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Report of the Board of Directors
Eltek’s top priorities for 2009 were to substantially improve cash flow and strengthen the company’s financial position. Measures to improve working capital management and cash collection have been successful. Free cash flow improved by more than NOK 1 billion compared to 2008, to NOK 585 million in 2009. All business segments reported positive free cash flow. Eltek’s 2008 Annual Report stated that the Group saw signs of reduced demand in some markets and generally a low demand visibility for 2009. The Group prepared for a non-growth market environment and specifically pointed out the uncertainty related to future developments in both revenue and earnings. As it turned out, demand for telecom equipment declined by an estimated five percent in 2009. The market for telecom power systems showed an even steeper decline, whereas the microwave transmission market was more or less flat.Eltek Valere showed a satisfactory development, as the company gained market share and strengthened its relative position in 2009. Eltek Valere also managed to increase gross margins and to reduce operating costs in response to the lower level of activity, and generated a strong free cash flow throughout the year.
Nera Networks reported a slight revenue increase in 2009 although low capacity utilization and intense competition and price erosion put pressure on gross margin. This, along with an increase in operating costs resulted in year-end asset impairments of NOK 190 million in Nera Networks in 2009.
Due to the impairments, the Eltek Group reported a loss before tax of NOK 92 million for the full year, compared to a loss before tax of NOK 758 million in 2008.
PRESENTATION OF ACCOUNTS
Pursuant to Section 3-3 of the Norwegian Accounting Act, the Directors confirm that the accounts have been prepared under the assumption that the enterprise is a going concern and that this assumption was realistic at the date when the accounts were approved. The Eltek Group reports its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union from 1 January 2005. For more information, please refer to the notes to the consolidated financial statements.
FINANCIAL PERFORMANCE – INCOME STATEMENT
The information below describes the financial information included in the reported Income Statement for 2009, with figures in brackets referring to the corresponding figures for 2008. ORDER ENTRY AND REVENUE
Order entry for the Eltek Group declined 14 percent to NOK 5,397 million in 2009 (6,252). Revenue declined by three percent to NOK 5,778 million (5,958) and by eight percent adjusted for currency developments. Eltek Valere showed a 12 percent revenue decline in 2009, whereas Nera Networks reported a slight revenue increase of four percent and Nera Telecommunications a 20 percent increase from 2008. Overall, the company believes it strengthened its market share in a market subdued by declining global investments in the telecommunication industry. GROSS MARGIN
Eltek has taken action to reduce the cost base and preserve gross margin, and gross profi t declined significantly less than revenue in 2009. The reported gross profit was NOK 1,338 million in 2009 (1,364), a decline of two percent from the previous year. The corresponding gross margin increased to 23.2 percent (22.9).
Copyright 2010 Eltek ASA • Date: 2010.9.4 • Disclaimer • Phone +47 32 20 32 00 eltek@eltek.com