Opus Group AB
Year-End Report (Jan – Dec, 2011)
Opus Prodox AB 22.02.2012 09:00 --------------------------------------------------------------------------- Gothenburg, Sweden, 2012-02-22 09:00 CET (GLOBE NEWSWIRE) -- Key Highlights > EBITDA of SEK 28.6 million, 12 percent margin, includes total acquisition costs for ESP, Inc. of SEK 2.5 million > Acquisition of ESP Inc. closed in January 2012, increasing future revenues by approx. 65% and net profit per share of approx. SEK 0.05 > Continued good profitability in North America - EBITDA margin of 26 percent, adjusted for ESP, Inc. acquisition costs > Continued positive development in Europe & Asia - organic growth of 14 percent and EBITDA margin of 6 percent > Cash flow from operating activities of SEK 35.2 million > Board proposes dividend of SEK 0.02 per share Full Year (January - December, 2011) * Sales increased to SEK 230.0 million (227.0) * EBITDA decreased to SEK 28.6 million (29.8), equivalent to an EBITDA margin of 12.3 percent (13.0) * Cash flow from operating activities before changes in working capital increased to SEK 26.9 million (26.8) * Net earnings increased to SEK -5.2 million (-10.0) * Earnings per share after dilution amounted to SEK -0.03 (-0.05) Reporting Period (October - December, 2011) * Sales increased to SEK 61.8 million (59.4) * EBITDA decreased to SEK 2.6 million (5.9), equivalent to an EBITDA margin of 4.1 percent (9.8) * Cash flow from operating activities before changes in working capital decreased to SEK 2.4 million (6.4) * Net earnings decreased to SEK -5.7 million (-4.8) * Earnings per share after dilution amounted to SEK -0.03 (-0.03) Wisconsin contract win and acquisition of ESP strengthens Opus Group in North Americafor the future With an EBITDA margin of 26 percent for the year, adjusted for ESP related acquisition costs, the North American business continues to deliver good profitability. In addition, Systech won a significant long-term contract to run the State of Wisconsin decentralized vehicle inspection program. The contract is for 5 years, with two possible extensions of 3 years each. Starting in July 2012, we expect this program will provide significant contribution to revenue and EBITDA. The strategic acquisition of Environmental Systems Products (ESP), closed in January 2012, is a major step forward toward becoming the No. 1 supplier in the decentralized vehicle inspection market in the US. ESP is the no. 1 brand in the industry. By combining ESP's market position and its experienced and dedicated staff with Systech's technological leadership in theindustry, we are convinced that the combination of Systech and ESP will lead to more business opportunities in the future. More than a year ago, we opened the Group's first vehicle inspection station in South America where we combined Systech's inspection program expertise and technology with Opus' European test equipment technology. We believe this reference will be of importance for other market opportunities in the region, in particular now that ESP Mexicohas been a part of the ESP acquisition. Europe & Asia reports a continued organic growth of around 14 percent for the full year 2011. EBITDA improved to SEK 10 million, equaling a margin of 6%. The demand for the company's products and services continues to increase, and during the year, new long term customer contracts have been successfully won. At the end of the year, we acquired a consumables business unit from Volvo Car Corporation. The business will add to revenues in 2012. The deregulation of the vehicle inspection market in Sweden has gained momentum and Opus sees good opportunities for equipment sales and service going forward, as the number of test lanes in the market is forecasted to double in the coming years. For the company as a whole, we see continued growth in parallel with good profitability. The net result is still affected by the five year depreciation of the Systech's IP. In April 2013, when the amortization is complete, we will see net income and earnings per share being significantlyimproved provided the business develops in accordance with plan. We are proud to report that, we now see that we will come close to the aggressive top-line target of SEK 500 million revenue in 2012, set during 2008, especially with regards to the global recession and difficult times for the vehicle industry in 2008 - 2009. Opus Group has continued to improve and is a profitable growth oriented company which continues to grow both organically and through strategic acquisitions. The cash flow of the company is strong and is forecasted to continue to be strong. The Board has therefore decided to propose to the