July–September 2013 (third quarter)
January–September 2013 (nine months)
For 2013, IFS expects strong license revenue growth and an improvement in EBIT.
The counterparty has increased its claim in the legal dispute that IFS is involved in, concerning the partly-owned company IFS Sri Lanka. IFS’s position with respect to the dispute remains unchanged: IFS rejects the counterparty’s claims as being frivolous and completely unmeritorious and unfounded, and rejects the claims in their entirety.
Sustained product growth and margin improvement.
In the third quarter we experienced growth in all our business areas, with license revenue growing by 8 percent in the quarter and by 20 percent year to date, currency adjusted.
The continued growth in license revenue is attributable to our strong industry solutions and our ability to deliver business systems globally in both a predictable and cost-effective manner. We continue to reap benefits from our successful strategy of focusing on growing sectors where we have a market leading position; such as offshore, EPCI, infrastructure, aerospace and defense, and service. Much of our business in the third quarter came from customers extending their global use of IFS products.
Our maintenance revenue has increased by 4 percent currency adjusted. This comparatively slower growth is a temporary issue primarily due to fewer customizations after customers have upgraded to Version 8, the functionally-richer latest release. The underlying ‘churn rate’ of IFS customers remains as low as previous.
Consulting revenue in the quarter improved by 11 percent currency adjusted with an improvement of the margin to almost 22 percent (15 percent). In the first quarter we carried out an efficiency improvement program to better align our resources and the improvement seen in the third quarter is partly attributable to the successful execution of this program. We continue to expect that consulting as a proportion of total revenue will continue to reduce over time. The development in our eco-system and partner programs continues, offering a greater range of choice to our customers.
The success of the action taken in the first quarter is also reflected in the EBIT, which improved to SKr 66 million (SKr 29 million) in the third quarter. The cost of the efficiency improvement program was SKr 92 million and was charged to the results for the first quarter. We continue to expect that this amount will be recovered in full by corresponding savings realized during the year.
The enterprise application market is in a slow but steady rate of growth, though a lot of caution is still prevailing. Industry analyst firms such as Gartner are prudently optimistic and expect the market will grow in the region of 6 percent in 2013.
IFS goes into the final quarter of 2013 with a strong pipeline. For the year, we expect to deliver strong license revenue growth and an improvement in EBIT.
President & CEO