Ework Group — Interim / Quarterly Report 2016

Apr 20, 2016

Strong market and continued high growth

First quarter 2016 compared to 2015

• • Net sales increased by 16% to SEK 1,685 M (1,458).
• • Operating profit up by 14% to SEK 19.6 M (17.2).
• • Order intake rose by 23% to SEK 2,284 M (1,850).
• • Earnings per share after tax and after dilution were SEK 0.87 (0.78).
• • The consultant market remained robust with healthy demand for consultants for new assignments.
• • The Board of Directors set new financial targets for the period 2016-2020:
• eWork will generate average yearly sales growth of 20%.
• Earnings per share will increase by an average of 20% per year.

Quarterly order intake

CEO ZORAN COVIC

We are advancing our positions

In the first quarter of the year, we saw a brisk market and eWork maintained its healthy growth. eWork announced new long-term targets in February. Over the next five years, net sales and earnings per share will grow by an average of 20% per year each.

he targets we have set are aggressive—by the end of the period, eWork will have sales of some SEK 15 billion, with earnings 2.5 times the current level. We view this as a natural progression

of the progress we have been making for many years, when our percentage growth rate has actually been somewhat higher.

We think we can keep growing on existing markets with our current offering. Our combination of new consultant assignments and new MSP contracts will remain the foundation of our growth for the coming five years. If we look further ahead, there are more, substantial growth opportunities. The Fourth Industrial Revolution, and how people will increasingly decide to work as consultants, is a common topic of discussion. This is a revolution that eWork has been predicting for a long time. We're ready with our tried-and-tested business model that streamlines the everyday lives of consultant purchasers and the new corps of consultants.

In the first quarter, operations progressed consistent with our plans and expectations. Our net sales and earnings increased well, while our order intake again rose by 20%. In the quarter we intensified work on a number of initiatives to further advance our positioning, the scalability of our operations and long-term growth potential.

I would like to highlight our Norwegian business especially, which despite poor economic conditions in the private sector, succeeded in growing briskly through public sector assignments. The Polish operation is also making great progress. I recently returned from a meeting with the management team that we have stationed in Poland, where we felt the pulse of the Polish market and gained inspiration from the pioneering spirit there. This same pioneering spirit has been one of eWork's distinguishing features over the past 15 years and remains one of the key cornerstones of our continued growth.

Zoran Covic, CEO

More consultants in the Fourth Industrial Revolution

More people will work as consultants in the future, the reason being that we are on the verge of a technology revolution, which is expected to fundamentally transform the way we live and work. "We'll see new business models, business opportunities and markets. This will make us redefine our view of what an organisation is. Corporations that run change processes continuously, and can rapidly adapt their needs for competence, will be the winners," says Zoran Covic, eWork's CEO.

F From self-driving cars and drones to virtual assistants and software that translates and invests. Just some of the evidence that we're surging ahead to the Fourth Industrial Revolution, when engineers, designers and architects will combine data design with materials technology and synthetic biology into a revolutionary symbiosis between microorganisms, our bodies, the products we consume, and even to the buildings we live in. The potential created by billions of people connected by mobile devices with massive processing power, storage capacity and access to knowledge is infinite. And this will be multiplied many times over by breakthroughs in new technologies like artificial intelligence, robots, the Internet of Things, nanotechnology, biotechnology, materials science, energy storage and quantum computing.

"Many commentators, including the World Economic Forum, think the Fourth Industrial Revolution has the potential to make people's lives better through higher pay levels and improved quality of life globally," explains Zoran.

"For example, new technology will enable people to work in new ways, remotely and via teleconferencing," he continues.

"As a result, it will be necessary to redefine concepts like talent, culture and organisation. Quite simply, corporations will need to re-assess the way they do business. Those companies with the capacity to understand the changes in their business environments and drive continuous change processes will be the winners," adds Zoran.

"Corporations are expected to downsize their bases of full-time employees that work in permanent functions, backed by colleagues in other countries. They will be supplemented by a substantial body of external consultants for specific assignments." A yearly SAP report on the consultant market authored by Ardent Partners forecasts that temporary employment, including independent consultants

and freelancers, will represent nearly 45% of the global workforce by 2017.

Those companies with the capacity to understand the changes in their business environments and drive continuous change processes will be the winners."

Zoran Covic, CEO, EWORK

In "The State of Contingent Workforce Management: The 2014/2015 Guidebook for Managing Non-Traditional Talent" based on interviews with some 200 HR and financial managers, as well as purchasing managers, 92% of companies stated that non-traditional staffing for assignments was very to reasonably important to companies' overall strategies.

Strong market and continued high growth

Market

The Nordic consulting market remained brisk during the first quarter of the year. The strong trend from 2015 sustained, and the demand for consultants for new assignments was healthy in most of the skills segments where eWork is active. As in recent quarters, growth was primarily driven by the demand for new consultant assignments. eWork judges that it has outgrown the consulting market and accordingly, continued to win market share.

eWork's demand indicators such as the number of client enquiries received, applications from consultants, the share of indicated skills segments, etc. continued to increase year on year, with no signs of slowing.

The eWork Barometer, eWork's regular consultant satisfaction survey of the market's largest base of contributing consultants, indicated consultants' strong belief in the future, through responses including a clear increase in the number of consultants expecting higher fee levels.

The number of applicants for assignments was relatively low compared to previous years. However, access to consultants in eWork's network that are available for new assignments

remained positive. The lower number of applicants is a sign of generally higher utilisation. eWork also views the Swedish and Danish markets as strong. The Finnish market showed signs of improvement after a long-term economic slump. The Norwegian private sector remained hesitant, but demand from the public sector did rise.

The Group's net sales

The Group's net sales for the first quarter increased by 16% to SEK 1,685 M (1,458), with growth primarily sourced from new consultant assignments. All segments contributed to the increase, with Sweden providing the highest growth in absolute terms.

The Group's profit

The Group's operating profit for the first quarter increased by 14% to SEK 19.6 M (17.2). Profit after financial items was SEK 19.6 M (17.2). Profit after tax for the quarter was SEK 14.9 M (13.4). The profit increase is a result of higher net sales, especially from new consultant assignments. The Group's positive operating profit is mainly sourced from Sweden. The Denmark and Norway segments contributed 10% of profits combined.

2015

2016

Business highlights

The Group's order intake increased by 23% on the first quarter of the previous year, to SEK 2,284 M (1,850). Order intake includes new assignments and extensions. Growth is primarily sourced from new consultant assignments. The number of consultants on assignment increased by 18%, and peaked at 5,817 (4,950).

In the period, the Board of Directors adopted new financial targets for operations for the period 2016-2020:

• eWork will generate average yearly sales growth of 20%.
• Earnings per share will increase by an average of 20% per year.

Sweden

The Swedish operation performed positively. Net sales for the quarter increased by 16% to SEK 1,398 M (1,202). The sales increase was partly sourced from MSP contracts, and partly from more new consultant assignments. The positive progress of new consultant assignments is due to the economy remaining strong, and positive demand on the consulting market.

Operating profit was SEK 18.4 M (15.9), up by 16%.

The Polish operation progressed positively. This market is dynamic, with

2014

Sales by region

as a percentage of net sales

* Poland is reported under Sweden.

2012

2013

very high demand for consultants for new assignments. eWork's offering has attracted great interest from its client base. Operations in Poland are reported under the Sweden segment for the present.

Finland

The net sales of the Finnish operation were up somewhat on the previous year to SEK 83.8 M (83.1). The Finnish operation retained its focus on delivery to its major MSP deal with Tieto. The number of new consultant assignments made slower progress than anticipated. Operating profit/loss was lower than in the first quarter of the previous year, at SEK -0.8 M (-0.4), mainly due to an altered sales mix.

Denmark

The positive progress the Danish operation made in the previous year continued, albeit with a somewhat lower growth rate.

Net sales increased by 20% in the first quarter to SEK 100.0 M (83.6). Operating profit reduced to SEK 0.8 M (1.4). The decrease is due to higher cost incurred to create the right conditions for continued growth.

Norway

The revenues of the Norwegian operation increased thanks to successfully securing new assignments in the public sector. Net sales increased by 16% to SEK 103.0 M (88.6). Operating profit was up sharply to SEK 1.1 M (0.2).

