Earnings Release • Nov 9, 2010
Earnings Release
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January – September 2010
Press release, November 9, 2010
| DORO GROUP | 2010 | 2009 | 2010 | 2009 | Rolling | 2009 |
|---|---|---|---|---|---|---|
| (SEK m) | Jul–Sep | Jul–Sep | Jan–Sep | Jan–Sep | 12 months | Full-year |
| Income/Net sales | 168.8 | 111.1 | 403.7 | 305.0 | 591.3 | 492.6 |
| Operating profit/loss after depreciation and write-downs, EBIT |
13.2 | 7.0 | 20.6 | 7.4 | 39.9 | 26.6 |
| Operating margin, EBIT % | 7.8 | 6.3 | 5.1 | 2.4 | 6.7 | 5.4 |
| Profit after financial items | 0.1 | 6.8 | 13.4 | 2.1 | 36.2 | 24.9 |
| Profit for the period | 10.7 | 6.4 | 23.0 | 1.7 | 44.1 | 22.8 |
| Average number of shares, thousands | 19,108 | 17,408 | 19,108 | 17,408 | 18,966 | 17,573 |
| Earnings per share before tax, SEK | 0.01 | 0.39 | 0.70 | 0.12 | 1.91 | 1.42 |
| Earnings per share after tax, SEK | 0.56 | 0.37 | 1.20 | 0.10 | 2.32 | 1.30 |
Doro AB discloses the information provided herein pursuant to the Securities Markets Act and/or the Financial Instruments Trading Act. The information was submitted for public release on Tuesday, November 9, 2010, at 07:30 a.m. CET. Doro AB | Corporate reg. no. 556161-9429
"The third quarter of 2010 was characterized by a strengthened, record growth in both revenues and order intake. We increased our sales in all markets, at the same time as our partners confirmed increased interest in our products and the special features we offer in cooperation with operators.
Sales generated within the Care Electronics business unit almost doubled, from SEK 69 m in the third quarter of 2009, to SEK 138 m. Care Electronics accounted for 82 percent of the Group's total sales for the quarter, which means we have now achieved our strategic objective for Care Electronics to exceed 80 percent of our business. The remainder is generated by the Home Electronics business unit, which now is a profitable, cash-generating operation, having recovered from its loss in 2009. The continued reduction of costs in the Home Electronics business unit has resulted in the business unit achieving a profit of SEK 5.6 m for the quarter and SEK 7.6 m for the first nine months of the year.
I am pleased to report that we are continuing to increase the number of countries in which our mobile phones are available. At the end of October, we signed partnership agreements with operators Rogers Wireless in Canada. Our entry into the Canadian market has been eased by our existing presence in US, thus enhancing the payback on our investments to secure certification for our products in the region.
We are also able to report a steadily improved operating margin, with EBIT for the third quarter of 2010 rising 89 percent compared with the year-earlier period. This is the seventh consecutive quarter with positive earnings and I am particularly proud this time as the operating margin amounted to 7.8 percent (6.3). This increase is the result of higher sales that better absorb our overhead costs, consisting of investments to prepare new markets, marketing activities to boost the brand and to increase visibility in retail stores, as well as the development of new products and new versions of existing models.
Cash flow was negatively influenced by delayed VAT recovery in France following the implementation of a streamlined Group organization and legal structure in January 1, 2010. This VAT claim is expected to be repaid during fourth quarter. We have also been able to maintain efficiency in our logistics systems through this phase of strong expansion.
Doro® will continue to achieve profitable growth. The brand is well-established and has become a benchmark in the niche area of telecommunication products for seniors. Doro's brand is now well positioned with seniors and has a strong position with leading international operators."
Doro's sales amounted to SEK 168.8 m (111.1) for the third quarter, an increase of 51.9 percent. Applying the same exchange rates as for the previous year, organic growth amounted to 63.0 percent (0.5).
For the third quarter of 2010, the Group's profit before tax and financial items amounted to SEK 13.2 m (7.0), an increase of 88.6 percent. This improvement was attributable to higher sales and a continued focus on the cost base.
The cash flow from current activities in the third quarter was negative SEK 21.2 m (positive 1.5), which derives from a build-up of working capital in line with expanded volumes and a non-recurring temporary effect of the delayed VAT recovery in France, as previously reported. In total, this impacted the cash flow for the quarter by SEK 9.3 m and for the year-to-date by SEK 23.8 m. This is a result of a
change in the VAT recovery procedures in connection with the transition to the new streamlined organization and legal structure as of January 1, 2010. As the VAT receivable in France is expected to be repaid in fourth quarter of 2010, cash flow is set to normalize.
