Sopheon plc, the international provider of solutions that improve the return from innovation and product development, announces that the Company's EBITDA result for the final quarter of 2004 is expected to be positive, and that the consolidated annual EBITDA loss for 2004 is expected to be in line with broker forecasts of £1.15m (2003 - £4.07m). Sales growth over the prior year achieved in Sopheon's continuing software business is substantial, however, total reported revenues for 2004 are expected to be moderately below broker forecasts. This expectation is due in part to the weakness in the dollar during the later stages of the year. Nevertheless the overall effect of the weak dollar is expected to have been marginally positive, due to the fact that a large portion of Sopheon's costs are dollar denominated.

As indicated in earlier announcements, the final quarter performance was dependent on completion of major sales in December. Sopheon was successful in signing three such orders. Each customer is a global leader in its respective industry and a widely recognized name, and two of the transactions included license fees of around $600,000. Apart from their financial and brand value, these deals underpin Sopheon's credentials in two industries with significant identified potential: fast-moving consumer goods (FMCG) and financial services. Several other transactions were concluded during the quarter, primarily in the chemicals sector, where we already have a substantial base of customers. We continue to focus on pipeline creation and extending business with existing customers. An excellent example of the latter is BASF. Developed as a customer through one of Sopheon's distribution partners, BASF began implementation of Accolade a year ago. Our relationship with this chemicals industry leader has grown rapidly since then, and BASF is now one of four Sopheon clients that have contracted for 2000 or more Accolade seat-licenses.

Sopheon made important progress in 2004 in positioning itself for the longer term by securing partnerships on two fronts: strategic alliances in key markets, and distribution partners in geographical areas outside the Company's existing sphere of operations. As a result of this effort we are part of Microsoft's Collaborative Product Development initiative. Since announcement of the program in October, Microsoft and Sopheon have been working together to enhance and promote the integration of their technologies. To enable development efforts arising from this and other initiatives, and with support from Microsoft, Sopheon implemented a controlled expansion in R&D resources, recruiting into our Denver development center. During the year Sopheon also undertook a successful balance sheet restructuring, and continues to have access to the group's €10m equity line, of which over 90% remains untapped.

Financial expectations noted above are subject to the completion of the year-end financial close process. Consistent with prior years, Sopheon plans to issue its 2004 preliminary results around the end of March.

Sopheon's Chairman, Barry Mence said:
"Achieving a positive quarterly result is an important milestone for Sopheon. We are focused on the challenge of maintaining this momentum into the first half of 2005, encouraged by our recent successes and the opportunities that are building through our strategic relationships."