Year end report for 2000 from IBS

Year End Report for 2000 from IBS * After a weak start of the year, software revenue grew by 20% during the fourth quarter. * Pre-tax profit, including SPP refund, amounted to SEK 5m (l.y. 163m). * Revenue fell by 7% to SEK 2,243m. * Profit per share was SEK 0 (1.13). * The IBS Group's financial status remains strong. The equity to total assets ratio is 51% (39%). * A further strengthening of the positive trend in demand is forecast for 2001. 24 January, 2001 IBS is a leading international supplier of Internet-based 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, Nintendo, Nautor Swan, Pioneer and Volvo. Software revenue increased by 20% during the fourth quarter The market At the beginning of last year, industry analysts were predicting significant pent-up demand for improved business systems, following a long period when millennium bugs were in focus. Furthermore, they were predicting a commercial breakthrough for new Internet technology. Within IBS, expectations were also raised when the Group received reports about increasing numbers of what were thought to be potential customers. Despite all the positive forecasts, the global IT industry was hit by declining demand. After a slow first quarter, it became more and more obvious that many companies were not prepared to start to large new IT projects. Most of them had reduced budgets after major millennium investments. As new companies in the field of e-business started to suffer, well-established companies were under less pressure to rapidly adopt new business models. In all, this had a negative effect on the industry's sales, utilisation, profitability and share price development. During the autumn, the market has made a gradual recovery. As have many other vendors, IBS reports considerable growth in software revenue. However, the recovery was too little and too late to balance the weak opening of 2000. The fourth quarter, 2000 Fourth quarter revenue fell slightly to SEK 679m (714m), or by 5% compared to the same period last year. Revenue streams were distributed as follows: * Software: SEK 165m, +20% * Professional services: SEK 359m, -13% * Hardware etc: SEK 155m, -6% The decrease in revenue is mainly due to professional services not achieving the same, exceptionally high, utilisation ratio as in 1999. However, professional services utilisation has improved and profitability is now at a normal level. A slight decrease in hardware sales is mainly due to delivery delays from our suppliers. Software revenue, which constitutes the main part of our operations, and a powerful driver of professional services, showed a 20% increase during the fourth quarter. The table below shows software revenue development since the fourth quarter 1999. For professional services, there is a 3-6 month delay in recovery. Period Softw Profes are sional reven servic ue es Q4-99/Q4- -17% +14% 98 Q1-00/Q1- -5% +2% 99 Q2-00/Q2- -2% -19% 99 Q3-00/Q3- +6% -21% 99 Q4-00/Q4- +20% -13% 99 As regards profits, the fourth quarter is traditionally the strongest. For 2000, operating profit amounts to SEK 48m, to be compared to SEK 81m in 1999, and SEK 60m in 1998. The full year 2000 For 2000, revenue showed a 7% decrease to SEK 2,243m (2,408m). In comparable currency rates, the decrease stopped at 6%. The average number of employees grew by 8%. Price pressure and low utilisation amounted to the equivalent of a 14% decrease in revenue. Revenue streams were distributed as follows: * Software: SEK 435 mkr, +6% * Professional services: SEK 1,305m, -13% * Hardware etc: SEK 503 mkr, 0%. The 7% decrease in revenue, together with a 2% increase in costs, led to a sharp fall in profits, compared to last year. Operating profit for the full year 2000 amounted to SEK 5m (156m), which also includes a SEK 53m pension premium refund from the Swedish pension fund manager, SPP. Development has been especially influenced by the following factors: * Increased resources for new units in Australia, Italy, Singapore and Spain, and for e-business. * Falling professional services margins due to lower utilisation and increased price pressure. * Increased projects for product development, with extensive investment in increased functionality and new technology (+14%). * Increased capacity for marketing and sales (+17%). As regards costs, restraint has been exercised throughout most of the year. Salary costs per employee have decreased by 2% and miscellaneous costs have decreased by 17%. Operations New software sales are accelerating again. Our U.S. subsidiary leads the development, showing the single largest sales increase. Software sales have also developed well in the Nordic countries, but there is a certain delay in signing new agreements. During the first three quarters, professional services had an excess capacity in this market. The balance is now redressed, due to growing demand and capacity cuts. Over the year, IBS has developed the new units in Italy, Singapore, Spain and Australia. In addition, the Group has invested further in South America in acquiring a Brazilian company. The Swedish consultancy organisation has via the acquisition of Vertex DataSystem AB also advanced its leading position in real estate systems. Early 2000, the shares in our Swiss business partner, Hostettler Informatik AG, were acquired. A total of 80 employees have been added through these acquisitions. At the end of the year, IBS reorganised, mainly in order to increase sales to larger international groups. In this field, Parent Company resources have been increased, and the geographical organisation