Adcore AB Interim Report January March 2002

Transcription

1 Adcore AB Interim Report January March 2002 Sales of SEK 112 m in a market that remains weak and burdened by over-supply and price pressure. In Adcore s consulting operation, profit before goodwill amortisation and items affecting comparability was SEK 1.1 m. Profit after financial items was SEK 34.2 m;. Current efforts to resolve remaining disputes proceeded better than planned, implying total assets reducing and the equity ratio rising to 39%. Liquidity reduced by SEK 36 m. Adcore retained its preferred supplier status with Ericsson, and received new assignments from clients including Birka Energi, Compaq, Cramo, Folksam, Green Cargo, ICA, Nordea IT, Sony Ericsson and Tibnor. The order backlog is satisfactory. Adcore anticipates an intensely competitive market for the remainder of 2002; the ongoing rationalisation programme will continue, intended to achieve positive earnings despite pressurised market conditions and lower pricing.

2 Market and Outlook Market activity early in the year was slower than expected, with the market featuring over-supply and price pressure intense sales efforts are needed to secure all business. Consulting services in the enterprise applications segment particularly ERP system SAP are encountering firm demand; utilisation is high. Certain segments, such as telecom, banking and finance, also remain satisfactory. Other sectors are also exhibiting healthy demand, although their overall status is compromised by slower market activity within general strategy and management consulting services, and certain resource-related consulting services. Adcore retains its previous assessment generally, the current year will feature the prevailing lower market activity. Therefore, Adcore will intensify measures to reduce its ongoing costs with the intention of achieving positive earnings, allowing for the adverse market conditions and general price pressure. Highlights in the first quarter Adcore acquired a compact consulting practice, with a number of very senior consultants, who all have experience of Adcore s business. The purchase price comprises a cash minority, and 5 per cent of the stock of Adcore Consulting. The transaction was consummated effective 1 April. Johan Wieslander, the former COO and co-founder of Connecta, was appointed as Adcore s COO. Adcore recruited a handful of experienced consultants, mainly within Enterprise Applications and Program Management. All matters relating to the divestiture of the majority holding of Adcore Stockholm AB (the former Connecta AB) on 6 December were completed in the quarter, generating a SEK 148 m positive effect on the parent company Income Statement, and SEK 29 m net at the consolidated level. Subsequent to the divestiture, Adcore cancelled its compulsory redemption process. Adcore made an offering to the remaining minority shareholders in March April, and as of 12 April 2002, had acquired 50% of the outstanding stock for SEK 25 per share. Efforts to resolve outstanding disputes have been successful, with thereby, commitments fulfilled and provisioning dissolved unexpectedly early. Liabilities and provisions reduced by a total of SEK 96 m since 1 January, with provisions reducing from SEK 81 to 41 m. Shareholders equity expanded by SEK 34.4 m, with an improved equity ratio resulting. Deficits from previous years and corporate divestitures have generated tax deductible losses of several billion Swedish kronor, expected in part to be utilised in Adcore s operations. Sales and profit Sales Quarterly net sales were SEK m, down 18.1% quarter on quarter, a reduction essentially due to operations now being more compact with a lower consultant headcount, reduced utilisation, and to some extent, lower pricing Q1 Q4 Q3 Q2 Q1 Sales, SEK m Sales per consultant, rolling, SEK 000 1,194 1,304 1,377 1,297 1,315 Sales per consultant, SEK

3 Rolling 12 month average billing per consultant amounted to SEK 1.2 m for the quarter, mainly due to lower billing rates during Q1. The first-quarter billing rate was 58%, against 65% in the final quarter of. Customers/order bookings As of 31 March 2002, Adcore s order backlog was SEK 98 m, equivalent to just over two months sales. Adcore retained preferred supplier status from Ericsson a major success considering that Ericsson has been one of Adcore s prime clients for several years. In Q1, the Swedish National Pharmacy Corporation, Ericsson, ICA, Sony Ericsson and the Confederation of Swedish Enterprise were Adcore s five biggest clients, representing a total of 46% of Adcore s sales in the first three months of the year. Adcore secured new assignments in the first quarter from clients including Birka Energi, Compaq, Cramo, Folksam, Green Cargo, ICA, Nordea IT, Sony Ericsson and Tibnor. Profit Consolidated quarterly profit after financial items increased by SEK 29 m as a consequence of the divestiture of Adcore Stockholm AB. Profit for the period was SEK 34.2 m Adcore pro forma, SEK m Q1 Q4 Q3 Q2 Q1 Profit before goodwill and items affecting comparability Of which consulting business Profit before goodwill and items affecting comparability for the consulting business was SEK 1.1 (16.4) m in Q1, with quarter-on-quarter profit gains of nearly SEK 2 m, the consequence of lower costs. The consolidated net financial position for the first quarter was SEK -1.3 (-0.9) m. Earnings after tax were SEK 34.2 (-456.8) m. Cash flow and financial position Cash flow for the period was SEK (-36.3) m. No investments were made in the first quarter. The measures taken regarding the resolution of disputes and balance sheet rationalisation resulted in an SEK 96 m reduction in debt and shareholders equity rising by SEK 34.4 m. One additional result is Adcore s equity ratio improving, amounting to 39% at the end of the period up 12 percentage points since 1 January. After goodwill, the equity ratio was 35%. At the end of the period, accounts receivable were SEK 97.9 m, down SEK 5.9 m on 1 January; no customer losses arose in the quarter. The closing balance of liquid funds was SEK 41.6 m, down by SEK 36.5 m since 1 January. The primary reason for this reduction is restructuring and reduction of the corporation s debt. SEK 7 m of un-utilised credit facilities are additional to existing liquidity. The liquidity situation is not satisfying and Adcore s management is pursuing various alternatives to achieve a necessary consolidation of the liquidity ahead of the summer months. 3