In line with IFRS, current hedge contracts have been valued among net financial items, affecting the net result for the year-to-date negatively by SEK 6.5 m.
At the end of September 2010, Doro had a net debt of SEK 6.6 m, to be compared with a net debt of SEK 31.5 m for the corresponding quarter in 2009. The net debt position is explained by the coverage of the temporary VAT expense mentioned above. In addition, the Company has overdraft facilities of SEK 30 m.
The equity/asset ratio improved to 30.2 percent (16.1) at the end of the period, as a result of improved profit and a revaluation of the deferred tax asset of SEK 11.8 m.
Care Electronics
Care Electronics supplies telecom and electronic products adapted to the needs of senior citizens.
Sales in the third quarter increased to SEK 137.8 m (69.2), an increase of 99.1 percent. Care Electronics represented 81.6 percent of Doro's total sales for the period.
Home Electronics offers domestic telephones and other products for the modern family.
Sales during the quarter amounted to SEK 31.0 m (41.9), a decrease of 26.0 percent, as a result of Doro's strategy to set a more focused range, which has lead to sales to certain customers being discontinued.
Effective from January 1, 2010, Doro has reorganized its markets into Nordic, EMEA (Europe, Middle East and Africa), UK, US & Canada, CALA (Central and Latin America) and AP (Asia Pacific).
Of the Group's total sales in the third quarter, Nordic represented 30 percent, EMEA 49 percent, UK 13 percent, and the other markets 8 percent.
At the end of the quarter, the headcount was 60 (58). Of these, 28 (25) are based in Sweden, 17 (18) in France, 5 (5) in the United Kingdom, 4 (4) in Norway and 6 (6) in Hong Kong.
The Parent Company's net sales for the year's third quarter amounted to SEK 168.8 m (53.1). The loss before tax amounted to SEK 28.3 m (profit 3.5).
Canadian partnership with Rogers Wireless
In November, Doro and Canada's leading operator Rogers Communications Inc. announced a partnership agreement. As a result, Doro's top-selling easy-to-use mobile phone, the Doro PhoneEasy® 410gsm, will now be available exclusively in Roger Wireless stores across Canada.
Hans Söderberg has been appointed new Vice President Sales and Marketing. Prior to joining Doro, Hans Söderberg was the President of the Q-matic Corporation in North America. He has also been Vice President, Business Development at Anoto Inc in the US, and has held several positions at Ericsson Mobile Communications (SonyEricsson).
Hans Söderberg is 47 years old and holds a Master of Science degree in Industrial Engineering and Management from the University of Linköping.
Doro is listed on the Nasdaq OMX Stockholm, Nordic list, Small Cap – Telecom/IT.
On September 30, 2010, Doro's market capitalization amounted to SEK 508.3 m, compared with SEK 210.2 m at the beginning of the year. During the period January 1–September 30, 2010, the share price increased from SEK 11.00 to SEK 26.60.
The number of shareholders on September 30, 2010 was 5,758 (3,358).
Doro's third quarter revenues and order intake reaffirm the previous full-year forecast of continued growth in sales and operating profit (EBIT).
No transactions took place between Doro and related parties that had a material impact on the Company's financial position and results.
Risks and instability factors are mainly related to supplier disruption, product adaptation and certification, customer relations, exchange rate fluctuations and loan financing. Apart from these risks and the instability factors described on pages 25–26 and 43–45 of the 2009 Annual Report, no other risks of any significance have been identified during the most recent period.
This Interim Report has been prepared on behalf of the Group according to IAS 34, Interim Financial Reporting, and for the Parent Company in accordance with the Annual Accounts Act and the Swedish Financial Reporting Board's recommendation RFR 2.3 Accounting of legal entities. The accounting principles and calculation methods applied are consistent with those that were applied when drawing up the previous year's accounts.
The AGM will be held at the Scandic Star Hotel, Glimmervägen 5 in Lund, Sweden, on March 23, 2011 at 3:00 p.m. CET. The notice to attend the AGM will be available on www.doro.com.
A nomination Committee consisting of Tedde Jeansson (representing Originat AB), Arne Bernroth (Nordea Bank) and Bo Kastensson (Chairman of the Board of Doro AB) was elected at the Annual General Meeting held on March 25, 2010. Tedde Jeansson is the Chairman of the Nomination Committee.
The Board has set the following dates for the publication of Doro's Interim Reports: Year-end report 2010: February 14, 2011 January-March 2011: May 6, 2011
The Interim Reports are available at www.doro.com under "Investor's room".
President & CEO Jérôme Arnaud, +46 (0)46 280 50 05 CFO, Annette Borén, +46 (0)70 630 00 09
Analysts, investors and the media are welcome to attend a presentation that will be given via the Internet. The presentation, which will be followed by a telephone conference, can be accessed via www.doro.com from 09:00 a.m. CET on November 9, 2010.
Doro's President and CEO Jérôme Arnaud and CFO Annette Borén will participate.
Approximately 1 hour before the start of the presentation, the presentation materials will also be available at the Company's website.
Please call about five minutes before the advertised starting time to access the telephone conference.
Call-in details: UK: +44 (0)20 3043 2436 SE: +46 (0)8 505 598 53 US: +1 866 458 40 87
Lund, November 9, 2010
Jérôme Arnaud President and CEO
Doro AB (publ) | Company registration number 556161-9429 Doro AB (publ) Magistratsvägen 10 SE-226 43 Lund, Sweden Tel: +46 (0)46 280 50 00 | www.doro.com
This interim report has been reviewed by the Company's auditors.
About Doro
Doro is a Swedish company focusing on the development, marketing and sales of telecom products specially adapted to the growing worldwide population of seniors. With over 35 years of experience in telecommunications, and sales in more than 30 countries on 5 continents, Doro is the world's leading brand for easy-to-use mobile phones. Doro created the Care Electronics category and in recent years and the products have received several highly distinguished international design awards. The company had sales of SEK 493 m in 2009. Doro's shares are quoted on the Nasdaq OMX Stockholm, Nordic list, Small companies. Read more about Doro at www.doro.com.
To the Board of Directors of Doro AB (publ) Corp. Reg. No: 556161-9429
We have performed a review of the condensed interim financial statements for Doro AB (publ) at 30 September 2010 and the nine-month period then ended. The Board of Directors and the Managing Director are responsible for the preparation and presentation of these Interim financial statements in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express an opinion on the condensed interim financial statements based on our review.
We have conducted our review in accordance with the Standard on Review Engagements, SÖG 2410, "Review of Interim Financial Statements Performed by the Independent Auditor of the Entity", issued by the Swedish Federation of Authorized Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review has a different purpose and a substantially less scope than an audit conducted in accordance with the Standards on Auditing in Sweden (RS) and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain such a level of assurance that would make us aware of all significant matters that might be identified in an audit. Accordingly, an opinion based on a review does not constitute the same level of assurance as an opinion based on an audit.
Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material aspects, for the group in accordance with IAS 34 and the Swedish Annual Accounts Act and for the parent company in accordance with the Swedish Annual Accounts Act.
Lund, November 9, 2010
Ernst & Young AB
Ingvar Ganestam Certified Public Accountant
| INCOME STATEMENT (SEK m) | 2010 | 2009 | 2010 | 2009 | 2009 |
|---|---|---|---|---|---|
| Doro Group | Jul–Sep | Jul–Sep | Jan–Sep | Jan–Sep | Full-year |
| Income/Net sales | 168.8 | 111.1 | 403.7 | 305.0 | 492.6 |
| Operating cost | -150.5 | -102.1 | -369.1 | -291.8 | -454.6 |
| Operating profit/loss before depreciation and write-downs, EBITDA |
18.3 | 9.0 | 34.6 | 13.2 | 38.0 |
| Depreciation according to plan | -5.1 | -2.0 | -14.0 | -5.8 | -11.4 |
| Operating profit/loss after depreciation and write-downs, EBIT |
13.2 | 7.0 | 20.6 | 7.4 | 26.6 |
| Net financial items | -13.1 | -0.2 | -7.2 | -5.3 | -1.7 |
| Profit/loss after financial items | 0.1 | 6.8 | 13.4 | 2.1 | 24.9 |
