10
ComputerLand SA
ADDITIONAL INFORMATION
to the abridged financial statements SA-QSr3 / 2005
1. Accounting principles and methods, assets and liabilities valuation methods as of the balance sheet day and profit and loss measurement methods.
The financial statements was drawn up according to the following regulations:
- The Act on Accounting of September 29th, 1994 (uniform text Journal of Laws No. 76, item 694, 2002);
- The Ordinance of the Council of Ministers of October 19th, 2005, on current and periodical information communicated by the issuers of securities (Journal of Laws No. 209, item 1744);
The principles for drawing up financial statements for Q3 2005 employed by the Company have not changed since their last description included in the financial statements for the year 2004 - SA-R 2004.
2. Information on corrections due to provisions and asset component revaluation write-offs.
As of September 30th, 2005, the provisions and assets related to deferred income tax were as follows:
- provisions related to deferred income tax:
in PLN thousand
Item / Balance on 30.06.2005 / Changes in Q3 / Balance on 30.09.20051. non-settled investment relief / 2 / (1) / 1
2. revaluation of securities / 528 / (141) / 387
3. estimated income from long-term contracts / 5,731 / 1,511 / 7,242
4. non-settled positive exchange rate differences / 10 / (1) / 9
5. capital component related to B series convertible bonds / 1.174 / (256) / 918
6. other / 6 / (2) / 4
Total provisions related to deferred income tax / 7,451 / 1,110 / 8,561
- assets related to deferred income tax
in PLN thousand
Item / Balance on 30.06.2005 / Changes in Q3 / Balance on 30.09.20051. provisions made / 2,266 / 1,059 / 3,325
2. non-paid remuneration / 1,466 / 90 / 1,556
3. estimated cost of handling B series convertible bonds / 4,332 / 536 / 4,868
4. non-settled negative exchange rate differences / 28 / 27 / 55
5. estimated costs from long-term contracts / 889 / 225 / 1,114
6. financial assets revaluation / 1,834 / (913) / 921
7. other / 367 / (86) / 281
Total assets related to deferred income tax / 11,182 / 938 / 12,120
Changes in asset revaluation write-offs during Q3 2005 were as follows:
in PLN thousand
Item / Balance on 30.06.2005 / Changes in Q3 / Balance on 30.09.20051. receivables revaluation / 4,868 / (83) / 4,785
2. financial assets revaluation / 10,967 / (5,175) / 5,792
3. other assets revaluation / 89 / - / 89
Total asset revaluation write-offs / 15,924 / (5,258) / 10,676
Selected items in assets and liabilities shown in financial statements were converted into EUR at an average PLN-EUR exchange rate specified by the National Bank of Poland on the balance sheet day. Selected items in the profit and loss account were converted into EUR at an average exchange rate calculated as an arithmetic mean of all average exchange rates specified by the National Bank of Poland on the last day of each month included in the profit and loss account.
Average Exchange rate on the
exchange rate last day of the period
January-September ending on September 30th
2004 4.3832 4.6214
2005 3.9166 4.0583
3. The ComputerLand SA Capital Group
On September 19th 2005,GEOMAR S.A. (a subsidiary of ComputerLand S.A.) has taken up 15.000 shares in KPG Sp. z o.o. GEOMAR S.A. shall own 19.847 shares constituting 81,66% in the Company’s share capital and shall be entitled to 19.847 votes at the Partner Assembly constituting 81,66% of the total number of votes at the KPG Sp. z o.o.’s Partner Assembly
(communication of ComputerLand SA – 52/2005 of 2005, September 20th)
In the Q3, ComputerLand increased its share in the Russian subsidiary company CSBIEE from 94,71% to 100,00%.
On September 5th, 2005, ComputerLand S.A. pursuant to a sales contract sold to PermobileSp.zo.o. 38.999 shares in eCard S.A. of nominal value PLN 100 each, representing 28,95% in share capital of eCard S.A. and entitling to 28,95% votes in a total number of votes at General Assembly of eCard S.A.
(communication of ComputerLand SA – 48/2005 of 2005, 6th)
On August 26th 2005 the Company „Projekty Bankowe Polsoft” Sp.zo.o received a ruling of the District Court in Poznań, XXI Economic Department of the National Court Register on the registration of the merger of this company with its subsidiary „Centrum Informatyki Zeto-Rodan” Sp.zo.o.