Annual General Meeting to pay a dividend of SEK 0.02 per share. After our latest acquisition of ESP, the Board has decided for the Opus Group to apply to list its shares on the NASDAQ OMX stock exchange in Stockholm during 2012. Gothenburg, Sweden, in February, 2012 Magnus Greko President and CEO Notable Events During the Year in Chronological Order Systech Signs Vehicle Emission Testing Contract with the State ofWisconsin On December 29, 2011, Opus announced that Systech has now signed a contract with the State for five years, with two three-year options to extend, for a total of 11 years. The contract starts on July 1, 2012, and covers the seven densely populated southeastern counties in Wisconsin. Under the contract, Systech will engage 200 auto service businesses as inspection program subcontractors to test approximately 800,000 vehicles annually. As an added service, Systech will offer registration renewals to Wisconsin motorists at inspection locations. This event follows the press release issued on September 29, 2011. Opus Signs Agreement to Acquire ESP, Inc. in the U.S. On December 16, 2011, Opus announced that its subsidiary Opus US, Inc. has signed an agreement with Environmental Systems Products Holdings, Inc. to acquire 100% of the shares of Environmental Systems Products, Inc. ('ESP'). The acquisition includes all of ESP's operations in the U.S., Mexico and Canada. Nomination Committee prior to the Annual General Meeting 2012 On November 19, 2011, Opus announced that the appointed members of the Nomination Committee prior to the Annual General Meeting 2012 are: - Göran Nordlund, as Chairman of the Board in Opus - Jörgen Hentschel, representing AB Kommandoran - Lothar Geilen, representing himself - Martin Jonasson, representing the Second AP Fund - Bengt Belfrage, representing Nordea Funds Martin Jonasson was elected Chairman of the Nomination Committee. The Nomination Committee has been appointed in accordance with the instructions adopted at the Annual General Meeting 2011. Opus and Carspect agree to cooperate to establish vehicle inspection in Sweden On November 17, 2011, Opus announced that it had signed an agreement to establish vehicle inspection at Bilia's locations in Sweden. During the last six months, work on this project has been ongoing and has now led to a cooperation agreement with Carspect as the operator. In this new cooperation, Opus will be responsible for test equipment, installation, maintenance and calibration, while Carspect is the operator and runs the vehicle inspection stations under its own brand, with its own staff. Opus Group has reached an agreement to take over operations from Volvo Cars Sweden AB On November 15, 2011, Opus Prodox AB (publ) announced that through its wholly-owned subsidiary Opus Bima AB, has reached an agreement that Opus Bima takes over part of Volvo Cars Sweden operations within the sale of hand tools and consumables to, among others, the Swedish Volvo dealers. Systech Receives Award for Wisconsin I/M Program Contract On September 29, 2011, Opus announced that the Wisconsin Department of Transportation (Wis- DOT), after completing its evaluation of a competitive bidding process, has issued the intent to award the State of Wisconsin emissions testing program contract to Opus subsidiary, Systech International, LLC. Testing will begin in July 2012. Systech and WisDOT are currently negotiating a five year contract with two three year extensions, for a total of 11 years. The WisDOT emission testing program addresses over a million vehicles, which are required to pass emissions inspections in the seven most populated counties in Wisconsin. State of Missouri Grants Contract Extension to Systech On September 22, 2011, Opus announced that The Department of Natural Resources (DNR) has granted a two year contract extension to Opus subsidiary, Systech International, LLC. In 2007, Systech was contracted by DNR to design, build and operate the Gateway Vehicle Inspection Program (GVIP). The GVIP addresses 1.4 million vehicles that are required to pass safety and emissions inspections in thegreater St. Louis area. State of Oregon Grants Contract Extension to Systech On September 14, 2011, Opus announced that The Oregon Department of Environmental Quality (DEQ), has granted a one plus one year contract extension to Opus subsidiary, Systech International, LLC Since the contract began in 2006, Systech has provided numerous services in support of DEQ's vehicle emission inspection program including: design, manufacturing, delivery and onsite service of Oregon's Emission Inspection Equipment and Vehicle Inspection Database; the industry's first 24/7 self-service OBD Kiosk inspection lane; and the innovative wireless remote OBD System. The Oregon DEQ operates seven centralized inspection facilities in the greater Portland area. Using Systech equipment and systems, they inspect 800,000 vehicles each year. Bernice Wellsted new CFO at Opus On June 21, 2011, Opus announced that Bernice Wellsted, the previous Group Accounting Manager at Opus, has been appointed new CFO for the Group as from August 1, 2011. Bernice Wellsted will form part of the Group Management Team. Systech Obtains Three-Year Contract Extension in Nashville, Tennessee On May 24, 2011, Opus announced that The Metropolitan Government of Nashville and Davidson County had unanimously voted in favour of a three-year contract extension for continuation of the current centralized emission testing program operated by Opus subsidiary, Systech International. The amendment extends the term of the contract to June 30, 2015. This secures the continuation of one of Systech's three largest vehicle inspection contracts. Opus to Offer Vehicle Inspections to the Public at Bilia Locations On April 13, 2011, Opus and Bilia announced that the companies have signed an agreement giving Opus the exclusive right of first refusal to establish vehicle inspection at Bilia's 68 dealerships in Sweden. Initially, vehicle inspection will be launched in the Stockholm region at the end of the year. Bilia will sublease premises and land surface to Opus, which will independently run the vehicle inspection business through a separate subsidiary. The vehicle inspection activities will be clearly separated from Bilia's customer reception and workshop. The operations require approval and accreditation by SWEDAC (the Swedish Board for Accreditation and Conformity Assessment). The contract period is five years with a five-year extension option. Success for Opus at the AUTO Exhibition 2011 and a New Service Contract Signed with Bilia In January 2011, the Opus Group participated at the AUTO Exhibition 2011 in Gothenburg, Sweden, with an impressive display. The event proved very successful. Opus wholly-owned subsidiary, J&B Maskinteknik AB, also signed a service contract with Bilia Personbilar AB for all workshops in Region West and South. Notable Events After the End of the Year Opus Completes Acquisition of ESP, Inc. in the US On January 25, 2012, Opus announced that its subsidiary Opus US, Inc. has completed the acquisition of 100% of the shares of Environmental Systems Products, Inc. ('ESP') from Envirotest Systems Holdings Corp. The acquisition includes all of ESP's operations in the U.S., Mexico and Canada. The acquisition is strategic and strengthens Opus' subsidiary Systech International in U.S. vehicle inspection and maintenance (I/M) market. ESP's dominant position in the decentralized market of emission inspection equipment sales and service is complementary to Systech's position as the leader in decentralized I/M program management contracts. ESP's vehicle emission testing products also align with Systech's innovative equipment and database technology used in program management contracts. In 2011, ESP generated approx. USD 27 million in revenues and approx. USD 3,5 million in EBITDA. The company has approximately 160 employees. ESP's expected turnover in 2012 is approx. USD 25 million (SEK 169 million*) with an EBITDA-margin of 12-13%, contributing to a growth of approx. 65 % to the existing Opus Group. The business includes approximately USD 7 million in contracts/business activitiesanticipated to expire over the next few years. The purchase price paid was USD 9.7 million, which includes a provisional net asset value of USD 5.2 million, whereof cash is USD 0.3 million. The company has not yet finalized the purchase price allocation. The financing of this acquisition is made through existing equity and bank loans. The financing bank is Swedbank AB (publ). Opus expects that the acquisition will immediately contribute positively to the company's bottom line and ESP is expected to contribute with approx. SEK 0.05 to the net profit per share from the beginning of 2012. Once the transaction is completed, Lothar Geilen, CEO of Systech and Opus US, Inc., will also become CEO of ESP. 'In tandem with Systech's industry-leading technologies, ESP will provide our company with first class equipment manufacturing capabilities, teamed with a top notch sales and service organization that is among the best in the vehicle inspection industry' stated Lothar Geilen. He added, 'We welcome ESP's employees in joining our organization. We will continue focusing on excellent relationships with customers of both Systech and ESP.' ESP is active in the states of California, Utah, Texas, Georgia, North Carolina, Virginia, Pennsylvania and Delaware. In addition, it has subsidiaries in both Canada and Mexico. The acquisition will combine the strengths offered by both Systech and ESP, adding valuable humanresources and infrastructure, and providing a clear path for new business and future growth. 