AI assistant
SAAB — Annual Report 2008
Feb 13, 2009
2958_10-k_2009-02-13_ac179d19-0a37-45fc-9315-3e4905e2e7ef.pdf
Annual Report
Open in viewerOpens in your device viewer
YEAR-END REPORT 2008
RESULTS AND SUMMARY Full Year
- • Order bookings increased during 2008 to MSEK 23,212 (20,846), order backlog amounted to MSEK 45,324 (47,316)
- • Sales increased 3 percent to MSEK 23,796 (23,021), adjusted for divestments and exchange rate effects sales increased 6 percent, above full-year guidance issued in September
- • Operating income adjusted for non-recurring items was MSEK 1,994 (2,154), corresponding to an operating margin of 8.4 percent (9.4) in line with September guidance
- • Non-recurring items in 2008 of total MSEK -1,828 (453) mainly related to delays in some orders and delivery schedules
- • Operating income of MSEK 166 (2,607), corresponding to an operating margin of 0.7 percent (11.3)
- • Net loss for 2008 of MSEK -242 (1,941) with earnings per share after dilution of SEK -2.31 (17.60)
- • Billion+ programme progressing in accordance with plan. In 2008 decision made to intensify programme targeting a total yearly cost reduction of SEK 1.5 billion by the end of 2010
- • Change in application of accounting principles for development costs to burden operating income in coming years, no change to cash flow
- • 2009 sales expected to be flat, profit margin reduced by about 4 percentage points due to conservative accounting for development
- • Proposed dividend of SEK 1.75 per share (4.50)
SAAB FOCUSES ON STRENGTHENING THE COMPANY FOR COMING YEARS
Statement by the CEO:
"Despite difficult circumstances Saab was able to deliver in line with our full-year guidance for 2008 issued in September after an underlying strong fourth quarter. Due to market effects from the declining world economy and delays in major projects, we have made non-recurring charges. We expect global conditions to remain uncertain. Going forward we take a more conservative approach in accounting for development costs in order to strengthen the company for coming years."
Saab's order bookings for the full-year 2008 increased by 11 percent to MSEK 23,212 (20,846). The order backlog amounted to MSEK 45,324 (47,316). Sales increased by 3 percent to MSEK 23,796 (23,021). Excluding Saab Space which was divested on September 1, 2008, and adjusted for exchange rate effects, sales increased by 6 percent, above Saab's guidance. Operating income for 2008 was MSEK 166 (2,607). Adjusted for non-cash, non-recurring items totally amounting to MSEK -1,828 (see below and table on page 4) operating income was MSEK 1,994 (2,154) corresponding to an operating margin of 8.4 percent (9.4), in line with Saab's guidance.
Non-cash charges due to an unstable environment
2008 saw dramatic changes in the macro economic environment, as well as uncertainties in Swedish government spending. We have made a non-cash, write-down of capitalized costs of MSEK 953 in the fourth quarter related to the civilian aircraft programmes mainly following announced delays in major projects. A provision to cover estimated losses related to the civilian aircraft programmes of MSEK 232 was also made. In the defence area a non-cash writedown of capitalized development costs related to the RBS 15 Mk3 Surface-to-Surface Missile system of MSEK 250 was made. A goodwill impairment charge of MSEK 103 related to Saab Grintek Technologies also became necessary due to the weak market situation.
Due to current delays in a helicopter project we have also determined that an amount of MSEK 350 should be recorded as a loss provision to cover estimated losses until a solution is found with the customer concerning the current project scope.
Billion+ Programme
The efficiency improvement programme, now called the Billion+ Programme, was launched by the end of 2007 to create greater financial strength to market and selffinance the development of new products and services. The goal at the start of the programme was to reduce costs by SEK 1 billion yearly by the end of 2010 compared with the start of 2008. We have intensified this work and initiated efficiency improvements that will lead to the reduction of 500 employees during a two-year period starting in 2009. This will be achieved primarily through attrition. We are thereby expanding the efficiency improvement programme with the objective to achieve total cost reductions of SEK 1.5 billion yearly by the end of 2010. During 2008, the programme progressed according to plan and positively affected the margins with approximately 1 percentage point.
Currently we are analyzing the structure and the resource situation in the company and future redundancies may not be avoided.
2008 in the rear-view mirror
We saw a positive start of 2008, with Thailand deciding to purchase six Gripen fighter aircraft and two Saab 340 aircraft, of which one will be equipped with Saab's radar surveillance system Erieye. Further, we launched the Gripen Demo, a platform for development of current and future generations of Gripen, within record time and made the first flight in May. This was followed by a proposal for Gripen NG handed in to Norway by the Swedish government. We also handed in a proposal to Switzerland for about 30 Gripen C/D and a response to a Request for Information from Brazil for 36 Gripen NG. In addition, information regarding 85 Gripen has been handed over to the Netherlands. In Brazil, Gripen was also selected as one of the candidates to provide a formal offer in response to a request for proposal (RFP).
Saab's civil security business had a strong development during 2008 with several important orders won, for example for nuclear power stations, prisons and probation services institutions. In South Africa we finalized negotiations with Imbani Amandaba (Pty) Ltd and Freetel to enter into BEE (Black Economic Empowerment) partnerships.
During the fourth quarter, the Norwegian government announced that they recommend selection of the competing American alternative. We must acknowledge their decision, however we do not agree with their evaluation. Saab is now focusing on the other potential customers for Gripen. The market remains strong and the goal to sell 200 aircraft on the export market remains.
The year ended with several important orders won, for example two separate contracts for anti tank weapons. Saab also signed a contract with Lockheed Martin Canada for being a partner in the design and development of a command and control system that will upgrade the Canadian Navy's Halifax frigates. Saab also won an important public-private cooperation order for overall responsibility for the Swedish armed forces jet trainer aircraft SK60.
Swedish government support essential
International sales during the 2008 continued to grow, yet still the Swedish market is of utmost importance for Saab. A reference customer is central when exporting complex systems like defence material and
strong government support is necessary for establishing long term agreements with other nations. A clear long term plan is vital for a domestic defence industry, based on the Swedish security policy decisions. Ensuring a sustainable capacity to supply the armed forces with advanced high-tech equipment requires a balance between development of new systems and purchasing of existing equipment. The Swedish defence budget and the way forward for it remains a challenge for Saab.
Code of conduct
The Director of Public Prosecutions for the Swedish Anti-corruption Unit is investigating alleged improprieties in connection with the lease of Gripen to the Czech Republic and Hungary and sales to South Africa. Corrupt behavior and bribes have never been, and will never be, permitted at Saab. No one at Saab has been accused of any irregularities in this matter. We are fully cooperating with the public prosecutor and providing all the information needed in the investigation.
Saab is constantly working to increase
knowledge and build support for Saab's common values throughout the company. During the year a revised and expanded Code of Conduct was launched. All employees at Saab were informed about the code and its contents and most part of the employees went through training in the code of conduct through various on-line or teacher led classes. Saab is committed to continuous improvements in this area and to constantly improve internal rules and directives to achieve the highest standards.
More conservative accounting for development costs
Going forward we expect to continue to self-finance some of our research and development costs. Defence related programmes generally have long lead times and require enduring technology investments from customers and companies. A more conservative approach is relevant as higher risks lead to higher uncertainties in the analysis of the recoverability of capitalized costs. We will start to capitalize development costs at a later stage in all projects. These and all development costs on the balance sheet will be amortized over not more than ten
years as of 2009. The change will reduce Saab's profitability over the coming five year period.
Our total level of investments in research and development is not expected to change as a consequence of this.
Outlook 2009
Saab's future development is dependent on the Swedish defence plans and will continue to be affected by the global economy. Saab is therefore facing uncertainties in the business environment.
We expect 2009 sales to be flat.
The profit margin will be reduced by about 4 percentage points due to our more conservative accounting for development costs.
Important events january– september 2008 Important events OCTOBER – december 2008
- • Saab signs a contract for supplying Ringhals nuclear power station with surveillance and protection that meet the requirements of the Swedish Nuclear Power Inspectorate.
- • Thailand orders an integrated air surveillance system and Saab secures a billion dollar contract from FMV, the Swedish Defense Materiel Administration, for the delivery of six Gripen aircraft and two Saab 340 aircraft, one to be equipped with radar surveillance system ERIEYE.
- • Saab signs a contract valued at MSEK 392 for supplying Oskarshamn nuclear power station with surveillance and protection that meet the requirements from the Swedish Nuclear Power Inspectorate.
- • Saab signs a contract for delivery of five GIRAFFE AMB to Lockheed Martin UK - INSYS, intended for the UK. The contract is valued at about MSEK 350.
- • Saab signs a contract valued at MSEK 282 for supplying surveillance systems for new maximum security units and remand centres.
- • Saab shows Gripen Demo, a development platform for current and future generations of Gripen, for the first time in a well attended roll out ceremony. Later this makes a successful first flight.
- Offerings were made regarding Saab's Gripen for Norway, India, the Netherlands and Switzerland.
- • Saab receives an order valued at approximately MSEK 185 for life time extension of the anti-tank system AT4 CS.
-
• Saab Space is divested to the Swiss aerospace and defense group RUAG. The purchase price for the shares amounts to MSEK 355.
-
• The Gripen NG (Next Generation) multi-role fighter was placed on the short list in October as an alternative to equip the Brazilian Air Force.
- • Saab won orders for delivering components to the multi purpose system Carl-Gustaf with a value of MSEK 296.
- • Saab received a logistic support order valued at MEUR 10.5 (approximately MSEK 99) for the French air force´s GIRAFFE AMB radars.
- • The Norwegian Defense Minister Anne-Grete Strøm-Erichsen announced that the Norwegian Government recommends to negotiate with a competing company to Saab. Shortly thereafter Saab released its view on the Norwegian fighter aircraft procurement process.
- • Saab received an order valued at approximately SEK 1.1 billion with Lockheed Martin Canada, for being a partner in the design and development of a command and control system to the Canadian Navy´s twelve Halifax Class frigates. Deliveries are planned for 2010-2017.
- • Saab received an order from the Finnish Defence Forces for an additional number of the new anti-tank weapon NLAW. The order value is approximately MSEK 200.
- • Saab received two orders from the Swedish Defence Material Administration, FMV, for continued development, support, and maintenance of the Swedish armed forces air defence system StriC and the simulator system Strics with a value of MSEK 117 .
- • Saab signed a long-term contract with the Swedish Defence Material Administration (FMV) regarding an overall support commitment for the SK 60 aircraft system. The value is approximately MSEK 900 and the contract runs through the middle of 2017.
GROUP
| MSEK | Jan–Dec 2008 |
Jan–Dec 2007 |
change, % |
Oct–Dec 2008 |
Oct–Dec 2007 |
change, % |
|---|---|---|---|---|---|---|
| Order bookings | 23,212 | 20,846 | 11 | 7,162 | 8,561 | -16 |
| Order backlog | 45,324 | 47,316 | -4 | -1,3283) | 5973) | |
| Sales | 23,796 | 23,021 | 3 | 8,188 | 7,358 | 11 |
| Gross income | 4,634 | 6,172 | -25 | 644 | 2,063 | -69 |
| Gross margin, % | 19.5 | 26.8 | 7.9 | 28.0 | ||
| Adjusted gross margin,1) % | 26.5 | 26.6 | 27.9 | 27.2 | ||
| Operating income before depreciation/amortization (EBITDA) | 1,515 | 3,685 | -59 | -130 | 1,654 | |
| Margin, % | 6.4 | 16.0 | -1.6 | 22.5 | ||
| Operating income (EBIT) | 166 | 2,607 | -94 | -809 | 1,245 | -165 |
| Operating margin, % | 0.7 | 11.3 | -9.9 | 16.9 | ||
| Adjusted operating margin,1, 2) % | 8.4 | 9.4 | 13.2 | 12.9 | ||
| Income before tax (EBT) | -406 | 2,449 | -1,030 | 1,180 | ||
| Net income/loss | -242 | 1,941 | -708 | 1,008 | ||
| Earnings per share after dilution | -2.31 | 17.60 | -6.78 | 9.24 | ||
| Operating cash flow | 659 | -1,603 | 1,038 | -1,253 | ||
| Net liquidity/debt (-) | -1,693 | -1,627 | 1,0353) | -1,2693) | ||
| Defence/Civil (% of revenues) | 83/17 | 81/19 | 84/16 | 82/18 | ||
| 1) Non-recurring items impacting gross income | ||||||
| Write-down of capitalized costs in civilian aircraft programmes | -1,187 | -953 | ||||
| Provision for civilian aircraft programmes | -232 | -232 | ||||
| Provision for helicopter project | -350 | -350 | ||||
| Gains on contractual settlements for regional aircraft | 196 | 60 | 60 | |||
| Goodwill impairment | -103 | -103 | ||||
| 2) Non-recurring items also impacting EBIT | ||||||
| Write-down of capitalized development costs System and Products | -250 | -108 | -250 | -108 | ||
| Capital gains | 98 | 501 | 347 | |||
| TOTAL NON-RECURRING ITEMS | -1,828 | 453 | -1,888 | 299 | ||
| 3) Refers to quarterly change |
Saab's business units are divided into the three business segments Defence and Security Solutions, Systems and Products, and Aeronautics for control and reporting purposes. In addition, Corporate comprises Group staff and departments and peripheral operations. It also includes the leasing fleet of Saab 340 and Saab 2000 aircraft.
SALES, INCOME AND ORDERS
Fourth quarter 2008
Order bookings for the fourth quarter amounted to MSEK 7,162 (8,561). Major orders include an order where Saab in partnership with Lockheed Martin Canada delivers command and control system to the Canadian Navy´s twelve Halifax Class frigates, orders for services and additional capabilities based on the GIRAFFE AMB radar system, an order from the Finnish Defence Forces for an additional number of the new anti-tank weapon NLAW, two orders from the Swedish Defence Material Administration, FMV, for continued development, support and maintenance of the Swedish armed forces air defence system StriC and an order from Hindustan Aeronautics Limited (HAL), India. In addition Saab signed a long-term contract with the Swedish Defence Material Administration (FMV) regarding an overall support commitment for the SK 60 aircraft system.
Sales in the fourth quarter amounted to MSEK 8,188 (7,358), an increase by 11 percent. Adjusted for the divestment of Saab Space sales increased with 15 percent.
Sales continued to be affected by the unfavourable exchange rate effects as a result of a lower ZAR and SEK vs. USD and the EUR with 1 percentage point in the quarter.
Gross income decreased to MSEK 644 (2,063), corresponding to a margin of 7.9 percent (28.0). A write-down of capitalized costs of MSEK 953 related to the civilian aircraft programmes was made mainly as a result of announced delays in major projects. A provision to cover estimated losses related to these programmes of MSEK 232 was also made. In the defence area a
provision to cover estimated losses for a helicopter project of MSEK 350 was made. A goodwill impairment charge of MSEK 103 related to Saab Grintek Technologies, became necessary due to the weak market situation.
During the fourth quarter, the Billion+ Programme positively affected the margin by approximately 1 percentage point.
Operating income before depreciation and amortization (EBITDA) was MSEK -130 (1,654), corresponding to a margin of -1.6 percent (22.5).
Operating income amounted to MSEK -809 (1,245), corresponding to a margin of -9.9 percent (16.9). Operating income was impacted by a write-down of capitalized development costs for the RBS 15 Mk3 Surface-to-Surface Missile of MSEK 250. Adjusted operating margin was 13.2 percent (12.9).
Quarterly information is shown on page 22.
January–December 2008 Orders
Order bookings for the full year 2008 totaled MSEK 23,212 (20,846) of which 76 percent (72) was attributable to defence-related operations. Larger orders with a value of more than MSEK 100 each and those with a smaller value represented 52 percent and 48 percent respectively.
The order backlog at the end of 2008 was MSEK 45,324 (47,316).
order backlog duration:
2009: SEK 18.4 billion
2010: SEK 11.2 billion
2011: SEK 5.8 billion
2012: SEK 3.5 billion
After 2012: SEK 6.4 billion
The order backlog primarily includes:
- • Gripen to Sweden and on export
- • Airborne early warning systems
- • Active and passive countermeasure systems
- • Missile systems for air, sea and land
- • Structures and subsystems for the aircraft producers Airbus and Boeing
- • Anti-tank systems
- • Command and control, avionics and fire control systems
- • Radar systems
- • Civil security solutions
Sales
Sales during full year 2008 amounted to MSEK 23,796 (23,021), an increase with 3 percent. Excluding Saab Space which was divested on September 1, 2008, and adjusted for exchange rate effects, sales increased by 6 percent. Sales year-to-date was negatively affected by exchange rate fluctuations of about 1 percentage point. The effects relate to the translation of foreign subsidiaries from local currency to Swedish krona, largely attributable to South Africa and the U.S..
Of sales, 83 percent (81) related to the defence market. Sales in the international market amounted to MSEK 16,247 (15,015), or 68 percent (65) of total sales. Total sales in the EU, excluding Sweden, were MSEK 6,000 (6,527), Americas MSEK 1,527 (1,619) and rest of the world MSEK 8,720 (6,869).
Total sales in the market area Air were MSEK 9,183, Land MSEK 5,680, Naval MSEK 2,127, Joint Operations MSEK 2,582, Civil Security MSEK 1,510, Commercial Aeronautics MSEK 1,165 and others MSEK 1,549.
Income, margin and profitability
Gross income amounted to MSEK 4,634 (6,172), corresponding to a gross margin of 19.5 percent (26.8). Adjusted gross margin, excluding non-recurring items of MSEK -1,676 (60), was 26.5 percent (26.6). The
gross margin increased for Systems and Products, while Defence and Security Solutions' and Aeronautics' gross margins were lower than previous year. Gross income was affected by write-downs of a total of MSEK 1,187 within Aeronautics related to civilian aircraft programmes and a provision made for these programmes of MSEK 232. A provision was also made for a helicopter project of MSEK 350. A goodwill impairment charge of MSEK 103 related to Saab Grintek Technologies became necessary due to the weak market situation. These items were partly compensated for by gains on contractual settlements of MSEK 196 (60) for regional aircraft.
The Billion+ Programme positively affected the gross margin by approximately 1 percentage point. The largest part of the cost cuttings has been achieved in Systems and Products.
Other operating income, MSEK 291 (785), includes currency gains and results from secondary activities. The divestment of Saab Space on September 1, 2008 generated a capital gain of MSEK 98. The previous year was affected by gains of MSEK 501 on business and property divestments.
Marketing expenses amounted to MSEK 1,805 (1,725). The increase is essentially attributable to tenders for Gripen to a number of countries.
Administrative expenses amounted to MSEK 1,404 (1,375).
Internally funded investments in research and development during 2008 amounted to MSEK 1,439 (1,396), of which a total of MSEK 635 (658) has been capitalized. As of 2009 a smaller portion will be capitalized due to the change in application of accounting principles for development costs (see page 3). Our total level of investments in research and development is not expected to change as a consequence of this.
Other operating expenses MSEK 68 (49), consist of exchange rate differences, among other things.
The share of income in associated companies, MSEK 50 (52), primarily relates to net income in Taurus GmbH and Grintek Ewation.
Operating income before depreciation and amortization (EBITDA) amounted to MSEK 1,515 (3,685). The EBITDA margin was 6.4 percent (16.0).
Operating income (EBIT) amounted to MSEK 166 (2,607). The operating margin was 0.7 percent (11.3). Operating income was impacted by a write-down of capitalized development costs for the RBS 15 Mk3 Surface-to-Surface Missile of MSEK 250 and a capital gain from the divestment of Saab Space of MSEK 98. The adjusted operating margin, excluding non-recurring items, was 8.4 percent (9.4).
Net financial income and expenses amounted to MSEK -572 (-158), of which the share in income of associated companies held as financial assets amounted to MSEK -36 (-40) primarily relating to EURENCO and Wah Nobel. Project interest from unutilized advance payments has reduced the financial income by MSEK 151 (142) and reduced the cost of goods sold correspondingly. Currency losses related to the tender portfolio of MSEK 227 (gains of 2) further reduced the financial net. Other net interest amounted to MSEK -158 (22), which was due mainly to the fact that the Group reported a net debt this year, compared to average net liquidity last year.
Income before taxes amounted to MSEK -406 (2,449).
Current and deferred taxes during the year amounted to MSEK 164 (-508), or an effective tax rate of 40 percent (21). The difference between reported tax rate, 40 percent, and the ordinary level for the tax rate, about 28 percent, is related to changes on tax rate on Swedish deferred tax and tax-exempt income.
Net result for 2008 was MSEK -242 (1,941), of which the minority interest amounted to MSEK 6 (20).
Diluted earnings per share for the interest of the Parent Company's shareholders amounted to SEK -2.31 (17.60).
The pre-tax return on capital employed was 1.4 percent (19.4) and the after-tax return on equity -2.4 percent (18.5).
ACQUISITIONS AND DIVESTMENTS
On September 1, Saab Space including the Austrian subsidiary Austrian Aerospace, was divested to the Swiss aerospace and defence group RUAG. In addition to the fixed price, MSEK 335, Saab is entitled to additional consideration related to the long-term performance of Saab Space. The transaction generated a capital gain of
MSEK 98.
In July, Imbani Amandaba (Pty) Ltd acquired 25 percent plus one share of Saab Grintek Defence (Pty) Ltd. The sale to Imbani Amandaba, a so-called Black Economic Empowerment consortium, demonstrates Saab's willingness to develop operations in South Africa and meet the requirements of the country's Black Economic Empowerment policy. The purchase price of the shares was MZAR 95 (approximately MSEK 78) and the transaction generated no capital gain.
No other significant acquisitions or divestments were made during the year.
FINANCIAL POSITION AND LIQUIDITY
Balance sheet
Intangible fixed assets amounted to MSEK 7,690 (7,940), of which goodwill amounts to MSEK 3,438 (3,404) and is largely attributable to the acquisitions of Celsius in 2000 and Saab Microwave Systems in 2006. Remaining goodwill primarily relates to the acquisitions of Grintek, Saab Avitronics and Combitech.
Other intangible fixed assets amounted to MSEK 4,252 (4,536), of which capitalized development expenses amounted to MSEK 3,628 (3,732). Other intangible fixed assets consist of acquired product development/ technology and customer relations primarily for radar and sensors as well as capitalized development expenses for the export version of Gripen, radar jamming systems and missile systems.
Intangible assets were impacted by the impairment charges of MSEK 103 in Defence and Security Solutions and of MSEK 250 in Systems and Products (108).
Due to increased self-financing of development costs going forward, we will start to capitalize development costs at a later stage in all projects. In addition, all development costs on the balance sheet will be amortized over a maximum five to ten year period as of 2009. This will lead to a reduced level of capitalized product development on our balance sheet compared to today.
Amortization and impairment of intangible fixed assets amounted to MSEK 1,016 (674) in 2008, of which amortization and impairment of capitalized product development amounted to MSEK 728 (515).
Tangible fixed assets amount to MSEK 3,407 (3,619) and refer to property, plant and equipment used in core operations. The decrease is mainly attributable to reclassification to investment properties.
Investment properties refer to properties leased to outside parties and valued at estimated fair value. Lease assets amount to MSEK 1,835 (1,822) and primarily relate to the leasing fleet of regional aircraft. Depreciation in 2008 on tangible fixed assets amounted to MSEK 333 (404), while depreciation on the leasing fleet amounted to MSEK 165 (180).
