HL Display annual report 2009 · 2014-05-05 · HL DispLay ÅrsreDovisning 2007 5 HL Display annual...

1HL DispLay ÅrsreDovisning 2007

HL Display annual report 2009

HL DispLay ÅrsreDovisning 2007 2

3 The year in brief 4 HL Display’s business model – an overview 6 statement by the Ceo 9 acquisition 10 HL Display – operations, strategies and objectives 14 HL Display’s market and sales work 19 HL Display’s offering to customers 22 product development 24 operations 27 Case story 28 support processes – administration 30 Corporate responsibility 34 The share 36 risk and sensitivity analysis 37 nine year summary 37 Definitions 38 administration report

group 40 income statement for the group 40 statement of Comprehensive income for the group 41 statement of Financial position for the group 42 statement of Changes in equity for the group 42 statement of Cash Flows for the group parent Company 43 income statements for the parent Company 44 Balance sheets for the parent Company 45 statement of Changes in equity for the parent Company 45 statement of Cash Flows for the parent Company

46 notes to the Financial statements 69 audit report 70 statement by the Chairman 71 Corporate governance report 2009 76 Board of Directors 77 senior executives 78 History 79 Financial information

ConTenT

Innehåll HL Display Årsredovisning 2009 2

This annual report has been prepared in swedish and translated into english. in the event of any discrepancies between the swedish and the translation, the former shall have precedence.


THe year in BrieF

• net sales amounted to MseK 1,360 (1,536).

• profit before tax was MseK 84 (136).

• earnings per share after tax amounted to seK 1.88 (3.11).

• equity per share amounted to seK 17.81 (17.40) as of 31 December 2009.

• acquisition of ppe Ltd.

• Maintained dividend proposed, seK 1,38 per share.

The year in briefHL Display annual report 2009 3

Key raTIos 2009 2008 2007

net sales, MseK 1,360 1,536 1,571

operating profit, MseK 86 130 161

profit before tax, MseK 84 136 155

profit after tax, MseK 58 96 108

earnings per share, seK 1.88 3.11 3.48

eBiTa margin, % 6.4 8.5 10.3

eBT margin, % 6.2 8.9 9.8

equity/assets ratio, % * 44.4 57.3 53.3

equity per share, seK * 17.81 17.40 15.26

average number of employees 906 983 968

* Key ratios affected by the ppe acquisition.For key ratio definitions, refer to page 37.

ImporTanT evenTs DurIng THe year

Q1 Q2 Q3 Q4

Targeted actions aimed at adapting production capacity to lower demand. a new matrix organisation was launched, resulting in increased regional and functional responsibilities, and less independent local subsidiaries. This opens up for rationalisations and shared services.

retail customers on all markets were putting their investments in the stores on hold. Brand customers continued investing. Decision was taken to use recycled peT in the next generation of shelf dividers, optimal™+. Heavy increase in raw material prices.

signs in the market of having passed the worst period. HL Display reached a balance between capacity and demand. Launch of powerTrack™, a unique system for supplying power to the shelf. HL Display sees great potential when combined with ad’lite™ – HL Display’s new lighting system.

The acquisition of ppe Ltd. is announced just before Christmas. ppe is HL Displays largest acquisition so far, with a turnover of MgBp 27. The company adds significant strengths to HL Display’s operations, particularly with regards to the brand manufacturers.HL Display starts a regional sales company in Dubai and a regional logistics centre in Hungary.


HL Display’s business model – an overview HL Display annual report 2009 4

HL DispLay’s Business MoDeL – an overview

HL Display is europe’s leading merchandising company. with more than 50 years experience, the company specialises in displaying products in stores in a way that increases sales and makes the store-work more efficient, and at the same time providing end consumers with all the information necessary to make a purchasing decision. net sales amounted to MseK 1,360 in 2009. The HL Display share is quoted on the nasdaq oMX stockholm small Cap list.

most of the world’s leading food chains, non-food chains and brand manufacturers figure among the Company’s customers.

FooD reTaIL

ahold (inkl iCa)auchan CarrefourCasinoChampion intermarché Metrosystème uTescowal-Mart (asDa)

non-FooD reTaIL

BaumaxDecathlonDsg retail Ltd.intergammaMüller

BranD manuFaCTurers

BaTColgateDanoneKraftL’oréalMasterfoodsnestléphilip Morrisprocter & gambleunilever

marKeTs servICeD By own saLes CompanIes

austriaBelgiumBulgariaChina (Hong Kong)China (shanghai)Czech republicFinlandFrancegermanyHungaryindiaindonesiaLatviaLithuaniaMalaysianetherlands norway

polandromaniarussiaserbiasingaporeslovakiasloveniasouth KoreaspainswedenswitzerlandTaiwanThailandTurkeyukraineunited arab emiratesunited Kingdom

marKeTs servICeD By DIsTrIBuTors

CanadaDenmarkestoniagreeceicelandireland

israelitalyKazakhstan Maltaportugalunited states

To the food and non-food retail sectors HL Display offers products and solutions for merchandising and In-store communication.

merchandising – products which present goods attractively and utilise store space efficiently, while allowing ease of maintenance.

In-store communication – products which ensure consumers have all the purchasing information they need and are able to find their way around the store with ease.

– approximately 90 percent of sales come from projects connected with store openings or remodelling of existing stores.

– The other 10 percent comes from replacement sales (new parts or spare parts).

– sales connected with new store openings are dominated by emerging markets, while store remodelling sales are dominated by developed markets. stores are normally remodelled every four to six years.

HL Display’s customerscome from the food andnon-food retail sectors,and from the brand manufacturers which produce the products sold in the stores.

HL Display sells products and solutions helping the food and non-food retail sectors increase sales and rationalise work in the store.

HL Display’s business activity is based on direct sales to customers. The majority of the 46 markets are serviced by the Company’s own sales companies.


HL Display’s business model – an overviewHL Display annual report 2009 5

– HL Display has four factories in sweden (one co-owned), one in the uK, one in China and one in the usa (co-owned).

– at the turn of the year 2010, a state-of-the-art production facility was added in the uK through the acquisition of ppe.

– efficient logistics shall ensure that customers experience high service levels and short lead times.

– HL Display invests more in innovation, product development and design than any other company in the sector.

– HL Display’s innovations have a proven record of establishing new standards on the market.

To the brand manufacturers HL Display offers products and solutions for primary placement and secondary placement.

primary placement – products which allow brand manufacturers to make optimal use of their allocated shelf space in the store and tempt shop-pers to make a purchase.

secondary placement – products which allow brand manufacturers to display their goods elsewhere in the store rather than just on the shelf.

– The majority of these sales come from projects connected with launches or relaunches of brand manufacturers’ products. Brand manufacturers run these projects on a regular basis for all their products.

HL Display sells products and solutions helping brand manufacturers optimise brand- building and give their products visibility in the store, ultimately resulting in increased sales.

Most of the products sold by HL Display are manufactured in the Company’s own factories.

HL Display’s focus on innovation, productdevelopment and design is one of the Company’s main competitive advantages.


when i wrote my Ceo report for the 2008 financial year back in January 2009, i made reference to the difficulty in predicting how the market might develop during the coming year. i also stressed the importance of being attentive to changes in the market, and quickly taking action where necessary.

in hindsight, it can be observed that these thoughts became reality almost immediately. The market developed more negatively than we expected – even in our worst-case-scenario.

we have however successfully adapted to the lower sales level during the year, which means that we retained a good profitability level. in addition, we have acted to strengthen our operations for the future, through our largest and most important acquisition to date.

Two key developmentsi would like to summarise the year by highlighting two key developments. it will come as no surprise that the first point is market development. even in the early part of the year, we saw many customers applying the brakes and reducing their investments. our total net sales declined by 11 percent during 2009. excluding currency effects, the decline was 15 percent.

The second key development is the earnings trend. we have adjusted our costs to match the lower sales during the year, which is why we can report an eBiTa margin of over six percent. it is important to point out that the cost reductions have been gradual during the year, which means that it is only towards the end of the year that we have had full benefits of a reduced cost level. entering 2010 we have a trimmed-down, cost-effective operation. This will create exciting opportunities when the market picks up again.

sales development if we take a more detailed look at sales development, we see a variation between the customer segments. Looking at our priority segments (food retail, non-food retail and brand manufacturers), we can conclude that sales to the two largest, food retail and brand manufacturers, have remained on acceptable levels during the year.

sales to brand manufacturers have risen by 5 percent, mainly because these companies continue to invest in merchandising and in-store communication. one reason is to meet competition from private labels which are being increasingly marketed by the food retail sector. we also provide these customers with a stronger offering than previously. sales to food retail, which is easily our largest customer segment, fell by 5 percent.

non-food retail has been hit harder by the recession, not least

within categories such as home electronics and Diy (do it yourself). Consequently, our non-food retail sales have fallen, showing a 20 percent decline on the previous year’s figure.

The figures have been pulled down largely by the two secondary segments, external distributors and shop-fitting companies. Both these segments show sales declines of around 30 percent. The shop-fitting companies have suffered from low levels of new store openings and store remodellings and the external distributors generally seem more affected by the recession than our own sales companies.

all regions affectedwe feel the effects of recession in all the countries where we operate, albeit to varying degrees. asia and Middle europe performed better than other regions. sales decreased by 8 and 7 percent respectively. For much of the year, sales in Middle europe were virtually unchanged from the previous year. However, towards the end of the year, sales declined somewhat, particularly in poland and austria.

in the nordic, Baltics and uK region, sales fell during the year, ending on minus 15 percent. However, towards the end of the year, the situation has improved significantly.

The countries of Central/eastern europe are some of the biggest victims of the recession. This was also reflected in our sales, which were down significantly at the beginning of the year. The situation was particularly serious in russia and ukraine. it should be said, however, that the trend reversed in the latter part of the year, with russia in particular showing strong sales growth. although the market situation is still difficult, we note an improvement. in total, sales in the region fell by 14 percent in 2009.

The southern europe region started quite well, only to experience a downward trend later. in total, sales fell by 16 percent on last year’s figures. our sales in spain have suffered badly in the latter part of the year, which is a clear reflection of the severe economic climate in spain at the moment. sales in France have also shown increasing negative growth during the year.

adapted cost levelas i said in my opening sentences, we have successfully adapted to the lower sales level. rationalisation measures have largely affected our sales companies across the world, where we have reduced our staff by approximately 90 jobs. we also made capacity adjustments in production; the workforce at our factories has been reduced by approximately 50 jobs. To some extent we have been able to do this gradually by not replacing staff that has left the company and by applying stricter control on new recruitments, thus minimising internal distractions and turbulence.

The entire organisation has aimed at improving working methods in order to achieve cost savings. Combined with the centralisation of the purchasing organisation, we have been able to reduce costs for energy, iT, travel, and our car fleet. Consequently, we are able to show a percentage reduction in operating expenses which is roughly on a par with the decline in sales.

gooD proFiTaBiLiTy DespiTe reCession

statement by the Ceo HL Display annual report 2009 6

we have successfully adopted to the lower sales level during the year, which means that we retained a good profitability level.


The investment level in tools and machinery has been main-tained, in particular to ensure increasing automation, which we consider essential in our efforts to achieve a sharper competitive edge. we have also upgraded our production facility in Falun with a digital printing line.

potential for sales improvementafter the measures we implemented during the year, i strongly feel that HL Display is a company with an attractive range of products, competitive production costs and reduced operating expenses. our primary objective in the short term is to increase sales. it is our opinion that this may partly change with an economic turnaround. Many customers will have an accumulated investment need as they are postponing investments at the moment. at the same time, it

should be said that there is potential for improvement in our sales work. at present, we are implementing changes with regard to the sales process and the work of the sales companies in order to make better use of the opportunities on the market.

Drive towards new technologyan area where we have kept our investment level high is product development. This is a deliberate policy on our part. HL Display aims to be the market leader first off the mark with innovative new solu-tions that have the potential to become the market standard – just as HL Display’s datastrip has become the natural standard in stores.

in 2009 we launched two highly important solutions – powerTrack™ and ad’Lite™ – that mark the start of the drive for new technology. powerTrack™ is a cost-effective, easy-to-install infrastructure which brings low voltage power to the shelf edge. with the new solution, the shelf edge is prepared for digital applications such as digital signage. in connection with this, we also launched ad’Lite™, a lighting solution for this infrastructure. ad’Lite™ is more cost-effective and environmentally friendly than the fluorescent lamps normally used for this type of lighting. For us, this is an important entry into an area where we see very interesting potential.

sustainability issues attracting more interestin recent years, we have increasingly addressed responsibility issues, in particular in order to strengthen the communication about all the measures we take with regard to economic, social and environmental sustainability. at HL Display, we have a strong tradition of addressing our environmental impacts, while also operating an economically successful business. at the end of the 1990s, our largest factories were environmentally certified under the iso 14001 environmental management system. we engage in continuous improvement work associated with these areas. some of the changes during the year include using an increased proportion of recycled materials in our new optimal™+ system, an improved shelf divider system based on the already successful optimal range. we have also entered an agreement to run our swedish production and distribution facilities entirely on green electricity from 2010. our code of conduct serve as guidance in all contracts we sign with suppliers.

Largest acquisition in the company’s historyin recent years, we have clearly stated that our aim is to strengthen the company’s offering and market position by means of acquisitive growth. During December, ppe Ltd. was acquired, which adds significant strengths to our operations, particularly with regards to the important brand manufacturers customer segment. HL Display gains access to strong skills and extensive experience in designing and manufacturing customized merchandising solutions. Brand manufacturers have high demands with regard to customisation and short lead times from concept and prototype to finished product. This is an excellent complement to our own production which is directed more towards cost effectiveness in long batches. we also gain access to expertise in multi-material production, in other words production of products with parts made of plastic, metal and wood, for example.

ppe has just over 280 employees and sales exceeding MseK 300. This means that the acquisition also gives us considerably stronger position in the British market. HL Display and ppe have a combined net sales of MseK 400 in the uK and will become one of the strong participants in the market. already from 2010 the acquisition is expected to contribute positively to the profit.

statement by the CeoHL Display annual report 2009 7

In 2009 we launched two highly important solutions – powerTrack™ and ad’Lite™ – that mark the start of our drive for new technology.


outlook for 2010as i mentioned at the beginning of my report, the key developments of the year were the fall in demand caused by the economic slowdown and our success in adapting operating expenses to the new situation.

The changes have obviously put pressure on all of us who work at HL Display. i would like to take this opportunity to thank all employees who participated in, and therefore made possible, the change work we have implemented. i would also like to extend a warm welcome to all the new colleagues who have joined us from ppe.

as far as the market is concerned, it is our judgement that the situation is starting to stabilise, although not showing any major improvements. This means that we will remain alert to changes in the market climate and be ready to act in response to these.

at the same time, it is important to remember that the recession prompted us to further sharpen our processes. we know that we have efficient operations and are maintaining a good profitability level, despite considerably lower sales than in the previous year. we also have clearly defined focus areas (see page 13) in order to

further strengthen our operations. HL Display’s financial position remains strong. we have secured a more efficient capital structure both in the short and long term. we have also taken measures to improve our cash flow. in other words, the stage is set for us to emerge from the recession as a more successful company than we were, which feels very exciting.

nacka strand, February 2010gérard Dubuy, president and Ceo

statement by the Ceo HL Display annual report 2009 8

During December, we acquired the British company ppe Ltd. The acquisition adds significant strengths to our operations, particularly with regards to the important brand manufacturers customer segment.


in recent years, it has been HL Display’s aim to strengthen its offering and market position by means of acquisitions. efforts have been constantly directed towards identifying and analysing potential acquisition candidates.

major strategic importanceThe acquisition of ppe is HL Display’s largest and most important acquisition to date. it is of major strategic importance in that it provides an excellent complement to HL Display’s operations. ppe has extensive experience and a high level of expertise in the design and manufacture of customised merchandising solutions. The company’s business is structured in such a way as to respond to the exacting demands of brand manufacturers. a high level of creative design and short production lead times are among ppe’s main qualities.

To date, ppe has sold its products and solutions mainly to the uK market, although demand for this type of products is global. This is where HL Display will be able to deploy its well developed sales network, encompassing 46 markets worldwide, and gradually offer these products in all its other active markets. Together, ppe and HL Display will present a very attractive and competitive offering to brand manufacturers – a customer segment which HL Display considers important to future growth.

Joining forces to become a uK leaderppe is a large and well established player in the uK market – a market which HL Display believes to have good future potential. However, HL Display has not so far achieved the success it wanted on the uK market. with the acquisition, the combined forces of HL Display and ppe now form one of the country’s leading market players.

another important advantage is that HL Display gains access to ppe’s expertise in multi-material production – the production of displays made of different materials, such as plastic, metal and wood. This creates new opportunities for HL Display, which will be of future benefit to the customers as HL Display can now supply the major international brands with products that the company previ-ously could not offer.

good profitability and financial positionHL Display’s acquisition criteria require potential candidates to be well managed, profitable companies in a good financial position. ppe fulfils all these requirements. The company has shown good profitability since it was established in 1971. in 2009, the eBiTa margin was 10 percent, with sales of MseK 304 (eleven months).

This means the acquisition will make a positive contribution to HL Display’s sales and results from 2010 onwards. The total acquisition price was MseK 318 (based on a gBp/seK exchange rate of 11.71) and was mainly financed by bank loans, which allows scope for future acquisitions.

The management of ppe will remain in place and will also take over responsibility for developing HL Display’s entire uK operations. in addition to Harlow-based ppe with 280 employees, these con-sist of a sales company in Kirmington with 30 employees and a production facility in shipley with 20 employees.

acquisitionHL Display annual report 2009 9

on 21 December 2009, HL Display completed the acquisition of ppe Ltd, a uK manufacturer of merchandising

solutions. The acquisition strengthens HL Display’s offering to the brand manufacturers segment and the

Company’s uK market position.

aCquisiTion oF ppe


HL Display’s business operations are based on three business processes – sales & Marketing, product

Development and operations – which work in synergy to create maximal customer value and customer

satisfaction. This is the cornerstone of the group’s efforts to achieve its overall business objective, namely

to be a market-leading merchandising company with high growth and good profitability, and delivering added

value for shareholders.

HL DispLay – operaTions, sTraTegies anD oBJeCTives

Customer

need

Human resources

administration (Finance, IT)

product Development

sales & marketing

HL Display’s business operations – from customer need to deliveryHL Display’s business operations are based on three primary business processes: sales & Marketing, product Development and operations. These are supplemented by group-wide support processes which include administration (Finance and iT) and Human resources.

sales & Marketing is largely made up of the work carried out at the sales companies across the globe and represents the company’s primary interface with customers. in addition to sales

that are based on the existing product range, the business process also involves taking onboard ideas for new products based on customers’ needs and preferences. These ideas are passed on to product development for further evaluation and exploitation. in addition to new developments, product Development is also responsible for managing and further developing the existing product range. operations consists of HL Display’s entire supply chain responsible for sourcing, production and logistics.

strategiesHL Display will employ four main strategies to achieve the group’s financial targets.

1. Focus on three primary customer segments – food retail, non-food retail and brand manufacturers.

2. prioritise on design and innovation with a view to setting new standards. product development will be customer-driven.

3. streamline and adapt the organisation to market requirements and needs.4. strengthen the product range and market position by means of acquisitions.

HL Display – operations, strategies and objectives HL Display annual report 2009 10


Delivery

to Customer

Human resources

administration (Finance, IT)

operations– production– sourcing– Logistics

Business concept HL Display’s business concept is to increase its customers’ profitability by offering the retail sector and brandmanufacturers cost-efficient products and solutions for in-storecommunication and merchandising. The focus is on makingproducts and solutions that can be adapted to customers’specific needs.

Long-term financial targets• eBiTa margin of at least 12 percent.• annual organic growth of 5-10 percent.

HL Display – operations, strategies and objectivesHL Display annual report 2009 11


HL Display’s financial targets – prerequisites for achieving objectivesHL Display has two long-term financial targets excluding currency effects: an annual growth target (organic growth) of 5-10 percent and a profit target corresponding to an eBiTa margin of at least 12 percent. HL Display’s work on achieving the targets can be described in three separate parts which have a direct bearing on the company’s ability to achieve the profit target. These are cost of goods sold, operating expenses and sales growth (organic and acquisitive).

Cost of goods sold can be reduced by continued measures which include streamlining production and work on materials in the company’s products. elsewhere, HL Display has focused strongly on achieving an effective and appropriate organisation and employing efficient procedures to allow a reduction in operating expenses.

The measures implemented during 2009 have enabled HL Display to make major progress in streamlining its operations, with regard both to cost of goods sold and operating expenses. However, there still remains a certain measure of streamlining to be done.

The critical parameter for achieving the profit target is the creation of profitable growth. To create the conditions for achieving the growth target, HL Display introduced large-scale efforts to enhance sales work in the sales companies around the world during 2009. These initiatives involve the design and implementation of a new group-wide sales model, which will also provide working methods for maximising time spent with customers, and the formulation of follow-up methods aimed at improving the control and management of sales work.

Follow-up of results for 2009HL Display has been strongly affected by the economic slowdown which started in late 2008 and worsened in 2009. excluding currency effects, net sales fell by 15 percent in 2009, while our long-term target for annual organic growth is 5-10 percent.

as mentioned above, HL Display has taken a number of measures to adapt operations to the current market situation. efforts to reduce operating expenses have been particularly successful, which is largely the reason why profitability was satisfactory in 2009 despite the decline in sales. The eBiTa margin for 2009 was 6.4 percent, while HL Display’s long-term target for the eBiTa margin is 12 percent.

Key focus areas for HL DisplayFor several years now, HL Display has reported on the areas the company considers particularly important during the coming year. on the next page follows a review of the previous year’s focus areas, the results achieved in each area and how the work will be developed in 2010.

outlook for 2010it is the Board’s judgement that the market is beginning to stabilise, however still acknowledging that there is large uncertainty in predicting how the market will develop over the year ahead.

The Board’s estimate is that HL Display’s net sales and profit will increase in 2010. The estimate is based on the addition of ppe and the completed cost efficiency measures.


EBITA margin %

20092008200720062005

7.4

Goal 12%10.3

8.5

6.6

4.9

Growth %

20092008200720062005

13

Organic growthGoal for organic growth 5-10%Acquisition

8

-2

-11

3

Operating expenses, excludingfreight, in relation to net sales %

20092008200720062005

35.4

33.5

31.5

34.8

36.3



Key FoCus areas

area Focus areas for 2009 results in 2009 Focus areas for 2010

group-wide operating expensesalthough the target of operating expenses below 30 percent of sales is still a long-term target, it is unlikely to be achieved with sales growth below target. During 2009, HL Display will focus on keeping operating expenses unchanged, measured in local currencies.

operating expenses excluding freight, measured in local currency, declined by MseK 57 during the year and amounted to 36 percent of net sales. in 2009 the group staff was reduced to 836 employees, excluding ppe.

The efforts in the area of operating expenses are well established throughout the group. Therefore it will not constitute a separate focus area in 2010.

Corporate responsibilitypriority will continue to be given to initia-tives in the area of the environment, with an emphasis on continuous improvements. in 2009, particular emphasis will be placed on improving production processes to sig-nificantly reduce raw material waste, and increase the proportion of recycled waste.

work during the year resulted in a reduction in production waste. 75 percent of all waste was recycled.

environmental initiatives aimed at continuous improvement remain a high priority. During 2010, HL Display will develop measurements and reporting in accordance with accepted standards.

acquisitionsHL Display plans to continue strengthening the company’s product range and market position by means of acquisitions. present market conditions are likely to increase the scope for acquisitions. with HL Display’s financial strength, the company should be in a position to make acquisitions during the coming years.

in December 2009, HL Display made its largest acquisition ever. The motivation behind the acquisition is to strengthen the product range, production capacity and competitiveness.

HL Display plans to continue to strengthen the company’s product range and market position by means of acquisitions. integration of the acquired operations in ppe will be given high priority in 2010 in order to ensure HL Display is able to quickly exploit the competitive advantages associated with the acquisition.

operations productionContinued streamlining measures are planned in production. important issues include the distribution of production capacity and how to deal with over-capacity. The aim is for production in russia to be up and running in 2009.

Further streamlining measures were implemented. The workforce was reduced by a total of 50 jobs at the factories. a production start-up in russia has been postponed as the result of a fall in demand on the russian market.

in 2010, production efforts will focus on further development of processes concerning lean manufacturing, as well as further restructuring.

Logisticsexpansion of the logistics centre for Central europe will be implemented in stages during 2009.

During the year, operations started at the new logistics centre in györ, Hungary. The slovakian and Hungarian markets were connected during 2009.

a further four countries will be connected to the györ logistics centre in 2010. another logistics centre will be opened in eastern europe.

purchasing (new 2009)HL Display will prioritise work in the area of purchasing in order to obtain economic benefits. a new purchasing strategy is already in place.

The success of these efforts has enabled HL Display to reduce costs for input goods in production as well as for energy and iT.

The new purchasing function is well integrated into the group’s operating activities. Therefore it will not constitute a separate focus area in 2010.

product development Innovationefforts to promote more innovation in product development will continue and be supplemented by increased investments in 2009.

This was achieved in 2009. Launches during the year included powerTrack™ and ad’Lite™, which represented HL Display’s first step into new areas such as dig-ital technology and lighting solutions for shelves.

efforts within product development continues to be of utmost importance to HL Display and is well integrated into the group’s operating activities. Therefore it will not constitute a separate focus area in 2010.

sales and marketing sales (new 2010)efforts to strengthen sales – both the actual sales process and working methods and control and manage-ment – will be HL Display’s top priority in 2010.

administration (Finance and IT)

Finance (new 2010) in 2010, efforts to establishing new processes and setting new goals for the operations within Finance will be prioritised.


MarKeTHL Display’s operations are geographically divided into five regions – nordic, Baltic and uK; Middle europe; southern europe; Central/eastern europe; asia & australia (the table on page 18 shows which countries come under each region).

The markets differ from region to region. There is a clear dividing line between the regions which are in western europe and can be described as developed markets, and the regions eastern europe and asia & australia, which are emerging markets.

Differences between developed markets and emerging marketsone of the clearest differences between developed markets and emerging markets is the level of market consolidation. Mature markets characteristically have a high level of consolidation in the retail sector. The five largest players in each market have (with a few exceptions) a total market share of over 50 percent, and sweden is one such example. in the food sector, the three largest chains have a market share of almost 80 percent.

The situation is often the reverse in emerging markets. Markets are more fragmented, with the five largest players having a total market share of less than 50 percent – even as low as 4-5 percent, which is the case in india. For HL Display, this generally means a small number of large customers in developed markets and a large number of small customers in emerging markets.

new building versus renovationanother clear difference between developed markets and emerging markets can be seen in the projects in which HL Display is involved. over several years, large local and international chains have expanded their operations in emerging markets. Consequently, the rate of new store openings in these markets is high, while in devel-oped markets it is considerably lower. instead, stores are renovated when retail chains implement new retail concepts or develop existing concepts, which they normally do every four to six years.

in emerging markets, HL Display’s sales are therefore made up of a higher proportion of the basic products and solutions required in new stores, while sales of larger concepts and innovations are more important in developed markets.

Brand manufacturers importantThe brand manufacturers – companies which produce the branded goods sold in stores – are often quick off the mark in establishing their brands in new markets. This makes them an important customer segment both in developed and emerging markets.

The products and solutions in demand from brand manufacturers do not differ substantially between developed markets and emerging markets.

Factors affecting demand in developed markets– general economic development.– HL Display’s development of innovative new products and

solutions.– implementation of new retail concepts/renovation projects.– new trends in store design.– introduction of new technology such as electronic price labels.– Brand manufacturers’ investment in brand-strengthening

campaigns in stores.

Factors affecting demand in Emerging markets– general economic development.– new store openings.– Market maturity, triggering demand for more sophisticated

solutions.– Brand manufacturers’ investment in brand-strengthening

campaigns in stores – to establish a brand on a market, for example.

market development, Developed marketsnordic, Baltic and uK; Middle europe, southern europeThe economic slowdown had an adverse effect on consumption patterns in 2009. The retail sector was hit harder in some countries than others. it can generally be observed that caution on the part of consumers prompted the retail sector to focus strongly on costs in 2009 in order to try to maintain profitability levels.

The economic slowdown affected both the food sector and non-food sector, albeit to differing extents. The food sector is normally more resistant to economic declines than the non-food sector, particularly in the area of capital-intensive goods such as computers and home electronics.

according to eurostat, the statistical office of the european union, the volume of retail trade in the eu (eu27) in December 2009 was down by 1.0 percent on the figure for the same month the previous year. However, the trend differs from country to country. in sweden, the volume of retail trade in December 2009 was just over three percent higher than the same month in 2008, while the equivalent figure for germany was -2.5 percent.

in the wake of the recession, a desire on the part of the food sector to position itself from a price perspective can also be detected. This is important in order to retain customers and

HL DispLays MarKnaD oCH FörsäLJningsarBeTeHL DispLay’s MarKeT anD saLes worK

HL Display’s market and sales work HL Display annual report 2009 14

HL Display’s market strategy is based on a strong local presence on all important markets. 34 markets are

serviced by the company’s own sales companies. a further 12 markets are serviced by distributors.


HL Display’s market and sales workHL Display annual report 2009 15

respond to competition from established low-price players such as Lidl and aldi which have been very successful. For the large food chains, a high proportion of sales still come from the home markets, despite strong geographical expansion in recent years. it has therefore been important to maintain a high level of competitiveness in these markets, and for this very reason the food retail sector saw price-cutting campaigns in 2009.

However, investment in private labels has also played a key role. The retail industry’s private labels allow product prices to be reduced without any too significant effect on margins. Today the chains often have their own brands not only in budget products but also in the medium and premium segments.

another clear and increasing market trend is for food chains to seek alternatives to the large hypermarkets situated outside towns and cities – a market which is starting to become saturated in many countries. instead, they are starting to favour smaller supermar-kets, often located close to city centres.

market development, emerging marketseastern europe; asia & australiaretailing in emerging markets was also adversely affected by the economic slowdown in 2009. This was particularly the case for many countries in eastern europe, where the economic crisis in general had a more serious impact than in western europe and asia.

The retail sector in most emerging markets has undergone a rapid metamorphosis in recent years, and this also continued in 2009. This transformation also involves more modern retailing, which is driven by international expansion by multi-national chains

and expanding national chains aiming to gain a market advantage over the international players. The relatively fragmented retail markets have made it an attractive proposition for western chains to establish themselves there. interest in these markets is also driven by large gDp increases and a rapidly growing middle class which demands new goods and global brands.

as the international chains continue their expansion in emerging markets, it can be observed that they have become more selective. There are several examples of chains which have pulled out of certain markets to concentrate on a smaller number of more attractive countries.

The expanding retail sector has focused on india, russia and China in recent years, and these are still among the countries with the highest level of expansion activity.

although the rate of growth in the Chinese economy slowed down during the year, China’s gDp increased by 7.7 percent in the first three quarters of 2009, largely due to generous stimulus packages. Many of the multi-national chains such as wal-Mart, Carrefour, auchan and Metro have a presence in China and also nurture ambitious expansion plans. Meanwhile, the national chains are expanding significantly by means of organic and acquisitive growth with the aim of gaining a lead over the international players.

The russian economy shrank in 2009 but many analysts expect it to revert to growth again as early as next year. The russian retail market is still fragmented and the five largest retail players have a market share of less than ten percent. This creates potential for further expansion, which is additionally supported by a rapidly growing middle class. Just as in China, national chains such as


group managing Director

organisation and management of sales workHL Display’s sales companies are divided into five geographical regions. The regions are led by area Managers, each having full responsibility for sales and results in their own region. The area Managers report directly to HL Display’s Ceo, thereby ensuring short decision- making channels and effective follow-up and control of sales work. HL Display’s group-wide functions (horizontal axis in the figure below) act as support to the regional organisation.


X5 are expanding aggressively with a view to strengthening their market position.

The rate of retail development in india is considerably slower than in China, for example. This is mainly due to legislation limiting direct foreign investment in multi brand retailing, which includes the food sector. The large chains are established instead by means of franchise models or joint ventures with local players. as is the case in other emerging markets, the fragmented market and a growing middle class seeking more international brands are the key motivation for international chains to establish themselves in india.

marketing and Business Development

research and Development

operations (production and sCm)

Finance and IT

Human resources

HL DispLay’s saLes worKHL Display’s sales work is based on direct sales to end customers through the Company’s sales companies across the world. a local presence in all key markets is of crucial importance to HL Display. although many customers are large multi-national retailers, very lit-tle central coordination takes place in the purchasing of products and solutions for merchandising and in-store communication. These purchasing decisions are made by the local companies.

a higher degree of coordination is evident in the brand manu-facturers customer segment, where merchandising solutions are often purchased for a large number of countries at the same time. Consequently, HL Display’s targeting and sales to this market have more central coordination.

new establishment in the middle eastat the end of the year, HL Display began its establishment process in the Middle east by opening a sales company in Dubai. work in the region will initially focus on the united arab emirates and saudi arabia, subsequently expanding to other countries, including egypt.

THe mosT aTTraCTIve growTH marKeTs (based on a weighting of risk, market attractiveness, market saturation and time horizon)

1. india2. russia3. China

4. united arab emirates5. saudi arabia

source: The 2009 a.T. Kearney global retail Development index™

area Manager nordic, Baltic & uK

area Manager middle europe

area Manager southern europe

area ManagerCentral/eastern europe

area Manager asia & australia


HL DIspLay’s CompeTITIon

International players(operations in ≥ 5 markets)

regional players(operations in 2-4 markets)

Local players(operations in one market)

examples of competitors

vKF renzel (germany) Kleerex (ireland)wilson & Brown (poland)

aL-Display (germany)visioplast (France)

Competitors’ strengths

– well-developed product range within their niche.

– efficient production process.– Low prices.

– often family companies with a low cost base.

– Flexible production process for small batches.

– good contacts with customers in the region.

– very good customer contacts.– High level of customisation.

HL Display’s competitive advantages

– Total offer that satisfies customer’s total needs.

– offers complete category solutions.– significant investments in

product development create a leading position.

– good relations with the end customer, in contrast to competitors who often work via distributors or agents.

– Total offer that satisfies customer’s total needs.

– offers complete category solutions.– Through its global presence,

HL Display can follow its major customers when they expand and become a preferred supplier.

– HL Display’s size and financial strength.

– Major global retail companies and brand manufacturers value a supplier who can help them in several markets.

– significant investments in product development create a leading position.

– HL Display’s size and financial strength.

HL Display’s market and sales workHL Display annual report 2009 17

Creating more effective salesDuring the year, HL Display made major changes to the Company’s sales work. The changes, which are aimed at creating more resource-efficient and impactful sales work, affect everything from the sales process and work in the sales companies to follow-up of sales development. HL Display aims to use the changes to more effectively exploit market opportunities, even in the current economic climate.

CustomersHL Display has three prioritised customer segments – food, non-food and brand manufacturers. There are also some sales to the shop-fitting companies which fit out the stores.

Most of the world’s leading food chains, non-food chains and brand manufacturers figure among the Company’s customers. HL Display’s dependence on individual key customers is low, and the 20 largest customers accounted for 27 percent of sales in 2009.

Brand manufacturers’ share of total sales during the year increased from 19 to 22 percent compared with the previous year. There are two main reasons for this. Firstly, HL Display has deliberately focused on increasing sales to this customer segment. Many of the products launched in 2008 and 2009 have been clearly targeted towards brand manufacturers, while sales efforts in this customer segment have been intensified. secondly, brand manufacturers have maintained a virtually unchanged investment level, even in the economic slowdown.

CompetitorsHL Display has to deal with an extremely fragmented competitive situation. at present none of HL Display’s competitors can match the Company’s breadth of product range and global presence. HL Display’s sales are also considerably higher than those of its competitors.

80-90 percent of competitors sell their products in one or two countries. Most of them compete with HL Display in one or two customer segments and one or two product areas.

Consequently, there are a large number of competitors. about 150 more or less direct competitors of varying sizes can be identified.

The table above shows a summary of the competitive situation facing HL Display.

Sales per customer segment MSEK

Retail food 575 (2008: 630)Brand manufacturers 299 (2008: 287)Retail non-food 187 (2008: 223)Shop-fitters 116 (2008: 155)Distributors 69 (2008: 103)Other 114 (2008: 138)



saLes anD proFIT By area

areaown sales companies Distributors market position

Development during the year 1)

nordic, Baltic and uK net sales MseK 400

operating profitMseK 58

Finland, Latvia/Lithuania, norway, sweden and uK.

Denmark, estonia, ireland and iceland.

HL Display is the market’s leading supplier of products and solutions for in-store communication and merchandising to both the retail sector and brand manufacturers. The acquisition of ppe will strengthen market position significantly in the uK.

sales in the region decreased by 15 percent during the year. after a weak start of the year, the sales development has gradually improved.

middle europenet sales MseK 220


austria, germany, poland, serbia, sloveniaand switzerland.

HL Display has a generally strong market position in Middle europe, both in the retail and brand manufacturers sectors.

in Middle europe, sales were virtually unchanged for much of the year. Towards the end of the year, sales declined somewhat which in total meant that sales during the year decreased by 7 percent.

southern europenet sales MseK 409


Belgium, France, netherlands and spain.

greece, italy, Malta and portugal.

HL Display has a market leading position as supplier of products and solutions for in-store communication and merchandising to the retail sector and brand manufacturers.

sales in the region developed quite well at the beginning of the year. During the second half of the year, the development showed a clear downward trend. sales development was especially weak in spain which, combined with a more difficult market in France, meant that sales in total decreased by 16 percent.

Central/eastern europenet sales MseK 189


Bulgaria, Czech republic, Hungary, romania, russia, slovakia, Turkey and ukraine.

israel and Kazakhstan.

By having quickly established operations in many of the region’s countries, HL Display now holds a strong market position in both the retail and brand manufacturers sectors.

eastern europe is one of the regions most affected by the recession. sales were significantly down during the first half of the year. The situation however improved during the latter part of the year. in total, sales decreased by 14 percent during the year.

asia and australianet sales MseK 134


China (Hong Kong), China (shanghai), india, indonesia, Malaysia, singapore, south Korea, Taiwan and Thailand.

australia and new Zealand.

HL Display’s market position has strengthened considerably in recent years, partly because the company has sharpened its competitive edge by establishing local production facilities.

asia and australia, together with Middle europe, have performed better than other regions during the recession. The more difficult market situation is however clearly affecting sales in this region as well, which meant that sales fell by 8 percent during the year.

other sales net sales MseK 10

north americaTrion industries is responsible for all sales work in the us market. at present sales initiatives are exclusively targeted towards retail companies. sales in the north american market has been affected by the ongoing dispute with Trion industries and amounted to MseK 9 (16) in 2009.

middle easta sales company was opened in Dubai, united arab emirates, late in 2009, which represents the first step in further establishment in the Middle east. operations in the Middle east are reported under other markets in 2009, but will constitute a separate segment in 2010.

1) percentage change in local currencies.


HL Display’s offering to customers HL Display annual report 2009 19

HL Display’s products are available in two main product families – optishop™ and Brandman™.

optishop™ comprises products and solutions for the food retail and non-food retail sectors, while

Brandman™ includes products and solutions for brand manufacturers.

opTisHop™ anD BranDMan™ – HL DispLay’s oFFering To CusToMers

positioning of HL Display’s product rangeHL Display’s four core values – innovation, quality, Competence and Customer focus – are the guiding principles of the Company’s entire business. They also play a vital part in how the Company’s products and solutions are positioned on the market.

Level of innovation – HL Display shall be the supplier developing the innovations that become industry standards. The Company’s product development initiatives are unparalleled in the industry.

Quality – HL Display’s products and solutions are characterised by high quality and functionality.

Competence – HL Display has built up a wealth of expertise of in-store communication and of displaying products in shops. HL Display is a natural partner of retail companies and brand manufacturers who are fitting out shops or developing new concepts for their shops or brands.

Customer focus – The Company’s product development takes place in close cooperation with customers to guarantee new products and solutions which best satisfy their particular business needs.


opTisHop™

The food and non-food sectors demand solutions which increase sales in the store and improve efficiency. This in turn brings cost savings as it allows a reduction in the number of store employees – and HL Display currently has the market’s widest range of products and solutions which do just that. These include solutions both for merchandising and in-store communication.

merchandisingMerchandising is essentially about presenting merchandise to the consumer in such a way as to stimulate a purchase. But there are other aspects which are also important to the stores. a well organised merchandising solution makes optimal use of shelf space, resulting in a more efficiently functioning store. one clear example is HL Display’s divider system with an automatic feed system. products automatically advance to the shelf front in correct order, giving an attractive, full-face display. This also means time spent on shelf management and re-merchandising is kept to a minimum.

In-store communicationin-store communication consists essentially of two main missions. Firstly, ensuring the store has well laid out overall information to allow customers to quickly and easily find the products they are looking for. secondly, ensuring customers have all the necessary information to make a purchasing decision right where the product is. This means providing basic price information, as well as more detailed information such as product campaigns and discount vouchers or environmental labelling.

Making the most out of your selling space



BranDMan™

Brand manufacturers demand solutions which optimise brand-building and give their products visibility in the store, ultimately resulting in increased sales. HL Display responds to these needs by providing solutions for product placement on the shelf and Campaign placement. The acquisition of ppe has enabled HL Display to strengthen its range of products and solutions for brand manufacturers, in particular by providing new solutions for floor display and a higher degree of customisation in general.

product placement on the shelfHL Display offers solutions which allow brand manufacturers to

make best possible use of their allocated shelf space in the store and create an attractive product presentation to tempt a purchase. This is combined with various accessories which give customers relevant product information or special solutions to support brand manufacturers’ new product launches.

Campaign placement Campaign placement comprises solutions allowing brand manu-facturers to display their goods elsewhere in the store, rather than just on the shelf. These include floor stands that can be placed at the check-outs or solutions for cross merchandising, which means closely-associated products (such as pasta and pasta sauce) are displayed together in order to generate extra sales.

Bring your brand to life



HL Display has three ways of expanding its range of products and solutions offered to customers. not surprisingly, the Company’s own product development is the most important of these, and HL Display invests more than any other sector in this area. The other two ways of expanding the product range are partnerships with other producers of unique products and through acquisitions.

Investments in new areasover the last two years, HL Display has invested in product development in new areas; one reason being to harness the potential of digital technology. powerTrack™, a flexible infrastructure which brings low voltage power to shelves, was launched during the year. power supply has proved an obstacle to gaining full benefit from new applications such as digital signage, where battery operation is often insufficient. with powerTrack™, power supply problems are resolved, thereby opening the door to a large number of new applications which require power. During the year, HL Display also launched an initial application for its new infrastructure, ad’Lite™, which is a new solution providing shelves with ambience lighting to enhance the product display.

Customer-driven product developmentThe Company’s own development takes place in close proximity to customers. This ensures the developed products correspond perfectly with customers’ needs and preferences.

ideas for new products are often generated in collaboration between customer, sales company and product manager. These might include ideas for resolving specific problems or improving the product display. The products managers are also responsible for the project throughout the development phase. The product development group also includes constructors and designers, as well as factory or production managers, to ensure a prompt start to production once the product has been perfected. overall responsibility for development strategy and decisions on which projects will be undertaken rests with the market council, which includes members of group management.

effective development processHL Display works according to a structured five-stage development process (see figure on next page). around 30 development projects of varying sizes are normally in progress at one given time. The development process has been constantly refined since the beginning of 2007, cutting the development phase for projects by an average of 6 months between 2006 and 2009. The development phase for small and medium-sized projects is currently three months, while for large concepts it is between six and nine months.

environmental consideration in the development phaseFor some years now, environmental screening has been incorporated into the concept phase of development projects. For HL Display, this largely involves maximising transport efficiency in the finished product, which means it must have optimised packaging and be as light as possible. it also involves materials and use of recycled materials.

product development is one of HL Display’s key success factors, and the Company sets itself ambitious goals

in this area. HL Display is committed to being the market leader which produces solutions with the potential to

become an established standard in the retail sector, just as the Company’s datastrip established a standard on

how price information was displayed on the shelf.

proDuCT DeveLopMenT

product development HL Display annual report 2009 22

with powerTrack™, power supply problems are resolved, thereby opening the door to a large number of new applications which require power.


paTenT anD DesIgn proTeCTIon 2009

– 78 (74) registered patents.– 20 (21) pending patent applications.– 4 (4) new patent applications in 2009.– 80 (78) registered protected designs.– Total cost of patents and design protection was MseK 2 (2).

seLeCTIon oF new proDuCTs 2009

– powerTrack™ – cost-effective, easy-to-install infrastructure bringing low voltage power to the shelf edge.

– ad’Lite™ – mood lighting for shelves.– optimal™+ – a new generation shelf divider systems,

partly manufactured using recycled material.

product developmentHL Display annual report 2009 23

Concept engineering Tooling Industrialisation market launch

– product specification

– Market analysis

– project approval

– Drawings and technical specifications

– Design review

– Tenders for tooling invited

– investment is approved

– Tool order

– Tooling design approved

– Final acceptance of tooling

– Tooling validated

– product samples produced

– production parameters validated

– Launch material

– Full scale launch

HL DIspLay’s proDuCT DeveLopmenT proCess


operations HL Display annual report 2009 24

purCHasingHL Display’s purchasing organisation was restructured in 2009, in order to achieve a higher level of centralisation. The aim was to build up a purchasing organisation in which large purchases are centralised and local purchases of products and services are handled via the regional service centres around the world, instead of by individual sales companies. The process of developing and streamlining the purchasing organisation will continue in 2010.

This process is advantageous to HL Display in several respects. supplier risk is minimised by continuously monitoring selected suppliers and assessing their fulfilment of contractual terms and conditions. another key consideration is to reduce the total cost of purchasing. The work in this area was successful in 2009. increasing numbers of suppliers became qualified and agreements were renegotiated in areas including energy and raw materials. This generated cost reductions, while also improving other contractual terms and conditions.

proDuCTionThe majority of the products and solutions sold by HL Display are produced in the Company’s own factories using automated processes. The Company focuses primarily on three production methods – extrusion, injection moulding and plastic sheet processing (bending, cutting and printing). HL Display has four factories in sweden, two in the uK and one in China. production

in the Chinese factory is mainly focused on the asian market. The glossary on the next page shows more detailed information about the factories and the different production methods.

The work in 2009as the economic slowdown gathered strength in 2009, HL Display’s production activities were re-prioritised. The focus was directed on two main areas – adapting production costs to the fall in demand and adapting production processes to an increased level of automation.

as a result, HL Display reduced staffing at all its factories. The workforce was reduced by a total of 50 jobs.

The Company has also established an automation group made up of representatives from the different factories in order to share expertise and create comprehensive automation principles. earlier work in this area has resulted in a large part of the production processes having a satisfactory level of automation. nevertheless, there are still some areas where further improvements are desirable – in particular, automated processes for packaging and labelling.

it had been HL Display’s intention to start production in russia at the end of 2009. However, the economic slowdown left an inadequate foundation for a production start-up and this project was put on hold.

Continuing investments in production HL Display continued to invest in production facilities in 2009 in order to reap the benefits of increased automation, as previously

operations comprises HL Display’s distribution and supply chain

– from purchasing to production and logistics.

operaTions

suppliers Customer

operaTIons

purchasing production Logistics


The group’s mission is to identify materials which are more environ-mentally friendly, less expensive or offer other advantages such as faster rates of production.

operationsHL Display annual report 2009 25

mentioned. with new machines, the processes can be adapted to a situation of lower staffing. Consequently, it is possible to increase the rate of production without any substantial increase in the number of employees.

HL Display also replaced machinery at the factory in Falun. The purchases, which included a digital printing machine and new hot-bending machines, bring considerable production advantages to Falun.

Change work focusing on lean manufacturingas previously mentioned, the extraordinary market situation in 2009 prompted re-prioritisations in the area of production. This meant that the programme to align production working methods with lean manufacturing principles temporarily took a back seat.

Lean manufacturing is an approach aimed at optimal handling of resources. it is about identifying and eliminating factors in the production process which do not bring added value to the end customer. Change work in this area will remain a priority in 2010.

new materialsanother priority area during the next year is work on new materials. HL Display has created a new materials group called green edge.

HL DIspLay’s proDuCTIon LInes LoCaTIon proDuCTIon meTHoDs – gLossary

extrusion – High speedThe High speed line manufactures datastrips, which can be produced at high speed.

sundsvall and suzhou

extrusion a production method that involves molten plastic being forced through a nozzle. The nozzle’s profile determines the form of the product’s cross-section. The products are manufactured in strips which are cooled in a water bath and then cut to the required length. Datastrips are one example of products manufactured using this method.

extrusion – FlexibleThe Flexible line manufactures mature products – often with several varieties – in which manufacturing is characterised by short batches and quick changeovers.


extrusion – ComplexComplex is used to produce newly developed datastrips and strips which combine different materials or functions.


Injection moulding – DividersThe main products are shelf dividers in transparent plastic materials, which are produced on injection moulding lines with integrated robots.


Injection mouldinga production method that involves molten plastic being injected into a hollow mould. The form of the hollow determines the product’s shape. shelf dividers and frames are examples of products manufactured using this method.Injection moulding – Frames – hi-tech parts

Karlskoga carries out injection moulding of items such as frames with plastic accessories.

Karlskoga

plastic sheet processing The main products are shelf talkers that are bended and printed.

Falun plastic sheet processingprinting of plastic sheets which in many cases are further processed by means of punching, cold-bending or hot-bending.

assembly lineManual assembly of standard articles and manufacturing of labour-intensive products.

suzhou assembly production method with a high degree of manual labour.

multi-materialManufacture of customised merchandising solutions with multi mate-rial capabilities.

Harlowacquired (ppe)

multi-materialThe manufacturing processes in the Harlow factory are adapted to the manufacture of merchandising solutions with a high degree of customisation, and consisting of several different materials, for example plastic, metal and wood. The manufacturing process is characterised by short lead times.

other productionThe cold/hot-bending of acrylic display stands takes place in shipley in the uK. Metal display hooks are manufactured at a joint venture in Lesjöfors (co-owned with Trion international LLC) and products for the us market are extruded in wilkes-Barre, pennsylvania, usa (also co-owned with Trion).

added capabilitiesThe acquisition of ppe will open up new opportunities for HL Display in terms of manufacturing. ppe has several production processes that are not present elsewhere in the HL Display group. some examples are high speed digital printing, state of the art laser cutting of metal and CnC router cutting – all under the same roof.

one other trait that ppe is bringing is sequenced parallel handling of production operations, which reduces the lead time of each order. This method will be evaluated and possibly ported to the group’s other production processes.


operations HL Display annual report 2009 26

in addition to stock management and distribution, the service centres also provide ancillary services such as administration and finance for the associated sales companies.

major productivity improvements in 2009in 2009, HL Display implemented major initiatives aimed at boosting productivity in its distribution activities and utilising the Company’s advantageous logistics structure.

The work was successful in many respects, both with regard to stock size and turnover and adaptation of costs to the lower sales volume in 2009.

inventory coverage days were 19 percent down at the end of 2009 compared with the same period the previous year, a key performance indicator that is neutral in relation to sales development. The total stock value at fixed exchange rates fell by 29 percent during the same period. This is largely due to HL Display’s structured work to reduce superfluous and obsolete stock during the year.

This work was complemented by a clearly expressed aim to reduce other costs associated with logistics. The overall effect was that the Company successfully aligned costs relating to stock and logistics to the decreased sales during the year.

one of the most important achievements during the year was the successful launch of the györ logistics centre in Hungary. The logistics centre will eventually provide logistics and ancillary services to six markets in Central/eastern europe.

Improved internal processesan important change in 2009 was the restructuring of the internal product supply organisation that handles traded articles. There is now a central support function for internal product orders made by the sales companies around the world. This has resulted in cost savings and more efficient routines as the sales companies now have one single contact channel for ordering products.

Continued efforts in 2010HL Display will continue its efforts to increase productivity in logistics in 2010. The deployment of the györ logistics center will be completed by connecting austria, Bulgaria, romania and slovenia to the logistics center. Further efforts include continued standardisation of logistic methods and procedures across the logistics network, centralisation of the management of slow movers to save on obsolescence costs and preparation of a wMs (warehouse Management system) implementation to get further productivity improvements.

Iso Certificationas is the case with production, HL Display has initiated a programme aimed at aligning logistics working methods with lean principles. The new logistics centre in the Hungarian city of györ will act as a pilot project in this initiative and the practises established here will be gradually adopted by all the Company’s service centres.

HL Display has also launched a project aimed at obtaining iso certification for all its logistics centres, after which every part of the Company’s operations will be iso certified. The Company expects the iso certification of the largest logistics centers – Falkenberg, györ and Tours – to be completed during 2010.

LogisTiCsHL Display’s logistics structure is based on regional service centres for logistics around the world. at present, the Company has logistics centres in Falkenberg (sweden), Tours (France), györ (Hungary), Moscow (russia) and in singapore. another logistics centre is planned in central europe during 2010. The exact location is yet to be determined. in time, all sales companies will be serviced by a regional logistics centre.

QualityHL Display engages in extensive work on quality, based on key figures with clearly defined targets. These key figures are followed up every month. all the factories have quality systems which are based on the international iso 9001 quality standard. The factories in Falun, Karlskoga, sundsvall and suzhou are all certified under iso 9001.

QuaLITy

Lead time in daysRefers to average lead time from order to delivery

production facility Target 2009 2008

Falun 12.0 11.6 12.0

Karlskoga 8.0 9.0 7.9

sundsvall 11.0 10.8 10.6

suzhou 9.0 7.0 7.0

Delivery performance (as a percentage) Defines the proportion delivered within the agreed delivery time


Falun 97.0 96.8 96.0

Karlskoga 98.0 97.3 98.4

sundsvall 98.0 98.0 98.7

suzhou 98.0 98.1 99.9

proportion of complaints (as a percentage) Refers to the number of complaints in relation to the total number of orders


Falun 0.60 0.70 0.70

Karlskoga 0.30 0.30 0.40

sundsvall 0.30 0.40 0.50

suzhou 0.30 0.35 0.40


Case storyHL Display annual report 2009 27

studies show that at least 2/3 of all purchasing decisions are influenced in store. This can be everything from choosing a product you didn’t intend to buy, to switching brand or pack size. in other words, it isn’t that difficult to understand how important it is for shops to present their products in the right way. one person who’s an expert in influencing in-store sales is Jens nordfält, head of the retail programme at the stockholm school of economics and author of an award-winning book on in-store marketing.

attention affects our image of the productaccording to Jens nordfält, how the shop works on its store environment, product placing and information is crucial to how customers perceive the products.

“say that the shop presents a product in a way that means you notice it, such as the label on the edge of the shelf being in a colour that makes it stand out, or that the display has the products sticking out slightly over the edge of the shelf. if you pay attention to the product, your brain tends to interpret this as meaning that the product is better than the others. This is why studies show that customers think that goods in a shelf solution which attracts their attention are of higher quality than the same goods in an ordinary shelf solution,” Jens nordfält explains.

The in-store environment influences us more than we thinkThe environment inside the store affects customers more than most people realise. one clear example is that the true price of a product actually plays a fairly minor role in what the customer thinks of the price. instead the price experienced by the customer is 4/5 guided by visual effects such as price signs or if the store decor and environment make a cheap or expensive impression. in other words, it is completely possible for a store with a higher price to be thought of as less expensive on the basis of what it looks like.

although this might appear not to make sense, Jens nordfält says it is entirely in line with research in the field of attributions psychology. put simply, it’s about the feeling you get from the store environment being transferred to the product.

“if you take an item of clothing and put it in an elegant branded clothing store, customers tend to think that the quality of the product is higher than if the same garment is in a low-price store,” says nordfält.

Location in the store also has a major effect on sales. Jens nordfält cites shelf-end displays as a clear example.

“studies show that sales of a product increase by up to about 500 percent if it is displayed on the end of a shelf. if it’s a product that people often impulse buy, the increase in sales can be even greater,” nordfält points out.

what was it that made you buy that new shampoo or decide to try a different washing powder? you probably

thought these products looked better, more exciting or better value for money than the other alternatives in the

shop. But do know you really know why you thought that? There’s a big chance that your decision was influenced

by the way the shop displayed the products.

CaTCHing CusToMers’ aTTenTion

in the same way, the height at which the product is displayed on the shelf is also important. The best location is at the customer’s eye level.

Inspiring the customerThe reason why it is so important to create attention is that most people go shopping “on autopilot”. Customers automatically identify around ten products that they normally buy and don’t even see the others. in this context, the way the store displays the products can help its customers. Most customers say that they would like shops to inspire them more.

“studies carried out show, for example, that 85 percent of customers would like to eat more fruit and vegetables. so why aren’t they buying them? well, because they’re not thinking when they are shopping. when the shop changes its displays, customers are forced to think and then they remember, ‘oh yes, that’s exactly the product i was looking for’,” nordfält explains.

product display trendsJens nordfält thinks that retailers in recent years have seriously realised that they can do a great deal with the store environment and that the effects of this work can be measured. Looking ahead, he can see that the introduction of digital technology to stores may open up a number of new opportunities.

“There is great interest in animated shelf-edge solutions, such as small screens that can create attention. in purely perceptual terms, colour is one of the most effective ways of creating attention. Lighting is also a good tool for creating points of colour and contrast on the shelf. These areas are only in their infancy at the moment,” nordfält concludes.


support processes – administration HL Display annual report 2009 28

FinanCeHL Display’s finance function has six main areas of responsibility: Business Control, Financial Control, Treasury, M&a, investor relations and iT.

in 2009, HL Display initiated a restructuring process in the finance function, aimed at creating processes, working methods and an organisation that ensure the highest quality in decision support and control for the lowest possible relative cost. a large number of initiatives were commenced and completed in 2009. These included the production of a new comprehensive monthly report package, the implementation of new targets and key figures for cost saving and capital efficiency in the group.

as part of this work, the accounting and controlling function was restructured to reflect the same regional and functional division as the Company’s matrix structure.

Business ControlThe Company’s controllers have responsibility for control, monitoring and decision support in each business area and support function (production, for example). They are also responsible for identifying and introducing efficient working methods and procedures throug-hout the group, and providing support to managers in the monitoring and development of the group’s profitability and profit growth and cash flows in each region and entity.

m&aThe group’s increased focus on mergers and acquisitions is sup-ported by a dedicated resource at group level, which specialises

in the area of acquisitions and acquisition candidates. The M&a function is responsible for financial analysis and evaluation in the initial phase, project management of the acquisition process and the initial integration phase.

TreasuryHL Financial services (HFs) is HL Display’s treasury department. HFs is responsible for management of currency risk and all the group’s financing activities. it also acts as a service centre for the swedish production companies and the service centre in riga with regard to trade receivables (including netting) and scanning and e-authorisation of supplier invoices.

in connection with the acquisition of ppe, a new overall financing structure for the group was established. The restructuring of the loan structure means that after the acquisition is financed there is still sufficient capacity to take advantage of future acquisition opportunities. Long-term credit and confirmed overdraft facilities have been set up. These can be used in different currencies in addition to the previously utilised financing.

Most of the group’s flows and balances are concentrated, so that a deficit in one currency can be netted against a surplus in another. This advanced cash pool-solution has resulted in a considerable reduction in financing costs. starting from 2010, HFs will also manage currency hedging of positions in all the group companies. HFs previously managed currency hedging primarily for the swedish entities.

Financial Control HL Display demands high quality in financial control at all its companies and requires this to take place in a way that supports

aDMinisTraTion

The administration support function

encompasses Finance and iT.


support processes – administration HL Display annual report 2009 29

internal monitoring as well as legal requirements. HL Display has a high level of ambition for its external reporting. The aim is to achieve fast internal and external reporting without jeopardising quality. The Company’s financial control functions are responsible for all external and internal reporting in each region and in the legal entities. They have ultimate responsibility for identifying and introducing more efficient working methods and procedures in all the group’s financial control processes.

Investor relationsHL Display further strengthened its business structure in 2009 by establishing a resource with responsibility for all investor relations issues. HL Display was awarded the title stockmarket Company of the year in 2005, and its 2007 annual report won the nasdaq oMX stockholm’s competition for the Best annual report, small cap class. The 2005 and 2006 reports also received honourable mentions.

