Interim report for the period 1 January - 30 June 2001

Interim report for the period 1 January - 30 June 2001 Important Events during the Period First quarter: · Internet and mobile services were launched during the first quarter. The sale of mobile services began at the beginning of March and is based on an agreement with Europolitan. · A strategic and structural change programme was launched in March involving, among other things, the division of operations into two business areas, one of which was into a new direction, the winding up of the Danish operation and a reduction of 11 in the number of employees in Sweden. Second quarter: · Glocalnet's revenue for the first half of 2001 was MSEK 101.4, an increase of 118% compared to the same period in 2000. Revenue for the second quarter was MSEK 54.0, an increase of 14% on the previous quarter. · Glocalnet's net earnings for the first half of the year were MSEK - 55.1. The net earnings for the second quarter were MSEK -17.5, an improvement of MSEK 20.0 compared to the previous quarter. · The improvement in earnings is a consequence of the structural change programme and further ongoing cost reductions. · A new share issue with preferential rights for existing shareholders was undertaken. This share issue earned the Company MSEK 66.5 after costs. · The number of registered mobile customers increased significantly, mainly through cross-selling against the existing customer base, and was 10,600 at the end of the quarter. During the first quarter Glocalnet launched Internet and mobile services, and was then able to be the first provider in Sweden with an integrated range of fixed and mobile telephony as well as Internet services on a shared invoice and a self-service portal. During March a strategic and structural change programme was launched, which is expected to bring the Company to profitability faster. Operations were divided into two business areas, Glocalnet Service Operator and Glocalnet Service Provider. In conjunction with this, the Danish operation was wound up including seven employees, and the number of employees in Sweden was reduced by 11. The AGM on 29 March 2001 passed a resolution on two share option schemes, one of which (involving one million options) was effected after the end of the period, and an authorisation for the board to issue a maximum of 40 million shares. During the second quarter, following the approval of an extraordinary general meeting held on 2 May 2001, a new share issue of 86,679,850 shares was implemented with preferential rights for existing shareholders. Approximately 60 percent of the new share issue were subscribed via subscription rights. The balance of around 40 percent was subscribed by the main shareholder Catella IT AB in accordance with a guarantee agreement. The share issue raised MSEK 66.5 after costs. The division of operations into two business areas was implemented. During the quarter, Glocalnet Service Provider focused mainly on cross- selling mobile telephony services to the Company's existing fixed telephony customer base. This was successful, and the take-up rate of customers was good. The number of registered mobile customers increased from around 1,800 at the end of March to 10,600 at the end of June. The number of customers using Glocalnet's fixed telephony services dropped somewhat, standing at 88,000 during June. The average income per fixed telephony customer did, however, rise for the second quarter in succession, to SEK 187 per month. The Glocalnet Service Operator business area worked mainly on technical and organisational preparations for obtaining partners, and held discussions with potential partners. Glocalnet's focus on profitability started to bear fruit during this quarter, and losses were more than halved compared to the first quarter, mainly due to the strategic and structural change programme. Financial Reporting (Unless otherwise stated, figures below relate to the group. Figures in brackets represent a comparison with the corresponding period/date in 2000.) Accounting Principles The accounting principles applied in this interim report are the same as for the previous financial year, and are contained in the annual accounts for 2000. Revenue The total operating revenue during the first half of the year amounted to MSEK 101.4 (46.5). The total operating revenue during the second quarter amounted to MSEK 54.0, corresponding to an increase of 14 percent compared to the first quarter. This increase was due mainly to higher average revenue per fixed telephony customer and the mobile telephony services that were launched at the beginning of March. The number of customers actively using Glocalnet's