Kährs Holding AB (publ) Interim report Q4 and full-year 2013

Transcription

1 Kährs Holding AB (publ) Interim report Q4 and full-year 13 February 2014

2 Chief Executive s comments Net sales in the fourth quarter were 1% lower than last year, and explained by a weaker market in Finland and Russia. This sales decline was counterbalanced by a stronger development in the Swedish and American markets during the last quarter of. The operating profit excluding depreciation and non-recurring items (adjusted EBITDA) amounted to 63 or 10.4% and this was 47 better than the same period (pro forma adjusted for gain on bargain purchase and transactions costs), despite a lower turnover. The improved operating profit was mainly related to higher margins and lower costs than fourth quarter. The group s total net sales during Q4-13 were lower than the same period last year (pro forma) due to a weaker development in Finland and Russia. However, this sales decline was compensated by an improved sales performance in the regions Nordics, Americas and Other markets. Fixed costs have also been lower in the fourth quarter compared with the year before. Focus on profitable business in combination with improved product mix and realised synergies supported the improved operating profit for the group. Operating profit excluding depreciation and non-recurring items (adjusted EBITDA) was 47 higher than Q4-12 (pro forma adjusted for bargain purchase and transaction costs) and amounted to 63 or 10.4% compared with 16 or 2.6% for the same period last year. During the year, there has been a high focus on reducing net working capital. After an increase by 67 during the first three quarters, lower account receivables and higher account payables supported the net working capital reduction of 108 in the fourth quarter. The inventory has increased in due to safety stock of finished goods for the factory shutdown in Finland and the transfer of veneer floor production to Poland. The parquet production in Kuopio, Finland, has been closed according to plan in October, and the expected synergies linked to the shutdown have been verified in Q4. The parquet production in Tuupovaara has been scaled down and do currently focus on specific design products. All other parquet production in Finland has been transferred to the production sites in Sweden and Russia. To summarize full-year, a year with high focus on the integration process between Kährs and Karelia-Upofloor which has been performed according to plan. Net sales have declined by 6% during the year and this is partly explained by negative currency impact, but mainly due to weaker market development in Finland and Russia. During the second half of, we have seen a positive development in especially Sweden and the US. The group s gross margin was 34.7% in compared with 33.6% in (pro forma) and our operating profit excluding depreciation and nonrecurring items (adjusted EBITDA) has improved to 227 or 9.3%. 2 (19) Christer Persson President and CEO

