Proha Plc Stock Exchange Bulletin November 10, 2005 at 9.00 a.m.
PROHA PLC INTERIM REPORT (IFRS) JANUARY 1, - SEPTEMBER 30, 2005
- The Proha Group net sales for the period January 1, - September 30,
2005 were EUR 46.6 million (EUR 48.4 million in the corresponding
period in 2004).
- The net sales for the three months July 1, - September 30, 2005 were
EUR 14.6 (14.5) million.
- The operating profit the period January 1, - September 30, 2005 was
EUR 0.2 (1.9) million.
- The operating profit for the period January 1, - September 30, 2005
includes EUR 0.6 (2.2) million in non-recurring items. The operating
profit before non-recurring items for the period was EUR -0.4 (-0.3) million.
- The operating profit for the three months July 1, - September 30, 2005
was EUR -0.5 (-0.7) million.
- The operating profit for the period July 1, - September 30, 2005
includes EUR 0.0 (-0.6) million in non-recurring items. The operating
profit before the non-recurring items was EUR -0.5 (-0.1) million.
- The Group's cash flow from operations was EUR -0.6 (-3.7) million
for the period January 1, - September 30, 2005.
- The result for the third quarter was as anticipated.
- Proha's management maintains its previous estimates and anticipates
the operating result for the full year 2005 to be positive.
KEY RATIOS OF THE PROHA GROUP
(EUR million)
7-9 7-9 Change 1-9 1-9 Change 1-12
2005 2004 % 2005 2004 % 2004
Net Sales 14.6 14.5 0.8% 46.6 48.4 -3.7% 65.7
Operating result -0.5 -0.7 -32.8% 0.2 1.9 -89.4% 2.9
% of Net Sales -3.2% -4.8% 0.4% 3.9% 4.3%
Result
before taxes -0.8 -0.9 -10.8% -0.9 1.6 -154.9% 2.9
Result for the
period -1.0 -0.9 2.5% -1.5 1.0 -250.8% 1.9
Return on
Equity % -23.9% -23.6% -12.7% 12.1% 16.0%
Return on
Investment % -5.2% -8.6% 6.8% 17.4% 20.8%
Cash and cash
equivalents 6.7 7.3 -8.2% 6.7 7.3 -8.2% 5.1
Debt-equity
ratio % 20.2% 15.1% 20.2% 15.1% 24.0%
Equity-ratio % 35.6% 34.6% 35.6% 34.6% 35.7%
Gross Investments 1.0 0.9 11.1% 3.2 3.4 -5.9% 7.5
% of Net Sales 6.9% 6.2% 6.9% 7.0% 11.4%
Research and
development
costs 1.8 1.6 12.5% 5.2 5.3 -1.9% 6.8
% of Net Sales 12.3% 11.0% 11.1% 10.9% 10.4%
Capitalized
development costs 1.0 1.0 0.0% 2.9 3.2 -9.4% 3.9
Personnel average
for the period 517 566 -8.7% 525 581 -9.6% 569
Personnel at the
end of the period 516 563 -8.4% 516 563 -8.4% 525
Basic earnings
per share, EUR -0.016 -0.015 -1.9% -0.025 0.016 -250.2% 0.034
Equity per
Share, EUR 0.26 0.25 1.4% 0.26 0.25 1.4% 0.26
Diluted earnings
per share, EUR -0.016 -0.015 -2.3% -0.024 0.016 -250.8% 0.033
Cash flows from
operating
activities -0.9 -0.5 -65.4% -0.6 -3.7 82.3% -4.8
IFRS REPORTING
The interim report of Proha has been prepared according to the International
Financial Reporting Standards (IFRS). Proha will publish its first IFRS
Financial Statements for the financial year ending December 31, 2005.
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 subsidiaries. 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 subsidiaries, Dovre International AS and Safran Software Solutions
AS, fully owned by Proha. The Norwegian subsidiaries operate globally focusing
their business on project management services and software. Of their business
approx. 75% comes from oil and gas sector and approx. 25% from other project
management.
At the end of the period Proha's ownership at Artemis was 53.46%. 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. The shares
subscribed for with these options have in their part reduced Proha s ownership
at Artemis.
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 period January 1, - September 30, 2005 Artemis sub-group accounted
for approximately 58.5% (63.7% 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 40.5% (33.8%) of the net sales of the Group.
Artemis sub-group
The new generation Artemis 7 solutions cover extensively the whole range of
portfolio management. 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 project management in other business areas such as
construction.
