Proha Plc Stock Exchange Bulletin August 11, 2005 at 9.30 a.m.
PROHA PLC INTERIM REPORT (IFRS) JANUARY 1, - JUNE 30, 2005
- The Proha Group net sales for the period January 1, - June 30,
2005 were EUR 32.0 million (EUR 33.9 million in the corresponding
period in 2004).
- The net sales for the three months April 1, - June 30, 2005 were
EUR 16.6 (17.0) million
- The operating profit the period January 1, - June 30, 2005 was
EUR 0.7 (2.6) million.
- The operating profit for the period January 1, - June 30, 2005
includes EUR 0.6 (2.8) million in non-recurring items.
- The operating profit for the three months April 1, - June 30,
2005 was EUR 0.4 (3.6) million.
- The operating profit for the period April 1, - June 30, 2005
includes EUR 0.2 (3.8) million in non-recurring items.
- The Group's cash flow from operations was EUR 0.2 (-3.1) million
for the period January 1, - June 30, 2005.
- The interim report of Proha has been prepared according to the
International Financial Reporting Standards (IFRS).
- Today Proha restated preliminary comparative IFRS-data and
interim report 1.1.2005 - 31.3.2005 in a separate stock exchange
bulletin.
- Pekka Pere was elected as the new Chairman of the Board of
Artemis
- Proha's management anticipates the Group's operating result to be
positive for the full year 2005. In line with normal seasonal
fluctuations the third quarter operating result is not expected to
be positive.
KEY RATIOS OF THE PROHA GROUP
(EUR million)
1-6 1-6 Change % 4-6/ 4-6/ Change % 1-12
2005 2004 2005 2004 2004
Net sales 32.0 33.9 -5.7% 16.6 17.0 -2.6% 65.7
Operating
result 0.7 2.6 -74.0% 0.4 3.6 -89.0% 2.9
% of net
sales 2.1% 7.6% -72.5% 2.4% 20.9% -88.7% 4.3%
Operating
result
before taxes -0.05 2.6 -102.0% 0.06 3.4 -98.3% 2.9%
Result for
the period -0.5 1.9 -127.9% -0.2 3.3 -106.7% 1.9
ROE % 6.8% 31.5% 16.0%
ROI % 13.0% 30.5% 20.5%
Cash and cash
equivalent 6.5 10.1 -35.6% 6.5 10.1 -35.6% 5.1
Gearing % 11.5% -8,3% 24.0%
Equity/asset
ratio % 35.3% 32.1% 35.7%
(EUR million)
1-6 1-6 Change 1-12
2005 2004 2004
Capital
expenditure 2.4 2.5 7.5
% of net sales 7.5% 7.3% 11.4%
Capitalized
software
development costs 1.9 2.2 3.9
R' costs 3.4 3.7 6.8
% of net sales 10.5% 11.0% 10.4%
Cash flow
from
operating
activities 0.2 -3.1 -4.8
Earnings/share,
EUR
(undiluted) -0.009 0.036 0.034
Equity/share, EUR 0.27 0.30 0.26
Average personnel
during period 529 588 -10.0% 569
Personnel at the
end
of the period 527 571 -7.7% 525
IFRS REPORTING
Proha will publish its first IFRS (International Financial
Reporting Standards) Financial Statements for the financial year
ending December 31, 2005. The interim reports for 2005, will be
prepared in accordance with the IAS 34.
The comparative financial data for 2004 presented in this interim
report as well as the essential differences between the Finnish
Accounting Principles and IFRS standards were published in stock
exchange bulletin on March 3, 2005. On August 11, 2005 Proha
restated preliminary comparative IFRS-data and interim report
1.1.2005 - 31.3.2005 in a separate stock exchange bulletin.
The IFRS standards differ significantly from the Finnish Accounting
Standards (FAS) used by Proha in the interim reports and the
financial statements for 2004.
Compared to Finnish Accounting Standards (FAS), adoption of IFRS
has the most significant impact on capitalization of software
development costs (IAS 38), treatment of goodwill and business
combinations (IFRS 3) and share based payments (IFRS 2). Also the
partial disposal of Artemis International Solutions Corporation
(AISC) has a material effect on the Proha Group's result for 2004
when treated according to IFRS. According to the IFRS 1 exemption
the IFRS 3 standard is not applied on acquisitions made prior the
effective date of January 1, 2004.
The information by segment is presented by business area based on
the Group's management structure and internal reporting system. The
segments reported are Artemis sub-group and Norwegian operations.
The unallocated items consist mainly of the Group's administrative
expenses.
GROUP STRUCTURE
The key business areas of Proha Group are the Artemis sub-group and
the Norwegian operations fully owned by Proha. The Norwegian
operations are composed of Dovre International AS and Safran
Software Solutions AS operating globally and focusing their
business on project management. Of the business 75% comes from oil
and gas sector and 25% from land based operations.
