STOCKHOLM, Sweden, April 25, 2002 (PRIMEZONE) -- HiQ is an IT and management consultancy that focuses on high-tech solutions in the fields of communication and simulation technology. The company is a leader in these fields and the Nordic region is its domestic market. HiQ employs around 480 people at offices in Sweden, Finland, Denmark and Norway. HiQ is listed on Stockholmsborsen. For more information, please visit www.hiq.se
Interim report for HiQ International AB (publ), corporate identity no. 556529-3205.
HiQ - Profitability in a tough market
- Net sales amounted to SEK 102.6 (146.5) million.
- The profit before goodwill (EBITA) is SEK 5.7 (28.3) million, which
is equivalent to a margin before goodwill of 5.6 per cent.
- Acquisition of profitable Finnish IT consultancy, Softplan, with 50
employees in Helsinki. Softplan is expected to contribute to the
earnings per share in 2002.
- New order from the Swedish Defence Material Administration (FMV)
worth SEK 24 million to develop training simulators for JAS 39
Gripen.
- Order worth SEK 30 million for an assignment with a new customer in
the insurance sector.
- New frame agreement is signed with Nokia Mobile Phones in Denmark.
- Agreement with Ericsson Mobile Platforms to develop and test mobile
platforms in Lund. The assignment will initially run for two years
and involve about fifteen HiQ's consultants.
- New frame agreement as preferred supplier within Research and
Development, IS/IT and Technical Documentation is signed with
Ericsson.
Market development
Despite a tough market, HiQ continues to show a profit. We believe that this is due to our strong brand, long-term customer relations and experienced employees. The major players are choosing to work with a smaller number of external suppliers, and HiQ continues to be among them, which is one of our strengths. We are continuing to receive more inquiries about outsourcing assignments, and we are discussing larger projects with both old and new customers.
2002 began in the same way as the previous year ended. Many customers are prioritising short-term profitability and are postponing investments. Customers are assessing which projects to implement, and decisions are centralised, which means that the process of awarding contracts takes more time.
Regions
There is a noticeable difference between the markets in the different regions where HiQ International is active. The high concentration of consultants and the downward pressure on prices seen in all markets is particularly evident in the Swedish market.
The Oresund region is an interesting growth region and a number of players in medicine, industry and telecoms are established there. HiQ is currently active in Skane through, among other things, a project for Ericsson Mobile Platforms, and the company will establish a subsidiary in Lund in the spring. HiQ already has a presence in the region through HiQ Wise in Copenhagen.
In order to strengthen HiQ's position as a Nordic consultancy, the company acquired the Finnish IT consultancy, Softplan. Softplan is a profitable and well-reputed company with customers primarily within Telecoms, Entertainment & Games and Public authorities. With the acquisition of Softplan HiQ is profitable in Finland.
Telecoms
The combination of an economic downturn and the ongoing technology shift to the next generation of mobile telephony (3G) affected both operators and suppliers. Several players are experiencing difficult time, and this has had an impact on their propensity to invest.
In the Nordic region the development of systems and products as well as the expansion of infrastructure for 3G networks continues, and at the same time, several new operators are emerging. We continue to believe that the focus on 3G in the Nordic region will intensify in the future.
The number of HiQ's 3G and GPRS assignments has increased compared to the same period last year. The company currently works with the majority of the 3G players in the Nordic region, such as Ericsson, Europolitan/Vodafone, Hi3G, Orange, Nokia, Sonera, Telia and 3GIS.
During the period, HiQ signed frame agreements with Nokia Mobile Phones and Ericsson as a preferred supplier in the fields of Research & Development, IS/IT and Technical Documentation.
Defence
In March HiQ received a new order from the Swedish Defence Material Administration (FMV) worth SEK 24 million for JAS 39 Gripen training simulators. HiQ holds a very strong position as a supplier of consulting services in simulation technology to the defence industry, and we believe that there is a good possibility that we will receive additional orders during 2002.
Finance & Insurance
The number of assignments with Finance & Insurance has increased compared to the same period last year. HiQ is currently working with such customers as NeoNet Technology, Nordea and OM.
In January HiQ received an order worth SEK 30 million from a new customer in the insurance sector. The order is for 10 - 15 consultants to work for a period of two years. We believe that we have the potential to further increase the number of assignments in this area during 2002.
Entertainment & Games
Softplan, the newly acquired consultancy in Finland, has also brought in new customers in the public sector and the entertainment industry including Veikkaus, the Finnish State Lottery.
Public authorities
The number of qualified IT consultancy assignments within Public authorities has increased compared to the same period last year. HiQ's current customers include the Swedish Labour Market Board, the Swedish National Police Board, the Swedish National Tax Board, the Swedish National Insurance Board and the government agency Vagverket Produktion.
Outsourcing
HiQ entered into a partnership with Ericsson Mobile Platforms in Lund involving testing and development of mobile platforms within GPRS and UMTS, i.e. 2.5G and 3G. For this purpose we have opened a design centre in Lund with some 15 consultants working on the project for an initial period of two years.
International assignments
HiQ has ongoing international assignments in many countries. The assignments outside Sweden, including Softplan, accounts for one third of total net sales.
Acquisition of Softplan Oy
In April HiQ acquired the Finnish IT consultancy, Softplan, with 50 employees and offices in Espoo, Helsinki. Softplan works with advanced technical system development in areas such as Telecoms, Entertainment & Games and Public authorities.
