Home > Financial > Scala Beats 2001 Expectations With $10.7m Operating Profit and $4.0m Net Profit

Scala Beats 2001 Expectations With $10.7m Operating Profit and $4.0m Net Profit

Added: (Mon Feb 18 2002)

Pressbox (Press Release) - Best-ever Profit; Cash Balances Up 66%; Strong Increases in License Revenue and Maintenance Revenue

18 February 2002: Solid business from global companies has led collaborative ERP vendor Scala Business Solutions to report its best-ever profits in 2001, with USD 10.7 million operating profit before interest, depreciation and amortization, and net profit of USD 4.0 million. Chief Executive Officer Mike Burdett said that Scala is the only mid-market vendor to provide a global collaborative ERP solution to the mid-size subsidiaries, divisions and suppliers of global companies, and its success is clearly demonstrated by the excellent profit figures and growth in license and maintenance revenue during the last financial year.

Operating profit in 2001, before interest, depreciation and amortisation, was USD 10.7 million compared to an operating loss in 2000 of USD 13.1 million. Net profit was USD 4.0 million, a dramatic improvement over the USD 36.6 million loss reported in 2000. Compared to 2000, license and maintenance revenue collectively grew by 14 percent to USD 51.9 million – the highest level ever. Total revenue for 2001 was USD 70.6 million.

Commenting on the company’s strong performance in 2001, Burdett said, “More global companies are looking to us to provide collaborative ERP systems for their mid-size subsidiaries and divisions in order to bring the essential standardisation to their business processes, not only for our advanced e-business connectivity solutions but also because we have the in-built legislative and language capabilities to support global operations, plus proven delivery capabilities throughout the world.”

Burdett added that for standardisation to be effective, it should be implemented across the enterprise. This is precisely what Scala is achieving for the mid-size subsidiaries and divisions of its multinational customers. “Not only are these companies seeing the immediate benefits of dealing with one reliable supplier, but they are also praising our products’ low total cost of ownership,” he said. “One of our major customers recently stated publicly that it costs them two-thirds less to run Scala than SAP. It is customers like this who are converting to Scala across their international operations, evidenced by the USD 4.5 million order we signed in the last quarter of 2001, our biggest-ever such contract.”

Strong Performance in 2001

Total revenue in the fourth quarter 2001 was USD 20.5 million compared to USD 17.6 million in Q4 2000, an increase of 16 percent. License revenue was USD 8.5 million compared to USD 7.1 million in the same quarter 2000, an increase of 21 percent. Maintenance revenue increased by 31 percent to USD 7.0 million. Net profit for Q4 2001 was USD 2.0 million (loss of USD 4.9 million in Q4 2000).

For the full year 2001, Scala reported total revenue of USD 70.6 million (USD 71.2 million in 2000). Revenue from software licenses and maintenance for the full year 2001 amounted collectively to USD 51.9 million, an increase of 14 percent compared to the 2000 figure of USD 45.5 million. As the company continued to increase the amount of services provided via third-party channels, consultancy revenue fell to USD 17.5 million, 23 percent lower than in 2000, reflecting the change in focus which has delivered higher gross margins on the reduced consultancy revenue base.

Total costs of revenue and operating expenses in 2001 were USD 59.9 million, a decrease of 29 percent compared to USD 84.3 million in 2000, providing clear evidence of the company’s achievement in significantly reducing its cost base. The closing cash balance for 2001 was USD 13.7 million, an increase of 66 percent on the closing balance in 2000 of USD 8.2 million.

The net profit of USD 4.0 million in 2001 translates into earnings per share of USD 0.18 compared to a net loss per share in 2000 of USD 1.78.

“I want to thank again and pay tribute to Chris Houle,” Burdett said. “As CEO in 2000 and 2001, Chris had the courage to lead our company to a successful turnaround in 2000, resulting in the very pleasing profitability and revenue figures we have reported for 2001. The good shape in which he leaves the company is a tribute to the success of his leadership.” Burdett succeeded Houle as CEO on 1 January 2002.

2001 Business Highlights

Biggest-ever order from a single customer – USD 4.5 million. Scala signed a major new contract with one of its existing global customers for Scala ERP and iScala Internet software. The new order includes upgrades to the customer’s existing Scala installations and substantial new license business, which will be implemented over the next two years.

Siemens Alarmcom USD 1 million contract for collaborative ERP system. Just four months after choosing Scala to plan and implement an e-commerce project, Siemens subsidiary Alarmcom signed a further contract valued at USD 1 million for a collaborative commerce project, to automate its internal business processes from end-to-end by using iScala Data Exchange Server and iScala Managers.

