09.02.2023 09:00 CEST/EET (UTC +2)
Innofactor Plc Financial Statement February 9, 2023, at 9:00 a.m. Finnish time
Innofactor’s Q4 net sales grew by 17.1 percent and exceeded EUR 20 million for a single quarter for the first time in the company’s history
October–December 2022 in brief:
- Net sales were approximately EUR 20.5 million (2021: 17.5), representing growth of 17.1%
- Of the growth, approximately EUR 2.2 million (12.7%) was organic, excluding the Invenco acquisition and the deduction of approximately EUR 0.4 million recognized in the net sales of Q4/2022 due to uncertainty concerning a receivable in an individual project for which net sales had previously been recognized
- Operating margin was approximately EUR 2.6 million (2021: 1.7), which shows an increase of 57.1%
- The operating margin was also affected by the deduction of EUR 0.4 million in the net sales for Q4/2022 due to uncertainty concerning a receivable in an individual project
- Operating profit was EUR 1.8 million (2021: 0.5), representing an increase of 244.9%
- The order backlog at the end of the review period was EUR 75.8 million (2021: 72.8),
representing an increase of 4.1% - Innofactor received several significant orders in the fourth quarter, for example:
- An information management solution for the Finnish Defence Forces Logistics Command, approximately EUR 22 million (not yet in the order backlog at the end of the review period, it is estimated that slightly over half of the total amount of EUR 22 million will be entered in the order backlog in the first quarter of 2023)
January–December 2022 in brief:
- Net sales were approximately EUR 71.1 million (2021: 66.4), representing an increase of 7.2%
- Without the Prime business sold in the first quarter of 2021, the comparable change would have been an increase of 8.1 percent
- Of the growth, approximately EUR 3.0 million (4.6%) was organic, excluding the Invenco acquisition, net sales from the Prime business in 2021 and the deduction of approximately EUR 0.4 million recognized in the net sales of Q4/2022 due to uncertainty concerning a receivable in an individual project
- Operating margin was approximately EUR 7.8 million (2021: 10.1), representing a decrease of 22.8%
- 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 7.5 million, the comparable operating margin increased by 3.4%
- Operating profit was EUR 4.8 million (2021: 6.5), representing a decrease of 27.1%
- The operating profit for 2021 includes a corresponding sales gain as the operating margin, without which the operating profit would have been approximately EUR 4.0 million, comparable operating profit increased by 19.9%
- The operating profit for 2021 includes a corresponding sales gain as the operating margin, without which the operating profit would have been approximately EUR 4.0 million, comparable operating profit increased by 19.9%
Key figures of the group, IFRS
| Oct 1–Dec 31, 2022 | Oct 1–Dec 31, 2021 | Change | Jan 1–Dec 31, 2022 | Jan 1–Dec 31, 2021 | Change | ||
| Net sales, EUR thousand | 20,536 | 17,530 | 17.1% | 71,130 | 66,364 | 7.2% | |
| Growth of net sales | 17.1% | -4.0% | 7.2% | 0.3% | |||
| Operating result before depreciation and amortization (EBITDA), EUR thousand | 2,612 | 1,663 | 57.1% | 7,808 | 10,111 | -22.8% | |
| percentage of net sales | 12.7% | 9.5% | 11.0% | 15.2% | |||
| Operating profit/loss (EBIT), EUR thousand* | 1,805 | 523 | 244.9% | 4,751 | 6,519 | -27.1% | |
| percentage of net sales* | 8.8% | 3.0% | 6.7% | 9.8% | |||
| Earnings before taxes, EUR thousand* | 1,678 | 330 | 407.7% | 4,178 | 5,730 | -27.1% | |
| percentage of net sales* | 8.2% | 1.9% | 5.9% | 8.6% | |||
| Earnings, EUR thousand* | 1,328 | 297 | 347.3% | 3,320 | 4,504 | -26.3% | |
| percentage of net sales* | 6.5% | 1.7% | 4.7% | 6.8% | |||
| Order backlog | 75,831 | 72,837 | 4.1% | 75,831 | 72,837 | 4.1% | |
| Net gearing | 50.0% | 30.9% | 50.0% | 30.9% | |||
| Net gearing without IFRS 16 | 30.0% | 18.1% | 30.0% | 18.1% | |||
| Equity ratio | 44.8% | 51.1% | 44.8% | 51.1% | -12.3% | ||
| Equity ratio without IFRS 16 | 49.2% | 54.7% | 49.2% | 54.7% | |||
| Active personnel on average during the review period** | 562 | 495 | 13.5% | 536 | 516 | 3.9% | |
| Active personnel at the end of the review period** | 564 | 500 | 12.8% | 564 | 500 | 12.8% | |
| Earnings per share (EUR) | 0.0363 | 0.0080 | 352.3% | 0.0907 | 0.1208 | -24.9% |
*) In accordance with IFRS 3, the operating result for October 1–December 31, 2022, includes EUR 55 thousand (2021: 74) and in January 1–December 31, EUR 277 thousand (2021: 464) in depreciation related to acquisitions, consisting of allocations of the purchase price to intangible assets.