3 Financial highlights and key ratios In Kährs Holding AB s consolidated financials, Karelia-Upofloor Oy is included since December 3,, when 100% of the shares were acquired. In immediate connection with this acquisition, the owner of Kährs Group, Nanna II S.C.A., contributed 100% of the shares in Oak Norge AS. The contribution appeared on December 3, and Oak Norge AS is also included in the financial statements of Kährs Holding AB group from that date. Fourth quarter and full-year in brief Comparative figures below are pro forma and show fourth quarter and full-year as if Kährs, Karelia-Upofloor and Oak Norge had been consolidated since 1 January. It should be noted that the comparison figures below for have been affected positively with 249 from gain on bargain purchase 1 and negatively by 19 from transaction costs in connection with the above mentioned acquisition. Net sales amounted to 607 (615), a reduction of 8 or 1% compared with last year. For full-year, net sales was 2,437 (2,605), a decrease of 6% of which 2.5% was related to currency impact. The operating profit excluding depreciation and non-recurring items (Adj. EBITDA) in Q4 amounted to 63 (246) or 10.4% (40.0). The adjusted EBITDA for full-year was 227 (406) or 9.3% (15.6). Adjusted for gain on bargain purchase and transaction costs for the Karelia-Upofloor acquisition, the adjusted EBITDA reached 176 or 6.8%. This means that the adjusted EBITDA of 227 was 29% higher than in. The operating result before non-recurring items (adjusted EBIT) in the fourth quarter was 47 (219) or 7.7% (35.6). Adjusted EBIT for full-year was 130 (290) or 5.3% (11.1). The profit for the period amounted to -36 (141) during Q4-13 and -39 (194) in FY. The reason for this negative deviation in was non-recurring items of -72 mainly related to factory shutdown in Finland and also the above mentioned bargain purchase and transaction costs. The shutdown of the parquet production in Finland during second half of has developed according to plan and the expected annual synergies have been verified during the fourth quarter. The company has in December done a 130 partial repayment on shareholder loans. Proforma 2 Proforma 2 Net sales ,437 1,561 2,605 Operating profit excl. depreciation (EBITDA) Operating profit excl. depreciation and non-recurring items (Adj. EBITDA) Operating profit excl. non-recurring items (Adj. EBIT) Operating profit (EBIT) Profit for the period Operating profit excl. depreciation (EBITDA), % 1.5% 53.7% 39.0% 6.4% 19.0% 15.0% Operating profit excl. depreciation and non-recurring items (Adj. EBITDA), % 10.4% 53.0% 40.0% 9.3% 19.3% 15.6% Operating profit excl non-recurring items (Adj. EBIT), % 7.7% 50.1% 35.6% 5.3% 16.4% 11.1% Operating profit (EBIT), % -1.2% 49.6% 34.6% 2.4% 15.7% 10.5% 1 In the PPA regarding the shares in Karelia-Upofloor the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed exceeded the aggregate of the fair value of the consideration transferred, usually referred to as bargain purchase. According to IFRS principles, the excess, 249, was recognized as other operating income in the IFRS financial statements. 2 Pro forma is presented as if Kährs, Karelia-Upofloor and Oak Norge had been consolidated since 1 January 3 (19)

4 Kährs, fourth quarter and full-year In Kährs Holding AB s consolidated financials, Karelia-Upofloor Oy is included since December 3,, when 100% of the shares were acquired. In immediate connection with this acquisition, the owner of Kährs Group, Nanna II S.C.A., contributed 100% of the shares in Oak Norge AS. The contribution appeared on December 3, and Oak Norge AS is also included in the financial statements of Kährs Holding AB group from that date. Below comparison figures for last year show the group s development for the fourth quarter and January to December as formally reported in the Provisional IFRS Financial Statement (i.e. not pro forma). The group s result development pro forma is presented on page 5-7. It should be noted that the comparison figures for have been affected positively with 249 from gain on bargain purchase and negatively by 19 from transaction costs in connection with the above mentioned acquisition. Net sales Fourth quarter Total group net sales amounted to 607 (421) in Q4-13. Full-year The net sales for the group during amounted to 2,437 (1,561). Operating profit Fourth quarter The operating profit (EBIT) for the fourth quarter amounted to -7 (209). The result of -7 has been affected by non-recurring items of -54. The operating profit excl. nonrecurring items (Adj. EBIT) amounted to 47 (211) or 7.7% (50.1). The operating result excluding depreciation and non-recurring items (Adj. EBITDA) reached 63 (223) or 10.4% (53.0). All result items above from have been affected positively with 249 from gain on bargain purchase and negatively by 19 from transaction costs. Full-year The operating profit (EBIT) for full-year amounted to 58 (246). The result of 58 was affected by non-recurring items of -72 during. The operating profit before non-recurring items (Adj. EBIT) amounted to 130 (256) or 5.3% (16.4). Operating profit excluding depreciation and non-recurring items (Adj. EBITDA) was 227 (301) or 9.3% (19.3). Net financial cost Fourth quarter The net financial cost was -41 (-28). The change from last year was mainly related to interest expense on the 500 bond financing. Full-year The net financial cost during was -109 (-23). The deviation to last year is mainly related to the 500 bond financing, and also due to FX impact on shareholder loans to Nanna II S.C.A. denominated in EUR. Cash flow and Investments Fourth quarter Operating cash flow in the fourth quarter amounted to 89 (85). In December, 130 was repaid on shareholder loans and in addition the company paid 11 in interest on the bond financing. Net working capital decreased by 108 in the fourth quarter and the investments amounted to 32 (15). Full-year During, the operating cash flow amounted to 81 (123). 130 was repaid on shareholder loans and the company also paid 44 in interest for the corporate bond. Net working capital decreased by 41 mainly due to higher account payables. The net investments during were 108 (46) with main focus on the largest production site in Nybro, Sweden. 4 (19)

