Interim report 1st January - 30th June 2000

Interim report st th 1 January - 30 June 2000 Sales increase 40% during integration process * The merger between Mandator and Cell Network is now concluded: The new Board, a new organisation and a new Management are all now in place, and the new Group has adopted the name "Cell Network". * Turnover in the first half of 2000 stood at SEK 759 million, compared with SEK 542 million for the same period in 1999 (pro forma). This is equivalent to growth of 40%, of which 37 percentage points entailed organic growth. * Turnover in international business amounted to SEK 245 (107) million, an increase of 128%, and corresponded to 30% (19%) of the Group's turnover. During the second quarter, turnover increased to SEK 173 (54) million, an increase of 222%. * The number of employees at the close of the period under review was 1,847, an increase of 657 people, or 55%, over the half-year end in 1999. * The gross profit (EBITA) amounted to SEK -154 (41) million during the first half of the year after transaction costs of SEK 105 million, merger costs of SEK 33 million and a refund from SPP amounting to SEK 35 million. Before these items, the gross profit stood at SEK-51 (41) million. This was caused by one off effects from the rapid integration, the strong international expansion, and continued investments in Cell ITS. Profit after financial items stood at SEK -194 (29) million. * The international expansion has continued: acquisitions in Malaysia and Italy have been concluded, and new offices were opened in the second quarter in Brussels and in Amsterdam. After the close of the period: * Cell Network has concluded an agreement for the acquisition of Aperto Multimedia GmbH in Germany. Aperto is a successful player on the German market for consulting services within the area of interactive media. The company employs around 125 staff in offices in Berlin and San Francisco. * To support Cell Network's international approach, the company intends to apply for Cell Network shares to be quoted on Neuer Markt, the stock exchange in Frankfurt. In order to fund the strong international expansion and to create conditions for liquid trading in the shares, the Board is considering a proposal to implement a new share-issue. Comments from MD and Group MD, Niklas Flyborg We are now creating a leading global consulting firm within the new digital economy. The first half of 2000 has, according to plan, been characterised by the formation of the new Cell Network. It has taken hard work and money, but I am very satisfied that we have come so far in such a short time. We have implemented a change in the customer offer: an offer where strategic competence and creative ideas about the business development of the customer are combined with the best in technical expertise and the experience of implementing projects on a large-scale. Thereby we are able to meet the ever-more-complex demands of our customers and to take on international offensives and the rapid pace of technology. We have now created the organisation necessary to be able to draw benefit from our various fields of expertise, something which means we are well placed to be able to meet the increasing demands of the market. The increase in turnover during the first half of the year was satisfactory when you consider the integration work that was being carried out. The strong growth in international business is particularly pleasing. Consulting business showed a result of zero, which is not satisfactory. The main causes of this are the focus on rapid integration, the costs for the creation of a common offer and the rapid expansion of our international business. The realignment of parts of the business - moving away from traditional IT-consulting business to the adoption of a greater focus on e-business and digital interactive media - has had a temporary negative effect on capacity utilisation and, therefore, on profitability too. Added to this is the fact that Cell ITS has still not started to receive any dividend on the market investment which was initiated during the previous year. Delayed projects in Scandinavia have during spring given a temporary drop in capacity utilisation. The international market investment develops according to plan. Work to bring in outside financiers for the continued development is under way. We are now entering a period of strong international expansion. The goal is to be able to offer full service to our customers on the ten major markets in Europe withing twelve months. The US precence will be accelerated towards the end of the year through the offices in New York and San Fransisco. Further expansion in Asia will be driven from Cell Network Malaysia. Our acquisition of Aperto, a highly renowned Internet company, provides us with a good presence in the important German market. From this basis, we will continue to pursue our strategy for Germany, and will soon be rounding this off with additional strategic expertise. Our intention is to issue new shares and to apply for Cell Network shares to be quoted on Neuer Markt in order thereby to lay the foundations for speedier international expansion. Our focus during the third quarter will be concentrated on increasing our growth, both in Scandinavia and the rest of the world. In June, we introduced a recruitment campaign and this is already bearing fruit. During the fourth quarter, we will be putting the final pieces of the jigsaw in place, allowing us to concentrate on achieving the challenging goals for the years ahead. In financial terms, our aim is to grow quicker than the estimated market growth of 45-55% per annum, with a positive gross result (EBITA). During the first six months this year we have laid a strong foundation for a competitiveness and growth in Cell Network. First half of 2000 in summary During the first half of 2000, the Group's turnover stood at SEK 759 (542) million, an increase of 40% compared with the same period in the previous year (pro forma). Organic growth was 37%. The gross profit (EBITA) stood at SEK -154 (41) million, after transaction costs, integration costs and a refund from SPP. The transaction costs of the merger between Cell Network and Mandator stood at SEK 105 million and had a serious adverse affect on the Group's result in the second quarter. th The integration costs amounted to SEK 33 million as at 30 June. For the year as a whole, integration costs are expected to end at around SEK 45 million. The costs are made up mainly of investments in a joint support system, structure capital, localisation and staff-promotion schemes. During the period under review, the refund from SPP amounting to SEK 35 million was accounted for. Before these items, the gross profit was SEK - 51 (41) million. The result after net financial items stood at SEK-194 (29) million. The Group's equity at the close of the period under review stood at SEK 1,023 million, compared with SEK 1,197 million at the close of 1999. This produces a equity/assets ratio of 52%. The Group's liquid funds stood at SEK 390 million. The number of staff increased to 1,847 as at the end of June 2000, an increase of 657 people, equivalent to 55%, compared with the same time in the previous year. A recruitment campaign was introduced in June in the Scandinavian countries as a stepping stone to the third quarter, where the focus will be geared towards meeting the increase in demand. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/08/23/20000823BIT00450/bit0001.pdf The full report http://www.bit.se/bitonline/2000/08/23/20000823BIT00450/bit0002.doc The full report