Shares in associated companies include the shares in Hawker Pacific, Grintek Ewation and Denel Saab Aerostructures.
Inventories are recognized after deducting utilized advances. Other receivables primarily relate to receivables from customers (after deducting utilized advances).
Shareholders' equity attributable to the Parent Company's shareholders amounted to MSEK 9,240 (10,981), or SEK 86.49 per share (101.53). The equity/assets ratio was 28.4 percent (32.6).
Provisions for pensions amounted to MSEK 4 (101). During 2008, the Saab Pension Fund was capitalized with a total of MSEK 362 . The purpose of the fund is to secure defined-benefit pension plans. The market value of the Saab Pension Fund was MSEK 3,083 at year-end, compared with an obligation of MSEK 4,454 according to IAS 19. The solvency margin was 69 percent. In a comparison with the obligation according to the FPG/PRI system, the solvency margin was 84 percent.
Deferred tax refers to temporary differences between the carrying value of assets and liabilities and their value for tax purposes and tax loss carry forwards. Other provisions mainly relate to obligations and anticipated deficits attributable to regional aircraft.
Liquidity and finance
The Group's net debt refers to interest-bearing liabilities and provisions for pensions less cash, short-term investments and interest-bearing receivables. Net debt has increased by MSEK 66 since the beginning of the year and amounted to MSEK 1,693 at the end of 2008.
Cash flow
Operating cash flow amounted to MSEK 659 (-1,603) in 2008 and was distributed between cash flow from core operating activities of MSEK -132 (-2,350), acquisitions of MSEK 0 (-515), divestments of subsidiaries and associated companies of MSEK 443 (970) and the regional aircraft business, MSEK 348 (292).
CAPITAL EXPENDITURES AND PERSONNEL
Capital expenditures
Gross capital expenditures in property, plant and equipment, excluding lease assets, amounted to MSEK 386 (395). Investments in intangible assets amounted to MSEK 636 (666) and related primarily to capitalized product development.
Personnel
At the end of 2008, the Group had 13,294 employees compared with 13,757 at the beginning of the year. Of the change, some 500 employees are a direct effect of the divestment of Saab Space.
As part of the Billion+ Programme savings of MSEK 500 will be achieved over the coming two years as a result of a reduction in number of employees, primarily through attrition.
Research and development
To maintain a leading position in its business, Saab devotes considerable resources to research and development, where some 2,500 people are employed. Investments in research and development are primarily made for customers in the business segments Systems and Products and Aeronautics. Total research and development costs for the year amounted to MSEK 4,141 (4,523), of which MSEK 2,702 (3,127) related to customer funded development.
RISKS AND UNCERTAINTIES
Saab's operations primarily involve the development, production and supply of technologically advanced hardware and software to customers around the world. The international part of the business is growing. Projects generally entail significant investments, long periods of time and technological development or refinement of the product. In addition to customer and supplier relations, international operations
involve joint ventures and collaborations with other industries as well as the establishment of operations abroad.
Operations entail significant risk-taking in various respects. The key risk areas are political, operating and financial risks.Various policies and instructions govern the management of significant risks.
Saab conducts significant development projects and manages the associated risks. Saab applies the percentage-of-completion method to recognize revenue from longterm customer projects. An estimation of total costs is critical to this method, and the outcome of technical and commercial risks may affect income.
The general description of the risk areas for 2008 can be found on pages 43–45 of the annual report for 2007.
SHARE REPURCHASE
The number of repurchased treasury shares as of December 31, 2008, was 2,320,451. At year-end 2007 we held 1,000,000 shares as treasury shares. In June 2008, the Board of Directors authorized the repurchase of 1,340,000 shares to hedge the year's share matching plan and performance share plan. The repurchases began on July 21, 2008 and were completed in the third quarter. The cost for the repurchased shares was MSEK 209.
EVENTS AFTER THE BALANCE SHEET DATE
No significant events have occurred since the balance sheet date that affect the Group's results of operations or financial position.
Defence and Security Solutions
| MSEK | Jan–Dec 2008 |
Jan–Dec 2007 |
change, % |
Oct–Dec 2008 |
Oct–Dec 2007 |
change, % |
|---|---|---|---|---|---|---|
| Order bookings | 9,997 | 7,259 | 38 | 4,410 | 2,612 | 69 |
| Order backlog | 10,918 | 10,764 | 1,140 3) | -1,061 3) | ||
| Sales | 9,443 | 9,300 | 2 | 3,078 | 2,914 | 6 |
| Operating income before depreciation/amortization (EBITDA) | 1,019 | 1,104 | -8 | 400 | 396 | 1 |
| Margin, % | 10.8 | 11.9 | 13.0 | 13.6 | ||
| Operating income (EBIT) | 732 | 934 | -22 | 240 | 353 | -32 |
| Operating margin, % | 7.8 | 10.0 | 7.8 | 12.1 | ||
| Adjusted operating margin,1) % | 8.8 | 9.5 | 11.1 | 11.9 | ||
| Operating cash flow | -322 | 380 | - | -201 | -307 | 35 |
| Defence/Civil (% of revenues) | 70/30 | 67/33 | 68/32 | 67/33 | ||
| No. of employees2) | 4,666 | 5,031 | -7 | |||
| 1) Non-recurring items: | ||||||
| Goodwill impairment | -103 | -103 | ||||
| Capital gains | 53 | 6 | ||||
| Total non -recurring items |
-103 | 53 | -103 | 6 | ||
| 2) Amount of employees and not FTE:s | ||||||
| 3) Refers to quarterly change |
The Defence and Security Solutions business segment brings together Saab's capabilities in the development and integration of high-technology systems for reconnaissance, surveillance, command and control, and communication. In the international market, tactical command and combat systems for land, sea and airborne forces are among the areas where Saab has an especially strong position.
The segment also offers a wide range of lifecycle support solutions. Consulting services in systems development, systems integration, and information and system security for customers mainly in the defence and telecommunication industries as well as government agencies with responsibility for infrastructure are part of the portfolio as well.
Growth in the civil security market continues, creating new opportunities for Saab in the area of crisis management systems and protection of infrastructure.
On July 1, 2008, a new business unit, Saab Security, was formed to consolidate the Group's resources in security in a new unit.
SALES, INCOME AND ORDERS
Fourth quarter 2008
Order bookings for the fourth quarter amounted to MSEK 4,410 (2,612). Large important orders received were a contract worth approximately SEK 1.1 billion with Lockheed Martin Canada, for being a partner in the design and development of a command and control system to the Canadian Navy´s twelve Halifax Class frigates and a long-term contract with the Swedish Defence Material Administration (FMV) worth approximately MSEK 900 regarding an overall support commitment for the SK 60 aircraft system.
Sales increased with 6 percent to MSEK 3,078 (2,914). Sales were positively impacted by the strong inflow of smaller orders and high production rates. Saab Grintek Technologies in South Africa still experienced a weak sales development compared to previous year due to the general weaker market situation in South Africa.
The business segment was negatively affected by approximately MSEK 55 by exchange rate fluctuations on the translation of Saab Grintek Technologies revenue in South African ZAR, corresponding to almost 2 percent of sales.
Operating income amounted to MSEK 240 (353) and the operating margin was 7.8 percent (12.1). The weaker profitability was mainly attributable to the development of Saab Grintek Technologies in South Africa.
January–December 2008 Orders
Order bookings for Defence and Security Solutions amounted to MSEK 9,997 (7,259). Larger orders with a value of more than MSEK 100 each and those with a smaller value represented 32 percent and 68 percent respectively.
Civil Security has increased order bookings significantly in 2008 through orders from nuclear power plants and the Swedish Prison and Probation Service. In addition, the strong order intake in the fourth quarter contributed to the development. Last year included a reduction of SEK 1.35 billion of the order received from Pakistan for airborne surveillance systems.
Sales
Sales for Defence and Security Solutions amounted to MSEK 9,443 (9,300), an increase of 2 percent. Sales were negatively affected by the weak development of Saab Grintek Technologies in South Africa by 2 percent. The business segment further was negatively affected by exchange rate fluctuations on the translation of revenue in South African ZAR, corresponding to 2 percent of sales.
The international market accounted for 54 percent (55) of sales. The split between sales to Defence and Civil market was 70/30 (67/33).
Major orders in the Civil Security area in 2008 contributed both to a large part of business being in Sweden and also an increasing part of the business in the Civil market.
Income and margin
Operating income for Defence and Security Solutions amounted to MSEK 732 (934) with a margin of 7.8 percent (10.0). The result for 2007 includes a capital gain of MSEK 53.
The weaker profitability in the year was mainly attributable to the weak development of Saab Grintek Technologies in South Africa due to the lack of so-called Black Economic Empowerment (BEE) partners during the first half of 2008 and the weaker market situation in South Africa.
Operating cash flow
Operating cash flow amounted to MSEK -322 (380). The deviation from last year is mainly attributable to an increase in capital tied up in airborne surveillance systems.
Employees
The number of employees was 4,666, compared to 5,031 last year. The decrease was mainly caused by changes internally within the Group.
Systems and Products
| MSEK | Jan–Dec 2008 |
Jan–Dec 2007 |
change, % |
Oct–Dec 2008 |
Oct–Dec 2007 |
change, % |
|---|---|---|---|---|---|---|
| Order bookings | 9,345 | 8,470 | 10 | 3,005 | 3,038 | -1 |
| Order backlog | 17,390 | 17,830 | -182 3) | 288 3) | ||
| Sales | 9,095 | 9,091 | - | 3,352 | 2,950 | 14 |
| Operating income before depreciation/amortization (EBITDA) | 1,518 | 1,367 | 11 | 750 | 516 | 47 |
| Margin, % | 16.7 | 15.0 | 22.4 | 17.5 | ||
| Operating income (EBIT) | 756 | 756 | - | 328 | 253 | 30 |
| Operating margin, % | 8.3 | 8.3 | 9.8 | 8.6 | ||
| Adjusted operating margin,1) % | 11.1 | 9.0 | 17.2 | 12.3 | ||
| Operating cash flow | 1,484 | -1,287 | - | 1,154 | -372 | - |
| Defence/Civil (% of revenues) | 91/9 | 89/11 | 95/5 | 90/10 | ||
| No. of employees2) | 4,869 | 5,213 | -7 | |||
| 1) Non-recurring items: | ||||||
| Write-down of capitalized development costs | -250 | -108 | -250 | -108 | ||
| Capital gains | 45 | -2 | ||||
| total non -recurring items |
-250 | -63 | -250 | -110 | ||
| 2) Amount of employees and not FTE:s | ||||||
| 3) Refers to quarterly change |
Customers in the Systems and Products business segment mainly consist of defence authorities and other defence contractors around the world. Saab has a broad-based portfolio of products and systems that in many cases are world leaders.
In avionics (aeronautical electronics), Saab is a leading supplier to both military and civil aviation manufacturers. In weapon systems, Saab's portfolio ranges from manportable weapons such as the Carl-Gustaf anti-armour weapon and its successors AT4 and NLAW to the missile systems RBS 15, RBS 70 and BAMSE as well as torpedo systems.
Electronic warfare – warning, jamming and protection against detection and weapons – is another area where Saab has developed worldleading products for a large number of combat vehicles, fighters, transportation and civil aircraft, helicopters, submarines and surface vessels around the world. The radar and sensor operations contribute
vital components to Saab's major systems solutions such as the BAMSE missile platform, the Gripen combat fighter and Saab's airborne surveillance system. But they also include products that command a leading position in the global market. The weapon detecting radar ARTHUR and the search radar GIRAFFE are two examples.
Signature management, camouflage which prevents detection by even the most advanced technical equipment, is another area where Saab has a worldleading position. Saab also has a strong position in advanced training systems for land-based forces and also now lists special police units among its customers.
Underwater technology for shallow water and harbours is another area where Saab has leading expertise. Significant potential exists in autonomous, unmanned underwater vehicles for both military and commercial applications.
SALES, INCOME AND ORDERS
Fourth quarter 2008
Order bookings for the fourth quarter amounted to MSEK 3,005 (3,038) and include orders for Carl-Gustaf, logistics support for GIRAFFE AMB and ARTHUR radars, NLAW from Finland, electronic warfare systems for Indian helicopters, a contract for lifetime extensions of the BILL anti-tank missile system and signature management systems.
Sales amounted to MSEK 3,352 (2,950). Excluding Saab Space, which was divested on September 1, sales in 2007 amounted to MSEK 2,738. Sales growth adjusted for this divestment was 22 percent.
The increase in sales was due to improvement in all areas.
Operating income amounted to MSEK 328 (253), including a write-down of capitalized development costs of MSEK -250 for RBS 15 Mk3 Surface-to-Surface Missile.
Adjusted operating income, excluding non-recurring items, increased to MSEK 578 (363) with a corresponding operating margin of 17.2 percent (12.3). All areas saw an improved profitability resulting from increased sales, a favourable product mix and the Billion+ programme.
January–December 2008 Orders
Order bookings for Systems and Products increased to MSEK 9,345 (8,470). Major orders received during 2008 include Carl-Gustaf, the GIRAFFE and ARTHUR radar systems, avionics and electronic warfare systems, RBS 70, NLAW and Remotely Operating Vehicles (ROVs) to customers in the offshore oil and gas market.
Larger orders with a value of more than MSEK 100 each and those with a smaller value accounted for 37 and 63 percent respectively.
Sales
Sales for Systems and Products was in line with 2007 with MSEK 9,095 (9,091). Excluding Saab Space, which was divested on September 1, sales increased 3 percent to MSEK 8,653 (8,367).
International sales accounted for 72 percent (71). The split between sales to Defence and Civil market was 91/9 (89/11).
Sales improved in all areas except for signature management systems due to lower turnover in the U.S..
Sales were negatively affected by approximately MSEK 100 by the effects of exchange rate fluctuations on the translation of foreign subsidiaries, corresponding to 1 percent of sales.
Income and margin
Operating income amounted to MSEK 756 (756), including a write-down of capitalized development costs of MSEK -250 for RBS 15 Mk3 Surface-to-Surface Missile.
Last year's result contained a gain on property sale of MSEK 45 and a write-down of capitalized product development of MSEK -108 related to radar jamming systems. Adjusted operating income for Systems and Products, excluding non-recurring items, amounted to MSEK 1,006 (819), with an operating margin of 11.1 percent (9.0). The result improved in all areas, except for signature management systems, but especially in Saab Microwave Systems. The improvement came from from higher sales, a favourable product mix, larger projects running well and the effects from the Billion+ programme.
Operating cash flow
Operating cash flow amounted to MSEK 1,484 (-1,287). The low level of operating cash flow in 2007 was mainly due to major project delays and increased capital tied up in the organisation.
Employees
The number of employees was reduced to 4,869 (5,213) as a result of the divestment of Saab Space.
Aeronautics
| MSEK | Jan–Dec 2008 |
Jan–Dec 2007 |
change, % |
Oct–Dec 2008 |
Oct–Dec 2007 |
change, % |
|---|---|---|---|---|---|---|
| Order bookings | 6,153 | 7,516 | -18 | 533 | 3,883 | -86 |
| Order backlog | 19,626 | 21,158 | -2,107 3) | 1,584 3) | ||
| Sales | 7,269 | 6,510 | 12 | 2,356 | 2,227 | 6 |
| Operating income before depreciation/amortization (EBITDA) | -1,313 | 617 | - | -1,358 | 266 | - |
| Margin, % | -18.1 | 9.5 | -57.6 | 11.9 | ||
| Operating income/loss (EBIT) | -1,508 | 454 | - | -1,416 | 198 | - |
| Operating margin, % | -20.7 | 7.0 | -60.1 | 8.9 | ||
| Adjusted operating margin,1) % | 3.6 | 7.0 | 5.1 | 8.9 | ||
| Operating cash flow | -1,007 | -773 | -30 | 61 | -641 | - |
| Defence/Civil (% of revenues) | 93/7 | 94/6 | 92/8 | 93/7 | ||
| No. of employees2) | 3,100 | 2,911 | 6 | |||
| 1) Non-recurring items: | ||||||
| Write-down of capitalized costs in civil aircraft programmes | -1,187 | -953 | ||||
| Provision for civil aircraft programmes | -232 | -232 | ||||
| Provision for helicopter project | -350 | -350 | ||||
| total non -recurring items |
-1,769 | -1,535 | ||||
| 2) Amount of employees and not FTE:s | ||||||
| 3) Refers to quarterly change |
Saab's aeronautics operations are dominated by the Gripen programme. Gripen, one of the world's most modern fighter aircraft in operational service is currently used in Sweden and NATO members Czech Republic and Hungary. During 2008 five Gripen were delivered to South Africa out of a total of 26. Thailand placed an order for six Gripen fighters in 2008 that will be delivered in 2011 and the British Empire Test Pilot School, ETPS continues to train pilots for next generation fighters with a Gripen aircraft. During 2008 Saab commenced test flights within the Gripen demonstrator programme.
The objective is to develop future generations of Gripen aircraft as well as develop and enhance the existing Gripen versions. The export potential is high and Saab is working actively in a number of markets to win new contracts. The Gripen programme includes significant sales of modifications, training and maintenance.
Saab is also a leader in the development of unmanned aerial vehicles, UAVs. In-house products are blended with participation in international development programmes. Saab has prime responsibility for key subsystems in the Neuron programme, a European project to develop an unmanned combat air vehicle and next-generation fighter aircraft.
In its role as a subsystem supplier, Saab develops complex structural units and subsystems for commercial and military aircraft manufacturers.
SALES, INCOME AND ORDERS
Fourth quarter 2008
Order bookings for Aeronautics decreased to MSEK 533 (3,883). The decrease was mainly attributable to a strong order intake in the fourth quarter 2007 when an order for upgrade of 31 Swedish Gripen aircraft to the latest standard was received from the Swedish Defence Material Administration,
worth SEK 3.1 billion and low activity within the civil aircraft industry.
Sales amounted to MSEK 2,356 (2,227). During the quarter the final delivery of Gripen Batch 3 to the Swedish airforce was done.
Operating income decreased to MSEK -1,416 (198) corresponding to a margin of -60.1 percent (8.9). Adjusted operating margin, excluding non-recurring items was 5.1 percent (8.9). Overall the segment continued to be affected by the weak market situation in the civil aircraft industry. A write-down of capitalized costs of MSEK 953 related to the civilian aircraft programmes was made, mainly as a result of delays in major projects. A provision to cover estimated losses related to these programmes of MSEK 232 was also made. In addition a provision of MSEK 350 was made to cover estimated losses for a helicopter project. This is related to a contract Saab signed with NH Industries (NHI) in
- The delivery primarily applies to a so-called Tactical Mission System (TMS) – a command and control system that makes up a part of the helicopter's electronics and software. Until a solution is found with the customer concerning the current project scope, we have determined that a loss provision should be recorded to cover estimated losses.
January–December 2008 Orders
Order bookings for Aeronautics amounted to MSEK 6,153 (7,516). Among major orders was an export contract from Thailand worth slightly more than SEK 2 billion for six Gripen fighters of the C/D version, two Saab 340 aircraft, and related equipment and services. Index changes also contributed positively to order bookings. Larger orders with a value of more than MSEK 100 each and those with a smaller value accounted for 90 and 10 percent respectively.
Sales
Aeronautics' sales increased to MSEK 7,269 (6,510). The increase was significant within all areas of the business segment. The change of revenue recognition method applied to the South African Gripen contract contributed strongly to the increase, whereas the delivery of Gripen in Sweden contributed with a negative amount due to the final price calculation.
International sales accounted for 64 percent (53). The split between sales to Defence and Civil market was 93/7 (94/6).
Income and margin
Operating income for Aeronautics decreased to MSEK -1,508 (454). The operating margin of -20.7 percent (7.0) remains under pressure from low capacity utilization as well as write-downs and a provision made for the civilian aircraft programmes in 2008 of MSEK 1,187 and MSEK 232 respectively. In addition a provision to cover estimated losses for a helicopter project of MSEK 350 was made. Adjusted operating margin, excluding non-recurring items, was 3.6 percent (7.0).
Operating cash flow
Operating cash flow amounted to MSEK -1,007 (-773). Cash flow has mainly been affected by lower customer advances within Aerosystems and low capacity utilization
in civil programmes, where modifications have been made to production plans.
Employees
The number of employees 3,100 compared to 2,911 last year. The increase was mainly caused by internal changes within the Group.
Gripen on the world market
At present Gripen has six customers. In addition to Sweden, the NATO member countries of Hungary and the Czech Republic both operate the aircraft, and the UK ETPS (Empire Test Pilots School) uses Gripen as its training platform. In February Thailand placed an order for Gripen that will be delivered in 2011. Deliveries to South Africa have been underway since April 2008. During 2008 five aircraft was delivered to South Africa.
Current ongoing deliveries of Gripen:
- • Sweden upgrade of 31 AB versions to CD versions between 2007 and 2014 (est.)
- • Thailand an order for 6 Gripen CD, to be delivered in 2011
- • South Africa an order for 26 Gripen CD, deliveries ongoing until 2012
During the third quarter 2008 a response to the Request for Proposal (RFP) issued on January 7, 2008 by Armasuisse, was submitted to Switzerland offering about 30 Gripen CD. Switzerland has a need to replace its fighter aircraft F-5E/F Tiger and Saab is one of three potential suppliers. In addition, responses to Requests for Information were submitted to the Netherlands for the F16 replacement issued by the Dutch Ministry of Defence, offering 85 Gripen NG (Next Generation) to the Royal Netherlands Air Force. Saab also responded to Request for Information to Brazil for 36 Gripen NG during the third quarter. On October 2, 2008, Brazil announced that Saab had been selected as one of three possible suppliers of fighter aircraft for the Brazilian Air Force. On November 20, the Norwegian government announced that they recommends to negotiate with a to Saab competing company. Saab is now unwinding activities linked to the previous Gripen sales campaign in Norway.
On December 19, 2008, the Dutch Defence Ministry said that a competitor to Saab had been evaluated as the best candidate to replace the country's ageing F-16 fighters. The Dutch cabinet will, however, first take a final decision on a replacement in 2010.
At present, there are binding tenders for Denmark, India, Romania and Switzerland. In addition, Saab has responded or is preparing responses to requests in various stages from Brazil, Bulgaria, Croatia and the Netherlands. Saab is also marketing Gripen in several other countries.
Saab's business objective to sell at least 200 Gripen aircraft on the world market remains.
Countries and requested number of aircraft:
- • Denmark 48 aircraft
- • India 126 aircraft
- • Romania 48 aircraft
- • Switzerland appr. 30 aircraft
- • Bulgaria 16 aircraft
- • Croatia 12 aircraft
- • Brazil 36 aircraft
- • The Netherlands 85 aircraft
CORPORATE
Corporate reported operating income of MSEK 186 (463). During 2008, gains from completion of contracts of MSEK 196 (60) were reported with respect to regional aircraft. A capital gain of MSEK 98 from the divestiture of Saab Space was reported. Previous year was positively affected by a gain of MSEK 264 on the sales of subsidiaries and other non-recurring items MSEK 139.