The aim is to further develop the proud tradition of transparency and service to the Company’s shareholders – large and small alike.

iTin order to have efficient operations and processes, there must be an iT environment that supports and allows this. The overall goal of HL Display’s iT structure is to meet to the organisation’s requirements for availability, user-friendliness and security, and to do so with an explicit cost-awareness.

new outsourcing partnersHL Display conducted a general review of its iT supply contracts in 2009. The review was aimed at reducing costs and ensuring these contracts give the Company an optimal service level. as a result of the review, HL Display has changed its outsourcing partners for the development, administration, support and operation of a large part of its iT structure.

projects during the yeara large number of projects were implemented during the year, mainly related to production and logistics. one of the most important of these was the establishment of a logistics centre in györ in Hungary.

at the same time, HL Display reviewed its iT strategy, which also involved making a global evaluation of architecture and systems. Key figures and associated long-term financial targets have been produced for follow-up and monitoring. work is in progress aimed at expanding the monitoring to include service levels and productivity in the area of iT.

Direction for 2010Development of the iT strategy will focus on two main areas in 2010. The first will be a review of the administration organisation, which will also include a general review of roles in the organisation in order to guarantee competence and optimal staffing. The second will be an improvement of the financial follow-up of iT development projects.


Corporate responsibility HL Display annual report 2009 30

HL Display decided to reinforce its corporate responsibility communication in 2009. HL Display is keen that its corporate responsibility reporting should have a high degree of transparency and allow benchmarking. During 2009, the Company started preparations for sustainability reporting in 2010 in accordance with the global reporting initiative’s guidelines (gri). The gri’s sustainability reporting guidelines are the most established reporting framework available today. HL Display is also a participant in un global Compact, which means the Company actively supports the un’s fundamental values and principles in the areas of human rights, labour, environment and anti-corruption.

HL Display’s central policy in terms of corporate responsibility is its Corporate responsibility policy, which was adopted by the Board in early 2010. around it are the other policies that govern the work in this area, including HL Display’s Code of Conduct, environmental policy, work environment policy, purchasing policy and the common operational policy for the production facilities.

preparations for grI reportingin 2009, HL Display started preparations for introducing sustainability reporting in accordance with the global reporting initiative’s guidelines. The work has the consensus of the Board and has now been introduced at group management level.

a survey of corporate stakeholders was initiated towards the end of 2009 to find out which aspects of sustainability they believe to be most important to HL Display. HL Display’s main stakeholders are customers, employees, shareholders and suppliers. The survey was carried out on a representative sample of these stakeholders.

The stakeholder survey will make an important contribution to the materiality analysis which will form the basis of our priorities in sustainability work and sustainability reporting.

environMenTaL aspeCTsHL Display has production at four factories in sweden, two in the united Kingdom and one in China. The main environmental impacts associated with HL Display’s production are plastic waste, energy consumption and use of plastic raw materials. as a Company with sales companies and distributors in 46 markets around the world, HL Display’s transport operations also have an impact on the environment. only the factory in Falun has operations that are subject to notification requirements. This is because a small amount of solvent is used in the screen-printing process.

environmental certificationCertification to the environmental standard iso 14001 plays an important part in HL Display’s environmental protection activities. HL Display’s largest production facilities, situated in sundsvall, Falun and Karlskoga, have held this certification since the end of the 1990s. These facilities account for around 80 percent of HL Display’s total production turnover. The Company intends to obtain this certification for its factory in China and the largest regional logistics centres, which are in Falkenberg and Tours (France). it is HL Display’s goal that all production facilities and regional logistics centres will have environmental certification by 2012.

plastic and other wasteHL Display addresses the problem of waste in production in two ways. The first way is to reduce plastic waste generated in production by fine-tuning the production processes where possible. The second is to recycle plastic and other waste as far as possible. HL Display’s goal is for all waste from production to be able to be recycled.

CorporaTe responsiBiLiTy

HL Display has been committed to corporate responsibility issues for a long time. The Company’s largest

production facilities were already certified to the iso 14001 environmental management standard back in

the late 1990s. Communicating and establishing a culture of good business ethics and respect for human

values to subsidiaries was particularly important during the rapid expansion of the 1990s and the early

years of the new millennium.

we Carein order to highlight HL Display’s environmental work, a new logotype has been developed. The we Care logotype is used on products, packaging and other communication from HL Display.


Corporate responsibilityHL Display annual report 2009 31

Total waste at the Company’s production facilities in 2009 was 1,400 tonnes. 75 percent of this was recycled.

raw material consumptionHL Display’s main raw material is plastic, in particular pvC. These account for 60 percent of the group’s total raw material purchases.

HL Display has also introduced an initiative aimed at using a higher proportion of recycled materials in the Company’s products. HL Display’s new optimal™+ shelf divider system, for example, contains 15 percent recycled peT.

HL Display complies with reaCH, the eu’s chemicals legislation, and this is taken into account when the Company approves new materials. The Company now requires its raw materials suppliers to complete a special declaration form based on the reaCH requirements. no substances classified as svHC (substances of very High Concern) may be used, and the use of phase-out substances is also controlled.

energy consumptionin 2009, HL Display consumed approximately 15.5 (18.6) gwh electricity in production. Different measures for reducing electricity consumption are being implemented at all factories. These range from heating the factories using waste heat from machinery to installing time relays for lighting.

HL Display has concluded a new energy agreement which came into force on 1 January 2010. The agreement covers all its factories in sweden, as well as the logistics centre in Falkenberg. under the agreement, with the electricity supplier vattenfall, all the swedish factories will run entirely on green electricity – in other words, electricity from renewable sources.

use of chemicalsas previously mentioned, the Falun factory is subject to notification requirements as it uses solvents in the screen-printing process. solvents are used in the printing ink itself and to wash templates used in the printing process. Total solvent consumption in 2009 was 3,800 litre.

use of solvents has been reduced radically in recent years, as solvent-based inks can be replaced by uv inks to some extent. unlike traditional solvent-based inks, uv inks are dried using uv radiation rather than by evaporation of the solvents. HL Display invested in a new digital printing line in 2009, which will reduce the use of screen printing.

Logisticswith sales companies on several continents around the world, it is important for HL Display to have efficient logistics operations. HL Display engages third-party suppliers for its transport and requires these suppliers to have environmental programmes in place. HL Display also works with its logistics suppliers to route inward and outward transport flows from road transport to sea and rail transport wherever possible.

in parallel with this, HL Display has a global company car policy. The policy, which only allows fuel-efficient diesel engines, is designed to reduce the car fleet’s carbon dioxide emissions.

There are also certain measures that HL Display carries out itself. These include increasing the number of products per package and reducing the size of packaging, thereby creating more efficient logistics.

awareness in everyday workeven the smallest action can make a difference. HL Display endeavours to promote a high level of environmental awareness in everyday activities at the Company’s offices around the world. This means collecting and sorting paper, packaging material and old electronic equipment and ensuring they are sent for recycling.

For many years, HL Display has been using telephone and video conferences as an alternative to travel between offices. The result is fewer environmental impacts and more efficient work.

Aluminium, steel and wire 3Packaging 6Semi manufactured articles 10Polycarbonate (PC) 3PVC 39

Raw materials and input goods 2009 %

Other 5Tape 9Electricity and cooling water 7Other plastic raw materials 18


Corporate responsibility HL Display annual report 2009 32

Average number of employees

20092008200720062005

933

949

968

983

906

Value added per employee KSEK

20092008200720062005

510 525

601 585

529

Age distribution year

61-51-6041-5031-4021-30-20

4

268

422

279

112

29

soCiaL aspeCTsas a participant in un global Compact, HL Display supports their declarations on the environment, human rights, labour and anti-corruption. HL Display’s Corporate responsibility policy and Code of Conduct constitute a framework for the Company’s work in these areas. The Company expects the same of its sub-contractors. They are required to sign a purchasing policy containing requirements and information relating to the points above.

in its Cr policy, HL Display takes a very firm stand against corruption. Corruption among employees will not be tolerated under any circumstances. This is also reiterated in the Code of Conduct, which is signed by everyone at managerial level in the Company.

employeesHL Display’s Cr policy defines the fundamental values that will be adhered to throughout the Company. The policy clearly states that the Company shall offer all employees equal opportunities regardless of background, gender, ethnicity or age. HL Display also respects employees’ rights to collective bargaining, and encourages organisation into trade unions as this facilitates dialogue with the employees.

2009 was dominated by an extraordinary market situation, which necessitated cost-cutting measures and optimisation of staffing in each subsidiary. This was a central part of the work of the Human resources department in 2009. staff cuts were necessary in the production companies and the sales companies across the world. approximately 140 jobs were discontinued. HL Display closely monitors local legislation and collective agreements in this process.

spotlight on management development HL Display values the importance of leadership in the Company and has high expectations with regard to the managerial role. Leadership plays a key role in the development of the business and in encouraging employee loyalty, motivation and performance.

During the year, HL Display implemented a large-scale manage-ment development programme. The main aim of the programme was to support managers and give them the necessary tools to successfully introduce the group’s overall business strategy into the local operations.

HL Display will be increasing its focus on skills development in the future for two main reasons. Firstly, employees expressed a wish for more skills development in HL Display’s employee survey. secondly, the staffing freeze introduced in 2009 reduced the inflow of expertise. This increased the need for internal skills develop-ment for the Company’s employees. skills development for sales personnel will be prioritised in 2010.

appraisal discussionsall employees at HL Display are offered appraisal discussions, referred to as ”plus” discussions. These are an important tool in supporting employees in their development. one of the aims is to clarify the link between the local company’s targets and the employee’s individual goals. This makes it clear to each employee that his or her own work is important for the business as a whole and that individual goals are linked to the company’s ability to achieve its targets.


Corporate responsibilityHL Display annual report 2009 33

empLoyee FaCTs 2009 2008

number of employees as of December 31 1,114 974

gender structure, % Male 64 62

Female 36 38

education level, % university 29 35

upper secondary school 44 53

Compulsory school 26 12

investment in staff training

Total, MseK 3 2

per employee, KseK 2 2

Costs related to health promotion activities

per employee, KseK 2 2

reported incidents Minor 5 21

serious 2 3

Number of years employed %

>24 years 220-24 years 315-19 years 810-14 years 175-9 years 23<5 years 47

Employee categories %

Production 42%Administration and management 12%Warehouse 11%Product development 5%Sales and marketing 30%

Distributed value %

Employees 64%Taxes and fees 24%Shareholders and other providers of capital 9%Retained in the operations 3%

Individual wage systemit is HL Display’s aim to have a wage system that encourages and rewards positive efforts and good results at work. employees must be able to see a link between their own performance and how their wages develop. This helps ensure the right expertise remains in the Company and encourages employees to develop their skills and per-formance. Finally, this type of wage system strengthens productivity, profitability and competitiveness in the group companies.

skills supplyHL Display appreciates the importance of creating a strong base of proficient employees able to move up the organisation. The Company works systematically to identify managers who have the potential to assume a more important role than their present one. it also identifies what are referred to as career positions. people are recruited to these positions if they have the capacity to gradually take on roles with more responsibility.

HL Display is also committed to promoting internal recruitment. The number of internally recruited managers rose to 70 (50) in 2009.

HL Dialogue – HL Display’s employee surveyHL Dialogue was improved further in 2009 by initiatives such as the introduction of new iT support, which will allow more efficient monitoring of results. employees in 10 subsidiaries in seven

countries took the HL Dialogue survey during the year. The survey, which is voluntary and completely anonymous, had a response rate of 95 percent during 2009. The Company served redundancy notices in many subsidiaries during the year. However, employees still consider HL Display to be an attractive employer and express their respect for the Company’s way of responding to the challenges it faces. each manager who took part in the employee survey drew up and implemented an action plan based on the specific issues identified as requiring improvement.

Health-promoting initiativesHealth risks at HL Display are very minor and mainly related to production. preventive work is aimed at ensuring safe workplaces with a good working environment. HL Display regularly updates its safety procedures and examines different risk factors. 5 (21) non-serious incidents and 2 (3) serious incidents were reported in 2009.

The idea of HL Display’s health-promoting initiatives is to prevent ill health at an early stage. one important element involves offering employees regular health checks and individually designed plans to prevent ill health. Health work has come furthest in sweden. an important reason is that health problems have been historically higher among employees at the factories than elsewhere in the Company and that most of the factory employees are in sweden. The Company aims to eventually have an equally well-developed programme in place for all employees around the world.

eConoMiC aspeCTsHL Display endeavours to achieve long-term profitable growth by running an operation that is grounded in good ethics and sustainable development. This creates long-term value for the Company’s shareholders and other stakeholders. The Company’s financial position and performance are described in the annual report and financial statements.

The economic value generated by HL Display’s business opera-tions is largely distributed to the Company’s stakeholders, which include suppliers, employees, shareholders and lenders. The taxes that are paid benefit the community. During 2009, MseK 479 was distributed to different stakeholders according to the table below.


The share HL Display annual report 2009 34

THe HL DispLay sHare

The HL Display share was listed in 1993 and is currently quoted on the nasdaq oMX stockholm small Cap list. as at 31 December 2009 the share capital in HL Display totalled seK 38,673,860, divided among 30,939,088 shares, of which 3,652,096 are class a shares and 27,286,992 class B shares. each share has a quota value of seK 1.25. Class a shares carry one vote and class B shares 1/10 of a vote. all shares provide equal entitlement to a share of the company’s assets and profits.

share price developmentsince its stock exchange launch, the share’s value has increased by 1,081 percent from seK 3.59 (corrected for bonus issues and share split) to seK 42.40 on 30 December 2009. During the same period the oMXspi increased by 279 percent. in 2009 the price increased by 79 percent, while the oMXspi recorded an increase of 47 percent. The highest price paid during the year for the HL Display share was seK 42.60, and the lowest seK 23.00. volume weighted average price was seK 29.64 and average closing spread 1.73 percent. at the end of 2009 HL Display’s market capitalisation reached MseK 1,157.

Trade volumesDuring the year 4,677,433 shares were traded at a value of MseK 138, corresponding to a turnover rate of 17.1 percent.

Liquidity providerHq Bank aB acts as liquidity provider in the company’s share. The intention is to promote liquidity in the share. The agreement means in brief that the liquidity provider will provide bid and offer prices for the HL Display share and undertakes to buy and sell shares at these prices on its own account.

shareholdersas at 31 December 2009 the number of shareholders was 2,145 (1,695). The proportion of institutional shareholders is estimated at 62 (62) percent of capital and the proportion of foreign shareholders is 5 (4) percent.

option schemesThere are three option schemes aimed at employees in senior management positions. The option schemes totals 287,252 employee stock options and 906,000 warrants, which represents a total of 3.90 percent of share capital and 1.87 percent of votes in HL Display if fully subscribed. if the warrants are fully subscribed, the number of shares will amount to 32,132,340. The warrants have been issued on commercial terms, defined in accordance with the so called Black & scholes valuation model, and the purchase price was paid in cash.

utilisation of the warrants is not subject to continued employment. The employee stock options have been issued to the Ceo without fee. The entitlement of the Ceo to these options is conditional on the achievement of certain group goals 2006-2008. utilisation is conditioned by his continued employment.

The programme has been reported in accordance with iFrs 2.

Dividend policyin the long term the Board is striving to achieve a dividend propor-tion corresponding to 30-50 percent of the profit per share after tax.

DividendFor the financial year 2009 the Board proposes a dividend of seK 1.38 (1.38) per share, equivalent to 73 (44) percent of earnings per share after tax. The justification for the proposal of an unchanged dividend in seK is the Boards positive view of the company’s long-term development.

2,000

4,000

6,000

8,000

10,000

12,000

2005 2006 2007 2008 2009

20

30

40

50

60

70

© NASDAQ OMX

Share price trends

B-shareOMXSPINumber of shares traded, thousands (incl. after-hours)

Foreign owners 4.5Swedish unit-trusts 16.4Swedish institutions 40.7Swedish private owners 38.4

Shareholder structure %


The shareHL Display annual report 2009 35

option schemes, number of options and subscription prices number of proportion of number of employee share capital if proportion of votes subscription year of implementation warrants stock options fully subscribed if fully subscribed price exercise period2006 – 287,252 0.97% 0.47% 39.25 1) 2009-03-31 - 2011-03-312007 2) 256,000 – 0.83% 0.40% 56.50 2010-03-01 - 2010-04-302009a 3) 325,000 – 1.05% 0.50% 33.95 2012-02-01 - 2012-03-312009B 3) 325,000 – 1.05% 0.50% 50.69 2012-02-01 - 2012-03-31Total 906,000 287,252 3.90% 1.87%

1) Corrected for share split (4:1) 2008-04-28. 2) at the end of the reporting period 196,000 warrants had been acquired by employees. 3) at the end of the reporting period, all warrants in scheme 2009a had been acquired by employees but none from 2009B.

ownership structure on 31 December 2009

no. of shares no. of shareholders no. of shares % of shares1 - 500 1,167 254,356 0.8501 - 2,000 616 708,465 2.32,001 - 10,000 287 1,220,843 4.010,001 - 50,000 44 972,518 3.150,001 - 100,000 11 792,538 2.6100,001 - 20 26,990,368 87.2Total 2,145 30,939,088 100.0

Data per share 1, 2)

2009 2008 2007 2006 2005 2004 2003 2002 2001earnings per share after tax, seK 1.88 3.11 3.49 1.97 1.15 1.52 -1.31 1.43 1.81earnings per share after dilution and tax, seK 1.88 3.11 3.48 1.96 1.14 1.51 -1.31 1.43 1.81Dividend per share, seK 3) 1.38 1.38 1.38 0.88 0.75 0.63 0.41 0.41 0.39Dividend, % of earnings after tax 73.4 44.4 39.4 44.5 65.4 41.2 n/a 28.9 21.5share price end of period, seK 42.40 23.00 48.75 46.00 35.25 34.25 27.75 22.75 32.00equity per share, seK 17.81 17.40 15.26 12.53 11.13 10.67 9.53 10.27 9.22equity per share, after dilution, seK 17.81 17.40 15.24 12.50 11.10 10.65 9.51 10.27 9.22Direct yield, % 3.3 6.0 2.8 1.9 2.1 1.8 1.5 1.8 1.2p/e ratio, 31 December 22.5 7.4 14.0 23.4 30.7 22.6 n/a 15.9 17.7operational cash flow per share, seK 4.42 5.44 4.59 3.81 1.15 2.57 1.03 2.16 1.38

no. of shares 30,939,088 30,939,088 30,939,088 30,908,688 30,755,488 30,755,488 30,755,488 30,755,488 30,755,488weighted-average no. of shares 30,939,088 30,939,088 30,933,176 30,774,032 30,755,488 30,755,488 30,755,488 30,755,488 30,755,488weighted- average no. of shares, diluted 30,939,088 30,939,088 30,984,444 30,843,836 30,838,152 30,828,556 30,801,440 30,769,556 30,755,488 1) see page 37 and note 15 for definitions of key ratios. 2) years 2001-2003 not restated according to iFrs. 3) according to the Board’s proposal.

Largest shareholders, 31 December 2009 no. of no. of Total no. share of no. of share of a shares B shares of shares capital, % votes votes, %ratos aB 436,864 8,463,416 8,900,280 28.8 1,283,206 20.1The remius family and company 3,215,232 5,518,632 8,733,864 28.2 3,767,095 59.0Didner & gerge mutual fund – 2,863,129 2,863,129 9.2 286,313 4.5Livförsäkringsaktiebolaget skandia – 1,763,958 1,763,958 5.7 176,396 2.8Lannebo funds – 1,255,000 1,255,000 4.1 125,500 2.0Jp Morgan Chase Bank – 875,000 875,000 2.8 87,500 1.4unionen – 468,400 468,400 1.5 46,840 0.7Jonsson family – 420,751 420,751 1.4 42,075 0.7psg Capital – 336,182 336,182 1.1 33,618 0.5invus investment aB – 331,200 331,200 1.1 33,120 0.5others – 4,991,324 4,991,324 16.1 499,132 7.8Total 3,652,096 27,286,992 30,939,088 100.0 6,380,795 100.0


risk and sensitivity analysis HL Display annual report 2009 36

sensitivity analysis effect on netFactor Change profit/loss, mseKnet sales 1% volume 6.7Decline in the largest market -1% volume -1.3price of pvC 1% 0.8price of polycarbonate 1% 0.1price of electricity 1% 0.1Cost of personnel 1% 3.9interest rates 1 percentage point 1.4Depreciation 1% 0.4euro exchange rate 10 öre 2.0

raw material sensitivityplastic raw materials constituted 47 percent of the group’s raw material purchases. The major raw material, pvC, was responsible for 39 percent the group’s total raw material costs. although the price of crude pvC recorded a steady increase during 2009, the average price in 2009 is 13 percent lower than in 2008. The price of pvC reached its highest recorded level in september 2008, but has since decreased. Customer agreements are generally renegotiated once annually and price adjustment clauses covering raw material fluctuations are rare in this business. an increase of one percent in pvC purchasing costs in 2009 would have reduced profit before tax by MseK 0.8. HL Display purchases raw materials on longer terms, often with currency clauses. in order to decrease raw material price sensitivity, HL Display is successfully developing methods for use of alternative materials.

Currency riskHL Display’s main markets are within the euro area. Consequently the company is exposed to exchange rate fluctuations as production mainly takes place in sweden and invoicing in foreign currencies. invoicing to subsidiaries is carried out in local currency in order to concentrate the group’s currency exposure to sweden. external distributors are invoiced in seK. The currency effects that impact the company’s earnings are the transaction flows in the different cur rencies, transaction exposure, and recalculation of the foreign subsidiaries’ profit and loss statements and balance sheets, translation exposure.

risK anD sensiTiviTy anaLysis

500

600

700

800

900

1,000

1,100

1,200

2009200820072006200520042003

Price of crude PVC EURO/TONNE

Source: ICIS-LOR

Exchange rate EURO/SEK

8.5

9.0

9.5

10.0

10.5

11.0

11.5

200920082007200620052004

Source: The Riksbank (Sweden’s Central bank)

Aluminium, steel and wire 3Packaging 6Semi manufactured articles 10Polycarbonate (PC) 3PVC 39

Raw materials and input goods 2009 %

Other 5Tape 9Electricity and cooling water 7Other plastic raw materials 18

Transaction exposureTransaction exposure is caused partly by invoicing in foreign currencies and partly by purchases in foreign currency or purchases where price is regulated by a currency clause. The swedish krona was weakened in comparison with HL Display’s most important export currencies in 2009, especially the euro and the norwegian Krona. in relation to the British pound and the russian ruble, the swedish Krona was strengthened. 39 percent of turnover is invoiced in euro, 7 percent in gBp, 6 percent in ruB and 8 percent in noK. HL Display’s purchases that affect exposure primarily consist of overhead expenses for the overseas sales companies and of material purchases whose prices are regulated through a currency clause. HL Display’s general policy is to hedge future cash flows in the most important currencies. HL Display’s currency exposure has, as compared to 2008, had a positive effect on operating profit before taxes by MseK 11.3, according to the table below.

Currency’s effect on profit before taxes (as compared to average exchange rate in 2008, MSEK) net sales 49.2Costs goods/services sold incl. freight -25.5selling expenses -13.3administrative expenses -4.2Development expenses -0.2other operating income/expenses 5.3Total effect of currency exchange rate changes on operating profit 11.3

Translation exposureThe net value of assets in currencies (equity in subsidiaries) other than the reporting currency (seK) will change according to exchange rate fluctuations. This risk is termed translation exposure. For more information please refer to note 2.

Financial risks and financial instrumentsFor a description of financial risks, financial instruments used, and financial policy in HL Display, please refer to note 2.


nine year summaryHL Display annual report 2009 37

1)

nine year summary Income statement (KseK) 2009 2008 2007 2006 2005 2004 2003 1) 2002 1) 2001net sales 1,360,416 1,535,639 1,571,181 1,448,138 1,284,824 1,249,029 1,129,005 1,154,407 1,071,934 gross profit 667,265 759,370 737,413 668,402 589,650 596,663 506,883 541,393 489,919operating profit/loss 86,215 130,258 160,540 106,727 62,727 107,753 -3,888 75,967 83,031Depreciation 35,581 36,123 39,515 44,379 46,798 46,460 47,556 49,231 46,572 amortisation of surplus values 435 394 1,081 – – 1,216 2,065 2,444 2,953 profit/loss before taxes 84,143 136,157 154,688 92,254 61,720 92,837 -9,212 65,353 81,831Loss from discontinued operations, net after taxes – – – – -7,709 -15,950 – – – net profit/loss for the year 58,208 96,317 108,236 61,874 34,745 46,621 -10,109 43,900 55,513 Balance sheet (KseK) non-current assets 487,968 202,233 195,644 233,793 241,993 247,637 171,456 193,697 197,742 Current assets 753,665 744,064 696,053 642,768 518,478 519,778 474,088 456,711 436,897 Total assets 1,241,633 946,297 891,697 876,561 760,471 767,415 645,544 650,408 634,639 shareholders’ equity 551,115 541,853 474,865 387,756 342,329 328,293 292,979 315,821 283,667 provisions – – – – – – 13,876 23,478 26,121 non-current liabilities 315,528 88,780 111,444 129,540 123,083 138,807 66,421 66,444 107,037 Current liabilities 374,990 315,664 305,388 359,265 295,059 300,315 272,268 244,665 217,814 shareholders’ equity and liabilities 1,241,633 946,297 891,697 876,561 760,471 767,415 645,544 650,408 634,639 Key ratios average number of employees* 836 983 968 952 933 967 975 925 855 revenue per employee, KseK 1,627 1,562 1,623 1,521 1,377 1,292 1,158 1,248 1,254 eBiTa margin, % 6.4 8.5 10.3 7.4 4.9 8.6 -0.3 6.6 7.7 eBT margin, % 6.2 8.9 9.8 6.4 4.8 7.4 -0,8 5.7 7.6 equity/assets ratio, % 44.4 57.3 53.3 44.2 45.0 42.8 45.4 48.6 44.7 Debt/equity ratio 0.64 0.19 0.27 0.52 0.55 0.63 0.49 0.44 0.45 return on total capital, %* 8.9 15.6 18.6 13.0 9.5 14.9 -0.2 12.0 16.0 return on equity after tax, %* 13.6 19.1 25.2 16.6 10.4 15.0 -3.3 14.6 21.2 return on capital employed, %* 12.8 23.0 27.6 19.0 13.5 20.8 -0.3 16.8 23.3 interest coverage ratio 20.9 20.7 16.5 7.4 6.6 6.5 -0.2 6.6 10.2 net investments, KseK 330,056 31,749 70,179 31,662 39,506 64,999 39,344 44,401 47,517 Cash and cash equivalents, KseK 213,427 220,773 177,079 163,244 81,131 112,013 94,840 100,388 65,201goodwill, KseK 230,754 33,270 23,411 – – – 1,216 3,281 3,941Development costs, KseK 26,984 28,000 37,545 39,070 40,378 42,142 36,958 32,897 30,589

1) years 2001-2003 not restated according to iFrs. For key ratios per share, see page 35.

Definitions

average collection periodaccounts receivables on 31 December divided by net sales increased by 20 percent vaT (average vaT in the group) multiplied by 365 days.

Capital turnover rate*

net sales in relation to average balance sheet total.

Development expensesDevelopment expenses are expenses for production, materials and product development.

Debt/equity ratiointerest-bearing liabilities in relation to total equity.

Direct yieldDividend as percentage of share price on 31 December.

earnings per share after dilutionprofit after tax, attributable to parent company shareholders, divided by the weighted average number of shares after dilution.

earnings per share after taxprofit after tax, attributable to parent company shareholders,

divided by the weighted average number of shares. Corresponds to net worth as HL Display does not have hidden reserves.

eBITa marginearnings before interest, taxes and amortisations. operating profit added for amortisation and impairment of goodwill on consolidation, in relation to net sales.

eBITDa operating profit added for deprecia-tion amortisation and impairments.

eBT marginearnings before taxes. profit before taxes in relation to net sales.

equity/assets ratioequity including minority share in relation to balance sheet total.

equity per share after dilutionreported equity divided by the weighted average number of shares after dilution.

equity per sharereported equity divided by the weighted average number of shares.

Interest-bearing net liability/receivableinterest-bearing liabilities less interest-bearing assets.

Interest coverage ratioprofit before taxes plus financial expenses in relation to financial expenses.

Inventory coverageinventory on 31 December divided by net sales per business day.

operating cash flow per shareChanges in cash and cash equiva-lents in any given year from operating activities after deduction of interests and tax payments, plus investments in intangible and tangible operational fixed assets, divided by the weighted average number of shares.

p/e ratioshare price on 31 December divided by earnings per share after tax.

return on capital employed*

profit after financial items plus finan-cial expenses in relation to average capital employed. Capital employed

is the balance sheet total less non-interest-bearing liabilities.

return on equity after tax* profit after tax in relation to average equity. Minority shares have been excluded from both profit and capital.

return on total capital*

profit before taxes plus financial expenses in relation to average balance sheet total.

share turnover velocity %share turnover during the year/average Market Cap during period * 250/number of trading days * 100.

staff turnoverno. of employees that have left the company divided by average number of employees.

value added per employeeoperating profit plus cost of salaries and social security payments divided by the average number of employees.

working capitalCurrent assets excluding cash and cash equivalents minus non interest-bearing current liabilities.

*2009 average calculated excluding ppe Ltd., which is consolidated from December 31, 2009. For glossary see page 25.


administration report HL Display annual report 2009 38

aDMinisTraTion reporT

HL Display aB (publ), reg. no. 556286-9957, is a swedish public limited company. The Company’s registered office is in nacka, at the address Cylindervägen 18, 131 26 naCKa sTranD.

groupBusiness – generalHL Display is a leading international supplier of merchandising and in-store communication products and solutions to the retail sector. it is HL Display’s goal to be a high-growth company with good profitability, thereby creating added value for its shareholders.

Economic situationHL is normally affected by seasonal variations, with sales lower in December and January. This is because customers – mainly retail companies – do not plan for restructuring during the Christmas period. The economic slowdown has caused an 11 percent decline in sales. This is commented on later.

DemandHL Display’s client structure, with a large number of customers in different markets, means market risk is well distributed. HL produces and delivers directly on the basis of assignments from customers. production changeover times are short and lead times are extremely short – in most cases under two weeks. as HL Display moves more towards customised integrated solutions, orders are growing in size. This has gradually resulted in more fluctuations in revenue streams.

CompetitionHL Display faces global competition at the product level, with some international suppliers able to offer individual products to several markets. in merchandising and in-store communication solutions, the Company is exposed to competition at the local level; in other words, in a country or a region. as a global integrated supplier, HL Display does not have any direct competitors at present. The fact that retail companies need uniform and common solutions across several markets means HL Display’s risk is low in developed markets and among large customers. as HL Display follows its established customers into new markets, the risk in these new markets is also considered relatively low.

Manufacturing, products and patentsHL Display is a world leader in the production methods which are most important to the Company. Fresh approaches and innovative design have been instrumental in HL Display’s establishment of a new product standard in large areas of retailing. it therefore comes as no surprise that there have been several instances of the Company’s products being copied. HL Display has an active patent strategy aimed at protecting all its innovations in the core competence areas of extrusion and injection moulding. where patent protection is not possible, pattern or design protection is used to discourage direct copies. HL Display actively defends its patents in case of infringement.

Political riskpolitical risk consists of legislation, taxation issues and trade policy factors. HL Display is not exposed to any significant political risk.

EmployeesHL Display has a large number of key personnel with a high expertise level and well-established customer relations. as the company’s expertise shifts further out in the organisation, closer to the customer, database documentation of work with customers becomes increasingly important. a CrM system to simplify documentation and support customer relationship work has been installed in the group for some time. work with customers takes place in teams, which means the financial effects of the loss of individual key staff are limited. The average number of employees during the

year was 906 (983). The number of employees at the balance sheet date was 1,114 (974). Disregarding ppe, the number of employees at the end of the year was 836 (see also note 8).

OwnershipThe HL Display share has been listed since 1993, and is now traded on the nasdaq oMX stockholm small Cap list. The number of shareholders at 31 December 2009 was 2,145 (1,695). institutional ownership represents approximately 62 (62) percent of the capital and foreign ownership 5 (4) percent. The largest shareholder is ratos aB, with 28.8 percent of the capital, followed by the remius family with 28.2 percent. For more information about the HL Display share, see pages 34-35.

significant events during and after the financial yearOperationsThe markets in which HL Display is active were hit hard by the global recession. Many retail customers postponed store renovation projects and new openings. This had an adverse effect on demand, which plummeted in the nordic region and in Central/eastern europe. However, the trend was not particularly apparent in asia. initiatives to streamline internal processes and adjust production capacity progressed continuously throughout the year.

HL Display has continued to develop the regional logistics centre structure, and a new logistics centre for Central and eastern europe was opened in Hungary during the year.

Organisational changesThe British ppe Ltd was acquired during the year. The acquisition strengthens HL Display in the important brand manufacturers’ customer segment by means of access to expertise in customised merchandising solutions. we also gain capacity in multi-material production, in other words production of products with parts made of plastic, metal and wood, for example. The company was consolidated with effect from 31 December 2009. For 11 months of 2009 (abbreviated financial year), ppe reported net sales of MseK 304 and eBiTa of MseK 31, after adjustment to comparable principles. see also note 5.

a sales company was established in Dubai during the year to develop the market in the Middle east. This brings the number of sales companies to 34.

New financing structure To secure financing for the acquisition and retain capacity for taking advantage of future acquisition opportunities, a bank financing package totalling MseK 382 was arranged in December. The package comprises three-year credit facilities of MseK 323 consisting of acquisition financing of MgBp 22 (term loan), with regular repayments and interest payments. a three-year credit facility of MseK 70 and a 364-day credit line of MseK 60 have been set up, which both were unused at 31 December 2009. in addition, the group had previously granted credits totalling MseK 75 and acquired credits amounting to MseK 37 at the end of the reporting period.

notes on earnings, financial position and cash flowIncome statementThe market experienced very negative growth in 2009 and this also affected HL Display. Measures to increase efficiency and adjust capacity were taken during the year. The group’s net sales for the year amounted to MseK 1,360 (1,536), which represents a decline of 11 percent on the 2008 figure. Compared with the previous year, the swedish krona’s value against local currencies had a positive effect of MseK 49 on sales.

operating profit for the year amounted to MseK 86 (130), while profit before tax was MseK 84 (136). Compared with the previous year, the swedish krona’s value against local currencies had a positive effect of MseK 11 on operating profit. net interest income/expense for the period was MseK -1 (-1). Currency effects amounted to MseK -1 (7). HL Display’s most


administration reportHL Display annual report 2009 39

important trading currencies apart from the swedish krona are the British pound, russian rouble and norwegian krone.

Balance sheetTotal assets increased by MseK 295 or 31 percent, which is largely an effect of the acquisition of ppe Ltd. working capital rose by MseK 10. a new financing structure was established in connection with the acquisition (see the section above). net investments in non-current assets for the period amounted to MseK 330 (32). MseK 302 of this figure is attributable to the acquisition of ppe. scheduled depreciation for the period was MseK 35 (36). inventories had declined by MseK 36 at 31 December, and constitute 11 (12) percent of net sales (without ppe). The inventory coverage in days, fell by 19 percent to 23. Trade receivables had declined by MseK 52 at 31 December (without ppe). The receivables turnover ratio was 16 (18) percent. The average customer credit period was 49 (54) days.

EquityThe group’s equity amounted to MseK 551 (542) at 31 December 2009. equity per share was seK 17.81 (17.40). The equity/assets ratio was 44 (57) percent. non-current liabilities increased by MseK 227 to MseK 316. Current liabilities increased by MseK 59. The debt/equity ratio rose to 0.64 (0.19). interest-bearing liabilities amounted to MseK 352 (100) at 31 December. of these, MseK 91 (39) were current liabilities. Changes in equity are largely made up of profit for the year and the annual dividend to shareholders. in 2009 the dividend was seK 1.38 per share (total MseK 42.7). existing share option schemes may result in changes in equity in 2010-2012 as the options can be converted into shares. For more information, see pages 34-35.

Cash flowThe cash flow statement has been prepared using the indirect method. reported cash flows only include transactions which involved cash inflows and outflows. Cash flow from operating activities fell to MseK 126 (154) in 2009, with the more effective working capital partly compensating for the weaker operating profit. The acquisition of ppe had a major impact on cash flow from investing activities, which amounted to MseK -290 (-24). without the ppe acquisition, investments amounted to MseK 23 and were largely made up of property, plant & equipment such as production equipment and tools for new products. Cash flow from financing activities was MseK 159 (-90). Loans increased by MseK 201 (net) and dividends totalling seK 43 (43) were paid.

research & developmentproduct development is an important part of HL Display’s growth strategy. Development expenses amounted to MseK 27 (28) in 2009. The level of investment in tools and production equipment was retained in order to allow an increased degree of automation.

Information on risks and uncertaintiesFluctuating raw material prices and exchange rates constitute uncertainties, but not significant risks. a more detailed description of HL Display’s risks and uncertainties can be found in the risk and sensitivity analysis on page 36.

DisputeDuring the year, a dispute arose with the partner in the group’s joint venture, Trion industries. Consolidated earnings in 2009 were charged with costs amounting to MseK 4.5. Currently remains uncertainly of up to MseK 10.

Financial instruments and risk managementinformation about HL Display’s financial policy, risk management and use of financial instruments can be found in note 2.

Information on the environmentintensive environmental protection programmes have been in progress at all the production facilities for some years. see page 30. The screen-printing operations at Falun are subject to notification requirements because of possible detrimental effects on the air. HL Display does not engage in any activities which are subject to permit.

The work of the Board during the yeara report on the work of the Board and its committees is contained in the corporate governance report on pages 71-75.

expectations regarding future growthBusiness objectivesThe financial objectives of HL Display group are annual organic growth of 5-10 percent, and an eBiTa margin of at least 12 percent within a few years.

Outlook for 2010sales and earnings are expected to increase compared with 2009.

parent companyThe parent company’s head office is in nacka and its operations cover group services and group management functions. a representative office has been set up in suzhou in China. The parent company’s profit after financial items amounted to MseK 74 (124).

remuneration of senior executivesinformation on remuneration of senior executives can be found in note 8. note 8 also describes the guidelines for remuneration of senior executives which were adopted by the 2009 annual general meeting. The guidelines to be proposed to the 2010 annual general meeting are unchanged apart from the warrants programme from 2009 being subsidised by 40 percent compared with 50 percent previously. The proposed guidelines can be found in note 8.

option schemesThere were three option schemes in the Company at the balance sheet date. The first is a warrant programme from 2007 comprising 256,000 warrants, 196,000 of which have been subscribed for by members of group management. The second is a warrant programme from 2009 comprising 650,000 options, 325,000 of which have been subscribed for by members of group management. The remainder can be subscribed for in March 2010. The third is a share option scheme comprising a maximum of 287,252 share options which can be exercised by the Ceo until the end of March 2011. if all the option schemes are fully exercised, the new shares will represent 3.9 percent of total share capital. For more information, see pages 34-35.

proposed distribution of profitThe Board proposes that the available profits of seK 329,506,850 be distributed as follows:

Dividend, 30,939,088 * seK 1.38 42,695,941 Carried forward 286,810,909Total 329,506,850

Details of the Company’s earnings and financial position can be found in the income statements, balance sheets and associated notes on the following pages.


group HL Display annual report 2009 40

group

Income statement for the group

KseK, 1 January-31 December note 2009 2008net sales 3, 4 1,360,416 1,535,639Cost of goods/services sold -693,151 -776,269gross profit 667,265 759,370 selling expenses -425,245 -463,214administrative expenses 39 -123,460 -134,454research and development expenses -26,984 -28,000other operating income 6 11,206 5,882other operating expenses 7 -16,567 -9,326operating profit 8, 9, 10 86,215 130,258 Financial income 11 2,817 12,794Financial expenses 12 -4,889 -6,895net financial items -2,072 5,899 profit before taxes 84,143 136,157 income tax expense 14 -25,935 -39,840net profit for the year 58,208 96,317 attributable to: The parent company’s shareholders 58,208 96,254Minority interest – 63 58,208 96,317 earnings per share 15 before dilution (seK) 1.88 3.11 after dilution (seK) 1.88 3.11

statement of Comprehensive Income for the group

KseK, 1 January-31 December note 2009 2008net profit for the year 58,208 96,317

other comprehensive income Translation differences on translation of foreign operations -14,998 22,385net change in fair value of cash flow hedges 11,486 -9,467other comprehensive income for the year -3,512 12,918

Comprehensive income for the year 14, 33 54,696 109,235

Comprehensive income for the year attributable to: The parent company’s shareholders 54,696 108,452Minority interest – 783Comprehensive income for the year 54,696 109,235


groupHL Display annual report 2009 41

statement of Financial position for the group

KseK, 31 December note 2009 2008assets 4, 16, 17

non-current assetsintangible assets 5, 18 243,612 42,781property, plant and equipment 19 223,469 137,922participations in associated companies and joint ventures 21 3,000 5,000non-current receivables 22 2,316 2,329Deferred tax asset 14 15,571 14,201Total non-current assets 487,968 202,233 Current assetsinventories 24 179,718 187,165Tax assets 24,900 8,892Trade and other receivables 25 255,997 271,025prepaid expenses and accrued income 26 30,158 25,038other current assets 27 49,465 31,171Cash and cash equivalents 28 213,427 220,773Total current assets 753,665 744,064Total assets 1,241,633 946,297 equity and liabilitiesequity 29 share capital 38,674 38,674reserves 9,266 12,778retained earnings including net profit for the year 503,175 490,401Total equity 551,115 541,853 Liabilities non-current liabilitiesinterest-bearing non-current liabilities 2, 31 261,077 61,780other non-current liabilities 25,380 607pension provisions 32 5,116 4,367Deferred tax liability 14 23,955 22,026Total non-current liabilities 315,528 88,780 Current liabilitiesinterest-bearing current liabilities 2, 31 91,087 38,559Trade and other payables 101,944 78,614Tax liabilities 12,302 14,292other current liabilities 29,554 49,733accrued expenses and prepaid income 35 140,103 134,466Total current liabilities 374,990 315,664Total liabilities 690,518 404,444Total equity and liabilities 1,241,633 946,297 For information about pledged assets and contingent liabilities, see note 36.


group HL Display annual report 2009 42

statement of Changes in equity for the group

equity relating to the parent company’s shareholders retained earnings

Translation Hedge including profit minority TotalKseK share capital reserve reserve for the year Total interest equityopening balance Jan 1, 2008 38,674 – 580 432,770 472,024 2,841 474,865Comprehensive income for the year – 21,665 -9,467 96,254 108,452 783 109,235 Dividend – – – -42,541 -42,541 – -42,541 equity-settled share-based instruments (iFrs 2) – – – 294 294 – 294Closing balance Dec 31, 2008 38,674 21,665 -8,887 486,777 538,229 3,624 541,853

equity relating to the parent company’s shareholders retained earnings

Translation Hedge including profit minority TotalKseK share capital reserve reserve for the year Total interest equityopening balance Jan 1, 2009 38,674 21,665 -8,887 486,777 538,229 3,624 541,853Comprehensive income for the year – -14,998 11,486 58,208 54,696 – 54,696 Dividend – – – -42,696 -42,696 – -42,696 acquired minority share – – – – – -3,624 -3,624 warrant premiums paid – – – 779 779 – 779 equity-settled share-based instruments (iFrs 2) – – – 107 107 – 107Closing balance Dec 31, 2009 38,674 6,667 2,599 503,175 551,115 – 551,115

statement of Cash Flows for the group

KseK, 1 January-31 December note 2009 2008operating activities operating profit 86,215 130,258Depreciation 35,580 36,123other items not affecting cash flow 37 4,940 18,697interest received 3,072 5,326interest paid -4,508 -6,639Taxes paid -35,683 -37,155Cash flow from operating activities before changes in working capital 89,616 146,610 Cash flow from changes in working capital increase (-)/Decrease (+) in inventories 30,665 -27,408increase (-)/Decrease (+) in operating assets 18,732 38,866increase (-)/Decrease (+) in operating liabilities -13,092 -3,650net cash flow from operating activities 125,921 154,418 Investing activities investments in property, plant and machinery -24,938 -27,652sale of property 401 4,247investments in intangible assets -1,829 -1,116acquisitions of subsidiaries, net effect on liquidity -265,547 -652Change in other financial assets 2,000 1,045net cash flow from investing activities -289,913 -24,128 Financing activities new share issue, warrant premiums 778 –Borrowing 258,280 2,688repayment of debt -57,155 -49,653Dividend paid to parent company’s shareholders -42,696 -42,541net cash flow from financing activities 159,207 -89,506 net cash flow for the year -4,785 40,784Cash and cash equivalents at beginning of the year 220,773 177,079Foreign exchange differences -2,561 2,910Cash and cash equivalents at end of the year 213,427 220,773


parent CompanyHL Display annual report 2009 43

parenT CoMpany

Income statements for the parent Company

KseK, 1 January-31 December note 2009 2008net sales 3 77,834 101,254Cost of services sold -81,211 -99,843gross profit -3,377 1,411 selling expenses 9,844 -2,385administrative expenses 39 -23,552 -21,774research and development expenses -18,085 -15,875other operating income 6 3,196 1,553other operating expenses 7 -666 –operating loss 8, 9 -32,640 -37,070 Financial income and expenses: income from participations in group companies 11 100,500 153,400income from other securities and receivables that are non-current assets 11 6,584 7,882other interest income and financial income 11 335 58interest and other financial expenses 12 -768 -247profit before appropriations and taxes 74,011 124,023 appropriations 13 -2,696 -12,386profit before taxes 71,315 111,637 income tax expense 14 -7,583 -19,515net profit for the year 63,732 92,122


parent Company HL Display annual report 2009 44

Balance sheets for the parent Company

KseK, December 31 note 2009 2008assets non-current assets intangible assets 18 5,537 7,562property, plant and equipment 19 5,490 3,055Financial assets participations in group companies 20 134,443 80,443 participations in associated companies and joint ventures 21 10,147 12,147receivable from group companies 23 203,284 –Deferred tax assets 14 2,097 – Total financial assets 349,971 92,590Total non-current assets 360,998 103,207 Current assets Current receivables receivables from group companies 23 366,549 367,560 prepaid expenses and accrued income 26 3,950 5,665 other current assets 27 16,323 7,153Total current assets 386,822 380,378 Cash and cash equivalents 514 10,048Total current assets 387,336 390,426Total assets 748,334 493,633 equity and liabilities equity 29 Restricted equity share capital (3,652,096 shares class a and 27,286,992 shares class B) 38,674 38,674 statutory reserve 8,010 8,010Unrestricted equity Fair value reserve -1,331 – retained earnings 267,106 235,678 net profit for the year 63,732 92,122Total equity 376,191 374,484 untaxed reserves 30 54,834 52,138 non-current liabilities Liabilities to group companies 34 253,766 –

Current liabilities Trade and other payables 15,534 7,013 Liabilities to group and associated companies, joint ventures 34 27,964 14,900 Tax liabilities – 7,596 other current liabilities 1,397 18,100 accrued expenses and prepaid income 35 18,648 19,402Total current liabilities 63,543 67,011Total equity and liabilities 748,334 493,633 pledged assets and contingent liabilities for the parent Company KseK, as at 31 December note 2009 2008Contingent liabilities 36 351,731 213,518


parent CompanyHL Display annual report 2009 45

statement of Changes in equity for the parent Company

restricted equity unrestricted equity share statutory Fair value retained profit/loss TotalKseK note 29 capital reserve reserve earnings for the year equity opening balance Jan 1, 2008 38,674 8,010 – 280,844 – 327,528group contribution paid – – – -2,919 – -2,919Total changes posted directly to equity – – – -2,919 – -2,919profit or loss for the year – – – – 92,122 92,122Total changes in equity, excl. distribution to shareholders – – – -2,919 92,122 89,203Dividend – – – -42,541 – -42,541equity-settled share-based instruments (iFrs 2) – – – 294 – 294Closing balance Dec 31, 2008 38,674 8,010 – 235,678 92,122 374,484

restricted equity unrestricted equity share statutory Fair value retained profit/loss TotalKseK note 29 capital reserve reserve earnings for the year equity opening balance Jan 1, 2009 38,674 8,010 – 327,800 – 374,484group contribution paid – – – -18,883 – -18,883Total changes posted directly to equity – – – -18,883 – -18,883profit or loss for the year – – -1,331 – 63,732 62,401Total changes in equity, excl. distribution to shareholders – – -1,331 -18,883 63,732 43,518Dividend – – – -42,696 – -42,696warrant premiums paid – – – 778 – 778equity-settled share-based instruments (iFrs 2) – – – 107 – 107Closing balance Dec 31, 2009 38,674 8,010 -1,331 267,106 63,732 376,191

statement of Cash Flows for the parent Company

KseK, 1 January-31 December note 2009 2008operating activities operating loss -32,640 -37,070Depreciation 3,656 3,014other items not affecting cash flow 37 -2,950 6,771interest received 7,106 6,968Dividends received and group contribution 143,363 155,859interest paid -437 -248income tax paid -16,852 -15,217Cash flows from operating activities before change in working capital 101,246 120,077 Cash flow from changes in working capital increase (-)/Decrease (+) in operating assets -45,550 -37,962increase (+)/Decrease (-) in operating liabilities -11,862 -13,626net cash flow from operating activities 43,834 68,489 Investing activities investments in property, plant and equipment -3,086 -3,011 investments in intangible assets -988 -273investments in subsidiaries -54,000 -4,159 Loans to group companies -205 088 –sale of shares and participations 2,000 644net cash flow from investing activities -261 162 -6,799 Financing activities new share issue, warrant premiums 778 –Loans from group companies 253,766 –Dividend paid -42,696 -42,541group contributions paid -4,054 -11,190net cash flow from financing activities 207 794 -53,731 net cash flow for the year -9,534 7,959Cash and cash equivalents at beginning of the year 10,048 2,089Cash and cash equivalents at end of the year 514 10,048


notes HL Display annual report 2009 46

noTes

noTe 1 sIgnIFICanT aCCounTIng poLICIes

Compliance with standards and laws The consolidated financial statements have been prepared in accordance with the international Financial reporting standards (iFrs) issued by the international accounting standards Board (iasB) and interpretations issued by the international Financial reporting interpretations Committee (iFriC), as adopted by the eu. in addition the swedish Financial reporting Board’s recommendation rFr 1.2, supplementary accounting rules for groups, have been applied. The group’s accounting policies described below have been consistently applied to all periods presented in the consolidated financial statements unless otherwise stated.

The parent Company applies the same accounting policies as the group, expect in the cases specified below in the section entitled “The parent Company’s accounting policies”.

The Board has authorised the annual report and consolidated financial statements for issue on 10 March 2010. The consolidated income statement, statement of comprehensive income and statement of financial position will be presented for adoption at the annual general meeting on 22 april 2010.

Basis of preparationThe parent Company’s functional currency is swedish kronor, which is also the presentation currency. Consequently, the financial statements are presented in swedish kronor. unless otherwise stated, amounts are reported in seK thousands, rounded to the nearest thousand. assets and liabilities are measured at historical cost, apart from certain financial assets and liabilities, which are measured at fair value. property, plant and equipment are reported at the lower of the earlier reported value and the fair value, less direct cost to sell.

preparation of financial statements in compliance with iFrs requires management to make critical judgments, accounting estimates and assumptions which affect the application of the accounting policies and the carrying amounts of assets, liabilities, income and expenses. The estimates and assumptions are based on historical experience and a number of other factors that are considered reasonable in the prevailing circumstances. The actual outcome may differ from these estimates. accounting estimates and assumptions are reviewed regularly. Changes to estimates are reported in the period in which the change occurs and, where applicable, in future periods.

Critical accounting estimates and assumptions made by management during application of iFrs are described in more detail in note 41. The group’s accounting policies described below have been applied consistently to all periods presented in the consolidated financial statements, unless otherwise specified.

The group’s accounting policies have been applied consistently to all periods presented for the reporting and consolidation of the parent Company, subsidiaries, associates and joint ventures.

amended accounting policiesThe following new standards and interpretations have been applied in preparing the 2009 annual financial statements:

Presentation of financial statementswith effect from 1 January 2009, the group applies the amended ias 1 presentation of Financial statements. The amendment means that income and expense, previously recognised directly in equity, is now reported under other comprehensive income in the statement of comprehensive income, which HL Display presents immediately after the income statement. HL Display has decided to use the new report titles introduced in ias 1 – income statement, statement of comprehensive income, statement of financial position, statement of changes in equity and statement of cash flows.

Comparative periods have been adjusted throughout the annual financial statements in order to follow the new format. as the changes only affect the

presentation, no amounts – either relating to earnings per share or other items in the financial statements – have been changed.

Segment informationiFrs 8 operating segments, which supersedes ias 14 segment reporting, introduces a management approach to the classification and presentation of operating segments. The new principles are described later in a separate section. iFrs 8 has been applied retrospectively in accordance with the standard’s transitional provisions, and the prior year disclosures have been restated. application of iFrs 8 has resulted in a new segment classification which corresponds to the classification used by group management to review financial performance. Consequently, the prior year amounts have been adjusted to reflect this classification.

Disclosure of financial instrumentsamendments to IFRS 7 Financial Instruments: Disclosures, effective for annual periods beginning on or after 1 January 2009, affect the Company’s financial reporting with effect from the 2009 annual financial statements. The amendments are essentially new disclosure requirements in respect of financial instruments measured at fair value in the statement of financial position. The instruments are divided into three qualitative levels of inputs. The 3-level hierarchy indicates what disclosures are required and how the data inputs disclosed are determined. Level 3 is the lowest level of input quality and is subject to more disclosure requirements than the other two levels. The disclosure requirements mainly affect note 2 below. The amendments to iFrs 7 also introduce certain changes regarding liquidity risk disclosure requirements.

with effect from 1 January 2009, the group applies the amended IAS 23 Borrowing Costs. The amendment means that the group capitalises borrowing costs relating to qualifying assets with a commencement date on or after 1 January 2009. Borrowing costs were previously expensed in the period in which they were incurred rather than being capitalised. The amendment is applied prospectively in accordance with the transitional provisions in ias 23. a more detailed description of the accounting policy can be found later in this note.

new IFrss and interpretations not yet appliedThe effective date for the following amended standards is in the next financial year. The Company has not applied early adoption in preparing these financial statements. There are no plans for early adoption of new or amended standards with a future effective date.

iFrs 3 Business Combinations (Revised) and ias 27 Consolidated and Separate Financial Statements (Revised) include the following changes: there is a new definition of ’a business’, transaction costs associated with a business combination are expensed, contingent consideration is required to be measured at fair value at the time of the business combination, effects of remeasurement of liabilities relating to contingent consideration are recognised in profit or loss for the year. The acquisition of additional shares after control has been obtained is accounted for as an equity transaction with owners, and is recognised directly in equity. This is a departure from HL Display’s present policy of reporting excess amounts as goodwill. The revised and amended standards will be effective for accounting periods commencing on or after 1 January 2010.

iFrs 9 Financial instruments is intended to supersede ias 39 Financial instruments: recognition and Measurement as of 2013 at the latest. There are presently no financial assets that are expected to be affected by the new rules. Changes to ias 24, ias 32, iFrs 2, as well as iFriC 12 and 15-18 are not expected to have any effects on the group’s profit or financial position.

segment reportingan operating segment is a component of the group that engages in business activities from which it may earn revenues and incur expenses, and for which discrete financial information is available. The segment’s operating results


notesHL Display annual report 2009 47

are reviewed by the Company’s chief operating decision maker, in order to make decisions about resources to be allocated to the segment and assess its performance. see note 4 for a further description of the classification and presentation of operating segments.

Classificationnon-current assets and liabilities are essentially amounts that are expected to be recovered or paid more than twelve months after the reporting date. Current assets and liabilities are essentially amounts that are expected to be recovered or paid within twelve months of the reporting date.

Basis of consolidation Subsidiariessubsidiaries are companies over which HL Display aB has control. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The existence and effect of potential voting rights that are presently (i.e. currently) exercisable or presently convertible should be considered when assessing whether control exists.

subsidiaries are accounted for by applying the acquisition method. The acquisition is treated as a transaction through which the group indirectly acquires the subsidiary’s assets and assumes its liabilities. The group’s cost of acquisition is determined by means of an acquisition analysis. The analysis determines the cost of acquisition and the fair value of the acquired identifiable assets and assumed liabilities and contingent liabilities. a positive difference between cost and the fair value of the acquired identifiable assets and assumed liabilities and contingent liabilities is recognised as goodwill. any negative difference is recognised directly in the income statement.

The results of operations of a subsidiary are included in the consolidated financial statements from the date of acquisition until the date on which control ceases.

Associates and joint venturesassociated companies are companies that are not subsidiaries, but where HL Display aB holds, either directly or indirectly, more than 20 percent of the votes or by some other means has a significant influence on operational and financial control. participations in associated companies are reported in the consolidated financial statements according to the equity method. Joint ventures where HL Display controls more than 50 percent of the number of votes and holds a deciding influence are consolidated as subsidiaries. Joint ventures where HL Display through partnership agreements with one or more parties, holds a joint, deciding influence over operational and financial control, are consolidated using the proportionate method. The proportionate method means that HL Display’s share of the joint venture companies’ income, expenses, assets and liabilities, is reported on an item by item basis.

Transactions eliminated on consolidationintra-group receivables and liabilities, income and expenses, and unrealised gains or losses arising from intra-group transactions are eliminated in full when preparing the consolidated financial statements.

unrealised profits resulting from transactions with associates and jointly controlled companies are eliminated to the extent that they correspond to the group’s shareholding in the company. unrealised losses are eliminated in the same way as unrealised profits, but only to the extent that there is no indication of any impairment.

Foreign currencyTransactions in foreign currency Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the transaction date. The functional currency is the monetary unit of account of the principal economic environment in which the Company operates. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rates prevailing at the reporting date. Foreign exchange gains or losses resulting from the settlement of such transactions are recognised in the income state-ment. non-monetary assets and liabilities recognised at historical cost are translated using the exchange rate prevailing at the date of the transaction.

Financial statements of foreign entitiesassets and liabilities of foreign entities, including goodwill and other fair value adjustments, are translated into swedish kronor using the exchange

rate prevailing at the reporting date. income and expenses in the income statements of foreign entities are translated into swedish kronor using average exchange rates. This average is an approximation of the cumulative effect of the rates prevailing at the transaction dates. exchange differences arising from the translation of foreign operations are recognised in other comprehensive income as a translation reserve.

revenueThe group’s revenue consists almost exclusively of sale of products. revenue from sale of goods is recognised when the significant risks and rewards of ownership of the goods have been transferred to the buyer. revenue from the sale of services is recognised by reference to the stage of completion at the reporting date. The stage of completion is established by calculating the relationship between value delivered and total value of order. revenues are not reported if it is probable that financial advantage will not accrue to the group. sales are reported net after vaT and discounts.

operating expenses and finance income and costsOperational leasesoperating lease payments are recognised as an expense in the income statement over the lease term on a straight-line basis. incentives for the agreement of a new or renewed operating lease are recognised as a reduction of the rental expense over the lease term. Contingent rents are recognised as an expense in the periods when they arise.

Finance income and costsFinance income and costs comprise interest income on bank deposits, receivables and interest-bearing securities, interest expense on borrowings, dividend income, exchange differences, unrealised and realised gains or losses on financial investments and derivatives. interest income on receivables and interest expense on liabilities are recognised using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future payments or receipts through the expected life of the financial instrument to the net carrying amount of the financial asset or financial liability. Dividend income is recognised when the right to receive payment is established. The group does not capitalise interest costs on assets, as allowed under ias 23.

Loan expenses are recognized in earnings using the effective interest method except to the extent they are directly attributable to the acquisition, construction or production of assets that take a considerable time to complete for use or sale, in which case they are part of the acquisition value.

Taxesincome tax consists of current tax and deferred tax. Taxes are recognised in the income statement except when the underlying transaction is recognised in other comprehensive income, in which case the related tax effect is recognised in equity.

Current tax is the amount of income taxes payable or recoverable in respect of the taxable profit or loss for the current year, and is calculated using tax rates enacted or substantially enacted by the reporting date, and any adjustments relating to prior periods.

a deferred tax liability is recognised for temporary differences between the carrying amounts of assets and liabilities and their corresponding tax bases except to the extent that the deferred tax liability arises from the initial recognition of goodwill or the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the trans-action affects neither accounting profit nor taxable profit or loss. a deferred tax liability is recognised for temporary differences associated with invest-ments in subsidiaries and associates except to the extent that it is probable that the temporary difference will not reverse in the foreseeable future. The measurement of deferred tax is based on the manner in which the Company expects to recover or settle the carrying amount of its assets and liabilities. Deferred tax liabilities and assets are measured using the tax rates and tax laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets on temporary differences and deferred tax assets arising from the carryforward of unused tax losses are only recognised to the extent that it is probable that they can be utilised. The carrying amounts of deferred tax assets are reviewed and reduced to the extent that it is no longer probable that the deferred tax asset can be utilised.

any additional income taxes arising from the distribution of dividends are recognised at the same time as the dividend is recognised as a liability.



