09/02/2006
- Several acquisitions, and continued expansion within the Information Logistics Division
- Commencement of integration work – decision taken to amalgamate factories in Denmark
- Refinement of operations – disposals within Business Area Labels and the SPI Division
- Operating income excluding one-off items MSEK 64.9 (56.8)
- Operating income including one-off items MSEK 63.6 (76.9)
Net sales MSEK 3 375 (3 058)
- Income after tax MSEK 26.6 (43.6)
- Earnings per share SEK 1.24 (2.04)
- Proposed dividend SEK 2.00 (2.00)
Sales and Income
Stralfors’ net sales during 2005 amounted to MSEK 3 375 (3 058). Operating income excluding one-off items during the period amounted to MSEK 64.9 (56.8). Operations acquired since the turn of the year 2004/2005 have brought Stralfors sales of MSEK 269, and operating income of MSEK 18. During the year, two operations were sold. Apart from capital gains, these two disposals have only had a marginal effect on sales and income for 2005.
For the fourth quarter of the year, net sales are reported at MSEK 926 (799) and operating income excluding one-off items of MSEK 19.8 (23.3).
Operating income for the year has been charged with one-off items of MSEK 1.3, consisting of capital gains of MSEK 18.0 net from disposals of operations, property and other assets, and structural costs of MSEK 19.3. The operating income for 2004 included one-off income of MSEK 20 net, consisting of capital gains of MSEK 56 and structural costs of MSEK 36.
Expansion within Information Logistics
Stralfors’ Information Logistics Division has shown continued expansion during 2005. Several acquisitions and new, extended customer agreements have resulted in improved market shares.
Acquired operations are the printing and enveloping activity in CSC Print Center in Denmark (turn of the year 2004/2005), Data Com Finland Oy (April), the remaining 50% of the shares in Stralfors Information Logistics A/S in Denmark (May) and DPS Direct Mail Ltd (October). The acquired operations have a combined turnover of MSEK 430 and a total of 300 employees.
Important customer agreements include printing and enveloping of mailings to all Nordea’s customers in the Nordic Area. Production start of the assignment was during the first quarter of 2005, and is now running at full extent. In January 2006, an agreement was entered into with Tele2 concerning printing and enveloping of their invoices in Sweden, Denmark and Norway. This production will start progressively during the first quarter of 2006 and will be in full operation before the summer.
Stralfors is now market leader in the Nordic Area within the area of information logistics, and is the only Nordic company with this as core activity. The annual rate of turnover is now up at SEK 1.2 billion, and intensive work is ongoing to ensure synergies from completed acquisitions and new business. In January 2006, a decision was made regarding the amalgamation of two factories in the Copenhagen area. This amalgamation will be complete by the summer of 2006. Efficiency measures will give earnings effects during 2006, and full savings effects will be achieved in 2007.
Disposals 2005
As a stage in the ongoing refining of Stralfors, two operations were sold during the year: Stralfors TradeCom Solutions AB in September, and Collamat Stralfors AG in December.
Stralfors TradeCom Solutions AB delivers system platforms and services within the areas of communication, integration and EDI-related logistics. This type of service is not considered to be strategic for Stralfors, which instead prioritises electronic services referring to communication from one to many. Such services are concentrated within the Information Logistics Division.
Collamat Stralfors AG in Switzerland is a leading manufacturer of labelling machinery. Although many of Stralfors’ label customers also require labelling machinery, the actual manufacture and development of these machines has not been considered to be strategic for Stralfors.
Prospects for 2006
The measures carried out and planned within Business Area Labels are expected to give positive earnings effects during 2006. For the Information Logistics Division, acquisitions made up to now, and new business taken on, together with internal efficiency measures, are expected to lead to continued significant improvements in earnings. In the SPI Division, several profitability-strengthening measures are ongoing within Business Area Supplies.
In total for Stralfors as a whole, the above expectations mean continued growth and definitely improved corporate earnings for 2006.
Proposal for Dividend
The Board proposes a dividend of SEK 2.00 per share, the same amount as last year.
Planned Date of General Meeting
The Annual General Meeting will take place in Ljungby on 26 April at 16.00 hours.
Annual Report
Stralfors’ Annual Report for 2005 is expected to be published on 24 March. It will be distributed by mail to those shareholders who have not declined this possibility, and as from 24 March will also be available on the company’s website.
