Interim report January 1- September 30, 2001
10/25/2001 4:48 PM EST
· Operating income increased by 222 percent to MSEK 58.3 (18.1).
· Profit/loss before restructuring costs and amortization of goodwill
was MSEK -2.5
(-21.7).
· In the third quarter, operations achieved a profit of MSEK 2.0
before restructuring costs and amortization of goodwill.
· Merger with Avanza carried out according to plan.
· The company's name was changed from HQ.SE Aktiespar AB to Avanza
AB.
Review of operations
The merger between Avanza and HQ.SE Aktiespar was completed in the third
quarter. As a result of the merger, considerable cost savings and
synergies have been attained. A new management team was formed and the
number of employees was reduced by around 35 percent to 67 at the end of
September.
At the beginning of October a new website was launched at www.avanza.se,
with substantially higher functionality and product range. The new web
site is largely based on Avanza's former prize-winning site, but
significant improvements and upgrades have been made in trading
functions and other features after the integration with HQ.SE
Aktiespar's system.
The Stockholm Stock Exchange fell 31.5 percent in the first nine months
of the year. Market development was particularly weak in the summer and
early autumn, resulting in low trading activity. The average number of
transactions per active customer and month during the first three
quarters was 1.0, compared with 3.1 in the same period of last year. The
average commission per transaction note was SEK 79.
Since loans to the public fell sharply in response to the negative
market trend, other sources of income also decreased in the third
quarter. In the first nine months of the year, commission income net of
direct expenses accounted for 56 percent of total operating income, with
net interest income, account fee and other revenues accounting for the
remaining 44 percent.
The number of open accounts on September 30, 2001, was 96,600, compared
with 39,000 at year-end. The number of active accounts with holdings was
72,100, compared with 37,000 at year-end. On September 30, 2001, Avanza
had SEK 8.8 billion in lender managed assets.
Avanza's market share on the Stockholm Stock Exchange in September was
4.3 (0.6) percent of the number of transactions and 1.0 (0.2) percent of
the turnover. Measured in the number of transactions, Avanza was the
second largest independent internet broker and the fifth largest overall
on the Stockholm Stock Exchange during the first three quarters of the
year.
In connection with the introduction of the new website, the underlying
technology has been significantly enhanced. A couple of disruptions
occurred in September and October after the launch, which must be
regarded as unsatisfactory. These problems have now been corrected and
improvements in the system architecture are underway. The availability
rate in the third quarter was 99.4 percent, falling short of the long-
term target of 99.5 percent.
Profit and financial position
Group
For the period January-September, the Group reports a result before
restructuring costs and amortization of goodwill of MSEK -2.5 (-21.7).
The corresponding result for the third quarter was a profit of MSEK 2.0
(-3.8), which provided an operating margin of 9.3 (neg.) percent before
restructuring costs and amortization of goodwill.
The improvement in earnings compared with the preceding year is mainly
attributable to the accretive profit and cost savings attained in
connection with the acquisitions of Aktiespar Fondkommission and Avanza.
Companies in the acquired Avanza Group are consolidated as per August 1,
2001.
Third quarter earnings were charged with restructuring costs of MSEK
26.6 for the integration of HQ.SE Aktiespar and Avanza, bringing total
restructuring costs to MSEK 30.3. Amortization of goodwill during the
period totaled MSEK 35.4 (0.0). The operating loss before tax was MSEK -
68.2 (-32.7).
Commission income for the first nine months of the year amounted to MSEK
45.7 (10.1) and operating income to MSEK 58.3 (18.1). This corresponds
to an increase of 352 and 222 percent, respectively, compared with the
same period of last year. The increase is primarily attributable to
acquisitions, but an improvement in net interest income, increased
account fees and growing institutional trading have also contributed to
earnings growth. However, the sluggish market, with low business
activity and consequently also commission income, has significantly
inhibited growth.
Net interest income was MSEK 18.0 (12.5), up 44 percent on the preceding
year.
Operating expenses excluding restructuring costs and amortization of
goodwill amounted to MSEK 60.8 (39.8).
Shareholders' equity as per September 30, 2001, amounted to MSEK 351.4
(350.5), or SEK 13.8 (16.7) per share. Consolidated liquid assets
totaled MSEK 415.5 (199.2).
