SYGNITY S.A. CAPITAL GROUP ADJUSTED ABBREVIATED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE-MONTH PERIODS ENDING ON 31 DECEMBER AND 31 DECEMBER DRAWN UP IN ACCORDANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS
Consolidated quarterly financial statements as of Table of contents Management board s commentary on the financial statements for the third quarter of 3 Interim consolidated profit and loss account 5 Interim consolidated balance sheet 6 Interim consolidated statement of changes in shareholders equity 8 Interim consolidated cash flow statement 10 Notes on the interim consolidated cash flow statement 11 Notes on the abbreviated consolidated financial statements 12 Stand-alone financial statements of the parent company 17-2 -
Consolidated quarterly financial statements as of Management board s commentary on the financial statements for the fourth quarter of In the 4Q the Sygnity Group recorded revenues in the amount of PLN 392 million, PLN 55.6 million of operational profit and PLN 43 million of net profit. This was the first quarter, in which the Sygnity recorded the first results of the restructurization programme launched in September. In the entire year, the Sygnity Group recorded PLN 1.27 billion of revenues, operational loss in the amount of PLN 71 million and net loss amounting to app. PLN 65 million. On the day of 12 December,, the Management Board of Sygnity S.A. communicated the adjusted forecast of financial results, which assumed the operational result in the amount of PLN 56 million. Execution of sales revenues is lower by 8% comparing to the forecast communicated on 14 November,, which results mostly from shifting of the scheduled public sector procurements for the total amount of PLN 21 million as well as shifting in telecommunication and utilities sector. The Company schedules its execution for 2008. Q4 Q4 Net sales revenues 392 125 420 206 Operational profit (loss) 55 610 (7 492) Net profit (loss) 43 050 (15 615) In the entire year, operational loss amounted to PLN 71.4 million and was burdened with established write-offs in the amount of app. PLN 64.3 million (including write-offs for restructurization of PLN 45.7 million and PLN 18.6 million for settlement of Emax shares acquisition transaction, so called goodwill). Also transaction settlement of sales of part of the company related to Infomedica and Mmedica products to the ABG SPIN company (income exceeding PLN 27 million) influenced the achieved financial result. Net sales revenues 1 269 185 Operational profit (loss) (71 376) Net profit (loss) (64 844) In 4Q the Group run an intensive restructurization process, due to which the Company was able to identify savings in the amount of PLN 14.5 million for restructurization of non-personnel costs and launched processes of employment reduction by 365 persons (comparing to state as of 31 July, ). Within internal structure ordering process the health sector has been included into public sector, moreover, two sales units functioning previously in this sector have been combined. The Management Board of the Company has also implemented new Organization Rules and Regulations of the Sygnity Group, determining structure of sales and executive branches together with appointment rules. Sygnity has also launched works on implementation of unified IT systems for sales, execution and finance management in all key companies of the Group of Companies. According to previous announcements, Sygnity has also launched sales of business activities, which are not compliant with currently implemented business model. At the beginning of December the Company has entered into agreement on sales of the organized part of the entrepreneurship related to Infomedica and Mmedica products to the ABG SPIN company. The merger has covered, among others, a group of employees and copyrights to the implemented and handled systems in more than 300 hospitals and other health care facilities. Final settlement of transaction took place on 11 January, 2008. Sygnity acquired PLN - 3 -
Consolidated quarterly financial statements as of 28 million. The Company has also obtained an approval of the shareholders to sale further business activities, among others, solutions for fuel stations networks. In February 2008 the Company has disposed its minority block of shares in EFH S.A. for the amount of net PLN 4 million. Sygnity assumes to sale 1-2 companies of the Group (to be executed at the turn of 1 and 2Q 2008) and runs intensive consolidation in subsidiary companies operating in IT service and outsourcing. To the end of the 1Q 2008 Sygnity assumes to sale minority block of shares in the next company. The Management Board is in the course of the final phase of negotiations on sale of 2 business areas (sale to the end of 1Q 2008) and has launched the activities concerning sale of three subsequent ones as well as defined and conducted analyses on potential sale of the other business areas. To summarize, the company aims to acquire the amount of PLN 50 60 million from sale of non-key business activities of the entrepreneurship to the end of April 2008 (PLN 32 million has been executed until now). In 4Q, the Management Board of Sygnity has taken intensive actions aiming at improvement of financial condition of the company. The Company has issued new shares, from sale of which it acquired more than PLN 30 million and purchased part of convertibles (in the amou of PLN 25 million) and improved working capital structure, due to which it was possible to reduce indebtedness of the Group of Companies from PLN 277 million (state as of 30 September, ) to the current level of PLN 106 million. At the same time, in December, the Management Board of Sygnity S.A. has established an agreement with the financing banks on their continuous engagement in the Company issues pursuant to the contracts in force. The Company has been currently negotiating with the banks on establishing of the banks agreement implementing unified credit terms and conditions. In 4Q the Company has entered into subsequent contracts, among others, general agreement on continued provision of advisory Service for the European Leasing Fund (ELF), concluded by the Business Consulting Division of Sygnity. The Company has proved its excellent position in the area of providing services for territorial self-government authorities and financial sector. At the end of an agreement with, among others, the Marshall Office of the Świętokrzyskie Voivodship on execution of the e- Świętokrzyskie project has been concluded. The Company has also participated in the EPRP project (epresentation of accounts and payments) for the National Chamber of Settlements, which has an opportunity to revolutionize the mass payment market in Poland. Sygnity has also signed an agreement on modification and development of the Co-financing Support System with the State Fund for Rehabilitation of Disabled Persons (PFRON). At the end of the year, Sygnity has once again acquired a status of the Authorized Partner of IBM Polska, which gives the company wide opportunities in the scope of development of portfolio of the offered services on the basis of high-quality advanced IBM technologies. Key focus of the restructurization program is connected, among others, with employment reduction and sale of non-basic business activities shall be completed in the 1Q 2008. Target of all restructurization activities, currently under way, is drastic cost reduction, profitability improvement and increase of operational effectiveness of Sygnity in order to develop stable basis for long-term development. - 4 -
Consolidated quarterly financial statements as of Interim consolidated profit and loss account 12 months 12 months Net income from sale of products, goods and materials, including: 392 125 1 269 185 420 206 927 062 Net income from sale of products 245 448 709 012 271 973 648 280 Net income from sale of goods and materials 146 677 560 173 148 233 278 782 Cost of sales of products, goods and materials including: (320 762) (1 117 969) (321 253) (713 430) Cost of sales of products (200 603) (619 822) (183 359) (454 831) Cost of sales of goods and materials (120 159) (498 147) (137 894) (258 599) Gross profit on sales 71 363 151 216 98 953 213 632 Other operating revenues 39 752 40 656 4 076 10 754 Selling and distribution expenses (17 526) (67 236) (31 293) (69 647) General administration expenses (34 630) (164 889) (73 615) (159 564) Other operating costs (3 348) (31 123) (5 613) (8 526) Operating profit /(loss) 55 610 (71 376) (7 492) (13 351) Financial revenues 1 699 5 666 723 2 678 Financial costs (5 060) (17 758) (1 867) (10 032) Net financial costs (3 360) (12 092) (1 144) (7 354) Share of profit /(loss) in assoctiates - 105 34 26 Profit /(loss) before tax 52 250 (83 363) (8 602) (20 679) Income tax (8 992) 2 991 (144) 80 Net profit: 43 258 (80 372) (8 746) (20 599) attributable to: Minority interest 208 (15 528) 6 869 6 996 Equity holders of the parent 43 050 (64 844) (15 615) (27 595) Net profit per share (in zł) : Basic 3,98 (6,00) (1,74) (3,46) Diluted 3,98 (6,00) (1,72) (3,42) - 5 -
Consolidated quarterly financial statements as of Interim consolidated balance sheet Fixed assets (long-term) Tangible fixed assets 42 094 53 664 Investment property 3 594 3 709 Goodwill 159 931 167 233 Other intangible assets 94 749 117 630 Investments in associates 640 745 Financial assets valued at fair value via financial result 1 810 2 817 Financial assets available for sale 791 - Long-term receivables 1 712 2 477 Long-term prepayments 51 358 Deferred tax assets 21 088 16 647 326 460 365 280 Current assets (short-term) Inventories 73 018 54 584 Trade and other receivables 344 834 392 680 Short-term prepayments 68 686 103 522 Loans granted 3 473 3 027 Financial assets valued at fair value via financial result 1 930 704 Cash and cash equivalents 51 024 59 774 542 965 614 291 Total assets 869 425 979 571-6 -
