25.10.2022 09:00 CEST/EET (UTC +2)
Innofactor Plc Interim Report October 25, 2022, at 9:00 Finnish time
Innofactor made a strong return to the path of profitable growth – highest-ever Q3 net sales, operating margin and order backlog
July–September 2022 in brief:
- Net sales were approximately EUR 16.7 million (2021: 13.7), representing an increase of 21.5%
- Of the growth, approximately EUR 1.8 million (13.4%) was organic
- Operating margin was approximately EUR 1.8 million (2021: 1.7), representing an increase of 4.8%
- Operating profit was EUR 1.0 million (2021: 0.9), representing an increase of 4.9%
- The order backlog at the end of the review period was EUR 77.3 million (2021: 72.0), representing an increase of 7.3%
- Innofactor received several significant orders in the third quarter, for example:
- Continued development and maintenance of the ERP and document management system for administrative courts and special courts for the Legal Register Centre (HAIPA project), approximately EUR 4.0 million, of which approximately EUR 2.0 million is entered in the order backlog (excluding years subject to options)
- Development and maintenance of the Aalto University Foundation’s centralized data warehouse, approximately EUR 5.0 million, to be entered in the order backlog in stages according to agreements to be subsequently concluded with the customer
January–September 2022 in brief:
- Net sales were approximately EUR 50.6 million (2021: 48.8), representing an increase of 3.6%
- Without the Prime business sold in the first quarter of 2021, the comparable change would have been an increase of 4.9 percent
- Of the growth, approximately EUR 1.3 million (2.6%) was organic
- Operating margin was approximately EUR 5.2 million (2021: 8.4), representing a decrease of 38.5%
- The operating margin in 2021 included a capital gain of approximately EUR 2.6 million from the sale of the Prime business, without which the operating margin would have been approximately EUR 5.9 million; the comparable change in operating margin is a decrease of 11.8%
- Operating profit was EUR 2.9 million (2021: 6.0), representing a decrease of 50.9%
- The operating profit for 2021 includes a corresponding sales gain as the operating margin, without which the operating profit would have been approximately EUR 3.4 million, representing a decrease of 14.3%
- The operating profit for 2021 includes a corresponding sales gain as the operating margin, without which the operating profit would have been approximately EUR 3.4 million, representing a decrease of 14.3%
| Key figures of the group, IFRS | ||||||||
| Jul 1–Sep 30, 2022 | Jul 1–Sep 30, 2021 | Change | Jan 1–Sep 30, 2022 | Jan 1–Sep 30, 2021 | Change | |||
| Net sales, EUR thousand | 16,683 | 13,730 | 21.5% | 50,594 | 48,834 | 3.6% | ||
| Growth of net sales | 21.5% | -2.0% | 3.6% | 1.9% | ||||
| Operating result before depreciation and amortization (EBITDA), EUR thousand | 1,777 | 1,695 | 4.8% | 5,196 | 8,448 | -38.5% | ||
| percentage of net sales | 10.7% | 12.3% | 10.3% | 17.3% | ||||
| Operating profit/loss (EBIT), EUR thousand* | 959 | 915 | 4.9% | 2,946 | 5,996 | -50.9% | ||
| percentage of net sales | 5.8% | 6.7% | 5.8% | 12.3% | ||||
| Earnings before taxes, EUR thousand* | 759 | 755 | 0.5% | 2,500 | 5,400 | -53.7% | ||
| percentage of net sales | 4.6% | 5.5% | 4.9% | 11.1% | ||||
| Earnings, EUR thousand* | 599 | 581 | 3.0% | 1,992 | 4,207 | -52.6% | ||
| percentage of net sales | 3.6% | 4.2% | 3.9% | 8.6% | ||||
| Order backlog | 77,251 | 71,979 | 7.3% | 77,251 | 71,979 | 7.3% | ||
| Net gearing* | 56.9% | 34.0% | 56.9% | 34.0% | ||||
| Net gearing without IFRS 16 | 41.8% | 21.2% | 41.8% | 21.2% | ||||
| Equity ratio | 43.7% | 52.9% | 43.7% | 52.9% | -17.4% | |||
| Equity ratio without IFRS 16 | 46.8% | 56.8% | 46.8% | 56.8% | ||||
| Active personnel on average during the review period* | 555 | 508 | 9.3% | 527 | 493 | 6.9% | ||
| Active personnel at the end of the review period* | 554 | 497 | 11.5% | 554 | 497 | 11.5% | ||
| Earnings per share (EUR) | 0.0164 | 0.0155 | 5.3% | 0.0544 | 0.1125 | -51.6% | ||
*) Innofactor Group monitors the number of active personnel. The number of active personnel does not include employees who are on leave for more than 3 months.
