Proha Plc STOCK EXCHANGE BULLETIN August 22, 2002 at 8.55 a.m.
INTERIM REPORT OF PROHA PLC FOR THE PERIOD JANUARY 1 - JUNE 30, 2002
- The Proha Group’s net result for the 6-month period was EUR 0.9
million positive, which exceeds the result of the corresponding
period in 2001 (EUR -3.2 million) by EUR 4.1 million
- Operating profit (EBIT) was EUR 1.4 million (operating loss
EUR -2.8 million)
- The Proha Group’s net sales amounted to EUR 42.0 million
(EUR 42.2 million, 1-6/2001)
- Net sales maintained last year’s level despite the challenging
situation in the software market
- Streamlining of operations and cost savings have improved
profitability
- During the first half of the year, customers acquired 49,000
end-user licenses from Proha, of which 27,000 were delivered in
the second quarter
- Proha management keeps to its previous result estimates for 2002
THE FIRST HALF IN BRIEF
The performance in 2002 has followed the management’s previous
estimates. The situation in the software market is still
challenging.
In the Project Management business area, significant progress was
made to expand from operative solutions provider to executive
management’s strategic partner. The international sales of
Artemis’ strategic management solution, PortfolioDirector,
improved in the second quarter by agreements worth about EUR 4
million. Most of these deals will be recognized as income in
2002.
In the second quarter of 2002, Artemis’ customers bought licenses
for 27,000 new users. The number of licenses sold grew by 23%
compared to the first quarter. Starting from January, a total of
49,000 new licenses have been sold. Worldwide, the number of
Artemis licenses sold amounts to 455,000.
The Artemis subgroup has streamlined its operations by
organizational rearrangements. New customer-oriented organization
shortens the cycle of product development and better facilitates
the use of global resources.
Net sales for the Financial Management business area, EUR 3.1
million, grew by 32% compared to the corresponding period in 2001
(EUR 2.4 million). The Financial Managemet completed its fully
electronic service solutions; Accountor Finance Department for
large and medium-sized enterprises and ProCountor service concept
for small and medium-sized companies. Especially Finance
Department solutions gained significant new customers.
Transfer of customer information into the Internet-based
ProCountor system begun in the second quarter. This process
clearly affected the result of the period. Towards the end of the
second quarter, the focus was turned from technical development
to customer acquisition and continuous service enhancement. The
new concept will deliver both for customer and internally
significant improvements in the use of resources by the end
of the year.
Net sales of the Internet Technologies, EUR 1.1 million, grew by
6% compared to the corresponding period in 2001 (EUR 1.0
million). Especially, the significance of ASP services in the
Group’s offering in Finland has grown.
The Proha Group provides management solutions that cover all
project and financial management needs on all organizational
levels; strategic, tactical and operative. The solutions help the
corporate customers to implement their strategy, allocate their
resources productively and control their operative functions
as profitably as possible. The Group operates through three
business areas. The largest business area is Project Management
(Artemis subgroup), whose net sales generate about 90% of the
Group’s net sales.
PROSPECTS FOR THE NEAR FUTURE
Proha management keeps to its previous result estimates for 2002.
The full-year result is expected to be positive, even without any
increase in net sales, as previously estimated. The Group’s net
sales growth target has been 0-20%. Net sales is expected to grow
during the second half of the year but under current market
conditions the upper limit of the growth target will hardly be
reached.
The division of net sales to one time license revenue, recurring
license revenue and service revenue will in the present market
situation be very strongly lead by services; ideally, each would
account for one third of net sales.
Artemis’ growth targets are based on new strategic offerings and
tactical resource management solutions. Their markets have better
growth potential than traditional project management.
The significant delivery agreements of the strategic-level
project portfolio management solution, PortfolioDirector, signed
during the period, are a good indication that the chosen concept
is functional and meets the needs of the market. The volume of
offers of PortfolioDirector is more robust, and pilot projects
have been launched.
Demand for resource management solutions is growing, the
development work of new solutions is in the final stage, and the
first extensive installations to the customers’ production
environment have been made. In the area of resource management,
Proha expects substantial growth during the remainder of 2002.
Effective allocation of project resources is becoming an
important competitive advantage in the customers’ industries.
NET SALES AND RESULT
For January-June 2002, the Group’s net sales amounted to EUR 42.0
million (EUR 42.2 million). In the present market situation, this
can be considered good. The performance is based on Proha’s
extensive and diverse customer base as well as its operation
close to the customers’ core businesses. Resting on public
information, the management of Proha anticipates that the non-
declining business volume has increased the market share.
