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000-036 IBM Maximo Asset Management V7.1(R) Fundamentals

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000-036 exam Dumps Source : IBM Maximo Asset Management V7.1(R) Fundamentals

Test Code : 000-036
Test denomination : IBM Maximo Asset Management V7.1(R) Fundamentals
Vendor denomination : IBM
: 98 existent Questions

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IBM IBM Maximo Asset Management

Ontracks Consulting Takes desirable IBM Maximo Reseller Title….again | killexams.com existent Questions and Pass4sure dumps

Edmonton, Canada, February 05, 2019 --(PR.com)-- Ontracks Consulting has solidified its vicinity as a premier IBM associate, once again being named the #1 Reseller of IBM Maximo EAM utility in North the usa. here is the fourth time over the terminal 5 years that Ontracks has been so honoured.

a number one Maximo implementer and an IBM Platinum stage commerce companion, Ontracks Consulting has been providing asset administration implementation services for over a decade. This corporate fulfillment has its roots within the ordinary corporate tradition. It highlights the delivered value that Ontracks continues to convey to its shoppers as smartly because the success of the company's client-focused philosophy.

“We’re very cozy to exist as soon as again exist recognized for because the leading reseller of IBM Maximo,” says Craig Mackenzie, main at Ontracks Consulting. “This achievement confirms their dedication to keeping the maximum even of competency with IBM Maximo and the tough work and dedication of their entire team.”

On the accomplishment, IBM’s Industrial Channel chief Matt Simons remarks, "As they evaluate their companion ecosystem you admire directly which partners savor the DNA to exist a hit: excellent of people, commerce potential, understanding chief, capacity to collaborate, etc. or not it's evident that Ontracks possesses these characteristics by means of once once again being their properly Maximo reseller in North the usa for the fourth time in 5 years. What an accomplishment!"

About Ontracks Consulting

Ontracks Consulting is a leading implementer of IBM’s enterprise Asset administration product Maximo and operational development firm, working with valued clientele world wide to enrich their operational efficiency. Ontracks specializes in supplying commerce implementations and assisting their purchasers understand tangible and sustainable operational improvements.


IBM provides Asset Optimization Capabilities With Oniqua Buyout | killexams.com existent Questions and Pass4sure dumps

international company Machines enterprise IBM lately bought Oniqua Holdings Pty Ltd. for an undisclosed quantity. Oniqua provides information superhighway of things (“IoT”) based mostly maintenance, restore and operations (“MRO”) stock optimization options. This buyout will bolster IBM’s Asset Optimization observe.

IBM’s asset optimization options portfolio already includes Tririga as well as the trade main Maximo. meanwhile, Oniqua caters to manufacturing, mining, transportation, oil & gasoline, utilities and different such asset-intensive industries. The transaction will allow IBM to more advantageous serve its latest valued clientele and optimize its operations for larger productiveness.

Focal features of the Acquisition

Per the press unlock, IBM plans to merge its asset optimization solutions with that of Oniqua’s. certainly, Oniqua’s flagship provider — MRO acknowledge — when combined with IBM’s asset optimization acknowledge Maximo will advocate IBM to deliver a “options-as-a-service” primarily based answer.

IBM services will moreover profit “a team of professionals” from Oniqua. The MRO and different prescriptive and predictive analytical capabilities of the neighborhood will give IBM a competitive area in software capabilities market.

With a combined acknowledge platform, IBM looks ahead to tender a single facts supply encompassing enterprise assets to enable a “24/7 operational effectivity.”

reduce Asset Downtime: Key Catalyst

The fundamental headwind for the asset intensive corporations is annual unscheduled asset downtime. This basically stems from the shortcoming of inventories and spare ingredients. The insights obtained by means of scrutinizing and examining the commerce records can prick down unscheduled operational downtime by route of guaranteeing the most commandeer fabric and spare components required to fulfill the demand.

IBM continues to exist focused to give the clientele with an acknowledge essentially aimed toward decreasing unscheduled asset downtime, which allows for these clientsto recognize their company dreams sooner. With Oniqua’s IoT expertise within the asset administration space, IBM is likely to give a boost to its asset optimization capabilities an excellent deal.

due to this fact, groups will improvement from the effortless connect with the records in actual-time. it is going to enable the clientele to prognosticate machine failures, because of this shrinking unplanned downtime.

What the investors should comprehend

IBM’s stock has misplaced 2.1% of its cost during the terminal yr, narrower than the business’s rally of two.6%.

The business’s starting to exist clout in the commerce Asset management (EAM) application market is transparent from market analysis enterprise Gartner’s November 2017 “Magic Quadrant for commerce Asset management utility” file where it Place IBM in the “Leaders” quadrant for its Maximo offering. With Oniqua buyout, IBM is likely to execute stronger the preponderant position it enjoys in the market.

furthermore, per research enterprise MarketsandMarkets, the EAM market size is anticipated to develop from $3.forty four billion in 2017 to $6.05 billion by route of 2022 at a CAGR of eleven.9%. They agree with IBM is neatly poised to capitalize on this profitable possibility with the extra IoT-based mostly capabilities Oniqua brings on board.

Strengthening IoT Capabilities Bodes well

Per IBM’s estimates, there may exist around 30 billion linked devices via 2020, consequently increasing the need for IoT structures. because of this, the business’s funding within the expertise seems to exist rather well deliberate. They trust the upcoming modern mixed solution holds promise.

on account that the advantages, they can count on consistent increase of the enterprise driven by IoT and synthetic intelligence (“AI”) technologies so that they can ultimately assist it to compete towards friends.

Zacks Rank & Key Picks

IBM presently contains a Zacks Rank #3 (hang).

greater-ranked stocks within the broader expertise sector are Western Digital WDC, Mellanox MLNX and Micron MU, every wearing a Zacks Rank #1 (potent purchase). that you may perceive the comprehensive checklist of these days’s Zacks #1 Rank shares here.

The projected lengthy-term revenue boom rate for Western Digital, Mellanox and Micron are 19%, 15% and 10%, respectively.

modern day stocks from Zacks' most Popular options

it's tough to agree with, even for us at Zacks. however whereas the market won +21.9% in 2017, their exact inventory-making a altenative on screens savor again +a hundred and fifteen.0%, +109.three%, +104.9%, +ninety eight.6%, and +67.1%.

And this outperformance has not simply been a fresh phenomenon. through the years it has been remarkably consistent. From 2000 - 2017, the composite every year accustomed gain for these techniques has overwhelmed the market more than 19X over. maybe much more outstanding is the indisputable fact that we're willing to partake their latest shares with you without can saturate or obligation.

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Story continues


IBM Maximo provider Request | killexams.com existent Questions and Pass4sure dumps

IBM Maximo service Request (service Request) app offers a platform for getting into provider requests into IBM Maximo Asset management. service Request is commandeer with IBM Maximo any Place 7.6.2.x.

clients can talk or sort a description of the request, and enter a Place and an asset for the request. they can additionally view the requests that they created which are at the jiffy unresolved that will comply with up on these requests. Contact your IBM Maximo any Place administrator earlier than using this software.


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International commerce Machines Corporation (IBM) Q2 2018 Earnings Conference convoke Transcript | killexams.com existent questions and Pass4sure dumps

Image source: The Motley Fool.

International commerce Machines Corporation (NYSE: IBM)Q2 2018 Earnings Conference CallJuly 18, 2018, 5:00 p.m. ET

Welcome, and thank you for standing by. At this time, bar not anything participants are in a listen-only mode. Today's conference is being recorded. If you savor any objections, you may disconnect at this time. Now I will circle the meeting over to Ms. Patricia Murphy with IBM. Ma'am, you may begin.

Thank you. This is Patricia Murphy, Vice President of Investor Relations for IBM, and I'd relish to welcome you to their second quarter earnings presentation. I'm here today with Jim Kavanaugh, IBM's Senior Vice President and Chief pecuniary Officer.

Our prepared remarks will exist available within a brace of hours, and a replay of the webcast will exist posted by this time tomorrow.

I'll moreover remind you that inevitable comments made in this presentation may exist characterized as forward looking under the Private Securities Litigation Reform Act of 1995. Those statements involve a number of factors that could cause actual results to vary materially. Additional information concerning these factors is contained in the company's filings with the SEC. Copies are available from the SEC, from the IBM web site, or from us in Investor Relations.

Our presentation moreover includes inevitable non-GAAP pecuniary measures, in an worry to provide additional information to investors. bar not anything non-GAAP measures savor been reconciled to their related GAAP measures in accordance with SEC rules. You will find reconciliation charts at the cease of the presentation, and in the figure 8-K submitted to the SEC.

So, with that, I'll circle the convoke over to Jim.

James J. Kavanaugh -- Senior Vice President and Chief pecuniary Officer

Thanks Patricia, and thanks to bar not anything of you for joining us.

In the second quarter, they delivered $20 billion of revenue, $3.4 billion of operating pre-tax income, and $3.08 of operating earnings per share. Overall, it was a first-rate quarter. They grew revenue, operating grievous profit, pre-tax income, and earnings per share, with strong pre-tax margin performance. Their revenue was up 4% as reported, with growth in bar not anything four of their major segments, and their constant currency revenue growth was 2%. This is their best constant currency growth in 7 years. And their pre-tax income was up 11%, reflecting first-rate operating leverage on net revenue growth.

Looking at their performance at constant currency, the revenue trajectory improved in both services segments, and both returned to modest growth. This is Important to their overall revenue growth profile, as services represents about 60% of their revenue on an annual basis.

In Cognitive, they had first-rate performance in analytics, and in their industry verticals driven by pecuniary services and IoT. Growth was mitigated by the same three areas I told you about on their terminal call, as they continue to focus on repositioning these offerings. And they had strong performance and gained partake in their Systems business, which was up over 20% with growth across bar not anything three hardware platforms.

Across their segments, they had continued momentum in their strategic imperatives revenue. Over the terminal twelve months, their strategic imperatives revenue has grown to $39 billion, which represents 48% of IBM's revenue. And within that, cloud is now $18.5 billion.

Our strategic imperatives revenue in the quarter was up 15%, and accelerated to 13% at constant currency. Revenue performance this quarter was led by Security and Cloud. Security was up about 80% this quarter, driven by strong exact for the pervasive encryption of IBM Z and growth in their integrated software and services business.

Cloud revenue was up 20%, or 18% at constant currency, driven by their as-a-service offerings. We're exiting the second quarter with an as-a-service annual hasten rate of over $11 billion, which is up about 25%. This reflects their success in helping enterprise clients with their journey to the cloud and we're becoming the destination for mission-critical workloads in hybrid environments. We're capturing this high-value growth with their unique differentiation of innovative technology combined with deep industry expertise, underpinned with trust and security bar not anything through their integrated model.

You saw that this quarter in a long-term partnership with the Australian government valued at about $740 million to automate and digitize government services, leveraging IBM's systems, software and cloud-based solutions. They expanded their work at Crédit Mutuel, who is using the IBM Cloud, security, IBM Z, and Watson to drive its next wave of transformation across its commerce lines. They delivered the world's most powerful supercomputer to the U.S. Department of Energy. They had competitive cloud wins at leading companies relish ExxonMobil, Amtrak, and Telefónica de España.

We signed a deal with Anthem, where we'll animate them drive their digital transformation to deliver an enhanced digital suffer for millions of health draw consumers. And in total, they signed 13 services deals over $100 million this quarter. These are just a few of the modern client engagements that will play out over the coming quarters and years, and putting this together with their first half performance, they continue to hope to deliver at least $13.80 of operating earnings per partake for the year.

Before getting into the particular pecuniary metrics, I want to provide a perspective on the drivers of their operating earnings-per-share growth for the quarter. What it shows is they delivered 5% growth, despite a significant tax headwind. So, let me smash it down.

Our 4% revenue growth contributed $0.10 of earnings-per-share growth at constant margin. They realized first-rate pre-tax operating leverage on that revenue growth, with 11% growth in pre-tax income, and they expanded their pre-tax margin by 110 basis points. About two-thirds of that pre-tax income growth came from grievous profit dollars, which were up 2%, driven by profit growth in Global commerce Services and Systems.

Gross margin was down 60 basis points year-to-year. About half was due to merge and half from the continued investments we've been making to build out their IBM Cloud. Productivity was fairly neutral to the year-to-year grievous margin dynamics in the quarter, and as they discussed terminal quarter, the capitalize from actions they took earlier in the year will ramp up in the second half. The remaining third of the pre-tax income growth came from efficiencies we've been driving in their expense structure. And then, as I said, tax was a significant headwind, driven primarily by a discrete tax capitalize terminal year.

Finally, a lower partake count contributed to growth. Putting it bar not anything together, they delivered the 5% growth, with first-rate contribution from revenue, pre-tax margin expansion, and to a lesser extent, partake repurchases.

Looking at their key pecuniary metrics, as I said, revenue is up 4%. Currency contributed 2 points, which is about half the contribution based on the spot rates at the time of their first quarter earnings call. And I'll remind you, the significant volatility in currencies has implications across the income statement, not just revenue.

Constant currency revenue was up 2%, which is essentially bar not anything organic. I'll talk to revenue on a constant currency basis going forward. Their revenue growth was broad based across geographies and sectors. They had growth in more than 60 countries, representing over 80% of IBM's revenue. EMEA growth accelerated to 4$, led by Germany, the U.K., France and Spain, with pervasive growth across commerce areas.

Looking at their operating pre-tax income growth of 11%, I said that about one-third of that was from operating expense, which was better by 2%. This includes a 2-point impact from currency, which is significantly less than the first quarter impact due to the dollar strengthening. And so their ground expense was better by 4%.

As they continue to invest to build their innovation pipeline in areas relish AI, and security and blockchain, we're moreover realizing acquisition synergies and driving operational efficiencies by streamlining their management system, scaling Agile, and implementing modern ways of working. I talked about some of these in their webcast back in March, and we're seeing the capitalize not only in improved hurry and responsiveness, but moreover in a more efficient structure.

Within expense, they moreover absorbed a lower even of IP income which was down $115 million year-to-year in the quarter, and about $240 million in the first half. Their operating tax rate of 16% was up nearly 7 points, with just over a point from the underlying rate, and the poise from terminal year's discrete tax benefits of $170 million.

Looking at the cash metrics, they generated $1.9 billion of free cash rush in the quarter, and $3.2 billion in the first half, which is down $400 million year-to-year. Their solid working capital performance was more than offset by a cash tax headwind and growth in capital investment, consistent with what they discussed earlier in the year. Remember, there's a lot of seasonality in their cash generation, and over the terminal 12 months we've generated $12.6 billion, that's 111% of GAAP net income.

Now, turning to their segments. Cognitive Solutions had $4.6 billion of revenue, which was down 1% at constant currency. They had continued growth in their as-a-service revenue, exiting the quarter with an annualized hasten rate of $2 billion. Within Solution software, we're scaling modern platforms and solutions, with growth in several key areas. I'll denomination a few.

Growth in their underlying analytics platform was led by the DB2 portfolio, their data science offerings, and their modern IBM Cloud Private for Data offering, which makes data ready for AI across bar not anything clouds.

In their Watson platform, the AI platform for business, growth reflects strong exact for their modern virtual second offering with triple-digit growth in their conversation service usage. Clients using Watson second include Bradesco, Orange Bank, Autodesk, Royal Bank of Scotland, Vodafone, and LivePerson, to denomination a few. Watson is both a platform on its own and a driver of growth and differentiation in several of their industry verticals.

Our industry verticals continue to scale, led by IoT and Watson for pecuniary Services. IoT growth was driven by Maximo, which is the No. 1 asset management solution, and Tririga, the No. 1 facilities management solution. pecuniary Services reflects strong performance in their Risk and Regulatory commerce and pecuniary Crimes portfolio, leveraging their Promontory skills and AI technologies. In Watson Health, they had first-rate performance in areas relish Payer and Life Sciences. And in emerging areas relish blockchain, we've now seeded the market with over 60 energetic blockchain networks.

This quarter they launched We.trade with 9 great banks, including Deutsche Bank, HSBC, KBC and Natixis. This is the first live blockchain-based, bank-to-bank trading platform. Growth in these areas is offset by a transition in some areas I talked about in April, specifically talent, collaboration and commerce, which today are a combination of on-prem and SaaS offerings. They are modernizing their offerings and making investments to address the secular shifts in the market. hold in mind, the time to value of these investments is longer in SaaS.

Our Transaction Processing Software was down 2%, driven by declines in storage software. Within TPS, they had growth in IBM Z middleware and Power middleware. Looking at profit this quarter, they grew pre-tax income 9% and expanded pre-tax margin by over 2 points year-to-year, driven by operational efficiencies and acquisition synergies, while continuing to invest at lofty levels in key strategic areas such as AI, Security and blockchain.

Before getting into Global commerce Services, let me give you a perspective on their total services business, across the two segments. They continue to execute first-rate progress. Their services signings grew, the year-to-year services backlog trajectory improved from terminal quarter, services revenue returned to growth, and they had a modest improvement in the year-to-year services grievous margin trajectory.

Our signings were up 6%, and within that, they had 13 deals over $100 million. So, we're clearly winning in a competitive environment. We're addressing the fundamental shifts in the industry, relish helping clients implement hybrid cloud, and managed security services. This is driving a shift in their backlog content, with nearly 30% of their outsourcing backlog now in Cloud. And then looking at the services grievous margin, it was down just 25 basis points year-to-year. I'll remind you again that they savor most of the benefits from the first quarter productivity actions quiet ahead of us.

So now let's pick up into the two segments. Global commerce Services returned to modest revenue growth, increased grievous profit dollars, and expanded grievous margin. We're realizing the improved revenue trajectory from the run-out of their opening backlog for the year. Their Strategic Imperatives revenue grew 6% with strong performance in the as-a-service offerings, which were up 25%.

We savor talked about how they savor realigned their exercise model around three growth platforms -- Digital Transformation, Cloud Application and Cognitive Processes. While bar not anything are progressing, they savor particular force in Digital, which again grew strong double digits. This was driven by Digital commerce Strategy and by their mobile offerings.

Across these platforms, Consulting revenue growth accelerated to 4% year-to-year, led by their offerings in Digital and Cloud. Their GBS Consulting exercise brings commerce expertise together with technology expertise to unlock value for their clients. For example, this quarter, IBM Digital and Mediaocean launched a blockchain consortium comprised of leading advertisers and publishers, including Kellogg, Unilever, Kimberly Clark, and Pfizer, to set the modern industry touchstone for the digital ad-buying ecosystem.

We're continuing to invest, recently announcing the acquisition of Oniqua Holdings, which adds technology and professional expertise in asset optimization. This strengthens their integrated IoT platform across Cognitive Solutions and GBS.

Application Management Services revenue was down 3%, reflecting continued declines in traditional Enterprise Application managed services. We're growing in strategic offerings relish Cloud Migration Factory and Cloud Application Development. The increased exact in these areas has led to two consecutive quarters of double-digit signings growth in Application Management.

Turning to grievous profit, GBS' grievous margin grew 130 basis points year to year. They savor done a lot of work to transform their portfolio and reposition their offerings to capture improved expense for value, and they are moreover starting to perceive early contributions from their productivity actions around labor models and structure.

In summary, GBS delivered a solid quarter and they are starting to perceive the realization of their initiatives in their results.

In Technology Services and Cloud Platforms, revenue returned to growth. Similar to GBS, this performance was driven primarily by their improved opening backlog run-out dynamics. The strategic imperatives revenue in the segment grew 24%. This was led by Cloud, which grew 27% and their as-a-service revenue grew 30%, which is up about 6 points sequentially and is now at an annualized hasten rate of $7.6 billion.

Infrastructure Services revenue growth improved to 1% this quarter, as they continue to animate clients on their journey to cloud. The IBM Cloud enables clients to migrate, modernize and build modern cloud apps, is AI-ready, and secure to the core. This quarter they completed the migration of Westpac's core banking applications to the IBM Cloud. It's just one specimen of how we're becoming the go-to destination for mission-critical workloads on the cloud.

We're continuing to build capabilities, recently announcing an expansion to 18 availability zones for the IBM Cloud across the world. The expanded global footprint is Important as clients scrutinize to maintain control of their data as they implement hybrid, especially given the increased data regulations.

In Technical advocate Services, revenue was down 4%. As is always the case with a Z launch, we're seeing a short-term impact in their maintenance stream, as IBM Z sales prance clients from maintenance to warranty for the first year. The impact to maintenance is becoming more pronounced now, with the higher adoption rates by existing clients in the strong current Z cycle. This impact was moderated by continued growth in their multi-vendor advocate offerings.

Integration Software grew 1%. They had first-rate performance in offerings that modernize applications and enable cloud adoption. This includes offerings relish IBM Cloud Private, which helps clients to develop cloud indigenous applications behind their firewall. We've added 100 modern clients in the second quarter, and now savor over 300 clients since the product was announced at the cease of terminal year.

Turning to grievous profit, margin for the segment was down a point from terminal year. The majority of this decline was driven by the revenue merge away from higher margin TSS in the quarter, with the comfort driven by the continued scale out of their Cloud. They did savor some productivity benefits, but as I said earlier, the actions they took in the first quarter will defer predominantly in the back half of the year.

In Systems, they grew revenue again, as they continue to deliver innovative technologies that address today's most synchronous workloads. bar not anything three brands, IBM Z, Power, and Storage grew, and they gained partake overall. In the second quarter, IBM Z grew revenues by 112% year-to-year on nearly 200% MIPs growth, again driven by modern workload MIPs. The Z14 adoption remained broad-based, and after four quarters, continues to track ahead of the prior program. The value prop benefits existing IBM Z clients who are growing and expanding workloads on Z14 this quarter, whether it's eCommerce sales, mobile banking volumes, machine learning, or emerging blockchain services. And we're adding modern clients from bar not anything corners of the globe, from a managed custody provider in the U.S., to a university in Canada, to an electronics distributor in Italy, to a bank in Africa. They moreover had first-rate acceptance of their modern single-frame Z14 designed specifically for cloud environments, which launched earlier in the quarter.

Power revenue was up 4% driven by adoption of their modern POWER9 entry even portfolio, and continued growth in Linux. These cloud-ready systems provide leadership capabilities in advanced analytics, cloud environments and data intensive workloads in AI, HANA, and UNIX markets. They continued to roll-out their supercomputers at the U.S. Department of Energy labs. As a portion of their deployment, the U.S. government recently unveiled POWER9-based Summit, the world's most powerful supercomputer, which is ranked No. 1 in the TOP 500 list of commercially available computers. This is the first time in over 5 years that a U.S. company topped the list.

Storage hardware returned to growth this quarter, after facing some sales execution challenges in a competitive market terminal quarter. This growth was broad-based geographically, and led by strong growth in bar not anything twinkle Arrays. twinkle grew double digits across the portfolio, and took share. They are coming out with modern offerings, including a modern mid-range FlashSystem announced terminal week, with industry-leading performance technology.

Turning to profit, Systems pre-tax income was up about $275 million year to year, and pre-tax margin was up over 10 points, so solid performance.

Moving on to cash rush and the poise sheet, in the second quarter they generated $2.9 billion of cash from operations excluding their financing receivables, and $1.9 billion of free cash flow. And, so, in the first half, they generated $3.2 billion of free cash flow, which is down $400 million from terminal year. This reflects solid working capital performance, offset by a $300 million increase in capex as they build out global cloud data centers, and $700 million more of cash tax payments. We've now got the entire cash tax headwind that they hope for the year behind us.

Looking at uses of cash for the half, we've returned $4.6 billion to their shareholders. In April, they again raised their dividend, and with that we've now tripled their dividend per partake over the terminal decade. In the first half, they bought back nearly 12 million shares, ending June with 913 million shares outstanding and $2 billion remaining in their buyback authorization.

Looking at the poise sheet highlights, their cash and total debt levels are pretty consistent with terminal June. About two-thirds of their debt supports their financing business, which is leveraged at 9 to 1, and the majority of their financing receivables, 54%, are at investment grade, which is 2 points better than this time terminal year. So, their poise sheet remains strong, with plenty of flexibility to advocate their investments and shareholder returns over the longer term.

In summary, their performance this quarter underscores the extent to which they savor repositioned their commerce over the terminal several years. As I said, nearly half of their revenue is aligned to the strategic imperatives, which picture the emerging, high-value, high-growth segments in their industry. This moreover reflects a major portfolio shift for IBM, driven, as they discussed at their investor webcast in March, by major shifts in their capital allocation and investment strategy.

Those shifts reflect their vision of what clients would value in a rapidly reordering IT industry, driven by Cloud, Data, and AI. And that is innovative technology in key emerging areas, the expertise to apply that technology in industry-specific processes and workflows, and a commitment that their enterprise data would exist handled responsibly. This is IBM's differentiation, and we're seeing it forward through in their revenue and profit performance.

This quarter, they delivered 2% constant currency revenue growth, 11% operating pre-tax income growth, and 5% earnings-per-share growth, capping off a first half where they moreover grew revenue, operating profit, and earnings per share.

As always, they savor some tailwinds and headwinds as they prance into the second half, but with this performance, and their continued focus on driving consistent operational execution, they continue to hope to deliver at least $13.80 of operating earnings per share, and free cash rush in the compass of $12 billion.

And with that, let me circle it back to Patricia for mp;A.

Patricia Murphy -- Vice President of Investor Relations

Thank you, Jim. Before they originate the mp;A, I'd relish to mention a brace of items. First, they savor supplemental charts at the cease of the glide deck that provide additional information on the quarter. And second, as always, I'd quiz you to forbear from multi-part questions.

So, operator, let's tickle open it up for questions.

Questions and Answers:

Operator

Thank you. They will now originate the question-and-answer session of today's conference. If you would relish to quiz a question, tickle press * followed by the number 1. Their first question comes from Wamsi Mohan from Bank of America Merrill Lynch. tickle travel ahead.

Wamsi Mohan -- Bank of America Merrill Lynch -- Analyst

Yes, thank you. Jim, you saw some constant currency deceleration in Cognitive revenues but PTI margins improved nicely. You alluded to a few factors in there. I was wondering if you could provide some more granularity on the drivers of that PTI margin expansion between the operational efficiencies, the acquisition synergies that you alluded to [inaudible] investments, and second, your ground expanse decline was quite significant in the quarter. Can you talk about the trajectory of that in the second half, especially given some of the cost actions that you said are yet to exist reflected? The cost actions that you took in 1Q that savor yet to exist reflected in the back half. Thank you.

James J. Kavanaugh -- Senior Vice President and Chief pecuniary Officer

Sure, Wamsi. Thank you very much for the question. Let me address the Cognitive Solutions segment first and talk about constant currency and then pick up to the operating leverage component. Then I'll address your expense question next. Cognitive Solutions, first of all, as you bar not anything know, their pecuniary model for the Cognitive Solutions segment is to deliver growth and moreover deliver operating leverage consistent with that growth. What we've been seeing over the terminal brace quarters as we've been driving the acquisition integration synergies across their business, we've been seeing that operating leverage well in forward of their actual revenue growth within that segment.

We've moreover been driving operational efficiencies and synergies around redefining how they accomplish work, redefining development optimization, applying Agile methodologies, and getting better speed, responsiveness, cycle time, and throughput and output within their organization. So, we're getting more value for dollar of spend overall. You perceive that play out in operating leverage in that segment in the first quarter and you've seen it play out in the second quarter, with strong profit growth of 9% on that constant currency revenue growth. So, they continue to hope that they prance forward and we'll continue to leverage and pick up value out of that commerce overall.

In terms of expense dynamics, you heard in the prepared remarks their operating expense was better by 2%. But there are many different components within that operating expense 2% better. First and foremost, currency had impacted their operating expense by 2 points. I will bid you that was about half of the impact or even a exiguous bit less than half the impact than they expected 90 days ago, just given the volatility of what's been happening in the FX markets, in particular around the U.S. dollar appreciation.

So, the terminal brace quarters, currency is impacted by expense by 4 to 5 points. Now, it was only a 2-point impact. So, their ground productivity was about 4% better. That is being driven, as they continue to drive the operating leverage through their enterprise productivity initiatives around reinventing IBM and how they actually accomplish work. Changing their management system, addressing their structure, attacking cost and complexity, aligning determination rights, and driving accountability.

So, that 4% is a ground even of productivity that we're driving and they hope that going forward. Then I'll just add one other point. That is on IP income. You perceive through the second quarter their IP income was down by over $100 million, $115 million, I cogitate to exist exact. Through the first half, it's down nearly $250 million overall. So, they continue to leverage and monetize the value of their research and development spending, and they continue to invest in those areas and we'll opportunistically optimize that through many monetization models, but IP birthright now is down $115 million. When you bring bar not anything that together, it's delivering substantial operating leverage to their business, as you perceive here in the second quarter.

Patricia Murphy -- Vice President of Investor Relations

Thanks, Wamsi. Can they travel to the next question, please, Anne?

Operator

Thank you. The next question comes from Steve Milunovich of UBS. Your line is now open.

Steven Milunovich -- UBS Securities -- Analyst

Thank you very much. A objective amount of your growth in revenue and even pre-tax profit came from the hardware area. What are you expecting in second half mainframe compares? Are they going to exist down year-over-year in the third and then down pretty severely in the fourth? And then just to succeed up on your currency comments, I assume you're losing about $2 billion of revenue in the second half relative to what you expected back in April. savor you taken actions to compensate for that to pick up to your $13.80, to pick up to your $12 billion of free cash flow?

James J. Kavanaugh -- Senior Vice President and Chief pecuniary Officer

Thank you, Steve. Many questions there. Let me Take each one individually. First of all, yes, they had a very strong systems quarter overall. Both on revenue and on operating leverage, where they grew pre-tax income over 10 points year-over-year. But let's Place the quarter in perspective. They delivered 4% revenue overall, 2% at constant currency. It was their strongest constant currency revenue growth rate in over 7 years. It was led by their continued acceleration and their strategic imperatives, which were up 15% at actual, 13% at constant currency. That was an acceleration from the first quarter and within that, their cloud business, $18.5 billion, up 23%.

Our adds to service annualized hasten rate now over $11 billion. That's up 24%. Their services businesses returned back to growth at constant currency. Both GBS, which had a much quarter, and TS and CP. But even if you Take their systems commerce into your question around mainframe, and if they Take mainframe out, you would perceive those same dynamics in the quarter-to-quarter acceleration of their strategic imperative commerce and as you bar not anything know, in their adds to service acceleration of over $11 billion, growing 24%, that doesn't savor any systems commerce within it.

The terminal point I'll bring up around top line and then I'll pick up to your other questions, they had broad-based geographic and sector growth across their business. Probably the best breadth and growth across the number of countries that we've had in quite a era of time. 60+ countries grew at constant currency and that represented over 80% of IBM's revenue.

If you extract out the mainframe cycle, they quiet had over 60 countries that actually grew. Those are great countries relish Japan, relish U.K., relish Germany, France, Spain, Australia. Many which are not mainframe dominant. So, they perceive continued momentum. Now, with regards to mainframe. I'm not going to apologize. This is the most enduring platform that you've seen out there and they continue to capitalize on gaining new, emerging workloads onto that platform.

We delivered substantial growth in the second quarter, over 100% growth. They tripled their installed MIPs inventory that they ship. We're capturing over 60% of that MIP ship is in specialty workloads. So, through the first four quarters -- now is the pertinent time to savor the discussion -- through the first four quarters, they are well in forward of what the prior cycle was.

With regards to your question about second half, I would hope that to continue in the second half as they prance forward. They know in the fourth quarter that we've got a tremendous compare and I talked about that 90 days ago. They will savor an impact, but we've got momentum in their services businesses returning the growth and, as you know, that's 60% of their commerce overall.

Now, with regards to currency. I'm joyful you brought that up. We've seen stagy volatility over the terminal 90 days since their terminal earnings call. To Place it in perspective, they had stated here 90 days ago that they expected about a 4-point tailwind in the second quarter coming off of a 5-patient tailwind in the first quarter and you perceive that only ended up being a exiguous bit over 2 points of a tailwind in the second quarter, as the U.S. dollar appreciated significantly against most currencies.

Now, when they scrutinize at the second half, they perceive about a 1 to 2-point headwind. Currency will flip. That's about somewhere in the neighborhood of $1.5 billion, including second quarter's $400 million that I talked about. Now, with that said, currency, you understand the top line dynamic of revenue. But currency moreover impacts margins, and they impact expense. From a margin perspective, if you scrutinize at, we've got two different businesses. We've got product-based businesses and we've got services-based businesses. On product-based businesses, you don't savor a direct alignment of your sources of revenue and your sources of cost. So, that translation revenue impact that you perceive in their product-based businesses, the hardware, software, and services, you will perceive a grievous margin impact on that at the GP line.

Services where you savor a much more alignment of source of revenue and cost, you savor basically a natural hedge. You won't perceive a grievous profit impact on that revenue translation. But as you bar not anything know, they drive a hedging program to mitigate the exotic exchange volatility at a profit level. Why? Because it gives us time to adjust their pricing terms, their structure, and their sourcing strategies. So, at a PTI level, you perceive a very de minimis impact in period. Hedging doesn't eliminate, it only defers it. But at a profit level, it's a very de minimis impact, but it impacts the P&L differently as they prance forward.

Patricia Murphy -- Vice President of Investor Relations

Okay, Steve. Let's travel to the next question, please.

Operator

The next question comes from Katy Huberty of Morgan Stanley. Your line is now open.

Katy Huberty -- Morgan Stanley -- Managing Director of Research

Thank you. first-rate afternoon. Jim, as was mentioned in an earlier question, investors are certainly worried about the tougher comps in the back half of this year and the 2% growth was a nice dumbfound this quarter, but you're not quite at consistent and meaningful growth across the businesses. And so my question is whether you and the comfort of the management team would respect stepping up either M&A or divestitures to more meaningfully remix revenue and set the company on a path and a narrative around much more meaningful and sustainable growth?

James J. Kavanaugh -- Senior Vice President and Chief pecuniary Officer

Katy, thanks for the question overall. As you stated, they delivered a very solid quarter at 2% constant currency. I would bid you it's their third straight quarter of growth overall with an acceleration in terms of breadth and depth across geographies, across sectors, and across countries around the world.

But let's Take a scrutinize at their portfolio. First and foremost, they are very confident in the portfolio lineup that they savor here today around each of their segments. They talked about, at their investor day, the value differentiation of IBM. That value differentiation is built around innovative technology, around deep industry expertise, and around trust and security. bar not anything delivered through an integrated model.

If you Take a scrutinize at it, they talked about the key value differentiators as they prance forward. The value of bringing that together, I cogitate you're seeing substantiated now here in the second quarter, with very strong growth overall in their systems platform, in the jiffy they play to their infrastructure, in their integrated model. You perceive their services ground of businesses continue that trajectory improvement that they talked about starting in January of this year. They improved in the first quarter and now we've got both businesses back to growth and they delivered double-digit signings at actual rates in the first half, which positions us well as they prance forward.

But you know their motto overall, we've done a lot of work around remixing their capital and investments to build out the portfolio that they savor today. We're very disciplined in their capital allocation strategy. They said 70% to 80% of that capital and investment is going to travel back to their shareholders in the figure of partake buy-back and dividend and you saw us raise their dividend here in April this year. Their 23rd straight year. But the comfort is for us to exercise internally to build out their differentiated capability around investments in R&D and capital to drive leadership in AI, leadership in blockchain, leadership in security, and leadership now in quantum as they prance forward.

But acquisitions are an integral part. We're going to continue to evaluate their portfolio and how they capitalize the value of those acquisitions in light of the integrated, differentiated strategy of the IBM company going forward.

Patricia Murphy -- Vice President of Investor Relations

Thank you, Katy. Let's travel to the next question, please.

Operator

Our next question is from Toni Sacconaghi of Bernstein. Your line is now open.

Toni Sacconaghi -- Bernstein -- Analyst

Yes, thank you. I'm wondering if you could remark a exiguous bit more about the dynamics affecting Cognitive Solutions' revenue growth. It was down at constant currency versus a pretty effortless comparison. It's the commerce that has the highest percentage of strategic initiatives in it, so it's obviously very Important for you. Can you maybe remark specifically on what's happening with Watson Health? There were lots of press reports about the significant retrenchment in that business.

And I know you said the acquisitions Take time, but you've had them bar not anything for at least a year. And so maybe you can remark on why you cogitate they haven't seen better revenue progress or what specifically happened this quarter.

Then very quickly, if you could just confirm, you talked about flattish grievous margins for the year. You're down in each of the first two quarters year-over-year, so should they exist expecting grievous margins to exist up about 50 basis points year-over-year in the second half to hit that bogey of flattish?

James J. Kavanaugh -- Senior Vice President and Chief pecuniary Officer

All right, Toni. There's a lot to exist compacted in a multiple-part question. But let me try to address each piece. We'll start with Cognitive. In terms of their Cognitive Solutions, they savor a strong portfolio in the key strategic areas around analytics, around industry verticals, around security and around IoT and they continue to perceive first-rate performance overall. But I'll remind you, this portfolio is a lofty annuity content. Over 80% of the commerce is annuity, with strong renewal rates. They continue to drive but that SaaS has a longer time to value, a longer time to realization.

But let me unpack the segment because you've got to understand the piece parts, because they each meet different purposes within the overarching IBM strategy in purpose. One is around TPS. TPS declined 2% overall and it's about what they would hope in this area. You've even commented on this the terminal brace quarters. We've been riding the wave of the mainframe product cycle over the terminal three quarters and saw pretty first-rate growth that was unusual. Now, we're back to down 2%. This is high-value, high-profit, strategically Important to their clients overall, but it's in stable to declining businesses and it wasn't unexpected.

When you scrutinize at their software solution portfolio, we've got growth in analytics as they revamp that portfolio coming off of a pretty disappointing fourth quarter. They grew in first quarter, they much again in second, and they got good, double-digit growth in their industry verticals relish pecuniary services and IoT and we're seeing first-rate growth in Watson Health. We've got growth in Life Sciences segment, Imaging, Payer, and we're seeing first-rate SaaS signings in their Government segments within that business.

Yes, they are driving acquisition synergies and you're seeing that play out. It's well in forward of a year. And you're seeing net operating leverage play out well in forward of their pecuniary model around Cognitive Solutions. So, transaction processing software pretty much as expected, high-value based markets, software solutions, the key strategic areas that they savor are growing. The focus that we've got, and they talked about this 90 days ago, are in three key segments around talent, around collaboration, and around commerce, where they are investing to modernize their portfolio to address the secular shifts that are happening in both client value and in consumption models.

As you know, this commerce today in these three segments are both a mixture of on-prem and SaaS. They are investing aggressively to revitalize this portfolio into a SaaS world around driving user interface improvements to execute their offerings more digitally consumable, and moreover about shifting and investing to embed AI to deliver differentiated value for their clients overall. So, that's Cognitive Solutions.

Now, you asked about grievous profit margins. So, let me Take a step back and give you my perspective. Now that I've been on the job six months as CFO of IBM and I've spent a lot of time with their investors and moreover with many of you, the sell-side analysts, listening and moreover getting a perspective of their company, the sentiment, and the strategic positioning and what you would relish to see. In each of those inevitably, the discussion around margin comes up. Why? Because yes, they are a value-based stock. Their investment thesis is around value. Value driving profit growth at the cease of the day that gives us the free cash rush flexibility to continue to recur value to their shareholders and invest in their business.

But the discussion around grievous profit margins always inevitably pick up at Services. Is Services deflationary and can you grow Services margins? I would bid you I cogitate that's at the heart of your question around grievous profit. I'll acknowledge it in a brace ways. One, talking about their pecuniary model, and two, talking about how they manage the business. But before I pick up into that, first and foremost, the net acknowledge is as I stated 90 days ago, they hope their Services grievous margin to expand in the second half and they quiet feel confident coming off of the trajectory improvement of what they saw in the second quarter really led by strong margin expansion in their GBS commerce and the productivity actions they savor in front of us.

But when you scrutinize at this from an overall IBM perspective, their pecuniary model, as they talked about, is low single-digit revenue growth, mid single-digit profit growth, and lofty single-digit EPS growth. In 2Q, you saw the instantiation of delivering that model. They grew revenue. They had PTI margin expansion of 110 basis points; the strongest we've had in years. And they drove operating leverage to deliver 11% profit growth, well in excess of their model.

So, for a full-year perspective, their view at an operating even in terms of profit growth has not changed. We're going to grow profit, we're going to grow PTI margins, and that supports their full-year guidance.

Now, let's talk about how they manage the business. Because I cogitate it's Important for their investors and it's Important for each of you as analysts to understand this. No. 1, they got two distinct, different commerce models in their company. They got a product-based commerce model and they got a services-based commerce model. In a product-based commerce model, hardware, software and solutions, value is instantiated in delivering returns at a PTI level. Why? Because bar not anything the investment they execute in a product-based commerce ends up below the grievous profit margin line. And you perceive in their product-based commerce systems and Cognitive Solutions, we're growing substantial operating leverage and we're growing substantial recur on investment.

Now, in services, as I said 90 days ago, in a human capital-based business, value is instantiated in grievous profit margins. They manage their services commerce to pick up a recur on their human capital at the grievous profit level. As I said, as a grievous profit even in services, they quiet hope to expand margins in the second half. The only thing that has changed in the terminal 90 days has been the extreme volatility in the FX world around the U.S. dollar appreciation. As I stated earlier, they savor a hedging policy that mitigates the volatility of currency inter-IME at a profit level, but it does impact grievous margins, in particular at a product even in their product-based businesses. It does not impact profit in the near-term. It allows you time to then travel adjust your pricing terms, your cost structure, and your sourcing strategies as they prance forward.

So, that's the only thing that's changed in the terminal 90 days. They feel confident we're going to grow revenue for the year at current spot rates, even in light of currency flipping to a headwind in the second half. They feel confident we're going to expand pre-tax margins similar to what they did in the second half. Within that, they feel confident we're actually going to deliver services grievous profit margin expansion in the second half of the year.

Patricia Murphy -- Vice President of Investor Relations

Thanks, Toni. Ann, can they tickle Take the next question?

Operator

The next question comes from the line of Tien Tsin Huang of J.P. Morgan. Your line is now open.

Tien Tsin Huang -- J.P. Morgan -- Analyst

Thanks so much. Yeah, so consulting accelerated, which is encouraging. I'm curious, is that starting to pull in some other services revenue around it or behind it? I saw or you mentioned the [inaudible] were first-rate again. So again, was it enough to drive positive effects mutual revenue growth in services for the second half? I'm just trying to piece bar not anything of those things together and cogitate about [inaudible] revenue growth for services overall in the second half.

James J. Kavanaugh -- Senior Vice President and Chief pecuniary Officer

Yeah, if you Take a scrutinize at GBS in second quarter, first of all, we're very pleased with their performance. The work that ticket and the team savor done tirelessly to transform their structure, their commerce models, their growth platforms, the set of initiatives around productivity, we're very pleased. You saw that play out in continued trajectory improvement throughout the first half, returning to modest revenue growth and significant operating leverage and margin expansion, which they hope will exist a colossal contributor in their second half services margin expansion that they talked about in the terminal question.

Now, with that said, if you scrutinize at that acceleration and what's been happening in the trajectory of their services business, first, as you bar not anything understand the dynamics of that business, you savor to pick up signings that savor to defer into backlog, which has to defer into revenue as they prance forward. We're seeing tremendous momentum in their consulting ground of business. They delivered 4% revenue growth as you stated in the second quarter, and that's leveraging momentum around how they redesign their growth platforms and how they resign their service lines and offerings and practices. We're capturing higher value. Value around digital transformation offerings that enable clients to prance their journey to the cloud as they prance forward. We're doing much in their CRM practice, their workday practice, and we're moreover capturing modern emerging areas relish blockchain, where we're seeing first-rate growth in their services ground of business.

As you know and they talked about extensively at their investor webcast in the ascend of the year, GBS has a very integral portion in an integrated model strategy in the IBM company. They savor the mission of bringing commerce and technology transformation together. So, the long acknowledge to your question around is consulting in GBS a key leading indicator of dragging the comfort of IBM? The acknowledge is definitely yes.

Patricia Murphy -- Vice President of Investor Relations

Thanks, Tien Tsin. Can they tickle Take the next question?

Operator

The next question comes from Jim Schneider of Goldman Sachs. Your line is now open.

Jim Schneider -- Goldman Sachs -- Analyst

Good afternoon. Thanks for taking my question. I was wondering if you could maybe succeed up on that prior question and talk about the aptitude of the tech services and cloud platform segment to start to recur a growth in the back half. Clearly, we're starting to pick up a exiguous bit better signings performance, but I'm wondering if that's a realistic expectation for that segment and whether you can achieve it at the same time as you're expanding margins there?

James J. Kavanaugh -- Senior Vice President and Chief pecuniary Officer

Sure, Jim. first-rate to talk to you again. Thanks for the question. Yes, on TS and CP, similar to their discussion around GBS, we're pleased with the trajectory improvement and the progress that we've been making within this commerce on the top line throughout the first half. They made sequential progress quarter-to-quarter. They savor now returned to growth, delivering $8.6 billion of revenue.

Let's talk about a brace of the key components. First, they are capitalizing on tremendous momentum around enterprise hybrid cloud strategy. They are becoming the destination of touching and enabling their clients' journey to the cloud. Their GBS commerce is an instrumental portion of that strategy as they prance forward. So, we've got a lot of momentum in their enterprise hybrid cloud. That, as you see, is delivering an as-a-service annualized hasten rate of $7.6 billion. That's up 30% year-to-year. That has tremendous value as they prance forward to continue getting scale efficiencies and the like.

But let's talk about then the core GBS commerce overall. If infrastructure services recur to growth, 1% in the growth, and it's really been built off of a very strong first half where they delivered double-digit signings growth at the GBS and TS and CP segment even and now, you saw their backlog continues to improve. Their backlog now in total is $116 billion. Within that, 30% of that backlog now is cloud, as they continue to capitalize on the secular shift and deliver more and more value overall.

Our integration software commerce has grown 1% and continues to grow through the first half. What we've got to work on, and this is portion of having an integrated portfolio and portion of having success in other areas, their TSS commerce is down 4%, but that's a office of us significantly overachieving against their terminal program, their mainframe product cycles. They perceive a deceleration in TSS, but we're seeing the offset in their systems ground of commerce going forward.

So, when you scrutinize at that trajectory improvement, they returned their backlog back to flat in the second quarter in TS and CP. And again, a lot of work ahead of us. We've got to fuel second half signings. We've got a first-rate chance pipeline, but I perceive continued trajectory improvement and then their focus on margins as they prance forward in the second half to deliver second half services grievous profit margin expansion are going to exist censorious to their guidance.

Patricia Murphy -- Vice President of Investor Relations

Thanks, Jim. Can they travel to the next question, please?

Operator

The next question comes from David Grossman of Stifel Financial. Your line is now open.

David Grossman -- Stifel pecuniary Corp. -- Analyst

Thank you. Hi, Jim. This year, you're guiding to free cash rush roughly equal to net income, which is above your longer-term target. I know it's route too early to providing 2019 insight; however, are there are factors that are driving the '18 free cash rush that may not reoccur next year or even potentially transpose that they should exist factoring into their thinking for next year?

James J. Kavanaugh -- Senior Vice President and Chief pecuniary Officer

Yes, David. Thank you very much and first-rate to hear from you again. Before I pick up to the long-term view, I exist Important I cogitate you kindly of nailed it. Let's talk about their free cash rush guidance here through the second quarter and more importantly, through the first half. First of all, they talked about entering the year that they expected $12 billion of free cash flow. That was down about $1 billion. If you remember, at that point in time, they talked about they were going to continue to invest in their commerce in terms of capital, to build out their IBM cloud architecture, and oh, by the way, in the second quarter, I cogitate you savor seen the announcement where they expanded 18 modern availability zones around the world, so they are committed to winning in the cloud space and we're investing to travel accomplish that. But they moreover said they were going to savor a significant cash tax headwind here in 2018. Then their GAAP profit, as they start turning this commerce and deliver on their at least $13.80, was going to pretty much offset their strong working capital efficiency that they exited terminal year with their mainframe cycle.

