HL Display Corporate Report 2012

Content

03 The yeaR in bRief

04 hL DispLay – an oveRview

06 sTaTemenT fRom The Ceo

08 hL DispLay’s sTRaTegiC DiReCTion

10 hL DispLay’s offeRing

14 pRoDuCT DeveLopmenT anD Design

16 hL DispLay’s maRkeTs

20 DeLiveRy oRganisaTion

23 hL DispLay’s empLoyees

25 hL DispLay anD CoRpoRaTe ResponsibiLiTy

29 finanCiaL RepoRTing

30 Risks anD sensiTiviTy anaLysis

31 CoRpoRaTe goveRnanCe of hL DispLay gRoup

35 boaRD of DiReCToRs

36 senioR exeCuTives

37 five yeaR summaRy

37 DefiniTions

38 hisToRy

This corporate 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.

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• net sales amounted to msek 1,657 (1,643).

• operating profit amounted to msek 103 (63).

• profit before tax was msek 70 (24).

tHe year in brief

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first quarterin february, the first step in the overhaul of the eRp systems structure was completed as the new eRp system in the produc-tion facility in gliwice went live. The rollout will continue over the next couple of years and will contribute to higher efficiency and cost effectiveness in all the company’s key processes.

seConD quarterThe production that previously took place in karlskoga is now up and running at full capacity in gliwice, poland. at the same time, the relocation of the production that took place in falun to gliwice continued.

hL Display launches facer™. it is a system that greatly streamlines store work in labor-intensive product categories.

tHirD quarterhL Display took the first steps in China booster, a project aimed at creating the prerequisites for increased sales i China.

hL Display launched a new merchandising system, next™. This is a flexible system that allows attractive product presentation for even the most difficult-to-display goods, such as bagged salad.

fourtH quarterDuring the fourth quarter, parts of the extensive changes that the company is currently making have moved into the final phase. This includes the production review, which brought the first positive effects in the form of lower production costs.

Key ratios 2012 2011 2010 2009

net sales for the group, msek 1,657 1,643 1,617 1,360

operating profit, msek 103 63 64 86

profit before tax, msek 70 24 29 84

profit after tax, msek 42 18 18 58

ebiTa margin, % 6,3 3,9 4,1 6,3

equity/assets ratio, % 55.8 53.3 50.6 44.0

average number of employees 1,162 1,158 1,102 836

1) pro forma.2) excluding ppe, that was consolidated from 31 December, 2009.

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HL Display is europe’s leading merchandising company. With expertise in the retail sector and a local presence in 47 markets, HL Display helps customers around the world to create attractive in-store environments.

hL Display was founded in 1954. since then, hL Display has evolved into an international company with operations in 47 markets in europe, the middle east and asia. 35 of these markets are serviced by hL Display’s own sales companies, while 12 are serviced by distributors.

hL Display has a turnover of more than sek 1,650 million and just over 1,100 employees. The Company has been owned by the publicly listed swedish private-equity company Ratos since 2010.

HL Display’s customers are retailers (food and non-food) and brand manufacturers, who supply the products sold in stores.

most of the world’s leading retail companies and brand manufacturers are customers of hL Display.

hL DispLay – an overvieW

HL Display helps retailers to increase the profitability of their stores.

The Company provides in-store communication and merchandising products and concepts that help to increase store sales and create a more efficiently functioning store.

HL Display helps brand manufacturers to attract consumers’ attention and increase sales.

with products and tailored solutions for merchandising on the shelf and in other parts of the store, hL Display helps customers build their brands and ensure that their products stand out.

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wHL Display has its own efficient production with a large number of manufacturing methods, which represents a key competitive advantage.

The Company has four factories, which are located in sweden, poland, the uk and China. most of the products and solutions offered by the Company are manufactured in its own factories. Regional logistics centres at nine locations around the world ensure customers receive fast delivery and good service.

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HL Display’s operations around the world

own sales companies Distributors factories Logistic centres

australia/ new Zealand austria belgiumChina (hong kong)China (shanghai)Dubaifinlandfrancegermanyhungaryindia

indonesiaLatvia/LithuaniamalaysianetherlandsnorwaypolandRomaniaRussia serbiasingaporeslovakiaslovenia

south koreaspainswedenswitzerlandTaiwanThailandThe Czech RepublicTurkeyukraineunited kingdom

bulgaria brazilDenmarkestoniagreeceicelandirelandisraelitalykazakhstanmaltasouth africa

China (suzhou) poland (gliwice)sweden (sundsvall) united kingdom (harlow)

China (shanghai)france (Tours)hungary (györ)poland (gliwice)Russia (moscow) singaporesweden (falkenberg)The united arab emirates (Dubai)united kingdom (harlow)

HL Display achieved significant earnings growth in 2012 in a market clouded by uncertainty. the Company has also begun to see the first results of the large-scale change programme currently being implemented.

Recent years have been characterised by major changes for hL Display. we have probably made the most extensive changes to operations in the Company’s history. The purpose of the changes is to increase our efficiency and we are doing so for two reasons. firstly, we must become more efficient in order to increase capacity and reduce costs. The second reason is even more impor-tant. we must become more efficient in order to provide customers with a faster and better service. in fact, speed is of the essence. Customers should expect to receive quotes and prototypes more quickly, and they should also expect production and delivery to be faster.

new production structurewe are now beginning to see some parts of the work moving into the final phase. This includes the production review, which brought us the first positive effects in the form of lower production costs during the year.

after previously having eight factories, we have consolidated production in four factories: sundsvall (sweden), gliwice (poland), harlow (uk) and suzhou (China). The last step, which involved moving production from falun to gliwice, was completed in 2012. production in gliwice already meets the quality levels we had prior to the move. now we will carry out further work to increase multi-material production capabilities, speed and quality in gliwice. This will let us realise one of the goals of the production transfer – to provide customers with even better and faster service.

after the implemented changes, we have two factories – harlow and gliwice – which encompass all the production skills required to meet the needs of brand manufacturers. This is an important part of our focus in this customer segment.

they are able to spend more time with customers. as with other measures, this is based on the fundamental principle that we must improve customer service, and an important way to do so is to be out there with them. This will also create the conditions for increased sales. These changes will be implemented during 2013.

increased sales during the yearThe cautious optimism in the market which characterised much of 2011 waned at the end of the year and there was a return to uncertainty in 2012. it should be said that it has been difficult to see any clear trends in our particular market during the year. The situation has differed from geographical region to region and there have also been significant differ-ences between individual countries in the regions. we have found that customers are generally a little more cautious with their investments, but here again the situation differs greatly from country to country. our sales amounted to sek 1,657 million, which is an increase of 1 percent compared with 2011.

significant improvement in earningsoperating profit increased by 63 percent to sek 103 million in 2012, despite the uncertain market. This is very encouraging as it is clear evidence that our measures are delivering results. at the same time it is important to remember that we still have some way to go to our long-term financial goals.

There are several reasons for the improvement. in 2012, we had somewhat fewer extraordinary costs associated with production relocation than in the previous year. we have also been restrained in the area of operating expenses. we have started to see some effects of the production changes, and this has had

Change pRogRamme bRings positive effeCts

new business processesin addition to the changes in gliwice, 2012 was marked by continued work on improving our business processes. This is done in connection with our implemen-tation of a new eRp system, an initiative which began in 2011. we analysed how we could become more efficient in all parts of our operations. The result is that most parts of our operations now have changed business processes and we have an eRp system that supports these processes. we have started the extensive work of implementing them in our operations, a process which will be carried out gradually and completed by the end of 2014.

the next stepwith some parts of the change process nearing the final phase, we took the next step in 2012 which involves work-process changes to the sales organisation. in short, this concerns organisational change aimed at minimising the time sales staff devote to administrative tasks; in other words ensuring that

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a positive impact on earnings. we can also expect further positive effects over the next few years. The combination of increased sales and improved gross margins has also had a beneficial effect on earnings.

positive growth in the uK regionLooking at sales in our different regions, i can say that one region performed very well, three regions showed acceptable performance and one region fell below expectations.

The uk region experienced very positive growth during the year. sales increased by 14 percent and hL Display continues to strengthen its market position.

strong growth in norwayThe north europe region had quite a difficult start to the year but recovered well. overall sales decreased by 2 percent. growth in norway has been strong however, with a sales increase of 29 percent.

Measures in asiaThe asia/pacific region made a good start to the year in terms of growth. however, the trend reversed towards the latter part of the year, leaving sales growth at 13 percent in 2012.