'This acquisition further strengthens our focus on the U.S. vehicle inspection market in our global strategy. We are excited to have ESP join us in building one of the leading vehicle inspection companies in the world.' Magnus Greko, CEO of the Opus Group stated. 'Together we commit to providing continued outstanding service to Systech's and ESP's customers once the acquisition is completed.' * Calculated with an exchange rate SEK/USD of 6.77 per January 25, 2012. Sales and Results Full Year Sales for the current financial year amounted to SEK 230.0 million (227.0). Organic growth was approx. 6 percent (10)*. Earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to SEK 28.6 million (29.8). The EBITDA margin equated to 12.3 percent (13.0). Reporting period Sales for the current reporting period amounted to SEK 61.8 million (59.4). Organic growth was approx. 4 percent (14)*. Earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to SEK 2.6 million (5.9). The EBITDA margin equated to 4.1 percent (9.8). In connection with the Systech acquisition in April, 2008, the company acquired Intellectual Propety (IP) of USD 12.3 million. This includes patents, software and systems, and is amortized over five (5) years, affecting the Group's net earnings. In addition, the Group amortizes Customer Contracts and Relationships over their estimated useful lives which also affects the Group's net earnings. For this reason, the company uses EBITDA, which excludes inter alia amortization, as a key performance measurement of the Group's profitability. Business Areas Starting 2011, Opus consolidates Europe and Asia into one business area. Reporting to the Group Management Team and the Board of Directors is in accordance with this new structure. Opus operations are therefore now divided into Europe & Asia and North America. Previously published amounts have been restated to conform to the current Group structure in 2011. Europe & Asia Full year Sales for the current financial year amounted to SEK 149.5 million (130.9). Organic growth was approx. 14 percent (16)*. EBITDA amounted to SEK 9.7 million (3.9), equivalent to an EBITDA margin of 6.4 percent (2.9). Reporting period Sales for the current reporting period amounted to SEK 43.1 million (36.6). Organic growth was approx. 18 percent (16)*. EBITDA amounted to SEK 1.6 million (2.3), equivalent to an EBITDA margin of 3.8 percent (6.1). The decrease in segments EBITDA margin is due to bonuses accounted for in the fourth quarter. The average number of employees during the current interim period was 70 (69). North America Full year Sales for the current financial year amounted to SEK 80.5 million (96.2). Negative organic growth was approx. -7 percent (1)*. EBITDA amounted to SEK 18.8 million (26.8), equivalent to an EBITDA margin of 23.3 percent (27.9). Reporting period Sales for the current reporting period amounted to SEK 18.7 million (22.9). Negative organic growth was approx. -19 percent (12)*. EBITDA amounted to SEK 0.9 million (5.1), equivalent to an EBITDA margin of 4.9 percent (22.4). The siginificant decrease in the segments EBITDA is due to the acquisition related costs for ESP Inc. taken in the fourth quarter of 2011, as well as a decrease in revenues. The revenue decrease is due to seasonal fluctuations. The average number of employees during the current financial year was 99 (100). *External net sales, for comparable units and in local currencies. Customers Opus customers are government agencies (counties, states etc.), the automotive industry, vehicle garages, and vehicle inspection companies (state and privately owned). Opus has no individual customers that represent more than 10 percent of the Group's turnover. Investments Investments during the current financial year amounted to SEK 3.8 million (8.4) and consist mainly of ongoing development projects amounting to SEK 2.0 million (2.0) and investments in furnishings, machinery and other technical equipment amounting to SEK 1.7 million (6.4). Financial Targets Opus new financial targets, over a business cycle, are: - Annual growth in revenues of 10% - EBITDA margin of at least 10% - Interest-bearing net debt relative to EBITDA should not exceed 3.0 times Dividend Opus Board has adopted the following dividend policy: Opus dividend policy is to distribute 10-20% of profit