Gross margin increases Income from operations soars

Transcription

1 IMAGE RECOGNITION INTEGRATED SYSTEMS GROUP SA (abbreviated I.R.I.S. Group ) NOTICE OF THE HALF-YEAR RESULTS Gross margin increases Income from operations soars Sales 19,095,000 EUR ( %) Gross margin 12,882,000 EUR ( %) Income from operations (EBIT) 1,353,000 EUR ( %) Profit 398,000 EUR ( %) CONSOLIDATED FIGURES (EUR) 30/6/ /6/ /6/2002 Sales 19,095,502 20,891,064 21,102,527 Gross margin 12,882,914 11,916,562 10,954,584 Cash flow from operations (EBITDA) 1,799,403 1,310, ,317 Income from operations (EBIT) 1,353, , ,240 Financial result before goodwill amortization 108, , ,404 Amortization of goodwill on acquisitions 383, , ,310 Net financial result 492, , ,714 Current income before taxes 861, , ,474 Net current income before goodwill 795, , ,494 Extraordinary result 13,122 11,899 13,926 Profit before income tax 847, , ,548 Taxes 449,472 36,875 79,670 Net profit (after taxes) 398,448 90, ,878 Net profit (group s share) 398,448 90, ,878 Results per share Average number of shares 1,495,079 1,480,791 1,480,791 Cash flow from operations (EBITDA) per share Net current income per share Net profit per share Capital per share Net equity per share I.R.I.S. Group sa Notice of the half-year results of June Press release 1

2 INTRODUCTION I.R.I.S. is a European market leader in the processing of the life cycle of an electronic document. Our company develops and markets professional solutions to scan documents, index them automatically and recognize them intelligently, and to store (archive) securely, consult and distribute information. I.R.I.S. is a hi-tech company with government agencies, large accounts, professional federations and individual PC users as clients. The I.R.I.S. range of office products (OCR software, pen scanners, business card readers) is sold throughout the entire world. This business generates about 20% of the gross margin. The products are the subject of license agreements and are marketed by the distribution channels and Internet shops. I.R.I.S. also develops software for professional solutions. The I.R.I.S. project teams handle comprehensive solutions that include the sales of software licenses, services and the supply of hardware. This activity accounts for about 80% of the gross margin. Hence, the major part of the gross margin is generated by the professional solutions, specifically by handling IT projects for large accounts and government agencies. This leads to a sales and delivery cycle where the turnover is mainly generated during the second half of the year. Still, the general expenses remain stable during the year: on June 30, the company usually loses money or is break-even, and the profit is generated in the second half-year. A SUMMARY OF I.R.I.S. OBJECTIVES FOR THE YEAR 2004 In the beginning of 2004, the management announced the following objectives for the fiscal year: o Strengthen organic growth and increase the resources of teams with a strong potential for growth o Integrate the team of Omnis ECMS, a business that was acquired by I.R.I.S. in January 2004: take over the client roster and search for synergies that allow to explore new markets o Maintain the considerable R&D effort in document recognition and management, and introduction of major new products o Cost-control effort: improve the company s organization and streamline the teams to increase productivity o Increase the nominal and relative gross margin: find new customers and give priority to added value o Improve the profitability, give priority to the bottom-line. EVOLUTION OF THE ACTIVITY DURING THE FIRST HALF-YEAR OF 2004 The R&D effort allowed to introduce a large number of new products for the office environment and professional applications during the first half-year of We ll mention the following product launches: o IRISPdf 2.5 Server, the server version of I.R.I.S. solution for production OCR. IRISPdf allows you to convert scanned documents into fully searchable PDF files in 104 languages. This software moves the OCR conversion and PDF generation to a central server. This solution can be quickly integrated in third-party applications. o Formiris Pro 5.1, form and document reading software, uses intelligent sorting and recognition technologies to read forms in many new languages such as Greek and the Cyrillic languages (Russian, Ukrainian etc.). This software suite now handles electronic forms just as it processes paper forms. o Readiris Pro 9 Corporate Edition, the professional version of I.R.I.S. best-selling OCR software, comprises extra features for the corporate market. o New OCR technology for Hebrew. Recognition of Hebrew documents is available as a software option for Readiris Pro, Readiris Pro Corporate Edition and IRISPdf. The sales effort of I.R.I.S. was also maintained during the first half-year. Here are some accomplishments: o A world-wide agreement with Eastman Kodak bundles Readiris Pro Corporate Edition with the new Kodak document scanners i30 and i40. I.R.I.S. Group sa Notice of the half-year results of June Press release 2