(communication of ComputerLand S.A. – 46/2005 of 2005, August 31st)
On November 7th, 2005, The Extraordinary General Shareholder Assembly of ComputerLand S.A. have passe resolutions on the merger of ComputerLand SA with the company Centrum Informatyki Energetyki Sp.zo.o. and the company ComputerLand Mielec Sp.zo.o.
(communication of ComputerLand SA – 70/2005 of 2005, November 7th)
4. Profit and loss accounts, description of significant achievements or failures and most important events that took place in the period subject to this report.
In Q3 2005 ComputerLand experienced an increase in income and the operating and net profits remained stable. Income amounted to over PLN 143 million, the operating profit to PLN 8.3 million, and the net profit to PLN 3.9 million.
Q1 2005 / Q2 2005 / Q3 2005Income / 118,966 / 129,610 / 143,503
Operating profit / 8,340 / 7,381 / 8,297
Net profit / 4,663 / 6,487 / 3,900
Q3 2004 / Q3 2005 / Change
Income / 133,045 / 143,503 / 7.9%
Operating profit / 8,788 / 8,297 / (5.6%)
Net profit / 4,651 / 3,900 / (16.1%)
The number of concluded agreements increased, and the order portfolio was enhanced.
In Q32005 the Group experienced a clear increase in the number of concluded agreements that resulted in an increase in the value of the order portfolio that amounted to over PLN 400 million as of the end of Q3. The Group concluded new contracts, mostly with Customers from the public sector, as well as in the B&F sector. The most important contracts are:
The agreement with the Ministry of Economy and Labour for maintenance and development of PULS application software within the SYRIUSZ Information System for Public Employment Services. Under this agreement the Company shall conduct works on maintenance and development of the PULS software deployed in Public Employment Service units for three subsequent years. The value of this agreement is nearly PLN 18 million gross.
The agreement with the Ministry of National Education (together with ComputerLand’s subsidiary company ARAM) on performing the “Internet laboratories for schools” project that is co-financed by the European Social Fund. The project consists in providing 1335 schools with internet laboratories - hardware installation, connection to the existing Internet network and overall integration. The value of this agreement in PLN 63 million gross.
The agreement with PSE Serwis Sp. z o.o. concluded by the general partnership “BUDIMEX DROMEX S.A. COMPUTERLAND S.A.”, which ComputerLand SA is a partner in. The company was created as a purpose company in order to organize the performance of the investment task named “Construction of the seat of a Transmission System Operator in Konstancin Bielawa, together with all external connections”. ComputerLand S.A. will be responsible for performing all teletechnical and electrical works. The expected Company’s income will be PLN 51 million gross, received before Q1 2007.
The agreement with the Agency for Restructuring and Modernization of Agriculture (in the name of a consortium that includes, apart from ComputerLand S.A., CL Group companies - KPG Sp. z o.o. and GEOMAR S.A., as well as Przedsiębiorstwo Miernictwa Górniczego Sp. z o.o.) for the delivery of a service consisting in controlling selected farms within the framework of the IACS system on the territory of the Łódzkie, Opolskie, Śląskie and Świętokrzyskie provinces. The consortium will use its own GIS (Geographical Information Systems) IT solutions to collect and analyze the data. The maximum value of the concluded agreement is over PLN 23 million gross.
Apart from the aforementioned contracts concluded with entities from sectors handled by the Group for a long time, the Company acquired interesting orders on the new chemical market and the intensively developed local government sector.
The agreement with Zakłady Azotowe Puławy for the deployment of a means of transport identification and access control system. This agreement covers the informatization of two areas of the enterprise’s activities - transport logistics and access to company’s facilities and dedicated manufacturing zones subject to strict access control in the area of the entire plant. Moreover, this contract concerns the installation of a visual monitoring system. The value of this agreement is PLN 3 million gross.
The agreement with Zarząd Komunalny Zasobów Lokalowych Miasta Poznania (Communal Management of Housing Resources of the City of Poznań) for IT outsourcing. Due to services provided comprehensively by ComputerLand, the city of Poznań will be able to, among others, better administer its housing assets, including renovation and maintenance of communal apartments in Poznań. The IT system developed and operated by ComputerLand will also facilitate the process of making strategic decisions on the construction and sale of apartments owned by the city. The agreement was concluded for 5 years, and its vale is over PLN 7 million gross.
Effect and performance guarantee
During the last quarter the ComputerLand Group completed many important and complex deployments and continued a number of significant projects for key Customers.
