11/02/2005
- Göthe Parkander deceased
- Continued earnings improvement: Operating income during the fourth quarter, excluding non recurring items, MSEK 25 (5).
- Net sales 3 058 (2 991)
- Operating income 2004 including non-recurring items: MSEK 82.9 (20.0)
- Operating cash flow MSEK 151 (31)
- Net income after tax MSEK 45.2 (-8.1)
- Earnings per share SEK 2.12 (-0.38)
- Proposed dividend SEK 2.00 (1.75)
- Acquisition within information logistics in Denmark and significant agreement for Nordea in the Nordic Area
Göthe Parkander Deceased
Stralfors' Board Member, formerly Chairman of the Board and CEO, Göthe Parkander died on 10 February 2005. Göthe Parkander, born in 1924, commenced employment at Stralfors in 1948, and took over management of the company in 1953. Having managed the company for 46 years, he retired as Group CEO in 1999. He was Chairman of the Board during the period 1993 to 2004, after which he was appointed Honorary Chairman
Fourth Quarter
Stralfors' earnings continue to improve. During the fourth quarter, operating income of MSEK 24.8 excluding non-recurring items was recorded, an increase of almost MSEK 20 compared with the same period of 2003 (5.0). All three divisions report improved earnings. During the fourth quarter, sales amounted to MSEK 799, an increase of 3% compared with the same period last year (775).
Operating income for 2004 as a whole amounted to 62.8 excluding non-recurring items, which is MSEK 46 more than in 2003 (16.3). The Graphic Solutions and Information Logistics Divisions report considerable improvements in earnings. During 2004, sales amounted to MSEK 3 058 (2 991). Growth has occurred primarily within the Information Logistics Division, while the other divisions generally report unchanged sales.
For 2004, items affecting comparability of MSEK 20 net were reported, of which MSEK 56 refer to capital gains in connection with the establishment of a joint venture with Böwe and MSEK 36 refers to one-off costs, for implementation of the retrenchment programme which was initiated during the third quarter.
Operating cash flow has developed well, and for 2004 amounted to MSEK 151 (31).
Expansion within Business Area Information Logistics
As per 31 December 2004, Stralfors has acquired the CSC Print Center from CSC Danmark A/S. The business, which has sales of some MSEK 150, provides services within information logistics, such as print and enveloping and electronic archiving services to large Danish companies and authorities. In connection with the acquisition, Stralfors has taken over employment of the personnel involved, a total of about 80 people. The print operations will be progressively integrated into Stralfors during 2005, and will begin to have a positive effect on earnings per share during the present year. Stralfors has also entered into a cooperation agreement with CSC involving Stralfors' print and enveloping services both to existing large customers and new large customers in the Nordic Area with whom CSC has agreements.
In December 2004, Stralfors signed an agreement with Nordea regarding taking over all print and enveloping for Nordea in Sweden, Denmark, Finland and Norway. The assignment involves an annual value of MSEK 70 and runs over five years. In connection with the assignment, Stralfors will take over the employment of about 30 employees from Nordea in Sweden, Denmark and Finland. Stralfors has already signed agreements with Nordea concerning the delivery of forms and envelopes which are used for these printed mailings.
Together with several other large assignments received during the year, this acquisition means that Stralfors' Business Area Information Logistics now has sales approaching 1 billion kronor.
Joint Venture with Böwe Systec regarding the Lasermax Operations
Böwe Systec and Stralfors have formed a jointly controlled company, as from 30 September, which has taken over Böwe's subsidiary company, Roll Systems Inc, USA and Stralfors' Lasermax operations. With this, the leading global suppliers of preparation and finishing systems for high-speed printers have been amalgamated. The new company, Lasermax Roll Systems AB, is 50% owned by each of Böwe and Stralfors, with head office in Ljungby.
