SEMCON: Interim Report January-September 2015

Regulatory News:

Semcon AB (STO:SEMC)

Even though all business areas reported positive earnings in Q3, this report is generally characterized by weak results. The Engineering Services Nordic business area’s profit for the quarter was negatively affected by investments in growth and a lower utilization rate as a result of new recruitments. Engineering Services Germany, like other companies in Germany, is continuing to adapt its activities to new legislation concerning the increased share of deliveries with project responsibility. This is in line with our strategy of increasing the number of project deliveries and we are currently actively working to streamline our organization in Germany, with the highest priority being given to profitable growth. The appointment of a new business area president is an important part of this initiative. We are also following developments at Volkswagen very carefully. We haven’t so far seen any short-term effects to our working relationship with them, but we are preparing ourselves to handle any possible changes. The Product Information business area concluded sales to one of the major customers in China, which negatively affected results. It is however pleasing that the business area signed a new international partnership deal in the quarter. This is once again proof that our global delivery model is competitive.

Third quarter

• The operating income was SEK 611 million (612) and organic growth was -2%

• The operating profit was SEK 13 million (32), giving an operating margin of 2.2% (5.2)

• The profit after tax was SEK 9 million (23)

• Earnings per share (EPS) after dilution was SEK 0.51 (1.26)

January-September

• The operating income was SEK 1,920 million (1,995) and organic growth was -5%

• The operating profit was SEK 19 million (76), giving an operating margin of 1.0% (3.8)

• The profit after tax was SEK 12 million (53)

• Earnings per share (EPS) after dilution was SEK 0.66 (2.93)

• The equity/assets ratio was 47% (49)

• Return on shareholder’s’ equity was 5% (11)

Income and result

Third quarter

The operating income amounted to SEK 611 million (612). Organic growth, adjusted for currency effects, acquisitions and divestments, amounted to -2 per cent. The operating profit amounted to SEK 13 million (32), giving an operating margin of 2.2 per cent (5.2). Compared with last year, all business areas, except Engineering Services International, reported worse results. The Product Information business area’s results were negatively affected by sales to one of the major customers in China concluding in Q3. Net financial items amounted to SEK -1 million (-1), giving a profit before tax of SEK 12 million (31). The tax expense for the quarter amounted to SEK 3 million (8). The profit after tax amounted to SEK 9 million (23) and EPS after dilution was SEK 0.51 (1.26).

January-September

The operating income amounted to SEK 1,920 million (1,995). Organic growth, adjusted for currency effects, acquisitions and divestments, amounted to -5 per cent. The business area Engineering Services Germany, adjusted for currency effects, reported lower income of 12 per cent, due to the transition underway in the German market. Last year’s sales also included a large portion of purchased goods and services in some projects. The operating profit amounted to SEK 19 million (76), giving an operating margin of 1.0 per cent (3.8). The Engineering Services Germany business area reported significantly weaker results due to the drop in sales and restructuring costs of SEK 20 million (2). Restructuring costs affected the Group’s overall operating profit by SEK 22 million (6). Net financial items amounted to SEK -3 million (-4), giving a profit before tax of SEK 16 million (72). The tax expense for the period amounted to SEK 4 million (19). The profit after tax amounted to SEK 12 million (53) and EPS after dilution amounted to SEK 0.66 (2.93).

Financial position

The operating cash flow from current activities was SEK -107 million (-43). Cash flow is seasonally weak in the first three quarters of the year, but this year it was also affected by weaker operating profit compared with previous year. Investments in hardware, licenses, office supplies and equipment amounted to SEK 29 million (20). The Group’s liquid assets amounted to SEK 43 million (76) with additional non-utilized credit of SEK 179 million (230) as at 30 September. The Group’s credit agreements were extended at the start of Q4 and will run until October 2018. Shareholders’ equity amounted to SEK 617 million (648) and the equity/assets ratio was 47 per cent (49). During Q2 a dividend worth SEK 45 million (45) was paid to shareholders. In addition, share buy backs were carried out to acquire 100,000 Semcon shares for SEK 6 million. The Group’s net debt amounts to SEK 214 million (110). Excluding pension commitments, net debt amounted to SEK 146 million (57). The debt/equity ratio was 0.3 times (0.2) with an interest coverage ratio of 12 times (21).

Staff and organisation

The headcount on 30 September was 2,864 (3,050). The number of employees in active service was 2,783 (2,940). Divestment and downsizing of business activities have been carried out over the past year, which have resulted in a fall in the number of employees. In the respective business areas the headcount is as follows: Engineering Services Nordic 1,011 (1,071), Engineering Services Germany 980 (1,069), Engineering Services International 345 (359) and Product Information 528 (551).

Semcon is an international technology company in the engineering services and product information sectors. We have around 3,000 employees with extensive experience from many different industries. We develop technology, products, plant and information solutions along the entire development chain and also provide many services and products in areas such as quality control, training and methodology development. We contribute to our customers’ competitive strength by providing innovative solutions, design and solid engineering expertise. The business activities are run via four business areas: Engineering Services Nordic, Engineering Services Germany, Engineering Services International and Product Information. Work processes and solutions are adapted to customer requirements, from taking part in the customer’s teams to in-house development projects. The Group had annual sales of SEK 2.7 billion in 2014 with activities at more than 40 sites in Sweden, Germany, the UK, Brazil, China, Hungary, India, Spain and Norway. Some of Semcon’s biggest customers include: ABB, AB Volvo, Audi, BMW, Daimler, Ericsson, Jaguar Land Rover, Scania, Volvo Cars and VW. Read more at semcon.com.

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