Semcon: Interim Report January-September 2016.

Regulatory News:

Semcon: (STO:SEMC)

In the third quarter, we continued to report better results compared with last year, and all business areas reported improved results in 2016. Business area Engineering Services Nordic noted continued strong demand from the automotive industry, while the energy sector was relatively weak.

In business area Engineering Services Germany, a reorganisation was initiated at the end of last year and a new organisation is now in place to achieve improved productivity with an even greater customer focus. During the autumn, construction will also commence of a new facility for engineering services and advanced testing in Ingolstadt with the aim of strengthening Semcon’s role as premium partner to the German automotive industry.

In business area Engineering Services International, we are increasing our deliveries in projects for Europe, such as in autonomous vehicles. The Group’s higher number of project commitments also means that we have greater possibilities to use the expertise available in Semcon’s international organisation, which generates distinct added value for our customers.

The interest in Business Area Product Information’s customers’ aftermarket business offering remains strong. More companies are seeing the benefits of employing a partner whose core business is to create, digitalize and distribute product information. The new partnership agreements signed earlier this year are clear evidence of this.

During the third quarter, we launched our new communication strategy and it is positive to see the attention and spread that the launch of the "Smiling Car” concept has had globally. In addition, a new graphic profile and new website were launched. With our new communication strategy, we are increasing our visibility and becoming even more distinct in our communication in relation to our position and our customer offering. We have a clear ambition to increase Semcon’s market share and further strengthen the brand.

Our international expertise in product development in several industries is a key element in contributing to our customers’ success. Our mission, to develop products that make life simpler for the end-user, is becoming increasingly important now that the next generation of smart products is being launched.

Third quarter

• The operating income amounted to SEK 591 million (611) and organic growth was -3%

• The operating profit amounted to SEK 23 million (13), yielding an operating margin of 3.8% (2.2)

• The profit after tax amounted to SEK 16 million (9)

• Earnings per share (EPS) after dilution amounted to SEK 0.89 (0.51)

January–September

• The operating income amounted to SEK 1,957 million (1,920) and organic growth was 2%

• The operating profit amounted to SEK 77 million (19), yielding an operating margin of 3.9% (1.0)

• The profit after tax amounted to SEK 55 million (12)

• Earnings per share (EPS) after dilution amounted to SEK 3.05 (0.66)

• The equity/assets ratio amounted to 51% (47)

Income and result

Third quarter

Operating income amounted to SEK 591 million (611). Adjusted for currency effects and acquisitions, income decreased by 3%. The business areas Engineering Services Nordic and Engineering Services International showed growth, while the business areas Engineering Services Germany and Product Information had reduced sales. Operating profit amounted to SEK 23 million (13), yielding an operating margin of 3.8% (2.2). In particular, it was the business areas Engineering Services Nordic and Product Information that reported improved operating profit compared with the preceding year. Net financial items amounted to SEK -1 million (-1), yielding profit before tax of SEK 22 million (12). The tax expense amounted to SEK 5 million (3). Profit after tax was SEK 16 million (9) and EPS after dilution was SEK 0.89 (0.51).

January-September

Operating income amounted to SEK 1,957 million (1,920). Adjusted for currency effects and acquisitions, income increased by 2%. Operating profit was SEK 77 million (19), yielding an operating margin of 3.9% (1.0). All business areas reported improved operating profit compared with the preceding year. Last year, the business area Engineering Services Germany’s operating profit was affected by SEK 20 million in restructuring costs. Business area Product Information’s operating profit was positively affected this year by recovered write-downs of accounts receivable of SEK 7 million. Net financial items amounted to SEK -3 million (-3), yielding profit before tax of SEK 74 million (16). The tax expense amounted to SEK 18 million (4). Profit after tax was SEK 55 million (12) and EPS after dilution was SEK 3.05 (0.66).

Financial position

Operating cash flow from current activities was SEK 8 million (-107). Cash flow is seasonally weak in the first three quarters. Investments in hardware, licenses, office supplies and equipment amounted to SEK 30 million (29). The Group’s cash and cash equivalents amounted to SEK 56 million (43), with additional non-utilised credit of SEK 257 million (179) as per September 30. Shareholders’ equity amounted to SEK 638 million (617) and the equity/assets ratio was 51% (47). During the second quarter, a dividend of SEK 22 million (45) was paid to shareholders. The Group’s net debt amounted to SEK 133 million (214). Excluding pension commitments, net debt amounted to SEK 60 million (146). The debt/equity ratio was 0.2 times (0.3).

Employees

The head count on September 30 was 2,858 (2,864) and the number of employees in active service was 2,699 (2,783). In the respective business areas the head count is as follows: Engineering Services Nordic 1,092 (1,011), Engineering Services Germany 822 (980), Engineering Services International 363 (345) and Product Information 581 (528). A restructuring has taken place over the past year in business area Engineering Services Germany resulting in a fall of number of employees.

Semcon is an international technology company that develops products based on human needs and behaviours. We strengthen our customers’ competitiveness by always starting from the end user, because the person who knows most about the user’s needs creates the best products and the clearest benefits to humans. Semcon collaborates mainly with companies in the automotive, industry, energy and life science sectors. With almost 3,000 specialised employees, Semcon has the ability to take care of the entire product development cycle, from strategy and technology development to design and product information. Semcon was founded in Sweden in 1980 and has offices in over 40 locations in nine different countries. In 2015, the Group reported annual sales of SEK 2.6 billion. Read more on semcon.com.

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