Annual Report 2004 - HL Display

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NOTES Note 2 FINANCIAL INSTRUMENTS Financial risks Financial risks are defined in RR 27: 37 (IAS 32:43), and the description below is based on these definitions. A financial risk involves not only a risk of losses, but also an opportunity for profit. HL Display’s policy for dealing with financial risks is based on profits being generated by the operational business and not through investments in financial instruments. This means that only investments with a low risk are permitted. HL Display’s financing and financial risks are managed under the control and auspices of the board. Financing activities are centralised within the HL Financial Services AB unit, which acts as an internal bank, with responsibility for financing and managing financial risks. Exchange rate risk Flow exposure The lead times for HL Display’s orders are very short, in most cases less than two weeks. Order stock at any time consists of more than one thousand order, most of a low value, from customers in different geographic markets and in different currencies. It is HL Display’s policy not to hedge future order flows in foreign currencies. Because of the short lead times and fragmented order structure, hedging would only create a degree of delay in exchange rate changes. Over a period of time, therefore, hedging would not have any real effect. This means that changes in exchange rates have a relatively quick impact on HL Display’s financial results. EUR M GBP M USD M The group’s net flow, 2004 29 10 3 The effect on the operating profit of a 5% change in the value of the SEK, SEK M based on average exchange rates in 2003 13 6 1 USD also includes other currencies linked to the dollar. Conversion exposure HL Display applies the monetary method for converting the income statements and balance sheets of foreign subsidiaries. This means that exchange rate changes in the net value of subsidiaries’ monetary assets and liabilities are posted in the consolidated income statement as translation differences. It is HL Display’s policy to hedge most of the net monetary value in subsidiaries. Put simply, this means that equity in foreign subsidiaries is hedged, as the foreign companies have almost exclusively monetary assets and liabilities. Hedging instruments are posted at the exchange rate at the year-end, and unrealised exchange rate differences are posted as net income. The effects on profits of the hedging contracts are posted in net financial items and offset against the translation difference in the income statement when converting foreign subsidiaries. In 2004 exchange rate effects of SEK 1 M were offset against the translation difference. To reduce currency risks, the assets in the foreign subsidiaries are financed locally, in the local currency, where this is commercially viable. However, there is a degree of financing via the subsidiary HL Financial Services AB in Sweden. It is HL Display’s policy to hedge most of the loan portfolio against foreign subsidiaries. Hedging instruments are posted at the exchange rate at the year-end, and unrealised exchange rate differences are posted as net income. The effects on profits of the hedging contracts are posted in net financial items and offset against exchange rate difference in the loan portfolio. In 2004 SEK 0 M was offset against exchange rate losses in the loan portfolio. At the year-end the group had hedged policies totalling a nominal value of EUR -6 M and USD -1 M. The remaining term is one month. Unrealised exchange rate losses totalled SEK -1 M, and have been posted as accrued expenses. EUR M GBP M USD M The group’s monetary net assets 5,9 -0,6 -0.3 USD also includes other currencies linked to the dollar. Interest rate risk The interest rate risk in HL Display is low, as there is a high degree of selffinancing. The equity/assets ratio was 47 per cent at the year-end, and the interest-bearing net liability was only SEK 18 M. Net interest was SEK -6 M. All interest-bearing assets and liabilities are subject to floating interest rates. A change of one per cent in the market interest rate would cause a change in the net interest