LGP Interim Report Jan-March 2003

Interim Report January-March 2003 SUMMARY JANUARY-MARCH ·Net sales increased to MSEK 317.2 (266.0). ·Cash flow after capital expenditures was positive, MSEK 2.9 (35.4). ·The operating result before items affecting comparability was MSEK 6.8 (-6.2). ·Writedown of fixed assets by MSEK 82.0 (-) reported as an item affecting comparability. ·The result after financial items was MSEK -76.6 (-12.6). ·Earnings per share amounted to SEK -2.35 (-0.35). · MARKET Telecom The market for products in infrastructure for wireless telecom showed a weak development during the quarter. LGP's expectations during the beginning of the quarter were met, with low levels of activity due to seasonal variations. The recovery that is normally seen in March failed to materialize, however. The market was influenced by the uncertainties in the world situation. The conflict in Iraq and the uncertain economic outlook are likely to have had a negative effect on capital spending plans. The uncertainty with respect to the 3G market is expected to remain during all of 2003. Availability of 3G telephones and services is still limited. Operators continue to be cautious in their capital spending. There are tendencies among operators to re-focus from 3G to 2.5 G as a way of reducing the need for capital expenditures. In countries where 3G has been launched, the reception has been mixed. Interest was weak in England, while the Italian market was more positive. A number of operators reported better than expected earnings, which should have a positive effect on the rate of capital spending going forward. Sales of TMAs (Tower Mounted Amplifier) for 3G networks accounted for 31 percent of total sales of TMAs. The corresponding figure for 2002 was about 34 percent. The market is fraught with severe pricing and margin pressures. Market development in the emerging markets in India and Russia was stable. The first quarter does show a somewhat lower level of activity in India. Europe Expansion of 3G networks continues, as does the expansion of GSM networks in Eastern Europe. GSM sales continue as expected. The anticipated increase in demand from operators for 3G networks in Germany have yet to result in large-volume orders. North and South America The market in North America was stable during the quarter. From South America, signals came during the quarter of higher levels of activity. Asia The development in Asia is distinguished by uncertainty and a wait-and- see attitude. The market is affected by the global economic uncertainty. The recovery that is usually seen in March, after the Chinese New Year, has not materialized. Contract manufacturing The wait-and-see attitude prevailing in the telecom industry is also noticeable in many other industries as a result of the weak economic trend. In consequence herewith, sales during the first quarter of 2003 were weak in business area Contract Manufacturing. ACQUISITION OF ALLGON On January 21, 2003 LGP made an offer to the shareholders in Allgon to acquire their Allgon shares in exchange for shares in LGP. By the end of March 2003 LGP was the owner of shares representing 92.5 percent of the votes and 90.1 percent of the capital in Allgon. After an additional extension period, ownership as of April 22 had reached 95.6 percent of the votes and 94.2 percent of the capital. The Allgon share was delisted from the Stockholm Stock Exchange effective as of April 22, 2003 due to LGP's large ownership and thin trading. When LGP reached 90 percent of capital and votes in Allgon, the job of integrating the two companies began. New operative management for the Telecom business was appointed and the main features of the new group's organization were established. The goal of cost savings totaling MSEK 75 previously communicated remains, as does the previous estimate of restructuring costs totaling MSEK 70-80. A major portion of this amount is expected to affect earnings during the second quarter of 2003. No restructuring costs are reported in the income statement for the first quarter. The integration work between the companies is progressing according to plan and has further confirmed management's belief in a strong joint company. LGP and Allgon complement each other well, both in terms of employee competence, product offerings and customer base. New integrated products have been shown to customers and have been positively received. The new group's suppliers have also reacted on a positive note to the news of the merger. The acquisition of Allgon has been handled as follows in the closing of the books for the first quarter: Allgon's balance sheet has been consolidated into LGP's consolidated balance sheet in its entirety. A goodwill item totaling MSEK 23.5 arose since the acquisition was valued at market price of the LGP share at the time of LGP's acquisition of shares in Allgon. Shares not yet acquired, and for which compulsory redemption proceedings will be requested, have been valued at the same market price as the latest acquired shares. The acquisition value has been adjusted for acquisition costs in LGP and due consideration has been given to structural costs totaling MSEK 9.0 in the form of severance payments to the departing management of Allgon, which has then been compared to Allgon's shareholders' equity as of March 31, 2003. The difference is reported as goodwill and short-term liability, respectively, with respect to the shares not yet acquired. Allgon has not been included in the consolidated income statement. Allgon will be consolidated as of April 1, 2003. This means that certain financial indicators and ratios, such as earnings per share, will be difficult to interpret since they thus also include newly issued shares, whereas earnings numbers are reported do not include Allgon's result. A pro forma income statement has therefore been compiled for the first quarter of 2003, as well as the corresponding pro forma calculation of certain financial indicators. The pro forma income statement shows how the consolidated income statement would have looked if the acquistion of Allgon had taken place January 1, 2003. NET REVENUES Net revenues for the quarter increased by 19.2 percent to MSEK 317.2 (266.0). RESULT The operating result for the first quarter amounted to MSEK -75.2 (- 6.2). The operating result was negatively affected by writedowns of fixed assets in a total amount of MSEK 82, reported as items affecting comparability in the income statement. The writedown refers to one of the Company's Swedish properties, where it is clear after the acquisition of Allgon that the property will not be developed and used by LGP, and also to fixed assets in subsidiary Bertmann. The Board of Directors of LGP will propose to the Annual General Meeting to be held May 6, 2003 that Bertmann as well as subsidiary Håmex be sold at a price that an independent appraisal has found to be reasonable. The operating result was also affected by realized and unrealized exchange rate results of MSEK -2.9 (-3.0). The result after financial items amounted to MSEK -76.6 (-12.6). CAPITAL TIED UP Accounts receivable amounted to MSEK 465.9 (190.0). MSEK 271.2 (190.0) of this amount is attributable to the Group not including Allgon, which is equivalent to 19.0 (18.5) percent of net revenues for the past twelve months. Inventories amounted to MSEK 427.3 (218.9). MSEK 198.3 (218.9) of this amount is attributable to the Group not including Allgon, which is equivalent to 13.9 (21.4) percent of the same net revenues. CAPITAL EXPENDITURES Capital expenditures for machinery and equipment during the first quarter amounted to MSEK 8.3 (4.9) in the Group not including Allgon. MSEK 0.2 (0.0) was invested in the Group not including Allgon in buildings and land. MSEK 0.5 (1.8) in development work was capitalized in the Group not including Allgon and is carried in the balance sheet under the heading Other intangible fixed assets. FINANCIAL POSITION The equity ratio as of March 31, 2003 stood at 56.6 percent (71.0). As of December 31, 2002 the equity ratio was 69.5 percent. Liquid funds at the end of the period amounted to MSEK 93.1 (47.4), while net indebtedness was MSEK 260.0 (181.1). MSEK 33.5 of the liquid funds are held in a restricted account as security for certain undertakings made by Allgon in connection with the sale of subsidiary Allgon Mobile Communications during 2002. The cash flow after capital expenditures in the Group not including Allgon was positive, as it was in 2002, and amounted to MSEK 2.9 (35.4). The positive cash flow and a part of the liquid funds have been used to reduce borrowing. The effect of the Allgon acquisition on the Group's financial position is summarized below: . Group Group,not Group Group MSEK Mar.31, 2003 including Dec. 31, Mar. 31, Allgon Mar 2002 2002 31, 2003 Liquid funds 93.1 22.0 45.8 47.4 Net liabilities 260.0 123.1 125.9 181.1 Unutilized committed 210.0 150.0 150.0 150.0 credit facilities Accounts receivable 465.9 271.2 285.1 190.0 Inventories 427.3 198.2 202.4 218.9 EMPLOYEES As of March 31, the number of employees was 1 460, 526, of whom in Allgon. The average number of employees in the Group, not including Allgon, was 934 during the quarter (743). PARENT COMPANY The result after financial items for the period January-March 2003 was MSEK 0.1 (-4.7). As of March 31, 2003 shareholders equity was MSEK 1 262.5 (864.9). Capital expenditures in machinery and equipment, and building and land were MSEK 0.4 during the first quarter of 2003 (0.0). In addition hereto, Allgon AB was acquired. Liquid funds at the end of the period amounted to MSEK 4.7 (0.0). ACCOUNTING PRINCIPLES 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 presented January 30, 2003 contained the following outlook: "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." LGP now makes the following assessment: "Future prospects continue to be uncertain for the telecom market for the remainder of the year. LGP shares the assessment made by several other players in the market, namely that no sure signs of any improvement in the current market demand situation have been noted. Some weakening in demand is expected for Contract Manufacturing" ANALYST AND PRESS MEEETING An analyst and press meeting will be held at 8:30 a.m., Tuesday, May 6 at Operaterassen, Stockholm. SCHEDULE OF FUTURE REPORTING Annual General Meeting May 6, 2003 Interim Report January-JuneJuly 11, 2003 Interim Report January-SeptemberOctober 17, 2003 Stockholm, May 6, 2003 LGP Telecom Holding AB (publ) Board of Directors This interim report has not been subject to examination by LGP's auditors. For further information, contact: Bengt Broman, President and CEO Telephone: +46-705-70 10 30 E-mail: bengt.broman@lgp.se Claes Silfverstolpe, CFO Telephone: +46-708-98 83 45 E-mail: claes.silfverstolpe@lgp.se ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2003/05/06/20030505BIT01130/wkr0001.doc The full report http://www.waymaker.net/bitonline/2003/05/06/20030505BIT01130/wkr0002.pdf The full report