Framtidsfabriken AB (publ) Interim report, 1 January - 30 September 2000

Framtidsfabriken AB (publ) Interim report, 1 January - 30 September 2000 Integration and consolidation Sales during the first nine months of the year increased to SEK 1 148.5 (206.9) million, an increase of 455 per cent, including SEK 111.0 million from the conversion of the additional purchase price in Bredbandsbolaget and the divestment of companies during the period, and SEK 3.5 million from the sale of Bredbandsbolaget in May 1999. Operating profit after depreciation of tangible fixed assets (EBITA) amounted to SEK -8.5 (36.5) million for the first nine months of the year, including effects of surplus funds from SPP to the amount of SEK 49.4 million. As a result, the Company estimates that it will not show profit, before amortization of goodwill, for the full year. For the first nine months, cash flow from current operations before changes in working capital amounts to SEK 23.7 (35.0) million. However, the strong growth has implied investments in working capital. Cash flow from current operations amounted to SEK -253.8 (4.2) million. In parallel with the consulting business, Framfab is developing Framfab Innovation, Driftbolaget and software. The table below shows the EBITA result and adjustments to show the result for the consulting business. Q1 2000 Q2 Q3 Jan- SEK millions 2000 2000 Sept 2000 Net sales 317.6 409.4 307.9 1 034.9 Other operating income 111.3 2.2 0.1 113.6 Sales 428.9 411.6 308.0 1 148.5 EBITA for the 35.3 -15.5 -88.7 -68.9 consulting business Initiatives in new -19.9 -29.1 -51.0 -100.0 companies and development of software Income from 110.6 49.8 0 160.4 Bredbandsbolaget, SPP and from the divestment of companies EBITA 126.0 5.2 -139.7 -8.5 The number of employees as per 31 October amounted to 2 980, including acquisitions, whereof 940 are employed outside Sweden. During the quarter, Framfab issued a convertible loan of SEK 97.6 million in Bredbandsbolaget. To improve profit in the Swedish consultancy operations the company intends to sharply reduce recruitment in Sweden, produce solutions in Sweden that are sold outside of Sweden, strengthen the global management team, set up a new Swedish management team, implement a program to reduce working capital, and further internationalise the client development organisation. Earnings and financial position January - September 2000 The Group's sales during the first nine months of the year amounted to SEK 1 148,5 (206.9) million, an increase of 455 per cent. During the period, other operating income was generated through the conversion of the additional purchase price in Bredbandsbolaget, SEK 104.0 million, and the divestment of companies SEK 7.0 million. In May 1999, 80 per cent of Bredbandsbolaget was sold, generating other operating income of SEK 3.5 million. Adjusted for this, total growth compared with the same period in 1999 amounted to 411 per cent, of which organic growth accounted for 116 per cent. The Group's operating profit after depreciation of tangible fixed assets (EBITA) amounted to SEK -8,5 (36.5) million during the first nine months of the year. The result includes the effects of surplus funds from SPP amounting to SEK 49.4 million. Initiatives in new entities and development of software are undertaken in parallel with the consulting business. To highlight the EBITA in the consulting business, the company's result is adjusted for conversion in Bredbandsbolaget and the divestment of companies, SEK 111.0 million, surplus funds from SPP, SEK 49.4 million, and initiatives in new entities (Framfab Innovation and Driftbolaget, etc.) and development of software (Brikks and CM), SEK 100.0 million. See table on first page. Adjusted in this way, EBITA in the consulting business amounted to SEK -68.9 million for the first nine months of the year. During the year, Framfab has succesfully established operations in several countries. Sales outside Sweden amounted to SEK 237 million during the first nine months, corresponding to 23 percent of the total adjusted sales. 2000 2000 2000 2000 SEK millions Q1 Q2 Q3 Q1-Q3 Adjusted sales* 318. 411. 308. 1037. 3 2 0 5 Sweden 280 336 184 800 Rest of the world 38 75 124 237 EBITA in the 35.3 - - -68.9 consultancy 15.5 88.7 Sweden 30 -17 -90 -77 Rest of the world 5 2 1 8 *Adjusted for conversion of the additional purchase price in Bredbandsbolaget and divestment of companies The table shows the negativ effect on the EBITA level due to efforts in new companies and development of software. See table on first page. 2000 2000 2000 2000 SEK millions Q1 Q2 Q3 Q1-Q3 Framfab Innovation 9.2 8.4 10.7 28.3 etc. Driftbolaget 5.4 10.6 24.0 40.0 Software 5.3 10.2 16.3 31.8 Sum 19.9 29.1 51.0 100.0 The Group's liquid assets as of 30 September 2000 amounted to SEK 595.5 (248.8) million. A new share issue in February contributed approximately SEK 1 112 million to Framfab after issue expenses. In addition, the company has gained a total of SEK 21.2 million during the first nine months of the year through the payment of warrants premiums and the exercise of warrants. Shareholders' equity as of 30 September 2000 amounted to SEK 4 554.9 million (540.9), giving an equity/assets ratio of 92.8 per cent (87.4). Investments in tangible fixed assets have been undertaken to the amount of SEK 97.3 million (6.8) during the period. Framfab participated in a share issue in Bredbandsbolaget in March with a capital contribution of SEK 36 million. In August Framfab issued a convertible loan in Bredbandsbolaget with a capital contribution of SEK 97.6 million. As per 31 October, Framfab's holdings in Bredbandsbolaget amounted to 10.6 per cent. The number of employees rose during the first nine months of the year from 727 to 2 638, an increase of 1 911 persons or 263 per cent. As per 31 October, the number of employees amounts to 2 980, including Stenström, Arexus, and NettX. Of these, 940 are employed outside of Sweden. A total of 1 180 employees has been net recruited during 2000, whereof 480 outside of Sweden. July - September 2000 The Group's sales during the third quarter of 2000 amounted to SEK 308.0 (94.9) million. Operating profit after depreciation of tangible fixed assets (EBITA) amounted to SEK -139.7 (13.7) million during the third quarter of 2000. In order to highlight the EBITA in the consulting business, the result is adjusted for initiatives in new entities (Framfab Innovation and Driftbolaget, etc.) and the development of software (Brikks and CM), amounting to SEK 51.0 million. See table on the first page. Adjusted in this way, EBITA in the consulting business amounted to SEK -88.7 million in the third quarter. Sales and profitability in the Swedish consultancy decreased during the quarter due to effects of holidays, integration of acquired companies, strong recruitment and that the Swedish Client Development organisation not yet has adjusted to changes in the marketsituation. The effect of holidays is estimated to SEK 85.1 million in reduced sales in the third quarter. Investments in tangible fixed assets have been undertaken to the amount of SEK 52.4 million (2.5) during the third quarter. The acquisition of the advertising agency Halbye Kaag & Partners in Copenhagen (11 employees at the time of the acquisition) was consolidated on 1 July. The acquisitions of the Dutch Internet consultancy NetlinQ (135 employees) and Dimac in Helsingborg (30 employees) were consolidated on 1 August. Framfab has signed letter of intent on the acquisitions of NettX Consult in Oslo (26 employees) with an experienced team of management consultants, the Stenström advertising agency in Stockholm (30 employees) and the majority of shares in Arexus, a technology consulting firm in Bulgaria (26 employees). Clients Since the close of the second quarter, Framfab has initiated business partnerships with companies including J.P. Morgan, Viag Interkom, Carlsberg, Postgirot, Steen och Ström, SAS, and Packard Bell. Existing clients such as AXA, Bredbandsbolaget, Electrolux, Ikano, I K E A, Kellogg's, Nike Europe, AB Volvo, Volvo Car Corporation and others have continued their Internet ventures together with Framfab. A major European project during the period is the co-operation with AXA Colonia Concern AG. The parties have together has created the most extensive broker extranet in the field of European insurance. The web site covers the areas of construction savings, construction financing, industrial, composite (object), health and life insurance. Outlook and Strategy Global Clients Framfab's long-established strategy is to work with global clients on their most demanding projects. The intent is to be a strategic total supplier of internet services and implement solutions in the client's full business process. These projects are growing substantially in terms of volume, complexity and number of countries involved. As a result, the projects concern the client's entire value chain, more countries, more parts of the clients operations and are more business critical, meaning that selling cycles have become longer. The underlying demand has not decreased. The market situation for national projects in Sweden motivates the company to further increase our focus on the largest clients. Framfab's international organisation with local presence