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UPDATE 3-IBA shares dive as Belgian proton therapy group flags slower growth
August 24, 2017 / 9:28 AM / a month ago

UPDATE 3-IBA shares dive as Belgian proton therapy group flags slower growth

* Cuts sales and margin outlook for 2018 and 2019

* Blames project delays and increased competition

* Shares lose a third of their value (Adds CFO comments)

By Alan Charlish

Aug 24 (Reuters) - Belgian proton therapy specialist Ion Beam Applications (IBA) lost a third of its $1 billion market value on Thursday as it cut revenue and margin guidance for 2018 and 2019, blaming project delays and increased competition.

The company is a leading maker of machines that deliver cancer-fighting proton beams, a super precise form of radiation, but it has been beset by delays in the construction of buildings to house its proton therapy systems by third party contractors.

Shares in the firm were down 35.1 percent at the close of trading.

IBA said it had adopted new measures to deal with project delays, including discussions to provide a dedicated construction service to customers.

“What we are trying to do now is to join up with large global construction companies who can offer something which allows us to reduce the risk ... in terms of the timing of construction,” Chief Financial Officer Soumya Chandramouli told Reuters by telephone, adding talks were in early stages.

She said competition in the proton therapy market had become more aggressive leading to pricing pressure. “It makes the conversion of prospects into hard customers a bit longer,” she said.

IBA, whose rivals include Varian Medical Systems and Hitachi, now targets flat to mid-single digit revenue growth and a mid- to high-single digit operating margin for 2018 and 2019.

In May, IBA said it expected double-digit revenue growth and an operating margin of about 13 percent in 2018.

The firm cut operating margin guidance for 2017 in May and again in July but said at the time of the second revision it was assessing the impact of delays on 2018 and 2019.

“We still believe in the long term PT (proton therapy) story ... but fear that next to EPS cuts, investors will lastingly de-rate IBA multiples,” KBC analyst David Vagman said.

KBC cut its rating on the stock to “hold” from “buy”.

Proton therapy involves a beam of particles accelerated to two-thirds the speed of light. Since protons cause little damage to cells they pass through but are very good at killing tumours at the end of their path, they are suited to treating cancers in parts of the body where there is little room for error.

Proton therapy hit the headlines in Britain three years ago when five-year-old Ashya King was removed from hospital by his parents, against the advice of doctors, and flown to Prague for proton treatment using an IBA machine.

IBA’s operating profit (REBIT) for the first half of 2017 fell by 87.4 percent to 1.9 million euros ($2.25 million) as a result of delays in project execution and increased one-off costs. Revenue rose by 4.5 percent to 151.6 million euros.

For 2017, the company reaffirmed that it expected 5-10 percent revenue growth and a low to mid-single digit operating margin. It also restated its mid-term target of a 13 to 15 percent operating margin.

IBA said it expected high single-digit to low double-digit revenue growth in the mid term.

It said its policy of maintaining a dividend payout ratio of 30 percent remained unchanged.

$1 = 0.8462 euros Additional reporting by Ben Hirschler; Editing by Jane Merriman and Edmund Blair

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