At the end of the period Proha's ownership at Artemis was 53.5%. On
December 31.12.2004 the ownership was 56.75%. The change in the
ownership is due to exercise of warrants entitling to 456,853
shares that were granted for a group of investors led by
Emancipation Capital and partial conversion of the convertible loan
of Laurus Master Fund, Ltd. into Artemis shares. During the first
quarter of 2005 Laurus converted a portion of USD 242,000 of the
total loan of USD 1.5 million into 166,700 Artemis shares. During
the second quarter Laurus further converted USD 393,000 worth of
its loan receivable into 219,278 shares. The remaining portion of
the convertible loan Laurus may convert into maximum of 336,576
Artemis shares representing 2.2% of the total number of Artemis
shares. Additionally, as part of its financial arrangements Artemis
has granted warrants to the group of investors led by Emancipation
Capital entitling to 409,092 shares. Artemis has an incentive plan
for personnel and management that includes options entitling to
company shares.
BUSINESS PERFORMANCE
In line with its strategy, Proha focuses on the international
project, resource and portfolio management software and service
business. Proha is one of the world leading providers of enterprise-
level project, resource and portfolio management solutions.
During the first half of 2005 the Artemis sub-group accounted for
approximately 59.2% (64.5% in 2004) of the net sales of the Group,
and project management operations in Norway, which mainly serve the
oil and gas sector represented approximately 39.7% (32.6%) of the
net sales of the Group.
Artemis sub-group
The new generation Artemis 7 solutions cover extensively the whole
range of portfolio management providing a competitive edge for
Artemis. Artemis solutions cover the following fields of
applications: New Product Development (NPD), IT Management and
Governance (ITM), Public Investment Management (PIM), Strategic
Asset Optimization (SAO) and Aerospace and Defense Program
Management (ADPM). Locally Artemis provides solutions also for
other fields of application such as construction.
The sales of strategically important Artemis 7 solutions continued
to develop favorably. Software solutions based on Artemis 7
represented over 70% (42%) of the total sales of new licenses.
During the period January 1, - June 30, 2005 a total of 23,315
Artemis end-user licenses were purchased (25,071 in 2004). The
total number of Artemis licenses sold worldwide is over 629,000.
Artemis sub-group has gained significant new customers during the
first half of 2005. The existing customers have expanded the use of
the systems and implemented completely new systems. For Artemis the
variety of both its customer industries and fields of application
reduce the business risk and prove the versatility and
functionality of Artemis 7 solutions in the global markets.
The cost level of Artemis sub-group has remained at a significantly
lower level than in the corresponding period in 2004. Artemis is
continuing to review its worldwide operations for additional
efficiencies to reduce costs and strengthen its balance sheet.
The global software markets continue to be unpredictable with
market development varying by geographical area. The lower cost
level of the subgroup will improve its competitive position.
Norwegian operations
The Norwegian operations consist of Dovre International AS and
Safran Software Solutions AS. During the first half of 2005 Dovre
accounted for approximately 96.2% (94.5% in 2004) and Safran 3.8%
(5.5%) of the net sales of the operations.
The business volume of the Norwegian operations as a whole
developed as anticipated and Dovre's investments in increasing
capacity have brought expected results during the second quarter of
2005. The optimism in the oil and gas industry investments
following the high oil prices has enabled the positive development
of Dovre's profitability and net sales. The level of investments in
the Norwegian oil and gas industry is higher than ever before.
Dovre's operations in the USA continued to develop favorably. The
first significant consulting agreements have been made and the
operations are profitable. The US-operations do not yet have a
material impact on Dovre's net sales or result.
In developing its business operations Dovre focuses in maintaining
the leading position in the Norwegian markets and in continuing the
growth in the USA and other foreign markets.
In June the Norwegian Ministry of Finance selected Dovre as one of
five independent consultants to evaluate publicly funded projects.
The duration of the frame agreement is until the end of 2006 with
the option to continue it twice until the end of 2010. The
agreement is strategically important for Dovre and strengthens
Dovre's solid position in the Norwegian project consulting markets.
Safran Software focused its marketing efforts on oil and gas
industry companies in close cooperation with its partners.
NET SALES
The Proha Group's net sales for the period January 1 - June 30,
2005 were EUR 32.0 million (33.9 million in 2004), which is 5.6%
less than in the previous year. The net sales for the second
quarter of 2005 were EUR 16.6 (17.0) million, which was 2.6% less
than in the corresponding quarter of 2004.
Distribution of net sales by revenue type:
(EUR million)
Net sales 1-6 % 1-6 % 4-6 % 4-6 %
2005 of 2004 of 2005 of 2004 of
net net net net
sales sales sales sales
One time
license
revenue 4.7 14.8% 5.4 15.9% 2.6 15.9% 3.0 17.5%
Recurring
license
revenue 7.2 22.6% 7.1 21.0% 3.7 22.6% 3.3 19.4%
Services 20.0 62.6% 21.4 63.1% 10.2 61.6% 10.7 63.1%
Total 32.0 100.0% 33.9 100.0% 16.6 100.0% 17.0 100.0%
For the period January 1 - June 30, 2005 the emphasis of net sales
was still on services, which constituted EUR 20.0 (21.4) million or
62.6% (63.0%) of the net sales. For the three months period April
1, - June 30, 2005 the service revenue was EUR 10.2 (10.7) million
constituting 61.6% (63.1%) of the net sales. The services include
Dovre's project management consultancy and the consultancy,
training, implementation and support services of Artemis' software
solutions.
