Atle - interim report January - September 1998

Interim Report January - September 1998 * Consolidated earnings after financial items rose to SEK 852M (636), whereas earnings before taxes were SEK 798M (605), an increase of 32 per cent. * Earnings per share on a rolling 12-month basis amounted to SEK 12.89 (1997 full-year: 10.62). * Application for A list quotation from 27 November 1998. * Business Sector Livsmedelsprodukter will be phased out. * For the full-year, both exit results and operating earnings are expected to be significantly higher than in the previous year. Major events during 1998 Business Sector Acquisitions Divestments Verkstadsindustri Hägglunds Drives KMT introduced on Moving acquires ITS- the stockmarket, 67 Comstore % of the shares are sold Holding in Mora Tool Tjänste & Handel Gadelius, which in turn acquires Mansson Miljöteknik Studsvik acquires Scandpower and SINA 30 % in Nordic Port Informationsteknologi Martinsson becomes Holding in Sicon subsidiary 28 % in Sourcecom Livsmedelsprodukter Holding in Viltpoolen Mergers & Acquisitions 60 % in Hilding Holdings in: Anders Fritidsresor 35 % in Nordisk Karlshamns Renting Optimera 33 % in Kronans CEA Droghandel 11 % in Mölnlycke Health Care Holding in Westwood converted to 6 % in the listed Norwegian company, Moelven Hilding Anders merges with Apax Development Företagskapital Holdings in: becomes wholly-owned Åke Larson Gruppen Convertible which Johnson Pump provides 20 % in Nord 2000 6 % in Asta Carotene Convertible which provides 20-30 % in Universalantenner 38 % in Hardford & Schtoff Företagskapital starts SEK 420M fund Group (Comparative figures for 30 Sep 97 and 1 Jan 97 - 30 Sep 1997 are shown in brackets) Market criteria Against the background of the economic developments in various parts of the world and on the financial markets, it is timely to give an assessment of how Atle is affected by these events. The profits of the Atle Group emanate from operating profits in the Atle-owned companies and from the exit results when these are sold. The companies are almost without exception Sweden-based and operate in greatly different sectors. The component of Trading, IT and other service companies is quite significant. Atle M&A and Atle Development, which account for just under half of the capital and two-thirds of the number of holdings, both have very considerable sector diversification. Atle Karolin Verkstadsindustri accounts for approximately one third of both sales and invested capital. More than 50 per cent of the net sales of the Atle Group refer to Sweden. The general economic trend in Sweden, as well as Sweden's international competitiveness, are therefore the individually most-important parameters for the current earning capacity. The remaining sales take place outside Sweden, of which just under 9 % in Asia and Australia and slightly less than 1 % in Eastern Europe. The international economy is therefore an important though not decisive factor. Of Atle's exits, less than 10 per cent have historically been carried out via stockmarket introductions, the by-far predominant part refers to sales to other players in the respective sector. On these so-called industrial sales, the price is affected - but to a lesser degree - by the variations in the stockmarket's pricing of listed companies. More important for the price, and thus Atle's earnings, is the improvement in the company's position and profit capacity which have taken place during Atle's ownership as well as the synergies which the right buyer can see in combination with his own operations. Taken together, the assessment is that recent developments should have a limited effect on Atle's development in the long term. The current operating earnings, which are rising significantly during 1998, may become affected, albeit moderately, in a negative direction. In the short term, the price of sold companies could possibly be slightly lower. The price of acquired companies falls correspondingly and the supply of acquisition objects increases as a consequence of difficulties in making stockmarket introductions on small companies lists. In the longer term, the exit operations will therefore be neutral or positive. The largest negative short-term effect could become apparent for the relatively few companies in which exit can take place via stockmarket introductions. If the market situation makes such introductions impossible, Atle will have a temporary reduction in exit profits. However, the value-creating business development in these companies continues even if the profits are realised later. Net sales and results Consolidated net sales during the period amounted to SEK 6,656M (5,298), an increase of 26 per cent. Consolidated earnings after financial items rose to SEK 852M (636) and earnings before taxes amounted to SEK 798M (605). Earnings of the Business Sectors were SEK 823M (551). The results of the Business Sectors include exit results of SEK 564M (368). Total operating earnings of the Business Sectors increased to SEK 259M (183). Investments and Exits During the period, the Group invested SEK 1,668M (442) in operating companies. Atle Mergers & Acquisitions: SEK 933M, Atle Karolin Verkstadsindustri: SEK 393M and Atle Informationsteknologi: SEK 169M account for the biggest volume. The largest investments referred to Hägglunds Drives, Gadelius, Martinsson Gruppen, Kronans Droghandel, Nordisk Renting and Hilding Anders. At end- September, the Business Sectors investments in operating companies amounted to SEK 4,377M (2,876), an increase of 52 per cent. During the period, 20 exits were carried out, of which one was in connection with a stockmarket introduction (KMT). The combined sales figure amounts to SEK 878M (531). The largest exit profits emerged on the sales referring to Fritidsresor, KMT, Karlshamns and Optimera. Business Sector operations Consolidated net sales and earnings before taxes (after minority interest) are shown in the following table. The results of the Business Sector include exit profits which are not evenly distributed over the year. In step with the expansion of the Group's operations, generation of operating earnings becomes increasingly distributed on the different Business Sectors. Jan - Sep 1998 Jan - Sep 1997 Full-year 1997 Business Sector Net sales Result Net sales Result Net Result sales Atle Karolin 2,283 257 2,509 91 3,644 153 Verkstadsindustri Atle Tjänste & Handel 1,561 37 1,210 26 1,627 42 Atle Miljöteknik 715 17 507 5 872 1 Atle 997 41 266 71 377 75 Informationsteknologi Atle 247 -12 258 48 347 53 Livsmedelsprodukter Atle Mergers & 797 435 533 303 724 308 Acquisitions Atle Development 16 48 15 7 18 39 Total Business Sectors 6,616 823 5,298 551 7,609 671 Group adjustments, 40 -25 - 54 7 41 overheads and the Parent Company's asset management Atle Group 6,656 798 5,298 605 7,616 712 Atle Karolin Verkstadsindustri During 1998, the Business Sector has changed its structure significantly compared with the previous year. In April, KMT was introduced on the stockmarket and is therefore no longer consolidated. The ownership in Zeteco was reduced as a consequence of a new issue of Zeteco shares in connection with the merger with SMZ. Zeteco is now reported as an associated company. At the beginning of the year, Hägglunds Drives which has developed as anticipated was acquired. These structural changes are aimed at a concentration on the materials-handling segment. For comparable units, the inflow of orders and invoicing during the period are on a par with the previous year's outcome. Volumes were affected by the stagnation on the Asian markets which, however, could be partly compensated on other markets. Of 1997 invoicing, 12 per cent was to Asia, a volume that will be significantly lower this year as Zeteco´s invoicing is no longer consolidated in the Atle Group. Rationalisation programmes initiated during 1997 will not be completed until the end of the year. This will influence net profit for the year with structural costs which amount to approximately SEK 20M for the period. Taken together, this has had the effect that operating earnings before exit profits for comparable units fell compared with the previous year. Net sales of the Business Sector for the period amounted to SEK 2,283M (2,509) and earnings to SEK 257M (91). By tradition, the fourth quarter is the strongest for Atle Karolin and earnings will therefore improve proportionately during the year. Atle Tjänste & Handel In general, the Business Sector follows its prepared plan, however with some positive and negative departures. HDF-Paulsson continues to develop positively. Earnings for July-September are higher than in the previous year. The Japan-based company, Gadelius, is facing a tougher market. Despite this fact, the company's earnings are expected to remain at a satisfactory level. Work on integrating Mansson in Gadelius continues with high intensity. Näsström Systems' integration of Alentec Hydraulik has now been completed. Since 1 November, the company has appeared under the name of Näsström throughout Sweden. Despite increased investments in sales resources, the earnings trend remains positive. Näckrosbuss is improving the result of its operations. This is a consequence of the fact that a number of awarded procurement contracts have now started to come into force. The third quarter was therefore significantly better than the second quarter. In addition, the company has signed an agreement in Dalarna to be responsible for 20 per cent of bus