During the period January-March, the market for the ÅF Group’s services improved over the corresponding period last year. This is confirmed by the fact that industrial investment is expected to increase by up to 10% in 1998. Capacity utilisation within the Group rose to 71% (70%). The order book amounted to SEK 379 (344) million.

The consolidated profit after net financial items and interest in associated companies amounted to SEK 21.0 (17.9) million. This corresponds to a return on shareholders’ equity of 18.6 (13.8)%. The operating profit was much higher than last year, amounting to SEK 20.0 (12.4) million.

Turnover amounted to SEK 316 (270) million and profit margin was 6.6% (6.6%). Profit margin for the whole year 1997 was 5.8%.

The consolidated profit was charged with a calculated bonus to the employees of SEK 1.7 (1.5) million.

The number of full-time equivalent employees during the period, including those in associated companies, was 1,843 (1,756).

The parent company's turnover amounted to SEK 20 (18) million and profit after net financial items was SEK 5.1 (6.6) million.

The Group’s net worth, after 20% standard tax on the estimated surplus value of property, was SEK 84 (81) per share. The equity ratio was 50% (52%).

At the beginning of the period, ISO Swedish Management Group was acquired and its name was changed to ÅF-Swedish Management Group. P-electronic was also acquired and became part of ÅF-Rateko. The two companies together have 30 employees.

As of 1 Jan. 1998, a new business area has been established: Education and Management. It consists of the educational company SIFU, in which the ÅF Group share is limited to 19% in 1998, and the ÅF-Swedish Management Group. SIFU has a turnover of approx. SEK 70 million. The ÅF Group has an option to acquire majority ownership of SIFU at year end 1998.

As of 1 Jan. 1998, the energy consultancy units joined business area Energy, Environment & Process Technology, after which HVAC & Sanitation Engineering formed a business area of its own.

Also as of 1 Jan., ÅF-Data is part of business area Software, Electronics & Mechanical Engineering. With that, important parts of the Group’s software and electronics competence have been merged.

Consulting businesses
The consolidated profit for the consulting businesses after financial items amounted to SEK 22.1 (12.6) million. Turnover rose to SEK 338 (301) million.

Business areas Electrical Engineering & Instrumentation, and HVAC & Sanitation Engineering posted higher profits during the first quarter of 1998 than in the corresponding period last year. The profits for business areas Energy, Environment & Process Technology, and Software, Electronics & Mechanical Engineering remained unchanged.

Business area Inspection & Testing halved its negative profit margin from the corresponding period in 1997 and losses were almost halved. The improvement is due equally to better capacity utilisation and cost reductions.

Current projects include an "intelligent buildings" project for Stockholm Energi, certification of ISO 14001 environmental management systems for sections of Sydved, and finalisation of a turnkey industrial project in Northern Ireland. Astra has appointed the ÅF Group to produce environmental permit documentation for its new plant outside Södertälje. For Siemens, the ÅF Group is designing the electrical installations for a new water treatment plant and a new wood handling section at AssiDomän’s Skärblacka mill. Norske Skog has appointed the ÅF Group to carry out an environmental investigation prior to planned company acquisitions in Asia.

Sweden’s Ministry of Finance has selected the ÅF Group to investigate a new energy tax system. A preliminary study was carried out for setting up a bank support scheme in Bosnia-Herzegovina. Other assignments include the establishment of radio base stations for Ericsson in Poland and a study for the regional association and some local energy utilities in the county of Kalmar, Sweden, concerning the conditions for combined heat and power production from the Mönsterås Bruk mill.

The Kalmar County Council has appointed SIFU to train all the county’s property technicians.

PX Control, the Group’s financial administration system produced by ÅF-Data, is increasingly successful in the market and now has over 20 external customers. ÅF-Data has also set up an office in Norway and Norwegian consulting businesses are showing great interest.

Real Estate and Finance Administration
The ÅF Group’s real estate is 95% office space, used mainly by the Group’s consulting businesses. Vacancy at year end was 5% (7%). At year end 1997 the Group had 39,000 sq. m of real estate, valued by VM Fastighetsekonomer at SEK 316 million at year end 1996. An internal valuation estimated its value to be SEK 349 million by year end 1997. The book value was SEK 236 (209) million.

As of 1 May 1998, an agreement in principle was signed to sell a building on North Djurgården island in Stockholm to a foundation, Vetenskapsstaden International Centre, for SEK 25 million, which corresponds to the book value. The property has 3,650 sq. m of floor are and is rented wholly to external tenants.

The ÅF Group's liquid assets amounted to SEK 90 (111) million at the end of the period, of which SEK 39 (47) was in listed Swedish and foreign stocks. The surplus value of the stock portfolio was SEK 12 (6) million. The remainder of the liquid assets were in interest-bearing securities in Sweden.

Forecast for 1998
Market conditions improved somewhat at the beginning of the year, and external assessments of industrial investment activity predict an increase of 10% during the year. Overall, this is expected to provide a good environment for the ÅF Group’s 1998 profits to exceed those of 1997.

Stockholm, 6 May 1998.
AB Ångpanneföreningen (publ)
Gunnar Grönkvist
Managing Director and CEO