For the period January 1 - June 30, 2005 the license sales amounted
to EUR 12.0 (12.6) million, accounting for 37.4% (37.0%) of the net
sales. The share of one-time licenses was EUR 4.7 (5.4) million and
that of recurring licenses EUR 7.2 (7.2) million.
For the three months period April 1, - June 30, 2005 the license
sales amounted to EUR 6.4 (6.3) million, accounting for 38.4%
(36.9%) of the net sales. The share of one-time licenses was EUR
2.6 (3.0) million and that of recurring licenses EUR 3.7 (3.3)
million.
Distribution of net sales by segment
(EUR million)
1-6 1-6 Change % 4-6/ 4-6/ Change %
2005 2004 2005 2004
Artemis sub-group 19.0 21.9 -13.3% 9.8 10.9 -9.6%
Norway 12.7 11.1 14.9% 6.5 5.7 15.1%
Unallocated
items 0.4 1.0 -64.0% 0.2 0.5 -55.2%
Inter-segment
net sales 0.0 0.0 0.0 0.0
Group total 32.0 33.9 -5.6% 16.6 17.0 -2.6%
Distribution of net sales by
country:
(EUR million)
1-6 % 1-6 % 4-6 % 4-6 % 1-12 %
2005 of 2004 of 2005 of 2004 of 2004 of
net net net net net
sales sale sales sales sales
Great
Britain 2.7 8.5% 3.2 9.4% 1.3 8.0% 1.5 8.8% 5.8 8.8%
Italy 3.1 9.8% 3.2 9.4% 1.7 10.0% 1.6 9.4% 6.0 9.1%
Japan 2.3 7.0% 2.0 5.9% 1.3 7.6% 0.9 5.3% 4.1 6.3%
Norway* 12.7 39.7% 11.1 32.7% 6.5 39.3% 5.7 33.5% 22.4 34.0%
France 3.5 11.0% 3.5 10.3% 1.7 10.4% 2.1 12.4% 6.6 10.0%
Germany 0.8 2.6% 1.6 4.7% 0.5 2.8% 0.8 4.7% 2.8 4.3%
Finland 2.8 8.7% 4.0 11.8% 1.5 9.1% 1.9 11.2% 7.2 11.0%
United
States 3.4 10.7% 4.7 13.9% 1.8 10.9% 2.3 13.5% 9.7 14.8%
Others 0.6 1.8% 0.6 1.8% 0.3 1.8% 0.2 1.2% 1.1 1.7%
Total 32.0 100.0% 33.9 100.0% 16.6 100.0% 17.0 100.0% 65.7 100.0%
*) The net sales of Dovre' s international operations outside Norway
have been listed under Norway.
Artemis sub-group
The net sales of the Artemis sub-group totaled EUR 19.0 (21.9)
million and accounted for 59.2% (64.5%) of the Group's net sales
for the six months in 2005. The net sales of Artemis declined by
13.3% compared to the corresponding period in 2004.
For the three months period April 1, - June 30, 2005 the net sales
of the Artemis sub-group were EUR 9.8 (10.9) million accounting for
59.4% (64.0%) of the Group' s net sales. Compared to the
corresponding period in 2004 the net sales of Artemis declined by
9.6%.
At Artemis sub-group the share of both one-time and recurring
license revenue increased. During the period January 1 - June 30,
2005 the share of license revenue was 60.4% (54.2%).
Norwegian operation
In the first half of 2005 the net sales of the Norwegian operations
totaled EUR 12.7 (11.1) million and accounted for 39.7% (32.6%) of
the Group's net sales. The net sales of Norwegian operations grew
by 14.9% compared to the corresponding period in 2004.
For the three months period April 1, - June 30, 2005 the net sales
of the Norwegian operations were EUR 6.5 (5.7) million accounting
for 39.3% (33.3%) of the Group' s net sales. The net sales of the
Norwegian operations grew by 15.1% compared to the corresponding
period in 2004.
PROFITABILITY
The Proha Group' s operating profit for the period January 1 - June
30, 2005 totaled EUR 0.7 (2.6) million. The operating profit for
the period January 1, - June 30, 2005 includes EUR 0.6 (2.8)
million in non-recurring items. The non-recurring income was EUR
0.9 (4.0) million and the non-recurring charges were EUR -0.3 (-
1.2) million. The non-recurring income includes EUR 0.6 million of
arbitration proceedings from Changepoint France settlement and EUR
0.3 million in from the partial disposals of Artemis. The non-
recurring charges were due to partial disposals of Artemis.
