Year-end Report 1999

Framtidsfabriken AB (publ) Year-end Report 1999 Continued strong and profitable growth during the fourth quarter of 1999 * Sales increased during 1999 by 240 percent to 355.0 (104.4) MSEK. During the fourth quarter sales amounted to 148.1 (36.9) MSEK. * The operating profit after depreciation of tangible fixed assets (EBITA) for 1999 amounted to 53.6 (16.2) MSEK, an increase of 231 percent compared with 1998. Corresponding margin was 15.1 (15.5) percent. The operating profit after depreciation of tangible fixed assets for the fourth quarter of 1999 amounted to 17.1 (8.4) MSEK. * The profit after financial items (EBT) for 1999 amounted to 39.7 (14.7) MSEK, which signifies a profit margin of 11.2 (14.0) percent. The corresponding profit for the fourth quarter of 1999 amounted to 10.8 (8.4) MSEK. * The number of employees rose during 1999 from 145 to 727, an increase of 582. * Framfab set up Framfab Innovation in order to leverage business ideas from Framfab's employees, customers or the market. * Framfab and Guide published the intent to merge and to create one of the world's largest Internet consulting firms. During the year Framfab has acquired, merged with, or signed letter of intent with 13 companies in Sweden and abroad. * Through the acquisition of Guide Konsult AB, Framfab has considerably increased its access to skilled and experienced personnel. This, combined with a very strong market outlook, makes Framfab believe in continued sales growth with profitability before goodwill-depreciation during 2000. Framfab's business concept is to create new business for the network economy through digital and interactive services. Framfab today comprises approximately 1,700 employees in 41 offices located in Gothenburg, Halden, Hamburg, Cologne, Copenhagen, Linköping, London, Lund, Malmö, Palo Alto, Paris, Skövde, Stockholm, Uppsala and Västerås. Framfab's customers include 3M, AstraZeneca, AXA, Electrolux, Ericsson, France Telecom, Ikea, the International Red Cross, the SAAB group, Tele Danmark, Vattenfall, Volvo Car Corporation and the Volvo Group. Framfab is listed on the OM Stockholm Exchange "O" list (ticker FTID). Results and financial position Year 1999 Sales increased to 355.0 (104.4) MSEK that is an increase of 240 percent, of which 150 percent was organic growth. Operating profit after depreciation of tangible fixed assets during 1999 increased to 53.6 (16.2) MSEK, corresponding to a profit margin of 15.1 (15.5) percent. The operating profit includes a capital gain of 3.5 MSEK from the sale in May 1999 of 80 percent of the shares in Bredbandsbolaget. The profit after financial items amounted to 39.7 (14.7) MSEK, which gives a profit margin of 11.2 (14.0) percent. Group Group MSEK 1999 1998 Sales 355.0 104.4 Sales growth 240.2 % Operating profit after depreciation of tangible 53.6 16.2 fixed assets Operating margin after depreciation of tangible 15.1 % 15.5% fixed assets Operating profit 36.2 14.5 Operating margin 10.2 % 13.9% Profit after financial items 39.7 14.7 Profit margin 11.2 % 14.0% The group's liquid assets as of 31 December 1999 amounted to 223.7 (38.0) MSEK. Through a new share issue in connection with listing on the "O" list (ticker FTID) of the OM Stockholm Exchange in June 1999 Framfab raised 231.6 MSEK after issue-related expenses. In addition, the firm during 1999 raised a total of 61.8 MSEK through payments of warrant premiums and exercising warrants. Shareholders' equity as of 31 December 1999 amounted to 668.8 (82.5) MSEK, giving an equity/assets ratio of 85.2 (76.0) percent. Interest-bearing liabilities amounted to 6.4 (0.2) MSEK. Framfab's cash flow from current operations amounted to -17.7 (-13.0) MSEK. Investments in tangible fixed assets have been made, amounting to 27.2 (4.9) MSEK during 1999. The relatively low investment volume is explained by the fact that Framfab records computer purchase as current expenses. During the year, expensed computer equipment was acquired to the amount of approx. 20 MSEK. Had this computer equipment instead been capitalised in the balance sheet, the earnings before depreciation (EBITDA) margin would have increased from 16.9 percent to 22.5 percent. The companies acquired during 1999 were included in the financial as follows (Framfab's ownership share in parenthesis): Netsolutions (100%) 1 May Networkers (100%) 1 May M.O.R. (70%) 1 May Vivid Edge (51%) 1 September Wcube (95%) 1 October Production Medialab (100%) 1 November Springway (100%) 1 December The number of employees rose during 1999 from 145 to 727, an increase of 528 (more than 400%). Of the increase, about 350 employees have been recruited, corresponding to a recruited growth of 240 percent. The average number of employees amounted to 367 (109) persons. As of 15 February 2000, the number of employees amounts to approximately 1.700, including employees in Mindfact, Guide and eBizApps.com (see "Acquisitions effected during 2000" below). October - December 1999 The operating profit after depreciation of tangible fixed assets during the fourth quarter of 1999 amounted to 17.1 (8.4) MSEK, which corresponds to a margin of 11.5 (22.9) percent. The profit after financial items amounted to 10.8 (8.4) MSEK, corresponding to a profit margin of 7.3 (22.7) percent. The quarter has been characterised by a very high organic growth in number of employees. Sales increased by 301 percent to 148.1 (36.9) MSEK compared with the same period in 1998. In the following table the group's sales and profits for 1998 and 1999 are summarised by quarters. Group 1998 1998 1998 1998 1999 1999 1999 1999 MSEK Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Sales 22.5 21.4 23.6 36.9 32.1 79.9 94.9 148.1 Operating profit after depreciation of 7.4 -1.5 1.9 8.4 6.1 16.8 13.7 17.1 tangible fixed assets Operating profit 7.0 -2.0 1.5 8.0 5.6 13.0 8.3 9.3 Profit after financial items 7.0 -2.1 1.4 8.4 5.8 13.1 10.0 10.8 The parent company During 1999, the net sales of the parent company amounted to 232.4 (61.1) MSEK. The profit after financial items amounted to -111.0 (11.3) MSEK. The significant loss relates to the fact that the parent company took over the operations of Netsolutions and as a consequence was forced to depreciate the value of the shares in the subsidiary Netsolutions with 125.1 MSEK. This is also the main reason behind the group's large negative non- restricted reserves. Investments in tangible fixed assets amounted to 27.2 (4.5) MSEK. As of 31 December 1999, the parent company had liquid assets of 201.7 (25.2) MSEK. Market and sales During 1999, the market for Internet services showed continued strong growth in volume and complexity. Companies' Internet ventures are becoming increasingly business-critical and thereby more sophisticated; strategically, technologically and communicatively. International customers increasingly seek to co-ordinate their Internet ventures across national borders. During the fourth quarter, sales volume increased strongly through new sales to A-lotterierna, Bosch, MacDonald's Denmark etc., but also through continued business with existing customers such as AXA, Bredbandsbolaget, Electrolux, Ericsson, IKEA, Volvo AB, Volvo Cars etc. Framfab has a good position as a strategic supplier of turnkey Internet services. The company works with several large multinational customers and carry out increasingly large, international and business-critical projects. Framfab is today the leading Internet consulting firm in Europe and one of the largest in the world. Outlook for 2000 Through the acquisition of Guide Konsult AB, Framfab has considerably increased its capacity and access to skilled and experienced personnel. This, combined with a very strong market outlook, makes Framfab believe in continued sales growth during the year 2000. The ratio of product-related sales is expected to increase and the internationalisation to be intensified. The goal to be the leading player in mobile and broadband Internet is unchanged. The efforts in intelligent vehicles and homes will be extended. One challenge for the year will be to quickly integrate acquired firms to get leverage of their different competencies and to increase their profitability to the group's level. The merger with Guide is expected to bring certain integration costs during the first two quarters. The start up of Framfab Innovation will lead to certain pressure on profitability. Framfab believes that during 2000, sales growth with profitability before amortisation of goodwill will continue. Acquisitions during 1999 In April and May, Framfab entered a phase of accelerated growth by acquiring all shares in Netsolutions and in Denmark's leading Internet consulting firm, Networkers, as well as 70 percent of the shares in the advertising agency M.O.R. These acquisitions were effected through directed new share issues. In August, a final agreement was signed concerning the acquisition of 51 percent of the London-based Internet consulting firm Vivid Edge. The following month, a final agreement was signed concerning the acquisition of 95 percent of the French Internet consulting firm Wcube. In November, a final agreement was signed concerning the acquisition of Production Medialab in Gothenburg. The purchase settlement comprised 109,431 shares in Framfab as well as a supplementary settlement based on goal achievement during 2000. Production Medialab contributes leading competence in new interactive broadband services based on moving images and web technology. In November, an agreement was signed on the acquisition of operations in the consulting firm Avrita. The purchase was made in cash. Avrita contributes leading competence in its sector, 3D simulation in real time. In December, a final agreement was signed concerning the acquisition of the Internet consulting firm Springway in Malmö. Springway develops e- business solutions with the focus on business benefits. The purchase settlement comprised 25,000 shares in Framfab as well as a supplementary settlement based on goal achievement during 2000. Acquisitions effected during 2000 In December, a letter of intent was signed for the acquisition of the Internet consulting firm eBizApps.com of Silicon Valley through shares in Framfab. eBizApps.com's experienced management team will initiate Framfab's expansion on the American market. Up to December, the firm had rapidly grown to 15 employees and has specialised in