Proha Plc Stock Exchange Bulletin November 14, 2002 at 8.40 a.m.
INTERIM REPORT OF PROHA PLC FOR THE PERIOD JANUARY 1 - SEPTEMBER
30, 2002
- The Proha Group's net result for January-September 2002 was
EUR -0.7 million, an increase of EUR 7.3 million compared to the
corresponding period in 2001 (EUR -8.0 million)
- Earnings before interest, taxes, depreciation and
amortization (EBITDA) was EUR 0.1 million (1-9/2001 EBITDA
EUR -4,6 million). Operating result (EBIT) was EUR -0.2 million
(EUR -7.8 million)
- Cost savings and streamlining of operations improved profitability
- The Proha Group's net sales for January-September 2002
amounted to EUR 59.8 million (EUR 60.4 million, 1-9/2001)
- Net sales and operating result were in line with the
expectations despite the challenging situation in the software
market. Development of profitability and sales during the third
quarter reflect seasonal fluctuations typical for the business
of the Group.
- During the nine-month period, customers acquired a total of
61,000 end-user licenses from Proha. The number of licenses
sold from January to September in 2002 exceeds the total
number of licenses sold in 2001 (58,000 licenses)
- After the nine-month period, Proha has continued to focus on
international software business in line with its strategy by
agreeing to sell its financial management and software testing
business operations
- Proha management's estimate for the operating result in 2002
remains unchanged. In addition, divestments and business
arrangements are expected to strengthen the result by
EUR 2 million
- Artemis released its quarterly report, prepared under US GAAP,
on Wednesday November 13, 2002
JANUARY-SEPTEMBER 2002 IN BRIEF
The business operations and profitability of the Group have
developed in line with the management's estimates. The situation
in the software market remains challenging. Despite this, net
sales remained nearly unchanged and the profitability of the
Group improved compared to the corresponding period in 2001.
The key objective of the Project Management business area is to
expand target markets from traditional project management
software products to encompass also strategic-level portfolio
management and resource management solutions. The volume of orders
and the sales pipeline of strategic management solutions has increased
in Europe. Several implementation projects of PortfolioDirector
solution have also been started.
In January-September 2002, the unconsolidated net sales of the
Project Management business area was EUR 56.9 million,
decreasing by 2.5% compared to the corresponding period in 2001
(EUR 58.4 million). However, the profitability of the business
area improved: the operating profit for the nine-month period
was EUR 2.7 million compared to the operating loss of EUR -3.1
million in the corresponding period in 2001.
The prudence conservatism is applied in the sales revenue
recognition. During the nine-month period, the revenue
recognition criteria have been further tightened. As a result,
some agreed software license deals will partly be recognized after
the end of the nine-month period.
During the nine-month period in 2002, the Group sold 61,000 new
end-user licenses, which is 3,000 licenses more than the total
number of licenses sold during the whole year 2001. The grand
total of Artemis licenses sold is approximately 467,000.
In January-September 2002, the unconsolidated net sales of the
Financial Management business area was 4.6 million, showing a
robust increase of 26% compared to the corresponding period in
2001 (EUR 3.6 million in 1-9/2001).
NET SALES AND RESULT
In January-September 2002, the Group's net sales amounted to EUR
59.8 million (EUR 60.4 million), which was in line with the
expectations. In the present market situation, net sales can be
considered as good. Proha management estimates that the market
share of the Group has increased substantially.
Division of net sales:
Net sales EUR share of
by product type: million net sales
One time license revenue 11.6 19%
Recurring license revenue 13.4 22%
Services revenue 34.9 58%
Total 59.8 100%
License sales amounted to EUR 25.0 million, accounting for 42%
of net sales. The share of one time licenses was EUR 11.6
million and the share of recurring licenses EUR 13.4 million.
The emphasis of the net sales was still on services,
the share of which was EUR 34.9 million. Services are mainly
comprised of consulting, training, implementation and support
services of the Group's standard software solutions.
