Proha Plc Stock Exchange Bulletin November 15,2001 at 11.20 am
INTERIM REPORT OF PROHA PLC FOR THE PERIOD JANUARY 1 - SEPTEMBER
30, 2001
- Net sales for January 1 - September 30, 2001 were EUR 60.4
million, growth compared to the corresponding period in 2000
228%.
- Operating loss was EUR 7.8 million, against operating profit
of EUR 2.8 million for the corresponding period in 2000.
- Earnings before financial expenses, taxes, and depreciation
(EBITDA) was EUR -4.6 million, compared to the profit of EUR 3.4
million for the same period in 2000.
- Result for the period is affected by the Opus360 Corporation
transaction. The the transaction had a negative effect of
EUR 2.9 million on EBITDA during the period under review The loss of
Opus360 was taken into account in the purchase price.
- In addition, the result was affected by the expenses from the
Opus360 transaction, some non-recurring expenses, and more
extensive use of outsourcing services. Further, the world
economic situation and disruptions in the US business due to the
events on September 11 have affected the result.
- Depending on the international economic development, the
organic growth of net sales for the financial year 2001 is
expected to be 5% which is within the previous forecast (5-20%).
- This financial year is expected to have zero result (EBITDA)
excluding the effect of Opus360 transaction, and a loss of
EUR 5 million including the effect of Opus360 transaction.
- The first phase of Opus360 Corporation transaction was
completed on July 31, 2001. The second phase is expected to
conclude after the Opus360 Corporation special stockholder
meeting on November 20, 2001.
- PortfolioDirector, a new Artemis product, was introduced
globally in September. The new product expands Artemis' product
offering to strategic decision-making. PortfolioDirector sales
are expected to be reflected in the net sales for 2002.
- The Company's Board of Directors decided to study the
possibility to demerge Proha into global Artemis software
business and Nordic software and service business. The study is
expected to be done by the end of 2001.
NET SALES AND RESULT
The result and balance sheet were calculated assuming that the
Opus360 transaction is completed and Proha owns 80% of Artemis
International Solutions Corporation (AISC) and AISC owns 19.9%
of both Intellisoft and Accountor. The assumption is deemed
justified since the Opus360 Corporation special stockholder
meeting will be held on November 20, 2001, and Proha Plc has
both an adequate number of voting rights and an obligation to
vote in favor of the transaction.
Proha Group's net sales for January 1 - September 30, 2001,
increased to EUR 60.4 million, compared to EUR 18.4 million for
the same period in 2000. Earnings before financial expenses,
taxes, and depreciation (EBITDA) was EUR -4.6 million (EUR 3.4
million).
Operating loss was EUR 7.8 million, compared to operating profit
of EUR 2.8 million for the corresponding period in 2000. Result
before appropriations and taxes was EUR -8.5 million (-14.1% of
net sales), compared to EUR 2.8 million in 2000. Earnings per
share for the nine month period amounted to EUR -0.16 (EUR
0.09).
NET SALES AND EBITDA BY BUSINESS AREA, EUR 1000
Business Area Net sales EBITDA %
Artemis companies
(Project Management) 58 379 -1 658 -2.8
Accountor companies
(Financial Management) 3 641 -138 -3.8
Intellisoft companies
(Internet Technologies) 1 476 -172 -11.6
Other areas 1 462 -1 167 -79.8
Eliminations -4 560 -1 491
Total 60 397 -4 626 -7.7
FINANCING AND INVESTMENTS
The balance sheet total at the end of the period was EUR 60.1
million, compared to EUR 51.5 million for the same period in
2000. Cash items and short term investments totaled EUR 6.5
million, against EUR 5.2 million for the corresponding period in
2000. The Quick Ratio was 0.89.
The product development expenses for international strategic
products totaled EUR 9.6 million, of which EUR 9.2 million were
entered as expenses.
Interest bearing liabilities were equivalent to 10.7% of the
Group's total capital at the end of the period.
PRODUCT DEVELOPMENT
During the period, 16% of the Group net sales was invested in
the product development of international strategic 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.
PortfolioDirector (TM), an entirely new Artemis product, was
launched globally in September. Until the end of the year 2001,
the product is expected to be offered internationally to a
limited number of customers. The pilot projects have been
launched.
The development of other Artemis products and product upgrades
introduced this fall has proceeded as planned. New versions of
Views products are expected to be launched during the last
quarter of 2001 and the first quarter of 2002. The product
development of the WorkForce Procurement product was terminated
due to a difficult market situation.
In the Financial Management business area, net sales of
Proha subsidiary Accountor Oy continued to grow. In the nine
month period, net sales increased by 125%, compared to the
corresponding period in 2000. The development of service
concepts into products has proceeded as planned. The Internet
Accounting Partner and IAP Flow products are targeted at large
companies, which can attain significant cost savings in the
handling of electronic purchase invoices.
In the Internet technologies business area, Proha subsidiary
Intellisoft Oy has continued with the development work -
integrating its own software with third-party systems -
according to plan. The marketing and sales of service entities
has started as expected. In addition, Intellisoft has a
significant role as the realizer of information systems for the
Accountor services. The profitability of the business is
expected to improve towards the end of the year.
ACQUISITIONS AND CHANGES IN ASSOCIATED COMPANIES
OPUS360 CORPORATION
In April, Proha Plc and Opus360 Corporation, a US-based software
company, signed an agreement pursuant to which Proha is to
receive 80% of the entire share capital of Opus360 Corporation
in exchange for the Artemis businesses and 19.9% of Proha's
Intellisoft Oy and Accountor Oy subsidiaries. The share exchange
agreement was amended on July 12, 2001, in order to complete the
transaction in a two-step process.
At the first closing, consummated on July 31, 2001, a total of
73,938,702 Opus360 common shares were issued to Proha in return
for its Artemis shares. As a result, Proha currently owns 59.75%
of the Opus360 share capital. Proha's extraordinary general
meeting approved the transaction on July 30, 2001, in accordance
with the terms and conditions of the contract.
At the second closing, Proha will receive approximately 125.5
million Opus360 common shares in return for concluding the
transfer of its Artemis shares and for the 19.9% shares of the
two Proha subsidiaries. After the second closing, Proha will own
approximately 80% of the Opus360 share capital. The second
closing is expected to occur after the special meeting of
Opus360 stockholders on November 20, 2001.
The closing of the second phase of the share exchange agreement
requires that the Opus360 stockholders approve an amendment to
the Opus360 restated certificate of incorporation. In
accordance with US legal requirements, Opus360 filed a
definitive proxy statement with the Securities and Exchange
Commission (SEC) on November 6, 2001. The proxy statement
includes a notice of a special stockholder meeting on November
20, 2001, and a proposal to approve the increase of the maximum
share capital from 150,000,000 shares to 500,000,000 shares. In
addition, the stockholders are being asked to approve another
amendment to the certificate of incorporation of Opus360 which
will change the name of the corporation to Artemis International
Solutions Corporation. All stockholders of record on November 5,
2001 are entitled to participate in the special stockholder
meeting. The proxy statement also contains information about the
voting agreements related to the transaction, pursuant to which
Ari Horowitz, Executive Vice President and holder of 2.7% of
outstanding Opus360 shares, and Proha Plc, the principal
stockholder, are required to vote in favor of the proposals in
the proxy statement.
As a result of the transaction, Opus360 Corporation becomes the
parent company of Proha's Artemis Group. The combined business
operations continue to operate under the name Artemis
International Solutions Corporation. Proha CEO Pekka Pere was
elected non-executive Chairman of the Board of Directors of
Artemis International Solutions Corporation and Steven Yager was
elected CEO of Artemis International Solutions Corporation. Mr.
Pere and Mr. Yager continue as members of the Proha Board of
Directors.
The transaction strengthens Proha's financial position and
decreases Artemis debt level.
PERSONNEL
The number of personnel continued to increase. At the end of the
period the number of employees in Proha Group is 717. The
corresponding number for the same period in 2000 was 461. The
staff expenses were EUR 37.2 million (EUR 7.7 million), 61,2% of
net sales (41.7%). Of these, 557 (322) people worked in the area
of Project Management, 98 (83) in Financial Management, and 42
(56) in Internet Technologies. The number of employees in
Finland was 250, while 467 worked abroad.
SHARE CAPITAL
On September 30, 2001, the number of company shares was
51,054,350 and the share capital was EUR 13,274,131.10. The
cancellation of 1,960,180 Proha shares owned by Artemis
Acquisition Corporation on August 15, 2001, was taken into
account in the number of shares.
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 a maximum of 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
6,685,595, corresponding to EUR 1,738,254.70. The authorization
is valid until December 12, 2001.
TRADING ON THE HELSINKI STOCK EXCHANGE
The number of registered shareholders of Proha Plc totaled 3,477
at the end of the period. During the period, the share price was
EUR 0.27 at its lowest and EUR 0.71 at its highest. Market
capitalization was approximately EUR 13.8 million as of the end
of the period.
EVENTS FOLLOWING THE NINE MONTH PERIOD
Study on the possible demerger
In its meeting on October 18, 2001, the Proha Board of Directors
decided to study the possibility to demerge the company into
global Artemis software business and Nordic software and service
businessThe study is expected to be done by the end of 2001. In
case the company decides in favor of the demerger in accordance
with the Companies Act, the owners of Proha Plc would continue
as the owners of the new companies and they would receive shares
of the resulting new companies in the same proportion as they
owned Proha Plc shares before the demerger.
Other events following the nine month period
The combination of Artemis Group and Opus360 Corporation
business operations has been completed.
Dovre International AS, an associated company of the Proha
Group, signed an agreement on the implementation of an oilfield
with the Norwegian state-owned oil company Statoil. The
agreement is valid for 2 years, and the expected workload is
over 10 man-years.
As required pursuant to the share exchange agreement between
Proha and Opus360 Corporation, Opus360 filed a definitive proxy
statement with the United States Securities and Exchange
Commission on November 6, 2001. The definite proxy statement
includes a notice of a special stockholder meeting on November
20, 2001. The special stockholder meeting will decide on
amending the Opus360 restated certificate of incorporation to
increase the corporation's maximum share capital from
150,000,000 shares to 500,000,000 shares. In addition, the
stockholders are being asked to approve another amendment to the
certificate of incorporation of Opus360 which will change the
name of the corporation to Artemis International Solutions
Corporation. All stockholders of record on November 5, 2001, are
entitled to participate in the special meeting.
DECISIONS OF THE GENERAL MEETING
Extraordinary general meeting of Proha Plc held on July 30, 2001
- approved the Opus360 Corporation transaction in accordance
with the proposal of Board of Directors
- approved the Board of Directors' proposal for the cancellation
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 to the combined book
parity of the cancelled 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 the share capital will have no impact on the
distribution of share ownership or voting rights, since the
shares to be cancelled are owned by the company's subsidiary
Artemis Acquisition Corporation.
- decided to change the section 6 of the 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) 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 Artemis 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 continue to serve as members in the Board of Directors.
ACCOUNTING PRINCIPLES FOR THE GROUP INTERIM REPORT
In the interim report, the consolidation follows the accounting
principles of the financial statements stipulated on December
31, 2000. Result and balance sheet were calculated assuming that
the Opus transaction is closed and Proha owns 80% of Artemis
International Solutions Corporations (AISC) and AISC 19.9% of
both Intellisoft and Accountor. Opus360 Corporation has been
combined as of August 1, 2001.
Amortization of negative goodwill
The negative goodwill of EUR 6.15 million originating from the
Opus360 Corporation transaction will be amortized during 11
months starting from August 1, 2001. For the nine month period,
the amortization of negative goodwill was EUR 1.12 million.
Depreciation of goodwill
Goodwill for Artemis companies will be depreciated in 10 years
and for other companies in 3 years. For the nine month period,
the depreciation of goodwill was EUR 2.3 million.
Minority interest of Opus360 Corporation
For the minority shareholders of Opus, a minority interest of
20% is presented separately from the capital and reserves at the
time of the purchase and the result for the period, a total of
EUR 0.9 million. The separate presentation of minority interest
is justified since the Opus360 Corporation special stockholder
meeting which is required for the closing of the Opus
transaction will be held on November 20, 2001, and Proha Plc has
both an adequate number of voting rights and an obligation to
vote in favor of the transaction.
If the minority interest had been presented in accordance with
the legal holding of 40.31% at the end of September, the
minority interest would have been EUR 1.8 million.
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 9.6 million of which
EUR 0.4 million was activated in the balance sheet and EUR 9.2
million was entered as expenses.
Company shares
The Group has no Proha Plc shares. The shares previously owned
by the Group were cancelled on August 15, 2001. These shares
were equivalent to 3.7% of all Proha Plc shares.
PROSPECTS FOR THE NEAR FUTURE
Difficult market situation and the recent events in the United
States decelerated especially the license sales during the
second half of 2001. We expect the net sales growth for the
financial year 2001 to be approximately 5% and the result
(EBITDA) to be zero excluding the effect of Opus360 transaction.
