Earnings Release • Feb 12, 2009
Earnings Release
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• Two large European retailers chose Pricer ESL
"Our strong fourth quarter in this difficult retail environment brought in a good year. We are pleased with the positive reception of our DotMatrix as well as the beginning of sales to tier 1 non food retailers. With our sound operating margins, our global reach and ESL volumes, we are confident of our leadership in these challenging times."
Charles Jackson, CEO Pricer AB
Order entry amounted to SEK 406 M (441) for the year and in the fourth quarter to SEK 99 M (89). At the end of December order back log amounted to approximately SEK 63 M (71).
Net sales, amounted to SEK 427.0 M (432.3) during the year approximately 1 percent less than in 2007. The downturn in the Japanese market, due to a shift in technology and a change in the business model, was offset by a strong growth in the French market. During the fourth quarter net sales amounted to SEK 147.7 M (133.4), the increase is primarily explained by higher sales in France. Pricer installed over 800 new stores in the year and about 286 stores in the fourth quarter not including the continued Metro migration of its German Cash & Carry-chain.
Gross profit increased to SEK 161.7 M (132.0) and the gross margin improved to 38 (31) percent for the year. The stronger gross margin is attributable to an improved market mix and reduced unit costs and also to the weak US-dollar, especially in the early part of the year, as most purchases are made in this currency. During the fourth quarter gross profit amounted to SEK 53.9 M (45.0) which is equivalent to a gross margin of 37 (34) percent. This was slightly lower than in previous quarters due to slightly less favourable currency effects, productmix and increased provisions for product guarantees.
Other operating income of SEK 6.2 M (20.6) in the first quarter was the second payment derived from the license agreement with Ishida. This agreement was signed in 2007 for development, marketing and sales of wireless graphic display labels mainly for the Japanese market. Pricer will also receive volumebased royalties for these products, expected during 2009.
Operating expenses decreased to SEK 112.5 M (146.6) for the year and amounted to SEK 32.1 M (30.6) for the fourth quarter. 2007 was however, affected by provisions for severance from the restructuring program in that year. Effects from the reduced headcounts are appearing in 2008. Operating expenses in the year have been reduced by SEK 0.8 M through recognized intangible assets from product development registered as investments.
The operating result amounted to SEK 55.4 M (6.0) for the year which is an improvement of SEK 50 M. Operating margin thereby amounted to 13 percent (1). During the fourth quarter operating result amounted to SEK 21.8 M (20.7) and operating margin was 15 percent (16).
Net financial items amounted to SEK 8.7 M (-7.2) for the year and in the fourth quarter SEK 12.0 M (0.0). It consisted of positive currency effects from revaluations of cash positions and loans to subsidiaries, partly offset by interest expense on convertible debentures.
Taxes amounted to SEK 43.6 M (2.2) based primarily on the registration of a deferred tax asset. As it is now likely that Pricer will continue to show profit a deferred tax asset is accounted for based on estimated future earnings. This should however, not be interpreted as an outlook of future earnings.
The net result was SEK 107.7 M (1.0) for the year and SEK 73.8 M (21.3) for the fourth quarter and was significantly impacted by the deferred tax asset mentioned above.
Sales were strong in the second half of the year as is traditional for sales to integrated retailers. The strong market reception of the new DotMatrix™ product line helped to widen the base offer, adding new features to the system and opened new segments such as the Do-It-Yourself retailers. Praktiker in Hungary is an example. Continued solid recurring revenues from all large tier 1 key accounts were recorded. The sales mix and segmentation has improved with significant growth in pharmacies, duty free, DIY and electronics retailers. During 2008, Pricer was present in 36 countries and generated sales in 34, a new record,
Over 800 new stores were installed in 2008, an increase of more than 20 percent over 2007. The 4,500 mark of installed stores was thereby passed. While the total number of ESLs sold to the market has remained constant, new stores have increased significantly reflecting the trickling down effect from large tier 1 retailers as anticipated for many years. The average store size has decreased primarily through sales to supermarkets.
During the fourth quarter, overall sales were at SEK 147.7 M with strong sales from French chains as well as expansion in Nordic, South Africa and Italy. Fourth quarter new store installations stood at 286 with indirect sales accounting for 246 stores.
The ESL industry is undergoing another consolidation, this time as a result of financial stress felt by newly funded start-ups, whether part of major conglomerates future ambitions, or stemming from Silicon Valley. The disruptive force of all these new players has affected ESL growth, especially in new markets such as the US. The exit of the weaker players will help grow the industry.
While certain retailers are visibly delaying decisions on new IT investments, the tough retail environment did not seriously affect sales into established accounts or markets as ESL represents an enabling technology for timely price strategy.
The strong fourth quarter European sales brought the year in line with last year with Europe growing to SEK 345 M in 2008 as compared to SEK 274 M in 2007, a 26 percent increase. This was due in part to continued strong penetration in the important French franchise market and the acceleration of the Metro program as well as Metro expansion in other European markets. French independent sales have seen an important increase of 45 percent over the last year. Continued sales to the major accounts such as Carrefour and Casino, which embarked on its ESL migration, completed the year. Also, the first full DotMatrix™ hypermarket installations were recorded, an industry first. The Nordic area has reversed a trend of flat sales as the new reseller was able to establish its position and initiate new programs.
555 stores were installed in Europe during the year versus 359 in 2007, with 219 new store installations in the fourth quarter. Pilot activity continues to increase significantly as price competition and value shopping as well as labour issues rise to the forefront of retail concerns.
Several key wins were made in the year.
Pricer was selected as the sole supplier for the Casino group to provide ESL solutions, system integration and support services over the next two years. Casino is amongst the largest retailers in Europe and a leader in store automation and one of the earliest to deploy ESL.
Evidence of the progress in non food was made when a leading Do-It-Yourself chain, Praktiker, selected Pricer for its multi store ESL implementation in Hungary. ESL has typically been implemented by Food retailers, and this tier 1 decision is very significant to Pricer and ESL in general. The first stores have been installed.
Many other major European retailers continued to expand their ESL programs to new stores, such as Eroski, a leading Spanish retailer, who placed further orders for new store installations, or the entire region of E. Leclerc Corsica which had recently changed flags and had to meet increased price changing requirements, or the 62 supermarkets Franprix additionally rolled out.
| Oct - Dec 2008 | Oct - Dec 2007 | Jan - Dec 2008 | Jan - Dec 2007 | |
|---|---|---|---|---|
| Net sales | 147.7 | 133.4 | 427.0 | 432.3 |
| Cost of goods sold | -93.8 | -88.4 | -265.3 | -300.3 |
| Gross profit | 53.9 | 45.0 | 161.7 | 132.0 |
| Gross margin, % | 37 | 34 | 38 | 31 |
| Other operating items | - | 6.3 | 6.2 | 20.6 |
| Expenses | -32.1 | -30.6 | -112.5 | -146.6 |
| Operating result | 21.8 | 20.7 | 55.4 | 6.0 |
| Operating margin, % | 14.8 | 15.5 | 13.0 | 1.4 |
More recently, Pricer was selected by one large French food chain operating in several European countries following trials. To date five hypermarkets have been installed as well as a pilot installation in its supermarket chain in Belgium.
A second DIY retailer, one of Europe's largest DIY retailers based in France, selected Pricer after store trials and pilots with competing solutions.
The DotMatrix™ graphic ESLs using electronic paper display technology also referred to as a bi-stable display technology, have become an important part of the continued expansion in France and several key projects were initiated. Grand Frais, the leading French retail chain in traditional fresh food segment, chose to equip its 100 stores with Pricer's new generation Dot-Matrix™ ESLs, for a total value of SEK 5 M. Most stores Pricer equips today have some form of DotMatrix™ solution for their wireless display needs, food and non food. However, the highlight of 2008 will remain the installation of the three E. Leclerc Hypermarkets with a total of 90 K DotMatrix ESL.
Several new projects were initiated in New Zealand, Australia, Singapore and South Africa where the market is developing strongly with a SEK 20 M order during the year. Revenue in the year declined significantly, however, due to the change in the business model from revenue to volume based royalties in Japan.
Sales in the region amounted to SEK 60 M from SEK 142 M in 2007, a decrease of 57 percent. Overall sales in Japan declined during the year due to new display technologies continuing to gain interest and the "wait and see"-effect that this has. Several leading technology companies have announced their developments in the field. However, Pricer has a unique position as both market leader and of supporting both segment based and pixel based displays under one and the same platform. A pilot program was initiated with a leading Japanese retailer with licensed Pricer technology.
Although the retail outlook at this point is very weak, a leading retailer has installed a four store pilot program with Pricer. Several store solution integration opportunities are being evaluated to seek further channel penetration leveraging DotMatrix™ solutions.
Cash flow from operating activities amounted to SEK 1.1 M (30.4) for the year. Cash flow has been negatively affected by increased inventory levels (from low levels) and increased receivables due to the relative increase of sales to customers in southern Europe. Sales in general and in Europe in particular take place to tier 1 and 2 customers hence the risk in working capital is limited. Also reduced current liabilities have affected cash flow negatively as provisions for severance and product issues relating to the restructuring program from 2007 have been paid. Cash flow from
operating activities during the fourth quarter amounted to SEK 12.5 M (37.3). Working capital amounted to SEK 144.4 M (67.7) at the end of the year, the increase being explained above mostly by increased receivables and inventory. Liquid funds at the end of December amounted to SEK 75.8 M (100.1).
Pricer issued convertible debentures of SEK 74.9 M in April 2007. The duration of the debentures is two years until April 19, 2009 with approximately 10 percent annual interest (6 months STIBOR + 4.5 percent). The loans can be converted to shares in Pricer at a share price of SEK 0.70, In line with IFRS a portion of the debenture loans is accounted as equity and, furthermore, an adjustment is being made to the interest expense during the duration of the loans. Pricer redeemed SEK 30 M of the convertible loans in November ahead of expiry in order to reduce interest expense. The remaining loan of SEK 45 M may at conversion lead to a dilution of the number of shares of 6 percent.
New bank credit facilities of SEK 50 M have been established in order to secure financing of Pricer's continued development. These facilities are not yet utilized.
Total assets amounted to SEK 659 (533) at the end of the year and consist of intangible assets of SEK 298.0 M (265.8) primarily from the acquisition of Eldat in 2006. The largest component is a goodwill item amounting to SEK 276 M. The acquisition of Eldat gave Pricer the market leadership position in the ESL industry and Pricer became the sole supplier of one wireless technology. The value of the goodwill is based on the expected future cash flow of Pricer as a whole as the business of Eldat has been absorbed within Pricer. The value has increased during 2008 due to currency effects.
Investments in fixed assets were low in the year. Total net capital expenditure amounted to SEK 1.4 M (-4.9) for the year and to SEK 1.0 M (-0.1) for the fourth quarter. As from the second half of the year investments include recognized intangible assets from product development of SEK 0.8 M in accordance with IAS 38.
The average number of employees during the year was 70 (95) and during the quarter 68 (87). The number of employees at the end of the year was 68 (83).
Number of Employees Number of Employees
The parent company had net sales of SEK 355.5 M (326.6) and result after tax was SEK 36.6 M (30.2) for the year. The result has been negatively affected by reduction of share value of subsidiaries (SEK 80 M) and positively affected by accounting of a deferred tax asset. Capital expenditures were SEK 1.1 M (1.1). The company had liquid funds of SEK 61.8 M (91.3) at the end of the year.
Pricer's results and financial position are affected by a number of risk factors that should be taken into consideration when assessing the company and its future potential. These risks are primarily related to development of the ESL market. Given the customer structure and the large size of the contracts any delay in the installations may have a significant impact on any given quarter. In addition to this, reference is made to a more elaborated description of risks and uncertainties in the annual report.
Pricer has redeemed SEK 30 M of loans to lenders who also are shareholders of Pricer. Other than that there have been no significant transactions with related parties which have a material impact on the financial standing and results of Pricer.
Pricer follows the IFRS standards adopted by EU and interpretations thereof (IFRIC). This interim report is issued in accordance with IAS 34 Interim reporting. Accounting principles and accounting methods are unchanged as compared to the annual report. For the parent company Pricer follows the Swedish Annual Accounts Act (1995:1554) and RFR 2.1.
