Belgium’s Ion Beam Applications dives on slowing growth

(Reuters) — Belgian proton therapy specialist Ion Beam Applications (EBR:IBAB) lost a third of its $1 billion market value today after it cut its 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.

IBAB shares closed down -35.1% at €20.00 ($23.64) apiece today in Brussels.

“The first half of 2017 has been slower, in line with the customary lumpiness which characterizes the proton therapy market,” CEO Olivier Legrain said in prepared remarks. “This combined with the increasing competition in the market is leading to limited visibility on the timing of new orders.”

IBA, whose rivals include Varian Medical (NYSE:VAR) and Hitachi (NYSE:HIT), now targets flat to mid-single-digit revenue growth and a mid- to high-single-digit operating margin for 2018 and 2019.

In May, the company said it expected double-digit revenue growth and an operating margin of around 13% in 2018.

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

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

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

IBA said it adopted new measures to deal with project delays, including adjustments to construction timelines to reflect timings in recent projects, updated project management information systems and discussions to provide a dedicated construction service to customers.

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 tumors at the end of their path, they are well 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 5-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% to €1.9 million ($2.25 million) as a result of delays in project execution and increased one-off costs.

Revenue for the first half rose by 4.5% to €151.6 million.

The company restated its guidance of 5% to 10% revenue growth and a low- to mid-single-digit operating margin for 2017 and also restated its mid-term target of a 13% to 15% operating margin.

The company expects 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% remains unchanged.

($1 = €0.8462)

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