Innofactor Plc's Interim Report for January 1–March 31, 2015 (IFRS)

21.04.2015 00:00

Innofactor Plc Interim Report April 21, 2015, at 8:30 Finnish time

Summary

*) The first quarter of 2014 included financial income of EUR 325 thousand for the additional purchase price related to the acquisition.

Innofactor’s net sales and operating margin (EBITDA) in 2015 is estimated to increase from 2014, during which the net sales were EUR 44.1 million and operating margin was EUR 4.1 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 first quarter of 2015, Innofactor continued profitable growth in accordance with its strategy. The growth of net sales was 5.2 percent (net sales EUR 11.3 million) and it was entirely organic.

The operating margin (EBITDA) was EUR 0.8 million (7.1 percent of the net sales) and grew 1.8 percent from same period last year.

The decrease in the result compared to the previous year is due to the fact that the corresponding period in 2014 included an additional EUR 325 thousand financial income related to acquisitions. The operating cash flow during the first quarter was strong and grew to EUR 3.7 million, which shows an increase of 186 percent from 2014.

Innofactor’s order book developed favorably during the first quarter of the year. Innofactor’s order book grew, for example, due to the largest single deal in Innofactor’s history—the stage 1 of the customer information system project for the Criminal Sanctions Agency—worth EUR 4.8 million, and providing a Service Design team for the Population Register Centre, worth EUR 0.6-0.7 million.

We think that Innofactor has good prerequisites to continue growing its business operations profitably in 2015.

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

Main forces affecting the markets are the transfer of software into the cloud, increased significance of social media, mobile devices and Internet of Things, data analytics and machine learning, and data security and protection. A clear change in the purchase habits of Innofactor’s customers has been observed as these business changes are taking place. The customers expect the IT provider to focus more on business benefits instead of technology benefits. The customers want the providers to have solutions that are ready for use without a need to make changes and they want to be able to buy more continuous services instead of large one-off projects.

Innofactor estimates that the growth of IT service market in 2015 will be 0–1% in Finland and 1–3% in other Nordic Countries. The estimate is based on research institutes’ forecasts and Innofactor’s outlook on markets.

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 just 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.

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 offering, 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 Nordic large and medium-sized companies and government organizations, which have high standards in their IT solution acquisitions. Innofactor develops solutions, products and services suitable for this group by itself and in cooperation with its partners. Innofactor's strategy supports well the change in the markets. Innofactor believes it can gain market share from its competitors and utilize possible IT market growth in the future.

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. 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, April 21, 2015

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–March 31, 2015

On April 21, 2015, 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 ir@innofactor.com or by phoning to +358 50 575 6120 (Tuija Österberg).

Innofactor will also hold a conference call in English for analysts, media and investors on April 21, 2015, at 16:00 Finnish time. Registrations to ir@innofactor.com before 12:00 Finnish time on April 21, 2015.

Financial releases in 2015

The schedule for financial releases in 2015 is as follows:

July 7–20, 2015: Silent period

July 21, 2015: Interim report January–June

October 6–19, 2015: Silent period

October 20, 2015: Interim report January–September

Distribution:

NASDAQ OMX Helsinki
Main media
www.innofactor.com

Attachment: Innofactor Plc's interim report for January 1-March 31, 2015 (IFRS)