Interim report for third quarter 2001

Adera AB (publ) Interim report for third quarter 2001 · Sales during the third quarter of 2001 totalled SEK 52 M (SEK 122 M in the year-earlier period) and amounted to SEK 275 M for the nine- month period (396). For comparable units, sales were SEK 50 M (74) for the quarter and SEK 218 M for the nine months (254). · The number of employees at September 30, 2001 was 298, which is 254 fewer than on the same date in the preceding year and 288 fewer than the 586 employees at December 31, 2000. · All remaining goodwill was written down as of September 30. The nonrecurring write-down amounts to SEK 55 M. · The operating result before goodwill amortization and items affecting comparability (EBITA) for the quarter was a loss of SEK 28 M (loss: 39) and a loss of SEK 95 M (loss: 53) was reported for the nine- month period. Adera proceeded during the third quarter with the streamlining and restructuring of operations to two business areas: IT-driven Business and Operations Development and Integrated Communication. The streamlining has contributed to a clearer presentation of Adera's expertise, internally and externally. Discussions are under way in each business area that can result in new future scenarios. Step by step, conditions have improved to achieve profitability, although given prevailing market conditions it will require a longer time to reach breakeven that was anticipated at mid-year. Through streamlining and focusing of operations on present customers and projects, it has been possible to reduce the costs significantly. These efforts continue. Taking into account the rising uncertainty in the world, this is a factor with great strategic importance for the future. Sales (SEK M) - third quarter 2001 No of employees - Sep 30, 2001 1) [REMOVED GRAPHICS] [REMOVED GRAPHICS] 1) Before eliminations of internal . sales. 2) Units being discontinued. Business Area IT-driven Business and Operations Development 2001 Q 3 Q 2 Q 1 Jan-Sep Sales, SEK M 26.4 44.5 54.0 124.9 Number of employees (end of period) 163 182 182 163 The IT-driven Business and Operations Development business area is active in the fields of strategic consulting, value-building processes, change management, advanced system development, system integration and web development. Operations are conducted under two trademarks, Astrakan and OOPix, both of which were acquired by Adera during the earlier expansion phase of the company. Astrakan, with operations in Stockholm and Gothenburg, focuses on IT- related operations development and training, while OOPix, with offices in Stockholm, works with in-depth IT and systems development. Sales Sales in the third quarter were affected by vacations, as well as by decisions taken by a number of customers to postpone parts of their IT investments to a later date. It is mainly the demand for such services as system development and system integration that declined or is being pushed forward. However, increased demand was noted with regard to operations development and training. Market development The general recession and growing concern as a result of recent global events contributed to a market situation that is extremely difficult to assess. No one can currently determine how deep the recession will be or when a swing upward will occur. This has complicated possibilities of discerning a distinct demand trend in any area. Customers are prioritising among projects very strictly, which means that the lead-times for securing new assignments are longer than previously. However, it is assessed that there is a continued favourable market for consultants with advanced technology as specialists. In particular, Astrakan's know-how within IT-supported operations development, with the aim of reducing costs and shortening lead-time, is at a premium in an extremely cost-oriented market. In contrast, with regard to demand for IT consulting services requiring less expertise and for resource consulting, price pressure is expected to remain very heavy. Examples of new business during the period Examples of customers that provided new or repeat business to Adera IT are Duni, FMV, Strängbetong, Scania, Compaq EMEA, Ascom, SACO and Arbetsmiljöverket. Projects in progress correspond to sales of slightly more than two months. This status is equivalent to the situation earlier in the year. Business Area Integrated Communication 2001 Q 3 Q 2 Q 1 Jan-Sep Sales, SEK M 25.5 34.8 56.8 117.1 Number of employees (end of period) 113 150 176 113 The Integrated Communication business area works primarily with marketing and branding strategies, e-business analyses, advertising, PR and