Aspiro AB (publ): Interim Report, January-June 2002

Interim report January-June 2002 · Net sales amounted to SEK 21.6 m (SEK 24.3 m). · The result after financial items amounted to SEK -54.8 m ( SEK -84,5 m). · The company's liquid funds totaled SEK 36.6 m (SEK 78.6 m) at the end of the period. · Aspiro signed 23 new sales agreements during the period including twelve in the last three months. · In May, Aspiro secured its first sale involving MMS services, after which another two commercial MMS-contract have been signed. · Håkan Persson took over as CEO and President in May. · After the end of the period Aspiro acquired Picofun AB. The agreement doubles Aspiro's customer base and considerably expands the company's product range with, among other things, Java-based mobile games. · After the end of the period, Aspiro decided to carry out additional cost savings. About 17 employees may be affected by the proposed measures. Net sales and result The Group's net sales during the first six months amounted to SEK 21.6 m (SEK 24.3 m). The second quarter's net sales amounted to SEK 11.1 m (SEK 11.8 m). Of total net sales for the period, 16 % (43%) are attributable to sales in Sweden, 64% (54%) in Europe, and 20% (3%) in the rest of the world. The result after financial items amounted to SEK -54.8 m (SEK -84.5 m). The period's result has been affected by restructuring costs totaling SEK 5.6 m (during the comparative period the accounts included SEK 2.9 m, which represented a dissolvation of provisions for restructuring costs) and a write-down in goodwill totaling SEK 3.8 m (SEK16.4 m). Operating result excluding write-downs and restructuring costs rose by SEK 30.8 m compared with the same period last year. The result after financial items for the second quarter amounted to SEK -25.0 m (SEK -52.7 m). Compared with the first quarter of 2002 operating result, excluding write-downs and restructuring costs, improved by SEK 7.5 m. Other external costs and personnel costs have been reduced by SEK 4.4 m and SEK 1.4 m respectively compared with the first quarter. The Board's decision to sell the company's Corporate Services and Mobile TextPhone business areas, as stated in the interim report for January- March 2002, has yet to affect the accounts. The sales are expected to have only a marginal effect on the Group's results. Earnings per share amounted to SEK -1.55 (SEK -1.35). Earnings per share are effected by the write-down in deferred taxes reported in the second quarter as this key ratio is calculated based on the recorded result after tax. Outstanding option rights involve no dilution of the company's stock. Parent Company The Parent Company's net sales during the period amounted to SEK18.7 m (SEK 21.4 m) yielding a result after financial items of SEK -46.5 m (SEK -85.3 m). Investments Group investments during the period amounted to SEK 0.8 m (SEK 8.8 m). Investments in tangible assets totaled SEK 0.8 m (SEK 4.8 m). Of total investments, SEK 0.7 m (SEK 3.9 m) related to finance leasing agreements. Liquidity and financing Liquid assets amounted to SEK 36.6 m (SEK 78.6 m) at the end of the period. Aspiro's stock Aspiro's stock has been traded on Stockholmsbörsen's O-list since June 2001. The number of outstanding shares at the end of the period amounted to 86,037,811. If all outstanding option rights are exercised to subscribe for shares, the number of additional shares will amount to 1,015,750, each with a nominal value of SEK 0.02. An extra general meeting of shareholders was held after the end of the report period on August 23 with the intention of authorizing an increase in the company's share capital through two new directed share issues for a total of12.900.000 new shares in connection with the acquisition of Picofun AB. The new share issues will generate a dilution effect of approximately 15% for current shareholders. The Market The market for mobile consumer services was dominated during the period by the prevailing financial crisis among telecommunication companies; lower forecasts for mobile phone usage and the risk that the rollout of 3G will be delayed still further. There are, however, some positive signs that are to Aspiro's advantage: ·Operators' revenues from mobile data continue to rise, indicating a growing market. ·Greater availability of MMS-enabled phones and mounting interest among operators for MMS-based services stimulate market development. Despite this, however, Aspiro does not expect to see significant rises in its sales revenues from MMS-based services over the remainder of 2002. ·There is a growing tendency among mobile operators -particularly 3G operators- to buy mobile service from independent providers such as Aspiro instead of developing their own in-house services. The investment budgets of 3G operators also allow for the