Australian software supplier Technology One is expecting up to 15 percent profit growth for its full 2015 year, but its latest results show that will come at a price.
The company reported a 10 percent fall in half-year profits after tax, down by $1.4 million for the six months ending 31 March 2015. Revenue was up three percent or $2.4 million.
Technology One continues to plough millions into infrastructure and research and development. The centrepiece for its cloud strategy, the TechnologyOne Cloud, contributed a loss of $1.6 million.
Over the full year, the company expects this loss to be $2.3 million, but then expects that will reduce to $1 million next year as its cloud customer base increases.
Technology One also saw losses in other areas in which it is investing heavily, including its United Kingdom division, its preconfigured solutions business, and its “next generation” of software, called TechnologyOne Ci Anywhere.
Millions are also being poured into acquisitions, despite Technology One not being an "acquisition driven business". In May the buyout of Perth software firm Digital Mapping Solutions (DMS) for up to $12 million was announced. The $10 million acquisition of Gold Coast-based Icon Software was announced in January.
Overall, the company’s research and development costs were $19.2 million for the first half. Variable costs, described as expenses directly associated with revenue growth, were up 23 percent.
However, the company is expecting a payoff from this development phase, with “significant revenue streams to emerge from these investments in future years”.
TechnologyOne is also expecting strong licence fee growth over the full year. According to its half year report: “We are confident the transition of our business to the cloud will be smooth over the next five years, with minimal impact on our business. We will come through this period with an even stronger, more resilient business model, and an even stronger competitive advantage.”