| Abstract: | The ERP provider lays out a five-year plan that calls for a doubling of revenue, helped by acquisitions to be financed by operating cash and debt.
|
| Keywords: | IFS growth plan, IFS five-year plan |
Enterprise application vendor IFS today unveiled an aggressive five-year growth plan that will include acquisitions and will see the company double product revenue between now and 2012, according to president and CEO Alastair Sorbie.
In addition to dramatically growing product revenue, IFS expects to more than double its earnings before interest and taxes (EBIT) over the next five years, increase shareholder dividends, and use surplus capital to repurchase its public shares.
In 2007, the Swedish company reported SKr 1.1 billion in product revenue from licenses, maintenance, and support. IFS predicts it will double that figure by 2012.
At least some of that growth, the company said, will come through selected acquisitions. Specifically, the company said it intends "to acquire profitable companies with well-managed customer bases and recurring revenue in the form of maintenance and support fees." IFS said it already has identified "several companies" that meet its acquisition criteria, primarily in the Western hemisphere. IFS said it expects to make these acquisitions profitable, in part, by moving activities such as development, support, and maintenance to existing IFS offshore facilities in locations such as Sri Lanka. IFS did not identify its possible acquisition candidates.
In a prepared statement, the company said, "Existing business applications used by acquired customers will be integrated in the long term as their functionality is added to the IFS applications product set ..."
Over the next five years, IFS expects to increase its EBIT margin to 15% from the 6% figure reported in 2007.
"We went through a consolidation phase following the dot-com bubble burst, but we have since restructured the business and begun to see steady growth," said Sorbie in an interview with Managing Automation. "Now we see license [sales] growing, profitability improving, and net cash improving. So we are able to embark on a more aggressive strategy and to grow using the profits we are generating."
Sorbie said IFS wants to implement its acquisition strategy "as fast as possible." He noted that the company began to assemble a list of possible takeover targets last year.
IFS will use funds from operations as well as debt to finance its acquisition activity, Sorbie said. Specifically, he said, the company will be willing to borrow up to three times its EBIT level — or about SKr 423 million — to finance acquisitions.
The aggressive financial and acquisition goals represent something of a turnaround for IFS. Over the past few years, the company has found it challenging to compete on a global scale with its primary, larger foes SAP and Oracle. As a result, between 2001 and 2005, IFS focused on reducing costs and increasing profitability. The company revamped its sales and marketing functions in the United States and increased its focus on major customers in industries that need strong logistics, service, asset, and project management processes, including defense, communications, construction, and process manufacturing.
In recent periods, that focus has begun to pay off. In 2006, IFS reported a 13% increase in product revenue, which was followed by a 12% jump in 2007. For the past three years, through 2007, IFS has reported positive pre-tax results every quarter. IFS ended 2007 with positive cash flow for the year of SKr 227 million.
While IFS' rebound has been impressive, it has also been uneven at times. In 2007, for example, the company reported 32% license revenue growth from its Europe/Middle East/Africa region, but a 26% decrease in license revenue in the Americas. Sorbie blamed the drop on delayed large deals, primarily in the defense industry.
Page : 12 ... NEXT
 |
|
|
|