Highlights of the year
. . . .1
Comment by the Group CEO
. . . .2
Mission, vision, business idea and financial targets
. .4
Financial targets – Follow-up
. . . .5
Strategy – Follow-up
. . . .6
Net worth
. . . .8
Shares and shareholders
. . . .10
Industrial Operations
. . . .14
Road Marking business area
. . . .18
External factors
. . . .20
Subsidiaries
. . . .22
Associate company
. . . .32
Products and product development
. . . .34
ChemTech business area
. . . .36
Subsidiaries
. . . .38
Environment
. . . .41
Employees
. . . .42
Management of Securities
. . . .44
Presentation of two holdings
. . . .50
Fund investments
. . . .52
Report of the directors
. . . .53
Proposed treatment of unappropriated earnings
. . . .57
Financial reports Consolidated profit and loss account – Group
. . . .58
Consolidated balance sheet – Group
. . . .59
Consolidated cash flow analysis – Group
. . . .60
Parent company profit and loss account
. . . .61
Parent company balance sheet
. . . .62
Parent company cash flow analysis
. . . .63
Changes in equity: Group and parent company
. . . .64
Accounting and valuation principles
. . . .65
Notes
. . . .70
Report of the auditors
. . . .82
Tax rules for investment trusts
. . . .83
Financial risk management and sensitivity analysis
. . . .84
Five-year review
. . . .86
Quarterly review
. . . .87
Definitions
. . . .88
Company organs and management
. . . .89
Board and auditors
. . . .92
Senior management personnel
. . . .94
Information for shareholders
. . . .95
Addresses
. . . .96
Geveko is a mixed investment trust. The business consists of wholly owned, unlisted Industrial Operations division, and a Mana- gement of Securities division. In- dustrial Operations is market leader in Europe in horizontal road markings and generates a healthy cash flow.
Management of Securities offers the Group financial stabi- lity, the potential to generate ca- pital growth and resources for the development of Industrial Opera- tions. Geveko’s Series“B”shares are listed on Stockholmsbörsen’s
“Small Cap”list.
Geveko in brief
Cover picture: Götatunneln Photo: Nils-Olof Sjödén
One of the largest traffic projects in the history
of Göteborg in Sweden is Götaleden, which
was inaugurated on 1 June 2006. The road is 3.3
kilometres long, of which a length of 1.6 kilo-
metres is in the Götatunnel. The Götatunnel
consists of two separate tunnels with three-lane
roads in each direction. The tunnel replaces the
previous stretch of the E45 that goes above
ground though central Göteborg and is heavily
trafficked, taking approximately 65,000 cars
every day. The completion of the tunnel frees up
valuable space, which is suitable for walkways
beside the river and parks. For example, Södra
Älvstranden will become accessible to the city’s
residents as well as tourists. The road markings
on the tunnel’s entrance roads have been ap-
plied by Geveko’s subsidiary Cleanosol.
Geveko shares Geveko shares
Equities Portfolio Equities Portfolio
Industrial Operations Industrial Operations
2005). This resulted in a lower consolidated result for 2006 than for 2005. The Geveko Group has a strong financial position. The Group’s net debt does not inc- lude the parent company’s Equities Portfolio, valued at SKr 563 million.
Profit/loss after tax,
SKr million 116.3 162.9 75.6 143.7 -77.7
Equity ratio, % 60.2 60.2 63.7 66.8 60.1
Net debt, SKr million 239.6 255.8 201.2 140.2 141.8 Return on equity, % 14.1 23.1 28.0 31.8 -27.1
Geveko’s Industrial Operations division is the market leader in Europe in horizontal road markings. The tur- nover has increased by some 53% over the past five years via acquisitions and organic growth in Eastern Europe. In 2006, the result was adversely affected by disruptions to the Romanian business during the first half-year. Later, Industrial Operations improved its performance, but did not, however, manage to recover from the previous deterioration in profit.
2006 2005 2004 2003 2002
Net turnover, SKr million 1,035.0 991.2 940.3 650.2 673.9 Operating profit,
SKr million *) 38.6 51.0 61.0 61.6 62.5
Operating margin, %*) 3.7 5.1 6.5 9.5 9.3
Return on operative
capital, % 6.9 9.6 - - -
Return on capital
employed, % - - 14.3 20.9 22.2
*) Excluding capital gains on divestment of subsidiary company in 2004.
Geveko’s Equities Portfolio is dominated by liquid shares, preferably listed on Stockholmsbörsen. At the end of 2006, shares in Industrials and Healthcare ac- counted for 45% of the market value of the portfolio.
ABB, Alfa Laval and Transatlantic’s were among the best performing shares in 2006.
2006 2005 2004 2003 2002
Market value, 31
December, SKr million 562.7 533.7 410.0 381.4 320.5 Dividends, SKr million 13.0 10.9 11.5 9.1 7.4 Change in value,
SKr million 100.4 135.0 38.3 70.0 -208.4
Net purchases(+)/sales(-),
SKr million -69.0 -11.2 -13.6 -18.3 -9.9
Annual change in value, % 21.2 34.2 11.1 28.1 -40.5 Annual change in SIX
General Index, % 24.5 32.6 17.5 29.7 -37.3
Geveko’s shares have been listed on Stockholmsbör- sen since 1983, and since October 2006 they have been listed on the Small Cap list. Geveko has a gene- rous dividend policy and over the past decade it ge- nerated an average direct yield of 6.9% a year. During these ten years, its net worth rose at an average rate of 12% a year.
2006 2005 2004 2003 2002
Net worth, SKr per share 268 239 205 192 168 Cash flow per share, SKr 9.20 17 -5.25 -1.90 -5.00 Profit per share, SKr 28.20 37.70 16.45 34.95 -18.40
Dividend, SKr per share *) 11 11 10 10 9
Direct yield, % 5.0 5.3 5.7 6.7 9.8
Total yield, % 10 25 23 73 -26
*) 2006 proposed dividend of SKr 11 per share. Also a 2:1 share split
with automatic redemption at SKr 75.
Dividend per share Structure of Stockholms-
börsen by sector Net turnover Operating profit/loss
Operating margin
Dividend as % of net worth Structure of Equities Portfolio
0 10 20 30 40 50 60
2006 2005 2004 2003 2002
0 200 400 600 800 1 000 1 200
2006 2005 2004 2003 2002 SKr million
0 15 30 45 60 75
2006 2005 2004 2003 2002 SKr million
2 4 6 8 10
%
Operating profit/loss Operating margin
0 1 2 3 4 5 6
2006 2005 2004 2003 2002
%
0 2 4 6 8 10 12
2006 2005 2004 2003 2002 SKr Financials
13.3%
Funds 5.7%
Services 5.7%
Equity index bond 2.1%
Industrials 29.2%
Consumer Goods 10.4%
Commodities 11.9%
Telecoms 5.9%
Health Care 15.3%
A
IT 0.5%
Financials 27%
Media 1.1%Services 2.2%
Industrials 24.4%
Consumer goods 12.6%
Commodites 7%
Telecoms 18.7%
Health care 5.8%
S
IT 1.2%
-100 -50 0 50 100 150
2006 2005 2004 2003 2002
• Consolidated profit after tax for 2006 amounted to SKr 116.3 million (162.9).
