Hitt og þetta 27. apríl 2006

ÅF: Interim report, January-March 2006 - Excellent prospects for all divisions

* Net sales amounted to SEK 642 million (figure for corresponding period in 2005: SEK 583 million) * Profit after net interest income/expense was SEK 43 million (SEK 24 million) * Profit after tax totalled SEK 31 million (SEK 17 million) * Earnings per share were SEK 5.12 (SEK 2.83) * The proposed record day for the 2:1 split is 4 May

A few words from the President, Jonas Wiström

The market for technical consulting services remained strong during the first quarter of the year. The favourable market is a major factor in the excellent prospects for all divisions within ÅF.

For the Process Division, however, the beginning of the year was relatively weak, even though earnings were slightly better than those for the fourth quarter of last year. Capacity utilisation (expressed as invoiced-time ratio, i.e. the proportion of time debitable to clients relative to the time that all the Group's employees spend at work) improved steadily over the quarter as new projects came online. This steady improvement in profits and margin is expected to continue.

The Systems Division continued to improve its results, and achieved an operating margin of 8.4 percent during the first quarter. It is also gratifying to note that the Infrastructure Division returned yet another strong quarterly profit, while maintaining its excellent prospects.

The Inspection Division recorded results in line with expectations. Organic growth amounted to approximately 15 percent, and the division is planning for new growth in selected sectors.

During the year, ÅF strengthened its organisation with the addition of 400 members of staff in acquired companies. The acquisition of Ingemansson Technology provides ÅF with cutting-edge expertise in the field of acoustics and vibrations, while the acquisition of Enprima, a Finnish company with some 270 employees, greatly improves ÅF's position in the international energy market.

Acquisitions and disposals (Q1, 2006)

ÅF signed an agreement on the acquisition of Finland's leading energy consulting firm, Enprima Oy. ÅF acquired the shares of Fortum Power & Heat Oy, Powest Oy and BE&K International Inc, as well as those of the management of Enprima. The acquired group has a workforce of approximately 270 people and sales last year totalled EUR 26.5 million. Enprima operates internationally and has its own offices in Europe and Russia. The purchase price was EUR 24 million. Enprima brought a net cash inflow of EUR 11 million. The operation was consolidated in the ÅF Group with effect from 24 April 2006.

ÅF acquired Ingemansson Technology AB from Lindeblad Technology AB. Ingemansson is a leading consulting firm in the field of acoustics and vibrations. The company has 130 employees in Sweden, Norway and Denmark. In 2005, the company had sales of SEK 125 million and reported an operating profit of approximately SEK 8 million. The purchase price was SEK 53 million. 48 percent of the purchase price was paid in cash, and 52 percent in the form of newly-issued shares - involving a dilution of approximately 1.8 percent of capital, and approximately 1.1 percent of the number of votes. SEK 42 million of the purchase price relates to goodwill and SEK 2 million to other intangible assets. The operation was consolidated in the ÅF Group with effect from 1 February 2006.

ÅF sold its PX Business Solutions software operations to Visma. 26 members of staff were transferred with the operation, which included a product portfolio in which the business system, PX Control was the main product. The sale realised SEK 21 million (capital gain: SEK 19 million).

ÅF acquired Industriell Miljökontroll AB in Enköping (IMKAB) a seven-man consulting team active in the fields of inspection and emissions control.

ÅF acquired Lekab i Dalarna AB. The company, which employs six people in Mora (330 kilometres north-west of Stockholm) works with surveying projects, inspection and site supervision.

Sales and profits

Net sales amounted to SEK 642 million (SEK 583 million).

Operating profit was SEK 44 million (SEK 25 million). The operating margin was 6.9 (4.3) percent. If "other operating income" is excluded, the operating margin was 4.0 (4.3) percent.

The profit figure benefited from a capital gain of approximately SEK 19 million from the sale of the software operation, PX Business Solutions.

Capacity utilisation (expressed as invoiced-time ratio) was 70.3 (71.5) percent.

Profit after net financial items totalled SEK 43 million (SEK 24 million). The profit margin was 6.7 (4.1) percent. If "other operating income" is excluded, the operating margin was 3.9 (4.1) percent. Earnings per share amounted to SEK 5.12 (SEK 2.83).

Divisional performance

Infrastructure Operating margin 3 months: 9.4% (7.1%)

The Infrastructure Division offers consulting services in four sectors; telecoms, installations, infrastructure planning and electrical power systems. The division accounts for just over 30 percent of ÅF's total sales.

The market remained stable during the first quarter, with a high level of demand in all business areas. In particular, consultants working in installations technology for the construction and property sectors recorded a strong quarter. The same applied to consultants specialising in the road and rail markets.

An upswing was also noted for the consultants in electrical power systems. After the hurricane that battered southern Sweden early in 2005 all the major electricity generating companies are reviewing their distribution networks with the aim of improving the reliability of supplies. The hurricane made it clear that the electricity grid was in considerable need of refurbishment and modernisation. This is expected to lead to increased investment over the next few years.

Important undertakings for customers during the quarter included the development of a new teleweapons system for FMV (Sweden's defence materiel administration), project engineering in installation technology for a leading pharmaceuticals company, and ongoing project engineering work on the railway systems for the tunnel under the Hallandsåsen Ridge.

The newly acquired operations of Ingemansson Technology reported first-quarter sales of SEK 37 million and an operating profit of SEK 3 million. The company was consolidated into the ÅF Group on 1 February, thus contributing SEK 25 million in sales to the ÅF accounts and SEK 2 million in operating profit.

Process Operating margin 3 months: 2.0% (5.6%)

The Process Division offers consulting services for all aspects of an industrial process. The division has a world-leading position in certain niches in the pulp and paper industries, and in energy-intensive industries. The division accounts for almost half of ÅF's total sales.

The first quarter was notable for a low but rising level of capacity utilisation. Thanks to the good underlying economic situation, the outlook for the next few quarters is cautiously positive.

At the end of the first quarter, the Process Division initiated two strategic studies for extensive investments scheduled in pulp and paper mills in markets outside the EU. Other customer assignments included the project planning for new investments for LKAB mining in Kiruna, as well as an assignment for Uppsala Energi, for whom ÅF is developing a control system for a new district heating plant.

In the immediate future the division will focus on the integration of the recently acquired Finnish company, Enprima, which will strengthen the division's resources for major energy projects. Enprima's experience of project management will benefit the whole division and boost ÅF's opportunities for additional growth in the expanding markets in the Baltic States, Russia and Asia.

Systems Operating margin 3 months: 8.4% (2.6%)

The Systems Division offers services in the field of IT systems, embedded systems and mechanical engineering. The division accounts for just over 10 percent of ÅF's total sales.

All units in the Systems Division increased their level of capacity utilisation during the first quarter.

The streamlining and strengthening of the division continued. The disposal of ÅF's business system for service companies, PX Business Solutions, was completed at the beginning of the year. (The capital gain of SEK 19 million is not recognised in the System Division's own accounts.) The Ericsson Design Centre in Lysekil, which is active in embedded systems technology, has been integrated and made a positive contribution to profits from the start.

Important customer assignments in the first quarter included the development of a factory-installed control system for a leading commercial vehicle manufacturer, the development of a test instrument (RBS-Master) for Ericsson's GSM base stations, and the development of production aids for FLIR System, who develop IR cameras.

To meet the demand from an increasingly strong market and deal with the large number of new enquiries, particularly in telecoms and vehicles, the division carried out a recruiting campaign with the aim of employing over a hundred engineering graduates during the year. In the first quarter 20 qualified consultants were recruited. The expansion plans also include establishing a foothold for the division in the Gothenburg and Öresund (Copenhagen-Malmö) regions.

Inspection Division Operating margin 3 months: 3.6% (3.5%)

The division works with technical inspections, chiefly in the form of periodic inspections, testing and certification. Major clients include the engineering and nuclear power industries. ÅF Kontroll accounts for almost 10 percent of ÅF's sales.

During the first quarter the division continued to take market share and recorded a high rate of growth in a moderately expansive market. Much of the division's work is seasonal, and the first quarter is always poorest for profits.

Important events during the first quarter included the division's accreditation for the verification of emission rights. The division also signed agreements for the periodic inspection of pipework and components at the Forsmark 1 and 2 nuclear power plants, and with the tramway company, Göteborgs Spårvägar, for inspection services.

This year the division will continue to focus firmly on the sectors in which it has been successful - such as nuclear power - in particular by recruiting new staff. The division also believes that improving the efficiency of its administrative systems will boost profitability and efficiency even further.

Accounting policy

This interim report has been drawn up in accordance with IAS 34 ("Interim Financial Reporting"). The interim report has been drawn up in accordance with International Financial Reporting Standards (IFRS), the interpretations of the current standards adopted by the EU and the International Financial Reporting Interpretations Committee (IFRIC), and in accordance with the Swedish Financial Accounting Standards Council's Recommendation RR 31 ("Interim reporting for groups"), and the relevant references to Chapter 9 of the Swedish Annual Accounts Act. The accounting policy and calculation methods adopted for this interim report are the same as those used for the Annual Report for 2005 (see Note 2, page 52).


Gross investment in machinery and equipment totalled SEK 8 million (SEK 12 million).

Cash flow and financial status

Cash flow was SEK 13 million (SEK -68 million). Before the amortisation of loans, cash flow was SEK 17 million (SEK -15.4 million). Cash flow includes liquid funds totalling SEK 21 million from the sale of PX Business Solutions to Visma.

The Group's liquid assets amounted to SEK 255 million (SEK 107 million).

Equity per share was SEK 105, and the Group's equity/assets ratio was 49 percent. At the beginning of the year, equity per share was SEK 98 and the equity/assets ratio was 48 percent.

ÅF shares

At the end of the reporting period ÅF's share price was SEK 284.50, an appreciation in value of 21 percent since the start of the year. The Stockholm Stock Exchange's (OMXSPI) all-share index rose by 12 percent during the same period.

Share split

The Board of Directors has proposed that the annual general meeting on 27 April 2006 adopt a 2:1 split of the company's shares. 4 May 2006 is proposed as the record day for the split. Provided that the annual general meeting adopts the 2:1 split on 27 April 2006, with 4 May 2006 as the record day, 28 April 2006 will be the final day for trading in unsplit shares, and 2 May 2006 will be the first day of trading in the split shares. After the proposed split ÅF will have 804,438 A shares and 11,341,378 B shares. Reporting date

ÅF's interim report for the period January-June 2006 will be published on 23 August.

Stockholm, 27 April 2006 AB Ångpanneföreningen (publ) Jonas Wiström, President and CEO

(This report has not been subjected to the scrutiny of the company's auditors.)

The full report including tables can be downloaded from the following link: