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DORO

Earnings Release Feb 14, 2019

3150_10-k_2019-02-14_f8545cbc-f819-44c5-bbaf-2e184b202250.pdf

Earnings Release

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Q4 Year-end Report January-December 2018

Doro AB Corporate registration no. 556161-9429

Improved profitability and cash flow
-1.1
%
Net sales
6.9
%
EBIT margin
October –
December 2018

Net sales were SEK 554.1 million (560.4), a decrease
of 1.1 percent.

Net sales for the category Products were SEK 467.9 million
(509.1), a decrease of 8.1 percent. Net sales for the category
Services were SEK 86.2 million (51.3), an increase of 68.0
percent.

The gross margin increased to 32.6% (31.0). For Products, the
gross margin increased to 29.4 percent (29.3) and for Services
the gross margin increased to 49.8 percent (49.4).

Operating profit (EBIT) was SEK 38.0 million (34.1), which
corresponds to an operating margin of 6.9 percent (6.1).

Profit after tax for the period was SEK 25.6 million (22.5).

Earnings per share were SEK 1.08 (0.95).

Free cash flow before acquisitions was SEK 36.1 million (17.8).
January –
December 2018

Net sales were SEK 1,906.4 million (1,924.0), a decrease
of 0.9 percent.

Net sales for the category Products were SEK 1,621.0 million
(1,731.3), a decrease of 6.4 percent. Net sales for the category
Services were SEK 285.4 million (192.7), an increase of 48.1
percent.

The gross margin increased to 33.4% (30.3%). For Products, the
gross margin increased
the gross margin increased to 47.4 percent (41.7).

Operating profit (EBIT) was SEK 122.3 million (92.0), which corre
sponds to an operating margin of 6.4 percent (4.8). The operating
profit includes restructuring costs of SEK 4.3 million (3.5).

Profit after tax for the period was SEK 91.5 million (66.5).

Earnings per share were SEK 3.86 (2.83).

Free cash flow before acquisitions was SEK 122.5 million (49.3).
to 31.0 percent (29.0) and for Services
THE DORO GROUP
(SEK million)
2018
Oct-Dec
2017
Oct-Dec
2018
Jan-Dec
2017
Jan-Dec
Net sales 554.1 560.4 1,906.4 1,924.0
Sales growth, % -1.1 -6.5 -0.9 924.0
-1.8
EBITDA 57.4 53.1 194.3 156.2
EBITDA margin, % 10.4 9.5 10.2 8.1
EBITA 40.0 35.7 130.8 97.2
EBITA margin, % 7.2 6.4 6.9 5.1
EBIT 38.0 34.1 122.3 92.0
EBIT margin, % 6.9 6.1 6.4 4.8
Profit after tax 25.6 22.5 91.5 66.5
Earnings per share 1.08 0.95 3.86 2.83
Equity ratio, % 46.7 49.6 46.7 49.6

Good growth in Services continues

Consumer service Response by Doro launched

Centralisation of warehouse operations and implementation of business system provide foundation for increased efficiency

Improved earnings for the eighth consecutive quarter

Message from the CEO

In 2018, we continued to develop our business towards offering the market service-oriented care solutions. During the year we have created a solid foundation to build on, a foundation that will now enable continued growth in prioritized segments. The organisation, which is now divided into private and public customers, now has better opportunities for creating offers that are tailored to the needs of each target group.

Services continued to show strong growth during the quarter and represents an ever-increasing share of sales. The positive development is primarily driven by increasing sales in the public sector in Sweden, Norway and the United Kingdom. The British telecare company Welbeing is now our base for the service business in the United Kingdom and the company has generated several new contracts during the period, including a new agreement that brought us 3,200 new connections.

It is primarily in the service segment that we are seeing interesting growth opportunities, for both consumers and the public sector, something that is also supported by market trends, with an increasingly ageing population. Moving forward, we wish to develop and broaden what we offer to both existing and new geographical markets.

In Sweden, we have conducted a first launch of the consumer service Response by Doro in a few selected stores. The service, which links our mobile phones with alarm centres and family members, is a new technology enabled care service, which we launch in more channels during the first half of 2019.

In our Products category, Doro is maintaining its market share in our key markets. Generally, the market in Europe is challenging. The USA stands out positively by generating growth figures, largely due to the fact that our feature phone adapted for 4G, 7050, was well received.

Our strategic initiatives to optimise operations have continued. During the period, warehousing in the Nordics and France was moved to our new central warehouse facility in the Czech Republic. Warehouse consolidation is continuing during the first quarter of this year. We have also implemented a new business system in much of the group, which creates the foundation for improving efficiency throughout the entire chain.

In conclusion, 2018 was a year in which we improved our operating profit (+33 percent), our free cash flow (+148 percent) and earnings per share (+37 percent), largely due to growth and investment in the public service sector. Naturally we are proud of this, but we have more work to do to achieve our longterm financial goals. We shall now continue to develop what we have started. By being responsive to developments in the market and the needs of our target group, we look forward to an exciting 2019.

Robert Puskaric, President and CEO

Net sales decreased by 1.1%

Positive sales trend in Services continues

Challenging market for Products has led to lower sales in some regions

Gross margin increased to 32.6% and operating margin to 6.9%

Group financial summary, fourth quarter 2018

Sales

Doro's net sales for the fourth quarter were SEK 554.1 million (560.4), a decrease of 1.1 percent compared with the fourth quarter of 2017. Excluding the acquisition of Welbeing, the decrease was 5.8 percent. Adjusted for currency effects, the downturn was 6.1 percent including the acquisition of Welbeing.

New orders during the fourth quarter increased by 7.9 percent to SEK 540.2 million (500.6). At the end of the quarter, the value of the order book was SEK 396.1 million (314.9).

Sales in the Products category decreased by 8.1 percent, while sales in the Services category increased by 68.0 percent compared with the fourth quarter of 2017.

Sales of smartphones accounted for around 18 percent of our total mobile phone sales, which is an improvement on the preceding quarter. Our latest smartphone, Doro 8035, has now also been launched with a number of customers in the United Kingdom after protracted acceptance tests, which will hopefully make a positive contribution in the future.

Sales in the Nordics increased by 2.2 percent compared with the fourth quarter of 2017. In the Western and Southern Europe and Africa region, sales decreased by 10.9 percent. In Central and Eastern Europe, sales decreased by 19.0 percent. Sales in the United Kingdom and Ireland increased by 18.6 percent including the acquisition of Welbeing, while sales in North America increased by 62.6 percent.

Earnings

The gross margin increased compared with the fourth quarter of 2017 and totalled 32.6 percent (31.0). The stronger gross margin is mainly the result of an increasing share of sales from Services.

EBITDA for the fourth quarter increased by 8.1 percent to SEK 57.4 million (53.1), which corresponds to an EBITDA margin of 10.4 percent (9.5). The increase in EBITDA is the result of the improved gross margin.

EBITA improved to SEK 40.0 million (35.7). Planned depreciation of intangible assets from company acquisition was SEK -2.0 million (-1.6) during the quarter, which resulted in an operating profit (EBIT) of SEK 38.0 million (34.1) and an EBIT margin of 6.9 per cent (6.1).

Net financial items for the fourth quarter totalled SEK -2.8 million (-0.8), including revaluation of financial instruments in foreign currency.

Group tax for the quarter was SEK -9.6 million (-10.8).

Profit after tax for the period was SEK 25.6 million (22.5).

Operating profit and operating margin per quarter, SEK million and %

Cash flow from operating activities, SEK million

Cash flow and financial position

Cash flow from operating activities during the fourth quarter was SEK 62.9 million (38.5). The increase was mainly due to improved working capital. Free cash flow, after investments but before operating acquisitions, amounted to SEK 36.1 million (17.8).

Cash and cash equivalents totalled SEK 134.2 million at the end of the fourth quarter (57.1). At the same time, the equity ratio was 46.7 per cent (49.6).

The net debt totalled SEK 105.8 million at the end of the fourth quarter, compared with SEK 141.2 million at the end of the previous quarter and SEK 102.9 million at the end of the fourth quarter of 2017.

Significant events during the period

No such events can be reported.

Significant events after the period

Jörgen Alsing, Corporate Strategic Projects, has decided to leave Doro. Jörgen Alsing will remain in his position until the end of February.

Sales by market, R12, January 2018 - December 2018

Nordics

  • Western and Southern Europe and Africa
  • Central and Eastern Europe
  • United Kingdom and Ireland
  • North America
  • Rest of the world

Net sales by market fourth quarter 2018

NET SALES BY MARKET*)

Doro Group (SEK million) 2018
Oct-Dec
Sales
growth, %
2017
Oct-Dec
restated
2018
Jan-Dec
2017
Jan-Dec
restated
Nordics 144.3 2.2% 141.2 546.5 556.2
Western and Southern Europe and Africa 117.1 -10.9% 131.5 433.3 444.0
Central and Eastern Europe 152.0 -19.0% 187.6 475.8 557.0
United Kingdom and Ireland 88.0 18.6% 74.2 300.3 250.2
North America 46.2 62.6% 28.4 152.9 96.1
Rest of the world 2.0 -76.8% 8.8 7.5 23.7
Other 4.4 -11.3 -9.9 -3.2
Total 554.1 -1.1% 560.4 1,906.4 1,924.0

* ) Note 1

Nordics

Sales in the Nordics increased by 2.2 percent compared with the fourth quarter of 2017. Growth in the region is driven by Services, which showed continued positive development during the quarter. The Products category still faces a challenging market trend and showed a slight decline in the quarter.

Western and Southern Europe and Africa

In the Western and Southern Europe and Africa region, sales decreased by 10.9 percent. The downturn is mainly the result of a weak development in France, where political turmoil had a negative impact on trade. However, we can see that we are succeeding in maintaining and strengthening our position in the market. Southern Europe showed growth during the quarter and Doro 7070 is now listed with the largest operators in Italy.

Central and Eastern Europe

The region saw sales decrease by 19.0 percent. The German market, in particular, has remained weak. Many of the larger customers in retail are experiencing a negative trend and have been forced to make greater savings. Sales in Eastern Europe were stable.

United Kingdom and Ireland

Sales in the United Kingdom and Ireland grew by 18.6 percent. Excluding the acquired company Welbeing, there was a decline of 16.5 percent. The market in the United Kingdom has been weak during the quarter with uncertainty about Brexit and a continuing decline in performance for many dealers. What is positive is that after long acceptance tests we have had our latest products listed by many of the major customers in the UK and Ireland.

North America

North America also shows good growth in the fourth quarter. Compared with the same period last year, sales increased by 62.6 percent. The launch of our Doro 7050 phone has gone according to plan and we have thereby reached a higher sales level than the previous year.

Rest of the world

Net sales in the rest of the world amounted to SEK 2.0 million (8.8).

Other

During the fourth quarter, income and income adjustments that were not connected to any specific region totalled SEK 4.4 million (-11.3).

Sales by category October

Services

- December 2018 Net sales and gross margin by category fourth quarter 2018

NET SALES BY CATEGORY*)

Doro Group (SEK million) 2018
Oct-Dec
Sales
growth %
2017
Oct-Dec
restated
2018
Jan-Dec
2017
Jan-Dec
restated
Products 467.9 -8.1% 509.1 1,621.0 1,731.3
Gross margin 29.4% 29.3% 31.0% 29.0%
Services 86.2 68.0% 51.3 285.4 192.7
Gross margin 49.8% 49.4% 47.4% 41.7%
Total 554.1 -1.1% 560.4 1,906.4 1,924.0
Gross margin 32.6% 31.0% 33.4% 30.3%
*) Note 2

Products

Sales in the Products category decreased by 8.1 percent compared with the fourth quarter of 2017. Weak development in our major markets in Europe has had a negative effect on sales during the quarter, although our general assessment is that we are maintaining or increasing our market share. During the quarter, we have succeeded in showing sales growth in North America and Southern Europe as we strengthen our positions in these markets. The gross margin for the category increased to 29.4 percent (29.3).

Services

Sales in the Services category increased by 68.0 per cent. We have seen a positive development from the Nordics as well as the UK, where the acquired company Welbeing is developing well. Including Welbeing, the number of subscriptions to Doro Care totalled approximately 200,000 (126,000), of which Welbeing contributed approximately 77,000 subscriptions. The gross margin for the category increased somewhat to 49.8 percent (49.4).

Equity and the Doro share

Doro's share is listed on Nasdaq Stockholm, Small Cap, in the segment Telecom/IT. On 31 December 2018, the number of issued shares was 24,204,568 of which Doro AB holds 439,030 Doro shares. Total equity amounted to SEK 683.7 million (583.7).

Related party transactions

During the period there were no transactions between Doro and related parties that had any significant effect on the company's position and financial results.

Personnel

On 31 December 2018, Doro had 685 (458) employees, corresponding to 534 (380) full-time equivalents. Of these, 361 (347) are based in the Nordics, 55 (58) in Central and Eastern Europe, 25 (28) in Western and Southern Europe and Africa, 235 (16) in the United Kingdom and Ireland and 9 (9) in the rest of the world.

Risks

Risks and uncertainty factors are primarily related to the challenge of continuously developing competitive products, disturbances to deliveries, customer relations, exchange rate fluctuations, loan financing and the public procurement process in Doro Care. Other than these risks, which are described in more detail on pages 35 and 36 of the annual report, no other significant risks have been identified during the period.

Parent company

The parent company's net sales during the fourth quarter totalled SEK 438.3 million (460.4). Profit after tax was SEK 33.2 million (24.5).

Accounting principles

This interim report has been created for the group in accordance with IAS 34, "Interim Financial Reporting" and for the parent company in accordance with Annual Reports Act and the Swedish Financial Reporting Board's recommendation RFR 2, "Accounting for legal entities". The accounting principles and calculation methods used correspond with those that were used to create the latest annual report, except that the group applies IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers with effect from 1 January 2018. The transition has had no significant effect on the financial reports.

