Innofactor Plc's interim report for January 1-March 31, 2011 (IFRS)

10.05.2011 00:00

Innofactor Plc Stock Exchange Release May 10, 2011, at 8:30 Finnish time

Summary

Innofactor group's key figures for January 1–March 31, 2011:

• Net sales EUR 3,943 thousand (2010: 2,210), increase of 78.4%
• Earnings before interest, taxes, depreciation and amortization (EBITDA) EUR 150 thousand (2010: 348), decrease of 56.9%
• EBITDA percentage 3.8% (2010: 15.7%)
• Earnings before interest and taxes (EBIT) EUR 19 thousand (2010: 279)
• EBIT percentage 0.5% (2010: 12.6%)

Innofactor's result for the first quarter was affected by one-off costs related to the relisting, a sum of about EUR 200 thousand in the review period.

The future outlook of Innofactor has not changed. The group's net sales in 2011 is estimated to be about EUR 17 million, which is an increase of 70% compared to 2010. Additionally, the earnings before interest, taxes, depreciation and amortization (EBITDA) both in euro and in percentage is estimated to be better than in 2010 (2010: EUR 979 thousand and 9.9 percent).

Key figures of the group

The figures in the interim report have not been audited.

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* The figures include one-off costs related to the relisting for about EUR 200 thousand.

** The percentages for the return on equity and return on investment have been adjusted to reflect the figures for a 12-month period.

*** There are no comparison data for the corresponding review period in 2010 as Innofactor did not draft comparable interim reports in 2010 due to the reverse acquisition in accordance with IFRS 3.

**** In accordance with the decision of the Innofactor Plc's Annual General Meeting on April 28, 2011, twenty old shares were consolidated into one new share (registered in the Trade Register on May 7, 2011) and due to this, the total number of shares decreased to 1/20 of the previous number.

Reporting

Innofactor Plc operates on one segment, offering software and systems and services related to them, and it operates mainly in Finland. Due to this, a segment-specific or geographical distribution of the net sales and result will not be presented.

CEO Sami Ensio's review:

On the first quarter of the year, Innofactor's net sales grew 78.4 percent compared to the same period last year. Large part of the growth was based on the acquisitions in 2010 and about 14 percent of the growth was organic. The predicted growth for the whole year is about 70 percent.

Research and development focused into new versions of old products and into Innofactor's first cloud solutions. Research and development costs recognized in the profit and loss statement were EUR 592 thousand (there is no comparison figure available for the same period in 2010).

During the first quarter of the year, the relisting of Innofactor Plc was completed. That resulted in about EUR 200 thousand of one-off costs and required a significant amount of attention from the upper management. The earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter was EUR 150 thousand (3.8%) and the earnings before interest and taxes (EBIT) was EUR 19 thousand (0.5%).

On the second quarter of 2011, Innofactor will focus on improving profitability, which will be helped by the good order backlog. During the quarter, the consolidation of Innofactor Documenta Oy and the companies of the Innofactor Software subgroup will be completed. In this arrangement, the operative business of the Innofactor group was centralized into the former Innofactor Documenta Oy (from now on, Innofactor Software Oy) as of May 1, 2011. This arrangement will decrease management costs in the future. Additionally, special attention will be paid to unifying and improving the methods of project management and resource allocation. There will also be attempts to decrease other business costs. These actions have been named as the cost-effectiveness program. We believe that the cost-effectiveness program can be implemented without a need to decrease the number of personnel.

Market outlook and business environment

Nokia and Microsoft made an announcement on significant cooperation on February 11, 2011. Nokia's move to start using the Microsoft operating system in its smart phones may offer Innofactor, Finland's largest software provider focused on Microsoft solutions, significant opportunities, which may have a fundamental effect on the growth of the group within the coming years.

Nokia's announcement on April 27, 2011, that it will transfer the Symbian development to an external service provider, will affect the business environment in Finland. This will bring some uncertainty factors to the business environment, but they are not predicted to cause significant risk for Innofactor's operation.

Innofactor will publish its new global cloud solutions in Microsoft's Worldwide Partner Conference in Los Angeles, USA, on July 10–14, 2011. The conference is Microsoft's largest partner event and over 10,000 Microsoft partners all over the world will attend. Possible product launches by Innofactor and other companies and their reception in the World Wide Conference will affect Innofactor's position as a global provider of Microsoft cloud solutions.

Cloud solutions combined with the Windows operating system becoming more common in mobile phones may offer Innofactor, Finland's largest software provider focused on Microsoft solutions, significant opportunities.
On the whole, Innofactor considers the market outlook to be positive.

Also, when considering the business environment, it should be noted that Innofactor has worked actively in Sweden to make itself better known among Microsoft Sweden and its local partners.

New publishing procedure

In accordance with the recommendation of the standard 5.2b of the Financial Supervisory Authority, Innofactor will introduce a new procedure for publishing the interim reports. This release is used for publishing the interim report of the first quarter of 2011, which is enclosed as a PDF file and can also be read on Innofactor's web site at www.innofactor.com.

Espoo, May 10, 2011

INNOFACTOR PLC

Board of Directors

Additional information:

Sami Ensio
CEO
Innofactor Plc
Tel. +358 50 584 2029
sami.ensio@innofactor.com

Distribution:

NASDAQ OMX Helsinki
Main media
www.innofactor.com

Financial releases in 2011

The interim reports of Innofactor Plc in 2011 will be published as follows:

• Interim report January–June on August 9, 2011, at 8:30 Finnish time
• Interim report January–September on November 1, 2011, at 8:30 Finnish time

The minutes of meeting for the Annual General Meeting on April 28, 2011, were published on May 5, 2011.

Enclosure: Innofactor Plc interim report for January 1–March 31, 2011