tne 2013 half year roadshow presentation

7/30/2019 TNE 2013 Half Year Roadshow Presentation

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2013 Half Year Results Presentat

Adrian Di Marco

[email protected]

Ending March 31st 2013


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Technology One Ltd (ASX: TNE) today conducted presentationsits 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 availacompanys web site: www.TechnologyOneCorp.com.

TechnologyOne Half Year

Technology One Ltd Half Year Presentation - 27 May
http://www.technologyonecorp.com/http://www.technologyonecorp.com/


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TechnologyOne Overview

Formed in

1987Employees

800+300+developersinR&Dcentre

800+corporations, governmand statutory authoritie

14inteAustralia |

South Paci

United King

Invest20%of revenue back into

R&D

Continually

profitablesince 1992

Doublesin sizeEvery 4 years

One of Australias most successful software compan


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We believe i

freedom of chour solution

modular by d

TechnologyOneOverview

We are one of only a few Enterprise

Vendors globally ...

The power of a single, integrated,enterprise system

Suite of 12 products

Deeply integrated

Common platform

Consistent user interface


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We focus on seven key markets ...


Market focus & commitment

We sell to

service i

organis

We do noretail, dist

manufaindus

Deep understanding and engagement in our markets

Deeply integrated pre configured solutions

Proven practice

Streamlined implementations Reduce time, cost and risk


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We take complete responsibility for building,marketing, selling, implementing and supporting

our enterprise solution for each customer toguarantee long term success.

We do not use implementationpartners or resellers


The Power of One


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One of Australias 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 currentgeneration product suite

Next generation of our enterprise suite Ci isunder development

Diversity of revenue streams from Multiple geographies

12 products

Seven vertical markets


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Agenda

Results

Significant Achievements

Outlook for Full Year

Long Term Outlook


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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


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Results Highlights

Good result given challenging and uncertain economic climate

Positions us to deliver continuing growth in both revenue and profit for th

Continued significant investments in a number of key areas as follows:

R&D into TechnologyOne Cloud

R&D into Ci - 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

High


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-

10

20

30

40

50

60

2009 2010 2011 2012 2013

$'m

Cash and Equivalents

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. 13.27%)

Net Assets: $72.4m (vs. $62.4m)

Interest Cover: 52 times

*after debt per share

Compound Growth 37%

Up 50%, $16.9m

Mar-13

$'000

Cash & Available-for-sale financial assets 50,251

Trade and other receivables22,060 Other current assets 7,496

Current assets 79,807

Property, plant and equipment 13,542

Intangible assets 16,064

Other non-current assets 4,831

Non-current assets 34,437

Total Assets 114,244

Trade and other payables 14,615

Provisions 9,684

Unearned revenue 7,317 Borrowings 6,355

Other liabilities 3,849

Total Liabilities 41,820

Net Assets 72,424

Issues Capital and Reserves 34,791

Retained earnings 37,633

Equity 72,424


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Mar-13

$ '000

EBIT 10,205 Depreciation & Amortisation 2,858

Change in working Capital

(Increase) / Decrease in Debtors 2,596

Increase / (Decrease) in Creditors (1,894)

Increase / (Decrease) in Staff Entitlements (190)

Net Interest Paid 523

Income Taxes paid (3,122)

Other 106

Operating Cash Flow 11,081

Capital Expenditure (855) Proceeds from Sale of PP&E and Investments 1,200

Free Cash Flow 11,427

Dividends Paid (10,670)

Repayment of finance lease (956)

Proceeds from leasing of PPE 0

Proceeds from Shares issued 462

Increase in Cash & Cash equivalents 262

Operating Cash Flow $11.1m, up 151% from $4.4m*

Operating Cash Flow $11.1m vs NPAT of $8.7m

* As at March 2012

Cash Flow

NPAT $7.4m

NPAT $8.7m

$4.4m

$11.1m

0

2

4

6

8

10

12

0

2

4

6

8

10

12

2012 2013

$'m

$'m

NPAT versus Operating Cash Flows

Operating Cash Flows


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Half Year 2013 v Half Year 2012FY13

$'000

FY12

$'000

Variance

$'000

Revenue excl interest 78,869 76,545 2,324 3

Expenses (excl R&D, Interest, Depn & Amortisation) 48,598 48,201 397 1

EBITDAR 30,271 28,344 1,927 7

R&D Expenditure 17,207 16,581 626 4

EBITDA 13,064 11,763 1,301 11

Depreciation 2,731 2,735 (4) (0%

Amortisation of Intangibles 127 141 (14) (10%

EBIT 10,206 8,887 1,319 15

Net Interest Income 662 402 260 65

Profit Before Tax 10,868 9,289 1,579 17

Profit After Tax 8,673 7,426 1,247 17

Results Analysis


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Half Year 2013 v Half Year 2012 FY13 FY12 Variance %

EPS (cents) 2.84 2.44 16%

Dividends (cents)

Standard 1.77 1.61 10%

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%

Results Key Metrics

* 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

Half Year 2013 v Half Year 2012 FY

ROE

Return on equity* 12

Adjusted return on equity** 23

Balance Sheet ($000s)

Net Assets 72,

Cash & Cash Equivalents 50,

Operating cash flows 11,

Debt/Equity 9

R&D as % of Total Revenue 22


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$1m Down 53%

Heads 145, Up 10%

$3.7m Up 43%

Heads 218, Down 15%

$1m Up 4%

Heads 66, Down 18%

$2.7m Up 46%

Heads 292, Down 6% $2.4m

Heads 116

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Sales Consulting PLUS R&D Corporate

$'m

Profit By Segment Analysis

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)

Profit ContributionLicence Fees down 12%


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Dividend

Dividends for this half year

Half 1 1.77 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 aconcession. Though this is a positive outcome, this will impact the availability of franking credits. As 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 expectthe H2 dividend will be partially franked. The review of prior R&D tax claims is expected to be complnext 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

0.00

0.50

1.00

1.50

2.00

2009 2010 2011

Centspershare

Dividend

Compound Growth 19%

R St


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Revenue Streams

Licence fees down 12%

Half year can not be extrapolated, as discussed at AGM

Our pipeline this year is weighted towards the 2nd half year.

