Sifo Group - preliminary year-end report for 1999
2/17/2000 11:02 AM EST
Sifo Group AB - Preliminary year-end report for 1999
Operating profit before goodwill amortization and items affecting
comparability rose to SEK 134.5 million (102.2). Profit before tax
amounted to SEK 95.8 million (73.7).
Profit per share excluding goodwill amortization and items affecting
comparability as well as after full dilution amounted to SEK 2.35 (1.84).
The group's operating revenue rose by 23 percent to SEK 1,096.3 million
(894.4). Organic growth was 11 percent.
The acquisition of Romeike Group of the UK in late 1999 has made the
Observer Media Intelligence division the largest media and market
monitoring company in the world.
Alternatives are being evaluated for Sifo Research & Consulting's
development and internationalization.
The dividend is proposed to be raised to SEK 0.35 per share.
Group structure
Sifo Group, which is listed on the OM Stockholm Exchange's O-list, has
three divisions: Observer Media Intelligence, which works with media and
market monitoring; Sifo Research & Consulting, which conducts surveys and
related consulting operations, and SMG Consulting (50-percent owned),
which is active in management and strategic consulting. Sifo Group has
operations in the Nordic region, the Baltic states, Germany and the UK.
Market
Demand was generally good in all operating areas. In the case of Observer
Media Intelligence, demand remained high particularly for value-added
services, such as editorial services and analyses. For Sifo Research &
Consulting, demand was good throughout Scandinavia.
Market prospects for 2000 are expected to remain good in all group
markets.
Revenue
The group's operating revenue for the year amounted to SEK 1,096.3 million
(894.4), an increase of 23 percent. For comparable units, operating
revenue rose by 11 percent.
For Observer Media Intelligence, operating revenue amounted to SEK 676.5
million (493.1), corresponding to growth of 37 percent. The organic growth
amounted to 22 percent. Romeike Group of the UK was acquired in December
and consolidated as of October 1, 1999.
The revenue has grown in all of Observer's companies. Editorial and
analytical services continued to develop faster than basic services.
Value-added services today account for 25 percent (21) of the entire
division's operations and 35 percent (32) of its Swedish operations.
For Sifo Research & Consulting, operating revenue amounted to SEK 411.4
million (386.7). Revenue increased for the Danish operations and in Sifo
Interactive Media. Excluding Sifo Interactive Media, operating revenue
rose to SEK 399.8 million (382.5). The organic growth amounted to 3
percent.
SMG Consulting's operating revenue remained at the same level as the
previous year, amounting to SEK 42.7 million (43.0). Delayed project
starts in Finland during the first half of the year hampered growth.
Profit
Sifo Group's operating profit before goodwill amortization and items
affecting comparability amounted to SEK 134.5 million (102.2). Excluding
the Romeike Group acquisition, consolidated profit amounted to SEK 106.2
million. Profit before tax was SEK 95.8 million (73.7).
Sifo Group's operating margin before goodwill amortization rose to 12.3
percent (11.4).
For Observer Media Intelligence, operating profit before goodwill
amortization and items affecting comparability amounted to SEK 140.4
million (89.0). Observer, excluding the Romeike Group acquisition, reached
an operating margin of 19.0 percent (18.1). The division has increased its
investments in the development of new concepts and IT tools, especially
during the fourth quarter of 1999. Romeike Group's operating margin before
goodwill amortization reached well over 30 percent in the last quarter of
1999.
Operating profit before goodwill amortization and items affecting
comparability for Sifo Research & Consulting (excluding the operations of
Sifo Interactive Media) amounted to SEK 8.2 million (20.7), corresponding
to an operating margin of 2.0 percent (5.4). The Internet operations of
Sifo Interactive Media reported a loss according to plan of SEK 11.7
million.
The profit level at Sifo Research & Consulting is unsatisfactory,
primarily due to weak development in Norway and in the RISC business area.
Moreover, the recently established Danish operations continue to report a
deficit. Together, these units account for a loss of slightly over SEK 15
million. A comprehensive program of measures has been launched to raise
the division's profitability. One result is the replacement of part of the
management of the Norwegian operations. In Denmark, the focus has been
shifted more to marketing and sales. The RISC business area is being
reorganized, resources are being adapted and the Nordic business is
concentrated to Stockholm. To enhance efficiency, RISC has also
established a close cooperation with its French licensee. Efficiency
improvements were also the reason for the consolidation of the telephone
interview operations in Ronneby and shutdown of the Borlänge office. The
division is also taking rationalization measures in the support area.
The Media, Brand Management, Health Care and MIA (Management of Intangible
Assets) business areas of Sifo Research & Consulting are developing
positively. During the year special efforts were made in the MIA business
area to improve relationships with both new and old major customers. This
resulted in, among other things, a large contract to conduct human capital
measurements with up to 60,000 employees throughout the Ericsson Group.
Operating profit before goodwill amortization and items affecting
comparability for SMG Consulting amounted to SEK 5.4 million (5.4),
corresponding to an operating margin of 12.6 percent (12.6).
The group's net financial income and expenses amounted to SEK -6.1 million
(-9.6). As of December 6, the financial net is charged with the cost of
financing the entire Romeike Group acquisition - SEK -5.7 million.
The Group's net profit after tax for the year amounted to SEK 50.9 million
(46.5). The net effect of Romeike Group's acquisition on profit after tax
for the year was SEK -5.4 million.
Before the rights issue the profit per share after full tax and full
dilution amounted to SEK 1.44 per share (1.34). Excluding goodwill
amortization and items affecting comparability, profit per share amounted
to SEK 2.35 (1.84) after full dilution.
