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HÅG, Q1 2005 - Good sales and profitability development
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The positive sales and profitability development in the 2nd half of 2004 has continued into 2005. Improved sales, material costs on the same level as last year and lower fixed costs have contributed to an operating margin above 6%, a 45% improvement vs. Q2 2004. It is expected that this development will continue into Q2. For the second half of the year, growth above the general market growth is expected.
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The positive sales and profitability development in the second half of 2004 has continued into 2005. There is a sound development in the market in some of the company's main markets. Compared with the first quarter in 2004, the sales increase was 4% even though Easter last year was in the second quarter.
The profitability in the first quarter has improved significantly both compared to the corresponding period last year and last quarter. The company's operating costs have developed positively. Purchased materials in per cent of sales has been somewhat higher than in 2004. Cost of labour is significantly lower than in last quarter and on the same level as the same period last year, despite a salary increase of approx. 3%.
Financial Development
HÅG's operating revenues were in the first quarter MNOK 130.1. This is an increase of MNOK 5.3 (4.2%) vs. the same period last year.
The operating income was MNOK 8.0. This is an improvement of MNOK 2.5 vs. same period last year. Income before taxes was MNOK 7.2 and net income was MNOK 5.1.
Total assets at the end of the quarter were MNOK 256, which is on the same level as the corresponding period last year and at the end of 2004 despite an increased activity level. The company's equity ratio is 41%. Net interest-bearing debt was MNOK 97.9, an increase of MNOK 12.8 since year-end. This is due to the activity level and shifting of some operating costs.
With effect from 1 January 2005, HÅG applies International Financial Reporting Standards (IFRS) in the consolidated accounts. The introduction of IFRS has influenced HÅG's accounts in some areas. HÅG has prepared the opening IFRS balance sheet at the date of the transition to IFRS, which is 1 January 2004. The 2005 interim reports will be prepared in accordance with IFRS and include comparative information for 2004. For specifications, see transition document sent in a report to Oslo Stock Exchange 10 May 2005.
The Markets
With sales revenues of MNOK 130, the sales development in the first quarter was good. The sales growth in Norway was 19% above last years level and contributes to confirm the company's leading position in the Norwegian office furniture market. In Denmark, sales were on the same level as last year. HÅG have met major market challenges in Germany and Sweden, where the sales decline was between 5 and 10% compared to last year. The market in the Benelux countries has developed positively, and HÅG achieved in the first quarter a sales increase of 46%. In the USA, more chairs were sold in the first quarter than in the same period in 2004. Sales in USD are however, on the same level while sales of components for local mounting give a lower value. In HÅG's other export markets, the market situation is difficult in Great Britain, whereas other markets as Switzerland, Spain and Finland experience a very sound progress.
The company's new chair-line, HÅG H09, is very well received in the market.
Future Outlook
Sales in the second and third quarter are normally poorer than in the first and forth quarter. However, sales have been on a satisfactory level into the second quarter, and a sales increase of 20 and 30% vs. same period last year is expected. The profitability is expected to be satisfactory in the second quarter.
For the second half of the year, growth above the general market growth is expected.
The efforts of reducing direct production costs through continued automation of own production, as well as increased purchasing from competitive suppliers, continue.
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