HTL-STREFA S.A. Supplementary information and additional information to condensed quarterly financial statements for 4Q2007

Transcription

1 HTL-STREFA S.A. Supplementary information and additional information to condensed quarterly financial statements for 4Q2007

2 Supplementary information information to HTL-STREFA S.A. condensed consolidated quarterly financial statements for 4Q2007 I. Brief description of significant achievements or failures of the issuer during the period covered by the report, including a list of the most significant events related to such achievements or failures 1. Achieved results Consolidated sales revenue in 4Q2007 accounted to PLN 21,633 thousand in comparison to PLN 15,975 thousand in 4Q2006 (growth by 35.4%) and PLN 19,522 thousand in 3Q2007 (growth by 10.8%). Consolidated net loss in 4Q2007 reached PLN 4,958 thousand in comparison with net profit of PLN 3,972 thousand in 4Q2006 and net profit of PLN 4,061 thousand in 3Q2007. FY2007 consolidated sales revenue accounted to PLN 80,604 thousand (growth by 32.6% YoY) and consolidated net profit reached PLN thousand (fall by 73.9% YoY). Lower than previously consolidated net profit results from: lower than expected sales volume (and sales revenue), caused by extraordinary delay in supply of two assembling machines. This results also in higher than expected costs of manufacturing - process of production launching was much slower. Total influence of these on the net profit accounts to ca. PLN 6,200 thousand. higher than usually transport cost, being effect of delay in supply of two assembling machines. Due to underrealisation of sales plan and in order to soften customerʼs inconvenience HTL-STREFA was transporting goods by air instead of sea transport. Higher costs of this influencing net profit account to ca. PLN 2,300 thousand. costs of HaeMedic AB acquisition in 4Q2007. Acquisition of significant foreign competitor influenced negatively HTL-STREFA financial results, while the positive impact of the transaction hasnʼt been yet visible. Tangible effects of acquisition are expected in Costs of acquisition mean: interests from bonds issued to finance the transaction (ca. PLN 3,300 thousand in financial costs), differences in exchange rates (ca. PLN 2,200 thousand in financial costs) and other costs (ca. PLN 500 thousand in overheads). further weakening of US dollar, especially in 4Q2007, with FX rates significantly less favourable than in move of some sales revenue from 2007 to 2008 financial statements (ca. PLN 800 thousand).

3 In 4Q2007 HTL-STREFA sold ca. 97,920,000 pcs. of safety lancets (growth by 68.8% YoY and by 21.3% QoQ) and ca. 151,130,000 pcs. of personal lancets (growth by 29.9% YoY and fall by 2.3% QoQ). Share of sales revenue from individual customers in 4Q2007 is presented below: Customer Share in total sales revenue Roche Diagnostics 34.2% Bayer Healthcare 23.3% Beckton Dickinson 23.1% Other 19.4% Sales revenue by region of the World in 4Q2007 is presented below: Region świata Share in total sales revenue North America 77.0% Europe (excl. Poland) 20.1% Poland 1.6% Asia and Middle East 1.2% Africa 0.1% 2. Acquisition of Swedish competitor - HaeMedic AB. Managemet Board of HTL-STREFA S.A. signed on 24th October 2007 contract concerning acquisition of 100% shares of HaeMedic AB - Swedish safety lancets manufacturer. Value of transaction accounted to EUR 23 million, i.e. ca. PLN million according to average NBP EUR/PLN rate from 24th October As a result of the transaction HTL-STREFA S.A. acquired manufacturing capacities, know-how, intelectual property and rights to sell safety lancets manufactured by HaeMedic AB to its customers. Safety lancets sales volume of acquired company in 2007 accounted to ca. 200 million pcs., resulting in global market share of ca. 13%. Funds for above-mentioned transaction were raised by issue of 5Y bonds face valued PLN 120 million. Detailed information concerning the acquisition was disclosed in periodical report RB 47/2007 on 7th November 2007.

