Interim report for the period July 1 - December 31, 2000

Interim report for the period July 1 - December 31, 2000 - and the second quarter of the split fiscal year · Consolidated net sales for the first six months of the fiscal year amounted to SEK 481 million (593, for comparable units 521). · The consolidated loss after net financial items was SEK -113 million (33), of which SEK -99 million was attributable to the impact of the minority interest in Viewlocity and SEK 53 million to a capital gain on the sale of Frontec Support and Operations (FSO) to Sonera Corporation. · Frontec eBusiness' net sales amounted to SEK 293 million (283), with a loss after net financial items of SEK -17 million (-5). · BlueLabs' net sales amounted to SEK 142 million (146), with a profit after net financial items of SEK 8 million (19). · The loss per share was SEK -4.00 (-2.55). Frontec Group Outlook The Group's profitability and growth are unsatisfactory. This is due to a weak market during the period combined with inadequate marketing. To alleviate this situation, the Group has adopted a package of measures that includes a restructuring, a reorganization and efforts to improve marketing, which in turn have resulted in charges short term against earnings. An administrative rationalization is planned in order to achieve a long-term reduction in expenses. The large part of the reported loss is attributable to non-core operations. Companies that are not considered core areas have been separated. A couple of units have already been sold during and after the period. This has also helped to strengthen liquidity. The goal of the streamlining is to create a strong group that builds integrated eBusiness solutions for large established companies and organizations. Sales and results Consolidated net sales for the first six months of the fiscal year amounted to SEK 481 million (593, for comparable units 521). The consolidated loss after tax and the minority interest in Viewlocity was SEK -114 million (72), including a charge of SEK -99 million for the share of Viewlocity's loss. The loss per share was SEK -4.00 (-2.55). The operating loss after goodwill amortization amounted to SEK -67 million (-113). The consolidated loss after net financial items was SEK -113 million (33). During the second quarter Frontec's net sales amounted to SEK 274 million (335, for comparable units 295), with a loss after net financial items of SEK -31 million (26, for comparable units 4). The Group's total goodwill amounted to SEK 86 million after an additional amortization of SEK 12 million. Employees During the quarter 64 (196) new employees were hired by the Group. As of December 31, 2000 the Group had 1,090 employees (1,403, including 221 in Viewlocity), of whom 53 (246) were outside Sweden. The sale of FSO to Sonera resulted in a decrease of 57 employees. The focus during the period was on stabilization rather than growth. Liquid assets As of December 31, 2000 the Group's liquid assets, including short-term investments, amounted to SEK 41 million (148, including 80 in Viewlocity). Following the conclusion of the period the company's liquidity was positively affected by the divestments of FSO and FRT. Investments The Group's net investments for the period amounted to SEK 30 million (25). Frontec eBusiness Sales and results Frontec eBusiness' net sales for the first six months of the fiscal year amounted to SEK 293 million (283), with a loss after net financial items of SEK -17 million (-3). During the second quarter eBusiness' net sales amounted to SEK 174 million (220), with a result after net financial items of SEK 0 million (27). Changes During the second quarter work was begun on a new organization and focus on eBusiness. The new organization introduced at the start of the year resulted in the transfer of all operations unrelated to eBusiness to a new business area, Venture Zone. eBusiness, headed by Michael Bergquist, has been divided into four business areas to meet demand from companies and organizations for quick implementation of efficient eBusiness solutions: Transformation Management, Business Integration, Enterprise Applications and System Development. All other operations (with the exception of BlueLabs), such as FMS and FRT (Frontec Research and Technology) and parts of the former eBusiness, have been brought together in Venture Zone, headed by Lars-Eric Green. Frontec Support and Operations (FSO) was sold to Sonera Corporation as of December 31, 2000. FSO was responsible for support and ASP solutions for Frontec's eBusiness clients. The goal of Venture Zone is to assist operations that are not part of eBusiness to find a new ownership structure, in some cases with outside capital, or on an interim basis evaluate and then integrate them with eBusiness. Moreover, Venture Zone will serve as an incubator for new ideas and businesses. At year-end Venture Zone had 117 employees. Market Since many clients used the new millennium as a reason to replace their entire IT solutions rather than upgrading what they had, the market remained weak in 2000. At the same time the market was disrupted by Internet consultants that slashed their prices due to overcapacity. As a whole, Frontec eBusiness' capacity utilization gradually improved during the quarter, partly due to higher demand and partly to increased sales efforts by the organization. Among the highlights during the quarter were as follows: · Sandvik selected Frontec as a partner in the implementation of SAP R/3. · Rail Combi, a Frontec client for many years, ordered the next generation of system. In the initial stage, the contract value is approximately SEK 10 million. · Frontec was involved in a number of eBusiness projects for Ericsson. · Frontec continued to build stronger ties with its major clients, including through new framework agreements with the Swedish Meteorological and Hydrological Institute, the National Prisons and Probation Administration and the National Social Insurance Board. Employees At the end of the period Frontec eBusiness had a total of 636 (668) employees. The decrease is due to the sale of FSO to Sonera, which transferred 57 employees to Sonera Juxto. BlueLabs Sales and results BlueLabs' net sales for the first six months of the fiscal year amounted to SEK 142 million (146), with a profit after net financial items of SEK 8 million (19). During the second quarter BlueLabs' net sales amounted to SEK 76 million (88), with a profit after net financial items of SEK 8 million (15). Measures that were taken to make the company independent have continued to impact its results. Market The Embedded business area develops electronics and software for embedded systems. The market for Embedded, as well as for the Systems business area, was favorable during the period, particularly in the telecom sector. BlueLabs' telecom projects comprise the development of electronics and software primarily for GSM, WCDMA, AXE and the Engine concept. The market for mobile services is expected to increase once the new generation of mobile telephony goes into service. During the year BlueLabs' Mobility business area, which is developing new services for various types of operators, substantially strengthened its capabilities. The Strategy business area was in the development stage during the period but was well received by clients. Demand in all the business areas - Embedded, Systems, Mobility and Strategy - was very good during the period. Highlights during the quarter: · ASIC development for Alcatel Norkrets. · Expanded cooperation with Motorola in training and micro coding projects. · Development of various subsystems for the Luleå Ice Arena as part of the so-called Arena project. · Establishment of an office in Malmö to strengthen the Mobility business area and meet demand from new 3G suppliers. · Following the conclusion of the period framework agreements were signed with both Ericsson and Telia. Employees At the end of the period BlueLabs had 315 (277) employees. It recruited 54 employees during the period and despite a high employee turnover in the Stockholm region due to integration work and restructurings increased the overall size of its staff. FMS (Frontec Maintenance Systems) Sales and results FMS' net sales for the first six months of the fiscal year amounted to SEK 29 million (39), with a loss after net financial items of SEK -3 million (- 4). During the second quarter FMS' net sales amounted to SEK 15 million (27), with a loss after net financial items of SEK -0 million (-1). Market FMS' systems for the maintenance of industrial facilities are marketed as best of breed applications and integrated in all leading ERP (Enterprise Resource Planning) systems. Clients are primarily in the chemical, pharmaceutical, food, pulp and paper, and power generating industries. Major orders were received during the period from, among others: · Five more of Nestlé's plants in Switzerland. In total, FMS has now installed systems in 80 Nestlé plants · SKF in Germany · Recitel in Belgium · Alstrom Power in Switzerland · Namascor in the Netherlands Employees At the end of the period FMS had a total of 60 (67) employees. The associated company Viewlocity Sales and results Viewlocity, which is 41% owned, increased its sales to SEK 197 million (85) during the first six months of the fiscal year, with a loss after net financial items of SEK -314 million (-127). Market The product range was expanded through the addition of Viewlocity TradeSync Supply Web Applications, the first in a series of Supply Web Applications that allow companies to automatically react to events in real time. Viewlocity entered into a cooperation with Microsoft to develop Microsoft BizTalk Open Integration Server, which streamlines the introduction of solutions based on Microsoft BizTalk Server 2000. Highlights included: · Viewlocity supplied an integration solution to Marconi (one of the world's largest IT companies, with operations in over 100 countries), which allows goods to be tracked globally through a network of mobile- and satellite-based communications and serves Marconi's InfoChain customers. · Cap Gemini Ernst & Young selected Viewlocity to design an integration solution for the U.S. Department of Defense's electronic commerce service. · Viewlocity's AMTrix® integration broker was selected by Foodstuff Wellington, New Zealand. · Ryder, one of the largest transport companies in the U.S., selected Viewlocity to set up an Internet-based solution that provides real-time delivery information. · QAD, a supplier of e-business solutions, signed a cooperation agreement with Viewlocity to supply integration solutions. Group highlights following the conclusion of the period · New Group organization. · Frontec reached an agreement with Marakanda to sell Tur&Retur®, one of the leading systems for electronic travel management. Marakanda, the new e-commerce company owned by Telia and FöreningsSparbanken, assumed all product rights and agreements with over 100,000 users. Frontec will remain responsible for maintenance and further development on behalf of Marakanda. · Frontec and Accenture signed a strategic agreement to cooperate in meeting client demand for IT solutions strongly tied to business development. Through the combined competencies of Frontec and Accenture, clients will have access to everything from strategic development to extensive IT capabilities in applications, integration and infrastructure. · After having worked for many years with Telia Telecom's customer support system for Internet subscribers, including in development and support, as well as with several projects for Telia E-commerce, Frontec was selected by Telia as a framework agreement partner. · The sale of FSO to Sonera Corporation during the fall has led to a cooperation in which Frontec will provide consulting services for Sonera Juxto's range of ASP and hosting services. · Viewlocity's application for a market listing (a so-called S1 registration) was withdrawn in January 2001 due to unfavorable market conditions in the U.S. · As part of the Group's streamlining, FRT (Frontec Research and Technology) was sold to Sigma in February, producing a small capital loss and a positive cash impact of approximately of SEK 20 million. · BlueLabs' IPO preparations are continuing according to plan, with the goal of being ready for a listing in the first half of 2001. Better conditions on the financial market will be needed, however, for the listing to be implemented. · Information Next report May 15, 2001 Year-end report August 29, 2001 Annual General Meeting November 22, 2001 Sundbyberg, February 21, 2001 Frontec AB (publ) Board of Directors This report has been reviewed by the company's auditors. For further information, please contact: Per Tjernberg, President and CEO, telephone + 46 8 733 7505, Björn Sandberg, CFO, telephone + 46 8 733 7521, or Carl-Erland Schröder, Director of Communications, telephone + 46 8 733 7509. Invitation to analysts' meeting Frontec invites you to a meeting for analysts and the media with CEO Per Tjernberg and CFO Björn Sandberg at 8:00 a.m. on Friday, February 23 at Operaterassen. Please notify Johan Kleis, Finanstidningen at + 46 8 5620 8765 or e-mail traffar@fti.se ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/02/22/20010222BIT00980/bit0002.doc The full year-end report http://www.bit.se/bitonline/2001/02/22/20010222BIT00980/bit0002.pdf The full year-end report