Interim report from IBS January-June 2000

Interim report from IBS January-June 2000 * Considerable customer activity regarding new business software. Major increase in software sales expected during the second half of 2000. * As forecast in June, profit after financial items for the first six months, including SPP pension premium refund, amounted to SEK 7m (l.y. 66m). Profit per share was SEK 0.19 (0.50). * In fixed exchange rates, software revenue for the second quarter grew by 2%. Professional services revenue decreased by 17%, mainly due to weaker utilisation. A normal level of utilisation is expected from September. * During the period, IBS has had success with its software for e-business and supply chain management. A new generation of multi-platform software, which enables integration with other supplier software, is to be launched this autumn. * The forecast for full-year profit after financial items is SEK 80m-130m. (The currency used in this report is the Swedish krona) th 17 July 2000 IBS is a leading international supplier of Internet-integrated business software and professional services, with a focus on distribution, Supply Chain Management, and Customer Relations Management. We have some 2,400 employees in 20 countries. Our 5,000 customers include ABB, CibaVision, Henkel, Miele, Nintendo, Nautor Swan, Pioneer and Volvo. Major increase in software sales expected during the second half of 2000 In mid-June, IBS announced that new software orders for April and May were subject to delay. Profit after financial items for the first half year, including the SPP refund, was forecast to some SEK 5-10m. However, we foresee a long-term expansion of the market for new business systems, and expect IBS' software revenue to increase significantly during the second half of the year. The market The global market for business systems is characterised by the initiation of a large number of purchasing projects, albeit with certain delay in the actual signing of orders. The reason for the delay is often that companies need time to plan and prepare for ventures in the fields of e-business and supply chain management. Only two of the world's ten largest listed suppliers of business software showed positive results for the last twelve-month period. IBS is one of these. Most market analysts predict strong sales during the second half of the year. This is based on the need for new systems following a longer period of investment and development being put on hold. Among factors driving demand is the development in the fields of business to business electronic commerce and the introduction of the euro, within both of which IBS has a strong market position. Yet another positive factor for the future of the larger suppliers is that three of the ten previously largest companies have either gone bankrupt or been acquired by companies from other industry segments. This restructuring entails major opportunities regarding sales to the previous competitors' customers. Operations Given the present market situation, IBS has opted to * only marginally reduce current professional services capacity, * increase financial capacity for taking part in the present structural transformation, * increase resources for marketing, sales and product development, * increase market exposure through new strategic alliances. IBS' US subsidiary has carried out its planned reorganisation and has now also turned the negative profit development. Several larger sales have been registered over the period, which indicates that the US market has regained momentum. IBS' recently established Australian subsidiary has experienced a satisfactory start-up period, with several important orders being taken. Development in the UK has continued to prosper and new software sales have remained at a high level. During the period, IBM and IBS signed an agreement concerning a new global alliance within e-business and supply chain management. The aim is to provide the international market with world-leading software, hardware and services for distribution and manufacturing companies. under the agreement, IBM is to allocate staff and resources in twenty countries, for marketing and sales. IBM and IBS will also further intensify their technical cooperation. In a recent market survey, the American analysts AMR Research have ranked IBS second in the field of supply chain management. i2 Technologies take first place and the German company SAP come in third. Our Internet unit, IBS NetCommerce, has entered into a cooperation with Microsoft. The agreement is a further step in providing the market with competitive e-business solutions based on both IBM and Microsoft technology. The second quarter, 2000 Due to weaker demand, second quarter revenue fell to SEK 522m (600m), or by 13% compared to the equivalent period last year. After adjustments for exchange rate differences caused by the strengthening of the krona, the decrease was 10%. Revenue streams were distributed as follows (last year's figures recalculated to exclude exchange rate differences): * Software: SEK 87m (85m), +2% * Prof. services: SEK 312m (375m), -17% * Hardware, etc: SEK 123m (120m), +3% The number of new qualified sales projects for business software where IBS is engaged increased during the second quarter. Demand has been especially strong for supply chain management solutions. Many planned investments in this field aim to considerably reduce transactions costs and tied-up capital through e- business technology. Such new investment, often pursued by senior management, require extensive planning and preparation. This often entails an initial delay in decision-making and choice of supplier. Software revenue increased by 2% during the second quarter 2000, exchange rate differences excluded. During the first quarter, software revenue decreased by 2%, while the equivalent decrease for the last quarter 1999 was 17%. The positive trend for software sales continues, primarily in the UK and Sweden, but also in the USA. Larger second-quarter sales include orders from ABB, Volvo Trucks, Raychem, Concordia Bus, Ensto Idealplast, Metria, Lufthansa, Bridge Solutions, Buhrmann and JCPaper. In addition, a large number of customers with older versions of IBS' ASW systems have decided to install later versions. This