Proha Plc STOCK EXCHANGE BULLETIN March 18,2003 at 9.00 am
PROHA PLC FINANCIAL STATEMENTS JANUARY 1 - DECEMBER 31, 2002
- The Proha Group's net result in 2002 was EUR 1.8 (-10.1 in
2001) million, showing an increase of EUR 11.9 million compared to
the net result in 2001.
- Result was in line with expectations despite the challenging
situation in the software market.
- Earnings before interest, taxes, depreciation, and
amortization (EBITDA) was EUR 5.3 (-4.4) million.
- Operating result (EBIT) was EUR 3.1 (-6.1) million.
- Profitability was improved by streamlining of operations and
cost savings.
- The sale of non-core operations had a positive impact of EUR
3.7 million on the result.
- Result was weakened by one-time charges of EUR 0.8 million of
the Internet Technologies business area.
- In 2002, the Proha Group's net sales were EUR 100.8 (82.8)
million. The increase in net sales results from consolidation of
Dovre International AS (Dovre) as a subsidiary into the
consolidated financial statements. In the interim reports of 2002,
Dovre has been consolidated as an associated company.
- The consolidation of Dovre as a subsidiary increased the net
sales by EUR 20.3 million. Without Dovre's impact, the volume of
operations increased but towards the year-end the strong euro had
a decreasing effect on the net sales presented in euros.
- In 2002, Proha sold over 92,000 end-user licenses of which
over 30,000 were delivered during the fourth quarter.
- The Group's cash and cash equivalents grew significantly in
the fourth quarter. On December 31, 2002, cash and cash
equivalents amounted to EUR 12.7 (7.0) million.
- In 2003, operative business of the Group is expected to grow
moderately and at least in line with the general growth of the
software market. Profitability is anticipated to improve further.
- The audit of the Artemis sub-group has not been completed.
2002 IN BRIEF
Profitability of the Group improved as planned and business
developed in line with the management's estimates, despite the
challenging situation in the software market throughout 2002.
Proha management estimates that the Group's market share has
grown substantially in 2002.
In January 2002, Proha acquired the remaining 40% of the Safran
Software Solutions AS (Safran) in Norway, after which Safran
became a fully owned subsidiary of Proha Plc. Safran owns 40% of
Dovre International AS (Dovre) in Norway, which is a leading
Norwegian consultancy specialized in project management. Safran
has options to buy the remaining 60% of Dovre's shares between
2003 and 2006. In accordance with a shareholder agreement, Proha
has a majority in Dovre's Board of Directors and therefore has
control over the company. On the basis of the control and the
options, Dovre has been consolidated as a subsidiary in the
Group's financial statements ending on December 31, 2002. The
consolidation increased the Group's net sales by EUR 20.3
million. In 2002, Dovre's operating profit was EUR 1.4 million.
In the interim reports of 2002, Dovre was consolidated as an
associated company using the equity method. Proha's share of
Dovre's result in January-September 2002 was EUR 0.2 million,
and it was presented in the interim reports of 2002 under the
item "share of associated companies result". If Dovre had been
consolidated as a subsidiary in the interim reports of 2002, it
would not have had an impact on the Group's net result or
capital and reserves.
In 2002, the consolidated net sales of the Project Management
business area without Dovre's impact were EUR 74.2 (76.5)
million, which is 3.0% less than in 2001. The volume of project
management business increased but towards the end of 2002 the
strong euro had a decreasing effect on the net sales presented
in euros. However, the profitability of the business area
improved so that without Dovre the operating profit in 2002
was EUR 4.1 million compared to the operating loss of
EUR -0.7 in 2001.
In sync with its strategy, Proha focuses on the international
portfolio and project management software business. Through its
80% owned subsidiary Artemis, Proha is a global market leader in
enterprise project and portfolio management solutions. To
support its strategy, Proha sold Accountor Oy, a group company
offering financial management services, in November 2002.
Accountor's net sales accounted for 5.1% of the Proha Group's
net sales in 2002. Project management operations constitute 99%
of Proha's net sales if the impact of Accountor is
eliminated.
In 2002, the Group sold over 92,000 new end-user licenses, which
exceeds the total number of licenses sold in 2001 by over 33,000
licenses. Over 30,000 of these licenses were delivered during
the fourth quarter. The total number of Artemis licenses sold
worldwide is about 500,000. Expanding the project management
target markets to strategic management solutions succeeded as
expected. The sales of PortfolioDirector solution started in
Europe and in the United States. Over 3,100 PortfolioDirector
end-user licenses have been sold.
In 2002, the consolidated net sales of the Financial Management
business area were EUR 5.3 (5.1) million, of which the 11-month
consolidated net sales of Accountor Oy accounted for EUR 5.1
million. Accountor Oy's business operations were sold at the end
of November 2002. ProCountor.com, which previously was part of
the Financial Management business area, was incorporated into
the Internet Technologies business area in November 2002. From
the beginning of 2003, financial reports will be provided for
one business area (portfolio and project management) only. Other
operations will not be reported separately.
NET SALES AND RESULT
In 2002, the Group's net sales without Dovre amounted to EUR
80.6 (82.8) million, which is EUR 2.2 million less than the
corresponding operations in 2001. The volume of net sales
increased but towards the year-end the strong euro had a
decreasing effect on the net sales presented in euros. Taking
into account the consolidation of Dovre, the net
sales grew by 21.7% and amounted to EUR 100.8 million.
Division of net sales:
Net sales Percent
by product type EUR million of net sales
One time license revenue 16.5 16.4%
Recurring license revenue 17.7 17.6%
Services 46,0 45.6%
Dovre 20.3 20.1%
Other sales 0.3 0.3%
Total 100.8 100.0%
The license sales amounted to EUR 34.2 million, accounting for
34.0% of net sales. The share of one time licenses was EUR 16.5
million and recurring licenses EUR 17.7 million. The emphasis of
the net sales still laid on services, which constituted EUR 66.3
(without Dovre 46.0) million of net sales. In addition to
Dovre's operations, the services mainly consist of consulting,
training, implementation and support services of the Group's
repeatable software solutions.
Net sales and EBIT by business area were as follows (million
euros):
Unconsolidated Consolidated
net sales net sales EBIT
Project Management 77.2 74.2 4.1
Dovre 20.3 20.3 1.4
Financial Management 5.6 5.3 0.2
Internet Technologies 2.1 0.8 (1.8)
Other areas 1.2 0.2 (0.8)
Eliminations (5.6) - -
Total 100.8 100.8 3.1
Dovre is part of the Project Management business area, but has
been presented separately in the above table for clarity.
Project management, the consolidated net sales of which were EUR
94.5 million, constituted 93.8% of the consolidated net sales.
In 2002, the Group's consolidated net sales of project
management without Dovre totaled EUR 74.2 (76.5) million, which
is 3.0% less than in 2001.
The operating result of project management amounted to EUR 5.5
(-0.7) million, of which Dovre accounted for 1.4 million. The
operating profit was improved by streamlining of operations and
cost savings.
In 2002, the amortization of the consolidation reserve from
Opus360 transactio improved the result by EUR 2.7 million. The
consolidation reserve originated from the expenses created by the
Opus360 transaction and were taken into account in the purchase
price. The consolidation reserve was amortized in full during 2002.
During the second half of 2002, the Group's cost level was lower than
at the time of the amortization of the consolidation reserve. In
spite of this, the result for 2002 is still affected by
significant juridical and auditing costs, which originate from
Artemis operating as a publicly held company in the United
States.
The profitability of the Internet Technologies business area was
weakened by one-time charges, a total of EUR 0.8 million.
Earnings before interest, taxes, depreciation, and amortization
(EBITDA) was EUR 5.3 (-4.4) million, improving by EUR 9.7
million compared to 2001.
Earnings per share was EUR 0.03 (-0.20). Return on investment
(ROI) was 18.2% (-25.4%) and return on equity (ROE) 16.4%
(-63.0%).
FINANCING AND INVESTMENTS
Cash and cash equivalents, EUR 12.7 (7.0) million, grew
significantly compared to 2001. Sale of non-core operations and
issue of a convertible loan increased cash assets. Quick Ratio
was 1.1 (0.9).
Investments in fixed assets were EUR 1.6 (3.3) million.
On December 31, 2002, the balance sheet total was EUR 59.6
(54.4) million. The increase in the balance sheet total is
primarily due to consolidation of Dovre.
Equity ratio was 32.5% (34.6%) and gearing -31.8% (-11.9%).
Interest-bearing liabilities amounted to EUR 7.2 (5.0) million
equivalent to 12.2% (9.8%) of the total of the Group's capital
and reserves total and provisions and creditors total at the end
of the financial year.
