Page 1

O E M A N N U A L RE P O RT 2007

C C J Kom m unik at ion • Photos Patrik Svedberg and others

For easy access to definitions while reading the annual report, open the flap and lay flat.

Annual Report 2007

Notific Annual General Meeting

The Annual General Meeting will be held on Thursday 24 April 2008 at 4 p.m. at Stadshotellet, Storgatan 22 in Tranås, Sweden.

Box 1009, SE-573 28 Tranås • Tel. +46 (0)75 24 24 000 • Fax +46 (0)75 24 24 029 • Email info@int.oem.se • www.oem.se

OEM2008_omslag_Plano_ENG_OK.indd 1

BUSINESS

Annual General Meeting must:

The agenda and business of the Annual

• be entered in the share register held by

General Meeting will be notified through

the Swedish Securities Register Centre

advertisements in the daily press and

(VPC AB) by Friday 18 April 2008.

will also be available on OEM’s website

• notify the company no later than

(www.oem.se). The agenda can also be

Monday 21 April 2008 before 1 p.m.:

obtained from the company when regis-

OEM International AB, Box 1009,

tering to attend the meeting.

SE-573 28 TRANÅS Tel. +46 (0)75 242 40 00

FUTURE REPORTS

or email info@oem.se

• Interim report, January-March 24 April 2008

Shareholders who have registered their shares in the name of an authorised agent must temporarily register the shares in their own name with the VPC AB by no later than Friday 18 April 2008 in order to participate at the Annual General Meeting.

• Half-yearly report, January-June 24 July 2008 • Interim report, January-September 24 October 2008 • Financial statement, 2008 February 2009 • Annual Report March/April 2009

DIVIDEND

The Board of Directors proposes that the

VISIT OUR WEBSITE

Annual General Meeting issue a dividend

The latest information about the

of SEK 3 per share for 2007 and stipulate

company is available on our website

Tuesday 29 April 2008 as record date. If

(www.oem.se).

the Annual General Meeting adopts the proposal, it is expected that dividends will be distributed on Monday 5 May 2007 to those entered in the share register on the

For easy access to definitions while reading the annual report, open the flap and lay flat.

07

Shareholders wishing to attend the

date of issue.

ANNUAL GENERAL MEETING – FUTURE REPORTS ❚ OEM ANNUAL REPORT 2007

2

08-04-21 15.51.53


C C J Kom m unik at ion • Photos Patrik Svedberg and others

O E M A N N U A L RE P O RT 2007

Annual Report 2007

Notific Annual General Meeting

The Annual General Meeting will be held on Thursday 24 April 2008 at 4 p.m. at Stadshotellet, Storgatan 22 in Tranås, Sweden.

Box 1009, SE-573 28 Tranås • Tel. +46 (0)75 24 24 000 • Fax +46 (0)75 24 24 029 • Email info@int.oem.se • www.oem.se

OEM2008_omslag_Plano_ENG_OK.indd 1

BUSINESS

Annual General Meeting must:

The agenda and business of the Annual

• be entered in the share register held by

General Meeting will be notified through

the Swedish Securities Register Centre

advertisements in the daily press and

(VPC AB) by Friday 18 April 2008.

will also be available on OEM’s website

• notify the company no later than

(www.oem.se). The agenda can also be

Monday 21 April 2008 before 1 p.m.:

obtained from the company when regis-

OEM International AB, Box 1009,

tering to attend the meeting.

SE-573 28 TRANÅS Tel. +46 (0)75 242 40 00

FUTURE REPORTS

or email info@oem.se

• Interim report, January-March 24 April 2008

Shareholders who have registered their shares in the name of an authorised agent must temporarily register the shares in their own name with the VPC AB by no later than Friday 18 April 2008 in order to participate at the Annual General Meeting.

• Half-yearly report, January-June 24 July 2008 • Interim report, January-September 24 October 2008 • Financial statement, 2008 February 2009 • Annual Report March/April 2009

DIVIDEND

The Board of Directors proposes that the

VISIT OUR WEBSITE

Annual General Meeting issue a dividend

The latest information about the

of SEK 3 per share for 2007 and stipulate

company is available on our website

Tuesday 29 April 2008 as record date. If

(www.oem.se).

the Annual General Meeting adopts the proposal, it is expected that dividends will be distributed on Monday 5 May 2007 to those entered in the share register on the

For easy access to definitions while reading the annual report, open the flap and lay flat.

07

Shareholders wishing to attend the

date of issue.

ANNUAL GENERAL MEETING – FUTURE REPORTS ❚ OEM ANNUAL REPORT 2007

2

08-04-21 15.51.53


O E M A N N U A L RE P O RT 2007

C C J Kom m unik at ion • Photos Patrik Svedberg and others

For easy access to definitions while reading the annual report, open the flap and lay flat.

Annual Report 2007

Notific Annual General Meeting

The Annual General Meeting will be held on Thursday 24 April 2008 at 4 p.m. at Stadshotellet, Storgatan 22 in Tranås, Sweden.

Box 1009, SE-573 28 Tranås • Tel. +46 (0)75 24 24 000 • Fax +46 (0)75 24 24 029 • Email info@int.oem.se • www.oem.se

OEM2008_omslag_Plano_ENG_OK.indd 1

BUSINESS

Annual General Meeting must:

The agenda and business of the Annual

• be entered in the share register held by

General Meeting will be notified through

the Swedish Securities Register Centre

advertisements in the daily press and

(VPC AB) by Friday 18 April 2008.

will also be available on OEM’s website

• notify the company no later than

(www.oem.se). The agenda can also be

Monday 21 April 2008 before 1 p.m.:

obtained from the company when regis-

OEM International AB, Box 1009,

tering to attend the meeting.

SE-573 28 TRANÅS Tel. +46 (0)75 242 40 00

FUTURE REPORTS

or email info@oem.se

• Interim report, January-March 24 April 2008

Shareholders who have registered their shares in the name of an authorised agent must temporarily register the shares in their own name with the VPC AB by no later than Friday 18 April 2008 in order to participate at the Annual General Meeting.

• Half-yearly report, January-June 24 July 2008 • Interim report, January-September 24 October 2008 • Financial statement, 2008 February 2009 • Annual Report March/April 2009

DIVIDEND

The Board of Directors proposes that the

VISIT OUR WEBSITE

Annual General Meeting issue a dividend

The latest information about the

of SEK 3 per share for 2007 and stipulate

company is available on our website

Tuesday 29 April 2008 as record date. If

(www.oem.se).

the Annual General Meeting adopts the proposal, it is expected that dividends will be distributed on Monday 5 May 2007 to those entered in the share register on the

For easy access to definitions while reading the annual report, open the flap and lay flat.

07

Shareholders wishing to attend the

date of issue.

ANNUAL GENERAL MEETING – FUTURE REPORTS ❚ OEM ANNUAL REPORT 2007

2

08-04-21 15.51.53


Contents

Share trends

Definitions

(SEK) 80 70

Annual General Meeting – future reports .... 2 This is OEM International ..................... 3-4 History ..................................................... 3-4 2007 in brief ............................................... 5 Comments from the CEO ..................... 6-7 Vision, business concept and business logic .................................. 8-9 Growth strategy ........................................ 10 Financial targets....................................... 11 Employees........................................... 12-13 Quality, the environment and ethics .. 14-15 Board of Directors............................... 16-17 Senior Management ........................... 18-19

OEM

GROUP STRUCTURE .......................... 20-21

■ ■ ■ ■

OEM has been listed on the Stockholm Stock Exchange Small Capital since 1983. More information about OEM is available at www.oem.se

OEM Automatic .......................... 22-23 OEM Electronics ........................ 24-25 Cyncrona ..................................... 26-27 Development ............................... 28-29

OEM Electronics – an important partner ................................................. 30-31 Positive path for Telfa.......................... 32-33 OEM Automatic strengthens its position .......................................... 34-35 FINANCIAL REPORTING

Five-year Group summary ...................... 38 Key indicators for the last five years ......... 39 Directors’ report .................................. 40-41 FINANCIAL REPORTS – THE GROUP

Income statement .................................... 42 Balance sheets ..................................... 43-44 Changes in shareholders’ equity.............. 45 Cash flow statement................................. 46 FINANCIAL REPORTS – THE PARENT COMPANY

Income statement .................................... 47 Balance sheets ..................................... 48-49 Changes in shareholders’ equity.............. 50 Cash flow statement................................. 51 Notes with accounting principles and comments to the financial statements ..................................52-80 Proposed allocation of profits .................. 81 Auditors’ report......................................... 82 OEM shares ........................................ 84-85 Ownership structure ................................ 85 Key indicators for OEM shares................ 86 Ownership data........................................ 87 Share capital trend................................... 87 Addresses ............................................. 88-89 Definitions ............................................... 90

60 50 40 30

Read more on pages 84-85

20 10 2003

2004

2005

OEM International B

2006

2007

2008

OMX Nordic EUR PI

This is OEM International OEM International is one of Europe’s leading industrial trading companies. The Group is comprised of 26 operating units with activities in 13 countries.

and application expertise. OEM is a local alternative to the manufacturers’ own subsidiaries and can provide better marketing and sales conditions. The Group is organised into four company groups. Three of the groups are

OEM Automatic

OEM Electronics

Cyncrona

Development

Components for industrial automation.

Appliance and circuit board components and EMC/ microwave components

Production systems and components for electronics production

Bearings and bearing solutions, motors & transmissions, seals and pumps

Read more on pages 22-23

Read more on pages 24-25

Read more on pages 26-27

Read more on pages 28-29

organised according to a concept with a well defined range of products that targets a specific market. The fourth group is a collection of other business activities

CYNCRONA

DEVELOPMENT

OEM Electronics AB Box 1025, Norrabyvägen 6B SE-573 29 TRANÅS Sweden Tel: +46 (0)75 242 45 00 Fax: +46 (0)75 242 45 09 info@oemelectronics.se www.oemelectronics.se

Cyncrona AB Tomtbergavägen 2 SE-145 67 NORSBORG, Sweden Tel: +46 (0)75 242 46 50 Fax: +46 (0)75 242 46 51 info@cyncrona.se www.cyncrona.com

Internordic Bearings AB Box 105 SE-571 22 NÄSSJÖ Sweden Tel: +46 (0)75 242 49 40 Fax: +46 (0)75 242 49 50 info@internordic.biz www.internordic.biz

OEM Electronics OY P O Box 122, Telekatu 6 FI-020101 TURKU Finland Tel: +358-207 499 300 Fax: +358-207 499 496 info@oemelectronics.fi www.oemelectronics.fi

Cyncrona Oy Hannuksenpelto 12 FI-020101 TURKU Finland Tel: +358-(0)20 7528700 Fax: +358-(0)20 7528770 info@cyncrona.fi www.cyncrona.fi

IBEC Aartsdijkweg 111 NL-2676 LE MAASDIJK Netherlands Tel: +31-174 52 51 00 Fax:+31-174 52 51 06 info@ibec.biz www.ibec.biz

OEM Electronics PL ul. Parowcowa 6B PL-02-445 WARSZAWA Poland Tel: +48-22-86 32 722 Fax: +48-22-86 32 724 info@oemelectronics.pl www.oemelectronics.se

Cyncrona A/S Sindalsvej 21 DK- 8240 RISKOV, Denmark Tel: +45-87-42 66 66 Fax: +45-87-42 66 77 info@cyncrona.dk www.cyncrona.dk Cyncrona AS Postboks 2144 Bjørnstjerne Bjørnsonsgate 110 NO-3003 STRØMSØ Norway Tel: +47-32-21 05 80 Fax: +47-32-21 05 81 info@cyncrona.no www.cyncrona.no

The business concept is to offer the industry components and systems from leading manufacturers to industrial companies by utilising our excellent product

OEM ELECTRONICS

Cyncrona Baltic States Suur-Jõe 62 EE-80042 PÄRNU Estonia Tel: +372 510 05 05 baltic@cyncrona.fi www.cyncrona.com

Earning capacity of capital employed: Operating income plus financial income as a percentage of average total capital. Capital employed refers to total assets minus non interest-bearing liabilities including deferred tax liabilities. Earning capacity of shareholders’ equity: Net profit for the year as a percentage of average shareholders’ equity. Average interest payable: Financial expenses as a percentage of interest-bearing liabilities.

Indoma AB Box 319, Fridhemsvägen 25 SE-551 15 JÖNKÖPING, Sweden Tel: +46 (0)75 242 43 50 Fax: +46 (0)75 242 43 58 info@indoma.se www.indoma.se

Debt/equity ratio: Interest-bearing liabilities divided by calculated shareholders’ equity. Calculated shareholders’ equity comprises shareholders’ equity plus minority interests.

Telfa AB Box 120 SE-402 41 GÖTEBORG Sweden Goods terminal address: Karl Johansgata 158, SE-414 51 GÖTEBORG, Sweden Tel: +46 (0)75 242 44 50 Fax: +46 (0)75 242 44 95 info@telfa.se www.telfa.se

Operating income/Sales: Operating income before depreciation/amortisation as a percentage of sales.

Price / Earning (P/E) ratio: Quoted price as per 31 December divided by earnings per share. Direct return: Dividend per share divided by the quoted price at year-end. Sales per share: The Group’s sales divided by the number of shares on the market at year-end. Sales increase per share: Increase of the Group’s sales per share. Dividend/Profit payout ratio: Proposed dividend in relation to the year’s profit. Dividend/Shareholders’ equity: Proposed dividend in relation to the Group’s shareholders’ equity and the minority interests. Cash flow per share: Cash flow for current operations divided by the number of shares. Beta values: Measure of historical change in the share price in relation to the price fluctuation of the general index.

Profit percent: Earnings after financial income as a percentage of sales.

Rate of turnover for shares: The number of shares sold during the year divided by the number of outstanding shares at year-end.

Profit margin: Profit before tax as a percentage of sales.

P/S ratio: Stock market value in relation to the Group’s sales.

Capital’s turnover rate: Sales divided by total assets.

P/E ratio: Quoted price as per 31 December divided by earnings per share.

Sales per employees: Sales divided by average number of employees.

Price/Shareholders’ equity: Quoted price divided by shareholders’ equity per share.

Equity/assets ratio: Shareholders’ equity as a percentage of total capital.

EV/Sales: Enterprise value (stock market value + net liability + minority interest) divided by the Group’s sales.

organised under Development. 2003 The Group stabilises at sales 30% lower than 2001. Industri AB Reflex is sold.

OEM’s History 1981 The first overseas subsidiary is established in Finland.

1974 The agency company OEM Automatic AB is founded by the Franzén and Svenberg families.

1983 The company is introduced on the Stock Exchange’s OTC list. Sales amount to SEK 30 million.

1986 Industri AB Reflex is acquired.

1988 Sales exceed SEK 100 million for the first time.

1989 The first subsidiary outside Scandinavia is set up in the UK.

1993 The A. Karlson Group is acquired.

1997 OEM International and Cyncrona (also listed on the OTC list) merge. Cyncrona becomes a third subgroup.

1991 OEM International is formed and becomes the Group’s parent company. The electronics product area breaks away from OEM Automatic to form a separate company, OEM Component.

1998 Three corporate acquisitions completed.

1996 New Group structure. The companies are divided into two subgroups: OEM Industrial Components and OEM Systemteknik.

2000 Jörgen Sahlin is appointed new MD. Acquisition of the group JMS Systemhydraulik

1999 Four corporate acquisitions completed.

2007 Acquisition of Crouzet, MPX Electra and Klitsö.

Quick ratio: Current assets minus inventories as a percentage of current liabilities.

2005 Acquisition of Telfa.

2002 OEM suffers significant decline in sales due to telecom downturn.

2004 OEM celebrates 30th anniversary Continued restructuring and streamlining. Profit climbs 55%.

Earnings per share: The Group’s net profit after deductions for both paid and deferred tax divided by the number of shares.

EBIT multiple: Enterprise value divided by the Group’s operating income after depreciation/ amortisation. Direct return: Dividend per share divided by the quoted price at year-end.

Shareholders’ equity per share: Shareholders’ equity and minority interests divided by the number of shares.

2006 The Group establishes itself in the Czech Republic via the acquisition of EIG. Divestment of JMS Systemhydraulik group ADDRESSES ❚ OEM ANNUAL REPORT 2007

OEM2008_omslag_Plano_ENG_OK.indd 2

Earning capacity of total capital: Operating income plus financial income as a percentage of average total capital.

89

DEFINITIONS ❚ OEM ANNUAL REPORT 2007

90

08-04-21 15.52.02


2007

Summary 2007

OEM’s ongoing expansion activities in 2007 resulted in the following:

• New organisations in three new markets. • Three corporate acquisitions completed.

The Group in figures

• 14% sales growth in traditional industry sectors.

2007

2006

Net sales* SEK m

1482

1448

Profit after net financial items* SEK m

139.1

127.5

Profit divested business unit (SEK m)

2.0

90.8

Profit for the year (SEK m)

102.8

181.6

SEK 813 million (698) and profit by 4% to

Earnings per share: (SEK)

4.34

3.92

SEK 94.6 million (91.0).

Cash flow per share (SEK)

1.91

4.89

22.88

27.65

Proposed dividend per share (SEK)

3.00

2.83

Earning capacity of shareholders’ equity (%)

17.6

32.5

(245) and profit amounted to SEK 3.6

Equity/assets ratio (%)

58.9

67.2

million (14.2).

Quoted price at year-end (SEK)

42.90

63.00

Market capitalisation at year-end (SEK m)

994

1460

Average no. of employees* (No.)

569

531

• 16% sales decline in the electronics sector. • 9% increase in profit before tax to SEK 139 million (127). • OEM Automatic increased sales by 16% to

• OEM Elektronic’s sales reached SEK 276 million (307) and profit amounted to SEK 14.1 million (18.8). • Cyncrona’s sales reached SEK 188 million

• Development increased sales by 4% to SEK 221 million (213) and profit by 18% to SEK 15.4 million (13.0).

*

Equity per share (SEK)

*) Remaining business units OEM Motor, with reported sales of SEK 40.2 million, has been transferred from company group Development to company group OEM Automatic as of 2008.

2006 in bRief z oeM annual RepoRt 2007

OEM2008_del1_5-36_ENG_OK.indd 5

5

08-04-21 16.16.58


Comme Comments from the CEO

6

oeM annual RepoRt 2007 z coMMents fRoM the ceo

OEM2008_del1_5-36_ENG_OK.indd 6

08-04-21 16.17.12


ments

Sales rose by 2% to SEK 1,482 million and profit by 9% to SEK 139 million in 2007. A sound demand and new acquisitions resulted in a 14% increase in sales for the business units that target traditional industry sectors. Weaker demand from the electronics sector caused a 16% decline in sales for this segment.

The Group now consists of 26 operating

Cyncrona reports lower demands which

contributes about SEK 88 million in sales

units, all of which generated profits in

pulled sales down to SEK 188 million

annually and had a margin impact on profits

2007. OEM’s market position is stronger

(245). The autumn’s cost-cutting scheme

in 2007. This acquisition enables us to en-

after introducing the new product selec-

cut costs by SEK 8 million/year, slowed

hance our expansion potential in Denmark.

tion from both existing and new suppliers.

the weakening in financial results and

Acquisitions also contributed to strength-

generated a profit of SEK 4.3 million (14.2).

Slovakia, Latvia and Lithuania in 2007.

ening the Group’s market position by

In December, all warehouses were centralised

This means that we cover the entire Baltic

cultivating significant synergy effects.

to Sweden which now serves all markets.

market and are making inroads south into

hiGher profits

acquisitions & new markets

OEM Automatic reports yet another

The outstanding 50% of the shares in

record-breaking year. Reported sales rose

Crouzet AB were acquired in February.

prepared for the future

by 16% to SEK 813 million and profit

Active in the automation component

Strong, long-standing relationships with

by 6% to SEK 94.5 million. Sales and

segment, the company was incorporated

suppliers and our customers’ genuine

profitability improved on all markets due

into OEM Automatic AB and OEM

trust cultivates excellent conditions for

to strong demand. Costs in the amount

Motor AB. The acquisition means an

ongoing organic growth.

of SEK 6 million for integrating the

additional SEK 30 million in sales

acquisition Crouzet AB are charged to

annually and negatively affected profits

streamlined processes facilitate acquisitions

the profit for 2007.

by SEK 1.5 million in 2007.

and geographic expansion. The organisa-

OEM expanded in new markets in

Eastern Europe together with our Poland

Development increased sales by 4% to SEK 221 million and profit by 25% to SEK 16.3 million. Business activities

Battery supplier MPX Elektra ApS in Denmark was acquired in September.

and Czech-based business units.

The strong balance sheet coupled with

tion’s dedication enables us to effectively incorporate acquisitions in the Group.

The acquisition contributes about SEK

in pumps and electric motors report

17 million in sales annually and had a

‘thank you’ to all employees

the best progress. New pump sup-

marginal impact on profits in 2007.

OEM’s achievements are based on our

pliers and access to Crouzet electric

The company was incorporated in OEM

ambitious employees who have created

motors reinforced the product offer.

Automatic in the autumn and constitutes

competitive business units through their

a new market segment in Denmark.

dedication and conscientiousness.

OEM Electronic’s sales dropped by 10% to SEK 276 million due to lost deals in 2006. Streamlining activities were carried out in the autumn that cut costs by SEK 6 million/ year, improved the financial results and

Simultaneously, the selection of products

Ongoing growth relies on the will to

improves our competitiveness in terms

accept new challenges and see opportuni-

of batteries on the Finnish and Swedish

ties in new situations. I want to take this

markets.

opportunity to extend a sincere thank-you

Klitsö Processtechnic AS in Denmark

generated a profit of SEK 15 million

sells valves and pneumatic systems and was

(18.8) for the whole year.

acquired in December. The acquisition

to all employees for their excellent efforts throughout the year. Jörgen Zahlin

coMMents fRoM the ceo z oeM annual RepoRt 2007

OEM2008_del1_5-36_ENG_OK.indd 7

7

08-04-21 16.17.26


Vision Vision, business concept and business logic vision

northern europe

with around 300 different suppliers and has

OEM International is to be a leading player

Most of OEM’s business activities are in

some 20,000 buying customers. OEM is

in industrial trading in northern Europe.

Sweden but it views northern Europe as its

responsible for marketing and sales of the

market. The company is active in Sweden,

products the company trades.

to achieve this vision means:

Finland, Norway, Denmark, Poland, the

• constantly improving our level of

Czech Republic, Slovakia, the Baltic coun-

knowledge and service to at the very

tries, the UK and Holland. In addition, the

least conform to customer expectations

company has a logistics and quality company

suppliers

customers

an alternative to suppliers’ own sales orGanisations

• making our suppliers market leaders

in China. While there is great potential for

• efficiency makes us more profitable

growth on these markets, new geographical

To our suppliers, OEM is a partner that has:

markets will be constantly evaluated as the

• the financial strength to make

than our competitors • our employees are able to realise

brand concepts are reinforced.

market investments • knowledge of the market in question

their ambitions. business concept

• national presence

industrial tradinG

OEM International is to be a leading player

Our product range spans from basic

in industrial trading in northern Europe.

To our customers, collaboration with

mechanical components such as seals and

Our product range is to consist of industrial

OEM means:

couplings to complete production systems

components and systems from suppliers

• access to a broad, extensive range of

for circuit boards. OEM trades in products

that are each specialists in their fields.

to which the company adds value and

The operating units are to adapt to the

products from specialised manufacturers • quick and high delivery capacity via

where the company has the potential to

conditions that apply in each respective

gain a substantial market share.

business area, and effectively satisfy the

We constantly expand our range by

interests of customers, suppliers, employees

adding new products and discontinuing

and shareholders.

• in-depth product and application knowledge

business loGic

An efficient logistics apparatus enables us

defined product range which, coupled

The OEM Group’s operating units serve

to adapt purchasing volumes, stock levels

with the added value of the organisation,

as an alternative to the suppliers’ own local

and transport methods for maximum

forms a brand concept.

sales organisations. The Group collaborates

competitiveness.

effective warehouses • the option to reduce the number of suppliers.

or replacing unprofitable products. Each company markets a clearly

8

oeM annual RepoRt 2007 z Vision, business concept and business logic

OEM2008_del1_5-36_ENG_OK.indd 8

08-04-21 16.17.35


OEM’s broad, extensive product selection

operating units to focus on business and

Opportunities for employees to grow

allows the company to customise its offers

together with group affiliation, facilitates

within the Group

to best suit the needs of our customers.

expansion in new geographical markets.

Developing a company means developing

At the same time, suppliers gain access

people. As the company develops, career

to customer groups that they themselves

Coordination

opportunities are created for employees

have difficulty reaching.

Logistics, range development and

both within their present business units

market communication is coordinated

and within the rest of the Group.

Group affiliation strengthens

at brand concept level which intensifies

competitiveness.

our competitiveness and makes us more

Belonging to a group with a clear focus

cost effective.

improves the conditions for the company to grow. Group affiliation means:

Spurred by each other’s achievements The business units are regularly com-

Economies of scale

pared to foster cross-company learning

A centralised infrastructure and administra-

and internal ranking lists spurs

tion contributes to conditions that allow the

better performance.

Vision, business concept and business logic z OEM Annual Report 2007

OEM2008_del1_5-36_ENG_OK.indd 9

9

08-04-21 16.17.42


Growth Growth strategy

Growth is central for the OEM Group. Our growth strategy is based on three parts: Organic growth, Geographical expansion and Acquisition. orGanic Growth

Over the past years, OEM has set up

acquisitions can be made at

OEM’s target is a 10% organic growth.

operations in the Baltic countries, the

three different levels:

This will be achieved by:

Czech Republic and Slovakia.

Supplementary acquisitions

• Developing our product range • Expanding our market shares

OEM uses its presence in markets where the company already has other business

A company or product range is incorporated into an existing business unit.

operations to expand geographically. Focus on developing customer/

Complementary acquisitions

supplier relationships, product offers

acquisitions

A company that fits in and is run as an

and service will improve competitiveness

Acquisitions are a central part of the

individual company within Development.

and increase market shares.

expansion throughout the entire Group’s development. OEM has both the resources

Strategic acquisitions

customers and that what we offer is attrac-

and the financial backing to continue

A brand-new product area with consider-

tive to new customers. Another essential

to evaluate and make acquisitions. The

able sales that becomes a new concept, or

aspect of organic growth involves start-ups

requirement for every acquisition is that

a company in a new geographical market.

with new suppliers.

it has the potential to evolve positively

Organic growth is evidence of satisfied

Organic growth over time is necessary to justify our business units.

within the OEM Group and that our integration strategy affords both economy of scale and aggressive initiatives.

GeoGraphical expansion

New opportunities for expansion are created by launching established brand concepts on new markets.

10

oeM annual RepoRt 2007 z gRoWth stRategY

OEM2008_del1_5-36_ENG_OK.indd 10

08-04-21 16.17.58


Financial targets OEM’s objective is to achieve a good return on shareholders’ equity with limited financial risks during a period of stable growth. the tarGets for one

external factors, fluctuations in

business cycle are:

the economy and acquisition

• 15% annual growth in profit

opportunities are all factors that

• 20% return on equity

mean that the Group must be

• Equity/assets ratio not lower than 35%

prepared at all times to adjust to

30

45 25% 32,5%

20

30 15%

implement changes that make us

achieve these goals entails

more competitive.

establishing a balance between

Over the last three years, OEM

growth and profits. Changes in

has realised the following targets:

0

17,6%

15

new circumstance and willingly The strategy to continue to

19,7%

10

1% 2005

2006

2007

Growth of profit

The growth in profit is calculated minus divestment of the hydraulic segment and real estate property.

0

2005

2006

2007

Return on shareholders’ equity 75 62%

67% 59%

50

25

0

2005

2006

2007

Equity/assets ratio

financial taRgets z oeM annual RepoRt 2007

OEM2008_del1_5-36_ENG_OK.indd 11

11

08-04-21 16.18.11


Employe Employees

OEM needs skilled, competent employees in order to live up to its vision of becoming a leading player in the industrial trading sector. Our employees are OEM’s single greatest

recruits and careers

and positive climate. The objective is for

asset. We are convinced that when our

Our ambition is to internally recruit 75%

employees to feel a sense of job satisfac-

employees grow, so does the company.

of our new managers and specialists.

tion, community and security.

Consequently, we feel it is important to

A propensity to change, curiosity and a

Our ambition is to cultivate a strong

create opportunities for our employees

goal-oriented approach are characteristics

sense of commitment in the company

to develop and realise their ambitions.

that ensure our employees an interesting

and pride in working at OEM.

We reinforce our competitiveness with

future and careers. We consider it a

cutting-edge expertise. It is our employees

major achievement when we can wish

employees and managers generates

that produce results and build long-term

an employee success in a new position

candour and improves the quality of

value for our customers, suppliers and

within the company.

personal performance dialogues.

shareholders.

Mutual trust is conducive to making trainee proGrammes

constructive criticism and praise a part

competence development

OEM has been running a two-year trainee

of the day-to-day communication.

To attract and retain qualified employees,

programme since 2006. The purpose

OEM must offer attractive employment

is to secure the supply of employees in

leadership

conditions and good opportunities for per-

key positions and increase the presence

For OEM, leadership is about being a role

sonal growth. Investing in our employees’

of Swedish executives in our foreign

model and sharing knowledge and insight.

competence development is also a natural

companies. The programme lays a sound

aspect of our ongoing quality efforts.

foundation for a successful career within

and drawing up individual goals and

the OEM Group.

plans together with the employees in

Competence development efforts are

Defining distinct goals and sub-goals

order to achieve these goals. The ability

primarily conducted by the respective

12

We believe that openness between

business units which organise various

corporate culture

to coach and develop our employees at

types of in-house training programmes.