During January-September 2002, earnings before interest, taxes,
depreciation and amortization (EBITDA) grew to EUR 0.1 million
compared to EUR -4.6 million in the corresponding period in
2001. Proha's operating result (EBIT) for January-September 2002
was EUR -0.2 million, compared to EUR -7.8 million for the
corresponding period in 2001. The result improved by EUR 7.6
million compared to the corresponding period in 2001. The
measures that the Group took to streamline operations and to
reduce costs had a positive impact on the result.
Seasonal fluctuations are typical for the business of the Group.
Because of this, net sales and operating result are usually
higher in the second and the fourth quarter. Consequently, the
result for the third quarter is lower than that of the second
quarter.
The last item of the consolidation reserve from the Opus360
transaction, EUR 5.8 million, was amortized during the period.
The consolidation reserve originated from the additional
expenses of the Opus360 transaction, which were taken into
account in the purchase price. The total amount of the
consolidation reserve was specified from the previous EUR 6.1
million to EUR 5.8 million during the third quarter. As a
result, the consolidation reserve amortization of EUR 3.3
million entered during the first half of 2002 was adjusted by
EUR 0.3 million during the third quarter. In the nine-month
period, the consolidation reserve had a positive impact of EUR
3.0 million on the result. The Group's cost level is now lower
than during the amortization of the consolidation reserve, but
the result is still affected by costs resulting from Artemis
operating as a publicly held company in the United States.
Net sales and EBIT by business area, EUR 1000
Unconsolidated Consolidated
net sales net sales EBIT
Artemis companies and
other project management 56,922 54,893 2,742
Accountor companies
(Financial Management) 4,580 4,211 -53
Intellisoft companies
(Internet Technologies) 1,577 543 -1,131
Other areas 929 185 -1,730
Eliminations -4,176 - -
Total 59,832 59,832 -170
Earnings per share for the nine-month period amounted to
EUR -0.01 (EUR -0.16).
FINANCING AND INVESTMENTS
On September 30, 2002, the balance sheet total was EUR 44.2
million, compared to EUR 60.1 million for the same period in
2001. The balance sheet total has declined during the current
year partly due to the depreciation of goodwill and other
intangible assets after the Opus360 transaction.
Interest-bearing liabilities amounted to EUR 4.9 million (EUR
6.2 million) equivalent to 11.4% (11.7%) of the Group's capital
and reserves total and provisions and creditors total at the end
of the nine-month period.
At the end of September 2002, cash items and short-term
investments stood at EUR 5.4 million, against EUR 6.5 million
for the corresponding period in 2001. Quick Ratio was 0.83
compared to 0.89 in the corresponding period in 2001.
In January-September 2002, the product development expenses of
strategic products were EUR 6.8 million (EUR 9.6 million in
1-9/2001), constituting 11% of net sales (16%). Of these,
EUR 6.7 million (EUR 9.2 million) was expensed and
EUR 0.1 million (EUR 0.4 million) was capitalized.
PERSONNEL
At the end of the nine-month period, the Proha Group employed
599 people. At the same time in 2001, the number of personnel
was 717. Staff expenses were EUR 34.0 million (EUR 37.2
million), constituting 57% of net sales (62%). 472 (577)
people worked in the Project Management business area, 99 (98)
in Financial Management, and 28 (42) in Internet Technologies.
The number of personnel in Finland was 221 (250), while 378
(467) worked abroad. The average number of employees in the
nine-month period was 615. As a result of the divestments of
Accountor Oy and Intellitest International Oy, which were agreed
after September 30, 2002, the number of employees will decrease
by approximately 100 people.
OTHER GROUP EVENTS
RELEASE OF ARTEMIS' QUARTERLY REPORT
Proha's 80% owned sub-group Artemis International Solutions
Corporation released its quarterly report (USGAAP) on Wednesday
November 13, 2002, after the markets were closed in New York.
The Artemis SEC Filing (FORM 10-Q) can be seen on the SEC
website www.sec.gov/edgar/searchedgar/companysearch.html with
the name Artemis International.