IFRS 16 - Leases is effective as of 1 January 2019. For lessees, the standard eliminates the classification of leases as either operating or finance, as required by IAS 17, and instead introduces a single lease accounting model. Applying that model a lessee is required to recognize, (a) assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value and (b) depreciation of leased assets separately from interest on lease liabilities in the income statement.

Doro has will adopt IFRS 16 using the modified retrospective approach, which means that the comparatives for 2018, in accordance with the standard will not be restated. The lease liability is the sum of the present value of all future payments until lease end date. The practical expedient to set the right of use asset (before adjustments for any prepayments) equal to the lease liability has been applied for the transition. The rate for discounting the lease payments is the Doro Group incremental borrowing rate with consideration to the maturity of the lease contracts. The practical expedient for definition of a lease has been applied, which means that all components within a lease has been considered as a lease component. The short term lease exception and the asset of low value exception has also been applied.

The estimated opening balance of the lease liability and the Right-of-use assets is around SEK 70 million for current lease contracts. The largest asset class of leases is office premises.

Seasonal variations

Doro's sales in the Products category are affected by seasonal variations. Normally, sales are lowest during the first quarter. Sales during the second and third quarters are normally higher than in the first quarter. Sales are normally strongest during the fourth quarter.

Outlook

The overall market for mobile phones is expected to remain challenging, Doro has maintained and is expected to maintain or increase market share in the senior segment.

Services is growing organically and we are active in multiple acquisition discussions and we expect continued double-digit growth for Services in 2019.

The profitability is expected to remain at a healthy level.

Dividend

The proposal for a dividend for 2018 is submitted at the latest in the notice of the AGM.

The report for the first quarter of 2019 will be published on 3 May 2019

This report is presented via an audiocast on 14 February at 09.00 CET

Report dates

Q1 report, January-March 2019: 3 May 2019 Q2 report, January-June 2019: 12 July 2019 Q3 report, January-September 2019: 25 October 2019

Annual General Meeting 2019

The Annual General Meeting will be held in Stockholm on 3 May 2019.

For further information, please contact:

Robert Puskaric, President and CEO, +46 (0)70 519 34 07 Carl-Johan Zetterberg Boudrie, CFO, +46 (0)70 335 84 49

E-mail: [email protected]

Doro's report is presented via an audiocast

Analysts, investors and the media are welcome to join the presentation via https://edge.media-server.com/m6/p/tae6csa5 or telephone at 09.00 CET on 14 February 2019. Doro's President and CEO Robert Puskaric and CFO Carl-Johan Zetterberg Boudrie will give the presentation and answer questions. Approximately one hour after the presentation has ended, an on-demand version will also be made available on the website https://corporate.doro.com/investors/reports-and-presentations/presentations/.

Telephone numbers

Sweden: + 46 (0) 8 505 564 74 France: + 33 (0) 1 7075 0712 United Kingdom: + 44 (0) 203 364 5374 USA: + 1 855 7532 230

About Doro

Doro AB develops telecom products and services for seniors, so that they can live a full, rich life. As well as being global market leaders in the category of telecom for seniors, Doro also offers a wide portfolio of products and services for safety and care solutions. These smart solutions are tailored to the specific needs of seniors and the disabled and also help to digitally connect generations and create a safe and independent environment in people's own homes. Doro is a Swedish publicly traded company and its share is listed on Nasdaq OMX Stockholm, Nordic List, Small Cap. Net sales in 2018 amounted to SEK 1,906 million (EUR 186 million).

Visit Doro on www.doro.se or www.facebook.com/dorosverige.

Financial reports

INCOME STATEMENT 2018 2017 2018 2017
Doro Group (SEK million)
Note
3
Oct-Dec Oct-Dec Jan-Dec Jan-Dec
Net sales 554.1 560.4 1,906.4 1,924.0
Cost of goods and services sold -373.6 -386.8 -1,269.2 -1,341.9
Gross profit 180.5 173.6 637.2 582.1
Selling, distribution and marketing expenses -77.1 -85.1 -278.4 -277.4
Research and development expenses -29.3 -28.2 -104.8 -103.0
Administrative expenses -36.7 -27.2 -134.3 -116.6
Other income and expenses 0.6 1.0 2.6 6.9
Total operating expenses -142.5 -139.5 -514.9 -490.1
whereof depreciation and amortisation of intangible and tangible fixed assets -19.4 -19.0 -72.0 -64.2
Operating profit/loss before depreciation and amortisation (EBITDA) 57.4 53.1 194.3 156.2
Operating profit/loss after depreciation and amortisation (EBIT) 38.0 34.1 122.3 92.0
Net financial items -2.8 -0.8 0.7 -0.3
Profit/loss before taxes 35.2 33.3 123.0 91.7
Taxes -9.6 -10.8 -31.5 -25.2
Profit/loss for the period 25.6 22.5 91.5 66.5
Average number of shares, thousands 23,766 23,755 23,674 23,536
Average number of shares after dilution, thousands* 23,766 23,755 23,674 23,591
Earnings per share, SEK 1.08 0.95 3.86 2.83
Earnings per share,after dilution, SEK* 1.08 0.95 3.86 2.82
*
) Dilution effects are only taken into account where they would have a negative effect on profit per share.

STATEMENT OF COMPREHENSIVE INCOME

Doro Group (SEK million) Oct-Dec Oct-Dec Jan-Dec Jan-Dec
Profit/loss for the period 25.6 22.5 91.5 66.5
Other comprehensive income to be reclassified to profit or loss in subsequent periods:
Translation differences -6.6 3.8 5.1 1.1
Effects from cash flow hedges -1.4 0.5 1.0 -3.1
Deferred tax 0.3 -0.1 -0.2 0.7
Total Result related to Parent company's shareholders 17.9 26.7 97.4 65.2

2018

2017

2018

2017

BALANCE SHEET

2018 2017
Doro Group (SEK million) 31 Dec 31 Dec
Non-current assets
Intangible assets 612.4 466.5
Property, plant and equipment 41.1 19.0
Financial assets 7.5 7.8
Deferred tax asset 6.5 9.5
Current assets
Inventories 264.0 196.9
Current receivables 398.6 420.5
Cash and cash equivalents 134.2 57.1
Total assets 1,464.3 1,177.3
Shareholders' equity attributable to Parent company's shareholders 683.7 583.7
Long-term liabilities 284.2 119.2
Current liabilities 496.4 474.4
Total shareholders' equity and liabilities 1,464.3 1,177.3
Financial instruments valued at fair value on the balance sheet, SEK million 2018
31 Dec
2017
31 Dec
Exchange rate contracts recorded as current liability 1.7
ec
8.1
Exchange rate contracts recorded as current receivable 4.3 4.0
Financial instruments valued at fair value consist of currency derivatives and these are valued at level 2.

CASH FLOW ANALYSIS

Doro Group (SEK million) 2018
Oct-Dec
2017
Oct-Dec
2018
Jan-Dec
2017
Jan-Dec
Operating profit/loss after depreciation and write-downs, EBIT 38.0 34.1 122.3 92.0
Depreciation according to plan 19.4 19.0 72.0 64.2
Net paid financial items -1.1 -1.2 -4.5 -5.0
Unrealized exchange rate differences in cash flow hedges -0.9 -2.7 -5.7 9.9
Taxes paid -3.8 1.4 -15.1 -10.9
Changes in working capital (incl changes in provisions) 11.3 -12.1 52.8 -30.7
Cash flow from current activities 62.9 38.5 221.8 119.5
Investments in intangible and tangible fixed assets -26.8 -20.7 -99.3 -70.2
Total Free Cash flow before acquisitions 36.1 17.8 122.5 49.3
Acquisitions 0.0 0.0 -110.7 0.0
Cash flow from investment activities -26.8 -20.7 -210.0 -70.2
Amortisation of debt 0.0 -25.0 -185.0 -75.5
New loans/changes in bank overdraft facility 0.0 0.0 265.0 25.0
Dividend/buy-back shares 0.0 0.0 -18.9 -23.2
New share issue 0.0 0.0 0.0 21.7
Warrant program, new/buy back 0.0 0.0 2.4 -1.2
Cash flow from financial activities 0.0 -25.0 63.5 -53.2
Exchange rate differences in cash and cash equivalents -0.6 -0.1 1.9 0.0
Change in liquid funds 35.5 -7.3 77.2 -3.9
Net debt 105.8 102.9 105.8 102.9

EQUITY

2017
Doro Group (SEK million) 31 Dec 31 Dec
Opening balance 583.7 520.0
Total Result related to Parent company's shareholders 97.4 65.2
Dividend/buy-back shares -18.9 -23.2
Warrants 2.3 0.0
New share issue 19.2 21.7
Opening balance 683.7 583.7

OTHER KEY FIGURES

2018
Doro Group
31 Dec
2017
31 Dec
Order book at the end of the period, SEK m**
396.1
314.9
Order intake Q, SEKm**
540.2
500.6
Gross margin, %
33.4
30.3
Gross margin Q, %
32.6
31.0
EBITA, SEKm
130.8
97.2
Equity/assets ratio, %
46.7
49.6
Number of shares at the end of the period, thousands
23,766
23,755
Number of shares at the end of the period after dilution, thousands*
23,766
23,755
Equity per share, SEK
28.77
24.57
Equity per share, after dilution SEK*
28.77
24.57
Return on average share holders' equity, %
14.4
12.1
Return on average capital employed, %
16.1
13.5
Share price at period's end, SEK
34.15
43.70
Market value, SEKm
811.6
1,038.1

* ) Dilution effects are only taken into account where they would have a negative effect on profit per share

)
NET SALES BY MARKET
*
Doro Group (SEK million)
2018
Oct-Dec
2017
Oct-Dec
restated
2018
Jan-Dec
2017
Jan-Dec
restated
Nordics 144.3 141.2 546.5 556.2
West and South Europe and Africa 117.1 131.5 433.3 444.0
Central and Eastern Europe 152.0 187.6 475.8 557.0
United Kingdom and Ireland 88.0 74.2 300.3 250.2
North America 46.2 28.4 152.9 96.1
Rest of the World 2.0 8.8 7.5 23.7
Other 4.4 -11.3 -9.9 -3.2
Total 554.1 560.4 1,906.4 1,924.0
)
NET SALES BY CATEGORY*
Doro Group (SEK million)
2018
Oct-Dec
2017
Oct-Dec
2018
Jan-Dec
2017
Jan-Dec
Products 467.9 509.1 1,621.0 1,731.3
Gross margin, % 29.4% 29.3% 31.0% 29.0%
Services 86.2 51.3 285.4 192.7
Gross margin, % 49.8% 49.4% 47.4% 41.7%
Total 554.1 560.4 1,906.4 1,924.0
Gross margin, % 32.6% 31.0% 33.4% 30.3%

*) Note 2

* ) Note 1

INCOME STATEMENT 2018 2017 2018 2017
Parent company (SEK million) Oct-Dec Oct-Dec Jan-Dec Jan-Dec
Net sales 438.3 460.4 1,483.9 1,531.8
Cost of goods and services sold -287.7 -326.6 -999.5 -1,070.3
Gross profit 150.6 133.8 484.4 461.5
Operating expenses -106.5 -102.4 -413.8 -415.4
Operating profit/loss (EBIT) 44.1 31.4 70.6 46.1
Net financial items -1.6 0.8 5.6 2.4
Profit/loss after financial items 42.5 32.2 76.2 48.5
Group contribution 0.0 1.4 0.0 1.4
Taxes -9.3 -9.1 -19.2 -13.1
Profit/loss for the period 33.2 24.5 57.0 36.8
STATEMENT OF COMPREHENSIVE INCOME
Parent company (SEK million)
2018
Oct-Dec
2017
Oct-Dec
2018
Jan-Dec
2017
Jan-Dec
Profit/loss for the period 33.2 24.5 57.0 36.8
Other comprehensive income to be reclassified to profit or loss in
subsequent periods: subsequent periods:
Effects from cash flow hedges
-1.4 0.5 1.0 -3.1
Deferred tax 0.3 -0.1 -0.2 0.7
Total Result related to Parent company's shareholders 32.1 24.9 57.8 34.4
SUMMARY BALANCE SHEET
Parent company (SEK million)
2018
31 Dec
2017
31 Dec
Non-current assets
Intangible assets 296.9 282.9
Property, plant and equipment 17.3 14.0
Financial assets 272.1 119.6
Current assets
Inventories 195.5 139.3
Current receivables 539.4 521.0
Cash and cash equivalents 98.3 41.5
Total assets 1,419.5 1,118.3
Shareholders' equity attributable to Parent company's shareholders 471.9 411.3
Provisions 78.1 58.6
Long-term liabilities 240.0 100.0
Current liabilities 629.5 548.4
Total shareholders' equity and liabilities 1,419.5 1,118.3

Notes

Note 1 – Net sales by market

With effect from 1 January 2018, Doro has changed its reporting of sales by market so that this follows the geographical markets. This means that Doro Care is no longer reported as a separate region. Comparison figures for 2017 have been recalculated according to the new way of reporting. With effect from 1 January 2018, Doro has changed the names of several of the geographical markets so as to show more clearly which region is referred to. The region that was previously called EMEA has changed name to West and South Europe and Africa (WSEA), DACH has changed name to Central and Eastern Europe (CEE), the United Kingdom has changed name to the United Kingdom and Ireland and the USA and Canada region has changed name to North America.

