Semcon Statement of Accounts 2000

STRONG GROWTH IN CONSULTING ACTIVITIES ! * Consulting activities climbed by 34% * Sales up by 17% to around SEK 1 billion * Operating profit is SEK 50.0 million (84.4 m) * Highest profit growth for e-Design + 29% * EPS is SEK 1.99 (3.38) * Board proposes dividend of SEK 0.5 per share (1.40) * Forecast for 2001: Good sales growth with significantly improved operating margins Statement by CEO Hans Johansson "For the 20th year in a row Semcon is reporting stable growth. Consulting activities climbed by 34%, and the Group as a whole saw sales go up by 17%. "We are not pleased with our earnings trend though. The fall in profits is mainly due to losses made by our Competence Development business area and the cost of closing it down as announced in Q3. This was a charge of SEK 45 million overall. Closing down the business area has required a lot of senior management involvement. Profits were also hit by lower demand form the forest and process industries. "Our focus for the future will be to return margins to previous levels. A programme for improved price-setting has been developed. Cost-cutting measures will be introduced and we will reorganise to support our growth targets. The new organisation that came into effect at the start of the year will mean fewer companies in the Group. This is being done to meet the increasing demand for taking full responsibility for a project and to improve administration and speed up decision-making. "We consider that the market will continue to progress positively. Product development assignments within areas such as embedded systems, mobile internet and technical implementation are continuously growing. We have chosen to concentrate on the growth segments of Telecom, Vehicle and Medical, because they are the most development-intensive sectors and first to use new technology. Semcon is one of the leading design and development companies in the Nordic region. Semcon's consultants develop products, processes and people for Sweden's most successful businesses. The combination of profitable growth for 20 years, and the fact that Semcon has long-term relationships with leading industrial groups, forms a strong base for continued success." Important events during the financial year Major deals * Semcon signed an outsourcing agreement with Valmet and ABB Automation Systems. * Semcon signed Letters of Intent with Besam, Tetra Top Packaging and ABB Flexible Automation concerning the outsourcing of technical information. * The ongoing long-term relationship with Saab Automobile resulted in two important agreements: Semcon was selected as the outsourcing partner for IT services for product development; and an order worth around SEK 20 million was agreed concerning consulting services, training, hardware and software. * Semcon was selected as IT consultant and technology partner for ASSA ABLOY's involvement in the Volvo Ocean Race 2001/2002. Important acquisitions and start-up of new companies * Zipper by Semcon, a new business within the IT strategies and infrastructure segment. * Pelmatic Group with over 100 employees, including Knud E Hansen a leader in marine design, was aquired. * Euromation was formed together with Ford, Volvo Truck Component Corporation and Volvo Technology Transfer. * TimeIT AB was formed to supply software for operations control via web and WAP solutions. Strategic development * Semcon Technology Trend Offices were started in Tokyo and Silicon Valley, San Francisco. * Semcon closed down its business area Competence Development. * New offices were opened in Malmö, Uppsala, Borlänge and Katrineholm, and new departments set up in Västerås and Karlstad. * Semcon launched a new strategy focused on Telecom, Vehicle and Medical. * Important events after the end of the financial year * Semcon refined its activities to safeguard continued growth. * Semcon was selected as a development partners for Ford's TH!NK electric car. * Zipper by Semcon received two orders for its IT infrastructure product, Fasttrack*, which will involve 96,000 users. Operations The Group's sales climbed to SEK 1007.2 million (863.5 m), an increase of 17 %. The operating profit was SEK 50.0 million (84.4 m), and the profit after financial items was SEK 50.4 million (84.4 m). The sales increase compared with the previous year was mainly due to an increase demand, more comprehensive responsibility in projects and growth in number of employees. Demand for IT-related technology services grew during the final quarter of the year. Other sectors saw demand fall slightly compared with the same period last year. The fall in profits was mainly due to losses made by, and the closing down of, the Competence Development business area, and to lower demand from the forest and process industries. Operating Business Turnover Operating profit margin areas (SEKm) (SEKm) (%) Change 2000 1999 2000 1999 Change in % 2000 1999 in % Technology 44.5 24.2 +84 2.7 3.1 -11 6.2 12.8 Management e-Design 416.9 323.7 +29 51.7 39.9 +29 12.4 12.3 Industrial 485.4 360.2 +35 22.0 34.8 -37 4.5 9.7 Design Subtotal 946.8 708.1 +34 76.4 77.8 -2 8.1 11.0 Competence 60.4 155.4 -61 -45.1 6.6 -780 Neg 4.2 Development SPP 19.6 - TOTAL 1007.2 863.5 +17 50.9* 84.4 -40 5.0 9.8 *The minority interests' share of the operating profit was SEK 911,000. TECHNOLOGY MANAGEMENT Technology Management improves profits for customers by developing strategies, processes, IT, manpower and technology. The business area's work with strategic issues and projects for change at management level creates opportunities for complete projects where the whole of Semcon's competence comes into use. The business area expanded strongly in 2000. Sales climbed by 84 % to SEK 44.5 million (24.2 m). The profit was SEK 2.7 million (3.1 m), a fall of 11 %. The launch of new operations within project management and IT strategy affected profits with SEK 2.5 million, during the second part of the year. A large-scale