Interim report, January - March 2000

Interim report, January - March 2000 * Invoiced sales totaled SEK 2,214 million (2,117), a rise of 5 percent after adjustment for the effects of exchange rate movements and company acquisitions/disposals. * Operating earnings rose by 35 percent to SEK 107 million (79). * Earnings after financial items and minority share rose from SEK 52 million to SEK 81 million. * Earnings per share after full tax rose to SEK 1.96 (1.27). * Cash flow from operations after tax rose to SEK 7.60 (1.13) per share. The Group's inflow of orders amounted to SEK 2,357 million (2,272) during the period, which is a rise of 5 percent for the current structure of the Group after adjustment for the effects of exchange rate movements. Invoiced sales rose to SEK 2,214 million (2,117). Adjusted for the effects of exchange rate movements, this is a rise of 7 percent. Company acquisitions/disposals account for 2 percentage points of this figure. Operating earnings rose by 35 percent to SEK 107 million (79), providing an operating margin of 4.8 percent (3.7). Cardo Door and Cardo Rail improved their operating earnings, and Cardo Pump's were on a par with last year. Earnings after financial items rose to SEK 83 million (54), providing a profit margin of 3.8 percent (2.5). Earnings after financial items and minority share rose to SEK 81 million (52). Earnings per share after full tax were SEK 1.96 (1.27). Exchange rate movements are estimated to have had only a marginal impact on Group earnings. Return on capital employed was 19.3 percent (18.9) for the twelve-month period ended March 31. Return on equity during the same period amounted to 22.0 percent (19.9). Cash flow from operations after tax improved to SEK 7.60 (1.13) per share. Invoiced sales and earnings by business area Invoiced sales Earnings January- Whole January-March Whole March year Year MSEK 2000 1999 1999 2000 1999 1999 Cardo Door 1,021 916 4,227 47 35 430 Cardo Pump 571 538 2,465 37 37 247 Cardo Rail 622 636 2,675 43 18 170 Other items - 27 122 -20 -11 -64 1) 2,214 2,117 9,489 107 79 783 Financial items -24 -25 -88 Earnings after financial items 83 54 695 Minority share in earnings after -2 -2 -21 financial items to be deducted Earnings after financial items 81 52 674 and minority share 1) Made up of the parent company, other central units and Group adjustments. Invoiced sales during 1999 relate to Tebel and Group adjustments. Cardo Door Cardo Door is one of the world's largest manufacturers of industrial doors and Europe's leading supplier of dock loading equipment. Cardo Door is also the market leader in the service of these products and one of Europe's largest manufacturers of residential garage doors. Its biggest brand names for industrial doors and dock loading systems are Crawford, Clever and Hafa, and for industrial doors alone Faltec, Alsta and Allhabo. Residential garage doors are marketed under the brand names Normstahl, Crawford, Car-In and Henderson. February saw the acquisition of the UK's leading manufacturer of residential garage doors, P C Henderson. Henderson is included in Cardo Door's invoicing and earnings as of the time of acquisition. Henderson, which has a turnover of approximately SEK 325 million and employs about 325 people, enjoys good profitability. In 1999, Henderson's earnings after financial items amounted to SEK 32 million. The purchase price of the shares was SEK 136 million, and goodwill as a result of the transaction is preliminarily estimated at slightly more than SEK 83 million. This acquisition, which is part of Cardo Door's strategy for continued growth in the residential garage door segment, further strengthens Cardo Door's position as the third largest supplier of residential garage doors in the European market. Following the acquisition, Cardo Door's previous garage door operations in the UK have been transferred to Henderson. The focus on dock loading systems, residential garage doors and service in recent years has meant that the proportion of Cardo Door's invoicing represented by industrial doors has gradually decreased and with it the business area's dependence on industrial new construction. Of Cardo Door's turnover, industrial doors today account for slightly less than 40 percent, dock loading systems for just under 15 percent and residential garage doors and service for roughly a quarter each. Cardo Door's invoiced sales rose during the period to SEK 1,021 million (916). Adjusted for the effects of exchange rate movements and company acquisitions, this represents a rise of 9 percent. Operating earnings rose to SEK 47 million (35). For industrial doors, demand rose in a number of European markets. After a previous declining trend in Germany, demand has stabilized since the end of 1999. Demand for dock loading equipment was on a par with last year, while demand rose for residential garage doors and service. A number of major orders were received during the period. In Italy, 212 industrial doors and 88 dock levelers were sold for installation in a logistics center as well as 27 dock loading systems for a freight terminal. A big service contract was also received in Italy relating to the transport company ATAC Roma's maintenance workshop in Rome. In Turkey, 6 big Megadoor doors were ordered for a steel works, 45 industrial doors for Ford's plant in Golcuk and 80 industrial doors for installation at an airport in Kurtkoy. There was a sale of 192 complete dock loading systems for a distribution center in the UK, and in Spain an order was received for 56 dock loading units and 59 industrial doors for a distribution center in the Basque Provinces. The service company Itevelesa ordered 150 industrial doors for installation in 27 repair plants in central and northern Spain. Cardo Pump Cardo Pump is one of Europe's largest manufacturers of centrifugal pumps, mixers and aerators for use in water and wastewater treatment plants, process industries and the construction sector. Cardo Pump is also a global leader in the production of sophisticated measuring instruments for the pulp and paper industry. Its products are marketed under the brand names ABS, Pumpex and Lorentzen & Wettre. The beginning of the year saw the acquisition of the operations of the American company CH&E, which has a turnover of approximately SEK 60 million and employs about 40 people. CH&E makes diesel-driven dewatering pumps that complement Cardo Pump's electrically driven pumps. Diesel- driven pumps are often used in the USA, since construction sites there do not always enjoy access to electricity in the initial phase. CH&E has been integrated with Cardo Pump's operations in the USA. Invoiced sales amounted to SEK 571 million (538), which is a rise of 3 percent after adjustment for the effects of exchange rate movements and company acquisitions. Operating earnings amounted to SEK 37 million (37). Deliveries to Cardo Pump's biggest segment, water supply and wastewater, rose while deliveries to the pulp and paper industry and to the heating, ventilation and sanitation field decreased somewhat compared to the corresponding period last year. A number of significant orders were received during the period, including one for 32 units of a newly developed flow booster for installation in Moscow. The flow booster is used to transport large volumes of water in tanks in connection with the treatment of wastewater. Gothenburg's water supply and wastewater works continued to modernize its pump stations and ordered a number of big submersible pumps. In partnership with Kværner Pumps, an order was received from the Gruvön paper mill in Sweden for process and vacuum pumps. The expansion of the treatment plant in Tallinn has continued with Cardo Pump as the main supplier of pumps and mixers. During the first quarter, the biggest submersible pumps ever built for pumping polluted water were delivered to Tallinn. These are equipped with 710 kW motors and weigh 10 tonnes each. Cardo Rail Cardo Rail, which markets its products mainly under the SAB WABCO trademark, is one of the world's largest manufacturers of brake systems and brake components for rail vehicles. Cardo Rail is a wholly owned business area in Cardo as of the turn of the year 1999/2000. The inflow of orders during the period amounted to SEK 613 million, which is on a par with last year for a comparable structure and adjusted for the effects of exchange rate movements. Orders received during the period included two important ones from Siemens/Krauss Maffei in Germany relating to bogie-brake equipment and complete brake systems for locomotives for ÖBB, the Austrian state railway company. These orders, with a total value of SEK 100 million, are of great significance to Cardo Rail's task of strengthening its position as a complete supplier of brake systems in the big and important German market. Cardo Rail's invoiced sales amounted to SEK 622 million (636), which adjusted for the effects of exchange rate movements is on a par with last year. Operating earnings rose to SEK 43 million (18). The improvement is mainly a result of reduced costs as a consequence of the restructuring process, which is gradually achieving full effect. Liquidity and financing At March 31, the Group's liquid assets stood at SEK 237 million (368) compared