January - March, 2010
• Organic growth of approx. 6 percent for the Group*
• Organic growth in all business areas: approx. 8 percent in Europe and 4
percent in North America*
• EBITDA margin of approx. 12 percent
• Break-even results in Europe - first quarter with black figures since the
second quarter in 2008
Reporting Period (January - March, 2010)
• Sales amounted to SEK 56.3 million (57.2)
• EBITDA amounted to SEK 6.5 million (11.3), equivalent to an EBITDA margin of
11.5 percent (17.7). The prior year's EBITDA includes a one-off goodwill income
of SEK 5.8 million related to the takeover of operations from Bilmateriel AB
(BIMA)
• Cash flow from operating activities before changes in working capital amounted
to SEK 5.8 million (12.9)
• Net earnings amounted to SEK 0.8 million (2.8)
• Earnings per share after dilution amounted to SEK 0.00 (0.01)
---------
* For comparable units and in local currencies.
Further Expansion in North America
The operations in North America continue to be stable, both in terms of revenue
and profitability, and we have successfully managed to add two new contracts to
our existing portfolio, an extension of our existing New York program and an
important vehicle inspection contract for the entire state of Idaho. We have
also started to build up operations in Peru, where our first vehicle inspection
station is expected to be operational in June this year.
In Europe, we are pleased to see that the business unit now is showing black
figures after six consecutive quarters of losses, this despite the fact that
the quarter has been affected by close down costs in our Danish operations. The
market conditions for the equipment business remain tough but we have seen
signs of improvement during the first quarter. Sales in Europe were up by
approx. 8 percent in comparison to the previous year and we see more inquires
and more business opportunities than in previous quarters. However, considering
the sales drop of roughly 35 percent during last year, volumes are still at
historically low levels and we currently do not anticipate any dramatic
increases in the second quarter.
Gothenburg, Sweden, in May, 2010
Magnus Greko
President and CEO
Notable Events During the Reporting Period
Opus Launches Vehicle Inspection Operations in Peru
On March 19, 2009, Opus announced that its wholly-owned subsidiary, SysTech
International LLC, has sought and received permission from the Communication
Department (MTC) in Peru to carry out vehicle inspection in the country. The
Company will open its first vehicle testing station in June 2010 and expects a
rapid expansion of the Peruvian vehicle inspection market, which the Company
estimates to total approximately USD 50 million per annum.
The inspection program in Peru, which is known as CITV, is currently being
rolled out and includes control over vehicle's wheel alignment, shock
absorbers, brakes, lights, a visual survey and environmental control. All
vehicles in Peru must be inspected on an annual basis and certain types of
vehicles require two inspections per annum. Vehicle testing stations have been
around for some time already in certain parts of the country; however there are
still several areas where stations are missing. All stations are owned and
managed by private operators, for which MTC sets certain minimum requirements.
SysTech's vehicle testing program will complement the existing CITV program
with a fully automated system based on proven technology and with significant
cost advantages.
In February 2010, SysTech commenced construction of its first vehicle testing
station in Ica, Peru. The facility will include a modern customer reception and
three test lanes for passenger vehicles, mini busses, busses and trucks.
Opus Expands For-Hire Vehicle Inspection Program in New York
On February 23, 2010, Opus announced that its wholly-owned subsidiary SysTech
International LLC, has expanded the For-Hire inspection program in New York
City to include testing of all For-Hire Vehicles in addition to testing
medallion taxis. Approximately 40,000 limousines will be affected by the
expanded program thus significantly increasing the number of vehicles inspected
at the New York City Taxi and Limousine Commission (NYCTLC) Woodside inspection
facility. NYCTLC awarded a contract amendment to SysTech in November 2009 that
includes an upgrade to the SysTech inspection software application and added
service and maintenance responsibilities. SysTech designed and installed the
NYCTLC Safety and Emissions Inspection Lane system in 2004 and has maintained
and enhanced it since.
The contract amendment is valued at USD 700,000 over a two year period and is
in addition to the existing contract SysTech has with the NYCTLC.
