Studsvik — Interim / Quarterly Report 2016

Apr 25, 2016

Interim Report January-March 2016

• • In April an agreement was made with EDF on the sale of the Waste Treatment business area. The transaction will generate a positive cash flow of about SEK 225 million and give a net result of about SEK 115 million and is expected to take place in the third quarter. The sale will give Studsvik more scope to focus on growth in Fuel and Materials Technology and Consultancy Services.
• • Sales in the quarter increased to SEK 171.6 (156.8) million. In local currencies sales increased by 10.6 per cent.
• • Operating profit improved to SEK 10.7 (–1.7) million.
• • The free cash flow was SEK –2.2 (–4.8) million.

	January March	January March	Full year
	2016	2015	2015
Sales, SEK million	171.6	156.8	721.2
Operating profit, SEK million	10.7	–1.7	36.6
Profit after tax, SEK million	5.9	–2.4	14.6
Free cash flow, SEK million*	–2.2	–4.8	–29.8
Net debt, SEK million*	137.8	107.0	134.3
Net debt/equity ratio, %*	48.3	37.2	45.0
Profit per share after tax, SEK	0.72	–0.29	1.78
Equity per share, SEK*	34.72	34.98	36.30
*Refers to total operations

Unless otherwise stated the information in text and figures refers to operations excluding operations held for sale.

Agreement on sale of Waste Treatment

On 19 April an agreement was signed with the French company EDF on the sale of the Waste Treatment business area. The transaction covers the operations of the business area outside Nyköping and in Workington in the United Kingdom. Studsvik retains the patents for the THOR technology.

EDF and Studsvik agreed as part of the transaction to collaborate on decommissioning of nuclear facilities and on waste treatment. The transaction will be finalized when necessary licenses and approvals have been obtained from the relevant authorities. Studsvik will account for earnings until the transaction is concluded, which is expected to be in the third quarter of 2016. The purchase price on a debt-free basis is SEK 355 million before certain final adjustments. The transaction will generate a positive cash flow of about SEK 225 million, giving a net result of about SEK 115 million. The operations within the Waste Treatment business area are accounted for as operations held for sale.

Sales

Sales in the quarter increased to SEK 171.6 (156.8) million. In local currencies the increase was 10.6 per cent. The sales increase is related to a royalty payment in the Consulting Services business area.

Profit

The operating profit for the quarter increased to SEK 10.7 (–1.7) million. The operating margin was 6.3 (–1.1) per cent. Net financial income was SEK –8.6 (–1.9) million, of which net interest income SEK –4.2 (–3.0) million and foreign exchange effects SEK –4.4 (1.1) million. Profit/loss for the period after tax was SEK 5.9 (–2.4) million.

Fuel and Materials Technology

Sales in the quarter decreased somewhat to SEK 58.1 (59.2) million. In local currencies the decrease was 2.0 per cent. However, the operating profit improved to SEK 5.4 (3.8) million and the operating margin was 9.3 (6.4) per cent.

Sales of services in materials technology increased, with an improved operating margin. Scandpower is still waiting for an export license from the American authorities for the orders in 2015 that had to be postponed to the first half of 2016.

Consultancy Services

Sales in the quarter increased to SEK 109.6 (91.1) million. In local currencies the increase was 21.9 per cent. The operating profit improved to SEK 12.4 (1.6) million and the operating margin was 11.3 (1.8) per cent. During the quarter a royalty payment of SEK 16.6 million was made, related to the THOR technology used in a facility in the USA. Payment is made when the responsibility for operating the facility is transferred to another party. Studsvik remains as the licensor and as previously will delivery consulting services. The royalty payment improved both sales and earnings.

The business area's operations in Sweden, England and the USA reported positive results during the quarter. In England staffing in ventilation services has been adapted to the current weak demand. As in the previous year, the operation in Germany reports a loss, as capacity utilization is seasonally low in the first quarter of the year.

Waste Treatment

The business area is accounted for as operations held for sale. Sales in the quarter decreased to SEK 37.4 (44.7) million. In local currencies the decrease was 15.4 per cent. The operating profit for the first quarter deteriorated to SEK –12.7 (–3.2) million. Quarterly earnings were reduced by SEK 8.0 million, related to the sale of the business area. The operating margin excluding these costs was –12.6 (–7.2) per cent.

Investments

Investments for total operations during the quarter were SEK 7.8 (6.4) million, of which SEK 4.2 (2.7) million refers to continuing operations.

Cash flow

There was a net reduction in working capital for total operations of SEK 6.7 (12.9) million during the quarter. After this change, cash flow from operating activities amounted to SEK 1.7 (0.8) million. The free cash flow was SEK –2.2 (–4.8) million.

Financial position and liquidity

Cash and cash equivalents at the end of the quarter were SEK 161.7 (122.8) million. Net interest-bearing debt was SEK 137.8 (107.0) million, which means that the net debt/equity ratio was 48.3 (37.2) per cent.

Personnel

The average number of employees as at March 31 was 697 (697), where an increase in the number of qualified consultants is offset by a reduction in the number of employees in administration. At the start of the year the number of employees was 708. The decrease refers to the head office and other administration.

Transactions with related parties

During the quarter a dividend of SEK 3 million was received from UK Nuclear Waste Management Ltd.

Parent company

Operations in the parent company consist of coordination of the Group. Parent company sales in the quarter amounted to SEK 4.7 (3.0) million. Operating profit was SEK –6.3 (–8.9) million. The loss after financial items was SEK -12.0 (–9.3) million. Cash and cash equivalents including current investments, amounted to SEK 61.5 (37.4) million.

Risks and uncertainties

An overall analysis of the Group's risks and how they are dealt with is given in the annual report, which is available on the company's website. Apart from these risks, no further significant risks are estimated to have arisen.

Accounting policies

The consolidated accounts for the Studsvik Group have been prepared in accordance with the Annual Accounts Act, the Swedish Financial Reporting Board recommendation RFR 1, Supplementary accounting rules for groups, International Financial Reporting Standards (IFRS) and interpretations by the IFRS Interpretations Committee (IFRIC) as adopted by the EU. There is a description of these accounting policies in the annual report. The consolidated accounts have been prepared in accordance with the historical cost method except as regards financial assets and liabilities carried at fair value through profit or loss.

The interim report for the parent company was prepared in accordance with the Annual Accounts Act and the Swedish Financial Reporting Board recommendation RFR 2 Accounting for legal entities.

Stockholm, April 25, 2016

Michael Mononen President

This report has not been reviewed by the company's auditors.

Time Schedule for Financial Information

Interim Report January–June 2016	July 22, 2016
Interim Report January–September 2016	October 21, 2016
Year-end Report January–December 2016	February 2017

For further information, please contact

Michael Mononen, President and Chief Executive Officer, +46 155 22 10 86 or Pål Jarness, Chief Financial Officer, +46 155 22 10 09.

The interim report will be presented at a conference call to be held in English, on April 25 at 2.30 p.m. Further information for those interested in participating is available at www.studsvik.com.

