eg group – budget 2013 › ... › eg_company_presentation_stockholm_march_16_2… · company...

Company Presentation

March 16, 2015

Click to edit Master text stylesAgenda

2

2014 Financials

Business profile

Historical financials

Page

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8

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Click to edit Master text styles

Analysing the financial performance of EG as reported

Q4 2014 financials

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Reported financials

1) Reflects EDB Gruppen Holdings A/S; 2) Pro-forma for AX IV EG Holding III Aps

PRESENTATION OF FINANCIAL INFORMATION

In this Company Description, the Group makes references to EBITDA and/or EBITA and EBITDA/EBITA margin, neither of which is defined under the Danish Financial Statements Act. The items excluded from EBITDA/EBITA and EBITDA/EBITA margin are significant in assessing the Group's operating results and liquidity. EBITDA/EBITA and EBITDA/EBITA margin have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, analysis of the Group's results as reported under the Danish Financial Statements Act. Other companies in the Group's industry and in other industries may calculate EBITDA/EBITA and EBITDA/EBITA margin differently from the way that the Group does, limiting their usefulness as comparative measures.

Under accounting policies of the Group certain development costs are capitalized in the balance sheet and not expensed in the year they were incurred. This means that EBITDA is higher than had such development costs been expensed. The development cost capitalized in the balance sheet will be depreciated over 3-5 year. EBITA includes depreciations on capitalized development costs.

DKKm 20101 20111 20121 20132 2014 Q4 20131 Q4 2014

Revenue 1.017 1.330 1.502 1.611 1.636 432 476

Costs of sales 279 342 344 364 354 103 115

Gross profit 738 989 1.157 1.247 1.282 329 361

Staff costs 524 677 815 849 924 220 269

Other external costs 126 183 200 224 181 66 34

EBITDA 88 128 143 174 177 44 58

Operational depreciation and amortisation 14 19 22 21 29 3 8

EBITA 74 109 120 153 149 41 49

Normalisation:

Acquisition / sale of activities 0 0 0 0 19 0 0

Restructuring expenses 4 11 10 10 26 1 19

Acquisition relared costs 0 11 10 12 7 6 2

Normalisations, total 4 22 20 22 52 7 21

Normalised EBITDA 93 150 163 195 229 51 79

Normalised EBITA 78 131 140 175 200 48 70


Increase in Revenue:

The increase in revenue from DKK 432 million in Q4 2013 to DKK 476 million in Q4 2014 is primarily due to the acquisition of new companies. Revenue remains negatively affected by the loss of a major customer account, but Q4 has seen an increase in organic growth in the continuing part of the business. In addition, adverse currency movements of NOK had a negative impact of DKK 7 million on the Q4 2014 revenue.

Increase in Q4 2014 EBITDA:

The increase in reported EBITDA from DKK 44 million in Q4 2013 to DKK 58 million in Q4 2014 is partly due to contributions from the acquired companies and partly due to increased earnings from the rest of the business compared to Q4 2013. The realisation of the company's strategy plan for 2014-2017 has led to a simplification of the organisational structure with the number of operational divisions being reduced from six to four. Further organisational changes were made in connection with the integration of the acquired companies. The overall effect of these changes was restructuring costs of DKK 19 million in Q4 2014. Normalised EBITDA for Q4 2014 amounted to DKK 78 million compared to DKK 51 million in 2013.

Increase in 2014 EBITDA

Realised EBITDA for 2014 amounted to DKK 177 million compared to DKK 174 million in 2013. Normalised EBITDA for 2014 amounted to DKK 229 million compared to DKK 195 million in 2013.

2015 outlook:

For 2015, the company expects growth in reported EBITDA and normalised EBITDA as a result of the companies acquired in 2014 and the restructurings carried out.

4

Q4 2014 Developments


DKKm

Pro forma sales and EBITDA of 2014 acquisitions

Five acquisitions completed in 2014

5

12

34

15

33

74

0

21

2

10

5

CGI Textile solutionTacticus IT Minds Team OnlineEMAR

EBITDA

Sales


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Agenda

2014 Financials

Business profile


Page

3

8

20


75%

Local presence with more than 30 offices throughout Scandinavia

Strong footprint securing proximity and flexibility towards customers

Group management located in Ballerup, Denmark

Financial development Product offering1

In brief

EG is among Scandinavia's leading IT software & service companies with a strong market position within the SME segment

Position based on close relationships with customers, deep sector knowledge and value adding IT solutions

Group structure with four market facing divisions organized according to vertical focus

21 acquisitions in selected verticals since 2009

Approx. 12,000 customers and more than 1,500 employees

2014 revenue of DKK 1,636m and normalized EBITDA of DKK 229m

– Recurring revenue of 38% of group revenue

– Sale of own developed software account for 55% of software revenue

EG at a glance

71) Management normalisation include restructuring costs and integration and transaction costs; 2) Reflects EDB Gruppen Holding A/S; 3) Pro-forma for AX IV EG Holding III Aps; 4)Share of 2013 revenue, eliminations accounts for -2% of group revenue

Consultancy & programming Management consultancy, Implementation and Programming of IT

solutions

Software Solutions are based on EG’s own software and configurations of the ERP

platforms Microsoft Dynamics AX and NAV and EG’s proprietary ERP platform ASPECT4

Subscription based revenue Operating the customer’s IT solution, either hosted from EG’s own data

centre or at the customers premises and service agreements (Technical, Hotline & Support, BPO)

Hardware Sale of infrastructure hardware (e.g. servers) and industry specific

hardware (e.g. POS and hand terminals) from external providers

Offices

9%

16%

EG is a leading Scandinavian IT software & service provider

1,6361,6111,502

1,330

1,017924

9.1%

9.4%

12.1%

20092 2013320122

12.1%

2014

11.3%

20102 20112

10.8%

14.0%

EBITDA margin, reported normalised1

Revenue, reported

Strong presence in Scandinavia

46%

30%

17%

7%

Mission

Adding value to business through industry leadership


9

Building & Construction

Logistics & Production

Retail Utility Public Professional Services

Understanding industry is our DNA

Click to edit Master text stylesDifferentiated approach based on same strategy

10

Tail

ore

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Pack

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Bu

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ess

in a

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Ta

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so

luti

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luti

on

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usin

ess

in a

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Industry insight

Product leadership

Cost leadership

Customer intimacy

Click to edit Master text stylesCustomer lifetime value

11© EG A/S

Infrastructure Management (IMS)

Application Management (AMS)

Continuous improvements (Tasks)

New projects

40%

15%

20%

20%

Hig

h r

isc

Lo

w r

isc

Valueto EG

Click to edit Master text styles360º solutions

12

Management consultancy

Business intelligence

IT operations

Service and support

Infrastructure

Mobility

ERP Collaboration

Upgrade Factory

EG 24/7 support

ASPECT4

EG Industry solution

EG Private Cloud

EG Licence check

EG CrossWork

EG CrossPad

Dynaway Blue

Dynaway EAM


13

EG

36

0

Industry/application knowledge

Industry expert with a 360 offering

EG = EG’s industry knowledge + EG 360

Click to edit Master text stylesEG’s offering

14

Your magazine subscription is most likely handled by an EG solution

The truck you passed this morning was most likely controlled by EG solutions

Comprehensive end-to-end retail offering supports your daily shopping

Your housing administrator most likely benefit from EG products…

..and you electricity bill is most likely delivered with assistance from EG

30% chance your lawyer is supported by EG

1,300 practitioners benefit from EG products on a daily basis

More than 90% of cemeteries and churches use a system from EG

EG is a trusted partner to the construction industry benefitting craftsmen, as well as DIY people

The royal family have benefitted from an EG solution

Your draft might have found its way to you with the help from EG


Share of revenue from software and subscription based revenue accounts for up to 50% of revenue

Product offering

151)Share of revenue 2014, 100% = DKK 1,636m. 2) On aggregate recurring revenue accounted for 38% of total 2013R revenue (=DKK 1,611m)

EG’s products

Hardware

Sale of infrastructure hardware (e.g. servers) and industry specific hardware (e.g. POS and hand terminals) from external providers

Only sold in relation to other software sales

EG’s solutions are based on some or all of the offered products: consultancy & programming, subscription based revenue, own software, external software and hardware

Focus is on increasing the share of revenue from software and subscription based revenue

– Allows EG to take further ownership of the customers and is attractive due to the recurring revenue nature from release license fees or subscription fees

Own software

An increasing part of EG’s software revenue is based on EG’s proprietary software (own IP) comprising a range of standard software products, EG’s own ERP platform ASPECT4, own IP modules and value adding configurations to standard software from external providers

Subscription based revenue

Operation of the customer’s IT solution, either hosted from EG’s own data centre or at the customers premises

Service agreements (Technical, Hotline & Support, BPO)

Share of total revenue1 (%)

External software Primarily related to EG’s implementation of the ERP

platforms Microsoft Dynamics AX and NAV, as well as other external software

Consultancy & programming

Management consultancy and design of IT solutions Implementation of solutions Programming and configurations of customer customised

solutions Around 50% of consultancy and programming relates to

own software sales

46%

17%

16%

14%

7%

Recurring revenue2 (%)

0%

100%

78%

62%

0%


Utility

EG’s country focus

EG’s segment focusIndustry focus of EG

EG focuses on selected industries in the Scandinavian IT market where EG has in-depth industry insight and knowledge of the value chain

EG’s focus in the market

16Note: Scandinavian defined as: Denmark, Norway and Sweden; IT market comprise Software, Service and Hardware . 1) In the businesses services segment EG has a strong position within several niche segments including among others lawyers and housing association administration 2) Strong presence within practitioners

Logistics/ wholesale

Discrete manufacturing

Construction

Transport

Communications / telecom

Retail

Central gov.

Business services

Local gov.

Education

BankingFocus of EG

16%

75%

9%

Share of revenue 2013 (100% = DKK 1,611m)

Insurance

Agriculture & mining

Health2 ()

Process manufacturing

Other finance

Other services

Segment focus (size) varies across verticals

Large enterprises(+1000 employees)

Mid-sized enterprises(500-999 employees)

Small enterprises(100-499 employees)

Small and medium businesses(1-99 employees)

Not EG

Primarily projects Primarily volume business Not in focus of EG

Pro

jects

Volu

me

Market position

EG is one of the leading IT and software providers in Scandinavia

– Strong presence in Denmark with revenue of more than DKK 1.2bn in 2014

– Critical mass in Norway accounting for DKK 269m of revenue in 2014

– Significant presence in Sweden accounting for DKK 147m in 2014l

Strong position in selected verticals where EG has deep industry knowledge

– Main industries in focus include logistics & manufacturing, retail, construction, utility, local government and business services1

– Deep knowledge of industry value chain and business best practice provides for a good dialog with both business and IT decision makers

Within its focus industries, EG is present across all market size segments, from small and medium businesses with 1-99 employees to large enterprises with +1000 employees

#1 Scandinavian and strong global Dynamics AX partner with more than 300 AX consultants


Segment growth2

Country growth1

EURbn

Scandinavian IT market growth1

EURbn

EG has exposure towards segments with above market growth rates and has increased exposure towards higher growth in Norway and Sweden

Scandinavian IT market

17Note: Scandinavian defined as: Denmark, Norway and Sweden; IT market comprise Software, Service and Hardware 1) Source: Nordic IT spending Forecast update, 1Q 2013 (excl. tables, smartphones and feature phones).2) Source: IDC Black Book Q2 2012 (excluding Smartphones, Feature Phones, Tablets&eReaders). 3) Total market excluding Banking, Communications, Education, Insurance, Government, Other Finance and other

31.330.429.528.427.827.226.8

2013201220112010

+3.2%+2.0%

201620152014

Segment size2

Total IT marketCAGR 2013 - 2016

9.18.48.0

+2.7%+1.5%

201620132010

14.212.812.0

+3.7%+2.2%

201620132010

8.07.36.8

+3.1%+2.0%

201620132010

Scandinavian IT market

The Scandinavian IT market is expected to grow with a CAGR of 3.2% from 2013 to 2016, 1.2% higher than the historical growth from 2010 to 2013 which was affected by the financial crises

Above market growth in sectors such as Utility and Retail, while IT spending in sectors such as Government, Discrete manufacturing and Wholesale are lower

Higher growth is expected in small and mid-sized enterprises which is of particular focus of EG

Growth rates in Denmark has been lower than in the other Scandinavian countries due to more severe impact of the financial crisis

Large enterprises(+1000 employees)

Mid-sized enterprises(500-999 employees)

Small enterprises(100-499 employees)

Small and medium businesses(1-99 employees)

2012 (100% = USD 37,978m)