Two of Europe's largest tier 1 retailers, one Do-It-Yourself, the other Food, have placed significant initial orders for the Pricer ESL system after pilots and evaluation programs during 2007 and 2008.
In the present uncertain economical environment it is difficult to give an outlook for 2009. Nevertheless, due to Pricer's strong market position and solid installed base the Company expects 2009 results to come within reach of 2008. The first part of the year is expected to be weak due to a lower order intake than last year.
The Annual General Meeting is planned for April 24, 2009 at 2 pm at Scandic Infra City, Upplands Väsby. The last day to request items to be addressed at the AGM is March 18. The Board of Directors proposes that no dividend will be paid. It is expected that the Annual Report will be published in March, 2009 at Pricer's web-site and be sent to the largest shareholders as well as to those who so require.
The quarterly report for January - March 2009 will be published on May 8, 2009.
Sollentuna, February12, 2009 Pricer AB (publ)
Charles Jackson CEO
(The interim report is a translation of the Swedish original only for convenience)
In its capacity as issuer, Pricer AB is releasing the information in this year-end report for January-December 2008 in accordance with the Swedish (2007:528) Securities Exchange Act. The information was distributed to the media for publication at 09:00 hrs CEST on Thursday February 12, 2009.
For further information, please contact: Charles Jackson, CEO, Pricer AB +46 8 505 582 00
| Q 4 | Q 4 | Full year | Full year | |
|---|---|---|---|---|
| Amounts in SEK M | 2008 | 2007 | 2008 | 2007 |
| Net sales | 147.7 | 133.4 | 427.0 | 432.3 |
| Cost of goods sold | -93.8 | -88.4 | -265.3 | -300.3 |
| Gross profit | 53.9 | 45.0 | 161.7 | 132.0 |
| Other operating items, net | - | 6.3 | 6.2 | 20.6 |
| Selling and administrative expenses | -26.5 | -24.5 | -92.1 | -114.7 |
| Research and development expenses | -5.6 | -6.1 | -20.4 | -31.9 |
| Operating result | 21.8 | 20.7 | 55.4 | 6.0 |
| Net financial items | 12.0 | 0.0 | 8.7 | -7.2 |
| Result before tax | 33.8 | 20.7 | 64.1 | -1.2 |
| Taxes | 41.9 | 0.6 | 43.6 | 2.2 |
| Net result for the period | 75.7 | 21.3 | 107.7 | 1.0 |
| Attributable to: | ||||
| Equity holders of the Parent Company | 75.7 | 21.5 | 107.7 | 1.1 |
| Minority interest | 0.0 | -0.2 | 0.0 | -0.1 |
| Net result for the period | 75.7 | 21.3 | 107.7 | 1.0 |
| EARNINGS PER SHARE, NUMBER OF SHARES | Q 4 | Q 4 | Full year | Full year |
| 2008 | 2007 | 2008 | 2007 | |
| Earnings per share before dilution, SEK | 0.07 | 0.02 | 0.11 | 0.00 |
| Earnings per share after dilution, SEK | 0.07 | 0.02 | 0.10 | 0.00 |
| Number of shares, millions | 1,016 | 1,016 | 1,016 | 1,016 |
| Number of shares after dilution, millions | 1,094 | 1,153 | 1,116 | 1,153 |
| NET SALES BY GEOGRAPHICAL MARKET | Q 4 | Q 4 | Full year | Full year |
| Amounts in SEK M | 2008 | 2007 | 2008 | 2007 |
| Nordic Countries | 11.0 | 7.8 | 27.1 | 23.6 |
| Rest of Europe | 107.7 | 78.2 | 317.8 | 250.1 |
| Asia | 19.8 | 41.4 | 61.7 | 142.5 |
| Rest of the world | 9.2 | 6.0 | 20.4 | 16.1 |
| Total net sales | 147.7 | 133.4 | 427.0 | 432.3 |
| Amounts in SEK M | 31/12/2008 | 31/12/2007 |
|---|---|---|
| Intangible fixed assets | 298.0 | 265.8 |
| Tangible fixed assets | 3.7 | 5.6 |
| Financial assets | 41.1 | 0.1 |
| Total fixed assets | 342.8 | 271.5 |
| Inventories | 65.7 | 28.8 |
| Other receivables | 174.6 | 132.1 |
| Cash and cash equivalents | 75.8 | 100.1 |
| Total current assets | 316.1 | 261.0 |
