Interim report for the period january 1 - september 30, 1998

INTERIM REPORT for the period January 1 - September 30, 1998 Net sales SEK 616 million (521) +18% Loss after financial items SEK -38 million (-64) Third-quarter loss SEK -6 million (-20) Frontec Nordic's and Frontec Software's net sales +12% and 38% Overall AMT operations rose 77% Substantial improvement in operating cash flow Acquisition of Upec completed Institutional investors choose Frontec [REMOVED GRAPHICS] Revenue and results Frontec's net sales rose by 21% during the third quarter to SEK 189 million (156). The loss after financial items during the third quarter amounted to SEK -6 million (-20). For the first nine months of 1998 net sales rose by 18% to a total of SEK 616 million (521), while the loss after financial items was reduced by 41% to SEK -38 million (-64). Included in the result for the third quarter is a gain of SEK 7 million on the previously announced sale of the property in Slough (capital gain of SEK 10 million less an exchange loss of SEK 3 million). Total AMT operations (within Software & Nordic) reported growth of 77% during the first nine months of the year, with revenue of SEK 149 million (84). The loss per share amounted to SEK -1.75 (-2.87). Frontec Nordic Frontec Nordic improved net sales rose during the third quarter by 14% to SEK 151 million (132). Profit after financial items for the third quarter amounted to SEK 6 million (9) after charges for investments in infrastructure capital announced in the first interim report in the form of the internal communication network, tools for project management and the employee program. These investments have now been completed and are expected to begin to have an impact during the fourth quarter. For the first nine months net sales increased by 12% to SEK 508 million (452), and profit after financial items amounted to SEK 19 million (27). Demand for Frontec Nordic's services in Sweden remains strong, especially in Technical Systems. In the long term an overall slowdown in the economy could impact IT investments. The highlights during the third quarter were: Frontec was selected as a partner by Telia to develop a new netservice based on AMTrix for electronic purchasing. The new concept, which was introduced together with IBM at the Electronic Commerce 98 convention in Stockholm, attracted great interest. The efforts made at Frontec Network Services resulted in Frontec's selection to update the Swedish Immigration Board's IT environment. The Swedish government's new integration authority also selected Frontec as its partner. Enator and Frontec signed a cooperation agreement on the further development of the Diabas product family for message, document and information handling. Frontec Software Frontec Software raised its third-quarter net sales by 50% to SEK 45 million (30). Its loss after financial items amounted to SEK -20 million (-19). During the first nine months net sales increased by 38% to SEK 126 million (91). The loss after financial items for the first nine months amounted to SEK -57 million (-71). AMT has reduced its cost expansion in some areas but continues to invest heavily in product development and sales force build-up to respond to very strong demand for enterprise application integration. Progress continued toward a profitable operation. The highlights during the third quarter were: AMTrix became the first system to be certified as a worldwide provider for SAP for integration, message handling and data migration. The Southeast Asian region closed several major orders - HIC (Health Insurance Commission) in Australia and Malaysia Electronic Payment Service. Revenue increased over last year in spite of economic problems in the area. The SAP application connector was shipped worldwide. Europe received several orders for SAP connectors, including from Kraft Jakob Suchard. In the USA major new customers were added including Perrier and Warner Lambert. FMS applications for maintenance of industrial plants, which are marketed primarily in Europe, have developed very well, with orders from several leading European industrial companies. [REMOVED GRAPHICS] Highlights after September 30, 1998 Frontec's subordinated loan program for employees was heavily oversubscribed, providing the company with proceeds of SEK 20 million. The acquisition of Upec was completed. Frontec further strengthened its capital base in preparation for future acquisitions in the IT area through a private placement with a consortium of institutional investors to subscribe for convertible preferred shares - a new instrument in the Swedish market - for a total of USD 10 million. Under certain conditions the investors have pledged to invest an additional USD 5 million + 5 million. Personnel During the first nine months 197 (162) new employees were hired by the Group. As of September 30 the number of employees in the Group was 987 (899), of whom 159 (130) are outside Sweden. The acquisition of Upec is expected to add around 100 employees. Liquid assets The Group's liquid assets, including short-term investments, amounted to SEK 40 million (69) on September 30. The Group's operating cash flow for the first nine months amounted to SEK -31 million (-75). Investments The Group's net investments for the period amounted to SEK 4 million (21), including investments of SEK 2 million (3) in intangible rights. During the third quarter a property with a book value of SEK 19 million was sold. Full-year 1998 Frontec Nordic is maintaining its previous forecast of continued growth and profitability. Frontec Software's growth rate for licensing sales is lower than expected. Against this backdrop a full-year result for the Group of about SEK -30 million is expected, implying brake-even result for the second half year. Information The next report will be released in February 1999. Solna, November 9, 1998 Frontec AB (publ) The Board of Directors This interim report has not been reviewed by the company's auditors. More information: Bertil Persson or Carl-Erland Schröder, tel +46 8 470 20 00. [REMOVED GRAPHICS] ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1998/11/09/19981109BIT00250/bit0001.doc http://www.bit.se/bitonline/1998/11/09/19981109BIT00250/bit0003.pdf