Össur hf. - Interim Report for the Third Quarter of 2001
Total revenue for the first nine months of the year amounted to ISK 4,948 million.
Profit in the first nine months of the year amounted to ISK 559 million.
EBIDTA in the first nine months of the year amounted to ISK 857 million.
Estimated profit for the year is projected to be ISK 810 million.
Reporting currency will be USD as of 1 January 2002.
The interim statement of the Össur hf. Group for the term ending 30 September 2001 was approved at a meeting of the Board of Directors on 26 October. The statement is prepared based on the same accounting principles as previous interim statements in 2001, and reviewed and signed off by the company auditors without qualification.
The Össur hf. Group consists of Össur hf. in Iceland, the groups Össur Holdings Inc., USA, and Össur Invest AB Group, Sweden, as well as individual companies in Iceland, Luxembourg and elsewhere. There have been no substantial changes in the combination of the Group in the course of the year 2001.
The principal results of the Group are as follows:
Profit and Loss Account (ISK m) 1st quarter 2nd quarter 3rd quarter Total
Operating revenues 1,421 1,712 1,815 4,948
Operating expenses 1,275 1,520 1,444 4,239
Operating profit 146 192 371 709
Financial income and financial expenses -31 17 1 -13
Earnings before taxes 115 209 372 696
Income tax -59 44 -126 -141
Earnings before other income and expenses 56 253 246 555
Share of income in affiliated companies 1 2 1 4
Net income for the period 57 255 247 559
EBIDTA 192 244 421 857
Balance Sheet (ISK m) , , 30 Sep 31 Dec
2001 2000
Fixed assets 3,094 2,614
Current assets 2,742 2,201
Total assets 5,836 4,815
Equity 2,823 2,061
Long-term liabilities 1,370 1,172
Short-term liabilities 1,643 1,582
Total equity and liabilities 5,836 4,815
Statement of Cash Flows (ISK m) 1st quarter 2nd quarter 3rd quarter Total
Cash from operations 118 262 374 754
Investment activities -90 -132 -24 -246
Financing activities -69 -218 -238 -525
Increase (decrease) in cash -41 -88 112 -17
Key Indicators 30 Sep
2001
Profit from regular activities per share ISK 2.3
P/E ratio 18.3
Return on equity 30%
Current ratio 1.7
Equity ratio 48%
Market value of shares (ISK billion) 13.6
Comparative figures for the year 2000
The third-quarter statement of the Company does not include comparative figures for the year 2000. The reason is that no comparable reviewed statement was prepared for the corresponding period last year. The operating results for the first nine months of 2000, published in October 2000, were as follows:
Profit and Loss Account 2000 (ISK m) 3rd quarter 01 Jan-
30 Sep
Operating revenues 1,505 2,827
Operating expenses 1,143 2,289
Operating profit 362 538
Financial income and financial expenses -153 -142
Earnings before taxes 210 396
Income tax -87 -136
Earnings before other income and expenses 123 260
Extraordinary expenses 15 -3,675
Profit (loss) for the period 138 -3,415
EBIDTA 401 610
Any comparison of the years 2001 and 2000 must take into account the fact that due to new acquisitions, the combination of the Group in the two periods is not compatable..
Operation during the quarter
Operations in the third quarter were in all principal respects according to plan. The contribution, on average, was slightly better than expected and sales costs were lower, but management costs were higher. Generally speaking, the Company's goals as regards revenue, EBITDA and profit were achieved despite unexpected costs claimed against general and administration expenses. These costs involve an amount of ISK 80 million resulting from reorganisational measures in the USA and Europe, and a special provision to the bad debt expense account in the amount of ISK 22 million relating to changes in the European sales network.
The impact on the Company's operations of the New York terrorist attacks on 11 September was that sales fell for 4-5 days, with the total reduction in sales from these causes assessed at ISK 140-160 million in the third quarter. Sales have levelled once more, and no other impact on the Company operation has been detected.
Restructuring of the sales network has now been completed, and the Company now sells directly to customers in all of its principal market areas, i.e. the USA, Scandinavia, and Europe. There is now some experience regarding the changes in the USA, and despite initial setbacks, these changes have proven positive for the Company. It is too soon, however, to assess the results of the changes in Europe.
Development and marketing of new products have been successful so far this year. Work has been in progress on reorganising the product line with the objective of meeting the needs of certain target groups. A new socket, the Transfemoral socket, was introduced in the market in May, designed specifically for persons amputated above the knee; it is the first socket of its kind in the world. Sales over the year, by piece, have already doubled in quantity from the projected sales for the entire year. At about the same time another socket, the Upper X liner, was introduced for upper- extremity amputees. The new socket has been extremely well received. An improved version of the Comfort socket, the Company's main silicon product, has also been well received. Sales in the Comfort socket have already exceeded last year's total sales by 25%. The Dermo socket product line has also been expanded.
Developments as regards artificial feet and knees have not been as positive. The development of a new electronically controlled knee, the Rheo knee, has proven a more ambitious project than anticipated. The design is conducted in co-operation with MIT (Massachusetts Institute of Technology), and marketing is now scheduled for 2002. The introduction of the TKO knee was moved back as a result of delays in design. A new artificial foot, Talux, was introduced last summer. The foot is based on new technology and marks the beginning of a renewal in the product line of artificial feet, which is regarded as necessary to maintain the company's market advantage in this area.
Prospects for the remainder of the year
The Company's operating plan for the year 2001, published in February, assumed a turnover of USD 74 million, or approximately ISK 6,100 million, with profits of USD 8.5 million, or approximately ISK 700 million. Based on the average value of the USD in the first nine months of the year, these figures now correspond to ISK 7,030 million and ISK 810 million, respectively. Assuming that the fourth-quarter objectives are achieved, the current projected annual revenue will amount to ISK 6,650 million, which corresponds to approximately USD 70 million. It is assumed that the initial projection of profit for the year will prove accurate, with total profit at USD 8.5 million, or approximately ISK 810 million. The EBIDTA contribution is projected at 20%, or approximately ISK 1,320 million.
It should be noted that uncertainty in the operation of the Company for the remainder of this year might be greater than normal. The reason is the extensive change in the sales network and organisation of the Company in the course of the year, together with the projection that a proportionally large part of the Company's sales will materialise in the final quarter of the year.
Change in the reporting currency
The decision has been made that as of 1 January 2002, the information systems and financial statements of Össur hf., will be presented in US dollars. It has also been decided to evaluate the possibility of exchanging current shares for USD denominated shares. These changes are subject to any potential legal constraints.
The reason for this decision is the belief that the proposed new order will make it easier for the Company to achieve its future growth objectives, as the change will remove barriers between the Company and investors outside Iceland.
Open teleconference with management
On Tuesday, 30 October, at 09:00 a.m., investors and other interested parties are invited to participate in an open teleconference. At the conference, Mr. Jón Sigurðsson, CEO, and Mr. Hjörleifur Pálsson, CFO, will review the results of the third quarter.
To participate in the teleconference, please call +354 595 2030. The conference can also be monitored on the Company website at www.ossur.is.