The Group' s operating profit for the second quarter of 2005 was EUR
0.4 (3.6) million. The operating profit for the period April 1, -
June 30, 2005 includes EUR 0.2 (3.8) million in non-recurring
items. The non-recurring income was EUR 0.3 (4.0) million and the
non-recurring charges were EUR -0.1 (-0.2) million. The non-
recurring income EUR 0.3 (4.0) million was due to partial disposals
of Artemis.
During the first half of 2005 the cost level of the Group business
operations was approximately 4.1% lower compared to the previous
year.
Distribution of operating result by segment:
(EUR million)
1-6 1-6 Change 4-6 4-6 Change 1-12
2005 2004 % 2005 2004 % 2004
Artemis sub-group 0.6 -0.8 -173.7% 0.3 0.1 124.2% -0.3
Norway 0.6 0.6 0.6% 0.3 0.1 168.5% 1.0
Unallocated items -0.5 2.9 -117.9% -0.2 3.3 -106.1% 2.1
Inter-segment
operating result 0.0 0.0 0.0 0.0
Group total 0.7 2.6 -74.0% 0.4 3.6 -89.0% 2.9
Artemis sub-group
For the period January 1 - June 30, 2005 the Artemis sub-group's
operating profit was EUR 0.6 (-0.7) million, which includes EUR 0.6
million of arbitration proceedings from Changepoint France
settlement in the first quarter of 2005.
The operating result of Artemis for the first half of 2005 does not
include any non-recurring restructuring charges. The total EUR 1.0
million of non-recurring restructuring charges for the
corresponding period in 2004 include employment termination costs
of EUR 0.8 million and other operating expenses of EUR 0.2 million
at Artemis.
For the three month period April 1 - June 30, 2005 the Artemis sub-
group's operating profit was EUR 0.3 (0.3) million.
Norwegian operations
For the period January 1 - June 30, 2005 the operating profit of
the Norwegian operations was EUR 0.6 (0.6) million. The extra costs
aimed at business growth increased the cost level of the Norwegian
operations during the first quarter of 2005. However, the business
operations were profitable.
For the three month period April 1 - June 30, 2005 the operating
profit of the Norwegian operations was EUR 0.3 (0.1) million.
The Group' s goodwill is not amortized but tested for impairment
under IAS 36. No indications of impairment of assets exist.
In the period January 1 - June 30, 2005 the Group' s research and
development costs were EUR 3.4 (3.7) million in total, of which a
total of EUR 1.9 (2.2) million were capitalized. Amortization of
software development costs were EUR 0.3 (0.1) million for the
period.
In the period January 1 - June 30, 2005 the Group' s result before
taxes was EUR 0.05 (2.6) million. The net result for the period was
EUR -0.5 (1.9) million.
Earnings per share amounted to EUR -0.009 (0.036). Return on
investment (ROI) was 13.0% (30.7%) and return on equity (ROE) was
6.8% (31.5%).
CASH FLOW, FINANCING AND INVESTMENTS
The balance sheet total on June 30, 2005 was EUR 48.9 (50.2)
million. At the end of the period, cash and cash equivalents
totaled EUR 6.5 (10.1) million, growing EUR 1.5 million compared to
the situation on December 31, 2004.
In the first half of 2005, cash flow from operating activities was
EUR 0.2 million (-3.1). In addition to the period sales the cash
flow was increased by payments made for the fourth quarter 2004
sales.
Total of EUR 2.4 million were used for investments primarily on
software development. However, the total cash flow of investments
was EUR 1.8 million positive with EUR 0.6 million proceeds from
divestment of Changepoint France and EUR 0.5 million from the
partial disposals of Artemis increasing the cash flow with total
EUR 1.1 million and the loan receivables decreased by EUR 3.0
million.
Total of EUR 2.9 million new loans were drawn and total of EUR 3.6
million loans repaid, resulting in total EUR -0.6 million in cash
flow of financing activities.
Equity to assets ratio was 35.3% (32.1%) and gearing was 11.5%
(-8.3%). On March 31, 2005 the interest-bearing liabilities amounted
to EUR 8.4 (8.8) million, accounting for 17.3% (19.6%) of the
Group's shareholders' equity and liabilities total. Of the interest-
bearing liabilities, EUR 4.4 (4.0) million were non-current
liabilities and EUR 4.0 (4.8) million current liabilities. The
Group's Quick Ratio was 1.1 (1.1).
In the first half of 2005 the capital expenditures were EUR 2.4
(2.5) million including EUR 1.9 (2.2) million of capitalized
software development costs.
STATEMENT ON THE ADEQUACY OF THE COMPANY'S ASSETS
On June 30, 2005 the Group's cash and cash equivalents amounted to
EUR 6.5 (10.1) million. The amount of cash and cash equivalents
grew by EUR 1.5 million from January 1, 2005.
According to Proha's management, the liquid assets of the company
are sufficient for Proha to continue as a going concern during the
following 12 months.
RESEARCH AND DEVELOPMENT
The software development of Proha group is mainly done in the
Artemis sub-group. The development of Artemis 7 and solutions based
on it continued during the period. In the end of June Artemis
released a distinctly renewed version 6.1 of Artemis 7 portfolio
management solution. The new version of Artemis 7 includes now also
project and program management modules as well as demand management
and detailed scheduling modules.
Also a new version 7.21 of Artemis Views project management software
was released including among others a new reporting module.
For the Scandinavian markets a new version 4.5 was released on the
Value Point software for project management, time reporting and
invoicing of work intensive projects.
Safran released new versions of both its Safran Planner and Safran
for Microsoft Project software.
In the first half of 2005 the software development costs of
strategic products were EUR 3.4 (3.7) million, representing 10.5%
(11.0%) of the period's net sales.
Capitalization of software development costs has a material
positive effect on Proha' s result for the first quarter of 2005.
The capitalization of software development costs commenced on
January 1, 2004. The software development costs have not been
capitalized prior to January 1, 2004 because the criteria for IAS
38 accounting treatment with respect to the control system were not
met prior January 1, 2004 (IFRS 1 IG46).
Of the software development costs incurred in the first half of
2005 a total of EUR 1.9 (2.2) million has been capitalized. Of the
previously capitalized software development costs EUR 0.3 (0.1)
million were amortized.
Software development costs are treated under IAS 38, i.e.
development costs of totally new products and product versions with
significant new features are capitalized when certain criteria for
recognition are met and amortized over their useful lives.
Maintenance of existing products and their minor development are
immediately expensed. Government grants related to capitalized
development expenses are deducted from the carrying amount of the
asset. The useful life of software development expenses is
estimated to be between three and five years depending on the type
of product developed. The amortization is commenced when the
software is available for use.
PERSONNEL
On June 30, 2005 the Proha Group employed 527 (571) people
worldwide. At the end of the period, Artemis sub-group employed 311
(364) people and the Norwegian operations 187 (182). The number of
Proha personnel declined by 10.4% compared to the corresponding
period in 2004. During the first half of 2005, the average number
of Group personnel was 529 (588).
During the period January 1, - June 30, 2005 the staff costs
amounted to EUR 24.3 (24.9) million, constituting 76.0% (73.5%) of
net sales. During the three month period April 1, - June 30, 2005
the staff costs were EUR 12.2 (12.6) million, constituting 73.5%
(73.8%) of the net sales. The staff costs at Artemis decreased by
17.0%. Also the proportion of staff cost to net sales was smaller
than in the corresponding period in 2004. The increased volume of
the work intensive business of Dovre increased staff costs by 20.6%
at the Norwegian operations.
In the first half of 2005 there were no one-time charges. The non-
recurring charges for the corresponding period in 2004 include
employment termination costs of EUR 0.9 million.
Capitalization of product development costs as per IAS 38 standard
reduces the staff costs in the income statement. Of the staff costs
incurred during the first half of 2005 EUR 1.4 (1.7) million were
capitalized.
According to IFRS 2 standard the option rights granted for the
employees are to be measured at fair value on the grant date and
expensed in the income statement during their vesting period. Proha
applies the standard to all option rights granted after November 7,
2002 and not vested before January 1, 2005. In the first half of
2005 approx. EUR 0.2 (0.3) million of options were expensed.
Majority of option expenses are due to options granted for the
Artemis sub-group employees.
PROHA'S ANNUAL GENERAL MEETING ON APRIL 22, 2005
On April 22, 2005 the Annual General Meeting of Proha elected
Birger Flaa as the new member of the Board of Directors. Olof Ödman
(Chairman), Pekka Pere, Alec Gores, Carlo Boldi and Pekka Mäkelä
were re-elected. Later Carlo Boldi resigned from the board on June
28, 2005.
The Annual General Meeting decided that each Board member, not
employed by the Proha Group or by such company which owns more than
five percents of Proha's share capital and who does not exercise
dominant influence over such company, to be paid EUR 18,000 per
year as remuneration for board work.
Ernst & Young Oy was elected to continue as the Company's auditor,
with Ulla Nykky, APA, as the auditor in charge.
On April 22, 2005 the Annual General Meeting authorized the Board
of Directors to increase the company's share capital. 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
12,243,554 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 3,183,324.04, which represents 20% of the currently
registered share capital and of the votes that can be cast in the
General Meeting of Shareholders. The authorization is valid until
April 22, 2006.
The Annual General Meeting approved the Board of Directors'
proposal to issue a maximum of 585,000 option rights that were
offered deviating from the shareholders' pre-emptive subscription
right to the management of the Group companies. Options were not
offered to the members of the Board of Directors or to the CEO of
Proha Plc.
The subscription of the option rights began on April 25, 2005 and
ended on May 25, 2005. The Board approved the subscriptions in its
meeting on May 9, 2005. The issue was fully subscribed If the
options are exercised the share capital of Proha Plc may increase
by a maximum of 585,000 shares and EUR 152,100.00. The options now
issued constitute a maximum of 0.95% of the Company's shares and
voting rights after the potential share capital increase. The
subscription price was EUR 0.50, which is the weighted average
price of the Company share from April 4, 2005 through April 22,
2005. The complete terms and conditions were given in a stock
exchange bulletin on March 30, 2005.