Also in the 2012 half year there was an unusually largecontract 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 gr

Compound growth over the last

Customer retention is important

Our investment in Compelling Cprogram and Ci is critical for the

R St


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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 ensureworld best practice & continuing strong growth

Compound growth over the last 10 years is 15%

Plus (non product consulting) reve

Plus profit is up $0.04m, 4% on p

Merged into our ConsultinManager

Strategy to move this busservices around our Ci pr

Market conditions for non Ci prod

Li F C t ib ti V ti l M k t


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Licence Fee Contribution - Vertical Market

Utilities, $2.3m, 14%

Health & Commu

$2.3m, 1

Managed Serv

Education, $5.3m, 33%

Local Government, $3.5m,

21%

Government, $1.7m, 11%

Financial Services, $520k, 3%Licence Fee Contribution - Vertical Market

Agenda


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Agenda

Results



Long Term Outlook



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R&D

TechnologyOne Cloud

TechnologyOnes Journey to the Clo

Marketing Transformation

Other Initiatives

R&D


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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 companys 25 year hi

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 Ci)

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

TechnologyOne Ci


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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

No more major upgrades - Apps and Enterprise App Store

Significant platform for future growth in coming ye

TechnologyOne Ci

Enterpris

incredib

Any device, an

TechnologyOne Ci


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Strategy being developed for roll out ofCi

Early adopters to be identified

Generally available early/late 2014

Minimise the risks associated with such a large andambitious project

Maximise the revenue potential at the same time

TechnologyOne Ci



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R&D

TechnologyOne Cloud



Other Initiatives

T d O P i


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client

Citrix Servers

Database Server

Installation Servers

DP

N-tier ApplicationServers

A complex computing model

Today On Premise

The old way- Run your own hardware & systems On Premise

What is cloud
http://www-132.ibm.com/webapp/wcs/stores/servlet/CategoryDisplay?catalogId=-840&storeId=1&categoryId=2286443&langId=-1&dualCurrId=73


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client

Internet connection

Cloud- a simpler computing model

The new way- sign onto a business service

What is cloud

Off Premise Servic

The TechnologyOne Cloud
http://www-132.ibm.com/webapp/wcs/stores/servlet/CategoryDisplay?catalogId=-840&storeId=1&categoryId=2286443&langId=-1&dualCurrId=73


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TechnologyOne Enterprise Suite in the cloud todaydelivered in a browser.

TechnologyOne takes care of everything


A simple andeasy experience

Enterprise SoftwareAs a Service

Th T h l O Cl d


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Partnerships with a global Infrastructure As a Services (IAS) provi

2 Data centres commissioned in Sydney in active/active configur

TechnologyOne Enterprise suite now optimised for the TechOne C

TechnologyOne Corporate now running on TechOne Cloud for 9+

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


Cloud


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Cloud

TechOne Cloud - a number of years before a meaningful contribution to ou



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R&D

TechnologyOne Cloud



Other Initiatives

TechnologyOnes Journey to The Cloud


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gy y

TechnologyOnes Journey to the Cloud ...

Email 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



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g


R&D

TechnologyOne Cloud



Other Initiatives



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g

Better position our solutions & products in a competitive, fast chan

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



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g


R&D

TechnologyOne Cloud



Other Initiatives

Other Initiatives


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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

Agenda


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Results



Long Term Outlook



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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

Assumptions


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p

Economic climate does not deteriorate any further and that the current pipeline remains s

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 (Ci)

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)

Agenda


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Results



Long Term Outlook

Improved Margins


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Profit margin has contracted over thelast 10 years

Expanded our product range investment

Profit margin now started to improve, aspredicted

Focus is to substantially improve marginsover next five years

21%

26% 26% 25% 25%

21%

1

0%

5%

10%

15%

20%

25%

30%

35%

2003 2004 2005 2006 2007 2008 2

Net Profit Margin B

Control R&D Costs


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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

Compound Growth 16%

2002 2011

R&D Growth Projections


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10

20

30

40

50

60

70

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

$'m

2011 Model for R&D Expense Growth

Actual

Projected from

2011

Model Compound

Growth 8%

$67m

$47m

Historical Compound

Growth 16%

Target for R&D growth of 8% per annum compound, over 5 years s 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

In year 5, Rof revenue

In year 10, 15% of reve

Still well abAverage of

2011 Model$20m/year

2012 year growth was 5%

This year growth target is 4%

Platform for Continuing Growth


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Ci continues to be successful

Ci - 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

Ci

Tec

Clou

Long Term Outlook


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Long Term Outlook is Strong .....

Enterprise Suite one of a few companies globally with an enterprise solut

Power of One unique approach to build, market, sell, implement and supp

Vertical markets focus focus on seven key markets and our deep industry

Preconfigured Solutions reduce time, effort, risk and increase penetration

Our large customer base opportunities to cross sell our expanding produc

Pipeline of products at various stages of maturity, which we will continue years, as immature products move from loss making to profitability

Long Term Outlook


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Geographical expansion United Kingdom has significant longer term gro

Acquisitions expand our product range and our customer base

TechnologyOne Cloud platform for further growth in coming years

Ci - 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 opera

Improving Profit Margin


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