Preliminary year-end report for 1998

PRESS RELEASE from Sifo Group, listed on the O-list of the Stockholm Stock Exchange Sollentuna, February 17, 1999 Preliminary year-end report for 1998 Strong development for Sifo Group in the fourth quarter. -Operating revenue rose by 24 percent to SEK 894.4 million (723.3), of which 13 percent organic growth. -Operating profit before goodwill amortizations and noncomparable items rose by 9 percent to SEK 102.2 million (93.7). Profit after financial items amounted to SEK 73.7 million (77.0) after a charge of SEK 5.3 million (1.1) for noncomparable items. -The proposed dividend is SEK 0.50 per share. -After the conclusion of the year an agreement was reached with Guide Konsult to establish a jointly owned IT consulting company (60-percent by Sifo Group). Furthermore, a cooperation agreement was signed with Scott, Madden & Associates in the U.S. on the takeover of the operations of SMG North America Inc. and licensing of Sifo Group's MIA concept. Pressfax OY in Finland was acquired in February 1999. Group structure Sifo Group is active in media and market monitoring, surveys and consulting services. Sifo Group, which was previously part of the Scribona Group, 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, the Baltic region and Germany. Market Demand was generally good in all operating areas. The global economic slowdown has not had an adverse effect on the market's development or demand for Sifo Group's services. For Observer Media Intelligence, demand for value-added services such as editorial services and analyses remained high. The market development for Sifo Research & Consulting were good for all operations. The conditions for 1999 are considered favorable. Revenue Sifo Group's operating revenue for the year amounted to SEK 894.4 million (723.3), a growth of 24 percent. For comparable units, growth was 13 percent. For Observer Media Intelligence, operating revenue amounted to SEK 493.1 million (348.5), an increase of 41 percent. Adjusted for acquisitions, organic growth was 18 percent. The growth rate was very good in Denmark, Norway, Finland and Germany (over 18 percent). Editorial and analytical services continued to develop faster than basic services. Today value-added services account for 21 percent (14) of the division's operations and 32 percent (23) of the Swedish operations. Sifo Research & Consulting's operating revenue amounted to SEK 386.7 million (366.8), an increase of 5 percent. In Sweden, growth was 10 percent, while revenue in Norway fell by 6 percent. SMG Consulting's operating revenue amounted to SEK 43.0 million (38.3), an increase of 12 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 102.2 million (93.7), an increase of 9 percent primarily attributable to organic growth. In the previous interim report, it was stated that this profit was expected to remain in line with the previous year. Profit after financial items, excluding noncomparable items, amounted to SEK 79.0 million (78.1). For Observer Media Intelligence, operating profit before goodwill amortizations and noncomparable items amounted to SEK 89.0 million (69.4), an increase of 28 percent primarily attributable to organic growth. The Swedish, Finnish and German operations developed especially well. The division's fourth-quarter profit was higher than expected. The operating margin was adversely affected by the two acquisitions Imedia in Sweden and Word Report in Germany, which were losing money or had a low profit level at the time of their takeover. The development of the acquired operations is progressing according to plan. Operating profit for Sifo Research & Consulting amounted to SEK 13.8 million (25.2). The profit level is unsatisfactory and has been affected primarily by a weak earnings trend in Norway, the new Internet operations within Sifo Interactive Media and the start-up in the Danish market. The action program now under way is beginning to lead to improvements in several business areas. Profit from Swedish operations was higher than expected. SMG Consulting's operating profit amounted to SEK 5.4 million (2.1). The Swedish operations accounted for the improvement. The Group's net financial income and expenses amounted to SEK -9.6 million (-5.7). The higher net expense is primarily explained by higher average financial debt due to acquisitions. Noncomparable items amounted to SEK -5.3 million (-1.1) and primarily related to expenses for the previously announced sale of the U.S. operations. Profit per share after full tax (excluding noncomparable items) amounted to SEK 1.45 (1.46) after full dilution. Financial position Investments in businesses acquired during the year amounted to SEK 32.9 million (90.7). The net debt/equity ratio declined to 22 percent (60). The interest coverage multiple fell to 7.9 (10.2). Goodwill in the balance sheet rose to SEK 219.2 million (189.8). Shareholders' equity amounted to SEK 194.1 million (141.1) as of year-end, corresponding to SEK 5.67 (4.12) per share. Acquisitions and alliances To complement its existing operations in Germany, Observer Media Intelligence in February acquired Word Report in Baden-Baden, which is active in television monitoring. Annual turnover amounts to approximately SEK 30 million and the operations, which are now conducted under the name Observer RTV Medienauswertungen, employ a staff of around 65. In October Sverige Media was acquired from Infratest Burke. The business, which has a turnover of approximately SEK 10 million, has been incorporated in the Media business area of Sifo Research & Consulting. The division thereby strengthened its position as Sweden's leader in media surveys and reach ratings. In November Observer Eesti, with operations in Estonia, Latvia and Lithuania, was acquired. Its turnover on an annual basis is SEK 2 million, with around 10 employees. The acquisition is an element in Observer Media Intelligence's geographic expansion. Profit from the acquired operations is included in the Group's accounts as of January 1, 1999. Together with Telia, Sifo Group established 1998 a jointly owned (50/50) company, Defacto, which sells standardized and IT-based customer surveys to small businesses, a target group that Sifo Research & Consulting previously did not reach. At the end of the year a cooperation agreement was signed with the consulting firm Scott, Madden & Associates in the U.S. Scott, Madden is licensing Sifo Group's MIA concept and took over all the employees from Sifo Group's subsidiary in the U.S. This cooperation strengthens Sifo Group's presence in the U.S. In the beginning of 1999 an agreement was reached with Guide Konsult to form a jointly owned IT consulting company (60-percent by Sifo Group) with around ten employees. The new company will support both Sifo Group and Guide Konsult in delivering total IT solutions together with information and consulting services to their clients. In February 1999 the shares in Pressfax OY in Finland were acquired. The company, which has a turnover of approximately SEK 2.5 million, forms a base for BIT's (Börslistans Informationstjänst) operations in Finland, a first step in its gradual internationalization. Year 2000 Measures to secure that internal systems will meet the demands of the new millenium have been and are continuously being taken. The project is coordinated at group level. The problems have been identified and necessary plans have been made. The project is estimated to be completed during the first six months of 1999. Dividend The Board of Directors and the President is proposing a dividend of SEK 0.50 per share. Annual General Meeting The Annual General Meeting will be held at 4:00 p.m. on April 26 at