A few words from the President, Jonas Wistrom

The market for qualified technical consulting services proved to be somewhat better in the first quarter than we had forecast in the previous quarterly report. This helped to limit the cost of AF’s restructuring programme to SEK5 million, compared to the SEK19 million that we had originally estimated.

The operating margin reached 8.8% for the first quarter, compared to 10.1% last year (adjusted for the pension premium reduction from Alecta for 2008).

Growth totalled 14%, of which 2% was organic. AF continues to gain market share in prioritised growth areas, and substantial investments were made to further consolidate AF’s position as the world’s largest independent consulting company in the field of nuclear power. During the first quarter of the year AF expanded its cooperation with Vattenfall with regard to nuclear power, while the Inspection Division took steps to reinforce its offer in this area. We also introduced the AF Nuclear Trainee Programme, the industry’s first training programme, which has already been well received by the labour market and our clients.

The outlook for the near future remains unchanged. AF is braced for a tough 2009 in a very challenging marketplace: there are as yet few signs that the economy has hit its lowest point, and important new investments for industry are still on hold. AF’s aim, however, is to continue to deliver levels of profitability and growth that are among the very best in our industry. The company still enjoys a well-established position in the market, long-term relationships with its clients and a strong brand.

Operating profit amounted to SEK106 million (Q1 2008: SEK117 million).

The operating margin was 8.8% (10.9%).

It is also worth mentioning in this connection that the profit for Q1 2008 was affected by a pension premium reduction from Alecta, which had a positive impact on earnings of SEK9.5 million.

Profit after net financial items amounted to SEK104 million (SEK109 million).

The profit margin was 8.6% (10.2%).

Capacity utilisation was 71% (74%).

Important events during Q1 and after the reporting date

AF signed a four-year framework agreement with Vattenfall that extends from 2009 to 2012. The agreement is for technical consulting services and encompasses everything from project management, analysis and investigation, to technical calculations and mechanical construction and design in all technical disciplines. Vattenfall was already one of AF’s largest clients prior to the signing of this agreement, and it is now expected that sales to Vattenfall will increase substantially.

Through its Inspection Division, AF was commissioned by Forsmarks Kraftgrupp AB to conduct periodic inspections of pipes and components using sophisticated testing systems. The assignment relates to reactors 1, 2 and 3 at the Forsmark nuclear power plant during the 2009-2011 audit period, with the option of a subsequent two-year extension.

AF was ranked in 7th place overall among the most attractive employer in Sweden in Universum’s annual survey of technology students, and was awarded the Best in Industry prize among technical consulting companies. Among young engineering professionals (2-8 years’ working experience) AF was rated in 8th place overall and again topped the rankings among technical consulting companies.

Acquisitions / New Markets / Disposals

AF has, via its Inspection Division (AF-Kontroll), established a new, wholly owned subsidiary in Lithuania. Operations will concentrate on testing and inspection services for the nuclear power industry. In the start-up phase the new company has a staff of 30, all of whom have been transferred to AF as part of an agreement with the state-owned Ignalina Nuclear Power Plant (INPP). A service contract has been signed with INPP relating to the supply of all inspection and testing services for the plant.

Investments

Gross investment in property, plant and equipment for the period totalled SEK7 million (Q1 2008: SEK15 million). The first quarter 2008 also saw investments of SEK7 million in land and buildings for AF’s Swiss subsidiary, AF-Colenco.

Cash flow and financial position

Cash flow for the period was negative at SEK-7 million (Q1 2008; SEK-46 million). Cash flow so far this year has been affected by SEK5 million relating to the buy-back of AF shares. The net of borrowing and amortisation of loans had a positive effect on cash flow of SEK3 million (SEK-66 million).

The Group’s liquid assets totalled SEK281 million (SEK269 million) at the end of the reporting period.

Equity per share was SEK103.4 and the equity/assets ratio was 49.4%. At the beginning of 2009, equity per share was SEK99.5 and the equity/assets ratio was 47.1%.

The Group’s net loan debt (cash and cash equivalents minus interest-bearing liabilities) amounted to SEK187 million (SEK61 million) at the end of March.

Divisional performance

Energy Division

The Energy Division is a front-rank international energy consultant and a world leader in nuclear power consulting.

The economic downturn has impacted on the demand for energy consulting services and there is a heightened sense of uncertainty in the market, particularly in the Russian, Baltic and South-East Asian markets. However, the inflow of orders was good in Q1, thanks to a new nuclear power assignment and a new hydropower assignment in Switzerland.

Energy Division clients are private or public-sector power companies, other energy-intensive industries, government authorities and financial institutions. Client investments are often considerable and extend over many years. The Energy Division has a substantial order book that is worth about SEK2.2 billion and includes ongoing nuclear power projects in more than 40 countries. AF-Colenco, AF’s Swiss subsidiary, and Lonas Technologia, the Russian company acquired in December 2008, achieved results that exceeded expectations in Q1, thanks primarily to the strength of their order books.

Nuclear and thermal power accounted for the strongest demand in the Energy Division.

Engineering Division

While the Engineering Division is feeling the effects of a weaker industrial economy in Sweden and internationally, the division successfully maintained good levels of profitability and capacity utilisation throughout the past quarter thanks to intensified sales efforts, a strong local presence in the market and the long-term nature of its relationships with clients.

Strategic, long-term work to improve the project economics of major fixed-price assignments is also starting to yield tangible and positive results for the division’s earnings.

The strongest demand during the reporting period came from the nuclear power, food processing and pharmaceutical industries. Clients are investing mainly in efficiency improvements in production plants, environment-related projects, the development of alternative fuels and the transition to efficient energy management.

Infrastructure Division

The market for infrastructure consulting services remained robust in Q1. Most business areas continued to report high levels of capacity utilisation and a good inflow of orders.

The weaker market that affected the Product Development business area at the end of 2008 prevailed, but did not weaken further. In the first quarter some 20 members of staff were laid off and a similar number were redeployed within the company.