Ångpanneföreningen AB (publ)
Interim Report January-June 1997

• Consolidated profit SEK 33.5 (52.7) million
• Turnover SEK 556 (550) million
• Profit per share SEK 4.20 ( 6.60)
• Net worth per share SEK 77 (73)
• Profit margin forecast: approx. SEK 8 per share for whole year 1997

During the first half of 1997 the market for the ÅF Group’s services declined somewhat compared with the corresponding period in 1996. Group capacity utilisation decreased slightly to 70% (71%). The order book, however, remained unchanged from the first quarter. The somewhat poorer market had a negative effect mainly on pricing.

The ÅF Group's operating profit after net financial items and interest in associated companies amounted to SEK 33.5 (52.7) million. This corresponds to a return on shareholders' equity of 13.7 (23.4)%.

Turnover amounted to SEK 556 (550) million and profit margin was 6.0% (9.4%).

The consolidated profit was charged with a calculated bonus to the employees of SEK 2.5 (5.9) million.

The number of full-time equivalent employees, including those in associated companies, was 1,762 (1,700).

The parent company's turnover amounted to SEK 36.4 (34.6) million and profit after net financial items was SEK 9.5 (-1.5) million.

The Group's net worth, after 20% standard tax on estimated surplus value of property, was SEK 77 (73) per share. Net worth at year end 1996 was SEK 79. The adjusted equity ratio was 53% (52%).

During the second quarter the ÅF Group signed an agreement in principle with the Swedish Society of Engineers (ISF) to acquire a minority holding of 19% in the educational company SIFU. The agreement also includes an option for the ÅF Group to become majority owner by year end 1998 at the latest. The 19% acquisition took place in July. SIFU provides educational services mainly in the fields of technology and the environment. It has a turnover of SEK 70 million and 60 employees. The purpose of the acquisition is that SIFU will form the basis of a sixth business area, Education, within the ÅF Group, with strong links to the other business areas.

Consulting businesses
Profit for the consulting businesses amounted to SEK 25.8 (54.0) million. Turnover rose to SEK 623 (603) million. At the end of the period the order book amounted to SEK 350 (355) million.

Business areas Electrical Engineering and Instrumentation, and Mechanical Engineering and Electronics, continued to post good profits. Operations in Energy, HVAC and Sanitation Engineering were affected mainly by low activity in building and construction. Capacity utilisation and profits in business area Process and Environment were lower, mainly due to a decline in investment in the pulp and paper industry.

Turnover for ÅF-Data, in the IT sector, increased by 30%, giving an increase in profit.

Competition in the former government monopoly of inspection and testing continued to be tough, with pressure to keep prices down as a result. There are signs, however, that the market is beginning to stabilise, albeit slowly. In the second quarter business area Inspection and Testing carried out a cost-reduction programme to improve competitiveness and reach a profit.

ÅF-Industriteknik acquired PRIMO System AB, an IT operation. This has reinforced ÅF-Industriteknik’s expansion in electronics and systems development.

During the period AB Ångpanneföreningen and its subsidiaries ÅF-IPK and ÅF-Energikonsult Stockholm received ISO 9001 quality management certification. With that, most of the ÅF Group has ISO 9001 certification.

Current projects include the fact that the Group has been appointed the main electrical, control and monitoring consultant for ABB Stal. This is one of the largest commissions the Group has obtained, and will involve at the most 30-40 full-time employees for the next four years.

The ÅF Group is responsible for the Swedish market study which is part of the large EU-financed study on the Nordic gas pipeline network. The study is scheduled for completion during 1998.

The renovation and expansion of a de-inking plant for a return fibre line is being carried out for the British paper mill Shotton Paper in Wales.

The Swedish Association of Painting Contractors is to seek environmental management certification for its members. The ÅF Group has been appointed to inspect the member companies.

Profit/loss, turnover and profit margin by business area 

ÅF-Data's profit amounted to SEK 0.5 (0.1) million

Real Estate and Finance Administration
At year end 1996 the Group had 34,000 sq. m of real estate, valued by VM Fastighetsekonomer at SEK 316 million. The book value was SEK 212 (202) million.

Real estate investments amounted to SEK 5 (6) million. Surplus value of the properties amounted to SEK 83 million after 20% deferred tax, corresponding to SEK 14 per share.

The ÅF Group's liquid assets amounted to SEK 94 (101) million at the end of the period, of which SEK 39 (33) was in listed stocks. The surplus value of the stock portfolio was SEK 9 million. At year end 1996 the surplus value was SEK 7 million. Net financial items amounted to SEK 8.5 (0.5) million, of which SEK 11.7 (2.0) million corresponded to capital gain from the sale of listed stocks.

Forecast for 1997
The high industrial investment of recent years is decreasing somewhat in 1997. Government decisions on energy policy will have no significant effect on the Group’s operations in 1997. Despite a definite decline, the market for the ÅF Group’s services is expected to be relatively good during the rest of this year.

In consideration of the poorer profit in the first half, the whole-year profit for 1997 is expected to be in the range of SEK 60-70 million, or about SEK 8 per share. This corresponds to a return on shareholders’ equity of approx. 15%.

Stockholm, 19 August 1996.
AB Ångpanneföreningen (publ)
Gunnar Grönkvist
Managing Director and CEO

Account in figures Jan-June 1997