Interim report January-September 2006

• Sales climbed by 7.8% to reach SEK 1,171.2 m (1,086.5)

• The profit after tax climbed by 7.7% to reach SEK 46.2 m (42.9)

• Earnings per share was SEK 2.49 (2.47)

• The operating profit after depreciation (EBIT) climbed by 15% to reach SEK 66.7 m (58.0)

• After the end of Q3 the JCE Group made a cash offer for Semcon of SEK 65 per share. The board has been contacted by further interested parties following the bid

Comments by CEO Henrik Sund
Our investments in the international market are starting to have an effect, something we started to see from our sales figures in Q3. Several of our most recent major deals have been accomplished in the face of stiff international competition, which shows that we have an attractive business offer. One lasting trend is that manufacturers are contracting out all or part of larger development assignments with subcontractors and partners. To an increasing extent they want to use just a few suppliers. This means that we must be where our customers’ development centres are and we must have the capacity to take on major projects. Increased interest from customers especially in Germany and the UK shows that we fulfil these demands. We have a strong offer, skilled and committed staff as well as the right price level.

Our Informatic business area took an important step onto the German market by signing a partnership agreement with the German company ESG (Elektroniksystem und Logistik GmbH). In close cooperation with them, we will provide products and services for aftermarket information primarily to General Motors, but also other German clients. The recently started business in the UK, in close proximity to Land Rover’s and Jaguar’s product development centres and departments for producing aftermarket information, has begun well. The office in China has also progressed well and is at the start of a significant growth phase. The international investments burdened the period’s results. We are seeing sustained expansion at our interactive agency, Zooma by Semcon, which has become one of the biggest and best of its type in Sweden. Awards for Ericsson Racing Team’s website in conjunction with the Volvo Ocean Race have been followed by a new award for FIFA’s World Cup 2006 mobile website. This was designed on assignment from the Canadian tele-operator Rogers, one of Ericsson’s Canadian customers.

Our Design & Development business area reported somewhat better results than the previous quarter particularly in the Vehicle and Industry sector, and mainly for traditional industry clients such as Saab AB and ABB. The order intake at Automotive R&D has been very strong over the past few months and a number of projects are at the start-up phase, but they did not affect the period’s results. Incoming projects are larger than before and international. One example of this is the order we won in stiff competition with three German suppliers. It stretches over three years and concerns project management and engineering for a car project.

Our perseverance in Trollhättan is creating major opportunities for winning orders from GM in Rüsselsheim for example. We have also had the chance to expand our business, which has made the Trollhättan office our second largest with 150 consultants. The office is an important part in our ventures with both GM and Volvo Aero. We have seen a divided picture at Industry, with a strong performance at aerospace as well as energy and hydroelectric power. The comprehensive service agreement that Semcon signed last autumn with Volvo Aero has progressed very well. The agreement covered Semcon’s complete range in product development, engineering, calculations, project management, project methodology and pre-production. The twenty consultants from Semcon in Trollhättan and Göteborg who started the assignments have today increased to thirty. Aerospace activities have also increased at Linköping. Sales to Saab AB are estimated to have risen by more than 50 per cent in 2006, partly on the back of further calculation and engineering work on the Saab 2000 aircraft. We also have assignments at Saab Aerostructures, working on projects to do with new types of aircraft. However it’s still tough on the Medical side, but a pleasing breakthrough has been made with Semcon’s and Flexlink’s joint company Compliant Logistics’ new order. This concerns Basic Design for upgrading and streamlining production sites.

Further business that has shown a positive trend with greater demand is our structuring activities in Norway with Kongsberg Devotek. The recently started satellite office in Göteborg means that we can develop the business together at a distance, effectively and profitably.

Our IT business within the Zpider business area is performing well and has shown strong volume growth. This trend has been strengthened by our expanded preferred supplier agreement with Ericsson, which now encompasses our IS/IT services. Zystems by Semcon’s unique offer in system integration, coupled with the more-established brand has led to even more assignments. Over the period the company has fixed ten new deals. One of them, Rikspolisstyrelsen (The National Police Board), is completely new for Semcon. Zipper by Semcon also has several new exciting assignments. One example is E.ON, which is now being helped by Zipper to create a new IT environment. E.ON – the world’s largest private energy group – is taking a first step towards working in a standard and consolidated environment across the company. Semcon’s SAP venture, Zuite by Semcon, has rapidly become a success and in a short time has been chosen as a Community Partner to SAP Svenska. The major demand for its services has led to an office being started in Göteborg to meet customers’ demands on local resources.

I took over responsibility as CEO for Semcon on 1 October, a challenge I accepted with great enthusiasm. Semcon has good potential. The professionalism, know-how and commitment of our employees, in combination with our successful customers, means that we are well equipped for the future.


Outlook
Our objectives are continued growth and improved profitability through reduced costs and increased use of low-cost alternatives and more partnership deals. The aim for 2006 is to win market shares in Sweden and abroad.

We expect the good business conditions to continue for the rest of the year, which will give us good opportunities of achieving our goals, even though there are a number of areas of uncertainty, such as trends in the auto industry.