We are still on track

Framtidsfabriken AB (publ) Interim report, January-September 2001 We are still on track · The Board maintains its estimate that Framfab will show operating profit (EBITA) at some point during the fourth quarter of 2001. Furthermore the Board believes that the company's liquidity is sufficient to sustain operations until the company starts to generate a positive cash flow, which is expected to happen sometime during the first quarter of 2002. · Framfab's losses are decreasing in accordance with the plan. During the third quarter, costs fell by 35 per cent and revenue by 26 per cent as compared to the second quarter of 2001. Operating profits after depreciation on fixed assets (EBITA), adjusted for one-off items, improved by SEK 65.7 million - or 43 per cent - between the second and third quarters of 2001, from SEK -151.7 million to SEK -86.0 million. · Costs are expected to decrease by an additional 30 per cent from SEK 200.3 million to SEK 140.0 million during the fourth quarter of 2001. Revenue for the fourth quarter of 2001 is expected to exceed that generated in the third quarter. Revenue for the period July-September 2001 amounted to SEK 114.3 million. · The Board has decided to write down all remaining goodwill by SEK 428.1 million. The equity ratio thereafter amounts to 45.5 per cent. · Framfab has continued to adapt its organisation following a decrease in demand caused by the ongoing downturn in economic conditions worldwide. On 30 October, the company employed 770 people, and this number will, with already implemented actions, decrease to around 650 by 31 December. · Framfab has focused its strategy. This involves the company developing Internet-based solutions that focus on the interaction between Framfab's clients and their customers and employees. · The Board confirms that Framfab is on track with its program that was presented on the ordinary Annual General Meeting at May 4, 2001: Focus on Internet consulting with operations in six countries, divestment of non-core operations, development and implementation of a long term strategic positioning and execution of a new share issue in order to strengthen the company's financial position. · Framfab is a leading supplier of consultancy services and business solutions based on Internet technology. Framfab's customer base primarily consists of major international companies such as 3M, AstraZeneca, AXA, Bosch, Danske Bank, Electrolux, Ericsson, Hydro Texaco, IKEA, Kellogg's, Maersk, McDonalds, NEC Packard-Bell, Nike Europe, Orange, Philips, Postbank, Postgirot, Quelle Versicherungen, SAAB, Shell, Volvo Car Corporation, Volvo Group and UBS. Framfab operates in Denmark, France, Germany, Great Britain, the Netherlands and Sweden. Framfab is listed on the Attract 40 list of the OM Stockholm Stock Exchange (ticker FTID). For additional information, visit www.framfab.com Comments from the CEO "I'm very pleased to restate that Framfab is on track. We have successfully implemented our action plans. We have developed a more focused strategy with a clear positioning. At the same time, the changing conditions on the market for Internet consultancy services have continued during the third quarter in line with the downturn in economic conditions worldwide. In response we have implemented further changes to our organisation and have succeeded in reducing costs considerably. I'm very proud of the will to change demonstrated by our employees. We continue to receive orders from new and existing clients, even though companies are currently more cautious when it comes to investments. In summary we are approaching our goal to return to profitability sometime during the fourth quarter", explains Johan Wall, CEO of Framfab. Profit and financial position Framfab has undergone a very deep and rapid restructuring process. In order to facilitate analyses and increase understanding for how the company's activities, action plans and sales of operations affect the profits as a whole, a comparison of results divided up by activities is presented in Appendix 2. Pro forma In order to present a picture of the company's future revenue, costs and numbers of employees in six countries, a pro forma income statement is presented below. Following restructuring, Framfab is now a pure Internet consultancy company with business activities in Denmark, France, Germany, Great Britain, the Netherlands and Sweden. During the restructuring work, the management has decided that Nayana and GWS software is of strategic importance for Framfab's activities in Sweden. The units that produce these software brands are therefore included in the Swedish consultancy business as from and including 1 July. Pro forma revenue amounted to SEK 112.7 million, a reduction of 14 per cent compared to the second quarter. At the same time, costs fell by SEK 64.3 million, an improvement of 25 per cent. EBITA rose from SEK -128.7 million to SEK -82.1 million, an improvement of 36 per cent. Total costs are expected to fall further during the fourth quarter - to SEK 140.0 million - while revenue in the fourth quarter are expected to exceed those generated in the third quarter. Pro forma FFC in Jul-Sep April-June Jan-March Jan-Sep six countries 2001 2001 2001 2001 SEK million Net revenue 110.9 126.7 146.9 384.5 Other operating 1.8 3.7 1.8 7.3 income Total revenue 112.7 130.4 148.7 391.8 Operating costs, including -194.8 -259.1 -333.7 -787.6 depreciation on tangible fixed assets EBITA -82.1 -128.7 -185.0 -395.8 (before depreciation on accounts receivable and the action plans) No. of employees at 1,293 1,590 1,802 1,802 start of period Of whom, outside 608 684 656 656 Sweden No. of employees at 855 1,293 1,590 855 end of period Of whom, outside 461 608 684 461 Sweden No. of employees on 770 - - 770 30 Oct 2001 Of whom, outside 410 - - 410 Sweden July-September The market Revenue during the third quarter have been adversely affected by the downturn in economic conditions worldwide and by recent and ongoing political conflicts. The economic situation in general is forcing Framfab's customers to be more cautious and postpone projects. However, despite current market conditions, Framfab's existing clients continue to place orders. Among these are leading global companies such as Volvo, Nike Europe and Kellogg's. Framfab has also gained new clients such as Sony Walkman, the insurance company Skandia and McDonalds. Revenue Revenue during the third quarter of 2001 totalled SEK 114.3 million (308.0). Revenue during the second quarter of 2001 totalled SEK 154.5 million. This means that revenue fell by 26 per cent between the second and third quarters of 2001. The figures for the third quarter are affected by the holiday period. Operating profit/loss The operating loss after depreciation on tangible assets (EBITA) during the third quarter of 2001 totalled SEK 86.0 million (139.7). Costs continued to fall during the third quarter of 2001, totalling SEK 200.3 million. This represents a reduction of 35 per cent in relation to the second quarter, when costs totalled SEK 306.2 million. EBITA improved by 43 per cent from -151.7 million during the second quarter of 2001 to SEK -86.0 million. Operations During the period, Framfab's core business, Framfab Consulting, FFC, generated revenue of SEK 112.7 million (268.4) and an operating loss after depreciation on tangible assets (EBITA) of SEK 82.1 million (84.5). During the second quarter, FFC's operating costs including depreciation on tangible assets amounted to SEK 276.0 million, as compared to SEK 194.8 million in the third quarter - a fall of SEK 81.2 million. The corresponding figure for the first quarter of 2001 was SEK 398.4 million. July-September The Framfab Other Eliminations 2001 Framfab Consulti units SEK million Group ng (FFC) - Net revenue 112.5 110.9 1.6 Other operating 1.8 1.8 - - income Total revenue 114.3 112.7 1.6 - Operating costs, -200.3 -194.8 -4.7 -0.8 including depreciation on tangible fixed assets EBITA (before -86.0 -82.1 -3.1 -0.8 depreciation on accounts receivable and the action plans) No. of employees 1,470 1,318 152 on 30 June 2001 Of whom, outside 651 651 - Sweden No. of employees 887 855 32 on 30 Sept 2001 Of whom, outside 461 461 - Sweden No. of employees 770 770 - - on 30 Oct 2001 Of whom, outside 410 410 - - Sweden The table below refers to FFC, i.e. the core business, divided between Sweden and other countries. SEK million Jul-Sep April-June Jul-Sep Framfab Consulting (FFC) 2001 2001 2000 Revenue Sweden 49.6 68.2 148.9 Other countries, including Group 63.1 75.5 119.5 adjustments FFC, total 112.7 143.7 268.4 Operating costs, including depreciation on tangible fixed assets Sweden, including Group-internal -100.1 -139.6 -233.2 costs Other countries, including Group -94.7 -136.4 -119.7 adjustments FFC, total -194.8 -276.0 -352.9 EBITA Sweden, including Group-internal -50.5 -71.4 -84.3 costs Other countries, including Group -31.6 -60.9 -0.2 adjustments FFC, total -82.1 -132.3 -84.5 Divestments Alongside the previously reported divestments, Framfab has sold the software company Dimac to a new buyer, as the original purchaser failed to fulfil its obligations in accordance with the contract. On 1 October, i.e. after the period covered by this report, Framfab sold its 15 per cent participation in B2 Bredband Mobil AB to Bredbandsbolaget. This deal took place in connection with Bredbandsbolaget selling its 34 per cent stake in the 3G consortium Orange Sverige AB via its subsidiary, B2 Bredband Mobil AB. For more detailed information about the company divestments, see Appendix 1. Write-downs Framfab has undergone a period of comprehensive restructuring and significant resources have been devoted to the re-establishment of the company. At the same time the value of this type of operations has been greatly reassessed by the market, which could be established not least by Framfab in connection with divestments during 2001. The excess value of previously made investments that goodwill represents no longer exists. According to this, the board has decided to write-down all remaining goodwill by SEK 428.1 million. The equity ratio thereafter amounts to 45.5 per cent, which by the board is estimated to be sufficient. In connection with the write-down of goodwill, the Board has also decided to take a conservative approach to the deferred tax obligation, which will therefore be reversed during the quarter. Profit after financial items The loss after financial items for the third quarter of 2001 totalled SEK 503.0 million (179.4). Of which the one off write-down of goodwill explains SEK 428.1 million. Financial position Cash flow from operating activities during the third quarter of 2001 was SEK -139,2 million (-176.0). Cash flow from current