fixed telephony services during June was around 88,000, 3,000 fewer than in March, but 1,500 more than in December 2000. The average revenue per active fixed telephony customer amounted to SEK 187 per month during the second quarter, representing an increase of SEK 12 on the previous quarter. This increase was mainly due to a price rise for calls to mobile phones and a higher volume per customer for these calls. The Internet service was used by 2,600 customers during June. Customer take-up on the mobile side was good during the quarter. On 30 June Glocalnet had 10,600 registered mobile customers, representing an increase of 8,800 since 31 March. Because of the lead time between registration of customers and actual use of the service, not all registered customers were active in June. Network Expenses and Margins Network expenses during the first half of the year amounted to MSEK 77.5 (36.1). The gross margin for the first half of the year was 23.5 percent, an increase of 1.2 percentage points compared to the same period in the previous year. Network expenses during the second quarter were MSEK 41.2, compared to MSEK 36.4 during the first quarter. This increase was mainly due to increased sales. The gross margin for the quarter was 23.7 percent, which was 0.4 percentage points higher than the previous quarter, largely due to the aforementioned price rise for calls to mobile phones. Other Expenses and Earnings Operating expenses excluding network expenses amounted to MSEK 76.8 (61.8) during the first half of the year. Operating expenses excluding network expenses were MSEK 29.6 during the second quarter, a reduction of MSEK 17.6 compared to the previous quarter. Of this, around MSEK 6 can be attributed to the direct effects of the structure programme. A further MSEK 9.0 relates to the items affecting comparability that comprised winding up costs as posted during the first quarter. The winding up work of the restructuring programme is running to plan and the reserve set aside during the first quarter is expected to match the actual outcome. Direct sales expenses increased during the second quarter due to the major take-up on the mobile side, and amounted to MSEK 3.1. Other external expenses amounted to MSEK 13.4, which was MSEK 6.2 less than the previous quarter, and included costs of the major customer acquisition programme on the mobile side. Thanks to cost efficient cross- selling to the existing customer base, it was possible to keep customer acquisition costs to a low level. The reduction of other external expenses was partly due to lower consultancy costs. Personnel expenses amounted to MSEK 8.2, which was MSEK 3.0 lower than the previous quarter, and was due to fewer employees during the quarter. The number of employees at the end of the period was 47 (65). Depreciation of tangible fixed assets was MSEK 4.9. The operating earnings for the first six months were MSEK -55.1 (-50.2). The operating earnings for the second quarter were MSEK -16.8, compared to MSEK -36.2 for the previous quarter. Net interest for the quarter was MSEK -0.7, and the earnings after financial items were therefore MSEK - 17.5, representing an improvement of MSEK 20.0 on the previous quarter. Assets and Liabilities At the end of the period the balance sheet total was MSEK 177.2 (201.7), and comprised fixed assets to the value of MSEK 33.9 (30.3), current receivables to the value of MSEK 61.2 (29.6) and cash to the value of MSEK 82.0 (141.8). The increase in current receivables related mainly to accrued income and accounts receivable. As of 30 June 2001 equity amounted to MSEK 74.2 (130.1), long-term liabilities to MSEK 35.1 (13.6) and current liabilities to MSEK 67.8 (58.1). The change in equity can be attributed to the Company's earnings for the last 12 months and the new share issue that took place during the second quarter. The increase in current liabilities related mainly to accrued costs and was due to higher network costs as a result of the increase in sales. The increase in long-term liabilities related to financing through leasing as well as the arrangement of a loan to the order of MSEK 20. Investments During the first half of 2001 total investments amounted to MSEK 5.8 (14.8), of which MSEK 2.3 (7.2) was financed through leasing. During the second quarter total investments amounted to MSEK 1.0. Investments made during the period relate mainly to upgrades of the Company's technical platform for invoicing and customer management. Cash Flow and Financial Position The cash flow after financing activities for the first half of the year was MSEK 4.7 (128.5). Negative cash flow before financing activities decreased during the second quarter by MSEK 5.3, and amounted to MSEK - 31.2. The new share issue implemented during the second quarter meant that cash flow after financing activities amounted to MSEK 33.2. As of 30 June 30 2001 Glocalnet's liquid assets amounted to MSEK 82.0. Change in Equity Equity has increased from MSEK 62.8 on 31 December 2000 to MSEK 74.2 on 30 June 2001. This change was brought about by the Company's loss during the period, which amounted to MSEK 55.1, and the new share issue implemented during the second quarter, which generated MSEK 66.5 after costs. The Parent Company The parent company's total revenue during the first half of 2001 was MSEK 144.9 (31.9), and the earnings after financial items were MSEK - 59.8 (-58.1). Investments in fixed assets during the period amounted to MSEK 5.8 (14.8). Future Reports The Company intends to publish an interim report for the third quarter on 17 October 2001. Market and Outlook There was a clear change in the direction of the profit trend during the second quarter compared to the previous quarter. We can thus confirm that many of the efficiency measures are already taking effect. The Company is also in the final phase of a major project of thoroughly analysing the Company's fixed telephony production. This is expected to result in continued, positive trends in the margin for fixed telephony. However, the project might also result in that major elements of the fixed assets that relate to the network will not be used for the time being. At the end of the period, these represented around one third of the Company's total fixed assets, which amounted to MSEK 33.9. In order to be able to take in new partners, technical and organisational preparations have been made in the Service Operator business area. The business area offers companies the opportunity to gain further returns from their customer bases and brand names by launching telecom services without major initial investments. As previously indicated, the sales process is expected to be relatively long since the offer is of strategic character and aimed at larger organizations and companies. No agreements have been signed during the period. The efforts put behind mobile telephony have thus far exceeded expectations. During the second quarter the Company has succeeded in increasing the customer base from 1,800 to 10,600 customers, at the same time improving profits. Growth continues to be good, but it is not possible to provide a forecast, as marketing campaigns are tried out on a weekly basis against defined targets for customer acquisition costs. CONSOLIDATED Q 2 - Q 2 - 6 months -2001 6 months -2000 INCOME STATEMENT 2001 2000 SEK 000 OPERATING REVENUE Gross Traffic 53,823 28,123 101,510 48,748 Revenue Discounts 0 -2,684 -267 -2,736 Net Traffic 53,823 25,439 101,243 46,012 Revenue Other Operating 137 72 138 435 Revenue Total Operating 53,960 25,511 101,381 46,447 Revenue OPERATING EXPENSES Network Expenses -41,161 -20,630 -77,538 -36,079 Direct Sales -3,100 -3,550 -4,884 -4,620 Expenses Other External -13,431 -17,756 -33,081 -34,673 Expenses Personnel Expenses -8,202 -8,848 -19,389 -17,199 Depreciation of -4,861 -3,005 -10,399 -5,349 Tangible Fixed Assets Items Affecting 0 0 -9,046 0 Comparability Total Operating -70,755 -53,789 -154,337 -97,920 Expenses Operating Earnings -16,795 -28,278 -52,956 -51,473 FINANCIAL ITEMS Interest Income 866 1,782 994 1,922 Interest Expenses -1,615 -641 -3,149 -695 Total Financial -749 1,141 -2,155 1,227 Items Earnings After -17,544 -27,137 -55,111 -50,246 Financial Items NET EARNINGS -17,544 -27,137 -55,111 -50,246 DATA PER SHARE Number of 130,019,775 43,304,120 130,019,775 43,304,120 Outstanding Shares at End of Period Weighted Average 66,200,545 43,241,398 54,833,386 39,972,194 Number of Shares During the Period Loss Per Share, -0.27 -0.63 -1.01 -1.26 SEK CONSOLIDATED BALANCE SHEET Jun 30 Dec 31 Jun 30 SEK 000 2001 2000 2000 ASSETS FIXED ASSETS Machinery and Equipment 33,877 44,301 30,260 Total Fixed Assets 33,877 44,301 30,260 CURRENT ASSETS Current Receivables Customer Receivables 20,110 6,695 8,100 Other Receivables 3,130 23,059 3,542 Prepaid Expenses and Accrued Income 38,000 23,252 17,983 Total Current Receivables 61,240 53,006 29,624 Cash and Bank Balances 82,037 77,386 141,826 Total Current Assets 143,277 130,392 171,450 TOTAL ASSETS 177,154 174,693 201,710 SHAREHOLDERS' EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY Restricted Equity Share Capital 6,501 2,167 2,165 Share Premium Reserve 328,262 266,066 265,574 Unrestricted Equity Accumulated Loss -205,424 -87,407 -87,407 Net Earnings -55,111 -118,017 -50,246 Total Shareholders' Equity 74,228 62,809 130,086 Long-Term