THE SYGNITY S.A. GROUP. CONSOLIDATED QUARTERLY REPORT FOR THE 2 nd QUARTER OF 2008

Transcription

1 CONSOLIDATED QUARTERLY REPORT FOR THE 2 nd QUARTER OF August

2 List of Contents Page I MANAGEMENT BOARD S COMMENTS TO THE CONSOLIDATED QUARTERLY REPORT FOR THE 2 ND QUARTER OF II CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE SYGNITY S.A. GROUP AS AT 30 JUNE 2008 AND FOR THE THREE MONTHS ENDED ON 30 JUNE FINANCIAL HIGHLIGHTS OF THE SYGNITY S.A. GROUP CONSOLIDATED PROFIT AND LOSS ACCOUNT CONSOLIDATED BALANCE SHEET CONSOLIDATED STATEMENT OF CHANGES IN THE EQUITY CONSOLIDATED CASH FLOW STATEMENT III NOTES TO FINANCIAL STATEMENTS AND OTHER INFORMATION GENERAL INFORMATION STATEMENT OF CONFORMITY BASIS FOR PREPARING CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ESTIMATES ADJUSTMENTS OF ERRORS FROM PREVIOUS PERIODS LIST OF SHAREHOLDERS AND DESCRIPTION OF CHANGES IN THE OWNERSHIP STRUCTURE OF SIGNIFICANT SHARE PACKETS STATEMENT OF CHANGES IN THE SYGNITY S.A. SHARES HELD BY MANAGEMENT BOARD AND SUPERVISORY BOARD MEMBERS SHAREHOLDERS MEETING DIVIDEND PAID (OR DECLARED) TOTAL AND PER ONE SHARE, WITH DIVISION INTO ORDINARY SHARES AND PREFERRED SHARES DESCRIPTION OF SIGNIFICANT ACHIEVEMENTS OR FAILURES IN THE REPORTING PERIOD INCLUDING MAJOR RELATED EVENTS FACTORS AND EVENTS, ESPECIALLY UNTYPICAL, AFFECTING THE GENERATED FINANCIAL RESULTS OTHER INFORMATION THAT THE ISSUER BELIEVES TO BE IMPORTANT TO ASSESS ITS HR, FINANCIAL, ECONOMIC SITUATION, THE PROFIT, AND ANY CHANGES IN THOSE ASPECTS OF BUSINESS, AND INFORMATION NECESSARY TO ASSESS THE ISSUER S CAPACITY TO MEET THE OBLIGATIONS SEGMENTS SEASONAL OR CYCLIC NATURE OF ACTIVITIES ISSUE, REDEMPTION AND REPAYMENT OF DEBT AND EQUITY SECURITIES UNTYPICAL TRANSACTIONS WITH AFFILIATED ENTITIES LIABILITIES OR PROVISIONAL ASSETS, WHICH AROSE SINCE THE END OF THE PREVIOUS FINANCIAL YEAR SURETIES GRANTED BY THE GROUP COMPANIES ASSESSMENT OF THE LIKELIHOOD OF ACCOMPLISHING THE PREVIOUSLY PUBLISHED FORECASTED RESULTS FOR THE YEAR INFORMATION ABOUT PENDING COURT PROCEEDINGS CONCERNING THE LIABILITIES OR RECEIVABLES OF SYGNITY S.A. AND ITS SUBSIDIARIES FACTORS THAT MIGHT AFFECT THE RESULTS GENERATED BY THE GROUP AT LEAST IN THE NEXT QUARTER POST BALANCE SHEET EVENTS IV CONDENSED FINANCIAL STATEMENTS OF THE SYGNITY S.A. AS AT 30 JUNE 2008 AND FOR THE THREE MONTHS ENDED ON 30 JUNE FINANCIAL HIGHLIGHTS OF SYGNITY S.A. FOR THE 2 ND QUARTER OF PROFIT AND LOSS ACCOUNT BALANCE SHEET STATEMENT OF CHANGES IN EQUITY CASH FLOW STATEMENT

3 I MANAGEMENT BOARD S COMMENTS TO THE CONSOLIDATED QUARTERLY REPORT FOR THE 2 nd QUARTER OF 2008 In the 2 nd quarter of 2008 the Sygnity Group generated PLN million of revenue, PLN 7 million of operating income and nearly PLN 8.5 million of net profit. The sale of shares in KPG and Geomar and the sale of an organised part of business related to the automatic logistics systems in the amount of PLN 6.6 million affected the operating and net results. As a result of the conducted restructuring and of the order portfolio worth PLN 790 million the company s Management Board expects the Group to generate similar operating income in the subsequent periods of the year 2008 to the operating income generated in the 2 nd quarter of the year. The 2 nd quarter results have been also affected by the growing margins in the individual sectors, the increased share of the sale of services in the revenue structure and further optimisation of operating expenses. Data in PLN millions Q Q Revenue 360, ,432 Operating profit (loss) (54,389) 7,047 Operating profit (loss) less restructuring writeoffs/proceeds from the sale assets (35,889) 413 Net profit (loss) (51,317) 8,468 Data in PLN millions H H Revenue 625, ,690 Operating profit (loss) (72,407) (17,797) Operating profit (loss) less restructuring writeoffs/proceeds from the sale assets (53,907) (24,431) Net profit (loss) (73,553) (17,827) Thanks to the results generated in the 2 nd quarter of 2008 the Group reduced its operating loss for the first half of the year to 17.8 million zlotys and generated revenue in excess of half a billion zlotys. The sale of some assets has affected the level of revenue generated during that period, which will reduce the Group s sales revenue for the entire year 2008 by more than 55 million zlotys while it reduced the sales revenue by more than 9 million zlotys in the first half of As for the restructuring, in the 2 nd quarter of the year the Group continued to sell off its individual businesses that in the future might not guarantee the Company s satisfactory growth but which might enrich the offer of an investor focusing on a particular market segment. Sygnity sold its shares in KPG and Geomar for the amount of 17 million zlotys and an organised part of business related to the automatic logistics systems for 2.1 million zlotys. In the 3 rd quarter of the year the Company also sold an organised part of business serving the IT systems of the National Health Fund for nearly 21 million zlotys. In total the Group has sold assets of aggregate worth of 72 million zlotys (more than 44 million zlotys in 2008). The Sygnity Management Board plans at least one transaction related to the sale of a business 3

