ANNUAL REPORT 2011 LAMMHULTS DESIGN GROUP CREATES POSITIVE EXPERIENCES THROUGH MODERN INTERIORS FOR A GLOBAL AUDIENCE. CONSUMER INSIGHT, INNOVATION, DESIGN MANAGEMENT AND STRONG BRANDS ARE THE CORNERSTONE OF OUR BUSINESS. WE DEVELOP PRODUCTS IN PARTNERSHIP WITH SOME OF THE FOREMOST DESIGNERS IN THE MARKET. LAMMHULTS DESIGN GROUP IS LISTED ON NASDAQ OMX STOCKHOLM. 1 THE PAST YEAR 56 CORPORATE GOVERNANCE REPORT 2 A WORD FROM THE CHAIRMAN 60 BOARD 4 A WORD FROM THE PRESIDENT 62 GROUP MANAGEMENT 8 STRATEGIC STRENGTHS AND GOALS 65 REPORT OF THE BOARD OF DIRECTORS 10 OUR DESIGN HISTORY – OUR FUTURE 69 CONSOLIDATED INCOME STATEMENT, STATEMENT OF COMPREHENSIVE INCOME, STATEMENT OF FINANCIAL 14 DESIGN AS AN INVESTMENT POSITION, STATEMENT OF CHANGES IN EQUITY AND 28 THE SHARE STATEMENT OF CASH FLOWS 32 SUSTAINABILITY REPORT 73 PARENT COMPANY INCOME STATEMENT, STATEMENT OF COMPREHENSIVE INCOME, BALANCE SHEET, STATEMENT 42 OFFICE & HOME INTERIORS OF CHANGES IN EQUITY AND CASH FLOW STATEMENT 50 PUBLIC INTERIORS 76 NOTES 54 SCANDINAVIAN EYEWEAR 108 AUDITOR’S REPORT THIS ANNUAL REPORT IS ALSO AVAILABLE IN SWEDISH OFFICE & HOME INTERIORS LAMMHULTS OFFICE LAMMHULTS HOME WHAT THE BUSINESS AREA DOES: WHAT THE BUSINESS AREA DOES: Lammhults Office develops and markets products for The Lammhults Home business area develops and interiors in public environments. The Lammhults brand markets home interior products. With its upholstered covers visually strong, timeless furniture with high design furniture and innovative storage solutions, Lammhults values, while the brands Abstracta and Borks encompass Home has one of the strongest product ranges in the products for visual communication and screening. home interior market. CUSTOMERS: CUSTOMERS: Lammhults Office primarily works with architects and de- The end customers of the Home business area are prima- signers who recommend products to their clients. Dealers rily private consumers but the products are also sold to constitute an important part of the sales process towards public environments, e.g. hotels. the end customer, usually companies and organisations. STRATEGIC CHANGE: STRATEGIC CHANGE: In October 2011 the decision was made to coordinate the In October 2011 the decision was made to coordinate the business area with Lammhults Office. The new business business area with Lammhults Home, which will create area will be called Office & Home Interiors. The decision income and cost synergies. The new business area will be is in line with the ambition of gradually developing the called Office & Home Interiors range to also encompass corporate environments while simultaneously creating income and cost synergies. NET PROFIT: NET PROFIT: Net sales Net sales SEK 331.9 million (287.8) SEK 62.4 million (73.4) Operating profit Operating loss SEK 33.7 million (32.8) SEK -9.1 million (-9.0) PROPORTION OF GROUP’S OPERATIONS: PROPORTION OF GROUP’S OPERATIONS: 44% 8% LARGEST MARKETS: LARGEST MARKETS: Sweden, Denmark, Norway, UK and Germany. Sweden, Norway, Finland, Germany and the UK. BRANDS: BRANDS: PUBLIC INTERIORS LAMMHULTS LIBRARY SCANDINAVIAN EYEWEAR WHAT THE BUSINESS AREA DOES: WHAT THE BUSINESS AREA DOES: Lammhults Library develops and markets attractive and Scandinavian Eyewear develops and markets functional interiors for libraries, schools and other public spectacle frames. The business comprises the meeting places such as educational premises and arts company's own Skaga brand and licensing deals for centres. The business area is partly dedicated to selling developing collections for other brands. total interior systems on a project basis and partly to after market sales of furniture and consumables. CUSTOMERS: Scandinavian Eyewear’s direct customers are private CUSTOMERS: and chain opticians. The end customers are private Lammhults Library works closely with architects and consumers. interior designers who design and suggest interiors for their end customers. Lammhults Library’s end customers STRATEGIC CHANGE: are mainly players whose operations are publically funded, In October 2011 the decision was made to hive off e.g. local government or education institutions. the business area in the long term as part of the Group’s streamlining strategy which sees it focusing STRATEGIC CHANGE: on profitable growth in furniture and interiors. In October 2011 the decision was made to broaden the business area’s operations. Increased sales initiatives alongside libraries, will be focused towards players in the education, health and care sectors. The business area is changing its name to Public Interiors. NET PROFIT: NET PROFIT: Net sales Net sales SEK 260.7 million (318.2) SEK 102.7 million (104.6) Operating profit Operating profit SEK 7.1 million (13.8) SEK 3.0 million (3.7) PROPORTION OF GROUP’S OPERATIONS: PROPORTION OF GROUP’S OPERATIONS: 34% 14% LARGEST MARKETS: LARGEST MARKETS: Germany, France, Sweden, Denmark and Norway. Sweden, Finland, Denmark, USA and Norway. BRANDS3 BRANDS: Where our revenues come from