Company presentation
June 2007
2
Disclaimer
The present study has been prepared only for information purposes. It does not
constitute an advertisement or offer for securities in public trading. It uses sources
of information that Sygnity S.A. and Emax S.A. have acknowledged as reliable and
exact, however it is not represented that the information is comprehensive and
fully reflecting the real state. The presentation may include forward-looking
statements which constitute an investment risk or a source of uncertainty and may
substantially differ from actual results. Sygnity S.A. and Emax S.A. bear no
responsibility for the effects of decisions taken on the basis of the present study.
The responsibility rests only on the user of the present study. The study is subject
to a protection resulting from the law on copyright and related laws. Copying,
publishing and distribution of the study is subject to a written consent of Sygnity
S.A. and Emax S.A.
2
3
Polish economy is in the good condition
• Continued economic revival commenced in 2005:
– 6,4% GDP growth y-o-y in Q4 2006
– Q1 2007 GDP growth expected at historically high level and set to
continue throughout whole 2007
– continued strong domestic consumption
• Improvement on the labour market:
– increase of employment by 3.8% y-o-y in January 2007
• Most optimistic assessment of the economic situation by
entrepreneurs since the beginning of the 1990s
3
4
Polish IT market ready for natural growth
• Annual IT spendings per capita in Poland ca. 100 EUR vs. over 700 EUR in EU 15
• EU funds availability for new EU members
• Development of outsourcing and BPO: Poland becoming the Europe’s accountant
• Domestic players outpace the international ones on the local IT services market
Software and IT services market growth in
Western Europe 2005-2010E (EUR bln)
250
CAGR
200
5.8%
4
3,5
3
2,5
2
1,5
1
0,5
0
150
100
50
0
2005
Software and IT services market growth in
Poland 2005-2010E (EUR bln)
2010
CAGR
12.8%
2005
2010
The expected speed of market growth in Western Europe vs. Poland
4
5
Signs of the Polish IT market revival
•
•
•
•
•
•
•
Ordinance on the State Informatization Plan for the years 2007-2013
Changes on the energy market
Medical Services Register (RUM)
Further computerization of schools by Ministry of National Education
Border Guards projects
Projects of the Central Office of Land Surveying and Cartography
Development of local (regional) government market - EUR 2.5 mln to be
granted from EU funds
• Development of banking market – increasing competition, new
products, implementation of Single European Payments Area, the
development of the network of banking outlets, tendency for foreign
banks to enter the Polish market
5
6
Sygnity snapshot – establishment of the Company
and market capitalisation
• Sygnity has been formed as the result of the process
of combining the experience and the best practicies
of ComputerLand and Emax in order to bring the new
quality to the Polish IT market. Sygnity SA is the
second biggest Polish IT company on the market with
over 3000 employees and the total turnover at the
level of PLN 1.2 bln (2006)
• Proforma capitalization as of 22 May 2007: PLN 988
bln (Sygnity: PLN 660 bln; Emax: PLN 328 bln)
• Free float (after the merger): 85%
6
7
Sygnity snapshot
Proforma results of ComputerLand Group for 2006, including the results of Emax Group for 2006, as if the acquisition had taken place on 1
January 2006
2006
CL Group
according to
Emax Group
accounting
principles
in PLN 000’s
Net revenues
Consolidation
exclusions
Emax Group 2006
adjustments
for variations
in accounting
principles
according to
CL Group
accounting
principles
the share of
ComputerLan
d in Emax in
Q4 reached
37%
CL-Emax
Group
772 275
444 788
(4 537)
440 251
(10 701)
1 201 825
Operating
profit/loss
15 076
16 426
(4 262)
12 164
(88)
27 152
Net / loss
profit
2 640
5 476
28
5 504
(4 439)
3 705
Employees
2 244
981
3 225
7
8
Sygnity snapshot – key references, sales structure
Key references:
•
•
Banking:
–
–
–
–
–
–
–
National Bank of Poland
BPH BANK (HVB - UniCredito)
BZ WBK (AIB)
Kredyt Bank (KBC)
PKO BP SA
GE Money Bank SA
Raiffeisen Bank
–
–
–
–
–
ENEA
Vattenfall
Polish Power Grid
KGHM SA
Panopa Logistic
–
TP SA (FT)
–
NFZ (National Health Fund)