So, through the first half, they delivered $3.2 billion of free cash flow. That's down $400 million. It's Important to understand the underpinnings behind that. Within that, we've invested $300 million year-to-year, up 20% on capital already through the first half. We've had strong operational after-tax profit performance that delivered a positive contribution of $600 million to advocate that investment in capital as they prance forward. So, when you accomplish the net then, their entire year-to-year reduction through the first half is bar not anything driven by cash tax headwind. That cash tax headwind is $700 million through the first half and it's bar not anything behind us now.

So, their second half free cash flow, to your point, we've always said as a rule of thumb, free cash rush should succeed their profit levels. When you scrutinize at their realization, you perceive it playing out in their realization. We're well in excess of 100%. Their trailing 12 months is at $12.6 billion and their attainment supports that $12 billion free cash rush even as they prance forward.

So, it's too early to scrutinize at '19. We'll deliver that in January. But at least hopefully the acknowledge gives you some of the dynamics of what's playing out in free cash flow.

Patricia Murphy -- Vice President of Investor Relations

Thanks, David. Ann, can they tickle Take the next question?

Operator

The next question comes from Keith Beckman of Bank of Montreal. Your line is now open.

Keith Beckman -- Bank of Montreal -- Analyst

Thank you very much. Jim, I wanted to perceive if you could talk a exiguous bit about the durability of services. You've talked about GBS and technology and cloud outsourcing growing constant currency in the second half of the year, yet backlog, total services backlog is down 1% in constant currency. So, once you recheck growth, are you quiet calling for durable growth in those businesses, even with backlog down? Then my follow-up -- well, let me quiz my follow-up question after that.

James J. Kavanaugh -- Senior Vice President and Chief pecuniary Officer

No, why don't you quiz your follow-up question now.

Keith Beckman -- Bank of Montreal -- Analyst

Well, just within GBS. Something I wanted to forward back to, application management is quiet under pressure, as it is for most of the providers. Is that going to continue within the context of GBS or you actually perceive application management within the confines of GBS improving?

James J. Kavanaugh -- Senior Vice President and Chief pecuniary Officer

Okay, Keith. So, thank you very much for just getting it bar not anything and giving me a better perspective of the entirety of your multiple-part questions so they can Place this in perspective. So, let's talk about, I'll drive you back to 180 days ago, when they were sitting here in January. They talked about the position where they were at. They talked about what's going on with the dynamics of their backlog overall, and they talked about the backlog realization and runout that they saw over the 2018 period.

We said entering 2018, that they had much stronger backlog realization or runout, I should say, they that were starting with than they did entering 2017. You're seeing that play out as they travel through the first half, where they made sequential year-to-year improvement over the first quarter and now they circle both of their services businesses back to growth.

Now, within that, as they stated earlier, in a human capital-based services business, you've got to continue fueling those signings that delivers backlog. And more importantly, you've got to drive the birthright composition of backlog that drives your backlog realization in yield, and moreover drives duration. Obviously, what you're seeing over time is you're seeing, I think, a secular shift with respect to what's happening to duration and long-term contracts. You're not seeing that anymore.

So, we're getting higher yielding revenue. We're also, the composition of their backlog with consulting, which accelerated to 4%, that composition is much more shorter term and higher value as they prance forward. So, over the long run, you're right. You've got to continue to fuel signings to fuel that backlog, but I would bid you, outer years of 6, 7, 8, 9, 10, in today's world are much less pertinent than an in era your first year, your second year, your third year in the composition.

So, they accomplish feel confident with that trajectory improvement. They came off the first half delivering first-rate growth, double-digits and signings in the first half, and the composition of those signings, as I said, they already savor 30% of their backlog that's sitting in cloud. By the way, over 40% of their backlog is now in key, strategic, imperative workloads overall. So, that's kindly of your first question.

Your second question, AMS. They talked about AMS. Obviously, that's going through a secular shift in the industry. You're seeing that play out against bar not anything the competitors that are in the space today. But I would bid you what differentiates IBM with regards to AMS? One, it's their value of incumbency. The integrated play, the integrated model of IBM, the value of incumbency and the understanding we're in the AMS commerce is they understand their clients' operating models, their client's workloads, and their clients' commerce processes. They said entering this year that they were seeing success in us leveraging that value of incumbency to exist the destination to animate their clients with the journey to the cloud and prance to the cloud.

We're seeing that play out in the first half. We're not only in the first quarter, but moreover in the second quarter they had double-digit signings growth in their AMS commerce over time. Again, backlog yes is quiet down overall. Their revenue is down 3%, but they perceive this inflection point as they prance forward and they continue to leverage and deliver that value for their clients as they prance on their journey overall.

Patricia Murphy -- Vice President of Investor Relations

Let's travel to the next question, please.

Operator

The next question comes from Jim Suba of Citibank. Your line is now open.

Jim Suba -- Citibank -- Analyst

Thanks very much. Jim, I just savor one question for you. As you sit there in the CFO seat and you're calling now for margins to accelerate or ameliorate or expand year-over-year in the second half of the year, what are the milestones that are hitting that kindly of execute you convoke that out? The happiness behind it, the confidence. What's the milestones that they can scrutinize back and talk that made a lot of sense and it has long-term durability to it? Thank you.

James J. Kavanaugh -- Senior Vice President and Chief pecuniary Officer

Jim, thank you very much for the question. It's a first-rate question overall. If you Take a scrutinize at it, I've said from January, they obviously savor multiple scenarios. How accomplish they execute at least $13.80? What I looked at and the team, and the entire management team looks at is the trajectory of their business, the operational indices, and the drivers as they perceive going forward of headwinds and tailwinds on that guidance for their shareholders of at least $13.80.

But when you Take a scrutinize at revenue growth, I said they would savor revenue growth at current spot rates for the plenary year, and that they would savor pre-tax operating margin expansion and operating leverage in their business. So, to your question, what accomplish they scrutinize at and what are the trends that are driving that? So, let's unpack it. I've talked about this the terminal brace calls. The route I scrutinize at margin expansion really centers around three or four major areas.

No. 1, margin expansion is going to exist delivered through us continuing to leverage the momentum in their enterprise cloud and their as-a-service-based business. Why? Because it's going to generate scale efficiencies for us to deliver on what they said at their investor day, which is margin accretion as they prance through to the cloud. So, scale efficiencies, they are seeing that improvement in the first quarter. We're seeing improvement in the second quarter, and it's bar not anything being built off of the momentum around their cloud and their as-a-service-based business.

Second, they talk about mix. merge being another lever. So, you scrutinize at the merge of one within each of their segments and how we're shifting to higher value, which we're making first-rate progress. The best instantiation of that is GBS, where they're getting better expense realization and better value around remixing their offerings to sell better value. But moreover across segments, they savor a colossal merge headwind as they talked about 90 days ago, with respect to the mainframe cycle. So, they Take that into account.

The third bucket is around productivity. This is around how you transform the route you work. It's predominantly led by their services-base of business. But it's moreover about how they reinvent and how they hasten their company around their infrastructure and enterprise productivity. Both are giving us operating leverage as they prance forward. We're seeing the latter play out in their expense efficiency structure here in the second quarter and in their services-base of business, they talked about the work we're doing around their workforce optimization, the significant actions they took in the first quarter. I said it's predominantly the defer on that is in the second half. That should accelerate significantly.

But we're moreover transforming the route they actually deliver service. Redesigning it, applying Agile methodologies, infusing AI and automation, and driving a differentiated value to their clients to ameliorate the attribute in addition to the efficiently and margin.

Finally, the terminal point, which given services is 60% of their business, human capital based business, you savor to generate revenue to generate operating leverage. It's tough generating operating leverage when revenue is down. We're seeing, as that revenue trajectory improves and we're seeing as they play out here in the second quarter returning services back to growth, that we're going to pick up the operating leverage as they prance forward. That's what makes us confident in delivering at least $13.80.

Patricia Murphy -- Vice President of Investor Relations

Great, thanks. Ann, let's Take one terminal question, please.

Operator

The terminal question comes from Amit Daryanani of RBC Capital Markets. Your line is now open.

Amit Daryanani -- RBC Capital Markets -- Analyst

Thanks. joyful I made it under the line there. Maybe to start, cognitive revenue is down in constant currency in the quarter and really there's some amount of transactional commerce there, but just animate me understand what tempered the growth there and then accomplish you cogitate cognitive will actually grow in the back half of the year because your compares start to pick up fairly difficult in that commerce I cogitate in the back half of the year.

And then, Jim, just on grievous margins, what's leading you to start talking about [inaudible] aggregate total IBM grievous margins will exist flat to stable and now it sounds relish it's on the in-services, so what's the degradation in cognitive or systems that's changing that statement on grievous margins from a corporate even to only services now?

James J. Kavanaugh -- Senior Vice President and Chief pecuniary Officer

Okay, so on each of them, Amit, first of all, thanks for getting into the queue. It's first-rate to hear from you again. But on each of these, I cogitate I answered them already. But let me just give the synopsis. On cognitive, they talked about the different dynamics within their portfolio around TPS, which had been growing, leverage the mainframe cycle. Now, it's more in line with what their expectations are. In solutions software, we've got force in key strategic areas of their portfolio, analytics industry verticals, both FSS, in health, in security, in IoT, but we've got work to accomplish on modernizing those key three segment areas of talent, collaboration, commerce. And that, as those secular shifts prance much more aggressively to SaaS, that time to value gets realized over a longer era of time.

So, they accomplish they force in inevitable components. We're making investments in others to transform, as I talked about, and modernize those offerings. That will play out over time. But with that said, we've done bar not anything the work and we're driving the acquisition integration synergies, the operational efficiency savings. They feel confident even at this even of revenue they can drive operating leverage within that business.

Then finally, back to your question on margins. As I talked, first, I cogitate the route they manage this business, value is instantiated in the services-base commerce in grievous profit margin. Value is instantiated in the product-based commerce in pre-tax income because you've got to recoup the recur on investment of your go-to-market and your development. So, I would not talk I'm changing. I would talk their operating view of the year of their pecuniary model of revenue growth, of profit growth, of earnings per share, is exactly the same. The only thing that's different within that is the FX change in the terminal 90 days, with the significant U.S. dollar appreciation.

Now, they hedge. They hedge that mitigates that profit variability. But when you scrutinize at currency around the component of the I&E, you perceive how it plays out differently. That transparency and credibility is what I feel is Important for you and investors to understand, but it has no impact on their bottom line profit contribution and their delivery of their free cash rush and their at least $13.80 for the year. So, thank you, Amit.

With that said, let me wrap up the convoke where I started by saying this was a first-rate quarter. We're pleased. They had solid revenue growth and profit performance. This reflects the work we've been doing to reposition their commerce in terms of their offerings, their people, the route they work, and reinventing IBM. Now, as always, there's more work to do. I scrutinize forward to continuing the dialog over the course of the year. Thank you bar not anything for joining us on the convoke here this evening.

Patricia Murphy -- Vice President of Investor Relations

Ann, I'm going to circle it back to you to close up the call.

Operator

Thank you for participating on today's call. The conference is now ended. You may disconnect at this time.

Duration: 80 minutes

Call participants:

James J. Kavanaugh -- Senior Vice President and Chief pecuniary Officer

Patricia Murphy -- Vice President of Investor Relations

Wamsi Mohan -- Bank of America Merrill Lynch -- Analyst

Steven Milunovich -- UBS Securities -- Analyst

Katy Huberty -- Morgan Stanley -- Managing Director of Research

Toni Sacconaghi -- Bernstein -- Analyst

Tien Tsin Huang -- J.P. Morgan -- Analyst

Jim Schneider -- Goldman Sachs -- Analyst

David Grossman -- Stifel pecuniary Corp. -- Analyst

Keith Beckman -- Bank of Montreal -- Analyst

Jim Suba -- Citibank -- Analyst

Amit Daryanani -- RBC Capital Markets -- Analyst

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Half Year Results | killexams.com existent questions and Pass4sure dumps

PhotonStar LED Group Plc

 

Half year results

 

PhotonStar LED Group Plc (AIM: PSL, "PhotonStar" or "the Group"), the British designer and manufacturer of smart LED lighting solutions, announces its half year results for the six months ending 30 June 2016.

