Interim Report January 1st - September 30th, 2001

Interim Report January 1st - September 30th, 2001 Hexagons change from being a traditional Swedish conglomerate into a focused technique company with international direction, continue according to plan. Through the acquisition of Wilcox the company has occupied a leading position within the rapidly growing and profitable software segment within the metrology business Order intake increased by 530 MSEK, corresponding to 14 %, to 4 349 MSEK Net sales increased by 652 MSEK, corresponding to 18%, to 4 335 MSEK Operating earnings, adjusted for capital gains and surplus funds from SPP, was 170 MSEK (160) For further information, please call: Ola Rollén, CEO, Hexagon AB, tel. no +46 (0) 8 - 601 26 20 Håkan Halén, CFO, Hexagon AB, tel. no +46 (0) 8 - 601 26 20 Subscription to Hexagons' financial information is available as e-mail at www.hexagon.se. Hexagon AB (publ), registration number 556190- Tel +46 (0) 8 - 601 26 20 4771 Box 1112 Fax +46 (0) 8 - 601 26 21 S - 131 26 Nacka Strand, Sweden www.hexagon.se E-mail postmaster@hexagon.se Hexagon is a multinational engineering group with the long-term ambition of positioning itself as number one or number two within its strategic sectors. The operation is divided into four business areas. The group's targets are to increase earnings per share after tax by at least 15 per cent p.a., and achieve a return on capital employed of more than 15 per cent over the business cycle. General Hexagon is currently passing an extensive change program from being a traditional Swedish conglomerate into a focused technique company with marked international direction. Brown & Sharpe, world leader within the metrology area, with a turnover of approx. 3 GSEK has been acquired. Through the acquisition of Berendsens' hydraulic operation, with a turnover on slightly more than 1 GSEK, a new Nordic leader has been created. At the same time, some thirty companies within technical trade and general industry with a total turnover of approx. 2 GSEK have been divested. Third quarter 2001 The quarter has been characterized by continued weak demand within primarily the heavy vehicle and telecom industry. Furthermore, the terror attack in the USA created anxiety within the American market causing displacements in investment decisions. Non-appearing air transports and cancelled orders have adversely affected the period's results by 10 - 15 MSEK. This, in combination with a normal seasonally weak profitability in the third quarter, has lead to that the result after financial items, adjusted for capital gains, was 16 MSEK (29). Including capital gains the result was 15 MSEK (61). The divested operations were trading businesses with a great proportion of their deliveries during the third quarter. Net sales increased by 398 MSEK to 1 582 MSEK (1 184). The order intake increased by 410 MSEK to 1 594 MSEK (1 184). Hexagon has during the last twelve months drastically changed it's group structure. The new structure has lead to the fact that the Group has amplified the seasonal variations in it's profitability. Quarter 3 has the weakest profit of all quarters because of an increased portion of own working up with processing shutting down in July and August. The comparability between years is affected by the disposal of AKA, Fagerberg, Norfoods and Johnson Metal Bearing Components and the acquisitions of the Berendsen hydraulic operations in the Nordic countries as well as Brown & Sharpe's global metrology operation. Quarterly figures 2000 2001 (MSEK) Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Order intake 1 292 1 343 1 184 1 1 177 1 578 1 395 594 Net sales 1 210 1 289 1 184 1 1 125 1 628 1 416 582 Earnings after 47 122 61 -7 56 71 15 financial items Operating margin, %, 4.4 % 5.0 % 3.6 % 4.1 4.2 % 5.1 % 2.5 * % % *= Adjusted for capital gains an non-recurring items First nine months 2001 - Earnings, net sales and order intake Earnings after financial items amounted to 142 MSEK (230). In the result for 2001 is included a capital gain of 19 MSEK from the disposal of the major part of AKA and Fagerberg. For the year 2000 the capital gains amounted to 34 MSEK. In the result for 2000 is also included 'surplus funds' from SPP by 66 MSEK. Adjusted for capital gains and the SPP funds, the group's operating result amounted to 170 MSEK (160) and the group's result after financial items to 123 MSEK (130). Operating margin, excluding capital gains and non-recurring item, was 3.9 % (4.3). The group's net sales increased by 652 MSEK to 4 335 MSEK (3 683). The order intake increased by 530 MSEK to 4 349 MSEK (3 819). Profitability Return on shareholder's equity was 7.2 % (8.1 excluding SPP funds / 11.8 including SPP funds). Return on capital employed was 8.6 % (10.8 / 14.1). Group financial position Shareholder's equity amounted to 1 699 MSEK (1 697). The equity ratio, which was 27.0 % (46.9), decreased primarily because of the acquisition of Browne & Sharpe. The equity ratio is within the frames expressed by Hexagon. Cash including non-utilised credit limits amounted to 845 MSEK (423). The net debt amounted to 2 508 MSEK (846) and the net indebtedness to 1.48 times (0.50). The increase is principally explained by the acquisition of Brown & Sharpe. Interest coverage ratio amounted to 2.7 times (6.3). Investments Investments in fixed assets, excluding acquisitions, amounted to 136 MSEK (136) and sales of fixed assets has been recorded by 3 MSEK (8). Depreciation amounted to 159 MSEK (151). Acquisitions and divestitures An extensive description was disclosed in the half-year report concerning the following acquisitions and divestitures which took place during the first half-year: AKA Industriprodukter och Gustaf Fagerberg were divested with effect from January 1st, 2001. Johnson Metal Bearing Components was divested with effect from January 1st, 2001. Brown & Sharpe is consolidated as of the day of taking possession on May 1st, 2001. - The transmission business was divested with effect from September 1st, 2001. During the third quarter Wilcox and Associates, Inc. (WAI) was acquired. The acquisition concerns the outstanding 70 % of the shares of the company, which means that Hexagon now owns 100 %. WAI is fully consolidated from October 1st, 2001. The acquisition is an expansion of the business area Metrology into the rapidly growing and very profitable software segment within the metrology business. Cash flow The Cash flow from operations before changes in working capital was 212 MSEK (238 excluding SPP funds/304 including SPP funds), which corresponds to 14.33 SEK per share (16.09/20.55). The operative cash flow amounted to -104 MSEK (-33/33). Group Tax rate Hexagons´ tax rate deviates from the Swedish rate of 28 % as a considerable part of the business is located abroad, and a part of the depreciation of goodwill is non-deductible. Workforce The Average number of employees during the first nine months was 4 885. The corresponding number for 2000 was 4 078 employees. The number of employees was 5 807 at the end of the period, a reduction during the quarter by 176 employees. Business areas Hexagon Automation The Business area is focused at hydraulics, pneumatics, transmission and gear controls. The customers are found within a great variety of industries, for example, the wind power industry, offshore, pulp and paper industry, process industry, engineering and vehicle industry as well as flow equipment. Net sales within the business area amounted to 1 554 MSEK (895). Order intake increased to 1 549 MSEK (1 107). Operating earnings rose and amounted to 59 MSEK (39). The improvement in earnings is principally explained by the automation operation which was acquired from Berendsen, but also by a positive development within most of the other subsidiaries. However, a significant weakening has occurred within the Finnish engineering industry. Hexagon Engineering The Business area is focused at selling components and systems to customers within the vehicle, engineering and construction industry. Net sales within the business area increased to 1 596 MSEK (1 593) and the order intake was 1 614 MSEK (1 545). Operating earnings rose to 99 MSEK (96). The part of the operation, which is exposed to the heavy vehicle industry, has been adversely affected during the period, while the demand within the construction sector and Norwegian off-shore industry has remained strong. Hexagon Wireless The Business area manufactures antennas for mobile phones and develops antenna solutions within wireless short wave communication (so called Bluetooth, LAN, etc.). Net sales within the business area fell to 67 MSEK (149) and the order intake was 56 MSEK (153). Operating earnings deteriorated to -33 MSEK (- 10). Both the decline in invoicing and operating earnings is principally explained by the significant decline in the telecom industry during the year and the displacement of the introduction of new models. The order intake is expected to increase during the rest of the year in pace with new customer projects coming into production. Following the relocation of the production from Sweden to China and Malaysia, Moteco's production is very competitive when the volumes begin to increase now. The Investment in gigaAnt AB, geared to antenna solutions for Bluetooth, is proceeding according to plan and charges the result of the business area by -17 MSEK (-7). The project costs have decreased compared with the first half-year. The Invoiced