January - June, 2010
> Organic growth of approx. 6 percent for the Group*
> Continued high profitability in North America - EBITDA margin of approx. 32
percent
> Positive signs in Europe - organic growth of approx. 13 percent* and
black figures during two consecutive quarters
> Cash flow from operating activities of approx. SEK 13 million
Interim Period (January - June, 2010)
• Sales amounted to SEK 113.1 million (113.0)
• EBITDA amounted to SEK 14.8 million (17.6), equivalent to an EBITDA margin
of 13.0 percent (14.6). 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 13.0 million (16.8)
• Net earnings amounted to SEK 5.0 million (1.6)
• Earnings per share after dilution amounted to SEK 0.03 (0.01)
Reporting Period (April - June, 2010)
• Sales amounted to SEK 56.8 million (55.7)
• EBITDA amounted to SEK 8.2 million (6.3), equivalent to an EBITDA margin of
14.4 percent (11.2)
• Net earnings amounted to SEK 4.2 million (-1.2)
• Earnings per share after dilution amounted to SEK 0.02 (-0.01)
* For comparable units and in local currencies.
Continued high profitability (EBITDA margin of 32 %) in North America
The profitability of the North American business continues in the second
quarter. The EBITDA margin amounted to approximately 32 percent for the first
half year, which in absolute figures represents a growth of six percent when
adjusting for currency effects. This despite the fact that we are carrying
costs for the rollout of the Group's first vehicle inspection station in Peru
and the start-up of the newly won vehicle inspection management contract in the
state of Idaho.
In Europe, the recovery, which we saw already in the first quarter, continues.
Second quarter growth was close to 19 percent, but there is still some way to
get back to previous levels. The losses in the previous year have turned around
into break-even results, and going forward focus continues to be on increasing
profitability. The close down of our Danish operations is completed as per end
of August and we are now working to identify further measures to reduce the
cost basis.
The global market for aftermarket products remains uncertain, but we see a
growing interest among our customers and distributors. This autumn, a number of
important contracts for vehicle inspection are up for bid, both in North and
South America. The de-regulation of the Swedish vehicle inspection market,
which has just recently come into force, also creates interesting opportunities
for the Group.
Gothenburg, Sweden, in August, 2010
Magnus Greko
President and CEO
Notable Events During the Reporting Period
Annual General Meeting 2010
In accordance with the notice published on April 28, 2010 in the Swedish
newspaper Dagens Industri, in the Swedish official gazette Post och Inrikes
Tidningar, as well as on the company's website, the Annual General Meeting was
held in Opus Prodox AB (publ), org. no. 556390-6063, on May 26, 2010.
Below follows a summary of the decisions taken by the Annual General Meeting
2010 in Opus:
• The income statement, balance sheet, as well as the consolidated income
statement and consolidated balance sheet, where approved.
• The company's distributable earnings were disposed in accordance with the
Board's proposal, meaning that no dividend shall be paid for the financial year
2009.
• The Board of Directors and Chief Executive Officer were granted discharge for
the financial year 2009.
• The Board shall, in accordance with the Nomination Committee's proposal and
until the next Annual General Meeting has been held, consist of five members
and no deputies (unchanged).
• Remuneration to the Board shall, in accordance with the Nomination
Committee's proposal, amount to SEK 120,000 to the Chairman of the Board and to
SEK 80,000 to each one of the other non-employed members of the Board. The
remuneration levels are unchanged compared to 2009.
• Compensation to the company's auditor shall, in accordance with the
Nomination Committee's proposal,be on an approved invoice basis.
• The Board shall, in accordance with the Nomination Committee's proposal and
until the next Annual General Meeting has been held, consist of:
o Göran Nordlund, Chairman (re-election)
o Märtha Josefsson (re-election)
o Bertil Engman (re-election)
o Jan-Crister Persson (re-election)
o Lothar Geilen (re-election)
Furthermore, the Annual General Meeting decided to elect a deputy auditor in
the company. Authorized Public Accountant Peter Ericsson, BDO Göteborg KB, was
elected as deputy auditor until the Annual General Meeting 2012 has been held.
• The Nomination Committee's proposal to a revised instruction for the next
Nomination Committee was approved.
• Remuneration to senior executives shall be in line with the Board's proposed
guidelines.
• The Board was, in accordance with the Board's proposal, authorized to decide
on an issue of new shares of up to 10 percent of the existing share capital
until the next Annual General Meeting.