–
–
–
–
–
–
Ministry of Labour, Ministry of Justice
Łódź City Administration
Uniform services (police, border guards)
Ministry of Education, Ministry of Finance
Police Headquarters
Polish Post
Power sector, industry and trade:
•
Telecom:
•
Healthcare:
•
Banking and
Finance
26%
General
Business
(energy,
industry,
trade)
29%
Public sector:
Healthcare
3%
Public sector
32%
Telecomu
nication
10%
Computerland S.A. and Emax S.A. –
2006 proforma sales by sectors
8
9
Reasons to merge
•
Two of the largest domestic IT services companies with long histories of
complex and successful projects
•
Both companies put strong emphasis on sector expertise as a key success
factor
•
Significantly complementary market offer (in particular in the energy, banking
and telecom)
•
Both companies develop consulting and outsourcing competencies to
complement their system integration services
•
Track record of successful mergers and acquisitions (e.g. ComputerLand –
Aram, CIE, CSBI, Elba, Polsoft; Emax – Winuel, Max Elektronik)
•
Growing importance of foreign sales
•
Similar organizational cultures and values: individual responsibility and
business flexibility, professionalism and transparent corporate governance
9
10
The Merger History
26th of May 2006
Announcement of the merger intention
27th of July 2006
Approval from antitrust regulator
11th of September 2006 ComputerLand reaches 33% of votes in Emax (12,1% in equity)
20th of September 2006 ComputerLand reaches 65% of votes in Emax (36% in equity)
24th of October 2006
ComputerLand reaches 66% of votes in Emax (37% in equity)
21th of November 2006
Announcement of the Plan of Merger
As of January 1, 2007
Implementation of the unified management
Joined organization of Departments of Marketing and Foreign Markets
5th of February 2007
Positive opinion on the Plan of Merger from auditors
February/March 2007
Consultancy with investors with respect to General Shareholders Meeting
14th and 15th of March
General Shareholders Meetings – approval of the merger and the change
of the brand of the company
10th of April 2007
Registration of the new brand of the company: Sygnity SA
31st of May 2007
Registration of the desicion of Shareholders about the merger
Share exchange parity: 1 share of Emax S.A. = 1,2 share of ComputerLand S.A.
10
11
Sygnity strategy
•
Sector focus accompanied by extensive industry
knowledge and expertise
•
Long-term client relationship based on the delivery
of full scope of services – from consultancy through
implementation to outsourcing
•
Focus on in-house software solutions
complemented by universal packages from major
global players
•
Revenue growth and development of services
supported by mergers and acquisitions
•
Marketing of tried-and-tested solutions and
experience abroad
•
Achieving 8% operating margin in 2008
•
Maintenance of highest level of Corporate
Governance
11
12
Strategy realised in particular sectors
Banking
–
–
–
–
–
–
–
–
–
Strong client base in
Poland
Know-how in
centralised systems
Extensive product
offer
Foreign sales – EU
and Eastern markets
Unquestioned leader in
the power market
Outsourcing for industry
Regional sales
ERP expertise
Growth in the
petrochemical sector
(values in PLN mln)
Telecoms
–
300M+
–
25%
10%
–
25%
33%
–
300M+
Industry/Utilities
120M+
400M+
–
–
Sales to the FT group
(KSP. NPT,
Convergence)
Growing revenues from
mobile operators
Outsourcing references
Solutions implemented
in many central
institutions
Strong position in local
government
Projects co-funded
from EU funds
Public Sector
12
13
Clear management goals
Achievement of operating
profitability of 8%+ in 2008
by:
•Maintaining revenues at stable level
•Reaching a bigger share of own solutions
in sales structure
•Maintaining the speed of restructuring
processes
13
14
Market position: Banking & finance
•
Market drivers
–
–
–
–
•
Major sources of demand: introduction of new
banking products, Basel II, cost cutting
Changes in banking law are opening the
market to outsourcing initiatives
Integration of new banking groups
New mobile technologies in banking
2,25
Company expertise
–
–
–
–
–
•
Polish B&F IT market 2006E (PLN bln)1
Strong relationship with iFlex solutions, a
worldwide leader in banking software
