Interim Report Jan - June 2012
23 Aug, 2012 20:42 CET
Opus Group AB
Interim information
Interim Report Jan - June 2012
Gothenburg, Sweden, 2012-08-23 20:42 CEST (GLOBE NEWSWIRE) -- Opus acquires a
significant part of Bilprovningen
January – June 2012
Interim Period (January – June 2012)
• Sales increased to SEK 188.9 million (119.2), a sales growth of 58 percent
for the Group
• EBITDA of SEK 12.1 million (17.5), equivalent to an EBITDA margin of 6.4
percent (14.6)
• EBITDA includes acquisition related costs for Bilprovningen of approx. SEK
3.0 million (0), as well as start-up costs for the Wisconsin program of SEK 2.3
million (0).
• Cash flow from operating activities of SEK 14.2 million (15.4)
• Net earnings amounted to SEK 3.5 million (0.1)
• Earnings per share after dilution amounted to SEK 0,02 kronor (0,00)
Reporting Period (April – June 2012)
• Sales increased to SEK 100.3 million (57.9)
• EBITDA decreased to SEK 3.5 million (8.4), equivalent to an EBITDA margin of
3.5 percent (14.5)
• EBITDA includes acquisition related costs for Bilprovningen of approx. SEK
3.0 million (0), as well as start-up costs for the Wisconsin program of SEK 1.7
million (0).
• Cash flow from operating activities increased to SEK 8.6 million (5.6)
• Net earnings amounted to SEK 6.5 million (-0.2)
• Earnings per share after dilution amounted to SEK 0.03 (-0.00)
Agreement signed for strategically important acquisition of a third of
Bilprovningen in Sweden
During the second quarter, the company invested significant resources to
participate in the sales process when two large areas of Bilprovningen were
offered to the market for sale. Opus Group has worked intensively on the
project and on 9 July, the company announced that it had signed an agreement
with Bilprovningen and its owner, the Swedish Government as the majority
shareholder, to acquire a third of the current Bilprovningen. The acquisition
includes 70 inspection stations with a few located in Värmland, Småland,
Blekinge, several in Stockholm and Mälardalen and north in Sweden up to Kiruna.
The deal is important from both a strategic and an economic perspective. In
addition to increasing of both sales and profits, this acquisition forms an
important platform for further international expansion in the services segment
of vehicle inspection. The acquisition is expected to close in the fourth
quarter and is financed by a bank loan, a promissory note and a rights issue,
which is scheduled for the third quarter of this year.
In Business Area North America, ESP continues to contribute to the strong
acquisition-driven revenue growth of 73 percent for the Group in the second
quarter. Earnings are affected negatively due to start-up costs for the
Wisconsin program, which influences the performance of the first half. year.
The Wisconsin program started as planned on 1 July and has now started to
generate revenue. In addition, in April, Systech won a vehicle inspection
contract which for the State of North Carolina includes delivery of an IT
system for over 6000 private vehicle inspection stations that perform about 7.7
million inspections per year. The development work of IT system has commenced
in the second quarter. The project is expected to be completed in 2013 and
contributes postively to operating profit in the second half of the year.
The Wisconsin program and Bilprovningen project impacted the first half year’s
result with start-up and acquisition related costs, of which the Bilprovningen
project amounts to approximately SEK 3 million. However, we expect a positive
impact in both revenue and earnings in the second half.
Business Area Europe & Asia have a slow first half year with negative growth.
The sales shortfall is primarily related to product sales, while service
business remains stable and increasing. The negative sales trend can be
primarily related to the overall negative economic situation in Europe and the
weak development of the automotive industry. For the company as a whole, we see
continued growth in parallel with good profitability for the full year related
to the ESP acquisition, the new vehicle inspection contracts in the United
States and the acquisition of a third of Bilprovningen, for which the latter,
which is expected to generate revenue by the end of 2012. The Board has
previously decided that Opus Group will apply for a listing of it’s shares on
the NASDAQ OMX Exchange in Stockholm in 2012. The acquisition of a third of
Bilprovningen represents a major growth for the Group, to approximately one
billion in sales and organizational challenges. This means that the list change
will be moved up to 2013.
Gothenburg, Sweden, in August 2012
Magnus Greko
President and CEO
Notable Events during the period
Annual general meeting 2012
Opus changes name from Opus Prodox to Opus Group. Jan Åke Jonsson and Anders
Lönnqvist are elected to the Board of Directors of Opus Group.
Systech Signs Vehicle Inspection Program Contract with the State of North
Carolina
On April 18, 2012, Opus announced that Opus’ subsidiary, Systech International
LLC., had signed a contract with the North Carolina Department of
Transportation (NCDOT) to develop the Motor Vehicle Inspection and Law
Enforcement System (MILES). The contract starts immediately, and includes the
design, development, implementation and maintenance of a statewide data
management system that will provide a real-time link to over 6,000 private
inspection stations conducting 7.7 million inspections per year.
Notable Events after the end of the period
Opus acquires a significant part of Bilprovningen
On July 6, 2012 Opus signed an agreement to acquire 70 inspection stations from
Bilprovningen with a geographical focus on Stockholm, the Mälardalen region and
north thereof corresponding to approx. a third of Bilprovningen’s revenue 2011.
The purchase price amounts to SEK 375 million and closing of the acquisition is
estimated in the fourth quarter 2012.
Systech’s vehicle inspection program goes live in Wisconsin
The new Wisconsin Vehicle Inspection Program (WIVIP) was successfully launched
on July 1st. The centralized stations, now closed as of June 30th, have been
replaced by 200 independent auto service businesses serving the seven-county
region, including Greater Milwaukee, Sheboygan, Waukesha, Racine, and other
cities, and scheduled to perform over 800,000 vehicle inspections per year.
Financial Information, Group
Sales
January – June 2012
Net sales for the period amounted to SEK 188.9 million (119.2). The acquisition
of ESP has contributed to a sharp increase in sales compared to last year. The
turnover has increased by 58 percent for the Group compared to the same period
for the previous year. The integration of ESP is on track and is expected to
generate synergies with other companies within the Group. The Group had
negative organic growth of -11.9 percent (5.4) over the period, mostly driven
by the business area Europe & Asia having a negative organic growth of -19.5
percent (20.4). The negative organic growth for the Group and Europe & Asia
were mainly attributable to the general downturn in the automotive industry and
the general uncertainty in the European economy in the first half year.
April – June 2012
Net sales for the period amounted to SEK 100.3 million (57.9). The acquisition
of ESP has contributed to a sharp increase in sales compared to last year. The
turnover has increased by 73 percent for the Group compared to the same period
for the previous year. The Group had negative organic growth of -10.2 percent
(1.9) over the period, mostly driven by the business area Europe & Asia having
a negative organic growth of -21.6 percent (18.1).
Result
January – June 2012
Earnings before interest, taxes, depreciation and amortization (EBITDA)
amounted to 12.1 million (17.5), corresponding to an EBITDA margin of 6.4
percent (14.6). EBITDA includes acquisition costs related to Bilprovningen of
approx. SEK 3.0 million (0), as well as start-up costs related to the Wisconsin
program of approx. SEK 2,3 million (0). Net earnings amounted to SEK 3.5
million (0.1 million). North America’s EBITDA margin amounted to 11.0 percent
(27.8) during the period. This decrease is due to the acquisition related
adjustments for ESP Inc.
April – June 2012
Earnings before interest, taxes, depreciation and amortization (EBITDA)
amounted to 3.5 million (8.4), corresponding to an EBITDA margin of 3.5 percent
(14.5). EBITDA includes acquisition costs related to Bilprovningen of approx.
SEK 3.0 million (0), as well as start-up costs related to the Wisconsin program
of approx. SEK 1.7 million (0). Net earnings amounted to SEK 6.5 million (-0.2
million). North America’s EBITDA margin amounted to 10.0 percent (25.4) during
the period. This decrease is due to the acquisition related adjustments for ESP
Inc.
In connection with the Systech acquisition in April, 2008, the company acquired
Intellectual Propety (IP) of USD 12.3 million. This includes patents, software
and systems, and is amortized over five (5) years, affecting the Group’s net
earnings. In addition, the Group amortizes Customer Contracts and Relationships
over their estimated useful lives which also affects the Group’s net earnings.
For this reason, the company uses EBITDA, which excludes inter alia
amortization, as a key performance measurement of the Group’s profitability.
Financial Position and Liquidity
Cash and cash equivalents
Available cash and cash equivalents at end of period amounted to SEK 22.4
million (16.1). The Group’s interest bearing liabilities at the end of the
period amounted to SEK 105.6 million (42.2). The Group’s net debt at the end of
the period amounted to SEK 84.4 million (26.1). The Group currently amortizes
about USD 1,2 million (SEK 8.2 million) per quarter.
Equity
Shareholders’ equity at the end of the period amounted to SEK 240.1 million
(227.0), equivalent to SEK 1.25 (1.18) per share outstanding at the end of the
period.
Solvency
The equity ratio at the end of the period amounted to 53.4 percent (75.3).
Cash Flow
Cash flow from operating activities
Cash flow from operations for the period January-June amounted to SEK 14.2
million (15.4).
Investments
Total investments for the period January - June consisting mainly of ongoing
development projects amounted to SEK 1.3 million (0.9) and investments in
furnishings, machinery and other technical equipment amounted to SEK 7.3
million (5.6). In addition, acquisitions have been made during the period. For
more information, see Note 1.
Financing
The Group’s interest bearing liabilities at the end of the period amounted to
SEK 105.6 million (73.6). Cash flows from financing activities during the
period amounted to SEK 58.8 million (-11.9). The increase relates to new debt
in connection with the ESP Inc acquisition.
Financial Targets
Opus financial targets, over a business cycle, are:
- Annual growth in revenues of 10%
- EBITDA margin of at least 10%
- Interest-bearing net debt relative to EBITDA should not exceed 3.0 times
Business Areas
Opus operations are divided into two business areas, being Europe & Asia and
North America.
Europe & Asia
Sales for the current reporting period amounted to SEK 29.8 million (38.0).
Organic growth was negative and amounted to approx. -22 percent (18). EBITDA
amounted to SEK -3.5 million (3.4) and includes acquisition costs related to
Bilprovningen, equivalent to an EBITDA margin of -11.8 percent (8.9). The
average number of employees during the current reporting period was 66 (70).
North America
Sales for the current reporting period amounted to SEK 70.5 million (19.9).
Organic growth was approx. 4 percent (-6). EBITDA amounted to SEK 7.0 million
(5.1) and includes start-up costs related to the Wisconsin program of SEK 1.7
million (0), equivalent to an EBITDA margin of 10.0 percent (25.4).The average
number of employees during the current reporting period was 248 (92).
Customers
Opus customers are primarily government agencies (counties, states etc.), the
automotive industry, vehicle garages, and vehicle inspection companies (state
and privately owned). Opus has no individual customers which represent more
than 10 percent of the Group’s turnover.
Taxes
The tax expense for the period is calculated using the current tax rate for the
Parent company and each subsidiary. Temporary differences and existing fiscal
loss carry-forwards have been taken into account.
Employees
The average number of FTEs (full-time equivalents) in the Group was 325 (162)
during the current reporting period.
Parent Company
The Parent company’s sales during the current reporting period amounted to SEK
11.9 million (30.5) and profit after financial items to SEK -2.1 million
(-0.6). On April 1, 2012, a restructuring occurred, where the parent company’s
operations were moved to a new subsidiary, Opus Equipment AB. In connection
with this, the parent company changed its name to Opus Group AB. Opus Group AB
is now a holding company and therefore is not comparable with the figures of
last year.
Related Parties
No significant transactions with related parties have taken place during the
reporting period.
Accounting and Valuation Policies
This report has been prepared in accordance with IAS 34, Interim Financial
Reporting. The group accounting has been prepared in accordance with
International Financial Reporting Standards, IFRS, as approved by EU, and the
Swedish Annual Accounts Act. The interim report for the Parent company has been
prepared in accordance with the Swedish Annual Accounts Act and recommendation
RFR 2. The same accounting and valuation policies were applied as in the 2011
Annual Report. New standards and interpretations effective from January 1, 2012
have not had any significant impact on the Group’s financial statements.
Accounting Estimates and Assumptions
The preparation of financial reports in accordance with IFRS requires the Board
of Directors and Management to make estimates and assumptions that affect the
application of accounting principles and the carrying amounts of assets,
liabilities, revenue and expenses. Actual outcomes may deviate from these
estimates.
