January - September, 2010
> Organic growth approx. 8 percent for the Group*
> Continued good profitability in North America
> Positive development in Europe - organic growth approx. 16 percent* and
positive EBITDA during three consecutive quarters
> Cash flow from operating activities approx. SEK 20 million
Interim Period (January - September, 2010)
• Sales amounted to SEK 167.6 million (162.0)
• EBITDA amounted to SEK 22.4 million (24.0), equivalent to an EBITDA margin of
13.3 percent (14.1). The prior year's EBITDA includes a one-time 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 20.4 million (22.1)
• Net earnings amounted to SEK 2.0 million (0.2)**
• Earnings per share after dilution amounted to SEK 0.01 (0.00)
Reporting Period (July - September, 2010)
• Sales amounted to SEK 54.5 million (49.1)
• EBITDA amounted to SEK 7.7 million (6.4), equivalent to an EBITDA margin of
13.9 percent (12.9)
• Net earnings amounted to SEK -3.0 million (-1.4)**
• Earnings per share after dilution amounted to SEK -0.02 (-0.01)
* For comparable units and in local currencies.
** The result is affected by foreign exchange differences on Group internal
receivables and liabilities, see note 1 page 14.
Continued Good Profitability in North America and Recovery in Europe
The good profitability in the North American business continues in the third
quarter. The EBITDA margin amounted to approximately 30 percent for the first
nine months. 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 continues. Third quarter growth was close to 25
percent. The nine months result (EBITDA) improved by SEK seven million compared
to the same period last year adjusted for one-off items. The improvement is a
result of increased sales but also an effect of the completed profitability
program. We are taking actions to further improve profitability in our European
operations.
The global market for aftermarket products remains uncertain, but we see a
steadily growing interest among our customers and distributors. This autumn, a
number of important contracts for vehicle inspection are up for tender, 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 November, 2010
Magnus Greko
President and CEO
Notable Events During the Interim Period
Annual General Meeting 2010
The Annual General Meeting was held in Opus on May 26, 2010. Minutes from the
meeting are available on Opus website where also the other material from the
meeting can be found.
SysTech Wins 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 started 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.
SysTech 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 Ministry of
Transport & Communication (MTC) in Peru to carry out vehicle inspection in the
country. The company opened its first vehicle testing station on November 13,
2010, and expects a rapid expansion on the Peruvian vehicle inspection market,
which the company estimates to total approximately USD 50 million per annum.
SysTech 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.
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.
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. The EPA is now awaiting public comment. The final standards
are planned to be issued by December 31, 2010.
Notable Events After the End of the Period
Nomination Committee prior to the Annual General Meeting 2011
On November 19 2010, Opus announced the appointed members of the Nomination
Committee prior to the Annual General Meeting 2011:
- Göran Nordlund, as Chairman of the Board in Opus
- Jörgen Hentschel, representing AB Kommandoran
- Lothar Geilen, representing himself
- Martin Jonasson, representing the Second AP Fund
- Bengt Belfrage, representing Nordea Funds
Martin Jonasson has been elected Chairman of the Nomination Committee. The
Nomination Committee has been appointed in accordance with the instructions
adopted at the Annual General Meeting 2010.
Opus Ends Market Maker Agreement
On November 17, 2010, Opus announced that the company has ended its agreement
with Remium as liquidity provider (Market Maker) for the trading in the Opus
share. Trading with liquidity guarantee ended 2010-11-19.
J&B Signs Subcontractor Agreement with YIT
On October 7, 2010, Opus announced that its wholly-owned subsidiary, J&B
Maskinteknik AB, has signed an agreement with YIT Sverige AB regarding
calibration and service of all test equipment at Bilprovningen.The agreement
runs until December 31, 2012 with the possibility of three two-year extensions.
The contract value is estimated to approximately SEK 15 million excluding any
extensions.
Sales and Results
Reporting Period
Sales for the current reporting period amounted to SEK 54.5 million (49.1).
Organic growth was approx. 11 percent*. Earnings before interest, taxes,
depreciation and amortization (EBITDA) amounted to SEK 7.7 million (6.4). The
EBITDA margin equated to 13.9 percent (12.9).
Acquired IP rights are amortized over five (5) years which affects the Group's
net earnings negatively. In connection with 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 167.6 million (162.0).
Organic growth was approx. 8 percent*. Earnings before interest, taxes,
depreciation and amortization (EBITDA) amounted to SEK 22.4 million (24.0). The
EBITDA margin amounted to 13.3 percent (14.1). The prior year's EBITDA includes
a one-time goodwill income of SEK 5.8 million related to the takeover of
certain operations from Bilmateriel AB.
