- Annual Accounts for the year 2006
" The consolidated profit of Milestone in the year 2006 amounted to ISK 21.4 billion net of taxes.
" Return of equity at year-end was 92%.
" Total assets at year-end 2006 amounted to in excess of ISK 170 billion and had increased by 102% during the year.
" The Group's goodwill amounts to 8% of total assets.
" The Group's equity at year-end 2006 amounted to in excess of ISK 43.7 billion, which is an increase by 69% from the beginning of the year.
" The Group's equity ratio was at year-end 26% but the parent company's equity ratio was 43%.
The consolidated profit amounted to ISK 21.4 billion net of taxes in year 2006. The year was characterised by good return on the Company's core investments, in addition to new projects both in Iceland and abroad. A great part of the Company's asset portfolio consists mainly of companies that are listed in the stock market and thus the return is partially influenced by market condition.
The Company's financial standing has been characterised by growth for the past several years thanks to investments and reinforcement of equity. The Group's total assets have from the beginning of year 2005 increased from approx ISK 11.4 billion to around ISK 170 billion, of which ISK 85.7 billion in year 2006.
Intangible assets amount to in excess of 12.5% of the Company's total assets, of which goodwill is merely 8.4% of total assets. Sjóvá's part in the Group has strengthened the operation with effective income flow and Milestone's purchase of L&H eignarhaldsfélag has also reinforced the operation, but part-taking in that company's profit will commence as of July 1, 2006.
The Group's equity at the beginning of the year amounts to over ISK 25.8 billion but equity at year-end amounted to approx. ISK 43.7 billion. The parent company's equity ratio at the end of the period was 42.9% and of the Group approx. 25.7%. Return on equity in the year 2006 was 91.5%.
The Company's financial standing is strong and is based on assets, on which it has generated great profit in the past years. The rationale for the Group's continuing growth is strong financial standing, especially as the Group includes two financial companies, whose return is based on credibility and capacity to stand by its commitments. Asset portfolio has been stable in accordance with the Company's investment policy.
The Company's investment policy has been defined and divided into five main sectors: Pharmaceuticals and related services, financial activities, insurance, real estates and other projects.
The Company's main investments during the year were carried out in May when Milestone purchased Glitnir's 33% share in Sjóvá and holds thus 100% of the shares in the company. On June 30, the Company acquired all shares in the company L&H eignarhaldsfélag, which among other things runs the pharmaceutical chain Lyf & heilsa. The purchase reinforces the Company's position in the pharmaceutical and health sector. At the end of the year, the establishment of a new investment bank was announced, Askar Capital, by the merger of Sjóvá fjármögnun, Ráðgjöf og efnahagsspár and Aquila Venture Partners. Milestone is the main investor in the bank and will own over 85% of the share capital, but Askar Capital's equity will at the beginning amount to approx. ISK 11 billion. At the end of the year, the Group included two subsidiaries, which are defined as financial companies and are subject to the surveillance of the Financial Supervision Authority. Furthermore, Milestone has been granted the authority to control up to 25% of the shares in Glitnir hf. as an active owner.
Qualifying under pharmaceutical and related operation is among others Lyf & Heilsa, shares in Actavis and Pharma Invest / TIG, but that company owns and runs over a hundred pharmacies in Macedonia, Romania and Croatia. The Group's biggest assets then qualify under financial activities and insurance, i.e. shares in Glitnir, Sjóvá and Askar Capital. Land and real estates is a new area in the Company's investments and has already become a great part of the asset portfolio. The largest part of the Group's real estates is owned by Sjóvá, which are in main part foreign assets in Germany and Western Europe. Assets classified as other investments are shares in Teymi hf., Merlin A/S, Spor ehf., og 365 hf., in addition to various short-term investments in shares.
