Proact IT Group AB (publ) Year-End Report 2001

PROACT IT GROUP AB (publ) YEAR-END REPORT 2001 Improved position and relative progress The past year has been distinguished by reticence with regard to new investments in IT and a weak market during the second six months. In spite of this, ProAct has enjoyed good development in relation to the IT sector as a whole. Some parts of the business have been restructured to allow additional focus on core competencies. Service activities have grown by 72 per cent over the year, and companies specialising in security and networks have now been established in all Nordic countries. Summary of the fourth quarter · Revenue amounted to SEK 273.9 million (257.2), an increase of 6 per cent compared to a very strong fourth quarter in the previous financial year. · EBITA, excluding restructuring costs of SEK 7.5 million, totalled SEK 6.8 million (18.6). · Liquid funds at the end of the year totalled SEK 190.5 million, which represents an increase of SEK 40 million during the fourth quarter. Summary of the year · Net revenue excluding capital gains increased by 23 per cent to SEK 826.9 million (670.7). EBITA excluding items that affect comparability totalled SEK 7.4 million (20.3). · Items that affect comparability refer to capital gains in the amount of SEK 21.0 million from the sale of activities in ProAct Medical, and restructuring costs of SEK -7.5 million - net total SEK 13.5 million. · Operating revenue amounted to SEK 847.9 million (670.7) and profits after net financial items totalled SEK 10.1 million (11.7). · A preferential stock issue generated the net sum of SEK 76.5 million for the company. · The average number of employees during 2001 was 268 (201). The number of employees increased by 66 during the year, and at the end of the year, the company employed 285 people. Significant events during the fourth quarter · Continued concentration in the fields of security and networks in the Nordic Region through the establishment of ProAct NetWorking in Denmark. · A number of major deals were concluded, with customers including RIT2000 and Statoil in Norway, Ericsson and GE Medical in Sweden and the Basel Canton Hospital. 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, Karlskrona, Linköping, Lund, Sundsval, and Zurich with employees more than 285, most of whom are technically oriented. What sets ProAct apart is the technical expertise and competence of its personnel. ProAct IT Group is listed on the O-list of the Stockholm Stock Exchange. 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 285 people, conducts business in Denmark, Finland, Norway, Switzerland and Sweden. Factors such as the expansion of the Internet and increased business activity on the Net make increasing demands for security, access to data, short response times, and high accessibility - 24 hours a day, all year round. ProAct's skills and system solutions are much in demand by customers in all sectors. Solid 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. Under the current market conditions, where customers are increasingly obliged to focus on their operating costs, this aspect will become even more important, and investments in the field of back-up and storage consolidation will provide rapid payback. Following the appreciable downturn that generally affected players on the IT market in 2001, market evaluations have become even more uncertain than usual. However, a majority of market analysts predict a modest general recovery during 2002, with progressive recovery for the IT market as a whole over the following years. On the basis of available market analyses of sub-markets, ProAct believes that the market for secure infrastructure will develop twice as rapidly as the IT market as a whole. Fourth quarter 2001 Revenue during the fourth quarter amounted to SEK 273.9 million (257.2), an increase of 6 per cent compared to a very strong Q4 in the previous financial year. Of this growth, 1 percentage unit is organic. Revenue shares per quarter: Q1 Q2 Q3 Q4 1999 21% 23% 25% 31% 2000 17% 26% 19% 38% 2001 20% 28%* 19% 33% ) *) excluding items that affect comparability Of the total revenue for the quarter, service income accounted for SEK 68.7 million (46.5), an increase of SEK 22.2 million or 48 per cent compared to the fourth quarter of the previous financial year. Service income refers to consultancy income and contracted customer support. During the fourth quarter, system sales fell by 2 per cent compared to the corresponding quarter of the previous financial year. EBITA excluding items that affect comparability totalled SEK 6.8 million (18.6). Profits after net financial items for the fourth quarter totalled SEK - 2.4 million (16.3). The fourth quarter was distinguished by continued reticence with regard to IT investments as well as longer sales cycles than in previous years. The fall in system sales was particularly noticeable on the Swedish market. Measures were implemented to deal with the lower level of system sales, including a restructuring of the Swedish operation. The activities of ProAct Media Technology AB have been integrated into ProAct Datasystem AB. In addition, the company workforce in Sweden has been reduced by approximately ten persons. Restructuring costs linked to these measures totalled SEK 7.5 million. The fourth quarter saw a continuation of concentration in the fields of security and networks in the Nordic Region through the establishment of ProAct NetWorking A/S in Denmark. The following major deals were concluded during the period covered by this report: The Basel Canton Hospital - Storage Area Networks (SAN) solution that contains a central information structure base, which is to deal with the ever-increasing volume of data that the hospital possesses in the form of image archives. Ericsson Global IT Services - file server solution for home catalogues and project data provides improved performance and storage space combined with reduce maintenance and administration costs. GE Medical Systems - SAN solution for Application Service Provider (ASP) solutions for a number of different hospitals in Sweden. RIT2000 - the Norwegian health care project RIT2000 has invested in data storage and back-up copy solutions for the Mid-Norway Health Region. Statoil - data storage solutions for Statoil offices in London and Stavanger, consisting of cluster solutions for extra-high accessibility of data and increasing the efficiency of IT operations so as to reduce IT administration costs. Telia IT Service - two framework agreements signed concerning consultancy services and project management, as well as maintenance and support for a part of the existing storage solution. Tele2 - an agreement has been signed concerning systems for the back-up copying of Tele2's IT environment. The agreement also covers support and operational support from ProAct. [REMOVED GRAPHICS] Revenue for the fourth quarter totalled SEK 273.9 million (257.2), an increase of 6 per cent. Net revenue for the year, excluding capital gains, amounted to SEK 826.9 million (670.7), an increase of 23 per cent compared to the same period of the previous financial year. The service share has continued to increase during the year. Full year 2001 Operating revenue for the year totalled SEK 847.9 million (670.7). Of the operating revenue, SEK 21.0 million is attributable to capital gains from the sale of the activities in ProAct Medical AB during the second quarter. ProAct's net revenue for the year, excluding capital gains, amounted to SEK 826.9 million (670.7), an increase of 23 per cent compared the previous financial year. This growth is divided between organic growth (16 percentage points) and acquired growth (7 percentage points). At 1 January 2002, the order book totalled SEK 32 million (28). Of the total revenue for the year, service income amounted to SEK 246.3 million (142.8), an increase of SEK 103.5 million or 72 per cent compared to the previous financial year. Services accounted for 30 per cent (21%) of the net revenue generated during the year. This in line with the mission of increasing service activities. Profits for the year have been influenced by items that affect comparability in the amount of SEK 13.5 million, of which SEK 21.0 million refers to capital gains from the sale of the activities in ProAct Medical, while SEK -7.5 million concerns costs linked to the restructuring of the Swedish operation. Operating revenue before the amortisation of goodwill (EBITA) excluding items that affect comparability totalled SEK 7.4 million (20.3). The company's profits after net financial items totalled SEK 10.1 million (11.7). The profits thus deviate from the forecast published in the interim report for the third quarter, where it was forecast that profits for the year as a whole would be on a par with those of the previous financial year. EBITA excluding items that affect comparability are SEK 13 million lower than for the previous financial year. During the fourth quarter, ProAct decided to write-down stocks in the amount of around SEK 5 million. In addition to this, the newly established companies returned profits that were SEK 5 million lower than expected for the fourth quarter. ProAct has expanded over the past year, partly through business development via the establishment of four new companies, and partly by concentrating on service activities through the acquisition -during the first quarter - of a consultancy company with approximately 20 employees. A number of new employees have also been taken on. The new companies accounted for SEK 48 million of the revenue generated over the past year. Since the beginning of the year, the number of employees increased by 66 to 285. Of this increase, more than 60 per cent is attributable to service activities. Exchange rate fluctuations have had only a marginal effect on profits for the past year. Of the total increase in revenue (23%), 4 percentage points can be attributed to exchange rate fluctuations. [REMOVED GRAPHICS] The average annual growth in revenue has exceeded 67 per cent over the past five years. The share of revenue attributable to service activities increased progressively during the year. 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 190.5 million. The group's approved credit limit was SEK 45.8 million, of which SEK 1.4 million has been utilised. During the past year, cash-flow from ongoing operations amounted to SEK 61.6 million (8.8). The total value of the investments made by the Group during the year was SEK 59.5 million (32.0), of which SEK 33.0 million (16.8) refers to investments in shares and shareholders' contributions in subsidiaries, while SEK 13.4 million (7.4) refers to investments in spare parts and SEK 13.1 million (7.8) to investments in equipment and computers. The company has an equity ratio of 44 per cent (37%). Total liabilities amount to SEK 325.4 million (256.1), of which SEK 1.7 million (4.1) is interest-bearing while the remainder is non-interest-bearing. The Parent Company The net revenue of the parent company for the year totalled SEK 21.5 million (13.1). Profits after net financial items totalled SEK -7.0 million (2.0). The parent company's liquid funds totalled SEK 164.5 million (42.7). Of the total liquid funds of the parent company, SEK 118.9 million (14.0) is placed in short-term interest-bearing securities. The capital expenditure of the parent company during the year totalled SEK 25.3 million, covering investments in shares and shareholdings in subsidiaries. Capital expenditure includes acquisitions of minority interest shareholdings in ProAct NetWorking AB and write-downs on shares in subsidiaries. During the year, new stock issues have generated SEK 98.9 million for the company, of which SEK 76.5 was attributable to a new stock issue with preferential rights for existing shareholders which was carried out during the second quarter. Personnel The average number of employees during the fourth quarter was 282 (208). The number of people employed by the Group increased by 5 during the fourth quarter. The average number of employees for the year as a whole was 268 (201), an increase of 33 per cent. More than 60 per cent of the increase in personnel is attributable to service activities. The Group currently employs 285 (219) people, an increase of 66. Of these 22 were employed in the new companies. Staff turnover is low for the sector.. In spring 2001, a share subscription option programme was carried out, targeted at new employees and key members of staff within the ProAct Group in the Nordic region. Future prospects The aim of the company is to reinforce its position as the leading specialist and independent integrator in the Nordic region. The long- term financial goal is to achieve growth in revenue that exceeds market growth with a net margin of 5-7 per cent. The financial goal for 2002 is to achieve an increase in revenue which exceeds that of the market in general, with a considerable improvements in profits. General Meeting and dividend The Annual General Meeting will be held on 10 April at 15.00 in the company premises at Djupdalsvägen 7, Sollentuna, Sweden. The Board proposes that no dividend be paid for the financial year 2001. Upcoming reports The complete annual report will be available from the company from the middle of March. Interim reports are only published on the company Web site at www.proact.se. Interim report, January-March 26 April 2002 Interim report, April-July 23 August 2002 Interim report, July-September 25 October 2002 Year-end report 2002 14 February 2003 Sollentuna, 15 February 2002 ProAct IT Group AB (publ) [REMOVED GRAPHICS] 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/2002/02/15/20020215BIT00510/bit0001.doc The Full Year-End Report http://www.waymaker.net/bitonline/2002/02/15/20020215BIT00510/bit0001.pdf The Full Year-End Report