| TOTAL ASSETS | 658.9 | 532.5 |
| Shareholders' equity | 509.9 | 356.4 |
| Equity, minority interest | 0.1 | 0.1 |
| Total equity | 510.0 | 356.5 |
| Long-term liabilities | 52.8 | 80.9 |
| Short-term liabilities | 96.1 | 95.1 |
| Total liabilities | 148.9 | 176.0 |
| TOTAL EQUITY AND LIABILITIES | 658.9 | 532.5 |
| Pledged assets | 166.6 | 310.9 |
| Contingent liabilities | 1.3 | 1.2 |
| Shareholders' equity per share, SEK | 0.50 | 0.35 |
| Shareholders' equity, SEK, after dilution | 0.52 | 0.31 |
| CHANGE IN EQUITY | ||
| Full year | Full year | |
| Amounts in SEK M | 2008 | 2007 |
| Equity at start of period | 356.5 | 353.2 |
| Translation differences and other adjustments | 44.6 | -5.0 |
| Issued employee options | 1.6 | 2.8 |
| Additional interest on convertible | -0.4 | 4.5 |
| Net result for the period | 107.7 | 1.0 |
| Equity at end of period | 510.0 | 356.5 |
| Attributable to: | ||
| - Equity holders of the Parent Company | 509.9 | 356.4 |
| - Minority interest | 0.1 | 0.1 |
| Total | 510.0 | 356.5 |
| Q 4 | Q 4 | Full year | Full year | |
|---|---|---|---|---|
| Amounts in SEK M | 2008 | 2007 | 2008 | 2007 |
| Net result after financial items | 33.8 | 20.6 | 64.1 | -1.2 |
| Adjustment for non-cash items | -9.4 | 9.0 | -2.6 | 12.3 |
| Paid tax | - | -0.1 | - | -0.1 |
| Change in working capital | -11.9 | 7.8 | -60.4 | 19.4 |
| Cash flow from operating activities | 12.5 | 37.3 | 1.1 | 30.4 |
| Cash flow from investing activities | -1.0 | -0.1 | -1.4 | 4.9 |
| Cash flow from financing activities | -32.1 | -8.7 | -32.1 | 34.3 |
| Cash flow for the period | -20.6 | 28.5 | -32.4 | 69.6 |
| Cash and cash equivalents at start of period | 89.8 | 73.8 | 100.1 | 31.5 |
| Exchange rate difference in cash and cash equivalents | 6.6 | -2.2 | 8.1 | -1.0 |
| Cash and cash equivalents at end of period 1) | 75.8 | 100.1 | 75.8 | 100.1 |
| Unutilised bank overdraft facilities | - | - | - | - |
| Disposable funds at end of period | 75.8 | 100.1 | 75.8 | 100.1 |
| 1) Whereof blocked accounts | 0.2 | 1.2 | 0.2 | 1.2 |
| Q 4 | Q 3 | Q 2 | Q 1 | Q 4 | |
|---|---|---|---|---|---|
| Amounts in SEK M | 2008 | 2008 | 2008 | 2008 | 2007 |
| Order entry | 98.5 | 135.0 | 74.5 | 98.1 | 89.3 |
| Order entry - moving 4 quarters | 406.1 | 396.9 | 376.9 | 447.7 | 440.7 |
| Net sales | 147.7 | 88.7 | 115.2 | 75.4 | 133.4 |
| Net sales - moving 4 quarters | 427.0 | 412.7 | 455.9 | 443.6 | 432.3 |
| Operating result | 21.8 | 11.2 | 16.2 | 6.2 | 20.7 |
| Operating result - moving 4 quarters | 55.4 | 54.3 | 42.3 | 15.4 | 6.0 |
| Result for the period | 75.7 | 17.6 | 14.6 | -0.2 | 21.3 |
| Cash flow from operating activities | 12.5 | 13.1 | -17.0 | -7.5 | 37.3 |
| Cash flow from op.activities - moving 4 quarters | 1.1 | 25.9 | 6.9 | 18.3 | 30.4 |
| Number of employees, end of period | 68 | 69 | 68 | 70 | 83 |
| Equity ratio | 67% | 68% | 71% | 68% | 67% |
| Full year | Full year | |
|---|---|---|
| Amounts in SEK M | 2008 | 2007 |
| Net sales | 355.5 | 326.6 |
| Cost of goods sold | -260.0 | -241.2 |
| Gross profit | 95.5 | 85.4 |
| Other operating income | 6.2 | 17.9 |
| Selling and administrative expenses | -33.8 | -58.1 |
| Research and development expenses | -18.4 | -20.4 |
| Operating result | 49.5 | 24.8 |
| Result from participations in group companies | -65.1 | 5.9 |
| Net financial items | 12.7 | -0.5 |
| Result before tax | -2.9 | 30.2 |
| Tax on result for the period | 39.5 | - |
| Net result for the period | 36.6 | 30.2 |
| Amounts in SEK M | 31/12/2008 | 31/12/2007 |
|---|---|---|
