HIQ - year-end release for the 2001 financial year

HiQ - YEAR-END RELEASE FOR THE 2001 FINANCIAL YEAR HiQ is an IT and management consultancy that focuses on high tech solutions in the fields of communication and simulation technology. The company is a leader in these fields, and the Nordic region is its domestic market. HiQ employs some 450 people at offices in Sweden, Norway, Denmark and Finland. HiQ is listed on the Stockholm Exchange. For more information, please visit www.hiq.se Year-end release for HiQ International AB (publ.), corporate identity no. 556529-3205, for 2001. HiQ 2001 - increases net sales by 22 per cent with a margin of 13.4 per cent · Net sales increase to SEK 492.0 (404.9) million, which is equivalent to a growth of 22 per cent compared to the previous year. · The profit before goodwill (EBITA) is SEK 66.1 (73.1) million, which is equivalent to a margin before goodwill of 13.4 per cent. · The operating profit (EBIT) was SEK 54.3 (66.1) million. The operating margin is 11.0 per cent. · HiQ receives a new order in March from the Swedish Defence Material Administration (FMV) worth SEK 20 million for the development of training simulators for JAS 39 Gripen. · In April HiQ intensifies its collaboration with Ericsson as a preferred supplier within research and development. In December the agreement is expanded to include technical documentation services. · In August HiQ signs a frame agreement with the Swedish National Post and Telecom Agency (PTS) for all areas of expertise in which the agency requires consultancy help. · HiQ signs a two-year overall frame agreement in November with the Swedish Agency for Administrative Development. · In November HiQ enters into a partnership with Multicom, a technical documentation consultancy with offices in Malmö and Stockholm, as well as the UK. · In the autumn, HiQ completes negotiations regarding a frame agreement with Ericsson Mobile Platforms to develop and test mobile platforms in Lund. · During the year frame agreements are signed with such companies as Saab Automobile, Telenordia, Tele2, 3GIS and Telia. · The Board of Directors is to propose an unchanged dividend of SEK 0.50 per share, a total of SEK 22 million, to the AGM. · The Board reiterates HiQ's long-term financial goal of an organic growth of 30 per cent and an operating margin before goodwill of 15 per cent. Market development In the beginning of 2001 the economy was booming, but a downturn in the spring was followed by a recession. In a recession many customers choose to prioritise short-term profitability and postpone investments. Customers think carefully about which projects to implement, and decisions are centralised, which means that the process of awarding contracts takes more time. Customers are also more careful about their choice of external suppliers and are enlisting the help of fewer suppliers with whom to work closely. We are receiving more inquiries about outsourcing assignments, and more customers, both existing and new ones, want to discuss larger projects. The concentration of consultants is too high in certain markets, bearing in mind the current market situation, and there is therefore a degree of downward pressure on prices. Despite the current situation, HiQ increased its share of the Nordic market during the year, and net sales outside Sweden rose to 20 per cent of the total net sales (15 per cent). We feel that this is due to our strong brand, long-term customer relations and experienced and skilled employees. All of HiQ's markets showed good growth in 2001, despite the fact that the recession caused restraint in the autumn among customers requiring consultancy services. The customer base has become diversified which is shown by an increase in net sales above our average growth in sectors such as industry, energy, medicine, and the public sector. In 2001 we have concentrated on strengthening our skills in simulation technology, and this has lead to several new assignments and increased net sales, in the second half- year, in the defence segment. The chart below shows the distribution of HiQ's markets. [REMOVED GRAPHICS] In 2001 HiQ intensified its relations with many customers and signed agreements with such companies as Aktiesparinvest, Birka Energi, Ericsson, Europolitan/Vodaphone, FMV, Hi3G, Nokia, OM, Orange, Saab Automobile, Sonofon, Telia, Teligent, Telenordia, Tele2, Utfors, Viking Telecom, Volvo, Vägverket Produktion and 3GIS. HiQ was voted Sweden's best IT consultancy in 2001 in a survey carried out by the weekly business magazine "Veckans Affärer" of 340 decision- makers within Swedish companies. HiQ was assessed on the basis of confidence, customer focus, expertise and results. Telecom During the year, the combination of an economic downturn and the ongoing technology shift to the next generation of mobile telephony (3G) affected