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www.IFSWORLD.com
INTERIM REPORT Q3 2013
© 2013 IFS
Alastair Sorbie, CEO and Paul Smith, CFO
OCTOBER 24, 2013
FINANCIAL AND OPERATIONAL HIGHLIGHTS
© 2013 IFS
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SUSTAINED PRODUCT GROWTH AND MARGIN IMPROVEMENT
INTERIM REPORT JANUARY–SEPTEMBER 2013
JULY–SEPTEMBER 2013 (THIRD QUARTER)
License revenue amounted to SKr 114 million (Q3 '12: SKr 109 million), an increase of 8 percent currency adjusted.
Maintenance revenue was SKr 227 million (Q3 '12: SKr 224 million), an improvement of 4 percent currency adjusted.
Consulting revenue amounted to SKr 291 million (Q3 '12: SKr 268 million), an increase of 11 percent currency adjusted.
Net revenue was SKr 633 million (Q3 '12: SKr 612 million), an improvement of 6 percent currency adjusted.
EBIT amounted to SKr 66 million (Q3 '12: SKr 29 million).
Cash flow after investments was SKr -43 million (Q3 '12: SKr -28 million).
Earnings per share after full dilution was SKr 1.94 (Q3 '12: SKr 0.86).
FINANCIAL AND OPERATIONAL HIGHLIGHTS
© 2013 IFS
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SUSTAINED PRODUCT GROWTH AND MARGIN IMPROVEMENT
INTERIM REPORT JANUARY–SEPTEMBER 2013
JANUARY–SEPTEMBER 2013 (NINE MONTHS)
License revenue amounted to SKr 326 million (YTD '12: SKr 284 million), an increase of 20 percent currency adjusted.
Maintenance revenue was SKr 685 million (YTD '12: SKr 678 million), an improvement of 5 percent currency adjusted.
Consulting revenue amounted to SKr 935 million (YTD '12: SKr 930 million), an increase of 4 percent currency adjusted.
Net revenue was SKr 1,950 million (YTD '12: SKr 1,907 million), an improvement of 6 percent currency adjusted.
EBIT amounted to SKr 40 million (YTD '12: SKr 69 million), including one-off costs for efficiency program.
Cash flow after investments was SKr 37 million (YTD '12: SKr -96 million).
Earnings per share after full dilution was SKr 0.71 (YTD '12: SKr 1.71).
PRODUCT GROWTH
© 2013 IFS
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THE INTELLIGENT ALTERNATIVE CHOICE
INTERIM REPORT JANUARY–SEPTEMBER 2013
LICENSE SALES—STRONG GROWTH Agile solutions for the agile enterprise.
Winning highly-competitive sales to new customers in our target sectors. Existing customers expanding their global use of IFS Applications.
MAINTENANCE REVENUE Good customer retention, scalable, and improving margins. Product revenue (R12) is now 52 percent of total revenue mix. Over the longer term, product revenue is expected to grow at least at twice the rate of consulting.
500
750
1,000
1,250
1,500
'04 '05 '06 '07 '08 '09 '10 '11 '12 R12
PRODUCT REVENUE
55%
60%
65%
70%
Q1 '0
9 Q2 Q3 Q4Q1
'10 Q2 Q3 Q4
Q1 '1
1 Q2 Q3 Q4Q1
'12 Q2 Q3 Q4
Q1 '1
3 Q2 Q3
MAINTENANCE MARGIN (R12)
CONSULTING REVENUE
© 2013 IFS
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AN EVOLVING BUSINESS
INTERIM REPORT JANUARY–SEPTEMBER 2013
CONSULTING REVENUE AND MARGIN Consulting not expected to grow at the same rate as product revenue due to:
reduced effort required to implement IFS Applications and changing mix of skills and increased involvement of partners.
EFFICIENCY IMPROVEMENT PROGRAM (Q1) To align consulting resources with demand in terms of skills and location. The cost of achieving targeted savings will be matched by corresponding savings for the full year. Benefits in Q3 were in line with this forecast.
PARTNER PROGRAM—INCREASING MOMENTUM Greater global reach—able to serve larger customers. Greater ability to manage peaks in demand. Increase in direct costs.
FINANCIAL OVERVIEW
© 2013 IFS
7 INTERIM REPORT JANUARY–SEPTEMBER 2013
A GROWING BUSINESS
19%
34%
47%
0%
REVENUE MIX R12
License Maintenance Consulting Other1,800
2,000
2,200
2,400
2,600
2,800
'04 '05 '06 '07 '08 '09 '10 '11 '12 R12
NET REVENUE
0
200
400
600
800
1,000
'04 '05 '06 '07 '08 '09 '10 '11 '12 R12
MAINTENANCE SUPPORT REVENUE
-150
-50
50
150
250
'04 '05 '06 '07 '08 '09 '10 '11 '12 R12
EBIT
-100
0
100
200
300
'04 '05 '06 '07 '08 '09 '10 '11 '12 R12
CASH FLOW AFTER INVESTMENTS
-100
0
100
200
300
400
'04 '05 '06 '07 '08 '09 '10 '11 '12 R12
NET LIQUIDITY
MARKET AND PRODUCT UPDATE
© 2013 IFS
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Q3
INTERIM REPORT JANUARY–SEPTEMBER 2013
IFS NAMED A “LEADER” IN GARTNER’S MAGIC QUADRANT For its product IFS Applications 8, IFS has been named as a “leader” in the Gartner Magic Quadrant for Single-Instance ERP for Product-Centric Midmarket Companies, which was published September 11, 2013.
LEADING SPANISH CONSULTING COMPANY LKS GROUP PARTNERS WITH IFS LKS Group is one of Spain’s leading providers of consulting services. Being able to offer the skills of some 400 experts, the companies will collaborate on joint sales opportunities, as well as implementation and support projects centered on IFS Applications.
NEC AND IFS STRENGTHEN BUSINESS RELATIONSHIP An IFS partner since 1998, NEC recently implemented IFS Applications as the manufacturing system for its System Platform business unit, the group’s largest business unit, which produces Windows servers, Linux Servers, and super computers.
BUSINESS AND STRATEGY
© 2013 IFS
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THE INTELLIGENT ALTERNATIVE CHOICE
INTERIM REPORT JANUARY–SEPTEMBER 2013
IFS WILL CONTINUE TO SUCCEED BECAUSE: Implementation time is critical for customers with international operations; IFS’s component architecture and worldwide support can reduce this. IFS targets growing markets that are less exposed to economic fluctuations. Through close cooperation with our customers, IFS can offer differentiating industry solutions; we listen and respond rather than dominate and dictate. IFS’s agile open-technology platform enables customers to benefit from new IT developments rather than causing restrictive customer lock-in.
IFS WILL CONTINUE TO GROW THROUGH: cash-generating organic growth and targeted acquisitions.
2007 2009 2010 2011 2012
LATINIFS
CUSTOMER WINS IN 2013
© 2013 IFS
10 INTERIM REPORT JANUARY–SEPTEMBER 2013
Aerospace and Defense
Al Esnad Est.
Dassault Falcon Jet Corp.
Emirates Group
Federal Aviation Administration
Lockheed Martin JSF
M7 Aerospace
Norwegian Defence Logistics
Asset Intensive
Hi-Crush Services
Nucor Steel Seattle
Rhino Resource Partners
Automotive
Agility Fuel Systems
Calsonic North America
CalsonicKansei North America
Deere & Company
DTR Industries
Manufactura Moderna de M l
Schlemmer
Toyota Material Handling Europe
Construction and Contracting
Babcock Infrastructure Services
Bergen Engines
Brookfield Multiplex
Projprzem
Technip
Energy and Utilities
Ericsson
Hafslund
Helsinki Energy
Jönköping Energi
Sisgraph
Statnett
Svensk Kärnbränslehantering
Vantaa Energy
High Tech
Instron
Skytron
TOMRA Sorting Solutions
Wolfson Microelectronics
Young Innovations
Industrial Manufacturing
Atlas Converting Equipment
Belvac Production Machinery
D&K Engineering
Flare Industries
GEBO Armaturen
Goizper, S. Coop.
Holland Company
Krinner
LightWorks Optical Systems
Orbotech
Pellenc
Polypipe
Quad/Graphics Europe
Samson AG Meß- & Regeltechnik
SWEP International
Oil and Gas
Apply Sørco
Atlas Pipeline
BW Offshore Norway
Seadrill Norge
Sevan Drilling
Process Manufacturing
Agrovista UK
Boyd Coffee Company
Fundação Butantan
GFPT Public Company
major life-science manufacturer
Service Providers
APM Terminals Management
Avinor
Wilhelmsen Ships Service
Miscellaneous
George Steuarts Optimize
Operadora de Hoteles City E
WP Beverages
STRONG UNDERLYING BUSINESS
© 2013 IFS
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HIGHLY-COMPETITIVE CONTRACTS IN TARGET SECTORS
INTERIM REPORT JANUARY–SEPTEMBER 2013
SUN INTERNATIONAL SELECTS IFS APPLICATIONS (Q4) Sun International operates 29 casinos, resorts, and luxury hotels across eight countries globally, making it one of the leading and world-class brands in the gaming and hospitality industry. The solution will be used by more than 10,000 employees in 22 properties and will support business-critical processes such as finance, HR, payroll, supply chain, facilities, and project management. The contract includes licenses and implementation services worth US$ 5.5 million.
FINANCIAL TARGETS
© 2013 IFS
12 INTERIM REPORT JANUARY–SEPTEMBER 2013
IFS’s board of directors has set long-term targets for growth, profitability, and financial leverage, and a policy for dividends and share repurchase.
Grow product revenue (licenses, maintenance, and support) through organic growth and acquisitions.
Improve the EBIT margin to 15% and achieve a return of 25% on average operating capital.
Increase dividends to 50% of earnings after tax.
Use additional surplus capital, which is not required for investments, expansion, and other needs relating to the financial position of the group, to repurchase shares.
FINANCIAL OVERVIEW
© 2013 IFS
13 INTERIM REPORT JANUARY–SEPTEMBER 2013
3RD QUARTER OCTOBER–SEPTEMBERSKr million 2013 2012 2012/13 2011/12
Net revenue 633 612 2,719 2,652of which Licenses 114 109 509 450of which Maintenance and support 227 224 916 898of which Consulting 291 268 1,288 1,285Gross earnings 338 305 1,380 1,288of which Licenses 107 103 473 427of which Maintenance and support 169 157 646 613of which Consulting 63 39 260 241EBIT 66 29 171 195EBIT margin 10% 5% 6% 7%Earnings before tax 63 29 154 182Earnings for the period 49 22 111 130Cash flow after investments -43 -28 92 -78
CASH FLOW
© 2013 IFS
14 INTERIM REPORT JANUARY–SEPTEMBER 2013
GROUP 3RD QUARTER OCTOBER–SEPTEMBERSKr million X 2013 2012 2012/13 2011/12
Cash flow before change in working capital 78 74 356 341Change in working capital -80 -60 -40 -93Cash flow from current operations -2 14 316 248
Cash flow from investments -41 -42 -224 -326Cash flow after investments -43 -28 92 -78
Cash flow from financing -4 -20 -57 5Cash flow for the period -47 -48 35 -73
Cash and equivalents, beginning of period 328 302 249 333Exchange differences in cash and equivalents -4 -5 -7 -11Cash and equivalents, end of the period 277 249 277 249
OUTLOOK
© 2013 IFS
15 INTERIM REPORT JANUARY–SEPTEMBER 2013
FOR 2013, IFS EXPECTS STRONG LICENSE REVENUE GROWTH AND AN IMPROVEMENT IN EBIT.
The outlook for 2013 includes the costs arising from and the savings realized through the ongoing efficiency improvements.
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THIS DOCUMENT MAY CONTAIN STATEMENTS OF POSSIBLE FUTURE FUNCTIONALITY FOR IFS’S SOFTWARE PRODUCTS AND TECHNOLOGY. SUCH STATEMENTS OF FUTURE FUNCTIONALITY ARE FOR INFORMATION PURPOSES ONLY AND SHOULD NOT BE INTERPRETED AS ANY COMMITMENT OR REPRESENTATION. IFS AND ALL IFS PRODUCT NAMES ARE TRADEMARKS OF IFS. THE
NAMES OF ACTUAL COMPANIES AND PRODUCTS MENTIONED HEREIN MAY BE THE TRADEMARKS OF THEIR RESPECTIVE OWNERS.
© 2013 IFS
