SysOpen Plc?s Interim Report for Q1/2004
SysOpen Plcs Interim Report for Q1/2004
SysOpen Plc STOCK EXCHANGE RELEASE 29 April 2004, 8.00 a.m.
·Consolidated turnover came to EUR 6.5 million, down EUR
0.5 million year on year
·Earnings before interest, taxes and goodwill
amortisation (EBITA) accounted for 6.5 per cent of turnover,
or EUR 421 thousand, down EUR 427 thousand
·Profit before extraordinary items and taxes amounted to
EUR 327 thousand, down EUR 407 thousand
·Earnings per share were EUR 0.03, down EUR 0.03
·The period-end number of employees totalled 272,
showing a staff reduction of 33 on a year earlier
·Consolidated turnover and business profitability for
Q2/2004 is expected to achieve the Q1/2004 levels
·SysOpen bought Done Information Oys Software Solutions
business on 28 April 2004
Markets
In the main, the market situation in early 2004 followed the
same pattern as in late 2003. Amid a somewhat uncertain
economic climate, there were not yet any clear signs of an
upturn in business investment propensity, as customers
continued to focus much of their attention on cutting costs
and evaluating their investments on a cost/benefit basis,
while hesitating to launch large-scale projects.
However, the first quarter of 2004 showed cautious signs of
recovery in demand for IT services. With the situation in
the job market slightly better than in the fourth quarter of
last year, companies were also more active in placing
orders. Although many key projects have advanced to their
planning phase, launches of major new projects have fallen
behind their original schedules.
SysOpens Business
Due to the general market conditions, demand for SysOpens
IT services in Q1/2004 remained at the Q4/2003 level. The
company expects stronger growth in autumn 2004. SysOpens
business profitability for the reporting period remained at
the forecast level. The Groups equity ratio and financial
position remained at healthy levels throughout the period.
By safeguarding its competitiveness, SysOpen has maintained
a solid basis for future growth.
SysOpen provides its customers with expert services and
application software that enhance their e-business
operations. Its business consists of Enterprise Application
Solutions and Software Solutions, as well as supporting
consulting and technology development services. The first
quarter saw agreements with, for example, Silja Line Oy, Oy
Samlink Ab and Erityiskoulutettujen työttömyyskassa ERKO
(unemployment fund), and agreements for a number of further
development projects with existing customers.
Reported Year-on-Year Turnover
Consolidated turnover amounted to EUR 6.5 million (Q1/2003:
EUR 7.0 million), down 7.6 per cent). International
operations accounted for 3.0 per cent of consolidated
turnover (3 per cent).
Slackness in IT investment activity has continued to
increase since the first quarter of 2003, with no marked
rebound experienced in the first quarter of 2004. Many of
SysOpens customers continued to postpone their IT
investments, which was reflected in the Groups lower year-
on-year turnover.
Turnover by business area for Q1/2004:
Enterprise Application Solutions 88.3%
Software Solutions 11.7%
Turnover for Q1/2004 compared with Q4/2003
Consolidated turnover for Q4/2003 came to EUR 6.5 million,
which is at the same level as that reported for Q1/2004.
However, the Group expects growth in turnover.
Year-on-Year Profitability and Financial Performance
Consolidated operating profit, or earnings before interest,
taxes and goodwill amortisation (EBITA) came to EUR 421
thousand (EUR 849 thousand), down 51.0 per cent), accounting
for 6.5 per cent of reported consolidated turnover (12.1 per
cent). The fall in turnover led to a marked fall in
operating profit from the figure of a year ago, when the
slackening of the market had not yet been felt.
SysOpen wrote down the share capital of its associated
company Midecraft Oy because the company, since
discontinuing business, no longer has future income
expectations. This write-down increased financial expenses
by EUR 88 thousand. A total of EUR 21 thousand in
appreciation of marketable securities was entered in
financial income. Financial income and expenses totalled EUR
25 thousand (EUR -47 thousand).
Profit before extraordinary items and taxes came to EUR 327
thousand (EUR 734 thousand), down 55.4 per cent.
Profit for Q1/2004 totalled EUR 259 thousand (EUR 586
thousand), down 55.9 per cent. Earnings per share were EUR
0.03 (EUR 0.06), down 50 per cent.
Q1/2004 Profitability and Financial Performance Compared
with Q4/2003
Q1/2004 EBITA, or operating profit before goodwill
amortisation, improved by 7.1 per cent from the EUR 393
thousand reported for Q4/2003.