events. The business area cooperates closely with Astrakan with regard to developing and implementing technical platforms, re- engineering of marketing processes and change management. There are three separate brands in the business area: Blanking (Malmö), Adera (Gothenburg, Ljungby, Stockholm) and Nucleus (London). Adera focuses on marketing within B2B, in which digital media is an attractive and growing segment, while Blanking is active in strategic marketing and brand issues for consumer products companies (B2C). Adera Nucleus in London is a separate unit within the business area. Currently, the company has 21 employees. Sales Sales in the third quarter were affected by vacations. The workload and, consequently, revenue per employee, improved toward the end of the period. Market development During the third quarter, the advertising industry was heavily affected by the recession. Media investments declined and many companies tabled planned marketing activities. The lead-time for securing new projects increased. The decline in the consumer sector was particularly significant. As a result, Blanking in Malmö as well as Nucleus in London and Adera in Stockholm were hit during the third quarter. The situation in the B2B area is somewhat more stable. Old customers remained loyal and increased their assignments to a certain extent. This is partially attributable to the fact that Adera's experience within integrated communication, supported by new technologies, proved to be exceptionally valuable for the companies seeking to cut costs and increase efficiency of their market communications. Examples of new business during the period Examples of customers that provided new or repeat business are Alfa Laval, Volvo Penta, SCA, Skanska, Tidningsutgivarna, Mölnlycke Healthcare, Telia, Trelleborg, Esab, Wireless Maingate and others. Projects in progress correspond to sales of about four months. This is an improvement compared with the situation earlier in the year. Comments to the income statement and balance sheet Sales and earnings 2001 2000 Q 3 Q 2 Q 1 Jan-Sep Jan-Sep Sales, SEK M "Adera today" 50.0 72.0 95.8 217.7 253,6 Other 1) 1.8 23.0 31.9 56.8 142,0 Total 51.8 95.0 127.7 274.5 395,6 EBITA 2), SEK M -28.1 -36.3 -30.6 -95.0 -53,2 Number of employees (end of 298 418 481 298 552 period) 1) Units that are in the process of being liquidated or have been liquidated during the year. 2) Adjusted for items affecting comparability. Sales during the third quarter amounted to SEK 52 M, which is a decrease of SEK 70 M compared with the year-earlier period. For comparable units ("Adera today"), the decline was SEK 24 M for the quarter and SEK 36 M for the first nine months of the year. Sales during the third quarter did not reach the level expected at the time the decision on the restructuring program and new business area organization was taken at the end of the second quarter. This has resulted in a significant decline in earnings. Operating expenses were 30% lower in Q3 compared with Q2 and 45% lower compared with Q1 and were down 40% compared with the year-earlier period. The reduction in costs during the period was fully in line with plans. Concurrent with continued streamlining and focusing within each business area, efficiency enhancement and continued cost reductions are the Group's highest priority in the short term. The market was very difficult to assess already in early summer and the uncertainty remains. A positive factor for Adera is that orders for Adera Communication appear relatively satisfactory and the balance between costs and revenues is at the expected level. Orders booked for Adera IT, for work to be carried out in the fourth quarter, corresponds to sales of about two months, which is on level with the first half of the year. A write-down of goodwill SEK 55.0 M, representing all remaining goodwill, was effected in the third quarter. The write-down was made after consideration of several factors, including the stock market's valuation of Adera. The book value of the goodwill was thus assessed to significantly exceed the recovery value, considering prevailing market conditions and taking into account the historical earnings trend. Items affecting comparability 2001 2001 2000 2000 Jul- Jan- Jul- Jan- Sep, Sep, Sep, Sep, 3 9 3 9 months months months months , SEK , SEK , SEK , SEK M M M M Closing costs, Adera Inc. (USA) - - - 11.8 Restructuring costs - 76.4 - - Total - 76.4 - 11.8 SEK 60 M of the total restructuring costs was disbursed during the period from January to September, of which SEK 21 M during the third quarter. The remaining portion is reported as a provision in the balance