Interim report January - June, 1999

Interim report January - June, 1999 * Turnover up by 23 percent to SEK 420.9 million (341.5) * Operating profits amounted to SEK 32.9 million (37.4) * Profit after financial items amounted to SEK 32.9 million (40.8) * Earnings per share amounted to SEK 1.37 (1.65) * Strong salesgrowth within the business areas Industrial IT and Competence and Process Development Important events during the period * Investment carried out in the Öresund region with a new electronics section opened in Lund and increased sales in Copenhagem * Further development of the business in Norway * Long-term agreements concluded with Ericsson and Astra * SCO Authorised Education Center, approval granted within Training concerned with UNIX Important events after the end of the period * Acquisition of a specialist company within technological cleanliness Business activity Consolidated turnover amounted to SEK 420.9 million (341.5), an increase of 23 percent over the same period last year. Operating profits amounted to SEK 32.9 million (37.4), and profit after financial items amounted to SEK 32.9 million (40.8). The profit was affected by higher costs and lower utilisation rate compared to the same period 1998. The 1998 year's figures included furthermore a one-off income of SEK 3.5 million from the option scheme. Major long-term investment was carried out during the period, which affected profits by approximately SEK 7 million. The rate of growth in all business areas was positive, despite a weaker market than over the same period last year. Efforts in Norway began to bear fruit and an order from the offshore sector was achieved during the period and also from TH!NK Nordic, a subsidiary of Ford, concerned with the development of electric cars. The establishment in Denmark developed well with orders both within the training and the consulting business. Semcon was appointed Active Preferred Supplier to the Ericsson companies in Western Sweden. The agreement will form the basis of an increased long-term partnership within electronics and IT. Business area (SEKm) Turnover Profit after Share of depreciation turnover 30/6/9 30/6/98 30/6/99 30/6/9 % 9 8 Product and production 222.2 212.3 17.0 23.3 53 (62) development Industrial information 111.5 75.7 9.3 7.8 26 (22) technology Competence and process 87.2 53.5 6.6 6.3 21 (16) development TOTAL 420.9 341.5 32.9 37.4 100 (100) Product and Production Development Turnover rose to SEK 222.2 million (212.3), an increase of five percent. Operating profit amounted to SEK 17 million (23.3). Vigorous investment was carried out in the new venture in Norway and within design activity in Gothenburg. Activities to build up the electronics area continued including the start-up of new departments in Stockholm and Lund. Investment was also carried out in Norrland (Northern Sweden) especially in Wood pulp and Paper. Finally, major internal programmes was carried out in training within Project Management and CAD tools such as Pro/Engineer, Unigraphics and Catia to meet customers' increased demands. The utilisation rate were somewhat down on last year however. The drop in orders was due to structural changes on the part of our customers leading to postponement of decision making. The tide has mainly changed here. Industrial Information Technology Turnover increased by 47 percent to SEK 111.5 million (75.7). Operating profit rose by 19 percent to SEK 9.3 million (7.8). There was increased collaboration with Volvo Cars as regards the development of interactive driver information and also the sale of further IT products to Saab Automobile increased during the period. New customers acquired during the period were Atlas Copco, Telia Telecom and AGA Cryo. A general agreement was signed with Ericsson Data and Astra Arcus, and long-term support agreements were concluded with several clinics world-wide for the further development of casebook handling systems, which is in accord with our investment in the pharmaceuticals industry. Semcon Informatics AB started during the period and the business developed well and resulted in recruitment of new employees. Competence and Process Development Turnover in this area increased by 63 percent to SEK 87.2 million (53.5). Operating profit rose by five percent and amounted to SEK 6.6 million (6.3). Semcon Education was approved as an SCO AEC (Authorised Education Center), which means that we can provide training and certification within Unix together with the American SCO, which is one of the world's largest suppliers of UNIX server operating systems. Efforts were put on the development of various training concepts and new departments were set up in Sundsvall, Kristianstad, Visby, Trollhättan and Göteborg with the aim of achieving closer relationship the customers and becoming a springboard for further expansion. There was increased involvement with Saab Automobile, Kværner and Hydro Raufoss in management and IT training. Within Management Consultancy, Semcon acquired Garnbratt consulting AB, a specialist Company within technological cleanliness. The company has developed the G-method (Garnbratt method), which forms the basis for the new Swedish cleanliness standard SS2687 (cleanliness in systems). Cleanliness is today one of the decisive design criteria in order to achieve the working life desirable in control systems, transmission systems, hydraulic systems and motors. This has resulted in Bosch USA becoming a strategic customer of Semcon Industrial Management. Other new customers include EHPT and DHL. The parent company Semcon AB is the parent company of the Group and is responsible for matters applying throughout the Group as a whole such as strategy, information and marketing. Turnover amounted to SEK 9.8 million (6.4). Profits after depreciation amounted to SEK 0.5 million (0.9). Parent company liquidity amounted SEK 0.5 million (4.2). Company investment amounted to SEK 0.3 million (0). Staff and