On the turn of September 2005 ComputerLand, as a subcontractor of Hewlett Packard Polska Sp. z o.o., completed the project related to the deployment of a banking system in LUKAS Bank S.A., the principal shareholder of which is the French bank Credit Agricole. The deployment was performed on the basis of the Profile centralized banking system and HP’s own solutions. The Company provided Lukas Bank with a license for the Profile transaction system, accessible in CITRIX’s MetaFrame environment, performed customization works and migrated data from LUKAS Bank’s legacy transaction system to Profile. ComputerLand also deployed the SPID data processing and interpretation system and SPID BP that performs obligatory reporting sent to the National Bank of Poland.
In Q3 ComputerLand was also finalizing a multiZBYT system deployment project in the Łódzki Zakład Energetyczny S.A. This system works with a centralized database and supports over 500000 recipients within the scope of Mass and Small receipt. The linking of multiZBYT with mySAP.com and FileNet systems, as well as basing ŁZE’s CallCenter on a request record module allowed to create a unique, state-of-the-art and comprehensive solution that supports ŁZE’s customer support.
ComputerLand continued the development of an Integrated Accounting System (ZSK) at the National Bank of Poland. The Group performed a number of large projects in Telekomunikacja Polska, among others Geomarketing.CL, Accounting System and Operations Support System (OSS) that consisted in developing and deploying an IT platform supporting far-reaching network services delivery and maintenance processes, as well as voice service diagnostics and activation automation processes.
The ability to perform such complex IT projects and numerous credentials combined with industry-focused knowledge and professional deployment teams show the strength of the Group. They are one of the factors that guarantee further dynamic development of ComputerLand.
Further market consolidation
In Q3 ComputerLand acquired the proprietary copyright to URZĄD software and took over all employees of Efekt Software Sp. z o.o. This acquisition allowed to support nearly 50 new customers from the local government administration sector, mostly commune offices.
At the same time ComputerLand merged with Zeto Rodan and PB Polsoft, commenced the process of merging with CL Mielec and CIE (completed with the resolution of the General Shareholder Assembly of November 7th, 2005), as well as purchased additional shares in Russian CSBI (now ComputerLand owns 100% of this company’s shares).
ComputerLand’s acquisitions result from the implementation of the strategy of an active, systematic and disciplined (within the scope of investment criteria) process of acquiring entities operating in the area of ComputerLand’s primary business activities. This process is aimed at ensuring an increase in the value of the entire Group. In this manner the Company intends to strengthen its competences and market position, at present mostly in the public, chemical and banking sectors on the international arena, as well as within the scope of outsourcing services. Within the framework of the initial stage of the strategy, over 150 companies were reviewed and a few dozens of possible acquisition targets were selected and negotiations were commenced. At the same time the Company performs current modifications of the Group’s structure in order to ensure effective management of projects performed by individual members of the Group.
Within the course of the next few weeks ComputerLand shall execute at least one new acquisition. The number of transactions is expected to increase during the next few months and to stabilize on 5-7 transactions a year.
5. Description of factors and events, especially untypical, that had significant influence on the profit achieved.
5.1. B series convertible bonds handling
The financial costs for Q3 2005 include the amount of PLN 4,168 thousand for handling issued B series convertible bonds. Interest of B series bonds (8.5% per annum) accrued during this period amounted to PLN 1,446 thousand, and the amount of Premium payable on buying back the bonds amounts to PLN 1,373 thousand.
The structure of financial costs related to B series bonds, with consideration of depreciated financial instrument costs, is as follows:
Reporting period / Interest 8.5% / Premium*/ / Depreciated financial instrument costs / One-time costs resulting from the partial buy-back transaction / Total costs2001 / 4,662 / 4,425 / (223) / 8,864
2002 / 7,597 / 7,210 / 725 / 15,532
2003 / 7,584 / 7,210 / 2,434 / 17,228
2004 / 7,609 / 7,230 / 4,440 / 4,772 / 24,051
1Q/2005 / 1,415 / 1,342 / 1,141 / 3,898
2Q/2005 / 1,431 / 1,358 / 1,232 / 4,021
3Q/2005 / 1,446 / 1,373 / 1,349 / 4,168
*/Amount of the Premium payable on buying back the bonds.
The table below shows this structure in subsequent years until the day of bonds buy-back on 21.05.2006, with consideration of savings from partial buy-back:
Reporting period / Interest 8.5% / Premium*/ / Depreciated financial instrument costs / Total costs4Q/2005 / 1,445 / 1,373 / 1,501 / 4,319
2006 / 2,216 / 2,104 / 2,600 / 6,920
*/Amount of the Premium payable on buying back the bonds.