Proha Plc Stock Exchange Bulletin May 15, 2003 at 9:50 am
INTERIM REPORT OF PROHA PLC FOR THE PERIOD JANUARY 1 - MARCH 31,
2002
- The Proha Group's net sales for January 1-March 31, 2003 were
EUR 22.1 million (EUR 19.8 million for January 1-March 31, 2002).
Net sales were increased by the consolidation of Dovre as a
subsidiary and decreased by the divestment of Accountor as well as
by the appreciation of the euro.
- Earnings before goodwill amortization (EBITA) was
EUR 0.6 (-1.4) million
- On March 31, 2003, the Group's cash and cash equivalents
amounted to EUR 12.8 (5.0) million. Cash and cash equivalents grew
by EUR 7.8 million compared to the corresponding period in 2002.
- As a whole business developed as expected; in Europe and Japan
the development was more favorable than in the United States.
- Calculated in local currencies the groups net sales are estimated
to grow by 5-10% compared to the corresponding net sales in 2002
(adjusted by the changes in corporate structure). The company
keeps to its previous profitability target of 7% (EBITA).
THE FIRST QUARTER IN BRIEF
The Group's profitability and business have continued to develop
in line with the management's estimates following the normal
seasonal fluctuations. During the first quarter, there have not
been any substantial changes in the development of Proha's market
share.
In the first quarter, 70% of the Group's net sales originated from
outside the euro area. Correspondingly the appreciation of euro
against other currencies decreases the euro denominated net sales
of Proha.
In line with its strategy, Proha focuses on the international
portfolio and project management software business. Through its
subsidiary, Artemis, Proha is a global market leader in
enterprise project and portfolio management solutions. During the
first quarter, 97% of the Proha Group's net sales originated from
the project management business. 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.
Geographically, the sales of project and portfolio management
software did not develop uniformly. The portfolio management
solutions were particularly well-received in Europe.
During the first quarter, the Group sold approximately 20,000 new
Artemis end-user licenses, which is slightly less that the number
of licenses sold during the corresponding period in 2002 (22,000).
The sales of the portfolio management solution that was launched
in 2002 advanced favorably. During the period, over 1500
PortfolioDirector user licenses were sold which corresponds half
of the total sales for 2002. The total number of Artemis licenses
sold worldwide is approximately 518,000.
NET SALES AND RESULT
The Group's business typically follows seasonal fluctuations, in
which the second and the fourth quarter are the best both in net
sales and in result. On the Group level, the business development
in the first quarter was in line with the expectations. However,
in Europe and Japan the operation advanced better than in the
United States. For the period, the Group's net sales amounted to
EUR 22.1 (19.8) million, which is EUR 2.3 million more than in
2002.
In the interim report of the corresponding period in 2002, Dovre
International AS (Dovre) has been consolidated as an associated
company. In the financial statements for 2002 and in this interim
report Dovre was consolidated as a subsidiary based on Proha's
control over the company. Accountor Oy was sold in November 2002
and is therefore included in the net sales of the corresponding
period in 2002. In the table below, the net sales for January 1, -
March 31, 2002 have been adjusted to be comparable with the net
sales for the first quarter of 2003 (EUR million).
Net sales for Q1/2003 22.1
Net sales for Q1/2002 19.8
The effect of Dovre's Q1/2002
consolidation as a subsidiary +4.6
The effect of
the sale of Accountor Q1/2002 -1.5
-------------------------------------------
Pro forma net sales (Q1/2002) 22.9
Effect of changes inexchange rates -1.7
-------------------------------------------
Net sales representing
the business volume (Q1/2002) 21.2 21.2
-----------------------------------------------
Growth of the business volume 0.9
The changes presented in the pro forma calculation do not have any
essential effect on operating profit.
The volume of business and net sales calculated in original
currencies grew, but the appreciation of the euro decreased the
net sales given in euros. The euro-denominated pro forma net sales
decreased by approximately 4%, even though calculated in original
currencies the volume of project and portfolio management business
grew by over 4%.
Division of net sales:
Net sales by EUR Percentage
product type million of net
sales
One-time license 4.4 19.6%
revenue
Recurring license 4.2 19.2%
revenue
Services 13.4 60.6%
Other sales 0.1 0.6%
Total 22.1 100.0%
License sales amounted to EUR 8.6 million, accounting for 39% of
net sales. The share of one-time licenses was EUR 4.4 million and
that of recurring licenses EUR 4.2 million. The emphasis of net
sales was still on services, which constituted EUR 13.4 million of
net sales. In addition to Dovre's operations, the services mainly
consist of consulting, training, implementation and support of the
Group's repeatable software solutions.
Net sales by countries (Dovre's net sales for January 1 - March
31, 2002 consolidated)
1-3/2003 1-3/2002 (pro forma)
Great Britain 14% 8%
Italy 7% 5%
Japan 7% 5%
Norway 29% 20%
France 9% 7%
Germany 4% 4%
Singapore 2% 2%
Finland 11% 17%
The United States 17% 31%
Other 0% 1%
100% 100%
Earnings before goodwill amortization (EBITA) was EUR 0.6 (-1.4)
million, improving by EUR 2.0 million compared to corresponding
period in 2002.
Operating result (EBIT) was EUR 0.1 million compared to an
operating loss of EUR -0.3 million in the corresponding period in
2002. Earnings per share amounted to EUR -0.013 (-0.005). Return
on investment (ROI) was 1.1% and return on equity (ROE) was
-11.1%.
FINANCING AND INVESTMENTS
Cash and cash equivalents were EUR 12.8 (5.0) million and grew
by EUR 7.8 million compared to the corresponding period in 2002.
Cash assets were increased by the sale of non-core operations and
the issue of a convertible loan in the fourth quarter of 2002.
Quick Ratio was 1.2 (0.9). During the period, cash flow from
operating activities was EUR 1.3 million positive. Gross
investments in fixed assets were EUR 0.03 million.
The balance sheet total on March 31, 2003 was EUR 53.6 (51.0)
million. Equity ratio was 34.1% (34.6%) and gearing was -29.0%
(-4.2%). Interest-bearing liabilities were EUR 8.0 (4.5) million
accounting for 15.2% (9.2%) of the Group's capital and reserves,
provisions, and creditors total at the end of the period. Interest-
bearing liabilities were EUR 8.0 (4.5) million of which long-term
liabilities were EUR 5.3 (1.5) million and short-term liabilities
were EUR 2.7 (3.0) million.
PRODUCT DEVELOPMENT
The product development costs of strategic software products were
EUR 2.1 (2.4) million, representing 10% (12%) of net sales for the
period. The reorganization of the product development conducted in
2002 has accelerated product development cycles and brought cost
savings. R & D costs are expensed in the financial year during
which they incurred. Tactical products have been developed
regionally. The product development costs of tactical products are
also expensed in full.
The development of project and portfolio management software
products continued intensive. The local project management products
were also enhanced. Towards the year-end, new versions will
expand the functionality of all solutions. This is anticipated to
enlarge the potential customer base.
PERSONNEL
At the end of the first quarter of 2003, the Proha Group employed
649 people. At the same time in 2002, the number of personnel was
773 (including the personnel of Dovre numbering at 164 persons at
the end of the period and at 150 at corresponding period in 2002).
The number of employees in Finland was 111 (229), whereas
538 (544) worked abroad.
In the first quarter, the average number of personnel was
650 (780). Accountor Oy, which was sold in 2002, employed
102 people during the corresponding period in 2002.
Staff costs were EUR 15.2 (12.2) million, constituting 69% (62%)
of net sales.
STATEMENT ON THE ADEQUACY OF THE GROUP ASSETS
On March 31, 2003, the Group's cash and cash equivalents amounted
to EUR 12.8 million. At the end of the corresponding period in
2002, cash and cash equivalents were EUR 5.0 million.
The divestment of the financial management business operations,
the reorganization of the software testing business and the issue
of a convertible loan strengthened the Group's cash assets in the
fourth quarter of 2002. During the first quarter the cash flow
from operating activities was EUR 1.3 million positive.
In 2003, operative business is expeted to grow and opeations to
be profitable. Cash and cash equivalents are expected to increase
during 2003.
SHARE CAPITAL
There were no changes in the share capital of the company during
the first quarter of 2003. On March 31, 2003, the share capital of
Proha Plc was EUR 13,485,490.20 and the total number of shares was
51,867,270. 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 did not use the authorization given by the
Annual General Meeting on April 15, 2002, to increase the
company's share capital. The validity of the authorization expired
on April 14, 2003.