5 Financial position Total assets of the group amounted to 2,164 per 31 December (2,261 per 31 December ) and the Equity ratio was 19% excl. shareholder loans to Nanna II S.C.A (21% per 31 December ). The net debt of the group, including finance lease and excluding shareholder loans, amounted to 376 per 31 December to be compared with 220 per December. The net debt to adjusted EBITDA ratio amounted per December to 1.7 and the ratio of adjusted EBITDA to net finance charges amounted to 4.4. Consolidated cash and cash equivalents per December 31, was 236 compared with 391 per December 31,, i.e. a reduction of 155 during the year. Repayment of shareholder loans and paid interest on the bond financing explain 174 of this cash outflow. In addition, 108 has been invested in the production sites during the year. The corporate bond issued in December by Kährs Holding AB (publ) was listed on the list for Corporate Bonds at NASDAQ OMX Stockholm on 4 October. Employees The number of employees per 31 December was 1,544, which is a decrease of 68 employees during the year and 37 employees in the fourth quarter. The number of employees outside Sweden at the end of the period was 782 compared with 866 at the beginning of, a reduction of 84. Net sales and result pro forma in summary To increase the comparability between current period and previous periods, net sales, operative result and segment development below are presented as pro forma on page 5-7. Net sales Net sales for the group amounted to 607 (615) in the fourth quarter, a reduction of 8 or 1%. The main reason for this decline is explained by the sales development in Finland and Russia and also negative currency impact. Full-year net sales amounted to 2,437 (2,605). The currency impact from the stronger Swedish krona explains 60 of the total sales reduction of 168 during the year. Net Sales by Product Group Hardwood flooring continued to show a mixed development in the regions during the fourth quarter. The hardwood sales dropped by 1% compared with LY to 525. The resilient flooring business reached a net sales in Q4 of 60 and this is a decrease by 13% compared with the same period LY, mainly related to the development in Finland. Net sales for other business, including flooring accessories, did increase by 22% in the fourth quarter to 22. Net sales FY within hardwood flooring amounted to 2,106 (2,231), a decline of 6%, while sales within resilient flooring business amounted to 247 (291), a decline of 15%. Net sales during the year for other business, i.e. flooring accessories, during the period January to December was 84 (83), an increase of 1%. 5 (19)

6 Net Sales by region The sales regions had a continued mixed development during the fourth quarter with Americas as the strongest region with 28% growth, followed by Other markets at 25% and Nordics at 7%. The positive development in the key markets in the Nordic region was driven by a favorable market situation but also due to taken market shares from competitors. Central Europe delivered net sales 2% lower than the fourth quarter last year, while region Finland/Baltics and Russia/CIS showed a declining sales development during the quarter at -19% and -18% respectively, mainly due to the weaker market situation in the project business. Also for the full-year, Americas was the strongest growing region for Kährs with a sales growth of 13%, followed by a positive development in Sweden where the group is clearly taking market shares from competitors in most market segments. Within the group s key markets, Russia and Finland had the weakest development during the year due to a passive project market. Operating result (adjusted EBITDA and EBIT) The operating result excluding depreciation and non-recurring items (adjusted EBITDA) amounted to 63 (246) or 10.4% (40.0) in the fourth quarter. Adjusted EBITDA for was 227 (406) or 9.3% (15.6). Operating result (EBIT) during Q4-13 was -7 (213) and for the full-year EBIT amounted to 58 (274). The negative EBIT development in compared to last year is explained by -72 in nonrecurring items. In addition, EBIT for has been affected positively by 249 from gain on bargain purchase and negatively by 19 for transaction costs. Adjusted for all items above, the adjusted EBITDA in the fourth quarter was 16 or 2.6% to be compared with 63 or 10.4% during the same period. The corresponding adjustments on full-year results in an adjusted EBITDA of 176 or 6.8% to be compared with at 227 or 9.3%, i.e. an improvement in with (19)