Financial position

The equity/asset ratio was 6.8% (8.7) at the end of the period. The lower equity/assets ratio is due to an increase in working capital resulting from higher sales and lower equity compared to the previous year as a result of the extraordinary dividend paid in the second quarter of 2015.

Cash flow from operating activities was SEK 8.0 M (-66.0) in the first quarter. The main explanation for the wide variation in working capital at reporting dates is that all payments from clients and to consultants are made at month-ends. Accordingly, a modest shift in payments made or received can have a significant effect on cash flow at a specific time.

The Group's net interest-bearing assets were SEK 33 M (124) at the end of the reporting period.

Key performance data

SEK 000	January-March 2016	January-March 2015	Rolling 4 quarters Apr 2015-Mar 2016	Full year 2015
Net sales	1,684,877	1,457,386	6,316,570	6,089,079
Operating profit, EBIT	19,585	17,246	80,744	78,405
Profit before tax	19,556	17,230	80,184	77,858
Profit for the period	14,900	13,352	61,215	59,667
Sales growth, %	15.6	32.0	24.6	29.2
Operating margin, EBIT, %	1.2	1.2	1.3	1.3
Profit margin, %	1.2	1.2	1.3	1.3
Return on equity, %	44.7	38.6	45.9	50.0
Total assets	1,863,158	1,626,860	1,863,158	1,797,943
Equity	127,432	139,474	139,474	112,212
Equity/assets ratio, %	7	9	7	6
Acid test ratio, %	108	109	109	111
Average number of employees	203	163	186	176
Net sales per employee	8,300	8,941	33,960	34,597
Key performance data per share
Earnings per share before dilution	0.87	0.79	3.58	3.49
Earnings per share after dilution	0.87	0.78	3.57	3.48
Equity per share before dilution	7.4	8.2	8.2	6.6
Equity per share after dilution	7.4	8.2	8.1	6.6
Cash flow from operating activities per share before dilution	0.47	-3.89	-0.85	-5.18
Cash flow from operating activities per share after dilution	0.47	-3.87	-0.84	-5.16
Number of shares outstanding at end of period before dilution (000)	17,085	16,984	17,085	17,085
Number of shares outstanding at end of period after dilution (000)	17,156	17,041	17,156	17,130
Average number of shares outstanding before dilution (000)	17,085	16,984	17,043	17,018
Average number of shares outstanding after dilution (000)	17,138	17,014	17,095	17,111

Shareholders

As of 31 March 2016	No. of shares	Votes and equity
Staffan Salén and family through companies1	4,668,945	27.3%
Försäkringsaktiebolaget Avanza Pension	3,110,179	18.2%
Investment AB Öresund	1,709,983	10.0%
Veralda Investment Ltd	1,132,705	6.6%
PSG Small Cap	451,241	2.6%
Handelsbanken Fonder AB RE JPMEL	428,398	2.5%
Claes Ruthberg	400,000	2.3%
Patrik Salén and family through companies2	374,000	2.2%
Jan Pettersson	349,000	2.0%
Erik Åfors through companies3	277,291	1.6%
Total	12,901,742	75.5%
Other	4,183,333	24.5%
Total	17,085,075	100%

1 Salénia AB and Westindia AB 2 Jippa Investment AB 3 Ingo Invest AB

The eWork share

Workforce

The average number of employees increased to 203 (163) excluding consultants employed on a project basis. The increase is due to higher net sales and the new start-up in Poland.

Parent Company

The Parent Company's net sales for the first quarter were SEK 1,400 M (1,205). Profit before financial items was SEK 19.2 M (15.9) and profit after tax was SEK 15.0 M (12.2).

The Parent Company's equity at the end of the quarter was SEK 126 M (138) and the equity/assets ratio was 7.8% (9.8). Otherwise, where appropriate, the above comments regarding the Group's financial position also apply to the Parent Company.

Material risks and uncertainty factors

eWork's material business risks, for the Group and Parent Company, consist of reduced demand for consulting services, difficulties in attracting and retaining skilled staff, credit risks, and to a lesser extent, currency risks. The Company is not aware of any new material business risks in the forthcoming six months.

For a more detailed review of material risks and uncertainty factors, please refer to eWork's Annual Report.

Subsequent events

No significant events have occurred after the end of the reporting period.