At the Annual General Meeting on April 24, 2003, the Board of
Directors was authorized to increase the company's share capital
through one or more issues of 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 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.
This represents 20% of the currently registered share capital and
of the votes that can be cast in the General Meeting of
Shareholders. The authorization is valid until April 23, 2004.
CONVERTIBLE LOAN
On December 20, 2002, the company issued a convertible loan that
was offered for subscription to professional investors. A total of
EUR 2,810,000 of the loan was subscribed. The fixed interest of
the loan is 6.00% p.a. The loan matures on December 30, 2007. The
loan can be converted into a maximum of 4,496,000 new shares.
INCENTIVE SYSTEM FOR PERSONNEL
At its meeting on May 8, 2003, after the first quarter, 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
824,055 Proha Plc stock options were subscribed, amounting to a
subscription of 824,055 shares. The stock options were granted
without compensation to the key persons of the Proha Group. On
April 24, 2003, the Annual General Meeting granted a total of
450,000 stock options to the members of the Board of Directors.
The Board of Directors granted the rest of the stock options.
The Board of Directors confirmed that the subscription price for a
share subscribed on the basis of the stock option is EUR 0.50.
TRADING ON THE HELSINKI STOCK EXCHANGE
The number of registered shareholders of Proha Plc totaled 3,796 at
the end of the first quarter in 2003. During the quarter, the
share price was EUR 0.43 at its lowest and EUR 0.61 at its
highest, and and the closing price on March 31, 2003 was EUR 0.44.
Market capitalization was approximately EUR 22.8 million at the
end of the quarter. The trading volume of the Proha share on the
NM list of the Helsinki Stock Exchange was over EUR 0.9 million
during the first quarter.
OTHER EVENTS OF THE FIRST QUARTER
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 of AISC is Squar Milner Reehl & Williamson
LLP.
Artemis International Solutions Corporation reverse 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.
EVENTS FOLLOWING THE FIRST QUARTER
Changes in Artemis International Solutions Corporation
The Board of Directors of Artemis International Solutions
Corporation (AISC), which is an 80%-owned subsidiary of Proha Plc,
elected Steven Yager, President of Gores Technology Group Inc, as
the new Chairman of the AISC Board. Mr. Yager has previously
served as Vice Chairman of the AISC Board. The former Chairman,
James Cannavino, continues as a member of the AISC Board.
The AISC Board of Directors terminated the employment agreement of
Ari Horowitz, the former Executive Vice President of Corporate
Development, as of April 14, 2003. Pursuant to the agreement, AISC
will pay Horowitz salary and benefits for two years as of the
termination of the agreement. As a result, AISC will enter a cost
reserve of USD 0.6 million during the second quarter.
Annual General Meeting held on April 24, 2003
The Annual General Meeting on April 24, 2003 confirmed the 2002
Financial Statements. The CEO and the following members of the
Board of Directors were discharged from liability: Pekka Pere,
Olof Ödman, Steven Yager, Alec Gores, and Klaus Cawen. The other
members of the Board of Directors, James Cannavino, Ari Horowitz,
and Michael Rusert, were not discharged from liability.
The Annual General Meeting approved the Board of Directors'
proposal according to which the result for the financial year 2002
is entered in capital and reserves and no dividend is paid.
The following six members were elected to the Board of Directors
of Proha Plc: Olof Ödman, Pekka Pere, Klaus Cawen, Alec Gores,
Steven Yager and Pekka Mäkelä.
Ernst & Young Oy was elected as the company's auditor, with Ulla
Nykky, APA, as the auditor in charge.
Increase in the company's share capital
The Annual General Meeting authorized the Board of Directors to
increase the company's share capital through an issue of new
shares, stock options, option warrants and/or convertible bonds
deviating from the shareholders pre-emptive subscription rights.
Pursuant to this authorization, the aggregate maximum number of
new shares to be issued or offered for subscription pursuant to
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, which represents
20% of the currently 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
shareholders' pre-emptive subscription right if there is a strong
financial reason, such as improving the company's capital
structure, financing operations and/or acquisitions and/or
creating incentives for the personnel of the Group. The
authorization entitles the Board to decide on the subscription
price and other terms and conditions. The authorization is valid
until April 23, 2004.
Stock option issue
The Annual General Meeting approved the Board of Directors'
proposal to issue a maximum of 850,000 stock options that are
offered, deviating from the shareholders pre-emptive subscription
right, to certain key employees of the Proha Group and to the
members of the Board of Directors of Proha Plc.
The Annual General Meeting April 24, 2003decided on the
distribution of 450,000 stock options to the members of the
Board of Directors as follows: 120,000 stock options to be
issued to the CEO and 66,000 stock options to each of the other
members of the Board of Directors. The Board of Directors
decided on the distribution of the remaining 400,000 stock options.
At its meeting on May 8, 2003, the Board of Directors approved the
subscriptions and confirmed the subscription price for the shares
subscribed on the basis of the stock options as EUR 0.50 per
share. In the issue, a total of 824,055 Proha Plc stock options
were subscribed, amounting to a subscription of 824,055 shares.
The subscriptions can increase the share capital by a maximum of
EUR 214,254.30.
The option terms and conditions are appended to the Notice of the
Annual General Meeting on March 18, 2003.
PROSPECTS FOR THE NEAR FUTURE
Proha management estimates that the market situation will not
change substantially in 2003. The sale of Accountor Oy at the end
of 2002, and the consolidation of Dovre as a subsidiary will
affect the comparability of the net sales for the following
quarters in respect to 2002. The net sales of Accountor for 2002
that were included in the consolidated financial statements of
Proha, were EUR 5.5 million. The consolidation of Dovre at the
year end affected the net sales in 2002 by EUR 20.3 million.
As 70% of the net sales of Proha-group are generated outside
the euro zone, the changes in the value of euro have an essential
impact on the group's net sales. Calculated in local currencies
the groups net sales are estimated to grow by 5-10% compared to
the corresponding net sales in 2002 (adjusted by the changes in
corporate structure).
The changes in the value of the euro will not have an essential
impact on the profitability for the rest of 2003, because majority
of the costs are also generated in local currencies. The company
keeps to its previous profitability target of 7% (EBITA).
The Board of Directors of Proha Plc
The Artemis sub-group announced its result for the first quarter
in 2003 on May 14, 2003 after the markets were closed in New York.
PRESS CONFERENCE
Proha Plc will hold a press conference for the media and financial
analysts at 12.00 am on May 15, 2003 at World Trade Center,
address: Aleksanterinkatu 17, Helsinki.
Welcome
For more information please contact:
PROHA PLC
CEO Pekka Pere, tel. +358 20 4362 000
pekka.pere@proha.com
www.proha.com
DISTRIBUTION:
Helsinki Stock Exchange
Major Media
The figures in this interim report are unaudited.
PROHA GROUP CONSOLIDATED INCOME STATEMENT AND BALANCE SHEET
JANUARY 1 - MARCH 31, 2003
INCOME STATEMENT
1/03-3/03 1/02-3/02 1/02-12/02
(EUR (EUR (EUR
1 000) 1 000) 1 000)
Net sales 22 135 19 812 100 824
Share of associated
companies' results 3 62 -316
Other operating income 277 210 4 098
Materials and services -2 037 -3 256 -13 467
Staff costs -15 237 -12 194 -63 234
Depreciation, amortization and
value adjustments
Depreciation according to plan -266 -461 -2 059
Value adjustments of investments
held as non-current assets 0 0 -703
Amortization of goodwill
on consolidation -495 -636 -2 243
Change in consolidation reserve 9 1 749 2 744
Depreciation, amortization and
value adjustments total -752 651 -2 261
Other operating expenses -4 321 -5 615 -22 592
Operating profit/loss 67 -330 3 052
Financial income and expense -379 -73 235
Profit/loss before extraordinary items, -313 -403 3 287
appropriations and taxes
Income taxes -146 -220 -786
Change in deferred tax liabilities -13 -3 26
Profit/loss before minority interest -472 -626 2 527
Minority interest -216 364 -762
Profit/loss for the period -688 -262 1 765
BALANCE SHEET
ASSETS
