GOTEBORG, Sweden, April 24, 2002 (PRIMEZONE) -- Semcon: Implemented cost-cutting scheme improved profits.
-- Group sales rose by 4% to SEK 298.2 million (286.8 m) -- The operating profit (EBIT) reached SEK 10.8 million (30.0 m) -- Cash flow improved by SEK 6 million compared to last year
Comments by CEO Hans Johansson
"The market developed as expected during Q1. We see no signs at the moment that the market will change during the current quarter. Demand in the Stockholm region continues to be weak due to the telecom sector's performance. Semcon did however succeed in rapidly implementing three partnership agreements with Ericsson in Copenhagen, Alborg and Karlstad during Q1. In total this means an extra thirty employees in the development of applications for mobile phones and twenty or so experts working with the PROPS project management tool. Through these deals we have ensured business with Ericsson that will exceed SEK 100 million over the coming two years."
"A number of primary supplier agreements have been signed with major customers. These include the Volvo Car Corporation, Ericsson Mobile Platform, Bombardier and Pharmacia, which shows that customers find our range attractive. Customers are increasing their focus on core activities and reducing costs, which is why we see significant possibilities for outsourcing and structural business where we currently have a strong position."
"The rationalization scheme, started in Q4 2001 was effectively completed during the period. This has led to all our business areas reporting positive results. We will continue to adapt to the prevailing market situation, which means recruiting on those businesses showing positive trends and adapting within weaker businesses."
"During the first half of 2002, we judge that the market as a whole will continue to be bleak. Semcon's assessment for the year remains unchanged, i.e. that successful new business coupled with the restructuring measures carried out, will lead to improved profitability."
Business activities
Sales rose by 4% to SEK 298.2 million (286.8 m). Growth was mainly created in Western Sweden and Denmark. The operating profit before goodwill depreciation was SEK 13.4-million (31.6 m), representing a profit margin of 4.5% (11.0). The operating profit after goodwill depreciation was SEK 10.8 million (30.0 m), representing a profit margin of 3.6% (10.4). The reason for lower profits is the weaker demand on certain markets compared to last year, plus investments in a number of new activities. The office in Sundsvall was closed down, as a result of our decision to leave the markets where we lack the conditions to operate with long-term profitability. This was also a step towards focusing on Semcon's prioritized industries.
Business areas Sales Growth Operating Operating margin
(SEK m) (%) profit (%)
(SEK m)
2002 2001 2002- 2001 2002 2001
03-31 03-31 03-31 03-31 03-31 03-31
Industrial 151.8 154.4 -1.7 7.8 17.5 5.1 11.3
Design
e-Design 112.2 110.7 +1.4 2.2 13.3 2.0 12.0
Technology 34.2 21.7 +57.6 0.8 -0.8 2.3 -3.9
Management
TOTAL 298.2 286.8 +4 10.8 30.0 3.6 10.4
INDUSTRIAL DESIGN
Industrial Design focuses on the development and design of products and production systems. Our strong connection to industrial design unites people and technology in a unique way.
Sales amounted to SEK 151.8 million (154.4 m). The operating profit was SEK 7.8 million (17.5 m). The business area saw stable growth and good demand mainly in Vehicle, Medical & LifeScience and Industry. Results were however affected by the downturn in the Telecom sector and prices coming under pressure from our customers.
Semcon was chosen as the Long Term Preferred Supplier for the Volvo Car Corporation (Nasdaq:VOLVY), developed concept cars for Saab Automobile and expanded its complete solutions for Scania (NYSE:SVCA) and Bombardier. Major projects are underway in Medical & LifeScience for Novo Nordisk, Gambro andPharmadule/Emtunga.
E-DESIGN
e-Design develops embedded IT systems for products and production systems, interactive web solutions and web design, systems solutions and also supplies IT products.
Sales amounted to SEK 112.2 million (110.7 m). The operating profit was SEK 2.2 million (13.3 m). Growth came from partnership agreements with Ericsson in Copenhagen and Alborg plus Semcon Informatic. Results were affected by the continued poor demand from the Telecom sector. Recovery has however been seen compared to the Q4's results last year. The business area has sharpened its focus on Medical & LifeScience with customers such as Pharmacia and AstraZeneca.