THE BILLION+ PROGRAMme
Saab's market situation is changing rapidly. We will have to self-finance a larger share of new product and service development than before and increase international marketing. To afford these investments and at the same time reach and maintain a level of profitability that meets the company's long-term objective, an efficiency improvement programme was launched at the start of the year.
The original programme had a target to reduce costs by MSEK 250 in 2008, another MSEK 350 in 2009 and MSEK 400 in 2010. In other words, by the end of 2010 costs will be SEK 1 billion lower than at the start of 2008. Around 70 percent of the savings will be generated by reducing the cost of goods sold (development, project implementation, purchasing and production) and will therefore positively affect the gross margin. The rest will be generated through lower operating expenses, mainly in administration.
The programme is progressing in a stable fashion and the results during 2008 are slightly better than targeted and positively affected the gross margin with approximately 1 percentage point. About 60 percent of these have impacted gross income positively. The costs associated with the programme are slightly lower than planned. Efficiency improvements were mainly achieved in production, administration and purchasing. Some minor layoffs were announced during 2008 as a direct result of the programme.
Given the uncertainty in the market a decision has been taken to expand this programme. Therefore actions have been initiated that will lead to an employee reduction of 500 during a two-year period starting 2009. The reduction will mainly come from attrition. This effort has the goal to lead to a total yearly cost reduction within the efficiency programme of SEK 1.5 billion at the end of 2010. We therefore now change the name of the programme to Billion+ Programme.
PARENT COMPANY
Sales and income
The Parent Company includes the business units Saab Aerosystems, Saab Aerostructures and the Swedish units within Saab Systems, Saab Avitronics, Saab Aerotech and Saab Microwave Systems. Saab Communication was included until July 1, when this unit was dissolved and the majority of its activities incorporated in the new business unit Saab Security. Group staffs and Group support are included as well. The Parent Company's sales amounted to MSEK 15,496 (14,779). Operating income was MSEK -1,293 (864) impacted by a write-down and a provision made for the civilian aircraft programmes in 2008 of MSEK 1,187 and MSEK 232 respectively. In addition a provision to cover estimated losses for a helicopter project of MSEK 350 was made. These items were partly compensated for by gains on contractual settlements of MSEK 196 (60) for regional aircraft.
Net financial income and expenses amounted to MSEK 255 (1,116). After appropriations of MSEK 41 (-25) and income tax of MSEK 342 (-311), net income for 2008 amounted to MSEK -655 (1,644).
Liquidity, finance, capital expenditures and number of employees
The Parent Company's net debt amounted to MSEK 9,701 (6,242). Gross capital expenditures in property, plant and equipment amounted to MSEK 253 (261). At the end of 2008, the Parent Company had 8,317 employees, compared with 8,256 in the previous year.
Share repurchase
The Annual General Meeting on April 15, 2008 decided to renew the Board of Directors' mandate to decide to repurchase up to 10 percent of the shares outstanding. The purpose of the authorization is to provide the Board with greater scope in working with the company's capital structure and enable acquisitions when considered appropriate, as well as to secure the Group's share matching plan. As proposed, the mandate would apply until the next Annual General
Meeting. Repurchases may be effected over the stock exchange or through offerings to shareholders. It is also proposed that the Board's mandate include the possibility to transfer repurchased shares as allowed by law.
During the third quarter 2008, 1,340,000 shares were repurchased starting on July 21, 2008. The cost for the repurchased shares was MSEK 209.
Proposed dividend
The Board of Directors proposes that shareholders receive a dividend of SEK 1.75 per share (4.50), or a total of MSEK 187 (491). April 21 has been proposed as the record day for the dividend, which is expected to be paid on April 24, 2009.
Annual General Meeting
The Annual General Meeting will be held at Aula Magna, Stockholm University, Stockholm, on Thursday, April 16, 2009 at 15:00 (CET). The annual report will be available at Saab's office in Linköping. The printed annual report will be distributed to shareholders upon request around March 13, 2009.
Owners
Saab's largest shareholders are BAE Systems, Investor AB, the Wallenberg foundations, Odin funds, Swedbank Robur funds, Nordea funds, SEB funds, Orkla ASA and JP Morgan Chase.
Four shareholder representatives have been selected to work with Chairman Marcus Wallenberg to draft a proposal for the Board of Directors to be presented to the Annual General Meeting. The representatives are Petra Hedengran (Investor), Peter Wallenberg Jr (Knut and Alice Wallenberg´s Foundation), Mats Lagerqvist (Swedbank Robur Funds), Nils Petter Hollekim (Odin Funds Norway).
Linköping, February 13, 2009
Åke Svensson
President and CEO
Saab AB is disclosing the information herein pursuant to the Securities Markets Act and/or the Financial Instruments Trading Act. The information was submitted for publication at 7:30 a.m. on February 13, 2009.
REVIEW REPORT
Introduction
We have reviewed the year-end report for 2008 for Saab AB (publ) for the period January 1, 2008 to December 31, 2008. The Board of Directors and the President are responsible for the preparation and presentation of the year-end report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this year-end report based on our review.
Scope of review
We conducted our review in accordance with the Standard on Review Engagements SÖG 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" as issued by FAR SRS. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in 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 a level of assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the year-end report, in all material respects, is not prepared for the Group in accordance with IAS 34 and the Annual Accounts Act and for the Parent Company in accordance with the Annual Accounts Act.
Stockholm, February 13, 2009
| erik åström To |
mmy Mår tensso n |
|---|---|
| Ernst & Young AB |
Deloitte AB |
Public Accountant PUBLIC ACCOUNTANT
Authorized AUTHORIZED
For further information, please contact
Media: Ulrika Fager, Press Secretary Tel. +46-8-463 00 32
Cecilia Schön Jansson, Group Senior Vice President, Corporate Communications and Public Affairs Tel. +46-8-463 01 80
Press center
Tel. +46-734-18 00 18
Financial market:
Ann-Sofi Jönsson, Manager Investor Relations Tel. +46-8-463 02 14, +46-734-18 72 14
Lars Granlöf, CFO Tel. +46-8-463 01 48
Press and financial analyst conference
CEO, Åke Svensson and CFO, Lars Granlöf Today, Friday, February 13, 2009, 10:00 a.m. (CET) Contact Annika Widell to register and for further information
International teleconference:
Today, Friday, February 13, 2009, 4:00 p.m. (CET) Contact Annika Widell to register and for further information Tel. +46-8-463 01 47, +46-734-18 71 47
Annual General Meeting:
APRIL 16, 2009, 15:00 (CET)
Annual Report 2008 Interim Report January–March 2009 Interim Report January–June 2009 Interim Report January–September 2009 PUBLISHED AROUND MARCH 13, 2009 PUBLISHED APRIL 23, 2009 PUBLISHED JULY 24, 2009 PUBLISHED OCTOBER 23, 2009
Consolidated income statement
| MSEK | Note | Jan-Dec 2008 |
Jan-Dec 2007 |
Oct-Dec 2008 |
Oct-Dec 2007 |
|---|---|---|---|---|---|
| Sales | 3 | 23,796 | 23,021 | 8,188 | 7,358 |
| Cost of goods sold | -19,162 | -16,849 | -7,544 | -5,295 | |
| Gross Income | 4,634 | 6,172 | 644 | 2,063 | |
| Gross margin, % | 19.5 | 26.8 | 7.9 | 28.0 | |
| Other operating income | 291 | 785 | 103 | 521 | |
| Marketing expenses | -1,805 | -1,725 | -472 | -479 | |
| Administrative expenses | -1,404 | -1,375 | -357 | -330 | |
| Research and development costs | -1,532 | -1,253 | -738 | -520 | |
| Other operating expenses | -68 | -49 | -30 | -18 | |
| Share in income of associated companies | 50 | 52 | 41 | 8 | |
| Operating income/loss (EBIT)1) | 3 | 166 | 2,607 | -809 | 1,245 |
| Operating margin, % | 0.7 | 11.3 | -9.9 | 16.9 | |
| Share in income of associated companies | -36 | -40 | -11 | -10 | |
| Financial income | 29 | 4 | -6 | -37 | |
| Financial expenses | -565 | -122 | -204 | -18 | |
| Net financial items | -572 | -158 | -221 | -65 | |
| Income/loss before taxes | -406 | 2,449 | -1,030 | 1,180 | |
| Taxes | 4 | 164 | -508 | 322 | -172 |
| Net income/loss for the period | -242 | 1,941 | -708 | 1,008 | |
| Of which Parent Company shareholders' interest | -248 | 1,921 | -724 | 1,008 | |
| Of which minority interest | 6 | 20 | 16 | - | |
| Earnings per share before dilution, SEK2) | -2.31 | 17.68 | -6.78 | 9.29 | |
| Earnings per share after dilution, SEK3) | -2.31 | 17.60 | -6.78 | 9.24 | |
| 1) includes depre ciation/amort ization and impairment |
-1,514 | -1,258 | -725 | -449 | |
| of which depre ciation of lease assets |
-165 | -180 | -46 | -40 | |
| 2) average number of shares before dilution |
107,515,049 | 108,668,700 | 106,828,876 | 108,150,344 | |
| 3) average number of shares after dilution. THERE IS NO DILUTION IMPACT IF THE RESULT FOR THE PERIOD IS NEGATIVE. |
107,515,049 | 109,150,344 | 106,828,876 | 109,150,344 |
16 YEAR-END REPORT
Quarterly income statement
| MSEK | Q4 2008 | Q3 2008 | Q2 2008 | Q1 2008 | Q4 2007 | Q3 2007 | Q2 2007 | Q1 2007 |
|---|---|---|---|---|---|---|---|---|
| Sales | 8,188 | 4,583 | 6,046 | 4,979 | 7,358 | 4,811 | 5,935 | 4,917 |
| Cost of goods sold | -7,544 | -3,638 | -4,381 | -3,599 | -5,295 | -3,516 | -4,471 | -3,567 |
| Gross Income | 644 | 945 | 1,665 | 1,380 | 2,063 | 1,295 | 1,464 | 1,350 |
| Gross margin, % | 7.9 | 20.6 | 27.5 | 27.7 | 28.0 | 26.9 | 24.7 | 27.5 |
| Other operating income | 103 | 89 | 61 | 38 | 521 | 46 | 178 | 40 |
| Marketing expenses | -472 | -408 | -483 | -442 | -479 | -429 | -434 | -383 |
| Administrative expenses | -357 | -336 | -368 | -343 | -330 | -344 | -349 | -352 |
| Research and development costs | -738 | -243 | -306 | -245 | -520 | -262 | -239 | -232 |
| Other operating expenses | -30 | -18 | -10 | -10 | -18 | -8 | -14 | -9 |
| Share in income of associated companies | 41 | 2 | - | 7 | 8 | 20 | 24 | - |
| Operating income/loss (EBIT)1) | -809 | 31 | 559 | 385 | 1,245 | 318 | 630 | 414 |
| Operating margin, % | -9.9 | 0.7 | 9.2 | 7.7 | 16.9 | 6.6 | 10.6 | 8.4 |
| Share in income of associated companies | -11 | -6 | -13 | -6 | -10 | -8 | 1 | -23 |
| Financial income | -6 | -12 | 25 | 22 | -37 | -6 | 17 | 30 |
| Financial expenses | -204 | -191 | -93 | -77 | -18 | 13 | -76 | -41 |
| Net financial items | -221 | -209 | -81 | -61 | -65 | -1 | -58 | -34 |
| Income/loss before taxes | -1,030 | -178 | 478 | 324 | 1,180 | 317 | 572 | 380 |
| Taxes | 322 | 75 | -140 | -93 | -172 | -92 | -134 | -110 |
| Net income/loss for the period | -708 | -103 | 338 | 231 | 1,008 | 225 | 438 | 270 |
| Of which Parent Company shareholders' interest | -724 | -97 | 341 | 232 | 1,008 | 218 | 434 | 261 |
| Of which minority interest | 16 | -6 | -3 | -1 | - | 7 | 4 | 9 |
| Earnings per share before dilution, SEK2) | -6.78 | -0.89 | 3.15 | 2.15 | 9.29 | 2.02 | 3.98 | 2.39 |
| Earnings per share after dilution, SEK3) | -6.78 | -0.89 | 3.12 | 2.13 | 9.24 | 1.99 | 3.98 | 2.39 |
| 1) includes depre ciation/amort ization and impairment |
-725 | -232 | -315 | -242 | -449 | -256 | -294 | -259 |
| of which depre ciation of lease assets |
-46 | -39 | -40 | -40 | -40 | -44 | -45 | -51 |
| 2) average number of shares before dilution |
106,828,876 | 107,094,803 | 108,150,517 | 108,150,421 | 108,150,344 | 108,667,722 | 109,075,944 | 109,150,344 |
| 3) average number of shares after dilution |
106,828,876 | 107,094,803 | 109,150,344 | 109,150,344 | 109,150,344 | 109,150,344 | 109,150,344 | 109,150,344 |
CONSOLIDATED BALANCE SHEET
| MSEK | Note | 31/12/2008 | 31/12/2007 |
|---|---|---|---|
| ASSETS | |||
| Fixed assets | |||
| Intangible fixed assets | 6 | 7,690 | 7,940 |
| Tangible fixed assets | 3,407 | 3,619 | |
| Lease assets | 1,835 | 1,822 | |
| Biological assets | 243 | 241 | |
| Investment properties | 239 | 72 | |
| Share in associated companies | 334 | 318 | |
| Financial investments | 142 | 233 | |
| Long-term receivables | 1,321 | 960 | |
| Deferred tax assets | 841 | 542 | |
| Total fixed assets | 16,052 | 15,747 | |
| Current assets | |||
| Inventories | 4,305 | 5,383 | |
| Derivatives | 1,315 | 479 | |
| Tax receivables | 55 | 122 | |
| Accounts receivable | 4,194 | 3,724 | |
| Prepaid expenses and accrued income | 503 | 556 | |
| Other receivables | 5,567 | 5,862 | |
| Liquid assets | 8 | 822 | 858 |
| Total current assets | 16,761 | 16,984 | |
| Assets held for sale | 9 | 77 | 1,070 |
| TOTAL ASSETS | 14 | 32,890 | 33,801 |
CONSOLIDATED BALANCE SHEET (CONT.)
