Annual Report 2004 - HL Display

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STATEMENT BY THE MANAGING DIRECTOR Increased profitability and growth In 2004 we celebrated HL Display’s 50th anniversary. In 50 years we have grown from a company operating out of a cellar in the small town of Borlänge to a global leader in the field of in-store communication and merchandising. At an early stage Harry Lundvall recognised the need to display products and their prices more clearly in shops, not least in the rapidly expanding number of self-service stores. 1954 saw the first deliveries of display stands and price label holders. With a constant supply of new, innovative products and solutions, HL Display has continued in Harry Lundvall’s spirit and set new standards for in-store communication and merchandising in the retail sector. This has meant that we are now a leading global company with sales companies and distributors in 43 countries and a turnover of SEK 1.3 billion. Objectives and prospects for the future During the year we have seen clear results from the measures initiated in 2003 and ongoing work to generate increased profitability. The operating profit rose to SEK 80 million. HL Display will also continue to prioritise profitability, and the improved profit figure is an indication that we are on the right track. In the Annual Report for 2003 we stated that the aim was to achieve an annual rate in line with the long-term profit margin target of 10-15 per cent by the end of 2005. This aim is still in place, and will be achieved by means of a continued focus on cost control and general efficiency improvements in production. It is our belief that in 2005 HL Display will increase its turnover by at least ten per cent. For the seventh year in succession HL Display is also included in the Europe’s Entrepreneurs for Growth list of the 500 most rapidly growing companies in Europe. We are extremely proud to be one of a total of five companies to have been on this list every year since it started seven years ago. Reduced operating expenses When turnover fell in 2003, partly due to the economic downturn, HL Display still had an organisation adapted for healthy growth, which meant that costs were too high. We therefore decided to limit the growth rate of operating expenses to 35 per cent of sales growth. In 2004 the company was well below this level. Operating expenses increased by only three per cent, while turnover increased by 16 per cent. We have used resources far more efficiently, and this is the main reason for the improved profit figure. Production a success factor In-house production is, and will remain, an important success factor for HL Display, not least because it gives us a strong competitive advantage. Flexible production creates short delivery times, excellent delivery performance and the opportunity to influence and actively compete on price, quality and service. But in-house HL DISPLAY ANNUAL REPORT 2004 2 production requires sufficiently high volumes to be profitable. As regards the in-store furnishing systems manufactured at the Falkenberg factory, the conditions did not exist for profitable production, which is why we during the year decided to outsource this production to subcontractors. As a result of this 33 people were made redundant in Falkenberg. We also continued work on improving efficiency at the factories in Sundsvall and Falun, and this had a positive effect on profitability during the year. For example, lead times at the Falun factory were halved during 2004. More efficient production has also enabled the company to deal with the general price pressure in the market and raw material price increases for plastic and metal. The launch of EasyShelf During 2004 we launched EasyShelf, our biggest innovation since the Optimal shelf divider system in 1990. With EasyShelf we can satisfy the retail sector’s requirement to be able to reorganise their product displays in stores quickly and efficiently. The launch is proof that HL Display can retain the organisation’s innovative strength while still keeping a focus on cost control. It is extremely important that we can constantly develop new, innovative solutions that have the potential to set new standards for merchandising and in-store communication in the retail sector. This will allow us to retain our position as a market leader that continuously develops the industry. More efficient organisation We are continuously evaluating our organisation and ways in which the business can be made more efficient. During the year a project was initiated to review how we can be more efficient in areas including logistics, administration and sales, and thus improve both our own profitability and the service we deliver to customers. We have good experiences of the service centre set up in the Netherlands in 2003, which combines a number of functions for the sales companies in Belgium, the Netherlands and Germany. One clear example of this is the way that the sales company in Germany has been able to use the service centre to reduce its costs and to achieve the best delivery service to customers of all sales companies in the whole group. There is therefore good reason to consider the possibilities of setting up more service centres that can take care of warehouse, delivery, finance and administration for a number of markets, which would also mean that the sales companies could increasingly focus on sales. Increased sales to major customers We have enjoyed good sales to the major retail chains in wellestablished markets such as France and the UK. One problem in 2003 was that the major customers delayed their new invest-
ments. These customers have now instead increased their investments. It is crucially important that we strengthen our relations with key customers so that they become repeat buyers who work together with us to develop new solutions tailor-made to meet their own requirements. HL Display is therefore working globally with Key Account Management and making plans for collaboration with every key customer. This means, for example, that we can allocate resources at group level when required and provide active support to work with customers. Developments in the sales companies in Asia continued to be positive during the year, with an increase in sales of 61 per cent. During the year two new sales companies were set up in the Asian market, one in South Korea and one in Indonesia. Activities in the Chinese sales company that was created in 2003 started up during the year. The Chinese market continues to be extremely attractive, bearing in mind the high rate of expansion that many of our customers are experiencing there. We are also investigating the possibilities of locating production for the Asian market in China, thus reducing delivery times and freight costs in Asia. Increased sales to the non-food sector During the year there was increased interest in category solutions from our non-food retail customers, and we have increased our expertise and our range of products and services in this area. On the basis of our long experience of merchandising and in-store communication, we are developing solutions for entire product cat- 3 VD HAR ORDET egories to create clear value for customers in the form of increased sales and reduced costs. Our attempts to target the non-food retail sector, for example sports outlets and DIY stores, have produced good results, with a sales increase of 26 per cent. Here we can benefit from our experiences from the food retail sector and translate these for the needs that exist in the non-food sector. While we invest in category solutions, it is still important to take care of product sales, and during the year we launched a number of innovative new products, including SkyLine for signage in ceilings. Growth combined with profitability The measures we initiated in 2003 and continued to work with in 2004 lay the foundation for a better level of profitability in the long term. HL Display will continue in the future to be a company that combines growth with good profitability. Ever since Harry Lundvall sold his first product stand in 1954 we have developed rapidly, and we are now a leading supplier to the global retail industry. It is important that we, while keeping costs under control, keep up the tempo in our sales and product development work. With these three basic elements we create the conditions for retaining the leading position that we have built up over a period of 50 years. Stockholm, January 2005 Anders Remius, Managing Director HL DISPLAY ANNUAL REPORT 2004
Page 1 and 2: HL Display Annual Report 2004
Page 3: The year in brief . Group net sales
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 and 40: Financial instruments An explanatio
Page 41 and 42: Note 3 BREAKDOWN OF NET SALES BY GE
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
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