Product Development
The product development costs of strategic products were EUR 8.6
(11.6) million, 8.5% (14.0%) of net sales. Of these, EUR 8.5
(11.2) million was expensed and EUR 0.1 (0.4) million was
capitalized.
Tactical products were developed regionally. The product
development costs of tactical products were expensed in full.
One of the major reforms in 2002 was the reorganization of
Artemis' product development into a centralized international
division. The arrangement enables a better use of product
development resources and local customer contacts. For the first
time, the new arrangement was used in an international resource
management development project, in which the product development
units in Finland, the USA, and Great Britain work together with
input coming also from France and Singapore.
A new Artemis product, an Internet technology based project
management solution, ViewPoint, was introduced in 2002. The
development of portfolio management solution, PortfolioDirector,
continued. A new version of the software will be launched in the
second half of 2003. In the fourth quarter, a new version of the
resource management software, ResourcePlanner, was introduced.
New versions of data analysis tool Voyant, project management
solutions CMPro, PlaNet, and Safran and cost control software
ValuePoint were also introduced in 2002.
Artemis software products received positive impartial reviews
from e.g. MetaGroup and PC Magazine.
PERSONNEL
At the end of 2002, the Proha Group employed 643 people. At the
same time in 2001, the number of personnel was 638. At the end
of 2002, the Project Management business area employed 601 (507)
people and the Internet Technologies business area employed 29
(36) people. The financial management business was sold in
November 2002, so the Financial Management business area had no
personnel at the year-end. At the end of 2001, the business area
employed 95 people. Dovre employed 157 people at the end of the
financial year.
The number of employees in Finland was 118 (231), while 525
(407) worked abroad. The average number of personnel in 2002 was
753, of which Dovre accounted for 153 employees.
The staff costs were EUR 63.2 (49.2) million, constituting 62.7%
(59.4%) of net sales. In 2002, the staff costs without Dovre
were EUR 45.6 million.
STATEMENT ON THE ADEQUACY OF THE GROUP ASSETS
On December 31, 2002, the Group's cash and cash equivalents
amounted to EUR 12.7 million. At the end of 2001, cash and cash
equivalents were EUR 7.0 million. The divestment of the
financial management business operation, the reorganization of
the software testing business and the issuance of a convertible
loan strengthened the Group's cash assets in the fourth quarter
of 2002.
In 2003, operative business is expected to grow and operations
to be profitable. Cash and cash equivalents are expected to
increase during 2003.
OTHER GROUP EVENTS
BUSINESS ARRANGEMENTS AND CHANGES IN GROUP STRUCTURE
Proha continued to focus on international portfolio and project
management software business in line with its strategy. In 2002,
the following business arrangements were made to support this
strategy:
Acquisition of a minority interest of Artemis International GmbH
in Germany
In January 2002, Proha Plc acquired a 43.2% minority share of
the share capital of Artemis International GmbH in Germany. The
transaction was conducted as a share exchange in which the
owners of the German Artemis subscribed Proha Plc shares in a
directed issue. On September 1, 2000, Proha Plc had acquired
30.8% of the company's share capital. All acquired shares were
transferred to Artemis International Solutions Corporation
(AISC), a subsidiary of Proha Plc, as a final payment of the
share exchange agreement signed between Proha Plc and Opus360
Corporation on April 11, 2001. After these arrangements, the
German Artemis is a fully owned subsidiary of AISC.
Acquisition of a minority share of Safran Software Solutions AS
In January 2002, Proha Plc used the option to acquire the
remaining 40% of the Norwegian Safran Software Solutions AS
(Safran) shares as per purchase agreement of April 6, 2000. The
transaction was conducted as a share exchange in which the
owners of Safran subscribed Proha Plc shares in a directed
issue. After the directed issue, Safran became a fully owned
subsidiary of Proha Plc. Safran owns 40% of Dovre International
AS (Dovre), a leading Norwegian-based consulting company
specializing in project management. Safran has an option to
purchase the remaining 60% of Dovre's shares between 2003 and
2006.
Cooperation in software testing with Tesnet
On October 8, 2002, Proha Plc and a software testing company,
Tesnet Software Testing Europe B.V (Tesnet), agreed on
cooperation in software testing in Finland and in the Nordic
region. Tesnet acquired a majority share of the Proha's fully
owned subsidiary Intellitest International Oy, which was later
merged with Tesnet Finland Oy. Proha remains a minority
shareholder with 35% share in the new merged company.