The document and the press release are also published on the
Nasdaq website at www.nasdaq.com, under symbol AISC.
A conference call for the quarterly report will be held on
Thursday November 14, 2002 at 18.00 EST (November 15, 2002, at
01.00, Finnish time). Phone number +1-847-619-6547, Reference
'Artemis Third-Quarter 2002 Financial Results Call'.
A telephonic replay is available until November 21, 2002 at the
phone number +1-630-652-3044, Conference ID: 6463231.
SHARE CAPITAL
There were no changes in the share capital of the Company during
the third quarter. On September 30, 2002 the share capital was
EUR 13,485,490.20, totaling 51,867,270 shares. The figures
include an increase in the share capital (a total of EUR
211,359.20 and 812,920 shares) on February 1, 2002, consisting
of directed share issues to the shareholders of the German
Artemis International GmbH and the Norwegian Safran Software
Solutions AS.
AUTHORIZATION TO ISSUE SHARES
The Board of Directors has an authorization given by the Annual
General Meeting on April 15, 2002 to increase the Company's
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. This represents 20% of the currently
registered share capital and the votes that can be cast in the
General Meeting of shareholders. The Board of Directors is
authorized to decide the subscription price and other terms and
conditions. The authorization is valid until April 14, 2003.
INCENTIVE SYSTEM FOR PERSONNEL
No stock options were issued during the third quarter.
In its meeting on January 31, 2002, Proha Plc Board of Directors
approved the subscriptions of the option issue that is part of
Proha's incentive system. In the issue, a total of 1,458,000
Proha Plc stock options were subscribed, entitling to the
subscription of 1,458,000 shares. The Board of Directors
confirmed the subscription price for the shares subscribed on
the basis of the stock options as EUR 0.43 per share.
The stock options were granted without compensation to the
personnel of Proha Plc and some Proha Group's subsidiaries as
well as the members of the Board of Directors.
TRADING ON THE HELSINKI STOCK EXCHANGE
The number of registered shareholders of Proha Plc totaled 4,010
at the end of the nine-month period. During the period, the
share price was EUR 0.30 at its lowest and EUR 0.71 at its
highest. The closing price on September 30, 2002 was EUR 0.38.
Market capitalization was approximately EUR 19.7 million at the
end of period.
EVENTS FOLLOWING THE NINE-MONTH PERIOD
Proha continues to operate in line with its strategy focusing on
the international software business. After the period ending
September 30, 2002, the following business arrangements have
been made.
Software testing cooperation with Tesnet
On October 8, 2002, Proha Plc and the software testing company
Tesnet Software Testing Europe B.V (Tesnet) agreed on software
testing cooperation in Finland and the Nordic region. Tesnet
acquires a majority share of Proha's fully-owned subsidiary
Intellitest International Oy, which will later be merged with
Tesnet Finland Oy. Proha maintains a 35 % share in the merged
company. The value of the agreement was not released.
Proha sells its financial management business area to Pretax
Group
On October 23, 2002, Proha Plc signed an agreement to sell the
whole share capital of Accountor Oy, operating in Proha's
Financial Management business area, to the Pretax Group. The
purchase price of EUR 4 million is to be paid in cash. The final
purchase price may be higher depending on Accountor's result for
the financial year ending February 28, 2004. Transfer of
ownership is estimated to take place by the beginning of
December 2002.
It is anticipated that the business arrangements will improve
the operating result of Proha by approximately EUR 2 million.
The estimated net sales of Accountor for this financial year is
EUR 6 million. The Internet-based management solution
Procountor.com continues as a subsidiary of Proha and becomes
part of the Internet technology business area.
DECISIONS OF THE GENERAL MEETINGS
The Extraordinary General Meeting of Proha on October 23, 2002
On October 23, 2002, the Extraordinary General Meeting of Proha
approved the Board of Directors proposal to:
- continue the current strategy of owning Artemis International
Solutions Corporation shares through Proha and discontinue
implementing other structural alternatives.
