Allgon Year End for 1998

[REMOVED GRAPHICS] ALLGON YEAR-END REPORT FOR 1998 Invoiced sales rose by 5 percent to SEK 1,725 million ( 1,639) during 1998 Operating income increased by 7 percent to SEK 144 million (135) and income before taxes to SEK 141 million (132) Continued very satisfactory volume growth for terminal antennas Sales of repeater systems developed very positively Jan Edhäll new President and CEO of Allgon - takes up his duties in February 1999 Market Sales of mobile telephones on the world market remained very strong during the fourth quarter. Allgon estimates that the number of telephones sold during 1998 amounted to approximately 150 million. Expansion of the mobile telephone networks in North America did not increase noticeably in the fourth quarter but remains at largely the same level as earlier during the year. On Allgon's part, no significant effects have so far been noted of the simplified tariff structures which were implemented during the second half of the year. In Europe, network expansion was stable whereas sales of telephones continued to increase strongly. In Asia, the markets, which Allgon works, enjoyed a positive trend. Fourth quarter 1998 In the third quarter, Allgon's invoicing increased by 7 percent to SEK 431 million (403). Operating income fell by 18 percent to SEK 37 million (45). Income after financial items was charged with increased investments in the radio link project and fell by 15 percent to SEK 40 million (47). However, it should be noted that for the fourth quarter 1997 the Company reported its highest income so far. Group invoicing and orders received During 1998, invoiced sales increased by 5 percent to SEK 1,725 million (1,639). Orders received improved by 6 percent to SEK 1,764 million (1,659). Business Area Systems Invoiced sales fell by 3 percent to SEK 938 million (963). Invoicing fell to customers in North America and Europe whereas it increased to customers in Asia. Continued price-squeeze prevails on the market. Sales of base station equipment developed weakly which is explained by the lower sales of automatically tuned combiners. The fall for combiners was expected and is related to the slow expansion of the North American mobile telephone networks. In addition, sales were affected by fluctuations in market shares for Allgon's customers in South America. The remaining product range in the product area showed a satisfactory sales trend. Sales of repeater systems developed very positively on all markets and increased significantly compared with 1997. In North America, 1998 sales increased strongly after the necessary type approvals were obtained at the end of 1997. Interesting areas of application for repeaters such as tunnels and subways open additional business opportunities. Sales of base station antennas rose slightly compared with 1997. During the fourth quarter, a new automated production line was deployed for manufacturing of modularized base station antennas. This method will lead to shorter throughput times. Work relating to the new radio link products is proceeding according to plan and the first products are now type approved within EU. The project remains resource intensive and charged net income for the year with an additional SEK 19 million compared with 1997. During the fourth quarter, 3C Scotland Ltd was acquired. The company develops and manufactures various components for radio applications within mobile telephony. In the short-term, the acquisition is expected to have only a marginal influence on Allgon's income and financial position. Business Area Mobile Communications Invoicing increased by 16 percent to SEK 787 million (676). Volume development for terminal antennas was significantly stronger than growth in invoicing also in the fourth quarter. During the year, 65 (40) million antennas were delivered, an increase of more than 60 percent. In the fourth quarter, the share of retractable antennas was 38 (65) percent, whereas the share of fixed antennas amounted to 62 (38) percent. Manufacturing of terminal antennas at Allgon's plant in the USA, which started during the year, is considered to have strengthened Allgon's position in the USA. Sales of vehicle antennas are at a slightly lower level than in the previous year, which is mainly connected with a falling market in Eastern Europe as a consequence of the weak economic development of the region. During the fourth quarter, manufacturing of vehicle antennas was subcontracted. Development of antennas for satellite telephones proceeded according to plan. The first deliveries are expected to be made during the fourth quarter of 1999. Income Allgon's operating income rose by 7 percent to SEK 144 million (135). Income after financial items increased by 7 percent to SEK 141 million (132). The increase is mainly attributable to an improved gross margin, 39 percent (36). Allgon's net exposure to the USD amounts to approximately 36 percent of invoiced sales. The exchange rate affected the period's income positively by SEK 48 million compared with 1997. Income after financial items would have been SEK 27 million higher if Allgon had not had any hedging. The Group's forward exchange contracts covering deliveries in USD which have yet to be made amounted to USD 4 million at an average rate of SEK 8.14 per USD. The Board of Directors makes decisions regarding hedging of net flows on a continuous basis. In the first six months, no hedging was made in USD, whereas the Group made some hedging during the second half of the year. At the year-end, signed contracts were equivalent to 100 percent of anticipated payment flows for the next 4 months. Financial position At the year-end, the equity ratio was 62 percent (63). Net liquid asses amounted to SEK 207 million (176) at December 31. Capital expenditure During the year gross capital expenditure amounted to SEK 150 million (72) for buildings, land, machinery and equipment. Of this amount, SEK 54 million refers to a site and work in progress for the new plant which is under construction for Business Area Systems in North Stockholm. New President and CEO In December, Allgon's Board of Directors appointed Jan Edhäll new President and CEO. Jan Edhäll will take up his duties on February 15, 1999 and was previously Executive Vice President of Ericsson Mobile Communications. Dividend The Board of Directors has decided to propose that the Annual General Meeting decide an increased dividend of SEK 0.75 (0.65) per share for 1998, equivalent to SEK 21.6 million (18.7) in total. Annual General Meeting The Annual General Meeting will be held in Täby Park Hotell in Täby outside Stockholm on Tuesday March 16, 1999 at 6 pm. Nomination of Board Members Shareholders who wish to submit proposals for Board Members in advance can contact one of the Members of the Nomination Committee: Gunnar Bark, Chairman of the Board and Chairman of the Nomination Committee, tel +46 8-402 06 60 Per Wejke, Board Member, tel +46 8-661 34 36 or 708-42 33 73 Jonas Kämpe, Board Member tel +377 97 77 8033 or 705-92 82 00 Upcoming information dates The complete Annual Report will be made available for the shareholders in Allgon AB at the end of February on Allgon's premises in Näsvägen 17, Åkersberga. It will be distributed to the shareholders at the same time. March 16, 1999 - Annual General Meeting April 15, 1999- Three-month interim report July 13, 1999 - Six-month interim report October 19, 1999 - Nine-month interim report Allgon's operations We develop, market and produce radio-based solutions and other products for wireless telephony and data communications. Our product range comprises systems and components for base stations, repeaters and transmission, as well as antenna solutions. Our customers are system operators and manufacturers, terminal manufacturers, vehicle manufacturers and distributors. Operations are divided into two Business Areas: Systems (base station equipment, base antennas and repeaters) Mobile Communications (antennas and antenna products for terminal and vehicle applications) Åkersberga, January 19, 1999 Allgon AB Board of Directors For further information, please contact Claes Silfverstolpe, Chief Financial OfficerTel. +46-8-540 822 32 (direct line) 1998 1997 1996 Condensed Consolidated Income Statement (SEK million) Net sales 1,725 1,639 1,369 Cost of goods sold -1,048-1,046 -963 Gross income 677 593 406 Selling expenses -186 -141 -119 Administrative expenses -105 -81 -88 Research and development costs -224 -162 -117 Other operating -18 -74 14 income/expenses Operating income 144 135 96 Net financial income/expense -3 -3 13 Income after financial items 141 132 109 Taxes -31 -20 -21 Minority share of net income -3 -1 -1 for the year Net income for the year 107 111 