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Boule Diagnostics AB (publ) Interim report January–March 2020

Stable start to the year

Quarter January–March 2020 in summary

  • Net sales amounted to SEK 118.4 million (118.6), down 0.2 percent. Adjusted for the change in
    exchange rates, this corresponds to a decrease of 3.2 percent.
  • Number of instruments sold in the quarter was 912 (1,159), a decrease of 21.3 percent.
  • Cash flow from operating activities amounted to SEK 14.5 million (-4.9).
  • Operating profit including non-recurring costs was SEK 15.2 million (16.7) which corresponds to an
    operating margin of 12.9 percent (14.1).
  • Net profit amounted to SEK 7.4 million (9.8).
  • Earnings per share before and after dilution amounted to SEK 0.38 (0.77).

Significant events during the quarter

Closeout letter received from the FDA
On February 28, 2020, Boule received a closeout letter from the US FDA (Food and Drug Administration) which described that the authority had completed their evaluation of the company’s corrective actions in respons to the Warning Letter dated October 2, 2018. The letter states that based on FDA’s evaluation it appeared that Boule had addressed the violations contained in the Warning Letter. With this the warning letter was closed.

Acting CEO
As of January 19, 2020, the date on which Fredrik Dalborg left the company, until when Jesper Söderqvist assumes his position on May 11, Christina Rubenhag, CFO and SVP, have assumed the position of acting CEO and Group President.

Significant events after the period

Proposed dividend withdrawn
The Board of Boule Diagnostics AB has decided to withdraw the previously communicated dividend proposal of SEK 0.60 per share, a total of SEK 11.6 million. The Board’s decision was made in light of the increased uncertainty of the market outlook following the global spread of COVID-19.

Comments from acting CEO Christina Rubenhag

First quarter of 2020
Following a record-breaking end to last year, this year started off with a slightly weaker instrument sales with a decrease of 9.0 percent. Sales from consumables increased by 2 percent. The positive development of the OEM products we saw in 2019 continued during the first quarter of 2020. Growth was good in South America and Eastern Europe, on par with the first quarter 2019 in Asia, Western Europe and the US, but considerably weaker in the Middle East/Africa. The quarter’s sales in our Middle Eastern key markets was affected by closed borders and banks, partly due to political instability.

The gross margin improved compared to the corresponding quarter last year thanks to a higher proportion of consumable sales. Some negative impact on the margin arose from the instrument mix, which contained a large proportion of shipments of distributed five-part instruments, and from the geographical mix with a large proportion of shipments to Asia.

Strengthening the organization
At the beginning of the year, a reorganization with new recruitments in production was implemented. Production responsibility was divided between production of instruments and global production of consumables with new managers for these areas of responsibility.

In early March, a new head of instrument development assumed the position and joined the management team. We have also recruited a new quality assurance manager for the Swedish operations.

Warning letter from the FDA has been closed
In 2019, the action plan that followed the warning letter 2018 was completed. In July 2019, the Food and Drug
Administration (FDA) conducted a follow-up inspection and the action plan from that inspection was completed in January 2020. At the end of February 2020, Boule received a letter from the FDA who, very gratifyingly to us, described that they had completed their evaluation of the company's corrective actions and that, based on their evaluation, Boule had addressed the violations in the warning letter and that the letter with this was closed.

Impacts of the COVID-19 pandemic
The outbreak and spread of COVID-19 affect people and companies worldwide. To protect our staff and reduce the spread of infection at the production facilities in Spånga and Florida, Boule follows the COVID-19 related regulations given by the authorities in the respective countries. This means, among other things, that we apply a virtual work environment with work from home and digital meetings as often as possible.

The effects on Boule were limited in the first quarter. We have had problems in logistics to customers due to lacking transport capacity and hindrances regarding closed borders. Boule works actively to mitigate the effects through close communication with the company's distributors and by planning and booking deliveries well in advance. We have worked through disruptions in the component supply chain, but if the effects become long-term there is a risk that production could be affected by a possible shortage of raw material components.

We plan for an increased impact on sales in the coming quarters, especially concerning the sales of instruments. We have already seen that the sales process of new instruments has slowed down as customers focus on emergency efforts and restrict access to hospitals and clinics. In the short term, completely shut down markets may have decreased sales of consumables as this results in fewer blood samples taken. The length of which key markets will be closed will therefore be decisive regarding the impact on sales of consumables. Boule has taken several actions to adjust the company's expenses, including short term furloughs in instrument production. We have placed extra focus on securing our liquidity, which includes capital tied up in production and postponement of CAPEX projects. The Board of Directors has decided to withdraw the, to the AGM 2020, proposed dividend and, after the end of the quarter, also decided to not follow through with the investment in our associated company biosurfit.

At present, it is impossible to predict the outcome of the COVID-19 pandemic. We have analyzed several scenarios and feel confident in our preparedness with the measures we have already taken and those we have planned.

Boule holds a steady course even in stormy weather
When I assumed the position of acting CEO in January, the following turbulent and stormy period that has hit the world was not foreseeable. Thanks to a dedicated and hardworking team we have navigated through the challenges that has arisen. I will now hand over the reins to Jesper Söderqvist as he assumes his position and becomes a part of Boule’s exciting future.”

THE INTERIM REPORT FOR JANUARY–MARCH 2020 IN ITS ENTERITY IS FOUND BELOW.

For further information, please contact:
Christina Rubenhag, acting CEO and Group President and CFO,
Boule Diagnostics AB, phone +46 (0)705-46 72 22

About Boule Diagnostics AB (publ)
Boule Diagnostics AB is a global diagnostics company that develops, manufactures and markets instruments and consumable products for blood diagnostics. The company serves hospitals, clinics, laboratories and companies within blood diagnostics, in both human and veterinary hematology. The company operates via subsidiaries in Sweden, the USA, Mexico and Russia. The company products are sold globally primarily through distributors, supported by Boule’s own local sales and support personnel. The Boule shares are listed on Nasdaq Stockholm since 2011. www.boule.com

This information is information that Boule Diagnostics AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above at 15:00 CET on May 7, 2020.