The Group delivers first quarter EBITDA of MNOK 87.2, excluding MNOK 9.0 in share based compensation. Operating profit was MNOK 56.0, up almost MNOK 70 year-over-year. The continued execution of the cost synergy program combined with improved gross margins, explains the near quadrupling of the EBITDA compared to the corresponding period in 2006.
“We continue to deliver solid financial results and positive cash flow, with first quarter 2007 results showing further reduction in operating expenses and improved margins,” says Jo Lunder, CEO Ementor ASA. “The financial performance put forth today, confirms the viability of the strategy and direction set by the company.”
Significant cost synergies are realised and operating expenses are reduced by 3.1 % (4.2 % excluding share based compensation) from MNOK 622.9 to MNOK 603.0 y-o-y. There was also a strong generation of cash from operations of MNOK 250.6 in first quarter 2007 and net debt was reduced from MNOK 781.0 at the end of fourth quarter to MNOK 509.1 at the end of first quarter 2007.
Revenue was MNOK 2971.5 and the development remains stable compared to corresponding period last year, with a 2.1% decline explained by the negative effects in Swedish government tax incentives for Home PCs. However, the Group shows strong growth in gross contribution, with a 5.8% increase y-o-y.
Financial performance by country
All countries deliver strong performance, with positive cost synergy effects from integration and restructuring across the board.
Country highlights include:
Norway
Norway continues to improve its performance and delivered a strong EBITDA result in the first quarter of MNOK 24.8 (3.9%), compared with MNOK -3.0 last year. Revenue grew by an impressive 10.6% and reflects growth in both services and products. Growth in revenue combined with major cost reductions of MNOK 21.8 (13.3%) explains the significant improvement in results.
Denmark
Denmark delivers strong performance and first quarter EBITDA ended at MNOK 36.8 (3.8%) compared to MNOK 4.5 (0.4%) in the corresponding period last year. The vast improvement is primarily related to significant cost reductions of MNOK 13.3 (7.4%), combined with improvement in product margins from 8.5% to 9.8 % y-o-y reflected by favourable product mix.
Sweden
Sweden reports first quarter EBITDA of MNOK 21.3 (2.1%) which is on same level (MNOK 22.3) as previous year. Revenue decreased by MNOK 55.3 (5.2%) and is fully explained by a drop in home PC sales which reflects the negative changes in government tax incentives effective from January 1, 2007. The drop in revenue is compensated by a reduction in operating expenses of MNOK 4.0. The performance in Sweden is satisfactory considering restructuring activities (cost cuttings), with full cost effect of restructuring process expected in 2H 2007.
Finland
The first quarter EBITDA of MNOK 8.3 (MNOK 1.4 last year) confirms the positive effects of the major cost cuttings done in fourth quarter of 2006, in order to generate profitability going forward. Operating expenses are down by MNOK 13.0 (22%) compared with corresponding quarter in 2006. Finland is now well positioned to focus their activities for top line growth going forward.
“With stable product revenues, increases in services revenue and a healthy order backlog our confidence in favourable growth development remains unchanged,” Jo Lunder says.
Acquisitions
Ementor is fast emerging as a leading Nordic IT industry consolidator, with recent acquisitions including Danish company dmsave, the Norwegian Tre65 and the Nordic player Informatikk.
dmsave, market leader within remote backup in Denmark and DKK 46 million in revenue and DKK 6 million in EBITDA in 2006, was acquired in March. The acquisition will strengthen and focus the service offering. Estimated revenue for 2007 is DKK 70 million and EBITDA of DKK 25 million. The expected improvement assumes investments in hardware and software, and is driven by sales and cost synergies with our existing Danish operation. The purchase price was DKK 52 million.
The acquisition of Tre65, a leading supplier of high-end server room solutions in Norway, for MNOK 111 (enterprise value), was announced April 18. Tre65 had MNOK 180 revenue and an operating result of MNOK 20 in 2006. Through the acquisition Tre65 will contribute to further development of a high-end data room offering. Estimated revenue for 2007 is MNOK 220 and a profit after tax of MNOK 23. The transaction is subject to approval from the Norwegian Competition Authorities.
Informatikk is the leading supplier of IBM AS 400/i series in the Nordic market. The company has its main activities in Norway and Sweden. Informatikk had revenue of MNOK 344 and EBITDA of MNOK 6.1 in 2006. Estimated revenue for 2007 is MNOK 400, with EBITDA estimated at MNOK 15 including 6 months of sales and cost synergy effects. The enterprise value of the acquisition is MNOK 92. The transaction is subject to approval from the Norwegian Competition Authorities.
“Strong strategic fit and accretive multiples have been achieved, and Ementor’s size and market position allows for positive synergy effects as a result of these recent acquisitions,” says Jo Lunder. “We are now capitalising on our well defined strategic position.”
The quarterly report and presentation is available at
www.ementor.com/reports The press conference is available through webcast at
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www.ementor.com/ose