Parent company
Avanza AB reports a loss before appropriations and tax of MSEK -7.5 (-
8.2) for the period. Operating revenues was MSEK 2.7. The loss includes
costs of MSEK 3.9 arising in connection with the acquisition of Avanza.
The company's liquid assets as per December 31, 2000, amounted to MSEK
41.2 (104.0).
Acquisition of Avanza
When all conditions for the acquisition of Avanza were met in the
beginning of July, HQ.SE Aktiespar purchased 93.6 percent of the shares
in the company. The selling shareholders received 4,425,907 shares in
HQ.SE Aktiespar as payment for the sale, after which the number of
shares outstanding currently amounts to 25,415,478. In September HQ.SE
Aktiespar changed name to Avanza.
The acquired Avanza is consolidated in the Group as of August 1, 2001,
giving rise to goodwill of MSEK 72.2. Avanza applies an amortization
schedule of five years.
Measures to achieve the annual cost savings previously estimated at MSEK
50 were implemented in the third quarter. Operating expenses excluding
depreciation and restructuring costs decreased to MSEK 6.6 per month
during the period August-September 2001, compared with a combined MSEK
13.0 per month in January-July 2001 for Avanza and HQ.SE Aktiespar.
An additional payment, to be established in December 2001 at the latest,
may consist of a maximum of 1,511,593 shares, partly depending on the
costs for winding-up Avanza's former operations abroad. After this, the
total number of shares outstanding can amount to a maximum of
26,927,071.
At the beginning of October the existing warrant program was extended
and participation was offered to all employees in the new company, after
which the number of outstanding warrants corresponds to 1,675,800
shares. The exercise price is SEK 22.88 per share and the term of
redemption ends on February 24, 2003.
Fourth quarter outlook
In view of the current market activity, fourth quarter earnings before
restructuring costs and amortization of goodwill is expected to improve
over the third quarter. As a result, Avanza is expected to report a
profit before restructuring costs and amortization of goodwill for the
full year 2001.
The anticipated improvement in earnings is explained by the fact that
cost savings generated by the acquisition of Avanza will reach full
effect in the fourth quarter. The final quarter of the year is also
seasonally stronger than the third, and certain price increases were
also introduced on October 1, 2001. No further restructuring costs are
expected to arise in the fourth quarter.
Other
Spin-off of HQ.SE Fonder
The spin-off HQ.SE Fonder was carried out in May in accordance with the
decision of the annual general meeting, after which HQ.SE Fonder was
listed on the Nya Marknaden marketplace.
Change of name
The extraordinary general meeting on September 19, 2001, adopted a
resolution to change the name of the company from HQ.SE Aktiespar AB to
Avanza AB. In connection with the name change, the company's symbol on
the Stockholm Stock Exchange was changed from HQSE to AZA.
Financial calendar
Year-end report February 11, 2002
Annual report March 2002
Stockholm, October 25, 2001
Nicklas Storåkers, President and CEO
Telephone +46 8 562 250 00
Rewiew report for Avanza AB
We have reviewed this interim report in accordance with the
recommendations issued by the Swedish Institute of Authorized Public
Accountants. A review is considerably limited in scope compared with an
audit. Nothing has come to our attention that causes us to believe that
the interim report does not comply with the requirements of the
Securities and Clearing Operations and the Annual Accounts Act.
