Annual Report 1999

Summary of Annual Report 1999 ¤Operating income increased by 23 percent to SEK 1,612 million (corresponding figure for 1998: SEK 1,312 million) ¤Consolidated profit was SEK 55 (82) million before tax - somewhat higher than forecast ¤Earnings per share SEK 6.90 (10.21) ¤The Board proposes a dividend of SEK 3.50 (5.00) per share ¤IT business operations move to Kista ¤A 30% increase in the number of shareholders The market for technical consultancy services in Sweden within the areas of industry and energy was not as good in 1999 as it had been in 1998. Capacity utilisation in the ÅF-Group was 68 percent (71 percent) - the lowest for five years. The second-half result was substantially better than that for the first half of 1999, despite very weak development in the business area Energy, Environment & Process Technology. To re-establish normal levels of profitability a package of contingency measures was put into effect halfway through the year, the aim being to restore the profit margin during 2000 to a level on a par with that for 1998. Greater emphasis will be put on expansion in the IT field, while other growth will be put on hold in order to improve overall profitability. Consolidated profit after net financial items, together with proportional interests in associated companies, amounted to SEK 55.1 (81.5) million. The profit margin amounted to 3.4 percent (6.2 percent). Consolidated profit was affected by performance bonuses to the Group's employees amounting to a total of SEK 3 (6) million. Earnings per share after the deduction of 28 percent standard tax amounted to SEK 6.90 (10.21). Group income totalled SEK 1,612 (1,312) million, an increase of 23 percent. The increase is a result of organic growth and acquisitions, as well as the consolidation of the education company ÅF-SIFU and of Nielsen & Borge in Norway. Net financial items for the year showed a loss of SEK 5.8 million as opposed to a profit of SEK 10.8 million in 1998, of which capital gain on the sale of shares amounted to SEK 8.9 (13.4) million. The equity ratio was 33 percent (47 percent). The parent company's income totalled SEK 103 (90) million and profit after net financial items was SEK 5.0 (3.7) million. The Group's net worth, calculated as shareholders' equity with the addition of 80% of the surplus value of property, amounted at the year-end to SEK 441 (492) million, equivalent to SEK 77 (86) per share. The number of shareholders in the company rose by 800 during 1999 to finish the year at a total of 3,600. Consulting activities The consolidated profit for the Group's consulting activities fell to SEK 61 (83) million. The value of orders on hand at the year-end amounted to SEK 453 (409) million. The table below shows the trends for the consulting activities per business area. Turnover (in millions of SEK) 1996 199 19 1999 7 98 Elec. Eng. & 365 394 43 498 Instrumentation 6 Energy, Environment & 428 393 37 391 Process Tech. 3 HVAC & Sanitation 136 153 16 186 4 Software, Electronics & 223 277 31 390 Mech. Eng. 0 Inspection & Testing 40 53 108 55 Education & Management - - 140 55 Profit/Loss (in millions of SEK) 1996 199 19 199 7 98 9 Elec. Eng. & 45* Instrumentation 40* 51 36* * Energy, Environment & 45* Process Tech. 16* 21 12* * HVAC & Sanitation 1 -7 8 13 Software, Electronics & 19 27 15 Mech. Eng. 17 Inspection & Testing -25 - - -17 20 16 Education & Management - - 2 1 * including associated companies Figures for the parent company are not included in the table above. At the start of 1999 the ÅF-Group increased its ownership in ÅF-SIFU from 19 to 75 percent: in conjunction with this, a new corporate management team was appointed for ÅF-SIFU. During the accounting period the ÅF-Group acquired Lundstrom Engineering, STK of Luleå, Cresita, Holotech, Ingenjörsgruppen 3 E and Elplanering AB (all in Sweden), bringing 100 new employees into the Group. The past year also saw the Group establish a bridgehead on the Danish consultancy market through its acquisition of a 25 percent stake in the electrical engineering and IT consultants Hansen & Henneberg with 60 employees. In addition, the Norwegian consultancy company Nielsen & Borge was consolidated as a result of an increase in ownership from 46 to slightly in excess of 70 percent of the shares in the company. Since the end of the accounting period the environmental consultancy company Miljöforskargruppen with 15 employees, has also been