LINKOPING, Sweden, July 11, 2002 (PRIMEZONE) -- Saab:
- Order bookings during the first half-year were more than SEK 12
billion, of which SEK 6 billion in the second quarter. Order backlog
amounted thereby to SEK 44 billion.
- Sales SEK 8,284 m. (7,458), an increase of 11%.
- Operating income SEK 474 m. (409 m., excluding capital gains) and
income after financial items SEK 374 m.
- Earnings per share SEK 2.47 (7.47).
- Breakthrough order for next generation anti-armor weapon,
confirming Saab's world leading position.
- Germany has decided to order serial production of the Taurus
standoff missile.
Statement by the CEO
"Order bookings continued to be very good during the second quarter and the order backlog has thereby increased to SEK 44 billion, which once again is an all-time high and equals more than two and a half years' sales. The largest individual order during the quarter was for the supply of the next generation light anti-armor weapon program for the British and Swedish armies. This order confirms that we are world leaders in the area of light anti-armor weapons and the product has a significant export potential. And last week, Germany decided to order serial production of the Taurus standoff missile, which Saab and LFK of Germany have developed together.
So far this year, we have seen a good growth in the defense related business.
The customary variation in income over the year normally means that the first half-year is usually weaker than the second. This picture is reinforced by the costs we took in the first quarter for restructuring our space activities. For the whole year, however, I continue to anticipate further improvement in operating income and operating margin, excluding capital gains."
Structural changes
With effect from January 1 this year, Nyge Aero has been transferred from Saab Technical Support and Services to Saab Aerospace as part of the co-ordination of the Group's aero structures activities.
During the second quarter, the US DoD granted Saab necessary approvals for takeover of the signature management operation acquired from BAE SYSTEMS. Earlier this year, Saab also acquired the remaining 35 percent in Combitech Systems.
Operations
Saab is one of the world's leading high-technology companies, with its main activities focusing on aerospace and defense. The operation covers clearly defined areas within defense electronics, missile systems and space electronics as well as military and civil aviation. Saab also focuses on high technology services and maintenance. Saab comprises the business areas Saab Systems & Electronics, Saab Aerospace, Saab Technical Support & Services, Saab Bofors Dynamics, Saab Ericsson Space and Saab Aviation Services. For a brief description of the business areas see the end of the report.
Sales, income and orders
Sales
Group sales increased organically during the first half-year by 11 percent to SEK 8,284 m. (7,458). Seventyfour percent of sales were related to defense and 40 percent of total sales were export. Sales during the second quarter increased by 16 percent to SEK 4,754 m. (4,096).
Sales of all operations in Systems & Electronics have increased compared with the same period last year. The increase in Aerospace is mainly attributable to defense, but sales of the commercial operations have also increased through more deliveries to Airbus and the internal acquisition of Nyge Aero. Sales for the first half-year included 12 (8) Gripen aircraft, of which 9 (6) in the second quarter. The changes compared with the previous year for Technical Support & Services are mainly due to the transfer of Nyge Aero and lower volumes for the aircraft maintenance operation in Saab Aviocomp. Total sales for Dynamics have increased compared to the first half-year of the preceding year, which also applies to most of the constituent business units. The decrease in sales for Space is mainly attributable to the situation in the commercial telecom market, as well as to reduced public funding of space research. The decrease in Aviation Services is related to the customer support activities and is a result of the general situation for air travel.
Income and profitability
Operating income amounted to SEK 474 m. (1,059), of which SEK 328 m. (256) in the second quarter. The result for the previous year included a capital gain from the divestment of Saab Marine Electronics of SEK 650 m. Operating income before capital gains was thus SEK 474 m. (409), corresponding to a margin of 5.7 percent (5.5). The six-month income has compared to the previous year been positively affected by SEK 120 m. related to capitalization of development costs and negatively affected by SEK 40 m. related to structural costs in the space operation. Income from the defense business has improved compared to the previous year, but the total income has been affected by the general market situation for the space business and Aviation Services.
Operating income per business area is reported before goodwill amortization, see table on page 7. Operating income for Systems & Electronics has improved mainly as a result of volume increases and higher margins for Saab Training Systems and Saab Avionics. Operating income for Aerospace has improved as a result of volume increases and capitalization of development costs. Operating margin excluding capitalization is on level with previous years. Operating income for Technical Support & Services is on a level with last year with an improved margin mainly due to higher utilization ratio and cost reductions. During the first half-year, the product mix has affected operating income and margin for Dynamics. Operations in Space have been affected both by the situation in the telecom industry and by a decrease in public-funded orders and by the provision made in the first quarter of SEK 40 m. for structural changes. Lower volumes have affected operating income for Aviation Services, but the margin continues to be above 8 percent, the same level as for the whole year 2001. Operating income for Corporate/Other operations has improved as a result of continued structuring.
Administration and marketing expenses are on level with previous year. Of the period's research and development costs, a total of SEK 120 m. (0) has been capitalized in accordance with new accounting principles and SEK 216 m. (369) has been charged to income. Capitalized development costs are mainly related to the export version of Gripen. If these rules had been applied in 2001, SEK 90 m. would have been capitalized in the balance sheet for the first half-year of that year. Other operating income during both the present and previous years consist mainly of trading income in Treasury and currency gains etc. The previous year also included a capital gain of SEK 650 m. Other operating expenses consist mainly of currency and capital losses. The present year also include the provision made for structural changes in Space of SEK 40 m. Project interest on non-utilized advance payments, which has decreased financial net and is reported as gross margin, amounted to SEK 83 m. (49).
