Interim report for AU-system AB (publ)

INTERIM REPORT FOR AU-SYSTEM AB (PUBL) JANUARY - JUNE 2001 * AU-System Reports 44% Growth in Revenue * The revenue was SEK 563.7 million (392.3 m), an increase of 44%. The organic revenue growth was 32%. International revenue was SEK 80.4 million (32.2 m), an increase of 150%. * The profit before depreciation and amortisation (EBITDA) was SEK 28.8 million (26.9 m), an increase of 7%. This is equivalent to a margin prior to depreciation and amortisation of 5.1% (6.9%). * Operating profit (EBIT) was SEK 7.9 million (15.9 m), a decrease of 50%. This is explained by increased depreciation of fixed assets due to high organic growth, and increased goodwill amortisation due to acquisitions. The operating profit is equivalent to an operating margin of 1.4% (4.1%). * Profit after financial items was SEK 12.6 million (11.2 m), an increase of 13%. * Net earnings per share after full tax on a fully diluted basis was SEK 0.06 (0.06). As part of AU-System's strategy to take an active and independent role in the development of new wireless and Internet technologies and applications the company closed an agreement with IT-Provider, web-angel and McKenna Venture Accelerator for the financing and creation of new product-oriented companies. AU-System was named Preferred Supplier to Ericsson. Market development During the period AU-System has experienced tangible effects of a general slowdown in the telecommunications industry. The company therefore announced an action program on June 14, with a focus on profitability and increased sales efforts. The program is running according to plan and will be fully implemented during the third quarter, thus giving full impact on the results of the fourth quarter. The action program is expected to generate cost savings of approximately SEK 50 million in 2001. AU-System's largest client, Ericsson, has started to implement the efficiency program that was announced on April 20. AU-System has experienced some effects from this program. However, during the period AU-System was again named Preferred Supplier to Ericsson in the area of R&D Consultants which has led to intensified co-operation between the companies. AU-System feels positive about the future collaboration with Ericsson. The increased sales efforts during the period have resulted in new strategic customers like Comneon. The uncertainty in the market regarding economic slowdown makes it difficult to predict the short-term future. Certain market segments may be subject to increased competition and some price pressure. AU-System remains positive about the long-term growth potential of our market. The company's market position combined with unique expertise regarding emerging technologies within IT and telecommunications makes it possible for us to leverage this market opportunity. International expansion AU-System believes its expertise and experience in emerging technologies within IT and telecommunications provide a critical competitive advantage for international expansion. Uncertainty in the market regarding economic slowdown has resulted in longer sales cycles than expected for our international sales force. Profitability is now the main focus for all our international offices. Consequently the Italian operations have been concentrated to Milan. At the end of the period AU-System had 72 (17) employees outside Sweden. International sales amounted to SEK 80.4 million (32.2 m) during the period under review. Product company generation As part of AU-System's strategy to take an active and independent role in the development of new wireless and Internet technologies and applications the company closed an agreement with IT-Provider, web-angel and McKenna Venture Accelerator. The agreement entails that the three venture capital companies will contribute with financing, strategic advice, and assistance of AU-System's mobile Internet product development operations. The agreement secures up to SEK 300 million in financing of new product companies over a period of three years. Each new company is guaranteed financing for 18 months. In conjunction with this, all activities relating to product company generation has been delegated to a new jointly owned company, AUXEMA. Revenue and profit AU-System's revenue increased by 44% to SEK 563.7 million (392.3 m) during the period. The organic revenue growth was 32%. The profit before depreciation and amortisation (EBITDA) was SEK 28.8 million (26.9 m). This is equivalent to a margin prior to depreciation and amortisation of 5.1% (6.9%). The operating profit (EBIT) was SEK 7.9 million (15.9 m). This is explained by increased depreciation of fixed assets due to high organic growth, and increased goodwill amortisation due to acquisitions. The operating profit is equivalent to an operating margin of 1.4% (4.1%). The profit after financial items was SEK 12.6 million (11.2 m). During the period net financial items have been positively affected by repayments of interest-bearing debts and exchange-rate gains. As planned, the reporting period included costs for establishing international offices. These costs are fully expensed over the income statement. Employees AU-System had an average of 979 employees over the period, compared with 643 for the same period the preceding year, an increase of 52%. At the end of the period the number of employees was 1,050 (782), an increase of 34%. Financial position At the end of the period the company had liquid funds of SEK 97.5 million (231.7 m). In addition, the company has unused lines of credits amounting to SEK 20 million. The company has interest-bearing debt of SEK 89.5 million (145.0 m). Receivables from trade debtors amounted to SEK 269.0 million (168.1 m) as of June 30. Days-sales-outstanding was 77 days (63). Due to new procedures at Ericsson, AU-System's largest client, the company has experienced delays in invoicing revenue accrued from March, April and May. This led to an extraordinary build-up of trade debtors' receivables by June 30. By adapting to the new routines days-sales-outstanding was down to 56 days as of July 31. Shareholders' equity totalled SEK 376.6 million (348.9 m) at the end of June. The equity/assets ratio was 53.8% (52.3%). Investments Investments in subsidiaries accounted for SEK 24.4 million. SEK 13.8 million was invested in tangible assets and new premises. Cash flow used by investment activities during the period was SEK 17.0 million (121.7 m). Parent company AU-System AB's revenue for the period under review was SEK 493.4 million (340.5 m). Profit after tax was SEK 44.0 million (10.4 m). The parent company's interest-bearing net cash at the end of the period was SEK 72.8 million (109.6 m). Shareholders' equity was SEK 428.6 million (395.5 m). The company's net investments for the period under review amounted to SEK 66.2 million (210.5 m). Share data Earnings per share after full tax on a fully diluted basis was SEK 0.06 (0.06). At the end of the period, shareholders' equity per share on a fully diluted basis was SEK 4.17 (3.51). The parent company had 88,689,725 outstanding shares as of June 30. The number of shares fully diluted at end of period was 90,222,767. In addition, the shareholders have authorised the board to issue a maximum of 10,000,000 new shares. Shareholdings As of June 30, 2001, AU-System had 7,675 shareholders. The company's largest shareholders include Schroder Ventures, The Capital Group, Ericsson and IBM. Important events after the end of the period under review AU-System has signed a general agreement with Comneon. The collaboration between the two companies has already resulted in several joint customer projects. Annual General Meeting On May 11, 2001, AU-System AB held its annual general meeting of shareholders at which the following resolutions were adopted: The meeting adopted the company's accounts and approved the Board of Directors' suggested disposition of the result. Johan Vunderink, Tomas Franzén, Jöran Hoff, Bengt Halse, Peter Sandberg, and Professor Dr.h.c. Rolf-Dieter Leister were re-elected to the Board of Directors. The authorisation granted to the board at the extra general meeting on March 14, 2001 was renewed, meaning that the board is authorised, for the period until the next annual general meeting, at one or several occasions, and with or without departure from the shareholders' pre- emption rights, 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. 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 a revenue growth of about 25 %. We expect a slight decrease 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 and competence 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. 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 9.00 AM CET (GMT+1), on August 21, 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 8240 8240 A recording of the telephone conference will be available for 7 days. Replay number: +44 (0)20 8288 4459, replay code: 612 842. Presentation material can be obtained from www.ausystem.com on August 21. The presentation can also be viewed on the Internet. Upcoming financial reports November 7, 2001 - Interim Report, January - September February 20, 2002 - Year-end Report 2001 Stockholm, Sweden August 21, 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 President & CEO Tel: +46 70 576 32 05 Joachim Jaginder CFO Tel: +46 70 669 76 64 Johannes Rudbeck Investor Relations Tel: +46 70 582 56 56 ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/08/21/20010821BIT00020/bit0002.doc The full report http://www.waymaker.net/bitonline/2001/08/21/20010821BIT00020/bit0002.pdf The full report