Atea Q2 2013 financial results

Highlights Q2 2013

· Revenue of NOK 5,501.8 million, up 3.0% y-o-y
· EBITDA of NOK 140.4 million, down 9.0% y-o-y
· EBITDA margin of 2.6%, down from 2.9% y-o-y
· Operational cash flow of NOK 158.2 million,
up from NOK 64.2 million y-o-y
· Paid dividend of NOK 5.50 per share, up from
NOK 5.00 y-o-y
· Raised 5-year bank loan of DKK 500 million
and issued 5-year bonds of NOK 300 million


Market update
The financial turmoil in Europe continued to impact
the Nordic IT infrastructure market in Q2 2013. The
market has remained weak, and margins have been under
pressure. This is particularly the case in the
hardware segment where demand for servers and PCs has
declined.

According to IDC, Atea's target market (the Blue Box)
grew 0.4% in the Nordics in Q2 2013. The hardware
market declined by 4.1%, software grew 4.6% and
services grew 3.2%.

In comparison with IDC's estimated market growth of
0.4% in Q2 2013, Atea achieved growth in constant
currency of 1.7% and organic growth of 0.4% in the
Nordics.

In H1 2013, Atea's target market (the Blue Box)
declined by 0.2% in the Nordics. Atea achieved growth
in constant currency of 3.6% and organic growth of
2.4% in the Nordics, indicating that Atea has gained
market share.

Financial review Q2 and first half 2013

Group
Group revenue was up 3.0% (up 1.3% in constant
currency) from NOK 5,339.7 million in Q2 2012 to NOK
5,501.8 million in Q2 2013. Hardware revenue was down
3.4%, software revenue was up 10.5% and services
revenue was up 10.1%. Organic revenue was down 0.3%
in constant currency. The drop in hardware revenue
reflects tougher market conditions in particular in
the PC and server segments.

EBITDA in Q2 2013 ended at NOK 140.4 million, down
9.0% y-o-y. The reason for the decline in EBITDA is
lower hardware sales and lower hardware margin as a
consequence of the challenging market conditions. The
decline in the hardware segment was somewhat
compensated for by strong performances in the
software and services segments. The total gross
margin for the Group was 24.3%, up from 23.7% in Q2
2012, mainly as a consequence of a higher share of
services revenue. In light of the market development,
Atea will continue to focus on costs and has
initiated actions in order to decrease the cost base
going forward.

Group revenue in H1 2013 was NOK 10,586.6 million, up
4.2% (up 3.4% in constant currency) compared with the
same period last year. Hardware revenue was down
2.4%, software revenue was up 16.7% and services
revenue was up 8.7%. Organic growth in constant
currency was 1.7%. EBITDA in H1 2013 ended at NOK
281.3 million, down 11.4% y-o-y, reflecting lower
hardware revenue and lower hardware margin in a tough
market environment.

Norway
Revenue in Q2 2013 was NOK 1,555.4 million, up 2.0%
compared with Q2 2012. Hardware revenue was up 0.2%,
software revenue was down 4.9%, while services
revenue was up 11.3%. Organic revenue decreased by
0.7% in a market which, according to IDC, declined by
1.0%.

Organic hardware revenue decreased by 3.1% compared
with a market which was down 7.4%. Organic software
revenue declined by 5.3% in a market which grew 3.6%.
The decrease in software revenue is seasonal. Organic
services revenue growth was 8.4% compared with a
market which increased by 3.7%. Services show a
positive development as a result of increased focus.
Atea in Norway continues to gain market share.

EBITDA in Q2 2013 ended at NOK 52.1 million, compared
with NOK 57.5 million in Q2 2012. Product margin
ended at 13.4%, down from 13.7% in Q2 2012,
influenced by increased public deliveries in Q2 2013.
The total gross margin ended at 28.5%, up from 27.3%
in Q2 2012, mainly due to an increased share of
services revenue. Organic growth in operational costs
of 5.0% reflects organic growth in the average
workforce of 88 employees, mainly in services. EBITDA
margin in Q2 2013 ended at 3.3% versus 3.8% last
year.

Revenue in H1 2013 was NOK 2,990.6 million, up 2.2%
compared with the same period last year. Hardware
revenue was down 4.6%, software revenue was up 14.7%
and services revenue was up 11.2%. Organic revenue
was down 0.1% in a market which, according to IDC,
decreased by 1.2%. EBITDA in H1 2013 ended at NOK
85.4 million, compared with NOK 109.1 million last
year, reflecting lower hardware revenue and a lower
hardware margin.

Sweden
Revenue in Q2 2013 ended at NOK 2,130.3 million, up
23.7% (up 18.4% in constant currency) compared with
last year. Hardware revenue was up 4.9%, software
revenue was up 42.4%, while services revenue was up
12.2% in constant currency. Organic revenue in
constant currency increased by 16.7% in a market
which, according to IDC, was flat.