- maintain the composition of the current Proha Board: Olof
Ödman (Chairman), Pekka Pere, James Cannavino, Klaus Cawén, Alec
Gores, Ari Horowitz, Michael J. Rusert, and Steven Yager.
The Annual General Meeting of Proha on April 15, 2002
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 will 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 Pcl authorized the Board of
Directors to increase the Company's 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 pursuant to the stock options, option warrants
and/or convertible bonds 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. 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. The Annual General
Meeting also canceled the authorization given by the
Extraordinary General Meeting on December 17, 2001 to increase
the share capital on the unused proportions.
The special meeting of stockholders of Artemis International
Solutions Corporation on October 21, 2002
On October 21, 2002, the special meeting of stockholders of
Artemis International Solutions Corporation (AISC), a subsidiary
of Proha Plc, approved the AISC Board of Directors proposal of
reverse stock split. According to the AISC Board of Directors
proposal, the possible ratios for the reverse stock split are
one-for-25, one-for-50, one-for-75, and one-for-100. The AISC
Board of Directors shall determine whether to actually effect
the reverse stock split and the timing of the action.
The annual meeting of Artemis International Solutions
Corporation stockholders on June 5, 2002
The annual meeting of Artemis International Solutions
Corporation stockholders was held on June 5, 2002. The meeting
re-elected the members of the Board of Directors whose term was
ending: James Cannavino, Klaus Cawén, Olof Ödman and Pekka Pere.
Ari Horowitz, Michael J. Rusert, and Steven Yager continue in
the Board.
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 the foreign subsidiaries have been
consolidated into the Group in accordance with the Finnish
Accounting Act.
Amortization of consolidation reserve
The consolidation reserve from the Opus360 transaction, EUR 5.8
million, was amortized during eleven months starting August 1,
2001. During the first half of 2002, EUR 3.3 million was
amortized. The total amount of the consolidation reserve was
specified from the previous EUR 6.1 million to EUR 5.8 million
during the third quarter. As a result, the consolidation reserve
amortization of EUR 3.3 million entered during the first half of
2002 was adjusted by EUR 0.3 million during the third quarter.
In the nine-month period, the consolidation reserve had a
positive impact of EUR 3.0 million on the result.
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
January-September 2002, the depreciation of consolidated
goodwill was EUR 1.6 million.
Valuation fixed assets
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 6.8 million of which
EUR 0.1 million was capitalized and EUR 6.7 million expensed.
Company shares
The Group has no Proha Plc shares.
PROSPECTS FOR THE NEAR FUTURE
Proha management keeps to its 2002 result estimate that excludes
the influence of the business arrangements. The management also
expects the full year result to be positive. Net sales is
anticipated to grow slightly from the previous year. Taking into
account normal seasonal fluctuations, the last quarter of 2002
is expected to be significantly better that the third quarter.
The influence of the business arrangements have not been
included in the net sales and result estimates. Proha has agreed
to sell the whole share capital of Accountor Oy and the share
majority of Intellitest Oy. The business arrangements are
expected to have a slight decreasing effect on the Group net sales
for 2002. Proha's result is estimated to grow by approximately
EUR 2 million.
Proha management estimates that the market situation in 2003
cannot change substantially. Despite of this, the operative
business of the Group is anticipated to grow in 2003 by
approximately 10% and the profitability is anticipated to
improve. Earnings before interests, taxes, and appropriations
is estimated to be over 7% of net sales.
The sale of Accountor Oy will have an impact on the net sales
for 2003. The net sales of Accountor, which will be included in
the consolidated financial statements of Proha, is expected to
be approximately EUR 6 million in 2002.
The Board of Directors of Proha Plc
For more information please contact:
PROHA PLC
Pekka Pere, President and CEO, Proha Plc, tel. +358 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 on November 14, 2002 at 12.30 pm, at Scandic
Hotel Simonkenttä, address: Simonkatu 9, Helsinki.
Welcome
PROHA GROUP CONSOLIDATED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET
JANUARY 1 - SEPTEMBER 30, 2002
Figures are unaudited.
