Enfo Oyj’s interim report
3/2014 (1 January – 30 September 2014)
Key points of the interim report
- Turnover fell by 4.8% in July–September to EUR 32.4 million (34.0). In January–September, turnover decreased by 6.1% and stood at EUR 105.3 million (112.1). The decrease in turnover was caused by the adaptation activities carried out in infrastructure consulting in Sweden, and the end of automatic meter management (AMM) projects in Financial Process Services.
- Operating profit (EBIT) before non-recurring costs grew by 3.8 % in July-September and stood at EUR 4.3 million (4.1). In January-September, operating profit before non-recurring costs increased by 7.3 % and amounted to EUR 10.0 million (9.3).
- Operating profit (EBIT) fell by 45.2% in July–September to EUR 1.8 million (3.4). In January–September, operating profit decreased by 11.6% and stood at EUR 7.6 million (8.6). The operating profit includes non-recurring costs from a loss-producing customer project in Consultancy Services in Sweden, and restructuring costs in Outsourcing Services in Finland, totalling EUR 2.4 million.
- Profit before taxes in July–September stood at EUR 1.8 million (3.2). In January–September, profit before taxes was EUR 6.6 million (7.7).
- Earnings per share in July–September were EUR 1.87 (4.50). In January–September, earnings per share were EUR 6.73 (8.72).
- The twelve-month return on investment was 11.8% (14.4).
- In January–September, Enfo Group employed an average of 765 people (789). At the end of September, the Group had a total of 807 employees (781).
- In January–September, cash flow from operating activities totalled EUR 8.1 million (6.5).
- The company estimates that consolidated turnover will decrease in 2014. Operating profit before non-recurring costs, the company estimates to reach the previous year´s level.
The financial situation in Enfo’s key market areas continued in different directions: The Finnish economy is weakened by the extended recession, while the Swedish macro-economy has remained strong. Companies are cautious in their purchases and the competition over prices will be even more fierce than before due to cost saving and reduction activities related to customers’ business operations, particularly in Finland.
Enfo estimates that the IT service market will grow by 2–3% in Finland and Sweden in 2014.
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 Financial Process Services.
In Outsourcing Services, Finnish customers signed extended agreements with Enfo. Are Oy, a Finnish professional in building engineering, expanded the acquisition of its IT services from Enfo through a share transaction signed with Lemminkäinen concerning building systems. Enfo’s workstation management and Service Desk project covers the transition of some 1,700 transferring employees to the service of Are as users of its systems. Furthermore, property investment company Technopolis selected Enfo as the producer of its IT services for the next three years. The IT service agreement signed between Technopolis and Enfo covers Service Desk and workstation life cycle services, and monitoring and management services for servers. At the end of the review period, efficiency procedures and reorganisations were carried out within Finnish Outsourcing Services with the aim of strengthening IT services of a higher competence level in order to improve price competitiveness. Enfo Outsourcing Services in Sweden were employed by large service transitions in different customer projects.
In Sweden, Enfo expanded its business consulting service operations in August 2014 by acquiring Framsteg AB, a company specialising in Business Intelligence (BI) and Service and Asset Management solutions. Through the transaction, nearly 50 new information management specialists and consultants were transferred to Enfo. Enfo’s strategic objective is to become the largest BI expert in Sweden. Through the Framsteg transaction, Enfo strengthened its BI services and during the current reporting period, Enfo signed project agreements for example with network service producer Cybercom. In infrastructure consulting, non-recurring costs related to a customer project significantly reduced profitability, regardless of previous efficiency procedures. SAP and integration consulting services have proceeded as planned.
Financial Process Services
In Financial Process Services, there has been growing demand for electronic invoicing services and, in consulting services, customers have expanded their service acquisitions. For example, PKS Sähkönsiirto Oy signed over one year consulting service agreement with Enfo. Closing agreements have been extended, and for example, Keravan Energia continued its partnership with Enfo as the producer of its financial process services. The agreement covers a printing service for paper sales invoices, and electronic sales and purchase invoice services for more than 300,000 invoices every year. Additionally, Enfo provides Keravan Energia with data transmissions within the electricity trade and the transmission of banking material. In financial outsourcing services demand for process consulting has been steady, with a number of analysis and scanning projects being in progress.
Enfo Group’s turnover fell by 4.8% in July–September to EUR 32.4 million (34.0). In January–September, consolidated turnover fell by 6.1% and stood at EUR 105.3 million (112.1). The decrease in consolidated turnover was caused by the adaptation activities carried out in infrastructure consulting in Sweden, and the end of automatic meter reading (AMM) projects in Financial Process Services. The decrease was decelerated by the good progress of SAP consulting in Sweden.
Development of turnover by reporting segment
EUR million 7–9/2014 7–9/2013 1–9/2014 1–9/2013 1–12/2013
IT Services 24.1 24.5 79.1 83.5 113.0
Financial Process Services 9.0 9.6 27.7 29.1 38.9
|Financial Process Services||9.0||9.6||27.7||29.1||38.9|
The turnover of Enfo’s IT Services fell by 1.6% in July–September to EUR 24.1 million (24.5). In January–September, the turnover of IT Services decreased by 5.4% and stood at EUR 79.1 million (83.5). The decrease in turnover was affected by the reduction in infrastructure consulting in Sweden. The decline was evened out by the Framsteg business transaction in Sweden, and the good progress of Outsourcing Services in Finland.
