Preliminary Accounts Report for 2000

Preliminary Accounts Report for 2000 Positive trend in the Swedish operations. Growing operation outside Sweden. - Positive trend in the Swedish operations towards the end of the fourth quarter and the beginning of 2001. Sales reached an all time high in December and the operating result was positive in January 2001. - Sales for the 2000 full year increased by 20.8 cent to SEK 341.8 M (282.9). Cleared of operations which were phased out during 2000 the increase was 32.7 per cent. Of total sales, SEK 108.7M (35.2) are attributable to companies acquired during the year. After changes in the Group's composition, pro forma sales amounted to SEK 409.7 M. - For the fourth quarter, sales were SEK 113.4M. (71.4), an increase of 58.8 per cent. - Operating result before goodwill amortisation and items affecting comparability amounted to SEK -81.6M (-19.4). Including the SPP refund, the corresponding result amounted to SEK -67.2M. Result after financial items amounted to SEK - 273.2M (-11.2). The operating margin was -80.2 per cent (-4.0) after goodwill and items affecting comparability. Several one- off costs of a significant nature affected the result, especially the aborted deal with Fi System and costs for staff redundancies. - For the fourth quarter, the result before goodwill amortisation and items affecting comparability amounted to SEK -18.6M (-13.2) and the result after financial items to SEK -214.2M (-4.0). - Rationalisation measures of approximately SEK 55M on a full-year basis were implemented. - As a result of the market development during the latter part of 2000, a revaluation was made of the acquisition values of acquired subsidiaries. This resulted in a goodwill write-down of SEK 185.3M. - Growing operation outside Sweden. Two acquisitions were made in Finland during the fourth quarter. In 2001, the operations in Finland and Germany are expected to account for 30 per cent of the Group's total sales. - Changes in the Executive Management. The former Managing Director, Torstein Johansen resigned on 31 October. Resco's Chairman, Kjell Jacobsson is currently also Acting CEO. Fourth quarter The turnaround of the Swedish operations was confirmed in December. Sales for the full fourth quarter increased by 58.8 per cent to SEK 113.4M (71.4) and the operating result (before goodwill amortisation and items affecting comparability) amounted to SEK -18.6M (-13.2). This is an improvement of the result compared with the third quarter, when the corresponding figure amounted to SEK -24.6M. However, the desired break- even was not achieved. This was due to a combination of low consulting capacity utilisation and the delayed impact of rationalisation. On the other hand, the operating result for January was positive which breaks the trend. The most important reasons for the positive development are: - The operations developed strongly during the quarter and Resco's comprehensive offer with integrated competence in business-critical systems and the Internet met with positive response from the market. During the period, demand increased for these services from established companies within industry, banking and insurance, trading and telecom. Orders received by Resco during December reached an all time high. - The savings and rationalisation activities which have been underway, mainly within the non-charging parts of the operations during the second half of 2000, were intensified during the fourth quarter and are now expected to make a positive impact on the result from 2001 of approximately SEK 55M on a full-year basis, compared with the previous estimate of SEK 40M. - Some of the activities impacted as early as at the end of the fourth quarter, but will make a full impact from the first quarter of the current year. The result for the fourth quarter includes a provision of SEK 6M for salaries and social security charges relating to staff who were made redundant and are not obliged to work during 2001. The result for 2000 has therefore been charged with costs of approximately SEK 10M for staff who were made redundant. This is reported as an item affecting comparability in the statement of income. Growing operation outside Sweden The operations in Finland and Germany developed well. In Finland, the acquisitions of Toneco and Dataform, to supplement Major Blue Company, which was acquired in May, were completed and successfully integrated. The Finnish operation reported total pro forma sales of SEK 73.2M on a full- year basis. Dataform is an IT and Internet consulting company with 35 employees which has cutting edge expertise in ERP and in the company's own development products, especially for the retail and ready-made clothing industries. Toneco operates within the object-oriented CRM products sector and has seven employees. These two new companies are included in the consolidated results for two months during 2000. The German operation within IT and the Internet contributed to Resco's operations through a strong inflow