PRESS RELEASE Observer AB is quoted on the Attract 40 section of Stockholmsbörsen s O-list and has approximately 25,000 shareholders.

Transcription

1 PRESS RELEASE Observer AB is quoted on the Attract 40 section of Stockholmsbörsen s O-list and has approximately 25,000 shareholders. Stockholm, August 5, 2004 Observer AB (publ) Interim report January June 2004 Strong development in North America and continued tough market conditions in the Nordic region The group s operating revenue amounted to SEK million (781.6). Exchange rate effects from the translation to Swedish kronor affected revenue negatively by SEK 22.4 million compared with the corresponding period of Organic growth in local currency was 1 percent. For the corresponding period 2003 the organic growth amounted to -5 percent. Operating profit before goodwill amortization and items affecting comparability, EBITA, amounted to SEK million (112.1). Exchange rate effects affected profit negatively by SEK 4.5 million compared with the year-on-year period. The operating margin was 12.4 percent (14.3). Profit per share after dilution, excluding goodwill amortization and items affecting comparability, amounted to SEK 0.85 (1.08). The loss after financial items amounted to SEK 3.6 million ( 10.6), and the net loss for the period was SEK 21.9 million ( 25.5). Operating cash flow amounted to SEK million (137.3). In April Observer acquired a radio and television monitoring company in California. In the process Observer continued its expansion in the US, where it now monitors all the largest broadcast media markets, the three most significant of which are New York, Chicago and Los Angeles. Comment by Observer CEO Robert Lundberg The second quarter is normally our weakest. As expected, the Nordic market remained tough, while growth and operating margins in North America still are strong. In Rest of Europe, growth was positive, although margins were weighed down by higher costs during the changeover to new digital technology in the UK. This technology has now been implemented and will make it possible to introduce a number of new services during the second half of the year. However, the technological shift is likely to cause expenses in our British operations to remain higher than normal during the third quarter. 1

2 Despite some positive signals in the Nordic market, we expect that it could take a while longer before we see a significant improvement. The new management in the Nordic region and Sweden is focused on increased sales activities and new client offerings. Market Spending restraint among clients still keeps pressure on prices in the Nordic market. The effects of increased PR and IR activity have not yet impacted Observer s revenue. The price of basic services for distribution of information (Contact) has declined due to the trend toward automated client solutions, although demand for various types of add-on services is rising. In the UK and Germany, demand has risen from large companies and organizations with advanced needs. Demand from the large number of PR firms has yet to pick up, however. North American clients have been positive to the introduction of new services and are increasingly demanding the combination of services Observer offers. The potential in the US market is high, and Observer is strengthening its market position. Long-term growth is driven by underlying trends such as globalization, growing information flows and rapid technological developments. The importance of analyzing media content, evaluating communication activities and monitoring the competition locally and internationally is growing, at the same time that the need to continuously improve and develop communications with important target groups is increasing as well. Revenue Operating revenue amounted to SEK million (781.6). Exchange rate effects from the translation to Swedish kronor affected revenue negatively by SEK 22.4 million compared with the previous year. Organic growth in local currencies was -1 percent. The Nordic market is still distinguished by spending restraint among our clients, and organic growth in the region was 12 percent. Rest of Europe achieved positive organic growth of 2 percent. In the UK, revenue from database services remained good, but the switch to digital technology has disrupted production and adversely affected revenue from media monitoring services. In Germany, Observer is gaining market share in an otherwise sluggish market. Despite that the election campaign prior to Canada s hastily called parliamentary election on June 28 affected the flow of business news in May-June, growth remained good in North America. The region reported organic growth of 12 percent. 2

