Half-year report for HiQ january - june 2000

HALF-YEAR REPORT FOR HiQ JANUARY - JUNE 2000 HiQ is the IT and management consultancy focusing on high-tech solutions within telecoms, the mobile Internet and simulation technology. Formed in 1992, the company is now a leader in these fields and the Nordic region is its domestic market. The Group's turnover in 1999 was SEK 223 million and it employs 365 people in Sweden, Norway, Denmark and Finland. HiQ is listed on the OM Stockholm Stock Exchange . For more information, please visit our web site at www.hiq.se Half-year report (January - June 2000) for HiQ International AB (publ), Swedish corporate identity no. 556529-3205. HiQ - Excellent growth with top profitability * Turnover increased by 66% compared with the same period last year to SEK 174.3 million (SEK 104.7 m). The organic growth was 59%. * The profit before goodwill increased by 49% to SEK 28.9 million (SEK 19.5 m) compared with the same period last year. This profit is equivalent to a margin prior to goodwill depreciation of 16.6%. * Operating profit increased by 42% compared with the same period last year, totalling SEK 27.0 million (SEK 19.1 m). This profit is equivalent to an operating margin of 15.5%. * HiQ appointed 79 employees during the period under review. * HiQ renewed its "preferred supplier" general agreement with telecoms supplier Ericsson regarding consulting services during 2000. * HiQ acquired WISE Networks in Copenhagen and Open Software in Gothenburg. The AGM decided on the acquisitions, and they are consolidated as of 1 May. * HiQ received orders from the Swedish Defence Material Administration (FMV) worth approximately SEK 130 million regarding the development of flight training simulators for JAS 39 Gripen. * A 10:1 share split was carried out on 15 June. * A new warrants programme for all HiQ employees was carried out. * HiQ established a subsidiary in Helsinki. Market trend The first six months of the millennium got off to a good start with continued strong growth combined with high profitability. We have consolidated our position in the market thanks to our clear focus on qualitative, high-tech consultancy services within telecoms, the mobile Internet and simulation technology. The acquisitions of HiQ Open in Gothenburg and HiQ WISE in Copenhagen strengthen our market offering. WISE gives us geographic presence in Denmark and southern Sweden and a strategic position close to the continent. HiQ Open strengthens our position in western Sweden, where our operations are already established at our subsidiary, HiQ Väst. The acquisitions have provided us with new attractive assignments and customers, such as an Active Preferred Supplier agreement with Ericsson in Gothenburg and an agreement with Motorola in Denmark regarding the development of systems for the Tetra standard. Demand for HiQ's services is increasing in both the Nordic region and in Europe as a whole. Our international focus continues, with assignments in some 10 different countries. Our strategy is to follow our customers abroad and continue to offer them high quality consultancy services. We have assignments in Finland and have acquired several new customers in countries where we are already operating, one example being the Netherlands. In the spring a subsidiary and office was established in Finland. Several of HiQ's present customers also have business operations in Finland and we view the Finnish market as most attractive. All market areas have shown positive development compared with the same period last year. In total HiQ has acquired 35 new customers since the turn of the year, in all market areas. We have also signed several important general agreements during the period. HiQ has strengthened its position in the area of finance, where we have acquired around 10 new customers. Spearhead expertise within advanced systems development is in demand, particularly in projects regarding the development of business-critical solutions such as systems for trading in shares and mutual funds. New agreements with the Swedish Defence Material Administration (FMV) regarding the development of training simulators for JAS 39 Gripen strengthen our position within the area of simulation technology. Furthermore, there is a positive trend in the number of assignments within civil systems simulation, such as telecoms and datacoms solutions. In Gothenburg, the autos industry is developing quickly and there is a trend towards different communication systems to and from cars being built into the latter. HiQ is working on a number of projects with e.g. Bluetooth and WAP solutions - an area in which we have longstanding experience. HiQ continues to work with the entire telecoms chain from suppliers to operators and users, and this provides us with a unique breadth of experience within telecoms. We work with the development of GPRS, Tetra, WAP, Edge and W-CDMA systems for suppliers. For the operators, we work with business and service development and we also contribute with our expertise in areas such as billing and UMTS. Our assignment for the Swedish National Post and Telecom Agency (Post- och telestyrelsen - PTS) in Sweden, which involves reviewing UMTS license applications, is a good example of evidence of the attractiveness of our expertise and longstanding experience in the area of telecoms. The need for effective tele- and datacoms solutions is increasingly evident in all industries. A good example is the power industry, which has a payment system similar to an operator's billing system. HiQ has been working with billing systems for operators for several years, acquiring expertise that enables the company to undertake highly qualified assignments within the power industry. Acquisitions In January an agreement was signed regarding the acquisition of WISE Networks, the Danish IT- and telecoms consultancy with just over 20 systems developers and project managers in the field of telecoms, the Internet and Wireless with offices in Copenhagen. In February an agreement was signed regarding the acquisition of Open Software in Gothenburg, an IT and telecoms consultancy, with 20 technical systems developers within the field of data- and telecoms as well as the mobile Internet. The acquisitions have been made with the help of new share issues of 77,749 shares and 58,590 shares respectively in HiQ International AB. For the acquisition of WISE Networks, an additional purchase sum may also be payable based on growth and profitability. The