The sales of strategically important Artemis 7 solutions grew by 63% compared
to the corresponding period in 2004 representing 65% of the total license
revenue for the nine months in 2005. Artemis sub-group has gained significant
new Artemis 7 customers during the nine months in 2005 and the existing
customers have expanded their 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 solutions have
been implemented e.g. in pharmaceutical industry, electronics industry,
transportation and in manufacturing as well as in insurance, finance and
banking sectors, consulting, retail and telecommunication sectors.
The share of one-time and recurring license revenue of Artemis net sales
increased during the period January 1, - September 30, 2005. During the period
a total of 30,157 Artemis end-user licenses were purchased (35,000 in 2004)
with Artemis 7 licenses accounting for over half of them. The total number of
Artemis licenses sold worldwide is over 636,000.
Norwegian subsidiaries
The Norwegian subsidiaries Dovre International AS and Safran Software Solutions
AS are reported as a business segment. During the nine months of 2005 Dovre
accounted for approximately 94.4% (94.2% in 2004) and Safran 5.6% (5.8%) of the
net sales of the operations. The business volume of the Norwegian operations as
a whole developed as anticipated and Dovre is planning to increase personnel to
meet the increasing demand in the oil and gas industry. The optimism in the oil
and gas industry investments following the high oil prices has continued. The
level of investments in the Norwegian oil and gas industry is higher than ever
before.
The business for Dovre's subsidiary in the USA continued to develop favorably.
The US-operations brought approximately 12% of the total net sales of Dovre
during the period January 1, - September 30, 2005. The subsidiary s net sales
more than doubled compared to the corresponding period in 2004, when the
subsidiary brought approx. 6% of Dovre s net sales.
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.
In September Proha started the new Mobile Business Unit, that develops and
sells automatic workflow management software and provides the integration
services for the software. The Unit s solutions communicate the information and
messages arising from the companies ERP, project management and/or customer
processes safely and automatically between the systems and their users.
Mobile Business Unit strengthens Proha s ability to operate in the expanding
project management and ERP markets. The first product Mobile Workflow Manager
with its service package was accomplished in September and piloting projects
are planned to start in the fourth quarter 2005.
The new business will not have a material impact on Proha s net sales or result
for 2005 and unit s operations are not reported separately. Mobile Business
Unit is, however, expected to become a significant addition to Group s business
in the future.
NET SALES
The Proha Group's net sales for the period January 1 - September 30, 2005 were
EUR 46.6 million (48.4 million in 2004), which is 3.7% less than in the
previous year. The net sales for the third quarter of 2005 were EUR 14.6 (14.5)
million, which was 0.8% more than in the corresponding quarter of 2004.
Distribution of net sales by revenue type:
(EUR million, % of net sales)
7-9 7-9 1-9 1-9 1-12
2005 % 2004 % 2005 % 2004 % 2004 %
One time
license
revenue 1.8 12.4 2.2 15.4 6.6 14.1 7.6 15.8 11.1 16.9
Recurring
license
revenue 3.5 23.9 4.0 27.9 10.7 23.1 11.2 23.1 14.9 22.6
Services 9.3 63.6 8.2 56.7 29.3 62.9 29.6 61.1 39.7 60.4
Total 14.6 100.0 14.5 100.0 46.6 100.0 48.4 100.0 65.7 100.0
For the period January 1 - September 30, 2005 the net sales continued to
constitute mainly of services with EUR 29.3 (29.6) million or 62.9% (61.1%).
For the three months period July 1, - September 30, 2005 the service revenue
was EUR 9.3 (8.2) million constituting 63.6% (56.7%) 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 - September 30, 2005 the license sales amounted to EUR
17.3 (18.8) million, accounting for 37.1% (38.9%) of the net sales. The share
of one-time licenses was EUR 6.6 (7.6) million and that of recurring licenses
EUR 10.7 (11.2) million.
For the three months period July 1, - September 30, 2005 the license sales
amounted to EUR 5.3 (6.3) million, accounting for 36.4% (43.3%) of the net
sales. The share of one-time licenses was EUR 1.8 (2.2) million and that of
recurring licenses EUR 3.5 (4.0) million.
