Enfo Oyj’s interim report 2/2014 (1 January – 30 June 2014)
Key points of the interim report
- Turnover in April–June fell by 11.6% and stood at EUR 35.8 million (40.5). Turnover for January–June fell by 6.6% to EUR 72.9 million (78.0).
- In spite of the decrease in turnover, operating profit (EBIT) increased in April–June by 4.2% to EUR 2.4 million (2.3). Operating profit for January–June increased by 10.2% to EUR 5.7 million (5.2).
- Profit before taxes in April–June stood at EUR 1.8 million (1.7). In January–June, profit before taxes increased by 5.5% and stood at EUR 4.8 million (4.5).
- Earnings per share in April–June were EUR 1.62 (1.33). In January–June, earnings per share were EUR 4.86 (4.22).
- The twelve-month return on investment was 12.9% (13.6).
- In January–June, Enfo Group employed an average of 757 people (792). At the end of June, the Group had a total of 762 employees (794).
- In January–June, cash flow from operating activities totalled EUR 6.6 million (3.8).
- Short-term risks are associated with maintaining competitive prices in the highly competitive IT services market. In IT Services, delays in start-up projects in Outsourcing Services may cause the invoicing of continuous services to be transferred over to the next financial period.
The crisis in Ukraine weakened the economic outlook in the eurozone, and particularly in Finland, during the second quarter. Sweden also experienced weaker than expected economic growth during the second quarter. Intensive price competition will continue in all of the company’s operating areas.
In 2014, the company estimates that the IT service market will grow by 2–3% in Finland and Sweden.
Group’s business operations
Enfo Oyj is the parent company of Enfo Group. Enfo’s business operations are divided into two separately reported segments – IT Services, and Information Logistics Services.
Despite the uncertainty in the general economic situation, there were no significant changes in the Nordic IT services market during the period under review. There is demand for well productized and cost-efficient IT services. The sales cycle is somewhat longer than expected, particularly in more extensive cases of outsourcing IT services. During the period under review, Enfo concluded new service agreements in Finland with several parties, including Kemijoki Oy. Kemijoki Oy chose Enfo as its supplier of IT services, and the agreement includes basic IT services, such as server and workstation management, as well as on-site support for three years. The Central Administration of the Evangelical Lutheran Church of Finland also chose Enfo as their IT partner for the Church’s Central Fund and as a producer of capacity services. The agreement includes capacity services for the Central Administration and through that, for all the Church’s parishes in Finland. The objective of this cooperation is to improve the efficiency of the Church’s IT operations. The agreement includes data centre, capacity and archiving services for various functions, including the keeping of parish registers.
Enfo has markedly improved the efficiency and automation of its service production during the past year, and data centre services have also been concentrated, particularly at centres located in Kuopio. In Sweden, Enfo concluded an extensive IT service agreement with FOREX Bank, the largest Nordic company specialising in currency exchange operations. The agreement is one of the largest Enfo has ever signed in the Nordic Countries.
In spite of intense price competition in Sweden, infrastructure consulting has developed positively, thanks to the enhancement actions taken. Self-service products in particular have generated a lot of interest in the market. In integration consulting, resources have been invested in service productization to allow more flexible responses to customers’ needs. SAP consulting services have made steady progress. In Business Intelligence services, existing customers such as COOP and British American Tobacco have initiated new projects, and demand has been good. Other new agreements signed by Consulting Services include those concluded with Saab AB, Gunnebo Nordic AB and Brightstar 20:20 Mobile Norden, Ambea AB and the municipality of Värmdö.
Financial Process Services
Financial Process Services have made good progress. The business has developed in line with expectations, and particularly the demand for information logistics services has been favourable. The total volume of e-invoicing has grown well. New service agreements have been signed with, among others, Keva (a company handling earnings-related pension services for public entities such as municipalities), HSS Media Group (specialists in media services) and Svea Perintä Oy (a company providing debt collection services). In addition, there has been demand for extensions to automatic meter management (AMM) services. The development was enhanced by financial management outsourcing projects, and demand has been particularly brisk in the market for process consultation.
Enfo Group’s turnover decreased by 11.6% in April–June and stood at EUR 35.8 million (40.5). In January–June, turnover fell by 6.6% and stood at EUR 72.9 million (78.0). The decrease in Group turnover reflects the downscaling of the infrastructure consulting business in Sweden and the decline of hardware and software sales in Finland. In addition, the decrease in turnover was affected by the end of automatic meter management (AMM) projects.
Development of turnover by reporting segment
|Financial Process Services||9.1||9.5||18.7||19.6||38.9|
The turnover of the IT Services unit decreased by 13.7% in January–June and was EUR 27.1 million (31.4). In January–June, the turnover of IT Services decreased by 6.9% and stood at EUR 55.0 million (59.1). The decrease in turnover was particularly affected by the downscaling of the infrastructure consulting business in Sweden and the decline of hardware and software sales in Finland. The decrease also reflects the expenditure in the growth and development of Outsourcing Services in Sweden and the modest progress made in integration consulting.
The turnover of Financial Process Services fell by 3.8% in April–June to EUR 9.1 million (9.5). In January–June, the turnover of Financial Process Services decreased to EUR 18.7 million (19.6). The decrease was 4.6%. The decrease in turnover was due to the ending of automatic meter management (AMM) projects. The decrease was mitigated by the growth in invoicing services and the good progress made in financial management outsourcing services.
Enfo Group’s operating profit increased by 4.2% in April–June and stood at EUR 2.4 million, representing 6.8% of turnover (EUR 2.3 million and 5.8%). The Group’s operating profit in January–June amounted to EUR 5.7 million, or 7.9% of turnover (EUR 5.2 million and 6.7%). In January–June, operating profit increased by 10.2% compared with the same period last year. The positive development in profitability was affected by the growth of Outsourcing Services in Finland and the efficiency measures regarding infrastructure consulting in Sweden, as well as the good progress made in SAP consulting in Sweden.
The Group’s profit before taxes in April–June stood at EUR 1.8 million, representing 5.1% of turnover (1.7 and 4.2%). In January–June, profit before taxes amounted to EUR 4.8 million (4.5), or 6.6% of turnover (5.8%). The Group’s net financial expenses in April–June stood at EUR -0.6 million (-0.6) and EUR -0.9 million (-0.7) in January–June. The result for April–June was EUR 1.4 million, or 4.0% of turnover (EUR 1.3 million and 3.2%). In January–June, the result was EUR 3.8 million, representing 5.2% of turnover (EUR 3.4 million and 4.4%). Earnings per share in April–June were EUR 1.62 (1.33). In January–June, earnings per share were EUR 4.86 (4.22).
Development of operating profit by reporting segment
|Financial Process Services||0.8||0.8||2.0||1.9||4.3|
The result of IT Services was boosted by the growth of Outsourcing Services in Finland and the efficiency measures regarding infrastructure consulting in Sweden, as well as the good progress made in SAP consulting in Sweden. Profitability was weakened by the growth investments made in Sweden in integration consulting and outsourcing.
Thanks to increases in volumes, operating profit of Financial Process Services remained at the same level as in the corresponding period last year.
Financing and investments
Enfo’s net investments stood at EUR 2.5 million (1.0) in April–June and EUR 3.9 million (1.6) in January–June. The investments were mainly attributable to data centre hardware acquired with financial leasing agreements.
The company’s equity ratio was 42.0% (42.7) at the end of the period. At the end of June, interest-bearing net liabilities amounted to EUR 29.6 million (31.0) and net gearing was 59.3% (63.8%).
In June 2014, Enfo Oyj participated in a EUR 70 million multi-issuer bond guaranteed by Garantia Insurance Company with a share of EUR 10 million. The multi-issuer bond has a maturity of five years. The loan will allow Enfo to diversify its financing structure.
In January–June, Enfo Group employed an average of 757 people (792). At the end of June, the Group had a total of 762 employees (794).