Financial instrumentsFinancial instruments reported in the statement of financial position under assets include cash & cash equivalents, trade receivables, financial deposits and derivatives. Financial instruments reported under liabilities include trade payables, borrowings and derivatives.

Recognition and derecognition a financial asset or liability is recognised in the statement of financial position when the Company becomes a party to the instrument’s contractual terms. Trade receivables are recognised in the statement of financial position when invoices are sent. a liability is recognised when the counterparty has performed and there is a contractual obligation to pay, even if an invoice has not yet been received. Liabilities are recognised when invoices are received.

Financial assets are derecognised in the statement of financial position when the rights under the contract have been realised, have expired or the Company loses control over them. The same applies to a part of a financial asset. Financial liabilities are derecognised in the statement of financial position when the contractual obligation has been discharged or extinguished in some other way. The same applies to a part of a financial liability.

a financial asset and a financial liability may be offset and the net amount presented in the statement of financial position when, and only when, the Company has a legally enforceable right to set off the recognised amounts, and the Company intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. purchases and sales of financial assets are recognised on the trade date (the commitment date).

Classification and measurementa financial instrument is classified on acquisition according to the purpose for which it was acquired. The categories described below determine how a financial instrument is measured subsequent to initial recognition.

Initial measurementnon-derivative financial instruments are initially measured at cost, which is the equivalent of the instrument’s fair value plus transaction costs. This is the case for all financial instruments except those recognised at fair value through profit or loss, which are recognised net of transaction costs. Derivative financial instruments are initially measured at fair value, with transaction costs recognised in profit or loss for the period.

Cash & cash equivalents consist of cash, demand deposits with banks and similar institutions and short-term deposits with an original maturity of three months or less which are subject to an insignificant risk of changes in value. Subsequent measurement – Financial assets or liabilities at fair value through profit or lossThis category consists of two sub-categories: financial assets held for trading and other financial assets the Company designates as financial assets at fair value (using the fair value option) on initial recognition. HL Display did not have any assets in this category in 2009 and 2008.

– Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. assets in this category are measured at amortised cost, which is calculated based on the effective interest method used at initial recognition. receivables are recognised at original invoice amount less an allowance for uncollectible amounts. HL Display does not have any loan receivables.

– Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity. assets in this category are measured at amortised cost. HL Display had no assets in this category in 2009 and 2008.

– Available-for-sale financial assetsavailable-for-sale financial assets are financial assets designated on initial recognition as available for sale or any other instruments that are not classified in any of the other categories. Holdings of shares and interests not reported as subsidiaries, associates or joint ventures are classified in this category. aFs assets are measured at fair value with the period’s changes in the statement of comprehensive income. accumulated fair value changes are recognised directly in equity, except for impairment losses, interest-bearing

aFs debt instruments, interest on dividends and foreign exchange gains or losses on monetary items, which are reported in profit or loss. on disposal of an asset, accumulated profit/loss is, as previously, recognised in the statement of comprehensive income under profit/loss for the year.

– Other financial liabilitiesLoans as well as other financial liabilities, for example accounts payable – trade, are included in this category. The liabilities are valued at amortised cost.

Derivatives and hedge accountingHL Display’s derivative instruments have been acquired for the purpose of hedging its interest and foreign currency exposure. Derivative instruments consist of items such as forward contracts, options and swaps. Derivatives may also be embedded derivatives, with contractual terms which are embedded into other agreements. HL Display did not have any embedded derivatives in 2009 and 2008. Derivative instruments are recognised initially at fair value, with transaction costs recognised as an expense in the income statement. subsequent to initial recognition, derivative instruments are recognised as follows:

The portion of the gain or loss on a hedging instrument that is determined to be an effective hedge is recognised in the income statement on the same line as the hedged item. in order to meet the criteria for hedge accounting, required under ias 39, an entity must formally designate the hedge relationship and show a clear link to the hedged item. The hedging instrument must be effective, and hedging documentation must be produced, demonstrating how the hedging instrument’s effectiveness will be measured. in the event that the criteria for hedge accounting are no longer met, the derivative instrument is reported at its fair value with the value change in the income statement.

Hedging of net monetary assetsinvestments in foreign subsidiaries (net assets including goodwill) have, to a certain extent, been hedged by means of foreign currency borrowing. Hedge accounting is not applied as hedging is reflected in the accounting in that the underlying receivable or liability and the hedging instrument are reported at the closing rate.

Transaction exposure – cash flow hedgesForeign exchange forward contracts hedging forecast cash flows are recognised at fair value in the statement of financial position. when hedge accounting is applied, fair value changes are recognised directly in other comprehensive income in the hedging reserve until the hedged cash flow affects profit or loss. The hedging instrument’s accumulated value changes are then reclassified to profit or loss in order to meet and match the profit or loss effects from the hedged transaction

property, plant and equipmentOwned assets property, plant and equipment is recognised as an asset when it is probable that future economic benefits associated with the asset will flow to the Company and the cost can be measured reliably. HL Display measures items of property, plant and equipment using the acquisition method.

items of property, plant & equipment are recognised at cost less accumulated depreciation and impairment losses. Cost comprises the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended. The cost of a self-constructed asset includes employee benefits, costs of materials and other construction costs directly attributable to the item.

The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the disposal of an item of property, plant and equipment is the difference between the selling price and the asset’s carrying amount less direct costs to sell. gains and losses are reported under other operating income/expense.

Subsequent costs subsequent costs are included in the carrying amount only when it is probable that future economic benefits associated with the asset will flow to the Company and the cost of the item can be measured reliably. all other subsequent costs are recognised as an expense in the period in which



they are incurred. in order for subsequent costs to qualify for inclusion in the carrying amount, they must relate to the replacement of identified components or parts thereof. The carrying amount of a replaced component or part thereof is derecognised at the time of replacement. repairs are recognised as an expense in the financial period in which they are incurred.

Depreciation Depreciation is applied on a straight-line basis over the estimated useful life of the asset. Land is not depreciated. The group applies component depreciation, which means depreciation is based on the estimated useful lives of components.

estimated useful lives:– facades and interior surfaces, business properties 27-40 years– fixed installations, business properties 12-50 years– plant and machinery 5-12 years– equipment, tools, fixtures & fittings 3-7 years– improvement of 3rd-party property 20 years

Depreciation methods, residual values and useful lives are reviewed annually.

Intangible assetsGoodwillgoodwill arising from an acquisition is the difference between the cost of acquisition and the fair value of the acquired identifiable assets and assumed liabilities and contingent liabilities.

Other intangible assetsComputer systems and market-based assets acquired by the group are recognised at cost less accumulated amortisation (see below) and impairment losses (see impairment). The cost of self-constructed or adapted computer systems includes licenses, employee benefits plus consultancy costs directly attributable to the computer system. The cost of market-based assets relates to customer agreements and the value of customer relationships.

Amortisation amortisation is recognised in the income statement on a straight-line basis over the intangible asset’s estimated useful life, provided it has a finite useful life. goodwill and assets with an indefinite useful life are tested for impairment annually or whenever there is an indication that the intangible asset may be impaired. amortisation of other intangible assets begins when the asset is available for use.

estimated useful lives:– computer systems 4 years– market-based assets 4-5 years

research and developmentDevelopment expenses, for which the results are used to achieve new or improved products or processes, are capitalised in the statement of financial position if the product or process is technically and commercially feasible and the Company has sufficient resources to complete the development and then use or sell the intangible asset. The carrying amount includes all directly attributable expenses such as costs of materials and services, salaries and other indirect costs attributable to the asset in a reasonable, consistent way. other development expenses are recognised in the income statement as incurred. in HL Display’s statement of financial position, capitalised development expenses are reported at cost less accumulated amortisation and impairment losses as property, plant & equipment. The reason is that once a decision has been made on commercial production, product development work essentially consists of designing the production equipment required to manufacture the product.

Inventoriesinventories are measured at the lower of cost and net realisable value. The cost of inventories is measured using the first-in, first-out (FiFo) method, and comprises costs of purchase and other costs incurred in bringing the inventories to their present location and condition. The cost of finished goods and work in progress includes a reasonable proportion of indirect costs based on normal operating capacity. net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Impairment The group’s assets are assessed at each reporting date to determine whether there is any indication of impairment. ias 36 is applied for impairment of all assets other than financial assets (ias 39 ), assets and disposal groups classified as held for sale (iFrs 5), investment property measured at fair value (ias 40), inventories (ias 2), plan assets used to fund employee benefits (ias 19), biological assets (ias 41) and deferred tax assets (ias 12). The carrying amount of assets listed as exceptions above is estimated within the scope of the relevant standard.

Impairment of assets, and investments in associates and joint venturesif there is an indication that an asset is impaired, the asset’s recoverable amount is measured (see below). The recoverable amount of goodwill, other intangible assets with an indefinite useful life and intangible assets not yet available for use is also measured annually, irrespective of whether there is any indication of impairment. if an asset does not generate independent cash inflows and its fair value less costs to sell cannot be used, it is tested for impairment as part of the cash-generating unit to which it belongs, i.e. the smallest identifiable group of assets which generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

an impairment loss is recognised when the recoverable amount of an asset or a cash-generating unit is less than its carrying amount. an impairment loss is recognised in profit or loss for the year. when an impairment loss is recognised for a cash-generating unit (group of units), the impairment loss is initially allocated to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of units). it is then allocated to the other assets of the unit (group of units) pro rata on the basis of each asset’s carrying amount.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. in measuring value in use, the discount rate used for cash flow projections reflects the risk-free rate of interest and the risks specific to the asset.

Impairment of financial assetsThe Company assesses at each reporting date whether there is any objective evidence that a financial asset or group of financial assets may be impaired. objective evidence is the occurrence of one or more events with an adverse effect and which indicate that the cost of the investment may not be recovered. For investments in equity instruments classified as available-for-sale financial assets, a significant and prolonged decline in fair value below cost is also objective evidence of impairment.

The Company classifies receivables as doubtful debts when they have been due for payment for 60 days or more. impairment losses on receivables are determined on the basis of historical loss experience with similar receivables. impaired receivables are recognised at the present value of estimated future cash flows. However, cash flows relating to short-term receivables are not discounted.

equity instruments classified as available for sale are considered impaired and an impairment loss is recognised if there is a significant or prolonged decline in the fair value below cost. The Company considers a decline in excess of 20 percent to be significant, and a period of nine months or more to be prolonged.

when an impairment loss is recognised for an equity instrument classified as available for sale, the cumulative profit or loss previously recognised in equity is reclassified to profit or loss via other comprehensive income. The amount of the cumulative loss reclassified from equity, via other comprehensive income, to profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss.

impairment losses on available-for-sale financial assets are recognised in profit or loss for the year under net financial items.

Reversal of impairmentimpairment losses recognised for assets covered by ias 36 are reversed if there is an indication that the impairment loss no longer exists and there has been a change in the estimates used to determine the asset’s recoverable amount. However, goodwill impairment is never reversed. an impairment loss is only reversed to the extent that any increase in the carrying amount of the asset does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset.



impairment losses on loans and receivables carried at amortised cost are reversed if objective evidence of impairment no longer exists and full payment is expected from the customer.

impairment losses recognised in profit or loss for an investment in an equity instrument classified as available for sale are not reversed through profit or loss but in other comprehensive income. The asset’s revalued amount is the value on which subsequent revaluations will be based. These are recognised in other comprehensive income. if the fair value of an interest- bearing instrument classified as available for sale increases and this can be objectively related to an event occurring after an impairment loss was recognised, the impairment loss is reversed and the amount of the reversal is recognised in profit or loss.

Dividends Dividends are recognised as a liability in the parent company when the dividend has been adopted by the annual general meeting.

earnings per shareCalculation of earnings per share is based on profit for the year attributable to owners of parent and the weighted average number of shares outstanding during the year. when calculating the earnings per share after dilution, profit/loss and the average number of shares are adjusted in order to take into consideration the effects of diluted, potential ordinary shares which have arisen from employee share option programmes.

employee benefitsDefined contribution pension plansDefined contribution pension plans are plans under which the Company’s legal or constructive obligation is limited to the amount that it agrees to con-tribute to the fund. obligations under defined contribution pension plans are recognised as an expense as incurred. The employee bears the actuarial risk (i.e. that pension payments will be lower than expected) and the investment risk (i.e. that the invested assets will not be sufficient to provide the expected pension payments). The company’s commitments concerning contributions into defined contribution plans are recognised as an expense in the income statement as they are earned by employees through the employment period.

Defined benefit pension plansHL Display has defined benefit for employees in norway, austria, switzerland and France. The group’s net obligation under these plans is calculated separately for each plan by estimating current and past service costs. These benefits are discounted to the net present value, and the fair value of plan assets is deducted. The discount rate is the market rate for government bonds with a corresponding term. The calculation is performed by a qualified actuary using the projected unit Credit Method.

The ‘corridor’ rule is applied. This means the portion of actuarial gains and losses that falls outside 10 percent of the higher of the present value of the benefit obligation and the fair value of plan assets is recognised in profit or loss the income statement over the average remaining service period. otherwise, actuarial gains and losses are not recognised.

when the calculation leads to an asset for the group, the recognised value of the asset is limited to the net result of unreported actuarial losses and unreported costs of employment during prior periods and the present value of future repayments from the plan or reduced future payments into the plan.

when the benefits in a plan are improved, the proportion of increased benefits relating to the employees’ employment during earlier periods is recognised as an expense in the income statement on a straight-line basis, allocated over the average period until the benefits have been earned in full. if the benefits have been earned in full, an expense is recognised directly in the income statement.

Termination benefits The Company recognises termination benefits only when it is demonstrably committed to terminating the employment of employees before the normal retirement date and has produced a detailed formal plan.

Short-term benefitsThe Company recognises the undiscounted amount of short-term employee benefits when the related services are rendered. provisions are recognised for anticipated costs of profit-sharing and bonus payments when the group has a valid legal or constructive obligation to make such payments as a

result of services rendered by employees, and the amount can be reliably estimated.

Share-based paymentsan employee share option programme enables employees to acquire shares in the company. The fair value of the granted options is recognised as employee expenses with an equivalent increase in equity. The fair value is calculated at the grant date and distributed over the vesting period. The fair value of the granted options is calculated using the Black & scholes model, taking into account the conditions that applied at the grant date. The recognised expense is the equivalent of the fair value of the estimated number of vested options. This expense is adjusted in subsequent periods in order to reflect the actual number. However, no adjustment is made when a decrease is due to the fact that the share price does not achieve the required level for the vested options.

social security contributions relating to employee share options are recognised during the financial periods in which the services are rendered. provisions for social security contributions are based on the fair value of the options at the reporting date. The fair value is calculated using the same formula as when the options were issued.

provisionsa provision is recognised when the group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

Restructuringa provision for restructuring is recognised when the group has established and approved a formal restructuring plan, and the restructuring has either commenced or been publicly announced. no provision is made for future operating costs.

Onerus contracta provision for an onerous contract is recognised when unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.

non-current assets held for sale and discontinued operationsThe reason why a non-current asset (or disposal group) is classified as a held for sale is that its reported value will be recovered primarily through the sale and not through utilisation.

a discontinued operation is a part of a company’s operations that represents an independent business segment or a significant business operation within a geographical region, or is a subsidiary that has been acquired for the sole purpose of being resold. an operation is classified as discontinued with effect from the date of disposal, or earlier if it meets the criteria for classification as held for sale.

Contingent liabilitiesa contingent liability is recognised when a possible obligation arises from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events, or when there is an obligation which is not recognised as a liability or provision because it is not probable that an outflow of resources will be required to settle the obligation.

events after the reporting dateinformation will be provided concerning significant, non-adjusting events that have occurred after the reporting date, but prior to the point in time when the financial statements are signed. if significant events have occurred, information will be provided in the Directors’ report or in a separate note.

The parent Company’s accounting policiesThe parent Company’s annual financial statements have been prepared in accordance with the swedish annual accounts act (1995:1554) and the swedish Financial reporting Board’s recommendation rFr 2.1 accounting for Legal entities.

in addition, statements concerning listed companies issued by the swedish Financial reporting Board have been applied. rFr 2.1 requires the parent Company, as a legal entity, to prepare its annual financial statements in compliance with all the iFrs and iFriC interpretations endorsed by the eu



to the extent possible within the framework of the swedish annual accounts act and the swedish act on safeguarding of pension obligations, and taking into account the relationship between tax expense (income) and accounting profit. The recommendation also specifies exceptions and additions to the standards issued by the iasB and iFriC.

The accounting policies described below have been applied consistently to all periods presented in the parent Company’s financial statements.

Financial guaranteesThe parent Company’s financial guarantee agreement consists of sureties for the benefit of subsidiaries and joint ventures. Financial guarantees mean that a company undertakes to reimburse the owner of a debt instrument for losses this owner may have incurred due to the fact that a debtor has not performed under the contractual agreement. For the reporting of financial guarantee agreements the parent Company applies one of the exemptions from the regulations permitted by swedish Financial accounting standards Council as compared with the regulations in ias 39. This exemption concerns the financial guarantee agreement established for the benefit of subsidiaries, joint ventures and associates. The parent Company reports financial guarantee agreements as warranty provisions in the Balance sheet when the Company has an obligation and an outflow of resources will be required to settle the obligation.

Group contributions and shareholders contributionsHL Display recognises group contributions and shareholder contributions in accordance with statement uFr 2 issued by the swedish Financial reporting Board. shareholder contributions are recognised directly in the recipient’s equity and are capitalised in the issuer’s shares and participating interests to the extent that impairment is not required.

group contributions are reported in accordance with financial substance. This means group contributions aimed at minimising the group’s total tax are recognised directly in retained earnings, net of the current tax effect of the transaction. group contributions which are comparable with a dividend are recognised as a dividend. in this case, group contributions received and their current tax effect are recognised in the income statement, while group contributions paid and their current tax effect are recognised in retained earnings. group contributions which are comparable with a shareholder contribution are recognised directly in the recipient’s retained earnings, taking into account the current tax effect. The issuer reports the group contribution and its current tax effect as an investment in group companies to the extent that impairment is not required.

Leased assetsin the parent Company, all leases are classified and reported as operating leases.

Income tax expensesuntaxed reserves are recognised inclusive of deferred tax liability in the parent Company. in the consolidated financial statements, untaxed reserves are divided into deferred tax liability and equity.

noTe 2 FInanCIaL InsTrumenT anD managemenT oF FInanCIaL exposures

management of financial exposures Financial exposures HL Display is exposed to various types of financial exposures in its operations. Financial exposure occurs when changes in foreign exhange rates, changes in interest rate levels as well as refinancing and credit risks affect the group’s net income, cash flow and value. Financing and financial exposures are centrally managed, within the framework established and governed by the Board of Directors, by HL Display’s CFo and the Treasury function, acting in the separate legal entity HL Financial services aB. The overall objectives of HL Finanical services aB, acting as the in-house bank for the HL Display group, are to ensure costefficient financing of the group, manage interest rate and foreign exchange exposures, as well as ensuring an efficient cash mangement structure for the HL Display group. The treasury function identifies, evaluates and hedges financial exposures in close co-operation with the operating entities of HL Display. This is done according to the financial policy of the group, which is annually reviewed and approved by the Board of Directors of HL Display aB. The policy contains written principles covering overall risk management as well as specific areas, such as foreign exchange rate risk, interest rate risk, credit risk, financing risk, permitted financial instruments and investment of excess liquidity. HL Display uses derivatives to hedge portions of these exposures in accordance with the financial policy. HL Display aB applies hedge accounting for derivatives, when it is considered appropriate, in order to reduce volatility in net income and cash flows, caused by changes in foreign exchange rates and market interest rates.

Financing and financing riskFinancing risk is defined as the risk that financing of HL Display’s capital requirements or refinancing of outstanding debt may become difficult or expensive to arrange. The policy of HL Display is that non-current assets shall be financed by equity and medium- and long term debt. in order to ensure financing of the acquisition of ppe Limited as well as potential future acquisitions, a credit agreement of MseK 382 in total, was arranged in December 2009. The financing consists of a three year Term loan of MgBp 22 with annual repayments and interest payments and a three year revolving Credit-facility amounting to MseK 70, not utilised at the time of acquisition. in addition, previously uncommitted overdraft facilities were renegotiated into a 364-days committed overdraft of MseK 60, which was not utilised as per December 31 2009.

The financing agreement is preconditioned to certain financial covenants such as net debt to eBiTDa and equity to Total assets.

at the end of the period, the group has further commited facilities amounting to MseK 75 and aqcuired facilities amounting to MseK 37.

Bank credit facilities Credit nominal facility whereof KseK maturity Currency amount Dec 31 2009 unutilisedBank loan 2012 gBp 22,000 252,670 –Bank loan 2011 pLn 2,000 5,000 –Bank loan 2011 gBp 947 10,876 –Bank loan 2012 gBp 636 7,303 –overdraft facility 2010 seK 39,000 39,000 39,000overdraft facility 2010 eur 2,000 20,706 20,706overdraft facility 2010 pLn 800 2,000 2,000overdraft facility n.a. gBp 1,100 12,634 12,634overdraft facility n.a. gBp 1,500 17,228 17,228overdraft facility n.a. gBp 150 1,723 1,723”revolving” credit facility 2012 seK 70,000 70,000 70,000”revolving” credit facility n.a. usD 500 3,606 3,606”revolving” credit facility n.a. sgD 10,000 51,350 18,019other bankloans n.a. – – 554 –Total 494,095 184,915



ConT. noTe 2 FInanCIaL InsTrumenT anD managemenT oF FInanCIaL exposures

Interest-bearing liabilities Carrying nominal amount amount Dec. 31 KseK maturity Currency Interest rate currency 2009non-current interest-bearing liabilities to credit institutes: Long term bankdebt 2012 gBp 1.95% 17,700 203,284 Long term bankdebt 2011 pLn 4.90% 2,000 5,000 Long term bankdebt 2011 gBp 1.75% 947 10,876 Long term bankdebt 2012 gBp Fixed/6.50% 636 7,303 other non-current interest-bearing liabilities 1) varied gBp Floating 3,000 34,614Total non-current interest-bearing liabilities 261,077

1) additional purchase price ppe acquisition. Current interest-bearing liabilities Carrying nominal amount amount Dec. 31 KseK maturity Currency Interest rate currency 2009short term interest-bearing liabilities to credit institutes: Bank debt maturing within 12 months 2010 gBp 1.95% 4,300 49,386 Drawn amount revolving Credit 2010 sgD 1.30% 6,491 33,331 other current bank debt 2010 – 554 other current interest-bearing liabilities 2010 – 7,816Total current interest-bearing liabilities 91,087

Total interest-bearing liabilities 352,164

maturity of financial liabilities – undiscounted cash flows 2009 2008 KseK < 1 years 1-5 years > 5 years Total < 1 years 1-5 years > 5 years Totalinterest-bearing liabilities 91,087 261,077 – 352,164 38,559 61,780 – 100,339interest payments 6,300 8,208 – 14,508 3,520 3,979 – 7,499Derivatives – – – – 8,887 – – 8,887accounts payables 101,944 – – 101,944 78,614 – – 78,614Total 199,331 269,285 – 468,616 129,580 65,759 – 195,339

The table shows the future cash flows including interest payments at the closing exchange rate, related to financial liabilities. The variable interest rates, current at December 31, 2009, are expected to remain at the same levels until the loan’s maturity. Derivatives at 2009-12-31 constituted a net receivable amounting to KseK 3,527 maturing within 1 year. Interest rate risk interest rate risk is defined as the risk that the value and/or cashflow related to financial instruments varies due to fluctuations in market interest rates. at the end of the financial year, December 31, 2009, the interest-bearing liabilities in the group amounted to KseK 352,164 (100,339), of which long-term KseK 261,077 (61,780). interest rate fixing on third party debt is variable – as per December 31 2009 – 3 months floating. The composition of the duration on debt and related derivatives should be a balance between floating interest rates in order to reduce interest expense over time and fixed interest rates to increase the stability of interest expense. The balance is dependent on the yield curve and on HL Display’s ability to manage negative interest rate scenarios.

a three-month floating interest rate has been chosen considering the above mentioned factors and a good availability of cash, which results in a high degree of self-financing and a relatively low interest rate risk. as per December 31 2009, the equity to assets ratio was 44 percent and interest-bearing net debt was KseK 138,737 (net liquidity 120,434).

weigthed average interest rate on long term interest-bearing debt was 2,27 percent as per December 31 2009 and 1,30 percent on short term debt. an overall change in interest rates on borrowings and financial investments by one percentage point would effect interest income expense by approximately KseK 1,400. at the end of the financial year, December 31, 2009, HL Display had no outstanding interest rate derivatives. Credit and Counterparty risk Financial Credit risk Credit risk may arise when the group invests liquid funds, and in terms of counterparty risk when the group enters into contracts for financial instruments provided by banks. The financial policy of HL Display stipulates

permitted counterparties for which maximum credit exposure as well as the lowest permitted creditrating is defined. The objective of HL Display is to transact with banks that have a high long term creditrating, minimum “a” by the creditrating institutes standard & poor’s/Moody’s, and are participating in the financing of the group. The group’s liquid funds are managed centrally within the treasury function and are invested in short-term bank deposits. as per the balance sheet date, liquid assets of HL Display amounted to KseK 213,427 isDa’s (international swaps and Derivatives association) Master agreement is used to settle counterparty risk regarding derivative transactions. Credit risk related to customer receivables Credit risk also arises when there is a risk of customers not fulfilling their payment commitments to the group. HL Display’s bad debt losses have historicaly been very low. The majority of the customers are large, well established companies that are financially sound and widely spread in several geographical markets. no customer accounts for more than 5 percent of the group’s total turnover. HL Display manages the risk of bad debts by well defined routines for credit control, debt collection and invoicing interest on overdue receivables. as per December 31 2009, there was no significant concentration of credit risk. The maximum exposure is apparent from the carrying value of outstanding accounts receivable. The provision for bad debts was KseK 8,758 (8,327). see note 25 ”Trade receivables”. Based on historical data, the group assesses that no impairment of trade receivables that are not yet overdue is necessary by the end of the reporting period. no significant customer credits have been renegotiated. in some markets and for customers with low credit ratings or insufficient credit history a prepayment policy is applied to reduce counterparty risk. Credit insurance is not used since it has not been found justified.



Liquidity risk Liquidity risk is defined as the risk of HL Display not being able to fulfill its obligation to repay its liabliaities in time or at a reasonable cost. The Treasury function is responsible for managing this risk. in order to reduce the liquidity risk, HL Display aim to have an available ”liquidity reserve” correspond-ing to at least 10 percent of the turnover of the group. ”Liquidity reserve” is in this context defined as cash and bank, financial investments which may be converted to cash within two banking days, as well as unutilized credit facilities. The policy of HL Display is to invest in highly liquidy instruments and bank deposits. By pooling seK, eur and gBp on a group level and daily reporting of bank balances from the major group companies worldwide, HL Financial services has good control of the total liquidity in the group. The credit rating institute soliditet has rated the parent company’s creditworthiness as aaa. as per December 31 2009, liquid assets amounted to KseK 213,427 (220,773), which corresponds to 16 percent of net turnover. in addition, HL Display had KseK 184,915 of unutilised credit facilities. HL Display has ensured long term financing until 2012.

Foreign exchange exposure HL Display is exposed to fluctuations in the foreign exchange rates related to its international operations and structure. exposures arise both in cash flows in various currencies, ”transaction exposure”, as well as in translation of net income and net assets of foreign group companies into seK, ”translation exposure”. The overall objective of HL Display´s management of foreign exchange exposures is to reduce volatility derived from fluctuations in foreign exchange rates, in income statement and balance sheet, as well as protecting the value of future cash flows in foreign currencies.

Transaction exposure Transaction exposure arises in terms of cash flows from purchases and sales in foreign currencies. The overall objective of HL Display´s management of transaction exposures is to reduce volatility in income statement and to protect the value of future cash flows. in order to concentrate transaction exposure to as few entities as possible, sales companies are invoiced in their respective local currencies. Third party distributors are invoiced in seK. approximately 87 percent of the turnover of HL Display take place in countries other than sweden. The most important inflows are in eur, gBp, ruB, noK and sgD. production is primarily located in sweden but also in the uK and China.

The financial policy of HL Display stipulates the following hedge levels for transaction exposure: Hedge as per Hedge level December policy as a 31 2009 average net exposure percentage (percentage)Forecasted net exposure 1-6 months 70-100 70Forecasted net exposure 7-12 months 30-70 50 Forward contracts with the purpose of hedging forecasted net cash flows in foreign currency are classified as cash flow hedges. in line with HL Display’s financial policy forecasted net cash flows in eur, gBp and sgD were hedged at December 31 2009. The market value of outstanding hedges of transaction exposures amounted to KseK 3,527 (-8,887) as per December 31 2009. These hedges are expected to be realised within the coming 12 months. The change in market value during the financial year of KseK 12,414, is recorded in other comprehensive income. Hedge accounting is applied and have been efficient during 2009. Foreign exchange differences related to currency hedges of KseK -4,021 have been recorded in operating profit/loss under net sales.

outstanding cash flow hedges, average contracted rated and fair value as per December 31 2009 Currencyhedge vs. nom. amount Contracted positive negativeseK (thousands loc. curr.) forward rate value valueeur -6,505 10.60 2,788 -490 gBp -2,360 11.89 1,147 -52 sgD -2,439 5.16 281 -148 The group’s transaction exposure is divided among the following currencies: 12 months net exposure vs. seK in KseK value 2009 2008eur 80,435 130,210gBp 53,599 44,975noK 44,260 44,737ruB 33,333 51,080sgD 18,652 23,961 Translation exposure Fluctuations in foreign exchange rates affect the income statement and balance sheet of the HL Display group as net investments and financial statements of foreign group companies are consolidated into the functional currency (seK) – translation exposure.

Currency impact related to translation exposure is recorded in recognised in other comprehensive income and in 2009 the amount was negative KseK 14,998 (positive 22,385). The consolidated net income is normally not hedged. equity in foreign currencies may be hedged, when deemed appropriate according to individual assessment, by raising long term financing in currencies representing significant net assets. as per December 31 2009, net investment in gBp was 95 percent hedged by arranging long term financing in gBp. Hedge accounting is applied for hedging of net investment.

