Interim report January - June 1998

Interim report January - June 1998 Operations in value-adding distribution with a combined annual turnover of SEK m. 650 were acquired during the second quarter. Income after net financial items amounted to SEK m. 241 (89), including a capital gain of SEK m. 162 on units sold. Operating income before items affecting comparability amounted to SEK m. 76 (77). Adjusted for Svanströms this represents an improvement of SEK m. 5 over the preceding year. Sales rose by 11% to SEK m. 4,619 (4,154). For comparable units the rate of increase was 22%. The previous forecast for the full year 1998 remains unchanged. Group structure Scribona is a trading and service-producing company which supplies offices and workplaces in the Nordic countries, the Baltic region and northwestern Russia with products and services from world-leading manufacturers. The Group is divided into three business areas; Computer Products, which includes the Scribona Computer Products and Toshiba PC divisions, Office Machines, which consists of the Scribona Office Machines and Carl Lamm divisions ( formerly called Enström) and Information Services, comprising the Sifo Group division. A decision was made by the Annual General Meeting to distribute Sifo Group to Scribona's shareholders. The settlement date for distribution has been set at 3 September this year and the introduction of Sifo Group's shares on the O list of the Stockholm Stock Exchange will take place on 10 September. Market Market demand leveled out during the second quarter of the year. Although demand for computer products remained high due to very strong interest in so- called staff purchases, the considerable attention these require throughout the distribution chain has tended to displace normal business, at least temporarily. Growth in the PC segment also slowed in Norway and Finland during the past quarter. Demand for copiers weakened during the second quarter in Sweden and Norway, although it remained strong in other markets. Sales Sales in the first half of the year amounted to SEK m. 4,619 (4,154), an increase of 11%. For comparable units and in comparable currencies the rate of increase was 22%, on a level with the first quarter. In the Computer Products business area sales amounted to SEK m. 3,632 (2,852), an increase of 27%. This represents faster growth in the second quarter than in the first, which is largely explained by staff purchases of PC packages and the newly acquired units in Finland and Norway. The large volume of staff purchases also have a negative impact on sales of laptop computer, which are only included in staff offers to a limited extent. In spite of this, the Toshiba PC division was able to report growth and increased market shares. Sales in the Office Machines business area totaled SEK m. 590 (707). Adjusted for the sale of cellular telephone operations in autumn 1997 and the office electronics business in early 1998, this represents sales growth of 2%. However, this is lower than in the first quarter. The dominant operations in this area are the agencies for Toshiba and Ricoh office machines, both of which have maintained their market shares at a high level during the past quarter. Sifo Group's sales amounted to SEK m. 401 (334), an increase of 20%. Adjusted for acquisitions the increase was 7%. This is attributable to the Observer companies, which continued to show positive development . Growth for value- added services was higher than for core operations, and these now account for around 30% of the Swedish media business. Income The Group's operating income before items affecting comparability totaled SEK m. 76 (77). Adjusted for Svanströms, which was sold at year end 1997, this is an increase of SEK m. 5 compared with the preceding year. Operating income for Computer Products amounted to SEK m. 21 (24). Substantial deliveries of staff PCs in Sweden during the second quarter made a positive contribution to the business area's income. However, this did not compensate for the income lost due to faltering demand in Sweden in connection with the focus on the market for staff purchases. Income and Norway and Finland also decreased during the second quarter as a consequence of sharper price competition and lower growth. Office Machines succeeded in improving its operating income to SEK m. 29 (16), despite lower growth. The effects of last year's structural changes has boosted income for both Scribona Office Machines and Carl Lamm. Sifo Group's operating income was SEK m. 36 (34). Income in the second quarter is in line with the trend set in the first. Financial position Consolidated net financial items amounted to SEK m. 3 (15) for the first half of the year and income after net financial items was SEK m. 241 (89). This includes gains on units sold amounting to SEK m. 162 (-3). In the second quarter this item was charged with costs of SEK m. 6 for winding up operations in the Sifo Group company SMG Inc. in the U.S. Earnings per share after full tax amounted to SEK 6.07 (1.99). Net financial capital during the second half of the year fell by SEK m. 85 (-362) and totaled SEK m. 87 (-36) at the end of the period. Acquisitions in Computer Products and the cash dividend to the shareholders, including the resolved extra dividend, totalling SEK m. 360, were largely offset by a strong operating cash flow and of sales. Investments during the period totaled SEK m. 94 (142). Shareholders' equity at the end of the period amounted to SEK m. 1,026 (1,112), corresponding to SEK 29.96 per share (32.48). The equity/assets ratio was 33% (39). Personnel The number of employees and the end of the period was 2,479 (2,297). Acquisitions and sales During the past quarter two companies in value-adding distribution were acquired and integrated with Scribona Computer Products. These were Routers in Norway and Instru Data with operations in Finland, the Baltic countries and the St. Petersburg area. The acquired units have a combined annual turnover of approximately SEK m. 650 and some 140 employees. Year 2000 The Scribona Group is conducting a number of projects aimed at securing both internal systems and products distributed by the Group companies for the new millennium. The projects are coordinated at the Group level. The extent of the Year 2000 problem in the internal systems has been charted and analyzed. Timetables have been drawn up for the required measures, which are expected to be completed during the first half of 1999 at the latest. Product statements which declare that the sold products are secure for the Year 2000 have been obtained from the suppliers. Efforts are underway to compile and supply customers with easy-to-understand information about the products' Year 2000 status. Information will be provided through the respective Group companies' web servers and in certain cases through supplementary information directly to the customers. Full-year forecast The previous forecast remains unchanged, that in 1998 it should be possible to improve income after net financial items, excluding gains on units sold, for comparable units in the entire Scribona Group. In connection with the distribution of a prospectus at the end of August in connection with the listing of Sifo Group, a separate Interim Report for those operations will be provided in addition to a corresponding pro forma for Scribona alone. Next interim report The Interim Report for January - September is expected to be published on October 27. This report has not been examined by the Company's auditors. Örjan Håkanson President and CEO For further 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 Scribonas Interim Report is also available at www.scribona.se SCRIBONA - INTERIM REPORT AS OF JUNE 30, 1998 Summary Consolidated Income Statement SEK m. 1998 1997 1998 1997 1997/98 1997 Jan-June Jan-June April- April- July- Jan-Dec June June June Total income 4,619 4,154 2,479 2,191 8,954 8,489 Operating expenses Goods for resale -3,698 -3,267 -2,011 -1,739 -7,072 -6,641 Other external costs -289 -285 -151 -150 -592 -588 Staff costs -502 -473 -260 -238 -963 -934 Depreciation -46 -41 -23 -22 -89 -84 Other operating -8 -11 -3 -4 -16 -19 expenses Items affecting comparability Gain on the sale of 162 -3 -6 -9 164 -1 operations Costs for - - - - -56 -56 implementation IT systems Income before net 238 74 25 29 330 166 financial items Net financial items 3 15 - 6 7 19 Income after net 241 89 25 35 337 185 financial items Tax -31 -20 -14 -11 -61 -50 Minority interests -2 -1 -1 -1 -3 -2 Income after tax 208 68 10 23 273 133 Summary Consolidate Balance Sheet 1998 1998 1997 1997 1997 SEK m. June March Dec Sept June Intangible fixed assets 397 356 332 299 302 Tangible fixed assets 210 201 225 209 210 Other fixed assets 37 37 39 44 51 Inventories 715 827 991 830 812 Current operating 1,366 1,418 1,588 1,349 1,273 receivables Financial assets 413 198 291 195 183 Total assets 3,138 3,037 3,466 2,926 2,831 Shareholder´s equity 1,026 1,376 1,179 1,130 1,112 Minority interests 7 6 3 3 2 Provisions 118 94 103 71 68 Long-term operating 29 20 19 21 31 liabilities Current operating 1,632 1,486 2,043 1,557 1,399 liabilities Financial liabilities 326 55 119 144 219 Total liabilities and 3,138 3,037 3,466 2,926 2,831 Shareholder´s equity Capital employed 946 1,239 1,010 1,082 1,150 Net financial capital 87 143 172 51 -36 Statement of changes in Financial Position SEK m. 1998 1997 1998 1997 1997/98 1997 Jan- Jan- April- April- July- Jan- June June June June June Dec Operating income before 122 118 54 60 311 307 depreciation Items affecting 162 -3 -6 -9 108 -57 comparability Tax -31 -20 -14 -11 -61 -50 Cash flow before change in 253 95 34 40 358 200 working cap. and net inv. Intangible fixed assets -81 -90 -49 -3 -124 -133 Other fixed assts -13 -52 -24 -23 -46 -85 Net investments in fixed -94 -142 -73 -26 -170 -218 assets Change in operating 112 -123 343 -86 285 50 assets/liabilities Cash flow from operations 271 -170 304 -72 473 32 Cash flow from financial 3 15 0 6 7 19 operations Translation difference 1 -2 -4 3 Dividend -360 -205 -360 -205 -360 -205 Change in financial -85 -362 -56 -275 123 -154 assets/liabilities SCRIBONA - INTERIM REPORT AS OF JUNE 30, 1998 Sales by Business Area SEK m. 1998 1997 1998 1997 1997/98 1997 Jan-June Jan-June April-June April-June July-June Jan-Dec Computer 3,632 2,852 1,980 1,488 6,676 5,896 Products Office 590 707 280 386 1,261 1,378 Machines Office - 265 - 123 278 543 Supplies Information 401 334 219 184 786 719 Services Total 4,623 4,158 2,479 2,181 9,001 8,536 business areas Other -4 -4 - 10 -47 -47 Total 4,619 4,154 2,479 2,191 8,954 8,489 Results before items affecting comparability SEK m. 1998 1997 1998 1997 1997/98 1997 Jan-June Jan-June April-June April-June July-June Jan-Dec Computer 21 24 4 9 77 80 Products Office 29 16 11 12 53 40 Machines Office - 6 - - 22 28 Supplies Information 36 34 21 20 79 77 Services Total 86 80 36 41 231 225 business areas Joint Group -10 -3 -5 -3 -9 -2 Total 76 77 31 38 222 223 Key Figures 1998 1997 1998 1997 1997/98 1997 Jan- Jan- April- April- July- Jan- June June June June June Dec Operating margin before items affecting comparability 1.6% 1.9% 1.3% 1.7% 2.5% 2.6% Earnings per share 6.07 1.99 0.29 0.67 7.97 3.88 - excluding items 1.29 2.04 0.41 0.85 4.43 5.18 affecting comparability Shareholder´s equity per 29.96 32.48 29.96 34.43 share Equity/assets ratio 33% 39% 33% 34% Return on capital 31% 15% employed before tax Return on shareholder´s 23% 11% equity after full tax Capital turnover rate 8.4 7.9 Capital employed, average 1,069 1,076 Shareholder´s equity, 1,178 1,180 average Number of employees end 2,479 2,297 2,479 2,498 of period Number of shares, 34,240 34,240 34,240 34,240 thousand Market price end of 96.00 90.00 96.00 88.50 period, share category B