IBS' interim report - 2nd quarter 2001

IBS' interim report 2nd quarter 2001 · The operating result for the second quarter amounted to SEK -48m, compared to SEK -66m last year (the comparison excluding a one- off pension premium refund). · The growing demand for IBS' software and services continues. · Compared to the equivalent quarter last year, revenue increased by 18%, gross profit by 33%, while indirect operating costs increased by 15%. · A Group program for reducing operating costs has been effectuated. Full effect is calculated at approximately SEK 10m per month. The effect on the current fiscal year is expected to total about SEK 50m. · For the second half, a substantial improvement of the Group's operating result is expected, compared to the equivalent period last year. 16 July, 2001 IBS is a leading international supplier of Internet-enabled business software and services, with a focus on distribution, supply chain management and customer relations management. IBS has approx. 2,300 employees in 22 countries. IBS' approx. 5,000 customers include ABB, CIBA Vision, Henkel, Miele, Royal Scandinavia, Nautor Swan, and Volvo. Improved operating result The market The growing demand for IBS' software and services continues. Software revenue grew by 28% during the first half of the year. Professional services utilisation, revenue and margin also continue to improve. As a consequence of the ongoing international recession, more and more companies are issuing warnings about slower demand. Many companies have also initiated cost reduction programs. Previous uncertainty regarding international market development has thereby been replaced by concrete action aimed at improving efficiency. In turn, this has affected how companies proceed in the field of IT investment. Major savings can be achieved through investment in business systems that replace manual processes, optimise supply chains, integrate e- business and provide improved customer service. In these and other high- priority areas, IBS offers very competitive software and solutions to the market. During the second quarter, IBS has engaged in an increasing number of major IT projects, especially those aiming at cost reduction in the field of supply chain management. Instead of tailoring IT solutions, or integrating different systems themselves, companies are more and more prone to purchase the kind of cost-efficient, ready-to-implement, standard software and frameworks that IBS provides. However, there is some uncertainty concerning the consequences of the euro transition for investment in business systems in the EMU zone. Exchange rate fluctuation Not least during the second quarter, IBS' reporting currency, the Swedish krona, has suffered a gradual decrease in value, especially in relation to the US dollar. For IBS, exchange rate fluctuation has produced an ostensible 9 percentage point increase of revenue and costs during the second quarter, and 6 percentage points for the first half. For this reason among others, IBS plans to convert to euro reporting, instead of using the Swedish krona. The second quarter 2001 The number of new business software projects involving IBS continued to grow during the second quarter. The number of deals won in competition has also grown. Second quarter revenue grew to SEK 616m (522m), or by 18% compared to the equivalent period last year. Software revenue increased by 22%. The positive software sales trend continues, primarily in the UK and the Nordic countries. Major second quarter deals include Cellbes, Macfarlane och CIN. Development of the most important revenue streams - software and professional services - over a longer period of time, exchange rate fluctuations inclusive and exclusive, are shown in the table below: Profession Period Software al services Adjus Adjus ted ted rates rates Q4 - -16% 14% 17% 99/98 17% Q1 -5% -3% 2% 4% 00/99 Q2 -2% 2% - -17% 00/99 19% Q3 6% 6% - -21% 00/99 21% Q4 20% 18% - -14% 00/99 13% Q1 33% 27% -1% -5% 01/00 Q2 22% 13% 13% 4% 01/00 As seen in this table, software revenue continues to develop well, albeit that the accelerating trend has slowed slightly during the second quarter. An effect of the increase in software sales is the continued improvement of professional services utilisation. This development is expected to continue during the second half of the year. The positive trend for professional services revenue thus continues, now showing growth after four decreasing quarters. The increasing utilisation ratio means improved professional services margin, which rose from 14% to 20%. Due to a successful IBM launch of their eServers, revenue stemming from servers and network equipment grew by 29%. Improved professional services margin and increasing revenue resulted in gross profit growing from SEK 148m to SEK 197m, i.e. by 33%. The increase in indirect costs has slowed down, and is now 15% (or 6% in fixed exchange rates). During the second quarter 2000, a pension premium refund from Alecta (previously SPP) was booked, an item affecting comparability in the form of a one-time cost reduction amounting to SEK 53m. The first half 2001 During the first half of the year, revenue grew by 9% to SEK 1,215m (1,114m). Revenue streams were distributed as follows: · Software SEK 243m (190m) · Professional services SEK 715m (678m) · Hardware etc SEK 258m (246m). For the first six months, the operating result before items affecting comparability amounted to SEK -67m (-44m). Net profit per share for the period was SEK -0,58 (0,19). Two companies have been acquired, one in Australia with some 35 employees, and one in France with some 15 employees. The decision has been made to integrate the activities within IBS' special unit for Internet consulting with other IBS operations, for which costs have been charged to the half year result with approximately SEK 7m. Furthermore, a surplus capacity within the consulting services has been reduced. A cost reduction program targeting Group indirect costs has been introduced. These three actions combined are expected to reduce costs by 5%, or SEK 10m per month. The effect on the current fiscal year is expected to total about SEK 50m. Development during the first half of the year has been affected by the following factors: · A substantial increase in software sales · Professional services profitability grew due to higher utilisation · Volume and margin for servers and network equipment rose towards the end of the first half due to new models being launched · Increasing costs for future-oriented product development and marketing · Costs increased for long-term measures to strengthen new subsidiaries in Australia, South East Asia and Italy, as well as for the reconstruction of US operations. The weak krona also contributed to the increase in costs. Software IBS strategy is to develop business software for sales, customer relations, supply chain management and business analysis and control. The software combines the latest technology with systems that are highly reliable and that have the capacity to handle large transaction volumes. Our long-term development partners are IBM and Microsoft, who have tradionally provided the major part of IBS' software development environment. IBS new Virtual Enterprise software has been very well received by the market. It is based on IBM's new WebSphere technology and can be used on most types of servers. A number of contracts have been signed and many major projects are in line for signature during the second half of the year. A number of large international consultants are also interested in using Virtual Enterprise in customer projects. Virtual Enterprise integrates different ERP systems within a group and between different business partners and portals in the supply chain. The software has inherent business logic för sales, procurement, supply chain management, financials and business control. With one of the industry's most extensive Java Business Object Frameworks, modifications and tailor-made development are easily effectuated. During the period, capitalised R&D costs for products to be launched within twelve months exceeded depreciation by SEK 9m (14m). Investment Group investment in equipment amounted to SEK 36m (25m). Liquidity and financial status Cash flow from operating activities during the first six months amounted to SEK 16m (11m). Cash and liquid assets including short-term investment amounted to SEK 177m (249m). In addition, we have unused credit facilities amounting to approximately SEK 240m (320m). Current assets represented 137% (165%) of current liabilities. Group equity amounted to SEK 731m (728m) and the equity to total assets ratio was 47% (51%). The parent company The parent company provides centrally developed software and Group services. Parent company net revenue amounted to SEK 74m (67m) and pre- tax profit was SEK -30m (-39m). Staff The number of employees as per 30 June was 2,288, a second quarter decrease of 38 persons. The average number of employees during the first half of the year was 2,319 (2,370), a 2% decrease. The IBS share The share price on 30 June was SEK 16.60 per share, which represents a 13% decrease since the end of last year. The total number of shares per 30 June was 79.6 million. In addition, IBS has two warrants programs, 98/02 comprising 5 million warrants at a strike price of SEK 40.60 per share, and 00/04 comprising 5 million warrants at a strike price of SEK 65 per share. After full dilution, the total number of shares would be 89.6 million. During the quarter, an issue of 500,000 IBS B shares has been effectuated in conjunction with the acquisition of an Australian company. Accounting principles The same accounting principles have been applied in this interim report as in the latest Annual Report, i.e. recommendations made by the Swedish Financial Accounting Standards Council, including year 2001 revisions. Future prospects The global economy has continued to decline since the previous report. Economic indicators for the US, Japan, and now Europe, are showing weak development. As regards IBS, there are no signs indicating a weaker inflow of orders for the Group's products and services. On condition that the coming euro transition in the EMU market does not incur any significant delay in software orders, IBS' software revenue is expected to continue its strong growth. We also expect the positive trend for professional services to continue. Effectuated and planned cost reductions will also improve results. During the third and fourth quarters, a significantly improved operating result is to be expected, due to increasing revenue and the cost reduction program. Taking this into account, the forecast full-year operating profit margin remains at a 1-4% interval. Information plan This autumn, IBS intends to hold an investors meeting for journalists and analysists. · The next interim report will be published 17 October. · The year-end report for 2001 will be published 24 January, 2002. · Solna, 16 July, 2001 Staffan Ahlberg CEO This report has not been audited. Questions concerning this report will be answered by CEO Staffan Ahlberg, tel. +46-70-627 2420, staffan.ahlberg@ibs.se or CFO Björn Bontin, tel. +46-8-627 2402, bjorn.bontin@ibs.se ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.bit.se/bitonline/2001/07/16/20010716BIT00420/bit0001.doc Full Report http://www.bit.se/bitonline/2001/07/16/20010716BIT00420/bit0001.pdf Full Report