• A new issue of 1,750,000 share options was decided in accordance with the
Board's proposal, that with deviation from the shareholders preferential rights
are to be targeted at Opus Bima AB, a wholly owned subsidiary and with the
condition that the share options, under the proposed conditions, shall be
transferred to employees and other key members in the Group. The reason for
deviating from the shareholders preferential rights is to create a long-term
commitment amongst the employees, which may be expected to increase the
interest in the company's operations and profit development.
The company's President and CEO Magnus Greko presented the company's development
during the financial year 2009 and first quarter 2010 and significant events
during the periods.
36 percent of the shares and votes were represented at the Annual General
Meeting. Minutes from the meeting are available on Opus website where also the
other material from the meeting can be found.
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 per- formed 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 sta tion subcontractors.
Other Notable Events During the Interim Period
Opus Launches Vehicle Inspection Operations in Peru
On March 19, 2010, 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
in- spections 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
test- ing 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 amend- ment 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 exist- ing contract SysTech has with the NYCTLC.
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.
Notable Events After the End of the Period
No notable events have occurred after the end of the period.
Sales and Results
Reporting Period
Sales for the current reporting period amounted to SEK 56.8 million (55.7).
Organic growth was approx. 6 percent*.
Earnings before interest, taxes, depreciation and amortization (EBITDA) amounted
to SEK 8.2 million (6.3). The EBITDA margin equated to 14.4 percent (11.2).
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.
Interim Period
Sales for the current interim period amounted to SEK 113.1 million (113.0).
Organic growth was approx. 6 percent*.
Earnings before interest, taxes, depreciation and amortization (EBITDA) amounted
to SEK 14.8 million (17.6). The EBITDA margin amounted to 13.0 percent (14.6).
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.
* For comparable units and in local curre ncies. Please also see page 7
“Translation of foreign operati ons”.
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
busi- ness 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 32.2 million (27.6).
Organic growth was approx. 19 percent*. EBITDA amounted to SEK 0.0 million
(-3.2).
Sales for the current interim period amounted to SEK 65.5 million (58.9).
Organic growth was approx. 13 percent*. EBITDA amounted to SEK 0.0 million
(1.8). 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.
Close down costs in the Danish operations have affected EBITDA negatively by
approx. SEK 0.9 million in the current reporting period and by SEK 2.6 million
in the current interim period.
The average number of employees during the current interim period was 57 (62).
North America
Sales for the current reporting period amounted to SEK 24.6 million (28.2).
Organic growth was approx. -7 percent*. EBITDA amounted to SEK 8.0 million
(9.6), equivalent to an EBITDA margin of 32.6 percent (34.2).
Sales for the current interim period amounted to SEK 47.5 million (54.0).
Organic growth was approx. -2 percent*. EBITDA amounted to SEK 15.3 million
(16.2), equivalent to an EBITDA margin of 32.2 percent (29.9).
The average number of employees during the current interim period was 89 (99).
Asia
Sales for the current reporting period amounted to SEK 1.7 million (0.1). EBITDA
amounted to SEK 0.3 million (-0.4).
Sales for the current interim period amounted to SEK 2.6 million (1.9). EBITDA
amounted to SEK 0.4 million (-0.4).
Note. External sales to the Asian market are currently invoiced from Business
Area Europe and amounted to SEK 0.7 million (0.3) during the current reporting
period and SEK 1.0 million (0.8) during the current interim period.
The average number of employees during the current interim period was 12 (13).
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 interim period consist mainly of ongoing
development projects, investments in new operations in Peru, and the
implementation of the newly won vehicle inspection manage- ment contract in the
state of Idaho.
Financial Position and Liquidity
The equity ratio amounted to approximately 73.1 percent (71.3) at the end of the
period. The cash flow from operating activities before changes in working
capital was SEK 13.0 million (16.8) during the current interim period. Cash and
cash equivalents at the end of the period equated to SEK 15.1 million (7.8) and
unused credit facilities amounted to SEK 2.3 million (1.4) 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 (174) during the current interim
period.
Parent Company
The Parent company's sales during the current reporting period amounted to SEK
14.2 million (10.0) and profit after financial items to SEK -0.8 million (-1.4).
The Parent company's sales during the current interim period amounted to SEK
31.8 million (19.6) and profit after financial items to SEK -0.3 million (-0.5).
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.
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. On translation of
foreign operations, the following exchange rates have been used:
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 imple- ment 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
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, August 26, 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 roughly SEK 220 million. Opus' share is
listed on First North Premier (NASDAQ OMX) under the ticker OPUS.
CONVENIENCE TRANSLATION - THE SWEDISH VERSION SHALL PREVAIL
This is a non-official translation of the Swedish original version which has
been developed in-house. In case of differences between the English translation
and the Swedish original, the Swedish text shall prevail.