organisation Semcon chose to adapt the rate of recruitment due to a weak market. The tide turned at the end of the period however and thanks to strong demand expected for the rest of the year, the rate of growth has increased. The total number of employees amounted to 1183 (1024), which represents an increase of 15.5 percent over the previous year. The organisation was strenghtened by the recruitment of Knut Simonsson, who was previously marketing manager at Volvo Car Corporation AB and responsible for Global Marketing. He has been appointed Deputy Managing Director of Semcon AB and will start on the 1 September this year. He will be working principally in marketing, strategic planning and building up the trademark. Financial items and investment Investment in machinery and equipment, mainly hard- and software, amounted to SEK 11.5 million (23.4). The equity ratio amounted to 34.8 percent (35.6) at the end of the period. Liquid assets at the end of the period amounted to SEK -12.8 million (7.2). Total overdraft facility amount to SEK 45 million. Shareholders' equity amounted to SEK 100.8 million (70.2). Due to significant delays in the implementation of a new business system, the invoicing has been delayed during the end of the period. This has in its turn affected the cash flow negatively. Measures have been taken and improvements are expected during the coming period. Future prospects The first six months of the year were marked by a weak market with much major restructuring amongst our customers. The recruitment rate was thus deliberately lower than during the same period for 1998. Demand for Semcon's services has now increased and major activities has been carried out to increase growth. The trend towards outsourcing has grown stronger and is expected to increase the number of partnerships with Semcon's customers. Prospects for the whole year are therefore positive and the Board's expectations is for a continued positive growth in turnover and a profit which is expected to be on a level with last years profit. Other information The next quarterly report for the period January - September will be published on the 27 October, 1999. For further information please contact: Hans Johansson, Group Executive, Tel: +46-31-721 08 66; Mobile: +46-70-591 43 34 or Bengt Nilsson, Financial Executive, Tel: +46-31-721 08 68; Mobile: +46-70-582 82 96. Gothenburg, 16 August, 1999 SEMCON AB (publ) The Board of Directors Detailed review report We have made a review of this Interim Report in accordance with recommendations by the Swedish Institute of Authorised Public Accountants. A review is substantially limited in relation to an audit. Based on our review, nothing came to our attention that indicates that this Interim Report fails to comply with the Swedish Companies Act and Stock Exchange Rules. Gothenburg, the 16 august, 1999 Björn Grundvall Göran Ekström Chartered accountant Chartered accountant Ernst & Young AB Ernst & Young AB Semcon AB Group accounts, summary Profit and loss accounts 1999 1998 1998 (SEK thousand) Jan-June Jan-June Full-year Net sales 420,888 341,538 708,908 Costs and expenses - 377,603 - 296,699 - 610,405 Operating profit after 43,285 44,839 98,503 depreciation Depreciation of machinery and -10,375 - 7,403 -16,611 equipment Operating profit after 32,910 37,436 81,892 depreciation Net interest profit -24 - 200 - 574 Income from option scheme - 3,522 3,522 Profit after financial items 32,886 40,758 84,840 Taxes - 9,208 - 12,227 - 25,111 Net profit 23,678 28,531 59,729 Balance sheets 30/6/99 30/6/98 31/12/98 (SEK thousand) Assets Fixed assets 40,782 36,318 39,340 Current assets 248,929 160,981 218,274 Total 289,711 197,299 257,614 Shareholders' equity and liabilities Shareholders' equity 100,762 70,158 101,358 Provisions 25,510 17,710 25,510 Long-term liabilities - 5,355 - Current liabilities 163,439 104,076 130,746 Total shareholders' equity and 289,711 197,299 257,614 liabilities Statement of changes in financial 1999 1998 1998 position (SEK thousand) Jan-June Jan-June Full-year Funds internally provided - 1,008 36,687 59,837 Investing activities - 11,536 -23,380 -35,487 Financing activities - 24,274 -10,403 -10,403 Changes in cash and cash equivalents -36,818 2,904 13,947 Key ratios Note 1999-06-30 1998-06-30 1998 Full-year Operating margin, (%) 1 7.8 11.0 11.6 Return on average shareholders' 2 34.2 54.9 75.5 equity, (%) Equity ratio, (%) 3 34.8 35.6 39.3 Risk capital ratio, (%) 4 43.6 44.5 49.6 Earnings per share after tax, (SEK) 5 1.37 1.65 3.44 Earnings per share incl. 764 300 6 1.31 1.58 3.30 options, (SEK) Shareholders' equity per share, 7 5.81 4.05 5.85 (SEK) Shareholders' equity per share incl. 8 5.57 3.88 5.60 764 300 options, (SEK) Average number of employees 9 1124 884 955 Value added per employee, (SEK 10 256 271 505 thousand) Profit after financial items per 11 29.3 46.1 88.8 employee, (SEK thousand) Investments, (SEK thousand) 11,536 23,380 35,891 Number of shares, (thousand) 17,338 17,338 17 338 Notes: 1. Operating profit as a percentage of net sales 2. Net profit as a percentage of average shareholders' equity 3. Shareholders' equity as a percentage of total assets 4. Shareholders' equity plus deferred tax liabilities divided by total assets 5. Net profit divided by the number of shares issued 6. Net profit divided by the number of shares issued plus options 7. Shareholders' equity divided by the number of shares issued 8. Shareholders' equity divided by the number of shares issued plus options 9. Average number of permanent employees 10. Operating profit plus salary expenses and national insurance divided by the average number of permanent employees 11. Profit after financial items divided by the average number of permanent employees Other definitions: Net profit Net profit after tax. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/08/16/19990816BIT00510/bit0001.doc http://www.bit.se/bitonline/1999/08/16/19990816BIT00510/bit0002.pdf