Year-end release January - December 2001

 

If you have any questions about this report, please contact:
Fredrik Cappelen, President and CEO, Lennart Rappe, Executive Vice President and CFO,
Katarina Sivander, Communications Manager, tel. +46 8 440 16 00
Financial information is also available on Nobia's website: www.nobia.se

 

Changes in the Group's structure
In line with the Group's strategy to focus on interior products for kitchens, bathrooms and storage units, Nobia acquired the UK kitchen group, Magnet, in May 2001. This acquisition has increased Nobia's geographic coverage and strengthened its position as the leading supplier of kitchen interiors in Europe.

 

Magnet manufactures and sells interior products, primarily for kitchens, bathrooms and bedrooms in the UK. The Magnet Group includes C.P. Hart, which sells exclusive bathroom interiors. The Magnet Group had annual net sales of about GBP 270 million, equivalent to SEK 4 billion. At the end of the year, Magnet had 227 sales outlets in the UK, as well as four factories and around 2,200 employees.

 

The purchase price, on a debt-free basis, amounted to SEK 1,777 million. SEK 1,476 million of the purchase sum was paid in cash and SEK 301 million was in the form of a loan from the vendors. The vendors also received 50,000 warrants with an exercise price of SEK 10.00 per share. Magnet is included in Nobia's consolidated accounts as of 1 May.

 

In January 2001, the Swedish building materials wholesaler, Star Byggprodukter AB, was divested. The capital gains amounted to SEK 22 million and the disposal was recorded in the accounts effective 1 January 2001.

 

In order to further rationalise costs, the German production unit, Star Beka, was closed down in 2001 and production was transferred to Pronorm and Optifit

 

Net sales
The European market continued to weaken in the course of the year. As a result of the acquisitions made during the year net sales increased by 102 per cent to SEK 8,283 million (4,102). Within the Group's core business area (i.e. adjusted for the sale of Star Byggprodukter and Svenska Fönster including Bordörren, which was sold in 2000), the net sales increased by SEK 5,193 million or 168 per cent.

 

For comparable units, i.e. excluding units that were acquired* or divested*, net sales increased by 11 per cent to SEK 2,648 million (2,392) of which currency effects accounted for about SEK 160 million, or 7 per cent. Organic growth thus amounted to 4 per cent for comparable units including the effects of the fall in sales in Germany as a result of the closure of Star Beka.

 

After the acquisition of Magnet, 71 per cent of the Group's pro forma sales for 2001 are through the Group's own stores, franchise stores, direct sales from factories, and other channels where Nobia has direct or considerable indirect contact with end customers. The number of our own stores and franchise stores stood at 518 at the end of the year.

 

Net sales in the Nordic business area amounted to SEK 3,311 million (2,327). The units acquired contributed SEK 836 million in 2001 and SEK 175 million in 2000. For comparable business activity, net sales increased by 15 per cent, of which currency effects accounted for 7 per cent, and organic growth for 8 per cent. The organic growth can largely be explained by strong market positions and a continued increase in product content, i.e. increased order values. The work on upgrading existing stores and sales channels continued.

 

Net sales in the Continental European business area amounted to SEK 2,459 million (782).) Acquired units accounted for SEK 2,272 million. The effect of the weakened Swedish krona amounted to SEK 53 million or 7 per cent. The fall in sales for comparable units amounted to some SEK 72 million, or 15 per cent, of which about half was the result of the closure of Star Beka.

 

Demand weakened in 2001 in Germany, and to a lesser extent in the Netherlands. This, combined with the phasing out of unprofitable sales channels, caused a fall in sales primarily in Germany. Increased exports, mainly to the US, compensated to some extent for the decrease in sales.

 

Net sales in the UK business area amounted to SEK 2,527 million during the period May to December. On a pro forma full-year basis, sales fell by about 4 per cent excluding currency effects as a result of the phasing out of unprofitable product segments and a somewhat lower demand for kitchen, bathroom and bedroom interiors. Considerable improvements have been made at the network of stores, mainly through the upgrading of kitchen displays.

