Proha Plc Stock Exchange Bulletin August 16, 2001 at 9.00 am
INTERIM REPORT OF PROHA PLC FOR THE PERIOD JANUARY 1 - JUNE 30,
2001
- Net sales for the first half-year 2001 was EUR 42.2 million
(FIM 250.6 million), growth compared to the corresponding period
in 2000 was 517%.
- Operating loss was EUR -2.8 million (FIM -16.7 million),
against operating profit of EUR 1.1 million for the corresponding
period in 2000.
- Earnings before financial expenses, taxes, and depreciation
(EBITDA) was EUR -0.7 million, compared to EUR 1.3 million for
the same period in 2000.
- Result for the first half-year 2001 was affected by the weak
result of associated companies, financing expenses resulting from
the Opus360 deal and some of non-recurring expenses, more
extensive use of outsourcing and the operating loss of Artemis
subsidiary SPR Inc.
- Despite of the uncertainty of the international economic
development, the Company aims at a positive result (EBITDA) for
the financial year 2001.
- The organic growth of net sales for the financial year 2001 is
expected to be 5-20%, depending on the international economic
development.
- The first phase of Opus360 Corporation share exchange agreement
was completed on July 31, 2001. The net sales and result
forecasts exclude the effects of the Opus360 Corporation
acquisition.
- The already known and forecasted losses of Opus360 will have an
impact on Proha’s financial result for the year 2001. Losses
have been taken into account in the purchase price of Opus360.
- The Opus360 deal has improved the Group’s financial position
and will decrease financial expenses for the rest of the year
2001.
NET SALES AND RESULT
Proha Group’s net sales for January 1 - June 30, 2001 increased
to EUR 42.2 million, compared to EUR 6.8 million for the same
period in 2000. Earnings before financial expenses, taxes, and
depreciation (EBITDA) was EUR -0.7 million (EUR 1.3 million).
Operating profit decreased to EUR -2.8 million, compared to EUR
1.1 million for the corresponding period in 2000. Loss before
appropriations and taxes was EUR -3.2 million (-7.5 % of net
sales), compared to EUR 1.1 million in 2000. Earnings per share
for the six month period amounted to EUR -0.06 (EUR 0.03).
NET SALES AND EBITDA BY BUSINESS AREA, EUR 1000
Business Area Net sales EBITDA %
Artemis companies
(Project Management) 39 499 487 1
Accountor companies
(Financial Management) 2 363 -129 -5
Intellisoft companies
(Internet Technologies) 1 007 -154 -15
Other areas 537 -940 -175
Eliminations -1 254
Total 42 152 -736 -2
FINANCING AND INVESTMENTS
At the end of the period, the balance sheet total was EUR 57.6
million, compared to EUR 14.4 million for the same period in
2000. Current assets totaled EUR 2.5 million, against EUR 5.7
million for the corresponding period in 2000. The Quick Ratio was
0.94.
The product development expenses of international strategic
products totaled EUR 5.5 million, of which EUR 5.1 million were
entered as expenses.
Interest bearing liabilities were equivalent to 14.3% of the
Group’s total capital at the end of the period.
PRODUCT DEVELOPMENT
During the period, Proha invested 13% of the Group net sales in
the product development of international products. In addition,
Proha developed tactical products regionally. The development of
these products was partly carried out as customer projects. The
development expenses of tactical products were entered as
expenses.
On August 15, 2001, Artemis announced in the United States an
entirely new product which complements Business Management
Architecture (BMA). Portfolio Director (TM) will be one of Artemis’
main products expanding its product offering to strategic
decision-making for businesses. Until the end of the year 2001,
the product will be offered to a limited number of customers.
Portfolio Director (TM) will be introduced globally in September.
The development of new Artemis products and product upgrades to
be introduced this fall has proceeded as planned. New versions of
Views products will be launched during the last quarter of 2001
and the first quarter of 2002. Opus WorkForce tool will be
offered restrictedly in the fall 2001 through Artemis’
distribution channel in the United States. More extensive
distribution will commence during the first quarter of 2002.
In the Financial Management business area, a Proha subsidiary
Accountor Oy, continued to develop software and service solutions
as planned. Accountor was the first in Finland to complete an
entirely digital financial management solution, IAP-Flow, that
will be offered as an ASP service. Major investments in product
development have now been done. Virtual financial management
service, ProCountor.Com, was started and the first end user and
accounting company agreements were signed.
