Frontec AB (publ) Interim report for the period July 1 - September 30, 2000 - the first quarter of the split fiscal year

Frontec AB (publ) Interim report for the period July 1 - September 30, 2000 - the first quarter of the split fiscal year * Consolidated net sales for the first quarter of the fiscal year amounted to SEK 207 million (257, for comparable units 213). * The consolidated loss after net financial items was SEK -82 million (- 48), of which SEK -52 million was attributable to the impact of the minority share in Viewlocity. * Frontec eBusiness' net sales amounted to SEK 119 million (131), with a loss after net financial items of SEK -17 million (-3). * BlueLabs' net sales amounted to SEK 66 million (58), with a result after net financial items of SEK 0 million (4). * Frontec currently has a 41% interest in Viewlocity, which is reported as an associated company. * The loss per share was SEK -2.88 (-1.75) Frontec Group Sales and results Frontec's net sales for the quarter amounted to SEK 207 million (257). As Frontec's ownership interest in Viewlocity is now 41%, only the share of its profit or loss is reported in the consolidated income statement. For comparable units, excluding Viewlocity, sales declined by 3% to SEK 207 million (213), The operating loss after goodwill amortization amounted to SEK -31 million (-48). The consolidated loss after net financial items was SEK -82 million (-48). The result was charged with SEK -52 million for the share of Viewlocity's equity. The work to prepare a separate listing of BlueLabs is continuing, with the goal to list the company during the first half of 2001. Employees During the quarter, 92 (97) new employees were hired by the Group. As of September 30, 2000, the Group had 1,179 (1,348) employees, of whom 50 (210) were outside Sweden. The comparative figures include Viewlocity's 202 employees. Liquid assets The Group's liquid assets, including short-term investments, amounted to SEK 44 million (100) as of September 30, 2000, of which Viewlocity's effect on liquid assets was SEK 24 million. Investments The Group's net investments for the period amounted to SEK 4 million (10). Frontec eBusiness Sales and results Frontec eBusiness' net sales amounted to SEK 119 million (131). The loss after net financial items was SEK -17 million (-3). The result was affected by investments in eBusiness concepts and the company's transition from an IT consultant to an eBusiness solution provider. Market Indications show that the traditional IT consulting market is weak, but that there is good demand for eBusiness transformation and integration. eBusiness clients consist primarily of traditional companies that are now changing and adapting their processes to a completely new market. A new organization has been created as of September 1 to take advantage of eBusiness competence and intensify marketing. Highlights during the quarter: * A cautious market has proven the importance of framework agreements and long-term relationships with strategic clients such as Volvo, the Swedish Civil Aviation Administration and AstraZeneca, which have raised their volumes. * Frontec's packaged solutions such as Team Games have been well received by the market and implemented at Schenker-BTL, among others. * The first order for Frontec's "Business Hotel" ASP service at was signed with NFB Transport Systems, one of Europe's largest moving companies. The agreement gives NFB access to eBusiness solutions based on in return for a fixed percentage of the company's annual sales. * Sandvik AB signed an agreement with Frontec for assistance in the introduction of SAP R/3 in the financial area and integration with existing peripheral systems. The project also includes a competence transfer to Sandvik regarding R/3. Employees At the end of the period, the total number of employees at Frontec eBusiness was 697 (657). After a long period of cautiousness, recruitment has again picked up. BlueLabs Sales and results BlueLabs' net sales amounted to SEK 66 million (58). The result after net financial items was SEK 0 million (4). During the first half of 2000, Frontec Technical Services began a major restructuring into an independent group with its own brand. The group structure and development of a separate infrastructure in the form of IT systems and telephony, as well as the continued launch of BlueLabs as a high-technology company focused on intelligent communication, again resulted in significant extraordinary costs. With the exception of the Stockholm region, growth remained good during the period. Market Demand in all business areas - Embedded, Systems, Mobility and Strategy - has been very good. Highlights during the quarter: * Development of a system for Biosys, which, with the help of Bluetooth technology, wirelessly transmits biological signals from a human to a computer. * Development of a system for Mobile Notifier for intelligent alarm signaling via the mobile Internet. * Delivery of e-Tuner, a system for receiving music in MP3 format via Ericsson's e-services and forwarding it to a home stereo. Employees At the end of the period, BlueLabs had 311 (262) employees. BlueLabs recruited 24 employees during the period. FMS (Frontec Maintenance Systems) Sales and results Frontec Maintenance Systems' net sales amounted to SEK 14 million (12). The loss after net financial items amounted to SEK -3 million (-3). FMS' applications for maintenance of industrial facilities are marketed primarily in Europe via its own sales companies and outside Europe by partners. The API system is being developed and marketed primarily for customers with NT or Unix platforms. The Idhammar 400 system is marketed for use with the IBM AS/400 platform and delivered in both client-server and character-based versions. A comprehensive cost-reduction program was implemented in order to adapt to market conditions and raise profitability. The impact of this program is expected next quarter. Market A distribution agreement was signed with Linc Software Services Pvt. Ltd. in India and major orders were received during the period from, among others: * SKF in South Africa * National Steel Corporation in Singapore * Johnson Controls Automotive in Belgium * H Lundbeck A/S in Denmark * Integral Accumulator in Germany Employees At the end of the period, the total number of employees at FMS was 60 (67). Viewlocity Sales and results Viewlocity, which is 41% owned, raised its net sales by 293% to SEK 129 million (44), with a loss after net financial items of SEK -135 million (- 43). Development was in line the with the American management's plan. In August, Viewlocity, Inc. submitted a preliminary application (S-1) to the U.S. Securities and Exchange Commission (SEC) to publicly list the company on a U.S. exchange. The application was supplemented in November and is currently under consideration. Frontec Group Future outlook eBusiness operations were reorganized in September, after which forward- looking work - conceptual as well as profit-oriented - was intensified. Although the establishment of BlueLabs as an independent unit has drained energy from external efforts, there have already been benefits thanks to a clearer business concept. For example, the number of spontaneous applications from highly competent individuals has increased significantly, which is an important factor in a sector where access to competence is often a limitation. The decision to delay the listing of BlueLabs until the first half of 2001 is considered positive, since it provides the market with a longer period to evaluate BlueLabs as an independent company. Information Annual General Meeting, November 28, 2000. Six-month interim report, February 22, 2001. Solna, November 9, 2000 Frontec AB (publ) Board of Directors This report has not been reviewed by the company's auditors. More information: Per Tjernberg, President and CEO, tel + 46 8 733 7505, Björn Sandberg, CFO, tel + 46 8 733 7521, or Carl-Erland Schröder, Director of Communications, tel + 46 8 733 7509. Invitation to a telephone conference Frontec invites you to a telephone conference with CEO Per Tjernberg and CFO Björn Sandberg at 11:00 a.m. on Thursday, November 9. Phone + 46 8 598 001 86, preferably several minutes prior to the start of the conference. 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