Interim report second quarter, april - june 2001

PROACT IT GROUP AB (publ) INTERIM REPORT SECOND QUARTER, April-June 2001 Strong growth in spite of weaker market Summary of the period * Revenue during the second quarter amounted to SEK 250.2 million (173.5), and revenue for the first six months of the year thus totalled SEK 418.4 million (286.1). Of the operating revenue and profits, SEK 21.0 million is attributable to capital gains from the sale of the activities in ProAct Medical AB during the second quarter. * Operating profits in the second quarter before the amortization of goodwill (EBITA) amounted to SEK 25.0 million (8.6), and operating profits totalled SEK 21.4 million (6.3). EBITA for the first six months of the year totalled SEK 29.4 million (3.5), while EBIT for the same period amounted to SEK 22.3 million (-1.2). * Revenue for the second quarter, excluding capital gains, totalled SEK 229.2 million (173.5), up 32 per cent, and for the first six months of the year, it amounted to SEK 397.4 million (286.1), an increase of 39 per cent. EBITA excluding capital gains for the second quarter totalled SEK 4.0 million (8.6), while for the first six months of the year it amounted to SEK 8.4 million (3.5). * The average number of employees during this interim period was 259 (189). Significant events during the period covered by this report, April-June * A new stock issue with preferential rights for existing shareholders generated SEK 76.5 million net for the company. The financial position of the company is strong, with liquid funds totalling SEK 178.0 million. * New activities in Finland and Norway in the areas of networks and security have strengthened the company's portfolio of services in the field of infrastructure. * The company has established its first presence outside the Nordic region through the acquisition of the Swiss integrator TNC Storage Consultants AG. * Sale of the activities in ProAct Medical AB to GE Medical generated capital gains of SEK 21.0 million before tax. * A degree of restraint in IT investments and extended sales cycles are having a negative effect on the IT market. However, the fundamental area of infrastructure - and thus ProAct's activities - is being affected to a lesser extent than the rest of the sector. ProAct is a specialist and independent integrator with know-how, methods and products in the field of data warehousing and infrastructure for securing mission-critical information. The company, which is active in Denmark, Finland, Norway, Switzerland and Sweden, focuses on large and medium-sized companies and organisations in need of secure and efficient handling of mission-critical information. Business is conducted in Copenhagen, Aarhus, Helsinki, Uleåborg, Oslo, Bergen, Stavanger, Trondheim, Stockholm, Gothenburg, Linköping, Sundsvall, Lund, Karlskrona and Zurich with a staff more than 270, most of whom are technically oriented. What sets ProAct apart is the technical expertise and competence of its personnel. ProAct IT Group AB is listed on the O-list of the OM Stockholm Stock Exchange, Attract 40. The Market and ProAct's role ProAct is a specialist and independent integrator with know-how, methods and products in the field of infrastructure for securing mission- critical information. The company, which employs around 270 people, conducts business in Denmark, Finland, Norway, Switzerland and Sweden. ProAct primarily works for large and medium-sized businesses and organisations. Factors such as the expansion of the Internet and increased business activity on the Net make increasing demands for high levels of security, access to data, short response times, and high accessibility - 24 hours a day, all year round. Demand is increasing for ProAct's skills and system solutions, from both traditional customers and customer groups from what is known as the new economy. Secure infrastructure consists of elements such as data warehousing, security, networks and associated functions for increased performance and accessibility - irrespective of the type of server and applications used. Infrastructure is built up from three perspectives: Volume - infrastructure must be able to cope with increasing volumes of information without these disrupting operation or creating unexpected extension problems. Value - infrastructure must be built up on the basis of the value that the information and accessibility to it has for the company Cost - the company must be able to manage the infrastructure in such a way as to ensure that the operating costs do not rise when the volume of information and the utilisation of the system increase. The market for secure infrastructure is increasing rapidly, with an estimated annual growth rate of 30-40 per cent. Second quarter 2001 Revenue in the second quarter amounted to SEK 250,2 million (173.5), an increase of 44 per cent compared to the second quarter of the previous financial year. Revenue excluding the profit made from the sale of the activities in ProAct Medical totalled SEK 229.2 million, which is equivalent to an increase of 32 per cent. In the second quarter, operating profits for the group before the amortization of goodwill (EBITA) totalled SEK 25.0 million (8.6). EBITA excluding capital gains totalled SEK 4.0 (8.6) MSEK. Operating revenue amounted to SEK 21.4 million (6.3), and operating revenue exclusive of capital gains totalled SEK 0.4 million (6.3). Prices for major projects were subject to some pressure during the quarter, and this resulted in margins being reduced to a degree. Initiatives aimed at continued expansion were also implemented during the second quarter, leading to a rise in costs. During the second quarter, ProAct's activities have encountered a market distinguished by a degree of restraint as regards IT investments as well as longer sales cycles. These two factors are both having a negative effect on the IT market in general. However the fundamental area of infrastructure - and thus ProAct's activities - has been affected to a lesser extent than the rest of the sector. Against these market conditions, ProAct's sales of services have developed very positively, although a degree of sluggishness has been observed in the area of new system projects. However, the deviations are not appreciable as compared to those in previous financial years. Major deals from ongoing activities during the period covered by this report include: Ericsson Global IT Services - consolidation of data storage through an error-tolerant system based on NetWork Attached Storage (NAS). Emerson Energy Systems - installation of a new security solution in Sweden. Lindövarv - storage solutions based on NAS technology were implemented in collaboration with Odense Steel Shipyard. Motorola - infrastructure for program development. NRK, Norska Radio och TV - backup solution for the consolidation of security copying from a large number of servers. SCA - consolidation of data storage using a system based on SAN technology. Statoil - storage solutions based on NAS have been installed at the major Statoil offices in the Nordic region during the period. The estimated value of this work is around NOK 25 million. Waasan Laainin Puhelin - design of network and security solutions and improvement of user access via the introduction of NetCache for content management. ProAct has expanded the working relationship with Alteon Websystems, a part of the Nortel group, via a Nordic agreement. Products from Alteon Websystems are primarily used to ensure that systems can cope with high loads without creating problems for users in the form of long response times. A number of projects involving Alteon products have already been completed. During the second quarter, the company has established new facilities in Finland and Norway in the areas of networks, security and monitoring. ProAct has also expanded the geographical range of its activities through the acquisition of TNC Storage AG in Zurich, Switzerland. ProAct owns 70 per cent of the three new companies. In Sweden, a new sales office has been opened in Karlskrona, a area strong on IT and telecommunication. The activities in ProAct Medical AB have been sold to GE Medical. The capital gains from this sale totalled SEK 21.0 million before tax. The deal also includes a partnership agreement, which involves ProAct handling infrastructure and services for GE Medical with regard to the digital image archive (PACS) for the hospital sector. This will result in an expansion of ProAct's business opportunities within the health care sector throughout the Nordic region. The first six months of 2001 Operating revenue for this period totalled SEK 418.4 million, an increase of 46 per cent compared to the first six months of the previous year. ProAct's net revenue for the period, excluding capital gains, amounted to SEK 397.4 million (286.1), an increase of 39 per cent compared to the same period of the previous financial year. This growth is divided between organic growth (33 per cent) and acquired growth (6 per cent). On 1 July, the order book totalled SEK 25 (22) million. Of the total revenue for the period, service income amounted to SEK 117.9 million (62.7), an increase of SEK 55.2 million compared to the same period of the previous financial year. Services accounted for 30 per cent (22%) of the net revenue generated during the first six months. Operating profit before the amortization of goodwill (EBITA) - adjusted for the capital gains from the sale of the activities in ProAct Medical AB - totalled SEK 8.4 million (3.5) and operating profit amounted to SEK 1.3 million (-1.2). This involved a positive break with tradition, as the first two quarters of the year have conventionally returned a negative result. Exchange rate fluctuations have had only a marginal effect on revenue and profits during this period. Financial development - rolling 12 months Net revenue for the most recent rolling 12-month period totalled SEK 782.0 million, compared to SEK 528.4 million for the corresponding period last year. This represents growth of 48 per cent. Operating profits before amortization of goodwill for the most recent rolling 12-month period - adjusted for capital gains from the sale of activities in ProAct Medical AB - amounted to SEK 25.2 million (11.3). This is equivalent to EBITA of 3.2 per cent (2.1%). Despite the prevalent market conditions, the company has thus returned an improved EBITA margin. [REMOVED GRAPHICS] The average annual growth in revenue has exceeded 80 per cent over the past five years. Financial position The company's financial position is good. At the end of the period, the Group's liquid funds including short-term investments totalled SEK 178.0 million. The group's approved credit limit was SEK 54.5 million, of which SEK 20.5 million has been utilised. The company has an equity ratio of 48 per cent, compared to 37 per cent at the start of the period. A new stock issue with preferential rights for existing shareholders was carried out during the period covered by this report. This issue was fully subscribed, increasing the number of shares in the company by 1,501, 218, and generating SEK 82.6 million before floatation costs. The net sum generated was SEK 76.5 million. Each shareholder was entitled to subscribe for one new share for every five shares held at an issue price of SEK 55 per share. Following this issue, the total number of shares in the company is 9,032,312. The liquid funds resulting from this issue will be used for supplementary acquisitions, organic expansion, initiatives in the area of development of advanced services, and for financing an increasing need for operating capital as a result of the rapid growth. During the interim period in question, cash-flow from ongoing operations amounted to SEK 13.0 million (12.0). The investments made by the Group were primarily expansion investments. During this interim period, their total value was SEK 22.8 million, of which SEK 10.5 million refers to investments in shares and shareholders' contributions in subsidiaries, and SEK 12.3 million refers to investment in equipment. Total liabilities amount to SEK 289.6 million, of which SEK 20.8 million is interest-bearing and SEK 268.8 million is non-interest-bearing. The Parent Company The net revenue of the parent company for the interim period totalled SEK 8.2 million (7.3). Profits after net financial items totalled SEK 1.2 million (0.1). The parent company's liquid funds amounted to SEK 170.3 million (25.5) including the liquid funds of the Swedish subsidiary in the central account. Of the total liquid funds of the parent company, SEK 114.4 million (11.8) is placed in short-term interest-bearing securities. The capital expenditure of the parent company during the period totalled SEK 0.8 million, covering investments in shares and shareholdings in subsidiaries. Option programme During the spring, the group introduced a share option programme targeted at new employees and key personnel within the ProAct group in the Nordic region. The preferential stock issue will give rise to recalculation of this option programme. Following translation, each option entitles the holder to subscribe for 1.08 shares at a price of SEK 173.70 per share. The programme is to run until 31 May 2004, with the subscription period running during May 2004. Interest was very high among the key personnel, while the other employees showed relatively little interest. As a result of the new stock issue, previous option programmes will also be translated. The new subscription price for the 1999/2002 option programme, which is to run until 30 June 2002, has been set at SEK 54.80. The new subscription price for the 2000/2002 option programme, which is to run until 29 November 2002, has been set at SEK 152.30. Both programmes entitle the holder of each option to subscribe for 1.08 shares after translation. Personnel At the end of the period, the Group employed 269 people, compared to 219 at the start of the period. During the second quarter, 35 new employees joined the company. Staff turnover is low. The average number of employees during this period was 259 (189), an increase of 37 per cent. Significant events after the period ProAct NetWorking AB starts activities in Gothenburg with a group consisting of consultants and sales staff. Future prospects ProAct is active in one of the IT market's fastest growing segments with a growth to date of 30-40 per cent per year. The aim of the company is further to consolidate its position as the leading specialist and independent integrator in the Nordic region. The financial goal for 2001 is an increase in revenue which exceeds that of the market in general, with considerable improvements in profits. As market conditions are currently uncertain, future prospects are more difficult to evaluate than in previous years. Future information dates Interim report, July-September 2001 25 October 2001 Year-end report 2001 15 February 2002 Sollentuna, 21 August 2001 ProAct IT Group AB (publ) Per-Arne Lundberg President and CEO For additional information, please contact: Per-Arne Lundberg, President Tel: +46 8 410 666 00 E-mail: itgroup@proact.se www.proact.se ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/08/21/20010821BIT00450/bit0001.doc The full report http://www.waymaker.net/bitonline/2001/08/21/20010821BIT00450/bit0001.pdf The full report