October–December 2013 (fourth quarter)
January–December 2013 (full year)
For 2014, IFS expects strong license growth and a significant improvement in EBIT.
Strong license growth generated from a well-aligned business.
Our strategy of achieving growth by focusing on key target markets can be seen to be successful by the 19 percent currency adjusted growth in license revenue for the year (19 percent for the quarter). We have seen strategic wins globally in all of our target sectors including aerospace and defense, manufacturing, energy, offshore, oil and gas. Increasingly it is our profile and proven capability in these industries that is resulting in our selection.
During the year we have stepped up our investment in brand awareness and marketing. We have undertaken global marketing campaigns to explain our unique capabilities in the industries we serve. This investment is not only to improve sales but also to support our drive to build a greater partner ecosystem. Expanding our global network of technology, reselling, and integration partners is a major priority. It will provide further leverage at a time when we have proven ourselves as the intelligent choice for global businesses. It is pleasing to see that our rating in the eyes of the industry analysts, e.g. Gartner, has also improved significantly. Our customer world conference held in Barcelona in October was our best ever.
Growth in maintenance revenue grew somewhat slower, 5 percent currency adjusted (6 percent in the quarter). This is partly due to the elimination of supported customer modifications resulting from the increased core functionality in the later releases of IFS Applications. With the strong growth in new licenses and the high customer retention the outlook for maintenance revenue remains good.
Consulting revenue grew by 3 percent currency adjusted (-1 percent in the quarter), which is, as previously commented upon, the result of increased use of partnering and less effort required for implementing the newer releases of the product. The improved efficiency program undertaken in the first quarter of 2013 was necessary to address this positive change in the business. The consulting margin in the year, which increased marginally to 19 percent (2012: 18 percent), has been impacted by the direct costs of bought-in services resulting from the startup of the partner strategy. Even though direct costs will continue to have an impact, we expect to see a marked improvement in the consulting margin in 2014.
Net revenue increased with 6 percent, both for the year and in the quarter, currency adjusted on a headcount close to 8 percent lower than the previous year, all in all resulting in an underlying improvement in earnings.
Despite caution among buyers due to the prevailing macroeconomic environment, companies in need of a business solution moved forward with their investment plans in 2013 and the enterprise application market showed a slow but steady rate of growth of approximately 5 percent. The buying environment’s positive trajectory leads industry analyst firms such as Gartner to anticipate the ERP market to maintain such growth rate in 2014 or even increase a little to around 6 percent.
In 2014, we will continue to build on our successes and strengthen our recognition as the intelligent choice for global businesses. We will continue to work on strengthening our brand, develop our partner ecosystem, and grow our pipeline. For the year, we expect to achieve strong license growth and a significant improvement in EBIT.
President & CEO
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