Interim report, 1 january - 31 march 2001

· Commission income for the first quarter rose by 27% to 54.7 m (43.2 m). Clients from Europe other than Sweden, the largest market, accounted for 38% of the quarter's income. US clients represented another 10%. Revenues rose for the last 12 months by 60%, compared to the preceding 12 month period. · Operating earnings before depreciation and net financial items increased by 11% to SEK 17.4 m (15.7 m). · Earnings before tax were up by 16%, from SEK 10.4 m to 12.1 m. · Trading on stock exchanges other than Stockholm accounted for 47% (27%) of the quarter's commission income. · The share of automatic order routing increased by 24 percentage points in the period, to 61% (37%) of commission income. · NeoNet linked up to the London Stock Exchange (LSE) for electronic trading in January. · NeoNet received membership of Euronext Paris in January, with an electronic trading link-up scheduled for the third quarter of this year. · NeoNet signed an agreement with US brokerage house and investment bank Jefferies & Co. Inc. in March, implying Jefferies' proprietary trading system and clients connecting electronically to NeoNet's electronic execution network. This deal offers 1,700 US institutional clients direct trading access on several key European stock exchanges through NeoNet. · NeoNet reached an agreement with The BRUT ECN, one of the major Electronic Communications Networks (ECNs) in the US, in April. This deal offers NeoNet access primarily to NASDAQ, but also the possibility of offering access to the NYSE and regional US exchanges. NeoNet client link-ups to NASDAQ through BRUT are scheduled to start early next year. · Investments, primarily in NeoNet's electronic execution network, were SEK 11.9 m for the period (7.7 m). · The consolidated equity ratio was 48% (18%). The closing balance of liquid assets was SEK 272.7 m (131.8 m). GROUP Operations NeoNet provides services relating to the electronic intermediation of equity transactions for institutional investors and broker-dealers, operations that are based on NeoNet's proprietary trading system. At present, NeoNet offers direct electronic trading access on the London, Frankfurt, Stockholm, Helsinki and Copenhagen Stock Exchanges, while also offering manual trading on the above exchanges, as well as the Oslo Stock Exchange. NeoNet has clients in ten European countries and the US. NeoNet received membership of the Euronext Paris exchange in January; development modifications for connecting NeoNet's electronic execution network are continuing according to plan. Full-scale electronic trading is scheduled to start in the third quarter. The inception of NeoNet's manual trading on Euronext Paris has been delayed as a consequence of the current settlement system changeover for the Paris Stock Exchange and with its clearing partners. Now, manual trading is expected to start just before electronic trading, during the third quarter. NeoNet's electronic execution network linked to the LSE on 31 January-in effect, clients had electronic trading access to the LSE for just over one month in the first quarter. Commission income from trading on the LSE amounted to nearly 2% of total quarterly commission income. In March, NeoNet reached an agreement with US brokerage house and investment bank Jefferies & Co., Inc., implying Jefferies' proprietary trading system and clients connecting to NeoNet's electronic execution network. Thereby, 1,700 US institutional clients will gain access to several key European exchanges through NeoNet. NeoNet reached another deal with The BRUT ECN, a major US ECN in April, a deal offering NeoNet access to NASDAQ. Access to the NYSE and regional US exchanges is a further possibility. NeoNet client link-ups to NASDAQ through BRUT are scheduled for early next year. The group employee headcount at the beginning and end of the quarter was 62 (49). Revenues and Earnings Consolidated commission income increased to SEK 54.7 m in the period, against SEK 43.2 m one year previously, a 27% increase. For the last 12 months revenues rose by 60% to 172.4 m, compared to the preceding 12- month period (107.6 m). The gains are mainly due to NeoNet's expansion on the US market, and existing European clients' increasing trading through NeoNet. Commission Income by Clients' Geographical Location, First quarter 2001 Sweden 28,5 52% Other Nordic countries 1,8 3% Europe 18,9 35% US 5,5 10% Total 54,7 100% Average daily trading value was SEK 1,669 m in the first quarter, up 10% on the SEK 1,522 m achieved for the corresponding period of 2000. Rolling 12-month daily trading values are 32% up on the corresponding point in 2000. [REMOVED GRAPHICS] The sector experienced a significant share price downturn and reduced trading volumes in the first quarter of 2001, which have resulted in a significant contraction in turnover on European stock exchanges. For example, on 15 March, the Stockholm Stock Exchange's OMX index was 36% down on one year previously; the corresponding downturn for the Helsinki Stock Exchange's HEX index was 47%. Total turnover on these exchanges declined by 1 and 6% respectively in Q1 compared to the corresponding period of the previous year. Against this background, the value of those equity transactions NeoNet intermediates (+10%), and the commission income and earnings it has achieved (27%), are very positive. Operating earnings before depreciation and net financial items rose by 11% to SEK 17.4 m (15.7 m). The operating margin was 32%. Depreciation expenses rose by SEK 1.4 m, the result of continued investments in systems development intended to enable NeoNet's sustained robust expansion. Consolidated earnings before tax were SEK 12.1 m, against SEK 10.4 m in the previous year (+16%). Quarterly Earnings SEK m Q1 '00 Q2 '00 Q3 '00 Q4 '00 Q1 '01 Commission income 43.2 37.0 34.3 46.3 54.7 Total operating revenue, inc. net 37.3 31.3 28.7 43.2 52.3 interest income Operating earnings before net 15.7 8.1 5.3 10.9 17.4 interest income and depreciation Earnings before tax 10.4 1.1 -2.3 6.7 12.1 First-quarter 2000 earnings gained a major positive impact from extreme share price and turnover levels on exchanges. Earnings per share were SEK 0.19 (0.22), the decline due to an increased number of shares resulting from new issues, mainly coincident with NeoNet's initial public offering in October 2000. Investments Investments in the period were SEK 11.9 m (7.7 m), and primarily relate to enhancements of the group's electronic execution network. Liquidity and Financial Position The closing balance of consolidated shareholders' equity was SEK 246.2 m (63.9 m); liquid assets were SEK 272.7 m on 31 March, against SEK 131.8 m on 31 March 2000. Of the total closing balance of liquid assets, SEK 185.4 m (121.0 m) were blocked funds-collateral for trading credits drawn down. The consolidated equity ratio at the end of the period was 48% (18%). NeoNet's capital adequacy ratio was 99% at the end of the period (24%). Outlook NeoNet operates exclusively on the execution of equity transactions on major stock exchanges on behalf of institutional clients. NeoNet generates revenues from commission based on the value of transactions executed. NeoNet does not pursue any proprietary trading, and accordingly, revenues and earnings in any given period are a function of client activity and quoted share prices. Accordingly, the value of daily trading volumes, and consequently revenues and earnings, are subject to short-term variations within certain limits. NeoNet expects to achieve sustained revenue growth through its brisk expansion by connecting to more stock markets for automatic order routing and by adding more clients in more countries. NeoNet also anticipates an increase in the share of its existing clients' trading. Link-ups to the LSE and forthcoming connections to Euronext Paris and NASDAQ, plus the ongoing accumulation of a US and European client base, are all examples of such market initiatives. The primary strategy is to offer access to 80% of the market capitalization of European stock exchanges before year-end 2001, and to offer access to 80% of global stock market capitalization before year- end 2003. The over-arching financial objective is to post minimum annual sustainable revenue growth of 50%, and earnings before depreciation and net financial items of a minimum of 25% of commission income. PARENT COMPANY The non-operational parent company pursues certain over-arching functions such as group management, finance, business development, IR and PR. The parent company posted earnings before tax of SEK -2.0 m (-1.1 m) for the period. In March, just over 49,000 subscription rights for new shares in the company were exercised, implying a SEK 2.7 m increase to restricted equity. The new issue is scheduled for registration in April, whereupon the number of shares will increase by 986,980 to a total of 41,574,980 shares. Annual General Meeting The AGM will be held on 17 May 2001. The Board has decided to propose to the AGM that no dividends are paid. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/04/25/20010425BIT00300/bit0002.doc The full report http://www.bit.se/bitonline/2001/04/25/20010425BIT00300/bit0002.pdf The full report