Q3 2014
Interim Report
January-September 2014
“I am very pleased to see EBITDA growth of 30%.
The EBITDA improvement has been achieved through
a combination of double-digit revenue growth, improved margins and
a continued focus on operational efficiency”
Steinar Sønsteby
CEO of Atea
Highlights
Revenue of NOK 5,173.5 million, up 10.9% y-o-y
EBITDA* of NOK 205.2 million, up 29.5% y-o-y
EBITDA* margin of 4.0%, up from 3.4% y-o-y
Cash flow from operations of NOK -94.2 million, up from NOK -96.9 million y-o-y
Acquisition of Datatech AS in Norway
Key figures
Q3 Q3 YTD YTD Full year
2014 2013 2014 2013 2013
Group revenue (NOK in million) 5,173.5 4,663.6 17,039.1 15,250.2 22,095.8
Gross margin (%) 24.6 25.5 23.6 24.7 24.1
EBITDA* (NOK in million) 205.2 158.4 562.7 439.7 800.3
EBITDA* margin (%) 4.0 3.4 3.3 2.9 3.6
EBIT (NOK in million) 117.3 70.8 296.9 192.6 354.9
Earnings per share (NOK) 0.84 0.49 2.06 1.39 3.33
Diluted earnings per share (NOK) 0.84 0.49 2.04 1.39 3.31
Cash flow from operations (NOK in million) -94.2 -96.9 213.3 -162.8 910.6
Free cash flow (NOK in million) -142.9 -141.5 59.5 -341.5 630.5
30 Sept 2014 30 Sept 2013 31 Dec 2013
Net financial position (NOK in million) -756.3 -957.6 -419.1
Liquidity reserve** (NOK in million) 1,298.2 980.6 1,325.7
Working capital*** (NOK in million) -59.1 536.3 -353.6
Working capital*** in relation to annualized revenue (%) -0.3 2.9 -1.3
Equity ratio (%) 36.5 40.8 31.6
Number of full-time employees 6,158 6,402 6,280
* Before share-based compensation, expenses/income related to acquisitions and restructuring ** Limited by 2.5 debt covenant ratio (net debt/last twelve months EBITDA)
*** Non-interest-bearing current assets less non-interest-bearing current liabilities
4 664 6 846 5 884 5 981 5 173 0 2 000 4 000 6 000 8 000 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Revenue NOK in million 158 361 180 177 205 0 100 200 300 400 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 EBITDA* NOK in million -97 1 073 -141 449 -94 -500 -300 -100 100 300 500 700 900 1 100 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Cash flow from operations
Financial review
Q3 2014
Group
Atea reported strong growth in revenue and profitability during the third quarter of 2014, driven by increased sales of hardware, higher product margins and improved operating efficiency. Both revenue and operating profits were at record high levels for the third quarter of the year.
Group revenue was up 10.9% (up 10.0% in constant currency) from NOK 4,663.6 million in Q3 2013 to NOK 5,173.5 million in Q3 2014. Hardware revenue was up 17.1%, software revenue was down 1.6% and services revenue was up 1.8%. Currency effects had a positive impact of 0.9% in Q3 2014. Organic revenue was up 9.6% in constant currency. The increase in hardware revenue was driven by growing demand for clients (PCs, tablets and smartphones). Q3 is the seasonal low point in the software business with fewer high-volume orders. The decrease in software revenue is temporary and was affected by a couple of large orders in Q3 last year. Despite 150 fewer consultants this year than last year (over 4% reduction), services revenue increased slightly due to continued growth in contracted services.
EBITDA* in Q3 2014 increased by 29.5% to NOK 205.2 million, up from NOK 158.4 million in Q3 2013. The improvement in profitability reflects double-digit revenue growth combined with improved product margin and a high focus on operational costs. The EBITDA* margin increased to 4.0%, up from 3.4% last year.
For the year to date 2014, Atea’s group revenue was NOK 17,039.1 million, an increase of 11.7% compared with the same period last year (up 8.0% in constant currency). Hardware revenue was up 13.9%, software revenue was up 13.0% and services revenue was up 5.1%. Currency effects have had a positive impact of 3.7% during the year to date 2014. Organic revenue growth in constant currency was 7.5%.
The company’s EBITDA* for the year to date 2014 was NOK 562.7 million, up 28.0% y-o-y, reflecting strong revenue growth, higher product margins, and improved operating efficiency.
*Before share-based compensation, expenses/income related to acquisitions and restructuring costs
3 609 2 868 2 758 2 929 3 908 3 283 3 031 3 430 0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 Q4 Q1 Q2 Q3
NOK in million Hardware revenue and growth
Comparable Quarter Latest Quarter +17,1% +9,9% +8,3% +14,5% 1 505 1 107 1 530 661 1 553 1 347 1 729 651 200 400 600 800 1 000 1 200 1 400 1 600 1 800 2 000 Q4 Q1 Q2 Q3
NOK in million Software revenue and growth
Comparable Quarter Latest Quarter -1,6% +13,0% +3,2% +21,7% 1 255 1 109 1 212 1 073 1 381 1 254 1 222 1 092 200 400 600 800 1 000 1 200 1 400 1 600 Q4 Q1 Q2 Q3
NOK in million Services revenue and growth
Comparable Quarter Latest Quarter +13,1% +0,8%
+1,8% +10,0%
Norway
Atea Norway reported a large increase in profitability during the third quarter of 2014, based on higher product margins and lower personnel and operating expenses.
Revenue in Q3 2014 was NOK 1,513.9 million, up 1.0% compared with Q3 2013. Hardware revenue was up 5.4%, software revenue was down 16.3%, while services revenue was down 0.7%. Organic revenue increased by 1.0%.
The growth in hardware revenue was driven by increased sales within the client business (PCs, tablets and smartphones). Software revenue was impacted by fewer high-volume orders this year than last year. The decline in services revenue mainly reflects 50 fewer consultants this year than last year.
