Yesterday, ComArch announced its 3-year strategy, which encompasses double-digit sales dynamics with a strong efficiency improvement. On all lines (sales, operating profit and net profit), the objectives are substantially above consensus estimates. ComArch plans to achieve these aims, despite plans of substantial headcount growth (from 1,800 employees in 2005 to over 3,000 in 2008) via:
- improving the sales mix with higher exports contribution and higher sales of own products (especially licences),
- benefiting from current exports development via charging higher gross margins,
- eliminating acceptance of low and unprofitable contracts,
- cautious SG&A policy,
- subsidising the R&D projects with EU donations.
ComArch's 3-year strategy clearly suggests that management feels the company’s competitive position allows it to concentrate on the bottom-line, as they have no problems with obtaining new orders. This could be proven by ComArch’s very strong backlog at the end of February 2006 of PLN 209m, up 36% y/y. The strategy had a positive trading impact during the last session, which we believe could continue over the next few weeks, as upgres from estimates will be coming through.