Net financial income and expenses amounted to SEK -100 m. (-8). The average return on external investments was 3,09 percent (4,89). The decrease in return is mainly attributable to revaluation of the obligation portfolio due to increasing market interests. The financial net has also been negatively affected by a major increase in the interest level on the pension debt. Income after financial items amounted to SEK 374 m. (1,051). Current and deferred taxes amounted to SEK -122 m. (-215). Minority interest in income is positive as a result of the negative income in Saab Ericsson Space and as a result of the acquisition of the outstanding minority in Combitech Systems.
Net income for the period was SEK 263 m. compared with SEK 795 m. for the same period previous year including the capital gain from the divestment of Saab Marine Electronics. This corresponds to an income per share of SEK 2.47 (7.47). Pre-tax return on capital employed was 9.9 percent (17.9). After-tax return on shareholders' equity was 9.3 percent (25.4).
Orders
Group order bookings amounted to SEK 12,456 m. (7,544), of which SEK 6,396 m. (3,750) in the second quarter. Of order bookings, seventy-five percent came from customers outside Sweden. Order bookings during the second quarter included development and serial production of next generation anti-armor weapon, further development of command and control systems for air and army forces, separate orders and spare parts for Gripen, sensors and anti-armor weapons and ammunition for the Carl- Gustaf system. In addition, Saab Training Systems has signed a 10-year agreement with the US army regarding gunnery and training ranges. The order backlog at the end of the period amounted to SEK 44,004 m. compared to SEK 40,034 m. at the beginning of the year.
Liquidity, finance and investments Finance and liquidity Liquid funds less liabilities to credit institutions compared to the beginning of the year have decreased by SEK 349 m. to 4,214 m. (4,563). The decrease is mainly related to payment of dividend and the decrease of the pension liability. The Group's net liquidity after deduction for allocations to pensions decreased to SEK 788 m., compared with SEK 885 m. at the beginning of the year.
Group equity/assets ratio amounted to 22.1 percent (20.4), compared to SEK 22.3 percent at the beginning of the year. Shareholders' equity amounted to SEK 6,476 m. (6,295), corresponding to SEK 60.83 (59.13) per share, compared with SEK 62.74 at the beginning of the year.
Cash flow
Operating cash flow was positive during the first half-year by SEK 373 m. Working capital has increased mainly due to increase in inventory related to the A380 project and payments related to utilization of previously made provisions. Operating cash flow of SEK 373 m. is distributed between cash flow from the operations of SEK 444 m., acquisitions SEK -77 m. and from the regional aircraft leasing business SEK 6 m.
Capital expenditures
The period's capital expenditures in property, plant and equipment, excluding lease assets, amounted to SEK 276 m. (197).
Personnel
At the end of the period, the number of employees in the Group was 14,226, compared with 14,028 at the beginning of the year. The increase is mainly due to the acquisition of the signature management business in the U.S.
Parent Company
During the first six months, parent company sales amounted to SEK 2,547 m. (1,800). Operating income was SEK 310 m. (113) and income after financial income and expenses was SEK 232 m. (132).
Cash and marketable securities, less liabilities to credit institutions, amounted to SEK 1,188 m., compared with SEK 1,617 m. at year-end. Capital expenditures in property, plant and equipment amounted to SEK 100 m. (54). The number of employees at the end of the period was 4,276, compared with 4,237 at the beginning of the year.
Ownership
Saab's principal owners are BAE SYSTEMS, Investor AB, the Wallenberg foundations, AMF, GMO International Funds, Third AP fund, Robur funds, Eikos fund, Fidelity funds, Skandia, SHB funds and several U.S. funds.
Accounting Principles
The Group follows all the recommendations of the Swedish Financial Accounting Standards Council which are applicable to 2002. This means that from 2002 onwards, the new accounting principles will be applied also in regard to intangible assets, allocations and depreciation, etc. Only the recommendation on intangible assets, RR 15, has been of material significance for the Group's income and financial position. In all other respects, the report has been drawn up in accordance with earlier applied accounting principles. Sales and operating income by business area for the year 2001 has not been adjusted for the internal re-organization regarding Saab Nyge Aero.
Linkoping, July 11, 2002
Bengt Halse
President and Chief Executive Officer
Audit review
We have reviewed this interim report in accordance with the recommendation issued by the Swedish Institute of Authorised Public Accountants, FAR. A review is significantly limited compared to an audit. We have found nothing to suggest that this interim report does not comply with the requirements set out in the Exchange and Annual Accounts Acts.
Linkoping, July 11, 2002
Bjorn Fernstrom Caj Nackstad Authorized Public Accountant Authorized Public Accountant Ernst & Young AB KPMG Bohlins AB
Dates for financial information:
Interim Report for January - September will be published on October 16, 2002. The 2002 Report will be published on February 14, 2003.
For further information, please contact: Agneta Kammeby, Manager Investor Relations tel. +46 13 18 71 25 Jan Nygren, Head of Corporate Communications tel. +46 13 18 19 99
Telephone interview with CEO Bengt Halse: Today Thursday July 11. tel.+46 13 18 71 75 Contact Anders Stalhammar, Press Officer tel. +46 708 89 70 96
International teleconference:
Today Thursday July 11, 16.00 (CET). Contact Marita Sidentel. +46 13 18 71 49 for registration and further information.
The Interim report can also be accessed on the Internet at www.saab.se
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