Year-end report 2000 for AU-System AB (publ)

YEAR-END REPORT 2000 FOR AU-SYSTEM AB (PUBL) JANUARY - DECEMBER 2000 AU-System Reports Continued Strong Growth · The revenue for the fourth quarter was SEK 281.4 million (121.3 m), an increase of 132%. The organic growth was 94%. · The revenue for the full year was SEK 866.1 million (402.3 m), an increase of 115%. The organic growth was 81%. International revenue was SEK 77.2 million (19.0 m), an increase of 306%. · The profit before depreciation and amortisation (EBITDA) was SEK 60.3 million (17.3 m), an increase of 249%. This is equivalent to a margin prior to depreciation and amortisation of 7.0% (4.3%). The profit for 2000 includes refund money from the Swedish Pension Fund, SPP, with a positive contribution of SEK 8.2 million. The income statement for 1999 included costs of SEK 17.2 million regarding Stock Appreciation Rights (SARs) to employees. · Operating profit (EBIT) was SEK 30.9 million (10.8 m), an increase of 186%. This is equivalent to an operating margin of 3.6% (2.7%). · Profit after financial items was SEK 25.8 million (19.7 m), an increase of 31%. The profit for 1999 included a capital gain of SEK 11.7 million due to the two spin-offs iD2 Technologies and Across Wireless. · AU-System was listed on the O-list of the OM Stockholm Exchange on June 21. · New international offices were established in Singapore, London, San Diego, Bangkok, Milan, and Rome. · New Swedish offices were established in Östersund and Umeå. · AU-System acquired SandbergTrygg, Medcom, Item Interactive and Henri, and announced the acquisition of C&C Consulting. Market development AU-System has had an increasingly strong demand for its services during 2000. Revenue increased by 115% compared to last year. The company saw no signs of a slowdown in demand during the second half of the year and believes that the demand for consulting services in AU-System's focus area, emerging technologies within IT and telecommunications, will remain strong during 2001. AU-System continues to show a high degree of recurring revenues. All top 20 customers 1999 remained customers during 2000. General agreements with organisations like Nordea, UPC, Stockholm County Council, Telia, and Ericsson, secure a high level of recurring revenues in the future. All client segments, i.e. telecommunications equipment suppliers, operators and enterprises, have contributed to the positive development during the year. From telecommunications equipment suppliers we have seen a strong demand for services within Operations Support Systems (OSS), WAP, Bluetooth, and mobile portals. Operators have had an increased demand for value added mobile services including mobile portals, OSS, and strategy services. The enterprise segment has seen a continued strong demand for advanced Internet applications and secure mobile services. AU-System believes 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 has reinforced its OSS offerings during the year and now delivers complete integrated turnkey solutions based on world-leading products. During the year we have been working with clients such as Banverket, Skanova, Nextra, Bredbandsbolaget (B2), Utfors and Telia. At the end of the year we also established a consulting team focused on billing, which we believe will further support our ambition to remain the leading provider of OSS solutions, both by volume and recognition, in the Nordic market. AU-System offers complete mobile portal solutions, from business planning to systems implementation and hosting. The technical solutions are mainly based on platforms from Ericsson and IBM. During the year we have been working with leading European operators and service providers and have also developed solutions for enterprise clients. AU-System believes that the company can give clients a significant time-to-market advantage through our extensive experience from mobile portal solutions. During the year AU-System has further established its leading position in the Bluetooth consulting market by winning several new assignments. One breakthrough assignment was the agreement with Philips Consumer Communications to supply Bluetooth software for use in mobile phones. During the year we have continued to perform work related to Bluetooth development for Ericsson and have also been working with telecommunications equipment suppliers like Xircom, Axis, and Mobilisys. AU-System believes that the Bluetooth market will increase considerably during 2001, and that the company is well positioned to benefit from this opportunity. 