MALMO, Sweden, May 6, 2003 (PRIMEZONE) -- Teleca AB (publ) (Stockholm:TELCb):
Good growth and strong international business
-- Sales increased 50% to SEK 645 M (431 M). Excluding
acquisitions sales increased 25%
-- Strong Mobile Device business. Start-ups in Korea, Germany and
Japan this year
-- Obigo sales increased to SEK 24 M (7 M)
-- Operating profit (EBITA) amounted to SEK 44 M (44 M).
-- The margin (EBITA) was 6.8% (10.1%). A significant increase in
margins is expected during the second half of the year due to the
distribution of Obigo royalties and international start-ups
-- Forecast for 2003 remains: Significantly increased sales and
profit
The Teleca Group
Teleca is an international consulting company developing and applying advanced technology. The company has more than 2,500 employees with operations in 15 countries in Asia, Europe and USA, of which 32% are based outside Sweden. Revenue outside Sweden was 44%.
The company's business concept is to strengthen the customers' market position and time to market. Core values are honesty, reliability and hard work. Teleca builds and integrates solutions for technology and software intensive customers worldwide in the following segments:
-- Automotive. Teleca offers a complete range of services to the
automotive industry that includes in-vehicle electronics and
software development, industrial IT & automation and services for
developing after sales concepts that focus on business benefits.
-- Life Science. Teleca's complete range of services covers
everything from expert advice to turnkey projects, with a focus on
medical equipment, biotechnical instruments and products, and the
optimisation of production processes in the pharmaceutical industry.
-- Enterprise. Teleca works primarily with public authorities,
banks and financial institutions. The services offered range from
expert advice to taking on total responsibility for large
development projects. The aim is to use Teleca's expertise and
commitment to quality to ensure that customers see a quick return
on their IT investments.
-- Operators. Teleca acts as systems integrator and partner to
network operators, supplying complete solutions based on
third-party products that are tailored to and integrated with
customers' systems. Teleca is responsible for the operation,
maintenance and support of systems, as well as various
implementations of process development and training in customers'
organisations.
-- Mobile Devices. Teleca develops and integrates systems,
software and electronics for handsets, smart phones, PDAs
(personal digital assistants) and mobile terminals. Teleca also
offers services related to its Obigo application suite.
-- Telecom Equipment. Teleca develops complete solutions for
manufacturers of telecommunication equipment and closely
associated technical areas. This includes the development of
embedded systems with both electronics and software, for example,
GPRS nodes for 2.5G and 3G and other telecom nodes.
-- Industrial. Teleca's expertise in industrial IT and automation,
which forms part of Teleca's Benima brand, is characterised by
turnkey solutions. A common factor among Teleca's Industrial
segment customers is that they are increasingly using information
technology (IT) to automate their processes and make them more
efficient, often by connecting process- and production- control
systems to their business systems.
Customers rely on the engineering skills of the Group across the range from small devices such as mobile phones and medical devices to large- scale operations like financial networks, telecom networks and production plant control.
Examples of customers of the Group are; ABB, AMS, Ericsson, 3, Motorola, Nokia, Orange, Panasonic, Saab, Sagem, Samsung, Siemens, Sony Ericsson, T-Mobile, Telia, Thales, Vattenfall, Vodafone and Volvo.
One reason why Teleca achieves growth and stable performance is its broad customer base with a good industrial and geographical spread. The main segments are Mobile Devices 32%, Telecom Equipment 19%, Operators 15%, Industrial 14%, Life Science 8%, Enterprise 8% and Automotive 3%.
Business and market update
The start of 2003 has been positive in areas including Mobile Devices, Operators, Obigo, UK and Italy. Teleca is growing well due to its strong international business and continues to take costs in order to deliver growth.
Local markets in Sweden and France are still challenging with turbulence in the industrial and automotive segments. Stockholm and Gothenburg are most affected by the continued weak markets. In France, resource-hire consulting has weak demand while higher-value solutions show some promising signs. Efficiency measures have been taken with some layoffs in Trollhattan, Stockholm and France.
Obigo performed slightly ahead of plan in Q1 due to some contracts being signed in Q1 ahead of Q2. Sales of Obigo increased substantially in Q1 to SEK 24.4 M (6.8M) and operating result was SEK -2.4 M. Excluding Obigo, Teleca's EBITA profit in Q1 was SEK 46 M compared with SEK 39 M in Q4 2002. Since the introduction of royalty based contracts at the end of 2001, and a forecast of 120 million devices to include Obigo in 2003, royalties will start to have an increasing positive effect on the results from Q3 and onwards. The effect of support contract renewals is expected to deliver additional profits specifically for Q4. The full year forecast for Obigo 2003 remains firm with an EBIT of SEK 20 M.
The Swedish Krona strengthened significantly against the US dollar and UK sterling during 2002. If the exchange rates had remained the same as Q1 2002 then Teleca's Q1 result would have been approximately SEK 14 M higher. This has particularly affected Teleca's mobile device business. However, this is also a segment with good growth and it is expected that the exchange rate effects on Teleca's results will be compensated with more higher value services in the coming quarters.
The ongoing focus on sales has resulted in a slight increase in utilisation to 68.5% during Q1 compared to 68.0% during Q4 2002. However, price pressure has affected the margin. The main effect on prices relates to market conditions during 2001/2002, which has had a delayed effect on average price. International prices for high-value solutions within the Operators and Mobile Devices segments are good. This is expected to help the average price improve over time as these markets show stronger growth.
The Industrial segment has improved compared to Q4 2002, with a stable outlook on low levels. In contrast, sales in the Automotive segment, particularly Sweden, have dropped significantly to 3% of total sales, compared to 7% in 2002. This has resulted in the closure of the office in Trollhattan. The demand from vehicle makers in Sweden is expected to remain weak for some time while demand from the suppliers to the car manufacturers remains good.
The Telecom Equipment segment is stable with reasonable margins due to long-term outsourcing agreements in Sweden, France and Norway. Life Science is improving with 8% of total sales compared to 7% in 2002. Over- capacity on local markets has created some price pressure in these segments.
Positive trends continue in Mobile Devices particularly in Asia, with Obigo, Symbian and Nokia's Series 60 Platform being driving forces. Sales in Asia have more than doubled compared to Q1 2002. The new operation in Korea is developing well with 16 staff employed at the end of the period. After start-up costs in Korea during Q1 the business is expected to continue to grow steadily during 2003 with good margins.
The huge opportunity for Teleca in Japan was reinforced with Sales in Q1 that amounted to approximately 1% of total sales. With this success, and the positive trends in Mobile Devices, a decision was taken to establish a new Teleca subsidiary in Japan. Start-up activities will occur during Q2 and the business is expected to be fully operational during Q3.
Sales by country are shown in the following table.
Sweden 56% UK 8% France 7% Norway 5% Denmark 4% Germany 4% Italy 4% Finland 3% Korea 3% Japan 1% USA 1% Rest of the world 3%
Approximate sales per country based on invoicing addresses
Major components of Geoworks' UK operations including 27 staff have been fully integrated and consolidated from February with good margins. These operations have significantly strengthened Teleca's experience in Mobile Devices, in particular the strong Symbian-OS market.
The acquisition of YacCom in January with 34 employees has strengthened Teleca's position in the Mobile Device and French markets. YacCom has added valuable experience in the development of Man-Machine Interfaces (MMI) for mobile devices and continues to be profitable with good margins.
During the period Teleca announced the start-up of a new subsidiary in Nuremberg, Germany with an initial 48 employees. At the same time Teleca signed a new development agreement with Ericsson Mobile Platforms, which runs for a two-year period. The business is operational from Q2 and is expected to have reasonable margins. The business shows a very exciting potential for growth on both the local German and Mobile Device markets.
Due to the Obigo royalty distribution effect and start-ups in Korea, Germany and Japan, where substantial revenue already exist, a significant increase in margins is expected in the second half of the year.
The global economic uncertainty has delayed projects. With a normal climate for corporate investments utilisation would increase a few percentage points. In addition to this, Obigo has excellent sales growth with costs that are not expected to increase significantly in the coming years. This will increase Teleca's margin. Teleca's goal of 15% margin (EBITA) is within reach. Sales and earnings
Sales during the first quarter increased 50% to SEK 645M (SEK 431 M). Sales outside Sweden accounted for 44%. Sales per employee increased to SEK 267 thousand (SEK 234 thousand). The increase compared with Q1 2002 is due to a number of factors including consolidation effects, more available hours, higher utilisation, software sales (including Obigo) and revenues from sub-consultants.
Excluding acquisitions, organic growth was 25% and part of this is due to outsourcing agreements with Ericsson in France and Norway. Excluding outsourcing agreements organic growth was 12%.
Operating profit before goodwill amortization (EBITA) amounted to SEK 43.6 M (SEK 43.7 M). The margin (EBITA) was 6.8% (10.1%).
Profit after financial items amounted to SEK 12.9 M (SEK 22.0 M).
Personnel
The average number of employees increased 32% to 2,420 (1,840). The number of employees at the end of the period was 2,520 (2,374 December 2002).
Liquid funds and financial position
The Group's liquid funds and other interest bearing assets amounted to SEK 209 M (SEK 236 M December 2002). This includes an interest-bearing loan to Sigma AB of SEK 43 M, which will be settled this year.