in several countries and experience from co-ordinating global projects are necessary conditions for being able to meet the growing demands of the global clients. The constant international strengthening of Framfab's trademark considerably improves its access to potential multinational clients. In addition, Framfab benefits from its international strength by rapidly transferring knowledge between countries and planning production to achieve a more even distribution of capacity. Production capacity in Sweden will to an increasing degree be used for projects sold outside Sweden. Industrial sectors An important part of Framfabs strategy is to have the leading offering in certain dynamic industrial sectors. As part of this, Framfab has internationalised and focused its client development organisation. The company is creating international client development team that are focused on certain industrial sectors, such as telecom, banking, healthcare, automotive etc. Framfab Innovation and Driftbolaget In addition to focusing on demanding global clients with megabrands, Framfab is also working with the new clients of the future within Framfab Innovation. Via these efforts, Framfab actively pursues the development of companies with digital production, digital sales and digital distribution, so called D3-companies. Quickwise is a new company within Framfab Innovation that utilises mobile information technology to carry out rapid market surveys. During current market conditions the number of new projects within Framfab Innovation will decrease. To support Driftbolaget's future expansion, the company is actively seeking for a partner. Growth Framfabs main strategy is to grow organically, but the company also carries out strategic acquisitions to grow internationally and to quickly get key competencies. Framfab has worked intensively to integrate new employees and acquired companies. The management assesses that the integration with the former Guide has been completed. Consultants from the former Guide have provided a significant contribution to Framfab, both in the form of leading-edge technical competence and experienced project managers. Recruitment An important factor for Framfab's continued success is being able to attract, develop and retain competent employees. Against this background, Framfab has demonstrated its strength by net recruiting 1 180 new employees during the year, whereof 480 outside Sweden. In Sweden recruitment will sharply be reduced. UMTS As part of its initiatives in mobile Internet, Framfab, together with Bredbandsbolaget and other strategic partners, is applying for UTMS licenses in Sweden and Norway. Framfab and Bredbandsbolaget are participating in the consortia through the jointly owned Bredband Mobil AB. Focus areas and software Framfab's goal is to become a leading supplier for services within mobile and broadband Internet. The company's initiatives in intelligent vehicles and intelligent homes will be expanded. The company will also continue its investments in commercialising software, primarily Brikks 2.0 and Content Management 2000. The company expects that Brikks 2.0 and CM 2000 will start to generate licences from the first quarter 2001. Outlook Continued recruitment and work on creating an efficient global structure will require internal resources, thus entailing some loss of income and certain costs. Initiatives in Framfab Innovation and Driftbolaget and further development of software will negatively affect the result during the fourth quarter of 2000. As a result, the Company estimates that it will not show profit, before amortization of goodwill, for the full year. Share data Profit after standard tax amounted to SEK -86.0 million (17.9) for the first nine months of the year, which corresponds to SEK -0.67 (0.24) per share. Shareholders' equity per share amounted to SEK 32.20 (5.37) as of 30 September 2000. The parent company had 141 475 601 registered shares as of 30 September 2000. On 6 March, an 8:1 split was carried out. During the period 1 January to 30 September 2000, the number of shares increased (adjusted for the split) through a new share issue directed at institutional investors (5 200 000) attributable to the exercise of warrants (1 903 400) and through non-cash issues in connection with acquisition of companies (29 551 761). At Framfab's extraordinary general meeting held on 11 October, it was decided to introduce a global warrants scheme giving current and future employees of the Group the possibility to receive call options. In connection with this, the board will void previous unexercised warrants corresponding to approximately 6.5 