Highlights and outlookSignificant improvement in earnings
OCTOBER–DECEMBER 2014 (FOURTH QUARTER)
- License revenue amounted to SKr 185 million (Q4 '13: SKr 207 million), a decrease of 15 percent currency adjusted.
- Maintenance revenue was SKr 274 million (Q4 '13: SKr 234 million), an improvement of 11 percent currency adjusted.
- Consulting revenue amounted to SKr 402 million (Q4 '13: SKr 337 million), an increase of 14 percent currency adjusted.
- Net revenue totaled SKr 867 million (Q4 '13: SKr 782 million), an improvement of 5 percent currency adjusted.
- Adjusted EBITDA was SKr 135 million (Q4 '13: SKr 126 million). EBIT amounted to SKr 117 million (Q4 '13: SKr 162 million).
- Cash flow after investments was SKr 97 million (Q4 '13: SKr 74 million).
- Earnings per share after full dilution amounted to SKr 4.32 (Q4 '13: SKr 4.99).
JANUARY–DECEMBER 2014 (FULL YEAR)
- License revenue amounted to SKr 558 million ('13: SKr 535 million), an increase of 1 percent currency adjusted.
- Maintenance revenue was SKr 1,037 million ('13: SKr 902 million), an improvement of 11 percent currency adjusted.
- Consulting revenue amounted to SKr 1,427 million ('13: SKr 1,256 million), an increase of 11 percent currency adjusted.
- Net revenue totaled SKr 3,034 million ('13: SKr 2,704 million), an improvement of 9 percent currency adjusted.
- Adjusted EBITDA was SKr 365 million ('13: SKr 279 million). EBIT amounted to SKr 275 million ('13: SKr 202 million).
- Cash flow after investments was SKr 269 million ('13: SKr 122 million).
- Earnings per share after full dilution amounted to SKr 8.45 ('13: SKr 5.72).
- Proposed dividend for 2014 amounting to SKr 4.50 per share ('13: SKr 3.50).
OUTLOOKFor 2015, IFS expects good growth in both license revenue and EBIT.
Net revenue for the year increased by 9 percent, currency adjusted, with license revenue being affected in the last quarter by the timing of deals that moved into 2015. Even though it meant we did not achieve the license-growth target for the year, it points to the fact that we are targeting increasingly larger deals, by their nature the timing of which is harder to predict. To a limited degree there has also been an impact resulting from the drop in oil price. This may reduce future investment in a number of oil and gas related industries but the overall impact is expected to be limited due to our broad and strong presence in other sectors—infrastructure, transportation, project-based industries, manufacturing, and service management—most of which are likely to benefit from a lower oil price. In particular, our execution in service management has improved considerably, with Gartner now rating us as a leader in its Magic Quadrant for Field Service Management.
Maintenance revenue for the year increased by 11 percent, currency adjusted, resulting from license sales and strong customer loyalty, the ongoing development of which remains a priority. Customers extending their use of IFS Applications within their global organizations will continue to contribute to our future growth. The maintenance margin increased to 75 percent ('13: 72 percent) resulting from investments in improving efficiency within our global support operation.
Consulting revenue for the year increased by 11 percent, currency adjusted, with a steadily larger proportion of services being delivered from our growing partner ecosystem. We continue to invest in our ecosystem to offer customer choice, create go-to-market alliances, and increase scalability within our business. We added a number of new strategic partners in 2014 that have contributed to our global implementation capability. Despite the higher proportion of services being delivered by partners, the consulting margin increased to 20 percent ('13: 19 percent).
We continue to see a steady increase of interest in cloud-deployed systems, especially where IFS Applications is offered in partnership with Microsoft on their Azure Cloud. We cater for all interests, whether off or on premise, and in the latter choice we launched ‘IFS in a Box’ in co-operation with Oracle to allow a simplified and even easier option to deploy our solution.
During the year, companies in need of consolidating their business solution or expanding its functionality moved forward with their investments and the gradual improvement of the buying environment seen over the last couple of years continued. However, based on preliminary figures, the ERP market as a whole did not perform in 2014 as well as originally projected and grew by around 4 percent. Industry analyst firms such as Gartner expect this trend of rather slight overall growth to persist in 2015.
We expect 2015 will be a year when we will see further benefit from our investment in sales and marketing, which is continuing to gain us recognition as being the intelligent alternative to the global giants for internationally-deployed solutions delivered in our target markets. Also in 2015 we will have our release to market of our latest version of IFS Applications; in this release we have a number of exciting new features and an enhanced architecture designed to better enable our partners to work with our product. On the back of our strong cash flow and finances we are actively searching the market for acquisitions we believe will strengthen our portfolio and create value. We expect to see good growth in both license revenue and EBIT in 2015.
PRESIDENT & CEO
IFS published its year-end report 2014 on Friday, February 6. In conjunction with this, Alastair Sorbie, president and CEO, and Paul Smith, CFO, held a telephone conference during which they presented and commented on the report.