Third quarter of 2010

Transcription

1 Third quarter of 2010 Main features of the third quarter of 2010 Merger with ErgoGroup completed with effect from 30 September 2010 Operating revenue NOK 1,679 million (NOK 1,716 million) EBITA NOK 70 million (NOK 150 million) Capitalised assets written down by NOK 176 million Provision of NOK 71 million in connection with previously announced cost program Cash flow from operations NOK 117 million (NOK 30 million) CAPEX NOK 47 million (55 million) Key figures (NOK million) Q Q3 2009* * 2009* Operating revenue 1,679 1,716 5,312 5,575 7,492 Operating costs 1,609 1,566 4,981 5,140 6,888 EBITA before non-recurring items EBITA % 4.2 % 8.8 % 6.2 % 7.8 % 8.1 % EBIT before non-recurring items Non-recurring items EBIT Profit before tax Cash flow from operations before restructuring Operational investment (CAPEX) EPS before non-recurring items (NOK) EPS (NOK) No. of employees 6,058 5,904 6,058 5,904 5,991 * Not adjusted for acquisition and sale of businesses in the period EDB ErgoGroup ASA Kvartalsrapport 3. kvartal 2010 Side 1/17

2 Summary of the third quarter of 2010 Since the merger was carried out with accounting effect from 30 September 2010, the profit and loss statement presented is only for the EDB group, i.e. excluding ErgoGroup. Only the balance sheet and key figures reported at 30 September 2010 show consolidated figures including ErgoGroup. The EDB Group reported operating revenue for the third quarter of 2010 of NOK 1,679 million as compared to NOK 1,716 million in the same quarter of 2009, representing an organic decline of 1 percent. The third quarter was affected by continuing weak conditions in the Nordic IT services market, and downward pressure on prices that was particularly apparent in the outsourcing segment. These conditions had an adverse effect on the IT Operations and Consulting business areas in particular. Operating revenues for the IT Operations business area were NOK 1,013 million in the third quarter of 2010 as compared to pro forma NOK 1,050 million in the same quarter of the previous year. The Solutions business area reported revenues of NOK 381 million in the third quarter of 2010 as compared to NOK 343 million in the third quarter of The Consulting business area reported revenues of NOK 390 million for the third quarter as compared to pro forma NOK 401 million in the same quarter of the previous year. The group generated 28 percent of its third quarter 2010 revenue outside Norway. The group reported operating profit before amortisation of intangible assets (EBITA) of NOK 70 million for the third quarter of 2010, as compared to NOK 150 million for the same quarter in The group s EBITA margin was 4.2 percent for the quarter as compared to 8.8 percent for the same quarter in The reduction in EBITA margin is principally the result of cost overruns and delays affecting the project to develop new solutions for the municipality sector. Development and implementation costs incurred in Q3 and subsequent periods will not be treated as satisfying the criteria for capitalisation. The change in accounting treatment has reduced EBITA by NOK 25 million in the third quarter of The IT Operations business area produced an EBITA margin of 6.6 percent for the third quarter of 2010 as compared to pro forma 9.7 percent in the third quarter of The Solutions business area s EBITA margin for the third quarter of 2010 was 2.5 percent as compared to 13.0 percent in the third quarter of The Consulting business area reported an EBITA margin of 4.6 percent for the third quarter of 2010, as compared to a pro forma EBITA margin of 6.5 percent for the third quarter of Amortisation of intangible assets totalled NOK 41 million in the third quarter of 2010, as compared to NOK 40 million in the third quarter of Amortisation of software developed in-house was NOK 26 million in the third quarter of 2010, as compared to NOK 20 million in the third quarter of The increase was due in part to higher sales of development projects in the Bank & Finance area. Amortisation of other intangible assets amounted to NOK 15 million in the third quarter of 2010 as compared to NOK 20 million in the third quarter of The reduction was due to the finalised amortisation of excess value arising from earlier acquisitions. In the course of the third quarter, the group implemented a number of the cost program measures announced at the time of the publication of the interim report for the second quarter of Non-recurring costs incurred in relation to the restructuring measures amounted to NOK 71 million in the third quarter of Of this total, costs associated with the early retirement pension scheme (AFP) and enhanced early retirement pension amounted to NOK 49 million. The company s offer of enhanced early retirement was accepted by 65 employees. In addition, the group has reduced its headcount by 103 employees. The annual effect of the restructuring measures carried out is expected to be in the order of NOK 180 million. The Board of Directors of EDB ErgoGroup has resolved to write down the capitalised value of in -house developed software by NOK 176 million in the third quarter of This amount relates in full to the project for developing industry specific solutions for the municipality sector. Non-recurring items recognised in the third quarter of 2010 amount to NOK 247 million in total. EDB ErgoGroup ASA Third quarter report 2010 Page 2/17

3 Operating profit before non-recurring items (EBIT) for the third quarter of 2010 was NOK 29 million as compared to NOK 110 million in the third quarter of After adjusting for non-recurring items, the operating result for the third quarter of 2010 was a loss of NOK 218 million, as compared to a profit of NOK 126 million in the third quarter of Net financial expenses were NOK 33 million in the third quarter of 2010, as compared to NOK 31 million in the third quarter of Net interest expense for the third quarter of 2010 totalled NOK 38 million, in line with the third quarter of The group reported a loss after tax of NOK 177 million for the third quarter of 2010, as compared to a loss after tax of NOK 9 million for the third quarter of Reported earnings per share before non-recurring items amounted to NOK for the third quarter of 2010, as compared to NOK 0.60 for the same quarter of After adjusting for non-recurring items, earnings per share for the third quarter of 2010 amounted to NOK The group s headcount was 6,058 at 30 September 2010 as compared to 6,080 at the close of the previous quarter. The reduction in headcount relates principally to the group s operating services activities in Norway and Sweden, and to the Nordic part of the group s consulting activities: these reductions are consistent with the previously announced cost program. The group s activities in the Ukraine and India increased their head count in the third quarter. Merger with ErgoGroup completed The boards of directors of EDB Business Partner ASA and ErgoGroup AS recommended to their respective shareholders on 7 June 2010 that EDB and ErgoGroup should merge to form a leading Nordic IT company, which would have the capacity for faster organic growth and the financial strength to exploit strategic and structured opportunities. The Norwegian Competition Authority notified the parties on 15 September 2010 but it did not intend to intervene against the merger. The merger was accordingly carried out with accounting effect from 30 September 2010, and was formally approved by the boards of directors of EDB Business Partner ASA and ErgoGroup AS on 13 October Upon completion of the merger, EDB Business Partner ASA changed its name to EDB ErgoGroup ASA and issued 81,064,078 new shares to Posten Norge AS, the sole shareholder of ErgoGroup AS, as merger consideration. Following the issuance of the new shares, the registered share capital in the company is NOK 301,834,333.50, divided into 172,476,762 shares with a nominal value of NOK The company's articles of association have been updated accordingly. With effect from the completion of the merger, the composition of the board of directors was changed in accordance with the resolution adopted at the company's general meeting on 8 July The Group s business areas IT Operations The business area IT Operations comprises network services, operation of infrastructure and applications, security services, and user support, as well as electronic business support services. IT Operations delivers accessible and reliable systems operation for its customers to ensure that their employees and customers can use the systems at all times. The activities of the IT Operations business area cover all industries and sectors, and it operates principally in Norway and Sweden. (NOK million) Q Q3 2009* * 2009** Operating revenue 1,013 1,050 3,139 3,252 4,363 Cost of goods sold ,294 1,232 1,650 Salaries and related costs ,023 1,077 1,445 Ordinary depreciation Other operating costs Total operating costs ,913 2,986 4,000 Operating profit before amortisation (EBITA) EBITA % 6.6 % 9.7 % 7.2 % 8.2 % 8.3 % Operational investment (CAPEX) No. of employees 1,944 1,957 1,944 1,957 2,004 * Proforma figures for the comparable period 2009 ** Proforma figures for the year 2009 EDB ErgoGroup ASA Third quarter report 2010 Page 3/17

