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Press release

Press release

ÅF: Interim Report January - June 2005 - Operating profit rose by 44% to SEK 64 million

  • Net sales amounted to SEK 1,217 million (figure for the corresponding period in 2004: SEK 1,112 million)
  • Operating profit rose to SEK 63.6 million (SEK 44.2 million)
  • Profit after net interest income/expense rose to SEK 61.1 million (SEK 42.4 million)
  • Profit after tax totalled SEK 41.3 million (SEK 41.0 million)
  • Earnings per share were SEK 6:84 (6.97)
    A few words from the President, Jonas Wiström
    The operations in the ÅF Group continued to develop in a positive direction throughout the second quarter. The operating margin improved to 6.0 percent for the period to finish at a figure of 5.2 percent for the first six months of the year. The rate of growth was almost 10 percent for the first half of 2005.
    Demand for technical consulting services has continued to grow and the transformation of the ÅF Group is now starting to show results in the form of synergies in both earnings and costs. The general opinion is that demand as a whole will continue to remain good throughout the second half of the year, albeit with a measure of uncertainty as regards developments within the industrial sector.
    The fact that we are in a strong financial position opens up all sorts of opportunities for us to take an active role in the consolidation of our own industry. As far as corporate acquisitions are concerned, the course we have staked out is to ensure that the Infrastructure Division, the Systems Division and ÅF-Kontroll continue to grow in Sweden and /or among our European neighbours, while the Process Division continues its expansion via acquisitions worldwide.
    Before concluding, I would also like to mention the progress that has been made by the Systems Division (IT/product development). Systems has previously been burdened with substantial losses, but this is no longer the case. Indeed, we now feel confident that, under the leadership of the new divisional manager Johan Olsson, who assumed his new post on 7 June, the division will report a profit for the second half of 2005 as a whole.
    Significant events during the second quarter
    ÅF signed a new 2-year framework agreement as a preferred supplier for the Ericsson telecom group to provide consulting services in research and development.
    ÅF was commissioned by ELYO to work with project engineering services in connection with the installation of a new back-pressure turbine for Norske Skog in Golbey, France. Another French contract, this time through UPM-Kymmene, Docelles, has resulted in the ÅF Group being given responsibility for extending the capacity of the existing paper line (PM1).

    ÅF-Kontroll was commissioned by Euromaint to carry out inspections and periodic testing of locomotive rolling stock, such as axles and wheels. The assignment will be carried out by staff from the ÅF Group's offices throughout Sweden (from Luleå in the north to Malmö in the south).
    Significant events after the second quarter
    On 28 April 2005 the annual general meeting of shareholders in the ÅF Group voted to raise a convertible subordinated loan through the issue of convertible bonds directed at the company's permanent employees in Sweden, Finland and Norway. The employees subscribed for a total of approximately SEK 54 million. The programme is set to run between 1 July 2005 and 30 July 2008. The conversion price has been set at SEK 172 and on full conversion share capital will increase by SEK 6,250,000. The number of shares will increase by 312,500, equivalent to a dilution effect of approximately 5.0 percent of the share capital and 3.2 percent of the votes.
    Acquisitions and partnerships
    ÅF acquired 30th of April the infrastructure consulting company Infraplan AB (Payment:5,7MSEK)(Goodwill:2,0MSEK).
    Founded in 1994 and based in Umeå in the north of Sweden, this company and its 12 employees bring added strength to the ÅF Group's Infrastructure Division (with approximately 900 employees), providing cutting-edge skills and expertise and opening doors to important customers both in Sweden and abroad.
    ÅF started a joint-venture in Brazil with project engineers A1 Engenharia e Gerenciamento Ltda, relating to activities within the forest industry in Brazil and other South American countries.

    Sales and profits
    Net sales for the period January to June amounted to SEK 1,217.1 million (corresponding period 2004: SEK 1,112.1 million). Sales for the second quarter totalled SEK 633.7 (570.3) million.
    Operating profit for the period was SEK 63.6 (44.2) million. Operating margin was 5.2 (4.0) percent. Second-quarter profits were SEK 37.8 (24.5) million and the operating margin rose to 6.0 (4.3) percent.
    Invoiced-time ratio for the first half of the year (calculated as "capacity utilisation", the proportion of time charged to clients relative to the total time spent at work) was 71.9 (68.5) percent, with a figure of 72.3 (69.9) percent for the second quarter.
    Profit after net financial items amounted to SEK 61.1 (42.4) million for the period. The profit margin was 5.0 (3.8) percent. For the second quarter, profits after net financial items rose to SEK 36.6 (23.9) million and the profit margin was 5.8 (4.2) percent.
    Earnings per share totalled SEK 6.84 (6.97), with a figure for the second quarter of SEK 4.00 (3.64).
    Taxes for January to June totalled SEK 18.7 million, compared with just SEK 1.1 million during the corresponding period in 2004. Last year's low figure is explained by the fact that capital gains on the sale of properties then owned by the ÅF Group were tax-free.
    The current status in the Group's divisions
    Infrastructure                                    Operating margin Jan-Jun: 8.7% (6.5%)
    The market for infrastructure consulting services remained strong throughout the first six months of the year. Property maintenance and construction-related sectors have continued to develop in the right direction at the same time as the division has also benefited from major investments in Nordic infrastructure projects (roads, rail and tunnels). Project engineering volumes are large and the ÅF Group is constantly capturing new market share, helping to ensure that demand remains good for all business areas (Installations, Electrical Power Systems, Telecoms and Roads & Railways).
    Process                                   Operating margin Jan-Jun: 5.9% (3.3%)
    The market for consulting services in the pulp and paper industry has been buoyant during the first six months of the year, although there are signs that certain investments in Europe are being put on ice. By contrast, the rate of investment is increasing in South America, Asia and Eastern Europe, where the ÅF Group is steadily increasing its presence. ÅF's market in the energy sector has stabilised somewhat thanks to increases in investment in both the production and distribution stages.
    ÅF-Kontroll                           Operating margin Jan-Jun: 10.1% (8.4%)
    ÅF-Kontroll grew its business by approximately 15 percent and increased its operating margin during the first half of 2005. The market for technical inspections has been good, most noticeably in the second quarter, and demand has increased in all three of the company's areas of business - inspection, testing and certification. Demand has been particularly strong from the Swedish nuclear power industry.
    Systems                                   Operating margin Jan-Jun: 1.4% (-5.8%)
    Systems has reported a small profit for the first six months of the year, which, in view of the heavy losses sustained in 2004, represents a satisfactory development of the business. This improvement is due to a modest increase in demand and the positive effects of the cost-cutting programme that was rolled out in December 2004. Johan Olsson, who took over the reins as the new divisional manager in June, has established a clear strategy for increasing profitability by improving sales work and recruiting more and predominantly younger consultants.
    Accounting principles
    This interim report for the Group has been drawn up in accordance with IAS 34 "Interim Financial Reporting".
    The company's Annual Report for 2004 includes a description of the accounting principles that are affected by the transition to the International Financial Reporting Standards (IFRS). For a description of the accounting principles applied by the company in its interim report for the second quarter of 2005, you are referred to the section "Convergence with International Financial Reporting Standards (IFRS)" in the Annual Report for 2004. It states there that IFRS will be applied with effect from 1 January 2005, and that the comparison figures in respect of 2004 have been recalculated in line with the new principles with the exception of those which apply to financial instruments. Under the transitional rules for IFRS, the new principles apply to financial instruments solely in those parts of the accounts which relate to 2005. In conjunction with the transition to IAS 39 the cash flow model will be applied to hedge accounting with effect from 2005.
    Transition to IFRS 2005: The effects on income statements, balance sheet and equity are explained in the appendix to this Interim Report.
    Gross investments in machinery and equipment during the period January to June 2005 totalled SEK 21 (23) million.
    Parent company
    Parent company sales totalled SEK 73.9 (62.1) million, yielding a profit after net financial items of SEK 48.2 million, in contrast to the loss of SEK 9.9 million for the corresponding period in 2004.
    Cash flow and financial status
    Cash flow was SEK -61 (+78) million. Before dividends and the amortisation of loans, cash flow was SEK 2 (112) million. There was a positive effect on cash flow for the first six months of 2004 of SEK 124 million from property sales.
    Cash flow for the second quarter of 2005 before dividends and the amortisation of loans was SEK 17 (84) million. There was a positive effect on cash flow for the second quarter of 2004 of SEK 79 million from property sales.
    The Group's liquid assets amounted to SEK 115 (170) million.
    Equity per share was SEK 71. The Group's equity/assets ratio was 34 percent. At the start of the year, equity per share was SEK 66 and equity/assets ratio 30 percent.
    Real estate administration
    In spring 2003, the Board of Directors resolved to sell the ÅF Group's properties. Seven of the Group's eight properties were sold during 2003 and 2004.
    The sole remaining property owned by the ÅF Group is Härolden 44 (10,700 square metres), the ÅF Group's head office on Fleminggatan in central Stockholm. These premises are also for sale and have been recognised in the accounts among current assets. The property, which has a book value of SEK 130 million, was valued at SEK 225 million at the end of 2004 by Forum Fastighetsekonomi AB (2003: SEK 220 million). 
    ÅF shares
    At the end of the second quarter, ÅF "B" shares were being quoted at SEK 153, which represents a rise of 15.9 percent since the start of the year. The Stockholm Stock Exchange's SAX all-share index rose by 11.2 percent over the same period.
    Capital Market Day
    On September 29, from 14.00 (2 p.m.) onwards, the ÅF Group will be hosting the ÅF Group Capital Market Day at the Hotel/Restaurant J at Nacka Strand in Stockholm.
    For more detailed information and registration, please contact the ÅF Group's Director of Corporate Information, Viktor Svensson. Phone +46 (0)8-657 12 01 or send an e-mail to
    Next reporting date
    The ÅF Group's interim report for the period January-September 2005 will be presented on 9 November 2005.
    Stockholm, Sweden - August 19, 2005
    AB Ångpanneföreningen (publ)
    Jonas Wiström
    President and CEO
    The full report including tables can be downloaded from the following link: