Ratos' Interimreport January-June 2000

I N T E R I M R E P O R T January - June 2000 Profit before tax rises to SEK 1,635m (1,103) Earnings per share up 52% to SEK 20.11 (13.22) Current profits from active holdings SEK 144m (37) Exit results SEK 833m (567) NAV per share increases 18% to SEK 129 on 30 June DataVis acquires technical consultant Systemintegration Ratos applies for UMTS licence with Teracom and Nomura Several new and follow-on investments The work of re-investing Ratos' assets in accordance with the private equity strategy adopted 18 months ago continues. The focus is on investments in medium-sized and large, primarily unlisted companies and projects with good development potential. The size of Ratos' investment ranges from SEK 250m to SEK 1,500m. Four new and follow-on investments were made during the period, totalling more than SEK 800m. In the spring, Ratos invested a total of SEK 254m in the IT company DataVis which is based in Sundsvall. The aim is to create a nationwide total supplier of IT services through both organic growth and acquisitions. In June, DataVis announced the acquisition of the Gothenburg-based IT consultant Systemintegration with some 60 consultants and customers in the telecom and other sectors. Ratos' investment in the mobile telephony company Telia Overseas was increased by SEK 82m. and now amounts to SEK 226m. The ownership stake remains unchanged at 9%. Ratos' wholly owned air and sea freight company, ACE, acquired the Conmel Group's logistics divisions. ACE has thus taken a key step in its strategy to be a leading player in the Nordic air and sea freight sector. Ratos' investment in ACE now amounts to SEK 119m. In the spring, through a wholly owned subsidiary, Ratos acquired the American air filter manufacturer Farr which was subsequently merged with the Swedish air filter manufacturer Camfil. It is the joint intention of Camfil's principal owner and Ratos to further strengthen Camfil's market position, among other things through additional acquisitions. Ratos' stake in Camfil is 30% with a total investment of SEK 450m. UMTS application Ratos is the largest owner of the consortium which together with Teracom AB and Nomura Asset Investment Group, among others, intends to apply for one of the four licences to be issued for UMTS third-generation mobile telephony in Sweden. Together with Teracom and Nomura, Ratos will be the consortium's largest owner and thus guarantee the business concept which is based on creating a neutral network, open to a larger number of service and content providers. One stake in the consortium has been reserved for those service providers who wish to join. The actual application procedure is not expected to entail any significant cost for Ratos. If the Ratos-led consortium receives a licence, the build out of a UMTS network will involve substantial investments. In such case, Ratos' contribution is expected to remain within Ratos' preferred investment size, SEK 250m to SEK 1,500m. Ratos' results Of which Ratos' Profit/share goodwill Ratos' of profits depreciation SEKm ownership, % 00 Q1-2 00 Q1-2 Active 1) holdings ACE 100 17 -4 Capona 47 29 -1 Dahl 44 32 - DataVis 49 -4 -2 Esselte 17 21 0 Scandic Hotels 24 46 -5 Superfos 33 3 -1 Telelogic 9 - - Telia Overseas 9 - - Total profit/share of profits 144 Exit gain, Telelogic 602 Exit result, exercise of option -7 2) Exit gain, DataVis -1 2) Exit gain, Scandic Hotels 39 Industri Kapital 56 Total exit result 689 Profit from active holdings 833 Profit from asset management 831 Net expenses -29 Consolidated profit before tax 1,635 1) Camfil is reported in the Ratos Group according to the equity method as from 1 July 2000. 2) Earnings impact of the completed new issue. Profit before tax SEK 1,635m The Group's profit before tax amounted to SEK 1,635m (1,103). This result includes profit from active holdings of SEK 833m (567) and profit from asset management of SEK 831m (584). The Group's profit, including share of profits of associated companies, includes a bonus allocation from SPP totalling SEK 77m. The organisation's costs remained low and the Group's cash flow from operating activities and investing activities was positive. Total consolidated goodwill amortisation in the Ratos Group and associated companies amounted to SEK 53m in the first six months of the year. Earnings improvements in active holdings Current profit and share of profits from the active holdings rose to SEK 144m (37). These earnings amounted to SEK 197m (79) before amortisation of goodwill. Ratos' subsidiary ACE contributed SEK 21m (-2)to this result. The associated companies Dahl, Scandic Hotels, Capona, Esselte and Superfos reported improved earnings while DataVis reported a loss of SEK 9m. Ratos' share of profits of associated companies includes goodwill amortisation for the holdings concerned. The active holdings Telelogic and Telia Overseas are not reported as associated companies. Both companies performed well but report an operating loss due to growth-oriented investments. Camfil and Farr are reported according to the equity method as from 1 July 2000. Exit gains 30% The exit result from active holdings amounted to SEK 689m (530). This result was mainly due to a one-third reduction in the holding in Telelogic which provided an exit gain of SEK 602m. Divestments from Industri Kapital generated exit gains of SEK 56m in the second quarter of 2000. In the first six months of 1999, the exit result mainly comprised the sale of holdings in PriFast and the Dahl transaction. Low management costs The organisation's costs amounted to SEK 41m (42), excluding income from SPP's surplus funds of SEK 11m. Staff costs amounted to SEK 13m (9). Other expenses, including costs in connection with acquisition processes, amounted to SEK 28m (33). Central expenses recomputed on a full-year basis thus amounted to 0.6% of net asset value at the end of the first half. Net financial items amounted to SEK 1m (-6). Cash flow from operating activities and investment activities for the period was SEK 292m (1,103) and the Group's liquid assets amounted to SEK 67m (188) at the end of the period. Re-investments generate capital gains Asset management's profit for the first half of the ear amounted to SEK 831m (584). As described in the previous interim report, the investment strategy for asset management has been changed to better reflect demands for greater liquidity and limited risk. The re-investments subsequently carried out provided capital gains of approximately SEK 450m. Taken as a whole, asset management generated capital gains of SEK 731m (484)in the first half of 2000 while dividends received amounted to SEK 100m (100). Shares were purchased for SEK 2,963m and sold for SEK 3,363m. From the end of April to the present day, Telia was added to the largest holdings in the asset management portfolio while Gambro and Industrivärden were removed. Asset management's total value amounted to SEK 5,283m or SEK 66 per share on 30 June. The value of the portfolio on 25 August was SEK 4,892m or SEK 61 per share. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2000/08/29/20000829BIT00330/bit0001.doc The full report http://www.bit.se/bitonline/2000/08/29/20000829BIT00330/bit0002.pdf The full report