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Press release

Press release

The ÅF Group - Summary of Annual Report for 2005

  • Net sales rose to SEK 2,269 million (2004: SEK 2,136 million)
  • Profit after net interest income/expense rose to SEK 222 million (SEK 31 million)
  • Profit after tax totalled SEK 204 million (SEK 36 million)
  • Earnings per share were SEK 34.31 (SEK 6.13)
  • The Board proposes a shareholders' dividend for 2005 of SEK 5.00 per share (SEK 2.60)
A few words from the President, Jonas Wiström
Developments were positive for ÅF in 2005. We consolidated our position in the market, improved earnings in all of the Group's divisions and concluded the sale of ÅF's property portfolio on favourable terms. Since the end of the reporting period new acquisitions have been made that have expanded the Group's workforce by a total of around 450, with the addition of new employees in Finland, Sweden, the Baltic states and Russia.
Our decision to establish the new Process and Infrastructure divisions has borne fruit. Merging five divisions into two has created more synergies than anticipated and, together with better conditions in the market, this has made a significant contribution to our improved earnings. ÅF-Kontroll continues to capture new shares of the market, mostly as a result of organic growth, and has reported its best ever financial result. The Systems Division finished the year somewhat more strongly than expected and in January 2006 sold its PX-Solutions business to Visma.
The weak fourth-quarter result for the Process Division was due to lower levels of capacity utilisation as two major paper industry projects drew to a close. However, the order books are strong and I believe this was merely a temporary dip in earnings. The division's profits were also reduced by dismissal costs of SEK 7 million. Claes-Inge Isacson, who took up the post as new divisional manager on 1 January 2006, brings with him to the ÅF Group many years of international experience both from industry and from technical consulting.
Capacity utilisation (the proportion of time debitable to clients relative to the time that all the Group's employees spend at work) rose by three percentage points to 71.5 percent.
In January ÅF acquired Finland's leading energy consulting company, Enprima. The acquisition is another step in ÅF's strategy of establishing an international presence in process consulting in order to meet the demands of an increasingly globalised client market. Today ÅF has almost 800 employees working from the Group's offices outside Sweden, compared with less than 200 a mere three years ago.
Against the background of our strong position in the market and the good demand for ÅF's services in most areas of business, our goal for 2006 is to continue the trend of improved earnings and increased margins and to grow at a faster pace than the industry as a whole.
Important events during the fourth quarter of 2005
ÅF was commissioned by E.ON Sverige to conduct detailed project planning work for natural gas pipelines between the cities of Linköping and Norrköping, south-west of Stockholm. ÅF was also commissioned to carry out preliminary project planning work for natural gas pipelines along a stretch from Västerås to Grycksbo, to the west of the Swedish capital.
ÅF was appointed turn-key contractor for all the installation systems for Rögle BK ice hockey club's training facilities (Gripenhallen) in Ängelholm in the south of Sweden. ÅF will carry out the project as a sub-contractor to Peab.
ÅF also announced plans to bring together most of its employees in the Stockholm region (approximately 900 people) under one roof in a new main office complex at Haga Norra, one of the main northern approaches to the city. The construction company Skanska will build and lease out the premises, which will be ready for occupancy by October 2008.
Acquisitions and disposals during the fourth quarter
ÅF reached agreement regarding the acquisition of Ericsson's Design Centre in Lysekil on the Swedish west coast. The 21 employees there work with radio-related systems development and software development for WCDMA (3G) and GSM technologies. The takeover was finalised on 1 January 2006 and the business was consolidated into the Systems Division.
Acquisitions and disposals after the end of the reporting period
ÅF reached agreement with Visma on the sale of its software operations, PX Business Solutions, with some 25 employees. The sale will generate a capital gain for the ÅF Group of SEK 19 million. This will have a positive effect on the Group's earnings for the first quarter of 2006.
ÅF acquired Ingemansson Technology AB from Lindeblad Technology. Ingemansson, Scandinavia's leading technical consulting firm in the field of sound and vibrations, employs 130 people. The purchase price was SEK 53 million, half in cash and half in the form of a new issue of ÅF shares, as authorised in principle by the Annual General Meeting of shareholders in the ÅF Group (28 April 2005). The new share issue will dilute capital by approximately 1.8 percent and the number of votes by 1.1 percent. Ingemansson's operations were consolidated into the Infrastructure Division with effect from 1 February 2006.
ÅF reached agreement on the acquisition of Enprima by purchasing shares from Fortum Power & Heat Oy, Powest Oy, BE&K International Inc and the management of the company. Enprima is a leading name in the energy consulting industry with international business operations and its own offices in Finland, the Baltic states and Russia. The company has a total of some 270 employees, 200 of them in Finland. Sales for 2005 are anticipated to be in the region of EUR 27 million. Settlement for the takeover is to be effected in cash, based on a company value assessed at approximately EUR 13 million. It is anticipated that the company's consulting business will be consolidated into the Process Division's operations with effect from 1 April 2006.
Sales and profits
Net sales totalled SEK 2,269 million (2004: SEK 2,136 million). Sales for the fourth quarter totalled SEK 586 (588) million.
Operating profit for the year was SEK 226 (37) million. The operating margin was 9.4 (1.7) percent. If the figure for "other operating income" is excluded, the operating margin was 4.0 (0.6) percent. Fourth-quarter profits were SEK 150 million (compared to a loss of SEK 16 million in the fourth quarter of 2004) and the operating margin was 20.7 (-2.7) percent. If the figure for "other operating income" is excluded, the operating margin for the fourth quarter was 2.3 (-2.7) percent
The sale of the ÅF Group's head office in Stockholm (officially designated Härolden 44) had a positive effect of SEK 136 million on net profits for the fourth quarter.