| Taxes | 10.6 | -0.4 | 9.6 | -0.4 | -2.1 |
| Profit for the period | 10.7 | 6.4 | 23.0 | 1.7 | 22.8 |
| Average number of shares, thousands | 19,108 | 17,408 | 19,108 | 17,408 | 17,573 |
| Earnings per share before tax, SEK | 0.01 | 0.39 | 0.70 | 0.12 | 1.42 |
| Earnings per share after tax, SEK | 0.56 | 0.37 | 1.20 | 0.10 | 1.30 |
| STATEMENT OF COMPREHENSIVE INCOME (SEK m) | 2010 | 2009 | 2010 | 2009 | 2009 |
|---|---|---|---|---|---|
| Doro Group | Jul–Sep | Jul–Sep | Jan–Sep | Jan–Sep | Full-year |
| Profit/loss for the period | 10.7 | 6.4 | 23.0 | 1.7 | 22.8 |
| Translation differences and others | 0.2 | -1.6 | -1.3 | -1.2 | -1.1 |
| Total result | 10.9 | 4.8 | 21.7 | 0.5 | 21.7 |
(Related to Parent Company's shareholders)
| STATEMENT OF FINANCIAL POSITION (SEK m) | 2010 | 2009 | 2009 |
|---|---|---|---|
| Doro Group | Sep 30 | Sep 30 | Dec 31 |
| Intangible assets | 22.1 | 18.5 | 18.3 |
| Tangible assets | 3.7 | 8.8 | 7.6 |
| Financial assets | 29.6 | 14.5 | 15.8 |
| Inventories | 85.3 | 60.4 | 35.6 |
| Current receivables | 150.0 | 77.9* | 114.5* |
| Cash and bank balances | 4.7 | 8.5 | 40.4 |
| Total assets | 295.4 | 188.6 | 232.2 |
| Shareholders' equity | 89.3 | 30.4 | 67.6 |
| Interest-bearing liabilities | 11.3 | 40.0 | 8.8 |
| Non interest-bearing liabilities | 194.8 | 118.2* | 155.8* |
| Total shareholders' equity and liabilities | 295.4 | 188.6 | 232.2 |
* Effective from 2010, the Group has amended the principle applied in the classification of customer bonuses with the effect that these are now recognized as a current liability rather than as deductions from accounts receivable-trade. The balance sheets for September 30, 2009 and December 31, 2009 have been adjusted accordingly. Key figures affected by the reclassification have also been adjusted.
| STATEMENT OF CASH FLOWS (SEK m) | 2010 | 2009 | 2010 | 2009 | 2009 |
|---|---|---|---|---|---|
| Doro Group | Jul–Sep | Jul–Sep | Jan–Sep | Jan–Sep | Full-year |
| Operating profit/loss after depreciation and write-downs, EBIT |
13.2 | 7.0 | 20.6 | 7.4 | 26.6 |
| Depreciation according to plan | 5.1 | 2.0 | 14.0 | 5.8 | 11.4 |
| Net financial items | -0.8 | -0.2 | -0.7 | -5.3 | -1.7 |
| Taxes | -5.0 | 0.0 | -6.0 | 0.0 | 0.0 |
| Changes in working capital | -33.7 | -7.3 | -50.8 | 5.8 | 28.7 |
| Cash flow from current activities | -21.2 | 1.5 | -22.9 | 13.7 | 65.0 |
| Disposal of Group companies | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Investments | -4.7 | -4.4 | -13.9 | -13.2 | -17.5 |
| Cash flow from investment activities | -4.7 | -4.4 | -13.9 | -13.2 | -17.5 |
| Share issue | ‒ | ‒ | ‒ | ‒ | 15.9 |
| Loans raised | 3.9 | 6.7 | 2.5 | -3.4 | -34.6 |
| Cash flow from financial activities | 3.9 | 6.7 | 2.5 | -3.4 | -18.7 |
| Translations difference and other | -0.1 | -1.6 | -1.4 | -1.2 | -1.1 |
| Change in liquid funds | -22.0 | 2.2 | -35.7 | -4.1 | 27.7 |
| Net debt | 6.6 | 31.5 | 6.6 | 31.5 | -31.6 |
| STATEMENT OF CHANGES IN EQUITY (SEK m) | 2010 | 2009 | 2009 |
|---|---|---|---|
| Doro Group | Jan–Sep | Jan–Sep | Full-year |
| Opening balance | 67.6 | 30.0 | 30.0 |
| Total result for the period | 21.7 | 0.5 | 21.7 |
| Share issue | ‒ | ‒ | 15.9 |
| Dividend | ‒ | ‒ | ‒ |
| Closing balance | 89.3 | 30.5 | 67.6 |
| OTHER KEY FIGURES | 2010 | 2009 | 2009 |
|---|---|---|---|
| Doro Group | Sep 30 | Sep 30 | Dec 31 |
| Equity/assets ratio, % | 30.2 | 16.1* | 29.1* |
| Average number of shares, thousands | 19,108 | 17,408 | 17,573 |
| Reported equity per share, SEK | 4.67 | 1.75 | 3.85 |
| Return on average shareholders' equity, % | 29.3 | 5.5 | 46.7 |
| Return on average capital employed, % | 34.5 | 10.0 | 52.0 |
| Share price at period's end, SEK | 26.60 | 8.40 | 11.00 |
| Market value, SEK m | 508.3 | 146.2 | 210.2 |
* Effective from 2010, the Group has amended the principle applied in the classification of customer bonuses with the effect that these are now recognized as a current liability rather than as deductions from accounts receivable-trade. The balance sheets for September 30, 2009 and December 31, 2009 have been adjusted accordingly. Key figures affected by the reclassification have also been adjusted.
| SALES PER SEGMENT (SEK m) Doro Group | 2010 | 2009 | 2010 | 2009 | 2009 |
|---|---|---|---|---|---|
| Jul–Sep | Jul–Sep | Jan–Sep | Jan–Sep | Full-year | |
| Care Electronics | 137.8 | 69.2 | 308.6 | 169.2 | 299.9 |
| Home Electronics | 31.0 | 41.9 | 95.1 | 135.8 | 192.7 |
| Total | 168.8 | 111.1 | 403.7 | 305.0 | 492.6 |
| OPERATING PROFIT/LOSS AFTER DEPRECIATION, | 2010 | 2009 | 2010 | 2009 | 2009 |
|---|---|---|---|---|---|
| EBIT PER SEGMENT (SEK m) Doro Group | Jul–Sep | Jul–Sep | Jan–Sep | Jan–Sep | Full-year |
| Care Electronics | 7.6 | 10.3 | 13.0 | 15.1 | 42.6 |
| Home Electronics | 5.6 | -3.3 | 7.6 | -7.7 | -16.0 |
| Operating profit after depreciation | 13.2 | 7.0 | 20.6 | 7.4 | 26.6 |
| INCOME STATEMENT (SEK m) | 2010 | 2009 | 2010 | 2009 | 2009 |
|---|---|---|---|---|---|
| Parent Company | Jul–Sep | Jul–Sep | Jan–Sep | Jan–Sep | Full-year |
| Income/Net sales | 168.8 | 53.1 | 403.7 | 149.0 | 246.8 |
| Operating cost | -177.8 | -46.8 | -373.1 | -136.9 | -224.3 |
| Operating profit before depreciation and write-downs, EBITDA |
-9.0 | 6.3 | 30.6 | 12.1 | 22.5 |
| Depreciation according to plan | -6.8 | -2.8 | -19.2 | -7.0 | -13.5 |
| Operating profit/loss after depreciation and write-downs, EBIT |
-15.8 | 3.5 | 11.4 | 5.1 | 9.0 |
| Net financial items | -12.5 | 0.0 | -7.4 | 8.3 | 11.1 |
| Profit after financial items | -28.3 | 3.5 | 4.0 | 13.4 | 20.1 |
| Taxes | 11.8 | 0.0 | 11.8 | 0.0 | 1.6 |
| Profit/loss for the period | -16.5 | 3.5 | 15.8 | 13.4 | 21.7 |
| SUMMARY OF BALANCE SHEET (SEK m) | 2010 | 2009 | 2009 |
|---|---|---|---|
| Parent Company | Sep 30 | Sep 30 | Dec 31 |
| Intangible assets | 33.3 | 27.3 | 26.1 |
| Tangible assets | 2.1 | 7.7 | 6.0 |
| Financial assets | 49.1 | 36.6 | 37.3 |
| Inventories | 85.8 | 22.4 | 34.9 |
| Current receivables | 149.2 | 39.2* | 88.1* |
| Cash and bank receivables | 4.1 | 1.2 | 12.2 |
| Total assets | 323.6 | 134.4 | 204.6 |
| Shareholders' equity | 82.9 | 42.8 | 67.1 |
| Interest-bearing liabilities | 34.9 | 39.6 | 33.0 |
| Non interest-bearing liabilities | 205.8 | 52.0* | 104.5* |
| Total shareholders' equity and liabilities | 323.6 | 134.4 | 204.6 |
* Effective from 2010, the Group has amended the principle applied in the classification of customer bonuses with the effect that these are now recognized as a current liability rather than as deductions from accounts receivable-trade. The balance sheets for September 30, 2009 and December 31, 2009 have been adjusted accordingly. Key figures affected by the reclassification have also been adjusted.
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