Atea Q3 2011 financial results

Highlights Q3 2011

• Revenue of MNOK 4,112.8, up 15.6% y-o-y
• EBITDA of MNOK 150.2, up 22.3% y-o-y
• EBITDA margin of 3.7%, up from 3.5% y-o-y
• EBIT of MNOK 97.6, up 38.3% y-o-y
• Acquired FotoPhono in Norway and Elsis IT in Lithuania

  
Market update

IDC's latest forecast for Atea's addressable market (the Blue Box) shows an expected growth of 3.6% in the Nordics in 2011. The Blue Box market in the Nordics is anticipated to reach a size of approximately BNOK 123 in 2011, which is equal to the market size before the financial crisis, back in 2007. The 2011 forecast for the hardware market shows a growth of 3.9%. The growth in the hardware market is however less than expected earlier this year as hardware replacements are postponed. The investment in hardware infrastructure also drives spending in software which is assumed to grow by 4.3% in 2011. The forecast for the IT services market is also positive with an expected growth of 2.7% in 2011.

In comparison to the expected market growth of 3.6% for the full year 2011, Atea has year to date 2011 delivered an actual growth of 23.0% and an organic growth of 8.2% in the Nordics. This demonstrates that Atea continues to gain market shares.

   
Financial review Q3 2011

Group

Group revenue in Q3 2011 is up 15.6% from MNOK 3,558.4 in Q3 2010 to MNOK 4,112.8 in Q3 2011. Hardware revenue increased by 11.1%, consulting and services revenue were up 28.8% and software revenue was up 18.2%. The Group revenue growth adjusted for acquisitions represents 5.0%. Adjusted for currency effects the growth was 6.0%.

EBITDA in Q3 2011 ended at MNOK 150.2, up 22.3% y-o-y and represents a margin of 3.7%, up from 3.5% in Q3 2010. The improvement in EBITDA is mainly due to increase in revenue combined with tight cost control. Total operating cost is 1.5% lower in Q3 2011 compared to Q3 2010, adjusted for acquisitions. Group EBIT ended at MNOK 97.6, which is up 38.3% compared to corresponding period last year.

Total revenue year to date Q3 2011 was MNOK 13,708.5 which is up 22.7% compared with the same period last year. Adjusted for acquisitions, the growth represents 8.2% and 7.7% in constant currency. EBITDA year to date is MNOK 496.4, up from MNOK 375.0 last year (up 32.4% y-o-y), representing an EBITDA margin of 3.6%, up from 3.4% in the corresponding period in 2010.

   
Norway

Revenue in Norway in Q3 2011 was MNOK 1,237.1, which is up by 18.0% compared with Q3 2010. Product revenue was up 8.5%, while consulting and services revenue were up 70.5%. Revenue growth in Q3 adjusted for impacts from the acquired businesses was -1.3%, to be compared with IDC prediction for annual 2011 growth y- o-y of 5.5%. However, year to date revenue growth is 6.4%. A major part of the negative trend in revenue in Q3 is caused by the decline of the Umoe IKT business from 2010 to 2011. This decline was expected and announced at the time of the acquisition of Umoe IKT in December 2010. Umoe IKT has since mid 2010 been through a major restructuring and recent merger with Atea AS, causing the revenue to fall but at the same time showing a healthy and increasing profit.

EBITDA for Q3 2011 ended at MNOK 55.2, up 43.9% compared with Q3 2010. Q3 is the first quarter where Umoe IKT is fully integrated with Atea AS. There are 50 fewer employees as a result of the integration.

At the same time overall gross margin has shown a positive development compared with previous year. EBITDA margin in Q3 2011 ended at 4.5% versus 3.7% in Q3 2010.

At the beginning of October Atea AS completed the acquisition of FotoPhono AS with expertise in AV solutions. FotoPhono is a Norwegian company with 137 employees and offices in Oslo, Bergen, Gjøvik, Trondheim, Drammen and Stavanger. In 2010 FotoPhono had revenue of MNOK 268 and EBITDA of MNOK 18.8. FotoPhono is expected to generate revenue of approximately MNOK 290 and EBITDA of MNOK 22.0 in 2011. The agreed enterprise value is MNOK 89 plus an earn-out element with a maximum value of MNOK 14 to be paid if the company reaches its EBITDA target for 2011.

In August Atea AS was awarded a contract by Kongsberg Maritime AS to deliver maritime approved computers and related services. The agreement is valid for 3 years and estimated total value for the contract is MNOK 100.

   
Sweden

Revenue in Sweden reached MNOK 1,247.2 in Q3 2011, which is up 22.7% (23.6% in constant currency) compared with Q3 2010. Product revenue was up 22.7% and consulting and services revenue were up 22.4%. Revenue growth in Q3 2011 adjusted for impacts from acquired businesses was 11.6% in constant currency. The organic growth in product revenue was 8.5% and consulting and services revenue were 17.6%. IDC prediction for overall annual 2011 growth y-o-y is 2.9%, thus Sweden is gaining considerable market shares. Especially deliveries of school pc's has shown a strong performance in Q3.

EBITDA for Q3 2011 ended at MNOK 31.0, up 6.2% (9.0% in constant currency). The strong increase in consulting and services revenue is causing higher use of subcontractors which has a negative effect on the gross margin. Average number of employees in Q3 is increased by 93 compared with previous year. EBITDA margin in Q3 was 2.5% compared with 2.9% previous year.

