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Divisional performance
The SMS business delivered good results. New business revenue grew by 18% to £7.3 million (2006 £6.2 million), achieved through growth in direct sales revenue and from the IBM OEM relationship. The performance includes winning a number of prestigious new name customers. The SMS business’s recurring revenue, although down on last year’s figure when calculated at actual exchange rates, grew slightly when calculated at constant rates. This is the first such increase in eight years. This is particularly encouraging since it suggests that the decline in revenue over recent years from cancellations from legacy rental products has halted.
The DMS business had a difficult year and did not manage to achieve the levels of new business revenue of the previous year, delivering revenue of £5.4 million (2006 £7.4 million). This disappointing performance was partially due to delayed decisions in a number of large opportunities, together with the time it has taken to establish new partner relationships. We will, however, continue with our channel-based approach to this side of the business given that there are encouraging signs of success through recent wins with partners Dell, Computacenter and Xerox Corporation.
The Balance Sheet remains strong with good cash reserves and no debt. While cash at 30 June 2007 of £6.6 million is lower than last year’s figure of £9.5 million, cash has, amongst other things, been utilised in making software acquisitions totaling £0.8 million and £1.3 million was applied in the acquisition of treasury shares to cover future share option exercises. We have continued to maintain a good rate of cash collections with days sales outstanding averaging 33 days (2006 30 days).
Strategy
The strategy for the SMS division defined in last year’s Annual Report has been implemented successfully this year. This is focused on investing in sales infrastructure, modernising existing products for the Internet and acquiring additional products to broaden our offerings in our chosen markets. A clear roadmap to expand beyond our traditional products and sales channels is now in place. The business review section gives full details on the execution of the strategy. We will aggressively market our new solutions and continue to expand our sales team, while looking for opportunities to broaden and deepen our product set still further.
A key element of the strategy for DMS is to use third party channels to assist new business sales activities. Alongside our direct sales efforts, we will continue developing our activities with partners, recognising that managed services providers (MSPs) are becoming increasingly dominant in providing total document management solutions. These solutions require specialist embedded technology such as the Macro 4 Columbus product suite as an essential part of fulfillment. As this market develops, we are in an excellent position to be the supplier of choice for this technology.
Goals
I believe the Group is in excellent shape, both financially and commercially. We have a strong Balance Sheet, good levels of cash and a large and solid base of recurring revenue. This, together with renewed growth in the SMS business, provides a good platform for the future. The key challenge is to firmly establish DMS as a demonstrable growth business. Therefore, our goals for this year are to:
- Sustain the strong performance in SMS
- Develop a solid new business revenue stream through our partner focus in DMS
- Achieve a step-change in our rate of revenue growth organically and by acquisition.
Outlook
Macro 4 is a sound business with an impressive range of software solutions, a strong market position in both the focus areas of SMS and DMS and an extensive and established blue chip customer base. Whilst the markets remain intensely competitive, I am confident that our strategies will deliver long-term value to our shareholders.
Ronnie Wilson
Group Chief Executive Officer
2006/2007 Results - Further Details |