In the Internet Technologies business area, the important
development phase of Intellisoft’s ASP service - premises with
hardware, software and testing - was completed.
ACQUISITIONS AND CHANGES IN ASSOCIATED COMPANIES
OPUS360 CORPORATION
In April, Proha Plc and Opus360 Corporation, US-based software
company, signed an agreement pursuant to which Proha will receive
80% of the entire share capital of Opus360 Corporation. The
acquisition is conducted as a share exchange, whereby Proha
subsidiary in the Project Management business area, Artemis
International, as well as 19.9% of Intellisoft Oy in the Internet
Technologies business area and 19.9% of Accountor Oy in the
Financial Management business area will be combined with Opus360
in return for the Opus360 common shares issued to Proha. The
share exchange agreement was amended on July 12, 2001, in order
to complete the deal in a two-step process.
At the first closing, consummated on July 31, 2001, 73,938,702
Opus360 common shares were issued to Proha in return for
the Artemis shares. Thereafter, Proha owns over 59.75% of the
Opus360 share capital. Proha’s Extraordinary General Meeting
approved the acquisition on July 30, 2001, in accordance with the
terms and conditions of the contract.
As a Proha subsidiary, Opus360 Corporation becomes the parent
company of Proha’s Artemis Group. The combined operations
continue to operate as Artemis International Solutions
Corporation. Proha CEO Pekka Pere was elected as the Chairman
of Artemis International Solutions Corporation and as the
CEO Steven Yager, who is CEO of Artemis and a member of the
Proha Board of Directors.
At the second closing, approximately 125.5 million Opus360
common shares will be issued to Proha in return for the
rest of its Artemis shares and for the 19.9% shares of Proha
subsidiaries, Accountor Oy and Intellisoft Oy. After the second
closing, Proha owns approximately 80% of the Opus360 share
capital. The second closing is expected to occur by the end of
2001.
The acquisition significantly strengthens and complements Proha’s
product offering in Project and Resource Collaboration. Opus360
Corporation’s Internet-based product portfolio for workforce
management is a natural addition to the software offering of
Artemis. The acquisition strengthens Proha’s financial position
and decreases the corporate financial expenses towards the end of
the year.
Opus360 Corporation shares were delisted from the Nasdaq National
Market on June 28, 2001. The trading of Opus360 shares on the OTC
Bulletin Board (OTCBB) commenced on June 29, 2001.
LOCALEYES SUOMI OY
In June, Proha sold the remaining share of LocalEyes Suomi Oy to
LocalEyes Ltd, a subgroup of the Italian-based Opera Multimedia
S.p.A, for the price of EUR 314,000. A year ago in 2000, Proha
spun off its localization business to LocalEyes Suomi Oy, and
Opera Multimedia purchased a 51% holding of the new company.
COOPERATION AGREEMENTS
In April, Proha Group’s Norwegian-based associated company, Dovre
International As, signed an extensive framework agreement with
Norsk Hydro Produksjon Aa. Dovre was selected as Norsk Hydro’s
most important supplier of consultants and competence within
Project Management and Supply Chain Management. The validity of
the agreement is 3 years. It includes an option to extend the
agreement to 9 years.
In May, Proha Plc signed an agreement with Manufacturing Channel
Europe Oy to offer its business management system worldwide as a
part of Proha’s ProCountor.Com and ASP services within the
Financial Management business area. Manufacturing Channel
business management system is an Internet service for
manufacturing companies.
GROUP STRUCTURE AND ITS CHANGES
Proha simplified its corporate structure in Finland. The
operations of the Project Management business area in Finland
were transferred to Artemis Finland Oy. In connection with the
Opus360 acquisition, the corporate structure was streamlined
globally. As a result, most of the operations in the Project
Management business area are now a part of Artemis International
Solutions Corporation. After the arrangements, the strategic
business units at the corporate level are Artemis International
Solutions Corporation (Project Management), Accountor Oy
(Financial Management) and Intellisoft (Internet Technologies).
PERSONNEL
The number of personnel continued to increase. At the end of the
period, the number of employees in the Proha Group totaled 707.
