SYSOPEN'S TURNOVER MAINTAINED AND PROFIT
SysOpen Plc STOCK EXCHANGE RELEASE 5 August 2004, 8:00 a.m.
SYSOPEN'S TURNOVER MAINTAINED AND PROFITABILITY IMPROVED
YEAR ON YEAR
Sysopen Plcs Interim Report for 1 January 30 June 2004
- Second-quarter turnover (Q2/2004) came to MEUR 6.6
(Q2/2003: MEUR 6.6), with business profitability (EBITA) 7
per cent (Q2/2003: 4 per cent)
- Cumulative turnover was MEUR 13, down by MEUR 0.6 year on
year
- Cumulative earnings before interest, taxes, and goodwill
amortisation (EBITA) accounted for 6.7 per cent of turnover,
amounting to EUR 870 thousand, down EUR 217 thousand
- Cumulative profit before extraordinary items and taxes
came to EUR 708 thousand, a drop of EUR 333 thousand
- Cumulative earnings per share were EUR 0.07, a decrease of
EUR 0.02
- The period-end number of employees totalled 298, up by 4
- On 28 April 2004, SysOpen acquired the Software Solutions
business of Done Information Oy
- On 22 June 2004, SysOpen acquired the Kuopio software
business of Yomi Software Plc
- Consolidated turnover in 2004 is expected to exceed the
2003 level and operating profit (EBITA) to come to the level
level of 7 per cent
Markets
The market situation for the information technology business
continued to be more subdued than usual during the first
half of the year. Price competition for customer projects
remained tough, and sales schedules were long. However,
towards summer, signs of recovery in the form of an
increasing invitation for tenders were seen in customer
companies investments, which is projected to lead to
significant new information technology projects in the
autumn.
SysOpens Business
During the first half of 2004, demand for SysOpen's IT
services remained at the level of year-end 2003. Due to
business acquisitions and invigorated customer demand at the
end of spring, autumn of 2004 is expected to see further
growth. During the period under review, SysOpen achieved the
predicted profitability. The Groups equity ratio and
financial position remained at good levels throughout the
report period. By looking after its competitiveness, SysOpen
has maintained a solid foundation for future growth.
SysOpen offers its customers expert services and application
software that enhance the companys operations in the
electronics business. Its business consists of information
system services that are tailored to meet customer needs as
well as software and supporting consulting and technology
development services. During the second quarter, SysOpens
Board of Directors launched a process in which the Group's
service and solutions range is developed and updated. As a
concrete result of the process, SysOpen has decided to set
up a new unit which will focus on supportive IT consulting
for business and IT management. Furthermore, in addition to
implementing customer-specific IT systems, SysOpen will
focus its offerings on services covering the entire life
cycle of applications, with a special emphasis on
application maintenance and support services.
During the second quarter of 2004, SysOpen offered tenders
more briskly than during the preceding quarter and promoted
negotiations on significant IT development projects with
existing and new customers. The acquisitions of Done
Information Oy's Jyväskylä business operations and Yomi
Software Plc's Kuopio-based software business improved
SysOpen's ability to offer services to existing customers
and brought SysOpen new customers, including the Social
Insurance Institution of Finland and Outokumpu Oyj.
Reported Year-on-Year Turnover
Consolidated turnover during the period reached MEUR 13.0
(Q1-Q2/2003: MEUR 13.6, down by 4.3 per cent). International
operations accounted for 3.8 per cent of consolidated
turnover (2003: 2.3 per cent). The impact of acquired
businesses on turnover was EUR 233 thousand.
At the beginning of the year, many of SysOpen's customers
postponed their large IT investments, which is why SysOpen's
turnover dropped over the previous year. The revival in IT
investments that started during the second financial quarter
has not yet significantly contributed to the cumulative
turnover of the report period.
Turnover by business area for Q1-Q2/2004:
Enterprise application solutions 90.5%
Software solutions 9.5%
Turnover by Quarter
Second-quarter consolidated turnover in 2004 was MEUR 6.6
(Q1/2004: MEUR 6.5), showing a slight improvement over the
first quarters turnover and remaining on the same level as
in the same quarter a year ago (Q2/2003: MEUR 6.6).
Turnover, compared to that reported in Q2/2003, is expected
to continue to improve in the autumn, spurred by business
acquisitions made during the second quarter and recovering
demand.