* External net sales, for comparable units and in local currencies. Please also
see page 7 “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 28.8 million (23.3).
Organic growth was approx. 25 percent*. EBITDA amounted to SEK 0.3 million
(-3.0).
Sales for the current interim period amounted to SEK 94.3 million (82.2).
Organic growth was approx. 16 percent*. EBITDA amounted to SEK 0.3 million
(-1.1). The prior year's EBITDA includes a one-time 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 2.9 million in the current reporting period and by SEK 0.3 million
in the current interim period.
The average number of employees during the current interim period was 56 (62).
North America
Sales for the current reporting period amounted to SEK 25.7 million (25.8).
Organic growth was approx. -1 percent*. EBITDA amounted to SEK 6.4 million
(9.2), equivalent to an EBITDA margin of 24.9 percent (35.8).
Sales for the current interim period amounted to SEK 73.3 million (79.8).
Organic growth was approx. -2 percent*. EBITDA amounted to SEK 21.7 million
(25.4), equivalent to an EBITDA margin of 29.6 percent (31.8).
The table below shows external revenue and EBITDA in local currency (USD).
EBITDA for the current interim period was USD 0.3 million lower than in the
previous year (USD 2.95 million compared to 3.23 million), as a result of an
inventory write-down as per last of September, costs related to various
expansion projects, and start-up costs in the new operations in Peru.
The average number of employees during the current interim period was 105 (92).
Asia
EBITDA for the current reporting period amounted to SEK 0.5 million (0.1).
EBITDA for the current interim period amounted to SEK 0.9 million (-0.3).
The average number of employees during the current interim period was 12 (13).
Customers
Opus customers are primarily government agencies (counties, states etc.), the
automotive industry, vehicle garages, and vehicle inspection companies (state
and privately owned).
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 the new operations in Peru, and the
implementation of the newly won vehicle inspection management contract in the
state of Idaho.
Financial Position and Liquidity
The equity ratio amounted to approximately 74.2 percent (71.4) at the end of
the period. The cash flow from operating activities before changes in working
capital was SEK 20.4 million (22.1) during the current interim period. Cash and
cash equivalents at the end of the period equated to SEK 14.3 million (13.9)
and unused credit facilities amounted to SEK 2.7 million (1.5) 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 (full-time equivalents) in the Group was 173 (167)
during the current interim period.
Parent Company
The Parent company's sales during the current reporting period amounted to SEK
12.0 million (8.4) and profit after financial items to SEK -2.0 million (-1.4).
The Parent company's sales during the current interim period amounted to SEK
43.7 million (27.9) and profit after financial items to SEK -2.3 million
(-2.0).
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 2011
The Annual General Meeting will take place on Wednesday May 25, 2011, in
Gothenburg, Sweden. Shareholders wishing to have items addressed at the Annual
General Meeting must submit a written request to the Board of Directors not
later than April 6, 2011. The request shall be addressed to the Board of
Directors but be sent to the company's address.
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 outlook for 2010 above is unchanged compared to that presented in the
Annual Report for 2009.
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 December 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.
Opus does not provide financial forecasts.
Financial Information 2010
The year-end report 2010 will be published on February 24, 2011.
This report has been subject to auditors' review.
Gothenburg, Sweden, November 25, 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 has around 170 employees. The turnover for 2009 was roughly SEK 220
million. Opus' share is listed on First North Premier (NASDAQ OMX) under the
ticker OPUS.
Auditor's Report on the Review of the Interim Report
Introduction
I have reviewed the interim report for Opus Prodox AB (publ) for the period
2010-01-01 - 2010-09-30. It is the Board of Directors and the Managing Director
who are responsible for the presentation of this interim report in accordance
with IAS 34. My responsibility is to express a conclusion on this interim
report based on my review.
The Scope of the Review
I have conducted my review in accordance with the Standard on Review
Engagements, SÖG 2410, Review of the Interim Financial Information Performed by
the Independent Auditor of the Entity, issued by the Federation of Authorized
Public Accountants. A review of the interim report consists of making
inquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially smaller and less in scope compared to an audit conducted
according to Standards on Auditing in Sweden (RS) and other generally accepted
auditing practices. The procedures performed in a review do not enable me to
obtain a level of assurance that would make me aware of all significant matters
that might be identified in an audit. Accordingly, the conclusion expressed
based on a review does not constitute the same level of assurance as a
conclusion based on an audit.
Conclusion
Based on my review, nothing has come to my attention that causes me to believe
that the interim report, in all material respects, is not prepared for the
Group in accordance with IAS 34.
Gothenburg, Sweden, November 15, 2010
Lennart Persson
Authorized Auditor
BDO Göteborg KB
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