The turnover of Financial Process Services fell by 5.9% in July–September to EUR 9.0 million (9.6). In January–September, turnover decreased by 5.0% and stood at EUR 27.7 million (29.1). The decrease in turnover was caused by the end of the automatic meter management (AMM) projects. Growth in invoicing service volumes decelerated the decline.
Enfo Group’s operating profit before non-recurring costs increased by 3.8 % in July-September and amounted to EUR 4.3 million, representing 13.2 % of turnover (4.1 and 12.1%). In January-September, the Group’s operating profit before non-recurring costs increased by 7.3 % and stood at EUR 10.0 million, representing 9.5% of turnover (9.3 and 8.3%). Enfo Group’s operating profit decreased by 45.2% in July–September and stood at EUR 1.8 million, representing 5.7% of turnover (3.4 and 9.9%). In January–September, the Group’s operating profit decreased by 11.6% to EUR 7.6 million, representing 7.2% of turnover (8.6 and 7.7%). The decrease in the Group’s operating profit was influenced by non-recurring costs arising from a loss-producing customer project in Swedish Consulting Services, and restructuring costs in Finnish Outsourcing Services.
The Group’s profit before taxes in July–September stood at EUR 1.8 million, representing 5.5% of turnover (3.2 and 9.4%). In January–September, profit before taxes amounted to EUR 6.6 million (7.7), or 6.3% of turnover (6.9%). The Group’s net financial expenses stood at EUR 0.1 million (0.2) in July–September and EUR 1.0 million (0.8) in January–September. The result for July–September was EUR 1.5 million, or 4.5% of turnover (2.8 and 8.2%). In January–September, the result was EUR 5.3 million, representing 5.0% of turnover (6.2 and 5.6%). Earnings per share in July–September were EUR 1.87 (4.50). In January–September, earnings per share were EUR 6.73 (8.72).
Development of operating profit by reporting segment
|Financial Process Services||1.4||1.5||3.4||3.5||4.3|
The decrease in the operating profit of IT Services was caused by adaptation measures in infrastructure consulting in Sweden, and restructuring costs in Finnish Outsourcing Services. In addition, the decline was increased by reductions in hardware sales in Swedish Outsourcing Services and the decreasing profitability of integration consulting.
In Financial Process Services, operating profit fell due to the end of automatic meter management (AMM) services. The decline in operating profit was decelerated by an increase in invoicing service volumes.
Financing and investments
Enfo’s net investments stood at EUR 3.8 million (2.2) in July–September and EUR 7.7 million (3.9) in January–September. Investments were mainly allocated to the acquisition of Framsteg AB.
At the end of September, the company’s equity ratio was 43.1% (45.6%). Interest-bearing net liabilities stood at EUR 31.6 million (30.1) and net gearing was 61.3% (58.1%) at the end of September.
In January–September, Enfo Group employed an average of 765 people (789). At the end of September, the Group had a total of 807 employees (781).
Enfo’s IT Services employed an average of 638 people (684) in January–September, while Financial Process Services employed an average of 103 people (82). Of Enfo’s personnel, 367 (350) were stationed in Finland and 397 (440) 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 Osmo Wilska (Outsourcing Services), Senior Vice President Nina Annila (Outsourcing Services), Senior Vice President Matti Seppänen (Outsourcing Services), Managing Director Tero Saksman (Enfo Zender), Executive Vice President Lars Aabol (Consulting Services), Managing Director Fredrik Bergman (Enfo Zystems), Managing Director Erik Brügge (Enfo Zipper), Managing Director Åsa Landén Ericsson (Enfo Pointer), and Marketing Director Adam Ritzén.
On 30 September 2014, Enfo Oyj had a total of 590,833 shares. At the end of September, Enfo had a total of 112 shareholders. The company has one series of shares. Enfo held 1,011 treasury shares at the end of September 2014.
At the end of September 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 Group’s IT Services segment will decrease in 2014 compared with the previous year. Operating profit before non-recurring costs, is estimated to grow from previous year´s level.
The turnover of the Group’s Financial Process Services reporting segment is estimated to fall from the previous year due to the end of automatic meter management (AMM) projects. However, its operating profit will remain close to the previous year.
The company estimates that consolidated turnover will decrease in 2014. Operating profit before non-recurring costs, the company estimates to reach the previous year´s level.
Risks and uncertainties
Short-term risks and uncertainties are associated with maintaining competitive prices in the highly competitive IT service market.
Timetable for financial reporting in 2014
Enfo Oyj will publish its financial statements bulletin for 1 January – 31 December 2014 on 26 February 2015. The timetable for financial reporting in 2015 will be published in full in connection with the financial statements bulletin.
Tables available in web: www.enfogroup.com/investors/reports-and-presentations
For additional information, please contact: CEO Arto Herranen +358 44 7193 000 or CFO Tero Kosunen +358 50 4441 200 (email@example.com).
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