Semcon AB, Annual General Meeting, 15 March 2000

Semcon AB, Annual General Meeting, 15 March 2000 The proposed income statement and balance sheet and consolidated income statement and consolidated balance sheet were officially adopted at the Semcon AB Annual General Meeting held in Göteborg, Sweden, on Wednesday 15 March 2000. The dividend was set at SEK 1.40 per share and 20 March 2000 was chosen as the record date for payment of the dividend. Carl-Åke Jansson, Göran Lundberg and Hans Johansson were re-elected to the Board of Directors until the next Annual General Meeting. Two new Board members were elected: Christian W Jansson, who is a professional board member and advisor to several businesses, and Pia Gideon, Information manager at Ericsson, who has responsibility for external communication at the Group. Summary of CEO Hans Johansson's speech at Semcon's AGM on 15 March 2000 Semcon's CEO, Hans Johansson, reported on the Group's activities during the previous year and presented several customer references. He stated that it had been a turbulent year of restructuring and global mergers, among both customers and competitors. As a result, demand for Semcon's services varied considerably during the year. In the first six months, demand for consulting services was weak, mainly due to several of Semcon's customers undergoing major changes. In the second half of the year demand picked up strongly especially in the telecoms and auto industries. There was expansion both geographically and within different sectors. Operations He reported that the focussing of business activities during the past year has created clearer profiles for each of the business areas. Semcon will now concentrate its competence and resources within the Group on its four business areas to give customers a comprehensive range of services that will include the development of their: - Processes (Semcon Technology Management) - Information and communication systems (Semcon e-Design) - Products and production systems (Semcon Industrial Design) - Human resources (Semcon Competence Development) Semcon has the unique capability to take a holistic grip of its customer's development projects, with the four Semcon business areas co-operating at the different stages of the development process. The Semcon Technology Management business area has built its rapid expansion within strategic consulting and renewal processes on a unique understanding of technology and processes in operations. Hans Johansson emphasised that the business area has the leading-edge competence to give customers support at the crucial early stages of strategic decision-making in product development. By exploiting the competence network throughout Semcon, the business area leads renewal projects that include strategies, processes, information, human resources and technology. Semcon Technology Management performed very well during the year and was responsible for 3% of total sales. The number of employees has almost doubled and amounted to 46 people in December 1999. Garnbratt Consulting AB, a specialist company within technical cleanliness, was acquired. The project management and leadership sector developed very strongly and a new company, Semcon Project Management AB, was formed in early 2000. Within the Semcon e-Design business area, Semcon develops systems for information management. This includes IT and electronics systems embedded in other products and IT systems for managing information connected with a product during both the development and application stages. Hans Johansson explained that Semcon's strength is its many years of experience and knowledge of the fundamentals in product development coupled with leading- edge know-how in new IT areas. Examples of competence areas at Semcon e- Design are: Labview, Bluetooth, WAP applications, interactive web functions, multimedia, etc. Semcon also sells IT based tools for efficient product development such as CAD and PDM products. The business area showed strong growth in 1999 and accounts for 37% of Semcon's total sales. During the year Semcon completed its first outsourcing venture and started a new company, Semcon Informatic AB. The new company has over 60 employees of whom around one third came from Volvo. The partnership with Volvo has led, among other things, to Semcon producing interactive driver instructions that are delivered to Volvo customers on CD-ROM. Hans Johansson revealed plans to launch this concept on the global market and offer it to other customers within the auto and telecoms industries. The Semcon Industrial Design business area constitutes the backbone of Semcon's know-how in product development with its primary operations in the development and design of products and production systems, and machine and installation construction. The business area hosts the classical skills of design, calculation, prototyping, testing and production development. Semcon Industrial Design accounts for 42% of Semcon's total sales. Design, which has become increasingly important in the development of new products, is an area in which Semcon is intensifying its focus. Design assignments are often the starting point for what becomes a project in which Semcon takes overall responsibility and applies all of its areas of expertise. The consulting business, Extern Engineering AB, was acquired in 1999. This was Semcon's first acquisition and a key step in the Group's strategy for growth. The new company added 35 employees and sales of SEK 30 million to the Semcon Group. Semcon Competence Development carries out training for private businesses and the public sector. The business area has offices at ten sites throughout Sweden, carries out training at 40 sites and recently opened an office in Denmark. Training focuses on three main areas: IT, technical development and development of operations. Hans Johansson explained just how important it is that Semcon has its roots firmly embedded in industry. Every customer that buys consulting services from Semcon is a potential customer of Semcon Competence Development. The business area accounts for 18% of Semcon's total sales. The start of 1999 brought rapid sales growth, but profits did not follow suit. Opening a new office and recruiting new staff were expensive investments. Demand in the public sector has significantly declined. Efforts will intensify in 2000 to do business with leading industrial businesses where demand for competence development is soaring. Financial performance The CFO Bengt Nilsson reported on Semcon's financial performance. He noted that Semcon has increased its sales for 19 years in a row. Group sales amounted to SEK 863.5 million (798.9 m), a rise of 22%. The operating profit climbed to SEK 84.4 million (81.9 m) and the profit after financial items was also SEK 84. 4 million (84.8 m). The operating margin remained strong at 8.8% (8.6). The jump in sales compared with last year was mainly due to Semcon Competence Development winning new market share, Semcon e-Design and Semcon Technology Management breaking through with new business models, and Semcon Industrial Design attaining higher coverage levels in the late autumn. The total number of employees rose by 17% to 1,266 (1.079) and EPS stood at SEK 3.38 (3.44). He also reported that the company's equity/assets ratio of 38% (39) was in line with the target of exceeding 35%. Markets and customers The CEO then explained that growth will primarily be organic but that outsourcing and partnership deals within priority sectors and acquisitions of complementary specialist companies will also take place. Growth areas are: Internet, mobility, electronics, design, embedded systems, competence development and management services. Expansion will continue through opening new offices in Scandinavia and through long-term international expansion, as Semcon follows its customers overseas. New departments and activities at existing offices will also boost Semcon's expansion. Semcon seeks long-term relationships with customers by providing swift service, sensitivity, strong commitment and local knowledge of customers and their development tools. The customer base will remain broad but the focus will be on telecoms, transport, autos, pharmaceuticals, medical technology, food and packaging. Since Semcon was formed in 1980, many of Sweden's leading industrial companies have been included in what is a broad and stable customer base. Customers include ABB, AstraZeneca, Atlas Copco, Electrolux, Ericsson, Volvo, Saab, Scania, Siemens-Elema, SCA, Mölnlycke, Tetra Pak and Alfa- Laval. Semcon has partnerships and general agreements with several of these companies. An increasing number of assignments are generated from these agreements and they help to build strategically important, long-term relationships. Semcon has the strong breadth of competence that matches its customers requirements for having only a few, large consultancy partners. Semcon's expertise in technology, IT, management and training make a strong blend. 2000 Hans Johansson announced that 2000 began with several strategically important business deals and agreements. Semcon has signed an agreement with ABB Automation whereby 40-50 employees will be offered employment at Semcon e-Design. Semcon has signed a letter of intent with Volvo Technology Transfer regarding the formation of a new company. In March, another letter of intent was signed with Volvo regarding Semcon's takeover of Volvo Kompetenscenter and the Volvo college in Skövde. Semcon One Defined AB, a new IT consultancy company, will start business on 1 April. The aim is to meet industry's needs for uniform and effective infrastructures for IT management. This new company will mean a large step for Semcon's fastest-growing business area, Semcon e-Design, which has specialist knowledge of mobile internet, Bluetooth, Labview and interactive technical information. The President of the new company will be Ulf Börjel, who joins Semcon from Framfab. He has also been involved in starting Guide Integration AB from scratch. All of Semcon's business areas are Active Preferred Suppliers to the Ericsson Group. During the start of the year business activities have begun in several new locations, including Malmö, Katrineholm, Borlänge and, soon, in Skövde. The first six months of 2000 will mean a continued decline in demand for Semcon Competence Development because of the flat conditions in the public sector. Operations are being restructured to focus on greater sales to private industry. The strongest performances can be expected within Semcon e-Design and Semcon Technology Management. The Board of Directors forecasts strong growth in sales and continued good margins for the full year in 2000. As in previous years, the best performance is expected in the second half of the year. Gothenburg 15 March 2000 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/03/16/20000316BIT00610/bit0001.doc http://www.bit.se/bitonline/2000/03/16/20000316BIT00610/bit0002.pdf