Development of new in-house products (MIS,
ERP, Security)
Acquisition of Support, creating the basis for
offering insurance services
Partnership with SunGard Trading and Risk
Systems
Complete offer and service – dedicated
solutions eg. banking automation, security
systems, loan processing systems
EMAX and ComputerLand position on the Polish B&F IT
market 2006 (PLN m)2
350,0
300,0
250,0
50,0
Sygnity Group
Asseco Poland
14,0%
12,0%
8,0%
150,0
100,0
16,0%
10,0%
200,0
6,0%
57,5
4,0%
2,6%
2,0%
0,0
0,0%
EMAX
Top market players
–
–
260,3
11,6%
317,8
14,2%
ComputerLand
Sales to the sector
Post merger
company
Market share
Market data - DiS Report 2006
Company Data
without consolidation exclusions
1
2
14
15
Market position: Telecoms
•
Market drivers
–
–
•
New Generation Network (NGN, DVB)
Strong competition – the fight for new
customers
1,88
Company expertise
–
–
–
•
Polish Telecom IT market 2006E (PLN bln)1
Group of specialized products created on
the basis of line inventory systems, a
source of stable revenues (OSS.CL)
Partnership with Atos Origin enables CL to
participate in the Oracle Financials project
for TP SA and France Telecom (FT)
Dedicated solutions implemented in TP SA
(eg. mass mailing)
Top market players
–
–
–
Prokom Software Group
Oracle Polska
Sygnity Group
EMAX and ComputerLand position on the Polish Telecom IT
market 2006 (PLN mln)2
140,0
7,0%
115,96,4%
120,0
94,5 5,3%
100,0
6,0%
5,0%
80,0
4,0%
60,0
3,0%
40,0
20,0
2,0%
21,4 1,1%
1,0%
0,0
0,0%
EMAX
ComputerLand
Sales to the sector
Post merger
company
Market share
Market data - DiS Report 2006
Company Data
without consolidation exclusions
1
2
15
16
Market position: Utilities
•
Market drivers
–
•
Deregulation, consolidation and privatization
in the power electricity and gas distribution
1,27
Company expertise
–
–
–
–
–
–
•
Polish Utilities IT market 2006E (PLN bln)1
New version of in-house multimedia billing
system
Successful implementation of a Network
Inventory System (GIS) at GZE (Vattenfall)
Dedicated own solutions to power energy
trading and metering (central system for
PSE – Power Energy Grid)
Other dedicated systems
Building position on the foreign power
industry markets by offering own, proved
products eg. contract with Stredoslovenska
Energetika a.s. (Slovakia)
Own ERP systems and integration of other
producers’ ERP systems (SAP)
EMAX and ComputerLand position on the Polish
utilities/energy IT market 2006 (PLN mln)2
Sygnity Group
28%
330,0
280,0
230,0
180,0
16,0%
14,0%
12,0%
177,8
14%
10,0%
178,3
14%
8,0%
130,0
6,0%
80,0
4,0%
30,0
2,0%
-20,0
Top market players
–
356,1
380,0
EMAX
ComputerLand
Sales to the sector
Post merger
company
0,0%
Market share
Market data - DiS Report 2006
Company Data
without consolidation exclusions
1
2
16
17
Market position: Public
•
•
Market drivers
–
–
–
Forthcoming projects financed from Schengen Funds –
Border Protection (SIS II), Police, Ministry of Justice
Continued EU funding for Poland
The development of the information society in Poland
3,01
Company expertise
–
–
–
SYRIUSZ Project – welfare support system for Ministry of
Labour
Command systems and new-generation technology for
500,0
military, fire depts. and police
e-Łódź - city administration
Space planning support systems
Local government integrated backoffice system
250,0
Complex solutions for public transport enterprises:
passenger information systems and ticket systems – eticket
Smart card applications (electronic city card, electronic
0,0
purse)
Command & Control and other systems for uniform
services
Systems for document processing and workflow
Implementation of SAP in large cities (Warsaw, Wroclaw)
–
–
Prokom Software Group
Sygnity Group
–
–
–
–
–
–
–
•
Polish Public IT market 2006E (PLN bln)1
EMAX and ComputerLand position on the Polish public IT market
2006 (PLN mln)2
393
13,0%
15,0%
13,0%
11,0%
9,0%
6,1%
185,1
207,9
6,9%
7,0%
5,0%
3,0%
1,0%
-1,0%
EMAX
ComputerLand
Sales to the sector
Post merger
company
Market share
Top market players
Market data - DiS Report 2006
Company Data
without consolidation exclusions
1
2
17
18
Market position: Healthcare
•
Market drivers
•
Company expertise
–
–
–
–
–
–
–
•
Annual sector IT spending ca. PLN 120 m with high growth potential
Limited competition: Spin (Prokom subsidiary), Kamsoft, Alma.
