Q1 report Semcon

Continued growth with restored profitability · Sales increased by 18 % to SEK 286.8 million (242.8 m) · Strong growth in Industrial Design of 42 % (24) · The operating margin after goodwill (EBITA) amounted to 11 % (10,6) · Earnings per share at SEK 1.19 (1.02) · Unchanged forecast for the full year: Good sales growth with considerably improved operating margins. Comments by CEO Hans Johansson - The year has started well. The operating profit for the first three months of 2001, SEK 30 million, is at the same level as the operating profit for the whole of 2000, which we are very pleased about. The quick recovery in profitability is due to us taking necessary measures including cost reductions, last autumn and this spring in combination with continuing strong demand. The results confirm our ability to grow with profitability something that has become natural for Semcon for over 20 years. - Industry's focus on product and process development remains considerable. As competition intensifies, it becomes ever more important for our customers to launch new and attractive products. Design and quality are the most important means of competition for our customers. Semcon is engaged already at the R&D stage of customer projects meaning that demand for our services is relatively stable despite the business cycle. An increasing part of our customers' investments are being made in these projects, which are long and complex as well as heading towards more complete measures. - In weaker business cycles our customers take a critical look at their activities, which creates new opportunities towards strategic partnerships and outsourcing. Semcon has conducted several successful outsourcing activities, where we take on employees and production and we have a strong position in outsourcing of technical information, the area we call Informatic. The latest business was carried out with Besam. - The state of the market also means that customers overhaul their suppliers and consultants. Semcon's strategy is to be a primary supplier to the leading industry companies, but not to be too dependent on any one client. As a step in this direction, we have broadened our customer base within Telecom by signing a framework agreement with Nokia and continues as active preferred supplier to Ericsson in the western parts of Sweden. Semcon is one of the Nordic region's leading consultancy companies in design and industrial IT solutions with sales of SEK 1,000 million in 2000 and around 1,600 employees. Semcon's consultants develop products, processes and people for the leading businesses in Sweden. The combination of profitable growth for 20 years and long-term relationships with leading businesses forms the basis for continued success. Semcon focuses on the telecom, medical and vehicle sectors, where development is intensive and there are large investments in R&D, product development and growth. Semcon AB (publ) is listed on the O-list of the Stockholm Stock Exchange. Important events during the period · Ford selects Semcon as its development partner for the Th!nk electric car. · Outsourcing agreement for technical information signed with Besam. · An agreement with APV strengthens competence within the Medical sector via new staff members. · Fast growth for Zipper by Semcon, with two new departments in Stockholm and Göteborg. · Continued growth within e-Design, four new departments started: -in Malmö and Linköping focusing on embedded design -in Södertälje and Skövde focusing on informatic design. Important events after the end of the period · Semcon is chosen Active Preferred Supplier to Ericsson in the western part of Sweden · Framework agreement is signed with Nokia. · Strategic co-operation started with global electronics group, Sanmina. · An agreement signed with Icomera AB concerning new technology for mobile internet. · Semcon receives an order for interactive instructions for Nike hydraulics and Jaguar. · Annmarie Gardshol, Senior Vice President of Gambro, was elected as new member of the Board. Business activities Sales reached SEK 286.8 million (242.8 m), a 18 % increase. Operating profit before goodwill (EBITA) was up by 22 % to SEK 31.5 million (25.8 m), which means an operating margin before goodwill of 11 % (10.6%). Operating profit rose by 18 % to SEK 30 million (25.3 m), which means an operating margin on 10,4 % (10.4). Demand in Q1 was good, from both new and existing customers. The improvement in profitability is a direct result of the cost reduction measures and programme for better price differentiation introduced last autumn. Semcon Industrial Design Industrial Design focuses on the development and design of products and production systems. Our strong connection to industrial design unites people and technology in a unique way. Sales climbed strongly by 42% to SEK 154.4 million (108.4 m). The operating profit climbed 32% to SEK 17.5 million (13.2 m). The rationalisation programme introduced at the end of 2000 has had a positive effect, and the integration of Pelmatic has been completed, which also gave a boost to the business area's performance. During the period there was increased interest from customers regarding increased responsibility taken by Semcon based on value debiting. Ford selected Semcon as a development partner for its Th!nk electric car. This assignment is in line with our focus on the Vehicle sector, which is one of the most development-intensive industries facing future growth. Our focus in the Medical sector is on medi-technical and biotechnology. Through an agreement with APV Systems, Semcon has further strengthened its position in the sector, and Semcon's offer of comprehensive project responsibility regarding specialist process technology within the Medical sector has been reinforced. Fifteen key personnel from APV Steridose joined Semcon and the newly started Life Science department. New assignments were received from, among others, Glaxo SmithKline, NovoNordisk and Baxter. Design activities continued to grow and a design centre was opened in Göteborg. Semcon e-Design. e-Design develops embedded IT systems for products and production systems, interactive web solutions and web design, system solutions, and also supplies IT