Year-on-Year Profitability and Financial Performance
Consolidated earnings before interest, taxes, and goodwill
amortisation (EBITA) came to EUR 870 thousand (Q1-Q2/2003:
EUR 1,087 thousand, down 19.9 per cent), accounting for 6.7
per cent of reported consolidated turnover (Q1-Q2/2003: 8
per cent). The weaker business profitability is mainly due
to the drop in turnover.
Consolidated financial income and expenses totalled EUR -2
thousand (Q1-Q2/2003: EUR 90 thousand).
Profit before extraordinary items and taxes came to EUR 708
thousand (Q1-Q2/2003: EUR 1,041 thousand), down 32 per cent.
First-half profit totalled EUR 669 thousand (Q1-Q2/2003: EUR
879 thousand), down 23.9 per cent. Consolidated earnings per
share were EUR 0.07 (Q1-Q2/2003: EUR 0.09), down 22.2 per
cent.
Profitability and Financial Performance by Quarter
Consolidated earnings during the second quarter in 2004
(Q2/2004) before interest, taxes and goodwill amortisation
(EBITA) came to EUR 449 thousand (Q1-Q2/2004: EUR 421
thousand), so operating profit for the quarter showed
improvement from the previous quarter for the second quarter
in a row. Business profitability for the second quarter was
7 per cent, which is clearly better than that of the second
quarter a year ago (Q2/2003: 4 per cent).
Financing and Capital Expenditure
With a positive cash flow, the Groups financial position
remained at a healthy level throughout the report period.
The balance sheet total came to EUR 16.1 million (Q1-
Q2/2003: EUR 15.6 million), and the equity ratio was 73 per
cent (Q1-Q2/2003: 74 per cent). The ratio of net liabilities
to shareholders equity, or net gearing, was -53 per cent
(Q1-Q2/2003: -60 per cent). Liquid assets totalled EUR 5.2
million (Q1-Q2/2003: EUR 6.5 million). The Group has no
interest-bearing liabilities.
The Groups gross capital expenditure came to EUR 985
thousand (Q1-Q2/: EUR 88 thousand). The Group continued to
spend on 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 (Q1-
Q3/2003: 17 per cent), while reported return on equity (ROE)
was 13 per cent (Q1-Q3/2003: 14 per cent).
Human Resources and Administration
The period-end number of employees totalled 298, up 1.4 per
cent year on year (Q1-Q2/2003: 294), while the average
number of employees during the report period was 274, down
9.3 per cent on a year earlier (Q1-Q2/2003: 302).
In comparison to the year-end 2003 figure, the number of
employees increased by 28, due to a business acquisition in
May and revived recruiting.
Reported employee turnover was 6.4 per cent (Q1-Q2/2003: 7.5
per cent).
Employees by function:
Enterprise Application Solutions 78%
Software Solutions 9%
Administration and Management 10%
International Operations 3%
Until the Annual General Meeting on 24 March 2004, SysOpen
Plcs Board of Directors comprised Kari Karvinen (Chairman),
Matti Savolainen (Vice-Chairman), Jorma Kylätie, and Risto
Linturi. The new Board of Directors elected by the AGM
consists of Kari Karvinen (Chairman), Risto Linturi (Vice-
Chairman), Pekka Eloholma, Reijo Koski-Lammi, and Matti
Mujunen. Arto Sahla is the Managing Director.
Group Structure and Organisation
During the report period, SysOpen Plc purchased the
remaining 17 per cent holding in its subsidiary located in
England, SysOpen UK Limited, which is now wholly owned by
SysOpen Plc.
SysOpen also acquired the software solutions business of
Done Information Oy. This deal included customer service and
software solutions operations in both Jyväskylä and
Helsinki, and through the acquisition, SysOpen strengthened
its relationships with customers and its regional presence
in the Jyväskylä business area, also expanding its range of
technology and software solutions. As a result of the
business acquisition and related streamlining measures, 22
Done Information employees joined SysOpen's payroll.
The SysOpen Group consists of parent company SysOpen Plc and
the following three operating subsidiaries: SysOpen Object
Team Oy (93 per cent holding), SysOpen Limited (100 per
cent) and SysOpen UK Limited (100 per cent).