Proha sold the financial management business to Pretax Group
On November 30, 2002, Proha Plc sold the entire share capital of
Accountor Oy, which was part of Proha's Financial Management
business area, to the Pretax Group.
The Financial Management business area was incorporated into the
Internet Technologies business area as of January 1, 2003.
Procountor International Oy, which was part of the Financial
Management business area, will continue as Proha's subsidiary.
The company was incorporated into the Internet Technologies
business area as of January 1, 2003.
Proha sold ABC Technologies business in France
In France, a Proha Group company, Artemis had business that was
based on cooperation with ABC Technology Inc. In December 2002,
this business was sold to SAS Institute Inc, which had acquired
ABC Technologies Inc.
SIGNIFICANT AGREEMENTS
Significant opening for Proha's Safran product family in the
shipbuilding industry
Kvaerner Masa-Yards Inc. signed an agreement to use the time and
resource management solution developed by the Proha Group's
subsidiary Safran in its shipbuilding projects. This is Safran's
first delivery outside the offshore industry.
Intellisoft outsourced server maintenance
In January 2002, Intellisoft agreed to outsource the hosting and
network services to Xenetic Oy. Intellisoft focuses on its core
know-how, the offering of service entities.
The most significant PortfolioDirector deals were made in Great
Britain and Italy
The sales of Artemis' new portfolio management software,
PortfolioDirector, started worldwide. By the end of 2002, over
3100 PortfolioDirector licenses have been sold.
The Regional Development Agencies (RDA) in Great Britain chose
PortfolioDirector for planning and management of eight regional
RDA investment projects. The value of the deal is approximately
EUR 3 million.
Telecom Italia chose Artemis PortfolioDirector for planning and
management of investment projects worth nearly EUR 6 billion.
Artemis Views for British Airports Authority
New product versions of Artemis Views product family were
introduced. One of the most important Views deals was the
project management system delivered to the British Airports
Authority for a building project of Terminal 5 at the Heathrow
airport.
Other significant deals
In Finland, 60% of the net sales of Artemis Finland originate
from the sales of Artemis software and 40% from the sales of
other project management software. These other applications
were sold especially for the project management of
manufacturing and construction industry. Customers include
Kvaerner Masa Yards, UPM Kymmene, Orion and Kemira.
Artemis' partnership agreement with Severn
In February 2002, Artemis International Solutions Corporation
and Severn Consultancy, an international management consultancy,
signed a strategic partnership agreement. The agreement
comprises the selling and implementation support of Artemis
PortfolioDirector into Severn's client base in Europe.
Cooperation with C/S Solutions Inc.
Artemis and C/S Solutions Inc. started their cooperation by
providing Lockheed Martin Aeronautics Company a comprehensive
solution for project management and analytical performance
measurement. Pursuant to the agreement, Artemis and C/S
Solutions will continue the alliance with other customers.
Cooperation with Spol AG
Artemis expanded its distribution network and signed a
cooperation agreement with Spol AG, a portfolio and project
management consultancy company in Switzerland. Pursuant to the
agreement, Spol delivers Artemis' portfolio and project
management solutions to leading companies in Switzerland.
New distribution channel program in North, Central and South
America
Artemis expands its distribution network in North, Central and
South America by launching a new distribution channel program.
The program aims at finding new companies for sales and
implementation projects of PortfolioDirector and ViewPoint
solutions in particular. The target markets include medium- and
large-sized organizations in specific geographical areas and
vertical industries, which currently are not covered by Artemis'
direct sales force. The program is directed to OEM
manufacturers, distributors and VAR resellers.
The new president and CEO and the new Board of Directors of
Artemis
The Board of Directors of Artemis International Solutions
Corporation (AISC) appointed Michael J. Rusert as the new
president and CEO of AISC as of January 25, 2002. At the same
time, he was elected to the Board of Directors. The former
president and CEO, Steven Yager, continues in the Board of
Directors of AISC. He was also elected the vice chairman of the
Board.
James Cannavino, who has acted as a member of the AISC Board of
Directors, was appointed as chairman of the AISC Board of
Directors. Other members of the AISC Board of Directors are:
Klaus Cawen, Ari Horowitz, Pekka Pere, Pekka Halonen and
Olof Ödman.
