Atea Q3 2013 financial results

Highlights Q3 2013

· Revenue of NOK 4,663.6 million, up 4.8% y-o-y
· EBITDA of NOK 158.4 million, up 0.3% y-o-y
· EBITDA margin of 3.4%, down from 3.5% y-o-y
· Operational cash flow of NOK -96.9 million,
down from NOK 39.5 million y-o-y


Market update
According to IDC's latest forecast from September
2013, Atea's target market (the Blue Box) grew 5.9%
in the Nordics in Q3 2013. The hardware market grew
6.4%, software grew 7.2% and services grew 4.6%.

Atea has not been experiencing the positive market
growth in Q3 2013 as indicated by IDC. Atea is rather
experiencing a hesitancy to invest and prolonged
sales processes with the customers. This has
particularly been the case in the hardware segment,
where demand for servers and PCs has declined.


Financial review Q3 2013

Group
Group revenue was up 4.8% (up 0.7% in constant
currency) from NOK 4,450.5 million in Q3 2012 to NOK
4,663.6 million in Q3 2013. Hardware revenue was up
3.0%, software revenue was up 9.7% and services
revenue was up 7.0%. The currency effect for Q3 2013
was positive by 4.1%. Organic revenue was down 0.4%
in constant currency. The organic revenue development
reflects tough market conditions in the hardware
market in particular in the PC and server segments.
The tough conditions in the hardware market have also
affected the services business as there has been
fewer server projects and PC roll-outs.

EBITDA in Q3 2013 ended at NOK 158.4 million, up 0.3%
y-o-y. Lower than expected revenue growth was
somewhat compensated by improved or maintained
margins within all three segments, and Atea achieved
EBITDA in line with last year.

Total revenue year to date 2013 was NOK 15,250.2
million, which is up 4.4% compared with the same
period last year. Organic growth amounted to 1.0% in
constant currency. EBITDA ended at NOK 439.7 million,
down from NOK 475.5 million last year, representing
an EBITDA margin of 2.9 % versus 3.3% last year.

In order to enhance operational efficiency and to
improve profitability going forward Atea has taken
actions to reduce personnel and other operating costs
by NOK 200 million per year from the beginning of
2014. This reduction in costs will mainly come from a
reduction in number of employees by approximately
300. A restructuring cost of approximately NOK 70
million related to the termination of employment
contracts will be accrued in Q4 this year.

Additionally, Atea will focus on taking full
advantage of the shared service operations in Riga,
Latvia. Atea has already near-shored some parts of
its back office administration, and in 2014 more back
office processes will, in a controlled manner, be
transferred to the shared services centre in Riga.
The aim is to enhance quality, strengthen the
competitive edge and lower the yearly costs by
approximately NOK 100 million. This will start to
have a positive effect in 2015 and will have full
annual effect in 2016.

Norway
Revenue in Q3 2013 was NOK 1,498.2 million, down 0.5%
compared with Q3 2012. Hardware revenue was down
5.7%, software revenue was up 30.0%, while services
revenue was up 1.1%. Organic revenue decreased by
2.0%.

Organic hardware revenue decreased by 7.3%. The
decrease in the hardware revenue is mainly due to
lower volumes of school PC roll-outs this year
compared with last year. Organic software revenue
increased by 29.7% as a consequence of a number of
large orders within this segment. Organic services
revenue was down 0.7%. This reflects a more even
distribution of projects this year, whereas a number
of large projects were being completed in Q3 last
year.

EBITDA in Q3 2013 ended at NOK 45.5 million, compared
with NOK 60.7 million in Q3 2012. Product margin
ended at 13.3%, up from 12.6% in Q3 2012, influenced
by lower volumes of low margin school PCs in Q3 2013.
The total gross margin ended at 25.9%, up from 25.6%
in Q3 2012. The higher gross margin compensated for
the lower revenue, and gross profit increased by NOK
3.6 million. Organic growth in operational costs of
3.4% reflects organic growth in the average workforce
of 78 employees. EBITDA margin ended at 3.0% versus
4.0% last year.

In order to enhance operational efficiency and to
improve profitability going forward, actions have
been taken to reduce the current cost base. These
actions are estimated to have an annual effect of NOK
75 million from January 2014.

Sweden
Revenue in Q3 2013 ended at NOK 1,589.5 million, up
12.0% (up 6.9% in constant currency) compared with
last year. Hardware revenue was up 6.5%, software
revenue was up 2.4%, while services revenue was up
11.4% in constant currency. Organic revenue in
constant currency increased by 5.4%.

Organic hardware revenue increased by 5.9%. The
growth in the hardware revenue reflects higher sales
to both the public and the private sector. Organic
software revenue increased by 1.7% on top of 40.7%
growth in Q3 last year. Organic growth in services
revenue of 6.7% was driven by particularly strong
revenue from contracted services.

EBITDA in Q3 2013 ended at NOK 32.2 million up from
NOK 25.9 million in Q3 2012. Product margin ended at
12.7%, down from 13.5% in Q3 2012 as a consequence of
price pressure in the market. The services margin
ended at 58.7% compared with 59.5% in Q3 2012. The
decrease in the services margin is a result of use of
subcontractors on a number of specific projects. The
total gross margin ended at 23.2% for Q3 2013, down
from 23.6% in Q3 2012. Organic operational costs were
down 0.2% as a consequence of an increased focus on
costs. EBITDA margin ended at 2.0% versus 1.8% last
year.

In order to enhance operational efficiency and to
improve profitability going forward, actions have
been taken to reduce the current cost base. These
actions are estimated to have an annual effect of NOK
46 million from January 2014.

Denmark
Revenue in Q3 2013 ended at NOK 1,169.4 million, up
1.1% (down 6.7% in constant currency) compared with
last year. Hardware revenue was down 3.9%, software
revenue was down 21.0% while services revenue was
down 6.8% in constant currency. Organic revenue in
constant currency decreased by 6.7%. The decline in
revenue was mainly driven by tough market conditions
within the PC and server segment, which have had a
spillover effect on services.

EBITDA in Q3 2013 increased to NOK 61.9 million, up
from NOK 56.6 million in Q3 2012. Despite tough
market conditions the product margin increased to
11.6% from 10.3% in Q3 2012. The services margin
increased to 67.0% from 61.9% in Q3 2012. The
increase in the services margin was due to growth in
the datacenter business and less use of
subcontractors. The total gross margin ended at 25.8%
for Q3 2013, up from 23.5% in Q3 2012. The higher
gross margin compensated for the lower revenue, and
gross profit increased by NOK 27.1 million. Total
EBITDA margin increased to 5.4% compared with 4.9%
last year.

In order to enhance operational efficiency and to
improve profitability going forward, actions have
been taken to reduce the current cost base. These
actions are estimated to have an annual effect of NOK
77 million from January 2014.

Finland
Revenue in Q3 2013 ended at NOK 261.4 million, up
1.9% (down 8.0% in constant currency) compared with
last year. Hardware revenue was down 11.6%, software
revenue was down 1.6%, while services revenue was
down 4.7% in constant currency. Organic revenue in
constant currency declined by 8.0%.

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

EBITDA in Q3 2013 ended at NOK 1.3 million, compared
with NOK 0.4 million in Q3 2012. The decline in
revenue was compensated by a higher margin than last
year. Total gross margin ended at 20.9% compared with
18.4% in Q3 2012.

The Baltics
Revenue in Q3 2013 was NOK 166.7 million, up 15.1%
(up 7.4% in constant currency) compared with last
year. Organic revenue in constant currency increased
by 4.1%.

The increase in revenue was driven by particularly
strong services revenue growth of 52.9%, which was
positively affected by a number of projects related
to the current EU presidency in Lithuania.

EBITDA in Q3 2013 ended at NOK 13.1 million, compared
with NOK 7.2 million in Q3 2012. Total gross margin
was positively affected by a higher share of services
revenue and ended at 23.6%, up from 21.4% last year.


Equity and cash flow
Shareholders' equity at 30 September 2013 was NOK
3,644.4 million corresponding to an equity ratio of
40.7%, down from 41.7% compared with 30 September
2012.

The Group generated an operational cash flow of NOK -
96.9 million in Q3 2013, compared with NOK 39.5
million in the corresponding quarter last year. This
is primarily explained by seasonal fluctuations end
of quarter related to customer and vendor payments.
Operational cash flow year to date is improved by NOK
155.0 million compared with the first three quarters
last year.

