Innofactor Plc's interim report for January 1–June 30, 2013 (IFRS)

30.07.2013 00:00

Innofactor Plc Interim Report July 30, 2013, at 8:30 Finnish time

Summary

* 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 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.

There are uncertainties related to the outlook for 2013 due to the integration of a major acquisition, so no detailed estimate of the outlook can be provided. Innofactor's net sales in 2013 are expected to be about EUR 34–37 million (2012: EUR 18.8 million). Operating profit before depreciation and amortization (EBITDA) in 2013 is expected to be about EUR 3–5 million (2012: EUR 1.2 million).

The figures in this interim report have not been audited. The figures include the acquired atBusiness Oy (current Innofactor Business Solutions Oy) as of June 1, 2013. Further details about the acquisition can be found in this interim report's section "Acquisitions and changes in the group structure."

Reporting

Innofactor operates on a single segment, offering software, systems and related services.

CEO Sami Ensio's review

The most notable single event in the review period was the acquisition on June 6, 2013, in which Innofactor acquired the entire share capital of atBusiness Oy. The net sales of atBusiness Oy in 2012 were EUR 17.4 million and profit margin (EBITDA) was EUR 2.7 million (15.3% of the net sales). Along with Innofactor, it has been one of the Finland's leading providers of solutions based on Microsoft technologies for commercial and public sector clients. atBusiness Oy's strategy was almost the same as Innofactor's strategy. The acquisition made Innofactor one of the five largest Nordic providers focused on Microsoft technologies. The new size will give Innofactor improved conditions to operate as a public limited company, implement its growth strategy in the Nordic Countries and to offer its own software products and services to its customers through its own channel. The arrangement is believed to result in significant synergy benefits. The arrangement is a major step in the story of Innofactor's growth.

The arrangement finalized during the reporting period with atBusiness will bring significant growth in 2013 and 2014 and will create an excellent base for growth also in the future. In the second quarter, Innofactor continued profitable growth in accordance with its strategy. The growth of net sales was at 94.3 percent and profit margin (EBITDA) was 8.6 percent. Measured in net sales (EUR 7.7 million) and EBITDA (EUR 0.7 million), this was the best second quarter in the company's history. Without the one-off costs related to the acquisition, the profitability would have been even better: EBITDA would have been about EUR 1.0 million, which would have been 13.3 percent of the net sales.

Innofactor expects 2013 to be a year of profitable growth due to the acquisition of atBusiness and due to other business as well. Our personnel is committed and motivated to work even harder for our customers, which can also be seen in the personnel satisfaction, which improved significantly during the review period. The integration of atBusiness and Innofactor has progressed as planned. However, Innofactor has prepared for the possible challenges presented by the integration, for example, by ensuring a high utilization rate of sales and personnel, by trying to utilize quickly the new possibilities of cross-selling among the clientele of both companies, and by ensuring successful communication in all stages of the integration.

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 1–2 percent in 2012 and they are expected to grow about 3–5 percent in 2013. The growth of software market in 2012–2013 is estimated to be about one percentage point faster, that is, 4–6 percent in 2013.

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 individuals, that is, the consumer market. Commercial clients tend to purchase software that can be used in 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 has made a strategic choice by focusing on solutions that use Microsoft technology. Innofactor believes that Microsoft is a strong player in the IT market change: it holds the leading position in the business software market, a significant position in the consumer software market, and invests heavily in mobile devices and cloud technologies.

Innofactor has selected as its application areas those areas where Microsoft's growth and, correspondingly, its partners' growth has exceeded manifold the growth of general global IT service and software markets. For example, in 2012, Microsoft repeatedly reported annual growth figures of over 30 percent in the sales of Dynamics CRM solutions and Microsoft SQL Server Premium servers (used in Microsoft-based BI solutions), and annual growth figures of over 10 percent in the sales of SharePoint, Lync and Exchange solutions. The above-mentioned Microsoft solution areas, which are growing significantly faster than other IT markets, form a significant part of Innofactor's business operations.

Additionally, the publishing of the Windows 8 operating system in October 2012 is significant for the Microsoft ecosystem and it is believed to strengthen Microsoft's competitiveness.

The company feels that 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 locally in the Nordic Countries and as a provider of cloud and mobile solutions globally.

Companies strongly committed to Microsoft in the Nordic Countries are mainly small companies. Innofactor believes that size gives a competitive edge for a company also in the Microsoft ecosystem, making mergers of small companies focused on Microsoft solutions probable. This gives Innofactor opportunities to grow.

Espoo, July 30, 2013

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–June 30, 2013

On July 30, 2013, 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 19, Espoo. The report will be presented by CEO Sami Ensio and CFO Mikko Karvinen. 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 ir@innofactor.com or by phoning to +358 50 554 3832 / Salla Tähtinen.

Innofactor will also hold a conference call in English for analysts, media and investors on July 30, 2013, at 16:00 Finnish time. Registrations to ir@innofactor.com at least one hour before the event.

Financial releases in 2013

The schedule for financial releases in 2013 is as follows:

October 15–October 28, 2013: Silent period

October 29, 2013, at 8:30 Finnish time: Interim Report for January–September

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

Attachment: Innofactor Plc's interim report for January 1–June 30, 2013 (IFRS)