Software group Kingdee targets 2018 breakeven for its cloud services business

Annual results: 1.86 billion yuan revenue, up 22.8pc; net profit 288.23 million yuan, up 172.5pc; cloud revenue soars 103pc

PUBLISHED : Thursday, 16 March, 2017, 3:26pm
UPDATED : Thursday, 16 March, 2017, 4:29pm

Kingdee International Software Group, the Hong Kong-listed business software specialist, is looking to new areas of business such as big data and internet finance to drive further growth as its cloud services business moves closer to breaking even, now expected in 2018.

The company said it had received approval for two major licenses to undertake internet finance business in China, and is currently working with Alibaba-backed online-only financial institution MyBank, to provide big data-based loan services.

The company has also been exploring further applications for big data technology in the financial services sector over the last two to three years, Robert Xu Shaochun, Kingdee’s chairman and chief executive, told a news conference accompanying its annual results on Thursday.

“We will continue to explore applications over the next four years, to develop ways that use data as a basis to provide loans,” Xu said.

For the year ended December 31, Kingdee reported revenue of 1.86 billion yuan, a 22.8 per cent increase on the previous year.

“In the last five years, last year was the best-performing,” said Xu. “After the transformation of our cloud business ... we are now headed towards a new phase of growth.”

Net profit was 288.23 million yuan for the year ended December 31, up 172.5 per cent compared with 105.77 million yuan in 2015.

In the last five years, last year was the best-performing. After the transformation of our cloud business ... we are now headed towards a new phase of growth
Robert Xu Shaochun, Kingdee chairman and chief executive

Although the company’s cloud business is still loss-making, Kingdee’s chief financial officer Lin Bo said that he expects it to break even in 2018.

“One characteristic about cloud businesses are that initial costs are high ... it is unlikely we will break even this year,” said Lin, adding that losses (for the cloud business) for 2017 should not exceed 50 million yuan.

Revenue for the business, however, soared 103 per cent compared with the previous year, to 340.82 million yuan.

That represents 18 per cent of its total revenue, Xu said, and it will now strive towards making that 50 per cent by 2020.

Much of its cloud business growth is expected to come from its enterprise resource planning (ERP) business, which targets larger-sized clients. Xu also said he was “confident” that side of the business will at least double its growth this year.

ERP allows the flow of information among different functions within a company. ERP software provides a central repository for all corporate information, while improving the flow of data across an organisation.

Kingdee is already considered a market leader in ERP, and in 2016 saw a 150 per cent increase in the number of customers using its services. Flagship clients include Huawei, Tencent, and Coca Cola.

The company’s 2016 results were in line with analyst expectations, said Rex Wu, equity analyst at Jefferies which has a “Buy” rating on the company.

Jefferies is “positive” Kingdee will narrow cloud service losses, he said in a note.

“We expect the cloud migration trend to accelerate, thanks to lower upfront costs, short implementation and deployment periods, and scalability,” Wu added.

Kingdee’s stock closed at HK$3.14 on the Hong Kong Stock Exchange on Thursday, down 1.57 per cent.