The SysOpen Groups business units are as follows: Business
Unit 1 (Telecoms, Industry, Trade, Services, Kuopio,
Jyväskylä), Business Unit 2 (Financing, Public
Administration, Organisations, Tampere), and SysOpen Object
Team Oy. The Consultation, Business Development, and
International Business unit is a new unit that starts to
operate in August.
Adoption of IFRS
The European Union requires that all listed companies
registered in EU countries adopt the IFRS (International
Financial Reporting Standards) system by 2005. SysOpen will
apply the IAS/IFRS standards in its interim and annual
accounts as of 2005.
Shareholders Meetings
Convened on 24 March 2004, SysOpen Plcs Annual General
Meeting (AGM) adopted the financial statements for 2003,
discharged Board members and the managing director from
liability, and approved the Board's proposed distribution of
profit for 2003. The meeting also agreed on the remuneration
of the members of the Board and elected the new Board of
Directors for the company.
In addition, the AGM decided to
1) reduce the share capital by EUR 10,000 by invalidating
100,000 treasury shares.
2) authorise the Board of Directors, on certain conditions,
to decide on issuing one or several convertible bonds,
issuing stock options, and/or increasing the companys share
capital through one or several rights issues. The
authorisation is valid for one year from the date of the
AGMs decision. The authorisation has not been exercised.
3) authorise the Board of Directors, on certain conditions,
to decide on buying back own shares using retained earnings.
The authorisation is valid for one year from the date of the
AGMs decision. This authorisation has not been exercised.
4) authorise the Board of Directors, on certain conditions,
to decide on disposing of the company's own shares. The
authorisation is valid for one year from the date of the
AGMs decision. The authorisation has not been exercised.
5) change the content of § 6 of SysOpen Plc's Articles of
Association so that it includes a mention of the election of
the Vice-Chairman of the Board.
6) change the content of § 8 of SysOpen Plc's Articles of
Association so that signing on behalf of the company
requires two people.
Share Capital and Shares
The nominal value of a share was EUR 0.1, and the number of
shares at the end of the report period came to 9,262,914.
The 100,000 own shares owned by SysOpen were invalidated on
16 April 2004 as a result of the AGM's decision.
SysOpen reported a total of 3,322 shareholders on 30 June
2004. Ten major shareholders are:
Shareholder Proportion (%) of shares
and votes
Kari Karvinen 17.1%
Matti Savolainen 17.0%
Jorma Kylätie 16.0%
Etera Mutual Pension Insurance 2.3%
Company
Olli Ahonen 2.0%
Suomi Mutual Life Assurance 1.7%
Company
Mandatum Finnish Small Cap Fund 1.6%
Mutual Fund Pohjola Finland 1.6%
Growth
Seppo Sneck 1.2%
Yrjö Toiviainen 1.1%
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 3.20, and the highest was EUR 5.35.
The share closed at EUR 3.66 on the final day of trading
during the report period. The trade-weighted average was EUR
4.11. The Groups market capitalisation totalled EUR
33,902,265.24 on the balance sheet date.
Stock-Option Schemes
The number of stock options attached to the 19992004 stock-
option scheme totals 49,185, 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 end on 31 October 2004. The 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 30 June
2004, SysOpen held a total of 3,100 stock options based on
the 1999-2004 stock-option scheme.
The number of stock options attached to the 20002005 stock-
option scheme totals 21,060, 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 end 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. On 30 June 2004, SysOpen held no stock
options based on the 20002005 stock-option scheme.
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. Adjusted for dividends,
the share subscription prices for 2003A, 2003B and 2003C
stock options are currently EUR 3.04, EUR 2.95, and EUR
3.92, respectively. For 2003D stock options, the
subscription price will be determined during the period 130
April 2005 by SysOpens share prices as quoted in public
trading, less the distributed dividends under the terms and
conditions of the stock-option scheme. On 30 June 2004,
wholly owned Group subsidiary SysOpen Partners Oy held a
total of 221,810 stock options under the 2003 stock-option
scheme. The 2003A stock options have been quoted on the
Helsinki Exchanges Stock Options list since 25 May 2004.
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 company's shares and votes entitled by the shares as a
result of any increase of the company's share capital. On 30
June 2004, SysOpen Partners still held 224,910 of all stock
options. The dilution effect of the distributed stock
options is currently a maximum of 5.3 per cent.