Distribution of net sales by segment:
(EUR million)
7-9 7-9 Change 1-9 1-9 Change 1-12
2005 2004 % 2005 2004 % 2004
Artemis sub-group 8.3 8.9 -6.9 27.3 30.8 -11.5 41.9
Norwegian
subsidiaries 6.2 5.3 16.5 18.9 16.4 15.4 22.4
Unallocated items 0.2 0.3 -32.0 0.6 1.4 -57.3 1.8
Inter-segment
net sales -0.1 -0.1 -0.2 -0.2 -0.3
Group total 14.6 14.5 0.8 46.6 48.4 -3.7 65.7
Distribution of net sales by country:
(EUR million)
7-9 7-9 1-9 1-9 1-12
2005 2004 2005 2004 2004
Great Britain 1.4 1.3 4.2 4.5 5.8
Italy 1.3 1.0 4.4 4.3 6.0
Japan 1.3 0.9 3.6 3.0 4.1
Norway *) 6.2 5.3 18.9 16.4 22.4
France 1.1 1.2 4.6 4.6 6.6
Germany 0.4 0.7 1.2 2.3 2.8
Finland 1.0 1.6 3.8 5.6 7.2
United States 1.7 2.1 5.1 6.8 9.7
Others 0.2 0.3 0.8 0.9 1.2
Net sales
between countries 0.0 0.0 0.0 0.0 -0.1
Total 14.6 14.5 46.6 48.4 65.7
Distribution of net sales by country:
(% of net sales)
7-9 7-9 1-9 1-9 1-12
2005 2004 2005 2004 2004
% % % % %
Great Britain 9.9 8.9 9.0 9.3 8.8
Italy 8.9 7.2 9.5 8.8 9.1
Japan 8.9 6.6 7.6 6.2 6.3
Norway *) 42.4 36.6 40.5 33.8 34.0
France 7.4 8.0 9.9 9.5 10.0
Germany 2.8 4.9 2.7 4.7 4.3
Finland 6.6 11.2 8.1 11.6 11.0
United States 11.7 14.5 11.0 14.1 14.8
Others 1.5 2.2 1.8 1.9 1.7
Net sales
between countries 0.0 -0.1 0.0 -0.1 -0.1
Total 100.0 100.0 100.0 100.0 100.0
*) 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 27.3 (30.8) million and
accounted for 58.5% (63.7%) of the Group's net sales for the nine months in
2005. The net sales of Artemis declined by 11.5% compared to the corresponding
period in 2004.
For the three months period July 1, - September 30, 2005 the net sales of the
Artemis sub-group were EUR 8.3 (8.9) million accounting for 57.0% (61.7%) of
the Group's net sales. Compared to the corresponding period in 2004 the net
sales of Artemis declined by 6.9%.
At Artemis sub-group the share of both one-time and recurring license revenue
increased. During the period January 1 - September 30, 2005 the share of
license revenue was 60.9% (56.1%) of the net sales.
Norwegian subsidiaries
In period January 1, - September 30, 2005 the net sales of the Norwegian
subsidiaries totaled EUR 18.9 (16.4) million and accounted for 40.5% (33.8%) of
the Group's net sales. The net sales of Norwegian subsidiaries grew by 15.4%
compared to the corresponding period in 2004.
For the three months period July 1, - September 30, 2005 the net sales of the
Norwegian subsidiaries were EUR 6.2 (5.3) million accounting for 42.4% (36.6%)
of the Group' s net sales. The net sales of the Norwegian subsidiaries grew by
16.5% compared to the corresponding period in 2004. The net sales include the
revenue from the operations outside Norway.
PROFITABILITY
The Proha Group' s operating profit for the period January 1 - September 30,
2005 totaled EUR 0.2 (1.9) million. The operating profit for the period January
1, - September 30, 2005 includes EUR 0.6 (2.2) 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 (1.8) million. The non-recurring income includes EUR 0.6
million of arbitration proceedings from Changepoint France settlement and EUR
0.3 million from the partial disposals of Artemis. The operating profit before
non-recurring items for the period was EUR -0.4 (-0.3) million.
The Group' s operating profit for the third quarter of 2005 was EUR -0.5 (-0.7)
million. The operating profit for the period July 1, -September 30, 2005 does
not include any non-recurring items. For the corresponding period in 2004 the
non-recurring items include EUR 0.3 million in personnel charges and EUR 0.3
million in other charges. The operating profit before non-recurring items for
the third quarter was EUR -0.5 (-0.1) million.
During the period January 1, - September 30, 2005 the cost level of the Group
business operations was approximately 6.0% lower compared to the previous year.
The cost level at Artemis was 14.4% lower due to more cost effective
performance. On the other hand the cost level at Norwegian subsidiaries was
14.6% higner reflecting the growth in their business volume.
Distribution of operating result by segment:
(EUR million)
7-9 7-9 Change 1-9 1-9 Change 1-12
2005 2004 % 2005 2004 % 2004
Artemis
sub-group -0.5 -0.4 -14.7 0.6 2.4 -73.3 3.3
Norwegian
subsidiaries 0.4 0.1 176.7 0.9 0.7 33.1 1.0
Unallocated
items -0.3 -0.3 13.9 -1.2 -1.1 -13.5 -1.3
Inter-segment
operating 0.0 -0.1 -143.2 -0.1 -0.1 -0.2
result
Group total -0.5 -0.7 32.8 0.2 1.9 -89.4 2.9
Artemis sub-group
For the period January 1 - September 30, 2005 the Artemis sub-group's operating
profit was EUR 0.6 (2.4) million, which includes EUR 0.6 million of arbitration
proceedings from Changepoint France settlement in the first quarter of 2005.
