cpr company profile International products

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4 cpr company profile Unit 4 Agresso is a leading international manufacturer of business software. With branches in 1 European countries, the United States and Canada and sales worldwide, a turnover of million (for continuing operations) was achieved in 26. The head office is situated in Sliedrecht, the Netherlands. At the end of 26 Unit 4 Agresso had 2,76 employees (continuing operations). Unit 4 Agresso develops, sells, implements and supports business software for the management, support and optimization of business operations and for the optimization of the operational management. Unit 4 Agresso has leading international market positions in the public sector and in the professional and business services sectors. In the Benelux Unit 4 Agresso also has strong market positions in the wholesale trade and distribution sectors and in the market for accountancy firms. International products With its leading international product Agresso Business World, Unit 4 Agresso directs itself primarily at the market which it defines as BLINC: Businesses Living IN Change. These are people-oriented companies and institutions where frequent changes in internal and external factors are inherent in the strategy. Organizations in which provision of services, projects and many different sorts of client relationships are the key element, receive maximum functionality for the management and control of their business operations. The competitive advantages of Agresso Business World are: specialization per business sector, which to a large extent makes customization superfluous; permanent flexibility following implementation, which ensures quick modifications in case of changes within the organization and enables direct management of change processes; short implementation time, which makes Agresso Business World quickly available; extensive and flexible reporting facilities; low total cost of ownership. With Unit 4 AccountAnalyser Unit 4 Agresso has an international product for accountancy firms and end users. The internationalization of Agresso Wholesale, for the wholesale and distribution sector, is under development. Local products In the Benelux and on a smaller scale in a number of other countries Unit 4 Agresso offers business software for small and medium-sized enterprises (SME) and various sectors, such as the wholesale trade and distribution, health care and accountancy. In addition, a range of functionalities is offered for personnel information and salary management. All applications have extensive facilities for reporting and management information. Stock exchange quotation and market capitalization Unit 4 Agresso shares have been quoted on Euronext Amsterdam since 1998 and form a part of the Amsterdam Small cap index (AScX). At the end of 26 the market capitalization was valued at approximately 46 million. Notice to the reader The underlying Annual Report 26 of Unit 4 Agresso N.V. is an unofficial translation of the Dutch version (Jaarverslag 26 Unit 4 Agresso). We have audited the official Dutch version of the Annual Report of Unit 4 Agresso N.V. for the year 26. Ernst & Young Accountants Annual Report 26

5 Key figures (in x 1 million) Continuing operations Turnover Turnover growth compared to prior year IFRS 26 IFRS 25 IFRS % 16.% Gross margin % gross margin 88.6% 89.6% 88.2% Operating result before depreciation and impairment (EBITDA) % EBITDA 16.9% 16.1% 18.7% Employees/activities ratios Average number of employees (FTE) * 2,116 1,696 1,474 Turnover per employee ** Discontinued operations*** Turnover Turnover growth compared to prior year 12.7% 7.7% Gross margin % gross margin 17.% 18.6% 21.5% Operating result before depreciation and impairment (EBITDA) % EBITDA 4.1% 2.9% 4.8% Employees/activities ratios Average number of employees (FTE) * Turnover per employee ** Total Net profit before impairment Net profit before impairment/turnover 7.% 7.3% 7.5% Cash flow (net profit + depreciations) Total number of employees year-end 2,933 2,91 1,85 Balance sheet ratios Equity % equity in total assets 35.1% 42.7% 41.3% % quick ratio 7.9% 11.6% 12.2% Financial figures per share Earnings per share before goodwill related impairment * in numbers ** in x 1, *** For an explanation on the discontinued operations see paragraph of the financial statements, page 9 Annual Report 26

6 Earnings per share before goodwill related impairment NL 23 NL GAAP GAAP IFRS IFRS IFRS Annual Report 26

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8 cntnts content s Unit 4 Agresso in short Company profile Key figures Vision, activities, strategy and objectives Management Report from the Board of Directors Prospects for 27 Developments continuing operations Discontinued operations Financial summary Risks and risk management Personnel, organization and environment Corporate governance Information for shareholders Report from the Supervisory Board 57 Financial statements Consolidated income statement Consolidated balance sheet Consolidated statement of changes in equity Consolidated cash flow statement Notes to the consolidated financial statements Company income statement Company balance sheet Notes to the company financial statements Other information Auditor s report Regulations in the articles of association concerning the appropriation of result Appropriation of the net profit 26 Stichting Continuïteit Unit 4 Agresso Operating companies and addresses Annual Report 26

9 vaso vision, activities, str ategy and objectives Vision Unit 4 Agresso is committed to being a reliable and sound, internationally operating organization which helps its clients realize their corporate objectives by means of the development, distribution and maintenance of business software and on the basis of specialized know-how and effective product market combinations. Activities Unit 4 Agresso develops, sells, implements and supports business software for the management, support and optimization of business operations and for the optimization of the operational management. With its international product Agresso Business World, Unit 4 Agresso focuses primarily on the market for people and project-oriented companies and institutions which it defines as BLINC: Businesses Living IN Change. In the Benelux, Unit 4 Agresso also focuses with other products on the small and medium-sized enterprises (SME) and a number of vertical markets, including wholesale trade and distribution, accountancy and health care. After the realization of the intended divestment of the security activities, the business software activities will comprise all activities of Unit 4 Agresso in 27. Str ategy Unit 4 Agresso decided in 26 to sharpen its strategic focus and intends to divest the security activities. The activities will be specifically concentrated on the development, distribution and maintenance of business software. Unit 4 Agresso offers its clients business software for the management, support and optimization of business operations and for the optimization of the operational management. Unit 4 Agresso distinguishes itself in this market from its competitors by means of combining specialized, in-depth knowledge of a number of selected markets and sectors with product Overview of the principal products, client groups, geographical markets and market positions Business Software Product clients countries Market position People-oriented, Agresso Business World Medium-sized and Worldwide Leading or strong BLINC * large companies regional positions and institutions (vertical markets) Sector-focused Agresso Wholesale Wholesale trade & Benelux plus a few No. 1 in Benelux distribution other European Unit 4 Cura Health care countries Top-3 Benelux Various accountancy Accountancy No. 1 in Benelux products Unit 4 Multivers SME Benelux Top-3 Benelux Supplementary Among other things Medium-sized and Part Benelux and Good (niche)positions payroll, large companies part worldwide personnel information, and institutions internet bookkeeping (horizontal markets) *BLINC stands for Businesses Living IN Change. With this specification of the target group the marketing communication for Agresso Business World was sharpened in 26. For more information see Developments continuing operations, page 24. Annual Report 26

10 standardization on the basis of high-quality technology and functionality. The business strategy is aimed at enabling the country organizations to improve their market positions by means of new, supplementary or improved products and services. Our international product Agresso Business World is a key element in this. Unit 4 Agresso promotes the growth possibilities of its international products with focused and centrally coordinated investments in R&D, marketing communication and acquisitions. In addition, our country organizations optimize their own mix of international and local products on the basis of the local market opportunities. SWOT analysis Strengths Leading position in the public sector In Sweden, Norway and the United Kingdom, Unit 4 Agresso, with its product Agresso Business World, has a leading position in the public sector. Also in other countries, Unit 4 Agresso is successful in the public sector. Contracts agreed in the public sector often have a longer term than contracts in the private sector. The product range Unit 4 Agresso has a range of strong products, which ensure a large degree of client satisfaction. Out of this range Agresso Business World and Agresso Wholesale are the most distinctive products. They are both based on a technologically and functionally high-quality concept. Positioning A strong advertizing campaign for Agresso Business World (ERP with NO expiration date) brings out the unique competitive advantages of this product very clearly. A strong market position in Europe With Agresso Business World, Unit 4 Agresso has strong market positions in Europe and with a number of other products strong market positions in the Benelux. Limited client turnover and good organic growth A high degree of client satisfaction and a large share of turnover in the public sector ensure a stable client portfolio with limited turnover. Partly for this reason the organic growth is stable and at a good level. The financial position As a result of many years of good profitability Unit 4 Agresso has built up a sound financial position, with a solvency of 35%. Weaknesses Scale size In relation to a number of important competitors the scale size is still limited, as a result of which the costs of R&D are relatively high. Name recognition In comparison to a number of important competitors the name recognition of Unit 4 Agresso and its products is less widespread. Small market positions in a number of countries In a number of countries the market positions are still too small for a good profit contribution. This is particularly the case in France and the United States. Opportunities Agresso Business World is perfectly positioned to be successful in new geographical markets. The intended divestment of the security activities will increase the financial opportunities for growth by means of acquisitions in new and existing markets. Strategic alliances provide the opportunity to gain access to new vertical and geographical markets with Agresso Business World in a cost-efficient manner. A number of products which have hitherto been successful in the Benelux, including Unit 4 AccountAnalyser, lend themselves well for international sales. The prospects for 27 are good with regard to the willingness to invest in the market for business software. Integration of technology and products and the relocation of a part of the development activities to countries with lower salary levels offer opportunities for cost management. Threats The consolidation of large IT companies leads to further increase in scale in the market. The general pressure on the prices of licence sales. Decreasing willingness to invest in the public sector in a number of geographical markets. Salary developments in the market for IT professionals. Annual Report 26

11 Str ategic priorities Partly on the basis of this strengths/weaknesses analysis Unit 4 Agresso has determined a main strategic direction with the following priorities: 1. Increase in scale by means of organic growth, acquisitions and strategic alliances. 2. Continued focus on specialized standard products for vertical markets, whereby the R&D capacity is utilized efficiently and the products distinguish themselves through a low total cost of ownership. 3. Optimization of the product mix per country. Every year these priorities are translated into new initiatives. The section entitled Prospects for 27 gives an overview of the strategic initiatives for the coming year. In the sections dealing with the developments in 26 the most important initiatives of 26 are discussed and the initiatives announced last year evaluated. Explanation of the str ategic priorities 1. Increase in scale Increase in scale can bring the profitability to a structurally higher level. Regardless of the profit level, Unit 4 Agresso spends a relatively constant amount on Research & Development. At present this is approximately 13% of the turnover. Increasing the number of clients, by means of organic growth, new distributors, strategic alliances or acquisitions, has for this reason a strong positive effect on the fixed R&D costs per client and the profitability of the company. In addition, increase in scale contributes towards an improvement of our name recognition. In countries with good sales prospects where Unit 4 Agresso does not have its own sales organization, the company often enters into an alliance agreement with a distributor of business software. In some cases the alliance acts as a trial period for acquisition of the distributor. In a strategic alliance Unit 4 Agresso and its partner offer their applications and/or services jointly. The objectives for a strategic alliance or an acquisition could be: increase in the number of potential clients by means of conversion to the products of Unit 4 Agresso. In the case of companies with a large client portfolio but with obsolete products, this is a good option; gaining access to new vertical markets or certain niche markets, for example those of local authorities in a country; expansion of functionalities, for example in the area of CRM, payroll or Human Resources; expansion of the services package. In principle Unit 4 Agresso will not make any acquisitions with a view to an expansion with similar products. In connection with return requirements and risk management a number of basic principles and conditions have been formulated for acquisitions. Reference is made here to Risks and risk management from page 37 onwards. By increasing the number of clients the annual maintenance turnover will similarly increase and supplementary services can be provided. This will improve the risk profile of the company. 2. Focus on specialized standard products As medium-sized international player, Unit 4 Agresso s competitive position is dependent upon the ability to put distinctive products onto the market. The financial resources are more limited than with the bigger players. In order to be able to utilize the R&D capacity efficiently, Unit 4 Agresso concentrates on standard technological concepts for a number of specific vertical markets. In these concepts, specialization, reliability, transparency and flexibility are important elements. Due to specialization per vertical market the Unit 4 Agresso standard applications are quick to implement and relatively simple to maintain. This results in a low total cost of ownership, with which Unit 4 Agresso distinguishes itself from its competitors. 3. Optimization of product mix per country Per country, Unit 4 Agresso strives for an optimum mix of international and national products in order to capitalize optimally on local opportunities and promote economies of scale in distribution and R&D. To this end three product classes are distinguished per country: Product class 1: international with a central market approach This is applicable to Agresso Business World, for which an international development plan has been drawn up and joint investments in marketing and R&D are made. Annual Report 26 1

12 Product class 2: local with international growth potential For these products there are national development plans, whereby the international growth potential is regularly assessed and where possible exploited. A contribution is made at a central level towards the development of these products. Examples from this category are Agresso Wholesale and Unit 4 AccountAnalyser, which were developed in the Netherlands, and a front-office application developed in Canada for educational institutions. Product class 3: local These products contribute per country towards a better overall range of products, whereby local sales opportunities, client needs and market requirements are responded to. Only a limited amount is invested in the marketing of these products. Products can be promoted or demoted to a different class. A number of products in product class 3 originate from acquisitions. These are usually replaced after a certain time by existing Unit 4 Agresso products with proven success. Product class 3 however also appears to act as a good breeding ground for the identification of products with growth potential. The sale of Unit 4 Agresso products takes place via: in-house sales organizations, which also sell products from partners in order to be able to offer clients a better overall choice. distribution partners who offer products from several manufacturers. strategic partners, who offer their own products coupled with a product from Unit 4 Agresso as a total solution. Unit 4 Agresso expects an active input from its employees in the realization of the necessary growth and a high degree of responsibility. Objectives Oper ational objectives In order to continue to distinguish itself from its competitors and to implement its business strategy, Unit 4 Agresso strives to fulfil the following objectives: supply the best products and services imaginable for selected markets and sectors; quick and effective implementation by means of standardization of products; acquire a strong market share (top-3 position) in the markets in which it operates; remain in a position to offer clients the lowest total cost of ownership by means of specialization; offer products which, by means of their many analysis and reporting facilities, make the business operations and results of our clients fully transparent; stay close to the client by means of field operatives, branches, distributors and/or dealers. Financial objectives for the medium term Our business strategy, aimed at the protection and strengthening of our market positions, requires continuous growth via existing and new activities. For the financing of this growth Unit 4 Agresso has determined a number of financial objectives for the medium term. Assuming a normal growth of economic activity the financial objectives for the coming 3 years are: an average organic growth in turnover of 7-1%; a turnover between at least 4 and 5 million in 29, including the contribution from new acquisitions. Employees Unit 4 Agresso considers the professionalism and dedication of its employees to be of vital importance. It goes without saying that Unit 4 Agresso values a good bond with the 2,76 plus employees. It therefore offers good opportunities for personal development and good salaries and fringe benefits. 11 Annual Report 26

13 Board of Directors C. Ouwinga (1955) Chris Ouwinga has been chairman of the board (CEO) since His primary area of attention within the organization is business software. In 198 he was co-founder of the then Unit 4. In 1983 he was promoted to assistant director and he became responsible for technical matters. In 1986 he was appointed CEO of Unit 4. Under his leadership Unit 4 Agresso grew into one of Europe s leading suppliers of business software. Annual Report 26 12

14 drs. E.T.S. van Leeuwen RA (1966) Edwin van Leeuwen joined Unit 4 Agresso in the middle of 1999 and has been Chief Financial Officer (CFO) since April 22. His primary areas of attention are Finance, Legal Affairs and Investor Relations. He is a chartered accountant (RA) and was previously employed as manager of Finance & Control with Koninklijke Van Ommeren N.V. Prior to this he worked for 8 years as an accountant at, amongst others, Coopers & Lybrand. 13 Annual Report 26