Stockholm, October 25, 2001
KPMG
Caj Nackstad, Authorized Public Accountant
Group development by quarter
MSEK Q 1-3 Q 3 Q 2 Q 1 Q 1- Q 4 Q 3 Q 2 Q 1
2001 2001 2001 2001 4 2000 2000 2000 2000
2000
Commission income 45.7 16.6 12.0 17.1 20.1 10.0 4.9 3.0 2.2
Operating income 58.3 21.6 16.5 20.2 26.6 8.5 8.9 3.1 6.1
Operating -60.8 - - - - - - - -
expenses 19.6 19.5 21.7 71.8 32.0 12.7 14.8 12.3
Profit/loss
before
restructuring -2.5 2.0 -3.0 -1.5 - - -3.8 - -6.2
costs and 45.2 23.5 11.7
amortization of
goodwill
Restructuring -30.3 - -3.7 - - -8.7 - -3.0 -8.0
costs 26.6 19.7
Amortization of -35.4 - - - -3.6 -3.6 - - -
goodwill 13.4 11.0 11.0
Profit/loss -68.2 - - - - - -3.8 - -
before tax 38.0 17.7 12.5 68.5 35.8 14.7 14.2
No. of open 96,60 96,6 50,8 52,9 39,0 39,0 8,80 6,90 4,80
accounts* 0 00 00 00 00 00 0 0 0
No. of active 72,10 72,1 43,0 48,0 37,0 37,0 6,10 4,80 2,40
customers* 0 00 00 00 00 00 0 0 0
Transaction notes
per active 1.0 0.8 0.9 1.4 2.8 1.9 1.8 2.1 5.6
customer and
month
Average no. of 64 78 57 57 23 27 23 25 18
employees
* In order to improve reporting, Avanza has clarified the definition of
the number of accounts and customers. "Open accounts" replaces the
former "No. of active customers", and states the number of correctly
registered and opened accounts. The new definition of "Active customers"
refers to the number of open accounts with holdings.
Consolidated performance data
January 1 - January 1 - January 1 -
September September December 31,
30, 2001 30, 2000 2000
Operating revenue, 58.3 18.1 26.6
MSEK
Operating expense, -126.5 -50.8 -95.1
MSEK
Profit/loss before -68.2 -32.7 -68.5
tax, MSEK
Earnings per share, -2.26 -1.74 -3.52
SEK
Earnings per share -2.26 -1.74 -3.48
after dilution, SEK
Equity per share, SEK 13.8 10.6 16.7
Return on equity, % neg. neg. neg.
Number of shares, 25,415,478 12,849,714 20,989,571
closing balance
Average number of 21,960,309 13,553,561 15,001,903
shares
Number of shares 25,439,278 12,849,714 22,104,541
after dilution,
closing balance
Capital adequacy 39 135 99
ratio, %
Definitions
Earnings per share after tax
Profit/loss after tax excluding dividends rendered in proportion to the
average number of shares during the period after dilution through the
exercise of warrants.
Equity per share
Shareholders' equity in proportion to the number of ordinary shares at
the end of the period.
Return on equity
Profit/loss after tax in proportion to average shareholders' equity
during the period.
Capital adequacy ratio
Capital base in proportion to risk-weighted capital.
Operating margin
Operating profit/loss in proportion to operating income.
Consolidated income statement (MSEK)
July July Jan. 1 Jan. 1 Jan. 1
1 - 1 - - - - Dec.
Sept. Sept. Sept. Sept. 31,
30, 30, 30, 30, 2001*
2001 2000* 2001 2000*
Operating income
Commission income 16.6 32.0 45.7 92.4 129.1
Commission expenses -2.9 -7.6 -8.4 -25.6 -37.4
Interest income 12.5 4.9 30.7 17.0 22.0
Interest expenses -5.2 -0.8 -12.7 -4.1 -6.5
Net result of 0.5 0.0 0.9 0.1 0.0
financial
transactions
Other operating 0.1 - 2.1 - -
income
Total operating 21.6 28.5 58.3 79.8 107.2
income
Operating expenses
General -17.6 -8.5 -51.6 -51.5 -71.7
administrative
expenses
Depreciation of
tangible and -14.6 -1.0 -39.2 -2.5 -7.4
intangible fixed
assets
Items affecting -26.6 - -30.3 -11.0 -19.7
comparability
Other operating -0.8 -13.1 -5.4 -23.4 -43.3
expenses
Net bad debt losses - - - - -
Total operating -59.6 -22.6 -126.5 -88.4 -142.1
expenses
Operating -38.0 5.9 -68.2 -8.6 -34.9
profit/loss
Tax 10.0 -1.6 18.5 2.4 9.6
Profit/loss from Not - - 4.1 82.5 82.5
spun-off operations e 1
Net profit/loss for -28.0 4.3 -45.6 76.3 57.2
the period
Earnings per share, -1.17 0.32 -2.26 -0.46 -1.69
SEK
* Including spun-off operations in HQ.SE Fonder.
Consolidated balance sheet (MSEK)
Sept. Sept. Dec. 31,
30, 30, 2000*
2001 2000*
Assets
Loans to credit 415.5 210.1 210.9
institutions
Loans to the public Note 155.0 55.5 61.1
2
Shares and participations 2.0 1.7 1.5
Intangible fixed assets 257.5 2.6 220.9
Tangible assets 16.9 8.9 9.0
Other assets 104.7 65.3 76.0
Prepaid expenses and 18.8 10.4 12.7
accrued income
Total assets 970.4 354.5 592.1
Liabilities, provisions
and equity
Borrowing from the public Note 500.4 93.4 139.5
3
Other liabilities 72.8 87.1 74.3
Accrued expenses and 45.8 19.9 23.0
prepaid income
Shareholders' equity Note 351.4 154.1 355.3
4
Total liabilities, 970.4 354.5 592.1
provisions and equity
* Including spun-off operations in HQ.SE Fonder.
Consolidated cash flow statement (MSEK)
Jan. 1 - Jan. 1 -
Sept. 30, Sept. 30,
2001 2000*
Cash flow from operating activities -28.9 -141.0
Cash flow from assets and 105.3 553.5
liabilities in operating activities
Cash flow from investing activities 143.3 -12.7
Cash flow from financing activities -15.1 -858.4
Cash flow for the period 204.6 -458.6
Liquid assets, opening balance ** 210.9 668.7
Liquid assets, closing balance ** 415.5 210.1
Cash flow for the period 204.6 -458.6
* Including spun-off operations in HQ.SE Fonder and Hagströmer &
Qviberg.
** Liquid assets are defined as the sum of cash in hand, loans to credit
institutions and liabilities to credit institutions.Notes
Accounting principles
The interim report has been prepared in accordance with the Swedish Act
(1995:1559) on Annual Reports (Credit Institutions and Securities
Companies), the rules and guidelines of the Swedish Financial
Supervisory Authority (FFFS 2000:18) and the recommendations of the
Swedish Financial Accounting Standards Council. The accounting and
valuation principles used in the interim report are the same as those
applied in the most recent annual report. Furthermore, the company
applies the new recommendations of the Swedish Financial Accounting
Standards Council as of 2001. As a result of the income tax
recommendation (RR9), loss carry forwards for the year 2000 were
utilized in a total amount of MSEK 9.2. The change of accounting
principle is reported according to RR5 and the comparative figures have
been adjusted accordingly. The other recommendations have not affected
the Group's accounts.
Unless otherwise stated, all figures in this report are reported
excluding operations in the HQ.SE Fonder business area, which was spun
off in May 2001.
Note 1 - Profit/loss in spun-off operations
In May 2001, operations in HQ.SE Fonder were spun off in accordance with
a resolution adopted by the annual general meeting. Profit for the first
quarter of 2001 in the spun-off operations amounted to MSEK 17. By
decision of the annual general meeting, all shares in Hagströmer &
Qviberg were distributed in June 2000. Profit in the spun-off operations
in the first quarter of 2000 totaled MSEK 329.
Note 2 - Loans to the public (MSEK)
Loans to the public are reported after deduction of confirmed and
probable bad debt losses. The company reported no doubtful debts as per
September 30, 2001. All loans, so-called account overdraft facilities,
are secured by securities up to the established lending value.
Note 3 - Funds managed on behalf of third parties (MSEK)
Aside from the funds reported in the balance sheet, Avanza managed funds
corresponding to MSEK 690.7 (487.1) on behalf of third parties as per
September 30, 2001.
Note 4 - Changes in shareholders' equity (MSEK)
Sept. 30, Sept. 30,
2001 2000*
Shareholders' equity, 346,1 650,6
opening balance
Effect of changed 9.2 -
accounting principle
Adjusted opening balance 355.3 650.6
Dividends -13.4 -369.0
Reduction of share capital - -5.1
Redemption - -202.2
New share issue 56.2 3.5
Translation difference -0.1 -
Subscription warrants -1.0 -
Net profit/loss for the -45.6 76.3
period
Shareholders' equity, 351.4 154.1
closing balance
* Including spun-off operations in HQ.SE Fonder