Annual report 2008 - Comrod

the compact power supply currently under development is alsoexpected to contribute to higher revenues and improved EBITmargins.OtherThe business area had 7 employees as of 31 December 2008(2007: 6). No occupational injuries resulting in sick leave ormaterial damage were recorded in 2008. The business area’sworking environment is regarded as good.Production processes and waste products do not require anyspecial permits. Waste products are sent to approved disposalsites or recycled. The products do not present a health hazardwhen they leave the company.RESEARCH AND DEVELOPMENTR&D is a continuous focus in all of Comrod CommunicationGroup’s business areas to secure a leading position in its field oftechnology and offer the best possible solutions and systems tocustomers. In 2008, the Group capitalized development costs ofNOK 13.4 million and expensed development costs of NOK 13.4million. (2007: NOK 5 million and NOK 12.3 million)The capitalized development costs in 2008 related to thefollowing main projects:- New telescopic mast- HF Loop antenna (NVIS)- Various multiband/wideband antennas, including jammingversions- Compact Power Supply- Various antenna control systemsThe capitalized development costs in 2008 also includedan amount of NOK 5.8 million (2007: 5.0 million) for thedevelopment of an unmanned aerial vehicle (UAV) in thesubsidiary Unmanned Systems Norway AS. During 2008,operating costs of NOK 1.9 million were expensed (NOK 1.5million for 2007) in UMS. A memorandum of understandinghas been agreed with Lockheed Martin concerning a jointdevelopment project for the next two phases of the UAV. TheGroup is actively looking for strategic or financial partners for thenext phases of the project.UMS had 1 employee at year-end 2008 (2007: 2).PARENT COMPANYThe Group’s administration is located in Tau (near Stavanger),Norway, and is made up of the Group’s President & CEO(currently the sole employee of the parent company), the ChiefFinancial Officer, and the Executive Vice President Production (aposition combined with Managing Director of Comrod AS). TheCFO position of the Group is currently covered by the financialdirector of Comrod AS. This arrangement provides a cost-effectiveGroup management.In 2008, the parent company returned an operating loss of NOK10.6 million compared to an operating loss of 4.4 million in 2007.The profit for the year was NOK 18 million compared with NOK 10million in 2007. The figures for 2008 include a non-recurring costof NOK 2.2 million related to the change of CEO.The working environment is regarded as good. There were noincidents resulting in personal injury or material damage. Thecompany’s operations do not pollute the external environment.GROUPThe Comrod Communication Group reported revenues of NOK368.6 million (compared with NOK 289.9 million in 2007) andan operating profit before depreciation/amortization (EBITDA)of NOK 44.4 million in 2008 compared with NOK 40.8 millionin 2007. Operating profit (EBIT) amounted to NOK 30.7 (29.6)million. The figures for 2008 include a non-recurring cost ofNOK 2.2 million related to the change of CEO. The 2008 figuresalso include non-recurring costs related to start-up of the plantin Hungary and establishing the sales organization in the UKand India. The benefit from the expanded sales organization isexpected to be increasingly apparent from first quarter of 2009.The equity as of 31 December 2008 was NOK 109.7 million (NOK95.0 million) and the corresponding equity ratio was 30.6%(31.3%). The group’s long-term strategy is to have an equity ratioof at least 30%.Inventories increased by NOK 12.7 million during the year. Currentreceivables fell by NOK 2.1 million. Current liabilities increased byNOK 5.6 million. Total working capital thus increased by NOK 5.0million.Net interest-bearing liabilities increased by NOK 37.0 millionduring the year. Of this increase, approximately NOK 20 millionis due to an increase in the EUR exchange rate from the end of2007 to the end of 2008. Of this latter amount, approximatelyNOK 16.9 million is from an increase in the NOK value of loansdenominated in EUR and recorded as net investment hedgingagainst the investment in Lerc.The total balance sheet at the end of December was NOK 358.5million. Group liquidity remains satisfactory.Cash flow from operations amounted to NOK 48.5 million (NOK7.5 million) compared with an EBITDA of NOK 44.4 million (NOK40.8 million).The Group fulfils all its obligations to its lenders.The Group had a total of 215 employees as of 31 December 2008(2007: 192). Of these, the main locations Norway and France have106 (2007: 102) and 86 (2007: 90) employees respectively. Sickleave in the Group amounted to 4.5% of working hours in 2008(2007: 2.5%). In absolute figures, total sick leave in the Groupduring 2008 amounted to 16,444 hours (2007: 7,947 hours).This is under the industrial average, however the Board and theadministration continue their efforts to improve the situation.The Board and management wish to promote diversity andequality in all areas. Recruitment and development opportunitiesare decided on the basis of a comprehensive evaluation of theshort-term and long-term competence requirements of theindividual company and the Group as a whole. Salaries are basedon education, qualifications, experience and performance. Menand women are treated equally. Most workplaces in the Groupare involved in industrial production, which is traditionally amale-dominated area. At Comrod AS, however, the percentageof women has increased from 36% at the end of 2007 to 41% atthe end of 2008 as a result of the company’s recruitment policy.Lerc SAS had 23% women at end of 2007 and 23% at end of2008. The total number of women in the Group was 73 (34%)in 2008 and 57 (30% in 2007). The Board is satisfied with thisdevelopment in 2008 and expects the trend to continue. TheBoard has 50% female representation.The financial statements for 2008 have been prepared on the28 Comrod Communication Group Annual report 2008