Financial position
The acquisition of Romeike Group took place in 1999, while the rights
issue that was implemented to partially finance the acquisition took place
in January 2000. In the short term, the entire purchase price was debt
financed, due to which the group's debt level was abnormally high on the
closing day, December 31, 1999. The issue generated net proceeds of SEK
822 million, which has been used to amortize the short-term bank loan.
The following information on net indebtedness and equity reflects the
group's position, pro forma, as if the rights issue and amortization had
taken place as of December 31, 1999. Per share figures are adjusted for
the rights issue.
Investments in businesses acquired during the year amounted to SEK 1,483
million (35). The net debt/equity ratio, pro forma, was 66 percent (22).
Goodwill on the balance sheet rose to SEK 1,708 million (219). As of year-
end, pro forma equity amounted to SEK 1,062 million (194), corresponding
to SEK 24.07 (4.40) per share.
Taking into account the rights issue, pro forma profit per share after
full tax excluding goodwill amortization and items affecting comparability
amounted to SEK 1.82 (1.43) after full dilution.
Acquisitions and divestments
Late in the year Sifo Group completed its largest acquisition to date. By
adding Romeike Group of the UK, Sifo Group, through the Observer Media
Intelligence division, has become the world's largest company in media and
market monitoring. Romeike Group is at least three times larger than its
nearest competitor in the British market. It has revenue of approximately
SEK 350 million, with nearly 500 employees.
The acquisition of Romeike Group is another step in Sifo Group's clearly
stated strategy of growth and internationalization. Observer has become
several times larger than its nearest competitor in Europe. Following the
acquisition, slightly over 70 percent of Observer's, and more than half
the group's, revenue will be attributable to markets other than Sweden.
In February, Sifo Group acquired the shares of Pressfax Oy, whose
operations serve as the base of BIT's (Börslistans Informationstjänst)
efforts in Finland.
During the year Sifo Group acquired Navigare Medical Marketing Research
AB, which specializes in medical surveys and offers consulting services in
the marketing of pharmaceuticals. Navigare forms the Health Care business
area
of the Sifo Research & Consulting division.
Late in the year Sifo Group divested its holding of 51 percent of the
shares of Norway's Key Resources Consulting AS, which was part of Sifo
Research & Consulting. The sale produced a capital loss of SEK 0.5
million.
Sifo Research & Consulting established, in the beginning of 1999, a
cooperation with Scott, Madden & Associates of the U.S., as part of which
Scott, Madden & Associates is licensing the products and services offered
by Sifo Group's former subsidiary, SMG North America Inc.
During the year Sifo Group and Guide Konsult formed a jointly owned IT
consulting firm (60-percent by Sifo Group) with around ten employees. The
new firm will support both Sifo Group and Guide Konsult in delivering
turn-key IT solutions together with information and consulting services to
their clients. In early 2000 Framfab acquired Guide Konsult through a
public offer.
As of January 1, 2000, Sifo Group acquired an additional 30 percent of the
shares of Argus Media GmbH of Germany, at which point Argus Media was
merged with the Sifo Group subsidiary Observer RTV Medienauswertungen
GmbH. Sifo Group owns 86 percent of the shares of the combined company,
Observer Argus Media GmbH, which is part of the Observer Media
Intelligence division.
In February, 2000, Sifo Group expanded its commitment in the area of
Internet measurements by becoming a co-owner of MMXI Europe. At the same
time,
Sifo Group transferred its shares of Sifo Interactive Media to MMXI. Sifo
Group received 8 percent of the shares in MMXI Europe, 52,000 shares in
the U.S.-based Media Metrix listed on the Nasdaq exchange in New York, and
SEK 43 million in cash. The transaction provides Sifo Group with a capital
gain of SEK 46 million.
Alternatives being evaluated for Sifo Research & Consulting
The market for Sifo Research & Consulting's services is becoming more and
more international. This has resulted in a growing structural
transformation and consolidation of previously fragmented markets.
Sifo Group has now begun a strategic review of how the operations of Sifo
Research & Consulting can be developed and internationalized based on its
leading position in the Scandinavian market.
One alternative for Sifo Group is to internationalize Sifo Research &
Consulting through acquisitions and by establishing new operations.
Another alternative is to join one or more strategic cooperations, in
which case a change of ownership for the division could be considered.
Dividend
The Board of Directors and the President are proposing a dividend of SEK
0.35 (0.50) per share. Adjusted for the rights issue the dividend of the
previous year corresponds to SEK 0.31 per share.
Annual General Meeting
The Annual General Meeting will be held at 5:00 p.m. on May 9 at
Industrihuset, Storgatan 19, Stockholm.
Scheduled information dates for Sifo Group in 2000
Annual General Meeting and interim report January-March, May 9
Interim report January-June, August 22
Interim report January-September, November 1
Sifo Group AB (publ)
Board of Directors
For further information, please contact:
Robert Lundberg, President and CEO, telephone +46-8-625 15 43,
e-mail
Jan-Erik Jansson, Chief Financial Officer, telephone +46-8-625 15 42,
e-mail
Per Blixt, Chief Communications Officer, telephone +46-8-625 15 51/+46-8-
70-549 28 08, e-mail
This press release can also be accessed online at http://www.sifogroup.com
We invite you to participate in a telephone conference on Friday February
18 at 11.00 AM (CET). In order to do so, please call +46 8 737 89 81 and
state code 357815. If you will participate, please also notify us today
Thursday, by
fax +46 8 35 31 65 or e-mail
.