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Innofactor Plc Financial Statement 2020 (IFRS)
Innofactor Plc Financial Statement February 18, 2021, at 9:00 Finnish time
Despite COVID-19 and an individual project write-down made in 2019, Innofactor achieved the highest net sales, EBITDA, and order backlog of its history in 2020
January–December 2020 in brief:
The net sales were approximately EUR 66.2 million (2019: 64.2), which shows an increase of 3.1%
The operating margin was approximately EUR 7.2 million (2019: 5.1), which shows an increase of 40.8%
In the last quarter of the year, the operating margin was subject to a final write-down and cost item of approximately EUR 1.0 million in total of a project conducted in Sweden in 2019, without which the operating margin would have been approximately EUR 8.1 million
The operating profit was EUR 2.5 million (2019: 0.8), which shows an increase of 214.4%
The operating profit was subject to a corresponding adjustment as the operating margin, without which the operating profit would have been approximately EUR 3.5 million
October–December 2020 in brief:
The net sales were approximately EUR 18.3 million (2019: 17.4), which shows an increase of 4.7%
The operating margin was approximately EUR 1.6 million (2019: 1.6), which shows an increase of 1.7%
In the last quarter of the year, the operating margin was subject to a final write-down and cost item of approximately EUR 1.0 million in total of a project conducted in Sweden in 2019, without which the operating margin would have been approximately EUR 2.6 million
The operating profit was EUR 0.4 million (2019: 0.5), which shows a decrease of 16.0%
The operating profit was subject to a corresponding adjustment as the operating margin, without which the operating profit would have been approximately EUR 1.4 million
The order backlog at the end of the review period was EUR 60.4 million (2019: 49.8),
which shows an increase of 21.4%Innofactor did not receive any orders exceeding the limit for requiring a stock exchange release in the fourth quarter as some decisions were delayed until the turn of the year; these are reported in the section "Events after the review period"
The order backlog increased due to orders received during the third quarter, which were recognized in the order backlog during the fourth quarter; more details under “Innofactor's order backlog increased further to a new record-high level, although there were no significant large orders during the fourth quarter of 2020”
Key figures of the group, IFRS
. | Oct 1–Dec. 31, 2020 | Oct 1–Dec 31, 2019 | Change | Jan 1–Dec 31, 2020 | Jan 1–Dec 31, 2019 | Change | ||
Net sales, EUR thousand | 18,252 | 17,432 | 4.7% | 66,164 | 64,198 | 3.1% | ||
Growth of net sales | 4.7% | 9.7% | 3.1% | 1.7% | ||||
Operating result before depreciation and amortization (EBITDA), EUR thousand* | 1,585 | 1,559 | 1.7% | 7,164 | 5,089 | 40.8% | ||
percentage of net sales* | 8.7% | 8.9% | 10.8% | 7.9% | ||||
Operating profit/loss (EBIT), EUR thousand* | 404 | 480 | -16.0% | 2,501 | 795 | 214.4% | ||
percentage of net sales* | 2.2% | 2.8% | 3.8% | 1.2% | ||||
Earnings before taxes, EUR thousand* | 951 | 271 | 251.1% | 2,050 | 12 | 17,234.5% | ||
percentage of net sales* | 5.2% | 1.6% | 3.1% | 0.0% | ||||
Earnings, EUR thousand* | 257 | 371 | -30.8% | 1,761 | 417 | 322.7% | ||
percentage of net sales* | 1.4% | 2.1% | 2.7% | 0.6% | ||||
Order backlog | 60,402 | 49,753 | 21.4% | 60,402 | 49,753 | 21.4% | ||
Net gearing* | 65.6% | 71.8% | 65.6% | 71.8% | ||||
Net gearing without IFRS 16 | 48.8% | 49.9% | 48.8% | 49.9% | ||||
Equity ratio | 42.2% | 40.2% | 42.2% | 40.2% | ||||
Equity ratio without IFRS 16 | 41.4% | 44.0% | 41.4% | 44.0% | ||||
Active personnel on average during the review period**** | 543 | 538 | 0.9% | 544 | 534 | 1.9% | ||
Active personnel at the end of the review period**** | 541 | 538 | 0.6% | 541 | 538 | 0.6% | ||
Earnings per share (EUR) | 0.0069 | 0.0099 | -30.8% | 0.0471 | 0.0113 | 316.1% |
*) The handling of lease liabilities in accordance with IFRS 16 had a positive effect of EUR 493 thousand (2020: 411) on the operating margin (EBITDA) in October 1–December 31, 2020, and an effect of EUR 1,994 thousand (2019: 1,676) on the operating margin (EBITDA) in January 1–December 31, 2020.
**) In accordance with IFRS 3, the operating result in October 1–December 31, 2020, includes EUR 473 thousand (2019: 507) and in January 1–December 31, 2020, EUR 1,894 thousand (2019: 2,030) in amortization related to acquisitions, consisting of allocations of the purchase price to intangible assets.
***) Exchange rate changes related to the Group's internal debts (due to the changes of exchange rate of the Swedish krona and Norwegian krone in relation to euro) results in an exchange rate gain of EUR 211 thousand in accordance with IFRS in January 1–December 31, 2020, but this loss does not affect the cash flow, only the result for the financial period, the Group's balance sheet and the equity ratio. In October 1–December 31, 2020, an exchange rate gain of EUR 685 thousand occurred.
****) The Innofactor Group monitors the number of active personnel. The number of active personnel does not include employees who are on a leave of over 3 months.
Innofactor’s future outlook for 2021
Innofactor’s net sales and operating margin (EBITDA) in 2021 are estimated to increase from 2020, during which the net sales were EUR 66.2 million and operating margin was EUR 7.2 million.
CEO Sami Ensio's review: After the year of COVID-19, we are expecting stronger organic growth in 2021
The net sales in 2020 were a record-high EUR 66.2 million, which shows an increase of 3.1 percent compared to the previous year. The operating margin (EBITDA) improved by EUR 2.1 million from the previous year and was also a record-high figure, EUR 7.2 million (10.8 percent of the net sales). In the last quarter of the year, the operating margin was subject to a final write-down and cost item of approximately EUR 1.0 million in total of a project conducted in Sweden in 2019, without which the operating margin would have been approximately EUR 8.1 million (12.3 percent of the net sales).
The net sales in the fourth quarter of 2020 were EUR 18.3 million, which shows an increase of 4.7 percent compared to the previous year. The net sales increased in Finland but continued to decrease in the other countries compared to the previous year, even though business in other countries did pick up towards the end of 2020. The net sales per employee grew 1.2% from the previous year. The operating margin (EBITDA) remained roughly on a par with the previous year, amounting to EUR 1.6 million (8.7 percent of the net sales). Without the adjustment described above, the operating margin would have been approximately EUR 2.6 million (14.0 percent of the net sales).
The order backlog grew to a new historic high, EUR 60.4 million, at the end of the quarter (2019: 49.8), which shows an increase of 21% compared to the same time in the previous year.
In 2020, we deepened our co-operation with customers further. We received a record-high number of new orders during the year, which strengthened the order backlog, such as a financial management system for a Finnish trading company, Health Village-related ICT specialist services for the Helsinki and Uusimaa Hospital District (HUS), follow-up development phase of the enterprise resource planning and documentation management system (HAIPA) of administrative and special courts for the Legal Register Centre, ICT consulting services for the Norwegian municipality of Ullensaker, administrative case management solution for the Social Insurance Institution of Finland, bankruptcy and reorganization proceedings system (KOSTI) for the Legal Register Centre, application management system services for Microsoft Office 365 and Microsoft SharePoint environments for VTT Technical Research Centre of Finland, digitization of the quotation process for a large Finnish globally operating manufacturing company, follow-up development of membership management solution for a Swedish trade union, primary IT specialist service framework agreement on the maintenance and development of information systems for the Finnish Transport and Communications Agency Traficom, consulting and maintenance services for Senate Properties, case management system for Tampereen korkeakoulusäätiö, and several other significant projects in Finland, Sweden, Denmark, and Norway. In addition to the above, on January 21, 2021, we announced that the Tax Administration had selected Innofactor in a public procurement competition as the primary provider of IT specialist services in the area of Azure programming, with a total value of EUR 15–25 million, which is the biggest individual order ever for Innofactor. I would like to thank our customers and partners for the trust you have shown in Innofactor.
Our 20th anniversary, 2020, continued the positive development that began in 2019 with regard to the improvement of profitability. During the year, we succeeded in sales, as reported above, and our order backlog increased to a new record-high figure, we got public attention for our achievements and were even able to celebrate, with COVID-19 safety in mind. It was a great year for Innofactor as a whole, despite COVID-19. We believe that we will be able to further accelerate our organic growth rate in 2021, which will also be supported by the improving business circumstances in the second half of 2020 outside of Finland compared to the second and third quarters.
The key factor that influenced Innofactor’s business in 2020 was COVID-19. The coronavirus caused challenges in Sweden, Norway and Denmark especially during the second and third quarters, which led to a decrease in customers’ purchases in these countries. As a result, net sales fell short of plans. However, profitability improved even faster than planned, which was mainly due to lower travel and other operating expenses due to the pandemic. In the Nordic countries, Innofactor received a total of approximately EUR 0.7 million in support from the states due to COVID-19 in 2020. As a whole, we reached record-high net sales, operating margin and order backlog in our anniversary year 2020.
In the long term, we believe that the digital step the society is taking due to the COVID-19 pandemic will increase Innofactor's possibilities to grow its business operations. The abilities of a modern digital organization will be even more important for our customers in the future. It is also possible that some of our customers will transfer some of their operations back to the Nordic countries in order to be closer to their customers. This would have a favorable effect as regards the business model of Innofactor's chosen strategy based on Nordic specialists. We also believe that Microsoft's position has strengthened during the COVID-19 pandemic. We believe in our chances of increasing our market share.
