RB-22-2005 Report on the Activities of the Supervisory Board including Assessment of the Situation of the Company in 2004 pursuant to Principle No. 18 of the Corporate Governance Principles.
The Management of ComArch SA releases for the public the report on activities of the Supervisory Board of ComArch SA in 2004, including assessment of the situation of the company in 2004, pursuant to Principle No. 18 of the Corporate Order, resulting from "Corporate Governance Principles":
Report on activities of the Supervisory Board of ComArch S.A. in 2004
The Supervisory Board held 4 sessions in 2004 (on 29 March, 14 June, 20 August and 13 December). Moreover, the Supervisory Board passed resolutions in the correspondence mode on 6 May and 15 June.
The average attendance in the session of the Supervisory Board was 4 out of 5 (five) members of the Supervisory Board.
The main topics of the Supervisory Board sessions were:
a) Monitoring and analysis of the financial situation of the Company and of the ComArch Group,
b) Assessment of execution of the Company strategy by the Management,
c) Analysis and assessment of risk related to activities of the Company,
d) Formal and legal issues.
In the opinion of the Supervisory Board, the Group achieved very good financial results in 2004. Increase of net profit by over 50% with increase in proceeds by 30% position ComArch as one of the fastest developing IT companies in Poland. It is noteworthy that the entire increase was achieved from organic development of the Group. Along with increase in net profit, financial indicators were improved, including mostly increase in the ROE index (profitability of own capital) from 8% to 12%. The Supervisory Board is satisfied to record the fact that 2004 saw significant increase in the rate of ComArch shares from PLN 51.30 to PLN 71.50, thus giving the return rate for shareholders in the amount of 39%.
The Supervisory Board positively assessed the strategy executed by the Company, both in the domestic and in international markets. ComArch as a product-focused company has the chance of significant improvement in results due to increasing scale of activities, therefore, in the opinion of the Board, geographical expansion is the proper direction for development of the Group. At the same time, maintaining sector-based diversification of proceeds is very important as a condition of minimising the risk of dependency on demand in any one sector of economy. In the opinion of the Board, the level of diversification of Group proceeds is appropriate.
The Supervisory Board was also preparing continuous analyses of risk areas related to activities of the Company and analyses of the method of managing these risks by the Management. The following were considered the most important risks, similarly to previous periods:
a) The risk related to the necessity of continuous developing of new and modernising the current software products;
b) The risk related to keeping conditions of the concluded agreements, in particular in keeping deadlines and quality of work (the risk of proper assessment of time consumption in long-term contracts);
c) The risk of international legal and political milieu related to execution of export contracts;
d) The risk of financial standing of international partners (lower capacity, difficulties, verification and monitoring);
e) The tax risk related to activities in the Special Economic Zone and instability of the legal and tax milieu in Poland;
f) The risk of proper operation of in-house control in the Company.
In the opinion of the Board, the Management properly identifies the risks related to activities of the Company and manages them efficiently.