11/04/2006
• Net sales MSEK 905 (816)
• Earnings after tax MSEK 14.0 (13.8)
• Earnings per share SEK 0.65 (0.64)
• Operating income MSEK 27.3 (22.5)
• Acquisition of pharmaceutical information printing works
• Disposal of French computer accessories business
Early Interim Report for the first quarter on account of Posten’s offer
As stated in the press release of 14 March, Posten has made an offer for all shares of Stralfors. Because of Posten’s stated acceptance period (30 March – 21 April), Stralfors now presents an Interim Report for the first quarter. This Report is definitive, and therefore no further report will be issued on 26 April, as had been previously announced.
For details of the offer, please see the Prospectus issued by Posten.
The first quarter of 2006
During the first quarter of 2006, Stralfors’ net sales amounted to MSEK 905, an increase of MSEK 89 compared with the equivalent period of last year (816). Operating income amounted to MSEK 27.3, an increase of MSEK 5 compared with the equivalent period of last year (22.5). The increases in both sales and earnings derive from the Information Logistics Division.
In February, Stralfors signed an agreement with Novo Nordisk regarding taking over their internal printing works for pharmaceutical information and packaging, on the outskirts of Copenhagen. The takeover, which was on 31 March, involved Stralfors taking over the existing personnel of 36 employees, and machinery and stock. Stralfors has also signed a five-year agreement with Novo Nordisk regarding printing their leaflets, labels and packaging. The agreement involves sales of at least MDKR 100 during the agreement period.
Events after the end of the interim period
Today, Stralfors signed an agreement on the sale of the computer accessories business which operates in the French departement of French Guyana, in South America and Guadeloupe and Martinique in the West Indies. The business has sales of MSEK 120 and 36 employees, and is operated in a subsidiary company of which Stralfors owns 81.6 %. The transaction gives Stralfors MSEK 32, of which MSEK 22 is paid cash. The disposed business was not strategic for Stralfors, and the sale is a further step in the cultivation which has been ongoing during recent years. The business is being sold to a local company.
The transaction gives Stralfors a capital gain of about MSEK 5. After the sale, Stralfors will have a remaining claim of about MSEK 10 on the company. The amount, which is secured with a bank guarantee, will be amortised over a two-year period. Otherwise, the transaction will have only a marginal effect on Stralfors’ earnings and position.
Outlook for the remainder of the year
The outlook for 2006 given previously remains. The following assessment was given in the Closing Statement and Annual Report for 2005.
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 during 2006. 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 significantly improved corporate earnings for 2006.
On account of the due diligence of Stralfors made by Posten prior to announcing its offer, Stralfors clarified in a press release of 23 March 2006 that this outlook was based on a budget adopted in December 2005 which showed that, on the basis of unchanged market conditions and expected earnings from completed acquisitions and planned measures, the company considered that it could double its operating income in 2006, excluding one-off items, compared with 2005.
Terms of executive management employees
Over and above the principles for compensation to executive management employees and the incentive programme given in the 2005 Annual Report, in connection with an impending change of ownership of Stralfors, the Board has fixed performance and stay bonuses for the CEO and four other leading executive managers of Stralfors. This compensation can amount for each person to a maximum of 12 months’ salary. The CEO did not participate in making this decision.
Division Graphic Solutions
Business Areas Graphics and Labels are in the division. The Swiss subsidiary company Collamat Strålfors AG (manufacture of labelling machinery), that was disposed on at the turn of the year 2005/2006 is included in the accounts. Adjusted for this business, the Division shows higher sales and earnings during the first quarter compared with the equivalent period of last year.
For the first quarter, Business Area Graphics shows somewhat higher sales than for the equivalent period of last year. As a result of somewhat lower margins however, operating income was generally unchanged compared with the first quarter of last year.
For Business Area Labels, the various measures implemented during the past year have begun to produce positive earnings effects during the first quarter. Adjusted for the sale of Collamat in Switzerland, sales remain at an unchanged level, and the first quarter of this year shows better earnings than during the equivalent period of last year. Activities in Switzerland showed a very positive development, not least thanks to increased demand for the new Multi-Label product.
Division Information Logistics
The Division’s sales during the first quarter amounted to MSEK 349,an increase of MSEK 108 compared with the same period last year. Of the increase, MSEK 68 can be attributed to the acquisitions in Finland, Denmark and Britain made during 2005. Operating income improved by MSEK 10 to MSEK 26.2.
As mentioned in previous reports, a decision was made to amalgamate two factories in the Copenhagen area. This amalgamation will be completed by the summer of 2006. The costs of the measures, about MSEK 13, will be charged to the second quarter of 2006. Full savings effects will be attained in 2007.
In January 2006, agreement was reached with Tele 2 regarding printing and enveloping of their invoices in Sweden, Denmark and Norway. Production commenced in Sweden in March and there will be full production in all countries before the summer.
Division SPI, System- and Product-related Information Transfer
The Division consists of Business Area Supplies, the joint venture Lasermax Roll Systems, and other businesses. During the first three-quarters of last year the company Stralfors TradeCom Solutions AB was also included in the division.
Business Area Supplies also shows an unsatisfactory result for first quarter of this year. Sales have declined, primarily due to focus on improved margins. The result is expected to improve progressively during the year.
For the first quarter of this tear, Lasermax Roll Systems shows higher sales and margins, which led to higher earnings thanduring the equivalent period of last year.
Joint resources
Joint group resources have charged the operating income of the interim period with MSEK 12.9 (8.2). The change is mainly due to temporarily lower internal income in the central resources, reduction in personnel and a less favourable outcome of the central currency management.
Apart from customary Group management functions, the joint resources consist of Group resources for such things as development, e-commerce, IT, environment, quality, security, currency management and the Group’s property operations.
Earnings for the period
The operating income for the interim period, MSEK 27.3 (22.5), has been charged with financial items of MSEK 5.3 (1.3). The explanation is due to increased indebtedness and because last year’s comparison figure included an exchange profit.
Pre-tax earnings were MSEK 22.0 (21.2) and tax amounts to MSEK 8.0 (7.4). Interim earnings of MSEK 14.0 (13.8) equate with earnings per share of SEK 0.65 (0.64).
Investments, cash flow, liquidity and financing
Investments (excluding company acquisitions) during the interim period amounted to MSEK 35, i.e. a reduction of MSEK 4 compared with the same period last year (39).
Operating cash flow during the interim period amounted to MSEK 7 (-7).
During the interim period, liquid funds declined by MSEK 4 and amounted at the end of the period to MSEK 187. Over and above this, at the end of the period, unutilised credit facilities amounted to MSEK. 577.
No significant changes have occurred in the balance sheet. At the end of the interim period, total assets amounted to MSEK, 2 265, which is about MSEK 30 less than at the beginning of the year. MSEK 12 of the decrease is due to changes in exchange rates, and the remainder to a reduction in operating assets.
No significant changes have occurred in contingent assets contingent liabilities after the beginning of the financial year.
Audit
This report has not been examined by the Company’s auditors.
The next report
The next report, the interim report for the first half of 2006, is scheduled to be published on 20 July.
Annual General Meeting
As previously announced, against the background of Posten’s offer, the Board has decided to delay the Annual General Meeting until 16 May 2006. For more detailed information about the Annual General Meeting, please see the separate invitation to attend.
Financial information from Stralfors
Questions concerning the contents of this report may be addressed to:
Per Samuelson, President and CEO, telephone +46 (0)372 854 40, or Kjell Åke Jönsson, Vice President, telephone +46 (0)372 852 34.
Accounting Principles
This interim report 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.
The same accounting principles and methods of calculation have been used in the Interim Report as in the latest Annual Report.
Stralfors’consolidated accounts have been converted to IFRS (International Financial Reporting Standards) as from 2005. The comparison figures for 2004 harve also been converted. In accordance with the rules for transition to IFRS, the new principles for financial instruments are used, however only as from 2005. Comparison figures for 2003 and earlier have not been converted to IFRS.
Addresses and corporate identity numbers
Strålfors 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 April 2006
Per Samuelson
President and CEO
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 3.5 billion and operates in 11 countries with a total of 2 000 employees. Stralfors "B" shares have been quoted on the Stockholm Stock Exchange since 1984.