4 The IT Operations business area reported operating revenues of NOK 1,013 million for the third quarter of 2010, representing negative organic growth of 3 percent from the third quarter of The drop in operating revenues is attributable almost entirely to price pressure on major outsourcing contracts. Cost of goods sold in the third quarter of 2010 was 8 percent higher than in the same quarter of This was caused by the reclassification of costs associated with the printing activities that were outsourced in In addition, costs were higher as the result of accruals of software costs. Salaries and related costs were 5 percent lower in the third quarter of 2010 than in the third quarter of 2009 as the result of restructuring measures carried out. Depreciation in the third quarter of 2010 was NOK 4 million lower than in the third quarter of 2009 as the result of a lower level of investment spending throughout 2009, and investment spending has been further reduced in Operating profit before amortisation of intangible assets (EBITA) was NOK 66 million in the third quarter of 2010, as compared to pro forma NOK 102 million in the third quarter of EBITA margin for the third quarter was 6.6 percent, as compared to pro forma 9.7 percent in the third quarter of Solutions The Solutions business area offers a complete range of software and consulting services for the Nordic banking and finance sector. The business area also serves the Norwegian public sector with software / solutions for Norwegian municipalities, health authorities and national public sector entities. The business area also supplies document handling solutions to public sector entities. (NOK million) Q Q Operating revenue ,198 1,103 1,507 Costs of goods sold Salaries and related costs Ordinary depreciation Other operating costs Total operating costs , ,310 Operating profit before amortisation (EBITA) EBITA % 2.5 % 13.0 % 9.5 % 13.3 % 13.1 % Operational investment (CAPEX) No. of employees 1, , ,006 The Solutions business area reported operating revenues of NOK 381 million in the third quarter of 2010 as compared to NOK 343 million in the same quarter of This represents organic growth of 11 percent for the quarter. The business area s Bank & Finance industry vertical achieved organic growth of 15 percent for the quarter as a result of an increased inflow of new customers and successful product launches. In the Public Sector vertical, EDB ErgoGroup is working on the development of an improved solutions portfolio for the municipality sector to meet these customers requirements for digital interaction between public bodies and the public. As communicated earlier, the company has experienced cost overruns and delays with its project to develop new solutions for the municipality sector. Development and implementation costs incurred in Q3 and subsequent periods will not be treated as satisfying the criteria for capitalisation, and will therefore have a negative impact on EBITA, but will not cause any change to cash flow. Cost of goods sold in the third quarter of 2010 was 26 percent higher than in the third quarter of This was due to a higher proportion of sales of products from third party suppliers in the card services area of the Bank & Finance industry vertical. Salaries and related costs in the third quarter of 2010 were 16 percent higher than in the third quarter of This principally reflects the general increase in salaries, and an increase in headcount in the Bank & Finance industry vertical. In addition, the increase reflects recognition of the internal resources element of development and implementation expenses in respect of the project for the development of industry-specific solutions for the municipality sector. EDB ErgoGroup ASA Third quarter report 2010 Page 4/17

5 The business area produced an operating profit before amortisation of intangible assets (EBITA) of NOK 10 million for the third quarter of 2010, as compared to NOK 44 million for the third quarter of EBITA margin for the third quarter was 2.5 percent, as compared to 13.0 percent for the third quarter of The Bank & Finance industry vertical maintained its EBITA margin in the third quarter, and the reduction in the business area s margin relates to the Public Sector vertical. Consulting With effect from 2009, all the group's companies involved in providing consulting services were brought together in a single business area - Consulting. Over the course of 2010, these companies will be successively merged in order to create a simpler structure and a clearer go-to-market model. The Norwegian companies were merged into EDB Consulting Group AS with effect from 1 April A similar merger of the Swedish companies was carried out during the third quarter of In order to ensure an optimal balance between Nordic and global resources in customer deliveries, the group's activities in India and the Ukraine are part of the Consulting business area. Following these changes, Consulting comprises almost 2,900 employees with extensive expertise in SAP, Microsoft, Oracle and IBM technology, as well as in project management, systems development and integration, in addition to expertise in customising and implementing standard systems. The business area operates from various locations in Norway, Sweden Denmark and Belgium, as well as locations in India and the Ukraine. (NOK million) Q Q * 2009** Operating revenue ,298 1,418 1,925 Costs of goods sold Salaries and related costs ,176 Ordinary depreciation Other operating costs Total operating costs ,228 1,323 1,782 Operating profit before amortisation (EBITA) as compared to pro forma NOK 401 million in the third quarter of After adjusting for the Swedish businesses sold in the third quarter of 2009, this represents a decline of 3 percent. The reduction is largely the result of lower demand from Nordic industrial customers. The group's global sourcing activities achieved organic growth between the third quarter of 2009 and the third quarter of 2010 of 27 percent. Cost of goods sold in the third quarter of 2010 was 23 percent lower than in the same quarter of 2009, due mainly to a reduction in the use of subcontractors. Salaries and related costs were 1 percent lower in the third quarter of 2010 than in the third quarter of 2009 due to a net reduction in headcount in the Nordic part of the business area s activities. The business area produced operating profit before amortisation of intangible assets (EBITA) of NOK 18 million for the third quarter of 2010, representing an EBITA margin of 4.6 percent. By way of comparison, the pro forma EBITA margin for the third quarter of 2009 was 6.5 percent. The average billable utilisation for Consulting in the third quarter of 2010 was 79.1 percent for 2,302 billable consultants. The business area s headcount was 2,904 at 30 September 2010 as compared to 2,895 at the close of the second quarter of Headcount increased at the group's businesses in India and the Ukraine in the third quarter, while headcount in the Nordic countries reduced. Of the total of 2,904 employees, 561 work in Sweden, 504 in Norway and 101 in Denmark. The group's companies in India and the Ukraine had 1,699 employees in total at the end of September In addition, the business area has a total of 39 employees located in other European countries, the USA and Singapore. EBITA % 4.6 % 6.5 % 5.4 % 6.7 % 7.4 % Operational investment (CAPEX) No. of employees 2,904 2,786 2,904 2,786 2,811 * Proforma figures for the comparable period 2009 ** Proforma figures for the year 2009 The Consulting business area reported operating revenues of NOK 390 million in the third quarter of 2010 EDB ErgoGroup ASA Third quarter report 2010 Page 5/17

