ConNova Group AB: Preliminary Year-End Report January - December 2001 (with link)


STOCKHOLM, Sweden, Jan. 30, 2002 (PRIMEZONE) -- ConNova Group AB:

Group operations in brief

Order intake. After a certain recovery in the systems market during the first six months of this year, the autumn's downward economic trends have delayed systems investments among our customers. Order intake rose, however, by 146% to SEK 24.9 million during the year compared with the same period the previous year (SEK 10.1 million). The order book total at the end of the period was SEK 18.0 million, an increase of 100% compared with the previous year (SEK 9.0 million).

Results. The increase in order intake has not had an impact on revenues during the year. This is due to a small opening order book total and the fact that several orders received concern long-term outsourcing contracts and maintenance agreements. This will provide ConNova with a higher and more stable flow of revenues, but will reduce short-term revenues. Revenues this year amounted to SEK 14.8 million (SEK 25.8 million). Expenses during the period amounted to SEK 60.6 million (SEK 86.8 million excluding items affecting comparability). The pre-tax loss was SEK 45.2 million (-SEK 75.1 million including items affecting comparability). All product development expenses, totaling SEK 14.9 million (SEK 17.8 million) have been charged to the results. In July, ConNova Systems AB initiated a cost reduction programme, which has now essentially been completed. Running cost levels have been cut by approx. 50% (not including the acquisition of Billiant AB) and this started to have an impact during Q4.

Systems. The period under review saw the commencement of deliveries of BizManager to Chinese Channel in London. Systems maintenance and outsourcing services have been delivered to existing customers. The latest version of BizManager is a complete standard product that can be delivered with a relatively small work input from ConNova. A scaled-down version of BizManager has been launched for small and medium-sized telecom and media operators.

TVX. Our subsidiary, ConNova TVX AB, which handles customer service on an assignment basis, developed positively during the period. Demand for outsourcing services rose and TVX landed several new assignments. TVX also started its first outsourcing assignment within the hardware industry during the period. The assignment covers technical support for an advanced consumer product in the Swedish market and will employ around six people from the outset. Furthermore, TVX's main competitor in the TV market wound up its operations in the autumn, and TVX is currently conducting negotiations with several TV channels that lack a distributor.

Acquisition. ConNova has an attractive product for customer management, a number of reference clients in the TV segment, as well as an outsourcing operation with a positive cash flow. The most important task for ConNova now is to reach larger sales volumes. During the year, ConNova actively sought suitable companies and this resulted in ConNova acquiring Billiant AB. This means that ConNova can now improve its offering for the existing TV market and, more importantly, work up what is presently a relatively undeveloped market for small and medium-sized telecom operators. ConNova's opportunities in this market are not only strengthened by the Billiant product itself but also by the existing reference customers for this product as well as new sales staff with established business networks.

Financing. An extraordinary shareholders' meeting at ConNova on December 21 resolved to carry out a new share issue with preferential rights for shareholders. The issue gives holders of two shares in ConNova the right to subscribe for three new shares at a price of SEK 2.25 per share. This will give ConNova a capital contribution of a maximum of SEK 25.4 million before issue costs. A guarantee consortium has agreed to subscribe for shares to the value of SEK 20.5 million.

New share issues and warrants programme

The acquisition of Billiant AB was conducted via a non-cash issue of 2,207,200 new shares, which will boost the company's capital by SEK 9.1 million. The extraordinary shareholders' meeting of December 21 also approved a new share issue worth SEK 25.4 million, to be carried out by the distribution of 11,299,065 shares at SEK 2.25 each. A guarantee consortium, which includes ConNova and Billiant's principal owners, was formed. Compensation for the guarantees of SEK 20.5 million put up by the consortium will amount to 10% of the guarantee undertaking. This claim on ConNova has been offset through a new share issue of a total of 911,110 shares, which was also approved at the extraordinary shareholders' meeting of December 21. The guarantee consortium will secure financing equivalent to SEK 12.7 million until the issues have been completed. Of this amount, SEK 10.8 million was paid in December and SEK 1.9 million in January 2002.

More information about the current new share issue (the subscription period runs from January 28 up to February 11, 2002) can be found in the prospectus. This is available in Swedish on the company's Web site and can also be ordered from the company or Mangold AB. All addresses and telephone numbers are listed on the last page.

