"I am delighted to see the confidence customers are placing in us, and it is particularly pleasing to note that we have achieved an international breakthrough with a number of export contracts for our banking and finance solutions. EDB is well positioned for further profitable growth", comments Endre Rangnes, CEO of EDB.

 

EDB implemented cost reducing measures in the third quarter in line with the plans previously announced, principally affecting IT Operations and related support functions in Norway. The entire provision for the costs of these measures was recognized in the third quarter accounts. "This will reduce the cost base and secure EDB's competitiveness and the scope for continuing profitable growth", explains Endre Rangnes.

 

EDB's operating revenue was 18% higher in the third quarter at NOK 1,370 million. The group reports operating profit before intangible asset amortisation (EBITA) of NOK 122 million for the quarter, in line with the third quarter of 2005. The group's EBITA margin was 8.9% for the quarter. The Application Services business area reported organic revenue growth of 12% in the third quarter. The business areas Solutions and IT Operations reported revenue growth of 3% and 1% respectively.

 

EDB signed contracts in the third quarter representing total contract value of NOK 480 million. A large part of the order inflow came from new sales to existing customers. Intensive cross selling, particularly between the newly established Application Services business area and the group's other activities, is beginning to produce results. EDB announced today a letter of intent with Gjensidige Bank. Taken together with other agreements signed since the start of October, new orders so far in the fourth quarter total NOK 300 million.

 

From 1 July until today, EDB has signed new agreements representing total contract value of NOK 780 million:

 

EDB Business Partner reports operating revenue for the third quarter of 2006 of NOK 1,370 million as compared to NOK 1,163 million in the same quarter of 2005. Revenue was up by 18% from the third quarter of 2005. The group's operating profit before intangible asset amortisation (EBITA) was NOK 122 million for the quarter, in line with the third quarter of 2005. The group's EBITA margin was 8.9% for the quarter as compared to 10.5% for the same quarter of last year. The group generated cash from operations of NOK 120 million in the third quarter of 2006 as compared to NOK 196 million in the same quarter of last year. The reduction in cash flow from the third quarter of 2005 is principally the result of differences between 2005 and 2006 in the quarter-to-quarter timing of certain cash flow items. Cash from operations for the first nine months of the year was 22% higher than in 2005. EDB's activities in Sweden reported an increase in total revenue of 100% in the third quarter to NOK 323 million. Revenue generated in the Swedish market now accounts for around 25% of the group's total turnover.

 

As previously announced, EDB implemented restructuring measures during the third quarter, principally affecting the IT Operations business area in Norway. These measures require a provision of NOK 144 million. This amount represents the total expected cost of the restructuring. The provision was charged in full to the third quarter accounts, and as a result of this the group reports a post-tax loss of NOK 46 million for the third quarter of 2006 as compared to a profit of NOK 56 million for the same period in 2005. The measures are expected to produce an annual cost saving in excess of NOK 100 million.

 

IT Operations reported operating revenue of NOK 925 million for the third quarter of 2006 as compared to NOK 920 million in the same quarter of 2005. This represents revenue growth for the business area of around 1% from the third quarter of 2005. EBITA was NOK 85 million in the third quarter of 2006, as compared to NOK 86 million in the third quarter of 2005.

Solutions reported operating revenue of NOK 271 million in the third quarter of 2006 as compared to NOK 264 million in the same quarter of 2005, representing growth of 3%. EBITA was NOK 41 million in the third quarter of 2006, as compared to NOK 50 million in the same quarter of 2005.

 

Application Services, which was not part of the group in 2005, reported operating revenue of NOK 202 million in the third quarter of 2006 as compared to proforma revenue of NOK 180 million in the same quarter of 2005. This represents year-on-year growth of 12% for the activities that now make up Application Services. EBITA was NOK 12 million in the third quarter.

 

The Nordic IT services market continues to develop positively, and is expected to show growth in the order of 5% in 2006 according to figures produced by the market intelligence company IDC. The overall rate of growth is expected to continue at the same level next year, both in Norway and in Sweden.

 

The IT Operations business area operates in the outsourcing market, which has shown a flat performance over the first three quarters of 2006. This picture is not expected to change significantly in the short term. There are, however, a number of tenders in the market that may create opportunities for new medium-size and larger contracts in 2007. During the third quarter of 2006, IT Operations and its related support functions implemented cost cutting measures that will deliver a significant annual saving of NOK 100 million. These measures will begin to take effect from the fourth quarter of 2006 and will have virtually full effect from the second quarter of 2007. This will help to ensure that the IT Operations business area maintains its profitability at the level achieved over recent years.

 

The Solutions business area is experiencing increasing demand from the international market, particularly in the banking and finance area. EDB expects that this focus will secure growth and profitability for this business area.

The Application Services business area is enjoying sound organic growth, largely as a result of an increasing utilisation rate for its consultants. The business area is experiencing continuing growth in demand, and is continually involved in recruiting new staff.

 

 

EDB Business Partner is Norway's largest IT company, with turnover of NOK 4.8 billion in 2005. The group had 3,900 employees at the start of 2006, of which 1,400 are in Sweden. EDB Business Partner is listed on Oslo Børs with the ticker code EDBASA. For further information see www.edb.com 

 

The third quarter 2006 interim report, including tables and the presentation of the results, can be downloaded from the following links: