Innovative solutions that help solve healthcare challenges Annual Report 2014 Content GROUP 2014 in brief . 1 Introducing Getinge . 2 Comments by the CEO . 4 Business Drivers . 6 Strategy . 10 Values and Culture . 16 Innovation . 18 Sustainability Report . 22 Business Area Overview . 30 Medical Systems Business Area . 32 Extended Care Business Area . 38 Infection Control Business Area . 44 The Getinge Share . 50 FINANCIAL INFORMATION Administration Report . 52 Corporate Governance Report . 56 Internal Control Report . 61 Getinge’s Board of Directors . 62 Getinge’s Group Management . 64 Proposed Allocation of Profits . 66 Consolidated Financial Statements 67 Income Statement . 67 Statement of Comprehensive Income . 67 Balance Sheet . 68 Changes in Shareholders’ Equity . 69 Cash-flow Statement . 70 Notes . 71 Parent Company . 91 Income Statement . 91 Statement of Comprehensive Income . 91 Balance Sheet . 92 Changes in Shareholders’ Equity . 93 Cash-flow Statement . 93 Notes . 94 Auditor’s Report . 98 GETINGE INFORMATION Multi-year Overview, Group . 99 Multi-year Overview, Business Areas . 100 Largest Markets . 101 Market Organization . 101 Acquisition History . 102 Quarterly Data . 103 Our success will be driven by our Quality & Environmental Certifications . 104 Environmental Data . 104 dedication to solve customer challenges Social Data . 104 Addresses . 105 with innovative solutions that save OTHER lives and ensure excellent care. Definitions . 110 Reading Guide . 110 Distribution Policy . 110 AGM & Nomination Committee . 111 OUR MISSION Financial Information . 112 Disclaimer. The information in this annual report is intended for an international audience outside of the United States. 2014 in brief USA & Canada Order intake + 5,6 % SEK 26 817 M (25 395) . Organic Increase: +0,7 % +5% Net sales + 5,5 % SEK 26 669 M (25 287) . Organic Increase: +0,6 % Sales SEK 9 030 M (8 575) Profit before tax -37,0 % SEK 1 987 M (3 153) Western Europe Net profit -36,9 % SEK 1 448 M (2 295) +7% Earnings per share -37,3 % SEK 6,01 (9,59 ) Sales SEK 9 833 M (9 160) EBITA before restructuring and acquisition cost -5,6 % SEK 4 501 M (4 766) Rest of the World Cash conversion 72,9 % (63,1 % ) +3% Dividend per share proposed at SEK 2,80 (4,15) Sales Corresponding to SEK 667 M (989) SEK 7 806 M (7 552) Key figures 2014 2013 Order intake, SEK M 26 817 25 395 Order intake, adjusted for exchange-rate effects and acquisitions, % 0,7 4,0 Net sales, SEK M 26 669 25 287 Net sales, adjusted for exchange-rate effects and acquisitions, % 0,6 4,2 Restructuring and integration costs, SEK M 1 162 401 Acquisition expenses, SEK M 38 13 EBITA before restructuring and acquisition cost, SEK M 4 501 4 766 EBITA margin before restructuring and acquisition cost, % 16,9 18,8 Earnings per share after comprehensive tax, SEK 6,01 9,59 No . of shares, thousand 238 323 238 323 Interest-coverage ratio, multiple 5,70 6,90 Working capital, SEK M 36 529 32 526 Return on working capital, % 8,2 12,8 Return on shareholders’ equity, % 10,4 14,4 Net debt/equity ratio, multiple 1,21 1,10 Cash conversion, % 72,9 63,1 Equity/assets ratio, % 35,4 37,4 Equity per share, SEK 78,44 69,60 The Annual General Meeting will be held on March 25, 2015 . Information regarding application, the Nomination Committee, dividend and dates for the Group’s financial reports in 2015 is available on pages 111 and 112 . GETINGE ANNUAL REPORT 2014 1 THIS IS GETINGE This is Getinge Every day, Getinge’s products contribute to saving lives and ensuring excellent care . The Group is a leading global provider of products and services for operating rooms, intensive-care units, hospital wards, sterilization departments, elderly care and for life science companies and institutions . The Getinge Group currently generates sales of almost SEK 27 billion and conducts sales via proprietary companies throughout the world . Production is conducted at facilities in Brazil, Canada, China, Denmark, France, Poland, the UK, Sweden, Turkey, Germany and the US . In total, the Group has nearly 16,000 employ- ees in over 40 countries . Western Europe is the largest region with 37% of sales, closely followed by the US and Canada with 34%, and the Rest of the World with 29% . 84% of sales are to hospitals, while elderly care accounts for 8% and the life science industry for 8% . Getinge has posted excellent growth since its listing and aims to continue growing in the next few years to achieve sales of SEK 50 billion . We will be the preferred healthcare partner and leading global contributor to sustainable healthcare systems - always with people in mind. VISION GETINGE ANNUAL REPORT 2014 2 THIS IS GETINGE Getinge’s Business Areas Medical Systems Extended Care Infection Control The Medical Systems business area’s The Extended Care Business Area The Infection Control Business product range includes operating- offers products and services geared Area offers an expansive range room equipment, intensive care toward the hospital and elderly of disinfection and sterilization units and cath labs, instruments and care markets . The product range equipment, designed to suit the needs implants for cardiovascular surgery, includes solutions for preventing the of hospitals, clinics, and within the life anesthesia equipment and ventilators, risk of pressure ulcers and deepvein science industry . The business area as well as advanced products for thrombosis . The business area features a full range of accessories to the minimally invasive treatment of also features a vast selection of ensure consistent, secure, ergonomic cardiovascular diseases . ergonomically designed products that and economic flow and storage of Medical Systems’ products and facilitate daily tasks, such as lifting, sterile goods . services are marketed under the transferring and patient hygiene . Infection Control’s products and brand Maquet . Extended Care’s products and services are marketed under the services are marketed under the brand Getinge . brand ArjoHuntleigh . Sales, MSEK 14 105 Sales, MSEK 7 164 Sales, MSEK 5 400 Overall sales performance, % 5,9 % Overall sales performance, % 4,3 % Overall sales performance, % 6,0 % Organic sales growth, % 0,5 % Organic sales growth, % 0,5 % Organic sales growth, % 2,3 % Number of employees 7 008 Number of employees 5 542 Number of employees 3 089 Number of sales companies 53 Number of sales companies 33 Number of sales companies 36 Number of production facilities 13 Number of production facilities 5 Number of production facilities 10 Share of Group sales Share of Group sales Share of Group sales 53% 27% 20% SEK 14 105 M SEK 7 164 M SEK 5 400 M GETINGE ANNUAL REPORT 2014 3 COMMENTS BY THE CEO 2014 - a challenging year for the Group 2014 was a challenging year for the Group on several levels . However, gradually improving demand for capital goods and greater visibility regarding Getinge’s regulatory challenges allow for sustainable improvement of the Group’s profitability through structural changes . The market did not perform according to THE PATH TO FUTURE SUCCESS It is important to state that there is no indi- our expectations, especially in the emer- It is important to adapt the Group to pre- cation that any of the business area’s ging markets where our targets were set vailing conditions to remain an attractive products are unsafe . We are taking this higher . Performance in mature markets partner for the healthcare sector . More very seriously and have made significant was according to plan, although these intense cost pressure and industry con- investments in the quality management markets began to recover from very low solidation mean that size is increasingly system . The remediation program has levels . critical to Getinge achieving success . In made considerable progress and has al- other words, acquisitions will remain a key ready led to major improvements . In recent years, healthcare has expanded strategic element to reach critical mass extensively in the regions outside Western and a relevant size . As an organization, we have learned a Europe and North America, and these great deal from this situation . We have markets have evolved into the Group’s It is also important to continue to enhance strengthened our structure for the Group’s most important markets for capital goods . efficiency and streamline the existing ope- quality work to ensure that this situation Due to the uncertain political situation in rations to ensure long-term and profitable is not repeated . Quality is the foundation some of the Group’s key emerging mar- organic growth . Focus will be directed to of our industry . The inspections and inter- kets in China, Brazil and Russia, construc- delivering clinical and financial benefits nal audits that have been performed shall tion of new hospitals has not materialized be regarded as support in the work on or been postponed in these countries . continuous improvements . This is an area This resulted in lower demand for capital The potential where we always have to strive for impro- goods during the year and lower order le- vements . vels at the Group’s capital goods plants . for improving SHARED VALUES CHANGING HEALTHCARE MARKET the Group’s Getinge has traditionally had a decen- The changes we are witnessing in the tralized organization characterized by a healthcare market are not merely short profitabilityin culture of entrepreneurship and responsi- term . The entire industry is undergoing bility . Due to our growth and acquisitions, extensive change that is altering the rules the medium term we are now a large company that in some of the game for both Getinge and its com- respects requires more structure in certain petitors . remains favorable areas . The rate of increase in healthcare costs through our customer offering, making Now that we are coordinating certain in mature markets in recent decades has further investments in expanding in emer- functions at a Group-wide level to been far higher than GDP growth .