2008-02-06
Period 1 January - 31 December 2007 compared with the same period 2006 1)
YEAR-END REPORT
1 January - 31 December 2007
Earnings per share increased by 32 percent
Period 1 January - 31 December 2007 compared with the same period 2006 1)
>>Net sales amounted to SEK 1,440 million (1,116), representing an increase of 29 percent.
>>Operating profit amounted to SEK 111m (83), giving a rise of 34 percent.
>>Profit after tax amounted to SEK 109m (84), an increase of 30 percent.
>>Earnings per share amounted to SEK 1.33 (1.01), representing an increase of 32 percent.
>>Cash flow from operations amounted to SEK 101m (39), a rise of 159 percent.
Fourth quarter 2007 compared with the fourth quarter 2006 1)
>>Net sales amounted to SEK 437m (339), representing an increase of 29 percent.
>>Operating profit amounted to SEK 37m (43), a decline of 14 percent.
>>Profit after tax amounted to SEK 33m (44), representing a fall of 25 percent.
>>Earnings per share2) amounted to SEK 0.42 (0.49), a decrease of 14 percent.
>>Cash flow from operations amounted to SEK 58m (21), an increase of 176 percent.
Significant events further to the end of the year
On 31 January 2008, Acando sold its entire shareholding in AS WMG (Webmedia Group), representing 38.6 percent of the share capital. This will result in a capital gain of SEK 13m in the first quarter 2008. On the same date, Acando acquired the remaining shares in Acando Denmark A/S, representing 49 percent of the share capital, resulting in the company becoming a wholly owned subsidiary of Acando AB.
Dividend
The Board of Directors proposes to the Annual General Meeting of Shareholders that a dividend of SEK 0.50 per share be declared, representing a total of approximately SEK 38.8m.
Repurchase
In accordance with the authorisation granted by the Annual General Meeting of Shareholders, the Board of Directors has adopted the repurchase of Series B shares up to an amount of SEK 30m, with however a maximum of 3,000,000 shares, representing a maximum of 3.9 percent of the total number of outstanding shares.
1) All figures include the operations of Webmedia divested in January 2008.
2) After dilution (as previously).
SUMMARY OF THE PERIOD 1 JANUARY – 31 DECEMBER
All figures include the operations of Webmedia divested in January 2008.
Profit and earnings
Earnings per share amounted to SEK 1.33 representing an increase of 32 percent compared with last year. The equivalent increase in the operating profit of SEK 111m was 34 percent. The operating profit for operations in Sweden rose by 30 percent compared with the same period in 2006. Growth-investments for the subsidiaries in the UK and Denmark have burdened the operating profit, while the subsidiaries in Germany, Norway and Finland have contributed positively to the Group's results. Operations in the part owned Webmedia also gave positive results. The loss-making units in the UK and Denmark have gradually improved their results and are expected to show a profit in 2008.
Sales
In Sweden, sales increased by 12 percent during the year compared with the same period 2006. Sales for the German operations rose by 76 percent compared with the same period last year. The equivalent rate of growth for Finland was 152 percent.
All in all, operations outside Sweden represent 32 percent of the Group's consolidated sales.
Comparative figures are affected by the acquired companies e-motion technology AB and Resco AB being consolidated as of 1 and 16 March 2006 respectively, and that Deva Management has been consolidated as of 1 February 2007. The companies Acando Denmark and Acando UK (previously IQ Consultancy Ltd) have been consolidated as of 1 March 2007, and the Norwegian company Abeo as of 1 October 2007.
SALES AND PROFIT FOR THE PERIOD 1 JANUARY – 31 DECEMBER
(SEK m) Sweden 2) Germany Webmedia Other countries
3) 4) Group elim.
Group
Net sales 976.3 287.3 96.5 98.0 -18.1 1,440.0
Operating profit 1) 82.0 13.6 8.7 6.8 -0.1 111.0
Operating margin 8.4% 4.7% 9.0% 7.0% 7.7%
1) Including Group-wide costs totalling SEK 28.8m that have burdened Sweden with SEK 20.6m, Germany with SEK 7.6m, Other Countries with SEK 0.6m and Webmedia with SEK 0.