7 Segment development (pro forma) Bargain purchase and transaction costs during have been allocated between the segment s result items below. Hardwood flooring Segment revenue External customers ,106 2,231 Operating profit excl. non-recurring items (Adj. EBIT) Operating profit excl. non-recurring items (Adj. EBIT), % 8.0% 36.0% 5.0% 10.6% Operating profit, (EBIT) Operating profit (EBIT), % -1.9% 34.8% 1.8% 9.9% Resilient products Segment revenue External customers Operating profit excl. non-recurring items (Adj. EBIT) Operating profit excl. non-recurring items (Adj. EBIT), % 5.0% 39.3% 8.1% 14.8% Operating profit, (EBIT) Operating profit (EBIT), % 3.3% 39.3% 7.3% 14.8% Other Segment revenue External customers Operating profit excl. non-recurring items (Adj. EBIT) Operating profit excl. non-recurring items (Adj. EBIT), % 9.1% 11.1% 6.0% 13.3% Operating profit, (EBIT) Operating profit (EBIT), % 4.5% 11.1% 3.6% 13.3% 7 (19)

8 General information Accounting principles in This interim report is prepared in accordance with the Swedish Annual Accounts Act and IAS34, Interim Financial Reporting. For information regarding the accounting policies applied, see the Provisional IFRS Consolidated Financial Statements for fiscal year. Related-party transactions Transactions with related parties are priced in accordance with market terms and prices. Related parties refer to companies over which Kährs Holding AB (publ) has a controlling or significant influence in terms of the operational and financial decisions. Related parties also includes those companies and individuals, such as board of directors and members of management, who have the ability to control or exercise significant influence over the Group's financial and operational decisions. Risk and uncertainty factors Kährs is a global company represented in many countries and as such exposed to a number of commercial and financial risks. Accordingly, risk management is an important process for Kährs in its work to achieve established targets. Efficient risk management is an ongoing process conducted within the framework of business controlling, and is a continuing review of the operations and forward-looking assessments of the business. Kährs long-time risk exposure is not assumed to deviate from the inherent exposure associated with Kährs ongoing business operations. Parent company The parent company, Kährs Holding AB (publ) was established in 1996 and is a limited liability company with its registered office in Nybro, Sweden. The revenue for the period January to December was 0 (0) with a profit after tax of -7 (65). The parent company s income statement and statement of financial position are presented on page in this interim report. Events after balance sheet date No significant events have taken place after the balance sheet date. 8 (19)

9 Consolidated Income Statement Note Sale of goods ,437 1,561 Cost of goods sold ,989-1,279 Gross profit % of Sale of goods % % % % Selling and distribution expenses Administrative expenses Other operating income Other operating expenses Operating profit 2 % of Sale of goods % % % % Financial income Financial expenses Profit before tax Income tax expense Profit for the period Consolidated statement of comprehensive income Profit for the period Other comprehensive income Items that can be reclassified into profit and loss: Translation differences Other comprehensive income, net of tax Total comprehensive income for the period Attributable to shareholders of the Parent Company Attributable to non-controlling interests Total Earnings per share before and after dilution (19)

10 Consolidated statement of financial position Note 31 Dec 30 Sept 31 Dec ASSETS Non-current assets Intangible assets Property, plant and equipment Financial assets Deferred tax assets Total non-current assets Current assets Inventories Trade receivables Derivatives Other current assets Cash and cash equivalents Total current assets 1,262 1,372 1,379 TOTAL ASSETS 2,164 2,247 2,261 EQUITY AND LIABILITIES Equity Share capital Other reserves Retained earnings Total Non-controlling interests Total equity Non-current liabilities Interest bearing liabilities 4 1,074 1,182 1,177 Provisions for pensions Other provisions Deferred tax liabilities Total non-current liabilities 1,094 1,226 1,221 Current liabilities Interest bearing liabilities Other provisions Trade payables Income tax payable Derivatives Other current liabilities Total current liabilities TOTAL EQUITY AND LIABILITIES 2,164 2,247 2, (19)