This growth figure is below our expec-tations and we have therefore taken the first steps in our China booster project, which is aimed at creating the conditions for increased sales in China. The logistics centre has been moved from singapore to shanghai, and we have strengthened the management function in the country ahead of the continuing work.

strong growth in russiasales in the east europe region increased by 5 percent in 2012. The overriding reason for this was that we experienced substantial growth in the Russian market, with a 21 percent sales increase compared with the previous year.

sales decline in south europeThe south europe region showed disappointing growth and sales declined by 12 percent compared with 2011. many of the countries in the region, such as greece, portugal and spain,

are affected by the crisis in europe. This is clearly reflected in our sales in those countries. in france, hL Display’s second-largest individual market, the trend was also negative during the year. however, we shall take action in 2013 to ensure that we do everything possible to reverse the trend in the face of a market situation that remains difficult.

exciting new launcheswe also launched some exciting new products in 2012. The first, which we call facer™, was actually launched in all stores of one of the leading retailers in uk in 2011, but had its global launch this year. it is a shelf organisation solution for bottles, mainly designed for wine depart-ments. we have received very positive feedback for facer™ due to the significant time savings it creates in the store. in simple terms, the staff spend less time on stock-counts, refilling shelves and facing up.

The second launch is the next™ display system. This is a flexible system that allows attractive product presentation for even the most difficult-to-display goods. it is also suitable for displaying products in refrigerators and freezers.

Continuing development work in new technologywe are also continuing our efforts in the area we call new technology. our products in digital signage, ad’pulse™, have been further developed during the year. This is a market that is still in its infancy, but it appears to have an interesting future. we have a strong position in this area, with attractive products and software.

our system for ambience lighting on the shelf has also undergone further develop-ment. it is now based on energy-efficient and reliable LeD technology, which has increased demand significantly.

building the HL Display of the futurewe are currently facing an uncertain market situation and it is difficult to predict how it will develop. we are obviously working to create the conditions for increased sales, and our efforts include the measures implemented in

the sales organisation. at the same time, we are adopting a cautious approach because of the market situation.

alongside our budget process, we went through a cost-reduction programme in autumn to ensure that we entered 2013 with the right cost model. This was an extensive task, which involved going through the entire company to lower our operating costs. it leaves us able to maintain good preparedness in uncertain times.

meanwhile, we shall continue our forward-looking work to strengthen our operations.

we have already carried out the most significant changes. we now continue the on-going improvement process and i believe that we have a few years left before the work is completed.

The change process means large investments for hL Display, both in terms of money and the time the organi-sation spends. The changes we have made, and still do, require a great deal of commitment from the entire company. i would like to say thank you to my staff at hL Display. without their enthusiasm and hard work these changes would not have been possible. Together we are building the hL Display of the future, a company that will be even more efficient and competitive than today.

nacka strand, march 2013Gérard Dubuypresident and Ceo

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in 2012, HL Display continued the change programme that was initiated in 2010. the programme involves focused efforts to streamline operations and offer customers an even faster and better service.

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hL Display’s business concept is to increase its

customers’profitability by offering the retail sector and brand manufacturers cost-efficient products and solutions

for in-store communication and merchandising. The focus is on making

products and solutions adaptable to customers’ specific needs.

business ConCepT

To create attractive and selling in-store environments

that enhance the customer’s shopping

experience.

mission

GROWTH %

20122011201020092008

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EBITA MARGIN %

20122011201020092008

6.4

Goal 12%

4.1 3.9

6.3

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Organic growthGoal for organic growth 5-10%Acquisition

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hL DispLay’s strateGiC DireCtion

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nfinancial goalhL Display strives for profitable growth, where profitability is a priority. fulfilment of the Company’s profit target creates room for investments to strengthen its leading position in the industry, and ensures a good return for the owner. – hL Display’s profit target is to achieve an annual ebiTa

margin of 12 percent in the long term. – hL Display’s growth target is annual organic growth of

5-10 percent.

strategieshL Display employs the following four main strategies to achieve the company’s targets. 1. focus on three primary customer segments – food retail,

non-food retail and brand manufacturers.2. prioritise design and innovation for the purpose of

setting new standards. product development must be customer-driven.

3. streamline and adapt the organisation to market requirements and needs.

4. strengthen the market position and product range by means of acquisitions.

The main strategies are broken down into ten strategic initiatives. These are clearly defined strategic areas with detailed action plans and careful evaluation. in several cases, the changes currently being implemented at hL Display have been based on these strategic initiatives.

Core valuesCustomer focus – hL Display focuses on providing customers with added business value and increasing their profitability. a high level of service and commitment leads to increased customer satisfaction, which is the Company’s main priority.

innovation – hL Display is proud to develop new and innovative solutions. hL Display sees this as a natural responsibility for a market-leading company and explores every opportunity to find solutions to new and old problems.

quality – hL Display does what it does well. The Company consists of professional employees who work hard to improve the delivery to customers. The quality of the Company’s products and services must be beyond question.

expertise – hL Display is a global expert in in-store communication and merchandising. The Company has long experience as a problem solver and supplier of solutions that address customers’ needs, and fully understands the intricacies of retailing.

Change programme for increased customer valuehL Display is currently implementing a change programme aimed at increasing efficiency in all its business processes. for hL Display, this is about being even better at meeting customers’ needs, and in turn providing them with added business value. in this area, customer surveys have been a natural way of listening to what customers want.

a key part of the change process is about creating shorter lead times. hL Display wants to provide customers with a faster and better service throughout the chain – from quotation request to delivery of the finished solution. it is in this context that investments in changed business processes and associated iT systems are important. with the support of the new iT system, hL Display has access to new working methods that can streamline operations – from giving salespersons more time with customers to improving stock control. a changed production structure and investments in new machinery create opportunities for shorter lead times in production.

quotation

prototype

Customer need

production and delivery sales work

HL Display’s core processes

in meeting customer needs

order Customer enquiry

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with hL Display’s solutions, retailers – both food and non-food – are able to increase the profitability of their stores. The solutions facilitate and streamline the functioning of the store, creating the conditions for increased productivity and reduced payroll costs. at the same time, retailers are able to create attractive in-store environments and product presentations that help to increase sales. The solutions also provide retailers with tools to constantly renew their stores and differentiate themselves from competitors, which plays a key role in retaining existing customers and attracting new ones.

The offering consists of merchandis-ing and in-store communication solutions and complete concepts for displaying

that was first placed on the shelf is also the first one to be picked by the consumer. hL Display has solutions that enable customers to improve the efficiency of their work in all the impor-tant product categories in the store.

MerchandisinghL Display’s merchandising solutions are aimed at presenting products in an attractive way that encourages purchasing, thereby increasing store sales. however, there are other aspects that are equally important in retailing. payroll is one of the largest cost items in a store. hL Display’s solutions help to reduce the time, and therefore payroll costs, spent on tasks such as replenishing and maintaining orderly

hL DispLay’s offeRing foR retaiLers

products, such as different product categories.

Conceptswith extensive retail experience and expertise, hL Display is a natural partner when its customers want to create concepts that meet the special challenges within different product categories. some categories, such as confectionery, are driven by impulse buying. These categories require an attractive central display to make the products stand out. in other categories, such as chilled products, the challenge may instead be to reduce the number of items that are discarded due to age. efficient feed systems are important here, in order to ensure that the product

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divider and automatic feed systems are good examples of these solutions. products automatically advance to the shelf edge in the correct order, which results in an attractive, well-stocked display. as the product feed is auto-matic, staff spend less time on shelf management.

in-store communicationhL Display’s in-store communication solutions provide stores with all the tools they need for clear overall information in the store. These solutions are concerned with creating an in-store environment that enables consumers to easily find the depart ments or product categories they want.

hL Display’s in-store communication solutions also help stores to give consumers all the necessary information relating to a product. with clear price information and details about promo-tions and special offers, it is easy for the consumer to choose the right product.

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next™

next™ is one of hL Display’s new merchandising systems. next™ replaces the traditional shelf with a metal structure which allows more goods to be displayed on the same surface. This is a flexible system that allows attractive product presentation for even the most difficult-to-display goods, such as bagged salad. it is also suitable for displaying products in chilled units and freezers. The automatic product feed system makes the shelves always look well stocked.

faCer™

facer™ is hL Display’s new solution for organising shelves in wine departments. The solution consists of a steel frame that holds the bottles in place on the shelf. The product has been very well received by customers, as it reduces labour costs in the store. staff spend less time on stock-counts and replenishing shelves. at the same time, product presentation is more attractive in that the bottles are in straight lines and at the shelf edge.

ad’Lite™

hL Display has a market-leading offering in digital signage and lighting for store shelves.

one of the great strengths here is power track™, hL Display’s unique solution for bringing low voltage power to the shelf edge. The current passes through wires that are encased in a plastic strip and can be fixed virtually anywhere on the shelf. hL Display’s digital signage and lighting systems are connected by a simple manipulation. with power Track™, a completely safe and secure installation is guaranteed, without the need for either tools or electricians.

ad’Lite™ – Mood lighting on the store shelfshelf lighting is constantly increasing in popularity in the retail sector because it is a very effective way of creating attractive product presentations, highlighting exclusive offers and enhancing the consumer’s shopping experience. hL Display’s ad’Lite™ lighting system is based on LeD technology, which means it is both energy-efficient and reliable. This means that hL Display’s customers can enhance their in-store environment, while also minimising operating and maintenance costs.

ad’pulse™ – Digital sales toolad’pulse™ is a digital screen-based sales tool for store shelves. with ad’pulse™, stores are able to communicate targeted and up-to-date messages in the consumer’s actual line of vision.

ad’pulse™ interactive contains touch functionality. This creates an interactive tool that is excellent for what we call guided selling. by making different choices and indicating their preferences on the screen, consumers are helped to choose the right product. a new feature this year is updated software that makes it even easier for store staff to create these guides.

neW teCH – hL DispLay’s DigiTaL signage anD LighTing pRoDuCTs

ad’pulse™

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hL Display’s offering is aimed at helping brand manufacturers to strengthen their brands in the store. The Company’s solu-tions create an attractive product presen-tation that attracts the consumer’s atten-tion. This also creates the conditions for increased sales.

hL Display’s solutions are often unique and tailored to the customer’s needs and preferences.

