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Press release

Enfo Oyj’s interim report

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Competence areas

1/2015 (1 JANUARY – 31 MARCH 2015)

Key points of the interim report:

 
  • Turnover fell by 7.3% to EUR 34.4 (37.1) million. The decrease in turnover was based on the intensified market situation in IT outsourcing services, and the shift in hardware and software sales towards a more commission-based business model.

  • Operating profit (EBIT) fell by 57.0% to EUR 1.4 (3.3) million. The decrease in operating profit was affected by fierce price competition in all of the Group’s businesses.

  • Profit before taxes stood at EUR 1.3 (3.0) million.

  • Earnings per share were EUR 1.25 (3.24).

  • In January–March, cash flow from operating activities totalled EUR 4.9 (3.2) million.

  • The twelve-month return on investment was 7.0% (16.0%).

  • The average number of personnel was 815 (754). At the end of March, the Group had a total of 818 employees (752).

  • The company estimates that consolidated turnover in 2015 will remain at the previous year’s level. Operating profit is expected to grow from the year before.

Arto Herranen, CEO:

The first quarter has been challenging for the entire industry. Price competition remained fierce in all of our business areas, both in Finland and in Sweden.

We will invest heavily in development projects aimed at building a stronger foundation for the future. These development projects are associated with the current market trend related to purchasing and outsourcing: companies are interested in outsourcing, not only their IT services and applications, but also their business processes, and they want to acquire all of these services from a single service provider as larger packages. Enfo’s excellent service range covers all of these outsourcing service areas that show the most potential for growth. For example, we are offering a solution which combines financial and IT service processes to Enfo’s medium-sized customer segment. The solution provides customers with a single partner that assumes full responsibility for ensuring that all IT and financial administration systems work seamlessly together. Correspondingly, in Sweden, Enfo’s industrial Internet and analytics services form a single service package that allows our customers to invest in the development of predictive maintenance.

We will further strengthen our service range, both organically and through business acquisitions. Our objective is to grow faster in the near future than the business field grows on average. The foundation required for this growth has already been laid, but we will already be making organisational changes this year to accelerate our growth rate.

Business development

IT Services

According to its strategy, the Enfo Group has expanded its IT outsourcing services to Nordic markets. Through the expansion, IT outsourcing services will shift to a new organisational model that is currently under planning.

Competition was fierce during the first quarter. Fewer new agreements were signed than before, while an unusually small number of significant bidding processes were in progress.

In Finland, the most significant new agreement involved the expanded cooperation between Otava Group and Enfo. Enfo has provided Otava Group with service desk and workstation services since 2009. Through the new agreement, Otava Group will also start using Enfo’s Private Cloud services. The agreement is significant on the Finnish scale.

In Sweden, the largest new agreement in IT outsourcing services was signed at the beginning of the year when FOREX Bank selected Enfo as one of its IT service providers. The five-year agreement covers workstation, network, service desk, on-site support and server services. The commissioning project included in the agreement in four Nordic countries is one of the largest in Enfo’s history.

The market situation remained fairly good in Swedish consulting operations. The development of the business model towards continuous services continued, and new agreements were signed with Volkswagen Finans, Coop and Ambea. Additionally, the construction of an integration platform for a large hotel chain was started.

The ISO 27001 information security certificate was granted to Enfo’s information security management system and Enfo’s Data Center services in Kuopio and Karlskrona. The certificate proves that Enfo is thoroughly prepared for risks associated with information security and is constantly developing its information security against changing threats.

As an indication of Enfo’s innovative operations, IBM gave Enfo the 2015 Cloud Innovation using IBM Cloud & Smarter Infrastructure Solutions award. It is given to a company that has been able to utilise the technology offered by the IBM solution in a way which shows an exemplary commitment and will to develop operations.

Financial Process Services

During the first quarter of the year, Enfo focused, according to its strategy, on the development of new services that utilise digitalisation and productised financial processes. Following the strategy, Enfo signed an outsourcing agreement with Strålfors Oy in February, through which the functions and personnel (ten Enfo employees and seven leased employees) of Enfo’s printing service production were transferred to Strålfors.

According to its strategic outlines, Enfo also sold the business operations of its unit specialised in remote reading and meter management services to Voimatel Oy, a service producer of power and data networks, in April. As a result of the transaction, nine permanent Enfo employees and two leased employees were transferred to Voimatel.

Through convergence in financial and IT processes, customers have shown much more interest towards Enfo’s comprehensive outsourcing solution.

The competition between invoice operators seems to remain tough. Investments in electronic services, together with debt collection services implemented as partnership projects, have strengthened Enfo’s competitiveness.

Turnover

Enfo Group’s turnover decreased by 7.3% in January–March and stood at EUR 34.4 (37.1) million.

Development of turnover by reporting segment
EUR million   1–3/2015  1–3/2014  1–12/2014
IT Services  25.5  27.9  109.3
Financial Process Services   9.3  9.6  37.6

 

The turnover of IT Services decreased by 8.6% in January–March and stood at EUR 25.5 (27.9) million. The decrease in turnover was based on the intensified market situation in IT outsourcing services, and the shift in hardware and software sales towards a more commission-based business model.

The turnover of Financial Process Services decreased by 2.9% in January–March and stood at EUR 9.3 (9.6) million. The decrease in turnover is explained by the fierce competition in the invoicing operator business. Compared to the first quarter of 2014, the turnover of outsourcing operations in Financial Process Services increased.

Profitability

Enfo Group’s profitability fell in January–March with operating profit being EUR 1.4 (3.3) million, comprising 4.1% (8.9%) of turnover.

