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AB Ångpanneföreningen (publ): Interim Report January-June 2003

ÅF Group continues to improves earnings despite the generally sluggish state of the economy
 
  • Net sales rose to SEK 996 million (Jan-June 2002: SEK 974 million)
  •  Profit after net financial items rose to SEK 24 (9) million
  •  Earnings per share rose to SEK 3.37 (1.47)
  • Capacity utilisation totalled 69% (67%)
  •  
    A few words from the President, Jonas Wiström
     
    The end of the second quarter of 2003 has seen the completion of our plans to restructure the ÅF Group, which have resulted in almost 200 employees leaving the company through redundancies and early retirement.
     
    This reduction in staffing levels has played a large part in raising the Group's capacity utilisation rate by more than two percentage points during the first six months of the year, enabling the ÅF Group to record an overall improvement in earnings in what remains a fairly difficult market.
     
    Profitability has still to reach a satisfactory level, but the completion of a package of restructuring measures means that the prospects now look more favourable for the ÅF Group to improve its earnings.
     
    There are one or two bright spots in key segments of the market, but it is still too early to talk of any real reversal of the trends, and the ÅF Group does not envisage any improvement in the situation in the market during the remainder of 2003.
     
    As a result of the resolve to streamline the ÅF Group's business by concentrating on core activities, a decision was made during the second quarter to commence the process of selling one of the Group's subsidiaries (the educational company, ÅF-SIFU AB) and large portions of the Group's portfolio of premises.
     
     
    Significant events during the second quarter
    The ÅF Group has signed a new framework agreement with Ericsson relating to consulting services in Research & Development, IS/IT and Technical Documentation.
     
    The ÅF Group has been commissioned with the task of upgrading and expanding the district heating grid in the centre of the Serbian capital, Belgrade. The grid is currently operated by the municipally owned company, Beogradske Elektrane. Consulting work will be funded by the Swedish International Development Cooperation Agency (SIDA). The total value of the contract amounts to approximately SEK 28 million, of which the ÅF Group's share will equate to around 25 percent. 
     
    The ÅF Group has been awarded a contract, together with the UK's Mott McDonald, to rehabilitate and develop the district heating network in the town of Surgut in Russia. For the ÅF Group the assignment is worth SEK 5-6 million.
     
    Sales and earnings
    Net sales for the ÅF Group for the first half of the year amounted to SEK 996 million (figure for the corresponding period in 2002: SEK 974 million). Sales for the second quarter were SEK 497 (495) million.
     
    Operating profit for the first six months was SEK 30 (16) million and the operating margin rose to 3.0 (1.6) percent. Operating profit for the second quarter was SEK 16 (7) million, with the operating margin rising to 3.2 (1.3) percent.
     
    Capacity utilisation increased to 69 (67) percent, with a figure of 69 (68) percent for the second quarter.
     
    Group consolidated profit after net financial items totalled SEK 24 (9) million for the first six months, yielding a profit margin of 2.5 (0.9) percent. Group consolidated profit for the second quarter totalled SEK 13 (2) million after net financial items.
     
    Earnings per share were SEK 3.37 (1.47). For the second quarter EPS was SEK 1.88 (0.53).
     
     
    The current status in the Group's divisions
     
    Energy & Environment
     
    While incoming orders for consulting services within the energy sector have been good, demand for environmentally related assignments has been somewhat slacker. Even so, the Energy & Environment Division has notched up a number of international successes so far this year, particularly in the second quarter, with its involvement in major district heating projects in Russia and Serbia, and an environmental education contract in Bolivia. These successes are, in part, founded on the strategic decision to limit the offer and focus sales efforts on a number of carefully selected countries within the area of development aid.
     
    Industry & Systems
     
    Following the dramatic contraction in the market for industrial and IT consulting services in 2002, demand has remained relatively weak. The market continues to demonstrate signs of overcrowding, with a certain amount of pressure on prices and expectations among customers of short lead times, especially in and around the big cities. Demand for the services of Industry & Systems was good, however, in central Sweden. Another bright spot on the horizon is the increasing interest for assignments relating to product development and production development, which are well suited to the portfolio of skills that the Group can offer in Industry & Systems.
     
    Installations
     
    The combined effects of a downturn for the Swedish construction market during the first six months of the year and increased competition have exerted a certain amount of pressure on prices within the Installations segment. On the other hand, this has, to some extent, been offset by increased demand for rebuilds, renovations and property maintenance projects. At the same time, a rise in demand for consulting services in conjunction with energy efficiency projects has also had a positive impact on the market as a whole.
     
    Pulp & Paper
     
    Demand for consulting services from the pulp and paper industry in Scandinavia showed signs of a slight upturn during the first half of 2003. This, compounded by the positive effect of certain internal measures carried out within the division, explains the improved result. Earnings were affected negatively by the Group's French subsidiary, Chleq Froté, but the German subsidiary, on the other hand, made a positive contribution to the division's overall result.
     
     
     
    New Markets
     
    - ÅF-Data
     
    Despite the relatively austere market for business systems during the first six months of the year, ÅF-Data recorded a substantial improved in earnings, not least as a result of the internal cost-cutting programme that has been implemented within the company.
     
    - ÅF-Infrateknik
     
    Incoming orders for ÅF-Infrateknik have been good during the first half, albeit with signs of a certain slackening off in the second quarter that saw one Traffic Technology project put on ice. Since the end of the reporting period the AF Group has taken over the operations of SwedeRail, which was created in 1981 as an international consultancy to provide efficient rail solutions.
     
    - ÅF-Kontroll
     
    ÅF-Kontroll recorded a substantial improvement in sales and profits in the first six months of the 2003, with a good level of demand for inspection services and a very good level of demand for testing.
     
    - ÅF-SIFU
     
    Dramatically reduced costs and somewhat greater stability in the education market have combined to help ÅF-SIFU post a much improved first-half result compared with the figures the company reported for January-June 2002.
     
    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 first six months of the year totalled SEK 17 (21) million.

     
    Cash flow and financial status
     
    The cash flow for the first half of 2003 was a negative one of SEK -34 (-124) million. This figure does, however, include SEK 15 (3) million for the amortisation of a loan, and a shareholders' dividend of SEK 11 (74) million.
     
    The cash flow for the second quarter, prior to the issue of the shareholders' dividend, was positive.
     
    The ÅF Group's liquid assets totalled SEK 34 (68) million.
     
    Equity per share at the end of the reporting period was SEK 58, and the Group's equity/assets ratio was 31 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 this real estate 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.
     
     
    Parent company
     
    Parent company sales totalled SEK 48 (48) million, yielding a profit after net financial items of SEK 69 (6) million. Excluding the effect of the utilisation of the restructuring reserve, the profit after net financial items as per 30 June 2003 was SEK 5 million. 
     
    ÅF shares
     
    At the end of the reporting period, ÅF "B" shares were valued at SEK 90 each, which corresponds to a fall of 2 percent since the start of the year. The Stockholm Stock Exchange's all-share index (Sax) rose by 7 percent during the same period.
     
     
     
    Capital Market day
     
    On September 30, from 14.00 (2 p.m.) onwards, the ÅF Group will be hosting the ÅF Group Capital Market Day at its head office on Fleminggatan in central Stockholm. For more detailed information and applications, please contact the ÅF Group's Director of Corporate Information, Viktor Svensson.
     
    Next reporting date
     
    The ÅF Group's interim report for the period January-September will be presented on October 23.
     
     
    Stockholm, August 20, 2003
     
    AB Ångpanneföreningen (publ)
     
    Jonas Wiström
    President and CEO
     
     
    The full Interim Report including tables is available to download from the enclosed link.

    For further information: <!-- hugin-supplied --><br> Jonas Wiström, President <!-- hugin-supplied --><br> Tel. +46 (0)8 657 11 15 <!-- hugin-supplied --><br> Mobile: +46 (0)70 608 12 20 <!-- hugin-supplied --><br> Viktor Svensson, Director, Corporate Information <!-- hugin-supplied --><br> Tel. +46 (0)8 657 12 01 <!-- hugin-supplied --><br> Mobile: +46 (0)70 657 20 26 <!-- hugin-supplied --><br> <!-- hugin-supplied --><br> AB Ångpanneföreningen (publikt) <!-- hugin-supplied --><br> Fleminggatan 7 <!-- hugin-supplied --><br> Box 8133 <!-- hugin-supplied --><br> 104 20 Stockholm. <!-- hugin-supplied --><br> Telefon 08-657 10 00. <!-- hugin-supplied --><br> Fax 08-650 91 18. <!-- hugin-supplied --><br> www.af.se. <!-- hugin-supplied --><br> Org.nr 556120-6474. <!-- hugin-supplied --><br> Säte i Stockholm.