The operating profit for the corresponding period in 2004 includes EUR 4.0
million income from the partial disposal of Artemis.
The operating result of Artemis for the nine months of 2005 does not include
any non-recurring restructuring charges. The total EUR 1.8 million of non-
recurring restructuring charges for the corresponding period in 2004 include
employment termination costs of EUR 1.2 million and other operating expenses of
EUR 0.6 million at Artemis.
For the three month period July 1 - September 30, 2005 the Artemis sub-group's
operating profit was EUR -0.5 (-0.4) million. Artemis initiated cost saving
measures that according to the Artemis management will positively impact
Artemis cost structure in 2006.
Norwegian subsidiaries
For the period January 1 - September 30, 2005 the operating profit of the
Norwegian subsidiaries was EUR 0.9 (0.7) million. The extra costs aimed at
business growth increased the cost level of the Norwegian subsidiaries during
the first quarter of 2005. The business operations were profitable during the
period January 1, - September 30, 2005.
For the three month period July 1 - September 30, 2005 the operating profit of
the Norwegian operations was EUR 0.4 (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 - September 30, 2005 the Group' s research and
development costs were EUR 5.2 (5.3) million in total, of which a total of EUR
2.9 (3.2) million were capitalized. Amortization of software development costs
were EUR 0.4 (0.1) million for the period.
In the period January 1 - September 30, 2005 the Group's result before taxes
was EUR -0.9 (1.6) million. The net result for the period was EUR -1.5 (1.0)
million.
Earnings per share amounted to EUR -0.025 (0.016). Return on investment (ROI)
was 6.8% (17.4%) and return on equity (ROE) was -12.7% (12.1%).
CASH FLOW, FINANCING AND INVESTMENTS
The balance sheet total on September 30, 2005 was EUR 46.0 (47.0) million. At
the end of the period, cash and cash equivalents totaled EUR 6.7 (7.3) million,
growing EUR 1.6 million compared to the situation on December 31, 2004.
During the nine months of 2005, cash flow from operating activities was
EUR -0.6 million (-3.7).
Total of EUR 3.2 million were used for investments primarily on software
development. However, the total cash flow of investments was EUR 1.1 million
positive with EUR 0.6 million proceeds from divestment of Changepoint France
and EUR 0.6 million from the partial disposals of Artemis increasing the cash
flow with total EUR 1.2 million and the loan receivables decreasing by EUR 3.1
million.
Total of EUR 4.9 million new loans were drawn and total of EUR 3.7 million
loans repaid, resulting in total EUR 1.2 million in cash flow of financing
activities.
Equity to assets ratio was 35.6% (34.6%) and gearing was 20.2% (15.1%). On
September 30, 2005 the interest-bearing liabilities amounted to EUR 9.9 (9.6)
million, accounting for 21.4% (20.5%) of the Group's shareholders' equity and
liabilities total. Of the interest-bearing liabilities, EUR 6.0 (4.0) million
were non-current liabilities and EUR 3.8 (5.6) million current liabilities. The
Group's Quick Ratio was 1.1 (1.1).
In period January 1, - September 30, 2005 the capital expenditures were EUR 3.2
(3.4) million including EUR 2.9 (3.2) million of capitalized software
development costs.
STATEMENT ON THE ADEQUACY OF THE COMPANY'S ASSETS
On September 30, 2005 the Group's cash and cash equivalents amounted to EUR 6.7
(7.3) million. The amount of cash and cash equivalents grew by EUR 1.6 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.
In the third quarter a new version 4.7 of the Value Point software for project
management, time reporting and invoicing of work intensive projects was
released for the Scandinavian markets. Likewise, a new version 6.1 of Planet
project management software was released in Scandinavia in the third quarter.
Safran released new versions of both its Safran Planner and Safran for
Microsoft Project software during the period under review.
During the third quarter Proha s Mobile Business Unit has developed the Mobile
Workflow Manager application that enhances the customers operative workflow
management and ERP. The product is developed in cooperation with BookIT Oy and
the work has been granted financing from Tekes (the National Technology Agency
of Finland).
In the period January 1, - September 30, 2005 the software development costs of
strategic products were EUR 5.2 (5.3) million, representing 11.1% (10.9%) of
the period's net sales.
Capitalization of software development costs has a material positive effect on
Proha' s result for the period January 1, - September 30, 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 during the nine months of 2005 a
total of EUR 2.9 (3.2) million have been capitalized. Of the previously
capitalized software development costs EUR 0.4 (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 September 30, 2005 the Proha Group employed 516 (563) people worldwide.
Distribution of personnel by segment (average):
7-9 7-9 1-9 1-9 1-12
Personnel 2005 2004 Change 2005 2004 Change 2004
% %
Artemis
sub-group 305 344 -11,3 % 311 359 -13,6 % 349
Norwegian
subsidiaries 186 185 0,5 % 186 183 1,9 % 183
Other 26 38 -31,6 % 29 39 -26,8 % 37
Group total 517 566 -8,7 % 525 581 -9,6 % 569
At the end of the period, Artemis sub-group employed 303 (340) people and the
Norwegian subsidiaries 187 (186). The number of Proha personnel declined by
8.4% compared to the corresponding period in 2004. In the period January 1, -
September 30, 2005, the average number of Group personnel was 525 (581).
During the period January 1, - September 30, 2005 the staff costs amounted to
EUR 35.4 (36.0) million, constituting 75.9% (74.3%) of net sales. During the
three month period July 1, - September 30, 2005 the staff costs were EUR 11.1
(11.0) million, constituting 75.8% (76.3%) of the net sales.
During the period January 1, - September 30, 2005 the staff costs at Artemis
decreased by 13.0% compared to the corresponding period in 2004. The proportion
of staff cost to net sales was 63.6% (64.8%). During the period the increased
volume of the work intensive business of Dovre increased staff costs by 15.6%
at the Norwegian subsidiaries. The proportion of staff cost to net sales was
88.8% (88.6%).
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 nine months of 2005 EUR 2.2 (2.5) million were capitalized as product
development costs.
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 period January 1, - September 30, 2005 EUR 0.3 (0.4) million of options
were expensed. Majority of option expenses are due to options granted by
Artemis sub-group .
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 and Alec Gores on August 17, 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 represented 20% of the 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 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.
ANNUAL MEETING OF ARTEMIS INTERNATIONAL SOLUTIONS CORPORATION STOCKHOLDERS AND
THE BOARD OF DIRECTORS
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 continue as Directors. On August 9, 2005 the Chairman
of Artemis Board of Directors changed as Steve Yager resigned and 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 four members of the
Proha Board of Directors only one is 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. In the period January 1, -
September 30, 2005 there were no changes in the subscribed capital. After the
period on October 12, 2005 a total of 900 new Proha Plc shares were registered
in the Trade Register. The shares were subscribed for by option rights of 2001.
After the registration, the share capital of Proha Plc is EUR 15,916,854.20 and
the number of shares is 61,218,670.
The Board of Directors has the authorization by the Annual General Meeting
April 22, 2005 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 approved the subscriptions of management options, in
total 585,000 option rights. Further in it s meeting on September 21, 2005 the
Board approved the subscriptions of total 90,000 option rights, which were
issued due to changes in the management. 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 share subscription price is the same
for the options issued on September 21, 2005.
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 4,760,742.
TRADING ON THE HELSINKI STOCK EXCHANGE
The number of registered shareholders of Proha Plc totaled 3,780 on September
30, 2005. During the period January 1 - September 30, 2005, the share price was
EUR 0.40 at its lowest and EUR 0.56 at its highest. The closing price on
September 30, 2005 was EUR 0.41. Market capitalization was approximately EUR
25.1 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 6.8 million
during the period.
PROSPECTS FOR THE NEAR FUTURE
Proha's management maintains its previous estimates and anticipates the
operating result for the full year 2005 to be positive.
PUBLICATION OF ARTEMIS' RESULT FOR THE THIRD QUARTER OF 2005
The Artemis sub-group published its third quarter result of 2005
on November 9, 2005. The full report (FORM 10-Q) is available on the SEC
website at
www.sec.gov/edgar/searchedgar/companysearch.html under the name
Artemis International.
PRESS CONFERENCE
Proha Plc will hold a press conference for the media and financial
analysts on November 10, 2005 at 12.00 a.m., at Marskin Sali cabinet,
World Trade Center, address Aleksanterinkatu 17, Helsinki.
More information
PROHA PLC
CEO Pekka Pere, tel +358 (0)20 4362 000
pekka.pere@proha.com
www.proha.com
DISTRIBUTION:
Helsinki Stock Exchange
Major Media
The figures are unaudited.
PROHA GROUP CONSOLIDATED INCOME STATEMENT AND BALANCE SHEET
JANUARY 1-SEPTEMBER 30, 2005
(EUR 1000)
7-9 7-9 Change 1-9 1-9 Change 1-12
2005 2004 % 2005 2004 % 2004
NET SALES 14 598 14 487 0.8 46 612 48 394 -3.7 65 714
Other operating
income -24 163 -115.0 1 337 4 264 -68.7 4 433
Material and
services -586 -846 30.7 -2 428 -3 551 31.6 -4 608
Employee
benefits expense -11 069 -11 047 -0.2 -35 389 -35 970 1.6 -47 593
Depreciation
and amortisation -415 -241 -72.2 -920 -553 -66.2 -804
Other operating
expenses -2 975 -3 217 7.5 -9 015 -10 704 15.8 -14 291
OPERATING RESULT -472 -701 32.8 198 1 879 -89.4 2 851
Financing income
and expenses -373 -291 -28.3 -1 094 -330 -231.1 -73
Share of
profit/loss
in associates 0 45 -100.1 0 84 -100.4 80
RESULT BEFORE
TAX -845 -947 10.8 -895 1 633 -154.9 2 858
Tax on income
from operations -116 16 -818.3 -616 -435 -41.7 -703
RESULT FOR
THE PERIOD -961 -931 -3.2 -1 512 1 198 -226.2 2 155
ALLOCATION OF
RESULT FOR
THE PERIOD
Result
attributable to
equity holders
of the parent -964 -940 -2.5 -1 506 999 -250.8 1 943
Result
attributable
to minority
interest 4 9 -60.3 -6 199 -102.9 212
-961 -931 -62.9 -1 512 1 198 -353.6 2 155
Earnings/share
(undiluted), eur -0.016 -0.015 -1.9 -0,025 0,016 -250.2 0,034
Earnings/share
(diluted), eur -0.016 -0.015 -2.3 -0,024 0,016 -250.8 0,033
30.9. 30.9. 31.12.
BALANCE SHEET 2005 2004 Change % 2004
ASSETS (EUR 1000)
Non-current assets
Intangible assets 8 447 5 054 67.2 5 665
Goodwill on consolidation 10 869 11 240 -3.3 11 245
Tangible assets 656 986 -33.5 818
Investments in associates 966 1 258 -23.2 967
Long term trade receivables
and other receivables 882 993 -11.2 1 097
Other long term
investments 81 56 45.2 76
Deferred tax receivable 37 0 0.0 35
Non-current assets total 21 938 19 587 12.0 19 903
Current assets
Current receivables 16 821 19 906 -15.5 21 703
Corporate tax receivable 535 199 168.3 262
Cash and cash equivalents 6 688 7 287 -8.2 5 069
Current assets total 24 045 27 392 -12.2 27 035
ASSETS TOTAL 45 983 46 979 -2.1 46 938
SHAREHOLDERS' EQUITY AND
LIABILITIES
Shareholders' equity
Subscribed capital 15 917 15 917 0.0 15 917
Share premium account 4 808 4 999 -3.8 4 807
Revaluation reserve 449 473 -5.1 467
Translation differences 2 470 1 762 40.2 1 498
Retained earnings -8 030 -7 752 -3.6 -6 773
Equity attributable to equity
holders of the parent 15 614 15 399 1.4 15 916
Minority interest 49 51 -4.9 70
Shareholders' equity total 15 663 15 450 1.4 15 986
Non current liabilities
Non-current
interest bearing
liabilities 6 034 4 045 49.2 4 701
Non-current
non-interest bearing
liabilities 1 288 992 29.8 971
Non current liabilities total 7 323 5 038 45.4 5 672
Current liabilities
Current interest
bearing liabilities 3 819 5 577 -31.5 4 208
Current non-interest
bearing liabilities 19 179 20 914 -8.3 21 072
Current liabilities total 22 997 26 491 -13.2 25 280
TOTAL EQUITY AND LIABILITIES 45 983 46 979 -2.1 46 938
STATEMENT OF CHANGES IN SHAREHOLDERS
EQUITY 1-9/2005
Profit/
Sub- Share Revalu- Trans- loss
scribed premium ation lation brought
(EUR 1000) capital account reserve diff. forward Total
SHAREHOLDERS'
EQUITY 1.1.2005 15 917 4 807 467 1 498 -6 773 15 916
Change in translation
difference 21 971 -152 840
Share based payments 363 363
Transfers between
items -39 39 0
NET PROFIT/LOSS
RECOGNIZED DIRECTLY TO
SHAREHOLDERS' EQUITY 0 0 -18 971 249 1 203
Profit/loss for
the period -1 506 -1 506
TOTAL PROFITS AND 0 0 -18 971 -1 257 -303
LOSSES
Share issue 1 1
SHAREHOLDERS'
EQUITY 30.9.2005 15 917 4 808 449 2 470 -8 030 15 614
STATEMENT OF CHANGES IN SHAREHOLDERS
EQUITY 1-9/2004
Profit/ Total
Sub- Share Revalu- Trans- loss
scribed premium ation lation brought
(EUR 1000) capital account reserve diff. forward
SHAREHOLDERS'
EQUITY 1.1.2004 13 875 2 964 0 1 681 -8 664 9 857
Revaluation of
intangible assets 489 489
Change in
translation difference 158 81 -519 -280
Share based payments 415 415
Transfers between
items -16 16 0
NET PROFIT/LOSS
RECOGNIZED DIRECTLY TO
SHAREHOLDERS' EQUITY 0 158 473 81 -88 624
Profit/loss for
the period 999 999
TOTAL PROFITS
AND LOSSES 0 158 473 81 911 1 623
Share issue 2 041 1 884 3 925
Other change -6 0 -6
SHAREHOLDERS'
EQUITY 30.9.2004 15 917 5 000 473 1 762 -7 752 15 399
CASH FLOW STATEMENT 1-9 1-9 1-12
2005 2004 2005
Cash flow from operating activities
Operating result 198 1 879 2 851
Adjustments 322 -3 060 -3 300
Change in net working capital -662 -1 674 -3 412
Financial income and expense, net -81 -446 230
Income taxes -423 -352 -1 203
Cash flow from operating activities -646 -3 653 -4 834
Cash flow from investing activities
Investments in tangible and
intangible assets -3 224 -3 390 -4 147
Disposal of other investments 236 236
Disposals of associated companies 625 0 0
Partial disposals of subsidiary companies 556 7 404 7 404
Proceeds (-) and repayments (+) of
loan receivables 3 116 279 292
Cash flow from investing activities 1 073 4 529 3 785
Cash flow from financing activities
Share issue 1
Proceeds from short-term loans 2 646 4 461 4 847
Repayments of short-term loans -3 742 -2 289 -2 983
Proceeds from long-term loans 2 297 224 223
Repayments of long-term loans 0 -148 -134
Increase (- )/ decrease (+) in long-term
receivables -2 500 -2 500
Dividends paid -9 -393 -393
Cash flow from financing activities 1 193 -645 -940
Change in cash and cash equivalents 1 620 231 -1 989
Cash and cash equivalents,
beginning balance -5 069 -7 058 -7 058
Cash and cash equivalents, ending balance 6 689 7 289 5 069
Change in cash and cash equivalents 1 620 231 -1 989
INCOME STATEMENT BY QUARTER, 2005
Proha Group
1-3 4-6 7-9
(EUR 1000) 2005 2005 2005
NET SALES 15 443 16 571 14 598
Other operating income 737 624 -24
Material and services -861 -980 -586
Employee benefits expense -12 133 -12 186 -11 069
Depreciation and
amortisation -231 -274 -415
Other operating expenses -2 676 -3 364 -2 975
OPERATING RESULT 279 391 -472
% of net sales 1,8 % 2,4 % -3,2 %
Financing income and
expenses -387 -333 -373
RESULT BEFORE TAX AND
MINORITY INTEREST -108 57 -845
% of net sales -0,7 % 0,3 % -5,8 %
Tax on income from
operations -225 -275 -116
RESULT FOR THE PERIOD -334 -217 -961
% of net sales -2,2 % -1,3 % -6,6 %
INCOME STATEMENT BY QUARTER, 2004
Proha Group
1-3 4-6 7-9 10-12
(EUR 1000) 2004 2004 2004 2004
NET SALES 16 887 17 020 14 487 17 320
Other operating income 27 4 074 163 169
Material and services -1 401 -1 304 -846 -1 057
Employee benefits expense -12 364 -12 559 -11 047 -11 623
Depreciation and amortisation -101 -211 -241 -251
Other operating expenses -4 031 -3 456 -3 217 -3 587
OPERATING RESULT -984 3 565 -701 972
% of net sales -5.8 % 20.9 % -4.8 % 5.6 %
Financing income and expenses 157 -196 -291 257
Share of profit/loss in associates 28 11 45 -4
RESULT BEFORE TAX AND
MINORITY INTEREST -800 3 380 -947 1 226
% of net sales -4.7 % 19.9 % -6.5 % 7.1 %
Tax on income from operations -348 -103 16 -268
RESULT FOR THE PERIOD -1 148 3 277 -931 957
% of net sales -6.8 % 19.3 % -6.4 % 5.5 %
GROUP KEY FIGURES
EUR 1,000,000 01-09/2005 01-09/2004 01-12/2004
Net Sales 46.6 48.4 65.7
Operating result 0.2 1.9 2.9
% of Net Sales 0.4% 3.9% 4.3%
Result before taxes -0.9 1.6 2.9
% of Net Sales -1.9% 3.4% 4.3%
Result -1.5 1.0 1.9
% of Net Sales -3.2% 2.1% 3.0%
Return on Equity, % -12.7% 12.1% 16.0%
Return on Investment, % 6.8% 17.4% 20.8%
Interes bearing liabilities 9.9 9.6 8.9
Cash and cash equivalents 6.7 7.3 5.1
Debt-equity ratio, % 20.2% 15.1% 24.0%
Equity-ratio, % 35.6% 34.6% 35.7%