• Earnings per share for 2006 amounted to SKr 28.20 (37.70).
• The market value of the Equities Portfolio rose by 21.2% (net), and amounted to SKr 563 (534) million on 31 December 2006.
• Industrial Operations’ turnover increased by 4.4% in relation to the previous year and amounted to SKr 1,035.0 (991.2) million.
• Industrial Operations’ operating profit amounted to SKr 38.6 million (51.0).
A weak start to the year as a result of the late start to the road marking sea- son in the Nordic region and Romania resulted in an operating loss being incurred at the half-year point. In the second half of the year the profit amounted to SKr 67.4 million (49.5), an increase of 36%.
• The return on Geveko’s Series“B”shares during the year, including paid dividends, was 9.6%. The SIX Return Index rose by 26.3% over the same period. A dividend of SKr 11 per share was paid in the second quarter.
• Net worth per share increased by 12.1% over the year and on 30 December 2006 it amounted to SKr 268 (239).
2007
• On 15 February the net worth per share amounted to SKr 272.
• As of 15 February 2007, the market value of the Equities Portfolio had risen by 5.2% since the beginning of the year.
Dividend
• The Board proposes to the AGM that a dividend of SKr 11 (11) per share be paid for 2006. The proposed dividend corresponds to 4.1% of the net worth at the end of 2006 and to a direct yield of 5.0% based on the Geveko share price as at 30 December 2006.
Split and automatic redemption programme
• The Board proposes a 2:1 share split combined with an automatic redemp-
tion procedure. Shareholders will receive one new share, which will be
automatically redeemed for SKr 75. The proposal means that SKr 316 mil-
lion will be transferred to the shareholders in addition to the proposed ordi-
nary cash dividend. The total transfer to Geveko’s shareholders will thus be
SKr 363 million.
With hindsight, the year that has passed can be summed up as a year of negative events as well as encour- aging developments. The Securities portfolio showed healthy growth for the fourth year in a row. The Equities Portfolio contributed SKr 100 million to the Group’s profit. In the busi- nesses carried on by Industrial Operations there was a sharp con- trast between the first and second halves of the year. By the half-year point, as a consequence of a late start to the season in northern Europe and with more or less no business at all in Romania, we saw a shortfall of SKr 30 million in the operating result in relation to 2005.
The situation turned up for the better in the summer, with a very strong order intake that continued for the remainder of the year. When com- bined with favourable weather con- ditions, this enabled us to recover most of the decline in earnings expe- rienced during the first half of the year. During the second half of the year turnover rose by 10% and the result increased by 36% in relation to the same period in 2005. However, all in all, Industrial Operations’ profit was lower than in the previous year.
Stock market rises for four years in a row By the end of the first quarter of 2006 the Swedish stock market had risen for 36 consecutive months after it turned back up in the spring of 2003. There were signs then that the American economy could be moving down into lower gear. Developments during the second quarter, with steeply falling share prices, strength- ened the belief that the economic was about to slow down. However, this did not happen. The stock mar- ket gained new strength towards the end of 2006 and by the year-end it was up by around 20%. At the time of writing equity prices have been rising for 48 months.
In the budget for 2006 the target return for the Equities Portfolio was altered from previously being index- related to a fixed target. The object is to earn a stable return over time and
to reduce our exposure to short-term fluctuations on the stock market. It is difficult to assess the new target after one year. A qualified analysis can only be made after an economic or stock market cycle has passed. The Equities Portfolio gained just over 21% in value during the year. At the beginning of 2006 the Portfolio was repositioned with the object of reducing exposure to cyclical shares and increasing the weighting of shares in companies with Europe- related businesses. The holdings in InnovationsKapital’s Funds 3 and 4 are also managed as part of Geveko’s Securities Portfolio. Fund 3, which was started in 2001, made its first divestment, of GPS company NordNav, at the beginning of 2007.
As an investor in the fund Geveko will earn a return of eight times the capital invested in NordNav.
Industrial Operations – change and development
Highlights of 2006 include a higher market share in Great Britain, the acquisition of Preformed Markings, an English company, a sustained positive sales performance for pre- fabricated road-marking symbols, strong growth in sales of water- based paints and expansion of the business in Finland. In the case of our niche products – Corrosion pro- tection and Marking sprays – sales increased for the fourth year in a row in 2006.
As a leading player on the European market for road markings, Geveko has created a strong plat- form for positive developments in the future. In Western Europe the road-marking industry is on the verge of a necessary process of restructuring. The fierce competition on the market intensified during the year when the largest road-marking company in the USA acquired its counterpart on the British market.
The market is characterised by con- siderable excess capacity and is frag- mented, partly owing to regulations drawn up at national level that have the effect of keeping the industry small-scale in nature. Geveko has
been studying acquisition targets for several years with the aim of achiev- ing greater efficiency by means of economies of scale and synergies.
Harmonisation of rules and more efficient procurement practices are examples of measures that would increase customer value and benefit the taxpayer. Geveko has long expe- rience, and sound knowledge, of new working practices, above all from its business in Great Britain.
Geveko has achieved a position of leadership on several large mar- kets in Eastern Europe. During the year new five-year agreements were signed for the maintenance of road markings on the Romanian national road network. We see opportunities for further growth in Poland, the Czech Republic, Slovakia, Ukraine and Turkey. In order to consolidate our position on East European mar- kets we also need to grow in other sectors apart from national road net- works. Meanwhile efficiency
improvements are essential in order to absorb rapidly rising wage costs in these countries. Our strategy for our contracting operations is growth via acquisition.
Future strategic direction
In view of Geveko’s tax status as an investment trust, various alternative future directions for the Group were examined during 2006, as the contin- uing growth of Industrial Operations may come into conflict with the risk- diversification requirements for investment trusts. The road-marking industry in Europe is facing the need for major changes. Geveko is in a good position, with its decentralised and cost effective operative practices, to grow further at a satisfactory level of profit.
The Board has therefore stated that Geveko will play an active part in the necessary restructuring of the road-marking industry in Europe.
This could mean that Geveko will have to give up its investment trust status. However, it is not possible to state when the change of status to that of operative company will take place.
Comment by the Group CEO
The announcement of the change in strategic direction has been well received by the stock market.
Geveko’s share price has risen by around 30% between the beginning of the year and mid-March. The new strategy will present many new chal- lenges, but with leading market positions, professional and dedicated employees and active product develop- ment the prospect of creating added value for Geveko’s shareholders is quite bright.
Dividend
Geveko has almost doubled its equity since the stock market began its recovery four years ago. During this period, Geveko has earned an aver- age direct yield of around 7% per year.
The Board proposes to the Annual General Meeting in April that, in addition to an ordinary divi- dend of SKr 11 per share, an addi- tional SKr 75 per share be trans- ferred to the shareholders via a share split in combination with automatic redemption.
This proposal can be seen in both a historical context and with an eye to the future. Historically the company’s equity has shown steady growth, enabling the Group to build up a strong financial position. The future scenario reflects the Board’s policy regarding Geveko’s strategic direction and the prioritisation of activities in Industrial Operations.
In conclusion I would like to express my heartfelt thanks to our business partners and shareholders for the past year, and to all our employees, who with their excellent performance, enthusiasm and loyalty have contributed to Geveko’s progress.
Göteborg, Sweden, March 2007
Hans Ljungkvist
Managing Director and Group CEO
Mission, Vision, Business idea and Financial targets
Geveko’s mission is to be a competent partner and solutions provider in the field of road safety by supplying innovative products and services of the high- est quality, which help to improve road safety.
Geveko’s vision is to be recognised as Europe’s leading player within the Road-marking sector. The vision shall strengthen Geveko’s business idea, which is to develop profitable industrial operations that generate financial strength as well as added value for shareholders, customers and employees.
Geveko’s business idea is to generate value for shareholders by developing profitable industrial operations and engaging in the professional manage- ment of securities.
• New financial targets for Industrial Operations were approved in 2006. The previous target of an 8% operating margin was changed to a target of 12%
return on operative capital. The new target requires a strong performance in terms of profit as well as effective use of capital.
• The target for the Equities Portfolio is to maximise the return subject to limi- ted risk. This means that the portfolio’s return can be lower than the stock market index when prices are rising sharply, and the opposite, i.e. it should outperform the index, when stock market prices are falling.
• Investments in venture capital funds shall achieve an increase in value of at least 25% per year.
• The total return on Geveko’s shares shall exceed the SIX Return Index each year by 5 percentage points.
• The established dividend policy means that at least 4% of the net worth, plus a bonus when particularly high profits are earned on exits, shall be paid out by way of dividend each year.
Mission
Vision
Business idea
Financial targets
The businesses within the Road- Marking business area are highly seasonal, with the second and third quarters being particularly busy. A high proportion of the business volume in the industry is the result
of procurements arranged during the first half of the year. The financial effects of this seasonality are thus that most of Industrial Operations’
profit is earned during the second half of the year. Geveko therefore
does not provide a full-year earnings forecast before the half-year report is published after the end of the sec- ond quarter.
Result 2006 2005 2004 2003 2002
Operating margin, % 3.7 5.1 6.5 9.5 9.3
Return on operative capital, % 6.9 9.6 - - -
Return on capital employed, % - - 14.3 20.9 22.2
In 2006, profitability was adversely affected by disruptions in the Romanian business. Once these were resolved, Industrial Operations performed strongly, albeit without making a complete recovery.
Result 2006 2005 2004 2003 2002
Change in value, % 21.2 34.2 11.1 28.1 -40.5
SIXGX, % 24.5 32.6 17.5 29.7 -37.3
The portfolio has been repositioned to include more holdings in companies whose businesses have a higher exposure to Europe. In 2006 the Equities Portfolio was overweighted in Industrials and Healthcare. High returns, between 46-95%, were earned on the holdings in ABB, Alfa Laval and Transatlantic in 2006.
Geveko has invested around SKr 11.6 million in InnovationsKapital Fund 3 and Fund 4. Fund 3 was set up in 2001 and is still being built up, while Fund 4 made its first investment in the autumn of 2006. InnKap Fund 3 carried out its first exit in January 2007, when the holding in NordNav, a Swedish GPS company, was sold. The investors received eight times the amount of capital invested.
Result 2006 2005 2004 2003 2002
Total return, % 10 25 23 73 -26
SIX Return Index, % 26 36 21 34 -35
Dividend payout ratio
% of net worth 4.1 4.6 4.9 5.2 5.4
In 2006 Geveko’s shares performed in line with the index until the summer.
After the interim report on June 30, and in connection with Industrial
Operations’ weak performance during the first half of the year, the share price fell sharply. There was a slight recovery towards the end of the year. The direct yield on Geveko shares for 2006 was 5.0%.
Forecast
Industrial Operations
Equities Portfolio
Fund investments
Geveko’s shares
– Strategy –
Industrial Operations
Industrial Operations shall create long-term competitive strength through sustainable profitability, effi- cient production and a target-orien- ted focus on the development of new and improved products. Geveko’s decentralised organisation with much of the responsibility being delegated to subsidiaries results in a high level of readiness and flexibility in relation to political decisions or new business models in the future.
The decentralised model also encourages initiative and co-workers that are highly customer-oriented.
Several key strategies have been for- mulated to help achieve the estab- lished return targets:
• Consolidate market shares and grow via the acquisition of European companies.
• Create growth on own account or via joint ventures on new markets.
• Co-ordinate purchasing volumes, systematise and develop new pur- chasing methods.
• Maintain cost-effective production.
• Purposefully invest in the develop- ment of new and improved pro- ducts to create long-term competi- tive strength and thus sustainable profitability.
• Be ready and have the flexibility required to respond to political decisions or new business models in the future.
• Invest in training and competence development, which will increase employee motivation.
Road Marking business area The Road Marking business area shall be developed by driving and participating in the development and restructuring of the industry on mature markets, mainly in the Nordic region and Western Europe.
A platform will be created on selec- ted growth markets in Eastern Europe from which we can generate higher profitable business volumes.
Growth in the Nordic region and Western Europe is limited. Geveko’s
strategy is in the first instance to consolidate its existing market shares and to grow via the acquisition of European companies. In Eastern Europe growth will be achieved on own account or via joint ventures on new markets. The Group will grow organically by developing niche products and capitalising on
Geveko’s technical leadership within, for example, environmentally adap- ted road-marking paints.
Active product development will lead to the development of products that are among the most advanced in technical terms and among the very best in quality terms.
Production shall be cost-efficient in order to achieve economies of scale with large volumes. This will enable us to offer competitive prices whilst at the same time achieving our profitability targets.
ChemTech business area
The ChemTech business area has an explicit niche strategy and is active within selected, customer segments requiring high specialist competence.
The business area has a high degree of added value, which boosts com- petitiveness. Significant chemical- technical competence and thus several points in common with other companies within Industrial
Operations create further business opportunities on new markets.
– Strategy follow-up – Road Marking business area Business volumes within the Road Marking business area increased by 4.6% in 2006. Road Marking consoli- dated or raised its market share on all Western European markets. In Great Britain, turnover increased for the fifth year in row as a result of organic growth. The English com- pany Preformed Markings Ltd, LKF Vejmarkering’s distributor, was acquired as part of the strategy to strengthen sales of Premark
®. A joint venture was set up in Eastern Europe during the year with the aim of contributing to the introduction of environmentally friendly road-mark- ing paints in Ukraine.
On the purchasing side, the Group’s companies co-ordinate the purchas- ing of their most important raw materials. This, together with the development of new purchasing channels, has enabled significant savings to be achieved.
Product development activities focus on environmentally friendly road-marking products. The advan- tages of being the leader in environ- mentally-adapted products are apparent from the extremely healthy sales performance for water-based road-marking paints in Scandinavia.
ChemTech business area Product development within the ChemTech business area remains focused on formulating products that make less impact on the environ- ment, whilst retaining their high level of functionality. In 2006 both Mercalin
®Marking spray and Mercasol
®corrosion protection noted a positive sales performance.
For Mercasol
®corrosion protection products 2006 saw the introduction of more environmentally adapted products and application methods, in the first instance in Sweden and Norway.
– Direction 2007 –
The established strategy for Geveko’s Industrial Operations means that Geveko’s companies within the Road Marking business area are continu- ing to strengthen positions in Europe by means of cost effective produc- tion. Meanwhile opportunities for acquisitions are being examined in both Western and Eastern Europe.
Strategy and follow-up
– Strategy – Securities Portfolio
The Management of Securities divi- sion shall contribute to financial sta- bility and diversification of risk for the Geveko Group.
Geveko mainly invests in shares in companies listed on Stockholms- börsen with excellent growth poten- tial and low or moderate cyclical exposure. Investments are also made to a lesser extent through mutual funds in unlisted shares with a higher risk but considerable growth potential, and in fixed-income secu- rities and bonds.
The investment strategy is based on guidelines established by the Board for Management of Securities.
The Board decides on the overriding strategic direction for the portfolio four times a year.
The object of the investment strategy is to generate the best possi- ble return.
The following approach provides the strategic base for achieving the established yield targets:
• Follow global factors that may affect the share’s return, such as the performance of the US econo- my, military threats and political/
economic crises on individual mar- kets.
• Follow economic factors such as interest rates, inflation rates, com- modity prices and currency markets.
• Carry out in-depth analyses relat- ing to the companies’ long-term profitability, their potential for future growth, dividend capacity and market conditions.
• Assess individual shares on the basis of the following criteria: his- torical earnings capacity, compe- tence and documented ability of the Board and management, respect for all shareholders and the share’s liquidity.
• Use derivatives (options) to limit risks, but also to increase the return on existing equity invest- ments.
• Engage external experts within the areas of macroeconomics and equity strategy.
– Direction 2007 –
As in 2006, the Swedish stock mar- ket will probably perform well dur- ing the first half of 2007. Dividends and buy-backs together with com- pany take-overs will ensure the stock market remains highly liquid. The Swedish state will eventually sell off some state-owned companies. The American market, which was previ- ously expected to be cautiously sub- dued, has performed more strongly than expected. In Asia stock markets are expected to go on performing well.
Geveko’s strategy is to maintain a high proportion of listed shares in the Securities Portfolio. In 2006 the strategy of repositioning the portfolio was completed. A number of
changes were made with the aim of reducing the proportion of cyclical shares by other holding that were less sensitive to economic cycles.
With hindsight it should be admitted that this was done a little too soon.
In 2006 the exposure to dollar-related shares was reduced, and the propor- tion of holdings of shares with expo- sure to the Euro was increased.
Shares in Industrials and Healthcare, which accounted for 45% of the Equities Portfolio in 2006, will con- tinue to dominate. Considering the exceptionally liquidity of the stock market Geveko plans on average to increase the weighting of liquid funds in the portfolio, for use in the event of any price reversal on the stock market.
Industrial Operations shall create long-term competitive strength through sustainable profitability, efficient production and the development of new products.
The net worth reflects the market value of Geveko’s assets less its lia- bilities. It is therefore the most rele- vant measure of the company’s net value at any given point in time.
Changes in net worth over a period of time provide a reliable yardstick of a company’s ability to generate value for its shareholders. Geveko is a
“mixed investment company”, i.e.
the business consists of a portfolio of listed securities and an unlisted wholly owned division, Industrial Operations.
Securities Portfolio
The Securities Portfolio consists mainly of equities and fixed-income securities with a market listing, mainly on Stockholmsbörsen. Their market value is consequently defined by their listed price. As investment trusts are not liable to taxation on sales of shares, no tax is deducted from their value. Geveko also owns units in unlisted mutual funds, whose value in the net worth is
identical to their book value, in all essentials their estimated market value.
Market valuation Industrial Operations
The value of Industrial Operations is based on its result for the past 12- month period. Adjustments are made for non-recurring costs and, in 2004-2006 for the effect of consoli- dating the Romanian subsidiary Plastidrum. This result is then multi- plied by a p/e ratio, determined on the basis of the current market situa- tion. This p/e ratio is based on the valuation of similar companies on Stockholmsbörsen. In Geveko’s case, the comparison is made with the Building and Civil Engineering sec- tor, as reflected in the Affärsvärlden index. As Geveko’s subsidiaries with- in Industrial Operations are unlisted, Geveko routinely uses a p/e ratio that is 25% lower than the average used for the compared industry to calculate the net worth of Industrial
Operations. As of 31 December 2006, Industrial Operations was valued by this method at SKr 520 million, which corresponds to a p/e ratio of 13.5 as above. At that time, the cor- responding p/e ratio for the building and civil engineering sector was 18.
The net worth of Geveko’s Industrial Operations is determined quarterly.
Changes in net worth
Over the past 10 years, Geveko’s net worth has increased at an average annual rate of 11.7%. After adjust- ment for dividends paid, Geveko’s net worth has increased at an aver- age annual rate of 16.6% over the past decade. The corresponding fig- ures for the SIX General Index and the SIX Return Index were 13.7%
and 16.6%.
Geveko’s net worth on 31 December 2006 was SKr 1,131 mil- lion, which corresponds to SKr 268 (239) per share. Taking into account dividends paid, the net worth increased by 16.6% in 2006.
Net worth
Strong performance by Securities Portfolio lifts net worth
Hennes§Mauritz
Hennes & Maurtiz is an international retailer with operations in 22 countries. At the end of 2006 Hennes & Mauritz was the largest holding in the Equities Portfolio.
Information on net worth Geveko’s net worth is published at the end of each month. The informa- tion is sent to Stockholmsbörsen, news agencies and other business media. The net worth is also avail- able on the company’s website at www.geveko.com upon publication.
Investment trust discount The difference between the compa- ny’s net worth and its current stock market value is known as the invest- ment trust discount. The prices of shares in investment trusts often stand at a discount that can vary in size. The most frequent reason for this is that investment trusts are often perceived to be vehicles that
give more priority to a specific group of shareholders’ power ambitions than to maximising the return on their investment for all shareholders.
Geveko’s view is that its share- holders receive the highest return if both Industrial Operations and the Securities Portfolio are managed so as to achieve faster growth and higher profitability.
SKr million 2006 2005 2004 2003 2002
Securities Portfolio 658 560 442 439 362
Listed holdings 563 534 410 390 321
Unlisted holdings 12 9 9 14 12
Liquid funds 83 17 23 35 29
Industrial Operations 520 480 460 400 365
Other assets and liabilities -47 -33 -37 -29 -17
Total 1,131 1,007 865 810 710
Per share, SKr 268 239 205 192 168
Annual change, % +12.3 +16.6 +6.8 +14.1 +7.2
Listed price, 31 December 218 209 175 150 92
Investment trust discount, % 19 13 15 22 45
Net worth: breakdown by type of asset, and changes
Net worth/share Changes in net worth
including accumulated dividends
Over the past ten years, Geveko’s net worth has increased at an average rate of 11.7% per year.
