Semcon: Good operating profit, but major one-off costs

Good operating profit, but major one-off costs · Sales for the year were SEK 1,614.1 million (1,500.5 m) meaning a sales rise of 7.6%. Sales for Q4 amounted to SEK 442.9 million (414.0 m) corresponding to a sales rise of 7%. · The operating profit (EBIT) for the year including one-off items was SEK 75.9 million (95.7 m), giving an operating margin of 4.7% (6.4). The figure for Q4 was SEK 9.2 m (37.8 m) respectively 2.1%. · One-off costs totalling SEK 29.2 million have been charged to the year's results. These items amounted to SEK 23.3 million for Q4. The operating profit, excluding these items, would be SEK 105.1 million for the full year. For Q4 the figure would be SEK 32.5 million. For 2006 the operating margin would have been 6.5 %, and for Q4 7.3%. · The profit after tax for the year was SEK 48.2 million (68.0 m). For Q4 it was SEK 2.1 million (25.1 m). · The EPS for the year was SEK 2.62 (3.91). For Q4 it was SEK 0.13 (1.44). Comments by CEO, Henrik Sund 2006 has been one of Semcon's more eventful years. The business has progressed successfully, but results have been affected by a number of one-off costs and depreciation. This means that the profit for 2006 fell short of 2005's. As the new CEO it is important to monitor the investments and business that aren't positively contributing so we can create a better foundation for the continued growth we've envisioned for ourselves. Semcon took further steps in 2006 towards the vision of being the leading international R&D and communications partner. This can be seen not least of all in the automotive sector where we have won some of our biggest projects ever in the face of stiff international competition. We are strongly focused in this area on meeting our customers' main requirements: being close to their development centres and having the capacity to take on major projects. We've started 2007 successfully through our new partnership agreement with Jaguar and Land Rover, which we won thanks to our extensive experience of the automotive industry and successful partnership with both Volvo Cars and Saab Automobile. We have taken over responsibility for developing aftermarket information. The business will be run at Semcon's recently opened premises in Kineton, England, close to Jaguar's and Land Rover's product development centres. Other successes in the automotive sector include the major development project in Germany. We have also started a joint venture with ESG (Elektroniksystem und Logistik GmbH) of Germany. We've also received our first assignment: to supply service instructions, repair schedules and illustrations for one of GM's future vehicle platforms. These deals are an example of success in the face of tough international competition. Semcon's telecom business has developed well, including in aftermarket information and through Semcon Project Management (SPM). SPM provides a wide range of services and training for project management and has the exclusive right to provide Ericsson's PROPS project model to customers around the world. On the other hand the aim for growth in embedded systems has been difficult to achieve, not least because of difficulties in recruiting the right people. Our interactive office Zooma by Semcon, which has seen strong growth in recent years has also been successful in telecom. Proof of this are the prizes received for the Ericsson Racing Team website and the mobile websites for the Volvo Ocean Race, and FIFA 2006 for the Canadian telephone operator Rogers during the World Cup. We saw clear signs of climate and environmental change in 2006, which has caused strong debate about environmental alternatives. In the global world we all live in this also has consequences for Semcon and our customers. For our part it has been reflected in the greater customer interest in energy and hydroelectric projects. Other areas in the industrial sector have also seen successes. We are seeing for example an increase in aerospace business, both from Saab AB in Linköping and Volvo Aero in Trollhättan. We made a pleasing breakthrough during the year in the Medical and LifeScience sector through Semcon's and Flexlink's joint venture, Compliant Logistics, which won a major international order. Our IT business has seen a year of strong sales growth. The performance was underpinned by the extension of the preferred supplier agreement with Ericsson, which also now includes our IS/IT services. Our jointly-owned company Zuite by Semcon started an SAP investment that quickly became a success, and was soon nominated as a Community Partner to SAP Svenska. Successes also include Zystems by Semcon, which received its first orders from the US, Norway and Finland. Zipper by Semcon was one of a very few firms chosen, together with Microsoft, to launch Windows Vista in November. Zipper has also begun to supply a new version of its successful FastTrack Mobile solution, for handling mail and calendars etc in mobile phones. Semcon's plans for the future remain fixed. We will grow and we will achieve this internationally and domestically. Major opportunities to grow faster with the help of acquisitions exist in 2007. Semcon is currently in the final phase of bidding for a major international consultancy firm. To sum up I can state that we have achieved a good operating profit despite a number of unforeseen events. Future prospects Semcon's aims and objectives will stay the same for the next year. We will continue to focus on profitable growth, internationalisation and increased efficiency. 2007 has started positively with the Jaguar and Land Rover partnership and a good assignment coverage rate. The competition is becoming more global and our internationalisation is a condition for continued success among our international customers mainly in the telecom and automotive sectors. We are continuing to develop and refine our range of product development, aftermarket and IT services, both in terms of greater project responsibility and partnership, and in other ways giving customers the opportunity of sharing our specialist skills. We expect the market's good economic climate to continue. Telephone conference Semcon's CEO Henrik Sund will host a telephone conference in English on Wednesday 7 February at 11 a.m. Journalists and financial analysts are invited to take part. You can enter the conference by connecting five minutes before the start on +46 8 8197595 and entering the following code: 911114#. A telephone conference in Swedish will take place at 10 a.m. on the same day. For more information, please contact: CEO Henrik Sund, tel + 46 (0)31 721 0305, mobile +46 (0)705 78 30 03 or deputy CFO Iréne Axelsson, tel + 46 (0)31 721 0905, mobile +46 (0)736 840 800. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://wpy.waymaker.net/client/waymaker1/f.aspx?id=374363&fn=wkr0001.pdf The full year-end report