Innofactor Oyj - Interim report (Q1 and Q3)

Innofactor Plc's Interim Report for January 1–March 31, 2014 (IFRS)

Innofactor Plc Interim Report April 23, 2014, at 8:30 Finnish time

Summary



                                      mo. 1-3/     mo.      Change  mo. 1-12/   
                                       2014         1-3/             2013       
                                                   2013                         
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net sales, EUR thousand                    10,718    5,541  +93.4%        32,685
Growth of net sales                   +93.4%       +39.5%           +73.7%      
Operating margin (EBITDA), EUR                713      584  +22.1%         3,284
 thousand                                                                       
percentage of net sales                      6.7%    10.5%                 10.0%
Operating profit/loss (EBIT), EUR             373      424  -12.0%         2,255
 thousand                                                                       
percentage of net sales                      3.5%     7.7%                  6.9%
Earnings before taxes, EUR thousand*          570      412  +38.3%         1,863
percentage of net sales*                     5.3%     7.4%                  5.7%
Earnings, EUR thousand*                       456      310  +47.1%         1,407
percentage of net sales*                     4.3%     5.6%                  4.3%
Net gearing                                 45.7%   -10.0%                 55.9%
Equity ratio                                49.0%    69.4%                 43.1%
Personnel on average during the               413      198  +108.6           307
 review period                                              %                   
Earnings per share (EUR)                   0.0142   0.0104  +36.7%        0.0432

* 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 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 first quarter of 2014, Innofactor continued profitable growth in
accordance with its strategy. The growth of net sales was 93.4 percent (net
sales EUR 10.7 million) and operating margin (EBITDA) was EUR 0.7 million (6.7
percent of the net sales). This proves that on the first quarter of 2014,
Innofactor has been able to realize its selected growth strategy persistently
and successfully. 

At the end of January 2014, Innofactor completed, as planned, the integration
project related to the acquisition of atBusiness Oy. At the beginning of 2014,
Innofactor implemented a common Enterprise Resource Planning system for its
Finnish operations. The entire personnel in Espoo moved to the common premises
right at the beginning of the quarter and the personnel of the last separate
offices in Tampere, related to the acquisition of Dynamic Team, by the end of
the quarter. 

In Denmark, the integration of Enabling Group has progressed well. The
Copenhagen offices were combined during January 2014 and the main parts of the
integration project were implemented by the end of the quarter as planned. 

Due to the 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. Four 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 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. 

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. To maintain its leading
position, Microsoft invests in product development significantly more than its
competitors. In the calendar year 2013, Microsoft's investments in product
development were about USD 11 billion, whereas the corresponding investments by
Google were about USD 8 billion, IBM about USD 6 billion, and Apple about USD 5
billion 

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, April 23, 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-March 31, 2014

On April 23, 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 Mikko Karvinen. 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 April 23, 2013, at 16:00 Finnish time. Registrations to
ir@innofactor.com at least one hour before the event. 

Financial releases in 2014

The schedule for financial releases in 2014 is as follows:

July 8-July 21, 2014: Silent period

July 22, 2014: Interim report January-June

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-March 31 2014 IFRS.pdf