Foreign net investments of the group are primarily distributed in the following currencies: Hedged by long KseK net investments term financingCurrency 2009 2008 2009 2008gBp 284,116 22,630 270,851 –eur 120,344 183,345 – 54,678 noK 18,440 12,260 – –sgD 9,592 -1,570 – –ruB 9,051 8,984 – –

Exposure in Display’s net income a change in the eur rate vs. seK by 10 öre, would, in the current structure, have an impact of KseK 2,005 on HL Display’s net income. in the short term the impact related to foreign exchange movements are reduced by hedges.

Valuation principles etc. Financial instruments in the categories receivables and other financial lia-bilities have been valued at acquisition cost.There is no indication that the reported value differs substantially from the fair value in the group or in the parent company since the loans have a variable interest-rate fixing and was taken as late as December 17 2009. Forward contracts with the purpose of hedging the transaction exposure of the group, are valued at fair value through discounting of the difference between the agreed forward ratio and the ratio that could be received at the end of the reporting period for the remainder of the contract period. The discounting is made at risk-free interest based on government bonds.

The table below presents valuation techniques used to assess fair value on financial instruments reported at fair value on Dec 31 Instruments with published valuation techniques based on valuation techniques based on price quotations in an active market observable quoted prices unobservable prices KseK Level 1 Level 2 Level 3 TotalAssets Forward contracts – -6,460 – -6,460Liabilities Forward contracts – 113,436 – 113,436 see note 1 for further information on valuation and classifications techniques.



The group engages in business in the following regions: – nordic, Baltic & uK – operations in sweden, norway, Denmark, Finland,

iceland, Latvia, estonia, Lithuania, uK, ireland – Middle europe – operations in austria, switzerland, germany, poland,

slovenia, serbia – southern europe – operations in France, spain, Belgium, netherlands,

portugal, italy, greece, Malta – Central/eastern europe – operations in russia, ukraine, Hungary,

Czech republic, slovakia, romania, Bulgaria, Turkey, Kazakhstan, israel– asia/australia – operations in China, Hong Kong, india, indonesia,

Korea, Malaysia, singapore, Thailand, Taiwan, australia/new Zealand– other sales

noTe 3 DIsTrIBuTIon oF InCome Income per each significant type of income group parent CompanyKseK 2009 2008 2009 2008Net Sales product sales 1,337,942 1,500,878 – –installations and other services 22,474 34,761 77,834 101,254Total sales 1,360,416 1,535,639 77,834 101,254 of the parent company’s net sales, KseK 77,824 (100,958) relates to consultancy services sold to group companies.

noTe 4 segmenT reporTIng The group’s operations are divided into operating segments based on the components of the business that the chief operating decision maker reviews. This is referred to as the management approach.

The group’s business is organised in such a way as to allow group management to monitor and review the results, return and cash flows generated by the group’s geographical regions. each region has a manager who is responsible for day-to-day operations and maintaining regular contact with group management with regard to the operating segment’s performance and its resource requirements. as group management reviews the results and performance, and decides on resource allocation on the basis of the regions in which the group engages in business, these represent the group’s operating segments. operating segments group nordic, Baltic & uK middle europe southern europeKseK 2009 2008 2009 2008 2009 2008external net sales 399,736 469,877 219,719 227,831 408,690 443,950 The segment’s operating profit 57,941 55,913 28,627 25,684 39,448 41,313adjustment to legal result net financial items profit before tax Central/eastern europe asia/australia other sales groupKseK 2009 2008 2009 2008 2009 2008 2009 2008external net sales 188,812 237,716 133,861 131,034 9,598 25,231 1,360,416 1,535,639 The segment’s operating profit 19,093 32,680 9,577 2,067 – – 154,686 157,657adjustment to legal result -68,471 -27,399net financial items -2,072 5,899profit before tax 84,143 136,157

The operating segments’ operating profit includes directly attributable items and items that can be allocated to segments in a reasonable and reliable way. operating profits per segment are monitored and reviewed based on calculated costs while the group report according to iFrs. The difference between calculated cost and actual results under iFrs is referred to as adjustment to legal result. sales between segments are negible.

internal prices for transactions between the group’s operating segments are defined on arms’ length terms, i.e. between independent, knowledgeable and willing parties.

The group’s total sales are attributable to one product group, namely in-store communication and merchandising products. The group does not have one individual customer accounting for 10 percent or more of sales.

geographical areas group external income non-current assetsKseK 2009 2008 2009 2008France 275,357 279,347 6,119 7,655sweden 180,868 246,120 101,480 99,815norway 110,983 121,309 41 57uK 99,928 110,562 4,240 7,002russia 79,277 114,313 139 199other countries 614,003 663,988 355,062 65,975Total 1,360,416 1,535,639 467,081 180,703

revenue from external customers has been allocated to individual countries based on the country where the customer is located.



noTe 5 aCQuIsITIons

on 21 December 2009, the group acquired 100 percent of the shares in ppe Ltd for a cash purchase consideration of MgBp 28.1 (MseK 323), with a potential MgBp 5.0 (MseK 57) earn-out payment. The acquisition strengthens HL Display in the important brand manufacturers segments by means of access to expertise in customised merchandising solutions. HL Display also gains capacity in multi-material production, in other words production of products with parts made of materials such as plastic, metal and wood. The company is consolidated with effect from 31 December 2009. For 11 months of 2009 (abbreviated financial year), ppe reported net sales of MseK 304 and eBiTa of MseK 31, after adjustment to comparable principles.

During the year, 50 percent of the shares in HL China were acquired for MseK 4 in cash, increasing the ownership share to 100 percent.

aggregate fair value of acquired assets and liabilities* Carrying Carrying Fair value amount in KseK amount adjustments groupAcquired assets and liabilities intangible assets 14,976 -9,211 5,765property, plant & equipment 97,953 -1,068 96,885Financial assets 965 – 965inventories 29,645 -1,413 28,232operating receivables 50,777 – 50,777Cash & cash equivalents 7,534 – 7,534Total assets 201,850 -11,692 190,158 non-current provisions non-current interest-bearing liabilities 18,181 – 18,181other non-current liabilities 2,136 – 2,136Current interest-bearing liabilities 7,741 – 7,741Current operating liabilities 49,620 – 49,620Total provisions and liabilities 77,678 – 77,678net identifiable assets and liabilities 124,172 -11,692 112,480non-controlling interest 3,624 goodwill 199,334Contingent consideration -57,425purchase consideration, cash ** 258,013Less: Cash & cash equivalents in acquired operation 7,534net effect on cash 265,547

*reported values are preliminary. The acquisition was completed December 21, 2009 and it has not been possible to definitively determine all values.** including acquisition costs about MseK 11. goodwill consists primarily of knowledge about the segment brand manufacturers and expertise in customized merchandising solutions. intangible assets relates to acquired brand with an estimated useful life of four years.

noTe 6 oTHer operaTIng InCome

group parent CompanyKseK 2009 2008 2009 2008exchange rate gains on receivables/liabilities of an operative nature 3,882 3,153 royalty income 1,131 428 1,131 428rental income 2,065 1,053 2,065 1,053Capital gain on sale of non-current assets 2,254 241 – –government grants – 72 – 72other 1,874 935 – –Total 11,206 5,882 3,196 1,553

noTe 7 oTHer operaTIng expenses group parent CompanyKseK 2009 2008 2009 2008exchange rate losses on receivables/liabilities of an operative nature -3,243 -6,848 -666 –impairments/disposals non-current assets -4,362 -227 – –provision for dispute -4,500 – – –other -4,462 -2,251 –Total -16,567 -9,326 -666 –

noTe 8 empLoyees, personneL expenses anD remuneraTIon To senIor exeCuTIves expenses for employee benefits group KseK 2009 2008salaries and remuneration etc. 304,276 321,911pension costs defined benefit plans see note 32 1,351 2,035pension costs defined contribution plans 1) 16,697 15,379other social security contributions 70,601 77,622Total 392,925 416,947

1) including premiums to alecta.

average number of which of whichof employees 2009 men 2008 menParent Company sweden 55 64% 45 67%Total for parent Company 55 64% 45 67% subsidiaries nordic region 362 71% 391 67%western europe 218 54% 237 54%eastern europe 130 47% 143 47%asia/australia 140 58% 158 61%north america – n/a 9 78%Total in subsidiaries 851 61% 938 61%group total 906 61% 983 62%

2009 2008 proportion proportiongender distribution in the executive management of women of womenParent Company The Board 22% 13%senior management 17% 14%Group total The Board 29% 13%senior management 24% 15% salaries, other remuneration and social security expenses

2009 2008 salaries and social salaries and socialKseK remuneration security exp remuneration security expParent Company 1) 33,932 12,578 38,403 13,215 (of which pension cost) 4,817 5,080Subsidiaries 270,344 76,071 283,508 81,821(of which pension cost) 13,231 12,334 Group total 2) 304,276 88,649 321,911 95,036 (of which pension cost) 18,048 17,414

1) of the parent company’s pension costs KseK 2,335 (2,292) relates to senior executives. The company’s outstanding pension commitments to these people amount to – (–). 2) of the group’s pension costs, KseK 5,206 (3,531) relates to senior executives. The company’s outstanding pension commitments to these people amount to KseK 59 (62).



ConT. noTe 8 empLoyees, personneL expenses anD remuneraTIon To senIor exeCuTIves

salaries and other remuneration per country and senior executives etc and other employees 2009 2008 senior senior executives other executives otherKseK etc employees etc employeesParent Company sweden 13,998 19,934 18,285 20,118(of which bonus, etc) 1,706 173 1,895 1,058parent Company total 13,998 19,934 18,285 20,118(of which bonus, etc) 1,706 173 1,895 1,058

social security expenses 4,750 7,828 6,292 6,923 Subsidiaries nordic region 7,675 125,796 7,813 137,091(of which bonus, etc) 416 1,660 500 3,308western europe 12,563 75,016 8,471 75,350(of which bonus, etc) 810 4,173 173 5,214eastern europe 7,907 21,446 5,826 25,726(of which bonus, etc) 541 2,008 938 2,360asia/australia 5,583 14,360 2,688 17,074(of which bonus, etc) 20 2,314 – 2,578north america – – 416 3,054(of which bonus, etc) – – 37 214 subsidiaries, total 33,728 236,617 25,214 258,295(of which bonus, etc) 1,787 10,155 1,648 13,674group total 47,726 256,551 43,499 278,413(of which bonus, etc) 3,493 10,328 3,543 14,732

For information on employee benefits after the end of employment, see note 32 post-employment benefits.

senior executives comprise the Board (7 people excl Ceo), the group management team (7 people), area Managers (6 people), and chief executives in the group companies (34 people).

Total absence through illness as a percentage of normal working hours

parent Company 2009 2008Men 0.9% 0.9%women 3.8% 2.6% age -29 3.5% 2.3%age 30-49 2.1% 1.4%age 50- 0.4% 2.1% Long-term absentees 2.0% 0.9%Total 2.0% 1.6% share-based benefits HL Display aB has through a wholly owned subsidiary, HL Financial services aB, 2007 and 2009 issued debentures with detachable warrants sold on senior executives within the group. The purpose of offering warrants is to promote long-term commitment to the company and to encourage senior executives to become future shareholders in the company. The term of the warrants is approximately three years, which the Board wishes to be acknowledged as an aim to gain warrant holders’ long-term commitment to the company’s future. The options have been issued on commercial terms, defined in accordance with the Black & scholes model, and the purchase price was paid in cash. The purchase price was subsidized at 50 percent (for the warrants issued 2007) and 40 percent (for the warrants issued 2009) over three years. as allocations have been carried out according to market conditions and no benefit has been gained from these programmes on the balance sheet date, no accounting consequences according to iFrs 2 have arisen.

There was also an employee stock options programme issued in 2006 and aimed at the Ceo as part of his remuneration agreement when entering upon office. This programme is reported in accordance with iFrs 2.

option schemes, number of options and subscription prices number of proportion of number of employee share capital if proportion of votes subscription year of implementation warrants stock options fully subscribed if fully subscribed price exercise period2006 287,252 0.97% 0.47% 39.25 1) 2009-03-31 - 2011-03-312007 2) 256,000 – 0.83% 0.40% 56.50 2010-03-01 - 2010-04-302009a 3) 325,000 – 1.05% 0.50% 33.95 2012-02-01 - 2012-03-312009B 3) 325,000 1.05% 0.50% 50.69 2012-02-01 - 2012-03-31Total 906,000 287,252 3.90% 1.87%

1) Corrected for share split (4:1) 2008-04-28. 2) at the end of the reporting period 196,000 warrants had been acquired by employees. 3) at the end of the reporting period, all warrants in scheme 2009a had been acquired by employees but none from 2009B.

option schemes per employment category schemes from this year schemes from previous years warrants employee stock options warrants 2009/2012 acquisition 2006/2011 2007/2010 acquisition KseK Quantity price Quantity Quantity priceThe Ceo, gérard Dubuy 162,500 2.39 287,252 80,000 8.25 other senior executives 162,500 2.39 – 36,000 8.25Total 325,000 287,252 116,000

remuneration to senior executivesPrinciplesThe Chairman of the Board and Board members are paid a fee in accordance with the decision of the annual meeting of shareholders. employees’ representatives and persons operative in the company do not receive a Board fee. remuneration to the Ceo and other senior executives consists of a basic salary, variable compensation (bonus), pension and company car. remuneration to the Ceo also includes an employee stock options scheme as well as a partly subsidised warrant scheme. The other senior executives are the six people who, together with the Ceo, have constituted group management. For the composition of group management, see page 77.

severance payment There is a mutual period of notice of 6 months in force between HL Display and the Ceo. if the company cancels the Ceo’s employment contract, severance pay to the equivalent of 24 monthly salaries will be paid. There is a mutual period of notice of 3-12 months in force between the company and other senior executives in the group.

Loans to senior executives There are no loans to senior executives.



remuneration and other benefits to senior executives, parent company 2009 Basic salary/ Flexible other pension FinancialKseK Board fee benefits benefits expense instruments TotalThe Chairman of the Board, anders remius 250 250 susanna Campbell 150 150stig Karlsson 165 165Mats-olof Ljungkvist 195 195Åke Modig 165 165anna ragén 150 150Lars-Åke rydh 165 165The Ceo, gérard Dubuy 3,805 494 511 466 107 5,383other senior executives (6 people) 8,080 777 649 1,729 11,235Total (14 people) 13,125 1,271 1,160 2,195 107 17,858

remuneration and other benefits to senior executives, parent company 2008 Basic salary/ Flexible other pension FinancialKseK Board fee benefits benefits expense instruments TotalThe Chairman of the Board, anders remius 250 250Jan-ove Hallgren 150 150stig Karlsson 175 175Mats-olof Ljungkvist 190 190Åke Modig 150 150anna ragén 150 150Lars-Åke rydh 150 150The Ceo, gérard Dubuy 3,282 676 83 328 294 4,663Former deputy Ceo, Kent Hertzell 1) 4,539 94 190 1,133 5,956other senior executives (5 people) 5,971 280 315 1,324 7,890Total (14 people) 15,007 1,050 588 2,785 294 19,724

1) including severance payment.

Comments on the tables The reported values relates to expensed remuneration. other benefits include company car, allowances and subsidy of warrants. The Ceo, the deputy Ceo and other senior executives have defined contribution pension plans. The Ceo has previously had a defined benefit pension plan. The retirement age for all senior executives is 65. The pension expense relates to the expense that affected the profit/loss for the year. For further information about pensions, see note 32. The Chairman of the Board has not received any remuneration other than the Board fee.

preparation and decision-making processremuneration to the Ceo for the financial year 2009 was decided by the Board after being prepared by the remuneration commmittee. remuneration to other senior executives has been decided by the Ceo in consultation with the remuneration commmittee. The remuneration commmittee has developed principles for decision on salary and other remuneration to senior executives in the group later adopted by the agM as described below. For information about the composition of the remuneration commmittee, see page 73.

guidelines for remuneration to senior executivesAt the Annual General Meeting 2009-04-02 the following guidelines were decided (main contents).an important part of HL Display’s strategy is to attract and retain key employees. The remuneration offered to holders of senior positions in the company forms a vital component of this strategy.

it is the Board’s perception that a fixed salary, combined with flexible, performance- related remuneration, is an effective means of attracting employees and guiding performance towards the objectives that the Board has defined for the company. By also offering long-term co-ownership in the company, the Board wishes to promote long-term commitment that makes it easier for the company to retain its key employees.

The three components of fixed salary, flexible performance-related remuneration and co-ownership shall be viewed as a whole, although the three elements are defined on the basis of different principles.– The fixed salary shall reflect the employee’s area of responsibility and the

complexity of the position. – The flexible performance-related remuneration shall always be linked to

measurable targets. For 2009 the Ceo will be able to achieve a maximum of 50 percent of the fixed annual salary. For other senior executives the maximum is 25 percent of the fixed annual salary.

– Long-term co-ownership for employees aims to encourage employees to share the vision of the company’s owners. it is therefore an important principle of such a scheme that there is an opportunity to share in the increased value of the company’s shares, while also involving a personal risk for those who are participating. another important principle is that the transaction values defined in such schemes are produced objectively using generally accepted methods. The long term incentive programs to acquire warrants were approved by the shareholders at the general meeting 2007.

The acquired warrants are subsidized and 50 percent of the premium will be paid back in equal installments during a three year period after a deduction of 58 percent for standard tax.

Proposal to the Annual General Meeting 2010-04-22 (main contents).an important part of HL Display’s strategy is to attract and retain key employees. The remuneration offered to holders of senior positions in the company forms a vital component of this strategy.

it is the Board’s perception that a fixed salary, combined with flexible, performance- related remuneration, is an effective means of attracting employees and guiding performance towards the objectives that the Board has defined for the company. By also offering long-term co-ownership in the company, the Board wishes to promote long-term commitment that makes it easier for the company to retain its key employees.




– Long-term co-ownership for employees aims to encourage employees to share the vision of the company’s owners. it is therefore an important principle of such a scheme that there is an opportunity to share in the increased value of the company’s shares, while also involving a personal risk for those who are participating. another important principle is that the transaction values defined in such schemes are produced objectively using generally accepted methods. The long term incentive programs to acquire warrants were approved by the shareholders at the general meeting 2007 and 2009. The acquired warrants are subsidized and 50 percent of the premium (2007 program) or 40 percent of the premium (2009 program) will be paid back in equal installments during a three year period after a deduction of 58 percent for standard tax.

The Board is entitled to make exceptions from the guidelines considering special circumstances.



noTe 9 Lease agreemenTs Lease agreements in which the company is the lesseeLease payments that cannot be terminated amounts to: Lease of machinery and equipment operating leases group parent CompanyKseK 2009 2008 2009 2008Lease payments 11,702 17,968 2,621 6,615 Minimum lease payments Fall due for payment: within one year 15,067 16,262 2,175 5,490Between one year and five years 13,828 19,331 1,756 4,433Later than five years 750 870 – –Total 29,645 36,463 3,931 9,923 Lease of properties and premises operating leases group parent CompanyKseK 2009 2008 2009 2008Lease payments 34,662 38,728 1,454 1,263 Minimum lease payments Fall due for payment: within one year 33,413 34,824 2,255 813Between one year and five years 59,078 75,349 4,510 4,510Later than five years 46,969 52,395 – –Total 139,460 162,568 6,765 5,323 all leasing agreements in the group are classified as operational.

noTe 10 CosT oF operaTIons per Type oF CosT groupKseK 2009 2008Cost of goods/services sold -693,151 -776,269non-production staff costs -291,439 -305,184Cost of premises -31,020 -36,641Communication costs -14,386 -15,574Depreciation -35,580 -36,123other operating expenses -219,831 -241,472Total -1,285,407 -1,411,263

noTe 11 FInanCIaL InCome

group KseK 2009 2008interest income 1) 2,445 5,173 net exchange rate changes – 7,244other financial income 372 377Financial income 2,817 12,794 1) interest income is largely attributable to bank deposits. parent Company profit/loss from participations in group companiesKseK 2009 2008Dividends 100,500 158,644impairment losses – -5,244Total 100,500 153,400 parent Company profit/loss from other securities and receivables Interest income that are non-current assets and similar profit itemsKseK 2009 2008 2009 2008interest income, group companies 6,440 6,479 – –interest income, others 144 431 335 58net exchange rate changes – 972 – –Total 6,584 7,882 335 58

noTe 12 FInanCIaL expenses

group KseK 2009 2008interest expenses 1) -3,241 -6,277 net exchange rate loss -669 – other financial expenses -979 -618Financial expenses -4,889 -6,895 1) interest expenses are largely attributable to bank loans valued at amortised cost. parent Company Interest expenses and similar profit itemsKseK 2009 2008 interest expenses, group companies -241 -227 interest expenses, others -566 -20net exchange rate changes 39 –Total -768 -247

noTe 13 approprIaTIons To unTaxeD reserves

parent Company KseK 2009 2008Computer systems, excess depreciation 1,070 – property, plant and equipment, excess depreciation -646 -898Tax allocation reserve, provision -3,120 -18,407Tax allocation reserve, reversal – 6,919Total -2,696 -12,386



noTe 14 Taxes group parent CompanyKseK 2009 2008 2009 2008Current tax expense Current income tax for the year -24,888 -38,249 -8,075 -17,845Current income-tax related to previous years -831 -1,808 -1,605 -1,670Total -25,719 -40,057 -9,680 -19,515 Deferred tax cost (-)/tax income (+) Deferred tax relating to temporary differences -395 1,680 – – Deferred tax income relating to tax loss carryforwards recognised during the year 1,752 878 2,097 – Deferred tax expense relating to the use of tax loss carryforwards recognised in prior years -1,573 -2,341 – – Total -216 217 2,097 –

Total tax expense in the income statement -25,935 -39,840 -7,583 -19,515

Tax expense/income taken directly to equity Current tax relating to expense/income taken directly to equity (group contributions) – – 3,984 1,135

reconciliation between profit/loss before taxes and tax expense group parent CompanyKseK 2009 2008 2009 2008profit/loss before taxes 84,143 136,157 71,315 111,637Tax according to swedish tax rate, 26.3% (28%) -22,130 -38,124 -18,756 -31,258adjustment for other tax rates outside sweden 773 2,179 – –

adjustment of previous years’ current tax -831 -1,808 -1,605 -1,670Tax effect of reassessment of tax loss carryforwards due to changed estimates, tax rates and exchange rates 1,111 1,470 2,097 – Tax effect of deficits for which tax assets were not taken into account -1,389 -1,367 – –

Tax effect of non-taxable dividends – – 12,265 15,215withholding tax on dividends from subsidiaries -1,077 -1,248 -1,077 – Tax effect of impairment loss of shares in subsidiaries – – – -1,468Tax effect of other non-taxable or non-deductible items -2,392 -942 -507 -334Current tax expense -25,935 -39,840 -7,583 -19,515 Tax attributable to comprehensive incomegroup 2009 2008 Before after Before after KseK tax Tax tax tax Tax taxTranslation differences for the year from translation of foreign operations -16,551 1,553 -14,998 22,385 – 22,385Cash flow hedges 10,558 928 11,486 -9,467 – -9,467other comprehensive income -5,993 2,481 -3,512 12,918 – 12,918

group Changes in deferred tax 2009 2008opening balance -7,825 -8,042This year’s acquisitions 873 – posted in equity -1,216 – posted in the income statement -216 217Closing balance -8,384 -7,825



ConT. noTe 14 Taxes The deferred tax assets and liabilities in the balance sheet relates to the following:

group group parent CompanyDeferred tax assets and liabilities 2009 2009 2008 2008 2009 2008 KseK receivables Liabilities receivables Liabilities receivables receivablesintangible assets – – – – – –Tangible assets 360 9,083 378 9,868 – –inventory 6,108 – 7,473 – – –Current receivables 610 – 463 – – –operating liabilities 2,819 – 2,367 – – –pensions 749 75 1,519 – – –Tax losses carry forward 5,242 – 2,966 – 2,097 –other items 186 15,300 301 13,424 – –Deferred tax receivable/liability 16,074 24,458 15,467 23,292 2,097 –netting -503 -503 -1,266 -1,266 – –Tax receivable/liability 15,571 23,955 14,201 22,026 2,097 – other items consist primarily of tax deductions (tax allocation and the like) that are not attributable to a particular balance sheet item. in the group deferred tax assets totalling KseK 1,827 (1,907) have been reported, relating to tax loss carryforwards in companies that have reported losses in the last two financial years. These are companies where group contributions and other tax-balancing measures can be used, as well as newly started companies where growth in revenue is prioritised ahead of profitability during a market development phase.

in the group deferred tax assets of KseK 13,963 (29,778) were not recognised for tax loss carryforwards. There are no time restrictions or legal obstacles to the potential utilisation of these tax loss carryforwards. no recognised tax loss carryforward have a limited asset-right.

noTe 15 earnIngs per sHare Before dilution after dilutionseK 2009 2008 2009 2008earnings per share 1.88 3.11 1.88 3.11

The calculation of the numerators and denominators used in the above calculations is specified below.

earnings per share before dilution Calculation of the earnings per share for 2009 was based on the profit for the year attributable to the parent company’s shareholders, totalling KseK 58,208 (96,254) and a weighted average number of outstanding shares in 2009, totalling 30,939,088 (30,939,088).

earnings per share after dilution Calculation of the earnings per share after dilution for 2009 was based on the profit for the year attributable to the parent company’s shareholders, totalling KseK 58,208 (96,254) and a weighted average number of outstanding shares in 2009, totalling 30,939,088 (30,939,088). weighted average number of outstanding shares has been calculated as follows:

weighted average number of outstanding shares, after dilution 2009 2008weighted average number of shares during the year, before dilution 30,939,088 30,939,088effect of issued warrants – –weighted average number of shares during the year, after dilution 30,939,088 30,939,088 Instruments that can have a potential dilution effect and changes after the year-end in 2009 the company had an outstanding warrant scheme, the subscriptionprice of which (56.50 and seK 33.95 per share) exceeded the average price of the shares (seK 29.38 per share). These warrants are therefore not considered to have a dilution effect and have been excluded from the calculation of the profit/loss per share after dilution. The employee option scheme also lacked dilution effect in 2009 and 2008. if, in future, the stock exchange price of outstanding shares in HL Display rises to a level above the subscription prices, these warrants will cause dilution.

noTe 16 parTICIpaTIons In JoInT venTures

group The group has 50 percent holdings in the joint venture companies HL Trion aB and Trion HL LLC, whose primary operations involve production in the field of wire-bending and extrusion respectively.

The group’s share of average number of employees in HL Trion aB was 6, and in Trion HL LLC 0.

The group’s financial statements include the items below, which constitute the group’s ownership of the joint venture companies’ assets, liabilities, income and expenses. KseK 2009 2008net sales 14,493 22,858expenses -17,185 -26,970profit/loss before taxes -2,693 -4,112 non-current assets 814 6,891Current assets 1,121 6,188Total assets 1,935 13,079 Current liabilities 2,992 7,379non-current liabilities 210 1,659Total liabilities 3,202 9,038net assets/net liabilities -1,267 4,041

noTe 17 InvesTmenT CommITmenTs in 2009 the group entered into agreements to acquire non-current assets to the order of KseK 14,221 (8,014). it is expected that these commitments will be settled during the following financial year.

