2013 Half Year Results Presentation

Transcription

1 2013 Half Year Results Presentation Ending March 31 st 2013 Adrian Di Marco Commercial in confidence

2 TechnologyOne Half Year Technology One Ltd Half Year Presentation - 27 May 2013 Technology One Ltd (ASX: TNE) today conducted presentations relating to its 2013 Half Year results. The attached presentation was made by: Mr Adrian Di Marco - Executive Chairman Mr Edward Chung - Operating Officer Corporate Services and CFO These slides have been lodged with the ASX and are also available on the company s web site:

3 TechnologyOne Overview Formed in 1987 Employees developers in R&Dcentre 800+ corporations, government and statutory authorities Revenue $170m One of Australia s most successful software companies Continually profitable since 1992 Doubles in size Every 4 years Invest 20% of revenue back into R&D 14 international offices in Australia New Zealand South Pacific Asia United Kingdom

4 TechnologyOne Overview We are one of only a few Enterprise Vendors globally... Suite of 12 products Deeply integrated Common platform Consistent user interface We believe in the freedom of choice our solution is modular by design The power of a single, integrated, enterprise system

5 TechnologyOne Overview We focus on seven key markets... Deep understanding and engagement in our markets Deeply integrated pre configured solutions Proven practice Streamlined implementations Reduce time, cost and risk Market focus & commitment We sell to asset and service intensive organisations. We do not service retail, distribution or manufacturing industries.

6 TechnologyOne Overview We do not use implementation partners or resellers We take complete responsibility for building, marketing, selling, implementing and supporting our enterprise solution for each customer to guarantee long term success. The Power of One

7 TechnologyOne Overview One of Australia s largest software houses, specialising in the research, development and commercialisation of enterprise software invest $33+m in R&D per year Connected Intelligence (Ci) is our current generation product suite Next generation of our enterprise suite Ci² is under development Diversity of revenue streams from Multiple geographies 12 products Seven vertical markets

8 TechnologyOne Overview Strong financial track record * Doubling in size approx. every 4 yrs (last 15 yrs) Continually profitable since 1992 (20 years) Continually paid dividends since 1996 (16 years) Cash and Equivalents $51.1m Return on Equity 32% Adjusted Return on Equity 70+% Debt/Equity 10% Interest Cover 50 * as at 30 th Sept 2012

9 Agenda Results Significant Achievements Outlook for Full Year Long Term Outlook

10 Results Summary FY13 FY12 Variance % Revenue $79.7m $77.3m 3% Initial Licence Fees $16.3m $18.4m (12%) Consulting Services Fees $22.2m $21.3m 4% Annual Licence Fees $29.9m $25.4m 18% Expenses $68.9m $68.0m 1% R&D Expenses * $17.2m $16.6m 4% Expenses excl R&D $51.7m $51.4m 1% Profit Profit After Tax $8.7m $7.4m 17% Profit Before Tax $10.9m $9.3m 17% Other Operating Cash Flow $11.1m $4.4m 151% Cash and Cash Equivalents $50.3m $33.4m 50% Profit Before Tax Margin 14% 12% * 22% of revenue v 21% last year

11 Results Highlights Good result given challenging and uncertain economic climate Positions us to deliver continuing growth in both revenue and profit for the full year Continued significant investments in a number of key areas as follows: R&D into TechnologyOne Cloud R&D into Ci² - Next generation of our Ci suite Pre-Configured solutions United Kingdom All costs associated with these investments fully expensed as incurred. These investments will drive growth in future years discussed later Highlights

12 Balance Sheet Strong balance sheet Cash & Cash Equivalents $50.3m (vs. $33.4m) Net Cash*: 14.00c/s (vs.7.55c/s) Debt/Equity: 8.77% (vs %) Net Assets: $72.4m (vs. $62.4m) Interest Cover: 52 times Mar-13 Mar-12 Var % $'000 $'000 $'000 Cash & Available-for-sale financial assets 50,251 33,410 16,841 50% Trade and other receivables 22,060 21, % Other current assets 7,496 11,909 (4,413) (37%) Current assets 79,807 66,948 12,859 19% Property, plant and equipment 13,542 17,587 (4,045) (23%) Intangible assets 16,064 16,320 (256) (2%) Other non-current assets 4,831 4, % Non-current assets 34,437 38,298 (3,861) (10%) $'m Cash and Equivalents Compound Growth 37% Up 50%, $16.9m Total Assets 114, ,246 8,998 9% Trade and other payables 14,615 13, % Provisions 9,684 9, % Unearned revenue 7,317 6, % Borrowings 6,355 8,303 (1,948) (23%) Other liabilities 3,849 4,625 (776) (17%) Total Liabilities 41,820 42,843 (1,023) (2%) 20 Net Assets 72,424 62,403 10,021 16% Issues Capital and Reserves 34,791 33,518 1,273 4% Retained earnings 37,633 28,885 8,748 30% Equity 72,424 62,403 10,021 16% *after debt per share