 

Results
The Group's operating profit increased by 106 per cent to SEK 537 million (261). The operating margin amounted to 6.5 per cent (6.4). Excluding goodwill amortisation, the operating margin was 7.1 per cent (6.6). Operating profit for the core business (i.e. adjusted for the divested units Star Byggprodukter and Svenska Fönster including Bordörren, and with adjustments for items affecting comparability) amounted to SEK 515 million (176). Thus, the operating margin for the core business was 6.2 per cent (5.7).

 

Acquired units contributed SEK 342 million in 2001 and SEK 19 million in 2000. The effect of increased amortisation of goodwill was SEK -42 million. The profit for comparable business activity thus increased by SEK 58 million or 37 per cent.

 

In the Nordic business area the operating profit rose by 50 per cent to SEK 355 million (237). Acquired units accounted for SEK 52 million in 2001 and SEK 7 million in 2000. The operating margin in the Nordic business area was 10.7 percent (10.2). The operating margin was improved due to cost reductions as well as increased growth in profitable product and customer segments.

 

In the Continental European business area the operating profit rose to SEK 70 million (-4). Acquired units contributed SEK 71 million in 2001 and SEK 12 million in 2000. The operating margin amounted to 2.8 per cent (-0.5). The close-down costs for Star Beka were absorbed by the Group's reconstruction reserves and have thus not affected the operating profit. The rationalisation programmes started in 2000 continued in 2001 and have resulted in reduced costs. The effect of these programmes was counteracted by a lower demand, primarily on the German market.

 

In the UK business area, the operating profit was SEK 219 million (-). The operating margin was 8.7 per cent (-). The UK business consists of Magnet, which Nobia acquired with effect from May 2001. A rationalisation programme to reduce costs was initiated during the final quarter of 2001.

 

Net financial items totalled SEK -123 million (-41). The increased indebtedness in connection with the acquisition of Magnet has raised the Group's interest expenses. Lower interest rates and amortisation of loans during the year compensated to some extent for this effect.

 

The Group's profit after net financial items increased by 88 per cent to SEK 414 million (220).

 

The Group's tax expenses amounted to SEK -160 million (-115), which represents a tax rate of 39 per cent. Excluding non-deductible consolidated goodwill amortisation, the tax rate was 35 per cent. The tax rate has increased because it was assessed that the deficit deduction arising in connection with the closure of Star Beka could not be set off against future profits, and therefore this was not capitalised as a deferred tax claim.

 

The profit after tax amounted to SEK 254 million (105), which makes the earnings per share SEK 52.82 (28.97) after full dilution.

 

The return on shareholders' equity amounted to 16 per cent (17) and the return on capital employed was also 16 per cent (22).

 

Net sales amounted to SEK 2,443 million (1,548). The operating profit rose to SEK 154 million (59) with an operating margin of 6.3 per cent (3.8). The profit after financial items was SEK 115 million (45).

 

Integration of the units acquired has gone according to plan, including planned cost rationalisation measures. In the Continental European business area, the effect of this was partially counteracted by the fall in demand resulting from a general decline in the market. The number of people employed by the acquired units and Star Beka has been reduced by around 450 since the fourth quarter 2000.

 

Cash flow
The cash flow from current activities before investments amounted to SEK 551 million (156). During the year, the working capital reduced by SEK 137 million excluding currency effects, which can mainly be explained by the fall in stocks and accounts receivable at the units that were acquired in 2000 and 2001.

 

Investments
Investments in fixed assets amounted to SEK 226 million (87) and consisted mainly of investments to improve production efficiency as well as investments in the network of stores.

 

The Group's capital employed amounted to SEK 4,237 million compared to SEK 2,242 million at the end of the previous year. As a result of acquisitions and divestments, the capital employed increased by SEK 1,800 million. The acquisition of Magnet created a goodwill of SEK 736 million. Acquisitions and divestments resulted in a net cash outflow of SEK -1,728 million.

 

The acquisition of Magnet involved an increase in the net debt of SEK 1,860 million, while the sale of Star Byggprodukter reduced the net debt by SEK 132 million.