Translation of Foreign Operations
Assets and liabilities in foreign entities, including goodwill and other
corporate fair value adjustments, are translated to Swedish kroner at the rate
prevailing on the balance sheet date, meanwhile all items in the income
statement are translated using an average rate for the period.
Essential Risks and Uncertainty Factors
Opus Group AB (publ) and the Opus Group companies are through their activities
at risk of both financial and operational nature, which the companies
themselves may affect to a greater or lesser extent. Within the companies,
continuous processes are ongoing to identify possible risks and assess how
these should be handled.
The companies’ operations, profitability and financial conditions are directly
related to investments within the automotive industry and regulations within
environmental and safety testing of vehicles. With therecent dramatic
development of the global economic climate, there is a general insecurity,
which in the short term results in an increased risk and uncertainty in respect
of Opus sales, profitability and financial condition, primarily in the business
segment Europe, which is more dependent of the equipment business. In North
America, the Group runs vehicle inspection programs through long-term contracts
with government agencies. There is a risk of early contract termination which
would affect the Group’s financial position negatively. Furthermore, the Group
has a currency risk through its translation exposure of the operations in the
U.S. A detailed description of the Parent company and subsidiaries’ risks and
risk management are given in Opus Annual Report 2011.
Outlook
In the North American vehicle inspection business unit, the company sees
interesting opportunities as a number of government contracts in the U.S.
emission testing market are scheduled to come out for bid. In addition, there
are a number of interesting new markets outside the U.S., where the demand for
environmental and safety testing of vehicles is increasing. Opus has a well
established position in the North American vehicle inspection market. The
acquisition of a portion of Bilprovningen will create a strong position in the
Swedish market for Opus. In the long term, Opus aims to expand the vehicle
inspection business in other markets. There are several emerging and developing
countries where vehicle inspection is being introduced. Interesting markets for
expansion in the next years include Central and South America, the Middle East,
Asia, Eastern Europe and Africa (Sub-Sahara).
The focus for 2012 will also be integrating ESP and Bilprovningen in our group
and exploit synergies between the companies within the group. Opus sees
significant synergies between Systech and Bilprovningen in terms of Systech’s
proprietary IT system but also the possibility of offering a wide range of
competitive vehicle inspection services to the Swedish vehicle inspection
market. Opus is experiencing rapid growth in 2012 resulting from organic growth
in North America and acquisition growth in both business areas. Such growth may
have a negative impact on near-term expenses. Also, management will be involved
in transition activities over the near term, which may temporarily result in
less focus on some of the existing operations.
In Europe & Asia the focus for 2012 will be to mitigate the negative growth and
ensure profitability. There are several government-run programs where vehicle
inspection equipment must be exchanged within the next few years, creating
great opportunities. Our organization, with its own products, developed in
Europe and the United States, and with production in Europe, U.S. and China,
creates a competitive advantage that we shall use internationally. In addition
we continue to look for acquisition opportunities that strategically strengthen
our group.
Opus does not provide financial forecasts.
Financial Information
•November 23, 2011, Interim Report (January - September, 2012)
•February 21, 2013, Year-end report 2012
This report has been subject to auditors’ review.
Gothenburg, Sweden, August 23, 2012
Magnus Greko
President and CEO
Contact Information
Opus Prodox AB (publ), (org no 556390-6063)
Bäckstensgatan 11C
SE-431 49 Mölndal, Sweden
Phone: +46 31 748 34 00
Fax: +46 31 28 86 55
E-mail:
www.opus.se
For any questions regarding the interim report, please contact Magnus Greko,
President and CEO, +46 31 748 34 91.
Opus Certified Adviser
Thenberg & Kinde Fondkommission AB
Box 2108
SE-403 12 Gothenburg, Sweden
Phone: +46 31 745 50 00
Opus Prodox AB (publ) in Brief
The Opus Group is in the business of developing, producing and selling products
and services within Automotive Test Equipment, Vehicle Inspection Systems and
Fleet Management for the global market. The products include emission
analyzers, diagnostic equipment, and automatic test lanes. Services include
management of mandatory vehicle inspection programs. The Group sells its
products and services in more than 50 countries all over the world and
currently has around 320 employees. The turnover for 2011 was roughly SEK 232
million. Opus’ share is listed on First North Premier (NASDAQ OMX) under the
ticker OPUS.