Final Results, Share Placing & Other News
Sopheon PLC
3 March 2000
Sopheon plc
£20M SHARE PLACING
£29M PROPOSED ACQUISITION OF TELTECH RESOURCE NETWORK CORP.
BUSINESS REVIEW INCLUDING
PRELIMINARY RESULTS FOR YEAR ENDED 31 DECEMBER 1999
Sopheon plc ('Sopheon' formerly named PolyDoc), the international
knowledge management software and services company, announces a
conditional share placing, a proposed US acquisition, and its
business review including preliminary results for the year ended
31 December 1999. Sopheon has operations in the UK, Netherlands
and the USA; its shares are traded on AIM in London and on the
Euro.NM in Amsterdam.
KEY POINTS
Share Placing
* Sopheon is raising £20m through a placing of 2.5m ordinary
shares with institutions at 800p.
* These funds will be used to support Sopheon's acquisition
strategy in the USA and to accelerate sales and marketing
efforts on both sides of the Atlantic.
Proposed acquisition of Teltech Resource Network Corporation
('Teltech')
* Teltech is a knowledge management and research services
company based in Minneapolis, USA, which uses web technology to
deliver its products and services through vertical internet
portals.
* Teltech is to be acquired for £29m, satisfied by 2.19m new
ordinary shares and $17m (£11m) in cash.
* This acquisition would give Sopheon access to a blue chip'
US client base which includes half the Fortune 500 companies
and also brings a substantial uplift in overall revenues.
Business review including preliminary results for the year
ended 31 December 1999
* Good progress was made during the year in the development
of the business and products.
* AppliedNet was acquired in late November 1999 for £8m in
shares and has been successfully integrated into the Group.
* In November 1999, £8m was raised through an institutional
placing to fund development.
Barry Mence, Sopheon's Chairman said :
'Sopheon has made huge progress during 1999. The proposed £29m
acquisition of Teltech announced today would give us a firm
footprint in the important US market, giving Sopheon substantive
operations in the UK, Netherlands and the USA. The £20m share
placing provides the enlarged Group with the resources to
accelerate its development into a global knowledge management
software and services organisation.'
For further information, please contact :
Barry Mence, Chairman
(barry.mence@sopheon.com) +44 (0)1483-883000
Richard Maddocks, Managing Director
(richard.maddocks@sopheon.com) +31 (0)20-301 3900
Arif Karimjee, Finance Director
(arif.karimjee@sopheon.com) +44 (0)1483-883000
Steve Liebmann at Buchanan Communications
(stevel@buchanan.uk.com) +44 (0)171-466 5000
£20 MILLION CONDITIONAL SHARE PLACING
It gives us great pleasure to announce the raising of £20 million
through the placing of 2,500,000 ordinary shares at £8.00. These
funds will be used to support our acquisition strategy in the USA
and to further strengthen our working capital base primarily to
accelerate our sales and marketing effort on both sides of the
Atlantic. This successful institutional fund raising, which was
achieved together with our brokers Durlacher, has resulted in a
number of existing investors enlarging their holding in Sopheon
and in a further number of top flight institutions becoming new
shareholders in the Group. Durlacher will use all the proceeds of
commissions due under the placing to subscribe for shares in
cash in Sopheon at the placing price.
The placing is conditional upon the admission of the new Ordinary
Shares to AIM.
PROPOSED ACQUISITION OF
TELTECH RESOURCES NETWORK CORPORATION
Sopheon has entered into a conditional agreement to acquire
Teltech Resources Network Corporation. The completion of the
acquisition of Teltech would give Sopheon significant operations
in the Netherlands, UK and the USA.
Teltech is a knowledge management and research services company
based in Minneapolis, USA, which uses web technology to deliver
its products and services to its customers through vertical
internet portals. It was founded in 1984 with the current
management being appointed in 1997. In early 1999, Teltech
became a Sopheon business partner and the first joint software
and services sales have been achieved. Currently, Teltech is
experiencing good growth in revenues, having made substantial
investment in the development of its knowledge portal
technologies, launched into the market as Teltech.com in
September 1999. Teltech has a blue chip' client base, which
includes half of the Fortune 500 companies. In the year ended 31
December 1999, Teltech's revenues were $16.2 million (£10.1
million) and it had a loss of $0.09 million (£0.06 million). All
development costs are written off as incurred. Teltech had net
liabilities of $1.6 million (£1.0 million) at 31 December 1999.