 

The net debt amounted to SEK 2,078 million (601) at the end of the year, an increase of SEK 1,477 million compared with the end of the previous year. The change was mainly attributable to the net effect of the cash flow from operations (SEK 341 million), negative effects of the weak Swedish krona (SEK 83 million), and the acquisition of Magnet and sale of Star Byggprodukter.

 

The effect of the translation difference on the shareholders' equity was SEK 148 million, as a result of the weakening of the Swedish krona. Thus, the shareholders' equity amounted to SEK 1,776 million (1,363). The equity/assets ratio at the end of the year was 27.8 per cent (37.5). The net debt/equity ratio was 1.17 per cent (0.44).

 

In connection with the acquisition of Magnet, the Nobia Group was refinanced. This resulted in new credit facilities of some SEK 2.5 billion excluding the vendor loan that was taken in connection with the Magnet acquisition. A more efficient amortisation plan and an increase in the life of the Group's loans were also achieved.

 

At the end of the year, the Group had available credit in the amount of some SEK 594 million, excluding liquid funds, of which approved but unutilised overdraft facilities accounted for SEK 172 million.

 

Employees
The average number of employees during the year was 5,343. The average number of employees increased by 1,317 as a result of acquisitions and divestments.

 

The parent company
The parent company is involved with group-wide activities and owns the subsidiaries. The parent company had an operating result of SEK 0 (0) and profit for the year of SEK 130 (-3).

 

Outlook
After acquiring the UK company Magnet, Nobia became Europe's leading kitchen interiors company. The Group's aim is to continue to achieve organic growth that over time will exceed market growth, and to continue to make acquisitions on the fragmented European kitchen market and thereby achieve further economies of scale.

 

Choosing a kitchen is a lifestyle issue, and this underlines the importance of having a strong brand. Nobia's strategy is to continue to develop its strong brand in the upper-middle segment and to increase sales through, and develop, sales channels where Nobia has a high level of contact with end customers. The Group's strategy is also to expand its offering to end customers and to focus on providing entirely individualised total solutions that not only include kitchen interiors, but also household appliances, accessories, measurement and design assistance and installation.

 

Ongoing cost rationalisation programmes mainly at the newly acquired units have the potential to provide additional synergy effects and improved margins in 2002 - 2003. The programmes primarily involve co-ordination of component production and purchasing as well as the transfer of best-practice for, among other things, cost effectiveness and the development of customer offerings and sales channels.

 

The demand for kitchen interior products usually follows the same business cycles as consumer durables. In 2002 demand is expected to be largely unchanged in the Nordic countries and the UK, while the fall in demand in Continental Europe is expected to continue, primarily in Germany, but also in the Netherlands.

 

Accounting principles
Nobia complies with the recommendations of the Swedish Financial Accounting Standards Council. The accounts have been adjusted in accordance with the new recommendation on income taxes (recommendation RR9), with deferred tax claims/tax liabilities being reported gross. The adjustment required by other new recommendations applicable from 2001 has had no significant effect on the Group's profits and standing. Otherwise the accounting principles are the same as those applied the previous year.

 

For definitions of key figures and ratios, please see Nobia's annual report 2000.

 

Stockholm, 21 February 2002

 

Fredrik Cappelen
President and CEO

 

This report has not been reviewed by the company's auditors.

 

Nobia AB corporate registration no. 556528-2752

 

Nobia in brief
Nobia is Europe's largest kitchen interiors company and is leading the consolidation of the European kitchen market. Under its strong brands, Nobia offers customers individual kitchen solutions. Nobia's own stores and franchise stores are responsible for most of the Group's sales.

 

The Nobia Group is mainly active in the Nordic region, Continental Europe and the UK. The units in the UK account for 42 per cent of the Group's pro forma sales, the Nordic countries for 32 per cent, and Continental Europe for 26 per cent. Nobia's brands include A la Carte, C.P. Hart Goldreif, HTH, Invita, Magnet, Marbodal, Myresjökök, Norema, Optifit, Petra, Parma, Poggenpohl, Pronorm, Sigdal and Uno form.

 

Nobia AB, Box 70376, 107 24 Stockholm, tel.: +46 8 440 16 00, fax: +46 8 440 16 20