Interim report January-September 2000 Observer

10/26/2000 9:01 AM EST

Interim report January- September 2000
Observer AB (formerly Sifo Group)

Strong third quarter and positive development of the acquired British
operations - favorable prospects for further growth

@ Operating profit before goodwill amortization and items affecting
comparability amounted to SEK 195.6 million (71.2). The operating margin
was 23.7 percent (9.9).

@ Profit after tax amounted to SEK 435.3 million (33.7).

@ Profit per share after tax and full dilution, excluding goodwill
amortization and items affecting comparability, rose to SEK 2.08 (0.98).

@ The group's operating revenue rose to SEK 824.8 million (720.2).
Organic growth was 21 percent in local currency.

@ Observer's financial position is very strong, which will facilitate a
further expansion through acquisitions.

@ The group's strong development continued in the third quarter, with
organic growth of 21 percent in local currency and an operating margin of
23.9 percent.

Structure
Observer's operations are separated into two divisions. The Media
Intelligence division offers media and market monitoring, communication
evaluations and analysis. Observer's operations within Communications form
a new division. The division offers clients, primarily in the fields of IR
and PR, databases of who's who in the media and financial worlds. Clients
also receive communication solutions for distributing business information
via various electronic channels including the Internet. The Communications
division has been established to capitalize on growth and
internationalization in this area.

Media Intelligence has operations in nine countries: the UK, Sweden,
Germany, Norway, Finland, Denmark, Estonia, Latvia and Lithuania. The
Communications division operates in the UK under the name Media
Information and in Sweden, Finland and Denmark as BIT.

In June 2000, the company changed its name from Sifo Group to Observer AB.
The name change, which was approved by the Annual General Meeting in May,
is a result of the group's divestment of the Sifo Research & Consulting
division.

Observer owns 50 percent of the shares in SMG Consulting, which is active
in management and strategic consulting. SMG's senior consultants own the
remaining 50 percent. To facilitate SMG's international expansion, a
reevaluation of its ownership structure is under way.

Market
Demand for Media Intelligence services was good during the period. Value-
added services remain in strong demand. The tendency of an event such as
the Olympics to dominate the news was offset in this case by a good flow
of business and other news pertinent to Observer's clients.

A growing number of listed companies, higher communication needs and our
introduction of new services in general are the reasons for a favorable
market development. As with Media Intelligence, the European market is
fragmented. As a result, this operating area also offers the opportunity
to expand to new geographic markets and achieve economies of scale.

Revenue
Operating revenue amounted to SEK 824.8 million (720.2), of which Media
Intelligence accounted for SEK 633.7 million and Communications for SEK
150.7 million. Organic growth in local currency was 21 percent during the
year's first nine months. All countries with the exception of Sweden and
the UK posted growth of over 20 percent in local currency. In Sweden,
growth was 14 percent, while Romeike Group of the UK, which was acquired
in December 1999, reported growth of approximately 12 percent.

Media Intelligence's value-added services, excluding the recently acquired
operations in the UK, accounted for 28 percent (24) of revenue.

Profit
The group's operating profit before goodwill amortization and items
affecting comparability rose to SEK 195.6 million (71.2). The operating
margin was 23.7 percent (9.9). For comparable units, profit rose by 20
percent compared with the corresponding period a year earlier.

The increased investments to develop IT solutions, new services and new
markets remain considerable.

The profit trend was favorable in all countries with the exception of
Sweden. Development expenses, together with expenses to move to new
offices in Stockholm, slowed the profit trend in Sweden during the report
period.

The operating margin in the UK remains high, mainly due to higher than
expected growth and the fact that investment expenses for sales and
marketing, production and IT support, as well as value-added services,
have not yet fully impacted earnings. Raising the growth rate will require
higher expenses and mean a slight decline in the operating margin.

Profit for the period after tax amounted to SEK 435.3 million (33.7).
Capital gains amounted to SEK 383.8 million (0), of which the sale of Sifo
Research & Consulting accounted for SEK 335.0 million and Sifo Interactive
Media for SEK 48.8 million.

Profit per share after full tax and full dilution, excluding goodwill
amortization and items affecting comparability, rose to SEK 2.08 (0.98).
Profit per share after tax and full dilution was SEK 7.97 (0.75).

Surplus insurance funds/SPP
The discounted present value of the surplus insurance refund from the
Swedish pension insurance company SPP is SEK 14.8 million. This amount has
been taken up in revenue as an item affecting comparability.


Growth and profit objective
Observer will achieve annual organic growth of at least 10-15 percent. In
addition, it will expand through acquisitions.

The group will achieve an average long-term operating margin before
goodwill amortization and items affecting comparability of 22 percent.
Acquisitions of companies with low margins as well as special investments
may temporarily result in a lower operating margin, however.

Financial position
As part of the financing for the acquisition of Romeike Group, a rights
issue was implemented in January. The issue proceeds of SEK 825.6 million
were used in their entirety to repay loans.

During the period, the group received SEK 600 million as the sales
proceeds for the Sifo Research & Consulting division.

Observer's financial position is very good, and it has the flexibility to
continue to expand through acquisitions. The debt/equity ratio was 6
percent (31). The total goodwill item in the balance sheet rose to SEK
1,595.1 million (220.3), primarily due to the acquisition of Romeike
Group. Shareholders' equity amounted to SEK 1,527.4 million (204.5) at the
end of the period, or SEK 27.52 per share (4.64).

Acquisitions/divestments
In September, Observer sold a small part of its UK operations, Hollis
Directories, which produces handbooks and catalogues. As a result, the

British operations have been focused on Media Intelligence and
Communications. Hollis has a turnover of approximately GBP 2 million on an
annual basis. The purchase price amounted to GBP 3.6 million and produced

no capital gain. The sale was effective as from September 1.


In June, Observer complemented its Norwegian operations by acquiring
Imedia Norge from Schibsted and Telenor. Imedia has a turnover of
approximately NOK 25 million and 55 employees. Its operations are being
integrated with those of Observer Norway. The takeover was effective as
from June 1.

The Sifo Research & Consulting division was sold effective January 1, 2000
to Research International, part of the London-based global communications
group WPP. During the year Observer also sold the subsidiary Sifo
Interactive Media and in return received in part eight percent of the
shares in MMXI Europe, which is active in Internet measurements.
Outlook for the full-year

We expect continued good demand in all markets, with the profit trend
remaining positive.

For further information, please contact:
Robert Lundberg, President and CEO,
telephone +46 8 507 410 10, e-mail  

Jan-Erik Jansson, Chief Financial Officer,
telephone +46 8 507 410 14, e-mail  

Per Blixt, Chief Communications Officer, telephone +46 8 507 410 12/+46 70
549 28 08, e-mail  

Additional comments on the interim report will be provided at a telephone
conference with Observer AB's management at 3:00 p.m. (CET) on Thursday,
October 26. To participate in the conference, please phone +46 8 600 53 81
and use code 630024.

Upcoming report date:

February 20, 2001 Preliminary year-end report for 2000


This press release is also available online at www.observergroup.com
and www.bit.se.