4 for the 3 rd quarter of The planned sale of assets should generate proceeds of additional PLN 30 million by the end of Sygnity has also taken intensive actions in order to improve the effectiveness. The Company is implementing project management support tools: a management board support and project advancement reporting application (Sygnity Przedsięwzięcia) and also an application enabling effective project work flow management and project portfolio management (RPM) have been rolled out. Unified corporate standards of operating activities e.g. in the area of control, human resources, payroll, etc. have been implemented. A motivational system combined with job evaluation function was implemented in the sales and development areas. The Company has commenced the implementation of a single ERP system. In the 2 nd quarter of 2008 the Sygnity Management Board has also taken actions to further decrease the debt, which consequently improved the Group s financial condition. As compared to the end of the 1 st quarter 2008 as at the statement publication date the Group reduced its debt resulting from contracted loans by another 25 million zlotys. Sygnity has used credit facilities under signed agreements on current basis but also it plans its financing structure by the end of 2009 in agreement with the banks. In the 2 nd quarter of the year the Company signed new contracts e.g. with the Commander in Chief of the Police for the delivery of nearly a thousand of portable mobile terminals with software; with Telekomunikacja Polska S.A. concerning the maintenance and technical support of the IT Network Systems supporting the operations of the largest telecom operator in Poland; with the Ministry of Labour and Social Policy concerning the upgrade and maintaining effectiveness of the POMOST (OU POMOST) Software and the Statistical Application Central (SAC); with Lublzel (the PGE Group) concerning the CSS and CMS systems; with Energa Operator concerning the CMS, D3S and ELMS systems and with PKP Informatyka for the delivery of network solutions. Sygnity also initiated cooperation with Banco Espirito Sanot Investment Poland concerning the delivery of a transaction system and applications for compulsory reporting purposes. In the 2 nd quarter of the year the Group generated its first revenue from the project conducted for the Polish Post related to the 3 rd stage of the Integrated IT System implementation. As previously announced the Company also developed its relationships with its current partners. Sygnity signed the three-year Partner Business Plan with Microsoft in order to tighten the cooperation between both companies in the scope of the sale of the Microsoft products and related services to large and medium-sized enterprises and to institutions operating in Poland. The Partners expect a particularly strong sales growth in the following three sectors: industry, utilities and the public sector. The Parties to the agreement expect the new form of cooperation to provide Sygnity with approx. USD 60 million from the sale of the Microsoft products and related services by the year 2011, i.e. 7-fold growth as compared to the year The Group also signed an agreement with Ness Technologies, Inc., an international provider of IT solutions and services. The main goal is to cooperate in the Central and Eastern Europe in the sale and implementation of IT solutions for selected customers. The Partners also consider expansion onto the markets of Western Europe. Thanks to the conducted restructuring program the Company s Management Board intends to generate a significant increase in margins in all the sectors in It should improve the Sygnity Group s effectiveness in subsequent years. 4

5 II CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE SYGNITY S.A. GROUP AS AT 30 JUNE 2008 AND FOR THE THREE MONTHS ENDED ON 30 JUNE Financial highlights of the Sygnity S.A. Group in thousands PLN 30 June 2008 and at 30 June June 2007 and at 30 June 2007 in thousands EUR 30 June 2008 and at 30 June June 2007 and at 30 June 2007 I Net income from sale of products, goods and materials, including: II Operating profit (loss) ( ) ( ) ( 5 118) ( ) III Profit (loss) before tax ( ) ( ) ( 5 575) ( ) IV Net profit (loss) ( ) ( ) ( 5 126) ( ) V Net profit (loss) attributable to equity holders of the parent company ( ) ( ) ( 5 171) ( ) VI Net profit (loss) attributable to miniority interest 154 ( ) 44 ( 4 101) VII Net cash flow from operating activities ( 1 257) ( ) ( 361) ( ) VIII Net cash flow from investing activities ( ) 598 ( 4 207) IX Net cash flow from financing activities ( ) ( 4 591) X Cash and cash equivalents at period end XI Total assets XII Total liabilities XIII Total equity XIV Equity attributable to equity holders of the parent XV Equity attributable to minority interest Selected financial data presented in the consolidated financial statements were converted into EUR as follows: - selected balance sheet items were converted using the fixing rate published by the National Bank of Poland as at the balance sheet date. The exchange rate was: as at 30 June 2008: EUR 1 = PLN as at 30 June 2007: EUR 1 = PLN selected items of the profit and loss account were converted using the arithmetical mean of the EUR fixing rates published by the National Bank of Poland as at the last day of each month. The exchange rate was: in the period from 1 January 2008 to 30 June 2008: EUR 1 = PLN in the period from 1 January 2007 to 30 June 2007: EUR 1 = PLN

