Interim report for au-system ab (publ)

INTERIM REPORT FOR AU-SYSTEM AB (PUBL) JANUARY - MARCH 2001 AU-System Reports Strong Growth in Revenue ·The revenue was SEK 300.2 million (170.6 m), an increase of 76%. The organic revenue growth was 57%. International revenue was SEK 39.7 million (12.5 m), an increase of 218%. ·The profit before depreciation and amortisation (EBITDA) was SEK 19.0 million (14.3 m), an increase of 33%. This is equivalent to a margin prior to depreciation and amortisation of 6.3% (8.4%). ·Operating profit (EBIT) was SEK 7.8 million (10.3 m), a decrease of 24%. This is equivalent to an operating margin of 2.6% (6.1%). ·Profit after financial items was SEK 10.7 million (7.6 m), an increase of 41%. ·Net earnings per share after full tax on a fully diluted basis was SEK 0.06 (0.05). ·AU-System has signed new framework agreements with the company's two largest clients, Ericsson and Telia. Market development The demand for consulting services in AU-System's focus area, emerging technologies within IT and telecommunications, remained strong during the first quarter of 2001. Demand was particularly high for services within 3G, WAP, Operations Support Systems (OSS), and mobile portals. AU-System expects that the emerging market for third generation (3G) mobile solutions will increase demand for the company's services, especially within mobile portals and OSS. AU-System also believes that the Bluetooth market will continue to increase during 2001, and that the company is well positioned to benefit from this opportunity. During the period, AU-System renewed its general agreements with Telia and Ericsson. The company announced portal projects for the Swedish Association of the Pharmaceutical Industry (LIF) and Speedy Tomato UK. AU-System also demonstrated the results of two Bluetooth projects, an interactive watch developed for Seiko and a wireless headset developed for Clarion. Together with Baltimore Technologies and Gemplus, AU-System delivered the world's first digital signature over GPRS. Our revenue from Ericsson continued to grow during the first quarter compared with the fourth quarter 2000. Based on our strong relationship with Ericsson, our strong expertise in Mobile Internet and OSS, and our outsourced R&D approach (taking on projects with full responsibility rather than offering resources), we believe that AU-System is well positioned to continue growing the Ericsson revenue this year. However, uncertainty around how Ericsson's efficiency program may impact the company remains. The uncertainty in the market regarding economic slowdown, coupled with Ericsson's measures, makes it difficult to predict the short-term future. Certain market segments may be subject to increased competition and some price pressure. As a consequence of the short-term uncertainty, AU-System has adopted a less aggressive approach to recruiting people. However, AU-System remains optimistic about the long-term growth potential of our market. Acquisitions AU-System has a strategy to pursue strategic acquisitions that provide the company with complementary skills, access to new markets, or reinforcement of a local market. As part of this strategy, the company completed the acquisitions of C&C Consulting KB and Svenska Teknikbolaget AB during the period under review. The company depreciates goodwill over 10 years. C&C Consulting On January 2, 2001, AU-System acquired C&C Consulting, a management consulting company with eight employees, based in Gothenburg, Sweden. As part of the consideration paid for C&C Consulting, AU-System issued an aggregate amount of 60,000 ordinary shares. This acquisition further strengthened the competence of AU-System in strategic business and service development. C&C Consulting has been integrated into AU-System's existing operations. The acquisition of C&C Consulting has been consolidated as of January 1. Svenska Teknikbolaget On January 2, 2001, AU-System acquired the Gothenburg-based tele communications consulting firm Svenska Teknikbolaget with five employees. This acquisition, which the Company has integrated into its existing Gothenburg operations, furthers AU-System's strategy of expanding its telecommunications operations in the Gothenburg region. The acquisition of Svenska Teknikbolaget has been consolidated as of January 1. International expansion AU-System believes its expertise and experience in emerging technologies within IT and telecommunications provide a critical competitive advantage for international expansion. The international expansion of the company began in March 2000 with the opening of an office in Singapore. Throughout the year, five more offices were established: London and San Diego in June, Bangkok in September, Milan in November and Rome in December. Uncertainty in the market regarding economic slowdown has resulted in longer sales cycles than expected for our international sales force. Consequently, we have assumed a less aggressive approach to recruiting, and profitability is now the main focus for all our international offices. According to plan, this quarter has been the most costly for our international expansion so far. In the following quarters, we expect the international expansion to have less impact on the company's earnings. At the end of the period AU-System had 63 (1) employees outside Sweden. International sales amounted to SEK 39.7 million (12.5 m) during the period under review. Revenue and profit The first quarter revenue was SEK 300.2 million (170.6 m), an increase of 76%. The organic revenue growth was 57%. The profit before depreciation and amortisation (EBITDA) was SEK 19.0 million (14.3 m). This is equivalent to a margin prior to depreciation and amortisation of 6.3% (8.4%). The operating profit (EBIT) was SEK 7.8 million (10.3 m). This is equivalent to an operating margin of 2.6% (6.1%). The profit after financial items was SEK 10.7 million (7.6 m), an increase of 41%. As planned, the reporting period included