No. 3 2012 Annual Report 2012

The Solar Group generated revenue growth in the first three quarters of 2013 but the fourth quarter revenue dropped – not least due to negative market trends in the Netherlands. The group’s 2012 revenue and EBITA fell short of previously announced expectations. We saw a positive trend in cash flow from operating activities.

On 17 February 2013 Solar A/S published announcement no. 2 2013 “The Solar Group’s results for 2012 and expectations for 2013”. Present announcement does not hold any changes compared with these previously announced figures.

Group CEO Flemming H. Tomdrup says about 2012:
”2012 was characterised by downturns in most of the markets where we operate with the Dutch market suffering a significant drop. With the implementation of Solar 8000 (SAP) in Solar Nederland in June 2012 it was not possible to make the necessary continuing adjustments to the organisation, which impacted earnings negatively in the second half of the year. In Q4 2012, we made adjustments to the organisations in several group enterprises.”
 

* Calculated as an average of the last four quarters’ inventories, trade receivables and trade payables.

Revenue in 2012:

• Negative market trends impacted Solar’s revenue growth. Organic growth in Q4 was -3.1%. Adjusted for the number of working days organic growth totalled -0.6% in Q4 instead of an expected weak positive organic growth.

EBITA in 2012:

• Lower revenue and gross profit in Q4 than projected resulted in EBITA in 2012 of
  € 38.0m, equal to 2.2% of revenue against 2.6% in 2011.
• EBITA was also negatively impacted by Solar 8000 costs of € 6.4m against € 5.3m in 2011 and restructuring costs of € 2.6m, the same level as in 2011.
• Adjusted for 2012’s restructuring and Solar 8000 roll-out costs, normalised EBITA totalled € 47.0m, equalling 2.8% of revenue against 3.6% in 2011.
• We adjusted the organisations in several group enterprises in Q4 2012, leading to restructuring costs of € 2.6m against the estimated € 2.0m.

 
Net working capital:

• Positive trends in net working capital contributed to cash flow from operating activities rising to € 61.4m against € 48.5m in 2011.
• Net working capital was reduced to € 215.4m, equating to 12.6% of revenue against 15.8% in 2011. This means that we met Solar’s target for net working capital by year-end 2012 of less than 14% of revenue.
• Net working capital was 14.0% of revenue when stated as an average of four quarters, meeting our target of approximately 14%.
• Efforts to reduce net working capital will carry on. The target for 2013 is to get under 14% of revenue when calculating net working capital as an average of four quarters.   We expect net working capital at approximately 13% at year-end 2013.

Ordinary dividend:

• At the annual general meeting on 5 April 2013, the Supervisory Board will propose dividend distribution of DKK 6.65 per share which equates to € 0.89 per share and a distribution percentage of 44.8.

Capital structure will be assessed after H1 2013:

• The group will maintain a target for financial gearing of 1.5 to 2.5 times EBITDA and does not expect to make any major acquisitions in 2013. In this light, the Supervisory Board will assess the option to pay out extraordinary dividends in the autumn of 2013. Therefore, at the upcoming annual general meeting, the Supervisory Board will propose that it be granted the authority to pay out extraordinary dividends of up to DKK 15.00 per share for the period until the next annual general meeting.

Expectations for 2013:

• Expectations for 2013 include revenue of € 1,690-1,730m and EBITA of € 34-41m. We expect Q1 performance to result in low earnings, partly due to the expected level of restructuring costs and partly due to the fact that Easter is in March this year.
• Expectations for 2013 EBITA include costs of approximately € 4m for Solar 8000 implementation and restructuring costs of approximately € 5m. After making adjustments for these factors, we expect normalised EBITA to total € 43-50m.
• The lower revenue expectations equal negative growth of just above 1%, while the upper expectation levels equal positive organic growth of just below 2%.
• As a result of the negative market trends, we restructured the organisations in several group enterprises in 2012 and will follow up with further restructuring in 2013. Consequently, estimated restructuring costs in 2013 will be up from approximately € 2m at approximately € 5m.
• Implemented and planned restructuring will generate savings of approximately € 6m for 2013. These savings total approximately € 9m when translated to full-year figures.

Solar 8000 (SAP):

• We plan to roll out Solar 8000 in Solar Danmark in late Q3, followed by roll-out in Solar Sverige 3-4 months later. Quality and safety are key, and this approach allows us to get any outstanding additions to the group template in place by the summer holidays.
• We no longer plan to implement Solar 8000 in Solar Deutschland. We find that this enterprise will be better supported by the Microsoft Dynamics AX solution that we use in Solar Polska, among others.
• As we will not be rolling out Solar 8000 in Solar Deutschland, we will change the original expectations of the Solar 8000 project. Thus, the overall investment in Solar 8000 is now expected to total under € 54m against the previously announced cost of up to € 55m.
• We still have the same expectations for positive effects as we still expect the transition to Solar 8000 to increase earnings (EBITDA) by € 8-10m annually when fully implemented.

Presentation - webcast and teleconference today
The presentation of Annual Report 2012 will be transmitted online in English from NASDAQ OMX Copenhagen today at 11.00 CET, and the webcast will be accessible via www.solar.eu. It will be possible to make comments and ask questions via teleconference. Please use these numbers to participate:

Callers from Denmark: tel. +45 32 72 80 18
Callers from Great Britain: tel. +44 145 255 5131
Callers from the USA: tel. +1 866 682 8490
International callers: tel. +44 (0) 145 255 5131

Yours faithfully
Solar A/S

Flemming H. Tomdrup

Appendix: Annual Report 2012 pages 1-112

Solar facts
Solar A/S was established 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 in Denmark incl. the Faroes, Sweden, Norway, the Netherlands, Belgium, Germany, Poland and Austria. Solar also owns Aurora Group, a leading Scandinavian distributor of accessories for consumer electronics that operates in Denmark, Sweden, Norway and Finland. In 2012, Solar Group revenue totalled € 1,700.9m, equating DKK 12.7bn. The group has some 3,600 employees.

For more information, please visit www.solar.eu.

Disclaimer
This announcement was published in Danish and English on 6 March 2013 via NASDAQ OMX Copenhagen. In case of discrepancy between the two languages, the Danish version shall prevail.