   
Denmark

Revenue in Q3 2011 ended at MNOK 1,251.3, up 10.2% (12.9% in constant currency) compared with Q3 2010. Product revenue was up 12.4%, while consulting and services revenue were up 14.7% in constant currency. Excluding impacts from acquisitions revenue was up 11.6% in constant currency. IDC prediction for annual 2011 growth y-o-y is 2.0%, thus Atea is gaining market shares in Denmark.

EBITDA ended at MNOK 52.1, up from MNOK 41.4 in Q3 2010 (up 28.9% in constant currency). The decline in operational cost of 3.5% compared to Q3 2010 is compensating for the drop in gross margins. Thus the EBITDA margin increased from 3.6% in Q3 2010 to 4.2% in Q3 2011

   
Finland

Revenue in Finland in Q3 2011 ended at MNOK 308.8, up 6.7% (9.3% in constant currency) compared with Q3 2010. Product revenue was up 6.9%, while consulting and services revenue were up 33.0% in constant currency. Revenue growth adjusted for impacts from acquired businesses is 4.4% in constant currency which is in line with IDC prediction for annual 2011 growth y-o-y. Revenue development is however considered good in light of delayed deliveries related to public frame agreements, on which Atea recognized considerable revenue last year.

EBITDA in Q3 2011 ended at MNOK 7.0, compared with MNOK 5.9 in Q3 2010, up 22.7% in constant currency. Lower consulting and services margin reflects a shift from own consultants to use of subcontractors. However, maintained product margins and continued focus on cost explains the improvement in EBITDA margin from 2.0% in Q3 2010 to 2.3% in Q3 2011.

   
The Baltics

Revenue in Q3 2011 was MNOK 77.3, which is down 0.1% (up 2.4% in constant currency) from Q3 2010. Product revenue was up 8.7%, while consulting and services revenue were down 30.9%. The decline is explained by some bigger public projects which has been delayed from Q3 to Q4.

EBITDA in Q3 2011 ended at MNOK 3.1, an improvement from MNOK 2.4 in Q3 2010. EBITDA margin ended at 4.0%, up from 3.2% in Q3 2010. The increase in EBITDA reflects improved gross margins and cost reductions.

At the beginning of September UAB Atea in Lithuania entered into agreement to acquire UAB Elsis IT with 86 employees and expected revenue of MNOK 93.6 and EBITDA of MNOK 6.2 in 2011. Elsis IT is the third largest and recognized as one of the strongest IT infrastructure companies in Lithuania. Atea has acquired 100% of the shares from the Elsis Group. All management team members and key employees will continue in Atea. The agreed transaction value is MNOK 25.1 and enterprise value is estimated to MNOK 30.0. The transaction is subject to approval from the Lithuanian Competition Authority and is expected to become effective during Q4 2011.

   
Outlook

Atea continues to gain market shares. Revenues increased by 22.7% year to date Q3 2011 compared to the same period last year. Adjusted for acquisitions, the growth rate was 8.2% while the IDC forecast for 2011 is 3.6%.

Atea has in 2009 and 2010 invested in high growth areas such as Unified Communication, Mobility, Virtualization, Software Asset Management, Windows 7, Consumerization and Green IT. All these areas will continue to fuel IT investments going forward.

The Group is expecting to continue to grow organically in 2011 and combined with the revenue of NOK 3.2 billion from acquired companies Atea is confident to exceed NOK 20 billion in revenue. With a firm focus on cost and EBITDA margin Atea maintain the ambition to reach the 20:11:1 plan, based on local currencies.

IDC's latest forecast for 2012 for Atea's addressable market shows an expected growth of 4.4%. This indicates no negative effects of the financial uncertainty in the US and Europe. Atea monitors the situation continuously but have seen no effects in Q3 2011.

   
Equity and cash flow

Shareholders' equity as of 30 September 2011 was MNOK 3,561.3 and non-controlling interests were MNOK 1.8 corresponding to an equity ratio of 44.5%, up from 41.4% compared to 30 September 2010.

The Group generated an operational cash flow of MNOK - 158.0 in Q3 2011. The negative cash flow is due to seasonality. Year to date the Group has generated MNOK 3.3, which is MNOK 28.2 below corresponding period last year. The working capital ratio in Q3 2011 was 3.9% which is up from 3.7% in Q3 2010.

During Q3 2011 capital expenditures were MNOK 53.2 and payments regarding acquisitions were MNOK 6.0. The acquisition payment is related to the purchase of DemiDoo in Finland.

Net interest bearing debt position as of 30 September 2011 compared to 30 June 2011, increased by MNOK 272.6 from MNOK 326.9 to MNOK 599.5. Cash reserves including unutilised credit facilities as of 30 September 2011, were MNOK 1,150.8.

Note: The statements have been prepared according to IFRS.

Enclosures on www.newsweb.no
Please go to www.atea.com/reports for the quarterly report and presentation.
Video of the press conference is available at www.atea.com/webcast

For further information, please contact:
Claus Hougesen, CEO Atea ASA, Mobile +45 3078 1200
Rune Falstad, CFO Atea ASA, Mobile +47 906 14 482

   
About Atea
Atea is the leading Nordic and Baltic supplier of IT infrastructure with approximately 5500 employees. Atea is present in 79 cities in Norway, Sweden, Denmark, Finland, Lithuania, Latvia and Estonia. Atea delivers IT products from leading vendors and assist its customers with specialist competencies within IT infrastructure services. Atea had revenue of approximately NOK 17 billion in 2010 and is listed on Oslo Stock Exchange.
www.atea.com

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