TECHNOLOGYONE OUTSTRIPS PROFIT EXPECTATIONS AS R&D SKYROCKETS

Written on the 23 May 2017 by Paris Faint

TECHNOLOGYONE OUTSTRIPS PROFIT EXPECTATIONS AS R&D SKYROCKETS
TECHNOLOGYONE (ASX: TNE) has surpassed market expectations to achieve a half-year profit after tax of $8.1 million, up 10 per cent on its previous result.

The Brisbane-based enterprise software company also posted an increased revenue of $113.9 million for the period, up 13 per cent on HY16.

Aside from brass tacks profit, TechnologyOne has gone the extra mile to invest $23.6 million in research and development (R&D) activity, as well as increasing its operating cash flow by 177 per cent to $2.6 million.

R&D spend for the half amounted to 21 per cent of total revenue, which, according to the company, outstrips its competitors' average spend of 12 per cent.

But for the financial impact of its tri-yearly Evolve customer conference, which welcomed 2,220 delegates to Brisbane in October last year, TechnologyOne estimates its profit would have surged a further 31 per cent during the half.

The company credits its results to the emerging strength of its TechnologyOne Cloud, which contributed more than $930,000 in profits during the latest half, as opposed to its performance last year which resulted in a $922,000 loss.

Its cloud capabilities have been improved by the mass production Software as a Service model, which according to TechnologyOne is "starting to deliver significant economies of scale".

"TechnologyOne Cloud has now been independently audited and recommended to be certified for the Federal Government IRAP security standard, making us the first SaaS vendor to achieve this high level of security accreditation in Australia which gives us a significant competitive
advantage," said the company in a release to the market.

"An important goal for TechnologyOne was to move away from perpetual licenses and to move new business to subscription licenses to create a strong longer term annuity business."

In the latest half, 80 per cent of all new businesses which enlisted TechnologyOne's services were brought in on subscription licenses.

Considering its strong half-yearly results, the company has raised its interim dividend by 10 per cent to 2.6 cents per share.

This year TechnologyOne made it to number 12 on Business News Australia's exclusive Brisbane Top Companies List.

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Author: Paris Faint

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