traffic. During the year, the company carried out three acquisitions which, among other things, are aimed at increased investments in the mobility service segment. Alentec Orion's result remains unsatisfactory. Extensive restructuring has been implemented and is expected to have a positive effect on earnings during 1999. Net sales of the Business Sector amounted to SEK 1,561M (1,210) during the period and earnings to SEK 37M (26). Atle Miljöteknik Studsvik enjoyed strong growth in both sales and earnings compared with the previous year. The company is expected to continue to grow both organically and via acquisition. During the spring, operations relating to software for core calculation programmes were acquired from the Norwegian company, Scandpower. During the summer, Studsvik acquired SINA in Germany which carries out radiation protection and decontamination operations. SINA is the market leader in Germany and the company also represents a platform for marketing Studsvik's other services on that market. Both acquisitions will have a positive effect on Studsvik's earnings as early as in the current year. The investment in the USA for handling low-level radioactive organic waste is developing according to plan. The plan was inaugurated on 24 September and is expected to become operational during December. Orders have been signed for the first few months' production. Continued negotiations are being held with a number of nuclear power stations. In step with the completion of the plant, the interest from these to sign orders is increasing. On Centralsug's part, a positive decision was made on one of the company's important markets. The largest real estate company in Hong Kong has decided that all new construction of housing will be equipped with vacuum-based technology for waste-handling. This creates a market in Hong Kong of SEK 200- 300M per annum. Spain has developed very positively during the year with significantly growing sales and earnings level. However, the overall result of Centralsug is slightly negative. Bala's sales have developed favourably during the year. Approximately 40 plants were sold during the period and the technology is considered to have achieved a clear acceptance on the market. From having reported a strongly negative result in the previous year, earnings are now positive. Net sales of the Business Sector for the period amounted to SEK 715M (507) and earnings to SEK 17M (5). Atle Informationsteknologi Developments are largely in line with plan even if the third quarter is traditionally weak because of holidays, especially for service-intensive companies like Martinsson and IGP. However, the growth company, DV Sweden AB, reported its strongest quarter ever and as early as September passed for the first time the "SEK 100M mark" in invoicing, measured by financial year. DV's pretax earnings are also strong, more than SEK 17M despite the fact that R&D costs are taken on a continuous basis. An action programme has started aimed at improving Dafix's profitability which is unsatisfactory. During the year, 28 per cent of Sourcecom has been acquired. Action has been initiated to distribute shares in Martinsson Informationssystem AB to the shareholders of Martinsson Gruppen AB (in which Atle owns 45 per cent). Net sales of the Business Sector amounted to SEK 997M (266) and earnings to SEK 41M (71). Atle Livsmedelsprodukter Sales of Lysekils Havsdelikatesser has developed positively. However, sales to the retail trade have had a lower rate of increase than planned. The earnings trend is largely in line with forecast. November and December are seasonally the most important months and very significant for the final annual result. This is expected to end up at the forecast level which is a slight improvement over the previous year. The result of Topp Livsmedelprodukter was negatively affected by a lower pea harvest and remains weak. Net sales of the Business Sector amounted to SEK 247M (258) and the result to SEK -12M (48). A decision has been made to concentrate Atle's investments on six Business Sectors and as a result close Business Sector Livsmedelsprodukter which has been deemed to have the least potential and represents less than 2 per cent of Atle´s investments. The Business Sector Management has been phased out and the two food companies will be transferred to Atle Mergers & Acquisitions. Atle Mergers & Acquisitions Earnings during the period were favourable, partly as a result of successful exits in Fritidsresor, Karlshamns and Optimera. Shares in profits of acquired companies also contributed positively to the earnings trend. Following significant net investments, primarily in the real estate renting company, Nordisk Renting, the logistics company, Kronans