11 Consolidated statement of cash flows Operating activities Profit before tax Reconciliation between profit before tax & net cash flow Interest received Interest paid Income tax paid Cash flow from operating activities Working capital adjustments Changes in inventories Changes in operating receivables Changes in operating liabilities Net cash flows from operating activities Investing activities Business combinations Purchase of property, plant and equipment Change in financial assets Proceeds from sale of property, plant and equipment Net cash flows used in investing activities Investing activities Dividends paid to equity holders of the parent Unconditional shareholders contribution Cash from contributed subsidiary Proceeds from borrowings Repayment of borrowings Net cash flows used in investing activities Cash flow for the period Cash and cash equivalents, opening balance Exchange - rate differences Cash and cash equivalents, closing balance (19)

12 Consolidated statement of changes in equity Share capital Contributions of other capital Other reserves Retained earnings Total equity As at 1 January Profit for the period Other comprehensive income As at 31 December Share capital Contributions of other capital Other reserves Retained earnings Total equity As at 1 January Profit for the period Other comprehensive income -7-7 Transaction with shareholders: Dividends Contribution of Oak Norge Group Unconditional shareholders contribution As at 31 December (19)

13 Kährs Holding AB (publ) - Income Statement Sale of goods Cost of goods sold Gross profit % of Sale of goods Selling and distribution expenses Administrative expenses Other operating income Other operating expenses Operating profit % of Sale of goods Financial income Financial expenses Profit excl. tax Income tax expense Profit for the period (19)

14 Kährs Holding AB (publ) - Statement of financial position 31 Dec 30 Sept 31 Dec ASSETS Non-current assets Financial assets 960 1,075 1,085 Deferred tax assets Total non-current assets 972 1,075 1,085 Current assets Other current assets Cash and cash equivalents Total current assets TOTAL ASSETS 981 1,096 1,098 EQUITY AND LIABILITIES Equity Share capital Retained earnings Total Non-controlling interests Total equity Non-current liabilities Interest bearing liabilities Total non-current liabilities Current liabilities Trade payables 2-8 Other current liabilities Total current liabilities TOTAL EQUITY AND LIABILITIES 981 1,096 1, (19)

15 Notes Note 1, Accounting policies This interim report is prepared in accordance with the Swedish Annual Accounts Act and IAS34, Interim Financial Reporting. For information regarding the accounting policies applied, see the Provisional IFRS Consolidated Financial Statements for fiscal year. The preparation of the financial reports in accordance with IFRS requires management to make judgments and estimates, as well as assumptions, which affect the application of the accounting principles and the carrying amounts in the income statement and balance sheet. Estimates and assumptions are based on historical experience and a number of factors that under current circumstances seem reasonable. The results of these estimates and assumptions are then used to determine the carrying amounts of assets and liabilities that otherwise are not clearly indicated by other sources. Actual outcomes may deviate from these estimates and judgments. Note 2, Segment Sale of goods by segment Hardwood flooring ,106 1,497 Resilient products Other Sale of goods ,437 1,561 Operating profit excl. non-recurring items (Adj. EBIT) by segment Hardwood flooring Resilient products Other Operating profit excl. non-recurring items (Adj. EBIT) Operating profit (EBIT) by segment Hardwood flooring Resilient products Other Operating profit (EBIT) (19)