switch from time-based pricing to value-based pricing took place, which is expected to boost results in 2001. During the year a new business, Zipper by Semcon, was started focusing on IT strategies and infrastructure. Zipper which has over 30 employees, progressed very positively in its first year and will receive increased investment in 2001. Two products were developed during the year; Insight@, which is an analysis tool that establishes current situations and makes an action plan for the technology infrastructure; and Fast track@, which is a semi-manufacture for automation of large PC platforms. The business meets the demand for well-planned and uniform infrastructure for managing information. The business received orders for its IT infrastructure product, Fasttrack*, from Vattenfall for 16,000 users and Göteborgs Stad (Gothenburg Town Council) for 80,000 users. Other customers include SAS, Ringhals, SCA and Ericsson. The project management and leadership sectors were further developed in 2000. A separate company was formed to ensure continued expansion. Semcon Project Management works with project management, analysis and advice, and competence development. E-DESIGN Semcon e-Design develops embedded systems for products and production systems, interactive web solutions and web design, system solutions, and also supplies IT products. The business area reported continued strong growth in sales and profits in 2000 of 29 % Sales amounted to SEK 416.9 million (323.7 m) and profits rose to SEK 51.7 million (39.9 m), which gave a profit margin of 12.4 %. Turbulence in the internet and IT sector in the second half of the year benefited Semcon. Access to skilled manpower improved as other companies laid off staff. Uncertainty led customers to seek out long-term and secure suppliers. All operations within the business area contributed to the overall positive development. Higher demand was noted within mobile internet, embedded design and PDM. Semcon's success in supplying efficient tools and methods for product development continued during the fourth quarter. Major efforts have been channelled into building up competence, important references and the packaging of comprehensive solutions within CAD and PDM. The long-term relationship with Saab Automobile resulted in, among other things, a large order for a product development tool worth around SEK 20 million plus a partnership, initially for five years, regarding the outsourcing of system and operation support for Saab Automobile's product development environment. Informatic Four new partnerships were started with Valmet, Besam, ABB Flexible Automation and Tetra Top Packaging. The aim is that Semcon will take over staff and equipment within technical information. Semcon will thus have primary responsibility for producing all of these companies' technical documentation. During the year Semcon developed and invested in One Source of Information (OSI) in partnership with Volvo Car Customer Service. OSI is a unique platform for managing information. Use of the platform cuts costs because producing information becomes more efficient and better controlled. The aim is to enhance product knowledge and the advantages are the links that bind different products together and make it easier for the user to find the right information. Products based on OSI include the interactive driver manuals for Volvo S60, V70 and Crosscountry, Volvo on Call and a web-based accessories catalogue for Volvo distributors. A breakthrough on the international auto market is expected during 2001. 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. The business area reported good growth, especially within its telecom and vehicle sectors. Sales climbed by 35 % to SEK 485.4 million (360.2 m), and the operating profit was SEK 22.0 million (34.8 m). The strongest development within the business area during the year came in the Stockholm region. The fall in profits was due to lower demand within the forest and process industries coupled with spiralling wages, as competition for qualified manpower intensified in the major cities. Restructuring at the Pelmatic Group also hit profits. An improvement programme, introduced towards the end of the year, changed the growth focus and reviewed costs. Semcon signed a partnership agreement with ABB Automation Systems AB in 2000 and took over responsibility for around 30 employees. New departments were started in Katrineholm, Borlänge, Uppsala and Kista. Operations in Norway were closed because of poor market conditions. The Pelmatic Group was acquired, bringing cutting-edge competence within analysis and calculation. During the year Semcon formed a joint company, Euromation, in partnership with Ford, Volvo Truck Component Corporation and Volvo Technology Transfer. Euromation AB will develop production systems of the future for the auto industry using advanced VR simulation plus analysis and calculation technology. COMPETENCE DEVELOPMENT Competence Development develops people and competence systems to meet the business needs of the future. Sales amounted to SEK 60.4 million (155.4 m) and the loss was SEK -45.1 million (6.6 m). The weak performance was due to scaled back investment in publicly financed training. Work was carried out during the year aimed at restructuring operations and moving the focus onto the private sector. New management was appointed towards the end of the year and were asked to close down unprofitable parts of the business area, i.e. those offering services to the public sector. The training focusing on private industry, will continue operating within other Semcon business areas. Many current training programmes will continue and new customers will be acquired from Semcon's existing customer base. Training areas cover technology, quality and the environment, operations development and project management. Investment in e-learning was carried out during the year as this form of training is one of the fastest growing areas on the internet. e-learning will complement traditional forms of training in the future. Semcon will offer customised training packages within the company's usual areas as well as the operation of the PingPong, Learning Management system from Partitur Informationsteknik AB. Parent company Semcon AB is the parent company in the Group, responsible for company-wide issues such as strategy, information and marketing. Sales totalled SEK 27.4 million (21.9 m). The profit after depreciation was SEK 0.4 million (0.4 m). The parent company's liquidity was SEK -37.5 million (-3.5). The company's investments in stock totalled SEK 6.0 million (0.8 m). Personnel and organisation Semcon continued growing successfully with 28 %, and the headcount was 1,623 (1,266) at year-end, which included organic growth of 253 employees. Acquisitions completed during the year added 104 employees to the headcount. The average number of employees was 1,504 (1,173). Continuous competence development was carried out during the year and Semcon developed, among other programmes, an interactive environmental training programme. New organisation Semcon launched a new organisation on 1 January 2001 to support new goals and better equip the company for expansion overseas and enable the company to manage the large development projects increasingly demanded by customers. It is a clear trend that customers wish to work with fewer, but larger suppliers. Several companies within the Group have therefore been merged. This will optimise administration, simplify overall control and speed up decision-making. In addition to the parent company, Semcon AB, headed as before by CEO Hans Johansson, three companies will be formed: Semcon Sweden, Semcon Innovation and Semcon International. Semcon Sweden AB covers the consulting activities in Sweden and its Managing Director is Hans Krondahl, previously Managing Director of Semcon Competence Development. Semcon Sweden is divided into three regions, with all competence centred in local offices. This means that customers can be offered better comprehensive solutions in a creative environment, with cross- fertilisation of knowledge. Managers will be appointed for each of the three selected key niches - Telecom, Vehicle, Medical - in order to sharpen the focus. Semcon will continue to operate within the Technology Management, e-Design and Industrial Design business areas, and it will present separate financial reports for each of these areas. Financial items and investments The Group's total investments, mainly in computer hardware and software, totalled SEK 26.9 million (26.8 m). At the end of Q4 the equity/assets ratio stood at 35 % (38). Liquid funds at the period's end amounted to SEK 12.2 million (66.1 m). Total bank overdraft facilities amount to SEK 45 million, of which SEK 41.4 million was utilised. Investment in shares of subsidiaries amounted to SEK 41.1 million (30.7). Investment in other shares amounted to SEK 11.2 million (0). The repayment from SPP was SEK 19.6 million and is reported as income in the income statement and key figures. Share dividend The Board of Directors has established a dividend policy whereby Semcon AB's share dividend over the long term shall correspond to 30-50% of profits after tax. The total amount of shares was 17,338,521 as of 31 December 2000. The number of options was 928,200. 764,300 options can be redeemed during 2001 at a price of SEK 75 each, while 163,900 options can be redeemed in 2003 at a price of SEK 196 each. The Board of Directors of Semcon AB will propose to the AGM that a dividend of SEK 0,5 per share (1,40) be paid out for the 2000 financial year, worth a total of SEK 8.7 million (24.3 m). Outlook Semcon expects customers to continue investing in research and product development. We operate in a market where growth and demand are stable. The customer base consists of leading industrial groups in the Nordic region. Turbulence in the internet and IT sector benefits Semcon. Uncertainty makes businesses seek out long-term and stable partners, and it makes it easier to recruit senior managers and consultants. The uncertainty in the economic outlook is likely to speed up efficiency improvements and restructuring, as well as encouraging a focus on core business. This creates opportunities for increased outsourcing. The growth centres for Semcon are primarily the major urban areas in Sweden and abroad where customers perform product development. Growth sectors include e-design.industrial design, mobile internet, the internet, IT infrastructure and IT strategies. The Board of Directors' assessment for 2001 is that the Group will achieve good growth in sales with significantly improved operating margins. Further information Reports and AGM Semcon will present its financial statement at a financial hearing to be held at 8.00 a.m. on Thursday 1 February. Please visit us at Operaterrassen, Stockholm, or follow proceedings via www.financialhearings.com The 2000 Annual Report will be published in mid March 2001 and will be sent to the company's shareholders who have requested it. It can also be ordered from Semcon's head office via tel: +46 31 721 00 00, fax: +46 31 721 03 33, or email: elisabeth.batelson@semcon.se The Annual General Meeting will take place at Lilla Bommens Konferens Center in Göteborg, Sweden, at 6 p.m. on Wednesday 21 March 2001. The proposed record day is 9 March 2001. If the AGM votes in accordance with the proposal, the dividend will be paid out via VPC on 29 March 2001. The Q1 report will be published on 9 May 2001. For further information please contact CEO Hans Johansson, tel: +46 31 721 03 05, mobile phone: +46 70 591 43 34 or CFO Bengt Nilsson, tel: +46 31 721 03 11, mobile phone: +46 70 447 28 68. Göteborg, Sweden, 31 January 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/2001/01/31/20010131BIT00330/bit0001.doc http://www.bit.se/bitonline/2001/01/31/20010131BIT00330/bit0002.pdf