OEM currently has 26 operating units

an individual level since each employee

Needs and preferences are mapped out

comprised of cultures that are inuenced

has unique needs.

through the personal performance dia-

by their employees. All units do however

logues held annually between employees

conform to the Group bywords, namely

as a lodestar for all employees and be

and immediate supervisors. An individual

dedication, openness, goal orientation,

encouraged by the managers. Managers

competence development plan for each

positive attitudes and modesty. It is natu-

and employees are mutually responsible

employee is prepared in conjunction

ral for us to share our experiences and

for contributing to a successful corporate

with this evaluation.

knowledge in order to create a learning

climate. Reciprocal demands are to lead

The will to learn and succeed is to serve

oeM annual RepoRt 2007 z eMploYees

OEM2008_del1_5-36_ENG_OK.indd 12

08-04-21 16.18.24


ees to constructive activities that make us

even better partners for our customers. work environment and health

A good, suitable working environment is a prerequisite for employee satisfaction and good performance. OEM encourages its employees to practice a healthy lifestyle by participating in various fitness activities and work with the contracted preventive healthcare service. equal opportunities

OEM is active in an industry that traditionally has an unequal distribution between men and women. Most of the women in the Group work in finance, administration and marketing. Therefore, we are working

facts

235 200

150 177

to attract more female applicants to male-dominated positions.

172

113

150

Key indicators employees Average no. of employees No. of women No. of men Sick leave person/yr Training costs/employee (SEK) Fitness costs/employee (SEK)

100

569 123 446 7 5762 1307

101

92

91

100 74 50

0

50

50 33

<25 26-35 36-45 46-55 56-65 (year)

Age distribution (no. of employees)

0

<1

1-3

4-7

8-11 >12 (year)

Period of employment (no. of employees)

eMploYees z oeM annual RepoRt 2007

OEM2008_del1_5-36_ENG_OK.indd 13

13

08-04-21 16.18.36


the envir Quality, the environment & ethics Our objective is that customers will associate OEM with good products, high delivery assurance, good technical support and a professional, positive reception. OEM’s all-embracing quality policy is that

requirements as well as what is techni-

transports and company cars

products and services must meet or exceed

cally possible and financially feasible.

OEM pressures forwarding agents to aim

customer expectations. A central aspect of

The aim is to reduce the impact of our

for alternative fuel and environmentally-

our quality efforts is a close collaboration

business on the environment in both the

classified cars. As per the Group’s own

with our customers and suppliers.

short and long term.

company car policy, only cars classified

All companies sell components and

in line with Environmental Class 2005

quires constant dialogue with our suppliers

systems from manufacturers all over the

(MK2005) will be supplied. OEM en-

on subjects ranging from product quality

world. This means that the greatest im-

courages choosing ethanol-driven cars.

and product development to delivery time

pact on the environment stems from:

and environmental issues. This is essential

• goods and personnel transports

our supplier requirements

toward upholding set quality targets. At the

• the presence of environmentally-

Our customers often ask questions about

damaging substances in products

whether the products contain substances

To maintain an improvement process re-

same time, we must have an intense dialogue to follow-up the customer-perceived quality and, together with our customers, identify areas for improvement.

• printing and distribution of product catalogues • packaging materials • office heating, lighting and cooling.

the environment

that have an impact on the environment. We review the environmental efforts of our suppliers when we visit. Our certified companies have special routines for supplier reviews.

OEM’s environmental policy dictates continuous efforts to minimise our external environmental impact. Environmental efforts are governed by legal

14

oeM annual RepoRt 2007 z QualitY, the enViRonMent and ethics

OEM2008_del1_5-36_ENG_OK.indd 14

08-04-21 16.18.57


vironmen printinG and distribution of

to cultivating these relationships.

OEM Automatic AB

product cataloGues

Consequently, it is vital that ethical

OEM Electronics AB

The Group prints and distributes about

issues are regularly discussed.

Internordic Bearings AB

50,000 product catalogues and brochures

One such ethical issue relates to the

Indoma AB

each year. When purchasing printing

certification of factories that OEM col-

services, we give top priority to environ-

laborates with in China. Among other

mentally-certified printers. To the greatest

things, this entails investigating the oc-

iso9001 quality certified

possible extent, OEM strives to print on

currence of child labour. Our day-to-day

companies

environmentally-friendly paper. We will

business is characterised by respect for

The following companies have

gradually expand our online product

employees and business partners.

ISO9001 quality certification:

information, which will reduce the number of printed catalogues.

Telfa AB

OEM Automatic AB iso14001 environmental

OEM Electronics AB

certified companies

Internordic Bearings AB

ethics

The following companies have ISO

Indoma AB

OEMâ&#x20AC;&#x2122;s business activities are based

14001 environmental certification:

Telfa AB

on long-term employee, supplier and customer relationships. The values of the management and our employees contribute

QualitY, the enViRonMent and ethics z oeM annual RepoRt 2007

OEM2008_del1_5-36_ENG_OK.indd 15

15

08-04-21 16.19.13


Board of Directors The Board of Directors of OEM International (publ) is comprised of seven regular members and three deputy members elected by the Annual General Meeting. Six Board meetings were held in

as Board members Hans FranzĂŠn,

2007, all of which were recorded in

Orvar Pantzar and Agne Svenberg.

the minutes. The work of the Board

The Committee nominates members

complies with the rules of procedure

to the Board and issues guidelines

adopted by the Board. Once a year,

for remuneration to the Managing

the principal auditor attends and

Director. The Board approves remu-

reports on the auditing process.

neration negotiated by the Chairman

Decisions and the division of

of the Board and the Managing

responsibility between the Board and

Director. The Committee convened

the Managing Director are regulated

once in 2007.

in the written instructions for the

Remuneration to other members of

Managing Director. Proposals regard-

Senior Management is determined by

ing remuneration to the Board are

the Managing Director in consultation

presented to the Annual General

with the Chairman of the Board.

Meeting for decision. The Board re-

5

ceives no bonuses. The amounts and

2

other benefits are reported in Note 7. Auditors are nominated and elected

6

by the Annual General Meeting for a

1

four-year tenure. The auditorsâ&#x20AC;&#x2122; work is invoiced within negotiated price frames.

3

4

Nomination and Remuneration Committee

The Nomination and Remuneration Committee is comprised of Chairman of the Board Jan Svensson as well

16

OEM Annual Report 2007 z Board of Directors

OEM2008_del1_5-36_ENG_OK.indd 16

08-04-21 16.19.18


JAN SVENSSON (1) Born 1956. Chairman of the Board since 2007. Not employed by OEM. Mechanical Engineer and MBA. Other appointments: MED and CEO of Investment AB Latour. Board member Munters AB, Loomis AB, Oxeon AB and Fagerhult AB. Number of shares: 3,000 OEM Class B HANS FRANZÉN (2) Born 1940. Chairman of the Board 1992-2006. Board member since1974. CEO until 31 Dec 2001. Engineer. Other appointments: Chairman of the Board, Tranås Rostfria AB, TR Equipment AB, Tranås Resebyrå AB, Aqua Safety Wall Asw AB, Linktech AB, Montico AB and Handelsbanken’s regional board in Tranås. Board member, Allt om Bostad i Skandinavien AB, OPIC Com AB, Ovacon AB, Bomarknadsbolaget i Skandinavien AB and IB Medical AB. Number of shares: 707,376 OEM Class A and 639,090 OEM Class B GUNNAR ELIASSON (3) Born 1951. Board member since 2000. Business Administrator. Not employed by OEM. Other appointments: Chairman of the Board, Oak Capital Group AB, Norden Finansforum AB and Ideometrics AB. Number of shares: 21,000 OEM Class B LARS-ÅKE RYDH (4) Born 1953. Board member since 2004. M.Sc. Engineering. Not employed by OEM. President and CEO of Nefab AB. Other appointments: Handelsbanken Region Eastern Sweden and Nolato AB. Number of shares: 3,000 OEM Class B ULF BARKMAN (5) Born 1957. Board member since 1997. Business Administrator. Not employed by OEM. Number of shares: 42,000 OEM Class B AGNE SVENBERG (6) Born 1941. Board member since 1974. Managing Director up until 29 February 2000. Engineer Other appointments: Chairman of the Board, EG:s El o Automation AB, Personality Gym AB and ISP AB. Number of shares: 665,400 OEM Class A and 238,530 OEM Class B ORVAR PANTZAR (not pictured) Born 1939. Board member since 1997. Founder of Cyncrona AB. Engineer. Not employed by OEM. Other appointments: Board member, Next Generation System AB. Number of shares: 1,627,320 OEM Class A and 2,802,360 OEM Class B

DEPUTY BOARD MEMBERS TOMAS FRANZÉN Born 1962. Deputy member since 1997. MD and CEO of Eniro AB. Graduate engineer. Not employed by OEM. Other appointments: Board member, Eniro AB, BTS AB, Securitas Systems AB, Teligent AB and Inspecta OY. Number of shares: 19,500 OEM Class B INGER SVENBERG Born 1937. Board member 1974-1997. Deputy member since 1997. Not employed by OEM. Number of shares: 558,000 OEM Class A and 237,456 OEM Class B JERKER LÖFGREN Born 1950. Deputy member since 2003. Head Counsel Carnegie Private Banking. Not employed by OEM. No OEM shares. AUDITOR: KPMG Bohlins AB. Principal auditor: Niklas Bengtsson Authorised Public Accountant boaRd of diRectoRs z oeM annual RepoRt 2007

OEM2008_del1_5-36_ENG_OK.indd 17

17

08-04-21 16.19.27


Senior Management OEM Internationalâ&#x20AC;&#x2122;s ambition is to develop the operating units through growth and profitability that surpasses our competitors. In addition to succinct management-by-objectives, this means also implementing a culture and strategy that produces long-term, stable business units.

18

OEM Annual Report 2007 z Senior Management

OEM2008_del1_5-36_ENG_OK.indd 18

08-04-21 16.19.34


JÖRGEN ZAHLIN (1) Born 1964. Managing Director of OEM International AB as of 1 March 2000. CEO since 1 Jan 2002. Group employee since 1985. Engineer. Number of shares: 171,500 OEM Class B JAN CNATTINGIUS (2) Born 1955. Finance Director. Group employee since 1985. Economist. Number of shares: 10,000 OEM Class B URBAN MALM (3) Born 1962. Managing Director of OEM Electronics AB. Group employee since 1983. Engineer. Number of shares: 900 OEM Class B FREDRIK TENGSTRAND (4) Born 1966. Business Director Development. Group employee since 1991. Engineer. Number of shares: 1,200 OEM Class B MIKAEL THÖRNKVIST (5) Born 1968. Managing Director of OEM Automatic AB. Group employee since 1990. Engineer. Number of shares: 3,000 OEM Class B JENS KJELLSSON (6) Born 1968. Foreign Business Director Group OEM Automatic. Group employee since 1990. Engineer. Number of shares: 7,700 OEM Class B

6

2 4 1 3 5

Jörgen Zahlin has been the Managing

Senior Management works to develop the

The board of an operating unit consists

Director of OEM International since

Group in line with the vision, business

normally of the business director,

2000 and is responsible for the company’s

concept and strategy defined by the Board.

controller and the Managing Director.

Governance

Group-wide resources

day-to-day management, which includes all issues not reserved for the Board.

The company groups OEM Automatic,

There are resources within the Group

making rights in terms of investments,

OEM Electronic and Cyncrona have

that work with specific Group-wide

corporate acquisitions/divestments and

separate boards over which the Group’s

functions. The resources cover financial

financing issues are regulated by the

Managing Director presides as chairman.

control, business systems, tele/data

regulations defined by the Board.

These boards are put together based on

communication, market communication,

the needs of each company group.

quality&, the environment and logistics.

The Managing Director’s decision-

The Group’s senior management consists of the Managing Director, Finance Director and four Directors in charge of the Group’s largest business units.

senioR ManageMent z oeM annual RepoRt 2007

OEM2008_del1_5-36_ENG_OK.indd 19

19

08-04-21 16.19.44


OEM Automatic

OEM Electronics

Components for industrial automation.

Appliance and circuit board components and EMC/microwave components.

Read more on pages 22-23

Read more on pages 24-25

Group st Group structure

The Group is organised into four company groups. Three groups are organised according to their distinct brand concepts and one company group, Development, is a collection of other business activities. Cyncrona 12.5%

Development 14.8%

OEM Electronics 18.4%

OEM Automatic 54.3% (Share of Group sales in %)

20

OEM Annual Report 2007 z Group structure

OEM2008_del1_5-36_ENG_OK.indd 20

08-04-21 16.19.58


Cyncrona

Development

Production systems and components for electronics production

Bearings and bearing solutions, motors & transmissions, seals and pumps

Read more on pages 26-27

Read more on pages 28-29

structure Company groups

Products

No. of countries

OEM Automatic

Components for industrial automation.

11

OEM Electronics

Electronic and electromechanical components

3

Cyncrona

Equipment and material for electronics production

5

Development

Other business activities

4

Group structure z OEM Annual Report 2007

OEM2008_del1_5-36_ENG_OK.indd 21

21

08-04-21 16.20.09


Automat OEM Automatic

2007 was yet another record-breaking year during which all business units made positive progress. The completion of three acquisitions coupled with organic growth generated higher sales and profit.

The Group made three acquisitions in 2007.

part of the group’s geographical expansion

The strategy is

Crouzet AB contributed about SEK 30

plan. Moreover, the group broadened its

• Strong local market presence with

million to the Swedish business sales, while

collaboration geographically with several

MPX ApS and Klitsö Prosesstechnic A/S

existing suppliers while concurrently

contribute sales of SEK 17 million and SEK

introducing five new suppliers in 2007.

face-to-face sales • Coordinate logistics, market communication and range development activities.

88 million respectively to the sales in Den-

• Enhance the customer offer by expand-

mark over the whole year. The acquisitions

Goals and strateGies

also offer expansion opportunities in other

The goal is a growth rate that exceeds

• Represent key suppliers on all markets

geographical markets in terms of products.

10% per year. OEM Automatic’s growth

• Geographical expansion in northern

Excluding the acquired units, the group’s reported sales growth is 10%. Business organisations have been set up in Latvia, Lithuania and Slovakia as

strategy is built around organic growth

and eastern Europe

comprised of greater market shares, broader supplier partnerships and ven-

facts

tures in new markets.

BUSINESS ACTIVITIES OEM Automatic sells industrial automation components in eleven markets. Customers include machine and appliance manufacturing industries, wholesalers and strategic end users. OEM Automatic represents some 80 suppliers that are specialists and leaders within their respective fields. Marketing is primarily conducted through face-to-face sales where OEM Automatic provides the customer with product and application knowledge. Products Components for industrial automation within the business areas of Electrical Machinery, Electrical Cabinets, Safety, Cables, Motors, Pressure & Flow and Pneumatics. Geographical markets OEM Automatic has operations in Sweden, Norway, Denmark, Finland, Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia and the UK.

ing our product range

Sales climbed by 16% to SEK 813 million (698) Profit rose 4% to SEK 94.6 million (91.0) 813

800

100

91,0

698 600

605

75

400

50

200

25

94,6

248

74,7

270

200

54,3%

100

0

Share of Group sales

307

300

2005

2006

2007

Sales (SEK m)

0

2005

2006

2007

Profit (SEK m)

0

2005

2006

2007

No. of employees

Effective 2008, OEM Motor AB is part of the OEM Automatic company group. OEM Motor AB is not included in the above sales and profit figures.

22

oeM annual RepoRt 2007 z oeM autoMatic

OEM2008_del1_5-36_ENG_OK.indd 22

08-04-21 16.20.29


atic markets and customers

Demand has remained sound on all markets. On the whole, the market for automation components in Europe is relatively stable and expected to grow about 2-3% per year over a business cycle. Markets in eastern Europe have a growth rate that exceeds 5%. As most of our customers have small to medium-sized volume production, there is no drastic transfer of production to low-cost countries. competitors

Competitors include manufacturers such as Schneider Electric, ABB and Omron as well as trading companies such as Indutrade and Addtech.

es.

Jens Kjellsson, Business Director Group OEM Automatic and Mikael Thรถrnkvist, Managing Director OEM Automatic AB oeM autoMatic z oeM annual RepoRt 2007

OEM2008_del1_5-36_ENG_OK.indd 23

23

08-04-21 16.20.42


Electron OEM Electronics

Lower demand in Sweden coupled with changes in the product offer caused sales to drop in 2007. The business units in Finland and Poland report positive growth.

Lower demands on the Swedish market,

in 2007 generating sound growth within

strongest player on the electronic compo-

particularly from our EMS customers

these fields.

nents market in northern Europe.

*

caused an overall decline in sales for the

The trend for OEM customers has

Swedish business unit, dropping from

been positive with higher sales in such

The strategy is:

SEK 253 million to SEK 217 million.

products as LED lighting and displays.

• Strong local market presence with

Adjustments to the business and initia-

face-to-face sales

The business units in Finland and Poland

• An organisation distinguished by

tives in the business area Keyboard &

improved sales by 13% and 73% respectively

Display, which reported a 35% increase

and both new suppliers and product seg-

service-mindedness, excellent

in sales climbing up to SEK 44 million,

ments were launched on these markets.

applications knowledge and various types of logistics solutions.

helped the company to recover its profits in the final quarter. New power supply and communication solution suppliers were introduced

Our goals include a growth rate that

expanding our product range

exceeds 10% per year and to become the

BUSINESS ACTIVITIES OEM Electronics is comprised of three companies active in the sale of electronic and electromechanical components. Our customers include appliance and electronics manufacturers as well as strategic electronic manufacturing services (EMS customers) in northern Europe. The company represents some 60 suppliers that are each specialists in their respective fields. Marketing is primarily conducted through face-to-face sales where OEM Electronics provides the customer with product and application knowledge alongside logistics solutions.

facts

• Streamlining through coordination

Sales amounted to SEK 276 million (307). Profit amounted to SEK 14.1 million (18.8). 400

18,4%

Products Appliance and circuit board components and EMC/microwave components. Geographical markets OEM Electronics has operations in Sweden, Finland and Poland.

• Enhance our customer offer by

Goals and strateGies

300

305

307

24,7 276

15,0

200

7,5

2005

2006

2007

Sales (SEK m)

75

22,5

100

0

Share of Group sales

100

30,0

0,0

78

85

85

2006

2007

18,8 14,1

50 25

2005

2006

2007

Profit (SEK m)

0

2005

No. of employees

*) EMS customers = Electronic Manufacturing Services

24

oeM annual RepoRt 2007 z oeM electRonics

OEM2008_del1_5-36_ENG_OK.indd 24

08-04-21 16.20.57


onics markets and customers

Manufacturing assignments for EMS customers is moving from country to country to a greater extent, which creates instability in the Nordic electronics market. Growth from the Polish business units continues to be good. competitors

Competitors include both the major, global component distributors Arrow and Avnet, as well as industrial trading companies such as Addtech, Lagerkrantz Group and Elektronikgruppen. Moreover, manufacturersâ&#x20AC;&#x2122; own sales companies rank among our competitors. *) EMS customers = Electronic Manufacturing Services

Urban Malm. Business Group Director OEM Electronics. oeM electRonics

OEM2008_del1_5-36_ENG_OK.indd 25

z oeM annual RepoRt 2007

25

08-04-21 16.21.08


Cyncron Cyncrona

Significant decline in sales and over-reliance on a major customer in the Finnish market caused the Cyncrona companies’ profit to drop in 2007.

Sales figures in Finland dropped by SEK

Cyncrona’s largest supplier, Fuji,

manages warehouses and logistics for the

68 million after the company’s largest

launched a new piece of equipment

entire Group. Each country organisation

customer started working on commission

(the XPF) that has created new business

is in charge of sales on their own markets

and the number of equipment orders

opportunities. A partnership has been

and product specialists are on stand-by to

were fewer than in previous years.

established with Omron, the leading

support all markets.

After a period of low demand in Sweden

inspection equipment supplier in the

and Denmark, several deals were settled

world. This partnership resulted in new

support staff and, depending on work-

in these markets. Demand in Norway and

business valued at about SEK 5 million.

load and need for expertise, the support

the Baltic countries is still very good.

We took over representation for Fein-

organisation can work in other countries.

The material for PCB manufacturing

focus, the leading x-ray equipment com-

product area was divested in 2007. Measures

pany in the Nordic region, which means

Goals and strateGies

to adapt the organisation to lower sales were

about SEK 8 million in additional sales.

Cyncrona is to be the leading distributor

carried out the second half of the year.

As of 2008, the Swedish business unit

of equipment, support and material for

BUSINESS ACTIVITIES Cyncrona is comprised of five companies that sell electronics production equipment and material. Cyncrona represents some 20 leading suppliers, each of which are specialists in their fields. Support is a significant aspect of our business activities and includes training, installation, startup and service. Marketing is primarily conducted through face-to-face sales where Cyncrona supplies the customer with product and application knowledge.

Geographical markets Cyncrona has operations in Sweden, Finland, Denmark, Norway, Estonia, Latvia and Lithuania.

facts

Sales amounted to SEK 188 million (245). Profit amounted to SEK 3.6 million (14.2). 300

20

284

80

18,5

245

12,5%

15 200

60

14,2

100

0

Share of Group sales

57

59

2005

2006

55

188 40

10

Products Production equipment, support and electronics production material.

26

Each country organisation has its own

5

2005

2006

2007

Sales (SEK m)

0

3,6

2005

2006

2007

Profit (SEK m)

20 0

2007

No. of employees

oeM annual RepoRt 2007 z cYncRona

OEM2008_del1_5-36_ENG_OK.indd 26

08-04-21 16.21.29


na electronics production in the Nordic and Baltic countries. Our ambition is to eventually achieve a 7% profit margin over 7% through a streamlined organisation and strong product offer. Local presence will create strong customer relations and Group-wide resources promise a high level of efficiency. markets and customers

Demand on the Finnish market was low in general in 2007. Other Nordic markets and the Baltic countries report stable demand. Our belief is that demand will be on par with last year throughout 2008 and we plan for higher profitability with retained sales levels. competitors

Cyncrona competes primarily with such manufacturers as Siemens and Mydatafor surface-mounting equipment and with a handful of local distributors, including Scanditron, HIN and Sincotron for other parts of the product range.

Pictured left to right: Lassi Peurakoski, Cyncrona Finland, Clas Kagerup, Cyncrona Sweden and Kjell Gunnar Koppangen, Cyncrona Norway

OEM2008_del1_5-36_ENG_OK.indd 27

cYncRona z oeM annual RepoRt 2007

27

08-04-21 16.21.43


Developm Development

Company group Development boosted both sales and profit due to a sound demand and streamlining initiatives.

Development is comprised of business

the range of SEK 3 million. Several new

profitability. The company is gaining

units that are in various stages of growth

suppliers were added in 2007, including

market shares and reports strong growth

and aim to either evolve into a strong

Milton Roy, world leader in volume

among its OEM customers.

brand concept or be modified to merge

pumps, SAER in the field of water treat-

with another business unit. The group

ment and Flojet, maker of small process

oem motor

constantly evaluates opportunities for ac-

pumps. The new suppliers have had a

Sales climbed by 34% to SEK 40 million.

quisitions within affiliated product areas,

marginal impact on the year’s sales figures.

Sales of almost SEK 4 million were gained in conjunction with the Crouzet acquisi-

but also within brand new product areas. indoma

tion. Other growth stems from growing

telfa

Sales climbed by 2% to SEK 40 million.

market shares.

Sales climbed by 6% to SEK 50 million.

Efforts to increase the company’s business

Collaboration gradually intensified

The phase out of product area filling

dealings with engine builders and reduce

with company group OEM Automatic’s

machines had a negative impact on sales in

the share of aftermarket helped to improve

units that are active in the motor segment.

BUSINESS ACTIVITIES Development is comprised of business units that are in various stages of growth and aim to either evolve into a strong brand concept or be modified to merge with another business unit. The group constantly evaluates opportunities for acquisitions within affiliated product areas, but also within brand new product areas.

Sales climbed by 4% to SEK 221 million (213) Profit rose 18% to SEK 15.4 million (13.0) 20

250 213

Products Pumps, seals, roller bearings, slide bearings and plain bearings, as well as motors and transmissions.

14,8%

10

100

0

13,0

2005

2006

2007

Sales (SEK m)

0

107

2006

2007

83 75 50

8,4

5

50

Share of Group sales

15,4

15

162

104 100

221

200 150

Incorporated units Telfa, Indoma, OEM Motor, Internordic Bearings and IBEC.

28

facts 25

2005

2006

2007

Profit (SEK m)

0

2005

No. of employees

oeM annual RepoRt 2007 z deVelopMent

OEM2008_del1_5-36_ENG_OK.indd 28

08-04-21 16.22.00


pmen As a result, the company is part of OEM Automatic company group as of 2008. internordic

Sales amounted to SEK 85 million, which is on par with last year. Gross margin rose in both Sweden and Finland. Both business units were reorganised in 2007 and more resources were allocated to marketing activities. ibec

Sales fell from SEK 33 million to SEK 26 million. The decline in sales is due to lower sales to customers in Central Europe. This is in line with the companyâ&#x20AC;&#x2122;s strategy to focus on the Nordic region. Better gross margin and higher efficiency mean stronger profits. IBECâ&#x20AC;&#x2122;s function is to supply Internordic companies will ball bearings via a quality and logistics center in China.

Fredrik Tengstrand, Business Group Director Development deVelopMent z oeM annual RepoRt 2007

OEM2008_del1_5-36_ENG_OK.indd 29

29

08-04-21 16.22.13


OEM Electronics – important partners Husqvarna was the first company to develop a fully automatic lawnmower. Husqvarna Automower™ was released in 1998 and today, increasingly more people use lawnmower robots to care for their lawns all over Europe. Husqvarna’s robot mower conquers

OEM onboard from the start

”We receive deliveries from the manufac-

Europe. Over the past years, sales have

The growth in sales means increasingly

turer Tianma via OEM. This is another

climbed by 50 per cent each year.

larger orders to OEM Electronics, sup-

instance where OEM’s presence in China

”Obviously, this is a very satisfying

plier to Husqvarna since the very first

is critical, should any problems arise.”

trend,” says Patrik Jägenstedt, head of

automatic lawnmowers were designed.

development for automatic lawnmower

“We initially bought the keyboard

The products are shipped from China and stored at OEM Electronic’s central

at Husqvarna. People appreciate con-

via OEM Electronics,” explains Patrik

warehouse in Tranås, Sweden. From there

venience. Success breeds success and

Jägenstedt. They represented the Chinese

they are shipped to northern England

when someone in the neighbourhood

company ECW, which is a major manu-

where the mowers have been assembled

buys an Automower, it spurs the interest

facturer. Since the keyboard is always

the past two years. They were previously

of the neighbours.

custom made it was essential that we had

“The grass is always perfectly cut and

a supplier who could contribute their

there’s no cuttings to gather since the

expertise and take part in our require-

Automower cuts regularly. It also automati-

ments specification. Quality and

cally recharges the batteries when needed.

delivery accuracy is assured since OEM Electronics has its own staff on site in Chine,” says Patrik Jägenstedt, Husqvarna. Expanded partnership

As of the past two years, OEM Electronics also supplies displays to Husqvarna. Patrik Jägenstedt, head of development for automatic lawnmowers at Husqvarna.

30

OEM Annual Report 2007 z OEM Electronics – an important partner

OEM2008_del1_5-36_ENG_OK.indd 30

08-04-21 16.22.18

fo


s

for Husqvarna’s robot mower assembled in the Swedish cities of

“OEM Electronics has the expertise we

over the years. Our expertise helps

Huskvarna and Ödeshög.

need to access the right products from

Husqvarna to further develop their

“Quality and delivery accuracy is assured since OEM Electronics has its own staff on site in Chine,” says Patrik Jägenstedt, Husqvarna. The right partner

China,” comments Patrik Jägenstedt.

innovative proucts,” says

for the Chinese market

Insight into the market and the possibi-

Fredrik Simonssonhead of

The partnership with OEM Electronics

lities there is valuable in our design and

sales at OEM Electronics AB.

has evolved positively over the years.

development efforts.

When Husqvarna moves on and designs a hybrid alternative of Automower,

Husqvarna an Important customer

OEM Electronics is a given partner.

“Husqvarna is a partner with whom we have developed a very positive partnership

OEM Electronics – an important partner z OEM Annual Report 2007

OEM2008_del1_5-36_ENG_OK.indd 31

31

08-04-21 16.22.21


Focus on pumps a winning path for Telfa Telfa in Göteborg sells pumps and motor-driven pump units from marketleading manufacturers. The customers are engine builders and end users in the marine, automotive and process industries. “Pumps are the world’s second largest

working with filling machines. It also

industrial commodity, second to electric

required substantial internal resources

engines,” explains Managing Director

from the organisation in the form of

Mats Björkner. There are about 40 com-

assembly, warehousing, trial runs, sales

panies in Sweden that are distributors of

overheads, after-sales service and marketing.”

pumps and combined, these companies have about SEK 1.3 billion in sales. If we

In what should we invest?

include around a dozen pump manu-

To generate growth in Telfa while

facturers, the industry’s total sales figure

retaining or improving profits, alterna-

lands at between SEK 5 and 6 billion.

tives were evaluated in terms of the

Telfa is one of the larger distributors on this market. A strategic decision was taken in 2007 to focus the business on pumps alone.

32

company’s capacity, growth potential and

Mats Björkner, Managing Director Telfa

margins on the available alternatives. After the evaluation, Telfa faced the

Strong growth potential

decision to develop the concept with

“The pump sector is big and we saw

filling machines or broaden its product

growth potential by taking market shares

Limited market

portfolio within the industrial segment

from other companies in the sector,”

“Filling machines were previously

and focus on pumps.

says Mats Björkner.

another leg of our business,” says Mats

After considering the margins, growth

Björkner. “That market is restricted and

potential and risks, the decision was taken

offered few options to cultivate growth

becoming more and more automated.

to invest in pumps, primarily against the

within the industrial pumps segment.

Major investments in new research and

industrial segment. The filling machines

We needed to expand our collection.

development are needed to continue

were phased out during the summer 2007.

Among other things, we lacked volume

“The existing product range (2006)

OEM Annual Report 2007 z Positive path for Telfa

OEM2008_del1_5-36_ENG_OK.indd 32

08-04-21 16.22.23


pumps, a competitive supplier for larger

With these new products, Telfa is a

“Hopefully, we will begin to reap the

process pumps and a supplier of smaller

complete pump supplier in the industrial

fruits of our efforts in 2008 and thereafter.

pumps for engine builders sold i larger

segment, well on par with the very best

Telfa is now well equipped to satisfy

volumes.

in standard pumps and in the vanguard

the strategically important customers’

in several areas where our rivals lack

needs and has thereby improved the

competitive alternatives.

prerequisites for growth and profitability

What was the outcome?

Telfa succeeded in signing exclusive

long term.

agreements with the following suppliers

Harvest 2008

in 2007:

Sales rose by about SEK 2.5 million in

suppliers. We find ourselves in a positive

2007 although the filling machines were

upward spiral,” Mats Björkner concludes.

• Milton Roy (Volume pumps) World leader with a 15% market share • Saer (Process pumps) One of Europe’s leading players • Flojet (Small OEM pumps)

“We are also an attractive partner for our

phased out. “We devoted a great deal of energy to finding new suppliers and presenting this to our customer groups in 2007,” says Mats Björkner.

World leader in small diaphragm pumps • Albin Pump (AOD pumps) Air-driven diaphragm pumps based on their own patented design

Positive path for Telfa z OEM Annual Report 2007

OEM2008_del1_5-36_ENG_OK.indd 33

33

08-04-21 16.22.25


“The purchase of Crouzet reinforces our position even more” OEM International AB acquired the remaining 50 per cent of the shares in Crouzet AB from Crouzet Automatismes SAS in 2007. Crouzet AB is thereby wholly owned and incorporated in OEM Automatic. Crouzet’s range of products include time

“We realise a number of obvious advan-

more market shares for Crouzet’s range.

relays, control relays, micro plc, small

tages,” comments Mikael Thörnkvist,

At the same time, we gain a closer

motors, motor controls and

Managing Director of OEM Automatic

collaboration with Crouzet’s parent

position indicators.

AB. We have created a mutual, strong

company Crouzet Automatismes SAS.

and efficient distribution chain for the entire Nordic market which reinforces

Long history

our position even more. We can pick

OEM Automatic has been the market

up the pace in terms of marketing and

leader in the Nordic countries for more

launches to secure

than 30 years in the product segment, starting as representative for former Syrelec. When Syrelec was acquired by Crouzet’s parent company, OEM International decided to buy 50% of Crouzet AB in 1994. The organisations have thereafter partially worked in parallel with the same products on the markets.

34

OEM Annual Report 2007 z OEM Automatic strengthens its position

OEM2008_del1_5-36_ENG_OK.indd 34

08-04-21 16.22.31


Charging to become Nordic and Baltic market leader in batteries

s

The acquisition of MPX Electra Aps gives OEM Automatic direct access to a generous selection of industrial batteries, including those from world-leading manufacturer, Yuasa. MPX was incorporated in OEM Automatic Denmark as a new product area. We gain a strong platform in Denmark with MPX now a part of OEM Automatic Denmark and can also there boost our total sales. We also see distinct synergies in our common customer approach in Denmark. ”We were already representing Yuasa in Sweden and Finland,” says Mikael Thörnkvist, Managing Director of OEM Automatic AB. The acquisition means that our customers in Sweden, Finland and the Baltic countries have access to a broader product range and more resources in the form of better market support. For OEM Automatic, the acquisition means a new aggressive Mikael Thörnkvist, Managing Director of OEM Automatic AB

approach with the ambition of becoming one of the leaders in industrial batteries the Nordic and Baltic markets. Coordinating the range, logistics and marketing communication makes

Muscles for the future

“By taking over Crouzet AB, we can

cost-saving initiatives possible. In total, OEM Automatic has an attractive supplier structure

concentrate all our energy and use our

with a generous product range within cyclical and high

muscles to move forward,” says Mikael

performance batteries. This enables us to approach customers

Thörnkvist. “Our offer to our customers

within the marine, telecom and caravan sectors.

will be more succinct.” “Discussions about how our companies

”We have formed special ”battery teams” in Denmark, Sweden, Finland and the Baltic countries. They have been

can together generate customer benefits

assigned the task of expanding our market,” explains

have been underway for some time.

Mikael Thörnkvist. By extension, we also predict excellent

We’ve reached an agreement that benefits

opportunities to expand on more markets, with Norway

all involved. We will be aggressive in our

and Poland as the most interesting targets.

marketing throughout the Nordic region,” Mikael Thörnkvist says in closing.

MPX Electra ApS (MPX) was founded in 1984 by Frank Birch, one of the people who introduced Yuasa on the Scandinavian market around the end of the 1970s. The company has steadily added to its collection ever since and has a broad range of industrial batteries.

OEM Automatic strengthens its position z OEM Annual Report 2007

OEM2008_del1_5-36_ENG_OK.indd 35

35

08-04-21 16.22.37


Financia 36

oeM annual RepoRt 2007

OEM2008_del1_5-36_ENG_OK.indd 36

08-04-21 16.22.49


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 37

ial repor Financial reporting

Five year Group summary ........................................38

Key indicators for the last five years ..........................39 Directors’ report ....................................................40-41 FINANCIAL REPORTS — THE GROUP

Income statement ......................................................42 Balance sheets ......................................................43-44 Changes in shareholders’ equity................................45 Cash flow statement ..................................................46 FINANCIAL REPORTS — PARENT COMPANY

Income statement ......................................................47 Balance sheets ......................................................48-49 Changes in shareholders’ equity................................50 Cash flow statement ..................................................51 Notes with accounting principles and financial statements ..................................52-80

Proposed allocation of profits ....................................81 Auditors’ report ..........................................................82

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

37


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 38

F I V E - Y E A R G R O U P S U M M A RY

SEK M

F R O M T H E I N C O M E S TAT E M E N T

2007

2006

2005

2004

2003

Sweden

890.9

848.6

801.4

900.5

Overseas

578.6

586.3

557.4

497.6

467.1

1 469.5

1 434.9

1 358.8

1 398.1

1 417.4

Operating income before depreciation and impairment

151.8

140.2

121.7

108.8

92.3

Depreciation and impairment

-14.8

-13.5

-12.6

-21.7

-37.0

2.1

-0.2

2.2

1.1

-2.9

-

1.0

1.3

1.1

1.0

139.1

127.5

112.6

89.3

53.4

-38.3

-36.7

-31.0

-25.7

-21.9

100.8

90.8

81.6

63.6

31.5

2.0

90.8

7.2

-

-

102.8

181.6

88.8

63.6

31.5

Total amount invoiced

Income from financial items Participation in associated companies Profit before tax

Tax Group profit for the year from remaining units

Profit from divested business unit

Group profit for the year

950.3

FROM THE BALANCE SHEET Intangible fixed assets Property, plant and equipment

46.7

20.5

18.2

10.3

15.6

160.2

139.6

122.5

136.1

125.5

Financial assets and 9.0

11.3

14.2

20.5

17.9

Inventories

deferred tax claims

255.2

214.6

218.2

205.9

230.9

Current receivables

295.1

279.2

241.0

228.6

198.9

7.1

-

-

-

-

127.0

288.5

150.0

111.0

52.7

900.3

953.7

764.1

712.4

641.5

Shareholders’ equity

530.1

640.7

477.9

424.9

391.1

Long-term liabilities

41.9

35.9

30.5

41.1

24.8

328.3

277.1

255.7

246.4

225.6

900.3

953.7

764.1

712.4

641.5

Available-for-sale assets Cash equivalents Total assets

Current liabilities Total shareholders’ equity and liabilities

In the above five-year summary and the key indicators for the past five years, the period between 2007 and 2004 is reported in line with IFRS while 2003 is reported in line with Swedish GAAP. Adjustments have been made for 2003 for goodwill and component depreciation to ensure consistency with IFRS. The five-year summary and key indicators for 2007-2005 are adjusted for divested business units in line with IFRS 5.

38

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 39

K E Y I N D I C AT O R S F O R T H E L A S T F I V E Y E A R S

OEM GROUP

2007

Net sales of which overseas Group’s profit before tax

2006

2005

2004

2003

SEK m

1 482

1 448

1 366

1 406

1 428

%

39.7

41.2

41.1

35.6

32.9

SEK m

139.1

127.5

112.6

89.3

53.4

SEK m

102.8

181.6

88.8

63.6

31.5

from remaining business units Group profit for the year

Earning capacity of total capital

%

15.7

15.2

15.8

13.8

8.1

Earning capacity of capital employed

%

22.0

21.2

23.1

20.6

11.9

Earning capacity of shareholders’ equity:

%

17.6

32.5

19.7

15.4

7.8

Average interest payable

%

4.2

5.8

3.4

4.4

2.2

times

0.16

0.10

0.12

0.12

0.10

Operating income/sales

%

10.2

9.7

8.9

7.5

6.5

Profit percent

%

9.8

9.0

8.5

6.7

3.9

Profit margin

%

9.4

8.8

8.4

6.4

3.7

times/yr

1.65

1.52

1.79

1.97

2.23

SEK m

2.6

2.7

2.8

2.5

2.2

%

58.9

67.2

62.5

59.6

61.0

SEK m

44.3

113.4

74.1

92.9

131.0

%

131

205

153

138

112

Debt/equity ratio

Capital’s turnover rate Sales/employee

Equity/assets ratio:

Cash flow from operations Quick ratio

Earnings per share before dilution**

SEK

4:43

7:84

3:83

2:74

1:29

Earnings per share after dilution***

SEK

4:43

7:81

3:81

2:72

1:28

Earnings per share before dilution** ***

SEK

4:34

3:92

3:52

2:74

1:29

Earnings per share after dilution** ***

SEK

4:34

3:90

3:50

2:72

1:28

Average no. of shares***

thousands

Average number of shares after dilution *** thousands Shareholders’ equity per share* ***

SEK

Earnings per share excl. repurchased shares***SEK No. of shares excl. repurchased***

thousands

23 169

23 169

23 169

23 217

24 417

23 169

23 268

23 289

23 337

24 498

22:88

27:65

20:62

18:34

16:02

4:43

7:84

3:91

2:80

1:38

23 169

23 169

22 707

22 707

22 809

Proposed dividends***

SEK

3:00

2:83

2:33

1:83

1:50

Quoted price as per 31 December***

SEK

42:90

63:00

54:50

39:33

34:00

P/E ratio

times

9.7

8.0

14.2

15.9

26.4

P/E ratio**

times

9.9

16.1

15.5

15.9

26.4

%

7.0

4.5

4.3

4.7

4.4

Direct return

No. of employees Salaries and remuneration

No.

569

531

494

571

636

SEK m

189

175

162

184

197

*Shareholders’ equity per share = visible equity per share. ** Remaining business units *** The key indicators are corrected for the 4:1 share split and automatic redemption of each fourth share carried out Q4 2007. Prior periods have been adjusted with a factor of 3 since the financial implication of the transaction is a 3:1 split combined with an extra dividend.

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

39


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 40

DIRECTORS’ REPORT

The Board and the Managing Director of OEM International AB (publ), corporate identity number 556184-6691, hereby submit the Annual Report and the consolidated financial statements for the 2007 financial year. The Annual Report and the consolidated financial statements, including for the auditors’ report cover pages 37-82. BUSINESS ACTIVITIES OEM International AB is represented via its subsidiaries in the Nordic countries, as well as in the UK, Poland, the Czech Republic, the Netherlands and Estonia, Latvia, Lithuania and Slovakia. OEM is an industrial trading Group operating primarily in northern Europe. Our product range consists of industrial components and systems from suppliers that are each specialists in their fields. Our product range spans from basic mechanical components such as seals and couplings to complete production systems for circuit boards, for instance. OEM’s broad, extensive selection allows the company to customise its offers to best suit the needs of our customers. We constantly expand our range by adding new products and discontinuing or replacing unprofitable products. Each company markets a clearly defined product range which, coupled with the added value of the organisation, forms a brand concept. The brand concepts are launched on new geographic markets as they grow in strength. In 2007, the Group was organised into four company groups/business segments: OEM Automatic, OEM Electronics, Cyncrona and Development. NET SALES AND PROFIT The Group’s net sales amounted to SEK 1,482 million (1,448) for the remaining business units, marking an increase of 2%. This figure also includes SEK 43 million in acquired net sales. Profit before tax rose 9% to SEK 139.1 million (127.5). The year’s profit after tax for the remaining business units totalled SEK 100.8 million (90.8), an increase of 11%. This corresponds to SEK 4.34 (3.92) per share. The Group’s hydraulics unit was divested in 2006 with the result of the sale contributing an additional SEK 2 million (90.8) after tax. This is reported in a separate row in the consolidated income statement. The year’s profit after tax including divested business units totalled SEK 102.8 million (181.6). Earnings per share reached SEK 4.43 (7.84). OEM AUTOMATIC Sales climbed by 16 % to SEK 813 million (698). The group made three acquisitions in 2007, namely Crouzet AB, MPX ApS and Klitsö Processtechnic AS. The acquisitions’ contribution to net sales for 2007 amounts to SEK 43 million, meaning that the group’s net sales rose by 10% excepting the acquisitions. On a whole year basis the acquisitions contribute net sales of about SEK 130 million. Profit before tax rose 4% to SEK 94.6 million (91.0). Business organisations have been set up in Latvia, Lithuania and Slovakia as part of the

40

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING

group’s geographical expansion plan. Moreover, the group broadened its collaboration geographically with several existing suppliers while concurrently introducing five new suppliers in 2007. OEM ELECTRONICS Net sales dropped to SEK 276 million (307). Lower demand in general in Sweden coupled with changes in the product offer caused the decline in sales. The business units in Finland and Polen report positive growth for 2007. Profit before tax dropped to SEK 14.1 million (18.8). Capacity adjustment measures were implemented in the Swedish unit in the autumn. New power supply and communication solution suppliers were introduced in 2007 and various activities carried out within the Keyboard & Display business area. CYNCRONA Net sales amounted to SEK 188 million (245). Profit before tax dropped to SEK 3.6 million (14.2). Sales figures in Finland dropped by SEK 72 million after the company’s largest customer started working on commission and the number of equipment orders were fewer than in previous years. After a period of low demand in Sweden and Denmark, several deals were settled in these markets. Demand in Norway and the Baltic countries is still very good. Measures to adapt the organisation to lower sales were carried out the second half of the year. DEVELOPMENT Company group Development boosted both sales and profit due to a sound demand and streamlining initiatives. Net sales climbed by 4% from SEK 213 million to SEK 221 million. Profit before tax rose 148% from SEK 13.0 million to SEK 15.4 million. Development is comprised of business units that are in various stages of growth and aim to either evolve into a strong brand concept or be modified to merge with another business unit. The group constantly evaluates opportunities for acquisitions within affiliated product areas, but also within brand new product areas. PROFITABILITY, FINANCIAL POSITION AND CASH FLOW Return on capital employed was 22% (21.2) and return on equity was 17.6% (32.5). The Group’s equity/assets ratio at year-end was 58.9 % (67.2). Shareholders’ equity per share was SEK 22.88 (27.65). Cash equivalents and unutilised credit commitments in the Group amounted to SEK 315 million (495) at the turn of the year. Cash flow from current operations totalled SEK 44.3 million (113.4). After net investments of SEK 10.6 million (31.9), as well as amortisation, new loans, paid dividends and redemption of shares for a total of SEK 220.9 million (-4.8), the year’s cash flow was SEK 166.0 million (140.5). Investments in the Group during the year amounted to SEK 16.0 million (15.3) in

machinery and equipment, SEK 16.0 million (25.8) in buildings, and SEK 28.4 million (11.1) in other intangible fixed assets. GROUP CHANGES On 2 January 2007, OEM acquired the remaining 50% of the shares in Crouzet AB, name changed to OEM Control AB, for EUR 0.6 million in cash. The company trades in automation components. The business has been integrated into OEM Automatic AB and OEM Motor AB. The acquisition means an annual increase in sales of about SEK 30 million but had an insignificant impact on the Group’s profits in 2007. On 1 September 2007, OEM acquired 100% of the shares in MPX Elektra ApS in Denmark for DKR 4 million. The company trades in a broad selection of industrial batteries for the Danish market. The acquired unit contributes sales of SEK 7.7 million and profit before tax of SEK 0.4 million for the 1 September to 31 December period. Had the acquisition occurred as per 1 January, impact on the Group’s sales would have been SEK 16.7 million and profit SEK 1 million. On 10 December 2007 OEM acquired 100% of the shares in Klitsö Processtechnic A/S in Denmark for DKR 28.2 million plus a maximum DKR 6 million in additional purchase price. The company trades in valves and pneumatic systems for Danish industrial customers primarily. Klitsö Processtechnic A/S represents several important suppliers for the OEM Automatic group, which generates significant synergy effects. The acquired unit contributed sales of SEK 5.5 million and profit before tax of SEK 0.2 million. Had the acquisition occurred as per 1 January, impact on the Group’s sales would have been SEK 87.8 million and profit SEK 5.6 million. More information about the acquisitions is presented in Note 5. Legal companies were formed in Latvia, Lithuania and Slovakia in 2007. Restructuring of the Group is still in progress. The objective is to achieve a simpler, more distinct legal Group structure through fusions and voluntary liquidations. Dormant companies Hydroprodukter International i Ängelholm AB and OEM Ejendomsselskab A/S were eliminated from the Group in 2007. EMPLOYEES The number of employees at year-end was 595 (532). The year’s acquisitions contributed an addition 32 (10) employees. The average number of employees in 2007 was 569, compared with 531 during the previous financial year. More detailed information is provided in Note 7 and on pages 12-13, “Employees”. GUIDELINES FOR REMUNERATION TO SENIOR MANAGEMENT The policies for remuneration to senior management adopted at the 2007 Annual General Meeting are described in Note 7. The Board’s proposed policies for remuneration to senior management to be presented at the 2008 Annual General Meeting is that corporate man-


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 41

agement apply market salaries and other remuneration terms. In addition to a base salary, management can also receive variable remuneration which can amount to a maximum 50% of the basic pay. Senior executives are to have defined contribution pension terms that are adjusted to market conditions and amount to a maximum 25% of the basic pay. All sharerelated incentive schemes are to be resolved by the Annual General Meeting. The level of remuneration coincides basically with previous years except for the fact that the defined contribution pension terms have been altered from a maximum 20% to a maximum 25% of basic pay. The period of notice will not exceed 24 months and involves the obligation to work during the period of notice. No employment agreements may contain conditions for severance pay. RISKS AND RISK MANAGEMENT OEM’s results and financial position as well as its strategic position are affected by a number of internal factors over which OEM has control and a number of external factors where the opportunity to influence the chain of events is limited. The most important risk factors include the economic situation combined with structural changes, the situation in terms of competition and exchange rate trends. Furthermore, OEM is affected by financial risks such as transaction exposure, translation exposure, financing risk, interest rate risk as well as credit and third-party risks. A description of the financial instruments and how OEM manages the financial risks is presented in Note 26.

votes and one Class B share represents one vote. The face value per share is SEK 1.67. REPURCHASE OF OWN SHARES With the objective of improving the Group’s return on shareholder’s equity and earnings per share, OEM International AB has an authorisation granted to the Board of Directors by the Annual General Meeting, to repurchase its own shares. The Annual General Meeting’s authorisation for the repurchase of shares extends to 10% of the total number of shares, that is, 2,316,690 shares. The company did not repurchase any shares in 2007 and at year-end, the company held no company shares. SHARE SPLIT AND REDEMPTION PROCESS To facilitate trading of company shares and alter the company’s capital structure, the Annual General Meeting decided to carry out a 4:1 share split combined with an automatic redemption procedure. This was carried out in 2007 and gave the shareholders three new shares and one redemption share. The redemption share was redeemed at SEK 20 per share and a total of SEK 154 million was paid to the shareholders for redeemed shares. The key indicators are corrected with a factor of 3 since the financial implication of the transaction is a 3:1 split combined with an extra dividend.

SHARES AND OWNERSHIP STRUCTURE, ETC

OTHER The Board of Directors is appointed by the Annual General Meeting. The Articles of Association include pre-emption clause that means if Class A shares are transferred from one shareholder to another shareholder in the company, or to someone not previously a shareholder in the company, the shares are to be offered immediately to the other holders of Class A shares for redemption through a written application to the company’s Board. If the company decides to issue new shares of Class A and B through cash issue or set-off, the owners of Class A and B shares have preferential right to subscribe for new shares of the same type. Notification of the Annual General Meeting and extraordinary meeting that will address the matter of changes in the Articles of Association is to be issued no earlier than six and no later than four weeks from the date of the Meeting. At year-end, there were four owners who through direct or indirect ownership represent at least one tenth of the voting rights for all shares in the company, namely Orvar Pantzar 28.9%, Hans Franzén and family 21.5%, Agne Svenberg and family 19.2% and Investment AB Latour 11.3%. Severance pay is not included in the employment conditions and notice of termination for the Managing Director is 24 months and a maximum 12 months for the rest of senior management.

OEM SHARES The company has 23,169,309 shares divided among 4,767,096 Class A shares and 18,402,213 Class B shares. One Class A share represents ten

THE BOARD OF DIRECTORS AND ITS WORK OEM International’s Board of Directors is comprised of seven regular board members and

RESEARCH AND DEVELOPMENT The Group does not conduct any research and development of its own. R&D is mainly conducted at our suppliers, using information about market demands that we provide. ENVIRONMENTAL IMPACT The Group had no operations that require registration under the Swedish Environmental Code in 2007. The Group’s greatest impact on the environment stems from goods and personnel transports, the presence of environmentally-damaging substances in products, printing and distribution of product catalogues, packaging materials and office heating, lighting and cooling. The OEM Group’s environmental policy dictates continuous efforts to minimise our external environmental impact. Environmental efforts will be governed by legal requirements as well as what is financially feasible, technically possible and ecologically justified. The aim is to reduce the impact of our business on the environment in both the short and long term.

three deputies elected by the Annual General Meeting. The members are presented on pages 16-17. Six Board meetings were held in 2007, all of which were recorded in the minutes as well as a Board meeting following election. The work of the Board complies with the rules of procedure adopted by the Board. Once a year, the principal auditor attends and reports on the auditing process. Decisions and the division of responsibility between the Board and the Managing Director are regulated in the written instructions for the Managing Director. The Nomination and Remuneration Committee is comprised of Chairman of the Board Jan Svensson as well as Board members Hans Franzén, Orvar Pantzar and Agne Svenberg. The Committee nominates members to the Board and provides guidelines for remuneration to the Managing Director. The Committee convened once in 2007. PARENT COMPANY The Parent Company is to be an active owner and develop the subsidiaries. In addition to succinct management-by-objectives, this means also contributing expertise and resources in the fields of IT, financial control, HR administration, market communication, quality and environmental control as well as warehouse management. The Parent Company’s sales amounted to SEK 42.7 million (41.3). Of this, SEK 42.5 million (39.3) relates to sales to subsidiary companies. Profit before appropriations and tax amount to SEK48.2 million (105.9). Of the year’s profit, SEK 1 (101.5) million stems from the sale of shares in JMS Systemhydraulik AB and Fastighets AB Hydraulen. In regard to non financial information and financial risk management, the Group’s information also refers to the Parent Company where applicable. PROPOSED DIVIDEND The Board of Directors proposes that the divided be raised from SEK 2.83 to SEK 3. The complete proposal for profit allocation is presented on page 81. FUTURE DEVELOPMENTS OEM’s objective is to achieve a good return on shareholders’ equity with limited financial risks during a period of stable growth. The targets for one business cycle are 15% annual growth in profit, 20% return on equity and an equity/assets ratio not lower than 35%. With its market position, organisation and financial position OEM is well equipped for continued expansion. Growth will be realised through organic growth, geographical expansion and acquisitions. The figures for 2006 are in parenthesis.

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

41


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 42

C O N S O L I D AT E D I N C O M E S TAT E M E N T

SEK m

Note

2007

2006

Net sales

2

1 482.2

1 447.9

Other operating income

3

13.2

2.5

-943.2

-941.5

Other expenses

8

-119.4

-109.2

Personnel expenses

7

-281.0

-259.5

O P E R AT I N G I N C O M E

O P E R AT I N G E X P E N S E S Trading goods

Depreciation/amortisation and impairment of property, plant and equipment and intangible fixed assets

9

-14.8

-13.5

OPERATING INCOME

2

137.0

126.7

FINANCIAL INCOME AND EXPENSES Financial income

12

8.3

3.5

Financial expenses

13

-6.2

-3.7

Participation in associated companies

11

0.0

1.0

139.1

127.5

-38.3

-36.7

100.8

90.8

2.0

90.8

102.8

181.6

102.8

181.6

-

-

before dilution, SEK

4:43

7:84

after dilution, SEK

4:43

7:81

before dilution, SEK

4:34

3:92

after dilution, SEK

4:34

3:90

PROFIT BEFORE TAX Taxes

14

THE YEAR’S PROFIT FROM REMAINING BUSINESS UNITS Profit from divested business unit, net after tax

6

PROFIT FOR THE YEAR AT T R I B U TA B L E T O : Parent company shareholders Minority interest

Earnings per share total**

Earnings per share from remaining business units**

Average no. of shares**

23 169 309

23 169 309

Average number of shares after dilution**

23 169 309

23 269 254

3:00*

2:83

Dividend, SEK**

*Proposal ** Corrected for the 4:1 share split and automatic redemption of each fourth share carried out Q2 2007. Adjusted with a factor of 3 since the financial implication of the transaction is a 3:1 split combined with an extra dividend.

42

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 43

C O N S O L I D AT E D B A L A N C E S H E E T S

ASSETS

SEK m

Note

31.12.2007

Goodwill

15

20.9

3.0

Other intangible fixed assets

16

25.8

17.5

46.7

20.5

109.8

31.12.2006

FIXED ASSETS I N TA N G I B L E F I X E D A S S E T S

P R O P E R T Y, P L A N T A N D E Q U I P M E N T Buildings and land

17

122.9

Equipment, tools and installations

17

37.3

29.8

160.2

139.6

FINANCIAL ASSETS Participation in associated companies

19

Other financial assets Other long-term receivables

D E F E R R E D TA X A S S E T S

23

14

TOTAL FIXED ASSETS

-

5.6

1.4

1.3

1.2

0.5

2.6

7.4

6.4

3.9

215.9

171.4

255.2

214.6

255.2

214.6

CURRENT ASSETS I N V E N T O RY, E T C . Trading goods

C U R R E N T R E C E I VA B L E S Tax claims Accounts receivable Other receivables

4.2

5.4

260.7

205.8

15.9

55.0

20

14.3

13.0

4

7.1

-

302.2

279.2

127.0

288.5

TOTAL CURRENT ASSETS

684.4

782.3

TOTAL ASSETS

900.3

953.7

Prepaid expenses and accrued income Available-for-sale assets

C A S H E Q U I VA L E N T S

28

FINANCIAL REPORTING â?&#x161; OEM ANNUAL REPORT 2007

43


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 44

C O N S O L I D AT E D B A L A N C E S H E E T S

SEK m

SHAREHOLDERS’ EQUITY AND LIABILITIES

Note

31.12.2007

31.12.2006

Share capital

38.6

38.6

Other contributed capital

39.4

39.4

SHAREHOLDERS’ EQUITY

21

Reserves

8.0

1.3

Surplus brought forward

341.3

379.8

Profit for the year

102.8

181.6

530.1

640.7

TOTAL SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO HOLDERS OF SHARES IN PARENT COMPANY

LIABILITIES

LONG-TERM LIABILITIES Interest-bearing liabilities Other long-term liabilities

22

9.8

9.3

Provisions for pensions

23

0.3

0.0

14

31.8

26.6

41.9

35.9

Non interest-bearing liabilities Deferred tax liabilities TOTAL LONG-TERM LIABILITIES

CURRENT LIABILITIES Interest-bearing liabilities Overdraft

24

71.3

53.1

Other current liabilities

22

3.2

2.9

Non interest-bearing liabilities Advances from customers Accounts payable, trade Liabilities to associated companies

0.5

1.3

142.8

124.6

-

0.8

39.0

32.0

68.1

59.7

3.4

2.7

TOTAL CURRENT LIABILITIES

328.3

277.1

TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES

900.3

953.7

31.12.2007

31.12.2006

Property mortgages

10.0

20.0

Business mortgages

55.1

55.1

65.1

75.1

Guarantee commitments

2.6

2.4

TOTAL CONTINGENT LIABILITIES

2.6

2.4

Other liabilities Accrued expenses and prepaid income

25

Guarantee provisions

PLEDGED ASSETS AND

Note

CONTINGENT LIABILITIES

PLEDGED ASSETS FOR OWN LIABILITIES AND PROVISIONS

TOTAL PLEDGED ASSETS

24

CONTINGENT LIABILITIES

44

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 45

GROUP CHANGES IN SHAREHOLDERS’ EQUITY

Share capital

Opening equity 01.01.2006

38.6

SEK m

Other contributed capital

39.4

Reserves

5.9

Repurchase of shares

-12.2

Brought forward capital

Total shareholders’ equity

406.2

477.9

Translation differences

-4.6

-4.6

Total changes in assets are recognised directly in shareholders’ equity, excluding transactions with owners

-4.6

-4.6

Profit for the year Total changes in assets, excluding transactions with owners

-4.6

Paid dividends

181.6

181.6

181.6

177.0

-53.0

-53.0

Repurchase of shares

-74.5

-74.5

Sale of own shares

113.3

113.3

Closing balance 31.12.2006*

38.6

39.4

1.3

26.6

534.8

640.7

Opening equity 01.01.07

38.6

39.4

1.3

26.6

534.8

640.7

Translation differences

6.7

6.7

Total changes in assets are recognised directly in shareholders’ equity, excluding transactions with owners

6.7

6.7

Profit for the year Total changes in assets, excluding transactions with owners

6.7

Paid dividends Redemption of shares

-9.7

Bonus issue

9.7

Closing balance 31.12.07*

38.6

39.4

8.0

26.6

102.8

102.8

102.8

109.5

-65.6

-65.6

-144.8

-154.5

-9.7

-

417.5

530.1

* Shareholders’ equity attributable to Parent Company shareholders.

