High growth enterprise software (ERP) developer IFS today presented an overview of its 2001 second quarter earnings ahead of the interim report due on August 24 because, said the firm, the outcome “differs considerably from the expectations of the market and of business analysts”.
The firm says it will have turned the corner back to profitability – pleasing the stock market which has seen the share price rise 15% – with net sales increased by 63% against the corresponding period in 2000, to SEK 918 million (£60,500,000), versus SEK 562 million (£37,000,000).
License revenue rose 82% to SEK 438 million (£29m), compared with SEK 241 million (£16m); consulting revenue was up 56% to SEK 411 million (£27m), compared with SEK 263 million (£17m). And net earnings amounted to SEK 10 million (£660,000), compared with a loss of SEK 111 million (– £7.3m).
IFS’ earnings improved the most in North America, which reported a second quarter profit helped by the huge contract with General Electric – which also resulted in income for the UK-based joint venture with BAE Systems, the latter receiving royalties for sales into the civil airlines sector.
And Alastair Sorbie, IFS UK managing director, notes that a substantial portion of the license revenue from the General Electric agreement remains to be accounted for as revenue during the rest of 2001 and beyond.
Sorbie also says IFS’ UK fortunes continue to be extremely bright – with profits doubled against budget in the first six months, helped by another contract signed last week with the UK Government via CDC for £8 million worth of software and services from the BAE Systems joint venture for the supply and maintenance of the in-service side of its hand-held communications.
It all comes at an interesting time for IFS and its users. The company had been roundly criticised by the stock market for its high growth, low profitability stance. Now, with the international growth and its product coverage expansion pretty well complete, the company has shown that a few prudent internal measures, built on that strong foundation, have easily turned it to profitability – where others have fared poorly.
And for users that’s doubly good news. A strong supplier is one that will be there to support you in years to come on your major investments. And one that has invested itself so heavily in its global coverage and product range as well is the golden ticket. Seems the IFS plan was right from the start.
IFS declined to make a forecast concerning the remainder of 2001, referring instead to the interim report due on August 24.
Author: Brian Tinham