Redeye gives its comment on IDL’s Q2 report. As estimated in our previous research note, the quarter saw a significant sales drop owing to down-priorities in the healthcare systems with the corona crisis. IDL guides for a better third quarter and we find it reasonable that FY 2020 sales could reach our forecasted SEK ~30 million, which would represent only a slight decrease in sales compared to last year’s figures. In this note, we share our impressions of the report, as well as our view on CEO Charlotte Berg’s resignation.
Financials
For the second quarter, net sales came in at SEK 4.9 (8.9) million. The corona crisis has put pressure on the healthcare systems in IDL’s main markets, which has contributed to a sharp decline in the short-term demand of point-of-care tests. The company guides for a gradual recuperation in sales over the coming quarters. More specifically, it expects the Q3 sales to be greater than Q2, with back-to-normal volumes starting from Q4.
EBIT came in at SEK -4.1 (-1.4) million, which was roughly in line with our estimates. The relatively large loss on an operational level is obviously explained by the lower sales for the quarter. OPEX was only slightly lower compared to previous quarters.
In line with the company, we expect sales to return to normal towards the end of the year. All in all, we regard 2020 and a lost year, with sales most likely coming in below last year’s figures. However, we want to emphasise that we still consider IDL as strong case for the long-term investor, attractively positioned in its focus markets.
CEO Resignation
On the 22nd of July, Charlotte Berg announced her resignation as CEO of IDL. Charlotte has been with company for ten years, with the last three years acting as CEO for the company. We are discouraged to see Charlotte go as we believe she has been a strong driving force behind “the new IDL” and the expansion to new markets. Charlotte will continue at IDL until at least late-October. We look forward to an announcement of a new CEO in the coming months.
Concluding Remarks
Following the report, our Base case remains at SEK 5 per share, representing upside potential in the share. However, we recognise a lack of near-term catalysts to close the value gap and we believe investors will need to see IDL return to growth before they start to buy into the long-term story.