Content. Financial information. The Year in brief Statement by the CEO Business concept The HL Display model...

Transcription

1 Annual Report 2000

2 Content The Year in brief... 3 Statement by the CEO... 4 Business concept... 6 The HL Display model... 7 HL Display position... 8 Operations Optishop Operations Shop Fixtures Operations Shop Systems Market Production and Environment Employees Risk and sensitivity analysis Board of Director's report Financial information Income statement Balance sheet Cash fl ow statement Notes Auditors' report The HL Display share Board of Directors Board procedures Senior Executives Defi nitions and glossary Several years summary History Annual General Meeting March Monthly report, 2 months March Interim report, 3 months April Monthly report, 4 months May Monthly report, 5 months June Interim report, 6 months...16 July Monthly report, 7 months August Interim report, 8 months September Interim report, 9 months...16 October Monthly report, 10 months November Monthly report, 11 months December

3 It is all about a positive shopping experience The main purpose of merchandising is to encourage the shopping experience. A positive experience in a store with attractively displayed goods stimulates the consumer to buy goods and to come back. HL Display s display and merchandising systems contribute to a heightened shopping experience and, as a consequence, increased profi tability for storeowners and brand manufacturers. It is all about meeting and exceeding the customer s expectations. HL Display

4 Focus on growth HL Display is a global niche company experiencing strong growth. Since HL Display was listed on the Stockholm stock exchange in 1993, annual net sales have, on average, risen by 28 per cent with an average annual profit margin of 10 per cent. In 2000 the group recorded net sales of SEK 874 M and employed just over 800 people. The market and the interest in merchandising is growing at a time when HL Display s customers are expanding considerably. HL Display focuses on continued growth. The objective is to achieve an annual growth rate of at least 20 per cent with an average profit margin of between 10 and 15 per cent during one business cycle. Group net sales SEK M 1,000 Profit/Share SEK 6 Equity/Share SEK HL Display 2000

5 Group net sales increased by 13.7 per cent to SEK M (768.5). Pre-tax profi ts decreased to SEK 44.1 M (47.1). Earnings per share after tax stood at SEK 3.48 (4.20) as of 31 st December Equity per share amounted to SEK (28.89). Investments continue to be high, particularly in the production process. Net investments totalled SEK 58.1 M (67.9). The change in the organisation has taken longer then expected. Establishment of sales companies in Singapore and Ukraine. Key figures (in 1,000 SEK) Group net sales 873, , ,646 Operating profi ts 47,731 55,401 69,042 Pre-tax profi ts 44,095 47,125 70,969 Number of employees, average Profi t margin, % Equity/assets ratio, % HL Display

6 STATEMENT BY THE CEO We are on the right track Despite continued positive growth in HL Display, we have to conclude that the fi nancial year 2000 was a mediocre year, characterised by preparation and change. But we have the target in sight! HL Display is going through a period of major changes. It has taken longer than anticipated to reorganise our sales organisation which has had a negative affect on both net sales and profits. Last year, group sales rose by 13.7 per cent. Operating profits amounted to SEK 47.7 M (55.4) representing a decrease of 13.8 per cent. Essentially, the reorganisation has been a positive experience and we are in the process of becoming the European leader in merchandising systems. Continued consolidation of the retail trade The wave of consolidation that has swept the European retail trade in the last few years is still continuing. Several of the very powerful market players have become even more powerful showing rapid growth in new markets. Many of today s market players have already gone global. They are expanding considerably, primarily through mergers and acquisitions, in order to achieve synergy effects and economy of scale. This trend is beneficial to us since we are a very well developed international organisation and able to supply our customers with the same service in several different markets. This trend also means larger volumes from which HL Display can derive additional benefits, even though this has led to increased downward pressure on prices in the entire sector. By climbing higher on the value chain and offering total solutions to our customers we are able to create the right conditions for larger volumes and improved margins. Parallel to the consolidation of the retail trade, there is also development towards centralising purchasing activities. Crucial decision-making on investments is moved within the company from stores to central functions. The chains have worked out concepts which determine the interior design of the stores and how goods are displayed. For HL Display, this means that cross-border relationships with customers have become increasingly important. For all major customers HL Display has appointed a Key Account Manager who coordinates all activities on a global level. Natural speaking partner The European food retail sector is the most important market for HL Display. We are increasingly becoming a natural partner with regard to our customers shop fixtures. We have attained a very strong position in Europe and supply almost 90 per cent of the largest chains. Exports to EU countries accounted for 79 per cent of HL Display s total net sales in The single largest markets are France, Sweden and Great Britain. HL Display continues to grow also geographically. In 2000 we opened sales companies in two new markets, namely Singapore and Ukraine. The sales company in Singapore is also responsible for some other markets in South-East Asia. Despite limited efforts in the American market, sales in the US have shown continued growth during the year. In fact, sales rose to SEK 20.0 M or 2.3 per cent of total net sales, representing an increase of 21.0 per cent compared with the same period last year. The marketing is handled by our partner, Trion Industries, who is a leading supplier of metal display hooks in the US. Merchandising is becoming increasingly important The development of merchandising has been stronger in the American market than in Europe. Still, American suppliers have not yet been able to establish themselves over here which could be attributed to cultural differences and the fact that the European market is very fragmented. In terms of innovative display of goods, France has become the leading European market. Following the European launch of the merchandising system Optishop in 2000, HL Display can offer a total solution. The concept not only makes work on the shop floor easier so that staff can devote more time to personal service, it also creates room for new goods on the shelves, a logical structure as well as a clear presentation of products. Most important of all, however, is the increase in sales generated by our systems. In 2001 we will intensify our efforts and implement our concept in several markets. Optishop provides us with very good opportunities to achieve new sales successes and makes us the obvious partner in the merchandising sector as we already are when it comes to shop fixtures. In markets where 4 HL Display 2000

7 STATEMENT BY THE CEO we are making most effort, we are beginning to see the fruit of our work. We are growing into a new division and are being accepted as a merchandising company. Today we enter into customers' procurement processes at an earlier stage. Specialising in factories Last year, the price for PVC reached its highest level since By the end of the year the price began to fall. For the most part it has not been possible to pass on this price increase to the customer since we are bound by supply agreements with the majority of our customers where prices are negotiated once a year. Compared with 1999, the price was on average 14.3 per cent higher in 2000, which resulted in a drop in profits of SEK 8.6 M. Production in our factories has become much more efficient with improved flow. All factories are aiming to specialise in fewer products. A constant increase in productivity is necessary in order to maintain a competitive edge. HL Display continues to work towards improving our IT-support to optimise and standardise all processes. The future rate of investment is also to remain high. Our rapid growth calls for regular investments in new machinery, but also in technology and product development. Net investment in 2000 amounted to SEK 58.1 M (67.9). Improvement of the Internet shop The inflow of orders via our in-house developed sales channel HL Smart Shop, where customers effectively place orders via the Internet, EDI or by telephone, has not developed as expected. Therefore, we increase marketing activities aimed at our customers and add more facilities. So far, HL Smart Shop has been put into operation in Sweden and Norway. Great Britain, Belgium and the Netherlands are next in line during this year. In the long-term, HL Smart Shop will be launched in all European markets. efficiently. We underestimated the difficulties inherent in the re organisation of our sales organisation. This change consumed more time and effort than we anticipated. Many new measures are already in place but we will need this year to finalise the entire plan. The expertise required to deliver solutions that contribute to a better shopping experience can be found at HL Display, even though certain positions are yet to be filled. Throughout the entire company there is a strong belief in the future. As our preliminary work is now nearing its final phase we are ready to take up our new role. Future prospects Our vision and our ambitions remain unchanged. In the course of one business cycle we should achieve an annual average growth rate of at least 20 per cent with a profit margin of between 10 and 15 per cent. The venture to develop HL Display from its current position as a supplier of display products to a leading merchandising company, from field sales to Key Account Management, was by no means a natural one. It requires time and resources and has temporarily influenced net sales and profits negatively. In the long-term these changes are necessary to ensure future growth and profits, in accordance with the vision adopted by HL Display. Continued restructuring Just over one year ago, a new organisation structure was introduced within the company in order to meet the increased needs and demands of our major customers more Anders Remius, CEO HL Display

8 BUSINESS CONCEPT International growth is the driving force for HL Display The core of HL Display s business concept is to offer systems that result in increased profi tability by means of better exposure. Clear displays and attractive shop interiors are conducive to a positive shopping experience and therefore increase sales. As early as in the 1950s, HL Display started to manufacture aids to display goods in stores, such as plastic label holders. Development was swift and the company has grown from a small entrepreneurial company into an international group while retaining a strong entrepreneurial spirit. Today, HL Display has 805 employees in 17 countries and net sales of SEK 874 M. The company has been listed on the OM Stockholm Stock Exchange since 1993 and is owned by 3,063 shareholders, most of them Swedish. Business concept HL Display shall increase customer profitability by offering the retail trade and its suppliers cost-efficient, customeradapted display systems. Production is to be flexible and delivery times are to be kept short. Vision HL Display s vision is to be the leading supplier of merchandising systems as well as the most cost-effective supplier of shop fixtures. HL Display want to be a leading company not only in terms of market share, but also in terms of knowledge of client requirements together with design and production expertise. Corporate objectives HL Display s overall objective is a stable growth rate with good profitability and an increase in shareholder value. HL Display has drawn up a number of objectives for its activities. The financial objectives are: Continued average growth of at least 20 per cent each year during one business cycle. An average profit margin of between 10 and 15 per cent in the same period. Equity/assets ratio of at least 40 per cent. The financial objectives are complemented by the following qualitative objectives: Vertical integration, i.e: use of internal resources first. To become the leading market player within development and design in our niche market. To increase the efficiency of product sales by means of IT-support. To become a natural speaking partner for major clients also within merchandising. To continue the geographic expansion by establishing new subsidiaries in and outside Europe. Strategy In order for HL Display to achieve the objectives set out for its activities, a number of key strategies have been drawn up. In brief, these stipulate that HL Display is to: Maintain its business concept and core activities. Expand by primarily exploiting internal resources. Retain key employees and attract new ones. Be perceived and act as one company in different markets. Constantly adapt its organisation according to the requirements and needs of the market. Exploit IT-support in order to standardise processes. Develop an expertise within research and development as well as design. Strengthen business culture by retaining the focus on growth and changes. 6 HL Display 2000

9 THE HL DISPLAY MODEL Profitable business is based on good customer relations Knowledge and understanding of customers problems is a condition in order to become a strategic partner. Good customer relations provide HL Display with the opportunity to deliver added value to the customer and increase profitability for each project. The European retail sector is undergoing considerable changes which consolidate HL Display s customers. Major chains are expanding abroad through mergers and acquisitions. At the same time, decisions with regard to purchases are moved up within the customer organisation from the shop manager to central functions. These customers increasingly require central agreements with suppliers who can offer total solutions in several markets. This has placed new demands on HL Display s sales organisation, at a time when customer relations are becoming increasingly important. Last year HL Display focused on getting its new organisation off the ground, an organisation which has unprecedented opportunities to dedicate resources to key customers. To safeguard such long-term customer relations, HL Display has appointed a Key Account Manager (KAM) for its major clients. The KAM has been given global responsibility as many of our major customers operate in several markets. Knowing the customer The overall strategy for Key Account Management is to work with the customer s organisation and structure as a starting point. Knowledge about the customer and the customer s activities are important in order to deliver a value which is greater than the functions of the product. With customer knowledge and experience within merchandising, the KAM can identify solutions to the customers problems. Management and coordination of all customer contacts is entrusted to one person: the Key Account Manager. Within HL Display, the KAM builds closer relationships with key customers, draws up strategies and market plans. The KAM involves many parts of the company and adopts a transverse function through HL Display s different channels. HL Display model HL Display has developed a model for operational activity. The model illustrates the company s working process and consists of four sections: product range, concept, channels and customers. Development and design as well as environmental concerns are basic requirements for the workflow. The HL Display model Product range Concepts Channels Customers P R O D U C T I O N P R O D U C T S Product range Shop Fixtures Optishop Shop Systems The range refers to all products that are supplied by HL Display. The majority is manufactured in-house. All products are owned by the product managers employed in each factory. Main production takes place in Sweden. 84 per cent of sales are attributed to exports. Smaller production sites are located in the UK and the Netherlands. Datastrips is also manufactured in the US through a joint venture with Trion Industries Inc. in Wilkes-Barre, Pennsylvania. Concept With the product range as a basis, different concepts are made up in order to illustrate HL Display s offers. One product can be part of more than one concept. HL Display markets three different concepts. These are: Shop Fixtures, Optishop and Shop Systems. With Shop Fixtures and Optishop more than 90 per cent of the products are manufactured by HL Display. With Shop Systems the corresponding figure is around 50 per cent. Channels HL Display s concepts are offered to customers via several sales channels. The sale channels represent different types of customer process, which are HL Smart Shop, product sales and project sales. Key Account Management coordinates all activities and has the overall responsibility for cooperation with customers. Customers HL Display s customers are active in the retail food sector, retail non-food sector and brand manufacturers industries. K E Y A C C O U N T M A N A G E M E N T HL Smart Shop Product Sales Project Sales Retail Food Retail Non-Food Brand Manufacturers HL Display

10 HL DISPLAY'S POSITION A strong position in a changing market The wave of mergers and acquisitions that characterised the retail industry in 1999 showed no signs of slowing down in Continuous consolidation of the industry prevails as large players become even larger and expand their concepts to new markets. The strong consolidation trend which has prevailed in the retail industry for a couple of years, with large retail chains growing even larger, continued also in The large chains have expanded greatly through takeovers and mergers. Currently there are no signs that this trend is weakening, on the contrary it is set to become even stronger in the years ahead. Several major deals were realised last year. The EU s final approval of the merger between the French retail chains Carrefour and Promodès created Europe s largest and the world s fourth largest retail chain. The Dutch food retail giant Ahold firmly established its presence in the Scandinavian market by acquiring 50 per cent of ICA. The market concentration in Europe is increasing. In Sweden, for example, the three largest players (ICA, KF and Axfood) currently have a market share of 95 per cent. Several of the truly major players are also global players, Ten largest retail food chains including Wal-Mart Europe 1 Carrefour/Promodès (FR) The world 1 Wal-Mart (US) of the US, Ahold of the Netherlands, Carrefour of France 2 Metro AG (DE) 2 Metro AG (DE) 3 Intermarché (FR) 3 Kroger (US) and Tesco of Great 4 Rewe (DE) 5 Auchan (FR) 6 Tesco (UK) 7 Aldi (DE) 8 Edeka (DE) 9 J.Sainsbury (UK) 10 Leclerc (FR) 4 Carrefour/Promodès (FR) 5 Albertson s US) 6 Rewe (DE) 7 Intermarché (FR) 8 Ahold (NL) 9 Tesco (UK) 10 Tengelmann (DE) Britain. Three of the five largest retail chains in the world are from the US. Apart from Wal- Mart, US chains owe their size mainly to Source: Elsevier Food International Retail Pocket their large home market. This is what the consumer feels is most important, in per cent This consolidation 1 Clean store environment 71 and globalisa- 2 Fruit & vegetables 3 Orderliness 4 Meat & delicatessen 5 Easy to fi nd 6 Knowledgeable staff 7 Personal service 8 Good parking facilities 9 Always low prices tion trend is beneficial to HL Display which has a welldeveloped international organisa tion. This trend also involves larger volumes from Source: SIFO Research & Consulting; survey commissioned by dairy group Arla. which HL Display can derive additional benefits, but it also gives rise to strong downward pressure on prices in the industry. Centralisation Concurrently with the consolidation of the retail industry, purchasing is becoming increasingly centralised. The chains have prepared concepts which govern the design and appearance of their stores. In these cases the shop managers no longer decide the product range or how it will be displayed. Instead they receive a concept which they must implement. As a consequence, HL Display must be able to increase its offer of conceptual solutions as a complement to traditional product sales. To keep up with this development, HL Display must also establish relationships at a higher level in customers organisations. Due to this development, crossborder relationships with clients have become a key factor, and consequently HL Display is working actively with global Key Account Management. Current trends also indicate that brand manufacturers and retail companies will further their cooperation to boost sales. Focus on the consumer The retail industry is focusing more on the consumer and it is becoming increasingly important to stimulate the desire to buy and ensure that the customer feels at home and will return. Loyalty to one store is not particularly strong despite the proliferation of different bonus card types. The average customer alternates between three to four different stores. A positive experience in the store is vital to tempt the customer to return. The experience can be heightened by smart display solutions. Surveys show that consumers no longer range the price level as the most important factor when they decide where they want to do their shopping. Consumers prioritise the experience, the cleanliness and orderliness of the store, and that goods can be found easily. Heightening the shopping experience has become an important challenge for both the storeowners and brand manufacturers. Many shopping decisions are made in the store, and in this situation the display is of vital importance. The store must have an 8 HL Display 2000

11 HL DISPLAY'S POSITION organised and logic presentation of its product range and simultaneously entice the customer to make impulse buys. This contradiction presents a challenge which can be solved with well-adapted merchandising systems which reinforce the visual impression. To fulfil these new requirements, HL Display has developed the Optishop concept which facilitates both order and stimulus. Furthermore, the actual work carried out in the store is made easier through different technical solutions. HL Display s merchandising systems have been successful in several markets as the company can prove to its customers that sales increase when they are used. HL Display suggests its customers to measure how sales are influenced. Europe is HL Display s home market The most important market for HL Display s products is the European food retail sector. HL Display has a strong position in Europe and is currently supplying products and services to nearly 90 per cent of the largest chains. Sales in Europe accounted for 95 per cent of HL Display s total net sales in In the global market, HL Display is currently serving 66 of the world s 100 largest food retail chains. HL Display has wide coverage through sales companies and distributors. The largest single markets are France, Sweden and Great Britain. Taking into account the current trends in the retail industry, HL Display s potential for continued growth must be considered as very promising. Customers HL Display has several thousand customers all over the world, principally in the food retail and non-food retail industry. Major clients in this segment include Swedish chains such as ICA and Konsum. An increasing number of chains are expanding internationally and HL Display has the opportunity of growing with them. A few examples of this are Ahold, Boots, Carrefour and H&M. Brand manufacturers looking to expose their products and strengthening their brands is an increasingly important customer group for HL Display. These companies include Coca-Cola, Nestlé, Procter & Gamble and Unilever. A great number of HL Display s customers have been customers for many years, despite substantial changes in the industry. One reason for this loyalty is HL Display s ability to successfully help customers display their goods and thereby increase sales in their stores. With the help of HL Display and its unique knowledge and competence in the field of merchandising systems, a store can increase its sales substantially. The pay back period for an investment in one of HL Display s products is normally no more than six months. Competitors With regard to Shop Fixtures, HL Display faces regional competition principally from smaller companies. For some products, however, Checkpoint Meto and VKF Renzel are exceptions on an international level. Due to HL Display s international organisation, well-established trademark and good customer relations, these competitors pose only a minor threat. The Optishop merchandising concept faces only limited competition in Europe. This is attributable to the fact that the concept creates a new market as HL Display offers in-house developed total solutions combined with an increased knowledge content. In this niche market HL Display has obtained a leading position. In the US, on the other hand, there are a number of companies that specialise in merchandising, but none of them has become truly established in the European market. The Shop System concept is only marketed in Sweden, where there are a number of competitors that specialise in shop fitting, such as Itab and Hestra. HL Displays current customer base in Europe, retail food 90% HL Displays current customer base in the world, retail food 66% HL Display

12 OPERATIONS OPTISHOP A new dimension in merchandising A more rewarding shopping experience has become the focus of retailers and brand manufacturers alike. It is all about stimulating the desire to buy and making the customer return. HL Display s customers can increase sales by a carefully prepared and tailor-made merchandising. It is in the store that customers finally decide if they are buying a certain product. Therefore, the packaging and display of the product is very important. Sales are increased by following up commercials and advertisements by a good display which sends out the right signals at the time a purchase is made. Besides a logical structure and a clear presentation of the product range, the store environment should also stimulate the customers to make impulse buys. This contradiction presents a challenge which can be solved with well-adapted merchandising systems which enhances the visual impression of the product. This is where Optishop comes into the picture. Supports category management The Optishop concept conforms to the increased focus on category solutions which the retail industry currently requests. Retailers and brand manufacturers are cooperating more closely on how to display different product categories. Products within Optishop TM concept Optimal Modular shelf management system with dividers, back supports and automatic feeding. Optishelf Extendable shelf to optimise shelfspace and facilitate re-merchandising. These categories include confectionery, baby food, hair care products etc. Each category in a store has its specific quality and character (the design of the packaging Optisign Optistand Optitrack Cost-effective sign systems to carry graphics and product information. Affordable fl oor stands with great design easily assembled without tools. Modular shelving system for shop-in-shop solutions. etc.). Over the years, HL Display has gained a broad and in-depth knowledge of which solutions are most efficient for a specific category. HL Display has developed different high-quality solutions for different categories which successfully handle intensive use in the store. This also entails that the service content of HL Display s offer is increasing. Another aim with the Optishop concept is to help retail chains create and maintain uniform store concepts. Efficient display Apart from the display itself, Optishop also addresses several customer problems, such as simple and swift re-merchandising. Ingenious accessories move products automatically forward which gives a positive impression of well-stocked shelves. The store area represents large expenditures. Because of this, it is important to utilise each square metre in the best possible way. Moreover, each year, an additional 15 per cent of new products arrive which have to be accommodated. Optishop plays a vital part to ensure that the sales surface utilisation is maximised by efficient shelf management. HL Display develops and offers entire concepts and systems. The system solutions are made up of building blocks and modules from HL Display s basic product range. These standard products are adapted according to customer requirements and complemented with different communication solutions. Market The most developed market for merchandising systems is the US where several companies specialise in these systems. Europe has at present no direct equivalent. HL Display s sales of merchandising systems is most developed in France where both chains and brand manufacturers use the Optishop system. There are development opportunities both by moving into other markets and by working with other customers. Customers, including large and leading retail chains and brand manufacturers, are increasingly active on a global scale. They require partners that can offer quality products and guaranteed service from one and the same supplier in all countries where they operate. 10 HL Display 2000