3.4% 3.7%

5.0% 5.6%

3.8% 4.5%

2.7% 3.1%

EG relevant IT market3

CAGR 2013 - 2016

CAGR

53%

13%

19%

15%

Segment share of total market 2012


Market drivers Perception of IT investments on productivity and profitability

Five primary market drivers expected to impact IT spending

Market drivers in the Scandinavian IT market

18Source: YouGov, EG and Quartz+Co analysis based on Gartner, Constellation Research, IDC and industry observers

2,780

2,113

1,630

1,253967

736538

367

+30%

2017

2016

2015

2014

2013

2010

2012

2011

Source: IDC Black Book Q1 2013, May 2013

Big data3

The demand for analyzing large data amounts require strong and well integrated systems to collect and store this information

Big data drive demand for Business Intelligence solutions and provides for new types of IT services

Cloud2

Cloud computing has been taking market shares in many other software applications and will impact ERP market within the next 3-5 years

Drives the opportunity for IT provided as a service IT decisions moves from IT to line of business

CRM and customer

experience4

According to a recent Gartner survey, CRM is the top software investment priority for 2013 (ERP is second) due to a stronger business focus on enhancing the customer experience, which has a positive impact on ERP spend

Mobility5

Mobile internet expected larger than wired in 2016, and will drive cloud-based business and revenue opportunities due to need for mobile applications

Large untapped productivity potential from mobility in most sectors drive extended usage of ERP on other devices

Productivity1

Tangible efficiency improvements from process optimization and IT is an important factor in undertaking IT investments

Perception of IT as productivity enhancer drives decision making upwards in the organisation with stronger inclusion of business decision makers

Scandinavian Cloud spending 2010-2016

USDm

3%

23%

74%

NoDon’t knowYes

88%

12%

Does IT investments contribute to improved productivity?

Do you expect improved profitability from IT supported process optimisation?

“We obtain an annual saving of 9 million euros and it is vital for the survival of our entire business”

Peter Maarssø, IT manager, Orifarm Group

CAGR


Market position and competitors in EG’s verticals

EG has leading market positions across all four divisions

Competitive landscape

19

Market position Larger main competitors

One of the strongest Microsoft Dynamics AX partner’s in Europe

Scandinavia’s largest end-to-end supplier of IT solutions for

production, logistics and retail companies

Divisions Revenue1

Note: 1) % do not add to 100%, due to group eliminations

Smaller competitors

EG Industry Solutions

DKK 840m(51%)

EG Citizen

Solutions

DKK 259m(16%)

EG Business

ReadySolutions

DKK 229m(14%)

EG Business Application

Services

DKK 350m(21%)

Solutions for the utility sector in Denmark and Sweden and the public

sector in Denmark

Leading provider of SaaS based software solutions in a number of

small attractive niches

Leading provider of Infrastructure-, Cloud Solutions and Managed Services,

cross business application solutions (BA, CRM, etc.) and 3rd party software

Click to edit Master text stylesKey credit highlights

20

• Leading Scandinavian IT service and software provider

• Diversified customer base

• High cash conversion

• Customised proprietary software solutions

• Large share of recurring business

• Experienced management team and lean organisation


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Agenda

2014 Financials

Business profile


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EG has been able to grow both normalised EBITDA and normalised EBITA margin, and has showed resilience to the financial crisis

Financial overview

221)Decrease in revenue primarily due to phase-out of unprofitable hardware sales; 2) Recurring revenue include software release sales and subscription based revenue; 3) Management normalisation include restructuring costs, integration costs and transaction costs; 4) Pro forma for AX IV EG Holding III Aps

EBITDA

Reported revenue growth

1,6361,6111,5021,330

1,0179241,032

200912008 20142010

+8.0%

2011 201342012

Reported revenue (DKKm)

Revenue split on type

30%

70%

38%

62%

Non-recurring revenue

Recurring revenue2

2009 2014

100% = DKK 924m 100% = DKK 1,636m

229195

163

879165

150

14.0%

12.1%10.8%11.3%

8.4%9.8%

6.2%

2009 2010 2013420122008 2011 2014

EBITDA margin, reported normalised3

EBITDA, reported normalised (DKKm)3


Analysing the financial performance of EG as reported

Reported financials

23

Reported financials

1) Reflects EDB Gruppen Holdings A/S; 2) Pro-forma for AX IV EG Holding III Aps

PRESENTATION OF FINANCIAL INFORMATION

In this Company Description, the Group makes references to EBITDA and/or EBITA and EBITDA/EBITA margin, neither of which is defined under the Danish Financial Statements Act. The items excluded from EBITDA/EBITA and EBITDA/EBITA margin are significant in assessing the Group's operating results and liquidity. EBITDA/EBITA and EBITDA/EBITA margin have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, analysis of the Group's results as reported under the Danish Financial Statements Act. Other companies in the Group's industry and in other industries may calculate EBITDA/EBITA and EBITDA/EBITA margin differently from the way that the Group does, limiting their usefulness as comparative measures.

Under accounting policies of the Group certain development costs are capitalized in the balance sheet and not expensed in the year they were incurred. This means that EBITDA is higher than had such development costs been expensed. The development cost capitalized in the balance sheet will be depreciated over 3-5 year. EBITA includes depreciations on capitalized development costs.

DKKm 20101 20111 20121 20132 2014

Revenue 1.017 1.330 1.502 1.611 1.636

Costs of sales 279 342 344 364 354

Gross profit 738 989 1.157 1.247 1.282

Staff costs 524 677 815 849 924

Other external costs 126 183 200 224 181

EBITDA 88 128 143 174 177

Operational depreciation and amortisation 14 19 22 21 29

EBITA 74 109 120 153 149

Normalisation:

Acquisition / sale of activities 0 0 0 0 19

Restructuring expenses 4 11 10 10 26

Acquisition relared costs 0 11 10 12 7

Normalisations, total 4 22 20 22 52

Normalised EBITDA 93 150 163 195 229

Normalised EBITA 78 131 140 175 200

1) Reflects EDB Gruppen Holding A/S, 2 Pro-Forma for AX IV EG Holding III ApS


24

Selected balance sheet items 2013-2014

The company's non-current assets amount to DKK 1,727 million, primarily in the form of goodwill related to acquisitions.

The company reported a negative working capital of DKK 111 million. The change from 31 December 2013 is due to seasonal fluctuations.

The company's net interest-bearing debt at the end of Q4 2014 was DKK -1,115 million.

In 2014, agreements regarding the acquisition of five companies were made, and all transactions had been completed at the end of Q4. Further information on the individual businesses is available on the company's website.

DKKm 31-12-2014 31-12-2013

Intangible fixed assets 1.683 1.454

Tangible fixed assets 44 39

Financial fixed assets 0 0

Non-current assets 1.727 1.493

Inventory 11 11

Trade receivables 278 221

Contract work in progress 0 10

Prepaid rent and deposits 12 11

Other receivables 43 11

Prepayments 32 28

Trade payables -103 -74

Other payables -324 -270

Accruals -60 -70

Reported NWC -111 -122

Cash 48 230

- dividend 0 -120

Securities 0 1

Bank loan -36 -37

Bond debt -1.100 -900

Employee bonds -7 -13

Tax payable -20 -13

Interest-bearing net debt -1.115 -853


25

Selected items from the cash flow statement 2013-2014

The company's cash flows from operating activities before financial items amount to DKK 156 million. After payment of interest, cash flows from ordinary activities amount to DKK 75 million. Cash flows from operating activities amount to DKK 62 million.

Cash flows from investing activities amount to DKK -321 million, primarily covering acquisitions (DKK 242 million) and investments in products and software development.Cash flows from financing activities amount to DKK 78 million, comprising a bond loan of DKK 202 million, dividends of DKK 120 million and repayment of employee bonds of DKK 4 million.

Change in liquidity for the year amounts to DKK -181 million.

The company's net cash amounted to DKK 12 million at 31 December.

DKKm 31-12-2014 31-12-2013 *)

Cash flows from operating activities:

Cash flows from operating activities before financial items 156 -231

Cash flows from ordinary activities 75 -263

Cash flow from operating activities 62 -279

Cash flows from investing activities -321 -925

Cash flows from financing activities 78 1.396

Change in liquidity for the year -181 193

Cash 1 January 193 0

Cash 31 December, net 12 193

Cash 31 December, net

Cash in accordance with the balance sheet 48 229

Amount owed to banks in accordance with the balance sheet 36 37

Cash 31 December, net 12 193

*) 2013 covers the period from June 20 to December 31

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