Framtidsfabriken AB (publ) Interim report January- June 2001

Framtidsfabriken AB (publ) Interim report January - June 2001 Framfab restructuring according to plan · For the January-June 2001, sales reached SEK 418.5 million (840.5)*. The operating loss after depreciation of tangible fixed assets (EBITA) was SEK -924.1 million (131.2). During the January-June 2001 period, the operating loss, after depreciation of tangible assets (EBITA), was SEK -427.8 million (-29.2) after adjusting for items affecting comparability. · For the period April-June 2001, sales reached SEK 154.5 million (411.6). The operating loss, after deductions of tangible assets (EBITA) and adjusted for items affecting comparability, improved by SEK 124.4 million between Q1 and Q2 2001, from SEK -276.1 million to SEK -151.7 million due to cost-cutting measures in the company. · During the January-June 2001 period, the loss after financial items (EBT) was SEK -2 078.2 million (95.5). · Framfab has successfully refined its core business to six countries of operation to focus exclusively on Internet consulting projects. As of October 1 2001, the total number of employees will be around 800. · Following the two successful stock issues, that were finalized in June, the company has received new orders from both new and existing customers, worth just over SEK 100 million, which indicates continued faith in Framfab. · The Board of Directors maintains its earlier projections that Framfab will demonstrate operating profitability some time during Q4 2001. The Board forecasts that liquidity, after giving effect to the new stock issue, is sufficient to sustain the business - until it begins to generate a positive cash flow, expected to be some time during Q1 2002. · The restructuring program, decided by the board in May, has: -Implemented Framfab's two new stock issues in May and June, which injected SEK 286.9 million into the company after issue costs. -Reduced the headcount in the consulting operation to around 800 (as of Oct. 1, 2001). -Disposed of 5 units within the core business and 5 companies in non- core business, involving 314 employees, during Q2 and the start of Q3. · * Note: Figures within parenthesis (xxx) show the corresponding figures for the same period last year. Framfab is a leading supplier of consulting services and business solutions based on Internet technologies. Its customers primarily include large international enterprises such as 3M, AstraZeneca, AXA, Bosch, Danske Bank, Electrolux, Ericsson, Hydro Texaco, I K E A, Kellogg's, Maersk, McDonalds, NEC Packard-Bell, Nike Europe, Orange, Philips, Postgirot, Postbank, Quelle Versicherungen, SAAB, Shell, Vattenfall, Volvo Car Corporation and Volvo Group. Framfab operates in Denmark, France, Germany, the Netherlands, Sweden, and the UK. The company is listed on the Stockholm Stock Exchange's Attract 40 list (ticker FTID). For more information go to: www.framfab.com. CEO's comments "We successfully implemented the new board's restructuring program, which focuses on strong liquidity, lower costs, and non-core business divestments," says Johan Wall president and CEO. "In Q2, we also offset the lower demand from our customers through staff reduction; we currently employ around 800 people rather than the previously announced 900. Now, we're filling our six remaining companies with new orders, finalizing our new strategy, and recruiting key employees. After the successful stock issues, we have seen a clear rise in orders." Results and financial position Framfab is undergoing a forceful and rapid reorganization, which makes it difficult to interpret the financial results. To simplify analysis and provide a greater understanding for how the company's activities, restructuring program and divestment of companies affect the overall position, a summary has been created to describe the results in Appendix 2. Pro forma The pro forma income statement below has been designed to illustrate the sales, costs, and number of employees of future operations in six countries: Since the restructuring, Framfab has become a pure Internet consulting company with operations in: Denmark, France, Germany, the Netherlands, Sweden, and the UK. During the restructuring, management decided that the Nayana and GWS software products are strategically important for Framfab Sweden. The units comprising these products are therefore included as of July 1, 2001 in Framfab Sweden's consulting business. Pro forma Framfab 2001 2001 2001 Consulting (FFC) in six Apr.- Jan.- Jan.- countries in SEK million June Mar. June Net sales 126.7 146.9 273.6 Other operating income 3.7 1.8 5.5 Total sales 130.4 148.7 279,1 Operating costs including -259.1 -333.7 -592.8 Depreciation of tangible fixed assets EBITA before write-down -128.7 -185.0 -313.7 of accounts receivable and restructuring program No. employees at start of 1 590 1 802 1 802 period No. outside Sweden 684 656 656 No. employees at end of 1 293 1 590 1 293 period No. outside Sweden 608 684 608 No. employees on Aug. 22, 966 - - 2001 No. outside Sweden 494 - - January to June 2001 The Market The market for consultancy services based on Internet technology has seen a decline during the spring. Despite the declining market and the uncertainty surrounding Framfab's financial situation, the company has succeeded in retaining its biggest customers. Following the successful completion of the new issues, Framfab's customers have shown renewed faith in the company, see also the section marked Market in the financial reporting for April - June. Today, Framfab is a pure Internet consulting company. The company has long experience of working with user interfaces, brand management and application development based on Internet technology. Sales The consolidated sales figure reached SEK 418.5 million (840.5) during 1H 2001. In 1H 2000, the company created additional operating revenue by converting the additional purchase price in Bredbandsbolaget worth SEK 104.0 million and sales of other companies worth SEK 7.0 million. Adjusted for these items affecting comparability sales decreased by 43% between the half years. Operating profits/losses The operating loss after depreciation of tangible fixed assets (EBITA) was SEK -924.1 million (131.2) during 1H 2001. Over the period, one-off effects from the restructuring program and sales of operations affected the EBITA margin with SEK -496.3 million. Adjusted for items affecting comparability, the operating loss after depreciation of tangible fixed assets was SEK -427.8 million (-29.2). Sales of operations During Q2 and in early Q3, a total of 5 units within the core business and 5 companies within the non-core business were sold with a resulting reduction of 314 in the workforce. A capital loss of SEK 12 million resulted from the sales, which is balanced by reserves made in Q1. The resulting effect is +/-0 for the quarter. For additional details, see Appendix 1. Operations Framfab Internetconsulting (FFC) - Framfab's core business (Internet consulting) reported sales of SEK 336.7 million (609.2) for the period. The operating loss after depreciation of tangible fixed assets (EBITA) was SEK 337.7 million (3.7). Jan.-June, 2001 Framfab Framfab Framfab Framfab Elimina SEK million Koncern Consult Labs Busines tions en ing s (FFC) Partner s Net sales 412.8 331.0 2.8 105.5 -26.5 Other operating 5.7 5.7 - - - income Total sales 418.5 336.7 2.8 105.5 -26.5 Operating costs -846.3 -674.4 -33.2 -159.0 20.3 (including depreciation of tangible fixed assets) EBITA before write- -427.8 -337.7 -30.4 -53.5 -6.2 down of accounts receivable and restructuring program No. employees on 2 666 2 062 85 519 - Dec. 31, 2000 No. outside Sweden 932 914 - 18 - No. employees on 1 470 1 318 70 82 - June 30, 2001 No. outside Sweden 651 651 - - - No. employees on 966 966 - - - Aug. 22, 2001 No. outside Sweden 494 494 - - - The table below describes FFC in Sweden and the rest of the world. SEK million Jan.- Jan.- 2000 June June full 2001 2000 year Sales Sweden 157.9 496.2 771.1 Rest of the world, including Group 178.8 113.0 339.0 adjustments Total FFC 336.7 609.2 1 110.1 Operating costs (including depreciation of tangible fixed assets) Sweden, including Group-wide costs -401.4 -499.5 -978.8 Rest of the world, including Group -273.0 -106.0 -399.2 adjustments Total FFC -674.4 -605.5 -1 378.0 EBITA Sweden, including Group-wide costs -243.5 -3.3 -207.7 Rest of the world, including Group -94.2 7.0 -60.2 adjustments Total FFC -337.7 3.7 -267.9 Outside FFC, very few operations remain. Starting with the Q3 report, the focus will be on FFC. Restructuring program The restructuring program presented in February has had its costs of SEK 79.9 million charged to the Q1 results. The program is now fully implemented and on a full-year basis, yields savings of SEK 240 million with no remaining negative cash flow effects. On May 4, the new board presented another comprehensive restructuring program for the entire Group and SEK 150 million has been set aside to cover the estimated costs. As of October 1, Framfab will have around 800 employees rather than the 900 previously announced. The program is fully implemented and is expected to produce a total savings effect during Q4 2001. Through the program, total costs will have been reduced from SEK 423.2 million for Q4 2000 to SEK 175 million for Q4 2001. This is SEK 25 million lower than the SEK 200 million figure that was quoted in the new issue prospectus in June 2001. The Board judges that the provisions that were made for the restructuring program are adequate. Depreciations and write-downs In conjunction with Framfab's restructuring