Interim report January-June 2015

The second quarter is normally Semcon’s weakest quarter because of the relatively few number of working days. As announced during Q1, restructuring measures have been implemented in the Engineering Services Germany business area that affected Q2 earnings by SEK 20 million. Work on changing the delivery model to meet German legal requirements has gone faster and been more comprehensive than we predicted at the end of last year. In the short-term this is affecting customer purchasing and our profitability although the underlying market in Germany is positive. The change in Germany to include a higher portion of project purchases means that Semcon can give customers more distinct added value. Project deliveries also mean that we have an opportunity to improve Semcon’s profitability through higher productivity and utilisation of our established international delivery capacity. The development contract for a European premium automotive manufacturer that Semcon won in Q2 is fully in line with Semcon’s strategy of being an independent partner with the expertise and capacity to deliver complex automotive projects. This project is yet another example of how we successfully use the advantages of Semcon’s global infrastructure. In our Engineering Services Nordic business area we have seen an improvement in demand and we have a strong focus within all our business areas on measures that will increase profitability and growth.

Second quarter
• The operating income was SEK 632 million (679) and organic growth was -8%
• The operating loss was SEK 28 million (+3), giving an operating margin of -4.5% (+0.4)
• The loss after tax was SEK 22 million (+1)
• Earnings per share (EPS) after dilution was SEK -1.21 (0.04)

January-June
•  The operating income was SEK 1,309 million (1,383) and organic growth was -7%
•  The operating profit was SEK 6 million (44), giving an operating margin of 0.4% (3.2)
•  The profit after tax was SEK 3 million (30)
•  Earnings per share (EPS) after dilution was SEK 0.15 (1.67)
•  The equity/assets ratio was 45% (48)
•  Return on shareholder’s’ equity was 7% (12)

Income and result
Second quarter
The operating income amounted to SEK 632 million (679). Organic growth, adjusted for currency effects, acquisitions and divestments, amounted to -8 per cent. The Engineering Services Germany business area reported lower income due to the transition underway in the German market. Last year’s sales also included a large number of purchased goods and services in a number of projects. The operating loss amounted to SEK 28 million (+3), giving an operating margin of -4.5 per cent (+0.4). Q2 is normally Semcon’s weakest quarter due to the relatively few number of working days. Compared with last year, the Engineering Services Germany business area is reporting lower results. Work on adapting the offer to the market, started in December 2014, continues. The measures taken negatively affected Q2’s operating profit by SEK 20 million (2). Restructuring costs in total affected the Group’s operating income by SEK 21 million (6). Net financial items amounted to SEK -1 million (-2), giving a loss before tax of SEK -30 million (1). Tax income amounted to SEK 8 million (-). The loss after tax amounted to SEK 22 million (+1) and EPS after dilution was SEK -1.21 (+0.04).

January-June
The operating income amounted to SEK 1,309 million (1,383). Organic growth, adjusted for currency effects, acquisitions and divestments, amounted to -7 per cent. The operating profit amounted to SEK 6 million (44), giving an operating margin of 0.4 per cent (3.2). The Engineering Services Germany business area reported lower results, mainly due to structural changes. Restructuring costs affected the Group’s operating profit by SEK 22 million (6) during the quarter.  Net financial items amounted to SEK -2 million (-3), giving a profit before tax of SEK 4 million (41). The tax expense for the period amounted to SEK 1 million (11). The profit after tax amounted to SEK 3 million (30) and EPS after dilution was SEK 0.15 (1.67).

Financial position
The operating cash flow from current activities was SEK -110 million (-52). Cash flow is seasonally weak in the first half of the year but this year it was also affected by the deterioration in operating profit. Investments in hardware, licences, office supplies and equipment amounted to SEK 23 million (13). The Group’s liquid assets amounted to SEK 55 million (61) with additional non-utilized credit of SEK 177 million (246) as at 30 June. Shareholders’ equity amounted to SEK 613 million (626) and the equity/assets ratio was 45% (48). During Q2 a dividend worth SEK 45 million (45) was paid to shareholders. In addition, share buy backs were carried out to acquire 100,000 Semcon shares for SEK 6 million. The Group’s net debt amounts to SEK 198 million (109). Excluding pension commitments, net debt amounted to SEK 132 million (56). The debt/equity ratio was 0.3 times (0.2) with an interest coverage ratio of 31 times (21).

Staff and organisation
The headcount on 30 June was 2,886 (3,032). The number of employees in active service was 2,775 (2,904). Several divestments and downsizing of business activities have been carried out over the past year, which have resulted in a fall in the number of employees. In the respective business areas the headcount is as follows: Engineering Services Nordic 996 (1,058), Engineering Services Germany 997 (1,082), Engineering Services International 338 (357) and Product Information 555 (535).

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Semcon is an international technology company in the engineering services and product information sectors. We have around 3,000 employees with extensive experience from many different industries. We develop technology, products, plant and information solutions along the entire development chain and also provide many services and products in areas such as quality control, training and methodology development. We contribute to our customers’ competitive strength by providing innovative solutions, design and solid engineering expertise. The business activities are run via four business areas: Engineering Services Nordic, Engineering Services Germany, Engineering Services International and Product Information. Work processes and solutions are adapted to customer requirements, from taking part in the customer’s teams to in-house development projects. The Group had annual sales of SEK 2.7 billion in 2014 with activities at more than 40 sites in Sweden, Germany, the UK, Brazil, China, Hungary, India, Spain and Norway. Semcon’s biggest customers include: ABB, AB Volvo, Audi, BMW, Daimler, Ericsson, Jaguar Land Rover, Scania, Volvo Cars and VW. Read more at semcon.com

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