both operators and suppliers. Several players are experiencing difficult times, and this has had an impact on their propensity to invest. Development of systems and products for 3G networks continue in the Nordic countries, infrastructure is being expanded for 3G networks, and at the same time, several new operators are emerging. We believe that the focus on 3G in the Nordic region will be intensified in the close future. In 2001 HiQ increased the number of assignments within 3G and GPRS. Today, HiQ works with the majority of 3G players in the Nordic region, and 3G accounts for around 20 per cent of the assignments. Medicine & biotechnology Medicine and biotechnology are markets that we believe are less affected in a recession. We have therefore intensified our focus within these areas and as a result, the number of assignments increased in 2001. HiQ works with such customers as Affibody, AstraZeneca, Bang&Olufsen Medicom and Novo Nordisk Engineering. The public sector In our opinion, the public sector is a market that will continue to be IT intensive, even during a recession. Our focus on this market has resulted in an increase in the number of public sector assignments in 2001. We have signed overall frame agreements with, among others, the Swedish Post and Telecom Agency, the Swedish National Social Insurance Board and the Swedish Agency for Administrative Development. Outsourcing HiQ recently entered into a partnership with Ericsson Mobile Platforms in Lund involving the testing and development of mobile platforms within GPRS and UMTS, i.e. 2.5G and 3G. For this purpose we have opened a design centre in Lund with some 10 consultants working on the project for an initial period of two years. Regions The Öresund region is an interesting growth region where a number of players are active within medicine, industry and telecom. HiQ has established a presence in Skåne through a project for Ericsson Mobile Platforms in Lund, and through a partnership with Multicom in Malmö. HiQ has already established a presence in Copenhagen through HiQ Wise. In Finland and Norway the market conditions deteriorated during the year contributing to lacking profitability. International assignments HiQ continues to work on international assignments. In 2001 we worked, for example, on assignments in the UK, France, Ireland, Italy, Japan, China, Lithuania and Germany. Invoicing and profit HiQ's net sales amounted to SEK 492.0 (404.9) million, which is equivalent to an increase of 22 per cent on the previous year. The growth has been entirely organic. The profit before goodwill (EBITA) amounted to SEK 66.1 (73.1) million. This is equivalent to a margin before goodwill depreciation of 13.4 per cent. The operating profit (EBIT) amounted to SEK 54.3 (66.1) million, which is equivalent to an operating margin of 11.0 per cent. The pre-tax profit (PTP) amounted to SEK 57.5 (69.6) million, which is equivalent to a margin of 11.7 per cent. Tax for the full year amounted to 38 per cent (31 per cent) of the pre- tax profit. The percentage increase is largely due to consolidation goodwill depreciation. The Group's net financial income for the year was SEK 3.2 (1.4) million. The profit in Norway was affected by a loss on accounts receivable of SEK 2 million reported in the third quarter. Accounting principles This report has been prepared in accordance with the Swedish Financial Accounting Standards Council's recommendation no. 20. The accounting principles applied are the same as those applied in the last annual report. Employees At the end of the period the number of employees was 438 (417). In 2001 recruitment activities were adjusted in line with the prevailing market situation. HiQ's staff turnover continues to be low. Investments The Group's net investments during the period amounted to SEK 17.9 (115.7) million, of which financial leasing investment accounted for SEK 4.5 (4.0) million. When translating goodwill in accordance with the Financial Accounting Standards Council's recommendation no. 8 the book value of intangible fixed assets (goodwill) was increased by SEK 9.1 million with a corresponding increase in the translation difference under shareholders' equity. The effect in the profit and loss accounts is an increase in depreciation of intangible fixed assets for the whole of 2001 of SEK 0.8 million. This affected the accounts for the fourth quarter 2001. The effect of fluctuations in exchange rates on profits in 2000 was marginal and consequently the exchange rate difference for intangible assets was not reported. Financial position HiQ's financial position continues to be strong. At the end of the period the Group's liquid assets amounted to SEK 133.6 (82.2) million, an increase of SEK 51.4 million. Interest-bearing net funds amounted to SEK 123.7 (74.2) million, an increase of SEK 49.5 million. The