Interim Report January - September 1999

Interim Report January - September 1999 *Net sales rose 50%, to SEK 569.3 (380.2) million. *Profit after financial items tripled to SEK 45.9 (15.7) million. *Earnings per share after tax advanced to SEK 4.39 (1.50). *From July 1, the HP Tronic business has been consolidated in the accounts. *New major contracts in telecommunications were signed for next year. Market trends Contract manufacturing is a high-growth industry. The trend towards companies focusing on their core competencies and subcontracting a larger proportion of their non-core activities continues to gain momentum. This is particularly true in telecommunications, information technology, and medical technology, but even other industries are beginning to realize the advantages of contract manufacturing. One of PartnerTech's strengths is its ability to combine its expertise in development with ample in-house manufacturing capacity. Increasingly, the market for contract manufacturing involves developing and manufacturing complete products, which bodes well for PartnerTech's future. PartnerTech keeps its focus on market needs, and the Company's overall strategy includes the goals of growing organically as well as through acquisitions and of providing for its customers, wherever they are. Net sales, earnings, and profitability In the third quarter of 1999, PartnerTech continued to perform well. The July- September quarter is often somewhat weaker for the Group than the April-June quarter. This is mainly because the number of working days in the third quarter is less than in the second. Also, the Åtvidaberg unit experienced a dip in capacity utilization in September. Market demand remained firm overall, though, with particular strength in Information Technology and Telecommunications. The Group sustained profits at the healthy level of the second quarter. The fundamental reason for this was the Company's robust volume growth since July 1, 1998. Consolidated net sales for the nine months to September 30, 1999, totaled SEK 569.3 (380.2) million. The increase of SEK 189.1 million, or 49.7%, included growth of SEK 171.7 million by comparable units, about 45.2% year-on-year. Profit after financial items for the same period totaled SEK 45.9 (15.7) million. The return on working capital reached 45.9% (17.5), while the return on shareholders' equity advanced to 44.0% (20.0). Quarterly consolidated results SEK Q 2 - Q 3 - Q 4 - Q 1 - Q 2 - Q 3 - millions 98 98 98 99 99 99 Net sales 136.7 122.8 205.5 188.3 209.9 171.1 Operating 9.1 6.3 14.7 9.5 21.1 17.8 * profit Operating 6.7 5.1 7.1 5.1 10.1 10.4 * margin % * Excluding items affecting comparability (SEK -4.1 million in Q41998) Balance sheet, cash flow, and investments At September 30, 1999, working capital equaled SEK 102.9 million, down 3.9%, or SEK 107.1 million, from one year previous and down SEK 6.1 million on the nine months. Excluding working capital of SEK 11.7 million from the HP Tronic business, the decrease was SEK 17.8 million, chiefly owing to reductions in inventories and accounts receivable in relation to sales. Consequently, the ratio of working capital to sales for the Group declined substantially to the preceding year. At September 30, consolidated liquid assets equaled SEK 51.7 (0.1) million, representing an increase of SEK 51.4 million during the period. Net indebtedness shrunk SEK 33.4 million during the first nine months, to SEK 31.1 (64.7) million at September 30. Net investments totaled SEK 41.2 (8.1) million for the period, including goodwill from the acquisition of the assets and liabilities of HP Tronic. The equity/assets ratio was 34.3% (29.9) at September 30, 1999. Employees The average number of employees in the first nine months was 603 (531). The main cause of the increase was the acquisition of HP Tronic (a total of 87 persons), but greater volumes also contributed to the rise. Excluding HP Tronic, staff numbers grew 8.1%, compared to the organic volume growth of 45.2%. Company acquisitions and new assignments The assets and liabilities of the electronics company HP Tronic AB were acquired in the month of June. The operations have been consolidated in PartnerTech's accounts since July 1. Hence, earnings from the HP Tronic business were completely integrated in the results for the third