Tilgin Interim report 1 January - 31 March 2008

First quarter 2008
“¢ Net sales SEK 31.3 million (128.6)
“¢ Net result SEK -31.4 million (1.1), of which write-downs on inventory negatively affected the result by SEK -1.2 million (-1.6)
“¢ Result per share SEK -1.41 (0.05) before dilution
“¢ Order intake SEK 66.6 million (77.3) and order backlog as of 31 March 2008 SEK 66.4 million (43.4)
“¢ Gross margin 37 % (26 %)
“¢ Operating result SEK -31.5 million (2.1)
“¢ Cash flow from operating activities SEK 1.2 million (25.6)
“¢ Cash and bank SEK 13.7 million (67.8) as of 31 March 2008

“As expected the company had a rough start in 2008 with significantly lower sales. However, improved order intake and stronger gross margins create conditions for a stronger long-term development.”

Net sales went down in the first quarter compared with the fourth quarter 2007 and also compared with the corresponding period last year. This was an expected development that was announced in the 2007 year-end report. Order intake and order backlog increased compared with the previous quarter, in particular in the IP residential gateway segment.

The decrease in net sales is in large part explained by the company’s loss of its largest customer in the IPTV segment (Belgacom) during the fourth quarter 2007. In 2007, this customer contributed with more than half of the company’s net sales and with almost 90 per cent of the IPTV segment net sales.

IP residential gateway, Tilgin’s other business segment, showed net sales of SEK 25.5 million, which is a decrease of 18 per cent since the fourth quarter 2007. The decrease is mainly due to longer lead times for sourcing a certain component from one of our subcontractors. This has brought delays to deliveries as well as to invoicing.

To ensure future growth and profitability the company has taken a series of cost-saving financial and operating measures. The planned cost savings are progressing according to plan and are expected to reach full effect during the second half of 2008 with savings of at least SEK 7 million per quarter. The pending fully guaranteed share issue will provide the company with SEK 72 million before issue and guarantee expenses. The company has also taken a number of steps to broaden its customer base and to increase profitability in its current projects.

The efforts in sales resulted in the gross margin reaching a new all-time high, as well as an increase in order intake and order backlog during the first quarter. Order intake in IP residential gateway in particular was very satisfactory with increasing volumes from several customers. The company has also taken measures to ensure deliveries of critical components. In order to broaden the customer base and increasing sales in IPTV, the company is cooperating with Ericsson and Nokia Siemens Networks. We are expecting this to generate new business already during the second quarter. Furthermore, since March 2008 the company is working together with a major Nordic operator with a pilot installation of the new IPTV product platform supporting HDTV and PVR.

There are favourable conditions for the company to once more create growth and profitability. In light of the company’s efforts and the improved order intake and gross margin, net sales is expected to recover during the second half of 2008, and the operating result for the year as a whole is expected to improve compared with 2007.