27/10/2005
- Continued sales and earnings growth for Business Area Information Logistics
- Operating income excluding one-off items: MSEK 45.1 (33.5)
- Net sales: MSEK 2 449 (2 259)
- Pre-tax net income: MSEK 36.7 (53.3)
- Earnings per share: SEK 1.02 (1.99)
Sales and Income
Stralfors’ net sales during the third quarter of 2005 amounted to MSEK 779 (704). Operating income excluding one-off items during the same period amounted to MSEK 11.3 (9.1). Operating cash flow during the third quarter amounted to MSEK 32 (28). The first three quarters of the year show net sales of MSEK 2 449 (2 259), and operating income excluding one-off items of MSEK 45.1 (33.5).
Activities that have been acquired since the turn of the year 2004/2005, i.e., the printing and enveloping operations within CSC Print Center in Denmark, Data Com Finland Oy and 50% of Stralfors Information Logistics A/S in Denmark, have brought Stralfors sales of MSEK 161 during the first three quarters of the year.
Operating income for the interim period has been charged with one-off items of MSEK 0.6, consisting of a capital gain of MSEK 5.7 from the disposal of subsidiary companies and structural costs of MSEK 6.3. Operating income for the equivalent period last year included one-off income of net MSEK 26.1, consisting of a capital gain of MSEK 55.9 and structural costs of MSEK 29.8.
Expansion within Information Logistics
At the turn of the year 2004/2005, the printing and enveloping operations in CSC Print Center, Denmark, were acquired, including about 80 employees and annual sales of about MSEK 150. On 1 April 2005, all shares in the Finnish company, Data Com Finland Oy were acquired. The company, which has sales of about MSEK 45 per year, and about 40 employees, has its operations centrally located in Helsinki. On 2 May, the remaining 50% of the shares in the Danish company, Stralfors Information Logistics A/S, which up to then had been 50% owned, were acquired, bringing Stralfors annual sales of about MSEK 75.
Stralfors is now the largest entity within the Nordic area within the area of Information Logistics, and the only Nordic company with this as tits core activity. The rate of annual sales is now up at SEK 1.2 billion and intensive work is ongoing to ensure synergies from the completed acquisitions and new business. These measures are expected to produce full effects during 2006.
Disposal of Stralfors TradeCom Solutions AB
At the end of September, all shares in Stralfors TradeCom Solutions AB were sold to PipeChain AB. Stralfors TradeCom Solutions delivers system platforms and services within the areas of communications, integration (XML/EDI) and EDI-related logistics. This type of service is considered not to be strategic for Stralfors, which instead prioritises electronic services which refer to communication from one to many. Such services – eBusiness Communication, e-mail, SMS solutions and electronic payment services – are grouped together in Stralfors’ Business Area Information Logistics.
Stralfors TradeCom Solutions has sales of about MSEK 22 per year and has 18 employees. The sale has given Stralfors a capital gain of MSEK 5.7. Otherwise, the deal only has a marginal effect on Stralfors’ earnings and position.
Outlook for the Remainder of the Year
The previous forecast remains, that earnings for the full year of 2005 (operating income excluding one-off items) will be better than that of last year. Earnings are on the increase for Information Logistics and stable for Graphics and Lasermax Roll Systems. The business areas Labels and Supplies have had a less favourable development than expected during the year, but profitability-improving measures within these two areas are expected to produce effects during 2006.
Graphic Solutions
The division comprises the business areas Graphics and Labels. Business Area Graphics reports somewhat higher earnings for the first three quarters than during the equivalent period last year. The result is stable, even though the outcome of the third quarter was somewhat less favourable than during the equivalent period last year. This is mainly due to lower volumes within the traditional Forms range. During the past year, the Business Area has strengthened its market positions. The decline in the total market within the traditional product range has been compensated through a combination of successful product and concept development, and adjustment of costs. Investments in products and services for gaming and for the pharmaceuticals industry continues.
Business Area Labels also had unsatisfactory profitability during the third quarter of 2005, especially as regards operations in Germany. Manufacture and assembly of labelling machinery, which was previously carried out in the units in Switzerland and Germany, is now being concentrated to Switzerland. The cost of this structural measure has been charged to the third quarter result in the form of a one-off item. Within other activities in Germany, reductions are now being carried out, and the workforce will be reduced by a total of between 25 and 30 persons, equivalent to almost half of previous number of employees. These measures are expected to give a positive earnings effect as from the first quarter next year. Profitability-improving measures are also being carried out within the other units of the business areas. Manufacturing within the various production units will be further specialised, and coordination will be carried out within both the sales function and the purchasing function.
Information Logistics
The various acquisitions (the printing and enveloping operations in CSC Print Center, Denmark, the Finnish company, Data Com Finland Oy, and 50% of the shares in the previously 50% owned Danish company, Stralfors Information Logistics A/S) and new businesses, have been developed in total in accordance with plans. Giving considerable improvements in sales and earnings, both during the third quarter and accumulated during the year. The Division’s sales during the interim period amounted to MSEK 772, an increase of MSEK 237 compared with the equivalent period of last year (535). MSEK 161 of the increase is derived from acquisitions, and the remaining MSEK 76 comes from organic growth. During the interim period, operating income amounted to MSEK 41.0 (25.8).
During the present year, Stralfors has progressively taken over all printing and enveloping for Nordea in the Nordic area, in accordance with the agreement signed at the end of last year. In connection with this assignment, Stralfors is taking over 30 employees from Nordea.
Completed acquisitions in connection with organic growth will mean that during the present year, the Division is expected to pass the SEK 1 billion mark in annual sales.
SPI, System and Product-Related Information Transfer
The Division consists of Business Area Supplies, the 50% owned operation, Lasermax Roll Systems, Stralfors TradeCom Solutions and other activities. The Stralfors TradeCom Solutions AB operation has been run as an independent subsidiary company, and, as mentioned above, the shares were sold at the end of September.
The market for Business Area Supplies continues to be characterised by over-establishment and stiff competition. The Business Area’s sales during both the third quarter and the full interim period were lower than during the equivalent periods of last year, and the operation is at present reporting unsatisfactory profitability. The measures which are ongoing for improving profitability cover such things as discontinuing unprofitable customers and increased investment in new customer segments. Additionally, after the end of the interim period, a decision was made concerning closing down the operation in Finland not later than the turn of the year 2005/06. This operation, which has sales of just on MSEK 40 and 8 employees, has been assessed to lack prospects of achieving acceptable profitability. As mentioned above, it is expected that the effects of profitability-improving measures will show gradually during 2006.
The former Business Area Lasermax has been included since the fourth quarter of 2004 in a joint venture, co-owned with Böwe Systec of Germany. Roll Systems, USA, is also included in this joint venture. Because the combined half-owned activity, both as regards sales and earnings, is roughly double the size of Stralfors’ previous 100%-owned Lasermax operation, the structural change only has a marginal effect on Stralfors’ financial figures. Exactly as for the second quarter this year, the third quarter shows improved earnings compared with the equivalent periods of last year, due to increased sales.
Joint Resources
The joint Group resources have charged the operating result of the interim period with MSEK 27.5 (25.8). The figure for last year included exchange gains of MSEK 1.2, which can be compared with exchange losses of MSEK 2.9 during the first three quarters of this year.
Apart from customary Group management functions, the joint resources consist of Group resources for such things as development, e-commerce, IT, environment, quality, safety and security, currency management, and management of the Group’s operating real property. In previous reporting, Group-strategic goodwill was also included in the central resources. This Group-strategic goodwill referred to the acquisition in the year 2000 of the French operation. In connection with conversion of the Group reporting to IFRS, recalculation of the acquisition has been made, and the intangible assets which arose for the acquisition, together with depreciations of them, are now reported in the Graphic Solutions Division.
Group Earnings
Group earnings for the interim period of MSEK 44.5 (59.6) have been charged with financial items of MSEK 7.9 (6.3).
Pre-tax earnings for the interim period were MSEK 36.7 (53.3), and tax amounts to MSEK 14.8 (10.7). The relatively low tax of last year was due to only a small part of the capital gain reported then being subject to income tax. Earnings for the period of MSEK 21.9 (42.5) equal earnings per share of SEK 1.02 (1.99). One-off items after tax for last year were equivalent to earnings per share of about SEK 1.50, while the equivalent amount for this year is about SEK -0.05. Earnings per share in ongoing operations have thus amounted to about SEK 0.95 during the first three quarters of 2005 compared with about SEK 0.50 during the same period last year.
Changes shown in the Income Statement during the first half of 2005 compared with the same period last year can be seen in the table below.
In the table above, the reduction of MSEK 53.2 in other operating income and costs is primarily attributable to capital gain and exchange differences.
Investments, cash flow, liquidity and financing
During the interim period, the Consolidated Balance Sheet has changed in accordance with the table given below. (see pdf-file).
During the interim period, investments (excluding company acquisitions) have amounted to MSEK 108, an increase of MSEK 40 compared with the same period last year (67). The increase in investments comes from the business areas Labels and Information Logistics, and from rebuilding and property conversions in Ljungby.
The acquisition of the printing and enveloping operations in CSC Print Center, Denmark did not include accounts receivable and accounts payable. These balance sheet items were thus established after Stralfors’ acquisition, and are shown in the table above as ”other changes”.
The increase in shareholders’ equity in connection with the acquisition refers partly to adjustment of the market value of assets of Stralfors Information Logistics A/S in connection with consolidation of the 50% acquisition, and partly to capital gain on disposal of the subsidiary company, Stralfors TradeCom Solutions AB. The increase in financial liabilities is primarily due to acquisitions.
During the interim period, liquid funds declined by MSEK 38, and at the end of the interim period amounted to MSEK 120. Over and above this amount, at the end of the period, there were unutilised credit facilities of MSEK 668.
During the quarter, there has been no change in contingent liabilities and contingent assets.
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 interim reports of last year. The changes are shown at the end of this report under the heading, Accounting Principles.
General Audit
This Interim Report has not been subject to review by the company’s auditors.
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.
The next report, the Closing Statement for 2005, will be published on 9 February 2006. The Interim Report for the first quarter of 2006 will be published on 26 April 2006, the same day as next year’s Annual General Meeting, which will be held in Ljungby.
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.
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 interim report for the equivalent period last year have been converted and therefore do not conform to the figures reported in last year’s interim reports. 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.
Change in profit/loss for the period of MSEK –1.2 is due to recalculation of acquisitions.
Changes in shareholders’ equity per 30-09-2004 of MSEK –25.3, 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 +2.1. 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 interim report, 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.
Nomination Committee and Annual General Meeting
At the Annual General Meeting of 3 May, it was decided to appoint a Nomination Committee prior to the Annual General Meeting of 2006, consisting of representatives of the four largest shareholders, together with Stralfors’ Chairman of the Board. The shareholder representatives have now been appointed, and the Nomination Committee consists of Björn Parkander (representative of the Parkander family), Caroline af Ugglas (Skandia), Mats Tunér (SEB’s funds), Åsa Nisell (Roburs funds) and Åke Fredriksson (Stralfors’ Chairman of the Board). Björn Parkander has been appointed Chairman of the Nomination Committee.
The 2006 Annual General Meeting will be held on 26 April in Ljungby.
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, 27 October 2005
Per Samuelson
CEO
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 3.1 billion and operates in 12 countries with a total of 1900 employees. Stralfors "B" shares have been quoted on the Stockholm Stock Exchange since 1984.