SYSOPEN PLC?S INTERIM REPORT FOR Q1/ 200
STOCK EXCHANGE RELEASE 8 May 2003 9:00 a.m.
SYSOPEN PLCS INTERIM REPORT FOR Q1/ 2003
- Business profitability was higher than in Q1/2002, being
still among the highest within the IT sector.
- Consolidated turnover came to EUR 7.0 million, down 8 per
cent on a year earlier.
- Earnings before interest, taxes and goodwill amortisation
(EBITA) accounted for 12.1 per cent of turnover, or EUR 0.8
million, up EUR 0.2 million.
- Profit before extraordinary items and taxes came to EUR
0.7 million, up EUR 1.2 million.
- Earnings per share were EUR 0.06, up EUR 0.13.
- The period-end number of employees totalled 305, showing a
staff reduction of 8 per cent.
- The sluggish economy and the persistently mild demand for
IT services will slightly add to the degree of uncertainty
in the prospects for SysOpens near-term profits and demand
for its products and services.
MARKETS AND SYSOPENS BUSINESS
The worldwide economic and political situation remained
uncertain during the report period, the corporate sector
continuing to restrain its investments towards the end of
the period, with increasingly weaker demand for IT services.
In particular, this downward trend was manifested in the
software solutions sector.
SysOpen offers its customers software and expert services
that enhance their electronic business operations. Its
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 high-value-added electronic business
solutions for large and mid-sized customers. With healthy
profitability, demand remained steady for enterprise
application solutions and consulting services in the
Helsinki Metropolitan Area, whereas an increasingly
uncertain market eroded demand for software solutions and
products and services provided by some of SysOpens regional
units in Finland. Despite the weaker market conditions and
the fall in turnover, SysOpen succeeded in markedly
improving its profitability over the previous year.
The report period saw new customers and contracts, including
Fortum Corporation, Patria, the Central Chamber of Commerce
and Telia Mobile Finland AB. For example, SysOpen concluded
a contract for implementing the Alli membership register
system for the Central Chamber of Commerce during the autumn
of 2003, demonstrating the systems excellent suitability
for a wide variety of associations and organisations. The
report period also saw agreements on a number of further
development projects with existing customers.
REPORTED TURNOVER YEAR-ON-YEAR
Consolidated turnover for the period reached EUR 7.0 million
(EUR 7.6 million in Q1/2002), showing a fall of 8 per cent
over the previous year, due mainly to the sale of an 85 per
cent holding in its Accessibility Software business (CallCom
Oy) in early 2003 and other divestments of unprofitable
businesses carried out last year. This was also partly due
to the postponement of customer project launches caused by
the general economic uncertainty.
International operations accounted for 3.0 per cent (3.5 per
cent).
The enterprise application solutions business units based in
the Helsinki Metropolitan Area either slightly improved
their year-on-year turnover, or maintained it at almost the
previous years level, whereas the turnover generated by the
regional units and software solutions was lower than last
years.
Turnover by business area in Q1/2003:
Enterprise Application Solutions 93.6%
Software Solutions 6.4%
Q1/2003 TURNOVER COMPARED WITH Q4/2002 TURNOVER
Consolidated turnover of EUR 7.7 million for Q4/2002 was 9
per cent higher than that reported for Q1/2003, due not only
to seasonal fluctuations, but also to the sale of the
Accessibility Software business and subdued market demand
for IT services in general.
REPORTED OPERATING PROFIT AND FINANCIAL
PERFORMANCE YEAR-ON-YEAR
During the past twelve months, SysOpen has systematically
focused on its core businesses, i.e. high value-added
enterprise application solutions and consulting services,
resulting in among-the-highest business profitability within
the IT sector.
Consolidated earnings before interest, taxes and goodwill
amortisation (EBITA) came to EUR 0.8 million (EUR 0.6
million, up 39 per cent), accounting for 12.1 per cent (8.0
per cent) of reported consolidated turnover (8.0 per cent).
This substantial improvement in operating profit was due not
only to the focus of operations, but also cost-savings
achieved through more efficient operations.
Profit before extraordinary items and taxes totalled EUR 0.7
million (a loss of EUR 0.5 million) and earnings per share
came to EUR 0.06 (EUR 0.07). In the previous year, the
profit was burdened by non-recurring write-downs related to
a loss-making subsidiary and associated companies share
capital, and loans in terms of equity and receivables.
Q1/2003 OPERATING PROFIT AND FINANCIAL
PERFORMANCE COMPARED WITH Q4/2002
Q4/2002 earnings of EUR 1.1 million before interest, taxes
and goodwill amortisation (EBITA) were 24 per cent higher
than those reported for Q1/2003, due to the lower turnover.
Reported EBITA accounted for 12.1 per cent of turnover (14.5
per cent in Q4/2002).
FINANCING AND CAPITAL EXPENDITURE
With a positive cashflow, the Groups financial position
remained at a healthy level throughout the report period.
The balance sheet total came to EUR 14.9 million (EUR 18.2
million) and equity ratio was 73 per cent (62 per cent). The
ratio of net liabilities to shareholders equity, or net
gearing, was 56 per cent (57 per cent) while liquid assets
totalled EUR 5.9 million (EUR 6.3 million). Based on the
AGMs decision, the EUR 3.5 million dividends became payable
to shareholders on 31 March 2003, which has been taken into
account in the companys key figures and ratios for the
report period (whereas 2001s dividends of EUR 2.0 million
did not become payable until the second quarter of 2002.).
The Groups gross capital expenditure amounted to EUR 20,000
(EUR 150,000). The Group continued to spend on service
development and in-house software component engineering.
These development costs were expensed as incurred.
ROI AND ROE
Reported return on investment (ROI) was 24 per cent (-17 per
cent), while return on equity (ROE) reached 20 per cent (19
per cent).
HUMAN RESOURCES AND ADMINISTRATION
The period-end number of employees totalled 305 (331), down
8 per cent year-on-year, while the average number of
employees for the period totalled 306 (348), down 12 per
cent. The reduction in staff from Q4/2002 (323) to Q1/2003
was due mainly to the outsourcing of SysOpens IT support
functions and the sale of the Accessibility Software
business.
Reported employee turnover came to 3.9 per cent (2.9 per
cent).
Employees by function:
Enterprise Application Solutions 72%
Software Solutions 9%
Administration and management 15%
International operations 4%
The employment of Kari Karvinen and Jorma Kylätie at SysOpen
terminated on 20 March 2003, at the Annual General Meeting,
the latter continuing to chair the Board of Directors on a
full-time basis and the former continuing as a Board member
in a position of trust.
GROUP STRUCTURE AND ORGANISATION
In January 2003, SysOpen Plc sold 85 per cent of its
majority holding in CallCom Oy, a SysOpen subsidiary
specialising in accessibility software for PABXs, to the
employees and management (5) of the company. As a result,
SysOpen now holds 10 per cent of the companys shares, but,
as specified in the terms of the sale, it will sell the
remaining holding to the buyers by the end of 2004.
SysOpen Plc is the SysOpen Groups parent company running
the following three subsidiaries at the end of the report
period, engaged in business operations: SysOpen Object Team
Oy (with a 90 per cent holding on 31 March), SysOpen Limited
(100 per cent) and SysOpen UK Limited (51 per cent).
Based on its modernised Group structure, SysOpen aims to
operate on an increasingly customer-driven basis and target
its marketing and sales efforts on a customer industry
basis. The SysOpen Groups business units are as follows, as
of 2003: Commerce and Services, Telecoms and Industry,
Financing, Organisations and Business Development, Domestic
Regions and SysOpen Object Team Oy.
ANNUAL GENERAL MEETING
SysOpen Plcs Annual General Meeting (AGM) convened on 20
March 2003.
The AGM adopted the financial statements for 2002 and
discharged Board members and the Managing Director from
liability. Pursuant to the Boards proposal, the AGM
confirmed the profit distribution for 2002, according to
which a per-share dividend of EUR 0.38, or a total of EUR
3,519,907.32, was distributed to shareholders (excluding
treasury shares held by the company). On 1 April 2003, the
dividend was paid to shareholders registered as the
companys shareholders on the record date of 25 March 2003.
The AGM approved the following Board proposals:
- The AGM decided on issuing new 2003A2003D stock options.
- The AGM authorised the Board to decide to issue one or
several convertible bonds, issue stock options and/or
increase the share capital through one or several rights
issues. The Board of Directors has not exercised this
authorisation.
- The AGM authorised the Board to buy back own shares. The
Board has not exercised this authorisation.
- The AGM authorised the Board to dispose of the companys
own shares (treasury shares). The Board has not exercised
this authorisation.
The AGM decided that Board members be entitled to a monthly
emolument of EUR 1,500 and the Chairman a monthly emolument
of EUR 6,500 in such a way, however, that if the member is
employed by the company on a permanent basis, (s)he is not
entitled to a separate Board emolument during his/her
employment. It also decided that Risto Linturi and Timo
Tiihonen, members of the Board of Directors who are entitled
to stock options under the terms and conditions of the stock
option scheme, be each granted 6,000 2003B stock options
based on the new stock option scheme.
The AGM re-elected Kari Karvinen, Jorma Kylätie, Risto
Linturi, Matti Savolainen and Timo Tiihonen as Board
members. At its meeting held after the AGM, the Board of
Directors re-elected Kari Karvinen as Board Chairman on a
full-time basis and Matti Savolainen as Vice Chairman.
SHARE CAPITAL AND SHARES
The nominal share value was EUR 0.1, the number of shares
totalling 9,362,914. At the end of the period, SysOpen had a
total of 100,000 treasury shares.
The Group´s shares are quoted on the Main List of the
Helsinki Exchanges under the telecommunications and
electronics business sector. One trading lot includes 50
shares and the trading code is SYS1V. The lowest reported
share quotation was EUR 2.95 and the highest EUR 3.79. The
Groups share closed at EUR 2.95. The trade weighted average
amounted to EUR 3.44. The Groups market capitalisation
totalled EUR 27,620,596 at the end of the period. SysOpen
reported a total of 2,879 shareholders on 16 April 2003.
STOCK-OPTION SCHEMES
A total of 369,000 stock options have been issued in
accordance with SysOpen Plcs stock-option scheme for
19992004, all of which have been exercised. The share
subscription period for all warrants will expire on 31
October 2004. The share subscription price for A, B, C and D
warrants is EUR 6.40, EUR 9.30, EUR 6.55 and EUR 4.43 per
share, respectively. On 31 March 2003, SysOpen Partners Oy,
the Group´s wholly owned subsidiary, held a total of 57,017
stock options, in accordance with the stock-option scheme
for 19992004.
A total of 400,000 stock options have been issued in
accordance with SysOpen Plcs stock-option scheme for
20002005, all of which have been exercised. The share
subscription period for all warrants will expire on 31 May
2005 and the share subscription price for E warrants is set
at EUR 8.30 per share, for F warrants at EUR 5.36 per share
and for G warrants at EUR 3.28. On 31 March 2003, SysOpen
Partners Oy, the Group´s wholly owned subsidiary, held a
total of 59,590 stock options, in accordance with the stock-
option scheme for 20002005.
Within the framework of the new stock option scheme for
2003, SysOpen Plcs Board of Directors has offered stock
options to the holders of 1999 and 2000 stock options who
are still employed by SysOpen Plc or still sit on SysOpen
Plcs Board. These new stock options were granted to option
holders in exchange for the 1999 and 2000 stock options in a
proportion determined by the Board of Directors and the
majority of those entitled to the exchange of options have
accepted the offer. This offer required that the option
holder swap all of his/her stock options, based on the 1999
and 2000 stock option schemes, for the 2003A and 2003B stock
options now issued. As a result of the swap, the number of
stock options held by option holders other than SysOpen will
substantially decrease, leading to a major decline in the
total dilution of SysOpens stock option schemes.
EVENTS AFTER Q1/2003
SysOpen Plc has taken up its right of option included in a
contract concluded in the autumn of 2001 by increasing its
holding in SysOpen UK Limited, a subsidiary, from 51 per
cent to 83.11 per cent.
NEAR-TERM PROSPECTS
General economic uncertainty and the subdued demand for the
products and services provided by several of SysOpens
business units have lowered SysOpens expectations for near-
term demand for its IT services and products. While a number
of industries and customers are undergoing a business
restructuring process, the uncertain economic environment
and market situation will protract investment decisions and
restrain business growth.
SysOpen maintained its position among its customers in
relation to other industry incumbents, while attracting new
customers with major growth potential. We expect Enterprise
Application Solutions to remain profitable, despite
increasing price pressures, and Software Solutions to show
growing delivery volumes, both at home and abroad, towards
the end of the year. Demand for consulting and technology
development services will remain steady, especially in
relation to object-based technology and IT architecture
projects.