The profit of the subsidiary Sjóvá on insurance and investment activities amounts to over ISK 11.9 billion after tax compared to a profit of ISK 3.7 billion the previous year. Sjóvá's insurance activity has gained considerable success. The company's operating expenses decreased by 21% from the previous year. The aggregate ratio of the company's insurance activities, which is operating expenses and claims in proportion to premiums for the period, amounted to 114.8% compared to 121.5% in year 2005.
Milestone ehf.'s Annual Accounts for the year 2006 are prepared in accordance with International Financial Reporting Standards, IFRS, but the Company's Annual Accounts in previous years have been prepared in accordance with the Annual Accounts Act and Generally Accepted Accounting Policies in Iceland. The effect of the standards on the Annual Accounts is mainly to be detected in their presentation. The overall effects of the new rules on the Company's equity are insubstantial but the book value of equity decreases by ISK 38 million. Comparative figures in the Annual Accounts have been recalculated in accordance with changed accounting methods. In the notes to the Annual Accounts, further information on the effects of the implementation of the new standards on the Company's Annual Accounts is accounted for.
Future vision
Good results in the Company's operation in the past years, building up strong operating units and strong financial standing of Milestone cannot but give reason for optimism in the Company's continuing operation. More support in the operation and risk spreading within the framework of the investment policy that the Company has developed increase the Company's capacity to react to changes in economy, such as fluctuation in the securities market and foreign currency exchange market. At the beginning of year 2007, positive changes have taken place in the market value of the Company's main listed assets together with the effects of the Icelandic krona on the Company's financing have diminished further.
At the beginning of year 2007, Milestone announced that a loan agreement had been concluded with the international investment bank Morgan Stanley on in excess of ISK 16.5 billion loan over a three year term. The agreement represents a turning point in Milestone's operation and is a part of the acknowledgement that the Company has received with foreign investors. Milestone will continue improving interactions in this area in year 2007.
Interesting opportunities in the pharmaceutical sector are at hand in Eastern Europe where Pharma Invest / TIG, an associated company within the group, has already invested in pharmacies ad related operations. The Group intends to expand further within this sector.
Milestone's subsidiary, Askar Capital, started its operation in the year. The bank's operation will have considerable effects on the operation and financial standing of the Group.
Milestone will hereinafter seek new investment opportunities within all sectors of the Company.
"Milestone's profit for the year 2006 was good and return on equity was outstanding. The company has gained considerable strength with new profitable investments. Milestone intends to continue its growth by strengthening current units and exploiting the investment opportunities emerging within core sectors, in which we have gained great expertise," says Karl Wernersson, Chairman of the Board of Directors of Milestone.
"Milestone's fast growth gives rise to great challenges in the structuring of the Company's infrastructure. he Company has reacted to this by bringing in good new employees in addition to those already working for companies within the Group. The Company is experiencing a turning point as for communication with foreign financers, which is an important factor in maintaining the Company's growth," says Guðmundur Ólason, the Director of Milestone.
Main results of the year 2006 (all amounts in ISK million)
Income statement 2006 2005 2004**
Investment income 19.374 18.872 1.199
Operating income 12.535 4.185 0
Operating expenses (13.993) 5.238) (8)
Profit before income tax 17.916 17.819 1.191
Tax income (expense) 3.528 ( 3.080) (216)
Profit for the year 21.444 14.739 975
Statement of cash flows
Net cash provided by operating activities 26.216 16.628 ( 20)
Net cash used in investing activities (71.111) (38.641) (7.796)
Net cash provided by financing activities 48.076 23.761 7.810
Net increase (decrease) in cash 3.181 1.748 (6)
Balance sheet 31.12.2006 31.12.2005 31.12.2004
Total assets 170.075 84.369 11.395
Total equity 43.727 25.833 2.949
Total liabilities 126.348 58.536 8.446
Financial ratios
Equity ratio* 25,7% 30,6% 25,9%
Return on equity 91,5% 207,4% 49,4%
* Equity ratio of the parent was 42,9% at the end the year 2006
** In accordance with IS-GAAP