shareholders' equity as of 31 December 2001 was SEK 236.6 million compared to SEK 208.6 million on 31 December 2000, an increase of SEK 28.0 million. The debt-equity ratio at the end of the period was 68.3 (66.7) per cent. The Board of Directors will propose an unchanged dividend of SEK 0.50 per share, a total of SEK 22 million, to the shareholders' meeting. This is in line with HiQ's long-term dividend policy of distributing dividends of some 50 per cent of the company's profit after tax. Other significant events after the end of the period: · HiQ establishes a subsidiary in Lund. · HiQ develops an SMS service for Connex. Outlook Due to continued uncertainty about the overall economic development, it is difficult to assess the future development of the market. HiQ continues to prioritise profitability before growth. In the current market situation we have chosen to adjust the pace of recruitment and to reinforce our sales capacity. In line with our strategy of remaining strong in the Nordic region, we are continuing to develop our Nordic platform and strengthen our presence in our existing markets. Our offices in the Nordic countries allow our international customers to work with HiQ in several geographic locations. We hope to acquire a company during year 2002 to complement the existing business in Finland. Our focus on the Öresund region continues through the forming of a subsidiary in Lund, and we will continue to invest in southern Sweden in 2002. Despite the state of the economy, the fast pace of technological development is continuing and the demand for communication will continue to increase. We therefore believe that all of the market segments where HiQ is active today are areas, which will continue to require communication-intensive solutions and knowledge of both technology, and how technical solutions are transformed into profitable businesses. In our opinion the demand for simulation technology expertise will continue to grow for both military and civil applications. HiQ is and will continue to be a pure consultancy in the fields of IT and management with skilled employees, good customer relations and a strong financial position. We are well-equipped to increase our market share, to continue to develop the company and to emerge from the recession stronger than before. HiQ does not present any forecasts. Our long-term goal of an organic growth of 30 per cent and an operating margin before goodwill of 15 per cent is reiterated. The parent company The parent company's net sales, all of which are intra-group sales, amounted to SEK 13.5 (28.9) million. The operating result was negative at SEK -8.3 (-0.4) million. The net effect of financial income and costs amounted to SEK 41.3 (53.8) million including profit from shares in Group companies of SEK 38.1 (52.5) million. The net profit for the year, after year-end appropriations of SEK -11.0 (-10.3) million and tax that reduced the year's profit by SEK 9.0 (11.5) million, was SEK 12.9 (31.7) million. As of 31 December the interest-bearing net funds amounted to SEK 105.0 (57.1) million, the shareholders' equity amounted to SEK 168.9 (172.6) million, and the debt-equity ratio was 86 per cent (89 per cent). The company's net investments for the period amounted to SEK -0.9 (109.9) million, most of which pertained to investment in existing subsidiaries. Telephone conference HiQ will be holding a telephone conference in English on 4 February at 4 p.m. (3 p.m. GMT). CEO Lars Stugemo and CFO Anna Jennehov will be participating on behalf of HiQ. Telephone number +46 8 600 53 81. Code: 16 42 42 Presentation materials will be available from 2 p.m. on 4 February at HiQ's website: www.hiq.se/english Next financial report: The interim report for January - March will be presented on 25 April 2002. Annual General Meeting 2 May 18 p.m. at Sveavägen 17, 17 stairs, Stockholm, Sweden. Separate invitation will follow. Stockholm, 4 February 2002 The Board of Directors of HiQ International AB Review report We have reviewed this year-end release in accordance with the recommendation issued by the Swedish Institute of Authorised Public Accountants (FAR). A review is considerably limited in scope compared to an audit. Nothing has come to our attention that indicates that the year- end release does not comply with the requirements of the Securities and Clearing Operations Act and the Annual Accounts Act. Stephan Tolstoy Tomas Johansson Auditors for HiQ International AB For more information, please contact: Lars Stugemo, CEO HiQ International AB, tel.: +46 8 588 90 000 Anna Svensson, CIO HiQ International AB, tel.: +46 8 588 90 015, +46 704 200 103 ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/02/04/20020204BIT00080/bit0001.doc The full Year-end report http://www.waymaker.net/bitonline/2002/02/04/20020204BIT00080/bit0001.pdf The full Tyar-end report