EBITDA* in Q3 2014 increased to NOK 57.4 million, up from NOK 45.5 million in Q3 2013, reflecting improved gross margin and reduced operating expenses. Product margin increased to 14.1%, up from 13.3% in Q3 2013, as a result of fewer high-volume cases with low margin. The total gross margin increased to 26.2%, up from 25.9% in Q3 2013.
Operating expenses fell by 0.9%, mainly due to a decrease in the average workforce of 116 full-time employees, as result of the cost reduction program carried out in Q4 2013. The EBITDA* margin increased to 3.8%, up from 3.0% last year.
On 11 September Atea AS completed the acquisition of Datatech AS. Datatech is a Norwegian company with 16 employees working out of Ålesund on the West Coast of Norway. The company is a supplier of IT infrastructure to the maritime and offshore industries, which offers its customers significant added value through specialized solutions. In 2013 Datatech reported revenue of NOK 37 million and EBITDA of NOK 7 million. The acquisition of Datatech will strengthen Atea's solution offering to customers within the maritime and offshore industries. Furthermore, the company has a strong position in the north-west part of Norway with several large international customers, which Atea will be able to offer a wider portfolio of products and solutions. Atea acquired all shares in the company and all employees will continue in Atea in order to strengthen Atea's competences. The enterprise value was NOK 30 million.
*Before share-based compensation, expenses/income related to acquisitions and restructuring costs
1 498 2 081 1 570 1 615 1 514 0 500 1 000 1 500 2 000 2 500 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14
NOK in million Revenue
45 118 39 66 57 0 20 40 60 80 100 120 140 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14
Sweden
Atea Sweden reported very high growth in product sales during the third quarter of 2014, driving a large increase in operating profit. Demand was strong across regions, and within both hardware and software product areas.
Revenue in Q3 2014 was SEK 1,972.0 million, up 14.1% compared with last year. Hardware revenue was up 18.7%, software revenue was up 11.3%, while services revenue was up 3.7%. Organic revenue increased by 14.1%.
The strong growth in the hardware revenue reflects higher demand from both the private and the public sector. The increase in software revenue was driven by growth in the private sector. Despite 38 fewer consultants this year than last year, services revenue grew due to strong demand for contracted services.
EBITDA* in Q3 2014 increased to SEK 51.2 million, up from SEK 34.9 million in Q3 2013, reflecting revenue growth and improved product margin, as well as fewer employees.
Product margin increased to 14.4%, up from 12.7% in Q3 2013, based on a higher proportion of smaller, higher margin orders. The total gross margin increased to 23.4% for Q3 2014, up from 23.2% in Q3 2013.
The average workforce for Q3 2014 decreased by 61 full-time employees compared with last year, as result of the cost reduction program carried out in Q4 2013. The EBITDA* margin increased to 2.6%, up from 2.0% last year.
*Before share-based compensation, expenses/income related to acquisitions and restructuring costs
1 728 2 649 2 269 2 566 1 972 0 500 1 000 1 500 2 000 2 500 3 000 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14
SEK in million Revenue
35 101 62 61 51 0 20 40 60 80 100 120 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14
Denmark
Atea Denmark saw revenue accelerate during the third quarter of 2014, based on increased demand for products and a large hardware deal. As a result of higher sales and reduced operating expenses, Atea Denmark reported a strong improvement in operating profit.
Revenue in Q3 2014 was DKK 1,282.8 million, up 17.5% compared with last year. Hardware revenue was up 23.8%, software revenue was up 12.8%, while services revenue was up 3.6%. Organic revenue increased by 17.5%.
The increase in hardware revenue was partially driven by a high-volume low-margin agreement within the client business. Software revenue was affected by a few new large orders in the public sector. Despite 43 fewer consultants this year than last year, services revenue increased.
EBITDA* in Q3 2014 increased to DKK 77.1 million, up from DKK 58.6 million in Q3 2013, reflecting revenue growth combined with lower personnel and operating expenses. Product margins were 9.4%, down from 11.6% in Q3 2013, as a result of high-volume deals with low gross margin. The total gross margin ended at 22.4% for Q3 2014, down from 25.8% in Q3 2013.
Operating costs in Denmark decreased by 5.8%, mainly due to a reduction of 101 full-time employees, as part of the cost reduction program carried out in Q4 2013. The EBITDA* margin increased to 6.0%, up from 5.4% last year.
*Before share-based compensation, expenses/income related to acquisitions and restructuring costs
1 091 1 605 1 384 1 353 1 283 0 200 400 600 800 1 000 1 200 1 400 1 600 1 800 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 DKK in million Revenue 59 128 69 43 77 0 20 40 60 80 100 120 140 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 DKK in million EBITDA*
Finland
Atea Finland continued to execute its turnaround strategy, and reported improved revenue and profit performance during the third quarter of 2014. Revenue in Q3 2014 was EUR 38.5 million, up 19.2% compared with last year. Revenue grew organically by 13.7%, with the remaining growth coming from the acquisition of BCC Finland Oy in April 2014.
Revenue growth was driven by higher sales of clients, particularly toward the private sector. Hardware revenue was up 32.6%, software revenue was down 0.7%, while services revenue was up 6.0%.
As a result of increased hardware sales within the revenue mix, total gross margin ended at 19.8%, compared with 20.9% last year.
Based on revenue growth and cost containment, EBITDA* in Q3 2014 increased to EUR 0.6 million, up from EUR 0.2 million in Q3 2013. Total EBITDA* margin increased to 1.5%, compared with 0.5% last year.
The Baltics
Atea Baltic reported flat sales and lower profitability during the third quarter of 2014, as regional macroeconomic uncertainties impacted demand for IT investments.
Revenue in Q3 2014 was EUR 21.0 million, in line with last year. Organic revenue fell by 2.7%, with the remaining revenue coming from the acquisition of CRC SIA in December 2013.
The Euro adoption in Lithuania from January 2015 is contributing to challenging market conditions in the region. Furthermore, 2014 is a transition year between two five-year EU funding programmes.
EBITDA* in Q3 2014 fell to EUR 0.9 million, compared with EUR 1.7 million in Q3 2013. This decline in EBITDA* was caused by lower gross margin, which fell to 20.2%, compared with 23.7% last year. Last year’s gross margin benefited from higher margin projects related to the EU presidency in Lithuania during 2013. Total EBITDA* margin fell to 4.2%, compared with 8.0% last year.
* Before share-based compensation, expenses/income related to acquisitions and restructuring
32 45 59 52 39 0 10 20 30 40 50 60 70 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14
EUR in million Revenue
0.2 -0.3 0.4 0.6 0.6 -0.4 -0.3 -0.2 -0.1 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14
EUR in million EBITDA*
21 26 20 20 21 0 5 10 15 20 25 30 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14
EUR in million Revenue
1.7 1.9 0.8 0.8 0.9 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14
Balance sheet and cash flow
As of 30 September 2014, Atea had total assets of NOK 9,263.4 million. Current assets such as cash, receivables and inventory represented NOK 4,860.8 million of this total. Non-current assets represented NOK 4,402.5 of this total, and primarily consisted of goodwill (NOK 3,045.0 million), deferred tax assets (NOK 557.2 million), and fixed assets. Additional information on the deferred tax assets can be found in Note 8 to the financial statements.Atea had total liabilities of NOK 5,879.7 million as of 30 September 2014, of which NOK 4,661.3 million were current liabilities. Shareholders’ equity was NOK 3,383.7 million, corresponding to an equity ratio of 36.5%. This is down from a 40.8% equity ratio on 30 September 2013, due to payment of dividends including an extraordinary dividend in November 2013.
Cash flow from operations was NOK -94.2 million in Q3 2014, compared with NOK -96.9 million in Q3 2013. For the year to date, cash flow from operations was NOK 213.3 million, compared to NOK -162.8 million last year. This significant improvement in cash flow from operations reflects increased earnings and a reduction in net working capital balances.
Cash flow from investments was NOK -79.5 million in Q3 2014, compared with NOK -46.1 million last year. Capital expenditures were NOK 48.7 million, compared with NOK 44.6 million last year, mostly related to facilities, internal systems and the development of Atea’s hosting centers. In addition to capital expenditures, Atea invested NOK 30.8 million in the acquisition of Datatech in Norway during Q3 2014.
Cash flow from financing was NOK +18.7 million in Q3 2014, as the Group drew on its credit facilities. At quarter end, the Group had a cash balance of NOK 288.4 million.
At the end of Q3 2014, the Group’s net financial position was NOK -756.3 million, up from NOK -957.6 million at the end of Q3 2013. The Group’s liquidity reserves at 30 September 2014 were NOK 1,298.2, including unutilized credit facilities. The Group’s debt covenants require a maximum net interest bearing debt of 2.5x EBITDA at quarter-end.
Shares
Atea ASA had 7,221 shareholders at 30 September 2014 compared with 7,751 shareholders at 30 September 2013.
The 10 largest shareholders at 30 September 2014 were:
Main Shareholders * Shares %
Systemintegration APS ** 25,112,363 24.15% State Street Bank & Trust Co. *** 8,583,702 8.26%
Folketrygdfondet 4,912,605 4.73%
RBC Investor Services Trust *** 4,178,744 4.02% JPMorgan Chase Bank N.A. London *** 3,052,609 2.94% JPMorgan Chase Bank N.A. London *** 2,875,195 2.77% Skandinaviske Enskilda Banken AB *** 2,614,021 2.51% JPMorgan Chase Bank N.A. London *** 2,253,115 2.17% State Street Bank & Trust Co. *** 2,167,844 2.09% State Street Bank & Trust Co. *** 2,144,135 2.06%
Other 46,072,202 44.31%
Total number of shares 103,966,535 100.00%
* Source: Verdipapirsentralen ** Includes shares held by Ib Kunøe *** Includes client nominee accounts
At 30 September 2014, Chairman Ib Kunøe and close associates control a total of 24.5% of the shares, including the shares held by Systemintegration ApS.
Business review
Background
Atea is the leading provider of IT infrastructure and related services to organizations within the Nordic and Baltic regions. The company is the largest player by far in its local markets, with approximately 16% market share in 2013. Roughly half of Atea’s sales are to the public sector, with the remainder of sales to private companies.
The market for IT infrastructure in the Nordic and Baltic regions has grown steadily during the last several years, despite challenging conditions in the global economy. According to estimates from IDC, the market for IT infrastructure and related services has grown at an average rate of 3% per year from 2007 – 2014.
Atea’s competence and leading market position in IT infrastructure has enabled the company to grow organically at a rate significantly higher than that of the market. Since 2007, the company has averaged an organic revenue growth rate of 4-5% per year.
In addition to organic growth, Atea has successfully pursued an M&A strategy to strengthen and consolidate its market position. Atea’s current organization structure is the result of the merger of the leading IT infrastructure companies in Denmark, Norway, Sweden and Finland and the Baltics in 2006 and 2007. Since 2007, Atea has acquired more than 50 companies, at valuation mutiples significantly below the Group.
Atea’s market share in the Nordic and Baltic regions far exceeds that of other IT infrastructure providers. Today, the company operates 84 offices in the Nordic and Baltic region, with nearly 6,500 employees. This scale provides Atea with critical competitive advantages in purchasing, local market presence, breadth and depth of product offering, system integration competence, and efficient shared service and logistics functions.
To address the needs of the Nordic and Baltic markets, Atea works closely with leading international IT companies, such as Microsoft, Cisco, HP, IBM, Apple, Lenovo, VMWare, Citrix, Symantec and EMC. These companies view the Nordic region as a critical market for the early adoption of new technologies, and work closely with Atea to penetrate these markets. In recent years, Atea’s cooperation with its technology partners has intensified. This enables Atea to stay at the forefront of the latest IT trends, and to offer its customers new and innovative IT solutions.
