RNS Number:8916Y
Esselte AB
19 July 2002
Press Release from Esselte AB
2002-07-19
Report on operations for the six months ended June 30, 2002
Improvement in net income for the second quarter due to lower restructuring
costs and reduced financial expenses
• Gross margin improved 1.0% to 29.7% compared to the second quarter last
year
• Operating income excluding items affecting comparability increased by 18%
to SEK 60 million (51) despite weak markets
• Restructuring costs were SEK 47 million compared to SEK 196 million last
year
• Financial expenses were reduced by SEK 43 million to SEK 22 million
• Net income was SEK -5 million, compared to SEK -126 million last year
• J.W. Childs has decided to implement the recommended public offer to the
shareholders of Esselte for all shares of Esselte AB (publ)
• De-listing from Stockholmsborsen and London Stock Exchange is planned for
01 August 2002
Results for the second quarter
Sales for the second quarter were SEK 2,401 million (2,453), a decrease of 2.1%.
Change in sales for comparable exchange rates and units was +0.6% compared to
last year. In spite of the economic slowdown in the US and several European
countries, sales held up well. DYMO was the best performing product category
with sales of SEK 364 million (344).
The gross margin was 29.7%, an improvement of 1.0% compared to last year.
Operating income excluding items affecting comparability was SEK 60 million
compared to SEK 51 million last year, an increase of 18%. However, it should be
noted that the Curtis computer accessories business had a breakeven result this
year compared to a loss of SEK 57 million the same period last year.
Included in the operating expenses for this year is a provision of approximately
SEK 36 million, related to the long-term incentive programme and advisory fees
related to the recommended offer from J.W. Childs Equity Partners III, L.P. to
purchase all the outstanding shares of Esselte AB.
Operating income including items affecting comparability was SEK 13 million
(-145). A restructuring charge of SEK 47 million was taken in the second quarter
this year relating to the earlier announced modernisation of manufacturing in
Stuttgart. Last year, a one-off restructuring charge of SEK 196 million related
to the Curtis business was taken.
The net financial expense was SEK -22 million compared to SEK - 65 million last
year, mainly explained by reduced debt and significantly reduced market rates.
Results for the six months
Continued weak global markets affecting sales
Sales for the six months were SEK 5,047 million (5,340). The reason for the
sales decrease of 5.5% is weak global markets, affecting sales in Germany and in
the USA among other countries.
Change in sales for comparable exchange rates and units was -4.6% compared to
last year.
The gross margin was 29.5% (28.9%). The improvement, in spite of the volume loss
in the production plants, is due to Esselte's continued cost reduction programme
in the supply chain.
Operating income
Operating income excluding items affecting comparability increased by 4% to SEK
234 million (225) despite a difficult trading climate. Off-setting the decrease
in sales of 5.5% is a 0.6% gross margin improvement and a 4.8% reduction in
operating expenses.
Esselte's UK business has made a small profit for the first time in many years
through cost focus, improved contracts and mix of sales. The supply chain unit
in Poland is also delivering significantly improved results compared to last
year.
Operating expenses have decreased by 4.8% to SEK 1,257 million (1,320). Esselte
is continuing its expense reduction efforts throughout the group.
The operating margin excluding items affecting comparability was 4.6% (4.2%).
Items affecting comparability
A restructuring charge of SEK 47 million was taken in the second quarter
relating to the earlier announced investment into modernisation of manufacturing
in Stuttgart. This investment facilitates a simpler production flow leading to
substantial savings in direct costs.
The simplification of production also means an opportunity for indirect cost
savings via a reduction of the infrastructure at the German unit. In total,
approximately 220 employees will be affected. The cost saving programme will
further strengthen the Esselte-Leitz competitive position in Germany.
Operating income including items affecting comparability
Operating income including items affecting comparability was SEK 187 million
compared to SEK 29 million last year. The improvement is mainly due to last
year's restructuring charge of SEK 196 million, related to the Curtis business.
Income before and after tax
Income before tax was SEK 133 million (-122). The net financial expense was SEK
-54 million (- 151), an improvement of SEK 97 million. There are three principal
reasons for the lower financial expenses.
Firstly, Esselte has reduced external debt from SEK 3,676 million on June 30,
2001 to SEK 2,364 million on June 30, 2002 a decrease of over SEK 1,3 billion.
Secondly, market rates have been reduced significantly during the last 12
months.
Thirdly, Esselte had, during the first quarter 2001, a foreign exchange loss of
a one-off nature in the Turkish subsidiary. The Turkish lira was devalued by
40%.
Net income was SEK 80 million, compared to SEK - 73 million for the same period
last year.
Operating cash flow
Cash flow from operations increased by 22% to SEK 300 million (246). This
increase is mainly generated by the reduced financial expenses.