Scala named by IDC as market leader in China for the second year running. In June 2001, International Data Corporation (IDC) named Scala as the number one ERP vendor in China. According to IDC, Scala was the vendor with the largest customer base in China at the end of 2000, totalling 315 installations – over 12 percent of all ERP installations in mainland China.

New partnerships in Japan, Latin America, Nordic region, Western, Eastern and Southern Europe, and Russia. Scala extended its network to a total of 110 partners worldwide. Partnership agreements include: Digital Design, a recognised leader in the Russian market for information systems development; Informatika, the largest systems integrator in Yugoslavia; and J-Seed Information Systems who will sell the integrated Scala product line – Scala ERP products and iScala Internet software – coupled with consulting and implementation services in Japan.

Acquisition of intellectual property rights. Scala bought the exclusive rights to ERP workflow and graphical user interface (GUI) development software from New Miracle AG, a Swiss software development company. The software will enable Scala to shorten time to market for enhanced and additional functionality in its iScala product line.

New products launched. Scala Connectivity Solution, Scala Smart Tags for Office XP, iScala Adapter for BizTalk Server, and iScala Web Reporter were all released in 2001.

Scala named ‘ERP Solution of The Year’ for 2001 by Microsoft. “This award recognises the value that Scala offers to its customers in over 100 countries," said Ian Rogoff, Vice President Worldwide Partner Group at Microsoft. The title was awarded to Scala following the company’s success in exceeding the high standards required to compete against worldwide competition.

On The Move in 2002

Despite the continuing difficult market conditions, Scala’s focused market strategy will continue to deliver similar rates of organic growth to those the company reported for 2001. “Our product development strategy will continue to deliver leading-edge technological developments that will further enhance our market and competitive position,” Burdett said. “In addition, we have begun the process of developing products and infrastructure to support the indirect channels that we anticipate will provide further license and maintenance growth in 2003 and beyond. We continue to be aware of the potential for industry consolidation and believe that Scala’s global position, advanced technology product platform, growing financial strength, and strong management team all combine to position us well for any such opportunities that will enhance shareholder value.”

Burdett added that Scala’s healthy liquidity, fundamental low cost level, and a growing customer base will enable the company to continue with its goal of sustaining profitability every quarter in 2002. “There is no question that Scala is on the move,” Burdett stated. “I am confident that in 2002 we will build on the achievements of 2001 and continue to deliver both existing and new collaborative ERP software and services that are right for the needs of global businesses today.”

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Notes to Editors

Forward-Looking Statements

Management believes certain statements in this press release may constitute forward-looking statements with respect to the financial condition, results of operations and activities of Scala Business Solutions NV with respect to these items. These forward-looking statements are based on currently available competitive, financial and economic data together with management’s views and assumptions regarding future events and business performance as of time the statements are made. Actual results may differ materially from those expressed or implied in the forward-looking statements. Such differences may result from, but are not limited to, changes in the demand for business management and e-business products, competitive pressures, changes in the financial condition of the Company’s major commercial customers and the Company’s future ability to continue to develop and expand its product and service offerings to address emerging business demand and technological trends.

About Scala Business Solutions

Scala Business Solutions creates collaborative ERP software – integrating Internet technology and traditional ERP functionality – to make global business simple. With Scala, global companies can fully integrate all their ERP systems anywhere in the world, whether in a subsidiary, division or headquarters, and extending to their partners and suppliers.

Scala’s collaborative ERP software makes it possible for global companies to meet the requirements for advanced e-business as well as use a standard ERP product for managing traditional business processes. This enables them to gain measurable benefits from trading electronically, building a private exchange or global portal, or optimising the supply chain.

From offices in Europe, North America and the Far East, and through its network of partners and dealers, Scala delivers software and services that are available in over 30 languages in more than 100 countries.

Scala is listed on the Euronext Amsterdam Stock Exchange (symbol: SCALA). 2001 revenue was USD 70.6 million.

Visit Scala’s website at www.scala.net for press information including press releases, information for investors, and company and product information.

© 2002 Scala Business Solutions, NV. All rights reserved. Scala® is a registered trademark. Other trademarks or registered trademarks are the property of their respective owners.

Further information available:
Q4 2001 and FY 2001 financial highlights
Audited consolidated statement of operations – in US dollars.
Proforma consolidated statement of operations – in Euros.
Audited consolidated balance sheet – in US dollars.

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