Interim Report January-June 2003

8/5/2003 4:16 AM EST

Observer AB (publ)
Interim report January - June 2003

Continued weak market in Nordic region and Germany. Increased activity
and positive growth in North America during second quarter.

·The group's operating revenue amounted to SEK 781.6 million
(874.5). Exchange rate effects from the translation to Swedish kronor
affected revenue negatively by SEK 60.4 million compared with the
corresponding period of 2002. Organic growth in local currency was -5
percent. Organic growth has gradually improved, and was during the
second quarter -4 percent.

·Operating profit before goodwill amortization and items
affecting comparability amounted to SEK 112.1 million (164.1). Exchange
rate effects affected profit negatively by SEK 12.9 million compared
with the corresponding period of 2002. The operating margin was 14.3
percent (18.8). The operating margin during the second quarter was 11.9
percent (15.8).

·Operations in North America achieved positive growth during
the second quarter. Weakly positive signs were also evident in the UK,
while growth in the Nordic region and Germany remained in line with the
first quarter.

·Profit per share after dilution, excluding goodwill
amortization and items affecting comparability, amounted to SEK 1.08
(1.65).

·Cash flow remains strong. Operating cash flow amounted to SEK
137.3 million (160.4).

Comment by Observer CEO Robert Lundberg
"I am not pleased with our development during the second quarter. The
Nordic region and Germany still appear to have further to go before
turning around, which affected earnings during the second quarter.
However, we are now receiving increasingly positive signals from the US
market, where we have positive growth and a good operating margin. There
are also some positive signs in the UK.

Economic conditions remain difficult to predict, however. We are
concentrating on utilizing the opportunities that exist in our markets
and implementing the cost reductions we decided on earlier in the year.
Effective sales work, a good margin and strong cash flows are our most
important priorities."

For further information, please contact:
Anders Lundmark, Chief Financial Officer, telephone: +46 70 333 29 77,
+46 8 507 417 23, e- mail:  

Per Blixt, Senior VP Corporate Communications/Investor Relations,
telephone: +46 70 549 28 08, +46 8 507 410 12, e- mail:
 

Robert Lundberg, President and CEO, telephone: +46 8 507 410 10,
e-mail: