SOLNA, Sweden, April 18, 2002 (PRIMEZONE) -- IBS:
-- IBS' software sales increased by 6% to SEK 145m, on a continued
weak market. Total first quarter revenue grew by 10% to SEK 657m.
-- The previous three-quarters' positive pre-tax profit development
continued. The first quarter 2002 showed a continued improvement
of SEK 14m, totaling SEK -5m.
-- The Group cost reduction and efficiency program continues.
Professional services utilisation has increased and related costs
have decreased.
-- Cash flow from operating activities grew from SEK 9m to SEK 103m.
-- The year's second quarter is expected to show continued pre-tax
profit improvement. The full-year forecast for a margin within a
1-2% interval, as announced earlier, remains unchanged.
Continued Positive Trend - The Fourth Consecutive Quarter to Show Improvement
The Market
IBS has continued to increase software sales. Compared to the first quarter 2001, which per se was a strong quarter with a 33% increase, 2002 revenue grew by 6%. Thus, IBS' development is proof of competitive strength. Demand for software is greatest within the fields of e- business, customer relations management and supply chain management - fields where IBS holds strong position.
The uncertainty regarding general economic development has put a damper on the market for business software. During the last month, several of IBS' competitors have reported a decrease in business volumes.
Alliance
A new agreement regarding co-operation around IBS' new Virtual Enterprise software was signed with IBM Global Services in January. The new alliance has produced many new market activities and identified business opportunities. The first joint project with IBM, for an installation of the system in the Expert stores in Sweden, has commenced.
Exchange Rate Effects
During the first quarter, the Swedish krona has been strengthened. For the IBS Group, however, the case is that compared to the equivalent quarter 2001, the krona has been weakened by about 2%, which in turn has increased Group revenue and costs. In the following analysis of the first quarter, the exchange rate effect has been eliminated.
Accounting Principles
IBS adheres to the recommendations made by the Swedish Financial Accounting Standards Council. New accounting recommendations valid from 1 January 2002 have not affected first quarter accounting. As from 2002, two calculation methods have been modified to improve analysis of the development of operations and to achieve comparability with other software suppliers. One modification entails the moving of depreciation costs for capitalised product development, approximately SEK 12m per quarter, from cost of revenue for software licences to product development costs. The other change entails the depreciation period for product development, capitalised as from 2002, being extended from three to five years, which will initially result in booked costs decreasing by approximately SEK 0.5m per quarter.
Resources and Efficiency
During the first quarter, the number of employees decreased by 32. The average number of employees in the Group decreased by 110, or 5% compared to the first quarter 2001. At the same time, revenue per employee grew by 13%, in fixed exchange rates.
Revenue
In comparable exchange rates, first quarter revenue grew to SEK 657m, or by 8% compared to the equivalent period last year. The different revenue streams were distributed as follows:
-- Software: SEK 145m, +4% -- Professional services: SEK 368m, -1% -- Hardware etc.: SEK 144m, +42%.
As shown above, the comparison period for the important software revenue was a very strong period. The comparison period's hardware revenue was exceptionally low, as the market was waiting for our main supplier to launch a new model later in the year 2001.
Gross Margins and Contribution
Taking into consideration the change in method, gross profit for software licences basically remained unchanged, at approximately SEK 130m. The equivalent figure for professional services, SEK 80m, was also basically the same, but would have improved during 2002 if the number of working days had not been lower than last year. The margin for hardware etc. continued to fall, but gross profit still grew by SEK 5m to SEK 24m, due to the increase in revenue.
Operating Costs
The Group cost reduction program continues. Product development costs, in fixed exchange rates, grew by 15% to SEK 67m, but this is mainly due to the change in method as presented above. Marketing and sales costs, as a share of revenue, have decreased from 15% to 13%, and the administrative costs from 14% to 13%. As a whole, operating costs fell from 39% to 36% of total revenue.
Regional Overview
All the Group's units showed improved results. The European region, excluding Sweden, doubled quarterly profit from SEK 9m to SEK 18m, while profit in Sweden grew from SEK 8m to SEK 10m. Even the relatively new operations outside Europe, including the USA, showed improved results, from SEK -13m to SEK -11m.
Products
IBS improves customer profitability by providing advanced software functionality, based on the most efficient technology available at each point in time. The target is mainly mid-sized companies and groups that are in need of solutions for collaborative commerce, supply chain management, customer relations management and decision support.
IBS technical development environment builds on integrating IBM's WebSphere based on Java and object technology, especially for collaborative e-commerce, with proven technology for the handling of large transaction volumes in mission-critical systems.
IBS new product range, Virtual Enterprise, constitutes the start of a new long-term development phase to provide software for all hardware platforms. The software has been very well-received by the market, as has IBS Pharma, our new product range for pharmaceutical distribution.
Liquidity and Financial Position
The Group's financial position continues to be strong. Group equity amounted to SEK 717m (758m) and the equity to total assets ratio was 45% (51%). Cash flow from operating activities amounted to SEK 103m (9m).
Cash flow after investment amounted to SEK 65m (-44m).
Tax for the period amounting to SEK 2m (10m) as shown in the income statement consists of SEK -4m (-6m) in current tax and SEK 6m (16m) in deferred tax. Tax paid during the period amounts to SEK -5m (-10m).
Cash and liquid assets including short-term investment per March 31 amounted to SEK 195m (173m). In addition, the Group has credit facilities amounting to approximately SEK 147m. Current assets represented 132% (144%) of current liabilities.
Investment
Group investment in equipment amounted to SEK 8m (31m).
During the quarter, capitalised product development costs for products to be launched within twelve months have exceeded depreciation by SEK 3m (12m).
In the balance sheet, acquired goodwill at the end of the period amounted to SEK 278m, a decrease of SEK 3m compared to the end of last year.
The Parent Company
The Parent company provides centrally developed software and Group services. Parent company net revenue amounted to SEK 42m (37m) and pre- tax profit was SEK -20m (-8m).
The IBS Share
The share price per March 31, 2002, was SEK 17.70 per share, which represents a 4% increase since the end of last year.
The total number of shares is 79.6 million. In addition, IBS has two warrants programs; 98/02 with 5 million warrants at a strike price of SEK 40.60 per share and 00/04 with 5 million warrants at a strike price of SEK 65 per share. After full dilution, the number of shares would be 89.6 million.
Report from IBS' Annual General Meeting
At IBS' Annual General Meeting on April 17, 2002, CEO Staffan Ahlberg reported on first quarter development, among other topics. He emphasised the success of IBS' product, marketing and partner strategy. This is a dominant factor for the Company being able to show improved results in each of the last four quarters, despite a weak economy and investment situation. The Chairman of the Board, Gunnar Rylander, thanked IBS' main auditor, K-G Giertz, who is now retiring, for his services. KPMG has appointed Anders Malmeby as new main auditor.
Furthermore, the AGM approved the proposed reelection of the Board of Directors. The AGM also decided to not pay dividends for 2001. The proposal regarding changes in the Articles of Association was adopted. As in previous years, the AGM authorised the Board to decide on directed new share issues, not exceeding 10% dilution.
The Future
The world economy is showing certain signs of improvement, through increasing consumer activity. On the other hand, the political situation continues to be uncertain. In turn, this has a negative effect on companies' investment plans. At the same time, many companies have a cumulated need for better business software to support operations and raise efficiency.
All things considered, IBS' Group management expects a continued weak investment climate. We plan for increased business volumes through new recruitments and acquisitions, when the economic situation has become more stable.
First quarter development has been according to plan. We expect to see continued improvement in pre-tax profit for the second quarter. Our aim is to reattain a positive operating result after the first half of the year, on a last twelve month basis. The full-year forecast for a margin within a 1-2% interval, as announced in the year-end report, remains unchanged.
Information Plan
-- Quarterly reports will be published July 17 and October 17. -- The year-end report for 2002 will be published January 23, 2003.
This report has not been audited.
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