01.08.2017

Innofactor Plc Half-Yearly Report, August 1, 2017, at 9:00 Finnish time

Innofactor Plc's Half-Yearly Report, January 1–June 30, 2017 (IFRS)

The first half of the year was passable—we expect to have a strong second half of the year

January–June 2017 in brief:

  • The net sales were approximately EUR 35.0 million (2016: 29.8), which shows an increase of 17.3%.
  • The operating margin was approximately EUR 2.0 million (2016: 2.0), which shows an increase of 2.6%.
  • The operating profit was approximately EUR 687 thousand (2016: 752), decreasing by 8.6% due to increased write-offs related to acquisitions, in accordance with IFRS 3, resulting in a decrease of EUR 1,014 thousand (2016: 910).
  • Innofactor received several significant orders during the first half of the year. For example, the Unemployment Insurance Fund (TVR) for approximately EUR 1.0 million, the Hospital District of Helsinki and Uusimaa (HUS) for approximately EUR 1.8 million, IF Metall (in Sweden) for approximately EUR 0.6-4 million, and a Finnish service company for approximately EUR 0.5 million.
  • The actions for improving effectiveness of operations, related to the Lumagate companies, have had the desired positive effect on the operating margin, especially in Norway.
  • The business operations in Denmark have not improved in the desired manner and, thus, the Country Manager in Denmark for now will be Per Bendix Olsen, who will also continue as the director of Innofactor's Nordic public administration business.
  • Innofactor's Executive Board has a new member, Vesa Syrjäkari, whose special goal is improving the Group's profitability.

April–June 2017 in brief:

  • The net sales were approximately EUR 17.5 million (2016: 15.2), which shows an increase of 14.6%.
  • The operating margin was approximately EUR 0.9 million (2016: 1.1), which shows a decrease of 18.5%; the weaker than expected profitability was contributed to by the lower than expected net sales and the fact that the results from the Danish business operations were significantly less than expected.
  • The operating profit was EUR 200 thousand (2016: 446), decreasing by 55.2% due to increased write-offs related to acquisitions, in accordance with IFRS 3, resulting in a decrease of EUR 507 thousand (2016: 455).

Apr 1–Jun 30, 2017

Apr 1–Jun 30, 2016

Change

Jan 1–Jun 30, 2017

Jan 1–Jun 30, 2016

Change

Jan 1–Dec 31, 2016

Net sales, EUR thousand

17,452

15,224

14.6%

34,969

29,821

17.3%

59,616

Operating margin (EBITDA), EUR thousand

870

1,067

-18.5%

2,033

1,982

2.6%

4,831

percentage of net sales

5.0%

7.0%

5.8%

6.6%

8.1%

Operating profit/loss (EBIT), EUR thousand**

200

446

-55.2%

687

752

-8.6%

2,332

percentage of net sales**

1.1%

2.9%

2.0%

2.5%

3.9%

Earnings before taxes, EUR thousand**

72

396

-81.8%

418

567

-26.3%

1,920

percentage of net sales**

0.4%

2.6%

1.2%

1.9%

3.2%

Earnings, EUR thousand**

-59

294

-120.1%

19

436

-95.6%

1,516

percentage of net sales**

-0.3%

1.9%

0.1%

1.5%

2.5%

Net gearing

48.9%

52.2%

48.9%

52.2%

70.2%

Equity ratio

43.5%

39.3%

43.5%

39.3%

35.9%

Active personnel on average during the review period***

609

500

21.8%

602

501

20.2%

427

Earnings per share (EUR)

0.0016

0.0096

-83.6%

0.0097

0.0137

-29.3%

0.0467

*) In accordance with IFRS 3, the operating profit for April 1–June 30, 2017, includes EUR 507 thousand (2016: 455) in depreciations related to acquisitions, consisting of allocations of the purchase price to intangible assets. Adjusted for the said depreciations, Innofactor’s operative business profit for the review period of April 1–June 30, 2017, would have been EUR 707 thousand (2016: 901), the operative business result before taxes EUR 579 thousand (2016: 851), the operative business result EUR 463 thousand (2016: 681), and the operative business result per share EUR 0.0141 (2016: 0.0211). In accordance with IFRS 3, the operating profit for January 1–June 30, 2017, includes EUR 1,014 thousand (2016: 910) in depreciations related to acquisitions, consisting of allocations of the purchase price to intangible assets. Adjusted for the said depreciations, Innofactor’s operative business profit for the review period of January 1–June 30, 2017, would have been EUR 1,701 thousand (2016: 1,662), the operative business result before taxes EUR 1,432 thousand (2016: 1,447), the operative business result EUR 1,146 thousand (2016: 1,182), and the operative business result per share EUR 0.0347 (2016: 0.0367).

**) 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.

Innofactor’s future outlook for 2017 remains the same

Innofactor’s net sales and operating margin (EBITDA) in 2017 is estimated to increase from 2016, during which the net sales were EUR 59.6 million and operating margin was EUR 4.8 million.

CEO Sami Ensio's review: In the second half of the year, Innofactor will focus in clearly improving the profitability

The growth of the net sales in the second quarter was 14.6 percent (net sales EUR 17.5 million). Innofactor has estimated that the Nordic IT market will grow faster in 2017 than in the previous years, and this estimate remains the same. The market growth is believed to also increase Innofactor’s growth possibilities.