Over the past 10 years Geveko’s dividends have amounted in total to SKr 96 per share. When taken together with changes in net worth total growth have averaged 17% per year.
SKr million
Net worth Accumulated dividends 0
200 400 600 800 1 000 1 200 1 400 1 600
2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 SKr
0 50 100 150 200 250 300
2006 2005 2004 2003 2002 2001 2000 1999 1998 1997
Geveko offers investors shares with a high direct yield, sound growth potential and limited risk. The risk is limited by the company’s dividend policy, which is made possible by the increase in the value of the Equities Portfolio and Industrial Operations’
strong cash flow. Geveko’s aim is that its shares should be regarded as an attractive investment, in the first instance for private investors and small institutions.
Listing
Geveko’s Series“B”shares were first listed in 1983, on Stockholms- börsen’s“A”list. In 2000 they were transferred to its“O”list. Geveko’s shares obtained a listing on the Small Cap list on Stockholmsbörsen’s Nordic List, which was introduced by OMX in October 2006. The identifi- cation code for Geveko’s Series“B”
shares is GVKO“B”. A trading block consists of 100 shares.
Taxation
Wealth tax is payable on Geveko’s shares and they should be stated in income tax returns at 80% of their closing listed value at the end of each fiscal year.
Share capital
The number of shares in issue has been 4,219,533 since 1993, of which 720,000 are Series“A”shares and 3,499,533 are Series“B”shares. Each
Series“A”share carries 1 vote, and each Series“B”share carries 1/10th of a vote.
Shareholders
The number of shareholders was 3,452 (3,482) on 31 December 2006, according to VPC’s list of sharehold- ers. Institutional shareholders accounted for 50% of the capital and 59% of the votes. Shareholders reg- istered abroad accounted for 25% of the capital and 9% of the votes.
“A” shareholder consortium A consortium agreement has been reached by owners of Series“A”
shares who together control more than 50% of the votes.
Share price and turnover The price of Geveko’s shares on 31 December 2006 was SKr 218 (209), an increase of 4.0% during the year, when the highest listed paid price was SKr 233 and the lowest was SKr 175. On 15 February 2007 the share price was SKr 254. During the year shares were traded for SKr 224 mil- lion, with an average daily turnover of SKr 896,000. The turnover rate was 31% and transactions were completed on 99% of all trading days.
Total return
The return on Geveko’s Series“B”
shares, including dividend, was
9.6%, which may be compared with the return on the SIX Return Index of 26.3%. During the 2002-2006 period, Geveko’s average total return was 21.0% per year. The correspon- ding figure for the SIX Return Index is 16.4%.
Dividend policy
Geveko’s Board has adopted a divi- dend policy whereby at least 4% of the net worth, plus a bonus when particularly good results are earned on exits, shall be paid out by way of dividend each year. Geveko aims to earn a direct return for its sharehold- ers that is higher than the average on Stockholmsbörsen. Between 2002 and 2006, the average direct yield was 6.9%.
Value growth and high direct yield
Geveko’s shares and shareholders
No. of Number Number
Size of share- of of % of % of
shareholding holders “A”shares “B”shares capital votes
1- 500 2,705 1,032 470,520 11.2 4.5
501- 1,000 400 1,013 343,723 8.2 3.3
1,000- 5,000 253 27,936 542,203 13.5 7.6
5,001- 10,000 43 28,240 303,615 7.9 5.5
10,000- 15,000 16 32,076 169,572 4.7 4.6
15,001- 20,000 6 - 107,539 2.5 1.0
20,001- 29 629,703 1,562,361 52.0 73.5
3,452 720,000 3,499,533 100.0 100.0
Source: VPC AB, direct- and nominee-registered holdings.
Proportion of dividend as a percentage of net worth.
Shareholders by size of shareholding, 31 December 2006
0 1 2 3 4 5 6 7
2006 2005 2004 2003 2002
%
Number of shareholders 2006 Shareholders
Physical persons 3,122 -of which resident
in Sweden 3,089
Juridical persons 330 -of which resident
in Sweden 256
Total number
of shareholders 3,452
Source: VPC AB, direct- and nominee- registered holdings.2006 2005 2004 2003 2002 Geveko Series“B”– listed
price SKr per share 30 December 218 209 175 150 92
Highest/lowest listed
price, SKr per share 233/175 209/170 181/141 150/95 140/64 Earnings/loss per share, SKr 28.20 37.70 16.45 34.95 -18.40
Cash flow per share, Skr 9.20 17.00 -5.25 -1.90 -5.00
Net worth per share, SKr 268 239 205 192 168
Investment trust discount, % 19 12 15 22 45
Dividend, SKr per share,1) 11 11 10 10 9
Direct yield % 5.0 5.3 5.7 6.7 9.8
Dividend ratio % 4.1 4.6 4.9 5.2 5.4
Return on share, %2) 10 25 23 73 -26
SIX Return Index +26 +36 +21 +34 -35
Average turnover per
trading day, thousand SKr 896 639 470 354 243
Average value per transaction 73 69 47 50 42
Percentage of trading
days with transactions, % 99 99 99 96 90
Percentage of number
of shares traded, % 31 19 17 22 16
Number of shareholders 3,452 3,482 3,358 3,153 2,866
Number of shares
at end of year 4,219,533 4,219,533 4,219,533 4,219,533 4,219,533
1)Dividend proposal for 2006, SKr 11 per share, plus 2:1 share split with automatic redemption at SKr 75.
2)Change in share price during the year plus dividend paid in relation to opening share price.
Source: VPC AB, direct- and nominee-registered holdings.
Dividend incl. bonus SKr
D
0 2 4 6 8 10 12
2006 2005 2004 2003 2002 2001 2000 1998 1998 1997
Direct yield, %
%
0 2 4 6 8 10 12
Geveko shares
in relation to SIX General index Dividends paid 1997-2006 Per share data
170 180 190 200 210 220 230 240 250 260 270 280
JAN 06
FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN 07
FEB
(c) FINDATA
Series “B” shares highest and lowest price per month SIX Generalindex
Dividend per share
0 2 4 6 8 10 12
2006 2005 2004 2003 2002 SKr
Dividend
In April 2006 a dividend of SKr 11 per share was paid for the 2005 financial year. The Board proposes to the Annual General Meeting that a dividend of SKr 11 per share be paid for the 2006 financial year, which is 4.1% of the net worth on 31
December 2006. This dividend repre-
sents a direct yield of 5.0%, based on
the transaction price of Geveko’s
shares on 31 December 2006.
