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The Knowledge To Compete ®
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Sopheon's mission is to give our clients the power
to more effectively create, capture and share
knowledge – and use it to compete.
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Group Profile
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Chairman’s & Chief Executive
Officer’s Statement
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Auditor’s Report
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Market & Product Overview
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Group Profit & Loss Account
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Directors & Advisers
Group Balance Sheet
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contents
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Report on Directors’
Remuneration
Company
Balance Sheet
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Directors’ Report
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Statement of Directors’
Responsibilities
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Group Statements of
Cash Flows
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Notes to the Accounts
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GROUP PROFILE
Sopheon is an international provider
of software-based solutions that
enable organizations to access
internal and external information and
knowledge more efficiently and turn
it into competitive advantage.
Sopheon’s software applications,
which are preloaded with specialized
content and access to human
expertise, enhance critical
G
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o
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p
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r
o
f
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processes within research and
development (R&D). The group has
operating bases in the United
Kingdom, the Netherlands, Germany
and the United States.
Its clients are
R&D-intensive companies in the life
sciences, high tech and healthcare
industry sectors, and include nearly
half of the technology-driven
companies on the Fortune 500.
STATEMENT FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
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Statement from the Chairman and Chief Executive Officer
INTRODUCTION
Like the two years that preceded it, 2001 proved very eventful for Sopheon on both corporate and operational fronts.
Against a background of dramatic market change, we have continued to make solid progress in building an organisation
that combines software with content and expertise to create integrated product and service offerings. During the past
year, Sopheon focused its activities increasingly within the market represented by major corporations and their
information and process requirements for product development and R&D.
Group development in 2001 included two further acquisitions – a division of Aventis Research & Technologies in
Germany in June and Orbital Software Holdings plc in the UK in November – deepening our customer base, market
reach and our product and technical capabilities.
The process of integrating the businesses acquired over the last two years advanced rapidly in the final quarter of 2001 as
the company was reorganized into two complementary global operating divisions: Information Management (IM), which
focuses on the more traditional research services side of Sopheon’s business, including outsourcing; and Business Process
Solutions (BPS) which concentrates on Accolade and Organik sales, more details of which are set out below.We have also
retained the Healthcare applications unit in the Netherlands to focus resources on regional opportunities in that sector.
The reorganization included a sharp reduction in the cost base through elimination of duplicated costs and a significant
contraction of the workforce.
TRADING BACKGROUND
The general economic downturn affected revenues within certain existing accounts, as well as the development of new
opportunities. During the second half of the year we disclosed disruption to trading with certain IM customers and this
continued through the final quarter. As ongoing uncertainty drives companies to restructure their operations and supplier
relationships, additional pressure is expected on elements of such revenues in North America and Germany in 2002.
However, these market conditions also create opportunities for IM services, exemplified by recent outsourcing contracts
signed with GE and Alticor, and an outsourcing relationship based on implementation of a custom research portal at
Armstrong World Industries announced earlier in the year. Packaged offerings are also being developed in areas such as
intellectual property research, which have secured new sales in Germany. Our consultancy and integration teams
continued to be awarded bespoke projects, though at a reduced level, as we continued their transition to supporting
Sopheon’s own products. Accolade, Sopheon’s software solution for automating the product development process, was
introduced in the first half of 2001. Early acceptance was achieved with new and existing customers during the second
half of the year in each of the US, the UK, the Netherlands and, at the end of the year, in Germany through our Aventis
relationship.
RESULTS AND FINANCE
Sopheon’s consolidated revenues in 2001 showed a 78% increase to £14.0m (2000 : £7.8m).This included a contribution
of £2.8m from our new German subsidiary for the six months from 1 July 2001 and £0.1m from Orbital Software
Holdings plc for the six-week period from 16 November 2001. Approximately 74% of the total revenues came from the
IM division representing research analyst services, portal subscriptions and information provision; of this, some 90% was
recurring revenue or sales to existing customers. The BPS division, representing software applications and related
consultancy services, contributed 26% of revenue during the year.
Consolidated EBITDA losses increased to £11.8m (2000 : £6.7m) reflecting continued high levels of investment in product
development, sales, marketing and implementation capabilities. Also included in this total was approximately £1m of
redundancy and restructuring costs which were incurred in the final quarter of 2001. Compared with interim
information reported by the enlarged group including Sopheon GmbH and Orbital, the combined annualised fixed cost
base going into 2002 was reduced by over 25% through elimination of duplicated costs and a significant contraction in the
workforce. Despite this backdrop of cost reductions, Sopheon ended the year with an expanded product and technology
offering, broader sales and distribution and deeper product development resources.
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STATEMENT FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
In accordance with accounting standards, goodwill amortisation was accelerated during the year to reflect the changed
market conditions since the acquisitions of AppliedNet in 1999 and Teltech in 2000.This resulted in a total goodwill
amortisation charge of £21.4m during the year, comprising £12.3m of regular charges and an exceptional impairment
charge of £9.1m, leading to a loss before tax of £34.6m (2000 : £11.9m) and a loss of 76.2p per ordinary share (2000 : 33.4p).
In June, Sopheon issued £2.6m of convertible unsecured loan stock to a group of investors with £750,000 contributed by
members of the board and senior management Together with the acquisition of Sopheon’s new German subsidiary from
Aventis Research and Technologies and the acquisition of Orbital Software Holdings plc, this resulted in gross cash
resources of £13.3m at 31 December 2001 (2000 : £7.9m) before overdrafts and lines of credit drawn totalling £0.7m
(2000 : £1.1m).
BUSINESS DEVELOPMENT AND STRATEGIC REVIEW
Sopheon’s vision has always been to develop software applications integrated with specialized content and expert services
that help organisations more effectively manage specific knowledge-intensive business processes. It is Sopheon’s belief that
the lack of content – whether internal or external, documented or tacit – in software applications is responsible for a
high percentage of implementations not living up to expectations. While software is always designed to bring new
efficiencies to business processes, Sopheon solutions are distinctive – they integrate with content and human expertise
that are critical to the business applications for which the solutions are intended, enabling users to maximise the
knowledge resources at their disposal and to reduce the time needed to complete essential tasks within a process.
Our original software applications primarily served the healthcare industry, in which we have a continued presence in the
Netherlands. Our principal focus has since shifted to the R&D market. We believe that R&D organisations within
technology-driven companies have the greatest need for solutions of the kind we offer. They also represent the historic
core customer base within the IM side of our business, which is targeted at vertical industry segments such as consumer
goods, high technology, chemicals, pharmaceuticals and foods. Customers find answers to their questions by accessing
Sopheon’s teams of research analysts, network of external experts and third-party content resources through Sopheon’s
proprietary portals.
Accolade, Sopheon’s flagship software solution for product development, was introduced in the first half of the year.
While order volumes were limited in 2001, our initial customers represent an active and supportive reference base on
which to build. The beta version of Accolade 3.0, with significantly increased functionality, was released in December.
Interest in Accolade continues to develop, attracting comment from analyst firms such as Gartner, Giga and IDC, as well
as editorial coverage in industry publications, proposal requests and paid pilot commitments. These underline the market
opportunity and pipeline, but also reflect the more cautious pace of today’s purchasing behaviour. Since the start of 2002,
we have had three additional orders for Accolade, in the chemicals, paper and medical products industries.
Sopheon’s optimism for Accolade is supported by market analysis which suggests that innovation and time-to-market are
among the top priorities of today’s CEOs. Recent studies indicate that for an average firm only 59% of products succeed
upon commercialisation. Sopheon has entered into an exclusive partnership with the Product Development Institute
(PDI), creators of the Stage-Gate™ product development methodology used by 60% of technology-driven companies in
the USA (source: PDMA report 1997), to develop Sopheon’s Accolade solution. Accolade automates the Stage-Gate™
and other product development process structures, helping product development teams terminate bad product ideas
sooner, reduce costs, accelerate time to market, and improve resource allocation and decision making. The solution has
already been accepted by market-leading companies such as Vodafone; we have been able to demonstrate strong return
on investment cases for Accolade, including attractive forecasted payback periods generally of less than 12 months. In line
with our stated vision, Sopheon’s IM services can be integrated with Accolade to support and inform product
development decisions from concept to launch.
Our acquisition strategy has closely followed our business strategy. In particular, our new German operations represent a
solid footprint of information management and IT skills serving R&D-intensive corporations, with a mature revenue base
in a new geographical market, and the Orbital acquisition has secured well-respected technology and development
resources, with over 20 deployments to date. Prior to becoming part of the group in late 2001, Orbital Software
undertook a review of its development strategy with the assistance of the Chasm Group, a business-strategy consultancy
specializing in technology markets. This review confirmed that Orbital should direct its commercial focus toward a
specific business problem, identifying R&D as the area most in need of the kind of solutions the combined group now
offers.These findings further validated Sopheon’s focus on the R&D and product development sector and the strategic
merits of the Orbital transaction. Since the acquisition of Orbital, orders for Organik have continued to come through,
including the first Organik sale into an existing Sopheon client, a leader in the pharmaceutical industry, in December.
In mid-2001, we announced the launch of Sopheon’s Via (Valued industry alliance) Program, an initiative to link the
company to technology-solution consultants, implementers and resellers throughout the world. It focuses on the
marketing and implementation of our software applications. Sopheon has signed and announced agreements with an
international mix of global and local providers of business process solutions and services. Our new partners typically
bring skills, experience and a customer base in product development, content delivery or business process improvement
and are therefore well suited to Sopheon’s Via Program objectives.
Towards the end of the first quarter of 2002, Sopheon’s direct sales organisation was working with 192 prospects for
our software products. Supporting the promise of a stronger mix of high-margin software revenues, Sopheon’s integration
and consultancy teams have continued to reduce involvement with third-party products and bespoke assignments, and are
focusing on being ready to support Accolade and Organik sales and projects. Nevertheless we continue to secure high
profile one-off assignments such as the Oxford English Dictionary CD-ROM development announced in January 2002.
STATEMENT FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
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PRODUCTS AND IPR
Accolade 3.0 was released in December 2001 with a range of additional features based on findings from a stringent
market-verification process involving research on user requirements among more than 60 current and prospective
Accolade clients. Features of the new release include two-way integration with Microsoft Project, integrated resource
planning tools, improved portfolio management reporting and a range of additional collaboration features such as
document sharing and version control, virtual meetings, threaded discussions and secure access for external partners.
We were delighted to be awarded a European patent in connection with the software architecture and methodology that
lie at the core of Sopheon’s proprietary business process applications.The technology is already built into applications
being used by teaching hospitals in the Netherlands to pilot conversion of paper-based medical protocols to electronic
documentation.
In addition, our technology portfolio has been significantly enhanced by Orbital’s patented profiling technology, around
which its Organik portal product was built. Organik was recently selected by the Software & Information Industry
Association (SIIA) as a finalist for the 2002 Codie Award for "best Internet-based communication/collaboration product,"
validating the expertise-sharing platform as an industry-leading software solution for leveraging an organization's
intellectual capital within knowledge-intensive business processes. Organik 3.5 has just been released with significant
benefits for customer integration and compatibility needs.
Development work is underway to integrate our patented architecture and methodology and Organik feature
functionality into the Accolade product development system, applying it to the process of creating, publishing and re-using
content from knowledge bases and communities of interest built up by an organisation during the product development
life cycle.
to enhance linkage to external content and analysis. Our expectation is that this "knowledge-centric" version of
Accolade, will be released around the middle of this year.
In addition, we are implementing tighter integration of our award-winning IM research portal within the system
Our development teams are now based in two key centres, being Edinburgh for the former Orbital unit and Denver for
the existing Sopheon unit.These two centres work in close cooperation with a single product calendar, under a single
management structure and with the same high quality standards, which we firmly believe deliver world-class, enterprise
strength software.
BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT TEAM
Last year we divided our group management structure into a Sopheon plc Board with at least half its directors being
non-executive, and an executive management board responsible for operations.
At the completion of the acquisition of Orbital we were pleased to welcome Andrew Davis, one of Orbital’s former
non-executive board members, to the Sopheon plc Board, taking the total number of non-executives to four compared
with three executive directors.The main focus of Mr. Davis’ transitional role is to support integration of the Orbital
people, products and infrastructure. It is planned to further strengthen our board during 2002.
Since the reorganisation, the executive management board has reduced in size. Andy Michuda, our CEO, has taken
day-to-day responsibility for driving our BPS division through to meeting the challenging business objectives we have set
for 2002. In addition to the executive directors, the management board comprises Jack Johnson (president of the IM
business), Chris Hawver (chief marketing officer), Huub Rutten (leader of our Healthcare unit) and Paul Heller (chief
technology officer).