figure of SEK 0.4 M. HL DISPLAY ANNUAL REPORT 2004 38 Short-term interest-bearing liabilities total SEK 74 M, and consist almost exclusively of utilised cheque account credit. The effective interest rate on utilised cheque credit is 3.2 per cent. Interest-bearing long-term liabilities total SEK 56 M, and consist of bank loans. The bank loans have an average effective interest rate of 5.3 per cent, and the due dates are as shown in the table. SEK M Due within 1 year Due within 1-5 years Due after 5 years 36 17 4 Market risk HL Display has no significant financial instruments that represent a market risk according to the definition in RR 27 (IAS 32). Credit risk The credit risk within HL Display comprises almost exclusively accounts receivable. HL Display has very few bad debts. The company’s customers are large, wellestablished companies that are financially sound and distributed over several geographic markets. The biggest single customer accounts for five per cent of turnover. Most orders are low in value. HL Display checks the risk of bad debt by means of defined routines for credit control, handling demands and invoicing of interest on overdue payments. Credit insurance policies have been considered, but have not been felt to be justified. The amount that best represents the maximum exposure to bad debt, without taking into account any security provided, is the outstanding figure for accounts receivable according to the balance sheet at the year-end, SEK 242 M. Liquidity risk HL Display has no significant financial instruments that represent a liquidity risk according to the definition in RR 27 (IAS 32). Cashflow risk The risk that future cashflows, which are related to financial instruments, may vary in value is described in the sections on currency risk and interest rate risk. Financial instruments within HL Display HL Display’s financial assets and liabilities comprise almost exclusively primary instruments. An inventory has been undertaken of the financial assets and liabilities of companies in the Group, and the only derivative instruments during 2004 are hedging contracts, which are described in the section on currency risks. The nature and scope of the financial instruments is best viewed through the consolidated balance sheet with associated notes. The items entitled other long-term receivables, accounts receivable trade, cash and bank, long-term liabilities and accounts payable consist exclusively of financial assets and liabilities. The items entitled prepaid expenses, other current receivables, other current liabilities and accruals and prepaid income contain some financial assets and liabilities. These items contain primary assets and liabilities relating to the operational business, and a more detailed specification of these was not considered to provide significant information. Accounts receivable are included in the balance sheet when an invoice has been issued. Accounts payable are included when an invoice has been received. A financial asset is removed from the balance sheet when the rights in the agreement have been realised, fall due or the company loses control over it. A financial liability is removed from the balance sheet when the obligation in the agreement is honoured or redeemed in any other way. Accounts receivable are reported at the amount that is expected to be received after deductions for unsafe receivables, which are assessed individually. The expected term of accounts receivable is short, which is why the value is posted at a nominal value with no discount. Accounts payable have a short expected term, and are valued at a nominal value with no discount. Liquid funds include cash and immediately available bank balances. Loans are reported initially at the amount received after a deduction for transaction costs. After the acquisition date the loan is valued at the accrued acquisition value in accordance with the effective interest method. The items are not affected by conditions that may be significant in assessing the size, date and degree of security relating to future cashflows. No reported financial assets and liabilities values vary significantly from actual values.
