Service fees keep TechnologyOne profitable

Australian-listed TechnologyOne has reported a 17 percent year-on-year drop in profit to AU$7.4 million, with cloud service fees and annual licence fees keeping the company in positive territory.

Enterprise software firm TechnologyOne has released its results for the half year ending March 31, 2016, announcing a 17 percent year-on-year profit drop to AU$7.4 million.

Executive chairman Adrian Di Marco told shareholders on Monday that half yearly net profit after tax (NPAT) was down due the company's total expenses being up 16 percent, a figure he said will rectify itself when full year results are compiled.

Revenue was up 12 percent from last year to AU$101 million, and cloud service fees were up 139 percent year-on-year to AU$10.3 million with 21 new cloud customers jumping on board within the six months.

Annual licence fees were also up from the same time last year by 15 percent to AU$43.7 million.

The company's total expenses jumped 16 percent for the half year to AU$91.5 million, having spent AU$20.9 million on research and development in the six month period.

TechnologyOne also held AU$45.4 million in cash or cash equivalents as of March 31.

Looking forward, Di Marco said he expects a strong full year, based on the company's sales pipeline, with Police Health, Queensland Catholic Education Commission, and Credit Union Australia among the 24 organisations listed for second half sales.

The company said it is on track to sign a number of large and high profile cloud customers in the latter half of the year. The company is also expecting full year growth of 10-15 percent.

In November, the company inked a AU$5.8 million deal with the Department of Treasury to provide the federal department with its preconfigured software-as-a-service (SaaS) solution, OneGovernment.

Under the deal, TechnologyOne will take responsibility for running the software, replacing the ageing SAP software the department previously had in place. It will also be made available for other government departments under the Treasury's shared services arrangements, with up to 15 expected to take advantage of the shared service over the next three years.

At the time, it was said the Australian Bureau of Statistics would be the first department to implement the solution alongside Treasury, with both departments expected to be live by mid-2016.

At the beginning of 2015, TechnologyOne was named as the preferred supplier for Wellington City Council's new core IT system, with the originally seeking to cut through the complexity of more than 120 separate IT systems that supported its business by replacing them with an integrated package.

However, a little over a year later, the council re-evaluated its strategic asset management software options after TechnologyOne had parted ways with Melbourne supplier Assetic -- the company awarded the Wellington Council contract. It was also revealed the budget rose from NZ$15.3 million to NZ$16.2 million.

At the time, Di Marco said the Assetic relationship ended after it was acquired by venture capitalists and Technology One was unable to negotiate a new distribution agreement.

In November last year, TechnologyOne recorded its 12th consecutive year of record revenue and licence fees during the 2015 financial year, attributing its AU$218 million revenue to the continued investments the company made, as well as the uptake of its cloud offerings in the marketplace.

The company reported that NPAT exceeded initial market guidance of between 10 and 15 percent, coming in at AU$46.5 million, an increase of 16 percent on the prior full year period.