acquired by the ÅF-Group. The results for Electrical Engineering & Instrumentation and Energy, Environment & Process Technology did not reach the same levels as in 1998, primarily because of widespread reluctance to invest in the industrial and energy sectors in Sweden. Even so, the profit returned by the Electrical Engineering & Instrumentation business area was satisfactory, while that for Energy, Environment & Process Technology was clearly not. In the latter part of the year measures were set in motion to start reducing the capacity of this business area. For the HVAC & Sanitation business area 1999 was a much better year than 1998. This was the result of more favourable market conditions and a raft of successfully implemented restructuring measures. The three business areas Software, Electronics & Mechanical Engineering, Education & Management and Inspection & Testing all recorded more or less the same results as in 1998: this means that, in all three instances, the results remain unsatisfactory. As far as Software, Electronics & Mechanical Engineering is concerned, the profit was affected by substantial write-downs for a project in the field of production equipment. This work has now come to a close, however, and the outlook for the current year is good. In order to bolster the prospects for the business area, the Group's largest subsidiary has now been divided into two companies ÅF-Industriteknik and ÅF-Systemdesign. The aim behind this move is to considerably expand IT-oriented business over the next few years. During the spring of 1999 IT consultancy operations and 300 consultants were moved to new premises in Kista, Sweden's "Silicon Valley" in the northern suburbs of Stockholm. Thanks to the extensive restructuring work undertaken within Education & Management and Inspection & Testing in 1999, operations in these business areas showed a positive development in the second half of the year. As far as inspection and testing activities are concerned, however, the exceptionally low profitability remains a problem for the industry as a whole, and new structural changes are anticipated. Among the most interesting assignments from the 20,000 plus tackled during 1999 - apart from those already mentioned in the year's interim reports - were contracts from Akzo-Nobel in Örnsköldsvik in the north of Sweden to work on new facilities for product development and product manufacture, and from IBM to adapt the company's premises in Kista to the requirements of the Swedish Royal Institute of Technology's IT University. The ÅF- Group's expertise in what have become known as "intelligent buildings" proved decisive in winning a contract for planning and organising systems solutions and programming for the student union building at Chalmers University of Technology in Göteborg, Sweden. In a different field the Group (in collaboration with the University College of South Stockholm) undertook a four-month bank industry education programme for bank managers from Cuba on behalf of the International Council of Swedish Industry. The Group is also participating in the development of new safety products for Autoliv and developing new router servers for NetInsight. Real Estate and Finance Administration The Group's properties, which consist of 97 percent offices, are used mainly by the Group's consulting businesses. At the year-end the vacancy ratio was 5 percent (5 percent). The Group had 34,300 square metres of real estate at the end of 1999. During the year a property in Umeå was sold for SEK 6.2 million, resulting in a capital gain of SEK 3.5 million. An owner-occupied apartment in Stockholm was also disposed of, and the premises housing the Group's headquarters in Stockholm were converted to make them more suitable for current ways of working, thereby creating around 60 new working places. Net investments in real estate amounted to SEK 36 (1) million for the year. At the year-end 1998 the Group's properties were valued by Catella Fastighetsekonomi at SEK 370 million. Book value amounted to SEK 233 million. Taking into account the investments made during the year, and with deductions for the property and the owner-occupied apartment that have been sold, it is estimated that the value of the Group's real estate at the end of 1999 was SEK 400 million. The book value was SEK 263 million. At the end of the year the Group's liquid assets, including current investments, totalled SEK 113 (93) million. Interest-bearing