* Sales during the second quarter of 2008 amounted to MSEK 404
(389), operating profit amounted to MSEK 44 (39) and profit
before tax to MSEK 44 (36). Net profit was reported as MSEK 31
(25) and profit per share after dilution was SEK 1.01 (0.81) for
the same period.
* Net sales for the period amounted to MSEK 787 (779). Operating
profit was MSEK 75 (77) and profit before tax was MSEK 72 (73).
Net profit amounted to MSEK 52 (51).
* EBITA for the second quarter was 10.8% and for the period 9.5%.
* Profit per share after dilution amounted to SEK 1.67 (1.64) for
the first six months of the year.
* A 4:1 share split was carried out with record date on 28 April.
* Revised sales forecast for 2008.
Statement by the Managing Director
Sales for HL Display during the second quarter increased by 4% and
EBITA was 10.8%. In spite of a development in a positive direction
the sales and profit growth is not yet in line with the long term
objectives for the company. Sales during the first six months of 2008
amounted to MSEK 787, an increase of one percent compared to the same
period 2007.
Operating profit during the first six month of 2008 amounted to MSEK
75, a decrease of two percent compared to the same period last year.
The gross margin had a positive development during the first six
months, from 46 percent 2007 to 49 percent 2008. On the other hand
the operating expenses and the freight costs had a negative
development during the year. The reason for the improved gross margin
is that efficiency of production has continued to increase, and thatwe introduced price increases at the year end.
Greater efficiency of production
Over the last few years, HL Display has introduced a raft of
successful measures to increase efficiency of production, something
which is continuing to show positive effects for the company. The
range rationalization work that has been in progress over the last
two years has resulted in longer production series, fewer tool
changes and faster production processes.
Increased operating and freight costs have negative effect
After a two-year period with falling operational expenses in relation
to net sales - a result of our concentrated efforts to increase
resource utilization within the organization - operating expenses
have increased again during the first half of 2008. This has affected
profitability negatively during the period and has counteracted some
of the positive effects of the increased gross margin. Work is
ongoing to correct this. Primarily is the company's logistic set up
and freight cost under evaluation.
Market and sales development
The development in the global retail industry has during the first
half of 2008 been showing signs of a slowdown.
It is HL Display's view that the primary reason for this is a more
cautious attitude because of a general weakening business cycle.
Usually HL is not affected by this type of tendency. However for the
current year, we cannot exclude an indirect effect from the rather
flat retail sales of our customers. Sales over the last six months
have not fulfilled our expectations. On certain markets, not least in
Western Europe, growth has been absent, and in some cases sales have
decreased compared to the same period last year. In France,
HL Display's single largest market, sales fell by 9 percent during
the first six months.
ur work of reversing development in those sales companies that
previously made losses has been successful. We can note that we
fairly quickly achieved the result effects we wanted. On the other
hand, it has taken longer than we initially believed to reverse sales
development on these markets, among them large markets, such as the
United Kingdom and Germany. Now the changes have been brought in, we
have new sales company managers and new organizations in several of
the countries, and our ambition is to be better able in future to
benefit from the opportunities that exist on each market.
Positive development in Nordic
As opposed to the development in Western Europe, sales in the Nordic
countries have developed very positively, with growth of 19 percent,
whereof 10 percent organic. As during 2007, development has been
particularly strong in Norway, with a sales increase of 28 percent.
It is very gratifying that we can record such growth in mature
markets.
Continued growth in rapidly growing markets
The sales growth in Russia and Asia was 14 and 17 percent
respectively. This is lower than last year, but still relatively
good. In Russia radical changes have been made in order to create a
platform for developing the business further. Today, the sales
company in Russia has a new office, a new warehouse, the right
organization and new systems. This means that we are confident of the
future there.
Strengthened offering to the customer segment brand manufacturers
In conjunction with EuroShop, the world's largest international
retailing trade fair, held in February, HL Display launched a number
of new products, among them Hero Shelf and Side Kick. These products
are primarily aimed at brand manufacturers. Together with the
products that were included in the acquisition of Display Team in
2007, the new launches mean that we, as planned, have considerably
strengthened our offering to brand manufacturers, a customer segment
with good potential for HL Display.
New production lines in China
In February, manufacturing within the production method injection
moulding started at the factory in Suzhou in China. This will further
strengthen our price competitiveness in the region. Production in
Karlskoga was augmented with the newly launched Hero Shelf and Side
Kick, and certain products from the range acquired from Display Team,
which were previously supplied by sub-contractors. At the same time,
other labour-intensive production was moved to the factory in Suzhou.
In the annual report for 2007, we wrote about the ambition to start
up production in Russia for the Russian market. Preparations are
continuing, but are taking longer than expected. However, we hope
that production can start towards the end of the year, and come into
full operation during next year.
Acquisitions
The work in finding suitable acquisition candidates continues. A
number of alternatives are being evaluated.
Focus on profitability and improved sales work
In conclusion, I note that our result for the first half year is
equal to an EBITA margin of 9.5 percent to be compared with our
long-term goal of 12 percent. We will continue to focus strongly on
improving the profitability of the operation, by increased work on
operating costs among others. At the same time, we have noted that
sales development has been less good than expected and that we must
improve our sales work, which is an important task for the remainder
of 2008.
Stockholm, July 2008
Gérard Dubuy
Interim report
Net sales and result for the second quarter of 2008
Net sales for the Group amounted to MSEK 404 (389) for the second
quarter, an increase of 4 percent compared to the same quarter 2007.