will have a positive effect on the utilisation of professional services during the second half of the year. Due to relatively weak sales during the second half of 1999 and the first half of 2000, the utilisation rate for consultants working with new installations has been unsatisfactorily low. This has to a certain extent been compensated by using less contractors and more orders from current customers. In all, professional services revenue decreased by 17%, exchange rate differences excluded. Results have also been negatively influenced by the fact that in almost all countries with an IBS presence, the number of working days has been lower than usual, 2-3 days out of 58, or some 3% compared to the same period 1999. Hardware sales were good during the quarter, and show an increased gross margin. The poorer utilisation rate for professional services and the relatively weak increase in software revenue have had a negative effect on second quarter results. Second quarter profit after financial items amounted to SEK -13m (+24m), including a SEK 53m refund of pension premiums. The first six months, 2000 During this period, revenue decreased by 5%, to SEK 1,114m (1,178m). Excluding exchange rate differences, the decrease amounted to 3%. Revenue streams were distributed as follows (last year's figures recalculated to exclude exchange rate differences): * Software: SEK 190m (192m), -1% * Prof. services: SEK 678m (727m), -7% * Hardware, etc: SEK 246m (228m), +8% As forecast, profit after financial items for the first six months amounted to SEK 7m (66m). Profit per share was SEK 0.19 (0.50). The results have been influenced by the following factors: * Operating losses on the US market. * The software sales margin fell due to higher depreciation of capitalised R&D costs. * The professional services margin fell due to a lower utilisation rate. * The hardware margin grew due to a shift towards larger systems and less PCs. * An increase in costs for future-oriented product development and marketing, as well as for strengthening Internet consulting capability. Software New software in IBS' successful ASW range is at present being tested and will be launched this autumn. This includes next-generation solutions for business to business e-commerce and for users within global supply chain activities and so-called collaborative computing. In these fields, businesses will find major potential for considerably lower transaction costs, quicker delivery and improved customer service. The new software is fully integrated with IBS' current ASW systems, but can also be utilised with competing systems. In addition, the applications will run on a variety of technical platforms. The new software is based on IBM's new development platform, WebSphere, which incorporates the IBS and IBM jointly developed SanFrancisco frameworks. Considerable advance interest is being shown for the new software, which enables the integration of a host of different supplier and customer web solutions, portals and business software. During the first half year, capitalised R&D costs for products to be launched within twelve months exceed depreciation by SEK 14m (6m). Investment Group investment in equipment amounted to SEK 25m (38m). No acquisitions have been made during the second quarter. Liquidity and financial status For the first six months, cash flow after investment totalled SEK -101m (16m). Cash and liquid assets, including short-term investment, as per 30 June, 2000, amounted to SEK 249m (264m). Current assets represented 165% (147%) of current liabilities. Group equity was strengthened considerably, totalling SEK 728m (490m) and the equity to total assets ratio grew to 51% (39%). Staff During the second quarter, the number of employees decreased by 24, totalling 2,366. Compared to the same period last year, the number of employees has grown by 165. During the period, IBS performed an international survey among all employees. The results show that motivation and work satisfaction are high. Share split and new share issue rd On May 23 , a 5:1 split of the IBS share was effectuated. At the same time, the nominal share price was changed from SEK 1 to SEK 0.20 per share. A round trading lot is now 100 shares. In June, IBS' warrants program 1997/2000 aimed at key employees expired. Staff investment in new shares increased equity by some SEK 57m. After the split and new issue, the total number of shares is 79,108,030. SPP As announced by SPP, the Swedish Pension Fund, IBS will be refunded pension premiums amounting to some SEK 53m. The sum is booked as an item affecting comparability and adds to the period's operating profit. SEK 26m is the sum expected to be refunded within the coming twelve-month period. This has been booked as current receivables. The remaining sum, SEK 27m, represents the value of future lower pension premiums over the following year. This sum is booked as long-term receivables. The net present value is almost equal to the nominal sum. Future prospects Demand is expected to result in a major increase in licence revenue during the second half of 2000. The professional services utilisation rate is expected to regain a normal level in September, partly due to increased sales, and partly to customers with older versions of IBS' business sytems already having decided to upgrade their software. Given our strong market position, we have a positive view as to future prospects. The June forecast for year-end profit after financial items amounting to SEK 80m-130m remains unchanged. This is, however, subject to strong software sales and a traditionally strong fourth quarter. Information plan * Interim report, 17 October, 2000 * Year-end report for 2000, 24 January, 2001 Solna, 17 July, 2000 Staffan Ahlberg CEO This report has not been audited. Questions regarding this report should be directed to CEO Staffan Ahlberg tel. +46-70-627 2420, staffan.ahlberg@ibs.se Christina Wågström, Head of Investor Relations tel. +46-8-627 2460, christina.wagstrom@ibs.se Magnus Wastenson, Int'l Markting Director tel. +46-8-627 2515, magnus.wastenson@ibs.se ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/07/17/20000717BIT00380/bit0001.doc The full report http://www.bit.se/bitonline/2000/07/17/20000717BIT00380/bit0002.pdf The full report