ITAB ANNUAL REPORT 2006

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ITAB ANNUAL REPORT 2006

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4-5 ITAB and 2006 – in brief 6-7 Important events 2006 8-11 CEO’s comments

12-13 Business concept, goals and strategic approach 14-15 The market

ITAB’s activities 16-17 Complete concepts 18-21 Shop fittings 22-25 Shop equipment

Organisation and work methods

26-27 Organisation

28-29 From concept to turnkey shop 30-31 Long-term environmental work

32-33 Sweden, Norway, Finland, Denmark, Baltic countries 34-35 The Netherlands, the UK, Czech Republic, Russia, Ukraine Financial information

37-38 Directors’ report The Group 39 Income statements 40-41 Balance sheets 42 Changes in equity 43 Cash flow statement The Parent Company 44 Income statements 45-46 Balance sheets 47 Changes in equity 48 Cash flow statement 49-62 Notes

63 Auditors’ report

64 Comments on financial performance 65 Financial review – five years

66 Share data, dividend policy and definitions 67 Share capital trends and ownership structure

68-69 Board of directors, auditors and group management

70-71 Contact information

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ITAB fittings and equipment can be found in chain stores throughout much of Europe.

Financial inFormation

itaB plans to publish the following financial information for the 2007 financial year:

Interim report, January - March 2 May 2007

Annual General Meeting 2 May 2007

Interim report, January - June 13 July 2007 Interim report, January - September 23 October 2007 Year-end report 2007 7 February 2008 Annual report 2007 March/April 2008

Annual General Meeting May 2008

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Shop-fitting concepts,

checkouts and entrance systems

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ITAB’s 2006 sales reached SEK 1,817.7 million and the compa- ny had 1,302 employees on the closing day. The parent company is based in Jönköping, Sweden, and the Group's Class B shares are traded on the First North marketplace on the OMX Nordic Exchange.

BUsINEss ACTIvITIEs

At the company’s own production and logistics facilities, meas- uring approximately 120,000 sq m, shop fittings, checkouts and entrance systems are developed and manufactured for delivery to much of Europe. Units that carry out production and project management are located in Sweden, Norway, Finland, Den- mark, the Baltic countries, the UK, the Netherlands, the Czech Republic, Russia and the Ukraine. The company’s own activities are supplemented by those of its partners within sales, project

ITAB develops, sells and manufactures products and the whole concept of fittings and equipment for chain stores. ITAB’s customers are in the retail trade in the Nordic and Baltic countries, the Benelux countries, the UK, Central Europe and Russia. The Group’s plants produce shop fittings, checkouts and entrance systems. ITAB also acts as a contractor for building new stores or revamping existing ones.

management, installation and service in other European coun- tries. ITAB’s well-established project management model allows the company to act as a contractor when it comes to building new shops or refitting existing ones.

ThE mARkET

ITAB’s target group consists of large-sized shops and major chain stores within the food and non-food segments. ITAB is currently the dominant player in the Nordic and Baltic countries. In the Benelux countries, parts of Central Europe and the UK, ITAB is one of the leading suppliers. In Russia, the Ukraine, Poland and Romania, evaluations are continuing as part of a careful break- through strategy. ITAB’s business activities are based on long- term business relations and excellent delivery reliability coupled with effective production resources.

2006 summary

– Net sales increased by 43% to SEK 1,817.7 million (1,269.5) – Profit after tax rose by 55% to SEK 71.1 million (46.0) – Earnings per share amounted to SEK 10.31 (6.87)

– Profit after financial items rose by 46% to SEK 96.6 million (66.0)

Key figures for the group

2006 2005

Net sales, SEK m 1,817.7 1,269.5

Operating profit, SEK m 115.8 77.9

Profit after financial items, SEK m 96.6 66.0

Profit after tax, SEK m 71.1 46.0

Earnings per share, SEK 10.31 6.87

Equity per share, SEK 43.18 29.72

Return on equity, % 28.9 26.4

Equity/assets ratio, % 23.1 25.9

Portion of risk-bearing capital, % 26.0 31.0

Average number of employees 1,189 880

1,800 1,600 1,400 1,200 1,000 800 600 400 200

0 2002 2003 2004 2005 2006

Net sales, seK m

30 25 20 15 10 5

0 2002 2003 2004 2005 2006

returN oN equity, %

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Important events

strategic acquisitions in the Uk – City Group and Radford CGC – place ITAB in a strong position on the Uk market for shop fittings, checkouts and entrance systems.

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ACqUIsITIONs

Five companies were acquired in the course of 2006. In the UK, ITAB CG (formerly City Group) and ITAB MK (formerly Radford CGC) were acquired. ITAB MK is the UK’s leading supplier of checkouts and entrance systems, while ITAB CG is an important shop fitting company.

At the start of the year the company acquired Novena, one of Lithua- nia’s largest shop fitting companies, and PremOers, one of the leading project management companies in the Netherlands. The summer saw the acquisition of Norwegian company PharmaService, a major supplier of shop fittings for pharmacies in Norway.

AGREEmENTs

Via Swedish subsidiaries, agreements have been signed with Lindex and Hästens Sängar to supply shop fittings. The Norwegian subsidiary has signed an agreement with NorgesGruppen Convenience to supply and install shop fittings for over 150 Shell filling stations in Norway. Agreements have also been signed with the Järnia Group regarding project management, supply and installation of shop fittings.

Via the Group’s Baltic subsidiary, a two-year agreement has been concluded with Rimi Baltic to supply and install shop fittings for hypermarkets and supermarkets in the Baltic countries.

Through the subsidiary in the Czech Republic, an agreement has been signed with Tesco Central Europe. This is a two-year agreement which concerns the supply of standard shop fittings for Tesco units in the Czech Republic, Slovakia, Poland and Hungary.

ITAB has had a busy year, with several strategic acquisitions and a large number of extensive customer agreements. The acquisitions in the UK represent solid investment in the UK market.

Other acquisitions secured a position as market leader in the Baltic countries and strengthened the company’s position within the non-food segment, in particular in the Netherlands and Norway.

Through PremOers, acquired 2006, ITAB will supply shop fittings to the Dutch chain store hema.

ITAB has signed agreements with the international super

market chain Tesco regarding deliveries to Central Europe.

stores belonging to swedish fashion chain Lindex will be profiled over the course of the coming year with ITAB fittings.

