Atea — Earnings Release 2010

Jul 15, 2010

Atea Q2 2010 financial results

Highlights Q2 2010

· Revenue of MNOK 4,042.4, up 6.8% y-o-y, up

11.8% in constant currency

· EBITDA of MNOK 132.4, up 13.1%

· EBITDA margin of 3.3%, up from 3.1%

· EBIT of MNOK 83.5, up 17.3%

· Acquired Dropzone in Norway, e-commerce

company serving SMB customers

· Acquired Portal in Sweden, one of the leading

IT infrastructure companies in Sweden

· Acquired Impact Europe's subsidiaries in

Sweden and Norway, leading video conferencing and AV

solutions company

Financial review Q2 and first half 2010

Group

Group revenue in Q2 2010 is up 6.8% from MNOK 3,785.3

in Q2 2009 to MNOK 4,042.4 in Q2 2010. In constant

currency the growth y-o-y represents as much as

11.8%. The growth in constant currency adjusted for

acquisitions represents 7.2%. The Nordic IT market is

expected by IDC to grow by 2.1% for the full year

2010. This implies that Atea continues gaining market

shares. Hardware revenue increased by 21.4% in

constant currency, services revenue was up 8.2% and

software was down 1.1%.

EBITDA in Q2 2010 ended at MNOK 132.4, up 13.1% y-o-y

and represents a margin of 3.3%, up from 3.1% in Q2

2009. The improvement in EBITDA is mainly due to

increase in revenue combined with tight cost control.

Group EBIT ended at MNOK 83.5, which is up 17.3%

compared to corresponding period last year.

In H1 2010 Atea generated total revenue of MNOK

7,613.2 which is up 4.4% compared with corresponding

period last year. In constant currency the growth is

as much as 9.4% and adjusted for acquisitions the

growth represents 5.9% y-o-y. EBITDA ended at MNOK

252.1, up from MNOK 208.2 last year, representing an

EBITDA margin of 3.3%, up from 2.9% in 2009.

Norway

Revenue in Norway in Q2 was MNOK 876.6, which is up

by 8.6% compared with Q2 2009. Product revenue was up

by 8.8% and consulting and services revenue was up by

7.9%. Q2 was affected by a larger portion of revenue

to private sector vs. public sector. However, order

backlog against public sector is strong going into

third quarter.

During Q2 Norway acquired two companies. Impact

Europe Norge AS with 13 employees was acquired in May

and is expected to generate a full year revenue of

MNOK 50 and an EBITDA of MNOK 1. The acquisition of

Impact Europe in Norway will strengthen the AV

solutions and video conferencing business of Atea in

Norway. In June Atea AS acquired Dropzone ASA at an

enterprise value of MNOK 29.2. Dropzone will be the

base for Atea's dedicated sales and marketing efforts

serving the small and medium sized customer segment

in Norway. Dropzone with 18 employees is expected to

generate full year revenue of

MNOK 170 and an EBITDA of MNOK 5.

Revenue growth in Q2, excluding the impacts from the

acquired businesses, was 6.6%, thus catching up most

of the negative trend in Q1 2010. The recently

updated IDC Atea Blue Box report predicts annual 2010

growth y-o-y for Norway to be 0.5 % (2009: -6.6%).

EBITDA before acquisition cost (MNOK 5.4) and share

based compensation (MNOK -0.6) for Q2 2010 ended at

MNOK 38.7, up 37.9% compared with Q1 2009. The EBITDA

margin was 4.4%, up from 3.5% in Q2 2009, reflecting

satisfying margins and cost control.

Denmark

Revenue in Q2 2010 ended at MNOK 1,367.4, up 7.7% in

constant currency compared with Q2 2009. Product

revenue was up 8.9% and consulting and services

revenues were up 3.0%. Excluding impacts from

acquisitions (Calamus Danmark) revenue in constant

currency was up 3.7%. IDC prediction for annual 2010

growth y-o-y for Denmark has recently been increased

to 1.5% (2009: -9.5%). The server business continues

to show a strong performance.

