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EDB ErgoGroup posts combined Q3 results

19 October 2010  |  1547 views  |  0 Source: EDB ErgoGroup

EDB ErgoGroup reports consolidated revenue of proforma NOK 2,823 million as compared to proforma NOK 2,835 million in the same quarter of 2009.

Operating profit before intangible asset amortisation (EBITA) was proforma NOK 166 million for the third quarter of 2010, as compared to proforma NOK 225 million for the third quarter of 2009. EDB ErgoGroup signed new contracts with total contract value of NOK 1.4 billion in the third quarter, as compared to new signings of NOK 1.0 billion in the same quarter last year.

"Today Norway's two largest IT companies meet the market with one face. The merger has been finally approved, and we have started work on establishing a new and powerful Nordic organisation. I look forward with great expectation to the opportunities that the merged EDB ErgoGroup can create for the benefit of its customers, employees and shareholders. We will put the Norwegian IT industry on the world map, and demonstrate that Nordic customers are best served by people that understand Nordic business and industry from the inside out", comments CEO Terje Mjøs.

Merger to create a leading Nordic IT company

EDB Ergo Group is the result of a merger between Norway's two largest IT companies, EDB Business Partner and ErgoGroup. The two companies were formally merged on 14 October 2010 with the merged company initially taking the name EDB ErgoGroup ASA, and report consolidated figures from and including the third quarter of 2010. The background for the merger is a shared desire to create a leading Nordic IT company that will be sustainable and competitive over the longer term, with the capacity for continuing growth and the financial strength that will make it possible to take advantage of strategic and structural opportunities as they arise.

EDB ErgoGroup has established a strategy with three phases to achieve Nordic leadership:

Phase 1, 2011: Focus on customers, successful integration of the businesses and realising synergies.

Phase 2, 2012-2013: Accelerated growth in prioritised areas of focus.

Phase 3, 2014-2se 3, 2014-2015: Establish the company's position as the leading Nordic IT company with strong positions in all four Nordic countries.

"We are now entering an important phase as we bring together 50 years of IT innovation to create the leading IT business in the Nordic region. I feel confident that with our extensive delivery capacity, increased local presence and strong competitiveness, we will be able to meet the expectations of our customers and the market in the very best way", comments Terje Mjøs.

Consolidated proforma key figures and main features of the third quarter of 2010
• Merger formally completed, accounting effect from 30 September 2010
• Proforma revenue of NOK 2,823 million (NOK 2,835 million)
• Proforma EBITA NOK 166 million (NOK 225 million)
• Combined order backlog of NOK 18.1 billion
• Program for cost synergies of NOK 325 million
• EDB and ErgoGroup have carried out cost saving programs that will take full effect from 2011


Consolidated third quarter 2010 proforma figures for the business areas of EDB ErgoGroup

IT Operations: The IT Operations business area reports revenue of proforma NOK 1,749 million for the third quarter of 2010 as compared to proforma NOK 1,769 million for the same quarter in 2009. EBITA for the quarter was proforma NOK 137 million, as compared to proforma NOK 146 million in the third quarter of 2009.

Solutions: The business area reports revenue of proforma NOK 456 million for the third quarter of 2010 as compared to proforma NOK 423 million for the same quarter in 2009. EBITA for the third quarter was proforma NOK 53 million, in line with the third quarter of 2009.

Consulting: The business area reports revenue of proforma NOK 800 million for the third quarter of 2010 as compared to proforma NOK 811 million for the same quarter in 2009. EBITA for the third quarter was proforma NOK 32 million, as compared to proforma NOK 58 million in the third quarter of 2009.

Summary of the third quarter of 2010: EDB Business Partner
• Operating revenue NOK 1,679 million (NOK 1,716 million)
• EBITA NOK 70 million (NOK 150 million)
• Cash flow from operations NOK 117 million (NOK 30 million)
• CAPEX NOK 47 million (NOK 55 million)


IT Operations: The IT Operations business area reports revenue of NOK 1,013 million for the third quarter of 2010 as compared to proforma NOK 1,050 million for the same quarter in 2009. EBITA for the quarter was NOK 66 million, as compared to proforma NOK 102 million in the third quarter of 2009.

Solutions: The business area reports revenue of NOK 381 million for the third quarter of 2010 as compared to NOK 343 million for the same quarter in 2009. EBITA for the third quarter was NOK 10 million, as compared to NOK 44 million in the third quarter of 2009.

Consulting: The business area reports revenue of NOK 390 million for the third quarter of 2010 as compared to proforma NOK 401 million for the same quarter in 2009. EBITA for the third quarter was NOK 18 million, as compared to proforma NOK 26 million in the third quarter of 2009.

Summary of the third quarter of 2010: ErgoGroup

• Operating revenue NOK 1,144 million (NOK 1,143 million)
• EBITA NOK 85 million (NOK 72 million)
• Cash flow from operations NOK 70 million (NOK 82 million)
• CAPEX NOK 41 million (NOK 53 million)
Operations & Infrastructure services: The Operations & Infrastructure services business area reports revenue of NOK 772 million for the third quarter of 2010, as compared to NOK 763 million in the third quarter of 2009. EBITA was NOK 69 million in the third quarter of 2010, as compared to NOK 44 million in the third quarter of 2009.

Solutions & Application services: The business area reports revenue of NOK 458 million for the third quarter of 2010, as compared to NOK 458 million for the third quarter of 2009. EBITA was NOK 19 million for the third quarter of 2010, as compared to NOK 36 million for the third quarter of 2009.

Program for cost synergies

Over the course of the autumn, work on planning the merger has verified cost synergies of NOK 325 million that will be realised over the course of 18 months. A separate program has been established to realise these synergies, and this will come into operation from 2011. The costs of realising the synergies are estimated to be in the order of NOK 325 million.

EDB ErgoGroup plans a rights issue in Q4 2010


Reference is made to the announcement of the merger between EDB Business Partner ASA and ErgoGroup AS 7 June 2010. As communicated in the merger announcement, EDB ErgoGroup ASA ("EDB ErgoGroup") would undertake an equity issue of up to NOK 1 billion after completion of the merger. Following completion of the merger on 14 October 2010, EDB ErgoGroup currently plans to conduct the equity issue in Q4 2010.

The equity issue will be structured as a rights issue to secure equal treatment of all shareholders. EDB ErgoGroup has a large number of smaller shareholders. By structuring the transaction as a rights issue all shareholders are given an equal opportunity to participate on equal terms, and, if they are not able to subscribe in the rights issue, they could sell their subscription rights in the market.

EDB ErgoGroup has a positive dialogue with its major shareholders and financing banks.

The rights issue will be fully underwritten by the largest shareholders and a bank syndicate.
DnB NOR Markets and SEB Enskilda have been retained as Joint Global Coordinators and Joint Bookrunners for the rights issue.

Further details on final size, timing and terms of the rights issue will be communicated to the market as soon as this has been resolved.

Future prospects

The Nordic IT services market showed a marked decline in 2009 due to reduced demand, resulting in pressure on prices. Customers remain reluctant to commit to new investment spending, and continuing downward pressure on prices in the outsourcing segment meant that the IT services market again showed an overall decline in the first half of 2010. There are, however, clear signs of growth in a number of segments, and this has caused the decline in demand to level off.

The market research companies IDC and Gartner expect an improving trend in the IT services market over the second half of 2010, with the prospect of moderate growth in 2011.

In view of the continuing uncertain market situation, EDB ErgoGroup has launched further cost saving measures. The Board of EDB ErgoGroup is maintaining a strong focus on ensuring that the company continues to implement the measures necessary to maintain satisfactory profitability and competiveness.

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