Industrihuset, Storgatan 19, Stockholm. Information dates in 1999 The annual report's scheduled release March/April Interim report January-March April 26 Interim report January-June August 9 Interim report January-September October 27 Sifo Group AB (publ) Board of Directors For further information, please contact: Robert Lundberg, President and CEO, phone +46-8-625 15 43, e-mail robert.lundberg@sifogroup.se Jan-Erik Jansson, Chief Financial Officer, phone +46-8-625 15 42, e-mail jan-erik.jansson@sifogroup.se This preliminary year-end report can also be accessed online at http://www.sifogroup.com SIFO GROUP - CONDENSED FINANCIAL STATEMENTS JANUARY-DECEMBER 1998 Consolidated income statement 1998 1997 1998 1997 Amounts in SEK million Jan- Jan- Oct- Oct- Dec Dec Dec Dec Operating revenue 894.4 723.3 277.1 224.6 Operating expenses -770.3-615.4-233.3-179.8 Depreciation, goodwill -13.6 -9.9 -3.5 -2.4 Depreciation, other -21.9 -14.2 -6.6 -4.5 Noncomparable items -5.3 -1.1 1.5 -1.8 Operating profit 83.3 82.7 35.2 36.1 Net financial income and -9.6 -5.7 -3.3 -2.4 expenses Profit after financial items 73.7 77.0 31.9 33.7 Appropriations 0.0 -11.2 0.0 -11.2 Tax -23.7 -21.4 -11.0 -14.4 Minority interest -3.5 -2.6 -1.9 0.6 Net profit for the period 46.5 41.8 19.0 8.7 Operating revenue is the sum of net sales and the change in work in progress. Consolidated balance sheet 1998 1997 Amounts in SEK million Dec 31Dec 31 Goodwill 219.2 189.8 Other fixed assets 91.4 75.0 Current receivables 210.6 187.5 Financial assets 72.6 79.9 Assets 593.8 532.2 Shareholders' equity 194.1 141.1 Minority shares 8.8 3.2 Provisions 21.8 24.7 Current liabilities 251.7 196.2 Financial liabilities 117.4 167.0 Equity and liabilities 593.8 532.2 Operating capital 247.7 231.4 Operating capital excl. 28.5 41.6 goodwill Interest-bearing net 44.8 87.1 indebtedness Cash flow analysis 1998 1997 Amounts in SEK million Jan- Jan- Dec Dec Cash flow from operations 141.6 49.1 Cash flow from investment -75.2-124.6 activities Cash flow from financing -58.7 92.7 Cash flow 7.7 17.2 SIFO GROUP - CONDENSED FINANCIAL STATEMENTS JANUARY-DECEMBER 1998 Operating revenue 1998 1997 1998 1997 Amounts in SEK million Jan- Jan- Oct- Oct- Dec Dec Dec Dec Observer Media Intelligence 493.1 348.5 141.3 111.3 Sifo Research & Consulting 386.7 366.8 129.8 115.6 SMG Consulting 43.0 38.3 14.4 12.0 Divisions 922.8 753.6 285.5 238.9 Group eliminations -28.4 -30.3 -8.4 -14.3 Total 894.4 723.3 277.1 224.6 Operating profit before goodwill amortizations and noncomparable items 1998 1997 1998 1997 Amounts in SEK million Jan- Jan- Oct- Oct- Dec Dec Dec Dec Observer Media Intelligence 89.0 69.4 27.1 18.8 Sifo Research & Consulting 13.8 25.2 10.8 23.4 SMG Consulting 5.4 2.1 2.4 1.6 Divisions 108.2 96.7 40.3 43.8 Group eliminations -6.0 -3.0 -3.1 -3.5 Total 102.2 93.7 37.2 40.3 Key ratios 1998 1997 1998 1997 Jan- Jan- Oct- Oct- Dec Dec Dec Dec Operating margin, % 11.4 12.9 13.4 17.9 Return on equity, % 28 39 ROE, excluding noncomparable 30 39 items, % Equity/assets ratio, % 34 27 34 27 Net debt/equity ratio, 0.22 0.60 0.22 0.60 multiple Interest coverage, multiple 7.9 10.2 13.0 - Cash flow from operating 55.1 51.9 21.2 15.0 activities, SEK million Acquisition values of acquired 34.7 90.7 1.5 26.1 operations, SEK million Other investments, gross, SEK 40.0 34.9 7.2 20.5 million Profit per share after full tax: Before dilution, SEK 1.36 1.46 0.56 0.49 Excl. noncomparable items, SEK 1.47 1.48 0.51 0.54 After full dilution, SEK 1.34 1.44 0.55 0.48 Excl. noncomparable items, SEK 1.45 1.46 0.51 0.52 Equity per share, SEK 5.67 4.12 5.67 4.12 Number of shares, thousands 34,24034,24034,24034,240 Number of employees at end of 1,089 949 1,089 949 period ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/02/17/19990217BIT00390/bit0001.doc http://www.bit.se/bitonline/1999/02/17/19990217BIT00390/bit0002.pdf