The offering for brand manufacturers consists of solutions in two areas – primary placement and secondary placement.

primary placementhL Display’s solutions for primary place-ment on the shelf help clients to present their brands attractively and make them

stand out from the many other goods on the store shelves. hL Display offers complete solutions for displaying prod-ucts and communicating messages about products to consumers – about special promotions to mark the launch of new products, for example. hL Display’s solutions also fulfil another important need for brand manufacturers. They are designed to allow customers to make optimal use of their allotted space on the shelf and to prevent other products infringing on their space.

secondary placementhL Display’s solutions for secondary placement help brand manufacturers to create attractive and selling product presentations in other parts of the store

hL DispLay’s offeRing foR branD ManufaCturers

rather than on the shelf. These may include floor stands and other special displays that attract attention and bring increased sales – during campaigns, for example. hL Display offers tailored solu-tions designed for a particular customer. This ensures that the displays create awareness and support long-term brand building. There are also solutions for cross merchandising, which involves displaying closely associated products together in order to increase sales.

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product development at hL Display consists of two parts: customised development and general development. Customised development involves creating solutions that are unique to each customer. This is of great strategic impor-tance for hL Display as it is an important part of the Company’s focus on the customer segment brand manufacturers.

general development is concerned with developing hL Display’s global range. The focus is on developing strategically important products that strengthen both hL Display’s offering and the Company’s market-leading position. This develop-ment work is carried out at hL Display’s innovation and design centres, which are located in stockholm and sundsvall. The ideas for new products are often born in cooperation with customers – improving the efficiency of certain operations in the store, for example.

regional design centresDuring 2012, hL Display maintained a clear focus on strengthening the development of customised products. one element of the work involved expanding the regional design capacity. by moving development resources closer to customers, hL Display is able to increase the level of service. This also allows shorter lead times for developing design proposals and prototypes.

Customers demand unique solutions that will support their brand building, make their brands visible in the store and help increase sales. This requires extensive and diverse competence in hL Display’s organisation. The Company’s key-account managers have an under-standing of how the customer’s brand is positioned and the values it must communicate. This knowledge, together

proDuCt DeveLopMent anD DesiGn

The aim is for each region to have a dedicated design centre. at present, hL Display has design centres in sweden (area north europe), france (area south europe), england (area uk) and poland (area east europe). a design centre is also being built in China for the asia region. The sizes of the design centres are tailored to the needs of each region.

Making ideas a reality The regional design centres work together with the sales companies in their region to implement customers’ ideas and create attractively designed products with the right functionality.

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HL ppe – Designing unique soLuTions foR CusTomeRs

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ignwith the customer’s specification, is then

translated into viable product proposals, and this requires a high level of creative concept design.

all regions follow a uniform develop-ment process, from customer specifica-tion to approved prototype. This ensures that the development process is carried out efficiently. having the same working methods and quality requirements also brings improved resource utilisation, as development projects can be moved from one region to another in the event of a lack of capacity.

for hL ppe, hL Display’s uk operations, no two products are the same. The company possesses all the design and production expertise required to create tailored merchandising solutions. its customers are both retail companies and brand manufacturers.

“we start with a blank sheet of paper,” says Jerry frowde, Design Director at hL ppe. “based on the customers’ needs we develop a bespoke solution that is best for them.”

three different proposalsThe process always starts with a brief, in which the customer gives hL Display detailed information about aspects such as the goal of the merchandising solution and how it will be used. The solution may relate to the launch of a new product or perhaps increasing sales of an existing product. with the customer’s information as a starting-point, the creative design process begins.

“we usually produce rendered visuals of three different proposals. our aim is that two of these should follow the requirements in the customer’s brief in every detail. in the third proposal, we allow ourselves more leeway and present a slightly different approach that we think is exciting.”

from concept to physical productwhen the proposal has been accepted, a prototype is devel-oped. in simple terms, this involves taking the presented concept and making it into a physical product. This phase

involves people from technical design, who produce all the detailed engineering drawings, and people from the prototype department, who manufacture the actual prototype. at this stage, the customer is also given a quote for the exact cost of the solution.

“when we develop a prototype, we use the same processes as in production. in other words, it looks and functions the same as it will when it’s produced later.”

it can often happen that several prototypes are developed. seeing the product in real life often inspires customers to come up with additional ideas.

“when the customer approves the prototype and project, the main part of our work is done and the production organisation takes over.”

unique production capacityJerry frowde believes that the company’s unique production capacity is a key competitive advantage. The company can manufacture in many different materials, including plastic, wood and metal. This offers incredible flexibility in creating the most attractive solution for the customer.

having design and production at the same location creates many benefits. The company maintains control over quality from start to finish, is able to respond to customer needs and make adjustments on the way, and – particularly important – can deliver quickly.

“in some cases, we can progress from concept to finished product in five to six weeks. This because we have a highly skilled design capacity and our own flexible production,” concludes Jerry frowde.

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HL Display is present in 47 markets around the world, with 35 of these markets serviced by HL Display’s own sales companies and 12 serviced by distributors. the market is divided into five regions, each led by an area Manager with responsibility for both sales and earnings in the region.

initiatives in selected marketshL Display made changes in its regions during the year and several smaller sales companies were merged. The sales company in Latvia/Lithuania was merged with poland, Romania was merged with hungary and slovakia was merged with the Czech Republic. in addition, the sales company in bulgaria was turned into a distributor. Creating larger units enables hL Display to reduce costs and increase sales efficiency.

at the same time, the Company is increasing its initiatives in selected markets, including Russia and China, in order to strengthen operations further. in China, for example, hL Display has expanded its sales resources to enable both large international retail chains and domestic regional chains to be serviced.

GLobaL CoMpany wiTh a LoCaL pResenCe

HL Display’s market division

area nortH europearea soutH europe/MiDDLe east area east europe area asia/paCifiC area uK

Market position

market-leading position as supplier to the retail sector.increasingly strong position as supplier to brand manufacturers.

market-leading position as supplier to the retail sector.increasingly strong position as supplier to brand manufacturers.

market-leading position as supplier to the retail sector.increasingly strong position as supplier to brand manufacturers.

market-leading position as supplier to the retail sector. position as supplier to brand manufacturers being built up.

market-leading position as supplier to the retail sector and brand manufacturers.

sales company

finlandnorwayswitzerlandserbiasloveniaswedengermanyaustria

belgiumfrancenetherlandsspainmiddle east

Latvia/LithuaniapolandRomaniaRussiaslovakiaCzech RepublicTurkeyukrainehungary

australia/new ZealandindiaindonesiaChina (shanghai and hong kong)malaysiasingaporesouth koreaTaiwanThailand

great britain

Distributors

Denmarkiceland

greeceitalymalta

brazilbulgariaestoniaisraelkazakhstansouth africa

ireland

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customershL Display focuses on three priority customer segments – food, non-food and brand manufacturers. in recent years, there has been a particular focus on strengthening the Company’s market position in the brand manu-facturers segment, and these efforts have been very productive. hL Display’s largest customer segment is food, which accounts for 42 percent of sales. brand manufacturers account for 25 percent of sales, followed by non-food with 14 percent. most of the world’s leading retailers (food and non-food) and brand manufacturers are customers of hL Display.

Cooperation with customers takes place mainly in local markets. although many food and non-food customers are large multinational companies, there is often a high degree of autonomy at local level. with its strong local presence, hL Display understands the conditions

that apply to the customer’s specific market and is able to offer a high level of service and quick help.

at the same time, hL Display’s size and the fact that the Company has a presence in many markets around the world offers unique opportunities. many large brand manufacturers, and to some extent non-food chains too, are increasingly seeking larger contracts with fewer suppliers. This is purely and simply because having one supplier that can help them in many markets provides efficiencies and economies of scale. hL Display’s operations are organised to support these customers at local, regional, and – where necessary – global level.

examples of HL Display’s customers

food retailbrand manufacturers non-food retail

aholdCarrefourmetroTescowal-mart (asda)

marsnestléL’oréalprocter & gambleunilever

as watson (drugstores)baumax (Diy)Decathlon (sports)media markt (electronics)ikea (furniture)

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SALES PER CUSTOMERSEGMENT 2012

Food retail 43%Brand manufacturers 25%Non-food retail 14%Shop-fitters 8%Distributors 5%Other 5%

HL in- store Dayhaving a thorough understanding of its customers’ reality is a cornerstone of hL Display’s business activi-ties. in order to strengthen this approach, hL Display has launched a new initiative called hL in-store Day in all markets where the company has operations. The new initiative involve management, the sales force, sales support staff and administrative staff in each country working as store staff in one of hL Display’s customers’ stores for one day during the year. This provides valuable experience of the challenges that exist in the day-to-day work in the store, experience that can form the basis of new innovative solutions. it also makes hL Display an even better partner to its customers. with the experience from practical store work the Company’s sales force can, in close dialogue with the customer, identify needs and propose solutions that improve store efficiency and help to increase sales.

hL Display’s marketshL Display’s markets encompasses a large part of the world. This means that the Company encounters different market conditions according to which part of the world its operations are in. where markets and regions have major differences, these relate to how well developed their modern retail sector is.