Financing and Capital Expenditure
With a positive cash flow, the Groups financial position
remained at a healthy level throughout the report period.
Balance sheet total amounted to EUR 17.2 million (Q1/2003:
EUR 14.9 million) and equity ratio stood at 61 per cent (73
per cent). The ratio of net liabilities to shareholders
equity, or net gearing, was 87 per cent (56 per cent).
Liquid assets totalled EUR 8.2 million (EUR 5.9 million).
Dividends for 2003 decided by the Annual General Meeting
have been taking into account by transferring EUR 2.2
million in dividend payables from unrestricted shareholders
equity to short-term liabilities. The dividend payment date
was 5 April 2004. The Group has no interest-bearing
liabilities.
The Groups gross capital expenditure amounted to EUR 69
thousand (EUR 20 thousand). It continued to invest in
service development and in-house software component
engineering. With respect to internal activities, research
and development costs were recorded as annual expenses
throughout the period under review.
Return on Capital
Reported return on investment (ROI) was 13 per cent (24 per
cent), while reported return on equity (ROE) stood at 10 per
cent (20 per cent).
Human Resources and Administration
The period-end number of employees totalled 272, down 10.8
per cent year on year (305), while the average reported
number of employees came to 271, down 11.4 per cent on a
year earlier (306).
The Groups staff increased by two employees during the
report period form the end-of-2003 figure. During the report
period, SysOpen began to recruit staff, in response to
budding market demand that is expected to lead to project
launches in autumn 2004.
Reported employee turnover came to 3.9 per cent (3.9 per
cent).
Employees by function:
Enterprise Application Solutions 76%
Software Solutions 10%
Administration and management 10%
International operations 4%
Until the AGM of 24 March 2004, SysOpen Plcs Board of
Directors comprised Kari Karvinen (full-time Chairman),
Matti Savolainen (Vice Chairman), Jorma Kylätie and Risto
Linturi. Following the AGM, the Board of Directors comprised
Mr Karvinen (Chairman), Risto Linturi (Vice Chairman), Pekka
Eloholma, Reijo Koski-Lammi and Matti Mujunen.
Group Structure and Organisation
During the report period, SysOpen Plc bought an additional 3
per cent holding in its subsidiary SysOpen Object Team Oy.
SysOpen Group consists of SysOpen Plc (Parent Company) and
the following three operating subsidiaries: SysOpen Object
Team Oy (parent company holding of 93 per cent), SysOpen
Limited (100 per cent) and SysOpen UK Limited (100 per
cent).
Based on the decision on the new corporate structure made
during the report period, SysOpen Groups business units are
now as follows: Business Unit 1 (Telecoms, Industry, Trade,
Services, Kuopio, Jyväskylä), Business Unit 2 (Financing,
Public Administration, Tampere), and SysOpen Object Team Oy.
With the modernised Group structure, SysOpen increased the
size of units responsible for various customer segments by
combining business units that were closely related in terms
of the nature of their businesses and customer portfolio.
The aim is to improve our units performance, customer-
drivenness, and service and product development to satisfy
customer needs while at the same time upgrading SysOpens
sales functions.
Shareholders Meetings
Convened on 24 March 2004, SysOpen Plcs AGM, adopted the
financial statements for 2003, discharged the Board members
and the Managing Director from liability and, pursuant to
the Board's proposal, confirmed the profit distribution for
2003, determined Board emoluments and elected a new Board of
Directors.
In addition, the AGM decided to:
1) Reduce the companys share capital by EUR 10,000 by
invalidating 100,000 own shares (treasury shares);
2) Authorise the Board, on certain conditions, to
decide to issue one or several convertible bonds, issue
stock options and/or increase share capital through one
or several rights issues. This authorisation will be
valid for one year from the date of the AGMs decision.
The Board has not yet exercised this authorisation;
3) Authorise the Board, on certain conditions, to
decide to buy back own shares using funds available for
profit distribution. This authorisation will be valid
for one year from the date of the AGMs decision. The
Board has not yet exercised this authorisation;
4) Authorise the Board, on certain conditions, to
decide to dispose of own shares (treasury shares). This
authorisation will be valid for one year from the date
of the AGMs decision. The Board has not yet exercised
this authorisation;
5) Alter the contents of Article 6 of the Articles of
Association in such a way that the said article also
mentions the election of the Boards Vice Chairman; and
6) Alter the contents of Article 8 of the Articles of
Association in such a way that two authorised persons
are required to sign for the company.
Share Capital and Shares
The nominal value of a share is EUR 0.1, the number of
shares totalling 9,362,914 at the end of the period. Based
on the AGMs decision, the 100,000 own shares held by
SysOpen were invalidated on 16 April 2004.
SysOpen reported a total of 3,336 shareholders on 31 March
2004. Ten major shareholders:
Shareholder Proportion (%) of shares
and votes
Kari Karvinen 16.9
Matti Savolainen 16.8
Jorma Kylätie 15.8
Suomi Mutual Life Assurance 2.4
Company
Etera Mutual Pension Insurance 2.3
Company
Olli Ahonen 2.0
Mandatum Suomi kasvuosake 1.6
(equity fund)
Sampo Finnish Equity Fund 1.3
Sijoitusrahasto Pohjola Finland 1.3
kasvu (equity fund)
Seppo Sneck 1.2
SysOpen Plc 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 4.06 and the highest was EUR 5.35.
The share closed at EUR 4.07 on 31 March 2004. The trade-
weighted average amounted to EUR 4.68. The Groups market
capitalisation totalled EUR 37,700,059.98 on the balance
sheet date.
Stock-Option Schemes
The number of stock options attached to the 19992004 stock-
option schemes totals 49.185, divided up as follows: 23,700
1999A stock options, 10,485 1999B stock options, 7,500 1999C
stock options and 7,500 1999D stock options, all of which
have been subscribed. The share subscription period for all
warrants will expire on 31 October 2004. The share
subscription prices for A, B, C and D warrants are EUR 6.40,
EUR 9.30, EUR 6.55 and EUR 4.43 per share, respectively. On
31 March 2004, SysOpen held a total of 3,100 stock options
based on the 19992004 stock-option schemes.
The number of stock options attached to the 20002005 stock-
option schemes totals 21,060, divided up as follows: 19,960
2000E stock options, 850 2000F stock options and 250 2000G
stock options, all of which have been subscribed. The share
subscription period for all warrants will expire on 31 May
2005 and the share subscription price for E warrants is EUR
8.30 per share, for F warrants EUR 5.36 per share and for G
warrants EUR 3.28 per share. On 31 March 2004, SysOpen held
no stock options based on the 20002005 stock-option
schemes.
The number of stock options attached to the 2003 stock
option scheme totalled 670,000. This consisted of 210,000
2003A stock options, 160,000 2003B stock options, 150,000
2003C stock options and 150,000 2003D stock options, all of
which have been subscribed. The share subscription period
for 2003A stock options will be from 2 May 2004 until 31
October 2005, 2003B stock options from 1 November 2004 until
31 October 2006, 2003C stock options from 1 November 2005
until 31 October 2007 and 2003D stock options from 1
November 2006 until 31 October 2008. The current share
subscription price for 2003A and 2003B options is EUR 3.04
and EUR 2.95, respectively. In accordance with the terms of
the stock-option scheme, the subscription price of the above-
mentioned stock options has been adjusted for the amount of
dividends for 2003. For other stock options, the
subscription price will be determined by SysOpens share
prices quoted in public trading. Dividends paid out will be
deducted from the subscription prices, in accordance with
the terms of the stock option scheme. On 31 March 2004,
SysOpen Partners Oy, the Groups wholly owned subsidiary,
held a total of 226,182 stock options, in accordance with
the 2003 stock option scheme.
The number of all stock options issued by SysOpen totals
740,245. The shares to be subscribed on the basis of the
stock options will account for a maximum of 7.4 per cent of
the companys shares and votes entitled by the shares as a
result of any increase of the companys share capital. On 31
March 2004, SysOpen Partners still held 226,182 of all stock
options. The dilution effect of the distributed stock
options is currently a maximum of 5.3 per cent.
Events after Q1/2004
On 28 April 2004, SysOpen Plc signed an agreement with Done
Information Oy for buying Done Information Oys Software
Solutions business, encompassing
customer-solutions and product businesses based in Jyväksylä
and Helsinki. The deal will strengthen SysOpens customer
base and presence in the Jyväskylä region while expanding
the companys technology and product offerings. Done
Informations 26 employees will join SysOpens payroll under
their current employment terms.
The second-quarter performance forecasts ignore the effects
of the deal.
More detailed information on the acquisition is available in
the stock exchange release of 28 April 2004.