with SEK 325 million at the beginning of the year. In addition, there are unutilized credit facilities of approximately SEK 2.3 billion (2.9). Cash flow from operations was SEK 228 million (34) after tax, which is equivalent to SEK 7.60 (1.13) per share. Adjusted for the effects of exchange rate movements on the change in working capital, cash flow was SEK 6.68 (-0.80) per share. The Group's gross investments, excluding company acquisitions, stood at SEK 77 million (42). Net interest bearing debt at March 31 amounted to SEK 1,463 million (1,538) compared with SEK 1,332 million at the beginning of the year. The increase is a consequence of company acquisitions. Equity amounted to SEK 2,617 million (2,364), which is equivalent to SEK 87.24 (78.82) per share. The Group's equity ratio at March 31 was 38.9 percent (36.5). Cardo's share of SPP's surplus funds In 1999, the life and pension insurance group SPP announced that it had allocated SEK 73.6 million of its surplus funds to the Group, of which SEK 5.6 million is for the parent company. Detailed information on the body of regulations concerning the utilization of these surplus funds will be received in mid-June. Since the Group discharged its PRI (Pension Registration Institute) liabilities in cash in 1999 in the sum of approximately SEK 200 million, it is expected that all the surplus funds can be received in cash this year. The surplus funds were not reported as assets in the balance sheet at March 31 2000. Personnel The number of employees in the Group at March 31 was 7,628 (7,364). The parent company The parent company's earnings after financial items amounted to SEK -17 million (166), its gross investments to SEK 0 million (0) and its liquid assets to SEK 3 million (6) as against SEK 3 million at the beginning of the year. C15 growth program With a view to generating greater growth for the Group in the future, an extensive program was started at the end of 1999 under the designation C15. C15, which stands for the Groupwide target "15 percent annual profitable growth in sales", involves a sharper focus on organic growth. This sharper focus on organic growth implies no change in the Group's acquisition strategy. Company acquisitions will continue to account for a significant part of growth. The measures and investments to increase organic growth primarily consist of increased marketing activities and a considerable expansion in service and the aftermarket. The effect of the measures and investments on earnings is expected to be limited during the course of this year and gradually increase as of 2001. Market prospects The business cycle for industrial construction in Europe shows signs of an upturn. An improved market situation and a rise in sales volume are therefore expected for Cardo Door during the year. For Cardo Pump's biggest segment, water supply and wastewater, a positive trend is expected in the long term. The improved economic climate for the pulp and paper industry has yet to lead to increased demand for pump equipment. Even if the rail market is growing in the long term, sales volume is foreseen as declining to some extent during the year. The restructuring measures carried through will lead to further improvement in earnings and an improved operating margin for Cardo Rail. Malmö, Sweden, May 16 2000 Cardo AB (publ) Kjell Svensson President and CEO This report has not been subjected to special examination by the Company's auditors. Cardo's interim report for January-June will be published on August 16 2000. Enclosed: 1. Consolidated income statement and balance sheet in brief 2. Consolidated cash flow statement in brief 3. Invoiced sales and earnings by business area 4. Group financial summary 5. Consolidated income statement and balance sheet in brief translated into euros For further information, please contact: Kjell Svensson, President and CEO, phone +46 40 35 04 53, +46 40 35 04 00 Sven-Erik Persson, Executive Vice President, phone +46 40 35 04 50, +46 40 35 04 00 Christer Roskvist, Head of Public Relations, phone +46 40 35 04 25, +46 40 35 04 00 Cardo is an international engineering group with a turnover of SEK 9.5 billion in 1999. Cardo holds a strong position in the markets for doors, pumps and rail-vehicle brake systems. Cardo has subsidiaries in about 30 countries with the focal point resting in western Europe, and roughly 7,700 employees. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/05/16/20000516BIT00610/bit0001.doc The full report http://www.bit.se/bitonline/2000/05/16/20000516BIT00610/bit0002.pdf The full report http://www.bit.se/bitonline/2000/05/16/20000516BIT00610/bit0003.xls Tables