The Roll Systems and Stralfors Lasermax operations perfectly complement one another, both as regards products and geographically. More rapid launching of new solutions to the market and better working both of existing and essential markets are made possible through a strong market position and joint expertise with regard to product lines. The new joint company will have sales of about MSEK 400 and about 200 employees.
Programme of Economy Measures
A programme of economy measures was initiated during September. Stralfors is encountering new customer requirements and stiffer competition with product development, increased productivity and specialisation. This reduces the staffing requirement, but at the same time puts increasing demands on the competence and flexibility of the personnel.
Operations within Stralfors are in differing phases. The Information Logistics Division is working in an expanding market and has acquired several new deals, and therefore needs more employees. Within other areas, primarily Labels, product specialisation is ongoing, leading to reduced resource requirements. Against this background, Stralfors has carried out a programme of economy measures which are calculated to produce annual cost reductions of between MSEK 40 and 50, as from the first quarter of 2005.
New Financial Goals
The Board has established a new financial goal based on required return on shareholders' equity and connected to the present interest rate situation. The new goal is that return on shareholders' equity should equal the risk-free interest rate together with a risk premium of 5%. The current goal for return on shareholders' equity is thus 10%. With the present financial structure, this goal means a required return on operating capital of 15%. The equity/assets ratio should be at least 40%.
Outlook for 2005
The improvement in earnings which began in 2004 is expected to continue progressively during 2005. Acquisitions and several new customer contracts contribute to this, as does the retrenchment programme.
Proposed Dividend
The Board propose a dividend of SEK 2.00 per share, i.e., an increase of SEK 0.25 compared with the previous year (1.75).
Annual General Meeting
The Annual General Meeting will be held in Ljungby on Tuesday, 3 May at 16.00.
Annual Report
The Annual Report is expected to be published on 24 March, and will be sent to shareholders by post. It will also be accessible on Stralfors' website from 24 March.
Graphic Solutions
Within the Graphic Solutions Division, which consists of the Business Areas Graphics and Labels, the graphics area reports considerably improved earnings compared with the previous year. The improvement in earnings is primarily due to increased sales, and reduced costs have also contributed to the improvement. New products and delivery solutions are continuing to compensate for reduced volumes within the traditional forms range. An example of this is a major assignment from ATG in Sweden regarding printing of free programme sheets and warehousing and logistics of all ATG’s printed items.
During 2004, Business Area Labels experienced a negative earnings trend, due to declining sales, primarily in Switzerland. Retrenchment and structural measures were carried out during the latter part of 2004, primarily in Switzerland, and also in Sweden. These measures involve such things as personnel reduction of up to 50 employees. This, in combination with investment in new products, including Multi-Label, a label with large volumes of information for pharmaceuticals, are expected to show through as positive earnings during 2005.
Information Logistics
Both for the fourth quarter and for 2004 as a whole, the Information Logistics Division reports a considerable improvement in earnings compared with 2003. Sales continued to improve. The comparison with the previous year is affected by the fact that unusually large deliveries of cards were made during the fourth quarter of last year. During the fourth quarter of 2004, the Division was the most profitable of Stralfors' divisions, as measured as return on operating capital.
Stralfors has signed an agreement with euroShell Cards concerning the production and distribution of Shell's fuel cards for the European market. The agreement runs over three years, with an option of a further two years. This agreement is yet another example of Stralfors' investment in cards having produced results. Previously, agreements have been signed concerning the delivery of membership cards to Swedish golfers, the European health insurance card to Swedish and Norwegian citizens, electronic gift cards for a large number of store chains, and the new chip-based EMV cards for a number of banks.
The Division is now in a phase of considerable expansion. As mentioned above, new customer contracts and new operations in Denmark were both added at the end of 2004. Operations are anticipated to continue at a high level during 2005, and the division is expected to pass annual sales of one billion kronor.
