Interim report for the period January - June 2001

Interim report for the period January - June 2001 · Net sales rose by 3 percent to SEK 690.6 million (669.7). · Profit after financial items amounted to SEK 31.9 million (50.5). · The operating margin was 4.6 percent (7.4). · Profit per share amounted to SEK 0.78 (1.43). · A slumping market resulted in a weak second quarter, with net sales of SEK 292.8 million (412.4), profit after financial items of SEK 3.7 million (31.5) and an operating margin of 0.6 percent (7.7). · An action program was initiated to adapt operations to a weaker market. · The Dimension share was listed on the Stockholm Exchange's O- list on February 20. · Geographic expansion through the establishment of new operations in Latvia and Lithuania. · New business area formed to strengthen offerings in monitoring systems for infrastructure solutions. · A number of important orders were secured from UPC Sverige, FöreningsSparbanken, Telenor, the Royal Swedish Library and Interactive Gaming Systems, among others. · Next Nordic signed a three-year agreement as an OEM supplier to Ericsson Radio Systems. · Significant strengthening of Next Nordic's product offerings in IT security. Following the conclusion of the period: · Partnership agreement signed with Skanska. · Success in the Baltic market, with several major agreements. · Continued geographic expansion through acquisition in Denmark. · About Dimension Dimension is an IT integrator specializing in business-critical systems that form the infrastructure of the digital economy. Examples include advanced server and data storage solutions for e-commerce and Internet banking systems, Internet/intranets and business systems. Clients are primarily in telecommunications, banking & finance, media and manufacturing industry. Dimension cooperates with market-leading suppliers in all its operating areas. For example, it has established extensive, long-term relationships with Sun, Veritas, Compaq Computer, Hitachi Data Systems and WebMethods. The wholly owned Group subsidiary Next Nordic, which works with the sale of Sun systems and related products to resellers and integrators, is Sun Microsystems' largest partner in the Nordic region. Dimension's objective is to become the Nordic and Baltic regions' leading supplier of business-critical systems and integrated solutions for the digital economy. In 2000 Dimension had sales of SEK 1,475 million and profit after financial items of SEK 138 million. The Group has around 295 employees and is active in Sweden, Norway, Denmark, Finland, Latvia and Lithuania. Sven Uthorn, Managing Director of Dimension AB, comments on the first half of 2001 After a strong start to the year, with growth and profit exceeding expectations, we experienced a major reversal in the market for IT infrastructure during the latter half of the second quarter. The economic slowdown, together with increased uncertainty about future economic development, was reflected during the period in a greater caution among clients, particularly in the telecom sector. At the same time structural changes are currently taking place in the banking & finance sector, for example. As a whole, this has led to the postponement of investment decisions and in certain cases the discontinuation of IT projects. On the positive hand, however, Dimension developed well throughout the first half-year in the industrial and state & municipal government sectors. Moreover, growth in the services area remained good. Profitability has always been the highest priority at Dimension, which is why we are now taking measures to adapt our operations to the current market situation. The savings will affect most areas, and initially measures have already been taken that will reduce costs by slightly over SEK 20 million this year. In addition, 35 staff positions will be eliminated. Together, these measures are expected to save SEK 65 million on an annual basis. The restructuring expenses for these measures amount to approximately SEK 15 million and will be charged against profit in the second half of 2001. A slowdown in the economy also provides an opportunity for the company, by acting aggressively, to strengthen its position prior to an eventual recovery. In accordance with the company's long-term strategy, we have taken several significant steps. Dimension's service offerings have been broadened and strengthened, including through the establishment of a new business area focused on services and products for monitoring and increased availability in business-critical systems. At the same time the Group's geographic expansion has continued according to plan, in part through an acquisition in Latvia and in part through the establishment of new companies in Lithuania, Denmark and Finland. On August 20 an agreement was signed to acquire the Danish IT company Benau's system integration division. The acquisition is expected to create important synergies in terms of both client segments and technical know-how, and now gives Dimension a major foothold in the Danish market. Although it is difficult today to predict when the market will recover, I remain firmly confident in the company's strong long-term development. This is based on a conviction that the transition to a digital economy will affect us for a long time to come, along with a strong belief in our consistent focus on business-critical infrastructure and cooperations with clients and suppliers. Market Dimension's clients are primarily in high technology and fast-growing areas such as telecommunications, banking & finance, media, e-commerce and manufacturing industry. Another important client segment is state & municipal governments. The growth in the market for IT infrastructure that distinguished the year's first quarter and continued initially in the second quarter leveled off substantially during the latter half of the second quarter. The economic slowdown has caused clients to