Costs incurred in conjunction with dismissal notices had a negative effect of SEK 7 million on fourth-quarter earnings.
Capacity utilisation (expressed as invoiced-time ratio) was 71.5 (68.5) percent over the year as a whole, and 70.5 (68.6) percent during the final quarter.
Group consolidated profit after net financial items totalled SEK 222 (31) million, yielding a profit margin of 9.2 (1.4) percent. If the figure for "other operating income" is excluded, the profit margin was 3.8 (0.4) percent. After net financial items, the fourth quarter saw a profit of SEK 149 million (as opposed to a loss of SEK 17 million for the corresponding period in 2004), to give a profit margin of 20.7 (-2.9) percent. If the figure for "other operating income" is excluded, the profit margin for the fourth quarter was 2.3 (-2.9) percent.
Earnings per share for the year as a whole rose to SEK 34.31 (6.13), while EPS for the fourth quarter was SEK 25.28 (-1.43).
Divisional performance
Infrastructure                                      Operating margin 12 months: 7.3% (6.0%)
The market for infrastructure consulting services remained strong throughout 2005. The division has benefited from an improving market for the construction and property industries, while major investments in the Swedish road and rail sectors have also played their part in high levels of employment for the division's consultants. The division captured new shares of the market in installations and the rail sector last year. It is also worthy of note that the telecom business, where the division maintains a firm focus on telecom operators and the defence industry, also chalked up a significant improvement in results for 2005.
Process                                                            Operating margin 12 months: 3.5% (2.0%)
The Process Division noted a slight slowdown in business towards the end of the year. Two major paper industry projects were brought to a close during the second half, releasing more consultants and thus reducing overall levels of capacity utilisation, At the same time business in Finland was still suffering in the aftermath of the paper strike there earlier in the year. The markets which showed the greatest interest in investing in energy, pulp and paper facilities were the Baltic states, Russia, South America and Asia. Costs incurred in conjunction with dismissal notices had a negative effect of SEK 7 million on fourth-quarter earnings.
Systems                                                Operating margin 12 months: 0.6% (-13.4%)
The Systems Division improved profitability and implemented a raft of changes during the second half of the year which are expected to pave the way for further improvements in earnings in the months ahead. In a move to boost growth in Systems more than 50 highly qualified new members of staff were recruited to the workforce between the summer and the end of the year, some as a result of takeovers, but others as part of the division's programme for organic growth. A strategic focus on increased sales activities and new recruitment had a positive effect on earnings for the fourth quarter.
ÅF-Kontroll                                         Operating margin 12 months: 10.5% (7.6%)
ÅF-Kontroll captured new market share and reported good profitability after posting growth of more than 15 percent for 2005 as a whole. Growth was strongest in inspections, but demand has stabilised at a good level in all three business areas: inspections, testing and certification. The individual market area behind the best growth was the nuclear power industry. The purchase of Force Technology's lift inspection business had a positive effect on earnings from the fourth quarter onwards.
Gross investments in machinery and equipment during year totalled SEK 44 (49) million.
Cash flow and financial status
The cash flow for the year was SEK 67 (83) million. Before shareholders' dividends and the amortisation of loans, cash flow was SEK 280 (109) million.
The sale of certain of the Group's premises had a positive effect of SEK 280 million on cash flow for the fourth quarter.
The cash flow for the fourth quarter before shareholders' dividends and the amortisation of loans was SEK 331 (35) million.
The ÅF Group's liquid assets totalled SEK 242 (175) million at the end of the reporting period.
Equity per share was SEK 97.50 and the Group's equity/assets ratio was 47.6 percent. These figures compare with figures of SEK 66.00 and 30 percent respectively at the beginning of the year.
Parent company
Parent company sales totalled SEK 147 (129) million, yielding a profit after net financial items of SEK 172 million (compared to a loss of SEK 5 million in 2004).
Accounting principles
This interim report for the Group has been drawn up in accordance with IAS 34 "Interim Financial Reporting".
The company's Annual Report for 2004 includes a description of the accounting principles that are affected by the transition to the International Financial Reporting Standards (IFRS). For a description of the accounting principles applied by the company in its interim report for the third quarter of 2005, you are referred to the section "Convergence with International Financial Reporting Standards (IFRS)" in the Annual Report for 2004. It states there that IFRS will be applied with effect from 2005, and that the comparison figures in respect of 2004 have been recalculated in line with the new principles, with the exception of those which apply to financial instruments. Under the transitional rules for IFRS, the new principles apply to financial instruments solely in those parts of the accounts which relate to 2005. In the accounts for 2005 a change has been made from the principles used in 2004 for reporting pension provisions. In accordance with the amendments made to IAS 19, the company has made use of the opportunity permitted to recognise actuarial gains and losses directly in equity. The figures for 2004 have not been recalculated as the actuarial loss per 31 December 2004 was immaterial. In conjunction with the transition to IAS 39, the cash flow model will be applied to hedge accounting with effect from 2005. Hedge accounting means that the introduction of IAS 39 has had only a marginal impact on the income statement. The effect on the balance sheet has been negligible as the fact that the majority of payments are made in local currency means that foreign exchange risks are limited. With effect from 2005 tax on the proportion of associated companies of SEK 2 (2) million is recognised in the accounts as an operating expense rather than a tax expense. The corresponding alteration has been made to the figures for 2004.
Transition to IFRS 2005: the effects on income statements, balance sheet and equity are explained in the appendix to this interim report.