6 2 Consolidated profit and loss account 30 June 2008 Three months 30 June June 2007 Three months 30 June 2007 (unaudited) (unaudited) (unaudited) (unaudited) Continued activity Net income from sale of products, goods and materials, including: Net income from sale of products Net income from sale of goods and materials Cost of sales of products, goods and materials including: ( ) ( ) ( ) ( ) Cost of sales of products (-) ( ) ( ) ( ) ( ) Cost of sales of goods and materials (-) ( ) ( ) ( ) ( ) Gross profit (loss) on sales Selling and distribution expenses (-) ( ) ( ) ( ) ( ) General administration expenses (-) ( ) ( ) ( ) ( ) Other operating revenues Other operating costs (-) ( ) ( ) ( ) ( ) Operating profit (loss) ( ) ( ) ( ) Financial revenues Financial costs (-) ( 6 099) ( 2 129) ( 7 284) ( 3 750) Share of profit /(loss) in assoctiates Profit (loss) before tax ( ) ( ) ( ) Income tax Net profit (loss) ( ) ( ) ( ) attributable to: Equity holders of the parent company ( ) ( ) ( ) Minority interest ( ) ( 8 443) 6

7 Consolidated balance sheet 30 June December June 2007 (unaudited) (audited) (unaudited) Fixed assets (long-term) Tangible fixed assets Investment property Goodwill Other intangible assets Investments in associates Financial assets valued at fair value via financial result Financial assets available for sale 0 0 Long-term receivables Long-term prepayments Deferred tax assets Current assets (short-term) Inventories Trade and other receivables Short-term prepayments Loans granted Financial assets valued at fair value via financial result Financial assets available for sale 0 Cash and cash equivalents Assets avaible for sale Total assets

8 Consolidated balance sheet 30 June December June 2007 (unaudited) (audited) (unaudited) Equity attributable to equity holders of the parent Share capital Share premium Other capital reserves Foreign exchange differences Accumulated profit /(loss) ( ) ( ) ( ) Minority interest Total equity Long-term liabilities Long-term bank loans and credits Trade and other liabilities 531 Other financial liabilities Retirement benefits provision Provisions for liabilities Long-term accruals Deferred tax provision Short-term liabilities Short-term bank loans and credits Trade and other liabilities Income tax liabilities Financial liabilities valued at fair value via financial result Other financial liabilities Retirement benefits provision Provisions Short-term accruals Total equity and liabilities

9 3 Consolidated statement of changes in the equity Share capital Share premium Other capital reserves Foreign exchange differences Accumulated profits Equity attributable to equity holders of the parent Minority interest Total equity Equity as at 1 January ( ) Taking up shares- execution of managerial options 0 0 Costs of managerial options Issue of shares Y Cost of shares issue Y ( 923) ( 923) ( 923) Loss cover ( ) Net profit (loss) ( ) ( ) 154 ( ) Changes in the make-up of the Group ( 2 145) ( 1 420) Foreign exchange differences ( 107) ( 107) ( 107) Equity as at 30 June ( ) Equity as at 1 January ( ) Taking up shares- execution of managerial options Costs of managerial options Issue of shares X Cost of shares issue X ( 81) ( 81) ( 81) Net profit (loss) ( ) ( ) ( ) ( ) Dividends for year 2006 paid ( ) ( ) ( ) Changes in the make-up of the Group ( ) ( ) ( ) ( ) Foreign exchange differences Equity as at 30 June ( )

10 4 Consolidated cash flow statement 30 June 2008 (unaudited) 30 June 2007 (unaudited) Cash flow from operating activities Profit before tax ( ) ( ) Adjustments: Share of profit in associates Depreciation and amortisation Change in working capital* ( ) Foreign exchange (gains) /losses Net interest and share in profits (Profit) /loss on investment activity ( 8 782) Costs of managerial options Other adjustments ( 2 889) Cash from operations ( ) Income tax (paid) / returned ( 2 594) ( 1 310) Interest paid ( 87) 0 Net cash flow from operating activities ( 1 257) ( ) Cash flow from investing activities Proceeds from sale of fixed and intangible assets Proceeds from sale of subsidiaries and associates 0 0 Sale / (purchase) of short-term securities Capital expenditures ( 5 386) ( ) Net expenditures on acqusition of subsidiaries and associates ( 1 724) ( 4 683) Interest received Granted / (repaid) loans Other investment expenditures and receipts ( 1 387) 425 Net cash flow from investing activities ( ) Cash flow from financing activities Proceeds from issue of shares, other equity instruments and contributions to equity Dividends and other payments to owners ( 28) Receipts ( Repayments) from loans and credits ( ) Receipts (Expenditure) from issuing of debt securities ( 4 720) Financial lease rent paid ( 978) Interest paid ( 2 921) Other financing expenditures and receipts ( 243) ( 14) Net cash flow from financing activities ( ) Net increase (decrease) in cash and cash equivalents ( ) ( ) Effect of exchange rate changes 0 Cash and cash equivalents at period beginning Cash and cash equivalents at period end

