Source: Systems Union Group
Systems Union Group plc is a leading global provider of world class Financial & Performance Management software solutions.
Today it announces record audited full year results for the year ended 31 December 2005.
The Group is pleased to report that all key performance indicators for 2005 are ahead of market expectations and last year:Revenue increased by 9% (6% organic) to £113.4 million.H2 revenue was £59.7 million (2004: £53.2 million) compared to H1 £53.7 million (2004: £51.0 million), representing growth of 12% (8% organic) in H2 and 5% (3% organic) in H1.EBITDA from ongoing activities increased by 16% to £16.5 million. EBITDA to Revenue margin increased to 16% in H2 from 13% in H1.Profit before taxation increased by 77% to £8.2 million.Strong operating cash flow of £13.5 million (2004: £12.1 million).Basic EPS increased by 73% to 6.9p.Adjusted Earnings increased by 14% to £12.7 million.Adjusted diluted EPS increased by 11% to 12.2p.Final dividend of 1.75p proposed, resulting in a total dividend for the year of 2.5p (2004: 2.0p).Eleventh consecutive half year in line with, or ahead of, market expectations.Major new contracts across the entire product portfolio including a large European retailer; major insurance companies in the USA, Sweden and South America; multinational oil and gas companies; many global hotel chains; several government departments in the UK and Central Europe; a leading international fleet management operator; leading real estate companies in the USA and Australia and one of the world's largest accounting practices in Asia Pacific.
I am pleased to report that the Group had a very successful year. We achieved our principal financial, operational and strategic objectives delivering organic revenue growth and increased profitability. We invested further in our personnel and reseller channel, research and development, and marketing to further strengthen our core product offering and expand our global footprint. Operationally the focus was on the further integration of the key strategic acquisitions made in 2003 and 2004. We have consolidated our competitive position and built on our commercial and financial success through the continued investment in the development of a technology framework through which we enhance and extend our suite of financial and performance management solutions.
The acquisition programme commenced in the final quarter of 2003 with the purchase of MIS AG, a leading business intelligence software company and Foundation Systems Limited, a leading reseller of SunSystems and other third party software. This was followed in 2004 with the acquisitions of the Vision suite of software from Lasata Pty, the ncSoft brand of business software and a leading accounting and business software distributor in Ireland, subsequently renamed Systems Union (Ireland) Limited. I am pleased to report that all of these businesses have been successfully rationalised and incorporated into the Group from a technical, commercial and organisational perspective. During 2005 we bought MIS Spain and acquired a reseller business operating in several countries in the Far East.
The dimension and dynamics of the business have changed significantly, notably with the acquisition of MIS, which I am now pleased to report is 100% owned by the Group. This enables us to aggressively expand and develop our solution portfolio, operating in a more diverse and enlarged market space. We are ideally positioned to take full advantage of the significant growth in the business intelligence software market and expect that 2006 will be another year of growth.
The Group is financially strong with £24 million in cash; £9 million net cash balances after deduction of £15 million medium term acquisition finance. This, together with the increase in the Group's capital value, has significantly increased our ability to make further acquisitions.
Revenues have increased by 9 per cent to £113.4 million (2004: £104.2 million)and EBITDA margins widened from 13.6 per cent to 14.6 per cent.
Earnings before interest, tax, depreciation and amortisation grew by 16 per cent to £16.5 million (2004: £14.2 million) and adjusted diluted earnings per share improved to 12.2 pence (2004: 11.0p). The underlying strength is demonstrated by our positive operating cash flow with £13.5 million (2004: £12.1 million) being generated during the year.
The Board is recommending a final dividend of 1.75 pence per share resulting in a total dividend for the year of 2.5 pence per share (2004: 2.0 pence per share) an increase of 25 per cent. The final dividend will be paid on 23 May 2006 to shareholders on the register at the close of business on 21 April 2006.
A global software business recognises the changing needs of customers, adapts to technology changes and delivers the benefits of these changes to its customers. Our management and staff continued to do this in 2005 and the directors recognise, and thank them for, their efforts.
In view of the strong financial performance, improved sales pipeline and enhanced solution portfolio, the Board is optimistic for a successful 2006.
27 February 2006
Chief Executive Officer's Review
2005 represented a year of significant progress with Systems Union Group delivering record results and our eleventh consecutive half year in line with, or ahead of, market expectations. We improved all key performance indicators across all operations. In addition, we invested further in staff, our infrastructure and in our unrivalled and global portfolio of financial and performance management solutions.
