Interim report January-June 2011Continued strong growth and improved operating marginSweden, Lund, 2011-08-17 07:30 CEST --
Highlights of the second quarter of 2011:
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Net sales rose to SEK 164.9 m (130.8), an increase of 26 percent.
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Operating profit (EBIT) rose to SEK 10.4 m (3.0), an increase of 247 percent. The EBIT margin improved to 6.3 percent (2.3).
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Profit for the period increased to SEK 7.9 m (7.3).
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Earnings per share after tax were SEK 0.41 (0.38).
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Cash flow from current activities was SEK 3.5 m (2.1).
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Order intake amounted to SEK 181.0 m (151.7), an increase of 19 percent. The Care product range increased by 36 percent.
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Prylos SAS was acquired after the close of the period. The acquisition is not expected to have any material effect on Doro’s result for 2011.
CEO Jérôme Arnaud: A strong and active quarter in line with our strategy
"The second quarter was a strong one in all regards, with increased sales for the 15th consecutive quarter. The operating margin also rose and was significantly better than in the corresponding period in 2010. Order intake was strong as well. In total, order bookings rose by 19 percent, despite the continued phasing out of portions of the Home product range. In the Care product range, order bookings rose by 36 percent.
Over the second quarter, we continued to strengthen our geographical presence by signing several important partnership agreements with retailers such as Tele-Choice of Australia, which sells one of our phones through its webshop and 153 stores nationwide, and Amplifon of Italy with its 400 stores. We have also streng-thened our presence in the UK through an agreement with Virgin Media, which sells one of our phones through its webshop, 78 proprietary stores and other affiliated outlets. Through our US partner Consumer Cellular, we are now also represented at Sears Roebuck & Co, which has 800 stores.
We have also secured new agreements with additional operators who all commenced sales of our new 3G phone in July. These are Sonera of Finland and, after the close of the period, 3 of Sweden. In addition, Orange, which has already been selling our phones in various countries, has expanded its distribution of Doro devices to Spain. The addition of yet another country illustrates the confidence that Orange has in Doro.
Doro’s strengthened product development organization has enabled new launches of two new easy-to-use models with functions that are in demand. New features include a specially-adapted camera, 3G technology and remote programming of the phone book and calendar functions, as well as a new design. These models have, in practice, been available in stores since July and have not therefore affected sales for the quarter to any material extent.
Today, 25 percent of all mobile phones sold globally are smartphones. Often based on the Android platform, smartphones are also increasingly in demand among our target group. Alongside the development of new markets and products, our growth strategy therefore entails the development of Android smartphones for seniors. These phones will support a selection of relevant services, including mHealth.
To reinforce this development, we acquired Prylos SAS following the close of the period. This provides us with an Android-based platform for new products and services, as well as an enhanced and focused development team in telecom solutions for seniors. With the acquisition, we expect to be able to extend the content of our new competitive offering and to hasten the pace of its launch."
The Group, Second quarter 2011
Net sales and operating profit
Doro’s sales for the second quarter amounted to SEK 164.9 m (130.8), an increase of 26 percent. Growth is primarily driven by the UK and the new markets – the US and Canada. Sales volumes in the Nordic and EMEA regions are beginning to recover after having been affected during the first half of the year by the phasing out of certain portions of the Home product range.
Using the same exchange rates as for the previous year, organic growth amounted to 36.4 percent for the second quarter.
Operating profit (EBIT) amounted to SEK 10.4 m (3.0), an increase of 247 percent.
The operating margin thus rose to 6.3 percent (2.3) despite increased marketing costs. The improved EBIT margin is attributable to the increased sales volume and the fulfilled depreciations of investments in the US. This has also offset a slightly lower gross margin compared to last year. The gross margin may vary from quarter to quarter, primarily due to geographical distribution of sales as well as product mix.
Geographic regions
Nordic
Sales in the Nordic region, where we have the greatest penetration, decreased by 5.7 percent to SEK 43.3 m, primarily due to reduced sales within the Home range. The EBIT margin remains healthy primarily due to Doro’s strong market position.
