Innofactor Plc’s Half-Yearly Report for January 1–June 30, 2024 (IFRS)

    Innofactor Plc’s Half-Yearly Report for January 1–June 30, 2024 (IFRS)

Innofactor Plc Half-Yearly Report July 18, 2024, at 9:00 Finnish time

In a challenging market situation, Innofactor fell short of its targets in the second quarter, and profitability was also significantly further reduced by legal expenses.

April–June 2024 in brief:

• Net sales were approximately EUR 19.9 million (2023: 20.1), representing a decrease of 1.1%
• The operating margin was approximately EUR 0.6 million (2023: 1.8), representing a decrease of 65.8%
  • The operating margin includes legal expenses of approximately EUR 0.75 million, without which the operating margin would have amounted to EUR 1.4 million and the comparable change would have been a decrease of 23.2%
• Operating profit was EUR -0.1 million (2023: 1.0), representing a decrease of 114.5%
  • The operating profit includes the corresponding legal expenses as the operating margin, without which the operating profit would have been approximately EUR 0.6 million and the comparable change would have been a decrease of 38.2%
• The order backlog at the end of the review period was EUR 70.4 million (2023: 77.3), representing a decrease of 8.9%

January–June 2024 in brief:

• Net sales were approximately EUR 41.1 million (2023: 40.3), representing an increase of 1.8%
  • The operating margin was approximately EUR 3.2 million (2023: 4.3), representing a decrease of 24.6%
    • The operating margin includes legal expenses of approximately EUR 0.75 million, without which the operating margin would have amounted to EUR 4.0 million and the comparable change would have been a decrease of 7.0%
  • Operating profit was EUR 1.7 million (2023: 2.7), representing a decrease of 37.2%
    • The operating profit includes the corresponding legal expenses as the operating margin, without which the operating profit would have been approximately EUR 2.4 million and the comparable change would have been a decrease of 9.3%
      
      

Key figures of the group, IFRS        

	Apr 1–Jun 30, 2024	Apr 1–Jun 30, 2023	Change		Jan 1–Jun 30, 2024	Jan 1–Jun 30, 2023	Change
Net sales, EUR thousand	19,866	20,095	-1.1%		41,052	40,317	1.8%
Revenue in the previous period	20,095	16,946			40,317	33,911
Growth of net sales	-1.1%	18.6%			1.8%	18.9%
Operating result before depreciation and amortization (EBITDA), EUR thousand	604	1,765	-65.8%		3,204	4,252	-24.6%
percentage of net sales	3.0%	8.8%			7.8%	10.5%
Operating profit/loss (EBIT), EUR thousand	-143	984	-114.5%		1,693	2,695	-37.2%
percentage of net sales	-0.7%	4.9%			4.1%	6.7%
Earnings before taxes, EUR thousand	-202	813	-124.9%		1,541	2,124	-27.4%
percentage of net sales	-1.0%	4.0%			3.8%	5.3%
Earnings, EUR thousand	-343	459	-174.8%		1,034	1,496	-30.8%
percentage of net sales	-1.7%	2.3%			2.5%	3.7%
Order backlog	70,355	77,250	-8.9%		70,355	77,250	-8.9%
Net gearing	24.6%	46.6%	-22.0%		24.6%	46.6%	-22.0%
Net gearing without IFRS 16	15.2%	30.5%	-15.3%		15.2%	30.5%	-15.3%
Equity ratio	51.0%	46.6%	4.4%		51.0%	46.6%	4.4%
Equity ratio without IFRS 16	53.6%	50.4%	3.2%		53.6%	50.4%	3.2%
Active personnel on average during the review period*	587	584	0.5%		583	576	1.2%
Active personnel at the end of the review period*	591	588	0.5%		591	588	0.5%
Earnings per share (EUR)	-0.01	0.01	-174.8%		0.03	0.04	-30.8%

*) Innofactor Group monitors the number of active personnel. The number of active personnel does not include employees who are on leave for more than three months.

Innofactor’s future outlook for 2024

Innofactor’s net sales and operating margin (EBITDA) in 2024 are estimated to increase from 2023, during which net sales were EUR 80.3 million and the operating margin was EUR 9.1 million.

CEO Sami Ensio’s review: In spite of the challenging market situation, we managed to increase our order backlog when compared to the previous quarter

Net sales in the second quarter of 2024 amounted to EUR 19.9 million, representing a year-on-year decrease of 1.1 percent. During the second quarter, net sales increased in Finland and Norway, but decreased in Sweden and Denmark. The operating margin (EBITDA) decreased by 65.8 percent year-on-year to EUR 0.6 million (3.0 percent of net sales), and was positive in Finland. The operating margin includes legal expenses of approximately EUR 0.75 million, without which the operating margin would have amounted to EUR 1.4 million and the comparable change would have been a decrease of 23.2%.

Net sales in the first half of 2024 amounted to EUR 41.1 million, representing a year-on-year increase of 1.8 percent. In the first half of the year, net sales increased in Finland and Norway, but decreased in Sweden and Denmark. The operating margin (EBITDA) decreased by 24.6 percent year-on-year to EUR 3.2 million (7.8 percent of net sales), and was positive in Finland and Norway. The operating margin includes legal expenses of approximately EUR 0.75 million, without which the operating margin would have amounted to EUR 4.0 million and the comparable change would have been a decrease of 7.0%.

The market situation remained difficult in the second quarter of 2024. New sales were challenging during the second quarter. The order backlog at the end of the review period was EUR 70.4 million, representing a year-on-year decrease of 8.9 percent. However, the order backlog increased by 2.2 percent when compared to the first quarter of the year. Our invoicing rate fell short of our target due to the challenging demand situation.

Innofactor wants to maintain its competitiveness when demand eventually turns to growth again. In our tendering activities, we have not priced our services below our cost. We are adapting our operations with a conservative approach. We have reduced the use of subcontracting, especially in Finland and Sweden. In the second quarter, we also reduced the number of our personnel by approximately 20 percent in Sweden, where profitability has been weak for an extended period of time and the challenging market situation has further exacerbated the situation. This resulted in expenses in the second quarter, but that will no longer be the case in the second half of the year.

According to a decision handed down by the arbitration tribunal of the Stockholm Chamber of Commerce, Innofactor Plc will not be able to collect the previously awarded damages of approximately EUR 2.3 million in relation to the 2016 Lumagate acquisition to the full extent of the awarded damages. Instead, Innofactor Plc's distribution share will be approximately EUR 1 million at a maximum. In addition to this, Innofactor Plc will bear its own legal costs of approximately EUR 309,000, the opposing party’s legal costs of approximately EUR 310,000 and the costs of the arbitration, EUR 166,150. These expenses were recognised in full in the second quarter, and there should be no further costs related to the matter.

Innofactor’s aim is to be the leading provider of organizations’ digital transformation in each of the Nordic countries. We believe in our chosen Nordic strategy and in reaching our long-term goals. This requires perseverance and determination from the company's management and employees as well as investors. Innofactor is still actively looking for new strategic partnerships in the Nordic countries. The Group’s goal is to grow both organically and through acquisitions.

Strategy and its realization in the review period

Innofactor’s strategy comprises our purpose, mission, vision, strategic choices, values, working principle, employer promise, and long-term financial goals.

Our purpose: Innovating to make the world work better

Our mission: Driving the modern digital organization

Our vision: Leading Nordic digital transformation partner in the Microsoft ecosystem

Our strategic choices:

• The most competent Nordic teams
• Productized and specialized offering
• Proactive and agile way of working
• Innovation with top customers

Our values:

• Accountability
• Empowerment
• Innovation
• Customer

Our working principle: Our principle is to put people first in everything we do. We want to provide solutions that make our customers’ everyday work and life run smoothly and bring a smile to their faces.

Employer Value Proposition: Be the real you

Our long-term financial goals:

• To achieve annual growth of about 20 percent, the majority of which is intended to be achieved by organic growth
• To achieve about 20 percent EBITDA in relation to the net sales
• To keep the cash flow positive and secure good financial standing in all situations.
  
  

Innofactor’s net sales in the first half of the year amounted to EUR 41.1 million (2023: 40.3), representing year-on-year growth of 1.8 percent. The prevailing weak market situation makes the net sales growth target challenging at present. Innofactor aims to continue to take measures to support stronger net sales growth going forward.

The operating margin (EBITDA) was 7.8 percent of net sales (2023: 10.5%). In the period under review, the operating margin decreased by 24.6 percent year-on-year. The operating margin includes legal expenses of approximately EUR 0.75 million, without which the operating margin would have amounted to EUR 4.0 million and the comparable change would have been a decrease of 7.0%. While profitability has improved over the long term, continued attention and efforts by the management are still needed in the coming years to reach the long-term operating margin target of approximately 20 percent.

Innofactor’s operating cash flow for the review period January 1–June 30, 2024, amounted to EUR 5.5 million (2023: EUR 3.9 million) and the equity ratio at the end of the review period was 51.0 percent (2023: 46.6 percent). Innofactor’s strong operating cash flow supports the company’s strategic goal of profitable growth and securing a solid financial standing in all situations. The amount of interest-bearing liabilities has decreased considerably. At the end of the review period, the company's interest-bearing liabilities to financial institutions amounted to only approximately EUR 4.0 million, consisting entirely of current liabilities.

Espoo, July 18, 2024

INNOFACTOR PLC

Board of Directors

Additional information:
CEO Sami Ensio, Innofactor Plc
tel. [phone]
[e-mail]

Briefings concerning the Half-Yearly Report for January 1–June 30, 2024

Innofactor will publish its Half-Yearly Report for January–June 2024 on Thursday, July 18, 2024, at approximately 9:00 Finnish time.

A briefing in Finnish concerning the Half-Yearly Report will be held for media, investors and analysts on the same day at 10:00 Finnish time, at the company’s premises at Keilaranta 9, Espoo. The report will be presented by CEO Sami Ensio. The corresponding video conference in English will be held at 12 noon Finnish time. The report will be presented by CFO Antti Rokala.

Please register for the briefing in advance by sending an e-mail to [e-mail].

The presentation materials will be available on Innofactor’s website after the briefing.

Distribution:
NASDAQ Helsinki
Main media
www.innofactor.com

Innofactor
Innofactor is the leading driver of the modern digital organization in the Nordic Countries for its about 1,000 customers in commercial and public sector. Innofactor has the widest solution offering and leading know-how in the Microsoft ecosystem in the Nordics. Innofactor has about 600 enthusiastic and motivated top specialists in Finland, Sweden, Denmark and Norway. The Innofactor Plc share is listed in the technology section of the main list of NASDAQ Helsinki Oy. www.innofactor.com #ModernDigitalOrganization #PeopleFirst #CreatingSmiles #BeTheRealYou

Attachment

• Innofactor Plcs Half Yearly Report for January 1 - June 30 2024 IFRS