EXPORT MARKETS 62 % Net sales: SEK 753.8 million (778.0) Operating profit: SEK 18.5 million (26.7) SWEDEN 38 % Operating margin: 2.5% (3.4) Return on capital employed: 3.5% (4.7) Equity/assets ratio: 52.2% (49.6) Distribution of revenues Debt/equity ratio: 0.51 (0.56) PRIVATE CONSUMPTION 21 % Dividend payout ratio: 69% (61) Average number of employees: 400 (394) PUBLIC CONSUMPTION 44 % CORPORATE CONSUMPTION 35 % THE PAST YEAR Q1 Q2 Q3 Q4 Net sales Net sales Net sales Net sales SEK 192.1 m. (196.8) SEK 172.6 m. (187.9) SEK 187.0 m. (185.4) SEK 202.1 m. (207.9) Operating profit/loss Operating profit/loss Operating profit/loss Operating profit/loss SEK 2.5 m. (4.5) SEK -2.4 m. (4.3) SEK 10.7 m. (18.1) SEK 7.7 m. (-0.2) At unchanged exchange rates Demand was weak during the Demand remained strong in The Board and Management from the preceding year, net sales second quarter, other than at Lammhults Office, where sales of decided to streamline operations would have totalled SEK 201.9 Lammhults Office. As a result, the Abstracta brand, in particular, and focus on profitable growth million and operating profit SEK net sales fell by 8%. increased. in furniture and interiors. Work 4.2 million. began on coordinating Lammhults Scandinavian Eyewear continued Weak order bookings in southern Office and Lammhults Home into Lammhults Library secured a to record sales successes in Europe for Lammhults Library a single business area, Office & library project for Darmstadt, North America. and in Sweden for Scandinavian Home Interiors, and to extend Germany. The project is worth Eyewear. operations in Lammhults Library around SEK 10 million and is for In all the Group’s business areas, to include the education, health delivery in 2012. gross margins declined from Storage furniture No. 5, designed and care sectors. those in the previous year. by Jesper Ståhl, was launched by PR and trade fair activities were Voice. This flexible storage system Lammhults Library was chosen to conducted to market the Modern with an international style is suited equip the new multimedia library Essentials brand concept under for use in both domestic and in Montpellier, France. The order the Lammhults brand and Great public environments. was valued at around SEK 7 million Workspaces under the Abstracta and is expected to be delivered in brand. the second quarter of 2012. Cash flow from operating activities totalled SEK 46.7 million (35.5) in the fourth quarter. LAMMHULTS DESIGN GROUP 1 A WORD FROM THE CHAIRMAN – ANDERS PÅLSSON GROWTH STRATEGY WITH SHARPER FOCUS FROM F OUR BUSINESS AREAS TO TWO 2 LAMMHULTS DESIGN GROUP With the Group’s stable financial position as a firm footing, we have the resources we need to realise the growth strategy. At Lammhults Design Group, in 2010–2011 we have put a strength which the Group can now draw on with the merger great deal of work into fine-tuning and streamlining our of the business areas Lammhults Office and Lammhults strategic focus. We have taken on board the requirements Home to form Office & Home Interiors, a step entirely in and wishes of our shareholders and during this process line with our ambition to expand our home range and also placed emphasis on conducting a good dialogue with the encompass corporate environments. The Voice and Ire stock market and our other key stakeholders. brands, previously part of Lammhults Home, will now be expanded and oriented towards target groups in public set- The Board of Directors and the senior management of tings. Together with the established brands Lammhults, Ab- Lammhults Design Group have decided to streamline the stracta and Borks, they will form part of one of the market’s Group’s operations and create profitable growth in furniture strongest brand portfolios. and interior design. As a result, our four business areas will now be concentrated into two. Lammhults Office and LIBRARY TO BECOME PUBLIC INTERIORS AND OPEN UP Lammhults Home will be merged to create Office & Home In- NEW MARKETS teriors. Operations within Lammhults Library will be broadened and the business area will change its name to Public Interiors. Development in the library market in recent years has been The business area Scandinavian Eyewear will be hived off in far from satisfactory. A number of outside factors, primarily the longer term. in the fields of media and technology, have reduced the importance of traditional libraries. At the same time, a new BACKGROUND: STRATEGIC MARKET ADAPTATION type of library, often a media centre, has evolved. We need to keep pace with these changes. Redefining the business Up until autumn 2011 the Group worked with a number of area as Public Interiors sees us taking a broader approach to companies distributed across four business areas. Now we this market. The public sector is a key market for Lammhults are focusing on the areas in which we have the greatest Design Group and we will be widening our focus, with priority potential and which are in line with our interior design profile.