There are no committed investments in the parent company.



noTe 18 InTangIBLe asseTs Accumulated acquisition cost group parent Company Computer systems acquired Computer systems KseK developed in-house market assets goodwill Total developed in-houseopening balance 1 January 2008 28,609 767 23,411 52,787 12,169other investments 412 – 4,287 4,699 274acquisitions – 274 – 274 –sales and disposals -429 47 – -382 –exchange rate differences for the year 1,173 186 6,097 7,456 –Closing balance 31 December 2008 29,765 1,274 33,795 64,834 12,443

opening balance 1 January 2009 29,765 1,274 33,795 64,834 12,443other investments 1,240 – – 1,240 –acquisitions – 5,767 199,475 205,242 986sales and disposals -480 – – -480 -374reclassification -11 2168 – 2,157 –exchange rate differences for the year -541 -105 -2,269 -2,915 –Closing balance 31 December 2009 29,973 9,104 231,001 270,078 13,055

Accumulated amortisation and impairment losses opening balance 1 January 2008 -17,058 -380 – -17,438 -2,143sales and disposals 429 – – 429 –Depreciation for the year -3,312 -49 – -3,361 -2,738exchange rate differences for the year -974 -184 -525 -1,683 –Closing balance 31 December 2008 -20,915 -613 -525 -22,053 -4,881

opening balance 1 January 2009 -20,915 -613 -525 -22,053 -4,881reclassification -83 -1,529 – -1,612 –sales and disposals 385 – – 385 374Depreciation for the year -3,662 -381 – -4,043 -3,011exchange rate differences for the year 475 104 278 857 –Closing balance 31 December 2009 -23,800 -2,419 -247 -26,466 -7,518

Carrying amounts 1 Januari 2008 11,551 387 23,411 35,349 10,02631 December 2008 8,850 661 33,270 42,781 7,562

1 Januari 2009 8,850 661 33,270 42,781 7,56231 December 2009 6,173 6,685 230,754 243,612 5,537

Amortisation is included in the following items in the income statement: group parent Company KseK 2009 2008 2009 2008selling expenses -2,767 -2,303 -1,990 -1,808administrative expenses -1,261 -1,050 -1,003 -911research and development expenses -11 -9 -20 -18Total -4,039 -3,362 -3,013 -2,737

Intangible assetsComputer systems are defined as systems that lead to improved products or processes. in accordance with ias 38 expenses for these are activated. a useful life of four years is applied. acquired market assets include brands and value of customer relations. a useful life of four to five years is applied. The result of impairment testing shows that there are no significant value declines in intangible assets, hence, no impairment loss have been implemented. Impairment tests of goodwill goodwill has an indefinite useful life. Carrying value of goodwill totals MseK 231. This includes MseK 199 that relates to the acquisition of ppe Ltd in great Britain that was carried out in December 21 and is consolidated from December 31 2009, why no impairment is assessed. The reported good-will value for Display Team oy, MseK 23, has been tested for impairment based on the group’s cash-flows related to the acquired product groups. The remainder of the reported goodwill value has been impairment tested by the end of the reporting period based on cash flows from the acquired companies and the recoverable amounts were in excess of the carrying amounts.

research and developmentexpenses for production, material and product development up until a decision is taken to finally develop the product are reported as expenses for research and development in the income statement. when a development decision has been made, expenses are activated in accordance with ias 38 intangible assets. as product development activities after this point almost exclusively consist of constructing the necessary production equipment to manufacture the product, expenses are then activated as tangible fixed assets.



noTe 19 properTy, pLanT anD eQuIpmenT group parent Company rebuilding of Buildings machinery and other party’s machinery andKseK and land equipment property Total equipmentAccumulated acquisition cost opening balance 1 January 2008 7,715 452,353 15,018 475,086 1,081purchases during the year – 27,162 614 27,776 3,011reclassification 287 96 – 383 –sales – -18,013 -58 -18,071 -129exchange rate differences 1,883 13,212 -311 14,784 –Closing balance 31 December 2008 9,885 474,810 15,263 499,958 3,963 Opening balance 1 January 2009 9,885 474,810 15,263 499,958 3,963acquired 65,593 127,647 – 193,240 –purchases during the year – 37,237 126 37,363 3,085reclassification – -3,052 -45 -3,097 –sales – -66,633 -169 -66,802 -714exchange rate differences -2,952 -8,980 49 -11,883 –Closing balance 31 December 2009 72,526 561,029 15,224 648,779 6,334 Accumulated depreciation and impairment losses opening balance 1 January 2008 -2,529 -327,539 -6,659 -336,727 -760Depreciation during the year -469 -31,470 -823 -32,762 -277reclassification -287 74 58 -155 –sales – 16,795 – 16,795 129exchange rate differences -1,439 -8,019 271 -9,187 –Closing balance 31 December 2008 -4,724 -350,159 -7,153 -362,036 -908 opening balance 1 January 2009 -4,724 -350,159 -7,153 -362,036 -908acquired – -97,423 – -97 423 –Depreciation during the year -448 -30,253 -841 -31,542 -643reclassification – 2 151 4 2,155 –sales – 57,586 101 57,687 707exchange rate differences 262 5,631 -45 5,848 –Closing balance 31 December 2009 -4,910 -412,467 -7,934 -425,311 -844 Carrying amounts 1 Januari 2008 5,186 124,814 8,359 138,359 32131 December 2008 5,161 124,651 8,110 137,922 3,055 1 Januari 2009 5,161 124,651 8,110 137,922 3,05531 December 2009 67,616 148,562 7,290 223,468 5,490

Depreciation and impairment losses are distributed to the following rows in the income statement

group DepreciationKseK 2009 2008Cost of goods sold/services -24,481 -25,428selling expenses -2,500 -2,597administrative expenses -4,374 -4,543other operating expenses -187 -194Total depreciation and impairments for property, plant and equipment -31,542 -32,762

parent Company DepreciationKseK 2009 2008administrative expenses -321 -138other operating expenses -322 -139Total depreciation and impairments for property, plant and equipment -643 -277



noTe 20 InvesTmenTs In group CompanIes

Corporate Capital number Carrying amount, KseKDirectly owned reg. office identity number share, % votes, % of shares 31-12-2009 31-12-2008Display Team oy espoo 0865289-8 100 100 100 – 25,652HL Display Belgium n.v. antwerp 0431.244.677 100 100 1,000 283 283HL Display Bulgaria eooD sofia 200041077 100 100 200 97 97HL Display Ceská republika s.r.o prague 65410394 100 100 1 26 26HL Display Deutschland gmbH Langenfeld HrB2713 100 100 1 2,614 2,614HL Display d.o.o. Ljubljana 47556722 100 100 1 93 93HL Display d.o.o. Beograd Beograd sr103831628 100 100 1 5 5HL Display españa s.L Madrid B83488213 100 100 3,814 1,267 1,267HL Display Falun aB Falun 556545-6976 100 100 1,000 100 100HL Display France sas Tours rCsB377988704 100 100 2,500 268 268HL Display g Ltd györ 08-09-018176 100 100 1 20 –HL Display Hungaria Budapest 01-09-667938 100 100 1 487 487HL Display inc. wilkes-Barre 23-2869204 100 100 1 1 1HL Display Latvia sia riga 50003303821 100 100 100 1,522 1,522HL Display Lesjöfors aB Filipstad 556439-7429 100 100 5,000 2,513 2,513HL Display Ltd sti istanbul 428930-376512 100 100 200 1,707 1,707HL Display nordic aB Falkenberg 556446-0557 100 100 1,500 3,383 3,383HL Display norge a/s asker 955437071 100 100 1,100 5,598 5,598HL Dislplay Middle east FZCo Dubai 133882 100 100 1 744 –HL Display ooo Moscow 7701211771 100 100 1 832 832HL Display pictoria aB Filipstad 556654-4952 100 100 1,000 100 100HL Display polska sp.zo.o warszawa 521-04-17-996 100 100 200 236 236HL Display product supply aB Falkenberg 556738-6577 100 100 1,000 100 100HL Display regional service Center Bergen op Zoom 20085397 100 100 1,671 100 100HL Display srL Bukarest ro14633525 100 100 2,500 103 103HL Display schweiz ag aarau CH-4003018955-6 100 100 100 543 543HL Display (asia) pte Ltd. singapore 200004486H 100 100 1 576 576HL Display slovensko s.r.o. Bratislava 36547662 100 100 1 1,134 1,134HL Display soumi oy Helsinki Fi21185753 100 100 100 27,633 1,981HL Display sundsvall aB sundsvall 556124-0481 100 100 1,500 11,125 11,125HL Display (suzhou) Co., Ltd suzhou qi Du su no. 016307 100 100 1 19,074 16,320HL Display sverige aB stockholm 556351-9528 100 100 1,000 50 50HL Display (uK) Ltd Kirmington 2187037 100 100 10,000 935 935HL Display uK Holding Ltd Harlow 07098667 100 100 1,000 50,482 –HL Display ukraine Kiev 09867 100 100 100 223 223HL Display österreich gmbH wienna Fn140307i 100 100 1 327 327HL Financial services aB stockholm 556435-0832 100 100 500 128 128sCi L’eclipse Tours rCs414745026 100 100 100 14 14Total 134,443 80,443 Indirectly owned HL Design sasu saint avertin rCs484754379 100 100 37,000HL Display (shanghai) Co Ltd shanghai prC 310230757570910 100 100 2HL Display Hong Kong Ltd Hong Kong 783 663 100 100 2HL Display india pvt Ltd Mumbai 05MH2006FTC164731 100 100 10,000HL Display Karlskoga aB Karlskoga 556457-7202 100 100 1,000HL Display Korea Co Ltd seoul 110111-3042176 100 100 16,800HL Display Malaysia sdn Bhd Kuala Lumpur 569116-0 100 100 2HL Display nederland Bv Bergen op Zoom 30152867 100 100 200HL Display shipley Ltd shipley 256682 100 100 1,000HL Display Taiwan Ltd Taipei 27578266 100 100 1HL Display Thailand Ltd Bangkok 10454600434 100 100 1pT. HL Display indonesia Jakarta 0904.5.51.20945 100 100 100ppe Ltd Harlow 10133443 100 100 54,443p.p.H Moulders Ltd Harlow 2265584 100 100 1,000The point of sales Centre Ltd Harlow 0944685 100 100 8,100ppe Merchandising solutions europe B.v rotterdam 1085986 100 100 1,000 acquisition cost parent CompanyKseK 2009 2008opening balance 123,885 119,726 Capital contributions paid 2,754 3,080 newly started/acquired companies 51,246 1,079Closing balance 31 December 177,885 123,885

accumulated impairment losses opening balance -43,442 -38,198impairment losses – -5,244Closing balance 31 December -43,442 -43,442 Carrying amount 134,443 80,443


noTe 21 InvesTmenTs In assoCIaTeD CompanIes anD JoInT venTures parent Company acquisition cost KseK 2009 2008opening balance 12,147 12,147sales -2,000 –Closing balance 31 December 10,147 12,147 The parent company’s directly owned holding in associated companies and joint venture companies

2008 voting and Joint venture company, corp. reg. capital share Carryingno. and registered office as a % amountAssociated companies optimus KB, 916620-1450, stockholm – 5,000Joint ventures – directly owned HL Trion aB, 556539-1637, Filipstad 50% 7,147Joint ventures – indirectly owned Trion HL LLC 50% –Total 12,147

2009 voting andJoint venture company, corp. reg. capital share Carryingno. and registered office as a % amountAssociated companies optimus KB, 916620-1450, stockholm – 3,000Joint ventures – directly owned HL Trion aB, 556539-1637, Filipstad 50% 7,147Joint ventures – indirectly owned Trion HL LLC 50% –Total 10,147

The group’s holding refer to participations in optimus KB.

noTe 22 oTHer non-CurrenT reCeIvaBLes

group parent CompanyKseK 2009 2008 2009 2008Deposits 2,224 2,329 – –other 92 – – –Total 2,316 2,329 – –

noTe 23 parenT Company reCeIvaBLes From group CompanIes

acquisition cost Current receivables from group companies KseK 2009 2008opening balance 367,560 326,532increases 49,200 55,926redemptions -50,211 -14,898Closing balance 31 December 366,549 367,560

acquisition cost non-current receivables from group companies KseK 2009 2008opening balance – –increases 203,284 –Closing balance 31 December 203,284 – at the year-end the parent company had no receivables from associated companies or joint ventures.

noTe 24 InvenTorIes group KseK 2009 2008raw materials and consumables 42,002 28,587 work in progress 5,621 1,369 Finished goods and goods for resale 131,860 157,151 work in progress on behalf of third parties 235 57Total 179,718 187,165 selling expenses for the group include impairment losses of inventories to the order of MseK 12 (6). The parent company has no inventories.

noTe 25 TraDe reCeIvaBLes

Trade receivables are reported after taking into account anticipated bad debt losses that amounted to KseK 8,758 (8,327) in the group. There were no trade receivables in the parent company. age analysis, overdue not impaired trade receivables Dec 31 2009 Dec 31 2008Trade receivables not yet due 154,072 184,985overdue trade receivables 0 - 30 days 58,012 43,197overdue trade receivables > 30 days - 90 days 32,755 29,791 overdue trade receivables > 90 days - 180 days 8,120 10,958overdue trade receivables > 180 days - 360 days 4,715 6,346overdue trade receivables > 360 days 7,081 4,075allowance for credit losses -8,758 -8,327Total 255,997 271,025

allowance account for credit losses Dec 31 2009 Dec 31 2008opening balance -8,327 -4,042Bad debt losses 178 383provision for anticipated bad debt losses -4,252 -5,872Cancelling of previous year’s provisions 3,335 1,204 exchange rate differences 308 Closing balance -8,758 -8,327

noTe 26 prepaID expenses anD aCCrueD InCome group parent CompanyKseK 2009 2008 2009 2008prepaid expenses: rents 4,826 5,790 – 115 leasing expenses 353 1,382 – 1,109 insurance expenses 976 1,569 – 600 iT support and communication 1,085 4,250 1,085 2,313accrued interest income 238 494 144 293other 22,681 11,553 2,721 1,235Total 30,158 25,038 3,950 5,665

noTe 27 oTHer CurrenT asseTs

The items other current receivables consists of derivates used for hedge accounting valued at fair value amounting to 3,527 (-8,887).

withholding tax concerning dividends from foreign subsidiaries of KseK 2,291 (3,561) is included in the parent company’s other current assets.



noTe 30 unTaxeD reserves parent CompanyKseK 2009 2008accumulated excess depreciation/amortisation Computer systems opening balance 1 January 2,074 2,460amortisation for the year in excess of plan -1,070 -386Closing balance 31 December 1,004 2,074 Property, plant and equipment opening balance 1 January 614 -670amortisation for the year in excess of plan 646 1,284Closing balance 31 December 1,260 614 Tax allocation reserves appropriations in conjunction with taxation 2005 2,656 2,656appropriations in conjunction with taxation 2007 10,974 10,974appropriations in conjunction with taxation 2008 17,413 17,413appropriations in conjunction with taxation 2009 18,407 18,407 appropriations in conjunction with taxation 2010 3,120 –Closing balance 31 December 52,570 49,450 Total untaxed reserves 54,834 52,138

noTe 31 InTeresT-BearIng LIaBILITIes see note 2 for information about the company’s contractual terms in respect of interest-bearing liabilities, as well as more information about the company’s exposure to interest rate risk and risks of exchange rate fluctuations.

groupKseK 2009 2008non-current liabilities Bank loans 226,463 61,261 other interest-bearing liabilities 34,614 519Total 261,077 61,780 Current liabilities short-term element of bank loans 83,270 36,827other interest-bearing liabilities 7,817 1,732Total 91,087 38,559

Interest-bearing liabilities 352,164 100,339 Terms and repayment period – group For information about pledged assets, see note 36.

noTe 28 CasH anD CasH eQuIvaLenTs groupKseK 2009 2008Cash and bank balance 95,784 102,164Credit balance in group account 117,643 118,609Total according to statement of cash flows 213,427 220,773

noTe 29 eQuITy

The groupFor a specification of the group’s equity, see the financial report on page 42.

share capitalas at 31 December 2009 the registered share capital amounted to seK 38,673,860, comprising 30,939,088 ordinary shares, 3,652,096 of which are class a and 27,286,992 class B. The group has not issued preference shares. Holders of ordinary shares are entitled to a dividend as decided subsequently and are entitled to vote at the annual general Meeting of shareholders with one vote per share for class a shares and 1/10 vote per share for class B shares.

Cash flow hedge reserveThe cash flow hedge reserve of KseK 2,599 constitutes the effective proportion of the cumulative net change in fair value of a cash flow hedging instrument attributable to hedging transactions that have not yet occurred.

retained earningsretained earnings include profits earned in the parent company and its subsidiaries, associated companies and joint ventures. previous allocations to the statutory reserve are included in this equity item.

Dividendafter closing date the Board has proposed the following dividend. This dividend has yet to be confirmed and there are no income tax consequences.

KseK 2010 1) 2009 2008Dividend, KseK 42,696 42,696 42,541Dividend per share, seK 1.38 1.38 1.38

1) according to the Board of Directors’ proposal.

parent CompanyFor a specification of the parent company’s equity, see the financial report on page 45.

restricted equityrestricted equity may not be reduced through dividends.

Statutory reserveThe purpose of the statutory reserve has been to restrict a portion of the net profit each year of dividend distribution.

unrestricted equityRetained earningsretained earnings comprises the previous year’s unrestricted equity after any dividend distributions. Together with the profit/loss for the year, it constitutes total unrestricted equity, i.e. the amount available for dividend distribution to the shareholders.



noTe 32 posT-empLoymenT BeneFITs

Defined benefit pension plans The group has five defined benefit plans providing remuneration to employees after they retire. in defined benefit plans the payment made to employees and former employees is based on the salary at retirement and the number of years worked. The group bears the risk for ensuring that the promised payments are made. KseK 2009 2008present value of wholly or partly funded obligations 10,010 7,267Fair value of managed assets -5,891 -4,392net wholly or partly invested obligations 4,119 2,875present value of unfunded obligations 2,780 2,535present value of net obligations 6,899 5,410 unreported actuarial profits (+) and losses (-) -1,783 -339net amount in balance sheet relating to defined benefit plans 5,116 5,071 The net amount KseK 5,116 (5,071) is reported in the item pension provisions and accrued expenses KseK 5,116 (4,367) and prepaid income KseK – (704) in the consolidated balance sheet. Managed assets consists of investment in mixed funds with the following allocation: 55 (59) percent in bonds, 15 (16) percent in shares, 21 (16) percent in real estate, and 9 (9) percent other. The net amount is per country: KseK 2009 2008France 1,603 1,500norway 2,140 2,043switzerland 492 702austria 881 826Total 5,116 5,071 Changes in the defined benefit obligations: KseK 2009 2008obligations to defined benefit plans as per 1 January 9,802 9,931Fees paid in 380 -1,909Current service costs plus interest cost 1,372 2,175actuarial gains (+) and losses (-) 59 -1,453exchange rate differences 1,177 1,058obligations to defined benefit plans as per 31 December 12,790 9,802 Changes in fair value of managed assets: KseK 2009 2008Managed assets’ fair value 1 January 4,392 5,981reclassification 12 –Contribution from employer 1,577 711payments – -2,010expected return on managed assets 229 251actuarial gains (+) and losses (-) -427 -1,458exchange rate differences 108 917Fair value of managed assets 31 December 5,891 4,392

expense reported to the income statement for defined benefit plans: KseK 2009 2008Current service cost 1,045 1,830administration cost 141 98interest cost 322 345expected return on managed assets -227 -238actuarial profits (-) and losses (+) 70 –Total expense 1,351 2,035Cost of defined contribution plans 16,697 15,379Total cost of remuneration after end of employment 18,048 17 414

The expense is reported in the following rows in the income statement KseK 2009 2008Cost of goods sold 7,005 5,305selling expenses 7,943 9,423administrative expenses 2,226 2,087research and development costs 874 599Total 18,048 17,414

assumptions for defined benefit plans

The most significant actuarial assumptions as at the year-end (expressed as averages) KseK 2009 2008Discount rate 31 December 3.31% 3.43%expected return on managed assets 31 December 4.75% 4.38%Future salary increase 2.63% 2.63%Future increase in pensions 1.38% 2.00%expected remaining service, years 18.1 18.9

Commitments for retirement pensions and family pensions for salaried employees in sweden are secured through an insurance policy with alecta. according to a statement issued by the swedish Financial reporting Board, uFr 3, this is a defined benefit plan involving several employers. For the financial year 2009 the company did not have access to information that enabled it to report this plan as a defined benefit plan. The iTp pension plan that is secured through an insurance policy with alecta is therefore reported as a defined contribution plan. This year’s charges for pension policies arranged with alecta total KseK 3,162 (1,918). alecta’s surplus can be distributed to those arranging the insurance and/or the insured parties. at the end of 2009 alecta’s surplus in the form of the collective consolidation level totalled 141 (112) percent. The collective consolidation level comprises the market value of alecta’s assets as a percentage of insurance commitments, calculated according to alecta’s insurance calculation assumptions, which do not correspond with ias 19. Historical information KseK 2009 2008 2007 2006 2005present value of benefit- based obligations -12,790 -9,802 -9,931 -4,564 -3,524Fair value of managed assets 5,891 4,393 5,981 1,206 942Deficit in plan -6,899 -5,409 -3,950 -3,358 -2,582 experience-based adjustments concerning managed assets amounted to KseK 229 (251) for 2009. experience-based adjustments concerning the reported obligations amounted to KseK 414 (740). actual return on managed assets amounted to KseK -198 (-1,208).

The estimated payments regarding defined benefits plans for the next year amounts to KseK 463 (447). Defined contribution plans in defined contribution plans the company pays fixed contributions to a separate legal entity and has no obligation to make any further payments. The group’s profit/loss is charged with expenses in line with earnings. group parent CompanyKseK 2009 2008 2009 2008payments to defined contribution plans 16,697 15,379 4,817 5,080



noTe 33 oTHer CompreHensIve InCome anD CHanges In reserves anD non-ConTroLLIng InTeresT non- group Translation Hedging controllingKseK reserve reserve interestopening balance, 1 Jan 2008 – 580 2,841Translation differences for the year 21,665 – –Changes in fair value of cash flow hedges – -9,467 –profit for the year attributable to non-controlling interest – – 783Closing balance, 31 Dec 2008 21,665 -8,887 3,624 Translation differences for the year -14,998 – –Changes in fair value of cash flow hedges – 11,486 –acquisition of non-controlling interest – – -3,624Closing balance, 31 Dec 2009 6,667 2,599 –

Translation reserve The translation reserve includes all exchange differences arising on translation of the financial statements of foreign operations which present their reports in a currency other than that used for presentation of the group’s financial reports. The parent Company and group present their financial reports in swedish kronor.

Hedging reserve The hedging reserve covers the effective portion of the accumulated net change in fair value of a cash flow hedging instrument attributable to hedge transactions which have not yet occurred.

noTe 34 LIaBILITIes To group anD assoCIaTeD CompanIes, JoInT venTures

as at year-end, the parent company’s non-current liabilities to group companies amounted to KseK 253,766 (–). The parent company’s current liabilities to group companies amounted to KseK 27,964 (14,900). There were no liabilities to associated companies or joint ventures.

noTe 35 aCCrueD expenses anD prepaID InCome group parent CompanyKseK 2009 2008 2009 2008accrued social security expenses 17,772 21,690 3,566 4,495accrued holiday pay 25,131 25,004 5,045 4,204accrued salaries & wages 22,461 28,568 3,084 5,432Customer bonuses 10,750 12,384 – –prepaid income 7,518 5,167 – –other accrued expenses 56,471 41,653 6,953 5,271Total 140,103 134,466 18,648 19,402

noTe 36 pLeDgeD asseTs anD ConTIngenT LIaBILITIes group parent CompanyKseK 2009 2008 2009 2008pledged assets For own liabilities and provisions Corporate mortgages 350 350 – –Total pledged assets 350 350 – –

Contingent liabilities securities for the benefit of subsidiaries – – 301,739 106,010guarantees issued for the benefit of subsidiaries – – 49,992 107,508Total contingent liabilities – – 351,731 213,518

HL Display aB has, to seB, undertaken that no company in the group will provide guarantees for loans or that the parent company will transfer the ownership of its shares or control of subsidiaries that have credits in this bank without the permission of the bank. in addition, the Company guarantees to fulfill certain financial covenants relating to the net debt/eBiTDa, and for equity in relation to total assets. noTe 37 sTaTemenT oF CasH FLows

For a compilation of the group’s and the parent company’s cash and cash equivalents, see note 28.

adjustments for items not included in cash flow group parent CompanyKseK 2009 2008 2009 2008Disposal of non-current assets 2,108 227 8 –Costs concerning share-based benefits 107 294 107 294pension provisions 1,120 77 – –Changes in provisions -357 375 – –Translation difference 527 11,246 – – provision for bonus -822 3,303 -822 3,302severance pay -2,243 3,175 -2,243 3,175 reserve Trion industries 4,500 – – –Total 4,940 18,697 -2,950 6,771

For information about acquisitions made during the year, see note 5.

noTe 38 reLaTeD parTy TransaCTIons

related parties The chairman of the board anders remius owned indirectly shares in XLenT Consulting aB until q2 2009. The relation ended when the shares were sold in q2 2009. During 2009, XLenT Consulting aB has invoiced the group’s companies KseK 3,445 (14,392) for service rendered. The invoices concern work carried out on management, development and support of the group’s iT network and erp system.

of the parent company’s revenue, KseK 77,824 (100,958) relates to consultancy services sold to group companies.

Transactions with key people in a managerial position The company’s Board members and their immediate family members represent 79.1 (79.2) percent of votes in the company. There are no loans to Board members. For further information, see note 8.




The Board of Directors and the Managing Director certify that the annual accounts have been prepared in accordance with generally accepted accounting principles and that the consolidated accounts have been prepared in accordance with the international set of accounting standards referred to in regulation (eC) no 1606/2002 of the european parliament and of the Council of 19 July 2002, on the application of international accounting standards. The annual accounts and the consolidated accounts give a true and fair view of the position and profit or loss of the Company and the group. The administration report for the Company and the group gives a fair review of the development and performance of the business,

position and profit or loss of the Company and the group, and describes the principal risks and uncertainties that the Company and the companies in the group face.

The annual accounts and the consolidated accounts as reported above have been approved for publication by the Board on March 10, 2010. The consolidated income statements, statement of comprehensive income, and statement of financial position for the group, as well as the income statements and balance sheets of the parent company will be submitted for adoption at the annual meeting of shareholders on april 22, 2010.

stockholm, 10 March 2010.

anders remiusChairman

Åke Modig anna ragén susanna Campbell Mats-olof Ljungkvist Member of the Board Member of the Board Member of the Board Member of the Board

Lars-Åke rydh stig Karlsson Magnus Jonsson Kent Mossberg Member of the Board Member of the Board Member of the Board, Member of the Board, employee repr. employee repr.

gérard DubuyMember of the Board,

Managing Director and Ceo

our auditor’s report was submitted on 10 March 2010.

KpMg aB

Åsa wirén Linder Mattias Johansson authorised authorised public accountant public accountant auditor in charge Joint auditor

noTe 39 Fees To auDITors

group parent CompanyKseK 2009 2008 2009 2008Kpmg audit engagement 4,215 3,481 1,010 593audit related counselling 177 410 89 208other engagements 266 – – –Total Kpmg 4,658 3,891 1,099 801

other auditors audit engagement 407 533 – –other engagements 3 627 – –Total other auditors 410 1,160 – – audit engagement and audit related counselling relate to the audit of the annual accounts and bookkeeping as well as the Board’s and the Ceo’s administration, other tasks that are the duty of the company’s auditor as well as advice or other activities arising from observations during such an audit or the performance of such other tasks. anything else is reported as other engagements.

noTe 40 evenTs aFTer THe BaLanCe sHeeT DaTe no significant events after the balance sheet date have occurred in the group or the parent Company. The financial statements were approved for issuing by the Board of the parent company on 10 March 2010.

noTe 41 ImporTanT esTImaTes anD evaLuaTIons Company management has discussed with the audit Committe developments, the selection of and information in respect of the group’s important accounting principles and estimates, as well as the application of these principles and estimates.

regarding the establishment of the acquisition analysis, impairment testing of goodwill, capitalization of deferred taxes and the assessment of the obsolescence of stock are regularly evaluated and estimates about future events made. on the balance sheet date no uncertainties exist which present a significant risk of material adjustment of the reported amounts of assets and liabilities within the next fiscal year.

noTe 42 DeTaILs oF THe parenT Company HL Display aB is a swedish-registered limited liability company with its registered office in stockholm. The parent company’s shares are quoted on the nasdaq oMX stockholm small Cap list. The address of head office is Cylindervägen 18, 131 26 nacka strand, sweden. The consolidated financial statements for 2009 comprise the parent company and its subsidiaries, together referred to as the group. The group also includes owned holdings in associated companies and joint ventures.


audit reportHL Display annual report 2009 69

auDiT reporT

To the annual general Meeting of the shareholders of HL Display aB (publ). Corporate identity number 556286-9957

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 2009. The annual accounts and the consolidated accounts of the company are included in the printed version of this document on pages 38-68. The Board of Directors and the Managing Director are responsible for these accounts and the administration of the company as well as for the application of the annual accounts act when preparing the annual accounts and the application of international financial reporting standards iFrss as adopted by the eu and the annual accounts act when preparing the consolidated accounts. 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 standards 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 and significant estimates made by the Board of Directors and the Managing Director when preparing the annual accounts and the consolidated accounts 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 have been prepared in accordance with the annual accounts act and give a true and fair view of the company’s financial position and results of operations in accordance with generally accepted accounting principles in sweden. The consolidated accounts have been prepared in accordance with international financial reporting standards iFrss as adopted by the eu and the annual accounts act and give a true and fair view of the group’s financial position and results of operations. The statutory administration report is consistent with the other parts of the annual accounts and the consolidated accounts.

we recommend to the annual general Meeting of shareholders that the income statements and balance sheets of the parent company, and the income statements and the statement of financial position for the group, be adopted, that the profit of the parent company be dealt with in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.

stockholm, 10 March 2010KpMg aB

Åsa wirén Linder Mattias Johansson authorised authorised public accountant public accountant auditor in charge Joint auditor


statement by the Chairman HL Display annual report 2009 70

sTaTeMenT By THe CHairMan

Dear shareholders,For many years, HL Display’s communication has been permeated by transparency and openness. it is our aim that shareholders should find it easy to form a clear idea of our current operations and position. This is perhaps even more important in the present situation, with market trends so difficult to predict. it is our hope that on reading the annual report, you will obtain a clear picture of our business and how it is run.

our Board discussions were largely focused on two areas in 2009. The first of these concerned the economic slowdown and how HL Display’s strategies and business operations should be adapted to the situation. The radically changed market climate placed major pressure on company management and brought with it a great deal of hard work and many difficult decisions. The Board’s role here was to act as mentor, advising management on which scenarios required adaptive measures.

secondly, much work was devoted to the area of acquisitions and evaluation of potential acquisition candidates. For a long time there has been a consensus on the Board about the type of acquisitions we are seeking. while we are keen to make acquisitions which strengthen our offering, it is also important with acquisitions that could consolidate our market position. The instruction was not to go ”bargain-hunting” for companies in difficulties, but to identify acquisition candidates which would strengthen HL Display’s position.

The acquisition of ppe fulfils these criteria. The acquisition strengthens our offering to the brand manufacturers segment, and we shall also be able to exploit this added strength globally. The acquisition also strengthens our uK market position. This is an important market where we have not yet achieved the success we

would have liked. ppe has achieved growth during the recession, showing healthy margins. in other words, this important acquisition is the right one for HL Display.

it is my belief that we have a well composed Board at present. our members represent different sectors and bring a range of experience and skills which combine to ensure optimum development for HL Display in the future.

My belief is also shared by the rest of the Board, as was evident in the evaluation conducted during the year. Departing from the practice of previous years, i decided to conduct the evaluation of the Board’s work myself, based on structured interviews with all the Board members. it was of immense value to me to have a very open discussion with Board members about the Board’s work and associated aspects.

even though the market situation affected our sales, the Board is nevertheless satisfied with the measures implemented in the Company, both regarding strategies and streamlining of operations. The common vision is a long-term focus on creating added value for shareholders. Cost-effectiveness measures are very much a balancing act. it is all about streamlining without losing value. There is life after the recession and HL Display should be well equipped to exploit the opportunities when the market returns to more normal levels.

anders remius,Chairman of the Board


CorporaTe governanCe reporT For HL DispLay aB

external control instrumentsThe external control instruments that affect the management of HL Display consist primarily of the swedish Companies act, the swedish annual accounts act, the Listing agreement with nasdaq oMX and the swedish Code of Corporate governance.

Internal control instrumentsThe internal control instruments that affect the management of HL Display consist primarily of the articles of association, which are defi-ned by the shareholders’ general meeting, and the control documents that are defined by the Board of Directors. These include the rules of procedure for the Board, instructions for the Ceo, instructions for Committees appointed by the Board (audit Committee and remuneration Committee), Finance policy, Code of Conduct, equal opportunity policy, subsidiary guide Book etc.

HL Display is listed on nasdaq oMX stockholm and applies the swedish Code of Corporate governance in accordance with the current regulatory framework. in 2009, HL Display noted one derogation from the Code’s rules. This has been reported in detail in the section below. HL Display’s corporate governance report has not been reviewed by the Company’s auditors.

