QUARTERLY REPORT FOR TAGMASTER AB (publ.)PERIOD 2012-04-01 – 2012-06-30
Focus on three business areas
Net sales quarter two: 11.3 MSEK (10.5)
Result quarter two: -0.6 MSEK (-1.7)
Good order intake and strengthened order book
New strategic direction towards the market with three frontiers focusing three business areas
Great interest in the position as CEO of TagMaster
Integration of the Malaysian company now up to speed
Quality certification of the company inSwedenandMalaysiastarted (ISO 9001)
New board and new direction
The AGM June 14 elected a totally new board consisting of Joe Grillo, Magnus Jonsson, Gert Sviberg and Rolf Norberg with the latter as chairman. The work to vitalize and direct the company towards the market and towards sales was started immediately. The key people who had handed in their termination letters and also had been forced to leave the company have recalled their terminations, which has also been accepted by the company.
As the former board also expressed at the AGM there was a financing need for about a million or so during the coming month or months. The truth was rather between 1.5 and 2 million per June 15. Intensive work started to manage the situation, if possible without additional financing. Through very good efforts from all personnel we have together managed to increase invoicing, make substantial savings and plan the payments in such a way that no additional financing has been necessary during the period. One part of this has been termination of substantial consultancy costs paid out during the last six months period. Another significant part is the decision to move to cheaper premises by September 1, 2012. Continued cost control and carefulness with cost continues.
Invoicing and result
Order intake as well as invoicing was very good during the second part of June, which means that the second quarter in spite of a slow start ended up with a net invoicing of 11.3 MSEK (10.5). The result turned out to be -0.6 MSEK (-1.7) corresponding to 0,00 SEK (-0,02) per share (totally 107.731.708 and 65,494,766 average number of shares respectively).
The costs during the quarter were 7.2 MSEK (7.6). During the work with the second quarter report we recognized that some costs were underestimated in the first quarter report. The reduced salaries were actuality not reduced salaries, but a transition from fixed to variable salary. Simply said a bad result for the company would lead to reduced salaries, a “normal” result would give unchanged salaries and a good result would mean increased salaries.
The actually paid salaries were lower, but there was already reason to expect at least a “normal” result so a reservation for some extra salary costs in December should have been done. Our judgment is that this extra salary including labor taxes will be more than 1 MSEK for the full year. In the report for the second quarter we have reserved 528,000:- of which half is related to the first quarter. There are also some other costs belonging to the first quarter which are now booked in the second quarter. The correct result for the first quarter should have been 300,000:- SEK lower than previously shown. All comparing figures are, however, based on what has been reported before.
The operating result (EBIT) for TagMaster AB was -0.6 MSEK (-1.7) and for TagMaster Group it was -0.6 MSEK (-1.7).
Liquidity
The Group’s cash position has during a period been tough. The main explanation is the big loss made during 2011. To improve the situation a number of actions have been taken. A share holder loan of 2.9 MSEK has been converted to share capital. After discussions with a number of major suppliers the payment conditions have been improved. The continued work with cost savings, e g relocation to smaller facilities with lower rent in September, will improve liquidity over time. The good order intake during the end of the quarter has also improved the situation. The company has therefore had a significant positive cash flow.
Liquidity planning for the company is based on regular follow-up of costs and income and also a detailed analysis of the cash flow for the next future. Liquidity and cash flow have priority in the daily work and the dialogue with creditors, suppliers and customers is continuous. The board therefore today, and based on the reduced cost structure in the company and the positive sales development we see now, makes the judgment that the company has sufficient liquidity for the coming 12 months.
Accounts receivable were 6,0 MSEK (8,3) and supplier debts were 3,9 MSEK (4,9). The goods for sale were 7,0 MSEK (8,3).
Sales
As has been already mentioned above the sales during the last weeks of the second quarter has been good. TagMaster has also during the following period had good order intake and the latest business comes from an active market for access and parking (AVI) and also from a first big order which is the first phase of another bigger project within Transportation.
New strategic direction
The market organization has together with other management and together with the board worked out a new strategic direction for the company during the period after June 15. This means the company will focus three business areas.
Access and Parking (AVI): This area is partly running by itself and is based on a number of distributors and integrators. The intention is to strengthen this area and make it even more self-generating through more systematic use of the application knowledge of the partners and at the same time make distribution more efficient to reach out to more integrators without increasing the TagMaster resources.
Transportation: This is an investment segment with high potential since the TagMaster products have had a number of years to show their strengths. This is valid for the traditional 2,45 GHz products as well as for the new UHF product program. Great efforts will be made to acquire further customers in this segment. Since the projects are mostly multi-million projects and also unevenly distributed over time as well as they require significant planning and decision time for the customers, it is important to work with several signaling system and train suppliers in parallel for a more even sales and a more stable business. Significant growth should be expected in this segment with many opportunities for ROI as well as environmental improvements.
Logistics: This is a new segment, yet rather virgin and we consider it a potential to find new business opportunities. Logistics is a wide scope and could be anything from containers and gas bottles to trucks and goods terminals. Most things moving around could have a need to be identified; this is valid for people as well as for goods and goods carriers. TagMaster will in this area focus on customers with needs corresponding to the company strengths – reliable and robust solutions in the upper segment of RFID.
Three frontiers – new organization
The TagMaster organization will follow the three business areas described above with the marketing and sales in the front with support from R&D, logistics and administration. There are already now persons responsible for the three market segments. There is also a product department responsible for R&D and production. Economy and administration is the third major function set and there is a QA responsibility established. The whole organization should from now on be sales driven with the other functions there to support in big and small.
Quality certification (ISO 9001)
An increasing number of customer require or expect that the company has quality certification, especially within the Transportation segment. This is not new, but has been on the agenda and postponed for several years. There is now a project leader appointed and the target date for certification of TagMaster inSwedenandMalaysiais June 30 2013.
Integration of TagMaster SB (Malaysia)
The integration of TagMaster SB is now fully activated. Decision has been taken regarding sales, technical cooperation and exchange of personnel for training in the different areas. Decisions are also taken regarding common administration platforms and quality certification (ISO 9001). A sales manager from TagMaster in Sweden will make a round trip in Asia to hand over customer responsibility to a colleague in Malaysia. Three technicians from Malaysia will visit TagMaster in Kista for training. This will be followed by Swedish technicians coming to Kuala Lumpur for training. The financial system Scala will be extended during the autumn to also include the company in Malaysia. The recently started quality certification project includes the Malaysian company from start.
New CEO to the TagMaster group
The process to find a new CEO for the Group started immediately after the AGM and the interest for the challenge has been exceptionally high. Evaluation of candidates is ongoing and the target is to make a decision before the end of August to have a new CEO in place during the autumn. In the meantime the company is running the business according to the new direction and strategy with support from the interim CEO as well as from the board and its chairman.
Looking forward
The company has its strength in the upper segment of RFID with 2.45 GHz and UHF high performance readers and tags. The proven reliability and competence in this area has already resulted in several major customer accounts with high demands within the transportation segment as well as within AVI (Automatic Vehicle Identification) and now lately also logistic applications. With an even stronger focus on these areas, which all represent growing markets and with focus on sales and acquisition of new customers in these areas there are good opportunities for growth. Markets like China and India are growing strongly, but the TagMaster market share is also small in the traditional markets in Europe and even more so in the US. The present establishments in US, China and Malaysia are valuable platforms for growth in these markets.
Coming reports
October 25, 2012, quarterly report January – September 2012
February 14, 2013, quarterly report January – December 2012
Annual General Meeting
April 18, 2013
Contact persons
Sven Wramner, Interim CEO, +46 8-6321950, Sven.Wramner@tagmaster.se
Maria Nordgren, Finance, +46 8-6321950, Maria.Nordgren@tagmaster.se