acquisitions are consolidated as of 1 May and goodwill is depreciated over 10 years. The integration work as regards these acquisitions is proceeding smoothly and a broad collaboration has emerged in a short time between the various HiQ offices. HiQ WISE and HiQ Open are performing well and contributing to the growth and profitability of HiQ. Invoicing and financial results HiQ's turnover during the first six months of 2000 increased 66% compared with the same period last year, totalling SEK 174.3 million (SEK 104.7 m). Organic growth is 59%. The profit prior to goodwill rose 49% to SEK 28.9 million (SEK 19.5 m) compared with the same period last year. This profit is equivalent to a margin prior to goodwill depreciation of 16.6% (18.6%). The operating profit rose 42% compared with the same period last year, totalling SEK 27.0 million (SEK 19.1 m). This profit is equivalent to an operating margin of 15.5%, compared with 18.2% for the same period in 1999. Recalculated on a rolling twelve month basis, i.e. for the period 1 July 1999 to 30 June 2000, HiQ's turnover was SEK 292.8 million, and the profit prior to goodwill for the same period was SEK 48.3 million, which means an operating margin prior to goodwill of 16.5 %. Employees HiQ had an average of 252 employees over the period, compared with 162 for the same period last year, an increase of 56%. HiQ has continued to focus on recruiting highly qualified employees, and this has led to a large number of applications. We have noted that interest in HiQ has grown due to attention from the media, and this has helped us in our recruitment efforts. 79 people were employed over the period. Investments The Group's net investments over the period totalled SEK 103.7 million, of which investments in the acquired companies accounted for SEK 91.2 million and investments in new premises SEK 8.4 million. Financial position HiQ's financial position continues to be healthy. At the end of the period, the Group's interest bearing net cash assets totalled SEK 28.0 million (SEK 11.0 m). Shareholders' equity totalled SEK 160.9 million on 30 June 2000, compared with SEK 39.7 million on the same date in 1999. The increase in shareholders' equity is due to the exercising of warrants and the acquisition of companies with newly issued shares. The equity/assets ratio was 69.0% (49.8%). SPP An upcoming refund of surplus funds from SPP has been booked to this period in the amount of SEK 2.1 million. The funds will be utilised up to and including the year 2001. The entire discounted amount is booked in the Income Statement under Extraordinary items. The AGM HiQ's AGM was held on 25 May in Stockholm. The Meeting resolved to approve the Board's proposal for a new share issue of 77,749 and 58,590 shares respectively to the vendors of WISE Networks and Open Software. The AGM resolved to approve the Board's proposal for a new share issue of a total of a maximum of 300,000 shares. It was decided to pay a dividend of SEK 3 per share, the dividend date being 5 June. A 10:1 share split was decided and was implemented on 15 June. A shareholders' programme in the form of a maximum of 60,000 detachable warrants was decided directed at all employees of HiQ was also adopted. The offering was oversubscribed. Other important events since the end of the period under review: - HiQ listed on the OM Stockholm Stock Exchange's Attract-40 list on 3 July. - HiQ signed a general agreement with Motorola regarding consultancy services in the filed of systems development for tele- and radio-communications for the Tetra standard. - HiQ is to review the UMTS license applications for the Swedish Post and Telecom Agency (PTS) in Sweden. - HiQ has signed a general agreement regarding consultancy services with the power supplier Birka Energi. - HiQ has signed a general agreement with UPC, the telcom and broadband operator. Future prospects HiQ's focus on top quality in the assignments it performs ensures customer satisfaction, excellent profitability and scope for continued growth. We are pursuing our efforts to make HiQ into a more international company, as well as a leading telecoms consultant in Europe. Our main strategy involves organic growth complemented with strategic acquisitions. We have established HiQ in Denmark and Finland and we will be continuing to invest during the autumn in our Finnish operations. HiQ is continuing to focus on telecoms, where we collaborate with the entire chain, from suppliers and operators to users. In addition, we help disseminate knowledge and experience about high-tech and telecommunications to other industries such as finance, autos, simulation and energy. We are also focusing on retaining and attracting highly qualified employees and making HiQ into an attractive workplace. The market for HiQ's services continues to look good and we believe that there we will be continuing to work to full capacity and to attract interesting new assignments both at the national and the international levels. HiQ's long-term financial goals are an organic growth of at least 30% and an operating margin prior to goodwill of at least 15%. The Parent Company HiQ International AB's profit after tax was SEK 135 thousand for the period under review (SEK 385 thousand). On 30 June, the company's interest-bearing net cash assets totalled SEK 15.0 million (SEK 14.1 m), shareholders' equity was SEK 123.6 million (SEK 18.9 m) and the equity/assets ratio was 89.6% (60.6%). The company's net investments for the period were SEK 96.1 million (SEK 9 thousand), of which SEK 95.8 million relates to investments in acquired companies. Telephone conference HiQ will be holding a telephone in English on 15 August at 4 p.m. CEO Lars Stugemo and CFO Anna Jennehov will be representing HiQ. Tel.: +46 8 686 70 81 Code: 41 40 64 Presentation material can be obtained from 2 p.m. on 15 August from HiQ's English home page, www.hiq.se/english Upcoming financial information The Interim Report for the period January - September will be presented on 23 October 2000. Stockholm 14 August 2000 The Board of Directors This Interim Report has not been reviewed by the auditors. For additional information, please contact: Lars Stugemo, CEO, HiQ International, tel: +46 8 588 90 000 Anna Svensson, CIO and Investor Relations, HiQ International, tel: +46 8 588 90 000 ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/08/14/20000814BIT00410/bit0001.doc The full report http://www.bit.se/bitonline/2000/08/14/20000814BIT00410/bit0002.pdf The full report