e-commerce solutions. In December, Framfab signed a letter of intent with the German Internet consulting firm Mindfact. Mindfact was set up in 1995 and in December had 105 employees. Mindfact is a supplier of turnkey Internet consulting services with two offices in Cologne and a third one in Hamburg that opened in January 2000. The firm will be Framfab's base for further expansion in Germany, Switzerland and Austria. Framfab will initially acquire 90 percent of the shares in Mindfact, and is to acquire the remaining 10 percent during the first quarter of 2001. In December 1999, Framfab made an offer for the shares in Guide Konsult AB. For every ten shares in Guide, three newly issued shares in Framfab were offered. By the end of the initial offer period, shareholders representing 98 percent of the votes in Guide had accepted the offer, after which Framfab extended the offer period until February 10. Final outcome after the extended period will be communicated February 16. Through the acquisition, the firm is given the possibility to meet demands from existing markets while freeing resources to be able to focus on new customers and new ventures in Europe and the USA. Guide contributes leading edge technological skills, especially in mobile data communication, competence in strategic consulting and project management, as well as contributing solid experience of integrating business processes with new technology. At the end of 1999, Guide had 778 employees. Framfab's acquisition of Guide is expected to reinforce the expanded firm's growth and earning potential. Framfab's sales during 1999, pro forma including Guide's activities, amounted to 997.1 MSEK (355.0 MSEK for Framfab excluding Guide). The operating profit before goodwill pro forma amounted to 54.9 MSEK (53.6 MSEK excluding Guide). The acquisition is expected to bring goodwill amounting to approx. 1,400 MSEK. The acquisition is estimated to have a positive effect on cash flow per share in Framfab from 2000 on. Framfab Innovation During 1999 Framfab Innovation was set up to utilise business ideas from Framfab's employees, customers or from the market outside consulting. The firm is to offer innovators access to Framfab's resources and accumulated experience as an Internet entrepreneur and to create value together through a long-term commitment. Framfab Innovation initially has 40 MSEK at its disposal. The first firm developed within Framfab's walls was Bredbandsbolaget, which since last year has operated as an independent firm. Framfab currently holds 10 percent of Bredbandsbolaget. Corporate expansion During 1999 and the current year, in addition to acquisitions mentioned, new offices have been set up in Gothenburg, Hamburg (2000), Linköping, Copenhagen, Lund, Malmö, Stockholm, Västerås and Uppsala. Today, Framfab has 41 offices in seven countries. Share data Profit after tax for 1999 amounted to 21.3 (9.9) MSEK, which corresponds to 2.04 (0.92) SEK per share. Shareholders' equity per share as of 31 December 1999 was 51.04 (11.78) SEK. The parent company had 13,102,555 registered shares as of 31 December 1999. During 1999, the number of shares has increased by a total of 6,095,774 through non-cash issues in connection with the acquisition of Netsolutions (2,536,687), Networkers (900,000), M.O.R. (109,958), Wcube (98,541), Production Media Lab (109,431), Hypernode (682) and Springway (25,000); through new share issues in connection with Framfab's listing on the stock exchange (2,000,000) and through exercise of warrants (315,475). During 2000, the number of shares has increased through non-cash issues in connection with the acquisition of Guide by (2,072,518), as well as through exercising warrants (47,500). Upon fully exercising outstanding warrants the number shares will increase by a further 1,437,025. Split At the extraordinary general meeting on 19 January it was decided to carry out an 8:1 split. The last day of trade in the share before split is Friday 3 March. The first day of trade in the share after split will be Monday 6 March. Ownership structure Foreign ownership of Framfab increased further during the fourth quarter of 1999 and on the balancing date amounted to 44 percent. Scheduled reports The Annual General Meeting of Framtidsfabriken AB will take place on 2 May 2000. The annual report will be available at Framfabs' offices from the first week of April. The interim report for the first quarter will be published on 2 May 2000. The interim report for the second quarter will be published on 24 August 2000. The interim report for the third quarter will be published on 31 October 2000. The Full-year report will be published on 14 February 2001. Stockholm, 15 February 2000 Framtidsfabriken AB (publ) The Board For further information, please contact:: Chief Financial Officer, Johan Haeggman 08-545 25 800 johan.haeggman@framfab.se Investor Relations Manager, Niclas Lilja 08-545 25 809 niclas.lilja@framfab.se Press Relations Manager, Ola Kallemur 08-545 25 806 ola.kallemur@framfab.se ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/02/15/20000215BIT00130/bit0001.doc The full report http://www.bit.se/bitonline/2000/02/15/20000215BIT00130/bit0002.pdf The full report