PROFIT AND LOSS ACCOUNT 1-9/02 1-9/01 1-12/01
(EUR 1 000)
Net sales 59 832 60 397 82 845
Variation in stock - -16 -16
Share of results
of associated companies 127 -702 -900
Other operating income 174 758 547
Raw materials and services -10 207 -10 315 -13 548
Staff expenses -33 974 -37 247 -49 188
Depreciation and reduction in value
Depreciation according
to plan -1 488 -1 925 -2 399
Depreciation of
consolidated goodwill -1 627 -2 360 -1 965
Change in consolidation
reserve 3 023 1 118 2 828
Write-downs of tangible and
intangible fixed assets -209 -18 -167
Depreciation and reduction
in value total -301 -3 185 -1 704
Other operating charges -15 821 -17 501 -24 135
Operating profit/loss -170 -7 811 -6 098
Financial income and
expenses 32 -759 -1 147
Profit/loss before
extraordinary items -138 -8 570 -7 246
Extraordinary items - 28 -
Profit/loss before
appropriations and taxes -138 -8 543 -7 246
Income taxes -680 -194 -621
Change in deferred
tax liabilities -7 -1 -2 999
Profit/loss before -825 -8 737 -10 865
minority interest
Minority interest 162 753 781
Profit/loss for
the period -663 -7 985 -10 085
BALANCE SHEET
ASSETS
Non-current assets
Intangible assets 15 287 20 735 17 330
Tangible assets 2 453 2 878 3 069
Investments 2 697 2 508 2 657
Non-current assets total 20 437 26 122 23 056
Current assets
Stocks 0 98 0
Non-current debtors 0 279 0
Current debtors 18 356 27 074 24 254
Short-term investments 124 165 93
Cash in hand and at bank 5 274 6 384 6 954
Current assets total 23 754 34 000 31 301
ASSETS TOTAL 44 191 60 122 54 357
LIABILITIES
Capital and reserves
Share capital 13 485 13 268 13 274
Share premium account 3 816 3 854 3 816
Retained earnings -5 065 3 746 5 409
Profit/loss for the period -663 -7 985 -10 085
Capital loan 187 187 187
Capital and reserves total 11 760 13 070 12 601
Minority reserve 869 1 099 1 125
Provisions 118 585 824
Consolidation reserve 298 5 160 3 544
Creditors
Non-current creditors 2 746 2 223 1 901
Current creditors 28 400 37 986 34 362
Creditors total 31 146 40 209 36 263
LIABILITIES TOTAL 44 191 60 122 54 357
KEY RATIOS OF THE PROHA GROUP 1-9/02 1-9/01 1-12/01
Net sales (EUR 1000) 59 832 60 397 82 845
EBITDA* 131 -4 626 -4 395
% of net sales 0.2% -7.7% -5.3%
Operating profit/loss (EUR 1000) -170 -7 811 -6 098
% of net sales -0.3% -12.9% -7.4%
EBIT** -170 -7 811 -6 098
% of net sales -0.3% -12.9% -7.4%
Profit/loss before
appropriations and taxes -138 -8 543 -7 246
% of net sales -0.2% -14.1% -8.7%
Profit/loss for the period -663 -7 985 -10 085
% of net sales -1.1% -13.2% -12.2%
* Earnings before interest, taxes,
depreciation and amortization
** Earnings before interest and
taxes
Personnel at the end of the period 599 717 638
Average personnel 615 701 690
1) Weighted number of
shares (split adjusted) 51 774 960 51 048 023 51 049 618
1) Earnings per share, EUR -0.01 -0.16 -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 0.22 0.25 0.24
3) Number of shares diluted
by stock options 51 851 181 51 048 023 51 049 618
3) Earnings per share, EUR -0.01 -0.16 -0.20
Net sales by geographical area
United States 38%
Finland 18%
Rest of Europe 34%
Asia 10%
Total 100%
Net sales by product type
One time license revenue 19%
Recurring license revenue 22%
Services 58%
Other 0%
Total 100%
|