Events after the Report Period
On 22 June 2004, SysOpen signed an agreement to acquire the
Kuopio software business of Yomi Software Ltd. With this
business acquisition, SysOpen strengthens its customer base
and its regional presence in the Kuopio business area. At
the beginning of August, 16 employees from Yomi Software
joined SysOpen's payroll. Strengthening its business
operations in Kuopio improves SysOpen's competitiveness,
especially in the industrial and telecommunications sectors,
and intensifies the Group's service range for its current
customers. Following the acquisition, SysOpen employs more
than 50 people in Kuopio.
Since the beginning of July, SysOpen has applied in-house
corporate governance guidelines which are in compliance with
the recommendation on corporate governance for listed
companies issued by the Helsinki Exchanges, the
Confederation of Finnish Industry and Employers (TT) and the
Central Chamber of Commerce, effective since 1 July 2004.
Near-Term Prospects
SysOpen's success has lain in its capabilities to respond to
market changes. SysOpen is currently developing and
upgrading 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. SysOpen will set up a
new unit, which will focus on supportive IT consulting for
business and IT management. Furthermore, in addition to
implementing customer-specific IT systems, SysOpen will
focus its service offerings on services covering the entire
life cycle of applications, with a special emphasis on
application maintenance and support services.
SysOpen aims to increase primarily its domestic 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.
SysOpen's expectations of a revival in the demand for IT
services and products remain moderate. Once the market
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 consolidated turnover for 2004 to exceed
the 2003 level and operating profit (EBITA) to come to a
level of 7 per cent. These estimates are based on SysOpen's
view of the development of the market situation, on the
first-half profit performance, and on order and tender
volumes.
Briefing
SysOpen will hold a briefing on its Interim Report for Q1-
Q2/2004 for analysts and the press on Thursday, 5 August
2004, at 10:00 p.m. The briefing will be held in the Holvi
room of the World Trade Center Club restaurant,
Aleksanterinkatu 17, 00100 Helsinki. All are welcome.
The Interim Report for Q1-Q3/2004 will be released on
Thursday, 28 October 2004.
Helsinki, 5 August 2004
SYSOPEN PLC
Board of Directors
FOR FURTHER INFORMATION, PLEASE CONTACT
Arto Sahla, Managing Director: tel. +358 424 2020 339,
mobile +358 400 442 986, e-mail arto.sahla@sysopen.fi
The financial statements and associated slideshow will be
available at
www.sysopen.fi in the "Investors" section from 11.00 a.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 January - 30 June 2004
Q1-Q2/2004 Q1-Q2/2003 2003
EUR 1,000
TURNOVER 13,011 13,596 25,211
Other operating income 78 116 243
Materials and services -513 -591 -1,055
Personnel expenses -7,810 -8,156 -15,101
Depreciation and write- -289 -325 -666
downs
Other operating -3,606 -3,553 -6,722
expenses
EBITA 870 1,087 1,910
Goodwill amortisation -160 -136 -266
OPERATING PROFIT 710 951 1,644
Financial income and -2 90 739
expenses
Profit before 708 1,041 2,383
extraordinary items
and taxes
Extraordinary expenses -667
Direct taxes -26 -141 -258
Minority interest -14 -21 -35
PROFIT/LOSS FOR THE 669 879 1,442
PERIOD
Consolidated Balance Sheet for 30 June 2004 (EUR 1,000)
TOTAL ASSETS 30 June 30 June 31 December
2004 2003 2003
FIXED AND OTHER NON-
CURRENT ASSETS
Intangible assets
Development costs 50 0 10
Intangible rights 516 475 393
Other non-current 65 114 82
assets
Business value 826 443 312
Intangible assets total 1,457 1,032 797
Tangible assets 1,054 1,285 1,137