sheet. Other provisions, contingent liabilities and assets pledged Provisions for receivables under examination, amounting to SEK 3.7 M at year-end, have been settled as a result of repayments having been received in conjunction with the sale of parts of the operations of the Dutch subsidiary during the second quarter. At the same time, the effect on earnings from this sale has been reserved in its entirety in the accounts. During the third quarter, an agreement was reached concerning a dispute for which a provision was made at year-end. The costs arising from the settlement were met by a reversal of the provision, with the result that profit for the year was not affected. No significant changes in contingent liabilities or assets pledged have occurred since year-end 2000. Investments No significant investments were made during the third quarter. Investments in fixed assets during the period from January to September amounted to SEK 1.5 M. A supplementary purchase amount of SEK 1.5 M for the acquisition of an operation in December 1999 was disbursed during the first quarter. Liquidity and financing The Group's cash and bank balances amounted to SEK 51.9 M at September 30, a decline of SEK 157.0 M since year-end 2000. The decline during the third quarter amounted to SEK 54.3 M, of which SEK 9.6 M was attributable to the liquidation of the Dutch subsidiary. Utilization of overdraft facilities (or the equivalent outside Sweden) has declined by SEK 9.4 M since year-end 2000. Utilization of overdraft facilities increased by SEK 5.6 M during the third quarter. Other interest-bearing liabilities have declined by SEK 5.4 M since year-end 2000. During the third quarter these liabilities have declined by SEK 0.3 M excluding the effect of the liquidation of the Dutch subsidiary. No new share issues were made and no new loans were assumed during the period. Under the anticipated market conditions, a positive cash balance is predicted at year-end 2001. Changed classification in the balance sheet of long-term receivables and liabilities Long-term interest-bearing liabilities at year-end 2000 and in earlier interim reports this year included a promissory note issued to the sellers of Nucleus Ltd, for which collateral was pledged in the form of a bank guarantee payable to the sellers. Adera has deposited a corresponding amount with the bank as counter-security for the bank guarantee. This deposit was reported previously as a financial fixed asset. The reporting that best reflects the purpose of the contract terms and the result of the complex transaction chain is, however, net accounting of these to items. Consequently, this has been applied from September 30, 2001. As of that date, the amount reported net was SEK 37.0 M. At year-end 2000, the corresponding amount was SEK 37.4 M. The balance sheets for earlier periods have been adjusted to reflect the change in classification. Other assets Current assets, excluding cash and bank balances, have declined by SEK 75.0 M since year-end 2000. The decline during the third quarter amounted to SEK 46.1 M, of which SEK 33.8 M was attributable to the discontinuing of the Dutch subsidiary. During the third quarter, accounts receivable declined by SEK 31.1 M, representing a decrease of SEK 54.8 M since year-end 2000. The value of unbilled revenues at September 30, 2001 was SEK 19.9 M, after deduction of advance invoicing. This represents a decrease of SEK 6.1 M since year- end 2000 and a decrease of SEK 4.1 M during the third quarter. As of September 30, 2001, other receivables amounted to SEK 15.0 M, a decrease of SEK 14.1 M since year-end 2000 and SEK 10.9 M since the preceding quarter. Shareholders' equity and number of shares As of September 30, 2001, shareholders' equity amounted to SEK 73.2 M, (SEK 310.3 M at December 31, 2000), which corresponds to SEK 3.64 (14.59) per share. The table below shows the changes in the number of shares, share capital and shareholders' equity during the current and preceding year. Future report dates Year-end report on operations in 2001 February 7, 2002 Annual report March, 2002 Gothenburg, October 24, 2001 Adera AB (publ) Rolf Jansson President and CEO This report has not been examined by the Company's auditors. For additional information, please contact: Rolf Jansson, President and CEO (+46 705-72 72 02) Adera AB (publ) Östra Hamngatan 41-43, SE-411 10 Gothenburg, SWEDEN Telephone: +46 31-701 67 00 Fax: +46 31-701 67 01 www.aderagroup.com ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/10/24/20011024BIT00610/bit0001.doc Full Report http://www.waymaker.net/bitonline/2001/10/24/20011024BIT00610/bit0002.pdf Full Report