QPR SOFTWARE PLC STOCK EXCHANGE BULLETIN 28 January 2005, AT 09.00 AM QPR SOFTWARE PLC?S FINANCIAL STATEMENTS BULLETIN 1-12/2004 1-12/2004 1-12/2003 Net Sales, MEUR 5.555 (5.166) +7.5% Other operating income, MEUR 0.039 (1.327) Operating Profit, MEUR 0.864 (0.800) +8.0% -percent of Net Sales 15.5% (15.5%) Profit before extraordinary items, MEUR 0.684 (0.187) +265.5% - percent of Net Sales 12.3% (3.6%) Extraordinary items, MEUR 0.000 (0.540) Net Profit, MEUR 0.460 (0.709) -35.1% - percent of Net Sales 8.3% (13.7%) Liquid Assets, MEUR 0.767 (0.410) +87.0% Earning per Share, EUR 0.04 (0.02) +140.2% Equity per Share, EUR 0.13 (0.07) +87.0% Equity Ratio 37.6% (20.7%) Return on Investment 30.9% (35.4%) The net sales of the software business increased 18.0% in the fiscal period 2004 compared to the previous year and was MEUR 5.555 (MEUR 4.707). End user sales (software business less initial partner payments)was MEUR 5.506 and increased 24.0% compared to the previous year (MEUR 4.439). The development of the software business was based on the increase of sales both by domestic direct sales and via the global distribution channel, and further by the domestic professional services. The share of international operations of the Group's net sales for the fiscal period was 66% (67%). The estimate of the Board of Directors is 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 remain on the same level as in year 2004. NET SALES AND FINANCIAL PERFORMANCE 1-12/2004 The Group's net sales and operating profit developed as anticipated. The net sales of the Group for the fiscal period 2004 increased 7.5% compared to the previous year and was MEUR 5.555 (MEUR 5.166 including turnover of MEUR 0.410 from the divested business games operations). The net sales of the software business increased 18.0% during the fiscal period compared to the previous year and was MEUR 5.555 (MEUR 4.707). The operating profit of the Group for the fiscal period 2004 increased 8.0% compared to the previous year and was MEUR 0.864 (MEUR 0.800 containing a sum of MEUR 1.200, being the accrual for the selling price of the divested Business Games operations). The operating profit was 15.5% (15.5%) of turnover. The net profit of the Group was MEUR 0.460 (MEUR 0.709 containing an entry of MEUR 0.540 for deferred tax gain, and the above mentioned accrual for the selling price in total of MEUR 1.200), a decrease of 35.1% compared to the previous year. The net profit was 8.3% (13.7%) of turnover. The earning per share was EUR 0.04 (EUR 0.02). End user sales (software business less initial partner payments) was MEUR 5.506 and increased 24.0% compared to the previous year (MEUR 4.439). Out of end user sales, software license sales were MEUR 2.994, in which there was an increase of 17.3% compared to the previous year (MEUR 2.553). During the fiscal period 78% (77%) of the license sales, MEUR 2.324, accumulated via the global distribution channel, where growth amounted to 17.7% compared to the previous year (MEUR 1.974). The turnover of the Group's software business was divided as follows during the review period, MEUR: 1-12/2004 1-12/2003 Software licenses 2.994 (2.553) +17.3% Initial partner payments 0.049 (0.268) -81.9% Maintenance services 1.803 (1.474) +22.3% Professional services 0.710 (0.412) +72.2% Software business in total 5.555 (4.707) +18.0% NET SALES AND FINANCIAL PERFORMANCE 10-12/2004 The Group's net sales and operating profit for the fourth quarter developed as anticipated. The sales in the fourth quarter showed, as typical in the software business, a significant growth compared to the third quarter and the Summer season. The net sales for the Group's fourth quarter, MEUR 1.693 increased 7.8% compared to the corresponding quarter of the previous year (MEUR 1.571) and increased 67.3% compared to the previous quarter (MEUR 1.012). End user sales (net sales from software business less initial partner payments) were MEUR 1.702, showing an increase of 10.6% compared to the corresponding quarter of the previous year (MEUR 1.539) and an increase of 68.1% compared to the previous quarter (MEUR 1.012). Sales of software licenses totalled MEUR 0.924, showing a decrease of 12.7% compared to the corresponding quarter of the previous year (MEUR 1.058) and an increase of 128.1% compared to the previous quarter (MEUR 0.405). The operating profit for the Group's fourth quarter was MEUR 0.481, showing a decrease of 41.9% compared to the corresponding quarter of the previous year (MEUR 0.828 containing a sum of MEUR 0.668, being the accrual for the selling price of the divested Business Games operations) and an increase of 726.6% compared to the previous quarter (MEUR 0.058). The net result of the Group for the fourth quarter was MEUR 0.230, showing a decrease of 80.9% compared to the corresponding quarter of the previous year (MEUR 1.204 containing an entry of MEUR 0.540 for deferred tax gain, and the above mentioned accrual for the selling price in total of MEUR 0.668) and an increase of 33,358% compared to the previous quarter (MEUR 0.001). BUSINESS OPERATIONS 1-12/2004 The positive development of the software business in year 2004 was based on the increase of sales both by domestic direct sales and via the global distribution channel, and further by the domestic professional services. International Operations and Distribution Network The share of international operations of the Group's net sales for the fiscal period was 66% (67%), and 78% (77%) of the license sales accumulated via the global distribution channel. In the fiscal period 2004, in total of 58 international resellers delivered QPR software in 46 countries. Co-operation with the key resellers was intensified and sales activities were more strongly focused on the most significant key customers. Geographically strongest regions were the United Kingdom, Germany, Switzerland, Sweden, the United States, South Africa and Japan. A significant opening was an agreement to deliver QPR?s software to NEC Software in Japan. The market segments of Local Authorities and Healthcare remained strong due to the statutory requirements, among others, which is continuously creating growing demand for the measurement of performance and effectiveness, and management of service processes. Segment specific solutions were delivered to distinguished customers, such as, Derby City Council, City of Plymouth, Reading Borough Council, and Gateshead Borough Council in the United Kingdom, and H??rs Kommun in Sweden; North Staffordshire Hospitals NHS Trust, South London and Maudsley NHS Trust, Preston PCT ja Morecambe Bay PCT in the United Kingdom, Evangelische Heimstiftung in Germany, AAG in the Netherlands, Skejby Sygehus in Denmark, Pfizer Health in Sweden, Kaiser Permanente and Roche Diagnostics in the United States, and Johnson&Johnson MD&D EMEA. Significant industry segment openings were accomplished in banking, finance and insurance, in consumer goods, in transport and logistics, and in the energy sector. QPR management systems were delivered within these industry segments to such distinguished customers as Commmercial Bank of Dubai in the United Arab Emirates, National Bank of Iceland, Vero Insurance in New Zealand, Menzis and Achmea Zorg in the Netherlands; Bosch Siemens Hausger?te (BSH Profilo) in Turkey, Nike in South Africa; Budapest Airport and Mal?v Hungarian Airlines in Hungary, Swiss Post and BLS Cargo in Switzerland, Slovensk? Posta in Slovakia, NYK Line in the United States; and Comisi?n Federal de Electricidad in Mexico and Petrobras in Brazil. Among the new growing solution segments, deliveries of solution projects were started in the area of Operational Risk Management. Important openings were accomplished and Operational Risk Management solution deliveries started e.g. to the banking sector, to Finibanco in Portugal, and to the mining industry, to African Rainbow Minerals (ARM) provided by Alexander Forbes Risk Auditing Services 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. Process Management solutions were delivered to the Local Authorities, such as, City of Turku and City of Tampere. Specific solution deliveries were started to support the Public Services initiative of the Ministry of Internal Affairs, in which projects selected significant Local Governance processes are designed and developed. An important new opening was accomplished by signing an agreement with the City of Kerava to develop and deliver a complete solution for a new kind of strategic annual planning and follow-up. QPR solution deliveries continued to the Construction industry, e.g. to Skanska, and deliveries were started to Lujatalo and Honkarakenne. The emphasis of the deliveries are on performance management, in particular for Quality, Environment, Health and Safety management, and as new important opening for Operational Risk Management. In the Telecommunications industry, significant roll-outs and system expansions as well as large projects were delivered, distinguished customers being such as Nokia. In the Wholesale and Logistics segment, solution projects were delivered to e.g. Tradeka. In the Food industry, deliveries were made to e.g. Atria and Valio. PRODUCT DEVELOPMENT The Group's R&D costs for the fiscal period 2004 totalled