The corresponding number for the same period in 2000 was 226 (466
if Artemis personnel is included). The staff expenses were EUR
24.7 million (EUR 3.1 million), 58.5% of net sales (45.5%). Of
these, 570 (329) people worked in the area of Project Management,
95 (68) in Financial Management, and 42 (69) in Internet
Technologies. The number of employees in Finland was 246, while
461 worked abroad.
SHARE CAPITAL
On June 30, 2001, the number of Company shares was EUR 53,014,530
and the share capital was EUR 13,783,777.80. Following the
redemption of a total of 1,960,180 Proha Plc shares owned by
Artemis Acquisition Corporation on August 15, 2001, the number of
Company shares is 51,054,350 and the share capital is EUR
13,273,131.10.
AUTHORIZATION TO ISSUE SHARES
The Board of Directors was authorized by the Extraordinary
General Meeting on December 13, 2000 to decide on increasing the
share capital through one or more new subscriptions having a
total combined value of at maximum 7,000,000 new shares, each
share having a book parity of EUR 0.26. On the basis of this
authorization, the Company’s share capital can be increased by a
maximum of EUR 1,820,000. The number of unused shares is
6,685,596, corresponding to EUR 1,738,254.70. The authorization
is valid until December 12, 2001.
INCENTIVE SYSTEM FOR PERSONNEL
In its meeting on April 24, 2001, Proha Board of Directors
approved the subscriptions made during the second subscription
period (April 18 - April 20, 2001) of the option issue, which is
a part of employee incentive system. In the issue, a total of
1,592,720 Proha Plc stock options were subscribed entitling to
the subscription of 159,272 shares in accordance with the terms
and conditions of the option issue. The options were offered
without compensation mainly to the new employees of the Proha
Group. Proha Board of Directors confirmed the subscription price
for the shares subscribed on the basis of the stock options as
EUR 1.35 per share.
The stock options are based on the decision made by Proha Board
of Directors, on the basis of the authorization of the
Extraordinary General Meeting on December 13, 2000, to increase
the Company share capital by a maximum of EUR 520,000 by issuing
a maximum of 20,000,000 stock options that entitle to a
subscription of 2,000,000 shares in accordance with the terms and
conditions of the option issue. After the second subscription, a
total of 559,000 stock options entitling to a subscription of
55,900 shares, are unused.
TRADING ON THE HELSINKI STOCK EXCHANGE
The number of registered shareholders in Proha Plc totaled 3,273
at the end of the period. During the period, the share price was
EUR 0.68 at its lowest and EUR 1.20 at its highest. Market
capitalization was approximately EUR 37.6 million as of the end
of the period.
DECISIONS OF THE GENERAL MEETINGS
Annual General Meeting of Proha Plc held on April 4, 2001
- confirmed the 2000 Financial Statements and discharged the
members of the Board of Directors and the CEO from liability for
2000.
- approved the Board of Directors’ proposal that no dividend is
paid from the distributable earnings.
-elected KPMG Wideri Oy Ab as the Company’s ordinary auditor,
with Mr Reino Tikkanen, APA, as the auditor in charge.
- decided to amend Articles 12 and 13 of the Articles of
Association in accordance with the proposal of the Board of
Directors.
Extraordinary General Meeting of Proha Plc held on July 30, 2001
- approved the Opus360 Corporation share exchange agreement in
accordance with the proposal of Board of Directors
- approved the Board of Directors’ proposal for the redemption of
1,960,180 Proha Plc shares owned by Proha subsidiary, Artemis
Acquisition Corporation, and for the decrease in the share
capital with the amount corresponding the combined book parity of
the redeemed shares, EUR 509,646.80. The reduction of the share
capital will be done by transferring EUR 509,646.80 to the share
premium account which is Company’s restricted capital. The
reduction of share capital will have no impact on the
distribution of share ownership or voting rights, since the
shares to be redeemed are owned by the Company’s subsidiary
Artemis Acquisition Corporation.
- decided to change the Article 6 of Articles of Association
as follows:
"6§ Board of Directors
The Board of Directors of the company is composed of no less than
three (3) and no more than eight (8) ordinary members. Their term
ends at the end of the first Annual General Meeting following the
election. In the first meeting after the election of the Board of
Directors, the Board appoints one member to be the Chairman of
the Board and another member to be the Vice-Chairman of the
Board, whose term lasts until the end of the Annual General
Meeting following the election."
