LINKOPING, Sweden, April 25, 2002 (PRIMEZONE) -- Nexus:
The Period In Brief
- Net sales decreased by 4% to SEK 116.5 million (121.7)
- The result before goodwill depreciation totalled ./. SEK 4.9
million (13.1)
- The result after financial items totalled ./. SEK 10.8 million
(SEK 8.7 million)
- The order book at the end of the period totalled SEK 377.4
million (344.1)
- Orders received during the period totalled SEK 41.7 million
(70.4)
- Liquidity, unaccounted credit, totalled SEK 64.4 million (55.1)
at the end of the period
- The number of employees at the end of the period was 409 (336)
- Result improvement program initiated in order to counteract the
negative result trend
- Agreement with ForeningsSparbanken concerning PKI
infrastructure
The CEO's Comments on Developments During the Period
Development during the period has not been satisfactory. Nexus' sales during the first quarter have been comparable to sales for the same period of the previous year, while the level of orders received has been lower. Market development has been much weaker than expected, and this has coincided with the postponement of a number of strategically important deals. This has affected the Company's sales trend negatively and the result in particular. The Company records a loss after financial items for the first quarter of SEK 10.8 million. Nexus' management has passed and begun to implement a result improvement program. The order book is still good.
The Company has concluded or is in the final stages of negotiations regarding a number of major contracts for the development and implementation of Secured Solutions. These contracts are in line with Nexus' business model and provide both good market leverage and profitability. The business climate during the first quarter, however, has been tough and several of these projects have been delayed or postponed. Customers are waiting to make decisions concerning new major projects while at the same time the implementation of projects already underway is being delayed. One such example is the Bankernas ID-tjanster (BIDT, The Banks' ID Services) project, which has been postponed by one or two quarters.
Another negative development during the period has been that certain serial deliveries have been delayed by customer request. In addition, the weak market for IT consulting services has resulted in the Company working at less than capacity and has forced prices down for the part of the Company's operations that works with system integration.
Nexus' operations with the maintenance of existing systems and products on the customers' behalf continues to be stable and to develop well. The gross margins are stabile, but lower than in other operations. In a market where few new implementation projects are being started, sales for the period in the O&M phase of operations have comprised a larger percentage of the Company's total sales than previously was the case.
The level of preliminary studies and planning for major projects is still high and forms a good foundation for strong development when the market turns. There is, however, a great deal of uncertainty as to when the market will turn. This uncertainty and the less than satisfactory result have led the Company to decide to restructure the Company's organisation and costs.
Market Developments
The market is expected to be characterised by a low level of activity during the first six months of the year. Successive improvement is expected towards the end of the year. It is uncertain, however, when the expected recovery will gain sufficient momentum.
The underlying need for increased security in data transmission and communications, payment systems, and products is still high, however, and will be even more so in the future. The market demand for Secured Solutions is more structural in nature and is not greatly steered by market trends. This means that the market has a good underlying growth rate and that recovery should come early in the economic cycle. For example, the Swedish banks will launch their ID service during the second and third quarters, and the Swedish Government is now conducting activities that entail a considerable need for information security. Nexus is currently in the advanced stages of negotiations concerning a number of comprehensive projects within its core area of Secured Solutions.
Result Improvement Program
Nexus' organisation has been streamlined during the period, with a focus on market demands. The Company's organisation is now structured around three areas of expertise and four marketing and sales regions. Company management has been strengthened through both external and internal recruitment.
Our organisational restructuring follows our customers' structure and supports Nexus' business model, while also providing advantages due to optimisation. In this way, the Company's stated business and profitability goals can be attained more rapidly.
The Company's costs will be reduced in parallel with the reorganisation. This will be achieved through cutbacks in management and personnel. The number of employees will be reduced by about 40 during the third and fourth quarters of the current year, equivalent to 10% of the total number of employees as of 31st March 2002. Savings from this program total SEK 30 million annually and are expected to affect the result starting in the second quarter and reach full effect during the fourth quarter. Costs that arise in connection with personnel reductions are charged on an ongoing basis to the result and are included in the Company's evaluation of development for the rest of the year. The effect on the result for the year, after restructuring costs, is estimated at SEK 15 million.