Derogations from the CodeRule 1.5 of the CodeHL Display has deviated from the Code in that the Company’s Ceo gérard Dubuy, who is French, addresses the annual general meeting in english. although the presentation is available in swedish, it is not simultaneously interpreted, which is a requirement under rule 1.5.

HL Display has applied this procedure since gérard Dubuy took up his position as Ceo in 2006. it is the Board’s opinion that this arrangement works well, particularly in the absence of any views or wishes from shareholders regarding simultaneous interpretation of the Ceo’s address to the annual general meeting. nor has the Board received any indications of shareholders being unable to understand or follow gérard Dubuy’s address to the meeting.

accordingly, the Board does not see any justification for simulta-neous interpretation and its associated costs at the present time.

shareholders’ meetingshareholders’ influence in the Company is exercised at the shareholders’ meeting (annual general meeting or extraordinary general meeting), which is HL Display’s highest decision-making body. The notice convening a shareholders’ general meeting is inserted as an announcement in post- och inrikes Tidningar and svenska Dagbladet. The notice of meeting is also sent out as a

press release and posted on the Company’s website. shareholders wishing to attend and vote at a shareholders’ meeting must be listed in the register of shareholders five working days before the meeting, and must notify the Company of their intention to attend the meeting, also indicating the number of advisors they are bring-ing, by 4.00 p.m. on the date specified in the notice of the meeting. shareholders who are unable to attend have the opportunity to be represented by a proxy.

The annual general meeting (agM) is held in nacka or in stockholm, normally in april. The shareholders elect the Board members and Chairman of the Board, appoint the auditor, decide on amendments to the articles of association, adopt the income statement, balance sheet and distribution of the Company’s profit, decide on discharge from liability for the Board members and Ceo, decide on Board fees and define the principles for remuneration of the Ceo and management group. Decisions at the shareholders’ general meeting are normally made by a simple majority, except in cases where the swedish Companies act prescribes a higher proportion of shares and votes at the shareholders’ general meeting in order for a proposal to be adopted.

The agM covering the 2008 financial year was held on 2 april 2009 in nacka strand. in addition to the points referred to above, the agM voted unanimously in favour of a warrant issue in accordance with the Board’s proposal.

The notice convening the meeting was published on 4 March. all other documentation relevant to the agM was published on HL Display’s website on 19 March 2009. at its meeting held on 31 March 2009, the Board decided to propose to the agM a change to the conditions of the warrant programme. under the Board’s proposal, the subscription price for the shares which warrant holders

CEO

Board of Directors

Shareholders’ General Meeting

Nomination Committee

Audit Committee

Remuneration Committee

Internal control environment

Group management Area Managers

Subsidiaries

Auditor

How HL Display is managed

Corporate governance report 2009HL Display annual report 2009 71


Corporate governance report 2009 HL Display annual report 2009 72

are entitled to subscribe for and the purchase price for the warrants would be determined in april 2009 for half the options. The price for the remainder would be determined in February 2010. information about the changed proposal regarding the allocation principles and the rationale behind the change was published on the Company’s website on 1 april and reported to the agM. The meeting voted unanimously in favour of the warrant issue and the decision has been registered with the swedish Companies registration office.

The agM was attended by 14 shareholders, representing 73 percent of the share capital and 87 percent of the voting power. The minutes from the agM are available for download on HL Display’s website.

The date and venue of the agM for the 2009 financial year were published on 21 october 2009. under ‘Corporate governance’ on HL Display’s website, shareholders can find out how to submit business for consideration by the meeting and what the submission deadline is.

extraordinary general meetingif there is reason to convene a shareholders’ meeting before the next agM, the shareholders are called to an extraordinary general meeting. HL Display had one (1) extraordinary general meeting in 2009. at this meeting, held on 25 February 2009, it was resolved to change the article of association regarding the registered office to reflect the new address of the head office in nacka. The meeting also decided that future shareholders’ meetings may be held either in nacka or in stockholm. The minutes from the extraordinary general meeting are available for download on HL Display’s website.

nomination committeeThe agM decides how the nomination committee will be appointed. The 2009 agM decided that the Chairman of the Board would appoint the nomination committee in consultation with the Company’s major shareholders. The appointment is based on the following criteria. The nomination committee should consist of at least four members, one of whom is Chairman of the Board. a member who is familiar with the Company’s major owners is elected as chairman of the nomination committee. However, the Chairman

of the Board may not serve as chairman of the committee. if an appointed member leaves the nomination committee, the Company’s major shareholders must consult to appoint a replacement. The present nomination committee serves until a new nomination committee is appointed.

HL Display’s present nomination committee consists of Johan Lannebo, representing Lannebo Fonder (Chairman), anders remius, Chairman of the Board of HL Display, arne Karlsson, Ceo of ratos and representing ratos, and adam gerge, representing Didner & gerge. The composition of the nomination committee was pub-lished on HL Display’s website on 4 september 2009.

The nomination committee’s tasks are as follows:– evaluate the composition and work of the Board;– make proposals to the agM regarding the election of the Board

and Chairman of the Board;– make proposals to the agM regarding the election of auditors

(if relevant), in consultation with the Company’s audit committee;– make proposals to the agM regarding remuneration of the Board

and auditors; and – make proposals to the agM regarding a chairman for the agM.

The nomination committee has held 4 meetings since its election. a report on the work of the nomination committee will be submitted to the 2010 agM. The members of the nomination committee does not receive any compensation.

BoardHL Display’s Board has the ultimate responsibility for the governance of the Company’s affairs between the agMs. The Board appoints the Ceo, who is also Managing Director, and makes decisions on issues concerning the strategic direction of the business and the Company’s overall organisation. Members of the Board are appointed by the agM of shareholders for a one-year term until the end of the following agM. in accordance with the Code, the Chairman of the Board is also appointed by the agM. in 2009, there were eight meeting-elected Board members. There were also two permanent employee representatives with one deputy.

aTTenDanCe oF THe BoarD memBer, parTICIpaTIon In CommITTees, anD remuneraTIon

audit Committee

remuneration Committee

attendance at Board meetings

attendance at committee

meetingsTotal

remuneration

anders remius Chairman of the Board – Chairman 14 of 14 4 av 4 250,000 seK

gérard Dubuy Board member and Ceo – – 14 of 14 – –

susanna Campbell Board member from april 2, 2009

– – 10 of 14 – 150,000 seK

Jan-ove Hallgren Board member until april 2, 2009 – Member 5 of 14 1 av 4 –

Åke modig Board member – Member 14 of 14 3 av 4 165,000 seK

stig Karlsson Board member Member – 12 of 14 4 av 6 165,000 seK

mats-olof Ljungkvist Board member Chairman Member 12 of 14 10 av 10 195,000 seK

anna ragén Board member – – 14 of 14 – 150,000 seK

Lars-Åke rydh Board member Member – 14 of 14 6 av 6 165,000 seK

Kent mossberg Board member * – – 12 of 14 – –

magnus Jonsson Board member * – – 12 of 14 – –

Henrik smedlund Deputy member * – – 0 of 14 – –

1,240,000 seK

* appointed by the employees


Independence of Board membersThe only member elected by the shareholders’ general meeting who is an employee of HL Display is Ceo, gérard Dubuy. all other members elected by the meeting are considered to be independent of the Company. anders remius (remius and family), stig Karlsson (ratos) and susanna Campbell (ratos) are not independent of the Company’s largest owners. other members elected by the shareholders’ general meeting – Mats-olof Ljungkvist, Åke Modig, anna ragén and Lars-Åke rydh – are considered independent of major shareholders. The composition of the Board is shown in the table below.

Further information about the Board members can be found on page 76.

work of the Board of HL DisplayThe Chairman of the Board organises and manages the work of the Board to ensure it is undertaken in accordance with current laws, rules and regulations. it is also the Chairman of the Board’s responsibility to ensure an annual evaluation is made of the Board’s work and to provide the nomination committee with the results of this evaluation. The Chairman of the Board monitors the business on an ongoing basis in dialogue with the Ceo and ensures the Board receives the information and documentation it requires to perform its tasks.

The Board’s work is regulated by a set of specially drawn up rules of procedure. in essence, the rules of procedure mean the Board is responsible for the Company’s strategy and organisation, as well as the administration of the Company’s affairs.

The Board regularly assesses the financial position of the Company and group. information is reported on a monthly basis to allow the Board to perform its duty of evaluation pursuant to current legislation, listing rules and good board practice.

The Board normally deals with matters of significant importance to the group, such as:– strategic plans– Budgets and forecasts– acquisitions, sales and closures of companies or operations– purchases, sales and write-downs of other significant assets

The Board held 14 Board meetings in the 2009 financial year. The Board normally sets the meeting dates for the coming calendar year at the october Board meeting. some Board meetings are planned to coincide with interim and annual reports. The Board’s work follows an annual presentation plan with special topics and fixed decision-making points.

The Board meeting agenda normally includes the following items:– review of the previous meeting’s minutes and action list– Ceo’s status report– Financial overview– reporting from committees– any other business

The Ceo attends all Board meetings, except where there is a conflict of interest, such as when the Ceo’s remuneration is being decided or the Ceo’s work is being evaluated. it is the explicit wish of the Board to invite members of HL Display’s management group or other parts of the organisation to Board meetings in order to give the Board in-depth information about their specific area. This took place at 5 meetings in 2009, and the Board gained information about areas such as product product development, logistics and purchasing. representatives from HL Display’s

auditors took part in one meeting in 2009.important matters dealt with in 2009 included:

– investments– organisation– updating of group instructions and policies– Monitoring of cost control and investments– Capital structure– incentive schemes– acquisitions

Committee work on behalf of the BoardThe Board has established committees which, in accordance with the Board’s instructions, deal with certain defined matters and prepare these for Board decisions. The Board currently has two committees: the remuneration committee and the audit committee.

Remuneration CommitteeThe remuneration committee prepares matters relating to remuneration and terms of employment for Company management, and makes proposals for guidelines on remuneration of the Ceo and senior executives, which the Board submits for a decision by the agM. it is also the remuneration committee’s responsibility to monitor remuneration trends with comparable players to ensure the Company offers a competitive level of remuneration.

The Ceo’s remuneration is decided by the Board. remuneration of other senior executives is decided by the Ceo in consultation with the remuneration committee.

The remuneration committee, which is appointed by the Board, consists of the Chairman of the Board and two Board members who are independent of the Company and its management. in 2009, the remuneration committee consisted of Chairman of the Board anders remius (Chairman) and members Åke Modig and Mats-olof Ljungkvist. The remuneration committee met on 4 occasions in 2009. Minutes were taken at all the meetings.

Audit Committeeit is the audit committee’s task to support the Board’s efforts to guarantee high quality in three primary areas: internal control, financial reporting and external auditing. The committee ensures efficient internal control systems are in place and a correct assessment of the Company’s financial position has been made. The committee also reviews interim and year-end reports before they are submitted to the Board and deals with all critical accounting matters, such as valuation and assessments.

The audit committee is also an important communication channel between the Board and the Company’s auditors. The committee’s tasks include assisting the nomination committee in preparing for the election of auditors and recommending remuneration of auditors, as well as maintaining dialogue with the auditors about the audit.

in 2009, the audit committee consisted of Board members Mats-olof Ljungkvist (Chairman), stig Karlsson and Lars-Åke rydh. The audit committee met on 6 occasions in 2009. Minutes were taken at all the meetings. The Company’s auditor participated in all the meetings.

evaluation of the BoardThe Chairman of the Board is responsible for ensuring the work of the Board is evaluated annually and the results of the evaluation are made available to the nomination committee. in 2009, Chairman of the Board anders remius conducted the evaluation.



Corporate governance report 2009 HL Display annual report 2009 74

This took the form of structured interviews, dealing with the areas such as the Board’s composition, its working procedures and responsibilities and the Chairman’s work. The survey was compiled and presented to the Board and to the nomination committee.

Chief executive officerHL Display’s Chief executive officer, gérard Dubuy, is in charge of day-to-day, operational business. a written set of instructions defines the division of responsibilities between Board and Ceo. The Ceo reports to the Board and presents a special Ceo’s report at each Board meeting, with information about how the business is performing on the basis of defined strategies and decisions made by the Board. Further information about the Ceo can be found on page 77.

group managementHL Display’s group management consists of 8 members who have day-to-day responsibility for different parts of the business. group management has 7 scheduled meetings during a year. More information about the members of group management can be found on page 77.

management of subsidiariesHL Display has five area Managers, each responsible for his/her own region, with between two and seven sales companies. The area Managers report directly to Ceo gérard Dubuy. each area Manager is fully responsible for results and sales in his/her own region. The division of responsibilities between area Managers and the Country Managers responsible for the day-to-day operation in the sales companies is stipulated in the subsidiary guide Book, an internal framework with guidelines concerning all aspects of the subsidiary operations. The groups production units and logistics centers are ultimately managed by the group operations and on Chain management.

remuneration of the Board and senior executivesRemuneration of the Boardin accordance with the nomination committee’s proposal, the 2009 agM adopted Board fees of seK 250,000 for the Chairman of the Board and seK 150,000 for each of the other non-executive directors. payment for committee work is as follows: seK 30,000 is paid to the committee chairman and seK 15,000 to the committee members. However, the Chairman of the Board is not entitled to any extra compensation for committee work. see the table on page 72 for further information about remuneration of Board members.

guidelines for remuneration to senior executivesAt the Annual General Meeting 2009-04-02 the following guidelines were decided (main contents).

an important part of HL Display’s strategy is to attract and retain key employees. The remuneration offered to holders of senior positions in the company forms a vital component of this strategy.

it is the Board’s perception that a fixed salary, combined with flexible, performance-related remuneration, is an effective means of attracting employees and guiding performance towards the objectives that the Board has defined for the company. By also offering long-term co-ownership in the company, the Board wishes to promote long-term commitment that makes it easier for the company to retain its key employees.

The three components of fixed salary, flexible performance-related remuneration and co-ownership shall be viewed as a whole, although the three elements are defined on the basis of different principles.

– The fixed salary shall reflect the employee’s area of responsibility and the complexity of the position.

– The flexible performance-related remuneration shall always be linked to measurable targets. For 2009 the Ceo will be able to achieve a maximum of 50 percent of the fixed annual salary. For other senior executives the maximum is 25 percent of the fixed annual salary.

– Long-term co-ownership for employees aims to encourage employees to share the vision of the company’s owners. it is therefore an important principle of such a scheme that there is an opportunity to share in the increased value of the company’s shares, while also involving a personal risk for those who are participating. another important principle is that the transaction values defined in such schemes are produced objectively using generally accepted methods. The long term incentive programs to acquire warrants were approved by the shareholders at the general meeting 2007. The acquired warrants are subsidized and 50 percent of the premium will be paid back in equal installments during a three year period after a deduction of 58 percent for standard tax.

Proposal to the Annual General Meeting 2010-04-22 (main contents).

an important part of HL Display’s strategy is to attract and retain key employees. The remuneration offered to holders of senior positions in the company forms a vital component of this strategy.

it is the Board’s perception that a fixed salary, combined with flexible, performance-related remuneration, is an effective means of attracting employees and guiding performance towards the objectives that the Board has defined for the company. By also offering long-term co-ownership in the company, the Board wishes to promote long-term commitment that makes it easier for the company to retain its key employees.




– Long-term co-ownership for employees aims to encourage employees to share the vision of the company’s owners. it is therefore an important principle of such a scheme that there is an opportunity to share in the increased value of the company’s shares, while also involving a personal risk for those who are participating. another important principle is that the transaction values defined in such schemes are produced objectively using generally accepted methods. The long term incentive programs to acquire warrants were approved by the shareholders at the general meeting 2007 and 2009. The acquired warrants are subsidized and 50 percent of the premium (2007 program) or 40 percent of the premium (2009 program) will be paid back in equal installments during a three year period after a deduction of 58 percent for standard tax.

The Board is entitled to make exceptions from the guidelines considering special circumstances.

Information about the auditorThe agM elects the auditor following a proposal by the nomination committee. at the 2008 agM, the audit firm KpMg aB was elected as auditor for the next four-year period. The auditor in charge is authorised public accountant Åsa wirén-Linder. Further information about the auditor can be found on page 77.

The 2009 agM decided that the auditor will be paid against approved invoice. Further information about remuneration of auditors can be found in note 39.

it is the auditor’s task, on behalf of shareholders, to audit HL Display’s annual accounts and bookkeeping, as well as the Board’s and the Ceo’s administration of the Company. The chief auditor also submits an audit report to the agM. shareholders have the opportunity to put questions to the auditor at the meeting.


THe BoarD’s reporT on inTernaL ConTroL over FinanCiaL reporTingin accordance with the swedish Companies act and the swedish Code of Corporate governance, the Board is responsible for internal control. This description has been prepared in accordance with the Code and is therefore confined to internal control regarding financial reporting.

The description is not part of the formal annual accounts. HL Display’s internal control process shall allow a reasonable guarantee of the quality and accuracy of financial reporting. it shall also ensure financial reports are prepared in accordance with the law, relevant accounting standards and other requirements for listed companies in sweden.

internal controls are normally described in accordance with internal Control - integrated Framework issued by Coso (Committee of sponsoring organizations of the Treadway Commission). This framework describes internal controls with the following components: control environment, risk assessment, control activities, information & communication and monitoring.

Control environmentThe basis of internal control regarding financial reporting includes the organisational and system structure, decision-making paths and division of responsibility, which are clearly documented and communicated in control documents, policies and manuals.

The Board has adopted a set of rules of procedure to regulate the Board’s responsibility and the Board’s work in committees. The Board has also appointed an audit committee, which has the task of ensuring that defined principles for financial reporting and internal controls are observed, and that ongoing relations are maintained with the Company’s auditors. in order to maintain an effective control environment and good internal controls, the Board has delegated the practical responsibility to the Ceo and drawn up a set of instructions for the Ceo.

in order to guarantee the quality of financial reporting, the Company has produced a number of internal control instruments, consisting primarily of the Finance policy, information policy and Controller guidelines. guidelines have also been defined for business ethics issues, with a view to clarifying and reinforcing the group’s philosophy and values. These include the Code of Conduct and the equal opportunity policy.

Risk assessmentThe audit committee is responsible for ensuring significant finan-cial risks and risks of errors in financial reporting are identified and actioned. every year a risk assessment is conducted in which risks relating to financial reporting are identified. The risk assessment is checked with the auditor. The risk assessment may, for example, include processes that are essential to the group’s financial performance and position, newly launched or acquired entities, as well as geographically remote operations.

Control activitiesControl activities are designed to ensure accuracy and completeness of financial reporting. procedures and measures have been formu-lated to deal with significant risks relating to financial reporting which have been identified in the risk assessment.

HL Display’s Controller function is organised in accordance with the matrix organisation used to manage the group. each area has a Financial Controller who monitor financial reporting and a Business Controller who monitor operations.

at function level (production, logistics etc), Business Controllers also monitor financial reporting against defined objectives.

The group’s control activities are carried out both on an overall level and a more detailed level. For example, there are monthly follow-up meetings between the production companies’ Managing Directors and Controllers and the group’s operations Director. The Company’s five area Managers constantly monitor the sales companies and report back to the Ceo on a monthly basis. in addition, the regional Controllers report to the corporate finance department on a monthly basis.

The area Managers also visit each sales company manager 3-4 times a year to discuss current issues, deal with the results and financial position and check that authorisation procedures are being observed.

The Board monitors operations by means of monthly report package containing detailed financial information, together with the Ceo’s comments on the business performance, results and financial position. Measures and activities aimed at improving internal controls are regularly implemented.

Information & communicationThe Board has defined an information policy specifying what will be communicated, who will communicate it and how the information will be issued, in order to ensure correctness and completeness of external information. To ensure effective, correct dissemination of information, both internally and externally, there are guidelines and procedures on how financial information is communicated between management and other employees.

information and communication on internal policies, guides and manuals with a bearing on financial reporting can be found on HL Display’s intranet, HL net. HL Display’s Controller guidelines is a central control document which is published on the intranet and regularly updated with amendments.

Monitoringinternal controls are constantly monitored. The Company’s financial position is dealt with at each Board meeting, prior to which the Board receives detailed monthly reports on the financial position and business performance. The Board’s monitoring of the internal control over financial reporting is conducted mainly by the audit committee. The audit committee goes through every interim report and discusses its contents with the Financial Director and the auditors. The external auditors annually monitor certain aspects of internal control within the framework of their audit. The auditors report the results of their audit to the audit committee and group management.

HL Display has no separate internal audit function. The local or regional controllers employed at the subsidiaries have a specific responsibility to report non-conformances to their contact person in the corporate finance and controller organisation. if a risk of non-conformances is identified, central resources can also be used. The corporate finance and controller organisation was restructured and reinforced in 2009, with a clear division of responsibilities between reporting and control. This strengthens control and monitoring of business operations and financial reporting. Consequently, the Board does not consider there to be any need for an independent internal audit function.



Board of Directors HL Display annual report 2009 76

BoarD oF DireCTors

Born: 1957.employee representative.Member of the Board since 1995.position: property Manager.education: engineering qualification.Holding: 5,320 shares.

Born: 1969.employee representative.Member of the Board since 1998.position: Machine operator.education: structural engineering qualification.Holding: –

Born: 1976.employee representative.Deputy member.position: Machine operator.education: Financial qualification.Holding: –

Kent mossberg magnus Jonsson Henrik smedlund

Born: 1947.Chairman of the Board.Chairman of the Board since 2006,member of the Board since 1982.education: Financial qualification.Holding: 3,516,856 shares, of which 1,607,616 a-shares.not independent in relation to major owners.

Born: 1961.Ceo of HL Display aB. Member of the Board since 2006.education: Master of science in economics and Business administration.Holding: 13,200 shares. 287,252 employee options. 242,500 warrants. not independent in relation to the company.

Born: 1952. Member of the Board since 2001.position: industrial advisor, ratos aB.education: Master of science in economics and Business administration. other appointments: Chairman of the Board in Haglöfs aB and Diab aB. Member of the Board in Lindab aB, eDB Business partner asa and Lagerstedt och Krantz aB.Holding: –not independent in relation to major owners.

Born: 1945.Member of the Board since 2006.education: Master of science in economics and Business administration. Harvard Business school (isMp). other appointments: Chairman of the Board in engelhardt & Co aB, Magnificent solutions aB and Björneruds gård aB. Member of the Board in spendrups Bryggeri aB, ColopLus aB and ecoclean a/s.Holding: –independent member.

anders remius gérard Dubuy stig Karlsson Åke modig

Born: 1951. Member of the Board since 2007.education: Master of science in economicsand Business administration. other appointments: Chairman of the Boardin Hermods aB and Twentyfourseven aB. Member of the Board in Biovitrum aB, sBC sveriges Bostadsrätts Centrum aB, swegro aB, Tema arkitekter aB, swedsec aB, Catella Capital aB, amplion aB and JLT risk solutions aB.Holding: 8,000 shares.independent member.

Born: 1965.Member of the Board since 2008.position: entrepreneur, Ceo of Tennstar Holding aB.education: Financial and technical university qualification.other appointments: Chairman of the Board in Fintl ytbehandlingsfabrik aB. Board member of örebo Läns Flygplats aB.Holding: 4,000 sharesindependent member.

Born: 1953.Member of the Board since 2008.education: Master of engineering.other appointments: Chairman of the Board in nefab aB, san sac aB, plastprint aB andschuchardt Maskin aB. Board member ofnolato aB, oeM international aB andHandelsbanken region east sweden.Holding: 2,000 shares.independent member.

Born: 1973.Member of the Board since 2009.position: investment Director ratos aB.education: Master of science in economics and Business administration.other appointments: Member of the Board in Haglöfs and arcus gruppen.Holding: -not independent in relation to major owners.

mats-olof Ljungkvist anna ragén Lars-Åke rydh susanna Campbell


senior eXeCuTives

Born: 1961.Managing Director.employed since: 1995.education: M. sc. economics. Holding: 13,200 shares. 287,252 options. 242,500 warrants.

Born: 1966.Financial Director.employed since: 2009.education: M. sc. economics. Holding: 37,500 warrants.

Born: 1969.operations Director.employed since: 2007.education: M. sc. economics. and MBa.Holding: –

Born: 1966.Marketing Director.employed since: 1992.education: M. sc. engineering.Holding: 800 shares. 49,500 warrants.

gérard Dubuy per sundqvist xavier volpato Håkan eriksson

Born: 1949.Human resources Director.employed since: 2000.education: B. sc. economics.Holding: 49,500 warrants.

Born: 1961.Development Director.employed since: 1999.education: M. sc. economics. Holding: 13,200 shares. 49,500 warrants.

Born: 1964.iT Manager.employed since: 2007.education: B. sc. economics.Holding: 12,500 warrants.

Born: 1967.group supply Chain Manager. employed since: 2009.education: M. eng. and MBa.Holding: –

staffan Forslund Birger nilsson elisabeth Tylstedt marc Hoeschen

senior executivesHL Display annual report 2009 77

Född 1968. auditor in charge and authorised public accountant (Far srs).other assignments: auditor in charge in iBs aB, pricer aB and Tilgin aB.

auditorKpMg aB stockholm.auditors since 2004.realected at the agM 2008 for the next four-year period.

Åsa wirén Linder


History HL Display annual report 2009 78

HisTory

HL Display’s history started in Borlänge, sweden, in 1954 by Harry Lundvall. His first product for shops was a plate stand made of shaped metal wire. in due course, by hotbending plastic he also produced an item for displaying the price next to the product.

In 1969 Harry’s son Åke westberg took over the business, which was at the time turning over about seK two million and had five employees.

In 1975 Åke westberg obtained a patent for the shelf edge strip that he had developed. The HL Datastrip is the product for which HL Display is still best known, and it remains an important part of the product range. The patent was the breakthrough for HL Display. The largest swedish retail chains recognised the benefits of Åke’s solution, and they soon became major customers.

In 1977 Åke westberg’s daughter Lis remius and her husband anders remius started a sales company that mainly sold products from HL Display’s product range.

In 1986 Lis and anders remius bought HL Display from the investment company parcon, which had acquired the company from Åke westberg in 1982. They recognised a potential in HL Display that they wanted to develop themselves, including the establishment of sales companies in other countries.

International expansion began in 1987. sales abroad had previously been channelled through direct sales and distributors, but now HL Display set up its own sales companies in Belgium and the uK. sales companies were then set up in germany in 1989, and in norway and France in 1990.

at the turn of the year 92/93 the company completed its first company acquisition, with the purchase of Jegab Display. since then HL Display has acquired a number of smaller companies, which have strengthened the product range or added expertise within a specific field of production technology.

In 1993 HL Display was listed on the stockholm stock exchange.

From the mid-1990s international expansion continued in line with the rapid growth of the retail trade. sales companies were established in poland, austria, the Czech republic, Latvia, russia and Turkey. in 1996 a partnership was set up with Trion industries as a means of entry into the american market. international expansion continued in line with the rapid growth of the retail trade.

In 2000 and 2001 the number of sales companies in eastern europe was augmented with new ones in ukraine, slovenia and slovakia. During 2000 HL Display also began to look further to the east, towards southeast asia. Many of the company’s customers, such as Carrefour, already had a presence in several major asian markets. it was therefore natural for HL Display to have its own

presence in these markets. The first asian company was launched in 2000 in singapore, and it now serves as the hub of HL Display’s activities in the region.

In 2002 and 2003 expansion continued apace in asia, with new companies being established in Hong Kong, Malaysia, Taiwan, Thailand and China.

In 2005 HL Display was awarded the title public Company of the year by the financial newspaper Dagens industri and the swedish shareholders’ association.

at the 2006 annual general Meeting anders remius was succeeded by gèrard Dubuy as Ceo of HL Display. anders remius’ commitment to the company continues, now as the Chairman of the Board.

in 2006 production started up at HL Display’s factory in China, situated in suzhou, to the northwest of shanghai. Local production is a very important step to increase competitiveness in the region.

During 2007 HL Display made two acquisitions in Finland; Display Team, a leading supplier of merchandising solutions to brand manufacturers, and sooni, HL Display’s previous distributor in Finland.

In 2008, HL Display acquired its Bulgarian distributor. The 2007 annual report won the nasdaq oMX’s competition for the best annual report, small Cap company class.

In 2009 the British company ppe Ltd. was acquired, which is HL Display’s biggest acquisition so far. a sales company was started in Dubai as a first entry into the Middle east market.

a regional logistics centre was opened in Hungary.


FinanCiaL inForMaTion

HL Display will publish financial information on the following dates during 2010: annual report 2009 week 13annual general Meeting, Factory, nacka strand 22/04/2010interim report 3 month 2010 22/04/2010interim report 6 month 2010 21/07/2010interim report 9 month 2010 29/10/2010

www.hl-display.comall relevant financial information about HL Display is available on the company’s website, www.hl-display.com, under the “investors” tab. The website also provides a comprehensive overview of the company. interim reports are available in swedish and in english. The website also includes an archive of monthly and interim reports dating back to 1997 and an archive of annual reports dating back to 1996. Financial information can be ordered by using the order form available on the website. it is also possible to subscribe to information from the company.

Distribution of annual reportHL Display prints and distributes the annual report to all shareholders.

Ir Contactyvonne Cedergrenphone: +46-8-683 73 48email: [email protected]

produced by ir stockholm and HL DisplayDesign: John Blomqvistphotography: Magnus Fondprinting: wassberg+skotte Tryckeri

press releases in 200921/12/2009 HL Display acquires British ppe Ltd.25/11/2009 HL Display opens sales company in the Middle east12/11/2009 HL Display brings new technology to the shelf21/10/2009 interim report January-september 200916/07/2009 interim report January-June 200920/04/2009 interim report January-March 200906/04/2009 HL Display aB (publ) gives notice03/04/2009 annual general Meeting HL Display aB (publ) 200902/04/2009 HL Display aB (publ) revises the sales forecast10/03/2009 annual report 2008 HL Display aB (publ)26/02/2009 extraordinary general Meeting HL Display aB (publ)05/02/2009 HL Display aB (publ) appoints per sundqvist as Financial Director 27/01/2009 extraordinary general meeting 25/02/200922/01/2009 year-end report 2008 HL Display (publ)


HL DIspLay aB • P.O. BOX 1118 • CYLINDERVÄGEN 18 • 131 26 NACKA STRAND • SWEDEN • TEL +46 8 683 73 00 • FAX +46 8 683 73 01www.hl-display.com

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