- approved the Board of Directors’ proposal to increase the
number of members in the Board to eight ordinary members instead
of the previous six.
- approved the Board’s proposal for the composition of the Board
of Directors in accordance with the share exchange agreement
signed with Opus360 Corporation as follows:
- Mr Pekka Mäkelä resigned from the Board of Directors. The
members of Opus360 Corporation Board of Directors, Mr Ari
Horowitz and Mr James A. Cannavino, as well as Chief Financial
Officer Peter Schwartz were elected as the new members of Proha
Board of Directors. Mr Olof Ödman will continue as the Chairman
and Mr Steven Yager, Mr Alec Gores, Mr Pekka Pere, and Mr Klaus
Cawén as members in the Board of Directors.
The decision on the election of the new Board members will be
entered into the Trade Register and the term of the new Board
members will commence providing that the share exchange agreement
with Opus360 Corporation is executed. The new composition of the
Board of Directors also requires the approval of the Finnish
Ministry of Trade and Industry, since over half of the Board
members reside outside the European Economic Area. In case the
agreement is not executed, the present Board of Directors will
continue until the end of its term and the decision expires.
ACCOUNTING PRINCIPLES
In the interim report, the consolidation follows the accounting
principles of the financial statements stipulated on December 31,
2000.
Depreciation of goodwill
Goodwill of Artemis companies, a total of EUR 16.6 million, is
depreciated according to a 10-year depreciation plan. During the
period, the depreciation of goodwill of the Proha Group was
EUR 0.933 million. Goodwill resulting from the consolidation of
other Group companies, EUR 0.4 million, is depreciated according
to a 3-year depreciation plan.
Fixed assets assessment
The depreciation plan of machinery and equipment was altered from
the previous year. According to plan, the depreciation period is
3-10 years. Straight-line depreciation is used as a depreciation
method.
Research and development expenses
Research and development expenses were EUR 5.5 million of which
EUR 0.4 million was activated in the balance sheet and EUR 5.1
million was entered as expenses.
Deferred tax assets and liabilities
Deferred tax assets totaled EUR 2.8 million on June 30, 2001. The
amount of deferred tax liabilities was EUR 7,185.
Company shares
Proha Plc shares which were in the Group’s holding already at the
end of the financial year 2000 are not presented in the
consolidated balance sheet on June 30, 2001. The shares equal
3.7% of the total number of shares. The shares were redeemed on
August 15, 2001.
PROSPECTS FOR THE NEAR FUTURE
Result for the first half-year 2001 was affected by the weak
result of associated companies, more extensive use of
outsourcing, the operating loss of Artemis subsidiary SPR Inc.,
as well as non-recurring expenses from the Opus360 acquisition
entered as expenses.
The joint venture founded in Germany with Change Point was
terminated due to weak profitability. Despite of the losses of
the corresponding associated company in France, its operation is
continued due to positive business prospects. The expansion of
service business especially in the United States temporarily
increased outsourcing expenses during the first half of 2001.
The Opus360 acquisition has improved the financial position of
the Group and will substantially decrease the financial expenses
of the rest of the year 2001. During the remaining half-year,
expenses resulting from business acquisitions and arrangements
will diminish essentially.
The benefits from investments made during the first half year,
for instance through the introduction of new products to
the market, are gained towards the end of the year. Investments
made by Accountor and Intellisoft have concentrated into the
first half of the year 2001.
The Company adheres to prior estimates of growth and result for
2001. In the previous interim report, Proha estimated the result
before financial expenses, taxes, and depreciation (EBITDA) to be
10% in case the general economic situation improves towards the
end of the year 2001, or just positive in case the economic
situation remains unchanged. Since no general economic recovery
is expected towards the end of the year, the EBITDA forecast is
positive. The organic growth is expected to be 5-20%. The net
sales and result forecasts exclude the effects of the Opus360
Corporation acquisition. The already known and forecasted losses
of Opus360 will have an impact on Proha’s financial result for
2001. Losses have been taken into account in the purchase price
of Opus360.
