SEMCON: Structural Measures and Strong Cash Flow in Fourth Quarter

Regulatory News:

Semcon (STO:SEMC)

2014 was characterized by major uncertainty globally, which negatively affected our customers. The Swedish export industry, which is important to Semcon, has adopted a general wait-and-see attitude towards new investments. Some offices in Germany also reported weak profitability, so work on customizing the offer for the market is underway. A review of the business was carried out in Q4 to boost profits. Efficiency measures and an adapted offer have meant redundancies in Sweden and Germany, affecting a total of 45 people. Semcon also sold Zooma by Semcon AB, with activities in online marketing and communication, affecting around 20 people. Capital gains from the sale and structural costs negatively impacted the operating profit by SEK 7 million net in Q4. It is pleasing however that the year ended with a strong cash flow and that the Product Information business area is continuing to report healthy sales growth and profits.

Fourth quarter

• The operating income was SEK 731 million (654) and organic growth was 6%

• The operating profit was SEK 27 million (22), giving an operating margin of 3.6% (3.3)

• The profit after tax was SEK 22 million (16)

• Earnings per share (EPS) after dilution was SEK 1.23 (0.87)

January-December

• The operating income was SEK 2,726 million (2,508) and organic growth was 5%

• The operating profit was SEK 102 million (125), giving an operating margin of 3.8% (5.0)

• The profit after tax was SEK 75 million (88)

• Earnings per share (EPS) after dilution was SEK 4.16 (4.86)

• The equity/assets ratio was 48% (48)

• Return on shareholders’ equity was 12% (15)

• The Board of Directors proposes an unchanged dividend of SEK 2.50 per share (2.50)

Income and result

Fourth quarter

Operating income amounted to SEK 731 million (654). Adjusted for currency fluctuations, acquisitions and divestments, organic growth was 6%. It is mainly Product Information that is reporting excellent sales increases. The operating profit was SEK 27 million (22), giving an operating margin of 3.6% (3.3). The quarter was affected by SEK -7 million net for structural costs and capital gains from the sale of Zooma by Semcon AB. Profits were hit last year through structural costs of around SEK 10 million. Net financial items totalled SEK -1 million (-2), giving a profit before tax of SEK 26 million (20). Tax costs for the quarter stood at SEK -4 million (-4). The profit after tax was SEK 22 million (16) and EPS after dilution was SEK 1.23 (0.87).

January-December

The operating income rose by SEK 218 million, amounting to SEK 2,726 million (2,508), giving organic growth of 5%. Sales growth is mainly attributable to the increased share of goods and services purchased in certain projects. The operating profit amounted to SEK 102 million (125), giving an operating margin of 3.8% (5.0). The decline is mainly attributable to lower utilization during the second quarter. There was also one fewer workday compared with 2013. Net financial items totalled SEK -5 million (-7), giving a profit before tax of SEK 97 million (118). The tax cost for the year stood at SEK -22 million (-30). The profit after tax was SEK 75 million (88) and EPS after dilution was SEK 4.16 (4.86).

Financial position

The operating cash flow from current activities was SEK 82 million (135). Cash flow this year has, in addition to declining profits, also been affected by increased tax and VAT payments of around SEK 30 million. Investments in hardware, licences, office supplies and equipment, amounted to SEK 28 million (24). The Group’s cash and bank balances amounted to SEK 152 million (153) with additional non-utilized credit of SEK 273 million (262) as at 31 December. Shareholders’ equity amounted to SEK 662 million (633) and the equity/assets ratio was 48% (48). A dividend of SEK 45 million (36) was paid to shareholders in Q2. The Group’s net debt amounted to SEK 14 million (net liquid assets SEK 7 million). Net liquid assets amounted to SEK 55 million (59) excluding pension commitments. Over the year pension obligations rose by SEK 17 million, mainly attributable to a lower discount rate and currency fluctuations. The interest coverage ratio was 26 times (22).

Staff and organisation

The headcount on 31 December was 2,990 (3,001). The number of employees in active service was 2,891 (2,851). In the respective business areas the headcount is as follows: Engineering Services Nordic 1,038 (1,083), Engineering Services Germany 1,044 (1,078), Engineering Services International 359 (331) and Product Information 549 (509).

Outlook

Semcon estimates that customers’ development needs will remain strong, even though the market situation is difficult to predict.

Semcon is an international technology company in the engineering services and product information sectors. We have around 3,000 employees with extensive experience from many different industries. We develop technology, products, plant and information solutions along the entire development chain and also provide many services and products in areas such as quality control, training and methodology development. We contribute to our customers’ competitive strength by providing innovative solutions, design and solid engineering expertise. From 2014, business activities are run via four business areas: Engineering Services Nordic, Engineering Services Germany, Engineering Services International and Product Information. Work processes and solutions are adapted to customer requirements, from taking part in the customer’s teams to in-house development projects. The Group had annual sales of SEK 2.7 billion in 2014 with activities at more than 45 sites in Sweden, Germany, the UK, Brazil, China, Hungary, India, Spain and Norway. Semcon’s biggest customers include: ABB, AB Volvo, Audi, BMW, Daimler, Ericsson, Jaguar Land Rover, Scania, Volvo Cars and VW. Read more at semcon.com

This information was brought to you by Cision http://news.cision.com