and issuance of the Q1 report, the board approved a one-off SEK 725.7 million goodwill write- down. The one-off SEK 30.0 million write-down of accounts receivable was made during Q1. Write-downs of tangible fixed assets SEK 46 million and other intangible fixed assets SEK 26.9 million were also carried out. Loss after financial items During 1H 2001, the loss after financial items was SEK -2 078.2 million (95,5). During the first quarter, write-downs of financial fixed assets burdened net financial income/expense with SEK 396.7 million. Remaining stock holdings in Bredbandsbolaget and the Orange consortium are booked at SEK 50 million. In addition, Framfab has retained part- ownership in several small companies in which it has no financing commitments. These stocks have been booked at SEK 0 value. Financial position In May and June, Framfab carried out two new issues that injected SEK 286.9 million into the company (SEK 324.8 million before issue costs). On June 30, 2001, the Group's liquid assets reached SEK 270.8 million (987.5). During 1H 2001, the cash flow from current activities was SEK - 310.4 million (-77.8). Stockholders' equity was SEK 801.1 million (4 282.4) on June 30, 2001, resulting in an equity/assets ratio of 68.6% (91.4%). Interest-bearing liabilities reached SEK 5.5 million (61.6). During 1H 2001, investments in tangible fixed assets worth SEK 25.6 million (44.9) were made. Employees During 1H 2001, the number of employees was reduced from 2 666 to 1470 as of June 30 - representing a reduction of 1 196 persons or 45%. As of August 22, 2001, the number of employees is approximately 966. On October 1, Framfab will have around 800 employees in its six countries of operations. Competence is focused on the fields of business development, technology, project management, and communication & design. April to June The market During Q2 sales were negatively affected by the uncertainty surrounding Framfab's financial position and a number of major customers chose to put orders on hold. Since the successful completion of the stock issues in May and June, the company's major customers have placed orders worth approximately SEK 75 million. Further, Framfab has attracted new customers such as Sony in Germany and McDonalds in France. New customers have placed orders worth approx. SEK 25 million in aggregate. Framfab won the Golden Lion award at the international advertising festival in Cannes for the Nike Women website. The company also received a Bronze Lion for its work with Nike Shox. This is the second year in a row that Framfab has won at Cannes. Last year, the company won the Grand Prix Lion for Nike Football. This recognition has had significant international influence and has generated new business. Sales During Q2 2001, sales reached SEK 154.5 million (411.6). During Q2 2000, Framfab created additional operating revenue through sales of other companies, worth SEK 0.4 million. Adjusted for this, sales fell by 62% between the quarters. Operating profit/loss During Q2 2001, the operating loss after depreciation of tangible fixed assets (EBITA) was SEK -151.7 million (5.2). During the quarter, several operations were sold and the profits and losses have been realized. Sales transactions made during the quarter resulted in a total capital loss of SEK 12 million. This loss was dealt with by using reserves totaling the losses during the first quarter, with the result that no impact will be seen for the period. During Q2 2000, Framfab had items affecting comparability worth SEK 49.8 million, primarily due to SPP refunds. Adjusted for items affecting comparability, the operating loss after depreciation for tangible fixed assets (EBITA) was SEK -151.7 million (-44.6). Operations Framfab's core business, FFC Internetconsulting reported sales over the period of SEK 143.7 million (347.6) and its operating loss after depreciation of tangible fixed assets (EBITA) was SEK -132.3 million (- 22.1). During Q1 2001, FFC's operating costs, including deductions for tangible fixed assets, were SEK 398.4 million, compared to SEK 276.0 million for Q2 2001, which is a reduction of SEK 122.4 million. Comparable costs for Q4 2000 were SEK 423.2 million. Apr.