Framtidsfabriken
Shares in Stockholm-based internet consultancy Framtidsfabriken (FramFab) had by late January risen 16½ times in value since the company’s Skr435 million (€50.6 million) initial public offering (IPO) in June.

And although the mid-January share price of Skr2,200 might not be justified by the company’s forecast profits, FramFab’s IPO was nevertheless one of the best small-cap equity issues in 1999, say European fund managers.

Bo Zethreus of lead manager Enskilda Securities: “Swedish journalists were advising investors not to subscribe to the shares in the offer”

Issuer: Framtidsfabriken
Pricing date: June 23
Size: Skr435 million
Type : IPO
Issue Price: Skr125 (€14.5)
Listing: Stockholm
Lead manager: Enskilda Securities

That’s because FramFab, which is Europe’s largest listed internet consultancy in Europe and ranks third globally, is making profits. Most of FramFab’s leading rival internet consultancies – iXL and Scient of the US, for instance, and Icon Media Lab of Sweden – are expected to have made losses in 1999.

“We had to have the stock – FramFab is a pioneer in the internet sector and we thought its positive results would protect it if technology stocks took a tumble,” says a London-based fund manager who bought shares at the time of
the IPO.

FramFab earns fees advising large blue-chip companies how to exploit the internet to sell products and services. Customers include Swedish auto-maker Volvo, Swedish electrical-goods manufacturer Electrolux, and UK-based pharmaceuticals company AstraZeneca.

Analysts at Enskilda Securities, the investment banking arm of Sweden’s SEB banking group, which underwrote FramFab’s IPO, expect FramFab to show 1999 pre-tax profits – due to be reported in February – of Skr41 million on fees of Skr320 million. That compares with pre-tax profits of Skr15 million and fees of Skr104 million in 1998.

Enskilda’s analysts expect FramFab’s pre-tax profits to fall to Skr5 million in 2000 as the result of the Skr200 million in goodwill charges FramFab is expected to incur once acquisition plans announced in December are sealed. FramFab is buying Swedish information services company Guide Konsult and UK internet consultant Mindfact for a price yet to be agreed. Once the operations have been merged, Enskilda analysts forecast a rise in pre-tax profits to Skr118 million in 2001. FramFab acquired four other internet services companies in 1999. Enskilda Securities analysts estimate these purchases boosted FramFab’s pre-tax 1999 sales by Skr5 million and pre-tax profits by Skr4 million.

“We were criticised in the press for selling the stock too dearly. At one point some Swedish journalists were advising investors not to subscribe to the shares in the offer,” says Bo Zethreus, director of Enskilda Securities in London.

The 1,660% rise in FramFab shares since they were floated at Skr125 compares with a mere 46.7% rise in the OM Swedish General Share Index of all public Swedish companies.