Financial Report 2002

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Financial Report 2002 SUMMARY OF THE FOURTH QUARTER Net revenues increased by 65.1 percent to MSEK 412.7. Cash flow after capital expenditures was positive and amounted to MSEK 26.3 (-20.1). The result after financial items amounted to MSEK 26.7 (-34.7). SUMMARY OF JANUARY - DECEMBER Net revenues increased by 21.5 percent to MSEK 1 378.6 (1 134.7). Cash flow after capital expenditures was positive and amounted to MSEK 94.9 (-166.8). The result after financial items amounted to MSEK 16.0 (-47.5). Costs for inventory obsolescence and repurchase undertakings amounted to MSEK 42.1 (33.5). MARKET Telecom The market for infrastructure products for wireless telecom continued to be weak during the quarter and was marked by a wait-and-see attitude. The 3G market remains surrounded by a lot of uncertainty and this uncertainty is likely to persist for the next six months. The low level of capital spending in the 3G market is partly due to the small number of handsets launched. The market is driven in large part by initial requirements for coverage. Products that constitute well-defined offers to the customers, such as new data services and MMS-ready handsets, are still focused on 2.5G applications. In spite of all this, demand in LGP's telecom segment still increased during the fourth quarter. The reason why LGP's sales have developed better than the market at large is, as in prior years and among other things, that the need for the type of products offered by LGP has increased in existing and new networks as these products are procured early in the process of building new networks and that LGP is one of the market-leading companies in this segment. A high level of activity was noted in the growth markets the United States, Russia and India during the quarter. A frame agreement with systems manufacturer NEC was concluded during the quarter. The contract is for 3G TMAs for delivery during 2003. TMAs (Tower Mounted Amplifiers) for 3G networks accounted for about 35 percent of total sales of TMAs during the quarter. The corresponding figure for the full year 2002 was about 42 percent. The market is distinguished by severe pricing and margin pressures. As a result, LGP's quarterly result is affected by lower gross margins for certain products. Europe The expansion of 3G networks, that began during prior quarters, continued, as did the expansion of GSM networks in Eastern Europe. The rest of Europe also displays some improvement market performance for 2G. North and South America In the United States and Mexico continued expansion of GSM networks has meant that market demand was at a stable level. Brazil started opening 2G networks during the period, but this had no effect on sales for the period. Asia Sales grew in China and South East Asia. The market situation remains divided in Asia, however. The development in China is marked by uncertainty and a wait-and-see attitude. A higher level of activity in the 2G market was noted during the quarter, which may be due in part to uncertainty with respect to when 3G licenses will be awarded. It remains unclear if a decision to expand the 3G networks will be reached before the end of 2003. Contract manufacturing The development in business area contract manufacturing continues to be stable. Sales to the vehicle and food industries increased during the quarter, while the development in medical technology was somewhat weaker. NET REVENUES Net revenues for the quarter increased by 65.1 percent to MSEK 412.7 (249.9). In terms of sales, this makes the quarter LGP's best ever to date. RESULT Operating profit for the fourth quarter was MSEK 30.4 (-27.7), which translates to an improvement of MSEK 58.1. The operating result was affected negatively by realized and unrealized foreign exchange losses of MSEK 1.2 (0.9). Profit after financial items amounted to MSEK 26.7 (-34.7). CAPITAL TIED UP Accounts receivable amounted to MSEK 285.1 (190.4), which is equivalent to 20.7 (16.8) percent of net revenues for the past twelve months. Inventories amounted to MSEK 202.4 (228.1), equivalent to 14.7 (20.1) percent of the same net revenues. CAPITAL EXPENDITURES Capital expenditures for machinery and equipment during the fourth quarter amounted to MSEK 23.5 (20.6). MSEK 0.1 (0.0) was spent on buildings and land. MSEK 0.1 (0.0) in development work was capitalized in the balance sheet during the quarter and is carried under the heading Other intangible fixed assets. A total of MSEK 7.2 (0.0) in development costs was capitalized during the year. FINANCIAL POSITION As of September 30, 2002 the equity ratio stood at 66.5 (70.3) percent. Liquid funds at year-end amounted to MSEK 45.8 (54.1), while net liabilities amounted to MSEK 125.1 (215.5). Unutilized committed credit facilities amounted to MSEK 150.0 (150.0). As during the three previous quarters, cash flow after capital expenditures was positive during the fourth quarter, amounting to MSEK 26.3 (-20.1). The positive cash flow has been used to reduce borrowing. EMPLOYEES The number of employees as of December 30, 2002 was 843 (719). The average number of employees during the fourth quarter was 850 (755). PARENT COMPANY The result after financial items for the period January-December 2002 amounted to MSEK -9.5 (3.9). As of December 31, 2002 