creation of a range of mobile services. ·Operators are increasingly demanding packet solutions, i.e. solutions that include services and marketing target at young people. Aspiro's range of games and entertainment services has been further strengthened by the acquisition of Picofun. The market for Aspiro's SMS network remained stable. During the latter part of the period Aspiro elected to sell its SMS traffic processing services with higher profit margins which reduced risk exposure somewhat, but also slightly lowered traffic volumes. At the same time customers received a better quality of service. Sales During the period Aspiro signed 23 new sales agreements, of which 13 involved text message processing. Aspiro had at the end of the period agreements with thirteen operators and portals in it business area Mobile Applications as well as some 45 text message processing customers. The acquisition of Picofun extended Aspiro's customer base for mobile applications by yet another 21 customers. Aspiro's collaboration with Ericsson continues. Despite its current cost- savings program Ericsson's stated strategy of acting as a distributor for Aspiro's applications remains unchanged, and during the summer joint sales efforts were conducted in several European countries. The result of the Ericsson collaboration during the second quarter lead to sales agreements with two European operators. In addition, trials of Aspiro's MMS-based services were carried out by some fifteen other operators of which several paid fees to extend trials. Aspiro also signed three commercial agreements during the period for MMS- based mobile services. These include, among others, "Snapshot" and "Tarot Reading". In addition, Aspiro finalized its first sale of 3G services to Swedish operator Hi3G. As a direct result of Aspiro's new business model the company experienced a slight drop in SMS traffic volumes, while maintaining the same level of contribution margin. Six new sales agreements were signed during the second quarter of the year. Personnel and organization At the end of the period Aspiro employed a total of 50 (139) persons in 49.1 (131) full-time positions. In March, Aspiro completed a restructuring program that lead to a reduction in the number of employees from 70 to 50 at the end of the period. The company's offices in Karlskrona were closed and its mobile services processing operations and customer support were contracted out to third parties. Håkan Persson took over as Aspiro's new CEO on May 6. Events after the end of the period Aspiro does not expect to see any drastic increase in demand for mobile services during the course of this year. In order to retain our position as a leading provider of mobile services and increase our market share Aspiro will continue with its strategy of consolidation. Additional cost- saving measures are necessary to adjust the company's costs to its earnings capacity. The company has decided to adopt a comprehensive plan of action aimed at retaining its delivery capacity despite a reduction in employees. This will be achieved by, among other things, fewer internal development projects and the distribution of products and services via third parties. At the same time, Aspiro is introducing a new business model that will improve the profitability of each customer. About 17 employees may be affected by the proposed measures. Negotiations with trade union representatives will begin immediately. Total annual cost-savings from these measures are estimated at SEK 12-15 million. In August, Aspiro acquired Picofun AB. Picofun is a leading distributor of mobile games and entertainment applications with a portfolio of some 80 different applications. It boasts a customer base of 27 mobile operators to whom Picofun delivers games and entertainment services regularly, thus complementing perfectly Aspiro's own existing portfolio of products and customer base. The acquisition of Picofun and its nine employees also gives Aspiro invaluable knowledge of the youth sector. The acquisition was financed by two new non-cash share issues totaling 12.9 million shares and a cash purchase sum of SEK 5.5 million. At Aspiro's extra general meeting of stockholders, on August 23, authorization was given to increase the company's share capital through the issue of 12.9 million new shares. At the same meeting, Johan Lenander was elected as new board member of Aspiro's board of directors. The acquisition of Picofun will have a marginal effect on Aspiro's results and liquidity during 2002. Aspiro is holding discussions with other companies that could further strengthen Aspiro's customer base and distribution network. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/08/23/20020823BIT00500/wkr0001.doc http://www.waymaker.net/bitonline/2002/08/23/20020823BIT00500/wkr0002.pdf