at the EBITDA level, provided the company meets the financial target for net indebtedness. For 2011, the Board will propose that a dividend of SEK 0.02 (SEK 0) per share will be paid out. Financial Position and Liquidity The equity ratio amounted to approximately 74.0 percent (72.5) at the end of the year. The cash flow from operating activities before changes in working capital was SEK 26.9 million (26.8) during the current financial year. Cash and cash equivalents at the end of the period equated to SEK 22.9 million (15.3) and unused credit facilities amounted to SEK 6.2 million (6.5) at the end of the period. Taxes The tax expense for the period is calculated using the current tax rate for the Parent company and each subsidiary. Temporary differences and existing fiscal loss carry-forwards have been taken into account. Employees The average number of FTEs (full-time equivalents) in the Group was 169 (169) during the current financial year. Contingent liabilities Contingent liabilities at the end of the 2010 financial year includes a bid guarantee in North America, which was relaeased during the first quarter of 2011. Parent Company The Parent company's sales during the current reporting period amounted to SEK 16.4 million (14.4) and loss after financial items to SEK 0.8 million (1.1). The Parent company's sales during the current financial year amounted to SEK 57.3 million (58.2) and loss after financial items to SEK -0.5 million (0.4). Related Parties No significant transactions with related parties have taken place during the interim reporting period. Annual General Meeting 2012 The Annual General Meeting will take place on Thursday May 24, 2012, in Gothenburg, Sweden. Shareholders wishing to have items addressed at the Annual General Meeting must submit a written request to the Board of Directors not later than April 5, 2012. The request shall be addressed to the Board of Directors but be sent to the company's address. Accounting and Valuation Policies This report has been prepared in accordance with IAS 34, Interim Financial Reporting. The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by EU. The interim report for the Parent company has been prepared in accordance with the Swedish Annual Accounts Act and recommendation RFR 2. The changes in RFR 2 'Accounting for legal entities' in force and applicable for fiscal year 2011 are that group contributions are no longer recognized in equity. A group contribution that the parent company received from a subsidiary is treated under the same principles as ordinary dividends from subsidiaries and accounted for as financial income. Other changes in RFR 2 have had no significant effect on the parent company financial statements. The same accounting and valuation policies were applied as in the 2010 Annual Report, with the exception of the reclassification of a portion of Goodwill to Customer Contracts and Relationships. This adjustment has been made in accordance with IAS 8, as described in Note 1. In addition, a change in segment reporting starting in 2011, has resulted in previously published amounts being restated to conform to the current Group structure. New standards and interpretations effective January 1, 2011 have not had any significant impact on the Group's financial statements. Accounting Estimates and Assumptions The preparation of financial reports in accordance with IFRS requires the Board of Directors and Management to make estimates and assumptions that affect the application of accounting principles and the carrying amounts of assets, liabilities, revenue and expenses. Actual outcomes may deviate from these estimates. Translation of Foreign Operations Assets and liabilities in foreign entities, including goodwill and other corporate fair value adjustments, are translated to Swedish kronor at the rate prevailing on the balance sheet date, meanwhile all items in the income statement are translated using an average rate for the period. Essential Risks and Uncertainty Factors Opus Prodox AB (publ) and the Opus Group companies are through their activities at risk of both financial and operational nature, which the companies themselves may affect to a greater or lesser extent. Within the companies, continuous processes are ongoing to identify possible risks and assess how these should be handled. The companies' operations, profitability and financial conditions are directly related to investments within the automotive industry and regulations within environmental and safety testing of vehicles. With the recent dramatic development of the global economic climate, there is a general insecurity, which in the short term results in an