15 drs. H.P. De Smedt (1963) Harry De Smedt has been Executive Vice President (COO) and director of Internet & Security since January 21. His primary area of attention is IT security. He has been employed by the company since 199 and has occupied various management positions. Mr De Smedt has a degree in computer sciences, in advanced management (Vlerick Management School), is a Bachelor of Economics and has an MBA from the University of Diepenbeek in Belgium. Annual Report 26 14

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17 rbd report from the board of directors Turnover EBITDA (operating result before depreciation and impairment) Net result attributable to Unit 4 Agresso s shareholders Earnings per share before goodwill related impairment e million +19% e 4.1 million +25% e 18.3 million +3% e % Focus on business software Unit 4 Agresso experienced a successful year in several ways. Our performance in the market was excellent, with our product Agresso Business World as the motor behind a stable international growth. We also took important steps in the implementation of our long-term strategy. The decision to divest our security activities creates space for the realization of our growth ambitions for business software. With the reinforcement of our positions in Germany and Spain we have already taken the first step in this respect in 26. Whilst the market for business software grew by between 6 and 7%, the organic growth of our business software activities amounted to approximately 9%. Our flagship product Agresso Business World provided an important contribution towards further internationalization of our activities and the improvement of our scale size in the weaker regions. The new 5.5 version, which was introduced in the second half of 25, was positively received and formed the basis for a steady growth in turnover during the year. A strong contribution towards the absolute growth in business software turnover was especially made by the Netherlands. The largest growth was realized in Germany (>1%), the United Kingdom (+32%), Norway (+2%) and the Benelux (+2%). Annual Report 26 16

18 NO expir ation date In the current replacement market the unique competitive advantages of Agresso Business World once again become clear. Whilst the business software of many companies has reached the end of its product cycle of between 5 and 8 years, this end is not yet in sight for the users of Agresso Business World. After all, Agresso Business World changes with the changing requirements organizations set for their business software. Practice proves the correctness of the closing sentence of our new marketing campaign launched in 26: ERP... with NO expiration date. Of the companies and institutions which do require replacement there are many who, following evaluation of their previous purchase, now opt for Agresso Business World. The licence sales to these new clients will also contribute to the growth in turnover from maintenance contracts during the coming years. In a number of countries national products also contributed substantially towards the growth in turnover, particularly in the Netherlands. Local and supplementary products remain important in the support of our international growth. With these products we direct ourselves at attractive niche markets, support the access to new vertical markets and increase the efficiency of our distribution network. Sale of NOXS and reseller activities Unit 4 Agresso succeeded in continuing the many years of turnover growth in Internet & Security in 26 as well. The turnover of the discontinued operations increased to million (+13%), whereby our small market positions in the United Kingdom and Italy were greatly strengthened. We had already announced earlier that we were considering the sale of these activities as the possibilities for synergy with the business software activities are very limited. In October 26 we were able to announce that we had entered into negotiations on the sale of NOXS, the distribution activity of the Internet & Security division. In February 27 Key points 26 Strong organic growth of 9% in business software Agresso Business World 5.5 the motor behind international growth Better growth prospects due to intended divestment of security activities Market positions in Germany and Spain strongly reinforced the negotiations were completed and agreement was reached with Westcon. The sale of NOXS enables a more efficient utilization of capital and accelerated internationalization of the business software activities. The strong European market position which we had built up over the last few years in Internet & Security, led to high demand in the market and made a good transaction possible. The internet activities under the name Amercom, which was successfully repositioned in 26, and Unit 4 Agresso Continuity & Security, which offers a total range of ICT services, are excluded from the sale and will be incorporated in the business software activities. Both activities offer good opportunities for cross-selling. Strengthening of positions in Spain and Germany One of our strategic spearheads is the strengthening of market positions in countries with as yet a limited scale size. In Germany we took an important strategic step with the acquisition of the financially sound sister companies Dogro and Kirp, with which we achieve a top-4 position in the German public sector and acquire a portfolio of approximately 6 clients, good references and knowledge of the required specific functionality for the German public sector. The addition of Agresso knowledge offers good growth prospects for the coming years. The joint turnover of Dogro and Kirp amounted to 14 million in 26. In Spain the basis for further turnover and profit growth was greatly strengthened with the acquisition of CCS, the largest acquisition by Unit 4 Agresso in business software since the acquisition of Agresso in 2. CCS enjoys a large name recognition as software developer and provider of support services. With 522 employees and a turnover in 26 of 34 million CCS has a leading position in the Spanish market for financial applications for medium-sized companies, accountancy firms and tax consultancy firms. Spain is one of the fastest growing software markets in Europe and offers good opportunities for cross-selling and the application of our knowledge for vertical markets. 17 Annual Report 26

