YEAR-END RELEASE, 2011 INTERIM REPORT OCTOBER-DECEMBER, 2011
The Board decided in December 2011 to divest the contracting activities in Poland, Romania, Slovakia, Great Britain and the Czech Republic, which are incurring losses. Agreements to sell the British contracting business was signed in December with Eurovia Group Ltd. In the accounts for 2011 the consolidated results are stated for “Continuing Operations”, and “Including Operations in process of Discontinuation” respectively. Continuing Operations consist of Contracting Nordic and Contracting Hungary as well as Material sales.
- Net sales increased, and amounted to SKr 229.9 million (206.4).
- The operating result was a loss of SKr 12.7 million (loss 25.2).
- The result after tax was a loss of SKr 35.6 million (loss 66.2).
- The loss per share was SKr 2.10 (loss 3.92).
- Net sales increased and amounted to SKr 1,046.2 million (1,037.4).
- The operating profit amounted to SKr 18.1 million (loss 0.3).
- The result after tax was a loss of SKr 27.0 million (loss 48.0).
- The loss per share was SKr 1.60 (loss 3.36).
Group total including Operations in process of Discontinuation
- Net sales increased and amounted to SKr 287.3 million (270.3).
- The operating result was a loss of SKr 65.9 million (loss 51.9).
- The result after tax was a loss of SKr 92.6 million (loss 85.1)
- The loss per share was SKr 5.49 (loss 5.04).
- Net sales declined and amounted to SKr 1,223.9 million (1,293.8).
- The operating result was a loss of SKr 71.3 million (loss 60.7).
- The result after tax was a loss of SKr 121.0 million (loss 101.3).
- The loss per share amounted to SKr 7.17 (loss 7.08).
Significant events during the quarter
• In December Geveko entered into an agreement to sell the business carried on through the subsidiaries Line Markings Ltd and Rommco Ltd in Great Britain. The purchaser is Eurovia Group Ltd, which belongs to Eurovia SA. The sale of the business in Great Britain is the first step on the way to implementing the decision taken to divest loss-making operations.
• A net charge of SKr 44.9 million - representing the adjustment to the value of the businesses being divested - was taken against the result, including a reserve for bad debts of SKr 18.7 million in Ukraine, and a positive revaluation of SKr 6.1 million in the value of the assets in Great Britain.
• Within the strategic revaluation process that was launched during the fourth quarter with the object of freeing up SKr 100 million just under 20 per cent had been realised by the end of the year. So far in 2012 a further 17 per cent have been realised, mainly by the sale of the contracting operations in Great Britain.
• The Board proposes to the AGM that no dividend be paid for the 2011 financial year.
Comments by Stefan Tilk, CEO and Managing Director
2011 was a year with many challenges, both strategic and financial. Financially, the year involved higher raw material costs. We were able to pass some of the price increases onto customers in Business Area Material, but not, on the other hand, to those on the contracting side of the business.
We have continued to make cost adjustments in Central and Eastern Europe. For the market to recover stronger public finances would be needed to enable investment in the road infrastructure to be resumed. However, the market situation has not improved, as a result of which conditions have remained very weak for the contracting business in these countries. Public finance problems also affected the British market, which is already subject to fierce competition, as the government was also forced to push through a programme of spending cuts in the road sector. As the business has been losing money for several years there was little choice but to decide to wind up loss-making contracting units in 2012. The first step was to sell the British contracting companies.
At the end of the year, Geveko was in breach of its borrowing covenants. In order to ensure liquid funds would be available in the future and be sure the company could continue to operate, discussions are being held with its bankers. Parallel to this Geveko is continuing to work on various projects with the object of raising liquid funds and reducing the amount of capital required. The decision to divest assets and wind up certain businesses is also expected to help reduce capital requirements and improve long-term profitability.
One effect of the decision to wind up the loss-making companies is that the Consolidated figures in the accounts for 2011 are stated as Continuing Operations, and Including Operations in process of Discontinuation. The Continuing Operations report a healthy profit while the result of Operations in process of Discontinuation has continued to deteriorate.
The Nordic contracting activities as a whole noted a satisfactory performance, but with varying results on the markets in relation to the previous year. Supplementary budgets for road building and maintenance resulted in a healthy volume trend on the Danish market. Conditions were stable in Norway, but the result was slightly poorer than in 2010, when volumes were very high. Volumes on the Finnish market were much higher than in the previous year and the result for 2011 improved. In the procurement round in Sweden, two major county contracts were lost, which reduced volumes in relation to 2010. Business Area Material reports healthy profitability and a significant increase in sales as a result of continued growth, especially in the prefabricated thermoplastic product segment. Decisions to raise budgets in the Nordic region and Western Europe, and the EU decision to earmark a further euro 500 million to finance road building and maintenance have helped to stimulate demand for Geveko’s products. In addition to co-operation on product development, the agreement with Saferoad will involve higher production of thermoplastic material for the Scandinavian market and further prospects of continued steady progress in Business Area Material.
By continuing to focus on marketing and product development, Geveko will be in a good position to grow organically. We are pursuing development projects with a sharp focus on environmental road markings and a new generation of road markings based on road sensors, with the aim of creating new business opportunities while also contributing to a safe road environment. Business Area Material has a well-established sales organisation that is intensifying its marketing to help it break into new, growth markets. Strategically, the efficiency measures in Nordic Contracting have resulted in a well co-ordinated business with every chance of making sustainable positive progress. Given the strategic focus we have chosen, and the goal of consolidating the position of market leadership in road marking in Europe, I look ahead to 2012 with confidence even though we will face many challenges along the way towards higher profitability.
Stefan Tilk, CEO and Managing Director
Tel: +46 (0) 31 172945, +46 (0) 702 499419
Göran Eklund, CFO
Tel: +46 (0) 31 172945, +46 (0) 727 325054
The information provided in this report is such that AB Geveko is required to publish in accordance with the Act concerning the Securities Market and/or the Act concerning Trading in Financial Instruments.
This information was released for publication on 23 February 2012 at 15.15 p.m.
AB GEVEKO (publ)
Company registration number: 556024-6844
P.O. Box 2137
403 13 Göteborg, Sweden
Tel: +46 (0) 31 172945