Interim Report: January 1 – March 31, 2009

January–March 2009
• Net sales decreased by 3% to 58,153 (59,881) kSEK.
• Operating profit before depreciation and restructuring costs amounted to 915 (1,499) kSEK.
• Operating profit before depreciation amounted to -4,795 (1,499) kSEK.
• Operating profit amounted to -7,240 (-970) kSEK, and the operating margin was -12.4 (-1.6) %.
• Net income after tax amounted to SEK -7,399 (-1,473) thousand.
• Earnings per share amounted to SEK -1.09 (-0.25).
• Cash flow for the period amounted to SEK -3,605 (1,556) thousand.
• Starting in 2009, Generic is operating under a new and more cost-effective group structure.
• New CEOs have been appointed at the parent company and Generic Mobile.
• The rationalization program continues in 2009.
• 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.

CEO COMMENT
Effective January 1, 2009, Generic is operating under a new, more cost-effective group structure comprising three operating subsidiaries with different focuses: the consulting firms Generic Systems, with a market focus on Defense and Public Safety, and Generic Solutions AB, with a market focus on Industry and Business, as well as the telecom operator Generic Mobile. New CEOs have been appointed at the parent company, Generic Mobile, and Generic Solutions.
Generic Systems has had a strong start to the year and posted solid results for the quarter. Generic Solutions has adapted to a declining market but has maintained good capacity utilization in those areas not affected by the downturn. Generic Mobile continues to post positive results, although profitability is lower than last year.
During the first quarter, further measures were taken to address the Group’s profitability issues. Among other things, approximately 15 employees were laid off in February 2009 due to a lack of work. The restructuring costs associated with these layoffs have been charged to the quarter’s earnings. Other costs incurred during the quarter include provisions for the departing CEOs of the parent company and Generic Mobile. In total, costs related to staff reductions and severance payments to the departing CEOs have reduced first-quarter earnings by approximately 5,700 kSEK. Our assessment of future cash flows corresponds to the reported value of goodwill. The underlying earnings are not satisfactory, which means the focus is on continued rationalization efforts.
The rationalization program will continue in 2009. The program will reduce costs primarily in the parent company, but also in the subsidiaries, to achieve profitability. Within the consulting business, this is being monitored, among other things, by continuously comparing total overhead with the number of consultants. We were previously organized for expansion, which led to an excessively large administrative structure, but we are now approaching a healthy level where resources for management, administration, and sales are in line with the number of consultants. The telecom business is also working on efficiency improvements to enhance profitability.
The deep economic downturn means there is significant uncertainty regarding market trends. However, the telecom operations within Generic Mobile and those parts of the consulting business that serve the defense market are relatively insensitive to economic fluctuations. This, combined with ongoing rationalization efforts and the fact that the workforce at Generic Solutions has been adjusted to the market situation, means that the Group is well on its way to profitability.

Marketing and Development

’s Telecommunications Business Generic Mobile strives to meet the corporate market’s demand for messaging solutions with exceptionally high availability by leveraging relevant expertise and a high degree of responsiveness. This approach has borne fruit, resulting in several new customers during the quarter.
Generic Mobile has entered into several strategic partnerships and signed agreements with major system integrators regarding the resale of the company’s messaging services. Generic Mobile’s niche profile as a provider of messaging services naturally complements the service offerings of many system integrators.
Within Minicall, the service portfolio has been further developed. Among other things, a new subscription plan, Minicall Flex, has been developed to meet the demand for a comprehensive subscription plan with a lower fixed monthly fee. Furthermore, the company has introduced a new, robust IP66-rated pager with a color screen to the Swedish market. The pager meets the needs of Generic Mobile’s target audience, primarily in emergency services, law enforcement, and healthcare, and will be available for sale during the second quarter.
In addition, the company, in collaboration with the web agency MeraMedia, has developed a concept for SMS notifications regarding trash collection. This is an example of how Generic Mobile can help the country’s municipalities communicate with their residents in a cost-effective manner. The concept could lead to savings for both waste management companies and municipal residents, depending on how individual waste management companies handle so-called “missed pickups.”
Johan Ågren succeeded Mats Hugosson as CEO of Generic Mobile in early March 2009. Johan has been with Generic Mobile since 2002, most recently as head of marketing and business development.