For a video presentation of SysTech, please visit:
http://web.nashvillevip.org/PublicWeb/SystechVideo/SysTechInternational_FINAL.wm
v
Opus Bima Establishes Sales Activities on the Danish Market
On February 10, 2010, Opus announced that its wholly owned subsidiary, Opus
Bima AB, is setting up sales activities on the Danish market. Sales will be
targeted directly to end customers but also through independent sales
representatives and distributors. Delivery and billing will be done directly
from Opus Bima in Sweden. Service and support will be managed by locally
contracted partners.
The U.S. EPA Proposes the Strictest Health Standards to Date for Smog
According to a January 7, 2010 press release issued by the United States
Environmental Protection Agency (EPA), the agency has proposed new ground-level
ozone standards. Ground-level ozone is the primary constituent of smog.
Ground-level ozone forms when emissions from industrial facilities, power
plants, landfills and motor vehicles react in sun light.
The EPA is proposing a level between 0.060 and 0.070 parts per million (ppm)
measured over eight hours, compared to today's level of 0.075 ppm which was set
in March 2008. According to the EPA, the costs of reducing ozone to the
proposed levels would range from an estimated USD19 - 90 billion per year with
health benefits in return of approx. USD 13 - 100 billion per year.
The EPA is now awaiting public comment. The final standards are planned to be
issued by August 31, 2010.
For the full EPA press release and more information on ground-level ozone,
please go to
www.epa.gov/ozonepollution
Notable Events After the End of the Period
Opus Wins State of Idaho Contract for Vehicle Emission Inspection Program
On April 8, 2010, Opus announced that its wholly-owned subsidiary SysTech
International, LLC, has been awarded a contract by the Idaho Department of
Environmental Quality (DEQ) to design, implement and operate the State of Idaho
vehicle emission inspection program. The program will first be extended to
Canyon County and the city of Kuna, Idaho. Other counties may be included at a
later date. The new contract requires that SysTech partners with twenty two
(22) local businesses as subcontractors and provides each one with a SysTech
computerized emission inspection analyzer. SysTech will also provide a central
computer Vehicle Inspection Database (VID) that will network the inspection
stations and relevant government authorities for motor vehicle registration
enforcement. Other services that SysTech will provide include: vehicle
inspector training and licensing; consumer waiver and referee service; station
auditing; public information and education; and a customer service call center.
SysTech will manufacture and deliver the emission inspection equipment and
begin all program operations in the initial program area on June 1, 2010.
Approximately 65,000 vehicle inspections will be performed each year in the new
biennial program. The contract allows for neighbouring Ada County (appr.
120,000 annual inspections) and any other counties that do not meet EPA air
quality limits to join the program in the future.
The initial contract period is five years. Under the contract, SysTech will
collect 10-11 dollars per inspection and remit a portion to DEQ and the
inspection station subcontractors.
Sales and Results
Sales for the current reporting period amounted to SEK 56.3 million (57.2).
Organic growth was approx. 6 percent*.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
amounted to SEK 6.5 million (11.3). The EBITDA margin equated to 11.5 percent
(17.7). The prior year's EBITDA includes a one-off goodwill income of SEK 5.8
million related to the takeover of certain operations from Bilmateriel AB.
Acquired IP rights are amortized over five years which affects the Group's net
earnings negatively. In connection to the SysTech acquisition in April, 2008,
the company acquired IP rights of USD 12.3 million. Amortization relating to
these IP rights amount to approx. SEK 4.5 million (USD 0.6 million) per quarter
and approx. SEK 18 million (USD 2.5 million) per year. For this reason, the
company uses EBITDA, which excludes amortization, as a key performance
measurement of the Groups profitability.
--------
* For comparable units and in local currencies. Please also see “Translation of
foreign operations”.
Business Areas
The Opus Group consists of three geographical business areas based on the
Group's legal entities, each with a business area manager. Reporting to the
Group Management Team, the Board of Directors and the stock market as well as
other external stakeholders is in accordance with this structure. The three
business areas are: Europe, North America and Asia. For a more detailed
description of the business areas, please see Opus Annual Report 2009.
Europe
Sales for the current reporting period amounted to SEK 33.3 million (31.3).
Organic growth was approx. 8 percent*. EBITDA amounted to SEK 0.0 million
(5.0). The prior year's EBITDA includes a one-off goodwill income of SEK 5.8
million related to the takeover of certain operations from Bilmateriel AB.
In Europe we still are incurring close down costs in our Danish operations,
which have affected EBITDA negatively by approx. SEK 1.7 million during the
quarter. We expect to finalise the close down during the second quarter of this
year, during which time we will also have transferred J&B Maskinteknik's
operations in Alingsås, to the headquarters in Gothenburg, which will bring
additional cost savings of approx. SEK 0.5 million on a yearly basis.
The average number of employees during the current reporting period was 57.
North America
Sales for the current reporting period amounted to SEK 22.9 million (25.9).
Organic growth was approx. 4 percent*. EBITDA amounted to SEK 7.3 million
(6.5), equivalent to an EBITDA margin of 31.5 percent (25.1).
The average number of employees during the current reporting period was 87.
Asia
Sales for the current reporting period amounted to SEK 1.0 million (1.8).
EBITDA amounted to SEK 0.1 million (0.1).
The average number of employees during the current reporting period was 14.
----------
Note. External sales to the Asian market are currently invoiced from Business
Area Europe and amounted to SEK 0.7 million (0.5) during the current reporting
period.
Customers
Opus customers are primarily vehicle inspection companies (state and privately
owned), government agencies (counties, states etc.), the automotive industry
and vehicle garages.
Opus has no individual customers which represent more than 10 percent of the
Group's turnover.
Investments
Investments during the current reporting period include ongoing development
projects and investments in new operations in Peru, which are primarily
investments in equipment and facilities.
Financial Position and Liquidity
The equity ratio amounted to approximately 71.8 percent (70.0) at the end of
the period. The cash flow from operating activities before changes in working
capital was SEK 5.8 million (12.9) during the current reporting period. Cash
and cash equivalents at the end of the period equated to SEK 15.9 million (7.1)
and unused credit facilities amounted to SEK 0.3 million (1.8) at the end of
the period.
Taxes
The tax expense for the period is calculated using the current tax rate for the
Parent company and each subsidiary. Temporary differences and existing fiscal
loss carry-forwards have been taken into account.
Employees
The average number of FTEs in the Group was 158 (176) during the current
reporting period.
Parent Company
The Parent company's sales during the current reporting period amounted to SEK
17.6 million (9.6) and profit after financial items to SEK 0.1 million (0.8).
Related Parties
There have been no significant changes in the relationships or transactions
with related parties for the Group or Parent company compared with the
information given in the Annual Report 2009.
Annual General Meeting 2010
The Annual General Meeting (AGM) will take place at 19:00 (CET) on Wednesday
May 26, 2010, at Elite Park Avenue Hotel (the Taube hall), Kungsportsavenyn
36-38, SE-400 15 Gothenburg. Registration to the AGM takes place between 6 pm
and 6.45 pm. Material for the AGM can be found on Opus website, www.opus.se.
Accounting and Valuation Policies
This report has been prepared in accordance with IAS 34, Interim Financial
Reporting. The group accounting has been prepared in accordance with
International Financial Reporting Standards, IFRS, as approved by EU, and the
Swedish Annual Accounts Act. The interim report for the Parent company has been
prepared in accordance with the Swedish Annual Accounts Act and recommendation
RFR 2.3.
The same accounting and valuation policies were applied as in the 2009 Annual
Report. New standards and interpretations effective from January 1, 2010 have
not had any significant impact on the Group's financial statements.
Accounting Estimates and Assumptions
The preparation of financial reports in accordance with IFRS requires the Board
of Directors and Management to make estimates and assumptions that affect the
application of accounting principles and the carrying amounts of assets,
liabilities, revenue and expenses. Actual outcomes may deviate from these
estimates.
Translation of Foreign Operations
Assets and liabilities in foreign entities, including goodwill and other
corporate fair value adjustments, are translated to Swedish kroner at the rate
prevailing on the balance sheet date, meanwhile all items in the income
statement are translated using an average rate for the period.
Essential Risks and Uncertainty Factors
Opus Prodox AB (publ) and the Opus Group companies are through their activities
at risk of both financial and operational nature, which the companies
themselves may affect to a greater or lesser extent. Within the companies,
continuous processes are ongoing to identify possible risks and assess how
these should be handled.
The Companies' operations, profitability and financial conditions are directly
related to investments within the automotive industry and regulations within
environmental and safety testing of vehicles. With the recent dramatic
development of the global economic climate, there is a general insecurity,
which in the short term results in an increased risk and uncertainty in respect
of Opus sales, profitability and financial condition, primarily in the business
segment Europe, which is more dependent of the equipment business. In North
America, the Group runs vehicle inspection programs through long-term contracts
with government agencies. There is a risk of early contract termination which
would affect the Group's financial position negatively. Furthermore, the Group
has a currency risk through its translation exposure of the operations in the
U.S. A detailed description of the Parent company and subsidiaries' risks and
risk management are given in Opus Annual Report 2009.
Outlook 2010
The focus for 2010 is to improve profitability in Europe. As the North American
business shows stable and strong profit levels the challenge is to get our
European equipment business back on track starting to generate profits to the
Group. Our cost savings program is expected to reach its full effect after the
second quarter of 2010 and will contribute to reach this target.
In terms of sales, the extreme drop in the equipment business during 2009 has
started to turn around, although volumes are still at lower levels. The
improvement in the business of our large customers (car dealerships etc.) is
comforting and we estimate that they have a pent-up demand for investments when
the market is returning. This can lead to an organic growth in our European
business during the year. In addition the de-regulation of the Swedish vehicle
inspection market may create new opportunities.
In our North American business segment, where the vehicle inspection business
is dominant, we foresee an interesting year with several opportunities as a
number of large state and provincial contracts are scheduled to come out for
re-bid. In addition, the EPA (Environmental Protection Agency) proposed a rule
for lowering the ground-level ozone standards. The EPA will issue the rule in
final form by August 31, 2010. We expect that this new rule will require
several states and counties to expand existing, or implement new, vehicle
emissions inspection programs. Furthermore, we see several interesting new
market opportunities outside the U.S., such as in Latin America, Middle East
and Africa where the demand for emission & safety testing of vehicles is
increasing.
The outlook for 2010 above is unchanged compared to that presented in the
Annual Report for 2009.
Opus does not provide financial forecasts.
Financial Information 2010
May 26, 2010, Annual General Meeting 2010
August 26, 2010, Interim Report (January - June, 2010)
November 25, 2010, Interim Report (January - September, 2010)
February 24, 2011, Year-end report 2010
This report has not been subject to auditors' review.
Gothenburg, Sweden, May 20, 2010
Magnus Greko
President and CEO
Contact Information
Opus Prodox AB (publ), (org no 556390-6063)
Bäckstensgatan 11C
SE-431 49 Mölndal, Sweden
Phone: +46 31 748 34 91
Fax: +46 31 28 86 55
E-mail: info@opus.se
www.opus.se
For any questions regarding the interim report, please contact Magnus Greko,
President and CEO, +46 31 748 34 91 or +46 705 58 45 91.
Opus Certified Adviser
Thenberg & Kinde Fondkommission AB
Box 2108
SE-403 12 Gothenburg, Sweden
Phone: +46 31 745 50 00
Opus Prodox AB (publ) in Brief
The Opus Group is in the business of developing, producing and selling products
and services within Automotive Test Equipment, Vehicle Inspection Systems and
Fleet Management for the global market. The products include emission
analyzers, diagnostic equipment, and automatic test lanes. Services include
management of mandatory vehicle inspection programs. The Group sells its
products and services in more than 50 countries all over the world and
currently employs around 160 persons. The turnover for 2009 was rougly SEK 220
million. Opus' share is listed on First North Premier (NASDAQ OMX) under the
ticker OPUS.
