INTERIM REPORT
January June 2002
Statement by the CEO
"Order bookings continued to be very good during the second
quarter and the order backlog has thereby increased to SEK 44
billion, which once again is an all-time high and equals more
than two and a half years sales. The largest individual
order during the quarter was for the supply of the next
generation light anti-armor weapon program for the British and
Swedish armies. This order confirms that we are world leaders in
the area of light anti-armor weapons and the product has a
significant export potential. And last week, Germany decided to
order serial production of the Taurus standoff missile, which
Saab and LFK of Germany have developed together.
So far this year, we have seen a good growth in the defense related business.
The customary variation in income over the year normally means that the first half-year is usually weaker than the second. This picture is reinforced by the costs we took in the first quarter for restructuring our space activities. For the whole year, however, I continue to anticipate further improvement in operating income and operating margin, excluding capital gains."
Structural changes
With effect from January 1 this year, Nyge Aero has been
transferred from Saab Technical Support and Services to Saab
Aerospace as part of the co-ordination of the Groups aero
structures activities.
During the second quarter, the US DoD granted Saab necessary approvals for takeover of the signature management operation acquired from BAE SYSTEMS. Earlier this year, Saab also acquired the remaining 35 percent in Combitech Systems.
Operations
Saab is one of the worlds leading high-technology
companies, with its main activities focusing on aerospace and
defense. The operation covers clearly defined areas within
defense electronics, missile systems and space electronics as
well as military and civil aviation. Saab also focuses on high
technology services and maintenance. Saab comprises the business
areas Saab Systems & Electronics, Saab Aerospace, Saab
Technical Support & Services, Saab Bofors Dynamics,
Saab Ericsson Space and Saab Aviation Services. For
a brief description of the business areas see the end of the
report.
Sales, income and orders
Sales
Group sales increased organically during the first half-year
by 11 percent to SEK 8,284 m. (7,458). Seventyfour percent of
sales were related to defense and 40 percent of total sales were
export. Sales during the second quarter increased by 16 percent
to SEK 4,754 m. (4,096).
Sales of all operations in Systems & Electronics have increased compared with the same period last year. The increase in Aerospace is mainly attributable to defense, but sales of the commercial operations have also increased through more deliveries to Airbus and the internal acquisition of Nyge Aero. Sales for the first half-year included 12 (8) Gripen aircraft, of which 9 (6) in the second quarter. The changes compared with the previous year for Technical Support & Services are mainly due to the transfer of Nyge Aero and lower volumes for the aircraft maintenance operation in Saab Aviocomp. Total sales for Dynamics have increased compared to the first half-year of the preceding year, which also applies to most of the constituent business units. The decrease in sales for Space is mainly attributable to the situation in the commercial telecom market, as well as to reduced public funding of space research. The decrease in Aviation Services is related to the customer support activities and is a result of the general situation for air travel.
Income and profitability
Operating income amounted to SEK 474 m. (1,059), of which SEK
328 m. (256) in the second quarter. The result for the previous
year included a capital gain from the divestment of Saab Marine
Electronics of SEK 650 m. Operating income before capital gains
was thus SEK 474 m. (409), corresponding to a margin of 5.7
percent (5.5). The six-month income has compared to the previous
year been positively affected by SEK 120 m. related to
capitalization of development costs and negatively affected by
SEK 40 m. related to structural costs in the space operation.
Income from the defense business has improved compared to the
previous year, but the total income has been affected by the
general market situation for the space business and Aviation
Services.
Operating income per business area is reported before goodwill amortization, see table on page 7. Operating income for Systems & Electronics has improved mainly as a result of volume increases and higher margins for Saab Training Systems and Saab Avionics. Operating income for Aerospace has improved as a result of volume increases and capitalization of development costs. Operating margin excluding capitalization is on level with previous years. Operating income for Technical Support & Services is on a level with last year with an improved margin mainly due to higher utilization ratio and cost reductions. During the first half-year, the product mix has affected operating income and margin for Dynamics. Operations in Space have been affected both by the situation in the telecom industry and by a decrease in public-funded orders and by the provision made in the first quarter of SEK 40 m. for structural changes. Lower volumes have affected operating income for Aviation Services, but the margin continues to be above 8 percent, the same level as for the whole year 2001. Operating income for Corporate/Other operations has improved as a result of continued structuring.
Administration and marketing expenses are on level with previous year. Of the periods research and development costs, a total of SEK 120 m. (0) has been capitalized in accordance with new accounting principles and SEK 216 m. (369) has been charged to income. Capitalized development costs are mainly related to the export version of Gripen. If these rules had been applied in 2001, SEK 90 m. would have been capitalized in the balance sheet for the first half-year of that year. Other operating income during both the present and previous years consist mainly of trading income in Treasury and currency gains etc. The previous year also included a capital gain of SEK 650 m. Other operating expenses consist mainly of currency and capital losses. The present year also include the provision made for structural changes in Space of SEK 40 m. Project interest on non-utilized advance payments, which has decreased financial net and is reported as gross margin, amounted to SEK 83 m. (49).
Net financial income and expenses amounted to SEK 100 m. (-8). The average return on external investments was 3,09 percent (4,89). The decrease in return is mainly attributable to revaluation of the obligation portfolio due to increasing market interests. The financial net has also been negatively affected by a major increase in the interest level on the pension debt. Income after financial items amounted to SEK 374 m. (1,051). Current and deferred taxes amounted to SEK -122 m. (-215). Minority interest in income is positive as a result of the negative income in Saab Ericsson Space and as a result of the acquisition of the outstanding minority in Combitech Systems.
Net income for the period was SEK 263 m. compared with SEK 795 m. for the same period previous year including the capital gain from the divestment of Saab Marine Electronics. This corresponds to an income per share of SEK 2.47 (7.47). Pre-tax return on capital employed was 9.9 percent (17.9). After-tax return on shareholders equity was 9.3 percent (25.4).
Orders
Group order bookings amounted to SEK 12,456 m. (7,544), of
which SEK 6,396 m. (3,750) in the second quarter. Of order
bookings, seventy-five percent came from customers outside Sweden.
Order bookings during the second quarter included development and
serial production of next generation anti-armor weapon, further
development of command and control systems for air and army
forces, separate orders and spare parts for Gripen, sensors and
anti-armor weapons and ammunition for the Carl-Gustaf system. In
addition, Saab Training Systems has signed a 10-year agreement
with the US army regarding gunnery and training ranges. The order
backlog at the end of the period amounted to SEK 44,004 m.
compared to SEK 40,034 m. at the beginning of the year.
Liquidity, finance and investments
Finance and liquidity
Liquid funds less liabilities to credit institutions compared
to the beginning of the year have decreased by SEK 349 m. to 4,214
m. (4,563). The decrease is mainly related to payment of dividend
and the decrease of the pension liability. The Groups net
liquidity after deduction for allocations to pensions decreased
to SEK 788 m., compared with SEK 885 m. at the beginning of the
year.
Group equity/assets ratio amounted to 22.1 percent (20.4), compared to SEK 22.3 percent at the beginning of the year. Shareholders equity amounted to SEK 6,476 m. (6,295), corresponding to SEK 60.83 (59.13) per share, compared with SEK 62.74 at the beginning of the year.
Cash flow
Operating cash flow was positive during the first half-year
by SEK 373 m. Working capital has increased mainly due to
increase in inventory related to the A380 project and payments
related to utilization of previously made provisions. Operating
cash flow of SEK 373 m. is distributed between cash flow from the
operations of SEK 444 m., acquisitions SEK -77 m. and from the
regional aircraft leasing business SEK 6 m.
Capital expenditures
The periods capital expenditures in property, plant and
equipment, excluding lease assets, amounted to SEK 276 m. (197).
Personnel
At the end of the period, the number of employees in the
Group was 14,226, compared with 14,028 at the beginning of the
year. The increase is mainly due to the acquisition of the
signature management business in the U.S.
Parent Company
During the first six months, parent company sales amounted to SEK 2,547 m. (1,800). Operating income was SEK 310 m. (113) and income after financial income and expenses was SEK 232 m. (132).
Cash and marketable securities, less liabilities to credit institutions, amounted to SEK 1,188 m., compared with SEK 1,617 m. at year-end. Capital expenditures in property, plant and equipment amounted to SEK 100 m. (54). The number of employees at the end of the period was 4,276, compared with 4,237 at the beginning of the year.
Ownership
Saabs principal owners are BAE SYSTEMS, Investor AB,
the Wallenberg foundations, AMF, GMO International Funds, Third
AP fund, Robur funds, Eikos fund, Fidelity funds, Skandia, SHB
funds and several U.S. funds.
Accounting Principles
The Group follows all the recommendations of the Swedish
Financial Accounting Standards Council which are applicable to
2002. This means that from 2002 onwards, the new accounting
principles will be applied also in regard to intangible assets,
allocations and depreciation, etc. Only the recommendation on
intangible assets, RR 15, has been of material significance for
the Group's income and financial position. In all other respects,
the report has been drawn up in accordance with earlier applied
accounting principles. Sales and operating income by business
area for the year 2001 has not been adjusted for the internal re-organization
regarding Saab Nyge Aero.
Linköping, July 11, 2002
Bengt Halse
President and Chief Executive Officer
Audit review
We have reviewed this interim report in accordance with the
recommendation issued by the Swedish Institute of Authorised
Public Accountants, FAR. A review is significantly limited
compared to an audit. We have found nothing to suggest that this
interim report does not comply with the requirements set out in
the Exchange and Annual Accounts Acts.
Linköping, July 11, 2002
Björn Fernström | Caj Nackstad |
Authorized Public Accountant | Authorized Public Accountant |
Ernst & Young AB | KPMG Bohlins AB |
Dates for financial
information:
Interim Report for January - September will be published on
October 16, 2002.
The 2002 Report will be published on February 14, 2003.
For further information,
please contact:
Agneta Kammeby, Manager Investor Relations tel. +46 13 18 71 25
Jan Nygren, Head of Corporate Communications tel. +46 13 18 19 99
Telephone interview with CEO
Bengt Halse:
Today Thursday July 11. tel.+46 13 18 71 75
Contact Anders Stålhammar, Press Officer tel. +46 70 889 7096
International teleconference:
Today Thursday July 11, 16.00 (CET). Contact Marita Sidén tel. +46
13 18 71 49
for registration and further information.
The Interim report can also be accessed on the Internet at www.saab.se
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