become more cautious, particularly in the telecom and banking & finance sectors, where uncertainty about the future is reflected in postponed investment decisions and revised IT projects. This is, in Dimension's opinion, an industry-wide phenomenon, and is also apparent internationally. Dimension's intention is to take advantage of the downswing in the market to strengthen its position prior to an eventual recovery. Several significant steps have been taken in this respect. Among other things, service offerings have been broadened and strengthened, at the same time that a number of new companies have been established and acquisitions completed, in line with the strategy to expand geographically in the Nordic and Baltic regions. Important orders were secured during the period, including from UPC Sverige, FöreningsSparbanken, Telenor, the Royal Swedish Library and Interactive Gaming Systems. Sales and profit for the second quarter of 2001 The market's downturn during the second quarter led to significantly lower order bookings than in the corresponding period a year earlier. Net sales decreased by 29 percent to SEK 292.8 million (412.4). The sales decline should also be seen in light of the fact that the second quarter, and June in particular, is normally a strong period for Dimension, as was the case in 2000. Profit after financial items amounted to SEK 3.7 million (31.5). The operating margin was 0.6 percent (7.7). The lower margin was due in large part to the fact that the company planned for higher volumes and therefore was overly extended in relation to sales. Sales and profit for the first half of 2001 For the first half-year as a whole, net sales rose by 3 percent to SEK 690.6 million (669.7). Profit after financial items amounted to SEK 31.9 million (50.5), and the operating margin for the period declined to 4.6 percent (7.4). Operations Until mid-May all operating areas reported good growth and profit. At that point sales dropped off substantially, primarily in the key telecom and banking & finance segments. Development in the industrial and state & municipal government sectors remained strong throughout the first half- year, however. At the same time the service area developed well, with Dimension, among other things, signing an agreement with Flextronics on support for its European data center. In order to strengthen offerings in systems for monitoring infrastructure solutions, a new business area, System Management, was established during the second quarter. The business area offers consulting services and products that increase the availability of business-critical systems. Dimension cooperates within this area with BMC Software and Twobyfour Software, among others. From the start System Management had projects from OM, Telia and Expressen, among others. Action program Profitability is Dimension's highest priority. In order to adapt operations to today's weaker market, the company has initially taken measures which will result in cost savings of slightly over SEK 20 million during the current year. This will be achieved primarily through fewer recruitments and lower expenditures for outside consultants. In addition, 35 staff positions will be eliminated. Together, these measures are expected to save SEK 65 million when completed by year-end. Restructuring expenses of approximately SEK 15 million will be charged against the second half of 2001. International expansion During the report period, the Dimension Group continued its geographic expansion and established operations in Lithuania, Latvia, Denmark and Finland. - As an extension of their multi-year cooperation, Dimension and Lithuania-based CompServis established CompServis Open Systems in late February. Dimension owns 51 percent of the new company, which initially had six employees and specializes in infrastructure solutions primarily for the banking & finance and telecom sectors. - In late March Dimension acquired 70 percent of the Latvian company Realogic, which had a turnover in 2000 of approximately SEK 10 million and a profit after financial items of approximately SEK 3 million. At the time of the acquisition the company had six employees. In connection with the acquisition, the company changed its name to Dimension Latvia. - The subsidiary Next Nordic started operations in Denmark and Finland during the period. Following the conclusion of the report period - A partnership agreement was signed with Skanska, making Dimension Skanska's main discussion and cooperative partner for IT infrastructure as well as its primary systems supplier. - A number of important transactions were secured in the Baltic market. Dimension's subsidiary in Lithuania received an order from Lithuania's largest energy company for the delivery and implementation of IT infrastructure valued at slightly over SEK 4 million. Dimension Latvia has, among other things, delivered IT infrastructure solutions to one of the largest banks and one of the leading telecom operators in Latvia. - Dimension is further strengthening its Nordic presence by acquiring the Danish IT company Benau Danmark's system integration division. Benau, one of Compaq's largest partners in Denmark, focuses on server solutions and data storage as well as related support and consulting services. The acquired operations generated a turnover of approximately SEK 150 million in 2000, with 35 employees. The purchase price is SEK 14.5 million, along with a conditional cash payment up to a maximum of SEK 7.5 million, based on future earnings. The acquired operations will be consolidated in the Dimension Group as of September 1. The goodwill that arises as a result of the acquisition is estimated at SEK 14 million and is scheduled to be amortized over five years. - ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/08/21/20010821BIT00080/bit0001.doc The full report http://www.waymaker.net/bitonline/2001/08/21/20010821BIT00080/bit0001.pdf The full report