Interim report for January - June 1998

Interim report for January-June 1998 - Operating revenue rose by 19 percent to SEK 425.7 million (357.5). - Operating profit before goodwill amortization and noncomparable items amounted to SEK 46.6 million (43.0). - Profit after financial items amounted to SEK 28.4 million (36.6). Included is the estimated close-down costs of SEK 6.9 million, which affect profit as a noncomparable item. - Observer Media Intelligence and SMG Consulting have developed positively, while the effects of the merger within Sifo Research & Consulting as well as a weak start to the year in Norwegian operations have affected the result. - Profit after financial items, excluding noncomparable items, is expected to be slightly lower for the full-year 1998 than for 1997 (SEK 78.1 million). Group structure Sifo Group is active in media and market monitoring, surveys and consulting services, and is a wholly-owned subsidiary of Scribona. The Annual General Meeting of Scribona AB on April 21, 1998 approved the distribution of the shares in Sifo Group AB to the shareholders in Scribona AB. The shares of Sifo Group AB are scheduled to be listed on the Stockholm Stock Exchange's O list on September 10. 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 generally was good in all operating areas during the period. A lack of major media events led to slower growth in Observer's basic services, however. This was well compensated by a faster rate of growth for editorial and analytical services. Market conditions for Sifo Research & Consulting were good. Revenue Operating revenue for the first six months of 1998 amounted to SEK 425.7 million (357.5), an increase of 19 percent. For comparable units, growth was 6 percent. For Observer Media Intelligence, operating revenue amounted to SEK 233.6 million (160.2), an increase of 46 percent. Adjusted for acquisitions and full-year values, organic growth was 15 percent. The growth rate was good in Sweden, Denmark and Finland (10-15 percent), and very good in Norway and Germany (over 15 percent). Editorial and analytical services have experienced faster development than basic services. Today, the value-added services account for 29 percent of Swedish operations, against 23 percent in the previous year. The share of value-added services is lower in the other countries, but is developing positively. For Sifo Research & Consulting, operating revenue amounted to SEK 187.8 million (184.4) during the year's first six months. In Sweden, growth was 7 percent, while the trend in Norway was negative, -15 percent. The business areas Brand Management, Market Development and Media reported very good growth in Sweden (over 20 percent), while MIA (Management of Intangible Assets) in particular developed weakly. In June Sifo Interactive Media launched RelevantKnowledge, a method for compiling detailed data on Internet users using panels. The first contracts have been signed. For the division's Norwegian operations, the year began with a decline in new orders and invoiced sales. Order bookings improved gradually, however, and were good during the final months of the period. SMG Consulting's operating revenue amounted to SEK 19.7 million (18.5), an increase of 7 percent. The Swedish operations reported strong growth after recruiting new staff. The order situation in the division is good. Profit The Sifo Group's operating profit before goodwill amortization and noncomparable items amounted to SEK 46.6 million (43.0), an increase of 8 percent primarily attributable to organic growth. For Observer Media Intelligence, operating profit amounted to SEK 41.4 million (34.8), an increase of 19 percent mainly attributable to existing operations. The Swedish, Norwegian and Finnish operations in particular developed well. Operating profit for Sifo Research & Consulting amounted to SEK 3.6 million (8.1), down 56 percent. The decline is primarily due to weak development in Norway in the beginning of the year and by the Internet operations within Sifo Interactive Media. Sifo Research & Consulting has been weighed down by the effects of the merger. An action program that has been initiated is expected to have a positive impact on profit beginning in 1999. Because its operations are project-oriented, Sifo Research & Consulting's revenue and profit may be unevenly distributed over the calendar year; consequently, strict comparisons for portions of the year may be somewhat misleading. SMG Consulting's operating profit amounted to SEK 1.9 million (- 0.7). The Swedish operations accounted for the increase. The group's net financial income and expenses amounted to SEK - 4.7 million (- 1.7). The higher net expense is primarily due to company acquisitions paid in cash. Noncomparable items amounted to SEK - 6.8 million (0.5) and primarily relate to costs for the close-down of the U.S. operations. Profit per share after full tax (excluding noncomparable items) amounted to SEK 0.56 (0.81). Financial position The investments in acquired businesses during the period amounted to SEK 31.4 million. Due to the acquisitions made, the net debt/equity ratio rose to 53 percent (45). The interest coverage declined slightly to 6.3 (7.9). Goodwill in the balance sheet rose to SEK 216.3 million (170.0). Shareholders' equity amounted to SEK 156.0 million (144.9) as of June 30, corresponding to SEK 4.56 (4.23) per share. Acquisitions To complement its existing operations in Germany, Sifo Group in February acquired Word Report in Baden-Baden, which is active in TV monitoring. Its revenues amount to approximately SEK 25 million on an annual basis and the business, which now operates under the name Observer RTV, employs around 60 people. Outlook for the full-year Operating profit before goodwill amortization and noncomparable items for the full-year 1998, is expected to be essentially the same as the previous year (SEK 93.7 million). Profit after financial items, excluding noncomparable items, is expected to be slightly lower than the previous year (SEK 78.1 million). Next interim report The interim report for the nine-month period ended September 30 is scheduled to be released on November 2. This report has not been reviewed by the company's auditors. Board of Directors 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 is also available on www.sifogroup.com