Market
The market for information technology is in the midst of revolutionary change, which is transforming society and the workplace.
Across private enterprise and throughout the public sector, organizations are increasingly relying on new and innovative IT solutions to improve productivity and living standards. While the specific applications for information technology are unique for each organization, the changing demands on internal IT departments follow several common themes. Organizations require their IT infrastructure to efficiently and securely capture, process and store ever larger amounts of data from diverse sources. This information must be available wherever it may be required, within or outside the workplace. Finally, IT systems must allow individuals to communicate, collaborate and be productive across a broad range of technology platforms.
As a result of these trends, the number of unique devices for capturing or receiving data is exploding, and the amount of data which is transferred between them and the data center is increasing exponentially. At the same time, the risk of security breaches becomes ever greater. All of this creates a level of complexity which IT departments struggle to support. Through its breadth and depth of competency and its system integration expertise, Atea supports IT departments in adapting to the rapid growth and complexity of today’s IT infrastructure requirements. Atea helps its customers to design, implement and support IT solutions tailored for their organization. In recent years, the company has invested in expanding its offering within a number of areas which are of growing interest for customers. These include: Mobility solutions
Employees expect to access information wherever they are and on whatever device they find appropriate, including smartphones, tablets and notebook computers. Atea provides a broad range of IT infrastructure, from clients to software to data center solutions, which enable IT departments to securely meet these mobility requirements.
Collaboration tools
As employees become more mobile and spread across geographies, organizations are relying more heavily on collaboration tools to enable teams to work together productively. Atea has been on the forefront of this trend, and provides a full range of collaboration solutions for the workplace and data center, including solutions for information sharing, conferencing systems, and work coordination tools.
Business review (cont’d)
Market (cont’d)
Cloud computing
Cloud computing is a model for IT service delivery in which IT infrastructure and applications are accessed remotely via the internet. In many cases, the service is delivered by a third party under an “IT as a Service” model.
When implemented effectively, cloud computing can reduce an organization’s IT costs, improve performance, and greatly enhance access to information. At the same time, cloud computing creates legitimate concerns about security, integration, and the loss of control over data. During the last years, Atea has invested in state-of-the-art data centers in the Nordic region for “cloud” based IT service delivery. The services which Atea provides through the cloud are highly differentiated from the simple and standardized offerings provided by large international vendors. Atea works with its customers to create cloud based IT solutions tailored to the customer’s specific needs and system integration requirements. These cloud solutions can be implemented at the customer’s own data center or from Atea’s data centers – with information stored locally and at an established level of security. Atea has seen growing customer interest in its cloud computing offering and views this area as a large business opportunity.
“IT as a Service”
IT as a Service is a commercial model in which organizations procure IT solutions from a service provider at a fixed fee for use (e.g., monthly fee per user). The service provider is then responsible from delivering the IT solution and maintaining an agreed service level.
IT as a Service is particularly popular among small- and midsize organizations, as it enables these organizations to procure IT without high upfront investments or large IT organizations, and in a way which is flexible to their changing needs. Atea is well-positioned to take advantage of the IT as a Service trend, with its strong market position, local service delivery organizations, and system integration expertise. The company plans to expand its IT as a Service offering to several new product concepts.
Business Outlook
Management expects that the market for IT infrastructure will continue to grow as organizations invest in new IT solutions to enhance productivity. This trend will be particularly rapid in the Nordic markets, which are early technology adopters and can benefit most from productivity gains due to high labor costs.
The adoption of new technologies will continue to drive increased complexity for IT departments, with growing requirements for system integration, mobility, communication and security. This trend greatly benefits Atea, as a system integrator with expertise across multiple platforms.
Based on its competitive advantages and leading market position in the Nordic and Baltic regions, Management believes Atea will maintain a growth rate faster than the IT infrastructure market. At the same time, Management expects Atea to improve its operating margins through revenue growth and a strong focus on cost containment.
Management believes that there are still opportunities for M&A and market consolidation in the Nordic region. The company will continue to be an active but disciplined buyer of IT companies which are attractively priced and can provide synergies with the group.
Atea’s business model generates strong cash flow, due to its sustained profitability, low capital expenditures and low net working capital requirements. This cash flow enables a high annual dividend payout to shareholders. In 2014, Atea will pay a dividend of NOK 6.00 per share to shareholders in two equal installments in May and October 2014.
Condensed financial information for the
nine months ended 30 September 2014
Consolidated income statement
*Q3 Q3 YTD YTD Full year
NOK in million Note 2014 2013 2014 2013 2013
Revenue 2 5,173.5 4,663.6 17,039.1 15,250.2 22,095.8
Cost of goods sold 3,900.7 3,473.6 13,010.8 11,475.9 16,776.2
Personnel costs* 889.5 856.2 2,903.5 2,789.2 3,766.4
Other operating expenses* 5 178.0 175.4 562.1 545.4 753.0
EBITDA (adjusted)* 2 205.2 158.4 562.7 439.7 800.3
Restructuring costs 0.0 0.0 0.0 0.0 76.5
Share based compensation 6.5 5.4 20.8 12.3 17.3
Expenses/income related to acquisitions 0.1 -0.6 -1.4 2.1 5.9
EBITDA 198.7 153.6 543.3 425.3 700.6
Depreciation and amortisation 7 81.4 82.8 246.4 232.7 345.7
Operating profit/loss (EBIT) 2 117.3 70.8 296.9 192.6 354.9
Net financial items -16.2 -15.1 -52.3 -35.4 -48.5
Profit/loss before tax, continued operations 101.1 55.7 244.6 157.3 306.4
Tax on continued operations 8 13.4 5.5 31.4 15.3 -33.5
Profit/loss for the period from continued operations 87.7 50.2 213.1 141.9 339.9
Of which non-controlling ownership interests 0.0 0.5 0.0 0.6 1.3
Earnings per share
- earnings per share for continued operations 0.84 0.49 2.06 1.39 3.33
- diluted earnings per share for continued operations 0.84 0.49 2.04 1.39 3.31
Consolidated statement of comprehensive income
Q3 Q3 YTD YTD Full year
NOK in million 2014 2013 2014 2013 2013
Profit/loss for the period from continued operations 87.7 50.2 213.1 141.9 339.9
Currency translation differences -88.2 81.4 -111.6 254.7 323.1
Forward contracts - cash flow hedging -3.7 -3.5 -17.9 1.3 2.2
Income tax OCI relating to items that may be reclassified to profit or loss 13.6 -13.3 24.0 -53.7 -62.6
Items that may be reclassified subsequently to profit or loss -78.3 64.7 -105.5 202.3 262.7
Other comprehensive income -78.3 64.7 -105.5 202.3 262.7
Total comprehensive income for the period 9.4 114.8 107.7 344.2 602.6
Of which non-controlling ownership interests 0.0 0.5 0.0 0.6 1.3
Consolidated statement of financial position
NOK in million Note 30 Sept 2014 30 Sept 2013 31 Dec 2013
ASSETS
Property, plant and equipment 492.2 405.2 520.1
Deferred tax assets 8 557.2 580.2 557.6
Goodwill 3,045.0 3,078.9 3,132.4
Other intangible assets 275.6 339.1 325.6
Other long-term receivables 4 32.5 1.9 0.3
Non-current assets 4,402.5 4,405.3 4,536.0
Inventories 597.2 495.6 462.5
Trade receivables 3,176.0 3,318.2 4,751.3
Other receivables 6 797.6 723.2 690.2
Other financial assets 1.6 1.1 1.6
Cash and cash equivalents 288.4 0.0 745.8
Current assets 4,860.8 4,538.0 6,651.4
Total assets 9,263.4 8,943.3 11,187.4
EQUITY AND LIABILITIES
Share capital and premium 3 1,129.9 1,813.3 1,092.2
Other unrecognised reserves 832.4 111.2 937.9
Retained earnings 1,421.3 1,719.9 1,502.7
Equity 3,383.7 3,644.4 3,532.8
Interest-bearing long-term liabilities 1,015.0 956.8 1,018.7
Other long-term liabilities 15.9 13.5 9.4
Retirement benefit obligations 0.5 30.2 0.5
Deferred tax liabilities 187.1 295.9 220.6
Non-current liabilities 1,218.5 1,296.5 1,249.2
Trade payables 2,711.8 2,255.1 3,847.4
Interest-bearing current liabilities 29.7 0.8 146.2
VAT, taxes and government fees 399.7 391.0 546.8
Provisions 170.3 85.8 177.1
Other current liabilities 1,327.1 1,268.9 1,687.4
Other financial liabilities 22.7 0.8 0.5
Current liabilities 4,661.3 4,002.5 6,405.4
Total liabilities 5,879.7 5,298.9 7,654.6
Consolidated statement of changes in equity
NOK in million 30 Sep 2014 30 Sep 2013
Equity at start of period 3,532.8 3,815.8
Currency translation differences -92.4 201.4
Forward contracts - cash flow hedging -13.1 0.9
Other comprehensive income -105.5 202.3
Profit/loss for the period 213.1 141.9
Total recognised income/expense for the year 107.7 344.2
Employee share-option schemes 15.4 10.4
Dividends paid -310.1 -561.2
Issue of share capital 37.8 35.2
Equity at end of period 3,383.7 3,644.4
Consolidated statement of cash flow
Q3 Q3 YTD YTD
NOK in million 2014 2013 2014 2013
Cash earnings 189.4 147.3 518.4 417.2
Changes in work. cap./accr. items -283.6 -244.2 -305.1 -580.0
Cash flow from operations -94.2 -96.9 213.3 -162.8
Capital expenditures -48.7 -44.6 -153.8 -178.7
Purch./sale of subs./assoc./investm. -30.8 -1.5 -39.7 -84.3
Cash flow from investments -79.5 -46.1 -193.5 -263.0
Change in debt 18.7 -143.5 -185.7 730.5
Equity transactions 0.0 0.4 -272.3 -526.0
Cash flow from financing 18.7 -143.1 -458.0 204.5
Change in cash -155.0 -286.1 -438.2 -221.3
Cash, start of period 462.2 282.8 745.8 180.4
Currency effects on cash and cash equivalents -18.7 3.4 -19.2 40.9
NOTES
NOTE 1 – General information and Accounting Policy
The condensed third quarter interim financial statements for the nine months ending 30 September 2014 were approved for publication by the Board of Directors on October 21, 2014. These Group financial statements have not been subject to audit or review.
Atea ASA is a public limited company incorporated and domiciled in Norway whose shares are listed on the Oslo Stock Exchange. Atea (the Group) consists of Atea ASA (the Company) and its subsidiaries. Atea is the leading provider of IT infrastructure and related services to organizations within the Nordic and Baltic region.
The financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS), IAS 34 “Interim Financial Reporting”. The condensed interim financial statements do not include all information and disclosures required in the annual financial statement, and should be read in accordance with the Group’s Annual Report for 2013, which has been prepared according to IFRS.
The accounting policies applied by the Group in these interim financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 31 December 2013. There are no changes in accounting policy effective from 1 January 2014 that have impact on the Group accounts.
In the interim financial statements for 2014, judgements, estimates and assumptions have been applied that may affect the use of accounting principles, book values of assets and liabilities, revenues and expenses. Actual values may differ from these estimates. The major assumptions applied in the interim financial statements for 2014 and the major sources of uncertainty in the statements are similar to those found in the annual accounts for 2013. The Board confirms that these interim financial statements have been prepared on a going concern basis. As a result of rounding differences numbers or percentages may not add up to the total.
The carrying amounts of Financial assets and Financial liabilities recognized in the Consolidated statement of financial position approximate their fair values, according to Management’s assessment.
NOTE 2 – Operating segment information
Atea is present in 84 cities in Norway, Sweden, Denmark, Finland, and the Baltic countries of Lithuania, Latvia and Estonia, with approximately 6,500 employees. For management and reporting purposes, the Group is organized within these geographical areas. The performance of these geographical areas are evaluated on a regular basis by Atea’s Senior Management Group.
In addition to the geographical areas, the Group operates Shared Services functions (Atea Logistics and Atea Global Services) and central administration. These costs are reported separately as Group Shared Service and Group cost.
Transfer prices between operating segments are on arm’s length basis in a manner similar to transactions with third parties.
NOTE 2 – Operating segment information (cont’d)
Operating segment information – NOK*
Revenue Q3 Q3 % YTD YTD % Full year
NOK in million 2014 2013 change 2014 2013 change 2013
Norway 1,513.9 1,498.2 1.0% 4,698.1 4,488.8 4.7% 6,569.5
Sweden 1,764.7 1,589.5 11.0% 6,235.0 5,504.4 13.3% 7,952.1
Denmark 1,424.4 1,169.4 21.8% 4,460.3 3,855.8 15.7% 5,608.7
Finland 318.6 261.4 21.9% 1,233.0 1,026.0 20.2% 1,396.0
The Baltics 173.7 166.7 4.2% 501.5 464.9 7.9% 678.1
Group Shared Services 1,144.2 1,000.6 14.3% 3,149.9 2,715.7 16.0% 3,844.3
Eliminations* -1,166.0 -1,022.2 -3,238.8 -2,805.5 -3,952.8
Atea Group 5,173.5 4,663.6 10.9% 17,039.1 15,250.2 11.7% 22,095.8
EBITDA** Q3 Q3 % YTD YTD % Full year
NOK in million 2014 2013 change 2014 2013 change 2013
Norway 57.4 45.5 26.2% 162.1 130.8 23.9% 248.6
Sweden 45.8 32.2 42.2% 160.2 123.6 29.6% 216.1
Denmark 85.6 61.9 38.3% 208.9 154.4 35.3% 291.1
Finland 4.6 1.3 252.8% 12.3 10.1 21.3% 7.7
The Baltics 7.2 13.1 -44.7% 20.5 25.0 -18.1% 40.0
Group Shared Services 13.7 12.0 13.8% 31.1 23.6 31.5% 33.7
Group cost -9.1 -7.5 -20.8% -32.3 -27.9 -15.7% -37.0
EBITDA** 205.2 158.4 29.5% 562.7 439.7 28.0% 800.3
EBITDA** margin (%) 4.0% 3.4% 3.3% 2.9% 3.6%
EBIT Q3 Q3 % YTD YTD % Full year
NOK in million 2014 2013 change 2014 2013 change 2013
Norway 39.1 26.2 49.1% 109.0 74.4 46.5% 136.5
Sweden 30.0 18.3 64.1% 108.4 85.9 26.2% 135.0
Denmark 45.3 20.2 124.9% 88.7 43.1 105.9% 103.9
Finland 1.7 -2.2 4.4 -2.2 -13.0
The Baltics 1.3 6.7 -80.6% 0.6 8.6 -93.2% 16.9
Group Shared Services 11.3 10.0 13.1% 24.4 18.7 30.5% 25.1
Group cost -11.5 -8.4 -37.8% -38.6 -35.7 -8.0% -49.6
Operating profit/loss (EBIT) 117.3 70.8 65.6% 296.9 192.6 54.1% 354.9
Financial income 66.5 21.5 209.3% 137.6 59.7 130.6% 86.4
Financial expenses 82.7 36.6 125.9% 189.9 95.1 99.8% 135.0
Profit/loss before tax, continued operations 101.1 55.7 81.4% 244.6 157.3 55.5% 306.4
Quarterly revenue and contribution/margin Q3 Q3 % YTD YTD % Full year
NOK in million 2014 2013 change 2014 2013 change 2013
Product revenue 4,081.1 3,590.8 13.7% 13,470.7 11,854.4 13.6% 17,315.0 Services revenue 1,092.2 1,072.8 1.8% 3,568.0 3,393.9 5.1% 4,774.9 Total revenue 5,173.5 4,663.6 10.9% 17,039.1 15,250.2 11.7% 22,095.8 Gross contribution 1,272.7 1,190.0 7.0% 4,028.3 3,774.3 6.7% 5,319.7 Product margin 13.4% 12.8% 12.4% 12.3% 12.0% Services margin 66.5% 68.1% 66.1% 68.4% 67.7% Gross margin 24.6% 25.5% 23.6% 24.7% 24.1% Q3 Q2 Q1 Q4 Q3 Q2 Q1 NOK in million 2014 2014 2014 2013 2013 2013 2013 Product revenue 4,081.1 4,759.3 4,630.4 5,460.6 3,590.8 4,287.9 3,975.7 Services revenue 1,092.2 1,221.8 1,254.0 1,381.0 1,072.8 1,212.1 1,109.0 Total revenue 5,173.5 5,981.2 5,884.4 6,845.6 4,663.6 5,501.8 5,084.8 Gross contribution 1,272.7 1,378.3 1,377.3 1,545.4 1,190.0 1,325.1 1,259.2 Product margin 13.4% 12.0% 12.0% 11.5% 12.8% 11.7% 12.3% Services margin 66.5% 66.1% 65.7% 66.0% 68.1% 67.7% 69.3% Gross margin 24.6% 23.0% 23.4% 22.6% 25.5% 24.1% 24.8%
* Most of Atea’s internal sales are related to Group Shared Services, which consists of Atea Logistics and Atea Global Services ** Before share-based compensation, expenses/income related to acquisitions and restructuring
NOTE 2 – Operating segment information (cont’d)
Operating segment information – local currency*
Revenue Q3 Q3 % YTD YTD % Full year
Local currency in million 2014 2013 change 2014 2013 change 2013
Norway NOK 1,513.9 1,498.2 1.0% 4,698.1 4,488.8 4.7% 6,569.5
Sweden SEK 1,972.0 1,728.1 14.1% 6,806.7 6,166.7 10.4% 8,816.0
Denmark DKK 1,282.8 1,091.4 17.5% 4,020.1 3,754.4 7.1% 5,359.0
Finland EUR 38.5 32.3 19.2% 149.0 134.0 11.2% 178.9
The Baltics EUR 21.0 21.1 -0.3% 60.6 60.7 -0.2% 86.9
Group Shared Services NOK 1,144.2 1,000.6 14.3% 3,149.9 2,715.7 16.0% 3,844.3
Eliminations* NOK -1,166.0 -1,022.2 -3,238.8 -2,805.5 -3,952.8
Atea Group NOK 5,173.5 4,663.6 10.9% 17,039.1 15,250.2 11.7% 22,095.8
EBITDA** Q3 Q3 % YTD YTD % Full year
Local currency in million 2014 2013 change 2014 2013 change 2013
Norway NOK 57.4 45.5 26.2% 162.1 130.8 23.9% 248.6
Sweden SEK 51.2 34.9 46.8% 174.9 138.5 26.3% 239.6
Denmark DKK 77.1 58.6 31.5% 188.2 150.4 25.2% 278.1
Finland EUR 0.6 0.2 271.8% 1.5 1.3 12.2% 1.0
The Baltics EUR 0.9 1.7 -48.0% 2.5 3.3 -24.2% 5.1
Group Shared Services NOK 13.7 12.0 13.8% 31.1 23.6 31.5% 33.7
Group cost NOK -9.1 -7.5 -20.8% -32.3 -27.9 -15.7% -37.0
EBITDA** NOK 205.2 158.4 29.5% 562.7 439.7 28.0% 800.3
EBITDA** margin (%) 4.0% 3.4% 3.3% 2.9% 3.6%
EBIT Q3 Q3 % YTD YTD % Full year
Local currency in million 2014 2013 change 2014 2013 change 2013
Norway NOK 39.1 26.2 49.1% 109.0 74.4 46.5% 136.5
Sweden SEK 33.5 19.5 71.4% 118.3 96.3 23.0% 149.7
Denmark DKK 40.8 19.2 112.5% 80.0 42.0 90.6% 99.3
Finland EUR 0.2 -0.3 0.5 -0.3 -1.7
The Baltics EUR 0.2 0.9 -81.9% 0.1 1.1 -93.7% 2.2
Group Shared Services NOK 11.3 10.0 13.1% 24.4 18.7 30.5% 25.1
Group cost NOK -11.5 -8.4 -37.8% -38.6 -35.7 -8.0% -49.6
Operating profit/loss (EBIT) NOK 117.3 70.8 65.6% 296.9 192.6 54.1% 354.9
Financial income NOK 66.5 21.5 209.3% 137.6 59.7 130.6% 86.4
Financial expenses NOK 82.7 36.6 125.9% 189.9 95.1 99.8% 135.0
Profit/loss before tax, continued operations NOK 101.1 55.7 81.4% 244.6 157.3 55.5% 306.4
* Most of Atea’s internal sales are related to Group Shared Services, which consists of Atea Logistics and Atea Global Services ** Before share-based compensation, expenses/income related to acquisitions and restructuring
NOTE 3 – Share capital and premium
Number of shares Share capital Issued Treasury shares Issued Treasury shares Share premium Total paid-in equity Whole figures Whole figures NOK in million NOK in million NOK in million NOK in million At 1 January 2014 103,181,020 -73,601 1,031.8 -0.7 61.1 1,092.2
Issue of Share capital * 785,515 - 7.9 - 29.9 37.8
At 30 September 2014 103,966,535 -73,601 1,039.7 -0.7 91.0 1,129.9
* Issue of Share capital is related to Share options for the Management and selected employees.
NOTE 4 – Business combinations
Acquisitions in 2014
Atea has acquired two companies during the first nine monts of 2014. The financial performance from the acquisition date to the end of the quarter for the acquired companies is considered to be immaterial from a Group perspective.
BCC Finland Oy:
Atea acquired BCC Finland Oy in April 2014. The acquisition will strengthen Atea’s market position in western and eastern Finland in the hardware segment, and will provide additional scale to Atea’s service operations in this region.
Datatech AS:
Atea acquired Datatech AS in September 2014. The acquisition of Datatech will strengthen Atea's solution offering to customers within the maritime and offshore industries in Norway.
The business combination of Datatech AS was effected at the end of Q3 2014. Therefore it has not been possible to provide information related to fair value of acquired assets in the balance sheet, net assets acquired and net cash payment for the acquisition before the Q3 2014 report was approved.
The total cost price of NOK 32.5 has provisionally been entered as “Other long term receivables” in the balance sheet at 30 September 2014.
Allocation of purchase price
Due to the high knowledge and low capital requirements for operating an IT sales and consulting organization, acquisitions within this sector will typically result in a goodwill balance. This goodwill balance represents the surplus of the purchase price compared with the accounting value of the net fixed and intangible assets of the acquired company.
The fair values have been determined on provisional basis because new information may occur.
NOK in million BCC Finland Oy
Acquisition date 8 April 2014
Country Finland
Voting rights/ownership interest 100%
Acquisition cost:
Consideration 1) 2.9
Total acquisition cost 2.9
Net assets acquired at carrying value of equity (see table below) 2.6
Identification of excess value:
Fair value of net assets acquired, excluding goodwill 2.6
Controlling ownership interests 2.6
Non-controlling ownership interest -
NOTE 4 – Business combinations (cont’d)
Assets and liabilities related to the acquisitions in 2014 are as follows:
NOK in million BCC Finland Oy
Deferred tax assets 0.3
Computer software and rights 0.0
Property, plant and equipment 1.2
Other long-term interest-bearing receivables 0.1
Other long-term receivables 0.1
Inventories 0.9
Trade receivables 5.9
Provisions for losses on receivables -0.2
Other current receivables and investments 0.8
Cash and cash equvalents 1.1
Other long-term liabilities and provisions -0.7
Trade payables -5.1
Other current liabilities and provisions -1.9
Net assets acquired 2.6
Net cash payments in connection with the acquisitions are as follows:
NOK in million BCC Finland Oy
Considerations and costs in cash and cash equivalents 2.9
Cash and cash equivalents in acquired companies -1.1
Net cash payments for the acquisitions 1.8
Pro Forma income statement
If all acquired entities had been consolidated from 1 January 2013, the consolidated proforma income statements for 2014 would show revenue and profit as follows:
YTD YTD
NOK in million 2014 2013
Operating revenue 17,056.3 15,332.9
Operating profit/loss (EBIT) 296.2 189.2
NOTE 5 – Related parties
Note 25 in the Annual Report for 2013 provides details of related party transactions. For new transactions with effect for 2014, see below:
In Q2 2014 Atea has been invoiced a consultant fee of NOK 0.2 million from Consolidated Holdings A/S. Consolidated Holding A/S is controlled by Ib Kunøe who is the Board Chairman and the largest shareholder of Atea ASA through the company Systemintegration ApS.
In Q3 2014 2014 Atea has entered into an agreement to lease premises from Sonex Consulting in Lithuania. Sonex Consulting is controlled by Arunas Bartusevicius who is the General Manager of Atea Baltic UAB. The rent for 2014 amount is NOK 1.3 million and will be adjusted according to the consumer price index during the following years. The agreement can be cancelled by both parties from 1 August 2019.
NOTE 6 – Legal disputes
Disputes related to the invoicing of licences and the bankruptcy of IT Factory A/S
Atea has received legal claims from Sydbank A/S, Krone Kapital A/S and Danske Bank A/S for compensation related to software licencing in connection with the bankruptcy of IT Factory A/S. Atea considers the claims to be unfounded.
In 2012, Sydbank A/S and Atea reached a settlement on compensation related to this claim. Atea’s insurance company compensated Atea for the settlement costs.
In 2012, Krone Kapital A/S won a legal verdict on its claim against Atea in a Danish court. This case was appealed by Atea. Atea lost the appeal in Q4 2013 and paid NOK 22.5 million to Krone Kapital A/S.
In October 2014, Danske Bank A/S and Atea reached a settlement on compensation related to this claim. The compensation has not yet been paid by Atea.
Management is of the view that Atea’s insurance covers direct losses resulting from all of the above claims. Atea’s insurance company has compensated Atea for the settlement with Sydbank A/S, but has so far not agreed to cover Atea’s losses from the remaining settlements with Krone Kapital A/S and Danske Bank A/S. The costs related to these settlements are approximately NOK 50 million in total.
Atea has taken legal action against the insurance company for the outstanding amounts. Management considers it to be beyond reasonable doubt that its insurance will cover these claims. Therefore, no provisions have been set aside in the financial accounts for these claims.
NOTE 7 – Depreciation and amortisation
For the year to date 2014, depreciation and amortization expense of NOK 246.4 million includes NOK 34.9 million related to amortisation of intangible assets from Business combinations.
NOTE 8 – Taxes
Income tax expense is recognized based on management’s estimate of the full year payable tax rate. The estimated payable tax rate used for the financial year 2014 is 12.6%. All remaining income taxes are estimated to be covered by tax loss carryforwards held within the group’s subsidiaries.
As of 31 December 2013, the Group’s subsidiaries had a total of NOK 2,740 million in tax loss carryforwards. Nearly all of these tax loss carryforwards were held by subsidiaries in Norway.
As of the year end 2013, the estimated value of the tax loss carryforwards within the group was NOK 733.0 million, of which NOK 520.1 million was recognized as Deferred Tax Assets on the balance sheet. The remaining value of NOK 212.9 million was not recognised on the balance sheet.
At the end of each year, Management reassesses the value of tax loss carryforwards which will be recognized on the balance sheet. This assessment is made based on financial estimates of tax payments for the next five years. This annual assessment may have a material effect on reported Deferred Tax Assets and income tax expenses in the fourth quarter and full year accounts.
NOTE 9 – Events after the Balance Sheet Date
There were no significant events after the balance sheet date which could affect the evaluation of the reported accounts.
Holding Atea ASA Brynsalleen 2 Box 6472 Etterstad NO-0605 Oslo Tel: +47 22 09 50 00 Org.no 920 237 126 [email protected] www.atea.com Norway Atea AS Brynsalleen 2 Box 6472 Etterstad NO-0605 Oslo Tel: +47 22 09 50 00 Org.no 976 239 997 [email protected] www.atea.no Sweden Atea AB Kronborgsgränd 1 Box 18 SE-164 93 Kista Tel: +46 (0)8 477 47 00 Org.no 556448-0282 [email protected] www.atea.se Denmark Atea A/S Lautrupvang 6 DK-2750 Ballerup Tel:+45 70 25 25 50 Org.no 25511484 [email protected] www.atea.dk Finland Atea Oy Jaakonkatu 2 PL 39 FI-01621 Vantaa Tel: + 358 (0)10 613 611 Org.no 091 9156-0 [email protected] www.atea.fi Lithuania Atea UAB Laisves pr. 3 LT-04215 Vilnius Tel: +370 5 239 7899 Org.no 122 588 443 [email protected] www.atea.lt Latvia Atea SIA Unijas iela 11a LV-1039 Riga Tel: +371 67 819050 Org.no 40003312822 [email protected] www.atea.lv Estonia Atea AS Pärnu mnt. 139C, 1 EE-1317 Tallinn Tel: +372 610 5920 Org.no 10088390 [email protected] www.atea.ee Atea Logistics AB Smedjegatan 12 Box 159 SE-351 04 Växjö Tel: +46 (0)470 77 16 00 Org.no 556354-4690 [email protected] www.atealogistics.com
Atea Global Services SIA
Skanstes Street 50 LV-1013 Riga Tel: +371 67359600 Org.no 40003843899 [email protected] http://services.atea.com/
