Innofactor Plc Interim Report April 23, 2014, at 8:30 Finnish time
Summary
| mo. 1–3/ 2014 | mo. 1–3/ 2013 | Change | mo. 1–12/ 2013 | ||
| Net sales, EUR thousand | 10,718 | 5,541 | +93.4% | 32,685 | |
| Growth of net sales | +93.4% | +39.5% | +73.7% | ||
| Operating margin (EBITDA), EUR thousand | 713 | 584 | +22.1% | 3,284 | |
| percentage of net sales | 6.7% | 10.5% | 10.0% | ||
| Operating profit/loss (EBIT), EUR thousand | 373 | 424 | -12.0% | 2,255 | |
| percentage of net sales | 3.5% | 7.7% | 6.9% | ||
| Earnings before taxes, EUR thousand* | 570 | 412 | +38.3% | 1,863 | |
| percentage of net sales* | 5.3% | 7.4% | 5.7% | ||
| Earnings, EUR thousand* | 456 | 310 | +47.1% | 1,407 | |
| percentage of net sales* | 4.3% | 5.6% | 4.3% | ||
| Net gearing | 45.7% | -10.0% | 55.9% | ||
| Equity ratio | 49.0% | 69.4% | 43.1% | ||
| Personnel on average during the review period | 413 | 198 | +108.6% | 307 | |
| Earnings per share (EUR) | 0.0142 | 0.0104 | +36.7% | 0.0432 |
* 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 in 2014 are expected to be about EUR 43–48 million (2013: EUR 32.7 million). The operating margin (EBITDA) in 2014 is expected to be about EUR 4–6 million (2013: EUR 3.3 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 2014, Innofactor continued profitable growth in accordance with its strategy. The growth of net sales was 93.4 percent (net sales EUR 10.7 million) and operating margin (EBITDA) was EUR 0.7 million (6.7 percent of the net sales). This proves that on the first quarter of 2014, Innofactor has been able to realize its selected growth strategy persistently and successfully.
At the end of January 2014, Innofactor completed, as planned, the integration project related to the acquisition of atBusiness Oy. At the beginning of 2014, Innofactor implemented a common Enterprise Resource Planning system for its Finnish operations. The entire personnel in Espoo moved to the common premises right at the beginning of the quarter and the personnel of the last separate offices in Tampere, related to the acquisition of Dynamic Team, by the end of the quarter.
In Denmark, the integration of Enabling Group has progressed well. The Copenhagen offices were combined during January 2014 and the main parts of the integration project were implemented by the end of the quarter as planned.
Due to the acquisitions and centralizing of operations, we think that Innofactor has good prerequisites to continue growing its operations profitably in 2014. Innofactor's strategy supports well the change in the markets and we believe that we can also benefit from any future growth in the IT market.
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 2–3 percent in 2013 and the growth is expected to increase to about 4–5 percent in 2014. The growth in business software market was estimated to be about 5 percent globally in 2013 and it is estimated to grow about 6–7 percent in 2014.
The IT market is changing. Four global mega trends can be observed. First, using information technology and information systems is increasingly transferring into a cloud. The cloud will connect people, data, services and hardware into one global whole. The benefits of the cloud are cost-efficiency and flexibility. It is estimated that 70 percent of companies either already use cloud solutions or are planning to start using them. In the future, customers increasingly want to buy flexible services fitting their needs at the time, not so much large one-off delivery projects.
Second, the growth in the importance of social media that started with consumers is transferring to companies. Information systems are more and more expected to enable flexible communications between people and different systems, between employees, customers and partners. Approximately 57 percent of major companies are planning to invest in social media solutions in 2014.
Third, mobile devices and convergence of devices change how people behave at work and in their leisure time. People want their preferred common and personal services and same usability regardless of time, place and device used. IT is also consumerizing. Increasingly larger part of IT purchases in companies are made on the conditions of individuals, that is, consumer markets. It is estimated that the number of mobile workforce will increase to 1.3 billion by 2015, which is approximately 37 percent of the entire global workforce.
Fourth, the cloud, social media and mobile devices are estimated to increase the amount of data saved globally by about 30–50 percent every year. Analyzing this so-called Big Data will offer plenty of possibilities for developing the operations of companies and the public sector and also new business models.
Innofactor believes that Microsoft—and thus, companies operating in the Microsoft environment—will have a strong position on the changing IT market. Microsoft has the leading position in consumer and business software, competitive offering and strong proof of very rapid growth in cloud solutions. Additionally, the acquisition of the Nokia mobile phone business will give Microsoft a strong position in device markets. To maintain its leading position, Microsoft invests in product development significantly more than its competitors. In the calendar year 2013, Microsoft's investments in product development were about USD 11 billion, whereas the corresponding investments by Google were about USD 8 billion, IBM about USD 6 billion, and Apple about USD 5 billion
Innofactor believes that this development will create markets with long term growth for companies like Innofactor that are strongly committed to Microsoft.
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 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. For example, in the association and parish sector, there are national software providers specialized in these fields. There are also specialized providers for these fields for the selected solutions, such as network services, case management and customer relationship management systems.
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 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 large and medium-sized companies and government organizations, which have high standards in their IT solution acquisitions.
Innofactor's competitive edge is based on a strategy, which differs from its competitors' strategies and which focuses on providing a wide range of Microsoft-based solutions for companies and organizations and also utilizing its own software and products. Innofactor has a leading position in and understanding of the Microsoft ecosystem in the Nordic Countries. Innofactor has one of the largest solution, product and service offerings based on Microsoft platforms in Europe. Profound understanding and good reputation in several customer verticals in the private, public and third sectors makes it possible to develop business operations so that they will serve the customers even better. Innofactor considers itself able to provide solutions that are competitive when compared to its competitors.
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 typically focused on one solution area. 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 23, 2014 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, 2014
On April 23, 2014, 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 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 50 307 0026 (Ingrid Peura).
Innofactor will also hold a conference call in English for analysts, media and investors on April 23, 2013, at 16:00 Finnish time. Registrations to ir@innofactor.com at least one hour before the event.
Financial releases in 2014
The schedule for financial releases in 2014 is as follows:
July 8–July 21, 2014: Silent period
July 22, 2014: Interim report January–June
October 7–October 20, 2014: Silent period
October 21, 2014: Interim report January–September
Distribution: NASDAQ OMX Helsinki Main media www.innofactor.com