An extraordinary shareholders' meeting on December 21 also approved the Board of Directors' proposal for an incentive programme for issuing a maximum of 1,320,000 warrants with an expiry date of August 31, 2004 mainly to the group's employees. The exercise price will be 200 per cent of the average volume-weighted price paid for the company's share during the period that corresponds to the actual subscription period for the agreed preferential rights issue. The warrants programme, which has a subscription period in 2002, will, if fully exercised, result in a dilution of 6.6%, as long as the new share issue is fully subscribed.

Results and liquidity

Net sales during the year amounted to SEK 14.8 million (SEK 25.8 million). The pre-tax loss amounted to SEK 44.9 million (-SEK 75.1 million including items affecting comparability). Expenses for the period totaled SEK 60.3 million (SEK 86.8 million excluding items affecting comparability), of which SEK 14.9 million related to internal product development (SEK 17.8 million). The reduced expenses are mainly a result of implemented staff reductions.

A provision for bad debt losses of SEK 3.1 million was charged to the result from October to December due to non-payments by a customer in Spain. There was also a tax cost of SEK 9.8 million, which related to a reduction in the company's deferred prepaid tax. In total during the year, the deferred prepaid tax has been reduced by SEK 22.9 million, which has been charged to the result as a tax cost. The reason for the changes to deferred prepaid tax is that a combination of the recession and delayed orders has forced the company to lower its profit forecasts. The remaining deferred prepaid tax, SEK 12 million, is estimated by the Board of Directors and management to be well motivated by the company's profit forecast for the next three years.

Available funds in addition to expected customer payments and the contribution from the agreed share issue all give the company a satisfactory capitalization.

General accounting principles

This preliminary report has been prepared in accordance with Recommendation No. 20, Interim report, of the Swedish Financial Accounting Standards Council. The company follows the accounting principles and calculation methods used in the latest annual report, with the exception of the changed estimation and assessment of the deferred prepaid tax as mentioned above. The company's management and Board of Directors expect to be able to utilize the reported deferred prepaid tax over a three-year period against tax-related surpluses that arise.

As Billiant AB was acquired on November 30, 2001, the company's balance sheet has been included in the consolidated balance sheet on the balance sheet date. Any Billiant AB results that are attributable to the time preceding the acquisition have not been included in the consolidated income statement.

The current new share issue, which has been included in the reporting of changes in the group's equity capital, relates to prepayments and accrued expenses in the current new share issue.

Organization

At the end of the year, the number of employees amounted to 35 (excluding the Billiant acquisition), of which three have been given notice of termination. This can be compared with 51 at the same time last year. In addition, the group has, through the acquisition of Billiant AB, received an additional 17 employees, of which seven have been given notice of termination. The greater part of Billiant's existing operations (including software rights) was transferred in December 2001 to ConNova Group AB and ConNova Systems AB. In November, Anders Ericsson took over as Managing Director, replacing Claes Rossby who was acting Managing Director since last summer. Anders Ericsson joined us from the acquired Billiant AB were he was Managing Director.

Expectations for 2002

The merger with Billiant will strengthen our position for 2002 through a broadening of our product range and the additional market coverage provided by the acquisition. In 2002, the company will increase its focus on the outsourcing services offered via ConNova TVX AB. The company has initiated a working up the segment for ASP (Application Service Provider) and the results of this will be evaluated during the spring. Next year, the group expects to more than double its sales in relation to this year. The cost framework for 2002 is planned at around SEK 40 million and the group expects to reach break even on a monthly basis in the last quarter of next year.

Annual General Meeting and proposed dividend

The Annual General Meeting will be held on April 26, 2002. The Board of Directors proposes that no dividend payment be made to shareholders for 2001. The 2001 Annual Report is expected to be published on March 22, 2002 and will be available at the company and on the company's Web site. The Annual Report will be distributed to shareholders and others who so request it.

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The full text report, with all financial tables, is available at thefollowing URLs:

http://www.waymaker.net/bitonline/2002/01/30/20020130BIT00640/bit0001.doc Full Year-End Report

http://www.waymaker.net/bitonline/2002/01/30/20020130BIT00640/bit0001.pdf Full Year-End Report



            

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