14.05.2019 09:00 EEST (UTC +3)
Innofactor Plc Interim Report May 14, 2019, at 9:00 Finnish time
Profitability and order backlog improved significantly in the first quarter
January–March 2019 in brief:
- The net sales were approximately EUR 16.1 million (2018: 16.5), which shows a decrease of 2%
- The operating margin was approximately EUR 0.9 million (2018: 0.3), which shows an increase of 155%
- Operating loss was EUR 90 thousand (2018: operating loss 364), improving by 75%
- The order backlog was EUR 41.0 million (2018: 22.2), which shows an increase of 85%
- The measures for improving profitability, carried out near the end of 2018, started to take an effect in the first quarter as planned
- Innofactor got several significant orders in the first quarter, for example, Traficom VISA, approximately EUR 0.5 million; a decision-making system for the City of Espoo, approximately EUR 1.5 million; and a membership management project for a Swedish organization, approximately EUR 1.3 million
|
|
|
Jan 1–Mar 31, 2019 |
Jan 1–Mar 31, 2018 |
Change |
|
Net sales, EUR thousand |
|
16,148 |
16,470 |
-2.0% |
|
Growth of net sales |
|
-2.0% |
-4.5% |
|
|
Operating profit before depreciation and amortization (EBITDA), EUR thousand*** |
|
869 |
341 |
155.1% |
|
percentage of net sales |
|
5.4% |
2.1% |
|
|
Operating profit/loss (EBIT), EUR thousand* |
|
-90 |
-364 |
75.3% |
|
percentage of net sales* |
|
-0.6% |
-2.2% |
|
|
Earnings before taxes, EUR thousand* |
|
-197 |
-477 |
58.8% |
|
percentage of net sales* |
|
-1.2% |
-2.9% |
|
|
Earnings, EUR thousand* |
|
-88 |
-382 |
77.0% |
|
percentage of net sales* |
|
-0.5% |
-2.3% |
|
|
Order backlog*** |
|
41,029 |
22,179 |
85.0% |
|
Net gearing* |
|
65.6% |
53.2% |
|
|
Equity ratio**** |
|
40.0% |
44.1% |
|
|
Active personnel on average during the review period** |
|
544 |
605 |
-10.1% |
|
Earnings per share (EUR) |
|
-0.0024 |
-0.0105 |
77.0% |
*) In accordance with IFRS 3, the operating result for January 1–March 31, 2019, includes EUR 507 thousand (2018: 507) 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. 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–March 19, 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.
****) The handling of lease liabilities in a new way in accordance with IFRS 16 had an effect of approximately EUR 300 thousand in the operating margin (EBITDA) and 4.3 percentage point negative effect in the equity ratio.
Innofactor's future outlook for 2019
Innofactor's net sales and operating margin (EBITDA) in 2019 is estimated to increase from 2018, during which the net sales were EUR 63.1 million and operating margin was EUR -1.0 million.
CEO Sami Ensio's review: The corrective measures had the planned effect – the profitability of the first half of the year improved and the order backlog grew into record-breaking amounts.
The net sales in the first quarter of 2019 were EUR 16.1 million, which shows a decrease of 2.0 percent compared to the previous year. The net sales grew in Finland and Norway, but decreased in Sweden and Denmark. 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 0.2 million. Despite the decreased net sales, the net sales per employee grew 9.2% from the previous year. It is also notable that, for the first time in Innofactor's nine-year history in the stock exchange, the net sales in the first quarter grew organically compared to the last quarter of the previous year (1.6% growth), whereas it has typically decreased by approximately ten percent.
The operating margin (EBITDA) grew 155.1 percent from the previous year and was EUR 0.9 million (5.4 percent of the net sales). The operating margin improved by EUR 1.8 million from the last quarter of 2018 (Q4/2018: -0.9). 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 0.3 million in the operating margin. Historically, Innofactor's operating margin has improved in every quarter towards the end of the year.
In the first quarter, the order backlog grew to a record-breaking amount and was EUR 41.0 million at the end of the quarter (2018: 22.2), which shows an increase of 85% compared to the same time in the previous year. Innofactor got several significant orders in the first quarter, for example, Traficom VISA, approximately EUR 5.0 million; a decision-making system for the City of Espoo, approximately EUR 1.5 million; and a membership management project for a Swedish organization, approximately EUR 1.3 million
Innofactor's Country Manager in Sweden, Viktor Lundqvist, and Country Manager in Denmark, Per Bendix Olsen, have made a personal decision to leave the company and search new challenges elsewhere. I would like to thank them for all the work they have done for Innofactor. Innofactor CEO Sami Ensio will be the acting Country Manager for Sweden for the time being, and Executive Vice President, Business Development and Operational Excellence Vesa Syrjäkari (who was the acting Country Manager for Norway until the end of February 2019, before the current Country Manager started in the position) will be the acting Country Manager in Denmark for the time being. Our goal is to turn the net sales in Sweden and Denmark into growth on the last quarter of 2019 at the latest. We will also start actions for recruiting new Country Managers. These changes in personnel are not estimated to cause any extra costs for the last three quarters of 2019.
The Board of Directors of Innofactor has decided on a share issue of 1.2 million shares directed at the personnel, which will be realized by the end of June 2019 and for which we issued a separate release today. We believe that this will further improve the commitment of our brilliant employees to being part of Innofactor's success.
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.
In the first half of the year, the operating margin (EBITDA) grew 155.1 percent from the previous year and was EUR 0.9 million (5.4 percent of the net sales). The operating margin improved by EUR 1.8 million from the last quarter of 2018 (Q4/2018: -0.9). As regards profitability, Innofactor was able to 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 the first quarter were EUR 16.1 million (2018: 16.5), which shows a decrease of 2.0 percent compared to the previous year. However, the net sales increased by 1.6 percent compared to the last quarter of 2018 when the net sales were EUR 15.9 million. The net sales grew in Finland and Norway, but decreased in Sweden and Denmark. It is essential for Innofactor's strategy to gain growth also in Sweden and Denmark. Our goal is to turn the net sales in Sweden and Denmark into growth on the last quarter of 2019 at the latest as was noted also in the CEO's review. The goal of getting the net sales to grow is also supported by the record-breaking order backlog of EUR 41.0 million (2018: 22.2).
Innofactor's operating cash flow in the review period of January 1–March 31, 2019, was EUR 1.6 million (2018: EUR 0.6 million) and the equity ratio at the end of the review period was 40.0 percent (2018: 44.0 percent). The handling of lease liabilities in a new way in accordance with IFRS 16 had a positive effect of approximately EUR 0,3 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, May 14, 2019
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 January 1–March 31, 2019
A briefing in Finnish concerning the interim report will be held for media, investors and analysts on May 14, 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 ir@innofactor.com.
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: Innofactor Plc's Interim Report for January 1–March 31, 2019 (IFRS).pdf