3 o New OEM agreements with numerous customers concern Readiris Pro, Cardiris and the OCR and bar code reading toolkits. Prominent are the contracts with HP and Samsung, two companies that bundle I.R.I.S. software with their scanners and all-in-one devices. o Successful sales by Apple Computers (via the AppleStore channel) of the new products Readiris Pro 9 and the IRISPen Executive. o A Microsoft-I.R.I.S. partnership. I.R.I.S. delivered a special version of its business card reader IBCR-II to Microsoft. Microsoft bundles the I.R.I.S. product with Office 2003 Professional as part of a promotional campaign. o The first regional centre for tax payments of the French Ministry of Finance became operational. This processing centre is based in Lille and uses the I.R.I.S. product ScanChecks to recognize and process bank checks automatically. o The sale of a license for I.R.I.S. DocShare, I.R.I.S. platform for on-line communication, to five professional federations: the Comité Européen des Assurances, the Fédération des Industries Electriques, Electroniques et de Communication, the Syndicat de l Eclairage, the Groupement des Professionnels du Petit Appareillage Electrique and the Groupement des Industries de l Equipement Electrique, du Contrôle commande et des Services Associés. The ScanFin system installed by I.R.I.S. at the Belgian Ministry of Finance is designed to process automatically and manage 3.4 million VAT forms per year. This project has received two major industry awards: the ICT award for Best Document and Workflow and the BeLAIIM award for Most Effective Use of Imaging Technology. DETAILED ANALYSIS OF THE RESULTS OF THE FIRST HALF-YEAR OF 2004 The sales figure of the first half-year of 2004 is lower than it was in the first half-year of 2003: the turnover was 19,095 million euro vs million euro (-8.59%) in However, the gross margin grew substantially (by 8.11%) and is now million euro (compared to million euro in 2003). The gross margin now constitutes 67.47% of the sales figure - it was 57.04% of the sales figure on June This evolution is easily explained: the delivery of hardware was much lower than in 2003, but significantly more licenses with a high added value were sold. I.R.I.S. usually ends the year with a gross margin around 58%; a gross margin of 68% is definitely extraordinary. Nevertheless, the management expects a steady increase of the gross margin in the coming years as more licenses get sold and more services with a high added value are carried out. For the year 2004, the company expects a gross margin of at least 60%. The gross margin is the first and foremost growth indicator for I.R.I.S. activity, and it increased by 8.11% in the first half-year of This growth is in part organic, the result of internal growth, and was in part generated by a contribution of the activity of Omnis ECMS, whose business was acquired in the beginning of The company s operational charges grew by 4.5% during the first half-year of This was caused primarily by the consolidation of the activity of Omnis ECMS in the accounts of I.R.I.S. In compliance with the budget for 2004, I.R.I.S. has continued its R&D effort and increased its sales effort, at the same time controlling the growth of the expenses, so that the profitability got improved. The cash flow from operations (EBITDA) grew substantially (by 37.28%) to 1,799,403 euro. The income from operations (EBIT) is now 1,353,388 euro, a 49.31% increase. The net profit after six months was 398,448 euro vs. a profit of 90,430 euro on June an increase of 340%. This result is extraordinary for I.R.I.S.: halfway through the year, the company usually loses money or is break-even (as is explained in the section Introduction above). I.R.I.S. Group sa Notice of the half-year results of June Press release 3