Outlook

eWork is retaining its judgement of the outlook for 2016 presented in the Yearend Report for 2015:

eWork judges that in future, a growing share of the labourforce will be consultants. The market's long-term consolidation trend is expected to continue, and is expected to generate positive growth potential for eWork in the period 2016 to 2020. eWork expects demand on the Nordic consulting market to remain strong in 2016 and the consulting market as a whole to grow. This means that the number of new consultant assignments on the market will continue to increase. In addition, new outsourcing deals are anticipated. This trend is expected to generate positive business potential for eWork. eWork has a strong market position and a competitive offering. Accordingly, eWork is expected to continue to outgrow the underlying consulting market on existing geographical markets and in existing skills segments. This means that eWork has the potential to achieve good sales growth with corresponding profit performance in the full year 2016.

Zoran Covic, CEO Stockholm, Sweden, 20 April 2016

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

The information disclosed in this Interim Report is mandatory for eWork Scandinavia AB (publ) to publish pursuant to the Swedish Securities Markets Act. This information will be submitted for publication at 10:00 a.m. (CET) on 20 April 2016.

ACCOUNTS

Consolidated Statement of Comprehensive Income

SEK 000 Note	January-March 2016	January-March 2015	Rolling 4 quarters Apr 15-Mar 16	Full year 2015
Operating income
Net sales 1	1,684,877	1,457,386	6,316,570	6,089,079
Work performed by the company for its own use and capitalized	2,002	0	2,002	0
Other operating income	8	181	-152	21
Total operating income	1,686,887	1,457,567	6,318,420	6,089,100
Operating costs
Cost of consultants on assignment	-1,607,819	-1,388,348	-6,018,690	-5,799,219
Other external costs	-16,465	-14,119	-60,338	-57,992
Personnel costs	-42,816	-37,673	-157,826	-152,683
Depreciation, amortisation and impairment of property,
plant & equipment and intangible non-current assets	-202	-181	-822	-801
Total operating costs	-1,667,302	-1,440,321	-6,237,676	-6,010,695
Operating profit	19,585	17,246	80,744	78,405
Profit/loss from financial items
Net financial items	-29	-16	-560	-547
Profit/loss after financial items	19,556	17,230	80,184	77,858
Tax	-4,656	-3,878	-18,969	-18,191
Profit for the period	14,900	13,352	61,215	59,667
Other comprehensive income/costs
Items that have been reclassified, or are reclassifiable, to profit or loss
Translation differences on translation of foreign operations for the period	320	-290	-1,099	-1,709
Other comprehensive income/costs for the period	320	-290	-1,099	-1,709
Comprehensive income for the period	15,220	13,062	60,116	57,958
Earnings per share
before dilution (SEK)	0,87	0,79	3,58	3,49
after dilution (SEK)	0,87	0,78	3,57	3,48
Number of shares outstanding at end of the reporting period:
before dilution (000)	17,085	16,984	17,085	17,085
after dilution (000)	17,156	17,041	17,156	17,130
Average number of outstanding shares:
before dilution (000)	17,085	16,984	17,043	17,018
after dilution (000)	17,138	17,014	17,095	17,111

Consolidated Statement of Financial Position

SEK 000	Note	31 Mar 2016	31 Mar 2015	31 Dec 2015
Assets
Non-current assets
Intangible non-current assets		2,284	469	313
Property, plant and equipment		1,428	1,585	1,419
Non-current receivables		508	446	486
Deferred tax asset		1,366	3,073	1,358
Total non-current assets		5,586	5,573	3,576
Current assets
Accounts receivable—trade		1,772,970	1,453,954	1,667,576
Tax receivables		0	5,062	0
Prepaid expenses and accrued income		19,229	26,611	12,479
Other receivables		12,171	11,999	18,734
Cash and cash equivalents		53,202	123,661	95,578
Total current assets		1,857,572	1,621,287	1,794,367
Total assets		1,863,158	1,626,860	1,797,943
Equity and liabilities
Equity
Share capital		2,221	2,207	2,221
Other paid-up capital		51,494	62,526	51,494
Reserves		-5,709	-4,610	-6,029
Retained earnings including profit for the period		79,426	79,351	64,526
Total equity		127,432	139,474	112,212
Non-current liabilities
Non-current interest-bearing liabilities		20,020	0	68,590
Total non-current liabilities		20,020	0	68,590
Current liabilities
Accounts payable—trade		1,663,494	1,429,639	1,567,447
Tax liabilities		812	0	484
Other liabilities		24,744	26,257	24,301
Accrued expenses and deferred income		26,656	31,490	24,909
Total current liabilities		1,715,706	1,487,386	1,617,141
Total equity and liabilities		1,863,158	1,626,860	1,797,943

