CEO's review

 



Digia’s growth continues, significant steps taken to implement the strategy

 

Digia's net sales continued to grow during the third quarter of 2016. In January-September, year-on-year growth amounted to 8.7 per cent. The trend in net sales was supported particularly by growth in the customised solutions service business, the ERP business based on the company's own technologies, and the integration business.

In January-September, operating profit represented 6.1 per cent of net sales. Growth outlays on increasing the number of personnel in line with the company's strategy and the substantial sales investments made during the competitive tendering for the national income register solution contributed to weaker profitability in July-September.

Digia's growth strategy seeks to strengthen the company’s position, particularly in the growing markets for digital services, process digitalisation and the service business. Digia is a visionary partner to its customers in modernising and developing business processes. The company wants to grow at a significantly faster pace than the IT market and seeks average annual growth of 15 per cent during the strategy period. Growth is sought both organically and inorganically.

During the third quarter, the company took major steps in implementing its strategy.

Digia agreed on the acquisition of Igence Oy Ab, a webshop expert. With this acquisition, Digia is expanding its current offering and expertise, especially in solutions for webshops and commercial product data management. The acquisition was carried out on 1 July 2016 and will be reported as part of Digia as from that date.

In September, Digia made a major agreement in its service business, whereby Digia will take responsibility for NAV calculation and shareholder register maintenance for funds managed by the investment services provider FIM. Digia will also be carrying out administrative tasks for discretionary asset management portfolios for FIM. For Digia, this agreement marks entry into a whole new business focusing on financial back office services. The aim is to build a service centre based on local market knowledge and the Digia Financial Systems product family, providing customers with cost-savings and efficiency through process digitalisation and software robotics. In addition to back-office functions, other examples of services that can be outsourced to Digia in the future include analytics services for management and e-solutions.

After the review period, on 14 October, the Finnish Tax Administration announced that it had chosen Digia as the supplier of the national income register solution. It is intended that the register will be launched at the beginning of 2019. The solution will be delivered as a fixed-price project worth EUR 13.7 million. The project will be started in late 2016 and it has no impact on the outlook or guidance for 2016. The package also includes the system's maintenance and further development. Digia's share of the overall value of the solution over a 15-year contract period is about EUR 60 million, including the fixed-price component of the project, provided that the solution is implemented according to the assumptions made in the Tax Administration’s invitation to tender.

”We have taken major steps to develop our business and implement our strategy during the past year. By setting up a service business in the financial sector, the company is making great inroads into a new area. The software as a service is also becoming more common in other business functions. The Finnish Tax Administration's income register project is also highly significant to Digia. It's wonderful that a national project of this scale is being implemented with Finnish resources," says President and CEO Timo Levoranta.

“We're now implementing a structural reorganisation to support growth. The goal of this reorganisation is to create a firm foundation that will support the implementation of our new strategy.,” he continues.

From 1 October, Digia will consist of four service areas which are Digital Services, Integration and Information Management, Industry Solutions, and Digia Financial Solutions and Services. The reorganisation will not have an effect on the Company’s financial reporting that will consist of one segment.

Digia reiterates its earlier guidance, estimating that demand will remain reasonable and net sales will continue to grow during the rest of 2016. The company expects that in 2016 its operating margin will remain on a par with the previous year.

Interim report, 1 January–30 September 2016, 28 October 2016



Timo Levoranta
President & CEO