4 The current net income (excluding the goodwill) is 795,016 euro (vs. 487,436 EUR on June , a 63% increase). This again confirms the outstanding character of I.R.I.S. performance during the first half-year of The activity of Omnis is consolidated as of January It generated a turnover of 758,976 euro (3.97% of the total sales figure) during the first half-year; the income from operations (EBIT) was 131,748 euro and the profit before taxes 131,481 euro. Says Pierre De Muelenaere, president and CEO of I.R.I.S. Group: On June 30, we are ahead of our objectives for the year Several I.R.I.S. divisions did very well: we saw considerable growth for the office products in Europe and the USA and we booked a positive contribution of the activity of Omnis which is the result of a successful integration. Let us not forget that the company introduced numerous major new products these last 18 months with more product launches to follow before the end of the year. The R&D effort is substantial, but it also broadens the product range and strengthens its potential for international growth. The financial result comprises the following elements: o Income from financial investments: 34,769 euro o Positive exchange and conversion differences caused by the dollar exchange rate: 79,957 euro o Amortisation of goodwill on acquisitions: 383,446 euro o Negative exchange and conversion differences caused by the dollar exchange rate: 49,296 euro o Interests paid for the use of short-term credit lines: 55,938 euro o Bank charges, including the reservation costs of stand-by credit lines: 84,706 euro. The extraordinary result contains the following elements: o Profit on the sales of fixed assets : 6,342 euro o Other extraordinary income: 1,002 euro o Extraordinary expenses caused by acquisitions: 17,886 euro o Other extraordinary charges: 2,580 euro SOLID FINANCIAL HEALTH One of the company s major strengths is undoubtedly its solid financial health. The net equity is 25.4 million euro, which corresponds to euro per share. The major indicators on June can only confirm the company s solvency and liquidity. o Ratio net equity - total balance: 63.04% o Ratio current assets - current liabilities (short-term debts): I.R.I.S. has no debt with a maturity over 1 year and the net cash position on June is 5 million euro. The company disposes of stand-by credit lines for 12 million euro (8.7 million of which cannot be revoked within 1 to 2 years). In short, I.R.I.S. has the financial means it needs to finance its further growth. To acquire the business of Omnis ECMS, I.R.I.S. issued 11,720 new shares and paid 250,000 euro. We repeat that the R&D effort about 9% of the turnover is recorded directly as an expense during the fiscal year as the money gets spent. Finally, the company improves its procedures on a regular basis, as part of its ISO certified quality program. OUTLOOK FOR THE FISCAL YEAR 2004 The growth of the gross margin and of the profitability exceeded the expectations for the first semester of But despite the growth of several of I.R.I.S. product lines, the market remains difficult because numerous large clients operate with very cautious investment programs. I.R.I.S. will launch several new products before the end of the year that should allow the company to deepen its client roster and international presence. I.R.I.S. Group sa Notice of the half-year results of June Press release 4

5 CEO Etienne Van de Kerckhove concludes: The management remains careful in its projections for the fiscal year. We have confidence in the quality of our products and in the interest that large accounts and government agencies have for our technologies, but the fact remains that the ICT market is tough these days and that many potential clients face budget restrictions. To date, the economy has not yet picked up and the second semester could be tougher than expected. For the on-going fiscal year, we still plan to increase the gross margin and to increase the net profit considerably. If these objectives are met, the management will ask the Board of Directors to initiate the payment of a dividend for the fiscal year 2004, as was already the case in AUDITOR S REPORT We have audited the consolidated accounts of June for the first semester 2004 of I.R.I.S. Group SA, that show total assets of 40,331,805 euros and a net profit of 398,448 euros. Our mission was done in compliance with the standards and recommendations of the Auditors Institute for limited audits. Our auditing basically covers the analysis, comparison and clarification of the financial information. The inspection was less comprehensive than it would be for a complete verification of the consolidated accounts. Our limited audit did not yield any significant corrections that should be added to the financial data of this press release. Brussels, September Ernst & Young Auditors, S.C.C. Represented by Eric Golenvaux, partner ADOPTION OF IFRS STANDARDS Our note on the impact of the transition to the international book-keeping standard (IAS/IFRS) is available on the I.R.I.S. web site ( and it constitutes an integral part of this press release. SHAREHOLDER S CALENDAR The results for the fiscal year 2004 will be published during the third week of March Visit the web site to learn more about I.R.I.S. Go to the financial section of our web site to subscribe to our Investor s Newsletter IMAGE RECOGNITION INTEGRATED SYSTEMS GROUP SA Rue du Bosquet 10, Parc Scientifique de Louvain-la-Neuve B-1435 Mont Saint-Guibert Telephone: etienne.vdk@irislink.com I.R.I.S. Group sa Notice of the half-year results of June Press release 5