Innofactor Oyj - Interim report (Q1 and Q3)

Innofactor Plc's Interim Report for January 1–June 30, 2016 (IFRS)

Innofactor Plc Interim Report July 19, 2016, at 8:30 Finnish time

The best second quarter in history in terms of net sales and operating margin
(EBITDA) 

April–June 2016 in brief:

  -- The net sales were approximately EUR 15.2 million, which shows an increase
     of 34.1%.
  -- The operating margin (EBITDA) was approximately EUR 1.1 million (7.0% of
     the net sales), which shows an increase of 119.1%.
  -- Operating profit was EUR 446 thousand (2015: 139) and grew 220.9%. The net
     sales were lowered by increased write-offs related to acquisitions, in
     accordance with IFRS 3, EUR 445 thousand (2015: 120).

January–June 2016 in brief:

  -- The net sales were approximately EUR 29.8 million, which shows an increase
     of 32.3%.
  -- The operating margin (EBITDA) was approximately EUR 2.0 million (6.6% of
     the net sales), which shows an increase of 64.1%.
  -- Operating profit was EUR 752 thousand (2015: 510) and grew by 47.5%. The
     net sales were affected by increased depreciations related to acquisitions,
     in accordance with IFRS 3, EUR 910 thousand (2015: 241).
  -- Innofactor’s operating cash flow in the review period remained strong and
     was approximately EUR 2.9 million.



                          Apr      Apr  Change      Jan     Jan  Change      Jan
                        1–Jun    1–Jun            1–Jun   1–Jun            1–Dec
                      30 2016       30          30 2016      30               31
                                 2015*                    2015*            2015*
--------------------------------------------------------------------------------
Net sales, EUR         15,224   11,352   34.1%   29,821  22,540   32.3%   44,452
 thousand                                                                       
Operating margin        1,067      487  119.1%    1,982   1,208   64.1%    3,705
 (EBITDA), EUR                                                                  
 thousand                                                                       
percentage of net        7.0%     4.3%             6.6%    5.4%             8.3%
 sales                                                                          
Operating                 446      139  220.9%      752     510   47.5%    2,542
 profit/loss (EBIT),                                                            
 EUR thousand**                                                                 
percentage of net        2.9%     1.2%             2.5%    2.3%             5.7%
 sales**                                                                        
Earnings before           396     -204  294.1%      567      55  930.9%    1,935
 taxes, EUR                                                                     
 thousand**                                                                     
percentage of net        2.6%    -1.8%             1.9%    0.2%             4.4%
 sales**                                                                        
Earnings, EUR             294     -163  280.4%      436      44  900.0%    1,548
 thousand**                                                                     
percentage of net        1.9%    -1.4%             1.5%    0.2%             3.5%
 sales**                                                                        
Net gearing             52.2%    35.1%            52.2%   35.1%            34.1%
Equity ratio            39.3%    52.3%            39.3%   52.3%            56.9%
Active personnel on       500      407   22.9%      501     402   24.6%      427
 average during the                                                             
 review period***                                                               
Earnings per share     0.0096  -0.0050  290.7%   0.0137  0.0014  893.7%   0.0475
 (EUR)                                                                          

*) During the third quarter, an error in the assessment of projects was
detected in the Group company concerning the period of January 1–June 30, 2015,
for the year 2015 as well as the previous financial periods. The assessment
error was corrected for the above-mentioned periods in accordance with IAS 8:
41–42. The total effect of the error was a decrease of approximately EUR 552
thousand in the operating margin (EBITDA). Of this, approximately EUR 155
thousand was for the period of April 1–June 30, 2015, and approximately EUR 238
thousand for the period of January 1–June 30, 2015, and the entire year 2015.
Adjustments and their effects on the Group figures are described in more detail
in the attachment to the interim report for January 1–September 30, 2015, which
was published on October 20, 2015. 

**) In accordance with IFRS 3, the operating profit for April 1–June 30, 2016,
includes EUR 455 thousand (2015: 120) in depreciations related to acquisitions,
concerning the allocations of the purchase price to intangible assets. Adjusted
for the said depreciations, Innofactor’s operative business profit for the
review period of April 1–June 30, 2016, would have been EUR 901 thousand (2015:
259), the operative business result before taxes EUR 851 thousand (2015: -84),
the operative business result EUR 681 thousand (2015: -67), and the operative
business result per share EUR 0.0207 (2015: -0.0021). The operating profit for
January 1–June 30, 2016, includes EUR 910 thousand (2015: 241) in depreciations
related to acquisitions, concerning the allocations of the purchase price to
intangible assets. Adjusted for the said depreciations, Innofactor’s operative
business profit for the review period of January 1–June 30, 2016, would have
been EUR 1,662 thousand (2015: 751), the operative business result before taxes
EUR 1,477 thousand (2015: 296), the operative business result EUR 1,182
thousand (2015: 236), and the operative business result per share EUR 0.0358
(2015: 0.0073). 

***) 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 2016 remains the same

Innofactor’s net sales and operating margin (EBITDA) in 2016 are estimated to
increase significantly from 2015, during which the net sales were EUR 44.5
million and operating margin (EBITDA) was EUR 3.7 million. 



CEO Sami Ensio's review: Profitable growth in Q2

In the second quarter of 2016, Innofactor continued profitable growth in
accordance with its strategy. The net sales grew 34.1 percent (net sales EUR
15.2 million). Innofactor estimates that the Nordic IT market will grow
slightly faster in 2016 than in the previous year. The estimate remains the
same regardless of Brexit. The market growth is believed to also increase
Innofactor’s growth possibilities. 

