IBS Interim report January-March 2001

IBS interim report January-March 2001 · Last year's positive development of the important software revenue continues. During the first quarter, the growth was 33%. · The inflow of orders for new software has been slow in the US. However, development in Europe remains strong, and there are no visible signs of a weakening of this market. · Total revenue amounted to SEK 599m (592m). Pre-tax profit amounted to SEK -19m (+23m). The weaker result is mainly due to a slow US market and the concentrated focus on products and marketing in conjunction with the launch of IBS' new software generation. · A considerably improved operating result is expected during the second quarter. · In anticipation of uncertain market development, IBS is initiating a program for reducing operating costs. · On condition that the rapid weakening of the US economy is not followed by a similar, dramatic development in Europe, the full-year forecast made in January, with an expected increase in both revenue and operating margin, remains. However, the forecast margin interval is revised down by one percentage unit, from 2-5% to 1-4%. 25 April 2001 IBS is a leading international supplier of Internet-enabled business software and services, with a focus on distribution, supply chain management and customer relations management. IBS has approx. 2,300 employees in 22 countries. IBS' approx. 5,000 customers include ABB, CIBA Vision, Henkel, Miele, Royal Scandinavia, Nautor Swan, Pioneer and Volvo. Software revenue grew by 33% during the first quarter Market and resources During the first quarter, the overall market for new business software has been relatively slow, especially in North America. Several software houses have compensated for lower demand with staff and cost reductions, or financial reconstruction. Despite the overall market situation, IBS has strengthened its position by signing a number of major deals with customers such as Sardus, Rexel and Royal Scandinavia. At the same time, we have exploited our strong financial position by acquiring two complementary companies during the first quarter. In Australia, software supplier Network400 was acquired. The Melbourne-based company has around 25 employees. After the acquisition, there are some 35 employees in two IBS units in the expanding Australian market. Secondly, IBS has acquired 50% of the shares in J.P. Services, a company with some 15 employees and offices near Paris. Their speciality is server and network solutions, as well as professional services for Lotus Notes and IBM's WebSphere development environ-ment. The Australian acquisition is financed primarily by means of a non-cash issue of 500.000 IBS B shares. The latter is a cash acquisition. Both companies are profitable and the acquisition will not to any greater extent affect Group profit per share. First quarter, 2001 In current exchange rates, first quarter revenue grew slightly to SEK 599m (592m), or by 1%, compared to the same period last year. Revenue streams were as follows: · Software: SEK 137m (103m), +33% · Professional services: SEK 363m (366m), -1% · Hardware etc: SEK 100m (123m), -19%. Thus, software revenue, which constitutes a major driver for professional services, con-tinued its strong growth trend during the first quarter. The decrease in hardware sales is mainly due to customers delaying orders while waiting for new product releases to be announced during the second quarter. These are expected to result in sales levels being compensated during the remaining months of the year. The table below shows software revenue development since the fourth quarter 1999. The trend is positive. For professional services, there is a six-month delay in recovery. (Exchange rate fluctuations have been eliminated, by recalculating comparison figures at a fixed exchange rate.) Period Softwa Professi re onal revenu services e Q4-99/Q4- -16% +17% 98 Q1-00/Q1- -3% +4% 99 Q2-00/Q2- +2% -17% 99 Q3-00/Q3- +6% -21% 99 Q4-00/Q4- +18% -14% 99 Q1-01/Q1- +27% -5% 00 Operating profit for the first quarter was weak. This is mainly due to lower gross profit for professional services and hardware, and to a continued focus on product development as well as sales and marketing. Booked activities include first quarter costs for a successful launch of the new Virtual Enterprise software generation. In addition, a larger non-budgeted loss has been taken in the US-based operations. IBS has initiated a program for reducing operating costs. Product strategy and product development IBS' product strategy is to strengthen our customers' profitability by providing advanced functionality in our software, based on the most effective technology at any given time. IBS' software utilises an optimal combination of IBM's WebSphere environment, with Java and object technology for e-business solutions, and conventional technology for handling large transaction volumes in mission-critical systems. The new Virtual Enterprise software marks the start of a new multi- platform development phase. ASW Virtual Enterprise can run on Microsoft 2000, UNIX servers and on all IBM servers. ASW Virtual Enterprise has been very well received. The fist sale was made at the end of 2000, and a number of larger customer projects have been initiated, with quotes being prepared. Liquidity and financial status The Group's financial status remains strong. Group equity amounted to SEK 758m (625m) and the equity to total assets ratio grew to 51% (45%). Cash flow from operating activities amounted to SEK 9m (2m). Cash flow after investment totalled SEK -44m (-42m). Taxes booked in the income statement for the period to a sum of SEK +10m (-4m) consists of SEK -6m (-2m) in paid tax and SEK +17m (-2m) deferred tax. Tax paid during the period is estimated at SEK -10m (-22m). Cash and liquid assets including short-term investment, as per 31 March, amounted to SEK 173m (293m). In addition, we have credit facilities amounting to approximately SEK 127m. Current assets represented 144% (169%) of current liabilities. Investment Group investment in equipment amounted to SEK 31m (44m). During the period, capitalised R&D costs for products to be launched within twelve months exceeded depreciation by SEK 12m (13m). At the end of the year, acquired goodwill amounted to SEK 267m, a SEK 26m increase since the end of last year. The Parent Company The Parent Company provides centrally developed software and Group services. Parent Company net revenue amounted to SEK 37m (34m) and pre- tax profit was SEK -8m (-16m). Staff The number of employees as per 31 March was 2,326, compared to 2,315 at the end of 2000. The average number of employees was 2,337 (2,374), a 2% decrease. The IBS share The share price on 31 March was SEK 21.50 per share, which represents a 13% increase since the end of last year. The total number of shares per 31 March was 79.1 million. In addition, IBS has two remaining warrants programs, 98/02 comprising 5 million warrants at a strike price of SEK 40.60 per share, and 00/04 comprising 5 million warrants at a strike price of SEK 65 per share. After full dilution, the total number of shares would be 89.1 million. In addition, there is a current, but as yet not registered, non-cash issue of 500,000 IBS B shares in conjunction with the acquisition of the Australian company Network400. Accounting principles The same accounting principles have been applied in this interim report as in the latest Annual Report, i.e. recommendations made by the Swedish Financial Accounting Standards Council, including year 2001 revisions. Future prospects The world economy has declined since the January report. This is particularly evident in the very negative development of the economic indicators in the US market. Experience shows that rapid changes in business cycles are often followed by restraint and delays as regards investment in business software. In the European market, however, there are no signs indicating a weaker inflow of orders for IBS' products and services. In fact, order take in this market shows a very positive trend. A considerably improved operating result is expected during the second quarter. However, taking into account US market development, we have revised the forecast for the full year operating profit margin, down by one per-centage unit from 2-5% to 1-4%. Information plan · The annual report and Annual General Meeting invitation for 3 May were sent out the first week of April. A report from the AGM will be sent out 4 May. · Interim reports will be published 16 July and 17 October. · The year-end report for 2001 will be published 24 January, 2002. Solna, 25 April 2001 Staffan Ahlberg CEO This report has not been audited. Questions concerning this report will be answered by CEO Staffan Ahlberg tel. +46-8-627 2420, staffan.ahlberg@ibs.se or CFO Björn Bontin, tel. +46-8-627 2402, bjorn.bontin@ibs.se ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/04/25/20010425BIT01290/bit0002.doc The full report http://www.bit.se/bitonline/2001/04/25/20010425BIT01290/bit0002.pdf The full report

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