NUMBER OF SHARES: Opening amount 01.01.2006

7 723 103

Closing amount 31.12.2006

7 723 103

Opening amount 01.01.07 Share split Share redemption Closing amount 31.12.07

7 723 103 23 169 309 -7 723 103 23 169 309

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

45


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 46

C O N S O L I D AT E D C A S H F L O W S TAT E M E N T

SEK m

2007

2006

C U R R E N T O P E R AT I O N S Profit before tax Adjustments for items not included in the cash flow

Paid taxes CASH FLOW FROM CURRENT OPERATIONS BEFORE CHANGES IN WORKING CAPITAL

141.1

127.5

1.5

12.6

142.6

140.1

-40.1

-42.1

102.5

98.0

Cash flow from changes in working capital Changes in inventory

-20.3

-20.0

Changes in accounts receivable

-30.6

-16.1

Change in other operating receivables Change in accounts payable Change in other operating liabilities CASH FLOW FROM CURRENT OPERATIONS

-2.9

-2.6

3.8

30.2

-8.2

23.9

44.3

113.4

INVESTMENT ACTIVITIES Divestment of subsidiaries, net liquidity impact

43.9

74.4

Acquisition of subsidiaries, net liquidity impact

-26.4

-19.5

Acquisition of intangible fixed assets Acquisition of property, plant and equipment Sale of property, plant and equipment Sale of financial assets CASH FLOW FROM INVESTMENT ACTIVITIES

-1.1

-

-32.2

-40.0

26.4

14.2

-

2.8

10.6

31.9

-

9.4

FINANCING ACTIVITIES Loans raised Amortisation loans Dividends paid

-

-65.6

-53.0

Redemption of shares

-154.5

-

Repurchase of shares

-

-74.5

Sale of own shares

-

113.3

CASH FLOW FROM FINANCING ACTIVITIES

-220.9

-4.8

CASH FLOW FOR THE YEAR

-166.0

140.5

288.5

149.2

Cash equivalents at start of the year Exchange rate difference cash equivalents Cash equivalents at end of the year

Additional information, refer to Note 28

46

-0.8

OEM ANNUAL REPORT 2007 â?&#x161; FINANCIAL REPORTING

4.5

-1.2

127.0

288.5


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 47

PA R E N T C O M PA N Y ’ S I N C O M E S TAT E M E N T

Notes

SEK m

2007

2006

O P E R AT I N G I N C O M E Net sales

42.7

41.3

3

-

1.8

Other external expenses

8

-19.8

-19.3

Personnel expenses

7

-22.1

-23.3

9

-1.5

-1.8

-0.7

-1.3

Other operating income

O P E R AT I N G E X P E N S E S

Depreciation/amortisation of property, plant and equipment and intangible fixed assets OPERATING INCOME

INCOME FROM FINANCIAL ITEMS Income from participation in Group companies

10

44.1

104.2

Income from participation in associated companies

11

-

1.0

Other interest income and similar profit items

12

4.9

2.3

Interest expenses and similar loss items

13

-0.1

-0.3

48.2

105.9

INCOME AFTER FINANCIAL ITEMS

Y E A R - E N D A P P R O P R I AT I O N S Difference between tax depreciation and depreciation according to plan: Expenses brought forward for software Equipment, tools and installations Tax allocation fund, provision PROFIT BEFORE TAX Taxes

PROFIT FOR THE YEAR

14

-0.3

-

-

0.2

-10.0

-14.7

37.9

91.4

1.4

3.7

39.3

95.1

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

47


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 48

PA R E N T C O M PA N Y ’ S B A L A N C E S H E E T S

ASSETS

SEK m

Note

31.12.2007

31.12.2006

FIXED ASSETS I N TA N G I B L E F I X E D A S S E T S Expenses brought forward for software

16

1.1

-

1.1

0.0

18.4

P R O P E R T Y, P L A N T A N D E Q U I P M E N T Buildings and land

17

17.9

Equipment, tools and installations

17

2.1

2.6

20.0

21.0

187.9

FINANCIAL ASSETS Participation in Group companies

18

235.9

Participation in associated companies

19

-

1.2

235.9

189.1

257.0

210.1

Tax claims

-

0.3

Accounts receivable

-

0.2

251.6

196.6

TOTAL FIXED ASSETS

CURRENT ASSETS

C U R R E N T R E C E I VA B L E S

Loans to Group companies Other receivables

0.8

45.6

3.9

2.8

256.3

245.5

66.9

220.8

TOTAL CURRENT ASSETS

323.2

466.3

TOTAL ASSETS

580.2

676.4

Prepaid expenses and accrued income

CASH AND BANK BALANCES

48

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING

20


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 49

PA R E N T C O M PA N Y ’ S B A L A N C E S H E E T S

S H A R E H O L D E R S ’ E Q U I T Y,

SEK m

Note

31.12.2007

31.12.2006

Share capital

38.6

38.6

Reserves

32.3

32.3

70.9

70.9

205.7

263.4

PROVISIONS AND LIABILITIES

SHAREHOLDERS’ EQUITY RESTRICTED EQUITY

21

NON-RESTRICTED EQUITY Surplus brought forward Profit for the year

TOTAL SHAREHOLDERS’ EQUITY

39.3

95.1

245.0

358.5

315.9

429.4

U N TA X E D R E S E R V E S Accumulated excess depreciation: Expenses brought forward for software

16

0.3

-

Machinery and equipment 13 569 243

17

0.4

0.4

Tax allocation fund, provision for taxation 2004

9.4

9.4

Tax allocation fund, provision for taxation 2005

13.0

13.0

Tax allocation fund, provision for taxation 2007

14.7

14.7

Tax allocation fund, provision for taxation 2008

10.0

-

TOTAL UNTAXED RESERVES

47.8

37.5

1.8

1.7

1.8

1.7

PROVISIONS Deferred tax liability

14

TOTAL PROVISIONS

CURRENT LIABILITIES Non interest-bearing liabilities Accounts payable, trade Liabilities to Group companies Tax liabilities

2.9

2.1

191.8

192.0

2.0

-

12.2

6.1

5.8

7.6

TOTAL CURRENT LIABILITIES

214.7

207.8

TOTAL SHARE HOLDERS’ EQUITY, PROVISIONS AND LIABILITIES

580.2

676.4

31.12.2007

31.12.2006

Property mortgages

7.5

7.5

TOTAL PLEDGED ASSETS

7.5

7.5

Security undertakings to the benefit of Group companies

239.5

219.7

TOTAL CONTINGENT LIABILITIES

239.5

219.7

Other liabilities Accrued expenses and prepaid income

PLEDGED ASSETS AND

25

Note

CONTINGENT LIABILITIES

PLEDGED ASSETS FOR OWN LIABILITIES AND PROVISIONS

24

CONTINGENT LIABILITIES

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

49


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 50

PA R E N T C O M PA N Y C H A N G E S I N S H A R E H O L D E R S ’ E Q U I T Y Restricted equity

Opening equity 01.01.2006

SEK m Non-restricted equity

Shares capital

Reserves

38.6

32.3

Repurchase of shares

-12.2

Group contributions received

Profit brought forward

248.0

306.7

61.7

61.7

-17.3

-17.3

-3.6

-3.6

1.0

1.0

Total changes in assets are recognised directly in shareholders’ equity, excluding transactions with owners

41.8

41.8

Profit for the year

95.1

95.1

136.9

136.9

-53.0

-53.0

Tax effect on Group contributions received Group contributions paid Tax effect on Group contributions paid

Total changes in assets, excluding transactions with owners

Paid dividends Repurchase of shares

-74.5

-74.5

Sale of own shares

113.3

113.3

Closing equity 31.12.06

38.6

32.3

26.6

331.9

429.4

Opening equity 01.01.07

38.6

32.3

26.6

331.9

429.4

Group contributions received

94.4

94.4

-26.4

-26.4

-0.9

-0.9

0.2

0.2

Total changes in assets are recognised directly in shareholders’ equity, excluding transactions with owners

67.3

67.3

Profit for the year

39.3

39.3

106.6

106.6

Tax effect on Group contributions received Group contributions paid Tax effect on Group contributions paid

Total changes in assets, excluding transactions with owners

Paid dividends Redemption of shares Bonus issue

Closing equity 31.12.07

-65.6

-65.6

-9.7

-144.8

-154.5

9.7

-9.7

-

218.4

315.9

38.6

32.3

Proposed dividends, SEK 3 per share

Opening amount 01.01.2006

7 723 103

Closing amount 31.12.2006

7 723 103

Opening amount 01.01.07

7 723 103

Share split

23 169 309

Share redemption

-7 723 103

Closing amount 31.12.07

23 169 309

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING

26.6

69.5

NUMBER OF SHARES:

50

Total shareholders’ equity


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 51

PA R E N T C O M PA N Y ’ S C A S H F L O W S TAT E M E N T

SEK m

2007

2006

C U R R E N T O P E R AT I O N S Profit after financial items Adjustments for items not included in the cash flow

Paid taxes

CASH FLOW FROM CURRENT OPERATIONS BEFORE CHANGES IN WORKING CAPITAL

48.2

105.9

1.5

-101.2

49.7

4.7

-22.5

-24.5

27.2

-19.8

Cash flow from changes in working capital Changes in accounts receivable Change in other operating receivables

0.2

-0.2

-11.3

-30.8

Change in accounts payable

0.8

0.2

Change in other operating liabilities

4.2

27.7

21.1

-22.9

-

120.0

-46.8

-29.9

CASH FLOW FROM CURRENT OPERATIONS

INVESTMENT ACTIVITIES Sale of subsidiary Acquisition of subsidiary Acquisition of intangible fixed assets

-1.1

-

Acquisition of property, plant and equipment

-0.5

-0.8

Sale of property, plant and equipment

-

0.1

Sale of financial assets

-

2.8

-48.4

92.2

CASH FLOW FROM INVESTMENT ACTIVITIES

FINANCING ACTIVITIES Group contribution Dividends paid

93.5

58.1

-65.6

-53.0

Redemption of shares

-154.5

-

Repurchase of shares

-

-74.5

Sale of own shares

-

113.3

CASH FLOW FROM FINANCING ACTIVITIES

-126.6

43.9

CASH FLOW FOR THE YEAR

-153.9

113.2

220.8

107.6

66.9

220.8

Cash equivalents at start of the year Cash equivalents at end of the year

Additional information, refer to Note 28

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

51


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 52

N O T E S W I T H A C C O U N T I N G P R I N C I P L E S A N D C O M M E N T S T O T H E F I N A N C I A L S TAT E M E N T S A M O U N T S I N S E K M I L L I O N U N L E S S O T H E R W I S E I N D I C AT E D

NOTE 1. ACCOUNTING PRINCIPLES

COMPLIANCE WITH STANDARDS AND LEGISLATION The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and interpretations published by the International Financial Reporting Interpretations Committee (IFRIC), as approved by the European Commission for application in all Member States. Furthermore, the Group has applied the Swedish Financial Accounting Standards Council’s recommendation RR 30:06 (Supplementary Accounting Regulations for Groups). The Parent Company applies the same accounting principles as the Group, except in those cases specified below in the section “Accounting Principles of the Parent Company”. The differences between the accounting principles of the Parent Company and the Group result from restrictions on how IFRS can be implemented in the Parent Company on account of the Swedish Annual Accounts Act and the Act on Safeguarding of Pension Obligations (Tryggandelagen) and, in some cases, for fiscal reasons. REQUIREMENTS FOR PREPARING PARENT COMPANY AND GROUP FINANCIAL REPORTS The Parent Company’s functional currency is the Swedish krona (SEK), which is also the official reporting currency for the Parent Company and the Group. This means that the financial reports are presented in Swedish krona. All amounts are rounded off to the nearest million unless otherwise stated. Assets and liabilities are reported at the historical acquisition value, except for certain financial assets and derivate instruments that are valued at their fair value and available-for-sale assets and disposal groups. Financial instruments, which are valued at their fair value, consist of financial assets classified as financial assets valued at fair value via the income statement or as financial assets that can be sold. Available-for-sale assets and disposal groups are reported at the lowest of the previously reported value and the fair value after deductions for sales costs. To prepare the financial statements in accordance with IFRS, management must make assessments, estimates and assumptions that affect the application of the accounting principles and the reported amounts pertaining to assets, liabilities, income and expenses. These estimates and assumptions are based on historical experience and a number of other factors that are deemed reasonable and prudent at the time they are made. Consequently, actual outcomes may differ from these estimates and assessments. The estimates and assumptions are regularly reviewed. Changes in estimates are reported in the period in which the change is made, if the change affects that period only, or in the period in which the change is made and future periods if the change affects both the current and future periods.

52

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING

Assessments made by the management in the application of IFRS that have a significant impact on the financial statements, and estimates and which may give rise to significant adjustments in future financial statements are described in detail in Note 31. The consolidated accounting principles outlined below have been applied consistently throughout the periods reported in the Group’s financial reports unless otherwise stipulated below. Consolidated accounting principles have also been applied consistently to the accounting and consolidation of the Parent Company, subsidiaries and associated companies. STANDARDS, AMENDMENTS AND INTERPRETATIONS ADOPTED FIRST IN 2007 The following new standards, amendments and interpretations have been applied when preparing the financial reports for 2007: IFRS 7 Financial instruments: Information and related amendments in IAS 1 Presentation of Financial Statementsdemands extensive information about the significance that financial instruments have for the company’s financial position and earnings, as well as qualitative and quantitative information about the character and scope of the risks. IFRS 7 and the affiliated changes in IAS 1 have lead to more information in the Group’s financial reports for 2007 in terms of the Group’s financial goals and capital management. The standard has not entailed any changes in the accounting principle, but only changes in terms of disclosure of financial instruments. IFRIC 10 Interim Financial Reporting and Impairment does not allow the impairment losses recognised during a period for goodwill, investments in equity instruments and financial assets at cost to be reversed on the subsequent closing day. IFRIC 10 will be applied in the Group’s financial reports for 2007. The interpretation will be applied future-oriented from the date when the Group first began to apply the impairment rules in IAS 36 and the measurement regulations in IAS 39, i.e. in terms of goodwill on 1 January 2004 and in terms of financial instruments as of 1 January 2005. Since no such reversals have been made, the interpretation has no impact on OEM’s financial reports. The Group is not affected by the phenomena covered in other interpretation statements from IFRIC that apply as of 2007. STANDARDS, AMENDMENTS AND INTERPRETATIONS FOR FUTURE APPLICATION WHERE THE GROUP DOES NOT APPLY EARLY ADOPTION The Group has not applied early adoption of new or amended standards and new interpretations that when taken into effect can come to have an impact on the Group’s financial reports. The following IASB and IFRIC adopted revisions with future application can com to have an impact on the Group’s financial reports:

Revised IFRS 3 Business combinations and revised IAS 27 Consolidated and Separate Financial Statements entail changes regarding consolidated accounts and reporting business combinations. The revised standards are to be applied to business combinations beginning the financial year on 1 July 2009 or after. Early adoption is permitted. IFRS 8 Operating segments stipulates what an operative segment is and what information is to be disclosed about these segments in the financial reports. The standard is to apply beginning the financial year on 1 January 2009 or after. Early adoption is permitted. Amendments to IAS 1 Presentation of Financial Statements: A Revised Presentation means that the presentation of the financial reports is altered in a few regards and proposes new, non-mandatory titles for the reports. The amendment will not affect the determination of the amounts reported. The revised IAS 1 is to apply beginning the financial year on 1 January 2009 or after. Early adoption is permitted. Based on the Group’s current situation, the following IASB and IFRIC adopted revisions with future application are not expected to have an impact on the Group’s financial reports: Amendments to IFRS 2 Share-based payment: Vesting conditions and cancellations; amendments to IAS 23 Borrowing costs IFRIC 11 IFRS 2: Group and Treasury Share Transactions; IFRIC 12 Service Concession Arrangements; IFRIC 13 Customer Loyalty Programmes and IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset Minimum Funding Requirements and their Interaction. CLASSIFICATION, ETC. Fixed assets and long-term liabilities essentially consist only of amounts that can be expected to be recovered or paid more than twelve months after the balance sheet date. Current assets and current liabilities essentially consist only of amounts expected to be recovered or paid within twelve months from the balance sheet date. SEGMENT REPORTING A segment is a part of the Group which is identifiable for accounting purposes that either supplies products or services (business segments), or goods or services in a given economic environment (geographic segment) that are exposed to risks and opportunities that differ from other segments. The Group’s primary segments are business segments. Segment information is presented only for the Group in accordance with IAS 14. CONSOLIDATION PRINCIPLES FOR SUBSIDIARY COMPANIES Subsidiaries are those businesses over which OEM International AB has a controlling influence. Control influence means the controlling entity has the direct or indirect right to structure the company’s financial and operating strategies to obtain economic advantages.


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 53

When determining whether a controlling influence exists, potential voting equity that can be used or converted without delay should be taken into account. Subsidiaries are reported in line with the purchase method. The method means that the acquisition of a subsidiary is regarded as a transaction through which the Group indirectly acquires the subsidiary’s assets and assumes its liabilities and contingent liabilities. The analysis determines the acquisition value of the shares or business, the fair value of acquired identifiable assets on the acquisition date, and assumed liabilities and contingent liabilities. The cost of an acquisition of the subsidiary’s shares and business respectively is measured as the fair values on the transfer date for assets, incurred or assumed liabilities and equity instruments issued in exchange for the acquired net assets and transaction-related costs that are directly attributable to the acquisition. The excess cost of acquisition over the fair value of the of the Group’s share of the identifiable assets, assumed liabilities and contingent liabilities is reported as goodwill. A negative difference is recognised directly in the income statement. The financial statements of the subsidiaries are included in the consolidated financial statements from the effective date of acquisition until the day that control ceases. CONSOLIDATION PRINCIPLES FOR ASSOCIATED COMPANIES Associated companies are companies in which the Group exercises substantial, but not controlling influence over the operational and financial management, generally through a holding of between 20% and 50% of the voting rights. From the date on which the Group acquires substantial influence, holdings in associated companies are reported in the consolidated financial statements according to the equity method. The equity method means that the value of the shares in the associated companies reported in the consolidated accounts corresponds to the Group’s share in the associated companies’ equity, the consolidated goodwill and other residual values that might exist in the consolidated fair value adjustments. In the consolidated income statement, the Group’s share in the associated companies’ net earnings after tax and minority interest adjusted for depreciation, write-downs or resolution of acquired fair value adjustments respectively is reported under “Participations in associated companies”. Dividends obtained from the associated company reduce the booked value of the investment. On acquisition, any differences between the acquisition value of the holding and the owning company’s share of the net fair value of the associated company’s identifiable assets, liabilities and contingent liabilities are reported in accordance with IFRS 3 “Business Combinations”. When the Group’s share of reported losses in the associated company exceeds the reported value of the shares in the Group, the value of the shares is reduced to zero. Deductions for losses are also made against unsecured, longterm financial transactions which, in their financial sense, constitute part of the owning company’s net investment in the associated company. Further losses are not reported,

unless the Group has undertaken to cover losses arising in the associated company. The equity method is adopted until the substantial influence is no longer exercised. TRANSACTIONS TO BE ELIMINATED ON CONSOLIDATION All intra-Group receivables and liabilities, income or expenses, and unrealised gains or losses arising from intra-Group transactions between Group companies are eliminated in their entirety when preparing the consolidated financial statements. Unrealised gains arising from transactions with associated companies are eliminated to an extent that corresponds to the Group’s share of ownership in the company. Unrealised losses are similarly eliminated as unrealised gains, but only if there is no indication of impairment. FOREIGN CURRENCY Transactions in foreign currencies Functional currency is the currency that applies in the primary economic environments in which the Group companies operate. Transactions in foreign currencies are translated to the functional currency at the exchange rate prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at the exchange rate prevailing on balance sheet date. Exchange rate differences resulting from translations are reported in the income statement. Exchange rate differences regarding operating assets and liabilities are reported in the operating income, while changes in value attributable to financial assets and liabilities are reported in net financial items. Non-monetary assets and liabilities reported at their historical acquisition values are translated at the exchange rate prevailing on the date of the transaction. Non-monetary assets and liabilities carried at fair value are translated to the functional currency at the rate prevailing at the date when the fair value was determined. Exchange rate fluctuations are then reported in the same way as other changes in value with regard to assets or liabilities. Foreign entities’ financial reports Assets and liabilities in foreign entities, including goodwill and other corporate fair value adjustments, are translated to Swedish kronor (SEK) at the exchange rate prevailing on the balance sheet date. Revenue and expenses in foreign entities are translated to Swedish kronor (SEK) at an average rate that represents an approximation of the rates that applied when each transaction took place. Differences that arise when translating currency in foreign entities are recognised immediately in shareholders’ equity as a translation reserve. The translation reserve includes the translation difference accumulated as of 1 January 2004. When a foreign entity is divested, the accumulated translation differences related to the entity are realised in the consolidated income statement. INCOME Sale of goods Income includes only the gross inflow of economic benefits that the company receives or

can receive for its own benefit. Revenue from the sale of goods is booked as income when the company has transferred to the purchaser to the essential risks and benefits associated with ownership of the goods. If there is considerable uncertainty in terms of payment, attached costs or risk for returns and if the seller retains involvement with the ongoing administration which is usually associated with ownership, revenue is not taken up as income. Income is booked at the fair value of what has been received or will be received with deductions for discounts. Amounts collected for the benefit of another are not included in the company’s income but instead constitute received commission. Sales of services and similar assignments Income from the sale of services is recognised in the income statement when the service is supplied based on the degree of completion on balance sheet date. The degree of completion is determined on the basis of costs that have been incurred in relation to the total calculated costs for the assignment. Income from the sale of services and similar assignments is recognised as revenue when the following conditions are met: • The income attributable to the assignment can be calculated in a reliable way. • It is likely that payment corresponding to the completed assignment will flow to the company. • The costs that have occurred and the costs that remain to complete the assignment can be calculated in a reliable manner. If it is considered probable that the combined costs for an assignment will exceed the total income, the suspected loss must be immediately reported in full as a cost. OPERATING EXPENSES AND FINANCIAL INCOME AND EXPENSES Operating leases Payments for operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Benefits obtained on signing an agreement are reported as part of the overall leasing cost in the income statement. Financial leases The minimum leasing fees are allocated as interest expenses and amortisation of the outstanding liability. The interest expenses are distributed over the period of the lease, so that each accounting period is charged with an amount corresponding to a fixed rate of interest for the liability reported in the respective period. Variable payments are entered as expenses in the periods they occur. Financial income and expenses Financial income and expenses include interest revenue from bank assets, receivables and interest-bearing securities, interest expenses related to loans, dividend incomes, exchange rate differences attributable to financial investments and financing activities, unrealised and realised gains and losses on financial investments, and derivative instruments used in financial operations. Interest revenue from receivables and interest expenses related to liabilities are calculated

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

53


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 54

using the effective interest method. The effective interest is the rate that ensures that the current value of all estimated future receipts and payments during the expected interest duration is the same as the reported value of the receivable or the liability. The interest element of financial lease payments is recognised in the income statement by using the effective interest method. Interest revenue and interest expenses respectively include a periodic amount of transaction expenses and discounts where applicable, premiums and other differences between the original reported value of the receivable and liability respectively and the amount received on maturity and the estimated future receipts and payments during the term of the agreement. Dividend income is recognised when the right to retain payment has been established. The Group and the Parent Company do not capitalise interest in the acquisition value of assets. TAXES Income tax consists of current tax and deferred tax. Income tax is reported in the income statement except where the underlying transactions is recognised in equity, in which case any tax effect is recognised in equity. Current tax is the tax to be paid or received for the current year with the application of the tax rates that have been established or which in practice have been adopted as of the balance sheet date. This includes adjustments of current tax attributable to prior periods. Deferred tax is calculated according to the balance sheet method on the basis of temporary differences between the carrying amounts and tax values of assets and liabilities. Temporary differences are not taken into consideration for differences relating to the initial recognition of goodwill, nor relating to the initial recognition of assets and liabilities that are not a business acquisition which, at the time of the transaction, do not affect either accounting or taxable income. Nor are temporary differences attributable to shares in subsidiaries and associated companies that are not expected to be reversed in the foreseeable future taken into consideration. Measurement of deferred tax is based on how the carrying amount of assets or liabilities is expected to be recovered or settled. Deferred tax is calculated with application of the tax rate and regulations in effect or in practice adopted as of the balance sheet date. Deferred tax claims relating to deductible temporary differences and loss carry-forwards are only recognised to the extent that it is likely that they can be utilised. The value of the deferred tax claims is reduced when it is no longer deemed likely that they can be utilised. FINANCIAL INSTRUMENTS Financial instruments recognised in the balance sheet include as assets cash and cash equivalents, loan receivables, accounts receivable and financial investments. Accounts payable and loan liabilities are reported as liabilities. A financial asset or financial liability is included in the balance sheet when the company is party to the instrument’s conditions of agreement. Liabilities are included when the counterparty has performed and there is a contrac-

54

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING

tual liability to pay, even if the invoice has not been received. A financial asset (or part thereof) is removed from the balance sheet when the contractual rights are realised, expire or the company transfers, in all essentials, the risks and benefits associated with ownership. A financial liability (or part thereof) is removed from the balance sheet when the contractual liability is fulfilled or otherwise discharged. Borrowing and investments are reported when the transaction is carried out (settlement date accounting), while derivative instruments are reported when the agreement has been entered into (trade date accounting). A financial asset and a financial liability are offset and reported in the balance sheet as a net amount only when there is a legal right to set off the amount and an intention to adjust the items with a net amount or, at the same time, realise the asset and settle the liability. Financial instruments are reported initially at an acquisition value corresponding to the fair value of the instrument plus transaction expenses for all financial instruments, except those instruments categorised as financial assets reported at their fair value in the income statement, which are reported at their fair value excluding transaction expenses. The financial instruments are classified in the initial recognition depending on the purpose for which the instruments were acquired which affects recognition thereafter. The fair value of listed financial assets corresponds to the asset’s listed bid price on the balance sheet date. The fair value of unlisted financial assets is established by applying valuation techniques such as recently completed transactions, references to similar instruments and discounted cash flow.

Financial investments are measured continuously at fair value, with changes in value being reported in the income statement in net financial items.

Accounts receivable and other current and long-term receivables classified in the category “loans and receivables” in accordance with IFRS 7. Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market and are reported at the accrued acquisition value according to the effective interest method. Accounts receivable and other current receivables that normally have a remaining duration of less than twelve months are reported at nominal value. A receivable is individually assessed with regard to its estimated loss risk and is entered at the amount it is expected to generate. Impairments are made where necessary and are reported in the income statement.

Interest-bearing liabilities classified in the category “Other liabilities” in accordance with IFRS 7 Loans are recognised continuously at accrued acquisition value, which means that the value is adjusted through discounts where applicable, or premiums when the loan is taken and costs when borrowing is spread over the expected term of the loan. The scheduling is calculated on the basis of the initial interest rate of the loan. Gains and losses arising when the loan is settled are recognised in the income statement.

Financial investments Financial investments are categorised as financial assets measured at fair value in the income statement. This category has two subgroups: financial assets held for trading and other financial assets that the Company initially chose to include in this category. A financial asset is classified as being held for trading if it was acquired for the purpose of being sold in the short term. To the second subgroup, the company has chosen to attribute financial assets which, according to the management’s risk management and investment strategy, are administered and evaluated based on the fair value. These assets include financial investments in equity instruments and interest-bearing securities.

Derivative instruments Derivatives are categorised as financial assets and liabilities measured at fair value in the income statement as instruments available-for-sale. Derivative instruments include forward exchange contracts and currency options to cover risks associated with changes in exchange rates. Derivatives are also contractual terms that are embedded in other agreements. Embedded derivatives are recognised separately if they are not closely related to the host contract. Derivative instruments are measured in the initial recognition and regularly thereafter at fair value with value changes recognised as income and expenses in the operating income or in net financial items, based on the intended use of the derivative instrument and how this use is related to an operating item or a financial item. The Group has not used derivatives for hedging purposes during the year 2007 or during the comparative year. Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held with banks and similar institutions, plus short-term highly liquid investments with original maturities of three months or less, which are only exposed to insignificant risk for fluctuations in value. The cash and bank balance is recognised at accrued acquisition value. The definition of cash and cash equivalents in the cash flow statement corresponds with cash and cash equivalents in the balance sheet.

Accounts payable and other operating liabilities classified in the category “Other liabilities” in accordance with IFRS 7 Liabilities are recognised at the accrued acquisition value determined from the effective interest that was calculated at the time of acquisition which normally implies nominal value. PROPERTY, PLANT AND EQUIPMENT Owned assets Property, plant and equipment are recognised at acquisition value after deductions for accumulated depreciation and impairment costs. The acquisition price includes the purchase price including expenses directly attributable to putting the asset into place and condition to be used as intended by the acquisition. Directly attributable costs, which are included in the acquisition value, include cost of delivery and handling, installation, title deeds, consultancy services and legal services.


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 55

Borrowing costs are not included in the acquisition value for fixed asset produced by the company. The accounting principles for impairment are described below. The carrying amount of property, plant and equipment is removed from the balance sheet on the disposal or retirement of the asset, or when no future economic benefits are expected from its use or disposal/retirement. Gains or losses arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset, less direct sales costs. The gain or loss is recognised in other operating income/cost.

• Frame 100 years • Frame extensions, interior walls, etc. 30 years • Installations, heating, electricity, water and sanitation facilities, ventilation, etc. 20-32 years • External surfaces, walls, roof, etc. 20-50 years The depreciation methods applied, and the residual value of the assets and their useful life are reviewed at the close of every year. INTANGIBLE FIXED ASSETS

Leased assets Leases are classified in the consolidated financial statements either as finance or operating leases. In a finance lease, the financial risks and benefits associated with the ownership are essentially transferred to the lessee, otherwise it is an operating lease. Assets leased under a finance lease are recognised as assets in the Group balance sheet. The obligation to pay future lease fees is recognised as long-term and current liabilities. The leased assets are depreciated according to plan, and the lease payments are recognised as interest and amortisation of liabilities.

Goodwill Goodwill is measured at the acquisition value minus any accumulated impairment. Goodwill is allocated to cash-generating units and tested annually for impairment. Goodwill arising from the acquisition of associated companies is included in the recognised value for participations in associated companies. If the acquisition value is less than the net value of the acquired company’s assets and assumed liabilities and contingent liabilities, the difference is recognised immediately in the income statement. In respect of goodwill in acquisitions that were made before January 1, 2004, the Group has not adopted IFRS retroactively on transition to IFRS. Instead, the recognised value in the future will be the acquisition value for the Group, after impairment testing.

Subsequent expenditure Subsequent expenditure is added to the acquisition value only if it is likely that the future economic benefits associated with the asset will flow to the enterprise and the acquisition value can be calculated in a reliable manner. All other subsequent expenditure is reported as an expense in the period it is incurred. A subsequent expenditure is added to the acquisition value if the expense refers to the exchange of identified components or parts thereof. Even in those cases when a new component has been constructed, the expense is added to the acquisition value. Any undepreciated values reported for replaced components, or parts of components, are discarded and charged to expenses when the component is replaced. Repairs are expensed as incurred.

Other intangible fixed assets Supplier relations are measured at the acquisition value minus any accumulated impairment. These have arisen through acquisition and have an indeterminable useful life. Testing is done each year to determine if the circumstances still indicate that the useful life is indeterminable. Impairment testing is done annually and performed when indicated. Other intangible assets include software, trademarks and customer relations. These have a determinable useful life and are recognised at acquisition value less accumulated amortisation and impairment. Expenses of internally generated goodwill and internally generated trademarks are capitalised not as assets but recognised as incurred as expense in the income statement.

Depreciation principles Straight-line depreciation is applied over the estimated utilisation period of the assets. Land is not depreciated. The Group applies component depreciation, meaning that the estimated useful life of components forms the basis for depreciation.

Subsequent expenditure Subsequent expenditure on capitalised intangible assets is reported as an asset in the balance sheet only when it increases the future economic benefits of the specific asset to which it relates. All other expenditure is expensed when incurred.

Estimates of useful life: • buildings, business property, see below • land improvements 20 years • machinery and other technical facilities 5-10 years • equipment, tools and installations 3-10 years

Amortisation Amortisation is reported in the income statement on a straight-line basis over the estimated utilisation period of the assets, unless such utilisation periods are undetermined. Goodwill has an undetermined utilisation period and is tested for impairment annually or as soon as indications arise that suggest the asset in question has dropped in value. The useful life periods are reviewed annually at least, refer also to Notes 13 and 14.

Business property consists of a number of components with different useful lives. The main group is buildings and land. Land is not depreciated as its useful life is considered to be indefinite. The buildings consist of a number of components with different useful lives. The following main groups of components have been identified and form the basis for depreciation of buildings:

Estimates of useful life: • IT software 5 years • trademarks 5 years • customer relations 5 years

INVENTORIES Inventories are measured at the lowest of the acquisition value and net realisable value. The net realisable value is the estimated sales price in the current operations after deductions for estimated costs for completion and for realising a sale. The first-in, first-out method (FIFO) is applied in estimating inventories. The acquisition value of inhouse manufactured semi-finished and finished products consists of the direct manufacturing costs and a reasonable share of the indirect manufacturing costs. Normal capacity utilisation is taken into account for measurement purposes. IMPAIRMENT The recognised values of the Group’s assets are tested on each balance sheet day for any indication of impairment. Below is a description of the impairment test performed for property, plant and equipment and intangible fixed assets, shares in subsidiaries and associated companies, as well as financial assets. Assets for sale and disposal groups, inventory and deferred tax claims are exempt. The recognised value of the exempt assets is assessed in accordance with the respective accounting standards. Impairment tests for property, plant and equipment and intangible assets as well as shares in subsidiaries and associated companies If there is any indication of impairment, then the asset’s recoverable value is calculated, according to IAS 36 (see below). The recoverable value for goodwill and other intangible assets with undetermined utilisation period is calculated annually. If essentially independent cash flow cannot be isolated for individual assets, then the assets are grouped at the lowest levels where essentially independent cash flows can be identified — a so-called cash-generating unit. An impairment loss is recognised when the carrying amount of an asset or cash-generating unit, or pool of units, exceeds its recoverable value. Impairment losses are charged against the income statement. Impairment losses attributable to a cash-generating unit, or pool of units, are mainly allocated to goodwill They are thereafter divided proportionately among other assets in the unit (pool of units). The recoverable value is the highest of the fair value minus sales expenses and utilisation value. Utilisation value is measured by discounting future cash flows using a discounting factor that takes into account the risk-free rate of interest and the risk associated with the specific asset. Impairment test for financial assets All financial assets except those categorised as financial assets valued at fair value via the income statement are tested for impairment. For each report, the company assesses if there is objective proof that indicates impairment of a financial asset or group of financial assets. A financial asset has impairment only if objective proof indicates that one or more events have occurred that have an effect on the financial asset’s future cash flows, if these can be reliably calculated. The recoverable value for the assets categorised as loan receivables and accounts receivable recognised at accrued acquisition value are calculated as current value of the future cash flow discounted by the effective interest that applied on initial recognition.

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

55


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 56

Assets with a short term are not discounted. Impairment losses are charged against the income statement. Reversal of amortisation An impairment is reversed if there is both an indication that the impairment no longer exists and there has been a change in the assumptions that served as the basis for determining the recoverable amount. Impairment goodwill is however never reversed. Impairment is reversed only to the extent the carrying amount of the assets following the reversal does not exceed the carrying amount that the asset would have had if the impairment had not been recognised, taking into account the amortisation that would have been recognised. Impairment of loan receivables and accounts receivables recognised at accrued acquisition value are reversed if a later increase in the recoverable amount can objectively be attributed to an event that occurred after the writedown was made. SHAREHOLDERS’ EQUITY Repurchase of shares Purchase of such instruments is recognised as a deduction from shareholder’s equity. Payment from sales of equity instruments is recognised as an increase of shareholder’s equity. Any transaction expenses are recognised directly against shareholders’ equity. Paid dividends Dividends are recognised as a liability after the Annual General Meeting has approved the dividend. EARNINGS PER SHARE Earnings per share are based on the Group’s net earnings for the year attributable to the Parent Company’s shareholders and the weighted average number of shares outstanding during the year. EMPLOYEE BENEFITS Defined-contribution pension plans Defined-contribution pension plans are classified as those plans for which the company’s obligation extends only to the contributions the company has committed to pay. In such cases, the size of the employee’s pension is determined by the contribution the company pays to the plan or to an insurance company and the return on capital yielded by the contributions. Consequently, it is the employee that carries the actuarial risk (that compensation is lower than expected) and the investment risk (that the invested assets will be insufficient to cover the expected compensation). Obligations concerning the amounts to the definedcontribution plans are recognised as an expense in the income statement at the rate they are earned as the employees perform their work. Defined-benefit pension plans The Group’s net obligation regarding definedbenefit pension plans is calculated separately for each plan by estimating the future compensation that the employees have earned through their employment in both present and previous periods; this compensation is discounted to current value. The discount rate is the interest

56

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING

rate on balance sheet date for a first-class corporate bond with a maturity corresponding to the Group’s pension obligations. When there is no active market for such corporate bonds, the market interest rate on government bonds with a similar maturity is used instead. Calculations are carried out by a qualified actuary using the projected unit credit method. Moreover, the fair value of any plan assets is calculated on reporting day. Actuarial gains and losses can arise when determining the obligation’s current value and fair value of the plan assets. These arise either when the actual outcome differs from prior assumptions, or when an actuarial assumption changes. The corridor rule is applied. The corridor rule means that the portion of the accumulated actuarial gains and losses in excess of 10% of the higher of the obligation’s current value and the fair value of assets under plan is recognised over the anticipated average remaining period of employment of the employees covered by the plan. Actuarial gains and losses are otherwise not taken into account. The liability recognised in the balance sheet in respect of pensions and similar obligations is the current value of the obligation at the balance sheet date, less the fair value of the plan assets, together with adjustments for unrecognised actuarial gains or losses and unrecognised costs for past service. When the calculation leads to an asset for the group, the carrying amount of the asset is limited to the net of unrecognised actuarial losses and unrecognised costs associated with service in previous periods and the current value of future repayments from the plan or reduced future payments to the plan. When the compensation in a plan improves, the portion of the increased compensation attributable to the employee’s services in previous periods is expensed through the income statement on a straight-line basis over the average period until the compensation is fully vested. If the compensation is fully vested, an expense is recognised directly in the income statement. All the components included in the period’s cost for a defined benefit plan are recognised in the operating income. Termination benefits A provision is recognised when employees are given notice of termination only if the company is demonstrably committed to terminate an employment before the normal date or when providing termination benefits as a result of an offer to encourage voluntary redundancy. Short-term benefits to employees Short-term benefits to employees are calculated without discounting and recognised as costs when the related services are received. A provision is recognised for the expected cost of bonuses when the Group has a contractual obligation or informal obligation to make such payments when the services received from the employee and the obligation can be reliably calculated. PROVISIONS A provision is reported in the balance sheet when the Group has a legal or informal obligation owing to an event that has occurred and it is likely that an outflow of economic resources will be required to settle the obligation and a

reliable estimate of the amount can be made. Where it is important when in time payment is made, provisions are estimated by discounting the expected future cash flow at a pre-tax interest rate that reflects current market estimates of the time value of money and, where appropriate, the risks associated with the liability. A provision for losses is reported when the underlying products or services are sold. The provision is based on historic data on losses and a total appraisal of feasible outcomes in relation to the probabilities associated with the outcome. FIXED ASSETS AVAILABLE FOR SALE AND DIVESTED BUSINESS UNITS The implication of a fixed asset (or a disposal group) classified as available-for-sale is that its recognised value will be recovered principally through a sale and not through use. When initially classified as available-for-sale, fixed assets and disposal groups are recognised at the lower of their carrying amount before classification as available for sale and fair value with deductions for sales expenses. Certain balance sheet items are exempt from the mentioned measurement rules and measured in the same was as before the reclassification. Exempt balance sheet items include financial assets, inventory, plan assets and deferred tax claims. On each subsequent reporting date, the fixed asset or disposal group as a whole is measured at the lowest of fair value minus sales costs and recognised value at the time of reclassification plus impairment that can be reversed without the recognised value exceeding fair value minus sales costs. Losses resulting from a change in value upon initial classification as available for sale are included in the income statement, as are gains or losses following subsequent revaluation. A divested business unit is a component of a company’s operations that represents an independent operation or significant operations within a geographic area or a subsidiary acquired exclusively with the intent to resale. Classification as a divested business unit is made upon divestment or at a previous time when the business unit meets the criteria to be classified as available for sale. A disposal group that will be discontinued can also qualify for classification as a divested business unit from the time it is no longer used. The figures for the comparative years in the consolidated income statement and cash flow statement have been restated and presented as if the business unit sold during the current year had been sold already at the start of the comparative year (refer also to Note 5 and Note 26). CONTINGENT LIABILITIES A contingent liability is reported when there is a possible obligation that stems from past events and the existence of which will be confirmed only by one or more uncertain future events, or when there is an obligation that is not recognised as a liability or provision because it is not possible that an outflow of resources will be required. PARENT COMPANY’S ACCOUNTING PRINCIPLES The Parent Company has prepared the Annual Report according to the Annual Accounts Act


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 57

(1995:1554) and the Swedish Financial Accounting Council’s recommendation RR 32:06 “Reporting for Legal Entities”. Also the Swedish Financial Accounting Council’s Emerging Issues Task Force’s statements for listed companies are applied. RR 32:06 means that the Parent Company in the annual report for the legal entity must apply all EU-approved IFRS and statements as far as possible within the framework of the Annual Accounts Act and taking into account the connections between reporting and taxation. The recommendation specifies exemptions and additions relative to IFRS. The same accounting principles applied for the consolidated financial statements as described above have been applied to the Parent Company, except in the instances described below. Classification and presentation The Parent Company’s income statement and balance sheets are prepared in accordance with the Annual Accounts Act’s scheme. The difference to IAS 1 Presentation of Financial Statements applied when presenting the consolidated financial statements refers primarily to reporting financial income and expenses, equity and the occurrence of provisions as a separate heading in the balance sheets. Subsidiaries and associated companies The parent company reports participation in subsidiaries and associated companies according to the acquisition value method. Only dividends received are reported as income on the condition that these stem from profits earned after the acquisition. Dividends that exceed profits earned are considered a repayment of the investment and reduce the reported value of the participation. Income Completion of service assignments In the Parent Company, income from service assignments is reported according to ÅRL 2, chapter 4 §when the service is completed. Until such time, ongoing work on behalf of another party in regard to the service assignment is reported at the lowest of the acquisition value and net sale value on balance sheet date.

Taxes The Parent Company recognises untaxed reserves including deferred tax liabilities. In the consolidated financial statements however, untaxed reserves are divided among deferred tax liability and shareholders’ equity. Financial guarantee contracts The Parent Company’s financial guarantee contracts consist primarily of security undertaking to the benefit of subsidiaries. Financial guarantees mean that the company has a commitment to compensate the owner of a debt instrument for losses incurred because a named debtor did not make payment on maturity in accordance with the contractual terms. In reporting financial guarantee contracts, the Parent Company adopts the Swedish Financial Accounting Council’s respite compared with the rules in IAS 39. The respite refers to financial guarantee contracts issued on behalf of subsidiaries. The Parent Company recognises financial guarantee contracts as provision in the balance sheet when the company has an obligation for which payment will probably be required to settle the obligation. Group contributions and owner contributions for legal entities The company reports Group contributions and owner contributions in accordance with the statement from the Swedish Financial Accounting Council’s Emerging Issues Task Force. Owner contributions are booked directly against shareholders’ equity for the receiver and capitalised in shares and contributor participations, to the extent that impairment is not required. Group contributions are reported in accordance with their financial substance. This means that Group contributions issued with the purpose of minimising the Group’s total tax are reported directly against profit brought forward after deductions for their current tax effects.

Anticipated dividends Anticipated dividends from subsidiaries are reported when the parent company has sole right to determine the size of the dividend and the Parent Company has decided on the size of the dividend before the Parent Company has published its financial statements. Property, plant and equipment Owned assets Property, plant and equipment in the Parent Company are recognised at acquisition value after deductions for accumulated depreciations and impairment when applicable in the same way applied for the Group but with additions for revaluation of assets when applicable. Leased assets The Parent Company recognises all leases in accordance with the regulations for operating leases.

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

57


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 58

NOTE 2. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS

Segment reporting is presented for the Group’s business segments and geographic areas. The Group’s internal reporting system is set up on follow-up on the returns of the Group’s goods and services, which is why the business segments are the primary basis for division. Internal prices between the Group’s different segments are fixed using the “arm’s-length principle”, i.e. between parties who are selfsufficient from each other, well informed and with an interest in completing the transaction. In the segments’ profit, assets and liabilities include directly attributable items and items that can be distributed to the segment in a rea-

sonable and reliable manner Non-distributed items consist of interest and dividend income, gains from the sale of financial investments, interest expenses, losses from the sale of financial investments, the Group’s share of losses in associated companies, tax expenses and general administration expenses. Assets and liabilities not distributed to the segments are deferred tax claims and deferred tax liabilities. The segments’ investments in property, plant and equipment as well as intangible fixed assets include all investments except investments in short-term equipment and equipment of a lesser value.

YEAR 2007 OEM Automatic

OEM Electronics

Cyncrona

Development

Other business units

The Group is organised into four segments, OEM Automatic, OEM Electronics, Cyncrona and Development. The Hydraulik segment was divested on 30 November 2006 and is reported as divested business unit below. For a description of activities in the business segments refer to pages 20-29 in the Annual Report. Parent Company activities are described in the Directors’ Report. Other operations include the Parent Company, owned shares in underlying companies, property companies owning operating properties where the Group conducts its own business.

Total Elimination/ remaining Undistributed business units

Divested business units

Total

INCOME External sales

806.3

274.8

187.7

212.0

1.4

1 482.2

-

7.0

1.2

0.6

9.2

26.1

-44.1

0.0

-

0.0

813.3

276.0

188.3

221.2

27.5

-44.1

1 482.2

0.0

1 482.2

94.5

15.0

4.3

16.3

6.9

Internal sales Total income

1 482.2

PROFIT Operating income Other financial items Tax expenses

-

137.0

2.1

2.1

2.1

-38.3

-38.3

-38.3

Profit divested business unit Profit/Loss

94.5

15.0

4.3

16.3

6.9

-36.2

100.8

O T H E R I N F O R M AT I O N Assets

368.8

110.2

140.7

108.0

622.5

-460.5

889.7

Liabilities

225.4

75.0

90.4

59.9

348.7

-460.5

338.9

27.3

-

-

-

1.1

-

28.4

6.4

0.8

2.6

0.5

21.7

-

32.0

-

-

-

-

-

-

0.0

-2.2

-

-

-

-

-

-2.2

-3.8

-0.4

-1.2

-1.2

-6.0

-

-12.6

Investments intangible fixed assets Investments property, plant and equipment Amortisation of goodwill Amortisation of intangible fixed assets Depreciation of property, plant and equipment

58

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING

137.0

2.0

2.0

2.0

102.8


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 59

YEAR 2006 OEM Automatic

OEM Electronics

Cyncrona

Development

Other business units

Total Elimination/ remaining Undistributed business units

Divested business units

Total

INCOME External sales

691.3

305.2

244.4

205.0

2.0

1 447.9

142.2

1 590.1

6.5

1.4

0.2

7.7

45.5

-61.3

0.0

-

0.0

697.8

306.6

244.6

212.7

47.5

-61.3

1 447.9

142.2

1 590.1

89.4

18.8

14.2

13.0

-8.7

142.2

Internal sales Total income

PROFIT Operating income

-

126.7

15.5

0.8

0.8

-0.3

0.5

-36.7

-36.7

-4.3

-41.0

79.9

79.9

90.8

181.6

Other financial items Tax expenses Profit divested business unit Profit/Loss

89.4

18.8

14.2

13.0

-8.7

-35.9

90.8

O T H E R I N F O R M AT I O N Assets

248.9

102.9

134.3

107.0

562.8

-211.6

944.3

Liabilities

157.5

72.5

82.3

57.5

147.9

-231.4

286.3

10.2

-

-

-

-

-

10.2

4.1

0.8

0.8

1.6

33.0

-

40.3

-

-

-

-

-

-

-

-1.5

-

-

-

-

-

-1.5

-0.5

-1.5

-1.5

-5.7

-

-11.7

Investments intangible fixed assets Investments property, plant and equipment Amortisation of goodwill Amortisation of intangible fixed assets

Depreciation of property, plant and equipment

-2.5

GEOGRAPHIC AREAS External sales 2007

Assets

2006

2007

Liabilities

2006

2007

Investments

2006

2007

2006

Remaining business units Sweden

894.5

851.3

441.1

610.3

98.1

97.3

24.8

22.4

Denmark

82.9

67.0

133.0

39.3

71.3

24.9

0.3

0.2

United Kingdom

77.4

65.9

51.0

50.0

20.3

18.9

0.5

0.4

272.5

320.8

147.9

153.4

97.5

101.1

3.7

16.5 0.0

Finland The Netherlands

3.8

6.8

9.8

8.2

2.2

2.4

-

Norway

78.5

80.7

45.3

43.5

26.1

27.4

0.1

0.3

Poland

42.7

34.7

17.0

11.0

10.0

6.4

1.9

0.1

Estonia

-

-

4.0

3.5

3.1

3.1

-

0.4

Latvia

-

-

0.4

-

0.7

-

0.2

-

Lithuania

-

-

0.0

-

0.1

-

-

-

29.9

20.7

40.1

25.1

8.9

4.8

0.5

0.0

-

-

0.1

-

0.1

-

-

-

1 482.2

1 447.9

889.7

944.3

338.4

286.3

32.0

40.3

-

142.2

-

-

-

-

-

-

1 482.2

1 590.1

889.7

944.3

338.4

286.3

32.0

40.3

Czech Republic Slovakia Total remaining business units

Divested business units Sweden Total

FINANCIAL REPORTING â?&#x161; OEM ANNUAL REPORT 2007

59


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 60

N O T E 3 . O T H E R O P E R AT I N G I N C O M E THE GROUP 2007

Capital gain tenant-owner right Capital gain property Total

PARENT COMPANY 2006

2007

2006

-

1.8

-

1.8

13.2

0.7

-

-

13.2

2.5

-

1.8

N O T E 4 . A VA I L A B L E - F O R - S A L E A S S E T S THE GROUP 2007

2006

Property in Denmark

7.1

-

Total

7.1

0.0

Agreement signed 13 Dec 2003 for the sale of property owned by Cyncrona Denmark. Effective from this date, the property is treated as an asset available for sale. According to the terms of the agreement, the property is to be vacated 1 March 2008. The property is part of the Cyncrona business segment, and the company will rent smaller facilities after relinquishing possession. The estimated gain incurred from relinquishing the property is about SEK 5.4 million.

N O T E 5 . A C Q U I S I T I O N O F O P E R AT I O N S The acquired companiesâ&#x20AC;&#x2122; net assets at the time of acquisition in accordance with a preliminary assessment. In terms of Crouzet AB, the assessment is definite. 2007

Trademarks Customer relations Property, plant and equipment

2006

9.5

-

-

11.1

20.5

11.8

Financial assets

0.1

-

Deferred tax claims

0.6

-

20.3

4.6 4.4

Inventories Accounts receivable and other receivables

27.6

Cash and cash equivalents

11.9

7.3

Deferred tax liability

-3.8

-4.1

Long-term liabilities

-19.8

-

Current liabilities

-30.2

-5.2

Net

36.4

29.9

Deduction of 50% ownership previously recognised using the equity method Net identifiable assets and liabilities

30.8

29.9

Group goodwill

17.8

-

Purchase price

-48.6

-29.9

Due in accordance with agreement

10.3

3.0

Cash and cash equivalents

11.9

7.3

-26.4

-19.6

Net effect of cash and cash equivalents

Other information about intangible assets, refer to Note 16.

60

-5.6

OEM ANNUAL REPORT 2007 â?&#x161; FINANCIAL REPORTING


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 61

ACQUISITIONS 2007 On 2 January 2007, OEM acquired the remaining 50% of the shares in Crouzet AB, name changed to OEM Control AB, for EUR 0.6 million in cash. The company trades in automation components. The business has been integrated into OEM Automatic AB and OEM Motor AB. The acquisition means an annual increase in sales of about SEK 30 million but had an insignificant impact on the Group’s profits in 2007.

Effects of the acquisition Net assets of the acquired company on acquisition (SEK m):

Booked value in Crouzet AB

Fair value adjustment

Fair value in the Group

Property, plant and equipment

1.6

1.6

Inventories

4.1

4.1

Accounts receivable and other receivables

7.1

7.1

11.6

11.6

Cash and cash equivalents Accounts payable and other liabilities

-13.1

Net identifiable assets and liabilities

11.3

-13.1 0

Deduction of 50% ownership previously recognised using the equity method

11.3 -5.6

Group goodwill

-

Purchase price*

-5.7

Cash and cash equivalents

11.6

Net effect of cash and cash equivalents

5.9

*Including the fee for acquisition expenses in the amount of SEK 0.1 million.

On 1 September 2007, OEM acquired 100% of the shares in MPX Elektra ApS in Denmark for DKR 4 million. 75 % was paid cash in 2007 and the remaining 25% will be paid in 2008 in accordance with the agreement. The company trades in a broad selection of industrial batteries for the Danish market. The acquired unit contributed sales of SEK 7.7 million and profit before tax of SEK 0.4 million for the 1 September to 31 December period. Had the acquisition occurred as per 1 January, impact on the Group’s sales would have been SEK 16.7 million and profit SEK 1 million. Goodwill is attributable to the benefits of co-ordination with existing units within the Group OEM Automatic and good profitability.

Effects of the acquisition Net assets of the acquired company on acquisition (SEK m):

Booked value in MPX Elektra ApS

Fair value adjustment

Fair value in the Group

Property, plant and equipment

0.4

0.4

Financial assets

0.1

0.1

Inventories

4.2

4.2

Accounts receivable and other receivables

2.0

2.0

Cash and cash equivalents

0.3

0.3

Accounts payable and other liabilities

-6.5

-6.5

Net identifiable assets and liabilities

0.5

0

0.5

Group goodwill

4.5

Purchase price*

-5.0

Due in accordance with agreement Cash and cash equivalents Net effect of cash and cash equivalents

1.2 0.3 -3.5

*Including the fee for acquisition expenses in the amount of SEK 0.1 million.

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

61


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 62

( C O N T. N O T E 5 ) On 10 December 2007 OEM acquired 100% of the shares in Klitsö Processtechnic A/S in Denmark for DKR 28.2 million plus a maximum DKR 6 million in additional purchase price. 75% was paid cash in 2007 and the remaining 25% will be paid in 2008 in accordance with the agreement. Where relevant, addition purchase prices will be paid 2009 and 2010. The company trades in valves and pneumatic systems for Danish industrial customers primarily and represents several important suppliers for the group OEM Automatic, which gives significant synergy effects. The acquired unit contributed sales of SEK 5.5 million and profit before tax of SEK 0.2 million for December. Had the acquisition occurred as per 1 January, impact on the Group’s sales would have been SEK 87.8 million and profit SEK 5.6 million. Goodwill is attributable to the benefits of co-ordination with existing units within the Group OEM Automatic and good profitability. EFFECTS OF THE ACQUISITION Net assets of the acquired company on acquisition (SEK m):

Recognised value of Klitsö Processtechsnic A/S

Fair value adjustment

Fair value in the Group

Trademarks

-

9.5

9.5

Property, plant and equipment

12.8

5.7

18.5

Inventories

12.0

12.0

Accounts receivable and other receivables

19.2

19.2

Cash and cash equivalents

-

Deferred tax liability

-

0.0

Long-term liabilities

-19.8

-19.8

Accounts payable and other liabilities

-11.0

-11.0

Net identifiable assets and liabilities

13.2

-3.8

11.4

-3.8

24.6

Group goodwill

13.3

Purchase price*

-37.9

Due in accordance with agreement

9.1

Cash and cash equivalents

0

Net effect of cash and cash equivalents

-28.8

*Including the fee for acquisition expenses in the amount of SEK 2.2 million.

ACQUISITIONS 2006 On 12 April 2006, the Group acquired 100% of the shares in EIG spol. s.r.o., name changed to EIG — OEM Automatic spol. s.r.o. for EUR 3.2 million. The company operates in the Czech Republic. 90% was paid cash in 2006 and the remaining 10% paid in 2007 in accordance with the agreement. The company trades in automation components and has been in business since 1990. It represents several of company group OEM Automatic’s most important suppliers, thereby generating significant synergy effects. During the first nine months that followed the acquisition, the subsidiary contributed SEK 1.8 million to the Group’s profit in 2006. If the acquisition had been made per 1 January, the effect on the Group’s profit would have been SEK 4.3 million. Goodwill is attributable to the benefits of co-ordination with existing units within the Group OEM Automatic and good profitability.

EFFECTS OF THE ACQUISITION Net assets of the acquired company on acquisition (SEK m):

Customer relations

Fair value adjustment

Fair value in the Group

-

11.1

11.1

Property, plant and equipment

6.1

5.7

11.8

Inventories

4.6

4.6

Accounts receivable and other receivables

4.4

4.4

Cash and cash equivalents

7.3

Deferred tax liability

-

Accounts payable and other liabilities

-5.2

Net identifiable assets and liabilities

17.2

7.3 -4.1

-4.1

12.7

29.9

-5.2

Group goodwill

-

Purchase price

-29.9

Due in accordance with agreement Cash and cash equivalents Net effect of cash and cash equivalents

62

Recognised value of OEM Automatic spol.s.r.o.

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING

3.0 7.3 -19.6


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 63

NOTE 6. DIVESTED BUSINESS UNITS On 30 November, the Group sold the Hydraulik group comprised of JMS Systemhydraulik AB and affiliated property company, Fastighets AB Hydraulen, where the company conducts its business activities in Borås. Hydraulik was an independent business segment. The Board’s plan to divest the business unit was adopted during the second half of 2006 in conjunction with a decision that JMS Systemhydraulik AB is a relatively small player on a large market, one which is restricted to a few major players. In calculating the profit of divested business units, SEK 3 million was reserved based on the fact that the final payment of SEK 11.4 million in accordance with the agreement in would be made 31 December 2007. The agreement included provisions for accounts receivable and deliveries, etc. The settlement has been made and the provision was SEK 2 million in excess which has a positive effect on profits for 2007. The purchase price was SEK 120 million.

PROFIT FROM DIVESTED BUSINESS UNITS 2007

2006

Income

-

142.2

Trading goods

-

-92.6

Other expenses

-

-8.9

Personnel expenses

-

-24.4

Depreciation of property, plant and equipment

-

-0.8

Financial expenses

-

-0.3

Profit before tax

-

15.2

Tax

-

-4.3

Profit after tax but before the profit of selling the divested business units

-

10.9

Profit from selling divested business units after tax

2.0

Profit from divested business units, net after tax

79.9 2.0

90.8

before dilution, SEK

0:09

3:92

after dilution, SEK

0:09

3:91

2007

2006

Earnings per share from remaining business units

EFFECT OF INDIVIDUAL AND LIABILITIES IN THE GROUP OF THE SALE

Intangible fixed assets

-

-6.4

Property, plant and equipment

-

-10.1

Inventories

-

-28.1

Accounts receivable

-

-27.2

Other receivables

-

-2.0

Deferred tax liabilities

-

0.5

Accounts payable, trade

-

17.0

Other liabilities

-

28.4

Divested assets and liabilities, net

-

-27.9

Purchase price

-

120.0

Deducted: Not paid 2006, to be paid 2007

-

-45.6

-

74.4

Paid purchase sum 2007 Impact on cash and cash equivalents

43.9

-

43.9

74.4

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

63


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 64

NOTE 7. EMPLOYEES AND PERSONNEL EXPENSES

AVERAGE NO. OF EMPLOYEES

2007

Whereof men

2006

Whereof men

PA R E N T C O M PA N Y Sweden

24

79%

19

79%

SUBSIDIARIES Sweden

308

76%

299

79%

Denmark

28

71%

22

73%

United Kingdom

29

86%

29

90%

Estonia

5

100%

3

100%

Finland

93

82%

90

81%

2

50%

2

50%

The Netherlands China

19

84%

18

89%

Latvia

1

100%

-

-

Lithuania

1

100%

-

-

Norway

19

84%

18

83%

Poland

27

74%

23

78%

Slovakia

1

100%

-

-

12

92%

8

88%

Total in subsidiaries

545

80%

512

80%

Group total

569

78%

531

80%

Czech Republic

S A L A R I E S , O T H E R R E M U N E R AT I O N A N D S O C I A L S E C U R I T Y E X P E N S E S

2007 Salaries and remuneration

Parent company

Social security expenses

13.5

7.6

(Whereof pension expenses)

Subsidiaries

Salaries and remuneration

Social security expense

14.1

7.2

(2.5)

175.6

60.1

(Whereof pension expenses)

Group total

2006

(2.4)

160.8

56.0

(16.0)

189.1

67.7

(Whereof pension expenses)

(15.0)

174.9

63.2

(18.5)

(17.4)

S A L A R I E S A N D O T H E R R E M U N E R AT I O N D I S T R I B U T E D P E R C O U N T RY A N D B E T W E E N S E N I O R EXECUTIVES. AND OTHER EMPLOYEES

2007 Senior executives

2006 Others employees

Senior executives

Others employees

PA R E N T C O M PA N Y Sweden, of which senior executives 12 people (11) (Whereof bonus)

64

OEM ANNUAL REPORT 2007 â?&#x161; FINANCIAL REPORTING

7.1 (0.3)

6.4

7.6 (1.2)

6.5


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 65

2007 Senior executives

2006 Other employees

Senior executives

Other employees

SUBSIDIARIES Sweden

5.9

(Whereof bonus)

94.1

5.1

(0.2)

Denmark

1.7

(Whereof bonus)

12.3

0.8

(-)

United Kingdom

0.9

(Whereof bonus)

(0.1)

Estonia

9.2

0.8

0.9

-

29.9

3.2

(0.3)

The Netherlands

0.7

(Whereof bonus)

(0.2)

China

0.3

0.2

0.4

-

0.4

(-)

-

(Whereof bonus)

0.3

(0.1)

(-)

Latvia

28.0

(0.6)

-

(Whereof bonus)

0.4

(-)

3.2

(Whereof bonus)

8.4

(0.1)

(-)

Finland

9.9

(0.1)

-

(Whereof bonus)

86.5

(0.3)

0.1

(-)

Lithuania

-

(Whereof bonus)

-

(-)

Norway

2.2

(Whereof bonus)

7.3

1.9

(0.3)

Poland

0.7

(Whereof bonus)

4.0

0.7

(0.1)

Slovakia

(-)

Czech Republic

0.4

(Whereof bonus)

(-)

3.1

(0.1)

-

(Whereof bonus)

9.5

(0.3)

-

1.4

0.4

0.8

(0)

Subsidiaries total, of which senior executives 18 people (18) (Whereof bonus)

15.7 (1.2)

159.8

13.1 (1.6)

147.3

The Group total, of which senior executives 30 people (29) (Whereof bonus)

22.8 (1.2)

166.2

20.7 (2.8)

153.8

Pension premiums in the amount of SEK 3.1 million (2.8) have been paid for the category senior executives.

R E M U N E R AT I O N F O R S E N I O R E X E C U T I V E S A N D B O A R D M E M B E R S G R O U P M A N A G E M E N T

Base pay, board fee

Variable remuneration

2007 Other benefits

Pension expenses

Base pay, board fee

Total

Variable remuneration

2006 Other benefits

Pension expenses

Total

Jan Svensson Chairman of the Board 0.2

-

-

-

0.2

-

-

-

-

-

-

-

-

-

-

0.4

-

-

-

0.4

Hans Franzén Board member

0.1

-

-

-

0.1

0.1

-

-

-

0.1

Ulf Barkman Board member

0.1

-

-

-

0.1

0.1

-

-

-

0.1

Gunnar Eliasson Board member

0.1

-

-

-

0.1

0.1

-

-

-

0.1

Orvar Pantzar Board member

0.1

-

-

-

0.1

0.1

-

-

-

0.1

Lars-Åke Rydh Board member

0.1

-

-

-

0.1

0.1

-

-

-

0.1

Agne Svenberg Board member

0.1

-

-

-

0.1

-

-

-

-

0.0

Jörgen Zahlin CEO

2.3

-

-

0.4

2.7

2.1

0.6

-

0.4

3.1

3.3

0.0

0.0

0.4

3.7

3.1

0.6

0.0

0.4

4.1

(7 people)*

5.2

0.5

0.2

1.0

6.9

4.9

0.9

0.2

0.9

6.9

Total

8.5

0.5

0.2

1.4

10.6

8.0

1.5

0.2

1.3

11.0

Hans Franzén Chairman of the Board

Other senior executives

* Of the other senior executives, two people receive remuneration from subsidiaries. This remuneration is included at an amount of SEK 1.9 million (1.9). Pension expenses correspond to SEK 0.3 million (0.2).

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

65


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 66

( C O N T. N O T E 7 )

CEO/Managing Director Pension expenses are defined contribution. There are no other pension obligations. The variable remuneration is as in prior years based on the attained profit levels and gave no result for 2007. SEK 0.6 million was paid in variable remuneration based on attained profit level which gave a 28% result for 2006. Bonus could be paid at a maximum of 50% of the basic pay. The period of notice for the Managing Director is 24 months from the Company’s side, with the obligation to work, and 6 months from the Managing Director’s side. Retirement age for the Managing Director is 60 years. CEO/ Managing Director’s salary and remuneration is set by the Board.

Other Senior Executives Pension expenses are defined contribution. There are no other pension obligations. Variable remuneration for the amount of SEK 0.5 million was paid in 2007 and SEK 0.9 million for 2006. Variable remuneration can, based on the attained profit level, be paid at a maximum 40% of the basic pay. The period of notice for other senior executives is maximum 12 months from the company’s side, with the obligation to work, and maximum 6 months from the employee’s side. If the company serves notice after the age of 55 years, a further maximum of 6 months salary is paid. Retirement age for other senior executives is between 60 and 65 years.

Guidelines for remuneration and other employment conditions for senior executives The Annual General Meeting decided on guidelines for senior executives by which management is to apply salaries adjusted to market conditions and other remuneration terms. In addition to a base salary, management can also receive variable remuneration which can amount to a maximum 50% of the basic pay. Senior executives are to have defined contribution pension terms that are adjusted to market conditions and amount to a maximum 20% of the basic pay. All share-related incentive schemes are to be resolved by the Annual General Meeting. The levels of remuneration coincide mainly with previous years. The period of notice will not exceed 24 months and involves the obligation to work during the period of notice. No employment agreements are to contain conditions for severance pay.

S I C K L E A V E PA R E N T C O M PA N Y 2007

2006

Total sick leave as a proportion of normal working hours

0,8%

1,3%

Proportion of total sick leave that refers to continuous sick leave of 60 days or more

0,0%

0,0%

Men

0.3%

0.4%

Women

2.6%

4.4%

29 years old or younger

0.3%

0.0%

30-49 years

0.5%

0.7%

50 years old or older

2.8%

4.3%

SICK LEAVE AS A PROPORTION OF EACH GROUP’S NORMAL WORKING HOURS Sick leave by gender:

S I C K L E A V E B Y A G E C AT E G O RY:

GENDER DISTRIBUTION THE GROUP

PARENT COMPANY

(Share of women) 2007

(Share of women) 2006

2007

2006

Board of Directors

0%

0%

0%

0%

Other Senior Executives

0%

0%

0%

0%

NOTE 8. FEES AND REIMBURSEMENT OF EXPENSES TO THE AUDITORS THE GROUP 2007

PARENT COMPANY 2006

2007

2006

KPMG Audit assignments

1.1

1.1

0.2

0.2

Other assignments

0.2

0.1

0.2

0.1

Audit assignments

0.6

0.6

Total

1.9

1.8

0.4

0.3

OTHER AUDITORS

Audit assignments refers to examining the annual report and accounts, and the administration by the Board and the Managing Director, any other tasks that fall to the Company’s auditors, and providing counsel or any other contribution brought about by observations during that review, or in performing other such tasks. All else falls under other assignments.

66

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 67

N O T E 9 . D E P R E C I AT I O N / A M O R T I S AT I O N / I M PA I R M E N T O F P R O P E R T Y, P L A N T A N D E Q U I P M E N T A N D I N TA N G I B L E F I X E D A S S E T S THE GROUP 2007

Goodwill, impairment

PARENT COMPANY 2006

2007

2006

-

-

-

-

Customer relations, amortisation

-2.0

-1.5

-

-

Trademarks, amortisation

-0.2

-

-

-

Buildings and land, depreciation

-2.8

-2.8

-0.6

-0.6

Equipment, tools and installations, depreciation

-9.8

-9.2

-0.9

-1.2

-14.8

-13.5

-1.5

-1.8

Total

N O T E 1 0 . I N C O M E F R O M S H A R E S I N G R O U P C O M PA N I E S PARENT COMPANY 2007

2006

Dividends received

42.0

Result of liquidation

3.1

2.7 -

Capital gain sold shares

-1.0

101.5

Total

44.1

104.2

NOTE 11. SHARES IN EARNINGS OF ASSOCIATED COMPANIES/ Income from participation in associated companies

THE GROUP 2007

PARENT COMPANY 2006

2007

2006

Dividends received

-

-

-

Income from shares in associated companies

-

1.0

-

-

0.0

1.0

0.0

1.0

Total

1.0

NOTE 12. FINANCIAL INCOME/ OTHER INTEREST INCOME AND SIMILAR PROFIT ITEMS THE GROUP 2007

PARENT COMPANY 2006

2007

2006

Interest income on bank balance

6.8

2.7

4.9

Other financial income

1.5

0.8

-

2.3 -

Total

8.3

3.5

4.9

2.3

NOTE 13. FINANCIAL EXPENSES/ INTEREST EXPENSES AND SIMILAR LOSS ITEMS THE GROUP 2005

PARENT COMPANY 2004

2005

2004

Interest expenses on other liabilities

-3.5

-2.4

-

-0.3

Other financial expenses

-2.7

-1.3

-0.1

-

-6.2

-3.7

-0.1

-0.3

Total

FINANCIAL REPORTING â?&#x161; OEM ANNUAL REPORT 2007

67


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 68

N O T E 1 4 . TA X E S THE GROUP 2007

Current tax Deferred tax Total recognised tax expenses

PARENT COMPANY 2006

2007

2006

-39.0

-33.9

1.5

3.7

0.7

-2.8

-0.1

0.0

-38.3

-36.7

1.4

3.7

-26.2

-16.3

Tax relating to items recognised directly against capital

L I N K B E T W E E N TA X E X P E N S E S F O R T H E Y E A R A N D I N C O M E B E F O R E TA X

Reported income before tax

139.1

127.5

37.9

91.4

Applicable tax rate for income tax in Sweden

-38.9

-35.7

-10.6

-25.6

Non-taxable share dividends

-

-

11.8

1.0

Non-taxable gain from sale of shares in subsidiaries

-

-

0.6

28.4

0.6

-1.0

-0.4

-0.1

-38.3

-36.7

1.4

3.7

Deficit deductions

2.7

1.9

-

-

Goodwill

1.4

1.4

-

-

Other

2.3

0.6

-

-

Total deferred tax claims

6.4

3.9

-

-

Intangible fixed assets

4.0

2.3

-

-

Buildings and land

6.6

5.5

1.8

1.7

21.2

18.8

-

-

31.8

26.6

1.8

1.7

Other taxable income/non-deductible items Total recognised tax expenses

D E F E R R E D TA X C L A I M S

D E F E R R E D TA X L I A B I L I T Y

Untaxed reserves Total deferred tax liability

The Group has SEK 0.5 million (2.3) in inactive deferred tax claims corresponding to deficit deduction, which, when measured in accordance with the probability principle, cannot be assumed to be usable as it is not possible to offset the surpluses against these within a reasonable period of time. Deficit deductions that are not calculated and can be used within 3 years have not been activated. The acquisition of subsidiaries affected the deferred tax liability in the amount of SEK 3.8 million while translation differences recognised directly in shareholdersâ&#x20AC;&#x2122; equity affected deferred tax liability in the amount of SEK 0.4 million.

NOTE 15. GOODWILL THE GROUP 2007

2006

A C C U M U L AT E D A C Q U I S I T I O N VA L U E S At the start of the year New acquisitions

9.2

15.6

17.9

-

-

-6.4

27.1

9.2

-6.2

-6.2

-

-

Total impairments

-6.2

-6.2

Residual value at year-end

20.9

3.0

Divestments Total acquisition value A C C U M U L AT E D I M PA I R M E N T S At the start of the year Impairments

68

OEM ANNUAL REPORT 2007 â?&#x161; FINANCIAL REPORTING


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 69

G O O D W I L L A N D I N TA N G I B L E A S S E T S W I T H A N I N D E T E R M I N A B L E U S E F U L L I F E

Companies

2007

2006

Indoma AB

3.0

3.0

MPX Electra ApS

4.6

-

13.3

-

20.9

3.0

8.8

8.8

29.7

11.8

Klitsö Processtechnic AS

Telfa AB Total

Impairment test for intangible assets The companies have performed impairment tests on cash-generating units containing goodwill and intangible assets that have an indeterminable useful life, based on the usage values of the units. The above amounts relate to goodwill for the amount of SEK 20.9 million and acquired supplier relations for Telfa AB in the amount of SEK 8.8 million. These are long-standing supplier relations that are appraised as stable over the foreseeable future. The usage values are based on estimated future cash flows for a total of twenty (20) years

with the starting point in the existing business plans for the next three (3) years. The principal assumptions for the measurement for all cashgenerating units are assumptions about margins and volume growth. The business plans are based on experience from previous years. Current market shares are expected to increase marginally in the forecast period. According to the business plans, operational growth is expected to reach between 5 and 10% each year. Growth is expected to be 3 to 5% each year for other years in the period of use.

The gross profit margins are expected to reach the same level as at the end of 2007. The forecast cash flows have been converted to a present value using a discount rate of 12% before tax. The recoverable values for the units are greatly in excess of their reported values. The Company management is of the opinion that no reasonable changes in the key assumptions will lead to the estimated recoverable values for the units being lower than the reported values.

N O T E 1 6 . O T H E R I N TA N G I B L E A S S E T S THE GROUP 2007

PARENT COMPANY 2006

2007

2006

Accumulated acquisition values At the start of the year

21.0

9.9

-

-

New acquisitions

10.5

11.1

1.1

-

31.5

21.0

1.1

-

At the start of the year

-3.5

-1.1

-

-

Amortisation

-2.2

-2.4

-

-

Total amortisation

-5.7

-3.5

-

-

Residual value acc. to plan at year-end

25.8

17.5

1.1

-

At the start of the year

-

-

-

-

Annual change

-

-

-0.3

-

-

-

-0.3

-

25.8

17.5

0.8

-

Total acquisition value A C C U M U L AT E D A M O R T I S AT I O N

A C C U M U L AT E D E X C E S S A M O R T I S AT I O N

Booked value

When Klitsö Processtechnic A/S was acquired in 2007, a purchase sum was paid that exceeded the net of assets and liabilities in the Company by SEK 28.5 million with deductions for deferred tax liabilities of SEK 3.8 million. The surplus value was analysed and distributed as SEK 5.7 million to buildings, SEK 9.5 million to trademarks and SEK 13.3 million to goodwill. Trademarks amounting to SEK 9.5 million are assessed to have a useful life of five (5) years, which means that these will be amortised by 20% every year. Other acquisitions made in 2007 have not affected the intangible fixed assets.

The Parent Company’s purchase relates to development costs for software amounting to SEK 1.1 million, which is written off during its assessed useful life of five (5) years. Amortisation begins January 2008. The purchase sum paid for the acquisition of EIG — OEM Automatic spol.s.r.o. in 2006 exceeded the net of assets and liabilities in the company by SEK 11.1 million. The surplus value was analysed and distributed as SEK 0.9 million to orders on hand and SEK 10.2 million to customer relations. The value of orders on hand relates to contribution margin and is

amortised in line with invoicing. At the end of 2006, all invoicing had been completed and SEK 0.9 million amortised. The amount has been charged to costs for trading goods. Customer relations amounting to SEK 10.2 million are assessed to have a useful life of five (5) years, which means that these will be amortised by 20% every year. Impairment test for other intangible assets, refer to Note 15.

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

69


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 70

N O T E 1 7 . P R O P E R T Y, P L A N T A N D E Q U I P M E N T 2007

THE GROUP

Buildings and land

2006 Equipment, tools and installations

Buildings and land

Equipment, tools and installations

A C C U M U L AT E D A C Q U I S I T I O N VA L U E S 141.1

116.5

125.6

126.1

New acquisitions

At the start of the year

16.0

16.0

25.8

15.3

Acquired through business acquisitions

18.4

10.8

13.4

0.9

-25.8

-21.3

-22.3

-25.2

Sales and disposals Reclassifications Translation differences for the year Total acquisition value

-0.9

-

0.6

2.8

1.0

-1.4

-1.2

152.5

122.1

141.1

116.5

-31.1

-86.7

-33.0

-96.2

-2.5

-5.2

-1.6

-0.9

9.1

17.5

5.8

19.2

-2.8

-9.9

-2.8

-9.2

0.3

-

-0.7

-2.3

-0.8

0.5

1.1

-29.6

-84.8

-31.1

-86.7

122.9 *

37.3

109.8 *

29.8

A C C U M U L AT E D D E P R E C I AT I O N A C C O R D I N G T O P L A N

At the start of the year Acquired through business acquisitions Sales and disposals The year’s depreciation according to plan at acquisition values Reclassifications Translation differences for the year Total depreciation according to plan Booked value at end of the year

*The value of the buildings amounts to 99.0 (100.8) for the Group and 17.3 (17.6) for the Parent Company. 2007

PA R E N T C O M PA N Y

Buildings and land

2006 Equipment, tools and installations

Buildings and land

Equipment, tools and installations

A C C U M U L AT E D A C Q U I S I T I O N VA L U E S At the start of the year

27.1

19.0

26.9

0.1

0.4

0.2

0.6

-

-6.9

-

-1.1

27.2

12.5

27.1

19.0

-8.7

-16.4

-8.1

-16.1

-

6.9

-

0.9

-0.6

-0.9

-0.6

-1.2

-9.3

-10.4

-8.7

-16.4

17.9 *

2.1

18.4 *

2.6

At the start of the year

0.0

-0.4

0.0

-0.6

Annual change

0.0

-

0.0

0.2

0.0

-0.4

0.0

-0.4

17.9

1.7

18.4

2.2

New acquisitions Sales and disposals

19.5

Accumulated depreciation according to plan At the start of the year Sales and disposals The year’s depreciation according to plan at acquisition values

Residual value acc. to plan at year-end

A C C U M U L AT E D E X C E S S A M O R T I S AT I O N

Booked value

TA X AT I O N VA L U E Buildings Land Total taxation value

70

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING

11.2

8.6

1.5

1.0

12.7

9.6


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 71

N O T E 1 8 . S H A R E S A N D PA R T I C I PAT I O N I N G R O U P C O M PA N I E S

Corp. id.no.

Registered office

No. of shares

Share of capital

Face value

Booked value

5 000

46.2

100

1.5

300

78.4

OEM Industrial Components AB, Sweden

556051-4514

Tranås

100 000

100%

OEM Automatic AB, Sweden

556187-1012

Tranås

-

100%

OEM Automatic AS, Norway

-

-

-

100%

OEM Automatic A/S, Denmark

-

-

-

100%

OEM AutomaticOY, Finland

-

-

-

100%

OEM Automatic Ltd, UK

-

-

-

100%

OEM Automatic sp.z o.o., Poland

-

-

-

100%

OEM China Development B.V, Netherlands

-

-

-

100%

Internordic Bearings AB, Sweden

556493-8024

Nässjö

Egevo Elektronik AB, Sweden

556311-3306

Stockholm

-

100%

OEM Electronics AB, Sweden

556054-3828

Tranås

-

100%

Pronesto AB, Sweden

556112-6755

Stockholm

-

100%

-

-

-

100%

556326-5171

Jönköping

-

100%

OEM Electronics OY, Finland Indoma AB, Sweden

OEM Systemteknik AB, Sweden

556050-9076

Stockholm

1 000

100%

A. Karlsson Industriteknik AB, Sweden

556163-0905

Stockholm

-

100%

Jubo Förvaltning AB, Sweden

556494-7058

Karlskoga

-

100%

IBEC Bearings AB, Sweden

556194-8521

Stockholm

-

100%

Skäggriskan AB, Sweden

556248-9780

Stockholm

-

100%

Technology AB, Sweden

556038-8356

Stockholm

300

100%

Cyncrona AB, Sweden

556296-1838

Stockholm

-

100%

Annual change

OEM Electronics Production

Cyncrona AS, Norway

-

-

-

100%

Cyncrona OY, Finland

-

-

-

100%

Cyncrona A/S, Denmark

-

-

-

100%

Cyncrona Sp.z.o.o, Poland

-

-

-

100%

A. Karlsson Fastigheter AB, Sweden

556029-8456

Stockholm

10 000

100%

1 000

10.3

Intermate Electronics AB, Sweden

556266-6874

Tranås

1 000

100%

100

0.6

OEM Ejendomsselskab A/S, Denmark

-

-

1 300

100%

DKK 1 300

-

OEM Fastighetsbolag AB, Finland

-

-

1 200

100%

FIM 1 200

1.4

OEM Property Ltd, UK

-1.2

-

-

400 000

100%

GBP 400

5.1

OEM Motor AB, Sweden

556650-6498

Tranås

1 000

100%

100

0.1

Internordic Förvaltning AB, Sweden

556302-0873

Nässjö

1 000

100%

100

1.3

i Ängelholm AB, Sweden

556241-1099

Ängelholm

2 500

100%

250

-

Hydrac AB, Sweden

556466-0875

Borås

2 000

100%

200

0.1

Fotbromsen AB, Sweden

556150-4282

Karlskoga

5 000

100%

500

1.0

Telfa AB, Sweden

556675-0500

Göteborg

1 000

100%

100

10.0

OEM Eesti Ou., Estonia

-

-

10 000

100%

EEK 40

0.0

EIG - OEM Automatic spol.s.r.o. , Czech Republic

-

-

-

100%

CZK 100

29.8

556197-1911

Stockholm

24000

100%

2 400

6.9

6.9

-

-

100

100%

LTL 100

0.1

0.1

Hydroprodukter International

OEM Control AB (formerly Crouzet AB) OEM Automatic UAB, Lithuania

-0.8

-0.1

OEM Automatic SIA, Latvia

-

-

20

100%

LVL 200

-

-

OEM Automatic s.r.o., Slovakia

-

-

-

100%

SKK 200

0.1

0.1

MPX Electra ApS, Denmark

-

-

125

100%

DKK 1,000

5.1

5.1

Klitsö Processtechnic AS, Denmark

-

-

1000

100%

DKK 1,000

37.9

37.9

235.9

48.0

Total

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

71


OEM2008_del2_ENG_OK

08-04-22

09.19

NOTE 19. SHARES

Sida 72

I N A S S O C I AT E D C O M PA N I E S

Corp. id.no.

Registered office

No. of shares

Share of capital

Face value

Booked value

Annual change

556197-1911

Stockholm

12 000

-

-

-

-5.6

556197-1911

Stockholm

12 000

-

-

-

-1.2

THE GROUP Crouzet AB, Sweden

PA R E N T C O M PA N Y Crouzet AB, Sweden

S P E C I F I C AT I O N F O R G R O U P VA L U E S R E L AT E D T O O W N E D S H A R E O F I N C O M E , P R O F I T, ASSETS AND LIABILITIES.

Owned share as %

Country

Income

Profit/Loss

Assets

50%

Sweden

25.8

1.0

12.2

Liabilities Shareholders’ equity

2006 Crouzet AB

6.6

5.6

N O T E 2 0 . P R E PA I D E X P E N S E S A N D A C C R U E D I N C O M E THE GROUP 2007

Accrued commission income, etc. Other prepaid expenses Total

PARENT COMPANY 2006

2007

2006

0.8

1.8

-

-

13.5

11.2

3.9

2.8

14.3

13.0

3.9

2.8

NOTE 21. SHAREHOLDERS’ EQUITY The shares consist of Class A and Class B. The face value is SEK 1.67 (5). 2007 Shares

Class A shares

10 votes

Class B shares

1 vote

Total

4 767 096

2006 Votes

Shares

Votes

47 670 960

1 589 032

15 890 320

18 402 213

18 402 213

6 134 071

6 134 071

23 169 309

66 073 173

7 723 103

22 024 391

A 4:1 share split combined with an automatic redemption process was carried out in 2007. This process gave each shareholder three (3) new shares and one (1) redemption share, which was redeemed. This means that the number of shares in the company has tripled.

For further information, see the section on share on pages 84-87.

72

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 73

REPURCHASED SHARES INCLUDED IN THE EQUITY ITEM S U R P L U S B R O U G H T F O R WA R D I N C L U D I N G T H E Y E A R ’ S P R O F I T

Number of shares: 2007

2006

Amounts that affected shareholders’ equity 2007

2006

Opening repurchased shares

-

154 000

26.6

The year’s purchase

-

455 400

-

-12.2 -74.5

The year’s sales

-

-609 400

-

113.3

Closing repurchased shares

-

-

26.6

26.6

C A P I TA L M A N A G E M E N T The Board’s ambition is to achieve a good return on shareholders’ equity with limited financial risks during a period of stable growth. The targets for one business cycle are: - 15% annual growth in profit - 20% return on equity - Equity/assets ratio not lower than 35% The last three years, the following results have been realised in terms of the targets: 2007

Growth of profit

2006

2005

1%

15%

25%

Return on shareholders’ equity:

18%

33%

20%

Equity/assets ratio:

59%

67%

63%

DIVIDENDS After balance sheet date, the Board proposed a dividend of SEK 3 per share (2.83). The Board aims to propose a reasonable dividend of profits to the shareholders, by taking into account the financial position, the tax situation and any need for acquisitions or investments in the operation.

NOTE 22. FINANCIAL LEASING LIABILITIES THE GROUP 2007

2006

Financial leasing liabilities fall due for payment as shown below: Within one year

3.2

2.9

Between one and five years

9.8

9.3

Later than in five years Total

-

-

13.0

12.2

The financial leasing liabilities relate to leasing of cars.

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

73


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 74

N O T E 2 3 . P R O V I S I O N S F O R P E N S I O N S A N D S I M I L A R O B L I G AT I O N S D E F I N E D - B E N E F I T O B L I G AT I O N S A N D VA L U E O F A D M I N I S T R AT I O N A S S E T S .