Markets with a developed retail sectorhL Display’s regions that encompass the european countries – north europe, south europe and the uk – are markets in which the retail sector is modern and developed. This means that numbers of new stores being built each year are relatively low. in addition, most retail segments in these mature markets are dominated by a small number of large

chains. This means that relatively few entirely new players are entering the market. in several of the countries in the east europe region, the retail sector is starting to move towards a higher level of maturity. poland, hungary and slovakia are examples of countries with a developed retail sector. however, the markets still do not have the concentra-tion on a small number of large players that other european countries have.

Markets with a developing retail sectorin many markets in the east europe and asia/pacific regions, the situation differs from that in hL Display’s european markets. The retail sector is still in a development and growth phase and the large retail chains do not have the same high market share as their counterparts in the developed markets.

Consumers in these markets, partly as a result of the growing middle class, want new, modern retail formats and are

demanding global brands. This results in a developing retail sector, with many new stores opening.

in other words, there are opportunities for players to strengthen their establish-ment in these markets. The markets in the bRiC countries (brazil, Russia, india and China) are one example. for several years they have attracted the interest of major international retail chains and many currently have operations in these markets. in parallel, the market coverage of the domestic chains is also strengthened.

Different drivers in different marketsin developed markets, there is a fierce battle for consumers, who are demand-ing attractive shopping environments. Retailers are constantly renovating stores and introducing new concepts to create stores that appeal to consumers. These renovations represent the main driver of hL Display’s sales in developed markets.

hL Display’s concept of new, unique merchandising solutions is an important

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competitive advantage in developed markets. These solutions create attrac-tive in-store environments and enable customers to increase sales. another key element is their ability to increase the efficiency of work in the store. salaries are often high and staff costs are one of the largest cost items in stores. with solutions that reduce the time spent on different tasks in the store, hL Display can help customers achieve cost-savings.

The main driver of hL Display’s sales in developing markets is the construction of new stores. in this work, customers need all the basic merchandising and in-store communication products required to open a store. as the markets mature and customer needs expand, hL Display places an increasing focus on offering its concepts in these markets.

brand manufacturers represent an attractive customer segment for hL Display, both in developed markets and developing markets. The products and solutions in demand from brand manufacturers do not differ substantially according to how developed a market

is. hL Display’s ability to offer tailored solutions is an important competitive strength in its cooperation with brand manufacturers. hL Display helps customers to produce solutions that are adapted to their unique needs and preferences.

performance in 2012hL Display’s overall sales increased by 2 percent in local currency. for the north europe region, sales were unchanged compared with the previous year. a weak performance in many individual markets such as finland and switzerland was offset by a very successful year in norway.

The south europe region was very weak during the year, with sales declining by 9 percent. most countries in the region are affected by the difficult economic situation in europe and this is having a clear impact on retail trade. figures from the eu’s statistical office, eurostat, show that the volume of retail trade for several of the region’s countries, such as greece, spain and portugal, were

considerably lower than in the previous year. This is obviously affecting hL Display’s customers, and has been reflected in the Company’s sales efforts.

Three regions showed increased sales. east europe showed an increase of 7 percent, while the uk and asia/pacific each reported 11 percent sales growth compared with the previous year.

in the uk region, hL Display has felt the benefits of several customers increasing investments in order to reno-vate their stores and make them more attractive to consumers.

The sales growth in the east europe region was largely attributable to Russia, where the retail trade is still in a phase of strong growth and many new stores are opening. at the same time, hL Display has successfully developed its efforts targeting brand manufacturers in the country. elsewhere in the region, the picture differs considerably from country to country. several countries are affected by the economic situation, which is also having an adverse impact on their retail sales.

in the asia/pacific region, the positive trend continues, albeit at a some-what slower pace than in the previous year. in several countries in the region, particularly China and india, retail chains continue to expand. however, it should be noted that several of the international retail chains have decided to deceler-ate their pace of development a little compared with their original plans. Retail sector growth is also positive in several markets. in China, for example, total retail sales of consumer goods increased by over 12 percent compared with 2011.

hL Display’s sales in the asia/pacific region increased by 11 percent compared with the previous year. hL Display experienced a lower growth rate during the final months of the year, as a result of customers’ caution regarding new investments. hL Display’s operations in China continue to develop at a faster rate than the rest of the region.

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HL Display’s ambition is to continually improve its service to customers. short, stable lead times and high product quality play a key part in this process. to achieve this ambition there must be an efficient supply chain – in everything from purchasing to production and delivery to customers.

a large part of the change programme that hL Display has been implementing since 2010 relates to the Company’s supply chain, in particular production. The overall aim has been to increase the Company’s competitiveness. This will be achieved partly by making it more cost effective and partly by increasing the level of service to customers.

new production structurehL Display has changed its production structure in recent years. The Company now has four factories, which are located in sundsvall (sweden), harlow (uk), gliwice (poland) and suzhou (China). in the new production structure, the focus has shifted from process-oriented factories, i.e. factories that specialise in one or more manufacturing processes,

DeLivery orGanisation

to product-oriented factories. This means that the factories will have the production processes required to produce a product from start to finish. This is important in order to meet the brand manufacturers’ requirements for customised products with short lead times. The only remaining process-oriented factory is sundsvall, which specialises in automated production in extrusion and injection moulding of plastics.

The factory in harlow is tailored to meet the needs of brand manufacturers. it has all the expertise needed to develop unique solutions for customers, whether the material is plastic, wood or metal. The factory in gliwice is structured on the basis of a similar model and has exper-tise in areas such as injection moulding and printing. This is complemented by a

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in areas such as metal and woodworking. in suzhou, work has begun to expand

production by adding more production processes. This is already a highly effi-cient factory and a broader production capacity will enable it to meet all the needs of the asian markets.

increased delivery reliability The bulk of the work in 2012 involved the transfer of the falun production to the new factory in gliwice. This was the second and final stage of the production transfer and marks the end of a 24-month-long process. The first step was completed in 2011 when production from the karlskoga factory was moved to gliwice. production is now carried out with considerably better efficiency

than before the transfer. The average lead time has dropped from approx. 15 days to 10 days and delivery reliability is above 98 percent. for customers, this means shorter and more predictable delivery times.

Lower costs bring increased competitivenessThe new production structure is producing additional benefits for hL Display. having fewer but larger production facilities creates the conditions for increased profitability. by optimally locating its factories, hL Display has also improved the cost structure of production, making it even more competitive.

at the same time, further productivity-increasing initiatives are in progress at all the factories. These are based on the concept of lean manufacturing. in simple terms, lean manufacturing is an approach aimed at optimal handling of resources. it is about identifying and eliminating factors in the production process that do not bring added value to the customer. maintaining a high level of investment in new machinery also contributes to improved productivity.

purchasing and logisticsin addition to the production initiatives, an extensive change programme is in progress in the other parts of the supply chain, namely purchasing and logistics. at the heart of the programme is hL Display’s project to establish uniform business processes and introduce a new eRp system. This will give the Company brand new tools for streamlining its working methods.

regional logistics centreshL Display has operations in 47 markets around the world, which presents a considerable challenge for the Company’s logistics solutions. The logistics structure is built around regional logistics centres in selected strategic locations. with this regional approach, hL Display aims to

21

generate maximum transportation and warehousing efficiency, thereby creating cost benefits for the Company and a high level of service to customers.

in 2012, hL Display established a new logistics centre in the Chinese city of shanghai in order to improve the efficiency of the growing number of the Company’s sub-suppliers in the country. The new logistics centre will be responsible for distribution of products from these sub-suppliers to all asian subsidiaries. hL Display has also moved the logistics centre in Tours, france, to new premises, resulting in significant improvements to the operations. both the working environment and productivity have been positively affected.

Lead times in focusLead times are constantly in focus within the area of logistics. This involves constantly improving operations in order to provide customers with shorter delivery times, which is an important competitive tool for hL Display. During the year, the Company introduced a new monitoring system to be used by all facto-ries and logistics centres. This measures both lead times and hL Display’s perfor-mance in meeting the delivery date agreed with the customer. During 2012 delivery lead times to customers have been reduced by more than 20 percent.

