Q3 report (1 Jan. - 30 Sep. 2001)

Q3 report (1 Jan. - 30 Sep. 2001) · Sales totalled SEK 777 million (977 m) · Loss before tax of SEK 115 million (-10 m) · EPS after tax SEK -10.18 (SEK -1.02) · Stiff competition and clearance sales of products · Significantly reduced balance sheet and positive cash flow · Financial reconstruction · Major restructuring · Extraordinary general meeting called for 27 November Sales and results During the first nine months of the year, DORO, the telecommunications company listed on the O-list of the Stockholm Stock Exchange, recorded sales of SEK 777 million (977 m), a fall of 20% over the same period last year. The Group made a loss before tax of SEK 115 million (-10 m). Competition has been stiff due to both customers and competitors having substantial stocks. Major one-off costs have been charged to the results. These costs were for clearance sales of old product ranges, depreciation of stock and product supply disruptions. The US dollar has risen during the year and affected margins negatively. Sales in Q3 amounted to SEK 232 million (324 m) and the loss before tax was SEK 34 m (-15 m). Stiff pricing competition and higher costs Lacklustre trade conditions continued in Q3. Activities contracted in Australia at the end of last year, and fell in the Nordic region during Q1 and in the rest of Europe during Q2. Pricing competition has been stiff due to customers and competitors holding excessive stock. Most of DORO's clearance sales of older stock have been completed. DORO's stock was written down in Q2 to adapt it to the new market prices. During Q1, DORO was hit by major problems in its product supply. These problems were reduced during the summer and at the end of the period the supply had returned to normal levels. Substantial costs and provisions for future warranty costs have hit the first nine months. New quality controls and a stricter choice of subcontractor factories will prevent these problems returning. Exchanges and wireless broadband products are also seeing flat demand, as many companies are reducing their investments. Stronger dollar The US dollar rate has continued to climb since the start of 2001. A majority of DORO's products are bought in US dollars and sold in other currencies. The purchase price usually drops for each different product. The price reduction level has usually absorbed the higher USD exchange rate. The rising US dollar rate has only been marginally compensated for in higher sales prices. DORO's board decided to change its currency policy in April and July. To reduce the risk level, 75% (previously 50%) of the US dollar flow will be hedged for the coming six months' sales. The new regulations were steadily phased in during Q3. As purchase volumes have been reduced and put on hold, a certain amount of surplus hedging has been obtained. These forward positions have been closed prematurely or provision has been made these costs. In total this reduced the results by around SEK 4 million in Q3. Significantly reduced balance sheet The Group's balance sheet total has declined by SEK 298 million to SEK 426 million since the start of the financial year. Investments totalled SEK 7 million (8 m). Goodwill stood at SEK 57 million (89 m). The Group's net debt (interest-bearing liabilities less cash) has increased by SEK 19 million to SEK 219 million since the start of the year. The debt/equity ratio has gone up from 1.51 to 4.90. Stock has fallen due to considerably lower purchase volumes and comprehensive clearance sales of old models. The cash flow from current activities continued to be positive in Q3. Financial reconstruction The Board has decided to call an Extraordinary General Meeting at 5.30 p.m. on 27 November 2001 at the Hotel Lundia in Lund, Sweden. The Annual General Meeting authorised the Board to carry out a new share issue amounting to SEK 75-100 million. Due to the poor earnings trend and the company's exposed position, the Board considers that a preferential rights issue is not possible. The Board proposes to the meeting that a directed issue of redeemable and convertible preference shares be made to Nordea and RunDor (a company owned by Rune Andersson and family) worth a total of SEK 100 million. Other investors may be offered the opportunity to subscribe for additional shares under certain circumstances. The price for the new shares is SEK 8.50 (the average pay price for most recent ten days of trading). The new shares will have one tenth of the voting rights and entitle the same rights to dividends as ordinary shares. Up until the AGM in 2005 DORO will be able to redeem these shares at the subscription price plus 10% interest per year. If preference shares are not redeemed, they will be converted into ordinary shares at the 2005 AGM. In the event of any future new share issue, preference shares will have the same rights as ordinary shares. In the event of a purchase by a third party, preference shares may also be converted into ordinary shares. The terms for the issue are that both parties shall receive dispensation from the Securities Council for any bid obligation that could arise from a new subscription and any resulting conversion. Furthermore the meeting's decision will comprise a decision within the Leo law. It is a requirement that at the meeting at least nine tenths of those entitled to vote and in attendance, in addition to RunDor's holding, support the motion. The conditions will be described in the invitation to attend the extraordinary meeting. The Board has also signed a credit agreement with Nordbanken running to the end of 2002. Restructuring and refining of activities Following a review of strategy the company will now refine its activities and focus on corded and cordless telephony. An action plan for other activities has been produced and major restructuring will be carried out for core activities. Restructuring will comprise the following main measures: · Headcount reduction of around 25% throughout the Group · Establishment of Nordic structure to obtain synergies within warehousing, service and administration · Clearer customer/channel selection with emphasis on profitable segments · Concentration on product groups where DORO has clear competitive advantages · More effective product development, quality assurance and product supply The total cost of restructuring is estimated at around SEK 70 million, which the Board intends to charge to the Q4 results. Large-scale restructuring will be possible due to the planned financial reconstruction explained above. The effect of restructuring and refining activities will be lower costs, more efficient distribution and a more competitive product range. The prospects for achieving positive results in 2002 will thereby improve. Parent company The parent company's net sales totalled SEK 16 million (22 m) during the first nine months. The loss before tax was SEK 46 million (17 m). Future reports The financial statement for 2001 will be issued on 24 January 2002 (changed date) and the AGM held on 5 March 2002. The Board has decided on the following dates for 2002's quarterly reports: 19 April, 2 August, 22 October and 30 January 2003 Quarterly reports can be found on DORO's website at: www.DORO.com. This interim report has been drawn up according to the same accounting principles as the last Annual Report and has not been subject to examination by DORO's auditors. For further information, please contact: Gunnar Åkerblom, CEO, + 46 (0)46 280 50 61 or Ingvar Karlsson, Deputy CEO, +46 (0)46 280 50 62 Lund, Sweden, 17 October 2001 The Board of Directors, DORO AB ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/10/17/20011017BIT01010/bit0001.doc The full report http://www.waymaker.net/bitonline/2001/10/17/20011017BIT01010/bit0001.pdf The full report