Unisys has finished FY12 with improvements in its technology business, lifting shares 11% in after hours trading. FY12 has been a year of ups and downs and, after a challenging Q3 (see Unisys hit hard in Q3), it can report some improvements in revenue and margin.
Fourth quarter revenue was flat* year-on-year at $979m, however international revenue grew 7% with increases in Europe and Latin America offsetting declines in Asia Pacific. Although the services business (82% of revenue) looked slightly better in Q4 than Q3, it continues to suffer with both revenue (-3%) and operating profit margins (down from 7.6% to 6.6%) down versus the comparable quarter in FY11. The quarterly services backlog is also down on FY11 as are order signings. For FY12, services revenue was down 5% to $3.19b, and operating margin down 50bp to 6.4%. Fortunately, the technology business has countered this to some extent with a 16% revenue increase, driven by ClearPath software and servers.
For the year as a whole, revenue declined 1% to $3.71b, but operating margin improved slightly from 8.4% to 8.6% - partly due to lower operating expenses. That said, the company is not in a position where it is able to produce improved profitability on a consistent or predictable basis.
During 2012 Unisys eliminated all remaining high-interest debt and reached its goal of reducing debt by 75% (from September 2010 levels) a year early. While that is a notable achievement, it still faces a sizeable challenge to take out further cost from the services business (e.g. by improving standardisation and automation of delivery) and to get it back to consistent revenue growth. In all, we expect another year of ups and downs!
*All figures quoted are constant currency