Prospective RUM (national medical service registration) system worth PLN 500-800 mln
26% of the medical IT market (NFZ +
hospitals)
100 specialists dedicated to healthcare IT
solutions
In-house built InfoMedica.CL modular
software implemented in 300 hospitals
Reference: START project (registration
system) in the Silesian Region (over PLN
20 mln) servicing 5 million patients
Top market players
–
–
–
Sygnity
Spin
Kamsoft
18
19
Key areas of synergies
Revenues synergies:
Cost synergies:
•
•
Rationalisation of the range of own
products offered
•
Centralisation of software production
•
Optimisation of service and help desk
operations
•
Optimisation of back office
operations
•
Intensification of sales,
and in particular exploitation of the
strong position of the merged
companies in selected sectors
Application of their best
experiences and practices
•
Elimination of mutual competition
•
Optimisation of revenue structure – •
among other things from expansion
of the range of products and
services
Optimisation of the holding group’s
structure
19
20
Assessment of synergies
in PLN 000’s
2007
2008
2009
2010
Total
35,075
46,453
51,908
44,189
177,625
7,300
10,064
11,273
9,875
38,512
Implementation
(1,992)
(6,644)
(6,644)
(6 644)
(21,924)
Management Board
(3,965)
(7,811)
(8,111)
(8,410)
(28,297)
Selling costs
(204)
(218)
(225)
(231)
(878)
Other
2,875
(198)
(198)
(198)
2,281
EBIT
10,586
24,935
26,451
25,358
87,330
Revenues
Additional margin
20
21
Merger benefits
•
For shareholders:
– Improving the general strategic position of the Company by increasing its critical mass
and scope of activities
– Strengthening the Company’s market position in certain sectors through cross-selling
– Continued improvement of the Company’s operating efficiency and the achievement of
specific cost synergies
– Increased investment attractiveness of the merged Company
•
For clients:
– A wider range of services and products as well as increased levels of team
competence
– The Company's increased creditworthiness and ability to execute large and complex
projects (including outsourcing projects)
•
For employees:
– Numerous large and interesting projects offer new possibilities for professional
development and careers
– Achievement of a bigger market share and strategic position increases the Company's
attractiveness as an employer
21
22
Sygnity consolidated results for Q1 2007
Q1 2007
THE SYGNITY GROUP
EXCLUDING THE
RESULTS OF THE
EMAX GROUP
(in PLN mln)
THE EMAX GROUP
CONSOLIDATED
EXCLUSIONS/
MORTISATION
ADJUSTMENT
THE CONSOLIDATED
SYGNITY GROUP
183,166
84,456
(1,320)
266,302
OPERATING PROFIT
(LOSS)
(9,986)
(8,032)
(3,106)
(21,124)
NET PROFIT (LOSS)
(10,732)
(11,504)
(2,516)
(24,752)
NET PROFIT (LOSS)
OF MINORITY
SHAREHOLDERS
(4)
(435)
(6,902)
(7,341)
NET PROFIT OF
SHAREHOLDERS IN
THE DOMINANT
COMPANY
(10,728)
(11,069)
4,386
(17,411)
NET REVENUE
22
23
Q1 2007 results - commentary
• Q1 – traditionally the slowest period
of the year in IT business on the
Polish market
• Stagnation on the public tenders
market
• No earnings from the projects
completed in 2006 (new projects has
not been started yet)
• Further development of own products
and costs related with the process
• The postponement of the
implementation of projects in the
banking, telecommunications and
utilities sectors
• Additional cost of PLN 3 million in the
first quarter associated with the
rebranding and integration processes
THE COSTS REDUCTION
IN Q1 BY MORE THAN
PLN 3 MILLION
COMPARED TO THE
FIRST QUARTER OF 2006
(EXCLUDING THESE
ONE-OFF EVENTS) AND
BY ALMOST
PLN 6 MILLION
COMPARED TO
AVERAGE QUARTERLY
COSTS FOR LAST YEAR.
23
24
Q1 – a period of intensive transformation
• Consent of the shareholders to the merger with Emax
(14 and 15 of March)
• Implementation of the Group’s Organisational Model –
ca. 100 Top Managers has their precisely defined
positions.
• Commencement of the consolidation of the Group
• Commencement of a product strategy review
• Efects of the CoLorado project
24
25
Effects of CoLorado project in 2006 and Q1 2007
•
Project - based organizational structure
– Change into project – based structure (8 domains and projects bureau instead of
22 competences centers); new assignments for production and implementation
employees, efficiency measures, pilot implementation of new incentive system
•
Concentration of clients
– Reduction of # of active accounts from 700 to 200 and reduction of selling costs
from PLN 52,5 mln in 2005 to PLN 42,3 mln in 2006, Offering Commitees
•
Centralization of purchases
– # of suppliers down from 1000 do 200, centralization, monitoring and
comprehensive policy of purchases
•
Productivity
– increase of efficiency and repeatability of projects planning, policy of testing
projects, optimization
Total 2006 savings due to implementation of CoLorado project reached PLN
12.5 mln in 2006 and PLN 4.1 mln in Q1 2007
25
26
Attachement – new name and logo
27
Reasons to change the name
CURRENT SITUATION - REASONS
CHALLENGE
OPTIMAL SCENARIO
MERGER
Introducing new
name
REPOSITIONNING
FOREIGN MARKETS
COMPLETED PROJECT OF
EXPORT BRAND
Introduce new
name when
deciding upon
merger
27
28
Key associations behind new name
Appropriate for large
companies as well as for small
and creative
Flexible
Associated with high
quality
Associated with dignity and solemnity
Easy to pronounce
and spell
Distinguishing
Appropriate for several industries,
including IT
28
29
Positioning theme: Competence on
The meaning: Efficient completion of projects thanks to full
understanding of the customer’s needs
29
Thank you