This is a translation into English of the original text in Danish. In case of discrepancies between the two texts, the Danish text shall be considered final and conclusive.
LIST OF CONTENTS
Satair – a global company ... 3
Summary ... 4
Financial highlights and key figures ... 5
Review of operations ... 6
New strategy – ”Destination 2014” ... 10
Shareholder relations ... 13
Corporate governance ... 15
Management ... 18
Definitions of key figures and ratios ... 19
Signatures and independent auditors‟ report ... 20
Income statement ... 22
Statement of comprehensive income ... 23
Balance sheet ... 24
Statement of cash flows ... 26
Consolidated statement of shareholders‟ equity ... 27
Statement of shareholders‟ equity, parent company ... 28
SATAIR – A GLOBAL COMPANY
Satair is among the world‟s leading companies in sales and distribution of spare parts for the aviation industry. Over a period of many years the Group has strengthened its position in the aviation industry by means of organic growth and acquisitions, and with its presence in Europe, North America, the Middle East and Asia Pacific Satair provides services to more than 2,200 cus-tomers worldwide.
In its capacity of important player with a wide product portfolio and global presence, Satair is capable of offering both customers and suppliers access to a large and efficient global network. The Group also offers customers and suppliers an array of services and devotes considerable resources to the development of new business concepts that help reduce supply chain costs – to the benefit of customers and suppliers alike.
Satair provides sales and spare parts distribution to all types of commercial operators, maintenance workshops and a number of military operators.
Satair has approx. 360 employees all over the globe.
Mission statement
Our mission is to become the global leader in aerospace distribution services by exceeding both customer and supplier needs for competitive and innovative supply chain solutions.
Satair values
We are committed to serving our customers and our suppliers We succeed through knowledge and competence
We demonstrate initiative and commitment
We conduct business professionally, ethically and respectfully
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Satair A/S
Amager Landevej 147A DK-2770 Kastrup Tel: +45 3247 0100 Fax: +45 3251 3434 www.satair.com e-mail: [email protected] Incorp. no. 78419717 ISIN code: DK001023039-0
SUMMARY
Fiscal 2010/11 turned out to be one of the most eventful years in Satair‟s 53 years of history. The most significant events were:
August 2010: Acquisition of Aero Hardware – purchase sum USD 13.5 million
October 2010: Divestment of the OEM activities at a price of USD 162.2 million
March 2011: Acknowledgements of interest to buy Sa-tair
April 2011: Acquisition of Aero Quality Sales – pur-chase sum USD 30.0 million
May 2011: Announcement of corporate strategy ”Destination 2014”
June 2011: Decision to declare an extraordinary divi-dend of DKK 50 per share
July 2011: Airbus announces its offer to buy all the shares of Satair at a price of 580, totalling DKK 2.6 billion and expiring on 27 Sep-tember 2011
After the divestment of its OEM activities the Group has fo-cused on the Aftermarket which developed favourably dur-ing the fiscal year. This was due partly to fine traffic growth, partly to a particularly keen demand for spares triggered by a steep increase in maintenance activities. The combina-tion of the favourable market environment, in-house effi-ciencies and improved order execution procedures resulted in an extremely satisfactory financial performance (for the continuing activities):
Revenue in 2010/11 of USD 403.0 million (up 33%) EBITDA of USD 36.2 million against USD 23.2 million
last year, and an EBITDA margin of 9.0% against the year-earlier 7.7%
Free cash flows before acquisition and divestment of companies of USD 19.8 million, up from USD 7.8 mil-lion last year
An increase in earnings per share in 2010/11 of 93%, to USD 4.68 per share
Including discontinuing activities, earnings per share rose by 334% to USD 20.07 per share.
Guidance for FY 2011/12
Revenue for 2011/12 is expected to rise to approx. USD 500 million, or approx. 24%; EBITDA is expected in the re-gion of USD 44 million, and free cash flows before acquisi-tion and divestment of companies are forecast at around USD 18 million.
Offer to buy
On 2 August 2011 Airbus made a public offer to the holders of shares and warrants in Satair. The offer expires on 27
September 2011. The Board of Directors finds that the combination with Airbus offers good strategic opportunities that are likely to accelerate the development of Satair‟s strategy.
Adjustment of the income statement
Following the divestment of the OEM activities, Satair‟s in-come statement has been restated in relation to the histori-cal reports to the effect that the revenue and earnings stated in the present annual report are contributed solely by the Aftermarket, whereas all earnings contributed by the OEM activities are reported as a discontinuing activity. This applies to both the current fiscal year as well as to the comparative year and the full years 2006/07 to 2008/09, as they appear in financial highlights and key ratios.
0 50 100 150 200 250 300 350 400 450 06/07 07/08 08/09 09/10 10/11
Revenue (USD million)
0 5 10 15 20 25 30 35 40 06/07 07/08 08/09 09/10 10/11
EBITDA (USD million)
0% 2% 4% 6% 8% 10% 06/07 07/08 08/09 09/10 10/11
EBIT & EBITDA margin
FINANCIAL HIGHLIGHTS AND KEY FIGURES
* Financial highlights and key ratios for 2006/07, 2007/08 and 2008/09 and comparative figures for 2009/10 have been restated to reflect the di-vestment of the OEM activities in relation to the income statement items. See the definitions of key ratios.
USD million 06/07 07/08 08/09 09/10 10/11
Income statement*
Revenue 237.8 284.3 288.5 303.2 403.0
Gross profit 47.1 57.0 59.1 63.1 81.9
Operating expenses (35.3) (43.8) (40.3) (39.8) (47.8)
Profit before depreciation and amortization (EBITDA) 13.8 17.0 7.7 23.2 36.2
Profit on primary operations (EBIT) 9.5 13.1 3.6 18.4 30.7
Financial items, net (3.4) (8.8) (9.1) (3.5) (4.8)
Profit before tax 6.1 4.2 (5.5) 14.9 25.9
Profit from discontinuing operations 10.4 13.7 12.9 9.3 66.6
Profit for the year 13.7 14.8 7.7 19.8 86.9
Share to Satair A/S of profit for the year 13.7 14.9 7.7 19.8 86.9
Balance sheet
Total assets 270.3 310.5 299.0 315.8 334.9
Working capital 129.7 172.6 170.3 170.0 117.2
Total shareholders‟ equity 103.1 117.4 119.8 126.7 176.3
Interest-bearing debt 78.0 106.2 97.2 87.6 42.0
Invested capital 181.2 221.7 218.0 210.3 171.2
Statement of cash flows
Cash flow from operating activities (0.6) (7.9) 8.2 8.4 19.4
Cash flow from investing activities (1.9) (8.7) (2.1) (0.6) 118.4
Free cash flow (2.5) (16.6) 6.2 7.8 137.9
Free cash flow before acquisition and divestment of companies (3.5) (16.6) 6.2 7.8 19.8
Financial key ratios
Gross profit, % 19.8 20.0 20.5 20.8 20.3
SG&A margin 14.8 15.4 14.0 13.1 11.9
EBITDA margin, % 5.8 6.0 2.7 7.7 9.0
EBIT margin, % 4.0 4.6 1.3 6.1 7.6
Working capital ratio 36.2 40.7 41.5 41.8 29.1
ROIC after tax % 7.4 9.6 3.9 12.2 16.5
Return on equity, % 14.1 13.5 6.5 16.0 56.9
Financial leverage year-end, % 0.8 0.9 0.8 0.7 (0.1)
Equity ratio, % 38.1 37.8 40.1 40.1 52.4
Share-related key ratios
No. of shares at year-end 4,262,267 4,282,252 4,282,252 4,282,252 4,290,481
Average no. of shares, restated 4,262,267 4,294,414 4,282,252 4,282,252 4,327,843
Earnings per share of continuing activities – diluted, USD - - - 2.43 4.68
Earnings per share of discontinuing operations – diluted, USD - - - 2.19 15.39
Earnings per share – diluted, USD 3.21 3.46 1.80 4.62 20.07
Cash flow from operating activities per share, USD (0.1) (1.8) 1.9 2.0 4.5
Book value per share, USD 24.2 27.4 28.0 29.6 41.1
Proposed in dividend per share, DKK 5.5 5.5 3.0 8.0 0
Proposed in dividend for the year, USDm 4.3 5.0 2.4 5.6 0
Declared dividend per share, DKK 5.0 5.5 5.5 3.0 58.0
Declared dividend, USD million 3.5 4.5 4.1 2.6 47.0
Listed share price at year-end, DKK 290.6 232.0 135.0 226.5 431.5
Market cap, USD million 224.8 210.0 109.7 159.8 358.7
Other indicators
USD/DKK as of June 30 551 473 527 607 516
Average rate USD/DKK 571 508 546 537 548
No. of employees, average 284 296 302 297 359
REVIEW OF OPERATIONS
The decision to divest the OEM activity gave clarification to Satair‟s corporate strategy and provided a strong financial basis for new growth.
Following the divestment, Satair has narrowed its focus area to the commercial Aftermarket where it is strongly po-sitioned and where there are extremely interesting growth perspectives.
Divestment of the OEM activities
In September 2010, Satair made the decision to divest its OEM activities, and the Group signed an agreement to that effect with B/E Aerospace effective from 27 October 2010. Because of the transaction the divested activities were rec-ognised as a discontinuing activity effective from 1 July 2010 and that is also the status under which they have been recognised in Satair‟s interim reports starting in Q1 2010/11.
The sales price achieved for the divested activities totalled USD 162.2 million (approx. DKK 870 million) stated on a debt-free basis, and the accounting gain from the sale of USD 64.6 million, has been recognised in the income statement.
The divestment was part of a strategic adjustment process and resulted in Satair‟s exit from the market for fasteners and similar aerospace products. The Group continues its main activity, the Aftermarket.
The revenue contributed by the divested activities in fiscal 2009/10 came to USD 107.5 million, or approx. 25% of Sa-tair‟s revenue at the time.
Offer to buy
In March 2011, Satair issued a release stating that it had received a number of unsolicited, non-committal inquiries from financial investors concerning a possible takeover of the company. At the time Satair was about to finalise its corporate strategy for the next couple of years, including the long-term financial objectives and the desired capital structure, and for that reason the Board decided not to pur-sue the specific inquiries, as the timing was found to be in-appropriate.
In May 2011 the Group announced its new corporate strat-egy ”Destination 2014”, and the share market gave it a positive reception. Satair then proceeded to roll out a struc-tured process for the purpose of finding the best possible solution for Satair and its stakeholders.
The process involved several strategic parties and financial investors. The parties invited to participate in the process were carefully selected so as to identify the most attractive parties for Satair and its shareholders.
Satair‟s Board of Directors is unanimous in its recommen-dation of the Offer, which it believes to be attractive in
terms of value and in the interests of shareholders, the employees and other stakeholders.
Throughout the process the Board continued to consider alternative options for Satair, including other types of coop-eration and a continuation of the Group‟s current stand-alone strategy.
The Board of Directors finds that the combination with Air-bus offers good strategic opportunities that are likely to ac-celerate the development of Satair‟s activities. The offer to buy involves an attractive premium to the shareholders compared to the price quoted for the share over the past twelve months as well as an attractive transaction multiple. The Offer also compares favourably with the Group‟s stand-alone strategy and the generally prevailing risks in aviation, where the market structure is reflective of large OEM entities and other players with targeted strategies to penetrate Satair‟s business areas.
For use in its assessment of the offer to buy, the Board re-ceived a fairness opinion from its financial adviser, Steen Associates, and from the independent adviser Carnegie. Both fairness opinions supported the Board‟s recommen-dation to the shareholders.
On the basis of the above, in view of Airbus‟ declared in-tentions for the future development of Satair, and based upon the fairness opinions received, the Board unani-mously decided to recommend the holders of shares and warrants to accept the offer which expires on 27 Septem-ber 2011.
Acquisitions
Satair carried out two acquisitions and implemented three Eaton product lines in fiscal 2010/11, and these activities made an aggregate contribution to growth of 13%, corre-sponding to USD 38.3 million.
Aero Hardware
In August 2010 Satair announced an agreement for the ac-quisition of all assets and activities in Aero Hardware at a total amount of USD 13.5 million. Aero Hardware special-ises in the manufacture of finished hydraulic hoses for the aerospace industry, and the company‟s special competen-cies allow access to an extremely wide product pro-gramme. The products are used for all Airbus and Boeing aircraft and for practically all other large and small types of aircraft. The acquisition will help Satair achieve its growth ambitions, while at the same time increasing the product range available to customers and strengthening the rela-tions with Eaton Aerospace, which is one of Satair‟s largest suppliers. Aero Hardware had 29 employees at end-June 2011 and has been integrated into Satair under the name of Satair Miami.
Aero Quality Sales (AQS)
In April 2011 Satair announced the takeover of Aero Qual-ity Sales (AQS), a leading distributor of batteries to the aerospace industry, at a price of USD 30.0 million. AQS is a good match for Satair‟s business model, and the Group expects to be able to make use of its strong market posi-tion to achieve significant growth in sales of batteries and to achieve cost synergies. The acquisition will also contrib-ute to solidifying Satair‟s growth ambitions within value-added services. AQS is a supplier of batteries for practi-cally all types of aircraft and has sales and service centres in Stamford, Connecticut, USA and in Heston outside Lon-don. AQS had 21 employees at end-June 2011.
The above two acquisitions contributed just over half of the acquisition growth, the remaining part being contributed by the added Eaton product lines which developed on a par with expectations.
Market developments – passenger
trans-port
Air traffic showed fine growth rates in fiscal 2010/11. The figure below outlines the annual growth on a month-by-month basis, both for air traffic (passengers) and for capac-ity (number of seats). The growth in capaccapac-ity is reflective of a higher number of aircraft in the air, and that increases the demand for maintenance and, hence, for Satair‟s products. The average growth in capacity in FY 2010/11 stood at 8%. The striking growth in traffic and capacity in April 2011 re-flects the effect in April 2010 of the ash cloud on Iceland, which brought large parts of air travel to a standstill.
The increase in capacity is the result of the delivery of new aircraft from the manufacturers as well as of the return to service of decommissioned aircraft parked in the desert during the financial crisis. Before being returned to service these aircraft have to go through a maintenance check, and that is one of the reasons why the growth in the After-market in the period in review was generally higher than the growth in capacity. Another reason is the replenishment of inventories undertaken by aircraft manufacturers and maintenance providers because of the larger fleets. And lastly, several air carriers have started up previously post-poned maintenance and upgradings of their aircraft. The combined effect of the above factors explains the ex-tremely favourable market environment all through the fis-cal year.