The Group's interest bearing net debt amounted to SEK 245 M (SEK 175 M December 31, 2002). The increase in net debt is due to temporarily increased working capital in large international projects and acquisitions. Included in the net debt are loan notes to the sellers of Teleca Ltd of SEK 153 M, which will be settled this year. The net debt/equity ratio was 12% (9% December 31, 2002).
Group shareholders' equity amounted to SEK 1,959 M (SEK 1,976 M, December 2002). The equity/assets ratio was 66% (67% December 2002).
Investments
The Group's investments during the period totalled SEK 42.1 M, of which SEK 24.5 M was invested in goodwill. The remaining SEK 17.6 M was invested in equipment, software development and IPR.
The group has recorded SEK 6.9 M as intangible fixed assets due to investments in Obigo software development arisen during the first quarter. Depreciation for the period amounts to SEK 2.1 M. The deprecation period used for software development is 3 years.
Acquisitions during the period
Teleca and Geoworks entered into an agreement whereby 27 Geoworks' UK staff were transferred to Teleca from the 1st February 2003. Teleca has also acquired some assets and assumed an office lease from Geoworks UK subsidiary. Teleca has also reached agreements with customers to assume responsibility for Geoworks' projects.
Teleca has acquired the consulting company YacCom in Rennes, France, with 34 employees. The acquisition is part of Teleca's strategy to build a global business within Mobile Devices and strengthen its position in France.
Parent Company
Sales during the period totalled SEK 12.3 M (SEK 7.7 M). After net financial items, a profit of SEK -3.0 M (SEK 5.0 M) was reported. Liquid funds totalled SEK 151.5 M (SEK 230.8 M).
During the period, the Parent Company invested SEK 42.4 M in shares in subsidiaries. In addition, SEK 2.0 M was invested in equipment.
Important events after the period
Teleca has decided to open a new subsidiary in Tokyo, Japan, which will be operational during Q3 2003. During 2002, Teleca started a local sales campaign in Japan, directed at mobile device customers, and has successfully developed new business with a number of leading companies. The new subsidiary will further strengthen Teleca's Mobile Device business in Asia, which continues to perform very well with strong demand.
A new subsidiary, Teleca Systems GmbH, has been opened in Nuremberg Germany. The company is operational from April.
Forecast
There has been a positive start to 2003 with good growth and strong international business. Weak local markets in Sweden and a downturn in the industrial and automotive segments have been addressed with increased sales efforts and efficiency programs.
Due to Obigo royalties, start-up costs in Korea, Germany and Japan, and costs of efficiency improvements in Sweden, the second half of the year is expected to generate a higher part of the full year profit compared with previous years.
The Board of Directors' forecast for 2003 for significantly increased sales and profit remains.
Accounting principles
This Interim report has been created in accordance with the Swedish Financial Accounting Standards Council recommendations and declarations. The same accounting principles and calculation methods have been used in the most recent Annual Report, with the additions described below.
During the year, the Swedish Financial Accounting Standards Council issued a number of new recommendations.
As regards this interim report, the Group is affected by recommendation RR22, dealing with the reporting of overdraft facilities. This means that, as of this interim report, the Group's overdraft facilities are reported as a current liability. The comparative data have been duly adjusted. However, the aim of the overdraft facility is long-term.
Forthcoming report dates
Six-month interim report (Q2) 2003: July 17, 2003 Nine-month interim report (Q3) 2003: October 21, 2003 Year-end report (Q4) 2003: February 13, 2004
Telephone conference
Teleca will be presenting the company and the Interim Report during a telephone conference held at 9.00 AM (CET) at Operaterassen, Stockholm, on May 6, 2003. The conference will also include a Question and Answer (Q&A) session with President & CEO Nick Stammers. Dial in number: +46 8 562 189 91 The presentation can also be viewed on the Internet: www.teleca.com
This Interim Report has not been subject to an examination by the company's auditors.
Stockholm, May 6, 2003 Teleca AB (publ) (Corp. reg. no. 556250-3515)
Board of Directors
The interim report may be ordered from the Company or downloaded from Teleca's website. www.teleca.com
For further information, please contact:
Nick Stammers, President and Chief Executive Officer, Teleca AB Mobile phone: +44-7768-32 35 35 e-mail: nick.stammers@teleca.com Thomas Pantzar, Executive Vice President, Teleca AB Tel: +46-31-744 80 10, mobile phone: +46-703-79 18 30 e-mail: thomas.pantzar@teleca.com Andreas Zartmann, Chief Financial Officer, Teleca AB Tel: +46-8-579 116 04, mobile phone: +46-702- 17 75 13 e-mail: andreas.zartmann@teleca.com Johannes Rudbeck, Investor Relations, Teleca AB Tel: +46-8-579 116 16, mobile +46-705-82 56 56 e-mail: johannes.rudbeck@teleca.com
This information is also available in Swedish.
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