Utfors Year End Report 2001

Strong growth and secured financing · Continued strong demand for Utfors IP-port leading to 1713 contracted access points as of 31 December 2001, of which 441 during the fourth quarter. In addition, further contracts have been signed for 151 access points up until the date of this report. · At the end of the period, 1126 IP Ports were active, representing an increase of 476 during the fourth quarter. The current economic climate and a sales trend towards fewer but larger IP Port accounts resulted in a weaker ARPU trend than the Company had first forecasted. · Large new customers for IP Ports include Domstolsverket [The National Swedish Judiciary Administration], Volkswagen, and SIF [The Swedish Union of Clerical and Technical Employees in Industry]. · Net total for 2001 amounted to SEK 445.2 million (283.4), an increase of 57 percent. Net total sales for the fourth quarter amounted to SEK 132.5 million (74,2) representing an increase of 78 percent compared with 2000 and 13 percent compared with the previous quarter. · Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) for the year amounted to SEK -355.1 million (-173.3) and for the forth quarter to SEK -86,4 million (-59.9). An improvement from SEK -92,0 million previous quarter. · Utfors has successfully completed a financial solution meaning that the Company now is fully financed according to the current business plan. Additional SEK 376 million before issue costs are thereby available to the Company. · Utfors has to Skellefteå Kraft sold one of Utfors' previously installed ducts between Umeå and Piteå for approximately SEK 20 million. · The settlement with Pangea implied a loss for Utfors in the accounts of SEK -16.2 million. · Improved deregulation of the market regarding local calls, has initially implied an increase in revenue of approximately 10 percent for Utfors' indirect telephony services. 3 mths 3 mths 12 mths 12 mths Oct-Dec Oct-Dec Full-Year Full-Year sek millions 2001 2000 2001 2000 Net total sales 132.5 74.2 445.2 283.4 EBITDA 1) -112.9 -36.2 -360.0 -39.1 Adjusted EBITDA 2) -86.4 -36.9 -355.1 -173.3 Operating loss -186.7 -80.4 -556.5 -119.2 Loss after financial items 3) -217.9 -88.4 -675.5 -131.8 1) Earnings Before Interest, Taxes, Depreciation & Amortization. 2) Excluding earnings from network sales and non-recurring items. 3) The amount includes foreign exchange gains/losses and commission costs etc. related to borrowings. Press Information Jan Werne, President and CEO, tel +46 8 5270 2540, mobile +46 708 48 2540 Markus Boberg, Corporate Communications, tel +46 8 5270 3016, mobile +46 708 48 3016 Mikael Sköld, CFO, tel +46 8 5270 3011, mobile +46 708 48 3011 OPERATIONS IN GENERAL Utfors supplies the market's most cost-effective and high-quality broadband-based communications services, based on the next generation of IP networks. Focusing primarily on the corporate market, Utfors aims to be one of the leading suppliers of broadband-based communications services in the Nordic Region. EVENTS DURING THE PERIOD AND UP TO THE DATE OF THIS REPORT Utfors has successfully completed the financial solution that the Company presented in a press release dated 3 December 2001. Three new share issues and an increased syndicated credit facility cover capital needs as per the Company's business plan, up until the moment that positive cash flow is achieved. A financial cushion has also been created. The financial need arose primarily because of the operator Pangea having informed the Company in September that it had gone into receivership, and had consequently suspended payments to Utfors, resulting in loss of debt due to Utfors of SEK 100 million plus ongoing maintenance and leasing. Utfors finalized negotiations with Pangea's administrator on 30 November. The settlement implied in total a loss for Utfors in the account of approximately SEK 16.2 million. Utfors may receive a certain amount should Pangea sell infrastructure to a third party. A program of rationalization measures was initiated in the third quarter implying savings of approximately SEK 50-60 million up until the end of 2002. This led to reorganization costs of SEK 10.2 million arising during the fourth quarter. The economic climate, the general uncertainty prevailing in the market and a sales trend towards fewer but larger IP Port accounts has resulted in a weaker ARPU trend than the Company had previously forecasted. In spite of the weak economic climate, the Company believes that the underlying demand continues to be strong. The completed financing solution ought to be positive for the development of Utfors' sales. On 21 January, Utfors officially opened its sales office in Denmark. Utfors already has a number of important customers in Denmark, including Black & Decker, Nova Print, Eterra and Skandiabanken. With the opening of the Danish office, Utfors