Interim report for second quarter ended June 30, 2001

Interim report for second quarter ended June 30, 2001 (See comment below regarding comparative numbers for the first quarter 2000) · Sales during the second quarter of 2001 totaled SEK 95 M, compared with SEK 128 M for the first three months of the year. Combined, Adera noted sales of SEK 223 M for the first half of 2001, compared with SEK 257 M for the second half of 2000. · The number of employees at June 30, 2001 was 418, compared with 481 on March 31, 2001 and 586 on December 31, 2000. When approved and expensed restructuring measures have been undertaken, Adera will have a total of 280 employees. · Before amortization of goodwill and restructuring costs, Adera showed an operating loss for the second quarter of SEK 36 M, compared with a loss of SEK 31 M for the first quarter. · Restructuring costs of SEK 35 M were charged against earnings for the second quarter and totaled SEK 76 M for the six month's period. · Including restructuring costs, the pre-tax loss for the second quarter was SEK 75 M and SEK 151 M for the six month's period. · Effective July 1, a new organizational structure was established, comprising two independent business areas: Integrated Communication and IT-driven Business and Operations Development. · It has been decided that the Dutch holding company petition for bankruptcy. Comment: The comparative numbers for the second quarter of the year 2000 refer to the results adjusted for the effects of the acquisition of HCM/BAM. HCM/BAM were not included in the interim results reported for the first quarter last year but were consolidated in the accounts as per March 1, 2000, when the acquisition was completed during the second quarter of 2000. The adjusted comparative numbers are shown in the quarterly analysis on page 6. Comment by the CEO Continued streamlining and focusing Sometimes, the process of stepping back to mobilize resources for a move forward can be wise strategy. This applies not only at the personal level but also for many businesses. Following the collapse of the Internet consulting segment and the general downturn in business conditions, Adera has elected to focus on its core business - Integrated Communication and IT-driven Business and Operations Development - two areas in which we have solid experience and can demonstrate clear and distinctive competitive advantages. Both of these core operations will contain significant elements of IT, communication and strategy in future. The difference will be that in the IT area, our main focus will be on technology, which will also be the factor that drives our projects and assignments, while IT in the communication area will be regarded as the tool and factor that will enable changes to be implemented based on communication and marketing needs. The fact that the new business areas will operate as independently controlled companies does not mean that opportunities for cooperation will diminish. The tools and methods developed within our IT area will function as important competitive advantages for the communication area - in the same way that our design and marketing know-how in the communication area can benefit certain projects in the IT area. Today, however, too few customers are organized to purchase total solutions and transformation projects, in which all of these elements are integrated. Accordingly, we are taking a step back to clarify and streamline our activities into two business areas that will be operated on their own terms and conditions. The E-business operations of Adera+Nucleus in London will continue in the form of an independent company within the Group. In parallel, we are applying measures to all operations that are not currently making a profitable contribution. This has resulted in two restructuring programs. The first, which showed itself to be inadequate, was launched in February, the second in June 2001. In total, the cuts affected slightly more than 300 employees. The cost of the restructuring programs, SEK 76 M, was charged against earnings for the first half of the year. When the measures have been completed, the total number of employees in Sweden and the UK will amount to about 280, while the offices in Copenhagen, Amsterdam and Antwerp will be sold or discontinued at an appropriate time, in line with the decision by the Board of Directors. In concrete terms this means that the holding company in Amsterdam (following the sale of parts of the operations) petition for bankruptcy. This is an extraordinary measure, already taken for the Danish operations earlier, that unfortunately has been deemed necessary in order to give the remaining operations the best possible chance of surviving and developing in a positive manner. Personally, I am convinced that as a result of these measures, we have now taken a step toward profitability, despite it being extremely difficult at present to predict how the market will develop due to the fact that the order backlog after the vacation period is relatively low and the lead times for new decisions tend to increase. Consequently, it is more important now than at any previous time to maintain close contact with our clients and ensure that everything we do is marked by the highest possible quality. Göteborg, August 24, 2001 Rolf Janson CEO Events during the second quarter of 2001 Structural changes The market trend for Internet-related services was weak throughout spring 2001. During the latter part of the period, the downturn also affected assignments within market communications, while the market for advanced IT services was not as severely exposed. Due to the weak market, the reconstruction program approved by the Board on February 12, proved inadequate. Accordingly, a second program was approved on June 20, this time relating to 180 employees, of whom 100 outside Sweden. The total cost of these restructuring measures during the first half of 2001 amounted to SEK 76 M of which SEK 41 M was attributable to the first quarter. The restructuring costs included costs related to the Group's reorganization. Operations outside Sweden The E-business company Adera+Nucleus continues to be an independent unit within the Adera Group. The company works with a number of well-known European brands. Adera+Nucleus has been rated third overall in the very influential UK "Marketing Magazine 2001 Design League" and first in their "Web" category, overtaking many famous names. This survey is probably one of the two most important industry surveys in the UK. This spring, as part of its adjustment to meet changed market conditions and focus on profitability, Adera has taken the decision to sell or terminate its operations in Denmark, The Netherlands and Belgium at an appropriate point in time. In future, Adera intends to instead build a presence in Europe through partnerships and alliances. On June 20, 2001, parts of the Dutch operation were sold to a newly formed company, 10 Wizards, which is owned by a consortium that consists in part of the former owners of HCM BV, the Amsterdam-based company that was acquired by Adera in spring 2000. This transaction means that Adera has sold an operation consisting of about 15 employees and estimated annual sales of NLG 5 M (about SEK 