4 II. Description of factors and events, in particular non-recurring ones, which have a significant impact on the performance; Following one-off events (described in detail also in I.1.) negatively influenced HTL-STREFA 4Q2007 financial results: delay in supply of two assembling machines. Much longer than expected installation of these machines resulted in significantly lower sales revenue and net profit in 4Q2007, for which substantial growth of sales had been planned. Delay also contributed to increase in costs of transport - late dispatches were send to customer by air. one-off costs of acquisition, i.e. differences in exchange rates and costs of transaction preparing and executing. III. Discussion of seasonality (cyclical nature) of the issuer s business in the period presented; HTL-STREFA S.A. business does not have cyclical nature. IV. Information on any issue, repurchase or repayment of debt and equity securities; HTL-STREFA S.A. issued on 20 July Y coupon bonds face valued PLN 120 million. Bonds will subject to one-off redemption for face value on 20 July Interest rate of these bonds is variable (WIBOR 6M + investor s margin) and one interest period lasts six months. Paid interest from above mentioned bonds accounted in 4Q2007 to ca. PLN 3,300 thousand. V. Information on any dividend paid out or declared, including its total and per share value, separately for ordinary and preference shares HTL-STREFA S.A. did not pay out dividend for 2004, 2005 and 2006 and did not pre-pay out dividend for Management Board has not declared payout of dividend. Management Board s priority has been assuring company s growth. Pace of the growth, especially in near years, limits, in Management Board s opinion, posibility of paying out company s profit as dividend.

5 VI. Events that occurred after the date of condensed quarterly financial statements, which are not included in such financial statements but may significantly affect the future performance of the issuer After the date of the statements such events have not occured. VII. Information on any changes in contingent liabilities or contingent assets which have occurred since the end of the last financial year Company did not have any contingent liabilities or contingent assets at the end of This hasn t changed till the date of the statements. Additional information I. Description of the organizational structure of the issuer s group, specifying the undertakings subject to consolidation HTL-STREFA S.A. group at the end of 4Q2006 consisted of: - HTL-STREFA S.A. located in Ozorków, Poland (parent company), - HT Lancet Sp. z o.o. located in Łęczyca, Poland, - HTL-STREFA Marketing Sp. z o.o. located in Warsaw, Poland, - HTL-STREFA, Inc. located in Marietta, Georgia, USA, - HTL-STREFA GmbH located inf Frankfurt am Main, Germany, - HaeMedic AB z located in Tyresoe, Sweden. HTL-STREFA S.A. manufactures personal and safety lancets (also in clean-zone conditions) and moulds needles. Company s duties include also quality control of all products made by capital group and logistics. HT Lancet Sp. z o.o. manufactures plastic details of safety lancets. In 3Q2007 this company opened own needle grinding facility. Needles are utilised in manufacturing personal and safety lancets. HTL-STREFA S.A. owns 100% of shares in HT Lancet Sp. z o.o.. HTL-STREFA Marketing Sp. z o.o. conducts sales and marketing activities on foreign markets. HTL-STREFA S.A. owns 94% of shares in HTL-STREFA Marketing Sp. z o.o. and remaining 6% of shares is owned by HT Lancet Sp. z o.o.. HTL-STREFA, Inc. supports other units in managing US key accounts and develops sales on American alternative market. HTL-STREFA S.A. owns 100% shares in HTL-STREFA, Inc.

