Year-end report january-December 1999

YEAR-END REPORT JANUARY - DECEMBER 1999 * Net sales rose by 24 percent to SEK 2,136 million (1,725) * Orders received increased by 28 percent to SEK 2,266 million (1,764) * Operating income fell by 14 percent to SEK 124 million (144). Income after financial items fell by 10 percent to SEK 127 million (141) * During the fourth quarter, Wireless Solutions was acquired. * General agreement has been signed with Telia Mobile regarding microwave radio. Market Sales of mobile telephones on the world market remained strong in the fourth quarter. Allgon estimated that the number of subscribers in the world amounted to 440-450 million during 1999 and the number of sold mobile telephones to 250-270 million. Sales of mobile telephones for the year 2000 is expected to be in the range of 360-400 million units. Expansion of the infrastructure of the mobile telephone networks in North America remained strong. The rising penetration and the increased expansion of digital systems, in combination with the rising talktime per subscriber, have been the prime driving forces behind the increased investments. Consolidation of operators in the USA continued via mergers and acquisitions. This leads to market stimulation as the subscribers are able to use their mobile phones throughout the country. Lower tariffs and strong growth of prepaid cash cards contributed to an increase in number of subscribers in Europe. The market is characterized by increased competition. In South America, increased activity was noted towards the end of the year. In Asia, China and Japan accounted for the largest growth in number of subscribers, whereas other parts developed relatively slowly. Telecom investments in China were low during the year pending a reorganization of the telecom sector. However, demand increased during the second half of the year when the new organization began to stabilize. The final structure of the telecom sector has not yet been established. During the latter part of the year, increased activity was noted in other parts of Asia. Fourth quarter 1999 Allgon's net sales in the fourth quarter rose by 46 percent to SEK 628 million (431). Operating income fell by 14 percent to SEK 32 million (37). Income after financial items fell by 8 percent to SEK 37 million (40). Income for the quarter was negatively effected by the fact that a large customer significantly reduced announced volumes of mobile telephone antennas. This was caused by the fact that the customer unexpectedly decided on a reconstruction. During the fourth quarter of 1999, Allgon acquired Wireless Solutions Sweden AB which develops products and systems for wireless communication. The purchase price amounted to SEK 75 million, of which SEK 5 million refers to a convertible loan and is paid via a new issue of 383,000 B shares and a cash payment of SEK 17.5 million. The goodwill, which has now been established at approximately SEK 73 million will be written off over 10 years. The acquisition is considered to affect Allgon's income negatively by approximately SEK 25 million during the year 2000 and thereafter will generate a positive contribution from the second half of year 2000. Under certain circumstances a supplementary purchase price will be paid during the period to 2003 inclusive. At the end of December 1999, Wireless Solutions received an order from the Doro Group, for wireless LAN products. The order amount is initially for SEK 32 million with a declaration of intent for important additional orders. Group net sales and orders received In 1999, net sales increased by 24 percent to SEK 2,136 million (1,725). Orders received rose by 28 percent to SEK 2,266 million (1,764). Business Area System Net sales rose by 22 percent to SEK 1,146 million (938). Sales increased in North America and Europe while sales remained unchanged in Asia. Sales of repeater systems rose slightly, especially in Europe. Sales of base station equipment developed positively, especially in North America. Sales of base station antennas increased compared with the previous year. Stronger sales were registered in North America, South America and in Europe, whereas they remained unchanged in Asia. During the fourth quarter, two contracts were received for fiber optic repeater networks for railroads. One contract related to coverage of the tunnels for the new express train to Arlanda airport in Stockholm. The other system referred to a GSM 1900 system for the subway in Santiago, Chile. The value of these orders amounted to SEK 14 million. During the year, production of base station antennas started in Brazil and the first deliveries were made during the fourth quarter. During the first quarter of year 2000, Allgon System will move into new premises which will involve certain lump-sum costs. Deliveries of the first microwave radio products took place in the fourth quarter of 1999. A two-year general agreement with the Swedish operator Telia Mobile was concluded in January 2000. The first delivery will be made during the first quarter of the year 2000. Invoicing within the framework of this agreement is estimated to amount to SEK 15-20 million in the year 2000. The microwave radio operations, which from January 2000 form a separate Business Area, will gradually increase its share of Allgon's sales. Stefan Wellenstam, who will join Allgon in February, has been appointed Head of the Business Area. He was previously President of Caran Systems AB in Gothenburg. Business Area Mobile Communications Net sales rose by 26 percent to SEK 990 million (787). Volume development for terminal antennas was slightly higher than growth in invoicing in the fourth quarter. The product mix was relatively stable during the year and the distribution between retractable, fixed and built-in antennas was 38/61/1 percent (48/52/0) in 1999. In September 1999, a large customer decided to reconstruct a telephone model, which was in production with high volumes planned for the fourth quarter of 1999 and the first half of the year 2000. Volumes for this model have been significantly reduced pending the new construction. As a consequence of this, Allgon was hit by a temporary reduction in deliveries and lower capacity utilization of newly-acquired nyanskaffad production equipment. During 1999, Allgon delivered 96 million (65) terminal antennas, an increase of 48 percent. A minor fall in Allgon's market share to just under 40 percent can be noted as a result of the aforementioned situation Sales of antennas for satellite telephones were on a par with the previous quarter. Sales of vehicle antennas were slightly above the previous year's level. Income Allgon's operating income fell by 14 percent to SEK 124 million (144). Income after financial items fell by 10 percent to SEK 127 million (141). The fall was mainly caused by: * temporarily increased direct costs in production in order to be able to handle the increased sales volumes during the second and third quarters * increased costs within the microwave segment of a total of SEK 50 million (31) * lower capacity utilization within production during the fourth quarter caused by the temporary reduction in deliveries. * costs on establishment in Brazil, China and Japan Allgon's net exposure to the USD amounts to approximately 44 percent of net sales. The exchange rate affected theoretically the year's result positively by SEK 56 million compared with the previous year. Income after financial items would have been SEK 25 million higher if Allgon had not had any hedging. The tax rate amounts to 35 percent (22), which exceeds the nominal tax rate in Sweden of 28 percent. This is due to non-deductible goodwill depreciation and the fact that significant profit was generated in foreign subsidiaries with higher tax rates. Financial position At December 31, 1999, the equity ratio amounted to 50 percent (62). Net borrowing amounted to SEK 162 million at the period-end. At end-1998, net liquid assets were SEK 207 million. Changeover to the year 2000 Allgon has not had any Y2K-related interruptions and the changeover to the new Millennium was problem-free. Capital expenditure During the year, capital expenditure in buildings, land, machinery and equipment amounted to SEK 281 million (152) gross, of which the ongoing new construction for Allgon System accounted for SEK 149 million (54). New growth target Allgon has revised upward its long-term target for annual sales growth from 15 percent to at least 20 percent. Dividend The Board of Directors has decided to propose that the Annual General Meeting decide to raise dividend of SEK 0.85 (0.75) per share for 1999, equivalent to SEK 24.8 million (21.6) in total. Annual General Meeting The Annual General Meeting will be held in Täby Park Hotell in Täby, outside Stockholm, on Wednesday March 15, 2000 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 tel +46 8 587 20 660 Nomination Committee, Per Wejke, Board Member, tel +46 8 661 34 36 or 708 42 33 73 Jonas Kämpe, Board Member tel +46 377 97 77 8033 or 705 92 82 00 Future information dates The complete Annual Report will be available at the end of February on Allgon's premises in Näsvägen 17, Åkersberga. It will be distributed to shareholders at the same time. March 15, 2000 - Annual General Meeting April 13, 2000 - Three-month Interim Report July 13, 2000 - Six-month Interim Report October 17, 2000 - Nine-month Interim Report Åkersberga, January 18, 2000 Allgon AB (publ) Jan Edhäll President and CEO For further information, please contact: Jan Edhäll Telephone: +46 8 540 822 31 President and CEO, Allgon AB Claes Silfverstolpe Telephone: +46 8 540 822 32 Chief Financial Officer, Allgon AB ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/01/18/20000118BIT00380/bit0001.doc The full report http://www.bit.se/bitonline/2000/01/18/20000118BIT00380/bit0002.pdf The full report