20 M) in return for a purchase price of about NLG 5 M, or SEK 20 M. Of the purchase price, NLG 4 M (SEK 16 M) has already been paid and the balance will be paid during 2001/2002. The positive effect on earnings has been reserved for additional restructuring measures in The Netherlands. In connection with the divestment, Adera reached an agreement regarding the return of 700,000 of the total of approximately 1.3 million newly issued Adera B shares, which Adera used as payment for HCM. At the Special General Meeting on July 17, the decision was taken to withdraw the 700,000 shares without repayment and to reduce the share capital in Adera by the par value of the shares, SEK 70,000. During the second quarter, the Danish subsidiary was declared bankrupt. This was motivated by the company being unable to find a purchaser for its operations and to the fact that the cost of winding up its operations would be out of proportion to the effect of such a move given the prevailing circumstances. On August 24, Adera took the decision to also declare its Dutch holding company bankrupt. This was motivated by the fact that neither the funds contributed earlier by Adera nor the funds generated by the sale of part of the Dutch operation would be sufficient to engage in a normal closure of the company's operations. Furthermore, it was considered that an additional contribution would be out of proportion to the effect of such a move given the prevailing circumstances. Ongoing investments/efforts will focus on those markets in which Adera intends to remain active in future, namely Sweden and the UK. It is estimated that the above measures will be covered by the provisions already made for restructuring and the decisions will thus have no further effect on Adera's earnings. Reorganization into two business areas Today, the IT-driven Business and Operations Development business area has about 130 employees active in the fields of strategic consulting, value-building processes, change management, advanced system development, system integration and web development. The business area includes Astrakan, OOPix and Astrakan Strategic Training, focusing on advanced training within IT and management. Initially, the Integrated Communication business area consists of approximately 90 employees working with the repositioning and transformation of companies and brands with the help of communication. Thanks to a structured and methodical approach and access to advanced IT tools, Adera can take far-reaching responsibility for ensuring that established goals are achieved. In its approach to customers, the business area will operate under two different brand identities: Adera (in Gothenburg, Ljungby and Stockholm) and Blanking (in Malmö and Stockholm). The business areas will be operated in the form of companies, which means that each will have its own President and Board of Directors. At the end of August, Torbjörn Lindh assumed the position of Working Chairman for the IT-driven Business and Operations Development business area. During the past 20 years, Torbjörn Lindh has been employed in leading executive positions within Cap Gemini, Telia and Merkantildata. For the past year, he has been active in his own strategy and management company, which specializes in assisting client companies to change, operate or develop their operations in accordance with established goals. Examples of new clients and assignments during Q2 Pharmaceuticals company Wyeth Lederle is cooperating with Adera for its investment in IT and the Internet. Adera has been assigned to operate and assure the quality of the company's website. Adera will also work strategically to develop Wyeth Lederle's future investments in the IT and Internet areas. Telia has been an important Adera client for many years. Last spring Telia launched its broadband portal www.startsidan.se, through which the company consolidated its position as a supplier of experiences and media on the Internet. The portal was also named best website in the Nordic region in the Nordic TV Award competition. Adera developed the concept and interface for the portal, an assignment that involved several offices and areas of competence within the Group. Euroben, which provides pension insurance, commissioned Adera to develop its website. Euroben is jointly owned by Swedish insurance group SPP and its Norwegian counterpart Storebrand. The Euroben website plays a central role in the company's communication strategy. The intention now is to develop the website so that it can also be used as a tool for sales and administration. Cofacerating Sverige AB is a credit rating company, for which Adera has earlier designed a strategic communication platform. This assignment has subsequently been expanded to include development of Cofacerating's presence on the Net. In the UK, the Thomson Travel Group has contracted Adera+Nucleus in London to carry out a major market communications investment on digital TV. The assignment consists of two parts: the development of a global site for the launch of Telewest's digital TV service, and the repositioning and adjustment of Thomson's existing consumer site, www.just.co.uk. The Buhrmann Group, one of the world's leading suppliers of office materials and graphic systems, has also made use of Adera+Nucleus's services to design a suitable strategy to increase customer value and safeguard Buhrmann's competitiveness in all channels of distribution. Comments to the income statement and balance sheet Sales and earnings Sales during the second quarter declined by SEK 33 M, compared with the first quarter, and totaled SEK 223 M for the first six months of the year. Compared with the corresponding period of the preceding year, this reflects a decrease of SEK 51 M. SEK 32 M of the decrease related to Swedish operations and SEK 19 M to foreign operations (see table on next page). Consulting revenue decreased in total by 13% to SEK 166 M, compared with SEK 191 M in the corresponding period of the preceding year. The main reason was the weaker market conditions, which led to shifts in certain project order bookings and significantly increased lead times for the period between contact and order. The web-related parts of Adera's operations were particularly affected by the downturn. The loss before amortization of goodwill and items affecting comparability (EBITA) amounted to SEK 66.9 M for the first half of the year, compared with a loss of SEK 14.0 M for the corresponding period of 2000. The negative trend was primarily attributable to the results of the web and communication-related operations and the Group's foreign offices, while IT operations in Sweden showed a more balanced trend and slightly positive earnings during recent months. Declining market demand during the spring led to a decision to launch a second program of restructuring measures, the costs of which, SEK 35.0 M, were charged against second-quarter earnings. Including restructuring costs totaling SEK 76.4 M, the operating loss for the six-month period was SEK 151.1 M (loss: 35.9). ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/08/24/20010824BIT00490/bit0002.doc The full report http://www.waymaker.net/bitonline/2001/08/24/20010824BIT00490/bit0002.pdf The full report