13 Cash Flow Operating Cash Flow $11.1m, up 151% from $4.4m* Operating Cash Flow $11.1m vs NPAT of $8.7m * As at March 2012 NPAT versus Operating Cash Flows $'m $11.1m NPAT $8.7m NPAT $7.4m 8 6 $4.4m Operating Cash Flows $'m Mar-13 Mar-12 Var % $ '000 $ '000 $'000 EBIT 10,205 8,887 1,318 15% Depreciation & Amortisation 2,858 2,876 (18) (1%) Change in working Capital (Increase) / Decrease in Debtors 2,596 (5,521) 8, % Increase / (Decrease) in Creditors (1,894) 1,874 (3,768) 201% Increase / (Decrease) in Staff Entitlements (190) (511) % Net Interest Paid (32%) Income Taxes paid (3,122) (3,860) % Other (166) (61%) Operating Cash Flow 11,081 4,413 6, % Capital Expenditure (855) (1,683) % Proceeds from Sale of PP&E and Investments 1, , % Free Cash Flow 11,427 2,730 8, % Dividends Paid (10,670) (14,209) 3,538 25% Repayment of finance lease (956) (1,131) % Proceeds from leasing of PPE % Proceeds from Shares issued (55) (11%) Increase in Cash & Cash equivalents 262 (12,094) 12, %

14 Results Analysis Half Year 2013 v Half Year 2012 FY13 $'000 FY12 $'000 Variance $'000 % Revenue excl interest 78,869 76,545 2,324 3% Expenses (excl R&D, Interest, Depn & Amortisation) 48,598 48, % EBITDAR 30,271 28,344 1,927 7% R&D Expenditure 17,207 16, % EBITDA 13,064 11,763 1,301 11% Depreciation 2,731 2,735 (4) (0%) Amortisation of Intangibles (14) (10%) EBIT 10,206 8,887 1,319 15% Net Interest Income % Profit Before Tax 10,868 9,289 1,579 17% Profit After Tax 8,673 7,426 1,247 17%

15 Results Key Metrics Half Year 2013 v Half Year 2012 FY13 FY12 Variance % Half Year 2013 v Half Year 2012 FY13 FY12 Variance % EPS (cents) % Dividends (cents) Standard % Special Dividend Payout Ratio 63% 67% Key Margin Analysis EBITDAR Margin 38% 37% EBITDA Margin 17% 15% Net Profit Before Tax Margin 14% 12% Net Profit After Tax Margin 11% 10% ROE Return on equity* 12% 12% Adjusted return on equity** 23% 16% Balance Sheet ($ 000s) Net Assets 72,424 62,403 16% Cash & Cash Equivalents 50,251 33,410 50% Operating cash flows 11,082 4, % Debt/Equity 9% 13% R&D as % of Total Revenue 22% 21% * 2012 Full year ROE was 32%, which is expected to be similar for 2013 full year ** 2012 Full year Adjusted ROE was 70+%, which is expected to be similar for 2013 full year ** Adjusted for net cash above required working capital, which was assumed at $10m

16 Profit By Segment Analysis $'m Licence Fees down 12% $1m Down 53% Heads 145, Up 10% $3.7m Up 43% Heads 218, Down 15% Profit Contribution $1m Up 4% Heads 66, Down 18% $2.7m Up 46% Heads 292, Down 6% $2.4m Up 38% Heads 116, Down 17% Sales Consulting PLUS R&D Corporate FY11 FY12 FY13 Net Profit Before Tax $10.9m, up 17% (up $1.6m) Sales $1m, down 53% (down $1.1m) Consulting $3.7m, up 43% (up $1.1m) PLUS $1m, up 4% (up $37k) R&D $2.7m, up 46% (up $866k) Corporate $2.4m, up 38% (up $656k)

17 Dividend Dividends for this half year Half cps up 10%* (declared, 85% franked) Payout ratio of 63% *Indicative of our confidence for the full year outlook Notes We have continuously paid a dividend since 1996 (through Dot-Com and GFC) As previously disclosed, an independent review of our R&D tax claim last year found a substantial additional tax concession. Though this is a positive outcome, this will impact the availability of franking credits. As such, our H1 dividend will now be partially franked. Our R&D tax claim has now been extended to prior years, and is as yet unquantified, but our expectation is that the H2 dividend will be partially franked. The review of prior R&D tax claims is expected to be completed within next 12 months. We expect in future years to return to 100% franked dividends Once we return to fully franked dividends the Board will again consider paying a Special Dividend Board is considering other Capital Management initiatives Cents per share Dividend Compound Growth 19% up 10%