SHARE CAPITAL
On January 1, 2002, the share capital of Proha Plc was EUR
13,274,131 and the total number of shares was 51,054,350.
The share capital was increased by a total of EUR
211,359.20 and 812,920 shares on February 1, 2002, consisting
of share issues directed to the shareholders of Artemis
International GmbH in Germany and Safran Software Solutions AS
in Norway.
On December 31, 2002, Proha Plc's registered share capital was
EUR 13,485,490.20 and the total number of shares 51,867,270
shares. The company has one class of shares. The book value of
the shares is EUR 0.26 per share and each share entitles the
shareholder to one vote. Proha Plc shares are traded on the NM
list of the Helsinki Stock Exchange.
AUTHORIZATION TO ISSUE SHARES
The Board of Directors has an authorization given by an 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. On December 31, 2002, this
represents 20% of the registered share capital and votes that
can be cast in the General Meeting of Shareholders. This
authorizes the Board of Directors to deviate from the
shareholder's pre-emptive subscription right, if there is a
strong financial reason, e.g improving the capital structure of
the company, financing operations and/or acquisitions and/or
creating incentives for the personnel of the Group. The Board of
Directors is also authorized to decide the subscription price,
and other terms and conditions.
The authorization is valid until April 14, 2003.
CONVERTIBLE LOAN
On December 20, 2002, an Extraordinary General Meeting approved
the Board of Director's proposal to issue a convertible loan.
Deviating from the pre-emptive subscription right of the
shareholders, the Company issued a convertible loan of EUR
8,000,000 that was offered for subscription to professional
investors on December 20, 2002. The decision to deviate from the
pre-emptive subscription right of the shareholders was made in
order to improve the company's capital structure and to secure
financing for the Company's operations and acquisitions.
The subscription period for the convertible loan was December
20, 2002. A total of EUR 2,810,000 of the loan was subscribed by
Proha Plc's President and CEO Pekka Pere (EUR 1,405,000) and by
Pohjola Non-Life Insurance Company Ltd (EUR 1,405,000).
After conversion of the loan, the share capital of the Company
can be increased by a maximum of EUR 1,168,960 corresponding to
a maximum of 4,496,000 new shares of the Company. The total book
value of the convertible shares is EUR 1,168,960.
The fixed interest rate for the loan is 6.00% p.a.
The issue price of the loan was 100%.
Each convertible loan note, with the nominal value of EUR 1000,
can be converted into one thousand six hundred (1600) new
company shares. Thus, the conversion price for each share is EUR
0.625. The conversion period commenced on February 19, 2003 and
ends two working days before the repayment of the loan on
December 30, 2007.
The shares received through the conversion of the loan entitle
the shareholder to dividends from the financial year during
which the convertible loan notes have been converted into
shares. The term of the loan is 5 years.
INCENTIVE SYSTEM FOR PERSONNEL
At 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, some of the Proha Group's subsidiaries,
and the members of the Board of Directors.
TRADING ON THE HELSINKI STOCK EXCHANGE
The number of registered shareholders of Proha Plc totalled 3813
at the end of 2002. During 2002, the share price was EUR 0.30 at
its lowest and EUR 0.71 at its highest, and the closing price at
the end of the financial year was EUR 0.52. Market
capitalization was approximately EUR 27 million at the end of
2002.
EVENTS FOLLOWING THE FINANCIAL YEAR
Artemis International Solutions Corporation changed independent
accountant
Artemis International Solutions Corporation (AISC), an 80% owned
sub-group of Proha Plc, changed its certifying accountant. The
new independent accountant Squar Milner Reehl & Williamson LLP
is responsible for the audit of AISC for the financial year
ended on December 31, 2002. Previously the certifying accountant
has been KPMG LLP.
According to the SEC-filing made by AISC there are no
disagreements between AISC and KPMG on any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedures concerning the financial year ended
on December 31, 2001 or the period thereafter until the
dismissal of the independent accountant.
KPMG Wideri Oy Ab continues as the auditor of Proha Plc, with
Mr. Reino Tikkanen, APA, as the auditor in charge.
Artemis International Solutions Corporation reverse stock split
1:25
Artemis International Solutions Corporation (AISC) implemented a
reverse stock split on February 7, 2003. Each twenty-five (25)
shares of AISC common stock issued and outstanding were
converted into one share of common stock. Artemis' shareholders
approved the reverse stock split at a special meeting held on
October 21, 2002.