6 HTL-STREFA GmbH develops sales of group products in German lingual markets. rozwija sprzedaż produktów grupy na rynkach niemieckojęzycznych. HTL-STREFA S.A. HTL-STREFA S.A. owns 100% shares in HTL-STREFA GmbH. HaeMedic AB is owner of machines and equipment to safety lancets manufacturing and respective know-how. These machinese and equipment are to be moved to Poland in near future. HTL-STREFA S.A. owns 100% shares in HaeMedic AB. II. The effects of changes in the structure of the company, including mergers, acquisitions or disposals of the issuer s group undertakings, long-term investments, demergers, restructuring and discontinued operations; Managemet Board of HTL-STREFA S.A. signed on 24th October 2007 contract concerning acquisition of 100% shares of HaeMedic AB - Swedish safety lancets manufacturer. As a result of the transaction HTL-STREFA S.A. acquired manufacturing capacities, patents and IP, ownership of trademarks and access to existing HaeMedic AB customers. According to Management Board estimations HaeMedic share in global market of safety lancets accounted to ca. 13% in 2007, while HTL-STREFA share accounted to ca. 28%. Both companies, acting together are to reach ca. 56% share of the safety lancets global market in Due to organic growth and accomplished acquisition sales volume of HTL- STREFA safety lancets is to grow by 112.9% YoY to at least ca. 660 million pcs. Acquisition of HaeMedic AB enable HTL-STREFA S.A. to widen its product portfolio by particular versions of personal lancets and to enter new market segments, previously held by the Swedish company. Before the transaction HTL-STREFA was mainly OEM manufacturer for big multinational corporations like Roche, Bayer or Beckton Dickinson. HaeMedic held strong position on the alternative market. Key safety lancet manufactured by HTL-STREFA and sold under own trademark was Medlance Plus, characterized by contact activation. All HaeMedic safety lancets are activated by the top button. Due to different customer preferences it is important diversifying factor, complementing portfolio of both companies. Furthermore in HaeMedic product range there are so-called semi-safety lancets, that may be used to enter price-sensitive markets. Thanks to significant widening of product portfolio it would be also possible to offer HaeMedic distributors some HTL-STREFA products and vice versa. Detailed information concerning the acquisition and its results was disclosed in periodical report RB 47/2007 on 7th November 2007.

7 III. The management board s position on the feasibility of achieving the results stated in the financial forecasts published earlier for a given year in view of the financial results presented in the quarterly report in relation to the projected results; Management Board presented on 5th February 2008 updated financia forecasts (current report RB 5/2008). New guidance assumed consolidated sales results of PLN 80,600 thousand and consolidated net profit of PLN 4,200 thousand. These results have been achieved - sales revenue accounted to PLN 80,604 thousand and net profit to PLN 4,216 thousand. IV. The shareholders holding, directly or indirectly (through subsidiary undertakings) 5% or more of the total vote at the issuer s general shareholders meeting as at date of the quarterly report, the number of shares held by such shareholders, their respective shares in the share capital, the number of votes attached to such shares and their share in the total vote at the issuer s general shareholders meeting, as well as changes in the ownership of significant blocks of the issuer shares which have occurred since the date of the previous quarterly report; Shareholder Number of shares Share in share capital Share in total vote Andrzej Czernecki 25,700, % 40.17% Noryt Company 19,525, % 30.52% Establishment Wojciech 5,000, % 7.81% Wyszogrodzki Other shareholders 13,758, % 21.50% Total 63,983, % % as on 28th February 2008, according to the Management Board knowledge. In 4Q2007 there were no changes in significant blocks of HTL-STREFA shares.

8 V. Statement of changes in the number of the issuer shares or rights to such shares (options) held by the issuer s managing or supervisory persons as at the date of the quarterly report, including changes in such holdings which have occurred since the date of the previous quarterly report, separately for each managing or supervisory person; Position Name Number of shares Changes Management Board President of the Board Andrzej Czernecki 25,700,000 Member of the Board Chief Technology Officer Member of the Board CFO CEO Józef Kosowski 50,000 Iwonna Soboń 50,000 Other managing persons 5,000,000 Wojciech Wyszogrodzki - - Supervisory Board President Witold Orłowski 0 - Vicepresident Andrzej Kidyba 0 - Member Beata Błędowska 0 - Member Jolanta Nejman Member Andrzej Woźnica 0 - as on 28th February 2008, according to the Management Board knowledge. In HTL-STREFA S.A. the motivation scheme for management and key employees for has been implemented. According to this scheme and after fulfilling its conditions (remaining Company s employee) Management Board members Iwonna Soboń and Józef Kosowski will get right to purchase not less than 100,000 and no more than 600,000 HTL-STREFA S.A. shares for face value till the end of VI. Proceedings pending before a court, a competent arbitration body or any public administration authority. In 4Q2007 there were no such proceedings concerning HTL-STREFA S.A. or its subsidiary liabilities or receivables.

9 VII. Information on any one or more transactions concluded by the issuer or its subsidiary undertaking with related parties which are not typical and exceed amount of EUR 500,000. HTL-STREFA S.A. and its subsidiaries didn t enter in such transactions in 4Q2007. VIII. Information on sureties for loans or guarantees issued by the issuer or its subsidiary undertaking HTL-STREFA S.A. and its subsidiaries did not conclude such activities in 4Q2007. IX. Other information which the issuer deems relevant for the assessment of its personnel, assets, financial situation, and its net result, as well as their changes, and for the assessment of the issuer s ability to perform its obligations; In Management Board s opinion there has been no events or circumstances relevant for the assessment of HTL-STREFA S.A. personnel, assets, financial situation, and its net result, as well as their changes, and for the assessment of the HTL-STREFA S.A. ability to perform its obligations X. Any factors which in the issuer s opinion will affect its results in a period covering at least the next quarter. In Management Board s opinion in a period covering at least one quarter following factors will affect company s results: 1. Changes in USD/PLN, EUR/PLN and EUR/USD FX rates In 4Q2007 sales revenue in USD accounted to ca. 55% of total sales revenue, while EUR revenue accounted to ca. 43% and PLN to ca. 2%. Almost all sales revenue are denominated in foreign currencies, while on the other hand costs are mainly paid in PLN. Therefore sales revenue and net profit subject to significant currency risk (USD/PLN, EUR/PLN and EUR/USD). Management Board conducts activities targeting to increase share of EUR revenues (in order to decrease USD/PLN and EUR/USD risk) by signing new contracts in EUR and transforming existing contracts from USD to EUR. This is to strongly limit currency risk of HTL-STREFA S.A. after EUR adoption in Poland.

10 In FY2007 ca. 64% of sales revenue were revenues in USD, ca. 34% revenues in EUR and ca. 2% revenues in PLN. According to plans for 2008, sales in EUR will bring ca. 60% of sales revenue, sales in USD ca. 39% and sales in PLN ca. 1%. Furthermore the Management Board uses financial market instruments to hedge sales revenues against currency risk. In period covering more than one quarter following factors will affect company s results: 1. Changes in USD/PLN, EUR/PLN and EUR/USD FX rates See above. 2. Effects of integration HaeMedic AB business with HTL-STREFA group Efficiency of integration of acquired HaeMedic AB business with HTL-STREFA group structure, as well as ability to utilise synergies (both on cost and revenue side) will be factor influencing company s performance. 3. Realisation of capacity increase plans Constantly growing demand for HTL-STREFA products pressures to constantly increase production capacities. The characteristic of production allows to increase production capacity of specific product only by significant per cent of current capacity. Therefore Management Board keeps capacities on level only slightly higher than demanded in order to limit costs of production per one piece. Each planned increase in capacity means building new production line, which lasts 6-12 months. In case of delay of supply from external sources, it is possible that company will not meet the demand (such situation occured in 1Q2007 and its results influenced financial performance in the whole 2007). In order to minimalise such risk the Management Board is ordering necessary machines and equipment as early as possible. Part of machines and equipment is manufactured directly by HTL-STREFA. 4. Ability to gain customers for new products Management Board undertake activities targeting to diversification of HTL- STREFA product portfolio. It results from constantly increasing market share in presently manufactured product lines (safety and personal lancets). In 2008 HTL-STREFA share in global safety lancet market is to exceed 50%. Because of customers risk management policies it would be more difficult to increase this market share significantly. In order to sustain pace of sales revenue growth it is planned to introduce new product lines - mainly basing on needles manufactured in own needle grinding facility. It is possible in horizon of dozen months.