The Board of Directors proposes a shareholders' dividend for 2005 of SEK 5.00 (2.60) per share.
ÅF shares
At the start of 2005, Ångpanneföreningen class "B" shares were being traded at SEK 132 each. By 31 December the share price had risen to SEK 235.50, which corresponds to an appreciation in value of 78.4 percent since the start of the year. The Stockholm Stock Exchange's (OMXSPI) all-share index rose by 32.6 percent during the same period.
The Board proposes a 2:1 share split. This means that each existing share will be replaced by two new shares.
Reporting dates for financial information 2006
The ÅF Group will publish financial information on the following dates in 2006:

Interim report January-March 2006                            27 April
Report from the Annual General Meeting                    27 April
Interim report January-June 2006                               23 August
Interim report January-September 2006                      9 November
Annual General Meeting
The Annual General Meeting of Shareholders will take place take place at 17.00 (5.00 pm) on 27 April at AB Ångpanneföreningen's head office at number 7 Fleminggatan in Stockholm, Sweden. A formal call to the meeting will be issued via an advertisement placed in the national Swedish daily newspapers.
The ÅF Group's Annual Report for 2005 will be despatched by post to shareholders who have indicated their interest. It will also be available at the ÅF Group's offices from 5 April 2006
Stockholm, 22 February 2005
AB Ångpanneföreningen (publ)
Jonas Wiström
President and CEO
This report has not been the subject of a special audit by the company's auditors.
The full report including tables can be downloaded from the following link: