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Press release

Press release

ÅF: Interim Report January-September 2003

ÅF Group improves earnings
despite the continued weak state of the economy
 
  • Net sales amounted to SEK 1,426 million
    (Jan-Sept 2002: SEK 1,364 million)
  • Profit after net financial items was SEK 35 million (compared to a loss of SEK 28 million during the corresponding period in 2002).
  • Earnings per share rose to SEK 4.58 (SEK -3.85)
  • Sale of ÅF-SIFU finalised during the third quarter
  •  
    A few words from the President, Jonas Wiström
     
    The market for technical consulting services has not improved after the summer vacation period. The widespread reluctance to make new investments persists among clients, and in the IT consulting sector the market remains overcrowded, with more consultants than assignments.
     
    At the same time we do not foresee the economy as a whole rallying during the remainder of 2003.
     
    The improvement in profits that the ÅF Group is able to report is the result of staff cut-backs and reductions in costs shared by the Group as a whole. Capacity utilisation has risen by close to 2 percentage points over the first three quarters, and since the beginning of the year we have improved efficiency and created an ÅF Group with a clearer, more distinctive profile. 
     
    Nevertheless, profitability has still to reach a satisfactory level.
     
    Notwithstanding the current harsh climate in the market the ÅF Group remains committed to improving profitability. Step by step the work of establishing a stronger commercial focus in our corporate culture and making better use of the size and structural capital of our organisation is producing results.
     
    The task of streamlining the Group's business by concentrating on core activities continues. The third quarter saw the sale of one of the Group's subsidiaries, the educational company ÅF-SIFU AB, proceed as planned. Parallel with this, preparations to sell large parts of the Group's portfolio of premises are also well in hand.
     
    Significant events during the third quarter
     
    The ÅF Group has sold one of its subsidiaries, the educational company ÅF-SIFU AB, to the Copenhagen-based Danish Technological Institute. The Institute has acquired all of the ÅF Group's shares in ÅF-SIFU, which represents a 75 percent stake in the company. Further information about the Danish Technological Institute can be found via its website www.teknologisk.dk
     
    The ÅF Group has acquired the operations of the Norwegian technical installation consultants Andresen & Jacobsen from Selmer Skanska of Norway. This business is estimated to generate sales equivalent to a figure of roughly SEK 10 million during the current financial year. Andresen & Jacobsen has been integrated into the ÅF Group's Norwegian operations, which, after this latest acquisition, now comprise a total of 55 employees based in Oslo, Moss, Alta and Bodö.
     
    The ÅF Group has acquired 60 percent of the outstanding shares in the Swedish energy consulting business, Göteborg Energi International (a subsidiary of Göteborg Energi), with an option to purchase the remainder of the shares in three years' time. Göteborg Energi International's invoiced sales for the current year are forecast to be slightly in excess of SEK 10 million.
     
    The ÅF Group has acquired SwedeRail from SJ, Green Cargo and EuroMaint. It is estimated that SwedeRail, an international consulting company specialised in creating efficient rail transport solutions, will invoice sales for SEK 26 million during 2003.
     
    Sales and earnings
     
    Net sales for the ÅF Group for the first nine months of the year amounted to SEK 1,426 million (the figure for the corresponding period in 2002 was SEK 1,364 million). Sales for the third quarter rose to SEK 430 (390) million.
     
    Operating profit for the first nine months was SEK 42 million (as opposed to a loss of SEK 13 million for the corresponding period in 2002), and the operating margin was 2.9 (- 0.9) percent. Operating profit for the third quarter was SEK 12.3 million (as opposed to a loss of SEK 29 million for the corresponding period in 2002), and the operating margin was 2.9 (-7.3) percent.
     
    The sale of ÅF-SIFU AB realised SEK 8 million. However, since ÅF-SIFU operations have reduced profits for the year by SEK 6 million, the net effect on the result was only SEK 2 million.
     
    Capacity utilisation for the first nine months was 68.3 (66.5) percent, with a third-quarter figure of 66.7 (65.8) percent.
     
    Group consolidated profit after net financial items totalled SEK 35 million for the first nine months (as opposed to a loss of SEK 28 million for the corresponding period in 2002). This yielded a profit margin of 2.5 (-2.1) percent. Group consolidated profit after net financial items for the third quarter alone was SEK 11 million (as opposed to a loss of SEK 37 million for the corresponding period in 2002).
     
    Earnings per share for the first nine months were SEK 4.58 (-3.85). EPS for the third quarter came to SEK 1.20 (-5.32).
     
