Doro AB 
Financial Statement Release / Year-end Report 2010

Top Quote Sales grew 22 percent in the fourth quarter with cash flow of SEK 103 m. End Quote
  • (1888PressRelease) February 15, 2011 - London.

    Highlights of the fourth quarter of 2010:
    • Net sales for the fourth quarter rose to SEK 229.1 m (187.6), an increase of 22 percent. The Care Electronics business unit generated sales of SEK 191.5 m, accounting for 84 percent of consolidated sales for the fourth quarter.
    • Operating profit (EBIT) amounted to SEK 26.4 m (19.2),
while profit for the period increased to SEK 34.1 m (21.1).
    • Earnings per share after tax were SEK 1.78 (1.17).
    • Cash flow from current activities was SEK 103.3 m (51.3).
    • Order intake amounted to SEK 164.8 m (155.4), an increase of 6 percent.
    • Doro signed a new distribution agreement with Rogers Communications in Canada and with TelstraClear in New Zealand.

    Highlights of the 2010 full-year:
    • Net sales of SEK 632.8 m (492.6), an increase of 28.5 percent.
    • Operating profit (EBIT) was SEK 47.0 m (26.6),
while pre-tax profit amounted to SEK 46.4 m (24.9).
    • Earnings per share after tax were SEK 2.99 (1.30).
    • Cash flow from current activities for the full-year amounted to SEK 80.4 m (64.4).
    • The Board of Directors proposes that a dividend of SEK 0.50 per share be distributed to shareholders for the 2010 fiscal year.
    • Updated financial targets: Long term target of 10 percent for the operating margin and an annual sales growth target of 20 percent over the coming years.
    • After the reporting period, Doro publicized the decision of a German court upholding its claim against a potential competitor, who had begun to promote a copy of Doro's PhoneEasy® 410gsm model. The decision of the court underscores the uniqueness of Doro's product design.
    • Based on Doro now having established a leading position in the expanding senior mobile segment, sales and operating profit (EBIT) are expected to continue to grow in 2011.

    Comments by the CEO, Jérôme Arnaud:
    "2010 was an exceptional year in Doro's history. We fulfilled our strategy to become a telecom products company focusing on seniors, we entered two new geographic markets and signed new or extended partnerships with six leading operators. We also crossed the one million mark for the number of senior mobiles sold.

    The fourth quarter of the year confirmed Doro's strategy and turn-around. I am proud to be able to report 22 percent sales growth for the quarter, sustained by a growth of almost 50 percent in Care Electronics. This figure is particularly strong compared with the equivalent period in 2009, when the Care Electronics segment's success was already significant. In the fourth quarter, this business unit accounted for 84 percent of the Group's total sales and, for the full-year, the figure amounted to 79 percent. Our operating profit of SEK 26.4 m only in the fourth quarter, an increase of 37.5 percent compared to 2009 is a record, both in absolute terms and relative to sales (11.5 percent).

    Speaking of our financial performance, I am pleased to report cash flow for the fourth quarter alone of an extraordinary SEK 103.3 m. While this was made possible as a result of operational rationalizations giving full result in 2010 with substantially increased stock turnover and generally improved working capital, there is also a component of SEK 23.8 m in repaid VAT receivables in France. The result is a net cash position of SEK 89.5 m at the end of 2010, which has not only financially strengthened Doro, but also enables future growth ventures, which may include complimentary acquisitions to enhance our product range and the services our products can deliver.

    Order intake for the fourth quarter rose by 6 percent in total, but by 23 percent in Care Electronics. Breaking down the sales by region, it is clear that our most mature markets, Nordic and EMEA, are the main contributors, both with sustained high growth. Meanwhile, our UK business has now also reached the necessary critical size, mainly thanks to the agreement we signed with Orange at the end of August. In the US and Canada, we secured an agreement with a major Canadian operator, Rogers Wireless, as late as in October and expect this partnership to reach its full potential during 2011. At the same time, our partnership with Consumer Cellular in the US continues to expand.

    Latin America, the Asia-Pacific region and CIS are still at an early stage of development. Consequently, we are still investing in sales, marketing, legal set-up and product certification, and this impacted profitability in 2010. We will continue to invest in those regions in 2011 and are considering more specifically the market potential in Russia, Australia, Mexico, Argentina and South Africa.