2) Deva Management is included as of 1 February.
3) Acando Denmark and Acando UK (IQ Consultancy Ltd) are included as of 1 March. Acando Finland, which has previously been reported separately, is included in the "Other Countries" category as of 1 January.
4) Abeo, Norway, is included as of 1 October.
The Group's consolidated net sales for the year amounted to SEK 1,440m (1,116).
The operating profit was SEK 111m (83), representing an operating margin of 7.7 percent (7.4). Profit after tax for the year amounted to SEK 109m (84).
The corporate tax reported as a cost in the income statement during the financial year 2007 is zero, and is composed of the net of reversed and capitalised tax receivable. The Company has fiscal deficit deductions totalling SEK 592m up to the tax year 2007, of which SEK 235m is deemed to be able to be utilised in the next few years. Deferred tax of SEK 66m calculated on this amount has been taken up as a financial asset in the balance sheet.
SALES AND PROFIT FOR THE FOURTH QUARTER 2007
(SEK m) Sweden Germany Webmedia Other countries 2) Group
elim.
Total
Net sales 275.8 75.6 33.2 60.4 -8.2 436.8
Operating profit 1) 23.6 3.7 2.3 7.4 0.2 37.2
Operating margin 8.5% 4.9% 6.9% 12.3% 8.5%
1) Including Group-wide costs totalling SEK 7.8m that have burdened Sweden with SEK 5.5m, Germany with SEK 2.1m, Other Countries with SEK 0.2m and Webmedia with SEK 0.
2) Abeo, Norway, is included as of 1 October.
The Group's consolidated net sales for the quarter amounted to SEK 437m (339), representing an increase of 29 percent compared with the same period 2006.
The operating profit was SEK 37m compared with SEK 43m in the same period last year, representing an operating margin of 8.5 percent (12.8). The operating profit after tax for the quarter amounted to SEK 33m (44).
NET SALES AND OPERATING PROFIT PER QUARTER
(SEK m) Q4 2007 Q3 2007 Q2 2007 Q1 2007 Q4 2006 Q3 2006 Q2 2006 Q1 2006
Net sales 437 317 343 343 339 246 298 233
Operating profit 37 21 21 32 43 3 16 21
Operating margin 8.5% 6.6% 6.1% 9.3% 12.8% 1.1% 5.4% 9.0%
MARKET AND TRENDS
Sweden
Demand for consultancy services was good in both the full-year and in the fourth quarter. Sales in Sweden increased for the year by SEK 106m to SEK 976m. The operating profit rose in the same period by SEK 19m to SEK 82m, representing an increase of 30 percent. Growth in profits fell however in the fourth quarter when the profit amounted to SEK 24m compared with SEK 38m in the same quarter last year.
This is due to a number of factors, such as fewer available working hours which reduced the profit by SEK 5m, losses in a fixed-price project of SEK 2m, as well as a non-recurring investment in skills enhancement within the "IT Solutions" area in the amount of SEK 3m.
Germany
Demand for consultancy services was good both during the year and in the last quarter. The operating profit for the year was SEK 14m (10), representing an increase of 40 percent. The operating profit for the quarter amounted to SEK 3.7m (0.5), representing an improvement of 640 percent. Results for the year were burdened by a provision for bad debts of nearly SEK 4m and a provision for a fixed-price project of approximately SEK 1m. The operating margin has also been affected by a licence arrangement of about SEK 9.5m without any margin.
The Baltic States and Eastern Europe via the part-owned company Webmedia
The operating profit was SEK 8.7m (8.8) for the year and SEK 2.3m (6.0) for the fourth quarter. Profit after tax was SEK 2.8m for the year. Further to the end of the financial year, Acando has sold all shares in Webmedia. Acando and Webmedia intend to continue their operating project cooperation.
Other countries
Norway: Acando acquired all shares in the Norwegian company Abeo on 28 September 2007. Sales for the Norwegian operations in the fourth quarter were SEK 33.6m with an operating profit of SEK 5.6m. Demand for consultancy services was good for both the full-year and the fourth quarter.
Finland: The Finnish operations developed very well in the second half-year. The operating profit for the full-year was SEK 7.3m (0.5) and SEK 3.6m (-1.2) in the fourth quarter.
Denmark: The newly started operations have burdened the Group's consolidated profit by approximately SEK 6m. The company showed a small profit in December. Acando owns 100 percent of these operations as of 1 February 2008.
United Kingdom: Operations started in the first quarter 2007 with 12 employees. The number of employees has grown by about 80 percent during the year. Operations broke even for the year.
Operations in Denmark and the UK have undergone a considerable development phase during the year. Both countries are expected to positively contribute to the Group's consolidated operating profit in 2008.
FINANCIAL POSITION AND CASH FLOW
The Group's liquid assets including current investments amounted to SEK 71m (136) as of 31 December 2007. In addition, the Group has an unutilised bank overdraft facility of SEK 65m. The equity/assets ratio was 60.0 percent (69.2).
In the second quarter, SEK 101m was paid to the shareholders further to the compulsory redemption procedure resolved by the Annual General Meeting of Shareholders in April, and SEK 11m was paid with regard to the compulsory purchase of the remaining shares in the former Resco AB (now Acando Europe AB). In September, shares in Webmedia and the Norwegian company Abeo were acquired for a total amount in cash of SEK 70m. The change in the equity/assets ratio is primarily due to these two redemption transactions.
Cash flow from current operations for the quarter amounted to SEK 58m (21), and SEK 101m (39) for the full-year. The principal cause of the negative net financial items for the Group in the fourth quarter is a capital loss and write-down of loans related to the divested company "Attribute Webmedia" in Serbia within the Webmedia Group. Other financial costs concern interest on the convertible debenture loan and pension liability in the balance sheet.
EMPLOYEES
The average number of employees during the year was 1,299 (925), and at the end of the year the number of employees was 1,431 (1,167). Of these, 731 (721) are employed in Sweden, 326 (249) in the Baltic States and Eastern Europe (Webmedia), 223 (181) in Germany, and 151 (16) in other countries.
INVESTMENTS
The Group's net investments in property, plant and equipment amounted to SEK 9m (7) for the year.
PARENT COMPANY
Risks for the Parent Company primarily concern the operations carried out in subsidiary form (see description below for the Group).
External net sales in the Parent Company amounted for the year to SEK 0 (0).
The operating loss for the year was SEK -5m (-12).
The Parent Company's net investments for the year were SEK 5m (4).
The Parent Company's liquid assets at the end of the year were SEK 9m (109).
SIGNIFICANT EVENTS FURTHER TO THE END OF THE YEAR
The following events have taken place since the end of the year:
In January 2008, AS WMG purchased all shares that Acando held in WMG (Webmedia Group) and Acando purchased all shares that WMG held in Acando Denmark AS.
Acando and Webmedia have enjoyed a good business relationship over the past two years. The companies intend to continue to further-develop their cooperation within near-shoring. Acando perceives Webmedia as a high-quality partner in several important joint commitments. These will continue to be pursued in the same way as previously.
However, Acando and other shareholders in Webmedia have different viewpoints with regard to future strategy for Webmedia and how the company should be further-developed. The parties have therefore agreed to terminate the shareholding connection and focus on the operative business cooperation.
Acando continues to believe in near/off-shore solutions, but would also like to be open to alternatives in other parts of the world, such as India and Sri Lanka.
Acando and Webmedia have subsequently carried out the following transactions:
• Acando AB has sold to WMG all shares in AS WMG for an amount of approximately SEK 38m, producing a capital gain of about SEK 13m.
• AS WMG has sold to Acando AB all shares in the Danish company Acando Denmark AS, representing 49 percent of shares and voting rights, for an amount of approximately SEK 0.3m. Further to the transaction, Acando holds 100 percent of the shares in the Danish subsidiary, which has 15 employees.
The transaction was completed on 31 January 2008, implying that Acando will cease to consolidate Webmedia as of 1 February 2008. Webmedia had sales in 2007 of SEK 96.5m and a profit after tax of SEK 2.8m. The effect on the Acando Group's results pertaining to the Parent Company's shareholders (profit after tax and minority interests) was SEK 0.1m, representing 0 percent of the equivalent results for the Group. The effect on "earnings per share after dilution" was SEK 0.
OUTLOOK
The Board of Directors believes that the market for management and IT consultancy services will remain favourable in 2008. The Company continues to prioritise organic growth with focus on improved profitability
Acando does not publish any profit or sales forecasts.
RISKS AND UNCERTAINTIES IN OPERATIONS
In order to be able to continue to grow, Acando is dependent on being able to recruit and develop new qualified staff, retain existing employees and achieve a level of personnel costs that is reasonable in relation to prices applied to clients.
The probability of improved price levels is greater than the contrary, despite a standardisation trend in the market that opens up for competition from low-cost countries. For the part of sales linked to clients with framework agreements, potential price changes are dependent on the renegotiation of such agreements. Framework agreements are normally entered into for one or two years. Other risk factors in the Group's operations are fixed-price assignments or similar commitments towards the client, as well as credit risks. Such commitments constitute a limited part of sales. Acando's ever-increasing internationalisation also implies a certain currency risk that is deemed to be limited in as much as the Company endeavours to match income and costs as well as assets and liabilities in the same currency, so that the currency exposure thereby be reduced. Acando's clients are primarily comprised of large companies and organisations with a high level of creditworthiness, implying that the credit risk is deemed to be low.
In conjunction with the signing of assignment contracts, companies within the Acando Group assume responsibility to carry out a defined assignment based on certain conditions and prerequisites. Should Acando not be able to fulfil a commitment or if Acando or its employees grossly neglect the terms and conditions of a contract, the Company could be exposed to a significant and, in extreme cases, unlimited claim for damages. Acando reduces such risk through the ongoing monitoring of projects, special attestation instructions and general liability insurance.
Reference is also made to the section "Risks and Opportunities" on pages 24-25 of the Annual Report 2006.
DIVIDEND
The Board of Directors proposes to the Annual General Meeting of Shareholders that a dividend of SEK 0.50 per share be declared for the financial year, representing a total of approximately SEK 38.8m. With effect as of the financial year 2007, the Board of Directors adopted in conjunction with last year's year-end report the following dividend policy: "The objective is that the long-term dividend level shall amount to at least one third (1/3) of the Group's reported profit after tax pertaining to the Parent Company's shareholders."
Stockholm, 6 February 2008
Acando AB (publ)
The Board of Directors
AUDIT REPORT
This report has not been examined by the auditors.
FORTHCOMING FINANCIAL INFORMATION AND FINANCIAL EVENTS
The Annual Report for 2007 will be published at the end of April 2008 and will be available in the Company's website at www.acando.com and at the Company's offices at Jakobsgatan 6 in Stockholm.
Annual General Meeting of Shareholders
The Annual General Meeting of Shareholders will be held at 3pm on Monday, 19 May 2008 at Salénhuset, Norrlandsgatan 15, Stockholm, Sweden.
Interim report January-March 2008 29 April 2008
Interim report January-June 2008 19 August 2008
Interim report January-September 2008 24 October 2008
Year-end report for 2008 13 February 2009
For further information, please contact
Lars Wollung, President and CEO Tel: +46 (0)8-699 73 09
Per Killiner, CFO Tel: +46 (0)8-699 74 06
www.acando.com Ticker: ACAN
Acando is a consultancy company that in partnership with its clients identifies and implements business improvements through information enabled by technology. Acando provides a balance of high business value, short project times and low total cost.
Further to the divestment of Webmedia in January 2008, the Acando Group has annual sales of approximately SEK 1.3 billion and about 1,100 employees in six European countries. The Company is listed on the OMX Nordic Exchange.
ACCOUNTING PRINCIPLES
The Group's year-end report is prepared in accordance with IAS 34 and RR 31. The application of IFRS is in accordance with the accounting principles set out in Acando's annual report for 2006. The accounts have not been affected by new standards adopted during the year.
The year-end report for the Parent Company has been prepared in accordance with the Swedish Annual Accounts Act and RR 32:06.
Reporting per segment: In view of that the Company's primary segment is consultancy services, the sales and profits for this segment are recorded directly in the income statement.