The start of Unit4’s second half of the year compares unfavorably to the first with Q3 results showing just a 3% increase in revenue to Euro 102.5m and EBITDA up 2% to Euro 20.5m. No acquisitions impacted the Q3 figures so the 3% growth is organic and indicates the underlying performance of this company who is a quiet acquirer.
There is another quarter to go before a true H1/H2 comparison can be made but as H1 revenue was up 13% yoy (see Unit4 bagging bigger contracts), the company has a long way to go in the remaining three months to match it. Q3 is also down compared to the year ago quarter, which saw yoy revenue growth of 10%.
Public sector sales have been surprisingly good for Unit4 in the UK (and Spain) over the past year or so but it looks like this line has slowed down. We are not surprised by that - we were surprised (and impressed) that Unit4 was managing to secure public sector deals during a period of cost cutting. It did secure a subscription-based public sector deal in Germany however, which was interesting. It has snatched a few contracts from SAP (see Unit4 chipping away at SAP) so it could well have beaten SAP on this one.
Subscription revenues are reported as still growing strongly and recurring revenues (maintenance and subscriptions) are now at 53%. Unit4’s Salesforce.com SaaS joint venture FinancialForce.com did better than expected delivering a growth in monthly run rate (September 2011 versus September 2010) of about 500%.
Licence revenues are still growing however, particularly in Scandinavia, North America and Asia where growth was over 20%. The UK was in line with expectations – H1 was flat compared to the previous half year and in the absence of any other reference that could mean Q3 was essentially flat too.
The rest of H2 could perk up as end of year budgets get spent but we think H2 will remain a period of comparative low growth.