Interim report January-June 2010

Weak first half of the year but successive improvements during second quarter

Second quarter

• Operating income was SEK 516 million (602)

• The operating loss was SEK 25 million (-63), giving an operating margin of -4.8% (-10.5)

• The loss after tax was SEK 19 million (-51)  

• Earnings per share (EPS) was SEK -1.06 (-2.80)
 

January-June

• Operating income was SEK 1,037 million (1,265)

• The operating loss was SEK 29 million (-105), giving an operating margin of -2.8% (-8.3) 

• The loss after tax was SEK 24 million (-82)

• Earnings per share (EPS) was SEK -1.32 (-4.54)
 

“We’ve seen a wait-and-see attitude from many customers in the first half of the year, mainly in the automotive sector, resulting in a low utilization ratio and weak results. The utilization ratio successively increased in Q2 as more companies saw an improved business climate. New deals signed in July, along with more enquiries in all our sectors mean that we now need to recruit in many areas.” 

Kjell Nilsson, President and CEO
 

Income and result - Second quarter
Operating income fell by SEK 86 million during the period to SEK 516 million (602) and organic growth was -12%. The fall in sales is mainly due to the lower sales volumes in the automotive sector where many customers still have a wait-and-see attitude in starting new development projects.
The operating loss was SEK 25 million (-63), giving an operating margin of -4.8% (-10.5). A low utilization ratio in some areas, along with the introduced cost-cutting scheme, had a negative affect on results. Of the cost-cutting scheme of SEK 15 million for 2010, SEK 8 million had an effect on results on the quarter, with the remaining amount expected to affect the second half of the year. Last year results were affected by one-off items of SEK - 39 million.
Net financial items amounted to SEK -2 million (-4). The operating loss before tax was SEK 27 million (-68). The operating loss after tax was SEK 19 million (-51) and the EPS after dilution was SEK -1.06 (-2.80). 

January-June
Operating income for the period was SEK 1,037 million (1,265) and organic growth was -15%. The fall in sales is mainly due to the wait-and-see attitude from customers starting new development projects and a very poor start during the first months of the year. The downturn remains largest for the units active in the automotive sector.
The operating loss was SEK 29 million (-105), giving an operating margin of -2.8% (-8.3). The cost-cutting scheme affected results by SEK 8 million. Last year results were affected by one-off items of SEK -49 million. The operating loss, excluding these one-off items, was SEK 21 million (-56) and the operating margin was -2.0% (-4.4).
Net financial items amounted to SEK -4 million (-6). The operating loss before tax was SEK 33 million (-111). The operating loss after tax was SEK 24 million (-82) and EPS after dilution was SEK -1.32 (-4.54). 

Financial position
The operating cash flow from current activities was SEK -53 million (147). The Group’s cash and bank balances amounted to SEK 33 million (47) with additional non-utilized credit of SEK 233 million as of 30 June. A new credit agreement was signed at the beginning of Q3. The credit agreement consists of a bank overdraft facility of SEK 100 million (100) and a revolving credit facility of EUR 32.8 million (42.8) to run until 22 July 2011 with an option available for the company, before the due date, to extend the revolving credit to a three-year loan.
 Investments in hardware, licences, office supplies and equipment, amounted to SEK 8 million (13). Shareholders’ equity amounted to SEK 359 million (517) and the equity/assets ratio was 31% (36). Net debt was SEK 332 million (292) and the debt/equity ratio was 0.9 times (0.6). 

Events during the year

• Semcon has signed a two-year contract with EuroMaint Rail for supplying construction services, meaning Semcon taking over EuroMaint Rail’s construction department in Örebro.

• Westinghouse has appointed Semcon as a preferred supplier, enhancing cooperation in engineering services.

• Semcon has appointed Henry Kohlstruck as the new country manager for the German business from 21 March. He joined Semcon from the German development company Edag, where he was most recently vice president for the product/production division.

• Semcon has received yet another order from FMV worth SEK 9 million. The order was for 19 special composite containers intended for the Swedish Armed Forces and for the Swedish task forces including the Nordic Battlegroup.  
 
• Semcon has signed an order worth SEK 6 million with an auto manufacturer in Germany for safety simulations for a future car platform. Semcon’s Indian and German simulation specialists will carry out the assignment. 

Events after the end of the period 

• Semcon has been chosen by a German auto manufacturer as its development partner for producing a new car model. The overall order is worth around SEK 150 million and will run for three years.

• Semcon has been chosen as a partner for developing product information for a med-tech company in Sweden. Both parties have signed an initial 3-year contract. 

Staff and organization
The headcount on 30 June was 2,586 (2,871) of which 1,427 (1,704) in Sweden and 1,159 (1,167) abroad. The number of employees actively employed was 2,438 (2,769). The average number of employees was 2,471 (3,029). The number of employees in the respective business areas was: Automotive R&D 1,463 (1,670), Design & Development 760 (838) and Informatic 363 (363). 

Outlook
Products, plants and systems are becoming increasingly complex, requiring extensive development and documentation. Meanwhile demands are being placed on more rapid development processes and to cut development costs through more effective working models. In all, these trends mean improved business opportunities for the Group.
The utilization ratio improved gradually during the second quarter as an increasing number of companies are sensing an improved business climate. New deals signed in July, along with more enquiries from all our prioritized industries mean there will be a need to recruit in a number of areas over the rest of the year.
 

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