Enfo’s IT Services unit employed an average of 632 people (688) in January–June, while the Financial Process Services unit employed an average of 101 people (81). Of Enfo’s personnel, 365 (348) were stationed in Finland and 392 (444) in Sweden during the review period.
Board of Directors and management
The Chairman of the Board of Directors of Enfo Oyj is Tapio Hakakari, managing director of Webstor Oy. The other members of the Board of Directors are Hannu Isotalo, Chairman of the Board of Directors of Lujatalo Oy; Mammu Kaario, investment director at Korona Invest Oy; Timo Kärkkäinen, senior portfolio manager at Ilmarinen Mutual Pension Insurance Company; Soili Mäkinen, CIO at Cargotec Corporation; and Lauri Kerman, Chairman of the Board of Directors of Osuuskunta KPY.
Enfo Group’s Management Team members were CEO Arto Herranen, CFO Tero Kosunen (Finance, Communications and IT), Senior Vice President Maria Lundell (HR), Executive Vice President Nina Annila (Outsourcing Services), Executive Vice President Osmo Wilska (Outsourcing Services), Managing Director Tero Saksman (Enfo Zender), Executive Vice President Lars Aabol (Consultancy Services), Managing Director Fredrik Bergman (Enfo Zystems), Managing Director Erik Brügge (Enfo Zipper), and Marketing Director Adam Ritzén.
On 30 June 2014, Enfo Oyj had a total of 590,833 shares. At the end of June, Enfo had a total of 112 shareholders. The company has one series of shares. Enfo held 1,011 treasury shares at the end of June 2014.
At the end of June 2014, the ten largest shareholders in the company were Osuuskunta KPY, Ilmarinen Mutual Pension Insurance Company, Enfo Oyj’s Personnel Fund HR, Einari Vidgrén Oy, Keskisuomalainen Oyj, Pohjois-Savo Cooperative Bank, Hannu Isotalo Oy, Kallax Oy, Arto Herranen and the Saastamoinen Foundation. Osuuskunta KPY’s share of ownership is 86.3%.
Forecast for likely future development
The company estimates that the turnover of the IT Services segment will decrease in 2014 compared with the previous year. However, operating profit is expected to grow as a consequence of efficiency measures carried out in consultancy operations in Sweden.
The turnover of the Group’s Financial Process Services reporting segment is estimated to fall from the previous year due to the end of AMM projects. Furthermore, operating profit is expected to decrease due to investments in new services and the fierce competition over prices.
The company estimates that consolidated turnover will decrease in 2014. However, operating profit is expected to improve from the year before.
Risks and uncertainties
Short-term risks are associated with maintaining competitive prices in the highly competitive IT services market. In IT Services, delays in start-up projects in Outsourcing Services may cause the invoicing of continuous services to be transferred to the next financial period.
Timetable for financial reporting in 2014
The 2014 Q3 interim report will be published on 30 October 2014.
Tables available in web: www.enfogroup.com/investors/reports-and-presentations
For additional information, please contact:
Arto Herranen, CEO, tel. +358 44 7193 000 and Tero Kosunen, CFO, tel. +358 50 4441 200 (firstname.lastname@example.org).
Enfo is a Nordic IT service company which offers IT outsourcing, financial process services and IT consulting services for our customers in Finland, Sweden, Norway and Denmark so that our customers can focus on their core businesses. With 50 years of experience developing proven IT solutions and concepts, along with the deep expertise of our nearly 800 top IT consultants, we make business processes simpler, smoother and smarter. Enfo’s annual turnover is EUR 150 million. For further information about Enfo, please visit www.enfo.fi and www.enfo.se.
Distribution: main media and www.enfo.fi
Business ID: 2081212-9
Visiting address: Viestikatu 7, Kuopio
Postal address: P.O. Box 1582, FI-70461 Kuopio, Finland
Billing address: P.O. Box 5005, FI-70701 Kuopio, Finland
Switchboard: +358 20 54321