**) The 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 2023
Innofactor’s net sales and operating margin (EBITDA) in 2023 are estimated to increase from 2022, during which net sales were EUR 71.1 million and operating margin was EUR 7.8 million.
CEO Sami Ensio’s review: We are confident that, in 2023, we will be able to continue the strong growth we achieved in the second half of 2022
Net sales in the fourth quarter of 2022 were a record-high EUR 20.5 million, representing year-on-year growth of 17.1 percent. Net sales increased in Finland (in spite of a deduction of approximately EUR 0.4 million recognized in the net sales of Q4/2022 due to uncertainty concerning a receivable related to previously recognized net sales) and Norway, but decreased in Denmark (due to exceptionally strong Q4 net sales in Denmark in 2021) and Sweden (although the business improved towards the end of 2022 compared to the earlier part of the year). Net sales per employee grew by 3.2 percent overall from the previous year. The operating margin (EBITDA) grew by 57.1 percent year-on-year and came to EUR 2.6 million (12.7 percent of net sales). In the fourth quarter of 2022, EBITDA was positive in all of Innofactor’s operating countries. The order backlog at the end of the quarter was EUR 75.8 million (2021: 72.8), representing an increase of 4.1 percent compared to the same time in the previous year.
Net sales for the full year 2022 reached a record high of EUR 71.1 million, representing year-on-year growth of 7.2 percent. The operating margin (EBITDA) was EUR 7.8 million (11.0 percent of net sales). We achieved good business growth in Finland, Norway and Denmark in 2022, and profitability was also at a good level in those countries. Unfortunately, net sales in Sweden declined again in 2022 and profitability was in the negative, although the operating margin for the latter two quarters of the year was positive. We have taken corrective measures in Sweden to turn our Swedish business to growth and profitability. On the whole, Innofactor reached record-high net sales, EBITDA (excluding non-recurring income from divestments) and order backlog in 2022.
In our strategy, we have set ourselves a target of approximately 20 percent annual growth. While we did not reach that target in the first half of the year, our growth exceeded 19 percent in the latter half of the year. We have identified four key drivers of growth: 1) improving operational efficiency and increasing the invoicing rate, 2) increasing the share of licenses and SaaS services, 3) increasing the number of employees, and 4) acquisitions. The first two drivers of growth also have a positive effect on the operating margin. Our growth in the latter half of the year and improved profitability towards the end of the year were particularly attributable to the following: improving operational efficiency and the resulting increase in the invoicing rate by several percentage points in the fourth quarter compared to the first three quarters; the growth of license and SaaS net sales from 25 percent in the first quarter to 28 percent in the fourth quarter; and the Invenco acquisition in June 2022. Our goal in 2023 is to improve the efficiency of our operations, increase the invoicing rate and further increase the share of net sales derived from licenses and SaaS.
In our Q2 interim report, we mentioned challenges related to certain individual project deliveries. The problematic projects in question were, for the most part, completed by the end of 2022. For one project, we recognized a deduction of approximately EUR 0.4 million in revenue in the fourth quarter due to uncertainty related concerning a receivable related to previously recognized net sales. We have improved our operating model to identify potentially challenging projects much earlier than before and enhanced the management of such projects to ensure their successful completion. The aim is to prevent the future occurrence of similar problematic projects.
Innofactor received a record number of new orders in 2022. The case and document management system for the Greater Stockholm Fire Brigade is an important strategic achievement, as it is the first delivery of our Dynasty product outside Finland. We see very attractive opportunities in Sweden and the other Nordic countries for significant market growth over the next few years with the help of our Dynasty product, which has become the market leader in Finland. In Finland, we achieved excellent success in several public procurement processes in 2022 with our Dynasty product. In December, Innofactor won the largest contract in its history when the Finnish Defence Forces selected our offer, which is based on our Dynasty product, as its new information management solution. The value of the contract is estimated to be approximately EUR 22 million. We are grateful to our customers for their trust.
In June 2022, Innofactor acquired Invenco Ltd, a company that specializes in data and analytics. We see significant growth opportunities in the area of data and analytics in Finland, and we now pursue these opportunities together with the leading professionals who joined us as part of the Invenco acquisition. Invenco was a long-term Microsoft partner with approximately 50 employees, of whom 35 are senior data professionals. Invenco’s annual net sales were approximately EUR 6 million and its EBITDA was approximately 5 percent of net sales. Innofactor’s aim is to grow the net sales of the data and analytics unit and improve its profitability through synergies, for example. One excellent example of this is the decision of the Aalto University Foundation in August 2022 to select Innofactor as part of a consortium formed with Invenco Ltd to develop and maintain Aalto University’s centralized data warehouse in a contract valued at approximately EUR 5 million.
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.
I am also pleased that we were able to purchase our own shares in 2022 and will be able to distribute funds to our shareholders for the year 2022 in accordance with our dividend policy at EUR 0.06 per share (2022: EUR 0.08 per share). I want to take this opportunity to thank our customers, partners, employees, and investors for the year 2022.
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 create solutions that make people's 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, of which majority 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 during the review period January 1–December 31, 2022, were EUR 71.1 million (2021: 66.4), representing year-on-year growth of 7.2 percent. Without the Prime business sold in the first quarter of 2021, the comparable change would have been an increase of 8.1 percent. The strategic goal of net sales growth is also supported by the favorable development of the order backlog of EUR 75.8 million (2021: 72.8). The Invenco acquisition brings inorganic growth to Innofactor’s business.
The operating margin (EBITDA) decreased during the review period January 1–December 31, 2022, from EUR 10.1 million in the corresponding period of the previous year to EUR 7.8 million (11.0 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 would have been approximately EUR 7.5 million, corresponding to the comparable operating margin increasing by 3.4%. With regard to profitability, continued attention and efforts by the management are still needed in the coming years to reach the long-term target of approximately 20 percent.
Innofactor’s operating cash flow for the review period January 1–December 31, 2022, amounted to EUR 6.7 million (2021: EUR 8.9 million) and the equity ratio at the end of the review period was 44.8 percent (2021: 51.1%). Cash flow in 2021 was increased by the capital gain of approximately EUR 2.6 million from the sale of the Prime business. The equity ratio in 2022 was reduced by a loan of approximately EUR 2.5 million taken in relation to the Invenco Ltd acquisition. Innofactor’s strong operating cash flow supports the company’s strategic goal of profitable growth and securing a solid financial standing in all situations.
The key actions to be taken to achieve growth of approximately 20 percent and EBITDA of approximately 20 percent:
- We will improve the efficiency of our operations and increase our invoicing rate by five percentage points. This will be achieved by, for example, improving the management of project and service contracts, enhancing the cross-resourcing of personnel between countries and units, reducing employee turnover and developing our self-directed team models.
- We will increase the share of licenses and SaaS services to over 33 percent of net sales from the current level of approximately 28 percent. This will be achieved by, for example, developing our offering, such as the new MDRaaS service (CSOC) and by focusing our sales efforts on customers and solution areas with the highest growth potential and that present the best opportunities for scaling our existing offering in each of the Nordic countries.
- We will increase the number of employees engaged in invoiced services. This will be achieved by, for example, doubling our recruitment of new university graduates to over 60 employees in 2023, concentrating the recruitment of senior professionals to our Nordic recruitment team, increasing the competence of our employees through certifications, reducing employee turnover, improving the efficiency of subcontracting and investing in the development of our employer brand.
- We will become an even more proactive player in the Nordic M&A field. This will be achieved by, for example, through the internal reorganization of operations, emphasizing the role of country directors in actively seeking new potential acquisition targets in their respective countries.
Board of Directors’ proposal on the distribution of profits
Innofactor is a growing company and intends to use its operating profit on actions promoting growth, for example, on realizing mergers. According to the dividend policy, Innofactor aims to pay a dividend regularly each year. The target is to pay about half of the result for the financial period in dividends, taking into account the company’s financial position, possible corporate reorganizations, and other development needs. For 2022, the Group’s result for the financial period was EUR 3,319,797.20. 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 year 2022, the distributable assets of the Group’s parent company amounted to EUR 23,493,847.82.
The Board of Directors proposes that Innofactor Plc distribute EUR 0.06 per share as a repayment of capital.
The Board of Directors further proposes that the Annual General Meeting authorize the Board to decide on a repayment of capital amounting to a maximum of EUR 2,459,293 (EUR 0.06 per share, taking into account the share issue authorization proposed to the Board of Directors).
Espoo, February 9, 2023
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, 2022
Innofactor will publish the financial statement 2022 and interim report for October–December 2022 (Q4) on Thursday, February 9, 2023, at approximately 9:00 a.m. Finnish time.
A briefing in Finnish concerning the financial statement will be held for media, investors and analysts on the same day at 10:00 a.m. Finnish time, at the company's premises at Keilaranta 9, Espoo. The report will be presented by CEO Sami Ensio. The corresponding video conference in English will be held at noon Finnish time. The report will be presented by CFO Markku Puolanne.
Please register for the conferences beforehand by sending email to ir@innofactor.com.
Presentation materials will be available on Innofactor’s website after the conferences.
Financial releases in 2023
The annual report for 2022 will be published on the company’s website on Thursday, March 9, 2023.
The Annual General Meeting will be held on Friday, March 31, 2023, at 9:00 a.m. Finnish time.
The schedule for financial releases in 2023 is as follows:
- Interim report January–March 2023 (Q1) on Tuesday, April 25, 2023
- Half-yearly report January–June 2023 (Q2) on Thursday, July 20, 2023
- Interim report January–September 2023 (Q3) on Tuesday, October 24, 2023
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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