The consideration for the proposed Teltech acquisition is for
2,192,954 new Ordinary Shares (valued at £18 million at the
placing price of 800p) and US$17 million (£11 million) in cash.
Included in the cash element of the consideration is $3 million
(£1.9 million) that would, as a result of the deal structure, be
injected into the Teltech balance sheet at completion. The cash
element of the proposed transaction, associated costs, and the
development of the enlarged US business that would result, will
be funded through the £20 million placing referred to above.
Directors and employees of Teltech receiving Sopheon shares will
undertake to retain them for 12 months and all other investors in
Teltech, other than those with a minimal holding, will undertake
not to dispose of any of their Sopheon shares for 6 months.
Completion of the acquisition of Teltech by Sopheon is subject to
Securities and Exchange Commission approvals as well as Teltech
shareholder approval, although the board of Teltech, which
represents over 50% of Teltech's shares, has already given its
approval.
SOPHEON PLC BUSINESS REVIEW FOR 1999
AND THE OUTLOOK FOR 2000 AND BEYOND.
EXTRACTS FROM CHAIRMAN'S STATEMENT AND REVIEW OF THE YEAR.
1999 was a year of considerable progress for Sopheon and the year
2000 has begun with even more substantial progress as we move
towards fulfilling our objective to become a major global company
in the knowledge management market.
Financial results
In line with expectations, revenue from the core business,
including the additional revenue from AppliedNet Limited which we
acquired on 22 November 1999, showed an increase in turnover by
70% to £1.5 million. On an illustrative combined basis, the total
revenue for AppliedNet and Sopheon for the full year 1999 was
£3.6 million, also in line with expectations. Revenue for
Teltech, the company proposed to be acquired by the Group, was
£10.1 million for 1999 which, also based on an illustrative
combined basis, would result in a revenue base for the enlarged
group of £13.7 million for 1999.
Sopheon earnings before interest, tax, depreciation and
amortisation (EBITDA') were £1.7 million. We have adopted this
approach for reporting on an ongoing basis in line with common
industry practice on both sides of the Atlantic.
Business development
The most significant business development during the last few
months has been the acquisition of the UK knowledge management
company, AppliedNet, which brought to the Group amongst other
important elements, a strong additional customer, revenue and
prospect base in the UK. With the integration of the former
PolyDoc and AppliedNet organisations into the new Sopheon
completed in a very smooth and expeditious manner, the Group is
already starting to experience accelerated commercial business
results. The most recent of these has been the signing of a
large contract (value to Sopheon at least £580,000) as part of a
consortium with DERA to deliver a substantial e-commerce site
with comprehensive knowledge management capabilities for the UK
Public Records Office.
Amongst several other notable events, I would like to mention the
recent successful launch of the new FT.com (Financial Times
online news website) in which Sopheon played an important role
providing software and services, as covered in a recent Financial
Times newspaper article. In addition to these and other business
successes, and with good progress being made in our Healthcare
business and a start in Life Sciences (Pharmaceutical and
Biotech), 1999 finished well and the year 2000 has started
strongly in Europe. Our North American office in Denver has
expanded rapidly with nine new staff joining in the last few
months and this, together with the substantial presence of
Teltech in the USA, would I believe position Sopheon
exceptionally well in that market.
Product development
The former PolyDoc focused on the development and provision of
content management and collaborative software solutions,
generically labelled KnowledgeCap software. This software is
delivered as specific business solutions by industry such as
QualiFlow for Healthcare, NormFlow for Manufacturing,
ResearchFlow for research in Biotech and High-tech manufacturing.