Near-Term Prospects
SysOpens success has lain in its capabilities to respond to
market changes. In the rapidly globalising market
environment, SysOpen will develop and upgrade its service
and solution offerings to meet changing customer needs, with
the core business maintaining a particular focus on areas
with prospects for strengthening demand in the medium and
long term.
The needs of SysOpens customers, and their focus, vary to
some extent, depending on the industry. While customers in
the manufacturing industry, telecoms and the service sector
aim at improving their operational efficiency by utilising
off-the-shelf software that SysOpen integrates with their IT
environments, public and financing-sector customer, amid a
period of transition from old to new technologies, rely on
SysOpens experience in order to safeguard the success of
this transition. Several customers representing associations
and unions are facing a period of mergers; SysOpen, as
integrator of information systems, aims to guarantee the
success of their mergers.
Based on comparison with the 2003 financial statements,
SysOpen is among the most cost-efficient companies in the
industry. With a view to guaranteeing its competitiveness,
SysOpen will continue to place strong emphasis on winning
new customers and streamline its sales and supply processes.
The company aims to increase primarily its market share
through organic growth, investments in new market areas, and
business acquisitions, as well as to improve its
profitability and profit performance on the previous year.
Recently, it seems, the economic situation has shown
slightly more positive signs, although the prolonged
uncertainty will die hard. Demand for the products and
services provided by SysOpens customers from various
industries has not picked up as predicted, keeping SysOpens
forecast of the near-term demand for its IT services and
products moderate. Once the economy rebounds, the pent-up
demand is expected to take off and corporate IT investments
to revive gradually as of the autumn of 2004.
SysOpen expects its Q2/2004 turnover and business
profitability to remain at the Q1/2004 levels.
Briefing
SysOpen will hold a briefing on its Interim Report for
Q1/2004 for analysts and the press at the World Trade
Center, Kabinetti 2, 2nd floor, Aleksanterinkatu 17,
FI00100 Helsinki, on Thursday, 29 April 2004, starting at
10.00 a.m. All are welcome.
The Interim Report for H1/2004 will be released on 5 August
2004.
Helsinki, 29 April 2004
SYSOPEN PLC
Board of Directors
FOR FURTHER INFORMATION, PLEASE CONTACT
Arto Sahla, Managing Director
tel. +358 (0)424 2020 339, mobile +358 (0)400 442 986,
email: arto.sahla@sysopen.fi
The financial statements and associated slide show will be
available at
www.sysopen.fi in the öInvestorsö section from 1.00 p.m.
DISTRIBUTION
Helsinki Exchanges
Major media
ATTACHMENTS
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Key figures and ratios
The Interim Report is based on unaudited figures.
Consolidated Income Statement for 1 January31 March 2004
Consolidated Income Statement for 1 January31 March 2004,
EUR 1,000
Q1/2004 Q1/2003 2003
EUR 1,000
TURNOVER 6,460 6,991 25,211
Other operating income 25 57 243
Materials and services 250 145 1,055
Personnel expenses 3,872 4,124 15,101
Depreciation and write- 135 162 666
downs
Other operating 1,807 1,769 6,722
expenses
EBITA 421 848 1,910
Goodwill amortisation 68 68 266
OPERATING PROFIT 352 780 1,644
Financial income and 25 47 739
expenses
Profit before 327 733 2,383
extraordinary items
and taxes
Extraordinary expenses 667
Direct taxes 55 127 258
Minority interest 13 20 35
PROFIT/LOSS FOR THE 259 586 1,442
PERIOD
Consolidated Balance Sheet on 31 March, EUR 1,000
ASSETS 31 March 31 March 31 Dec.
2004 2003 2003
FIXED AND OTHER
NONCURRENT ASSETS
Intangible assets
Development costs 10 0 10
Intangible rights 385 475 393
Other non-current 73 130 82
assets
Group goodwill 274 552 312
Intangible assets total
743 1,157 797
Tangible assets 1,091 1,419 1,137
Long-term investments 916 1,191 1,004
INVENTORIES AND CURRENT
ASSETS
Current receivables 6,290 5,273 5,362
Short-term investments 2,035 1,456 2,014
Cash and bank 6,142 4,435 5,767
receivables
ASSETS TOTAL 17,219 14,930 16,081
LIABILITIES AND 31 March 31 March 31 Dec.
SHAREHOLDERS EQUITY 2004 2003 2003
SHAREHOLDERS EQUITY
Share capital 936 936 936
Issue premium fund 7,091 7,091 7,091
Retained earnings 995 1,797 1,796
Profit/loss for the 259 586 1,422
period
Translation difference, 34 11 35
unrestricted
shareholders equity
SHAREHOLDERS EQUITY 9,315 10,421 11,280
TOTAL
MINORITY INTEREST 113 178 153
LIABILITIES
Dividend payables 2,224
Other short-term 5,567 4,331 4,648
liabilities
LIABILITIES TOTAL 7,791 4,331 4,648
LIABILITIES AND 17,219 14,930 16,081
SHAREHOLDERS EQUITY
TOTAL
Consolidated Cash Flow Statement for 20042003, EUR 1,000
Cash flow from business Q1/2004 Q1/2003 2003
operations:
Cash flow from business 407 995 2,134
operations
Cash flow from investments 11 4 748
Cash flow from financing:
Repayment of short-term 2 2
loans
Repayment of long-term
loans
Dividends paid and other 3,516 3,516
profit distribution
Cash flow from financing: 0 3,518 3,518
Change in liquid assets 396 2,527 637
Liquid assets at period 7,781 8,418 8,418
start
Liquid assets at period 8,177 5,890 7,781
end
Difference 396 2,527 637
Group key figures and ratios (on a comparable basis), EUR
1,000
Q1/2004 Q1/2003 2003
Extent of
business
Turnover 6,460 6,991 25,211
- change %, 8% 8% 13%
year on year
Capital 9,428 10,600 11,432
invested
Gross capital 69 20 223
expenditure
- % of turnover 1% 0% 1%
Capitalised 0 0 10
research and
development
- % of turnover 0% 0% 0%
Personnel at 272 305 270
period end
Average 271 306 290
personnel
Profitability
EBITA 421 849 1,911
- % of turnover 7% 12% 8%
Operating 352 781 1,644
profit
- % of turnover 5% 11% 7%
Profit before 327 733 2,383
extraordinary
items and taxes
- % of turnover 5% 10% 9%
Profit for the 257 586 1,422
period
- % of turnover 4% 8% 6%
Return of 10% 20% 17%
equity
Return on 13% 24% 19%
capital
invested
Financing and
financial
position
Interest- 0 0 0
bearing
liabilities
Security on 1,676 0 1,141
advance payment
Short-term 8,177 5,891 7,781
investments +
cash and bank
receivables
Net Gearing 87% 56% 68%
Equity ratio 61% 73% 76%
Cash flow from 407 995 2,134
business
operations
Earnings per 0.03 0.06 0.23
share, EUR,
undiluted
Earnings per 0.03 0.06 0.23
share, EUR,
diluted
Equity per 1.01 1.13 1.22
share
Price-earnings 146.87 46.6 17.28
ratio (P/E)
Lowest share 4.06 2.95 2.83
price
Highest share 5.35 3.79 4.44
price
Average share 4.68 3.44 3.63
price
Market 37,700 27,621 37,733
capitalisation
at period end
Group key figures and ratios (on a comparable basis by
quarter), EUR 1,000
Q1/2004 Q4/2003 Q3/2003 Q2/2003 Q1/2003
Extent of
business
Turnover 6,460 6,541 5,074 6,605 6,991
- change %, 8% 15% 18% 12% 8%
year on year
Gross capital 69 95 40 68 20
expenditure
- % of turnover 1% 1% 1% 1% 0%
Profitability
EBITA 421 393 431 238 849
- % of turnover 7% 6% 7% 4% 12%
Operating 352 328 365 170 781
profit
- % of turnover 5% 5% 6% 4% 11%
Profit before 327 343 999 307 734
extraordinary
items and taxes
- % of turnover 5% 5 % 15 % 5 % 10 %
Profit/loss for 259 253 796 293 586
the period
- % of turnover 4% 4% 12% 5% 8%
Cash flow from 407 735 203 607 995
business
operations
Earnings per 0.03 0.04 0.10 0.03 0.06
share, EUR,
undiluted
Earnings per 0.03 0.04 0.10 0.03 0.06
share, EUR,
diluted
The weighted average of the issue-adjusted number of shares
totals 9,262,914 during the reporting period. At the end of
the period, the dilution-adjusted number of shares totalled
9,337,471, while the number of outstanding shares totalled
9,262,914.
At the end of the period, the company held a total of
100,000 treasury shares, which were invalidated on 16 April
2004 on the basis of the AGMs decision. This invalidation
has no effect on shareholders equity.
The Group has no liabilities associated with derivative
contracts.