No. of No. of % of % of A-aktier B-aktier votes capital Gunnar och Märtha
Bergendahl Foundation 339,048 376 31.7 8.0
Bergendala Foundation 137,665 222,200 14.9 8.5
Jarl Ergel 34,720 65,292 3.8 2.4
Ingvar Kamprad - 239,650 2.3 5.7
Klas Dunberger & family 20,600 32,933 2.2 1.2
Magnus Ergel 18,000 53,000 2.2 1.7
Marie Dunberger 20,600 13,000 2.0 0.8
Ulf Dunberger 20,600 - 2.0 0.6
Gunilla Ergel & family 18,000 33,335 2.0 1.2
David Bergendahl 18,500 2,500 1.7 0.5
Ikano Investment Ltd - 173,900 1.6 4.1
Henrik Bergendahl 15,000 - 1.4 0.4
Lars Lewerth 9,600 32,531 1.2 1.0
Anders Mattsson 12,180 765 1.2 0.3
Claes-Göran Mattsson 10,000 - 1.0 0.2
SSB C1 Omnibus AC - 91,849 0.9 2.2
Svenska Handelsbanken S.A. - 90,800 0.8 2.1
Lars Bergwall 8,640 - 0.8 0.2
Goldman Sachs
International Ltd - 66,345 0.6 1.6
Eskil Johannesson 1,970 48,000 0.6 1.2
Others 34,877 2,333,057 25.1 56.1
720 000 3 499 533 100,0 100,0
Source: VPC AB, direct- and nominee-registered holdings.
Shareholders at 31 December 2006 (listed in order of number of votes)
Shareholders by category 31 December 2006 In addition the board proposes a 2:1
share split in combination with an automatic redemption procedure.
Shareholders will receive one new share for each one already owned, which will be automatically redeemed for SKr 75.
Taxation of transfer of assets For the individual shareholder the redemption procedure will mean lower taxation that if a dividend of the same amount had been paid. On redemption the shareholder may make deductions of a proportion of the acquisition value of the share.
The acquisition value will be deter- mined by the National Tax Board.
Contacts with the capital market Geveko made presentations during the year at meetings of financial ana- lysts and at several events organised by local shareholders’ associations.
Analyses of Geveko
During 2006 Geveko was followed by independent investment research firm Redeye and its equities analyst Henrik Alveskog.
Holding, %
Financial companies 3.6 State and municipalities 1.9 Associations, unions,
foundations and similar 18.7 Other Swedish
juridical persons 8.0 Owners resident abroad 25.0 Swedish physical persons 42.8
Total 100.0
Source: VPC AB, direct- and nominee- registered holdings.
Shareholders by domicile, top countries 2006 Holding, %
Sweden 75.0
Switzerland 6.6
USA 4.4
Isle of Man 4.2
Luxembourg 4.0
Other 5.8
Total 100.0
Source: VPC AB, direct- and nominee- registered holdings.
60 80 100 120 140 160 180 200 220 240 260 280 300
02 03 04 05 06 07
(c) FINDATA
Series “B” shares highest and lowest price per month SIX Generalindex
60 120 180 240 300
100 150 200 250 300 350 400
02 03 04 05 06 07
Series “B” shares (incl. dividend) SIX Return Index
Average turnover SKr ‘000
(c) FINDATA
Geveko shares
in relation to SIX General index
Geveko shares including
dividend compared with SIX General index Shareholders by
category 31 December 2006
Shareholders by domicile, top countries 2006
State-owned and municipal companies 1.9%
Foreign physical shareholders 25.0%
Other swedish juridical persons 8.0%
Swedish physical shareholders 42.8%
Financial companies 3.6%
Foundations etc 18.7%
Ä
Source: VPC AB, direct- and nominee-registered holdings.
USA 4.4%
Sweden 75.0%
Isle of Man 4.2%
Ä
Source: VPC AB, direct- and nominee-registered holdings.
Switzer- land 6.0%
Luxembourg 4.0%
Other 5.8%
GREAT BRITAIN
NORWAY
SWEDEN
FINLAND
RUSSIA
UKRAINE
ROMANIA POLAND
CZECH REPUBLIC GERMANY
SWITZERLAND
HUNGARY Subsidiaries Road Marking business area
Subsidiaries ChemTech business area Parent company Geveko Industri Holding AB Head office Göteborg, Sweden
NETHER- LANDS
DENMARK
Nature of business
Geveko’s Industrial Operations seg- ment is divided into two business areas: Road Marking and ChemTech.
The subsidiaries Cleanosol, LKF Vejmarkering, Plastiroute, Plastidrum and Roadcare are all members of the Road Marking business area, which accounted for over 90% of Industrial Operations’ turnover in 2006.
The ChemTech business area conducts its activities through Geveko Industri and Geveko Oy.
All the subsidiaries are wholly owned, except for that in Romania, in which Geveko has a 69% interest.
The Group’s interest in its associate company in Hungary is 50%.
Industrial Operations mainly carries on its business in the Nordic countries, Great Britain, Germany, Poland, the Czech Republic, Switzer- land and Romania, as well as through its associate company in Hungary.
The Road Marking business area manufactures mainly horizontal road marking material and products to meet the growing need for function- ality and safety on roads and high- ways. Geveko is Europe’s largest manufacturer of horizontal road marking products. Product develop- ment and production of materials in combination with the contract road marking services, have helped to give the Group market leading pro- ducts as well as innovative application and packaging systems.
The ChemTech business area manufactures marking sprays, rust protection products, and industrial and house paints. The business is focused on a segment with high demands for customer-adapted products. The ChemTech business area possesses considerable chemical- technical competence, which makes possible production synergies with other companies within Industrial Operations.
Sales
Net turnover amounted to SKr 1,035 million (991), which corresponds to an increase of 4.4% in relation to 2005. The gross operating profit amounted to SKr 207.9 million
(214.3). The operating profit was SKr 38.6 million (51.0) and the operating margin 3.7% (5.1). The return on operative capital was 6.9% (9.6).
The business carried on by the Road Marking Business Area is highly seasonal with the second and third quarters being particularly busy. The road-marking season in the Nordic region, where Geveko has some 60%
of its invoiced sales, begins in April and continues until October/
November. Consequently, it is not unusual for losses to be incurred for the first six months of the year. In terms of capital invested, large stocks and a high level of accounts receiv- able are built up during the first half of the year, but these then fall and disappear completely before the opening of the next year’s season. In recent years, however, there has been a shift in the season towards the end of the year, which for 2006 meant that road-marking projects were still in progress at the end of December.
Sales volumes within Road Marking increased by 3.3% and amounted to SKr 910 million in 2006. Turnover increased by 11% on the mature markets in Western Europe as a result of organic growth.
The niche product Premark
®per- formed particularly well. New con- tracts, and thus increased market share, were won in Great Britain and Finland.
In Eastern Europe, turnover in Romania declined by 25% as a result of a drawn out procurement process during the first half of the year.
However, underlying market growth remains healthy, with many major infrastructure projects underway. In Hungary, the associate company Magyar Plastiroute increased its turnover by 25%. The strong per- formance was much due to the com- pany’s involvement in the expansion of motorway projects in Hungary.
The strong sales performance in 2006 within the ChemTech business area was a result of success in the Marking spray and Rust protection product areas, as well as increased subcontract production of water-
Strengthened positions on markets subject to intense competition
Head office: Göteborg, Sweden MD: Anders Björnek
Resigned February 2007 Hans Ljungkvist is acting MD Turnover 2006: SKr 1,035 (991) million Operating profit: SKr 39 (51) million Number of employees: 607 (598) Road Marking business area Subsidiaries: Cleanosol AB, LKF Vejmarkering A/S, Plastiroute GmbH, Plastidrum SRL and Roadcare Ltd.
Associate company: Magyar Plasti- route Kft.
Products: Road marking products and contract road marking services.
Customers: Road authorities, civil aviation authorities and municipali- ties in each country plus building and civil engineering companies.
Competitors: See page 19.
ChemTech business area Subsidiaries: Geveko Industri, Geveko Oy and Geveko Industri BV.
Products: Rust protection and marking sprays, industrial and house paints.
Customers: Building and construc- tion industry, board industry, auto- motive after market and consumer market.
Competitors: See page 37.
INDUSTRIAL OPERATIONS
based road-marking paints. The building and civil engineering econ- omy was strong in the Nordic region in 2006, which provided good growth prospects for the Marking spray product area.
Co-operation with several car manufacturers on the Russian auto- motive after sales market resulted in healthy sales for Rust protection.
Cost structure
Three quarters of Industrial
Operations’ costs consist of produc- tion costs. In the Road Marking busi- ness area’s material production, the cost of raw materials accounts for 40%. The most important raw mate- rials used in the production of road- marking materials are titanium diox- ide, binding agents and glass beads.
Efficient purchasing procedures are therefore vital for achieving a high level of cost efficiency.
Market and product development Road Marking business area
Preformed Markings Ltd, the English company that is LKF Vejmarkering’s distributor in the UK, was acquired in the second quarter of 2006. In the future the company will continue to act primarily as the distributor for Premark
®(prefabricated road- marking products) from LKF Vej- markering.
Cleanosol set up a branch in Turkey in 2005. In 2006, according to plan, the business was transferred to a new company owned together
with a local partner. Geveko has a minority holding of 30%.
In 2006 the Romanian road administration invited companies to submit tenders for road-marking maintenance of the national road network for a period of five years.
Plastidrum was awarded the con- tract, which is worth a total of around SKr 800 million. Plastidrum then divested three branches, whose contract value amounts to around SKr 200 million. The new contract creates a solid foundation for con- tinued development of the business on the Romanian road-marking market.
The Road Marking business area’s product development activities are focused on eco-friendly road marking products and the visibility of road markings in dark and wet conditions. The particularly strong trend in sales of Premark
®in 2006 demonstrates the benefits of being up at the forefront in the develop- ment of environmentally adapted products.
ChemTech business area
More rigorous demands for an emis- sion-free work and external environ- ment at corrosion protection stations are driving the trend towards pro- ducts that have a lower solvent con- tent and produce less wastage and spillage from the treated vehicle.
Within the marking spray area pro- duct development is driven by the area of application and specific cus- tomer requirements.
ITS – Intelligent Transport Systems In the ITS area the company is engaged in the development of elec- tronically controlled products such as optical warning systems. Geveko has developed the“Safer2School”system for improving road safety for school- children on their way to and from school. The system was tested in several municipalities in Sweden last year.
IT systems and operational reliability
In order to improve the efficiency of the business the IT environment shall maintain a high standard in terms of user friendliness, accessi- bility and reliability.
In order to create standardised procedures and working practices within the group a group-wide financial reporting system was installed in 2005 and 2006. The sys- tem provides advantages in the monitoring and control of the sub- sidiaries as well as resulting in an internal reporting process of high quality.
The group’s companies have been certificated and operate in accordance with ISO 9001 and ISO 14001.
Product certification is an on- going process on both domestic and export markets.
SKr million, except where otherwise stated 2006 2005 2004 2003 2002
Net turnover 1,035.0 991.0 940.3 650.2 673.9
Operating profit1) 38.6 51.0 61.0 61.6 62.5
Operating margin, % 3.7 5.1 6.5 9.5 9.3
Capital employed 587.8 540.1 437.9 297.5 283.8
Return on operative capital, % 6.9 9.6 - - -
Return on capital employed, % - - 14.3 20.9 22.2
Operative cash flow before investment activities 73.2 82.9 109.0 35.6 73.6 Investments in tangible fixed assets, net 41.4 61.7 107.4 20.3 41.2
No. of employees 607 598 555 357 367
1)Excluding capital gains on divestment of subsidiary in 2003.
Five-year review Cost structure 2006
Sales costs 9%
Administra- tive costs 8%
Development costs 2%
Production costs 72%
Depreciations acc. to plan 7%
G
Prospects for 2007 Road Marking business area The demand for road marking is expected to match last year’s on the markets in the Nordic region and Western Europe. In Eastern Europe growth rates are generally higher but can vary widely from one market to another. Substantial investments in the infrastructure in Eastern Europe will be the factors driving further growth. Sales volumes during the year will be decisive for the result and profitability, as well as the extent to which we can compensate for sharply higher raw material prices.
ChemTech business area
Market developments for Mercalin
®marking spray are dependent on developments in the building and civil engineering industries, which, in the Nordic region, are expected to remain strong, with infrastructure investments in Sweden, Norway and Finland. A drive to broaden the mar- ket focus, mainly in Sweden was launched during the autumn of 2006 and will be further developed during 2007.
Sales of Mercasol
®rust protec- tion agents are expected to rise fur- ther in 2007 as a result of growth in the Nordic region, Svensk Bilvård’s planned market campaigns in Sweden and higher market share in Russia. Environmentally-adapted products and rust protection meth- ods are currently being introduced, and will make their breakthrough on the Nordic market in 2007.
Industrial Operations
Net turnover per month, 2006
0 20 40 60 80 100 120 140 160 180
Q4 Q3 Q2 Q1 SKr million
SKr million 2006 2005
Consolidated profit and loss account
Net turnover 1,035.0 991.2
Cost of sold products -826.9 -776.9
Gross operating profit 208.1 214.3
Development, sales and
administrative costs -180.5 -169.7
Interest in earnings of associate companies 11.0 6.4
Profit before financial items 38.6 51.0
Net financial items -13.2 -14.2
Consolidated profit before tax 25.4 36.8
Tax -8.3 -3.2
Net profit for the year 17.1 33.6
Consolidated balance sheet
Intangible fixed assets 40.2 31.3
Tangible fixed assets 267.1 290.9
Interest in associate companies 75.8 61.5
Financial fixed assets 18.2 17.8
Total fixed assets 401.3 401.5
Current assets 305.2 235.2
Liquid funds 22.0 89.8
Total current assets 327.2 325.0
Total assets 728.5 726.5
Equity 204.5 213.0
Minority interests 26.4 35.3
Total equity and minority interests 230.9 248.3
Interest-bearing liabilities 352.5 343.9
Interest-free liabilities 21.3 24.9
Other liabilities 123.8 109.4
Total liabilities 497.6 478.2
Total equity and liabilities 728.5 726.5
Operative cash flow
Profit before financial items 38.6 51.0
Depreciation according to plan 73.7 68.7
Cash flow before changes in working capital 112.3 119.7
Changes in working capital -10.9 -25.2
Cash flow before investment activities 101.4 94.5 Investments in intangible
and tangible fixed assets, net -58.9 -77.9
Operative cash flow after investment activities 42.5 16.6 Key ratios
Operating margin, % 3.7 5.1
Operative capital, average 561.0 532.7
Turnover rate, operative capital 1.8 1.9
Return on operative capital, % 6.9 9.6
Number of employees 607 598
Road Marking business area
Nature of business
The Road Marking business area comprises the wholly owned Cleanosol companies in Sweden, Norway, Poland and the Czech Republic, LKF Vejmarkering in Denmark, Great Britain and the Netherlands, Plastiroute in Germany, Plastidrum in Romania, and Road- care in Great Britain, as well as Magyar Plastiroute, the associate company in Hungary. The companies are active in the Nordic region and in Western and Eastern Europe.