11 Change in working capital 30 June 2008 (unaudited) 30 June 2007 (unaudited) Change in provisions ( 7 471) Change in inventory ( ) Change in receivables Change in liabilities ( ) Change in prepayments and accruals ( 7 087) ( ) ( ) 11

12 III NOTES TO FINANCIAL STATEMENTS AND OTHER INFORMATION 1 General Information Sygnity S.A. with registered office at Al. Jerozolimskie 180 in Warsaw ( Company, Issuer, Dominant Entity ) is the dominant entity of the Group. The Company is registered in the enterprise register of the National Court Register under number KRS On the 5 th of April 2007 the Dominant Entity changed its business name from ComputerLand S.A. to Sygnity S.A. after the Company s merger with Emax S.A., registered in the KRS on 31 May The Company s shares have been listed at the Warsaw Stock Exchange since The primary business activities of the Company and the Group s companies include software related activities and computer hardware related consulting services. As at 30 June 2008 the Sygnity S.A. Group (the Group ) consisted of 15 companies. The UAB Baltijos KC subsidiary is not consolidated due to immaterial financial data. As at 30 June 2008 the structure of Group was as follows: Sygnity S.A. PB Polsoft Sp. z o.o. Winuel S.A. 100 / / 100 Support Sp. z o.o. Web Inn S.A. 100 / ,99 / 99,99 ICD Comp Consulting Sp. z o.o. Sygnity Technology Sp. z o.o.*) 100 / / 100 Global Services Sp. z o.o. Elpoinformatyka Sp. z o.o. 100 / / 99 CL Agent Transferowy Sp. z o.o. ZEC Infoservice Sp. z o.o. 100 / ,92 / 97,92 Aram Sp. z o.o. ComputerLand CIS OOO 100 / / 100 Max Elektronik S.A. UAB Baltijos KC 91,67 / 91, / 100 Jointly owned subsidiaries: Affiliates: C2 System Polska S.A. Geomar S.A. 50 / 50 37,50 / 37,50 RUM IT S.A. Dolnośląska Szkoła Bankowa Sp. z o.o. 50 / 50 24,75 / 24,75 Emtal Sp. z o.o. 50 / 50 CSBI EE 20,06 / 20,06 Stal Portal S.A. 49,71 / 49,71 Tetra System Polska Sp. z o.o. 21 / 21 figures in the chart denote the share in the share capital / votes at the Shareholders Meeting held by Sygnity S.A. *) on 6 June 2008 the change of the company s name from ComputerLand Serwis Sp. z o.o. to Sygnity Technology Sp. z o.o. was registered 12

13 In the 2 nd quarter of 2008 there were the following changes in the Group s structure: On 30 June 2008 a share sale agreement was signed with Terra Technologies Sp. z o.o. concerning the sale of all the shares of KPG Sp. z o.o. held by Sygnity S.A., i.e. 19,847 shares constituting a 81.66% stake in the company s share capital granting 81.66% votes at the company s shareholders meeting. The ownership of the shares was transferred to the Buyer on the date of the agreement. The price of the sold KPG Sp. z o.o. shares amounted to PLN 6,155,000. Due to the sale of KPG Sp. z o.o. shares the Dominant Entity lost control over the company; On 30 June 2008 a share sale agreement was signed with Terra Technologies Sp. z o.o. concerning the sale of all the shares of Geomar S.A., i.e. 68,595 shares constituting a 43.85% stake in the company s share capital granting 43.85% votes at the company s shareholders meeting, held by Sygnity S.A. The ownership of the shares was transferred to the Buyer on the date of the agreement. The price of the sold Geomar S.A. shares amounted to PLN 5,846,000. Due to the sale of a part of Geomar S.A. shares the Dominant Entity lost control over the company. Meanwhile on 30 June 2008 a share sale agreement was signed with Terra Technologies Sp. z o.o. binding Sygnity S.A. to sell the company s remaining shares, i.e. 58,668 shares constituting a 37.50% stake in the company s share capital granting 37.50% votes at the company s shareholders meeting. The agreed price of the shares is PLN 5,000,000. On 31 July 2008 the Company signed Annex no. 2 to the Agreement binding Sygnity S.A. to sell shares signed Terra Technologies Sp. z o.o. According to Annex no. 2 the ownership of the shares was transferred by Sygnity S.A. through a brokerage house by the 29 August This quarterly report contains a condensed consolidated financial statements for the reporting quarter on 30 June 2008 and data comparable to the balance sheet data as at 31 December 2007 and 30 June 2007 and to the data in profit and loss account, cash flow statement and the statement of changes in equity for the interim period on 30 June The condensed consolidated financial statements included in this quarterly report were approved by the Sygnity S.A. Management Board on 12 August Statement of Conformity The condensed consolidated financial statements were prepared in conformity with the International Financial Reporting Standards (IFRS) as adopted by European Union, in particular with the International Accounting Standard 34 Interim Financial Reporting. 3 Basis for preparing condensed consolidated financial statements The condensed consolidated financial statements were drafted in accordance with the historical cost concept, except for the derivative financial instruments and financial assets available for sale which were stated at fair value. The accounting principles used to draft the interim condensed financial statements are consistent with the accounting principles used to draft the annual consolidated financial statements for the financial year on 31 December The interim condensed consolidated financial statements do not contain information or disclosures required for full financial statements and should be read in conjunction with the annual consolidated financial statements for the financial year on 31 December Some Group companies keep accounting ledgers in accordance with the accounting principles defined in the Accounting Act and the executive regulations issued on its basis. The consolidated financial statements contain adjustments not included in the accounting 13