EBITDA ended at MNOK 37.6 compared to MNOK 57.2 in Q2

2009, a decrease in constant currency of 26.1%.

Product margin is above previous year, however,

consulting and services have seen a temporary set-

back. Due to a less favourable mix in services, the

gross margin has decreased. Billing rate performance

is expected to improve during Q3. Cost base in Q2

2010 compared with Q2 2009 (excluding impacts from

acquired companies) is up by 2.7%.

Sweden

Sweden has made a strong performance in Q2 2010.

Revenue was MNOK 1,252.4, which is up 15.1% in

constant currency. Product revenue was up 17.3% and

consulting and services revenues were up 6.9%.

Late April Sweden acquired Impact Europe AB with 46

employees located in seven offices throughout Sweden.

The company is expected to generate a full year

revenue of MNOK 108 and an EBITDA of MNOK 5. The

acquisition of Impact Europe in Sweden will

strengthen the AV solutions and video conferencing

business of Atea in Sweden, according to Atea's

strategic growth plan. Enterprise value of the total

of Impact Europe (Sweden and Norway) was MNOK 40.9.

Mid June Sweden entered into agreement to acquire

Portal AB with 110 employees and with an expected

full year revenue of MNOK 644 and EBITDA of MNOK 20

in 2010. The enterprise value is estimated to MNOK

115. The Stockholm based company is recognized as one

of the strongest and fastest growing IT

infrastructure companies in Sweden and it will

increase the customer base and sales force especially

within the mid-market segment. The acquisition is

expected to have effect from August 2010 pursuant to

the approval from the Swedish Competition Authority.

Revenue growth in Q2, excluding impacts from acquired

businesses, was 8.7% in constant currency, compared

with recently updated IDC predictions for annual 2010

growth for Sweden of 2.5% y-o-y (2009: -7.1%). Hence,

Sweden is gaining market shares in the biggest Nordic

IT market. Consulting and services revenues excluding

acquired businesses are down 2.7%, caused by less

consultants compared to Q2 2009. The billing rates,

however, have shown a strong development and is at a

satisfactory level.

EBITDA before acquisition cost (MNOK 2.4) and share

based option cost (MNOK -1,2) for Q2 ended at MNOK

47.6, up 46.4% in constant currency and implying an

EBITDA margin of 3.8% (Q2 2009: 3.0%). Both product

and services margins are above the level of previous

year. While reaching a strong top-line growth at

improved margins, cost base is satisfying going

forward.

During Q2 Sweden has made a series of frame

agreements with public sector (Kammarkollegiet,

Kommentus, The Swedish Cooperative Union) to deliver

products, operations and services over several years,

thus strengthening the basis for further growth in a

market about to slowly recover from the financial

down-turn.

Finland

Revenue in Finland in Q2 ended at MNOK 453.6, which

is up 25.2% in constant currency from Q2 2009.

Product business is still performing well and is up

23.4% and consulting and services is up 49.3%, thus

picking up the slow performance of Q1 2010. Revenue

growth excluding impacts from acquired businesses (A

Communications and PALnet) is 14.4% in constant

currency, to be compared with recently revised IDC

predictions for annual 2010 growth for Finland of

3.7% y-o-y (2009: -9.3%). Hence Finland is still

gaining market shares. Deliveries in Q2 are affected

by a major contract to public sector, implying a more

moderate development in the coming quarters.

EBITDA for Finland was up from MNOK 0.1 in Q2 2009 to

MNOK 7.6 in Q2 2010. Product margin is 0.7 percent

point lower compared to previous year, related to

software. A reduction of 30 employees from 2nd half

of 2010 will reduce the cost base further.

The Baltics

Revenue in the Baltics in Q2 was MNOK 90.3, which is

up 38.5% in constant currency. Revenue for Q2 was

higher than estimated mainly due to projects which

were completed earlier than expected.

EBITDA in Q2 was MNOK 2.1 compared with MNOK 4.4 the

previous year. The main reason for the reduction is

the low product margin caused by a generally

difficult market. Constant cost focus has bridged

most of the gap in margins. As a result, four days

working week is implemented for the period April to

end of August.

Closed projects in Q2 2010 were with the Ministry of

Education in Lithuania (MNOK 17.7), the Ministry of

Internal Affairs (MNOK 4.0) and the Citizens Register

(MNOK 4.0).

Outlook

According to IDC the total Nordic IT infrastructure

market targeted by Atea, declined by 8.0% in 2009.

The IDC forecast for 2010 is a total market growth of

2.1%. In first half of 2010 Atea growth was 11.8% in

constant currency. Atea is expecting to continue

gaining market shares during 2010. Important

technology trends, such as Unified Communication,

Mobile Infrastructure Solutions, Virtualisation,

Software Asset Management, Device Lifecycle

Management, Windows 7 and Green IT, areas in which

Atea has established a strong presence through

organic initiatives and acquisitions during 2009 and

beginning of 2010, will help fuel IT investments

going forward.

It is expected that the positive organic development

in 2010 will be supplemented by growth through

acquisitions, as Atea has the financial strength and

a clear intent to continue playing an important role

in the ongoing market consolidation.

The target goal is to achieve revenues of NOK 20

billion and EBITDA of NOK 1 billion in 2011.

Equity and cash flow

Shareholders' equity as of June 30, 2010 was MNOK

2,861.1 and minority interests were MNOK 4.0

corresponding to an equity ratio of 40.2%. Same level

compared to June 30, 2009.

The Group generated an operational cash flow of MNOK

71.2 during Q2 2010. This is at the same level as Q2

During Q2 2010 capital expenditures were MNOK 26.1

and payments regarding acquisitions were MNOK 86.9.

The acquisition payments are related to Impact Europe

in Sweden and Norway, Dropzone and Tre65 (earn out)

in Norway. A total interest bearing debt of MNOK 12.3

was included in the balance sheet from these

companies in addition to the cash payments (MNOK

86.9).

Cash flow from equity transactions was MNOK -111.0 in

Q2 2010 and is related to dividend payment (MNOK -

117.4) and proceeds from a minor share issue (MNOK

6.4) in connection with the employee share option

scheme.

The working capital ratio as of June 30, 2010, was

2.0% which is down from 2.8% as of June 30, 2009. Net

interest bearing position as of June 30, 2010,

compared to March 31, 2010, increased by MNOK 169.0

from MNOK 339.4 to MNOK 508.4. Cash reserves

including unutilised credit facilities as of June 30,

2010, were

MNOK 1,191.1.

Note:

· The interim financial statements have been

prepared in accordance with IFRS standard for interim

financial reporting (IAS 34). The statements are

consistent with accounting principles used in the

financial statements for 2009, plus IFRS 8, IAS 23

(Revised), IFRS 2 (Amendment), IAS 1 (Revised).

Enclosures on [http://www.newsweb.no]

Please go to [http://www.atea.com/reports] for the

quarterly report and presentation.

Video of the press conference is available at

[http://www.atea.com/webcast]

For further information, please contact:

Claus Hougesen, CEO Atea ASA, Mobile +45 3078 1200

Rune Falstad, CFO Atea ASA, Mobile +47 906 14 482

About Atea

Atea is the leading Nordic and Baltic supplier of IT

infrastructure with approximately 4700 employees.

Atea is present in 73 cities in Norway, Sweden,

Denmark, Finland, Lithuania, Latvia and Estonia. Atea

delivers IT products from leading vendors and assist

its customers with specialist competencies within IT

infrastructure services. Atea has an annual revenue

of approximately NOK 15 billion and is listed on Oslo

Stock Exchange. [http://www.atea.com]