Organic growth in hardware revenue of 4.1% compared
with a market which was down 5.0% was driven by
particularly strong revenue growth in the public
sector. Organic software revenue increased by 41.9%
compared with market growth of 5.6%. Atea has a
strong position within license sale and is winning
many new cases. Organic services revenue growth was
7.3% compared with a market which increased by 3.3%.
Atea in Sweden continues to gain market share in all
market segments.

EBITDA in Q2 2013 ended at NOK 44.8 million compared
with NOK 39.5 million in Q2 2012. Product margin
ended at 11.4%, down from 12.6% in Q2 2012 as Atea
has successfully won a number of large public deals
with lower than average margins. The services margin
ended at 58.6% compared with 62.2% in Q2 2012. The
decrease in the services margin is a result of
increased use of subcontractors on a number of
projects. The total gross margin ended at 20.8% for
Q2 2013, down from 23.0% in Q2 2012. EBITDA margin
ended at 2.1% versus 2.3% last year.

Revenue in H1 2013 was NOK 3,914.9 million, up 22.9%
(up 18.9% in constant currency) compared with the
same period last year. Hardware revenue was up 11.0%,
software revenue was up 43.0% and services revenue
was up 9.8% in constant currency. Organic revenue was
up 17.4% in a market which, according to IDC,
decreased by 1.4%. EBITDA in H1 2013 ended at NOK
91.4 million, compared with NOK 88.4 million last
year, reflecting increased revenue.

Denmark
Revenue in Q2 2013 ended at NOK 1,354.8 million, down
10.9% (down 11.3% in constant currency) compared with
last year. Hardware revenue was down 14.3%, software
revenue was down 14.2% due to seasonality, while
services revenue was up 0.2% in constant currency.
Organic revenue in constant currency decreased by
11.3%. The decline in hardware revenue mainly
reflects reduced activities in the private sector.

According to IDC, the market grew 1.7% in Denmark in
Q2 2013, split between -0.4% for hardware, 4.3% for
software and 3.0% for services, indicating that Atea
is losing market share.

EBITDA in Q2 2013 ended at NOK 36.2 million, compared
with NOK 44.5 million in Q2 2012. The product margin
ended at 9.8% compared with 10.2% in Q2 2012. The
tough market conditions are causing increased price
pressure on hardware. The services margin increased
to 64.9% from 60.4% in Q2 2012. The increase in
margin was due to less use of subcontractors. The
total gross margin ended at 22.5% for Q2 2013, up
from 20.5% in Q2 2012. Total EBITDA margin ended at
2.7% compared with 2.9% last year. The overall
achievement was lower than expected, but due to a
promising backlog the performance is expected to
improve going forward.

Revenue in H1 2013 was NOK 2,686.5 million, down 5.1%
(down 4.2% in constant currency) compared with the
same period last year. Hardware revenue was down
9.0%, software revenue was up 5.1% and services
revenue was up 1.3% in constant currency. Organic
revenue was down 4.6% in a market which, according to
IDC, increased by 1.4%. EBITDA in H1 2013 ended at
NOK 92.6 million, compared with NOK 101.0 million
last year, reflecting lower hardware revenue and a
lower hardware margin.

Finland
Revenue in Q2 2013 ended at NOK 340.7 million, down
17.2% (down 18.1% in constant currency) compared with
last year. Hardware revenue was down 16.4%, software
revenue was down 22.1%, while services revenue was
down 8.2% in constant currency. Organic revenue in
constant currency declined by 18.1% in a market
which, according to IDC, increased by 0.6%.

The decline in revenue was caused by strong
competition in both the private and the public sector.

EBITDA in Q2 2013 ended at NOK 3.9 million, compared
with NOK 4.7 million in Q2 2012. The decline in
revenue was somewhat compensated for by a higher
hardware margin and lower operational costs. Gross
margin ended at 17.1%, up from 15.7% in Q2 2012.

Revenue in H1 2013 was NOK 764.7 million, down 17.4%
(down 16.9% in constant currency) compared with the
same period last year in a market which, according to
IDC, increased by 1.5%. EBITDA in H1 2013 ended at
NOK 8.8 million, compared with NOK 5.5 million last
year.

The Baltics
Revenue in Q2 2013 was NOK 155.5 million, down 7.8%
(down 8.4% in constant currency) compared with last
year. Organic revenue in constant currency declined
by 17.3%.

The revenue in Q2 2013 has been affected by delayed
public spending due to a temporary macroeconomic
uncertainty as a consequence of the potential
adoption of the Euro in Lithuania in the near future.

EBITDA in Q2 2013 ended at NOK 8.3 million, compared
with NOK 8.4 million in Q2 2012. The decline in
hardware revenue was compensated for by a higher
hardware margin than last year and a higher share of
services revenue. Total gross margin ended at 23.0%
compared with 18.0% in Q2 2012.

Revenue in H1 2013 was NOK 298.2 million, down 2.4%
(down 1.7% in constant currency) compared with the
same period last year. EBITDA in H1 2013 ended at NOK
12.0 million, compared with NOK 15.2 million last
year, reflecting lower hardware revenue.


