Today’s full year results from Microgen (12 months ending December 31 2012) show the extent of the struggles that were apparent as the end of the year approached (see Microgen struggles towards end of year). Revenue slumped 17% yoy to £32.3m, although continued cost management kept PBT levels relatively high at £9.1m vs. £9.6m, and the operating margin was up from 24% to 28%.
Management describes overall performance as “resilient”. The prime culprit for the revenue slump was consultancy within the Microgen Aptitude Solutions Division (MASD). Although lower services revenue was anticipated at part of the strategy to move towards licence and recurring revenue, the 44% drop was more than was expected. Even the 23% rise in licence and recurring revenue (to £7.2m) could not compensate for it. Revenue for the division was £16.3m vs. £21.8m. However, it was heartening to see Microgen adapt an aspect of its go-to-market strategy to minimise the need for consultancy and reduce the size of commitment customers need to make upfront. It is splitting the Aptitude Accounting Hub into modules targeted at specific industry requirements. When the going gets tough, bite-size targeted modules are an established response.
The more mature Financial Systems Division (FSD) reported revenue of £16m (vs. £17m) on the back of unusually strong consultancy demand and some one-off benefits. Otherwise, it continues to rely on recurring revenue (78% of divisional revenue) from its existing customer base – and high margins. It does see opportunities in wealth management and banking but overall the division is in a hold and maintain pattern.
One of the ongoing concerns around Microgen’s performance is that much of its revenue in each division derives from the top 5 clients (57% in MASD although this is down from 64% last year year; and 28% within FSD). Maybe the modules will take the entry level cost down to a point where Aptitude will attract more new customers.