QPR SOFTWARE PLC STOCK EXCHANGE BULLETIN 27 July 2005, AT 09.00 AM QPR SOFTWARE PLC INTERIM REPORT JANUARY 1 ? JUNE 30, 2005 1-6/2005 1-6/2004 Net Sales, MEUR 3.157 2.815 +12.2% Operating Result, MEUR 0.264 0.338 -21.9% -percent of Net Sales 8.4% 12.0% Net Result, MEUR 0.314 0.236 +32.8% -percent of Net Sales 9.9% 8.4% Liquid Assets, MEUR 1.432 0.363 +294.5% -Gearing -35.9% 114.1% Earning per Share, EUR 0.03 0.02 +26.4% Earning per Share, diluted, EUR 0.03 0.02 +30.5% Equity per Share, EUR 0.14 0.09 +57.6% Equity Ratio 45.8% 30.0% Return on Investment 32.0% 28.3% QPR Software Plc transferred to reporting according to International Financial Reporting Standards (IFRS) as of January 1, 2005. This interim report, including the comparison figures, is according to IFRS standards. The interim report is unaudited. NET SALES AND FINANCIAL PERFORMANCE 1-6/2005 The Group?s net sales and net result developed positively. The net sales of the Group for the review period increased 12.2% compared to the corresponding period of the previous year and was MEUR 3.157 (MEUR 2.815). The operating profit of the Group for the review period was MEUR 0.264 (MEUR 0.338), which was 8.4% (12.0%) of turnover. The net result of the Group increased 32.8% compared to the corresponding period of the previous year and was MEUR 0.314 (MEUR 0.236), which was 9.9% (8.4%) of turnover. The earning per share was EUR 0.03. The Group?s net sales is accrued in its entirety from the software business, divided as follows during the review period, MEUR: 1-6/2005 1-6/2004 Software licenses 1.520 1.631 -6.8% Maintenance services 1.015 0.793 +27.9% Professional services 0.623 0.390 +59.5% Net sales in total 3.157 2.815 +12.2% The classification of the previously separately reported Initial partner payments has been adjusted to correspond to the actual content, training services, which are reported as part of the Professional services. Initial partner payments were in total of MEUR 0.009 in the review period and in total of MEUR 0.049 in the fiscal year 2004. The share of international operations of the Group?s turnover for the review period was 50% (71%). During the review period 64% (82%) of the license sales, MEUR 0.971 accumulated via the global distribution channel, and decreased 27.7% compared to the corresponding period of the previous year. The license sales in the domestic market for the review period was MEUR 0.549, and increased 90.8% compared to the corresponding period of the previous year. NET SALES AND FINANCIAL PERFORMANCE 4-6/2005 The net sales for the Group's second quarter, MEUR 1.607 increased 12.9% compared to the corresponding quarter of the previous year (MEUR 1.423) and increased 3.6% compared to the previous quarter (MEUR 1.551). The presentation of the share of the results in associated companies has been revised in accordance with IAS 1. Consequently, the now presented revenue for the comparative period differs slightly from what was presented before. The operating result for the Group's second quarter was MEUR 0.128 (MEUR 0.203), which was 8.0% (14.2%) of turnover. The net result of the Group for the second quarter was MEUR 0.157 (MEUR 0.124), which was 9.8% (8.7%) of turnover. BUSINESS OPERATIONS 1-6/2005 The positive development of the software business during the review period was based on the increase of sales by domestic direct sales and further by the domestic professional services. The large domestic customer projects progressed as scheduled or even faster than anticipated, and key customer relations were developed successfully. In comparison, the large international customer projects progressed slower than anticipated and system implementations were deferred. Investments targeted at the growth of the international sales were increased towards the end of the review period. The personnel in the international sales increased by 5 during the review period totalling 13 in the end of the review period. The international distribution network was expanded and partly renewed targeting at sales growth. The increased investments were targeted on the market segments, where company has assessed to have a lead against its main competitors, and where company aims at securing its market position by rapid growth. Investments targeted at the growth of international sales are anticipated to show return on investments already towards the end of the fiscal year. Investments will be increased also during the latter half of the fiscal year targeting to support the sales growth during the next fiscal year. International Operations and Distribution Network During the review period, in total of 47 