Long-term investments 966 1,191 1,004
INVENTORIES AND CURRENT
ASSETS
Current receivables 7,431 5,581 5,362
Short-term investments 2,032 1,581 2,014
Cash and bank 3,210 4,949 5,767
receivables
TOTAL ASSETS 16,150 15,619 16,081
LIABILITIES AND 30 June 30 June 31 December
SHAREHOLDERS EQUITY, 2004 2003 2003
TOTAL
SHAREHOLDERS EQUITY
Share capital 926 936 936
Issue premium fund 7,101 7,091 7,091
Retained earnings 995 1,796 1,796
Profit/loss for the 669 879 1,422
period
Translation difference, 32 11 35
unrestricted
shareholders equity
SHAREHOLDERS EQUITY, 9,723 10,714 11,280
TOTAL
MINORITY INTEREST 106 138 153
LIABILITIES
Short-term liabilities 6,321 4,768 4,648
LIABILITIES AND 16,150 15,619 16,081
SHAREHOLDERS EQUITY,
TOTAL
Consolidated Cash Flow Statement 2004-2003 (EUR 1,000)
Cash flow from business Q1- Q1-Q2/2003 2003
operations: Q2/2004
Cash flow from business 640 1,602 2,134
operations
Cash flow from investments -956 29 748
Cash flow from financing
Repayment of short-term -3 -2
loans
Repayment of long-term
loans
Dividends paid and other -2,223 -3,516 -3,516
profit distribution
Cash flow from financing: -2,223 -3,519 -3,518
Change in liquid assets -2,540 -1,888 -637
Liquid assets at period- 7,781 8,418 8,418
start
Liquid assets at period- 5,241 6,530 7,781
end
Difference -2,540 -1,888 -637
Group financial indicators, incl. comparable data
(EUR 1,000)
Q1- Q1- 2003
Q2/2004 Q2/2003
Extent of
business
Turnover 13,011 13,596 25,211
- change year -4% -10% -13%
on year
Capital 9,829 10,851 11,432
invested
Gross capital 985 88 223
expenditure
- % of turnover 8% 1% 1%
Capitalised R&D 50 0 10
- % of turnover 0% 0% 0%
Personnel at 298 294 270
period-end
Average number 274 302 290
of personnel
Profitability
EBITA 870 1,087 1,911
- % of turnover 7% 8% 8%
Operating 710 951 1,644
profit
- % of turnover 5% 7% 7%
Profit before 708 1,041 2,383
extraordinary
items and taxes
- % of turnover 5% 8% 9%
Profit/loss for 669 879 1,422
the period
% of turnover 5% 6% 6%
Return on 13% 15% 17%
equity, %
Return on 13% 17% 19%
investment, %
Financing and
financial
position
Interest- 0 0 0
bearing
liabilities
Advance payment 2,211 0 1,141
security
Short-term 5,242 6,530 7,781
investments +
cash and bank
receivables
Net gearing, % -53% -60% -68%
Equity ratio, % 73% 74% 76%
Cash flow from 640 1,602 2,134
business
operations
Earnings per 0.07 0.09 0.23
share, EUR
(Group)
undiluted
Earnings per 0.07 0.09 0.23
share, EUR
(Group)
diluted
Equity per 1.05 1.16 1.22
share
Price/earnings 50.46 31.2 17.28
ratio (P/E)
Lowest share 3.20 2.83 2.83
price
Highest share 5.35 3.79 4.44
price
Average share 4.11 3.27 3.63
price
Market 33,902 27,511 37,733
capitalisation
at period-end
Group key figures and ratios (on a comparable basis by
quarter), EUR 1,000
Q2/200 Q1/200 Q4/2003 Q3/200 Q2/200
4 4 3 3
Extent of
business
Turnover 6,551 6,460 6,541 5,074 6,605
- change year -1% -8% -15% -18% -12%
on year
Gross capital 916 69 95 40 68
expenditure
- % of 14% 1% 1% 1% 1%
turnover
Profitability
EBITA 449 421 393 431 238
- % of 7% 7% 6% 7% 4%
turnover
Operating 358 352 328 365 170
profit
- % of 5% 5% 5% 6% 4%
turnover
Profit before 381 327 343 999 307
extraordinary
items and
taxes
- % of 6% 5% 5% 15% 5%
turnover
Profit for 410 259 -253 796 293
the period
% of turnover 6% 4% -4% 12% 5%
Cash flow 233 407 735 -203 607
from business
operations
Earnings per 0.04 0.03 0.04 0.10 0.03
share, EUR
(Group)
undiluted
Earnings per 0.04 0.03 0.04 0.10 0.03
share, EUR
(Group)
diluted
The weighted average for the issue-adjusted number of shares
during the reporting period was 9,262,914. The dilution-
adjusted number of shares at the end of the period was
9,458,471, 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 AGM's decision.
The Group has no liabilities associated with derivative
contracts.