31.12.2007

31.12.2006

Current value of entirely or partially funded obligations

10.8

8.6

Fair value of plan assets

-8.7

-8.3

Net of entirely or partially funded obligations

2.1

0.3

-

-

Net obligations before adjustments

2.1

0.3

Accumulated unrecognised actuarial gains (+) and losses (-)

-2.5

-0.3

-0.4

0.0

-0.7

0.0

Current value of non-funded defined-benefit obligations

Net amount in balance sheet (obligations + assets -) The net amount recognised in the following items in the balance sheet: Other financial assets Provisions for pensions and similar obligations Net amount in balance sheet (obligations + assets -)

0.3

0.0

-0.4

0.0

The net amount is split over plans in the following countries: Norway

-0.4

0.0

-0.4

0.0

Obligation for defined-benefit plans as of 1 January

8.6

7.9

Pensions earned during the period

0.7

0.6

Interest on obligations

0.4

0.4

-0.3

-0.5

1.4

0.2

10.8

8.6

Fair value of plan assets as of 1 January

8.3

7.5

Contributed funds from employer

1.0

0.5

-0.3

-0.2

Net amount in balance sheet (obligations + assets -)

C H A N G E I N C U R R E N T VA L U E O F T H E O B L I G AT I O N FOR DEFINED-BENEFIT PLANS

Paid benefits Actuarial gain or loss Obligation for defined-benefit plans as of 31 December

CHANGE IN PLAN ASSETSâ&#x20AC;&#x2122; FA I R VA L U E

Paid benefits Expected return on plan assets

0.5

0.5

Actuarial gain or loss

-0.8

-

Fair value of plan assets as of 31 December

8.7

8.3

Expenses for pensions earned during the year

0.8

0.6

Interest expenses

0.5

0.4

Expected return on plan assets

-0.5

-0.5

Total net expenses in the income statement

0.8

0.5

E X P E N S E R E C O G N I S E D I N T H E I N C O M E S TAT E M E N T

ACTUARIAL ASSUMPTIONS The following significant actuarial assumptions have been applied when calculating the obligations: (weighed average values)

Discount rate

5.0%

5.5%

Expected return on plan assets

5.8%

6.5%

Future salary increases

4.5%

3.0%

Future increases of pensions

2.0%

2.0%

Employee turnover

4.3%

3.0%

19 years

18 years

Expected remaining length of service

74

OEM ANNUAL REPORT 2007 â?&#x161; FINANCIAL REPORTING


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 75

( C O N T. N O T E 2 3 ) In Norway, all employees are covered by defined-benefit pension plans. SEK 0.9 million is expected to be paid in contributions for the plans and the expected return on the pension funds is expected to total SEK 0.6 million. In countries other than Sweden, all employees are covered by definedcontribution plans for which the Company pays fixed contributions to a separate legal entity and has no obligation to pay further contributions. The Group’s results are charged by costs as the benefits are earned. The obligation of old age pension and family pension by a small section of the employees in Sweden is secured by an insurance policy with Alecta. According to a statement from the Swedish Financial Accounting Standards Council’s Emerging Issues Task Force, URA 42, this is a defined benefit plan which covers several employers. The Company has not had access to sufficient information to make it possible to report this plan as a defined benefit plan for financial years 2007 and 2006. The pension plan according to ITP, which is secured via insurance with Alecta, is therefore reported as a defined-contribution plan. Contributions this year for pension insurance with Alecta amount to SEK 1.3 million (1.9). Alecta’s excess can be allocated to the policy holders and/or the insured. At the end of 2007, Alecta’s excess in the form of the collective consolidation level was 152% (143). The collective consolidation level is made up of the market value of Alecta’s assets as a percentage of the insurance commitment calculated according to Alecta’s insurance calculation premise, which does not comply with IAS 19. Most of the employees in Sweden are covered by defined-contribution plans. The Group’s total cost for defined-contribution plans is SEK 15.8 million (14.9). The Group’s total cost for defined-contribution plans is SEK 2.5 million (2.4).

NOTE 24. OVERDRAFT The majority of the Swedish companies are connected to a central account system with a total limit of SEK 125 million (150). The overall degree of utilisation is reported in the Parent Company under this item. The subsidiaries’ balance/liability in the central account system is reported in the Parent Company, either as a receivable from, or a liability to, the subsidiaries. The total limit in the Group is SEK 259 million (260).

PLEDGED ASSETS TO CREDIT INSTITUTES THE GROUP 2007

PARENT COMPANY 2006

2007

2006

Property mortgages

10.0

20.0

7.5

Business mortgages

55.1

55.1

-

-

65.1

75.1

7.5

7.5

Total

7.5

N O T E 2 5 . A C C R U E D E X P E N S E S A N D P R E PA I D I N C O M E THE GROUP 2007

PARENT COMPANY 2006

2007

2006

Accrued holiday pay

23.5

19.4

2.0

1.8

Accrued social security expenses

11.9

11.3

1.4

1.7

Prepaid income

2.0

1.6

-

-

Accrued supplier inv./commercial debts

4.7

5.2

-

-

26.0

22.2

2.4

4.1

68.1

59.7

5.8

7.6

Other accrued expenses Total

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

75


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 76

NOTE 26. FINANCIAL RISKS AND RISK MANAGEMENT

The OEM Group’s primary risks are connected to currencies, customer credits and customer guarantees. Through matching, however, the risks have almost been completely eliminated, through risk elimination that contributes to securing a relatively stable coverage ratio over time for the Group. In addition to the named risks, the Group has a limited interest risk in the form of a cash flow risk. Customer guarantees have not been a cause of any risks of practical significance. There are often corresponding rights of recourse against the supplier for provided guarantees. This management has worked well in practice. The OEM Group’s financial activities and management of financial risks is primarily performed in the Parent Company. There are plans for risk management and how the risks are to be limited. The plans are distinguished by a low level of risk. The basis is a structured and effective management of the financial risks that arise in the business units.

FINANCIAL INSTRUMENTS The OEM Group’s holdings of financial instruments that constitute fixed assets are fairly limited. At the end of 2007, the book value of the financial assets of long-term securities holdings was SEK 1.4 million (1.3) and other long-term receivables SEK 1.2 million (0.5). The Group’s holding of financial instruments that represent current assets amounted at year end to SEK 261 million (206) and accrued income to SEK 0.8 million (1.8) and other receivables to SEK 15.9 million (55.0). As is evident above, the financial assets are categorised as loans receivable and accounts receivable to 99%. The financial liabilities are measured at accrued acquisition value. The Group does not have any liabilities with fixed interest and at year-end long-term receivables amounted to SEK 1.2 million (0.5), which is less than one percent of total assets. The risk of a shift in the interest rate causing a significant change in fair value is thus non-existent. The item cash and bank balance SEK 127

million (288), the overdraft item SEK 71.3 million (53.1) and other interest-bearing liabilities (finance leases) SEK 13.0 million (12.2) have variable interest rates and are thus marred by cash flow risks. Overdrafts apply for one (1) year and are not combined with any specific requirements from the guarantor. LIQUIDITY RISKS Liquidity risk relates to the risk that the Group will not be able to fulfil its obligations associated with financial liabilities. This is prevented whenever possible by ensuring an age structure that makes it possible to take any necessary alternative capital procurement measures should it be needed. Cash and bank balance at the end of the year was SEK 127 million (288) and financial current assets were SEK 261 million (206). The Group’s financial liabilities at the end of the year totalled SEK 266 million (223) and the age structure is presented in the table below.

2007 (SEK m) Total

Overdraft* Accounts payable, etc.

Within 1 month

2006

1-3 months

3 months1 year

1 year and longer

Total

Within 1 month

1-3 months

3 months1 year

1 year and longer

71.3

-

-

71.3

-

53.1

181.8

122.1

58.3

1.4

-

157.4

116.2

41.2

-

53.1 -

13.0

0.3

0.5

2.4

9.8

12.2

0.2

0.5

2.2

9.3

266.1

122.4

58.8

75.1

9.8

222.7

116.4

41.7

2.2

62.4

Finance leasing liabilities

* Overdraft runs for one (1) year at a time.

76

INTEREST RISKS The interest risk is low. The Group does not have any liabilities with fixed interest, and longterm receivables with fixed interest are very small. The risk of a shift in the interest rate causing a significant change in fair value for the Group is thus non-existent. The cash and bank items, the overdraft item and other interestbearing liabilities (finance leases) are marred by cash flow risks. A one per cent change in interest would on the balance sheet date entail a change of SEK 0.4 million (2.2) in the profit.

Purchasing is split as a percentage as follows:

CURRENCY RISKS The currency risks are primarily due to purchases being made in foreign currency. The risks are managed by the customer contract often prescribing that the price must be adjusted in relation to any currency changes. Alternatively, the sale is carried out in the same currency as the purchase. A detailed report is given in connection with the below table. The currency flow of the Group is attributable to imports from Europe, Asia and North America.

Exchange rate changes significant currencies

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING

2007

2006

EUR

53%

53%

USD

21%

11%

JPY

8%

12%

GBP

5%

5%

SEK

2%

7%

11%

12%

100%

100%

Other currencies

Currency Weighed average 2006

Weighed average 2007

Change

EUR 1

9.22

9.24

0%

USD 1

6.72

7.35

-9%

GBP 1

13.45

13.54

-1%

JPY 1

5.71

6.33

-10%

As long as it is possible, the Group eliminates the effects of exchange rate fluctuations by

using currency clauses in the customer contract and by purchasing and selling in the same currency. On the whole, purchasing is carried out in the supplier’s functional currency. From the table above it can be seen that 21% (11) for USD, 53% (53) for EUR, 8% (12) for Yen and 5% (5) for GBP, 2% (7) for SEK and 11% (12) for other currencies are attributable to purchasing in 2007. The OEM Group manages the effects of changing exchange rates by currency clauses in the sales contract and by invoicing in the same currency as the corresponding purchase. OEM sells goods to Swedish and foreign customers and either invoices in the purchasing currency or in another currency with currency clauses with regard to the purchase currency. The currency clauses adjust 80-100% of the changes in the exchange rate from the sales order to the date of invoicing, depending on whether OEM receives currency compensation for the profit margin or not. There is often a threshold value, which means that exchange rate changes below 2.25% are not taken into account. Currency adjustments are made


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 77

symmetrically for rising and falling currency rates. There are no conditions that give debt ratios or that are similar to options. Currency clauses and sales in the purchasing currency make up about 71% (75) of all sales contracts. Where purchasing is based on sales orders, economic hedging of currency risks is achieved in sales and purchasing. However, in many cases there is a mismatch in timing between purchase orders and sales orders. Purchase orders normally run 7-60 days prior to delivery. The customer credit period is about 30 days. The currency adjustment clauses means that only currency changes between the time of sale and the time of invoicing affect the amount reported in Swedish Kronor. Since invoicing, in accordance with currency adjustment clauses, is carried out in SEK, there is no exchange rate difference after the date of invoicing. OEM applies the same terms and conditions for adjusting currencies and prices for its Swedish and overseas customers. The changes in values related to the currency clauses are therefore treated consistently from the points of view of risk and accounting. A ten per cent change in exchange rates for the EUR and USD would, using a simplified model, mean about SEK 80 million in change in earnings. With regard to currency risk, it can be determined that OEM also has balance exposures in the form of net investment in independent foreign operations. At present, these currency risks are not hedged.

The sensitivity of the change in exchange rates is described below: Nominal amount SEK million

Sensitivity analysis +/- 5% i exchange rate Impact on the Group’s shareholders’ equity

CZK DKK EEK EUR GBP NOK PLN

25.6 26.1 0.9 62.1 28.9 16.5 7.5

1.3 1.3 0.0 3.1 1.4 0.8 0.4

Total

167.6

8.4

Currency rates are used in the Group’s consolidated accounts for recalculating foreign subsidiary’s income and net assets. Currency

Weighed average 2007

December 2007

NOK 100

115.06

118.45

DKK 100

123.90

126.85

EUR 1

9.2235

9.4485

GBP 1

13.4454

12.8700

PLN 1

2.4351

2.615

EEK 1

0.5891

0.6035

CZK 1

0.3316

0.3537

Currency

Weighed average 2006

December 2006

NOK 100

114.99

109.49

DKK 100

123.97

121.03

EUR 1

9.2366

9.0138

GBP 1

13.5376

13.4178

PLN 1

2.3625

2.3455

EEK 1

0.59

0.5757

CUSTOMER AND CREDIT RISKS The customer credit risks are small. Defined customer limits are carefully decided and strictly applied. Short credit periods and absence of risk concentrations for individual customers, segments or geographic areas contribute to a good risk picture, one that is confirmed by the small historical customer losses. The Group has approximately 22,000 purchasing customers in total. The largest individual customer accounted for approximately 4.5% (6.6) of sales. The five largest customers accounted for 9.9% (12.1) of sales and the ten largest customers accounted for 13.7% (15.8) of sales. The distribution of risk is thus very good. Customer losses during the year amounted to SEK 1.1 million (0.5), which corresponds to 0.07% (0.03) of sales. The average credit period rose to approximately 45 days.

A G E A N A LY S I S , A C C O U N T S R E C E I VA B L E N O T W R I T T E N D O W N ( S E K M I L L I O N )

2007

Accounts receivable not matured Accounts receivable matured 0-30 days

2006

219.7

153.5

29.0

31.1

Accounts receivable matured > 30 - 90 days

6.5

16.0

Accounts receivable matured > 90 - 180 days

4.3

4.8

Accounts receivable matured > 180 - 360 days

1.0

0.2

Accounts receivable matured >360 days

0.2

0.2

260.7

205.8

Opening balance

0.6

0.6

Group changes

0.6

0.1

Provision for suspected losses

0.7

0.3

Confirmed losses

-0.5

-0.4

Closing balance

1.4

0.6

Total PROVISIONS FOR LOSS (SEK M)

N O T E 2 7 . O P E R AT I N G L E A S E S THE GROUP 2007

PARENT COMPANY 2006

2007

2006

Leases where the Company is the lessee Non-redeemable lease payments amount to Within one year

10.1

8.7

0.9

0.4

Between one and five years

18.8

22.0

0.9

0.2

-

-

-

-

28.9

30.7

1.8

0.6

Longer than five years Total Most of the above operating leases relate to rent for premises.

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

77


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 78

N O T E 2 8 . C A S H F L O W S TAT E M E N T A D D I T I O N A L I N F O R M AT I O N C O N C E R N I N G C A S H F L O W S TAT E M E N T S :

THE GROUP 2007

PARENT COMPANY 2006

2007

2006

S P E C I F I C AT I O N F I N A N C I A L I T E M S Interest received

6.8

2.7

4.9

2.3

-

-

2.1

101.5

0.0

0.0

42.0

3.7

-3.5

-2.4

-

-0.3

Capital gain profits Dividends received Interest paid

S P E C I F I C AT I O N I T E M S N O T I N C L U D E D I N T H E C A S H F L O W Depreciation Capital gain profits Other Write-off shares Total

14.8

13.5

1.5

1.8

-15.3

-2.0

-2.1

-103.3

2.1

1.1

2.1

0.3

-

-

-

-

1.6

12.6

1.5

-101.2

A C Q U I S I T I O N O F S U B S I D I A RY C O M PA N I E S - G R O U P

ACQUIRED ASSETS AND LIABILITIES Intangible fixed assets

27.3

11.1

Property, plant and equipment

20.5

11.8

Inventories

20.3

4.6

Operating receivables

28.4

4.4

Cash and cash equivalents

11.9

7.3

108.4

39.2

3.8

4.1

Total assets Deferred tax liability Long-term operating liabilities

19.8

-

Current operating liabilities

30.6

5.2

54.2

9.3

Total liabilities Deduction of 50% ownership previously recognised using the equity method Net

-5.6

-

48.6

29.9

48.6

29.9

PURCHASE PRICE Purchase price As yet unsettled purchase price

-10.3

-3.0

Deducted: Cash and cash equivalents acquired business units

-11.9

-7.3

26.4

19.6

Impact on cash and cash equivalents

D I V E S T M E N T O F S U B S I D I A RY C O M PA N I E S - G R O U P

DIVESTED ASSETS AND LIABILITIES: Intangible fixed assets

-

6.4

Property, plant and equipment

-

10.1

Inventories

-

28.1

Operating receivables

-

29.2

Cash and cash equivalents

-

-

0.0

73.8

Total assets Current operating liabilities

-

0.5

Current interest-bearing liabilities

-

45.4

0.0

45.9

Total liabilities

78

OEM ANNUAL REPORT 2007 â?&#x161; FINANCIAL REPORTING


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 79

PURCHASE PRICE Sale price

-

120.0

Sale price adjusted

-1.0

-

Outstanding receivables

44.6

-

Due in accordance with agreement

-0.7

-45.6

Purchase sum received

43.9

74.4

43.9

74.4

Impact on cash and cash equivalents C A S H A N D C A S H E Q U I VA L E N T S Cash and cash equivalents currently only cover cash and bank balance.

N O T E 2 9 . I N F O R M AT I O N A B O U T T H E PA R E N T C O M PA N Y OEM International AB (Publ) is a Swedish-registered public limited company with its headquarters in Tranås, Sweden. The Parent Company shares are listed on the OMX Nordic Exchange Stockholm. The address of the head office is Norrabyvägen 6B, Box 1009, Tranås, Sweden. The consolidated financial statements for 2007 incorporate the financial statements of the Parent Company and its subsidiaries, jointly referred to as the Group. The Group also includes shareholdings in associated companies.

N O T E 3 0 . E V E N T S A F T E R B A L A N C E S H E E T D AT E No significant events have occurred after the balance sheet date.

N O T E 3 1 . I M P O R TA N T E S T I M AT E S A N D A S S U M P T I O N S

Executive management has together with the chairman of the Board and the auditors discussed the developments, the choices and the information regarding the Group’s most important accounting principles and estimates, as well as the application of these principles and estimates. The recognised values for certain assets and liabilities are based in part on assessments and estimates. Executive management does not however find that the recognised assets and liabilities amount are associated with substantial risks mitigating the need to make significant adjustments over the course of next year. The presentation below discusses the areas that may mitigate significant adjustments, but where the risk that so will occur during the course of next year is not deemed significant.

Impairment test of goodwill In calculating the recoverable value of cashgenerating units for the company’s assessment if amortisation is required for goodwill, future circumstances and estimates of parameters have been assumed. An account of these is described in Note 15. The management is of the opinion that no reasonable changes in the key assumptions will lead to the estimated recoverable values for the units being lower than the reported values. Valuation other intangible fixed assets Other intangible fixed assets consist primarily of the values arising at acquisition, divided into SEK 8.8 million for supplier relations, SEK 6.6

million for customer relations and SEK 9.3 million for trademarks. Supplier relations have continued to develop positively, explaining the assessment that impairment is not necessary for 2007. Customer relations entail establishments on new markets and the assessment is that these will be written-down over a five-year period. 39 months remain of the amortisation period. Trademarks include the company name Klitsö which is well established on the Danish market in the sector of valve and pneumatic trading and the assessment is that this be written off over a five-year period.

FINANCIAL REPORTING ❚ OEM ANNUAL REPORT 2007

79


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 80

NOTE 32. EARNINGS PER SHARE Calculations of earnings per share before and after dilution are based on the year’s profit attributable to the Parent Company’s shareholders. (SEK m) 2007

2006

Total business units

102.8

181.6

Remaining business units

100.8

90.8

2.0

90.8

Divested business units

Earnings per share for total, remaining and divested business units is based on the following number of shares before and after dilution*. 2007

Weighted average number of shares before dilution Dilution effect options Weighted average number of shares after dilution

2006

23 169 309

23 169 309

-

99 945

23 169 309

23 269 254

** Corrected for the 4:1 share split and automatic redemption of each fourth share carried out Q2 2007. Adjusted with a factor of 3 since the financial implication of the transaction is a 3:1 split combined with an extra dividend. At the close of 2007 and throughout the year, the Group had no outstanding potential ordinary shares.

2007

2006

E A R N I N G S P E R S H A R E T O TA L before dilution, SEK

4:43

7:84

after dilution, SEK

4:43

7:81

before dilution, SEK

4:34

3:92

after dilution, SEK

4:34

3:90

before dilution, SEK

0:09

3:92

after dilution, SEK

0:09

3:91

EARNINGS PER SHARE FROM REMAINING BUSINESS UNITS

EARNINGS PER SHARE FROM REMAINING BUSINESS UNITS

N O T E 3 3 . I N F O R M AT I O N A B O U T A S S O C I AT E D PA R T I E S The OEM Group’s associated parties consist primarily of senior executives and major shareholders. Details are provided in Note 7.

80

OEM ANNUAL REPORT 2007 ❚ FINANCIAL REPORTING


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 81

P R O P O S E D A L L O C AT I O N O F P R O F I T S

PARENT COMPANY The following profits are at the disposal of the Annual General Meeting Profit brought forward

205 661 944,80

Profit for the year

39 309 516,31 244 971 461,11

The Board of Directors proposes that the profit be disposed of in such a way • that a dividend of SEK 3 per share is paid to shareholders • that the following be carried forward

69 507 927,00 175 463 534,11 244 971 461,11

The consolidated financial statements and the annual report have been prepared in accordance with the International Financial Reporting Standards as approved by the European Commission for application within the EU, Regulation (EC) No. 1606/2002 of 19 July 2002 regarding the application of international accounting standards and generally accepted accounting practice and gives a fair and true view of the Group’s and Parent Company’s financial position and results. The Directors’ Report for the Group and Parent Company gives a true and fair summary of the Group’s and Parent Company’s business operations, financial position and results and describes significant risks and uncertainties faced by the Parent Company and companies included in the Group.

TRANÅS, 28 FEBRUARY 2008

Jan Svensson Chairman of the Board

Orvar Pantzar Board member

Lars-Åke Rydh Board member

Ulf Barkman Board member

Agne Svenberg Board member

Gunnar Eliasson Board member

Hans Franzén Board member

Jörgen Zahlin CEO

A statement by the Board concerning the dividend proposal will be published on the Company’s website and can be obtained on request. The Annual Report and the consolidated financial statements have been approved for issue by the Board of Directors on the above date. The consolidated income statement and balance sheet and the Parent Company’s income statement and balance sheet will be matters for approval at the Annual General Meeting on 24 April 08. The information in the report is such that OEM International AB (publ) is obliged to publish in accordance with the Securities Act. The information was released to the media for publication on 20 March 2008 at 08.00.

PROPOSED ALLOCATION OF PROFITS ❚ OEM ANNUAL REPORT 2007

81


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 82

AUDITORS’ REPORT T O T H E A N N U A L G E N E R A L M E E T I N G O F O E M I N T E R N AT I O N A L A B ( P U B L . ) C O R P O R AT E I D E N T I T Y N U M B E R 5 5 6 1 8 4 - 6 6 9 1

We have examined the Annual Report, the consolidated financial statements, the accounting records and the administration of the Board of Directors and the Managing Director of OEM International AB (Publ.) for the financial year 2007. The Company’s Annual Report is included in the printed version of this document on pages 36-81. The Board of Directors and the Managing Director are responsible for the accounts and the administration of the Company, and for ensuring that the Swedish Annual Accounts Act is applied when preparing the Annual Report and for ensuring that the international accounting standards IFRS, as approved by the European Union, and the Annual Accounts Act are applied when preparing the consolidated financial statements. Our responsibility is to express an opinion on the Annual Report, the consolidated financial statements and the administration based on our audit. We conducted our audit in accordance with generally accepted accounting standards in Sweden, which meant that we planned and performed the audit to obtain reasonable, but not absolute, assurance that the Annual Report and the consolidated financial statements are free of

material misstatement. An audit includes examining a selection of the documentation with respect to amounts and other information in the accounting records. An audit also includes assessing the accounting principles used and their application by the Board of Directors and the Managing Director, as well as evaluating the important assessments made by the Board of Directors and the Managing Director when preparing the Annual Report and the consolidated financial statements, as well as appraising the overall presentation of information in the Annual Report and the consolidated financial statements. As a basis for our pronouncement on discharge from liability, we have examined significant decisions, actions taken and circumstances at the Company in order to determine the possible liability to the Company of any Board Member or the Managing Director. We have also examined the question of whether any Director or the Managing Director has otherwise acted in contravention of the Swedish Companies Act, the Swedish Annual Accounts Act or the Company’s Articles of Association. We are of the opinion that our

TRANÅS, 3 MARCH 2008

KPMG Bohlins AB

Niklas Bengtsson Authorised Public Accountant

82

OEM ANNUAL REPORT 2007 ❚ AUDITORS’ REPORT

audit gives us reasonable grounds on which to pronounce as follows. The Annual Report has been prepared in accordance with the Swedish Annual Accounts Act and, consequently, provides a true picture of the Company’s income and position in accordance with generally accepted accounting practice in Sweden. The consolidated financial statements have been prepared in accordance with international accounting standards IFRS, in line with the requirements of the European Union and the Swedish Annual Accounts Act, and provide a true picture of the Group’s income and position. The Directors’ Report is consistent with the remainder of the Annual Report and the Consolidated Financial Statements. We recommend that the Annual General Meeting adopt the income statement and the balance sheet of the Parent Company and of the Group, appropriate the Parent Company’s surplus as proposed in the Directors’ Report and grant the Members of the Board and the Managing Director discharge from liability for the financial year.


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 83

NOTES

NOTES ❚ OEM ANNUAL REPORT 2007

83


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 84

Shares OEM shares

OEM’s shares were quoted on the Stockholm Stock Exchange’s OTC List in December 1983, and since then have displayed a healthy price trend. Anyone who purchased 100 shares in OEM for

OEM’s market value at the close of 2007 was

company shares at year-end. The Board has

SEK 12,500 at the time of introduction onto

SEK 994 million. During the year, the market

been authorised by the Annual General Meet-

the market had a holding of 7,200 shares at a

index for OMXS PI dropped 6% and index for

ing to repurchase up to 10% of the total num-

value of SEK 308,880 on 31 December 2007,

OMXS Industrials rose 7%.

ber of shares, that is, 2,316,931 shares.

equivalent to an annual yield of about 15%,

The objective is to continue the repurchases

excluding dividends. In 2000, the OEM share

SALES

up to 10% of the total number of shares while

was transferred to the O list and is as 2006 listed

In 2007, 2,049,225 Class B shares were sold

the Board considers the conditions to be attractive.

on OMX Small Cap for the OMX Nordic

corresponding to a turnover rate of 17%.

The acquired shares will be retained, deregistered

Exchange Stockholm.

The average shareholder in OEM therefore

or used as payment in corporate acquisitions.

retains their shares for about six (6) years.

We have minimised the disadvantages which this

4:1 SHARE SPLIT COMBINED WITH AN

The corresponding figure for the OMX Nordic

can entail, that is, that the number of shareholders

AUTOMATIC REDEMPTION PROCESS.

Exchange Stockholm as a whole in 2007 was

is decreased and the liquidity of the share declines,

To facilitate trading of company shares and alter

139% and 74% for the Stockholm Small Cap.

by mainly purchasing large blocks of shares.

the company’s capital structure, a 4:1 share split

OEM’s Class B shares were sold on 96% of the

combined with an automatic redemption proce-

trading days, with an average turnover per day

LIQUIDITY BOOSTING MEASURES

dure was carried out in 2007. This process gave

in 2007 of 8,503 shares. OEM International

OEM International has signed an agreement

each shareholder three (3) new shares and one

had 2,434 shareholders as of 28 December

with Handelsbanken Capital Markets for

(1) redemption share, which was redeemed for

2007. Institutional ownership comprises 37%

liquidity guarantees for Company shares.

SEK 20. This means that about SEK 154 mil-

and foreign ownership amounts to 25%.

This comes to a close on 29 February 28 and

lion was distributed to the shareholders.

will be replaced by a new agreement signed REPURCHASE OF SHARES

with Remium AB effective 1 March 2008.

PRICE TRENDS

The repurchase programme for shares, which was

The purpose is to reduce the difference

The price of OEM International shares rose

adopted for the first time by the Annual General

between buy and sell price. The goal is to

during the year by 32% to a closing price of

Meeting in 2000, is intended to improve our capi-

achieve a lower investment cost and to lower the

SEK 42.90. The highest price paid during the

tal structure and contribute positively to return on

share trading risk for present and future shareholders.

year was SEK 65.34* recorded on 22 February,

shareholders’ equity and earnings per share.

The obligation falls within the scope of the

and the lowest price was SEK 40.50, recorded on 28 December.

After implemented reductions the previous

OMX Nordic Exchange Stockholm’s system

year there are 23,169,309 shares in the Com-

with liquidity guarantees and started on

pany at year-end. The Company held no

1 December 2004.

* Recalculated after split and redemption.

84

OEM ANNUAL REPORT 2007 ❚ OEM SHARES


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 85

RISK

DIVIDEND POLICY

information to the market and the media.

OEM’s beta value - a measure of how a share

The Board of OEM International aims to

The goal is for the information to facilitate an

moves given a change in the stock exchange’s

propose a reasonable dividend of profits to the

accurate valuation and liquid trading of the shares.

OMXS PI index - is approximately 0.75.

shareholders, by considering the financial

The dates for the Annual General Meeting, inter-

This means that the shares can be said to have

position, the tax situation and any need for

im reports and annual report for the 2008

a low risk. The spread between the operations

acquisitions or investments in the operation.

financial year are shown on page 2 of this Annual Report. Financial information is also

within the Group entails a low business risk.

published on the Group’s website, www.oem.se.

At the same time, the financial risk is very low,

DIVIDENDS

due to the high equity/assets ratio.

The Board proposes a dividend of SEK 3 per

This means that the equity/assets ratio can be

share, equivalent to 15% of distributable

tunity to receive interim reports and other press

lowered to correspond better with the business

equity in the Group.

releases by e-mail, at the same time as they are

FINANCIAL INFORMATION

info@oem.se and write “Company information” and

OEM aims to maintain high quality as regards

you will be placed on our list for future mailings.

The Company offers shareholders the oppor-

made public to the market. Send an email to

risk without the overall risk to OEM’s shares increasing significantly.