has achieved its objective of being locally represented in all of the Nordic countries. Utfors has to Skellefteå Kraft sold one of Utfors' previously installed ducts (canalization) between Umeå and Piteå for approximately SEK 20 million in cash, as well as Utfors' access to fibre cable for 18 years. Domstolsverket [The National Swedish Judiciary Administration] signed a contract with Utfors on 12 November for the delivery of data communication. The contract shall run over three years, and is worth approximately SEK 44 million. Utfors and TietoEnator signed a contract on 6 November enabling TietoEnator to implement and sell Utfors' IP Ports to TietoEnator's customers. The contract is Nordic and means that TietoEnator will have access to Utfors' service portfolio in all countries where the two companies are operational. On 26 November, Utfors launched the sale of its e-meeting service. The service is an effective way to meet, discuss, work with pictures and text, present and inform - without having to travel. Unlike most video and telephone conferencing systems, with Utfors' E-meeting one can jointly work with pictures and text at the same time as one communicates in real-time with picture and sound. The encoding level is the highest possible for civilian use. In 2001 Utfors filed an application for fixed radio access with the Swedish National Post and Telecom Agency. On December 5, 2001 the National Post and Telecom Agency announced its decision that Utfors would not be granted a license. The cost of the license application is expected to affect operation costs for the forth quarter of 2001 in an amount of SEK 3.4 million in the form of a write-down. Utfors' business plan was not based on the assumption that a license would be granted for fixed radio access and this occurrence will therefore not involve a departure from the business plan On 2 February, a pre-selection reform was introduced that implies that local telephone calls may be automatically connected via the pre- selection carrier chosen by the customer for his/her telephone traffic. Initial evaluations indicate an increase in revenue of approximately 10 percent, which represents about SEK 1,5-2 million per month. CARRIER OPERATIONS Corporate Market Utfors offers companies, municipalities and public authorities a service portfolio based on Utfors' IP Port. Utfors' IP Port is a service that provides a simplified data and telecommunications solution with extremely high capacity. Both data and telephony traffic can be joined in a physical connection with Utfors' IP Port. Calls between directly connected customers in Utfors' Nordic network are always free of charge. The Company has observed continued good demand, and 1713 access points had been contracted as per 31 December 2001, resulting in 441 new access points during the fourth quarter. The Company has signed several important contracts, including with Domstolsverket, Volkswagen and SIF [see above]. At the end of the report period, 1126 IP Ports were active. Utfors implemented measures in the first half-year to enable an increase the Company's delivery and activation capacity. The measures have produced good results and Utfors activated 476 IP Ports in the fourth quarter. Delivery capacity is considered to be sufficient for the forecasted forthcoming growth. At the end of the period, Utfors had approximately 7500 indirect corporate customers. Revenues derived from sales of IP Ports are first recorded at the time that the service is provided. The ongoing monthly average revenue (ARPU) per active port amounted to SEK 10 600, which is a decline from SEK 11 400. The economic climate and sales trend towards fewer but lager IP Port accounts has resulted in a weaker ARPU trend than the Company had previously forecasted. Private Market Utfors increased its marketing efforts towards the private market during the third quarter. In addition, Utfors reviewed its customer offer and introduced a complete customer offer. Utfors intends to ensure continued good growth in the telephony and Internet connection private market segment. The campaign has been successful and the net inflow of subscriptions was approximately 3000 in the fourth quarter. Revenue from indirect services increased during the period to SEK 79.8 million (74.7 in the third quarter 2001). At the end of the report period, Utfors had approximately 143 000 active private subscriptions. NETWORK SALES AND RENTALS Skellefteå Kraft acquired one of Utfors' previously installed ducts (canalization) between Umeå and Piteå for approximately SEK 20 million in cash, as well as Utfors' access to fiber cable for 18 years. Utfors finalized negotiations with Pangea's administrator on 30 November. The settlement implied in total a loss for Utfors of approximately SEK 16 million. Utfors may receive a certain amount should Pangea sell infrastructure