Espoo, August 16, 2001
The Board of Directors of Proha Plc
For more information please contact:
PROHA PLC
President and CEO Pekka Pere, tel. +358 (0)20 4362 000
pekka.pere@proha.com
www.proha.com
DISTRIBUTION:
Helsinki Stock Exchange
Major Media
PRESS CONFERENCE
Proha Plc will hold a press conference for the media at 12.30 am
and for the financial analysts at 1.30 pm on August 16, 2001, at
Hotel Simonkenttä, Bulsa-Freda cabinet, address: Simonkatu 9,
Helsinki.
Welcome
PROHA GROUP CONSOLIDATED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET
JANUARY 1 - JUNE 30, 2001
The figures are unaudited.
CONSOLIDATED PROFIT AND LOSS ACCOUNT JANUARY 1 - JUNE 30, 2001
1/01-6/01 1/00-6/00 1/00-12/00
(EUR 1 000) (EUR 1 000) (EUR 1 000)
Net sales 42 152 6 833 36 149
Variation in stock -16 4 -
Share of results
of associated companies -401 22 -56
Other operating income 371 743 2 227
Raw materials and services -5 841 -1 147 -5 777
Staff expenses -24 650 -3 109 -17 324
Depreciation and reduction in value
Depreciation
according to plan -1 149 - -1 163
Depreciation
of goodwill -933 - -711
Depreciation and reduction
in value total -2 082 -228 -1 874
Other operating
charges -12 351 -2 013 -11 402
Operating profit/loss -2 817 1 105 1 943
Financial income and
expenses -342 23 -406
Profit/loss before
extraordinary items -3 159 1 128 1 537
Extraordinary items 0 0 0
Profit before
appropriations and taxes -3 159 1 128 1 537
Appropriations 0 0 0
Income taxes -330 -212 -486
Change in deferred
tax liabilities 1 0 0
Profit/loss before
minority interest -3 489 916 1 051
Minority interest
of profit 254 -83 -126
Profit/loss
for the financial year -3 234 833 925
CONSOLIDATED BALANCE SHEET 30.6.2001 30.6.2000 31.12.2000
ASSETS
Non-current assets
Intangible assets 18 461 1 119 17 519
Tangible assets 2 975 812 2 885
Investments 3 438 1 298 2 706
Non-current assets total 24 874 3 229 23 110
Current assets
Stocks 98 132 145
Non-current debtors 301 0 361
Current debtors 29 893 5 291 26 002
Short-term investments 277 269 270
Cash in hand and at bank 2 181 5 461 5 787
Current assets total 32 750 11 153 32 565
ASSETS TOTAL 57 625 14 382 55 675
LIABILITIES
Capital and reserves
Share capital 13 784 6 786 13 703
Share premium account 3 267 27 3 107
Conversion difference 27 -5 -
Retained earnings 3 877 907 2 907
Profit/loss
for the financial year -3 234 833 925
Capital loan 187 187 187
Capital and reserves total 17 906 8 735 20 829
Minority interest 79 342 325
Provisions 582 0 468
Appropriations 0 0 0
Creditors
Non-current creditors 4 381 554 5 162
Current creditors 34 676 4 751 28 891
Creditors total 39 057 5 305 34 053
LIABILITIES TOTAL 57 625 14 382 55 675
KEY RATIOS OF THE PROHA GROUP
1/01-6/01 1/00-6/00 1/00-12/00
Net sales (EUR 1000) 42 152 6 833 36 149
EBITDA* -736 1 333 3 817
% of net sales -1.7 19.5 10.6
Operating profit/loss
(EUR 1000) -2 817 1 105 1 943
% of net sales -6.7 16.2 5.4
EBIT** -2 817 1 105 1 943
% of net sales -6.7 16.2 5.4
Profit before appropriations
and taxes -3 159 1 128 1 537
% of net sales -7.5 16.5 4.3
Profit for the period -3 234 833 925
% of net sales -7.7 12.2 2.6
Earnings per share, EUR -0.06 0.17 0.03
Equity per share, EUR 0.33 1.64 0.39
Average personnel 688 208 249
*Earnings before financial expenses, taxes and depreciation
**Earnings before financial expenses and taxes
NET SALES BY COUNTRY
United States 36.4 %
Finland 16.1 %
Great Britain 10.6 %
France 10.6 %
Italy 9.4 %
Japan 9.1 %
Germany 3.8 %
Singapore 2.0 %
Norway 1.0 %
Korea 0.8 %
Other 0.2 %
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