On June 12, Intentia International AB (XSSE: INT B), a Swedish provider of enterprise business applications for mid-size and large enterprises, vehemently denied certain erroneous information in media about its Q1 2002 cash flow situation. In issue no.23, the Swedish publication Aff�rsv�rlden published an article that compared, in terms of liquidity, the financial situations of a selection of the IT companies listed on the Stockholm Stock Exchange. The article generated a great deal of attention and was cited by a variety of other media sources.
The first quarter is traditionally the one in which Intentia's cash flow is affected by once-a-year payments such as employee bonuses for the previous year. In the first quarter of 2002 bonus payments accounted for SEK 220 million. Because the calculations in the article were based on cash flow before investments � a figure that includes one-time payouts related to bonus payments � the resulting estimate of future cash flow was inaccurate. Intentia pointed this out to Aff�rsv�rlden, which subsequently published the following correction:
"In the compilation of IT companies' cash flows (Aff�rsv�rlden no. 23) the entire amount of bonus payouts for 2001 was included for Intentia. This payment should have been time phased, thus resulting in a positive cash flow for Intentia. The company therefore should not have been included on the list."
The retraction was only a crumb of comfort in light of Intentia's announcement of Q1 2002 results on April 24, though. The profitability restoration plan, which was launched back in 2000 with the intention to ensure the company would continue to generate higher license revenue within the constraints of its current product development and sales organization, has yet to result in consistently improved earnings and cash flow. As mentioned above, cash flow from operating activities of negative SEK 126 million (~$12.1 million) for the quarter was impacted by tax and employee bonus payments that totaled ~$21.1 million for 2001. Yet, cash and bank balances and current investments were at solid SEK 310 million (~$29.7 million), while liquidity continues to exceed borrowings. In addition to the cash position, the company disposes with an undisclosed (for competitive reasons) notable amount of available cash within its borrowing facilities. Still, license revenue was down by 11% to SEK 211 million (~$20.2 million), while consulting revenue was up by 8% to SEK 673 million (~$64.5 million) despite the lower number of billable days during the quarter. Total revenue of SEK 903 (~$86.5 million) represents a 3% increase compared to Q1 2001 (See Figure 1).
Figure 1.
As a result of somewhat improved capacity utilization, Intentia's consulting margin increased to 18%, which still could not counteract an operating loss of SEK 33 million (~$3.2 million). Net loss of SEK 39 million (~$3.7 million), attributable mainly to poorer license revenue and increased personnel costs, was nevertheless slightly lower compared to a SEK 42 million net loss from a year ago (See Figure 1). Its geographic regions reportedly posted mixed results.
While net revenue for the Northern Europe region fell by 14% and license revenue declined by 29%, net revenue in Central Europe was flat as the continued increase in consulting revenue offset the lower license revenue, and in Northwest Europe, where higher consulting revenue offset lower license revenue, net revenue was still down by 7%. Better performing regions were Southern Europe, which enjoyed higher license and consulting revenue during the quarter compared to the same period last year and had net revenue up by 26%.
Net revenue in the Americas rose by 4%, as license revenue was unchanged and consulting revenue rose by 20%, along with a continuing increase in the consulting margin. Net revenue in Asia Pacific climbed by 11% as the improvement reflected higher consulting revenue as a result of solid license trends in 2001, while license revenue decreased in the region. Still, these better performing regions still represent a small fraction of the company's total revenue (e.g., the Americas contributed to less than 6% of total revenues). Intentia does not break down profit figures by regions, nor does it provide detailed forecasts or a breakdown of its new business versus existing clients revenues.
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