Canadian mining software company Gemcom Software International Inc has reported strong growth in sales and profits, helped by its July 2006 acquisition of Perth-based competitor Surpac Minex Group Pty Ltd.
Canadian mining software company Gemcom Software International Inc has reported strong growth in sales and profits, helped by its July 2006 acquisition of Perth-based competitor Surpac Minex Group Pty Ltd.
Gemcom lifted sales by 94 per cent to C$35.8 million (A$39.8 million) for the year ended 31 March 2007.
It said Surpac accounted for 68 per cent of the increase in revenue, or A$13.1 million, while organic growth acounted for 32 per cent of the increase.
There was a similar pattern in the March quarter, which highligjhted the growth of the business.
Total revenue increased to A$13.4 million in the March quarter. Surpac contributed $4.9 million, which implies that the Perth-based business was generating annual revenue of about A$20 million.
Gemcom said net income doubled to C$4.5 million (A$5.0 million).
Gemcom claimed that the Surpac acquisition gave it the largest customer base in the industry. Gemcom's privately owned competitors, such as Maptek and Datamine, acknowledge that Gemcom has a large number of customers but say that it has many small clients.
A statement from Gemcom is pasted below:
GEMCOM ANNOUNCES RECORD FINANCIAL RESULTS FOR 2007
Acquisition of Surpac Minex Group boosts total revenue by 94%
Vancouver, Canada - June 20, 2007 - Gemcom Software International Inc. (TSX:GCM), the
largest global supplier of specialised mining productivity solutions, today announced its financial
results for the three and twelve-month periods ended March 31, 2007. Gemcom's consolidated
results include the July 2006 acquisition of Surpac Minex Group Pty Ltd. (Surpac Minex), and are
compared to pre-acquisition results of prior fiscal periods as applicable. All figures are quoted in
Canadian dollars.
Fiscal 2007 Highlights:
- Total revenue increased 94% to $35.8 million in 2007 from $18.5 million in 2006;
- EBITDA increased 113% to $7.3 million in 2007 from $3.4 million in 2006;
- Net income increased by 111% to $4.5 million or $0.10 per share in 2007 from $2.2
million or $0.09 per share in 2006;
- Acquired 100% of Surpac Minex a world leading provider of mining software;
- Completed $12 million private placement to fund Surpac Minex acquisition;
- Working capital increased 152% to $11.4 million on March 31, 2007 as compared to $4.5
million on March 31, 2006.
"Doubling our year-on-year revenue while increasing our profit margins validates our acquisition of Surpac Minex," said Rick Moignard, president and CEO of Gemcom. "We have been successful in structuring our business to achieve economies of scale while delivering software solutions that enable our clients to efficiently manage their mining operations. At the same time, we have increased our footprint within mining companies by expanding our technological base and services capabilities to a broader product offering."
"We are making prudent, cost effective investments in our business," said Garth Albright, CFO of Gemcom. "Synergy and efficiency programs that we have put in place across all areas of the company have been effective at increasing our contribution to the bottom line as we continue to grow our revenue and expand our geographical presence."
Fourth Quarter 2007 Financial Review:
Total revenue increased to $12,026,562 for the three months ended March 31, 2007 compared with $5,254,328 for the same three month period in 2006, an increase of $6,772,234 or 129%.Higher license sales resulting from the expanded software offering was the primary reason for the increase. Higher sales of maintenance and professional services fees revenues also contributed to the increase. As compared to Q4 of fiscal 2006, the acquisition of Surpac Minex accounted for 65% of the $6,772,324 increase in revenue, while organic growth accounted for a 35% increase
in revenue
EBITDA increased to $2,411,832 for the three months ended March 31, 2007 compared with $1,392,317 for the same three month period in 2006, an increase of $1,019,514 or 73%. Net income was $1,954,541, or $0.04 per share (basic and diluted) for the three months ended March 31, 2007 compared to $1,035,126, or $0.04 per share (basic and diluted) for the same three month period in 2006, an increase of $919,415 or 89%. Total shares issued and outstanding as of March 31, 2007 was 51,688,731.
Total revenue was $35,848,003 for the year ended March 31, 2007 compared with $18,499,731 for 2006, an increase of $17,348,272 or 94%. The acquisition of Surpac Minex in July 2006 accounted for 68% of this increase while organic growth accounted for a 32% increase in revenues.
Revenue from license sales increased to $18,883,811 in 2007 from $8,266,859 in 2006, a 128% increase. Upgrade Service & Technical Support (USTS) revenues increased to $10,228,380 in 2007 as compared to $5,265,118 in 2006. Revenue from professional services fees increased to $5,107,627 in 2007 as compared to $3,397,935 in 2006. Gross Margin as a percentage of revenue was 80% for the year ending March 31, 2007 compared with 82% for fiscal 2006, a decrease of 2%.
EBITDA(1) increased from $3,421,814 (19% of revenue) in fiscal 2006 to $7,285,814 (20% of
revenue) for 2007.
Investment in research and development increased by 101% to $7,581,599 in 2007 from $3,774,968 in 2006. This includes the addition of 49 research and development staff from Surpac Minex on July 19, 2006.
Sales and marketing expenses increased by 80% to $12,700,282 in 2007 from $7,046,313 in 2006 as a result of the addition of 70 regional sales, service, and support staff from the Surpac Minex acquisition.
Net income grew 111% in 2007 to $4,537,818 ($0.10 per share), from $2,152,037 ($0.09 per share) in 2006 as a result of the Surpac Minex acquisition, and the realization of efficiencies across the organization.
The strategic acquisition of Surpac Minex in fiscal 2007 is generating the following benefits and synergies for Gemcom:
- Creates the largest customer base in the industry;
- Significantly strengthens Gemcom's global competitive position in other regions, especially Australia, China and Russia;
- Unites complementary revenue streams and channels to market, across all mining commodities and geographic locations;
- Offers industry-leading breadth and depth of products and services;
- Includes the acquisition of technology for stratified deposits, such as coal, iron ore, lateritic nickel, bauxite and oil sands;
- Enhances Gemcom's strong employee base with the addition of 119 highly-skilled mining and software specialists;
- Facilitates research and development efficiencies, including an established development facility in India.
In conjunction with the acquisition, the Company initiated a detailed integration and change management plan that has resulted in several achievements since the acquisition was completed on July 19, 2006. The Company has succeeded in cross-selling, selling into new markets and growing in developing markets. On an operational level, Gemcom has integrated regional business unit offices, brought together the research and development groups, and aligned accounting systems and corporate and regulatory reporting.
