EDB BP ASA has made a strong start to 2006.
First quarter revenue increased by 14% to NOK 1.3 billion. EBITA for the quarter was NOK 123 million as compared to NOK 109 million for the same quarter last year. This represents growth of 13%. Pre-tax profit for the first quarter was 36% higher at NOK 94 million. The business areas Solutions and Application Services reported good revenue growth. IT Operations reported a stable performance.
"EDB is on a positive trend, and this demonstrates the long-term effects of the strategy set out for the company. Establishing the Application Services business area has strengthened our position in the market. We now have three business areas that complement each other", comments Endre Rangnes, CEO of EDB Business Partner. Following the recent acquisitions, the business areas Solutions and Application Services will account for 16% and 20% respectively of the group's total revenues. The IT Operations business area will generate 64% of total revenues.
First quarter highlights
- EBITA margin of 9.2%
- Earnings per share up by 44% to NOK 0.74
- Swedish activities increased revenue by 25% to NOK 190 million, with improved profitability
- Five company acquisitions carried out
- New contracts in the quarter with total contract value of NOK 900 million
- Major conversion project for DnB NOR completed
First quarter
EDB Business Partner reported operating revenue for the first quarter of 2006 of NOK 1,341 million as compared to NOK 1,180 million in the same quarter of 2005. Revenue was up by 14% from the same quarter of 2005. Of the corporate acquisitions carried out towards the end of 2005 and in early 2006, Tag Systems is consolidated in the Solutions business area with effect from 1 January 2006 and Datarutin in the IT Operations business area with effect from 1 February 2006, while Avenir and Spring Consulting are included in the new business area Application Services with effect from 1 January 2006.
Revenue for IT Operations was 1% higher than in the first quarter of 2005 as a result of the acquisition of Datarutin, while the Solutions business area reported revenue 18% higher than the same quarter of last year, of which organic growth accounted for 8%. Application Services reported revenue of NOK 111 million in the first quarter of 2006. Proforma revenue for this business area was NOK 91 million for this quarter in 2005, representing aggregate growth of 22% for the activities now included in Application Services.
The group reports operating profit before intangible asset amortisation (EBITA) of NOK 123 million for the quarter, as compared to NOK 109 million for the first quarter of 2005. The group's EBITA margin was 9.2% for the quarter, in line with the same quarter of last year. The IT Operations business area produced an EBITA margin of 8.2% as compared to 8.7% in the first quarter of last year. The change is mainly the result of previously reported price reductions for 2006 on some larger customer contracts. The Solutions business area reported an EBITA margin of 14.9% as compared to 15.2% for the same period last year. The new business area Application Services reported an EBITA margin of 13.8%, which is a substantial improvement from the business area's proforma EBITA margin for the first quarter of 2005.
EDB increased its first quarter revenue by 25% to NOK 190 million. EDB's business areas Solutions and Application Services are now reporting double-digit margins. Datarutin was taken over with effect from 1 February 2006. This business has had a positive effect on the profitability of IT Operations in Sweden.
Future prospects
The Nordic IT services market grew in the first quarter of 2006, and EDB expects this trend to continue for the rest of the year. There is good demand for bank and finance solutions, and the market for application services and IT consulting shows a similar favourable trend. The IT outsourcing market saw fewer major contracts signed in the latter part of 2005 and the first quarter of 2006. The timing of new major contracts causes volatility in the growth of the total outsourcing market.
Seperately, Teller AS has signed an agreement with EDB Business Partner to buy software and operating services for its card activities.
The agreement runs for two years, with a total contract value of NOK 46 million.
The agreement provides for EDB to deliver solutions for receiving and processing card transactions, MultiAcquring, and for Teller's archiving system, and EDB will also be responsible for the operation and future development of Teller's core system. The agreement also includes network solutions and security solutions for smart cards (EMV).
This contract gives Teller access to higher quality standards by expanding its high-availability solutions. The agreement will also improve security by adapting to the new PCI Data Security Standards.
"Electronic payment services are a core area for us. This contract with Teller demonstrates that EDB is well ahead here in terms of both quality and security", comments Petter Jensen, EVP responsible for Bank and Finance at EDB.
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