Preliminary financial statement for financial year 1998

PRELIMINARY FINANCIAL STATEMENT for financial year 1998 OPERATING RESULT BEFORE RESTRUCTURING COSTS AND WRITE-DOWN OF GOODWILL: -209.8 (-218.2) MSEK NET RESULT: -765.6 (-213.5) MSEK WRITE-DOWN OF INTACTIX VALUE AFFECTED NET RESULT WITH 417.9 MSEK NEW STRATEGY FOR GROWTH AND PROFITABILITY NEW STRATEGY The Pricer Board decided in 1998 on a new strategy for the future development of the Company. A number of radical changes and activities have set the foundation for future growth and profitability: Customer focus Pricer will focus the market strategy on retailers where the benefits of using ESL systems is most evident. Marketing will be directed to segments such as department stores, Cash & Carry and the areas in stores which benefits most from active pricing. Partnership Through cooperation with partners who provide total IT-solutions for the retail trade, Pricer will increase market penetration for the electronic shelf label system (ESL system). Pricer is specialising on development, manufacturing and marketing, while the partners are responsible for sales, installation and maintenance. New partner for Intactix The Board has decided to find a new partner for Intactix. The write-down of the book value is a preparation for this process, which is expected to create a substantial cash injection. Rights issue The Pricer Board has proposed a rights issue to the shareholders, estimated to raise up to about 110 MSEK before issue costs. Reduction in fixed costs As a consequence of the new focus, great emphasis have been put on reducing fixed costs. The work force has been reduced from 365 to 298 employees, and other operating expenses have been gradually reduced. Relocation of production All ESL-label manufacturing has been moved to Malaysia, with higher quality and reduced manufacturing costs as a result. New management and new Chairman A new management, with experience from retailing, IT, marketing and finance, has been recruited. In connection to Grimaldi Industri AB becoming main owner, the composition of the board of director was changed. Göran Lindén was in December appointed new Chairman, replacing Erik Danielsson, who has decided to decline re-election to the Board at the Annual General Meeting in May 1999. It is the view of the Pricer Board, that the new strategy together with the rights issue and expected cash injection in connection with Intactix receiving a new industrial or financial partner, sets the foundation for Pricer's continued development until the ESL-business shows a positive cash flow. OPERATIONS In 1998, substantial activities have been carried out to create a platform for Pricer's future development. Under the new management, appointed during the year, the operation has been rationalised and focused towards two areas, Pricer/ESL and Intactix. During the year, Intactix has been restructured and the operation is now focused on Space Management and continued development in Category Management. In November 1998, the Board proposed that a process be initiated to find a new industrial or financial partner for Intactix. As part of Pricer's new strategy of cooperating with partners, Pricer and Siemens Nixdorf signed a global OEM-agreement in the last quarter, whereby Siemens Nixdorf has a non-exclusive right on sales, installation and maintenance of the Pricer electronic shelf label system, ESL system, as well as integration of the system in their total solution for the retail trade. This cooperation is in line with previous agreements with Telxon, Esselte Meto, Ishida in Japan, and others. These agreements will give Pricer a broader and faster development of the market for ESL systems. During 1998, the order inflow for the Pricer ESL system has been weaker than earlier expected. Orders equivalent to 64 (76) MSEK have been received in 1998, and 8 (1) MSEK in the fourth quarter, reducing the order backlog to 218 (254) MSEK as per December 31, 1998. Intensified sales efforts are expected to yield results in 1999 and in coming years. Last November, the software InterCept was certified for the interface to SAP Retail , which provides the retail trade and its suppliers with a safe link to Intactix Space Management software and the ability to freely exchange information between SAP Retail and InterCept . In December, Intactix followed up the earlier launch of the software pro/fusion with its second software in the Category Management area, pro/filer , an analysis tool. NET REVENUE AND RESULTS The 1998 revenue amounted to 298.8 (151.3) MSEK and 66.5 (68.8) MSEK for the fourth quarter of the year. Intactix was acquired July 1, 1997 and was consolidated in the accounts from this date. In 1998, deliveries of Pricer Labels increased by 300 per cent, and more than 1.2 million labels were installed. Worldwide, more than 180 stores of various type and size are operating Pricer ESL systems. During the fourth quarter, deliveries of Pricer ESL systems increased to 16.3 (9.1) MSEK, primarily through successful installations at Metro in Germany and Macy's in the US. Normally, deliveries of ESL systems are low in the fourth quarter as customers prepare for the Christmas shopping season. During the same period, the Intactix operation revenue was 50.2 (59.6) MSEK, which was less than expected. The 1998 operating costs amounted to 363.1 (288.1) MSEK. The explanation for the increase is that Intactix was only included during only six months of 1997. During the fourth quarter, the operating costs amounted to 92.1 (107.3) MSEK compared to 85.0 MSEK in the third quarter. The activity level and related costs are normally lower during the summer. As a result of implemented activities, the annual cost level for the Group has been reduced to approximately 335 MSEK. Taking an expected increase in sales into account, Intactix is estimated to generate profits in 1999. The operating result for the fourth quarter, before