Prior to the reverse split, AISC had approximately 250,000,000
shares of common stock outstanding, and following the reverse
split it now has approximately 10,000,000 shares outstanding.
The trading of the reverse split shares commenced on February 7,
2003 on OTCBB. The new trading symbol for the shares is AMSI.
The reverse split is a technicality that does not have an effect
on the size of Proha's ownership of AISC or on the Proha share
or on trading of Proha shares.
DECISIONS OF THE GENERAL MEETINGS
Extraordinary General Meeting held on December 20, 2002
On December 20, 2002, an Extraordinary General Meeting of Proha
Plc approved the following proposals of the Board of Directors:
1. CONVERTIBLE LOAN
The Extraordinary General Meeting approved the Board of
Directors' proposal to issue a convertible loan (the Loan) in
accordance with the terms and conditions given in the notice of
the Extraordinary General Meeting with the additions that the
Board of Directors suggested in its meeting on December 19,
2002.
Issue Price
The issue price of the loan is 100%.
Conversion Rate
Each convertible loan note, with the nominal value of EUR 1000,
can be converted into one thousand six hundred (1600) new
company shares, with a book value of EUR 0.26 each (the
Conversion Rate). Thus, the conversion price for each share is
EUR 0.625 (the Conversion Price).
Amount of the Loan
The amount of the loan is EUR 2,810,000.
Increase in Share Capital as a Result of Conversion
After conversion of the loan, the share capital of the Company
can be increased by a maximum of EUR 1,168,960 corresponding to
a maximum of 4,496,000 new shares of the Company.
Subscription of the Loan
Deviating from the pre-emptive subscription right of the
shareholders, the Extraordinary General meeting decided to
accept the subscriptions of Pohjola Non-Life Insurance Company
Ltd and Pekka Pere.
2. USING THE PREMIUM FUND TO COVER THE LOSS OF THE ADOPTED
BALANCE SHEET FROM EARLIER FINANCIAL YEARS
The Extraordinary General Meeting approved the Board of
Directors' proposal to use EUR 897,879.03 from the premium fund
to cover the loss shown on the adopted balance sheet from
earlier financial years.
Extraordinary General Meeting held on October 23, 2002
On October 23, 2002, an Extraordinary General Meeting of Proha
Plc approved the following proposals of the Board of Directors:
- 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 of
Directors: Olof Ödman (Chairman), Pekka Pere, James Cannavino,
Klaus Cawen, Alec Gores, Ari Horowitz, Michael J. Rusert and
Steven Yager.
Annual General Meeting held on April 15, 2002
On April 15, 2002, an Annual General Meeting of Proha Plc
confirmed the 2001 Financial Statements and discharged the
members of the Board of Directors and the CEO from liability for
2001.
The Annual 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 Cawen, 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 Mr.
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 authorization is valid until April 14, 2003.
The Annual General Meeting also canceled the authorization given
by an 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) approved the
AISC Board of Directors' proposal for a reverse stock split of
the AISC shares.
The General Meeting of Stockholders of Artemis International
Solutions Corporation on June 5, 2002
The General Meeting of Artemis International Solutions
Corporation re-elected the members of the Board whose term was
ending: James Cannavino, Klaus Cawen, Olof Ödman and Pekka Pere.
Ari Horowitz, Michael J. Rusert, Steven Yager and Pekka Halonen
continue in the Board.
ACCOUNTING PRINCIPLES
Scope of the consolidated financial statements
The consolidated financial statements include the financial
statements of the parent company, Proha Plc, and of the
companies in which it owns, directly or indirectly, over 50% of
the shares and voting rights, and of associated companies. The
companies acquired during the financial year are consolidated
from the date of acquisition and the companies divested during
the financial year are consolidated to the date of disposal.
Artemis International Solutions Corporation (former Opus360
Corporation) has been consolidated as of August 1, 2001 although
the transaction was implemented in a two-step process on July
31, 2001 and November 20, 2001. This was justified because, in
the special shareholder meeting of the Opus360 Corporation that
was required to close the transaction, Proha had both the
required number of voting rights and an obligation to vote in
favor of the transaction.