The Group’s profit before taxes in January–March stood at EUR 1.3 (3.0) million, representing 3.9% (8.0%) of turnover. In January–March, the Group’s net financing costs totalled EUR -0.1 (-0.3) million. The result for January–March was EUR 1.1 (2.4) million, or 3.1% (6.4%) of turnover. Earnings per share in January–March were EUR 1.25 (3.24).

Development of operating profit by reporting segment
 
EUR million  1–3/2015  1–3/2014 1–12/2014
IT Services   0.4  2.1  5.6
Financial Process Services   1.0  1.2  4.1

The decrease in the operating profit of IT Services was affected by increasingly fierce price competition in all of the company’s businesses.

The operating profit of Financial Process Services fell slightly from the previous year’s level because of the decrease in turnover and non-recurring reorganisation costs.

Financing and investments

In January–March, Enfo’s net investments totalled EUR 0.6 (1.4) million. Investments mainly consisted of data centre hardware acquired through a financial leasing agreement and development costs associated with Financial Process Services.

At the end of the review period, the company’s equity ratio was 41.5% (45.4%). Interest-bearing net liabilities stood at EUR 24.4 (26.6) million, and net gearing was 48.8% (52.5%) at the end of March.

Personnel

 
In January–March, Enfo Group employed an average of 815 people (754). At the end of March, the Group had a total of 818 employees (752).

Enfo’s IT Services employed an average of 687 people (634) in January–March, while Financial Process Services employed an average of 102 people (95). Of Enfo’s personnel, 359 (359) were stationed in Finland and 456 (395) in Sweden during the review period.

Annual General Meeting and administration

The Annual General Meeting of Enfo Oyj held on 25 March 2015 decided, according to the proposal of the Board of Directors, to distribute a dividend of EUR 5.90 per issued share, i.e. a total of EUR 3,478,162.10, over the previous financial period on the basis of the confirmed balance sheet. The dividend will be paid to shareholders who are recorded in the company’s list of shareholders maintained by Euroclear Finland Oy on the record date for the dividend payment, 27 March 2015.  The dividend will be paid on 29 May 2015.

Tapio Hakakari, Mammu Kaario, Lauri Kerman, Timo Kärkkäinen and Soili Mäkinen were re-elected as members of the Board of Directors. Hannu Isotalo, who stepped down from the Board of Directors at his own request, was not replaced by a new member.

At the organisation meeting held after the AGM, the Board of Directors appointed Tapio Hakakari chairperson and Mammu Kaario deputy chairperson.

The AGM authorised the Board of Directors of Enfo Oyj to decide on the issuance of new shares through a rights issue. The authorisation covers the issuance of a maximum of 175,000 shares. The shares can be used in corporate or business transactions to obtain the assets required by the company. The Board of Directors will decide on the subscription price and other terms and conditions of the rights issue.

Furthermore, the AGM authorised the Board of Directors to decide on the issuance of new shares or shares held by the company through a special rights issue. The authorisation covers the transfer and/or handover of a maximum of 10,000 shares. The shares can be transferred and/or handed over in order to finance or carry out any business acquisitions, as part of the company’s payroll and incentive scheme, and to the company’s employees and personnel fund. The Board of Directors will decide on the subscription price and other terms and conditions of the issue.

The AGM authorised the Board of Directors of Enfo Oyj to decide on the acquisition of the company’s treasury shares using the company’s unrestricted equity. The authorisation covers the acquisition of a maximum of 10,000 shares at a minimum price of EUR 1 and at a maximum price of EUR 120 per share. The shares can be acquired to help the company acquire assets for its business operations, for any business acquisitions, as part of the company’s payroll and incentive scheme, to fulfil share purchase commitments made by the company, and for annulment. The Board of Directors may decide on the purchase price and other terms and conditions of the acquisition. The authorisations remain valid until the end of the next Annual General Meeting.

Shares

On 31 March 2015, Enfo Oyj had a total of 590,833 shares. At the end of the financial period, Enfo had a total of 112 shareholders. The company has one series of shares. Enfo held 1,314 treasury shares at the end of March 2015.

At the end of March 2015, 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 86.35%.

Forecast for likely future development

The company estimates that the turnover of the IT Services segment will increase in 2015 compared with the previous year. Operating profit is expected to grow from the year before.

The turnover of the Financial Process Services segment is estimated to fall clearly from the previous year due to divested business operations. Operating profit is expected to be significantly lower than last year due to investments in new businesses and divested operations.

The company estimates that consolidated turnover in 2015 will remain at the previous year’s level. Operating profit is expected to grow from the year before.

Risks and uncertainties

Short-term risks and uncertainties are associated with maintaining competitive prices in all of the Group’s business areas. Over the long term, new delivery methods, such as global cloud services, may significantly change the business environment for IT outsourcing services.

Timetable for financial reporting in 2015

The 2015 Q2 interim report will be published on 20 August 2015, and the Q3 interim report on 28 October 2015.

Tables

Tables available at http://www.enfo.se/en/about-us/investor-relations/financial-reports/

For additional information, please contact: CEO Arto Herranen +358 44 7193 000 and CFO Christian Homén +358 40 750 6902 (email format: firstname.lastname@enfo.fi).

Enfo is a Nordic IT service company that offers IT outsourcing, business process outsourcing and IT consulting services for our customers in Finland, Sweden, Norway and Denmark so that our customers can focus on their core business operations. 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 145 million (2014). For more information about Enfo, please visit www.enfo.fi and www.enfo.se.

Distribution: main media and www.enfo.fi

Enfo Oyj

Business ID: 2081212-9

Visiting address: Viestikatu 7, FI-70600 Kuopio

Mailing address: P.O. Box 1582, FI-70461 Kuopio

Billing address: P.O. Box 5005, FI-70701 Kuopio

Switchboard: +358 20 54321

Email: firstname.lastname@enfo.fi