Softplan is a well-run and profitable company. In 2001, Softplan's full- year net sales amounted to SEK 43.5 million. The company has experienced an average growth of more than 30 per cent over the past five years with very good margins. Softplan is expected to strengthen HiQ's margins and contribute to the earnings per share in 2002.
Softplan works primarily with large Finnish customers such as Nokia, Sonera, TEKES (National Technology Agency), Sanoma Group, Emergency Center of Helsinki and Veikkaus (Finnish State Lottery). Demand for Softplan's services is strong on the international market, which is leading to an increase in the number of HiQ's international assignments.
The purchase price amounts to SEK 121.8 million, of which operations account for SEK 86.0 million, the company's property for SEK 8.3 million and cash balances for SEK 27.5 million. HiQ will pay for the acquisition in cash in the amount of SEK 74.4 million and with 2,989,551 newly issued HiQ shares. The amount of a portion of the purchase price depends on the results for 2002.
The acquisition is expected to provide goodwill in the amount of some SEK 90 million, which will be amortized over a period of ten years.
Softplan is consolidated on the 1st of April 2002.
Invoicing and profit
HiQ's net sales amounted to SEK 102.6 (146.5) million.
The profit before goodwill (EBITA) was SEK 5.7 (28.3) million. This is equivalent to a margin before goodwill depreciation of 5.6 per cent. The operating profit (EBIT) was SEK 2.9 (25.5) million, which is equivalent to an operating margin of 2.8 per cent.
The pre-tax profit (PTP) was SEK 3.5 (26.2) million, which is equivalent to a margin of 3.4 per cent.
The group's net financial income for the period was SEK 0.6 (0.7) million.
Accounting principles
This report has been prepared in accordance with the Swedish Financial Accounting standards Council's recommendation no. 20. The accounting principles are the same as those applied in the preparation of the last annual report.
Employees
At the end of the period the number of employees was 431 (434). In April HiQ acquired Softplan Oy with its 50 employees.
Investments
The Group's net investments during the period totalled SEK 1.4 (2.3) million, of which financial leasing investment accounted for SEK 1.0 (1.3) million.
Financial position
HiQ's financial position continues to be strong.
At the end of the period, the Group's liquid assets totalled SEK 120.0 (103.0) million, an increase of SEK 17.0 million. Interest-bearing net funds amounted to SEK 110.0 (94.4) million, an increase of 15.6 million.
The net effect on HiQ's cash funds is SEK 46.9 million due to the acquisition of Softplan in April.
The shareholders' equity as of 31 March 2002 amounted to SEK 239.2 million, compared to SEK 229.4 million on 31 March 2001.
The equity/assets ratio at the end of the period was 72.0 per cent (68.3 per cent).
Recalculated as a continuous twelve-month profit, i.e. for the period 010401-020331, HiQ's net sales were SEK 448.2 million. The profit before goodwill was SEK 43.5 million, which is equivalent to a margin before goodwill of 9.7 per cent.
The Board of Directors proposes a dividend of SEK 21,850 thousand. This is in line with HiQ's long-term dividend policy of distributing about 50 per cent of the company's profit after tax.
Outlook
The market continues to be tough and it is difficult to assess how the markets will develop. It is our belief that the market should become easier to assess at the end of the year.
In the current market situation, we are adapting operations and prioritising profitability. Both fixed and variable costs are constantly under review, the pace of recruitment is adapted taking into account regional differences and the sales organisation is being reinforced.
According to our strategy of being a strong player in the Nordic region, we are continuing to develop HiQ as a Nordic company and to strengthen our position in the countries where we are already active. The fact that our customers are focusing on the Nordic market supports our opinion that it is important to be a strong Nordic consultant as we move forward.
After the acquisition of Softplan we are very optimistic about future development in the Finnish market.
HiQ's focus on the Oresund region continues through the forming of a subsidiary in Lund, and we intend to invest further in southern Sweden in 2002.
Based on HiQ's unique position as a supplier of training simulators for the defence industry, we believe that our potential for securing further assignments is good.
HiQ is and will continue to be a pure consultancy in the fields of IT and management with skilled employees, good customer relations and a strong financial position. We are well equipped to take a greater share of the markets, to continue to develop our company, and to emerge from the recession stronger than before.
HiQ does not present any forecasts. Our long-term financial goal is growth of 30 per cent and an operating margin before goodwill of 15 per cent.
The parent company
HiQ International AB's profit after tax was SEK 1.9 (-6.5) million. As of 31 March 2002, the company's interest-bearing net funds amounted to SEK 106.6 (79.8) million, the shareholders' equity to SEK 200.8 (187.1) million, and the equity/assets ratio to 83.8 (88.1) per cent.
The company's net investments for the period totalled SEK 29 thousand (229 thousand).
Telephone conference
HiQ will be holding a telephone conference in English on 25 April at 4 p.m. (3 p.m. GMT). CEO Lars Stugemo, and CFO Anna Jennehov will be participating on behalf of HiQ. Telephone number: +44 (0)20 8241 0004
Presentation materials will be available from 2 p.m. on 25 April on HiQ English website.
Next financial report
The interim report for January - June will be presented on 15 August 2002. The Annual General Meeting will be held on 2 May at 6 p.m. at Sveavagen 17, 17th floor, Stockholm.
Stockholm, 25 April 2002
The Board of Directors of HiQ International AB
This report has not been subject to an auditor's review.
For further information, please contact: Lars Stugemo, President and CEO HiQ International AB, tel. +46 (0)8 588 90 000 Anna Svensson, CIO HiQ International AB, tel. +46 (0)8 588 90 015, 0704 200 103
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