The emphasis of the net sales is strongly on services that
account for 58% of the net sales amounting to EUR 24.3 million.
Compared to the first quarter, the sales of one time software
licenses grew by 28% in the second quarter to EUR 4.6 million,
constituting 21% of the net sales of Q2. The share of recurring
license revenue of the net sales in the second quarter was 20%,
amounting to EUR 4.5 million.
Measures for streamlining the operations and reducing the costs
generated a positive operating profit (EBIT). Proha’s cumulative
operating profit for the first two quarters of 2002 was EUR 1.4
million positive, compared to the corresponding period in 2001,
which showed a loss of EUR -2.8 million. The operating profit for
the second quarter, EUR 1.7 million, improved substantially
compared to the first quarter of 2002 (EUR -0.3 million).
The amortization of consolidation reserve affected the result.
The consolidation reserve originates from the additional expenses
of the Opus360 transaction, and it was taken into account in the
acquisition price. The consolidation reserve was amortized within
11 months and ended in June 2002. This period the consolidation
reserve had a positive impact on the result by EUR 3.3 million.
The Group expense level is now lower than during the amortization
of the consolidation reserve, but the result is still affected by
the cost of Artemis operating as a publicly held company in the
United States.
Net sales and EBIT by business area, EUR 1000
Business Area Net sales Consolidated EBIT
net sales
Artemis companies and other
project management 40,186 38,602 3,371
Accountor companies
(Financial Management) 3,122 2,939 -86
Intellisoft companies
(Internet Technologies) 1,063 312 -926
Other areas 586 111 -953
Eliminations -2,992
Total 41,964 41,964 1,406
Also earnings before interests, taxes, depreciation and
appropriations (EBITDA) for the period grew to EUR 0.4 million,
compared to EUR -0.7 million for the same period in 2001. In the
first quarter of 2002, the earnings before interests, taxes,
depreciation and appropriations (EBITDA) was still negative (EUR
-1.0 million). In the second quarter of 2002, EBITDA was EUR 1.4
million positive.
Earnings per share for the 6-month period amounted to EUR 0.02
(EUR -0.06).
FINANCING AND INVESTMENTS
On June 30, 2002, the balance sheet total was EUR 51.1 million,
compared to EUR 57.6 million in 2001. At the end of June, cash
items and short-term investments stood at EUR 5.8 million,
against EUR 2.5 million for the same period in 2001. Compared to
the end of the first quarter (EUR 5.1 million), the amount of
cash items and short-term investments grew slightly. The Quick
Ratio was 0.87, compared to 0.94 for the corresponding period in
2001.
The product development expenses of strategic products (1-6/2002)
totalled EUR 4.7 million, of which EUR 4.6 million was expensed.
Interest-bearing liabilities were EUR 3.8 million (EUR 7.7
million), equivalent to 7.7% (13.5%) of the Group’s capital and
reserves total and provisions and creditors total at the end of
the period.
PRODUCT DEVELOPMENT
During the 6-month period, the product development expenses of
strategic products were EUR 4.7 million, constituting 11% of the
net sales. EUR 4.6 million was expensed and EUR 0.1 million was
capitalized.
One of the major reforms of the period was the reorganization of
Artemis’ product development into a centralized international
division. The arrangement improves the use of product development
resources and local customer contacts. For the first time, the
new arrangement is used in an international resource management
development project, in which the product development units in
France, Great Britain, USA and Singapore work together with
Artemis Finland. Also TEKES, the National Technology Agency of
Finland, is involved in the project.
PERSONNEL
At the end of the period, the Proha Group employed 609 people. At
the same time in 2001, the number of personnel was 707. Staff
expenses were EUR 23.8 million (EUR 24.7 million), 56.8% of net
sales (58.5%). 470 (570) people worked in the Project Management
business area, 113 (95) in Financial Management and 26 (42) in
Internet Technologies. The number of employees in Finland was 226
(246), while 383 (461) worked abroad. The average number of
personnel for the period was 621.
OTHER GROUP EVENTS
THE ANNUAL GENERAL MEETING OF ARTEMIS INTERNATIONAL SOLUTIONS
CORPORATION
The Annual General Meeting of Artemis International Solutions
Corporation was held on June 5, 2002. The meeting re-elected the
members of the Board all of whose terms of office were expiring:
James Cannavino, Klaus Cawén, Olof Ödman, and Pekka Pere. Ari
Horowitz, Michael J. Rusert, and Steven Yager continue in the
Board.