14 ledgers of the Group companies required to ensure that the financial statements of these companies comply with the IFRS. All figures in the condensed consolidated financial statements are stated in Polish zlotys (PLN), and unless stated otherwise all amounts are stated in PLN thousands. 4 Estimates Preparation of interim financial statements in compliance with IAS 34 requires the Management to exercise professional judgement, estimates, and objectives that impact the adopted accounting principles and the measurement of the assets, liabilities, income, and expense. Although the adopted estimates and assumptions are based on the Management Board s best knowledge of the current activities and events, the actual values might differ from the estimates. In the 2 nd quarter 2008 the deferred income tax provision decreased by PLN 13,879,000 as compared to the balance as at 31 March As a result of the valuation of the IT system development and implementation contracts within the Group the receivables resulting from the valuation amounted to PLN 48,892,000 as at 30 June 2008 as compared to PLN 12,252,000 as at 31 March Adjustments of errors from previous periods Not applicable. 6 List of shareholders and description of changes in the ownership structure of significant share packets According to the best knowledge of the Sygnity S.A. Management Board shareholders having directly or indirectly trough affiliates at least 5% of all votes at the Company s Shareholders Meeting and the changes in the period since the submission of the previous quarterly report were as follows: Shareholder As at 15 May 2008 As at 30 June 2008 As at 12 August 2008 Changes Changes % of Votes in the % of Votes in the % of Votes at the Number number at the Number number at the Number Company s of shares of Company s of shares of Company s of shares Shareholder shares Shareholder shares Shareholder s Meeting s Meeting s Meeting Legg Mason Zarządzanie Aktywami S.A. and Legg Mason Towarzystwo Funduszy Inwestycyjnyc h S.A , , ,34 BB Investment Sp. z o.o. with subsidiaries , , ,56 PKO Towarzystwo Funduszy Inwestycyjnyc h S.A ,84 N/A <5% N/A <5% Commercial Union Investment Management (Polska) S.A* ,11 N/A >5% N/A >5% 14

15 Deutsche Bank AG , , ,075 AIG Towarzystwo Funduszy Inwestycyjnyc h S.A , , ,001 Pionieer Pekao Investment Management S.A. on behalf of open- investment funds N/A <5% N/A <5% ,77 *According to the Current Report 4/2008 submitted by Commercial Union Investment Management (Polska) S.A. ( CUIM ) on 28 January 2008 the shareholder stated that it held 552,853 shares constituting 5.11% of the Sygnity s share capital totalling PLN 10,813,373 as at that date. As a result of the increase in the share capital of Sygnity S.A. on 31 January 2008 the share capital totalled PLN 11,885,742 zlotys; lack of another notice after 31 January 2008 means that CUIM concluded a transaction between 28 January and 31 January as a result of which it maintained its stake in Sygnity above 5%; Therefore the Company assumes that CUIM is a shareholder holding more than 5% of Sygnity s shares. As at the publication date of this quarterly report the share capital of the Dominant Entity totalled PLN 11,885,742 and was divided into 11,885,742 shares of PLN 1 of par value each. The Dominant Entity s share capital stated in these consolidated and financial statements and the entity s financial statements totalled PLN 15,081,742 as at 30 June 2008 and were higher than the registered share capital by PLN 3,196,000 as a result of the hyperinflation adjustment. Hyperinflationary revaluation of share capital in accordance with IAS 29 Financial Reporting in Hyperinflationary Economies was recognised as at the date of the shift to the IAS, i.e. 1 January Statement of changes in the Sygnity S.A. shares held by management board and supervisory board members Management Board Members Total Number of Shares Held as at 15 May 2008 Changes in the Number of Shares Number of Shares Held as at 30 June 2008 Changes in the Number of Shares Number of Shares Held as at 12 August 2008 Piotr Kardach Rajmund Gral Andrzej Kosturek Bogdan Kosturek Supervisory Board Members Total Number of Shares Held as at 15 May 2008 Changes in the Number of Shares Number of Shares Held as at 30 June 2008 Changes in the Number of Shares Number of Shares Held as at 12 August 2008 Tomasz Jędrzejczak Jacek Kseń Przemysław Aleksander Schmidt Tomasz Sielicki Paweł Turno Shareholders Meeting In the 2 nd quarter of 2008 the following Shareholders Meeting of Sygnity S.A. were held: 15

