Amer Group Plc COMPANY ANNOUNCEMENT 1 (11) 4 May at 1:00pm (Finnish time) AMER GROUP INTERIM RESULTS FOR THE PERIOD 1 JANUARY TO 31 MARCH In the first quarter, Amer Group s net sales were up 36% at EUR 266.3 million (: EUR 195.6 million). Operating profit amounted to EUR 14.2 million (: EUR 4.8 million). Profit before extraordinary items totalled EUR 10.0 million (: EUR 0.8 million) and earnings per share EUR 0.36 (: EUR 0.03). The positive trend in the Group s performance is expected to continue, stabilising, however, after the first quarter. The result for the financial year is estimated to improve significantly compared to last year. NET SALES AND RESULTS Consolidated net sales were up 36% at EUR 266.3 million (: EUR 195.6 million). Of this strong growth, 9% was organic, 12% was attributable to exchange rate changes and 15 % to acquisitions. Profitability improved considerably; profit before extraordinary items amounted to EUR 10.0 million compared to EUR 0.8 million during the first quarter in. Wilson s net sales increased by 28% and by 15% in local currency terms. Profitability improved and operating profit grew by 42% as a result of increased sales of all high margin core products, improved sourcing and reduced close-outs due to low inventories. Atomic s net sales grew by 29%. Sales of alpine skis continued to be strong with net sales increasing by 50%. Sales of bindings grew by 90%. There was a clear improvement in profitability with operating profit totalling EUR 0.5 million compared to a loss of EUR 3.8 million in the corresponding period in. In addition to increased ski sales, the improvement in profitability was due to higher realised prices as a sell off of inventories was not necessary. In addition, Atomic s inventories were low. It should be noted, however, that due to seasonal fluctuations, Atomic s deliveries mainly take place in the latter part of the year. Suunto s outdoor and sports instruments sales were up by 28% and profitability improved considerably. The strongest growth figures were reported by diving instruments and wristop computers. Amer Tobacco s net sales decreased by 10% and profitability weakened slightly due to extraordinary Y2K reserve purchases made by the trade last December which were reflected in January s sales in particular. Teletekno s net sales grew by 10% and profitability remained at last year s level.
2 The Group s net financing expenses totalled EUR 4.2 million. The relative proportion of the estimated tax charge for the full financial year has been charged against the results for the period. CONSOLIDATED RESULTS Figures in EUR million. Unaudited. Change % Dec NET SALES 266.3 195.6 36 825.7 Depreciation 8.5 7.2 33.0 OPERATING PROFIT 14.2 4.8 58.5 Net financing expenses -4.2-4.0-15.0 PROFIT BEFORE EXTRAORDINARY ITEMS 10.0 0.8 43.5 Extraordinary items 0.0 0.0 0.0 PROFIT BEFORE TAXES 10.0 0.8 43.5 Taxes -1.3-0.1-1.9 Minority interest 0.0 0.0 0.2 PROFIT 8.7 0.7 41.8 Adjusted earnings per share, EUR 0.36 0.03 1.72 Adjusted average number of shares in issue (million) 24.3 24.3 24.3 Adjusted equity per share, EUR 15.32 13.79 15.38 Average rates used: EUR 1.00 = USD 0.99 1.11 1.07 AVERAGE PERSONNEL 4,306 3,659 3,834 NET SALES BY DIVISION Change % Dec Golf 69.4 58.0 20 224.9 Racquet Sports 71.6 55.6 29 225.1 Team Sports 59.2 42.3 40 143.1 Wilson, total 200.2 155.9 28 593.1 Atomic 24.6 19.1 29 139.1 Suunto 16.3 - - Amer Tobacco 18.6 20.6-10 93.5 Teletekno 6.6 - - Net sales, total 266.3 195.6 36 825.7 Gross sales, total 385.2 319.0 21 1,395.5
