Highlights first half of 2003 Revenue of € 102.8 million (same period in 2002: € 103.5 million)
At constant currency rates, revenue of € 110.7 million
Strong operating margin of 24.5% despite weak economic conditions (same period in 2002: 21.2%.)
Earnings per share before amortization of € 0.79 (same period in 2002: € 0.73); earnings per share after amortization amounted to € 0.61 (same period in 2002: € 0.59)
US, where e-Synergy's Supplier Portal received the 'Best Enterprise Software Solution' award from Cebit America, PC Magazine and eWeek Continued increase in e-Synergy users with 5,500 to 25,500 globally
Financial results
In the first half of 2003 Exact realized a revenue of € 102.8 million (€ 103.5 for the same period in 2002). At constant currency rates Exact would have realized a revenue of € 110.7 million, a 7% increase compared to the same period in 2002. This increase is due to the fact that Kewill ERP was consolidated for the full six months in 2003. The operating result amounted to € 25.2 million (€ 22.0 million for same period in 2002). Despite weak economic conditions Exact was able to improve its strong operating margin for the first six months of 2003 (24.5% versus 21.2% for the same period in 2002). The company's liquid assets amounted to € 85.9 million at 30 June 2003. The shares held in Softline are classified as financial fixed assets and are valued at the historical purchase price of € 9.4 million.
Revenue
Software revenue amounted to € 27.6 million compared to € 32.7 million for the same period in 2002. At constant currency rates the software revenue would have been € 30.1 million, down 8%. A weaker demand for business software throughout the global industry was compensated by an increase in add-on revenue from customers after migrating to Exact Globe 2000 and revenue from new e-Synergy users.
Recurring revenue derived from service and upgrade contracts increased by 9% to € 60.1 million, representing 58% of total revenue. At constant currency rates the recurring revenue from maintenance would have been € 64.1 million, an increase of 16%. This increase is particularly due to the increase in the average contract value, sales of add-ons to existing and new customers, and the consolidation of Kewill ERP for the full six months.
Revenue from implementations amounted to € 15.0 million compared to € 15.5 million for the same period in 2002. At constant currency rates revenue from implementations would have been € 16.4 million. The softer demand for business software resulted in less demand for new implementations. However, more and more service revenue is being generated from customers migrating to Exact Globe 2000 and e-Synergy implementations.
Operating margin and net income
The company’s operating margin for the first half of 2003 was 24.5% (€ 25.2 million) compared to 21.2% (€ 22.0 million) for the same period in 2002. This strong operating margin is due to cost control, the relocation of job groups to Malaysia and a reduction in the spending on sales and marketing. The effectiveness of sales and marketing was increased by the creation of business units focusing on the installed base and by the successful international strategy focusing on providing multinational customers a global solution.
Net income before amortization of goodwill for the first half of 2003 amounted to € 18.4 million (same period in 2002: € 17.1 million). Net income after amortization of goodwill amounted to € 14.3 million (same period in 2002: € 13.8 million).
Balance sheet
The company has a shareholder's equity of 63% of the balance sheet total, no debt, a strong working capital and a cash balance of over € 85 million on 30 June 2003. With that, the company maintains a strong financial position that forms a solid basis for continued investments in products and services for its customers, for acquisitions, and for future growth.
Product strategy
Exact focuses its research & development efforts entirely on a ‘single product’ strategy. The two product lines, Exact Globe 2000 (back office ERP) and e-Synergy (front office) use the same architecture and database, providing customers full integration of back and front office solutions. New versions of acquired product lines are developed based on the same architecture as Exact Globe 2000 and e-Synergy, ensuring long-term economies of scale, product integration of acquired brands and product continuity for customers.
The Netherlands
Revenue from the Netherlands, representing 44% of total revenue, amounted to € 45.7 million (versus € 47.0 million for the same period in 2002). The revenue was primarily affected by continued weak market conditions and postponement of the introduction of several Exact Globe 2000 modules. The number of customers migrating to Exact Globe 2000 was lower than expected, although the average value per migrated customer increased due to more add-on sales and an increased average contract value.
International market
Revenue from the international markets at constant currency rates amounted to € 33.0 million (versus € 31.2 million for the same period in 2002). At actual currency rates the revenue from the international markets amounted to € 30.4 million.
Exact International has further increased its global infrastructure with a new office in Guadalajara, Mexico. This office contributes to its strategic plan to offer multinationals a standard front and back office solution for their smaller to medium-sized organizations around the world, serviced through a global infrastructure and network of Exact offices offering direct support, sales and services.
In the first half of 2003 Exact secured more than 65 new contracts with these multinational companies. Currently Exact International supports more than 8,000 international companies.
Market in North America
Exact North America realized an increase in revenue at constant currency rates of 27% to € 32.0 million, compared to € 25.1 million for the same period in 2002. This increase is mainly due to the fact that the Kewill acquisition is included in the revenue for the full six months in 2003. The revenue growth from e-Synergy users has compensated the weaker demand for traditional back office products. At actual currency rate the revenue realized in the North American market amounted to € 26.7 million, a 6% increase. Exact North America represents 26% of total revenue.
e-Synergy's Supplier Portal was granted the CeBIT America 'Best Enterprise Software Solution' award by CeBIT America, PC Magazine and eWeek. This award, in addition to PC Magazine’s ‘Best of COMDEX Finalist’ award last year, will continue to provide recognition for the Exact brand in North America.
Softline
Exact’s intention to make an offer for the acquisition of Softline Limited in South Africa depends on the outcome of the due diligence process, which has not yet been finalized.
Outlook
The company will continue to focus on migration of its customer base, cost control and profitability. The company will set forth its investments in products, the support and service organization, and its global network of offices. Establishment of new offices will focus on expansion in the Middle East and Latin America, where the company has opened two regional centers in 2002. In addition, Exact intends to focus its attention and investments in the China market throughout 2003 and 2004.