Ottobock creates considerable value

Growth for technology leader in “Wearable Human Bionics”*. Management Board reports 2018 financials and outlines potential risks around Freedom Innovations

The medical technology company Ottobock, who have an international presence, have created considerable added value for users, employees and owners in 2018. Innovative products and technologies give users new freedom of movement and prevent consequential damage. These include microprocessor-controlled knee joints such as the C-Leg—the fourth generation with IOS control—and the Kenevo for less active users, the second generation of the mechatronic C-Brace orthosis, the multi-articulated bebionic hand, the Juvo power wheelchair family and the Paexo exoskeleton.

Thanks to a high demand in the core area of prosthetics (plus 7.2%**) and a turnaround in the mobility/high-tech wheelchairs sector (plus 10.1%**), the technology leader and disruptive innovator increased sales in 2018 by 6.7 percent** over the previous year to EUR 927 million. Thanks to significant progress in efficiency, adjusted operating profit before exceptional items (underlying EBITDA) rose by 15.9 percent** to a record EUR 174 million.

The Supervisory Board of the company, chaired by Dr. Bernd Bohr, conducted a detailed review in the Audit Committee of the annual financial statements of Ottobock SE & Co. KGaA for the fiscal year 2018, before unanimously approving them this week when it convened in Duderstadt. The Annual General Meeting subsequently adopted the financial statements. "The strong result for 2018 confirms our future course as a technology leader and a provider of the best possible care. Even 100 years after my grandfather Otto Bock founded the company, our credo remains: quality of life and mobility for people with disabilities," explained Prof. Hans Georg Näder, Chairman of the Management Board.

Marcus Brennecke, Global Co-Head Private Equity at EQT and Member of the Management Board at Ottobock, adds: "As an investor with a 20 percent stake in the company, we are hugely pleased with Ottobock and its dynamic growth. EQT is actively involved."

In doing so, the Management Board followed the proposal by the Executive Board to take precautions against the current financial risks posed from a takeover of the US company Freedom Innovations (FI), currently on hold. "In the spirit of prudency, we have written off almost EUR 78 million in connection with FI due to the legal uncertainties," says Philipp Schulte-Noelle, CEO and CFO of Ottobock.

On 8 May, Ottobock of North America announced that it would lodge an appeal ("a notice of its intention to appeal") against the first-instance decision of the Federal Trade Commission (FTC) of the USA. "We continue to believe, as we did when we acquired FI in September 2017, that the combination with Freedom Innovations is in the best interests of users and the industry. Ottobock will continue to work with the FTC to find a good solution for everyone," said Brad Ruhl, Managing Director of Ottobock North America. "We will continue to operate Freedom Innovations as a strong, independent company. Looking to the future, both Ottobock and FI continue to strive to implement our long-term strategies and serve our customers by offering them a selection of the most innovative solutions that meet their needs."

As part of its ambitious global plan for the future, Ottobock is investing in digital transformation using artificial intelligence (AI) for technical orthopaedics at all its locations. The medical technology company has earmarked up to 50 million euros for further investments in digitisation and corresponding modern IT systems alone by 2022. By means of so-called centres of excellence, the German-speaking locations adopt high-tech production processes, that over the next few years will entail massive investments in plants and equipment as well as training and further education.

In Duderstadt, Ottobock is expanding its logistics centre and the so-called iFab for the individual digital production of prostheses and orthoses by using AI. In addition, there are further centres of excellence. Ottobock is investing an additional EUR 15 million in production (Operations) alone in 2019 and 2020. One focus is the optimisation of the CNC milling centre.

In Vienna, Ottobock is expanding its high-tech location, where new myo-electronic and microprocessor-controlled products can be implemented. Almost two million euros will be invested in expanding the site and optimising production in 2019 and next year. In Königsee, the focus is on the flexible production of sophisticated customer-specific wheelchairs and accessories. To this end, Ottobock is investing an additional 600,000 euros in Operations alone.

"In order to manufacture innovative technologies and achieve our growth targets, we need a suitable modern production structure. After an intensive examination by experts, both internal and external, the management is convinced that an additional Low Cost EU production facility is necessary", says Arne Jörn, COO of Ottobock. The company is investing millions in the new plant (production area around 10,000 sqm).

Suitable standard of training, spatial and cultural proximity and total costs are decisive factors in the choice of location. "This is why we have chosen the region of Southeast Europe. In addition to the criteria mentioned, it has the advantage of creating new jobs in the European Union," said Jörn. "The expansion of network of plants makes it possible for our established locations to focus on higher-end production tasks. We will qualify our colleagues in production accordingly."

*Replace a part of or add a part to the human body.
**On the basis of organic, currency-adjusted growth compared to previous year