liabilities and allocations amounted to SEK 352 (155) million, bringing the Group's net borrowings to SEK 239 (62) million. The company is affected by the premium refund announced by the SPP insurance company. The Group's portion amounts to SEK 299 million. The method by which this refund is to be paid out has still not been clarified, but SPP anticipates that this will be finally resolved in April 2000. Dividend In 1997 the Board decided that the goal for the ÅF-Group's equity ratio in the long term should be kept within the interval of 40-45 percent and that the dividend paid out to shareholders should correspond to 50 percent of the profit after tax. Equity ratio at the end of 1999 was 33 percent. The Board is therefore proposing that 50 percent of the 1999 profit after tax be paid out to shareholders, equivalent to a dividend of SEK 3.50 per share. Outlook for 2000 It is anticipated that the market conditions for the industrial and energy sectors will be more favourable during the current year than they were in 1999. The market in other areas where the ÅF-Group is active is expected to remain buoyant. Against the background of these prospects and in view of the measures taken by the Group during the past twelve months, it is therefore our opinion that the result for 2000, excluding any SPP funds, will show an improvement on that for 1999. Stockholm, Sweden, 15 February 2000 AB Ångpanneföreningen (publ) The Board CONSOLIDATED PROFIT AND Whole Whole Whole Whole Whole LOSS year year year year year ACCOUNTS (SEK, mill.) 1995 1996 1997 1998 1999 Net turnover 954,5 1 087,6 1 169,5 1 312,2 1 612,0 Personnel costs -550,4 -638,9 -730,0 -820,8 -996,2 Other costs -273,3 -324,0 -339,1 -367,5 -503,9 Depreciation -36,5 -42,7 -48,3 -51,4 -63,7 Share of profit in -0,4 2,3 0,3 -1,8 1,1 associated companies Operating profit 93,9 84,3 52,4 70,7 49,3 Net financial items 3,9 4,4 15,4 10,8 5,8 Profit after net financial 97,8 88,7 67,8 81,5 55,1 items Tax -30,7 -28,1 -22,6 -33,5 -18,5 Minority share of profit - - - - -0,1 and loss Profit after tax 67,1 60,6 45,2 48,0 36,5 CONSOLIDATED BALANCE SHEETS 31 31 31 31 Dec. 31 Dec.1999 Dec.1995 Dec.1996 Dec.1997 1998 (SEK, mill.) Assets Intangible assets 29,6 25,2 23,5 30,7 43,8 Tangible assets 267,2 288,8 321,1 325,3 391,1 Financial assets 15,9 29,3 31,9 39,3 41,0 Current receivables 254,9 262,6 284,7 325,4 417,3 Liquid assets and short- 136,2 121,6 91,0 92,9 112,6 term investments Total assets 703,8 727,5 752,2 813,6 1 005,8 Shareholders´ equity and liabilities Shareholders´ equity 333,2 367,0 380,6 382,6 332,7 Minority interest - - - - 3,9 Allocations 155,3 160,0 156,8 153,9 151,3 Long-term liabilities 2,3 2,8 15,2 44,4 58,7 Current liabilities 213,0 197,7 199,6 232,7 459,2 Total shareholders´ equity 703,8 727,5 752,2 813,6 1 and liabilities 005,8 CASH FLOW ANALYSIS (SEK, Whole Whole Whole Whole Whole mill.) year year year year year 1995 1996 1997 1998 1999 Cash flow from current operations before changes in working 111,1 107,3 95,0 103,8 65,1 capital Cash flow from changes in-11,0 -23,0 -42,2 35,3 -4,2 working capital Cash flow from investment-57,0 -61,9 -79,1 -76,1 -130,8 operations Cash flow from financing -14,4 -37,1 -17,5 -28,4 111,0 operations The period´s cash flow 28,7 -14,7 -43,8 34,6 41,1 KEY FIGURES Return on shareholders´ 22,9 18,2 13,1 15,4 11,1 equity, % (whole year) Return on capital employed, 24,7 20,4 14,7 17,2 12,9 % (whole year) Equity ratio, % 47,3 50,4 50,6 47,0 33,1 Adjusted equity ratio, % 51,0 54,2 54,4 51,8 38,7 Profit margin, % 10,3 8,0 5,8 6,2 3,4 Profit per share after 12,25 11,11 8,49 10,21 6,90 standard tax, SEK Adjusted shareholders´ 58 64 66 67 58 equity per share, SEK Net worth per share, SEK 70 79 82 86 77 No. of full-time equivalent 1 428 1 562 1 624 1 770 2 048 employees, excl. assoc. cos. No. of full-time equivalent 1 520 1 702 1 764 1 910 2 222 employees, incl. assoc. cos. No. of shares 5,748,569 (For definitions see Annual Report 1998. ) Future events: Annual Report 1999 will be available on 25 april, 2000, can be ordered via the ÅF-Group tel. +46 8 657 10 00 or e-mail to info@afk.af.se Annual General Meeting on 11 May, 2000 at 17.00 hours at the ÅF-Group head office, Fleminggatan 7, Stockholm. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/02/15/20000215BIT00850/bit0001.doc http://www.bit.se/bitonline/2000/02/15/20000215BIT00850/bit0002.pdf

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