Intact Software is competing with the likes of Microsoft in the ERP arena. CEO Justin Lawless talks to Gerry Byrne about the company’s development and growth plans

While trailblazing VC-funded start-ups attract attention, it is easy to overlook that the majority of successful Irish companies grow and prosper without surrendering equity control.

An example is Aptech Business Systems, trading as Intact Software. It is a 24-year-old Dundalk software venture that employs 184 people, mostly skilled programmers and systems analysts, conducts half of its business in the UK, and is breaking into several other export markets.

Intact operates in direct competition with giants of the Enterprise Resource Planning (ERP) software sector like Microsoft and SAP. The company says it wants to add hundreds of new employees in the coming years, yet almost 90% of the ordinary equity is still held by its founders.

The bulk of the company's working capital comes from cashflow, explains CEO Justin Lawless. To effect a 2016 acquisition in England, the company leveraged the Employment and Investment Incentive Scheme and sourced preference share funding from Enterprise Ireland. Almost €2m was raised, in addition to some modest borrowings.

In May 2021, the company redeemed the €1.5m EIIS investment, paying the investors a 10% premium on their capital investment. The €400,000 received from Enterprise Ireland was redeemed too, for an outlay of €425,000.

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The company’s 2020 accounts filing also disclosed group year-end VAT liability of €1.2m, up from €140,000 a year earlier, and payroll tax liability of €710,000, up from €440,000.

Unlike many of its competitors in the ERP market, which resell Microsoft or SAP products (among others), Intact's product is its own creation, the brainchild of accountant Paul Marry and programmer Aiden Lawless, the company's founders.

"We are not selling a third party program which many of our competitors do," explains Justin Lawless, a brother of the co-founder. "Instead of companies being required to change their procedures and processes to suit other ERP software, we tailor our software to match our customers' way of working. We give them that extra competitive edge by enabling digitisation of processes they favour."

Lawless (45) has been with the company since inception and assumed the chief executive role in 2013. He has driven the export drive, and two-thirds of Intact’s revenue is sourced outside Ireland, mostly in the UK.

In 2016, Intact acquired one of its main UK distributors, Ramtac Computer Systems in Watford. "We acquired it so that we had a closer connection to our customers in the UK," says Lawless.

Half the company’s staff work in the UK, and earlier this year headquarters in England was established in Hemel Hempstead. Initial expansion into the UK market was driven by resellers approaching Intact to become agents for its products. The company threw its weight behind their efforts.

"Most of them were selling a different product which they found difficult to tailor to client needs and they asked if they could handle ours instead," says Lawless. "That's also the way we do things in Australia and New Zealand. We develop a relationship with distributors, and they build a very successful business out of it. Some of them have teams of 50 to 70 people selling our technology."

Intact mostly works with merchant, wholesale and distribution businesses. Yet with Microsoft practically giving its ERP away in special offers, how does Intact get a foot in the door with prospective clients? Word-of-mouth referrals is typically how it works, says Lawless.

"It's not easy to break into Europe and North America with a product like ours, because you need advocacy, and you need people to see their peers using it. Breaking into a new market can be difficult."

Lawless is also eyeing expansion for Intact in France, Germany and Spain. "For some reason, we seem to have attracted a lot of attention in central Europe. We don't want to waste this opportunity by being pig-headed and saying it is easier to stick with the English language. We are now making the product available in different European languages.”

Turnover at Aptech Business Systems Ltd increased to €13.2m in 2020 from €11.6m the previous year, a creditable performance against the backdrop of pandemic lockdowns. The gross profit margin widened from 51% to 61%, and EBITDA was €1.6m. Net cash generated from operating activities widened to €2.7m from €670,000 in 2019, and period-end trade debtors were €2.6m compared with €2m a year earlier.

According to Lawless, Intact Software’s revenue in 2021 was c.€17m, and could grow to €24m in the current year. That outcome will depend on an acquisition which is at the heads of agreement stage.

Though coy about the identity of the new buy, Lawless declared: "To reach turnover of €24m this year makes me very proud of what we have achieved. We're profitable most years and we mostly hit between 5% and 10% net profit on a yearly basis. Last year it was about 11%."

Annual subscription

Lawless is also directing the change to the revenue model from what he calls the “old capex system” of payment, where apart from an annual maintenance fee customers paid for their software upfront. Intact is migrating to a subscription model where clients make annual payments. The benefit, says Lawless, will be improved profitability and cashflow. Annual recurring revenue is what private equity players like to see too, should the founders ever decide to sell up.

"Clients are happy with the transition,” says Lawless. “The subscription model with lower upfront investment is more normal now, and customers are happy with that for sure. It also makes us serve their business longer term rather than just in the short term."

Intact has never sold its product in the capex format in Australia or New Zealand, and the UK has quickly adopted the recurring payment model. However, Lawless notes that Ireland has been a bit slower to catch on.

With a growing move towards more mobile workforces, Intact Software is also positioning its ERP software for tablets and mobile phones, which requires significant investment in cloud infrastructure.

The company is aiming for 5,000 new users annually in its target verticals, and Lawless concedes that ramping up employment to match growth targets will be a challenge. One strategy is to garner recruits straight out of college. Intact’s graduate programme provides 12-months technical, professional and leadership skills training, and graduates are offered a permanent contract at the outset. Average pay across the company in 2020 was c.€48,000.

"So far we have been very lucky,” says Lawless. “In recent months we have recruited some amazing people, and we have been fortunate with retention as well. I think we are operating well below the attrition rates of a lot of our competitors. Many of our best people come from an accounting or business background because they understand business processes. We also require people who have worked in warehousing and in supply chains, and who understand how goods move around a distribution network. They are very hard to find."

Dundalk advantage

For the Irish activities, Lawless views Intact’s location in Dundalk as an advantage. "There are over three million people within 90 minutes’ drive of Dundalk, and there is access to skills north and south of the border. Dublin Airport is 40 minutes away, there are two airports in Belfast, plus we have a local Institute of Technology. We are able to attract really good people where we are, and we also have an office in Cork, where the quality of talent is very high.”

A recent recruit to the board of directors is accountant Stephen McGivern, a director of EIIS Management which manages the Goodbody EIIS funds.

"Stephen had contact with our board when Goodbody was making the EIIS investment. He liked the fact that our board is not just there to make up numbers. Our non-executive chairman Lionel Alexander was on the board of the IDA for nine years and is a former vice-president at  Hewlett Packard. We have some really smart people on our board and that really helps."

The conversation returns to the issue of raising finance to fund future expansion, and Lawless says the company might consider doing that sometime in the future. "This is not a hill we want to die on," he remarks.