SysOpen Plc STOCK EXCHANGE RELEASE 8 May 2002 at 10.50 a.m. SYSOPEN PLC S INTERIM REPORT FOR Q1/2002 - The Group s business profitability markedly exceeded that of the IT sector s average - Turnover amounted to EUR 7.6 million, up 2 per cent year-on-year - Earnings before interest, taxes and amortisation on goodwill (EBITA) accounted for 8 per cent of turnover, or EUR 0.6 million, down 39 per cent - A one-off write-down of EUR 1.2 million was entered due to unprofitable subsidiary and associated companies - Loss before extraordinary items was EUR 0.5 million - Earnings per share were EUR -0.07 - The period-end number of employees totalled 331, up 3 per cent on a year earlier - EBITA for Q1-Q2/2002 are expected to account for 10 per cent of turnover REPORTED TURNOVER FOR THE PERIOD YEAR-ON-YEAR Turnover growth slowed down, which was due to the delay in the launch of customer projects caused by the overall economic uncertainty. In addition, the divestment of Logistics Consulting Services affected sales. Consolidated turnover for the period reached EUR 7.6 million (Q1/: EUR 7.5 million). Organic growth in turnover was 2.2 per cent. International operations accounted for 3.5 per cent of consolidated turnover (Q1/: 2.5 per cent). Turnover by business area for Q1/2002: Enterprise Application 85.3% solutions Software Solutions 14.7% REPORTED TURNOVER COMPARED TO THE PREVIOUS QUARTER Reported consolidated turnover for Q1/2002 fell by 13.6 per cent from EUR 8.8 million for Q4/. OPERATING PROFIT AND FINANCIAL PERFORMANCE FOR THE PERIOD YEAR-ON-YEAR The Group s business profitability continued to markedly exceed the industry average. Consolidated earnings before interest, taxes and amortisation on goodwill (EBITA) amounted to EUR 0.6 million (Q1/: EUR 1.0 million, down 39 per cent), accounting for 8.0 per cent of reported consolidated turnover (Q1/: 13.4 per cent). Due to the financial situation connected with SysOpen s associated companies, SysOpen entered a one-off write-down of EUR 130,000 for accounts receivable in its consolidated income statement. This
precautionary measure will lower the values of the Group s key figures. Without the write-down, the Group s EBITA accounted for 9.7 per cent of turnover. In other respects, the delay in the launch of customer projects and the increase in office and equipment leases affected the Group s relative profitability. The Group s structure was streamlined in by consolidating profitable subsidiaries into the parent company. The Group has, as a precaution, written down the entire share capital of its loss-making subsidiary and associated companies including other related items in terms of equity. As a result of this one-off write-down, financial expenses amounted to approximately EUR 1.0 million (Q1/: financial income of EUR 13,000). Owing to the one-off write-down allocated to financial expenses, loss before extraordinary items and taxes came to EUR 506,000 (Q1/: profit of EUR 945,000). Earnings per share were EUR -0.07 (Q1/: EUR 0.07). OPERATING PROFIT AND FINANCIAL PERFORMANCE COMPARED TO THE PREVIOUS QUARTER Consolidated earnings before interest, taxes and amortisation on goodwill (EBITA) for the report period decreased by 47 per cent from EUR 1.2 million in Q4/. EBITA for the report period accounted for 8.0 per cent of reported consolidated turnover (Q4/: 12.5 per cent). HUMAN RESOURCES AND ADMINISTRATION At the end of the period, the number of employees totalled 331, up 2.8 per cent year-on-year (Q1/: 322). The average number of employees was 348, up 9.1 per cent on a year earlier (Q1/: 319). The decrease in the number of employees from the previous quarter (Q4/: 351) was due to the management buyout of Logistics Consulting Services. The reported employee turnover was 2.9 per cent. Employees by function: Enterprise Application Solutions 63% Software Solutions 17% Administration and management 15% International operations 5% FINANCING AND CAPITAL EXPENDITURE The Group s financial position remained healthy throughout the report period. Balance sheet total amounted to EUR 18.2 million (Q1/: EUR 18.3 million) and equity ratio was 62 per cent (Q1/: 68 per cent). The ratio of net liabilities to shareholders equity, or net gearing, was -57 per cent (Q1/: -60 per cent). Liquid assets totalled EUR 6.3 million (Q1/: EUR 7.4 million). The Group s gross capital expenditure amounted to EUR 0.15 million (Q1/: EUR 0.28 million). In addition to the gross capital
expenditure, the Group continued to spend on service development and software component engineering. These investments were directly expensed as incurred. SHARE CAPITAL AND SHARES The nominal value of a share is EUR 0.1. The number of shares totals 9,362,914. Ten major shareholders, as of 30 April 2002 Shareholder Proportion of shares and votes Kari Karvinen 16.9 Matti Savolainen 16.8 Jorma Kylätie 16.2 LEL Employment Pension Fund 4.2 Olli Ahonen 2.0 Mutual Insurance Company Eläke-Fennia 1.6 Suomi Insurance Company Ltd 1.6 Seppo Sneck 1.4 Sampo Suomi Osake 1.3 Yrjö Toiviainen 1.2 Holding by the number of shares held, as of 30 April 2002 Number of shares Holding (%) Proportion (%) of shares and votes 1-100 36.7 0.8 101-1,000 52.0 6.2 1,001-10,000 9.1 7.4 10,001-100,000 1.8 20.0 100,001-1,000,000 0.3 15.5 1,000,001-3,000,000 0.1 50.0 Total number of holdings: 2,749 Total number of shares: 9,362,914 Holding by sector, as of 30 April 2002 Proportion (%) of holdings of shares Corporate sector 7.8 4.6 Financing and insurance 0.6 9.0 Government sector 0.1 5.9 Non-profit organisations 0.3 0.6 Households 91 79.8 The Group s Share Performance on the Helsinki Exchanges during Q1/2002 The lowest reported share quotation was EUR 5.11 and the highest was EUR 6.35. The Group s share closed at EUR 5.80 on the final trading day of the report period. The weighted average price was EUR 5.40. The Group s market capitalisation totalled EUR 54,304,901 at the end of the period. SysOpen reported a total of 2,749 shareholders on 30 April 2002. The Group s shares are quoted on the Main List of the Helsinki Exchanges under the telecommunications and electronics business sector. The lot includes 50 shares.
Shareholders Meetings SysOpen Plc s Annual General Meeting was held on 21 March 2002. The AGM adopted the Financial Statements for and discharged those accountable from liability. In accordance with the Board s proposal, the AGM confirmed the profit distribution for, according to which a per-share dividend of EUR 0.22, or a total of EUR 2,037,841.00 (85.7 per cent of the Group s profit), was distributed to shareholders (excluding treasury shares). On 4 April 2002, the dividend was paid to shareholders registered as the company s shareholders on the record date of 26 March 2002. Kari Karvinen, Jorma Kylätie, Risto Linturi, Matti Savolainen and Timo Tiihonen were re-elected members of the Board of Directors. At its meeting after the AGM, the Board of Directors re-elected Jorma Kylätie Chairman of the Board and Kari Karvinen Vice-Chairman of the Board. The AGM unanimously approved the following Board proposals: The AGM decided to increase the company s share capital and the par value of the share through a bonus issue in order to round off the euro-denominated par value of the share and amend Articles 3 and 4 of the Articles of Association. Following the adoption of the euro on 1 January 2002, the company s share capital of FIM 4,681,457.00 has been converted into euros, rounding it off to the nearest five cent. As a result of the conversion, the company s share capital amounted to EUR 787,364,55 and the share par value was EUR 0.08 (approximate par value). In order to round off the par value, the AGM decided that the new euro-denominated par value of the share be raised to the nearest tenth of a euro, i.e. EUR 0.10, and, as a result, the AGM decided that the company's share capital be increased to EUR 936,291.40 through a bonus issue of EUR 148,926.85 (approx. FIM 885,478.84) by transferring an amount equal to the increase from the issue premium fund to the company's share capital. No action was required from shareholders, and the increase of the share capital and the par value of the share became effective by registration. - The AGM decided that the amount of minimum share capital, specified in Article 3 of the Articles of Association, be altered to EUR 600,000.00, and that the authorised maximum share capital be altered to to EUR 2,400,000.00. Moreover the AGM decided that Article 4, which deals with the par value of the share, be amended so as to correspond to the new par value. - The AGM authorised the Board of Directors to decide on issuing one or more convertible bonds, issuing stock options and/or increasing the company s share capital through one or more rights issues. The Board of Directors was authorised to decide on issuing one or more convertible bonds, issuing stock options, and/or increasing the company s share capital through one or more rights issues in such a way that the maximum number of shares, whose par value is EUR 0.10, issued through one or more rights issues, subscribed on the basis of stock options or in exchange for convertible bonds, shall amount to no
more than 1,872,582, and that the company s share capital may not be increased by more than EUR 187,258.20. The authorisation includes a right to make an exception to the shareholders pre-emption right if there is a cogent financial reason for doing so, such as a business acquisition, a co-operation arrangement, the strengthening or development of the company s financial or capital structure or the motivation of personnel. The Board is also authorised to decide that shares may be subscribed against a non-cash contribution, or on other specific terms. The Board were authorised to decide on those people entitled to share subscription, the subscription price and the bases on which the subscription price is determined. The authorisation is valid for one year from the date of the Annual General Meeting s decision. - The AGM authorised the Board of Directors to transfer the company s own shares (treasury shares). The Board of Directors was authorised to decide on transferring not more than 100,000 of the company s own shares that have been bought back. The Board would be authorised to decide about whom to and in which order the company s own shares can be transferred, as well as to decide about the bases for determining the transfer price. The Board may decide about transferring the company s own shares deviating from the shareholders subscription privilege. Shares may be transferred as a consideration in the event of purchasing assets pertaining to the company's business or in the event of business acquisitions or to finance or implement other arrangements, or in another manner and to the extent decided by the Board. Shares may also be transferred through public trading organised by the Helsinki Exchanges. The authorisation is valid for one year as of the date of the AGM s decision. Stock-Option Schemes A total of 369,000 stock options has been issued in accordance with SysOpen Plc s stock-option scheme for 1999-2004, and all of the options have been subscribed. The share subscription period for all warrants will expire on 31 October 2004. The share subscription price for A, B and C warrants is EUR 6.40, EUR 9.30 and EUR 6.55 per share, respectively. On 25 March 2002, SysOpen Partners Oy, the Group s wholly owned subsidiary, held a total of 58,116 stock options in accordance with the stock-option scheme for 1999-2004. SysOpen Plc s Board of Directors has approved the subscription rights for the stock-option scheme for 2000-2005. All the 400,000 stock options were exercised. The share subscription period with all warrants will expire on 31 May 2005. The share subscription price for E warrants is set at EUR 8.30 per share and that for F warrants at EUR 5.36 per share. On 25 March 2002, SysOpen Partners Oy, the Group s wholly owned subsidiary, held a total of 123,328 stock options in accordance with the stock-option scheme for 2000-2005. GROUP STRUCTURE SysOpen s reshaped business units as of the beginning of 2002 were as follows: Commerce and Services, Telecoms and Industry, Financing, Domestic regions, SysOpen Object Team Oy, Software Solutions and
Business Development and International Operations. With the modernised Group structure, we aim to make more efficient use of our industry expertise and be closer to our customers. In February, SysOpen sold the Logistics Consulting Services business, which had been part of Commerce and Services, to the management of the business. The 25 employees involved in the business joined the new company on 1 March 2002. SysOpen holds a 10 per cent minority interest in the new company (EP-Logistics Oy). BUSINESS SysOpen offers its customers software and expert services that enhance their electronic business operations. Our business consists of enterprise application solutions and software and the supporting consulting and technology development services. During the report period, SysOpen strengthened its position as an integrator of electronic business solutions for large and mid-sized customers. With healthy profitability, demand for enterprise application solutions and consulting services remained at a steady level. Overall, Software Solutions made a loss for the period due to R&D spending financed through cash flow from business operations. During the report period, SysOpen continued to focus on foreign sales of standard software and partnerships. Software Solutions primary focus is on systems implementations based on in-house components, such as OpenPort and OpenID. Component-based software solutions implementations are primarily based on integrated systems for the needs of passenger traffic and various organisations and associations. The period saw new customers and contracts, including Metso, Fennia and the Veitsiluoto mills of Stora Enso. Account Strategy New-technology projects for Metso Paper Inc. SysOpen Plc will implement for Metso Paper Inc. a Pulp&Paper portal to serve as an information channel between Metso and its customers. The server-based extranet application is well on the way to being completed: installation and integration tests will be launched in early May. The project also involves developing a software framework,which will technically serve as the basis for other future portals, while finding solutions for user authentication and directory management. SysOpen will also provide Metso Paper Inc. with a browserbased Intranet application for customer relationship management. Consulting and Spearhead Strategy Architecture consultancy for Fennia The project involves mapping out the infra for the architecture and the related technology, systems definition and a road map description. The systems definition includes presenting Fennia s new application architecture and providing the most important bases for the solutions
selected. According to the proposal for the road-map, the aim is to move towards the new type of integrated architecture through pilot projects. Product Strategy OpenZone for Stora Enso s Veitsiluoto mills OpenZone is a solution for automated identification of vehicle traffic, managing passes and controlling bars at gates and display boards. An access-control system for personal identification will also be included in the application. The rollout period for and training in the systems was implemented in early February. Currently on trial, the system was delivered at the beginning of April. This OpenZone implementation means breaking into the field of the pulp and paper industries, and the largest Stora Enso mills in Finland are also following the project closely. The corporate insurance sector is also interested in applying it as a system that supports regional management and security. Acquisition and Alliance Strategy In February, SysOpen sold the Logistics Consulting Services business, which had been part of Commerce and Services, to the management of the business. The 25 employees involved in the business joined the new company on 1 March 2002. SysOpen holds a 10 per cent minority interest in the new company (EP-Logistics Oy). SysOpen will be actively involved in IT industry restructuring that will strengthen its position as a software provider. During the report period, SysOpen was active in mapping out prospective partners. EVENTS AFTER Q1/2002 Due to the delay in the launch of customer projects caused by the overall economic uncertainty, SysOpen s Board of Directors has decided to enter into joint discussions with employees at the Group s regional units with a view to laying off temporarily an estimated number of 15 employees during summer 2002. Demand for the Group s services has remained at a brisk level in the Helsinki Metropolitan Area. Due to serious illness, Jorma Kylätie, Chairman of SysOpen s Board of Directors, has been on sick leave since the beginning of April. His sick leave is estimated to extend until the end of June 2002. Kari Karvinen, Vice-Chairman who is actively involved in the Group s operations with the third owner-founder, Matti Savolainen, will meanwhile chair the Board. Arto Sahla, Managing Director, will be in charge of investor relations until further notice. NEAR-TERM PROSPECTS Uncertainty in the economic climate will affect SysOpen s business. Business restructuring processes in a number of industries and the postponed investment decisions by companies caused by the current market situation will slow down business growth. Nevertheless, demand for SysOpen s services has remained strong, especially in the Helsinki Metropolitan Area and we have maintained our position among our customers and obtained new customers with great business potential.
We expect our Enterprise Application Solutions business to be profitable and the domestic and foreign delivery volumes of Software Solutions to be on the rise during the current year. Demand for Consulting Services and Technology Development will also remain robust, especially when it comes to challenging object-based technology projects and IT architecture projects. The group continues to pay special attention to cost-control measures and focus on profitable and growing business areas. The second-quarter Group earnings (EBITA) are expected to account for 10 per cent of turnover. BRIEFING SysOpen will hold a briefing on its Interim Report for Q1/2002 for analysts and the press on Wednesday, 8 May 2002 at 12.00 noon. The briefing will be held at Marskinsali of the World Trade Center on the 2nd floor, Aleksanterinkatu 17, 00100 Helsinki. A lunch will be served. All are welcome. The Interim Report for Q2/2002 will be released on 15 August 2002. Helsinki, 8 May 2002 Sysopen Plc Board of Directors FOR FURTHER INFORMATION, PLEASE CONTACT Arto Sahla, Managing Director, tel. +358 424 2020 339, gsm +358 400 442 986, email: arto.sahla@sysopen.fi Kirsi Lindroth, Director of Corporate Communications, tel. +358 424 2020 388, gsm +358 40 521 6332, e-mail: kirsi.lindroth@sysopen.fi The Interim Report and the related slide show are also available on the Group s web site:, as of 1:00 p.m. Wednesday, 8 May 2002. DISTRIBUTION Helsinki Exchanges Major media
Consolidated Income Statement for 1 January-31 March 2002 EUR 1,000 1 Jan.- 31 March 2002 1 Jan.- 31 March Jan.1-31 Dec. TURNOVER 7,635 7,480 30,756 Other operating income 59 6 68 Materials and services - 248-265 -1,683 Personnel expenses - -4,234-16,936 4,615 Depreciation and write downs - 191-156 -780 Other operating expenses - 2,031-1,828-7,317 EBITA 609 1,003 4,108 Goodwill amortisation - 88-71 -292 OPERATING PROFIT 521 932 3,816 Financial income and -1,027 13-155 expenses Profit before extraordinary items and taxes -506 945 3,661 Direct taxes -81-305 -1,181 Minority interest 18-33 -102 PROFIT/LOSS FOR THE PERIOD -569 607 2,379
Consolidated Balance Sheet on 31 March 2002, EUR 1,000 ASSETS March 31 2002 March 31 Dec. 31 FIXED AND OTHER NON- CURRENT ASSETS Intangible assets Development costs 112 221 139 Intangible rights 538 480 564 Other non-current assets 195 142 170 Group goodwill 1,047 1,030 1,135 Intangible assets total 1,892 1,873 2,008 Tangible assets 1,854 1,509 1,916 Long-term investments 1,227 Other investments 1,198 1,208 INVENTORIES AND CURRENT ASSETS Inventories Current receivables 6,976 6,255 7,599 Short-term investments 1,827 1,968 1,827 Cash and bank 4,481 5,478 3,478 receivables ASSETS TOTAL 18,227 18,291 18,055 LIABILITIES AND SHAREHOLDERS EQUITY March 31 2002 March 31 Dec. 31 SHAREHOLDERS EQUITY Share capital 787 777 787 Share issues 149 Issue premium fund 7,092 7,209 7,241 Retained earnings 3,430 3,549 3,089 Profit/loss for the -569 607 2,379 period SHAREHOLDERS EQUITY 10,890 12,142 13,496 TOTAL MINORITY INTEREST 142 115 161 LIABILITIES Long-term liabilities 75 Short-term liabilities 7,195 5,958 4,398 LIABILITIES AND SHAREHOLDERS EQUITY TOTAL 18,227 18,291 18,055
Group key figures and ratios for 1 January-31 March 2002 on a comparable basis 1 Jan.- 31 March 2002 1 Jan.- 31 March Jan.1-31 Dec. Turnover 7,635 7,480 30,756 Turnover growth, % 2 57 34 EBITA 609 1,003 4,108 - % of turnover 8 13 13 Operating profit 521 932 3,816 - % turnover 7 12 12 Profit before extraordinary items and taxes -506 945 3,661 - % turnover 0 13 12 Return on equity, % -19 21 19 Return on capital 17 30 27 invested, % Interest-bearing 8 75 10 liabilities Short-term investments + Cash and bank receivables 6,308 7,446 5,304 Net gearing, % -57-60 -39 Equity ratio, % 62 68 76 Capital expenditure 146 281 1,690 - % of turnover 2 4 5 Personnel at period-end 331 322 355 Average personnel 348 319 341 Earning per share, EUR -0.07 0.07 0.26 Equity per share, EUR 1.18 1.32 1.46 Group key figures and ratios for 1/2002 and 1/ on a quarterly basis Q1/ 2002 Q1- Q4/ Q1-Q3/ Q1-Q2/ Q1/ Turnover 7,635 30,756 21,937 15,001 7,480 Turnover 2 34 37 46 57 growth, % EBITA 609 4,10 2,950 2,788 1,003 8 - % of turnover 8 13 13 19 13 Operating 521 3,81 2,736 2,646 932 profit 6 - % turnover 7 12 12 18 12 Profit before extraordinary -506 3,66 2,588 2,569 945 items and taxes 1 - % turnover 0 12 12 17 13 Return on -19 19 18 27 21 equity, % Return on capital 17 27 27 40 30
invested, % Interestbearing liabilities Short-term investments + Cash and bank receivables Net gearing, % 8 10 11 53 75 6,308 5,30 4 6,575 5,853 7,446-57 -39-51 -45-60 Equity ratio, % 62 76 72 77 68 Capital expenditure 146 1,69 0 1,190 4,33 2,81 - % of turnover 2 5 5 3 4 Personnel at period-end 331 355 351 348 322 Average 348 341 336 329 319 personnel Earning per -0.07 0.26 0.18 0.19 0.07 share, EUR Equity per share, EUR 1.18 1.46 1.39 1.40 1.32 Key figures and ratios are based on calculations on a quarterly basis. The earnings per share ratio is based on the average share-issueadjusted number of shares (9,191,756) for the period. The number of outstanding shares totalled 9,262,914 at the end of the period. The ratios of return on equity and return on capital invested have been annualised. SysOpen held a total of 100,000 treasury shares at the end of the period. The Group has no contingent liabilities associated with derivative contracts. Figures in this Interim Report are unaudited. Helsinki, 8 May 2002 SysOpen Plc Board of Directors