Innofactor’s future outlook for 2022
Innofactor’s net sales and operating margin (EBITDA) in 2022 are estimated to increase from 2021, during which net sales were EUR 66.4 million. Innofactor's operating margin (EBITDA) for 2022 is estimated to increase from EUR 7.5 million, which would have been the operating margin for 2021 without the proceeds of EUR 2.6 million from the sale of the Prime business.
CEO Sami Ensio’s review: Focus on increasing customer work and project profitability improved Innofactor’s organic growth and profitability in Q3 – we will continue on the same path for the remainder of the year
Net sales in the third quarter of 2022 amounted to EUR 16.7 million, representing year-on-year growth of 21.5 percent, with the rate of organic growth being 13.4 percent. The operating margin (EBITDA) grew by 4.8 percent year-on-year and came to EUR 1.8 million (10.7 percent of net sales). Innofactor’s net sales grew, and operating margin was positive in all countries (Finland, Sweden, Norway and Denmark).
Net sales for the first nine months of 2022 amounted to EUR 50.6 million, representing year-on-year growth of 3.6 percent. Excluding the Prime business sold on March 31, 2021, from April 1, 2021, onwards the comparable rate of growth was 4.9 percent. The rate of organic growth was 2.6 percent. The operating margin (EBITDA) decreased by 38.5 percent year-on-year and came to EUR 5.2 million (10.3 percent of net sales). The operating margin in 2021 included a capital gain of approximately EUR 2.6 million from the sale of the Prime business, without which the operating margin in 2021 would have amounted to EUR 5.9 million and the comparable change in the operating margin would have been a decrease of 11.8 percent.
The order backlog increased slightly from the previous quarter and amounted to EUR 77.3 million at the end of the review period, representing year-on-year growth of 7.3 percent.
In connection with our half-yearly report, I noted that we could not be satisfied with our operational performance in Finland and Sweden in the first half of 2022. As previously announced, we immediately took action in the summer to improve our performance. We focused particularly on increasing project profitability and the invoicing ratio by focusing even more on customer work. The actions we took enabled us to systematically increase the invoicing ratio from one week to the next during the quarter, especially in Finland. Our goal is to maintain the invoicing ratio at least at the level we achieved at the end of the quarter until the end of the year, and to further increase it in 2023.
Martin Söderlind was appointed in September as Country Manager for Innofactor Sweden. Martin has previously served as a member of Innofactor’s Group Executive Board and held the position of Chief Innovation and Talent officer since April 2021. In his new role, Martin will continue as a member of the Group Executive Board. Innofactor Sweden’s previous Country Manager, Marcus Hasselblad, will leave Innofactor Group in November to pursue other opportunities. Innofactor has appointed Anni Pokkinen as Innofactor Group’s Chief People Officer and a member of the Group Executive Board. She has taken over a significant share of the duties previously handled by Martin Söderlind. Anni has held several HR-related roles at Innofactor since July 2015. Most recently, she held the position of HR Director, Nordic Development and Operations, and HR Director, Finland. In her new position, Anni will also continue to lead Innofactor’s Finnish HR.
The integration of Invenco Ltd into Innofactor’s operations has progressed according to plan. Invenco Ltd was acquired by Innofactor in June 2022. We have harmonized our operating models and moved to shared office premises. We opened a new office in Oulu at the end of September, which we hope will also support the recruitment of new professionals in the Oulu region. We aim to complete all key aspects of the integration process by the end of the year.
