07/08/2003
Interim Report January-June 2003 (120 kb)
- Operating income MSEK 4.0 (38.2) before structural costs
- Cash flow MSEK 7.2 (2.6)
- Positive earnings trend expected during the second half
The Group
During the second quarter, Group net sales amounted to MSEK 737, a reduction of MSEK 67 compared with the same period last year (803). The decline in sales originates primarily from the Graphic Solutions Division and also Business Area Supplies within the SPI Division. The Information Logistics Division shows a sales increase of 8%.
The second quarter shows an operating loss of MSEK –11.4 (8.3). The loss of contribution margin due to reduced sales has not been fully compensated by reduced costs. Earnings have also been negatively affected by an operating exchange loss of just over
MSEK 5.
During the interim period January – June, sales totalled MSEK 1 546, a reduction of MSEK 120 compared with the same period last year (1 666). The reduction, which primarily derives from the Graphic Solutions Division, has entailed a loss of contribution margin of MSEK 40, while costs declined by MSEK 19. During the present year, the result has additionally been charged with exchange losses in operating claims of just over MSEK 10, compared with an equivalent profit of MSEK 3 during the same period last year. The operating profit for the interim period amounted to MSEK 4.0 before structural costs. The equivalent profit for the same period last year was MSEK 38.2. Of the MSEK 34 decline in profits, MSEK 30 stems from the Graphic Solutions Division, while the Information Logistics Division shows an MSEK 11 increase in profits. The operating result for the interim period has also been charged with MSEK 10, which was appropriated during the first quarter for structural measures, primarily within the graphics business area.
Measures to be taken
The decrease in volume during the last few years, primarily within the graphic forms area, has been countered with successive efficiencies and rationalisations. In Scandinavia, all production of forms has been concentrated to the unit in Ljungby, in France the number of production units has been reduced from four to two, and in England all operations are now concentrated in a new, efficient unit compared with three units previously. At the same time, development has occurred, both of new graphical niche products and concepts and new electronic information carriers. The Group’s total cost level has progressively reduced and the number of employees has been reduced by almost 200 people. Ongoing reductions in personnel and efficiencies, primarily within the graphic business area, are assessed to have reduced cost levels by just over a further MSEK 30 during the second half.
Outlook for the remainder of the year
A number of new orders and customer projects are expected to compensate to some extent for the negative sales effects of a continued weak market. This, in combination with cost reductions, is estimated to lead to that the negative earnings trend will be broken during the second half.
Graphic Solutions
The Graphic Solutions Division, consisting of Business Area Graphics and Labels shows sales of MSEK 346 during the second quarter of this year, a reduction of MSEK 60 compared with the same period last year (406). It has not been possible to fully compensate the reduction, which primarily derives from the product area Forms and also label operations in Switzerland, with lower costs. The second quarter this year shows an operating profit of MSEK 2.5, a decline of MSEK 17 compared with the same period last year (19.2).
Within the Business Area Graphics, the decline for product area Forms has been strengthened. The turnover of the product area declined during the first half by just over 20%, which can be compared with a decline of barely 10% during all of 2002. For the product area Gaming Products, volumes are more stable. The greatest decline in sales derives from England, where operating business was temporarily influenced negatively by the move from the existing three units to a completely new and more efficient installation. The move was fully completed at the end of the month of June. Operations in France have developed positively during the latter part of the interim period, with increasing sales and improved earnings. Newly developed products, directed primarily to the pharmaceuticals industry have, to a certain extent, compensated the decline within the Forms area in Scandinavia. Ongoing structural measures within the product area Forms will lead to a reduction of the cost level during the second half. The sales trend is expected to continue weak, but improved contribution ratios in combination with cost reductions are expected to lead to the business area’s negative earnings trend being broken during the second half.
For Business Area Labels, improvement in sales and earnings in Scandinavia and Germany are shown, while operations in Switzerland have shown a negative trend, resulting from reduced demand from the aerospace and pharmaceutical industries among others. In the German operations, which previously had considerable profitability problems, measures taken in the form of personnel reductions and altered sales organisation have brought about an improvement in both sales and earnings. The decline in demand in Switzerland has been countered with cost reductions, and in Scandinavia a continued positive earnings trend is expected. Against this background a better full year result is expected than that of last year for the entire business area.
Information Logistics
The division shows a continued positive trend, primarily within output data operations and the payment services. Gross margins have been improved and, for several larger customers, projects have been commenced for electronic information transfer, for example electronic invoices.
The positive earnings trend stems from Sweden and Norway. A number of new businesses, not least within the Cards area, will give further growth during the second half year. In the half-owned Danish operations, full efficiency has not yet been attained in the production installation, which has entailed unsatisfactory earnings. Measures put in place are, however, beginning to show results, which, together with an expected, continued, positive trend in other countries, is assessed to bring about a considerable improvement in earnings during the remainder of the year as well.
On 1 January 2003 all the shares of Maila Nordic AB were acquired in order to broaden Stralfors’ supply of solutions for electronic information transfer. The acquisition, which brought with it investments in goodwill and other intangible fixed assets totalling MSEK 7.6, has been developed as planned.
SPI, System and Product-related Information Transfer
The SPI Division, comprising the Business Areas Supplies and Lasermax, the Company Strålfors TradeCom Solutions and also other operations, shows earnings this year at the same level as last year. The global market for products within the Business Area Lasermax has improved this year, after a negative trend during both 2001 and 2002. In combination with newly developed products and reduced costs, this has brought with it an improvement in both sales and earnings. The Business Area Supplies, which conducts operations in Sweden, Denmark, Finland and Norway, has experienced a decline in sales during the first half in all countries except Norway. Despite fierce price competition, gross margins have been maintained, but the reduced turnover has brought a decline in earnings for the business area. The tendency during the first half, i.e., an unchanged earnings level in total, is expected to continue during the second half as well.
Mutual resources
Apart from central Group functions, mutual resources also consist of the Group’s property stock. The costs of unutilised property are at present charged to the mutual resources, which are also charged this year with an operating exchange loss of some MSEK 5 per quarter. During the first half of last year, operating exchange profits of almost MSEK 3 were shown, mainly during the second quarter.
The Group
Operating income (including items affecting comparability) amounted to MSEK –6.0 (43.6) during the first half. Operating income for the year has been charged with structural costs of MSEK 10, while last year’s result included items affecting comparability of MSEK 5.4. During the first half, earnings before tax amounted to MSEK –9.8 (36.7) and earnings per share (after tax) were SEK –0.50 (0.98).
Investment, cash flow, liquidity and financing
Investment, excluding Company acquisitions, amounted during the first half to MSEK 72, of which MSEK 30 applied to new investment in connection with the move in England. The old property in England will be disposed of later this year.
Operating cash flow during the first quarter amounted to MSEK 7, which is somewhat better than during the same period last year (3).
During the interim period, liquid funds have declined by MSEK 48 (excluding translation differences) and at the end of the interim period amounted to MSEK 178. In addition to this, at the end of the period, credit facilities which had not been utilised, amounted to MSEK 608.
During the first half, total assets declined by MSEK 86 and at the end of the interim period totalled MSEK 1 921. The change was mainly due to translation differences and reduced liquid funds. At the end of the interim period, shareholders’ equity amounted to MSEK 969, equivalent to SEK 45 per share. The equity/assets ratio is more-or-less unchanged, 51%.
Financial information from Stralfors
Queries about the content of this report may be addressed to Per Samuelson, President and CEO, on +46 (0)372-854 40, or to Kjell Åke Jönsson, Vice President, on +46 (0)372-852 34.
The next report, the interim report for the period January – September will be published on 4 November.
Business Concept
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 3.1 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.
Accounting principles
This Interim Report has been drawn up in accordance with the recommendations issued by the Swedish Financial Accounting Standard Council RR20 (Interim Reports). As to the rest the same accounting principles have been applied as stated in the Annual Report 2002.
General audit
This report has not been examined by the company’s auditors.
Addresses and Organisation number
Strålfors AB (publ). Postal address: SE-341 84 Ljungby.
Visitors' address: Helsingborgsvägen 20, Ljungby.
Telephone: +46 372 850 00.
Organisation number: 556062-0618.
Ljungby, 7 August, 2003
Per Samuelson
President and CEO