Source: Lindex Internet

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The year has been characterised by a number of large-scale acquisitions, particularly on the UK market. An increase in sales, acquisitions and internal streamlining of operations has contributed to growth in both turnover and profits during 2006. In the next year the new production facilities in the Czech Republic are expected to bring competitive advantages. At the same time, work continues on limiting the effects of seasonal variations, as does the work of developing the organisation.

Rapid expansion: 43% growth

CEO’S COmmEntS

2006 was characterised by growth – both organic and through major acquisitions. The establishment of new ventures in the Uk and the Baltic countries made ITAB’s internationalisation even clearer.

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2006 was an eventful year, with several large-scale acquisitions and numerous customer agreements. The company’s success is due to a number of factors. Especially important are the company’s excellent contacts within the market, the high level of investment in production units, its efficient organisation and, last but not least, its committed employees. The strategic acquisitions that have taken place have also had a significant effect on positive development.

sALEs AND PROfIT

The Group’s net sales increased by 43% during 2006 to SEK 1,817.7 million (1,269.5). Acquisitions made during the year have contributed to this strong growth, while the long-term customer agreements entered into have all developed in a positive manner. Looking at individual markets, it can be seen that there has been growth in Norway, Denmark, Finland, the Baltic countries and the Netherlands, while Sweden and the Czech Republic have maintained the same level of turnover as 2005. The UK market, which has become a factor during the year, has also contributed to the increased growth and market share.

In terms of profit, trends during 2006 have been favourable. Profit for the year after financial items was SEK 96.6 million (66.0), which is a 46% increase on 2005. The improved profit can initially be put down to increased volumes, but the Group has also benefited from the effects of streamlining and cost reductions through increased utilisation of resources at the production facilities and in terms of salaried employees. The amalgamations and mergers that began in 2005 in the Czech Republic and Sweden in particular have continued to burden the profit throughout 2006, but will have a positive effect during the coming year.

COmmODITy PRICEs AND INvEsTmENTs

Following a period of rapid price rises, the market price for raw materials remained stable throughout 2005, a development the company hoped would continue into 2006. However, the price of raw materials and components rose again.

The largest investments during the year have taken the form of acquisitions of operations, structural and organisational changes and marketing campaigns; all with a view to strengthening the company’s position as one of the leading players in Europe. In Lit- huania, Norway and the Czech Republic, investments in machinery have been made for the purpose of expanding capacity.

fIvE COmPANy ACqUIsITIONs IN 2006

In the UK two different companies were acquired during the year:

the shop fittings company City Group, and Radford, the UK’s market leader for checkouts, entrance and guidence systems. The common platform that has been created through the acquisition of these two companies makes ITAB a partner and complete supplier of shop equipment, fittings, project management and service for UK retail chains.

The acquisition of Novena, Lithuania’s largest manufacturer and supplier of shop fittings, strengthens ITAB’s position as the leading supplier of complete shop fittings, equipment and project management in the Baltic countries.

The Dutch company PremOers is a pure project management company that further improves ITAB’s position within the non- food segment in the Benelux countries. The acquisition also contributes to increased volumes in production of wooden products in the Netherlands and metal products in the Czech Republic.

The acquisition of the Norwegian company PharmaService will increase ITAB’s market share in the non-food segment in Norway and in the long term, with other markets where ITAB is active.

The company is Norway’s foremost supplier of shop fittings for pharmacies.

ChANGEs TO CzECh OPERATIONs

In the Czech Republic coordination of the various units intensified during 2006. In 2007, all operations will transfer to a single shared facility. The Czech organisation will also undergo extensive changes. Switching from simply being a production unit to becoming concept suppliers with extensive market canvassing requires much in the way of resources. These efforts have brought results, however, and the company is pleased by the successes achieved in the market, within both shop fittings and checkouts.

swEDIsh UNITs CONsOLIDATED

Consolidation work in connection with the amalgamations of operations in Jönköping and Hjo, as well as Nässjö and Örebro, has continued during the year, and will be concluded during the course of 2007. Due to large seasonal variations, stock built up during the spring and a larger number of sub-suppliers were used during the autumn. The effects of the mergers have thus been less than was hoped.

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Rapid development 2007

…CEO’S COmmEntS

“In 2007 ITAB will gain high capacity in production, a well-functioning supplier network, a high level of competence and a broad market presence. Last but not least – the company is trusted by many of the largest, most successful retail chains.”

PRODUCTION CAPACITy

During the year, construction started on a new factory in the Czech Republic. It is expected that it will be ready for the company to move into in the second quarter of 2007. This plant is being built in order to deal with the large demand and major seasonal variations that occur. Production capacity will be multiplied, better work flow and logistics will increase efficiency and increased storage space will be able to cope with the seasonal variations. The new factory is intended for the mass production of standard shop fittings and checkouts, while other production facilities within ITAB are adapted for flexibility and customised solutions. The combination of local, flexible factories close to the customer and access to the company’s own production of standard products provides competitive advantages.

In order to reduce costs and increase the company’s competitiveness, new purchasing channels are being built up, primarily in Asia.

mARkET 2007

The foundations that were laid during 2006 through acquisitions in the UK, Norway, the Netherlands and Lithuania place ITAB among Europe’s top suppliers of shop fittings and equipment. The amalgamations and mergers that will be completed during the course of 2007 will provide the company with increased competitiveness, and will contribute to further market successes. Through the company’s organisation and structure as a concept supplier able to offer the major European chains everything from product deliveries to complete stores, it can see major opportunities for further expansion in selected markets.

The company has high expectations of the UK in the coming year, the UK being a new market for ITAB. Acquisitions have made ITAB’s current position strong; in entrance systems and guidance systems the company is a market leader, and where shop fittings are concerned it is a major player. These new companies give ITAB a solid base of large-scale customers, which will henceforth expand

within both the food and non-food segments. ITAB is currently the second-largest company in this niche in the UK, and it is aiming to become the market leader.

Where Russia is concerned, the company works in partnership with one of the larger domestic chains. ITAB also supplies products such as checkouts and entrance systems to a number of European chains, primarily in Moscow and St Petersburg. No major campaign has yet been launched to increase the company’s market share in Russia, largely due to insufficient capacity. Now that the company has dealt with the issue of capacity through its new production facilities in the Czech Republic, it will be possible to expand eastwards.

ThE ImmEDIATE fUTURE

The company is experiencing some uneasiness, primarily regarding increasing costs for raw materials and the fact that it will be difficult to compensate for this. Another potentially troublesome fact is that more and more of the company’s largest customers have orders in the autumn that greatly exceed those of the first half of the year. The consequence of this is that the company’s warehouses must be filled during the spring in order to prepare for the deliveries that will need to be made in the autumn, something that is quite a burden and involves something of a risk.

In summary, it can be said that the outlook for expansion in northern and Central Europe is good. The company will gain capacity in production and a well-functioning supplier network in Europe and Asia. ITAB has extremely good know-how and competence as a complete concept and product supplier. It has a broad market presence and an ambition to become even better and stronger in existing markets.

Last but not least: ITAB has won the confidence of many of the largest and most successful chains. That is the greatest strength as ITAB faces the future!

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tailor-made for chain stores

BuSInESS COnCEpt, gOalS anD StRatEgIC appROaCh

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ITAB’s business concept is to offer shop fitting concepts for chain stores in the food and non-food segments. ITAB will realise a market leading position on selected markets through its expertise and long-term strategies.

BUsINEss GOALs

• ITAB will experience growth of at least 15 per cent per year over an extended period.

• ITAB will maintain its position as market leader on the Nordic and Baltic markets.

• ITAB will become market leader in the UK, the Nether- lands and Central Europe.

• ITAB will develop and gain market shares on new European markets.

fINANCIAL GOALs

• Over an extended period, ITAB will have a minimum 20 per cent return on equity.

• ITAB will have at least 25 per cent risk-bearing capital.

• ITAB’s share dividends will, over an extended period, follow the company’s profits and correspond to 20 – 30 per cent of the company’s profit after tax. Distribution will, however, be adapted to the company’s investment needs and any share repurchase schemes.

sTRATEGIC APPROACh

ITAB will develop and nurture long-term business relations with chain stores within the food and non-food segments by working closely with its customers and their markets. The competence, commitment and businesslike attitude that characterises the Group will create trust and confidence in each and every customer. Turnkey solutions will be offered through responsibility for the entire flow – from concept, design, project management and construction to production, logistics and installation.

ITAB will develop new concepts, products and solutions by utilising its extensive market expertise and innovativeness while also working closely with its customers. ITAB will use its highly efficient and flexible production resources, thorough logistics process and selected partners to offer the market competitive terms coupled with precise delivery reliability and quality.

ITAB will use its leading position in the Nordic and Baltic countries

to create the conditions for further growth and expansion on selected

markets.

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Broad base in Europe

thE maRkEt

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ITAB supplies shop fittings and equipment for major chain stores within the food and non-food segments throughout Europe. The aim for ITAB is to operate near its customers, which means that the geographical markets can be steadily developed.

ITAB’s primary target groups are major European chain stores in the food and non-food segments. The food segment consists of national and international grocery chains such as Ahold with ICA, Rimi, Albert Hein and Hypernova, as well as COOP Nor- den, Axfood, Dansk Supermarket with Netto, Kesko, Kaufland, Tesco and Carrefour. Within the non-food segment, ITAB has a broad customer network of chain stores within ready-to-wear clothing, petrol, sports and home furnishing sectors. Customers include H&M, KappAhl, Cubus, Stadium, Statoil, Etos, Hema and Marks & Spencer.

ThE mARkET

ITAB is currently the second-largest supplier of checkouts and entrance systems in Europe. In terms of shop fittings too ITAB has successfully established a position for itself among the fore- most players on the market. Its primary geographical markets are the Nordic and Baltic countries, the UK, the Benelux countries and Central Europe. There are also some sales in Romania, Rus- sia, the Ukraine and Poland, although these countries are mainly regarded as future growth markets.

ITAB’s geographical presence is distinguished by its strategy to operate near its customers. When these customers expand into new countries, ITAB can continue to act as supplier, either by establishing its own operations or through authorised part- ners. ITAB’s broad geographical distribution in Europe and its willingness to follow customers to new areas creates excellent conditions for increased cooperation between the customer and ITAB. Through long-term customer relationships, ITAB is able to continually develop its markets.

COmPETITORs

ITAB has a number of competitors in Scandinavia and the Bal- tic countries, for example Expedit, Grön Hansen, GWS Pikwal, Hestra, Pan-Osten, Rol and the Samuelsson Group. In the UK competitors include Clares, Eden and HMY/Radford, while in the Benelux countries and Central Europe there are players such as Hermes Metal, van Keulen, Mago, Tego Metal and Wanzl.

sUPPLIERs

ITAB’s products, concept fittings and turnkey solutions require a

broad supplier network for materials such as steel, wood, plastics

and glass. Substantial purchasing expertise ensures the Group

a strong, independent position with its suppliers, which fosters

the long-term collaborations that have evolved. These collabora-

tions are distinguished by ongoing efforts to ensure maximum

delivery reliability, both from ITAB’s suppliers and to ITAB’s

customers. The UK acquisitions have meant that ITAB now has

a larger number of partners and suppliers in Asia. Since autumn

2005 the Group’s purchasing activities have been coordinated

in a single central purchasing and logistics function, which has

led to reduced manufacturing costs and costs associated with the

products themselves.

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Complete concepts for chain stores

ItaB’S aCtIvItIES

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ITAB sells and supplies complete concepts for chain stores. These concepts include shop fittings and equipment adapted to suit the profile of each shop. Thanks to the broad organisation of the company itself and its extensive network of partners, ITAB can act as a supplier in much of Europe.

COmPETENT CONCEPT sALEs

ITAB has the capacity to develop, manufacture and install entire concepts for chain stores. A complete concept includes most things that make up a store: shop fittings, such as shelving and various types of product displays, and equipment, such as checkouts and entrance systems. ITAB can also take responsi- bility for the entire in-store environment, for example, colour schemes, floors and lighting. In certain cases, ITAB works as an all-inclusive contractor and is then responsible for building new business premises or revamping existing ones.

ExTENsIvE NETwORk

A broad organisation is required in order to be able to supply complete shop fitting concepts for chain stores. ITAB has units providing production in eight countries and project manage- ment offices in a further four. In other European countries there are partner networks within sales, project management, installation and service. ITAB also gains major advantages through its combination of central volume production and local, flexible factories.

PROjECT mANAGEmENT

In order to carryout extensive high-quality projects, ITAB fol-

lows a well-established work process. The hub of this process

is the project management function, which is involved in each

stage of the work. By working according to this given frame-

work, quality and delivery reliability are assured, even though

every agreement and thus each individual project is unique. A

description of the work process, from concept to turnkey shop,

can be found on pages 28 - 29.

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Fittings for shopping experiences

ItaB’S aCtIvItIES – ShOp FIttIngS

ShOp FIttIngS

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Shop fittings cover everything from shelving, consoles, counters and product stands to entire desig- ned shop fitting concepts. Customers include chain stores in both the food and non-food segments throughout the whole of northern and Central Europe. Shop fittings, with project management, installation and service, account for around 70% of ITAB’s turnover.

PRODUCTION

ITAB develops and produces shop fittings for major chain stores within the food and non-food segments. There are both standard systems and concept fittings, specially designed for a particular customer, in the food segment. The fittings for the non-food segment are usually unique to each chain. ITAB manufactures wood and metal shop fittings at its own faci- lities in Sweden, Norway, Finland, Denmark, Lithuania, the Netherlands, the Czech Republic and the UK. Volume pro- duction of standard fittings takes place mainly in the Czech Republic, while other manufacturing units have been con- structed for high flexibility and customised solutions.

DEsIGN

Large chain stores are very careful about their brand and their image. The store’s profile includes everything from staff clo- thing and the way the staff greet customers, to advertising and range. Shop fittings are also an important part of their marketing strategies. The shape, colour and choice of mate- rial for shelves and product stands, as well as colour schemes and lighting, emphasise the identity of the store. To create optimal sales, ITAB works with its own designers and archi- tects but also works closely with the customer’s designers and partners.

ShOp FIttIngS

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market shop fittings 2006

... ItaB’S aCtIvItIES – ShOp FIttIngS

2006 was a successful year for ITAB’s shop fitting sales. Both turnover and profits were better than the previous year. ITAB’s shop fittings are marketed to much of Europe. Sales are made both through ITAB’s own operations and via partners. The mar- ket situation for the largest sales areas is described below.

ThE NORDIC COUNTRIEs

ITAB is the market leader for shop fittings in Scandinavia.

During the past year this position has been strengthened further.

The Norwegian market has exhibited the greatest rate of growth for ITAB, with success in both food and non-food segments.

Increased sales in Norway are primarily due to increases in ac- tual sales and, to a certain extent, to the acquisition of a shop fitting company targeting the pharmacy segment. The Swedish market has displayed a slight decline in the food segment, while non-food remains the same as the previous year. In Denmark sales have increased markedly, and in Finland the positive trend begun a few years ago is continuing.

ThE BALTIC COUNTRIEs

In the Baltic countries ITAB is the leading player. The emphasis is on shop fittings for the food segment, although non-food is also significant. 2006 was an intense year, with large volumes and full-service commitments, primarily involving new hyper- markets (superstores with food, clothes, white goods, home elec- tronics, sport, building materials, etc). The acquisition of ITAB Novena has strengthened ITAB’s already prominent position and plays an important role in plans for future expansion eastwards.

Uk & BENELUx

With the acquisition of ITAB CG (formerly City Group), ITAB has established itself as a major player in the UK. Sales are to national and international chains within the food segment.

In the Netherlands ITAB is one of the largest suppliers of shop fittings. In 2006 sales increased in comparison with the previous year, primarily in non-food.

CENTRAL EUROPE

Central Europe, with the Czech Republic, Slovakia and Hunga- ry, is an important market for ITAB. The food segment, and hy- permarkets in particular, are the main type of customer. ITAB is one of the largest suppliers of checkouts and standard metal shop fittings. During the year sales have fallen slightly, largely due to the difficulties experienced by a major customer concerning per- mits for construction and the establishment of a business.

RUssIA & POLAND

As far as ITAB is concerned, Russia is characterised by a small number of large customers of the hypermarket variety, as well as an ongoing assessment of the market. During the year sales of shop fittings, checkouts and entrance systems have grown, although the market share is still small. There is a great deal of future potential, but no major campaign will be launched until ITAB’s capacity has been expanded.

Poland is an area that ITAB views with interest. A number of major chains are active on this market and growth is good. ITAB has some sales of shop fittings here and though these are only modest at present, the market is under assessment.

”Shop fittings include everything from

standard shelving, product stands, as

well as fruit and vegetable concepts, to

complete customer-unique fittings.”

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shop fittings also cover nonfood counters and cash desks, as they form part of the shop’s fittings profile.

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Checkouts and entrance systems

ItaB’S aCtIvItIES – ShOp EquIpmEnt

ChECkOutS

EntRanCE

SyStEmS

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Shop equipment covers both customer-unique and standard checkouts and entrance systems for shops. The company’s customers, who are found over much of Europe, consist of chain stores within the food and non-food segments. These customers account for around 30% of ITAB’s total turnover.

ChECkOUTs

ITAB develops, constructs, sells and manufactures checkout systems.

These are supplied largely to the food segment, but also to chain stores within the furniture, building and garden centre segments. The common denominator for all ITAB’s checkout systems is that they have efficient flow and high quality with well-designed ergonomics, and can be adapted to various register and payment systems. They are also very dependable, serviced by our experienced staff and an exten- sive service network. Checkouts are produced at ITAB’s facilities in Sweden, Denmark, the Czech Republic and the Netherlands.

In all stores, the interaction with the customer is important. A well- functioning checkout system enables good customer contact and a good final impression of the store before the customer leaves. This is why we design checkout systems based on the needs and condi- tions of each chain store. For shops stocking a lot of products and where speed is a decisive factor, ITAB manufactures highly effective, ergonomic checkout systems with patented conveyor belt scales and third-customer features*. Other customers have limited space in their stores. In these places, ITAB supplies compact checkout sys- tems, optimised for the flow of customers and goods, efficiency and ergonomics. ITAB also has development projects for self-scanning checkouts. During the first half of 2007 the brand new self-scanning checkout will be launched.

ENTRANCE sysTEms

ITAB develops and manufactures entrance gates marketed in a num- ber of varieties with various accessories. The entrance systems have a flexible design. Customers can choose from a range of features such as radar or photocell-controlled opening, and open or closed systems.