Innofactor’s aim is to be the leading provider of organizations’ digital transformation 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.
Strategy and its realization in the review period
Innofactor’s strategy comprises our purpose, mission, vision, strategic choices, values, working principle, and long-term financial goals.
Our purpose: Innovating to make the world work better
Our mission: Driving the modern digital organization
Our vision: Leading Nordic digital transformation partner in the Microsoft ecosystem
Our strategic choices:
- The most competent Nordic teams
- Productized and specialized offering
- Proactive and agile way of working
- Innovation with top customers
Our values:
- Accountability
- Empowerment
- Innovation
- Customer
Our working principle: Our principle is to put people first in everything we do. We want to provide solutions that make our customers’ everyday work and life run smoothly and bring a smile to their faces.
Our long-term financial goals:
- To achieve annual growth of about 20 percent, the majority of which is intended to be achieved by organic growth
- To achieve about 20 percent EBITDA in relation to the net sales
- To keep the cash flow positive and secure good financial standing in all situations.
Innofactor’s net sales in January–September 2022 amounted to EUR 50.6 million (2021: 48.8), representing year-on-year growth of 3.6 percent. Without the Prime business sold in the first quarter of 2021, the comparable change would have been an increase of 4.9 percent. Approximately EUR 1.3 million (2.6%) of the growth was organic, excluding the net sales derived from the Invenco acquisition. The net sales growth target is supported by Innofactor’s record-high order backlog of EUR 77.3 million (2021: 71.9). The Invenco acquisition adds inorganic growth to our business, and we have also successfully initiated measures to improve our performance and net sales in Finland and Sweden, and those measures will continue through the rest of the year.
The operating margin (EBITDA) was 10.3 percent of net sales (2021: 17.3%). EBITDA for the review period decreased by 38.5 percent year-on-year, which was particularly attributable to the capital gain recognized on the sale of the Prime business in 2021. Without the sale of the Prime business, the operating margin (EBITDA) would have decreased by 11.8 percent year-on-year. The measures we have initiated in Finland and Sweden to improve our performance and net sales are aimed at increasing our EBITDA in the fourth quarter and, in line with our market guidance, we expect to exceed last year’s EBITDA, excluding the effect of the capital gain recognized on the sale of the Prime business.
Innofactor’s operating cash flow for the review period of January 1–September 30, 2022, amounted to EUR 3.0 million (2021: EUR 6.2 million) and the equity ratio at the end of the review period was 43.7 percent (2021: 52.9 percent). Cash flow in 2021 was increased by EUR 2.2 million in proceeds from the sale of the Prime business. In connection with the Invenco acquisition, Innofactor took out a bank loan of EUR 2.5 million in June 2022. The bank loan and the effect of consolidating Invenco into Innofactor’s balance sheet on June 30, 2022, reduces the equity ratio in 2022. Cash flow from financing was also weakened by repayments of Invenco Ltd’s loans in the third quarter. Innofactor’s strong operating cash flow supports the company’s strategic goal of profitable growth and securing a solid financial standing in all situations.
Espoo, October 25, 2022
INNOFACTOR PLC
Board of Directors
Additional information:
CEO Sami Ensio, Innofactor Plc
tel. +358 50 584 2029
sami.ensio@innofactor.com
Briefings concerning the Interim Report for January 1–September 30, 2022
Innofactor Plc will publish its Interim Report for January–September 2022 on Tuesday, October 25, 2022, at approximately 9:00 am Finnish time.
A video conference call for media, investors and analysts will be held in English on the same day beginning at 12:00 Finnish time. The report will be presented by CFO Markku Puolanne.
To participate in the conference, kindly register in advance by sending an e-mail to ir@innofactor.com. The participation link will be sent via e-mail to the registered participants the day before the conference.
The presentation materials will be available on Innofactor website after the conference.
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 1,000 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 over 500 enthusiastic and motivated top specialists in Finland, Sweden, Denmark and Norway. The Innofactor Plc share is listed in the technology section of the main list of NASDAQ Helsinki Oy. www.innofactor.com #ModernDigitalOrganization #HybridWork #PeopleFirst #CreatingSmiles
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