Interim report January - September 1999

Interim report January - September 1999 * Group operating profit before goodwill amortisation was SEK 27.0 m. * Consultancy sales amount to SEK 130.2 (86.5) m- a 50.5% increase on the corresponding period of 1998. * Profit before goodwill amortisation in the Consultancy operations emerged at SEK 20.7 (7.3) m, up 183.6%. The profit margin was 15.9 %. * The Consultancy operations were robust in the third quarter, despite the vacation period. Sales emerged at SEK 43.5 m, with profits of SEK 7.6 m. The profit margin was 17.5%. * Information Highway's recognised specialist technology skills were complemented by the acquisition of Veritema, which provided additional business development competencies, making the company the biggest Scandinavian Internet-related strategic and management consulting player. * The group is launching an over-arching HR (Human Resources) initiative, plus the augmentation of human and structural capital, in order to achieve its growth objective of 700 employees before the end of 2000. * International expansion continues with the start-up of a UK branch, plus expansion in the Öresund region (after the end of the period). * The Swedish expansion is also continuing, with the incorporation of Information Highway Uptime AB (operation and infrastructure services), as well as a branch in Umeå (Northern Sweden, after the end of the period). Information Highway is the Scandinavian leader within Internet-related strategic, management and technology consulting. We provide Internet-based strategies and business solutions to electronic enterprises- companies either based entirely on the new network economy, or that are migrating their operations from traditional to Internet-based business models, utilising a multiplicity of electronic channels. We assist our clients in discovering and exploiting those business opportunities and working methods exposed by the Internet. Our objective is to consolidate our clients' competitiveness and make them successful in the digital arena. Information Highway has a customer base of 300 companies and 330 employees in Sweden, Norway, Denmark and the UK. Our ambition is to grow while retaining sustained healthy profitability and high quality. Our objective is to have 700 employees on eight geographical markets before the end of the year 2000. Positioning Continued successes in positioning Information Highway hallmarked the third quarter. The company is now the Scandinavian leader within Internet-related strategic, management and technology consulting, and has achieved this position by continuing to implement the internationalisation strategy formulated during the first half-year, as well as by acquiring Veritema. The company's objective is to become a leading European provider of strategies and business solutions to electronic enterprises- companies either based entirely on the new network economy, or migrating their operations from traditional to Internet-based business models, utilising a multiplicity of electronic channels. In this respect, Information Highway is probably unique in Europe, while even on the US market, only very few companies have succeeded in securing a similar position. Fundamentally, Information Highway's objectives and strategies are based on the conviction that those enterprises that allow all their operations to be entirely interwoven with the Internet will gain a decisive competitive advantage. Critical business solutions entail in-depth technology expertise; Information Highway assists its clients in discovering and exploiting those business opportunities exposed by the Internet. Market The market has received Information Highway's positioning positively, with several major strategic deals being won during the third quarter. In September, the leading Scandinavian telco, Telia, signed a master agreement with Information Highway and six other suppliers. Telia will invest a total of nearly SEK 500 m in the development of Internet solutions and interactive media over the next 12 months. Also in September, Information Highway was appointed as a supplier to the KK Foundation (The Foundation for Knowledge and Competence), which is investing SEK 90 m in an Internet service for disseminating the experiences of its schools initiative. Ongoing operations have made strong progress. Despite the fact and generally, the third quarter is the company's weakest period for reasons including vacations, sales and profits were compatible with second-quarter figures. Growth during September was particularly robust. The company's WAP-related initiatives have resulted in several new deals. The company also undertook an extensive customer survey during the period, which indicated that Information Highway's customers are very satisfied. All of the one hundred or so clients that participated would be willing to recommend the company. Internationalisation Information Highway embarked on its internationalisation during the third quarter by acquiring Norwegian Internet player Interaction Design. Start-ups of branches in Copenhagen and London marked further key steps towards the objective of securing a presence on eight markets by the end of 2000. Further start-ups in Europe can be expected during the fourth quarter. Consolidation of Business Consulting and Interactive Consulting Internet-based business solutions elicit the fundamental strategic and organisational transformation of Information Highway's clients. Operational development and business process expertise are necessities for functioning as capable client partner. The acquisition of Veritema complements Information Highway's competencies within business critical systems integration and makes the company Scandinavia's biggest player within Internet-related strategic and management consulting. Veritema's employees have many years' experience of strategic corporate management, as well as organisational and process development. The acquisition of Interaction Design provided Information Highway with vital expertise in the interactive sphere. Interaction Design's Vision Builder methodology will be refined by Information Highway and will be utilised in all Information Highway's business areas to realise client visions in the new network economy. Human resources growth At the end of the reporting period, the group had 269 employees, representing a 50% increase since the end of the first half-year. Including Veritema, headcount amounted to a total of about 330 as of 25 October 1999. Information Highway's growth objective is to have 700 employees before the end of the year 2000, and the company intends to achieve this objective through acquisitions and organic growth. A group-wide HR (human