operations improved by SEK 79.5 million compared to the second quarter of 2001, adjusted for items that affect comparability. Operational cash burn in FFC was SEK -55.0 million during the third quarter. The operational cash flow is expected to improve even further during the fourth quarter. When implementing the action plans, the non-operational cash flow will improve considerably. The table below illustrates the cash flow for the second and third quarters of 2001, adjusted for items that affect comparability. Jul-Sep Apr-Jun SEK million 2001 2001 Cash flow from operating -87.2 -185.8 activities before changes in net working capital Change in working capital -52.0 71.6 Cash flow from current -139.2 -114.2 operations Adjustment for items affecting comparability Final payment - -71.2 ITC/Integration Sale of SPP funds - -33.3 Total - -104.5 Adjusted cash flow from -139.2 -218.7 current operations Employees The number of employees decreased during the third quarter of 2001 from 1,470 to 887, a reduction of 583 people or 40 per cent. On 30 October, the company employs around 770 people. Corporate staff has been reduced to 12 employees. January-September The market The market for consultancy services based on Internet technology has fallen during the first nine months of the year. Revenue During the first nine months of 2001, the Group's revenue totalled SEK 532.8 million (1,148.5). During the same period in 2000, other operating income was generated due to the conversion of the additional purchase price in Bredbandsbolaget (SEK 104.0 million) and divestments of companies (SEK 7.0 million). Adjusted for items affecting comparability, revenue decreased by 49 per cent during the period January-September 2001 in relation to the same period in 2000. Operating profit/loss The operating loss after depreciation on tangible assets (EBITA) for the first nine months of 2001 totalled SEK 1,010.1 million (8.5). During the period, the EBITA margin has been adversely influenced by one-off effects from the action plans and from divestments of operations, which translates to the sum of SEK -496.3 million. Adjusted for items affecting comparability, the operating loss after depreciation on tangible assets (EBITA) amounted to SEK 513.8 million (168.9). Operations During the period, Framfab's core business, Framfab Consulting (FFC), generated revenue of SEK 449.2 million (877.7), and an operating loss after depreciation on tangible assets (EBITA) of SEK 419.8 million (80.8). January-September The Framfab Framfab Other Eliminations 2001 Group Consultin units SEK million g (FFC) Net revenue 525.3 441.9 110.0 -26.6 Other operating 7.5 7.5 - - income Total revenue 532.8 449.4 110.0 -26.6 Operating expenses including depreciation -1,046.6 -869.2 -197.0 19.6 of tangible assets EBITA (before write- -513.8 -419.8 -87.0 -7.0 down of accounts receivable and the action plans) No. of employees on 2,666 2,062 604 - 31 Dec 2000 Of whom, outside 932 914 18 - Sweden No. of employees on 887 855 32 - 30 Sept 2001 Of whom, outside 461 461 - - Sweden No. of employees on 770 770 - - 30 Oct 2001 Of whom, outside 410 410 - - Sweden The table below refers to FFC, i.e. the core business, divided between Sweden and other countries. SEK million Jan-Sep 2001 Jan-Sep Jan-Dec 2000 2000 Revenue Sweden 207.5 645.1 771.1 Other countries, including 241.9 232.5 339.0 Group adjustments FFC, total 449.4 877.6 1,110.1 Operating costs, including depreciation on tangible fixed assets Sweden, including Group- -501.6 -732.9 -978.8 internal costs Other countries, including -367.6 -225.5 -399.2 Group adjustments FFC, total -869.2 -958.4 -1,378.0 EBITA Sweden, including Group- -294.1 -87.8 -207.7 internal costs Other countries, including -125.7 7.0 -60.2 Group adjustments FFC, total -419.8 -80.8 -267.9 Action plans During the year, Framfab has completed two action plans, for which the sums of SEK 79.9 million and SEK 150.0 million have been reserved. On 30 October, Framfab employed 770 people. Accounting for the action plans, the total costs for FFC will have decreased from SEK 423.2 million for the fourth quarter of 2000 to SEK 140.0 million for the fourth quarter of 2001. This figure is SEK 60.0 million lower than the SEK 200.0 million stated in the prospectus published in connection with the preferential rights issue of June 2001. The Board believes that the provisions for the action plans are sufficient. Write-downs When publishing the Q1-report, the Board decided on a write-down of goodwill totalling SEK 725.7 million. During the third quarter all remaining goodwill has been written down by SEK 428.1 million. During the first quarter, write-downs on other intangible assets were carried out in the sum of SEK 26.9 million. One-off write-downs on accounts receivable to the value of SEK 30.0 million were completed during the first quarter. Within the framework of the action plan, tangible assets have also been written down in the amount of SEK 46.0 million. Profit after financial items The loss after financial items for the first nine months of 2001 totalled SEK 2,581.2 million (83.9). During the first quarter, write- downs on financial fixed assets adversely affected net financial income in the amount of SEK 396.7 million. The only remaining major shareholding is Framfabs participation in Bredbandsbolaget, which have been booked at a value of SEK 50.0 million. In addition, there are some holdings in a number of small companies in which Framfab has no financial obligations. All these holdings are booked at a value of SEK 0.0 million. Following the new stock issue in Bredbandsbolaget, Framfab's holdings in this company have been diluted from 10.6 per cent to 3.8 per cent. Financial position In May and June, Framfab completed two new stock issues, which jointly generated SEK 324.8 million for the company before issue costs, and SEK 286.9 million after issue costs. On 30 September 2001, the Group's liquid funds amounted to SEK 125.9 million (595.5). Cash flow from current operations amounted to SEK - 449.6 million (-253.8) for the first nine months of 2001. On 30 September 2001, shareholders' equity amounted to SEK 192.9 million (4,554.9), resulting in an equity ratio of 45.5 per cent (92.8). Interest-bearing liabilities totalled SEK 5.4 million (47.1). Employees The number of employees decreased during the first nine months of 2001 from 2,666 to 887 at 30 September. On 30 October, the company employs around 770 people. By 31 December the number of employees is expected to total around 650, excluding those whose employment has already been terminated. This is due to the streamlining of the organisation carried out during the autumn. Corporate staff has been reduced to 12 employees. Framfab's new strategy Framfab is an Internet consulting and solutions provider, specialising in developing Internet-based solutions that improve the interaction between our clients and their customer and employee base. Framfab's key strengths are to work together with our clients to exploit the online potential of their brands, products, and services, driving their online sales and marketing, and saving cost by making online user interaction more efficient. Framfabs focus is on creating excellent usability on all digital devices based on user-centric concepts, creative design and innovative technology. Framfab delivers measurable results for their clients. Outlook for 2001 The Board maintains its estimate that Framfab will show operating profit (EBITA) at some point during the fourth quarter of 2001. Furthermore the Board believes that the company's liquidity is sufficient to sustain operations until the company starts to generate a positive cash flow, which is expected to happen sometime during the first quarter of 2002. Share information Losses after tax for the period January-September 2001 totalled SEK 2,568.9 million (86.0), which is equivalent to SEK -9.26 (-0.67) per share. On 30 September 2001, shareholders' equity per share amounted to SEK 0.41 (32.20). Following the new stock issues, there were 474,682,438 registered shares in the Parent Company as of 30 September 2001. As of 30 October, there were 474,682,438 registered shares in the Parent Company. In the event of full utilisation of the outstanding warrants, the total number of shares may rise by 10,771,340. The Parent Company Since the beginning of March, the parent company has been purely a holding company running staff functions, following the transfer of the Swedish consultancy activities to the subsidiary Framfab Sverige AB. For the period January-September 2001, net revenue amounted to SEK 144.7 million (478.9), of which SEK 43.8 million (30.4) was attributable to internal invoices. Profits after net financial items totalled SEK - 1,822.8 million (46.8). This figure includes write-downs of shares in subsidiaries in the amount of SEK 1,200.5 million (0.0), and write-downs of other financial assets in the amount of SEK 379.1 million (0.0). Investment in fixed assets totalled SEK 652.3 million (2,123.0), where of the main part is capital contribution to subsidiaries through conversion of loans. New stock issues have gen-erated SEK 286.9 million for the company, after issue costs. At 30 September, the company's liquid assets totalled SEK 85.3 million (451.4). Accounting principles This interim report has been drawn up in accordance with the recommendation of the Swedish Financial Accounting Standards Council RR 20 concerning interim reports. The company applies regulation RR 9 concerning income tax, and has chosen not to capitalise deficit payments. Otherwise, the accounting principles applied are unchanged compared to the preceding year. Upcoming reports The year-end report for 2001 as a whole will be published on 13 February 2002. Stockholm, 30 October 2001 , Framtidsfabriken AB (publ) The Board of Directors For additional 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 The press office, +46 70 973 75 16, or visit www.framfab.com, where the management's presentations of the quarterly reports for January- September 2001 are available. Audit report We have reviewed this Interim Report and have thereby complied with the recommend-ation issued by FAR, the Swedish Institute of Authorised Public Accountants. Compared to an audit, a review is essentially limited. Nothing has, however, emerged which would indicate that this interim report does not comply with the requirements of the Swedish Annual Accounts Act. Stockholm, 30 October 2001 Lars Marcusson Anders Malmeby Authorised public accountant Authorised public accountant ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/10/30/20011030BIT00760/bit0002.doc The Full Report http://www.waymaker.net/bitonline/2001/10/30/20011030BIT00760/bit0002.pdf The Full Report