The working capital ratio at 30 September 2013 was
2.9%, down from 4.0% at 30 September 2012.

Capital expenditures in Q3 2013 amounted to NOK 44.6
million compared with NOK 48.6 million in the
corresponding quarter last year. These investments
relate to general maintenance investments including
further development of internal systems and
investments in the Group's hosting centers.

At the end of Q3 2013, the Group's net financial
position was NOK -957.6 million, down from NOK -772.8
million at the end of Q2 2013.

Liquidity reserves, including unutilized credit
facilities and limited by a gearing ratio of 2.5x
(financial covenant from loan agreements linked
to "net interest bearing debt/EBITDA"), at 30
September 2013, were NOK 980.6 million. Please see
note 8 for further information.


Operational efficiency programme
Market demands are currently undergoing a
transformation towards more solution based sales, and
for the 11th consecutive quarter Atea reports double
digit growth rates within the contracted services
segment. It is very positive that a growing number of
the customers are looking to Atea for serving their
growing needs within services, outsourcing services
and IT infrastructure as a service. In the future
Atea will continue to develop solutions, increase
competencies and focus on the segments where Atea
believe the market is growing.

Going forward Atea will therefore strengthen its
investments in mobility, hybrid cloud, and
collaboration, helping companies to take advantage of
the growing possibilities within these areas. To
create room for new investments and to drive
profitable growth, Atea has launched a programme to
enhance the operational efficiency.

The operational efficiency programme is two-sided.
The first part is a cost reduction programme that
will be conducted in Q4 2013. The target is to reduce
the current cost base with an annual effect of NOK
200 million or 3.8% of the current cost level from
January 2014. This reduction in costs will mainly
come from a reduction in number of employees by
approximately 300. The organizational changes will be
achieved by increasing the span of command, by
consolidating departments and by a general reduction
in all types of personnel. A restructuring cost of
approximately NOK 70 million will be accrued in Q4
this year.

The second part of the programme focuses on taking
full advantage of the shared service operations in
Riga, Latvia. Already today Atea has near-shored some
parts of its back office administration. During 2014
more back office processes will, in a controlled
manner, be transferred to the shared services centre
in Riga. The aim is to enhance quality, strengthen
the competitive edge and lower the yearly costs by
approximately NOK 100 million. This will start to
have a positive effect in 2015 and will have full
annual effect in 2016.

Taking these actions, Atea will be better positioned
to serve customer needs in an efficient manner and
will improve profitability going forward. With an
annual cost base which at the beginning of 2014 will
be NOK 200 million lower than the current run rate,
EBITDA will improve assuming unchanged or improved
gross profit in 2014.


Outlook
IDC's latest forecast for Q4 2013 for Atea's Blue Box
in the Nordics shows growth of 0.7%. The services
market is expected to grow by 3.5% and the software
market by 4.4%. The hardware market is again expected
to drop substantially from growth of 6.4% in Q3 2013
to a decline of 2.9% in Q4 2013.

IDC believes that the hardware market in Q4 2013 will
be driven by continued reduction 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, which are being
launched in Q4 2013.

In 2014 IDC expects market growth of 4.0% for Atea's
Blue Box in the Nordics. The services market is
expected to grow by 4.2% and the software market by
5.2%. The hardware market will return to positive
growth at a rate of 3.3%. The PC market will decline
further but at a lower rate than during 2013, the
server market will return to positive growth rates,
whereas networks, smartphones and tablets will
continue to grow.

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 programmes. 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 3.3% 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 set 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 expected to gain market shares and
improve profitability in the coming years.

The financial goal of the strategy was 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 2013, the Board of
Directors has revisited the financial goal.

The Board of Directors still believes that the
operational actions and initiatives in the Together
Towards The Top strategy are right for the company,
and with these actions Atea will ensure increased
market share and profitability going forward.

Targets solely in nominal value are not a meaningful
measure in a market with low visibility. Atea will
maintain the market share target of 20%, and will
achieve this by growing the revenue organically
faster than the market, and continue to be a
disciplined buyer of companies. A continued focus on
operational excellence and total customer
satisfaction will ensure that EBITDA grows faster
than the revenue. The long term target for the EBITDA
margin is maintained at 6%.


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 6,600 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]