Digia Plc
Half Year Financial Report
9 August 2019 at 8:00 am
Digia Plc’s Half Year Financial Report 2019
Profitable growth continues – net sales grew by 16% and operating profit improved by 37.5% in the first half of the year
April-June 2019
- Net sales: EUR 32.8 (28.9) million, up 13.5 per cent
- Operating profit: EUR 2.9 (1.9) million, up 47.6 per cent; 8.8 (6.7) per cent of net sales
- Earnings per share: EUR 0.08 (0.06)
January-June 2019
- Net sales: EUR 64.6 (55.7) million, up 16.0 per cent
- Operating profit: EUR 4.9 (3.5) million, up 37.5 per cent; 7.5 (6.3) per cent of net sales
- Earnings per share: EUR 0.14 (0.10)
- Return on investment: 14.8 (11.8) per cent
- Equity ratio: 49.8 (52.5) per cent
- Acquisition of Starcut Oy, which specialises in mobile apps and cloud services
- Profit guidance for 2019 remains unchanged: Digia's net sales will continue to grow and operating profit will improve compared to 2018.
After the end of the review period, Digia acquired the entire share capital of Accountor Enterprise Solutions Oy (AES) in a transaction that was carried out on 1 August 2019. AES specialises in Microsoft Dynamics 365 and Oracle NetSuite solutions. AES posted net sales of EUR 12.7 million in 2018 and the company had 101 employees at the end of the year.
Unless otherwise stated, the comparison figures provided in parentheses refer to the corresponding period of the previous year.
GROUP KEY FIGURES
| EUR 1,000 | 4-6/ 2019 | 4-6/ 2018 | Change % | 1-6/ 2019 | 1-6/ 2018 | Change % | 2018 |
| Net sales | 32,750 | 28,860 | 13.5% | 64,648 | 55,741 | 16.0% | 112,122 |
| Operating profit | 2,867 | 1,943 | 47.6% | 4,856 | 3,531 | 37.5% | 6,494 |
| - as a % of net sales | 8.8% | 6.7% | 7.5% | 6.3% | 5.8% | ||
| Result for the period | 2,244 | 1,490 | 50.5% | 3,733 | 2,593 | 44.0% | 4,704 |
| - as a % of net sales | 6.9% | 5.2% | 5.8% | 4.7% | 4.2% | ||
| Return on equity, % | 15.3% | 11.6% | 10.2% | ||||
| Return on investment, % | 14.8% | 11.8% | 10.6% | ||||
| Cash flow from operations | 8,374 | -1,186 | 3,602 | ||||
| Interest-bearing net liabilities | 16,762 | 14,337 | 16.9% | 12,707 | |||
| Gearing, % | 33.8% | 31.4% | 26.6% | ||||
| Equity ratio, % | 49.8% | 52.5% | 54.9% | ||||
| Number of personnel at period-end | 1,144 | 1,074 | 6.5% | 1,091 | |||
| Average personnel | 1,135 | 1,072 | 5.8% | 1,124 | 1,054 | 6.7% | 1,069 |
| Shareholders' equity | 49,651 | 45,627 | 8.8% | 47,782 | |||
| Balance sheet total | 100,394 | 87,315 | 15.0% | 88,104 | |||
| Earnings per share | 0.08 | 0.06 | 51.1% | 0.14 | 0.10 | 44.5% | 0.18 |
Digia has adopted IFRS 16 Leases retrospectively as from 1 January 2019; comparative information has not been restated, but the impacts of the adoption of IFRS 16 have been recorded as adjustments in the opening balance sheet for 2019. The adoption of IFRS 16 has impacted, for instance, on certain key figures calculated from the balance sheet and the cash flow statement. IFRS 16 does not have a material impact on the operating profit or result for the review period.
