STOCKHOLM, Sweden, Feb. 15, 2002 (PRIMEZONE) -- Saab:
-- Order bookings SEK 15 billion and order backlog SEK 40 billion.
-- Sales SEK 15,689 m. (17,840), an increase of 5% for comparable
units.
-- Operating income SEK 1,594 m. (1,533).
-- Earnings per share amounted to SEK 10.59 (9.75).
-- After-tax return on shareholders' equity 18.3% and pre-tax
return on capital employed 15.5%.
-- Proposed dividend per share: SEK 3.25 (3,00).
-- Hungary signed lease for 14 Gripen aircraft.
-- Czech Republic started negotiations on purchase of 24 Gripen
aircraft.
-- Order for new tactical system for NH90 helicopters received in
January 2002; order value approximately SEK 2 billion.
Statement by the CEO
"As expected, income in 2001 was well in line with the previous year and the strong cash flow improved yet further. Like previous years, the fourth quarter was a strong quarter for our core business. Order bookings in the quarter was also good and the order backlog remains at just over SEK 40 billion, or about two and half years' sales.
For natural reasons, interest was focused on Hungary's decision and the Czech Republic's choice of Gripen for equipping their respective Air Forces. Significant business has also taken place in other areas, such as combat training centers for new NATO customers, countermeasures for the US and the choice of the RBS 15 anti-ship missile in key markets.
Sweden's decision to purchase 18 NH90 medium weight helicopters has provided us with important business potential. The fact that Saab has been given responsibility for development of a totally new tactical system is a testament to the strength of our systems integration and defense electronics capabilities. Development, adaptation and maintenance of the new helicopters mean considerable revenues for Saab.
Streamlining of the Group has continued during the year through extensive divestments and development of the core business. During the fourth quarter, Aerothrust has been divested, which means that we have now found solutions for all the operations that previously made up Celsius Aviation Services.
We have a clear future orientation in growth sectors such as systems integration, segments of defense electronics and high technology services. We intend to strengthen our orientation and concentration with continued acquisitions and divestments, and to play an active part in the continued restructuring of the global defense and aerospace industry.
For 2002, I anticipate further improvement in operating income and operating margin, excluding capital gains."
Major events and structural changes During the fourth quarter, Aerothrust and the 25 percent holding in the German shipyard Howaldtswerke-Deutsche Werft, HDW, were divested. The effect on earnings of the divestments has been considered in the fair value analysis that was done in connection with the acquisition of Celsius, and will not affect the earnings of the Saab Group.
Saab Marine Electronics was sold earlier this year with a capital gain of SEK 650 million. The divestments of Celsius Amtec, Celsius Aerotech, Aero Systems Engineering, the defense related part of Hawker Pacific, the Kockums engineering workshop and other operations have taken place without any impact on income, and agreement has also been reached on the gradual divestment of Hawker Pacific. Through the venture capital function created during the year, the share in Triangle Equipment A/S, 60 percent in A2 Acoustics and the operation of Sanguistech have been divested during the year. The divestments during the year have had, in total, a positive effect of about SEK 3 billion on net liquidity.
With effect from the beginning of the year, the minority share in Saab Avionics has been acquired for SEK 225 million and with effect from October 1, the minority share in AerotechTelub has been acquired for SEK 1.1 billion.
Operations
Saab is one of the world's leading high-technology companies, with its main activities focusing on aerospace and defense. The operation covers clearly defined areas within defense electronics, missile systems and space electronics as well as military and civil aviation. Saab also focuses on high technology services and maintenance. Saab comprises the business areas Saab Systems and Electronics, Saab Aerospace, Saab Technical Support and Services, Saab Bofors Dynamics, Saab Ericsson Space and Saab Aviation Services. For a brief description of the business areas see the end of the report.
Sales, Income and Orders
Sales
Group sales decreased to SEK 15,689 m. (17,840), due to divestments of companies and operations mainly within Systems and Electronics and Aviation Services. Sales have increased for almost all today remaining operations and the average organic growth was about 5 percent for comparable units. The year's acquisitions have not affected sales, as they were acquisitions of outstanding minorities. Seventy percent (62) of sales were related to defense and 40 percent (48) of total sales were export. Sales have increased for all remaining operations in Systems and Electronics compared to the previous year. The increase in Aerospace is related to both military and commercial aircraft. During the year, 18 (17) Gripen aircraft were invoiced, of which seven (five) in the fourth quarter. The delivery of one more Gripen aircraft compared to the previous year was to some extent evened out by lower rate in development orders. The sales increase in Technical Support and Services is mainly attributable to organic growth in the defense-related business and in the field of medical technology within AertotechTelub. The increase in Dynamics depends mainly on increased deliveries of Carl-Gustaf ammunition and disposable anti-armor weapons and the delivery start of Torpedo 62 to Sweden. The sales increase in Space is attributable to higher volumes in the commercial market. The sales decreases in Aviation Services and Other operations respectively, are to all extent related to divestments, while the customer support business and the other remaining operations are on a level with last year.