87 Condensed Consolidated Balance Sheet (SEK million) 1998 1997 1996 31 Dec31 Dec31 Dec Assets Fixed assets 213 137 99 Current assets 731 643 563 Total assets 944 780 662 Shareholders' equity and liabilities Shareholders' equity 579 491 393 Minority interest 3 2 1 Provisions 60 37 43 Long-term liabilities 11 5 2 Current liabilities 291 245 223 Total liabilities and 944 780 662 shareholders' equity Key figures 1998 1997 1996 Orders received (SEK million) 1,764 1,659 1,384 Operating margin (%) 8 8 7 Profit margin (%) 8 8 8 Return on capital employed (%) 31 37 30 Return on shareholders' equity 20 25 24 (%) Equity ratio (%) 62 63 59 Average number of full-time 865 764 684 employees Investment in buildings and 54 - - land (SEK million) Investments in machinery and 96 72 34 equipment (SEK million) Number of shares at period-end28,80028, 8014, 40 (000) 0 0 Earnings per share (SEK)* 3.70 3.84 3.01 Equity per share (SEK)* 20 17 14 * Adjusted for new share issue Invoiced sales (SEK 1998 1997 Change % million) Systems 938 963 -3 Mobile Communications 787 676 16 Total 1,7251, 639 5 Europe 479 573 -16 North & South America 769 763 1 Rest of the world 477 303 58 Total 1,7251, 639 5 QUARTERLY VALUES Condensed Consolidated 1997 1997 1997 1997 1998 1998 1998 1998 Income Statement (SEK M) Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Mar Jun Sep Dec Mar Jun Sep Dec Net sales 385 433 418 403 412 435 447 431 Cost for goods sold -243 -282 -261 -260 -259 -267 -278 -244 Gross income 142 151 157 143 153 168 169 187 Selling expenses -39 -33 -34 -35 -42 -52 -41 -51 Administrative expenses -19 -22 -23 -17 -28 -21 -22 -34 Research and development -39 -40 -38 -45 -50 -56 -53 -65 costs Other operating -19 -33 -21 -1 -3 -10 -5 0 income/expenses Operating income 26 23 41 45 30 29 48 37 Net financial 2 -3 -4 2 -5 1 -2 3 income/expense Income after financial 28 20 37 47 25 30 46 40 items Taxes -7 -4 -9 0 -3 -8 -11 -9 Minority share of net 0 -1 0 0 -1 0 -1 -1 income for the year Quarterly income 21 15 28 47 21 22 34 30 Condensed Consolidated 1997 1997 1997 1997 1998 1998 1998 1998 Balance Sheet (SEK 31 30 30 31 31 30 30 31 million) Mar Jun Sep Dec Mar Jun Sep Dec Assets Fixed assets 107 113 112 137 147 157 198 213 Current assets 583 613 649 643 683 689 695 731 Total assets 690 726 761 780 830 846 893 944 Shareholders' equity and liabilities Shareholders' equity 416 416 444 491 512 515 547 579 Minority interest 1 2 2 2 3 4 4 3 Provisions 31 33 35 37 34 34 34 60 Long-term liabilities - - - 5 4 4 4 11 Current liabilities 242 275 280 245 277 289 304 291 Total liabilities and 690 726 761 780 830 846 893 944 shareholders' equity Key figures 1997 1997 1997 1997 1998 1998 1998 1998 Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Mar Jun Sep Dec Mar Jun Sep Dec Orders received (SEK 421 464 407 367 433 441 428 462 million) Operating margin (%) 7 5 10 11 7 7 11 8 Profit margin (%) 7 5 9 12 6 7 10 9 Return on capital 30 22 39 45 28 27 42 30 employed (%) Return on shareholders' 21 14 26 40 17 17 26 21 equity (%) Equity ratio (%) 60 58 59 63 62 61 62 62 Average number of full- 706 705 848 773 801 819 969 871 time employees Investments in buildings - - - - - 3 43 8 and land (SEK million) Investments in machinery 16 18 15 23 27 25 22 22 and equipment (SEK M) Numbers of shares at 14,4028,8028,8028,8028,8028,8028,8028,80 period-end (000) 0 0 0 0 0 0 0 0 Earnings per share 0.73 0.51 0.97 1.62 0.73 0.77 1.18 1.03 (SEK)* Equity per share (SEK)* 14 14 15 17 18 18 19 20 *Adjusted for new share issue Invoiced sales (SEK M) 1997 1997 1997 1997 1998 1998 1998 1998 Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Mar Jun Sep Dec Mar Jun Sep Dec Systems 228 254 258 223 222 226 255 235 Mobile Communications 157 179 160 180 190 209 192 196 Total 385 433 418 403 412 435 447 431 Europe 135 152 137 149 116 144 100 119 North & South America 180 180 220 183 177 177 235 180 Rest of the world 70 101 61 71 119 114 112 132 Total 385 433 418 403 412 435 447 431 Cash flow analysis (SEK M) 1998 1997 Adjusted operating income 220 176 Cash flow from current 186 154 operations Change in working capital 14 73 Capital expenditure -152 -79 Cash flow after 48 148 investments Financing -14 -16 Change in liquid funds 34 132 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/01/19/19990119BIT00120/bit0001.doc http://www.bit.se/bitonline/1999/01/19/19990119BIT00120/bit0002.pdf