million shares. As per 31 October, the parent company has 141 755 601 outstanding shares. Upon fully exercising outstanding warrants, the number of shares will increase by a further med 15 091 040, adjusted for cancelation of warrants as stated above. Scheduled reports The full year report 2000 will be published on 14 February 2001. The interim report for the first quarter will be published on 4 May 2001. The interim report for the second quarter will be published on 22 August 2001. Stockholm, 31 October 2000 Framtidsfabriken AB (publ) The Board of Directors For further information, please contact: CFO, Johan Haeggman +46 8 545 25 800 johan.haeggman@framfab.se IR Manager, Niclas Lilja +46 709 41 21 79 niclas.lilja@framfab.se PR Manager, Ola Kallemur +46 709 41 21 11 ola.kallemur@framfab.se or visit www.framfab.se Auditors' Review Report We have reviewed this Interim Report following the recommendation for reviewing interim reports issued by the Swedish Institute of Authorized Public Accountants (FAR). A review is significantly less in scope than an examination in accordance with generally accepted auditing standards. During our review, nothing came to our attention that indicates that this report has not been prepared in accordance with the requirements for interim reports as set out in the Swedish Annual Accounts Act. Stockholm, 31 October 2000 Lars Marcusson Anders Malmeby Authorized public accountant Authorized public accountant Framfab's business concept is to create new business for the network economy through strategic advice and digital services. In addition to the consulting business, Framfab consists of the business areas Boosters, Marketing, Investments and Software. Framfab today has over 2 980 employees in 60 offices in Bulgaria, Denmark, France, Italy, the Netherlands, Norway, Great Britain, Sweden, Germany and USA. Our clients include 3M, AstraZeneca, AXA, Bosch, Electrolux, Ericsson, Expressen, France Telecom, IKEA, International Red Cross, le Groupe Pernod Ricard, Nike Europe, SAAB Group, Vattenfall, Volvo Car Corporation and Volvo Group. Framfab is listed on the OM Stockholm Exchange's "ATTRACT-40" list (ticker FTID). Income Statement in Brief SEK millions Jan-Sept Jan-Sept 1999 2000 1999 Net sales 1 034.9 203.1 350.8 Other operating income 113.6 3.8 4.2 Sales 1 148.5 206.9 355.0 Operating expenses -1 118.0 -167.9 -294.9 Result in associated -7.7 - - companies Operating profit before depreciation 22.8 39.0 60.1 Depreciation of tangible -31.3 -2.5 -6.4 fixed assets Operating profit after depreciation of tangible -8.5 36.5 53.7 fixed assets (EBITA) Amortisation of goodwill -92.3 -9.3 -16.8 Depreciation of other intangible fixed assets -3.4 -0.3 -0.7 Operating profit -104.2 26.9 36.2 Net financial items 20.3 2.1 3.5 Profit after financial -83.9 29.0 39.7 items Standard tax 0 -10.9 -15.0 Minority shares in profit -2.1 -0.2 -0.4 for the period Profit for the period -86.0 17.9 24.3 July- July- SEK millions Sept Sept 2000 1999 Net sales 307.9 94.6 Other operating income 0.1 0.3 Sales 308.0 94.9 Operating expenses -429.5 -80.0 Result in associated -4.3 - companies Operating profit before -125.8 14.9 depreciation Depreciation of tangible fixed assets -13.9 -1.2 Operating profit after depreciation of tangible -139.7 13.7 fixed assets Amortisation of goodwill -44.9 -5.3 Depreciation of other intangible fixed assets -1.2 -0.1 Operating profit -185.8 8.3 Net financial items 6.4 1.7 Profit after financial -179.4 10.0 items Standard tax 29.0 -4.4 Minority shares in profit 0.5 -0.1 for the period Profit for the period -149.9 5.5 Cash Flow Statement in Brief Jan-Sept Jan-Sept 1999 SEK millions 2000 1999 Cash flow from current operations before changes 23.7 35.0 56.7 in working capital Changes in working capital -277.5 -30.8 -74.4 Cash flow from current operations -253.8 4.2 -17.7 Acquisition of -51.7 13.9 -22.4 * subsidiaries Cash flow from other investment operations -429.1 -42.7 -71.3 Cash flow before financing -734.6 -24.6 -111.4 Cash flow from financing 1 104.6 235.3 297.0 operations Cash flow for the period 370.0 210.7 185.6 Exchange rate differences in liquid assets 0.3 0.0 0.1 Liquid assets at the close 595.5 248.8 223.7 of the period July- July-Sept SEK millions Sept 1999 2000 Cash flow from current operations before changes -123.5 16.5 in working capital Changes in working capital -52.5 -32.2 Cash flow from current operations -176.0 -15.7 Acquisition of -43.6 -0.8 * subsidiaries Cash flow from other investment operations -159.7 -36.6 Cash flow before financing -379.3 -53.1 Cash flow from financing -14,8 63.2 operations Cash flow for the period -394.1 10.1 Exchange rate differences in liquid assets 0.6 0.0 Liquid assets at the close of the period 595.5 248.8 *Net cash payments made (-) and acquired liquid assets (+). Non-cash issues in connection with acquisitions have not been taken into account in the cash flow statement since non-cash issues have no effect on liquid assets. Balance Sheet in Brief 30 Sept 30 Sept 31 Dec SEK millions 2000 1999 1999 Assets Goodwill 3 085.3 199.8 296.1 Other intangible fixed assets 12.7 1.2 5.3 Tangible fixed assets 179.0 13.9 35.3 Financial fixed assets 359.9 36.2 39.6 Total fixed assets 3 636.9 251.1 376.3 Accounts receivable 416.1 68.6 114.4 Other current assets excluding liquid assets 263.1 51.7 69.6 Liquid assets 595.5 248.8 223.7 Total current assets 1 274.7 369.1 407.7 Total assets 4 911.6 620.2 784.0 Shareholders' equity and liabilities Restricted equity 4 753.9 514.6 792.4 Non-restricted reserves -113.0 8.4 -145.0 Profit for the period -86.0 17.9 24.3 Total equity 4 554.9 540.9 671.7 Minority interests 1.9 1.4 1.8 Provisions 12.3 10.2 9.0 Interest-bearing 47.1 18.0 6.4 liabilities Long-term non-interest 0 0.0 0.0 bearing liabilities Current non-interest 295.4 49.7 95.1 bearing liabilities Total liabilities 356.7 79.3 112.3 Total shareholders' equity 4 911.6 620.2 784.0 and liabilities Income Statement in Brief per Quarter 1999 1999 1999 2000 2000 2000 SEK millions Q2 Q3 Q4 Q1 Q2 Q3 Sales 79.9 94.9 148. 428. 411. 308.0 1 9 6 Adjusted sales* 76.4 94.9 148. 318. 411. 308.0 1 3 2 Operating profit after depr. of fixed tangible 16.8 13.7 17.1 126. 5.2 - assets 0 139.7 Operating profit/loss 13.0 8.3 9.3 105. - - 5 23.9 185.8 Profit/loss after 13.1 10.0 10.8 110. - - financial items 6 15.1 179.4 Total growth, 138% 24% 56% 115% 29% -25% sequential* *Adjusted for conversion of the additional purchase price in Bredbandsbolaget and divestment of companies Key Ratios Jan- Jan- July- July- 1999 Sept Sept Sept Sept 2000 1999 2000 1999 Sales growth 455.1 206.8 224.5 303.0 240.2 % % % % % Adjusted sales growth (1) 410.9 201.2 225.6 303.0 236.5 % % % % % Gross margin 2.0 % 18.8 % -40.8 15.7 % 16.9 % % Operating margin after depreciation of tangible -0.7 17.6 % -45.3 14.4 % 15.1 % fixed assets % % EBITA margin in the -6.6 15.8 % -28.8 14.4 % 14.2 % consulting business(2) % % Operating margin -9.1 13.0 % -60.3 8.7 % 10.2 % % % Profit margin -7.3 14.0 % -58.2 10.5 % 11.2 % % % Equity/assets ratio 92.8 87.4 % 92.8 % 87.4 % 85.9 % % Return on capital employed -2.4 14.6 % -2.4 % 14.6 % 10.6 % (3) % Return on shareholders' -2.8 9.5 % -2.8 % 9.5 % 6.5 % equity (3) % Average number of 1 889 285 2 365 407 367 employees Number of employees at 2 638 459 2 638 459 727 close of period Sales per employee, in SEK 855 985 855 985 968 thousands (3) Adjusted sales per 782 972 782 972 957 employee (1:3) Profit per employees, in 6 183 6 183 146 SEK thousands (3) Shareholders' equity per 32.20 32.20 6.41 share, SEK (4) Profit per share, SEK(4) -0.67 -1.08 0.29 1 adjusted for the conversion in Bredbandsbolaget and divestment of companies 2 adjusted for the conversion in Bredbandsbolaget, divestment of companies, surplus funds from SPP and initiatives in new entities (Framfab Innovation and Driftbolaget), Brikks and CM 3 based on a rolling twelve-month period 4 corrected for split 8:1 in March 2000 Definitions Gross margin: Operating margin after Operating profit before depreciation of tangible fixed depreciation as a percentage of assets: sales. Operating profit after depreciation of tangible fixed assets as a percentage of sales. Operating margin: Profit margin: Operating profit as a percentage Profit after financial items as of sales. a percentage of sales. Equity/assets ratio: Capital employed: Shareholders' equity including Total assets reduced by non- minority interest as a percentage interest bearing liabilities of total assets. including deferred tax liability. Return on capital employed: Return on shareholders' equity: Profit after financial items plus Profit after financial items financial expenses divided by the after full tax divided by average capital employed. average shareholders' equity. Sales per employee: Profit per employee: Sales divided by the average Operating profit after number of employees. depreciation of tangible fixed assets divided by the average number of employees per year. Shareholders' equity per share: Profit per share: Shareholders' equity divided by Profit for the period after the number of outstanding shares. full tax divided by the average number of shares. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/10/31/20001031BIT00050/bit0001.doc http://www.bit.se/bitonline/2000/10/31/20001031BIT00050/bit0002.pdf