEO of Ottobock.
In the Others segment, which includes the Human Mobility wheelchair business and the Industrials start-up, Ottobock's sales grew organically by 7 per cent to total EUR 127 million. Developments in the wheelchair business were highly positive, with growth in the double-digit percentage range, notably thanks to increased demand for lightweight wheelchairs, wheelchairs for active use, sport wheelchairs and power wheelchairs. Electromobility has been a permanent part of the product range for years. With sales in the low single-digit figures (in millions of euros), the start-up Ottobock Industrials is still relatively small; however, it is growing exponentially. Innovative exoskeletons – for employees who work in production, logistics and manual labour – considerably reduce physical strain in the back and shoulder regions, and offer tremendous potential for the coming years.
On a regional level, business in Western Europe grew by 6 per cent. This accounts for around half of Ottobock's total sales. While sales in North America and EEMEA (Eastern Europe, Middle East and Africa) grew by 2 and 7 per cent respectively, the growth rates for the emerging markets of Asia-Pacific (+8 per cent) and Latin America (+15 per cent) were exceptional.
"For us, solid and lasting growth means that all segments and regions contribute to our positive development. We maintained this balance extremely well in 2019," says Philipp Schulte-Noelle.
With adjusted operating profit before special items (underlying EBITDA) increasing to EUR 191 million, the company's EBITDA margin also improved by 0.3 percentage points to 19.2 per cent. By comparison, the EBITDA margin in 2016 was 16.0 per cent. Since then, profitability has continuously improved thanks to various measures such as the optimisation of quality management and positive effects in purchasing. "Our next step is to reach a level of 20 per cent," says Jörg Wahlers, CFO of Ottobock. Operating cash flow, which stabilised at EUR 104 million in 2019, is another indicator of the improved operating performance.
Ottobock's investment volume totalled EUR 184 million in 2019, an increase of EUR 54 million or 42 per cent. This was mainly due to the acquisition of Vigo, a leading patient care provider in Belgium and Poland with annual sales of about EUR 70 million, as well as to other transactions to strengthen patient care in France, Italy, Sweden and the USA. Ottobock invested a total of EUR 100 million in company acquisitions. "We recognised early on that nurturing close ties to users is a strategic success factor. Not only does it help with orders for prosthetics, but it also means we can take user's needs into account when we develop or upgrade our products," Philipp Schulte-Noelle says.
The company also invested EUR 51 million in property, plant and equipment, not least to expand production, logistics and service. EUR 21 million was invested at the headquarters in Duderstadt, among other things for a new logistics centre, a mill centre and iFab, a facility for the customised, digitally-controlled fabrication of prostheses and orthoses using 3D printing. "We are pursuing an ambitious plan for the future, and intend to maintain our growth course and improve efficiency over the coming years. High investments form the basis, and prove convincingly that we believe in our potential," Jörg Wahlers says.
Ottobock expended another EUR 61 million on research and development activities in the past financial year. The R&D ratio – i.e., expenditure to product sales – was 9.0 per cent. The company registered 42 new patents. "Over the past decades, innovations have earned us the position of market and technology leader in wearable human bionics. By supplementing existing product ranges and developing new concepts for the treatment of people with prostheses and orthoses, we intend to defend and strengthen this competitive advantage in the future," says Professor Hans Georg Näder. Ottobock has a total of 7,383 employees, of whom 497 work in research and development.
Originally, Ottobock planned to increase its dynamic growth once again in the 2020 financial year and achieve a higher than average increase in its adjusted operating profit before special items (underlying EBITDA). "We were on track to reach these goals in the initial months," Philipp Schulte-Noelle says. However, the coronavirus pandemic severely limited patient care in the key sales markets from March onwards, almost halting it completely at times. The exact impact on the development of sales and results cannot be assessed yet. Once the situation normalises and patient care accelerates again, the company expects the backlog to have positive effects. Schulte-Noelle: "Thanks to the robust nature of our business model and the great dedication of our employees, customers and stakeholders – all of whom I would like to thank – I am convinced that we will emerge stronger from this situation. We stand by our 2022 medium-term planning and are preparing for the end of the respective shut-downs around the world."
*Wearable human bionics replace or enhance part of the human body.