international resellers delivered QPR software in 36 countries. During the review period, in total of 18 new reseller agreements were signed, especially in the Latin America, in the new EU countries, and in the Middle East. Geographically strongest regions were South Africa, the United States, the United Kingdom, Switzerland and Sweden. Banking, finance and insurance continued to be the strong industry segment with such distinguished customers as F?reningsSparbanken in Sweden, Banco Ita? in Brazil, Dubai Islamic Bank and Commercial Bank of Dubai in the United Arab Emirates, The National Company of Co-operative Insurance (NCCI) in Saudi Arabia, the Central Bank of Indonesia, Vero Insurance in New Zealand, and Stanbic Africa and Metropolitan Health Group in South Africa. Domestic Operations Business in Finland developed positively supported by the strong growth in professional services. An increasing share of the deliveries were focused on delivering larger complete management solutions, and the supporting professional services and project agreements. Deliveries were largely based on the QPR?s industry specific solutions. Telecommunications, Local Government, Manufacturing, Construction, Wholesale and Logistics as well as Food continued to be the strong industry segments with such distinguished customers as Nokia, City of Kerava, Metso, Skanska, SRV Westerlund, Tradeka and Valio. PRODUCT DEVELOPMENT The Group's R&D costs for the review period totalled MEUR 0.641 (MEUR 0.535), that is, 20.3% (19.0%) of turnover, and increased 19.9% compared to the previous year. No overhead costs have been included in the R&D costs, neither have any R&D costs been capitalized in the balance sheet, as the R&D costs for the review period are regarded not to fulfil the particular criteria for R&D costs stated in the IAS 38. Product creation is consistently focused on development of software products for Performance Management, Process Management and Operational Risk Management. The core know-how of product development is on-goingly centralised in the own organisation, and long-term co-operation is continued with subcontractors. All software products developed by QPR are best-of-breed, ready-to- run applications, which are largely adaptable to the particular management methods of the customer, are adaptable also by the customers themselves, are delivered in multiple language versions, and integrate seamlessly to the customer?s other information systems. It is the goal of QPR to expand the current product offering by developing new management software applications that fit into the QPR product portfolio. The new product version QPR 7.4 was released in June 2005. QPR 7.4 is a management software solution that combines strategic performance management (QPR ScoreCard) and business process management (QPR ProcessGuide) into one complete collaborative management solution (QPR Collaborative Management). With the help of QPR?s software solutions, organisations support their people's commitment to organisation's objectives and processes. QPR's software have been translated into more than 20 different languages. PERSONNEL At the end of the review period the Group employed a total of 49 people (39). The number of employees increased in total by 9 during the review period. For incentive and commitment purposes, the Group has personnel bonus scheme covering the whole personnel and personnel stock option plan. The subscription period for stock options 2003/IIIA began in 30 September 2004 and is scaled to begin for stock options 2003/IIIB in 30 September 2005. FINANCING, INVESTMENT AND CHANGES IN EQUITY At the end of the review period, the Group?s equity was MEUR 1.712 (MEUR 1.065), and the Group?s equity ratio was 45.8% (30.0%) correspondingly. The Group?s investments in fixed assets during the review period were MEUR 0.064 (MEUR -0.023), i.e. 2.0% (-0.8%) of turnover. During the review period, the Group?s liquidity has further improved. At the end of the review period, liquid cash funds amounted to MEUR 1.432 (MEUR 0.363). Long-term liabilities decreased in total of MEUR 0.511 during the review period. Current assets less MEUR 0.603 long-term receivables amounted to MEUR 3.938, short-term liabilities amounted to MEUR 2.330 and deferred revenue amounted to MEUR 1.099. Thus the Quick Ratio key figure at the end of the review period was 3.20 (2.49). The liquidity situation is estimated to remain good during the next 12 months. The liquidity situation is further supported during the next 12 months by the instalments from the sale of Business Games operation (estimated MEUR 0.3) and instalments from the sale of holding in partly owned company (estimated MEUR 0.1). During the review period, new shares were subscribed with stock options in May 2005. This served to increase share capital by MEUR 0.003 and the Company's equity by MEUR 0.008. DECISIONS MADE BY THE ANNUAL SHAREHOLDERS? MEETING The Annual Shareholders? Meeting held on March 15, 2005 adopted QPR Software Plc?s financial statements and the consolidated statements and granted the members of the Board of Directors and the Managing Director discharge from liability for the financial year ended December 31, 2004. The Annual Shareholders? Meeting resolved that no dividend shall be distributed for the fiscal year 2004. The Annual Shareholders? Meeting resolved that the Board of Directors consists of five (5) ordinary members. The Annual Meeting re-elected Vesa-Pekka Leskinen, Teemu Malmi, Jane Moilanen, Asko Piekkola and Timo Tirkkonen to the Board of Directors. The Board of Directors elected Timo Tirkkonen to continue as Chairman of the Board. Ernst & Young Oy, Authorised Public Accountants, continues as QPR Software Plc?s auditors. The Annual Shareholders? Meeting resolved on approving the proposals of the Board of Directors on issuing stock options and authorisation of Board of Directors to decide on the increase of share capital. The proposals of the Board of Directors are available in the QPR Software Plc?s stock exchange bulletin released on 23 February 2005. OTHER EVENTS DURING THE REVIEW PERIOD The Board of Directors of QPR Software Plc resolved on 26 April 2005 that the hitherto undistributed stock options issued on 1 October 2003 be partly distributed to the personnel of the QPR Software Group. The total number of stock options issued to the personnel of the QPR Software Group was 7,500 stock options 2003/IIIA and 22,500 stock options 2003/IIIB. The Board of Directors resolved as well that of the hitherto undistributed stock options 2003/II, issued by the Extraordinary General Meeting of Shareholders on 22 July 2003, be distributed a total of 11,917 stock options to the CEO of the Company. The 30,000 shares subscribed by 27 May 2005 under the QPR Software Plc Stock Option Plan 2003/III with the hitherto unconverted options entered public trading on the Helsinki Stock Exchange New Market list together with old shares as of 10 June 2005. COMPANY OWNERSHIP AND TRADING IN COMPANY SHARES At the end of the review period the Company had a total of 708 shareholders. Company announced during the review period the following notices of holding changes in accordance with Chapter 2, Section 10 of the Securities Market Act: 12 May 2005, the holding of Antti Kosunen (Helsinki) in QPR Software Plc decreased from 21.12% to 0.00% of QPR Software Plc's share capital and votes. 12 May 2005, the holding of Ulkomarkkinat Oy (Company ID 0115507- 1) in QPR Software Plc increased above one-tenth (1/10) to 13.08% of QPR Software Plc's share capital and votes. 12 May 2005, the holding of Alesco SA (RCS Luxemburg B64824) in QPR Software Plc increased above one-tenth (1/10) to 10.78% of QPR Software Plc's share capital and votes. In the review period trading in company shares amounted to MEUR 2.539, i.e. an average of EUR 21,158 per trading day. Trading in shares totaled 4,488,934 shares, giving an average of 37,408 shares per trading day. Turnover in shares corresponds to 37.1% of the total shares and the average price was EUR 0.57 per share. The market value of the shares at the end of the review period was EUR 0.59 per share, totaling MEUR 7.135. The number of shares issued by QPR Software Plc at the end of the fiscal period and at the time of review was 12,092,606. In addition to this the Company has issued stock option rights to Board members, management and other personnel, which entitle the holders to further subscribe 415,667 new shares with the hitherto unconverted options. Thereof, the subscription period for a total of 209,417 options began in 30 September 2004, and will begin for a total of 206,250 options in 30 September 2005. In addition, stock option rights are also in the possession of the subsidiary to be given to present and future employees and management, which would entitle holders to subscribe a maximum of 321,281 shares. On the basis of the authorization given at the annual general meeting of 15 March 2005 the Board of Directors could further issue securities, which would increase the number of company shares in circulation at maximum by 2,412,518 shares. This authorization is in force until 15 March 2006. CORPORATE GOVERNANCE QPR Software Plc complies with the Helsinki Exchanges' Guidelines for Insiders entered into force on 1 March 2000 and the Recommendation on Corporate Governance entered into force on 1 July 2004. The Company's Corporate Governance Statement is available in the Investor sector of the Company's website. ADOPTION OF IFRS, CALCULATORY TAX GAIN The date of transition to IFRS for QPR Software Plc is January 1, 2004. The major effects of the adoption of IFRS on QPR Software Plc?s financial information is available in the QPR Software Plc?s stock exchange bulletin released on 25 February 2005. QPR Software Plc will prepare its first IFRS financial statements for the fiscal year ending December 31, 2005. This interim report released on July 27, 2005, for the review period ending June 30, 2005, including the comparison figures, is according to IFRS. The calculatory tax gain and output based on the mother company's losses prior to January 1, 2004, for which, in accordance with generally accepted accounting principles considering precaution, a calculatory tax gain and output of 540,000 euro, was entered in the mother company's and the Groups annual books in 2003. The amount entered for calculatory tax gain was not affected by the transition to IFRS. The calculatory tax gain has decreased during January through June 2005 reflecting the accumulated taxable income during that period. In the Group's balance sheet as of 30 June 2005, the remaining calculatory tax gain is 296,412 euro. FUTURE PROSPECTS It is the conception of the Board of Directors that the estimates of Company?s turnover and profit given for the whole of 2005 needs not to be changed. The Board of Directors estimated on 28 January 2005 that the organic growth in the net sales of the QPR Group will for 2005 be on an annual level around 20-30%, and based on that the operating profit percentage will be approximately 15%. In addition, the Company further intends to follow the developments in the re-structuring of software industry, and aims to actively participate in it. COMPANY?S FINANCIAL INFORMATION IN 2005 The subsequent Interim Report of QPR Software Plc will be published: Interim Report 1-9/05 Wednesday, October 26, 2005 GROUP INCOME STATEMENT 1-6/05 1-6/04 1-12/04 (MEUR) change NET SALES 3.157 2.815 12% 5.446 Other operating income 0.016 0.019 -15% 0.085 Expenses 2.804 2.344 20% 4.398 Depreciation 0.106 0.152 -31% 0.251 OPERATING PROFIT/LOSS 0.264 0.338 -22% 0.882 Net financial income and expenses 0.138 -0.002 7512% -0.142 Share of the results in associated companies 0.000 -0.026 -100% -0.046 PROFIT BEFORE TAXES 0.402 0.310 30% 0.694 Taxes -0.088 -0.074 19% -0.224 NET PROFIT/LOSS 0.314 0.236 33% 0.470 Earnings per share (EUR) 0.026 0.021 26% 0.040 Earnings per share, diluted (EUR) 0.026 0.020 31% 0.039 6/05 6/04 12/04 GROUP BALANCE SHEET (MEUR) ASSETS FIXED ASSETS AND OTHER NON-CURRENT ASSETS 0.297 0.815 -64% 0.339 Intangible assets 0.160 0.254 -37% 0.207 Tangible assets 0.132 0.159 -17% 0.127 Investments in associated companies 0.000 0.397 -100% 0.000 Other investments 0.005 0.005 0% 0.005 CURRENT ASSETS 4.541 3.615 26% 4.453 Deferred tax gain 0.296 0.474 -37% 0.362 Long-term receivables 0.307 0.548 -44% 0.509 Short-term receivables 2.506 2.230 12% 2.815 Cash and cash equivalents 1.432 0.363 294% 0.767 TOTAL ASSETS 4.838 4.429 9% 4.792 SHAREHOLDERS' EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY 1.712 1.065 61% 1.459 Share capital 1.330 1.304 2% 1.327 Other shareholders' equity 0.382 -0.239 260% 0.132 LIABILITIES 3.126 3.365 -7% 3.333 Subordinated loans 0.486 0.486 0% 0.486 Other long-term liabilities 0.310 0.784 -60% 0.821 Short-term liabilities 2.330 2.095 11% 2.026 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 4.838 4.429 9% 4.792 Shareholders' equity per share (Euro) 0.14 0.09 58% 0.12 Equity ratio 45.8% 30.0% 36.7% ROI 32.0% 28.3% 31.4% R&D expenditure (MEUR) 0.641 0.535 20% 1.095 Gross-investments in non-current assets (MEUR) 0.064 -0.023 -381% 0.024 Average number of personnel 45 38 39 Adjusted average number of 12,066,087 11,491,741 11,815,860 shares in review period Number of shares at the 12,092,606 11,851,356 12,062,606 end of review period GROUP STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Share Other Translation Retained (kEUR) capital funds differences earnings Total SHAREHOLDERS' EQUITY 1 JANUARY 2004 1,257 3,163 146 -3,901 664 Issuance of new shares 47 47 Share premium 132 132 Covering retained losses with share premium fund -3,132 3,132 0 Share-related compensation 16 16 Translation differences -31 -31 Profit for the period 236 236 CHANGE IN SHAREHOLDERS' EQUITY 47 -2,985 -31 3,369 400 SHAREHOLDERS' EQUITY 30 JUNE 2004 1,304 178 115 -532 1,065 Issuance of new shares 23 23 Share premium 40 40 Share-related compensation 16 16 Translation differences 82 82 Profit for the period 234 234 CHANGE IN SHAREHOLDERS' EQUITY 23 56 82 234 395 SHAREHOLDERS' EQUITY 31 DECEMBER 2004 1,327 234 197 -298 1,459 Issuance of new shares 3 3 Share premium 4 4 Share-related compensation 16 16 Translation differences -85 -85 Profit for the period 315 315 CHANGE IN SHAREHOLDERS' EQUITY 3 20 -85 315 253 SHAREHOLDERS' EQUITY 30 JUNE 2005 1,330 254 112 16 1,712 Consolidated cash-flow for the review period, for 2004 and for the corresponding period in the previous year (MEUR) 1-6/05 1-6/04 1-12/04 CASH-FLOW FROM OPERATING ACTIVITIES EBIT 0.264 0.338 0.882 Depreciation 0.106 0.152 0.251 Other income and expenses that include no payment 0.241 -0.019 0.509 IFRS-adjustments, that include no payment 0.016 -0.010 -0.014 Items included in other cash-flow in EBIT 0.000 0.071 0.105 Other adjustments 0.000 0.003 0.005 Net financial income 0.058 -0.002 -0.142 Taxes -0.022 -0.007 -0.031 Net change in interest- free receivables 0.148 -0.238 -0.768 Net change in interest- free loans 0.530 -0.012 -0.022 Net change in long-term receivables and debts 0.201 -0.008 -0.015 Net cash-flow from operating activities 1.541 0.268 0.760 CASH-FLOW FROM INVESTING ACTIVITIES capital expenditure -0.065 0.000 -0.024 Proceeds from sale of tangible/intangible assets 0.000 -0.003 0.000 Cash-flow from investing activities -0.065 -0.003 -0.024 CASH-FLOW FROM FINANCING ACTIVITIES Repayment of long-term borrowings -0.734 -0.385 -0.563 Proceeds from issuance of new shares 0.007 0.178 0.241 IFRS-adjustments 0.000 -0.074 -0.110 Translation differences -0.084 -0.031 0.051 Cash-flow from financing activities -0.811 -0.312 -0.381 Net change in cash and cash equivalents (+) / (-) 0.665 -0.048 0.355 Cash and cash equivalents at beginning of period 0.767 0.410 0.410 Cash and cash equivalents at end of period 1.432 0.363 0.767 CONTINGENT LIABILITIES Securities for own commitments (MEUR) Motgages for loans 0.000 1.325 1.325 Rent commitments 0.036 0.034 0.032 RECONCILIATION OF PROFIT IN THE COMPARATIVE PERIOD Group Income Statement January 1-June 30, 2004 FAS IFRS- IFRS- (kEUR) 1-6/04 adjustments 1-6/04 NET SALES 2,849 -34 2,815 Other operating income 19 19 Share of the results in associated companies -60 60 0 Material and services 254 254 Personnel expenses 1,278 16 1,294 Depreciation and amortization 81 71 152 Tangible assets 31 71 102 Intangible assets 50 50 Other operating expenses 871 -74 796 Operating profit 325 13 338 Financing income and expenses -22 20 -2 Financial income 44 23 66 Financial expenses -65 -3 -68 Share of the results in associated companies 0 -26 -26 Profit before tax 303 7 310 Taxes -74 -74 Profit for the period 230 7 236 RECONCILIATION OF PROFIT IN THE COMPARATIVE PERIOD Group Income Statement April 1-June 30, 2004 FAS IFRS- IFRS- (kEUR) 4-6/04 adjustments 4-6/04 NET SALES 1,440 -17 1,423 Other operating income 0 0 Share of the results in associated companies -26 26 0 Material and services 78 78 Personnel expenses 619 8 627 Depreciation and amortization 34 39 73 Tangible assets 9 39 48 Intangible assets 25 25 Other operating expenses 483 -40 443 Operating profit 200 3 203 Financing income and expenses -28 9 -19 Financial income 13 11 24 Financial expenses -41 -2 -42 Share of the results in associated companies 0 -9 -9 Profit before tax 171 3 174 Taxes -51 -51 Profit for the period 121 3 124 RECONCILIATION OF SHAREHOLDERS' EQUITY Group balance sheet 30 June 2004 FAS IFRS- IFRS- (kEUR) 6/04 adjustments 6/04 Share capital 1,304 1,304 Share premium account 257 -125 132 Share-related compensation 0 24 24 Reserve fund 22 22 Retained earnings -662 9 -653 Profit for the period 230 7 236 Subordinated loans 486 -486 0 SHAREHOLDERS' EQUITY 1,636 1,065 Reconciliation of shareholders' equity between FAS and IFRS on January 1, 2004 has been published as a stock exchange release on February 25, 2005. In addition, the impact of adoption of IFRS on the profit for the period of 1 January 2004 through 31 December 2004 and on the shareholders' equity as of 31 December 2004 has been published in reconciliations in a stock exchange bulletin, published on 27 April 2005. The interim report is unaudited. QPR SOFTWARE PLC Board of Directors Further information: QPR SOFTWARE PLC Mr. Matti Kanninen, Managing Director tel. +358-40-545 5877 matti.kanninen@qpr.com http://www.qpr.com DISTRIBUTION: Helsinki Stock Exchange Main media Neither this press release nor any copy of it may be taken, transmitted into or distributed in the United States of America or its territories or possessions.