Prior to acquiring AppliedNet, PolyDoc was looking to extend its
software product range to incorporate software that can gather,
filter and disseminate information from both internal and
external sources. AppliedNet's KnowledgeAgents software not only
satisfies these needs, it also profiles information automatically
for distribution to individual users. Sopheon's solutions moving
forward will now be drawing upon the integrated set of solutions
and technology comprising both KnowledgeCap and KnowledgeAgents
software, a very powerful and currently unique offering.
Recently, Doculabs (a Chicago-based software industry analyst
firm) positively evaluated elements of our Sopheon technology and
gave verification of our integrated product strategy.
In the immediate future our product development efforts will be
focused on enhancing this integration as well as bringing the
next generation of our industry-specific knowledge management
business solutions to market, utilising these new capabilities.
In addition, the inclusion of Teltech's portal technology and
approach into the Sopheon product set will, I believe, allow the
Group to significantly enhance its offering in the world of e-
business and e-commerce.
Acquisition strategy
We embarked on our acquisition strategy in 1998 with step one
being the acquisition of Lessenger in the Netherlands, which gave
us over 50 healthcare software clients and ownership of a
complementary software product. Step two was achieved with the
acquisition of AppliedNet at the end of 1999, which gave us a
more substantial customer base in the UK and ownership of further
complementary software. It also secured us an established UK
commercial organisation with strong product development and
implementation groups, which are already providing a firm base
from which to further expand our business. As previously
announced step three was targeted to be in the USA in the year
2000 with the objective of obtaining similar benefits for the
Group. The proposed acquisition of Teltech in the USA announced
today, our most substantial to date, would satisfy all of our
requirements for this. It would bring us a commercial
organisation with strong management and over 100 additional
personnel, a customer base that includes half of the Fortune 500
companies, a substantial growing revenue base with a strong
recurring element, and complementary technology. This together
with our strong software team already in place in Denver, would
give us a firm footprint into the North American market upon
which to build.
A large number of our clients operate on a global basis and they
expect their suppliers to operate in a similar way. This is in
line with our own objective of becoming a global player in due
course. Therefore step four of our acquisition strategy is
targeted at the Pacific Rim in the year 2001. Other options are
also being explored. However the integration of Teltech and its
technologies into the Group would take us through the summer and
I will report to shareholders on these matters at that time.
Capital raising developments
I was pleased to announce in October last year that we had raised
£8m to finance the development of the enlarged group at the same
time as we acquired AppliedNet in the UK. Earlier last year we
also raised £0.5m to invest in a joint venture company with three
of our major healthcare clients in the Netherlands. I am
confident that the acquisition of AppliedNet and the investment
in the healthcare joint venture will make significant
contributions to Sopheon's future.
It gives me great pleasure to further announce the raising of an
additional £20 million. These funds will be used to fund the cash
requirements of £11 million for the proposed acquisition of
Teltech, and in addition the associated costs, and to further
strengthen our working capital base primarily to accelerate our
sales and marketing effort on both sides of the Atlantic. This
successful institutional fund raising, which was achieved
together with our brokers Durlacher, has resulted in a number of
existing investors enlarging their holding in Sopheon and in a
further number of top flight institutions becoming new
shareholders in the Group. Durlacher will use all the proceeds of
commissions due under the placing to subscribe in cash for shares
in Sopheon at the placing price.
I would like to welcome those new institutions to the company and
to thank them for sharing our confidence in Sopheon's future. I
would also like to extend this thank-you to all new and existing
shareholders who have retained or acquired stock during 1999 and
the beginning of 2000.
Outlook for 2000 and beyond
The full integration of the AppliedNet business and potentially
the Teltech business into the Group should ensure the year 2000
will be another year of substantial progress. With a growing
customer base on both sides of the Atlantic and a product and
service offering that we believe has a considerable 'first to
market' advantage we have confidence that we are well positioned
for considerable growth in a rapidly growing market. In line with
our customers' requirements and Sopheon's ambitions to become a
global player in the knowledge management market, we plan to
continue to accelerate our progress by acquisitions in further
geographic locations.
