03/08/2000
- Investment in development of combined logistics and e-commerce solutions
- A temporary drop in income during the second quarter will delay recovery of profit for six months
- Strålfors now has 92 % of the shares in the French company Siaco
Developments during the second quarter
The increase in the efforts to develop new businesses such as the logistics solutions combined with e-commerce technology led to expenditure earlier than planned. The intensified work on streamlining the customer structure had a negative effect on the growth of net sales. The measures to be taken to achieve the Group’s goals for growth and profitability were judged to be what was required. Reduced margins have resulted in lower profitability in the Business Areas Lasermax and
IT-Supplies. It has not yet been possible to compensate fully for the drastic increases in the price of paper, the effect of which was felt during the second quarter. All in all, therefore, this means it has now been estimated that the improvement in income which was forecast earlier will be delayed for up to six months.
Income and net sales
Income for the first six months before items affecting comparability and tax was MSEK 44.7, compared with MSEK 66.4 for the first six months last year. Income for the second quarter before items affecting comparability and tax amounted to MSEK 4.4, compared with MSEK 36.0 for the second quarter of 1999. Income in the recently acquired French company Siaco has been reported as of 2000-06-01.
Net sales for the first six months amounted to MSEK 1 366 (1 303) of which MSEK 36 refers to Siaco. Turnover for the second quarter excluding Siaco was MSEK 641, compared with MSEK 665 for the second quarter of 1999.
InfoConcept, the area being focused on, reported a 67% growth in net sales for the second quarter. Business Area Graphics also increased its turnover during the second quarter. The unsatisfactory growth in the other Business Areas was due partly to the changes to the customer structure mentioned above. The comparison in turnover for the Business Area Card Solutions has been influenced by the large-scale delivery of the driving licence solution made to the Swedish National Road Administration last year.
The gross margins diminished during the second quarter by approximately 1.5 percentage points owing partly to the lower margins within the Business Areas Lasermax and IT-Supplies and partly to the fact that it has not yet been possible to compensate fully for the drastic increases in the price of paper. This in combination with a slowdown in net sales and the marketing and development investments that were brought forward earlier has led to a drop in income.
Income before tax for the first six months amounted to MSEK 99.5, which sum includes an item affecting comparability of net earnings of MSEK 54.8. The surplus funds from SPP were posted as earnings of MSEK 48.9 during the second quarter. The remaining amount was accrued during the first quarter.
Investment in new customer-tailored logistics solutions
Strålfors is investing in new customer-tailored logistics solutions. Customers are offered efficient total solutions within the logistics area by combining e-commerce technology with a central warehousing facility and the distribution of primarily the company’s own products. The new business is being run initially in Sweden and England and is expected to lead to a number of contracts with customers during the autumn. The cost of setting up the business, including the development of the system for e-commerce and the Internet plus the recruitment of some 30 employees in England, was a charge on the result for the second quarter.
Capacity was further enlarged in Strålfors’ e-commerce company TradeCom Solutions during the first six months of the year. The business now employs some 50 persons, and more staff will be recruited. The new employees will contribute to an increase in net sales within the area during the second half of the year. TradeCom Solutions’ range of products includes Trade-it® , Strålfors’ own Web/EDI-based solution that Strålfors helped to develop. Trade-it® ,which has been used up to now as a tool for Strålfors’ own sales of primarily IT-accessories, will also be delivered externally during the current year.
Stock options programme
The proposal to issue promissory notes with separate option rights on the new issue of Strålfors shares was adopted by the Annual General Meeting on 3 May. The stock options are part of a new programme of incentives for top executives and other key persons within the Strålfors Group whereby they can be offered a shareholding in Strålfors. The share price on subscription on the new issue of shares (1 July, 2002 – 30 June, 2004) is SEK 111. All of the 20 individuals who at present have been offered the programme have accepted the invitation and, up to now, have acquired a total of 76 000 stock options.
Acquisition of Siaco
By the end of the first six months, Strålfors had acquired 92% of the shares in the French company Siaco S.A., which is listed on the Paris Stock Exchange. Via this acquisition Strålfors has gained access to a comprehensive customer and production base. The move facilitates the expansion on the important French market within the prioritized Business Areas InfoConcept, smart cards and e-commerce. The acquisition also strengthens Strålfors’ position as the European market leader within the graphic gaming products segment.
The purchase money paid in cash for the shares and the costs incurred by the acquisition amounted to MSEK 114. Strålfors’ balance-sheet total has thereby been increased by MSEK 280, of which MSEK 90 constitutes goodwill and MSEK 7 liquid funds. The acquisition has thus been a charge on the cash flow of MSEK 107, this amount being reported as a separate item in the Consolidated Cash Flow Analysis. With regard to the strategic character of the acquisition, the goodwill amount will be written off in accordance with the straight-line depreciation method over a period of 20 years.
SPP’s surplus funds
The so-called client company funds allocated to Strålfors amount to a nominal MSEK 52.4. Regulations as to how the funds can be used were stipulated on 28 April this year. The current estimated value of the funds, MSEK 48.9, has been posted as an asset in the balance sheet per 2000-06-30. The corresponding amount has been reported as taxable income, an item affecting comparability, in the Consolidated Statements of Income for the first six months.
Financial standing
The Group’s balance-sheet total for the second quarter increased by MSEK 261 to MSEK 1 922. The acquisition of Siaco and SPP’s surplus funds have led to an increase in the assets of a total of MSEK 329, while liquid funds have diminished by MSEK 69 to MSEK 124 ( in addition to this amount there is an unused credit facility of approximately MSEK 400).
Shareholders’ equity at the end of the first six months amounted to MSEK 996, corresponding to SEK 47 per share. This means that the equity/assets ratio is 52%, a reduction of 8 percentage points compared with the situation on 2000-03-31.
The acquisition of Siaco was financed roughly equally by liquid funds and by borrowing more capital. At the time of the acquisition, interest-bearing liabilities of MSEK 53 were posted in Siaco’s balance sheet. By the end of the first six months, therefore, the Strålfors Group’s interest-bearing liabilities had thus increased to MSEK 267. The acquisition of Siaco thereby led to an increase in the non-interest-bearing liabilities of MSEK 123, which by the close of the report period had increased to MSEK 510. Deferred tax liabilities in connection with the Siaco acquisition have been written off against the Group’s deferred tax liabilities, which were reduced to MSEK 66 at the end of the first half of the year.
Outlook for the year
Income for the whole year before items affecting comparability and tax is expected to be of the same magnitude as that for 1999 (MSEK 123). The steps being taken to streamline the structure of the Group may influence the forecast result.
Financial information from Strålfors
Questions about the contents of the Report may be addressed to the CEO and MD Per Samuelson on +46 372-854 40, or to vice MD Kjell Åke Jönsson on +46 372-852 34.
The next Report, covering the first nine months’ operations, will be published on 2 November.
Business Concept
Strålfors is an IT-focused Business to Business company with a print heritage, and provides turnkey solutions for information transfer. The Group turnover amounts to SEK 3 billion with operations in 11 countries and 1900 employees worldwide, of whom about 825 in Sweden. Strålfors’ shares have been listed on the Stockholm Stock Exchange since 1984.
The report has not been examined by the company’s auditors.
Ljungby, 3 August, 2000
Board of Directors