3 BREAKDOWN OF OPERATING PROFIT Change % Dec Wilson 13.1 9.2 42 42.4 Atomic 0.5-3.8 15.1 Suunto 1.3 - - Amer Tobacco 1.1 1.8-39 9.6 Teletekno 0.3 - - Headquarters -2.1-2.4-8.6 Total 14.2 4.8 58.5 CAPITAL EXPENDITURE The Group s gross capital expenditure amounted to EUR 27.0 million, of which EUR 23.8 million was due to the acquisition of DeMarini Sports Inc. s business operations. R&D A total of EUR 3.9 million was invested in research and development, i.e. 1.5% of the period net sales. FINANCE The equity ratio decreased from 46.2% as at 31 to 43.1% as at 31 (43.9% as at 31 December ), while gearing increased from 48% to 56% (39% as at 31 December ). On 11 January the Group redeemed the remainder of the convertible subordinated bonds of USD 75 million issued in 1993. The amount of the loan outstanding was USD 31.82 million, representing a total of 1,430,877 Amer Group A shares, i.e. 5.9% of the number of shares and voting rights currently in issue. The Group s net debt increased due to seasonal fluctuations and the DeMarini acquisition, totalling EUR 213.5 million at the period end, compared to EUR 151.7 million as at 31 December. Liquid assets amounted to EUR 38.7 million at the period end. PERSONNEL Amer Group employed 4,333 people at the end of the period under review compared to 4,223 at the year-end and an average of 4,306 during the period. A total of 2,021 were employed in the US, 698 in Finland, 576 in Austria and 1,038 in the Rest of the World. SHARES AND SHAREHOLDERS A total of 20% of the Group s A shares in issue were traded during the period under review; approximately 4 million were traded on the Helsinki Exchanges and approximately 0.9 million on the London Stock Exchange, in total 4.9 million shares.
4 The share price low in Helsinki was EUR 18.10, the high EUR 32.00 and the average EUR 26.25 and in London GBP 12.25, 18.22 and 16.21, respectively. There were 11,613 registered shareholders at the end of. Nominees accounted for 51% of the shares in issue at the period end. Lazard Frères & Co. LLC and Lazard Asset Management Ltd notified the Company that they together own 1,260,600 Amer Group Plc A shares, representing 5.182% of the Company s paid-up share capital and voting rights. Lazard s holding in Amer exceeded 5% on 27. The Company s market capitalisation stood at EUR 681.2 million as at 31. At the end of the period the Board of Directors had no share issue authorisation outstanding. AGM RESOLUTIONS Based on a decision made by Amer Group Plc s Annual General Meeting on 8, a dividend of FIM 3.50 (EUR 0.59) per share was distributed for the financial year. The dividend was paid on 20. The AGM approved a proposal to authorise the Board of Directors to purchase and dispose of the Company s shares. The Board may also propose that the acquired shares be cancelled by decreasing the share capital. The authorisations are limited to 5% of the total number of shares in issue and votes thereon, i.e. a maximum of 1,216,344 shares. The authorisations are valid until the 2001 AGM, however for a maximum period of one year from the date of the AGM at which they were approved. The authorisations had not been exercised by the end of the period under review. Moreover, the AGM authorised the Board of Directors to undertake the measures necessary to sell on behalf of the owners of shares registered on the joint book-entry account unless they have already been transferred to the book-entry system. The AGM also approved the proposed amendments to paragraphs 3, 4 and 9 of the Articles of Association relating to the number of shares, denomination of the minimum and maximum share capital in euros and the notice of the General Meeting. It was resolved that the number of members of the Board of Directors to be seven. Mr Timo Maasilta, whose term was scheduled to expire was re-elected for the term -2002. Two new Board members, Mr Ilkka Brotherus and Mr Tuomo Lähdesmäki were elected for the period -2002. At its first meeting the new Board of Directors elected Mr Pekka Kainulainen as Chairman and Mr Tauno Huhtala as Vice Chairman.