Consolidated quarterly financial statements as of Interim consolidated balance sheet Equity Share capital 14 009 11 171 Share premium 282 633 173 837 Other capital reserves 149 074 159 067 Foreign exchange differences 325 41 Accumulated profit /(loss) (102 360) (39 399) Equity attributable to equity holders of the parent 343 681 304 717 Minority interest 3 080 128 956 Total equity 346 761 433 673 Long-term liabilities Long-term bank loans and credits 1 143 243 Other financial liabilities 3 405 4 450 Retirement benefits provision 833 726 Provisions for liabilities 696 689 Long-term accruals 325 4 359 Deferred tax provision 26 092 33 602 32 494 44 069 Short-term liabilities Short-term bank loans and credits 106 560 87 471 Trade and other liabilities 244 154 275 040 Income tax liabilities 6 018 - Financial liabilities valued at fair value via financial result 62 961 77 326 Other financial liabilities 2 159 4 421 Retirement benefits provision 1 326 82 Provisions 17 723 9 074 Short-term accruals 49 269 48 415 490 170 501 829 Total liabilities 522 664 545 898 Total equity and liabilities 869 425 979 571-7 -
Consolidated quarterly financial statements as of Interim consolidated statement of changes in shareholders equity Share capital Share premium Other capital reserves Foreign exchange differences Equity attributable to equity holders of the parent Minority interest Total equity Equity as at 1 October 11 167 173 448 158 583 (2) (23 601) 319 595 4 022 323 617 Taking up shares- execution of managerial options 4 389 - - - 393-393 Issue of W series shares - - - - - - - - Net profit - - - - (15 615) (15 615) 6 869 (8 746) Appropriation of net profit in the parent company - - - - 6 946 6 946-6 946 Dividends paid out - - - - (6 946) (6 946) - (6 946) Costs of managerial options - - 484 - - 484-484 Equity part of the redeemed convertible bonds - - - - - - - - Foreign exchange differences - - - 43-43 - 43 Changes in the make-up of the Group resulting from acqusition of EMAX - - - - - - 120 164 120 164 Other changes in the make-up of the Group - - - - (183) (183) (2 099) (2 282) Equity as at 11 171 173 837 159 067 41 (39 399) 304 717 128 956 433 673 12 months Accumulated profits Equity as at 1 January 10 090 53 467 166 404 (415) (13 563) 215 983 4 534 220 517 Taking up shares- execution of managerial options 81 6 370 - - - 6 451-6 451 Issue of W series shares 1000 114 000 - - - 115 000-115 000 Net profit - - - - (27 595) (27 595) 6 996 (20 599) Appropriation of net profit in the parent company - - 5 273 - (5 273) - - - Dividends paid out - - - - (6 946) (6 946) - (6 946) Costs of managerial options - - 1 936 - - 1 936-1 936 Equity part of the redeemed convertible bonds - - (14 546) - 14 546 - - - Foreign exchange differences - - - 43-43 - 43 Changes in the make-up of the Group resulting from acqusition of EMAX - - - - - - 120 164 120 164 Other changes in the make-up of the Group - - - 413 (568) (155) (2 738) (2 893) Equity as at 11 171 173 837 159 067 41 (39 399) 304 717 128 956 433 673-8 -
Consolidated quarterly financial statements as of Interim consolidated statement of changes in shareholders 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 October 14 009 282 633 148 869 121 (145 396) 300 236 2 872 303 108 Taking up shares- execution of managerial options - - - - - - - - Issue of merger shares of (X series) - - - - - - - - Repurchase of minority interest in EMAX Group - - - - - - - - Declared dividend for - - - - - - - - Net profit - - - - 43 050 43 050 208 43 258 Costs of managerial options - - 205 - - 205-205 Costs of shares issue - - - - - - - - Foreign exchange differences - - - 204-204 - 204 Other changes in the make-up of the Group - - - - (14) (14) - (14) Equity as at 14 009 282 633 149 074 325 (102 360) 343 681 3 080 346 761 12 months Equity as at 1 January 11 171 173 837 159 067 41 (39 399) 304 717 128 956 433 673 Taking up shares- execution of managerial options 43 3 753 - - - 3 796-3 796 Issue of merger shares of (X series) 2 795 252 469 - - - 255 264-255 264 Repurchase of minority interest in EMAX Group - (147 345) - - - (147 345) (107 919) (255 264) Declared dividend for - - (10 813) - - (10 813) - (10 813) Net profit - - - - (64 844) (64 844) (15 528) (80 372) Costs of managerial options - - 820 - - 820-820 Costs of shares issue - (81) - - - (81) - (81) Foreign exchange differences - - - 284-284 - 284 Other changes in the make-up of the Group - - - - 1 884 1 884 (2 429) (545) Equity as at 14 009 282 633 149 074 325 (102 360) 343 681 3 080 346 761-9 -
Consolidated quarterly financial statements as of Interim consolidated cash flow statement 12 months 12 months Cash flow from operating activities Profit before tax 52 250 (83 363) (8 602) (20 679) Adjustments: 72 887 76 876 (53 353) (56 507) Share of profit in associates 399 294 (34) (26) Depreciation and amortisation 12 232 49 355 49 945 68 485 Foreign exchange (gains) /losses (698) (893) 2 (163) Net interest and share in profits 777 8 652 (4 264) 1 423 (Profit) /loss on investment activity (18 668) 2 728 (289) (4 779) Change in working capital 77 038 12 442 (104 237) (128 470) Costs of managerial options 205 820 484 1 936 Other adjustments 1 602 3 478 5 040 5 087 Cash from operations 125 137 (6 487) (61 955) (77 186) Income tax (paid) / returned (305) (1 510) (1 064) (7 658) Net cash flow from operating activities 124 832 (7 997) (63 019) (84 844) Cash flow from investing activities Proceeds from sale of fixed and intangible assets 365 1 584 3 451 4 409 Sale / (purchase) of short-term securities (2 259) (1 477) 6 231 86 750 Capital expenditures (10 333) (31 534) (7 718) (21 379) Net expenditures on acqusition of subsidiaries and associates (2 983) (8 765) (70 596) Granted / (repaid) loans (928) (627) (2 338) (2 338) Other investment expenditures and receipts 29 341 29 131 38 700 38 600 Net cash flow from investing activities Cash flow from financing activities 16 186 (5 906) 26 110 35 849 Proceeds from issue of shares, other equity instruments and contributions to equity (851) 10 322 437 6 497 Dividends and other paymenst to owners 80 (10 143) (291) (6 946) Receipts from loans and credits 9 844 186 968 (10 000) 27 166 Repayment of loans and credits (93 411) (165 944) 27 900 (125) Repayment of lease liabilities (20) (2 205) 75 000 75 000 Issue of interest-bearing bond 10 111 37 647 (67 669) (67 669) Redemption of convertible bonds (35 000) (42 647) 37 026 (30 643) Interest paid (4 834) (8 664) 27 706 (1 267) Other financing expenditures and receipts (441) (181) 118 186 Net cash flow from financing activities (114 522) 5 153 90 227 2 199 Net change in cash and cash equivalents 26 496 (8 750) 53 318 (46 796) Cash and cash equivalents at period beginning 24 528 59 774 6 456 106 570 Cash and cash equivalents at period end 51 024 51 024 59 774 59 774-10 -
Consolidated quarterly financial statements as of Notes on the interim consolidated cash flow statement 12 months 12 months Change in working capital Change in provisions 7 751 11 399 (2 020) (7 383) Change in inventory (10 211) (38 331) 5 721 10 235 Change in receivables (94 970) 24 633 (110 029) (42 416) Change in liabilities 150 237 6 450 19 312 (82 631) Change in prepayments and accruals 24 231 8 291 (17 221) (6 275) 77 038 12 442 (104 237) (128 470) - 11 -
Consolidated quarterly financial statements as of Notes on the abbreviated consolidated financial statements 1 General information, changes to Management Board and Group of Companies structure. 1.1 The basic scope of business activity of the Sygnity S.A. Group covers the software-related area and computer hardware consultancy. As of,, the Sygnity Group of Companies consists of Sygnity S.A. being the dominating company and 15 subsidiary companies. In addition, Sygnity S.A. has a significant influence on 3 associated companies. 1.2 Within the 4Q of the current year no changes to the Management Board of Sygnity Group of Companies took place. Present composition of the Management Board of Sygnity S.A. is as follows: - Mr. Piotr Kardach President of the Management Board, - Mr. Andrzej Marciniak Vice President of the Management Board, - Mr. Jacek Kujawa - Vice President of the Management Board, - Mr. Bogdan Kosturek - Vice President of the Management Board, - Mr. Andrzej Kosturek - Vice President of the Management Board, - Mr. Rajmund Gral - Vice President of the Management Board. 1.3 Within the 4Q of the current ear no changes to structure of Sygnity Group of Companies took place. 1.4 The abridged financial statement has been prepared for the period of the last three months, ending on 31 December,, with data comparable to the three months on,. The financial statement has been approved for publishing by the Management Board of Sygnity S.A. on 26 February,. 2 Essential accounting principles a) The basis for preparing a consolidated financial statement The abridged consolidated financial statement was prepared in line with the historical cost principle, with the exception of the derivative financial instruments and financial assets available for sale, which are indicated at fair value. The abridged financial statement is expressed in PLN, and all values are indicated in thousands PLN, unless specified otherwise. b) Declaration of conformity The abridged consolidated financial statement of the Sygnity S.A Group was prepared according to the International Financial Reporting Standards (IFRS.) c) Coherence of the used accounting principles The consolidated balance sheet as per, the consolidated profit and loss account, the consolidated cash flow statement and the consolidated statement of changes in equity for the three months on were not subject to an audit. The consolidated balance sheet as per 30 June, the consolidated profit and loss account, the consolidated cash flow statement and the consolidated statement of changes in equity for six months on 30 June have been prepared according to the IFRS principles and were subject to an audit of financial statements. - 12 -
