KISTA, Sweden, Feb. 9, 2017 /PRNewswire/ --
For the full year 2016, Enea's revenue, operating profit and operating margin improved compared with previous year. In the quarter, revenue and operating profit also increased on the corresponding period of the previous year, and Enea completed its acquisition of Qosmos. More info at www.enea.se/investors .
October to December 2016
(fourth quarter previous year in brackets)
Anders Lidbeck, President and CEO comments:
"Results of operations
2016 was the best year in the history of Enea. We have never generated such high earnings, nor achieved such good profit margins, and never reported so much earnings per share as in 2016. Our revenues were also up on the previous year. We finished the year by posting the highest quarterly earnings in Enea's history, and by completing what, for us, is a substantial acquisition -- market-leading software company Qosmos.
An eventful year
Heading into 2016, I wrote that we no longer believed that continued expansion of our profit margins was the best way forward for Enea. Instead, our goal was to keep our margins stable at levels of over 20 percent, while simultaneously focusing on continuing our substantial investments in developing our product portfolio, and initiatives to build a stronger sales and marketing organization. In parallel, we would actively continue to seek acquisitions. We started 2016 by acquiring a US software business in January and in October we announced the largest acquisition in Enea's history so far, a deal we completed in December. Despite our investments and acquisition activities, we reported an operating margin of 23.7 percent in 2016, compared to 22.9 percent in 2015. Our ambition was also to continue to increase earnings in absolute terms, and thus also earnings per share on 2015. In 2016, operating profit was up by 8 percent to SEK 118.8 million, and earnings per share also increased by 8 percent to SEK 5.95 per share, Enea's highest earnings per share ever.
Our fourth quarter could have been even stronger but for a significant slowdown in the US coincident with the presidential election, which had a clear negative impact on our service sales in the US. After two strong quarters in our US Services business, our quarter four revenues was down by over 20 percent year on year. Our services sales in the US have substantial exposure to the aerospace and defence industry and are sensitive to delays of projects where the ultimate client is a public authority. However, we are now noting a fairly large number of deals that will be decided in the first quarter of 2017, and we expect that our US Services business will move back into growth in the beginning of 2017. Services sales in Europe progressed well in the fourth quarter, and we expect this to continue in 2017. 2016 was an eventful and successful year for Enea to say the least.
A record year -- and the start of a new journey
We have now achieved five consecutive years of profit growth and margin expansion. The fourth quarter 2016 was the 15th consecutive quarter of increased operating profit year over year, but it was not the 21st consecutive quarter of margin expansion. Despite our profit increasing from SEK 32.3 million in the corresponding period of the previous year to SEK 33.5 million in the fourth quarter 2016, operating margin decreased from 25.6 percent in the corresponding period of the previous year to 24.7 percent. This is an effect of revenue outgrowing profit. Revenue was up by 8 percent year on year to SEK 135.7 million. The acquisitions also had a clear positive effect on revenue and operating profit in the quarter, and we should expect this to continue in 2017. The companies we acquired in 2016 have operated on margins significantly below the 20 percent Enea has delivered through recent years. However, we should also bear in mind that Enea before 2012, posted operating margins below 10 percent. In other words, we will need to repeat that type of margin improvement in the new Enea starting in 2017, and we should expect a number of quarters to pass before we re-attain 20 percent. Although our ambition is to achieve this operating margin as early as in late 2017. Margin expansion is mainly created by focusing on fewer segments, and by cutting out what is unprofitable and lacks clear future potential. We have a clear ambition of being the market leader in the segments we focus on, independently or jointly with partners, and to be the leader in those segments where there is demand and where the future is created. Accordingly, we will continue to prioritize sales growth in new segments. In a period when sales on our Key Accounts are decreasing, this is more important to us than margin expansion. In 2016, sales on our largest account fell by nearly 10 percent. We expect this trend to continue through the coming years, and may increase or decrease depending on the customer's successes with products that embed our technology. First and foremost, this negative trend is a consequence of more widespread usage of open source, so in other words, to keep Enea growing overall, we need to grow more than this decline.
To address these new market conditions, we are working on sharpening our existing portfolio, but also adding new segments, most recently network intelligence, where Qosmos' DPI (Deep Packet Inspection) solution is the fundamental component. This is a specialist segment where at present, there are few, if any, competing open source projects. Because of a continuous stream of new protocols and services is being generated, users are dependent on continuous updates. This dependency creates the potential for stable and repeated revenues, while also setting a threshold against competition from open source and other commercial competitors.
We are continuing our endeavour to build a bigger and stronger company, which delivers increasing value to customers, employees and shareholders. The transformation we are currently undergoing is fundamentally positive for Enea, bringing less dependency on a single major product and a few Key Accounts. Acquisitions that strengthen our market position and long-term earnings capacity are an important part of this transformation, and despite our expectation of lower revenues from our Key Accounts, our objective is to keep growing the company with good profitability and healthy cash flows.
Our objective for the full year 2017 is to achieve double-digit revenue growth and improved operating profit compared to 2016. We expect the improvement of operating profits to occur in the second half-year 2017."
Press and analyst meeting
Press and financial analysts are invited to a press and analyst meeting where Anders Lidbeck, President and CEO, will present and comment on the report.
Time: Thursday February 9 at 08:30 am CET
Phone number: SE: +46 856642663, UK: +44 2030089803
The full report is published at www.enea.com/investors
This information is information that Enea AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Markets Act. The information was submitted for publication, through the agency of the contact person set below, on February 9, 2017 at 7.20 am CET.
For more information visit www.enea.com/investors or contact:
President & CEO
Julia Steffensen, Executive Assistant
Enea is a global supplier of network software platforms and world class services, with a vision of helping customers develop amazing functions in a connected society. We are committed to working together with customers and leading hardware vendors as a key contributor in the open source community, developing and hardening optimal software solutions. Every day, more than three billion people around the globe rely on our technologies in a wide range of applications in multiple verticals – from Telecom and Automotive, to Medical and Avionics. We have offices in Europe, North America and Asia, and are listed on Nasdaq Stockholm. Discover more at www.enea.com and start a conversation at email@example.com.
Enea®, Enea OSE®, Netbricks®, Polyhedra®, Zealcore®, Enea® Element, Enea® Optima, Enea® LINX, Enea® Accelerator, Enea® dSPEED Platform and COSNOS® are registered trademarks of Enea AB and its subsidiaries. Enea OSE®ck, Enea OSE® Epsilon, Enea® Optima Log Analyzer, Enea® Black Box Recorder, Polyhedra® Lite, Enea® System Manager, Enea® ElementCenter NMS, Enea® On-device Management and Embedded for LeadersTM are unregistered trademarks of Enea AB or its subsidiaries. Any other company, product or service names mentioned above are the registered or unregistered trademarks of their respective owner. © Enea AB 2017.
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The following files are available for download:
Q4 2016 rapport-eng
PR Q4 2016 eng