Sifo Group - Interim report January - March 2000

Sifo Group - Interim report January-March 2000 * Operating profit before goodwill amortization and items affecting comparability rose to SEK 72.8 million (27.1). The operating margin amounted to 26.1 percent (10.8). * Profit per share after tax and full dilution, excluding goodwill amortization and items affecting comparability, rose to SEK 0.72 (0.36). * The group's operating revenue rose to SEK 278.7 million (251.6). Organic growth was 20 percent. * Sifo Research & Consulting and Sifo Interactive Media were divested as of January 1, with a total capital gain of SEK 384 million. * The Parent Company is proposing that its name be changed to Observer AB. New group structure and new name In March, Sifo Group agreed to sell the Sifo Research & Consulting division to Research International of the UK. The sale was completed in April, but was effective January 1, 2000. Sifo Group's core operations now consist of media and market monitoring, which is carried out by Observer Media Intelligence. The Board of Directors therefore recommends that the Annual General Meeting approve a name change to Observer AB. Observer operates in the Nordic region, Baltic states, Germany and UK. The group owns 50 percent of SMG Consulting, which is active in management and strategic consulting. SMG's senior consultants own the remaining 50 percent. A review is under way to find a suitable location that will facilitate an international expansion of the consulting operations. Market Demand for the group's services remained good during the first months of the year. Observer's value-added services remain in strong demand. In several markets, a surge in new events also positively affected demand. Revenue Operating revenue amounted to SEK 278.7 million (251.6). For comparable units and in local currency, revenue rose by 21 percent. For Observer Media Intelligence, operating revenue amounted to SEK 270.4 million (147.4). Growth in all countries, with the exception of Sweden and the UK, amounted to nearly 20 percent or more, calculated in local currency. In Sweden, growth was 14 percent. Romeike Group of the UK, which was acquired in December 1999, reported growth of slightly over 10 percent. Observer's value-added services, excluding the recently acquired operations in the UK, account for 27 percent (24) of revenue. Operating revenue for SMG Consulting rose to SEK 12.8 million (10.4). Profit The group's operating profit before goodwill amortization and items affecting comparability rose to SEK 72.8 million (27.1). The operating margin amounted to 26.1 percent (10.8). Observer Media Intelligence's operating profit before goodwill amortization and items affecting comparability amounted to SEK 72.6 million (27.6), corresponding to an operating margin of 26.8 percent (18.7). The operating margin for comparable units continued to improve, surpassing the objective that had been set. Efforts to integrate the recent British acquisition are progressing according to plan. The operating margin for the British operations is higher than expected. The increased investments to bring them in line with Observer's other companies have not yet fully impacted earnings. Operating profit for SMG Consulting amounted to SEK 1.9 million (0.8), corresponding to an operating margin of 14.8 percent (7.7). The group's profit before tax for the period amounted to SEK 421.1 million (22.1). Capital gains amounted to SEK 383.7 million (0.0). After the sale of Sifo Research & Consulting was completed, the capital gain was calculated as SEK 335.0 million, which is SEK 155 million higher than preliminarily estimated. The divestment of Sifo Interactive Media generated a capital gain of SEK 48.7 million. Profit per share after tax and full dilution, excluding goodwill amortization and items affecting comparability, rose to SEK 0.72 (0.36) New profit objective Due to the divestment of Sifo Research & Consulting, the group's Board of Directors has established a new profit objective. The group will achieve an average long-term operating margin before goodwill amortization and items affecting comparability of 22 percent (18). During the remainder of 2000, the group expects the operating margin of the recently acquired British operations to, according to plan, decline slightly. To achieve a faster growth rate in the UK, expenses will increase in the areas of sales and marketing, production and IT support, and value-added services. Financial position As part of the financing for the acquisition of Romeike Group, Sifo Group implemented a rights issue in January 2000. As a result, the level of indebtedness was temporarily high at the start of the year. The issue proceeds of SEK 825 million were used in their entirety to repay loans. The remaining financing for the Romeike acquisition consists of loans from the sellers (SEK 740 million), which will be amortized over a five-year period at a rate determined by the lenders. The net debt/equity ratio was 6 percent (17). The total goodwill item in the balance sheet rose to SEK 1,635 million (214). Shareholders' equity amounted to SEK 1,463 million (202) at the end of the period, corresponding to SEK 26.35 per share (4.59). Acquisitions and divestments The Sifo Research & Consulting division has during the period been divested to Research International, which is part of the London-based global communications group WPP. The transaction was finalized in April, although Research International took over division's operations effective January 1, 2000. The sale also includes the Sifo name. Sifo Group has therefore pledged to change its name. In 1999, Sifo Research & Consulting had around 375 employees and operating revenue of SEK 400 million. Operating profit before goodwill amortization and items affecting comparability amounted to SEK 8.2 million. During the first quarter, the group increased its commitment to the area of Internet measurements by becoming a co-owner of MMXI Europe. Its ownership interest is a result of the group having sold its shares in the subsidiary Sifo Interactive Media and in return receiving eight percent of the shares in MMXI Europe, along with 52,000 shares in the U.S. licensee of RelevantKnowledge, Media Metrix, and SEK 44 million in cash. The other co-owners of MMXI Europe are Media Metrix of the U.S., GfK of Germany and Ipsos of France. Sifo Interactive Media's operating revenue amounted to SEK 11.6 million in 1999, with an operating loss before goodwill amortization and items affecting comparability of SEK -11.7 million. At the beginning of the year, Sifo Group acquired an additional 30 percent of Argus Media of Germany. Argus Media has been merged with Observer RTV Medienauswertungen, and the ownership is now 86 percent in the combined Observer Argus Media. The investment amounted to SEK 34 million. Outlook for the full-year We expect continued good demand in all markets, with the profit trend remaining positive. This report has not been reviewed by the company's auditors. Sifo Group AB (publ) Robert Lundberg President and CEO For further information, please contact: Robert Lundberg, President and CEO, telephone +46-8-625 15 43, e-mail robert.lundberg@sifogroup.se Jan-Erik Jansson, Chief Financial Officer, telephone +46-8-625 15 42, e-mail jan-erik.jansson@sifogroup.se Per Blixt, Chief Communications Officer, telephone +46-8-8-625 15 51/+46- 8-70-549 28 08, e-mail per.blixt@sifogroup.se We invite you to participate in a telephone conference on Wednesday May 10 at 3.00 PM (CET). In order to do so, please call +46 8 737 89 81 and state code 357815. Consolidated income statement 2000 1999 1999/2000 1999 Amounts in SEK million Jan-Mar Jan-Mar Apr-Mar Jan-Dec Operating revenue¹ 278.7 251.6 1,123.4 1,096.3 Operating expenses -198.5 -217.0 -910.1 -928.6 Amortization of goodwill -21.3 -3.5 -49.9 -32.1 Other -7.4 -7.5 -33.1 -33.2 amortization/depreciatio n Items affecting 383.7 - 383.2 -0.5 comparability Operating profit 435.2 23.6 513.5 101.9 Net financial income and -14.1 -1.5 -18.7 -6.1 expenses Profit before tax 421.1 22.1 494.8 95.8 Tax -29.0 -8.2 -59.1 -38.3 Minority interest -1.5 -1.1 -7.0 -6.6 Net profit for the 390.6 12.8 428.7 50.9 period ¹ Refers to the sum of net sales and the change in work in progress. Consolidated balance sheet 2000 1999 1999 Amounts in SEK million March 31 March 31 Dec 31 Goodwill 1,634.6 214.2 1,708.0 Other