’ Consulting Operations Effective January 1, 2009, the consulting operations are organized into two consulting companies, each with a clear focus on its respective main market: Defense and Public Safety for Generic Systems, and Industry and Business for Generic Solutions. The new organization is significantly more cost-effective than the old one and is a key prerequisite for restoring profitability in the consulting business.
The rationalization program within the consulting business continued in 2009. Approximately 15 employees were laid off in February as a result of low capacity utilization. Generic continues to work on signing framework agreements with major consulting clients and is focusing its sales efforts on strategically important customers. During the period, Generic Systems signed a two-year framework agreement with Storstockholms Lokaltrafik (SL).
Generic Systems has had a strong start to the year. Among its client assignments, the following are particularly noteworthy:
• Technical expertise provided to SOS Alarm in the field of radio communications. The company’s consultants are participating in the integration of local command and control systems at various emergency services throughout Sweden into SOS Alarm’s central system.
• Continued trust to provide specialized technical services in communications technology to NASDAQ. The project involves integrating OMX’s network into NASDAQ’s global communications infrastructure.
• Continued development collaboration with IDS Scheer regarding customizations of the architecture and BMP tool Aris. IDS Scheer plans to launch the new products in the second quarter. This is a strategically important collaboration given the tool’s standing within the Swedish Armed Forces and upcoming implementation assignments.
• Generic’s work within the NESP consortium (Network Enabling System Partner—a development partner to FMV for work on future command and control systems). During the period, a transformation was carried out, shifting from being a development partner to FMV to providing support for the Swedish Armed Forces’ command and control system development.
Generic Solutions is undergoing a transformation process. During the first quarter, the company reduced its number of consultants in response to economic conditions. At the same time, the business is being streamlined. By focusing on fewer areas, the company can become even more specialized in its fields of operation. One example of an area where the company has focused its efforts is development on Microsoft platforms. By certifying its consultants, Generic Solutions was designated a Microsoft Certified Partner during the period.
Two markets that have been particularly successful during the period are the power industry and infrastructure. Notable client projects include:
• The development of systems and tools for controlling and monitoring power grids at ABB.
• The development of a web-based trading platform for Vattenfall’s electricity distribution.
• Implementation of new business systems in Westinghouse’s nuclear fuel production.
• Bombardier Transportation is a major client where several of our consultants are involved in large-scale development projects. These projects deliver various types of trains to customers around the world. The work often involves international collaboration with other Bombardier units and its suppliers.

Employees
The average number of employees (converted to full-time equivalents) for the period January–March was 170 (177). The number of employees at the end of the period was 167 (188).

Financial Performance for the Current Quarter: January–March 2009
Net sales decreased by 3% and amounted to 58,153 (59,881) kSEK. Operating income amounted to -7,240,
,000 SEK (-970,000 SEK), and the operating margin was -12.4% (-1.6%). Operating income declined by 6,270,000 SEK compared with the corresponding period in 2008. Operating income before depreciation and amortization amounted to -4,795 (1,499) kSEK. The decline in operating income is primarily attributable to restructuring costs of 5,710 kSEK charged to the period. Operating income and the operating margin, excluding restructuring costs, amounted to SEK -1,530 thousand and -2.6%, respectively.
Net sales in the telecom business decreased by 14.2% to SEK 13,716 (15,984) thousand. Operating profit amounted to SEK 290,000 (2,675,000), and the operating margin to 2.1% (16.7%). The decline in the operating margin is attributable to lower revenue in both the Minicall and Messit operations. Within the Messit business, it is primarily modem pool revenue that has declined.
The decline in revenue is partially offset by lower costs. Operating expenses before depreciation, excluding restructuring costs and increased Group-wide costs, are approximately SEK 772,000 lower compared with the corresponding period last year. The restructuring costs relate to a provision for severance pay to the departing CEO. Overall, this means that operating profit for the entire telecom business has decreased by approximately 2,385 kSEK compared to the previous year.
Net revenue of 44,746 (45,081) kSEK, as well as operating income of -3,048 (-3,030) kSEK for the consulting business, are roughly at the same level as the previous year. The operating margin amounted to -6.8 (-6.7) %. The low profitability during the first quarter of the year is primarily due to a low billing rate at the start of the year. Restructuring costs charged to the consulting business were offset by the fact that the consulting business incurred lower Group-wide costs than in the previous year. Restructuring costs in the consulting business amounted to nearly 2,800 kSEK, and Group-wide costs were approximately 3,200 kSEK lower than the previous year. During the second quarter of 2009, personnel costs in the consulting business are expected to decrease by approximately 2,000 kSEK compared to the first quarter, as costs for laid-off employees will no longer be charged to the income statement.
Total personnel costs of 49,684 (43,264) kSEK include costs for subcontractors of 8,034 (5,325) kSEK and restructuring costs of 5,605 kSEK, which include compensation to the outgoing CEO of Generic Sweden.

Financial Position
Financial Position
The Group’s cash and cash equivalents amounted to 110 (3,776) kSEK as of March 31, 2009. In addition, the Group has access to an overdraft facility with a limit of 20,000 kSEK. As of March 31, 2009, 9,705 (19,168) kSEK of the overdraft facility had been drawn down. The decrease in the utilization of the overdraft facility is primarily due to the fact that, during the second quarter of 2008, the Group replaced part of it with a short-term loan amounting to 10,000 kSEK. The loan is being repaid in monthly installments of 84 kSEK starting in September 2008.
Short-term interest-bearing debt related to finance leases amounted to SEK 3,818,000 (3,830,000), and the corresponding long-term interest-bearing debt amounted to SEK 7,637,000 (7,659,000).
The equity ratio as of March 31, 2009, was 30.2% (36.1%).

Cash Flow
Cash flow from operating activities amounted to -1,114 kSEK (715). The decrease is primarily attributable to taxes paid. Cash flow from operating activities before changes in working capital is approximately 600 kSEK higher than in the previous year. In operating activities, adjustments have been made for items not included in cash flow related to restructuring costs of 5,710 kSEK. As of March 31, 2009, these items had no effect on cash flow. Compared with the same period last year, operating liabilities—primarily accounts payable—increased by approximately 5,500 kSEK, while operating receivables—primarily accounts receivable—decreased by approximately 2,800 kSEK.
Cash flow from investing activities amounted to –107 kSEK (–1,318) and consisted of investments in intangible assets of 9 kSEK and in property, plant, and equipment of 98 kSEK.
Cash flow from financing activities was SEK -2,384,000 (2,159,000). The decrease is attributable to a reduction in the utilization of the overdraft facility of 1,393 kSEK, loan principal repayments of 252 kSEK, and repayment of lease liabilities of 739 kSEK.
Total cash flow for the period amounted to -3,605 (1,556) kSEK.

Investments
Total investments during the quarter amounted to 107 (2,876) kSEK; no investments were made in assets under finance leases, nor in capitalized development work performed internally. During the comparison period, these investments amounted to 1,203 and 213 kSEK, respectively. During the first quarter, however, assets under finance leases were sold for a total of 982 kSEK. The sale did not affect cash flow.