16 on 7 May 2008 an Extraordinary Shareholders Meeting was held that passed a resolution on the consent to the sale of an organised part of the Company s business in the form of the activities of the Automation, Telecommunication Engineering, Logistics Domain in the scope of the Automatic Logistics Systems; on 11 June 2008 the Annual Shareholders Meeting was held which passed resolutions on the acceptance of the Company s financial statements for the financial year 2007 and of the consolidated financial statements of the Group for the financial year 2007, on the acceptance of the Dominant Entity Management Board s Report and of the Group Management Board s Report, on the acceptance of the Supervisory Board s report on the evaluation of the Sygnity S.A. Management Board s Report. In addition, a resolution was passed on the covering of the net loss generated by Sygnity S.A. for the financial year 2007 in the amount of PLN 52,987,000 using the Company s revenue reserve. The Annual Shareholders Meeting also passed resolutions on the discharge of duties of the Management Board and Supervisory Board members and on the appointment of Tomasz Jędrzejczak and Martin Miszerak as the Company s Supervisory Board members; on 30 June 2008 an Extraordinary Shareholders Meeting was held that passed a resolution on the consent to the sale of an organised part of the Company s business related to the provision of services and delivery of IT solutions in the scope of the software of the National Health Fund. 9 Dividend paid (or declared) total and per one share, with division into ordinary shares and preferred shares On 11 June 2008 the Annual Shareholders Meeting was held on which no resolution was passed concerning the dividend payment to the Company s shareholders for the financial year Description of significant achievements or failures in the reporting period including major related events In the 2 nd quarter of 2008 the Group has recognised the following significant events having material impact on its activities and financial results: on 17 April 2008 Aram Sp. z o.o. signed with Ente Sp. z o.o. with registered office in Gliwice a computer hardware and software purchase contract for the total amount of PLN 40,074,000 net; on 17 April 2008 Aram Sp. z o.o. signed with BIW Koncept Sp. z o.o. with registered office in Kraków a computer hardware and software sale contract for the total amount of PLN 43,862,000 net; on 17 April 2008 Sygnity S.A. signed an agreement with three banks introducing harmonised terms of using loan facilities by the Company under the facility agreements signed with the individual banks. The Banks agreed to maintain the Company s financial exposure in accordance with the applicable agreements. The agreement constitutes one of the elements of the current restructuring of the Group s debt. The agreement was valid until 27 June Meanwhile the Company and the banks agreed the preliminary plan of actions int to ensure the Company s financing after that date. The new cooperation terms will be suited to the Company s credit needs and the restructuring plan presented by Sygnity Management Board; on 31 March 2008 Lagicome Sp. z o.o. with registered office in Poznań signed an agreement concerning the sale of an organised part of the Company s business in the form of the activities of the Automation, Telecommunication Engineering, Logistics Domain in the scope of the Automatic Logistics Systems for the amount of PLN 16

17 2,100,000. The agreement was concluded under the condition precedent that the Company s Shareholders Meeting would approve the transaction. On 7 May 2008 the Extraordinary Shareholders Meeting of Sygnity S.A. passed a resolution on the consent to the sale of an organised part of business constituting the object of the agreement; in the reporting period the Sygnity S.A. Management Board decided not to sell the organised part of the Company s business related to the sale, development and implementation of solutions for fuel stations (PetroStation.CL) due to the lack of a buyer offering a price reflecting the actual value of this part of business activities. Planned proceeds from the sale of this part of business shall be realised from the sale of other types of the Company s activities. Sygnity S.A. is conducting intensive development work on products for the fuel sector. The development program is mostly conducted in cooperation with the academic centres and is co-financed by the European Union (PLN 2 million of subsidies to be used by the end of the year). The industrial research stage has been already complete and currently the PetroStation.CL system is being intensively tested so that by the end of 2008 it would be possible to offer a commercial version to the end customers enabling them to offer new services and capabilities. On 10 June 2008 the Dominant Entity signed the three-year Partner Business Plan with Microsoft in order to tighten the cooperation between these companies in the scope of the sale of the Microsoft products and related services to large and medium-sized enterprises and to institutions operating in Poland. The Partners expect a particularly strong sales growth in the following three sectors: industry, utilities and the public sector. it is expected that the new form of cooperation to provide Sygnity S.A. with approx. USD 60 million from the sale of the Microsoft products and related services by the year 2011, i.e. 7-fold growth as compared to the revenues generated in Under the agreement signed with Microsoft Sygnity S.A. will also enlarge the group of certified engineers who will provide services for the following technologies: ERP systems (Axapta, CRM),Infrastructure Optimisation, Unified Communications, Business Intelligence and Office SharePoint Server. Within the internal structures at three Competence Centres: ERP, Microsoft Business Solutions and the Infrastructure and Security there are already strategic business units specialising in the Microsoft solutions, thus Sygnity S.A. is integrating its own industry expertise with the partner s technology. 11 Factors and Events, Especially Untypical, Affecting the Generated Financial Results Factors and events, especially untypical, affecting the generated financial results were presented in point I of the report. 12 Other information that the Issuer believes to be important to assess its HR, financial, economic situation, the profit, and any changes in those aspects of business, and information necessary to assess the Issuer s capacity to meet the obligations In the 2 nd quarter of 2008 there were the following changes in the composition of the Sygnity S.A. Supervisory Board: on 9 June 2008 Grzegorz Ogonowski resigned as a Supervisory Board member effective as of 11 June 2008; on 9 June 2008 Przemysław Cieszyński resigned as a Supervisory Board member effective as of 11 June 2008; on 11 June 2008 the Shareholders Meeting appointed Tomasz Jędrzejczak and Martin Miszerak as Supervisory Board members. No changes in the Management Board s composition were made in the reporting period. 17

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19 13 Segments Basic reporting model acc. to the Group s segments is based on the industry segments. 30 June 2008 and at 30 June 2008 Banking- Financial Segment Industrial- Telecommunication Segment Continued actvity Public Segment Utilities Segment Other Segments Discontinued activity Exclusion and unascribed items Total activity Income Net income form sale for external clients Net income from sale between segments Net profit from segment Effect Costs of segment ( ) ( ) ( ) ( ) ( 4 503) ( ) ( ) Profit (loss) of segment ( 55) ( ) ( ) Net profit (loss)b before tax and net financial costs ( 55) ( ) ( ) Net financial costs ( 110) ( 69) ( 295) ( 34) 0 ( 1 084) ( 1 592) Net profit (loss) before tax ( 55) ( ) ( ) Income tax ( 134) ( 597) ( 6) ( 165) Net profit (loss) ( 55) ( ) ( ) Assets and liabilities Segments assets Segments liabilities ( 1 598) Equity Equity and liabilities ( 1 598) Additional inforamtions related with segments Capital expenditures Depreciation and amortisation ( 6 027) ( 4 580) ( 7 423) ( 1 288) ( 270) ( 3 545) ( ) Other non-cash expenditures 19

20 30 June 2007 and at 30 June 2007 Banking- Financial Segment Industrial- Telecommunication Segment Continued actvity Public Segment Utilities Segment Other Segments Discontinued activity Exclusion and unascribed items Total activity Income Net income form sale for external clients Net income from sale between segments Net profit from segment Effect Costs of segment ( ) ( ) ( ) ( ) ( ) ( ) ( ) Profit (loss) of segment ( ) ( ) ( ) ( ) ( ) Net profit (loss)b before tax and net financial costs ( ) ( ) ( ) ( ) ( ) Net financial costs ( 5 771) ( 5 771) Net profit (loss) before tax ( ) ( ) ( ) ( ) ( ) Income tax Net profit (loss) ( ) ( ) ( ) ( ) ( ) Assets and liabilities Segments assets Segments liabilities Equity Equity and liabilities Additional inforamtions related with segments Capital expenditures Depreciation and amortisation ( 7 429) ( 5 554) ( ) ( 2 958) ( 147) ( ) Other non-cash expenditures 20

21 14 Seasonal or cyclic nature of activities The Group s sales revenues are subject to fluctuations resulting from the performance of long-term contracts. 15 Issue, redemption and repayment of debt and equity securities In the 2 nd quarter of 2008 the Dominant Entity continued its 5-year program of short-term and medium term notes issue. On 8 May 2008 the Dominant Entity sold its three-month notes of total nominal value of PLN 5,500,000 while the par share of one note was PLN 10,000. In addition on 14 May 2008 the Dominant Entity sold its three-month notes of total nominal value of PLN 1,700,000 while the par share of one note was PLN 10,000. The aforementioned notes were issued as discount notes, which rate of return is based on the WIBOR 3M rate and margin. The notes were denominated in zlotys and were issued as unsecured bearer s notes. The notes will be redeemed at par value; the redemption date was set at 8 August Both issues of the notes constitute an additional source of funding for the Company s activities. Meanwhile on 9 May 2008 the Company redeemed notes of total worth of PLN 6,000,000. The total nominal value of the notes issued by the Company, including the notes issued in the previous reporting periods, amounted to PLN 57,200,000 as at 30 June On 8 August 2008 the Dominant Entity sold its three-month notes of total nominal value of PLN 6,750, Untypical transactions with affiliated entities in the period from the beginning of the financial year 2008 the Group s entities did not conclude untypical transactions with any units on terms deviating from the commonly used terms for particular types of agreement and which total value would exceed the equivalent of EUR 500, Liabilities or provisional assets, which arose since the end of the previous financial year The value of liabilities under the issued guarantees totalled PLN 71,220,000 as at 30 June As at 30 June 2008 the Group granted sureties for the total amount of PLN 29,058,000. The total value of contingent liabilities totalled PLN 105,396,000 as at 30 June As at 30 June % of the guarantees issued by the Dominant Entity were good performance guarantees. The purpose of a good performance guarantee is to secure the claims resulting form failure to perform or from the incorrect performance of an agreement. As at 30 June % of the issued guarantees were payment guarantees securing the prompt cash payments. Tender guarantees constitute 4% of all guarantees and sureties. 18 Sureties granted by the Group companies In the 2 nd quarter of the year the Group companies did not grant any sureties to secure loans or borrowings and did not grant guarantees where the total value of existing sureties or guarantees would be equal or greater than 10% of the Issuer s equity. 21

22 19 Assessment of the likelihood of accomplishing the previously published forecasted results for the year The Sygnity S.A. Management Board did not publish any forecasted financial results for the year Information about pending court proceedings concerning the liabilities or receivables of Sygnity S.A. and its subsidiaries In the represented reporting period there were no pending proceedings before a court, an arbitration body or public administration institution related to liabilities or receivables of Sygnity S.A. or its subsidiaries, which total value would constitute at least 10% of Issuer s equity. 21 Factors that might affect the results generated by the Group at least in the next quarter Financial results that the Sygnity Group may generate in the 3 rd quarter of 2008 may be affected by the following factors: proceeds from the sale of subsequent assets planned increase in realised project margins reduction of operating expenses 22 Post balance sheet events The following material events took place after the balance sheet date: on 17 July 2008 Sygnity S.A. sold shares held in the subsidiary Global Services Sp. z o.o. to Mr Zygmunt Kamiński. The Company sold 100 shares of Global Services Sp. z o.o. of PLN 1,200 of par value each totalling PLN 120,000 constituting 100% shares in the share capital and granting 100% votes at the Shareholders Meeting of Global Services Sp. z o.o. The price of the shares totalled PLN 120,000; on 23 July 2008 Sygnity S.A. sold an organised part of business related to the area of IT support of head office and voivodship branches of the National Health Fund to Global Services Sp. z o.o., 100% shares of which the Company sold on 17 July The sale of the organised part of business includes e.g. the specified in the agreement proprietary copyrights to the software National Health Fund IT System, rights to licenses and other proprietary rights used to develop and operate the aforementioned software, transfer of employees and of the rights resulting from the contracts signed with the partners providing the development and operation services in the scope related to that software. The agreed sale price of the organised part of business amounted to PLN 20,880,000. The sale of the organised part of business constituted another step in the restructuring of the Sygnity Group, i.e. focusing on the Group s core business and the sale of divisions that in the future might not guarantee the Group s satisfactory growth. 22

23 IV CONDENSED FINANCIAL STATEMENTS OF THE SYGNITY S.A. AS AT 30 JUNE 2008 AND FOR THE THREE MONTHS ENDED ON 30 JUNE Financial highlights of Sygnity S.A. for the 2 nd quarter of 2008 in thousands PLN 30 June 2008 and at 30 June June 2007 and at 30 June 2007 in thousands EUR 30 June 2008 and at 30 June June 2007 and at 30 June 2007 I Net income from sale of products, goods and materials, including: II Operating profit (loss) ( ) ( ) ( 5 236) ( 7 604) III Profit (loss) before tax ( 5 695) ( ) ( 1 638) ( ) IV Net profit (loss) ( 3 087) ( ) ( 888) ( 9 234) V Net cash flow from operating activities ( 9 483) ( 3 502) ( 2 727) ( 910) VI Net cash flow from investing activities VII Net cash flow from financing activities VIII Cash and cash equivalents at period end IX Total assets X Total liabilities XI Total equity Selected financial data presented in the financial statements were converted into EUR as follows: - selected balance sheet items were converted using the fixing rate published by the National Bank of Poland as at the balance sheet date. The exchange rate was: as at 30 June 2008: EUR 1 = PLN as at 30 June 2007: EUR 1 = PLN selected items of the profit and loss account were converted using the arithmetical mean of the EUR fixing rates published by the National Bank of Poland as at the last day of each month. The exchange rate was: in the period from 1 January 2008 to 30 June 2008: EUR 1 = PLN in the period from 1 January 2007 to 30 June 2007: EUR 1 = PLN

24 2 Profit and Loss Account 30 June 2008 Three months 30 June June 2007 Three months 30 June 2007 (unaudited) (unaudited) (unaudited) (unaudited) Continued activity Net income from sale of products, goods and materials, including: Net income from sale of products Net income from sale of goods and materials Cost of sales of products, goods and materials including: ( ) ( ) ( ) ( ) Cost of sales of products (-) ( ) ( ) ( ) ( ) Cost of sales of goods and materials (-) ( ) ( ) ( ) ( ) Gross profit (loss) on sales Selling and distribution expenses (-) ( ) ( ) ( ) ( ) General administration expenses (-) ( ) ( ) ( ) ( ) Other operating revenues Other operating costs (-) ( 2 410) ( 1 756) ( 3 780) ( 3 753) Operating profit (loss) ( ) ( 3 761) ( ) ( ) Financial revenues Financial costs (-) ( 5 404) ( 2 899) ( ) ( ) Profit (loss) before tax ( 5 695) ( ) ( ) Income tax Net profit (loss) ( 3 087) ( ) ( ) 24

25 3 Balance Sheet 30 June December June 2007 (unaudited) (audited) (unaudited) Fixed assets (long-term) Tangible fixed assets Investment property Goodwill Other intangible assets Investments in associates Financial assets valued at fair value via financial result Financial assets available for sale 0 0 Long-term receivables 0 0 Long-term prepayments 0 0 Deferred tax assets Current assets (short-term) Inventories Trade and other receivables Short-term prepayments Loans granted Financial assets valued at fair value via financial result Financial assets available for sale 0 Cash and cash equivalents Assets avaible for sale Total assets

26 Balance Sheet 30 June December June 2007 (unaudited) (audited) (unaudited) Total equity Share capital Share premium Other capital reserves Accumulated profit /(loss) ( 3 404) ( ) ( ) Long-term liabilities Long-term bank loans and credits Other financial liabilities Retirement benefits provision Provisions for liabilities Long-term accruals 0 0 Deferred tax provision Short-term liabilities Short-term bank loans and credits Trade and other liabilities Income tax liabilities 0 0 Financial liabilities valued at fair value via financial result Other financial liabilities Retirement benefits provision 0 0 Provisions Short-term accruals Total equity and liabilities

27 4 Statement of changes in equity Share capital Share premium Other capital reserves Accumulated profits Total equity Equity as at 1 January ( ) Taking up shares- execution of managerial options 0 Costs of managerial options Issue of shares Y Cost of shares issue Y ( 923) ( 923) Loss cover ( ) Net profit (loss) ( 3 087) ( 3 087) Equity as at 30 June ( 3 404) Equity as at 1 January ( ) Taking up shares- execution of managerial options Costs of managerial options 0 Issue of shares X Cost of shares issue X ( 81) ( 81) Net profit (loss) ( ) ( ) Dividend ( ) ( ) Profit distribution ( 5 961) Equity as at 30 June ( )