| MSEK | Note | 31/12/2008 | 31/12/2007 |
|---|---|---|---|
| SHAREHOLDERS' EQUITY AND LIABILITIES | |||
| Shareholders' equity | |||
| Parent company's shareholders' interest | 9,240 | 10,981 | |
| Minority interest | 90 | 27 | |
| Total shareholders' equity | 9,330 | 11,008 | |
| Long-term liabilities | |||
| Long-term interest-bearing liabilities | 7 | 13 | 25 |
| Other liabilities | 336 | 284 | |
| Provisions for pensions | 11 | 4 | 101 |
| Other provisions | 2,402 | 1,979 | |
| Deferred tax liabilities | 1,105 | 1,263 | |
| Total long-term liabilities | 3,860 | 3,652 | |
| Current liabilities | |||
| Short-term interest bearing liabilities | 7 | 3,870 | 3,635 |
| Advance payments from customers | 897 | 2,558 | |
| Accounts payable | 1,712 | 1,229 | |
| Lease obligations | - | 204 | |
| Derivatives | 2,363 | 414 | |
| Tax liabilities | 149 | 368 | |
| Other liabilities | 1,131 | 806 | |
| Accrued expenses and deferred income | 8,868 | 8,788 | |
| Provisions | 710 | 752 | |
| Total current liabilities | 19,700 | 18,754 | |
| Liabilities attributable to assets held for sale | 9 | - | 387 |
| Total liabilities | 23,560 | 22,793 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 14 | 32,890 | 33,801 |
CHANGES IN SHAREHOLDERS' EQUITY
| MSEK | Cap ital sto ck |
Other capital contr ibu tions |
Net res ult on cash flow hedges |
Trans lation reser ve |
revaluation reser ve |
Retained earn ings |
Total | Minor ity interest |
Total |
|---|---|---|---|---|---|---|---|---|---|
| Opening balance, January 1, 2008 | 1,746 | 543 | 80 | -110 | - | 8,722 | 10,981 | 27 | 11,008 |
| Items reported directly in shareholders' equity: | |||||||||
| Translation differences for the year | -112 | -112 | -112 | ||||||
| Net loss on cash flow hedges | -692 | -692 | -10 | -702 | |||||
| Revaluation of fixed assets | 51 | 51 | 51 | ||||||
| Net income/loss of the year | -248 | -248 | 6 | -242 | |||||
| Transactions with shareholders: | |||||||||
| Dividend | -487 | -487 | 10 | -477 | |||||
| Repurchase of shares | -209 | -209 | -209 | ||||||
| Share matching plan | 13 | 13 | 13 | ||||||
| Acquisitions in and sale of operations | -57 | -57 | 57 | - | |||||
| Closing balance, December 31, 2008 | 1,746 | 543 | -612 | -222 | 51 | 7,734 | 9,240 | 90 | 9,330 |
| Opening balance, January 1, 2007 | 1,746 | 543 | 72 | -8 | - | 7,449 | 9,802 | 223 | 10,025 |
| Items reported directly in shareholders' equity: | |||||||||
| Translation differences for the year | -102 | -102 | -4 | -106 | |||||
| Net gain on cash flow hedges | 8 | 8 | 8 | ||||||
| Net income/loss of the year | 1,921 | 1,921 | 20 | 1,941 | |||||
| Transactions with shareholders: | |||||||||
| Dividend | -464 | -464 | -2 | -466 | |||||
| Repurchase of shares | -184 | -184 | -184 | ||||||
| Acquisitions in and sale of operations | - | -210 | -210 | ||||||
| Closing balance, December 31, 2007 | 1,746 | 543 | 80 | -110 | - | 8,722 | 10,981 | 27 | 11,008 |
STATEMENT OF CASH FLOWS
| MSEK | Note | 2008 | 2007 |
|---|---|---|---|
| Operating activities | |||
| Income after financial items | -406 | 2,449 | |
| Transferred to and establishment of pension fund | -408 | -283 | |
| Adjustments for items not affecting cash flows | 3,068 | 867 | |
| Income tax paid | -182 | -216 | |
| Cash flow from operating activities before changes in working capital | 2,072 | 2,817 | |
| Cash flow from changes in working capital | |||
| Increase(-)/Decrease(+) in inventories | -27 | -644 | |
| Increase(-)/Decrease(+) in current receivables | 312 | -1,605 | |
| Increase(+)/Decrease(-) in advance payments from customers | -1,618 | -934 | |
| Increase(+)/Decrease(-) in lease obligations | -220 | -251 | |
| Increase(+)/Decrease(-) in other current liabilities | 708 | -287 | |
| Increase(+)/Decrease(-) in provisions | -273 | -443 | |
| Cash flow from operating activities | 954 | -1,347 | |
| Investing activities | |||
| Investments in intangible fixed assets | -1 | -8 | |
| Capitalized development costs | -635 | -658 | |
| Investments in tangible fixed assets | -386 | -395 | |
| Sale of tangible fixed assets | 41 | 45 | |
| Sale of lease assets | 212 | 325 | |
| Investments in and sale of financial assets | -58 | -310 | |
| Investments in subsidiaries, net effect on liquidity | - | -515 | |
| Sale of subsidiaries, net effect on liquidity | 10 | 443 | 970 |
| Cash flow from investing activities | -384 | -546 | |
| Financing activities | |||
| Loans raised | 85 | 2,017 | |
| Repurchase of shares | -209 | -184 | |
| Dividend paid to Parent Company's shareholders | -487 | -464 | |
| Contribution from/dividend to minority interest | 10 | -2 | |
| Cash flow from financing activities | -601 | 1,367 | |
| Cash flow for the year | -31 | -526 | |
| Liquid assets at the beginning of the year | 858 | 1,389 | |
| Exchange rate difference in liquid assets | -5 | -5 | |
| Liquid assets at year-end | 8 | 822 | 858 |
| QUARTERLY INFORMATION |
JANUARY–MARCH | APRIL–JUNE | |||||||
|---|---|---|---|---|---|---|---|---|---|
| MSEK | 2008 | Operating margin |
2007 | Operating margin |
2008 | Operating margin |
2007 | Operating margin |
|
| Sales | |||||||||
| Defence and Security Solutions | 2,096 | 2,053 | 2,365 | 2,264 | |||||
| Systems and Products | 1,734 | 1,885 | 2,238 | 2,417 | |||||
| Aeronautics | 1,612 | 1,383 | 2,040 | 1,621 | |||||
| Corporate | 10 | 20 | 12 | 11 | |||||
| Internal sales | -473 | -424 | -609 | -378 | |||||
| Total | 4,979 | 4,917 | 6,046 | 5,935 | |||||
| Operating income | |||||||||
| Defence and Security Solutions | 193 | 9.2% | 230 | 11.2% | 187 | 7.9% | 216 | 9.5% | |
| Systems and Products | 138 | 8.0% | 158 | 8.4% | 228 | 10.2% | 245 | 10.1% | |
| Aeronautics | 111 | 6.9% | 67 | 4.8% | -66 | -3.2% | 121 | 7.5% | |
| Corporate | -57 | -41 | 210 | 48 | |||||
| Total | 385 | 7.7% | 414 | 8.4% | 559 | 9.2% | 630 | 10.6% | |
| Net financial items | -61 | -34 | -81 | -58 | |||||
| Income/loss before taxes | 324 | 380 | 478 | 572 | |||||
| Net income/loss for the period | 231 | 270 | 338 | 438 | |||||
| Attributable to Parent Company's shareholders |
232 | 261 | 341 | 434 | |||||
| Earnings per share after dilution | 2.13 | 2.39 | 3.12 | 3.98 | |||||
| No. of shares after dilution, thousands | 109,150 | 109,150 | 109,150 | 109,150 |
| JULY–SEPTEMBER OCTOBER–DECEMBER |
||||||||
|---|---|---|---|---|---|---|---|---|
| MSEK | 2008 | Operating margin |
2007 | Operating margin |
2008 | Operating margin |
2007 | Operating margin |
| Sales | ||||||||
| Defence and Security Solutions | 1,904 | 2,069 | 3,078 | 2,914 | ||||
| Systems and Products | 1,771 | 1,839 | 3,352 | 2,950 | ||||
| Aeronautics | 1,261 | 1,279 | 2,356 | 2,227 | ||||
| Corporate | 11 | 9 | 100 | 11 | ||||
| Internal sales | -364 | -385 | -698 | -744 | ||||
| Total | 4,583 | 4,811 | 8,188 | 7,358 | ||||
| Operating income | ||||||||
| Defence and Security Solutions | 112 | 5.9% | 135 | 6.5% | 240 | 7.8% | 353 | 12.1% |
| Systems and Products | 62 | 3.5% | 100 | 5.4% | 328 | 9.8% | 253 | 8.6% |
| Aeronautics | -137 | -10.9% | 68 | 5.3% | -1,416 | -60.1% | 198 | 8.9% |
| Corporate | -6 | 15 | 39 | 441 | ||||
| Total | 31 | 0.7% | 318 | 6.6% | -809 | -9.9% | 1,245 | 16.9% |
| Net financial items | -209 | -1 | -221 | -65 | ||||
| Income/loss before taxes | -178 | 317 | -1,030 | 1,180 | ||||
| Net income/loss for the period | -103 | 225 | -708 | 1,008 | ||||
| Attributable to Parent Company's shareholders |
-97 | 218 | -724 | 1,008 | ||||
| Earnings per share after dilution | -0.89 | 1.99 | -6.78 | 9.24 | ||||
| No. of shares after dilution, thousands | 107,095 | 109,150 | 106,829 | 109,150 |
MULTI-year overview
| MSEK | 2008 | 2007 | 2006 | 2005 | 2004 5) |
|---|---|---|---|---|---|
| Order bookings | 23,212 | 20,846 | 27,575 | 17,512 | 16,444 |
| Order backlog at Dec. 31 | 45,324 | 47,316 | 50,445 | 42,198 | 43,162 |
| Sales | 23,796 | 23,021 | 21,063 | 19,314 | 17,848 |
| Sales in Sweden, % | 32 | 35 | 35 | 44 | 52 |
| Sales in EU excluding Sweden, % | 25 | 28 | 29 | 28 | 26 |
| Sales in Americas, % | 6 | 7 | 9 | 9 | 8 |
| Sales in Rest of the World, % | 37 | 30 | 27 | 19 | 14 |
| Operating income | 166 | 2,607 | 1,745 | 1,652 | 1,853 |
| Operating margin, % | 0.7 | 11.3 | 8.3 | 8.6 | 10.4 |
| Operating margin before depreciation/amortization and impairments, excluding leasing, % |
6.4 | 16.0 | 12.0 | 11.3 | 13.1 |
| Income after financial items | -406 | 2,449 | 1,693 | 1,551 | 1,712 |
| Net income/loss for the year | -242 | 1,941 | 1,347 | 1,199 | 1,310 |
| Total assets | 32,890 | 33,801 | 32,771 | 30,594 | 27,509 |
| Operating cash flow | 659 | -1,603 | -1,900 | 2,645 | 325 |
| Return on capital employed, % | 1.4 | 19.4 | 14.5 | 14.6 | 17.3 |
| Return on equity, % | -2.4 | 18.5 | 13.8 | 13.5 | 16.7 |
| Equity/assets ratio, % | 28.4 | 32.6 | 30.6 | 31.0 | 29.9 |
| Earnings per share, SEK 2) 4) | -2.31 | 17.68 | 11.91 | 10.89 | 11.78 |
| After dilution, SEK 3) 4) | -2.31 | 17.60 | 11.91 | 10.89 | 11.78 |
| Dividend per share, SEK | 1.75 6) | 4.50 | 4.25 | 4.00 | 3.75 |
| Equity per share, SEK 1) | 86.49 | 101.53 | 89.80 | 84.10 | 74.89 |
| Number of employees at year-end | 13,294 | 13,757 | 13,577 | 12,830 | 11,936 |
1)Number of shares as of December 31, 2008: 106,829,893; 2007: 108,150,344; 2006/2005/2004: 109,150,344
2)Average number of shares 2008: 107,515,049; 2007: 108,668,700; 2006/2005: 109,150,344; 2004: 108,234,126 3)average number of shares after dilution 2008: 107,515,049; 2007/2006/2005: 109,150,344, 2004: 108,234,126. Conversion of the debenture loan concluded on july 15, 2004.
