WKR: Interim report Q2 Semcon AB

Comments by CEO Hans Johansson
-Sales increased compared to the first six months of last year, which shows that we have an attractive range of services. This is thanks to the steady development of our services in close cooperation with the leading industrial businesses in the Nordic region. Growth has mainly been achieved through value-based partnership agreements where we take over responsibility for a specific part of clients’ business activities while signing long-term contracts with them. Joint growth and more efficient business activities are the foundation of successful partnerships.

-Semcon increased its business internationally during the period by following its Nordic clients abroad in line with our long-term aims. The proportion of sales outside Sweden currently amounts to 11%.

-Our strategic commitment in Medical & LifeScience continues to develop positively. We received the first order for our ER/ES logger, which carries out ER/ES validation of electronic data for the pharmaceutical industry.

-Our organisation is equipped for a continued weak market and continues to be adapted in line with changes in the market situation. Growth in our respective focus industries varies. Telecom continues to be lacklustre, while Vehicle, Industry and Medical & LifeScience remain relatively stable. We have long contracts with customers in Telecom and Vehicle, which creates an important stability in operations.

-An increased technology and IT content in products together with a focus on design means that our customers are continuing to invest in developing new products and varieties. Despite current market conditions, the long-term factors driving product development remain in place, which favours Semcon. During the period we succeeded in carrying out a number of large projects involving, FMV, Kockums, Pharmadule/Emtunga, Ericsson and Scania.

Business activities
Sales rose by 4.6% to SEK 632.3 million (604.5 m). Sales in Q2 amounted to SEK 334.0 million (317.7 m), an increase of 4.9%. The operating profit before goodwill depreciation was SEK 26.0 million (48.7 m), representing a profit margin of 4.1%(8.1). Operating profit after goodwill depreciation was SEK 20.9 million (45.5), representing a profit margin of 3.3 % (7.5). Sales increased thanks to our partnership business, greater internationalisation and good growth at Medical&LifeScience. Profits were affected by a continued weak market, especially in Telecom. The Stockholm area was the worst hit, as surplus capacity meant continued pressure on prices.

Business areas		Sales (SEKm)			Growth (%)		Operating profit (SEKm)			Operating margin (%)
	30/6/02		30/6/01			30/6/02		30/6/01	30/6/02		30/6/01
Industrial Design	306.1		299.1	+2.3		13.0		22.3	4.2		7.5
e-Design	246.7		255.6	-3.5		5.1		23.1	2.1		9.1
Technology Management	79.5		49.8	+59.6		2.8		0.1	3.5		0.2
TOTAL	632.3		604.5	*+4.6*		20.9		45.5	3.3		7.5

Industrial Design
Industrial Design focuses on the development and design of products and production systems. Our strong connection to industrial design unites people and technology in a unique way.

Sales increased by 2.3% to SEK 306.1 million (299.1 m) and the operating profit was 13.0 million (22.3 m). The business area recorded stable growth mainly in Vehicle, Medical & LifeScience and Industry. Semcon received further orders from FMV for base containers. The order was for approximately SEK 12 million. Semcon strengthened its position within Industrial IT by employing new staff members and by acquiring products and software ownership/user rights from Done Logistics. Semcon was chosen as the Preferred Supplier by Scania, which utilizes all of Semcon’s competency within product development.

e-Design
e-Design develops embedded IT systems for products and production systems, interactive information, web solutions and web design, systems solutions and also supplies IT products.

Sales amounted to SEK 246.7 million (255.6 m). The operating profit was SEK 5.1 million (23.1 m). The reason for the lower sales figures were the cutbacks carried out as a result of the weak telecom market. However, Semcon continued to change the make-up of its business with Ericsson and signed a partnership agreement for the delivery of consultancy services for data communication. The agreement involves 30 or so employees from Ericsson Norway being employed by Semcon at Asker and Grimstad. The agreement will initially cover assignments up to the end of 2003. Semcon received an additional order, worth SEK 2.2 million, from Kockums regarding technical information. Semcon received a strategically important order within ER/ES validation of electronic data. A logger has been developed for the storage and validation of electronic data for the pharmaceutical industry according to the FDA’s new directive.

Informatic
Informatic continued to see positive growth. The partnership with the Volvo Car Corporation was extended for a further three years. Informatic developed a new IT system for handling all after-market information. The Zooma by Semcon subsidiary developed an e-learning product for launching Saab Automobile’s new 9-3 Sport Sedan.