In 2012, IT Solutions revenue grew by a remarkable 13.0%. As detailed in the table, group revenue was fueled by growth in both IT transactional and non-transactional revenues, and despite the expected decrease in direct distribution revenue.
IT Transactional revenue increased by 20.7% in 2012, to €519.2 million. This increase was supported by strong growth in all main revenue lines:
Average IT transactional revenue per PB for the year was €0.92, below the average fee of €0.98 reported in 2011, and in line with internal expectations. The main reasons for this dilution are (i) the change in the Altéa client mix, due to the migration of new hybrid carriers to the platform at the end of 2011 (whose service and fee level are reduced vs. the existing average), (ii) revenue mix within IT transactional revenue, as e-commerce and standalone IT solutions grow at lower rates than Altéa (these revenue streams are not charged on a per PB basis and therefore do not grow in line with PB). This dilution was partially offset by the positive FX (translational) impact.
Revenue from Direct Distribution fell by 10.6% in 2012 compared to 2011. This decrease in revenue was mostly driven by a drop in bookings as a consequence of the migration of some of our existing users of our Reservations module (notably SAS) to the Inventory module of our Amadeus Altéa Suite in 2012. Once migrated on to the Altéa platform, these clients pay a fee per PB, and revenue is accounted for under IT Transactional revenue, rather than in Direct Distribution. In addition, revenue growth was negatively affected by the demigration of LAN in the second half of the year.
Non-transactional revenue increased by 10.4% in 2012, driven both by higher revenue from gaps and implementations (deferred revenues starting to be recognised after the client cutover) and from services, such as consulting or hosting.
The contribution of our IT Solutions business is calculated after deducting from our revenue those operating costs which can be directly allocated to this business (variable costs, including certain distribution fees, and those product development, marketing and commercial costs which are directly attributable to this business).
In 2012, the contribution of the IT Solutions business grew by a significant 13.9% to €519.3 million. As % of revenue, there was a slight margin expansion of 0.6 p.p. vs. a contribution margin of 72.6% in 2011.
The 13.9% increase in the contribution of our IT Solutions business in 2012 was driven by a 13.0% increase in revenues and a more limited 10.5% increase in net operating costs.
The increase in operating costs was mainly driven by activities which were subject to capitalisation, as they relate to investment in R&D to fuel future growth (portfolio expansion with new modules and functionalities, new business areas, etc). In particular, costs were driven by: (i) an increase in our R&D expenditure associated with client implementations, as well as increased efforts on new functionality and New Business areas (as reflected in a strong increase in FTE in our development area), (ii) an increase in commercial and technical efforts related to local support (regionalisation), with the establishment of new local sites such as Korea and Dubai and new services to support customer satisfaction. We have also increased the focus on postimplementation teams to support our growing customer base and (iii) negative impact of EUR depreciation on our cost base.