STOCKHOLM, Sweden, Jan. 24, 2002 (PRIMEZONE) -- IBS:
-- The result for the fourth quarter amounted to SEK 75m (last year
48m). The result is within the forecast interval.
-- Due to the weak beginning of the year, the full-year result after
financial items amounted to SEK -39m, compared to SEK 5m in 2000
(the latter figure includes a pension refund of SEK 53m from
Alecta/SPP).
-- The increasing demand for IBS' business systems continues. During
2001, revenue grew by 17%, reaching SEK 2,624m (2,243m). Software
licence sales increased by 20%, to SEK 523m (435m).
-- A cost reduction program has been carried out. The number of staff
per December 31 decreased by 3% to 2,252 persons.
-- After the year-end closing, a new comprehensive strategic alliance
has been announced with IBM, whereby IBM Global Services, the
world's largest information technology services provider, will
sell and install IBS' Virtual Enterprise software. This is
expected to result in a significant increase of future licence
revenue.
IBS is a leading international supplier of Internet-enabled business software and services, with a focus on distribution, supply chain management and customer relations management. IBS has approx. 2,250 employees in 22 countries. IBS' approx. 5,000 customers include ABB, CIBA Vision, Henkel, Miele, Royal Scandinavia, Nautor Swan, and Volvo.
Quarterly Results Continue to Improve, Despite Weak Business Climate
The fourth quarter 2001 During 2001, the Swedish krona decreased in value. Compared to the equivalent period last year, exchange rate fluctuations caused a 6% increase of revenue and costs for the fourth quarter, and 8% for the full year. Profit has not been influenced to any greater extent by the exchange rates, as costs and revenue are balanced in each currency.
The fourth quarter is normally the Group's strongest, and this year is no exception. During the quarter, software licence revenue increased by 6%, to SEK 184m, compared to last year. Here, as in the following analysis, the increase is shown in fixed exchange rates. As shown above, figures have increased by approximately 6 percentage points during the fourth quarter. Due to the relatively slow software sales around the turn of the millennium, customer renewal fees show little increase. New software licence sales increased by 18%, i.e. at a much steeper rate than total sales.
Professional services revenue for the period grew by 8% in fixed exchange rates, reaching SEK 407m. At the same time, the number of consultants decreased by 4%. Invoicing for professional services in the countries converting to the euro increased during the transition to the new currency.
Revenue from hardware sales etc, primarily larger computer servers and so-called Facilities Management, as well as invoiced expenses, grew by 55% during the fourth quarter. After a weak start to the year, the increase in this revenue stream has gradually accelerated, partly due to strong market development for IBM's new servers, but also due to our focus on an expanded cooperation with IBM.
In current exchange rates, total revenue grew by 24% during the fourth quarter, whereof 6% is, as mentioned above, an effect of exchange rate fluctuation and 18% is real growth.
The margin for software licence sales fell by six percentage points to 86%. With the growth in revenue, gross profit increased from SEK 151m to SEK 159m.
A cost reduction program has been implemented and the trend of increasing costs has been broken. During the summer, capacity adjustment was effectuated. The number of employees for the fourth quarter grew by 11, to 2,252, which is 63 fewer employees than during the fourth quarter 2000. Due to this year's fourth quarter having a lesser number of working days and a larger number of sub-consultants being used, the gross margin for professional services remained basically at the same level, 28%. Gross profit grew with the revenue, from SEK 101m to SEK 114m.
Besides marked growth in revenue from hardware etc, the gross margin also grew significantly, from 14% to 20%. Computer sales are often subject to little added value and low margins. However, as regards more advanced servers used by our customers, specialist competence is necessary to be able to specify optimal solutions. In this field, IBS has a strong market position. Gross profit for this part of operations more than doubled, from SEK 22m to SEK 49m.
In all, gross profit for the quarter grew from SEK 274m SEK 322m, or by SEK 48m, thanks to improved figures for all three revenue streams.
Costs for product development, in fixed exchange rates, fell slightly during the quarter, to SEK 56m, which represents 6,6% (7,8%) of total revenue. At SEK 104m, marketing and sales costs changed little and represent a smaller share of total revenue, from 14.1% during the fourth quarter last year to 12.3% this year. Administrative costs, however, grew in fixed rates by approximately 7%, to SEK 88m, mainly due to reservations for the implementation of cost reduction and increasing costs for transport, IT and bad debts. However, these costs have also decreased as a percentage of revenue, from 11.4% during the fourth quarter last year to 10.4% this year. In all, fixed costs for the quarter were more or less the same, compared to the equivalent period 2000, whereas the gross result improved by 18%.
In summary, these figures show that during this difficult period of recession, IBS presents its second-best quarterly result ever. After financial items, pre-tax profit amounted to SEK 71m (50m), surpassed only by the fourth quarter 1999, when pre-tax profit was SEK 90m.
The Year 2001
The increasingly weak global business climate caused companies to further prolong decision-making processes for investment in new business software. In the wake of tough competitive conditions caused by the lagging world economy, a positive effect is that more and more companies are rationalising by investing in more cost-efficient systems. Substantial savings can be achieved by investing in new software that can replace manual processes, optimise supply chain management, integrate e-business and help provide improved customer service.
During the year, IBS' revenue grew by 17%, from SEK 2,243 to SEK 2,624m. If last year's revenue were recalculated according to the weaker 2001 exchange rate, approximately 8% for the IBS country mix, the adjusted revenue increase would be 9%. Acquired units represent about 6% hereof, organic growth in comparable units thus representing a growth of about 3%. At the same time, the average number of employees in these units fell by 6%, which means that price and efficiency growth was approximately 9%.
At the beginning of the year, an Australian company with some 35 employees was acquired, as was a French company with some 15 employees. In addition, a smaller company in Sweden with 4 employees was acquired. During the fourth quarter, another French company was acquired, adding a further 10 employees. Our dedicated Internet consulting unit has been integrated with regular unit operations.
Revenue stems from the following streams:
-- Software SEK 523m (435m) -- Professional services SEK 1,437m (1,305m) -- Hardware etc. SEK 664m (503m)
During the first part of the year, budgeted costs were not in parity with actual revenue. Therefore, a cost reduction program was initiated in April, and compared to budget, it has lowered costs by some SEK 50m. At the same time, software sales grew by 20%, in fixed rates by 12%. Professional services utilisation and revenue have also developed satisfactorily. Lower costs and increased revenue turned the negative profit trend from 2000 and the first quarter of 2001.
The last three quarters have all shown an improved operating result compared to 2000. However, the weak start to the year led to a pre-tax loss of SEK -39m, compared to a SEK 5m profit for 2000. The latter year, however, included a SEK 53m pension premium refund from Alecta/SPP. This is the second year out of 24 in business that IBS shows a pre-tax loss.
Development during 2001 was also characterised by:
-- A successful launch of a new product generation and a new
industry- specific solution, both of which have won market
interest and acclaim.
-- Growing professional services revenue (+2%) and a lower number of
consultants (-4%), led to strong growth of revenue per consultant.
Margin improvement was, however, reduced by severance fees and a
temporary increase in sub-consultant utilisation.
-- Rapidly growing volume and gross profit for servers and so-called
Facilities Management.
-- Continued international activities targeting long-term growth of
operations in the USA, Australia, South East Asia, Italy and Latin
America.
After the year-end closing, a new comprehensive strategic alliance has been announced with IBM, whereby IBM Global Services, the world's largest information technology services provider, will sell and install IBS' Virtual Enterprise software.
Software
Integration and automation are predicted to become one of the industries fastest growing business areas. To meet these needs, IBS has developed a new generation of business software, Virtual Enterprise. The software complements our ASW system very well. It can also integrate other ERP systems within a group, as well as suppliers, customers and business partners. The software is unique as it has its own inherent business logic for e.g. sales, procurement, collaboration, logistics and business analysis. The new alliance with IBM Global Services indicates the potential that the world's largest IT services company has seen in this product range.
IBS' ASW business software is a leading solution for supply chain management. The latest release has been well-received by the market. The software has also won international attention for its exceptional performance, which allows for the handling of up to 2.9 million orders per hour.
Investment and Financial Status
Group investment in equipment amounted to SEK 43m (57m). Investment in new units amounted to SEK 15m (35m). During the year, SEK 211m (200m) was invested in product development, whereof SEK 69m (46m) was capitalised. Net borrowing during the year amounted to SEK 83m.
Cash flow from operating activities amounted to SEK 60m (-32m). Cash flow after investment amounted to SEK -112m (-178m).
From Dun & Bradstreet, IBS has received AAA rating, thus being one of the few Swedish companies to achieve the highest level of credit rating.
Cash and liquid assets including short-term investment per 31 December amounted to SEK 160m (183m). In addition, the Group has unused credit facilities amounting to SEK 124m (153m). Cash, liquid assets and unused credit facilities thus amount to SEK 284m (336m). Current assets represented 131% (151%) of current liabilities. Group equity amounted to SEK 724m (757m) and the equity to total assets ratio was 43% (51%).
The Parent Company
Parent company net revenue amounted to SEK 151m (136m) and pre-tax profit was SEK -68m (1m). Financial income includes dividends and Group contribution from subsidiaries amounting to SEK 35m (94m). During the year, the Parent Company invested SEK 5m (2m) in equipment.
Staff
The number of employees per 31 December was 2,252, compared to 2,315 at the end of 2000. The decrease is mainly due to staff reduction in the USA and the Nordic countries. The average number of employees was 2,238 (2,348), a 3% decrease.
The IBS Share
Over the last ten years, the IBS share has been one of the top ten investments on the Stockholm Stock Exchange. However, the share price at the end of the year, SEK 17 per share, represents a 10% decrease over the year 2001. The total number of shares per 31 December was 79.6 million. During the year, 500,000 IBS B shares have been issued in conjunction with the acquisition of an Australian company.
New accounting principles for 2002 Starting 2002, IBS will adapt the depreciation period for product development to Swedish industry practice, i.e. from three to five years. Furthermore, depreciation of capitalised costs for product development will be booked as product development costs instead of costs for goods sold, as has previously been the case.
The Future
It is generally predicted that the IT industry will continue to operate under difficult market conditions during 2002. However, many analysts predict that business systems based on standard software will become one of the fastest growing segments within the IT industry during the year.
The expanded alliance with IBM and IBM Global Services will generate initial short-term costs for both parties, but in the long term, it is expected to provide important synergies. This is an important step in our new and more focused plan to become a world-leading supplier of supply chain management systems for mid-sized and larger international companies. If the collaboration develops according to plan, IBS' licence revenue from this new market channel will over a three-year period become as large as this year's new software licence sales. The focus on specific industries is also expected to increase the Group's licence revenue and its capacity to serve larger customer companies.
Professional services utilisation is expected to develop well. During 2002, the implemented program for Group cost reduction will achieve full effect. The pre-tax margin for 2002 has been budgeted within a 1-2% interval. This is lower than IBS' average margin target over a business cycle, but considerably better than the previous year.
AGM and Dividends
The Board will invite shareholders to attend IBS' Annual General Meeting on 17 April, 2002. The Board proposes that no dividend be paid for 2000.
Information Plan:
-- The annual report and AGM documents will be sent out during week
no. 12.
-- Quarterly reports will be published 17 April, 17 July and 17
October.
-- The year-end report for 2002 will be published 23 January, 2003.
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The following files are available for download: www.waymaker.net/bitonline/2002/01/24/20020124BIT00660/bit0001.doc The full year-end report www.waymaker.net/bitonline/2002/01/24/20020124BIT00660/bit0001.pdf The full year-end report