quarter. With the acquisition, PartnerTech has broadened its customer base and reinforced its competencies, primarily in the area of test equipment. During September and October, PartnerTech has signed Letter of Intent of two possible acquisitions. One was Nordisk Kvalitetsproduktion AB, a contract manufacturer in high-speed processing expected to have sales of roughly SEK 120 million in 1999. The other was the Danish medical-technology production unit Troniqa, in the Artema group, which anticipates sales of more than SEK 100 million in 1999. New, major assignments were received from Ericsson and Kreatel and are expected to contribute to healthy development for PartnerTech in the year 2000. Financial information The report for full-year 1999 will be presented on February 10th, 2000. PartnerTech AB, October 26, 1999 Mikael Jonson President The Company's auditors have not audited this interim report. Business concept "PartnerTech is to develop and manufacture electronic products under contract to leading growth companies, primarily in the fields of Telecommunication, Information Technology and Medical Engineering. We are to be a system supplier which, with geographical flexibility and a high level of service, grows and develops with our clients." 1999 1998 1998 Consolidated Income Statement Jan- Jan- Jan-Dec (SEK million) Sept Sept Net sales 569.3 380.2 585.6 Cost of goods and services sold -504.2 -352.5 -539.3 Gross profit 65.2 27.7 46.3 Selling expenses -8.8 -5.4 -8.3 Administrative expenses -8.4 -3.9 -5.2 Items affecting comparability 0.0 0.0 -4.1 Other operating income 0.8 1.4 2.0 Other operating expenses -0.8 -1.3 -1.7 Operating profit 48.1 18.5 29.0 Net financial items -2.2 -2.9 -3.9 Profit after financial items 45.9 15.7 25.1 Tax on profit for the period -12.7 -4.3 -7.9 NET PROFIT FOR THE PERIOD 33.2 11.3 17.2 1999 1998 1998 Consolidated Balance Sheet (SEK Sept 30Sept 30Dec 31 million) ASSETS Fixed assets 88.1 38.5 54.7 Current assets - Inventories 115.1 127.4 115.9 - Accounts receivable 87.8 101.1 129.7 - Other current assets 4.1 3.1 2.2 - Cash and equivalents 51.7 0.1 0.3 Total current assets 258.7 231.7 248.2 TOTAL ASSETS 346.7 270.2 302.9 SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity 118.9 80.8 86.7 Long-term interest-bearing 72.0 64.8 64.8 liabilities Current interest-bearing 10.8 liabilities Total interest-bearing 82.8 64.8 64.8 liabilities Accounts payable 67.2 57.0 85.0 Other current non-interest- 77.9 67.6 66.5 bearing liabilities Total non-interest-bearing 145.0 124.6 151.4 liabilities TOTAL SHAREHOLDERS' EQUITY 346.7 270.2 302.9 AND LIABILITIES Starting with the 1999 semiannual report, the Company has reported its accounts as a group, one consequence of which is changes in the way untaxed reserves and leased assets are reported. Figures in this report for previous periods have been restated in this report on the new accounting principles. Consolidated Statement of 1999 1998 1998 Changes in Financial Position (SEK Jan- Jan- Jan-Dec million) Sept Sept Net profit 33.2 11.3 17.2 Reversal of depreciation 7.8 5.1 7.6 Capital gain/loss 0.0 -0.1 -0.3 Change in deferred tax liability0.0 0.0 2.8 Change in working capital 34.5 -20.9 -13.1 Net investments -41.2 -8.1 -26.5 Cash flow after investments 34.3 -12.7 -12.3 Change in loans 8.7 5.9 4.1 Change in lease debt 9.3 -0.9 0.9 Dividends -3.0 -1.9 -1.9 Issue of subscription rights, 2.0 - - net CHANGE IN LIQUID FUNDS 51.4 -9.5 -9.2 1999 1998 1998 Key Ratios for the Group Jan- Jan- Jan-Dec Sept Sept Gross margin, % 11.4 7.3 7.9 Operating margin, % 8.4 4.9 5.0 Profit margin, % 8.1 4.1 4.3 Return on operating capital 45.9 17.5 20.4 * (ROOC), % Return on shareholders' equity, 44.0 20.0 23.3 * % Equity/assets ratio, % 34.3 29.9 28.6 * Profitability ratios have been calculated based on the average values at the end of each quarter. 1999 1998 1998 Per Share Data Jan- Jan- Jan-Dec Sept Sept No. of shares at end of period 7,560 7,560 7,560 (thousands) Profit after full income tax 4.39 1.50 2.28 (SEK) Adjusted equity (SEK) 15.73 10.69 11.47 The current warrant program for employees will increase the number of outstanding shares a maximum of 5.3%. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/10/26/19991026BIT00430/bit0001.doc http://www.bit.se/bitonline/1999/10/26/19991026BIT00430/bit0002.pdf