In the second quarter of 2017, the operating margin (EBITDA) was EUR 0.9 million (5.0 percent of the net sales) and decreased 18.5 percent from the previous year. The weaker than expected profitability was contributed to by the lower than expected net sales and the fact that the results from the Danish business operations were significantly less than expected. The actions for improving effectiveness of operations (stated in the financial statement on March 7, 2017, and related to the Lumagate companies), including renewal of the organization structure and trimming down management, have continued to improve the net sales, especially in Norway.

In Innofactor’s history, the end of the year has typically been better in terms of operating margin than the beginning of the year, but special attention still needs to be paid to improving the profitability and raising it to the goal level.

In its meeting yesterday, July 31, 2017, Innofactor's Board of Directors decided that the new director of Nordic public administration business, Per Bendix Olsen from Denmark, will also act as the Country Manager in Denmark as of August 1, 2017, until further notice. Per Bendix has an extensive experience on managerial positions in IT companies, especially in Microsoft, where his latest job was managing international public administration partnerships at the Microsoft's head office at Redmond.

Also another person coming from the Microsoft's head office, Vesa Syrjäkari, will start in the Innofactor's Executive Board on September 1, 2017. His title will be Executive Vice President, Business Development and Operational Excellence. Vesa has been one of the highest-ranking Finns ever in the Microsoft's international organization. His last job there was to be responsible globally for the effectiveness of Microsoft's sales to its major customers. Vesa's first job in Innofactor is to focus on improving profitability and to ensure that the already made plans for improving effectiveness in business units are implemented successfully.

Despite the challenging operating margin level, the cash flow from business activities in the first half of the year remained strong and was approximately EUR 3.9 million (2016: EUR 2.9 million).

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.

Strategy and its realization in the review period

Innofactor is the one of the leading implementers of cloud solutions and digitalization in the Nordic Countries. Innofactor has the widest solution offering and leading know-how in the Microsoft ecosystem in the Nordic Countries. Innofactor has over 600 enthusiastic and motivated top specialists in Finland, Sweden, Denmark and Norway. Innofactor's customers include over 1,500 companies and public administration and third sector organizations. During the years 2017-2020, Innofactor will primarily strive to unify its offering in the Nordic Countries in its selected areas. This may happen either through organic growth or selected acquisitions.

Innofactor's mission: We empower organizations and people to make a difference in the digital world.

Innofactor's vision: We are the leading implementer of cloud solutions and digitalization in each of the Nordic Countries (Finland, Sweden, Denmark and Norway).

Innofactor's strategy for achieving this vision includes:

  • The best Nordic professionals in the Microsoft ecosystem
  • The leading offering in cloud solutions and digitalization
  • A proactive, value-adding and flexible delivery model
  • Spearhead customers in selected fields in the Nordic Countries

Innofactor's long-term financial goal is to grow profitably:

  • To achieve annual organic growth of approximately 20 percent in 2020 at the latest
  • To achieve approximately 20 percent operating margin (EBITDA) in relation to the net sales in 2020 at the latest
  • To keep the cash flow positive and to secure solid financial standing in all situations

Innofactor's net sales in the review period of January 1–June 30, 2017, grew by 17.3% and the main part of this was based on inorganic growth resulting from the Lumagate acquisition.

Innofactor's operating margin (EBITDA) in relation to net sales was 5.8 percent in the review period. Typically, Innofactor’s profitability has improved towards the end of the year.

Innofactor’s operating cash flow in the review period of January 1–June 30, 2017, was EUR 3.9 million positive (2016: EUR 2.9 million). Innofactor’s financial stability is good.

Net gearing at the end of the review period was 48.9 percent (2016: 52.2 percent).


Espoo, August 1, 2017

INNOFACTOR PLC

Board of Directors


Additional information:
CEO Sami Ensio, Innofactor Plc
Tel. +358 50 584 2029

Briefings concerning the Half-Yearly Report January 1–June 30, 2017

On August 1, 2017, at 10:00 Finnish time, Innofactor will hold a briefing concerning the Half-Yearly Report in Finnish for the media, investors and analysts at the company's premises at Keilaranta 9, Espoo. The report will be presented by CEO Sami Ensio.

Innofactor will also hold a corresponding conference call in English on August 1, 2017, at 16:00 Finnish time.

We ask you to register for the briefings beforehand by sending email to .

The presentations of the briefings will be available on Innofactor's web site after the briefings.


Distribution:
NASDAQ Helsinki
Main media
www.innofactor.com

Attachements: Innofactor Plc's Half-Yearly Report, January 1–June 30, 2017 (IFRS)

Innofactor
Innofactor is a leading Nordic provider of digitalization and cloud solutions. Innofactor has Microsoft Ecosystem’s leading expertise and the most comprehensive offering in the Nordics. Innofactor has over 600 eager and motivated top professionals in Finland, Sweden, Denmark and Norway. Innofactor serves over 1,500 commercial, public, and third sector organizations. In 2012 to 2016, the annual growth of Innofactor’s net sales has been approximately 28%. The Innofactor Plc share is listed in the technology section of the main list of NASDAQ Helsinki Ltd. www.innofactor.com

Media Contacts

Salla Tähtinen
Communications Manager
salla.tahtinen@innofactor.com
+358 50 554 3832
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