EDB Business Partner ASA FOURTH QUARTER 2003 INTERIM REPORT

Transcription

1 - 1 - EDB Business Partner ASA FOURTH QUARTER 2003 INTERIM REPORT Summary The EDB group reports its best quarterly earnings since the fourth quarter of 2001 All business areas report improved operating margins EDB continues to increase its share of a slightly weaker market Breakthrough for IT Operations in Sweden through a contract with Apoteket AB Cost-saving measures show good results Gradual improvement in market outlook, with a number of new contracts NOK million Q4'03 Q4' Operating revenue Operating costs EBITA EBITA % 9,5 % 1,3 % 3,8 % 2,7 % Profit after tax Cash flow from operations CAPEX Gearing 0,25 0,21 0,25 0,21 No. of employees EDB Business Partner reported turnover for the fourth quarter of 2003 of NOK 1,113 million as compared to NOK 1,126 million in the same quarter of Adjusted for businesses sold and discontinued, turnover was slightly higher than in the fourth quarter of The business areas IT Operations and Telecommunications reported higher turnover, while Bank & Finance reported stable turnover after adjusting for divested businesses. The Business Consulting area was closed with effect from 1 July 2003, and some of its activities were transferred to IT Operations and Telecommunications. In addition, two foreign subsidiaries in the Bank & Finance area were sold during the third and fourth quarters. All business areas achieved improved profitability in the fourth quarter. The group reports operating profit before amortisation of goodwill (EBITA) of NOK 106 million for the quarter, as compared to NOK 15 million for the fourth quarter of A number of measures were implemented during the third and fourth quarters to strengthen the group s profitability. Reduced headcount, salary cuts, the sale or closure of unprofitable activities and a number of minor measures have reduced the group s cost base at the close of 2003 relative to the previous year. The group s EBITA margin was 9.5% in the fourth quarter as compared to 1.3% in the equivalent quarter of 2002 (6.8% after adjusting for non-recurring items in the fourth quarter of 2002). The fourth quarter operating margin is the highest that the group has achieved since the fourth quarter of The group reduced its overall headcount by 110 in the fourth quarter, principally as a result of restructuring in the Bank & Finance business area. Employee numbers showed a net reduction of 283 over the course of Total headcount at the close of 2003 was 2,504.

2 - 2 - Goodwill amortisation in the fourth quarter was NOK 38 million. By comparison goodwill amortisation and write-downs were NOK 399 million in fourth quarter of Operating profit for the fourth quarter was therefore NOK 68 million as compared to an operating loss of NOK 383 million for the same quarter of Net financial items represented a charge of NOK 4 million in the fourth quarter as compared to NOK 5 million in the same quarter of Stronger cash flow, lower interest margins and positive foreign currency effects contributed to this reduction. The group reports a post-tax profit for the fourth quarter of NOK 46 million as compared to a loss of NOK 312 million for the same quarter in Earnings per share was NOK 0.51 as compared to a loss per share of NOK 3.45 for the same quarter of Cash flow and liquidity The group generated cash from operations of NOK 343 million in the fourth quarter of 2003, up by NOK 102 million from the fourth quarter of 2002 and by NOK 231 million from the third quarter of The improvement is due to normal seasonal variation and measures targeted on improving the group s cash flow. Cash from operations for 2003 was NOK 302 million as compared to NOK 205 million for Net interest-bearing liabilities totalled NOK 397 million at 31 December This represents a reduction from the third quarter of 2003 of NOK 258 million and an increase since the start of 2003 of NOK 54 million. The group s liquidity reserve was NOK 736 million at 31 December This figure includes undrawn credit facilities of NOK 550 million. The liquidity reserve has increased by NOK 240 million since the end of the third quarter of Investment Investment in operations-related fixed assets amounted to NOK 65 million in the fourth quarter as compared to NOK 36 million in the same quarter of IT Operations made several significant investment during the fourth quarter, principally in respect of specific customer projects. Total investment in 2003 was somewhat higher than in 2002, reflecting a shift of emphasis from operational to financial leasing.

3 - 3 - The group s business areas IT Operations This business area comprises both the centralised and remote operation of computer systems, data communications and services related to backup and publishing. The activities of the IT Operations business area cover all industries and sectors, and it operates in Norway and Sweden. NOK million Q4'03 Q4' Operating revenue Salaries and related costs Ordinary depreciation Other operating costs Total operating costs EBITA EBITA % 9,6 % 8,9 % 8,7 % 6,6 % CAPEX No. of employees The IT Operations business area reported turnover of NOK 760 million for the fourth quarter, an increase of 5% from same quarter in Activities transferred from the former Business Consulting area accounted for approximately NOK 18 million of fourth quarter turnover. In addition the business area enjoyed sound underlying growth in its activities that more than outweighed the effect of lower unit prices over the course of the year. The business area s operating profit before goodwill amortisation (EBITA) of NOK 73 million was NOK 9 million (14%) higher than the equivalent quarter in EBITA margin for the fourth quarter was 9.6%, which is the highest level achieved since the fourth quarter of The business area has improved its operating margin through increased turnover and a continuing focus on improving operational efficiency by realising economies of scale. The year-on-year increase in salaries and related costs is due in part to the increase in headcount caused by the transfer of personnel from the former Business Consulting area. Moreover the high level of activity in the fourth quarter, not least in the publishing area, required some use of overtime and temporary staff. At the same time other operating costs were lower as a result of a reduction in property lease costs and continuing cost savings and efficiency improvements in a number of areas. The business area s Swedish activities reported a 7.5% increase in operating revenues for the fourth quarter and sound profitability for the year as a whole. In common with the rest of the group, the business area s activities in Sweden are focusing on realising economies of scale.

4 - 4 - Bank & Finance This business area comprises the sale of software, systems and consultancy services to the banking and finance market. The Bank & Finance business area operates in Norway and Sweden. Markets outside the Nordic region are served through partnership arrangements. NOK million Q4'03 Q4' Operating revenue Salaries and related costs Ordinary depreciation Other operating costs Total operating costs EBITA EBITA % 14,1 % -14,0 % -5,1 % -2,8 % CAPEX No. of employees The Bank & Finance business area reported turnover of NOK 212 million for the fourth quarter as compared to NOK 223 million for the same period in After adjusting the figures for divested activities, turnover for the quarter was in line with the fourth quarter of This represents an improvement in the slow down seen in recent quarters with respect to new sales of software. The business area signed new contracts in the fourth quarter with Sparebank1, Storebrand Bank and the newly established Verdibanken. In addition Bank & Finance signed a contract in January 2004 to supply card services to a group of UK banks in the Channel Islands. The order book for development and software contracts at the start of 2004 was almost double the level seen one year earlier. Bank & Finance reported a NOK 32 million (18%) increase in turnover between the third and fourth quarters of This was a result of normal seasonal variation. The business area achieved an operating profit before goodwill amortisation (EBITA) of NOK 30 million in the fourth quarter of 2003 as compared to a loss of NOK 31 million in the equivalent quarter of 2002 (loss of NOK 2 million after adjusting for non-recurring items in the fourth quarter of 2002). This is the best operating profit reported by this business area since the second quarter of 2000, and represents an EBITA margin of 14.1%. The improvement in the fourth quarter represents an increase of NOK 14 million in relation to underlying EBITA in the third quarter of The improvement in profitability relative to 2002 reflects a lower cost base following the reductions in headcount in 2002 and 2003, as well as the salary cuts announced in the first quarter. The salary cuts have generated a monthly cost saving of NOK 3.5 million starting in May and continuing for the rest of The business area s Swedish activities reported somewhat higher turnover relative to both the fourth quarter of 2002 and the third quarter of 2003, but the quarter produced an operating loss in line with the fourth quarter of The Swedish subsidiary represented a full year operating loss of NOK 11 million for Bank & Finance in Appropriate measures are currently being implemented to improve the subsidiary s profitability. Terra-Gruppen has given notice to terminate its current contracts with EDB Business Partner with effect from end-2004 and end-2005, and is now involved in negotiations with a different supplier. The outcome of these negotiations may affect the business area s turnover and earnings starting in This assumes that any decision to move to a different supplier is implemented by 31 December 2004.

5 - 5 - Telecommunications This business area comprises the sale of software, systems and consultancy services to the telecommunications sector, with a focus on the Revenue Assurance product area and on Mediation and Network Inventory Management Systems in particular. The Telecommunications business area has operations in Norway, the USA, Switzerland, Spain and the United Kingdom. NOK million Q4'03 Q4' Operating revenue Salaries and related costs Ordinary depreciation Other operating costs Total operating costs EBITA EBITA % 11,1 % 6,0 % 10,3 % 4,5 % CAPEX No. of employees Telecommunications business area reported turnover for the fourth quarter of 2003 of NOK 173 million as compared to NOK 157 million in the same period of The improvement is linked to the acquisition of Incatel. This company is now fully integrated into the business area, and is generating turnover and earnings in line with expectations at the time it was acquired. Activity in the United States continues to be at a low level, but there are signs that the extended downturn in this market has passed its trough. The business area now sees more attractive business prospects in the mediation area internationally. Operating profit (EBITA) for the quarter was NOK 19 million, which is in line with 2002 after adjusting for non-recurring items in the fourth quarter of The increase in other operating costs reported for the fourth quarter compared to third quarter 2003 relates to the acquisition of Incatel and the use of sub-contractors on certain major development projects, and is linked to the increased volume of activity for the quarter. The business area continued to maintain strong focus on costs in the fourth quarter, and this had a positive effect on the earnings reported. Parent company/other Parent company/other reported an operating loss before goodwill amortisation (EBITA) of NOK 16 million in the fourth quarter 2003 as compared to an operating loss of NOK 10 million in the fourth quarter of EDB Stradec was sold in the fourth quarter of 2003, and in addition to the NOK 4 million charged in this respect to the third quarter accounts, a further NOK 3 million was recognised in the fourth quarter as a loss on sale of the shares. In addition expenditure on analysis and review work was somewhat higher in the fourth quarter than in previous quarters. This work was completed by the end of 2003.

6 - 6 - Other matters The group has a share option scheme for all employees. Options for a total of 9.5 million shares were outstanding at 31 December These options were granted between November 1999 and February 2002 with exercise prices set at the market share price at the time of issue increased by 1% for each new calendar month to the date of exercise. The next and final opportunity to exercise these options is in May 2004 with the following exercise prices: NOK (3.9 million shares), NOK (4.5 million shares), NOK (0.4 million shares), NOK (0.6 million shares) and NOK (0.3 million shares). The company s Chief Executive Officer was granted a share option agreement when he joined the company in respect of options over 0.6 million shares accrued for a three-year period. This interim report has been prepared in accordance with the Norwegian accounting standard for interim reporting, and uses the same accounting principles as in the company s Annual Report and Accounts. Future prospects Over the course of 2003 the markets in which the EDB operates suffered a downturn in the early part of the year that flattened out in the last two quarters. There is now a general picture of increasing signs of growth in demand, but EDB believes that it will be some time before this has any marked effect on market conditions. The IT Operations business area is seeing growing interest in the company s services, both in Norway and Sweden. Market conditions are characterised by limited organic growth for the companies and other entities that have already outsourced their IT requirements. Market growth will principally come from an increasing number of businesses deciding to outsource all or part of their IT activities to external suppliers. This applies to both the public and private sectors. EDB expects to see an increase in the number of outsourcing contracts placed in the market, but the process involved typically takes some considerable time and requires considerable commitment by the companies involved as they work through the market evaluation and competitive tendering phases prior to awarding the contract. EDB will, in line with its business strategy, seek to prioritise larger businesses as potential customers. The market in which the Bank & Finance business area operates continues to show little enthusiasm for investment, but the level of activity is slowly improving and a modest increase in demand can be expected. The situation in the Norwegian market, which is the main market for this business area, is currently affected by the recently completed merger of DnB and Gjensidige NOR and the effects that this may have on consolidation and demand over the next months. EDB is well placed to participate in this process. The market for the Telecommunications business area is characterised by uncertainty that affects all players in the market, and there are still no pronounced signs of any significant increase in demand for services in the international markets. For EDB the current level of activity in relation to Telenor represents a high volume of business as the group works to make its IT spending more effective. The business area expects a high level of activity to continue throughout Oslo, 28 January 2004 The Board of Directors of EDB Business Partner ASA

7 - 7 - EDB Business Partner Analysis by business area (NOK million) Operating revenue: Q4'03 Q4' Q3'03 Q2'03 Q1'03 Q4'02 Q3'02 Q2'02 Q1'02 TELECOMMUNICATIONS BANK & FINANCE BUSINESS CONSULTING IT OPERATIONS ADMINISTRATION NETTING EDB GROUP Operating profit before goodwill amort. (EBITA) Q4'03 Q4' Q3'03 Q2'03 Q1'03 Q4'02 Q3'02 Q2'02 Q1'02 TELECOMMUNICATIONS BANK & FINANCE BUSINESS CONSULTING IT OPERATIONS ADMINISTRATION EDB GROUP Operating margin: Q4'03 Q4' Q3'03 Q2'03 Q1'03 Q4'02 Q3'02 Q2'02 Q1'02 TELECOMMUNICATIONS 11,1 % 6,0 % 10,3 % 4,5 % 10,2 % 11,5 % 7,7 % 6,0 % 7,6% -6,8 % 10,8 % BANK & FINANCE 14,1 % -14,0 % -5,1 % -2,8 % -40,4 % 7,6 % -7,5 % -14,0 % 5,1% 4,3 % -5,7 % BUSINESS CONSULTING 0,0 % -23,0 % -8,6 % -9,6 % 0,0 % -15,3 % -1,7 % -23,0 % 0,1% -6,8 % -7,1 % IT OPERATIONS 9,6 % 8,9 % 8,7 % 6,6 % 9,2 % 8,6 % 7,3 % 8,9 % 9,0% 5,4 % 3,0 % EDB GROUP 9,5 % 1,3 % 3,8 % 2,7 % -4,5 % 5,5 % 4,0 % 1,3 % 7,1 % 2,0 % 0,8 %

8 - 8 - EDB Business Partner Profit and loss account NOK mill Q4'03 Q4' Operating Revenues 1 113, , , ,4 Cost of goods sold 374,8 373, , ,3 Salaries and related costs 444,9 524, , ,5 Other operating costs 116,4 145,9 643,1 657,3 EBITDA 177,1 81,9 399,2 352,2 Ordinary depreciation 71,5 66,8 234,6 235,4 EBITA 105,6 15,1 164,6 116,8 Goodwill amortization 37,5 46,6 152,0 169,4 Goodwill written-of - 351,9 16,3 356,0 EBIT 68,1-383,4-3,7-408,7 Share in results of associated companies 0,1-2,5-1,8-51,4 Write-down of shares -1,6-11,5-21,2-36,7 Net financial items -4,0-5,2-61,5-49,6 Pre-tax profit (EBT) 62,7-402,5-88,2-546,4 Tax -17,9 90,9 21,4 107,4 Minority interests 1,1 0,0 3,8 - Profit after tax 45,8-311,6-63,0-439,0 Balance sheet NOK mill Goodwill 1 426, ,3 Tangible fixed assets 374,3 398,3 Financial fixed assets 528,6 545,3 TOTAL FIXED ASSETS 2 329, ,9 Accounts receivable 451,2 682,0 Other current receivables 353,3 433,3 Liquid assets 185,7 379,7 TOTAL CURRENT ASSETS 990, ,0 TOTAL ASSETS 3 319, ,0 TOTAL EQUITY 1 595, ,0 Provisions 164,5 157,6 Other non-interest bearing liabilities 10,0 15,9 Loan on special conditions 450,0 450,0 Other interest bearing liabilities 142,4 272,9 TOTAL LONG TERM LIABILITIES 766,9 896,4 Non-interest bearing liabilities 957, ,5 Interest bearing liabilities - - TOTAL CURRENT LIABILITIES 957, ,5 TOTAL LIABILITIES AND EQUITY 3 319, ,0

9 - 9 - EDB Business Partner Cash flow statement and key figures NOK mill Q4'03 Q4' Cash from/for operations 343,0 241,4 302,0 204,8 Operational investments -64,8-35,5-210,0-176,0 Sale of fixed assets 3,0-3,6 2,1 Acquisition of businesses -1,2-76,7-56,9-115,9 Sale of businesses -19, ,6 4,0 Purchase/sale of real estate ,3 Net cash from/for investments -82,2-112,2-278,9-169,5 Debt repayment -319,3-40,2-421,6-226,9 New borrowing - 73,5 201,5 73,5 Tilført ved emisjon 2,0-1,5 - Net cash from/for financing -317,3 33,3-218,6-153,4 Net change in liquid assets -56,6 162,5-195,5-118,1 Liquid assets at start of period 244,2 219,0 379,7 514,6 Currency translation difference on liquid a -2,0-1,8 1,5-16,8 Liquid assets at end of period 185,7 379,7 185,7 379,7 Q4'03 Q4' Key figures per share (NOK) Earnings 0,51-3,45-0,70-4,86 Earnings (post-tax, before goodwill amort.) 0,92 0,96 1,16 0,96 Cash from operations 3,80 2,67 3,34 2,27 Book equity 17,66 18,44 Other key figures: EBITA-margin 9,5 % 1,3 % 3,8 % 2,7 % Equity ratio (as % of total assets) 48 % 42 % Gearing 0,25 0,21 Net interest bearing debt (NOK mill) Average number of shares Reconciliation of changes in equity (exc. minority interests) NOK mill Equity at Changes in eguity: Profit for the year Restatement differences Equity at