Consolidated Statement of Changes in Equity

SEK 000	Share capital	Other paid-up capital	Translation reserve	Retained earnings incl. profit for the period	Total equity
Opening equity, 1 Jan. 2015	2,207	62,526	-4,320	65,999	126,412
Comprehensive income for the period
Profit for the period				13,352	13,352
Other comprehensive income/costs for the period			-290		-290
Comprehensive income for the period			-290	13,352	13,062
Closing equity, 31 Mar. 2015	2,207	62,526	-4,610	79,351	139,474
Opening equity, 1 Apr 2015	2,207	62,526	-4,610	79,351	139,474
Comprehensive income for the period
Profit for the period				46,315	46,315
Other comprehensive income/costs for the period			-1,419		-1,419
Comprehensive income for the period			-1,419	46,315	44,896
Transactions with the Group's shareholders
Dividends		-15,288		-61,140	-76,428
Warrants exercised by staff	14	4,256			4,270
Closing equity, 31 Dec 2015	2,221	51,494	-6,029	64,526	112,212
Opening equity, 1 Jan. 2016	2,221	51,494	-6,029	64,526	112,212
Comprehensive income for the period
Profit for the period				14,900	14,900
Other comprehensive income/costs for the period			320		320
Comprehensive income for the period			320	14,900	15,220
Closing equity, 31 Mar 2016	2,221	51,494	-5,709	79,426	127,432

Consolidated Statement of Cash Flows

SEK 000 Note	January-March 2016	January-March 2015	Rolling 4 quarters Apr 15-Mar 16	Full year 2015
Operating activities
Profit after financial items	19,556	17,230	80,184	77,858
Adjustment for items not included in cash flow	202	181	822	801
Income tax paid	-4,334	-4,273	-11,113	-11,052
Cash flow from operating activities before changes in working capital	15,424	13,138	69,893	67,607
Cash flow from changes in working capital	-7,455	-79,140	-84,379	-156,064
Increase (-)/Decrease (+) in operating receivables	-108,054	-243,099	-323,139	-458,184
Increase (+)/Decrease (-) in operating liabilities	100,599	163,959	238,760	302,120
Cash flow from operating activities	7,969	-66,002	-14,486	-88,457
Investing activities Acquisition of property, plant & equipment	-163	-693	-463	-993
Acquisition of intangible assets	-2,002	0	-2,026	-24
Cash flow from investing activities	-2,165	-693	-2,489	-1,017
Financing activities
Warrants exercised	0	0	4,270	4,270
Dividend paid to Parent Company shareholders	0	0	-76,428	-76,428
Borrowings	-48,570	0	20,020	68,590
Cash flow from financing activities	-48,570	0	-52,138	-3,568
Cash flow for the period	-42,766	-66,695	-69,113	-93,042
Cash and cash equivalents at beginning of period	95,578	190,506	123,661	190,506
Exchange rate difference	390	-150	-1,346	-1,886
Cash and cash equivalents at end of period	53,202	123,661	53,202	95,578

Parent Company Income Statement

	January-March	January-March	Rolling 4 quarters	Full year
SEK 000 Note	2016	2015	Apr 15-Mar 16	2015
Operating income
Net sales	1,396,761	1,202,020	5,231,278	5,036,537
Work performed by the company for its own use and capitalized	2,002	0	2,002	0
Other operating income	3,696	2,807	12,465	11,576
Total operating income	1,402,459	1,204,827	5,245,745	5,048,113
Operating costs
Cost of consultants on assignment	-1,337,210	-1,147,915	-4,997,931	-4,808,636
Other external costs	-13,813	-12,001	-50,608	-48,796
Personnel costs	-32,032	-28,840	-118,746	-115,554
Depreciation, amortisation and impairment of property, plant & equipment and intangible non-current assets	-156	-147	-637	-628
Total operating costs	-1,383,211	-1,188,903	-5,167,922	-4,973,614
Operating profit	19,248	15,924	77,823	74,499
Profit/loss from financial items
Other interest income and similar items	129	20	315	206
Interest expense and similar items	-67	-196	-1,305	-1,434
Profit after financial items	19,310	15,748	76,833	73,271
Tax	-4,290	-3,526	-17,190	-16,426
Profit for the period *	15,020	12,222	59,643	56,845

* Profit for the period corresponds to comprehensive income for the period.

Parent Company Balance Sheet

SEK 000	Note 31 Mar 2016	31 Mar 2015	31 Dec 2015
Assets
Non-current assets
Intangible non-current assets	2,284	469	313
Property, plant and equipment	722	1,058	832
Financial non-current assets
Other non-current receivables	45	0	45
Participations in Group companies	22,072	19,392	22,072
Total financial non-current assets	22,117	19,392	22,117
Total non-current assets	25,123	20,919	23,262
Current assets
Accounts receivable—trade	1,543,541	1,262,732	1,466,885
Receivables from Group companies	17,872	13,489	22,390
Tax receivables	0	4,613	0
Other receivables	486	404	5,952
Prepaid expenses and accrued income	10,837	14,221	6,922
Cash and bank balances	22,568	94,784	64,555
Total current assets	1,595,304	1,390,243	1,566,704
Total assets	1,620,427	1,411,162	1,589,966
Equity and liabilities Equity Restricted equity
Share capital (17,085,075 shares with par value of SEK 0.13)	2,221	2,208	2,221
Statutory reserve	6,355	6,355	6,355
Development fund	2,002	0	0
Total restricted equity	10,578	8,563	8,576
Non-restricted equity
Share premium reserve	45,535	56,566	45,535
Retained earnings	54,843	61,140	0
Profit for the period	15,020	12,222	56,845
Total non-restricted equity	115,398	129,928	102,380
Total equity	125,976	138,491	110,956
Non-current liabilities
Liabilities to credit institutions	20,020	0	68,590
Total non-current liabilities	20,020	0	68,590
Current liabilities
Accounts payable—trade	1,433,858	1,230,501	1,375,339
Tax liabilities	830	0	794
Other liabilities	23,517	24,879	20,098
Accrued expenses and deferred income	16,226	17,291	14,189
Total current liabilities	1,474,431	1,272,671	1,410,420
Total equity and liabilities	1,620,427	1,411,162	1,589,966

Accounting policies

The Interim Report for the Group has been prepared in accordance with IAS 34 Interim Financial Reporting and the appropriate provisions of the Swedish

Annual Accounts Act. The Interim Report for the Parent Company has been prepared in accordance with the Swedish Annual Accounts Act. The same accounting principles and basis of calculation have been applied as in the Annual Report for 2015. At present, the operation in Poland is reported under the Sweden segment.

Notes on the financial statements

The Group's operating segments

		Sweden Jan-Mar		Finland Jan-Mar		Denmark Jan-Mar		Norway Jan-Mar		Total Jan-Mar
SEK 000	2016	2015	2016	2015	2016	2015	2016	2015	2016	2015
Income from clients		1,398,076 1,202,020	83,766	83,106	100,007	83,641	103,028		88,619 1,684,877 1,457,386
Profit per segment	30,107	28,130	561	756	2,027	2,240	2,144	1,155	34,839	32,281
Group-wide expenses	-11,692	-12,206	-1,340	-1,116	-1,195	-807	-1,027	-906	-15,254	-15,035
Operating profit/loss	18,415	15,924	-779	-360	832	1,433	1,117	249	19,585	17,246
Net financial items									-29	-16
Profit/loss for the period
before tax									19,556	17,230

www.ework.se

eWork Scandinavia AB (publ).

Klarabergsgatan 60, 3rd floor SE-111 21 Stockholm Tel: +46 (0)8 506 05500 Corporate ID no. 556587-8708

Reporting calendar

20 July 2016	Interim Report 2	April-June 2016
21 October 2016	Interim Report 3	July-September 2016

Contacts for more information

Zoran Covic, CEO +46 (0)8 506 05500 +46 (0)70 665 6517 Magnus Eriksson, CFO +46 (0)8 506 05500 +46 (0)73 382 8480