Interim Report for January - September 1999

Interim Report for January - September 1999 *Upturn in market demand during September, following weak summer months. *Sales amounted to MSEK 5,785 (5,985). *Operating income before items affecting comparability amounted to MSEK 24 (53). This income was charged with costs of MSEK 20 for restructuring of computer distribution operations in Finland during the third quarter. Income before tax was MSEK 24 (231). Income for the corresponding period of last year included a capital gain on units sold of MSEK 161. Group structure After restructuring in 1998, Scribona consists of two business areas with two divisions each. The Computer Products business area includes distribution operations in Scribona Computer Products and the sales agency for Toshiba PC. The Office Machines business area conducts agency sales for both Scribona Office Machines and Carl Lamm, with their respective vertically integrated sales channels for document handling products from Toshiba and Ricoh. All divisions work on a Nordic basis, apart from Carl Lamm which is a Swedish operation. Scribona Computer Products is also active in the Baltic countries and the St. Petersburg area. The market A slight upturn in demand was noted during September, although demand for both PCs and document handling products in the third quarter was generally lower than in the same period of last year. According to preliminary statistics, the number of PCs delivered in the Nordic countries during the third quarter of this year was 9% lower than in 1998. The decrease in Sweden remained stable at around 30%. This fall-off is primarily attributable to the large number of personnel PC purchases in the corresponding period of the previous year. Demand for copiers and faxes continued its downward trend from the second quarter. Demand for copiers in the Nordic countries decreased by more than 10 %, which also applies to Sweden. The share of digital copiers is continuing to rise and was around 50% during the third quarter. The falling trend in the Nordic countries during 1999 followed the same pattern as in other geographic markets in Europe and has mainly affected the professional market, while the consumer market has shown an upswing in many places. The downturn in the corporate market was caused mainly by the customers' increasing wariness as the turn of the century approaches. The market outlook for the remainder of the year is still difficult to appraise. In spite of the increase in demand during September, we stand by our earlier assessment that 1999 must be regarded as a transitional year. We judge the market outlook for 2000 to be favorable, and market's pent-up need for upgrades and new investments in IT equipment is expected to generate rising demand. The sector At present, the distribution channels for IT products are characterized by severe turbulence and substantial consolidation, both in Sweden and internationally. To accommodate these changes in the market, an internal renewal project was initiated during the autumn in order to more clearly define the organization and business responsibility. Scribona has a very solid position in the Nordic market, and with our strong balance sheet we are well poised to play an active role in future structural changes in the market. Sales and income The Group's sales amounted to MSEK 5,785 (5,985). For comparable units and in comparable currencies, sales decreased by 7%. However, the previous year's sales included substantial deliveries of personnel PCs, which were not matched in the current year. Adjusted for personnel PC deliveries, the Group's sales increased by 5%. Third quarter sales amounted to MSEK 1,654 (1,766). For comparable units and in comparable currencies, and adjusted for personnel PC deliveries, sales rose by 9%. Operating income before items affecting comparability amounted to MSEK 24 (53), while operating income for the third quarter was negative, at MSEK -8 (10). This is entirely attributable to the Scribona Computer Products divisions' operations in Finland, which underwent extensive restructuring during the past quarter. Aside from a minor operating loss in these operations, third quarter income was charged with costs for measures such as inventory write-downs and phasing out of personnel, which resulted in a combined loss of MSEK 24 for the quarter in the Finnish operations. After this structuring process, we expect the Finnish operations to show a positive result as of the fourth quarter this year. Other operations in the Group reported better result than correspondign period in 1998. Net financial items amounted to MSEK 5 (17) and income before tax was MSEK 24 (231). The preceding year's income included capital gains on units sold of MSEK 161. Cash flow and financial position The Scribona Group's cash flow was MSEK 133 (-280) during the third quarter and MSEK -244 (-441) during the first nine months of the year. Consolidated net investments totaled MSEK -48 (-80). Net financial capital as per September 30 amounted to MSEK -243 (-105). In May, a cash dividend of SEK 5 per share (10.50), or a total of MSEK 171 (360), was distributed to the shareholders. Key ratios Earnings per share for the first nine months of the year amounted to SEK 0.50 (6.25), or SEK 0.60 (1.55) excluding items affecting comparability. Earnings per share for the past 12-month period, excluding items affecting comparability, totaled SEK 2.82. Shareholders' equity per share at the end of the period was SEK 20.36 (22.78). Return on shareholders' equity for the past 12-month period amounted to 11.2% (32.0% for the full year 1998), and to 12.3% excluding items affecting comparability (14.5% for the full year 1998). Return on capital employed for the past 12-month period amounted to 11.0% (37.7% for the full year 1998) and to 12.0% excluding items affecting comparability (18.3% for the full year 1998). The equity ratio as per September 30 was 28.7% (33.4%). Development by business area Computer Products Sales for the period amounted to MSEK 4,930 (5,174). One factor that contributed to the drop in sales was a lower volume of personnel PCs compared with the preceding year. Adjusted for sales, acquisitions and personnel PC purchases, a sales increase of 6% was reported. Following a weak market in July and August, demand improved in September and the business area's sales for the month were on par with the previous year. Sales for the entire third quarter amounted to MSEK 1,400 (1,542). Adjusted for sales, acquisitions and personnel PC purchases, sales growth amounted to 7% during the quarter Scribona Computer Products' distribution operations in Sweden and Norway are showing favorable development with considerably higher income than in the corresponding period of the preceding year, and the market share has improved particularly in Sweden. Value added operations have also been successful in both Finland and Sweden. Demand for Toshiba's' laptop computers improved markedly and sales in the Toshiba PC division rose by 14% during the quarter, with a corresponding increase in income. The business area's operating income for the third quarter amounted to MSEK - 12 (9), including the above-mentioned loss of MSEK 24 in Finland. This means that the other units in the business area showed an increase in income compared with the previous year. Income for the first nine months of the year amounted to MSEK 11 (32). Office Machines Sales in the business area totaled MSEK 838 (810). For comparable units this represents an increase of 5%, which is a higher rate of growth than earlier in the year. The increase during the past quarter amounted to 15%. Both Scribona Office Machines and Carl Lamm are showing higher sales growth. Toshiba's new range of digital products, which were launched in the second quarter, has been well received by the market and substantial deliveries were made during the third quarter. By increasing sales in the currently shrinking market, it has been possible to enlarge the market shares for both Toshiba and Ricoh document handling products. The business area's operating income during the quarter improved to MSEK 8 (6) and income for the first nine months of the year was MSEK 28 (35). Year 2000 As previously announced, work to ensure that both internal systems and products distributed by Group companies are Y2K-compliant have been completed and all identified problems have been corrected. Y2K-compliance statements have been obtained from suppliers of embedded systems and quality assessments have been carried out. Statements certifying that the marketed products are Y2K-compliant have been obtained from the manufacturers, and information is being distributed to customers and resellers via the respective Group companies' web servers. Personnel The number of employees on September 30 was 1,397 (1,418). This report has not been examined by the company´s auditors. Örjan Håkanson President and CEO For additional information, please contact: Örjan Håkanson, President, tel +46-8-734 35 76 Lennart Bernard, Head of Economy and Finance, tel +46-8-734 36 91 SCRIBONA - INTERIM REPORT AS OF SEPTEMBER 30, 1999 Summary Consolidated Income Statement 1999 1998 1999 1998 1998/99 1998 SEK m, Jan- Jan- July- July- Oct-Sept Jan- Sept Sept Sept Sept Dec Total income 5,785 5,985 1,654 1,766 8,680 8,880 Operating expenses Goods for resale -4,960 -5,194 -1,426 -1,530 -7,454 - 7,688 Other external costs -306 -287 -93 -88 -413 -394 Staff costs -436 -403 -125 -122 -610 -577 Depreciation, goodwill -14 -11 -5 -5 -17 -14 Depreciation, -34 -30 -11 -10 -46 -42 inventories Other operating expenses -11 -7 -2 -1 -22 -18 Items affecting comparability Gain on the sale of - 161 - -6 -5 156 operations Costs for implementation of IT-systems, utilization of reserves -5 - - - -5 - etc, Income before net 19 214 -8 4 108 303 financial items Net financial items 5 17 -4 9 10 22 Income before tax 24 231 -12 13 118 325 Tax -7 -17 2 2 -29 -39 Minority interests - - - - -1 -1 Income after tax 17 214 -10 15 88 285 Summary Consolidated Balance Sheet 1999 1999 1999 1998 1998 SEK m, Sept June March Dec Sept Intangible fixed assets 72 76 82 88 77 Tangible fixed assets 174 175 159 158 147 Other fixed assets 34 36 38 33 26 Inventories 618 711 915 968 703 Current operating 1,408 1,375 1,477 1,692 1,315 receivables Financial assets 125 12 18 154 64 Total assets 2,431 2,385 2,689 3,093 2,332 Shareholders´ equity 697 710 872 854 780 Minority interests - - 1 1 - Provisions 39 47 54 63 64 Long-term operating 8 9 8 9 10 liabilities Current operating 1,319 1,231 1,557 2,013 1,309 liabilities Financial liabilities 368 388 197 153 169 Total liabilities and 2,431 2,385 2,689 3,093 2,332 Shareholders´ equity Capital employed 940 1,086 1,052 854 885 Net financial capital -243 -376 -179 1 -105 SCRIBONA - INTERIM REPORT AS OF SEPTEMBER 30, 1999 Sales by Business Area 1999 1998 1999 1998 1998/99 1998 SEK m, Jan- Jan- July- July- Oct- Jan- Sept Sept Sept Sept Sept Dec Computer Products 4,930 5,174 1,400 1,542 7,479 7,723 Office Machines 838 810 252 220 1,186 1,158 Total business areas 5,768 5,984 1,652 1,762 8,665 8,881 Other 17 1 2 4 15 -1 Total 5,785 5,985 1,654 1,766 8,680 8,880 Results Before Items Affecting Comparability 1999 1998 1999 1998 1998/ 1998 99 SEK m, Jan- Jan- July- July- Oct- Jan- Sept Sept Sept Sept Sept Dec Computer Products 11 32 -12 9 92 113 Office Machines 28 35 8 6 55 62 Total business areas 39 67 -4 15 147 175 Joint Group -15 -14 -4 -5 -29 -28 Total 24 53 -8 10 118 147 Key Figures 1999 1998 1999 1998 1998/9 1998 9 Jan- Jan- July- July- Oct- Jan- Sept Sept Sept Sept Sept Dec Operating margin before items affecting comparability 0.4% 0.9% -0.5% 0.6% 1.4% 1.7% Earnings per share 0.50 6.25 -0.29 0.44 2.57 8.32 - excluding items 0.60 1.55 -0.29 0.61 2.82 3.77 affecting comparability Shareholders´ equity per 20.36 22.78 20.36 24.94 share Equity/assets ratio 28.7% 33.4% 28.7% 27.6% Return on capital 11.0% 37.7% employed before tax - excluding items 12.0% 18.3% affecting comparability Return on shareholders´ 11.2% 32.0% equity after full tax - excluding items 12.3% 14.5% affecting comparability Capital turnover rate 8.8 11.1 Capital employed, 983 804 average Shareholders´ equity, 783 890 average Number of employees 1,397 1,418 1,397 1,428 Number of shares, 34,240 34,240 34,240 34,240 thousand SCRIBONA - INTERIM REPORT AS OF SEPTEMBER 30, 1999 Cash Flow Statement 1999 1998 1999 1998 1998/ 1998 99 SEK m, Jan- Jan- July- July- Oct- Jan- Sept Sept Sept Sept Sept Dec ONGOING OPERATIONS Income after financial 24 231 -12 13 118 325 items Adjustments for items not included in cash flow Depreciation 48 41 16 15 63 56 72 272 4 28 181 381 Paid tax -24 -8 -9 -2 -30 -14 Cash flow from ongoing operations before changes in working 48 264 -5 26 151 367 capital Cash flow from changes in working capital Changes in inventories 350 217 93 -73 86 -47 Changes in receivables, 256 -55 -105 -145 -32 -343 etc, Changes in accounts -675 -401 161 -70 -79 195 payable - trade Cash flow from ongoing -21 25 144 -262 126 172 operations INVESTMENT ACTIVITIES Acquisitions of tangible and other fixed assets -50 -80 -9 -5 -94 -124 Sale of equipment 2 - 1 - 2 - Cash flow from investment -48 -80 -8 -5 -92 -124 activities FINANCING ACTIVITIES Dividend paid -171 -360 - - -171 -360 Adjustm, pertaining to - -26 - -12 - -26 dividend in Sifo Group Change in translation -4 0 -3 -1 -1 3 difference Cash flow from financing -175 -386 -3 -13 -172 -383 activities Cash flow for the period -244 -441 133 -280 -138 -335 Net financial capital, 1 336 -376 175 -105 336 opening balance Net financial capital, -243 -105 -243 -105 -243 1 closing balance ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/10/25/19991025BIT00880/bit0001.doc http://www.bit.se/bitonline/1999/10/25/19991025BIT00880/bit0002.pdf