costs for establishing international offices in Singapore, London, San Diego, Bangkok, Milan, and Rome. These costs are fully expensed over the income statement. Employees AU-System had an average of 961 employees over the period, compared with 575 for the same period the preceding year, an increase of 67 %. At the end of the period the number of employees was 1,036 (682), an increase of 52 %. Financial position At the end of the period the company had liquid funds of SEK 102.4 million (28.4 m). In addition, the company has unused lines of credits amounting to SEK 20 million. The company has interest-bearing debt of SEK 106.7 million (150.8 m). Receivables from trade debtors amounted to SEK 266.8 million (146.2 m). Days sales outstanding was 67 (63). Shareholders' equity totalled SEK 373.4 million (118.3 m) at the end of March. The equity/assets ratio was 53.2% (27.1%). Investments Investments in subsidiaries accounted for SEK 20.1 million. SEK 9.1 million was invested in tangible assets and new premises. Cash flow used by investment activities during the period was SEK -10.7 million (-45.9 m). Parent company AU-System AB's revenue for the period under review was SEK 264.7 million (156.2 m). Profit after tax was SEK 25.3 million (5.7 m). The parent company's interest-bearing net cash at the end of the period was SEK 73.4 million (19.6 m). Shareholders' equity was SEK 404.7 million (165.9 m). The company's net investments for the period under review amounted to SEK 33.0 million (204.4 m). Share data Earnings per share after full tax on a fully diluted basis was SEK 0.06 (0.05). At the end of the period, shareholders' equity per share on a fully diluted basis was SEK 3.88 (1.30). The parent company had 87,883,400 outstanding shares as of March 31. On a fully diluted basis, including all outstanding options, the maximum number of shares was 104,587,207 as of the same date. In addition, the shareholders have authorised the board to issue a maximum of 10,000,000 new shares. Shareholdings As of March 31, 2001, AU-System had 7,163 shareholders. The company's largest shareholders include Schroder Ventures, Ericsson and IBM. Important events after the end of the period under review AU-System has closed an agreement with IT-Provider, web-angel and McKenna Venture Accelerator for the financing and creation of new, innovative companies. AU-System has renewed its general agreement with Arbetsmarknadsstyrelsen (AMS, the Swedish National Labour Market Board) for a further one-year period. As part of Ericsson's efficiency program all existing suppliers of consultancy services have been re-evaluated. After this process AU- System was again named Preferred Supplier to Ericsson within the area of R&D Consultants. The nomination means that AU-System is one of a limited number of consultancies that Ericsson will continue to intensify a close co-operation with and that will be a first choice for new assignments. Extra General Meeting On March 14, 2001, the company held an Extra General Meeting. The meeting decided to issue a stock option programme to employees outside of Sweden in the AU-System group. The programme comprises a maximum of 1,000,000 options. The meeting also approved that the newly elected member of the board, Professor Dr.h.c. Rolf-Dieter Leister participates in the above-mentioned employee stock option programme and is thereby allotted a maximum of 25,000 employee stock options. The board was also authorised to issue a maximum of 10,000,000 new shares, whereupon payment shall be possible to make in cash, in kind or by set-off. The Annual General Meeting will be held on Friday May 11, 2001, at 15.00 at IVA, Grev Turegatan 16, Stockholm, Sweden. Future prospects Our financial ambition is a yearly organic (without acquisitions) revenue growth of 30 - 40 % with a long term EBITDA margin of 15 %. For the full year 2001, the company expects an organic revenue growth of approximately 40 %. In the year-end report for 2000, we expected an organic revenue growth above 30 - 40 % for the full year 2001. We expect an improvement of margins compared to 2000. We will continue to focus on the deliverance of high-quality performance in our customer assignments. Our ambition is to be the "number one" on quality in the minds of our customers. Our efforts to make AU-System the most attractive employer in the business for highly-skilled staff will continue. Our strong growth combined with profitability enables us to continue investing in internationalisation and incubation. Accounting principles This interim report has been prepared in accordance with the Swedish Financial Accounting Standards Council Recommendation RR20. The accounting principles applied in the annual report for 2000 have remained unchanged. Telephone conference AU-System will be presenting the interim report during a telephone conference held at 8.00 AM CET (GMT+1), on May 3, 2001. The conference call will include a Question and Answer session with President and CEO Tomas Franzén and CFO Joachim Jaginder. Dial in number: +44 (0)20 8781 0562 A recording of the telephone conference will be available for 7 days. Replay number: +44 (0)20 8288 4459, replay code: 636 342. Presentation material can be obtained from www.ausystem.com on May 3. The presentation can also be viewed on the Internet. Upcoming financial reports August 21 - Interim Report, January - June November 7 - Interim Report, January - September Stockholm, Sweden May 3, 2001 For the Board of Directors: Tomas Franzén, President and CEO The company's auditors have not reviewed this Interim Report. For additional information, please contact: Tomas Franzén Joachim Jaginder President & CEO CFO Tel: +46 70 576 32 05 Tel: +46 70 669 76 64 Johannes Rudbeck Investor Relations Tel: +46 70 582 56 56 ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/05/03/20010503BIT00020/bit0002.doc The full report http://www.bit.se/bitonline/2001/05/03/20010503BIT00020/bit0002.pdf The full report