products. Sales climbed by 8% to SEK 110.7 million (102.0 m). The operating profit fell by 15% to SEK 13.3 million (15.7 m). The reason for the fall in profits is the ongoing concentration on new infrastructure, including the opening of four new departments and investment in the OSI development tool. The market is characterised by continued strong demand. New assignments have been received within mobile internet, interactive design and embedded design, including several Labview projects. Semcon aims to be a dominant supplier within telematics and is forming a Competence village, an internal competence network. It will be headed by a new recruit, Mats Överfjord from General Motors, who will also lead work aimed at boosting competence within standards such as OSGi (Open Service Gateway Initiative). New customers within this segment include Green Cargo Road & Logistics and Wilson. Our Informatic activities are based on our being a partner and system supplier within technical information and new media. An outsourcing agreement with Besam was signed during Q1. New assignments were carried out for Ford, and Semcon will deliver interactive workshop instructions to Jaguar on behalf of Nike Hydraulics. Semcon Technology Management Technology Management's activities include strategy advice, project management and change processes. The business area has a unique understanding of the technology and processes used by customers. By using the competence network that exists throughout the Semcon Group, Technology Management leads development projects that include strategies, organisations, processes, manpower and technology. Sales increase by 67% to SEK 21.7 million (13.0 m). The operating loss was 0.8 million (2.8 m). Results were hit by development costs for new offers and concepts, and by the start of new activities in Stockholm (Zipper) and Copenhagen (Industrial Management). During the period a partnership began with Lean Enterprise Institute, which works with cost reduction for Swedish businesses. New customers in the period included Swedia Networks, Telia IT Service, Teracom, Optillion, Ascom Tateco and Ericsson Radio Access. Zipper Zipper by Semcon expanded during the period. A new office was opened in Stockholm and a new operation was established for system integration, Zipper Systems AB in Göteborg. Mats Nygård, previously sales manager at Framfab, took over as head of Zipper System. Johan de Verdier will take over as overall head of Zipper at the start of July. Johan was previously the Managing Director of Guide and head of Swedish operations at Framfab. Zipper provides businesses with well planned and uniform infrastructure for managing information. Business Sales Operating Operating areas (SEKm) profit margin (SEKm) (%) 31. 31.03 31. 31.03 31. 31.03 03 2000 03 2000 03 2000 2001 2001 2001 Industrial 154.4 108.4 17.5 13.2 11.3 12.2 Design e-Design 110.7 102.0 13.3 15.7 12.0 15.3 Technology 21.7 13.0 -0.8 2.8 -3.9 21.6 Management Competence - 19.4 - -6.4 - - Development * TOTAL 286.8 242.8 30.0 25.3 10.4 10.4 * Competence development was closed down in 2000. Parent company Semcon AB is the parent company in the Group and responsible for company- wide issues such as strategy, information and marketing. Sales totalled SEK 3.1 million (6.5 m). The loss after depreciation was SEK 0.9 million (0.2 m). The parent company's negative liquidity was SEK 47.2 million (- 32.9 m). The company's investments in stock totalled SEK 0 million (0.1 m). Personnel and organisation The average number of employees was 1,583 (1,347), 18% up on the previous year. The total number of employees at the end of the period was 1,575 (1,369). At the end of 2000 the total number of employees was 1,623. The decrease is due to the closing down of the unprofitable parts of Semcon Competence Development. The need for personnel within areas such as embedded design, design and mobile internet is expected to remain strong and a recruitment campaign was therefore initiated during Q1. Board members At Semcon's AGM held on 21 March, Christian W Jansson was re-elected as Chairman of the Board. Board members Pia Gideon, Carl-Åke Jansson and Hans Johansson were re-elected, while Göran Lundberg did not stand for re-election. Annemarie Gardshol, Senior Vice President at Gambro, was elected to the Board. Her responsibility will be global strategic development. Semcon's Board now has extensive expertise in all its areas of focus - Vehicle, Medical and Telecom. Financial items and investment The Group's total investments, mainly in computer hardware and software, totalled SEK 3.4 million (4.3 m). At the end of Q1 the equity/assets ratio stood at 36.4% (37.4). Liquid funds at the period's end amounted to SEK -42.8 million (+32.7 m). Outlook The Board's forecast of good sales growth and a considerably improved operating margin compared with 2000 remains firm. Semcon's long-term strategy involves focusing on three growth sectors - Telecom, Vehicle and Medical - and on specialist niches such as embedded design, mobile internet, industrial design and interactive information. Growth will be achieved organically, through outsourcing in priority sectors and through the acquisition of specialist businesses. Further information All figures are based on the same accounting principles and calculation periods used in the previous year. The report has been produced in accordance with the recommendations and statements of the Swedish Financial Accounting Standards Council. The company's auditors have not examined this report. Semcon will present its Q1 report at a Financial Hearing to be held at 8 a.m. on Friday 11 May at Operaterassen in Stockholm. To see the presentation on the internet, visit www.financialhearings.com. The Q2 report will be published on 22 August 2001. For further information please contact the CEO, Hans Johansson on Tel. +46 (0)31 721 08 66, or mobile +46 (0)70 591 43 34 or the CFO, Bengt Nilsson on Tel. +46 (0)31-721 08 68, or mobile +46 (0)70-582 82 96. Göteborg, Sweden, 9 May 2001 SEMCON AB (publ) The Board of Directors ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/05/09/20010509BIT00270/bit0002.doc Full Report http://www.bit.se/bitonline/2001/05/09/20010509BIT00270/bit0002.pdf Full Report