Otherwise, the result improvement program is market-oriented. Marketing and sales activities towards those market areas and customers in the initial stages of a market upswing have been intensified considerably during the period. The newly signed agreements with JM, SSAB, and Ericsson are a result of these efforts.
Our Customers
The Company has a continued strong relation with its existing customers and the percentage of returning customers is constantly high.
In addition to a number of smaller agreements, the Company signed an extensive general agreement during the period with ForeningsSparbanken concerning the implementation of PKI-based services and information security.
Acquisitions
The Company regularly holds discussions concerning complementary acquisitions, but these have not resulted in any agreements during the period as such acquisitions have not been able to fulfil the Company's restrictive criteria.
In keeping with previously announced goals, the Company views acquisitions, within both Scandinavia and Europe, as a part of its growth strategy. Nexus' financial position is good and the prevailing market situation offers interesting opportunities for a more offensive positioning with regard to acquisitions. This is, however, on the condition that the Company's business and financial criteria are met and share value can be created.
Sales and Results
The Company's net sales totalled SEK 116.5 million (121.7).
The result totalled ./. SEK 4.9 million (13.1), before goodwill depreciation.
The result after financial items for the period totalled ./. SEK 10.8 million (8.7).
Cash flow from operations was negative during the period.
The Group's liquid funds totalled SEK 64.4 million at the end of the period. In addition, there are approved, unutilised checking account facilities totalling SEK 20.0 million.
Solidity at the end of the period was 78% (76%).
Investments during the period totalled SEK 2.8 million, which are attributable in their whole to investments in machinery and equipment.
Employees
At the end of the period, the Company employed 409 (336) persons. Personnel turnover was 1.5% (3.0).
Employee skill development has continued during the period. Nexus' internal training is carried out within the framework of the Nexus Security Academy and encompasses all Company employees. The training program comprises a number of expertise levels. Last year, all employees completed at least the base levels and some employees completed higher levels during the period.
Forecast for the Rest of the Year
The forecast for the year is characterized by uncertainty as to when the market will recover. The Company has, therefore, based its plan for the rest of the year on a continued weak market. Even under these conditions, the goal of the result improvement program initiated is to secure a positive result for the year.
A number of extensive projects within Nexus' core area, Secured Solutions, are expected to come to an end during the coming months. This will provide further opportunity for result improvement.
Despite a low level of orders received during the first quarter, the Company's order book is good, considering the circumstances. Nexus' market position is strong and the order book is expected to improve successively during the second half of the year.
The Company forecasts organic sales growth for the whole year of 10-15% in comparison with 2001. Higher growth may be attained via acquisitions.
The result after financial items is expected to be positive, but not on a level with the previous year.
Despite the result for the period, the Company views its future economic development with confidence and has not changed its goal to attain, within three years, a margin after goodwill of 10% and annual growth of 30%. Next Financial Report
The quarterly report for January-June will be made public on 21st August 2002.
For the Board:
Linkoping, Sweden, 24th April 2002
Technology Nexus AB (PLC)
Mikael Jacobsson. Chief Executive Officer
We have performed an overall review of this quarterly report in accordance with the recommendations of the Swedish Institute of Authorised Public Accountants (Foreningen Auktoriserade Revisorer, FAR). An overall review is considerably more limited than an audit. We have found nothing that would indicate that the quarterly report does not meet the requirements of the Swedish Accounting Act.
Linkoping, Sweden, 24th April 2002
Juri Pundi Tom Skarin Authorised Accountant Approved Accountant
Technology Nexus AB (Head Office), Agatan 40, Box 513, S-581 06 Linkoping, SWEDEN Tel. +46 13 35 74 00, Fax. +46 13 10 02 43
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