Consolidated statement of profit or loss and other comprehensive income

Amounts in SEK million	January March	January March	Full year
	2016	2015	2015
Net sales	171.6	156.8	721.2
Cost of services sold	–116.8	–116.0	–519.6
Gross profit	54.8	40.8	201.6
Selling and marketing expenses	–9.8	–8.4	–41.3
Administrative expenses	–29.8	–29.6	–106.8
Research and development costs	–6.0	–5.7	–25.0
Share in earnings from associated companies	3.3	3.1	11.6
Other operating income	1.3	0.9	6.9
Other operating expenses	–3.1	–2.9	–10.3
Operating profit	10.7	–1.7	36.6
Financial income	0.0	0.0	0.2
Financial expenses	–4.2	–3.0	–13.6
Fair value gain/loss (realized and unrealized)	–4.4	1.1	–4.3
Profit/loss before tax	2.1	–3.6	18.9
Income tax	3.9	1.2	–4.3
Profit/loss for the period from continuing operations	5.9	–2.4	14.6
Operations held for sale Note 1
Profit/loss for the period from operations held for sale	–12.5	–3.3	–12.2
NET PROFIT/LOSS FOR THE PERIOD	–6.6	–5.7	2.4
Other comprehensive income
Items that may later be reversed in the income statement
Translation differences on foreign subsidiaries	–8.6	4.7	2.6
Cash flow hedging	2.8	–5.7	0.5
Income tax on items recognized in other comprehensive income	–0.6	1.3	–0.1
Other comprehensive income for the period, net after tax	–6.4	0.3	3.0
Total profit/loss and other comprehensive income for the
period	–13.0	–5.4	5.4
Income for the period attributable to
Parent company's shareholders	–6.6	–5.7	2.4
Non-controlling interests	0.0	–	0.0
Total comprehensive income attributable to
Parent company's shareholders	–13.0	–5.4	5.3
Non-controlling interests	0.0	–	0.1
Earnings per share calculated on income attributable to
the parent company's shareholders during the period, SEK
Earnings per share (There is no dilution effect)
Profit/loss from continuing operations	0.72	–0.29	1.78
Profit/loss from operations for sale	–1.52	–0.40	–1.49
NET PROFIT/LOSS FOR THE PERIOD	–0.80	–0.69	0.29

Group statement of financial position

Amounts in SEK million	March	March	December
	2016	2015	2015
ASSETS
Intangible assets	172.2	178.7	181.4
Property, plant and equipment	112.9	355.8	344.8
Other non-current assets	116.0	152.3	127.7
Total non-current assets	401.1	686.8	653.9
Inventories	2.3	2.2	2.4
Trade receivables	148.6	131.6	196.6
Other current receivables	74.5	77.7	65.7
Cash and cash equivalents	147.5	122.8	74.9
Total current assets	372.9	334.3	339.6
Assets in disposal group held for sale Note 1	275.3	–	–
TOTAL ASSETS	1,049.3	1,021.1	993.5
EQUITY AND LIABILITIES
Equity attributable to parent company's shareholders	285.0	287.2	297.9
Non-controlling interests	0.3	0.3	0.3
Borrowing	297.1	202.3	1.0
Provisions and other non-current liabilities	112.4	246.5	238.0
Total non-current liabilities	409.5	448.8	239.0
Trade and other payables	185.5	257.3	248.1
Borrowing	0.0	27.5	208.2
Total current liabilities	185.5	284.8	456.3
Liabilities in disposal group held for sale Note 1	169.0	–	–
TOTAL EQUITY AND LIABILITIES	1,049.3	1,021.1	993.5
Pledged assets	148.9	159.2	148.9
Contingent liabilities	60.0	60.8	52.1

Changes in equity

Amounts in SEK million			Equity attributable
		Other			to the parent	Non
	Share	contributed		Retained	company's	controlling
	capital	capital	Reserves	earnings	shareholders	interest	Total equity
Equity at December 31, 2014	8.2	225.3	12.6	46.5	292.6	0.3	292.9
Changes January 1 – March 31, 2015
Comprehensive income for the period	0.0	0.0	0.3	–5.7	–5.4	0.0	–5.4
Equity at March 31, 2015	8.2	225.3	12.9	40.8	287.2	0.3	287.5
Changes April 1 – December 31, 2015
Comprehensive income for the period	0.0	0.0	2.6	8.2	10.8	0.0	10.9
Equity at December 31, 2015	8.2	225.3	15.5	49.0	297.9	0.3	298.3
Changes January 1 – March 31, 2016
Comprehensive income for the period	0.0	0.0	–6.4	–6.6	–13.0	0.0	–13.0
Equity at March 31, 2016	8.2	225.3	9.1	42.4	285.0	0.3	285.3

Group statement of cash flow

Amounts in SEK million	January	January	Full year
	March	March
Total operations	2016	2015	2015
Cash flow from operating activities
Operating profit	–1.7	–5.0	24.4
Adjustment for non-cash items	6.1	–1.6	28.7
Financial items, net	–4.3	–3.0	–11.5
Income tax paid	–5.1	–2.5	–6.9
Cash flow from operating activities before change in working capital	–5.0	–12.1	34.7
Change in working capital	6.7	12.9	–41.3
Cash flow from operating activities	1.7	0.8	–6.6
Investing activities
Acquisition of property, plant and equipment	–7.8	–6.4	–33.5
Divestment of subsidiaries	0.0	–	–
Dividend from associated companies	3.0	–	12.7
Other cash flow from investing activities	0.9	0.8	–2.4
Cash flow from investment activities	–3.9	–5.6	–23.2
Free cash flow	–2.2	–4.8	– 29.8
Financing activities
Change in borrowing	89.3	4.0	–16.7
Dividend to shareholders	–	–	–
Cash flow from financing activities	89.3	4.0	–16.7
Changes in cash and cash equivalents	87.2	–0.8	–46.5
Cash and cash equivalents at the beginning of the period	74.9	120.1	120.1
Translation difference	–0.4	3.5	1.3
Cash and cash equivalents at the end of the period	161.7	122.8	74.9

Financial ratios for the Group

Amounts in SEK million	January	January	Full year
	March	March
	2016	2015	2015
Margins
Operating margin, %	6.3	–1.1	5.1
Profit margin, %	1.2	–2.3	2.6
Return on investment*
Return on capital employed, %	2.5	4.8	12.0
Return on equity, %	3.3	-1.0	8.2
Capital structure**
Capital employed	584.8	517.3	507.5
Equity	285.3	287.5	298.3
Net debt	137.8	107.0	134.3
Net debt/equity ratio, %	48.3	37.2	45.0
Equity/assets ratio, %	27.2	28.2	30.0
Employees
Average number of employees	697	697	708
Net sales per employee	1.0	0.9	1.0

*Calculation based on closing balance **Refers to total operations

Data per share	January March	January March	Full year
	2016	2015	2015
Number of shares at the end of the period	8,218,611	8,218,611	8,218,611
Average number of shares	8,218,611	8,218,611	8,218,611
Earnings per share before and after dilution
Profit/loss from continuing operations	0.72	–0.29	1.78
Profit/loss from operations held for sale	–1.52	–0.40	–1.49
Profit/loss for the period	–0.80	–0.69	0.29
Equity per share, SEK	34.72	34.98	36.30

Net sales per geographical area

Amounts in SEK million	January	January	Full year
	March	March
	2016	2015	2015
Sweden - from continuing operations	30,1	34,5	144,7
Europe, excluding Sweden - from continuing operations	99,3	90,9	438,5
North America	37,9	29,3	105,0
Asia	4,3	2,1	26,8
Other	0,0	0,0	6,1
Total	171,6	156,8	721,2
Sweden - operations held for sale	10,7	12,7	33,3
Europe - excluding Sweden – from operations to sale	26,4	31,6	140,9
Total operations	208,7	201,1	895,4

Quarterly review

Amounts in SEK million	2014				2015				2016
	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1
Net sales	152.9	156.8	171.9	187.8	156.8	177.7	189.8	197.0	171.6
Operating expenses	–156.7	–158.6	–160.9	–165.4	–158.5	–176.9	–164.1	–185.3	–160.9
Operating profit	–3.8	–1.8	11.0	22.4	–1.7	0.8	25.7	11.7	10.7
Financial items, net	–6.6	–4.1	–4.9	–3.3	–1.9	–4.4	–5.4	–5.9	–8.7
Profit/loss after financial	–10.3	–5.9	6.1	19.1	–3.6	–3.6	20.3	5.8	2.1
items