Operating profit for the same period was MSEK 44 (39) and profit
before tax amounted to MSEK 44 (36). The result has been affected by
one-off costs amounting to MSEK 4 as a result of adaptation to
agreements with a new employee counterpart. Net interest for the
second quarter amounted to MSEK -1 (-2), while exchange rate effects
amounted to MSEK 1 (-1).
Net sales and result for the first half of 2008
The Group's net sales amounted to MSEK 787 (779) for the first half,
an increase of 1 percent compared to the same period in 2007. The
change in the value of the krona vis-a-vis the export currencies has
not affected net sales in comparison with last year.
Operating profit for the first six months was MSEK 75 (77) and profit
before tax amounted to MSEK 72 (73). The change in value of the krona
compared to last year has had a positive effect amounting to MSEK 2
on operating profit. Net interest for the period amounted to MSEK -1
(-5), while exchange rate effects amounted to MSEK -2 (2). 1.5 MSEK
of the exchange rate effects is explained by the changeover to the
current method. HL Display's most important export currencies are
Euro, British pounds and Russian roubles.
Gross margin has improved, thanks to a favourable product mix and
price increases introduced as from the year end. Raw material prices
have remained high during the six month period. However, the
efficiency improvements carried out at the factories have well
counteracted any negative effects on the result. Expenses have
increased with MSEK 24 or 8% in comparison with last year. Around
MSEK 13 related to newly acquired subsidiaries and the building up of
sales companies on growth markets. Around MSEK 4 are costs related to
the retailing trade fair EuroShop, which is held every third year.
Sales growth by market
Sales on the markets in which HL Display operates has in total been
weaker than expected during the first half of 2008. The exception has
been the Nordic countries, which developed better than expected and
showed a growth in sales of 19 percent. Sales in Western Europe
decreased by 6 percent, mainly explained by turbulence in connection
with organizational changes. Sales in Eastern Europe increased by 9
percent. Sales in Asia increased by 17 percent during the first six
months of 2008.
Seasonal effects
HL Display is normally affected negatively by seasonal variations
during December and January. The reason is that customers, who
consist mainly of retailing companies, do not plan any changes during
the Christmas shopping period. In 2007, Easter fell during the first
quarter and in 2008 in the second quarter, which affects the
comparison between the quarters.
Investments
During the first half, net investments in fixed assets totalled MSEK
19 (54). Net investments for 2007 included the acquisition of Display
Team. Depreciation according to plan amounted to MSEK 19 (21).
Cash flow and financial position
As at 30 June 2008, liquidity amounted to MSEK 159 (147); at the
start of the year to MSEK 177. Interest-bearing net receivables,
which at the beginning of the year amounted to MSEK 49, amounted to
MSEK 36 (8) on the balance sheet date. Dividend decided upon
amounting to MSEK 43 (27) has been paid during the period. Cash flow
from operating activities fell to MSEK 42 (75), primarily as a result
of a negative change in working capital. Cash flow from operating
activities for the second quarter amounted to MSEK 47 (34).
Operational cash flow amounted to SEK 1,56 (2,39) per share; during
the second quarter to SEK 1,44 (1,02). The equity ratio on the
balance sheet date amounted to 53 (49) percent; at the beginning of
the year to 53 percent.
Employees
The average number of employees during the period was 991 (949). The
number of employees on the balance sheet date was 999 (956) and at
the beginning of the year 972. The increase in employees is
concentrated to the factory in Suzhou in China.
Information about risks and uncertainty factors
Variations in raw material prices and exchange rate differences
constitute uncertainty factors, but not significant risks. For a
closer description of the risks and uncertainty factors facing HL
Display, please see the risk and sensitivity analysis on page 32 of
the annual report for 2007.
Parent company
The parent company's result after financial items for the first half
of 2008 amounted to MSEK -46 (-33). No significant changes have been
noted in the income statement and balance sheet.
Annual general meeting
The Board's proposal for dividend for 2007 amounting to SEK 5.50
(3.50) per share was adopted by the annual general meeting, which was
held on 2 April 2008. The AGM also decided to carry out a 4:1 share
split, which means that each share gave entitlement to three new
shares. The record date was 28 April and the total number of shares
is now 30,939,088. Anna Ragén and Lars-Åke Rydh were elected as new
members of the Board. Lis Remius resigned from the Board.
Prospects for the remainder of 2008
In the previous quarterly report the organic growth for 2008 was
expected to fall within the interval 5-10 percent. Due to the
uncertainty that today prevails on the market combined with the
outcome for the first six months the forecast for present year is now
being revised. Sales for 2008 are expected to be in line with 2007 or
slightly above.
As in the last few years, profitability will be prioritized. Further
cost rationalization within freight and logistics is planned.
HL Display plans to continue strengthening the company's offering and
market position through acquisitions.
A detailed forecast for the full year will be provided as usual in
conjunction with the quarterly report for the third quarter.
The contents of this report have not been the subject of examination
by the company's auditors.
The Board and the Managing Director confirm that the interim report
provides a true overview of the parent company and the Group's
operation, position and result and describes significant risks and
uncertainty factors facing the parent company and the companies that
are part of the Group.
The information was released for publication on 16 July 2008 at 8.40
am.
Stockholm, July 16th, 2008
Anders Remius
Chairman of the board
Jan-Ove Hallgren Stig
Karlsson Mats-Olof Ljungkvist
Member of the board Member of the board
Member of the board
Åke Modig Anna
Ragén Lars-Åke Rydh
Member of the board Member of the board
Member of the board
Magnus Jonsson
Kent Mossberg
Member of the board, Employee repr Member of the
board, Employee repr
Gérard Dubuy
Member of the board, Managing Director and CEO
The full report including tables can be downloaded from the enclosed
link.
Interim report January - June 2008 HL Display AB (publ)
| Quelle: HL Display AB
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