16 Note 3, Non-recurring items Operating profit excl. non-recurring items (Adj. EBIT) Effects of acquisitions Production footprint changes Other non-recurring items Operating profit (EBIT) Note 4, Interest bearing liabilities 31 Dec 30 Sept 31 Dec Non-current liabilities Shareholder loans Corporate bond Financing costs Finance lease Other loans Total non-current interest bearing liabilities 1,074 1,182 1,177 Current liabilities Finance lease Other loans Total current interest bearing liabilities Total interest bearing liabilities 1,078 1,185 1,180 1 Shareholder loans to Nanna II S.C.A. (PIK interest only) 2 Financing costs accrued over the corporate bond-loan maturities 16 (19)

17 Note 5, Change of accounting principles transition to IFRS The Group is a first time adopter of IFRS. In accordance with IFRS 1, the opening statement of financial position as at the transition date, 1 January, has been prepared. The main differences in the IFRS opening statement of financial position between the previously applied Swedish accounting principles and IFRS is the identification and accounting of finance leases and financial derivative instruments. As a consequence of the business combination with Karelia Upofloor Group and the contribution by the shareholders of the Oak Norge Group, additional differences between the previously applied Swedish accounting principles and IFRS are affecting the financial statements. In the table below reconciliation is shown for the conversion effects on the Group s equity and net profit/loss after tax between Swedish accounting principles and IFRS. Equity 1 Jan 30 Sep 31 Dec Equity in accordance with Swedish accounting principles IAS 17 - leases IAS 39 derivative contracts IAS 39 corporate bond IFRS 3 transaction costs IFRS 3 gain on bargain purchase IFRS 3 common control contribution IAS 19 - pensions Equity in accordance with IFRS Net profit/loss after tax Jan-Sep Net profit/loss after tax according to Swedish accounting principles IAS 17 - leases IAS 39 derivative contracts IAS 39 corporate bond 9-9 IFRS 3 transaction costs IFRS 3 gain on bargain purchase IAS 19 - pensions Net profit/loss after tax according to IFRS Other comprehensive income Translation differences Total comprehensive income for the period (19)

18 Consolidated key performance indicators Net sales ,437 1,561 Operating profit excl. depreciation (EBITDA), % 1.5% 53.7% 6.4% 19.0% Operating profit excl. depreciation and non-recurring 10.4 % 53.0 % 9.3% 19.3% items (Adj. EBITDA), % Operating profit excl. non-recurring items (Adj. EBIT), % 7.7% 50.1% 5.3% 16.4% Operating profit (EBIT), % -1.2% 49.6% 2.4% 15.7% Profit for the period, % -5.9% 39.9% -1.6% 13.3% Net working capital Net debt Equity ratio % 21% 1 Corporate bond and finance lease minus cash and cash equivalents Financial reporting calendar 2014 Kährs Holding AB (publ) s interim reporting as well as the year end-report are available on Kährs website The reporting calendar is as follows: Statutory report April 2014 Interim report Q1 May 2014 Interim report Q2 August 2014 Interim report Q3 November 2014 Interim report Q4 February 2015 Governing text This report has been translated from Swedish. The Swedish text shall govern for all purposes and prevail in the event of any discrepancy between the versions. 18 (19)

19 Nybro, 13 February 2014 KÄHRS HOLDING AB (PUBL) Sven-Gunnar Schough Chairman Carl Johan Falkenberg Anders Wassberg Hannu Paitula Bertel Langenskiöld Board director Board director Board director Board director Anne Berner Stefan Karlsson Jakob Jakobsson Board director Union representative Union representative Christer Persson President and CEO The information in this interim report is what Kährs Holding AB (publ) is obliged to publish under the provisions of the Stock Exchange and Clearing Operations Act and/or the Trading in Financial Instruments Act. The information was released to the media for publication on February 13, 2014 at 1500 CET. This report has not been reviewed by the company s auditors. For further information, please contact: Christer Persson President and CEO Phone: christer.persson@kahrs.se Peter Ericsson CFO Phone: peter.ericsson@kahrs.se Address: Kährs Holding AB (publ) Dunderbergsgatan Nybro Sweden Corporate identity number: Phone: (19)