restructuring costs, write-down of goodwill and market and industrial rights, amounted to -43.8 (- 65.9) MSEK, which is on par with the third quarter result. The corresponding fourth quarter operating result for Pricer excluding Intactix was -34.5 (- 62.6) MSEK compared to -37.2 MSEK for the third quarter. Fourth quarter deliveries were made with improved margins due to higher prices, changed customer mix, and lower production costs. The corresponding operating result for Intactix for the fourth quarter was -9.4 (-3.4) MSEK, which due to increased costs was lower than the third quarter result of -6.6 MSEK. For 1998, the operating result amounted to -690.1 (-250.7) MSEK. The book value of Intactix has been adjusted to its estimated market value and this has negatively affected the result due to a write-down of 417.9 MSEK. This item, and other costs related to restructuring, primarily within Intactix, have been accounted for as items affecting comparability. The Group's net result for 1998 amounted to -765.6 (-213.5) MSEK. The result has been burdened with 46.4 MSEK related to the sale of 7.5 % of Pricer Inc., US, to Telxon, which, in the 1998 annual accounts, the Board has accounted for as a loan following a revised judgement. The transaction had been accounted for as capital gain in the 1997 annual accounts. This item has been accounted for as an item affecting comparability. FINANCIAL POSITION The operational cash flow - adjusted for issue related debts - was -189.1 (-208.8) MSEK for the full year 1998 and -20.4 (-56.2) MSEK for the fourth quarter. The Group disposable liquid assets, liquid funds and unutilised overdraft facilities, as per December 31, 1998 amounted to 42.5 (53.8) MSEK. The Board estimates that the payment for the forthcoming new issue in March, 1999, and expected payment from the ongoing process to find a strategic partner for Intactix, will supply Pricer with the capital needed until the ESL operation has a positive cash flow. INTANGIBLE ASSETS A considerable part of the Group's balance sheet total relates to intangible assets, primarily in the form of goodwill and market rights. A revised judgement has made the Board decide on an adjustment of the book value of Intactix to an estimated market value, which has resulted in a write-down of 417.9 MSEK pertaining to acquired goodwill in Intactix International Inc. This measure should be seen from the viewpoint that the Intactix acquisition in 1997 mainly was paid for by Pricer shares relating to a considerably higher value of Pricer, and as a preparatory measure for the ongoing process of seeking a new partner for Intactix. INVESTMENTS The total investments, excluding intangible assets, in 1998 amounted to 18.0 (25.4) MSEK and 4.5 (15.2) MSEK for the fourth quarter, primarily relating to production tools, computers and office equipment. All product development has been expensed. PERSONNEL The average number of Group employees in 1998 was 311 (340) while the number of employees as per December 31, 1998 was 298 (365). PARENT COMPANY The 1998 net revenue for the parent company was 110.8 (39.7) MSEK and for the fourth quarter 14.8 (8.9) MSEK. The operating result for the same periods were -317.0 (-157.5) MSEK and -211.7 (-52.2) MSEK, respectively. To adjust the parent company book value to that of the Group, the book values of shares and receivables on the US subsidiary Pricer Inc. have been written down in the parent company by approximately 225 MSEK. Disposable liquid funds in the parent company at year-end amounted to 31.0 (35.1) MSEK. IMPORTANT EVENTS AFTER THE REPORTING PERIOD On January 22, 1999, the Board decided, pending the approval of an Extra General Meeting on February 18, 1999, to increase Pricer's share capital by at least 32,000,000 SEK and no more than 44,159,710 SEK through a new issue of at least 16,000,000 shares and no more than 22,079,855 shares. The issue rate is five (5) SEK per share. The subscription period is March 4@19, 1999. The Board also proposes that the Extra General Meeting approves of changed terms for the Pricer convertible debenture 1998/99, whereby the new maturity date is set for December 31, 2001 and the conversion rate at 4.35 USD (approximately 34.80 SEK). Furthermore, the Board proposes that the Extra General Meeting authorises the Board, up until the next Annual General Meeting, to issue shares, convertible debentures and/or debentures associated with options for new subscription. GENERAL MEETINGS AND DIVIDEND An Extra General Meeting will be held on February 18, 1999, at 5 p.m. at Smålands Nation, Uppsala. The Annual General Meeting will be held on May 10, 1999, at 5 p.m. at Folkets Hus, Uppsala. The Board proposes that no dividend is paid. NEXT REPORT DATE The quarterly report for the period January @ March, 1999 will be published on May 6, 1999. Uppsala, February 11, 1999 Pricer AB (publ) The Board For further information, please contact: Thomas Landberg, President and CEO, Pricer AB: +46-18-18 81 00 Pricer AB (publ) was founded in 1991 in the city of Uppsala, Sweden. In only a few years, it has built a leading position in the growing market of electronic price and information systems for the retail trade. Through the co-operation with Intactix International Inc., the world leader in Space Management, Pricer has built a strong platform for future growth. Pricer offers integrational IT solutions such as electronic price and information systems, application software and consulting services to substantially improve consumer value and satisfaction and increase the profitability of retailers and their suppliers. The Pricer Group have subsidiaries in eleven countries. Pricer AB is listed on the O-list of the Stockholm Stock Exchange. Please visit Pricer's web site at www.pricer.se ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/02/11/19990215BIT00050/bit0001.doc http://www.bit.se/bitonline/1999/02/11/19990215BIT00050/bit0002.pdf