Net sales by market
Doro Group (SEK million)
2017
Jan-Mar
restated
2017
Apr-Jun
restated
2017
Jul-Sep
restated
2017
Oct-Dec
restated
2017
Full year
restated
Nordics 146.5 131.9 136.6 141.2 556.2
West and South Europe and Africa 103.6 99.2 109.7 131.5 444.0
Central and Eastern Europe 119.6 128.3 121.5 187.6 557.0
United Kingdom and Ireland 49.7 57.5 68.8 74.2 250.2
North America 22.5 25.5 19.7 28.4 96.1
Rest of the world 5.6 4.7 4.6 8.8 23.7
Other 4.8 -1.1 4.4 -11.3 -3.2
Total 452.3 446.0 465.3 560.4 1,924.0

Note 2 – Net sales by category

With effect from 1 January 2018, Doro reports net sales and gross margin by the categories Products and Services. Products consists of sales of primarily telephones and alarm devices where each transaction is a separate deal. Services normally offers a packaged solution over an agreed period including, for example, alarm device, alarm receipt, alarm call-out and communication between alarm device and alarm centre. Doro previously reported recurring revenue i.e. the period's income from agreed subscriptions. Recurring revenue represents the majority of net sales for the Services category. Comparison figures for 2017 have been recalculated according to the new way of reporting.

Net sales by category
Doro Group (SEK million)
2017
Jan-Mar
restated
2017
Apr-Jun
restated
2017
Jul-Sep
restated
2017
Oct-Dec
restated
2017
Jan-Dec
restated
Products 405.2 400.5 416.5 509.1 1,731.3
Gross margin, % 28.6 30.2 27.8 29.3 29.0
Services 47.1 45.5 48.8 51.3 192.7
Gross margin, % 36.2 38.0 42.3 49.4 41.7
Total 452.3 446.0 465.3 560.4 1,924.0
Gross margin, % 29.3 31.1 29.4 31.0 30.3

Note 3 – Subdivision of income statement by function

With effect from 1 January 2018, Doro is changing from subdivision of income statement by cost type to subdivision of income statement by function. The reason for the change is that Doro is governed on the basis of a functional organisation, so that a subdivision of income statement by function gives clearer information about the group's development. In connection with this change, the definition of gross profit has changed so that costs of services performed and guarantee costs etc. are now included in the cost of goods and services sold.

INCOME STATEMENT
Doro Group (SEK million)
2017
Jan-Mar
restated
2017
Apr-Jun
restated
2017
Jul-Sep
restated
2017
Oct-Dec
restated
2017
Jan-Dec
restated
Net sales 452.3 446.0 465.3 560.4 1,924.0
Cost of goods and services sold -319.5 -306.8 -328.8 -386.8 -1,341.9
Gross profit 132.8 139.2 136.6 173.6 582.1
Selling, distribution and marketing expenses -60.5 -67.4 -64.4 -85.1 -277.4
Research and development expenses -26.2 -24.7 -23.9 -28.2 -103.0
Administrative expenses -32.1 -29.4 -27.9 -27.2 -116.6
Other income and expense 3.3 1.4 1.2 1.0 6.9
Total operating expenses -115.5 -120.1 -115.0 -139.5 -490.1
whereof depreciation and amortisation of intangible and tangible fixed assets -14.0 -14.7 -16.5 -19.0 -64.2
Operating profit/loss before depreciation and amortisation (EBITDA) 31.3 33.8 38.0 53.1 156.2
Operating profit/loss after depreciation and amortisation (EBIT) 17.3 19.1 21.5 34.1 92.0
Net financial items 0.4 0.2 -0.1 -0.8 -0.3
Profit/loss before taxes 17.7 19.3 21.4 33.3 91.7
Taxes -4.7 -4.0 -5.7 -10.8 -25.2
Profit/loss for the period 13.0 15.3 15.7 22.5 66.5

Note 4 – Acquisitions

On 1 June 2018, Doro acquired the British telecare company Welbeing by purchasing all shares in the parent company of the Welbeing group, Greencoat House Limited. Acquisition expenses had a negative effect on the net profit of SEK 6.7 million. The purchase price was paid partly in cash, SEK 128.9 million, of which SEK 15.2 million related to payment of liabilities to the previous owner, and partly through a directed placement of 449,313 shares, valued at SEK 19.2 million. Goodwill is linked to the strengthened position in the Care area in the United Kingdom, which Welbeing's sales channels provide, and increased know-how in the Care area. At the time of acquisition the company had about 180 employees. In the last full financial year at the time of acquisition, Welbeing had annual sales of GBP 7.6 million.