Source: IATA Carrier Tracker
Market developments – air cargo
The demand for air cargo is determined by developments in world trade. In 2010 the international export volume in-creased by 14.5%, which is the largest increase since measurements began in 1950. The highest increases in exports, 23%, were posted in Asia, led by China. This boom in world trade in the wake of the severe recession in 2009 caused a considerable increase in the demand for air cargo. The increase was highest early in the year and has been edging downwards since then. WTO has announced a forecast for 2011 that shows an increase of 6.5% in global exports.
The figure below shows the developments in air cargo and capacity in the period in review, and the trend is clear. Early in the period the annual growth rate in the value of air cargo rose above 20%, only to end up in a minus of 3% 12 months later. For the fiscal year as a whole air cargo ca-pacity increased by 8%, making 2010/11 an extremely good year for those products in Satair‟s product range that are related to air cargo.
Source: IATA Carrier Tracker
Developments in revenue in 2010/11
As of 1 July 2010, the divested OEM activity is recognised as a discontinuing activity, and the income statement for the full year 2010/11 and the comparative year 2009/10 have been cleared of OEM activities, which are stated in separate lines under discontinuing activities.
Satair‟s primary market is the Aftermarket, where the Group‟s activities include sales and distribution to all types of commercial operators, maintenance workshops and a number of military operators. Satair is a global distributor within aftermarket services and has sales and warehousing locations in Europe, North America, the Middle East, and Asia Pacific.
Revenue in fiscal 2010/11 increased from USD 303.2 mil-lion to USD 403.0 milmil-lion, up USD 99.8 milmil-lion or 33%, driven by organic growth of USD 61.5 million (20%) and growth from acquisitions of companies and product lines totalling USD 38.3 million (13%).
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Y/ Y gr o w th %
Development in international passenger traffic and capacity Capacity (ASK) Passenger traffic (RPK) -5% 0% 5% 10% 15% 20% 25% Y/ Y G ro w th %
Development in international freight and capacity Freight Capacity (AFTK) Freight Volume (FTK)
The regions contributed growth as follows:
USD million 2009/10 2010/11 Actual
growth Organic growth EMEA 118.3 147.4 25% 14% Asia Pacific 106.1 128.4 21% 15% North/South America 78.8 127.2 61% 37% Total 303.2 403.0 33% 20%
The steep increase in growth in North/South America in 2010/11 has levelled out the differences in revenue contri-bution from the Group‟s three main regions.
Regions
The revenue contribution from EMEA (Europe, the Middle East and Africa) in 2010/11 totalled USD 147.4 million, or 36% (39% in 2009/10) of consolidated revenue.
Revenue in Europe increased 25% driven by strong growth in the large markets (UK, France and Germany). Other countries also contributed fine growth. Organic growth came to 13%, with growth from acquisitions stand-ing at 12%. Many European customers still feel the effects of the crisis and fail to achieve growth at the same high level as the other regions. The Middle East generated revenue growth of 31% of which 27 percentage points was organic, and the region still accounts for 7% of Satair‟s revenue. The region is reporting of significant growth in the aircraft fleet and performs part of its operations to and from the other regions. Africa posted only moderate growth due to the unrest in several countries in North Africa.
The revenue contributed by Asia Pacific totalled USD 128.4 million, up 21% of which organic growth accounted for 15%. The region generates 32% of the Group‟s consoli-dated revenue. The highest growth rates were contributed by China, Hong Kong, India and South Korea. The
achievement of 32% in growth in 2010/11 makes China the second-largest market for Satair after the USA, and there are no signs of stagnation. Revenue declined in Japan and Indonesia due to factors such as the tsunami in Japan.
North and South America posted revenue of USD 127.2 million, reflecting an increase of as much as 61% of which 37% was organic. This is highly satisfactory. The acquired businesses in Miami and Stamford, Connecticut, and the acquired product lines made a total contribution of USD of 19.7 million for the region. The new sales strategy and the strongly improved delivery capacity were the main drivers of this outstanding organic growth. The largest contribution by far to revenue growth was attributable to the USA, with revenue in the countries in South America posting 25% in growth overall. The region accounts for 32% of the Group‟s consolidated revenue.
Product lines
All major product lines posted fine growth in the period in review, the main drivers being the increase in aircraft
ca-pacity, the carrying out of postponed maintenance and the replenishment of inventories.
The strong growth in world trade resulted in high activity levels in the freight market, and this again triggered a keen demand for spare parts and components for Telair‟s sys-tems.
The two acquisitions involved the introduction of new prod-uct lines. Major efforts were devoted to the integration of Satair Miami from both an operational and sales point of view. The battery products from AQS accounted for a modest proportion of revenue at the time of the acquisition, which was late in the fiscal year. The aggregate revenue contributed by the acquired businesses was on a par with expectations, and the integration proceeded according to plan.
The phasing-in of Eaton‟s product lines continued as planned, and considerable improvements have been achieved in the provision of service to customers.
Boeing was expected to start deliveries of the 787 Dream-liner, but the launch was postponed several times. The first delivery has now been scheduled for the autumn of 2011. The launch of Boeing‟s new jumbo series, the 747-8, is also delayed, and for that reason none of these types of aircraft will have a significant effect on Satair‟s revenue in the present fiscal year.
Blue Sky Alliance
Satair and its partners in this joint venture have decided to wind up the company following the announcement by the primary partner, Airbus, that it has chosen a different strat-egy.
Gross profit
Gross profit came to USD 81.9 million against USD 63.1 million in 2009/10, up 30%. The gross margin stood at 20.3% against 20.8%.
Operating expenses
Operating expenses (selling, general and administrative expenses) aggregated USD 47.8 million against USD 39.8 million in 2009/10, reflecting an increase in operating ex-penses of 20% of which the acquired activities Satair Miami and AQS accounted for a total of 7%.
The average USD/DKK rate in 2010/11 rose by 2.0% and stood at 548 for the year as a whole. Compared with 2009/10, the increase in the average USD/DKK rate caused an improvement in total operating expenses of approx. USD 0.5 million, which brings the underlying growth in costs adjusted for currency and acquisitions to the level of 12% against the organic revenue growth of 20%.
The SG&A margin improved considerably in 2010/11 and ended at 11.9% for the year as a whole against 13.1% in 2009/10.
The SG&A margin is declining despite the basically un-changed fixed costs of the functional management struc-ture and the running of SAP after the sale of the OEM ac-tivities, and this is evidence of improved efficiencies.
At end-June 2011 the Group had a total of 356 full-time employees against 299 at end-June 2010. The acquired activities contributed a total of 50 employees.
EBITDA
EBITDA for fiscal 2010/11 came to USD 36.2 million against USD 23.2 million in 2009/10, up 56%. The steep revenue growth led to major cost efficiencies, and that ac-celerated earnings. Not unexpectedly, the strong sales growth had a certain adverse effect on the gross margin, which declined by 0.5 percentage points in 2010/11.
The EBITDA margin came to 9.0% against 7.7% last year.
Hedging of future currency cash flows
In keeping with the Group‟s risk management policy, hedg-ing has been arranged of the USD 35 million in expected net cash flows in EUR and DKK for the full fiscal 2010/11 at an average USD/DKK rate of 575. The average USD/DKK for the year was 548.
Fiscal 2010/11 included a total realised gain of USD 2.2 million from the hedging of operating expenses, and at end-June 2011 the amount in shareholders‟ equity included an income item of USD 0.1 million relating to operating ex-penses likely to be incurred in FY 2011/12.
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Amortisation and depreciation
The amount in amortisation and depreciation includes am-ortisation of acquired distribution rights and the investment in SAP as well as the depreciation of other fixed assets, and it is taken to the income statement in accordance with the adopted accounting policies. The accounting item am-ortisation includes a total of USD 0.4 million in amam-ortisation of distribution rights acquired in 2010/11.
Financials
Financial net costs totalled USD 4.8 million for 2010/11 against USD 3.5 million in 2009/10. The accounting item reflects the considerable impact of the weak USD/DKK rate which declined by 15% in 2010/11 as illustrated in the above chart. The decline of the USD resulted in a total of
USD 1.5 million in foreign exchange losses on monetary debt items in foreign currency, up from USD 0.1 million in 2009/10. Also, the amount in financial net costs reflects the positive effect of the Group‟s redemption of all bank debt in October 2010 upon receipt of the proceeds of the divest-ment of the OEM activity.
The redemption of the bank debt made it unnecessary to apply the rules on hedge accounting to an amount of USD 53.6 million in interest hedging of debt. Accordingly, in 2010/11 an amount of USD 0.3 million in fair value adjust-ment of interest hedging contracts was recognised as an expense item against an income item of USD 2.0 million in 2009/10.
Profit before tax
Profit before tax for 2010/11 came to USD 25.9 million against USD 14.9 million in 2009/10.
Profit from discontinuing activities
The profit from discontinuing activities relates to the di-vestment of the OEM activity effective from 27 October 2010. The total amount in cash proceeds from the sale was USD 162.2 million, and the accounting profit comes to USD 64.6 million with addition of the operating profit from the OEM activity from the opening of the year until the time of divestment, a total of USD 2.1 million.
Profit
Profit after tax for 2010/11 came to a total of USD 86.9 mil-lion against USD 19.8 milmil-lion in 2009/10.
Cash flows
The free cash flow before the acquisition and divestment of companies came to USD 19.8 million in 2010/11, up from USD 7.8 million in 2009/10.
The cash flow from investing activities totalled USD 118.4 million and consists of USD 157.0 million from the divest-ment of the OEM activities including transaction costs, etc., reduced by the acquisition of activities in the form of Satair Miami and AQS of a total value of USD 40.7 million. As re-gards Satair Miami, USD 5.0 million of the purchase sum was financed by means of a debt instrument issued by the vendor which was due in August 2011.
The cash flow from financing activities consists of the amount in ordinary dividend declared in October 2010, DKK 8.00 per share, and the extraordinary dividend de-clared in June 2011, DKK 50.00 per share. A total of USD 6.8 million in dividend tax remained unpaid in July 2011.
In December 2010 and February 2011, in connection with the incentive programme the Group carried out capital in-creases by issuing a total of 8,229 shares at a price of DKK 250 per share. The total proceeds from the issue came to USD 0.4 million. The costs of the capital increases amounted to USD 3,000. 460 480 500 520 540 560 580 600 620 640 ju l-09 aug-09 sep -09 o kt -09 n o v -09 d e c -09 ja n -10 feb -10 m a r-10 a p r-10 m a j-10 ju n -10 jul-10 aug-10 sep -10 o kt -10 n o v -10 d e c -10 ja n -11 feb -11 m a r-11 a p r-11 m a j-11 ju n -11 U SD /D K K USD/DKK 1 July 2009 - 30 June 2011
Balance sheet
In accordance with the IFRS provisions, assets and debt relating to the discontinued activities are not stated sepa-rately in the comparative figures, and for that reason the balance sheet at end-June 2011 cannot be directly com-pared with previous years.
At end-June 2011 the total working capital came to USD 117.2 million, corresponding to 29.1% of the revenue posted for the past 12 months. In comparison the level at end-June 2010 was 41.8%.
Accordingly, the divestment of the OEM activities caused a significant reduction of the capital tied up in working capital.
The risk of losses on trade debtors or obsolete inventories is considered to be unchanged.
Cash resources
After the divestment of the OEM activities, the total amount in net interest-bearing debt has now changed from being net bank debt to being a net bank deposit, now including investments in securities, at a value of USD 9.1 million in-cluding a portfolio of short-term bonds and after payment of the extraordinary dividend.
The amount in total drawing rights stands at USD 150.5 million, and at end-June 2011 a total of USD 8.2 million had been utilised.
Of the total drawing rights of USD 150.5 million, USD 65.0 million is covered by a contractual obligation by the lender with a term of 3 years.
Guidance for FY 2011/12
Market developments
Developments in air traffic are closely linked to develop-ments in the world economy in general. The latest IMF forecast from June 2011 included expectations of growth in 2011 of 4.3% and 4.5% in 2012.
An IATA analysis from August 2011 includes expectations of 4-5% in annual growth in air traffic. RBC Capital Market expects around 5% growth in traffic and capacity in 2011, and 4% in 2012. According to IATA, the growth figures for the first half of 2011 were 6.5% for traffic and 7.1% for ca-pacity stated before the major turbulence erupted in the fi-nancial and share markets in August 2011.
Financial guidance
The expectations for FY 2011/12 announced in release no. 207 dated 27 July 2011 are maintained.
Revenue in 2011/12 is thus forecast in the region of USD 500 million, reflecting growth of approx. 24%, and an EBITDA of around USD 44 million.
EBITDA has been stated before transaction costs for the sale to Airbus of the Satair Group. On the assumption that the transaction goes ahead as planned, the transaction costs are expected to aggregate USD 5.0 million for recog-nition as expenses in FY 2011/12.
The free cash flow before acquisition and divestment of companies is forecast at around USD 18.0 million.
The guidance builds upon a USD/DKK rate of 525.
NEW STRATEGY – ”DESTINATION
2014”
In May 2011 Satair presented its new corporate strategy, ”Destination 2014”. The development and initiatives con-tained in it will be pursued by Satair over the next 3-5 years regardless of the outcome of the acquisition process.
Background
For the past ten years, Satair has achieved sizeable reve-nue growth in the Aftermarket segment. This has enabled the Group to position itself among the world‟s leading pro-viders in sales and distribution of spare parts for aircraft maintenance and services. Satair has succeeded in bene-fiting from the economies of scale offered by sales growth, resulting in an improvement in profitability year by year. Sa-tair has a group of motivated and committed employees positioned in the key areas of the aerospace industry: the USA, Asia Pacific and Europe, and they are well organised and supported by an efficient SAP system. Satair‟s capi-talisation allows it to make acquisitions to accelerate reve-nue growth in the years ahead in a combination with a higher EBITDA margin. The next couple of years will be devoted to the implementation of the many identified im-provement measures and growth initiatives.
The main areas of the strategy
The new strategy consists of two main areas: A) Initiatives aimed at growing revenue
B) A number of activities aimed at optimising the internal processes.
A) The initiatives aimed at growing revenue consist of four overarching measures:
1) The addition of new product lines
2) Optimal utilisation of the existing sales and market-ing structure
3) Acquisition of companies 4) The addition of new services
Several initiatives have been identified for a strengthening of sales and marketing efforts, and they are scheduled for implementation within the next years. Satair has also drawn up a list of potential takeover candidates and new product lines for further investigation and has identified
several new services, among them component handling and customer integration.