3 Profit The group s operating profit before goodwill amortization and items affecting comparability amounted to SEK million (112.1). Exchange rate effects affected profit negatively by SEK 4.5 million year-to-year. The operating margin was 12.4 percent (14.3). Net financial income and expenses amounted to SEK 22.5 million ( 23.5). The loss after financial items was SEK 3.6 million (-10.6), and the net loss for the period was SEK 21.9 million (-25.5). The loss per share was SEK 0.31 ( 0.37). Profit per share after dilution, excluding goodwill amortization and items affecting comparability, amounted to SEK 0.85 (1.08). Financial position Shareholders equity amounted to SEK 1,791.3 million (1,784.2) at the end of the period, or SEK per share (26.25). Shareholders equity increased as a result of exchange rate effects of SEK 69.9 million. Investments during the period amounted to SEK 23.6 million (30.1). The debt/equity ratio was 43 percent (42), and the interest coverage ratio was 5.3. Operating cash flow amounted to SEK million (137.3), while cash flow from operating activities was SEK 98.9 million (88.4). The group s liquid assets amounted to SEK million at the end of the period. The total goodwill item on the balance sheet amounted to SEK 2,416.0 million (2,372.3). Due to a minor acquisition and exchange rate effects of SEK 93.1 million, goodwill rose during the period by SEK 20.2 million after amortization of SEK 81.4 million. On a regular basis, Observer valuates operations that together represent more than 90 percent of the group s total goodwill item. The most recent valuation confirms the book value. Acquisitions Observer has acquired California-based MediaClips. In the process Observer continued its expansion in broadcast monitoring services in the US, where it now monitors all the largest broadcast media markets, the three most significant of which are New York, Chicago and Los Angeles. MediaClips, with an annual turnover of approximately SEK 8 million, is consolidated in Observer s accounts from April 1,

4 Outlook We anticipate that our market in North America will remain strong. In the UK and to some extent in Germany, market conditions are expected to improve gradually, while a turnaround in the Nordic region may be delayed. The integration of services and offerings as well as high sales activity, together with further productivity improvements and an attention to costs, will ensure a good operating margin and strong cash flow moving forward. The long-term objectives of percent organic growth and an operating margin before goodwill amortization and items affecting comparability of 22 percent remain firm. Observer AB (publ) Stockholm, August 5, 2004 Robert Lundberg President and CEO 4

5 Observer Interim report January June 2004 CONSOLIDATED INCOME STATEMENT Jan-Jun Jan-Jun Apr-Jun Apr-Jun Jul-Jun Jan-Dec Operating revenue , ,544.1 Operating expenses , ,260.3 Depreciation/amortization, excl. goodwill amortization EBITA Amortization of goodwill Items affecting comparability Operating profit/loss Net financial income and expenses Profit/loss before tax Tax Net profit/loss for the period Profit/loss per share Jan-Jun Jan-Jun Apr-Jun Apr-Jun Jul-Jun Jan-Dec Amounts in SEK / Before dilution Excl. goodwill amortization and items affecting comparability 0,85 1, After dilution Excl. goodwill amortization and items affecting comparability 0,85 1, CONSOLIDATED BALANCE SHEET June 30 June 30 Dec 31 Amounts in SEK million Goodwill 2, , ,395.8 Other fixed assets Current receivables Tax assets Financial assets Total assets 3, , ,154.0 Equity 1, , ,774.8 Minority shares Current liabilities Tax liabilities Financial liabilities Total equity and liabilities 3, , ,154.0 Operating capital 2, , ,562.9 Operating capital excl. goodwill Interest-bearing net debt

6 CONSOLIDATED STATEMENT OF CASH FLOWS Jan-Jun Jan-Jun Apr-Jun Apr-Jun Jul-Jun Jan-Dec Operating activities Operating profit excl. items affecting comparability Amortization/depreciation ,7 Items affecting comparability Other non-cash items Reversal: Result from participations in associated co Net of interest and dividends Income tax paid Change in working capital Cash flow from operating activities Investing activities Business acquisitions Investments in other fixed assets Disposal of other fixed assets Increase/decrease in financial fixed assets Cash flow from investing activities Financing activities New share issues Increase/decrease in long-term financial liabilities Increase/decrease in current financial liabilities Dividend to shareholders Cash flow from financing activities Cash flow for the period Liquid assets at beginning of period Translation difference in liquid assets Liquid assets at end of period

