INTERIM REPORT January - March 2018 Cover image: First test for largest Mars mission parachute at Esrange Space Center on 29 March. The test is part of ESA’s EXOMars project. Photo: ESA/I.Barel 2 INTERIM REPORT 1 JANUARY – 31 MARCH 2018 FINANCIAL DEVELOPMENT IN BRIEF Amounts in MSEK 2018 03 2017 03 NET SALES 206 256 OPERATING PROFIT -2 14 PROFIT BEFORE TAX -13 12 PROFIT AFTER TAX -22 10 CASH FLOW AFTER INVESTMENTS 56 -1 SIGNIFICANT EVENTS DURING THE FIRST QUARTER 2018 The activity level at Esrange was, after a calm period during the fall, regained during the first quarter. Mapheus 7 was, in cooperation with DLR, launched in March. Also REXUS 23 and 24 were planned for March, but after a smaller launch failure of REUS 24, the launch of REXUS 23 was moved until fall 2018. Beginning of January SSC presented a business plan regarding the possibilities to launch satellites from Esrange Space Center on commercial basis. The report will be the input for a decision regarding governmental funding of new infrastructure at Esrange. The report received a positive response. It confirmed our previous conclusions regarding the viability of the project as well as the demand on the market. Esrange Space Center has played a central role for Swedish as well as European space activities for 50 years. A positive decision would add new and demanded capabilities, and strengthen Esrange’s and Sweden’s role in the development of the space based infrastructure of the future. In February a larger customer event was held at the Esrange Space Center. The meeting attracted participants from all over the world. Amongst others topics like security and the future of the space industry were discussed. SWEDISH SPACE CORPORATION I INTERIM REPORT JANUARY – MARCH 2018 3 DEVELOPMENT OF THE GROUPS FINANCIAL POSITION DURING THE FIRST QUARTER 2018 Consolidated operating profit was -2 MSEK (14 MSEK). The operating profit for the first quarter was weaker than previous year due to a relatively low activity level at the Esrange Space Center and lower volumes in Satellite Management services. Group financial net was -10 MSEK (-2 MSEK). Included in the financial net were currency effects of -9 MSEK (-1 MSEK) which relates to translation differences in EUR. Profit before tax was -13 MSEK (12 MSEK). Group profit amounted to -22 MSEK (10 MSEK). Since SSC runs operations in several countries, and profits in one country may not be deducted against losses in another country, SSC’s tax paid is high in relation to the Group’s profit level. Total assets 31 March 2018 amounted to 1 168 MSEK (1 120 MSEK on 31 December 2017), an increase with 48 MSEK. The increase is due to increased liabilities, both interest bearing and non-interest berating. Interest bearing debts have increased with 20 MSEK, where-of 8 MSEK adjusted for currency effects. Cash flow from operations amounted to 75 MSEK (5 MSEK). Net investments amounted to 19 MSEK (6 MSEK), where of 3 MSEK (2 MSEK) related to investments at the Esrange Space Center. DEVELOPMENT OF THE PARENT COMPANY’S FINANCIAL POSITION DURING THE FIRST TWO QUARTERS 2018 Operating profit for the Parent Company was -13 MSEK (-14 MSEK). Profit after tax for the Parent Company amounted to -26 MSEK (-10 MSEK). Total assets 31 March 2018 amounted to 877 MSEK (911 MSEK on 31 December 2017), a decrease of 34 MSEK, due to a lower investment level and less capital tied up in projects. Interest bearing liabilities have increased with 20 MSEK, where-of 8 MSEK adjusted for currency effects. Cash flow from operations amounted to 48 MSEK (-32 MSEK). Net investments amounted to 18 MSEK (4 MSEK). SIGNIFICANT RISK FACTORS FOR THE SSC GROUP Large parts of the SSC operations involve high technical risks. These are both technical development risks, and the risks of failure at for instance launches of rockets, satellites and balloons as well as risks that satellites in orbit for some reason fail. Malfunctions can often not be corrected after the errors have occurred. The technical risks in many cases also result SWEDISH SPACE CORPORATION I INTERIM REPORT JANUARY – MARCH 2018 4 in financial / commercial risks, for instance cancelled assignments due to breakdowns. These risks can only to a limited extent be insured at a reasonable cost. SSC is exposed to currency exchange rate changes, mainly in euros and US dollars. To which extent varies, but the part of turnover in euro in the parent company typically reaches 35-45%. For the first quarter 2018 it was 65%. The legal entity in Chile mainly has its revenues in US dollars but a large part of the costs in local currency. The entity is therefore exposed to changes in currency exchange rates between these two currencies. The subsidiaries in Chile and in the US are both financed by loans in US dollars from the parent