Skandigen's Interim Report January - September 1999

Skandigen's Interim Report January - September 1999 * Net sales for the period amounted to MSEK 44.4 (32.1). * The consolidated result after financial items was a loss of MSEK 0.4 (loss: 2.2). * A directed issue of 6 million shares earned the company MSEK 136.1. * Sale of shares in SIBIA brought a price of MSEK 69.3 and a capital gain of MSEK 21.5. * Fermentech obtains CE approval of Fermathron® and signs distribution agreement. * 15 percent of the shares in PartnerTech were acquired during the period. Following an additional purchase on November 1, the holding amounts to 25 per- cent. New Group Structure In January, a non-cash issue was made to acquire 100 percent of Björkman Ti- gerschiöld Intressenter AB and Björkman Fritzell Tigerschiöld AB, plus 70 per- cent of G. Kallstrom & Co AB (the KBB companies). Through the acquisition, Skandigen extended its scope of operations beyond biotechnology to also include investments in a number of Swedish growth compa- nies, mainly in the fields of contract manufacturing of advanced industrial components, electronics and information technology. Investment activities are divided into three business areas: Technology, Biotechnology and Services & 1) Trade, comprising the following holdings : BIOTECHNOL- TECHNOLOGY SERVICES & TRADE OGY Arkivator 13.8 % BioNative 23.8 % Beep Network 40.0 % CMA Microdi- Axis 17.5 % 56.0 % H. Lundén Fondkom. 14.0 % alysis Fermentech 2) LG Products 2.2 % 97.0 % PBK Outsourcing 49.5 % Medical Gramma Diag- 2) Micronic 0.8 % 92.0 % Plenia 37.5 % nostik InRo Biomed- MYDATA 33.3 % 33.3 % The Chimney Pot 19.9 % tek PartnerTech 15.0 % Sepragen 2.4 % TPC Security 20.6 % Vellinge 37.3 % Electronics 1) The ownership percentage reflects Skandigen's 70 percent ownership in G. Kallstrom & Co AB. 2) Including options and convertibles. The new Group structure consists of the Parent Company Industriförvaltnings AB Skandigen and the subsidiaries Fermentech Medical Ltd., CMA Microdialysis AB, Gramma Diagnostik AB, Björkman Tigerschiöld Intressenter AB, Björkman Fritzell Tigerschiöld AB and G. Kallstrom & Co AB. Skandigen acquired 49 percent of CMA Microdialysis in February, after which the Group's total ownership stake amounts to 56 percent. The shares were acquired for a nominal amount, with the proviso that the seller will obtain a price premium should Skandigen sell the shares within a given period of time. The holding company BMPI Liquidating Trust was liquidated during 1999. The acquisition of the KBB companies will be accounted for as a so-called "reverse acquisition", which gives the most true and fair picture of the transaction in terms of both financial position and results. This entails that Skandigen is valued at its market value at the time the offer was made public, giving rise to goodwill of MSEK 97.2. The goodwill will be amortized over a period of five years, resulting in an annual charge to earnings of MSEK 19.4. Strengthened Organization and New Issue Patrik Tigerschiöld was appointed president in April 1999. The organization has furthermore been strengthened by a couple of additional recruitments. Håkan Dahlin has assumed the post of Financial Manager. An extraordinary General Meeting of the Shareholders was held on 1 July. The Meeting approved a directed new issue of 6 million shares for the purpose of obtaining funds for new investments, preferably to be made in companies with a technological or IT-related profile. The reason for bypassing the preferential rights of the shareholders was to broaden ownership by bringing in some new institutional owners. The objective is that this should lead to improved li- quidity in the share. Some dozen or so Swedish and international institutions chose to subscribe to the issue. Skandigen Group - Sales and Earnings The Group's net sales for the period January - September 1999 amounted to MSEK 44.4 (32.1). The sales are entirely attributable to the biotechnology busi- ness. CMA Microdialysis's sales amounted to MSEK 29.3 and Fermentech Medical's to MSEK 15.0 (32.1). The consolidated net result