Long- and short-term debt has been reduced from SEK 2,774 in December 2001 to
2,364 in June 2002 reflecting the strong cash flow and a weakening of the US
dollar. Net investments in fixed assets for the period were SEK 41 million
(129).
The strong focus on strengthening the balance sheet has lead to an equity-assets
ratio of 34.2% compared to 29.9% on December 31, 2001.
PRODUCT CATEGORIES
From January 2002, the composition of the product categories has changed. The
Product category "Development Categories" has been removed and therefore Binding
& Lamination products are now included in "Workspace" and Curtis computer
accessories in "Other Products".
Filing
Sales were SEK 3,094 million (3,273), a decrease of 5.5%. Continued weak demand
in North America and Europe affected sales. The positive sales development in
some Eastern- and Southern European markets continued.
DYMO
Sales of DYMO branded products were SEK 750 million (716), an increase of 4.7%.
Strong sales in North America for both LabelMakers and LabelWriters coupled with
a positive sales development in Southern- and Central Europe was behind the
increase in sales. Sales development in Northern Europe and UK was negative.
Workspace
Workspace includes products such as staplers, perforators, moulded plastics and
Binding & Lamination. Sales were SEK 456 million (477), a decrease of 4.4%,
affected by the slow economy.
Other Products
Other Products include printer supplies, ring binder mechanisms, computer
accessories and traded articles. Sales were reduced to SEK 747 million
(874) of which a decrease of SEK 76 million relates to divestments.
Recommended offer to the shareholders of Esselte AB (publ)
On May 24, 2002, J.W. Childs Equity Partners III, L.P. ("J.W. Childs"), through
its affiliate J.W. Childs Acquisition Sweden AB, announced a recommended offer
to purchase all the outstanding shares of Esselte AB (publ). On July 11, 2002,
J.W. Childs announced that all conditions of the offer have been met and J.W.
Childs has therefore decided to implement the offer. Following J.W. Childs
announcement, the Board of Directors of Esselte AB (publ) has applied for the
Esselte shares to be de-listed from Stockholmsborsen and the London Stock
Exchange with effect as from 01 August, 2002. The final day for trading on
either exchange is planned to be July 31, 2002.
Extra General Meeting
The shareholders of Esselte AB (publ) have been convened to an Extra General
Meeting on August 1, 2002 for the purpose of electing new Directors to the
Board.
Other
On May 15, 2002, Anders Igel left his position as CEO of Esselte and Ulrik
Svensson, the CFO of Esselte, was appointed acting CEO. Following the completion
of the acquisition by J.W. Childs (see above), Magnus Nicolin will become Chief
Executive Officer and President of Esselte.
Accounting principles
This report is prepared according to the Annual Accounts Act and the standards
issued by the Swedish Accounting Standards Council. There have been no changes
in the accounting principles applied compared to last year except for new
standards applicable for Esselte. These are;
RR 1:00, RR 15, RR 16, RR 17, RR 21 and RR 23. It is the company's opinion that
the above standards have no material effect on the financial reports.
For comparative figures, the balance sheet and the cash flow statement are not
identical in this report compared to the annual report 2001 due to minor
re-classifications.
This report has not been reviewed by the auditors.
Solna 19 July, 2002.
Esselte AB (publ)
Ulrik Svensson
Acting CEO
Esselte is the leading global office supplies manufacturer with annual sales of
approx. SEK 11 billion, subsidiaries in 25 countries, selling office products in
over 120 countries and employing approx. 6,200 people.
Esselte makes it easier for people to organize the modern workplace. Our
principal brands are: DYMO, Pendaflex, Leitz and Esselte.
To learn more about Esselte, visit our website at www.esselte.com.
For further information please contact:
• Ulrik Svensson, acting CEO +44 (0) 1895 878 770
• Thomas Groth, IR +44 (0) 1895 878 983
Gross profit
SIX MONTHS ENDED 30 JUNE 2002
CONSOLIDATED INCOME STATEMENT
April - June January - June Full Year
SEK millions 2002 2001 2002 2001 2001
Net sales 2,401 2,453 5,047 5,340 10,853
Cost of goods sold -1,687 -1,749 -3,556 -3,795 -7,786
Gross Profit 714 704 1,491 1,545 3,067
Selling expenses -367 -421 -749 -849 -1,678
Administrative expenses -222 -177 -398 -346 -715
Goodwill amortization (Note) -24 -25 -48 -50 -99
Other operating expenses -41 -30 -62 -75 -133
Operating income exc. items aff. comparability 60 51 234 225 442
Items affecting comparability -47 -196 -47 -196 -118
Operating income inc. items aff. comparability 13 -145 187 29 324
Financial income and expense -22 -65 -54 -151 -240
Income after financial items -9 -210 133 -122 84
Tax 4 84 -53 49 -34
Net income -5 -126 80 -73 50
Number of shares 34,239,628 34,239,628 34,239,628 34,239,628 34,239,628
Income per share exc. items aff.
comparability - SEK 1.20 -0.20 3.70 1.30 2.50
Income per share inc. items aff.
comparability - SEK -0.10 -3.70 2.30 -2.10 1.50
Depreciation and amortization 105 181 211 295 528
CONSOLIDATED BALANCE SHEET
30 June 31 March 31 Dec
SEK millions 2002 2001 2002 2001 2001
Intangible fixed assets 1,183 1,347 1,223 1,409 1,298
Tangible fixed assets 1,832 2,144 1,950 2,126 2,078
Financial fixed assets 799 802 893 785 944
Inventories 1,432 2,056 1,409 2,066 1,510
Short term receivables 2,255 2,337 2,287 2,510 2,444
Cash and bank 68 313 59 243 45
Assets 7,569 8,999 7,821 9,139 8,319
Shareholders' equity 2,589 2,321 2,531 2,568 2,485
Provisions for pensions 509 490 488 483 500
Provisions, other 276 301 258 249 310
Long term liabilities, interest bearing 1,051 2,395 1,227 2,391 1,358
Short term liabilities, interest bearing 1,313 1,281 1,312 1,180 1,416
Short term liabilities, non-interest bearing 1,831 2,211 2,005 2,268 2,250
Shareholders' equity and liabilities 7,569 8,999 7,821 9,139 8,319
Capital structure
Capital employed 4,743 5,681 4,975 5,795 5,208
Net financial liabilities 2,155 3,360 2,444 3,227 2,723
Shareholders' equity per share, SEK 75.60 67.80 73.90 75.00 72.60
Equity/assets ratio - % 34.2% 25.8% 32.4% 28.1% 29.9%
Number of employees
Number of employees - end of period 6,230 6,519 6,354 6,975 6,462
KEY FIGURES
April - June January - June Full Year
2002 2001 2002 2001 2001
Excluding items affecting comparability
Gross profit margin 29.7% 28.7% 29.5% 28.9% 28.3%
Operating expenses / sales 27.2% 26.6% 24.9% 24.7% 24.2%
Operating margin 2.5% 2.1% 4.6% 4.2% 4.1%
Including items affecting comparability
Gross profit margin 29.7% 28.7% 29.5% 28.9% 28.3%
Operating expenses / sales 29.2% 34.6% 25.8% 28.4% 25.3%
Operating margin 0.5% -5.9% 3.7% 0.5% 3.0%
July - June Full Year
2002 2001 2001
12 months moving values
Rate of capital turnover 2.1 2.0 1.9
Return on capital employed 9.4% 4.9% 5.8%
Return on shareholders' equity 8.1% 0.1% 2.1%
Note : Excludes depreciation on fair market valuation of fixed assets related to
the acquisition of Leitz in 1998. This is included in cost of goods sold at a
value of SEK 31 m (31) for the period January to June 2002.
SIX MONTHS ENDED 30 JUNE 2002
CONSOLIDATED CASH FLOW STATEMENT
April - June January - June
SEK millions 2002 2001 2002 2001
Operations
Operating income including items affecting
comparability 13 -145 187 29
Depreciation and amortization 105 181 211 295
Other non-cash items 96 67 101 85
Financial items and income taxes paid -42 -130 -91 -238
Change in working capital -51 157 -108 75
Cash flow from operations 121 130 300 246
Investments
Investment in / divestment of operations 0 34 0 34
Net investment in fixed assets -23 -83 -41 -129
Change in financial assets -10 108 8 140
Cash flow from investments -33 59 -33 45
Financing
Dividend paid -45 -68 -34 -68
Change in financial liabilities -56 -55 -205 -120
Other 12 -5 -3 -17
Cash flow from financing -78 -128 -242 -205
Net cash flow 10 61 25 86
Cash and bank at beginning of period 59 244 45 208
Exchange difference in cash and bank -1 8 -2 19
Cash and bank at end of period 68 313 68 313
CHANGE IN SHAREHOLDERS' EQUITY
January - June
SEK millions 2002 2001
At beginning of period 2,485 2,588
Dividend paid to shareholders -34 -68
Change in translation differences 58 -126
Net income 80 -73
At end of period 2,589 2,321
NET SALES BY PRODUCT CATEGORY
April - June January - June
SEK millions 2002 2001 2002 2001
Filing 1,442 1,475 3,094 3,273
DYMO 364 344 750 716
Workspace 220 221 456 477
Other products 375 413 747 874
Total 2,401 2,453 5,047 5,340
SHARE OF NET SALES BY COUNTRY
January - June
2002 2001
USA 33% 33%
Germany 18% 18%
France 6% 6%
UK 4% 4%
Canada 4% 4%
Italy 4% 4%
Netherlands 4% 4%
Sweden 4% 3%
Spain 4% 3%
Denmark 3% 3%
Other countries 16% 18%
Total 100% 100%
This information is provided by RNS
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