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AB Ångpanneföreningen (publ) Interim Report January - June 2001

Demand for the consulting services offered by the ÅF Group has remained good throughout the second quarter of 2001 with capacity utilisation running close to 72 percent. During the first six months of 2001 capacity utilisation was 71 (68) percent. The first indications of a general downturn in the market have been noted in the company's dealings with the telecommunications sector, but, given the ÅF Group's status as a "preferred supplier" to Ericsson, this slackening demand is expected to be of a temporary character. The framework agreement that the company has signed with Ericsson means that over the next few years the ÅF Group will be well placed to take further shares of the market.

Of the Group's six business areas, all except for Software, Electronics & Mechanical Engineering reported substantial improvements on their margins from the corresponding period in 2000. Inspection & Testing was able to report its first half-year of profits since it was established as a business area. The balance between supply and demand in this area is now more favourable than before and capacity utilisation for the period was 65 (58) percent. The trend in rising profits for Software, Electronics & Mechanical Engineering has stalled as a result of falling demand from the telecom industry, but business areas working in the field of installations have continued to report good operating margins.

The Group's Swedish-based operations serving plant and process industries showed an improvement, and the companies in France, Finland and the UK also reported good results and good levels of capacity utilisation.

During the reporting period certain acquisitions were made with regard to shareholdings in companies outside Sweden. At the beginning of the year the Group acquired a 20 percent share in the Finnish consulting company CTS Engineering, with an option to subsequently increase ownership to 33 percent. CTS has 250 employees. The Group also increased its interest in the French company Chleq Froté from 49 to 66 percent, thereby conferring subsidiary status on the company and incorporating its results into the consolidated accounts. CTS and Chleq Froté are consulting companies that work mostly with the pulp and paper industry. The ÅF Group's shareholding has risen too in the Danish company Hansen & Henneberg, from 25 to 49 percent. Hansen & Henneberg has around 60 employees and works with installation consulting services in Electrical Engineering & Instrumentation.

Since the end of the reporting period two further acquisitions have been made. The management consultants Graphium Consult and the IT consulting company Arjano Data will add extra strength to the ÅF Group's resources within the areas of Education & Management and Software, Electronics & Mechanical Engineering respectively. Together these two companies employ around 25 people and have a turnover of approximately SEK 50 million a year.

Group profit after net financial items and proportions of associated companies' profits amounted to SEK 59 million, compared to a figure for the corresponding period in 2000 of SEK 27 million excluding premium refunds from SPP pensions insurance. This gives an operating margin of 6.5 (4.3) percent and a profit margin of 5.9 (3.1) percent. These profits are charged with unrealised losses in the share portfolio of SEK 2.0 million, and have also been influenced by a bonus to ÅF Group staff calculated at SEK 7 (1) million. Return on equity was 14.9 (10.1) percent. When comparing the quarterly results, it is important to note that the second quarter was four working days shorter than the first.

Sales amounted to SEK 1,002 (849) million, with order stock remaining at a level more or less identical to that in the corresponding period last year, namely SEK 464 (468) million. The number of employees (calculated as full-time equivalents) during the period was 2,433 (2,215) including those in associated companies, or 2,157 (2,069) excluding those in associated companies. The increase in staff was attributable chiefly to the CTS acquisition.

Parent company sales totalled SEK 52 (52) million, and the result after net financial items was SEK -6.9 (-0.6) million.

The ÅF Group's net worth, after a 20 percent standard tax deduction on the estimated surplus value of property was SEK 117 (109) per share. Adjusted equity ratio was 45 (43) percent.

Last year ÅF Group employees were given the opportunity to subscribe to a convertible bond loan, which may be converted to shares in 2004-2005. More than 700 people made use of this offer. In accordance with the conditions of this offer, the conversion rate was re-calculated in June 2001 and revised from SEK 171.00 to SEK 162.70 as the shareholders' dividend for 2000 approved by the Annual General Meeting exceeded an agreed level.

The profits generated by the Group's consulting businesses for the first six months of 2001 were more than double those in the corresponding period for 2000, totalling SEK 70 (33) million. Capacity utilisation level rose to 73 (69) percent and sales increased by 18 percent to SEK 1,069 (908) million. Five percentage points of this rise were attributable to the incorporation of Chleq Froté into the Group's consolidated accounts. If the performance of the French company is excluded, sales rose by 13 percent.

Real Estate and Finance Administration

The Group's properties, 95 percent of which are offices, are used primarily by the Group's consulting businesses. The vacancy ratio at the end of the reporting period was 5 (5) percent. The Group currently owns 33,500 sq.m. of real estate. In an evaluation carried out by Fastighetsforum at the end of 2000 the market value of the Group's properties was assessed at SEK 469 (394) million. Book value was SEK 272 million.

Gross investments in machinery and equipment amounted to SEK 27 (23) million, excluding investments made via corporate acquisitions.

The Group's liquid assets totalled SEK 158 (92) million, with SEK 27 million of this figure being invested in Swedish and foreign shares. Interest-bearing liabilities and allocations totalled SEK 369 (357) million, bringing the Group's net borrowing to SEK 211 (265) million

The negative cash flow for the period of SEK -142 (+20) million is attributable partly to the payment of tax on the large premium refund from Alecta (formerly SPP), which was entered in the Group's accounts for last year, and partly to the SEK 75 million that was paid out as a shareholders' dividend during the second quarter.


Major change in ownership

Early in July 2001 Sweco AB acquired 751,700 B shares in AB Ångpanneföreningen from Traction AB. This corresponds to 13 percent of the capital and 8 percent of the shares. Prior to this SWECO owned no shares in AB Ångpanneföreningen. The acquisition was agreed at a price of SEK 180 per share.

Accounting and valuation principles

The principles and calculation methods used in this interim report remain unchanged from those used in the ÅF Group's most recent annual report.

Outlook for 2001 as a whole

Market conditions for all the ÅF Group's business areas with the exception of Software, Electronics & Mechanical Engineering are anticipated to be somewhat more favourable throughout the remainder of 2001 than they were in 2000. Notwithstanding a degree of uncertainty with regard both to the downturn in the telecom sector as well as to the state of the economy as a whole and the effect this may have on investment, we remain confident that the consolidated profit for the ÅF Group in 2001 will show a marked improvement on the result for 2000 excluding SPP refunds.

Stockholm, 9 August 2001
AB ÅNGPANNEFÖRENINGEN (publ)


Gunnar Grönkvist
Managing Director and CEO

For further information: <br>Gunnar Grönkvist, Managing Director and CEO, Tel. +46 (0)8-657 11 15 <br>Kaj Sandart, Director, Corporate Information, Tel. +46 (0)8-657 11 85 ÅF Group