Droghandel, and the bed manufacturer, Hilding Anders, the Business Sector's invested capital measured as acquisition value doubled during the period from SEK 865M to SEK 1,630M. After the end of the period, Atle - subject to the approval of the Competition Authority - together with Nordic Capital and the Adolfsson, Hultman and Conradsson families as well as Skandia Investment will form the third largest bed manufacturer in Europe when Hilding Anders is merged with Apax. Before the merger, Atle owned 60 per cent of Hilding Anders and 15 per cent of Apax. As the largest individual owner, Atle will have 36 per cent of the shares in the new Group which will be named Hilding Anders. The annual sales rate in the new Group amounts to just under SEK 1 billion, earnings before financial net and goodwill to approximately SEK 110M and the number of employees to more then 500. The current operations in the Business Sector developed favourably. Both earnings of subsidiaries and share in profits of associated companies continued to be higher than anticipated. An especially strong earnings trend was achieved by Nordisk Renting (holding 35 per cent) which during the period acquired, among other things, the real estate complex in Stockholm which includes the so-called DN skyscraper building. Hilding Anders, HL Display, Kronans Droghandel and Divinycell-Polimex also achieved very considerable market success. Net sales of the Business Sector amounted to SEK 797M (533) and earnings to SEK 435M (303). Atle Development Operations were successful with earnings for the period which are significantly in excess of the previous year's. The main contributions emanate from exits in Åke Larson Gruppen (with a consolidated profit of SEK 19M), Johnson Pump (SEK 12M) and Cadence (SEK 11M). New involvements during the year are Asta Carotene (food supplement), Nord 2000 (angle-grinding machines), Universalantenner (terminal antennas) and Hardford & Schtoff (cosmetics). Following the acquisition of the shares of the other owners, Företagskapital has been wholly- owned by Atle since the June/July turn of month. In addition, Företagskapital acquired TUAB from Atle at the beginning of the year. TUAB is now a subsidiary within Företagskapital with an orientation towards young high-tech companies. As a result, Atle Development's operations are concentrated on the Företagskapital Group. During the third quarter, a SEK 420M fund was started for investments in small and medium-size entrepreneur-led companies. The capital is invested in equal parts by Atle and by some five external investors. Net sales of the Business Sector amounted to SEK 16M (15) and earnings to SEK 48M (7). Financial position, etc At end-September, the Group's liquid resources and short-term investments (excluding unutilised bank overdraft facilities) amounted to SEK 566M (1,009). The Group's equity ratio was 51 per cent (54). At end-September, the net asset value was SEK 90.31 per share (86.10). In net asset value, unlisted shares are valued at consolidated book values and listed shares at market price. The majority of Atle's assets consist of unlisted shares. Their book values may differ very considerably from the market values which only emerge on exits. Tax assessment is based on exit profits not being taxed in Atle AB and estimated tax burden for other results in the Atle Group. Ownership During the period, the number of shareholders increased to 12,383. At the 1997 year-end, the number was 10,313 and at end-1996, 5,164. Approximately 35 per cent of the shares are owned by private individuals. Average daily trading was approximately 47,000 shares. 9-months Full-year Key figures 980930 970930 971231 961231 951231 Net sales, SEK M 6,656 5,298 7,616 5,882 2,228 Earnings before 798 605 712 576 451 taxes, SEK M Earnings after tax, 664 540 579 503 376 SEK M Total assets, SEK M 9,572 7,898 7,586 8,448 5,248 Equity ratio, % 50.9 53.2 57.1 46.1 64.1 Net asset value per 90.31 86.10 88.78 73.46 66.47 share, SEK Market price at 103.5 114.5 125.50 77.00 40.00 period-end, SEK Rolling 12-months Full-year 9710-9809 9610-9709 1997 1996 1995 Return on 17.1 16.9 15.5 14.9 12.8 shareholders' equity, % Return on capital 16.6 14.2 14.7 14.1 14.1 employed, % Earnings per share, 12.89 11.33 10.62 9.21 6.89 SEK P/E ratio at 8.0 10.1 11.8 8.4 5.8 period-end, times Prospects for 1998 The forecast from the Six-Month Report stands, i.e. for the full-year, both exit results and operating earnings are expected to be significantly higher than in the previous ear. Parent Company (comparative figures for 30 Sep 97 and 1 Jan 97 - 30 Sep 97 are shown in brackets) As a consequence of Atle AB's fiscal status, Atle AB owns the majority of all the shares in operating companies whereas operations