And we bring you news from the 'land of the samba sun' that Brazilian (and LatAm) ERP market leader, Totvs, had a pretty troublesome start to the new year with revenues from new licence sales plummeting 27% on the back of attracting fewer new clients and lower average selling prices. Totvs (pronounce the 'v' as a 'u') is battling against a dramatic slowdown in the Brazilian economy which saw GDP growth slump from 7.5% in 2010 to 2.7% in 2011 and to less than 1% last year. Like Sage, with whom it also competes in Brazil (see Sage places more bets on Brazil), Totvs mainly targets the cost-conscious SME market.
It was the 15% rise in maintenance revenues that saved the quarter. Maintenance comprised around half of Totvs R$374m (£125m) revenues for the 3 months to 31st March, and helped push the top line up by 6.6%. Professional services revenues grew by 6.8% to R$107m. There was also a R$11m contribution from local ERP firm PC Sistemas, which Totvs acquired in January (see here), suggesting organic growth was more like 3%. A few weeks ago Totvs also acquired a majority stake in PRX, a Brazilian IT consultancy specialising in the LatAm agribusiness market (good move!).
Totvs managed to hold EBIT margins steady at 20% despite an employee 7% wage hike effective from 1st January. But there was no news on the profitability (in the negative sense) of its operations outside of the LatAm region (see Totvs bounds ahead – within bounds).
I think Totvs should be able to make more of its regional market dominance and wonder if management may be getting a bit distracted with other ventures. I am back in Sao Paulo mid-year and hope to meet management again then.