for the first nine months was MSEK 0.0 (loss: 2.2), equivalent to SEK 0.00 per share. The corresponding figure last year, based on the number of shares outstanding at that time, was a loss of SEK 0.22 per share. Earnings have been charged with amortization of net goodwill aris- ing from the acquisition of the KBB companies totaling MSEK 11.6 (0). The Group's research and development costs amounted to MSEK 13.0 (9.5), which is equivalent to 29 (30) percent of sales. According to information from SPP, the Skandigen Group's share of SPP's poli- cyholders' surplus amounts to MSEK 3.2. In view of the uncertainty concerning the implementation of the consolidation decisions, the monies have not been included in the interim report. Capital Expenditures The Group's net capital expenditures amounted to MSEK 41.7 (1.8), of which in- vestments in shares account for MSEK 39.0. Liquidity, Equity/Assets Ratio and Number of Shares The Group's cash balances and short-term investments amounted to MSEK 145.1 (14.7) at the end of the period. In addition there are short-term investments in shares of MSEK 49.9 (0). Interest-bearing liabilities amounted to MSEK 0.3 (8.7). The equity/assets ratio was 88 (81) percent. Equity per share amounted to MSEK 8.86. The new issue of 6 million shares earned the company MSEK 136.1 after deduc- tion of issue expenses. The total number of shares after the issue is 55,043,920. Parent Company The Parent Company's income before taxes for the period January-September was MSEK 22.2 (loss: 3.7). Net capital expenditures were MSEK 33.1 (0). Liquid as- sets amounted to MSEK 120.4 (14.7) at the end of the period. Personnel The average number of employees in the Group as per 30 September 1999 was 82 (30). The increase is attributable to CMA, which is consolidated from 1999. The figure for the Parent Company was 5 (1). Technology Business Area Arkivator AB is a high-tech manufacturing group focusing on production and as- sembly of advanced industrial components, primarily in aluminum and steel. The Group's net sales for the period January - September amounted to MSEK 382 (378). The increase can be attributed entirely to the third quarter, since stock level adjustments for certain customers led to lower sales during the first six months. Income before standard tax amounted to MSEK 66 (78), having been charged with costs of MSEK 5.9 for the closure of two units and the start-up of new production capacity. Earnings for the year as a whole are ex- pected to be on a par with last year. Arkivator is quoted on the Stockholm Stock Exchange's OTC list. The Skandigen Group owns 13.8 percent of Arkivator. On 23 September, Arkivator concluded an agreement with the principal owners of LG Products i Solna AB (LGP) on acquisition of their shares, representing 64 percent of all the shares. The acquisition, which, among other things, is con- tingent on approval by Arkivator's Annual General Meeting, will take place by means of a directed share issue. An equivalent bid will be submitted to LGP's other shareholders. The acquisition will give Arkivator competency in design- ing mobile telephone systems. Sales are projected to amount to MSEK 850, while income before taxes, goodwill amortization and transaction cost are projected to amount to MSEK 128, pro forma for the whole year 1999. Axis AB develops and markets products that enable connection of various types of peripheral equipment to computer networks. Net sales for the period May- September (figures for five months) amounted to MSEK 273 (211), while income after net financial items amounted to MSEK 5.1 (loss: 4.1). Since the beginning of the year, the company has deepened its cooperation with world- leading high-tech companies such as Microsoft and Sun. The Skandigen Group owns 17.5 percent of Axis. MYDATA automation AB develops, manufactures and markets advanced equipment for surface mounting of electronic components on printed circuit boards. Net sales for January-September amounted to MSEK 317 (282), while income after net fi- nancial items was MSEK 12.5 (loss: 13.3). Thanks to a firm commitment to prod- uct