Liabilities and
shareholder's equity 46.0 47.0 46.9
Gross Investments 3.2 3.4 7.5
% of Net Sales 6.9% 7.0% 11.4 %
Research and development costs 5.2 5.3 6.8
% of Net Sales 11.1% 10.9% 10.4%
Capitalized development costs 2.9 3.2 3.9
Personnel average for the period 525 581 569
Personnel at the end of the period 516 563 525
Basic earnings per share, EUR -0.025 0.016 0.034
Equity per share, EUR 0.26 0.25 0.26
Diluted earnings per share, EUR -0.024 0.016 0.033
Share issue adjusted weighed average
share number during financial period 61 217 770 61 217 270 57 313 830
Weighed average number of shares,
shareoptions and bonds
during financial period 61 247 194 61 493 093 58 473 243
Share issue adjusted share number
at the end of the financial period 61 217 770 61 217 270 61 217 770
CONTINGENT LIABILITIES (EUR 1,000,000)
30.9.2005 31.12.2004
COLLARETAL FOR OWN COMMITENTS
Liabilities secured by corporate mortgages
Pension loans 0.1 0.1
Corporate mortgages given as security of 0.2 0.2
the loans
Liabilities secured by the assets of the company
Loans from financial institutions 0.7 1.1
Liabilities are secured by the assets of
Artemis International Solutions
Corporation except for intellectual
property rights.
Liabilities secured by assets
Loans and checking account
credit lines used 1.3 1.8
Book value of trade receivables and
fixed assets given as security 4.4 6.0
Liabilities secured by shares
Loans from financial institutions 0.1 0.1
Book value of pledged shares 0.2 0.2
Leasing and rental liabilities
In the following financial year 3.2 2.7
Thereafter 3.1 6.2
Total 6.3 8.8
CONTINGENT LIABILITIES ON BEHALF OF
SUBSIDIARY COMPANIES
Liabilities secured by deposits
Loans from financial institutions 2.5
Book value of deposits 2.5
RECONCILIATION OF RESULT IN THE COMPARATIVE PERIOD
GROUP INCOME STATEMENT 1.1.-30.9.2004
IFRS-
FAS adj. IFRS
1-9/2004 Total 1-9/2004
Net sales 48 394 48 394
Other operating
income 614 3 650 4 264
Materials and
services -3 551 -3 551
Staff costs -38 097 2 127 -35 970
Depreciation and
value adjustements
total -1 958 1 397 -561
Other operating
expenses -11 566 869 -10 696
Operating result -6 164 8 043 1 879
Financing income and
expenses -320 -11 -330
Share of associated 84 84
companies' results
Result before taxes -6 400 8 033 1 633
Income taxes -414 -21 -435
Result before
minority interest -6 814 8 012 1 198
Minority interest -199 -199
Result for the
financial period -7 013 8 012 999
Reconciliation of result in the financial year of 2004 has been
published as a stock exchange bulletin on August 11, 2005.
RECONCILIATION OF SHAREHOLDERS' EQUITY IN THE
COMPARATIVE PERIOD
IFRS-
BALANCE SHEET adj.
FAS Total IFRS
30.9.2004 30.9.2004
ASSETS
Non-current assets
Intangible assets 362 4 691 5 054
Goodwill 13 404 -2 163 11 240
Tangible assets 989 -3 986
Investments 1 393 -8 1 385
Non-current assets
total 16 148 2 516 18 664
Current assets
Non-current
receivables 923 923
Current receivables 20 105 20 105
Cash and cash
equivalents 7 287 7 287
Current assets total 28 315 28 315
ASSETS TOTAL 44 463 2 516 46 979
SHAREHOLDERS' EQUITY
AND
LIABILITIES
Shareholders' equity
Subscribed capital 15 920 -3 15 917
Share premium account 12 249 -7 393 4 856
Revaluation reserve 489 489
Profit/loss brought
forward -7 674 812 -6 861
Result for the
financial period -7 013 8 012 999
Shareholders' equity
total 13 482 1 917 15 399
Minority interest 51 51
Provisions 231 231
Liabilities
Non-current 4 393 414 4 807
liabilities
Current liabilities 26 305 186 26 491
Liabilities total 30 698 599 31 297
TOTAL EQUITY AND
LIABILITIES 44 463 2 516 46 979
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 December 31, 2004 has been published as a stock exchange bulletin on
August 11, 2005.
|