Graphic Solutions
Business Areas Graphics and Labels are included in the Division.
Business Area Graphics reports somewhat lower earnings for 2005 than for the previous year, due both to lower volume and somewhat lower gross margins. The Business Area has, despite this, strengthened its market positions during the latest year. The contraction of the total market within the traditional product range has been compensated with new products and total solutions for the customers. Gaming products and pharmaceutical information are two important product niches. Although the increased input of gaming on the Internet has resulted in the use of gaming tickets declining somewhat, an increased interest in gaming has generated new paper-based gaming. On the pharmaceuticals side, further investment has been made in development and production of information material. Both leaflets and small brochures for the pharmaceuticals industry have gained increased importance.
Business Area Labels has also shown unsatisfactory profitability during 2005, especially as regards operations in Germany. These operations have covered both production of labels and assembly of labelling machinery. The machinery operations were transferred during the year to the Swiss group company, Collamat Stralfors AG, which was disposed of at the end of the year. Reductions have also been made within other activities in Germany. The workforce of the German unit was halved during 2005, and at the end of the year totals about 30 persons. These measures are expected to give positive earnings effects as from the first quarter of this year. Manufacturing has become specialised and made more efficient in the other production units, and coordination has been carried out within both sales and purchasing functions.
As mentioned above, Collamat Stralfors in Switzerland was sold at the end of the year. This company is a leading manufacturer of labelling machinery, an activity which is not a natural part of Stralfors’ core activities. The operation was sold to HM Labelling A/S in Denmark. Through close cooperation with this company, Stralfors is now able to offer its label customers an even broader range of labelling equipment.
Information Logistics
As mentioned above, the Information Logistics Division is at present in a very expansive phase. Since the turn of the year 2004/2005, operations with a combined turnover of MSEK 430 and a total of 300 employees have been acquired. Of the expected sales, MSEK 269 showed through in the sales for 2005. The remaining sales increase, MSEK 121, is organic and is equivalent to growth of 17%. The various acquisitions and new businesses have developed in total according to plan, and earnings have improved by about 50% to MSEK 58. Sales are now up at an annual rate of SEK 1.2 billion.
The trend of big companies to solve their business and marketing communications to their customers with a few cooperating partners continues to be strong, and Nordic solutions are increasingly sought after. The biggest single assignment was signed with Nordea at the end of 2004, and refers to printing and enveloping of mailings to all Nordea’s customers in the Nordic Area. Start of production of the assignment was during the first quarter of 2005, and is now in full operation. In January 2006, an agreement was entered into with Tele2 regarding printing and enveloping of their invoices in Sweden, Denmark and Norway. This production will commence progressively during the first quarter of 2006, and be in full operation before the summer.
SPI, System- and Product- related Information Transfer
The Division consists of Business Area Supplies, the half-owned operation, Lasermax Roll Systems, Stralfors TradeCom Solutions until 30 September 2005, and other operations. Operations in Stralfors TradeCom Solutions have been conducted in an independent subsidiary company, and the shares were sold at the end of September.
The market for Business Area Supplies is still characterised by over establishment and severe competition. Several strategic decisions were taken during 2005. It was decided to drop some large, unprofitable customers, which produced a reduction in turnover of about 5%. Operations in Finland, which had showed unsatisfactory profitability for a long period of time, were closed down at the end of the year. During 2005, the decision was also made regarding changing product strategy, involving a 25-percent decrease in the number of articles within the product range, and increased investment in the customer category, medium-sized companies.
Lasermax Roll Systems, which is half owned by Stralfors and half owned by Böwe in Germany, was established on 30 September 2004 through the amalgamation of Stralfors’ Business Area Lasermax with Böwe’s subsidiary company, Roll Systems. Integration of the two units is now, in all essentials, complete, and the businesses have shown positive development of both sales and earnings.
Joint Resources
The joint Group resources have charged the year’s operating income with MSEK 34.0 (30.5). The change is due to a less favourable outcome of joint Group currency management and lower surpluses from the Group’s internal property management. Costs of other central resources have declined in 2005 compared with 2004.
Apart from customary Group management functions, the joint resources consist of resources for such things as development, e-commerce, IT, environment, quality, safety and security and currency management, and management of the Group’s operating property. In previous accounting, a goodwill item was also included in the central resources. This goodwill referred to the acquisition of the French operation in 2000. In connection with the transition of consolidated accounting to IFRS, recalculation of the acquisition has been made, and the intangible assets which arose through the acquisition, together with amortisation, are reported in the Graphic Solutions Division as from 2004.
Consolidated Earnings
The year’s operating income, MSEK 63.6 (76.9), is charged with financial items of MSEK 12.9 (13.3). The amount for last year included a currency loss, which was partly regained in 2005. Due to acquisition-related increase in debt, interest costs increased during 2005.
Pre-tax earnings for 2005 were MSEK 50.7 (63.6), and tax amounted to MSEK 24.1 (20.0). The relatively low tax of the previous year was due to only a minor part of the reported capital gain being subject to income tax. Earnings for the period of MSEK 26.6 (43.6) equate with earnings per share of SEK 1.24 (2.04). One-off items after tax of last year were equal to earnings per share of about SEK 0.72, while the equivalent amount for this year is about SEK -0.10. Earnings per share in current activities have thus amounted to about SEK 1.34 during 2005 compared with about SEK 1.32 last year.
The reduction in other operating income and costs of MSEK 36, shown in the table above, is mainly attributable to capital gains and exchange rate differences.
Reporting in accordance with IFRS
Stralfors’ consolidated accounting was converted to IFRS (International Financial Reporting Standards) as from 2005. The reported comparison figures for the equivalent period last year have also been converted in this report and therefore do not conform to the reported figures in the closing statement of last year. The changes are shown at the end of this report under the heading, Accounting Principles.
Financial Information from Stralfors
Questions concerning the contents of this report may be addressed to:
Per Samuelson, CEO and president, telephone +46 (0)372 854 40, or Kjell Åke Jönsson, Vice President, telephone +46 (0) 0372 852 34.
The next report, the Interim Report for the first quarter 2006, will be published on April 26.
Number of shares
The number of outstanding shares for all the periods given above amounted to 21 381 288. Outstanding options do not produce a dilution effect because the present value of the subscription price considerably exceeds the actual value of the shares.
Accounting Principles
This closing statement has been prepared in accordance with IAS 34 Interim Reporting, which in essence conforms to recommendation RR 31 of the Swedish Financial Accounting Standards Council, Interim Reporting for Groups.
All listed companies within the EU shall have fully converted their Group reporting to IFRS (International Financial Reporting Standards) as from 2005. The changes that affect Stralfors’ accounting most in the transition to accounting in accordance with IFRS have been described under ”New Accounting Principles 2004 and 2005” in the 2004 Annual Report. This also includes a description of the changes in the transition to IFRS in the 2004 net result and in shareholders’ equity at the commencement and close respectively of 2004. As mentioned in the introduction, the comparison figures reported in this closing statement for the equivalent period last year have been converted and therefore do not conform to the figures reported in last year’s closing statement. The changes are given in the tables below.
Intangible assets attributable to the acquisition of the operation in France, and depreciations of them, have previously been reported as central items. After conversion of accounting to IFRS, these assets are reported, together with the depreciations, in the Graphic Solutions Division. All intangible assets attributable to company acquisitions are now reported in the business areas covered by the acquisition.
The change in result for the period of MSEK –1.7 is due to recalculation of acquisition.
Changes in shareholders’ equity per 31-12-2005 of MSEK -25.4, are due partly to recalculation of company acquisitions to the extent of MSEK -27.4, and partly to the minority component being reported as shareholders’ equity MSEK +2.0. In accordance with the rules for transition to IFRS, the new principles for financial instruments are only applied in those parts of the accounts that refer to 2005.
Changes in the cash flow analysis consist of reclassification within the cash flow from current operations and are due to recalculation of acquisitions.
The comparison figures in the other tables in this closing statement, with the exception of the summary covering several years, have also been recalculated as a result of the changes in the income statement and balance sheet. In the summary covering several years, only figures referring to 2004 have been recalculated.
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, 9 February 2006
The Board
About Stralfors
Stralfors is an IT-focused Business-to-Business company with print heritage, and 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 3.4 billion and operates in 12 countries with a total of 2 000 employees. Stralfors "B" shares have been quoted on the Stockholm Stock Exchange since 1984.