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ENDigia Plc Half Year Financial Report 2021
Digia Plc
Half Year Financial Report
6 August 2021 at 8:00 am
January-June net sales up 9 per cent, operating profit (EBITA) improves by 20 per cent
April-June 2021
- Net sales: EUR 38.6 (35.2) million, up 9.8 per cent
- Operating profit (EBITA): EUR 3.5 (4.1) million, down 15.3 per cent; EBITA margin: 9.0 (11.7) per cent of net sales. Major investments in future competitiveness: Digia Business Engine, building cloud platform solution capabilities and recruitment
- Operating profit: EUR 2.7 (3.7) million, down 25.8 per cent; operating margin: 7.0 (10.4) per cent of net sales
- Earnings per share: EUR 0.08 (0.10)
January–June 2021
- Net sales: EUR 78.0 (71.8) million, up 8.7 per cent
- Operating profit (EBITA): EUR 8.7 (7.3) million, up 19.8 per cent; EBITA margin: 11.2 (10.2) per cent of net sales
- Operating profit: EUR 7.2 (6.4) million, up 12.3 per cent; operating margin: 9.2 (8.9) per cent of net sales
- Earnings per share: EUR 0.21 (0.18)
- Return on investment: 15.6 (15.3) per cent
- Equity ratio: 44.4 (44.9) per cent
- Acquisition of Climber International AB
- Profit guidance for 2021 remains unchanged: Growth in Digia’s net sales will outpace the previous year (5.5% in 2020) and the EBITA margin will be at a level of about 10%.
Unless otherwise stated, the comparison figures provided in parentheses refer to the corresponding period of the previous year.
GROUP KEY FIGURES
| EUR 1,000 | 4–6/2021 | 4–6/2020 | Change,% | 1–6/2021 | 1–6/2020 | Change,% | 2020 |
| Net sales | 38,638 | 35,193 | 9.8% | 77,995 | 71,758 | 8.7% | 139,049 |
| Operating profit (EBITA) | 3,481 | 4,111 | -15.3% | 8,737 | 7,295 | 19.8% | 16,000 |
| - as a % of net sales | 9.0% | 11.7% | 11.2% | 10.2% | 11.5% | ||
| Operating profit (EBIT) | 2,711 | 3,655 | -25.8% | 7,167 | 6,384 | 12.3% | 14,102 |
| - as a % of net sales | 7.0% | 10.4% | 9.2% | 8.9% | 10.1% | ||
| Result for the period | 2,003 | 2,718 | -26.3% | 5,547 | 4,905 | 13.1% | 10,627 |
| - as a % of net sales | 5.2% | 7.7% | 7.1% | 6.8% | 7.6% | ||
| Return on equity, % | 18.1% | 18.1% | 18.7% | ||||
| Return on investment, % | 15.6% | 15.3% | 16.5% | ||||
| Cash flow from operations | 10,209 | 17,928 | -43.1% | 23,589 | |||
| Interest-bearing net liabilities | 16,828 | 11,553 | 45.7% | 10,531 | |||
| Net gearing, % | 27.0% | 21.0% | 17.3% | ||||
| Equity ratio, % | 44.4% | 44.9% | 50.7% | ||||
| Number of personnel at period-end | 1,329 | 1,265 | 5.1% | 1,258 | |||
| Average number of personnel | 1,331 | 1,265 | 5.3% | 1,327 | 1,262 | 5.1% | 1,261 |
| Shareholders' equity | 62,252 | 55,073 | 13.0% | 60,737 | |||
| Balance sheet total | 141,291 | 124,294 | 13.7% | 121,078 | |||
| Earnings per share | 0.08 | 0.10 | -26.1% | 0.21 | 0.18 | 13.1% | 0.40 |
| Earnings per share, diluted | 0.07 | 0.10 | -26.3% | 0.21 | 0.18 | 12.6% | 0.39 |
In April 2021, the IFRS Interpretations Committee issued its final agenda decision on the accounting treatment of configuration or customisation costs in a cloud computing arrangement (IAS 38 Intangible Assets). In this decision, the Interpretations Committee examined whether, applying IAS 38, configuration and customisation of software shall be recognised as an intangible asset and, if an intangible asset is not recognised, how these configuration and customisation costs are to be recognised. IFRIC agenda decisions do not have an effective date; it is expected that they are applied as soon as possible. As Digia is introducing cloud computing arrangements related to its new business platform (Digia Business Engine), it has started analysing whether this agenda decision has an effect on the accounting principles applied to the deployment costs of Digia’s cloud services. Digia will carry out this analysis in autumn 2021 and any impacts will be taken into account retrospectively in the 2021 financial statements at the latest.
PRESIDENT & CEO TIMO LEVORANTA:
“Digia’s net sales were up 9.8 per cent in April-June and amounted to EUR 38.6 (35.2) million. Net sales growth gained momentum in the second quarter compared to the first months of the year. In January-June, our net sales grew by 8.7 per cent to EUR 78.0 (71.8) million.
In the second quarter, the pace of net sales growth was boosted by data utilisation solutions, customer-specific digital services and the renewal of business platforms. The use of in-house experts in the development of our internal business platform (Digia Business Engine) put the brakes on net sales growth, with an impact of about two percentage points on net sales in January–June. Our service and maintenance business generated about 67 (65) per cent of net sales in January-June, and the project business about 33 (35) per cent.
Operating profit (EBITA) totalled EUR 3.5 (4.1) million in April–June. The EBITA margin amounted to 9.0 (11.7) per cent of net sales. Second-quarter profitability was weakened by our major investments in Digia Business Engine, building up the capabilities of cloud platform solutions and recruitment. These investments had been decided on earlier. During the second quarter, we also bolstered our sales as part of our Next Level strategy. These investments will strengthen our future competitiveness. Recruitment costs were increased by tighter competition for experts in our field. Compared year-on-year, the positive effect of the coronavirus pandemic on expenses was minor during the second quarter.
Demand during the first half of 2021 reflected customers’ need to develop and renew their digital business, which also increased the need for business platform renewal. Data utilisation requirements had a particularly strong impact on business platform renewal. In line with our strategy, we offer applications to our customers and combine them with data utilisation solutions. A good example of our capabilities is that Microsoft chose Digia as its Smart Business Solutions / Dynamics 365 Partner of the Year in July. The main reasons for their choice were our strengths in providing wide-ranging service to our customers by combining Azure cloud, Dynamics technology and analytics utilisation with our extensive industry and development expertise.
In addition to our own expertise, we harness our Digia Hub network in our customer projects – more than 70 experts now work on Digia customer projects through this network. All in all, around 260 experts work on Digia projects alongside our own professionals. Our personnel at period-end amounted to 1,329.
In addition to continuous personnel expertise development, the Digia Business Engine is Digia’s most important strategic project for business renewal, in which we are building a smart technological growth platform and supporting Digia’s future growth and productivity development. During the first half of the year, an average of 20 full-time Digia employees worked on the project. In January–June, we capitalised EUR 1.4 million in costs from the project, which had an impact of approximately EUR -0.2 million on earnings. We have capitalised a total of EUR 2.1 million from this project to date. Digia Business Engine will be introduced in phases in 2022.
The use of cloud platforms is becoming commonplace and the public cloud has become an important development and production platform in almost all of our business functions. We have bolstered our offering and recruited more cloud sales and consulting experts. Our employees completed a significant number of new cloud technology certificates during the first half of the year. Sales opportunities and bid volumes in cloud platform services are surging. Our aim is to be a major supplier of hybrid cloud consulting and managed services in Finland as well as the main supplier to selected customers by the end of our strategy period (2020–2022).
The integration of the Climber Group, acquired in January, has progressed as planned and its business has developed in line with our expectations. Climber’s business is largely based on the business-driven use of advanced Qlik technologies. Demand for Climber’s services has remained strong in all of its market areas. During early 2021, we also updated our key principles, targets and indicators for responsibility. In addition to environmental responsibility and digital expertise, our principles highlight the responsible utilisation of data. Through our customers, we want to promote the safe and sustainable digitalisation of society, while taking the environment into consideration.
Digia expects to see further growth in the Finnish IT service market in the long term. Data utilisation as part of day-to-day business and the digitalisation of business are strong trends that are picking up momentum. Organisations' value creation models and people's working methods are evolving. Uncertainty about 2021 is fading in the market.
Digia’s offering has also demonstrated its competitiveness during exceptional circumstances. Our special strengths are various operational system solutions and data-driven business. Our success is supported by an extensive product and service portfolio, which is not tied to any single field of business or customer account, and by the fact that a significant share of our operations is accounted for by continuous services.
We believe in a world in which value is created in ecosystems through smart data management.”
PROFIT GUIDANCE FOR 2021
Profit guidance for 2021 remains unchanged: Growth in Digia’s net sales will outpace the previous year (5.5% in 2020) and the EBITA margin will be at a level of about 10%.
BRIEFING INVITATION
A briefing for analysts will be held at 10:00 am on Friday, 6 August 2021 as a Teams meeting. Attendance instructions have been emailed to participants.
The material and presentation for the event will be available from 10:00 am on 6 August 2021 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 1,300 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’s net sales totalled EUR 139 million in 2020. The company is listed on Nasdaq Helsinki (DIGIA). digia.com
Digia is a software and service company that combines technological possibilities and human capabilities to build intelligent business, society and a sustainable future. Our mission is to ensure that our customers are at the forefront of digital evolution. There are more than 1,500 of us working at Digia and we operate globally with our international customers. Digia’s turnover in 2023 was EUR 192,1 million. The company is listed on Nasdaq Helsinki (DIGIA).