PRESIDENT & CEO TIMO LEVORANTA:
“Digia’s net sales growth continued in the second quarter in line with our expectations. Second-quarter net sales amounted to EUR 32.8 (28.9) million, year-on-year growth of 13.5 per cent. First-half net sales increased by 16.0 per cent year-on-year to EUR 64.6 (55.7) million. Organic growth in the second quarter amounted to 8.0 per cent and in the first half to 8.9 per cent. After the end of the review period, we acquired the entire share capital of Accountor Enterprise Solutions Oy (AES) on 1 August 2019. AES specialises in Microsoft Dynamics 365 and Oracle NetSuite solutions. AES posted net sales of EUR 12.7 million in 2018 and the company had 101 employees at the end of the year.
Our profitability continued to improve. Operating profit was EUR 2.9 (1.9) million in the second quarter and EUR 4.9 (3.5) million in January-June. Operating profit was 8.8 (6.7) per cent of net sales in the second quarter and 7.5 (6.3) per cent in January-June. Our profitability has been improved by our determined efforts to develop our service offering, organisation and operating methods. I am especially pleased that, as our customer projects move into the maintenance phase, we can offer our customers an even wider range of services for the continuous development of the solutions we provide and expansion of customer cooperation. We have substantially bolstered our ability to serve as an end-to-end solution provider to our customers in recent years. With respect to the first part of the year, I am also pleased that our cash flow from operations improved to EUR 8.4 (-1.2) million.
Net sales in the review period were increased especially by good demand for online business, integrations and software interface (API) services as well as for Microsoft ERP systems and business analytics. Data utilisation is playing a greater role in business, boosting demand for analytics, integrations and core business systems. In networked business, the seamless compatibility of systems and service packages is vital. The organisational change we implemented in the first months of the review period and the development of our operating models bolstered our ability to implement such end-to-end solutions. In line with plans, we have harnessed the expertise of Starcut Oy, a specialist in mobile app development and cloud services that we acquired in the first quarter, and demand for these services has been as strong as expected.
Demand in the financial sector has remained good. Changes in its operating environment create demand for technological solutions that enable new services and operating models as well as boost efficiency in the automation of functions. New technical solutions are also needed to respond to changing regulatory requirements.
The service and maintenance business grew by 13 per cent in January-June and accounted for 49.2 (50.4) per cent of net sales. In the service and maintenance business, we focused on both expertise and monitoring technologies. Development focused on creating a more comprehensive operational overview of customer environments and utilisation of data from them. By analysing data, we can anticipate the maintenance needs of platforms and systems even more effectively, for instance. The project business accounted for 50.8 (49.6) per cent of net sales.
Our R&D expenditure amounted to EUR 2.8 million during the review period. The most important development focuses were our ERP system, mobile communications and monitoring products.
Skilled personnel who are committed to the objectives of our customers are the cornerstone of all our operations. We want to be a team of top professionals who are always learning and are both highly skilled and flexible. During the review period, our number of personnel grew by 53 and was 1,124 on average. We proactively develop our culture and employee experience to provide our experts with the best possible framework to succeed in their work. During the review period, we put our heads together to define the four core principles of our culture: learning, sharing, courage and professional pride. Professional skill and passion for continuous learning are the basis on which we build our future. At the same time, we see our work as meaningful for society as a whole. At Digia, we believe in a world in which value is created in ecosystems through smart data management.”
PROFIT GUIDANCE FOR 2019
The profit guidance for 2019 remains unchanged: “Digia’s net sales will continue to grow and operating profit will improve compared to 2018.”
BRIEFING INVITATION
Digia will hold a briefing for analysts on Friday 9 August 2019 at 11 am at the Business Meeting Park, Helsinki (Forum, Mannerheimintie 20 B). Welcome.
The material and presentation for the event will be available from 11 am on 9 August 2019 on the company’s website: www.digia.com/en/investors/reports-and-presentations.
FURTHER INFORMATION
President & CEO Timo Levoranta, tel. (exchange) +358 (0)10 313 3000
DISTRIBUTION
Nasdaq Helsinki
Key media
digia.com
Digia is a software and service company that helps its customers renew themselves in the networked world. There are more than 1,200 of us working at Digia. Our roots are in Finland and we operate with our customers in Finland and abroad. We are building a world in which digitalisation makes a difference – together with our customers and partners. Digia net sales were EUR 112.1 million in 2018. The company is listed on Nasdaq Helsinki (DIGIA). digia.com
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