Financial data per segment

Amounts in SEK million			Fuel and
Total operations	Waste	Consultancy	Materials
January-March 2016	Treatment*	Services	Technology	Other	Elimination	Group
External sales revenue	37.1	106.6	57.5	7.5	0.0	208.7
Revenue from segment	0.3	3.0	0.6	4.7	–8.6	0.0
Operating profit	–12.7	12.4	5.4	–6.8	0.0	–1.7
Assets	267,6	402.4	251.8	399.4	–271.9	1,049,3
Liabilities	177.8	322.5	123.8	411.7	–271.9	763,9
Investments	3.6	1.0	2.7	0.5	0.0	7,8
Depreciation/amortization	3.2	0.6	2.0	2.0	0.0	7,8
Average number of employees	109	521	125	50	0	805

January-March 2015	Waste Treatment*	Consultancy Services	Fuel and Materials Technology	Other	Elimination	Group
External sales revenue**	44.3	90.8	59.0	7.0	0.0	201.1
Revenue from segment**	0.4	0.3	0.2	2.7	–3.6	0.0
Operating profit**	–3.2	1.6	3.8	–7.2	0.0	–5.0
Assets	318.4	334.2	201.0	418.8	–251.3	1,021,1
Liabilities	248.3	272.7	109.8	354.1	–251.3	733.6
Investments	3.7	0.4	1.7	0.6	0.0	6.4
Depreciation/amortization	3.6	0.6	2.1	1.8	0.0	8.1
Average number of employees**	132	510	132	54	0	828

Full year 2015	Waste Treatment*	Consultancy Services	Fuel and Materials Technology	Other	Elimination	Group
External sales revenue**	174.2	416.1	276.1	29.0	0.0	895.4
Revenue from segment**	1.2	1.4	0.4	11.0	–14.0	0.0
Operating profit**	–11.8	23.8	40.9	–28.4	0.0	24.4
Assets	320.9	394.8	234.1	344.2	–300.5	993.5
Liabilities	226.8	319.3	98.3	351.2	–300.5	695.2
Investments	18.9	1.2	5.9	7.5	0.0	33.5
Depreciation/amortization	14.9	2.2	9.0	7.4	0.0	33.6
Average number of employees**	122	522	128	57	0	829

*Operations held for sale. For more information, please see Note 1.

**Reclassfication of income, earnings and employees was made between segments for the

comparison year to achieve comparability with 2016.

Parent company income statement	January March	January March	Full year
Amounts in SEK million	2016	2015	2015
Net sales	4.7	3.0	10.6
Cost of services sold	–0.7	–0.3	–2.9
Gross profit	4.0	2.7	7.7
Other operating income and costs	–10.3	–11.6	–36.6
Operating profit	–6.3	–8.9	–28.9
Result from participations in Group companies	0.0	–	45.1
Net financial items	–5.7	–0.3	–8.2
Profit/loss before tax	–12.0	–9.3	8.0
Income tax	2.6	2.0	–1.2
NET PROFIT/LOSS FOR THE PERIOD	–9.4	–7.2	6.8

Parent company balance sheet

Amounts in SEK million	March	March	December
	2016	2015	2015
ASSETS
Intangible assets	3.1	0.0	3.3
Property, plant and equipment	0.0	0.0	0.0
Financial non-current assets	621.3	627.1	607.3
Total non-current assets	624.4	627.1	610.6
Current assets	53.9	12.3	51.8
Cash and cash equivalents	61.5	37.4	14.5
Total current assets	115.4	49.7	66.3
TOTAL ASSETS	739.8	676.8	676.9
EQUITY AND LIABILITIES
Equity	281.4	234.1	290.9
Provisions	–	–	–
Non-current liabilities	364.5	272.2	106.7
Current liabilities	93.9	170.5	279.3
Total liabilities	458.4	442.7	386.0
TOTAL EQUITY AND LIABILITIES	739.8	676.8	676.9
Pledged assets	133.9	133.9	133.9
Contingent liabilities	5.3	5.4	5.3

Note 1 Operations held for sale

Assets and liabilities referring to the Waste Treatment business area have been accounted for as held for sale. Amounts in SEK million	January March 2016	January March 2015	Full year 2015
Cash flow from operating activities	–8.4	16.6	27.3
Cash flow from investing activities	–3.6	–3.7	–18.9
Cash flow from financing activities	–0.9	0.7	–25.1
Total cash flow	–12.9	13.6	–16.7
Assets in operations held for sale
Property, plant and equipment	225.2	–	–
Intangible assets	7.3	–	–
Financial assets	13.9	–	–
Current assets	28.9	–	–
Total assets	275.3	–	–
Liabilities in operations held for sale
Trade and other payables	43.7	–	–
Non-current liabilities	23.9	–	–
Provisions	101.4	–	–
Total liabilities	169.0	–	–
Analysis of profit/loss from operations held for sale
Income	37.1	44.3	174.2
Costs	–49.6	–47.6	–186.4
Profit/loss from operations held for sale – before tax	–12.5	–3.3	–12.2
Income tax	–	–	–
Profit/loss from operations held for sale – after tax	–12.5	–3.3	–12.2
Income tax	–	–	–
Profit/loss from operations held for sale for the period - after tax	–12.5	–3.3	–12.2

Note 2 Fair value estimation

The tables below show financial instruments at fair value on the basis of their classification in the fair value hierarchy. The definition of the various levels can be found in the Annual Report, Note 2.3. The tables below refer to total operations.

The Group's assets and liabilities measured at fair value as at Mars 31, 2016 (MSEK)	Level 1	Level 2	Level 3
Assets
Financial assets at fair value through profit or loss	–	24.1	11.4
Derivatives used for hedging	–	2.7	–
Liabilities
Derivatives used for hedging	–	4.8	–
The Group's assets and liabilities measured at fair value as at December 31, 2015 (MSEK)	Level 1	Level 2	Level 3
Assets
Financial assets at fair value through profit or loss	–	22.5	11.3
Derivatives used for hedging	–	2.5	–
Liabilities
Derivatives used for hedging	–	6.8	–
Fair value of the Group's borrowings (MSEK)	March 31, 2015		December 31, 2015
Non-current loans	297.6		1.0
Current loans	1.9		208.2
Total loans	299.5		208.2

Major shareholders, March 31, 2016
	Number of shares	Share, %
The Karinen Family	1,769,552	21.5
Briban Invest AB	1,283,492	15.6
Peter Gyllenhammar AB	547,669	6.7
Credit Agricole Suisse SA	363,879	4.4
Avanza Pensionsförsäkring AB	357,036	4.3
Nordnet Pensionsförsäkring AB	260,771	3.2
Malte Edenius	250,000	3.0
Invus Investment AB	226,594	2.8
Leif Lundin	187,000	2.3
Unionen	152,709	1.9
Total ten largest shareholders – holdings	5,398,702	65.7
Other shareholders	2,819,909	34.3
Total	8,218,611	100.0

The Studsvik share

Facts about Studsvik

Studsvik offers a range of advanced technical services to the international nuclear power industry in such areas as consultancy services and fuel and materials technology. The company has over 65 years' experience of nuclear technology and radiological services. Studsvik has 700 employees in 7 countries and the company's shares are listed on the Nasdaq Stockholm.

This report is a translation of the Swedish statutory report. In the event of any discrepancies between this document and the Swedish original, the latter shall govern. The content of this interim report may not, in whole or part, be reproduced or stored in a machine-readable medium without the previous permission of Studsvik AB (publ).

Production/Graphic design: Studsvik AB Photo: Studsvik

Studsvik AB

SE-611 82 Nyköping, SWEDEN Telephone +46 155 22 10 00 Fax +46 155 26 30 70 E-mail studsvik@studsvik.se www.studsvik.com