development, MYDATA can now offer a wider product range. The performance of the products has been further improved. Moreover, the market for placement machines has improved. The Skandigen Group owns 33.3 percent of MYDATA. Vellinge Electronics AB conducts contract manufacture of electronic products and is one of Sweden's largest producers of circuit boards. Net sales for the period May-September (figures for five months) amounted to MSEK 186 (181), while income after net financial items amounted to MSEK 15.5 (14.2). The Skandigen Group owns 37.3 percent of Vellinge Electronics. During the period, Skandigen has acquired 15 percent of the votes and equity in PartnerTech AB from Addum AB. Following an additional purchase from Addum on November 1, the holding amounts to 25 percent. Of the total 1,890,200 shares, 150,000 shares are covered by a call option issued to PartnerTech´s president Mikael Jonson. PartnerTech´s business concept is to contract-manufacture complete modules and products within electronics and advanced mechanics. The company is quoted on the Stockholm Stock Exchange's O list. PartnerTech reports for the first nine months of the year net sales of MSEK 569 (380) and income after net financial items of MSEK 45.9 (15.7). The fundamental reason for the earnings improvement is the good volume growth. Market demand has continued to be good within the fields of information technology and telecommunications. Biotechnology Business Area The subsidiary Fermentech Medical Ltd's sales of Ophthalin, which is used in cataract surgery, amounted to MSEK 15.0 (32.1) for the period. Demand and price have fallen compared with last year. Both volume and price level have now stabilized. Sales are in a build-up phase in a number of countries outside Europe. The result for the period was a loss of MSEK 9.6 (income: 1.6). Earnings were charged with MSEK 7.3 in R&D costs for clinical trials of, among other things, the company's hyaluronan-based product for intraarticular injec- tion for pain relief in patients with osteoarthritis. Fermathron® obtained CE approval in September. At the same time, a long-term agreement was signed with Biomet Inc. (listed on the NASDAQ exchange) in which Biomet is designated sole distributor of Fermathron® all over the world. The agreement makes Biomet re- sponsible for the clinical costs incurred in launching the product in the USA. The launch is expected to take place in 2001. The first deliveries will take place in the fourth quarter, and the effect on the earnings is expected to be very positive. Fermentech's whole-year forecast is that sales will amount to about MSEK 30 with a loss after financial items of about MSEK 3. Further sales increases and a positive net result for the year are expected next year. Skandigen owns 97.0 percent of Fermentech Medi- cal. The subsidiary CMA Microdialysis AB (CMA), which manufactures and markets mi- crodialysis equipment, reported net sales of MSEK 29.3 for the period. CMA's sales for the corresponding period last year amounted to MSEK 30.1. The de- crease is attributable to the products for preclinical research. CMA has in- tensified its marketing of instruments for clinical applications, primarily in the fields of neurosurgery and neurointensive care. The loss for the first nine months was MSEK 4.4 (loss: 4.9). R&D costs amounted to MSEK 5.6, equiva- lent to 19 percent of sales. The Skandigen Group owns 56.0 percent of CMA, which is being consolidated from the first quarter of 1999. Stock in SIBIS Neurosciences, Inc. equivalent to approximately 10 percent of the outstanding shares was sold in September. The sale brought in MSEK 69.3 and realized a gain of MSEK 21.5. The buyer was the Merck subsidiary MC Sub- sidiary Corp., which in August announced a bid of USD 8.5 per share. Skandi- gen's holding was 986,696 shares. Business Area Services & Trade Multisound Technology MST AB was merged in March with TPC Security AB. The Skandigen Group increased its holding in the merged company, TPC Security AB, to 20.6 percent in conjunction with a new issue. Net sales during the first half of the year, amounting to MSEK 1.3, came mainly from the alarm product TeleSafe. The loss after net financial items was MSEK 3.0. TPC is listed on Aktietorget. In May, 19.9 percent of The Chimney Pot AB (TCP) was acquired by means of a directed non-cash issue of 799,600 shares. TCP, founded in 1996, specializes in postproduction and special effects for video and film productions. By means of the acquisition, Skandigen has acquired an ownership interest within the rapidly expanding media sector. The board of H. Lundén Fondkommission AB has decided to change its business focus during the last quarter of the year. From previously having conducted stockbrokerage activities, the company is now switching to asset management. Year-End Press Release Skandigen's Year-End Press Release for fiscal 1999 will be published on Febru- ary 24, 2000. Stockholm, November 8, 1999 Industriförvaltnings AB Skandigen (publ) Patrik Tigerschiöld President For more information, please contact: Patrik Tigerschiöld, President, telephone: +46 8-614 00 20 or +46 70-777 71 90, e-mail: pa- trik.tigerschiold@skandigen.se This report has not been subject to separate examination by the company's auditors. Skandigen is quoted on the Stockholm Stock Exchange's O list. Consolidated Statement of Income - summary 1999 1998 1998 Amounts in SEK '000 Jan.-Sept. Jan.-Sept. Jan.-Dec. Net sales 44,431 32,132 35,816 Change in inventories 2,002 -223 1 627 Other operating revenues 304 206 313 46,737 32,115 37,756 Raw materials and consumables -11,717 -9,142 -11,038 Other external expenses -28,744 -14,921 -21,641 Personnel costs -24,379 -7,991 -10,458 Depreciation Goodwill -11,615 - - Tangible assets -4,678 -2,779 -3,626 Operating loss -34,396 -2,718 -9,007 Financial income and expense, net 34,005 526 695 Loss after financial items -391 -2,192 -8,312 Taxes - - - Minority shares 404 - - Net income/loss for the period 13 -2,192 -8,312 CMA Microdialysis AB is consolidated in the Group from the first quarter of 1999. The results from participations in associated companies for the period are not included in the consolidated financial statements in this quarterly report. Quarterly Group Overview Amounts in MSEK 3/99 2/99 1/99 4/98 3/98 2/98 1/98 Operating revenues 13.2 16.3 15.2 3.7 10.9 11.3 10.2 Change in inventories 0.8 0.4 0.8 1.9 0.2 1.3 -1.8 14.0 16.7 16.0 5.6 11.1 12.6 8.4 Operating expenses -25.5 -27.0 -28.6 -11.9 -12.4 -11.6 -10.8 Operating income/loss -11.5 -10.3 -12.6 -6.3 -1.3 1.0 -2.4 Net financial items 27.8 4.8 1.8 0.2 0.2 0.1 0.2 Income/loss for the period 16.3 -5.5 -10.8 -6.1 -1.1 1.1 -2.2 Consolidated Balance Sheet - summary Amounts in SEK '000 Sept. 30 1999 Sept. 30 1998 Dec. 31 1998 ASSETS Fixed assets Intangible assets 71,762 - - Tangible assets 13,845 12,710 12,119 Financial assets 231,526 79,909 58,466 Total fixed assets 317,133 92,619 70,585 Current assets Other current assets 90,901 23,365 24,769 Liquid assets 145,053 14,707 29,476 Total current assets 235,954 38,072 54,245 Total assets 553,087 130,691 124,830 SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity 487,920 105,632 99,482 Minority interest 37,144 8 8 Provisions 6,968 5,523 4,459 Liabilities 21,055 19,528 20,881 Total shareholders' equity and li- 553,087 130,691 124,830 abilities CMA Microdialysis AB is consolidated in the Group from the first quarter of 1999. The results from participations in associated companies for the period are not included in the consolidated financial statements in this quarterly report. Consolidated Statement of Cash Flows - summary 1999 1998 1998 Amounts in SEK '000 Jan.-Sept. Jan.-Sept. Jan.-Sept. Cash flow from operating activities before change in working capital -6,857 587 -4,689 Change in working capital -18,118 -2,738 1,002 Cash flow from operating activities -24,975 -2,151 -3,687 Cash flow from investing activities 8,805 -1,800 13,124 Cash flow from financing activities 131,916 8,708 10,245 Cash flow for the period 115,746 4,757 19,682 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/11/08/19991108BIT00040/bit0001.doc http://www.bit.se/bitonline/1999/11/08/19991108BIT00040/bit0002.pdf