Mandator AB Interim report January - March 2007: Continued strong organic growth of 20%
First quarter 2007
• Sales: SEK 143 (128*) million
• Sales excluding non-recurring items: SEK 143 (119) mln
• Operating profit: SEK 7 (14*) mln
• Operating profit excl. non-recurring items: SEK 7 (5) mln
• Operating margin excluding non-recurring items: 5 (4) %
• Profit after tax: SEK 7 (14*) million
• Earnings per share: SEK 0.04 (0.08*)
Comments from CEO Katarina Mellström
In 2006, we experienced some of the strongest growth in the IT industry and, most pleasingly, we've managed to maintain this trend during the initial part of 2007. Sales increased by 20% compared with the first quarter of last year. Operating profit, adjusted for positive non-recurring items reported last year, increased by SEK 2 million.
Mandator's three prioritised sectors, the manufacturing industry, the telecom industry and the public sector, generate approximately three quarters of our sales. Most growth was seen within telecom, which on a rolling 12-month basis increased by 42% compared with the first quarter of last year. Our involvement in the prestigious BT21C telecom project in England continues to provide a base for expansion in the UK market. During the quarter we established new operations in Reading.
We recently merged our units in Southern Sweden and Denmark, motivated by the strong growth seen in the Öresund region. The new unit has 150 consultants under its wings and I look forward to the effects of this increased cross-border collaboration from a customer perspective, as well as that of our employees. We're strengthening our position within project management, configuration management and testing.
In 2006, Mandator saw a 71% increase in the numbers of assignments and consultants at the company's three largest customers. The manufacturing industry, with Sandvik and Volvo Cars to the fore, played a major role in this development. Priorities for 2007 are to broaden our offering to these customers so as to include more packaged and specialised services within areas like nearshore, e-learning and business systems. In the first quarter, we also signed a new general agreement on IT services with Västra Götaland County Council. Further to this, a new nearshore project was begun in Sweden, encompassing systems development for a product company.
Organic growth has been the strongest driving force behind the company's long-term positive earnings trend. In the short term, our extensive recruitment process will have a dampening effect on the utilisation rate, even though it increased a couple of percentage points compared with the first quarter of 2006. At the beginning of the year, we implemented a group-wide drive in skills development and corporate culture to strengthen Mandator's image as an attractive employer, to ease new consultants into assignments and to broaden knowledge of Mandator's offering. This drive burdened the quarterly accounts in the amount of SEK 2 million and I expect this investment to be recouped before the end of the year.
The IT consulting services market shows good promise, even if pricing levels are not increasing at the same rate as demand. Despite increased competition for the most able employees, Mandator can report one of the best growth rates in the industry. I'm satisfied that we've maintained our positive earnings trend for yet another quarter, though we're still to meet our long-term profitability goals. In 2007, we'll take additional steps towards realising them.
*A non-recurring item attributable to realising part of the value of tax-deductible deficits affected last year's sales and earnings in the amount of SEK 9 million and earnings per share in the amount of SEK 0.05. Adjusted for this non-recurring item, sales for the first quarter increased by 20% compared with the same quarter of last year.
For further information, please contact:
Katarina Mellström, CEO and Group President, tel +46 703 09 22 50
Robert Karlsson, CFO, tel +46 709 565 141
The full report including tables can be downloaded from the following link: