CIMdata PLM Industry Summary Online Archive
22 February 2011
Financial News
IFS Year-End Report Q4 2010
Highlights and Outlook
Financial reports —Year end-report, January–December 2010
Strong earnings and cash flow in 2010
Financial and Operational Highlights
October–December 2010 (fourth quarter)
- Net revenue at SKr 729 million (Q4 '09: SKr 750 million) was 3% higher currency adjusted.
- EBIT at SKr 110 million (Q4 '09: SKr 116 million) was 3% lower currency adjusted.
- Cash and cash equivalents at the end of the period were SKr 445 million (Q4 '09: SKr 355 million).
January–December 2010 (full year)
- Net revenue at SKr 2,585 million ('09: SKr 2,605 million) was up 4% adjusted for currency.
- EBIT was SKr 221 million ('09: SKr 198 million), up 14% adjusted for currency.
- Cash flow after investments was SKr 234 million ('09: SKr 186 million).
- Earnings per share after full dilution amounted to SKr 4.96 ('09: SKr 4.57).
- Proposed dividend for 2010 amounting to SKr 3.00 per share (2009: SKr 2.00).
Outlook
IFS expects good organic growth in 2011, with stronger license sales and an improvement in EBIT.
Financial Overview
Chief Executive Summary
Continued strong profits and cash flow
We continue to execute on our communicated strategy by growing profit, improving cash flow, and performing acquisitions. As commented upon in previous reports during 2010, currency has had a marked effect on our reported numbers and it is therefore necessary to adjust for this when considering key results. In addition, exchange-rate differences negatively affected the valuation of assets and liabilities for the full year by SKr 26 million (14).
Market conditions continued to improve in all regions with the resulting EBIT increasing by 14% and net revenue growing by 4%, both adjusted for currency. A good number of new customers were signed by us during the year as we further strengthened our presence in our target markets.
The Aerospace and Defense market, while experiencing cut-backs in some geographies, e.g. United Kingdom, is in contrast seeing strong investment occurring in other regions such as the Middle East, India, and the Far East. We are well placed to benefit from this activity thanks to our strong market solution and established global partnerships. A number of high-profile and strongly-competed new customers were won including the U.S. Army, the U.S. Federal Aviation Administration, Sabreliner Corporation, and a European defense organization.
Building upon recent success in the specialist markets of Engineering, Procurement, Construction, and Installation (EPCI) as well as Offshore Marine, we have secured additional high-profile customers such as Technip Engineering, Semco Marine, and Huber SE. Also, we continue to sell well into our long-standing sectors of process and general manufacturing, with many new customers being signed during the year, including such names as William Grant & Sons Ltd.
Maintenance revenue increased by 7% adjusted for currency and the margin also improved. The customer base continued to grow by the winning of new customers, by existing customers extending their use with international deployments, and by customers contracting for additional components as they make deeper use of the expanding functionality in IFS Applications.
Although there was strong demand for consulting services throughout 2010, the first half of the year saw delays in the launch of a number of large projects, resulting in a drop in consulting revenue. As predicted, this reduction was temporary, and consulting performed much better in the second half of the year, outperforming the corresponding period in 2009. Consulting revenue for the full year increased by 3% currency adjusted and the consulting margin, which continues to improve year on year, increased to 23% (19%). The consulting backlog and delivery continue strongly into 2011.
The acquisition of 360 Scheduling in October was a clear demonstration of IFS executing on its growth strategy. 360 Scheduling is a market-leading complementary product that further strengthens our offering to companies in the service-management sector. Thanks to our international sales coverage, this product now gets a far wider reach, and both customers and prospects have shown great interest in it. We will increase the pace of acquisitions in 2011, supported in this goal by the strong increase in cash flow after investments to SKr 234 million (186).
At a number of successful international customer summits during the second half of the year, we announced the launch of the next major release of IFS Applications—Version 8, which is scheduled to go to early adopters in 2011.
We are well positioned to benefit from this upturn thanks to our market strategy and world-class customers. Acquisitions will continue to be a high priority for us in 2011 and are expected to become an increasingly more significant activity within the business. Due to the market segments we are focused on, the timing of contracts and projects has a marked impact on our results as reported quarterly. Business that did not close in 2010 will likely benefit 2011. Also, we enter the year with a full order book of active projects, thereby favoring the consulting outlook. Currency exchange rates are expected to continue to influence the consolidated results of our global operations. The long-term target to achieve an EBIT margin of 15% in 2013 remains in place and we expect good organic growth in 2011, with stronger license sales and an improvement in EBIT.
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