Interim Report for the Period Jan. 1 - Jun. 30, 2000

Interim Report for the Period Jan. 1 - Jun. 30, 2000 Significant Events during First Half of 2000 First quarter; * Launch of new profile * The Expert chain becomes new distributor of Glocalnet's services * Two new issues totaling SEK 160 m completed Second quarter; * Traffic revenue increased to SEK 48.7 m in the first half-year, which is 336% higher than the same period 1999 * Customer base expanded to 90,000, up 418% in 12 months * Glocalnet resolved to establish a presence in Denmark * Glocalnet share quoted on OM Stockholm Exchange's O List During the first quarter a new profile was launched in the biggest marketing campaign in the company's history. The campaign, encompassing TV commercials, ads in the evening papers, direct marketing and telemarketing elements, was intended to raise brand awareness and establish Glocalnet's price advantage, thereby attracting new customers. A new collaboration agreement was signed with the Expert chain, implying that Glocalnet's services are now sold in all of Expert's 225 stores around Sweden. Two private placements totaling SEK 160.6 m were completed. In the first placement 5,000,000 class B shares were issued at a subscription price of SEK 16. In the second placement 2,120,000 class B shares were issued at SEK 38. Numbers quoted above are adjusted in accordance with the share split carried out in May. In April, the customer base increased by 10,000 as a result of the aforementioned campaign, which mainly took place in March and April. In addition to the new customers the campaign attracted, Glocalnet's brand was significantly consolidated. In May, the company effected a 10:1 share split in accordance with the Annual General Meeting's resolution on April 18, 2000. Glocalnet also announced that the company will establish operations in Denmark. The company intends to launch telecom services on the Danish market during the fourth quarter 2000. In June, Glocalnet's share was quoted on OM Stockholm Exchange's O List. There was no new issue coincident with this listing which took place on June 5. Prices on international calls were cut by up to 60 per cent, implying that Glocalnet's prices remain below Telia's and Tele2's. Financial Report (Figures below are consolidated numbers unless otherwise stated. Figures in brackets relate to a comparison with the first half-year 1999.) Sales and Revenue Glocalnet's total revenue amounted to SEK 46.4 (11.8) m in the first half- year 2000. Traffic revenue, excluding non-recurring discounts, amounted to SEK 48.7 (11.2) m, which represented an increase of 336 per cent on the corresponding period of the previous year. The total number of customers as of June 30, 2000 stood at 90,000 (17,375), up 418 per cent on one year previously. Customer numbers increased by 28,000 in the first half-year 2000, of which two-thirds were attributable to the second quarter. As a result of the substantial inflow of new customers, discounting totaled SEK 2.7 (0.0) m. This discounting was of a non-recurring nature and is part of Glocalnet's customer acquisition expenses. The substantial growth in Glocalnet's customer base during the second quarter will not feed through fully until the third quarter. The increased customer base, and ensuing higher traffic volumes, will continue to have a positive impact on revenue and earnings over forthcoming quarters. Network Expenses and Margins Network expenses amounted to SEK 36.1 (10.5) m, primarily comprising variable expenses. The gross margin for the period was 22 per cent, 11 percentage points higher than in the previous year. In the second quarter 2000, the gross margin was slightly below the level in the preceding quarter, largely attributable to the increased discounting resulting from abundant customer inflows. Excluding this discounting, the gross margin amounted to 27 per cent in the second quarter, which is comparable to the previous quarter. The negative effects of price cuts and increased share of national traffic have been balanced by cost reductions. Expenses and Operating Earnings Total expenses including depreciation amounted to SEK 61.8 (30.9) m for the period. Excluding items affecting comparability, expenses increased by SEK 38.4 m on the corresponding period of the previous year. Direct sales expenses rose sharply and amounted to SEK 4.6 (0.4) m. The increase related to the buoyant customer growth, which entailed significant non- recurring expenses relating to the registration of pre-selection customers with Telia. Other external expenses stood at SEK 34.7 (8.6) m. A high proportion of the increase on the previous year related to direct marketing expenses, which comprised more than half of other external expenses in the first half-year 2000. Expenses for listing on OM Stockholm Exchange totaling just over SEK 2.0 m were also included in this item. Personnel expenses amounted to SEK 17.2 (11.5) m, increasing in line with the recruitment of new staff. Total number of employees at the end of the second quarter was 65 (40). Depreciation of tangible fixed assets stood at SEK 5.3 (2.9) m. Operating earnings amounted to SEK -51.5 (-29.6) m for the period. Net interest income improved sharply as a result of increased interest income derived from the new issues in the first quarter, amounting to SEK 1.2 (0.3) m. Earnings after financial items were SEK -50.2 (-29.3) m. Assets and Liabilities Total assets stood at SEK 201.7 (47.1) m at the end of the period, comprising fixed assets of SEK 30.3 (15.7) m, current receivables of SEK 29.6 (7.6) m and cash of SEK 141.8 (23.7) m. Shareholders' equity totaled SEK 130.1 (25.3) m, long-term liabilities amounted to SEK 13.6 (1.0) m and current liabilities SEK 58.1 (20.7) m. The increase in current receivables was primarily attributable to increased customer receivables and accrued income relating to the sharp sales growth. The increase in liquid assets and shareholders' equity was a result of the two new issues totaling SEK 160.6 m, effected during the first quarter. The change in current liabilities primarily related to accounts payable and accrued expenses and can be explained by an increased cost mass. Investments in Fixed Assets Investments in fixed assets amounted to SEK 14.8 (11.1) m during the period, of which leasing assets totaled SEK 7.2 (0.0) m. The lion's share of investments made in the first half-year 2000 related to hardware used for operations of the company's billing and reporting system. A smaller proportion of the investments made in the second quarter related to the development of an Internet-based customer care system. Cash Flow Cash flow before financing amounted to SEK -36.2 (-26.2) m for the period. The corresponding amount after financing activity was SEK 128.5 (-0.1) m. The positive outcome for the financing operations in the first half-year was attributable to the two new issues completed in the first quarter. Parent Company The parent company's total revenue amounted to SEK 31.9 m during the first half of 2000. Earnings after financial items were SEK -58.1 m. Investments in fixed assets amounted to SEK 14.8 m. Forthcoming Reports The company intends to publish its interim report for the third quarter on November 6, 2000 and the financial statement for 2000 on February 26, 2001. Market Position and Outlook Glocalnet's robust growth is continuing; the extensive marketing campaign launched in March has consolidated the company. The customer base has continued to expand and has passed 90,000, of which 4,000 are small businesses. This implies that the customer base has expanded by 27 per cent over the past quarter and by 45 per cent so far this year. The customer base currently generates traffic of approximately 23 million minutes per month, implying that volumes have more than doubled compared to at the end of last year. Another intention of the campaign was to strengthen the brand. The new graphics profile launched towards the end of the first quarter has raised awareness of Glocalnet via advertising and TV commercials. Customer acquisitions will continue to be of high priority. New campaigns are planned ahead of this autumn, both under Glocalnet's own auspices and via distributors. So far this year a majority of new customers have been sourced via Glocalnet's own campaigns and through the collaboration with electronics retail chain Expert initiated in April. The two-year collaboration with Birka Energi runs until end of September 2000. The partnership has not resulted in any significant customer inflows during the year. Our objective of reaching 130,000 customers by year-end stands. Glocalnet's international expansion has begun. The work associated with launching Glocalnet in Denmark in the forth quarter 2000 is underway. Growth in customer base and traffic volumes is expected to materialise in the early part of 2001. Mobile offerings will constitute an important element of Glocalnet's future offering and we aim to offer services both in Sweden and Denmark as soon as access to mobile capacity is secured. Discussions with several parties relating to different consortium constellations for the next generation of mobile telephony UMTS, where Glocalnet are promoting open mobile networks, are ongoing. Glocalnet is also pursuing discussions relating to purchasing mobile capacity within the GSM networks. Glocalnet is facing an eventful autumn; new marketing initiatives intended to continue to build the customer base, the launch of new services and international expansion are underway. At the same time, we continue with our efforts to offer mobile services. Glocalnet's management is also continuing to investigate potential acquisition targets as a means to step up the rate of expansion further and bring the company closer to our vision of becoming a leading supplier of IP-based communication services in northern Europe. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/08/14/20000814BIT00890/bit0001.doc The full report http://www.bit.se/bitonline/2000/08/14/20000814BIT00890/bit0002.pdf The full report