Note 3 BREAKDOWN OF NET SALES BY GEOGRAPHIC MARKET Sales divided by geographical markets Group Parent Company SEK T 2004 2003 2004 2003 Nordic region 222,735 225,801 39,045 38,726 Western Europe 814,180 677,403 29,614 33,746 Eastern Europe 176,606 158,061 6,007 6,135 Asia/Australia 65,275 45,160 1,678 523 North America 32,207 22,580 — — Total 1,311,003 1,129,005 76,344 79,130 Assets divided by geographical markets Group Parent Company SEK T 2004 2003 2004 2003 Nordic region 279,028 294,154 303,741 295,784 Western Europe 276,145 257,484 — — Eastern Europe 60,190 47,815 — — Asia/Australia 46,631 26,994 — — North America 24,119 19,097 — — Total 686,113 645,544 303,741 295,784 Investments divided by geographical markets Group Parent Company SEK T 2004 2003 2004 2003 Nordic region 35,609 26,055 344 720 Western Europe 1,328 5,203 — — Eastern Europe 748 2,848 — — Asia/Australia 830 445 — — North America 6,847 4,793 — — Total 45,362 39,344 344 720 Note 4 INTRA-GROUP PURCHASING AND SALES Of the parent company’s net sales SEK 76,296 T (78,711) refers to services sold to Group companies. Note 5 SPECIFICATION OF OTHER OPERATING INCOME/EXPENSES SEK T Other operating income Group 2004 Group 2003 Exchange rate differences 750 1,413 Royalty income 2,186 1,025 Rental income 1,505 1,059 Reversal Write-down 2,850 — Other 2,505 2,161 Total 9,796 5,658 Other operating expenses Exchange rate differences –1,590 –3,708 Write-downs/disposals of fixed assets –4,000 –17,692 Other –277 –1,630 Total –5,867 –23,030 Write-downs/disposals for 2004 refers to production machinery at the factory in Falkenberg, and for 2003 mainly property and production machinery at the factory in Lesjöfors. 39 Note 6 WAGES, SALARIES OTHER REMUNERATION AND SOCIAL SECURITY COSTS 2004 2004 2003 2003 Wages, Wages, salaries Social salaries Social and other security and other security SEK T remuneration costs remuneration costs Parent Company 26,876 15,729 24,878 16,027 (of which pension costs) (5,095) (5,525) Subsidiaries 265,443 80,902 249,937 79,761 (of which pension costs) (12,269) (12,599) Total 292,319 96,631 274,815 95,788 Note 7 BREAKDOWN OF WAGES AND OTHER REMUNERATION 2004 2004 2003 2003 Board Other Board Other SEK T and MD employees and MD employees Parent Company 1,991 24,885 1,924 22,954 Subsidiaries in Sweden 4,289 134,803 4,477 134,387 Subsidiaries abroad 17,875 108,476 18,012 93,061 Total 24,155 268,164 24,413 250,402 Note 8 DEPRECIATION Group Parent Company SEK T 2004 2003 2004 2003 Computer systems –3,276 –4,504 –1,126 –1,882 Goodwill –1,216 –2,065 — — Land and buildings — –440 — — Plant and machinery Capital expenditure on –41,351 –39,883 –311 –315 leasehold properties –617 –664 — — Total –46,460 –47,556 –1,437 –2,197 NOTES HL DISPLAY ANNUAL REPORT 2004
Page 1 and 2: HL Display Annual Report 2004
Page 3 and 4: The year in brief . Group net sales
Page 5 and 6: ments. These customers have now ins
Page 7 and 8: panies are measured on the basis of
Page 9 and 10: DEVELOPMENT OF OPERATING EXPENSES,
Page 11 and 12: HL Display’s new Slimline shelf-e
Page 13 and 14: emphasis on further developing its
Page 15 and 16: The new EasyShelf system makes it e
Page 17 and 18: the region attractive to the multin
Page 19 and 20: Developments during the year Sales
Page 21 and 22: Competitors The competitive situati
Page 23 and 24: 21 Super GB uses colour codes to he
Page 25 and 26: the company’s products. This mean
Page 27 and 28: EMPLOYEE FACTS Employee categories
Page 29 and 30: Customer agreements are normally re
Page 31 and 32: 29 THE HL DISPLAY SHARE Options sch
Page 33 and 34: Income statement Comments on the co
Page 35 and 36: 33 Group Parent Company BALANCE SHE
Page 37 and 38: Cash flow statement 35 CASH FLOW ST
Page 39: Financial instruments An explanatio
Page 43 and 44: Note 15 TAX ON PROFIT FOR THE YEAR
Page 45 and 46: Note 21 SHARES IN GROUP UNDERTAKING
Page 47 and 48: Note 28 LONG-TERM LIABILITIES Of lo
Page 49 and 50: Note 35 TRANSACTIONS WITH RELATED P
Page 51 and 52: Nine year summary 49 NINE-YEAR SUMM
Page 53 and 54: Board procedures 2004 HL Display’
Page 55 and 56: 50 years of HL Display It was 50 ye

Annual Report 2004 - HL Display

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