has also been changed. Product strategy and development IBS' product strategy is to strengthen our customers' profitability by providing advanced funtionality in our software, based on the most effective technology at any given time. IBS' software utilises an optimal combination of IBM's WebSphere environment, with Java and object technology for e-business solutions, and conventional technology for handling large transaction volumes in mission- critical systems. During the autumn, ASW Virtual Enterprise was announced. This software marks the start of a new multi-platform development phase. ASW Virtual Enterprise can run on Microsoft 2000, UNIX servers and on all IBM servers. The announcement was very well received by several larger customers and leading IT analysts, and shortly thereafter, a large pilot project was signed. Liquidity and financial position The Group's financial position remains strong. Group equity amounted to SEK 757m (541m) and the equity to total assets ratio grew to 51% (39%). Cash flow from operating activities amounted to SEK -32m (145m). Cash flow after investment totalled SEK -178m (-22m). As per 31 December, cash and liquid assets including short-term investment amounted to SEK 183m (241m). Current assets represented 152% (149%) of current liabilities. Per 31 December, cash and liquid assets, including unused credit facilities, amounted to approx. SEK 425m. Investment Group investment in equipment amounted to SEK 57m (70m). Capitalised R&D costs for products to be launched within twelve months exceeded depreciation by SEK 20m (13m). At the end of the year, acquired goodwill amounted to SEK 243m, a SEK 10m increase. The Parent Company The Parent Company provides centrally developed software and Group services. The Parent Company's net revenue amounted to SEK 136m (129m) and pre-tax profit was SEK 1m (-23m). Included in financial revenue are dividends and Group contributions from subsidiaries to an amount of SEK 94m (72m). Investment in equipment amounted to SEK 2m (3m). Staff The number of employees as per 31 December, 2000, was 2,315, compared to 2,340 at the end of 1999. The net decrease is primarily due to staff reduction in the USA and the Nordic countries. The average number of employees was 2,348 (2,165), an 8% increase, whereof 2% through acquisitions. The share The share price at the end of the year, SEK 19 per share, represents a 60% decrease over the year. Over the last five years, the share has, on average, increased in value by some 45% per year. In March, with Carnegie and Cheuvreux as advisors, new shares were issued to financial investors, comprising the equivalent of 2.5 million shares after a 5:1 split and at a price of SEK 64 per share. At the split, the nominal share price was changed from SEK 1 to SEK 0.20 per share. A round trading lot is now 500 shares. In June, IBS' warrants program 1997/2000 aimed at key employees fell due at a strike price of SEK 22.80 per share. Some 2.5 million shares were subscribed. After direct costs, the two issues increased Group equity by some SEK 214m. The total number of shares per 31 December was 79.1 million. In addition, IBS has two remaining 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 SEK 65 per share. After full dilution, the total number of shares is 89.1 million. SPP As announced by SPP, the Swedish Pension Fund, IBS will be refunded pension premiums amounting to some SEK 53m. Contrary to the Swedish Financial Accounting Standards Council's recommendation, the whole sum has been booked as an item affecting comparability and not as a negative salary cost. The reason for this is that the important key figure, salary cost/employee, would otherwise be of no use in comparisons between the years. During the year, SEK 14m have been paid by SPP. Of the remaining receivables, SEK 26m will be refunded within the coming twelve-month period, and are booked as current receivables. The remaining sum, SEK 13m, represents the value of lower pension premiums over the following year, and is booked as long-term receivables. The net present value is almost equal to the nominal sum. Future prospects For IBS, the second half of 2000 consituted a turning-point for new software sales. Supply and demand regarding professional services are again reasonably balanced. e now plan to turn the strong position generated by IBS' competitive software and international organisation to account. We are budgeting for increased revenue and profitability. Software revenue is expected to become the fastest growing revenue stream. We do believe, however, that it will take yet a few more quarters to attain the operating margins of 1998 and 1999. The margin for the full year 2001 is estimated at 2-5%. Annual General Meeting and dividends The Board will invite shareholders to attend the IBS AGM on Thursday, 3 May, at 6.00 p.m. The Board proposes that no dividend be paid for 2000. Information plan * The 2000 Annual Report and AGM documents will be distributed at the beginning of April. * Interim reports will be published on 25 April, 16 July, and 17 October. * The year end report for 2001 is scheduled for 24 January, 2002. Solna, 24 January, 2001 Staffan Ahlberg CEO Questions regarding the report should be directed to Staffan Ahlberg, CEO Tel. +46-70-627 2420, staffan.ahlberg@ibs.se Christina Wågström, Director of Investor Relations Tel. +46-8-627 2460, christina.wagstrom@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/2001/01/24/20010124BIT00820/bit0001.doc The full report http://www.bit.se/bitonline/2001/01/24/20010124BIT00820/bit0002.pdf The full report