are reported within the Business Sectors. This means that the Group's operating and legal structures are different and the effect is that the Parent Company's Profit and Loss Account contains exit results. After nine months, the Parent Company's earnings before appropriations and taxes amounted to SEK 657M (553). During the period, SEK 1,602M (356) was invested in shares in the investment operations. At the period-end, the net of the Parent Company's liquid resources, shares in the listed stock portfolio, other securities and utilised overdraft facility amounted to SEK -12M (1,515). At the start of the year, the corresponding value was SEK 530M. The market value of the corresponding items was SEK -15M at the period-end and SEK 558M at the start of the period. At end-September 1998, the equity ratio amounted to 84 per cent (69). At the same date, the number of employees was 11 (11). Stockholm 19 November 1998 Atle AB (publ) Lars Gårdö Managing Director For further information, please contact: Lars Gårdö, Managing Director Gunnar Huss, Deputy Managing Director Leif Fahrman, Chief Financial Officer This Report and a specification of Atle's holding of operating companies at 30 September 1998 are available on Atle's website: www.atle.se. Financial information in 1999 Preliminary Accounts Report 1998, 26 February. Interim Report January-March 1999 and AGM, 5 May. Interim Report January-June 1999, 26 August. Interim Report January-September 1999, 11 November. Summarised Profit and Loss Accounts Amounts in SEK M GROUP PARENT COMPANY 9 mon 9 mon Full-year 9 mon 9 mon Full- months year month 1998 1997 1997 1998 1997 1997 Net sales 6,656 5,298 7,616 - 0 0 GROUP PARENT COMPANY Cost for sold goods -4,897 -3,926 -5,595 - - - Gross income 1,759 1,372 2,021 - 0 0 Exit results Exit profits 585 384 452 522 409 475 Exit losses and write- -21 -30 -55 -3 -141 -250 downs Total exit result 564 354 397 519 268 225 Share in results of 141 111 124 - - - assoc. companies befortaxes before taxes Other costs and income Selling, adm and R&D -1,527 -1,275 -1,836 -50 -77 -69 costs Write-down of goodwill -93 -60 -90 - - - Dissolution of negative 6 8 10 - - - goodwill Other oper income and 21 11 15 0 0 0 oper expenses rörelsekostnader Operating earnings 871 521 641 469 191 156 Results of financial investments Divid from subsid and - - - 167 219 287 assoc comp intresseföretag Capital gains in asset 31 131 157 31 131 157 management anläggningstillgångar Other financial items, -50 -16 -15 -10 12 11 net Earnings after financial 852 636 783 657 553 611 items Minority interest in -54 -31 -71 - - - earnings after financintäkter financial items Earnings before taxes 798 605 712 657 553 611 Paid shareholder - - - - -5 - contributions Taxes -134 -65 -133 0 0 -12 Net profit for the 664 540 579 657 548 599 period/year Summarised Balance Sheets Amounts in SEK M GROUP PARENT COMPANY ASSETS 300998 300997 311297 300998 300997 311297 Fixed assets Intangible and material 3,303 2,127 2,430 2 2 2 fixed assets Participations in - - - 3,147 2,401 2,631 subsidiaries Participations in 1,488 853 687 1,180 595 517 associated companies Other participations 453 213 270 281 139 158 Other financial fixed 67 74 42 5 - - assets Total fixed assets 5,311 3,267 3,429 4,615 3,137 3,308 GROUP PARENT COMPANY Current assets Stock 1,446 1,348 1,287 - - - Current receivables 2,250 1,403 1,702 158 188 300 Other participations 184 379 324 10 365 324 Other short-term - 1,181 240 - 1,135 25 investments Cash and bank 382 320 604 0 15 181 Total current assets 4,262 4,631 4,157 168 1,703 830 TOTAL ASSETS 9,573 7,898 7,586 4,783 4,840 4,138 SHAREHOLDERS' EQUITY, PROVISIONS AND LIABILITIES Shareholders' equity 4,357 3,889 3,934 4,026 3,358 3,632 Minority interest 514 315 399 - - - Provisions 835 630 778 57 44 48 Long-term liabilities 1,421 824 732 289 - - Current liabilities 2,446 2,240 1,743 411 1,438 458 TOTAL SHAREHOLDERS' 9,573 7,898 7,586 4,783 4,840 4,138 EQUITY, PROVISIONS AND LIABILITIES Detailed Audit Report We have reviewed this Interim Report. The examination has been carried out in accordance with the recommendation issued by the Swedish Institute of Authorised Public Accountants, FAR. A review is significantly limited compared with an Audit. Nothing has emerged which indicated that the Interim Report does not comply with the requirements in the Stockmarket and Annual Accounts Acts. Stockholm, 19 November 1998 Sigvard Heurlin Lennart Danielsson Authorised Public Accountant Authorised Public Accountant ATLE AB (publ) - Box 7308 - SE-103 90 Stockholm Telephone +46 8-506 101 00 Fax +46 8-506 101 10 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1998/11/19/19981119BIT00120/bit0001.doc http://www.bit.se/bitonline/1998/11/19/19981119BIT00120/bit0002.pdf