The Annual General Meeting confirmed the Financial Statements of
2004 and discharged the CEO and the Board of Directors from
liability.
The Annual General Meeting approved the Board of Directors'
proposal according to which no dividend is paid and the result for
the financial year is entered in profit/loss brought forward.
The Annual General Meeting cancelled the decision of the
Extraordinary General Meeting of Proha on October 23, 2002 to
continue the strategy of owning Artemis International Solutions
Corporation shares through Proha and discontinue implementing other
structure alternatives. The Board of Directors is now enabled to
evaluate and carry out all strategic alternatives, which the Board
of Directors considers to serve the interests of the shareholders
in the changed circumstances.
EVENTS AFTER THE PERIOD
DECISIONS OF ANNUAL MEETING OF ARTEMIS INTERNATIONAL SOLUTIONS
CORPORATION STOCKHOLDERS
The Annual Meeting of Stockholders of Artemis International
Solutions Corporation was held on July 27, 2005. The stockholders
re-elected Pekka Pere, Olof Ödman and Bengt-Åke Älgevik. In
addition, Steve Yager, Mike Murphy, Joseph Liemandt and David
Cairns will continue as Directors.
NEW CHAIRMAN OF ARTEMIS BOARD
On August 9, 2005 the Chairman of Artemis Board of Directors Steve
Yager resigned the Board. Effectively immediately, as voted upon
and ratified by the Company's entire Board of Directors, current
Board member Pekka Pere assumed the role of Chairman of the Board.
CORPORATE GOVERNANCE
Proha Plc follows the recommendations of the Helsinki Stock
Exchange, the Central Chamber of Commerce and the Confederation of
Finnish Industries and Employers regarding the corporate governance
of publicly held companies. Proha deviates from the recommendation
in two respects. 1) Of the five members of the Proha Board of
Directors only two are currently independent of the company and
only one of them is also independent of any significant owners. 2)
A share-based bonus system may also be applied to those members of
the Board, who do not have an employment relationship with the
company. Proha's corporate governance principles can be found on
the company's website at www.proha.com.
SHARE CAPITAL AND AUTHORIZATIONS TO ISSUE SHARES
Proha Plc has one class of shares. The book value of the shares is
EUR 0.26 per share. Each share entitles the shareholder to one
vote. Proha Plc shares are traded on the NM list of the Helsinki
Stock Exchange.
On January 1, 2005, the subscribed capital of Proha Plc was EUR
15,916,620.20 and the total number of shares was 61.217.770. During
the first half of 2005 there were no changes in the subscribed
capital.
The Board of Directors has the authorization by the Annual General
Meeting to increase the company's share capital. Pursuant to this
authorization, the aggregate maximum number of new shares to be
issued shall not exceed 12,243,554 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 3,183,324.04. The
authorization is valid until April 21, 2006.
On April 26, 2005, Proha Board of Directors approved the
subscriptions of the option issue for employees, in total 535,080
option rights. In it' s meeting on May 9, 2005 the Board the
subscriptions of management options, in total 585,000 option
rights. All option rights entitle to subscription of one share
each.
The Board confirmed the subscription price for the shares
subscribed on the basis of both the management and personnel stock
options as EUR 0.50 per share. The confirmed share subscription
price for the options is the weighted average price of the Company
share from April 4, 2005 through April 22, 2005 and thus
corresponds to the fair market price.
The terms and conditions of the option issues were published in the
Stock Exchange Bulletin on March 30, 2005.
The grand total of Proha Plc shares subscribable under all Proha' s
option plans is 4,670,742.
TRADING ON THE HELSINKI STOCK EXCHANGE
The number of registered shareholders of Proha Plc totaled 3,787 on
June 30, 2005. During the period January 1 - June 30, 2005, the
share price was EUR 0.44 at its lowest and EUR 0.56 at its highest.
The closing price on June 30, 2005 was EUR 0.47. Market
capitalization was approximately EUR 28.8 million at the end of the
period. The trading volume of the Proha share on the NM list of the
Helsinki Stock Exchange was approximately EUR 6.5 million.
PROSPECTS FOR THE NEAR FUTURE
Proha' s management anticipates the Group' s operating result to be
positive for the full year 2005. In line with normal seasonal
fluctuations the third quarter operating result is not expected to
be positive.
PUBLICATION OF ARTEMIS' RESULT FOR THE SECOND QUARTER OF 2005
The Artemis sub-group published its Report for first half of 2005
on August 11, 2005. The Report for the second quarter 2005 (FORM 10-
Q) is available on the SEC website at
www.sec.gov/edgar/searchedgar/companysearch.html under the name
Artemis International.
