In 2019, HANZA Holding AB (publ) has completed two acquisitions with factories in Finland, Germany and the Czech Republic, as well as listed the company on NASDAQ's main list. Furthermore, extensive efficiency projects are underway in the Group's manufacturing clusters. The acquisitions, projects and financial impact have previously been described in press releases and interim reports. In order to give an updated view of the Group's development, HANZA now summarizes and supplements the operational and financial information. Furthermore, HANZA develops its presentation of the financial key figures, in order to more clearly describe the company's net debt- and profitability development.
Please note that this English translation is for information purposes only. In case of any discrepancies between this version and the Swedish version of this information, the Swedish version shall prevail.
In 2018, HANZA initiated a new phase- the third since HANZA was founded in 2008. Plans and ambitions for this phase- named Strategy 2022- were presented in the interim report for the second quarter of 2018, alongside new financial targets. The aim of Strategy 2022 is for HANZA to grow from its current position- a leading manufacturing strategist in the Nordic region- into a major manufacturing strategist in Europe by 2022.
The major activities completed so far this year, the acquisition of Toolfac in Finland, the listing on NASDAQ's main list and the acquisition of the German RITTER Group, are part of this strategy. Strategy 2022 also includes a review of the Group's five production clusters to meet new sales volumes from existing and new customers. Partly through an efficiency program, and partly through so-called customer exchanges, where non-strategic production volumes obtained from acquisitions are phased out and replaced with new contracts.
The Group. The profitability of the HANZA Group is expected to increase significantly during the beginning of 2020 as the costs and projects mentioned above are completed. Opportunities for additional market shares are expected to increase significantly as the German market is established.
Balance. RITTER was acquired on July 25[th], 2019. If HANZA's balance sheet is adjusted as of June 30[th], 2019, with the acquired company's balance sheet, according to the preliminary acquisition analysis, as well as the new share issue made at the acquisition and raised acquisition loans, the equity/assets ratio amounts to 31% and the Group's interest-bearing net debt amounts to approx. SEK 550 million. The acquisition loan was EUR 7.2 million. Excluding the new accounting method introduced as of January 1[st,] 2019 (IFRS16), the Group's net debt together with the effects of the acquisition amounts to approx. SEK 443 million. HANZA has had, and will continue to have, a clear focus on positive cash flow and debt reduction, among other things in order to reduce the debts that arise in connection with acquisitions.
Operating profit: The acquisitions result in a significant amount of the assets in the acquisition analysis being allocated to intangible assets that are depreciated according to plan. To clarify the company's underlying profitability development, HANZA will mainly report earnings before amortization of intangible assets (EBITA). The Group's profitability target of achieving an operating margin of 6% after amortization of intangible assets (EBIT) during a business cycle remains fixed, however, and this profit measure will continue to be reported in the company's interim reports.
Net debt: As of January 1[st], 2019, new accounting rules apply (IFRS16) where, among other things, future rental payments should be reported as a liability in the balance sheet. In order to enable a comparison of the Group's debt development, HANZA will, in addition to the net debt that includes the effect of IFRS16, report the Group's operating interest-bearing net debt, based on previous accounting rules.
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