Ementor AB

Results 3rd quarter 2005

Pressmeddelande   •   Okt 20, 2005 09:54 CEST

20.10.2005 - Press Release


* Revenues MNOK 757.9
* Result before taxes MNOK -28.3
* Cash reserve including unutilised credit facilities MNOK 281.2
* Restructuring activities under way and on track:
- Finnish subsidiary divested
- Divestment of outsourcing businesses in Norway and Sweden agreed
- Independent consulting businesses being established in Norway and Denmark
* Unsatisfactory operating performance in Norway
- Reduction in manpower of approximately 100 persons in Norway which will contribute to improved operating performance in 2006


The result before taxes for continued operations in the third quarter is MNOK -69.7 compared to MNOK -63.8 in the second quarter.

Revenues amounted to MNOK 757.9 in the third quarter, down 9.1% from the corresponding period last year. Third quarter year-on-year revenues are on the same level when adjusted for currency rate changes and reduced sales following the disposal of the Danish product (HW) sales unit in 2004. Service revenues in the third quarter are on the same level as both the second quarter 2005 and the third quarter 2004. Consulting revenues are down 12.1% compared with third quarter 2004. The largest reduction is related to the Business Solutions area in Denmark mainly reflecting the reduction in number of consultants year on year.

The gross margin of 42.7% in the third quarter has improved from 42.0% in the corresponding period last year, and is marginally reduced compared with the second quarter 2005.

Operating expenses in the third quarter were MNOK 383.4, down MNOK 57.0 compared with the second quarter 2005 (excluding unusual items), primarily due to the impact of holiday period costs. Operating expenses were up MNOK 35.8 compared to the corresponding period last year mainly due to different timing of holiday periods, increased cost base in the Swedish outsourcing business and one time cost in connection with SAP implementation in the Group.

Operating profit/loss in the third quarter was MNOK -59.9, compared to MNOK -57.7 in the corresponding quarter last year and MNOK -57.3 in the second quarter 2005. Net financial items were MNOK -9.7 in the third quarter compared to MNOK -7.3 in the same period last year. Profit/loss before taxes for continued operations in the third quarter was MNOK -69.7, compared to MNOK -66.4 in the same period last year. The result for the quarter reflects a significant improvement in Demark and Sweden compared to second quarter 2005, but unsatisfactory results in Norway. Reduction in manpower of approximately 100 persons in Norway will contribute to improved operating performance in 2006. The sale of Ementor Finland Oy to Kuopion Puhelin Oyj generated in the third quarter a profit from discontinued operations of MNOK 41.3, including a gain from the sale of MNOK 40.8 and two months consolidated profits of MNOK 0.5. Profit/loss before taxes in the third quarter was MNOK -28.3, compared to MNOK -68.7 in the same period last year.

Ementor had cash and cash equivalents on hand of MNOK 210.5 as of 30 September 2005. Cash reserve including unutilised credit facilities and excluding restricted cash was MNOK 281.2. Third quarter change in cash and cash equivalents were MNOK -44.1. Cash flow from operations was MNOK -45.0. This includes payments of MNOK -13.7 related to restructuring provisions made in earlier periods. Reduction of debt was MNOK -51.9, and net cash proceeds from sale of investments was MNOK 52.7.

Restructuring process
In connection with the second quarter reporting, the Group announced a plan to concentrate its strategic focus and build on its core strengths as an Infrastructure Solutions provider in Scandinavia. It was announced that the Finnish subsidiary was likely to be divested, the underlying value within the outsourcing operations would be realised on a country by country basis, independent consulting businesses would be established in Norway and Denmark and the cost base would be reduced in line with the needs of the core business. The restructuring process started in earnest in the third quarter and will continue until all necessary measures are completed. On 6 September Ementor sold its Finnish subsidiary to Kuopion Puhelin Oyj realising MNOK 54 in cash. Further, on 3 October Ementor entered into an agreement with ErgoGroup AS to sell it’s Norwegian and Swedish outsourcing businesses. This sale is expected to be closed in November, generating up to MNOK 200 in cash and a minimum of MNOK 90 to MNOK 110. The process of establishing an independent consulting business in Norway is well under way (Avenir AS) and the process is completed in Denmark (Ementor Consulting A/S).

As a result of the above restructuring measures, which will simplify the Groups business significantly, it will now be possible to implement changes which are expected to realise a reduction in annual operating costs of approximately MNOK 100 in Norway and Sweden. The plan includes a reduction in manpower of approximately 100 persons in Norway and further measures to reduce the cost base of the Swedish business by the end of the year. These measures will be implemented during the fourth quarter, and it is expected that a restructuring provision of approximately MNOK 45 will be recorded at this time. On completion of the major restructuring measures in the fourth quarter, an assessment of capitalised costs in the restructured Group will be undertaken and the need for additional restructuring provisions will be considered.

Please go to www.ementor.com/reports for the Q3 report, presentation and www.ementor.com/webcast for video of the presentation.

For further information please contact:
Jo Lunder, President/CEO Ementor ASA, tel. +47 900 80 842
Rune Falstad, CFO Ementor ASA, tel. +47 906 14 482
Karine Mathiesen, Communication Director Ementor ASA, tel. +47 916 26 166