Interim Report: January 1 – June 30, 2009
August 27, 2009
January–June 2009
• Net sales decreased by 12.8% to 111,464 (127,864) kSEK.
• Operating profit before depreciation and restructuring costs amounted to 775 (4,973) kSEK.
• Operating profit before depreciation amounted to -4,935 (4,973) kSEK.
• Operating profit amounted to -9,997 (85) kSEK, and the operating margin was -9.0 (0.1) %.
• Net income after tax amounted to -10,412 (-1,070) kSEK.
• Earnings per share amounted to -1.52 (-0.20) SEK.
• Cash flow for the period amounted to -2,533 (-1,856) kSEK.
• Starting in 2009, Generic is operating under a new and more cost-effective group structure.
• New CEOs have been appointed at the parent company, Generic Mobile, Generic Systems, and Generic Solutions.
• The rationalization program will continue in 2009 alongside aggressive initiatives to increase revenue.
• Restructuring costs have reduced earnings for the period by approximately 5,700 kSEK. Approximately 15 employees were laid off in February 2009 due to a shortage of work.
• The parent company has acquired the minority shareholders’ shares in Generic Mobile.
CEO’S COMMENT
Generic’s consulting business has been unprofitable for several years and has even operated at a loss during certain periods. The main reason for this is that the company has not succeeded in implementing its chosen growth strategy. The costs of the organization created to achieve the desired growth have been too high relative to the scope of the business. The strong profitability of the telecom business has partially offset the profitability issues in the consulting division.
A rationalization effort has now been underway for just over a year to restore financial balance within the Group. Changes in CEO positions and staff layoffs have been implemented, resulting in restructuring costs of 5,700 kSEK. During the second quarter, additional events occurred that have exacerbated the situation. As a result of the economic downturn, Generic Mobile has seen a decline in revenue and, consequently, a deterioration in profitability. Within the consulting business, a number of consultants have decided to leave the company, and the resulting decline in revenue means that the cost-cutting measures implemented to date are insufficient.
Despite the economic downturn and the company’s challenging situation, there is still much to be pleased about. After a long period of unprofitability, Generic Solutions achieved a positive result in the second quarter, and the company maintained high capacity utilization throughout the period. Generic Systems has also been profitable, despite lower-than-normal capacity utilization, and Generic Mobile has secured several new deals within the Messit business area. Overall, June was a good month, with a positive operating profit for the Group and for all three operating companies.
Given Generic’s current situation, more comprehensive measures are needed than just continued cost-cutting. An action plan to achieve profitability with the current business volumes will be implemented this fall. The plan focuses on improving profitability through both cost reductions and revenue growth. By increasing our sales efforts, we can boost capacity utilization and, consequently, revenue at Generic Systems. We will also increase capacity utilization and volumes at both consulting firms through strategic hiring. At Generic Mobile, for example, we are focusing on increasing revenue primarily through sales with the help of partners. The action plan also includes developing our strategy and vision. This is particularly necessary given that we have so many new people in leadership positions within the Group.
In June, the parent company acquired the minority shares in Generic Mobile in accordance with the agreement.