In the second quarter of 2016, the operating margin (EBITDA) was EUR 1.1
million (7.0 percent of the net sales) and grew 119.1 percent from the previous
year. In Innofactor’s history, the end of the year has typically been better in
terms of operating margin (EBITDA) than the beginning of the year. 

In the first half of 2016, Innofactor’s net sales grew 32.3 percent (net sales
approximately EUR 29.8 million). The operating margin (EBITDA) was
approximately EUR 2.0 million, which shows an increase of 64.1 percent since
last year. The cash flow from business activities in the first half of the year
remained strong and was approximately EUR 2.9 million. 

The name of the Swedish company Cinteros AB, acquired by Innofactor at the
beginning of 2016, was changed to Innofactor AB at the beginning of June. The
company’s integration, net sales and profitability have developed favorably. We
believe that we can finish the main parts of the integration according to the
plan and in schedule by the end of 2016. 

Innofactor got some significant orders during the second quarter. Innofactor’s
order book grew, for example, due to the agreement for delivering an
Azure-based Integrated Management System, which is based on Innofactor’s
out-of-the-box Quality First product, to ABB Oy in Finland and the Baltic
countries, valued at approximately EUR 925 thousand. 

Innofactor’s Board of Directors appointed Patrik Pehrsson as the Group’s new
Chief Financial Officer (CFO) starting from October 1, 2016. He assumes this
task after working as the CFO at Microsoft Oy. I am very happy to get Patrik
into our team. I have known him for a long time, due to our cooperation with
Microsoft. I am convinced that as the CFO, he can offer us the kind of business
outlook and management support that Innofactor’s growth and globalization
needs. Our goal is to change our financial management so that it will guide our
future development more than before. Our current CFO Janne Martola will
continue in his position until Pehrsson will start. 

We think that Innofactor has good prerequisites to continue growing its
business operations profitably in 2016. 

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 January–June 2016

Innofactor strengthens its customers’ competitiveness by providing outstanding
IT solutions, products and services. Innofactor focuses on Microsoft-based
solutions and the Microsoft ecosystem. Innofactor’s customers include companies
and public and third sector organizations. At the moment, Innofactor’s
operations are focused on Finland, Sweden and Denmark. Innofactor’s strategy is
to actively expand its operations in the Nordic Countries, which may happen
either organically or through acquisitions. 

Innofactor's mission: We empower organizations and people to make a difference
in the digital world. 

Innofactor's vision: We are the number one Microsoft-based solution provider in
the Nordic Countries. 

Innofactor’s strategy is to build competitive advantage as the leading provider
focused on Microsoft-based solutions and the Microsoft ecosystem. Innofactor's
strategy is to differentiate itself from the competitors in the following ways: 

• Deep understanding of companies, public sector and third sector customers in
the Nordic Countries 

• The best Nordic professionals in the Microsoft ecosystem

• Comprehensive Microsoft-based offering, products and services

• Fast delivery and value-adding customer support

Innofactor's long-term financial goal is to grow profitably:

• By achieving over 10 percent operating margin (EBITDA) every year in 2014–2017

• By achieving an average annual growth of 25–35 percent in 2014–2017 through
organic growth as well as acquisitions 

• By keeping the cash flow positive and by securing solid financial standing in
all situations 

The growth of 32.3 percent in Innofactor's net sales in the review period of
January 1–June 30, 2016, matched the planned growth rate stated in the
strategy. 

Innofactor's operating margin (EBITDA) in relation to net sales was 6.6 percent
in the review period of January 1–June 30, 2016. According to the strategy, the
annual EBITDA should be over 10 percent. Typically, Innofactor’s profitability
has improved towards the end of the year. 

Innofactor’s operating cash flow in the review period of January 1–June 30,
2016, was EUR 2.9 million positive (2015: EUR 3.5 million). Innofactor’s
financial stability is good. Net gearing at the end of the review period was
52.2 percent (2015: 35.1 percent). 

The acquisition of Cinteros AB, agreed on in December 2015, was realized on
January 8, 2016. 



Espoo, July 19, 2016

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–June 30, 2016

On July 19, 2016, 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 by sending email to
ir@innofactor.com. 

Innofactor will also hold a conference call in English for analysts, media and
investors on July 19, 2016, at 16:00 Finnish time. Registrations to
ir@innofactor.com before 12:00 Finnish time on Tuesday, July 19, 2016. 



Financial releases in 2016

The schedule for financial releases in 2016 is as follows:

October 11–24, 2016: Silent period

October 25, 2016: Interim report January–September 2016



Distribution:
NASDAQ Helsinki
Main media
www.innofactor.com



Innofactor
Innofactor is one of the leading Nordic IT solution providers focused on
Microsoft platforms. Innofactor delivers business critical solutions and
maintenance services as a system integrator and develops its own software
products and services. The focus area in Innofactor’s own product development
is Microsoft’s cloud solutions. Innofactor's customers include over 1,200
private and public sector organizations in the Nordic Countries. The company
has over 500 motivated and skilled employees in a number of locations in
Finland, Sweden and Denmark. In 2011–2015, the annual growth of Innofactor’s
net sales has been approximately 35%. Microsoft named Innofactor Plc as the
Finnish Partner of the Year in 2015. Innofactor was also selected into the
Microsoft’s international finals in two categories. The Innofactor Plc share is
listed in the technology section of the main list of NASDAQ Helsinki Oy. 
www.innofactor.com

Liitteet:

Innofactor Plcs Interim Report for January 1-June 30 2016 IFRS.pdf