to a third party. Contracts and sales of ducts and are reported under Profit/Loss from Network Sales. Results related to contract work are accounted for successively on the basis of the degree of completion. Accounting of duct sales takes place upon final delivery. For the period January to December 2001, the loss (profit) from network sales amounted to SEK 5.3 million (134.1) and pertains to contract work and the loss upon the sale of ducts to Pangea. Sales of fibre capacity (IRU), tele-housing, as well as operations and maintenance (O&M) are reported under Net Total Sales. The allocation of results related to IRUs is carried out on a linear basis over the total contract period. The net total sales for the period January to December include revenue pertaining to IRU, tele-housing and O&M in the amount of SEK 51.4 million (4.7). EARNINGS Fourth Quarter Net total sales for the quarter amounted to SEK 132.5 million (74.2). Of this revenue, SEK 49.9 million (32.1) pertained to indirect telephony services (prefix and pre-selection telephony), SEK 29.9 million (27.3) to dial-up Internet services, SEK 3.1 million (1.1) to direct telephony services, SEK 37.4 million (4.5) to IP Port services, SEK 1.8 million (5.4) to fixed Internet services, SEK 7.9 million (3.8) to network sales (IRU, tele-housing, and O&M), as well as SEK 2.4 million (0) to other products and services. The operating loss before depreciation and amortization (EBITDA) amounted to SEK -112.9 million (-36.2). Adjusted EBITDA amounted SEK - 86.4 million (59.9). The operating loss amounted to SEK -186.7 million (- 80.4). The operating result contains a loss (profit) from network sales of SEK -16.3 million (23.6) and items affecting comparability of SEK - 10.2 million (-23.0). The loss after financial items amounted to SEK -217.9 million (-88.4). Net financial items include sundry financial items of SEK -13.0 million (-5.1) related to foreign exchange differences, as well as commission costs related to borrowings. Depreciation and amortization for the quarter amounted to SEK 73.8 million (44.2). Tax expense for the quarter amounted to SEK 0.5 million (12.3). Twelve-Month Period January-December Net total sales for the period January-December amounted to SEK 445.2 million (283.4). Indirect telephony services (prefix and pre-selection telephony) accounted for SEK 168.0 million (146.4), dial-up Internet services for SEK 111.1 million (101.7), direct telephony services for SEK 6.8 million (2.2), IP Port services for SEK 83.6 million (6.5), fixed Internet services for SEK 11.8 million (18.3), network sales (IRU, tele-housing and O&M) for SEK 51.4 million (4.7), and other items for SEK 12.4 million (3.6). Costs for services sold have increased as a consequence of strong growth in operations, including costs related to the development, sales, delivery and support of an increased number of the IP Port, as well as the start-up of the Company's own network. The operating loss before depreciation and amortization (EBITDA) amounted to SEK -360.0 million (-39.1). Adjusted EBITDA amounted SEK - 355.1 million (-173.3). The operating loss for the period amounted to SEK -556.5 million (-119.2). The operating result includes profit from network sales of SEK 5.3 million (134.1) and items affecting comparability of SEK -10.2 million (-23.0). The loss after financial items amounted to SEK -675.5 million (-131.8). Net financial items contain sundry financial items of SEK -76.2 million (-6.7) related to foreign exchange differences, and commission costs related to borrowings. Depreciation and amortization for the period amounted to SEK 196.5 million (80.1). The increase is a consequence of the start-up of the network, as well as the expansion of operations. Tax expense for the period amounted to SEK -2.7 million (-18.6). FINANCIAL POSITION Net investments amounted in the fourth quarter to SEK 46.3 million (104.2) and consisted mainly of tangible fixed assets related to the network. The lower investment level from the previous quarter is a result of network investments having been switched from large infrastructure projects to customer-operated investments. Net investments during the period January-December amounted to SEK 792.1 million (1 278.2) and consisted essentially of tangible fixed assets related to the network amounting to SEK 781.8 million (1 492.3). Free cash flow for the fourth quarter amounted to SEK -122.5 million (6.5), which although being a considerable improvement compared with the third quarter, is primarily due to a shortfall in ongoing operations. Free cash flow for the period January-December amounted to SEK -864.5 million (-1 204.0). Long-term liabilities amounted on balance sheet date to SEK 919.3 million, and include SEK 633.0 million from a syndicated credit, and SEK 168.1 from what is known as a mezzanine loan. Liquid funds at the end