| Intangible fixed assets | 0.9 | 2.2 |
| Tangible fixed assets | 2.1 | 3.8 |
| Financial assets | 379.4 | 354.3 |
| Total fixed assets | 382.4 | 360.3 |
| Inventories | 46.0 | 22.0 |
| Current receivables | 52.6 | 61.0 |
| Cash and cash equivalents | 61.8 | 91.3 |
| Total current assets | 160.4 | 174.3 |
| TOTAL ASSETS | 542.8 | 534.6 |
| Shareholders' equity | 434.6 | 397.2 |
| Total equity | 434.6 | 397.2 |
| Long-term liabilities | 46.6 | 72.9 |
| Current liabilities | 61.6 | 64.5 |
| Total liabilities | 108.2 | 137.4 |
| TOTAL EQUITY AND LIABILITIES | 542.8 | 534.6 |
| Pledged assets | 51.9 | 131.9 |
| Contingent liabilities | 0.2 | 0.2 |
A technology that can retain a pixel-based image without power. The crystals in the display exist in one of two stable orientations (black and "white") and power is only required to change the image. A major benefit of this technology is to allow pixel display with the same very low energy consumption as segment-based display.
In retail industry, stores that are specialized in self-service for goods in large quantities (bulk).
Pricer's range of bi-stable pixel based displays.
Also called e-paper, is a bi-stable display technology designed to mimic the appearance of ordinary ink on paper.
Electronic Shelf Labelling for price and product information at the store shelf.
A store where Pricer ESL system has been installed. Installations can be "new installations" (first time) or "replacement" or "migration" (ESL and software are upgraded).
The replacement of one ESL system (ESL and software) installation to the next generation using the same wireless communication platform.
A store that is designated to test the solution in order to make a decision for deployment.
Digital display technology that uses segments. Segment based technology allows to display only numeric and alphanumeric information. The Pricer Continuum ESLs are segment based displays.
Digital display technology that uses pixels, the smallest elements of an image. Pixel based technology allows to display all type of graphic information. The Pricer DotMatrix ESLs are pixel based displays.
Interface between data creators and users: the Pricer platform communicates with the labels, the wireless communication infrastructure, the store's back-office and different accessories in the store (scanners, printers, etc.).
Pricer provides the retail industry's leading electronic display and Electronic Shelf Label (ESL) platform, solutions, and services for intelligently communicating, managing, and optimizing product information on the shop floor. The platform is based on a two-way communication protocol to ensure a complete traceability and management of resources. The Pricer system significantly improves consumer benefit and store productivity.
Pricer, founded in 1991 in Uppsala, Sweden, offers the most complete and scalable ESL solution. Pricer has over 4,500 installations in over 30 countries with approximately 60 percent market share. Customers include many of the world's top retailers and some of the foremost retail chains in Europe, Japan and the USA. Pricer, in co-operation with qualified partners, offers a totally integrated solution together with supplementary products, applications and services.
Pricer AB (publ.) is quoted on the Nordic Small Cap list of OMX. For further information, please visit www.pricer.com
Pricer AB (publ.) Bergkällavägen 20-22 SE-192 79 Sollentuna Sweden
Website: www.pricer.com Telephone: +46 8 505 582 00 Corporate Identity number: 556427-7993
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