Accounting principles used in the consolidated financial
statements
The consolidated financial statements are prepared in accordance
with the Finnish Accounting Act. The financial statements of
foreign subsidiaries and the Artemis sub-group are converted to
comply with the accounting and consolidation principles of the
Group, when necessary.
Mutual shareholdings
Mutual shareholdings are eliminated in accordance with the
accounting principles generally accepted in Finland, using the
acquisition cost method or the pooling method.
In applying the acquisition cost method, the differences
originating from the elimination are presented as goodwill on
consolidation or consolidation reserve (Opus360 transaction).
Goodwill on consolidation is depreciated over its expected
useful life. The goodwill items created from the Artemis
companies are depreciated over ten years. The goodwill items
created from other companies are depreciated over three years.
The consolidation reserve originating from the Opus360
transaction was amortized in full by the end of 2002.
In applying the pooling method, the remainder originating from
the elimination is presented as a disposal in the consolidated
capital and reserves.
Deferred tax assets and liabilities
For financial reporting purposes, deferred tax assets and
liabilities are determined for all temporary differences arising
between the tax bases of assets and liabilities and their
carrying values. Currently enacted tax rates are used to
determine deferred tax assets and liabilities. The balance sheet
includes deferred tax liabilities at their full amounts and
deferred tax assets at estimated realizable amounts. Deferred
tax assets originating from the losses carried forward were not
stated on the balance sheet, except for the deferred tax asset
of Artemis Finland Oy, a total of EUR 0.03 million.
The deferred tax asset of EUR 3.0 million, included in the
balance sheet of Artemis International Solutions Corporation
(former Opus360 Corporation) at the time of acquisition, was
expensed in 2001 because it was likely that the company was not
able to fully utilize the tax benefit.
Associated companies
Associated companies are consolidated into the Group accounts
using the equity method, except for Kiinteistö Oy Kuukoti, which
does not engage in business and DA Management Solutions Oy, the
consolidation of which is not necessary to give a true view of
the consolidated result of operations or of the Group's
financial position.
The Group's share in the results of the associated companies is
presented as a separate item before the operating profit.
Foreign currency transactions
Transactions in foreign currencies are recorded at the rates of
exchange prevailing at the transaction date. At the end of the
accounting period, the unsettled balances on foreign currency
items are valued at the rate of exchange prevailing at the
balance sheet date.
In the consolidated financial statements, all items in the
income statements of foreign Group companies are converted into
euros at the average exchange rates for the accounting period.
The balance sheets are converted into euros at the closing
exchange rate prevailing at the balance sheet date. All exchange
rate differences resulting from the consolidation as well as the
conversion differences of capital and reserves are presented
separately in the consolidated capital and reserves.
Foreign exchange gains and losses related to financing are
presented under financial income and expense in the income
statement. Other foreign exchange gains and losses are included
in the operating profit.
Revenue recognition
Product and service sales are recorded upon delivery to the
customer. License sales are recognized when the delivery has
occurred. Maintenance fees are recognized during the contract
period.
Pensions
The pension schemes of the parent company are funded through
payments to insurance companies. Statutory pension expenses are
expensed in the year they are incurred. The pension expenses of
subsidiaries are recorded in accordance with local requirements
and practices. Uncovered pension liabilities are presented in
provisions.
Research and development
Research and development costs are expensed in the year they are
incurred.
Fixed assets assessment
The balance sheet value of fixed assets is stated at acquisition
cost, less accumulated depreciation. Depreciation is recorded on
a straight-line basis over the expected useful lives of the
assets.
Depreciation periods are as follows:
Intangible rights (software) 3 years
Goodwill on consolidation 3-10 years
Other long-term expenses 3-10 years
Machinery and equipment 4 years
Gains and losses on the disposal of fixed assets are included in
the operating profit/loss.
Trade receivables
Trade receivables are presented in the balance sheet at the
original invoice amount to customers, less an estimate made for
doubtful receivables.
Marketable securities
Marketable securities are valued at cost price or market price
if lower.
PROSPECTS FOR THE NEAR FUTURE
Proha management does not expect the market situation to change
substantially in 2003. The comparability of the net sales for
2003 will be affected by the divestment of Accountor Oy. In
2002, the net sales of Accountor, included in the consolidated
financial statements of Proha, were EUR 5.5 million. In 2003,
operative business is expected to grow moderately and at
least in line with the general growth of the software market.
Profitability is still anticipated to improve.
The Board of Directors of Proha Plc
PRESS CONFERENCE
Proha Plc will hold a press conference for the media and
financial analysts at 12.00 a.m. on March 18, 2003 at Scandic
Hotel Simonkenttä, address: Simonkatu 9, Helsinki.
Welcome
For more information please contact:
PROHA PLC
CEO Pekka Pere, tel. +358-20 4362 000
pekka.pere@proha.com
http://www.proha.com
DISTRIBUTION:
Helsinki Stock Exchange
Major Media
PROHA GROUP CONSOLIDATED INCOME STATEMENT AND BALANCE SHEET
JANUARY 1 - DECEMBER 31, 2002
Figures are unaudited. The audit at Artemis has not been completed.
INCOME STATEMENT 1/02-12/02 1/01-12/01
(EUR 1 000) (EUR 1 000)
Net sales 100 823 82 845
Variation in stock 0 -16
Share of associated
companies' results -316 -900
Other operating income 4 098 547
Materials and services -13 467 -13 548
Staff costs -63 234 -49 188
Depreciation and value adjustments
Depreciation according to plan -2 059 -2 399
Amortization of goodwill
on consolidation -2 243 -1 965
Change in consolidation reserve 2 745 2 828
Value adjustments of investments 0
held as non-current assets -703 -167
Depreciation and value adjustments total -2 260 -1 703
Other operating expenses -22 592 -24 135
Operating profit/loss 3 052 -6 098
Financial income and expense 235 -1 147
Profit/loss before extraordinary items 3 287 -7 246
Extraordinary items 0 0
Profit/loss before
appropriations and taxes 3 287 -7 246
Income taxes -786 -621
Change in deferred tax liabilities 27 -2 999
Profit/loss before
minority interest 2 528 -10 865
Minority interest -763 781
Profit/loss for the financial year 1 765 -10 085
BALANCE SHEET
ASSETS
Non-current assets
Intangible assets 14 914 17 330
Tangible assets 1 755 3 069
Investments 2 076 2 657
Non-current assets total 18 745 23 056
Current assets
Stocks 0 0
Non-current receivables 429 0
Current receivables 27 682 24 254
Marketable securities 92 93
Cash and cash equivalents 12 666 6 954
Current assets total 40 869 31 301
ASSETS TOTAL 59 614 54 357
LIABILITIES
Capital and reserves
Subscribed capital 13 485 13 274
Share premium account 3 898 3 816
Profit/loss brought forward -6 167 2 522
Profit/loss for the financial year 1 765 -10 085
Translation differences 1 995 2 887
Capital loan 187 187
Capital and reserves total 15 163 12 601
Minority interest 2 392 1 125
Provisions 383 824
Consolidation reserve 290 3 544
Creditors
Non-current creditors 5 197 1 901
Current creditors 36 189 34 362
Creditors total 41 386 36 263
LIABILITIES TOTAL 59 614 54 357
KEY RATIOS OF THE PROHA GROUP
Net sales (EUR 1000) 100 823 82 845
EBITDA* 5 312 -4 395
% of net sales 5.3 % -5.3 %
EBITA** 2 550 -6 961
% of net sales 2.5 % -8.4 %
EBIT*** 3052 -6 098
% of net sales 3.0 % -7.4 %
Profit/loss before 3 287 -7 246
appropriations and taxes
% of net sales 3.3 % -8.7 %
Profit/loss for the financial year 1 765 -10 085
% of net sales 1.8 % -12.2 %
* Earnings before interest, taxes, depreciation and amortization
** Earnings before interest, taxes and amortization
*** Earnings before interest and taxes
Personnel at the end
of the financial year 643 638
Average personnel 753 690
1) Weighted number of shares 51 798 227 51 049 618
1) Earnings per share, EUR 0.03 -0.20
2) Number of shares
at the end of the financial year 51 867 270 51 054 350
2) Equity per share, EUR 0.29 0.24
3) Number of shares
diluted by stock options 51 938 283 51 049 618
3) Earnings per share, EUR 0.03 -0.20
Net sales by geographical area
United States 30 % 36 %
Finland 14 % 16 %
Rest of Europe 49 % 35 %
Asia 7 % 10 %
Other 1 % 3 %
Total 100 % 100 %
Net sales by product type
One time license revenue 16 % 22 %
Recurring license revenue 18 % 23 %
Services 66 % 54 %
Other 0 % 1 %
100 % 100 %
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