Revenues grew to £113.4 million, a 9 per cent increase on last year and we delivered 8 per cent organic revenue growth in H2 and 3 per cent in H1. EBITDA grew by 16 per cent to £16.5 million and adjusted earnings grew by 14 per cent to £12.7 million.
Global in reach, scale and solutions
The Group is committed to designing and delivering solutions that help global users to understand, manage and improve business performance and profitability. R&D successfully delivered significant enhancements to our core SunSystems and Pegasus financial management solutions, to MIS, our world class performance management and business intelligence suite and to our Vision portfolio of pan-application reporting and analytical products. 2005 saw the launch of SunSystems Procurement, Vision Serduct Studio, Pegasus XRL for competitive products, MIS DecisionWare 5.1.1 and the development of MIS Consolidation and Vision Reporting Services.
We increased our staff numbers by 10 per cent and recruited 22 new channel partners around the world. A total of 44 training courses improved the sales skills of our staff and partners. We have also devised a new classification system for partners, Gold Certified, Certified and Registered, which provides recognition for partner achievement and competency.
In terms of the reach and scale of our operations we made a number of acquisitions in Asia Pacific, Ireland and Spain. We opened new offices in Chicago and Los Angeles and plan to open offices in Kuala Lumpur, Malaysia and Guangzhou, China. In addition, we gained recognition as a Microsoft Global Independent Software Vendor. This enables us to build our commercial relationship with Microsoft and undertake joint go to market activity as well as strengthen our R&D relationship across the product portfolio.
Our financial, technical and commercial progress has been recognised by several independent global awards programmes. The highlights include the appearance of Systems Union solutions in the highly influential Gartner CPM Magic Quadrant, a ranking in the Deloitte Technology Fast 50 for London and the South East, Europe's Top 500 and in MIS Asia Magazine's Top 100 Technology Companies.
Group revenue grew by 9 per cent to £113.4 million. Licence revenues at £31.5 million increased by 10 per cent, maintenance revenue at £48.6 million increased by 7 per cent and services revenue at £33.3 million increased by 10 per cent.
Total operating expenses increased by £5.6 million (up 6 per cent) to £104.9 million. Most of this increase was attributable to the increased investment in personnel. The total number of personnel increased by 126 to 1,442 and was primarily in sales, marketing and consulting largely in the Americas and Asia Pacific regions.
EBITDA increased by 16 per cent to £16.5 million from £14.2 million in 2004 and the EBITDA margin increased to 14.6 per cent from 13.6 per cent. The growth in Group profit before tax was 77 per cent and 25 per cent adjusted for the £1.9 million of non-recurring charges in 2004. The Group's tax rate benefits from the utilisation of corporate tax losses brought forward from previous years and R&D tax credits.
Gross cash balances at 31 December 2005 were £24.0 million (2004: £16.5 million). After the deduction of £15 million medium term acquisition finance, the net cash balances were £9.0 million (2004: £1.5 million). Cash flow from operating activities increased by 11 per cent to £13.5 million. During 2005 the Group spent £2.4 million on acquisitions, net of cash, in acquired businesses.
Dividends paid during 2005 amounted to £2.3 million representing 1.5 pence per share in May and 0.75 pence in October. The directors are proposing a final dividend for 2005 of 1.75 pence per share which makes 2.5 pence per share for the year which will absorb approximately £1.8 million in cash, payable in May 2006.
The Group operates through four geographic regions; UK and Ireland (UKI), Central and Eastern Europe, Middle East and Africa (CEEMEA), Asia Pacific and the Americas. The growth and profitability generated in all regions is due to the team's commercial and technical understanding of prevailing local, national and international market dynamics and specific customer needs.
Revenue grew by 5 per cent to £44 million and represents 39 per cent of global revenue. This region combines Systems Union UK and Ireland together with Pegasus, Foundation and REDtechnology.
In Systems Union the operations of the previously stand-alone acquisitions and existing businesses were fully integrated in 2005 with a view to ensuring that all product offerings and business solutions were marketed and sold cohesively. Significant successes were recorded across the entire product portfolio with notable wins including a development agency in Scotland; a central government department in London; a UK financial institution; a global oil and gas provider; a construction firm; a specialist travel agent; an elite car manufacturer; a chemical science organisation; a food retailer; a property management organisation and a leading employment specialist.