Preliminary information about the acquisition is given below, fair value SEK million

Intangible assets 34.6
Tangible fixed assets 15.5
Inventory 0.5
Current receivables 27.1
Cash and bank 18.3
Deferred tax liabilities -7.0
Long-term liabilities -0.3
Current liabilities -28.6
Acquired net assets 60.2
Goodwill 87.9
Total purchase price 148.1
Directed placement 19.1
Cash in acquired company 18.3
Effect of the acquisition on Group cash flow 110.7

Financial definitions

Average number of shares after
dilution
The average number of shares adjusted for the dilution effect of
subscription options calculated as the difference between the
presumed number of shares issued at the redemption price and the
presumed number of issued shares at the average market price for
the period.
Profit per share Profit after tax divided by the average number of shares for the
period.
Profit per share after dilution Profit after tax divided by the average number of shares for the
period, after the dilution effect.
Number of shares at end of period
after dilution effect
The number of shares at the end of the period adjusted for the
dilution effect of subscription options calculated as the difference
between the presumed number of shares issued at the redemption
price and the presumed number of issued shares at the market
price at the end of the period.
Equity per share Equity on the balance date divided by the number of shares on the
balance date.
Equity per share after dilution Equity on the balance date divided by the number of shares at the
end of the period after dilution effects.
Net debt/Net cash Cash and bank deposits less interest-bearing liabilities
Market value, SEK million Share price at the end of the period times the number of shares at
the end of the period.

Use of non-IFRS results measurement

Guidelines regarding alternative key figures for companies with securities listed on a regulated market within the EU have been issued by the ESMA (European Securities and Markets Authority). These guidelines shall be applied to alternative key figures that are used with effect from 3 July 2016. The interim report has references to a number of non-IFRS result measurements that are used to help both investors and management in analysing the company's activities. Below we describe the non IFRS result measurements that are used as a supplement to the financial information that is reported according to IFRS.

Description of financial result measurements that are not found in the IFRS rules

Non-IFRS result measurement Description Reason for use of measurement
Restructuring costs Costs of impairment and personnel costs in connection with
restructuring.
This measurement shows the specific costs that arise in
connection with restructuring of a specific activity, which
contributes to better understanding of the underlying cost
level in the ongoing operational activities.
Gross margin % Net sales minus cost of goods and services sold as a
percentage of net sales.
The gross margin is an important measurement for
showing the margin before other costs.
Sales growth comparable units % Net sales for the period minus net sales for companies
acquired during the period minus net sales for the
corresponding period in the previous year as a percentage of
net sales for the corresponding period in the previous year.
Sales growth comparable units shows the group's organic
growth excluding company acquisitions.
Currency adjusted sales
growth %
Net sales for the period recalculated with exchange rates for
the corresponding period the previous year minus net sales
for the corresponding period the previous year as a
percentage of net sales for the corresponding period the
previous year.
This measurement shows sales growth with currency
effects cancelled out.
Equity ratio Equity expressed as a percentage of total assets A traditional measurement for showing financial risk,
expressed as the percentage of the total capital that is
financed by the owners.
Return on average equity Rolling 12-month profit, after financial items and tax, divided
by average equity.
Shows from a shareholder perspective what the return is
on the owners' invested capital.
Capital employed Total assets less non-interest-bearing liabilities and cash
and bank deposits.
The measurement shows how much total capital is used
in the operation and is thus the one component in
measuring return from the activities.
Return on average capital
employed
Rolling 12-month operating profit divided by the average
quarterly capital employed
The key measurement for measuring the return on all the
capital in the company.
Number of subscription
customers
Number of subscription customers connected to alarm
reception.
This measurement shows the volume of customers in the
alarm reception activities.
Calculation of financial result measurements that are
not found in the IFRS rules
2018
Oct-Dec
2017
Oct-Dec
2018
Jan-Dec
2017
Jan-Dec
Currency adjusted sales growth (SEK million)
Currency adjusted sales growth -34.2 -32.4
Currency effect 27.9 -6.6
Reported sales growth -6.3 -39.0
Capital employed
Total assets 1,464.3 1,177.3
-non interest bearing liabilities 540.6 428.6
-cash and cash equivalents 134.2 57.1
Reported capital employed 789.5 691.6

Confirmation by the Board

The board and managing director affirm that this interim report provides an accurate overview of the operations, position and earnings of the company and group and the Parent Company, and that it also describes the principal risks and uncertainty factors faced by the company and its subsidiaries.

This year-end report has not been reviewed by the Company's auditors.

Malmö, Sweden, 14 February 2019

Johan Andsjö Chair of the Board Henri Österlund Deputy chair of the Board Lena Hofsberger Board member

Niklas Savander Board member

Jonas Mårtensson Board member

Josephine Salenstedt Board member

Mona Kristensson Employee board member Robert Puskaric CEO

This information is information that Doro AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons on page 9, on February 14 2019, at 08.00 CET.

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