PRESS CONFERENCE
PRESS CONFERENCE
Proha Plc will hold a press conference for the media and financial
analysts on August 11, 2005 at 12.00 a.m., at cabinet 1,
World Trade Center, address Aleksanterinkatu 17, Helsinki.
PROHA GROUP CONSOLIDATED INCOME STATEMENT AND BALANCE SHEET
JANUARY 1-JUNE 30, 2005
INCOME STATEMENT 1/05-6/05 1/04-6/04 1/04-12/04
(EUR 1000) (EUR 1000) (EUR 1000)
Net sales 32 014 33 907 65 714
Other operating income 1 361 4 101 4 433
Materials and services -1 841 -2 705 -4 608
Staff costs -24 320 -24 924 -47 593
Depreciation, amortization and
value adjustments total -504 -312 -804
Other operating expenses -6 040 -7 488 -14 291
Operating profit/loss 670 2 580 2 851
Financial income and expense -721 -40 -73
Share of associated companies'
results 0 39 80
Result before taxes -51 2 580 2 858
Income taxes -500 -451 -703
Profit/loss before minority
interest -551 2 129 2 155
Minority interest 9 -190 -212
Profit/loss for the financial -542 1 939 1 943
BALANCE SHEET 30.6.2005 30.6.2004 31.12.2004
(EUR 1000) (EUR 1000) (EUR 1000)
ASSETS
Non-current assets
Intangible assets 7 678 4 293 5 665
Goodwill on consolidation 10 877 11 170 11 245
Tangible assets 694 977 818
Investments 1 062 1 234 1 095
Non-current assets total 20 311 17 674 18 822
Current assets
Non-current receivables 881 1 023 1 081
Current receivables 21 177 21 309 21 966
Marketable securities 0 80 0
Cash and cash equivalents 6 535 10 065 5 069
Current assets total 28 593 32 477 28 116
ASSETS TOTAL 48 904 50 152 46 938
SHAREHOLDERS' EQUITY AND
LIABILITIES
Shareholders' equity
Subscribed capital 15 917 15 917 15 917
Share issue 0 0 0
Share premium account 4 807 4 848 4 807
Revaluation reserve 461 480 467
Translation differences 2 473 1 866 1 646
Profit/loss brought forward -6 748 -8 988 -8 863
Profit/loss for the financial
year -542 1 939 1 943
0 0 0
Shareholders' equity total 16 367 16 061 15 916
Minority interest 60 49 70
Provisions 294 241 190
Liabilities
Non-current
liabilities 5 311 4 942 5 482
Current liabilities 26 871 28 859 25 280
Liabilities total 32 182 33 801 30 762
TOTAL EQUITY AND LIABILITIES 48 904 50 152 46 938
1) Weighted number of shares
(undiluted), EUR 61 217 770 53 367 270 57 313 830
1) Earnings per share
(undiluted), EUR -0.009 0.036 0.034
2) Weighted number of shares
diluted by stock options 61 352 668 55 228 011 58 473 243
2) Earnings per share,
(diluted), EUR -0.009 0.035 0.033
3) Number of shares at the end
of the period 61 217 770 53 367 270 61 217 770
3) Equity per share, EUR 0.27 0.30 0.26
RECONCILIATION OF SHAREHOLDERS'
EQUITY
Sub- Share Revalu Transl Profit Total
scribed premium ation ation loss/
capital account reserve diff. brought
forward
SHAREHOLDERS' EQUITY
IFRS 1.1.2005 15 917 4 807 467 1 647 -6 923 15 916
Change in translation
difference 21 762 0 783
Share based payments 204 204
Result for the
period -542 -542
Transfers between
items -27 27 0
Other change 7 7
SHAREHOLDERS' EQUITY
IFRS 30.6.2005 15 917 4 807 461 2 409 -7 227 16 367
RECONCILIATION OF SHAREHOLDERS' EQUITY
Sub- Share Revalu- Trans- Profit Total
scribed premium ation lation loss
capital account reserve difference brought
forward
SHAREHOLDERS'
EQUITY
1.1.2004 13 875 2 964 0 2 363 -9 346 9 857
Share issue 2 041 1 884 3 925
Revaluation
of
intangible 480 480
assets
Change in
translation
difference -497 -497
Share based
payments 196 196
Profit /
loss brought
forward 1 939 1 939
Other change 0 161 161
SHAREHOLDERS'
EQUITY
30.6.2004 15 917 4 848 480 1 866 -7 050 16 061
CASH FLOW 1/05- 1/05- 1/04- 1/04- 1/04- 1/04-
STATEMENT 03/05 06/05 03/04 06/04 09/04 12/04
Cash flow from
operating activities
Operating
result 279 670 -986 2 594 1 879 2 851
Adjustments -48 159 249 -3 086 -3 060 -3 300
Change in net
working
capital 2 359 408 -1 580 -1 868 -1 674 -3 412
Financial
income and
expense, net -478 -523 259 -42 -446 230
Income taxes -487 -465 -619 -710 -352 -1 203
Cash flow from
operating
activities 1 625 249 -2 677 -3 112 -3 653 -4 834
