IBS' interim report 3rd quarter 2001

IBS' interim report 3rd quarter 2001 · The result for the quarter amounted to SEK -39m (-52m), a 24% improvement. · The professional services utilisation ratio grew. Third quarter revenue per consultant in fixed exchange rates grew by 14%. · There is an ongoing Group program for reducing operating costs, which has reduced the costs for the period by approximately SEK 30m. · Cash flow from operations was positive for the first nine months of the year. · For the fourth quarter, a continued improvement of the operating result is expected, within a SEK 55m-110m interval. 17 October, 2001 [REMOVED GRAPHICS] 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. 2,250 employees in 22 countries. IBS' approx. 5,000 customers include ABB, CIBA Vision, Henkel, Miele, Royal Scandinavia, Nautor Swan, and Volvo. Improved operating result in an uncertain global business climate The market During the third quarter, the international recession was further strengthened. Many companies have now implemented programs to raise efficiency and reduce costs. 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 to the market. During the third quarter, IBS' total revenue grew by 26%. We also have a large number of ongoing sales projects with closure planned for the fourth quarter. If the customers' willingness to invest does not decline further, we expect a major portion of these projects to result in signed orders. Exchange rate fluctuation During the period, IBS' reporting currency, the Swedish krona, has suffered a continued gradual decrease in value in relation to the euro and the US dollar. This has resulted in a 10 percentage point increase of both revenue and costs during the third quarter, and 8 percentage points for the period starting 1 January 2001. The result has not been influenced to any great extent by the exchange rates, as costs and revenue are balanced in each currency. The third quarter 2001 The third quarter is characterised by the fact that a large part of employee holidays take place during the period, thereby reducing the number of working days by some 30%. The uncertain global business climate resulted in the delay of several licence agreements. Certain planned consultant resources, especially as regards the USA, could not be deployed due to cancelled flights. Despite these facts, software revenue increased by 8% to SEK 96m and professional services by 7% to SEK 315m. Here, as in the rest of this section, the increase is shown in fixed exchange rates. As shown in the previous section, Exchange rate fluctuation, the figures would then increase by a further 10 percentage points. Development of the software and professional services revenue streams over a longer period of time, exchange rate fluctuations inclusive and exclusive, are shown in the table below: Period Software Profession 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 Q3 19% 8% 17% 7% 01/00 Hardware sales continued to grow during the quarter, and amounted to SEK 156m, or 42% in fixed rates. The positive development of hardware sales, primarily servers, is mainly due to successful IBM product development and increased marketing initiatives from IBS. As previously announced, the Group is already reviewing resources and costs, to be able to downsize costs to a lower level. During the period, the number of employees decreased by 47, to 2,241. Compared to the same quarter last year, the number of employees decreased by 91, which is the equivalent of approx. 4%. Professional fees per consultant in fixed rates has thus increased by 14%. The professional services margin has grown from 19% to 23%, which corresponds to SEK 72m (51m) in gross contribution from professional services. Due to larger depreciation of software development costs and a slightly increasing share of third party software, the high software sales margin fell from 81% to 79%. However, due to higher gross volumes, the gross contribution from licences grew to SEK 76m (65m). As shown above, server sales rose considerably. However, a decrease in margins meant that gross contribution remained at almost the same level, or SEK 28m. In all, gross profit for the period grew by 23%, totalling SEK 176m (142m). Of this growth, reduced capacity costs account for some SEK 15m. Costs for product development and marketing show little change, amounting to approx. SEK 130m. Taking exchange rates into account, this is the equivalent of an actual reduction in costs by some SEK 12m. As a percentage of revenue, operating costs have decreased from 29% to 23%. However, we have had to reserve exceptionally large amounts in administrative costs for bad debts, in total approx. SEK 12m (3m). Just over half of this amount is attributable to the suspension of payments effectuated by a large French white goods group. Actions will be taken to strengthen Group credit control. The operating result for the period was SEK -39m (-52m), a relative improvement of 24% compared to the third quarter last year. This is to be seen against a background of the difficulties ensuing from the international September crises, and unexpectedly high bad debts. January-September 2001 During the first nine months of the year, Group revenue has grown continuously, a development propelled by increasing software sales, with