13 OPERATIONS OPTISHOP Optishop Optimisation of shelf space Slimline is an innovation from HL Display. It is a new generation of datastrip which improves utilisation of available space and facilitates price and product information. HL Display

14 OPERATIONS OPTISHOP CASE The new generation of hypermarkets The Auchan hypermarket in Val d Europe outside Paris was inaugurated on 25 October. It is the new generation of hypermarkets and HL Display was involved in its development. Val d Europe is located outside Paris not far from Euro- Disney. It is a new spectacular shopping centre which has been inspired by glass and metal constructions dating from the end of the 19th century. This modern facility offers a complete range of the latest in shopping technology. Many ultra-modern solutions are found under one roof. Accessibility, natural light, airiness, greenery, space for service and children have all been catchwords during the development and construction of the shopping complex in Val d Europe. The shopping experience and service were given priority. A new generation of shops Auchan is one of Europe s leading retail companies with net sales of more than FRF 80 billion. The Auchan group employs 119,000 people in just over 740 hypermarkets in 12 countries. The Auchan hypermarket is the main attraction of the shopping centre in Val d Europe. The extensive two-storey complex took two years to complete. Auchan alone has made investments of just over FRF 2 billion in the new hypermarket. Auchan, which focuses greatly on becoming a market leader, prioritised new and innovative solutions and opted for cooperation with partners who could meet such requirements. This hypermarket is the first of its kind with all the latest technology employed within shopping and product presentation. It represents an entirely new generation of shops shops for the new millennium. HL Display in France has been a supplier of Auchan for 10 years. The new and innovative systems for merchandising, price and product information which were launched by HL Display in 2000, were major contributory factors in HL Display becoming a key supplier to the Val d Europe establishment. Careful testing Construction work for the store itself commenced eight months before it was opened on 25 October All products used in Val d Europe were first discussed and evaluated together with the people responsible for different categories at Auchan (Fruit & Vegetables, Baby Food, Confectionery, Hair Care etc.). The different solutions were afterwards tested in an internal test centre at Auchan. Following the evaluation, price negotiation and modifications, each category was approved individually. HL Display has come up with several different solutions from the Optishop concept, such as shelves with a gravity solution, extendable shelves that optimise all shelving space and make re-merchandising easier (Optishelf ), modular shelf managment systems with dividers, back supports and automatic feeding systems (Optimal ). Half of the shop is equipped with HL Display s latest datastrip called Slimline, while the other half was equipped with electronic labels for which HL Display provided the holders. HL Display took care of the installation process in the shop. Within three weeks, HL Display staff assembled one category after another. Prior to delivery, a thorough quality and functionality check of all units was carried out. Valuable partnership After the opening of the Auchan complex in Val d Europe, work has continued with the fine-tuning and training of staff. Subsequently, a follow-up and evaluation of each category will take place to establish if there is room for further improvements. The partnership with Auchan is of considerable value to HL Display as it entails constant development for both partners resulting in new knowledge. The complex in Val d Europe served as a testing ground for Auchan during the evaluation of the Optishop concept. Auchan is pleased with the results and the majority of units from the Optishop concept will be integrated in all hypermarkets under construction and in all other hypermarkets undergoing refurbishment. The first hypermarket after Val d Europe will be Auchan in Châteauroux due to open at the beginning of HL Display 2000

15 OPERATIONS OPTISHOP CASE Optishop Optimisation of shelf space The employees at Auchan in Val déurope, is very content with Optishop TM and the smart and timesaving solutions. HL Display

16 OPERATIONS SHOP FIXTURES Clear store information increases sales One key factor for retail sales is to display prices close to the goods. All HL Display products are developed to facilitate this. Shop Fixtures for price information Well-displayed products and clear signs with pricing and product information, which are close to the products, is a basic requirement for the retail sector. Failure to provide information can result in lost sales as the customer is unable to locate the correct price for the merchandise. Logical structure Several studies have shown that customers no longer rank the price as the most important factor when deciding where to shop. Instead, other factors, such as a clean shop environment, orderliness, and finding the merchandise easily rank high on the customer s priority list. A shop should offer its product range in an organised and logical fashion while, at the same time, entice the customer to impulsive buying. Products from the Shop Fixture concept constitute a complete basic range for pricing and product information. HL Display may still be best known for its datastrips, which continue to be the single largest product. However, HL Display offers several other products and the basic range comprises more than 2,000 different products. These products can be combined into various total solutions. Within Shop Fixtures there are also a number of solutions which communicate offers and sales messages to the consumer. Constant development The Shop Fixture range is constantly being developed. Last year, HL Display launched a completely new concept in the field of price labelling, called Slimline. The concept can be regarded as a new generation of datastrips but also strengthens the utilisation of the available store space, in line with the idea behind the Optishop concept. Shop Fixtures Datastrips: More than 350 profi les for different shelves meet most retail requirements. HeLec: Datastrips for different electronic labels found in the market. Freezer system: Price and product information for open freezers that are easy to use. Pinpac: Display hooks and price labelling for merchandise on hooks. Price cassettes: Cassette systems facilitate quick alteration and exchange of pricing and product information within the fruit & vegetables and delicatessen sections. Frame system: Plastic display frames enhance the message in a direct yet effective manner. Pictoria: Sky-Line: Information holders: Jegab: Shelftalkers: Metal pavement stands and metal wall frames for outdoor communication. Ceiling displays. Everything from aluminium bars and glass fi bre-strengthened plastic connections to anti-glare poster holders. A complete range for brochure display. Holders for signs and sales messages in the form of hooks, pegs, fl ags, mobiles, rivets and connections. Range of promotional signs and special customer-adapted shelftalkers with or without screen-printing. 14 HL Display 2000

17 OPERATIONS SHOP SYSTEMS Total supplier Over the years, HL Display has developed an extensive knowledge of merchandising and how a store should be laid out. An inviting and inspiring atmosphere with a clear structure and effective shop space are all success factors for any store. Shop Systems total store concept The major chains are streamlining purchases and they are increasingly looking to work with fewer suppliers. Through HL Display s Shop System concept, customers can acquire entire shop fittings from just one supplier. Just over 50 per cent of all of HL Display s offers are based on its own standard range while other fittings, such as lighting and checkouts, are purchased externally. HL Display is in charge of project management and installation. This means that the customers can obtain everything from one supplier, namely HL Display. A natural partner The Shop System concept enables HL Display to enter the customer project at an earlier stage which increases the opportunity to sell other concepts. By constructing entire shops, HL Display becomes a natural partner in many issues from layout and display systems to individual products. Shop Systems All types of shop fi ttings in metal, plastic or wood. Own design, construction and manufacture. Lighting for best possible display. In-house fi tting teams for guaranteed delivery and assembly. Special competence Many customers often have own ideas about the design of their store and how the goods should be displayed. HL Display makes customised fittings according to customers requirements based on a standard frame. This results in store systems that offer both functionality and shopping experience. With the help of computer animated plans, the customer can in advance see how the solutions will be realised. Through the Shop System concept HL Display has been able to develop a design competence which enables us to manage a project from its conception through to its implementation. Market The concept offers a great potential but pricing competition is tougher than for any other concept. Today a number of companies specialise in the construction of shops. In addition, HL Display can offer more detailed solutions within specific categories, such as baby food, hair care products, confectionery etc. At present, HL Display delivers entire shop fittings only to the Swedish market. HL Display

18 MARKET Fast expansion in new markets Today HL Display is represented in 31 countries through its own sales companies or via its distributors. Thanks to internationalisation the company has a very broad coverage in Europe through its own sales companies and distributors with growth potential. Future expansion into new markets will primarily be carried out by setting up subsidiaries to ensure the highest possible focus on new markets. HL Display maintains a high rate of expansion, having over the last three years set up subsidiaries in seven new markets. In 2000 the company opened sales companies in two new markets, namely Singapore and Ukraine. HL Display s distributors are largely using the same working methods and ideas used by our own sales companies. Development in the distribution markets was very positive during The European food retail sector is the most important market for HL Display. Sales in Europe accounted for 95 per cent of HL Display s total net sales in HL Display largest markets are France, Sweden and Great Britain. Western Europe HL Display has attained a very strong position in Western Europe with a high market penetration and a significant share of the market for a number of products. The Western European market is mature and market players place great demands on innovation, quality and a high degree of conceptual selling. In line with this, the sales organisations have been strengthened and developed further with the focus on Key Account Management and project sales. Most sales companies have experienced continued strong growth. The French market, where sales of merchandising systems is most developed, remains HL Display s largest market in terms of net sales, followed by Sweden and Great Britain. The sales companies in Austria and Switzerland saw very positive development during These companies have a broad customer base which is a stable foundation for continued growth. Sweden Benelux countries MD Leo van Hoek SEK M 72 Established in Number of employees Net sales 2000 (SEK M) ,2 Increase in net sales 2000 (%) Great Britain SEK M MD Alex Robertson Established in Number of employees Net sales 2000 (SEK M) , Increase in net sales 2000 (%) Germany SEK M MD Tomas Thorslund Established in Number of employees Net sales 2000 (SEK M) ,5 Increase in net sales 2000 (%) SEK M MD Marcus Diwo Established in ANumber of employees Net sales 2000 (SEK M) , Increase in net sales 2000 (%) France SEK M MD Gérard Dubuy 167 Established in Number of employees Net sales 2000 (SEK M) ,0 Increase in net sales 2000 (%) Norway SEK M MD Ketil Torp Established in Number of employees Net sales 2000 (SEK M) ,9 Increase in net sales 2000 (%) Switzerland SEK M 20 MD Peter Moser Established in Number of employees Net sales 2000 (SEK M) ,6 Increase in net sales 2000 (%) Austria SEK M MD Günther Bucher 34 Established in Number of employees Net sales 2000 (SEK M) ,8 Increase in net sales 2000 (%) HL Display 2000