Income and Profitability
Operating income increased by 4 percent to SEK 1,594 m. (1,533). The result includes the capital gain from the divestment of Saab Marine Electronics of SEK 650 m. (638). Operating income before capital gains was thus SEK 944 m. (895), corresponding to an increase of 5 percent and an improvement of the margin to 6.0 percent (5.0). The improvement is mainly due to the continued restructuring and increased volumes in Aerospace and AerotechTelub.
Operating income and margin for the remaining operations in Systems and Electronics have improved during the year and by that, the total margin is on a level with the previous year despite the divestment of Saab Marine Electronics. Operating income for Aerospace and Technical Support and Services were as a result of volume increases compared to previous year higher with maintained margins. As a result of the integration work to realize cost synergies and focus the operation, which started in 2000, Dynamics has increased both operating income and margin. Operating income for Space has been affected by the situation in the telecom market and has during the fourth quarter also deteriorated due to major cost over runs in a few development projects. The cost overruns are mainly related to the development of the computer based sensor system for the Metop meteorological system. Operating margin for Saab Aviation Services and operating income for Corporate/Other operations have improved sharply as a result of the year's restructuring. Fourth quarter income, however, for Aviation Services has been affected by the general situation in the aviation business.
Operating expenses have decreased as a result of continued cost rationalization and divestments. Development costs for the export version of Gripen were on a level with the previous year. Other operating income during both the present and previous years consists mainly of capital gains, trading income in Treasury and currency gains etc. Other operating expenses consist mainly of currency and capital losses. Items affecting comparability the previous year related to reversal of reserves regarding Regional Aircraft, funds received from Alecta (SPP) and provisions for certain development projects. Project interest on non-utilized advance payments, shown in the gross margin, amounted to SEK 168 m. (172).
Net financial income and expenses amounted to SEK -40 m. (-85), of which Saab Aircraft Leasing SEK 80 m. (68). The average return on external investments was 5.32 percent (4.72) and the average liquidity was SEK 3,066 m. (5,400). The increase is attributable to both the higher return and non-recurrent items. The financial net has also been positively affected as a result of that the former long-term net present value calculated receivable on Alecta (SPP) due to changed payment rules and an agreement with the employee organizations has become short-term. Income after financial items amounted to SEK 1,554 m. (1,448). Current and deferred taxes amounted to SEK -379 m. (-333). The tax portion of income after financial items has been affected by the fact that certain capital gains have been assessed as tax-free and that certain capital losses have been assessed as non-deductible and goodwill amortization. The Group's effective tax rate for the year amounted by that to approximately 24 percent compared to normally 29 percent. Minority interest in income has decreased as a result of the acquisitions of the outstanding minorities in Saab Avionics and AerotechTelub during the year.
Net income for the year was SEK 1,127 m. (1.038), corresponding to an income per share of SEK 10.59 (9.75). Income per share before goodwill amortization amounted to SEK 12.11 (11.47). Pre-tax return on capital employed was 15.5 percent (14.6). After-tax return on shareholders' equity was 18.3 percent (20.0).
Orders
Group order bookings amounted to SEK 15,274 m. (28,141), of which the fourth quarter SEK 4,820 m. (5,043). Of the year's order bookings 52 percent were export. Fourth quarter order bookings included the adaptation of the Gripen aircraft which Hungary will lease from the Swedish Government, reconnaissance pods for Sweden's Gripen aircraft, naval fire control system to Finland, countermeasure dispensers to USAF F-15 and order for maintenance equipment for Sweden's fourth Gripen wing. The order backlog at year-end amounted to SEK 40,034 m. (41,091), and includes defense orders worth SEK 38,040 m.
Liquidity, Finance and Investments
Balance sheet
Goodwill has net increased through the acquisitions of the outstanding minorities in Saab Avionics and AerotechTelub and the divestment of Amtec. The goodwill amount related to the acquisition of Celsius has finally been confirmed to SEK 700 m. The acquisition of the outstanding minority in AerotechTelub brought additional goodwill of SEK 586 m. From 2002, all goodwill will be allocated to the business areas.