Cost control will remain high on the companys agenda, while
focusing on strengthening profitable and expanding business
areas in its strategy implementation. SysOpen will be ready
to respond quickly to any market downbeat.
According to our forecast, second-quarter demand for
SysOpens services and products will be slightly lower than
in the first quarter. We estimate that consolidated earnings
before interest, taxes and goodwill amortisation for Q1 and
Q2/2003 will remain at the previous years level (EBITA 10
per cent).
SysOpens target for 2003 as a whole is to improve its year-
on-year turnover and profitability, although, in the face of
the general deterioration in the markets (and excluding
company acquisitions), this will require that the economy
turn rapidly for the better, providing scope for the launch
of IT investments. Strategic fit and the promotion of
factors critical to shareholder value will be given a
special emphasis when it comes to potential company
acquisitions and alliances.
BRIEFING
SysOpen will hold a briefing on its Interim Report for
Q1/2003 for analysts and the press at the World Trade
Centre, in the Marskinsali (on the 2nd floor),
Aleksanterinkatu 17, FIN00100 Helsinki, starting at 12:00
p.m. on 8 May 2003. All are welcome.
The Q1+Q2/2003 Interim Report will be released on Thursday,
7 August 2003.
Helsinki, 8 May 2003
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
The Interim Report and the related slide show will also be
presented to Investors on the Group´s website at
www.sysopen.fi from 1:00 p.m.
DISTRIBUTION
Helsinki Exchanges
Consolidated Income Statement for 1 January31 March 2003,
EUR 1,000
1 1 Jan. 131
EUR 1,000 Jan.31 Jan.31 Dec.
March March 2002
2003 2002
TURNOVER 6,991 7,635 28,997
Other operating income 57 59 166
Materials and services 145 248 902
Personnel expenses 4,124 4,615 16,863
Depreciation and write
downs 162 191 882
Other operating
expenses 1,769 2,031 7,278
EBITA
848 609 3,237
Goodwill amortisation 68 88 342
OPERATING PROFIT 780 521 2895
Financial income and 47 1,027 699
expenses
Profit before
extraordinary items and 733 -506 2,196
taxes
Direct taxes 127 81 284
Minority interest 20 18 26
PROFIT/LOSS FOR THE 586 569 1,886
PERIOD
Consolidated Balance Sheet on 31 March 2003, EUR 1,000
ASSETS 31March 31March 31Dec.
2003 2002 2002
FIXED AND OTHER NON-
CURRENT ASSETS
Development costs 0 112 37
Intangible rights 475 538 517
Other non-current
assets 130 195 147
Group goodwill 552 1 047 620
Intangible assets
total 1,157 1,892 1,321
Tangible assets 1,419 1,854 1,548
Long-term investments 1,191 1,198 1,191
INVENTORIES AND
CURRENT ASSETS
Current receivables 5,273 6,976 5,205
Short-term investments 1,456 1,827 1,524
Cash and bank 4,435 4,481 6,894
receivables
ASSETS TOTAL 14,930 18,227 17,683
LIABILITIES AND 31 March 31 March 31 Dec.
SHAREHOLDERS´ EQUITY 2003 2002 2002
TOTAL
SHAREHOLDERS´ EQUITY
Share capital 936 787 936
Share issue 0 149 0
Issue premium fund 7,091 7,092 7,091
Retained earnings 1,797 3,430 3,430
Profit/loss for the 586 -569 1,886
period
Translation 11 11
difference,
unrestricted
shareholders equity
SHAREHOLDERS´ EQUITY 10,421 10,890 13,355
TOTAL
MINORITY INTEREST 178 142 192
LIABILITIES
Short-term liabilities 4,331 7,195 4,136
LIABILITIES AND 14,930 18,227 17,683
SHAREHOLDERS´ EQUITY
TOTAL
Consolidated cashflow statement for 1 January31 March 2003,
incl. comparable data, EUR 1,000
1 Jan.31 1 Jan.31 1 Jan.31
March 2003 March 2002 Dec. 2002
Cash flow from 995 1,108 5,466
business operations
Cashflow from 4 103 307
investments
Cashflow from
financing:
Dividends paid 3,516 2,038
Change in liabilities
Cashflow from 3 2 7
financing total
3,519 2 2,045
Change in liquid 2,527 1,003 3,114
assets
Liquid assets at 8,418 5,305 5,305
period-start
Liquid assets at
period-end 5,890 6,308 8,418
Difference 2,527 1,003 3,114
Group key figures and ratios (on a comparable basis)
Q1/2003 Q1/2002 Q1Q4/2002
Extent of
business
Turnover 6,991 7,635 28,997
- % of change, 8 2 6
year-on-year
Capital 8,028 8,028 8,028
invested
Restricted 8,028 8,028 8,028
capital
Gross capital 20 146 477
expenditure
- % of turnover 0 2 2
Personnel at 305 331 323
period-end
Average 306 348 328
personnel
Profitability
EBITA 849 609 3,237
- % of turnover 12 8 11
Operating 781 521 2,895
profit
- % of turnover 11 7 10
Profit before 733 506 2,196
extraordinary
items and taxes
- % of turnover 10 7 8
Profit/loss for 586 569 1,886
the period
% of turnover 8 7 7
Return on 20 19 14
equity, %
Return on 24 -17 16
investment, %
Financing and
financial
position
Interest- 0 8 2
bearing
liabilities
Short-term 5,891 6,308 8,418
investments +
cash and bank
receivables
Net Gearing, % 56 57 62
Equity ratio, % 73 62 77
Cashflow from 995 1,108 5,463
business
operations
Earning per 0.06 0.07 0.20
share, EUR
(Group)
Equity per 1.13 1.18 1.44
share
Price-earnings 46.6 -74 17.2
ratio (P/E)
Lowest share 2.95 5.11 2.52
price
Highest share 3.79 6.35 6.35
price
Average share 3.44 5.8 4.51
price
Market 27,621 54,305 29,868
capitalisation
at period-end
Group key figures and ratios (on a comparable basis)
Q1/2003 Q1Q4/20 Q1Q3/2 Q1Q2/2 Q1/2002
02 002 002
Extent of
business
Turnover 6,991 28,997 21,298 15,122 7,635
- % of change, 8 6 3 0.8 2
year-on-year
Capital 8,028 8,028 8,028 8,028 8,028
invested
Restricted 8,028 8,028 8,028 8,028 8,028
capital
Gross capital 20 477 300 264 146
expenditure
- % of turnover 0 2 1 2 2
Personnel at 305 323 317 319 331
period-end
Average 306 328 330 336 348
personnel
Profitability
EBITA 849 3,237 2,122 1,515 609
- % of turnover 12 11 10 10 8
Operating 781 2,895 1,865 1,340 521
profit
- % of turnover 11 10 9 9 7
Profit before 734 2,196 1 334 140 506
extraordinary
items and taxes
- % of turnover 10 8 6 1 7
Profit/loss for 586 1,886 1,291 25 569
the period
% of turnover 8 7 6 0 7
Return on 20 14 13 0 19
equity, %
Return on 24 16 14 2 -17
investment, %
Financing and
financial
position
Interest- 0 2 4 6 8
bearing
liabilities
Short-term 5,891 8,418 6,456 5,263 6,308
investments +
cash and bank
receivables
Net Gearing, % 56 62 50 5 57
Equity ratio, % 73 77 80 73 62
Cashflow from 995 5,463 3,356 2,121 1,108
business
operations
Earnings per 0.06 0.20 0.14 0.00 0.07
share, EUR
(Group)
Equity per 1.13 1.44 1.38 1.24 1.18
share
Price-earnings 46.6 17.2 28.6 3568 -74
ratio (P/E)
Lowest share 2.95 2.52 2.52 3.50 5.11
price
Highest share 3.79 6.35 6.35 6.35 6.35
price
Average share 3.44 4.51 4.71 5.24 5.8
price
Market 27,326 29,868 25,280 32,770 54,305
capitalisation
at period-end
The Group key figures and ratios are based on quarterly
data.
In our Interim Report for the second quarter of 2002, we
announced that we would adopt a new reversal procedure for
holiday pay provisions as of the beginning of 2003, to
better correspond to the actual holiday periods, affecting
the Q1+Q2/2002 figures on the table accordingly, with no
impact on other periods.
The earnings-per-share ratio is based on the average share-
issue adjusted number of shares (9,262,914) for the
financial period. The number of outstanding shares totalled
9,262,914 at the end of the period.
The figures for return on equity and return on investment
have been annualised. The company held a total of 100,000
treasury shares at the end of the period. The Group has no
liabilities associated with derivative contracts.
Helsinki, 8 May 2003
SysOpen Plc