increased risk and uncertainty in respect of Opus sales, profitability and financial condition, primarily in the business segment Europe & Asia which is more dependent of the equipment business. In North America, the Group runs vehicle inspection programs through long-term contracts with government agencies. There is a risk of early contract termination which would affect the Group's financial position negatively. Furthermore, the Group has a currency risk through its translation exposure of the operations in the U.S. A detailed description of the Parent company and subsidiaries' risks and risk management are given in Opus Annual Report 2010. Outlook In North America, the company sees opportunities throughout the next year when a number of large government contracts in the U.S. vehicle inspection market are scheduled to come out for bidding. In addition, there are several interesting new markets outside the U.S. where the demand for environmental and safety testing of vehicles is increasing. The focus for 2012 will also include making ESP part of our group and utilize synergies between the companies in the Group. In Europe & Asia focus for 2012 is to continue to grow profitably. There are law-driven programs where vehicle inspection equipment has to be updated within the next few years creating nice opportunities. Our organization, with its own products, developed in Europe and the United States, and with production in Europe, U.S. and China, creates a competitive advantage that we shall use internationally. In addition we continue to look for acquisition opportunities that strategically strengthen our group. In 2008, when acquiring Systech, Opus set an aggressive financial target to reach revenue of SEK 500 million in 2012. With the step-up in both revenue and profit from the ESP acquisition, combined with the organic growth from new contracts and increased equipment sales, we are on track to reach a revenue level of SEK 400-450 million in 2012, reaching 80-90% of the original target, despite the recent economic recession. The Board of Directors has now adopted new financial targets for the Group (please see page no 7). This outlook replaces the previous one which was presented in the interim report for the third quarter 2011. Opus does not provide financial forecasts. Financial Information May 24, 2012, Interim Report (January - March 2012) May 24, 2012, Annual General Meeting 2012 August 23, 2012, Interim Report (January - June 2012) November 22, 2012, Interim Report Q3 (January - September 2012) February 21, 2013, Year-end Report 2012 The Annual Report 2011 is expected to be published on or before April 26, 2012. The Annual Report will be made available on the company's website www.opus.se. Gothenburg, Sweden, February 22, 2012 Magnus Greko President and CEO Contact Information Opus Prodox AB (publ), (org no 556390-6063) Bäckstensgatan 11C SE-431 49 Mölndal, Sweden Phone: +46 31 748 34 00 Fax: +46 31 28 86 55 E-mail: info@opus.se www.opus.se For any questions regarding the interim report, please contact Magnus Greko, President and CEO, +46 31 748 34 91. Opus Certified Adviser Thenberg & Kinde Fondkommission AB Box 2108 SE-403 12 Gothenburg, Sweden Phone: +46 31 745 50 00 Opus Prodox AB (publ) in Brief The Opus Group is in the business of developing, producing and selling products and services within Automotive Test Equipment, Vehicle Inspection Systems and Fleet Management for the global market. The products include emission analyzers, diagnostic equipment, and automatic test lanes. Services include management of mandatory vehicle inspection programs. The Group sells its products and services in more than 50 countries all over the world and currently has around 330 employees. The turnover for 2011 was roughly SEK 232 million. Opus' share is listed on First North Premier (NASDAQ OMX) under the ticker OPUS. CONVENIENCE TRANSLATION - THE SWEDISH VERSION SHALL PREVAIL This is a non-official translation of the Swedish original version which has been developed in-house. In case of differences between the English translation and the Swedish original, the Swedish text shall prevail. News Source: NASDAQ OMX 22.02.2012 Dissemination of a Corporate News, transmitted by DGAP - a company of EquityStory AG. The issuer is solely responsible for the content of this announcement. DGAP's Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------------- Language: English Company: Opus Prodox AB Sweden Phone: Fax: E-mail: Internet: ISIN: SE0001696683 WKN: End of Announcement DGAP News-Service ---------------------------------------------------------------------------
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