No. 13 Quarterly report Q2 2011

(Q2 2010 figures in brackets)

The Solar Group recorded revenue growth in Q2 2011 while EBITA was reduced. Expectations for revenue and EBITA in the year 2011 are adjusted downwards.

Group CEO Flemming H. Tomdrup about Q2 2011:
Both revenue and EBITA were at lower levels than expected and clearly unsatisfactory. Q2 as a whole could not offset the weak April results. We are pleased that the group's cash flows are showing such positive notes. In total, cash flows were up € 15.8m compared with Q1 2011. We are also seeing a strengthened market position in Solar Norge as they are adhering to the restructuring plan introduced following the SAP implementation. 

Revenue in Q2 2011:

• Revenue growth was 6.0% (-1.9%).

EBITA in Q2 2011:

• The German enterprise generated unsatisfactory Q2 results in 2011 and several enterprises failed to meet expected levels.
• A combination of organic growth and gross profit both underperforming meant that we did not generate expected EBITA levels.

Net working capital:

• Net working capital was reduced to 15.0% (15.3%).
• Net working capital was negatively impacted by Norway where this figure was 20.9% of the last 12 months’ revenue at the end of Q2 2011 against 13.6% at the end of Q2 2010.

Expectations for 2011:

• Expectations for 2011 are downgraded to revenue between € 1,465-1,505m against the previously announced € 1,485-1,525m. EBITA is downgraded to between
  € 35-43m against the previous announcements of € 45-52m.
• The revenue downgrading is based on the emerging slowdown in growth evident in several markets.
• When comparing to 2010, these new expectations represent organic growth between 2-5% against previous forecasts of 3-6%.
• Declining growth combined with a reduced gross profit percentage will impact earnings negatively. In Q2, we have launched a number of activities aimed at strengthening gross profit in H2 2011.
• Overall waning growth in our markets in Northern Europe calls for further restructuring in H2 to adjust cost levels to this expected new market situation.
• Expectations still include Solar 8000 (SAP) roll-out costs of € 7.0m.
• We will be cautious when it comes to further acquisitions in the current situation.

Solar 8000 (SAP)

• The transition to Solar 8000 in Norway has led to an operating loss. It is estimated that this has been reduced to approximately € 2.5m in Q2 2011 against € 3.5m in Q1 2011. This means that Norway is on track with the restructuring plan. The enterprise generated positive results in June – the first since the SAP implementation.

• The first review of the group template has now been completed. The remaining review procedures will be finalised in the autumn of 2011. Roll-out in the next countries will continue when the revised template has been fully incorporated. This should minimise roll-out related risks.
• We still expect to roll out Solar 8000 in the four enterprises in the Netherlands, Denmark, Sweden and Germany by the end of 2012. The total investment in Solar 8000 is still set at € 55m.

Q2 presentation and webcast today
The presentation of quarterly report Q2 2011 will be held at NASDAQ OMX Copenhagen today at 9.00, and a webcast in English will be transmitted online for live viewing at www.solar.eu.

Yours sincerely,

Solar A/S

Flemming H. Tomdrup

Facts about Solar
Solar A/S (formerly Aktieselskabet Nordisk Solar Compagni) was founded in 1919 and listed on the Copenhagen Stock Exchange in 1953. Solar is one of Northern Europe’s leading technical wholesalers within electrical, heating, plumbing and ventilation products. The group based in Kolding, Denmark, has subsidiaries operating under the Solar brand in Denmark incl. the Faroe Islands, Sweden, Norway, the Netherlands, Germany and Poland. Furthermore, Solar’s Aurora Group operates in Denmark, Sweden, Norway and Finland. In 2010, Solar's revenue totalled € 1,401.5m, corresponding to DKK 10.4bn. The group has approximately 3,000 employees.

For further information, go to: www.solar.eu

Enclosure: Quarterly report Q2 2011, pages 1-25