Remaining provision for the phase-out of regional aircraft production amounts to SEK 1,567 m. and relates mainly to estimated costs for the responsibility of airworthiness. The loss risk reserve for the leasing operation amounted to SEK 1,648 m. at year-end. After offset against the lease assets with SEK 1.030 m., the provision shown in the balance sheet amounts to SEK 618 m. Remaining provisions are mainly related to restructuring and project reserves resulting from the acquisition of Celsius.
Finance and Liquidity
Liquid funds less liabilities to credit institutions have increased by SEK 621 m. to 4,563 m. (3,942). The increase is mainly a net of new advances and payment from divestment of businesses and high utilization of advances within the Gripen program, utilization of structural reserves, payment of dividend and acquisitions of businesses. The Group's net liquidity after deduction for allocations to pensions amounted to SEK 885 m. (415).
Group equity/assets ratio amounted to 22.3 percent (18.2). The interest coverage ratio was 5.50 (5.32). Shareholders' equity amounted to SEK 6,679 m. (5,670), corresponding to SEK 62.74 (53.26) per share.
Cash Flow
Operating cash flow was positive and amounted to SEK 1,642 m. Group cash flow from operating activities have further improved to SEK 2,652 m. Working capital has despite higher advances increased mainly due to utilization of part of last year's provisions within Dynamics, payments related to the regional aircraft business and decreased lease obligations due to planned changes in the portfolio. In cash flow from investments, the investments in lease assets are a net of decreased lease assets due to the divestment of Amtec and a planned increase of leasing aircraft on balance sheet, regarding aircraft already included in the portfolio.
Operating cash flow of SEK 1,642 m. is distributed between cash flow from the operation of SEK 566 m., from divestments and acquisitions SEK 2,336 m. and from increase according to plan of internal funding in the lease portfolio and phase-out of regional aircraft production of SEK - 1,260 m.
Capital Expenditures
The year's capital expenditures in property, plant and equipment, excluding lease assets, amounted to SEK 532 m. (1,077). Net investments including lease assets and intangible fixed assets amounted to SEK -331 m. (-502), including lease assets of SEK -120 m. (476).
Research and Development
The year's expenditure on research and development amounted to SEK 3,819 m. (3,808), of which SEK 3,101 m. (2,948) relates to development paid for by customers.
Personnel
At the end of 2001, the number of employees in the Group was 14,028, compared with 15,453 at the beginning of the year. The decrease is mainly related to divestment of operations.
Parent Company
Sales and Income
Sales of the parent company amounted to SEK 4,097 m. (3,921). Operating income amounted to SEK 421 m. (838). Net financial income and expenses amounted to SEK 930 m. (843) and income after financial income and expenses was SEK 1,351 m. (1,681). Of the financial net SEK 954 m. (743) are group contributions and dividends. After appropriations of SEK -6 m. (-148) and paid and deferred tax of SEK -102 m. (-305), net income for the year amounted to SEK 1,243 m. (1,228).
Proposed Dividend and Repurchase of Own Shares
The Board of Directors long-term dividend policy is for 20-40 percent of the Group's net income to be distributed. For 2001, the Board of Directors and the President propose to distribute to the shareholders SEK 3.25 (3.00) per share or a total of SEK 346 m. (319), corresponding to 31 percent (31) of the Group's net income. April 11, 2002 has been proposed as the record date and the dividend is expected to be distributed, April 16, 2002.
Further, the Board of Directors will as the previous year propose the Annual General Meeting an authorization for the Board to decide on repurchase of the company's shares up to 10 percent of the total shares outstanding. The mandate is proposed to be valid until the next Annual General Meeting. The purpose of the empowerment is to provide the Board with increased scope for action in working with the company's capital structure and to enable acquisitions to be made where considered appropriate. Such repurchases may be effected over the stock exchange or through offerings to shareholders. It is also proposed that the Board's mandate includes the possibility to transfer repurchased shares in accordance with current legislation.
Annual General Meeting
The Annual General Meeting will be held at Saab, Linkoping on Monday, April 8, 2002 at 18.00. Saab's revised annual report will be available at the company's office in Linkoping. The printed Annual Report will be distributed upon request to shareholders from March 4, 2002.
Ownership
Saab's principal owners are BAE SYSTEMS, Investor AB, the Wallenberg foundations, AMF, Fidelity Funds, Third AP Fund, Eikos Fund, Skandia and SHB Funds.
Accounting Principles
The report has been drawn up in accordance with earlier accounting principles. This means that divested companies, such as Saab Marine Electronics, are not included in the Group for any part of 2001. The figures for 2000 have not been adjusted for external acquisitions and divestments made during 2001. However, sales and operating income by business area for the year 2000 have been adjusted for internal reorganizations.
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