MEUR 1.095 (MEUR 1.085), that is, 19.7% (21.0%) of turnover, and increased 0.9% 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. Product creation was consistently focused on development of software products for Performance Management, Process Management and Operational Risk Management. The core know-how of product development was on-goingly centralised in the own organisation, and long-term co-operation was 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. QPR 7.3 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 7.3, organisations support their people's commitment to organisation's objectives and processes. In accordance with the plans, the major R&D effort during the fiscal period was the development, revision and launch of the new QPR 7.2 and 7.3 product versions. QPR's software have been translated into 20 different languages. PERSONNEL At the end of the fiscal period the Group employed a total of 40 people (41), all of who are working in the software business. The average number of employees in the fiscal period was 39. For incentive and commitment purposes, the Group has personnel bonus scheme and stock option plan covering the whole personnel. 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 fiscal period, the Group's equity was MEUR 2.012 (MEUR 1.259), and the Group's equity ratio was 37.6% (20.7%) correspondingly. At the end of the fiscal period, the Group's liquid cash funds were MEUR 0.767 MEUR (0.410). The Group's investments in fixed assets during the fiscal period were MEUR 0.024 (MEUR 0.098), i.e. 0.4% (1.9%) of turnover. The equity of the parent company QPR Software Plc totalled MEUR 2.343, of which MEUR 1.327 share capital. During the fiscal period, the Group's liquidity has further improved. At the end of the fiscal period, liquid cash funds amounted to MEUR 0.767 (MEUR 0.410). Current assets less MEUR 0.794 long-term receivables amounted to MEUR 3.640, short-term liabilities amounted to MEUR 2.045 and deferred revenue amounted to MEUR 0.817. Thus the Quick Ratio key figure at the end of the fiscal period was 2.96 (1.18). The liquidity situation is estimated to improve further during the next 12 months. Factors contributing to the improvement in liquidity are improvement in the profitability of the Group's business operations, and instalments from the sale of Business Games operation (estimated MEUR 0.4) and instalments from the sale of holding in partly owned company (estimated MEUR 0.1), both during the next 12 months. During the fiscal period, new shares were subscribed with stock options in March, November and December 2004. This served to increase share capital by MEUR 0.070 in total and the Company's equity by MEUR 0.753 in total. During the fiscal period no new subordinated loans were drawn. DECISIONS MADE BY THE ANNUAL SHAREHOLDERS' MEETING The Annual Shareholders' Meeting held on March 8, 2004 adopted QPR Software Plc's financial statements and the consolidated statements and granted the members of the Board of Directors and the Managing Directors discharge from liability for the financial year ended December 31, 2003. The Annual Shareholders' Meeting resolved that no dividend shall be distributed for the fiscal year 2003. The Annual Shareholders' Meeting decided to use Company's Share Premium Fund in order to cover the retained losses of EUR 3,132,471 from the previous accounting periods. The Annual Shareholders' Meeting resolved that the Board of Directors consists of five (5) ordinary members. The Annual Meeting re-elected the following members to the Board of Directors: Timo Tirkkonen, Vesa-Pekka Leskinen, Teemu Malmi and Asko Piekkola, and elected Jane Moilanen as a new member 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, with Rauno Sipil?, Authorized Public Accountant, as the auditor with primary responsibility. The Annual Shareholders' Meeting authorised, by revoking the previous unused authorisations, the Board of Directors to decide on increase of the share capital, until March 8, 2005, through one or more new issues and/or on one or more convertible bonds and/or granting option rights in one or more instalments. The authorisation is for the maximum amount of EUR 251,300. On the basis of the authorization, the number of company shares in circulation may increase at maximum by 2,284,545 shares totalling in 14,135,901 shares. OTHER EVENTS DURING THE FISCAL PERIOD The 650,000 shares subscribed on stock option rights as part of the Stock Option Plan 2003/I and the 400,000 shares subscribed in the targeted share issue entered public trading on the Helsinki Stock Exchange New Market list together with old shares as of 14 January 2004. The share of QPR Software Plc was removed from the surveillance list by the decision of Helsinki Stock Exchange on 29 January 2004. The 425,000 shares subscribed by 10 March 2004 under the Stock Option Plan 2003/I entered public trading on the Helsinki Stock Exchange New Market list together with old shares as of 19 March 2004. The number of shares available for trading thus rose to 11,851,356. The number of shares can no more increase by stock options under the Stock Option Plan 2003/I. The 171,250 shares subscribed by 15 November 2004 and the 40.000 shares subscribed by 17 December 2004 under the Stock Option Plan 2003/II and 2003/IIIA entered public trading on the Helsinki Stock Exchange New Market list together with old shares as of 19 November 2004 and 30 December 2004 respectively. The total number of publicly traded shares therefore increased to a total of 12,062,606 shares. Company decided on 20 December 2004 to divest its holding of 32.35 percent (1,073 shares) in its Dutch partly owned company QPR CostControl BV at the sales price of 466,631 euro in total. The divestment was in line with QPR's strategy to divest its non- core assets. The divestment has no impact on QPR Group's business operations. The payment schedule of the sales price of 466,631 euro is based on the business volumes of QPR CostControl BV, and the sales price is expected to be fully paid within a period of three years. The non-significant sales profit derived from the divestment has been entered into the books in the fiscal period 2004. COMPANY OWNERSHIP AND TRADING IN COMPANY SHARES At the end of the fiscal period the Company had a total of 724 shareholders. Ownership was distributed as follows: Number of shares Owners % Number of shares % 1 - 500 231 31.91% 50,491 0.42% 501 ? 1,000 124 17.13% 108,491 0.90% 1,001 ? 5,000 212 29.28% 575,682 4.77% 5,001 ? 10,000 63 8.70% 514,362 4.26% 10,001 ? 50,000 64 8.84% 1,377,596 11.42% 50,001 ? 100,000 10 1.38% 583,522 4.84% 100,001 ? 2,726,914 20 2.76% 8,852,462 73.39% Total 724 12,062,606 Of the shareholders 22 (3.04%) were foreigners, owning 87,452 shares (0.73%). Company announced in the fiscal period the following notices of holding changes in accordance with Chapter 2, Section 10 of the Securities Market Act: 14 January 2004, the holding of Antti Kosunen (Helsinki) in QPR Software Plc decreased under one forth (1/4) and was 24.47%. 14 January 2004, the holding of Vesa-Pekka Leskinen (Helsinki) in QPR Software Plc increased above one twentieth (1/20) and was 6.23% 14 January 2004, the holding of Vesa-Pekka Leskinen and Kauppamainos Oy (company ID 0109754-5) in total in QPR Software Plc increased above one tenth (1/10) and was 11.89%. 14 January 2004, the holding of Pohjolan Rahoitus Oy (company ID 0486816-5) in QPR Software Plc increased above one twentieth (1/20) and was 5.16%. 18 March 2004, the holding of Pohjolan Rahoitus Oy (company ID 0486816-5) in QPR Software Plc decreased under one twentieth (1/20) and was 4.83%. 8 July 2004, the holding of P?ivi Marttila (Oulu) in QPR Software Plc decreased under one twentieth (1/20) and was 2.65%. In the fiscal period, trading in company shares amounted to MEUR 2.605, i.e. an average of EUR 10,216 per trading day. Trading in shares totalled 4,462,406 shares, giving an average of 17,500 shares per trading day. Turnover in shares corresponds to 37.0% of the total shares and the average price was EUR 0.58 per share. The market value of the shares at the end of the fiscal period was EUR 0.52 per share, totalling MEUR 6.273. The number of shares issued by QPR Software Plc at the end of the fiscal period and at the time of review was 12,062,606. 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 415,000 new shares with the hitherto unconverted options. Thereof, the subscription period for a total of 223,750 options began in 30 September 2004, and will begin for a total of 191,250 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 151,948 shares. On the basis of the authorization given at the annual general meeting of 8 March 2004 the Board of Directors could further issue securities, which would increase the number of company shares in circulation at maximum by 2,284,545 shares. This authorization is in force until 8 March 2005. 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 QPR Software Plc has conducted, during the fiscal period, preparations to proceed to report in accordance with the IFRS (International Financial Reporting Standards) from the beginning of fiscal period 2005. The interim reports will be published in accordance with the IFRS. Company will comply with the recommendations of the Committee of European Securities Regulators, CESR, according to which companies transiting to IFRS in 2005 should publish quantative information of the implications of the transit already in the financial statements of 2004. 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 calculatory tax gain has decreased during January through December 2004 reflecting the accumulated taxable income during that period. In the Group's balance sheet as of 31 December 2004, the remaining calculatory tax gain is 362,100 euro. FUTURE PROSPECTS The estimate of the Board of Directors is 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 remain on the same level as in year 2004. In addition, the Company 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 In 2005, QPR Software Plc will publish Annual Report and three Interim Reports as follows: Annual Report 2004 Week 8, 2005 Interim Report 1-3/05 Wednesday, April 27, 2005 Interim Report 1-6/05 Wednesday, July 27, 2005 Interim Report 1-9/05 Wednesday, October 26, 2005 GROUP INCOME STATEMENT (MEUR) 1-12/04 1-12/03 change NET SALES 5.555 5.166 8% Other operating income 0.039 1.327 -97% Share of the results in associated companies -0.108 -0.144 25% Expenses 4.475 5.338 -16% Depreciation according to plan 0.146 0.212 -31% OPERATING PROFIT/LOSS 0.864 0.800 8% Net financial income and expenses -0.179 -0.613 71% PROFIT BEFORE EXTRAORDINARY ITEMS 0.684 0.187 266% Extraordinary earnings 0.000 0.540 Extraordinary expenses 0.000 0.000 PROFIT BEFORE TAXES 0.684 0.727 -6% Taxes -0.224 -0.018 1125% Minority interest 0.000 0.000 NET PROFIT/LOSS 0.460 0.709 -35% Earnings per share (EUR) 0.04 0.02 140% GROUP BALANCE SHEET (MEUR) 12/04 12/03 ASSETS FIXED ASSETS AND OTHER NON-CURRENT ASSETS 0.306 0.852 -64% Intangible assets 0.207 0.301 -31% Tangible assets 0.095 0.123 -23% Investments in associated companies 0.000 0.424 -100% Other investments 0.005 0.005 0% CURRENT ASSETS 4.572 3.578 28% Deferred tax gain 0.362 0.540 -33% Long-term receivables 0.669 0.681 -2% Short-term receivables 2.774 1.947 42% Cash and cash equivalents 0.767 0.410 87% TOTAL ASSETS 4.878 4.430 10% SHAREHOLDERS' EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY 2.012 1.259 60% Share capital 1.327 1.257 6% Other shareholders' equity 0.199 -0.484 141% Subordinated loans 0.486 0.486 0% MINORITY INTERESTS 0.000 0.000 LIABILITIES 2.866 3.171 -10% Long-term liabilities 0.821 0.102 707% Short-term liabilities 2.045 3.069 -33% TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 4.878 4.430 10% Shareholders' equity per share (Euro) 0.13 0.07 Equity ratio 37.6% 20.7% ROI 30.9% 35.4% R&D expenditure (MEUR) 1.095 1.085 1% Gross investments in non-current assets (MEUR) 0.024 0.098 -76% Average number of personnel 39 54 Adjusted average number of shares in review period 11,815,860 10,413,753 Number of shares at the end of review period 12,062,606 11,426,356 Consolidated cash-flow for the review period and for the corresponding period in the previous year (MEUR): 1-12/04 1-12/03 CASH-FLOW FROM OPERATING ACTIVITIES EBIT 0.864 0.800 Depreciation according to plan 0.146 0.212 Other income and expenses that include no payment 0.509 0.099 Net financial income -0.179 -0.613 Incidental revenue and expense 0.000 0.540 Taxes -0.031 -0.018 Net change in interest- free receivables -0.726 1.176 Net change in interest- free loans 0.051 -1.859 Net change in long-term receivables and debts 0.017 -0.959 Net cash-flow from operating activities 0.650 -0.623 CASH-FLOW FROM INVESTING ACTIVITIES Capital expenditure -0.024 0.020 Investment in associated companies 0.000 -0.109 Purchase of investments 0.000 0.693 Proceeds from sale of tangible/intangible assets 0.000 0.000 Proceeds from repayments of loans 0.000 0.000 Cash-flow from investing activities -0.024 0.604 CASH-FLOW FROM FINANCING ACTIVITIES Proceeds from long-term borrowings 0.000 0.000 Repayment of long-term borrowings -0.563 -0.445 Net change in minority shares 0.000 0.000 Proceeds from convertible subordinated debentures 0.000 0.000 Proceeds from issuance of new shares 0.241 0.447 Dividends paid 0.000 0.000 Foreign exchange adjustments 0.051 0.156 Cash-flow from financing activities -0.270 0.158 Net change in cash and cash equivalents (+) / (-) 0.356 0.139 Cash and cash equivalents at beginning of period 0.410 0.270 Cash and cash equivalents at end of period 0.767 0.410 CONTINGENT LIABILITIES Securities for own commitments (MEUR) Mortgages for loans 1.325 1.325 The Group has no liabilities from derivatives. The financial statement 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.