06.03.2018 09:00 CEST/EET (UTC +2)
Innofactor Plc Financial Statement March 6, 2018, at 9:00 Finnish time
Quarter 10–12/2017
- The net sales were approximately EUR 17.2 million (2016: 18.0), which shows a decrease of 4.5%.
- The operating margin was approximately EUR 0.6 million (2016: 2.0), which shows a decrease of 71.2%. The weaker than expected profitability was contributed to by the lower than expected net sales of which a significant part consisted of net sales from licensing.
- The operating loss was EUR 182 thousand (2016: operating profit 1,326) and decreased by 113.7 %.
- On October 13, 2017, Innofactor announced in a stock exchange release that Innofactor would change the result forecast for 2017 to state that the operating margin of 2017 will be lower than the operating margin of 2016.
- Innofactor got several significant orders on the last quarter, for example, the Finnish Communications Regulatory Authority, approximately EUR 0.9 million; Finnish Safety and Chemicals Agency (Tukes), approximately EUR 0.6 million; and a financial organization, approximately EUR 0.6 million.
Year 1–12/2017:
- The net sales were approximately EUR 66.1 million (2016: 59.6), which shows an increase of 10.9%.
- The operating margin was approximately EUR 1.7 million (2016: 4.8), which shows a decrease of 64.2%.
- The operating loss was approximately EUR 1,0 million (2016: operating profit 2.3), decreasing by 144.6% due to increased write-offs related to acquisitions, in accordance with IFRS 3, resulting in a decrease of EUR 2,030 thousand (2016: 1,884).
Oct 1–Dec 31, 2017 |
Oct 1–Dec 31, 2016* |
Change |
Jan 1–Dec 31, 2017 |
Jan 1–Dec 31, 2016* |
Change |
|||
|
Net sales, EUR thousand |
17,189 |
17,992 |
-4.5% |
66,088 |
59,616 |
10.9% |
||
|
Operating margin (EBITDA), EUR thousand |
574 |
1,990 |
-71.2% |
1,730 |
4,831 |
-64.2% |
||
|
percentage of net sales |
3.3% |
11.1% |
2.6% |
8.1% |
||||
|
Operating profit/loss (EBIT), EUR thousand* |
-182 |
1,326 |
-113.7% |
-1,039 |
2,332 |
-144.6% |
||
|
percentage of net sales* |
-1.1% |
7.4% |
-1.6% |
3.9% |
||||
|
Earnings before taxes, EUR thousand* |
42 |
1,196 |
-96.5% |
-1,157 |
1,920 |
-160.3% |
||
|
percentage of net sales* |
0.2% |
6.6% |
-1.8% |
3.2% |
||||
|
Earnings, EUR thousand* |
33 |
125 |
-73.6% |
-926 |
1,536 |
-160.3% |
||
|
percentage of net sales* |
0.2% |
0.7% |
-1.4% |
2.6% |
||||
|
Net gearing |
53.1% |
70.2% |
53.1% |
70.2% |
||||
|
Equity ratio |
43.8% |
35.8% |
43.8% |
41.6% |
||||
|
Active personnel on average during the review period** |
613 |
589 |
4.1% |
610 |
532 |
14.7% |
||
|
Earnings per share (EUR) |
0.0009 |
0.0038 |
-76.0% |
-0.0262 |
0.0176 |
-248.9% |
*) In accordance with IFRS 3, the operating result for October 1–December 31, 2017, includes EUR 507 thousand (2016: 518) 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 October 1–December 31, 2017, would have been EUR 325 thousand (2016: operating profit 1,884), the operative business result before taxes EUR 549 thousand (2016: 1,714), the operative business result EUR 439 thousand (2016: 1,371), and the operative business result per share EUR -0.0121 (2016: 0.0149). In accordance with IFRS 3, the operating result for January 1–December 31, 2017, includes EUR 2,030 thousand (2016: 1,884) 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–December 31, 2017, would have been EUR 991 thousand (2016: 4,216), the operative business result before taxes EUR 873 thousand (2016: 3,804), the operative business result EUR 698 thousand (2016: 3,043), and the operative business result per share EUR 0.0198 (2016: 0.0926).
**) 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 2018
Innofactor’s net sales and operating margin (EBITDA) in 2018 is estimated to increase from 2017, during which the net sales were EUR 66.1 million and operating margin was EUR 1.7 million.
CEO Sami Ensio's review: The last quarter continued to be challenging – completing the ERP project and unification of the Nordic operating models is central in ensuring future profitability and Nordic growth strategy
The net sales decreased by 4.5 percent in the last quarter (net sales EUR 17.2 million). Especially the net sales from licensing was significantly lower than we expected. In the last quarter of 2017, the operating margin (EBITDA) was EUR 0.6 million (3.3 percent of the net sales) and decreased by 71.2 percent from the previous year. The weaker than expected profitability was primarily contributed to by the lower than expected net sales.
