Resco AB (publ) Interim Report January - June 2000

Resco AB (publ) Interim Report January - June 2000 The new Resco takes shape * Sales amounted to SEK 150.2M (160.6). Including participation in associated companies, sales were SEK 160.1M. * Pro forma, sales rose by 37 per cent to SEK 220.2M (160.6). * Operating result amounted to SEK -26.9M (6.1). After financial items, the result amounted to SEK -22.9M (6.3). * Extensive restructuring and a relatively weak market for business systems (ERP) hampered the sales and results trend in the first half of the year. ERP sales amounted to SEK 38M (64). Cleared of ERP, an underlying sales growth of more than 16 per cent is noted for the first six months, excluding participation in associated companies. * Nearly 20 ERP consultants within subsegments of the ERP market, which are not strategically important for Resco, left the Company during the first half of the year. Around 15 consultants, with a similar orientation, are expected to leave Resco during the second half of the year. In parallel, a successful recruitment campaign is underway which is directed at more growth-oriented and, for Resco, strategic business segments. * The forecast of a sales growth, including associated companies and future aquisitions, of 50 per cent in the current year stands. * The assessment is that Resco will achieve a significantly better operating result before goodwill depreciation in the second half of the year, compared with the first six months. * The number of employees was 512 (338) at the period-end, an increase of 51 per cent. * Staff turnover over a rolling 12-month period amounted to 13 (16) per cent. * Prioritised internationalisation. Resco has achieved a critical mass in Hamburg, Germany via 54 locally recruited staff so far. Operations commence on 1 October and the unit is expecting full capacity utilisation right from the start. In Finland, Resco currently has 105 employees. Continued advance towards prioritised segments of the European market is expected during the second half of the year. * The e-learning company, Involve Learning - the result of the merger in February of the Norwegian company in2win AS and Resco Learning - is reporting rapid growth. Resco AB owns 45 per cent of Involve Learning. At end-June, the company had 91 employees. The aim is to float Involve Learning on the stockmarket within a twelve-month period. COMMENTS BY THE MANAGING DIRECTOR The new Resco looks ahead with great confidence * Extensive restructuring and a weak ERP market have hampered the Company's performance during the first half of the year. * A new organisation in place which will provide for both an increased sales focus and more efficient supply. * Resco is confident that there will be an upturn in performance for the second half of the year and that the existing growth target will be achieved. * The focus for the second half of the year will be on continued rapid internationalisation. The first six months were characterised by extensive strategic restructuring work in Resco. This was hard work which has unavoidably been carried out at the expense of a reduced focus on marketing. This, together with falling demand which was especially noticeable in the business systems side, contributed to a significant loss of income. Resco had previously announced that the restructuring, which was initiated at the turn of the year, would colour the Company's results during the first few months of the year. Unfortunately, the work required more time than anticipated. However, the evaluation is that Resco has, through the restructuring, created a solid platform for long-term competitiveness and growth as well as gradually improving profitability. The new organisation, which was fully in place by the middle of the year is based on a sales and supply function. Both functions are now equipped with mainly new first- class management resources. The new organisational structure, above all, provides for a more stringent sales focus - especially in the selected market segments of ERP, e-business and CRM, - as well as significantly shorter lead times. From a staffing viewpoint, the new Resco is being built around prioritised market segments. The consequence of this will be a number of redundancies running in parallel with new recruitment. The net effect will be rapid organic growth. An extensive recruitment process has been successfully initiated and a shaping of the Company's competence profile directed at more growth-oriented segments. Resco is to stand for ability to act both internally and externally. The new organisation model is expected to have a gradual effect during late autumn and the last quarter which, together with signals about a brighter market situation, means that Resco is looking very confidently at the second half of the year. The current forecast for a sales growth of 50 per cent in the current year, including our associated company and future aquisitions, stands. From a results viewpoint, the forecast is that the second half of the year will generate a significantly improved operating result before goodwill depreciation and excluding items affecting comparability. On an annual basis, a controlled loss is expected. The reason for this expected loss - apart from the restructuring and a partly negative demand trend in the first six months - is the investment required for the internationalisation of Resco, an investment which has become increasingly central since the Swedish market has become increasingly concentrated following a strong period of consolidation. So far, Resco has succeeded in achieving a critical mass in Hamburg, Germany - via nearly 55 locally recruited employees - and has attained an established market position in Finland via the recently acquired company, Major Blue Company. The continued internalisation will, like the expansion model in Germany, be based on organic growth. However, acquisitions are very much a possibility. In the relatively short term, the criteria for establishing operations in yet another Central European market are being examined. In conclusion, it should be emphasised that Resco is working in a target- oriented way to achieve improved profitability. The new organisation is characterised by strong income and cost control which, in combination with a sharpened market offer and an increased sales focus, will provide Resco with gradually improved profitability. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/08/25/20000825BIT00720/bit0001.doc The full report http://www.bit.se/bitonline/2000/08/25/20000825BIT00720/bit0002.pdf The full report

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