6 Financial information Cash flow and liquidity Cash flow from operations, before payments related to restructuring, was NOK 117 million in the third quarter of 2010 as compared to NOK 30 million for the same quarter of The increase is related to extraordinary payments from customers of NOK 150 million in third quarter of The prepayment will be settled in fourth quarter of 2010 and the first quarter of 2011 in line with customer deliveries. Net interest-bearing liabilities totalled NOK 3,965 million at 30 September 2010, an increase of NOK 1,052 million from the close of the second quarter of Of the increase, NOK 1,094 million is the result of the merger. At 30 September 2010, the group s liquidity reserves totalled NOK 1,124 million, representing a net increase of NOK 654 million from the close of the second quarter of The net increase as a result of the merger is NOK 618 million. Undrawn credit facilities accounted for NOK 440 million of the total at 30 September Investment in operational fixed assets amounted to NOK 47 million in the third quarter of 2010 as compared to NOK 55 million in the same quarter of Costs of NOK 28 million in respect of developing and upgrading software for the Public Sector and Bank & Finance verticals in the Solutions business area were capitalised as intangible assets in the third quarter of By way of comparison, costs of NOK 42 million were capitalised as intangible assets in the third quarter of The Bank & Finance vertical capitalised costs of NOK 22 million in the third quarter of 2010, which related in the main to contractual customer deliveries, as well as development work on new credit process solutions and sales support systems for a number of Nordic banks. The development costs incurred by the Public Sector vertical in connection with its SAP project were recognised to profit and loss in the third quarter of 2010 since the criteria for capitalisation of these costs are no longer satisfied. Future development costs that are expected to be incurred until the completion of the project in the first half of 2011 will also be recognised to profit and loss. Development costs for in-house software capitalised to the balance sheet totalled NOK 173 million at 30 September Order backlog The group s order backlog amounted to NOK 18,127 million at 30 September 2010 following the signing of agreements representing total contract value of approximately NOK 1.4 billion in the third quarter of IT Operations reported an increase in order backlog of NOK 3,279 million to NOK 13,510 million, of which NOK 3,788 million relates to order backlog taken over from ErgoGroup. The Solutions business area s order backlog increased by NOK 344 million from 30 June 2010 to NOK 2,923 million, of which NOK 500 million relates to ErgoGroup. The order backlog for the Consulting business area increased by NOK 1,088 million to NOK 1,694 million at 30 September Of the net increase of NOK 1,088 million, NOK 1,167 million relates to ErgoGroup. Support functions/eliminations Elimination of internal revenue between companies in the EDB ErgoGroup totalled NOK -105 million in the third quarter of 2010 as compared to NOK -91 million in the third quarter of The increase relates mainly to cross-selling between the companies in the Consulting area and IS Partner, as well as an increase in deliveries from Global Sourcing companies to the other business areas. Support functions not allocated to individual business areas represented an operating loss before amortisation of intangible assets (EBITA) of NOK 24 million in the third quarter of 2010, as compared to a loss of NOK 23 million in the third quarter of In the third quarter of 2010, an amount of NOK 7 million was reversed in respect of previous elimination of internal services relating to the project for the development of industry-specific solutions for the EDB ErgoGroup ASA Third quarter report 2010 Page 6/17

7 municipality sector as a consequence of the significant write-down of this project. In addition, NOK 6.3 million was incurred in respect of the integration project for the merger. Other matters EDB ErgoGroup implemented a new share option scheme for key personnel at the Annual General Meeting held on 10 May The subsequent Annual General Meeting decided that no new share options should be granted, but that option agreements already entered into can be carried out. The earliest date for the exercise of the first one-third of the options from the scheme followed the publication of the third quarter 2007 interim report. A total of 250,000 options were outstanding under the terms of this scheme at 30 September EDB ErgoGroup implemented IFRS accounting on 1 January The interim report has been produced using the same accounting principles and methodology as used for the annual report. The interim report is published in accordance with IAS 34 on interim reporting. Future prospects The Nordic IT services market showed a decline in the first half of 2010 due to weaker demand and pressure on prices. The start of the second half of 2010 saw continuing price pressure for outsourcing, but at the same time there are clear signs of growth a number of other segments. The market research companies IDC and Gartner expect an improving trend in the IT services market over the second half of 2010, with the prospect of moderate growth in In view of the continuing uncertain market situation, EDB ErgoGroup has launched further cost saving measures. The Board of EDB ErgoGroup is maintaining a strong focus on ensuring that the group continues to implement the measures necessary to maintain satisfactory profitability and competiveness. Oslo, 18 October 2010 The Board of Directors of EDB ErgoGroup ASA EDB ErgoGroup ASA Third quarter report 2010 Page 7/17

8 About EDB ErgoGroup EDB Business Partner carried out the merger with ErgoGroup AS with accounting effect from 30 September The combined company, which has now changed its name to EDB ErgoGroup ASA, is a leading information technology (IT) services provider in the Nordic region. We help customers to unlock substantial value from the entire IT services value chain, spanning solutions, consulting and outsourcing. We are approximately 10,000 employees with an annual revenue of approximately NOK 12.5 billion in EDB ErgoGroup serves as a responsive partner, combining local expertise with deep industry knowledge. EDB ErgoGroup is listed on the Oslo Stock Exchange. Financial calendar Q3 Interim report: October Q4 Interim report and provisional annual account for 2010: February Contact details EDB ErgoGroup ASA Nedre Skøyen vei 26 PO Box 640 Skøyen N-0214 Oslo Org. no: MVA Telephone: (+47) Fax: (+47) edbergogroup@edbergogroup.com EDB ErgoGroup ASA Third quarter report 2010 Page 8/17

9 EDB ErgoGroup Analysis by business area* (NOK million) Operating revenue: Q3'10 Q3' Q1'10 Q4'09 Q3'09 Q2'09 Q1'09 Q4'08 Q3'08 IT Operations 1,013 1,054 4,380 1,076 1,110 1,054 1,107 1,108 1,211 1,103 Solutions , Consulting , Eliminations Total group 1,679 1,716 7,492 1,824 1,917 1,716 1,923 1,936 2,145 1,854 Operating profit before amortisation (EBITA): Q3'10 Q3' Q1'10 Q4'09 Q3'09 Q2'09 Q1'09 Q4'08 Q3'08 IT Operations Solutions Consulting Staff / Not allocated Total group EBITA margin: Q3'10 Q3' Q1'10 Q4'09 Q3'09 Q2'09 Q1'09 Q4'08 Q3'08 IT Operations 6.6 % 9.7 % 8.3 % 7.9 % 8.7 % 9.7 % 8.2 % 6.7 % 8.4 % 9.6 % Solutions 2.5 % 13.0 % 13.1 % 12.1 % 12.6 % 13.0 % 14.1 % 12.7 % 13.7 % 15.6 % Consulting 4.6 % 6.6 % 7.4 % 6.5 % 9.4 % 6.6 % 6.2 % 7.1 % 9.3 % 6.0 % Total group 4.2 % 7.9 % 8,0% 7.4 % 8.8 % 8.8 % 7.9 % 7.0 % 9.0 % 9.0 % * Not adjusted for acquisition and sale of businesses in the period Order backlog by business area (NOK million) Order backlog Order backlog distributed 30/09/ Later IT Operations 13,510 1,508 4,535 3,078 2,457 1,932 Solutions 2, Consulting 1, Total order backlog 18,127 2,516 6,115 4,121 3,200 2,175 % of total 14% 34% 23% 18% 12% EDB ErgoGroup ASA Third quarter report 2010 Page 9/17

10 EDB ErgoGroup Profit and loss account (NOK million) Q Q /09/10 30/09/ Operating revenue 1,679 1,716 5,312 5,575 7,492 Cost of goods sold ,611 1,703 2,280 Wages and salaries ,448 2,615 3,516 Other operating costs Operating profit bef. depreciation (EBITDA) Depreciation of operating assets Operating profit bef. amortisation (EBITA) Non-recurring items Depreciation of intangible assets Operating profit (EBIT) Net financial items Profit before tax (EBT) Tax on profit Profit for the year Whereof minority interests EDB ErgoGroup ASA Third quarter report 2010 Page 10/17

11 EDB ErgoGroup Statement of financial position (NOK million) 30/09/10 30/09/09 31/12/09 Goodwill 6,744 4,066 4,014 Other intangible assets Tangible assets 1, Non-current financial assets Total non-current assets 8,435 5,363 5,312 Accounts receivable 1, Other current receivables 1, Bank deposits Total current assets 3,816 2,370 2,566 Total assets 12,251 7,733 7,878 Equity 4,265 2,143 2,184 Minority interests Total equity and minority interests 4,316 2,176 2,221 Provision for liabilities Non-current non-interest bearing liabilities Non-current interest bearing liabilities 4,067 3,482 2,682 Total non-current liabilities 4,681 4,057 3,131 Accounts payable Duties payable, vacation allowance Current non-interest bearing liabilities 1, Current interest bearing liabilities Total current liabilities 3,254 1,500 2,526 Total equity and liabilities 12,251 7,733 7,878 EDB ErgoGroup ASA Third quarter report 2010 Page 11/17

12 EDB ErgoGroup Cash flow analysis (NOK million) Q Q EBITDA Net taxes / financial items paid Change in accounts receivable Change in accounts payable Change in other accruals Operational cash flow before non-recurring items Change in provision non-recurring items Net cash flow from operations Operational investment In-house developed software paid Sale of fixed operating assets Acquisition of businesses Sale of businesses Net cash flow from investments Debt repayment New borrowing Share issues Net cash flow from financing Net change in liquid assets Bank deposits at start of period Currency translation diff. cash and bank dep Bank deposits at end of period * Change in other accruals includes changes in the follow ing statement of financial items: other current receivables, duties payable and other current liabilities EDB ErgoGroup ASA Third quarter report 2010 Page 12/17

13 EDB ErgoGroup Key figures Q Q /09/10 30/09/ Key figures per share (NOK): Earnings per share Earnings before non-recurring items EBITDA per share Cash from operations b/f non-recurring items Other key figures: EBITDA-margin 7.6 % 12.4 % 9.5 % 11.3 % 11.5 % EBITA-margin 4.2 % 8.8 % 6.2 % 7.8 % 8.1 % Return on invested capital (ROIC) 4.3 % 9.6 % 7.4 % 9.7 % 10.3 % Net working capital Working capital in % of revenue 8.1 % 4.4 % 0.9 % Equity ratio 35% 28% 28% Gearing Net interest bearing debt (NOK mill) 3,965 2,944 2,695 Average number of shares 89,699,744 90,345,684 89,879,240 90,345,684 90,202,210 Comprehensive income and expense (NOK million) Q Q /09/10 30/09/ Cash flow hedges Option scheme employees Restatement differences Total Comprehensive income Reconciliation of changes in equity before minority interests 30/09/10 30/09/ Equity at ,184 2,123 2,123 Profit after tax Comprehensive income Merger with ErgoGroup (pooling of interests) 2, Trade in own shares Dividends Equity at end of period 4,265 2,143 2,184

14 Note: Business combination Merger with ErgoGroup With accounting effect from 30 September 2010, EDB Business Partner Holding AS merged with ErgoGroup AS, a Nordic full-service supplier of IT operations, solutions and consulting services. The merged company has taken the name EDB ErgoGroup AS. The background for the merger is a shared desire to create a leading Nordic IT company that will be sustainable and competitive over the longer term, with the capacity for continuing growth and the financial strength that will make it possible to take advantage of strategic and structural opportunities as they arise. EDB ErgoGroup will have a strong portfolio of services and products, extensive expertise and delivery capacity both locally and regionally, and a strong customer base. The decision to merge was consistent with both companies strategic objectives to win Nordic leadership, and the merger paves the way for a marked acceleration of the tempo for realising this strategy. The merger is based on an exchange ratio between the values of EDB Business Partner ASA and ErgoGroup AS of 53:47 (EDB:ErgoGroup). Consideration for the merger takes the form solely of the issue of shares in EDB to Norway Post ( Posten ), which is the sole shareholder of ErgoGroup. 81,064,078 new shares will be issued, each with nominal value NOK 1.75, by an increase in EDB s share capital of NOK 141,862,137. Consideration for the new shares takes the form of EDB establishing a claim on EDB Business Partner Holding AS equivalent to the net equity transferred to EDB Business Partner Holding AS as the result of the merger. EDB Business Partner Holding AS has acquired 100 percent of the share capital of ErgoGroup AS. Since both companies are controlled by the same owner, the Norwegian State, the transaction was carried out as pooling of interests. Transaction costs of NOK 24 million incurred in connection with the merger have been recognised to profit and loss and are reported as administration costs in the profit and loss account, and as part of operational cash flow in the cash flow analysis. The pro forma profit and loss account and statement of financial position for EDB ErgoGroup ASA as at 30 September 2010 are as follows: EDB ErgoGroup ASA Third quarter report 2010 Page 14/17

15 Pro forma profit and loss account 30 September 2010 EDB ErgoGroup (NOK million) EDB Ergogroup Operating revenues 5,312 3,772 9,084 Costs of goods sold 1,611 1,112 2,723 Wages and salaries 2,448 1,798 4,245 Other operating costs ,149 Operating profit before depreciation (EBITDA) Depreciation of operating assets Operating profit before amortisation (EBITA) Non-recurring items Depreciation of intangible assets Operating profit (EBIT) Net financial items Profit before tax (EBT) Tax on profit Profit for the periode Whereof minority interests 8 2 9

16 Statement of financial statement EDB ErgoGroup (NOK mill) EDB Ergogroup Goodwill 4,100 2,644 6,744 Other intangible assets Tangible assets ,080 Non-current financial assets Total non-current assets 5,182 3,253 8,435 Accounts receivables ,655 Other current receivables ,477 Bank deposits Total current assets 2,189 1,627 3,816 Total assets 7,371 4,880 12,251 Equity 2,104 2,161 4,265 Minority interests Total equity and minority interests 2,150 2,166 4,316 Provision for liabilities Non-current non-interest bearing liabilities Non-current interest bearing liabilities 3, ,067 Sum langsiktig gjeld 3,615 1,066 4,681 Accounts payable Duties payable, vacation allowance Current non-interest bearing liabilities ,279 Current interest bearing liabilities Total current liabilities 1,605 1,649 3,254 Total equity and liabilities 7,371 4,880 12,251 EDB ErgoGroup ASA Third quarter report 2010 Page 16/17

17 Proforma figures for EDB ErgoGroup Operating revenue: Q3'10 Q3' Q2'10 Q1'10 Q4'09 Q3'09 Q2'09 Q1'09 IT Operations 1,749 1,769 7,604 1,875 1,850 1,976 1,769 1,900 1,958 Solutions , Consulting , , ,032 Eliminations Total group 2,823 2,835 12,608 3,155 3,106 3,284 2,835 3,206 3,283 Operating profit before amortisation (EBITA): Q3'10 Q3' Q2'10 Q1'10 Q4'09 Q3'09 Q2'09 Q1'09 IT Operations Solutions Consulting Staff / Not allocated Total group EBITA margin: Q3'10 Q3' Q2'10 Q1'10 Q4'09 Q3'09 Q2'09 Q1'09 IT Operations 7.9 % 8.2 % 6.2 % 5.6 % 5.8 % 6.8 % 8.2 % 5.0 % 5.1 % Solutions 4.8 % 12.6 % 12.5 % 11.4 % 11.3 % 13.1 % 12.6 % 12.8 % 11.5 % Consulting 4.1 % 7.2 % 8.4 % 6.4 % 8.1 % 10.7 % 7.2 % 7.6 % 8.1 % Total group 5.9 % 7.9 % 7.1 % 6.2 % 9.5 % 8.4 % 7.9 % 7.9 % 6.0 % EDB ErgoGroup ASA Third quarter report 2010 Page 17/17