Liabilities Leasing Commitments 10,101 13,944 8,565 Other Long-Term Liabilities 25,000 15,000 5,000 Total Long-Term Liabilities 35,101 28,944 13,565 Current Liabilities Leasing Commitments 8,558 9,049 5,253 Accounts Payable 32,240 36,185 39,247 Other Liabilities 889 19,489 1,531 Accrued Expenses and Deferred Income 26,138 18,217 12,028 Total Current Liabilities 67,825 82,940 58,060 TOTAL SHAREHOLDERS' EQUITY AND 177,154 174,693 201,710 LIABILITIES CONSOLIDATED CASH FLOW STATEMENT Q 2 - Q 2 - 6 6 SEK 000 2001 2000 months months - 2001 - 2000 Operations Payments from Customers 35,170 15,972 73,218 34,965 Payments to Suppliers and -64,635 -30,227 - -64,802 Employees 135,318 Cash Flow From Operations Before -29,465 -14,255 -62,100 -29,837 Interest and Income Tax Paid Interest Received 866 1,782 994 1,922 Interest Paid -1,615 -641 -3,149 -695 Cash Flow From Operations -30,214 -13,114 -64,255 -28,610 Investment Activities Acquisitions of Tangible Fixed -1,023 -3,949 -3,558 -7,553 Assets Cash Flow From Investment -1,023 -3,949 -3,558 -7,553 Activities Financing Activities New Issue 66,530 0 66,530 161,459 New Debt 0 0 10,000 5,000 Amortization of Debt -2,064 -1,069 -4,066 -1,785 Cash Flow From Financing 64,466 -1,069 72,464 164,674 Activities CASH FLOW FOR THE PERIOD 33,229 -18,133 4,651 128,512 Cash at Beginning of Period 48,808 159,959 77,386 13,314 CASH AT END OF PERIOD 82,037 141,826 82,037 141,826 CONSOLIDATED KEY RATIOS Millions of SEK (Unless stated otherwise) Income statements Q 2 - Q 2 - 6 6 2001 2000 months months - 2001 - 2000 Total Operating Revenue 54.0 25.5 101.4 46.4 Network Expenses -41.2 -20.6 -77.5 -36.1 Gross Profit1) 12.8 4.9 23.8 10.4 Adjusted Operating Expenses2) -24.7 -30.2 -57.4 -56.5 Depreciation -4.9 -3.0 -10.4 -5.3 Operating Earnings Before Items -16.8 -28.3 -43.9 -51.5 Affecting Comparability Operating Earnings -16.8 -28.3 -53.0 -51.5 Financial Items -0.7 1.1 -2.1 1.2 Net Earnings -17.5 -27.1 -55.1 -50.2 Balance Sheets Jun 30 Dec 31 Jun 30 2001 2000 2000 Fixed Assets 33.9 44.3 30.3 Current Assets 61.2 53.0 29.6 Cash and Bank Balances 82.0 77.4 141.8 Total Assets 177.2 174.7 201.7 Shareholders' Equity 74.2 62.8 130.1 Long-Term Liabilities 35.1 28.9 13.6 Current Liabilities 67.8 82.9 58.1 Total Shareholders' Equity and 177.2 174.7 201.7 Liabilities Cash Flow Statements Q 2 - Q2 - 6 6 2001 2000 months months -2001 - 2000 Cash Flow from Operations -30.2 -13.1 -64.3 -28.6 Cash Flow from Investment Activities -1.0 -3.9 -3.6 -7.6 Cash Flow from Financing Activities 64.5 -1.1 72.5 164.7 Cash Flow for the Period 33.2 -18.1 4.7 128.5 Key Ratios Traffic Margin3), % 24 19 23 22 Gross Margin4), % 24 19 24 22 Gross Margin Before Discounts5), % 24 27 24 27 Operating Capital at End of Period6) 35.8 7.1 35.8 7.1 Equity to Assets ratio at End of 42 64 42 64 Period7), % Debt to Equity ratio at End of 0.59 0.14 0.59 0.14 Period8), times 1) Total Operating Revenue less Network Expenses. 2) Operating Expenses excluding Network Expenses, Depreciation and Items Affecting Comparability. 3) Difference between Net Traffic Revenue and Network Expenses divided by Net Traffic Revenue. 4) Gross Profit divided by Total Operating Revenue. 5) Sum of Gross Profit and Discounts divided by sum of Total Operating Revenue and Discounts. 6) Sum of Shareholders' Equity and Interest bearing debt, less Cash and Bank Balances. 7) Shareholders' Equity divided by Total Assets. 8) Interest bearing debt divided by Shareholders' Equity. Stockholm, Sweden, July 17, 2001 Stefan Krook Chief Executive Officer Glocalnet develops and markets telecom services - for fixed and mobile telephony plus the Internet - to private individuals. Glocalnet is Sweden's only provider capable of offering these services with an integrated bill, customer service function and self-service www portal. Activities are pursued through two business areas: Glocalnet Service Provider, Sweden's third-largest private fixed telephony operator, offers Glocalnet-branded telecom services direct to consumers, and Glocalnet Service Operator, which offers turn-key telecom operation solutions to other corporations - virtual operators - who want to launch proprietary branded integrated telecom offerings. Glocalnet is headquartered in Stockholm, Sweden; its stock is quoted on the Stockholm Stock Exchange O-list. For more information, please contact: Stefan Krook CEO Glocalnet AB Box 6896 Västmannagatan 44 A SE-113 86 Stockholm Tel: +46 (0)8 566 34100 Fax: +46 (0)8 566 34141 E-mail: info@glocalnet.com Internet: www.glocalnet.com ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/07/17/20010717BIT00210/bit0002.doc http://www.waymaker.net/bitonline/2001/07/17/20010717BIT00210/bit0002.pdf