18 Revenue Streams Licence fees down 12% Half year can not be extrapolated, as discussed at AGM Our pipeline this year is weighted towards the 2 nd half year. Also in the 2012 half year there was an unusually large contract with a million+ dollar licence fee that was booked Pipeline for second half is good Continued growth in Licences expected in full year Annual licence fees continue to grow strongly: up 18% Compound growth over the last 10 years is 18% Customer retention is important Our investment in Compelling Customer Experience program and Ci² is critical for the future

19 Revenue Streams Product Consulting revenue up 4% Consulting profit up $1.1m, 43% on prior year A new Operating Officer Consulting Transformation of this business unit to ensure world best practice & continuing strong growth Compound growth over the last 10 years is 15% Plus (non product consulting) revenue down 10% Plus profit is up $0.04m, 4% on prior year Merged into our Consulting Business, with a new Manager Strategy to move this business to value added services around our Ci products Market conditions for non Ci product services challenging

20 Licence Fee Contribution - Vertical Market Financial Services, $520k, 3% Licence Fee Contribution - Vertical Market Government, $1.7m, 11% Utilities, $2.3m, 14% Health & Community Services, $2.3m, 14% Local Government, $3.5m, 21% Managed Services, $664k, 4% Education, $5.3m, 33%

21 Agenda Results Significant Achievements Outlook for Full Year Long Term Outlook

22 Significant Achievements Significant Achievements R&D TechnologyOne Cloud TechnologyOne s Journey to the Cloud Marketing Transformation Other Initiatives

23 R&D R&D $17.2m, 22% of revenue R&D fully expensed as incurred R&D is an important driver for future growth The most ambitious R&D plan in the company s 25 year history R&D continued across all our Ci products R&D into new innovations, ideas and concepts R&D into the continuing evolution of Ci (code name Ci²) R&D into the TechnologyOne Cloud New Off Shore R&D centre Target for full year is growth of 4%, below our long term target of 8%

24 TechnologyOne Ci² Continuing evolution of Ci R&D into new technologies, innovations, ideas and concepts Simple, easy way forward for our Ci customers Browser based no more software installs & pervasive Incredibly simple to use, Consumer type software Support smart mobile devices iphone, ipad, Android etc.. Instant familiarisation High performing and very scalable On Premise and Cloud Enterprise software incredibly simple Any device, anywhere, anytime No more major upgrades - Apps and Enterprise App Store Significant platform for future growth in coming years

25 TechnologyOne Ci² Strategy being developed for roll out of Ci² Early adopters to be identified Generally available early/late 2014 Minimise the risks associated with such a large and ambitious project Maximise the revenue potential at the same time

26 Significant Achievements Significant Achievements R&D TechnologyOne Cloud TechnologyOne s Journey to the Cloud Marketing Transformation Other Initiatives

27 Today On Premise The old way - Run your own hardware & systems On Premise Database Server client Citrix Servers N-tier Application Servers Distributed Processors A complex computing model Installation Servers

28 What is cloud The new way - sign onto a business service client Internet connection Cloud- a simpler computing model Off Premise Service Provider

29 The TechnologyOne Cloud TechnologyOne Enterprise Suite in the cloud today, delivered in a browser. TechnologyOne takes care of everything Enterprise Software As a Service A simple and easy experience

30 The TechnologyOne Cloud Partnerships with a global Infrastructure As a Services (IAS) providers 2 Data centres commissioned in Sydney in active/active configuration TechnologyOne Enterprise suite now optimised for the TechOne Cloud TechnologyOne Corporate now running on TechOne Cloud for 9+ months 4 Early adopters now being implemented Pepper UK, WA Tourism, WA Small Business Development Council, MTC Works All TechOne Cloud costs are being fully expensed as incurred Good pipeline of opportunities emerging Significant platform for future growth in coming years

31 Cloud TechOne Cloud - a number of years before a meaningful contribution to our profit

32 Significant Achievements Significant Achievements R&D TechnologyOne Cloud TechnologyOne s Journey to the Cloud Marketing Transformation Other Initiatives

33 TechnologyOne s Journey to The Cloud TechnologyOne s Journey to the Cloud... done Corporate Accounting done R&D in the Cloud done Demonstrations in the Cloud Dec 2013 Documents & Files in the Cloud Dec 2013 Consulting in the Cloud Dec 2013 Significant cost savings expected in 2013/2014 year