company and from equity. The external financing in the parent company is made in euro and USD. MARKET AND FUTURE PROSPECTS The space industry and its markets are characterized by rapid change with an increasing element of private actors and investments. The space industry is still heavily depending on public sector financing and SSC is striving toward increased sales to the private sector. SSC has continued the extensive upgrade and enhancement of Esrange Space Center, where one of the goals is to launch smaller satellites into orbit. SSC has, together with the Swedish National Space Agency produced a Business Plan for commercial launching of satellites from Esrange. The Business Plan will support a government decision to fund necessary infrastructure at Esrange. If the government decides to finance the infrastructure the work will continue for several years ahead. SSC continues its expansion within Satellite Management Services. Already made and planned investments in enlarged capacity, strategically placed earth stations and investments in new technology are positioning the company well for new businesses and a gradual development of a broader and even more attractive global offering for both present and new customers. SSC also has the ambition to extend the operations within Engineering Services, through acquisitions combined with organic growth. IMPORTANT EVENTS AFTER THE BALANCE SHEET DATE No essential events after the balance sheet date. SWEDISH SPACE CORPORATION I INTERIM REPORT JANUARY – MARCH 2018 5 CONSOLIDATED INCOME STATEMENT 2018 2017 2017 Amount in MSEK JAN-MAR JAN-MAR JAN-DEC Net sales 206 256 935 Other revenues 5 1 12 External expenses1) -75 -90 -396 Personnel costs1) -117 -129 -471 Amortizations and depreciations -23 -24 -94 OPERATING PROFIT -2 14 -14 Financial income and expenses -10 -2 -24 PROFIT BEFORE TAX -13 12 -38 Income taxes2) -10 -1 -9 PROFIT AFTER TAX -22 10 -47 TOTAL OTHER INCOME ITEMS THAT WILL BE RECLASSIFIED TO PROFIT AND LOSS WHEN SPECIFIC CONDITIONS ARE MET Translation differences in foreign operations 6 -1 -9 Cash flow hedges -2 0 -1 ITEMS THAT WILL NOT BE INCLUDED IN PROFIT AND LOSS Change in fair value of financial assets available for sale -20 14 32 Income tax relating to items above 5 -3 -7 TOTAL OTHER INCOME FOR PERIOD -12 10 15 TOTAL PROFIT/LOSS FOR PERIOD -34 20 -32 Of which attributable to the parent company's shareholders -34 20 -32 Earnings per share, SEK -1 380 623 -2 890 1) Change in provisions external costs 0,3 -0,1 0,1 and personnel costs 0,0 0,5 1,9 2) Estimated tax during the year. Final tax at year end. SWEDISH SPACE CORPORATION I INTERIM REPORT JANUARY - MARCH 2018 6 CONSOLIDATED BALANCE SHEET Amount in MSEK 2018-03-31 2017-03-31 2017-12-31 ASSETS NON-CURRENT ASSETS Intangible assets 63 68 63 Tangible assets 609 681 609 Other securities held as non-current assets 32 33 52 Deferred tax assets 2 2 2 TOTAL NON-CURRENT ASSETS 706 785 725 CURRENT ASSETS Inventories 10 10 5 Current receivables 219 299 224 Cash and cash equivalents 234 132 166 TOTAL CURRENT ASSETS 462 440 395 TOTAL ASSETS 1 168 1 225 1 120 Amount in MSEK 2018-03-31 2017-03-31 2017-12-31 EQUITY AND LIABILITIES EQUITY Share equity 33 33 33 Other reserves 26 33 38 Retained earnings including profit for the period 365 445 388 TOTAL EQUITY ATTRIBUTABLE TO HOLDERS OF THE PARENT COMPANY 424 510 458 TOTAL EQUITY 424 510 458 NON-CURRENT LIABILITIES Interest bearing liabilities 233 341 223 Other liabilities 121 101 124 Provisions 4 2 4 Deferred tax liability 8 11 7 TOTAL NON-CURRENT LIABILITIES 366 455 359 CURRENT LIABILITIES Interest bearing liabilities 100 - 90 Short-term non-interest bearing liabilities 275 254 209 Provisions 3 6 3 TOTAL CURRENT LIABILITIES 378 260 303 TOTAL EQUITY AND LIABILITIES 1 168 1 225 1 120 SWEDISH SPACE CORPORATION I INTERIM REPORT JANUARY - MARCH 2018 7 CONSOLIDATED STATEMENT OF CASH FLOW 2018 2017 2017 Amount in MSEK JAN-MAR JAN-MAR JAN-DEC OPERATING ACTIVITIES Cash flow from operations 6 30 105 Change in working capital 69 -25 -9 CASH FLOW FROM OPERATING ACTIVITIES 75 5 97 INVESTING ACTIVITIES Investments in intangible assets -1 - -2 Investments in tangible assets -19 -6 -42 Sale of subsidiary, net liquidity impact - - 6 CASH FLOW FROM INVESTING ACTIVITIES -19 -6 -37 CASH FLOW AFTER INVESTMENTS 56 -1 60 CASH FLOW FROM FINANCING ACTIVITIES 8 -36 -59 CASH FLOW FOR THE YEAR 64 -37 0 Cash and cash equivalents at the beginning of the year 166 169 169 Currency gains/losses in liquid assets 4 -1 -4 CASH AND CASH EQUIVALENTS, END OF THE YEAR 234 132 166 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Equity attributable to holders of the parent company Retained Amount in MSEK Share capital Reserves earnings Total equity OPENING BALANCE 1 JANUARY 2017 33 23 435 490 Dividend for 2016 - -