Innofactor Plc Interim Report October 29, 2019, at 9:00 Finnish time
Innofactor’s operating margin and order backlog significantly better than in comparison periods, also the net sales turned to growth in the third quarter
July–September 2019 in brief:
- The net sales were approximately EUR 14.0 million (2018: 13.8), which shows an increase of 1.4%.
- The operating margin was approximately EUR 1.5 million (2018: -0.5), which shows an increase of EUR 2.0 million
- The operating profit was approximately EUR 0.3 million (2018: -1.2), which shows an increase of EUR 1.4 million
- The order backlog at the end of the review period was EUR 53.2 million (2018: 25.6), which shows an increase of 107%
- The measures for improving profitability, carried out near the end of 2018, have had the planned effect in 2019
- In the third quarter, Innofactor got several major orders, for example the Finnish Tax administration has selected Innofactor as the primary provider of IT specialist services in the area of cloud specialists, approximately EUR 10-20 million, Swedish Epiroc Rock Drills has selected Innofactor as provider of directory services, approximately EUR 0.7 million, and got also several smaller orders
January–September 2019 in brief:
- The net sales were approximately EUR 46.8 million (2018: 47.3), which shows a decrease of 1.0%
- The operating margin was approximately EUR 3.5 million (2018: -0.1), which shows an increase of EUR 3.6 million
- The operating profit was approximately EUR 0.3 million (2018: -2.2), which shows an increase of 114.5%
| Key figures of the group, IFRS | |||||||||
| Jul 1–Sep 30, 2019 | Jul 1–Sep 30, 2019 | Change | Jan 1–Sep 30, 2019 | Jan 1–Sep 30, 2019 | Change | ||||
| Net sales, EUR thousand | 13,968 | 13,773 | 1.4% | 46,767 | 47,253 | -1.0% | |||
| Growth of net sales | 1.4% | -2.5% | -1.0% | -2.6% | |||||
| Operating profit before depreciation and amortization (EBITDA), EUR thousand* | 1,535 | -503 | 405.2% | 3,532 | -124 | 2,938.7% | |||
| percentage of net sales* | 11.0% | -3.7% | 7.6% | -0.3% | |||||
| Operating profit/loss (EBIT), EUR thousand* | 252 | -1,186 | 121.3% | 315 | -2,177 | 114.5% | |||
| percentage of net sales* | 1.8% | -8.6% | 0.7% | -4.6% | |||||
| Earnings before taxes, EUR thousand* | 42 | -1,223 | 103.4% | -259 | -2,480 | 89.6% | |||
| percentage of net sales* | 0.3% | -8.9% | -0.6% | -5.2% | |||||
| Earnings, EUR thousand* | 93 | -763 | 112.2% | -183 | -2,227 | 91.8% | |||
| percentage of net sales* | 0.7% | -5.5% | -0.4% | -4.7% | |||||
| Order backlog*** | 53,167 | 25,602 | 107.1% | 53,167 | 25,602 | 107.1% | |||
| Net gearing* | 84.6% | 84.6% | |||||||
| Net gearing without IFRS 16 | 60.5% | 71.4% | 60.5% | 71.4% | |||||
| Equity ratio* | 40.2% | 40.2% | |||||||
| Equity ratio without IFRS 16 | 44.6% | 41.2% | 44.6% | 41.2% | |||||
| Active personnel on average during the review period** | 535 | 591 | -9.5% | 535 | 598 | -10.5% | |||
| Active personnel at the end of the review period** | 542 | 588 | -7.8% | 542 | 588 | -7.8% | |||
| Earnings per share (EUR) | 0.0036 | -0.0271 | 113.5% | 0.0013 | -0.0548 | 102.3% | |||
*) In accordance with IFRS 3, the operating result for July 1–September 30, 2019, includes EUR 507 thousand (2018: 507) and the result for January 1–September 9, 2019, EUR 1,522 thousand (2018: 1,522) in depreciations related to acquisitions, consisting of allocations of the purchase price to intangible assets. The implementation of the IFRS 16 standard affects extensively different figures for 2019. The handling of lease liabilities in a new way in accordance with IFRS 16 had the following effects: on July 1–September 30, 2019, EUR 645 and on January 1–September 30, 2019, EUR 1,265 thousand thousand in the operating margin (EBITDA). Additional information on the standard’s implementation and effects can be found in the “Accounting policies” section of “Financial statement summary and appendixes January 1–September 30, 2019 (IFRS).”
**) The Innofactor Group monitors the number of active personnel. The number of active personnel does not include employees who are on a leave of over 3 months.
***) Before implementing the common ERP system in two stages in Sweden on July 1, 2018, and October 1, 2018, the figures there are partly based on management estimates.
Innofactor’s future outlook for 2019
Innofactor’s net sales in 2019 are estimated to increase from 2018, during which the net sales were EUR 63.1 million, and the operating margin (EBITDA) in 2019 is estimated to grow to EUR 4–6 million, while the operating margin in 2018 was EUR -1.0 million.
CEO Sami Ensio’s review: The record order backlog turned the net sales to growth in the third quarter and ensured good profitability
The net sales in the third half of 2019 were EUR 14.0 million, which shows an increase of 1.4 percent compared to the previous year. The net sales grew in Finland, Norway and Denmark, but decreased in Sweden. The weaker than expected net sales were partly due to the lower exchange rates of Swedish krona and Norwegian krone in relation to euro. This had an effect of approximately EUR 0.1 million. Due to the measure for improving efficiency, the net sales per employee grew 12.0% from the previous year.
The operating margin (EBITDA) improved by EUR 2.0 million from the previous year and was EUR 1.5 million (11.0 percent of the net sales). The improvement in the operating margin was especially due to the measures in the last quarter of 2018 for reorganizing operation and making it more efficient, cost-cutting, and the changes in handling lease liabilities due to IFRS 16, which had an effect of EUR 0.6 million in the operating margin. Historically, Innofactor’s operating margin has improved in every quarter towards the end of the year.
In the third quarter, the order backlog again grew to a record-breaking amount and was EUR 53.2 million at the end of the quarter (2018: 25.6), which shows an increase of 107% compared to the same time in the previous year.
I am especially happy that the Tax administration selected Innofactor in a public procurement competition as the primary provider of IT specialist services in the area of cloud specialists. In the area of cloud specialists, the purpose of the procurement is to expand the use of the Tax administration’s MS Azure and Office365 cloud services as the platform for different systems. The emphasis in this area is on the specialist resources for the Azure cloud service infrastructure, but the services also include support, for example, for application development tools. On the basis of the volume stated by the customer in connection with the procurement, the total value in this area is approximately EUR 10–20 million. The duration of the framework agreement is 6 years, and assignments started during the framework agreement period may continue 48 months after the expiration of the framework agreement. Innofactor’s order backlog is calculated based on customer’s estimate of six years volume.
As regards Sweden, measures aiming at increasing net sales are ongoing. Our goal is to turn the net sales also in Sweden into growth still in the last quarter of 2019. The search for the new Country Manager for Sweden is in progress, but we were not able to select one in the third quarter as we had planned. Our new goal is the select the new Country Manager by the end of November.
Innofactor has hired a new Chief Technology Officer, Jufo Peltomaa, and he started on October 28, 2019. I am very glad to have him with us to strengthen the Innofactor team.
Innofactor’s vision is to be the leading implementer of digitalization in each of the Nordic countries. We believe in our chosen Nordic strategy and in reaching our long-term goals. This requires perseverance and determination from the company’s management and employees as well as investors. Innofactor is still actively looking for new strategic partnerships in the Nordic countries. The Group’s goal is to grow both organically and through acquisitions (however, these are not a priority in 2019).
Strategy and its realization in the review period
Innofactor’s vision is to be the leading provider of organizations’ digital transformation in each of the Nordic countries (Finland, Sweden, Denmark and Norway) The long-term financial goal is to grow profitably by achieving an annual growth of approximately 20 percent, of which majority is intended to be achieved by organic growth, by achieving approximately 20 percent operating margin (EBITDA) in relation to the net sales, and by keeping the cash flow positive and by securing solid financial standing in all situations. In 2019, Innofactor will focus especially on improving its profitability.
The operating margin (EBITDA) grew in January–September 2019 from EUR -0,1 million in the same period in the previous year to EUR 3.5 million (7.6 percent of the net sales). As regards profitability, Innofactor was able to again improve its performance substantially, but a significant effort is still needed in order to reach the long-term goal of approximately 20 percent.
Innofactor’s net sales in January–September were EUR 46.8 million (2018: 47.3), which shows a decrease of 1.0 percent compared to the previous year. In the third quarter, the net sales grew in Finland, Norway and Denmark, but decreased in Sweden. It is essential for Innofactor’s strategy to gain growth also in Sweden. Our goal is to turn also the net sales in Sweden into growth in the last quarter of 2019 at the latest. The goal of getting the net sales to grow is also supported by the record-breaking order backlog of EUR 53.2 million (2018: 25.6).
Innofactor’s operating cash flow in the review period of January 1–September 30, 2019, was EUR 3.4 million (2018: -1.9) and the equity ratio at the end of the review period was 40.2 percent (2018: 41.2%). The handling of lease liabilities in a new way in accordance with IFRS 16 had a positive effect of approximately EUR 1,6 million in the operating cash flow and approximately 4.3 percentage point negative effect in the equity ratio. The strong operating cash flow supports Innofactor’s strategic goal of profitable growth and securing solid financial standing in all situations.
Espoo, October 29, 2019
INNOFACTOR PLC
Board of Directors
Additional information:
CEO Sami Ensio, Innofactor Plc
Tel. +358 50 584 2029
[email protected]
Briefings concerning the Interim Report January 1–September 30, 2019
A briefing in Finnish concerning the interim report will be held for media, investors and analysts on October 29, 2019, at 10:00 Finnish time, at the company’s premises at Keilaranta 9, Espoo. The report will be presented by CEO Sami Ensio. The corresponding conference call in English will be held at 12:00 Finnish time.
Please register for the briefings beforehand by sending email to [email protected].
The presentations will be available on Innofactor’s web site after the briefings.
Distribution:
NASDAQ Helsinki
Main media
www.innofactor.com
Innofactor
Innofactor is the leading driver of the modern digital organization in the Nordic Countries for its over 1,500 customers in commercial, public and third sector. Innofactor has the widest solution offering and leading know-how in the Microsoft ecosystem in the Nordics. Innofactor has approximately 600 enthusiastic and motivated top specialists in Finland, Sweden, Denmark and Norway. In 2014–2018, the annual growth of Innofactor’s net sales has been approximately over 14%. The Innofactor Plc share is listed in the technology section of the main list of NASDAQ Helsinki Oy. www.innofactor.com #ModernDigitalOrganization
Attachment
