STOCKHOLM, Sweden, Nov. 1, 2002 (PRIMEZONE) -- Effnet (Other OTC:EFFNF) (Stockholm:EFFN):
- Sales during the period January - September amounted to SEK 3,480,000 (8,018,000). - Operating loss improved to SEK -39,515,000 (-86,329,000) for the nine-month period. The result after financial items amounted to SEK -35,026,000 (-78,605,000). Since the revenue continues to be far below expectations it resulted in a profit warning sent out by the management in the middle of September. - The average level of costs per month for the nine-month period amounted to SEK 5,220,000 (10,483,000) and the negative cash flow to 5,190,000 (8,189,000). - Liquid funds at the close of the period totaled SEK 133,123,000, or SEK 2.42 per share. - The number of full-time employees at the end of the period amounted to 27 (63).
In August Orjan Grinndal left his post as CEO of Effnet Group AB. Effnet board member Goran E Larsson was appointed acting CEO. Executive Vice President Marika Philipson also left the company. Hans Runesten, also an Effnet board member, was appointed acting Executive Vice President.
- On August 29 Effnet Group AB held an Extra general meeting during which the shareholders decided, in accordance with the suggestion from the board, to reduce the Company's share premium reserve by SEK 175 million. The decision is subject to acceptance from the district court in accordance with the Swedish Companies Act.
Events after the end of the period
- In the beginning of October the board and the management of Effnet Group AB (publ) decided to decrease the personnel by an additional 15 employees. This action was taken as a part of the previously announced cost reduction program. The measures will be completed during the fourth quarter 2002. Two of the company's founders, Stephen Pink and Mikael Degermark, have already left the company. - On the 14th of October Effnet Group AB acquired the company Factum Electronics from Teracom. Factum develops and sells systems for digital radio, DAB, as well as digital stereo sound in TV broadcasting, NICAM. Factum had a turnover of SEK 14,000,000 during the period January - September this year. Factum Electronics has approximately 20 employees and is situated in Linkoping.
Effnet Group AB (publ) is a parent company in a group of wholly owned subsidiaries. Effnet AB develops and sells integrated software, Header Compression, to manufacturers of network products. Wkit Security AB is specialized in developing copy protection software. Factum Electronics AB develops and sells systems for digital radio, DAB, as well as digital stereo sound in TV broadcasting, NICAM. Effnet Group AB shares are traded on Sweden's Nya Marknaden (symbol: EFFN). Read more at www.effnet.com, www.wkit.com and www.factum.se.
THIRD QUARTER 2002
A new management team took over on August 15 with the goal of adapting current operating expenses to the company's short-term income and benefitting from the favorable market for corporate acquisitions.
Short- and medium-term market conditions for the company's main products in the field of header compression have not developed according to expectations during the period. Most 3G players (the next generation mobile network) have postponed their investment decisions, which has had a negative impact on Effnet's sales. In the field of data security, sales of the company's copy protection software for CD-ROMs have also been very weak. Because of these factors, the company's income is far below expected levels and unfortunately, no crucial improvements in these fields can be seen in the near future.
As a consequence of the company's disappointing sales, the company's Board of Directors and management has formulated a cost-cutting program that includes reducing the number of employees by fifteen. This program is currently under implementation and it should be completed during fourth quarter 2002. One effect of the program will be an increased concentration of the company's operational functions to Sweden.
Effnet has a strong financial position in a world where companies that are searching for capital today offer yield levels far above what has been commonly seen in recent years. The Board of Directors has therefore decided to intensify its efforts to build up a small portfolio of technology companies with strong potential for the future through selective acquisitions. As a first step in this strategy, after the end of the reporting period the company acquired Factum Electronics AB from Teracom AB.
FINANCIAL STATEMENT
Effnet's sales amounted to SEK 3,480,000 (8,018,000) during the first nine months of 2002. The revenue continues to be far below expectations and resulted in a profit warning sent out by the management in the middle of September.
The group's operating result amounted to SEK -39,515,000 (-86,329,000). The result after financial items amounted to SEK -35,026,000 (-78,605,000). Losses have been reduced to less than half compared to the same period last year.
Personnel costs continue to decrease as a direct consequence of the cost cutting measures that where implemented earlier this year and amounted to SEK -26,993,000 (-57,395,000) for the period January - September.
Total write-downs for the period amounted to SEK -1,151,000 (-3,349,000) of which goodwill write-downs comprised of SEK 0 (-1,460,000).
Research and development
Total costs for research and development during the period amounted to SEK -15,914,000 (-33,809,000), of which SEK 1,369,000 (0) was capitalized in the balance sheet in compliance with RR 15, the Swedish Financial Accounting Standards Council recommendation that went into force on January 1, 2002.
Financial position
Effnet's equity/asset ratio on September 30, 2002 was 91.7 % (92.2 %, at the same time last year). Liquid funds, including current investments, amounted to SEK 133,123,000 (201,259,000), or SEK 2.42 (3.66) per share.
Investments
Investments in material fixed assets during the period January - September amounted to SEK 84,000 (-1,517,000) and comprised primarily computer equipment.
Personnel
The number of full-time employees at the end of the period totaled 27, down 36 from one year ago (63). The average number of full-time employees during the period was 29 (68), 11 (11) of whom were based in the U.S.
Financial Calendar
Earnings Release 2002 on February 11, 2003
This report has not been examined by the company's auditors.
Stockholm, November 1, 2002
Effnet Group AB (publ)
Goran E. Larsson Chief Executive Officer
For more information, please contact:
Goran E. Larsson, Chief Executive Officer +46-(0)8-564 605 50, +46-(0)705-65 68 69 Hans Runesten, Executive Vice President +46-(0)8-564 605 50, +46-(0)702-80 26 26
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