Interim report

PRESS RELEASE Sollentuna, November 2, 1998 Interim report January-September 1998 Operating revenue rose by 24 percent to SEK 617.3 million (498.7). Operating profit before goodwill amortizations and noncomparable items rose by 22 percent to SEK 65.0 million (53.4). Profit after financial items amounted to SEK 41.8 million (43.3). This includes an accrual for close-down charges of SEK 6.9 million for the operations in the U.S. In October Sifo Group acquired Sverige Media, which is active in media surveys and reach ratings (sales SEK 10 million). Together with Telia, Sifo Group also established the company Defacto (owned 50/50), which offers standardized and IT-based customer surveys for small businesses. The forecast for the full-year 1998 remains unchanged. Group structure Sifo Group is active in media and market monitoring, surveys and consulting services. Sifo Group, which was previously part of Scribona, has been listed on the Stockholm Stock Exchange's O-list since September 10, 1998. Sifo Group has three divisions: Observer Media Intelligence, which works with media and market monitoring; Sifo Research & Consulting, which works with surveys and related consulting services; and SMG Consulting (50-percent owned), which is active in management and strategic consulting. Sifo Group operates in the Nordic countries as well as Germany. Market Demand was generally good in all operating areas during the period. A lack of major media events and the elections in Sweden and Germany led to slower growth in Observer's basic services, however. This was well compensated by faster growth in editorial and analytical services. Market conditions for Sifo Research & Consulting were good. The global financial situation has not had any adverse effect on the market's development or demand for Sifo Group's services. Revenue Operating revenue for the first nine months of 1998 amounted to SEK 617.3 million (498.7), an increase of 24 percent. For comparable units, growth was 10 percent. For Observer Media Intelligence, operating revenue amounted to SEK 351.8 million (237.2), an increase of 48 percent. Adjusted for acquisitions, organic growth was 16 percent. The growth rate was good in Sweden, Denmark and Finland (over 10 percent) and very good in Norway and Germany (over 20 percent). Editorial and analytical services have continued to develop faster than basic services. Today, value-added services account for 32 percent of Swedish operations, against 23 percent in 1997. The share of value-added services is still lower in other countries, but is increasing continuously. Sifo Research & Consulting's operating revenue amounted to SEK 256.9 million (251.2), an increase of 2 percent. In Sweden, growth was 11 percent, while revenue in Norway fell by 16 percent. In Sweden, all business areas had good growth. Sifo Interactive Media's new product, MediaMetrix (formerly RelevantKnowledge), a method for Internet audience measurement via user panels, has now been available in the market for a quarter and has been received well. The division's Norwegian operations had a weak start to the year, with a lower order backlog and invoiced sales. The order situation has improved, but is not yet fully satisfactory. SMG Consulting's operating revenue amounted to SEK 28.6 million (26.3), an increase of 9 percent. The Swedish operations reported strong growth after recruiting new staff. Profit Sifo Group's operating profit before goodwill amortizations and noncomparable items amounted to SEK 65.0 million (53.4), an increase of 22 percent primarily attributable to organic growth. For Observer Media Intelligence, operating profit amounted to SEK 61.9 million (50.6), an increase of 22 percent primarily attributable to organic growth. The Swedish, Norwegian and Finnish operations in particular developed well in terms of profit. Operating profit for Sifo Research & Consulting amounted to SEK 3.0 million (1.8). In comparison with previous year, the profit of the division has improved by approximately SEK 4 million as work in progress now is recorded in accordance with percentage of completion method within all business areas to better reflect the income development. The profit level is not yet satisfactory and was adversely affected by weak development in Norway, the new Internet operations within Sifo Interactive Media and the start-up in the Danish market. The action program in progress has begun to lead to improvements in several business areas, and profits are expected to be impacted positively starting in 1999. Because its operations are project- oriented, the division's revenue and profit may be unevenly distributed over the calendar year. The third quarter of 1997 was significantly weaker than normal, while the fourth was stronger than normal. Strict comparisons for portions of the year can be somewhat misleading, depending mainly on the status of major projects being worked on during the year. SMG Consulting's operating profit amounted to SEK 3.0 million (0.5). The Swedish operations accounted for the improvement. The group's net financial income and expenses amounted to SEK -6.3 million (-3.3) during the period. The higher net expense is primarily due to company acquisitions paid in cash. Noncomparable items amounted to SEK -6.8 million (0.7) and primarily relate to expenses for the previously announced close-down of the U.S. operations. Profit per share after full tax (excluding noncomparable items) amounted to SEK 0.95 (0.95) after full dilution. Financial position Investments in businesses acquired during the period amounted to SEK 31.4 million. The net debt/equity ratio declined to 42 percent (56). The interest coverage multiple rose slightly to 6.2 (5.8). Goodwill in the balance sheet rose to SEK 218.6 million (164.2). Shareholders' equity amounted to SEK 173.0 million (133.9) as of September 30, corresponding to SEK 5.05 (3.91) per share. Acquisitions In October Sverige Media was acquired from Infratest Burke. The business, which has a turnover of approximately SEK 10 million, will be incorporated into the Media business area of Sifo Research & Consulting. The division thereby strengthens its position as the Swedish leader in media surveys and reach ratings. Together with Telia, Sifo Group established a jointly owned company, Defacto, which sells standardized and IT-based customer surveys to small businesses, a target group that Sifo Research & Consulting has not reached until now. Outlook for the full-year The forecast for the full-year 1998 remains unchanged, meaning that operating profit before goodwill amortizations and noncomparable items is expected to be in line with the previous year (SEK 93.7 million). Profit after financial items, excluding noncomparable items, is expected to be slightly lower than in 1997 (SEK 78.1 million). Next report The preliminary year-end report for 1998 is scheduled to be released on February 17, 1999. This report has not been reviewed by the company's auditors. Sifo Group AB (publ) Robert Lundberg President For further information, please contact: Robert Lundberg, President, phone +46-8-625 15 43 Jan-Erik Jansson, Chief Financial Officer, phone +46-8-625 15 42 Sifo Group's interim report can also be accessed online at www.sifogroup.com Consolidated income statement 1998 19971997/9 1997 8 Amounts in SEK million Jan- Jan- Oct- Jan- Sep Sep Sep Dec Operating revenue 617.3 498.7 841.9 723.3 Operating expenses -537.0-435.6-716.8-615.4 Depreciation, excl. -15.3 -9.7 -19.8 -14.2 amortization of goodwill Operating profit before goodwill amortizations and noncomparable items 65.0 53.4 105.3 93.7 Amortization of goodwill -10.1 -7.5 -12.5 -9.9 Noncomparable items -6.8 0.7 -8.6 -1.1 Operating profit 48.1 46.6 84.2 82.7 Net financial income and -6.3 -3.3 -8.7 -5.7 expenses Profit after financial items 41.8 43.3 75.5 77.0 Appropriations 0.0 0.0 -11.2 -11.2 Tax -12.7 -7.0 -27.1 -21.4 Minority interests -1.6 -3.2 -1.0 -2.6 Net profit 27.5 33.1 36.2 41.8 Operating revenue is the sum of net sales and the change in work in progress. Consolidated balance sheet 1998 1997 1997 Amounts in SEK million Sep 30Sep 30 Dec 31 Goodwill 218.6 164.2 189.8 Other fixed assets 90.2 55.9 75.0 Current receivables 193.1 192.3 187.5 Financial assets 57.2 54.4 79.9 Assets 559.1 466.8 532.2 Shareholders' equity 173.0 133.9 141.1 Minority shares 6.6 3.1 3.2 Provisions 13.1 13.3 24.7 Current liabilities 233.1 185.9 196.2 Financial liabilities 133.3 130.6 167.0 Equity and liabilities 559.1 466.8 532.2 Capital employed 255.7 213.2 231.4 Interest-bearing net debt 76.1 76.2 87.1 Operating revenue 1998 1997 1997/98 1997 Amounts in SEK million Jan- Jan- Oct-Sep Jan- Sep Sep Dec Observer Media Intelligence 351.8 237.2 463.1 348.5 Sifo Research & Consulting 256.9 251.2 372.5 366.8 SMG Consulting 28.6 26.3 40.6 38.3 Divisions 637.3 514.7 876.2 753.6 Group eliminations -20.0 -16.0 -34.3 -30.3 Total 617.3 498.7 841.9 723.3 Operating profit before goodwill amortizations and noncomparable items 1998 1997 1997/98 1997 Amounts in SEK million Jan- Jan- Oct-Sep Jan- Sep Sep Dec Observer Media Intelligence 61.9 50.6 80.7 69.4 Sifo Research & Consulting 3.0 1.8 26.4 25.2 SMG Consulting 3.0 0.5 4.6 2.1 Divisions 67.9 52.9 111.7 96.7 Group eliminations -2.9 0.5 -6.4 -3.0 Total 65.0 53.4 105.3 93.7 Key ratios 1998 1997 1997/98 1997 Jan- Jan- Oct-Sep Jan- Sep Sep Dec Operating margin, % 10.5 10.7 12.5 13.0 Return on equity, % 29 39 ROE, excluding noncomparable 33 39 items, % Equity/assets ratio, % 32 29 32 27 Net debt/equity ratio, 0.42 0.56 0.42 0.60 multiple Interest coverage, multiple 6.2 5.8 11.3 10.3 Cash flow from operations, SEK 35.1 36.9 50.1 51.9 million Cost of acquired operations, 31.4 64.6 57.5 90.7 SEK million Other investments, gross, SEK 31.6 14.4 52.1 34.9 million Profit per share after full tax: Before dilution, SEK 0.80 0.97 1.29 1.46 Excl. noncomparable items, SEK 0.95 0.95 1.47 1.48 After full dilution, SEK 0.80 0.96 1.28 1.44 Excl. noncomparable items, SEK 0.94 0.94 1.45 1.46 Equity per share, SEK 5.05 3.91 5.05 4.12 Number of shares, thousands 34,24034,240 34,24034,240 Number of employees at end of 1,104 784 1,104 949 period ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are ready for download: http://www.bit.se/bitonline/1998/11/02/19981102BIT00290/bit0001.DOC http://www.bit.se/bitonline/1998/11/02/19981102BIT00290/bit0002.pdf