case solar 2012

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From www.solar.eu

If relevant: Analysis should be for Group not for Parent Company
http://www.solar.eu/http://www.solar.eu/http://www.solar.eu/

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Extract from Solar Annual Report 2012, source: www.solar.eu

If you have problems in reading the details below, you may look at pages 13 ff.

And be prepared to calculate the New business opportunity on page 12.

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If relevant, analysis should be for Group not for Parent company.

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New business opportunity.

Solar has the opportunity to have a new product in the portfolio. After investigating this product, analyzing the market

and calculating internal costs, following information is presented to the management.

Estimated quantity/price relation for the following 5 years:

Year 2014 2015 2016 2017 2018

Quantity sold 25.000 55.000 115.000 115.000 65.000

Price dkk. 40 40 35 35 30

The product is supplied by a manufacturer in China. The price for 2014 and 2015 can be agreed now, however based on

previous experience Solar is expecting higher prices in the following years as follows. In addition Solar has to modify and

test the product in order to make it compatible with existing Solar product lines. The import price and the costs to modify

and test are estimated per piece :

Year 2014 2015 2016 2017 2018

Net import price in

Denmark dkk. 7 7 10 11 13

Modify and test costs in dkk. 5 7 7 7 12

Solar is expecting considerable costs in order to have this new product introduced in Denmark:

Year 2014 2015 2016 2017 2018

Sales promotion dkk. 150.000 150.000 125.000 100.000 40.000

Education and support

programme for customers 70.000 70.000 70.000 50.000 50.000

Solar has to make some expensive changes in the site in Vejen to be able to handle this product. The price of a new

building is estimated to dkk 2.200.000. The equipment for modification and test of the product is estimated to dkk

1.200.000. Setup of the equipment is estimated to dkk 150.000, education of Solar workers is estimated to dkk. 150.000.

At the end of the planning period of 5 years the building and equipment may have a net value dkk. 600.000.

Please make calculations to decide whether this project is profitable at a calculation rate of 12 %.

Calculate the Net Present Value and the Internal Rate of Return.

Determine the Pay-Back period for the project.

Sensitivity analyses:

Will the project be profitable, if the net value of the building and equipment is dkk. 0 at the end of the 5 years, assuming

prices and costs at the original level.

Calculate minimum scrap value.

Calculate Max initial investment.

Calculate Max rate of return.

Will the project be profitable, if the price is dkk 35 all 5 years ? Same quantities as initial expectations.

Calculate minimum profitable price, assuming the same price all 5 years.

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Text-extract of Solar Annual Report, 2012.

FINANCIAL HIGHLIGHTS

Consolidated ( million) 2012 2011 2010 2009 2008

Revenue 1,700.9 1,532.4 1,401.5 1,431.4 1,500.3

Earnings before interest, tax,

depreciation and amortisation (EBITDA) 49.5 51.2 60.6 48.0 74.2

Earnings before interest, tax and amortisation (EBITA) 38.0 39.1 49.0 36.2 65.0

Operating profit or loss before special items 28.9 26.7 41.6 29.4 58.3

Earnings before interest and tax (EBIT) 28.9 26.7 41.6 22.4 58.3

Earnings before tax (EBT) 23.2 19.6 35.4 17.4 45.4

Net profit for the year 15.7 12.2 24.6 10.1 31.0

Balance sheet total 767.4 723.5 684.1 620.5 604.1

Equity 294.8 282.2 284.9 257.3 203.6

Interest-bearing liabilities, net 74.9 120.3 98.5 102.8 229.0

Cash flow from operating activities 61.4 48.5 46.6 118.2 44.3

Financial ratios (% unless otherwise stated)

Organic growth 0.1 3.6 (4.8) (12.1) 5.0

EBITDA margin 2.9 3.3 4.3 3.4 4.9

EBITA margin 2.2 2.6 3.5 2.5 4.3

Effective tax rate 32.4 37.8 30.5 42.0 31.7

Net working capital (year-end NWC)/revenue (LMT) 12.6 15.8 15.9 15.0 18.7

Gearing (net interest-bearing liabilities/EBITDA), no. of times 1.5 2.3 1.6 2.1 3.1