4)Net income for the year less minority interest divided by the average number of shares
5)Restated according to IFRS. 6) as proposed by the board of directors.
KEY RATIOS AND TARGETS
| Long-term target |
2008 | 2007 | 2006 | |
|---|---|---|---|---|
| Operating margin before depreciation/amortization and impairments, excluding leasing, % |
15 | 6.4 | 16.0 | 12.0 |
| Operating margin, % | 10 | 0.7 | 11.3 | 8.3 |
| Earnings per share after dilution, SEK 1) | -2.31 | 17.60 | 11.91 | |
| Return on capital employed, % | 1.4 | 19.4 | 14.5 | |
| Return on equity, % | 15 | -2.4 | 18.5 | 13.8 |
| Equity/assets ratio, % | 30 | 28.4 | 32.6 | 30.6 |
1) Average number of shares after dilution 2008: 107,515,049; 2007/2006: 109,150,344
PARENT COMPANY INCOME STATEMENT
| MSEK | Jan-Dec 2008 |
Jan-Dec 2007 |
Oct-Dec 2008 |
Oct-Dec 2007 |
|---|---|---|---|---|
| Sales | 15,496 | 14,779 | 5,246 | 5,121 |
| Cost of goods sold | -13,927 | -11,430 | -5,904 | -4,008 |
| Gross Income | 1,569 | 3,349 | -658 | 1,113 |
| Gross margin, % | 10.1 | 22.7 | -12.5 | 21.7 |
| Marketing expenses | -1,115 | -1,024 | -296 | -304 |
| Administrative expenses | -841 | -747 | -229 | -175 |
| Research and development costs | -931 | -864 | -278 | -268 |
| Other operating income | 58 | 173 | -31 | 111 |
| Other operating expenses | -33 | -23 | 1 | -9 |
| Operating income/loss (EBIT) | -1,293 | 864 | -1,491 | 468 |
| Operating margin, % | -8.3 | 5.8 | -28.4 | 9.1 |
| Financial income and expenses: | ||||
| Results from securities and receivables held as fixed assets | 972 | 1,352 | 195 | 972 |
| Other interest income and similar items | 101 | 88 | 81 | -2 |
| Interest expenses and similar items | -818 | -324 | -474 | -129 |
| Income/loss after financial items | -1,038 | 1,980 | -1,689 | 1,309 |
| Appropriations | 41 | -25 | 41 | -25 |
| Income/loss before taxes | -997 | 1,955 | -1,648 | 1,284 |
| Taxes | 342 | -311 | 330 | -183 |
| Net income/loss for the period | -655 | 1,644 | -1,318 | 1,101 |
PARENT COMPANY BALANCE SHEET
| MSEK | 31/12/2008 | 31/12/2007 |
|---|---|---|
| ASSETS | ||
| Fixed assets | ||
| Intangible fixed assets | 51 | 55 |
| Tangible fixed assets | 2,478 | 2,506 |
| Shares in Group companies | 11,662 | 11,964 |
| Receivables from Group companies | 140 | 166 |
| Shares in associated companies and joint ventures | 317 | 204 |
| Receivables from associated companies and joint ventures | 31 | 25 |
| Other long-term securities holdings | 1,512 | 1,514 |
| Other long-term receivables | 44 | 45 |
| Deferred tax assets | 1,207 | 487 |
| Total fixed assets | 17,442 | 16,966 |
| Current assets | ||
| Inventories, etc | 2,649 | 4,524 |
| Receivables from Group companies | 2,877 | 3,461 |
| Receivables from associated companies and joint ventures | 513 | 349 |
| Other receivables | 9,032 | 6,274 |
| Liquid assets | 237 | 387 |
| Total current assets | 15,308 | 14,995 |
| Total assets |
32,750 | 31,961 |
| SHAREHOLDERS' EQUITY AND LIABILITIES | ||
| Equity | ||
| Shareholders' equity | 5,479 | 5,599 |
| Net income for the year | -655 | 1,644 |
| Total shareholders' equity | 4,824 | 7,243 |
| Untaxed reserves | 422 | 463 |
| Provisions | ||
| Provisions for pensions and similar commitments | 606 | 270 |
| Other provisions | 1,929 | 1,463 |
| Total provisions | 2,535 | 1,733 |
| Liabilities | ||
| Interest-bearing liabilities | 3,832 | 3,658 |
| Liabilities to Group companies | 9,939 | 8,229 |
| Advance payments from customers | 3,310 | 3,164 |
| Liabilities to associated companies and joint ventures | 126 | 80 |
| Other liabilities | 7,762 | 7,391 |
| Total liabilities | 24,969 | 22,522 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 32,750 | 31,961 |
Notes TO THE FINANCIAL STATEMENTS
NOTE 1
CORPORATE INFORMATION
Saab AB (publ), corporate identity no. 556036-0793, with registered office in Linköping, Sweden. The address of the company's head office is Kungsbron 1, Stockholm, with the mailing address Box 70 363, SE-107 24 Stockholm, Sweden, and the telephone number +46-8-463 00 00. Saab has been listed on NASDAQ OMX Stockholm since 1998 and on the large cap list from October 2006. The company's operations, including subsidiaries and associated companies, are described in the annual report for 2007.
The Board of Directors and the President approved this year-end report for the period January 1 – December 31, 2008 for publication on February 13, 2009.
NOTE 2
ACCOUNTING PRINCIPLES
This year end report is prepared applied to the regulation for the year-end reporting in the Annual Accounts Act and IAS 34.
The same accounting principles have been applied during 2008 as in 2007, as described on pages 60-66 in the annual report 2007. The report does not contain all the information and disclosures available in the annual report, and the year-end report should be read together with the annual report for 2008.
NOTE 3
SEGMENT REPORTING
Saab is one of the world's leading high-technology companies, with its main operations in defence, aviation and civil security. Operations are primarily focused on well-defined areas in defence electronics and missile systems as well as military and commercial aviation. Saab is also active in technical services and maintenance. While Europe is its main market, Saab has growing markets in Australia, South Africa and Asia. For a description of the business segments, see previous section.
