- 4.9% increase of sales
- Net income falls below expectations
- Cloud computing business doubled
- Third quarter crucial for further annual planning
Mülheim an der Ruhr, August 31, 2018 – With more than 13,300 installations and being the market leader among German content service providers, EASY SOFTWARE AG (ISIN DE0005634000) today published its interim report for the first half of 2018. While sales especially increased in the cloud business, developments on the earnings side were not satisfactory for several reasons.
“There were delays of orders particularly in consulting business. Thus a short-term under utilization emerged with effects on the operating income. There were also postponements in licensing sales, which where already partly realized in July and August 2018. Further progress in the cloud business has been made by winning more than 5,000 customers by the end of August 2018. With an average order rate of 70%, the high number of current test customers, indicates a significant increase as the year progresses,” says Thorsten Eska, EASY CFO, commenting the situation and prospects.
The sales, earnings and financial situation
The EASY Group’s revenue during the first half of 2018 amounted to €20.6 million (first half of 2017: €19.6 million). This equals an increase of 4.9%. The cloud computing business, which doubled, was the growth driver. However, there were significant project postponements in the traditional licensing and consulting business. Regionally, the German market developed at a growth rate of about 5.6%, while the international subsidiaries were unable to show any growth. In addition own fixed assets capitalized amounting to €0.1 million (first half of 2017: no own fixed assets capitalized) and other operational income amounting to €0.3 million (first half of 2017: €0.5 million), the resultant total revenue amounted to €21.0 million (first half of 2017: €20.1 million).
On the cost side, two contrary developments were noted for the reporting period. Cost of materials decreased from €4.8 million of the previous year to €4.5 million. Thus, purchase of external services was higher than planned. Whereas personnel expenses, being the largest part of costs, increased from €10.7 million to €12.5 million. In the first place, this is due to the increase in the number of employees in the Consulting area. The focus is now on an accelerated productivity and increased capacity. Other operational expenditures increased to €4.6 million during the first half of 2018 (first half of 2017: €4.4 million). The decisive factor was increased marketing expenses for CeBit as well as one-off expenses for implementing SAP Business by Design. Against this background, operating income before interest, taxes and write-offs (EBITDA) during the first half of 2018 amounted to -€0.6 million (first half of 2017: €0.1 million).
Net cash flow arising from operational activity for the reporting period amounted to €6.0 million (first half of 2017: €7.4 million). Net cash flow arising from investment activity increased, through increased payments for acquiring enterprises, to €1.6 million (first half of 2017: €1.2 million). Net cash flow from financing activities amounted to -€3.0 million during the first half of 2018 (first half of 2017: €2.0 million.). Therefore, the total cash flow for the first half of 2018 amounted to €1.4 million (first half of 2017: €4.2 million). On June 30, 2018 cash and cash equivalents amounted to €3.1 million (December 31, 2017: €1.7 million.).
Outlook
The EASY Group intends to continue its development from technology supplier to a solution provider also during FY 2018. Its strategic goals remains rolling out the cloud platform business. Here the EASY Group made significant progress during the first half of 2018. It was able to win more than 5,000 customers via the cloud platform already by the end of August 2018. The switch to agile processes and agile marketing, implemented as part of the EASY FIT program, shows effect through an increasing number of qualified leads. In the current financial year, some 160 new customers (without cloud) were won by mid-August. Numerous changes were implemented in EASY’s international subsidiaries during recent months. In particular, measures were implemented for the Turkey and UK subsidiaries. In the short term, however, international business remains a challenge.
Crucial for achieving the target of the annual forecast predicting sales amounting to €45 – €47 million and a Group EBITDA amounting to €3.5 – €4.3 million is if the delayed licencing project from first half year can be sold within the remaining months of 2018. Another factor to achieving the target will be our new employees that should succeed in generating revenue. The third quarter will prove the progress. Planning possible short-term measures based on the half-year statement, and the investments based on the new EASY 21 strategy will be finalized during the third quarter 2018. For medium- to long-term development, the EASY Management Board mapped out the new EASY 21 strategy, which was presented as part of the general meeting 2018.
The complete half-year financial report 2018 is available for download on the Internet in the Investor Relations section.
EASY SOFTWARE AG
The Management Board