4 Human resources Staff headcount was 518 (779) at the end of the period; the average number in the period was 513 (788). The discrepancy with the previous year is entirely dependent on the planned downsizing of operations. Of total employee headcount at the end of the period, 81% comprised billing consultants. personnel turnover was 7% in the period, excluding terminations initiated by Adcore. Parent company The parent company employs the CEO and two staff; first-quarter net profit amounted to SEK m, with these earnings almost entirely due to the divestiture of Adcore Stockholm AB in December, definitively accounted in the first-quarter Otherwise, the revaluation and dissolution of reserves exerted a positive impact on parent company earnings. Accounting principles The accounting principles remain unchanged in the period compared to the most recent annual financial statement. Forthcoming reports January - June January - September 22 August 6 November Ole Oftedal Chief Executive Officer Stockholm, Sweden, 25 April 2002 This interim report has not been reviewed by Adcore s auditors. 4

5 Summary consolidated income statement, SEK m /02 April-Mar Jan-Dec Net sales ,062.4 Operating costs ,257.7 Personnel costs Depreciation Other external costs Items affecting comparability Operating profit before goodwill amortisation Goodwill amortisation Goodwill write-downs , ,299.3 Operating profit , ,125.7 Financial income and expenses Profit after financial items , ,122.4 Tax Deferred tax Net profit , ,198.3 Earnings per share, SEK After full dilution, SEK No. of shares at end of period, thousands 575,672 No. of shares after dilution, thousands 592,400 Ave. no. of shares, thousands 235,590 Ave. no. of shares after dilution, thousands 249,641 Key figures /02 April-Mar Jan-Dec Operating margin before goodwill amortisation and items affecting comparability, % Operating margin, % 31.6 neg neg neg Return on equity, % 24.1 neg neg neg Employee headcount at the end of the period 518 1, Employee headcount, average 513 1, ,361 Sales per employee, 12 months, SEK Sales per consultant, 12 months, SEK 000 1,117 1,110 1,117 1,104 Billing rate, % Net debt (-)/financial assets (+), SEK m Equity ratio, % Equity ratio exc. goodwill, %

6 Summary consolidated balance sheet, SEK m 31 Mar Mar Dec ASSETS Fixed assets Patents, licenses, rights Goodwill , Total intangible fixed assets , Tangible fixed assets Financial fixed assets Total fixed assets , Current assets Accounts receivable Other receivables Pre-paid costs and accrued income Total current receivables Liquid funds Total current assets TOTAL ASSETS , LIABILITIES AND SHAREHOLDERS EQUITY Shareholders equity , Provisions Long-term liabilities Current liabilities Accounts payable Other current liabilities Accrued costs and deferred income Total current liabilities TOTAL LIABILITIES AND SHAREHOLDERS EQUITY , Liabilities Of which interest bearing Of which non interest bearing Change in shareholders equity Share capital Restricted Non-restricted Total reserves equity Opening balance, 1 Jan , , Net profit Other, net Closing balance, 31 Mar , , Cash flow statement, SEK m 2002 Jan-Dec Ongoing operations Operating profit, in cash terms Financial income and expenses Income tax paid Cash flow from ongoing operations before change 6

7 in working capital Change in working capital Accounts receivable Current receivables Current liabilities Total change in working capital Cash flow from ongoing operations Investment activity Investments in goodwill, supplementary purchase price Acquisitions of subsidiaries and operations New issues coincident with acquisitions Sales of subsidiaries Acquisitions of intangible fixed assets Acquisitions of tangible fixed assets Cash flow from investment activity Financing activity New issue Change in long-term liabilities Change in long-term receivables Change in current liabilities Change in current receivables Options premiums received Cash flow from financing activity Cash flow for the period Liquid funds, opening balance Liquid funds, closing balance

8 Quarterly data, SEK m 2002 Q1 Q4 Q3 Q2 Q1 Net sales Operating costs Items affecting comparability , Profit before goodwill amortisation , Goodwill amortisation Goodwill write-downs Operating profit , Financial income and expenses Profit after financial items , Tax Net profit , Operating margin, % Neg neg neg Cash flow from operations No. of employees, end of period ,595 1,948 Key figures Adcore pro forma, SEK m 2002 Q1 Q4 Q3 Q2 Q1 Full yr. Net sales Profit before goodwill and items affecting comparability Operating margin, % No. of employees, closing balance No. of employees, average Sales per consultant,, SEK 000 1,194 1,304 1,377 1,297 1,315 1,322 8