 

Operational and strategic overview

·      Paid for trials for HalcyonTM and halcyon cloudBMSTM, which are expected to lead to larger roll out opportunities, now installed and customer planning side 2 roll out discussions are taking place.

·      The first side 2 Halcyon order secured from an NHS Hospital following a successful three month on-site trial;

·      Participated at IBM Interconnect in February 2016 and previewed cloudBMSTM, which delivers Internet of Things ("IoT") edifice Management System as a Service (BMaaSTM)

·      Secure commissioning patent granted - Targeted at IoT lighting, sensors, actuators and other devices employed where security vulnerabilities must exist safeguarded

·      Established a modern Halcyon IoT team to better deliver 'turnkey' IoT lighting and cloudBMSTM solutions to customers, with additional staffing being satisfied through outsourcing arrangements

·      commerce restructuring during Q1 2016 has resulted in a significantly leaner organisation with an annualised cost saving on overheads of approximately £0.5m

 

Financial overview

•     Raised £1.00m (before expenses) of additional capital from modern and existing shareholders in March 2016 to further expand the HalcyonTM software and services offering

•     Revenues down 22% to £2.53m (H1 2015: £3.26m)

•     grievous profit margin down to 33% (H1 2015: 37%)

•     Administrative expenses down 4% to £1.76m  (H1 2015: £1.83m)

•     Adjusted EBITDA loss increased to £0.54m (H1 2015: loss £0.20m)

•     Pre-tax loss of £0.91m (H1 2015: loss £0.59m)

•     Loss per partake of 0.4p (H1 2015: loss per partake 0.4p)

•     At 30 June 2016, net debt £0.68m (H1 2015: net debt £0.67m)

•     H1 2016 Segmental revenue analysis

-    Lighting Fixtures revenues down 21% to £1.59m (H1 2015:£2.00m)

-    constrict manufacturing revenues down 32% to £0.68m (H1 2015:£1.00m)

-    Halcyon / Light engines up 6% to £0.26m (H1 2015:£0.25m)

•     Segmental Adjusted EBITDA analysis

-    Lighting Fixtures loss of £0.25m (H1 2015: loss £0.09m)

-    constrict manufacturing loss of £0.05m (H1 2015: profit £0.10m)

-    Halcyon / Light engines loss of £0.10m (H1 2015: loss £0.06m)

 

 

 

James McKenzie, Chief Executive of PhotonStar, said:

"In H1 2016, they made first-rate progress in transitioning the Group into becoming a retrofit connected lighting and edifice management business.  They savor installed a number of trials in a variety of different industry sectors and savor just received their first side 2 order from these trials.  They are therefore very pleased with the significant progress in this area of the business.

 

The traditional lighting commerce continues to exist affected by significant competitor expense reductions, resulting in a decline in revenues and increased pressure on profit margins. They savor restructured the Group in order for this area of the commerce to exist profitable at the lower revenue levels now experienced and to better deliver upon the growth opportunities afforded by Halcyon IoT projects and paid for trials which they hope will lead to the roll out of significant modern contracts.

 

Key technical demonstrations of halcyonPRO2TM and cloudBMSTM products at IBM interconnect 2016 point the route to the future of the group and its future growth."

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.

 

For further information:

 

PhotonStar LED Group Plc (www.photonstarled.com)

+44 (0)2381 230381

James McKenzie - Group Chief Executive

Northland Capital Partners

+44 (0)20 3861 6625

Patrick Claridge/David Hignell/Margarita Mitropoulou (Corporate Finance)

John Howes/Rob Rees (Corporate Broking)

 

About PhotonStar LED Group Plc

 

PhotonStar LED Group Plc is a leading British designer and manufacturer of smart lighting and edifice control solutions. The Group's proprietary technology Halcyonâ„¢ is a scalable, secure wireless IoT platform for retrofit into commercial buildings, for energy reduction, asset monitoring & control, and existent time environmental, behavioural and energy insights.

 

PhotonStar is based in Romsey, Hampshire with a manufacturing facility in Wales. 

 

  

 

Overview

 

The Group has been concentrating upon the successful delivery of the HalcyonTM product compass to customers for both one off projects and moreover for paid for trials.  The express purpose by both PhotonStar and its paid for tribulation customers is that such trials are expected to lead to material roll outs across numerous sites in many locations. They are, therefore, very pleased to exist able to report that following a tribulation lasting three months the first of these side 2 orders has now been received from a NHS hospital located in the North of England.  This order is the first of what is expected to become a roll out across the trusts hospital estate with an initial order value of £60,000.  They are in energetic discussions with their other paid for tribulation customers about touching to side 2 with them as well and so anticipate further great scale roll outs over the coming months. 

 

In order to achieve the delivery of successful trials followed by great scale roll outs across multiple sites they savor re-organised the Group from one that has been more traditionally set up to deliver touchstone lighting solutions through touchstone lighting sales channels into one that delivers HalcyonTM directly to customers with sub-contractors in Place to carry out the work and customer liaison and training being organised by PhotonStar.  They savor achieved this by creating a minute team of directly employed key staff who work with a network of sub-contractors.  This means that they are able to exist highly springy in terms of the technicians that are needed for a particular installation without incurring substantial fixed costs and overheads that would forward with these highly trained people being directly employed.  The initial paid for trials that are now installed and are being monitored by ourselves and the pertinent customer cover a wide cross section of industries and moreover a compass of project sizes.  They anticipate that in future these trials will moreover act as reference sites for modern customers so that they are able to prance more quickly from the project design side into plenary scale project delivery rather than having to install a tribulation project as an interim step.

 

PhotonStar remains heavily focused on further expanding its HalcyonTM product compass and to exercise this compass to transition itself into a Group that increasingly focuses on being a retrofit connected lighting and edifice management business, which offers the potential to address a broad compass of significant future commerce opportunities and markets.

 

The Group's proprietary technology Halcyon™ is a scalable, secure wireless IoT platform for retrofit into commercial buildings, for energy reduction, asset monitoring & control, and existent time environmental, behavioural and energy insights. The aptitude of the system to assemble and report existent time data has created significant interest from a wide compass of industry sectors which respect this aptitude as a key portion of their future needs requirements. 

 

The Board is pleased with the on-going collaboration with IBM and anticipates that this will lead to some further project work within IBM premises and moreover as a result of the steady rush of introductions by IBM to a variety of potential customers where IBM savor identified a customer requirement for cloudBMSTM.   This started at the ascend of the year with the test installation at IBM's Hursley House offices, then developed into a demonstration of the Halcyon™ smart wireless lighting system operating with the IBM Watson IoT Cloud platform to IBM® clients and partners at IBM's Global Watson IoT Headquarters in Munich, Germany and moreover attendance by PhotonStar at the IBM Interconnect Conference in February 2016, where PhotonStar previewed its cloudBMSTM, the modern cloud based solution that delivers an IoT edifice Management System as a Service (BMaaSTM). The modern solution is built on the second generation of its low cost retrofittable wireless monitoring and control platform, halcyonPRO2TM. PhotonStar moreover demonstrated the automated shading solution feature of halcyonPRO2TM at the event. This solution taps into the IBM Watson IoT Platform, taking environmental and occupancy data from the HalcyonTM sensor network, geolocation information per room and existent time weather and forecast data from The Weather Company, an IBM Business, to optimise window penumbra exercise to deliver maximum energy savings thus reducing HVAC costs by intelligently using or preventing solar heat gain and optimizing thermal, daylight and visual comfort for edifice occupants.  PhotonStar demonstrated with IBM the retrofittable asset monitoring feature of halcyonPRO2TM and cloudBMSTM, providing device health and key asset performance indicator information seamlessly to IBMs Maximo asset management package.

 

The initial development of HalcyonTM is now largely complete with current and future development work concentrating on improvements to HalcyonTM and the expansion of cloud services. 

 

We savor moreover been working to ensure that their more traditional businesses are changed in order to reflect the ever increasing competitiveness of the markets that they operate in.  This has meant that during the era under review they savor prick a significant amount of overheads out of the business.  The plenary pecuniary capitalize of this work will exist seen from October 2016 but they hope that the saving on overheads for the second half of 2016 will exist approximately £0.25m and the plenary year saving next year will exist approximately £0.5m.  Alongside the huge worry in reducing their cost ground they savor moreover re-organised the sales efforts of the businesses in order to ensure that they successfully generate revenue and at the same time to ensure that their grievous profit margins recover from the poor levels that they savor endured in the era under review.  They are starting to perceive the impact of these efforts, with grievous margins in bar not anything commerce segments now increasing again from a low for the Group of approximately 24% in January 2016 to 40% in June 2016 alongside revenue growth.  There is no doubt that the traditional lighting markets savor continued to exist highly competitive with constant downward pressure on prices.  In addition the recent increased volatility of exchange rates has meant that their costs of imported goods savor become harder to forecast.  They accomplish believe however that they are much better placed to generate positive results in terms of increased revenues, better grievous margins and a positive contribution to the EBITDA result in the second half of this year and into 2017.

 

On 25 February 2016 it was announced that the Group had conditionally raised grievous proceeds of £1.00m (before expenses) by route of a placing of 38,000,000 ordinary shares of 1p each and a subscription of 2,000,000 ordinary shares of 1p each at a expense of 2.5p per share. The funds raised savor been used to complete the HalcyonTM development work and to provide the capital required for on-going software and product expansion together with HalcyonTM channel and brand development.  The Board welcomes the modern shareholders and thanks existing shareholders for their continued advocate to the Company.  The net funds raised will moreover exist used to capitalise on the significant investment that has already been made into the Company and will, it is anticipated, transform PhotonStar into a retrofit connected lighting and edifice management commerce with hardware sales and a recurring revenue base. 

 

Business review

 

PhotonStar Technology Ltd -Halcyon IoT and LED light engines ("PST")

Focused on retrofitting existing buildings with lighting, environmental monitoring and cloud based edifice management services

 

The Group was restructured during the era under review to create a modern Halcyon IoT team to better deliver 'turnkey' IoT lighting and cloudBMSTM solutions and services to customers. The team became operational in April 2016 and since then has made solid progress in delivering projects and trials with customers which had a positive sequel on revenues. This trend continued after the era cease with £0.1m of revenue being recorded in July 2016 lonesome following the installation of a second major tribulation with a company that is accountable for a great amount of student accommodation.  The HalcyonTMIoT team are now focused on ensuring that the installed trials are completed successfully in anticipation of a further roll out across the customers' entire property estate.

In January 2016, HalcyonTM was selected by the Royal Bank of Scotland Group plc ("RBS"), the international banking and pecuniary services company, to install Halcyon into one portion of Trinity House, the RBS commercial office edifice in Bristol.  This tribulation has been funded by RBS as portion of its initiative to source innovative solutions to address a compass of environmental challenges. They are pleased to exist able to report that they savor now successfully installed HalcyonTM and it is being monitored to assess its effectiveness to animate reduce the energy consumption and environmental impact of the office building. This tribulation installation is now being evaluated by RBS and ourselves in order to gain further insight into how the system operates and the information and cost savings that it delivers.

 

During the era under review they savor moreover installed HalcyonTM into a number of other buildings in a variety of different industry sectors. They hope that they will suffer significant pecuniary and property usage benefits from the HalcyonTM system.  Many of the trials that they savor now installed are portion of significant property portfolios. Management's expectation is that these trials will provide compelling information and confirmation of the benefits of installing the HalcyonTM system.  Due to the fact that HalcyonTM has been designed as a retrofit system the payback on installation costs for the customer are usually less than 12 months so management are confident that the results of the trials will animate convince the customer that a plenary scale roll out is both desirable and affordable.