34 Significant Achievements Significant Achievements R&D TechnologyOne Cloud TechnologyOne s Journey to the Cloud Marketing Transformation Other Initiatives

35 Marketing Transformation Better position our solutions & products in a competitive, fast changing landscape World class marketing capability Well advanced in the transformation of our Marketing group Appointed a new Director of Marketing New Marketing Strategy Vertical Market driven Messaging - simple, clear and powerful messages consistent through out the year Simplify Buyers Journey, Pro-Active, Just In Time Pro-active rolling calendar of events to support Buyers Journey around our markets Events smaller, higher quality, quicker & easier to manufacture through out the year Measure the effectiveness of events to allow us to tailor them Continually evolving, adapting & responsive events based on the metrics & feedback

36 Significant Achievements Significant Achievements R&D TechnologyOne Cloud TechnologyOne s Journey to the Cloud Marketing Transformation Other Initiatives

37 Other Initiatives Transformation of Consulting Business TechnologyOne Leadership TechnologyOne Solutions Compelling Customer Experience TechnologyOne College United Kingdom New strategy being implemented No new contract wins this half Significant improvement will require UK conditions to improve

38 Agenda Results Significant Achievements Outlook for Full Year Long Term Outlook

39 Outlook for Full Year Economic environment remains challenging and uncertain Strong committed annual licence fees in the second half TechnologyOne enterprise business remains resilient Good pipeline of opportunities in second half We expect profit growth of 10% to 15% for the full year

40 Assumptions Economic climate does not deteriorate any further and that the current pipeline remains strong Total expense growth of 3% for the full year Reduces risk for the business R&D expense growth of 4% for the full year TechnologyOne continuing evolution of Ci (Ci²) TechnologyOne Cloud New Offshore R&D centre Round off existing products ECM, HR & Payroll, Asset Management Plus revenue will be line ball to last year United Kingdom market remains challenging, but expect to continue to reduce losses UK full year loss of $800k (vs $1.3m loss last year)

41 Agenda Results Significant Achievements Outlook for Full Year Long Term Outlook

42 Improved Margins Profit margin has contracted over the last 10 years Expanded our product range investment Profit margin now started to improve, as predicted Focus is to substantially improve margins over next five years 35% 30% 25% 20% 15% 10% 5% 0% Net Profit Margin Before Tax 26% 26% 25% 25% 21% 21% 17% 17% 18% 17%

43 Control R&D Costs Compound Growth 16% Control R&D costs... Leveraging our new Offshore R&D centre Economies of scale World Class R&D Practices Maintaining an ambitious R&D agenda

44 R&D Growth Projections Target for R&D growth of 8% per annum compound, over 5 years set in 2011 In 2012 year we demonstrated this was achievable with R&D growth of 5% Continues to be a very aggressive R&D program Operating leverage & economy of scale Assumes no Acquisitions in next 5 years, and continuing growth in revenue $'m Model for R&D Expense Growth This year growth target is 4% 2012 year growth was 5% Historical Compound Growth 16% Model Compound Growth 8% $47m $67m Actual Projected from Model, shows savings of $20m/year in year 5 (2016) In year 5, R&D will be 18.5% of revenue (vs 20% now) In year 10, target for R&D is 15% of revenue Still well above Industry Average of 10% to 12%

45 Platform for Continuing Growth Ci continues to be successful Ci² - continuing evolution of Ci (next generation) Enterprise software incredibly simple New technologies, new innovations, new concepts Early adopters expected late 2013/early 2014 Generally available mid/late 2014 TechnologyOne Cloud Enterprise software as a service Early adopters now on board Generally available mid/late 2014 R&D growth of 8% per annum (vs historical average of 16%) Save $20m in year 5 alone Ci Ci² TechOne Cloud R&D Growth of 8%

46 46 Long Term Outlook Long Term Outlook is Strong... Enterprise Suite one of a few companies globally with an enterprise solution Power of One unique approach to build, market, sell, implement and support our products Vertical markets focus focus on seven key markets and our deep industry knowledge Preconfigured Solutions reduce time, effort, risk and increase penetration in our markets Our large customer base opportunities to cross sell our expanding product range Pipeline of products at various stages of maturity, which we will continue to harvest in future years, as immature products move from loss making to profitability

47 47 Long Term Outlook Geographical expansion United Kingdom has significant longer term growth Acquisitions expand our product range and our customer base TechnologyOne Cloud platform for further growth in coming years Ci² - Next generation of our enterprise suite under development Our Compelling Customer Experience program retain our customers New offshore R&D centre provide access to additional talent and operating leverage Improving Profit Margin

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