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.
Personally, I am particularly happy that we can pay out dividends to our shareholders for 2020 in accordance with our revised dividend policy. We would like to thank all of our customers, partners, employees, and investors for the year 2020!
Strategy and its realization in the review period
Innofactor’s strategy comprises our purpose, mission, vision, strategic choices, values, working principle, 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 create solutions that make people's everyday work and life run smoothly and bring a smile to their faces.
Our long-term financial goals:
To achieve annual growth of about 20 percent, of which majority 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 review period of January 1–December 31, 2020, were EUR 66.2 million (2019: 64.2), which shows an increase of 3.1 percent compared to the previous year. The net sales grew 4.7% in the last quarter of 2020. The net sales grew in Finland, but decreased in other countries. The strategic goal of getting the net sales to grow is also supported by the favorably developed order backlog of EUR 60.4 million (2019: 49.8). In 2021, Innofactor will pay special attention to management of growth, sales, expertise and resourcing, in connection with which we have revised our organization, among other measures. A Chief Innovation and Talent Officer will start as a new role in April 2021.
The operating margin (EBITDA) grew in the review period of January 1–December 31, 2020, from EUR 5.1 million in the same period the previous year to EUR 7.2 million (10.8 percent of the net sales). As regards profitability, Innofactor was able to further improve its performance substantially. However, a significant amount of management effort and work are still needed in order to reach the long-term goal of approximately 20 percent. The required actions are clear and known, so we believe that reaching this goal is entirely possible.
Innofactor’s operating cash flow in the review period of January 1–December 31, 2020, was EUR 5.0 million (2019: EUR 6.2 million) and the equity ratio at the end of the review period was 42.2 percent (2019: 40.2%). The strong operating cash flow supports Innofactor’s strategic goal of profitable growth and securing solid financial standing in all situations.
Board of Directors' proposal on the distribution of profits
Innofactor is a growing company and intends to use its operating profit on actions promoting growth, for example, on realizing mergers. On August 31, 2020, Innofactor confirmed the company’s updated dividend distribution policy as part of the annual strategy process. According to the revised policy, the aim of the Board of Directors is to pay a dividend regularly each year. The goal is to pay about half of the result for the financial period in dividends, taking into account the company's financial position, possible corporate reorganizations, and other development needs. For 2020, the Group’s result for the financial period was EUR 1,761,496.06. In making the proposal on the dividend, the Board of Directors takes into account the company's financial situation, profitability and near-term outlook.
At the end of the financial period of 2020, the distributable assets of the Group's parent company were EUR 29,910,687.
The Board of Directors proposes that Innofactor Plc distributes EUR 0.02 per share as dividends for the financial period of 2020 and additionally a repayment of capital amounting to EUR 0.02 per share, for a total of EUR 0.04 per share.
In addition, the Board of Directors proposes that the General Meeting authorizes the company’s Board of Directors to decide on a potential extra dividend and repayment of capital of maximum EUR 1,639,529 (EUR 0.04 per share taking into account the share issue authorization proposed to the Board of Directors).
Espoo, February 18, 2021
INNOFACTOR PLC
Board of Directors
Additional information:
CEO Sami Ensio, Innofactor Plc
tel. +358 50 584 2029
sami.ensio@innofactor.com
Briefings concerning the financial statement of January 1–December 31, 2020
Innofactor Plc will publish its 2020 Financial Statements Bulletin and Interim Report October–December 2020 (Q4) on Thursday, February 18, 2021, at approximately 9:00 am Finnish time.
A video conference call for media, investors and analysts will be held in Finnish on the same day beginning at 10:00. An equivalent video conference call in English takes place at 12:00 Finnish time. The report will be presented by CEO Sami Ensio and CFO Markku Puolanne.
To participate in the conferences, kindly register in advance by sending an e-mail to ir@innofactor.com. The participation link will be sent via e-mail to the registered participants the day before the conference.
Presentation materials will be available on Innofactor website after the conferences.
Financial releases in 2021
The annual report for 2020 will be published on the company's website on Tuesday, March 9, 2021.
The Annual General Meeting will be held on Tuesday, March 30, 2021, at 8:30 Finnish time.
The schedule for financial releases in 2021 is as follows:
Interim report January–March 2021 (Q1) on Tuesday, April 27, 2021
Half-Yearly Report January–June 2021 (Q2) on Thursday, July 22, 2021
Interim report January–September 2021 (Q3) on Tuesday, October 26, 2021
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 over 1,000 customers in commercial, public and third sector. Innofactor has the widest solution offering and leading know-how in the Microsoft ecosystem in the Nordics. Innofactor has over 500 enthusiastic and motivated top specialists in Finland, Sweden, Denmark and Norway. In 2016–2020, the annual growth of Innofactor's net sales has been approximately 8.3%. The Innofactor Plc share is listed in the technology section of the main list of NASDAQ Helsinki Oy. www.innofactor.com #ModernDigitalOrganization #PeopleFirst #CreatingSmiles
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