FINANCIAL STATEMENT January-December 2007
IMPROVED PROFITABILITY BUT DELAYED SALES GROWTH
REPORT PERIOD OCTOBER-DECEMBER 2007
• Net sales amounted to SEK 323.7 million (374.4 m)
• The operating profit was SEK 6.1 million (-17.1 m)
• The loss after tax was SEK 8.0 million (-19.2 m)
• EPS was SEK -0.86 (-2.26)
PERIOD JANUARY-DECEMBER 2007
• Net sales amounted to SEK 930.1 million (1,113.7 m)
• The operating loss was SEK 52.7 million (-134.9 m)
• The loss after tax was SEK 82.6 million (-158.6 m)
• EPS was SEK -8.88 (-25.08)
SIGNIFICANT EVENTS DURING AND AFTER THE REPORT PERIOD
• The Board proposes that no dividend be paid.
• In December BRIO signed an agreement with Kungsleden concerning the sale of two properties in Osby. The price was SEK 98 million, which after allocations to reserves is expected to boost profits by around SEK 75 million. In connection with the sale BRIO signed a 10-year rental agreement for the properties at market rates. The sale of the properties was completed in early February 2008.
• The BRIO 2008 action plan has exceeded expectations. Fixed costs in the current corporate structure have been cut by SEK 82 million, as opposed to the planned SEK 80 million, while tied-up capital has been reduced by SEK 194 million since 2004. However, weaker than expected sales meant that BRIO was unable to achieve positive cash flow in 2007, which had previously been forecast.
• Considering the uncertainty about when the major 2008 launch program will yield full financial impact, BRIO has decided not to forecast positive net profit for 2008, excluding capital gains from the sale of Group property.
This information is published by BRIO AB (publ) in accordance with Swedish law regarding the securities market and the law regarding trading in financial instruments.
The information was submitted for publication at 3 p.m. on 14 February.
CEO’s STATEMENT
Dear shareholders,
It’s time to summarize the final quarter of 2007 and close our accounts for the year as a whole. It’s pleasing to confirm that the BRIO Group made positive progress, and that our major program of realignment measures is starting to produce the required results in a number of areas.
Unfortunately, sales growth has not matched expectations. This is partly because we have launched a limited number of new products during the year and as yet they have not compensated for the distribution agreements that ended in recent years. Furthermore, some of our new product projects have been delayed due to extended quality checks. Our aim is to always exceed the safety demands of consumers and the authorities, so it felt specially important to make extra checks in light of the market situation. Another reason why sales did not reach expected levels is that we have still not managed to establish ourselves among the really large customers in the US. Naturally, we will continue to work on the high-volume markets in 2008 in order to achieve success on the American market.
Our realignment process began in connection with the BRIO 2008 action plan, launched in 2005. The purpose was to improve the efficiency of our business, create growth by renewing the range, and improve profitability. Profitability has improved considerably during the period, even though there is some way to go before we reach a satisfactory level. Since 2004 we have cut costs by SEK 162 million. Profits have improved by SEK 82 million in the current business, before the cost increase for product development. During the same period, tied-up capital was cut by SEK 194 million, which can be compared with the established target of SEK 100 million set in the BRIO 2008 action plan. Structural changes accounted for SEK 108 million, while the organic contraction amounted to SEK 86 million.
The BRIO 2008 action plan was expected to produce positive cash flow in 2007. Even though cash flow improved, we did not fully succeed. This was partly due to higher inventories resulting from sales in December being lower than expected, and to a lower operating profit. Despite intensive efforts to reduce costs, the failure to increase sales produced a negative outcome. Overall, realignment activities have exceeded plans, but positive sales growth is somewhat delayed.
A series of new products will be launched on the market in 2008. This is when our intensive investment in product development in recent years will be visible. Over 70 new toys will be launched together with three new pram models and a completely new furniture concept. This is the largest launch of products developed by BRIO in the company’s history.
2008 will be an important year for BRIO. It will be a new phase in our development when sales growth will drive improved profitability. It will entail continued hard work focused on comprehensive implementation of our new strategy.
Thomas Bräutigam
President and CEO, BRIO
Thomas Bräutigam
President and CEO
For further information, please contact
Thomas Bräutigam, President and CEO,
thomas.brautigam@brio.net
Tel +46 479 190 00