Barry Mence
Executive Chairman
3 March 2000
Group profit and loss account and Statement of recognised gains
and losses
For the year ended 31 December 1999 (Unaudited)
Restated
1999 1998
£'000 £'000
Turnover 1,510 891
Cost of sales (1,362) (892)
------- -------
Gross profit/(loss) 148 (1)
Administrative and distribution
expenses (1,885) (1,102)
Amortisation of goodwill (323) -
------ -------
Operating loss-continuing
operations (2,060) (1,103)
Bank interest receivable 62 13
Interest payable and similar
charges (74) (52)
------- ---------
Loss on ordinary activities before
and after taxation (2,072) (1,142)
======= =========
Loss per share-basic and diluted (10.1p) (6.1p)
Statement of recognised
gains and losses
Loss for the financial year (2,072) (1,142)
Exchange difference on
retranslation of net assets
of subsidiary undertakings (45) 47
------ -------
Total recognised gains and losses
relating to the year (2,117) (1,095)
Prior year adjustment (373) -
------- --------
Total recognised gains and losses
recognised since last annual
report (2,490) (1,095)
======= =========
The prior year adjustment and the reasons for restatement of
comparatives are discussed in note 1.
Group Balance Sheet
at 31 December 1999 (Unaudited)
Restated
1999 1998
£'000 £'000
Fixed assets
Goodwill 7,605 167
Tangible assets 386 203
------ ------
7,991 370
Current assets
Debtors 1,362 127
Cash and short term deposits 7,751 674
------ -------
9,113 801
Creditors: amounts falling due
within one year 3,624 2,032
------ -------
Net current assets/(liabilities) 5,489 (1,231)
------ --------
Total assets less current liabilities 13,480 (861)
Creditors: amounts falling due after 1 3
more than one year ------ --------
13,479 (864)
====== ========
Capital and reserves
Called up share capital 4,491 3,773
Shares to be issued 10 15
Share premium account 17,960 2,213
Profit and loss account (8,982) (6,865)
------ ---------
Shareholders' funds
(all equity interests) 13,479 (864)
====== =========
Included within creditors due within one year is £1,570,920 of
Convertible Loan Stock held by three of the company's
shareholders. This loan stock is repayable or convertible on 31
July 2000.
Group Statement of Cash Flows
for the year ended 31 December 1999 (Unaudited)
Restated
1999 1998
£'000 £'000
Net cash outflow from operating
activities (1,322) (946)
Return on investment and servicing
of finance
Interest received 62 13
Interest paid (72) (50)
Interest element of finance lease rental
payments (2) (2)
------- -------
(12) (39)
------- -------
Capital expenditure and financial
investment
Payments to acquire tangible
fixed assets (53) (52)
------- -------
(53) (52)
------- -------
Acquisitions and disposals
Purchase of subsidiary undertakings (178) (95)
Net cash acquired with subsidiary
undertakings 389 2
------- -------
211 (93)
------- -------
Management of liquid resources
Increase in short term deposits (6,602) (401)
------- -------
(6,602) (401)
------- -------
Net cash outflow before financing (7,778) (1,531)
------- -------
Financing
Issue of ordinary share capital 8,265 110
New short term loans 4 1,571
Repayment of long term loan - (299)
Repayment of capital element of
finance lease (16) (12)
------- -------
8,253 1,370
------- ------
Increase/(decrease) in cash excluding
short term deposits 475 (161)
======= =======
Notes
1. Accounting policies
Accounting convention
The accounts are prepared under the historical cost convention
and in accordance with applicable accounting standards.
Basis of consolidation
The consolidated accounts include the results of the company and
its subsidiary undertakings. The results of AppliedNet Limited
have been included since the date of acquisition, 22 November
1999.
Tangible fixed assets
Tangible fixed assets are stated at historical cost, less
accumulated depreciation. Tangible fixed assets are depreciated
on a straight line basis at rates ranging from 20% to 33% per
annum on cost over their expected useful lives.
Research and development
Research and development expenditure is written off as incurred.
The cost of patents and trademarks are written off as incurred.
Subsidies received from the European Eureka funding programme are
credited to the profit and loss account over the period to which
they relate.
Prior year adjustment
Historically, development expenditure incurred for specific
products was capitalised when its future recoverability could
reasonably have been regarded as assured, and amortised in line
with the expected future sales from the related product, to a
maximum of 5 years. Following the acquisition of AppliedNet
Limited and subsequent harmonisation of group accounting
policies, all such expenditure is now written off as incurred.
The effect of changing this policy has been reflected by way of a
prior year adjustment to the 1998 financial statements of the
group.
Goodwill
Goodwill arising on consolidation is capitalised and amortised on
a straight line basis over its estimated useful economic life,
currently estimated at 3 to 5 years depending on circumstances.
Goodwill is reviewed for impairment at the end of the first full
financial year after acquisition and in other periods if events
or changes in circumstances indicate that carrying values may not
be recoverable.
Foreign currencies
Company: Transactions in foreign currencies are recorded at the
rate ruling at the date of the transaction or at the contracted
rate if the transaction is covered by a forward exchange
contract. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the rate of exchange ruling at the
balance sheet date or if appropriate at the forward contract
rate. All differences are taken to the profit and loss account.
Group: The assets and liabilities of the subsidiary undertakings
are translated at the rate of exchange ruling at the balance
sheet date. The profit and loss account is translated at the
average rate of exchange. The exchange difference arising on the
re translation of the subsidiary undertaking is taken, together
with differences arising on the translation of intra-group
funding loans, directly to reserves. All other translation
differences are taken to the profit and loss account.
Pensions
Sopheon contributes to the personal pension arrangements of
certain employees, the costs of which are charged in the profit
and loss account as incurred.
2. Acquisition of AppliedNet Limited
On 22 November 1999 the group completed the acquisition of
AppliedNet Limited for consideration of 6,402,961 ordinary shares
of Sopheon plc in respect of the entire ordinary share capital of
AppliedNet and cash of £11,000 in respect of its entire
preference share capital, as well as attributed costs of
£167,000. The market value of Sopheon plc's ordinary shares on 27
October 1999, the date the acquisition became unconditional, was
129p. Accordingly, the total cost recorded in respect of the
acquisition was £8,438,000.
As part of this transaction the share capital of Sopheon plc was
restructured such that each ordinary share of 20p was converted
into one ordinary share of 5p and one deferred share of 15p. The
deferred shares carry no rights as to dividend, voting or return
of capital on liquidation, and are not listed on any exchange.
The number of ordinary shares listed and in issue did not change
as a consequence of the restructuring.
On the same date 6,500,000 ordinary shares of Sopheon plc were
placed with institutions at a price of 125p per ordinary share,
realising net proceeds after attributed costs of £7,699,000.
3. Post Balance Sheet Events
Since the year end, and as alluded to in previous reports, the
group has committed funds of £425,000 for a 25% equity stake in
ProGram BV, a company established with a number of Dutch
healthcare institutions to market knowledge management solutions
incorporating Sopheon's software to the Dutch healthcare
industry.
Since the year end 55,000 ordinary shares in Sopheon plc have
been issued for £11,000 in cash to option holders exercising
their options, giving rise to a premium of £8,250.
A placing of shares for cash, and a potential acquisition, have
been announced on 6 March 2000 details of which are given in the
announcement of which this preliminary statement forms a part.
4. Loss Per Ordinary Share
The calculation of basic loss per ordinary share is based on a
loss of £2,072,000 (1998 £1,142,000 as adjusted), and 20,565,985
(1998: 18,730,633) ordinary shares, being the weighted average
number of ordinary shares in issue during the year.
The effect of all potential ordinary shares is antidilutive in
1998 and 1999.
The historic earnings per share calculations are not affected by
the restructuring of share capital described in note 2 above
because the number of ordinary shares in issue did not change as
a result of the restructuring.
5. Financial Information
The financial information set out above does not constitute the
company's statutory accounts as defined in section 240 of the UK
Companies Act 1985 for the years ended 31 December 1999 or 1998,
and is unaudited. Statutory accounts for 1998 have been delivered
to the registrar of companies and an unqualified audit opinion
was issued thereon. The statutory accounts for 1999 will be sent
to shareholders in due course and will be delivered to the
registrar of companies following the Company's annual general
meeting.
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