Innofactor Plc's interim report for January 1–September 30, 2013 (IFRS)
29.10.2013 00:00
Innofactor Plc Interim Report October 29, 2013, at 8:30 Finnish time
Summary
mo. 7–9 /2013 | mo. 7–9/ | Change | mo. 1–9 /2013 | mo. 1–9/ | Change | mo. 1–12 /2012 | ||||
Net sales, EUR thousand | 8,317 | 4,567 | +82.1% | 21,595 | 12,521 | +72.5% | 18,818 | |||
Growth of net sales | +82.1% | +21.3% | +72.5% | +3.7% | +9.4% | |||||
Operating profit before depreciation and amortization (EBITDA) , EUR thousand* | 714 | 495 | +44.2% | 1,963 | 180 | +990.6% | 1,215 | |||
percentage of net sales* | 8.6% | 10.8% | 9.1% | 1.4% | 6.5% | |||||
Operating profit/loss (EBIT), EUR thousand* | 403 | 348 | +15.8% | 1,269 | -249 | +609.6% | 620 | |||
percentage of net sales* | 4.8% | 7.6% | 5.9% | -2.0% | 3.3% | |||||
Earnings before taxes, EUR thousand** | 270 | 328 | -17.7% | 838 | -269 | +411.5% | 591 | |||
percentage of net sales** | 3.2% | 7.2% | 3.9% | -2.1% | 3.1% | |||||
Earnings, EUR thousand** | 204 | 224 | -8.9% | 631 | -367 | +271.9% | 449 | |||
percentage of net sales** | 2.5% | 4.9% | 2.9% | -2.9% | 2.4% | |||||
Net gearing | 62.3% | 8.6% | 62.3% | 8.6% | 5.4% | |||||
Equity ratio | 45.7% | 66.1% | 45.7% | 66.1% | 66.1% | |||||
Personnel on average during the review period | 384 | 196 | +95.9% | 279 | 186 | +50.0% | 189 | |||
Earnings per share (EUR) | 0.0059 | 0.0074 | -20.3% | 0.0200 | -0.0123 | +262.3% | 0.0150 | |||
* 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 continue to be slight uncertainties related to the outlook for 2013 due to the finalization of the integration of a major acquisition. Innofactor's net sales in 2013 are expected to be about EUR 32–34 million (2012: EUR 18.8 million). Operating profit before depreciation and amortization (EBITDA) in 2013 is expected to be about EUR 3–4 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
One of the major issues on the review period was starting the integration of atBusiness Oy, acquired on June 6, 2013, as part of Innofactor's operation in Finland. The atBusiness Oy integration process will continue until January 31, 2014. The Espoo offices, in which over 60% of Innofactor's personnel work, will be combined as of January 1, 2014, which is expected to realize a major part of the synergy benefits. Innofactor has decided to transfer part of the recruiting planned for the end of 2013 to the year 2014, which decreases the net sales of 2013, but has no significant effect on EBITDA.
In the third quarter, Innofactor continued profitable growth in accordance with its strategy. The growth of net sales was 82.1 percent and profit margin (EBITDA) was 8.6 percent. Measured in net sales (EUR 8.3 million) and EBITDA (EUR 0.7 million), this was the best third quarter in the company's history. As a significant part of Innofactor's net sales comes from selling human labor, the net sales of the third quarter are typically the lowest of the year due to summer vacations.
The merger of Innofactor and atBusiness has been received enthusiastically among our customers, personnel, major partners, and investors. During the review period, Innofactor won, for example, the tender for delivering centralized data warehouse maintenance and further development for Aalto University, valued at EUR 568,490, and after the review period, the tender for maintaining FICORA’s (The Finnish Communications Regulatory Authority) eServices platform for a period of four years including the option of one additional year, valued at EUR 2,257,800.
According to our new published strategy, Innofactor's goal is to achieve EBITDA of over 10% in each year during 2014–2017. In order to achieve this goal, Innofactor will at the end of 2013 focus on ensuring the speedy realization of the synergy benefits - related among others things to cross selling and cross resourcing - resulting from the atBusiness acquisition.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. Among central trends are mobility and 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 central trend consists of the new environments offered by cloud computing and the possibility of offering software from a cloud globally to a wide range of end users and for all devices, including mobile phones. The third trend is the intensive growth of the amount of information and analyzing it, that is, big data. The fourth trend is the increase of social media and other communications in information systems.
Innofactor has made a strategic choice by focusing on solutions that use Microsoft technology. The company believes that Microsoft is a strong player in the IT market change. Microsoft has the leading position in business software and a significant position in consumer software. It also has a strong position in services and devices, especially after the acquisition of the Nokia mobile phone business. Microsoft has the world's largest software and service offering, and it invests annually about 10 billion dollars into research and development, for example, in cloud and mobile software. Many Microsoft programs, such as Windows and Office, are de facto standards. Microsoft also has the world's largest IT business partner network, which innovates new solutions continuously. Microsoft is growing considerably faster than the markets.
Innofactor has selected as its application areas especially 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, on the financial period that ended in June 2013, Microsoft reported growth in two-figure percentages, for example, in the areas of Dynamics CRM solutions, Microsoft SQL servers used in Microsoft-based BI solutions, and SharePoint, Lync and Exchange solutions. In many cloud solutions, Microsoft reported an even faster growth. The above-mentioned Microsoft solution areas, which are growing significantly faster than other IT markets, form a significant part of Innofactor's business operations.
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 solution provider in wider areas.
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, October 29, 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–September 30, 2013
On October 29, 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 October 29, 2013, at 16:00 Finnish time. Registrations to ir@innofactor.com at least one hour before the event.
Financial releases in 2014
The 2013 Financial Statements Bulletin and Interim Report October-December 2013 will be published on Tuesday February 25, 2014. The Annual Report for 2013 will be published on Innofactor's web site on Febuary 27, 2014. The Annual General Meeting is tentatively scheduled to be held on March 20, 2014.
The schedule for financial releases in 2014 is as follows:
April 9-April 22, 2014: Silent Period
April 23, 2014: Interim Report for January-March
July 8-July 21, 2014: Silent Period
July 22, 2014: Interim Report for January-June
October 7-October 20, 2014: Silent Period
October 21, 2014: Interim Report for January-September
Distribution:
NASDAQ OMX Helsinki
Main media
www.innofactor.com
Attachement: Innofactor Plc's interim report for January 1–September 30, 2013 (IFRS)