Cash flow from
investing activities
Investments in
tangible and
tangible
assets -1 073 -2 358 -1 267 -2 424 -3 390 -4 147
Disposal of other
investments 0 236 236 236
Disposals of
associated
companies 573 626 0 0 0 0
Partial
disposals of
subsidiary
companies 197 548 0 7 404 7 404 7 404
Proceeds and
repayments of
loan
receivables 2 608 3 030 -12 14 279 292
Cash flow from
investing
activities 2 305 1 846 -1 279 5 230 4 529 3 785
Cash flow from
financing activities
0
Proceeds from
short-term
loans 2 119 2 409 3 556 3 655 4 461 4 847
Repayments of
short-term
loans -2 262 -3 568 -19 -2 292 -2 289 -2 983
Proceeds from
long-term loans 0 543 0 72 224 223
Repayments of
long-term loans -13 -13 -135 -158 -148 -134
Increase / decrease
in long-term
receivables -2 500 -2 500
Dividends paid 0 0 0 -388 -393 -393
Cash flow from
financing
activities -156 -629 3 402 889 -645 -940
Change in cash
and cash
equivalents 3 774 1 466 -554 3 007 231 -1 989
Cash and cash
equivalents,
beginning
balance -5 069 -5 069 -7 058 -7 058 -7 058 -7 058
Cash and cash
equivalents,
ending balance 8 843 6 535 6 504 10 065 7 289 5 069
Change in cash
and cash
equivalents 3 774 1 466 -554 3 007 231 -1 989
The opening balance sheet on January 1, 2004 has been published as
a stock exchange bulletin on March 3, 2005. Reconciliations of
shareholders' equity on June 30, 2004 and on December 31, 2004
have been published as a stock exchange bulletin on August 11, 2005.
Reconciliation of result in the financial year of 2004 and
reconciliation of result for the period January 1 - June 30, 2004
have been published as a stock exchange bulletin on August 11, 2005.
CONTINGENT LIABILITIES 30.6.2005 31.12.2004
(EUR 1000) (EUR 1000)
COLLARETAL FOR OWN
COMMITENTS
Debts secured by corporate
mortgages
Pension loans 100 100
Corporate mortgages given as
security of the loans 168 168
Debts secured by the assets
of the company
Loans from financial 715 1 101
institutions
Debts secured by the assets
of Artemis International
Solutions Corporation except
for intellectual property rights.
Debts secured by assets
Loans and checking account
credit lines used 1 433 1 810
Book value of trade receivables
and fixed assets given as
security 5 063 6 035
Debts secured by shares
Loans from financial 60 72
institutions
Book value of pledged shares 152 152
Leasing and rental
liabilities
In the following financial year 1 978 2 673
Thereafter 5 476 6 162
Total 7 454 8 835
CONTINGENT LIABILITIES ON BEHALF OF
SUBSIDIARY COMPANIES
Debts secured by deposits
Loans from financial 2 500
institutions
Book value of deposits 2 500
INCOME STATEMENT
(1000 EUR) 1-6 1-6 Change 4-6 4-6 Change 1-12
2005 2004 % 2005 2004 % 12/2004
NET SALES 32 014 33 907 -6 16 571 17 020 -3 65 714
Other
operating
income 1 361 4 101 -67 624 4 074 -85 4 433
Material and
services -1 841 -2 705 -32 -980 -1 304 -25 -4 608
Employee
benefits
expense -24 320 -24 924 -2 -12 186 -12 560 -3 -47 593
Depreciation
and
amortisation -504 -320 58 -274 -209 31 -804
Other
operating
expenses -6 040 -7 480 -19 -3 364 -3 457 -3 -14 291
Operating
Profit 670 2 580 -74 391 3 566 -89 2 891
Financing
income and
expenses -721 -40 1 722 -333 -197 69 -73
Share of
profit/loss in
associates 0 39 -101 0 11 -100 80
PROFIT/LOSS
BEFORE TAX AND
MINORITY
INTEREST -51 2 580 -102 57 3 382 -98 2 858
Tax on income
from
operations -500 -451 11 -275 -103 167 -703
PROFIT/LOSS
FOR THE PERIOD -551 2 129 -126 -217 3 279 -107 2 155
ALLOCATION OF
PROFIT OR LOSS
FOR THE PERIOD
Profit or loss
attributable
to minority
interest -542 1 939 -128 -217 3 270 -107 1 943
Profit or loss
attributable
to equity
holders of the
parent -9 190 -105 0 9 -101 212
-551 2 129 -126 -217 3 279 -107 2 155
1-6/ 1-6/ Change 4-6/ 4-6/ Change 1-12/
% %
2005 2004 2005 2004 2004
Earnings/share
(undiluted), -0.009 0.036 -125 -0.004 0.061 -106 0.034
eur
Earnings/share
(diluted), eur -0.009 0.035 -126 -0.004 0.061 -106 0.033
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