 

The modern halcyonPRO2TM is an extended version of the original HalcyonTM system and adds the regulation of heating and cooling, shading and power management to the proven lighting control and environmental sensor network already in exercise in the first HalcyonTM product. cloudBMSTM, halcyonPRO2TM and cloud based analytics combine to deliver an extremely capable, scalable and secure BMaaSTM solution at a expense point and low entry cost that enables owners of minute to medium sized businesses to reduce energy and operating costs and realise modern insights into their operations.

 

The combination of the retrofittable hardware and sensor inputs, cloud analytics, visualisation and the connectivity options to asset management software will lower operating expenses for owners of multiple facilities by reducing manual compliance tests, manual monitoring and inspection of assets, and enable smart predictive and preventative maintenance.

 

In March 2016 the Company announced the grant of the first of its IoT patents on secure commissioning. The secure commissioning patent is a censorious component of the HalcyonTM and halcyonPRO2TMwireless network technology. The out-of-band secure commissioning patent is targeted at IoT lighting, sensors, actuators and other devices employed particularly in commercial applications where security vulnerabilities at the commissioning stage must exist safeguarded. The commissioning approach provides multiple novel options to securely associate wireless devices of different types to a network without the need to exist in physical contact or in proximity of the device, while not compromising the network security keys. The protocol moreover benefits from its aptitude to commission devices at any time, even following installation, without the need for special commissioning time windows. This lends itself to commercial installation practices where phased installation and commissioning may Take place.

 

The Board anticipates that PST's revenue growth will exist driven by a combination of hardware  sales and services in lighting, heating, cooling, ventilation and censorious asset monitoring. Management anticipate that as the systems are installed the service revenue component will strengthen the Group's grievous margin.

 

PhotonStar LED Ltd - LED fixtures business

LED lighting focused on the modern build market

 

During the era under review LED Lighting Fixtures revenues fell by 21% to £1.59m (with EBITDA losses of £0.25m) compared to the first half of 2015 when revenues were £2.00m and which generated an EBITDA loss of £0.09m. The export specification commerce came under significant pressure with revenues falling significantly due to economic conditions deteriorating in the Middle East.  In addition the unexpected increase in exact from house builders meant that they experienced stock shortages in house-builder and wholesale product lines so that they were unable to meet the plenary exact that they experienced and some of the fulfillment of this exact that they did fill was through the exercise of airfreight product and parts which impacted margins.  They resolved these issues during the second quarter so that revenues for that era improved.  The resolution of these issues and the reduced cost ground moved the fixtures commerce back into profitability on an EBITDA basis during June 2016 and they hope this trend to continue in the second half of the year.

The lighting market continues to transition towards LED lighting, with colour-tuneable and Circadian LED lighting becoming a significant subsector.  The market in Europe lonesome is estimated to exist worth up to €2.3bn per year by 2020 (Source: Lighting Europe 2013, 'Human Centric Lighting').  The company has installed a number of such projects in H1 2016 including:

·      Derriford Hospital, Glenborne wing (Phase 2); and

·      The Royal Mint visitor centre

House builder sales exceeded forecast in 2015 and H1 2016. The Group benefits from an exclusive constrict with a leading UK house builder, initially announced in September 2012.  The company subsequently announced in June 2016 that its major house builder constrict has been extended for another year.  Management are monitoring the housing sector closely with regards to the future exact for its lighting products as it remains unclear what effect, if any, the Brexit vote will savor on the modern build housing sector.

 

Camtronics Vale Ltd

External customer constrict electronics manufacturing business

 

Camtronics Vale Limited, a subsidiary of the Company, undertakes censorious LED and electronic assembly operations for the Group's manufacture of its lighting fixtures. Camtronics Vale moreover contracts electronics manufacturing for some third party customers. constrict manufacturing revenues were down 32% to £0.68m (H1 2015:£1.00m) with a loss of £0.05m (H1 2015: profit £0.10m). This company experienced a material descend in revenue during the final quarter of 2015 and the first quarter of the era under review.  The descend in revenue was due to a number of factors including a key customer deciding to source its product from overseas and a modern customer placing a very great assembly order but then entering receivership.  They savor reduced the cost ground of this company and increased their sales worry so that the revenues are now growing again and they hope will exist back to the historic levels that they savor benefited from by the fourth quarter of the current year.  This growth in revenues and reduction in costs means that they hope that this company will execute a positive contribution to the Group's revenues in the second half of 2016.

 

Financial review

The Group is making first-rate progress in transitioning from its traditional LED product markets into becoming a retrofit connected lighting and edifice management business. Meanwhile, focus continues on maximizing its traditional revenues and maintaining its margins, and investing in the enhancement of its Halcyon product compass and its edifice management services.

The Group's half year revenues decreased by 22% to £2.53m (H1 2015: £3.26m) with a grievous profit margin of 33% (H1 2015: 37%).

Administrative expenses decreased by a further £0.07m to £1.76m (H1 2015: £1.83m), due to downsizing in 2014, 2015 and 2016, and continuing tight control on costs (whilst maintaining the substantial investment in R&D and product development).

Adjusted EBITDA (adjusted for partake based payments) loss was £0.54m (H1 2015: loss £0.20m).

The Group reported a pre-tax loss of £0.91m (H1 2015: loss £0.59m) and loss per partake for the half year was 0.4p (H1 2015: loss per partake 0.4p). The Group's unused aggregate tax losses are approximately £9m.

Group net borrowings debt at 30 June 2016 was £0.68m (H1 2015: £0.67m).

Group capital expenditure was £0.59m (H1 2015: £0.49m), related to the purchase of the latest rig for constrict manufacturing, and to the continuing investment in product development and the patent portfolio, in particular the development of the HalcyonTMlighting systems.

 

Current Trading and Outlook

 

The Group enters the second half of 2016 as a much leaner commerce and with a significantly reduced cost base.  They anticipate that the final cost savings capitalize from the work already undertaken will exist reflected in the accounts from October 2016.  The research and development work that they savor undertaken over the terminal three years for the creation of HalcyonTM and halcyonPRO2TM is now largely complete with current and future development work concentrating on improvements, modern solutions and markets for HalcyonTM rather than the creation of the system itself. 

 

Trading continues to exist difficult in the traditional LED and constrict assembly businesses, with competitive expense pressure remaining.  However, further revenue improvement in bar not anything commerce units is being seen in the current era of Q3 2016 which, together with the cost savings already in place, means that although trading is currently below market expectations when considering the results for the first half of 2016 on an annualised basis, they hope that the second half of 2016 will provide a positive contribution to the results for the plenary year.

 

The Group has targeted HalcyonTMsales and marketing efforts into the retrofit market and they continue to perceive first-rate growth in this market.  This combined with the fact that their development work for this industry leading product is now complete means that the Board views the future with increased optimism.

 

 

 

 

Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2016

 

 

6 Months

6 Months

Year

Ended

Ended

Ended

30 June

30 June

31 December

2016

2015

2015

Unaudited

Unaudited

Audited

Notes

£'000

£'000

£'000

Revenue

2

2,532

3,256

6,901

Cost of Sales

(1,696)

(2,056)

(4,416)

Gross Profit

836

1,200

2,485

Administrative Expenses

(1,762)

(1,834)

(3,567)

Other Income

35

46

74

Operating Loss before exceptional item

(891)

(588)

(1,008)

Exceptional item

2

-

-

(1,983)

Operating loss after exceptional item

2

(891)

(588)

(2,991)

Financial Expense

(23)

(14)

(34)

Loss Before Income Tax

(914)

(602)

(3,025)

Taxation Credit

3

130

136

258

 

Loss and total comprehensive income for the era attributable to the Equity Shareholders of the Parent

 

 

 

(784)

 

 

 

(466)

 

 

 

(2,767)

Loss per share

Basic and diluted

4

(0.4)p

(0.4)p

(1.9)p

 

 

Consolidated Statement of pecuniary Position

as at 30 June 2016

 

30 June

30 June

31 December

2016

2015

2015

Unaudited

Unaudited

Audited

£'000

£'000

£'000

Non-Current Assets

Property, Plant & Equipment

435

296

214

Intangible Assets

1,848

3,623

1,811

Total Non-Current Assets

2,283

3,919

2,025

Current Assets

Inventories

956

1,244

874

Trade & Other Receivables

1,139

1,610

1,637

Current Tax Assets

311

302

360

Cash & Cash Equivalents

247

158

197

Total Current Assets

2,653

3,314

3,068

Total Assets

4,936

7,233

5,093

Equity

Ordinary partake Capital

1,877

1,438

1,477

Share premium

7,773

7,188

7,271

Share capital reduction reserve

10,081

10,081

10,081

Share option reserve

617

626

599

Reverse acquisition reserve

(8,843)

(8,843)

(8,843)

Profit and Loss

(8,964)

(5,879)

   (8,180)

Equity

2,541

4,611

2,405

Liabilities

Current Liabilities

Trade & Other Payables

1,416  

1,758  

1,595

Borrowings

930

825

1,042

Provisions

34

24

36

Total Current Liabilities

2,380

2,607

2,673

Non-Current Liabilities

Deferred Tax Liabilities

15

15

15

Total Liabilities

2,395

2,622

2,688

Total Equity and Liabilities

4,936

7,233

5,093

 

 

 

Consolidated Statement of Cash Flows

For the six months ended 30 June 2016

 

6 Months

6 Months

Year

 

Ended

Ended

Ended

 

30 June

30 June

31 December

 

2016

2015

2015

 

Unaudited

Unaudited

Audited

 

£'000

£'000

   £'000

Cash Flows from Operating Activities

 

Operating Loss

(891)

(588)

(3,025)

 

 

Exceptional particular - impairment

-

-

1,983

 

Depreciation

49

69

133

 

Amortisation

278

290

584

 

Share Option Charge

18

30

3

 

Movement in Provisions

(2)

(7)

5

 

Grant Income

(35)

(26)

(74)

 

Receipt of grants

25

-

41

 

Change in Inventories

(82)

(60)

185

 

Change in Trade & Other Receivables

498

(36)

(63)

 

Change in Trade & Other Payables

(169)

(249)

(406)

 

Cash Generated from/(Used in) Operations

(311)

(577)

(634)

 

Interest Paid

(23)

(14)

-

 

Tax Received

179

-

64

 

Net Cash Generated from/(Used in) Operating Activities

(155)

(591)

(570)

 

 

Cash Flows From Investing Activities

 

Proceeds on disposal of Plant, Property & Equipment

-

1

             -

 

Purchase of Property, Plant and Equipment

(270)

(27)

(51)

 

Purchase of Intangible Assets

(315)

(461)

(758)

 

Net Cash Used in Investing Activities

(585)

(487)

(809)

 

 

Cash Flows from Financing Activities

 

Proceeds from the issue of ordinary shares

                      902  

            -

122

 

New bank facilities

-

-

872

 

Repayment of previous bank facilities

-

-

(872)

 

Increase/(Decrease) in borrowings

(112)

99

317

 

Net Cash (Used in)/Generated from Financing Activities

790

99

439

 

 

Net (Decrease)/Increase in Cash and Cash Equivalents

50

(979)

(940)

 

Cash and Cash Equivalents at the Start of the Period

197

1,137

1,137

 

Cash and Cash Equivalents at the cease of the Period

247

158

197

 

 

 

 

Consolidated Statement of Changes in Equity

For the six months ended 30 June 2016 (unaudited)

                                                                                                                  

Ordinary

Share

capital

     Share

Reverse

 

Share

Share

reduction

Option

Acquisition

Retained

Capital

Premium

 

reserve

Reserve

Reserve

Losses

Total

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 January 2016

1,477

7,271

 

10,081

599

(8,843)

(8,180)

2,405

Issue of modern Shares

 400

502

-

-

-

-

902

Share Option Charge

-

-

-

18

-

-

18

Comprehensive Loss for the Period

-

-

-

-

-

(784)

(784)

At 30 June 2016

1,877

7,773

 

10,081

617

(8,843)

(8,964)

2,541

 

 

 

For the six months ended 30 June 2015 (unaudited)

Ordinary

Share

capital

Share

Reverse

Share

Share

reduction

Option

Acquisition

Retained

 

Capital

Premium

 

Reserve

Reserve

Reserve

Losses

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

At 1 January 2015

1,438

7,188

10,081

596

(8,843)

(5,413)

5,047

 

Share Option Charge

-

-

-

30

-

-

30

 

Comprehensive Loss for the Period

-

-

-

-

-

(466)

(466)

 

At 30 June 2015

1,438

7,188

 

10,081

626

(8,843)

(5,879)

4,611

 

 

 

 

 

 

For the year ended 31 December 2015 (audited)

Ordinary

   partake capital

Share

Reverse

Share

Share

reduction

Option

Acquisition

Retained

 

Capital

Premium

Reserve

Reserve

Reserve

Losses

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

Balance at 1st January 2015

1,438

7,188

10,081

596

(8,843)

(5,413)

5,047

 

Issue of modern shares

    39

83

-

-

-

-

122

 

Share Option Charge

 -

-

-

3

-

-

3

 

Comprehensive Loss for the Period

       -

-

-

-

-

(2,767)

(2,767)

 

At 31 December 2015

1,477

7,271

 

10,081

599

(8,843)

(8,180)

2,405

 

 

 

 

Notes to the pecuniary statements

For the six months ended 30 June 2016 (unaudited)

 

1. Basis of preparation

 

These interim pecuniary statements savor been prepared in accordance with IAS 34 - Interim pecuniary Reporting using the recognition and measurement principles of International Accounting Standards, International pecuniary Reporting Standards and Interpretations adopted for exercise in the European Union (collectively "Adopted IFRS").

 

The principal accounting policies used in preparing these interim pecuniary statements are those expected to apply to the Group's Consolidated pecuniary Statements for the year ending 31 December 2016 and are unchanged from those disclosed in the Group's Annual Report for the year ended 31 December 2015.

 

The pecuniary information for the six months ended 30 June 2016 and 30 June 2015 is unaudited and does not constitute statutory pecuniary statements for those periods.

 

The comparative pecuniary information for the year ended 31 December 2015 is not statutory accounts within the acceptation of s434 of the Companies Act 2006 but has been derived from the audited statutory pecuniary statements for that year. The statutory accounts for the year ended 31 December 2015 savor been reported on by the Company's auditor, delivered to the Registrar of Companies and savor been sent to the shareholders.

 

The Auditor's persuasion on the Group's statutory pecuniary statements for the year ended 31 December 2015 included the following:

 

"Opinion on pecuniary statements

 

In their opinion:

 

·    the pecuniary statements give a precise and objective view of the state of the Group's and the Parent Company's affairs as at 31 December 2015 and of the Group's loss for the year then ended;

·    the Group pecuniary statements savor been properly prepared in accordance with IFRSs as adopted by the European Union;

·    the Parent Company pecuniary statements savor been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

·    the pecuniary statements savor been prepared in accordance with the requirements of the Companies Act 2006.

 

Emphasis of matter - going concern

 

In forming their persuasion on the pecuniary statements, which is not modified, they savor considered the adequacy of the disclosure made in note 2.2 to the pecuniary statements concerning the directors' assessment of the aptitude of the Company and the Group to continue as going concerns. The aptitude of the Company and the Group to continue as going concerns is subject on the Group achieving the sales and profits growth projected by the directors in their current forecasts. The Directors are confident of being able to meet these forecasts, however, there can exist no guarantee that these will exist met within the necessary timeframe. These conditions bespeak the existence of material suspicion which may cast significant doubt about the aptitude of the Company and the Group to continue as going concerns. The pecuniary statements accomplish not include the adjustments that would result if the Group and the Company was unable to continue as going concerns."

 

The directors' disclosures made in note 2.2 to the pecuniary statements remain cogent and are reproduced in plenary below:

 

"The directors savor adopted the going concern basis in preparing the pecuniary statements for the year to 31 December 2015. In reaching this conclusion, the directors savor considered for both the Company and the Group, current trading and the current and projected funding position for the era of just over 12 months from the date of approval of the pecuniary statements through to 31 May 2017.

 

 

 

 

Current Funding

 

The Group's cash poise at 31 December 2015 was £197,000 and the drawdown of borrowings was £1,041,000 against bank facilities of £1,650,000. Since then the Group has continued to execute its commerce draw by:

 

·    investing in the continuing growth of its Lighting fixtures commerce and the development of modern product ranges,

·    continued further investment in expanding its Halcyon range, and

·    continued transition of the Group into a retrofit connected lighting and edifice management commerce through its HalcyonTM and cloudBMSTM platforms.

 

Projected Funding

 

Subject to the continued growth in HalcyonTM sales, the cash rush projections interpret that the Group can continue to operate for a era of 12 months from the date the pecuniary statements were signed.

 

The achievement of these projections is subject to uncertainties described below.

 

The projections include assumptions on the amount and timing of revenue and grievous margin that the Group expects to achieve during the era of the projections. These assumptions are subject to both market and other uncertainties, as discussed in the Chief Executive Officer's Statement and the Strategic Report.

 

The Group has incurred a net loss of £2,767,000 in the year (2014: £1,332,000) and has been loss making since incorporation. The projections reflect the directors' expectation that the Group will exist monthly adjusted EBITDA positive in 2016. To the extent there is a shortfall in revenue and/or grievous margin, it is likely to exist at least partially offset by a reduction in working capital requirements. Nevertheless, the aptitude of the Company and the Group to continue as going concerns is subject on the aptitude of the Group to achieve the growth in sales of its products projected by the directors in their current forecasts. Growth needs to exist enough for the Company and the Group to exist able to operate within their cash resource and borrowing facilities.

 

Conclusion

 

It is acknowledged that the achievement of these projections is subject to market and other uncertainties as outlined above and consequently there is a material suspicion which may cast significant doubt about the Group's and Company's aptitude to continue as a going concerns. Nevertheless, after taking account of the Group's current funding position, its cash rush projections and the risks and uncertainties associated with these, the directors savor a reasonable expectation that the Group and Company savor access to adequate resources to continue in operational existence for the foreseeable future. For these reasons they continue to prepare the pecuniary statements on a going concern basis. These pecuniary statements accomplish not include any adjustments that would result from the going-concern basis of preparation being inappropriate.''

 

2.  Segmental Information

 

The Group's reportable segments are currently LED Light Fixtures, Halcyon and LED Light Engines and constrict Manufacturing. Prior era results savor been restated to reflect the revised management reporting responsibilities from the ascend of 2016.

 

Six Months Ended 30 June 2016 (unaudited)

LED Lighting

Halcyon & Light

 

Contract

Total

 

Fixtures

Engines

Manufacturing

 

£'000

£'000

£'000

£'000

 

Revenue;

 

UK

1,495

263

               600

2,358

Rest of World

97

-

                77

174

Total Revenue

1,592

263

               677

2,532

Adjusted EBITDA for reportable segments

(252)

(95)

              (49)

(396)

Depreciation and Amortisation

(129)

(173)

              (25)

(327)

Interest Expense

(8)

-

              (15)

(23)

Taxation Credit

35

95

-

130

Total Assets

1,736

1,891

                 802

4,429

Total Liabilities

684

277

           408

    1,369

 

Six Months Ended 30 June 2015 (unaudited, restated)

LED

Light

Halcyon & Light

 

Contract

Total

 

Fixtures

Engines

Manufacturing

 

£'000

£'000

£'000

£'000

 

Revenue

 

UK

1,586

247

822

2,655

 

Rest of World

419

-

182

601

 

Total Revenue

2,005

247

1,004

3,256

 

Adjusted EBITDA for reportable segments

(86)

(63)

99

(50)

 

Depreciation and Amortisation

(162)

(176)

(21)

(359)

 

Interest Expense

(8)

-

(6)

(14)

 

Taxation Credit

42

94

-

136

 

 

Total Assets

2,149

1,845

880

4,874

 

Total Liabilities

733

242

522

1,497

 

 

 

Year Ended 31 December 2015 (audited, restated)

LED Light

Halcyon & Light

 

Contract

Total

Fixtures

Engines

Manufacturing

£'000

£'000

£'000

£'000

Revenue;

UK

3,648

503

1,699

5,850

Rest of World

387

-

664

1,051

Total Revenue

4,035

503

2,363

6,901

Adjusted EBITDA for reportable segments

(55)

(284)

273

(66)

Depreciation and Amortisation

(292)

(384)

(41)

(717)

Interest Expense

(19)

-

(15)

(34)

Taxation Credit

59

199

-

258

 

Total Assets

1,964

1,891

 

808

4,663  

Total Liabilities

676

348

511

1,535

 

Adjusted EBITDA for reportable segments is defined as EBITDA before partake Option saturate and Corporate Expense allocation.

 

Reconciliation of Adjusted EBITDA to Loss Before Tax

6 Months

6 Months

Year

ended

Ended

Ended

30 June

30 June

31 December

2016

2015

2015

Unaudited

Unaudited

Audited

£'000

£'000

£'000

Adjusted EBITDA for Reportable Segments

(396)

(50)

(66)

Corporate Expense

(150)

(149)

(170)

Adjusted EBITDA

(546)

(199)

(236)

Share Option Charge

(18)

(30)

(55)

Depreciation and Amortisation

(327)

(359)

(717)

Interest Expense

(23)

(14)

(34)

Exceptional Item*

-

-

(1,983)

Loss before Tax

(914)

(602)

(3,025)

* The exceptional particular related to a non-cash impairment provision arising from the Group's change in strategic direction transitioning towards a Group increasingly focused on being a retrofit connected lighting and edifice management business. The impairment saturate was made against non-strategic areas of the Group, mainly the remaining goodwill on the poise Sheet from the transpose transaction with Enfis in 2010.

 

 

 

Reconciliation of Reportable Segment Assets to Total Assets

30 June

30 June

31 December

2016

2015

2015

Unaudited

Unaudited

Audited

£'000

£'000

£'000

Segment Assets for Reportable Segments

4,429

4,874

4,663

Unallocated:

Cash at Bank

247

158

197

Impaired Assets*

-

1,983

-

Other

260

218

233

Total Assets per the Statement of pecuniary Position

4,936

7,233

5,093

Reconciliation of Reportable Segment Liabilities to Total Liabilities

30 June

30 June

31 December

2016

2015

2015

Unaudited

Unaudited

Audited

£'000

£'000

£'000

Segment Liabilities for Reportable Segments

1,369

1,497

1,535

Unallocated:

Borrowings

930

825

                 1,042

Other

96

300

111

Total Liabilities per the Statement of pecuniary Position

2,395

2,622

2,688

 

 

3. Income Tax Credit

 

The income tax credit of £130,000 for the six months ended 30 June 2016, (6 months ended 30 June 2015: £136,000; year ended 31 December 2015: £258,000) represents estimated research and development tax credit receivable for that period. Excluding these matters, the effective tax rate for the Group for the year ended 31 December 2016 is expected to exist zero, reflecting the availability of estimated brought forward tax losses at 31 December 2015 of about £9m.

 

 

4. Earnings per share

 

6 months

6 months

Year

ended

ended

ended

30 June

30 June

31 December

2016

2015

2015

Loss attributable to ordinary shareholders

£(784,000)

£(466,000)

£(2,767,000)

Weighted average number of ordinary shares

184,042,465

124,868,624

144,042,465

Basic and diluted loss per share

(0.4p)

(0.4p)

(1.9p)

 

Diluted earnings per partake is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding after adjusting these amounts for the effects of dilutive potential ordinary shares.

 

As the results for the six months ended 30 June 2016 and 30 June 2015 and for the year ended 31 December 2015 are losses, any exercise of partake options would savor an anti-dilutive sequel on earnings per share. Consequently earnings per partake and diluted earnings per partake are the same as potentially dilutive partake options savor been excluded from the calculation.

 

5. Copies of Interim Report

 

Copies of this interim report are available upon request to members of the public from the Company's registered office, Unit 8 Westlink, Belbins commerce Park, Cupernham Lane, Romsey, Hampshire SO51 7JF. This interim report can moreover exist viewed on the Group's website: www.photonstarled.com.



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