shareholders' equity stood at MSEK 868.2 (868.6). Capital expenditure during the period January-December 2002 amounted to MSEK 0.3 (91.8). Liquid funds at the end of the period amounted to MSEK 7.1 (26.6). DIVIDEND The Board of Directors has decided to propose to the Annual General Meeting that no dividend be declared for 2002. ANNUAL GENERAL MEETING The Annual General Meeting will be held at 5:00 p.m., Tuesday, May 6, 2003 at the Company's premises in Tullinge, Alfred Nobels väg 107. BID FOR Allgon AB (publ) On January 21, 2002, that is after the end of the period under review, LGP announced an offer to the shareholders of Allgon AB (publ) for a merger of the two companies. Allgon AB commands a strong position, especially in the fields of base station antennas and repeaters. The two companies complement each other well, in Sweden as well as internationally, in terms of products, customer base and geographic coverage. The boards of directors of both companies endorse the offer. A prospectus concerning the offer will be distributed on or about February 17, 2003. The period of application is expected to run from February 18, 2003 to March 10, 2003, inclusive. On the condition that LGP pursues the offer to its conclusion no later than March 13, 2003, distribution of consideration is expected to begin March 24, 2003. LGP's shareholders will, at an extra general meeting of shareholders expected to be held March 3 2003, adopt the necessary resolutions prompted by the bid. If the offer is pursued to its conclusion, revamping charges totaling MSEK 70-80 are expected to be charged to the group's result for 2003. A merger will also involve a review of the group's need for premises, which may give rise to a need to write down the value of assets and, possibly, additional revamping costs. Annual cost savings in the order of MSEK 75 are expected to be generated. ACCOUNTING PRINCIPLES From January 1, 2002 LGP has implemented the following new recommendations from the Swedish Financial Accounting Standards Council: RR 1:00 Consolidated reporting, RR 15 Intangible assets, RR 16 Provisions, contingent liabilities and assets, RR 17 Writedowns, RR 21 Loan costs and RR 23 Information about closely affiliated parties. Implementation of RR 1:00, RR 16, RR 17, RR 21 and RR 23 has not had any major effect on results or financial position. According to RR 15 Intangible assets, expenses for development of new products should be reported as intangible assets to the extent such expenses with a high degree of certainty will lead to future economic benefits for the company. The cost of such intangible assets shall be amortized over their estimated useful life. Under LGP's application of the new rules, all development projects are carefully assessed. To justify capitalization of sunk costs, LGP's judgment has to be that customer orders will be received with a high degree of certainty. Under the accounting principles previously applied by LGP, all expenses for development of new products were expensed. From January 1, 2002 foreign exchange translation differences attributable to operations are reported on a net basis as other income/expense. Comparative data have not been recalculated. In all other respects the same accounting principles and calculation methods have been applied for the semi-annual report as for the most recent annual report. OUTLOOK The interim report dated October 18, 2002 contained the following outlook: "The telecom market as a whole has showed no signs of improvement during the third quarter and future prospects remain uncertain. In LGP's opinion, its niche of the telecom market will continue to show a stable development during the next quarter. The first quarter of 2003 may be negatively affected by normal seasonal variations. The order situation for mechanical products is stable." LGP now makes the following assessment: Future prospects continue to be uncertain for the telecom market as a whole. A slightly higher level of activity, which has yet to result in increased order bookings, was noted during the fourth quarter. For LGP the first quarter will show a weak development in the telecom sector due to seasonal variations. The order situation for contract manufacturing continues to be stable. ANALYST AND PRESS MEEETING An analyst and press meeting will be held at 8:30 a.m., January 30 at Operaterassen, Stockholm. SCEDULE OF FUTURE REPORTING The complete Annual Report for LGP Telecom Holding AB (publ) for 2002 will be available from the beginning of March 2003. The Annual Report will simultaneously be available at LGP's website,, and be mailed to the Company's shareholders. Annual Report Beginning of March 2003 Extra general meeting of shareholders March 3, 2003 Annual General Meeting May 6, 2003 Interim Report January-March May 6, 2003 Interim Report January-June July 11, 2003 Interim Report January-September October 17, 2003 Stockholm, January 30, 2003 LGP Telecom Holding AB (publ) Board of Directors This financial report has been subject to review by LGP's auditors. For further information, contact: Bengt Broman, President & CEO Phone +46-70 570 10 30 Claes Silfverstolpe, CFO Phone +46-70 898 83 45 ------------------------------------------------------------ This information was brought to you by Waymaker The following files are available for download: The full report The full report