SOLNA, Sweden, Jan. 31, 2002 (PRIMEZONE) -- LGP Telecom:
-- Net revenues for the year ended December 31, 2001 declined by
13 percent to MSEK 1 135 (1 299).
-- The operating result was MSEK -15,5 (188,3).
-- New frame orders worth MSEK 225 during the fourth quarter.
-- No dividend is proposed.
-- Proceeds of a private placement during the period were MSEK 187.2.
-- Bengt Broman appointed to the post of President and CEO of
LGP Telecom Holding AB.
Revenues and Result
Fourth Quarter 2001
Revenues for the fourth quarter amounted to MSEK 249.9 (386.9), a drop of 35.4 percent. The operating result amounted to MSEK -27.7 (49.2). Earnings per share were SEK -0.90 (0.98).
LGP's gross margin declined despite higher sales compared with the third quarter. In part, this is due some increase in pricing pressures, repositioning the stock of finished goods and start-up costs in connection with generation changes. The operating result for the fourth quarter was affected by costs of a non-recurring character of about MSEK 10, such as costs for sale of machinery, a provision for commitments to a supplier and adjustments to the MPS system.
New frame orders worth MSEK 225 were received during the fourth quarter for telecom products in 2G and 3G, and for products for machining. A weak increase in orders received was seen during the latter part of the quarter.
A reduction of the capital tied up in the business was a priority issue during the year. During 2001 the Group's inventory was reduced from MSEK 270.8 to MSEK 228.1, a decrease of 15.8 percent. Another step taken to strengthen the Group's financial position was the private placement with institutional investors in Sweden and abroad undertaken towards the end of the fourth quarter after a period of major capital expenditures. This has provided resources for the Group to take advantage of opportunities that will emerge as market demand picks up again.
2001
The sharp downturn experienced in the telecom sector since the second quarter has affected LGP's growth and profitability. Consolidated net revenues amounted to MSEK 1 134.7, for a decrease by 164.3 MSEK, equivalent to 12.6 percent compared to the similar period a year earlier. Telecom accounts for 77.3 percent of total revenues and compared to the similar year-ago period sales of telecom products declined by 12.0 percent. Telecom products developed in-house recorded growth of 10.3 percent compared to year before, while sales of contract- manufactured mechanical products showed a steep drop.
The operating result for the period was MSEK -27.2 (188.3) including amortization of goodwill. The operating margin was -2.4 (14.7) percent. The operating result has been charged with costs for writing down the value of inventory in an amount of MSEK 33.5 and costs for a not completed acquisition in an amount of MSEK 3.7. The loss per share was SEK 1.31 compared to earnings per share of SEK 4.48 for 2000.
All production of proprietary telecom products was moved to LGP's newly built production facility in Tullinge during spring.
A number of measures to reduce costs were carried out during the year. There were personnel as well as capacity reductions in production. The number of employees has been reduced by 213, 176 of who were engaged in production and 37 in administration. All other costs in the Group were carefully scrutinized.
Market
LGP's first quarter was strong, both in the telecom area and in contract manufacturing. The second and third quarters, on the other hand, were distinguished by a sharp fall in sales to systems suppliers as well as operators. The European market in particular was hard hit during this period, the reason being that several operators delayed their GSM expansion while waiting for increased GPRS service offerings. Investments in 3G have also been delayed. Another reason for the drop- off was that sales of contract-manufactured mechanical products declined sharply as several major customers focused on reducing their own inventories of components and finished goods.
Despite the harsh climate for telecom products, it is gratifying to be able to report that LGP has started regular and continuous 3G shipments. LGP has concluded a 3G TMA agreement with a leading systems supplier and is in the process of negotiating similar contracts with other customers. LGP has also concluded two additional frame agreements for 3G products in Europe and in South East Asia. The Group is currently shipping 3G products to three operators in Europe.
The market in North America looks positive. Several major operators have started the process of migration from TDMA to GSM systems.
Sales in Asia showed good growth during the year. This market still represents a relatively small, but rapidly growing part of LGP's total sales. During 2001 Asia accounted for 9.4 (4.2) percent of LGP's total sales. The market in China is driven mainly by deliveries by systems suppliers of 2G networks, while a large portion of sales in South East Asia was to network operators.
Capital Expenditures
The Group's capital expenditures during January - December amounted to a total of MSEK 220.7 (178.9). MSEK143.1 (37.4) was invested in buildings and land and MSEK 77.6 (141.5) was invested in machinery and equipment. MSEK 26.3 of the latter amount was in the form of leasing contracts. Investments in buildings and land refer to the new head office in Sollentuna which amounts to MSEK 91.4 and the production plant in Tullinge MSEK 51.7. Depreciation amounted to MSEK 106.7 (82.4). Amortization of goodwill amounted to MSEK 19.7 (19.7).
Personnel
The number of employees as of December 31, 2001 was 719 (818). Personnel reductions were carried out during the year, meaning that 213 employees were terminated. These employees had left the Group as of year-end. In March, when the first round of lay-offs took place, the number of employees was 927.
Financing
A private placement of shares with Swedish and foreign institutional investors was made during December. The issue price was SEK 78 and a total of 2 486 142 new shares were subscribed for. The proceeds of the issue after issuing costs were MSEK 187.2. After the new issue, the share capital amounts to SEK 30 250 000 and the number of shares outstanding is 30 250 000.
The equity ratio as of December 31, 2001 was 70.3 percent. The equity ratio as of December 31, 2000 was 62.8 percent. The Group's liquid funds amounted to MSEK 54.1 (54.8). Unutilized committed credit facilities amounted to MSEK 150.0 (34.7) and interest-bearing liabilities amounted to MSEK 269.6 (241.6).
Cash flow from current operations for the full year amounted to MSEK 90.8 (224.7). Net after capital expenditures the cash flow was MSEK - 166.8 (-63.2). Shareholders' equity per share stood at SEK 34,7 (33.4).
Dividend
The Board of Directors has decided to propose to the Annual General Meeting that no dividend will be paid for 2001.
Miscellaneous
The Annual General Meeting held April 24 resolved the issuance of a subordinated convertible debentures in a nominal amount of SEK 50 000 by issuing debentures with detachable warrants. These warrants will be issued over a three-year period. All employees have been offered to acquire warrants. The warrants remain valid for subscription during the period June 5, 2001 - May 24, 2004. This option program means that up to 500 000 shares may be issued for a dilutive effect of about 1.8 percent of the number of shares and votes.
The same accounting principles and computation methods have been applied in compiling this report as in the most recent annual report.
Forecast
No forecast for 2002 will be offered at this time. However, LGP sees no reason to hold an opinion different from other players to the effect that capital spending in Telecom will pick up momentum during the second half of 2002.
Organizational Change
Bengt Broman has been appointed to the post of President and Chief Executive Officer of LGP Telecom Holding AB. Most recently Bengt Broman held the posts of Chief Technical Officer and Executive Vice President of Telia Mobile. During the period 1998-2000, Bengt Broman was President of Allgon System AB.
Bengt Broman, who was already a member of LGP's Board of Directors, will assume his duties in April 2002. Bengt Broman is 48 years old and has extensive experience from the telecom industry. Bengt Broman was previously active in Ericsson and Philips and he has held a number of senior positions in Telia and Allgon. Mikael Gottschlich will continue as CEO until the Annual General Meeting and will then be proposed for the position of Vice Chairman of LGP's Board of Directors and he will continue to be active in LGP.
"It will be both stimulating and challenging to return to the world of telecom suppliers. Particularly so because LGP has had a difficult year. My previous experience with operators as well as telecom suppliers has given me a good understanding for what the customers expect and for the challenges facing the suppliers," says Bengt Broman.
Johan Ek has been appointed to the post of Executive Vice President of the LGP telecom Group. Johan Ek has served in the Group since 1999 and his primary responsibilities have included the Group's mechanical operations and business development. Johan Ek holds an MBA and is 33 years old. Before LGP, Johan Ek worked as a consultant for McKinsey & Company.
Annual General Meeting
The regularly scheduled Annual General Meeting will be held at 6:00 p.m., Tuesday April 23, 2002 at IVA, The Royal Academy of Engineering Sciences, Grev Turegatan 16 in Stockholm.
Reporting 2002
The Annual Report for 2001 will be available by March 10, 2002. The Annual Report will also be available at LGP's Web site, www.lgp, from this date.
Interim report January - March April 23 Interim report April - June August 21 Interim report July - October October 22
Telephone Conference
Thursday, January 31 at 11:00 a.m. Telephone +44 20 8240 8242 Swedish Thursday, January 31 at 5:00 p.m. Telephone +1 334 323 4040 English
If you are unable to participate, you can listen to a recording of the conference by calling the instant replay number +44 20 8288 4459 access code 648 482 swedish, +1 703 925 2490 access code 15520.
The recording conference will be available until the 7th of February 2002.
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