Strong growth in license sales and earnings
October–December 2015 (fourth quarter)
- License revenue amounted to SKr 245 million (Q4 '14: SKr 185 million), an increase of 27 percent, currency adjusted.
- Maintenance revenue was SKr 303 million (Q4 '14: SKr 274 million), an improvement of 7 percent currency adjusted.
- Consulting revenue amounted to SKr 419 million (Q4 '14: SKr 402 million), an increase of 3 percent currency adjusted.
- Net revenue totaled SKr 968 million (Q4 '14: SKr 867 million), an improvement of 9 percent currency adjusted.
- Adjusted EBITDA was SKr 182 million (Q4 '14: SKr 135 million). EBIT amounted to SKr 134 million (Q4 '14: SKr 117 million).
- Cash flow after investments was SKr 133 million (Q4 '14: SKr 97 million).
- Earnings per share after full dilution amounted to SKr 3.26 (Q4 '14: SKr 4.32).
January–December 2015 (full year)
- License revenue amounted to SKr 682 million ('14: SKr 558 million), an increase of 14 percent currency adjusted.
- Maintenance revenue was SKr 1,174 million ('14: SKr 1,037 million), an improvement of 6 percent currency adjusted.
- Consulting revenue amounted to SKr 1,524 million ('14: SKr 1,427 million), an increase of 2 percent currency adjusted.
- Net revenue totaled SKr 3,389 million ('14: SKr 3,034 million), an improvement of 5 percent currency adjusted.
- Adjusted EBITDA was SKr 428 million ('14: SKr 365 million). EBIT amounted to SKr 314 million ('14: SKr 275 million).
- Cash flow after investments was SKr 196 million ('14: SKr 269 million).
- Earnings per share after full dilution amounted to SKr 8.37 ('14: SKr 8.45).
Strong growth in license sales and earnings
License sales showed strong growth, currency adjusted, of 27 percent in the final quarter of the year and 14 percent for the full year. This growth was achieved despite the fact that throughout 2015 many of our target sectors showed a significant decline, including all markets affected by the fall in the price of oil and also those regions affected by the downturn in the demand for commodities. This demonstrates that IFS is both a resilient and an agile business with many new customers being added in the last quarter.
In a market that remains very competitive IFS continues to be selected because of our understanding and ability to deliver both solutions to our target sectors and global projects with a lower cost of ownership than our larger competitors The ongoing addition of new customers and the low level of churn has resulted in the growth of our maintenance and support revenue being, currency adjusted, 7 percent for the quarter and 6 percent for the full year and being fully in line with our expectations. Product revenue as a proportion of total revenue for the quarter continues to move in the correct direction at 57 percent (Q4 '14: 53). The maintenance and support margin for the quarter improved to76 percent (72) and for the full year remained unchanged at 75 percent. The ongoing investment being made in the centralization of our global support operation should continue to create margin improvement.
The low growth in the consulting revenue at 3 percent in the quarter and 2 percent for the year, currency adjusted, is in line with our strategic direction, which is to grow our partner ecosystem as a complimentary delivery resource. This, as previously stated, will provide reach and scalability to IFS and provide our customers with choice. The partner ecosystem grew during 2015 with a good number of new partners joining each month and the Partner Academy coming on stream creating an increasing global pool of IFS certified consultants. The consulting margin increased to 24 percent (Q4 '14: 23).
The gradual improvement of the buying environment seen in recent years continued. Based on preliminary figures, the ERP market as a whole grew by around 7 percent in 2015. Demand in North America, Western Europe, and Asia Pacific (excluding China) remains steady and industry analyst firms such as Gartner expect this trend of rather moderate overall growth to persist in 2016.
The acquisition of VisionWaves undertaken in July 2015 has been successfully integrated into the IFS Group. We are seeing that the acquired product is able to be packaged with other parts of the IFS product set to provide new innovative solutions and so create new market opportunities. Our acquisition strategy continues to be a high priority as we seek to build a stronger solution for our target markets.
On December 7, following the acquisition of the shares held by the main owner and other larger shareholders in IFS, EQT, through IGT Holding, announced a mandatory cash offer to the shareholders to acquire all outstanding shares. At the time of writing, IGT Holding owned 83.8 percent of the capital and 87.4 percent of the votes in the company. On December 17, the board of directors of IFS* unanimously recommended the shareholders to accept this offer. Over the five years preceding the offer, shareholders have seen total returns including reinvested dividends of 314 percent, or 33 percent per annum. This reflects the steady improvement that we have achieved and the attractiveness of our product for our ever-expanding group of customers. For 2016, we expect to see continued positive development and further improvements to our strengths.
Alastair Sorbie PRESIDENT & CEO
* Anders Böös, chairman of the board, and Bengt Nilsson, deputy chairman of the board, did not participate in the recommendation and decision.