The net sales for the entire year grew by 10.9 percent (net sales EUR 66.1 million) and the main part of this was based on inorganic growth resulting from the Lumagate acquisition. The operating margin (EBITDA) for the entire year was EUR 1.7 million (2.6 percent of the net sales) and decreased by 64.2 percent from the previous year. The weak profitability was especially due to the lower than expected net sales on the second half of the year, especially in licensing net sales, and the resulting decrease in the operating margin.
Innofactor's vision is to be the leading implementer of cloud solutions and digitalization in each of the Nordic Countries. Despite the challenges of 2017, 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.
In its first stage, reaching organic growth of approximately 20 percent and operating margin of approximately 20 percent in long term requires especially completing the common Nordic operating models and central information system projects, the most important one being the Nordic ERP (enterprise resource planning) system. The ERP system has been introduced in Denmark in 2016, in Finland in 2017, and in Norway at the beginning of 2018. In Sweden, the goal is to introduce it as soon as possible. The entire ERP project is planned to be finished by the end of 2018 (including group level consolidation, budgeting for 2019, and internal accounting). This means that this one system will eventually replace 20 separate systems. The new ERP system has already clearly improved the control of our operations in several areas, but the most important benefits from it are expected to be gained starting from the second half of 2018.
The realization of the strategy and means for reaching the long terms goals are described in more detail below, in the section "Strategy and its realization in the review period."
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 2018–2020, Innofactor will primarily strive to unify its operating model and offering in the Nordic Countries in its selected areas. Unifying the offering may take place 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 growth of approximately 20 percent, most of which should be organic
- To achieve approximately 20 percent operating margin (EBITDA) in relation to the net sales
- 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–December 31, 2017, grew by 10.9 percent and the main part of this was based on inorganic growth resulting from the Lumagate acquisition. The company did not reach the goal it had set for organic growth.
Innofactor's operating margin (EBITDA) in relation to net sales was 2.6 percent in the review period. This is a record low and very far away from the set target level of 20 percent.
The main actions for reaching the approximately 20 percent growth and 20 percent operating margin:
- In the Nordic Countries, we will focus on those fields and customer segments, which have great growth potential, such as social services and health services.
- We will improve sales of our products and services to existing customers in order to get a greater share of the budget the customers are using for digitalization.
- We will invest in using modern digital marketing methods to improve our sales.
- We will concentrate on management of know-how, recruiting, and resource optimization in the Nordic level.
- In the future, we will increasingly shift the focus of our offering to products and productized services.
- We will continuously strengthen the professional competence of our experts to ensure that our customers are prepared to pay their services and our leading offering prices that are above the industry average.
- We will develop our flexible and quick delivery model, which facilitates the creation of added value, in such a way as to further minimizing unnecessary work, improving invoicing ratio and increasing customer satisfaction.
- We drive operational excellence to improve Financial Quarterly Accountability (FQA), internal information systems and predictability.
Innofactor’s operating cash flow in the review period of January 1–December 31, 2017, was EUR 4.2 million positive (2016: EUR 3.4 million). Innofactor’s financial stability is good. Net gearing at the end of the review period was 53.1 percent (2016: 70.2 percent).
Board of Director’s proposal on the dividend
Innofactor is a growing company and intends to use its operating profit on actions promoting growth, for example, on realizing mergers. Innofactor has defined a dividend distribution policy according to which the aim of the Board of Directors is to provide an opportunity for the shareholders to distribute, from the part of the operating margin (EBITDA) that exceeds 10%, the maximum dividend allowed by the state of the business. For 2017, the operating margin (EBITDA) was 2.6% of the net sales. In making the proposal on the dividend, the Board of Directors takes into account the company's financial situation, profitability and near-term outlook.
At the end of the financial period of 2017, the distributable assets of the Group's parent company were EUR 27,377,826.67.
The Board of Directors proposes that no dividend be distributed for the financial period of 2017.
Espoo, March 6, 2018
INNOFACTOR PLC
Board of Directors
Additional information:
CEO Sami Ensio, Innofactor Plc
Tel. +358 50 584 2029
sami.ensio@innofactor.com
Briefings concerning the financial statement of January 1–December 31, 2017
On March 6, 2018, at 10:00 Finnish time, Innofactor will hold a briefing concerning the financial statement 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 March 6, 2018, at 16:00 Finnish time.
We ask you to register for the briefings beforehand by sending email to ir@innofactor.com.
The presentations of the briefings will be available on Innofactor's web site after the briefings.
Financial releases in 2018
The annual report for 2017 will be published on the company's web site on Tuesday, March 13, 2018.
The Annual General Meeting will be held on Wednesday April 4, 2018, at 9:00 Finnish time.
The schedule for financial releases in 2018 is as follows:
- Interim Report January−March 2018 (Q1) on Tuesday May 8, 2018
- Half-Yearly Report January−June 2018 (Q2) on Tuesday, July 24, 2018
- Interim Report January−September 2018 (Q3) on Tuesday, October 30, 2018
Distribution:
NASDAQ Helsinki
Main media
www.innofactor.com
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