fixed assets 169.7 90.4 202.7 Current receivables 275.2 200.3 361.0 Financial assets 815.1 79.1 222.2 Assets 2,894.6 584.0 2,493.9 Shareholders' equity 1,462.9 202.3 240.3 Minority shares 10.2 6.1 9.0 Provisions 199.8 12.8 117.1 Current liabilities 317.7 248.0 371.4 Financial liabilities 904.0 114.8 1,756.1 Equity and liabilities 2,894.6 584.0 2,493.9 Operating capital 1,562.0 244.1 1,783.2 Operating capital excl. -72.6 29.9 75.2 goodwill Interest-bearing net 88.9 35.7 1,533.9 indebtedness Operating revenue 2000 1999 1999/2000 1999 Amounts in SEK million Jan-Mar Jan-Mar Apr-Mar Jan-Dec Observer Media Intelligence: Sweden 79.1 69.6 288.2 278.7 Denmark 16.3 14.1 59.9 57.7 Norway 20.5 16.1 69.8 65.4 Finland 17.1 15.1 59.9 57.9 Baltic states 0.8 0.3 3.1 2.6 Total, Nordic and 133.8 115.2 480.9 462.3 Baltic regions Germany 37.5 32.2 134.3 129.0 UK 99.1 - 184.3 85.2 Total, rest of Europe 136.6 32.2 318.6 214.2 Total, Observer Media 270.4 147.4 799.5 676.5 Intelligence Sifo Research & - 102.4 309.0 411.4 Consulting SMG Consulting 12.8 10.4 45.1 42.7 Divisions 283.2 260.2 1,153.6 1,130.6 Group eliminations -4.5 -8.6 -30.2 -34.3 Total 278.7 251.6 1,123.4 1,096.3 Operating profit before goodwill amortization and items affecting comparability (EBITA) 2000 1999 1999/2000 1999 Amounts in SEK million Jan-Mar Jan-Mar Apr-Mar Jan-Dec Observer Media Intelligence: Nordic and Baltic 30.5 25.2 106.3 101.0 regions Rest of Europe 42.1 2.4 79.1 39.4 Total, Observer Media 72.6 27.6 185.4 140.4 Intelligence Sifo Research & - 0.1 -3.6 -3.5 Consulting SMG Consulting 1.9 0.8 6.5 5.4 Divisions 74.5 28.5 188.3 142.3 Group eliminations -1.7 -1.4 -8.1 -7.8 Total 72.8 27.1 180.2 134.5 Consolidated statement of cash flows 2000 1999 1999/2000 1999 Amounts in SEK million Jan-Mar Jan-Mar Apr-Mar Jan-Dec Operating activities Operating profit 435.2 23.6 513.5 101.9 Depreciation/amortizatio 28.7 11.0 83.0 65.3 n Capital gain -383.7 - -383.7 - Other non-cash items 60.6 -3.8 53.6 -10.8 Net interest and -17.2 -11.6 -10.2 -4.6 dividends Income tax paid -13.3 -8.5 -38.4 -33.6 Change in working -2.9 1.6 -75.3 -70.8 capital Cash flow from operating 107.4 12.3 142.5 47.4 activities Investing activities Business acquisitions -34.1 -4.5 -1,512.3 -1,482.7 Business divestments 74.5 - 74.3 -0.2 Investments in non- financial fixed assets -15.0 -7.4 -71.6 -64.0 Divestment of non- financial fixed assets - - 2.7 2.7 Increase/decrease in -25.5 - -20.5 5.0 financial assets Cash flow from investing -0.1 -11.9 -1,527.4 -1,539.2 activities Financing activities Issue in kind - - 27.2 27.2 Rights issue 825.6 - 825.6 - Increase/decrease in long-term financial 28.1 5.7 791.9 769.5 liabilities Increase/decrease in current financial liabilities -812.7 - 55.6 868.3 Dividend to shareholders -17.1 -17.1 Cash flow from financing 41.0 5.7 1,683.2 1,647.9 activities Cash flow for the period 148.3 6.1 298.3 156.1 Liquid assets at 218.7 68.3 218.7 68.3 beginning of year Translation difference -1.3 - -1.3 -5.7 Liquid assets at year- 365.7 74.4 365.7 218.7 end Key ratios 2000 1999 1999/2000 1999 Amounts in SEK million Jan-Mar Jan-Mar Apr-Mar Jan-Dec Operating margin (EBITA 26.1 % 10.8 % 16.0 % 12.3 % margin) Return on equity 51 % 23 % Return on equity excl. items affecting 18 % 24 % comparability Equity/assets ratio 51 % 36 % 51 % 10 % Net debt/equity ratio 6 % 17 % 6 % 615 % Interest coverage, 27.9 12.9 19.2 8.2 multiple Profit per share after tax: Before dilution, SEK* 8.07 0.29 11.34 1.15 Excl. goodwill amortization and items affecting 0.74 0.37 2.72 1.89 comparability, SEK* After full dilution, 7.82 0.29 10.92 1.12 SEK* Excl. goodwill amortization and items affecting 0.72 0.36 2.64 1.82 comparability, SEK* Equity per share, SEK (at end of period) 26.35 4.59 26.35 5.38 Number of shares at end 55,510 34,240 55,510 34,694 of period, thousands Average number of shares 48,419 34,240 37,796 34,271 Number of employees at 1,460 1,132 1,460 1,794 end of period * Historical amounts have been adjusted for the rights issue. For definitions, see the annual report for 1999. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/05/09/20000509BIT01080/bit0001.doc http://www.bit.se/bitonline/2000/05/09/20000509BIT01080/bit0002.pdf