Consolidated quarterly financial statements as of The abridged financial statement as per was prepared according to the International Accounting Standard 34 Interim Financial Reporting and should be studied along with the audited consolidated financial statement as per 30 June, prepared according to the IFRS. The adopted accounting principles were continuously applied to every presented period in this abridged financial statement. 3 Share capital Share capital of Sygnity S.A. being the dominating company, presented in the individual financial statement amounted to PLN 10. 813 thousand as of the day of,. Within the period covered by this report no increase of share capital has been recorded. Share capital determined in the consolidated statement is higher than in individual statement by hyperinflation adjustment of PLN 3.196 thousand and amounts to PLN 14.009 thousand. Hyperinflationary overestimation of share capital pursuant to the International Accounting Standard 29 Financial reporting in hyperinflationary economies has been determined on the day of transition onto IFRS i.e. on 1 January, 2005. As of the day of 22 February, 2008, share capital of the Sygnity S.A. company amounts to PLN 11 885 742 and divides into 11 885 742 shares with nominal value of PLN 1 each. According to information the Company has access to, the shareholders that on February 22, 2008, have a number of shares exceeding 5% of Sygnity S.A. s share capital were as follows: - BBI Capital SA with 9,.41% of share capital of Sygnity S.A. and the same percentage of votes on Sygnity S.A. General Shareholder Assembly, - Legg Mason Towarzystwo Funduszy Inwestycyjnych Spółka Akcyjna (Investment Fund Association Joint Stock Company) with 9.84 % of share capital of Sygnity S.A. and the same percentage of votes on Sygnity S.A. General Shareholder Assembly, - Deutsche Bank AG with 5.07 % of share capital of Sygnity S.A. and the same percentage of votes on Sygnity S.A. General Shareholder Assembly, Changes in the structure of ownership of blocks of shares exceeding 5% of Sygnity S.A. s in the period since the communication of the previous quarterly report are presented in the table below: Shares As At 14.11. No. of shares % of votes at GSM Change in No. of shares As at 31.12.*/ No. of shares % of votes at GSM Changes from As at 22.02.2008 31.12. % of till No. of shares votes at 22.02.2008 GSM BBI Capital S.A. 1.000.000 9,24% - 1.000.000 9,24% 207.631 1.207.631 9,41% Tomasz Sielicki 528.841 4,89% - 528.841 4,89% - 528.841 4,89% CU OFE BPH CU WBK 650.000 6,011% (224.373) 425.627 3,94% - - - ING Nationale- Nederlanden Polska OFE Commercial Union Investment Mamagement Pioneer Pekao Investment Management SA 704.000 6,51% - 403.184 3,73% - bd bd 632.801 5,85% - Bd Bd - 532.853 4,94% 688.894 6,37% 688.894 6,37% (174.703) 514.191 4,76% PKO TFI - - - - - 689.059 689.059 5,84% Deutsche Bank AG - - - - - 603.152 532.853 5,07% - 13 -
Consolidated quarterly financial statements as of Legg Mason TFI AIG Otwarty Fundusz Emerytalny - - 809.939 809.939 7,49% 360.061 1.170.000 9,84% 573.415 5,30% - 573.415 5,30% - 573.415 4,82% */ The list of shareholders has been drawn up according to the Company s best knowledge and on the basis of notifications received under Article 69(1) of the Act on Public Offer and Conditions of Introduction of Financial Instruments to Organized Trading System and on Public Companies (Journal of Laws of 2005, No. 184, item 1539) and on the number of shares owned by a given shareholder recorded on the previous Company s Extraordinary General Shareholder Assembly. 4 Transactions with related entities (a) Management Board and Supervisory Board Gross remunerations paid by Sygnity S.A. to the members of the Management Board within the three-months period on,, amounted to PLN 2 192 thousand (for three months on 31 December, : PLN 974 thousand). 5 Seasonality No seasonality is present in the Group activity. 6 Intangible assets acquired in result of merger of the EMAX Group of Companies. Sygnity Group has communicated its intangible assets acquired in the course of merger of the EMAX Group of Companies separately from the company s value. The table below presents impact of depreciation of the acquired intangible assets on the results of the Sygnity Group in 4Q and the expected depreciation impact in the years 2008-2011. Gross book value 30.09. Net book value 31.12. Impact of depreciation on the Group's financial result for Q4 and estimates of depreciation charges in following periods Q4 / 2008 2009 2010 2011 Non-tangible assets acquired with EMAX Group A. Business relations of EMAX Group 28 531 22 124 (1 281) (5 126) (5 126) (5 036) (4 693) (3 568) B. Signed contracts of EMAX Group 11 340 2 062 (1 362) (5 451) (2 008) (56) 0 0 C. Product trade marks of EMAX Group 18 482 14 786 (462) (1 848) (1 848) (1 848) (1 848) (1 848) D. Trade marks: Emax, Winuel oraz Max Elektronik 64 543 24 408 (1 526) (6 102) (6 102) (6 102) (6 102) (6 102) Total 122 897 63 380 Impact of depreciation charge on operating profit (4 631) (18 527) (15 084) (13 042) (12 643) (11 518) Adjustment in deferred taxes 880 3 520 2 866 2 478 2 402 2 188 Impact of depreciation charge on the net profit (3 751) (15 007) (12 218) (10 564) (10 241) (9 329) The present estimations of depreciation concerning Winuel and Max Elektronik brands (EMAX brand was depreciated in total in Q4 ) are based on the assumption that these assets will be used for the period of 5 years. One-off write-downs of Winuel and Max Elektronik brands may take place in future in the case of further reorganization of the Sygnity Group and decision on withdrawal from business use of these brands. - 14 -
Consolidated quarterly financial statements as of At the same time, the Management Board of Sygnity S.A. wishes to emphasize that depreciation of intangible assets is non-cash expense of the Sygnity Group result. Therefore it has no impact in cash flows generated neither by the Group nor for valuation of the Group using income valuation method. Depreciation of the above-mentioned intangible assets has been included in the Management Board Costs position in the consolidated profit and loss account. 7 Essential transactions of special nature. On 5 December, the Sygnity S.A. Company entered into agreement on sale of the organized part of the entrepreneurship related to Infomedica and Mmedica products to the ABG SPIN company. The merger covered, among others, group of employees and copyrights to the implemented and serviced systems in more than 300 hospitals and other health care facilities. The agreement contained also the provisions on cooperation and information exchange with ABG SPIN in the scope of handling settlements of health care services with the National Health Fund. Sale price has been established for the amount of net PLN 28 million. Transfer of the organized part of Sygnity onto ABG SPIN took place in December, whereas final settlement of sales transaction took place in January 2008. The transaction described above increased operational profit of the Sygnity Group for the period of three months on, by the amount of PLN 27 416 thousand. 8 Information on issuing, purchase and payment of debt and equity securities. Within the period of 3 months on,, the dominating Company purchased the bonds for the amount of PLN 35 000 and reissued the bonds for the amount of PLN 10 000 within the Bonds Issuing Programme executed by Sygnity S.A. 9 Liabilities for credits and loans As of the day of,, liabilities of the Group for credits amounted to PLN 107 703 thousand. 10 Information on credit or loan sureties or guarantees granted The dominating Company granted no sureties / guarantees on loans or credits to a single entity or subsidiary entity, total value of which would exceed 10% of equity capitals of the company. Total value of bank guarantees granted by the Group as of the day of,, amounted to PLN 37 000 thousand. Among the guarantees issued on the day of,, 57% are due (good) agreement (contract) performance warranties. The aim of the performance warranty is to secure the claims arisen in the case of failure to perform or improper performance of the agreement. As of the day of 31 December,, 14$ of the issued guarantees are payment guarantees, aiming at securing on-time payment of the liabilities. Tender guarantees constitute 18% of the guarantees total. 11 Events after balance sheet day No significant events after balance sheet day, results of which would require inclusion into or revealing in the financial statement, made as of,, took place. 12 Information on the ability to execute profit and loss forecasts for the current year that were published earlier On the day of 12 December, the Management Board communicated the adjusted forecast of results, assuming operational profit in the amount of PLN 56 million. Execution of sales revenues is lower by 8% comparing to the forecast communicated on 14 November,, which results mostly from shifting of the - 15 -
Consolidated quarterly financial statements as of scheduled public sector procurements for the total amount of PLN 21 million as well as shifting in telecommunication and utilities sector. The Company schedules its execution for 2008. 13 Proceedings before a court, arbitration authority or other public administration authority In the said quarter, the dominating Company and the companies subject to consolidation have not brought an action or carried out any procedures before the court or public administration authority on debts or liabilities, total value of which would exceed 10% of equity capitals of the company. 14 Other significant information for evaluation of the personnel, property and financial condition, financial result and their changes as well as information important for the evaluation of opportunities to cover liabilities by the company Within the reporting period no actions related to significant information for evaluation of the personnel, property and financial condition of Sygnity as well as information important for the evaluation of opportunities to cover liabilities by Sygnity took place. 15 Factors that may influence the Group s results in the next quarter perspective Financial results to be achieved by the Sygnity Group in 1Q2008 may be influence by the following factors: usually lower revenues in the 1Q from the economic sectors dependent from the State Treasury, which concerns in particular public and utilities sectors. first results of the carried out Group restructurization programme - 16 -
Consolidated quarterly financial statements as of Stand-alone financial statements of the parent company Stand-alone profit and loss account 12 months 12 months Net income from sale of products, goods and materials, including: 223 960 620 539 201 902 581 436 Net income from sale of products 153 695 427 295 151 511 462 259 Net income from sale of goods and materials 70 265 193 244 50 391 119 177 Cost of sales of products, goods and materials including: (181 285) (520 657) (159 075) (441 259) Cost of sales of products (123 950) (350 739) (114 576) (334 822) Cost of sales of goods and materials (57 335) (169 918) (44 499) (106 437) Gross profit on sales 42 675 99 882 42 827 140 177 Other operating revenues 38 792 35 216 837 3 102 Selling and distribution expenses (15 933) (55 423) (13 461) (48 922) General administration expenses (20 555) (102 834) (13 655) (86 873) Other operating costs (3 011) (9 082) (2 517) (4 128) Operating profit /(loss) 41 968 (32 241) 14 031 3 356 Financial revenues 1 516 8 921 (276) 5 317 Financial costs (4 447) (29 297) (8 435) (15 853) Net financial costs (2 931) (20 376) (8 711) (10 536) Profit /(loss) before tax 39 037 (52 617) 5 320 (7 180) Income tax (8 152) 8 331 (2 104) (610) Net profit: 30 885 (44 286) 3 216 (7 790) - 17 -
Consolidated quarterly financial statements as of Stand-alone balance sheet Fixed assets (long-term) Tangible fixed assets 27 000 20 404 Investment property 3 594 3 709 Goodwill 115 273 2 670 Other intangible assets 37 961 17 843 Financial assets valued at fair value via financial result 256 445 265 118 Deferred tax assets 16 206 11 470 456 479 321 214 Current assets (short-term) Inventories 45 310 22 289 Trade and other receivables 219 805 198 496 Income tax receivables - 4 001 Short-term prepayments 26 016 49 017 Loans granted 2 618 2 048 Financial assets valued at fair value via financial result 1 930 705 Cash and cash equivalents 27 524 9 666 323 203 286 222 Total assets 779 682 607 436-18 -
Consolidated quarterly financial statements as of Stand-alone balance sheet Equity Share capital 14 009 11 171 Share premium 301 165 173 838 Other capital reserves 142 140 158 180 Accumulated profit /(loss) (50 844) (12 519) Total equity 406 470 330 670 Long-term liabilities Other financial liabilities 2 692 - Retirement benefits provision 248 261 Provisions for liabilities 553 - Deferred tax provision 7 704 7 610 11 197 7 871 Short-term liabilities Short-term bank loans and credits 79 064 18 287 Trade and other liabilities 171 260 128 771 Financial liabilities valued at fair value via financial result 63 174 77 322 Provisions 4 268 - Short-term accruals 44 249 44 515 362 015 268 895 Total liabilities 373 212 276 766 Total equity and liabilities 779 682 607 436-19 -