7 KEY FINANCIAL HIGHLIGHTS FOR THE GROUP Jan-Jun Jan-Jun Apr-Jun Apr-Jun Jul-Jun Jan-Dec / Operating margin (EBITA margin) 12.4% 14.3% 10.0% 11.9% 13.5% 14.5% Return on equity -1% -1% Excl. goodwill amortization and items affecting comparability 7% 8% Debt/equity ratio 43% 42% 43% 42% 43% 43% Equity/assets ratio 56% 57% 56% 57% 56% 56% Interest coverage, multiple Excl. items affecting comparability, multiple Profit/loss per share before dilution, SEK Excl. goodwill amortization and items affecting comparability Profit/loss per share after dilution, SEK Excl. goodwill amortization and items affecting comparability Equity per share, SEK No. of shares at end of period, thousands 69,957 67,957 69,957 67,957 69,957 69,957 Avg. number of shares before dilution, thousands 69,957 67,957 69,957 67,957 69,072 68,078 Avg. number of shares after dilution, thousands 69,957 67,957 69,957 67,957 69,072 68,341 No. of employees at end of period 2,464 2,417 2,464 2,417 2,464 2,454 CONSOLIDATED SHAREHOLDERS EQUITY Share Restricted Nonrestricted Amounts in SEK million capital reserves reserves Total Opening balance, Jan. 1, , ,774.8 Dividend Transfers from restricted to non-restricted equity Translation difference for the period Net profit/loss for the period Closing balance, June 30, , ,

8 OPERATING REVENUE Jan-Jun Jan-Jun Apr-Jun Apr-Jun Jul-Jun Jan-Dec REGIONS Sweden Denmark Norway Finland Baltic states Total, Nordic & Baltic Germany UK Portugal Ireland Total, Rest of Europe USA Canada Total, North America Total, regions , ,567.6 Group eliminations Group , ,544.1 SERVICE AREAS Research/Contact (formerly Communication Tools) Monitor/Evaluate (formerly Media Intelligence) , ,188.1 Total, service areas , ,567.6 Group eliminations Group , ,544.1 EBITA Jan-Jun Jan-Jun Apr-Jun Apr-Jun Jul-Jun Jan-Dec REGIONS Nordic & Baltic Rest of Europe North America Total, regions Group eliminations Group SERVICE AREAS Research/Contact (formerly Communication Tools) Monitor/Evaluate (formerly Media Intelligence) Total, service areas Group eliminations Group

9 INCOME STATEMENTS BY REGION Jan-Jun Jan-Jun Apr-Jun Apr-Jun Jul-Jun Jan-Dec External revenue Nordic & Baltic Rest of Europe North America Other/eliminations Group , ,544.1 Intra-group revenue Nordic & Baltic Rest of Europe North America Other/eliminations Group Intra-segment revenue Nordic & Baltic Rest of Europe North America Other/eliminations Group TOTAL OPERATING REVENUE Nordic & Baltic Rest of Europe North America Other/eliminations Group , ,

10 INCOME STATEMENTS BY REGION cont. Jan-Jun Jan-Jun Apr-Jun Apr-Jun Jul-Jun Jan-Dec Operating expenses Nordic & Baltic Rest of Europe North America Other/eliminations Group , ,260.3 Depreciation/amortization, excl. goodwill amortization Nordic & Baltic Rest of Europe North America Other/eliminations Group EBITA Nordic & Baltic Rest of Europe North America Other/eliminations Group EBITA margin Nordic & Baltic 5.0% 13.3% 2.1% 10.4% 10.7% 14.7% Rest of Europe 14.8% 17.9% 10.5% 14.3% 14.5% 16.0% North America 23.3% 19.2% 23.2% 18.0% 22.2% 20.1% Other/eliminations Group 12.4% 14.3% 10.0% 11.9% 13.5% 14.5% 10

11 OPERATING CAPITAL BY REGION June 30 June 30 Dec 31 Amounts in SEK million Assets Operating assets Nordic & Baltic Rest of Europe North America Other/eliminations Group Intra-group receivables Nordic & Baltic Rest of Europe North America Other/eliminations Group Goodwill Nordic & Baltic Rest of Europe 1, , ,244.5 North America 1, ,021.5 Other/eliminations Group 2, , ,395.8 Financial assets and tax assets Nordic & Baltic Rest of Europe North America Other/eliminations Group TOTAL ASSETS Nordic & Baltic Rest of Europe 1, , ,472.8 North America 1, , ,169.7 Other/eliminations Group 3, , ,