Thirty or so highly qualified Ericsson employees with competence in 2.5 and 3G for developing applications for mobile phone started at Semcon Denmark in the middle of the period. Other work includes project management and process services for transfer projects in France, Germany and Croatia, where the Ericsson Group is strengthening its future development centers.
The Telematics business area was underpinned by the takeover of Integritech of Goteborg. Integritech operates in electronic verification for the auto industry.
TECHNOLOGY MANAGEMENT
Technology Management improves customers' results by developing strategies for processes, IT, people and technology. The business area's work with strategic issues and transforming projects at senior management level creates opportunities for comprehensive undertakings where the complete range of Semcon's skills can be exploited.
Sales climbed 57.6% to SEK 34.2 million (21.7 m). The operating profit was SEK 0.8 million (-0.8 m). The business area's positive growth mainly came from the outsourcing agreement with Ericsson for PROPS, management activities in Goteborg and Zipper.
The PROPS outsourcing agreement means that Semcon has taken on twenty or so highly qualified Ericsson Project Management Institute's employees from former activities in Karlstad. These individuals are experienced consultants and project management instructors, who have been part of designing the PROPS model and Ericsson's websites for project management and networks. The agreement is unique, and will initially run for three years, meaning that Semcon will supply and develop training and consultancy services in Ericsson's PROPS project management model, both for Ericsson and external customers. An example of external customers during the period is BT Industries.
Zipper by Semcon
Growth continues to be good and the earnings trend stable, despite the company operating on a weak market. More effective administration is the key to reducing IT costs. An example is the current scheme for building SonyEricsson's IT infrastructure. Examples of other customers during the period are ESAB, SEB and AGA.
Parent company
Semcon AB is the parent company in the Group and responsible for company-wide issues such as strategy, information and marketing. Sales totaled SEK 3.2 million (3.1 m). The profit after depreciation was SEK 0.4 million (-0.9 m). The parent company's liquidity was SEK 44.5 million (-47.2 m). The company's investments in stock totaled SEK 0 million (0 m).
Personnel and organization
The total headcount was 1,596 (1,575), the average number of employees was 1,614 (1,583).
Semcon showed itself to be one of the fastest climbing companies in the "Foretagsbarometer" (Company barometer) technology ranking as an attractive employer. The research company, Universum carries out this study each year and Semcon was at 47, 22 places better than last year.
At Semcon's AGM it was decided that a staff options scheme should be introduced. The price per option was set at SEK 7. Each option gives the holder the right to subscribe for new shares at a price of SEK 63 between 1 June and 31 August 2005. Full utilization will involve 18,091,021 shares and the dilution effect will be 3.8 per cent.
Financial items and investments
The Group's total investments, mainly in computer hardware and software, totaled SEK 2.8 million (3.4 m). At the end of the period the equity/assets ratio stood at 29.7% (36.4). Liquid funds at the period's end amounted to SEK 2.3 million (1.8 m). Of a total SEK 100 million in bank overdraft facilities, SEK 39.9 million (44.6) was utilized. Investments in subsidiaries' shares amounted to SEK 91 thousand (0.2 m).
Outlook
Despite a weak market Semcon's long-term strategy remains unchanged. This means investing in the growth industries, Medical & LifeScience, Vehicle, Telecom and Industry. The focus is still on R&D and specialist areas such as embedded design, mobile internet, industrial design and interactive information. Growth will be organic and via outsourcing, where we take on staff and business from customers in prioritized industries, plus acquisitions of complementary specialist companies.
During the first half of 2002, we judge that the market as a whole will continue to be bleak. Semcon's assessment for the year remains unchanged, i.e. that successful new business coupled with the restructuring measures carried out, will lead to improved profitability.
Further information
All figures are based on the same accounting principles and calculation periods used in the previous financial year. This quarterly report has been produced in accordance with recommendations and statements by the Swedish Financial Accounting Standards Council.
The Q2 report will be published on August 21.
The full text report with financial tables can be found at the following URLs: www.waymaker.net/bitonline/2002/04/24/20020424BIT00400/wkr0001.doc
www.waymaker.net/bitonline/2002/04/24/20020424BIT00400/wkr0002.pdf
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