Interim report January-September 2001

INTERIM REPORT JANUARY-SEPTEMBER 2001 * The result for the third quarter was a loss of MSEK 14 and the accumulated loss for the ninemonth-period January-September was a loss of MSEK 176. A write-down in the value of the portfolio accounts for MSEK 150, none of which was charged during the third quarter. * Equity of MSEK 602 or SEK 5.53 per share. Equity ratio of 98 per cent * Investments in portfolio companies amounted to MSEK 163 during the period (of which MSEK 49 in Q3). * Closing liquid funds amounted to MSEK 267 or SEK 2.45 per share * Measures approved and taken to reduce cost base to MSEK 25, on an annual basis. All winding-up and restructuring costs (MSEK 8) were charged against the quarter´s income. * New outside investors such as Siemens Mobile Acceleration GmbH, Skandia, MIC and Swedish Industrial Development Fund invested a toal amount of MSEK 63 in 4 of the portfolio companies during the third quarter at levels corresponding to the average aquisition price. Ledstiernan is building Europe's leading seed and venture capital company with a special focus on Mobile Communication. FINANCIAL DEVELOPMENTS Ledstiernan incurred a loss of MSEK 14 for the third quarter 2001 before net financial items. The accumulated loss for the nine month period amounted to MSEK 176. This figure includes write-downs of MSEK 150 in the value of the portfolio, of which Digital Mobility accounted for MSEK 74, as reported in the half-yearly report. No further write-downs were made during the third quarter. All winding-up and restructuring costs, amounting to MSEK 8, for the adaption of the business to the prevailing market situation were charged against the quarter´s income. This means that as of the fourth quarter the cost base will be running at an annual level of MSEK 25. Accumulated write-downs in the value of the existing portfolio amount to MSEK 250, of which approximately MSEK 150 should be regarded as provisions and around MSEK 100 as proven losses. Ledstiernan's operating expenses consist primarily of personnel costs, rent, and direct costs associated with its investment activities. These have increased in relation to the same period last year following the expansion of the organisation. However, operating costs will be markedly lower in the future. A cost-reduction programme involving cutbacks was implemented during the third quarter, including the closure of the office in London and other adjustments that will bring the annual cost base to MSEK 25. PORTFOLIO DEVELOPMENTS The company continued to focus on developing its existing portfolio. No new investments were made during the third quarter. Investments in existing portfolio companies amounted to MSEK 49 during the period. Total investments during the first nine months of the year amounted to MSEK 163, of which second phase investments in existing portfolio companies accounted for MSEK 158. Prior to the finalisation of the quarterly accounts, each company in the portfolio was evaluated to determine whether it is overvalued or undervalued in relation to its acquisition value. The portfolio companies are stated in the books at the lower of acquisition value and estimated market value. Ledstiernan also presents the portfolio in the section entitled supplementary information at acquisition value, which is identical to invested capital, as well as at transaction value in those cases where a third party has provided a high level of financing or, if the company's shares are listed on a stock market, at the latest price paid for the shares as at September 30th 2001. During the third quarter, several major financing projects involving new, outside parties, were arranged. They are: q IP Unplugged AB received MSEK 48 from the Swedish Industrial Development Fund and Mobile Internet Capital, a Japanese company in which NTT DoCoMo has an interest, and Ledstiernan who invested 22 MSEK on a postmoney valuation of MSEK 178. q Mint, for which Skandia has provided financing of MSEK 20, of which MSEK 10 on a valuation of MSEK 100 post-money, together with an MSEK 10 convertible loan. q The Phone Pages has received MSEK 10.8 from Siemens Mobile Acceleration GmbH, which has subscribed to shares corresponding to 10.7 per cent of the company giving a post-money valuation of MSEK 100. q RoamInfo has received MSEK 6 from the Swedish Industrial Development Fund on a postmoney valuation of MSEK 23, to launch a unique access gateway for mobile Internet known as RoamConnect. At the end of the period there were 36 portfolio companies, of which 14 are in the mobile communication focus area, which accounts for 59 per cent of the invested capital (after exercise of options: 63 per cent). During the period, many of the portfolio companies made significant commercial advances. Interesting cases include the following: Ambio - mobile online solution for the property industry - has signed contracts and delivered its system to organisations including Vasakronan, BodenBo and the Swedish Armed Forces, where it is now in operation. CCNOX - a leading firm of IT security consultants. After one year in business, the company has demonstrated its ability to generate stable earnings., which is an on-line B2B flower market giving wholesalers direct access to florists, reached break-even in September. Euroflower's turnover is growing steadily, and the company is moving in the right direction in terms of earnings. Infomakers has signed a contract with SEB to operate a service that will enable SEB to improve its customer service at bank branches via Internet terminals. Incomit has recently started up a number of important paid pilot- projects with Telenor, a world-leading American operator, and other companies. The company simplifies and reduces the cost of creating new telecom services through its products i-Sea - an application server that creates accessibility to information and intelligence in mobile and fixed telecom networks, and i-Sluice - a gateway that provides the network operator with total security when using i-Sea. MGON - one of the leading online computer games portals, has reached a figure of 1.5 million unique visits per month and 50 million hits (Source: DoubleClick). This represents traffic growth of more than 100 per cent during the period. At the beginning of December, it will be launching eSports, a unique concept enabling players all over the world to compete with each other online. With its eSports concept, MGON, together with local ISPs, will be creating portals where gamers compete for championship titles and attractive prizes. Mint - the company that enables you to use your mobile phone for shopping - has further developed its business and entered into an agreements with Stockholm Parkering for the payment of streetparking charges via the mobile phone, a system that was brought into operation in September. Person-to-person payments, via the mobile phone have also been further developed and brought into operation. North Node -The company has developed products to enable online homes/properties, and broadband services for the energy, security and home help sectors. The company has distribution and marketing agreements with leading players on the market such as ABB, Momentum, Fiberdata, Skanska, and Bravida, as well as Intelli of Norway. Its customers also include Örebro Bostäder, Markvärden i Göteborg, Karlstadsbostäder and Platzer Bygg. Repeat IT - has developed Wilma III, a system of products for fixed wireless broadband. The products have recently been finalised and tested in a pilot project on Ljusterö, which has resulted in orders from Norrtälje Energi, Katrineholms Energi and other companies. Repeat IT has a number of co-operation agreements, including one with Philips Communication in Sweden, for sales to local and regional authorities. RoamInfo - Together with operators in 10 European countries, RoamInfo is launching a unique access gateway for mobile internet, known as RoamConnect. This product provides lower cost access to mobile internet. Initially, the services will be available via Halebop (Telia) and Zed for Business (Sonera). Ticket Anywhere - has developed a market-leading platform for the distribution and control of mobile documents of value. Customers include Sandrews, which will initially be using Ticket Anywhere's platform at all its cinemas in Stockholm, the Öresund bridge, Nordnet and Svenska Spel. Voice Provider is the leading company in Sweden in the development of voice-control applications. The company has entered into agreements to deliver its voice-control services to Expressen, Aftonbladet, Nordnet, Svenska Spel and Swebus. DIVESTMENTS AND EXIT PROFITS DURING NINE-MONTH PERIOD The 48 per cent holding in Mobile Garden, a greenhouse company, was sold in May to Livförsäkrings AB Skandia for a capital gain of MSEK 1.7. The 32.5 per cent holding in Hotvision was sold in July in return for a 6.5 per cent interest in Kamera, a new company that was formed by leading online TV company Kamera Interactive and into which Hotvision was injected. ALLIANCES In May, Ledstiernan entered into an alliance with Mobile Internet Capital (MIC), a Japanese seed and venture capital company. The object is to support those of Ledstiernan's portfolio companies that wish to enter the Japanese market, to handle joint investments in mobile communication in Japan and the Nordic region, and to exchange information and experience. NTT DoCoMo, Japan's largest mobile telecom operator, has a 30 per cent interest in MIC. Two effects of the partnership are that MIC has invested in IP Unplugged and that an extensive programme has been arranged for our portfolio companies to visit Japanese customers and prospective investors. IBM and Ledstiernan signed a Technical Alliance Agreement in October, making IBM a preferred solution provider for Ledstiernan's portfolio companies. As a result of this agreement several portfolio companies have entered into arrangements with IBM. One of these is Ambio, for which IBM and AU-System (amongst others) are developing its Focuz- system, a mobile solution for property companies. INVESTMENTS AND SECOND PHASE INVESTMENTS Of the period's total investments of MSEK 163, of which second phase investments amounted to MSEK 158, the following may be mentioned: In March, together with Denmark's 2M Invest and the Norwegian company Telenor Venture, Ledstiernan made a second phase investment totalling MSEK 6 - MSEK 2 each - for an interest of 10 per cent each in Voice Provider, which is developing solutions for voice-controlled services. In June, Ledstiernan made a second phase investment of just over MSEK 6 together with Telia Mobile in TicketAnywhere to give it 17.2 per cent of the votes and capital. TicketAnywhere is developing a platform for the mobile handling of documents of value, such as tickets, etc. In September, Ledstiernan, Purpose and NextGear made a joint investment for a total value of MSEK 9.3 in Ekonomi24, to give Ledstiernan an interest of 26.3 per cent. Also in September, Ledstiernan, together with MIC and the Swedish Industrial Development Fund, invested a further MSEK 48 in IP Unplugged in the form of a convertible loan. Following conversion, Ledstiernan's interest will amount to 49.7 per cent of the company. In May, a new investment was made together with Telenor Ventures in North Node, one of the Nordic region's leading