Innofactor Plc Interim report January 1-March 31, 2012 (IFRS)

30.04.2012 00:00

Innofactor Plc Stock Exchange Release April 30, 2012, at 8:30 Finnish time

Summary

Innofactor group's key figures for January 1–March 31, 2012:

• Net sales EUR 3,972* thousand (2011: 3,943), increase of 0.7%*
• Operating profit before depreciation and amortization (EBITDA), EUR -209** thousand (2011: 150), decrease of 239.3%
• EBITDA percentage -5.3%** (2011: 3.8%)
• Operating profit (EBIT) EUR -347** thousand (2011: 19), decrease of 1,926.3%
• EBIT percentage -8.7%** (2011: 0.5%)

The future outlook for Innofactor remains the same. There are notable uncertainties related to the outlook for 2012 due to the instability of the global financial situation, so no detailed estimate of the outlook can be provided. In 2012, the organic growth of Innofactor is estimated to continue (2011: net sales were EUR 17,205 thousand). The profitability of the business operations is expected to remain positive.

The figures in this interim report have not been audited.

* Due to the organizational change on January 2, 2012, projects were rearranged, which had a one-off effect of lowering the net sales in January by about EUR 300 thousand.

** Due to the organizational change on January 2, 2012, projects were rearranged, which had a one-off effect of lowering the net sales in January by about EUR 300 thousand. Additionally, the personnel and office space arrangements related to the organizational change led to a one-off cost of about EUR 100 thousand. In total, these reduced the profitability by about EUR 400 thousand.

Key figures of the group, IFRS

* Due to the organizational change on January 2, 2012, projects were rearranged, which had a one-off effect of lowering the net sales in January by about EUR 300 thousand.

** Due to the organizational change on January 2, 2012, projects were rearranged, which had a one-off effect of lowering the net sales in January by about EUR 300 thousand. Additionally, the personnel and office space arrangements related to the organizational change led to a one-off cost of about EUR 100 thousand. In total, these reduced the profitability by about EUR 400 thousand.

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

**** 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), which reduced the total number of shares to 1/20 of the previous number. The key figures presented in the table have been adjusted to correspond with the current number of shares.

Reporting

Innofactor operates on a single segment and mainly in Finland, offering software, systems and related services. No distribution of net sales or earnings by segment or geographical area is therefore presented.

CEO Sami Ensio's review

During January 1–March 31, 2012, Innofactor’s net sales grew by 0.7 percent compared to the corresponding period last year. Due to the organizational change on January 2, 2012, projects were rearranged, which had a one-off effect of lowering the net sales in January by about EUR 300 thousand. The growth was entirely organic.

The effect on net sales related to the starting of the organizational change has been larger and has lasted longer than estimated beforehand. The organizational change is necessary to secure Innofactor's competitiveness in the long run and it is expected to improve Innofactor's competitiveness on the second half of the year. For example, dividing the product development and system integrator operations into their own units has already improved the quality of product development.

There have not been any significant changes in the general market situation compared to the last quarter of 2011.

The revenue development was also affected by research and product development costs, which were larger than on an average quarter and partly unexpected. New versions of two key products were delayed and therefore required more resources that had been planned causing extra costs and delays in agreed version installments, which hindered the growth of net sales. Research and development costs recognized in the profit and loss statement in the review period were EUR 692 thousand (2011: EUR 592 thousand), which was 17.4% of the net sales (2011: 15.0%).

Operating profit before depreciation and amortization (EBITDA) in the review period was EUR -209 thousand (-5.3%) and operating profit (EBIT) was EUR -347 thousand (-8.7%). In addition to the above-mentioned write-off of EUR 300 thousand in the net sales, the operating profit was affected by the personnel and office space arrangements related to the organizational change, which led to a one-off cost of about EUR 100 thousand. Innofactor's costs are mainly personnel costs, which cannot be adapted in the short term to changes in the net sales, so the challenges of developing the net sales have a significant effect on the operating profit.

In order to improve the profitability, Innofactor's Board of Directors has made a decision to start co-operation negotiations, which will concern the personnel of Innofactor’sSharePoint Solutions unit. In the longer term, Innofactor is seeking a competitive advantage and flexibility, for example, by increasing the productization level of its solutions, the share of subcontracting and the use of lower-cost resources.

Innofactor continues to seek potential strategic partnerships in Finland and neighboring countries. The group will seek growth, which can be organic or based on mergers or acquisitions.

Market outlook and business environment

There have not been changes in the market outlook and business environment.

Due to the uncertainties in economic situation, it is impossible to make a reliable estimate of the development of the IT market. During the previous recession, the IT market reacted to the change less radically than many other sectors. It can therefore be assumed that in a possible new recession, the impacts will not be very dramatic, but it is difficult to present any figures.

The IT market is experiencing a clear turning point. One of the major trends is the consumerization of information technology: an increasingly larger share of the IT purchases made by companies is based on the requirements of the consumer market. Company and corporate clients tend to purchase software that can be used on phones, tablets and computers. Another trend is the ability of public clouds to offer software in a scalable and global form to a wide range of end users and for all devices, including mobile phones. Innofactor believes that Microsoft is a strong player in this situation: it holds the leading position in the business software market and invests heavily in mobile devices.

For companies like Innofactor, which is strongly committed to Microsoft, this development creates growing global markets in the long term both as a traditional system integrator as well as a provider of cloud and mobile solutions. Innofactor sees that strong commitment to Microsoft brings significant competitive advantages. As the companies focusing purely on Microsoft products are typically small, Innofactor believes that they are likely to be consolidating into larger units, and this will offer Innofactor expansion opportunities.

Espoo, April 30, 2012

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 for January 1–March 31, 2012

On April 30, 2012, at 9:00 Finnish time, Innofactor will hold a briefing concerning the interim report in Finnish for the media and analysts at the company's premises at Keilaranta 19, Espoo. At the briefing, CEO Sami Ensio will comment the achievements of Q1/2012 and the outlook for this year.

Innofactor will also hold a conference call in English for analysts, media and investors on April 30, 2012, at 4:00 pm Finnish time. Registrations to ir@innofactor.com at least one hour before the event.

Financial releases in 2012

The schedule for financial releases in 2012 is as follows:

July 16–July 30, 2012: Silent period
July 31, 2012, at 8:30 Finnish time: Interim report for January–June
October 16–October 30, 2012: Silent period
October 31, 2012, at 8:30 Finnish time: Interim report for January–September

Distribution:
NASDAQ OMX Helsinki
Main media
www.innofactor.com

Innofactor Plc Interim Report January 1-March 31, 2012, IFRS (pdf)