Return on equity (ROE) excl. amortisation 8.6 8.7 11.8 7.3 17.5

Return on invested capital (ROIC) excl. amortisation 7.4 6.9 8.8 6.5 10.3

Equity ratio 38.4 39.0 41.6 41.5 33.7

Share ratios

Earnings per share in per share outstanding (EPS) 2.00 1.55 3.13 1.48 4.55

Earnings per share excl. amortisation

in per share outstanding (EPS) 3.16 3.13 4.08 2.48 5.53Dividend in per share 0.89 0.70 1.34 0.57 2.01

Dividend in % of net profit for the year (payout ratio) 44.8 45.0 42.9 44.4 43.6

Dividend in DKK per share 6.65 5.20 10.00 4.25 15.00

Employees

Average number of employees (FTE) 3,596 3,200 2,955 3,175 3,010

Outline

2012 was characterised by slowdown in all markets where Solar operates, and trends were particularly disappointing in late Q4. The

groups revenue and earnings in 2012 fell short of our previously announced expectations. Net working capital was reduced to

215.4m, equalling 12.6% of revenue against 15.8% in 2011. This positive development in net working capital contributed to a rise incash flow from operating activities at 61.4m, up from 48.5m in 2011. The group will maintain our target for financial gearing of 1.5

to 2.5 times EBITDA. Solar does not expect to make any major acquisitions in 2013. In this light, the Supervisory Board will assess the

option to pay out extraordinary dividends in the autumn of 2013. Therefore, at the upcoming annual general meeting, the Supervisory

Board will propose that it be granted the authority to pay out extraordinary dividends of up to DKK 15.00 per share for the period until

the next annual general meeting.

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SUMMARY FOR THE SOLAR GROUP2008-2012

Income statement ( million) 2012 2011 2010 2009 2008

Revenue 1,700.9 1,532.4 1,401.5 1,431.4 1,500.3


depreciation and amortisation (EBITDA) 49.5 51.2 60.6 48.0 74.2

Earnings before interest, tax and amortisation (EBITA) 38.0 39.1 49.0 36.2 65.0

Operating profit or loss before special items 28.9 26.7 41.6 29.4 58.3Earnings before interest and tax (EBIT) 28.9 26.7 41.6 22.4 58.3

Financials, net (5.7) (7.1) (6.2) (5.0) (12.9)

Earnings before tax (EBT) 23.2 19.6 35.4 17.4 45.4

Net profit for the year 15.7 12.2 24.6 10.1 31.0

Balance sheet ( million)

Non-current assets 255.8 260.4 245.0 230.5 221.0

Current assets 511.6 463.1 439.1 390.0 383.1

Balance sheet total 767.4 723.5 684.1 620.5 604.1

Equity 294.8 282.2 284.9 257.3 203.6

Non-current liabilities 144.1 153.9 163.0 163.7 167.5

Current liabilities 328.5 287.4 236.2 199.5 233.0Interest-bearing liabilities, net 74.9 120.3 98.5 102.8 229.0

Invested capital 395.4 433.8 415.1 388.4 457.8

Net working capital, year-end 215.4 242.2 223.1 214.9 280.8

Net working capital, average 228.7 233.9 216.5 235.6 265.3

Cash flow ( million)

Cash flow from operating activities 61.4 48.5 46.6 118.2 44.3

Cash flow from investing activities (9.4) (68.8) (32.1) (20.4) (74.7)

Cash flow from financing activities (14.3) (23.1) (13.8) 23.0 11.8

Net investments in intangible assets (2.3) (4.2) (15.7) (12.4) (4.7)

Net investments in property, plant and equipment (7.1) (2.3) (6.4) (7.8) (11.2)

Acquisition and disposal of subsidiaries and activities, net 0.0 (62.0) (10.3) 0.0 (58.6)

Financial rations (% unless otherwise stated)

Revenue growth 11.0 9.3 (2.1) (4.6) 9.7

Organic growth 0.1 3.6 (4.8) (12.1) 5.0

EBITDA margin 2.9 3.3 4.3 3.4 4.9

EBITA margin 2.2 2.6 3.5 2.5 4.3

EBIT margin 1.7 1.7 3.0 1.6 3.9

Effective tax rate 32.4 37.8 30.5 42.0 31.7

Net working capital (year-end NWC)/revenue (LTM) 12.6 15.8 15.9 15.0 18.7

Net working capital (average NWC)/revenue (LTM) 14.0 15.3 15.4 16.5 17.7

Gearing (interest-bearing liabilities, net/EBITDA) no. of times 1.5 2.3 1.6 2.1 3.1

Return on equity (ROE) 5.4 4.3 9.1 4.4 14.4

Return on equity (ROE) excl. amortisation 8.6 8.7 11.8 7.3 17.5

Return on invested capital (ROIC) 4.9 3.8 7.0 4.4 8.7

Return on invested capital (ROIC) excl. amortisation 7.4 6.9 8.8 6.5 10.3

Adjusted market capitalisation/earnings before interest,

tax and amortisation (EV/EBITA) 8.9 9.0 11.1 11.5 6.2

Equity ratio 38.4 39.0 41.6 41.5 33.7

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SUMMARY FOR THE SOLAR GROUP2008-2012 continued

Share ratios (% unless otherwise stated) 2012 2011 2010 2009 2008

Earnings per share in per share outstanding (EPS) 2.00 1.55 3.13 1.48 4.55

Earnings per share excl. amortisation in per share outstanding

(EPS) 3.16 3.13 4.08 2.48 5.53

Intrinsic value in per share outstanding 37.5 35.9 36.3 32.8 30.3

Cash flow from operations per share outstanding 7.81 6.17 5.93 15.05 6.60Share price in 34.4 30.2 56.6 46.0 25.6

Share price/intrinsic value 0.92 0.84 1.56 1.40 0.85

Dividend in per share 0.89 0.70 1.34 0.57 2.01

Dividend in % of net profit for the year (payout ratio) 44.8 45.0 42.9 44.4 43.6

Price earnings (P/E) 17.2 19.4 18.1 31.1 5.6

Share price in DKK 257 224 422 343 191

Dividend in DKK per share 6.65 5.20 10.00 4.25 15.00

Employees

Average number of employees (FTE) 3,596 3,200 2,955 3,175 3,010

DefinitionsOrganic growth Revenue growth adjusted for enterprises acquired and sold off and any exchange rate

changes. No adjustments have been made for number of working days.

Net working capital Inventories and trade receivables less trade payables.

Gearing Interest-bearing liabilities, net, relative to EBITDA. EBITDA have not been adjusted for

enterprises and activities acquired.

ROIC Return on invested capital calculated on the basis of operating profit or loss before

special items less calculated tax.

Financial ratios are calculated in accordance with the Danish Society of Financial Analysts' Recommendations & Financial Rat ios2010.

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If relevant, analysis should be for Group not for Parent Company.

INCOME STATEMENTGroup Parent company

Note million 2012 2011 2012 2011

3 Revenue 1,700.9 1,532.4 411.5 371.4

Cost of sales (1,337.9) (1,206.4) (299.6) (270.6)

Gross profit 363.0 326.0 111.9 100.8

Other operating income - - 4.7 4.54 External operating costs (80.1) (70.9) (11.5) (11.1)

5 Staff costs (227.5) (199.4) (63.1) (59.3)

6 Loss on trade receivables (5.9) (4.5) (1.7) (2.5)


depreciation and amortisation (EBITDA) 49.5 51.2 40.3 32.4

7 Depreciation on property, plant and equipment (11.5) (12.1) (3.7) (3.5)

Earnings before interest, tax and amortisation (EBITA) 38.0 39.1 36.6 28.9

7 Amortisation of intangible assets (9.1) (12.4) (4.8) (4.4)

Earnings before interest and tax (EBIT) 28.9 26.7 31.8 24.5

Dividends from subsidiaries - - 8.3 4.3

8 Financial income 5.3 4.9 3.6 5.3

9 Financial costs (11.0) (12.0) (26.9) (19.5)

Earnings before tax (EBT) 23.2 19.6 16.8 14.6

10 Income tax (7.5) (7.4) (8.1) (6.4)

11 Net profit for the period 15.7 12.2 8.7 8.2

12 Earnings per share in per share outstanding (EPS) 2.00 1.55

12 Diluted earnings per share in per share outstanding (EPS-D) 2.00 1.55

STATEMENT OF COMPREHENSIVE INCOME

Net profit for the period 15.7 12.2 8.7 8.2Other income and costs recognised:

Foreign currency translation

adjustment at the beginning of the year (1.0) 0.7 (1.1) 0.9

Foreign currency translation adjustment of foreign subsidiaries 5.5 (0.7) - -

Value adjustment of hedging instruments before tax (2.8) (5.9) (3.0) (4.3)

Tax on value adjustments of hedging instruments 0.7 1.5 0.8 1.1

Other income and costs recognised after tax 2.4 (4.4) (3.3) (2.3)

Total comprehensive income for the year 18.1 7.8 5.4 5.9

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BALANCE sheetGroup Parent company

Note million 31.12 31.12 31.12 31.12

2012 2011 2012 2011

Assets:

13 Intangible assets 80.7 86.4 29.4 31.9

14 Property, plant and equipment 168.1 170.0 40.1 41.3

15 Investments 7.0 4.0 228.6 252.5Non-current assets 255.8 260.4 298.1 325.7

16 Inventories 198.4 178.2 36.9 33.6

17 Trade receivables 242.1 243.3 54.5 54.3

Receivables from subsidiaries - - 91.6 67.4

Income tax receivable 5.3 6.2 3.3 0.0

Other receivables 3.4 3.7 1.5 1.7

18 Prepayments 4.2 3.9 0.8 1.2

Cash at bank and in hand 56.6 25.6 23.7 4.7

Assets held for sale 1.6 2.2 0.0 0.0

Current assets 511.6 463.1 212.3 162.9

Total assets 767.4 723.5 510.4 488.6

Equity and liabilities:

19 Share capital 106.2 106.5 106.2 106.5

Reserves (8.1) (11.5) (9.8) (7.6)

Retained earnings 189.7 181.7 218.2 217.3

Proposed dividend for the year 7.0 5.5 7.0 5.5

Equity 294.8 282.2 321.6 321.7

20 Interest-bearing liabilities 111.4 118.6 45.9 50.0

22 Provision for pension obligations 4.2 3.9 0.3 0.3

23 Provision for deferred tax 24.7 26.4 11.5 11.7

24 Other provisions 3.8 5.0 0.0 0.0

Non-current liabilities 144.1 153.9 57.7 62.0

20 Interest-bearing liabilities 20.1 27.3 12.5 14.7

Trade payables 225.1 179.4 68.5 46.2

Amounts owed to subsidiaries - - 13.0 11.1

Income tax payable 3.2 7.0 0.7 2.7

25 Other payables 75.2 71.5 35.4 30.2

26 Prepayments 1.0 0.7 0.0 0.0

24 Other provisions 3.9 1.5 1.0 0.0

Current liabilities 328.5 287.4 131.1 104.9

Liabilities 472.6 441.3 188.8 166.9

Total equity and liabilities 767.4 723.5 510.4 488.6

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Cash flow statementGroup Parent company

Note million 2012 2011 2012 2011

Net profit for the period 15.7 12.2 8.7 8.2

Depreciation and amortisation 20.6 24.5 8.5 7.9

Change in provisions and other adjustments (0.1) (2.0) (0.9) (0.1)

8, 9 Financials, net 5.7 7.1 23.3 14.2

Income tax 7.5 7.4 8.1 6.48, 9 Financials, net, paid (6.0) (6.6) (0.6) (0.2)

Income tax paid (14.9) (5.2) (12.7) (0.4)

Cash flow before change in working capital 28.5 37.4 34.4 36.0

Change in inventories (17.1) (1.2) (3.3) (0.6)

Change in receivables 7.3 1.3 (4.9) 0.8

Change in interest-bearing liabilities 42.7 11.0 20.0 14.1

Cash flow from operations 61.4 48.5 46.2 50.3

13 Purchase of intangible assets (2.3) (4.2) (2.3) (3.7)

27 Purchase of property, plant and equipment (8.4) (5.7) (3.3) (3.9)

Purchase of investments 0.0 (0.3) 0.0 (23.5)

28 Acquisition of subsidiaries and activities 0.0 (62.0) 0.0 (18.5)

27 Divestment of property, plant and equipment 1.3 3.4 0.7 2.5Cash flow from investing activities (9.4) (68.8) (4.9) (47.1)

Repayments of long-term, interest-bearing debt (8.9) (12.6) (4.2) (5.9)

Raising of non-current interest-bearing liabilities 0.1 0.0 0.1 0.0

Loans to subsidiaries - - (10.5) (13.6)

Dividends distributed (5.5) (10.5) (5.5) (10.5)

Cash flow from financing activities (14.3) (23.1) (20.1) (30.0)

Total cash flow 37.7 (43.4) 21.2 (26.8)

Cash as at 1 January (1.7) 32.0 (10.0) 16.8

Assumed on acquisition of subsidiaries 0.0 9.5 0.0 0.0

Foreign currency translation adjustments 0.5 0.2 0.0 0.0

Cash as at 31 December 36.5 (1.7) 11.2 (10.0)

Cash as at 31 December

Cash at bank and in hand 56.6 25.6 23.7 4.7

Current interest-bearing liabilities (20.1) (27.3) (12.5) (14.7)

Cash as at 31 December 36.5 (1.7) 11.2 (10.0)

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Statement of changes in equity

Group

Reserves

for foreign

Reserves currency

Share for hedging translation Retained Proposed

million capital transactions adjustment earnings dividend Total

2012:Equity as at 1 January 106.5 (11.7) 0.2 181.7 5.5 282.2

Foreign currency translation adjustment at the beginning

of the year (0.3) (0.7) (1.0)

Foreign currency translation adjustment of foreign

subsidiaries 5.5 5.5

Value adjustment of hedging instruments before tax (2.8) (2.8)

Tax on value adjustments 0.7 0.7

Net income recognised directly in equity (0.3) (2.1) 5.5 (0.7) 0.0 2.4

Net profit for the period 8.7 7.0 15.7

Comprehensive income (0.3) (2.1) 5.5 8.0 7.0 18.1

Distribution of dividends (5.5) (5.5)

Other movements 0.0 0.0 0.0 0.0 (5.5) (5.5)

Equity as at 31 December 106.2 (13.8) 5.7 189.7 7.0 294.8

2011:

Equity as at 1 January 106.3 (7.3) 0.9 174.5 10.5 284.9


of the year 0.2 0.5 0.7

Foreign currency translation adjustment of foreign

subsidiaries (0.7) (0.7)



Net income recognised directly in equity 0.2 (4.4) (0.7) 0.5 0.0 (4.4)


Comprehensive income 0.2 (4.4) (0.7) 7.2 5.5 7.8


Other movements 0.0 0.0 0.0 0.0 (10.5) (10.5)

Equity as at 31 December 106.5 (11.7) 0.2 181.7 5.5 282.2

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Statement of changes in equitycontinued

Parent company

Reserves

for foreign

Reserves currency

Share for hedging translation Retained Proposed

million capital transactions adjustment earnings dividend Total

2012:Equity as at 1 January 106.5 (7.5) (0.1) 217.3 5.5 321.7


of the year (0.3) (0.8) (1.1)



Net income recognised directly in equity (0.3) (2.2) 0.0 (0.8) 0.0 (3.3)


Comprehensive income (0.3) (2.2) 0.0 0.9 7.0 5.4


Other movements 0.0 0.0 0.0 0.0 (5.5) (5.5)

Equity as at 31 December 106.2 (9.7) (0.1) 218.2 7.0 321.6

2011:

Equity as at 1 January 106.3 (4.3) (0.1) 213.9 10.5 326.3

Foreign currency translation adjustment at the beginning of

the year 0.2 0.7 0.9



Net income recognised directly in equity 0.2 (3.2) 0.0 0.7 0.0 (2.3)


Comprehensive income 0.2 (3.2) 0.0 3.4 5.5 5.9


Other movements 0.0 0.0 0.0 0.0 (10.5) (10.5)

Equity as at 31 December 106.5 (7.5) (0.1) 217.3 5.5 321.7

case solar 2012

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