Interim Results, etc.
Sopheon PLC
18 September 2000
SOPHEON PLC
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2000
Sopheon plc ('Sopheon'), the international knowledge management
software, services and content group, announces its unaudited
interim results for the six months to 30 June 2000. Sopheon has
operations in the UK, USA and the Netherlands; its shares are
traded on AIM in London and on the Euro.NM in Amsterdam.
Highlights :
* Revenues increase six-fold to £3.1m (1999: £506,000). EBITDA
losses for the period were £2.4m (1999: £649,000).
* Completion of the $35m (£24m) acquisition of Teltech
Resource Network Corporation, a leading US business-to-business
research portal and provider of knowledge management services.
* £20 million share placing to support acquisition strategy
and accelerate business development on both sides of the
Atlantic.
* Full contribution to revenue and successful integration of
AppliedNet which was acquired in late November 1999.
* Major teaching hospitals go live with Sopheon healthcare
solution and place order to enhance system further with the
development of Evidence Monitor software.
* Good commercial progress with UK public sector and media
clients with substantial orders to supply, develop and implement
knowledge portal software.
* Strategic partnership with Product Development Institute to
create leading-edge Stage-Gate(TM) new product development
process software solution.
* Management organisation strengthened including the
appointment of Andy Michuda as CEO.
* Share listing strategy review includes an objective of
obtaining a listing in North America.
* On outlook, Chairman, Barry Mence said;
'During the past 10 months we have brought together three
companies and raised working capital to support the
development of Sopheon's business in North America, the UK and
continental Europe. We recognise the challenges that lie
ahead for Sopheon and firmly believe that the Group is well
positioned and equipped to meet them. We view the future with
confidence and optimism.'
For further information contact :
Barry Mence, Chairman Sopheon plc
Tel : + 44 (0)1483-883000
Arif Karimjee, CFO Sopheon plc
Tel : + 44 (0)1483-883000
Steve Liebmann Buchanan Communications
Tel : + 44 (0)207-466-5000
Terry Davidson Eurocommunications Group
Tel : + 32 (0)2 640 92 07
CHAIRMAN'S STATEMENT
Introduction
The year to date has been eventful with substantial progress made
towards our objective of becoming a major global company in the
emerging knowledge management market. During the first half
year, AppliedNet, acquired in late November 1999, has been
successfully integrated into the group. In early March, the
proposed acquisition of Teltech Resource Network Corporation
('Teltech') was announced; following registration of Sopheon's
shares with the Securities Exchange Commission at the end of
August, this acquisition was completed on 15 September 2000.
Results and Finance
In line with expectations, revenue for the six months to 30 June
2000 showed an increase of 600% to £3.1 million (1999: £506,000)
and included a full contribution from AppliedNet. The loss on an
EBITDA basis (earnings before interest, tax, depreciation and
amortisation) was £2.4 million (1999: £649,000). The loss per
share was 9.9p (1999 : 3.4p).
On an illustrative combined basis, the revenue for the enlarged
group of Sopheon including Teltech for the same period would have
been £8.6 million.
In March £20 million was raised through the placing of 2,500,000
new ordinary shares 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 fund raising has resulted in a number
of existing investors enlarging their holding in Sopheon and in a
further number of institutions becoming new shareholders in the
Group. Accordingly, cash and short term deposits were £23.3
million at 30 June.
Business Development
Following the recent completion of the Teltech acquisition,
Sopheon has significant operations in each of the UK, USA and the
Netherlands with over 250 employees worldwide. Teltech brings
complementary products and services as a knowledge management and
research services company based in Minneapolis, USA. Teltech was
founded in 1984, with the current management being appointed in
1997. Teltech has made a substantial investment in the
development of its knowledge portal technologies, used to deliver
its products and services to customers and launched into the
market as Teltech.com in 1999. Teltech has a blue chip' client
base which includes half of the Fortune 500 companies.
The final net consideration payable for the Teltech acquisition
is $35 million (£24 million) using a price per Sopheon share of
$7.95, a computed average based on a formula in the merger
agreement. $15 million (£10 million) of the total consideration
is in cash with the remainder to be satisfied by the allotment of
2.1 million ordinary 5p shares, and the grant of 0.75 million
options over ordinary 5p shares with a combined exercise price of
$2.4 million (£1.6 million).
Having successfully integrated AppliedNet, the period between
announcing and completing the acquisition of Teltech has been
used to plan its integration within the enlarged group. We
expect these plans to be implemented smoothly and quickly.
The commercial development of the business has continued to
progress with a number of achievements in the period. Our
customer group of major teaching hospitals in the Netherlands
have gone live with Sopheon's healthcare solution and we are also
pleased to announce further business to enhance the system with
the development of Evidence Monitor software, an automated agent
to read and forward relevant information to support evidence-
based medicine. The production of content is well under way and
should be available to other hospitals during this October; we
expect further hospitals to take our system in the near future.
Our prospect list includes healthcare organisations in Holland,
Germany, the UK and North America.
Good commercial success has also been achieved within parts of
the UK public sector and with a number of substantial media
clients to supply, develop and implement the knowledge portal
software for which Sopheon is recognised increasingly.
Teltech recent developments
In recent months, Teltech has invested heavily in the expansion
of its sales organisation to support solutions-selling strategies
aimed at selected vertical markets, doubling the company's sales
coverage across North America. Meanwhile, the market continues
to show good acceptance of Teltech's research and consulting
services. Earlier this year, one of the world's largest high-
tech' industrial and consumer product manufacturers adopted
Teltech's research portal as its corporate information-services
solution. More recently, both a leading chemical company and a
multi-national food manufacturer deployed the portal for
organisation-wide use. In June, Teltech's research solution was
awarded Chief Information Officer magazine's prestigious
international Web Business 50/50 award as a premier online site.
In another development, Teltech will soon begin market testing an
Internet site that enables open, transactional access to the
company's renowned network of technical and industry experts by
potential users around the globe. The service is due to be
introduced later this year.
Teltech's consulting group continues to be acknowledged for its
industry-leading best practices in the design and development of
knowledge management solutions. The company's panel of experts
recently completed a sophisticated content taxonomy that will
serve as a structural framework for the extranet of one of the
world's top IT research firms. Teltech was recognized in July by
KM World magazine as one of the '100 Companies That Matter' in
knowledge management.
Product Development
Our product development efforts are focused on bringing the next
generation of our industry-specific knowledge management business
solutions to market in the Healthcare, High Technology
Manufacturing and Life Sciences sectors.
In the future, Sopheon's business solutions will draw upon the
foundation of our integrated set of software and technology
comprising Sopheon Composer, Modeler, Terms, Agents and Publisher
as well as Teltech's portal technology with its e-business
credentials. Our strategy remains the development and sale of
packaged business solutions, based on our software foundation,
geared to enabling companies to make better decisions and improve
their business processes by helping them structure, capture and
share information. These knowledge management solutions will be
tailored to vertical markets with industry specific content; our
improved expertise in knowledge management services will enrich
the pre-sales, specification and implementation processes.
New versions and enhancements to our healthcare solution will be
released by year-end and the first release of our Stage-Gate
Manager product (see below) is scheduled for the first quarter of
2001.
Business Partnerships
We are committed to developing a number of long term, strong and
profitable business partnerships, and we are confident that our
recently announced partnership with the Ontario-based Product
Development Institute ('PDI') will fulfil this potential.
The partnership will focus initially on the development of a
complete, integrated set of tools, research capabilities and
knowledge management software solutions that will serve as the
backbone of a company's product development process and
dramatically boost new product success rates. The solution will
be based on PDI's world-renowned Stage-Gate process, which is
presently used in some form by an estimated 70% of technology-
driven companies in North America and many companies in Europe,
and will be built and delivered using Sopheon's software
technologies together with its research and knowledge management
capabilities. For companies already using the Stage-Gate
process, or for those without an established product development
process, the Sopheon/PDI offering will constitute an easily
adoptable, turnkey solution which will convert the process from
paper to computer.
This strategic relationship between Sopheon and PDI is important
for a number of reasons including the significant business
opportunity this relationship represents. It is also an
excellent illustration of the potential power of the synergy
between Sopheon's software technologies and Teltech's research
and knowledge management competencies that typifies the benefits
we perceive from the merger of the two organisations.
Other business partnerships and potential strategic alignments
are under discussion and progress should be reported in due
course.
Board of directors and executive management team
The completion of the acquisition of Teltech marks a substantial
increase in the size of the business. We have taken this
opportunity to change the structure of the group's management to
provide for future growth and to accelerate progress towards
standards of corporate governance appropriate to an international
quoted company. This new structure comprises a Sopheon plc Board
with at least half its directors being non-executive together
with an Executive Management Board responsible for operations.
To this end it gives me great pleasure to announce that Andy
Michuda, until now CEO of Teltech, will be appointed as Chief
Executive Officer of the enlarged Group and will also be joining
the Board as an executive director with immediate effect. Joe
Shuster, the founder and Chairman of Teltech, will be joining the
Board of Sopheon as a non-executive director at the same time.
These two North American appointments reflect the importance
placed upon the development of our business in the United States.
Our longer-term objective is to have a balanced group of non-
executives from both sides of the Atlantic.
Jack Johnson, the Chief Operating Officer and Vice President of
Teltech, is becoming CEO and President of Sopheon Corporation in
the United States; Craig Robinson, currently Sales Director of
Sopheon in Europe, is becoming the COO and Vice President of
European operations. Huub Rutten, Director of Research and
Design, and James Macfarlane, Business Development Director, will
be stepping off the Board to allow them to focus on their
expanded roles within the executive management team.
On the completion of the merger with Teltech, Richard Maddocks,
COO and Managing Director of Sopheon, and Hans Coltof, non-
executive Director, will stand down from the board. I would like
to thank both Hans and Richard for their significant
contributions during the early phase of Sopheon's development.
Sopheon's Board of Directors will therefore become :
Barry Mence Chairman
Andy Michuda Chief Executive Officer
Arif Karimjee Chief Financial Officer and Secretary
Mike Brooke (UK) non-executive director
Stuart Silcock (UK) non-executive director
Joe Shuster (USA) non-executive director
Outlook for 2000 and beyond
During the past 10 months we have brought together three
companies and raised the working capital with which we will
develop Sopheon's business in North America, the UK and
continental Europe. The enlarged Group, with its combined
offering of software, expertise and content, has much to prove
before it can claim that it has really arrived. We aim to
complete rapidly the integration of our technologies in the
coming months, at the same time as marshalling our enlarged sales
force with the objective of achieving a substantial volume of
sales during 2001. Profitability will then become the major
objective and we expect to make progress towards that goal during
2001.
As these volume sales begin to take shape during 2001 we plan to
make further acquisitions, as previously indicated, in additional
geographic locations. To further accelerate our progress we are
also looking to strategically align Sopheon with one or two
substantial organisations. These developments should further
contribute to the development of Sopheon as we drive toward our
objective of becoming a truly global business in the rapidly
developing Knowledge Management Industry.
We are currently reviewing our overall listing strategy and it
remains one of our key objectives to have a listing in North
America in due course. This would enable us to better service our
newly acquired North American shareholder base as well as giving
Sopheon a higher profile in the US, assisting us in accelerating
the development of the business.
The year 2000 has seen extreme volatility in financial markets -
especially within the TMT sector; Sopheon's shares have not
escaped this volatility. As a relatively young company we are
well aware of the concern and frustration this can give to
shareholders and I would like to thank everybody for their
support and patience during these times. It remains our number
one objective to reward all of our shareholders in the longer
term.
Your Board recognises the challenges that lie ahead for Sopheon
and firmly believes that the Group is well positioned and
equipped to meet them. We view the future with confidence and
optimism.
Barry Mence 18 September 2000
Executive Chairman
Cautionary Statement under U.S. Securities Laws.
Sopheon has made forward-looking statements in this press
release, including statements about the benefits of the
acquisition of Teltech; financial results; product development
plans; the potential benefits of business relationships with
third parties and business strategies. These statements about
future events are subject to risks and uncertainties that could
cause Sopheon's actual results to differ materially from those
that might be inferred from the forward-looking statements.
Sopheon can make no assurance that any forward-looking statements
will prove correct. A description of the risk factors that could
negatively affect Sopheon's future performance is contained in
Sopheon's Form F - 4 Registration Statement on file with the U.S.
Securities and Exchange Commission.
GROUP PROFIT AND LOSS ACCOUNT FOR THE 6 MONTHS TO 30 JUNE 2000
(UNAUDITED)
Restated
6 months 6 months
to 30 to 30
June June
2000 1999
£'000 £'000
Turnover 3,098 506
Cost of sales (1,922) (390)
------ -----
Gross profit 1,176 116
Administrative, research and development,
and distribution expenses (3,583) (709)
Amortisation of goodwill (1,414) (8)
------- -----
Operating loss (3,821) (601)
Bank interest receivable 513 12
Interest payable and similar charges (79) (68)
------ -----
Loss on ordinary activities before and after
taxation (3,387) (657)
====== =====
Loss per share-basic and diluted (9.9p) (3.4p)
Loss on an EBITDA basis (2,407) (649)
====== =====
STATEMENT OF RECOGNISED GAINS AND LOSSES (UNAUDITED)
Restated
6 months 6 months
to 30 to 30
June June
2000 1999
£'000 £'000
Loss for the financial year (3,387) (657)
Exchange difference on retranslation of net
assets of subsidiary undertakings 59 (80)
------ -----
Total recognised gains and losses relating (3,328) (737)
to the period
Prior year adjustment - (373)
------ -----
Total recognised gains and losses recognised
since annual report (3,328) (1,110)
====== ======
GROUP BALANCE SHEET AS AT 30 JUNE 2000
(UNAUDITED)
Restated
As at As at
30 June 30 June
2000 1999
£'000 £'000
Fixed assets
Goodwill 6,968 158
Tangible assets 598 167
------ ----
7,566 325
Current assets
Debtors 3,306 314
Cash and short term deposits 23,296 319
----- ----
26,602 633
Creditors: amounts falling due within one
year 3,810 484
------ ---
Net current assets/(liabilities) 22,792 149
------ ---
Total assets less current liabilities 30,358 474
Creditors: amounts falling due after more
than one year 40 1,571
----- -----
30,318 (1,097)
====== =======
Capital and reserves
Called up share capital 4,648 3,846
Shares to be issued 10 15
Share premium account 37,969 2,643
Profit and loss account (12,309) (7,602)
------ ------
Shareholders' funds (all equity interests) 30,318 (1,098)
====== ======
STATEMENT OF CASH FLOWS FOR THE 6 MONTHS TO 30 JUNE 2000
(UNAUDITED)
Restated
6 months 6 months
to 30 to 30
June June
2000 1999
£'000 £'000
Net cash outflow from operating activities (4,197) (770)
Return on investment and servicing of
finance 433 (55)
Capital expenditure and financial investment (837) (10)
Management of liquid resources (15,500) 402
Financing 20,146 481
------- -----
Increase/(decrease) in cash excluding short
term deposits 45 48
Increase/(decrease) in short term deposits 15,500 (402)
------- -----
Increase/(decrease) in cash including short
term deposits 15,545 (354)
======= ======
NOTES
Earnings per share
The calculation of basic loss per ordinary share is based on a
loss of £3,387,000 (1998 £657,000 as adjusted), and 34,097,689
(1998: 19,081,962) ordinary shares, being the weighted average
number of ordinary shares in issue during the period. The effect
of all potential ordinary shares is anti-dilutive in 1998 and
1999.
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 in 1999 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.
Acquisition of Teltech
Included within debtors is £1,264,000 due from Teltech Resource
Network Corporation (Teltech), a US based company which the group
is in the process of acquiring. Included within revenues is
approximately £218,000 relating to pre-acquisition sales to
Teltech. The cash consideration and costs arising on completion
of this acquisition are anticipated to be of the order of
£10,000,000.
Convertible Loan Stock
Included within creditors due within one year is £1,571,000 of
Convertible Loan Stock held by three of the company's
shareholders. This loan stock was converted into ordinary shares
on 31 July 2000.
Interim Report
The Interim Report will be posted to shareholders shortly and
will also be available from Sopheon's registered office at
Stirling House, Surrey Research Park, Guildford, Surrey GU2 5RF.
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