    The current status in the Group's divisions
     
    Energy & Environment
     
    Third-quarter demand for the services of the Energy & Environment Division was relatively weak from staple industries. However, there has been a rise in demand from the nuclear power industry, with an increase in fact-finding assignments in the wake of large-scale power failures and blackouts both in Sweden and abroad. International business improved the result for all areas of operations within the division.
     
    Industry & Systems
     
    The market for industrial and IT consulting services remains bleak. Competition continues to be fierce with unrelenting pressure on prices, especially in and around the big cities. In order to further enhance its clarity and competitive appeal, the Industry & Systems Division has been reorganised during the third quarter, with the establishment in Sweden of three nationwide business areas: Automation, Product Development and Electric Power.
     
    Installations
     
    The Installations Division continues to feel the effects of a downturn in demand from the construction market, with the fall in the number of large projects making it difficult to establish any continuity in the order books. On the other hand, the weak demand within new construction business has been offset to some degree by an increase of assignments relating to rebuilds and renovations.
     
    Pulp & Paper
     
    The Pulp & Paper Division improved its result thanks to the closure of unprofitable units and a slight rise in demand for consulting services from the pulp and paper industry. Operations in France and Germany had a positive effect on the division's third-quarter earnings.
     
    New Markets
     
    ÅF-Data
    Despite what remains an austere market for business systems ÅF-Data improved its earnings thanks to a major additional order in the third quarter, an improvement in capacity utilisation and reductions in its costs.
    Matz Axelsson took up his position as the new Managing Director for ÅF-Data during the third quarter. He comes to the ÅF Group from the consulting company Prevas.
     
    ÅF-Infrateknik
    ÅF-Infrateknik experienced a temporary slackening in demand in the market for infrastructure-related investments, with relatively weak demand from the Swedish Armed Forces and the telecom sector. The market for investments in rail transport has, however, remained stable with signs even of a slightly more positive attitude towards investments.
     
    ÅF-Kontroll
    ÅF-Kontroll reported strong earnings for the third quarter, which is traditionally a good one for the company. Capacity utilisation was good for all areas of operations: Inspection, Testing and Certification. Internal rationalisation work also contributed to the increased earnings.
     
    Accounting principles
     
    This interim report has been compiled in accordance with recommendation RR20 (Interim Reports) issued by the Swedish Financial Accounting Standards Council. New recommendations came into effect at the beginning of 2003. These include RR22 (Presentation of Financial Statements) and RR 25 (Segment Reporting).
     
    Investments
     
    Gross investments in machines and equipment during the period January-September 2003 totalled SEK 18 (29) million.
     
    Cash flow and financial status
     
    The cash flow for the first nine months of 2003 was a negative one of
    SEK -44 (-153) million. This figure does, however, include SEK 23 million for the amortisation of loans, and a shareholders' dividend of SEK 11 million. Before these payments, the cash flow was SEK -10 (-118) million.
     
    The cash flow for the third quarter was a negative one of SEK -10 (+29) million, or SEK -1 (-71) before the amortisation of loans.
     
    The ÅF Group's liquid assets totalled SEK 25 (63) million at the end of the reporting period.
     
    Equity per share at the end of the reporting period was SEK 59, and the Group's equity/assets ratio was 34 percent. These figures compare with SEK 57 and 30 percent respectively at the beginning of the year. 
     
    Real Estate and Finance Administration
     
    The ÅF Group's Board of Directors and Senior Management Group have resolved to sell a majority of the Group's current portfolio of properties - seven premises in all.
     
    According to an evaluation of the Group's properties carried out by Forum Fastighetsekonomi AB, the market value of the real estate earmarked for sale totalled SEK 170 million at the end of 2002.
     
    For the time being at least, the buildings which currently house the ÅF Group's head office in Stockholm (approximately 10,700 square metres in size) will not be affected. These premises (officially known as the Härolden 44 building) were valued at SEK 240 million at the end of 2002.
     
    During the third quarter the ÅF Group sold its premises in Tyresö on the outskirts of Stockholm for SEK 12 million, on which there was a capital gain to pay of SEK 1 million.  
     
    ÅF shares
     
    At the end of the reporting period, ÅF "B" shares were valued at SEK 114 each. This corresponds to an appreciation in value of 24 percent since the start of the year. The Stockholm Stock Exchange's all-share index (Sax) has risen by 15 percent during the same period.
      
    Next reporting date
     
    The summary of the ÅF Group's Annual Report for the financial year 2003 will be presented on February 18, 2004.
     
     
    Stockholm, October 23, 2003
     
    AB Ångpanneföreningen (publ)
     
    Jonas Wiström
    President and CEO
     
     
    The full report including tables can be downloaded from the enclosed link.