OUTLOOK
2001 was another year of considerable progress in a very difficult market.The two acquisitions completed during the year
have brought increased commercial reach, complementary intellectual property and a strengthened balance sheet. We
have been disappointed with the speed of conversion of our sales pipeline, but in spite of econonic conditions, we remain
convinced that our Accolade and Organik products, and our outsourcing propositions for research and information
services, can become solutions of choice within the R&D organisations of major corporations.
We are determined to focus on, invest in and implement our business model, which we believe will offer persuasive
returns on investment and enhanced competitive advantage to our customers.This determination is coupled with a drive
to increase significantly the proportion of group revenues derived from BPS during 2002. Our cash resources going into
2002 give us a foundation with which to implement our business plan, which has the objective of becoming cashflow
generative going into 2003. In conjunction with setting this challenging target, we continue to maintain a tight grip on
costs.
We believe that Sopheon is an integrated and focused business well positioned to capitalise on its strengths going
forward.With some early 2002 wins under our belt, all efforts are now being concentrated on revenue growth and
operational excellence to build towards the stated goal of being a profitable and leading provider of software and services
to major corporations within the R&D sector.
Barry Mence
Executive Chairman
3 April 2002
Andy Michuda
Chief Executive Officer
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MARKET AND PRODUCT OVERVIEW
Market and Product Overview
The need for precisely relevant decision-making and problem-solving support is central to the successful execution of
today’s business processes. As the quantity of internal and external information and knowledge grows, the ability to
quickly organize it, access it, gain insight from it and apply it has become an increasingly critical necessity. This
requirement, in turn, is driving more and more demand for high-performance tools and solutions that effectively enable
such gathering and use.
Sopheon’s product and services are uniquely capable of facilitating information and knowledge access and application.
The primary reason is that they integrate technology and human expertise. People can provide answers and context that
document-centric software offerings simply cannot. Sopheon’s solutions provide cost-effective access to both
documented information and human knowledge sources within one application environment, a standard by which future
software-based business process applications are likely to be measured.
The utility of Sopheon’s products and services is further enhanced by their tight integration with workflow inside critical
business processes. From pivotal research and development to product creation and commercialisation, from assessment
of business opportunities to management of intellectual property and optimisation of patient care, organisations depend
upon Sopheon’s solutions to cope with their greatest challenges.
Today, the power and accessibility of Sopheon technology, information management services and expertise are redefining
the capacity of technical professionals to access and apply needed information and know-how. This is true whether such
information resides in the mind of a nearby colleague, or that of a world-class technical authority on the other side of the
globe; whether it’s to be found in the knowledgebase of another operating unit within the same company, or the
document database of a far-off technical publisher. Our solutions empower individuals.
In turn, entire teams and
organisations are empowered, making them more innovative and productive. Sopheon’s capabilities are helping
organisations in high-tech manufacturing, life sciences and healthcare – by enabling them to achieve specific business
objectives, and important bottom-line results.
"ADL's interest in teaming with Sopheon is based on our judgment that their success in blending technology, content and human
expertise has resulted in products that are exceptional in their ability to strengthen business processes, cut costs and improve the
return on investments in intellectual capital."
Robert Shelton,Vice President, Arthur D. Little
Our History
Sopheon began in 1993 as Netherlands-based PolyDoc. Building on unique competencies in linguistics and language
management, the company created software applications that allowed organizations to capture, organize and access
knowledge through structured authoring tools, terminology management and thesauri. Use of this technology was
focused on specific processes such as hospital protocol management and the sharing of quality standards.
In November of 1999, PolyDoc added to its knowledge harvesting and content dissemination competencies by acquiring
AppliedNet, a leading UK supplier of knowledge management solutions and products with particular skills in search and
portal technologies. Besides extending the intellectual property of the group, this acquisition added strength in
implementation services and significantly expanded PolyDoc's market presence in the UK. Coincidental with its
acquisition of AppliedNet, PolyDoc changed its name to Sopheon.
MARKET AND PRODUCT OVERVIEW
9
With innovative, commercially promising software tools in place, Sopheon next looked for an opportunity to integrate
content into its solutions and to gain a foothold in the US market.
In September of 2000, Sopheon completed the
acquisition of Teltech Resource Network Corporation, a leading US knowledge management and research services
organization. With a 16-year history,Teltech immediately gave Sopheon a diversified, blue-chip US client base.
As a part of the strategy for globalizing its research services offering, in July of 2001 Sopheon acquired the Technology
and Information Services division ("AIT") of Aventis Research & Technologies, Frankfurt, Germany. Originally formed as
the Scientific Information Department of Hoechst A.G. - Central Research, AIT was converted to profit-center status in
1998 when it extended its service reach to include a growing number of customers outside the Hoechst (now Aventis)
group. The acquisition gave Sopheon a substantial presence and customer base in Germany and in the life sciences
market, including a relationship with one of the world's leading pharmaceutical companies.
Consistent with its focus on offering solutions that integrate technology with human expertise, in November of 2001
Sopheon acquired UK-based Orbital Software, a leading provider of knowledge sharing and collaboration solutions. The
acquisition expanded Sopheon's ability to enable access to both documented information and human expertise.
Investing in Solutions to Support Knowledge-Intensive Business Processes
One widely accepted maxim in today’s rapidly evolving knowledge-based economy is that business success depends upon
speed and precision in identifying and responding to market needs.
In 2001, Sopheon moved to sharpen the focus and
increase the efficiency and response-time of its solutions development, marketing and sales efforts by dividing its
organisation into two global operating divisions: Business Process Solutions (BPS) and Information Management (IM).
As an aspect of this reorganisation, the group also retained its Healthcare applications unit in the Netherlands.
E X E C U T I V E S F RO M F O RT U N E 1 0 0 0 C O M PA N I E S R A N K
N EW P RO D U C T D E V E L O P M E N T A M O N G T H E I R TO P T H R E E
BU S I N E S S S T R AT E G I E S F O R 2 0 0 2 . – AC C E N T U R E
Business Process Solutions – Helping Organizations Move from Strategy to Results
Sopheon's solutions blend the richness of human expertise and specialized content with the efficiencies of technology to
support strategic, knowledge-intensive business processes such as R&D and product development. Sopheon's solutions
model and automate the steps of these processes, integrating market, technical and competitive research to support and
inform process decisions.
"We have a world-class product development process and Sopheon's Accolade solution will help us manage our process in order to
optimize innovation and productivity and reduce time to market."
Malcolm Mitchell, Director of Information Technology, Vodafone UK Limited
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MARKET AND PRODUCT OVERVIEW
Sopheon Accolade™ As part of their strategies for achieving and sustaining success in today’s economic order,
many companies are striving to generate more revenue from new products. The best practitioners of new
product development are deriving as much as 50% of their revenue from products introduced to market in the
last 5 years . The number of new products introduced last year was triple the number introduced in 1980,
contributing to increasingly fierce market competition and ever-shorter product life cycles (Booz Allen & Hamilton,
Cap Gemini, Cooper & Edgett,The Performance Measurement Group). As a result, companies must be able to develop
new products faster than ever before. Sopheon's Accolade for product development embodies our vision for
integrated business process solutions. Accolade is a software system that automates the product development
process.
It was developed by Sopheon in partnership with Drs. Robert Cooper and Scott Edgett, founders of the
Product Development Institute (PDI) and creators of the Stage-GateTM product development methodology used by
more than 60 percent of the technology-driven companies in the US. Accolade’s principal components – a
process engine and a just-in-time knowledge network – organise documents, resources and metrics, facilitate team
communication, and provide access to the internal and external information and human expertise necessary to
inform decision making throughout the product concept-to-commercialisation cycle. System modules include a
portfolio management tool, screening software that predicts the probability of a product concept’s commercial
success, and a benchmarking module that identifies product-development process strengths and weaknesses. By
applying Accolade's capabilities, R&D teams are able to more efficiently and cost-effectively bring products to
market.
"The focus of Cargill's R&D organization is on developing and optimizing innovative products, and we feel that in Accolade we have
the key to significant improvement in managing that effort….We expect that the cost and time savings resulting from Accolade
implementation will demonstrate a payback metric of seven months."
Theo van den Abeele, European Research and Development Director, Cargill
MARKET AND PRODUCT OVERVIEW
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Sopheon Organik® Organik creates an environment in which worker communities can find answers, locate
expertise and share knowledge. An adaptable, scalable Web-based offering that can be configured to integrate into
desktop solutions, it captures the questions and answers of knowledge workers within an organisation and builds
a searchable and re-usable knowledge base. Organik's patented profiling technology automatically locates the best
people to answer a user’s question or recommends people who can help with a particular topic. The software
continually learns about each knowledge worker’s experience, creating dynamic profiles that evolve to reflect the
expertise and interests that the professional demonstrates through continued use of the system.
Integration of
Organik with Sopheon’s Accolade and information management solutions allows Sopheon to offer software
systems that enable access to both documented information and human expertise, whether internal or external to
an organisation, within a single application environment.
"Organik's approach to supporting communities was easy to sell within Ericsson … as we found our engineers keen to share best
practices and discover new visions in a more informal and intuitive manner."
Anders Hemre, Director of Enterprise Performance, Ericsson
Information Management – A Trusted Source of Actionable Information
Research indicates that knowledge workers spend an average of 30 percent of their time looking for information
(Working Counsil for CIO's).That's nearly 600 hours annually that could otherwise be used to apply the information to
critical decisions. Sopheon understands that business success depends on timely access to essential knowledge and
information for decision making and problem solving.
With 16 years of experience, Sopheon has strong, proven competencies in the
development of content and links to information resources to support
successful implementation of knowledge-intensive business processes.
Its
clients are companies in the life sciences, high tech and healthcare
sectors, and include nearly half of the technology-driven companies
on the Fortune 500.
"By outsourcing information management services, we improve our
efficiency in acquiring critical information and focus more of our
internal energy on fostering collaboration and reuse of shared
information. Sopheon has tailored information to the individual
needs of our users and business processes, with an emphasis on
providing better information as the basis for faster, more-informed
decisions within our R&D/QA organisation."
Greg Evans,Vice President, Product Development, R&D/QA Division,
Access Business Group
Sopheon’s Information Management solutions are
designed to improve the effectiveness of information
delivery, analysis, and use across organizations. Each year,
Sopheon supplies answers to tens of thousands of business
and technical questions by providing access to its staff of
analysts and a proprietary network of technical and
industry experts, and by supplying business intelligence
through our award-winning,Web-based research portal,
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MARKET AND PRODUCT OVERVIEW
Teltech.com. Access to these comprehensive research
sources, which blend human expertise and specialized
content, tailored to the unique information needs of specific
communities of users, takes several forms.
Research Services. Through Sopheon's services,
organisations seeking quick answers to everyday
questions or complex market, competitive and
technical analyses, can access experienced technical
and business analysts and thousands of technical and
industry authorities representing virtually every facet
of science and technology. Sopheon provides
personalised service to help knowledge workers sort
out their information needs. It then satisfies those
needs by conducting primary and secondary research,
including custom, in-depth research projects that
synthesize and analyze findings. Backed by thousands of information sources around the globe, as well as by
leading-edge technology and methodologies, Sopheon’s analysts and experts are uniquely positioned to enable
corporations to innovate and solve problems faster than their competitors. Sopheon’s research capabilities
include a document delivery service that provides users with complete copies of needed print information, such
as articles, patents, standards, conference proceedings, unclassified government reports and books.
Information Management Outsourcing. Sopheon applies its research capabilities and information
management expertise to the outsourcing of corporate information services. As part of this offering, it conducts
assessments that determine the clients’ information needs and identify internal and external sources that can meet
them. Sopheon sourcing experts then establish relationships with appropriate content suppliers and subsequently
BU S I N E S S P RO C E S S O U T S O U R C I N G ( B P O ) I S
E X P E C T E D TO G ROW TO $ 3 0 1 B I L L I O N I N 2 0 0 4 . – G A RT N E R , I N C .
assume responsibility for managing those contracts. Research support is typically provided through custom
portals that integrate access to Web content, published literature and proprietary information collections with the
services of Sopheon’s analysts and experts. Analysts assigned to each portal have academic and work backgrounds
that match each client’s industry and technical competency requirements. The service package includes
customised training of end users on how to identify and apply needed information most cost-effectively.
Implementation of Sopheon’s information management outsourcing capabilities allows clients to reduce the cost of
information service support while often expanding the scope of services available to knowledge workers.
Specialized Service Packages. Sopheon supplements its broad research offerings with service packages
designed to support specific application areas such as product development and intellectual property (IP)
management. The latter offering features access to a team of top patent analysts. Based on their broad source
knowledge and extensive, industry-specific experience, these specialists provide users with the targeted
intelligence and analysis needed to maximize the return on IP investments. Sopheon’s IP competency centers are
located in the US and Germany. Similarly, the product development service package provides on-demand technical
and business decision support during each stage of product development. Sopheon's experienced research
analysts and its proprietary network of industry experts draw on an extensive range of primary and secondary
information sources to inform go/kill decisions, ultimately improving time to market and maximising the value of
projects in the client’s product development portfolio.
MARKET AND PRODUCT OVERVIEW
13
“We count on the expertise of Sopheon’s patent analysts to ensure that our intellectual property assets build corporate value.
Sopheon has earned our confidence by consistently providing timely intelligence and thorough analysis.”
Herbert Stark, Head of Chemical Stimulants/R&D, Aventis CropScience
Healthcare Solutions – Precision and Consistency Where They Mean the Most
During the past decade, the amount of electronic information stored and exchanged inside healthcare systems has
soared. There are numerous initiatives across Europe and elsewhere that place technology at the center of organised
healthcare. Hospitals and clinics are increasingly turning to software-based systems for the management of both medical
and non-medical processes, including the implementation of procedures and guidelines that directly impact life or death
clinical prognoses, liability claims and issues surrounding budgetary control.
Sopheon has been researching, developing and deploying language-based software for healthcare applications since 1992.
The products that comprise Sopheon’s Healthcare business were developed largely through advanced research funded by
major government, corporate and institutional sponsors. Already in use at hospitals and other medical facilities in
mainland Europe, Sopheon’s solutions include content creation, management and publication tools, news monitors and
analysis technologies. Sopheon’s Healthcare business is focused on two principal offerings:
The QualiFlow suite of products supports the entire process of clinical guidelines management and reuse,
including authoring, process management, publishing, advanced new-evidence monitoring, and terminology
management. The suite enables healthcare providers to comply with the demanding requirements of evidence-
based medicine by providing tailored procedural instructions at the point of care and by helping doctors, nurses
and other medical practitioners keep up-to-date with the latest medical news and best practices.
The NormFlow suite of products adapts Qualiflow technology to the needs of manufacturers in the hi tech and
life sciences industries. This offering allows users to more effectively produce, control and distribute documents
containing standards and product information that are critical to meeting requirements for compliance
management and conformity assessment.
Alliance Strategies
In mid-2001, Sopheon launched its Via (“Valued industry alliance”) Program, an initiative that is teaming the company with
technology-solutions consultants, implementers and resellers around the world. The goal of the program is to link
Sopheon to companies providing complementary products and services that will allow it to meet client demands and
implement solutions with speed, precision and comprehensive support anywhere in the world. Sopheon's current
network of Via partners includes companies such as A.D. Little, Horvath & Partner,The Valen Group, Product
Development Consulting, Inc. and Creatifica Associates.
"Getting to market faster and making early kill-decisions on projects that are wasting time and money are critical to improving new
product success….Our consultants believe in Accolade because they have been on the other side of launching new products and
new ventures, trying to beat the competition with limited resources. It's the right product to give market leaders another leg up."
Gus Valen, President and Managing Partner,The Valen Group
14
DIRECTORS AND ADVISERS
Directors and Advisers
Directors
Barry K. Mence
Andrew L. Michuda
Arif Karimjee ACA
Stuart A. Silcock FCA
Joseph Shuster
Bernard Al
Andrew B. Davis
Executive Chairman
Chief Executive Officer
Finance Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Secretary
Arif Karimjee
Registered office
Stirling House, Surrey Research Park
Guildford
Surrey GU2 7RF
Registered name and number
Registered in England and Wales: Sopheon plc, 3217859
Auditors
Principal bankers
Solicitors
Ernst & Young LLP
Apex Plaza
Reading RG1 1YE
Silicon Valley Bank
3003 Tasman Drive
Santa Clara California
CA 95054 United States
Lloyds TSB Bank Plc
77 High Street
Southend-on-Sea
Essex SS1 1HT
Hammond Suddards Edge
7 Devonshire Square
Cutlers Gardens
London EC2M 4YH
Briggs and Morgan
2400 IDS Center, 80 South Eighth Street
Minneapolis
Minnesota 55402, United States
AIM Nominated Adviser and Broker
Euronext Paying Agent
Registrars
Financial PR Consultants
Nauta Dutilh
Prinses Irenestraat 59
1077 WV Amsterdam
The Netherlands
HSBC Investment Bank plc
Vintners Place
68 Upper Thames Street
London EC4V 3BJ
Dexia Securities
Herengracht 182
1001 GJ Amsterdam
The Netherlands
Capita IRG Plc
Balfour House, 390/398 High Road
Ilford, Essex IG1 1NQ
Buchanan Consultants
107 Cheapside
London EC2V 6DN
Citigate First Financial BV
Assumburg 152A
1081 GC Amsterdam
The Netherlands
REPORT ON DIRECTORS’ REMUNERATION
15
Report On Directors’ Remuneration
The remuneration committee of Sopheon plc is responsible for oversight of the contract terms, remuneration and other
benefits for executive directors, including performance related bonus schemes. The committee comprises two
non-executive directors together with Barry Mence, other than in respect of his own remuneration, and is chaired by
Bernard Al. The committee makes recommendations to the board, within agreed parameters, on an overall remuneration
package for executive directors and other senior executives in order to attract, retain and motivate high quality
individuals capable of achieving the group’s objectives. The package for each director consists of a basic salary, benefits
and pension contributions, together with performance related bonuses and share options for certain directors on a case
by case basis. Consideration is given to pay and employment policies elsewhere in the group, especially when considering
annual salary increases. From time to time the remuneration committee may take advice from appropriate remuneration
consultants.
Contracts
Service contracts between the company and the executive directors are terminable on 6 months’ notice.
Fees for non-executive directors
The fees for non-executive directors are determined by the board. The non-executive directors are not involved in any
discussions or decisions about their own remuneration.
Directors’ remuneration
Set out below is a summary of the fees and emoluments received by all directors during the year, or (where applicable)
period of office. Details of directors’ interests in shares and options are set out in the Directors’ Report.
Executive directors
B. K. Mence
A. L. Michuda (1)
A. Karimjee (2)
H. J. M. Rutten (3)
J. M. Macfarlane (3)
R.V. Maddocks (3)
E. R. E. I.Wiebenga (4)
Non-executive directors
J. M. Shuster (1)
S. A. Silcock
B.P.F. Al (5)
A.M. Davis (6)
M. J. Brooke (7)
H. Coltof (3)
Salary
and fees
£
120,986
135,736
85,900
-
-
-
-
16,624
18,000
18,000
1,500
-
-
________
396,746
________
________
Benefits
£
Contributions
to Pension
£
4,041
3,967
700
-
-
-
-
3,675
-
-
-
-
-
________
12,383
________
________
3,600
2,349
3,504
-
-
-
-
332
-
-
-
-
-
________
9,785
________
________
Total
2001
£
128,627
142,052
90,104
-
-
-
-
20,631
18,000
18,000
1,500
-
-
________
418,914
________
________
Total
2000
£
114,156
42,274
76,319
58,279
83,226
81,866
3,242
6,201
28,949
-
-
12,000
2,931
________
509,443
________
________
(1) Appointed on 18 September 2000
(2) Appointed on 1 February 2000
(3) Resigned on 18 September 2000
(4) Resigned on 1 February 2000
(5) Appointed on 8 January 2001
(6) Appointed on 15 November 2001
(7) Resigned on 8 January 2001
(8) Pension contributions are made to individual directors’ personal pension schemes.
The emoluments of S. A. Silcock are paid to Lawfords Limited, of which Mr. Silcock is a director. Mr Michuda was eligible
to participate in an incentive scheme established at the time of the acquisition of Teltech Resource Network Corporation
whereby he received 41,666 Sopheon ordinary shares on 28 December 2001.
16
DIRECTORS’ REPORT
Directors’ Report
Financial Results
The loss for the year ended 31 December 2001 before interest, tax, depreciation and amortisation (LBITDA) was
£11,757,000 (2000 - £6,655,000) on a turnover of £13,963,000 (2000 - £7,763,000).The result for the year, after allowing
for a £21,431,000 (2000 - £5,561,000) amortisation and impairment charge in respect of goodwill, both before and after
taxation, is a loss of £34,631,000 (2000 - £11,945 000).The directors do not propose to declare a dividend.
Principal Activities
The group’s principal activities during the year continued to focus on the provision of software and services that enable
organisations to access internal and external information and knowledge more efficiently. Sopheon has also focused its
activities increasingly within the market represented by major corporations and their information and process
requirements for product development and R&D.
Review of the Business
2001 was a year both of significant challenges and of significant progress for Sopheon.The general economic downturn
affected revenues within certain existing accounts, as well as the development of new opportunities. In common with
many companies, sales cycles lengthened as markets slowed and it proved a challenging environment in which to generate
organic growth. Nonetheless, significant progress was made in refining Sopheon’s positioning and corporate development.
Two further acquisitions were completed during the year – a division of Aventis Research & Technologies in Germany in
June and Orbital Software Holdings plc in the UK in November – deepening our customer base, market reach and our
product and technical capabilities.These acquisitions coupled with a convertible bond issue raised £16.5m of capital for
the group, which ended the year with cash resources of £13.3m.The process of integrating the businesses acquired over
the last two years has advanced rapidly.The organisation has been restructured into two complementary operating
divisions – Information Management (IM) representing research analyst services, portal subscriptions and information
provision; and Business Process Solutions (BPS) representing software applications and related consultancy services – and
the annualised fixed cost base has been reduced by over 25% compared to the interim reported position for the
combined group through elimination of duplicated costs and a significant contraction of the workforce. Our flagship
product, Accolade, was released and contributed to revenue in the year, with a new version released in December and
new orders secured early in 2002, reinforced by the addition of Orbital’s Organik solution to our product range. Market
conditions have also created fresh opportunities for IM outsourcing services.
Sopheon’s consolidated revenues show a £6.2m increase to £14.0m (2000 : £7.8m).This includes a contribution of £2.8m
from our new German subsidiary for the six months from 1 July 2001 and £0.1m from Orbital Software Holdings plc for
the six-week period from 16 November 2001. Approximately 74% of total revenues came from IM and of this, some 90%
represents recurring revenue or sales to existing customers. BPS contributed 26% of revenue during the year. Both areas
experienced a difficult year. Certain IM revenues were impacted by customer M&A and restructuring activity, and
revenues from bespoke applications and consultancy services, part of BPS, reduced substantially in line with the end of the
website construction boom, which was sharper than expected. As planned, this reduction was partially offset by the initial
revenues contributed by Accolade licenses and services.
Consolidated EBITDA losses increased to £11.8m (2000: £6.7m) reflecting continued high levels of investment in product
development, sales and marketing and implementation capabilities and approximately £1m of redundancy and
restructuring costs. Goodwill amortisation was accelerated to reflect the changed market conditions since the
acquisitions of AppliedNet and Teltech, resulting in a total goodwill amortisation charge of £21.4m during the year,
comprising £12.3m of regular charges and an exceptional impairment charge of £9.1m.
Future Developments
Sopheon intends to continue to focus on, invest in and implement its business model, which is founded on a belief that its
products and services will offer persuasive returns on investment and enhanced competitive advantage to customers.This
belief is coupled with a drive to increase significantly the proportion of group revenues derived from BPS during 2002.
Cash resources going into 2002 have given the business a good foundation with which to implement its business plan,
which has the objective of becoming cashflow generative going into 2003. Nevertheless, in conjunction with setting this
challenging target, the board continues to maintain a tight grip on costs, and will monitor developments and adjust the
operating plan if this is considered appropriate.The group emerges from 2001 a more integrated and focused business,
aiming to capitalise on its strengths and concentrate all efforts on revenue growth and operational excellence, to build
towards the stated goal of being a profitable provider of software and services to major corporations within the R&D
market.
DIRECTORS’ REPORT
17
Research & Development
Sopheon’s development teams are now based in two key centres, Edinburgh and Denver.These two centres work in
close cooperation with a single product calendar, under a single management structure and with the same high quality
standards designed to deliver world-class, enterprise strength software.
During the year Sopheon was awarded a European patent in connection with its knowledge management software
architecture and methodology originally developed in the early 1990’s.The technology portfolio has also been enhanced
by Orbital’s patented profiling technology. Development work is underway to integrate these technologies into the
Accolade system, applying them to the process of creating, publishing and re-using content from knowledge bases and
communities of interest built up by an organisation during the product development life cycle. This is to be coupled with
tighter integration of IM research portals to enhance linkage to external content and analysis.
initial version of a "knowledge-centric" Accolade, to be released as version 4.0, around the middle of 2002.
Internal plans call for an
Directors and their interests
The interests of the directors who held office at the end of the year in the share capital of the Company (all beneficially
held except those marked with an asterisk (*), which are held as trustee), were as follows:
Director
Share Options
2001
2000
Ordinary Shares
2001
2000
B. K. Mence
A. Michuda (appointed on 18 September 2000)
A. Karimjee (appointed on 1 February 2000)
S. A. Silcock
S. A. Silcock*
J.M. Shuster (appointed on 18 September 2000)
B.P.F. Al (appointed on 8 January 2001)
A.M. Davis (appointed on 15 November 2001)
22,500
285,675
112,500
-
-
50,237
25,000
-
-
225,983
100,000
-
-
50,237
-
-
8,696,457
41,355
-
181,383
98,077
76,186
25,000
494,520
8,696,457
189
-
181,383
98,077
76,186
-
-
Of the 8,696,457 ordinary shares mentioned above B. K. Mence beneficially owns and is the registered holder of
4,846,657 ordinary shares. He is, or his wife or children are, potential beneficiaries under trusts holding an aggregate of
3,847,800 ordinary shares, of which trusts directors of Lawfords Ltd., in the Isle of Man, are trustees and are registered as
the holders of such shares. S.A. Silcock is a shareholder in Lawfords Ltd. At 31 December 2000 Mr. Mence also held
warrants to subscribe for 300,000 ordinary shares at 146p per share.The warrants expired unexercised on 31 March
2001.
On 19 June 2001 the directors listed below subscribed for Sopheon Convertible Loan Stock (the "Stock") with
detachable warrants.When issued, the Stock was convertible into Sopheon shares at 70p per share. On 7 November
2001, at an Extraordinary General Meeting of holders of the Stock, the conversion rate of the Stock was amended to 46p
per share, the price prevailing immediately before the announcement of the offer for Orbital Software Holdings plc. In the
event of any further offering of Sopheon shares taking place prior to conversion, whether by way of rights issue, placing,
open offer or similar issue, the conversion rate shall be adjusted to the higher of offering price, if lower than 46p, and
31.5p.
The exercise price for the Sopheon warrants is 70p per share.
Name
B. K. Mence
A.L. Michuda
A. Karimjee
S.A. Silcock
B.P.F. Al
Nominal amount
of Stock subscribed
No.of
warrants
£390,000
£28,000
£17,000
£100,000
£25,000
83,571
6,000
3,643
21,429
5,357
Each of the above was entitled at any time prior to 31 December 2001 to subscribe for a further amount of Stock, with
detachable warrants, equal to one third of the nominal value of his existing holding, on the same terms as the existing
stock, save that the conversion rate would be 30% higher than that applicable to the existing Stock and the exercise price
for the warrants would be 91p per share. None of the stockholders has subscribed for further Stock.
18
DIRECTORS’ REPORT
The following table provides summary information for each of the directors who held office during the year and who
held options to subscribe for Sopheon ordinary shares. All options were granted without monetary consideration.
Date of
Grant
Exercise
price
At 31
December
2000
Granted
during
year
`Exercised
during
year
At 31
December
2001
B.K. Mence (1)
A. L. Michuda (2)
A. L. Michuda (2)
A. L. Michuda (2)
A. L. Michuda (2)
A. L. Michuda (3)
A. L. Michuda (3)
A.L. Michuda (3)
A. Karimjee (1)
A. Karimjee (1)
J. Shuster (2)
J. Shuster (2)
J. Shuster (2)
J. Shuster (2)
J. Shuster (3)
B.P.F. Al (1)
2 May 2001
15 September 2000
15 September 2000
15 September 2000
15 September 2000
2 October 2000
1 January 2001
2 May 2001
22 November 1999
2 May 2001
15 September 2000
15 September 2000
15 September 2000
15 September 2000
2 October 2000
2 May 2001
77.5p
184p
230p
322p
368p
427.5p
160p
77.5p
150p
77.5p
184p
230p
276p
368p
427.5p
77.5p
-
187,600
7,846
12,501
1,756
16,280
-
-
100,000
-
24,779
1,502
1,502
17,191
5,263
-
22,500
-
-
-
-
-
5,030
54,662
-
12,500
-
-
-
-
-
25,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22,500
187,600
7,846
12,501
1,756
16,280
5,030
54,662
100,000
12,500
24,779
1,502
1,502
17,191
5,263
25,000
(1) Exercisable between the third and tenth anniversary of the date of grant.
(2) Fully vested options, which were granted as part of the acquisition of Teltech Resource Network Corporation.
(3) One fourth of these options becomes exercisable on each of the first four anniversaries of the date of grant and they
expire on the tenth anniversary of the date of grant.
The mid-market price of Sopheon ordinary shares at 28 December 2001 was 28.5p. During the financial year the mid-
market price of Sopheon ordinary shares ranged from 160p to 24.5p.
Save as disclosed above, no director (or member of his family) or connected persons within the meaning of Section 346
of the Companies Act 1985 has any interest, beneficial or non-beneficial, in the share capital of the company.
Substantial Shareholdings
The Directors are aware of the following persons who as at 5 February 2002 were interested directly or indirectly in
three per cent or more of the company’s issued ordinary shares:
Name
B. K. Mence (director)
Friends Ivory & Sime plc
3i Group plc
Aventis Research & Technologies GmbH & Co KG
A. Slater
C. Smeaton
No. of
Ordinary
Shares
8,696,457
4,525,453
3,944,145
3,471,191
3,068,820
3,068,820
% issued
Ordinary
Shares
10.6
5.5
4.8
4.2
3.7
3.7
Mr. Mence’s interest represents direct beneficial holdings as well as those of his family.
Share Option Schemes
Details of options granted are shown in note 18.
DIRECTORS’ REPORT
19
Creditor payment policy and practice
It is the company’s policy that payments to suppliers are made in accordance with those terms and conditions agreed
between the company and its suppliers, provided that all trading terms and conditions have been complied with. At 31
December 2001, the group had an average of 55 days’ purchases outstanding in trade creditors.
Derivatives and other financial instruments
The group’s principal financial instruments comprise the 6% Convertible Loan Stock 2004, together with bank loans, cash
and short-term deposits.The main purpose of these financial instruments is to secure funds and manage cash flow for the
group’s operations. The group has various other financial instruments such as trade debtors and trade creditors that
arise directly from its operations.
It is, and has been throughout the period under review, the group’s policy that no trading in derivatives and other financial
instruments shall be undertaken. However, the group is considering the use of forward exchange contracts to assist with
management of foreign exchange exposures.
The main risks arising from the group’s financial instruments are interest rate risk, liquidity risk and foreign currency risk
as summarized below. The board reviews and agrees policies for managing each of these risks. These policies have
remained unchanged during 2000 and 2001.The group also monitors the market price risk arising from all financial
investments.The magnitude of this risk that has arisen during the period is detailed in Note 20.
Interest rate risk
The group has overdraft facilities and lines of credit in UK Sterling, US Dollar and Euros at floating rates of interest.
Where the group has significant cash resources available that are in excess of the short term needs of the business, such
funds are maintained in sterling, US Dollars or Euros and are placed on short and medium term bank deposit at the best
interest rate available.
Liquidity risk
The group’s objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts
and bank loans. Short term flexibility is achieved by overdraft facilities and lines of credit.
Foreign currency risk
As a result of having significant operating units in the USA, Germany and the Netherlands, which give rise to short term
creditors, debtors and cash balances in US Dollars and Euros, the group’s balance sheet can be affected by movements in
the US Dollar/Sterling and Euro/Sterling exchange rates.
Auditors
On 29 June 2001, Ernst & Young transferred its business to Ernst & Young LLP, a limited liability partnership incorporated
under the Limited Liability Partnerships Act 2000. With effect from that date, the directors have exercised their statutory
powers to treat the appointment of Ernst & Young as extending to Ernst & Young LLP. A resolution to reappoint Ernst &
Young LLP as auditors will be put to the members at the Annual General Meeting.
Approved by the Board on 3 April 2002 and signed on its behalf by
A. Karimjee
Secretary
20
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF FINANCIAL STATEMENTS
Statement of Directors’ Responsibilities In
Respect Of The Financial Statements
Company law requires the directors to prepare financial statements for each financial year which give a true and fair view
of the state of affairs of the company and of the group and of the profit or loss of the group for that period. In preparing
those financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and estimates that are reasonable and prudent;
•
state whether applicable accounting standards have been followed, subject to any material departures disclosed and
explained in the financial statements;
prepare the financial statements on a going concern basis unless it is inappropriate to presume that the company will
continue in business;
•
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time
the financial position of the company and to enable them to ensure that the financial statements comply with the
Companies Act 1985.They are also responsible for safeguarding the assets of the company and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SOPHEON PLC
21
Independent Auditors’ Report To The Members Of
Sopheon plc
We have audited the group's financial statements for the year ended 31 December 2001, which comprise the
Consolidated Profit and Loss Account, Consolidated Balance Sheet, Company Balance Sheet, Consolidated Cash Flow
Statement, Consolidated Statement of Total Recognised Gains and Losses, and the related notes 1 to 21. These financial
statements have been prepared on the basis of the accounting policies set out therein.
Respective responsibilities of directors and auditors
As described in the Statement of Directors' Responsibilities the company's directors are responsible for the preparation
of the financial statements in accordance with applicable United Kingdom law and accounting standards.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and
United Kingdom Auditing Standards.
We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared
in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors' Report is not
consistent with the financial statements, if the company has not kept proper accounting records, if we have not received
all the information and explanations we require for our audit, or if information specified by law regarding directors'
remuneration and transactions with the group is not disclosed.
We read the Directors' Report and consider the implications for our report if we become aware of any apparent
misstatements within it.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial
statements.
preparation of the financial statements, and of whether the accounting policies are appropriate to the group's
circumstances, consistently applied and adequately disclosed.
It also includes an assessment of the significant estimates and judgements made by the directors in the
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary
in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or other irregularity or error.
the overall adequacy of the presentation of information in the financial statements.
In forming our opinion we also evaluated
Opinion
In our opinion the financial statements give a true and fair view of the state of affairs of the company and of the group as
at 31 December 2001 and of the loss of the group for the year then ended and have been properly prepared in
accordance with the Companies Act 1985.
Ernst & Young LLP
Registered Auditor
Reading
3 April 2002
22
GROUP PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2001
Group Profit And Loss Account For The Year Ended
31 December 2001
Notes
2
Continuing
Operations
2001
£’000
10,966
(8,255)
–––––––
2,711
(6,654)
Acquisitions
2001
£’000
2,997
(1,931)
–––––––
1,066
(627)
Total
2001
£’000
13,963
(10,186)
–––––––
3,777
(7,281)
2000
£’000
1999
£’000
7,763
(5,402)
–––––––
2,361
(3,450)
1,510
(983)
–––––––
527
(760)
TURNOVER
Cost of sales
GROSS PROFIT
Sales and marketing expenses
Research and development expenditures
(2,830)
(180)
(3,010)
(3,321)
(878)
Amortisation and impairment charges in
respect of goodwill
(21,423)
(8)
(21,431)
(5,561)
Other administrative expenses
(5,591)
(1,201)
(6,792)
(2,759)
(323)
(582)
Total administrative expenses
(29,844)
–––––––
(1,389)
–––––––
(31,233)
–––––––
(11,641)
–––––––
(1,783)
–––––––
OPERATING LOSS
Share of operating loss
of associated undertaking
Interest receivable
Interest payable and similar charges
LOSS ON ORDINARY ACTIVITIES
BEFORE AND AFTER TAXATION
Loss per share -
basic and diluted (pence)
LOSS ON AN EBITDA BASIS
3
5
8
EBITDA is defined in Note 1 to the Accounts.
(33,787)
(950)
(34,737)
(12,730)
(2,016)
(63)
373
(204)
–––––––
(34,631)
–––––––
–––––––
(76)
950
(89)
–––––––
-
62
(118)
–––––––
(11,945)
–––––––
–––––––
(2,072)
–––––––
–––––––
(76.2p)
–––––––
–––––––
(33.4p)
–––––––
–––––––
(10.1p)
–––––––
–––––––
(11,757)
–––––––
–––––––
(6,655)
–––––––
–––––––
(1,654)
–––––––
–––––––
GROUP STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES FOR THE YEAR ENDED 31
DECEMBER 2001
Loss on ordinary activities after taxation
Exchange difference on retranslation
of net assets of subsidiary undertakings
Total recognized gains and losses relating to the year
2001
£‘000
2000
£‘000
1999
£‘000
(34,631)
(11,945)
(2,072)
31
–––––––
(34,600)
–––––––
–––––––
100
–––––––
(11,845)
–––––––
–––––––
(45)
–––––––
(2,117)
–––––––
–––––––
GROUP BALANCE SHEET AT 31 DECEMBER 2001
23
Group Balance Sheet At 31 December 2001
FIXED ASSETS
Intangible assets
Goodwill
Less: Negative goodwill
Tangible Assets
Investments
CURRENT ASSETS
Debtors
Cash at bank and in hand
CREDITORS: amounts falling due within one year
NET CURRENT ASSETS
TOTAL ASSETS LESS CURRENT LIABILITIES
CREDITORS: amounts falling due after more than one year
6% Convertible Unsecured Loan Stock 2004
PROVISIONS FOR LIABILITIES AND CHARGES
CAPITAL AND RESERVES
Called up share capital
Shares to be issued
Share premium account
Merger reserve
Other reserves
Profit and loss account
Shareholders’ funds (all equity interests)
Approved by the Board on 3 April 2002
B. K. Mence
Director
Notes
2001
£’000
2000
£’000
9
9
10
11
12
13
14
15
15
16
18
19
19
19
19
19
11,124
(277)
–––––––
10,847
30,945
-
–––––––
30,945
2,159
46
–––––––
13,052
3,592
13,344
–––––––
16,936
(8,584)
–––––––
8,352
–––––––
21,404
(25)
(2,553)
(461)
–––––––
18,365
–––––––
–––––––
4,116
465
45,372
18,384
5,455
(55,427)
–––––––
18,365
–––––––
–––––––
2,387
260
–––––––
33,592
4,610
7,925
–––––––
12,535
(7,809)
–––––––
4,726
–––––––
38,318
(22)
-
-
–––––––
38,296
–––––––
–––––––
4,816
630
43,320
7,940
2,417
(20,827)
–––––––
38,296
–––––––
–––––––
A. Karimjee
Director
24
COMPANY BALANCE SHEET AT 31 DECEMBER 2001
Company Balance Sheet At 31 December 2001
FIXED ASSETS
Investments
CURRENT ASSETS
Debtors
Cash at bank and in hand
CREDITORS: amounts falling due within one year
NET CURRENT ASSETS
TOTAL ASSETS LESS CURRENT LIABILITIES
CREDITORS: amounts falling due after more than one year
CAPITAL AND RESERVES
Called up share capital
Shares to be issued
Share premium account
Merger reserve
Other reserves
Profit and loss account
Shareholders’ funds (all equity interests)
Approved by the Board on 3 April 2002
B. K. Mence
Director
Notes
2001
£’000
2000
£’000
11
12
14
15
18
19
19
19
19
19
23,477
39,422
14
4,839
–––––––
4,853
(1,198)
–––––––
3,655
–––––––
27,132
(6,848)
–––––––
20,284
–––––––
–––––––
4,116
465
45,372
10,619
5,455
(45,743)
–––––––
20,284
–––––––
–––––––
14,545
7,318
–––––––
21,863
(1,259)
–––––––
20,604
–––––––
60,026
-
–––––––
60,026
–––––––
–––––––
4,816
630
43,320
7,940
2,417
903
–––––––
60,026
–––––––
–––––––
A. Karimjee
Director
GROUP STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2001
25
Group Statements Of Cash Flows For The Year
Ended 31 December 2001
Notes
2001
£’000
2000
£’000
1999
£’000
NET CASH OUTFLOW FROM OPERATING ACTIVITIES
3
RETURN ON INVESTMENTS AND SERVICING OF FINANCE
Interest received
Interest paid
Interest element of finance lease rental payments
CAPITAL EXPENDITURE & FINANCIAL INVESTMENT
Payments to acquire tangible fixed assets
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings
Net cash acquired with subsidiary undertakings
Purchase of investment in associated undertaking
MANAGEMENT OF LIQUID RESOURCES
Increase in short term deposits
NET CASH OUTFLOW BEFORE FINANCING
FINANCING
Issues of ordinary share capital
Issue of convertible loan stock
New long-term loan
Repayment of long-term loans
Repayment of capital element of finance lease
(11,224)
–––––––
(8,793)
–––––––
(1,278)
–––––––
373
(204)
-
–––––––
169
950
(88)
(1)
–––––––
861
62
(116)
(2)
–––––––
(56)
(201)
–––––––
(954)
–––––––
(52)
–––––––
(668)
13,705
-
–––––––
13,037
(3,512)
–––––––
(1,731)
1,567
2,553
-
(36)
(1)
–––––––
4,083
–––––––
(11,962)
(155)
(164)
–––––––
(12,281)
(267)
–––––––
(21,434)
20,222
-
-
(30)
(8)
–––––––
20,184
–––––––
(179)
389
-
–––––––
210
(6,602)
–––––––
(7,778)
8,265
-
4
-
(16)
–––––––
8,253
–––––––
INCREASE /(DECREASE) IN CASH
13
2,352
–––––––
–––––––
(1,250)
–––––––
–––––––
475
–––––––
–––––––
26
NOTES TO THE ACCOUNTS
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 Sopheon
GmbH (formerly the Technology and Information Services Division of Aventis Research & Technologies) and of Orbital
Software Holding plc and its subsidiaries have been included, using the acquisition method of accounting, since their
respective dates of acquisition, 29 June 2001 and 15 November 2001.
Tangible fixed assets
Tangible fixed assets are stated at historical cost, less accumulated depreciation.The costs of developing portals used to
deliver products and services are capitalised as tangible fixed assets in accordance with UITF29.Tangible fixed assets are
depreciated on a straight line basis over their expected useful lives over the following periods.
Computer equipment
Fixtures and fittings
Internet portals
3 years
4 to 5 years
3 years
Research and development
Research and development expenditure is written off as incurred.The cost of registering patents and trademarks are
written off as incurred. Subsidies received from the European Union and other state agencies are credited to the profit
and loss account over the period to which they relate.
Goodwill
Goodwill arising on consolidation is capitalised and amortised on a straight line basis over its estimated useful economic
life, which in all cases is 3 years. 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. If a subsidiary, associate or business is subsequently sold or closed, any goodwill arising on acquisition that
has not been amortised is taken into account in determining the profit or loss on sale or closure.
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 differences arising on the
retranslation of subsidiary undertakings are, together with differences arising on the translation of long term intra-group
funding loans which are not intended to be repaid in the foreseeable future, taken directly to reserves. All other
differences are taken to the profit and loss account.
Long term contracts
Profit on long term contracts is taken as the work is carried out if the outcome can be assessed with reasonable
certainty. The profit included is calculated on a prudent basis to reflect the proportion of the work carried out at the
year end, by recording turnover and related costs as contract activity progresses. Turnover is calculated as that
proportion of total contract value which costs incurred to date bear to total expected costs for that contract. Revenues
derived from variations on contracts are recognised only when the customer has accepted them. Full provision is made
for losses on all contracts in the year in which they are first foreseen.
Pensions
Sopheon contributes to the personal pension arrangements of employees, the costs of which are charged in the profit
and loss account as incurred. One of its subsidiary companies, Sopheon GmbH, is committed to providing certain
pensions based on final pensionable salary.
Its pension liabilities are measured using a projected unit method and
discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the
liabilities.
Leasing
Assets held under finance leases, which are leases where substantially all risks and rewards of ownership of the assets
have passed to the group are capitalised in the balance sheet and are depreciated over their useful lives. The capital
elements of future obligations under financial leases are included as liabilities in the balance sheet. The interest elements
of the rental obligations are charged to the profit and loss account over the period of the lease and represent a constant
proportion of the balance of capital repayments outstanding. Rentals payable under operating leases are charged in the
profit and loss account on a straight line basis over the lease term.
EBITDA
EBITDA represents earnings before interest, tax, depreciation and amortisation and also excludes non-recurring equity-
based costs incurred in connection with acquisitions.
NOTES TO THE ACCOUNTS
27
2.TURNOVER AND SEGMENTAL INFORMATION
Turnover (excluding valued added tax) represents the amounts derived from the group’s principal activities which comprise
(a) the design, development, production and marketing of software products together with associated implementation and
consultancy services and (b) the provision of information and research services.The group results are analysed between
three geographical markets, the United States, the United Kingdom and the rest of Europe.
Analysis of turnover by area of activity
Software and consultancy
Information and research services
Analysis of operating loss by area of activity
Software and consultancy
Information and research services
Gross margin
Sales and marketing expenses
Administrative expenses (including goodwill
amortisation and impairment charge)
Operating loss
Analysis of turnover by geographical destination
United Kingdom
Rest of Europe
North America
Rest of World
Continuing
Operations
2001
£’000
3,147
7,819
–––––––
10,966
–––––––
–––––––
Continuing
Operations
2001
£’000
427
2,284
–––––––
2,711
(6,654)
(29,844)
–––––––
(33,787)
–––––––
–––––––
Acquisitions
2001
£’000
507
2,490
–––––––
2,997
–––––––
–––––––
Acquisitions
2001
£’000
292
774
–––––––
1,066
(627)
(1,389)
–––––––
(950)
–––––––
–––––––
Total
2001
£’000
3,654
10,309
–––––––
13,963
–––––––
–––––––
Total
2001
£’000
719
3,058
–––––––
3,777
(7,281)
(31,233)
–––––––
(34,737)
–––––––
–––––––
2001
£’000
2,026
3,239
8,471
227
–––––––
13,963
–––––––
–––––––
Analysis of turnover and operating loss by geographical origin
United Kingdom
Rest of Europe
United States of America
Operating loss
2001
£’000
9,016
1,651
24,070
2000
£’000
4,934
1,735
6,061
1999
£’000
346
1,414
256
2001
£’000
2,253
3,239
8,471
2000
£’000
4,912
2,851
–––––––
7,763
–––––––
–––––––
1999
£’000
1,510
-
–––––––
1,510
–––––––
–––––––
2000
£’000
1999
£’000
1,406
955
–––––––
2,361
(3,450)
(11,641)
–––––––
(12,730)
–––––––
–––––––
2000
£’000
2,965
1,339
3,459
-
–––––––
7,763
–––––––
–––––––
Turnover
2000
£’000
3,942
500
3,321
527
-
–––––––
527
(760)
(1,783)
–––––––
(2,016)
–––––––
–––––––
1999
£’000
693
777
40
-
–––––––
1,510
–––––––
–––––––
1999
£’000
636
874
-
–––––––
34,737
–––––––
–––––––
–––––––
12,730
–––––––
–––––––
–––––––
2,016
–––––––
–––––––
–––––––
13,963
–––––––
–––––––
–––––––
7,763
–––––––
–––––––
–––––––
1,510
–––––––
–––––––
Analysis of net assets by geographical origin
United Kingdom
Rest of Europe
United States of America
Unallocated cash and loans at group level
2001
£’000
602
1,033
8,501
8,229
2000
£’000
5,182
476
25,320
7,318
1999
£’000
8,054
89
(76)
5,412
–––––––
18,365
–––––––
–––––––
–––––––
38,296
–––––––
–––––––
–––––––
13,479
–––––––
–––––––
28
NOTES TO THE ACCOUNTS
3. OPERATING LOSS
(a) This is stated after charging/(crediting):
Auditors’ remuneration - audit services
Auditors’ remuneration - non audit services
Research and development expenditure written off
Eureka and other EC subsidies
Foreign exchange (gains)/losses
Amortisation of goodwill
Impairment charge in respect of goodwill
Depreciation of owned assets
Depreciation of assets held under finance leases
Operating lease rentals - land and buildings
Operating lease rentals – equipment and vehicles
2001
£’000
2000
£’000
1999
£’000
90
26
3,010
(19)
(20)
12,288
9,143
1,175
-
916
191
–––––––
–––––––
67
19
3,321
(78)
(645)
5,561
-
405
4
411
173
–––––––
–––––––
34
13
878
(315)
16
323
-
74
9
103
84
–––––––
–––––––
During 2001 £95,000 (2000 £114,000 and 1999 £64,000) was charged by the auditors in respect of due diligence and
other work in connection with corporate transactions which has been capitalised or written off to share premium as
appropriate.
(b) Reconciliation of operating loss to net cash outflow from operating activities
Operating loss
Depreciation
Amortisation of goodwill
Impairment charge in respect of goodwill
(Increase)/decrease in debtors
(Decrease)/increase in creditors and provisions
Net cash outflow from operating activities
2001
£’000
2000
£’000
1999
£’000
(34,737)
1,175
12,288
9,143
1,669
(762)
–––––––
(11,224)
–––––––
–––––––
(12,730)
409
5,561
-
(453)
(1,580)
–––––––
(8,793)
–––––––
–––––––
(2,016)
83
323
-
(338)
670
–––––––
(1,278)
–––––––
–––––––
4. STAFF COSTS
Wages and salaries
Social security costs
Other pension costs
The fees and emoluments of all directors were as follows:
Fees and emoluments
Pension contributions
NOTES TO THE ACCOUNTS
29
2001
£’000
12,506
1,082
299
–––––––
13,887
–––––––
–––––––
2001
£’000
409
10
–––––––
419
–––––––
–––––––
2000
£’000
1999
£’000
6,834
579
173
–––––––
7,586
–––––––
–––––––
1,231
124
42
–––––––
1,397
–––––––
–––––––
2000
£’000
1999
£’000
490
19
–––––––
509
–––––––
–––––––
333
15
–––––––
348
–––––––
–––––––
Pension contributions are to personal defined contribution schemes and have been made for four directors who served
during the year.The emoluments of the highest paid director were as follows:
Salary and fees
Benefits
Pension contributions to defined contribution scheme
Total
The average monthly number of employees during the year was made up as follows:
Development and operations
Sales and management
2001
£’000
136
4
2
–––––––
142
–––––––
–––––––
2001
Number
164
94
–––––––
258
–––––––
–––––––
2000
£’000
1999
£’000
107
3
4
–––––––
114
–––––––
–––––––
78
16
7
–––––––
101
–––––––
–––––––
2000
Number
1999
Number
79
71
–––––––
150
–––––––
–––––––
26
14
–––––––
40
–––––––
–––––––
30
NOTES TO THE ACCOUNTS
5. INTEREST PAYABLE AND SIMILAR CHARGES
Bank loans and overdrafts
Convertible loan stock
Finance charges on finance leases
2001
£’000
115
89
-
–––––––
204
–––––––
–––––––
2000
£’000
1999
£’000
49
39
1
–––––––
89
–––––––
–––––––
39
78
1
–––––––
118
–––––––
–––––––
6.TAXATION
There was no tax charge for 2001, 2000 or 1999. Tax losses are available for carry forward by the Group the amount of
which is under discussion with the relevant authorities in the UK, US and the Netherlands.
group’s policy, no provision has been made for the potential deferred tax asset on these losses.
In accordance with the
7. LOSS ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY
The loss dealt with in the accounts of the parent company for the year ended 31 December 2001 (which includes a
provision of £54,670,000 against the company's investment in and loans to subsidiary companies) was £54,411,000
(2000 - profit £908,000 and 1999 - £nil). Advantage has been taken of Section 230 of the Companies Act 1985 not to
present a profit and loss account for the parent company.
8. LOSS PER ORDINARY SHARE
The calculation of basic loss per ordinary share is based on a loss of £34,631,000 (2000 - £11,945,000 and 1999
£2,072,000 as restated), and on 45,471,220 (2000 - 35,732,477 and 1999 - 20,565,985) ordinary shares, being the
weighted average number of ordinary shares in issue during the year.
The loss attributable to ordinary shareholders and the weighted average number of ordinary shares for the purpose of
calculating the diluted loss per ordinary share are identical to those used for calculating the basic loss per ordinary share.
This is because the exercise of share options and warrants and the conversion of the 6% Convertible Loan Stock 2004
would have the effect of reducing the loss per ordinary share and is therefore not dilutive under the terms of Financial
Reporting Standard 14.
9. INTANGIBLE FIXED ASSETS
Group only
Cost
At 1 January 2001
Additions
At 31 December 2001
Amortisation
At 1 January 2001
Provided during the year
Impairment charge
At 31 December 2001
Net book value
At 31December 2001
At 31December 2000
NOTES TO THE ACCOUNTS
31
Goodwill
£'000
36,751
1,509
–––––––
38,260
–––––––
5,806
12,265
9,065
–––––––
27,136
–––––––
11,124
–––––––
30,945
–––––––
–––––––
Negative
goodwill
£’000
-
(332)
–––––––
(332)
–––––––
-
(55)
-
–––––––
(55)
–––––––
(277)
–––––––
-
–––––––
–––––––
The impairment charge results from an evaluation of the recoverable value of goodwill, carried out in accordance with the
requirements of Financial Reporting Standard 11, and using a discount rate of 15% per annum.
10.TANGIBLE FIXED ASSETS
Group only
Cost
At 1 January 2001
Acquired with subsidiary undertakings
Additions
Disposals
Exchange adjustments
At 31 December 2001
Depreciation
At 1 January 2001
Provided during the year
Disposals
Exchange adjustments
At 31 December 2001
Net book value
At 31 December 2001
At 31 December 2000
Computer
Equipment
£’000
Furniture &
fittings
£’000
1,959
586
149
(2)
18
–––––––
2,710
–––––––
662
687
-
(7)
–––––––
1,342
–––––––
1,368
–––––––
–––––––
1,297
–––––––
–––––––
438
110
52
(9)
1
–––––––
592
–––––––
145
193
(8)
(2)
–––––––
328
–––––––
264
–––––––
–––––––
293
–––––––
–––––––
Internet
Portals
£’000
820
-
-
-
22
–––––––
842
–––––––
23
295
-
(3)
–––––––
315
–––––––
527
–––––––
–––––––
797
–––––––
–––––––
Total
£’000
3,217
696
201
(11)
41
–––––––
4,144
–––––––
830
1,175
(8)
(12)
–––––––
1,985
–––––––
2,159
–––––––
–––––––
2,387
–––––––
–––––––
The net book value of furniture and fittings above includes an amount of £Nil (2000: £9,000) in respect of assets held
under finance leases.
32
NOTES TO THE ACCOUNTS
11. INVESTMENTS
Group
Investment in associated undertaking
At 1 January 2001
Share of retained loss
Amortisation of goodwill
Impairment charge
Exchange difference
At 31 December 2001
Share of net
tangible
assets
£’000
103
(63)
-
-
6
–––––––
46
–––––––
–––––––
Goodwill
£’000
157
-
(79)
(78)
-
–––––––
-
–––––––
–––––––
Total
£’000
260
(63)
(79)
(78)
6
–––––––
46
–––––––
–––––––
The investment in associated undertaking is a 25% interest in Pro-GRAM BV, a joint venture with three Dutch teaching
hospitals, involved in the provision of software solutions for the medical and healthcare market.
Company
Investment in subsidiary undertakings
Cost
At 1 January 2001
Additions at cost
At 31 December 2001
Amounts provided:
At 1 January 2001
Amounts provided in year
At 31 December 2001
Net book value at 31 December 2001
Net book value at 31 December 2000
£’000
39,422
14,123
–––––––
53,545
–––––––
-
30,068
–––––––
30,068
–––––––
23,477
–––––––
39,422
–––––––
–––––––
The amounts provided against investments in subsidiary undertakings result from an evaluation of the recoverable value of
the investments, carried out in accordance with Financial Reporting Standard 11, and using a discount rate of 15%.
NOTES TO THE ACCOUNTS
33
On 29 June 2001 the Group completed the acquisition of Sopheon GmbH. Sopheon GmbH was incorporated on
9 February 2001 to acquire the Technology and Information Services Division of Aventis Research & Technologies GmbH
& Co KG.The consideration for the acquisition comprised 822,598 ordinary shares of Sopheon plc as well as attributable
costs of £80,000. In addition deferred consideration estimated at £465,000 is payable in the form of Sopheon shares if
Sopheon GmbH meets certain profit targets.The market value of Sopheon shares on the date of completion was 58.5p
and accordingly the total cost recorded in respect of the acquisition was £1,026,000.
Analysis of the acquisition of Sopheon GmbH:
Net assets at the date of acquisition:
Tangible fixed assets
Deferred costs
Cash
Creditors falling due within one year
Accruals
Deferred subscription income
Creditors falling due in more than one year
Pension provision
Net assets
Goodwill arising on acquisition
Discharged by:
Fair value of shares issued
Fair value of deferred consideration
Attributable costs
Book value
and fair value
£’000
302
190
1,828
–––––––
2,320
(241)
(250)
(471)
–––––––
1,358
(332)
–––––––
1,026
–––––––
–––––––
481
465
80
–––––––
1,026
–––––––
–––––––
In the view of the directors there were no fair value adjustments required.
The deferred consideration is payable in the form of Sopheon shares and is dependant upon the profitability of Sopheon
GmbH in the years 2001 to 2003.The maximum amount payable is Euro 1,533,000.
During the period from acquisition, Sopheon GmbH contributed £218,000 to the group’s net operating cash outflow and
utilised £15,000 for capital investment.
Including the unaudited results of the predecessor business, Sopheon GmbH had turnover of £5,817,000 and a profit
before tax of £54,000 in the year ended 31 December 2001. Comparatives for the year ended 31 December 2000 are not
available, since the predecessor business formed part of a larger division of the vendor. The summarised profit and loss
account for the period from 1 January 2001 to 29 June 2001 (the date of acquisition) is as follows:
Turnover
Profit before tax
There were no recognised gains and losses other than the profit for the period.
£’000
2,952
–––––––
46
–––––––
–––––––
34
NOTES TO THE ACCOUNTS
11. INVESTMENTS (continued)
Acquisition of Orbital Software Holdings plc ("Orbital")
On 22 October 2001 the Group announced an agreed share offer for the whole of the share capital of Orbital, on the
basis of eight Sopheon shares for every nine Orbital shares. The offer was declared wholly unconditional on 15 November
2001.The consideration for the acquisition comprised 40,016,715 ordinary shares of Sopheon plc, as well as attributable
costs of £931,000. In addition holders of Orbital in-the-money share options accepted proposals whereby such options
were exchanged for 660,066 Sopheon share options at 6.193p per share.The market value of Sopheon shares on the date
of completion was 30p and accordingly the total cost recorded in respect of the acquisition was £13,096,000.
Analysis of the acquisition of Orbital:
Net assets at the date of acquisition:
Tangible fixed assets
Debtors
Short-term bank deposits
Cash
Creditors falling due within one year
Creditors falling due in more than one year
Net assets
Goodwill arising on acquisition
Discharged by:
Fair value of shares issued
Fair value of share options issued
Attributable costs
Book value and
fair value
£’000
394
417
10,208
1,669
–––––––
12,688
(1,076)
(25)
–––––––
11,587
1,509
–––––––
13,096
–––––––
–––––––
12,005
157
934
–––––––
13,096
–––––––
–––––––
In the view of the directors there were no fair value adjustments required.
During the period from acquisition, Orbital contributed £817,000 to the group’s net operating cash outflow and utilised
£2,000 for capital investment.
For the nine months to 31 December 2001, Orbital had turnover of £359,000 and a loss before tax of £6,934,000 (year
ended 31 March 2001 turnover of £1,090,000 and loss of £5,874,000). The summarised unaudited profit and loss account
for the period from 1 April 2001 to 15 November 2001 (the date of acquisition) is as follows:
Turnover
Operating loss
Interest receivable
Interest payable
Loss before tax
There were no recognised gains and losses other than the loss for the period.
£’000
227
–––––––
(6,587)
510
(3)
–––––––
(6,080)
–––––––
–––––––
NOTES TO THE ACCOUNTS
35
Details of the investments in which the group or company holds more than 20% of the nominal value of any class of share
capital are set out below. Companies marked with an asterisk* are held via Sopheon UK Limited and those marked with an
obelus† are held via Orbital Software Holdings plc.
Name of Company
Country of incorporation
Sopheon Corporation
Minnesota USA
(trading as Sopheon-Teltech)
Sopheon Corporation
Delaware USA
Orbital Software Inc. †
Delaware, USA
Sopheon GmbH
Germany
Sopheon NV
The Netherlands
Lessenger BV
The Netherlands
Sopheon UK Ltd
United Kingdom
Orbital Software Holdings plc
United Kingdom
Sopheon Edinburgh Ltd †
(formerly Orbital Software Group Ltd)
United Kingdom
Orbital Software Europe Ltd †
United Kingdom
Network Managers (UK) Ltd*
United Kingdom
AppliedNet Ltd*
(formerly Future Tense UK Ltd)
United Kingdom
Future Tense Ltd*
United Kingdom
Polydoc Ltd
Applied Network Technology Ltd*
United Kingdom
Holding
Proportion of
voting rights
Nature of Business
Common Stock
100%
Information management services,
software sales and services
Common Stock
100%
Software development
Common Stock
100%
Software sales and services
Ordinary Shares
100%
Information management services,
software sales and services
Ordinary Shares
100%
Software sales and services
Ordinary Shares
100%
Software sales and services
Ordinary Shares
100%
Software sales and services
Ordinary Shares
100%
Holding company
Ordinary Shares
100%
Software development
Ordinary Shares
100%
Software sales and services
Ordinary Shares
100%
Dormant
Ordinary Shares
100%
Dormant
Ordinary Shares
100%
Dormant
Ordinary Shares
Ordinary Shares
100%
100%
Dormant
Employee Share Ownership
Trust
36
NOTES TO THE ACCOUNTS
12. DEBTORS
Group
Trade debtors
Other debtors
Prepayments and accrued income
Company
Amounts owed by subsidiary undertakings (net of provisions)
Prepayments
2001
£’000
2000
£’000
2,489
121
982
–––––––
3,592
–––––––
–––––––
3,162
62
1,386
–––––––
4,610
–––––––
–––––––
2001
£’000
2000
£’000
-
14
–––––––
14
–––––––
–––––––
14,107
438
–––––––
14,545
–––––––
–––––––
A full provision has been made against amounts totalling £24,602,000 owed to the company by subsidiary undertakings,
which are due after more than one year, and are subordinated to the claims of all other creditors.
13. NOTES TO STATEMENT OF CASH FLOWS
(a) Reconciliation of net cash flow to movement in net funds.
Increase/(decrease) in cash
Decrease/(increase) in overdrafts and lines of credit
Net increase/(decrease) in cash and cash equivalents
Issue of convertible loan stock
Repayment of term loans
New loans
Repayments of capital elements of finance leases
Cash inflow from change in liquid resources
Change in net debt resulting from cash flows
Loans and finance leases acquired with subsidiary
Conversion of convertible loan stock
Exchange difference
Movement in net funds/(debt)
Net funds/(debt) at 1 January
Net funds at 31 December
(b) Analysis of changes in net funds
NOTES TO THE ACCOUNTS
37
2001
£’000
2000
£’000
1999
£’000
1,907
445
–––––––
2,352
(2,553)
36
-
1
3,512
–––––––
3,348
(63)
-
(27)
–––––––
3,258
–––––––
6,745
–––––––
10,003
–––––––
–––––––
(93)
(1,157)
–––––––
(1,250)
-
39
-
8
267
–––––––
(936)
-
1,571
30
–––––––
665
–––––––
6,080
–––––––
6,745
–––––––
–––––––
475
-
–––––––
475
-
4
(8)
16
6,602
–––––––
7,089
(92)
-
-
–––––––
6,997
–––––––
(917)
–––––––
6,080
–––––––
–––––––
Cash at
Bank
£’000
747
(93)
-
–––––––
654
1,907
-
-
-
–––––––
2,561
–––––––
–––––––
Short Term
Deposits/
Liquid
Resources
£’000
Overdrafts
and Lines
of Credit
Convertible
Loan Stock
Term Loans/
Finance
Leases
Total
£’000
£’000
£’000
£’000
7,004
267
-
(1,127)
(1,571)
-
(100)
47
6,080
(906)
-
–––––––
7,271
3,512
-
-
-
–––––––
10,783
–––––––
–––––––
-
–––––––
(1,127)
445
(27)
-
-
–––––––
(709)
–––––––
–––––––
1,571
–––––––
-
-
-
(2,553)
-
–––––––
(2,553)
–––––––
–––––––
-
–––––––
(53)
37
-
-
(63)
–––––––
(79)
–––––––
–––––––
1,571
–––––––
6,745
5,901
(27)
(2,553)
(63)
–––––––
10,003
–––––––
–––––––
At 1 January 2000
Cashflow
Conversion of convertible
loan stock
At 31 December 2000
Cashflow
Exchange difference
Issue of convertible
loan stock
Acquisitions
At 31 December 2001
38
NOTES TO THE ACCOUNTS
14. CREDITORS: amounts falling due within one year
Group
Overdrafts and bank lines of credit
Current instalments due on bank loans
Obligations under finance leases and hire purchase contracts
Trade creditors
Other taxes and social security costs
Accruals and deferred income
Other creditors
2001
£’000
709
54
-
2,781
282
4,528
230
–––––––
8,584
–––––––
–––––––
2000
£’000
1,127
30
1
2,190
177
3,951
333
–––––––
7,809
–––––––
–––––––
The bank line of credit is secured against the trade debtors of Sopheon-Teltech and bears interest at a rate of 3% above
US prime rate.
Company
Other creditors
Other taxes and social security costs
Accruals
Amounts owed to subsidiary undertakings
15. CREDITORS: amounts falling due after more than one year
Group
6% Convertible Unsecured Loan Stock 2004
Bank loans: amounts falling due
From one to two years
Company
Amount owed to subsidiary undertaking
6% Convertible Unsecured Loan Stock 2004
2001
£’000
496
12
690
-
–––––––
1,198
–––––––
–––––––
2001
£’000
2,553
25
–––––––
2,578
–––––––
–––––––
2001
£’000
4,295
2,553
–––––––
6,848
–––––––
–––––––
2000
£’000
70
12
306
871
–––––––
1,259
–––––––
–––––––
2000
£’000
-
22
–––––––
22
–––––––
–––––––
2000
£’000
-
-
–––––––
-
–––––––
–––––––
£2.6 million nominal of 6% Convertible Unsecured Loan Stock 2004 "the Stock"), with 557,143 detachable warrants to
subscribe for Sopheon shares, was issued at par on 20 June 2001.The Stock is convertible at any time prior to
redemption at a conversion rate of 46p per Sopheon share. In the event that the Company makes an offer of Sopheon
shares by way of rights issue, placing, open offer or similar issue at an issue price of less than 46p per share, the
conversion rate will be adjusted to equal the offering price for such Sopheon shares, provided that the conversion rate
shall not be reduced below 31.5p per share.The exercise price of the warrants is 70p per Sopheon share.The Stock is
redeemable on 30 June 2004 or earlier at the Company's option.
The bank loans comprise (i) a sterling asset purchase facility at an implicit rate of 8.8% and is repayable in 36 equal
instalments from October 1999 and (ii) a sterling loan made under the Small Companies Loan Guarantee Scheme,
bearing interest at 3% over bank base rate, in respect of which the lender holds a guarantee for 85% of the loan facility
from the Department of Trade and Industry.
NOTES TO THE ACCOUNTS
39
16. PROVISIONS FOR LIABILITIES AND CHARGES
Group
Pension provision
At 1 January 2001
Acquisitions during year
At 31 December 2001
2001
£’000
2000
£’000
-
461
–––––––
461
–––––––
–––––––
-
-
–––––––
-
–––––––
–––––––
The pension provision represents the commitment of Sopheon GmbH to provide certain pensions based on final salary.
The provision represents an actuarial calculation of the pension liabilities, as at the date of acquisition of Sopheon GmbH,
based upon the following actuarial assumptions:
Increase in salaries
Discount rate
Inflation assumption
2.75%
6.25%
1.75%
17. OBLIGATIONS UNDER LEASES
The company and group had no amounts due under finance leases and hire purchase contracts.
At 31 December 2000 and 2001 the group had annual commitments under operating leases as set out below.
Group
Operating leases which expire:
within one year
in two to five years
Totals
Land &
Buildings
2001
£’000
450
684
–––––––
1,134
–––––––
–––––––
Other
2001
£’000
43
105
–––––––
148
–––––––
–––––––
Land &
Buildings
2000
£’000
69
719
–––––––
788
–––––––
–––––––
Other
2000
£’000
12
119
–––––––
131
–––––––
–––––––
The company had no commitments under operating leases as at 31 December 2000 and 2001.
40
NOTES TO THE ACCOUNTS
18. SHARE CAPITAL
Authorised
Ordinary shares of 5p each
Deferred shares of 15p each
Allotted, called up and fully paid
Ordinary shares of 5p each
Deferred shares of 15p each
2001
Number
2001
£
2000
Number
2000
£
125,000,000
-
–––––––––
–––––––––
6,250,000
-
–––––––––
–––––––––
60,000,000
19,228,885
–––––––––
–––––––––
3,000,000
2,884,333
–––––––––
–––––––––
2001
Number
2001
£
2000
Number
2000
£
82,311,575
-
4,115,579
-
–––––––––
4,115,579
–––––––––
–––––––––
38,624,913
19,228,885
1,931,246
2,884,333
–––––––––
4,815,579
–––––––––
–––––––––
On 18 January 2000 25,000 ordinary shares were issued for cash to exercising holders of share options at 20p each and
30,000 ordinary shares were issued at 145p per share in consideration for the provision of marketing services together
with a payment of 20p per share in cash. On 1 February 2000 400,000 ordinary shares were issued for cash to an
exercising holder of share options at 20p each.
On 9 March 2000 2,500,000 ordinary shares of Sopheon plc were placed with institutions at a price of 800p per share,
realising net proceeds of £18,953,000 after attributed costs of £1,047,000. On 22 March 2000 a further 122,500 ordinary
shares were issued for cash at a price of 800p per share to certain of the company’s advisers from their commissions or
fees arising from the placing.
On 25 April 2000 20,000 ordinary shares were issued for cash to an exercising holder of share options at 20p each, and
45,000 ordinary shares were issued at 145p per share in consideration for the provision of marketing services together
with a payment of 20p per share in cash. On 25 May 2000 10,000 ordinary shares were issued for cash to an exercising
holder of share options at 89.5p each.
On 30 June 2000 the authorised share capital of the Company was increased to £5,884,333 by the creation of an
additional 17,097,039 ordinary shares of 5p each.
On 31 July 2000 1,075,971 ordinary shares were issued pursuant to the exercise of conversion rights attaching to the
£1,571,920 5% convertible loan stock.
On 15 September 2000 2,094,105 ordinary shares were issued as part consideration for the acquisition of Teltech
Resource Network Corporation and on 12 December 2000 a further 491 ordinary shares representing fractional
entitlements were placed for cash at 180p per share.
On 10 October 2000 170,000 ordinary shares were issued for cash pursuant to the exercise of share options, comprising
120,000 shares at 120p each, 30,000 shares at 150p each and 20,000 shares at 177.5p each .
On 1 June 2001 17,441 ordinary shares were issued for cash at 8.6p per share pursuant to the exercise of a share option
and 7,114 ordinary shares were issued at 146p by way of deferred consideration to the vendors of Lessenger BV
On 28 June 2001 3,471,191 ordinary shares were issued to Aventis Research & Technologies GmbH & Co. KG, of which
822,598 were issued at 58.5p as consideration for the acquisition of Sopheon GmbH and 2,648,593 were issued for cash
at 58.5p per share.
On 29 June 2001 at the Annual General Meeting shareholder approved the purchase for cancellation of the issued
deferred shares of 15p each in the Company. Following such cancellation, the unissued deferred shares of 15p each were
subdivided and re-designated as unissued ordinary shares of 5p each.
On 12 September 2001 20,000 ordinary shares were issued for cash at 20p per share pursuant to the exercise of a share
option.
On 7 November 2001 at an Extraordinary General Meeting convened to approve the acquisition of Orbital Software
Holdings plc, the authorised share capital of the Company was increased to £6,250,000 consisting of 125,000,000
ordinary shares of 5p each.
NOTES TO THE ACCOUNTS
41
On 15 November 2001, the offer to acquire the share capital of Orbital Software Holdings plc ("Orbital") was declared
wholly unconditional. On 4 December 2001 Sopheon plc, having received acceptances to the offer in respect of over 90%
of the issued share capital of Orbital, initiated the procedure under section 429 of the Companies Act 1985 to acquire
compulsorily the remaining Orbital shares. Pursuant to the offer, 40,016,715 ordinary shares were issued at 30p per share
as consideration for the acquisition of 100% of the issued share capital of Orbital.
On 23 November 2001 18,941 ordinary shares were issued for cash pursuant to the exercise of share options, comprising
1,500 shares at 184p each and 17,441 shares at 8.6p each.
On 11 December 2001 17,441 ordinary shares were issued for cash at 8.6p per share pursuant to the exercise of a share
option.
On 21 December 2001 8,720 ordinary shares were issued for cash at 8.6p per share pursuant to the exercise of a share
option.
On 28 December 2001 109,099 ordinary shares were issued at 565p per share by way of incentive payments to certain US
members of staff, including 41,666 ordinary shares issued to A. Michuda, a director of Sopheon plc, pursuant to terms
agreed at the time of the acquisition of Teltech Resource Network Corporation
Contingent rights to subscribe for Sopheon shares
At 31 December 2000 there were outstanding 900,000 warrants to subscribe for Sopheon shares at a price of 146p per
share. In December 2000 the latest date for exercise of the warrants was extended from 31 December 2000 to 31 March
2001.The warrants were issued in July 1998 to the subscribers of £1,570,920 5% Convertible Loan Stock referred to
above.The warrants expired unexercised on 31 March 2001.
On 19 June 2001 Sopheon issued £2.6 million of Convertible Unsecured Loan Stock (the "Stock") with 557,143 detachable
warrants to subscribe for Sopheon shares. On 7 November 2001 at an Extraordinary General Meeting of holders of the
Stock, the conversion rate of the Stock was reduced to 46p, the market price for Sopheon shares prevailing immediately
before the announcement of the offer for Orbital. In the event of any further offering of Sopheon shares taking place prior
to conversion, whether by way of rights issue, placing, open offer or similar issue, the conversion rate shall be adjusted to
the higher of offering price, if lower than 46p, and 31.5p.The warrants are exercisable at 70p per share during the period
20 June 2002 to 19 June 2003.
Employee share option schemes
On 28 August 1996 the directors adopted, and the company in general meeting approved, a share option scheme to
provide for the grant to certain directors and employees of PolyDoc NV (renamed Sopheon NV) of options over Sopheon
ordinary shares in exchange for the surrender by such directors and employees of their existing options over shares in
PolyDoc NV, and to provide for further grants of share options to employees of the Sopheon group subject to Dutch tax.
On the same date the directors adopted, and the company in general meeting approved, the Sopheon Executive Share
Option Scheme in a form approved by the Inland Revenue. Subsequently an unapproved executive share option scheme
was established with terms similar to the approved scheme.
Pursuant to the acquisition of AppliedNet Limited in November 1999, share options granted under the AppliedNet
unapproved share option scheme were released in exchange for the grant of new options over Sopheon ordinary shares.
These share options remain subject to the rules of the AppliedNet unapproved scheme.
On 29 September 2000, following the acquisition of Teltech Resource Network Corporation, the directors adopted the
Sopheon plc (USA) Stock Option Plan, under which share options can be granted either as qualifying Incentive Stock
Options (ISOs) or as Non-Qualifying Options (NQOs).
At the Extraordinary General Meeting held on 7 November 2001 shareholders approved a maximum of 4,250,000
Sopheon ordinary shares, plus such number of Sopheon options as may fall to be issued as replacement options to holders
of Orbital share options, over which options could be granted under any employee share option scheme.
Pursuant to the acquisition of Orbital Software Holdings plc in November 2001, share options granted under the Orbital
Software Group Limited Share Option Scheme were released in exchange for the grant of 660,066 new options over
Sopheon ordinary shares.These options remain subject to the rules of the Orbital Software Group Limited Share Option
Scheme. Accordingly, the maximum limit referred to in the previous paragraph increased from 4,250,000 to 4,910,066
Sopheon shares over which options may be granted.
42
NOTES TO THE ACCOUNTS
18. SHARE CAPITAL (continued)
A summary of options granted under the share option schemes at 31 December 2001 is set out below.
Year of grant
1996
1997
1998
1998 (1)
1999
1999
1999 (1)
1999
1999 (2)
1999 (1)
1999 (1)
1999 (2) (3)
1999
1999 (3)
2000 (2)
2000
2000 (2)
2000 (2)
2000 (2)
2000 (2)
2000
2000
2000 (2)
2000 (2)
2000
2000 (2)
2001
2001
2001(2)
2001 (4)
2001 (4)
Number
40,000
1,000
24,000
100,284
2,500
10,000
87,209
35,000
42,500
13,080
43,600
52,500
10,000
100,000
12,000
3,000
2,000
10,000
13,500
25,000
62,000
15,000
110,261
10,000
5,000
122,900
36,000
94,000
215,939
209,443
450,623
Exercise
Price (£)
Exercise Period
From
To
0.2000
1.9750
1.7000
0.0860
1.4150
1.4150
0.0860
1.4250
1.5000
0.8732
0.8732
1.5000
1.5000
1.5000
5.7900
6.0725
7.1800
9.6000
4.9500
5.0000
4.9500
4.2750
4.2750
3.7250
1.6000
1.6000
1.0000
0.7750
0.7750
0.0619
0.0619
28-08-96
01-06-00
29-06-98
29-12-01
20-01-02
20-01-99
04-03-02
28-04-99
28-04-00
01-06-02
01-10-02
03-11-00
03-11-02
22-11-02
24-01-01
25-01-01
31-01-01
08-02-01
28-06-01
26-06-01
28-06-03
02-10-03
02-10-01
15-11-01
31-12-03
31-12-01
01-04-02
02-05-04
02-05-02
14-09-01
03-08-00
21-07-06
01-06-07
29-06-03
29-12-08
20-01-09
20-01-04
04-03-09
28-04-04
28-04-09
01-06-09
01-10-09
03-11-09
03-11-09
22-11-09
24-01-10
25-01-10
31-01-10
08-02-10
28-06-10
26-06-10
28-06-10
02-10-10
02-10-10
15-11-10
31-12-10
31-12-10
01-04-03
02-05-11
02-05-11
14-09-08
03-08-10
(1) Arising from options held by employees of AppliedNet and rolled over into Sopheon options.
(2) One fourth of these options become exercisable each year starting on the date indicated. All other options become
exercisable in full from the date indicated.
(3) Includes options which are contingent upon certain performance targets.
(4) Arising from options held by employees of Orbital Software Holdings plc and rolled over into Sopheon options.
Other share options
Fully vested options to subscribe for 718,292 Sopheon ordinary shares at prices between £1.84 and £5.15 were granted
on 15 September 2000 as part of the consideration payable in respect of the acquisition of Teltech Resource Network
Corporation.These options, with exercise dates between 7 June 2001 and 31 July 2010, are held by the vendors of
Teltech. At 31 December 2001 73,555 of such options had lapsed, 1,500 have been exercised and 643,237 remained
outstanding, in respect of which the aggregate exercise price was £1.4 million.
NOTES TO THE ACCOUNTS
43
19. SHAREHOLDERS’ FUNDS
Group
At 1 January 1999
Arising on share issues
Adjustment to earn out
Retained loss for the year
Exchange differences
At 31 December 1999
Arising on share issues
Shares to be issued
Issue of share options
Retained loss for the year
Exchange differences
At 31 December 2000
Purchase and cancellation
of deferred shares
Arising on share issues
Shares to be issued
Issue of share options
Retained loss for the year
Exchange differences
At 31 December 2001
Share
Capital
£’000
3,773
718
-
-
-
–––––––
4,491
325
-
-
-
-
–––––––
4,816
(2,884)
2,184
-
-
-
-
–––––––
4,116
–––––––
–––––––
Shares
to be
Issued
£’000
15
-
(5)
-
-
–––––––
10
-
620
-
-
-
–––––––
630
-
(630)
465
-
-
-
–––––––
465
–––––––
–––––––
Share
Premium
Account
£’000
2,213
7,807
-
-
-.
–––––––
10,020
33,300
-
-
-
-.
–––––––
43,320
-
2,052
-
-
-
-
–––––––
45,372
–––––––
–––––––
Merger
Reserve
£’000
-
7,940
-
-
-
–––––––
7,940
-
-
-
-
–––––––
7,940
-
10,444
-
-
-
-
–––––––
18,384
–––––––
–––––––
Other
Reserves
£’000
-
-
-
-
-
–––––––
-
-
-
2,417
-
-
–––––––
2,417
2,884
(6)
-
160
-
-
–––––––
5,455
–––––––
–––––––
Profit &
Loss
Account
£’000
(6,865)
-
-
(2,072)
(45)
–––––––
(8,982)
-
-
-
(11,945)
100
–––––––
(20,827)
-
-
-
-
(34,631)
31
–––––––
(55,427)
–––––––
–––––––
The adjustment to earn out represents an adjustment to contingent consideration payable in respect of Lessenger
Associates BV, acquired in December 1998.
44
NOTES TO THE ACCOUNTS
19. SHAREHOLDERS’ FUNDS (continued)
Company
At 1 January 2000
Arising on share issues
Shares to be issued
Issue of share options
Retained profit
for the year
At 31 December 2000
Purchase and cancellation
of deferred shares
Arising on share issues
Shares to be issued
Issue of share options
Retained loss for the year
Transfer of impairment loss
to merger reserve
At 31 December 2001
Merger
Reserve
£’000
7,940
-
-
-
Other
Reserve
£’000
-
-
-
2,417
Profit &
Loss
Account
£’000
(5)
-
-
-
-
–––––––
7,940
-
–––––––
2,417
908
–––––––
903
Share
Capital
£’000
4,491
325
-
-
Shares to
be Issued
£’000
10
-
620
-
-
–––––––
4,816
-
–––––––
630
Share
Premium
Account
£’000
10,020
33,300
-
-
-
–––––––
43,320
-
2,052
-
-
-
(2,884)
2,184
-
-
-
-
–––––––
4,116
–––––––
–––––––
-
(630)
465
-
-
-
10,444
-
-
-
2,884
(6)
-
160
-
-
–––––––
465
–––––––
–––––––
-
–––––––
45,372
–––––––
–––––––
(7,765)
–––––––
10,619
–––––––
–––––––
-
–––––––
5,455
–––––––
–––––––
-
-
-
(54,411)
7,765
–––––––
(45,743)
–––––––
–––––––
Other reserves comprise (for both Group and Company):
Capital redemption reserve
Reserve arising from issues of share options
in connection with acquisitions
2001
£’000
2,884
2000
£’000
-
2,571
–––––––
5,455
–––––––
–––––––
2,417
–––––––
2,417
–––––––
–––––––
NOTES TO THE ACCOUNTS
45
20. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
The group’s approach to managing financial risk is described in the Directors’ Report. Disclosures made in this note, other
than currency disclosures, exclude short term debtors and creditors.
Interest rate risk profile of financial liabilities
The financial liabilities of the group at each year-end are set out below.
Floating rate line of credit – US Dollar
Floating rate overdraft – Sterling
Fixed rate loans – Sterling
Fixed rate 6% convertible unsecured loan stock 2004
2001
£'000
2000
£'000
641
68
78
2,553
–––––––
3,340
–––––––
–––––––
1,011
116
53
-
–––––––
1,180
–––––––
–––––––
Other than the 6% Convertible Loan Stock 2004, these financial liabilities bear interest rates that are based on local bank
rates.
Interest rate risk profile of financial assets
The financial assets of the group at each year end comprise cash or cash deposits on money market deposit at call and
monthly rates.The amounts were as follows
Floating rate
Sterling
Euro
Non-interest bearing
Sterling
US Dollar
Euro
Total financial assets
Currency exposures
2001
£'000
2000
£'000
10,511
1,805
–––––––
12,316
806
115
107
–––––––
1,028
–––––––
13,344
–––––––
–––––––
7,271
-
–––––––
7,271
198
217
239
–––––––
654
–––––––
7,925
–––––––
–––––––
The table below shows the group's transactional currency exposures that give rise to the net currency gains and losses
recognised in the profit and loss account. Such exposures comprise the monetary assets and monetary liabilities of the
group that are not denominated in the operating currency of the operating unit involved, and have arisen only in operating
units with a functional currency of Sterling.
2000 Sterling
2001 Sterling
Net foreign currency monetary assets
US dollar
£’000
101
10
–––––––
–––––––
Euro
£'000
Total
£'000
25
272
–––––––
–––––––
126
282
–––––––
–––––––
46
NOTES TO THE ACCOUNTS
20. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (continued)
Maturity of financial liabilities
The maturity profile and interest rates of the group's financial liabilities at each relevant period or year-end is as set out in Notes
14 and 15.
Borrowing facilities
The group had no undrawn committed facilities available at each relevant period or year end, apart from overdraft facilities and
lines of credit.
Fair values of financial assets and liabilities
The fair values of financial assets and liabilities are set out below. Finance leases are included in the analysis of long term
borrowings.The directors consider that there were no material differences between the book values and fair values of all the
group's financial assets and liabilities at each year end.
Cash and short term deposits
Bank overdrafts and lines of credit
Current portion of long-term borrowings
Long-term borrowings
Convertible Unsecured Loan Stock 2004
21. CONTINGENT LIABILITIES
Book value
2001
£'000
13,344
(709)
(54)
(25)
(2,553)
–––––––
–––––––
2000
£'000
7,925
(1,127)
(31)
(22)
-
–––––––
–––––––
In accordance with Article 403, Paragraph 1, Subsection b, Book 2 of the Dutch Civil Code (B.W.), Sopheon plc guarantees the
liabilities of Sopheon NV and agrees with the departure from the regulations in Title 9 Book 2 of the Dutch Civil Code (B.W.), that
prescribes the submission of the accounts of Sopheon NV to the Trade Register in the Netherlands.
NOTES TO THE ACCOUNTS
47
Sopheon Corporation (USA)
Sopheon NV (NL)
Sopheon UK Limited (UK)
Sopheon GmbH (D)
2850 Metro Drive
Minneapolis, Minnesota
55425-1566
USA
Tel: +1 952-851-7500
Fax: +1 952-851-7744
“De Gelder”
A.J. Ernststraat 595-G
1082 LD Amsterdam
The Netherlands
Tel: +31 (0) 20 301 3900
Fax: +31 (0) 20 301 3999
Stirling House, Stirling Road
Surrey Research Park
Guildford, Surrey GU2 7RF
UK
Tel: +44 (0) 1483 883 000
Fax: +44 (0) 1483 883 050
Industriepark Höchst, F821
D-65926 Frankfurt am Main
Deutschland
Telefon: +49 (0)69 305-16662
Telefax: +49 (0)69 305-29770
E-mail:
info_us@sopheon.com
E-mail:
info_nl@sopheon.com
E-mail:
info_uk@sopheon.com
E-mail:
info@sopheon.de
www.sopheon.com