Innofactor Oyj - Interim report (Q1 and Q3)

Innofactor Plc's Interim Report for January 1–June 30, 2014 (IFRS)

Innofactor Plc Interim Report July 22, 2014, at 8:30 Finnish time

Summary



                             mo.     mo.  Change     mo.     mo.  Change     mo.
                            4-6/    4-6/            1-6/    1-6/           1-12/
                            2014    2013            2014    2013            2013
--------------------------------------------------------------------------------
Net sales, EUR thousand   11,226   7,737  +45.1%  21,944  13,278  +65.3%  32,685
Growth of net sales       +45.1%  +94.3%          +65.3%  +66.9%          +73.7%
Operating profit before      708     665   +6.5%   1,421   1,249  +13.8%   3,284
 depreciation and                                                               
 amortization (EBITDA),                                                         
 EUR thousand*                                                                  
percentage of net sales*    6.3%    8.6%            6.5%    9.4%           10.0%
Operating profit/loss        358     442  -19.0%     731     866  -15.6%   2,255
 (EBIT), EUR thousand*                                                          
percentage of net sales*    3.2%    5.7%            3.3%    6.5%            6.9%
Earnings before taxes,       456     156  +192.3   1,026     568  +80.6%   1,863
 EUR thousand**                                %                                
percentage of net           4.1%    2.0%            4.7%    4.3%            5.7%
 sales**        
Earnings, EUR thousand**     365     117  +212.0     821     427  +92.3%   1,407
                                               %                                
percentage of net           3.3%    1.5%            3.7%    3.2%            4.3%
 sales**                                                                        
Net gearing                52.2%   61.2%           52.2%   61.2%           55.9%
Equity ratio               47.6%   41.3%           47.6%   41.3%           43.1%
Personnel on average         420     261  +60.9%     417     229  +82.1%     307
 during the review                                                              
 period                                                                         
Earnings per share (EUR)  0.0114  0.0039  +192.3  0.0256  0.0142  +80.3%  0.0432
                                               %                                

*) The second quarter of 2014 included a one-off cancellation of a cost reserve
related to the integration, amounting to about EUR 135 thousand. The second
quarter of 2013 included one-off costs related to the atBusiness Oy acquisition
for about EUR 164 thousand, and also cost reserves related to the integration
for about EUR 200 thousand, a total of about EUR 364 thousand. 

**) The second quarter of 2014 included a one-off cancellation of a cost
reserve related to the integration of about EUR 135 thousand and a financial
income of EUR 216 thousand from the additional purchase price related to the
acquisition, a total of about EUR 351 thousand. The second quarter of 2013
included one-off costs related to the atBusiness Oy acquisition for about EUR
370 thousand (of which EUR 206 thousand were costs related to organizing the
loans), and also cost reserves related to the integration for about EUR 200
thousand, a total of about EUR 570 thousand. 



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 second quarter of 2014, Innofactor continued profitable growth in
accordance with its strategy. The growth of net sales was 45.1 percent (net
sales EUR 11.2 million) and operating margin (EBITDA) was EUR 0.7 million (6.3
percent of the net sales). 

During the review period, Innofactor published stock exchange releases on two
major deals, to AEL and Finland's Slot Machine Association, with a total value
of about EUR 3.8 million. In addition to these deals, Innofactor received
several other orders. 

In June, Innofactor started measures on the group level to improve its
operations. These include, for example, making sales more efficient, improving
the billing rate and cutting costs. The goal is to make the business operations
and organization more streamlined. The measures are estimated to have
significant effects on the operating profit. The plan is to complete the
measures for the most part by the end of August 2014. 

Janne Martola was appointed as the new CFO and deputy CEO of Innofactor as of
July 9, 2014. Janne Martola has extensive knowledge in business and long
experience on Innofactor's operation, which will help the financial management
to support the business better. 

Due to the positive development of the order book and improvement measures
during the review period and the earlier 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. Five 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 will 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. 

Fifth, the importance of data security and the cyber crimes are growing fast.
Approximately 12 persons every second become victims of cyber crimes, which
means 400 million persons annually. Additionally, it is estimated that one in
five small and medium-sized companies are targeted by cyber criminals. 

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. 

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, July 22, 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-June 30, 2014

On July 22, 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 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 50 307 0026 (Ingrid Peura). 

Innofactor will also hold a conference call in English for analysts, media and
investors on July 22, 2014, at 16:00 Finnish time. Registrations to
ir@innofactor.com before 12:00 Finnish time on July 22, 2014. 



Financial releases in 2014

The schedule for financial releases in 2014 is as follows:

October 7-October 20, 2014: Silent period

October 21, 2014: Interim report January-September



Distribution:
NASDAQ OMX Helsinki
Main media
www.innofactor.com

Attachments:

Innofactor Plc Interim Report January 1-June 30 2014 IFRS.pdf