Equity and cash flow
Shareholders' equity as of 30 June 2013 was NOK
3,524.3 million, corresponding to an equity ratio of
36.8%, down from 38.2% compared with 30 June 2012.

The Group generated an operational cash flow of NOK
158.2 million in Q2 2013, which was NOK 94.0 million
above the corresponding quarter last year. This is
primarily explained by working capital improvements
in the relationship between trade receivables and
trade payables.

The working capital ratio as of 30 June 2013 was
1.3%, down from 2.8% as of 30 June 2012.

Capital expenditures in Q2 2013 amounted to NOK 57.0
million and relate to general maintenance
investments, including further development of
internal systems and investments in the Group's
hosting centres.

At the end of Q2 2013, the Group's net financial
position was NOK -772.8 million, down from NOK -266.7
million at the end of Q1 2013. The change in net
financial position includes the effect of the 2012
dividend payout on 14 May 2013 of NOK 561.6
million, which corresponds to NOK 5.50 per share.

Liquidity reserves, including unutilized credit
facilities, as of 30 June 2013, were NOK 1,189.0
million.

On the basis of Atea's strong cash flow performance
and deleveraged balance sheet, the company conducted
a thorough review of its financing strategy over the
last period in order to create maximum value for its
shareholders while maintaining a robust capital
structure. Atea has historically been financed
through short-term bank facilities only. In order to
decrease the dependency on such short-term financing
and diversify the sources of financing, Atea
concluded to raise long-term bank debt and bonds in
addition to its existing facilities.

Based on this conclusion, Atea raised a DKK 500
million, 5-year non-amortizing bank loan from Nordea.
In addition, Atea has issued a total of NOK 300
million of senior unsecured bonds with 5-year
maturity in the Norwegian bond market. The bank loan
and the bonds have a covenant limiting the Leverage
Ratio (net interest bearing debt/EBITDA) to less that
2.5 at quarter-end. Please see note 8 for further
information.


Outlook
IDC's latest forecast for the second half of 2013 for
Atea's Blue Box in the Nordics shows growth of 3.7%.
The services market is expected to grow by 4.2% and
the software market by 5.7%. The hardware market is
expected to improve substantially from a decline of
4.5% in H1 2013 to growth of 2.7% in H2 2013

IDC believes that the hardware market in the second
half of 2013 will be driven by continued decline in
the PC and server markets, while networks,
smartphones and tablets will grow. This is supported
by the ongoing shift in the client market, where the
use of desktop PCs is declining, the use of laptop
PCs is stagnating, and the use of smartphones and
tablets is increasing. Growth in the product market
will be driven by a gradual increase in Windows 8
projects and the new touchscreen products related to
this that are being launched in H2 2013.

Atea's current view on the development in the
hardware market in H2 2013 is more conservative than
IDC's expectations, as Atea is still experiencing
prolonged sales processes with the customers.

The outsourcing of internal IT functions to external
partners represents a strong trend in the services
market, particularly the outsourcing of client
management. This trend is being reinforced by
increasing complexity in the client environment, with
more and new types of equipment, more operating
systems and programs, as well as increased demand for
access and availability. Atea is well positioned for
further growth in this area.

The uncertainty in the outlook primarily relates to
macroeconomic developments. A macroeconomic downturn
or increased uncertainty may result in hesitancy to
commit to large investment programs. However, because
of the relatively short lifespan of the IT
infrastructure environment, investments cannot be
postponed for longer periods of time.

Investments in IT infrastructure are an integral part
of the solution to the major challenge facing the
western world, which is increasing efficiency. IDC
therefore believes that the IT infrastructure market
in the Nordics will grow faster than GDP at an
average annual rate of 3.0% towards 2017. Atea is
well placed to take advantage of the opportunities
ahead.

In November 2011, Atea launched the 'Together Towards
The Top' strategy, which sets the stage for Atea's
development towards 2015. Key initiatives in the
strategy include market-oriented actions aimed at
increasing services revenue, and in particular
contracted services revenue, a dedicated sales focus
on mid-market and international customer groups, as
well as internal actions to improve gross margins,
improve processes and lower the cost base. On this
basis, Atea expects to gain market shares and improve
profitability in the coming years. The goal of the
strategy is to increase revenue to NOK 30 billion and
EBITDA to NOK 1.8 billion by 2015. A key assumption
for achieving this financial goal was that the market
conditions would be positive and that the market
would grow at an average rate of 4.3% from 2011 to
2015. In light of the market development in 2012 and
IDC's expectations for 2013, Atea will monitor the
development during 2013 and will revisit the goal
later this year.


For further information, please contact:
Claus Hougesen, CEO Atea ASA, Mobile +45 3078 1200
Rune Falstad, CFO Atea ASA, Mobile +47 906 14 482


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]


About Atea
Atea is the leading Nordic and Baltic supplier of IT
infrastructure with approximately 6,500 employees.
Atea is present in 82 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 had revenue of
approximately NOK 21 billion in 2012 and is listed on
Oslo Stock Exchange. [http://www.atea.com]