They are also available in a variety of designs, colours and materials – all intended to provide our customers with the freedom to choose the optimum solution and flexibility. Entrance systems are developed and manufactured in Sweden and the UK.

*ITAB developed the patented third-customer feature to increase the flow of customers in checkout aisles where customers have a large number of purchases. The feature allows a third customer to start the purchasing process even though the first two customers have not yet packed their goods.

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...ItaB’S aCtIvItIES – ShOp EquIpmEnt

market shop equipment 2006

Shop equipment is primarily marketed to the food segment, al- though non-food segment customers such as garden centres and building and home furnishing warehouses are also responsible for part of the turnover. Sales and profits increased in 2006 com- pared with 2005. This growth is due to both strong sales and new acquisitions.

Through ITAB’s own activities and via its partners, the company’s shop equipment is marketed to the entire European market. The most comprehensive activities are those for which ITAB itself is responsible. The market situation in the most important areas is described below.

ThE NORDIC COUNTRIEs

ITAB is the dominant supplier on the Nordic market. Its ex- tremely strong position has been confirmed during the year th- rough sales successes in a number of countries. In both Sweden and Norway sales have increased during 2006, within both the food and non-food segments. Denmark has had a stable year, with a turnover comparable to that of 2005. In Finland sales have been modest, but new partnership agreements are creating expectation for future development of checkouts for the food segment.

ThE BALTIC COUNTRIEs

Today, ITAB has a relatively small market share in the Baltic countries for shop equipment. Sales for the year show a slight increase compared with the previous year, primarily due to full- service commitments, in which shop fittings are complemented by checkouts and entrance systems. Through the acquisition of Novena and its strong market position, the aim is to gain further market shares in the Baltic countries as early as 2007.

Uk & BENELUx

The acquisition of ITAB MK (formerly Radford CGC) has made ITAB one of the leading players on the UK market for shop equipment. Most customers are in the food segment. Systems for entry and exit are an important component for ITAB in the UK, and the company is currently the market leader in this area.

Entrance systems are used in both chain stores and public envi- ronments. The company also has a large subsidiary range with

products for shopping trolleys. Examples include collision pro- tection, trolley parking and security devices such as Radlok, a product that effectively prevents trolley theft.

In the Netherlands ITAB is the largest supplier of checkouts, while its market share for entrance systems is relatively low.

During the year, checkout sales have increased markedly com- pared with the previous year. This increase is primarily due to acquisitions and expansions on the part of ITAB’s customers, leading to extensive reprofiling, with checkouts forming an im- portant component of this.

”Checkout systems are developed in constant dialogue with the customer.

Within the European food segment, there are more and more self-service stores where customers scan their items themselves, which has given rise to a completely new type of checkouts.”

CENTRAL EUROPE

For several years now, Central Europe has been one of ITAB’s most important markets. The Group is one of the largest suppli- ers of checkouts for that region, and sales increased dramatically during 2006. This success in Central Europe is due, among other things, to the fact that the Czech subsidiary now focuses on ac- tive sales to major customers, something made possible through the security of belonging to a group and a clear strategy.

RUssIA, POLAND & ROmANIA

Russia is an interesting market for ITAB, although the company

only has a limited presence currently. Concept sales of complete

shops constitute the majority of turnover here, while entrance

systems and checkouts are also sold separately. The Russian

market is dominated by hypermarkets: superstores with food,

clothes, white goods, home electronics, sport, building materi-

als etc. Poland and Romania are growth markets, where ITAB’s

share is relatively modest but is expected to increase.

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for the nonfood segment, effective solutions are being developed for exit checkouts.

Examples include building and home furnishing warehouses and largesized garden centres.

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“ItaB is growing both organically and through strategic acquisitions”

ORganISatIOn anD wORk mEthODS

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ITAB’s strength comes from well-established units in North and Central Europe. During the year, the Group has made several strategic acquisitions that strengthen its market position, expand its geographical distribution and increase volumes at existing plants.

ITAB UNITs

The ITAB Group has 22 units and 1,302 employees. Strategic issues such as business development and investment needs are dealt with by the parent company in Jönköping alongside such Group- wide functions as financing, marketing, purchasing and accounting.

Companies that carry out production, R&D, project management and concept sales are located in Sweden, Norway, Finland, Den- mark, Lithuania, the Netherlands, the Czech Republic and the UK.

Purchasing and project management functions are managed by units in Estonia, Latvia, the Ukraine and Russia. The Group has sales, service and installation partners throughout large parts of Europe.

PERsONNEL & mANAGEmENT

ITAB’s management philosophy is based on distinct, accessible leadership and delegation. During the year, ITAB has introduced a trainee programme, in which a number of graduates will be given the opportunity to participate in developmental assignments for one year. Following this trainee period, the participants are offered continued employment at an ITAB company.

The Group has an ITAB spirit, distinguished by solidarity, openness and accountability for the company and its growth. The working environment is customer-orientated and the company’s method of working on projects permeates the entire Group.

ACqUIsITIONs 2006

ITAB mk (fORmERLy RADfORD CGC)

ITAB MK is the UK’s leading player in the field of checkouts, entrance and guidance systems in stores and public environments.

ITAB MK has marketed ITAB checkouts for a number of years, making this acquisition a natural progression. This company purchase makes ITAB the second largest supplier of entrance and guidance systems in Europe.

ITAB CG (fORmERLy CITy GROUP)

The acquisition of ITAB CG puts ITAB in a significant position on the UK market. ITAB CG is the UK’s fastest growing company within shop fittings, project management and service.

ITAB CG and ITAB MK together make ITAB a complete supplier for shop fittings and equipment in the UK, further strengthening its market position across Europe. In addition to the expanded market, the acquisitions also contribute to increased production volumes at the Czech plants.

ITAB NOvENA (fORmERLy NOvENA)

ITAB Novena is one of Lithuania’s largest shop fitting companies.

The company also has a subsidiary in the Ukraine. ITAB Novena supplies shop fittings and manufactures wooden, metal and wire products. This acquisition consolidates ITAB’s market-leading position in the Baltic countries and contributes to ITAB’s eastward expansion.

PREmOERs

PremOers is a leading project management company in the Nether- lands. It has been successfully merged with ITAB’s operations in the Netherlands. This acquisition strengthens the Group’s market position, within non-food primarily, but also increases production volumes in the Netherlands and the Czech Republic.