of orders and high capacity utilisation throughout the fourth quarter from the start in October 2000. A large part of the activities focuses on Internet integration with existing business systems in major companies. The operation has 70 employees. Changes in the Executive Management The former Managing Director, Torstein Johansen resigned on 31 October following the aborted transaction with Fi System. Resco's Chairman, Kjell Jacobsson, has since taken over the position of Acting CEO until the appointment of a new Managing Director. The Board of Directors has appointed two new Deputy Managing Directors, Mats Ohlsson and Hans Lycke (First Deputy Managing Director) Mats Ohlsson was previously managing director of Reference who joined Resco at the time of the acquisition. Hans Lycke is Sales & Marketing Director and has worked at Resco since January 1999. Goodwill During the first half of 2000, optimism in the stockmarket was very high for IT and Internet-related service companies. Owing to the dramatic reduction in the market valuations of these companies during the latter part of 2000, Resco was justified to make a special evaluation of the acquisition values linked to acquisition of operations during the past year. The market's high valuation of the listed Internet consulting companies was also reflected in the valuation of acquisitions made by many companies, including Resco, especially when these acquisitions were made against payment in the form of newly issued shares. Resco has chosen to evaluate the original acquisition values of companies acquired during 2000 in relation to the discounted future cash flows which these operations are expected to generate. This model includes the prerequisites for and anticipated performance of the individual subsidiaries. The evaluation has resulted in a total goodwill write-down of SEK 185.3M at 31 December 2000. The remaining goodwill amounts to SEK 128.6M at 31 December. This need for a write-down is a reflection of the external valuations of IT companies that prevailed during spring 2000 and the revaluation of the entire sector which was made later. It is not an indication of the performances of Resco's subsidiaries which are essentially in line with expectations. Prospects for the future The strong sales increase during the fourth quarter and the positive operating result in January 2001 now clearly shows that Resco is back on a profitable development curve. Resco has received several interesting customer assignments in recent months, which make use of Resco's comprehensive knowledge within IT and the Internet. This means that capacity utilisation is high. Vasakronan is a good example of an assignment where the customer utilises the combination of Resco's leading edge competences. Vasakronan aims to offer simple and efficient company- related services via the Internet for Vasakronan's existing and potential tenants. Resco's customer profile is a combination of traditional industrial companies, commerce, banking and insurance, telecoms and pharmaceuticals, in which no individual customer sector represents more than 25 per cent of total sales. Assignments from these customers are based on the end users' needs which result in requirements for business development, product development, rationalisation, and new, cost-efficient solutions. The fall in demand for e-commerce solutions business to consumer affects Resco only marginally as less than five per cent of sales is exposed to the so-called dot.com sector. The workforce and the competence mix are balanced and made up in accordance with an e-integrator's need for different competences. The term 'e-integrator' means the ability to integrate e-solutions with the company's business systems and other operations critical systems and processes. The definition also includes integrating e-solutions between the systems of different companies. The operations in Germany and Finland developed positively and are expected to contribute approximately 30 per cent of total sales. The cost savings programme in the Swedish operations has meant that Resco now has an efficient organisation with the same in-depth experience as before. An organisation for cross border projects has been established to promotes synergy gains, and the criteria for delivering solutions to multinational customers has been strengthened still further. In the Nine-month Interim Report an assessment was made that there were prerequisites for achieving a break-even operating result before goodwill amortisation (EBITA) for the fourth quarter. EBITA for the fourth quarter was negative. However, against the background of the prospects for the future outlined above, we have reason to expect strong growth and a significantly improved operating result. Our target is a positive operating result in 2001. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/02/27/20010227BIT01120/bit0001.doc The full year-end report http://www.bit.se/bitonline/2001/02/27/20010227BIT01120/bit0001.pdf The full year-end report