The implementation of the new eRp system and uniform business processes creates new scope for improving opera-tions – improvements that will benefit customers. They can, for example, expect accurate information about their order status and an exact date on which the order will be delivered.

Centralised purchasing processhL Display has a centralised purchasing process at present. all agreements with strategic suppliers are negotiated by centrally positioned lead buyers. purchasing includes production inputs and finished components of hL Display’s products. The lead buyers draw up frame-work agreements which ensure that hL Display obtains the best possible conditions, both in terms of payment and delivery time.

The logistics centres and factories

each have their own regional purchasing managers and buyers. They have respon-sibility for managing purchasing in their region or factory in accordance with the centrally negotiated framework agree-ments. They also identify and negotiate with local suppliers.

a stronger supplier base and increased control were key concepts in 2012. in particular, hL Display has identified new partnerships with suppliers near the factory in gliwice, which will support operations there in various ways. This has been very successful and has resulted in cooperation initiatives that hL Display can utilise in other regions. it is hL Display’s aim to channel the highest possible proportion of its purchasing to selected strategic suppliers. with larger volumes,

hL Display will have a higher status as a customer, resulting in better terms and service.

hL Display maintains careful control and monitoring of its day-to-day business to ensure that it supports the Company’s purchasing strategy. The local suppliers that hL Display wishes to engage in the regions must be validated centrally. This ensures that the prices and other terms are in line with the Company’s other collaborations. hL Display also continuously monitors the suppliers’ performance in areas such as delivery times and achievement of their own key financial targets. This creates continuous improvement efforts which benefit both hL Display and its customers.

HL DispLay’s reGionaL LoGistiCs CentreshL Display’s regional logistics centres handle purchasing, administration, warehousing and distribution for the sales companies in the region. The centres also offer services that provide added value for customers, such as assem-bly or co-packing of goods according to their requests.

hL Display has logistics centres in falkenberg (sweden), Tours (france), gliwice (poland), györ (hungary), moscow (Russia), harlow (uk), Dubai (united arab emirates), shanghai (China) and singapore.

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HL Display strives to be a preferred employer, providing its employees with challenges and development opportunities in an international environment. this results in skilled and dedicated employees who create value for both HL Display and its customers.

at the heart of hL Display’s employee development work is the online-based tool for performance appraisals, hL plus 2.0, which was launched in 2011. with hL plus, employees are given clear work objectives, which are followed up in the biannual performance appraisals. in addition, a long-term development plan is drawn up jointly by the employee and his or her manager.

hL plus 2.0 was implemented around the world during 2012 and all managers have received training in use of the tool. The aim is that all administrative staff within hL Display will be covered by hL plus 2.0 in 2013. These represent about 700 of the Company’s total employees (just over 1,100). in a few years’ time, hL plus 2.0 should be intro-duced for all the group’s employees.

for the sales organisation, the hL plus 2.0 targets are linked to key ratios showing how work efficiency is performing. These key ratios are also used as a basis for the variable component of the salary in the new salary model that has been

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employee facts 2012 2011

number of employees as of December 31 1,175 1,168

gender structure, % male 61 62

female 39 38

education level, % university 40 36

upper secondary school 40 38

Compulsory school 20 26

investment in staff training Total, msek 2 4

per employee, ksek 2 4

Costs related to health promotion activities per employee, ksek 1 1

number of workplace accidents leading to absence or sick leave 33 n/a

*The increase in the number of employees compared to 2011 is a result of a temporary double staffing related to the production move to gliwice.

*

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form of an annual employee review for all staff at hL Display. This is partly based on the information that emerges from the hL plus performance appraisals. in addi-tion, each manager gives an assessment of the employee’s aspirations and ability to take on new challenges and positions, both in the short and long term.

nurturing talentone of the main reasons behind the annual employee review is to identify and develop individuals who want to make a career within the Company. They need to know that there are clear development paths and opportunities to take on exciting new assignments.

This also strengthens the basis for inter-nal recruitment, which is a preferred form of recruitment for hL Display. maintaining a high proportion of internal recruitment ensures a strong corporate culture and reduces risks associated with recruitment.

The fact that there are good inter-nal career opportunities also reinforces the image of hL Display as an attractive employer, which is important in order to attract the most competent staff.

The second aspect of the work is about ensuring that there is succession plan-ning for the employees identified as key individuals in the Company. These are not necessarily individuals in manage-ment positions; they may also be other employees with strategic skills that may be difficult to replace. all the individuals in key positions are identified in the annual employee review, and succession planning is then carried out.

improved recruitment quality one priority area in 2012 was to increase the quality of the recruitment process, thereby reducing the risk associated with recruitment for key positions. The Company’s initiatives in this area included introducing new tools for testing and evaluating candidates’ aptitude and personality. This provides extra support to ensure that the candidates selected have the right skills and qualities for the position. The tests are used in all recruit-ment for senior positions, key account managers and the newly created role of customer project manager.

successful knowledge transferas in the previous year, one of the major challenges for hL Display’s hR depart-ment concerned the expansion of production, logistics and development operations in the polish city of gliwice. ensuring that hL Display gets the right skills and that new employees are able to settle in quickly has presented a consid-erable challenge for those involved in the local recruitment process.

The skills transfer project was completed in 2012, which meant that former employees at the falun factory were working on site in poland. They were contracted in connection with the transfer of production from falun to gliwice to ensure a smooth knowledge transfer. The successful project has been a contributing factor in the achievement of a high level of production quality and efficiency at an early stage.

introduced for the sales force. The basic salary is somewhat lower in the new model. however, the variable component provides opportunities for employees to achieve higher salary levels than before. The model is being introduced gradually and takes into account all the legal requirements in each particular country.

annual employee reviewin 2012, hL Display has further strength-ened the process of working strategically with the talent base within the Company.

There is at present a well-structured programme led by the group’s human resources department, which takes the

NUMBER OF EMPLOYEES

AsiaOther EuropeSweden

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206

317

438

72

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AsiaOther EuropeSweden

WomenMen

AGE DISTRIBUTION

>6051-6041-5031-4021-30<20

170

19

200

52

104

69

289

5

84

39

18

105

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iTy hL DispLay anD Corporate responsibiLity

hL Display’s corporate responsibility programme is decided by the board of Directors. The programme has been intro-duced at group management level and the work is headed by the Company’s product Development Director, with the support of group management colleagues. The group’s local entities have a high level of responsibility for day-to-day sustainability work. The production facilities in particular have special responsibility with regard to environmental issues.

hL Display has developed guidelines for the work undertaken in areas such as social responsibility, environment and ethics. hL Display’s Corporate Responsibility policy forms the basis of the Company’s work in these areas. it is discussed and renewed every year by the board. The policy also

25

interacts with other policies governing corporate responsibility work. These include hL Display’s Code of Conduct, environmental policy, work environment policy, purchasing policy and the common operational policy for the production facilities.

hL Display has been a participant in the un global Compact since 2010. hL Display’s president and Ceo, gérard Dubuy:

“At HL Display, we continuously drive for improvement in the area of corporate responsibility. Through our membership in the United Nations Global Compact, we clearly demonstrate that we support the UN’s fundamental values and principles in the areas of human rights, labour, environment and anti-corruption.”

ethics and social responsibilityhL Display’s Corporate Responsibility policy defines the fundamental guidelines that the Company follows in the areas of human rights, gender equality and discrimination, and anti-corruption.

equal opportunitieshL Display is a multicultural company. it therefore goes without saying that the Company will endeavour to give all its employees equal opportunities for professional development, promotion and pay growth, regardless of background, gender, race or age. The Company also respects the right of employees to organise and bargain collectively.

Health and safety at workhealth and safety is monitored continuously at hL Display’s facilities. health risks at the Company are mainly associated with production. hL Display’s preventive work is aimed at ensuring safe workplaces with a good working environment. The Company regularly updates its safety procedures and examines different risk factors. hL Display has established

processes which are designed to provide local managers, mainly at the production facilities, with methods for optimal management of sickness absence. The number of workplace accidents leading to absence or sick leave in 2012 was 33. no fatal accidents occurred.

Zero tolerance to corruptionCorporate responsibility risk analyses have identified corruption as the area in which the Company faces the greatest risks. Risks are mainly associated with purchases made in local markets. The risk is lower for large purchases of raw materials for production, for example. This is because the counterparties are large international suppliers which share hL Display’s high standards in the area of anti-corruption. Risk for corruption also exists in the customer relationship. hL Display operates in some risk markets, where some parties try to facilitate deals by making direct payments to individuals in the client company.

To combat corruption, all employees in managerial or particularly vulnerable positions must sign hL Display’s Code of Conduct, which contains clear rules of practice with regard to corruption. This is also followed up each year in the annual performance appraisal.

increased centralisation and control of purchasing activities also plays an important part in the Company’s anti-corruption efforts. any local suppliers that hL Display wishes to engage in the regions must be validated centrally. This ensures that the prices and other terms are in line with the Company’s other collaborations. under the local purchasing procedures, the individual placing a purchase order is not the one who identifies and selects a supplier. in the selling activity, agreed prices are entered into hL Display’s eRp system. invoicing and client payment relating to each order is controlled by the company’s back-office function and separated from the field sales.

hL Display had 1 (2) corruption-related incident that led to disciplinary action in 2012.

purchasing policyhL Display has clear requirements for its suppliers. all suppliers must sign hL Display’s purchasing policy, guaranteeing their compliance with the iLo (international Labour organization) conventions relating to human rights and labour. in addition, there are clear guidelines on business ethics and corruption.

Whistleblower functionit was hL Display’s intention to establish a whistleblower function within the group in 2012. at the end of 2012, the board adopted the establishment of such a function, which will now be implemented during 2013. The function will enable employees to report malpractice to a centrally placed unit. it will complement the natural dialogue that takes place between employees and managers about malpractice at the Company.

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iTy MATERIAL USAGE METRIC TON

Aluminium,steel and wire

Polystyrene(PS)

Polycarbonate(PS)

ABSPETPVC

6,638

2,194

2399861,458

642

environmenthL Display’s Corporate Responsibility policy defines the fundamental guidelines that the Company follows with regard to environmental impacts.

hL Display has four production facilities, which are located in sweden, poland, the uk and China. The main environ mental impacts of the Company’s production are related to plastic waste, use of plastic raw materials and energy consumption.

The Company has a presence in 47 markets, which means that shipments of products represent a source of indirect environmental impacts.

requirements for suppliershL Display requires its suppliers to comply with all current environmental legislation. all new suppliers are expected to sign hL Display’s purchasing policy, which defines the Company’s requirements in this area. The actual conditions at suppliers’ premises are observed during site visits. hL Display’s major suppliers are large international producers of plastic raw materials which have their own environmental programmes in place.

iso 14001 certificationCertification under the iso 14001 environ mental management standard has been an important part of hL Display’s environmental work. back in the late 1990s, hL Display’s largest factories were certified under the standard. Changes in the production structure in recent years mean that the proportion

hL Display replaced polycarbonate materials in its merchandising solutions for loose goods (3ebin™) in 2012, due to the fact that polycarbonate contains the hormone-disrupting substance bisphenol a.

Waste managementThe waste generated at hL Display’s factories consists largely of plastic. hL Display addresses the problem of waste in production in two ways. The first is to reduce plastic waste generated in production by streamlining production processes where possible. The second is to recycle plastic and other waste as far as possible.

hL Display’s goal is that all waste from production will eventually be recyclable. Total waste at the Company’s production facilities in 2012 was 2,778 tonnes, and 91.7 percent of this was recycled.

of factories with iso 14001 certification has fallen to 50 percent from 60 percent in 2011. The factories in sweden and China have iso 14001 certification. it is hL Display’s aim that its factories in poland and the uk will be certified as soon as practicable.

raw materialshL Display’s main raw material is plastic, notably pvC. see the table above for more details about raw materials use.

hL Display complies with ReaCh, the eu’s chemicals legislation, and this is taken into account in the Company’s approval of new materials. in conse-quence of this, raw materials suppliers now have to complete a special decla-ration form based on the chemicals regulations. no substances classified as svhC (substances of very high Concern) may be used, and the presence of phase-out substances is also checked.

applying the precautionary principle,

Waste management, metric ton

total plastic Metalpackaging materials

Mixed materials

other safe waste

total safe waste

Hazardous waste

Composting – – – 1 – 1 –

Re-use in own production 114 – – – – 114 –

Recycled externally 1,273 371 170 362 – 2,176 3

Recycled for heating – – – 258 – 258 –

Deposit 120 – – 1 109 230 4

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use of chemicalsproduction at the falun factory was trans-ferred to the new factory in the polish city of gliwice in 2012. operations at falun were subject to notification require-ments due to solvent use in the screen-printing process. The solvent was used in the printing ink itself and for washing templates used in the printing process. production at falun lasted until 31 July 2012. During that period, use of solvents amounted to 2,500 litres (4,968 for the full year 2011). hL Display no longer operates its own screen printing; this is purchased from suppliers instead. at the new factory in poland, hL Display has invested in a new digital printing line which can replace screen printing in many cases.

energy consumptionhL Display’s direct electricity consump-tion in production was 26.6 (25.8) gwh in 2012. various measures for reducing electricity consumption are being imple-mented at all the factories. These range from heating the premises using waste heat from machinery to installing time-controlled lighting.

under an energy agreement signed with vattenfall in 2010, hL Display’s sundsvall factory and logistics centre in falkenberg run entirely on hydrogen-erated electricity. This is a conscious choice on hL Display’s part and the Company pays a somewhat higher elec-tricity fee for using renewable energy.

water is used primarily for cooling in certain of hL Display’s production processes, in particular the cooling of extruded plastic products, such as data-strips, in waterbaths. 313,334 (317,233) cubic metres of water were used at the group’s production facilities in 2012. several of hL Display’s factories use

large proportion of production is now closer to many of the Company’s largest markets. This should result in reduced costs and lower environmental impacts from transport.

reducing Co2 emissions from company carsit is hL Display’s aim to gradually reduce Co2 emissions from its car fleet. The Company has four different categories of vehicles and there are limits on Co2 emissions for each category. These limits are revised every 12-18 months to see if they can be lowered.

respect for the environment in all operationshL Display endeavours to promote a high level of environmental awareness in everyday activities at its offices around the world. This means collecting and sorting paper, packaging material and old electronic equipment and ensuring they are sent for recycling.

hL Display has been using telephone and video conferences as an alternative to travel between offices for many years now. with technological development and the launch of services such as google hangout, the use of video conferencing at hL Display has increased further. This means lower travel costs for the Company and a reduction in the environ-mental impacts of business travel.

closed cooling water systems in order to minimise water consumption.

transporthL Display has sales companies and distributors in western and eastern europe, asia, the middle east, south africa and brazil. This means that trans-port is a major part of hL Display’s environmental impacts. hL Display engages third-party suppliers for its trans-port and requires these suppliers to have environmental programmes in place.

The majority of shipments are by truck. hL Display works with its logistics suppliers to route inward and outward transport flows from road transport to sea and rail transport wherever possible.

hL Display’s efforts to reduce carbon dioxide emissions also include strategies to improve transport efficiency. The Company constantly endeavours to increase the number of products per package and reduce package size.

The transfer of production from sweden to the polish city of gliwice was completed in 2012. This means that a

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energy consumption 2012

electricity “green” (mwh)* 12,642

electricity (mwh) 8,217

gas (mwh) 5,693

oil (m3) 30

water (m3) 313,334

* electricity from renewable sources.

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income statement for the Group

KseK, 1 January - 31 December 2012 2011

net sales 1,656,875 1,643,317

Cost of goods/services sold -945,013 -926,705

Gross profit 711,862 716,612

selling expenses -425,022 -438,487administrative expenses -161,379 -166,859Research and development expenses -21,622 -20,779other operating income 7,006 10,708other operating expenses -8,473 -38,560profit from group companies 324 –

operating profit 102,696 62,635

financial income 9,349 2,162financial expenses -42,477 -40,577

net financial items -33,128 -38,413

profit before taxes 69,568 24,222

income tax expense -27,955 -5,844

net profit for the year 41,613 18,378

attributable to:The parent company’s shareholders 41,613 18,378minority interest – –

41,613 18,378

statement of comprehensive income for the Group

KseK, 1 January - 31 December 2012 2011

net profit for the year 41,613 18,378

other comprehensive incomeTranslation differences on translation of foreign operations -2,016 1,353net change in fair value of cash flow hedges -3,724 -11,634

other comprehensive income for the year -5,740 -10,281

Comprehensive income for the year 35,873 8,097

Comprehensive income for the year attributable to: The parent company’s shareholders 35,873 8,097 minority interest – –

Comprehensive income for the year 35,873 8,097

statement of financial position for the Group

KseK 31-12-2012 31-12-2011

assets

intangible assets 1,202,787 1 166,974property, plant and equipment 195,776 226,516participations in associated companies and joint ventures 3,000 3,000non-current receivables 2,291 2,404Deferred tax asset 19,652 31,302

total non-current assets 1,423,506 1,430,195

inventories 155,229 177,120Trade and other receivables 258,955 267,392prepaid expenses and accrued income 30,024 26,382other current assets 29,050 38,632Cash and cash equivalents 175,211 163,219

total current assets 648,469 672,745

total assets 2,071,975 2,102,940

equityshare capital 147 147other capital contributions 1,141,283 1,141,283Reserves -20,740 -15,095Retained earnings including net profit for the year 35,618 -3,557

total equity 1,156,308 1,122,778

Liabilitiesnon-current interest-bearing liabilities 459,154 535,342other non-current liabilities 13,117 11,412pension provisions 3,470 2,753other provisions 1,220 1,783Deferred tax liability 10,484 19,972

total non-current liabilities 487,445 571,262

Current interest-bearing liabilities 110,841 96,711Trade and other payables 133,004 130,094Tax liabilities 15,741 3,775other current liabilities 12,329 36,678accrued expenses and prepaid income 156,307 141,642

total current liabilities 428,222 408,900

total liabilities 915,667 980,163

total equity and liabilities 2,071,975 2,102,940

PRICE OF PVC RESINSEURO/TON

EXCHANGE RATEEURO/SEK

PRICE OF PETEURO/TON

Source: Sveriges Riksbank (Sweden’s central bank)Source: Plastics Information Europe Source: Plastics Information Europe

500

900

1,300

1,700

12111009080706058

9

10

11

12

1211100908070605900

1,200

1,500

1,800

1211100908070605

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risKs anD sensitivity anaLysis

production takes place outside of the eurozone. invoicing from the production units to subsidiaries are conducted in their local currency in order to concen-trate the group’s currency exposure to a few units, where it is managed by a central treasury function. external distributors are invoiced in the respective currencies of the production units. The currency effects that have an impact on the Company’s earnings are transaction flows in different currencies (transaction exposure) and translation of foreign subsidiaries’ income statements and balance sheets (translation exposure).

transaction exposureTransaction exposure arises partly from foreign currency invoicing and partly from foreign currency purchases or purchases for which the price is regula-ted by a currency clause. 28 percent of hL Display’s sales are invoiced in euros, 23 percent in pound sterling and 10

raw material sensitivity plastic raw materials accounted for 65 percent of the group’s total raw material purchases. The main raw material, pvC, accounted for 32 percent of the group’s total raw materials costs. with a few ex ceptions, the supply of standard plastics in 2012 did not face shortages, with volumes available throughout the year. even though the demand in China has remained solid, imports from asia were abundant, putting pressure on european producers. Combined with a rather low demand, 2012 was a year of rationalization amongst market players worldwide. in order to reduce commodity price sensitivity, hL Display’s purchasing is made using a mix of contracting and spot pricing.

Currency riskhL Display’s main markets are in the eurozone and the uk. hL Display is expo-sed to currency movements, as most

sensitivity analysisfactor Change

effect on net earnings, seK million

net sales 1% volume 7.2

Change on largest market 1% -1.1

price of pvC 1% 1.0

price of peT 1% 0.3

personnel expenses 1% 5.1

market rate 1 percentage point 0.0

Depreciation 1% 0.4

euro rate 10 öre 2.7

percent in swedish kronor. The remainder is spread among the other currencies, led by norwegian kroner and Russian roubles, with 8 and 7 percent respecti-vely. The swedish krona was somewhat strengthened against hL Display’s main trading currencies. on average, the swedish currency was strengthened by 4 percent against the euro and 3 percent against the pound sterling. Revenue currency exposure is offset by purchases in the corresponding currencies, in particular the foreign sales companies’ expenses, but also by purchasing materials with prices regulated by currency clauses. hL Display previously hedged future cash flows in the major currencies. in 2012 a decision was taken to stop hedge cash flows. hL Display’s total currency exposure had a negative effect of sek 14.6 million on pre-tax profit for 2012 compared with 2011, as illustrated in the table below.

effect of exchange differences on operating profit(compared with average rate in 2011, SEK million)

net sales -13.5

Cost of goods/services sold incl. freight -5.7

selling expenses 3.8

administrative expenses 0.1

Development expenses –

other operating income/expenses –

total effect of exchange differences on operating profit -14.6

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business operations hL Display ab and subsidiaries

Ratos ab

hL intressenter abmanagement

and board

hL Display holding ab

oWnersHip of HL DispLay

100%

100%

99% 1%

Corporate GovernanCe of hL DispLay gRoup

elects the board members and Chairman, appoints the auditor, adopts the income statement, balance sheet and distribu-tion of the Company’s profit, decides on discharge from liability for the board members and Ceo and fixes board fees.

board of DirectorsThe board is formally responsible for hL Display’s management and organisa-tion. The board appoints the president 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 owner at the annual general meeting for a one-year term until the end of the following agm.

Board members at the 2012 agm, hL Display’s board was expanded from five to six

ownershipDay-to-day business operations in hL Display are formally conducted in the operational company hL Display ab and its subsidiaries.

The sole business of the owner company hL Display holding ab is the ownership and administration of the wholly-owned subsidiary hL Display ab. hL Display holding ab is 99 percent owned by hL intressenter ab, a wholly- owned subsidiary in the Ratos group. The remaining 1 percent is owned by hL Display’s board and management.

General meetingThe general meeting is hL Display’s ultimate decision-making body and the forum in which the owners exercise their formal influence over hL Display. The annual general meeting of shareholders

agm-elected members. The board is composed of individuals with expertise and experience in the areas of strategy and finance, as well as in industry and other matters relating to hL Display’s operations.

The election of peter holm brought the board added expertise and experience in retail and brand products. peter holm has previously been Ceo of santa maria ab, brämhults Juice ab and Löfbergs Lila.

in 2012, Robin molvin was also elected to the board, as the Ratos representa-tive. Robin molvin is senior investment manager at Ratos and responsible for the holding in hL Display. he replaced susanna Campbell, who resigned from the board to take up the position of Ceo of Ratos ab.

Board independenceThe only agm-elected board member who is an employee of hL Display is Ceo gérard Dubuy. all other agm-elected members are independent of the Company. stig karlsson (industrial advisor to Ratos) and Robin molvin (Ratos) are not independent of the Company’s owner. other agm-elected members – peter holm, mats-olof Ljungquist and Lars-Åke Rydh – are independent of the Company’s owner. information about the board members can be found on page 35.

Work of the BoardThe Chairman of the board, stig karlsson, organises and leads the work of the board. The Chairman is in continuous dialogue with the Ceo. he is responsible for ensuring that board members have the information they need to monitor the Company’s position, financial planning and development and receive satisfactory decision support material for their work. The Chairman is

also responsible for ensuring the board’s work is evaluated every year.

The board’s work is regulated by a set of specially drawn up rules of procedure. The board regularly assesses the financial position of the Company and the group. information is reported on a monthly basis to allow the board to perform its duty of evaluation pursuant to current legislation and good board practice.

The board deals with matters of significant importance to the group, which include– strategy plans. – budgets and forecasts. – acquisitions, sales and closures of

companies or operations. – purchases, sales and write-downs of

other significant assets.

The board held 9 meetings in 2012. The meetings follow an annual agenda with special topics and fixed decision-making points for each meeting held during the year.

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orGanisationaL struCture in HL DispLay ab

product Development Director

marketing & business Development Director

iT manager

finance Director

hR Director

purchasing Director

supply Chain Director

production Director

groupmanaging

Director/Ceo

area managernorth europe

production sundsvall

area managersouth europe

and middle east

production gliwice

area managereast europe

area managerasia/pacific

productionsuzhou

area manageruk

productionharlow

sales companies and distributors

finance/admin

supply chain

hL Display’s long-term strategy is discussed at two of the board meetings during the year. The first strategy meet-ing, held in spring, defines the strategic areas on which the board wants manage-ment to concentrate. The second strategy meeting, held in autumn, deals with the strategies, and decisions are taken.

on one occasion during the year, the board visits one of the Company’s customers. in addition, at least one board meeting per year is held at one of hL Display’s locations away from the head office.

it is also the express wish of the board to invite members of hL Display’s management group or other areas of the organisation to attend board meetings in order to provide the board with in-depth information about their specific area.

hL Display’s auditor normally attends at least one board meeting during the year.

important matters dealt with in 2012 included:– enhanced strategic work and design of

strategic initiatives.– production improvement investments

in sundsvall, gliwice and suzhou. – investments in new iT structure.

Board committees The board has established a remuneration committee and an audit committee which prepare certain defined matters for resolution by the board.

The remuneration committee examines and prepares matters relating to remuneration and terms of employ-ment for company management and makes annual proposals for guidelines on remuneration of the Ceo and senior executives. The Ceo’s remuneration is decided by the board. Remuneration of

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responsibilities between the 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 board decisions. further information about the Ceo can be found on page 35.

Group Managementin addition to the president, hL Display’s group management consists of eight members who have day-to-day responsi-bility for different parts of the business. group management has at least ten scheduled meetings during a year. for more information about the members of group management, see page 36.

Management of subsidiarieshL Display has a presence in 47 countries through its sales offices, logistics centers, factories and distributors. These companies are divided into five geographical regions. each region is headed by an area manager who reports directly to the president and Ceo. The area managers have full responsibility for sales and results in their region. This responsibility also includes the sales companies and logistics centre in each region. for the uk

and asia, it also includes the production companies.

The division of responsibilities between the area managers and the country managers who are responsible for day-to-day operations in the sales companies is regulated in the framework of the internal subsidiary guide book, which contains guidelines on different aspects of the subsidiaries’ business. other produc-tion units are controlled by the group’s production Director.

auditorThe annual general meeting elects the auditor following a proposal by the board. kpmg ab was appointed as the Company’s auditor until the 2013 annual general meeting. it is the audi-tor’s task, on behalf of the owner, to audit hL Display’s annual accounts and bookkeeping methods, as well as the board and Ceo’s administration of the Company. The chief auditor also submits an audit report to the annual general meeting. further information about the auditor can be found on page 35.

other senior executives is decided by the Ceo in consultation with the remu-neration committee. The remuneration committee consists of stig karlsson, Robin molvin and mats-olof Ljungquist. stig karlsson is chairman of the committee.

The audit committee’s task is to ensure high quality is achieved in three primary areas: internal controls, financial report-ing and external auditing. The commit-tee ensures effective internal control systems are in place and a correct assessment of the company’s financial position has been made. The committee reviews the quarterly financial informa-tion and annual reports for hL Display ab and hL Display holding ab. it also deals with critical accounting issues, such as valuation and assessments. it is also the audit committee’s task to maintain dialogue with the external auditors about the audit. The audit committee consists of mats-olof Ljungquist, Robin molvin and stig karlsson. mats-olof Ljungquist is chairman of the committee.

president and CeohL 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

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stig Karlssonborn: 1952.Chariman of the board.member of the board since 2001, Chairman since 2010.position: industrial advisor, Ratos ab.education: master of science in economics and business administration.other appointments: Chairman of the board in Diab group ab, hafa bathroom group ab and ivf sverige ab. member of the board in Lagerstedt & krantz ab and acobiaflux ab.not independant in relation to major owners.

Lars-Åke rydhborn: 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, schuchardt maskin ab and oem international ab. member of the board in nolato ab and oLJa ekonomisk förening. independent member.

Henrik smedlundborn: 1976.employee representative.Deputy member.position: machine operator.education: financial qualification.

Gérard Dubuyborn: 1961.Ceo of hL Display ab. member of the board since 2006.education: master of science in economics and business administration.not independent in relation to the Company.

robin Molvinborn: 1972.member of the board since 2012.position: senior investment manager, Ratos ab.education: master of science in economics and business administration.other appointments: member of the board in ah industries a/s and bTJ group ab.not independant in relation to major owners.

Magnus Jonssonborn: 1969.employee representative.member of the board since 1998.position: machine operator.education: structural engineering qualification.

Mats-olof Ljungquistborn: 1951.member of the board since 2007.education: master of science in economics and business administration.other appointments: Chairman of the board in brunnberg & forshed arkitektkontor ab, hermods ab and Tribona asa. member of the board in sbC sveriges bostadsrättsCentrum ab, svegro ab, swedsec ab and JLT Risk solutions ab.independent member.

peter Holmborn: 1964. member of the board since 2012. previous positions: managing Director santa maria ab, brämhults Juice ab, Löfbergs Lila ab and sales & marketing positions in the fmCg business. education: master of science in industrial engineering and management. independent member.

Jenny askfelt ruudborn: 1973.Deputy member of the board since 2013.position: senior investment & CR manager, Ratos ab.education: master of science in economics and business administration.other appointments: –not independant in relation to major owners.

Kent Mossbergborn: 1957.employee representative.member of the board since 1995.position: property manager.education: engineering qualification.

Åsa Wirén Linderborn: 1968.auditor in charge and authorised public accountant (far).other assignments: auditor in charge in skistar ab, pricer ab and mTg ab. member of the board in far.

auditorkpmg ab stockholm. auditors since 2004. Re-elected at the agm 2012 for one year.

auditor

senior exeCutives

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fredrik birkhammarborn: 1964. group iT manager (Cio) employed since: 2010.education: b. sc. economics.

xavier volpatoborn: 1969.production Directoremployed since: 2007.education: m. sc. economics, politics and mba.

birger nilssonborn: 1961.Development Directoremployed since: 1999.education: m. sc. economics.

Gérard Dubuyborn: 1961.managing Director (Ceo).employed since: 1995.education: m. sc. economics.

Håkan erikssonborn: 1966.marketing and business Development Directoremployed since: 1992.education: m. sc. engineering.

Julien Wagnerborn: 1975.purchasing Director (Cpo) employed since: 2008.education: m. sc. engineering and mba.

Magnus bergendorffborn: 1964.finance Director (Cfo).employed since: 2011.education: b. sc. business administration.

staffan forslundborn: 1949.human Resources Directoremployed since: 2000.education: b. sc. economics.

Clément Charpilletborn: 1965.area manager south europe.employed since: 2003.education: business & administration school.

Lasse ohlssonborn: 1959.area manager asia.employed since: 2002.education: b. sc. business administration and emba.

petri rantaborn: 1961.area manager east europe.employed since: 1997 (Display Team 1997-2009).education: b. sc. business administration.

Duncan Hillborn: 1959.area manager uk.employed since: 2006.education: b. sc. psychology.

reinhard rollettborn: 1961.area manager north europe.employed since: 2004.education: b. sc. engineering.

Marc Hoeschenborn: 1967.supply Chain Director employed since: 2009.education: m. sc. engineering and mba.

five year suMMary

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income statement (KseK) 2012 2011 2010 2009 2008

net sales 1,656,875 1,643,317 1,617,289 1,360,416 1,535,639 operating profit 102,696 62,635 64,445 86,216 130,258 Depreciation and amortisation 39,554 37,546 38,587 35,581 36,123 profit before taxes 69,568 24,222 28,738 84,143 136,157

net profit for the year 41,613 18,378 18,200 58,208 96,317

balance sheet (KseK)non-current assets 1,423,506 1,430,195 1,438,066 390,094 202,233 Current assets 648,469 672,745 782,655 667,124 744,064

total assets 2,071,975 2,102,940 2,220,721 1,057,218 946,297

shareholders’ equity 1,156,308 1,122,778 1,122,986 433,113 541,853 non-current liabilities 487,445 571,262 657,132 295,217 88,780 Current liabilities 428,222 408,900 440,603 328,889 315,664

shareholders’ equity and liabilities 2,071,975 2,102,940 2,220,721 1,057,218 946,297

Key ratiosebiTDa, ksek 142,250 100,181 104,832 121,797 166,381 ebiTa, ksek 104,041 64,306 66,245 86,679 130,652 ebiTa margin, % 6.3 3.9 4.1 6.3 8.5 ebT margin, % 4.2 1.5 1.7 6.2 8.9 Return on equity after tax, % 3.7 1.6 2.2 10.6 1) 19.1 Return on capital employed, % 6.4 3.6 5.3 11.0 1) 22.9Return on total capital, % 5.4 2.6 8.9 1) 15.6 equity/assets ratio, % 55.8 53.3 50.6 44.0 57.0net interest-bearing debt, ksek 396,039 469,258 490,336 143,251 -119,693 Debt/equity ratio, times 0.50 0.57 0.63 0.64 0.19 interest coverage ratio, times 2.6 1.4 1.7 20.9 20.7 net investments, ksek 50,597 52,816 39,613 330,056 31,749 Cash and cash equivalents, ksek 175,211 163.219 206,309 205,892 220,773 goodwill, ksek 1,153,934 1,157,309 1,180,343 230,754 33,270 Revenue per employee, ksek 1,426 1,419 1,468 1,627 1) 1,562 Development expenses, ksek 21,622 20,779 26,232 26,984 28,000 average number of employees 1,162 1,158 1,102 836 1) 983

1) average figures for 2009 excluding ppe, that was consolidated from 31 December, 2009.

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

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

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

ebitDaoperating profit added for depreciation 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.

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

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

return on capital employedprofit after financial items plus financial expenses in relation to average capital employed. Capital employed is the balance sheet total less non interest-bearing liabilities.

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

return on total capitalprofit before taxes plus financial expenses in relation to average balance sheet total.

DefiniTions

History

HL Display was 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 hot bending 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 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.

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 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. 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. Ratos becomes a minority shareholder in 2001.

in 2002 and 2003, expansion continued apace in asia, with new companies being established in hong kong, malaysia, Taiwan, Thailand and China. a sales company was started i Romania in 2002.

at the 2006 annual general meeting, anders Remius was succeeded by gérard Dubuy as Ceo of hL Display. anders Remius’ commitment to the Company continued, now as the Chairman of the board. in 2006, production started up at hL Display’s factory in China, situated in suzhou, to the north-west of shanghai. Local production was a very important step to increase competitiveness in the region.

During 2007-2009, hL Display made a number of acquisitions. finnish Display Team, a leading provider of merchandising solutions targeting the brand manufacturer customer segment, was acquired in 2007. in 2009, the Company made its biggest acquisition so far, by acquiring british company ppe Ltd. Through the acquisition hL Display extended its offer to the brand manufacturer customer segment as well as strengthened its market position in the uk.

in 2009, a sales company was started in Dubai as a first entry into the middle east market.

in July of 2010, the publicly traded private equity company Ratos acquired the Remius family’s holding in hL Display and then made a public offer to all other shareholders to acquire their shares. hL Display was delisted from nasdaq omx stockholm on 17 september 2010.

in 2011, hL Display signed agreements with distributors in brazil and south africa, which are two new markets for the Company.

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produced by iR stockholm and hL DisplayDesign: John blomqvistphotography: magnus fondprinting: vitt grafiska

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HL DispLay • 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