Interim Report 1 January - 30 September 1999

Interim Report 1 January - 30 September 1999 *Increase in net turnover by 21 percent to SEK 280.6 million (232.2). *Improvement in results to SEK -23.8 million (-44.6). *Large volume of new orders for distribution of international mail. *New distribution structure from 1 January 2000 results in cost reductions of about 10%. Revenues For the first nine months of 1999, CityMail's revenues amounted to SEK 280.6 million, an increase 21% compared with the corresponding period in 1998. The average revenues per postal item increased by 3.4% as compared with the corre- sponding period 1998. CityMail's revenues during the third quarter amounted to SEK 88.5 million (75.7). The turnover from CityMail's existing customers increased by approximately 15%. Within the large customer segment, existing customers accounted for 98% of the increase while the increase amongst small and mid-sized customers came almost exclusively from new sales. The distribution of international mail has developed extremely well. The mar- ket is characterised by a low level of competition and high pricing, thus mak- ing possible great savings potentials for customer companies. CityMail has re- ceived a large volume of orders and is currently negotiating with several large customers which, together, can provide an increase in turnover of more than 100 MSEK during 2000. In co-operation with the company "nxt direct" CityMail has developed and launched a unique new product which is aimed at customers who currently mail large volumes of unaddressed advertising. The product, which is called "Prop- erty-Addressed" is based on a detailed segmentation of various distribution areas. The customers avoid unnecessary "waste" and can obtain a greater effect at the same or lower total costs. The items are semi-addressed, i.e. they are addressed to a street address and, where appropriate, to a particular floor, but not to an individual person. The market for unaddressed mail items in Swe- den is approximately SEK 1.2 billion and CityMail anticipates, in the long run, to be able to achieve a significant portion of this market with the new product. During the second quarter, a settlement agreement was entered into with Sweden Post. The settlement agreement resulted in net compensation to CityMail, of which a certain portion is accounted for as revenue during the second quarter and a smaller portion during the third quarter. The result of the third quar- ter has thereby been positively effected. Costs CityMail's operating costs for the first nine months of 1999 amounted to SEK 303.1 million (275.2). The increase between the years is accounted for by the expansion of the sales organisation and an increased dimensioning of the dis- tribution organisation which were made during 1998. During the third quarter of 1999, operating costs amounted to 97.9 MSEK, a de- crease of SEK 4 million as compared with the second quarter of 1999. During the period, decisions were taken to change the distribution structure commenc- ing with the year 2000. CityMail's services are being developed to cover every business day of the week through a rolling three-day schedule. The distribu- tion pace for a shipment will be three days from the posting date, evenly di- vided over these days. The intention is to allocate the volumes more evenly, thus allowing for sig- nificantly improved utilisation of capacity and cost savings. A cost reduction of approximately 10% is anticipated. Negotiations with the relevant labour un- ions are under way. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/11/08/19991108BIT00410/bit0001.doc The full report http://www.bit.se/bitonline/1999/11/08/19991108BIT00410/bit0002.pdf The full report