SPI, System- and Product-Related Information Transfer
The SPI Division comprises the Business Area Supplies, joint venture Lasermax Roll Systems, the company Stralfors TradeCom Solutions AB and other operations. The decline in earnings derives, to a very large extent, from Business Area Supplies, which experienced a negative sales and earnings trend during the first three quarters. During the fourth quarter, however, an increase in sales was reported, and during the last quarter of the year, earnings were more or less unchanged compared with the same period last year.
As mentioned above, the former Business Area Lasermax was amalgamated in a joint venture as from the fourth quarter of 2004, jointly owned with Böwe Systec, Germany. Roll Systems, USA, is also party to this joint venture, and the amalgamated units operate under the name Lasermax Roll Systems. Stralfors reports its 50-percent holding in accordance with the so-called proportional method, and because the amalgamated operations are roughly double the size of Stralfors' former Lasermax operations, this structural change does not have any marked effect on Stralfors' operational key ratios. For 2004 as a whole, the operation reports slightly reduced sales and earnings compared with 2003.
Joint Resources
Apart from traditional Group management functions, joint resources consist of Group resources for such things as development, e-commerce, IT, environment, quality, safety and security and management of foreign exchange, together with the Group's real estate and Group-strategic goodwill. The joint resources have charged the 2004 result to the extent of MSEK 36, which is markedly lower than for 2003 (54). The reduction is due both to a better outcome from central foreign exchange management and reduced costs.
Items Affecting Comparability
As from 2004, items affecting comparability are not reported on a separate line in the Income Statement. The 2004 items affecting comparability, MSEK 20, refer to capital gains from the establishment of the new 50%-owned company, Lasermax Roll Systems, of MSEK 56, together with the costs of structural measures and other one-off costs totalling MSEK 36. In the Income Statement, the capital gains are reported in the profit item, Other Operating Income and Expenses, while the structural costs are included to the extent of MSEK 20 in Cost of Goods Sold, MSEK 11 for Sales and Administration Expenses, and MSEK 5 in Other Operating Income and Costs. The 2004 items affecting comparability have not been reclassified in the Income Statement.
Group Earnings
Operating income for the year of MSEK 82.9 (20.0) has been charged with financial items of MSEK 13.3 (7.9). This year's net financial items include MSEK 5.8, referring to foreign exchange losses on liquid funds, mainly USD. With this, the pre-tax profit amounted to MSEK 69.6 (12.1). Tax for the year amounted to MSEK 24.5 (20.0). The result after tax for the year, MSEK 45.2 (-8.1), is the equivalent of earnings per share of SEK 2.12 (-0.38).
Investments, Cash Flow, Liquidity and Financing
During the year, Group total assets increased by about MSEK 100 to MSEK 1 997 due to company acquisitions.
Operating cash flow for 2004 amounted to MSEK 151 (31). The improvement was due to both an improved result and reduced capital tied up in the form of working capital and fixed assets.
Investment in the business for the year amounted to MSEK 121 (109). Over and above this amount, company acquisitions and disposals have affected cash flow by MSEK 95 (9) net.
At the end of the interim period, liquid funds amounted to MSEK 158, a reduction of MSEK 12 during the year. Over and above this amount, unutilised credit facilities of MSEK 641 were available at the end of the interim period.
Financial Information from Stralfors
Queries about the contents of this Report may be addressed to:
Per Samuelson, President and CEO, telephone +46(0)372-854 40, or to Kjell Åke Jönsson, Vice President, telephone +46(0)372-852 34.
The next report, the Interim Report for the first quarter of 2005, will be published immediately prior to the Annual General Meeting of 3 May. Reporting dates will be 10 August (second quarter), 27 October (third quarter) and 9 February 2006 (Closing Statement for 2005).
Accounting Principles
This report has been prepared in accordance with recommendation RR 22 (Formulation of Financial Reports) of the Swedish Financial Accounting Standards Council. Recommendation RR 29 (Remuneration to Employees) of the Swedish Financial has been applied from 1 January 2004. As a result of this, the Stralfors Group's total pension liability, taking into account special payroll tax and deferred tax, has been reduced by MSEK 0.2, and this amount has been posted directly to opening shareholder’s equity, see Changes in Shareholder’s Equity, above. The net increase shown in earlier reports of MSEK 3.5 of shareholders' equity has been revised in connection with the compilation of the end of year accounts. Apart from that, the accounting principles and methods of calculation presented in the Annual Report for 2003 have been applied.
