Innofactor Oyj - Interim report (Q1 and Q3)

Innofactor Plc's Interim Report for January 1–June 30, 2015 (IFRS)

Innofactor Plc Interim Report July 21, 2015, at 8:30 Finnish time



Summary

                            mo.     mo.   Change     mo.     mo.  Change     mo.
                           4-6/    4-6/             1-6/     1-6           1-12/
                           2015    2014             2015   /2014            2014
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net sales, EUR           11,507  11,226    +2.5%  22,778  21,944   +3.8%  44,119
 thousand                                                                       
Growth of net sales       +2.5%  +45.1%            +3.8%  +65.3%          +35.0%
Operating profit            642     708    -9.3%   1,446   1,421   +1.8%   4,107
 before depreciation                                                            
 and amortization                                                               
 (EBITDA), EUR                                                                  
 thousand*                                                                      
percentage of net          5.6%    6.3%             6.3%    6.5%            9.3%
 sales*                                                                         
Operating profit/loss       294     358   -17.9%     748     731   +2.3%   2,720
 (EBIT), EUR                                                                    
 thousand**    
percentage of net          2.6%    3.2%             3.3%    3.3%            6.2%
 sales**                                                                        
Earnings before taxes,      -49     456  -110.7%     293   1,026  -71.4%   2,259
 EUR thousand**                                                                 
percentage of net         -0.4%    4.1%             1.3%    4.7%            5.1%
 sales**                                                                        
Earnings, EUR               -39     365  -110.7%     235     821  -71.4%   1,807
 thousand*                                                                      
percentage of net         -0.3%    3.3%             1.0%    3.7%            4.1%
 sales*                                                                         
Net gearing               34.5%   52.2%            34.5%   52.2%           42.4%
Equity ratio              52.8%   47.6%            52.8%   47.6%           49.0%
Personnel on average        426     420    +1.4%     421     417   +1.0%     421
 during the review                                                              
 period                                                                         
Earnings per share      -0.0012  0.0114  -110.6%  0.0073  0.0256  -71.5%  0.0563
 (EUR)                                                                          

*) 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 2014 included a one-off cancellation of a cost
reserve related to the integration, amounting to about EUR 135 thousand, and
financial income of EUR 216 thousand from the additional purchase price related
to the acquisition, a total of about EUR 351 thousand. 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 and operating margin (EBITDA) in 2015 is estimated to
increase from 2014, during which the net sales were EUR 44.1 million and
operating margin was EUR 4.1 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 2015, Innofactor continued profitable growth. The
growth of net sales was 2.5 percent (net sales EUR 11.5 million) and it was
entirely organic. The operating margin (EBITDA) was EUR 0.6 million (5.6
percent of the net sales), which shows a decrease of 9.3 percent since last
year. 

In the first half of 2015, Innofactor's growth was 3.8 percent (net sales EUR
22.8 million). The operating margin (EBITDA) was EUR 1.4 million, which shows
an increase of 1.8 percent since last year. The cash flow from business
activities on the first half of the year was strong, increasing to EUR 3.5
million from the previous year's EUR 0.0 million. 

During 2015, Innofactor has renewed its management to ensure that the growth
goals will be met. New members assigned to the Innofactor's Board of Directors
are Anthony Gyursanszky (Chief Operating Officer) and Janne Heikkinen (CTO and
Executive Vice President, Products and Services). They will both assume their
duties on the third quarter. Other changes in the management have also been
made. The organization structure and job descriptions have been changed, so
that the Executive Board's size remains the same, but the number of other
management personnel has decreased. 

Due to the organizational arrangements and writedowns related to certain
customer receivables prior to current fiscal year, the beginning of the year
shows significantly higher costs than normally. For this reason, the operating
margin has not reached the target level. The operating margin is estimated to
improve during the second half of the year. 

Innofactor was selected as Microsoft's Partner of The Year in Finland and as a
finalist in two international categories. During its history, Innofactor has
received significantly more Microsoft awards than any other Finnish company.
Innofactor strives to capitalize these awards in its marketing and business
operations. In July, Innofactor was selected to participate in Microsoft's
Cloud Solution Provider program, which enables Innofactor to sell significantly
more Microsoft licenses. Our goal is to clearly increase our net sales through
this arrangement. 

Innofactor's order book continued to develop favorably during the second
quarter of the year. We think that Innofactor has good prerequisites to
continue growing its business operations profitably in 2015. 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

Main forces affecting the markets are the transfer of software into the cloud,
increased significance of social media, mobile devices and Internet of Things,
data analytics and machine learning, and data security and protection. A clear
change in the purchase habits of customers has been observed as these business
changes are taking place. The customers expect the IT provider to focus more on
business benefits instead of technology benefits. The customers want the
providers to have solutions that are ready for use without a need to make
changes, and they want to be able to buy more continuous services instead of
large one-off projects. 

Innofactor estimates that the growth of IT service market in 2015 will be 0-1%
in Finland and 1-3% in other Nordic Countries. The estimate is based on
research institutes' forecasts and Innofactor's outlook on markets. 

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 just 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. 

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 offering, 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 Nordic
large and medium-sized companies and government organizations, which have high
standards in their IT solution acquisitions. Innofactor develops solutions,
products and services suitable for this group by itself and in cooperation with
its partners. Innofactor's strategy supports well the change in the markets.
Innofactor believes it can gain market share from its competitors and utilize
possible IT market growth in the future. 

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. 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 21, 2015

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, 2015

On July 21, 2015, 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. 

If required, Innofactor will also hold a conference call in English for
analysts, media and investors on July 21, 2015, at 16:00 Finnish time.
Registrations to ir@innofactor.com before 12:00 Finnish time on Monday, July
20, 2015. 



Financial releases in 2015

The schedule for financial releases in 2015 is as follows:

October 6-19, 2015: Silent period

October 20, 2015: Interim report January-September



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

Attachments:

Innofactor Plcs Interim Report for January 1-June 30 2015 IFRS.pdf