United Kingdom
In the United Kingdom sales continue to grow. Over the period, they rose by 99.2 percent to SEK 26.3 m. This was an effect of the distribution agreement with Orange and Tesco, and to a certain extent of the new agreement with Virgin Media. Due to continued market investments, the EBIT margin is still negative.
EMEA (Europe, Middle East and Africa)
In EMEA, sales increased by 1.8 percent to SEK 62.1 m, with an improved EBIT margin.
USA and Canada
Operations in the US and Canada reported substantial growth. However, Consumer Cellular’s agreement with Sears Roebuck & Co has yet to make an impact. Sales increased by 492 percent from SEK 5.3 m to SEK 31.4 m, with an increased EBIT margin.
Other regions
Other regions only account for SEK 1.8 m (5.4) and the negative EBIT relates to costs for business development for new markets.
The operating margin for the different regions may vary from quarter to quarter since the allocation of overhead costs is based on sales.
Profit/loss for the period
Profit for the second quarter amounted to SEK 7.9 m (7.3). Net financial items for the period were SEK 7.5 m lower than in the year-earlier period. This is primarily due to the fact that current forward rate agreements have, in accordance with IFRS, been assessed under financial items, affecting net financial items negatively by SEK 2.0 m.
Cash flow, investments and financial position
Cash flow from current activities over the period amounted to SEK 3.5 m (2.1). The improvement is mainly attributable to increased EBIT that was, to a certain extent, offset by increased working capital as a consequence of increased volumes.
The equity/asset ratio improved to 41.6 percent (32.9) at the end of the period.
At the end of the period, Doro had no interest-bearing liabilities (SEK 7.4 m), and a net cash balance of SEK 65.9 m (19.4).The company has unused check facilities of SEK 32.0 m.
Personnel
At the end of the quarter, the headcount was 62 (59). Of these, 29 (27) are based in Sweden, 16 (17) in France, 7 (5) in the United Kingdom, 3 (4) in Norway and 7 (6) in Hong Kong.
Parent Company
The Parent Company’s net sales for the year’s second quarter amounted to SEK 164.3 m (130.8). The profit before tax amounted to SEK 5.3 m (13.8).
Events after the close of the period
A retail agreement was signed with 3 of Sweden which, effective from July, will sell the Doro PhoneEasy® 615 camera phone.
Doro acquired French-based Prylos SAS, which has 12 employees. The acquisition provides Doro with an Android-based platform for its new product launches, as well as a focused development team in telecom solutions for seniors. The acquisition will strengthen Doro’s strategy to grow in mHealth – health solutions based on mobile telephony.
Doro has also continued to develop its partnership with the Orange Group through a sales agreement with Orange in Spain. Effective from July, the mobile operator will sell Doro’s PhoneEasy® 410gsm via the Internet and 2,100 stores throughout Spain.
Outlook
The results of the second quarter confirm the previous outlook presented: Sales and operating profit (EBIT) are expected to grow in 2011.
For full Report, please view the enclosed pdf file.
Doro AB discloses the information provided herein pursuant to the Securities Markets Act and/or the Financial Instruments Trading Act. The information was submitted for public release on Wednesday, August 17, 2011, at 07:30 a.m. CET.
About Doro
Doro is a Swedish company focusing on the development, marketing and sales of telecom products specially adapted to the growing worldwide population of seniors. With over 35 years of experience in telecommunications, and sales in more than 30 countries on 5 continents, Doro is the world’s leading brand for easy-to-use mobile phones. Doro created the Care Electronics category and in recent years, its products have received several highly distinguished international design awards. The company had sales of SEK 633 m in 2010. Doro’s shares are quoted on the Nasdaq OMX Stockholm, Nordic list, Small companies. Read more about Doro at www.doro.com
For further information, please contact:
President & CEO, Jérôme Arnaud, +46 (0)46 280 50 05
Vice President & CFO, Annette Borén, +46 (0)70 630 00 09
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