    Looking at the reported result per segment, the declining business unit Home Electronics shows an extraordinary high operating margin, which is due to that during 2010 we have financially treated Home Electronics as a marginal business. Looking at gross margins for Care Electronics I am happy to report this is well in line with our plans. Although it is a natural effect that our gross margin may come under some pressure as our strong growth continues, I believe however that our strict control of pricing, cost per sold unit, currency and operational costs also will show up in improvement of our operational results.

    The two business units Care Electronics and Home Electronics will actually be merged going into 2011. In order to improve our transparency we will start to report our consolidated gross margin as well as operating results per sales region.

    Doro maintains close contacts with operators, distributors and end-users. As our year-end numbers are being published, we are attending the GSMA Mobile World Congress in Barcelona, Spain. This is the very heart of the mobile telecom sector and Doro is taking the opportunity to launch four new mobile phones, one of which includes an easy-to-use camera, a feature requested by our customers.

    To better match our partners' ambitions to provide the best telecom solutions, we are also adapting some of our products to 3G technology. We are also showcasing the first two mobile health services, to be linked to Doro devices. Mobile Health (mHealth) is expected to be a major growth segment in coming years.

    To create optimal conditions for the potential interconnection of medical devices to our devices, Doro has also become a member of the Continua Health Alliance. The aim of the Alliance is to establish an ecosystem of interoperable personal health solutions. In addition, we start developing a platform based on the Android operating system in order to more easily introduce new applications.

    Since Doro's success is largely associated with the design of our products, we were pleased by a recent ruling by a German court upholding Doro's claim against a potential competitor who had begun to promote a copy of our PhoneEasy® 410gsm model. The decision of the court underscores the uniqueness of Doro's product design.
    Although Doro is now well-established in its category and core markets, I still perceive great potential for development and further growth. The global population of people above the age of 65 is increasing and these people are looking for easy, user-friendly products to simplify their everyday lives. Among the 65+ population in the Nordic countries, we have reached a penetration level of close to 10 percent. In the remaining markets where we are established, our average penetration among the same 65+ demographic is around 1 percent."

    Net sales
    Doro's sales for the fourth quarter amounted to SEK 229.1 m (187.6), an increase of 22.1 percent. For the full-year, sales increased to SEK 632.8 m (492.6), an increase of 28.5 percent. Using the same exchange rates as for the previous year, organic growth amounted to 31.3 percent for the fourth quarter.

    Operating result (EBIT)
    For the fourth quarter of 2010, the Group's profit before tax and financial items amounted to SEK 26.4 m (19.2), an increase of 37.5 percent. This improvement was attributable to higher sales and a continued focus on the cost base. For the 2010 full-year EBIT amounted to SEK 47.0 m (26.6).

    Cash flow, investments and financial position
    The cash flow from current activities in the fourth quarter was positive in an amount of SEK 103.3 m (51.3). The positive result combined with a strong focus on working capital, is the main explanation, as well as the recovery of the delayed VAT receivable in France amounting to SEK 23.8 m.
    In line with IFRS, current hedge contracts have been valued among net financial items, affected the net result for 2010 positively by SEK 0.2 m.
    At year-end, 2010, Doro was debt free, with net cash of SEK 89.5 m, to be compared with net cash of SEK 31.6 m at year-end 2009. The company has unused check facilities of SEK 32.0 m.
    The equity/asset ratio has improved to 36.0 percent (29.1) at the end of the period, as a result of improved profit and a revaluation of the deferred tax assets amounting to SEK 12.9 m.

    New reporting structure as of 2011
    As of the first quarter 2011, Doro will replace its current disclosure by business unit with segment information by geographical region, as well as the gross margin level for the company. The geographical regions will be Nordic, EMEA (Europe, Middle East and Africa), UK and rest of the world. This is in line with the management and board perspective into 2011 and its monitoring of the Group.

    Business units
    Care Electronics
    Care Electronics supplies telecom and electronics products adapted to the needs of senior citizens.
    Sales in the fourth quarter rose to SEK 191.5 m (130.7), an increase of 46.5 percent. Care Electronics represented 83.6 percent of Doro's total sales for the period.

    Home Electronics
    Home Electronics offers domestic telephones and other products for the modern family.
    Sales during the quarter amounted to SEK 37.6 m (56.9), a decrease of 33.9 percent, as a result of Doro's strategy to set a more focused product range, which has lead to sales to certain customers being discontinued.

    Of the Group's total sales in the fourth quarter, Nordic represented 32 percent, EMEA 42 percent, UK 15 percent, and the other markets 11 percent.
    At the end of the quarter, the headcount was 59 (58). Of these, 29 (26) are based in Sweden, 16 (18) in France, 5 (4) in the United Kingdom, 3 (4) in Norway and 6 (6) in Hong Kong.

    Parent Company
    The Parent Company's net sales for the year's fourth quarter amounted to SEK 223.7 m (97.8). The profit before tax amounted to SEK 31.2 m (6.7).
    Events after the close of the period
    Doro wins dispute against German competitor over telephone design
    A German court (Landgericht) has issued a ruling preventing German manufacturer ITM Einkaufs GmbH from selling a model similar in design to Doro's phones. The court found that the phone represented an encroachment on one of Doro's registered designs for its PhoneEasy® 410gsm model. Doro works continuously with branding, design and innovation and consistently resists all and any infringements on its intellectual property rights.

    Financial targets
    Following Doro's turn-around in recent years and the strong development of its business, the Board has had reason to review the financial targets.
    Therefore, the Board has decided to set a long term target of 10 percent for the operating margin. The Board has furthermore adopted an annual sales growth target of 20 percent over the coming years.
    Dividend and dividend policy
    The Board has proposed a dividend of SEK 0.50 per share to be paid in 2011, the first dividend to be paid since 2000. The Company's long-term target is to pay a dividend of approximately one third of net profit after tax. Additionally, the Board has set a maximum debt/equity ratio of 1.0 (interest-bearing debt/equity).
    At present, Doro holds a net cash position and therefore has a strong financial base and readiness to finance growth through investments, either organically or via acquisitions.

    Based on the fact that Doro has now established a leading position in the expanding senior mobile sector, sales and operating profit (EBIT) are expected to continue to grow in 2011.
    Doro share
    Doro is listed on the Nasdaq OMX Stockholm, Nordic list, Small Cap - Telecom/IT.
    On December 31, 2010, Doro's market capitalization amounted to SEK 596.2 m, compared with SEK 210.2 m at the beginning of the year. During the period January 1-December 31, 2010, the share price increased from SEK 11.00 to SEK 31.20.
    The number of shareholders on December 31, 2010 was 5,900 (3,932).

    Related-party transactions
    No transactions took place between Doro and related parties that had a material impact on the Company's financial position and results.

    Risks and instability factors are mainly related to supplier disruption, product adaptation and certification, customer relations, exchange rate fluctuations and loan financing. Apart from these risks and the instability factors described on pages 25-26 and 43-45 of the 2009 Annual Report, no other risks of any significance have been identified during the most recent period.

    Accounting principles
    This Interim Report has been prepared on behalf of the Group according to IAS 34, Interim Financial Reporting, and for the Parent Company in accordance with the Annual Accounts Act and the Swedish Financial Reporting Board's recommendation RFR 2.3 Accounting of legal entities. The accounting principles and calculation methods applied are consistent with those that were applied when drawing up the previous year's accounts.

    Annual General Meeting 2011
    The AGM will be held at the Scandic Star Hotel, Glimmervägen 5 in Lund, Sweden, on March 23, 2011 at 3:00 p.m. CET. The notice to attend the AGM will be available on the Doro website.

    Nomination Committee
    A nomination Committee consisting of Tedde Jeansson (representing Originat AB), Arne Bernroth (Nordea Bank) and Bo Kastensson (Chairman of the Board of Doro AB) was elected at the Annual General Meeting held on March 25, 2010. Tedde Jeansson is the Chairman of the Nomination Committee.

    Financial calendar 2011
    The Board has set the following dates for the publication of Doro's Interim Reports: 

January-March 2011: May 6, 2011
January-June 2011: August 17, 2011
January-September 2011: November 9, 2011

    Interim Reports
    The Interim Reports are available on the Doro website under "Investor's room".


    Further information

    President & CEO Jérôme Arnaud, +46 (0)46 280 50 05

    CFO, Annette Borén, +46 (0)70 630 00 09

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