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Innofactor Plc's Interim Report for January 1-June 30, 2014 (IFRS)(OMX Via Acquire Media NewsEdge) Innofactor Plc Interim Report July 22, 2014, at 8:30 Finnish time Summary mo. mo. Change mo. mo. Change mo. 4–6/ 4–6/ 1–6/ 1–6/ 1–12/ 2014 2013 2014 2013 2013 -------------------------------------------------------------------------------- Net sales, EUR thousand 11,226 7,737 +45.1% 21,944 13,278 +65.3% 32,685 Growth of net sales +45.1% +94.3% +65.3% +66.9% +73.7% Operating profit before 708 665 +6.5% 1,421 1,249 +13.8% 3,284 depreciation and amortization (EBITDA), EUR thousand* percentage of net sales* 6.3% 8.6% 6.5% 9.4% 10.0% Operating profit/loss 358 442 -19.0% 731 866 -15.6% 2,255 (EBIT), EUR thousand* percentage of net sales* 3.2% 5.7% 3.3% 6.5% 6.9% Earnings before taxes, 456 156 +192.3 1,026 568 +80.6% 1,863 EUR thousand** % percentage of net 4.1% 2.0% 4.7% 4.3% 5.7% sales** Earnings, EUR thousand** 365 117 +212.0 821 427 +92.3% 1,407 % percentage of net 3.3% 1.5% 3.7% 3.2% 4.3% sales** Net gearing 52.2% 61.2% 52.2% 61.2% 55.9% Equity ratio 47.6% 41.3% 47.6% 41.3% 43.1% Personnel on average 420 261 +60.9% 417 229 +82.1% 307 during the review period Earnings per share (EUR) 0.0114 0.0039 +192.3 0.0256 0.0142 +80.3% 0.0432 % *) The second quarter of 2014 included a one-off cancellation of a cost reserve related to the integration, amounting to about EUR 135 thousand. The second quarter of 2013 included one-off costs related to the atBusiness Oy acquisition for about EUR 164 thousand, and also cost reserves related to the integration for about EUR 200 thousand, a total of about EUR 364 thousand. **) The second quarter of 2014 included a one-off cancellation of a cost reserve related to the integration of about EUR 135 thousand and a financial income of EUR 216 thousand from the additional purchase price related to the acquisition, a total of about EUR 351 thousand. The second quarter of 2013 included one-off costs related to the atBusiness Oy acquisition for about EUR 370 thousand (of which EUR 206 thousand were costs related to organizing the loans), and also cost reserves related to the integration for about EUR 200 thousand, a total of about EUR 570 thousand. Innofactor's net sales in 2014 are expected to be about EUR 43–48 million (2013: EUR 32.7 million). The operating margin (EBITDA) in 2014 is expected to be about EUR 4–6 million (2013: EUR 3.3 million). The figures in this interim report have not been audited. Reporting Innofactor operates on a single segment, offering software, systems and related services. CEO Sami Ensio's review In the second quarter of 2014, Innofactor continued profitable growth in accordance with its strategy. The growth of net sales was 45.1 percent (net sales EUR 11.2 million) and operating margin (EBITDA) was EUR 0.7 million (6.3 percent of the net sales). During the review period, Innofactor published stock exchange releases on two major deals, to AEL and Finland's Slot Machine Association, with a total value of about EUR 3.8 million. In addition to these deals, Innofactor received several other orders. In June, Innofactor started measures on the group level to improve its operations. These include, for example, making sales more efficient, improving the billing rate and cutting costs. The goal is to make the business operations and organization more streamlined. The measures are estimated to have significant effects on the operating profit. The plan is to complete the measures for the most part by the end of August 2014. Janne Martola was appointed as the new CFO and deputy CEO of Innofactor as of July 9, 2014. Janne Martola has extensive knowledge in business and long experience on Innofactor’s operation, which will help the financial management to support the business better. Due to the positive development of the order book and improvement measures during the review period and the earlier acquisitions and centralizing of operations, we think that Innofactor has good prerequisites to continue growing its operations profitably in 2014. Innofactor's strategy supports well the change in the markets and we believe that we can also benefit from any future growth in the IT market. Innofactor is still actively looking for new strategic partnerships in the Nordic Countries. The group will seek growth, which can be organic or based on mergers or acquisitions. Market outlook and business environment Due to long-standing uncertainties in the economic situation, it is challenging to make a reliable estimate on the development of the IT market in the near future. According to research companies monitoring the IT market, the IT service markets grew globally about 2–3 percent in 2013 and the growth is expected to increase to about 4–5 percent in 2014. The growth in business software market was estimated to be about 5 percent globally in 2013 and it is estimated to grow about 6–7 percent in 2014. The IT market is changing. Five global mega trends can be observed. First, using information technology and information systems is increasingly transferring into a cloud. The cloud will connect people, data, services and hardware into one global whole. The benefits of the cloud are cost-efficiency and flexibility. It is estimated that 70 percent of companies either already use cloud solutions or are planning to start using them. In the future, customers will increasingly want to buy flexible services fitting their needs at the time, not so much large one-off delivery projects. Second, the growth in the importance of social media that started with consumers is transferring to companies. Information systems are more and more expected to enable flexible communications between people and different systems, between employees, customers and partners. Approximately 57 percent of major companies are planning to invest in social media solutions in 2014. Third, mobile devices and convergence of devices change how people behave at work and in their leisure time. People want their preferred common and personal services and same usability regardless of time, place and device used. IT is also consumerizing. Increasingly larger part of IT purchases in companies are made on the conditions of individuals, that is, consumer markets. It is estimated that the number of mobile workforce will increase to 1.3 billion by 2015, which is approximately 37 percent of the entire global workforce. Fourth, the cloud, social media and mobile devices are estimated to increase the amount of data saved globally by about 30–50 percent every year. Analyzing this so-called Big Data will offer plenty of possibilities for developing the operations of companies and the public sector and also new business models. Fifth, the importance of data security and the cyber crimes are growing fast. Approximately 12 persons every second become victims of cyber crimes, which means 400 million persons annually. Additionally, it is estimated that one in five small and medium-sized companies are targeted by cyber criminals. Innofactor believes that Microsoft—and thus, companies operating in the Microsoft environment—will have a strong position on the changing IT market. Microsoft has the leading position in consumer and business software, competitive offering and strong proof of very rapid growth in cloud solutions. Additionally, the acquisition of the Nokia mobile phone business will give Microsoft a strong position in device markets. Innofactor believes that this development will create markets with long term growth for companies like Innofactor that are strongly committed to Microsoft. As concerns Microsoft-based solutions, competition in the Nordic Countries is divided between different kinds of parties. The first group is formed by large companies that operate in all of the Nordic Countries. Typically, these companies offer a wide range of IT solutions for companies and organizations, using several competing technologies of which Microsoft technology is one option. The second group is formed by companies that focus on a narrower solution area in the Nordic level. These companies also offer IT solutions for companies and organizations using several competing technologies of which Microsoft technology is typically one option. The third group is formed by companies operating in just one country. These small or medium-sized companies often focus on one solution area, client and/or field. For example, in the association and parish sector, there are national software providers specialized in these fields. There are also specialized providers for these fields for the selected solutions, such as network services, case management and customer relationship management systems. Innofactor has made a strategic choice by focusing on solutions implemented with and utilizing the Microsoft platforms and by selecting as its solution areas the ones in which Microsoft's growth, and thus its partners' and ecosystem's growth, has exceeded the general average growth of IT service and software markets many times over. Innofactor is primarily focused on large and medium-sized companies and government organizations, which have high standards in their IT solution acquisitions. Innofactor's competitive edge is based on a strategy, which differs from its competitors' strategies and which focuses on providing a wide range of Microsoft-based solutions for companies and organizations and also utilizing its own software and products. Innofactor has a leading position in and understanding of the Microsoft ecosystem in the Nordic Countries. Innofactor has one of the largest solution, product and service offerings based on Microsoft platforms in Europe. Profound understanding and good reputation in several customer verticals in the private, public and third sectors makes it possible to develop business operations so that they will serve the customers even better. Innofactor considers itself able to provide solutions that are competitive when compared to its competitors. Microsoft's partner network in the Nordic Countries, and also elsewhere in Europe, is quite fragmented and mainly consists of a large number of small and medium-sized local providers typically focused on one solution area. For Innofactor, this provides interesting potential for consolidation and globalization. Innofactor's good reputation, unique proofs of rapid and profitable growth and successful acquisitions together with business culture with entrepreneurial spirit make it a very attractive partner when making reorganizations in the field in the Nordic Countries. Espoo, July 22, 2014 INNOFACTOR PLC Board of Directors Additional information: CEO Sami Ensio, Innofactor Plc Tel. +358 50 584 2029 [email protected] Briefings concerning the Interim Report January 1–June 30, 2014 On July 22, 2014, at 9:00 Finnish time, Innofactor will hold a briefing concerning the Interim 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 and CFO Janne Martola. The presentations of the briefing will be available on Innofactor's web site after the briefing. We ask you to register for the briefing beforehand either by sending email to [email protected] or by phoning to +358 50 307 0026 (Ingrid Peura). Innofactor will also hold a conference call in English for analysts, media and investors on July 22, 2014, at 16:00 Finnish time. Registrations to [email protected] before 12:00 Finnish time on July 22, 2014. Financial releases in 2014 The schedule for financial releases in 2014 is as follows: October 7–October 20, 2014: Silent period October 21, 2014: Interim report January–September Distribution: NASDAQ OMX Helsinki Main media www.innofactor.com Copyright © 2014 OMX AB (publ). Copyright © 2014 OMX AB (publ) |