providers of hardware and software for intelligent homes and property. North Node's products and services are already in operation with several leading property owners. Ledstiernan and Telenor Ventures have each invested MSEK 5 to give them a combined 38.8 per cent interest in this company; they also have an option to invest an additional MSEK 11 for a further 28.2 per cent in the company, which would give them each an interest of 33.5 per cent. North Node has entered into an alliance with ABB. At the end of the period, Ledstiernan had interests in 36 portfolio companies (of which three are being discontinued), acquired at a total investment cost of MSEK 590, or SEK 5.42 per share. Of the capital invested in the existing portfolio, write-downs of MSEK 100 were made as of December 31st 2000 and of MSEK 150 as of June 30th 2001. The book value of the portfolio at September 30th 2001 thus amounts to MSEK 340, or SEK 3.12 per share. VENTURE CAPITAL MARKET AND FUTURE PROSPECTS THE SECTOR It will be some time before the VC sector turns back up. There is great interest and substantial amounts of capital from investors in the VC sector for investments in quality projects, but at relatively moderate valuation levels. The key to a general recovery within the mobile sector and mobile internet projects lies very much with mobile operators, who determine the pace of investment in the infrastructure and are central to the development of new services. The entire mobile operator and infrastructure industry needs to achieve financial equilibrium and stable profitability before the VC sector can show any general signs of a strong recovery. The good news is that both data and mobile communication are still displaying impressive growth. There are also distinct signs that the new technology can generate new sources of revenue - for example, mobile Internet is performing strongly in Japan/Korea, and messaging/SMS in Europe. LEDSTIERNAN For Ledstiernan, the above scenario, coupled with our cash position, means that we have developed a strategy that involves: · focusing on and working hard with our existing portfolio companies. There are promising opportunities for new investments, but only if we share the investment with other strong financiers. · cost control in Ledstiernan and our portfolio companies. Ledstiernan has identified and decided upon measures that will gradually reduce the annual cost base to MSEK 25 at the forth quarter 2001. · a high level of activity in our financing activities in order to attract new external capital for the portfolio companies. We have completed four large-scale financing arrangements bringing new external investors into portfolio companies at valuation levels that match our acquisition value. · Exit-activities put on hold. Ledstiernan has rejected offers to acquire some of our portfolio companies because of excessively low values. The above strategy means that, before exits and investments in new companies, our liquid assets are sufficient to finance our portfolio companies until the end of 2004, by when the market will, hopefully, have turned back up. Exits at interesteng levels should also be possible during this period. SIGNIFICANT EVENTS AFTER END OF PERIOD North Node, the portfolio company which provides brightHome (a complete system for broadband connected homes and properties for the supply of energy, security and home-help services) has entered into an alliance with ABB whereby ABB will market and sell North Node's products and services as part of its package of cost-effective IP-based property services. This new strategic partnership between ABB and North Node will increase the ability of property-owners, companies and private persons to exploit the infrastructure provided by the open city network. A decision has been made by Avisator to wind up the company, the Swedish part of which was sold in October to Provisa Information AB. The remaining parts are being sold, and Ledstiernan expects to recover its book value of MSEK 4. Ledstiernan expects to recover some MSEK 2, over and above their book value, which is zero, from Digital Mobility and Linkpool, two other companies that are being wound up. The above three companies will thus not generate any further losses. LIQUID FUNDS AND FINANCIAL POSITION Ledstiernan's closing liquid funds amounted to MSEK 267, or SEK 2.45 per share. Ledstiernan has no loan liabilities. By the end of 2001, after expected second phase investments in portfolio companies and administrative costs, liquid funds are expected to amount to some MSEK 225. TAX Ledstiernan's request for advance information regarding its application for investment trust status is with the Supreme Administrative Court, whose decision is expected in the autumn of 2001. The Corporate Taxation Committee of Enquiry's proposal for new corporate taxation is another important development that Ledstiernan is following closely. Accumulated loss allowances amounted to MSEK 96 at December 31st 2000. The write- downs of MSEK 250 in the value of the portfolio become deductible for tax purposes in the event of the assets in question being sold. PERSONNEL The number of employees at the end of the period was 14 (11), of whom three were abroad. Stockholm, November 12th 2001 LEDSTIERNAN AB (publ) Johan Wachtmeister President This report has not been examined by the company's auditors. Financial Information Year-end release 2001 February 12, 2002 Annual report 2001 March 2002 Annual General April 25, Meeting 2002 2002 ------------------------------------------------------------ This information was brought to you by Waymaker The following files are available for download: The full report The full report