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Prophecy Consolidates and Forecasts improved Financials
Released 13 September 2002

Prophecy International Holdings Limited has announced revenues for 2001/2 of $9.14 million.
The company reports that the downturn in revenue was primarily due to the global contraction of the IT industry although delays in the release of its new product has also impacted expected revenues.

In common with many IT vendors, Prophecy faced difficult trading conditions and was unable to achieve the results expected by the Board.

Throughout the year many actions were taken to improve sales and to reduce costs. These actions included significant reduction in headcount, the closure of one of its development centres in the UK, reduction in the company's expenses, change in sales personnel, redevelopment of all marketing collateral and the announcement of the new Java product, Velatte.

Profit after tax showed a loss of $3.2m which was a 35% improvement on the previous year. Receivables improved dramatically through the year with collections now at less than 45 days compared with more than 90 days in the previous period. Bad debts have been reduced to $125k in the year, down from $2.5m.

The cash reserves remain at a healthy level and were $6.35m at 30 June 2002

It should be noted that Prophecy's share price has declined 16.7% during the 12-month period ending 30 August 2002 ($0.27 to $0.225). However, this contrasts favourably with the ASX Information Technology sector index (XIJ), which fell 56.3% and the US NASDAQ, which fell 25.4% over the same period.

Prophecy's CEO, Mr. Bruce Lakin, has tendered his resignation to the Board. However, he will continue to work with the Board to transition his responsibilities.

Brighter Prospects

The company expects the market in 2002/3 to continue to be difficult as there is little evidence of a global recovery in our markets at this time.
However, the exciting market reaction to our new Java product, Velatte, which was announced in Australia and USA during 2002, provides the potential for improved revenues.

An agreement was announced in July 2002 which provides for IBM - the world's largest computer company, to resell Velatte through its world wide network of distributors and resellers with a royalty stream back to Prophecy from sales. This distribution agreement is expected to boost the company's future revenues.

The Board maintains its belief that the North American market will provide major growth opportunities and this market will continue to be the company's strategic focus.
During the past 12 months, 4 additional business partners have been secured in USA and together with alliance agreements with IBM and SUN Microsystems this should provide a platform for growth.

The company's established customers continue to be loyal and to utilize its products and services with a number of the customers upgrading their Prophecy products. New customers who have purchased significant licences and services during the year have included Southampton University UK, Department of Water Licencing and Biodiversity Conservation.

Consulting services revenues increased over the previous year.


Return to Profit expected

The Board expects 2002/3 to be a profitable year following past losses and the consolidation of 2001/2.However the overall global market is likely to continue to be difficult.
The company has made substantial improvements in its capabilities over the past 12 months and more improvement will be achieved in 2002/3.
This continued commitment to growth with profit should see improved results in the coming period.

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