These estimates are in line with the lower end of our previous
estimates. The loss (EBITDA) resulting from Opus360 transaction
for August-September 2001 is approximately EUR 2.9 million and
the estimate of the management of Proha for the last quarter is
approximately EUR 2 million loss (EBITDA).
No significant growth in net sales is expected for 2002, and the
operations are focused on improving the profitability. New
software updates and entirely new products are expected,
however, to result in an opportunity for stronger growth if
market conditions are favorable. Due to a slowdown in software
markets, the company expects that even a modest growth will
enhance the market share.
Accountor and the entire financial management service and
software operation are expected to grow significantly during the
end of the year and continue to grow next year. In 2002, the
company expects the profitability to improve even further. IAP
Flow, a globally unique service product for electronic handling
of purchase invoices, has attracted wide interest on the market
and its production use has been started.
Intellisoft has reached its profitability target, and the
operation as well as the profitability are expected to grow
further during 2002. The weakening of the general economic
situation has given ASP services competitive edge over
traditional information technology investments.
Espoo
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 and for the
financial analysts at 12.00 am on November 15, 2001, at World
Trade Center, cabinet 2, address: Aleksanterinkatu 17, Helsinki.
Welcome
PROHA GROUP CONSOLIDATED PROFIT AND LOSS ACCOUNT AND BALANCE
SHEET JANUARY 1 - SEPTEMBER 30, 2001
The figures are unaudited.
PROHA GROUP CONSOLIDATED PROFIT AND LOSS ACCOUNT,
JANUARY 1 - SEPTEMBER 30, 2001
PROFIT AND LOSS ACCOUNT
1/01-9/01 1/00-9/00 1/00-12/00
(EUR 1000) (EUR 1000) (EUR 1000)
Net sales 60 397 18 415 36 149
Variation in stock -16 50 1
Share of results
of associated companies -702 6 -56
Other operating income 758 2 491 2 226
Raw materials and services -10 315 -3 132 -5 777
Staff expenses -37 247 -7 684 -17 324
Depreciation and reduction
in value
Depreciation according to plan -1 925 -440 -1 163
Reduction in value of goods
held as non-current assets -18 -1 -1
Depreciation of goodwill -2 360 -184 -711
Amortization of
negative goodwill 1 118 0 0
Depreciation and reduction
in value total -3 185 -626 -1 874
Other operating charges -17 501 -6 762 -11 402
Operating profit/loss -7 811 2 758 1 943
Financial income and expenses -759 -61 -407
Profit/loss before
extraordinary items -8 570 2 697 1 537
Extraordinary items 28 131 0
Profit/loss before
appropriations and taxes -8 543 2 828 1 537
Appropriations 0 0 0
Income taxes -193 -463 -486
Change in deferred
tax liabilities -1 0 0
Profit/loss before
minority interest -8 737 2 365 1 051
Minority interest
of result 753 -31 -126
Other direct taxes -1 0 0
Profit/loss
for the financial year -7 985 2 334 925
CONSOLIDATED BALANCE SHEET 30.9.2001 30.9.2000 31.12.2000
ASSETS
Non-current assets
Intangible assets 20 735 13 557 17 520
Tangible assets 2 878 2 690 2 885
Investments 2 508 3 528 2 706
Non-current assets total 26 122 19 775 23 111
Current assets
Stocks 98 178 145
Non-current debtors 279 319 361
Current debtors 27 074 26 096 26 001
Short-term investments 165 269 270
Cash in hand and at bank 6 384 4 884 5 787
Current assets total 34 000 31 746 32 564
ASSETS TOTAL 60 122 51 521 55 675
LIABILITIES
Capital and reserves
Share capital 13 268 12 560 13 702
Share premium account 3 854 454 3 107
Retained earnings 3 746 3 004 2 907
Profit/loss
for the financial year -7 985 2 334 925
Capital loan 187 187 187
Capital and reserves total 13 070 18 538 20 828
Minority interest 1 099 273 325
Provisions 585 691 468
Appropriations 0 0 0
Negative goodwill 5 160 0 0
Creditors
Non-current creditors 2 223 5 210 5 173
Current creditors 37 986 26 808 28 880
Creditors total 40 209 32 018 34 053
LIABILITIES TOTAL 60 122 51 521 55 675
KEY RATIOS OF THE PROHA GROUP
Unfortunately some of the previous stock exchange bulletins
contained incorrect key ratios per share. In some cases, the
historical key ratios were calculated by using the number of
shares that had not been split adjusted. The corrected key ratios
from the beginning of 2000 are presented in separate tables below:
KEY RATIOS OF THE PROHA GROUP 1/01-9/01
1/01-9/01 1/00-9/00 1/00-12/00
Net sales (EUR 1000) 60 397 18 415 36 149
EBITDA* -4 626 3 383 3 817
% of net sales -7.7 18.4 10.6
Operating profit/loss
(EUR 1000) -7 812 2 758 1 943
% of net sales -12.9 15.0 5.4
EBIT** -7 812 2 758 1 943
% of net sales -12.9 15.0 5.4
Result before appropriations
and taxes -8 543 2 828 1 537
% of net sales -14.1 15.4 4.3
Result for the period -7 985 2 334 925
% of net sales -13.2 12.7 2.6
1) Weighted number of
shares (split adjusted) 51 048 023 26 368 320 31 707 249
1) Earnings per share, EUR -0.16 0.09 0.03
2) Number of shares 51 054 350 46 215 370 50 739 945
at end of period
2) Equity per share, EUR 0.25 0.40 0.41
3) Number of shares diluted by
stock options 51 048 023 26 749 352 32 057 323
3) Earnings per share, EUR -0.16 0.09 0.03
Personnel
at end of period 717 461 634
*Earnings before financial expenses, taxes and depreciation
**Earnings before financial expenses and taxes
KEY RATIOS OF THE PROHA GROUP 2000
1/00-3/00 1/00-6/00 1/00-9/00 1/00-12/00
Net sales (EUR 1000) 2 413 6 833 18 415 36 149
EBITDA* 530 1 332 3 383 3 817
% of net sales 22.0 19.5 18.4 10.6
Operating profit/loss
(EUR 1000) 463 1 105 2 758 1 943
% of net sales 19.2 16.2 15.0 5.4
EBIT** 463 1 105 2 758 1 943
% of net sales 19.2 16.2 15.0 5.4
Result before appropriations
and taxes 487 641 2 828 1 537
% of net sales 20.2 9.4 15.4 4.3
Result for the period 361 833 2 334 925
% of net sales 15.0 12.2 12.7 2.6
1) Weighted
number of shares
(split adjusted) 20 139 353 22 266 312 26 368 320 31 707 249
1) Earnings
per share, EUR 0.02 0.04 0.09 0.03
2) Number of shares
at end of period 23 447 815 26 101 100 46 215 370 50 739 945
2) Equity
per share, EUR 0.30 0.33 0.40 0.41
3) Number of shares
diluted by
stock options 20 374 888 22 555 095 26 749 352 32 057 323
3) Earnings
per share, EUR 0.02 0.04 0.09 0.03
Personnel
at end of period 190 226 461 634
*Earnings before financial expenses, taxes and depreciation
**Earnings before financial expenses and taxes
KEY RATIOS OF THE PROHA GROUP 2001
1/01-3/01 1/01-6/01 1/01-9/01
Net sales (EUR 1000) 20 779 42 152 60 884
EBITDA* 2 -736 -3 269
% of net sales 0.0 -1.7 -5.4
Operating profit/loss
(EUR 1000) -984 -2 817 -6 419
% of net sales -4.7 -6.7 -10.5
EBIT** -984 -2 817 -6 419
% of net sales -4.7 -6.7 -10.5
Result before appropriations
and taxes -1 080 -3 159 -7 150
% of net sales -5.2 -7.5 -11.7
Result for the period -1 106 -3 234 -6 761
% of net sales -5.3 -7.7 -11.1
1) Weighted number of
shares (split adjusted) 51 035 158 51 044 807 51 048 023
1) Earnings per share, EUR -0.02 -0.06 -0.13
2) Number of shares
at end of period 51 054 350 51 054 350 51 054 350
2) Equity
per share, EUR 0.39 0.35 0.25
3) Number of shares
diluted by
stock options 51 172 992 51 095 323 51 048 023
3) Earnings per share, EUR -0.02 -0.06 -0.13
Personnel
at end of period 684 707 717
*Earnings before financial expenses, taxes and depreciation
**Earnings before financial expenses and taxes
NET SALES BY COUNTRY
United States 36.3%
Finland 17.7%
Great Britain 12.2%
France 9.0%
Italy 8.0%
Japan 8.8%
Germany 4.1%
Singapore 2.0%
Norway 1.0%
Korea 0.7%
Hong Kong 0.2%
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