Sales amounted to 3 MSEK (1). Hexagon Metrology The business are consists of Brown & Sharpe, which is world leader within the metrology area. It produces coordinate measurement machines (CMM:s) and hand tools at seven production plants in different parts of the world. It produces coordinate measurement machines (CMM:s) and hand tools at 7 plants all over the world. Extensive aftermarket services are fulfilled by 20 regional so called Precision Centres with responsibility for upgrade of machines and software, education, contracted maintenance and other services. The largest customers are found in the automotive, aerospace, electronics, medicine and engineering industries. Net sales within the business area amounted to 1 136 MSEK (-) and the order intake was 1 130 MSEK (-). Operating earnings amounted to 53 MSEK (-). After the terror attacks in the USA, we have recognised some hesitance among our American and European customers, which has lead to that decisions regarding new investments have been postponed in time. Slightly more that 14 % of last year's net sales was to the aerospace related business which today is struck after the terror acts. The reduction in demand from these customers will adversely affect us. During the period, non-appearing air transports and cancelled orders have adversely affected the results by 10 - 15 MSEK. Inquiries regarding qualified metrology equipment from defence related customer's increase. China continues to grow very strong. Affiliated companies The Affiliated Company VBG AB contributes to Hexagons earnings in accordance with the equity method with 6 MSEK (19). During the second quarter VBG has during the year been negatively affected by the worsening trade conditions within the heavy vehicle industry. During the first half-year, the company was heavily affected by the recession within the vehicle industry, but shows again a positive result for the third quarter. Share data The Total number of shares outstanding was 14 793 182, which is unchanged compared with last year. Earnings per share after tax were 6.22 SEK (6.69 excluding SPP funds/9.94 including SPP funds). On September 13th, 2001 equity per share was 114.85 SEK (111.47/114.72) and the share price was 117 SEK (132). Parent company The parent company's earnings after financial items were 135 MSEK (-18). The main reason for the increase in earnings is dividends from affiliated companies. The equity ratio in the parent company was 35 % (46). The shareholder's equity including the capital proportion of untaxed reserves amounted to 1 481 MSEK (1 167). Liquid assets, including unutilised credit limits, amounted to 494 MSEK (255). The corresponding figure on December 31st, 2000 was 923 MSEK. Accounting principles This interim report has been prepared in compliance with the Swedish Financial Accounting Standards Council's recommendation RR20. The accounting principles remain unchanged compared with those applied in the Annual Report for the year 2000. Stock options During 2000 Hexagon introduced a stock option programme. The motive was to facilitate for key personnel in the Group to become shareholders in the company. There are in total 700 000 options whereof 591 500 have been subscribed. Each option entitles the holder to subscribe to one new share of class B during the period from June 1st, 2002 to and including May 31st, 2005 for 201 SEK. The option rights are transferred at market value. The dilution effect on full utilisation corresponds to approx. 4.7 per cent of the share capital and 3.1 per cent of the votes. A calculation of any dilutions effect in key numbers hasn't been done as the effect is judged to be marginal. Forecast for fiscal 2001 As commented in the annual report for 2000, as well as in the report for the first quarter of 2001, Hexagon is adversely affected by the economic down turn. The new structure of the group has amplified the seasonal variations in profitability and explains partially the weaker result in third quarter. Considering this, we still expect the result for the whole year to be at the same level at last year. However, the terror attacks in the USA and their consequences have increased the uncertainty. Financial information On the Group's web site, www.hexagon.se, all external information is published as soon as it has become public. Year-end report for the year 2001 will be published on February 18th, 2002. Nacka Strand, 30th of October, 2001 HEXAGON AB (publ) Ola Rollén C.E.O and President This interim report has not been audited by the Company's auditors. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/10/30/20011030BIT00970/bit0002.doc The full report http://www.waymaker.net/bitonline/2001/10/30/20011030BIT00970/bit0002.pdf The full report