Interim Financial Report for the Period January - June 2001

Interim Financial Report for the Period January - June 2001 Increased sales, improvement in net result and continued profitable international growth · Sales for the first half of 2001 increased by 61 per cent to MSEK 242.0 (150.2). 54 per cent was attributable to company acquisitions during 2000. The pro forma increase in sales was 10 per cent. During the second quarter of 2001 sales amounted to MSEK 115.7 (79.4), representing an increase of 46 per cent compared to the same period the previous year. · The operating result before goodwill amortisation (EBITA) and items affecting comparability during the period January to June 2001 amounted to MSEK -11.9 (-38.5), of which MSEK 6 were non-recurring costs mainly for terminated personnel. This means an improvement in profit of almost MSEK 27. The result would have amounted to MSEK -9.2 if the negative effect on profit amounting to MSEK -2.7 due to a change in the method used for calculating service revenue in Finland in order to adapt to Group policy had been excluded. During the second quarter of 2001 EBITA after items affecting comparability amounted to MSEK -12.6 (-26.0). · Group cash flow from current operations was positive during the second quarter. · The capacity utilisation of consultants within the fields of competence; business systems, technology and systems development is very high. · Business continues to be very strong in Finland. The acquisitions of Sector Oy with 14 employees in Joensu in Finland and Animated Images AB in Borås with 3 employees will contribute by providing extra competence and products in the area of systems for HRM (human resource management) and PDM (product data management) respectively. · The operations in Germany continue to develop better than was anticipated. The operation broke even in June, which was one quarter earlier than planned. The business has grown from 0 to 90 employees since October 2000. · The number of employees at the end of the reported period was 590 (512), an increase of 15 per cent. Staff turnover over a rolling 12- month period amounted to 16 (13) per cent. Market The North European markets of Sweden, Finland and Germany are characterised by a change in demand, which was also described in the interim financial report for the first quarter. The focus on measurable value-creating projects and specialist competence has been accentuated during the second quarter. The market's demand for our competence in the areas of technology, system development and ERP as well as our products is stable and has increased in certain areas. This trend, which started during the second half of 2000, has thus continued through the whole of the first half of 2001. Companies invest in IT in the form of rationalisation projects and projects aimed at achieving greater efficiency even during periods of recession. However, the economic slowdown in Sweden and Europe has left its mark. This has resulted in the decision processes being characterised by greater caution and by an increase in competitive pressure. The customers set much greater store by having partners who are long-term and who have a documented capacity to deliver. This benefits companies such as Resco, which was established in 1982 and which has long and stable customer relations as well as a solid list of references. Resco's assessment is that the Swedish market is characterised by a continued significant need for competence and solutions linked to business systems and systems integration, what we call e-integration, i.e. the need to integrate business-critical systems such as business systems and logistics solutions with intranets and extranets as well as the Internet. Resco's focus on e-integration with ERP as a basis has thus proven to be a strategically correct decision. The capacity utilization within the fields of competence; business systems, technology and systems development is very high. The Finnish market is characterised by continued high demand within the product segments in which Resco operates. Resco Finland, Major Blue Company Oy, is focusing on sales and the development of its own software within the areas of HRM, CRM and ERP. During the second quarter Resco acquired Animated Images AB which is specialised in PDM tools, and Sector Oy, which operates within the area of personnel administrative systems such as pay administration, for example. By both these acquisitions Resco is strengthening its position in Finland within the business areas of HRM and Business Systems, as well as increasing its capacity to export software aimed at the ready-made clothing industry in Sweden and elsewhere. Resco Sweden will benefit from this as this will result in an emerging need for consulting services to adapt the products to and integrate them with other business-critical systems. Like the Swedish market the German market is also characterised by increased caution. The first half of the year developed better than planned and Resco is predicting a continued good level of demand for the consulting services that it provides in IT, business systems, business development and communications. During the short time that the business has been active Resco GmbH has built up an impressive customer base with large international companies as customers. Prospects for the future Uncertainty about how the market will develop has increased since the last report. But the assessment in the Preliminary Accounts Report of strong growth this year and a significantly improved operating result still stands. The target of a positive result for the whole year before goodwill amortisation and items affecting comparability for the full year also still stands. The Group Sales and results The Resco Group reported sales of MSEK 242.0 (150.2) during the period from January to June 2001, which was an increase of 61 per cent compared to the same period for the previous year. Sales amounted to MSEK 115.7 (79.4) in the second quarter, i.e an increase of 46 per cent. 36 percentage points of this increase was attributable to the companies acquired during 2000. The Group's sales increased pro forma by 10 per cent for the first half of the year compared to the same period in the previous year. During the second quarter of 2001 sales essentially remained unchanged compared to pro forma for the same period in 2000. The continued strong development in Germany and Finland contributed greatly to the positive increase in sales. In the Swedish operation, sales increased by a total of 16 per cent during the half year and by 8 per cent during the second quarter. The operating result before goodwill amortisation and items affecting comparability improved significantly compared to the same period in the previous year. During the first half year the group reported a loss of MSEK -11.9, which was a profit improvement of MSEK 27 compared to the same period in the previous year when the corresponding figure amounted to MSEK -38.5. The corresponding amount was MSEK -12.6 (-26.0) for the second quarter. Of the loss of MSEK -11.9, about MSEK 6, relating mainly to terminated personnel, is non-recurring. The operating result after goodwill amortisation for the first half of the year amounted to MSEK - 15.5 (-26.9), with the second quarter representing MSEK -14.4 (previous year: MSEK -14.7 including SPP refund of MSEK 14.5). The result after financial items was MSEK -16.2 (-26.1). The Board of Directors is presently reviewing the Group's continued capital needs. A number of concrete solutions for ensuring financing are being discussed. One alternative may be a new issue. The profit improvement of MSEK 27 has been achieved as a result of the continued measures taken, such as concentration on e-integration and business systems, the implementation of rationalisation measures, continued cost control and continued trimming of the composition of skills in line with the market's continued strong demand for Resco's core competence: business systems and e-integration. The customers are mainly large industrial companies, banks, insurance companies and telecom companies. However, the result was worse during the second quarter of 2001 than during the first, as the result before goodwill amortisation and items affecting comparability for the group was a positive MSEK 0.7. This is mainly due to the Swedish consultant business. It is in the nature of normal seasonal fluctuations that the result is worse during the second quarter compared to the first because there are a lot of holidays and fewer available working hours during the spring. However, the level of consultant utilisation has not been satisfactory during the second quarter. April and particularly May resulted in a generally lower level of incoming orders than anticipated, which has had an effect on the capacity utilisation during the quarter in question. However, sales recovered during the month of June when they exceeded the target set. Further ongoing adaptations of the composition of skills and geographical presence will continue, which will result in lower costs and a higher overall utilization level during the coming quarter. Finland also had a lower result compared to the first quarter. However, a change in the method of calculating service revenue in the Finnish subsidiary so as to adapt to group policy has had a negative effect on both the result and sales of MSEK 2.7. This change will have a positive effect on sales and the result during the coming fiscal year. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/08/31/20010831BIT00900/bit0001.doc The full report http://www.waymaker.net/bitonline/2001/08/31/20010831BIT00900/bit0001.pdf The full report