SHARE CAPITAL
There were no changes in the share capital of the company during
the second quarter. The share capital on June 30, 2002 was EUR
13,485,490.20, totalling 51,867,270 shares.
AUTHORIZATION TO ISSUE SHARES
The Proha Board of Directors has an authorization given by the
Annual General Meeting on April 15, 2002 to increase the Company
share capital in one or more issues by issuing new shares, stock
options, option warrants and/or convertible bonds. Pursuant to
this authorization, the aggregate maximum number of new shares to
be issued or offered for subscription shall not exceed 10,373,454
shares with an account equivalent value of EUR 0.26 each, and the
share capital of The Company may be increased by no more than EUR
2,697,098.04, which represents 20% of the currently registered
share capital and of the votes that can be cast in the General
Meeting of Shareholders. The Board of Directors is authorized to
decide the subscription price and the other terms and conditions.
The authorization is valid until April 14, 2003.
INCENTIVE SYSTEM FOR PERSONNEL
No stock options were issued during the second quarter.
TRADING ON THE HELSINKI STOCK EXCHANGE
The number of registered shareholders of Proha Plc totaled 3,904
at the end of the period. During the period, the share price was
EUR 0.31 at its lowest and EUR 0.71 at its highest. Market
capitalization was approximately EUR 24.9 million at the end of
the period.
DECISIONS OF THE GENERAL MEETING
The Annual General Meeting of Proha Plc held on April 15, 2002
confirmed the 2001 Financial Statements and discharged the
members of the Board of Directors and the CEO from liability for
2001.
The General Meeting approved the Board of Directors’ proposal
according to which the result for the financial year 2001 is
entered in capital and reserves and no dividend is paid.
Michael J. Rusert, President and CEO of Artemis International
Solutions Corporation, was elected as a new member of the Proha
Board of Directors. Olof Ödman (Chairman), Pekka Pere, James
Cannavino, Klaus Cawén, Alec Gores, Ari Horowitz, and Steven
Yager continue as members of the Board of Directors.
KPMG Wideri Oy Ab was elected as the Company’s auditor, with
Reino Tikkanen, APA, as the auditor in charge.
The Annual General Meeting of Proha Plc authorized the Board of
Directors to increase the Company share capital in one or more
issues by issuing new shares, stock options, option warrants
and/or convertible bonds. Pursuant to this authorization, the
aggregate maximum number of new shares to be issued or offered
for subscription shall not exceed 10,373,454 shares with an
account equivalent value of EUR 0.26 each, and the share capital
of The Company may be increased by no more than EUR 2,697,098.04,
which represents 20% of the currently registered share capital
and of the votes that can be cast in the General Meeting of
Shareholders. The Board of Directors is authorized to decide the
subscription price and the other terms and conditions. The
authorization is valid until April 14, 2003.
ACCOUNTING PRINCIPLES FOR THE CONSOLIDATED FINANCIAL STATEMENTS
In the interim report, the consolidation complies with the
accounting principles of the financial statements on December 31,
2001.
The financial statements of foreign subsidiaries have been
consolidated
into the Group in accordance with the Finnish Accounting Act.
Amortization of consolidation reserve
The consolidation reserve of EUR 6.15 million originating from
the Opus360 Corporation transaction was amortized during 11
months starting from August 1, 2001. During the period, the last
item of consolidation reserve, EUR 3.3 million, was amortized.
Depreciation of consolidated goodwill
The consolidated goodwill for Artemis companies is depreciated in
10 years and for other companies in 3 years. For the period, the
depreciation of consolidated goodwill was EUR 1.1 million.
Fixed assets assessment
Straight-line depreciation is used as a depreciation method.
Depreciation according to plan is 3-10 years.
Research and development expenses
Research and development expenses were EUR 4.7 million of which
EUR 0.1 million was capitalized and EUR 4.6 million was expensed.
Company shares
The Group has no Proha Plc shares.
PROSPECTS FOR THE NEAR FUTURE
Proha management keeps to its previous result estimates for 2002.
The full-year result is expected to be positive, even without any
increase in net sales, as previously estimated. The Group’s net
sales growth target has been 0-20%. The net sales is expected to
grow during the second half of the year but under current market
conditions the upper limit of the growth target will hardly be
reached.
The Board of Directors of Proha Plc
For more information please contact:
PROHA PLC
Pekka Pere, President and CEO, Proha Plc, 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
financial analysts at 12.00 p.m. on August 22, 2002 at the World
Trade Center, Marskin sali, second floor, address:
Aleksanterinkatu 17, Helsinki.
Welcome
PROHA GROUP CONSOLIDATED PROFIT AND LOSS ACCOUNT AND BALANCE
SHEET JANUARY 1 - JUNE 30, 2002
The figures are unaudited.
PROFIT AND LOSS ACCOUNT 1/02 - 6/02 1/01 - 6/01 1/01-12/01
(EUR 1 000) (EUR 1 000) (EUR 1 000)
Net sales 41 964 42 152 82 845
Variation in stock 0 -16 -16
Share of results of
associated companies 71 -401 -900
Other operating income 191 371 547
Raw materials and services -6 979 -5 841 -13 548
Staff expenses -23 842 -24 650 -49 188
Depreciation and reduction
in value
Depreciation according
to plan -1 021 -1 149 -2 399
Reduction in value of goods
held as non-current assets -187 0 -167
Depreciation of goodwill -1 138 -933 -1 965
Change in consolidation
reserve 3 338 0 2 828
Depreciation and reduction
in value total 992 -2 082 -1 704
Other operating charges -10 990 -12 351 -24 135
Operating profit/loss 1 407 -2 817 -6 098
Financial income and
expenses -95 -342 -1 147
Profit/loss before
extraordinary items 1 312 -3 159 -7 246
Extraordinary items 0 0 0
Profit/loss before
appropriations and taxes 1 312 -3 159 -7 246
Appropriations 5 0 0
Income taxes -388 -330 -620
Change in deferred
tax liabilities -86 1 -2 999
Profit/loss before
minority interest 844 -3 489 -10 865
Minority interest
of the result 61 254 781
Other direct taxes -3 0 -1
Profit/loss for
the period 902 -3 234 -10 085
BALANCE SHEET 30.06.2002 30.06.2001 31.12.2001
ASSETS
Non-current assets
Intangible assets 16 070 18 461 17 330
Tangible assets 2 727 2 975 3 069
Investments 2 451 3 438 2 657
Non-current assets total 21 248 24 874 23 056
Current assets
Stocks 0 98 0
Non-current debtors 150 301 0
Current debtors 23 874 29 893 24 254
Short-term investments 57 277 93
Cash in hand and at bank 5 742 2 181 6 954
Current assets total 29 823 32 750 31 301
ASSETS TOTAL 51 070 57 625 54 357
LIABILITIES
Capital and reserves
Share capital 13 485 13 784 13 274
Share premium account 3 872 3 267 3 816
Retained earnings -4 406 3 904 5 409
Profit/loss for the period 902 -3 234 -10 085
Capital loan 187 187 187
Capital and reserves total 14 040 17 906 12 601
Minority reserve 1 030 79 1 125
Provisions 124 582 824
Appropriations 0 0 1
Consolidation reserve 308 0 3 544
Creditors
Non-current creditors 1 402 4 381 1 901
Current creditors 34 167 34 676 34 362
Creditors total 35 569 39 057 36 263
LIABILITIES TOTAL 51 070 57 625 54 357
KEY RATIOS OF THE PROHA GROUP
1/02-6/02 1/01-6/01 1/01-12/01
Net sales (EUR 1000) 41 964 42 152 82 845
EBITDA* 415 -736 -4 394
% of net sales 1.0 -1.8 -5.3
Operating profit/loss (EUR 1000) 1 407 -2 817 -6 098
% of net sales 3.4 -6.7 -7.4
EBIT** 1 407 -2 817 -6 098
% of net sales 3.4 -6.7 -7.4
Profit/loss before appropriations
and taxes 1 312 -3 159 -7 246
% of net sales 3.1 -7.5 -8.7
Profit/loss for the period 902 -3 234 -10 085
% of net sales 2.2 -7.7 -12.2
1) Weighted number of
shares (split adjusted) 51 728 041 51 044 807 51 049 618
1) Earnings per share, EUR 0.02 -0.06 -0.20
2) Number of shares
at the end of the period 51 867 270 51 054 350 51 054 350
2) Equity per share, EUR 0.27 0.35 0.24
3) Number of shares diluted
by stock options 51 840 478 51 095 323 51 049 618
3) Earnings per share, EUR 0.02 -0.06 -0.20
Personnel at the end of the period 609 707 638
Average personnel 621 688 690
*Earnings before interests, taxes, depreciation and
appropriations
**Earnings before interests and taxes
Net sales by geographical area
United States 38%
Finland 18%
Rest of Europe 33%
Asia 11%
Net sales by product type
One time license 20%
Recurring license 21%
Services 58%
Other 1%
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