2005 was a year of further progress for Pegasus; revenue grew by 6 per cent, with significant licence sales generated from its flagship Opera II solution. In addition, there was an improvement in operating margins. Foundation embraced the enlarged portfolio and generated an encouraging 6 per cent organic revenue growth. REDtechnology recorded a 33 per cent increase in revenue.
Revenue from ongoing activities grew by 7 per cent to £37.3 million and represents 33 per cent of global revenue. This region now combines the previous operations of Systems Union and MIS.
Underscoring this performance was the securing of significant deals across the region from a major Swiss retail group; an engineering company in Germany; an international courier service provider; a German airport services organisation; a French business and security services company; a substantial Swedish insurance company; a leading rubber manufacturer; an Austrian government department; a leading automotive distribution company; a large energy provider and a German financial services provider.
Revenue grew by 23 per cent to £13.1 million and represents 11 per cent of global revenue. This region now combines the previous operations of Systems Union, MIS and Lasata.
2005 saw growth in excess of 40 per cent in services revenue, 8 per cent in licences and 18 per cent in maintenance. Additionally there were new and significant business wins with a US based global insurance provider; a financial services provider; a major Canadian airport; leading global hoteliers; a leading energy provider; a commercial real estate specialist; several oil and gas companies; an international media company and a large commodities trading house.
There has been considerable investment in this region to drive future growth with a view to reflecting the global importance of this region. We extended our footprint by opening offices in Los Angeles and Chicago.
Revenue grew by 23 per cent to £19.0 million and represents 17 per cent of global revenue. This region now combines the previous operations of Systems Union, MIS, Lasata and Eclipse Asia.
The region achieved an increase of 56 per cent in its consulting revenues, 21 per cent in licences and 14 per cent in maintenance. The Asia Pacific team secured contracts with a Tokyo based manufacturer; a leading accountancy practice; a Hong Kong freight services organisation; an educational services provider and a consumer goods provider both based in Australia; a global coffee retailer and leading financial services organisations in China and Japan. The team has achieved a high rate of profitability and is exploring new opportunities in the rapidly expanding markets within the region. We will also be opening new offices throughout the region in 2006.
The Group owns all of the intellectual property rights (IPR) for its financial and performance management solution portfolio. We are committed to the continual development, delivery and support of a portfolio of first class financial and performance management solutions which enable our clients to manage, understand and improve their businesses. There were many enhancements made to products during the course of the year which were launched in 2005 and early 2006.
Robust financial management systems will always be critical to the integrity of an organisation. Additionally the growth in the business intelligence (BI)marketplace is being driven by the ever more complex regulatory environment; the increasingly global nature of business transactions; the requirement to reduce risk and respond earlier to negative events; the need for greater transparency and availability of up-to-the-minute enterprise wide information and the need to plan, budget and forecast more effectively for the future. Spreadsheets are no longer adequate and organisations are looking for BI solutions that offer database integrity, business rules, access rules and audit trails, as well as a common operating platform and secure enterprise-wide access to data.
Systems Union is widely recognised as a leading provider of a range of market-leading and proven solutions for the mid-market.
SunSystems is a leading transactional processing solution enabling the generation of mission critical, reliable and comprehensive financial information. Its rich functionality was recognised in July 2005 when SunSystems 5 was certified by KPMG in Germany as offering compliance with Sarbanes Oxley and IFRS.
There has been a substantial increase in sales of SunSystems exfm, which remains a unique proposition in the marketplace. This solution integrates elements from across the portfolio into a single solution combining core financials with advanced reporting, budgeting and forecasting capabilities along with a portal framework.
SunSystems' core functionality was enhanced with the release of SunSystems Procurement and Productivity (Time, Expense and Resource) designed to help organisations streamline and rationalise purchasing, expense and time management processes. In addition, in early 2006 SunSystems 5.2.2, a major release, was launched incorporating new reporting and query management functionality.
Pegasus launched innovative and competitive products including Opera II Enterprise SQL and Pegasus XRL for third party software. It also launched Pegasus CIS for the construction industry which will aid regulatory compliance.
MIS solutions enjoyed notable successes during 2005. We launched a series of enhancements to the portfolio including MIS Balanced Scorecard which was developed to help customers communicate strategy, set goals and measure and monitor business performance in a more efficient manner.
In addition, MIS solutions received significant independent endorsements including the influential OLAP (Online Application Processing) Survey 5, which reviewed 2,100 software implementations in 71 countries and recognised MIS solutions for high levels of user satisfaction, excellent goal achievement rates and fast implementation times. In addition, a new release of DecisionWare was launched in early 2006 together with a new version of Enterprise Planning delivering new multi-lingual capabilities.
The Group formed strategic partnerships to further extend the portfolio and market reach of MIS solutions. Germany's leading mid-market financer, The Sparkassen Financial Syndicate, has released software based on MIS technology, while a partnership with a global telecoms giant delivered a mobile reporting solution.
Vision is a powerful pan-application reporting and analytics suite. Among our significant R&D achievements for 2005 was the development of Vision Reporting Services which is based on Microsoft .Net technology. By developing this solution we have removed our utilisation of third party reporting solutions.
Vision's extensive reporting on real-time data and drill down across multiple products was enhanced with the launch of Serduct Studio in June. This offering enables organisations to build Serducts, Vision's data mapping technology, which in turn enables reporting applications to deliver live reporting and analysis across multiple data sources including competitive products.
During 2005 the global marketing team has successfully re-branded and re-launched Systems Union's corporate positioning as a market leader in the provision of world-class financial and performance management solutions to the mid-market. This new positioning is designed to reflect the breadth and depth of Systems Union's solution portfolio and to recognise the changing needs of CFOs who continue to demand excellence in financial transactional processing but who also now require proactive business intelligence tools to drive improved business performance.
A globally co-ordinated marketing programme has been executed to launch the new Systems Union corporate identity and promote the Group's unique market proposition. This has resulted in improved coverage of Systems Union's solutions by market leading industry analysts such as Gartner and the OLAP survey, the winning of a number of industry awards, and a significant improvement to the sales pipeline year on year.
The second phase of this re-branding has also now been executed with the re-branding of the three global Systems Union solutions of SunSystems, Vision and MIS. The logos for these solutions have now been conformed to the same look and feel to reflect the cohesive nature of the integrated financial and performance management suite. In addition, a new corporate positioning message of "manage, understand, improve" has been launched to reinforce the respective value propositions of the global solutions - SunSystems helping organisations manage their businesses more efficiently through best of breed transactional processing, Vision helping companies improve their understanding of financial and operational activities via powerful real-time reporting and analysis, and MIS driving business improvement with a comprehensive portfolio of performance management tools.
Research and Development
The information needs of users have changed and the demand for business, financial and wider management information to be available in a unified and consistent format is increasing. We have responded with further investment in our cohesive R&D road map. Our global R&D teams work collaboratively to ensure maximum productivity across the entire portfolio and the result has been that our solutions enable finance professionals to take advantage of enterprise wide financial and performance information. The result is that focus can now be placed on added value activities such as evaluating strategies, assessing how to drive top line growth, improve the bottom line, and use assets more effectively. All of which contribute to delivering improved overall business performance.
Further investment has been made in our new .Net based technology framework which enables us to achieve even faster and even more efficient development in the future. It provides us with a robust architecture on which we extend the breadth of our solutions and offer quantifiable benefits to our customers.
We have also implemented a zero defects strategy to deliver even higher levels of product quality.
Support and Services
The Group's support network comprises two SuperCentres, a network of regional support centres on four continents, as well as an international team of highly skilled consultants, professional services, pre sales and solution experts. We continue to invest in our ability to provide timely, professional and highly responsive service and support standards for our partners and users around the world.
Our support consultants are closely involved with our customers from early in the sales cycle and work closely with the professional services and pre-sales teams. This ensures team wide understanding of specific installations and ensures that customers receive ongoing expert and personalised support.
We offer a comprehensive customer support system with a global IP telephony system routing customer calls from around the world to the best available consultant who speaks their local language. The 'follow the sun' support initiative diverts calls placed out of office hours to the nearest open support desk. We offer multi-lingual support on a 24 hour, 5 day a week basis.
Systems Union's staff and management are committed to the ongoing success and profitability of our company. We possess a capable and experienced team who ensure we deliver service and solution excellence to our customers around the world.
I am proud to be the chief executive officer of Systems Union and would like to thank every member of the team for their hard work, support and dedication.
2006 and beyond
2005 has been a year of record results for the Group. We have exceeded market expectations in terms of revenue growth and profitability. Operationally our solution portfolio has been enhanced with the addition of new "value-add" functionality and we have invested further in our staff, our partner communities, our global infrastructure and our service and support network.
Systems Union is a truly global company with an enviable and comprehensive solution portfolio and world-wide distribution network. We have a clear and achievable agenda which is already proving itself. We enter 2006 stronger than ever before with continued optimism for future growth.
Chief Executive Officer
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