The Road Marking business area develops, manufactures and markets mainly horizontal road-marking products and systems to meet the growing need for functionality and safety on roads and highways.
Horizontal road markings include lines and symbols on roads, cycle paths, parking spaces, airfields and other such areas of application.
The associate company Magyar Plastiroute manufactures vertical road signs and other traffic engineer- ing products for the Hungarian mar- ket. In 2006 its subsidiary Plastidrum and Signaux Girod, France, set up a jointly owned company to manufac- ture road signs, mainly for the
Romanian market.
In the Intelligent Transport Systems area – known as ITS – the company is engaged in the develop- ment of electronically controlled products such as optical warning systems for improving road safety for schoolchildren on their way to and from school.
The Road Marking business area also provides contracting services for public authorities with responsibility for road maintenance as well as pri- vate civil engineering companies.
The contracting business is mainly carried on in Scandinavia, Great Britain and Romania, as well as through the associate company Magyar Plastiroute in Hungary.
Market developments
Nordic region and Western Europe The total market for road marking in the Nordic region and Western Europe is worth around SKr 6 billion per year. Growth is modest, at around 1-2% a year. The road- marking industry is characterised by considerable excess capacity and very stiff price competition. Geveko’s principal strategy, therefore, is to maintain its market share and
expand via the acquisition of European companies. Many compa- nies on the market are suffering from poor profitability. It is therefore necessary to restructure the industry, and this process has begun with company failures and mergers and acquisitions.
Eastern Europe
Geveko will generate growth in Eastern Europe either organically or via joint ventures on new markets.
Growth rates vary in these countries, but they are expected to be 5-8% per year and are driven partly by a press- ing need to improve road safety, in combination with major investments in infrastructure financed partly by the EU. The number of road fatalities is considerably higher than in the Nordic region and Western Europe.
The market for horizontal road- marking products in Eastern Europe is estimated at around SKr 1-2 billion and although in terms of value it corresponds to around half of the estimated value for Western Europe, it is growing faster.
Factors affecting demand There are several factors affecting
Focus on profitable growth
The Road Marking business area manufactures horizontal road-marking products and systems to meet the growing need for functionality and safety on roads and highways.
SvenWaldemarsson
demand on the market for road- marking products. One key factor is raising funds to finance new invest- ments in roads and road mainte- nance. In the Nordic region and Western Europe, political decisions and the allocation of public funds are the key to infrastructure investments.
In most countries in Eastern Europe the country’s own financial resources are often insufficient. The EU pro- vides financial support to enable these countries realise their infra- structure plans and projects. Another factor affecting investments in the infrastructure is the cost of road acci- dents, which was estimated at 200 billion euro in the EU in 2005.
Competitors
There are no independent assess- ments or statistics available to enable the total size of the market for hori- zontal road-marking products to be reliably estimated. There are a few large companies in Europe that are involved to some extent in the road- marking business, as well as numer- ous small and medium-sized national, regional and local companies. Of the major companies in Europe, Geveko is the one that has concentrated its business on horizontal road-marking products. Other companies have concentrated to a greater extent on vertical road signs and traffic engi- neering, which makes it difficult to compare the market shares of indi- vidual companies within horizontal road marking segment. Internal assessments suggest that Geveko is the largest company in Europe in horizontal road marking and has a leading position on the Nordic mar- ket and a strong position in Great Britain and central Europe.
Companies in the Geveko Group are among the leaders on the East European markets in Romania and Hungary.
Competitors in the Nordic region EUROSKILT and its
subsidiaries EUROSTAR and EKC Eurostar belongs to Euroskilt AS, a privately owned Norwegian group.
Euroskilt’s range includes road-
marking products. Its subsidiaries – Eurostar in Norway and Denmark and EKC in Sweden – are active in the road-marking sector. Eurostar is one of the major players in road marking in Norway and has a small market share in Denmark and Sweden.
TIELINJA
Tielinja Oy provides road-marking services on the Finnish market and for some municipalities in the north of Sweden.
VÄGAFFÄRSVERKET
Vägaffärsverket, which is owned by the Finnish state, is the leader on the infrastructure market in Finland.
Vägaffärsverket offers building, oper- ation and maintenance services for the road and traffic environment sec- tors. Road-marking services are part of the Aggregate Services segment.
VÄGVERKET PRODUKTION Vägverket, which is owned by the Swedish state, is responsible for planning, building, operation and maintenance of state roads and highways. The business is conducted through three business units. The business unit Vägverket Produktion is engaged in building, operation and maintenance activities in the road- building and civil engineering sec- tors.
Competitors in Western and Eastern Europe BURELLE and its subsidiary COMPAGNIE SIGNATURE
Compagnie Signature is a subsidiary
of Burelle S.A., a listed French group.
Compagnie Signature is one of Europe’s largest manufacturers of road safety products, market leader in France and one of the largest players on the German market.
PRISMO – ENNIS PAINT
Great Britain is the largest thermo- plastic market in Europe with a vol- ume of some 40,000 tonnes a year.
Prismo, which manufactures road- marking products and carries out contract road marking services, was acquired in December 2006 by Ennis Paint, an American company. Prismo is one of the largest manufacturers of thermoplastics in Europe and the largest company on the British road- marking market.
SWARCO with subsidiaries LIMBURGER LACK, VESTGLAS and IMS
The Swarco Group is privately owned and has its head office in Austria. Swarco manufactures and markets the glass beads that are incorporated into road-marking materials, road-marking products and other traffic engineering pro- ducts. Road marking materials are manufactured by Swarco’s sub- sidiaries Limburger Lack and Vestglas. Limburger Lack is Germany’s largest manufacturer of road-marking products and is mar- ket leader on the German market.
IMS (International Marking Systems GmbH) produces prefabricated road- marking symbols under the
Eurotherm brand name.
Business area’s share of Industrial Operations’ turnover
Business area’s revenue by market
91% Nordic
Region 65,4%
F
Eastern Europe 15,1%
Western Europe 19,5%