PhARmAsERvICE

The Norwegian company PharmaService has extensive experience of concept development and project management, and is a leading supplier of complete shop fittings for pharmacies in Norway. Phar- maService has strengthened ITAB’s position on the Norwegian non- food market.

parent company

woudenberg Tallinn

Riga kaunas vilnius kleipeda Allerød

hinnerup järvenpää

Oslo Trondheim stadsbygd sandefjord jönköping

hjo Nässjö

Sweden norway Finland Denmark Baltic countries netherlands czech republic Ukraina

kiev Ukraine

Blansko Letovice milton keynes

hemel hempstead

st Petersburg russia UK

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From idea to turnkey shop

ORganISatIOn anD wORk mEthODS

IDEA

ITAB uses the customer’s needs and specifications as the starting point. This phase entails close collaboration between the customer’s representatives and various experts from ITAB. Proposals can include designs and/or construction elements depending on the nature of the assignment.

TURNkEy shOPs

ITAB manages projects through to the very end.

when the last screw is in place the customer has a finished product, a new concept or a complete shop that can be used for new successful sales and greater profitability.

DEsIGN

ITAB’s development engineers and designers keep each customer’s brand and image in mind at all times as they work. Proposals are illustrated using 3D layouts, which are also used for making prototypes, which are tested for function and appearance.

fURThER DEvELOPmENT

During work on a shop concept, new ideas and needs often come up. Thanks to a coordinated project management function and a wellfunctioning work process, new stages can be slipped smoothly into the right phase of the flow. Thus the work of creating the opti

mum store continues.

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Project management is the coordinating link in ITAB’s work method “From idea to turnkey shop”.

The fact that project management is involved at every stage in the flow guarantees that everything runs efficiently and that cooperation and dialogue between ITAB and the customer functions effecti- vely. Competent project management ensures everything runs smoothly and reassures the customer.

CONsTRUCTION

Design documentation is produced using threedimensional CAD systems that minimise development times and support the decisionmaking process. Important elements include finalising the stability criteria, selecting the right materials and enabling costeffective production.

PRODUCTION

modern facilities provide the Group with efficient produc

tion of highquality standard fittings and enable flexible production of customised solutions. high availability is guaranteed by ITAB’s broad geographical distribution and network of subsuppliers.

LOGIsTICs

frictionfree flow for largescale installations requires competent management of goods and information. Pro

duction planners and purchasing networks work to reduce purchasing costs, optimise the size and transport of goods and communicate with customers.

INsTALLATION

ITAB’s own technicians and certified installation teams are specialists in the company’s products and systems.

Installation can be performed while a store carries on its usual activities, or alternatively, a completely empty space can be converted into a readytouse shop.

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 0 I T A B A N N U A L R E P O R T 2 0 0 6

long-term environmental work

ORganISatIOn anD wORk mEthODS

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The Group’s environmental goal is for its companies to continuously strive for reduced environ- mental impact by making environmentally-sound choices when it comes to raw materials, produc- tion processes and transport. The companies are to be sensitive to the wishes of their customers and must comply with the market’s environmental requirements.

For a number of years ITAB has been implementing “green”

investments in offices and factories, giving rise to extremely energy-efficient units. For example, systems for reducing electri- city and gas consumption have been implemented, and equip- ment that uses residual heat from factories to heat other premises is in use. The Group also uses an advanced water-based surface treatment for wood products. In addition to recycling the company’s own materials such as metal, plastics, cardboard, glass and paper, ITAB also offers its customers products for recycling.

Even when it comes to choosing suppliers, the environmental aspects are significant.

fACTORs ThAT AffECT ThE ENvIRONmENT

Factors in ITAB’s business that have an environmental impact include emissions to air and water, wastewater, noise, packaging, waste and transport. The nature of ITAB’s business – its manu- facturing processes and products – is such that the environmen- tal risks are deemed to be limited.

ACTIvITIEs REqUIRING DIsCLOsURE IN swEDEN

The Group conducts activities that require disclosure in accord- ance with the Environmental Code at two Swedish subsidiaries.

IsO 14001 CERTIfICATION

One of the Group’s Swedish companies has a certified environ- ment management system in accordance with ISO 14001:2004.

Through the certification process, the company contributes to

long-term sustainable development by monitoring its resource

usage and environmental impact when developing and produ-

cing products and services. Environmental watchwords include

complying with laws and regulations, working on constant im-

provements, restrictive use of resources, limiting our environme-

ntal impact, preventing pollution and adopting an approach that

considers the entire lifecycle. The certification process also inclu-

des environmental training for all employees. This means that

employees have documented training in environmental aspects

of waste management, transport and the impact on the environ-

ment that stems from metals and power consumption.

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SwEDEn

ORganISatIOn anD wORk mEthODS

Production of shop fittings in wood takes place at the Nässjö plant, while metal products, checkouts and entrance systems are manufactured in Jönköping. The project management organisation, construction, R&D and logistics are to be found in both Nässjö and Jönköping. In addition to the production sites, there is a smaller assembly unit in Hjo. There are 269 employees in Sweden.

During the year restructuring has resulted in the closure of the Örebro unit and a decision to transfer its activities to Nässjö. At the Jönköping unit, the marketing organisation has been reinforced to provide increased strength and competence in project management.

In 2007 great emphasis will be placed on internal development and efficiency, and on further improving delivery reliability.

nORway

ItaB’s organisation in Europe

Our Oslo office houses management, marketing functions, project management and architectural and design skills. Our unit in Stadsbygd manufactures wood and metal shop fittings. There is a smaller project management unit in Trondheim.

There are 139 employees in all at the Norwegian units.

During the summer ITAB acquired PharmaService, a company based in Sande- fjord that specialises in shop fittings for pharmacies. The company has no manufacturing facilities of its own but is increasing volumes at ITAB’s other units.

During the year factory areas and warehouse capacity were expanded by 2,000 sq m at the unit in Stadsbygd in connection with efficiency-raising investments.

In 2007 the focus will be on maintaining the company’s market position and on developing concept sales primarily within the non-food segment.

Finnish operations are concentrated in Järvenpää, where metal production for shop fittings is carried out. In addition to production for the Finnish market, manufacturing in Järvenpää also accounts for large proportions of ITAB’s deliveries to Russia. There are 65 employees.

In 2006 the Finnish company celebrated its 50-year anniversary. During the year work on increasing customer orientation has continued together with an increased focus on the non-food segment. A new partnership agreement with a distributor is expected to result in increased sales of checkouts for the food segment in the coming year.

FInlanD

här kommer annan bild

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ITAB strives to act as one company on all markets. Customers are treated in the same way and are offered the same ranges wherever they are. The Group has 22 units in 12 countries.

Here is a summary of the Group’s activities.

DEnmaRk

BaltIC COuntRIES

The company’s Danish centre for project management, logistics and checkout assembly is in Alleröd in Sjælland. At Hinnerup in Jylland there is a small unit for production of limited series and customised shop equipment solutions. The Danish company has 33 employees.

During the past year no major organisational changes have been made; all efforts have been concentrated on gaining market shares. In 2007 there will be increased intra-group cooperation between the Danish company and production in the Czech Republic, Lithuania and Sweden. In combination with continuing hard work in terms of marketing, this is expected to result in a strengthening of the company’s position in Denmark.

At the start of 2006, ITAB Novena was acquired (formerly Novena). This is a Lithuanian shop fitting company with wood and metal production.

ITAB Novena’s production facilities are in Kaunas, but the company also has a project management office in Kleipeda and a subsidiary in the Ukraine. There are project management and logistics centres in Tallinn in Estonia, Riga in Latvia, and Vilnius and Kleipeda in Lithuania. There are 220 employees.

During the year, ITAB Novena has initiated a change in its activities;

from being a product-orientated company it has developed into marketing and concept-thinking organisation. With a view to increasing production capacity in Lithuania, investments have been made in finishing equipment.

For the coming year, work is continuing to integrate the newly-acquired company with ITAB’s other activities in the Baltic countries. In the first instance the companies’ sales, installation and service work will be coordinated. These activities will also act as a support function for other ITAB companies.

The new organisation and the strong market position create conditions for further expansion within both shop fittings and shop equipment.

ITAB Baltic will help the company as a whole increasing its activity in Poland and further eastwards.

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nEthERlanDS

uk

ITAB’s operations in the UK take place at the newly-acquired companies ITAB CG (formerly City Group) in Hemel Hempstead and ITAB MK (formerly Radford CGC) in Milton Keynes. ITAB CG supplies shop fittings and focuses on project management, logistics, service and some production of customised solutions.

ITAB MK supplies and produces entrance systems and checkouts as well as niche products such as security systems and collision protection for shopping trolleys. The companies have 206 employees altogether.

The past year has seen the start of cooperation between the two UK units, primarily concerning marketing, IT, administration, service and installation. Integration with other companies in the Group has also begun, with deliveries of shop fittings and checkouts from the Czech Republic to the UK, for example.

In 2007 the cooperation between the UK companies will be intensified, resulting in rationalisations. The focus will be on broadening the existing customer base of the two newly-acquired companies.

ITAB’s Dutch subsidiary has 69 employees. Wood production, some customised metal production, logistics, R&D and project management take place in Woudenberg, 60 km from Amsterdam. Much of the company’s requirement for checkouts and standard shop fittings is produced at ITAB’s Czech production units.

PremOers, a leading project management company in the Netherlands, was acquired during 2006. This operation and its five employees have been incorporated with ITAB’s company, strengthening its market position, particularly with regard to the non-food segment. In general the year has been characterised by extensive product development of new concepts and adaptations for new and existing customers. During the year company management has been strengthened and a new business system has been implemented.

2007 will be a year of new investment for our Dutch company. Above all, activities aimed at building up a broader customer base will be given priority.

…ORganISatIOn anD wORk mEthODS

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ITAB’s operations in Central Europe are managed from the Czech Repu- blic. There is a project management office and a production facility for checkouts in Blansko, and a production facility for shop fittings in Leto- vice. ITAB has 301 employees in all in the Czech Republic. The company has certified installation and project management partners in several other Central European countries.

The Czech plants also provide production support to other ITAB companies. During 2006 there was an increase in internal deliveries of checkouts to the Netherlands, the UK and Denmark. The organisation has under- gone major changes, as three different operations have merged together to form one company. Extensive work has also been done to change the direction of the activities, from being a sub-supplier to becoming an independent supplier of complete shop concepts.

In order to create scope for new market investments, construction has begun of a new 20,000 sq m production and logistics facility. The new factory is expected to be ready in the second quarter of 2007. In the coming year work will continue to develop the organisation, including the recruitment of management and other key personnel.

RuSSIa

ukRaInE

Operations in Russia are controlled from St Petersburg, where ITAB has a sales and project management office. In Moscow, ITAB has a partner with an extensive network, which enables installation and servicing of checkouts and entrance systems in several Russian regions.

During the year operations have developed, although ITAB is still cautious about Russia. Its presence on the market is important, but to a certain extent it merely consists of assessing future opportunities among customers, partners and suppliers. Major changes to chain store ownership and to concept trends are expected in the coming year, something that creates interesting possibilities for ITAB.

Operations in the Ukraine are based in Kiev, where the sales and project management office is located. In organisational terms, the office is part of ITAB’s Baltic operations. In the Ukraine, shop fittings and equipment are bought in from other ITAB companies, primarily from Lithuania.

In the coming year ITAB sees potential for expansion in this area, as the chain stores here are increasingly using profiling and new concepts.

CzECh REpuBlIC

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  I T A B A N N U A L R E P O R T 2 0 0 6 | F I n a n c I a L I n F o r m a t I o n

Financial information

Directors’ report ... 37-38 Income Statement, the Group ...39 Balance Sheets, the Group ... 40-41 Changes in equity, the Group ...42 Cash Flow Statement, the Group...43 Income Statement, the Parent Company ...44 Balance Sheets, the Parent Company ... 45-46 Changes in equity, the Parent Company ...47 Cash Flow Statement, the Parent Company...48 Notes ... 49-62 Auditors’ report ...63 Comments on financial review ...64 Financial review – five years ...65 Share data, dividend policy and definitions ...66 Share capital trends and ownership structure ...67

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F I n a n c I a L I n F o r m a t I o n | I T A B A N N U A L R E P O R T 2 0 0 6  

DIRECtOR’S REpORt

The Board of Directors and the CEO of ITAB Shop Concept AB (publ), 556292- 1089, hereby submit the annual report and consolidated financial statements for the 2006 financial year.

TURNOvER AND PROfIT

The Group’s net sales increased by 43 per cent to SEK 1,817.7 million (1,269.5 million) and the profit after financial items rose 46 per cent to SEK 96.6 million (66.0 million).

shARE DATA AND kEy RATIOs

Profit per share after full tax amounted to SEK 10.31 (6.87) and sharehol- ders’ equity per share to SEK 43.18 (29.72). The equity/assets ratio was 23 per cent (26) at the end of the period.

INvEsTmENTs

The Group’s net investments amounted to SEK 203 million (26), of which SEK 140 million concerned corp. transactions, SEK 27 million property and SEK 36 million machinery and equipment.

fINANCING AND LIqUIDITy

The Group’s liquid assets including granted but unutilised credit facilities amounted to SEK 306 million on the closing day.

ACTIvITIEs

ITAB Shop Concept is a concept and product supplier of shop fittings and equipment for food and non-food business in the Nordic countries, the Bal- tic Region, the Benelux countries, the United Kingdom and Central Europe.

Wood and metal shop fittings, as well as checkouts and entrance systems, are designed and produced at the company’s own facilities. ITAB’s well-established project management model allows the company to be an all-inclusive contractor when it comes to building new shops or refitting existing ones.

Production facilities are located in Sweden, Norway, Denmark, Finland, Lithuania, England, the Netherlands and the Czech Republic. The units in Estonia, Latvia, Russia and the Ukraine have functions involving project management and purchasing. Service, installation, project management and sales are functions assigned to various partners throughout Europe.

ITAB is currently the largest player in the Nordic countries and the Baltic Region, while in the United Kingdom the acquisition of two companies has helped establish the Group as a major player in the shop fittings field. In the Benelux countries and certain parts of Central Europe, ITAB has assumed a leading market role. In Russia and the Ukraine, evaluations are continuing with the ambition to carefully enter these marketplaces. Activities are foun- ded on long-term business relationships and delivery reliability in combination with efficient production resources.

The Group’s net sales increased by 43 per cent during the year to SEK 1,817.7 million (1,269.5). Acquisitions made during the year have contributed to this strong growth and the long-term customer agreements entered into have all developed in a positive manner. Growth is being recorded in Norway, Denmark, Finland, the Baltic Region and the Netherlands. Sweden and the Czech Republic have recorded the same level of sales as in 2005.

In terms of profit, trends during 2006 have been favourable. The profit after financial items was SEK 96.6 million (66.0), an increase of 46 per cent.

The improved profit can initially be put down to increased volumes, but the Group has also benefited from the effects of streamlining and cost reductions through increased utilisation of resources at the production facilities and in terms of salaried employees.

During 2006, the purchasing patterns of ITAB’s chain customers changed.

The first half of the year was quieter than normal in terms of deliveries, while the autumn was rather hectic. In order to cope with the increases in volume during the second half of the year, large volumes of goods for warehousing were produced during the spring. This resulted initially in additional costs associated with external warehousing and logistics. The high level of orders

received during the year has led to high capacity utilisation at all of ITAB’s production units, but there is also an increased proportion of purchasing from subsuppliers. This has resulted in greater focus on measures to increase capacity at several of the Group’s production units, primarily in the Czech Republic and Lithuania.

The amalgamations and mergers that began in 2005 in the Czech Republic and Sweden have continued to burden the profit throughout 2006. In the Czech Republic, coordination of the various units intensified during 2006 and comprehensive change work has taken place to improve capacity and address issues concerning corporate structure. The businesses themselves are also changing – from being solely production units to becoming concept suppliers involved in extensive market cultivation. Running parallel with this, the first phase of construction of a new factory covering an area of 20,000 sq m has commenced. ITAB has invested in modern new production technology for the new facility, which will mean additional training for employees, some of whom are new. Although this will initially increase costs, the new facility is an investment for ensuring ITAB’s future growth.

ImPORTANT EvENTs

During the year, ITAB acquired two companies in the United Kingdom.

City Group, which is one of the U.K.’s fastest growing companies within shop fittings, project management and service and Radford CGC, which is a leading player in the U.K. of checkouts, entrance and exit systems in shops and public office areas. The common platform that has been created through the acquisition of these two companies makes ITAB a complete supplier and partner for British retail chains requiring shop equipment, fittings, project management and service. The acquisitions are of major strategic importance for ITAB, which is now making its serious foray into the British market.

ITAB is the market leader for entrance and exit systems in shops and public office areas and one of the major players within shop fittings. In addition to the expanded market, the acquisitions are also contributing to increased production volumes for ITAB’s other companies, mainly in the Czech Re- public.

In January 2006, ITAB acquired Novena, Lithuania’s leading supplier of shop fittings. Novena´s principal area of business are metal and wire products production, but also has some wood products production. The acquisition is an important part in ITAB’s growth strategy and will confirm ITAB’s position as a market leader in the Baltic Region. Integration work has commenced and the organisation is being strengthened and coordination with ITAB’s other Baltic activities is underway. New production equipment was installed during the autumn to increase the efficiency and capacity of the business.

PremOers, which is a well-renowned project management company in the Netherlands, was acquired at the start of the year. PremOers has extensive experience of concept development and project management of complete shop concepts, primarily within the specialised retail trade. PremOers was successfully integrated with ITAB’s Dutch company during 2006.

During the year, ITAB acquired PharmaService a.s in Norway. This company is currently the leading supplier of fittings for pharmacies in Norway. The company has solid and extensive experience of concept development and project management within the pharmacy field. This acquisition will help to strengthen and further consolidate ITAB’s market position.

During the year, ITAB entered into a number of important customer agreements. Agreements have been signed with NorgesGruppen AS, Hästens Sängar AB, Rimi Baltic, the Järnia Group and Lindex. One long-term Eu- ropean partnership agreement has been entered into with Ahold. After the end of the accounting period, a two-year agreement was signed with Tesco Central Europe for delivery of shop fittings to be manufactured at ITAB’s production facilities in the Czech Republic. The long-standing partnership with Stadium is being expanded, as during 2006 ITAB and Stadium jointly developed a new shop fitting concept, which is due to be launched in spring 2007.

ITAB ANNUAL REPORT 2006