OWNERSHIP STRUCTURE OEM’S LARGEST SHAREHOLDERS AS OF 28 DECEMBER 2007

Class A shares

Class B shares

Percentage shares capital

Percentage votes

Pantzar Orvar

1 627 320

2 802 360

19.1%

28.9%

Franzén Hans and family

1 280 376

1 381 590

11.5%

21.5%

Svenberg Agne and family

1 223 400

475 986

7.3%

19.2%

636 000

1 100 000

7.5%

11.3%

Lannebo equity funds

1 555 701

6.7%

2.4%

AFA Försäkringar

1 214 525

5.2%

1.8%

Livförsäkringsaktiebolaget

619 800

2.7%

0.9%

AB Traction

609 000

2.6%

0.9%

Länsförsäkringar Jönköping

420 000

1.8%

0.6%

Fjärde AP-Fonden

376 200

1.6%

0.6%

10 555 162

66.1%

88.1%

7 847 051

33.9%

11.9%

4 767 096

18 402 213

100.0%

100.0%

10

1

Investmentaktiebolaget Latour

Total 10 owners

4 767 096

Others Total Votes per share

OEM SHARES ❚ OEM ANNUAL REPORT 2007

85


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 86

K E Y I N D I C AT O R S F O R O E M ’ S S H A R E S F O R T H E PA S T F I V E Y E A R S

2007

2006

2005

2004

2003

P E R F O R M A N C E K E Y I N D I C AT O R S Sales per share** Increase in sales per share

SEK

64

62

60

62

63

%

2.4

3.3

8.1

-1.0

-4.1

Earnings per share* **

SEK

4:34

3:92

3:59

2:80

1:38

Shareholders’ equity per share* **

SEK

22:88

27:65

21:04

18:71

17:14

Proposed dividends**

SEK

3:00

2:83

2:33

1:83

1:50

Dividend/Income

%

69.1

72.2

64.9

65.4

109

Dividend/Shareholders’ equity

%

13.1

10.2

11.1

9.8

8.7

SEK

1:91

4:89

3:26

3:96

5:91

Cash flow per share* **

R I S K K E Y I N D I C AT O R S Beta values (48 months)

0.78

0.36

0.44

0.54

0.41

%

17

34

10

8

7

SEK

42:90

63:00

54:50

39:33

34:00

SEK m

994

1 460

1 238

893

776

Rate of turnover for shares

VA L U AT I O N K E Y I N D I C AT O R S Quoted price as per 31 December** Quoted price as per 31 December*

P/S ratio

times

0.7

1.0

0.9

0.6

0.5

P/E ratio

times

9.7

16.1

15.2

14.0

24.6

198

Price/Shareholders’ equity

%

188

228

259

210

EV/Sales

times

0.6

0.8

0.8

0.6

0.5

EBIT multiple

times

6.9

9.7

10.3

9.3

13.4

%

7.0

4.5

4.3

4.7

4.4

Direct return

* Calculated on the number of shares, excluding own holding ** The key indicators are corrected for the 4:1 share split and automatic redemption of each fourth share carried out Q4 2007. Prior periods have been adjusted with a factor of 3 since the financial implication of the transaction is a 3:1 split combined with an extra dividend.

The key indicators are based on the remaining business units. In order to present a comparison, the figures for 2006 and 2005 have also been recalculated.

Earnings per share (SEK)

86

OEM ANNUAL REPORT 2007 ❚ OEM SHARES

Shareholders’ equity per share (SEK)

Proposed dividend (SEK)


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 87

O W N E R S H I P D ATA AS PER 28.12.07*

Percentage of no. of owners

Percentage of share capital

0.8

Size class

1-500

39.1

501-1 000

20.4

1.5

1 001-2 000

16.0

2.4

2 001-5 000

13.2

4.4

5 001-10 000

5.3

3.9

10 001-20 000

2.8

4.2

20 001-50 000

2.0

6.2

50 001-100 000

0.2

2.0

100 001-5 000 000

0.9

74.7

100.0

100.0

Total Total number of shareholders in OEM is 2,434.

*) Source: VPC AB. Directly and fund manager registered. In the table, ownership details may be a combination of several items in VPC’s statistics. This combination is intended to show an institution’s or a private individual’s total ownership in OEM.

S H A R E C A P I TA L T R E N D

Year

Transaction

Change in share capital, SEK million

Total share capital, SEK million

Average no. of shares

Face value per share SEK

Opening value

0.1

0.1

500

100.00

1981

Bonus issue

0.3

0.4

4 000

100.00

1983

Split

-

0.4

40 000

10.00

1983

Bonus issue

0.4

0.8

80 000

10.00

1983

New issue

0.8

1.6

160 000

10.00

1983

New issue

0.4

2.0

200 000

10.00

1986

Bonus issue

4.0

6.0

600 000

10.00

1986

New issue through conversion

0.4

6.4

636 000

10.00

1994

Split

-

6.4

1 272 000

5.00

1994

Bonus issue

6.4

12.7

2 544 000

5.00

1996

Bonus issue

12.7

25.4

5 088 000

5.00

1997

New issue through subscription in kind

20.1

45.5

9 113 703

5.00

2001

Reduction

-3.9

41.6

8 332 203

5.00

2003

Reduction

-1.0

40.6

8 132 203

5.00

2004

Reduction

-2.0

38.6

7 723 103

5.00

2007

Split

-

38.6

30 892 412

1.25

2007

Redemption

-9.6

29.0

23 169 309

1.25

2007

Bonus issue

9.6

38.6

23 169 309

1.67

OEM SHARES ❚ OEM ANNUAL REPORT 2007

87


OEM2008_del2_ENG_OK

08-04-22

09.19

Sida 88

Addresses of operating units PARENT COMPANY

OEM AUTOMATIC

OEM International AB Norrabyvägen 6B, Box 1009, SE-573 28 TRANÅS Sweden Tel: 075-242 40 00 Fax: 075-242 40 29 info@int.oem.se www.oem.se

OEM Automatic AB Box 1011, Dalagatan 4 SE-573 28 TRANÅS Sweden Tel: +46-75-242 41 00 Fax: +46-75-242 41 19 info@aut.oem.se www.oemautomatic.se

OEM Automatic UAB Paliuniskio g. 1 LT-35113 PANEVEZYS, Lithuania Tel: +370-6550 0323 Fax: +370-4557 7987 info@oem.lt www.oem.lt

Corp.id.no. 556184-6691

OEM Automatic OY Box 9, FI-20101 ÅBO, Finland Fiskarsinkatu 3 FI-20750 ÅBO, Finland Tel: +358-207-499 499 Fax: +358-207-499 456 info@oem.fi www.oem.fi

OEM Automatic SIA Ganibu dambis 24a-620 LV-1005 RIGA, Latvia Tel: +371-6738 2926 Fax: +371-6738 2927 info.lv@oem.fi

OEM Automiatic OÜ Kanali tee 1-328 EE-10112 TALLIN Estonia Tel: +372-6550 871 Fax: + 372-6550 873 info.ee@oem.fi www.oem.ee

88

OEM ANNUAL REPORT 2007 ❚ ADDRESSES

^

OEM Automatic Sp. z o. o. ul. Postepu 2 PL-02-676 WARSZAWA Poland Tel: +48-22-863 27 22 Fax: +48-22-863 27 24 info@pl.oem.se. www.oemautomatic.com.pl

OEM Automatic, s.r.o. Tamaskovicova 17 SK-917 01 TRNAVA, Slovakia Tel: +421-911-122 009 Fax: +421-335-331 567 info@oem-automatic.sk www.oem.sk ^

OEM Automatic Ltd Whiteacres, Cambridge Road Whetstone, LEICESTERSHIRE LE8 6ZG, UK Tel: +44-116-284 99 00 Fax: +44-116-284 17 21 information@uk.oem.se www.oem.co.uk

^

Klitsö Processtechnic AS Engholm Parkvej 4 DK-3450 ALLERØD, Denmark Tel: +45-70-15 05 25 Fax: +45-70-75 05 72 klitso@klitso.dk www.klitso.dk

.

OEM Automatic A/S Møllehaven 8 DK-4040 JYLLINGE Denmark Tel: +45-70-27 05 27 Fax: +45-70-27 06 27 info@dk.oem.se www.oem-automatic.dk

^

OEM Automatic AS Postboks 2144, STRØMSØ Bjørnstjerne Bjørnsonsgate 110 NO-3003 DRAMMEN, Norway Tel: +47-32-21 05 00 Fax: +47-32-21 05 01 info@no.oem.se www.oem.no

EIG - OEM Automatic spol.s.r.o. Baarova 3a CZ-140 00, PRAG 4 Czech Republic Tel: +420-241-484 940 Fax: +420-241-484 941 info@oem-automatic.cz www.oem-automatic.cz

OEM Motor AB Box 1011, Dalagatan 4 SE-573 28 TRANÅS Sweden Tel: +46-75-242 41 00 Fax: +46-75-242 44 49 info@motor.oem.se www.oem-motor.se


Contents

Share trends

Definitions

(SEK) 80 70

Annual General Meeting – future reports .... 2 This is OEM International ..................... 3-4 History ..................................................... 3-4 2007 in brief ............................................... 5 Comments from the CEO ..................... 6-7 Vision, business concept and business logic .................................. 8-9 Growth strategy ........................................ 10 Financial targets....................................... 11 Employees........................................... 12-13 Quality, the environment and ethics .. 14-15 Board of Directors............................... 16-17 Senior Management ........................... 18-19

OEM

GROUP STRUCTURE .......................... 20-21

■ ■ ■ ■

OEM has been listed on the Stockholm Stock Exchange Small Capital since 1983. More information about OEM is available at www.oem.se

OEM Automatic .......................... 22-23 OEM Electronics ........................ 24-25 Cyncrona ..................................... 26-27 Development ............................... 28-29

OEM Electronics – an important partner ................................................. 30-31 Positive path for Telfa.......................... 32-33 OEM Automatic strengthens its position .......................................... 34-35 FINANCIAL REPORTING

Five-year Group summary ...................... 38 Key indicators for the last five years ......... 39 Directors’ report .................................. 40-41 FINANCIAL REPORTS – THE GROUP

Income statement .................................... 42 Balance sheets ..................................... 43-44 Changes in shareholders’ equity.............. 45 Cash flow statement................................. 46 FINANCIAL REPORTS – THE PARENT COMPANY

Income statement .................................... 47 Balance sheets ..................................... 48-49 Changes in shareholders’ equity.............. 50 Cash flow statement................................. 51 Notes with accounting principles and comments to the financial statements ..................................52-80 Proposed allocation of profits .................. 81 Auditors’ report......................................... 82 OEM shares ........................................ 84-85 Ownership structure ................................ 85 Key indicators for OEM shares................ 86 Ownership data........................................ 87 Share capital trend................................... 87 Addresses ............................................. 88-89 Definitions ............................................... 90

60 50 40 30

Read more on pages 84-85

20 10 2003

2004

2005

OEM International B

2006

2007

2008

OMX Nordic EUR PI

This is OEM International OEM International is one of Europe’s leading industrial trading companies. The Group is comprised of 26 operating units with activities in 13 countries.

and application expertise. OEM is a local alternative to the manufacturers’ own subsidiaries and can provide better marketing and sales conditions. The Group is organised into four company groups. Three of the groups are

OEM Automatic

OEM Electronics

Cyncrona

Development

Components for industrial automation.

Appliance and circuit board components and EMC/ microwave components

Production systems and components for electronics production

Bearings and bearing solutions, motors & transmissions, seals and pumps

Read more on pages 22-23

Read more on pages 24-25

Read more on pages 26-27

Read more on pages 28-29

organised according to a concept with a well defined range of products that targets a specific market. The fourth group is a collection of other business activities

CYNCRONA

DEVELOPMENT

OEM Electronics AB Box 1025, Norrabyvägen 6B SE-573 29 TRANÅS Sweden Tel: +46 (0)75 242 45 00 Fax: +46 (0)75 242 45 09 info@oemelectronics.se www.oemelectronics.se

Cyncrona AB Tomtbergavägen 2 SE-145 67 NORSBORG, Sweden Tel: +46 (0)75 242 46 50 Fax: +46 (0)75 242 46 51 info@cyncrona.se www.cyncrona.com

Internordic Bearings AB Box 105 SE-571 22 NÄSSJÖ Sweden Tel: +46 (0)75 242 49 40 Fax: +46 (0)75 242 49 50 info@internordic.biz www.internordic.biz

OEM Electronics OY P O Box 122, Telekatu 6 FI-020101 TURKU Finland Tel: +358-207 499 300 Fax: +358-207 499 496 info@oemelectronics.fi www.oemelectronics.fi

Cyncrona Oy Hannuksenpelto 12 FI-020101 TURKU Finland Tel: +358-(0)20 7528700 Fax: +358-(0)20 7528770 info@cyncrona.fi www.cyncrona.fi

IBEC Aartsdijkweg 111 NL-2676 LE MAASDIJK Netherlands Tel: +31-174 52 51 00 Fax:+31-174 52 51 06 info@ibec.biz www.ibec.biz

OEM Electronics PL ul. Parowcowa 6B PL-02-445 WARSZAWA Poland Tel: +48-22-86 32 722 Fax: +48-22-86 32 724 info@oemelectronics.pl www.oemelectronics.se

Cyncrona A/S Sindalsvej 21 DK- 8240 RISKOV, Denmark Tel: +45-87-42 66 66 Fax: +45-87-42 66 77 info@cyncrona.dk www.cyncrona.dk Cyncrona AS Postboks 2144 Bjørnstjerne Bjørnsonsgate 110 NO-3003 STRØMSØ Norway Tel: +47-32-21 05 80 Fax: +47-32-21 05 81 info@cyncrona.no www.cyncrona.no

The business concept is to offer the industry components and systems from leading manufacturers to industrial companies by utilising our excellent product

OEM ELECTRONICS

Cyncrona Baltic States Suur-Jõe 62 EE-80042 PÄRNU Estonia Tel: +372 510 05 05 baltic@cyncrona.fi www.cyncrona.com

Earning capacity of capital employed: Operating income plus financial income as a percentage of average total capital. Capital employed refers to total assets minus non interest-bearing liabilities including deferred tax liabilities. Earning capacity of shareholders’ equity: Net profit for the year as a percentage of average shareholders’ equity. Average interest payable: Financial expenses as a percentage of interest-bearing liabilities.

Indoma AB Box 319, Fridhemsvägen 25 SE-551 15 JÖNKÖPING, Sweden Tel: +46 (0)75 242 43 50 Fax: +46 (0)75 242 43 58 info@indoma.se www.indoma.se

Debt/equity ratio: Interest-bearing liabilities divided by calculated shareholders’ equity. Calculated shareholders’ equity comprises shareholders’ equity plus minority interests.

Telfa AB Box 120 SE-402 41 GÖTEBORG Sweden Goods terminal address: Karl Johansgata 158, SE-414 51 GÖTEBORG, Sweden Tel: +46 (0)75 242 44 50 Fax: +46 (0)75 242 44 95 info@telfa.se www.telfa.se

Operating income/Sales: Operating income before depreciation/amortisation as a percentage of sales.

Price / Earning (P/E) ratio: Quoted price as per 31 December divided by earnings per share. Direct return: Dividend per share divided by the quoted price at year-end. Sales per share: The Group’s sales divided by the number of shares on the market at year-end. Sales increase per share: Increase of the Group’s sales per share. Dividend/Profit payout ratio: Proposed dividend in relation to the year’s profit. Dividend/Shareholders’ equity: Proposed dividend in relation to the Group’s shareholders’ equity and the minority interests. Cash flow per share: Cash flow for current operations divided by the number of shares. Beta values: Measure of historical change in the share price in relation to the price fluctuation of the general index.

Profit percent: Earnings after financial income as a percentage of sales.

Rate of turnover for shares: The number of shares sold during the year divided by the number of outstanding shares at year-end.

Profit margin: Profit before tax as a percentage of sales.

P/S ratio: Stock market value in relation to the Group’s sales.

Capital’s turnover rate: Sales divided by total assets.

P/E ratio: Quoted price as per 31 December divided by earnings per share.

Sales per employees: Sales divided by average number of employees.

Price/Shareholders’ equity: Quoted price divided by shareholders’ equity per share.

Equity/assets ratio: Shareholders’ equity as a percentage of total capital.

EV/Sales: Enterprise value (stock market value + net liability + minority interest) divided by the Group’s sales.

organised under Development. 2003 The Group stabilises at sales 30% lower than 2001. Industri AB Reflex is sold.

OEM’s History 1981 The first overseas subsidiary is established in Finland.

1974 The agency company OEM Automatic AB is founded by the Franzén and Svenberg families.

1983 The company is introduced on the Stock Exchange’s OTC list. Sales amount to SEK 30 million.

1986 Industri AB Reflex is acquired.

1988 Sales exceed SEK 100 million for the first time.

1989 The first subsidiary outside Scandinavia is set up in the UK.

1993 The A. Karlson Group is acquired.

1997 OEM International and Cyncrona (also listed on the OTC list) merge. Cyncrona becomes a third subgroup.

1991 OEM International is formed and becomes the Group’s parent company. The electronics product area breaks away from OEM Automatic to form a separate company, OEM Component.

1998 Three corporate acquisitions completed.

1996 New Group structure. The companies are divided into two subgroups: OEM Industrial Components and OEM Systemteknik.

2000 Jörgen Sahlin is appointed new MD. Acquisition of the group JMS Systemhydraulik

1999 Four corporate acquisitions completed.

2007 Acquisition of Crouzet, MPX Electra and Klitsö.

Quick ratio: Current assets minus inventories as a percentage of current liabilities.

2005 Acquisition of Telfa.

2002 OEM suffers significant decline in sales due to telecom downturn.

2004 OEM celebrates 30th anniversary Continued restructuring and streamlining. Profit climbs 55%.

Earnings per share: The Group’s net profit after deductions for both paid and deferred tax divided by the number of shares.

EBIT multiple: Enterprise value divided by the Group’s operating income after depreciation/ amortisation. Direct return: Dividend per share divided by the quoted price at year-end.

Shareholders’ equity per share: Shareholders’ equity and minority interests divided by the number of shares.

2006 The Group establishes itself in the Czech Republic via the acquisition of EIG. Divestment of JMS Systemhydraulik group ADDRESSES ❚ OEM ANNUAL REPORT 2007

OEM2008_omslag_Plano_ENG_OK.indd 2

Earning capacity of total capital: Operating income plus financial income as a percentage of average total capital.

89

DEFINITIONS ❚ OEM ANNUAL REPORT 2007

90

08-04-21 15.52.02


Contents

Share trends

Definitions

(SEK) 80 70

Annual General Meeting – future reports .... 2 This is OEM International ..................... 3-4 History ..................................................... 3-4 2007 in brief ............................................... 5 Comments from the CEO ..................... 6-7 Vision, business concept and business logic .................................. 8-9 Growth strategy ........................................ 10 Financial targets....................................... 11 Employees........................................... 12-13 Quality, the environment and ethics .. 14-15 Board of Directors............................... 16-17 Senior Management ........................... 18-19

OEM

GROUP STRUCTURE .......................... 20-21

■ ■ ■ ■

OEM has been listed on the Stockholm Stock Exchange Small Capital since 1983. More information about OEM is available at www.oem.se

OEM Automatic .......................... 22-23 OEM Electronics ........................ 24-25 Cyncrona ..................................... 26-27 Development ............................... 28-29

OEM Electronics – an important partner ................................................. 30-31 Positive path for Telfa.......................... 32-33 OEM Automatic strengthens its position .......................................... 34-35 FINANCIAL REPORTING

Five-year Group summary ...................... 38 Key indicators for the last five years ......... 39 Directors’ report .................................. 40-41 FINANCIAL REPORTS – THE GROUP

Income statement .................................... 42 Balance sheets ..................................... 43-44 Changes in shareholders’ equity.............. 45 Cash flow statement................................. 46 FINANCIAL REPORTS – THE PARENT COMPANY

Income statement .................................... 47 Balance sheets ..................................... 48-49 Changes in shareholders’ equity.............. 50 Cash flow statement................................. 51 Notes with accounting principles and comments to the financial statements ..................................52-80 Proposed allocation of profits .................. 81 Auditors’ report......................................... 82 OEM shares ........................................ 84-85 Ownership structure ................................ 85 Key indicators for OEM shares................ 86 Ownership data........................................ 87 Share capital trend................................... 87 Addresses ............................................. 88-89 Definitions ............................................... 90

60 50 40 30

Read more on pages 84-85

20 10 2003

2004

2005

OEM International B

2006

2007

2008

OMX Nordic EUR PI

This is OEM International OEM International is one of Europe’s leading industrial trading companies. The Group is comprised of 26 operating units with activities in 13 countries.

and application expertise. OEM is a local alternative to the manufacturers’ own subsidiaries and can provide better marketing and sales conditions. The Group is organised into four company groups. Three of the groups are

OEM Automatic

OEM Electronics

Cyncrona

Development

Components for industrial automation.

Appliance and circuit board components and EMC/ microwave components

Production systems and components for electronics production

Bearings and bearing solutions, motors & transmissions, seals and pumps

Read more on pages 22-23

Read more on pages 24-25

Read more on pages 26-27

Read more on pages 28-29

organised according to a concept with a well defined range of products that targets a specific market. The fourth group is a collection of other business activities

CYNCRONA

DEVELOPMENT

OEM Electronics AB Box 1025, Norrabyvägen 6B SE-573 29 TRANÅS Sweden Tel: +46 (0)75 242 45 00 Fax: +46 (0)75 242 45 09 info@oemelectronics.se www.oemelectronics.se

Cyncrona AB Tomtbergavägen 2 SE-145 67 NORSBORG, Sweden Tel: +46 (0)75 242 46 50 Fax: +46 (0)75 242 46 51 info@cyncrona.se www.cyncrona.com

Internordic Bearings AB Box 105 SE-571 22 NÄSSJÖ Sweden Tel: +46 (0)75 242 49 40 Fax: +46 (0)75 242 49 50 info@internordic.biz www.internordic.biz

OEM Electronics OY P O Box 122, Telekatu 6 FI-020101 TURKU Finland Tel: +358-207 499 300 Fax: +358-207 499 496 info@oemelectronics.fi www.oemelectronics.fi

Cyncrona Oy Hannuksenpelto 12 FI-020101 TURKU Finland Tel: +358-(0)20 7528700 Fax: +358-(0)20 7528770 info@cyncrona.fi www.cyncrona.fi

IBEC Aartsdijkweg 111 NL-2676 LE MAASDIJK Netherlands Tel: +31-174 52 51 00 Fax:+31-174 52 51 06 info@ibec.biz www.ibec.biz

OEM Electronics PL ul. Parowcowa 6B PL-02-445 WARSZAWA Poland Tel: +48-22-86 32 722 Fax: +48-22-86 32 724 info@oemelectronics.pl www.oemelectronics.se

Cyncrona A/S Sindalsvej 21 DK- 8240 RISKOV, Denmark Tel: +45-87-42 66 66 Fax: +45-87-42 66 77 info@cyncrona.dk www.cyncrona.dk Cyncrona AS Postboks 2144 Bjørnstjerne Bjørnsonsgate 110 NO-3003 STRØMSØ Norway Tel: +47-32-21 05 80 Fax: +47-32-21 05 81 info@cyncrona.no www.cyncrona.no

The business concept is to offer the industry components and systems from leading manufacturers to industrial companies by utilising our excellent product

OEM ELECTRONICS

Cyncrona Baltic States Suur-Jõe 62 EE-80042 PÄRNU Estonia Tel: +372 510 05 05 baltic@cyncrona.fi www.cyncrona.com

Earning capacity of capital employed: Operating income plus financial income as a percentage of average total capital. Capital employed refers to total assets minus non interest-bearing liabilities including deferred tax liabilities. Earning capacity of shareholders’ equity: Net profit for the year as a percentage of average shareholders’ equity. Average interest payable: Financial expenses as a percentage of interest-bearing liabilities.

Indoma AB Box 319, Fridhemsvägen 25 SE-551 15 JÖNKÖPING, Sweden Tel: +46 (0)75 242 43 50 Fax: +46 (0)75 242 43 58 info@indoma.se www.indoma.se

Debt/equity ratio: Interest-bearing liabilities divided by calculated shareholders’ equity. Calculated shareholders’ equity comprises shareholders’ equity plus minority interests.

Telfa AB Box 120 SE-402 41 GÖTEBORG Sweden Goods terminal address: Karl Johansgata 158, SE-414 51 GÖTEBORG, Sweden Tel: +46 (0)75 242 44 50 Fax: +46 (0)75 242 44 95 info@telfa.se www.telfa.se

Operating income/Sales: Operating income before depreciation/amortisation as a percentage of sales.

Price / Earning (P/E) ratio: Quoted price as per 31 December divided by earnings per share. Direct return: Dividend per share divided by the quoted price at year-end. Sales per share: The Group’s sales divided by the number of shares on the market at year-end. Sales increase per share: Increase of the Group’s sales per share. Dividend/Profit payout ratio: Proposed dividend in relation to the year’s profit. Dividend/Shareholders’ equity: Proposed dividend in relation to the Group’s shareholders’ equity and the minority interests. Cash flow per share: Cash flow for current operations divided by the number of shares. Beta values: Measure of historical change in the share price in relation to the price fluctuation of the general index.

Profit percent: Earnings after financial income as a percentage of sales.

Rate of turnover for shares: The number of shares sold during the year divided by the number of outstanding shares at year-end.

Profit margin: Profit before tax as a percentage of sales.

P/S ratio: Stock market value in relation to the Group’s sales.

Capital’s turnover rate: Sales divided by total assets.

P/E ratio: Quoted price as per 31 December divided by earnings per share.

Sales per employees: Sales divided by average number of employees.

Price/Shareholders’ equity: Quoted price divided by shareholders’ equity per share.

Equity/assets ratio: Shareholders’ equity as a percentage of total capital.

EV/Sales: Enterprise value (stock market value + net liability + minority interest) divided by the Group’s sales.

organised under Development. 2003 The Group stabilises at sales 30% lower than 2001. Industri AB Reflex is sold.

OEM’s History 1981 The first overseas subsidiary is established in Finland.

1974 The agency company OEM Automatic AB is founded by the Franzén and Svenberg families.

1983 The company is introduced on the Stock Exchange’s OTC list. Sales amount to SEK 30 million.

1986 Industri AB Reflex is acquired.

1988 Sales exceed SEK 100 million for the first time.

1989 The first subsidiary outside Scandinavia is set up in the UK.

1993 The A. Karlson Group is acquired.

1997 OEM International and Cyncrona (also listed on the OTC list) merge. Cyncrona becomes a third subgroup.

1991 OEM International is formed and becomes the Group’s parent company. The electronics product area breaks away from OEM Automatic to form a separate company, OEM Component.

1998 Three corporate acquisitions completed.

1996 New Group structure. The companies are divided into two subgroups: OEM Industrial Components and OEM Systemteknik.

2000 Jörgen Sahlin is appointed new MD. Acquisition of the group JMS Systemhydraulik

1999 Four corporate acquisitions completed.

2007 Acquisition of Crouzet, MPX Electra and Klitsö.

Quick ratio: Current assets minus inventories as a percentage of current liabilities.

2005 Acquisition of Telfa.

2002 OEM suffers significant decline in sales due to telecom downturn.

2004 OEM celebrates 30th anniversary Continued restructuring and streamlining. Profit climbs 55%.

Earnings per share: The Group’s net profit after deductions for both paid and deferred tax divided by the number of shares.

EBIT multiple: Enterprise value divided by the Group’s operating income after depreciation/ amortisation. Direct return: Dividend per share divided by the quoted price at year-end.

Shareholders’ equity per share: Shareholders’ equity and minority interests divided by the number of shares.

2006 The Group establishes itself in the Czech Republic via the acquisition of EIG. Divestment of JMS Systemhydraulik group ADDRESSES ❚ OEM ANNUAL REPORT 2007

OEM2008_omslag_Plano_ENG_OK.indd 2

Earning capacity of total capital: Operating income plus financial income as a percentage of average total capital.

89

DEFINITIONS ❚ OEM ANNUAL REPORT 2007

90

08-04-21 15.52.02


O E M A N N U A L RE P O RT 2007

C C J Kom m unik at ion • Photos Patrik Svedberg and others

For easy access to definitions while reading the annual report, open the flap and lay flat.

Annual Report 2007

Notific Annual General Meeting

The Annual General Meeting will be held on Thursday 24 April 2008 at 4 p.m. at Stadshotellet, Storgatan 22 in Tranås, Sweden.

Box 1009, SE-573 28 Tranås • Tel. +46 (0)75 24 24 000 • Fax +46 (0)75 24 24 029 • Email info@int.oem.se • www.oem.se

OEM2008_omslag_Plano_ENG_OK.indd 1

BUSINESS

Annual General Meeting must:

The agenda and business of the Annual

• be entered in the share register held by

General Meeting will be notified through

the Swedish Securities Register Centre

advertisements in the daily press and

(VPC AB) by Friday 18 April 2008.

will also be available on OEM’s website

• notify the company no later than

(www.oem.se). The agenda can also be

Monday 21 April 2008 before 1 p.m.:

obtained from the company when regis-

OEM International AB, Box 1009,

tering to attend the meeting.

SE-573 28 TRANÅS Tel. +46 (0)75 242 40 00

FUTURE REPORTS

or email info@oem.se

• Interim report, January-March 24 April 2008

Shareholders who have registered their shares in the name of an authorised agent must temporarily register the shares in their own name with the VPC AB by no later than Friday 18 April 2008 in order to participate at the Annual General Meeting.

• Half-yearly report, January-June 24 July 2008 • Interim report, January-September 24 October 2008 • Financial statement, 2008 February 2009 • Annual Report March/April 2009

DIVIDEND

The Board of Directors proposes that the

VISIT OUR WEBSITE

Annual General Meeting issue a dividend

The latest information about the

of SEK 3 per share for 2007 and stipulate

company is available on our website

Tuesday 29 April 2008 as record date. If

(www.oem.se).

the Annual General Meeting adopts the proposal, it is expected that dividends will be distributed on Monday 5 May 2007 to those entered in the share register on the

For easy access to definitions while reading the annual report, open the flap and lay flat.

07

Shareholders wishing to attend the

date of issue.

ANNUAL GENERAL MEETING – FUTURE REPORTS ❚ OEM ANNUAL REPORT 2007

2

08-04-21 15.51.53

Annual Report 2007  

OEM Annual Report 2007

Read more
Read more
Similar to
Popular now
Just for you