SALES AND ORDER INFORMATION
Sales by business segment
| MSEK | 2008 | 2007 | Change, % |
Q4 2008 |
Q4 2007 |
|---|---|---|---|---|---|
| Defence and Security Solutions | 9,443 | 9,300 | 2 | 3,078 | 2,914 |
| Systems and Products | 9,095 | 9,091 | - | 3,352 | 2,950 |
| Aeronautics | 7,269 | 6,510 | 12 | 2,356 | 2,227 |
| Corporate | 133 | 51 | - | 100 | 11 |
| Internal sales | -2,144 | -1,931 | - | -698 | -744 |
| Total | 23,796 | 23,021 | 3 | 8,188 | 7,358 |
Sales by geographic market
| MSEK | 2008 | % of sales |
2007 | % of sales |
Change, % |
|---|---|---|---|---|---|
| Sweden | 7,549 | 32 | 8,006 | 35 | -6 |
| Rest of EU | 6,000 | 25 | 6,527 | 28 | -8 |
| Rest of Europe | 300 | 1 | 297 | 1 | 1 |
| Total Europe | 13,849 | 58 | 14,830 | 64 | -7 |
| North America | 1,346 | 6 | 1,534 | 7 | -12 |
| Latin America | 181 | 1 | 85 | - | 113 |
| Asia | 3,381 | 14 | 2,203 | 10 | 53 |
| Australia, etc. | 838 | 3 | 848 | 4 | -1 |
| Africa | 4,201 | 18 | 3,521 | 15 | 19 |
| Total | 23,796 | 100 | 23,021 | 100 | 3 |
Order bookings by business segment
| MSEK | 2008 | 2007 | Chan ge, % |
Q4 2008 |
Q4 2007 |
|---|---|---|---|---|---|
| Defence and Security Solutions |
9,997 | 7,259 | 38 | 4,410 | 2,612 |
| Systems and Products | 9,345 | 8,470 | 10 | 3,005 | 3,038 |
| Aeronautics | 6,153 | 7,516 | -18 | 533 | 3,883 |
| Corporate | 156 | 46 | - | 19 | 11 |
| Internal | -2,439 | -2,445 | - | -805 | -983 |
| Total | 23,212 | 20,846 | 11 | 7,162 | 8,561 |
Note 3 continued
Order backlog by business segment
| MSEK | 31/12/2008 | 31/12/2007 |
|---|---|---|
| Defence and Security Solutions | 10,918 | 10,764 |
| Systems and Products | 17,390 | 17,830 |
| Aeronautics | 19,626 | 21,158 |
| Corporate | 28 | - |
| Internal | -2,638 | -2,436 |
| Total | 45,324 | 47,316 |
OPERATING INCOME
Operating income by business segment
| MSEK | 2008 | 2007 | Change, % |
Q4 2008 |
Q4 2007 |
|---|---|---|---|---|---|
| Defence and Security Solutions |
732 | 934 | -22 | 240 | 353 |
| Systems and Products | 756 | 756 | - | 328 | 253 |
| Aeronautics | -1,508 | 454 | - | -1,416 | 198 |
| Corporate | 186 | 463 | -60 | 39 | 441 |
| Total | 166 | 2,607 | -94 | -809 | 1,245 |
Depreciation/amortization and impairments by business segment
| MSEK | 2008 | 2007 | Change, % |
Q4 2008 |
Q4 2007 |
|---|---|---|---|---|---|
| Defence and Security Solutions |
287 | 170 | 69 | 160 | 43 |
| Systems and Products | 762 | 611 | 25 | 422 | 263 |
| Aeronautics | 195 | 163 | 20 | 58 | 68 |
| Corporate – lease assets |
165 | 180 | -8 | 46 | 40 |
| Corporate – other | 105 | 134 | -22 | 39 | 35 |
| Total | 1,514 | 1,258 | 20 | 725 | 449 |
OPERATING CASH FLOW AND CAPITAL EMPLOYED
Operating cash flow by business segment
| MSEK | 2008 | 2007 | Q4 2008 |
Q4 2007 |
|---|---|---|---|---|
| Defence and Security Solutions | -322 | 380 | -201 | -307 |
| Systems and Products | 1,484 | -1,287 | 1,154 | -372 |
| Aeronautics | -1,007 | -773 | 61 | -641 |
| Corporate | 504 | 77 | 24 | 67 |
| Total | 659 | -1,603 | 1,038 | -1,253 |
Capital employed by business segment
| MSEK | 31/12/2008 | 31/12/2007 |
|---|---|---|
| Defence and Security Solutions | 4,510 | 4,417 |
| Systems and Products | 8,431 | 9,115 |
| Aeronautics | 3,022 | 4,202 |
| Corporate | -2,745 | -2,965 |
| Total | 13,218 | 14,769 |
PERSONNEL
Personnel by business segment
| MSEK | 31/12/2008 | 31/12/2007 | Change |
|---|---|---|---|
| Defence and Security Solutions |
4,666 | 5,031 | -365 |
| Systems and Products | 4,869 | 5,213 | -344 |
| Aeronautics | 3,100 | 2,911 | 189 |
| Corporate | 659 | 602 | 57 |
| Total | 13,294 | 13,757 | -463 |
NOTE 4
TAXES
| MSEK | 2008 | 2007 |
|---|---|---|
| Current tax | -30 | -245 |
| Deferred tax | 194 | -263 |
| Total | 164 | -508 |
NOTE 5
DIVIDEND TO PARENT COMPANY'S SHAREHOLDERS
At its meeting on February 12, 2009, the Board of Directors decided to Propose to the Annual General Meeting that the Parent Company's shareholders receive a dividend of SEK 1.75 per share, totaling MSEK 187.
NOTE 6
INTANGIBLE FIXED ASSETS
| MSEK | 31/12/2008 | 31/12/2007 |
|---|---|---|
| Goodwill | 3,438 | 3,404 |
| Capitalized development costs | 3,628 | 3,732 |
| Other intangible assets | 624 | 804 |
| Total | 7,690 | 7,940 |
NOTE 7
INTEREST BEARING LIABILITIES
| MSEK | 31/12/2008 | 31/12/2007 |
|---|---|---|
| Liabilities to credit institutions | 2,832 | 2,603 |
| Liabilities to ass comp and JV | 1,029 | 1,041 |
| Other interest-bearing liabilities | 22 | 16 |
| Total | 3,883 | 3,660 |
Committed credit lines
| MSEK | Facilities | Drawings | Available |
|---|---|---|---|
| Revolving credit facility (Maturity 2012) | 4,000 | - | 4,000 |
| Back-up facility (Maturity 2009) | 2,100 | 300 | 1,800 |
| Overdraft facility (Maturity 2009) | 421 | - | 421 |
| Total | 6,521 | 300 | 6,221 |
| Parent company | ||||
|---|---|---|---|---|
| MSEK | 31/12/2008 | 31/12/2007 | ||
| Long-term liabilities to credit institutions | 1,076 | 1,158 | ||
| Short-term liabilities to credit institutions | 2,756 | 2,500 | ||
| Total | 3,832 | 3,658 |
Of short-term liabilities to credit institutions, MSEK 2,456 are issued under the Commercial Paper program with the limit of MSEK 5,000.
NOTE 8
SUPPLEMENTAL INFORMATION ON STATEMENT OF CASH FLOWS
Liquid assets
| MSEK | 31/12/2008 | 31/12/2007 |
|---|---|---|
| The following components are included in liquid assets: | ||
| Cash and bank balances (incl. available overdraft facilities) |
795 | 825 |
| Deposits | 27 | 33 |
| Total according to balance sheet | 822 | 858 |
| Total according to statement of cash flows | 822 | 858 |
Operating cash flow vs. statement of cash flows
| MSEK | 2008 | 2007 |
|---|---|---|
| Operating cash flow | 659 | -1,603 |
| Investing activities – interest-bearing: | ||
| Financial investments and receivables | -89 | -247 |
| Financing activities: | ||
| Loans raised | 85 | 2,017 |
| Establishment of pension fund | - | -43 |
| Repurchase of shares | -209 | -184 |
| Dividend paid to the Parent Company's shareholders | -487 | -464 |
| Contribution from/dividend to minority interest | 10 | -2 |
| Cash flow for the year | -31 | -526 |
Specification of operating cash flow for 2008
| MSEK | Saab excl. acquisi tions/ divest ments and SAL |
Acquisi tions and divest ments |
Saab Aircraft Leasing |
Total Group |
|---|---|---|---|---|
| Cash flow from operating | ||||
| activities before changes in working capital |
1,877 | - | 195 | 2,072 |
| Cas h flow from changes |
in work ing capital |
|||
| Inventories | -4 | - | -23 | -27 |
| Receivables | -54 | - | 366 | 312 |
| Advance payments from customers |
-1,615 | - | -3 | -1,618 |
| Lease obligations | - | - | -220 | -220 |
| Other liabilities | 768 | - | -60 | 708 |
| Provisions | -85 | - | -188 | -273 |
| Change in working capital | -990 | - | -128 | -1,118 |
| Cash flow from operating activities |
887 | - | 67 | 954 |
| Invest ing activities |
||||
| Investments in intangible fixed assets |
-636 | - | - | -636 |
| Investments in tangible fixed assets |
-386 | - | - | -386 |
| Sale of tangible fixed assets | 41 | - | - | 41 |
| Sale of lease assets | - | - | 212 | 212 |
| Sale of and investment in shares, etc. |
-38 | - | 69 | 31 |
| Sale of subsidiaries, net effect on liquidity |
- | 443 | - | 443 |
| Cash flow from investing activities excluding change in interest bearing financial assets |
-1,019 | 443 | 281 | -295 |
| Operating cash flo w |
-132 | 443 | 348 | 659 |
NOTE 9
ASSETS AND LIABILITIES HELD FOR SALE
Assets and liabilities held for sale comprise investment properties. During the second quarter a decision was taken not to divest Saab Grintek Technologies that previously was held for sale. During the third quarter 2008, Saab Space, including the Austrian subsidiary Austrian Aerospace, was divested to the Swiss aerospace and defence group RUAG.
NOTE 10
Acquisitions and divestments of operations
On September 1, Saab Space, including the Austrian subsidiary Austrian Aerospace, was divested to the Swiss aerospace and defence group RUAG. The purchase price for the shares was MSEK 335. In addition to the fixed price, Saab is entitled to additional consideration related to the long-term performance of Saab Space. The transaction generated a capital gain of MSEK 98 during the year. The effect on Saab's income statement if the sale had taken place on January 1, 2008 would have been a decrease in sales of MSEK 413 and a decrease in net income of MSEK 13.
In July, Imbani Amandaba (Pty) Ltd acquired 25 percent plus one share of Saab Grintek Defence (Pty) Ltd. The sale to Imbani Amandaba, a socalled Black Economic Empowerment consortium, demonstrates Saab's willingness to develop operations in South Africa and meet the requirements of the country's Black Economic Empowerment policy. The purchase price of the shares was MZAR 95 and the transaction generated no capital gain.
The impact on the Group's liquidity during 2008 was as follows:
MSEK
| 335 |
|---|
| 78 |
| 30 |
| 443 |
NOTE 11
DEFINED-BENEFIT PLANS
Saab has defined-benefit pension plans where post-employment compensation is based on a percentage of the recipient's salary. The predominant plan is the ITP plan, which is secured through a pension fund. The Saab Pension Fund had assets of MSEK 3,083 as of December 31, 2008, compared with an obligation of MSEK 4,454 according to IAS 19, or a solvency margin of 69 percent. In a comparison with the obligation according to the FPG/PRI system, the solvency margin was 84 percent.
NOTE 12
CONTINGENT LIABILITIES
No additional obligations were added during 2008. With regard to the Group's so-called fulfillment guarantees regarding commitments to customers, the likelihood of an outflow of resources is extremely small and, as a result, no value is recognized.
NOTE 13
TRANSACTIONS WITH RELATED PARTIES
No significant transactions have occurred during 2008.
Related parties with which the Group has transactions are described in the annual report for 2008, note 43.
NOTE 14
CONDENSED SUBDIVIDED BALANCE SHEET AS OF december 31, 2008
| MSEK | Saab | Saab Aircraft Leasing |
Elimina tions |
Saab Group |
|---|---|---|---|---|
| Assets | ||||
| Intangible fixed assets | 7,690 | - | - | 7,690 |
| Tangible fixed assets etc. | 3,889 | - | - | 3,889 |
| Lease assets | 1 | 1,834 | - | 1,835 |
| Long-term interest-bearing | ||||
| receivables | 443 | - | - | 443 |
| Shares, etc. | 1,934 | 3 | -1,500 | 437 |
| Other long-term receivables | 895 | 22 | - | 917 |
| Deferred tax assets | 710 | 131 | - | 841 |
| Inventories | 4,266 | 39 | - | 4,305 |
| Other current assets | 9,344 | 46 | - | 9,390 |
| Derivatives | 1,315 | - | - | 1,315 |
| Short-term interest-bearing | ||||
| receivables | 858 | 1,124 | -1,053 | 929 |
| Liquid assets | 795 | 27 | - | 822 |
| Assets held for sale | 77 | - | - | 77 |
| Total assets | 32,217 | 3,226 | -2,553 | 32,890 |
Shareholders' equity and liabilities
| Shareholders' equity | 9,038 | 1,792 | -1,500 | 9,330 |
|---|---|---|---|---|
| Provisions for pensions | 4 | - | - | 4 |
| Deferred tax liabilities | 1,105 | - | - | 1,105 |
| Other provisions | 2,214 | 898 | - | 3,112 |
| Interest-bearing liabilities | 4,936 | - | -1,053 | 3,883 |
| Advance payments from customers |
897 | - | - | 897 |
| Other liabilities | 11,660 | 536 | - | 12,196 |
| Derivatives | 2,363 | - | - | 2,363 |
| Total shareholders' equity and liabilities |
32,217 | 3,226 | -2,553 | 32,890 |
NOTE 15
FORECAST 2009
Saab's future development is dependent on the Swedish defence plans and will continue to be affected by the global economy. Saab is therefore facing uncertainties in the business environment.
We expect 2009 sales to be flat.
The profit margin in 2008 compared to 2009 will be reduced by about 4 percentage points due to our more conservative accounting for development costs.