resources) programme was initiated in the third quarter, as an element of this growth strategy. The development of our human capital Our growth is to be achieved while maintaining profitability. The HR programme is also intended to provide a further boost to the company's attractions on the labour market, to contribute to increased productivity and to consolidate the corporate culture that is one of Information Highway's success factors. A quality-assured recruitment process is a central element of the HR programme; for example, all prospective employees undergo a personal assessment by an external party. Recruitment is undertaken according to plan, and by utilising several co-ordinated channels. Training is another crucial element; Information Highway's internal training is targeted on new and existing employees. The tasks of IH's business school include the establishment of a consensus view of deals and clients, training in methods, methodologies and working methods, consultancy roles, leadership, legal considerations/finance etc. Additional training in individual competency areas complements the over-arching programme. Information Highway's high-paced expansion places considerable demands on the company's ability to define clearly and communicate those values that will guide each employee in their interaction with clients and colleagues. Information Highway has formulated how the company wants to be perceived on the labour market, and by existing or potential clients. The results of these cultural efforts are measured regularly in client, employee and management surveys. The development of our structural capital Information Highway is an out-and-out knowledge business. The company gained high-profile recognition for its WAP skills during the reporting period, when the company became a member of the WAP Forum- an international collaboration of companies active in WAP (Wireless Application Protocol, a wireless Internet standard). The introduction of the Vision Builder methodology will link the company's three competency areas- Business, Interactive and Technology- in an integrated, interactive systems development process. Vision Builder is a systematic method for describing, implementing and supporting development processes. The methodology unites methods and tools from systems analysis, industrial design and business modelling. From the perspective of Information Highway's clients, this implies that all development and proposed solutions are anchored in client business needs. Vision Builder is utilised to collate, structure and analyse information on client business objectives, target markets, positioning and strategic focus. The technical analysis ensures that the solution provided forms an integrated element of clients' existing IT platforms, as well as that clients' previous investments in such platforms are utilised optimally. The client participates in the development process and the methodology imbues the communication between developers and principles with structure. In this manner, consistency between client expectations and the solution provided is ensured. Developing and structuring the group's shared competencies in order to maximise market competitiveness has the highest priority. During the third quarter, Information Highway brought an advanced intranet on stream, which implies opportunities including utilising common methods, advanced information retrieval, and exploits the aggregate experience and abilities harboured in the organisation and its members. New organisational resources - focus on profitability and expansion The organisational realignment announced in the half-year interim report became effective during the third quarter. Information Highway's Business Consulting, Interactive Consulting and Technology Consulting business areas are headed up by Mats Winkler, Daniel Segui and Göran Ekström respectively. Ulf Pettersson has been appointed to head up Information Highway's Swedish activities. The parent company's role in the group is being focused on expansion, profitability and growth. We will define our organisational structure more clearly by dividing it into the following functions: Finance (Katarina Nyberg), Strategic and Business Development (Dag Forsén), Human Resources (Göran Westberg), Sales and Marketing (Sune Holm) plus Corporate Communications and IR/PR (Ulf Karnell). Significant events after the end of the period New operations are being introduced through the incorporation of Information Highway Uptime AB, which will provide operational and infrastructural services; Stefan Viklund will become CEO of this company on 1 December. Mr. Viklund was recruited from Ericsson, where he had leading executive roles within operations, technology, support and training. These services will be characterised by high quality, accessibility and flexibility- preconditions for the new era of Internet-based business solutions. Today, Information Highway already assumes operational responsibility for several clients including Fondex, Locus Medicus and the KK Foundation. The company also offers consultancy services within areas such as infrastructure, networks and security. Apart from the Sundsvall branch, Information Highway's northern Swedish activities have been consolidated by the establishment of a further branch in Umeå. On 1 November, Erik Johansson becomes its CEO, and will be responsible for establishing this branch, with at least ten employees being in place within one year. Mr. Johansson's last position was on the sales side of Modul1 Data AB. Three senior consultants will be located at Umeå from inception, while close proximity to the University confers good recruitment potential. Information Highway is the only quoted Internet consultancy established in northern Sweden. The company is also focusing resolutely on western Sweden, initiatives starting with the recruitment of Bert Dahlén from Oracle, who will be CEO of Information Highway's Gothenburg branch, as well as Bertil Blomsterberg, recruited from Telia, who will be responsible for business development. Fourth quarter A healthy fourth quarter is expected, both in terms of sales and profit growth. Veritema will be consolidated during the fourth quarter. The company retains its assessment that at least 700 employees will serve eight markets by the end of 2000. Sales The group sustained growth on the previous year. Sales (for the first nine months of the year) climbed to SEK 140.1 (86.5) m, an increase of 61.9%. During this period, the net sales share generated by Consultancy increased by 50.5%. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/10/25/19991025BIT00860/bit0001.doc http://www.bit.se/bitonline/1999/10/25/19991025BIT00860/bit0002.pdf