Consolidated quarterly financial statements as of Stand-alone statement of changes in shareholders equity Share capital Share premium Revaluation reserve Other capital reserves Other capital reserves Accumulated profits Total equity as at 1 January Equity as at 1 January under PAS 6 894 48 861 5 156 297 156 302 8 305 220 362 Adjustments arsing from change of accounting principles - IFRS: granted management options IFRS 2 - - - 6 888 6 888 (6 888) - other IFRS adjustments taken to retained earnings - - - - - 1 730 1 730 re-measurement of equity to hyper-inflationary conditions Equity at 1 January (after restatement) under IFRS 3 196 4 680 - - - (7 876) - 10 090 53 541 5 163 185 163 190 (4 729) 222 092 Equity as at 1 October 11 167 173 524 5 164 637 157 696 (15 766) 326 621 Taking up shares- execution of managerial options 4 314 - - - 515 833 Net profit - - - - - 3 216 3 216 Costs of managerial options - - - 484 484 (484) - Equity as at 11 171 173 838 5 165 121 158 180 (12 519) 330 670 Nine months 30 September Equity as at 1 January 10 090 53 541 5 163 185 163 190 (4 729) 222 092 Taking up shares- execution of managerial options 1 081 120 297 - - - - 121 378 IFRS adjustments recognized in accumulated profits - - - - - 1 936 1 936 Net profit / loss - - - - - (7 790) (7 790) Declared dividend - - - - (6 946) - (6 946) Costs of managerial options - - - 1 936 1 936 (1 936) - Equity as at 11 171 173 838 5 165 121 158 180 (12 519) 330 670-20 -
Consolidated quarterly financial statements as of Stand-alone statement of changes in shareholders equity Share capital Share premium Revaluation reserve Other capital reserves Other capital reserves Accumulated profits Total equity Equity as at 1 October 14 009 301 165-141 940 141 935 (81 729) 375 380 Taking up shares- execution of managerial options - - - - - - - Net profit / loss - - - - - 30 885 30 885 Costs of managerial options - - - 205 205-205 Equity as at 14 009 301 165-142 145 142 140 (50 844) 406 470 12 months Equity as at 1 January 11 171 173 838 5 158 180 158 180 (12 519) 330 670 Taking up shares- execution of managerial options 43 3 755 - - - - 3 798 Issue of shares - merger with EMAX 2 795 123 567 - - - - 126 362 Net profit / loss - - - - - (44 286) (44 286) Appropriation of profit - - - - (5 961) 5 961 - Shares issue expenses - - - - (81) - (81) Declared dividend - - - - (10 813) - (10 813) Costs of managerial options - - - 820 820-820 Equity as at 14 009 301 165-159 000 142 140 (50 844) 406 470-21 -
Consolidated quarterly financial statements as of Stand-alone cash flow statement 12 months 12 months Cash flow from operating activities Profit before tax 39 037 (52 617) 5 320 (7 180) Adjustments: 8 679 51 860 (79 354) (80 804) Depreciation and amortisation 5 148 20 119 3 938 16 349 Foreign exchange (gains) /losses (808) (1 103) (82) (263) Net interest and share in profits - - 208 1 903 (Profit) /loss on investment activity (18 107) 964 7 922 8 192 Change in working capital 22 212 30 945 (89 665) (108 318) Costs of managerial options 205 820 484 1 936 Other adjustments 29 115 (2 159) (603) Cash from operations 47 716 (757) (74 034) (87 984) Income tax (paid) / returned - - - Net cash flow from operating activities 47 716 (757) (74 034) (87 984) Cash flow from investing activities Proceeds from sale of fixed and intangible assets 269 771 179 980 Dividends received - 4 988 1 995 3 990 Sale / (purchase) of financial assets - - 4 577 Interest received (7) 114 130 Sale / (purchase) of short-term securities (596) (596) 2 367 82 152 Net expenditures on acqusition of subsidiaries and associates (11 768) (16 122) (1 233) (11 820) Sale / (purchase) of subsidiaries and associates (449) (6 683) (12 372) (76 001) Granted / (repaid) loans 1 764 446 500 Other investment expenditures and receipts 28 000 42 559 7 163 Net cash flow from investing activities Cash flow from financing activities Proceeds from issue of shares, other equity instruments and contributions to equity 17 213 25 363 (8 943) 4 671-3 797 505 6 565 Dividends and other payments to shareholders (10 131) (291) (6 946) Receipts from loans and credits (26 112) 18 469 12 440 18 287 Repayment of loans and credits - - (125) Issue of interest-bearing bonds - 75 000 75 000 Redemption of interest-bearing bonds (24 890) (15 000) - (67 669) Interest paid (3 883) (3 883) (28 734) Other financing expenditures and receipts - - - Net cash flow from financing activities (54 885) (6 748) 87 654 (3 622) Net change in cash and cash equivalents 10 044 17 858 4 677 (86 935) Cash and cash equivalents at period beginning 17 480 9 666 4 989 96 601 Cash and cash equivalents at period end 27 524 27 524 9 666 9 666-22 -
Consolidated quarterly financial statements as of Note to the stand-alone cash flow statement Change in working capital 12 months 12 months Change in provisions 6 221 13 231 2 409 (1 458) Change in inventory 5 461 (23 021) 1 187 6 371 Change in receivables (75 444) (15 626) (71 790) (28 229) Change in liabilities 59 370 45 861 (9 367) (77 302) Change in prepayments and accruals 26 604 10 500 (12 104) (7 700) 22 212 30 945 (89 665) (108 318) Piotr Kardach President of the Management Board Andrzej Marciniak Vice-President of the Management Board Bogdan Kosturek Vice-President of the Management Board Andrzej Kosturek Vice-President of the Management Board Jacek Kujawa Vice-President of the Management Board Rajmund Gral Vice-President of the Management Board Warsaw, 26 February 2008-23 -