-June, 2001 Framfab Framfab Framfab Framfab Elimina SEK million Group Consultin Labs Busines tions g s (FFC) Partner s Net sales 150.8 140.0 2.1 13.1 -4.4 Other operating 3.7 3.7 - - - income Total sales 154.5 143.7 2.1 13.1 -4.4 Operating costs -306.2 -276.0 -15.7 -20.8 6.3 including depreciation of tangible fixed assets EBITA before write- -151.7 -132.3 -13.6 -7.7 1.9 down of accounts receivable and restructuring program No. employees on 1 951 1 724 87 140 Mar. 31, 2000 No. outside Sweden 836 836 - - No. employees on 1 470 1318 70 82 Jun. 30, 2001 No. outside Sweden 651 651 - - No. employees on 966 966 Aug.22, 2001 No. outside Sweden 494 494 Sales of operations During the quarter, operations within FFC were sold or shut down. The result therefore contains revenue and costs that will not be booked in the future. These operations represented sales worth SEK 15.9 million and EBITA of SEK -12.4 million. In addition, Framfab Labs AB's activities in Lund were sold on July 1. Lund has been part of Framfab Labs AB during the entire quarter, with sales of SEK 1.2 million and EBITA of SEK -10.6 million. Within Framfab Business Partners, operations with sales worth SEK 12.8 million and EBITA of SEK -2.5 million were sold. For more detailed information about sales, see Appendix 1. This table describes core activities in Sweden and the rest of the world, respectively. Framfab Consulting (FFC) Apr.- Jan.- Apr.- SEK million June March June 2001 2001 2000 Sales Sweden 68.2 89.7 272.7 Rest of the world, including 75.5 103.3 74.9 Group adjustments Total, FFC 143.7 193.0 347.6 Operating costs including depreciation of tangible fixed -139.6 -261.8 -296.8 assets -136.4 -136.6 -72.9 Sweden, including Group-wide costs Rest of the world, including Group adjustments Total, FFC -276.0 -398.4 -369.7 EBITA Sweden, including Group-wide -71.4 -172.1 -24.1 costs Rest of the world, including -60.9 -33.3 2.0 Group adjustments Total, FFC -132.3 -205.4 -22.1 Profit loss after financial items During Q2 2001, the loss after financial items was SEK -148.6 million (- 15.1). Financial position During Q2 2001, the cash flow from current activities was SEK -114.2 million (-61.2). This is an improvement of SEK 82.0 million, compared to Q1 2001, which had a cash flow of SEK -196.2 million from current activities. During the period, the company received SPP refunds worth SEK 33.3 million. The booked value for the refunds was SEK 34.1 million. Framfab has additional SPP refunds to use. Investments in tangible assets worth SEK 7.1 million (25.8) were made during Q2 2001. Employees During Q2 2001, the number of employees was reduced from 1 951 to 1 470, a reduction of 481 persons (25%). As of August 22, 2001, the number of employees was approximately 966. Changes to the Board and Group Management Framfab has acquired a new board of directors that consists of Sven Skarendahl, executive chairman, Bob Gogel, vice chairman antfactory Holdings Ltd., Kaj Green, CEO EDS Nordic and Johan Wall, Framfab's president and CEO. As previously announced, Göran Westling, manager of Framfab Business Partners, Sofia Ericsson, Head of Mergers & Acquisitions, Leif Andersson, VP Corporate Communications, and Ralf Pispers, Head of Framfab's international activities, have resigned from Framfab's group management. In addition, Peter Svanfeldt, Head of Client Development, will leave the group management in order to take on a new role working directly with Framfab's biggest customers. Following these changes, Framfab's group management consists of: Johan Wall, President and CEO Johan Haeggman, CFO Johan Ekesiöö, manager, Business re-engineering 2001 outlook The successfully implemented restructuring program is ahead of plan. Non- core businesses have been dissolved faster than expected. During the rest of 2001, demand is expected to remain flat inside and outside Sweden. As a consequence, Framfab will have slimmed down its business to around 800 employees by October 1, (rather than 900, as previously announced). Framfab successfully carried out two new stock issues and has thus strengthened its liquidity. After this capital injection, the company has noted more business from both new and existing customers. The board continues to believe that the company will achieve operating profitability some time during Q4 2001. Stock data From January-June 2001, the loss after tax was SEK -1 971.9 million (64.0), which corresponds to SEK -10.22 million (0.51) per stock. Equity per share reached SEK 1.69 million (31.22) as of June 30, 2001. After the new issues were carried out, the parent company had 474 682 438 registered stocks as of June 30, 2001. On August 22, the parent company had 474 682 438 registered stocks. If all outstanding options are exercised, the number of stocks will increase by 10 771 340. Scheduled reports The Q3 report will be published on October 30, 2001. The financial statement for fiscal 2001 will be published on February 13, 2002. The Board Framtidsfabriken AB (publ) Stockholm, Sweden August 22, 2001 For more information please contact: Johan Wall, CEO +46 8 545 258 00, johan.wall@framfab.se Johan Haeggman, CFO +46 8 545 258 00, johan.haeggman@framfab.se Press contact +46 70 973 75 16 or visit www.framfab.com ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/08/22/20010822BIT00020/bit0002.doc The full report http://www.waymaker.net/bitonline/2001/08/22/20010822BIT00020/bit0002.pdf The full report