of the report period amounted to SEK 105.5 million (540.2). On 30 November, Utfors signed a contract for an enlarged syndicated credit. The new credit will increase the credit ceiling by SEK 150 million, implying a maximum credit limit of SEK 1 100 million with final maturity in 2007. The credit is subject as previously to customary terms and conditions regarding the development of Utfors' business activities. Utfors carried out two new share issues in December, which brought SEK 126 million to the Company before issue costs, and a third new share issue in January 2002 that provided the Company with SEK 100 million before issue costs. All in all, the Company has been provided with SEK 226 million before costs through the new share issues, and SEK 150 million through the increased credit limit. These measures are considered to cover the Company's financing requirements up until the moment that positive cash flow is achieved, and in addition create a financial cushion in relation to the business plan. KEY FINANCIAL DATA The return on capital employed was negative for both the report period and for the corresponding period 2000, as was the return on equity. The net debt/equity ratio was a multiple of 0.8 (0.0). The equity/assets ratio amounted to 32.5 percent (43.2). Earnings per share were negative for both the report period 2001 and 2000. Shareholders' equity per share amounted to SEK 16.62 (33.96). SHARE DATA AND OWNERSHIP STRUCTURE The number of registered shares as at 31 December 2001 amounted to 59 540 785 (45 388 973) and the number of shares that had not yet been registered amounted to 200 000 (0). The average number of shares for the period January-December amounted to 46 441 710 (34 357 755). Warrants corresponding to 11 616 617 new shares were outstanding, which implies that the number of shares after full exercise of the warrants amounted to 71 357 402. As at 31 December 2001, the Company had approximately 10 000 shareholders, of which the largest were Norsk Vekst and Litorina Kapital. NUMBER OF EMPLOYEES At the end of the period, the Utfors group had 322 employees (248). PARENT COMPANY The parent company had 10 employees (8) at the end of the period. Net total sales for the period amounted to SEK 30.0 million (15.0). The profit (loss) after net financial items amounted to SEK 26.4 million (- 50.3). Net investments for the period amounted to SEK 758.2 million (211.5), and consisted essentially of shareholder contributions to subsidiaries. Liquid funds at the end of the report period amounted to SEK 54.1 million (284.9). OUTLOOK FOR 2002 In the report of the third quarter it was expected that the investment level was continuing to decrease. The investment level for 2002 is expected to be kept at the lower level that was established during the fourth quarter 2001, yet some variations may occur between the quarters. A strong revenue growth in fixed network services was also expected in the report and it was estimated that a positive EBITDA were to be reached by the end of year 2002. The forecasts of revenues and positive EBITDA still stands. This is due to a continues strong revenue growth in Utfors fixed network services. DIVIDEND The board of Utfors will propose to the annual general meeting that no dividend will be paid for 2001. ANNUAL REPORT The annual report for 2001 will be distributed to Utfors shareholders and will be available at Utfors head office (Råsundavägen 12, Solna) from 29 April 2002. SHAREHOLDERS' MEETING Shareholders' meeting will be held 14 May 2002 at the Company's premises. Notice to attend will be presented at Utfors homepage www.utfors.com and will be published in the daily press. ACCOUNTING AND VALUATION PRINCIPLES The same accounting principles and calculation methods have been applied in this interim report as in the most recent annual report. Solna, 13 February 2002 Utfors AB (publ) The Board of Directors The Group's consolidated profit & loss statement, balance sheet, cash flow statement, quarterly data and key figures and ratios, as well as financial terminology are set out in Appendix 1. Utfors AB (publ) (Swedish Corporate Registration Number 556513-3393) Box 525 169 29 Solna Switchboard: +46 8 5270 20 00 Fax: +46 8 5270 25 95 This and other reports are also available at Utfors' website: www.utfors.se FINANCIAL INFORMATION Interim report Jan-Mar 26 April 2002 Annual report 29 April 2002 Shareholders' meeting 14 May 2002 Interim report Jan-Jun 30 July 2002 Interim report Jan-Sep 31 October 2002 Year End report 2002 7 February 2003 FURTHER INFORMATION Utfors AB, Information dep Ph no. + 46 8 5270 2200 Fax + 46 8 5270 2595 info@utfors.se www.utfors.com ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/02/14/20020214BIT00300/bit0001.doc The full year-end report http://www.waymaker.net/bitonline/2002/02/14/20020214BIT00300/bit0001.pdf The full year-end report