B) The optimisation of internal processes includes two sub-areas:
1) Efficiencies in the Sales and Supply Chain organisa-tions
2) The Finance, IT and HR organisations.
Efficiencies in the Sales and Supply Chain organisations will be achieved by the implementation of a number of op-timisation projects several of which build upon the Lean concept. The Finance, IT and HR organisations will con-tribute to the process by the establishment of new incentive schemes and by ensuring that the necessary competencies and resources are available for the implementation of and adherence to the growth strategy.
Innovation
Satair‟s customers and supplies want business partners capable of adding value to the value chain, and Satair re-ceives many requests for new services. With a strengthen-ing of its innovation activities, Satair will be able to forge closer relations with customers and supplies while at the same time tapping into the interesting growth opportunities in services. For that reason Satair must become an innova-tive business. Innovation management must be strength-ened, and the Group must improve its ability to offer new services.
Human resources
Satair‟s values are created by the employees, and under the new strategy the Group will continue its development of competencies, the establishment of clear objectives and the development of a global mindset. This will be done by means of global processes and other initiatives.
Employee development builds upon the relationship be-tween employee and manager and involves regular meet-ings to follow up on developments. It also involves an array of training programmes aimed at developing the employees and enabling them to meet new requirements. All manag-ers attend focus management training programmes to en-sure that Satair‟s management philosophy and corporate values are firmly rooted in the organisation. The Group will develop a special talent programme to retain and develop young in-house talents.
Clear objectives and development plans must be drawn up for all employees, and they must be supportive of the com-pany‟s strategic objectives. Managers will be evaluated once a year in a performance analysis. Satair devotes con-siderable resources to the development of its employees in its endeavours to have the most competent workforce in the industry.
The financial objectives of the strategy
The financial objectives for the next 3-5 years are:
Average annual revenue growth in the region of 15-17% before new acquisitions
An EBITDA margin that inclines to the level of 11% end-of-period
An annual free cash flow, before any acquisitions, of minimum USD 30 million p.a. end-of-period
A return on capital, stated as ROIC (including goodwill and after tax), of minimum 18% p.a. end-of-period A gearing of two to three times EBITDA, i.e. EBITDA
rated against net interest-bearing debt end-of-period.
The objective for revenue growth builds upon an underlying market growth of 5-6% p.a. during the above period and a USD/DKK rate of 525.
The above forward-looking statements about Satair’s ob-jectives, in particular those that relate to future sales and operating profit, are subject to risks and uncertainties as various factors, many of which are outside Satair’s control, may cause the actual development to differ materially from the expectations contained in this report. Factors that might affect such expectations include, among others, major changes in the market environment, including the global economy and the events in the Middle East and Japan, etc., currency fluctuations, changes in the product portfolio, the customer portfolio and company acquisitions or divest-ments.
Social responsibility
Satair strives to run its business in a responsible manner and wishes to comply with legislation in the countries and local communities in which it operates. Satair has drawn up specific objectives and policies in a number of relevant ar-eas, but the Group has not adopted an actual policy for the integration of social responsibility in its corporate strategy and activities.
For that reason the present statement on Satair‟s social re-sponsibility does not include information about the stan-dards applied by the Group; information about the way tair translates policies into action; an assessment of Sa-tair‟s achievements, and its expectations concerning future efforts in this area.
Satair‟s considerations in relation to social responsibility and the work hitherto done in the field have been based upon the Group‟s business model, which builds upon its ability to act with a high degree of credibility and deliver quality in services and products. Quality and predictability are key services in Satair‟s business area, and for that rea-son Satair wishes to appear a trustworthy and attractive business partner for all stakeholders in the markets and countries in which the Group operates.
For the purpose of the present statement stakeholders are defined as a wide circle of suppliers, customers, employ-ees, shareholders, public authorities, potential new em-ployees and society in general.
The above fundamental attitude is reflected in contracts and agreements signed by the Group in which the overall goal is primarily to create the necessary framework for a cooperative effort that builds upon trust and decency and is developmental for the participants. For that reason social responsibility is a natural consequence of Satair‟s general attitude.
The environment
In the performance of its business activities the Group en-deavours to assess and reduce the impact on the environ-ment, and it strives to make both a direct and indirect con-tribution to a sustainable environment.
The direct environmental impact from Satair is extremely limited, as its business activities comprise distribution and service provision. However, the Group nevertheless aims at being vigilant. The most important environmental impact comes from the use of electricity.
The Group is not involved in any contamination cases and is not covered by the provisions of Danish legislation on environmental permits; nor is it covered by the Danish act on environmental corporate reporting in the form of „green‟ accounts.
Incentive schemes
It is part of the Group‟s strategy to establish incentive schemes to make sure that management, employees and shareholders are endeavouring to achieve common goals.
The share-based part of the existing incentive scheme ex-pired at the closing of FY 2009/10, and due to the efforts devoted to the new corporate strategy and the subsequent structured process it has been considered inappropriate to establish a new share-based incentive scheme.
Warrants programme
The existing warrants program was established in late FY 2006/07 and expired in June 2010. At end-June 2011 a to-tal of 12 persons, including the Executive Committee and a former employee, had a total of 111,999 outstanding war-rants.
Warrants earned may be exercised in the period until the publication of the Annual Report 2012/13 during the trading windows occurring during that period. See more informa-tion about the warrants programme in note 33. The exer-cise price for the warrants at the closing of fiscal 2010/11 was calculated at DKK 201.34 against DKK 250 before the decision in June 2011 to declare an extraordinary dividend.
Bonus programme
In June 2007 it was decided to roll out a new bonus pro-gramme covering the same group of people as the war-rants program. An annual cash bonus is allocated on the basis of the fulfilment of targets defined for each individual participant in relation to his or her personal development
and business area. The size of the bonus depends upon the degree of fulfilment of each of the predefined targets.
Employee shares
Satair has been offering employee shares on a regular ba-sis, most recently in December 2007. The employee shares, which are currently placed on trust, account for a total of 0.5% of the total share capital. At the closing of FY 2010/11 a total of 48% of the Group‟s employees held Sa-tair shares, accounting for about 1.8% of the share capital.´
Proposals for the Annual General
Meet-ing
Given the offer made for the company and the terms out-lined in section 3.2 of the Offer Document, which provide that the offer price of DKK 580 will be reduced on a DKK-for-DKK basis in the event of any declarations of dividend, the Board of Directors has decided to propose to the An-nual General Meeting that no dividend be declared for fis-cal 2010/11.
Tthe Board thus recommends to the company in general meeting that the profit for the year, USD 86.9 million, be transferred to the free reserves.
The Board proposes to maintain the ordinary emolu-ment of USD 35,000 to board members and USD 80,000 to the chaiman of the Board. Furthermore, in a reflection of the considerable additional workload un-dertaken by the Board in fiscal 2010/11, the Board pro-poses an extraordinary emolument of USD 35,000 to ordinary board members and USD 80,000 to the chair-man of the Board.
If the offer to buy made by Airbus on 6 August 2011 has not come through at the time of the Annual General Meeting, the Board recommends the re-election of N.E. Nielsen, William E. Hooever, Yves Liénart, W. Nicholas Howley, Finn Rasmussen and Carsten Sørensen.