12 OPERATING CAPITAL BY REGION June 30 June 30 Dec 31 Amounts in SEK million Liabilities and operating capital Current liabilities Nordic & Baltic Rest of Europe North America Other/eliminations Group Intra-group liabilities Nordic & Baltic Rest of Europe North America Other/eliminations Group Financial liabilities & tax liabilities Nordic & Baltic Rest of Europe North America Other/eliminations 1, , ,013.3 Group 1, , ,013.3 TOTAL LIABILITIES Nordic & Baltic Rest of Europe North America Other/eliminations 1, , ,039.3 Group 1, , ,379.2 OPERATING CAPITAL Nordic & Baltic Rest of Europe 1, , ,369.2 North America 1, ,027.7 Other/eliminations Group 2, , ,562.9 OPERATING CAPITAL EXCL. GOODWILL Nordic & Baltic Rest of Europe North America Other/eliminations Group

13 OPERATING CASH FLOW BY REGION Jan-Jun Jan-Jun Apr-Jun Apr-Jun Jul-Jun Jan-Dec EBITA Nordic & Baltic Rest of Europe North America Other/eliminations Group Depreciation/amortization, excl. goodwill amortization Nordic & Baltic Rest of Europe North America Other/eliminations Group Investments Nordic & Baltic Rest of Europe North America Other/eliminations Group Disposals Nordic & Baltic Rest of Europe North America Other/eliminations Group

14 OPERATING CASH FLOW BY REGION cont. Jan-Jun Jan-Jun Apr-Jun Apr-Jun Jul-Jun Jan-Dec Other non-cash items/result from participations in associated cos. Nordic & Baltic Rest of Europe North America Other/eliminations Group Change in working capital Nordic & Baltic Rest of Europe North America Other/eliminations Group OPERATING CASH FLOW Nordic & Baltic Rest of Europe North America Other/eliminations Group

15 DISTRIBUTION BY SERVICE AREA Amounts in SEK million June 30 June 30 Dec 31 Operating assets Research/Contact (formerly Communication Tools) Monitor/Evaluate (formerly Media Intelligence) Other Group DISTRIBUTION BY SERVICE AREA Jan-Jun Jan-Jun Apr-Jun Apr-Jun Jul-Jun Jan-Dec External revenue Research/Contact (formerly Communication Tools) Monitor/Evaluate (formerly Media Intelligence) , ,165.5 Other Group , ,544.1 Investments Research/Contact (formerly Communication Tools) Monitor/Evaluate (formerly Media Intelligence) Other Group Accounting principles Observer applies the recommendations of the Swedish Financial Accounting Standards Council. From January 1, 2004 a new recommendation is applied in the consolidated accounts, RR 29, Employee benefits. The introduction of this recommendation has not had an effect on earnings. 15

16 Observer AB Observer is active in Business and Communication Intelligence and offers media monitoring and communication evaluation services. Clients, who are primarily in IR and PR, are also offered tools and channels for distribution and publication of business information. Observer has around 2,400 employees and a turnover of slightly over SEK 1.5 billion in The company operates in the US, UK, Sweden, Canada, Germany, Norway, Finland, Denmark, Portugal, Ireland, Estonia, Latvia and Lithuania. Financial report schedule: October 29, 2004 Interim report January September 2004 For further information, please contact: Anders Lundmark, Chief Financial Officer, telephone: , , e- mail: anders.lundmark@observergroup.com Per Blixt, Senior VP Corporate Communications/Investor Relations, telephone: , , e- mail: per.blixt@observergroup.com Robert Lundberg, President and CEO, telephone: , robert.lundberg@observergroup.com Further comments on the report will be provided at a telephone conference with Observer AB s management at 11:30 a.m. (CET) on August 5. To participate, please phone +44 (0) Use code: Observer Observer AB Linnégatan 87, SE Stockholm, Sweden. Telephone , Reg. no