IFS results show rising star still dogged by losses

Formerly fast growing Swedish enterprise software vendor IFS has seen net revenues slide 11% from SEK 3,044 million (£218m) in 2001 to SEK 2,700 million (£193m), according to its preliminary results for last year. The results will mean an operating loss of SEK 265 million against 2001’s SEK 184 million. After write downs it will record a loss of SEK 760 million (£54m), compared with a loss of SEK 350 million (£25m) in 2001. Licence sales were down 10% to SEK 1,100 million compared with SEK 1,237 million in 2001. However, the firm reports that during the fourth quarter they were “in line with the previous year, and orders on hand increased.” It, like many, blames contracts postponed. IFS has now embarked on another round of cost cutting, axing around 10% of its workforce (some 350 people) and looking for SEK 300 million savings during 2003. It’s not good news from the former shining star of enterprise IT companies serving the middle manufacturing market, which seemed to be getting everything right – technically, functionally and geographically. It’s also poor compared with SAP’s stunningly good results of a few days ago. Those showed license revenues for its Q4 down against its exceptional 2001 fourth quarter, but 2002 full year revenues up on what was by any measure a very good 2001, with operating margins “at least one percentage point over the 20% achieved last year.” And it’s a bitter pill for the company to swallow so shortly after passing the £40 million revenues mark in the UK, including its joint venture operations with Bae Systems. Just two months ago,, managing director Alastair Sorbie claimed a “very good pipeline” and indeed that he had “closed three substantial deals in the last week.” He also said that IFS UK was staffing up, taking defectors from competitors in the ERP vendor community, and that “We’re seeing serious revenue growth and serious revenue growth per head,” he said. In fact, IFS UK has grown its business to 100-plus customers since 1997, and current hesitation in aerospace and defence notwithstanding, expects similar serious growth from the JV shortly. Under new CEO Michael Hallén, formerly head of R&D, that picture of growth is somewhat dented. Although the firm has restructured its finances to handle the revenue position, it will inevitably mean belt tightening. Bengt Nilsson, former CEO, now becomes executive deputy chairman, and will turn his attention to the ailing North American market. Final accounts are due out on February 11.