the exception of the far-from-normal month of September. During the period, revenue grew by 14% in current exchange rates, and by 6% in fixed exchange rates. Revenue streams were distributed as follows: · Software SEK 338m (270m) · Professional services SEK 1,030m (947m) · Hardware etc SEK 414m (347m). The operating result before items affecting comparability amounted to SEK -107m (-95m). Net profit per share for the period was SEK -1.30 (-0.40). As previously shown in the half-year report, two companies have been acquired, one in Australia with some 35 employees, and one in France with some 15 employees. Activities within IBS' special unit for Internet consulting have been integrated with other IBS operations, for which costs have been charged to the period's result with approximately SEK 9m. A program targeting cost and capacity reduction has been implemented. These actions combined are expected to reduce costs for the full year by approx. SEK 50m. If the market situation continues to decline, a further cost reduction program will be applied. Development during the period has been affected primarily by the following factors: · Increased competitiveness in major sales projects · Increased software sales · Gradual improvement of professional services margins · Increasing costs for marketing and for bad debts · Costs for long-term measures to extend operations to new countries. Software Globalisation, company consolidation and integration of the supply chains are placing new demands on enterprises. At the same time, business climate and competition are getting tighter as the economy slows. To meet these demands, IBS has created a new generation of business systems, Virtual Enterprise, which complements ASW, and can also integrate with other supplier's ERP software. Virtual Enterprise integrates not only a large number of business systems within a group, but also its suppliers, industry portals and clients, etc. Virtual Enterprise is unique, with its inherent business logic for sales, procurement, logistics and business analysis. Virtual Enterprise and ASW have been sold to many new customers during the quarter. IBS has also internationally launched IBS Pharma, software specifically developed for companies engaging in e.g. pharmaceutical distribution. In general, such companies have exacting requirements for high transaction volumes, tracability, security and availability, fields within which IBS has a leading edge. During the period January-September, capitalised development costs for products to be launched within twelve months exceeded depreciation by SEK 21m (17m). Investment Group investment in equipment amounted to SEK 33m (38m). Liquidity and financial status Cash flow from operating activities during the first nine months amounted to SEK 9m (-41m). From Dun & Bradstreet, IBS has received AAA rating, thus being one of the few Swedish companies to be rated at the highest level of credit worthiness. Cash and liquid assets including short-term investment amounted to SEK 184m (179m). In addition, we have unused credit facilities amounting to approximately SEK 157m (134m). Cash and liquid assets and unused credit facilities thus amount to SEK 341m (313m). Current assets represented 132% (163%) of current liabilities. Group equity amounted to SEK 697m (708m) and the equity to total assets ratio was 45% (54%). The parent company The parent company provides centrally developed software and Group services. Parent company net revenue amounted to SEK 112m (102m) and pre- tax profit was SEK -11m (-33m). Staff The number of employees as per 30 September was 2,241, a third quarter decrease of 47 persons. The average number of employees during the first three quarters was 2,295 (2,359), a 3% decrease. The IBS share The share price on 30 September was SEK 10,00 per share, which represents a 47% decrease since the end of last year. The total number of shares per 30 September 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 major economies in the world are sluggish, and at the same time, global uncertainty has grown. These factors lead to companies often delaying investment decisions. Nevertheless, IBS has engaged in a large number of major sales projects, which will, should they be brought to successful closure, have a strong positive influence on the results for the full year. Given the reigning conditions, uncertainty regarding IBS' forecast for the last quarter is unusually high. However, our considered opinion is that the fourth quarter operating profit will fall within an interval of SEK 55m-110m (last year SEK 50m). This would entail a full-year operating profit somewhere between SEK 0 and -50m. Information plan IBS intends to hold an investors meeting for analysts and journalists in November. The year-end report for 2001 will be published 24 January, 2002. Solna, 17 October, 2001 Staffan Ahlberg CEO This report has not been audited. Questions concerning this report will be answered by CEO Staffan Ahlberg, tel. +46-8-627 2420, +46-70-627 2420, staffan.ahlberg@ibs.se or CFO Björn Bontin, tel. +46-8-627 2402, +46-70-627 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.waymaker.net/bitonline/2001/10/17/20011017BIT00530/bit0002.doc Full Report http://www.waymaker.net/bitonline/2001/10/17/20011017BIT00530/bit0002.PDF Full Report