IBS year-end report for the full year 2002

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IBS year-end report for the full year 2002 · The comparable operating result for the fourth quarter was SEK +61m (+75m), which is SEK 7m better than forecast. For the full year 2002, the comparable operating result was SEK -43m (- 32m). · Software revenue grew by 5% during the fourth quarter, and by 4% for the full year. · Cash flow from operating activities amounted to SEK +98m (+60m). · The year's result has been charged with one-time costs to an amount of SEK 130m. In addition, a one-time goodwill write-down has been booked to an amount of SEK 6m. · On condition that the market is not subject to significant deterioration, 2003 is expected to show a positive result after financial items. 23 January, 2003 Software revenue grew in a continued weak market The market IBS increased software sales by 5% during the last quarter and by 4% for the full year. We consider this to be one of several positive effects attributable to IBS' increased specialisation on software and services for specific market segments, including pharmaceutical distribution, electronics, housing, consumer durables, automotive and spare parts, the food industry and industrial supplies. During the year, the global cooperation with IBM has been further strengthened and a number of joint marketing and customer activities have taken place. New management Magnus Wastenson, previously Vice President Sales and Marketing, is new Group CEO as of 1 October, 2002. He succeeds the company's founder, Staffan Ahlberg, who continues as member of the Board of Directors of the company. Per-Arne Sendrén has been appointed new Vice President and CFO, and Gustaf Lindgren is new Vice President Sales and Marketing. Cost reductions for profitability 2003 The new Group Management has implemented a cost reduction program aimed at adapting the Group's total costs to a continued slow market, increasing efficiency and restructuring subsidiaries showing poor profitability. The cost reduction program has included staff reduction, replacement of operations managers, restructuring of subsidiaries and an increased focus on sales efficiency and market niches. For the full year 2002, program costs amounted to SEK 130m. During the year, the number of employees has been reduced by a total of 248, whereof 137 during the fourth quarter. Exchange rates During the year, the value of the Swedish krona has risen by approximately 1%, in relation to the revenue distribution of IBS' subsidiaries. During the last quarter, the value has risen by 3%. Accounting principles IBS adheres to the recommendations made by the Swedish Financial Accounting Standards Council. New accounting recommendations valid from 1 January 2002 have not had any impact on full-year accounting. As from 2002, two calculation methods have been modified to improve analysis of the development of operations and to achieve comparability with other software suppliers. One modification is that depreciation costs for capitalised product development, SEK 48m for the full year, have been moved from cost of revenue for software licences to product development costs. The other change is that the depreciation period for product development capitalised as from 2002, is extended from three to five years, which has resulted in booked costs decreasing by SEK 1.7m during the fourth quarter, and by SEK 5.0m during the full year 2002. The fourth quarter 2002 The fourth quarter gave a comparable operating result of SEK +61m (+75m), which is SEK 7m better than forecast. One-time costs amounting to SEK 18m are attributable to staff reduction, replacing operations managers, and restructuring of subsidiaries. In addition, a one-time SEK 6m goodwill write-down has been booked, in accordance with the Swedish Financial Accounting Standards Council's recommendation no. 17 Write- offs. During the quarter, software revenue grew by 5% compared to the equivalent period last year, while professional services revenue decreased by 14%. As we had forecast, professional services revenue continued to decrease due to the slow market and a reduced number of consultants. During the fourth quarter, the margin for hardware and other revenue improved, whereby gross profit was maintained despite a decrease in revenue. As a rule, hardware revenue varies between periods, due to the launch of new models and special offers. The full year 2002 The comparable full-year result for 2002 amounted to SEK -43m (-32m). One-time costs amounted to SEK 130m. In addition, a one-time SEK 6m goodwill write-down has been booked. These costs included, the operating result amounted to SEK -179m (-32m). The different revenue streams were distributed as follows: · Software: SEK 543m (523m), +4% · Professional services: SEK 1,341m (1,437m), -7% · Hardware etc.: SEK 633m (665m), -5% The unsatisfactory result is primarily due to the decrease in professional services revenue during the second half of the year, which in turn is a consequence of the weaker market. The Group has thereby had excess capacity, and a total cost level that has been too high in relation to revenue. Furthermore, for certain subsidiaries in countries with a relatively small customer base, the costs for sales and marketing targeting new customers have also been too high. In markets with limited sales, this has led to negative operating results. Capacity and costs have therefore been adjusted during the year, to be able to focus on serving current customers while waiting for the market to accelerate. The year's net profit per share amounted to SEK -2.46 (-0.82). Software Specialisation on industries and certain kinds of companies, as well as on solutions for the integration of supply chains and logistics, are some of the more important elements of IBS' software strategy. In a weak market, IBS software revenue grew by 4% during the year, whereas the total market appears to have decreased. Exchange rate fluctuation considered, the increase in software revenue was 6%. Today, IBS has a competitive range of software and services for its target market, which mainly comprises mid-sized and larger companies in selected industry sectors. The Group's new version (Release 5) of its ASW business software has been very well-received by current and potential customers. ASW is specifically designed for efficient supply chain management, customer relations management, distribution and logistics, after-market service and financials. IBS Pharma, which is the specialised version of ASW that targets the growing market for pharmaceutical distribution, has also been well-received, resulting in many new prospects and projects. IBS' new Virtual Enterprise software, which integrates and co-ordinates different ERP systems, has received considerable attention, and contracts for several new projects have been signed. IBS has a special focus on the integration requirements of medium-sized company groups, a market segment that is generally expected to generate considerable growth over the next few years. Today, business management is to a much greater extent involved in the acquisition of new business software. This is expected to benefit IBS, whose software provides powerful functionality for management information and the tracking and follow-up of return on investment. IBS will enhance its focus on selected market segments, including pharmaceutical distribution, electronics, housing, consumer durables, the automotive and food industries, and industrial supplies. Investment Group investment in equipment has been restrained, and for the full year amounted to SEK 36m (43m). During the year, SEK 207m (211m) was invested in product development, whereof SEK 57m (69m) has been capitalised. Depreciation of capitalised development costs amounted to SEK 48m (36m). Liquidity and financial position During the year, cash flow from operating activities amounted to SEK +98m (+60m). Net loans from banks (excluding debts to leasing companies) amounted to SEK -27m (-10m). Tax for the year amounting to SEK -2m (-26m) as shown in the income statement, consists of SEK -15m (-29m) in current tax and SEK 13m (3m) in deferred tax. Per 31 December, cash and liquid assets including short-term investment amounted to SEK 169m (160m). In addition, there were unused credit facilities amounting to SEK 121m (124m). Current assets represented 110% (131%) of current liabilities. Group equity per 31 December amounted to SEK 518m (724m) and the equity to total assets ratio was 33% (43%). The Parent Company The Parent Company provides centrally developed software and group services. Parent Company gross profit for the year amounted to SEK 171m (151m), and the result after financial items was SEK -130m (-68m). Staff The number of employees per 31 December was 2,004, a decrease during the year of 248. For the full year, the average number of employees was 2,169 (2,283), a reduction by 114. The IBS share The share price per 31 December 2002 was SEK 4.30 per share, which represents a 75% decrease since 31 December 2001. During the fourth quarter, the price of the IBS share increased by 25%. The total number of shares per 31 December was approximately 80 million. The 98/02 warrants program with 5 million warrants fell due without the warrants being utilised. The warrants program 00/04, with 5 million warrants at a strike price of SEK 65 per share, remains. The future There is a significant accumulated need within many companies to reduce costs, improve customer service and grow profits, utilising new or enhanced business software. Due to the uncertain economy, it is at present difficult to assess when the demand for business software may show sustained growth. IBS foresees a contined slow market during 2003, and is not planning for overall market growth until 2004. Efficiency measures and cost adjustments will continue to be applied within the scope of current operations. By means of continued specialisation and enhanced sales concepts, IBS is calculating on long-term growth of its market share. On condition that the market is not subject to significant deterioration, the IBS Group's extensive cost reductions, combined with its competitive solutions, are expected to generate a positive result after financial items for 2003. Annual General Meeting and dividends The Board of Directors will invite shareholders to attend IBS' Annual General Meeting on 12 May, 2003. The Board of Directors proposes that no dividend be paid for the year 2002. Information plan · Quarterly reports will be published 29 April, 22 July and 24 October. · The Annual Report and AGM documents will be sent out during week no. 15. · The year-end report for the full year 2003 will be published 29 January, 2004. Solna, 23 January, 2003 Magnus Wastenson CEO Questions concerning this report will be answered by CEO Magnus Wastenson tel. +46-8-627 2515, +46-70-627 2515, magnus.wastenson@ibs.se or CFO Per-Arne Sendrén, tel. +46-8-627 2360 per-arne.sendren@ibs.se This report has not been audited. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2003/01/23/20030123BIT00650/wkr0001.doc The full report http://www.waymaker.net/bitonline/2003/01/23/20030123BIT00650/wkr0002.pdf The full report