Non-current assets
Intangible assets 616 1 372 508
Goodwill on consolidation 13 902 15 383 14 406
Tangible assets 1 414 3 326 1 755
Investments 2 265 2 469 2 076
Non-current assets total 18 197 22 550 18 745
Current assets
Non-current receivables 416 0 429
Current receivables 22 119 23 374 27 682
Marketable securities 88 95 92
Cash and cash equivalents 12 804 4 968 12 666
Current assets total 35 427 28 436 40 869
ASSETS TOTAL 53 624 50 986 59 614
LIABILITIES
Capital and reserves
Subscribed capital 13 485 13 485 13 485
Share premium account 3 906 3 872 3 906
Profit/loss brought forward -2 415 -4 462 -4 179
Profit/loss for the period -688 -262 1 765
Capital loan 187 187 187
Capital and reserves total 14 475 12 820 15 164
Minority interest 2 608 594 2 392
Consolidation reserve 281 1 859 290
Provisions 430 833 383
Creditors
Non-current creditors 5 389 1 635 5 196
Current creditors 30 440 33 246 36 189
Creditors total 35 829 34 880 41 385
LIABILITIES TOTAL 53 624 50 986 59 614
KEY RATIOS OF THE PROHA GROUP
1/03-3/03 1/02-3/02 1/02-12/02
Net sales (EUR 1000) 22 135 19 812 100 824
EBITDA* 819 -981 5 313
% of net sales 3.7% -4.6% 5.3%
EBITA** 553 -1 443 2 551
% of net sales 2.5% -7.3% 2.5%
EBIT*** 67 -330 3 052
% of net sales 0.3% -1.7% 3.0%
Profit/loss before extraordinary -313 -403 3 287
items, appropriations and taxes
% of net sales -1.4% -2.0% 3.3%
Profit/loss for the period -688 -262 1 765
% of net sales -3.1% -1.3% 1.8%
* Earnings before interest, taxes, depreciation and goodwill
amortization
** Earnings before interest, taxes and goodwill amortization
*** Earnings before interest and taxes
Research and development costs,
EUR 1000 2 135 2 400 8 610
% of net sales 9.6% 12.1% 8.5%
Personnel at the end
of the period 649 623 643
Average personnel 650 626 753
1) Weighted number
of shares 51 867 270 51 587 264 51 798 227
1) Earnings per share, EUR -0.013 -0.005 0.034
2) Number of shares
at the end of the period 51 867 270 51 867 270 51 867 270
2) Equity per share, EUR 0.275 0.240 0.289
3) Number of shares
diluted by stock options 52 072 361 51 867 270 51 938 283
3) Earnings per share, EUR *) *) 0.034
*) The key ratio Earnings per share, adjusted by the dillution effect,
is not presented because it would be better than the undiluted figure.
Net sales by geographical area
1/03-3/03 1/02-3/02 1/02-12/02
United States 17% 36% 30%
Finland 11% 23% 14%
Rest of Europe 63% 31% 49%
Asia 9% 10% 7%
100% 100% 100%
Net sales by product type
One-time license revenue 20% 19% 16%
Recurring license revenue 19% 23% 18%
Services 61% 56% 66%
Other 0% 1% 0%
100% 100% 100%
CASH FLOW STATEMENT 1.1.-31.3. 1.1.- 31.12.
2003 2002
Cash flow from operating activities
Operating profit/loss 67 3 052
Adjustments
Depreciation, amortization and
value adjustments 752 2 261
Profits and losses on sale of
fixed assets and shares 0 -3 037
Other adjustments 56 165
Change in net working capital 766 -2 883
Financial income and expense, net -380 2
Income taxes -2 195
Cash flow from operating activities 1 259 -245
Cash flow from investing activities
Investments in tangible and
intangible assets -33 -1 071
Cash flow from acquisition of
subsidiaries and associated companies 0 -804
Cash flow from disposal of
subsidiaries and associated companies 0 4 225
Other paid cash flows 0 -57
Other received cash flows 248 263
Cash flow from investing activities 215 2 556
Cash flow from financing activities
Proceeds from short-term loans 34 1 487
Repayments of short-term loans -1 320 0
Proceeds from convertible loan 0 2 810
Proceeds from long-term loans 147 1 733
Repayments of long-term loans -197 -2 891
Cash flow from financing activities -1 336 3 139
Change in cash and cash equivalents 138 5 450
Cash and cash equivalents
at the beginning of the period -12 666 -6 954
Cash and cash equivalents of
subsidiaries acquired 0 -319
Cash and cash equivalents of
subsidiaries sold 0 57
Cash and cash equivalents
at the end of the period 12 804 12 666
Change in cash and cash equivalents 138 5 450
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