Interim Report January - September 2001

Interim Report January - September 2001 ConNova Group AB (publ) Operations during the period After a certain recovery in the market for systems during the first six months of this year vacation and downward economic trends have delayed investments among our potential customers. In July ConNova initiated a cost savings process. Working expenses have been reduced by 50%, which will have an effect during Q4. The trend for ConNova TVX is however positive. Demand for outsourcing services has increased and TVX has secured several smaller orders at the same time as the prospect stock for large operations has developed well. The inflow of orders rose 6% to SEK 20.3 million compared with the same period the previous year (SEK 19.1 million). The order book total at the end of the period was SEK 19.1 million, an increase of 19% compared with the previous year (SEK 16.1 million). The figure had more than doubled compared with the level at the beginning of the year. The increase in the inflow of orders has not had an impact in terms of revenues during the period. This is due to a small opening order book total and the fact that several orders received concern long-term outsourcing contracts and support agreements. Long-term contracts with pricing models based on current payments provide ConNova with higher revenues and a more stable flow of revenues, but reduce the short-term revenues effect. Revenues during the first nine months of this year amounted to SEK 10.5 million compared with the corresponding period the previous year (SEK 27.5 million). During the period, Chinese Channel in London has ordered a BizManager system. System support and outsourcing services have been delivered to current customers. The latest version of BizManager that has been completed is now a standard product that can be delivered alongside partners with relatively small work input from ConNova. A stripped version of BizManager for start-ups and small broadband operators has been launched this fall. During the period under review, expenses amounted to SEK 45.6 million (SEK 65.1 million). All internal product development expenses (totalling SEK 11.9 million) have been charged to the profit/loss. Previous collaborative projects with Soluziona and Sema Group have been further developed, and a number of tenders and sub-projects have been delivered alongside partners. Because of the development within partner relations, ConNova's need for in-house distribution and product development resources has been reduced. Developments within ConNova TVX The subsidiary, ConNova TVX AB, which manages customer service on an assignment basis, has demonstrated a positive trend during the period. A distribution assignment for another TV channel, ORT, has been secured and several projects have been initiated for a large company in a new field, a collaboration which is expected to lead to a considerable increase in turnover for ConNova TVX. ConNova TVX's main competitor is winding up its operations in the autumn. ConNova TVX is currently involved in discussions relating to more potential assignments for TV channels that will lack a distributor due to the competitor's closure. There will be no established competitor to ConNova TVX for the service they require as of the autumn. We expect that both volume and pricing for our standard services can develop healthily following several years of tough pricing pressure. Strategic collaborations ConNova has an attractive product for customer care, a number of reference clients in the TV-segment as well as an outsourcing operation with positive cash flow. The most important task for ConNova now is to reach larger sales volumes. A merger with one or more suitable partners gives co-ordination effects within sales and a stronger product portfolio, which lead to larger growth of volume in a cost effective manner. The market is favourable to structural deals and ConNova has during this period actively searched suitable, potential partners. As a result of this, ConNova has, since the end of the period, reach an agreement regarding the acquisition of Billiant AB, a company whose products and market complement those of ConNova. In this regard, a new share issue worth SEK 25.4 million is planned to be launched, and a guarantee consortium has been created by the main owners of ConNova and Billiant. ConNova's management is of the opinion that profitable expansion should be given the highest priority and it views additional structural business deals as an important complement to the general business operations. Since the end of the period, a partnership agreement regarding a sales collaboration was also signed with Kreatel Communications AB. Profit/loss and liquidity Net sales during the period amounted to SEK 10.5 million (SEK 27.5 million). The profit/loss amounted to -SEK 34.7 million (-SEK 36.8 million). Expenses for the period totalled SEK 45.6 million (SEK 65.1 million), of which SEK 11.9 million related to internal product development (SEK 11.3 million). The reduced expenses are mainly a result of the staff reduction process initiated towards the end of 2000. ConNova continues to charge all product development costs to the financial result as they arise. In addition to liquid assets, expected customer payments and the contribution from the planned share issue give the company a satisfactory capitalisation. General accounting principles The report is prepared in accordance with Recommendation No. 20, Interim report, of the Financial Accounting Standard Council. The company applies the accounting principles and calculation methods used in the latest annual report Organisation At the end of the period, the number of employees amounted to 40, which can be compared with 70 at the same time last year. Because BizManager is now complete as a standardised basic product, and collaborative relationships have been established with several partners within sales, delivery and development, ConNova has been able to reduce staff further. During summer the company's former Managing Director, Christian Ekström, left the company and has been replaced by Claes Rossby. The remainder of the year The recovery of the market for customer management systems for media operators has stopped while the outsourcing operation has developed positively. To broaden the market for systems ConNova has initiated activities towards broadband operators, a considerable larger segment that TV. The agreement for the acquisition of Billiant AB has strengthened ConNova's activities further. A complementary product and presence in the market for broadband operators has now been added. The outsourcing operation has developed positively and management expects ConNova TVX to grow during Q4 and show pronounced increase in sales during next year. The initiated cost savings programme will cut the current fixed cost level by 50%, and the acquisition of Billiant will make further rationalisation possible. Motala 6 November 2001 Claes Rossby CEO ConNova Group AB (publ) Addresses and company details ConNova Group Tel: +46 141 237 600 Box 231 Fax: +46 141 564 24 Platensgatan 1 e-mail: info@connova.se SE-591 23 Motala Web site: www.connova.se Sweden Swedish corporate identity number: 556423-7716 Additional information For more information, please contact: Cleas Rossby, CEO Torbjörn Ullman, CFO Tel: +46 705 380 885 Tel: +46 141 237 685 e-mail: clro@connova.se e-mail: toul@connova.se ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/11/07/20011106BIT01210/bit0002.doc The Full Report http://www.waymaker.net/bitonline/2001/11/07/20011106BIT01210/bit0002.pdf The Full Report