Equity
At the Annual General Meeting on April 23, 2007, it was resolved to issue a maximum of 183,000 warrants to senior executives and other key personnel within the Generic Group, entitling them to subscribe for a maximum of 183,000 shares. The exercise price of the warrants is SEK 30, and 25 individuals subscribed for a total of 131,000 warrants. Since the exercise price significantly exceeds the average share price during the period, the warrants are considered to have no dilutive effect and have therefore been excluded from the calculation of earnings per share. If the average share price in the future reaches a level above the exercise price, these warrants will result in dilution.

, the Parent Company The Parent Company provides group-wide services to other Group companies. The Parent Company’s external net sales for the period amounted to 3,699 (84) kSEK, and operating income amounted to -5,241 (-634) kSEK. During the period, the parent company invoiced Network Enabling System Partner (NESP) on behalf of Generic System for an amount of 3,552 kSEK. During the period, the parent company invested 10 (0) kSEK in intangible fixed assets and 0 (109) kSEK in tangible fixed assets. The parent company’s cash and cash equivalents amounted to SEK 1 (4) thousand as of March 31, 2009. A provision for severance pay and termination benefits for the departing CEO was charged to the period. In addition, during the period, the parent company billed a lower proportion of group-wide expenses to the subsidiaries than in the same period the previous year.

The Board of Directors of Generic Sweden has appointed Peter Jansson as the new President and CEO of Generic Sweden. Peter Jansson assumed his position on April 6, 2009. Peter Jansson previously served as President of Generic Solutions.

Significant Events Since the End of the Period
Johan Bostedt has been appointed the new CEO of Generic Solutions. He assumed his position on May 1, 2009. He previously served as a unit manager at Generic Solutions.

Peter Thysell has been appointed the new CFO of Generic Sweden. He will assume his position on May 14, 2009. He previously served as a business developer at Generic Mobile.

Significant Risks and Uncertainties
The consulting business continues to be heavily dependent on the defense sector. In this sector, business stability has been good in the long term and risks have been low. However, the consulting business has a relatively large share of assignments for the industrial sector, where the impact of economic cycles is significant. For further information, please refer to the discussion in the management report in the 2008 annual report.

The minority stake in Generic Mobile amounts to 8%. Discussions regarding the buyout of the minority’s shares are ongoing and have not been finalized. The minority has requested arbitration. The outcome of this arbitration is not yet clear.

Outlook
Generic holds a strong position in the defense market and has secured several new and important contracts during the year. We believe that demand for the company’s consulting services in the defense sector will remain strong going forward. The rapid slowdown in the Swedish economy means that it is uncertain how demand for consulting services in the rest of the market will develop. The cost-cutting measures that have been implemented and will be implemented will have a positive effect on the Group’s earnings going forward, all else being equal.

Accounting Principles
This interim report for the Group has been prepared in accordance with IAS 34 Interim Financial Reporting and RFR 1.2 Supplementary Accounting Rules for Groups. The interim report for the parent company has been prepared in accordance with the Annual Accounts Act (ÅRL) and the Securities Market Act, which is in accordance with the provisions of RFR 2:2 Accounting for Legal Entities. The accounting principles and calculation methods applied to the Group and the parent company are consistent with the accounting principles used in the preparation of the most recent annual report. Certain new standards and interpretations have been applied effective January 1, 2009; these have not had any material impact on this interim report.

The revised IAS 1 Presentation of Financial Statements requires that certain items recognized directly in equity that do not result from transactions with owners are now recognized in the income statement under the heading “Other Comprehensive Income.” There are currently no such items to report for the current year or the comparative period.

IFRS 8 Operating Segments has not changed the identification of the Group’s segments.

Audit Report This report has not been reviewed by the company's auditors.

Upcoming Financial Reports for 2009
The interim report for January–June 2009 will be released on August 27, 2009.
The interim report for January–September 2009 will be released on November 12, 2009.
The year-end report for January–December 2009 will be released on February 19, 2010.

Stockholm, May 14, 2009

Generic Sweden AB (publ)

Peter Jansson
Chief Executive Officer

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