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 Media Communications Int AB (Medcom), SandbergTrygg AB, Item Interactive AB, Henri AB, and announced the acquisition of C&C Consulting KB. The company depreciates goodwill over 10 years. MedCom On February 4, 2000, AU-System acquired Medcom, an IT security consultancy firm based in Stockholm. Medcom was acquired to help the company strengthen its resources with regard to security technology, including PKI secure communications and security verification solutions. Today, Medcom is a fully integrated business unit within AU-System. The acquisition of Medcom has been consolidated as of February 1. SandbergTrygg On March 3, 2000, AU-System acquired SandbergTrygg, Sweden's leading business-to-business marketing communications agency. SandbergTrygg is focused on providing strategic marketing, interactive design and traditional advertising services to large Swedish companies including Scania, SKF and ABB. SandbergTrygg also provides marketing strategy services to Ericsson and Telia complementing the technology services provided by AU-System to those clients. SandbergTrygg, will remain as a separate subsidiary and brand of the company. The acquisition of SandbergTrygg has been consolidated as of March 1. Item Interactive On October 13, 2000, SandbergTrygg acquired Item Interactive, an Internet consulting company with nine employees based in Gothenburg, Sweden. Through the acquisition, SandbergTrygg further strengthened its integrated knowledge in user-experience design and systems development for web and mobile services. Item Interactive has been fully integrated into SandbergTrygg's existing Gothenburg operations. The acquisition of Item Interactive has been consolidated as of October 1. Henri On November 30, 2000, SandbergTrygg acquired Henri, an advertising agency based in Malmö, Sweden, with fourteen employees. Through the acquisition, SandbergTrygg increased its presence in southern Sweden. Henri has been fully integrated into SandbergTrygg's existing Malmö operations. The acquisition of Henri has been consolidated as of December 1. C&C Consulting On November 9, 2000, AU-System announced the acquisition of C&C Consulting, a management consulting company based in Gothenburg, Sweden, with eight employees. C&C Consulting specialises in strategic consulting services for business development. Through the acquisition, which was effective as of January 2, 2001, AU-System will further strengthen its competence in strategic business and service development. International expansion AU-System believes its expertise in, and experience of, emerging technologies within IT and telecommunications provides it with a critical competitive advantage for international expansion. During the year the company has opened international offices in Singapore, London, San Diego, Bangkok, Milan and Rome. The location of the offices has been determined by two guiding principles: either in locations that allow AU-System to serve the company's existing clients better, i.e. Singapore (Singapore Telecom) and Bangkok (AIS), or in locations where there is a high concentration of companies in AU- System's customer segments, i.e. London, Milan, Rome (network operators and service providers), and San Diego (telecommunications equipment supplies). At the end of the year AU-System had 44 (0) employees outside Sweden. International sales, including invoicing from Sweden, amounted to SEK 77.2 million (19.0 m) during the period under review. The target for each new office is to reach a positive cash flow within 12 months and up until then have an accumulated loss not exceeding SEK 10 million. Revenue and profit The fourth quarter revenue was SEK 281.4 million (121.3 m), an increase of 132%. The organic growth in revenue was 94%. AU-System's revenue for the full year increased by 115% to SEK 866.1 million (402.3 m) during the period. The organic growth was 81%. The profit before depreciation and amortisation (EBITDA) was SEK 60.3 million (17.3 m). This is equivalent to a margin prior to depreciation and amortisation of 7.0% (4.3%). The profit for 2000 includes money refunded from the Swedish Pension fund SPP, with a positive contribution of SEK 8.2 million in the third quarter. The profit for 1999 included costs of SEK 17.2 million in the second quarter for Stock Appreciation Rights (SARs) to employees. Adjusted for these "non-comparable items", the EBITDA was SEK 52.1 million (34.5 m), an increase of 51%. This is equivalent to an EBITDA margin of 6.0% (8.6%). The operating profit (EBIT) was SEK 30.9 million (10.8 m). This is equivalent to an operating margin of 3.6% (2.7%). The profit after financial items was SEK 25.8 million (19.7 m), an increase of 31%. The profit for 1999 included a capital gain of SEK 11.7 million due to the two spin-offs iD2 Technologies and Across Wireless. As planned, costs for the reporting period included: - costs for establishing international offices (Singapore, London, San Diego, Bangkok, Milan, and Rome) - lower utilisation due to high organic growth and introduction costs for new staff - integration costs related to the acquisitions of SandbergTrygg and Medcom - start-up costs for the incubator These costs are fully expensed over the income statement. Employees AU-System had an average of 740 employees over the period, compared with 387 for the same period the preceding year, an increase of 91 %. At the end of the period the number of employees was 939 (443), an increase of 112 %. The staff turnover during the year was 10,9%. Financial position At the end of the period the company had liquid funds of SEK 108.7 million (50.8 m). In addition, the company has unused lines of credits amounting to SEK 20 million. The company has interest-bearing debt of SEK 111.4 million (90.0 m). Receivables from trade debtors amounted to SEK 259.1 million (122.7 m). Days sales outstanding was 69 (74). Shareholders' equity totalled SEK 356.3 million (16.3 m) at the end of December. The increase is due to profits from 2000 and the new issue of shares in connection with AU-System's listing on the OM Stockholm Exchange on June 21, 2000. The equity/assets ratio was 53.0% (7.8%). Investments Investments in subsidiaries accounted for SEK 207.8 million. SEK 39.2 million was invested in tangible assets and new premises. Cash flow used by investment activities during the period was SEK -162.9 million (+28.5 m). Parent company AU-System AB's revenue for the period under review was SEK 742.8 million (2.7 m). Profit after tax was SEK -20.6 million (-16.6 m) and includes a write-off of SEK 53.0 million relating to shares in subsidiaries. The write-off is due to the transfer of the business in AU-System Network AB and AU-System Radio AB to the parent company The parent company's interest-bearing net cash at the end of December was SEK 113.8 million (46.7 m). Shareholders' equity was SEK 367.2 million (59.9 m). The company received net SEK 227.9 million as a result of the IPO. In addition SEK 90.0 million of new issued shares was used in connection with the acquisition of SandbergTrygg. The company's net investments for the year 2000 amounted to SEK -239.0 million (+32.1 m). Share data Earnings per share after full tax on a fully diluted basis was SEK 0.13. At the end of the period, shareholders' equity per share on a fully diluted basis was SEK 3.61. The parent company had 86,303,375 outstanding shares as of December 31. On a fully diluted basis, including all outstanding options, the maximum number of shares was 104,527,207 as of the same date. In addition the shareholders have authorised the board to issue a maximum of 10,000,000 new shares with departure from the shareholders' pre-emption rights. 60,000 new shares will be issued as part payment for C&C Consulting. Shareholdings As of December 31, 2000 AU-System had 6,170 shareholders. The company's largest shareholders include Schroder Ventures, Ericsson and IBM. Important events after the end of the period under review New framework agreements have been signed with the company's two largest clients, Ericsson and Telia. AU-System has been commissioned to build a portal for the Swedish Pharmaceutical Industry. AU-System has acquired Svenska Teknikbolaget to further strengthen its Gothenburg operations and to establish a telecom practice in western Sweden. AU-System has established a partnership with Speedy Tomato UK, focused on mobile service and systems development. Extra General Meetings On December 18, 2000, the company held an Extra General Meeting. The meeting authorised the board to issue a maximum of 10,000,000 new shares with departure from the shareholders' pre-emption rights. Professor Dr.h.c. Rolf-Dieter Leister was elected a new member of the board since Graham Wrigley had resigned. An Extra General Meeting will be held on Wednesday March 14, 2001, at 13.00 at IVA, Grev Turegatan 16, Stockholm, Sweden. The Annual General Meeting The Annual General Meeting will be held on Friday May 11, 2001, at 15.00 in Stockholm, Sweden. The Board of Directors will propose at the Annual General Meeting that no dividend (SEK 0 per share) will be given. The Annual Report will be distributed to shareholders and be available at AU-System's headquarter at Liljeholmsstranden 3, Stockholm, Sweden, two weeks prior to the AGM. Future prospects Our financial ambition is a yearly organic revenue growth of 30 - 40% with a long term EBITDA margin of 15%. For 2001 the company expects an organic revenue growth above 30 - 40% and an improvement of margins compared to 2000. We expect the market for our services to continue to be strong. 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 to invest in internationalisation and incubation. Telephone conference AU-System will be presenting the full-year report during a telephone conference held at 9 AM (CET), on February 20, 2001. The conference call will include a Question and Answer session with President & CEO Tomas Franzén and CFO Joachim Jaginder. Dial in number: +44 20 8401 1043 A recording of the telephone conference will be available for 7 days. Replay number: +44 20 8288 4459, replay code: 648922. Presentation material can be obtained from www.ausystem.com on February 20. The presentation can also be viewed on the Internet. Upcoming financial reports May 3 - Interim Report, January - March August 21 - Interim Report, January - June November 7 - Interim Report, January - September Stockholm, Sweden February 20, 2001 AU-System AB (publ) The Board of Directors For additional information, please contact: Tomas Franzén Joachim Jaginder President & CEO CFO Tel: +46 70 576 Tel: +46 70 669 32 05 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/2001/02/20/20010220BIT00080/bit0002.doc The full Year-End Report http://www.bit.se/bitonline/2001/02/20/20010220BIT00080/bit0002.pdf The full Year-End Report