Change to Reporting in accordance with IFRS as from 2005
All listed companies within the EU shall have completely converted their group reporting to IFRS (International Financial Reporting Standards) as from 2005. IFRS is constructed on a conceptual framework which gives the basic principles and starting points upon which separate recommendations shall be formulated. Of these, book principles and the going-concern principle are important. The conceptual framework also deals with qualitative aspects of financial information, such as the requirements that it shall be comprehensible, shall be relevant, reliable, comparable and give a true and fair view of the activity. These basic principles thus do not deviate from existing regulations.
Those changes which most affect, or may most affect, Stralfors' reporting during the transition to reporting in accordance with IFRS are as follows:
- In the case of company acquisition, the acquired identifiable intangible assets, for example, customer contracts and customer relations, shall be separated from goodwill and depreciated during their period of use. On the other hand, acquired goodwill shall not be written off, but the reported value shall instead be continually reassessed. With the transition to reporting in accordance IFRS, earlier acquisitions may be recalculated. Stralfors has chosen to recalculate acquisitions as from 2000 in accordance with IFRS. This recalculation will affect the acquisition of Stralfors SAS in France in that the goodwill value will be reduced by MSEK 53, while the value of customer contracts and customer relations increases by MSEK 41 with the transition to the IFRS per 01-01-2004. Deferred tax liability has increased by MSEK 14. Depreciation on customer contracts and customer relations for 2004 and 2005 will be respectively MSEK 6.0 and MSEK 2.3 more than goodwill depreciation up to now. As from 2006, depreciation on intangible assets attributable to the acquisition of Stralfors SAS will be roughly the same as the goodwill depreciation up to now.
- More stringent requirements concerning ongoing testing of book value, so-called ”impairment tests”. As far as Stralfors is concerned, intangible assets are primarily involved, acquired in connection with company acquisitions, which can be affected by these requirements. In Stralfors, the Group Balance Sheet per 31-12-2004 includes such intangible assets totalling about MSEK 200.
- Increased effect of market evaluation, for such things as assets which are to be disposed of and financial instruments. Financial instruments which are held for trading or which can be sold shall be valued at their actual value. This group includes such things as derivatives. Other financial instruments, i.e., those which originate in the company or have been acquired, and which are not held for trading, together with investments held until maturity, shall continue to be valued at accrued acquisition value, taking into account any amortisation and depreciation. The financial instruments that are to be found with Stralfors are primarily of the latter type, which means that in this respect, the transition will have insignificant consequences for Stralfors.
- The outcome of derivatives, primarily hedging, will be allocated differently over time. The total financial effect will, however, be unchanged compared with principles applied up to now.
- Minority shareholdings shall be reported as shareholders' equity. In Stralfors' Balance Sheet per 31-12-2004, minority shareholdings are reported totalling MSEK 2.0.
Addresses and Corporate Identity Number
Stralfors AB (publ). Corporate identity number: 556062-0618.
Postal address: SE-341 84 Ljungby. Visiting address: Helsingborgsvägen 20, Ljungby. Tel: +46 (0)372-850 00.
Web address: www.stralfors.com
Ljungby, 11 February 2005
STRALFORS AB (publ)
The Board of Directors
Business Concept and Corporate Description
Stralfors is an IT-focused Business-to-Business company with a print heritage providing total solutions within the field of information transfer. Stralfors develops, produces and delivers systems, services and products for the efficient communication of information crucial to operating a business. The Group has net sales of SEK 3 billion and operates in 12 countries with a total of 1725 employees. Stralfors “B” shares have been quoted on the Stockholm Stock Exchange since 1984.