SHAREHOLDER RELATIONS
Basic data about Satair
Share capital 85,809,620
No. of shares 4,290,481
Denomination 20 DKK
No. of share classes 1
Voting right restrictions None
Listing locations NASDAQ OMX Copenhagen
Trading symbol SAT
ISIN code DKK10230390
Bloomberg code SAT DC
Reuter code SATA.CO
Index MidCap
Investor Relations
It is Satair‟s ambition that the share price should always re-flect the company‟s actual and expected ability to create shareholder value. Satair endeavours to attain this ambi-tion by communicating regular, timely, accurate and rele-vant information about the company – including its strat-egy, results and expectations. By means of detailed report-ing, Satair aims to give its stakeholders simple and conven-ient access to information, and the Group stresses the im-portance of engaging in an active dialogue with its stake-holders. For instance, the Executive Committee regularly participates in meetings with investors, analysts and the media. Communications and share-related presentations from Satair are made available on the company‟s website, www.satair.com, immediately upon their publication.
The Satair share
At end-June 2011 the share capital consisted of 4,290,481 shares in denominations of DKK 20, corresponding to a share capital of DKK 85,809,620, see the table below.
Movements in Satair’s share capital
No. of shares in denomina-tions of DKK 20 Share capital, DKK IPO in 1997 2,005,073 40,101,460
Issue of employee shares in 1997 50,000 1,000,000
Issue of employee shares in 2000 25,000 500,000 Issue of employee shares in 2002 35,000 700,000
Issue of shares in 2004 300,000 6,000,000
Issue of employee shares in 2004 40,000 800,000 Targeted placement in November 2005 245,000 4,900,000 Pre-emptive issue in January 2006 1,349,252 26,985,040
Targeted placement in May 2006 212,942 4,258,840 Issue of employee shares in December
2007 19,985 399,700
Exercise of warrants in December 2010 1,000 20,000
Exercise of warrants in February 2011 7,229 144,580
Total at 30 June 2011 4,290,481 85,809,620
Pursuant to the Articles of Association, in the period until 31 December 2011 the Board of Directors is authorised to increase the share capital by up to nominal DKK 1,000,000 through the issue of employee shares. Moreover, in the pe-riod until 30 September 2011 the Board of Directors is authorised to increase the share capital by up to nominal DKK 400,000 through the issue of bonus shares to the em-ployees.
In end-June 2011 the price of the Satair share was 431.5, reflecting an increase of 144% during fiscal 2010/11 which includes the DKK 50 in extraordinary dividend per share declared in June 2011. In the same period the MidCap in-dex of NASDAQ OMX Copenhagen increased by 1%.
0 50.000 100.000 150.000 200.000 250.000 300.000 50 100 150 200 250 300 350 400 450 500 550
jul 10 aug 10 sep 10 okt 10 nov 10 dec 10 jan 11 feb 11 mar 11 apr 11 maj 11 jun 11
No. of shares Price
The total volume of Satair shares traded in FY 2010/11 stood at 1,727,478 (1,588,077 in FY 2009/10), correspond-ing to approx. 40% of the total number of shares in the Group.
The Satair share is followed by the analysts at SEB En-skilda and Nordea.
Shareholders
Just under 5,000 shareholders had arranged for name reg-istration of their shares at the closing of fiscal 2010/11, rep-resenting 97% of the share capital.
Shareholders having filed ownership of 5% or more of the share capital:
ATP (labour market pension scheme)
Kongens Vænge 8, 3400 Hillerød, Denmark (8.3% of the share capital and voting rights).
Matignon Investissement 2 FCPR
1, rue de la Faisanderie, 75116 Paris, France (8.1% of the share capital and voting rights).
Compagnie du Bois Sauvage s.a.
Rue du Bois Sauvage 17 B, 1000 Brussels, Belgium (5.8% of the share capital and voting rights).
The Group had no holding of treasury shares at the closing of FY 2010/11.
Members of the company‟s Board of Directors and Execu-tive Committee held a total of 2.1% of the share capital at 30 June 2011.
Some of the agreements signed by Satair contain provi-sions that will take effect, or that may take effect, in the event of a change of control, including agreements signed with customers, suppliers, credit institutions and members of Satair‟s top management. See also notes 2, 4 and 27.
Dividend
Given the offer made for the company and the terms out-lined in section 3.2 of the Offer Document, which provide that the offer price of DKK 580 will be reduced on a DKK-for-DKK basis in the event of any declarations of dividend, the Board of Directors has decided to propose to the An-nual General Meeting that no dividend be declared for fis-cal 2010/11.
Annual General Meeting
is held on 31 October 2011 at 10am at the Hotel Crown Plaza, Ørestads Boulevard 114, DK-2300 Copenhagen S.
Inquiries concerning Satair from shareholders, analysts, in-vestors, stockbrokers and other stakeholders should be addressed to
Satair A/S
Amager Landevej 147A DK-2770 Kastrup Tel: +45 3247 0100
IR-responsibles: CEO John Stær E-mail: [email protected]
CFO Michael Højgaard E-mail: [email protected] VP – Investor Relations: Pål Rikter-Svendsen Email: [email protected]
Releases to NASDAQ OMX Copenhagen
in 2010/11, except for releases
concern-ing share transactions
2010
6 August Satair completes the acquisition of Aero Hard-ware in the USA
14 September Annual Report 2009/10
25 October Satair focuses its business by divesting its OEM activities
25 October Annual General Meeting
27 October Satair completes the divestment of its OEM ac-tivities
26 October Satair establishes a new global organisation 10 November Report for Q1 2010/11
2011
9 February Report for Q2 and H1 2010/11
29 March Acknowledgements of interest in the company and announcement of corporate strategy 8 April Satair takes over Aero Quality Sales 10 May Report for Q3 2010/11
12 May Announcement of new corporate strategy 16 May Satair‟s new growth strategy and long-term
fi-nancial objectives
15 June Extraordinary General Meeting
15 June The Chairman‟s presentation at the extraordi-nary General Meeting
15 June Resolution to declare an extraordinary dividend
Financial diary
31 October 2011 Annual General Meeting 30 November 2011 Report for Q1 2011/12 9 February 2012 Report for Q2 2011/12 11 May 2012 Report for Q3 2011/12 30 June 2012 Closing of fiscal 2011/12
CORPORATE GOVERNANCE
Management structure
Satair has a dual management structure consisting of the Board of Directors and the Executive Committee. There is no overlap of membership between the two bodies.
The Board of Directors is responsible for the general man-agement of the Group and considers all matters of rele-vance to its overall development, including its objectives and strategies, budgets, risk management, proposals for mergers, acquisitions and divestments of companies, and major development and investment projects. The Board of Directors also supervises the work done by the Executive Committee.
The Executive Committee is employed by the Board of Di-rectors that also lays down the terms of employment and the framework for the work to be done by the Executive Committee. The Executive Committee is responsible for the day-to-day management of the Group, including the devel-opment of its activities and operations, its performance and internal development as well as the implementation of its strategy and the overall decisions approved by the Board of Directors. The performance of the Executive Committee is evaluated by the Board of Directors.
The shareholders are the highest authority in the Group and they exercise their influence at the annual general meetings. Matters to be resolved by the annual sharehold-ers‟ meeting are generally decided by simple majority. The adoption of special resolutions, such as proposals to amend the Group‟s Articles of Association and to change the size of its share capital, requires the support of two thirds of the votes cast and two thirds of the voting stock represented at the meeting.
The work of the Board of Directors
The Board of Directors held 22 meetings in 2010/11, and on 14 occasions a member cancelled his/her attendance. Most cancellations were from board members residing out-side Denmark and related mostly to conference calls con-vened at short notice. In order to ensure that the Board of Directors is kept adequately updated about the running of the Group, the members of the Executive Committee at-tend the meetings of the Board. At these meetings, the members of the Executive Committee have a right to speak, but not a right to vote, and they do not attend the meeting during the discussion of items reserved exclusively for internal consideration by members of the Board.
The Board operates on the basis of an annual working schedule to ensure that all relevant topics are dealt with in the course of the year. Budgets are discussed at a meeting in June, and the corporate strategy is discussed at a spring meeting.
The Board has set up two committees – an Audit Commit-tee and a Remuneration CommitCommit-tee. The terms of refer-ence of the two committees are available on the Group‟s website.
The Audit Committee has two members: Finn Rasmussen (chairman) and Carsten L. Sørensen, and it held two meet-ings in 2010/11. The Audit Committee functions as a pre-paratory body for the work done by the Board of Directors and the resolutions it has to make. Prior to the final discus-sion of an item by the Board of Directors, the Executive Committee presents aspects in relation to particularly risky decisions such as accounting estimates, foreign exchange and finance policy and special tax aspects to the Audit Committee. Accordingly, there is no independent decision-making competence vested in the Committee.
The Remuneration Committee has three members: N. E. Nielsen (chairman), W. Nicholas Howley and William E. Hoover, and it held two meetings in 2010/11. The Remu-neration Committee oversees the remuRemu-neration paid to members of the Executive Committee to ensure compli-ance with the adopted policy.
The Board of Directors evaluates its performance annually by means of a questionnaire for the purpose of improving its work and cooperation with the Executive Committee. The evaluation did not take place in FY3020/11 due to the considerations about the future strategy.
The composition of the Board of Directors
The Board has nine members of whom six are elected by the annual Shareholders‟ meeting and three are elected by the employees. The former group is elected for a term of one year and may be re-elected. The members elected by the annual Shareholders‟ meeting resign from the Board at the annual Shareholders‟ meeting held in the year they turn 70, unless the Board unanimously decides otherwise. The members elected by the employees sit for a term of four years, and this term was fixed in pursuance of the provi-sions of the Danish Company Act. See p. 18 of this Report for a presentation of the individual board members. The Board members elected by the shareholders are all con-sidered independent.
The Chairman of the Board is a partner of LETT lawfirm which in certain cases acts as legal adviser to Satair. How-ever, Satair also retains the services of other legal advis-ers, and the business relationship between LETT lawfirm and Satair is not deemed to be material to either party.
The seniority among the members of the Board averages 9 years for the members elected by the shareholders and 8 years for the members elected by the employees.
When the Board proposes new candidates for board mem-bership, it does so only after a careful assessment of the knowledge and professional experience needed to ensure the presence on the Board of all the necessary competen-cies. Also, the Board strives to achieve the best possible composition in relation to age, background, gender, etc., so as to ensure a competent and diverse contribution to the work performed by the Board.
A couple of years ago the Board decided that it would be appropriate to allow the Group‟s international activities to be reflected in the composition of the Board. Consequently, the Group now has three non-Danish board members re-siding in Belgium, the USA and Malaysia, respectively. When recommending candidates for election to the Board by the annual Shareholders‟ meeting, the Group sends out advance information about their competencies and other executive functions as well as an outline of the criteria that underlie the Board‟s recommendation.
Emoluments to the Board of Directors
The total ordinary emoluments amount to USD 360,000 and remain unchanged from last year. In addition, emolu-ments to the members of the Audit and Remuneration Committees amount to USD 30,000.
A proposal will be made to the company in general meeting concerning payment to the Board of Directors of a special fee of USD 360,000 for the workload handled by it in fiscal 2010/11, bringing the total emolument to the Board of Di-rectors for FY 2010/11 to USD 750,000.
Good corporate governance
Satair‟s Management has a steadfast commitment to good corporate governance practices and strives to improve its standards in this area on an ongoing basis.
The recommendations issued by NASDAQ OMX Copen-hagen regarding corporate governance are applicable to Satair, and Satair complies with practically all of these rec-ommendations. However, the Group has chosen a different practice in the following respects:
Satair does not disclose the amount in emolument paid to each individual member of the Board and the Execu-tive Committee, but only the total amount in remunera-tion paid to the members of the two bodies. Manage-ment takes the view that the important thing must be for shareholders to be able to relate to the overall amount paid in remuneration.
Until now, the Board has found it appropriate to refrain from appointing a vice-chairman.
As regards the organisation of the work of the Audit Committee, it has been decided to conduct the discus-sion of the interim financial reports on the full Board of Directors rather than on the Audit Committee.
It is considered most practical to handle nominations di-rectly at board meetings, and for that reason the Group has decided not to set up a Nominating Committee. The incentive programme established in 2007 does not
include rules for the repayment of variable pay in case it turns out subsequently that the criteria for the payment of such pay were flawed.
It has not been found necessary for the Board in ple-nary to meet with the external auditor at regular inter-vals without the attendance of the Executive Commit-tee.
A detailed description of Satair‟s corporate governance is available on the Group‟s website, www.satair.com, under ”Investors” and ”Corporate governance”.
Control and risk management in
connec-tion with financial reporting
Satair has established a number of control and risk man-agement systems for its financial reporting for the purpose of:
Ensuring timely, true and fair and informative financial reporting in accordance with applicable legislation on fi-nancial reporting and disclosure requirements to listed companies, and
Providing a basis for internal financial management and budget follow-up.
The established control and risk management systems are improved on an ongoing basis and were implemented to ensure that errors and irregularities are detected and cor-rected in time, but they are no absolute guarantee against the occurrence of such errors and irregularities. The estab-lished systems may be subdivided as follows:
Control environment Risk assessment Control activities
Information and communication Monitoring
Control environment
Responsibilities and powers are defined in the Board‟s in-structions to the Executive Committee as well as in other policies, procedures and codes.
The Board of Directors approves Satair‟s general policy for finance, currency and risk management as well as its gen-eral business code of conduct. The Board also discusses important estimates and uncertainties in connection with fi-nancial reporting.
The Executive Committee approves other policies and pro-cedures, and the responsible functions issue guidelines and oversee compliance with all policies and procedures. Systems have been rolled out to ensure that the various functions in the Accounting Department are adequately separated, and throughout the organisation a structure has been established which ensures that costs and commit-ments cannot be incurred or entered into without due ap-proval.
The control environment consists of the organisational structure and internal guidelines in a combination with leg-islation and other external rules and regulations.
Risk assessment
The Executive Committee makes assessments of risks on an ongoing basis, including risks with a direct impact on fi-nancial reporting, risks related to general IT controls, such
as IT breakdowns and data losses, and risks related to fraud and irregularities.
The risk of errors in accounting items building upon esti-mates or generated by means of complex processes is relatively higher than for other items. The Board of Direc-tors and the Executive Committee have constant focus on this issue.