5 SVH Pricewaterhouse Coopers Oy, Authorised Public Accountants, were re-elected Auditors to the Company. The auditor in charge of the audit is Mr Göran Lindell, Authorised Public Accountant. CHANGES IN THE GROUP S STRUCTURE After the end of the public offer for Suunto s entire share capital on 30 November, a redemption offer, valid until 10 January, was made for the remaining shares. As a result of the public offer and the redemption offer, together with other Suunto shares purchased by the Company from the stock market, the Amer Group Plc s holding had reached approximately 99.5%. In January arbitral proceeding were instituted to redeem those shares in Suunto which were not transferred to Amer Group as result of the redemption offer. On 20 the arbitral tribunal confirmed Amer Group Plc s right to redeem the shares held by minority shareholders in Suunto. The Company placed the security approved by the Arbitral Tribunal to cover the payment of the redemption price, after which Amer Group Plc s ownership in Suunto increased to 100%. At the time of publishing this report, the arbitral proceeding is pending, and the redemption price will be confirmed in an arbitral award given later. Suunto s shares were delisted from the Helsinki Exchanges on 31. In January the Group acquired the operations of DeMarini Sports Inc., manufacturers and marketers of premium baseball and softball bats. The company s operations became part of Wilson s Team Sports Division with immediate effect. PROSPECTS Global demand for sporting goods is expected to remain stable during the current year. Amer Group s net sales are expected to grow more rapidly than the market and its results to improve clearly from last year. These expectations are based on the opportunities available to all divisions to increase their net sales and market shares in their core product categories. The Group also has scope to improve its performance through further enhancing its supply chain management and sourcing. The global golf equipment market stabilised during the latter part of, and the market is expected to remain flat compared to last year. The golf ball market is expected to continue to be extremely competitive throughout the year as a result of new manufacturers entering the market. However, due to new product launches Wilson s Golf Division s net sales are expected to increase and profitability to improve slightly. The global tennis market is forecast to grow slightly. Wilson s Hyper Carbon racquets are forecast to increase their market shares. Net sales are expected to grow and profitability to improve from last year.
6 Sales growth in traditional team sports categories is likely to remain modest. Wilson s Team Sports Division s net sales are expected to increase and its profitability to improve through higher sales of premium products, DeMarini acquisition and enhanced sourcing. Atomic s profitability is expected to continue to improve, though at a more modest rate than in the first quarter. At this stage of the year, pre-bookings for Atomic s alpine skis, bindings and boots for European markets are higher than last year. However, Atomic s performance is dependent upon reorders, which are themselves subject to snow conditions at the beginning of the /2001 season. Market shares of Atomic s alpine skis and bindings are expected to grow. Atomic s integrated ski/binding/boot system is expected to boost sales of the new ski boot line. Sales of Suunto s outdoor and sports instruments are forecast to continue to grow but at a slightly slower rate than in the first quarter. The fastest growth will be seen in wristop computers and diving instruments. It is expected that there will be a clear improvement in the company s profitability compared to last year. Amer Tobacco is expected to maintain its dominant market position. Net sales are expected to grow as a result of new product launches and the price increase valid from 1 May. A strengthening of Amer Tobacco s position in the Finnish cigar market is also anticipated. Amer Tobacco s profitability is expected to decrease slightly compared to last year due to the appreciation of the US dollar and the shift in demand towards lower price point products. Teletekno s net sales are likely to increase slighly compared to last year. Profitability is expected to remain at last year s level or improve slightly. DIVISIONAL HIGHLIGHTS GOLF The decline in the global golf equipment market is believed to be over and the market is likely to remain flat compared to last year. Wilson s Golf Division s net sales increased by 20% and its profitability improved. Sales of premium golf clubs grew by 16% in local currency terms. The success of Fat Shaft irons continues, and the new Fat Shaft Hyper Carbon clubs are now in global distribution. Commercial club sales grew by 5%. The golf ball market continues to be extremely intense due to competition in premium balls and fierce price competition started in commercial balls in the US. During the first quarter the US golf ball trade shipments grew by 9% due to the pipeline fill by new entrees into the business. Wilson s global golf ball sales remained at the previous year s level. Premium balls were selling well: sales grew by
7 23% in local currency terms. Sales of commercial balls decreased by 19%. RACQUET SPORTS The global tennis market grew slightly compared to. The Racquet Division s net sales increased by 29% and profitability further improved. In local currency terms sales of Hyper Carbon premium racquets increased by 17% and sales of pre-strung racquets by 30% respectively. Increased market shares in all major markets strengthened Wilson s position as the No. 1 tennis brand. In the US, Wilson had four out of five best selling performance racquets; all of them are Hyper Carbon. Sales of Wilson s tennis balls increased by 6% in local currency terms and sales of tennis shoes by 8%, respectively. TEAM SPORTS The US baseball and American football markets were flat compared to last year, while basketball and apparel sales declined. Wilson s Team Sports Division s net sales grew by 40% and its profitability improved driven by increased sales of premium products, the acquisition of DeMarini and enhanced sourcing. The company strengthened its strong position in all team sports product categories in the US; in local currency terms baseball sales increased by 12%, American football sales by 18%, basketball sales by 15% and apparel sales by 23%. WINTER SPORTS Atomic s businesses continued to develop positively at the end of the / season. Net sales increased by 29%. Driven by good snow conditions, successful product lines and Atomic s new ski/binding system the alpine ski sales grew by 50% and binding sales by 90%. The contract with Hermann Maier, the current Alpine World Champion was renewed for two years. In addition a new contract has been signed with Shaun Palmer, a leading athlete in extreme sports. Following the decision to exit from the in-line skate business, the company signed an exclusive worldwide licensing agreement for its Oxygen brand of in-line skates and other related products with Canadian Gen-X Sports Inc. Atomic will continue to market and manage the Oxygen brand in the snowboard business. There will be no costs incurred by the exit from the in-line skate business. In order to improve logistics and customer service Atomic plans to build a new central warehouse to facilitate direct deliveries to most European customers. The decision on its location will be made in May.
8 OUTDOOR AND SPORTS INSTRUMENTS Suunto s net sales increased by 28%. Profitability also improved significantly with operating profit doubling. Of the product categories, the fastest sales growth was seen in diving instruments and wristop computers. Wristop computer sales grew steadily in Europe and North America, whereas in Asia sales more than doubled. Compass sales remained at the previous year s level. In the first quarter, the diving instrument market grew only slightly, while Suunto increased its diving instrument sales by more than 50%. Sales grew steadily in all markets. Strong growth was mainly driven by the success of the new diving computers launched towards the end of. Profitability in this product category improved considerably. AMER TOBACCO Tobacco deliveries decreased in Finland by approximately 10% compared to the corresponding period in mainly due to the extraordinary Y2K reserve purchases made by the trade. This was reflected in January s sales. Contraband trade and smuggling are estimated to have increased, particularly in cigarettes and cigarette paper. Amer Tobacco s sales decreased in all product categories with net sales down by 10%. Growth was reported only in imports and in the sales of its Estonian subsidiary. There was a slight deterioration in profitability mainly due to the decrease in sales. In January the company renewed its licensing agreement with Philip Morris Products Inc. The agreement, valid at least until year-end 2005, will continue thereafter by mutual agreement. In the company signed a new distribution agreement with Swedish Match as a result of which Amer Tobacco will import Swedish Match s cigars and pipe tobacco into Finland as of 1 August. TELETEKNO Teletekno s net sales grew by 10%. Demand for telecommunications technology products continued to be brisk in Finland and demand recovered in the Baltic countries and Russia. The most successful of the product groups was Test and Measurement Technology, the sales of which almost doubled. The strongest growth was experienced in the sales of internet and LAN testing products. Network Technology maintained its leading market position in Finland. New general agreements made with Finnet Group, Sonera, Lattelekom and Lietuvos Telekomas at the beginning of the current year will create a good foundation for the positive long-term development of the business. Fibre Optic Technology was at full production capacity.
9 GEOGRAPHIC BREAKDOWN OF NET SALES EUR million Change % Dec North America 151.1 115.0 31 420.8 Finland 23.8 19.0 25 89.2 Rest of Europe 58.1 41.8 39 205.8 Japan 16.6 9.3 78 54.4 Asia Pacific 8.1 5.3 53 24.2 Other 8.6 5.2 65 31.3 Group, total 266.3 195.6 36 825.7 CONSOLIDATED CASH FLOW STATEMENT Dec Net cash from operating activities -9.9-4.4 119.9 Net cash from investing activities -26.7-1.8-70.7 Net cash from financing activities 4.3-3.2-32.5 Net increase/decrease in cash and cash equivalents -32.3-9.4 16.7 Cash and cash equivalents at 1 Jan 71.0 51.6 53.1 Cash and cash equivalents at 31 /31 December 38.7 42.2 69.8 CONSOLIDATED BALANCE SHEET Assets 31 31 31 Dec Group goodwill 223.1 153.8 201.1 Other intangible fixed assets 20.0 22.2 20.4 Tangible fixed assets 167.6 166.7 163.2 Long-term investments 33.4 13.4 33.2 Inventories and work in progress 143.6 132.6 141.7 Receivables 260.3 216.0 245.8 Marketable securities 5.0 13.2 18.3 Cash and cash equivalents 33.7 29.0 51.5 Assets 886.7 746.9 875.2 Shareholders equity and liabilities Shareholders equity 372.3 335.2 374.2 Minority interest 10.1 10.0 10.1 Provision for contingent losses 3.4 2.8 4.1 Long-term interest-bearing liabilities 149.5 139.6 119.6 Other long-term liabilities 34.8 5.0 34.6 Short-term interest-bearing liabilities 102.8 67.0 101.9
10 Other short-term liabilities 213.8 187.3 230.7 Shareholders equity and liabilities 886.7 746.9 875.2 Equity ratio 43.1% 46.2% 43.9% EUR 1.00 = USD 0.96 1.07 1.00 SHAREHOLDERS EQUITY Share capital Premium fund Revaluation fund Retained earnings Total Balance at 31 Dec 1998 82.7 183.7 3.0 68.7 338.1 Dividend -4.1-4.1 Translation differences 0.5 0.5 Net profit 0.7 0.7 Balance at 31 82.7 183.7 3.0 65.8 335.2 Balance at 31 Dec 82.7 183.7 2.9 104.9 374.2 Dividend -14.3-14.3 Translation differences 3.5 3.5 Other increase/decrease 0.2 0.2 Net profit 8.7 8.7 Balance at 31 82.7 183.7 2.9 103.0 372.3 CONTINGENT LIABILITIES AND SECURED ASSETS, CONSOLIDATED 31 31 31 Dec Charges on assets 20.3 18.6 22.1 Mortgages pledged 39.0 23.3 39.0 Guarantees 2.6 2.9 2.6 Liabilities for leasing and rental agreements 45.4 40.0 42.9 Other liabilities 45.9 19.6 46.0 There are no guarantees or contingencies given for the management of the company, the shareholders or the associated companies. NOTIONAL AMOUNTS OF DERIVATIVE FINANCIAL INSTRUMENTS 31 31 31 Dec Foreign exchange forward contracts 323.4 312.9 330.7 Forward rate agreements - 651.6 100.0
11 QUARTERLY BREAKDOWNS EUR million I IV III II I IV 1998 III 1998 II 1998 NET SALES Golf 69.4 38.1 47.0 81.8 58.0 35.5 39.6 79.2 Racquet 71.6 45.9 58.8 64.8 55.6 41.6 46.0 56.9 Team Sports 59.2 35.8 32.9 32.1 42.3 30.6 29.9 27.3 Wilson total 200.2 119.8 138.7 178.7 155.9 107.7 115.5 163.4 Atomic 24.6 60.6 47.4 12.0 19.1 46.7 40.0 14.5 Suunto 16.3 - - - - - - - Amer Tobacco 18.6 23.7 24.7 24.5 20.6 22.3 23.8 23.6 Teletekno 6.6 - - - - - - - Total 266.3 204.1 210.8 215.2 195.6 176.7 179.3 201.5 OPERATING PROFIT/LOSS Wilson 13.1 1.9 8.5 22.8 9.2 0.3 5.3 20.1 Atomic 0.5 14.3 8.3-3.7-3.8 4.6-0.2-8.1 Suunto 1.3 - - - - - - - Amer Tobacco 1.1 2.4 2.3 3.1 1.8 1.8 1.9 2.7 Teletekno 0.3 - - - - - - - Headquarters -2.1-2.8-0.7-2.7-2.4-0.3-1.4-1.6 Total 14.2 15.8 18.4 19.5 4.8 6.4 5.6 13.1 All forecasts and estimates mentioned in this report are based on management s current judgement of the economic environment and the actual results may be significantly different. AMER GROUP PLC Board of Directors For further information, please contact: Mr Roger Talermo, President & CEO, tel. +358 9 7257 8210 Mr Pekka Paalanne, Senior Vice President & CFO, tel. +358 9 7257 8212 AMER GROUP PLC Communications Department Marja-Leena Simola V.P., Communications Tel. +358 9 7257 8306 e-mail: marja-leena.simola@amer.fi www.amer.fi