Financial Statement 2000

Financial Statement 2000 Highlights in the Period Fourth quarter: @ Glocalnet's revenues for 2000 were SEK 115.5 m, a 277% increase. @ Fourth-quarter revenues were SEK 37.7 m, the fifth consecutive quarterly rise exceeding 20%. @ The net earnings for year 2000 were SEK -118.0 m, compared to SEK -62.1 m previous year. @ The customer base expanded to 118,000, up 90% in 12 months. @ Number of active customers increased to 86,500, also up 90%. Of these, 82,500 were pre-selection customers, which makes Glocalnet the third largest operator in the Swedish residential market. @ Glocalnet's brand recognition increased rapidly, to 48% by the end of the year. @ An agreement was reached with Europolitan relating to the purchase of mobile capacity, enabling the launch of mobile services during the first half-year 2001. @ Danish mobile and fixed telephony agreements complete. @ IP based fixed telephony network in Denmark brought into operation. January-September: @ New graphics profile launched. @ Distributor agreement signed with home electronics retailer Expert. @ Two private placements totaling SEK 160.6 m implemented. @ 10:1 share split effected. @ Glocalnet stock quoted on OM Stockholm Exchange's O-list. @ Glocalnet's fixed-fee nationwide call concept G-telefoni launched. @ Glocalnet implemented a new technology platform for Internet-based customer care. Highlights after the End of the Period @ Internet service launched. Glocalnet launched its new graphics profile in the first quarter, coincident with a major marketing campaign. A distributor agreement was reached with home electronics retail chain Expert, implying the sale of Glocalnet's services through all Expert's 225 stores throughout Sweden. Thus the customer base expanded by 9,000, reaching 71,000 by March 31. Active customers, i.e. pre-selection and prefix customers who used Glocalnet's services during March, were 55,000. Operating revenues were SEK 20.9 m. Two private placements were consummated, raising a total of SEK 160.6 m for the corporation. The first issue related to 5 million class B shares with a subscription price of SEK 16; the second issue to 2,120,000 class B shares at a price of SEK 38. Glocalnet's customer base expanded to 90,000, of which 73,000 active, during the second quarter as a consequence of the marketing campaign initiated during the first quarter. Revenues expanded by 22% quarter on quarter, amounting to SEK 25.5 m. Glocalnet stock was quoted on the OM Stockholm Exchange O-list; no share issue was effected coincident with this IPO. Glocalnet cut the prices of international calls by up to 60%, allowing its prices to remain below Swedish competitors Telia and Tele2. During the third quarter, Glocalnet's revenues continued to expand robustly to SEK 31.3 m, 23% up quarter on quarter. As of September 30, the customer base amounted to 100,000, of which 76,000 were active. Glocalnet linked up to a consortium formed by Ratos, Teracom and Nomura- Tenora Networks- to apply for a UMTS license. Glocalnet launched its G-telefoni concept at the end of September, allowing its customers to make zero-tariff calls nationwide to other Glocalnet customers for a fixed monthly fee of SEK 19. Thereby, Glocalnet became Sweden's first operator to replace floating call tariffs with a fixed fee. Meanwhile, Glocalnet also brought a new www-based platform on stream, enabling the rationalization and enhancement of customer care, allowing processes including subscription sales, bill reviews and adding new services on the Internet. Glocalnet's customer base expanded to 118,000 during the fourth quarter. Some 86,500 customers were active during December. Of these, 82,500 were pre-selection customers, making Glocalnet the third largest operator in the Swedish residential fixed telephony market. Revenues were SEK 37.7 m, a 20% quarter-on-quarter increase. Glocalnet effected its biggest-ever marketing campaign coincident with the launch of G-telefoni. Apart from a sustained healthy influx of customers, this campaign produced a significant enhancement of brand recognition. However, customer recruitment expenses increased, implying that Glocalnet did not achieve its objective of 130,000 customers. Independent assessments indicate that 48% of the Swedish population aged between 22 and 44 recognized Glocalnet's brand- a more than four-fold increase on the corresponding point in the previous year. At the beginning of the quarter, Glocalnet established its Danish organization, encompassing six professionals at the end of the year. A fixed telephony agreement was reached with TeleDanmark, while an agreement with Sonofon was reached regarding the purchase of GSM capacity. Glocalnet installed a nationwide IP fixed telephony network during the quarter, and thereby, as planned, Glocalnet is ready to launch fixed telephony services in Denmark. Glocalnet pursued discussions with GSM operators regarding the purchase of mobile capacity in parallel with Swedish regulator PTS's (the Swedish National Post and Telecom Agency) selection process for allocating UMTS licenses. Soon after the regulator indicated that Tenora Networks' application had been unsuccessful, Glocalnet signed an agreement with Europolitan regarding mobile services on its existing GSM network. Glocalnet began a major initiative relating to the development of mobile services and modification of support systems and processes during the quarter, and alongside the Europolitan agreement, this will enable the launch of mobile services during the first half-year 2001. After the end of the period, Glocalnet launched an Internet service with two subscription types in Sweden. Financial Reporting (Unless otherwise indicated, the following are full-year figures for the group. Figures in brackets are comparables from 1999). Revenues Glocalnet's total revenues for 2000 were SEK 115.5 (30.6) m. Traffic revenues, excluding non-recurring discounting, amounted to SEK 122.6 (31.4) m, a 290% increase on the previous year. Excluding discounting, fourth-quarter traffic revenues were SEK 41.2 m, a quarter-on-quarter increase of 26%. As of December 31, 2000, Glocalnet's total customer base was 118,000, of which 86,500 were active, 90% up on one year previously. Thus the customer base expanded by 56,000 during 2000. Discounting amounted to SEK 7.6 (1.4) m, a partial consequence of this robust customer influx. Over half of this discounting was generated coincident with customers signing agreements with Glocalnet and was a part of Glocalnet's non-recurring customer recruitment expenses. The remainder is attributable to fixed fees relating to G-telefoni not invoiced as yet. Coincident with the launch of G- telefoni at the end of September, Glocalnet issued non-recurring discounting to existing pre-select customers, which were not billed for the fixed fee until January 1, 2001 onwards. Average revenue per active customer was SEK 160 per month in the fourth quarter, up SEK 13 on the previous quarter. Primarily, this increase is due to higher average call volumes. Network Expenses and Margins Network expenses were SEK 93.1 (24.4) m, mainly comprising floating expenses. The gross margin for the period was 19.4%, 0.9 percentage points lower than the previous year. In the fourth quarter of 2000, Glocalnet's gross margin was lower than in the preceding quarter, largely explained by increased discounting coincident with the launch of G-telefoni. Fourth- quarter gross margins excluding discounting were 22.3%, down 1.3 percentage points quarter on quarter, a deterioration due primarily to a substantial increase in expenses relating to calls to mobile phones. Operating Expenses and Earnings Operating expenses including depreciation for the period were SEK 142.1 (68.7) m. Excluding items affecting comparability, expenses increased by SEK 80.9 m on the previous year. Direct sales expenses rose to SEK 8.3 (5.3) m, an upturn related to robust customer growth, with implications including substantial expenses relating to the pre-select registration of customers. Other external expenses includes items such as marketing, external customer services and consultants for services development, amounting to SEK 81.0 (24.7) m. A high proportion of the increase on the previous year related to direct marketing expenses, which comprise some 30% of other external expenses in the period. Human resources expenses amounted to SEK 38.7 (24.4) m, an increase consistent with the hiring Glocalnet has effected. The employee headcount at the end of the period was 73 (42), 6 of which were in Denmark. The depreciation of tangible fixed assets was SEK 13.9 (6.7) m. Total expenses including depreciation were SEK 51.7 m in the fourth quarter, with over half of this total comprising direct marketing expenses, start-up costs in Denmark and expenses relating to Glocalnet's Internet and mobile services. A large part of these expenses are non- recurring, however being slightly lower than the SEK 20 m anticipated in Glocalnet's last Interim Report. Operating earnings for the period were SEK -119.7 (-62.5) m. Glocalnet's net interest income improved as a consequence of increased interest income relating to the private placements in the first quarter, standing at SEK 1.7 (0.4) m. Thereby, earnings after financial items amounted were SEK - 118.0 (-62.1) m. Assets and Liabilities Total assets at the end of the period were SEK 156.0 (52.0) m, comprising fixed assets of SEK 44.3 (20.8) m, current receivables of SEK 34.3 (17.9) m and SEK 77.4 (13.3) m in cash. The increase in current receivables relates mainly to accrued income from Glocalnet's brisk sales growth. The increase in liquid funds is primarily the consequence of two private placements totaling SEK 160.6 m effected in the first quarter. As of December 31, 2000, shareholders' equity was SEK 62.8 (18.9) m, long- term liabilities were SEK 28.9 (4.2) m, with current liabilities of SEK 64.3 (29.0) m. The change in shareholders equity is due to the aforementioned private placements and net earnings. The increase in current liabilities is primary because of accounts payable and accrued expenses due to an increased cost mass. The increase in long-term liabilities relates to leasing financing and raising a SEK 15 m loan. Investments in Fixed Assets Investments in fixed assets in the period were SEK 37.6 (20.9) m, SEK 19.7 (7.9) m of which was financed through leasing contracts. The majority of investments implemented related to the aforementioned www-based customer care platform, computer equipment for the corporation's billing and reporting systems and equipment sourced from Cisco to expand network capacity. Cash Flow Cash flow before financing activities was SEK -107.8 (-62.2) m for the period, with the corresponding figure after financing activities being SEK 64.1 (-10.5) m. The positive actual for financing activities for the period is explained by the two private placements effected in the first quarter. Share Data Earnings after tax were SEK -118.0 (-62.1) m, corresponding to SEK -2.72 (-1.72) per share. In accordance with the decision of an April 20 shareholders' meeting, Glocalnet effected a 10:1 share split in May. All key financial ratios in this Financial Statement have been adjusted in accordance with this corporate action. In conjunction to the quotation on the OM Stockholm Exchange O-list all class A shares were converted to class B shares, which means that all shares have the same voting power. The total number of shares at the end of the year was 43,339,925 class B shares, an increase of 7,339,925 in the period. Of this, 7,120,000 shares related to the private placements effected in the first quarter, with the remainder due to the exercise of warrants. With full exercise of outstanding warrants, the number of shares would increase by a further 2,545,875. Market and Outlook Glocalnet has achieved yet another year of brisk growth, with revenue expansion generated through a growing base of fixed telephony customers in Sweden. The present customer base is 118,000, of which 86,500 are active, nearly twice that at the corresponding point of the previous year. The launch of the G-telefoni concept has attracted a sustained abundant influx of customers and resulted in substantial strengthening of Glocalnet's brand. Sustained revenue growth will primarily be possible through launching new services; Glocalnet has been intensively engaged with the enhancement and modification of billing and customer care systems and its in-house processes since September 2000. In January, Glocalnet launched its Internet service. The corporation is now focusing on the launch of mobile services. Through its agreement with Europolitan, Glocalnet will be able to purchase mobile capacity on the existing GSM network, thereby launching mobile services in Sweden during the first half-year 2001. Progressive deregulation also creates the right prospects for revenue growth within fixed telephony. The EU has decided that the dominant players on individual markets must open their fixed networks to competition, with thereby, Glocalnet expected to gain the opportunity to compete for fixed telephony subscriptions. Glocalnet's efforts in Denmark are presently focused on structuring a mobile offering and intensifying its search for market partners. The launch will occur during the second or third quarter 2001, a delay on previous plans to coordinate the launch of fixed and mobile services in Denmark with mobile services in Sweden, and to ensure cost-efficient launches through market partners. Fixed telephony market deregulation, the recent Internet services launch and upcoming fixed telephony launches in Denmark, and mobile services launches in Sweden and Denmark imply that the market Glocalnet can address will multiply- therefore, the prospects of sustained growth are very bright. Glocalnet's 118,000-strong customer base, its solid brand and established infrastructure in terms of organizational resources and systems mean that the corporation is well positioned to exploit these opportunities. The corporation will now sharpen its focus on achieving profitability: * In January 2001, margins are expected to be affected positively by the implementation of the G-telefoni fixed-fee. The cost increases on mobile calls that have negatively affected the margin during the last quarter are expected to burden the margin also during the first quarter of 2001. Glocalnet is considering raising its mobile prices as several competitors have already done. However, Glocalnet's prices will continue to be competitive. * When pricing Internet services and subscriptions, Glocalnet will prioritize margins ahead of robust volume expansion. * Our ongoing systems and process rationalizations will generate further cost savings. In combination with the launch of an Internet service, and the opportunity to offer fixed telephony subscriptions and acquisition of customer bases, is expected to mean Glocalnet's Swedish fixed telephony activities becoming profitable by the second quarter of 2002. * To ensure cost-efficient customer recruitment, the G-telefoni concept will be replicated to recruit fixed-telephony customers and mobile services marketing will be mainly targeted on the existing customer base. Activities relating to Glocalnet's further funding have begun; apart from liquid assets of SEK 77.4 m on December 31, 2000, Glocalnet has an additional funding facility of SEK 10 m within the framework of its agreement with the Swedish Industrial Development Fund reached during the first quarter of 2000. With the current expansion plans, existing funding covers Glocalnet's capital requirement until the latter part of the second quarter. To cover the capital requirements of existing business and further expansion, Glocalnet intends to effect a new issue during the first half-year 2001. Allocation of Earnings/Dividends The group's aggregate losses amount to SEK -205.4 m; the Board and Chief Executive Officer propose zero dividends for the year. Shareholders' Meetings and Forthcoming Reports Glocalnet's AGM will be on March 29, 2001. The Annual Report will be available at the corporation's offices from the second week of March. The first-quarter Interim Report will be published on April 20, 2001 The second-quarter Interim Report will be published on July 17, 2001 The third-quarter Interim Report will be published on October 17, 2001. Glocalnet develops and produces communications services sold directly to end customers, or alongside market partners. Glocalnet is presently Sweden's third largest private telephony player and has recently launched an Internet service. The company intends to offer fixed telephony, Internet and mobile services with integrated customer service, single billing and a joint Web portal in the first half-year 2001. The vision is to become one of northern Europe's leading Internet-based services operators. Glocalnet has strategic collaborations with corporations including Cisco Systems and Portal Software. Glocalnet is headquartered in Stockholm, Sweden; its stock is quoted on the OM Stockholm Exchange O- list. For more information, please contact: Mikael Hedlöf Stefan Krook Executive Vice President and CFO CEO Glocalnet AB Box 6896 Västmannagatan 44 A SE-113 86 Stockholm Sweden Tel: +46 (0)8 566 34 100 Fax: +46 (0)8 566 34 141 Mob: +46 (0)709 279 144 E-mail: info@glocalnet.com Website: www.glocalnet.com CONSOLIDATED INCOME STATEMENT Q 4 - Q 4 - 2000 1999 SEK 000 2000 1999 OPERATING REVENUE Gross Traffic Revenue 41,235 15,105 122,64 31,36 5 4 Discounts -3,518 -861 -7,580 - 1,424 Net Traffic Revenue 37,717 14,244 115,06 29,94 5 0 Other Operating Revenue 2 -345 447 661 Total Operating Revenue 37,719 13,899 115,51 30,60 2 1 OPERATING EXPENSES Network Expenses -32,050 -9,806 - - 93,100 24,40 0 Direct Sales Expenses -2,165 -4,584 -8,348 - 5,328 Other External Expenses -32,183 -11,686 - - 81,046 24,74 3 Personnel Expenses -12,138 -7,492 - - 38,743 24,43 5 Depreciation of Tangible -5,246 -2,108 - - Fixed Assets 13,945 6,698 Items Affecting Comparability 0 0 0 - 7,474 Total Operating Expenses -83,782 -35,676 - - 235,18 93,07 2 8 Operating Earnings -46,063 -21,777 - - 119,67 62,47 0 7 FINANCIAL ITEMS Interest Income 442 82 3,365 693 Interest Expenses -604 -73 -1,712 -294 Total Financial Items -162 9 1,653 399 Earnings After Financial -46,225 -21,767 - - Items 118,01 62,07 7 8 NET EARNINGS -46,225 -21,767 - - 118,01 62,07 7 8 CONSOLIDATED BALANCE SHEET Dec 31 Dec 31 SEK 000 2000 1999 ASSETS FIXED ASSETS Machinery and Equipment 44,301 20,840 Total Fixed Assets 44,301 20,840 CURRENT ASSETS Current Receivables Customer Receivables 6,695 5,981 Other Receivables 4,371 3,297 Prepaid Expenses and Accrued 23,252 8,618 Income Total Current Receivables 34,318 17,896 Cash and Bank Balances 77,386 13,314 Total Current Assets 111,704 31,210 TOTAL ASSETS 156,005 52,050 SHAREHOLDERS EQUITY AND LIABILITIES SHAREHOLDERS EQUITY Share Capital 2,167 1,800 Share Premium Reserve 266,066 104,480 Accumulated Loss -87,407 -25,332 Net Earnings - -62,078 118,017 Total Shareholders Equity 62,809 18,870 Long-Term Liabilities Leasing Commitments 13,944 4,217 Other Long-Term Liabilities 15,000 0 Total Long-Term Liabilities 28,944 4,217 Current Liabilities Leasing Commitments 9,049 4,170 Accounts Payable 36,185 15,249 Other Liabilities 801 866 Accrued Expenses and Deferred 18,217 8,678 Income Total Current Liabilities 64,252 28,963 TOTAL SHAREHOLDER EQUITY AND LIABILITIES 156,005 52,050 ASSETS PLEDGED AND CONTINGENT LIABILITIES Assets Pledged 28,192 8,748 Contingent Liabilities 4,105 4,105 CONSOLIDATED CASH FLOW STATEMENT SEK 000 Q 4 - Q 4 - 2000 1999 2000 1999 Operations Payments from Customers 38,976 4,929 100,357 10,730 Payments to Suppliers and -74,619 -26,490 --64,717 Employees 191,900 Cash Flow From Operations Before Interest and Income Tax Paid -35,643 -21,561 -91,543-53,986 Interest Received 442 82 3,365 693 Interest Paid -605 -73 -1,712 -294 Cash Flow From Operations -35,805 -21,552 -89,890-53,587 Investment Activities Acquisitions of Tangible Fixed -3,227 241 -17,885-14,959 Assets Sale of Tangible Fixed Assets 0 3,061 0 6,392 Cash Flow From Investment -3,227 3,303 -17,885 -8,566 Activities Financing Activities New Issue 318 26,470 161,953 52,858 New Debt 10,000 0 15,000 0 Amortization of Debt -2,033 -318 -5,107 -1,218 Cash Flow From Financing 8,285 26,153 171,846 51,640 Activities CASH FLOW FOR THE PERIOD -30,747 7,904 64,072-10,513 Cash at Beginning of Period 108,132 5,410 13,314 23,827 CASH AT END OF PERIOD 77,386 13,314 77,386 13,314 CONSOLIDATED KEY RATIOS Millions of SEK Q 4 - Q 4 - 2000 1999 2000 1999 Revenue 37.7 13.9 115.5 30.6 1) Network Expenses -32.1 -9.8 -93.1 -24.4 2) Gross Profit 5.7 4.1 22.4 6.2 3) Traffic Margin , % 15% 31% 19% 19% 4) Gross Margin , % 15% 29% 19% 20% 4) Gross Margin Before 22% 34% 24% 24% Discounts, % Earnings Before Depreciation -40.8 -19.7 -105.7 -55.8 and Financial Items Operating Earnings -46.1 -21.8 -119.7 -62.5 Earnings Before Tax -46.2 -21.8 -118.0 -62.1 Cash Flow From Operations -35.8 -21.6 -89.9 -53.6 Cash Flow From Investment -3.2 3.3 -17.9 -8.6 Activities Cash Flow After Investment -39.0 -18.2 -107.8 -62.2 Activities Other Data Dec 31 Dec 31 2000 1999 Shareholders' Equity 62.8 18.9 Cash and Bank Balances less 39.4 4.9 Interest Bearing Debt 5) Net Capital Employed 23.4 13.9 6) Return On Equity , % Neg Neg 7) Return On Capital Employed , Neg Neg % 8) Equity/Assets Ratio , % 40% 36% Data Per Share Q 4 - Q 4 - 2000 1999 2000 1999 Number of Outstanding Shares at43,339,36,000,043,339,936,000,0 9) End of Period 925 00 25 00 Loss Per Share, SEK -1.07 -0.60 -2.72 -1.72 1 Expenses for network capacity and telephony traffic. 2 Operating revenues less network expenses. 3 The difference between net traffic revenues and network expenses divided by net traffic revenues. 4 Gross earnings divided by operating revenues. 5 Shareholders' equity and interest-bearing liabilities less cash and bank balances. 6 Net earnings divided by average shareholders' equity in the period. 7 Operating earnings divided by average capital employed in the period. 8 Shareholders' equity divided by total assets. 9 Number of shares as of December 31, 1999 has been calculated to be consistent with the 10:1 share spirit effected in May 2000. Stockholm, Sweden, January 16, 2001 Stefan Krook Chief Executive Officer ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/01/16/20010116BIT00300/bit0001.doc http://www.bit.se/bitonline/2001/01/16/20010116BIT00300/bit0002.pdf