Control activities
The control activities are integrated into Satair‟s accounting and reporting procedures and include procedures for e.g. attestations, authorisations, approvals, reconciliations, budget follow-up, separation of irreconcilable functions, controls integrated in IT applications and the general IT controls.
The control activities take place partly locally, partly in con-nection with the controlling of business units and opera-tions.
Information and communication
Satair maintains information and communication systems to ensure that its financial reporting is correct and com-plete. Satair‟s bookkeeping rules and procedures for finan-cial reporting are outlined in reporting instructions and Standard Operating Procedures, which are updated as and when required.
Representatives from all finance functions meet at regular intervals to ensure that all parts of the organisation are up-dated about the latest policies and procedures, the purpose being to attain a high level of quality in the ongoing ing which provides a basis for the Group‟s financial report-ing and financial control.
Monitoring
Satair applies a fully integrated finance and information system for the monitoring and collection of financial re-ports. This enables head office to maintain full transpar-ency in relation to the individual reporting units and by means of analyses to detect errors, irregularities and weaknesses in the internal controls as well as non-compliance with procedures and policies, etc.
Members of the Board of Directors, the Executive Commit-tee and the top management team receive monthly finance and sales reports for comparison with their own knowledge and expectations. The monthly reporting is being devel-oped on an ongoing basis.
MANAGEMENT
Board of Directors
N.E. Nielsen, born 1948 Attorney-at-law Chairman of the Board Joined the Board in 1994 Re-elected in 2009, term expires in 2011 Chairman of the Board of:
Ambu A/S
Charles Christensen A/S TORM A/S
Danica-Elektronik A/S Gammelrand Holding A/S InterMail A/S
MK A/S
PELE Holding A/S P.O.A. Ejendomme A/S SCF Technologies A/S
Member of the Board of:
Weibel Scientific A/S
and their subsidiaries Special competencies:
General management as chairman of listed companies with global activities, and company law
Dorte Sonne Ekner, born 1969 IT Application Owner
Elected by the employees Joined the Board in 2002, term expires in 2014
W. Nicholas Howley, born 1952 CEO and chairman of the board of TransDigm Group Inc.
Joined the Board in 2006 Re-elected in 2009, term expires in 2011
Special competencies:
Founder of TransDigm, which is en-gaged in the design, manufacture and distribution of components for civil and military aircraft, based in the USA
Per Iversen, born 1957
Director – Eaton Strategic Development Elected by the employees
Joined the Board in 1997, term expires in 2014
Majbrit Karlsdotter, born 1966 Customer Service Executive Elected by the employees Joined the Board in 2010, term expires in 2014 Yves Liénart, born 1962
Member of the Executive Committee of Compagnie Bois du Sauvage, Brussels, Belgium.
Joined the Board in 2007, Re-elected in 2010, term expires in 2011 Special competencies:
Management background from both in-dustrial and financial companies, based in Belgium
Finn Rasmussen, born 1949 General Manager
Joined the Board in 1997 Re-elected in 2009, term expires in 2011 Special competencies:
International experience within aero-space. Aviation maintenance and insur-ance specialist, based in Denmark
Carsten L. Sørensen, born 1952 President
Joined the Board in 1996 Re-elected in 2010, term expires in 2011 Special competencies:
General management experience from major international companies, based in the Far East
William E. Hoover, Jr (Bill), born 1949 Joined the Board in 2010,
term expires in 2011 Chairman of the Board of:
ReD Associates
Member of the Board of:
Danfoss A/S GN Store Nord A/S Lego Foundation
Special competencies:
Management experience from a 30-year period with McKinsey & Company with special focus on strategy and organisa-tional development
Executive Committee
John Stær, born 1951 CEO
Joined Satair in 1994
Member of the Board of:
Ambu A/S DLH A/S
Michael Højgaard, born 1964 CFO
Joined Satair in 2005
Morten Olsen, born 1964 COO
Joined Satair in 1985
Shareholdings of members of Board and Executive Committee
No. of shares held at June 30, 2011 Sold in 2010/11 Acquired in 2010/11 N. E. Nielsen 1,706 0 0
Dorte Sonne Ekner 1,634 0 0
W. Nicholas Howley 2,695 0 0 Per Iversen 1,048 (3,200) 3,200 Majbritt Karlsdotter 923 0 0 Yves Liénart 0 0 0 Finn Rasmussen 55,800 (10,000) 0 Carsten L. Sørensen 12,734 0 0 John Stær 14,655 0 316 Morten Olsen 2,670 0 0 Michael Højgaard 50 0 0 Total 93,915 (13,200) 3,516
DEFINITIONS OF KEY FIGURES AND RATIOS
The key figures and ratios are calculated in accordance with “Recommendations and Key Figures 2010‟ issued by the Danish Association of Financial Analysts and as stated below:
Gross margin: Gross profit * 100 Revenue
SG&A margin: Staff and other costs*100 Revenue
EBITDA margin EBITDA * 100 Revenue
EBIT margin: EBIT * 100 Revenue
Working capital: Inventories + trade receivables – trade payables
Working capital Working capital related to revenue: Revenue
Invested capital: Working capital, intangible and tangible assets and other provisions. Return on equity Profit after tax and minorities * 100
Average shareholders‟ equity less minorities
ROIC after tax EBITA – tax on EBITA * 100
Average invested capital incl. goodwill
Equity ratio: Shareholders‟ equity at year-end less minorities * 100 Balance sheet total at year-end
Financial gearing Net interest-bearing debt to credit institutions Shareholders‟ equity
Earnings per share: Profit after tax and minorities Average no. of shares
Cash flow from operating Cash flow from operating activities activities per share Average no. of shares
Free cash flow: Cash flow from operating activities less cash flow from investing activities Book value per share: Shareholders‟ equity at year-end less minorities
No. of shares at year-end
Market cap/book value: Listed price at year-end * no. of shares at year-end USD rate at year-end
SIGNATURES AND INDEPENDENT AUDITORS’ REPORT
Management’s statement on the annual report
The Executive and Supervisory Boards have today considered and adopted the Annual Report of Satair A/S for the financial year 1 July 2010 – 30 June 2011.
The Consolidated Financial Statements and Financial Statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU. Moreover, the Consolidated Fi-nancial Statements and the FiFi-nancial Statements are prepared in accordance with additional Danish disclosure requirements for listed companies. Management‟s Review is also prepared in ac-cordance with Danish disclosures requirements for listed compa-nies.
In our opinion, the Consolidated Financial Statements and the Fi-nancial Statements give a true and fair view of the fiFi-nancial
posi-tion of the Group and the Company at 30 June 2011 and of the re-sults of the Group and Company operations and cash flows for the financial year 1 July 2010 - 30 June 2011.
In our opinion, Management‟s Review includes a true and fair ac-count of the development in the operations and financial circum-stances of the Group and the Company, of the results for the year and of the financial position of the Group and the Company as well as a description of the most significant risks and elements of un-certainty facing the Group and the Company.
We recommend that the Annual Report be adopted at the Annual General Meeting.
Kastrup, September 14, 2011
Executive Committee
John Stær Michael Højgaard Morten Olsen
(CEO) (CFO) (COO, Head of Global Sales)
Board of Directors
N. E. Nielsen
(chairman)
Dorte Sonne Ekner William E. Hoover W. Nicholas Howley
Per Iversen Majbrit Karlsdotter Yves Liénart
