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TMCNet:  EVRY reports EBITA of NOK 223 million for the fourth quarter of 2012

[February 08, 2013]

EVRY reports EBITA of NOK 223 million for the fourth quarter of 2012

(Thomson Reuters ONE Via Acquire Media NewsEdge) (Oslo, 8 February 2013) EVRY ASA reports operating revenue for the fourth quarter of 2012 of NOK 3,248 million, equivalent to a drop in organic revenue of 6% as the result of weaker economic conditions in Sweden. EBITA increased by 9% to NOK 223 million for the fourth quarter of 2012 after adjusting for positive pension effects in the fourth quarter of 2011.

Cash flow from operations was NOK 657 million in the fourth quarter of 2012, up from NOK 623 million for the fourth quarter of 2011. In accordance with the company's dividend policy, the Board of Directors has resolved to recommend that the Annual General Meeting should approve a dividend for the 2012 financial year of NOK 0.35 per share.

EVRY reports operating revenue for 2012 of NOK 12,731 million, equivalent to organic growth of zero percent. EBITA for 2012 was NOK 708 million as compared to NOK 669 million in 2011 after adjusting for a positive pension effect from actuarial gains of NOK 112 million in 2011. The Solutions and Consulting segments reported increases in EBITA, but the IT Operations segment reported lower EBITA.

"I am pleased to see the improvement in profits reported for the fourth quarter and for 2012 as a whole, but I am still not satisfied with the level of profits.

We implemented a new and streamlined organisational structure at the start of 2013, and this together with the Future Proof improvement program for IT operations will help to improve the company's profitability", comments Terje Mjøs, CEO of EVRY.

Key figures and main features of the fourth quarter of 2012 * Operating revenue of NOK 3,248 million (NOK 3,478 million in the fourth quarter of 2011) * EBITA NOK 223 million (NOK 204 million in the fourth quarter of 2011 before pension effects) * EBITA margin of 6.9% in the fourth quarter of 2012 (5.9% in the fourth quarter of 2011) * Non-recurring items in the fourth quarter of 2012 totalled NOK 209 million including Digoff NOK 112 million, NOK 30 million related to reduced overhead and simplified organisation and NOK 67 million from write down linked to old solution portfolio.

* EBIT in the fourth quarter of 2012 was NOK 70 million (NOK 174 million in the fourth quarter of 2011) * Cash flow from operations of NOK 657 mill (NOK 623 million in the fourth quarter of 2011) * EPS NOK -0,12 in the fourth quarter of 2012 (NOK 0.28 in the fourth quarter of 2011) * Proposed dividend of NOK 0.35 per share accordance with the company's dividend policy Key figures and main features of 2012 * Consolidated operating revenue for 2012 was NOK 12,731 million, with virtually zero growth from 2011 * EBITA of NOK 708 million in 2012 (NOK 669 million in 2011 before pension effects) * EBITA margin of 5.6% in 2012 (5.2% in 2011 before pension effects) * Non-recurring items in 2012 totalled NOK 209 million (NOK 88 million in 2011) * EBIT was NOK 552 million in 2012 (NOK 512 million in 2011 before pension effects) * EPS NOK 0.74 for 2012 (NOK 0.86 for 2011) Fourth quarter 2012 figures for EVRY's business areas IT Operations Operating revenue for the IT Operations segment was NOK 1,484 million for the fourth quarter of 2012 as compared to NOK 1,570 million in the fourth quarter of 2011. Operating profit before intangible asset amortisation (EBITA) was NOK 73 million in the fourth quarter of 2012 compared to NOK 81 million in the fourth quarter of 2011. The earnings reported for the fourth quarter of 2012 were adversely affected by lower revenue from the enterprise segment (excluding banks) and from the public sector in Norway, but the negative effect on earnings was offset to some extent by the cost saving measures that have been implemented. EBITA margin for the fourth quarter of 2012 was 4.9% compared to 5.2% in the fourth quarter of 2011.

Solutions Operating revenue for the Solutions segment was NOK 1,138 million for the fourth quarter of 2012 as compared to NOK 1,173 million in the fourth quarter of 2011.

Operating profit before intangible asset amortisation (EBITA) was NOK 119 million in the fourth quarter of 2012 compared to NOK 106 million for the fourth quarter of 2011. EBITA margin for the quarter was 10.5% compared to 9.0% in the fourth quarter of 2011.

Consulting Operating revenue for the Consulting segment was NOK 1,007 million for the fourth quarter of 2012, which represents a reduction of 2% compared to the fourth quarter of 2011. The Consulting segment reported operating profit before intangible asset amortisation (EBITA) of NOK 75 million for the fourth quarter of 2012, which is at the same level as the fourth quarter of 2011.

Company outlook The situation seen in the fourth quarter of 2012 and expectations for 2013 reflect differences in the macroeconomic situation between Norway and Sweden.

The Norwegian economy continues to defy the weak global economic situation, and Norwegian leading indicators strengthened in the fourth quarter of 2012.

Statistics Norway expects this positive trend to continue in 2013. EVRY's experience is that the IT services market in Norway is growing in line with previous years, driven by a high level of project activity and good utilisation of consultants, and accompanied by a moderate increase in hourly charges. In terms of outsourcing and IT operating services, market conditions are currently flat in overall terms, with growth in some market segments offset by declining revenue in other segments. However, some large first-time outsourcing tenders are now expected in the Norwegian market.

Weaker economic conditions in the Euro zone had a marked effect on the Swedish economy in the second half of 2012. The Swedish National Institute of Economic Research reported a fall of 0.3 points in its Economic Tendency Indicator in January 2013, and the indicator now stands at 89.4%, which is slightly more than 10 points below the historic average. This indicates that growth in the Swedish economy is still considerably weaker than normal. EVRY has seen that the uncertain outlook in 2012 had a marked effect on the IT services market in Sweden in the second half of 2012. Customers in Sweden were clearly taking a cautious approach, causing them to defer decisions on IT investments with a resulting drop in demand for consultants and projects.

However, there are signs of emerging optimism in the Euro zone. The main index for the Swedish stock market has risen by around 20% over the last six months, and this may indicate that investors expect that the current period of weak economic growth in Sweden will be relatively short-lived.

Based on this, EVRY expects the Swedish IT services market to remain at the level of the fourth quarter of 2012 throughout the first half of 2013, but expects to see the Swedish economy improve leading to growth in the IT services market in the second half of 2013.

Customers in both markets insist on an attractive profitability analysis when considering investments in projects and solutions, but are also willing to pay higher prices for specific domain competencies. This has resulted in increases in hourly rates in some segments of the market, while other market segments are still affected by downward pressure on prices as the result of competition from global vendors.

In relation to outsourcing, the Norwegian market was flat throughout 2012, but the Swedish outsourcing market has continued to grow. Global players have started to be serious contenders in these markets, and this is causing higher expectations for price and quality on big customer contracts. However, this is having only limited effect on the market for other large and medium-sized customers, since global vendors focus on the very largest customers. The SMB market in Norway is in general growing markedly more quickly than the enterprise market, although in Sweden there are only small differences between these customer segments. These trends are expected to continue over the course of the quarters ahead.

In connection with the interim report for the third quarter of 2012, EVRY stated that it did not expect the IT Operations segment to achieve any improvement in earnings in the fourth quarter of 2012 relative to the fourth quarter of 2011.

The company similarly does not expect any improvement in EBITA from IT Operations in 2013 relative to 2012. This relates to the downward trend for revenue in Enterprise & Public Norway, as well as costs in respect of essential network upgrades in order to ensure better quality and the costs of the Future Proof program. EVRY expects this to continue to apply.