19 MARKET In Norway and Germany, sales have not lived up to expectations. A number of actions have been taken and these are expected to produce results during the current year. Eastern Europe In some Eastern European countries the food retail sector has seen an explosive development as a result of the fast expansion by retail chains from Western Europe. HL Display benefits from this and can utilise the already established contacts. During the year the Russian market recovered which resulted in a large demand for HL Display products. Sales development has been very positive and a platform for continued expansion has been established. The Latvian market also saw a positive development in The brand manufacturer segment dominates sales, but an increasing number of foreign investments in the retail sector increased the demand for HL Display s more traditional products. In Hungary, HL Display has developed very positively. This was due to a number of breakthroughs for the Optishop concept for brand manufacturers, among other things. Ukraine has over 50 million inhabitants and is regarded as a market with a large potential in the long-term. Here, most of the largest multinational brand manufacturers are already active and make up the primary target group. North and South America In the US HL Display primarily sells products through the Shop Fixture concept. Manufacture and sales are carried out in cooperation with Trion Industries Inc. Sales in the US rose during the year by 21 per cent. The South American market is currently being worked on by HL Display s Spanish distributor. Asia Last year, a sales company was opened in Singapore which initially will be responsible for sales in large parts of South- East Asia. The customers include several larger European chains such as Auchan, Carrefour and Makro. Even though sales in Asia are still moderate, HL Display s future development potential has to be described as excellent. Poland SEK M MD Anders Kollenstam Established in Number of employees Net sales 2000 (SEK M) ,4 Increase in net sales 2000 (%) Czech Republic SEK M MD Petr Sindelár 10 9 Established in Number of employees Net sales 2000 (SEK M) ,5 Increase in net sales 2000 (%) Hungary SEK M MD Timea Pestí 11 Established in Number of employees Net sales 2000 (SEK M) ,3 Increase in net sales 2000 (%) Turkey MD Erdogan Yildis 3 Established in Number of employees Net sales 2000 (SEK M) ,4 Increase in net sales 2000 (%) Latvia SEK M MD Jana Rubina 6 Established in Number of employees Net sales 2000 (SEK M) ,5 Increase in net sales 2000 (%) Russia SEK M SEK M MD Zilvinas Petrauskas 8 Established in Number of employees Net sales 2000 (SEK M) ,1 Increase in net sales 2000 (%) HL Display

20 PRODUCTION AND ENVIRONMENT Focus on development and design For many years, HL Display s product range has been developed in close cooperation with customers. To remain a leading display and mechandising company and to find new innovative solutions, HL Display is increasing its focus on development and design. HL Display has developed its product range by building on its long-standing experience from the shop floor and its expertise in the field of display and merchandising. The development of new products is mainly a customer-driven process. To remain one of the leading display and merchandising companies, HL Display is increasing its focus on development and design. It is vital for HL Display to remain at the forefront of developments to strengthen the company s competitiveness in international markets. Last year, HL Display dedicated more resources to develop general products to complement many of the customer-driven projects undertaken. The aim is to make use of ideas about new products which are generated in various places in the organisation. For this purpose, the organisation has been strengthened and development processes which ensure shorter lead times have been set up. In 2000 development costs amounted to 3.1 per cent of net sales, and this share is set to increase gradually over the next few years. The company has purpose-built production facilities with modern equipment in seven locations. HL Display continues to invest to make production more efficient and last year investments of SEK 49.1 M were made in new production capacity. Major investments in new machinery included new extruding lines as well as new injection moulding machines, together with portal robots for picking up and packaging goods. Managing its own production was and remains a success factor for HL Display. Long-term investments in staff, facilities and machinery have enabled HL Display to obtain efficient production at all plants. Today, the company has four production plants in Sweden, in Sundsvall, Falun, Falkenberg and Lesjöfors. Some production also takes place in Great Britain and in the Netherlands to serve local markets. The company also has production facilities in the US through a joint venture. HL Display uses several different production techniques. These are extruding, injection moulding, screen printing, vacuum forming, heat- and cold-bending of plastics, as well as metal plate and wire processing. Plastic extrusion is one of the areas where the company has expertise and unique knowledge. HL Display has extensive experience and high competence in this field. Datastrip is the largest product group which is extruded. In HL Display s Sundsvall plant, more than 350 different profiles in over 300 different colours are currently manufactured. More than 40 million metres of datastrips are produced every year. In Sundsvall HL Display also operates injection moulding. At this plant a number of different products, including shelf dividers and frame systems are manufactured. All production in Sundsvall is based on customer orders which minimises the need for stock keeping. Screen printing, vacuum forming and heat- and coldbending of plastics is carried out at the Falun plant. Products manufactured in Falun include shelftalkers as well as floor displays and sales racks. An efficient production process which combines screen printing and heat- and cold-bending, enables customised products and short delivery times. Bending and welding of wire products, such as sales and display racks is carried out at HL Display s Lesjöfors plant. Plate and piping products are manufactured in Falkenberg. The most important products are complete shelving systems for the retail industry which have been developed in-house by HL Display. 18 HL Display 2000

21 PRODUCTION AND ENVIRONMENT Each deal is a reference for the next deal To remain a competitive company in the international market, HL Display must ensure that customer requirements on service, quality, lead times and delivery deadlines are met. To fulfil customers expectations, a quality policy has been prepared. In brief, the policy states that all products manufactured and delivered must be of such quality that they completely satisfy the customer. It states further that it is the duty of every co-worker to ensure that a high level of service is maintained and that quality issues are always prioritised. Any defects in raw materials, processes, procedures and control equipment is to be observed and attended to without delay. Key quality targets include a punctuality rate of at least 96 per cent of all deliveries, the number of complaints is not to exceed 0.8 per cent and production accessibility is to reach a minimum of 93 per cent. HL Display s efforts to ensure quality are continuously developed and reimaning plants will be ISO 9001 certified for quality standards. The product range is developed on an on-going basis in close cooperation with suppliers and customers. Environment It is vital for HL Display to fulfil customer requirements with regard to environmentally friendly products. For a number of years, the company has been engaged intensively in environmental issues and an environmental policy has been drawn up. In brief, the policy stipulates that the company should endeavour to minimise the environmental Environmental policy HL Display will work to minimise impact on the environment and contribute to a better living environment. HL Display will make decisions based on weighing up what is ecologically motivated, technically possible and fi nancially viable. impact from its activities and contribute to a better environment. Consequently, HL Display is actively working towards reducing the amount of waste from production and selecting materials and products which affect the environment as little as possible. The environmental impact is an aspect which is considered during the decision-making process. For instance, investment decisions are made by judging whether an alternative is ecologically motivated, technically possible and financially reasonable. In the purchasing process, products and services which have less impact on the environment are preferred to equivalent alternatives. The most important environmental targets are to reduce wastage, and to increase re-cycling of waste materials. This environmental policy is to be an integrated part of the company. During the past years HL Display has been working towards increasing the use of alternative materials instead of PVC. HL Display s plants in Sundsvall and Falun are ISO certified for environmental standards. Sundsvall MD Hans Olsson Number of staff: 240 Production: Extrusion and injection moulding. Other: The plant is ISO 9001 and ISO certifi ed. Falun MD Mikael Lindell Number of staff: 72 Production: Screen printing, heat- and cold-bending. Other: The plant is ISO certifi ed. Lesjöfors MD Marita Larsson Number of staff: 65 Production: Metal wire products. Falkenberg MD Roger Nilsson Number of staff: 42 Production: Plate and piping products. HL Display

22 EMPLOYEES A strong and well-defined company culture One of HL Display s most important challenges is to recruit and retain skilled and qualifi ed staff. Knowledge and competence is vital if the company is to defend its leading position. HL Display is growing fast through expansion into new markets and currently employ just over 800 people in 17 countries. To ensure continued growth, HL Display devotes great care to recruit and retain staff who possess the will and ability to continuous learning and development. To train new members of staff in the best possible way HL Display has prepared induction programmes which are adapted to each individual. All recently employed staff are given the same basic knowledge but also an introduction which is tailored to each position. Entrepreneurial spirit Profitability and success are achieved through co-workers who feel they are a part of the company, by supportive management and operations which are characterised by trust, a will to change and an ability to take advantage of all opportunities. HL Display s human resource concept has been developed in line with its entrepreneurial spirit and is mainly based on participation, lateral decision-making and few hierarchic levels. A decentralised organisation must be based on a clear and firmly established company culture. This will minimise bureaucracy, facilitate inter-company relations and the ability to take action. Today, HL Display s customers and co-workers live and work in many different countries and belong to different cultures. It is a challenge for management and co-workers alike to show respect and to communicate clearly. Openness at all levels within the company is important and facilitates the delegation of responsibility. All this is fundamental to HL Display s company culture. Last year HL Display launched an initiative to clearly set out the company s values. It is an important task to consolidate a common approach which can be communicated to all new members of staff. HL Display s strategy and vision gives the company a collective force which strengthens the company culture further. Ensuring growth by developing competence HL Display works together with a great variety of professional customers with high standards. This creates a strong incentive to develop the company s competence and offer, as it is the company s ambition to be regarded as the leading supplier. The second decisive factor when investing in competence development is HL Display s desire to retain long-term relations with all members of staff and all our customers. HL Display s ambition is continued growth in a rapidly changing business environment. The will and ability of the organisation and staff to change is becoming increasingly important, especially in HL Display s production facilities. Consequently, HL Display is working systematically to offer production staff opportunities to broaden their skills and to increase their ability to change. 20 HL Display 2000

23 EMPLOYEES Tomorrow s leader HL Display endeavours to increase the number of managers that are recruited internally. To facilitate this, systematic efforts are being made to improve the prerequisites for smooth internal recruitment of managers. HL Display is recruiting staff which have the potential and ambitions to pursue a career in the company. For this reason, comprehensive efforts to set out clearly the career and development paths offered within the group have been instigated. Key staff in different Group companies are offered a socalled International Training Assignment. This is a customised programme where a co-worker, for a period of three months, participates in a development programme in another Group company in order to gain specific skills. HL Display is encouraging staff to apply for different positions in the Group and has set up an internal recruitment site on the company s intranet. To further stimulate the movement of staff between companies and countries, a policy for overseas assignments has been devised. of staff to buy a stake in the company, either by directly buying shares or indirectly through a shareholders association. In 2000 HL Display employed an average of 773 (706) staff. The total number of staff employed by the group on 31 December 2000 was 805 (713). 31 per cent of the company s staff are women and 69 per cent are men. 29 per cent work in sales and marketing, 52 per cent work in production and warehouse and others with management, administration and product development. 40 per cent of the white-collar workers have university degrees. 61 per cent of the staff are employed in Sweden. The average age of staff in the group is 35 (35). Value added per employee amounted to SEK 406 T (423) in Competitive terms of employment Retaining key competence within the company is a vital task. HL Display must be able to offer members of staff competitive terms of employment and appropriate remuneration. To provide motivation and stimulus, HL Display introduced the HL Award, offering employees in all countries the opportunity to apply for an award for further training in subjects relating to their work. Several key staff in the group currently hold shares in the company and the management encourages more employees Employee categories 2000 Product development, 5.1% Stock, 5.2% Production, 46.6% Number of employees, average Value added per employee SEK T Admin. and Management, 13.7% Sales & Marketing, 29.4% HL Display

24 RISK AND SENSITIVITY ANALYSIS Risk and sensitivity analysis HL Display are described to a low operating and fi nancial risk. Below a number of factors are described which could affect the valuation of the company. Income The lead-time for HL Display s orders is very short, normally less than two weeks. Such a high level of service gives the company a competitive edge, but it also makes it difficult to plan and re-dimension operations when unexpected fluctuations of demand occurs. The order book contains, at any given time, over a thousand orders, the majority with limited order value, from customers in different geographical markets. Consequently, the market risk is well spread. Variances attributed to business cycles and season are, however, not offset, since our customers mainly operate in the same industry, the retail trade. However, a significant part of our sales is non-cyclical; price and product information is a fundamental condition for a well-functioning store. It is forecast that merchandising projects will generate an increasing part of the company s net sales in the future, which will lead to a larger dependency on business cycles in the long term. Around 40 per cent of the Group s costs do not fluctuate in line with net sales. This means that if sales increase or fall by one per cent, the profit will be affected by 8.5 per cent. HL Display. Customer agreements are normally re-negotiated once a year, and price-change clauses for fluctuation in the raw material market are a rare occurrence in the industry. Therefore, it has not been possible to pass on this price increase. Instead it resulted in a decrease in Group profits of around SEK 8.6 M. Since July 2000, however, prices have been falling and in January 2001 reached the level of their previous peak of January There is a risk of limited supply which could cause prices to increase also for other important plastics raw material. To reduce the company s sensitivity to raw material prices, HL Display is developing methods to use alternative materials in its basic product range and these efforts have been successful. In this way, the risk can be transformed to an opportunity which gives the company competitive advantages. Salary costs Salaries and salary-related costs represent HL Display s largest single overhead. Had salaries increased by one per cent in 2000, the company s profits would have fallen by SEK 2.4 M, or 5.5 per cent. Credit risk Historically, HL Display has had very low bad debt losses. The company s customers are major and well-established companies with high solvency. The largest single customer only accounts for two per cent of HL Display s net sales. Raw material price-changes Different plastic raw materials represent 66 per cent of the Group s raw material purchases. The price fetched by these plastics is governed by supply and demand in the world market. The most common raw material, PVC, accounts for 15.8 per cent of the costs for goods sold. If the purchase price for PVC increases by one per cent, pre-tax profits will decrease by SEK 0.8 M, or 1.8 per cent. The price of PVC (compound) on the world market is not influenced by the world market price for crude oil. Last year, the fast price increase of PVC, which reached its highest price since 1998 in May, resulted in considerable additional costs for Flow exposure Flow exposure in foreign currency depends on invoicing and purchasing in foreign currency as well as purchases where the price is regulated by a currency clause. As HL Display s distributors are invoiced in Swedish kronor, around 70 per cent of Group net sales were affected by currency fluctuations in per cent of net sales is invoiced in currencies tied to the Euro and 15 per cent in British pounds. The currency outflow mainly comprises purchases of materials, for which the price is regulated through a currency clause. HL Display s has at present no forward contracts. Conversion exposure When the foreign subsidiaries are consolidated into the Group, sales are affected more than costs as production is mainly located in Sweden, whereas the bulk of sales takes place abroad. The Group s income statement is also affected in a more tangible way because HL Display, as one of few 22 HL Display 2000

25 RISK AND SENSITIVITY ANALYSIS Swedish listed companies, uses the MNM method. The difference that arises upon translation of foreign subsidiaries income statements and balance sheets is then included in the net interest income/expense instead of being taken directly to equity. At present, HL Display does not practise any socalled equity hedging to secure net assets. Sensitivity analysis of currency A translation of the financial statements of 2000 into currency levels recorded in the 1999 annual account shows that Group net sales would have been 1.1 per cent higher. Cost of goods sold would have been 1.3 per cent higher and pre-tax profits 0.5 per cent higher. A general currency change of the Euro in the range of one per cent would cause Group net sales to fluctuate by 0.4 per cent, while cost of goods sold would change by 0.5 per cent. Group pre-tax profits would change by 1.0 per cent. Interest sensitivity A change of one percentage point in 2000 would have caused profits to fall by SEK 0,9 M or around 2 per cent. goods destined for retail, as these costs represent the main part of their purchasing costs. The introduction of the Euro is estimated to affect costs for the purchase of goods and salaries to a very small extent. HL Display s purchases from the Eurozone countries were previously tied to DEM. The exposure of HL Display s activities have foremost been identified as marginal effects in connection with the translation of prices in local currencies to the Euro, as certain products have a unit price of under one Swedish krona. The effects of rounding off the price could affect the price by between 10 and 20 per cent in connection with a translation. This risk will be reduced by HL Display switching to pricing per package for the products in question. A positive effect of the introduction of the Euro is the simplification of currency management between the production units in Sweden and customers and suppliers in the currency union. Currency flows between the Euro companies can be utilised and reduce the exposure to interest risk. Currency risks for the smaller currencies currently tied to the Euro has been reduced. The introduction of the Euro HL Display s main markets are in the Eurozone. One subsidiary has switched to using the Euro as its basic accounting currency. International customers increasingly choose to use the Euro as the currency for agreements, which increases the risk of downward pressure on prices due to price transparency. However, it is likely that customers in the retail industry will prioritise an overhaul of the purchase of consumer Effects of technical developments HL Display s position as the market leader in its niche was obtained by offering groundbreaking product ideas which subsequently developed into the market standard. Through a close cooperation with customers and on-going investments in product and production development, this area is one of the company s most vital strengths. Average price of crude PVC DEM 2,00 1,85 1,70 1,55 1,40 1,25 1,10 0,95 0, Average exchange rate of SEK/Euro Raw materials 2000 Packaging material, 3% Aluminium, steel and wire, 7% Tape, 9% Other plastic raw materials, 11% Polycarbonate (PC), 13% Semi-manufactured articles purchased, 15% PVC, 42% Source: Platt's Polymerscan European Polymer Prices. Source: The Swedish central bank. HL Display

26 BOARD OF DIRECTOR'S REPORT Board of Director s report HL Display AB (publ) company reg.no HL Display s net sales in 2000 increased by 13.7 percent to SEK M, compared with SEK M in Profit after financial items amounted to SEK 44.1 M (47.1), a decrease of 6.4 percent. The profit margin was 5 percent (6.1). The Board proposes a dividend of SEK 1.40 (1.30) per share. Market overview Demand for HL Display s products increased in virtually all countries during the year. HL Display strengthened its position through the launch of new products and concepts. Development costs in 2000 totalled SEK 26.9 M (24.6). Exports from Sweden rose by SEK 89 M and today account for 84 (83) percent of the Group s net sales. The food retail trade is the customer segment that continues to dominate sales. HL Display believes that growth will remain high and will primarily take place organically, albeit being open to opportunities of supplementary acquisitions. The emphasis is expected to remain on Europe, although geographic expansion is a key element of the business strategy. In Shop Fixtures there is still considerable market potential, since only an estimated two-thirds of the full potential in HL Display existing markets has been penetrated. The greatest potential is seen with Optishop, a merchandising concept, where many of the company s products are combined in a manner that is attractive to the customers. The focus on Shop Systems, where selected parts or entire store installations can be delivered, will be limited to Sweden. Structural changes In 2000, HL Display established sales companies in Singapore and Ukraine. In order to meet changes in the market, HL Display continued work on the implementation of a new organisation in This has, however taken longer than anticipated. Environment For several years the company has conducted intensive environmental work in all production facilities. The paintspraying plants at Lesjöfors and Falkenberg have to register according to Swedish Environmental laws, but are not depending on permits. Personnel Average no of employees Total Sweden Abroad Women Men The average number of employees in HL Display increased by 67 (124) in The number of employees at year-end was 805 (713). The share of employees in Sweden was 61 (65) percent. Parent company The Parent Company has its registered office in Stockholm and its activities include Group management functions. The Parent Company s profit after financial items was SEK 77.6 M (60.3). Refund of premiums from SPP For the financial year 2000 HL Display recorded a refund of pension premiums according to the ITP plan from the insurance company SPP, totalling SEK 4.5 M. Proposed disposition of earnings The following earnings in the Parent Company are at the disposal of the Annual General Meeting: Retained profit, SEK 27,142,750 Net profit for the year, SEK 72,119,505 SEK 99,262,255 The board proposes: dividend to the shareholders, SEK 10,764,421 to be carried forward, SEK 88,497,834 SEK 99,262,255 The Group s unappropriated earnings amount to SEK 155,625 T (137,846). 24 HL Display 2000

27 INCOME STATEMENT Income statement Group Parent Company SEK T per 31 December Note Net sales 2, 3 873, ,451 44,121 29,556 Costs of goods/services sold 494, ,643 42,899 34,777 Gross profit 379, ,808 1,222 5,221 Selling expenses 196, ,185 Administrative expenses 113, ,641 14,043 11,209 Development expenses 26,902 24,581 Other operating income 6,103 4,945 Other operating expenses 1,083 1,066 Operating profit/loss 4, 5, 6, 7 47,731 55,401 8,942 16,430 Results from participations in Group companies 8 77,203 71,067 Results from other securities and receivables accounted for as fixed assets ,300 9,159 6,090 Other interest income and similar items 10 3, , Other interest expense and similar items 11 7,406 5,646 1, Result after financial items 44,095 47,125 77,635 60,284 Appropriations 12 7,131 4,229 Tax on profi t for the year 13 17,381 15,060 12,646 12,382 Minority NET PROFIT FOR THE YEAR 26,747 32,277 72,120 43,673 Comments to the Group income statement The Group s sales increased by 13.7 per cent compared with 1999, which was considerably lower than HL Display s expectations. Operating profi t fell by 13.8 per cent from SEK 55.4 M to SEK 47.7 M. Funds re-allocated from the insurance company SPP have, in their entirety, been entered into the books according to published instructions and contributed positively to profi ts for the fi nancial year by a total of SEK 4.5 M. Profi ts were reduced by SEK 8.6 M as the price of PVC, the Group s most commonly used raw material, increased dramatically compared with HL Display s net interest income/expense was SEK 3.6 M ( 8.3). The main explanation item was the change in the translation difference which is charged to the income statement since the Group uses the MNM method for translating foreign subsidiaries income statements and balance sheets. The translation difference in 2000 was SEK 0.1 M ( 3.8 ). Net interest income/expense was negatively affected as a result of increased net borrowing. Profi t after fi nancial items declined by 6.4 per cent to SEK 44.1 M (47.1), which corresponds to a profi t margin of 5.0 (6.1) per cent. Total currency effects boosted profi t be - fore tax by 5.7 per cent or SEK 2.5 M compared with The year s profi t amounted to SEK 26.8 M (32.3). The Group s tax rate rose from 32 per cent to 39 per cent. This was mainly due to the non recurrent tax deductible items that ocurred in Earnings per share after full tax amounted to SEK 3.48 M (4.20). HL Display

28 BALANCE SHEET Balance sheet Group Parent Company SEK T per 31 December Note ASSETS Fixed assets Intangible fixed assets 14 Computer systems 13,414 9,456 6,563 5,233 Goodwill 6,957 9,753 Total intangible fixed assets 20,371 19,209 6,563 5,233 Tangible fixed assets 15 Land and buildings 13, ,997 Plant and machinery 131, ,036 1,759 2,491 Capital expenditure on leasehold property 10,654 7,770 Total tangible fixed assets 155, ,803 1,759 2, 491 Financial fixed assets 16 Participation in Group companies 17 46,603 42,063 Participation in associated companies 18 10,000 10,000 12,851 11,851 Other long-term receivables Total financial fixed assets 10,220 10,229 59,454 53,914 Total fixed assets 186, ,241 67,776 61,638 Current assets Inventories 19 99,694 78,988 Current receivables Accounts receivable trade 149, , Receivables from Group companies 121, ,294 Other receivables 20 19,730 9,749 6,948 2,168 Pre-paid expenses and accrued income 21 15,145 12,814 2,309 1,704 Total current receivables 184, , , ,175 Cash and bank 31,238 22, Total current assets 315, , , ,202 Total assets 501, , , ,840 Comments to the Group balance sheet Total assets increased by SEK 71.4 M. Fixed assets increased as a result of investments. Working capital increased due to increased net sales, while liquidity improved as a result of borrowing. The capital turnover rate remained unchanged, 1.88 (1.88) times. Investments Net investment in fixed assets over the period amounted to SEK 58.1 M (59.3) and refers mainly to production equipment. Another SEK 0 M (8.6) is attributable to company acquisitions. The investments include capitalised leasing contracts at SEK 1.1 M. Depreciation according to plan was SEK 40.2 M (31.3) for the period. Inventories and accounts receivable Inventories increased as per 31 December by SEK 20.7 M to 11.4 (10.3) per cent of net sales. Accounts receivable as per 31 December increased by SEK 12.2 M to 17.2 (17.9) per cent of net sales. The average collection period dropped from 54 days in 1999 to 52 days in HL Display 2000

29 BALANCE SHEET Group Parent Company SEK T per 31 December Note SHAREHOLDERS EQUITY AND LIABILITIES Shareholders equity 22 Restricted equity Share capital 38,444 38,444 38,444 38,444 Restricted reserves 44,850 45,878 7,689 7,689 Total restricted equity 83,294 84,322 46,133 46,133 Unrestricted equity Unrestricted reserves 128, ,569 27,143 25,991 Net profi t for the year 26,747 32,277 72,120 43,673 Total unrestricted equity 155, ,846 99,263 69,664 Total shareholders equity 238, , , ,797 Minority share in equity 33 Untaxed reserves 23 21,020 28,151 Provisions 24 16,997 14,051 2,940 2,940 Long-term liabilities 25 Bank overdraft facilities 26 8,778 17,713 3,322 10,921 Other liabilities to credit institutions 28 83,481 52,699 2,336 2,548 Other liabilities 1, Total long-term liabilities 93,727 71,174 5,658 13,469 Short-term liabilities Accounts payable trade 69,771 57,995 3,068 2,362 Liabilities to Group companies 16,120 1,196 Income tax liability 3,132 1,067 Other liabilities 27,741 17, Accrued expenses and pre-paid income 27 51,513 47,329 3,578 3,043 Total current liabilities 152, ,946 23,255 8,483 TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 501, , , ,840 Assets pledged 28 92,140 66,450 46,603 12,500 Contingent liabilities 29 16,220 2,086 27,107 8,425 HL Display continues to work to make its warehouses more effective and to maintain an effective credit monitoring with the aim to reduce tied-up capital. Shareholders Equity HL Display s shareholders equity as per 31 December 2000 amounted to SEK M (222.2). Equity per share amounted to SEK (28.89). The equity/assets ratio was 47.6 (51.6) per cent. Liabilities Long-term liabilities increased by SEK 22.6 M, of which SEK 0.9 M relates to future payments for fi nancial leasing contracts. Short-term liabilities increased by SEK 29.2 M. The debt/equity ratio rose to 0.39 (0.32) times. Interest-bearing liabilities on 31 Dec ember amounted to SEK 99.8 M (70.8). HL Display

30 CASH FLOW STATEMENT Cash flow statement Group Parent Company SEK T per 31 December Note OPERATION ACTIVITIES Operating profi t/loss 47,731 55,401 8,942 16,430 Depreciation 40,197 31,255 2,709 1,787 Other items not effecting the cash fl ow 1,090 4,598 3,292 Dividends and Group contribution received 59,993 72,520 Interest received 1,530 1,425 9,608 6,192 Interest paid 7,550 4,923 2, Income tax paid 11,471 29,007 4,877 8,065 Cash flow before change in working capital 71,527 49,553 56,373 51,844 Increase ( ) / decrease (+) in inventories 20,706 13,524 Increase ( ) / decrease (+) in accounts receivables 12,249 21, Increase ( ) / decrease (+) in other shot-term receivables 13,675 17,568 47,808 35,073 Increase (+) / decrease ( ) accounts payable 11,776 13, ,784 Increase (+) / decrease ( ) other current operating liabilities 14,206 2,077 15,282 6,258 Total cash flow from operating activities 50,879 47,294 24,504 7,733 INVESTMENT ACTIVITIES Net investments in intangible fi xed assets 7,830 8,785 3,096 4,123 Net investments in tangible fi xed assets 50,723 40, Investments in Group companies 34, 35 8,259 5,540 24,927 Disposal of other fi nancial fixed assets ,900 Cash flow from investment activities 58,543 57,367 8,847 15,958 FINANCING ACTIVITIES Loans raised 41,830 12,999 10,921 Amortisation 16,538 7,626 5, Dividend paid 9,996 9,996 9,996 9,996 Cash flow from financing activities 15,296 4,623 15, The year s cash flow 7,632 14, ,513 Liquid assets at the beginning of the year 22,935 38, ,540 Exchange rate difference on liquid assets 671 1,070 Liquid assets at the end of the year 36 31,238 22, Comments to the Group cash flow statement Cash fl ow in the Group for 2000 was SEK 7,6 ( 14.7) M. The reason for the slightly positive fl ow is mainly an increase in borrowing. Capital tied up in working capital also increased because of the large increase in net sales. Since HL Display has its production, and therefore most of its accounts payable, in Sweden, and the bulk of its sales outside Sweden, accounts receivable increased more than accounts payable. This is due to the fact that HL Display has a longer credit period for accounts receivable in the foreign subsidiaries that on accounts payable in the Swedish companies. Of the accounts receivable, 21 per cent are in the Swedish companies and 79 per cent in the foreign, while 71 per cent of accounts payable in Sweden and 29 per cent abroad. Investments of SEK 1.1 M were fi nanced via so-called fi nancial leasing. These assets have been included in the balance sheet, but in accordance with recommendations, are not reported as investments in the cash fl ow statement but for the leasing fees paid. 28 HL Display 2000

31 NOTES Notes NOTE 1 ACCOUNTING AND VALUATION PRINCIPLES HL Display AB s accounting and valuation principles are in compliance with the recommendations of the Swedish Financial Accounting Standards Council. Unless otherwise stated, these principles are unchanged compared with last year. Consolidated financial statements Swedish Financial Accounting Standards Council s recommendation No. 1 for consolidated fi nancial statements was applied. Group accounts are prepared according to the purchase method. The Group s annual accounts include the parent company HL Display AB (publ) and those companies in which the parent company controls more than 50 per cent of the votes. Swedish Financial Accounting Standards Council s recommendation no. 8 is applied for translation of foreign subsidiaries. According to the definition in the recommendation, the subsidiaries are integrated and translated according to the MNM (Monetary/Non-monetary) method. Monetary items in the subsidiaries balance sheets are translated to the closing day exchange rate, while non-monetary items are translated at the investment date exchange rate. In the income statement, depreciation is calculated at the investment date exchange rate and other items at the year s average exchange rate. Costs for goods sold are translated to the average exchange rate since turnover is high. The translation difference is included in the income statement, under financial items. Associated companies Associated companies are reported as companies that are not subsidiaries but where the parent company directly or indirectly controls at least 20 per cent of the votes. In the Group s joint ventures, where major decisions are made mutually by the owners and where contracts regulate decision-making, the proportional method is used. The reason for this is that partowners control their share of future profi t via their share of the joint-owned company s assets and debts. Reporting of Group contributions HL Display applies the Swedish Financial Accounting Standards Council s statement on reporting of Group contributions and shareholders contributions. Receivables Receivables are valued at the amount which is expected to be received, after individual assessment. Receivables and liabilities in foreign currency Receivables and liabilities in foreign currency are valued at closing day exchange rates in accordance with Swedish Financial Accounting Standards Council s recommendation no. 8. Inventories Inventories are valued at the lower of cost and market value. Swedish Financial Accounting Standards Council s recommendation no. 2 for reporting of inventories is applied. In-house manufactured goods and products in progress are valued at the manufacturing cost including a reasonable percentage of overheads. Fixed assets Depreciation according to plan is calculated on the acquisition value and based on the assets estimated economic lives as follows: Computer systems 4 years Goodwill 5 years Buildings 33 years Plant and machinery 5 12 years Inventory, tools fi xtures and fi ttings 3 7 years Capital expenditure on leasehold properties 20 years Leasing Swedish Financial Accounting Standards Council s recommendation no. 6 is applied. Assets that are leased via contracts classifi ed as fi nancial are accounted for in the Group as plant and machinery and are written off in accordance with the principles for these. Future leasing fees are reported as liabilities, and leasing fees paid during the year reduce the reported liability after deduction for interest. Development work Expenses for production, materials and product development are reported in the income statement. Cash flow statement The cash-fl ow statement was prepared on the basis of Swedish Financial Accounting Standards Council s recommendation no. 7 with application of the indirect method. NOTE 2 BREAKDOWN OF NET SALES BY GEOGRAPHIC MARKET Group Parent Company SEK T Sweden 143, ,471 44,121 29,556 France 163, ,973 Great Britain 130, ,697 Germany 82,718 90,826 Other markets 353, ,484 Total 873, ,451 44,121 29,556 HL Display

32 NOTES NOTE 3 INTRA-GROUP PURCHASING AND SALES Of the parent company s net sales SEK 43,732 T (24,614) refers to services sold to Group companies. NOTE 4 WAGES, SALARIES, OTHER REMUNERATION AND SOCIAL SECURITY COSTS Wages, salaries Soc.sec costs Wages, salaries Soc.sec costs and other of which pension and other of which pension SEK T payments costs payments costs Parent company 13,346 7,524 9,355 5,374 (of which pension costs) (2,273) (1,375) Subsidiaries 189,968 58, ,300 57,490 (of which pensions costs) (7,759) (8,450) Total 203,314 66, ,655 62,864 NOTE 5 BREAKDOWN OF WAGES AND OTHER PAYMENTS Board Other Board Other SEK T and MD employees and MD employees Parent company 1,247 12,099 1,245 8,110 Subsidiaries in Sweden 3, ,328 3, ,793 Subsidiaries abroad 9,630 62,956 8,320 53,119 Total 13, ,383 12, ,022 NOTE 6 DEPRECIATION Group Parent company SEK T Computer systems 3,879 2,059 1,766 1,043 Goodwill 2,896 2, Land and buildings Plant and machinery 32,463 25, Capital expenditure on leasehold properties Total 40,197 31,255 2,709 1,787 NOTE 7 LEASING CONTRACTS Equipment hired by the company under fi nancial leasing contracts is reported for as plant and machinery. Accumulated acquisition values amount to SEK 13,266 T and accumulated depreciation to SEK 2,291 T. An amount of SEK 7,139 T is reported as long-term liability and SEK 2,562 T as current liability. Group Parent company Financial Operational Operational SEK T leasing leasing leasing Paid leasing fees ,603 10,017 1,326 Future payment obligations Due for payment ,623 9,843 1,160 Due for payment ,485 21,614 1,930 Due for payment 2005 or later 1,086 6,154 Total future payment obligations 10,194 37,611 3, HL Display 2000

33 NOTES NOTE 8 RESULTS FROM PARTICIPATIONS IN GROUP COMPANIES Parent Company SEK T Dividends and Group contribution 77,203 79,067 Write-down of participations 8,000 Total 77,203 71,067 NOTE 9 RESULTS FROM OTHER SECURITIES AND RECEIVABLES THAT ARE ACCOUNTED FOR AS FIXED ASSETS Group Parent Company SEK T Translation difference 57 3,796 Interest from Group companies 8,676 5,671 Currency exchange rate differences on long-term receivables Interest income from long-term receivables from associated companies Capital gains 72 0 Total 540 3,300 9,159 6,090 NOTE 10 OTHER INTEREST INCOME AND SIMILAR ITEMS Group Parent Company SEK T Interest income 1, Currency exchange differences 2,144 2, Total 3, , NOTE 11 OTHER INTEREST EXPENSES AND SIMILAR ITEMS Group Parent Company SEK T Interest expenses 7,406 5,048 1, Interest expenses Group companies Currency exchange differences 598 Total 7,406 5,646 1, NOTE 12 APPROPRIATIONS Parent Company SEK T Difference between book depreciation and depreciation according to plan 450 2,400 Provision to tax allocation reserve 6,561 1,950 Change in tax equalisation reserve Total 7,131 4,229 NOTE 13 TAX ON PROFIT FOR THE YEAR Group Parent Company SEK T Tax paid 16,105 17, ,596 Tax on Group contributions paid 12,649 9,786 Deferred tax 1,276 2,274 0 Total 17,381 15,060 12,646 12,382 HL Display

34 NOTES NOTE 14 INTANGIBLE FIXED ASSETS Group Parent Company SEK T Computer systems Goodwill Computer systems Acquisition value, opening balance 16,530 19,897 10,461 The year s purchases 7, ,101 Sales and disposals 4,148 4,048 Reclassifi cations 256 Accumulated acquisition value, closing balance 20,368 19,997 9,514 Depreciation, opening balance 7,074 10,144 5,228 Sales and disposals 4,108 4,043 Reclassifi cations 109 The year s depreciation 3,879 2,896 1,766 Accumulated depreciation, closing balance 6,954 13,040 2,951 Planned residual value, closing balance 13,414 6,957 6,563 NOTE 15 TANGIBLE FIXED ASSETS Group Parent Company Land Plant and Capital expenditure Plant and SEK T and buildings* machinery on leasehold properties machinery Acquisition value, opening balance 13, ,956 9,554 6,090 Acquired acquisition values The year s purchases ,134 3, Sales and disposals 4 8, ,632 Reclassifi cations 256 Accumulated acquisition values, closing balance 14, ,339 12,985 4,668 Depreciation, opening balance ,920 1,784 3,599 Acquired depreciation Sales and disposals 3 5,575 1,633 Reclassifi cations 109 This year s depreciation , Accumulated depreciation, closing balance 1, ,699 2,331 2,909 Planned residual value, closing balance 13, ,640 10,654 1,759 * Book value of properties in Sweden SEK 13,214 T. Tax assessment values of properties in Sweden SEK 4,570 T. NOTE 16 FINANCIAL FIXED ASSETS Group Parent Company Participations Other Participations Participations SEK T in associated long-term in Group in associated companies receivables companies companies Opening balance 10, ,063 11,851 Shareholder contributions 4,540 1,000 Amortizations 9 Planned residual value, closing balance 10, ,603 12, HL Display 2000

35 NOTES NOTE 17 PARTICIPATIONS IN GROUP COMPANIES Corporate Capital Votes, Number Book Directly owned Reg. offi ce identy no. share, % % of shares value HL Display Belgium N.V. Antwerp , HL Display Ceská republika s.r.o Prague HL Display Deutschland GmbH Langenfeld HRB ,606 HL Display Falkenberg AB Falkenberg ,500 13,208 HL Display Falun AB Falun , HL Display France S.A. Tours RCSB HL Display Inc. Wilkes-Barre ,297 HL Display Latvia SIA Latvia ,522 HL Display Leigdekkers Wigk Big Dunrstede HL Display Ltd Sti Istanbul HL Display Norge A/S Asker ,000 5,598 HL Display OOO Moscow HL Display Polska Sp.z o.o Warzaw HL Display Schweiz AG Aarau HL Display Singapore Pte Ltd. Singapore H HL Display Sundsvall AB Sundsvall ,500 11,125 HL Display Sverige AB Stockholm HL Display (UK) Ltd Kirmington , HL Display Österreich GmbH Vienna FN140307i HL Display Lesjöfors AB Filipstad ,000 4,454 HL Qvarnströms Förvaltning AB Filipstad , H Lundvall Display Hungaria Budapest / Jegab Display AB Stockholm Media Display AB Stockholm SCI L Eclipse Tours D Total 46,603 Indirectly owned Envoy Display Ltd. Buckingham RIM Fabrications Ltd. Shipley ,000 HL Display Nederland B.V. Westnoordbraband ,671 NOTE 18 PARTICIPATIONS IN ASSOCIATED COMPANIES Corporate Capital Votes, Number Book Directly owned Reg. offi ce identy no. share, % % of shares value HL Trion AB, (joint venture) Filipstad ,851 Optimus KB Stockholm ,000 Summa 12,851 Indirectly owned Trion HL LLC. (joint venture) Wilkes-Barre NOTE 19 INVENTORIES Group Parent Company SEK T Raw materials and consumables 25,872 20,867 Products in progress 6,584 6,120 Finished goods 66,762 52,001 Work in progress 476 Total 99,694 78,988 HL Display

36 NOTES NOTE 20 OTHER RECEIVABLES The Group s other receivables include income taxes recoverable SEK (1,502) T and SEK 3,813 T ( ) in the parent company. NOTE 21 PREPAID EXPENSES AND ACCRUED INCOME Group Parent Company SEK T Prepaid rents 1,709 2, Prepaid leasing costs 1,415 1, Prepaid insurance costs Prepaid product catalogue costs Prepaid costs for rebuilding 2,374 3,524 Accrued interest income Other items 7,985 3, Total 15,145 12,814 2,309 1,704 NOTE 22 CHANGE IN SHAREHOLDER S EQUITY Group Parent Company Share Restricted Unrestricted Share Legal Retained SEK T capital reserves reserves capital reserve profi t Opening balance 38,444 45, ,846 38,444 7,689 69,664 Dividend paid 9,996 9,995 Transfers between restricted and unrestricted equity 1,028 1,028 Group contributions paid 45,175 Tax on Group contributions paid 12,649 Net profi t for the year 26,747 72,120 Closing balance 38,444 44, ,625 38,444 7,689 99,263 NOTE 23 UNTAXED RESERVES Parent Company SEK T Provisions for taxes 1,950 2,400 Provisions for additional purchase price 19,070 25,631 Provisions for customer bonus/es 120 Total 21,020 28,151 NOTE 24 PROVISIONS Group Parent Company SEK T Provisions for taxes 8,716 7,436 Provisions for additional purchase price 2,940 2,940 2,940 2,940 Provisions for customer bonus/es 5,341 3,675 Total 16,997 14,051 2,940 2,940 NOTE 25 LONG-TERM LIABILITIES Of long-term liabilities in the Group SEK 46,901 T (11,379) comprises liabilities to credit institutions due for payment more than fi ve years after closing day. The corresponding fi gure for the parent company is SEK 1,274 T (1,699). NOTE 26 BANK OVERDRAFT FACILITIES Approved bank overdraft facilities amounted for the Group SEK 73,767 T (63,306) and SEK 50,000 T (40,000) for the parent company. 34 HL Display 2000

37 NOTES NOTE 27 ACCRUED EXPENSES AND PRE-PAID INCOME Group Parent Company SEK T Accrued interest expenses Accrued social security fees 11,156 11,548 1,247 1,160 Accrued vacation liability 19,365 16,568 2,132 1,652 Accrued wages/salary 6,988 6,429 Other items 13,949 12, Total 51,513 47,329 3,578 3,043 NOTE 28 ASSETS PLEDGED Assets pledged to secure liabilities to credit institutions Group Parent Company SEK T Floating charges 79,140 53,450 12,500 Property mortgages 13,000 13,000 Participations in group companies 46,603 Total 92,140 66,450 46,603 12,500 NOTE 29 CONTINGENT LIABILITIES Group Parent Company SEK T Guarantees on behalf of other Group companies 27,056 8,370 Other guarantees Discounted bills 15,998 1,816 Total 16,220 2,086 27,107 8,425 NOTE 30 AVERAGE NUMBER OF EMPLOYEES Average number Employees Of which Employees Of which men men Parent Company, Sweden Subsidiaries, Sweden Total Subsidiaries abroad Austria Belgium Czech Republic France Germany Great Britain Hungary Latvia Norway Poland Russia Switzerland The Netherlands Turkey 5 3 Total Group total HL Display

38 NOTES NOTE 31 BENEFITS TO SENIOR EXECUTIVES There are no agreements for severance pay or final salary. Board of directors Fees to the Board SEK 260 T were paid, of which the Chairman received SEK 120 T. Members employed by the company received no extra fee for Board work. Managing director The parent company s MD and CEO received payment during the year of SEK 1,063 T including car allowance. The pension agreement follows the ITP plan. A mutual six-month period of notice is applied. No agreements of severance pay or profi t participation exists. Other senior executives Pension agrements for the rest of the Group management follows the ITP plan. A mutual six-month period of notice is applied. There are no outstanding convertibles or options programmes in HL Display. However, the Board is, in principle, positive to incentive programmes and is currently looking into the issue. NOTE 32 TRANSACTIONS WITH RELATED PARTIES Board members Anders Remius, Lis Remius and Kent Hertzell own through a company shares in DataVis AB. During 2000 DataVis invoiced the Group companies an amount of SEK 15,588 T (10,935). The invoices relates to licences and work carried out for operating, developing and supporting the Group s IT network and business systems. NOTE 33 FEES TO AUDITORS The Group s cost for auditing fees to ÖhrlingsPricewaterhouse Coopers amounted to SEK 882 T (500), of which SEK 50 T (80) relates to the parent company. Costs for other assignments amounted to SEK 1,109 T (1,335 M), of which SEK 901 T (564) relates to the parent company. The Group has also employed Deloitte & Touche at a cost of SEK 25 T (114) for auditing and SEK 55 T (15) for other assignments. Auditing fees to other auditing firms totalled SEK 23 T ( ). NOTE 34 PURCHASE PRICE OF ACQUISITIONS During the year no subsidiaries were purchased. Last year acquisitions worth SEK 8,588 T were made. NOTE 35 LIQUID ASSETS IN ACQUIRED COMPANIES Liquid assets in acquired companies upon purchase last year amounted to SEK 329 T. NOTE 36 DIVISION OF LIQUID ASSETS The item liquid assets consists only of the items cash and bank. Stockholm, 1 February 2001 Åke Wester Chairman Gustav Bard Kent Hertzell Arne Karlsson Kent Mossberg Magnus Jonsson Lis Remius Anders Remius Managing Director 36 HL Display 2000

39 AUDITORS' REPORT Auditors report To the general meeting of the shareholders of HL Display AB (publ) Reg.no We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the board of directors and the managing director of HL Display AB (publ) for the year These accounts and the administration of the company are the responsibility of the board of directors and the managing director. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit. We conducted our audit in accordance with generally accepted auditing standard in Sweden. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the board of directors and the managing director, as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the managing director. We also examined whether any board member or the managing director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below. The annual accounts and the consolidate accounts have been prepared in accordance with the Annual Accounts Act and, thereby, give a true and fair view of the financial position of the company and Group and of the results of operations in accordance with generally accepted accounting standards in Sweden. We recommend to the general meeting of shareholders that the income statement and balance sheet for the parent company and Group be adopted, that the profit for the parent company be dealt with in accordance with the proposal in the administration report and that the board of directors and the managing director be discharged from liability for the financial year. Stockholm, 1 February 2001 Richard Roth Authorised Public Accountant Öhrlings PricewaterhouseCoopers Liselott Stenudd Authorised Public Accountant Öhrlings PricewaterhouseCoopers HL Display

40 THE HL DISPLAY SHARE The HL Display share Share price development Since 1993, HL Display s shares have been listed on the OM Stockholm Stock Exchange. Since the introduction, the value of the shares has increased by 408 per cent, from SEK (corrected for bonus issues) to SEK 73 on 31 December During the same period, Affärsvärlden s General Index increased by 252 per cent. In 2000, the share price fell by 54.6 per cent. Last year, the share has been traded at a maximum of SEK 161 and a minimum of SEK Last year, 1,437,652 shares were traded, corresponding to 18.7 per cent of the number of shares in HL Display. At the end of the year, HL Display s market capitalisation was SEK 561 billion. Share capital On 31 December 2000, the share capital amounted to SEK 38,444,360 divided among 7,688,872 shares, each with a nominal value of SEK 5. Series A shares carry one vote and series B carry 1/10 of a vote. A block of shares amounts to 100 shares. Shareholders The number of shareholders on 31 December 2000 was 3,063 (3,862). The proportion of institutional owners is estimated at 48.9 (45.6) per cent of the capital and the proportion of foreign owners amounted to 2,6 (1.3) per cent. 79 (82) per cent of all shareholders in HL Display owned fewer than 500 shares each. Dividend policy HL Display s Board have decided that a restrictive dividend policy should be applied during an anticipated growth phase. Over time, the dividend will correspond to one fifth of profit after financial net and standard tax. The Board proposes that the dividend be increased to SEK 1.40 (1.30) per share. Share price trend B-Share Afv General Index No. of Shares traded, thousands (incl. after-hours) Ownership Structure, % Foreign Owners, 2.6% Swedish Units Trusts, 3.3% Private Owners, 51.1% Swedish Institutions, 43% (c)six Distribution of shareholdings, 31 December 2000 No. of shares No. of shareholders No. of shares % of shares , , , , ,001 10, , ,001 50, , , , , > 100, ,673, Total 3,063 7,688, HL Display 2000

41 THE HL DISPLAY SHARE Data per share 1,2) Earnings per share after full tax, SEK Earnings per share after standard tax, SEK Dividend per share, SEK ) Dividend, % of profi t after full tax Share price, end of period, SEK Equity per share, SEK Return on equity after full tax, % Direct yield, % P/E ratio, 31 December P/CE ratio, 31 December 1.08 neg. neg neg. neg. 5.3 Cash fl ow per share, SEK ) For definitions of key ratios, see page 43. 2) Data per share corrected for bonus issues in 1994 and ) According to the Board s proposal. Largest HL Display shareholders, 31 December 2000 Name No. of No. of Total no. Share of No. of Share of A shares B shares of shares capital, % votes votes, % Remius family 803,808 1,659,668 2,463, , Atle AB 109,216 2,115,854 2,225, , Skandia 795, , , Robur s small Co. fund Sweden 180, , , Lars Jonsson, and family 161, , , CDC Gestitres 106, , , Richard Moser 84,000 84, , Göran Källebo 81,600 81, , Småbolagsfonden 51,100 51,100 0,7 5, Ulrika Wiman, and family 48,000 48, , Others 1,492,292 1,492, , Total 913,024 6,775,848 7,688, ,590, Change in share capital Share capital Change in Total Change in Par value/ Year development share capital share capital no. of shares A shares B shares Total share , New issue 1) 750, ,000 7,500 8,000 8, Split 1:10 800,000 72,000 80,000 80, Bonus issue 1,600,000 2,400, , , , New issue 2) 645,000 3,045,000 64, , , Restamping 3,045, , , , Split 2:1 3,045, , , , , Restamping 3,045, , , , Conversion 3) 673,590 3,718, , , , , New issue 4) 1,086,955 4,805, , , , , Bonus issue 14,416,635 19,222,180 2,883, , ,924 3,844, Bonus issue 19,222,180 38,444,360 3,844, , ,848 7,688, ) Share price SEK ) Share price SEK ) SEK 1,500,000 at a price of SEK and SEK 2,467,500 at a price of SEK ) Share price SEK 115. HL Display

42 BOARD OF DIRECTORS Board of Directors Åke Wester Born: Member of the Board since Board chairman. Holding: 2,000 shares (family). Other appointments: Board chairman of Atle Teknik AB, Atle Mergers & Acquisitions, AB Centralsug, AB Studsvik. Board member in Hilding Anders AB. Kent Hertzell Born: Member of the Board since Position: Financial director HL Display AB. Holding: 12,500 shares. Other appointments: Board member in Kriss AB, DataVis AB, CTT Systems AB. Gustav Bard Born: Member of the Board since Position: MD of Atle Mergers & Acquisitions. Holding: 0 shares Anders Remius Born: Member of the Board since Position: MD of HL Display AB. Holding: 874,464 shares, including 401,904 A shares. Through company 84,050 B shares. Other appointments: Board member in DataVis AB. Arne Karlsson Born: Member of the Board since Position: MD of Förvaltnings AB Ratos. Holding: 0 shares. Other appointments: Board member in Esselte, Superfos, Scandic. Lis Remius Born: Member of the Board since Holding: 873,622 shares, including 401,904 A shares. Through company 84,050 B shares. Magnus Jonsson Born: Member of the Board since Employee representative. Holding: 0 shares. Kent Mossberg Born: Member of the Board since Employee representative. Holding: 1,330 shares. Deputy member Tommy Persson Born: Deputy member since Employee representative. Holding: 0 shares. 40 HL Display 2000

43 BOARD PROCEDURES Board procedures HL Display s board consists of six members and a deputy elected by the AGM, as well as two representatives and a deputy elected by the employees. The Chairman of the Board is appointed by the AGM. Among the Board members there are persons with connections to HL Display s larger shareholders and to persons independent of the owners. The Board normally meets six times per year and, additionally when required. During the 2000 financial year, the Board met seven times. Board meeting days are set in conjunction with the statutory board meeting. Some Board meetings coincide with dates for financial information. These are the quarterly, half-yearly and annual closing days. The work of the Board follows an annual plan with special themes and fixed dates for decisions. A normal agenda for a board meeting is as follows: Meeting opened Election of minute-verifiers Review of minutes of previous meeting Finances Board s basis of appraisal Internal control Other questions Meeting adjourned The Group s CFO, Kent Hertzell, serves as secretary of the Board. Rules of procedure The work of the Board is regulated by special rules of procedure. In brief, the rules of procedure state that the Board is responsible for the company s organisation and the administration of the company s affairs. The Board must ensure that the company s organisation is such that accounting, funds administration and the company s financial affairs are checked and managed in a secure manner. The Board must continuously monitor the financial situation of the company and Group. This is reported monthly so that the Board can carry out its appraisal duties as required by law, listing rules and good board practice. Generally, the Board deals with matters of essential importance to the Group, such as: Strategic plans Budget Marketing plans Production planning Acquisition and sale of companies or businesses Acquisition and sale of other significant assets Important issues during 2000 Establishment of Sales companies in Singapore and Ukraine. Organisational changes Investments. Instructions The Board has issued special instructions on the responsibilities and authority of the Managing Director of HL Display. The Board has further issued special reporting instructions to the management. Fees Total fees to the Board of HL Display amounted to SEK 260,000 of which SEK 120,000 to the Board Chairman. No payments, other than those approved by the AGM, have been made. Committees Last year, the Board appointed a special nomination committee charged with proposing suitable Board members in close consultation with the larger shareholders. The committee also proposes fees for the Board. During the year, the nomination committee consisted of three members; Åke Wester, Chairman of HL Display AB, Anders Remius, Managing Director of HL Display AB and Lars Gårdö, Managing Director of Atle AB. Proposals from individual shareholders can be made by post via HL Display s head office in Skarpnäck. Last year, HL Display s Board did not appoint a remuneration or audit committee. These issues are decided by the Board directly. HL Display

44 SENIOR EXECUTIVES Senior Executives Anders Remius Managing Director Born: Employed since: Holding: 874,464 shares, including 401,904 A shares. Through company 84,050 B shares. Jan Sigurdh Production Born: Employed since: Holding: 500 shares. Kent Hertzell Economy and Finance Born: Employed since: Holding: 12,500 shares. Martin Ljungström Sales Born: Employed since: Holding: 300 shares. Håkan Eriksson Marketing Born: Employed since: Holding: 100 shares. Staffan Forslund Personnel Born: Employed since: Holding: 0 shares. Kenneth Löfgren IT Born: Employed since: Holding: 0 shares. Alistair Burke Business Development Born: Employed since: Holding: shares. Auditors Richard Roth Born: Auditor for the company since Öhrlings PricewaterhouseCoopers Liselott Stenudd Born: Auditor for the company since Öhrlings PricewaterhouseCoopers R & D Born: Employed since Holding: 200 shares. Bengt Ahlund Lennart Danielsson Born: Deputy since Öhrlings PricewaterhouseCoopers 42 HL Display 2000