19 In addition we acquired a 5% interest in the Dutch software company Amedia (turnover 12 million in 26), with an option for complete takeover. Amedia is market leader in software for insurance and mortgage intermediaries. This niche market offers opportunities for expansion of our market share and cross-selling. Acceler ated internationalization through cooper ation With the growing scope and spread of our activities, the opportunities for cross-border cooperation and synergy are increasing. A new technological step in 26 was the separation of the Agresso platform and the Agresso applications. As a result of this we will be able to couple this platform with several other products. In 26 a start was made with the introduction of Agresso Wholesale, formerly Omnivers. The more frequent use of the Agresso platform does not only lead to efficiency advantages in product development. It makes more products suitable for international growth, improves the effectiveness of our marketing and brings a number of our technological concepts closer together. Agresso Business World is the motor behind our international growth, but for the penetration of new vertical markets and strengthening of market positions the correct supplementary functionality is of great importance. This functionality we develop ourselves, acquire by means of acquisitions or obtain from strategic partners. Strategic alliances can lead to both a strong product on the basis of integrated functionality and access to new markets. In 26 we entered into an alliance with the American Hansen Information Technologies. We expect that in 27 this will lead to orders in the American public sector and to an entry into Australia. We also achieve integrated functionality through increased internal cooperation. In France we acquired access to the market for higher education with the help of a student registration system from our Canadian branch. Cooperation between the country organizations led to it that Unit 4 AccountAnalyser, a specialized product for the accountancy market, is now being sold in the Netherlands, France and the USA. Furthermore, a number of contracts were concluded for this product with internationally operating accountancy firms. In addition, we continue to improve upon our ability to utilize our joint knowledge, capacity and experience in the area of R&D and the strengthening of positions in countries with as yet small market positions. Investing in basis for growth With a strong product range, a dedicated organization with 1% focus on business software and a good investment climate the prospects for Unit 4 Agresso are excellent. However, we are faced with major challenges to successfully take a new step in our international growth. Although many clients and technical analysts are already convinced of the unique competitive advantages of Agresso Business World, we still lack name recognition in many markets to be able to grow quickly and cost efficiently. In 26 we therefore invested in a sharpening of our marketing communication, whereby we explain the advantages for the client and the distinctive strength of Agresso Business World even better. Also in the coming years we will keep our investments in marketing at a substantially higher level than in the past years. New acquisitions remain important. In 26 we invested 49.8 million in acquisitions and partly depending on the opportunities which arise, we will also invest substantially in acquisitions in the coming years. In addition we will strive for geographic expansion via strategic participating interests, so that we can build up large market positions more quickly, and achieve profitability more quickly in new markets. Growth also takes place by means of cooperation with new distributors and intensification of existing relationships with distributors. A point for special attention, in the case of continued growth, is to keep our R&D costs manageable and at a moderate level. A more efficient utilization of our joint R&D capacity and intensification of cooperation with partners in countries with lower salary levels are essential in this respect. Annual Report 26 18

20 Almost every country in which we are active contributed to our growth in turnover in 26. The fact that also during the past year we were able to convince so many existing and new clients of the quality of our products and services, is attributable to the effort and dedication of our employees. The management is fully aware of this and wishes to thank them for this. Kind regards, on behalf of the management, Chris Ouwinga 19 Annual Report 26