The company communicated its financial targets in connection with the Capital Markets Day held in February 2012. The stated ambition was to achieve EBITA of NOK 1.3 billion in 2015. One year on, the current status in relation to this target is as follows:  The Solutions segment is currently slightly above its earnings target, while the Consulting segment is slightly below its target due to the situation in Sweden with weaker conditions in the fourth quarter and a challenging economic situation. However, taken together the Solutions and Consulting segments are performing in line with their EBITA targets. In the IT Operations segment, three out of four areas are in line with the original targets for both growth and margins, and these areas account for 75% of the segment's total revenue. However, the fourth area of IT Operations, which comprises enterprise customers (excluding banks) and the Norwegian public sector, is below target with a relatively large decline in both revenue and earnings. As a result, IT Operations in total is below target in relation to the ambition for 2015.

In addition, the current weak economic conditions in Sweden will in the short term cause significantly slower growth than was assumed for the 2015 targets, and this in turn will mean that the profit contribution in relation to the 2015 target will be smaller than originally planned.

In total, this means that EVRY finds it necessary to revise down the EBITA target previously announced of NOK 1.3 billion in 2015 to NOK 1.1 - 1.2 billion in 2015.

At the Capital Markets Day in February 2012, EVRY presented a target for working capital of 4% by the close of 2013. In the first half of 2012, working capital increased to 6.8% of revenue, but as the result of work carried out to address this, working capital was reduced to 6% by the close of 2012. EVRY maintains its target for working capital to be 4% of revenue by the close of 2013, but the risk that this target will not be achieved is somewhat higher than was the case a year ago.

The Future Proof improvement program will strengthen the profitability of IT Operations and improve quality. The main features of this program are greater use of offshoring and automation, together with data centre consolidation. In addition, the segment has increased its sales and market focus. The introduction of a new and streamlined organisational structure with effect from 2013 will play an important role in achieving greater profitability for IT Operations.

The Consulting segment has established a scalable leverage model that was announced as an important tool for profitability at the Capital Markets Day in February 2012. In addition, reorganisation of the Consulting Oslo unit has been completed and is contributing to improved profitability for the segment.

Consulting will in the future place greater focus on industry verticals.

In order to strengthen further the Solutions segment, the company has decided to concentrate its focus on Nordic banking and finance customers into a separate industry vertical that will have complete responsibility for this market. In addition, the company will continue to build other industry verticals in Norway and Sweden that are positioned at the higher stages of the value chain in areas where the company can benefit from its unique position in the Nordic countries.

The changes to the group's organisational structure that EVRY approved in the third quarter of 2012 have been implemented. This gives the group a sharper market focus based on closeness to customers and understanding of their business, ensuring that EVRY is well-equipped to meet the challenges caused by uncertain market conditions. Close dialogue with customers and greater focus on attractive sectors that are showing growth will ensure that revenue will now grow more strongly than the company achieved in 2012. Together with the streamlined and cost-effective structure for IT Operations, this will ensure that EVRY reaches its EBITA target.

Contact names Terje Mjøs, CEO, EVRY. Tel: + 47 06500 Eli Giske, CFO, EVRY. Tel: +47 908 44 189 Geir Remman, SVP Corporate Communications, EVRY. Tel: + 47 970 55 017 About EVRY EVRY is one of the leading IT companies in the Nordic countries, with a strong local and regional presence in 50 Nordic towns and cities. Through its knowledge, solutions and technology, EVRY contributes to the development of the information society of the future, and so creates value for the benefit of its customers and for society as a whole. EVRY combines in-depth industry knowledge and technological expertise with a local delivery model and international strength.

EVRY has some 10,000 employees, and the company is committed to demonstrating that Nordic customers are best served by a supplier that understands Nordic business from the inside. EVRY reports annual turnover approaching NOK 13 billion. The company is listed on the Oslo Stock Exchange and operates from headquarters in Oslo, with major activities in both the Norwegian and Swedish markets. EVRY is the result of the merger in 2010 of Norway's two leading IT companies, EDB Business Partner and ErgoGroup.

This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.

4th quarter 2012: Presentation of 4th quarter 2012: This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: EVRY via Thomson Reuters ONE [HUG#1676602]

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