Innofactor Plc Interim Report July 21, 2015, at 8:30 Finnish time

Summary

mo. 4-6/ 2015

mo. 4-6/ 2014

Change

mo. 1-6/ 2015

mo. 1-6 /2014

Change

mo. 1-12/ 2014

Net sales, EUR thousand

11,507

11,226

+2.5%

22,778

21,944

+3.8%

44,119

Growth of net sales

+2.5%

+45.1%

+3.8%

+65.3%

+35.0%

Operating profit before depreciation and amortization (EBITDA), EUR thousand*

642

708

-9.3%

1,446

1,421

+1.8%

4,107

percentage of net sales*

5.6%

6.3%

6.3%

6.5%

9.3%

Operating profit/loss (EBIT), EUR thousand**

294

358

-17.9%

748

731

+2.3%

2,720

percentage of net sales**

2.6%

3.2%

3.3%

3.3%

6.2%

Earnings before taxes, EUR thousand**

-49

456

-110.7%

293

1,026

-71.4%

2,259

percentage of net sales**

-0.4%

4.1%

1.3%

4.7%

5.1%

Earnings, EUR thousand*

-39

365

-110.7%

235

821

-71.4%

1,807

percentage of net sales*

-0.3%

3.3%

1.0%

3.7%

4.1%

Net gearing

34.5%

52.2%

34.5%

52.2%

42.4%

Equity ratio

52.8%

47.6%

52.8%

47.6%

49.0%

Personnel on average during the review period

426

420

+1.4%

421

417

+1.0%

421

Earnings per share (EUR)

-0.0012

0.0114

-110.6%

0.0073

0.0256

-71.5%

0.0563

*) The second quarter of 2014 included a one-off cancellation of a cost reserve related to the integration, amounting to about EUR 135 thousand.

**) The second quarter of 2014 included a one-off cancellation of a cost reserve related to the integration, amounting to about EUR 135 thousand, and financial income of EUR 216 thousand from the additional purchase price related to the acquisition, a total of about EUR 351 thousand. The first quarter of 2014 included financial income of EUR 325 thousand for the additional purchase price related to the acquisition.

Innofactor's net sales and operating margin (EBITDA) in 2015 is estimated to increase from 2014, during which the net sales were EUR 44.1 million and operating margin was EUR 4.1 million.

The figures in this interim report have not been audited.

Reporting

Innofactor operates on a single segment, offering software, systems and related services.

CEO Sami Ensio's review

In the second quarter of 2015, Innofactor continued profitable growth. The growth of net sales was 2.5 percent (net sales EUR 11.5 million) and it was entirely organic. The operating margin (EBITDA) was EUR 0.6 million (5.6 percent of the net sales), which shows a decrease of 9.3 percent since last year.

In the first half of 2015, Innofactor's growth was 3.8 percent (net sales EUR 22.8 million). The operating margin (EBITDA) was EUR 1.4 million, which shows an increase of 1.8 percent since last year. The cash flow from business activities on the first half of the year was strong, increasing to EUR 3.5 million from the previous year's EUR 0.0 million.

During 2015, Innofactor has renewed its management to ensure that the growth goals will be met. New members assigned to the Innofactor's Board of Directors are Anthony Gyursanszky (Chief Operating Officer) and Janne Heikkinen (CTO and Executive Vice President, Products and Services). They will both assume their duties on the third quarter. Other changes in the management have also been made. The organization structure and job descriptions have been changed, so that the Executive Board's size remains the same, but the number of other management personnel has decreased.

Due to the organizational arrangements and writedowns related to certain customer receivables prior to current fiscal year, the beginning of the year shows significantly higher costs than normally. For this reason, the operating margin has not reached the target level. The operating margin is estimated to improve during the second half of the year.

Innofactor was selected as Microsoft's Partner of The Year in Finland and as a finalist in two international categories. During its history, Innofactor has received significantly more Microsoft awards than any other Finnish company. Innofactor strives to capitalize these awards in its marketing and business operations. In July, Innofactor was selected to participate in Microsoft's Cloud Solution Provider program, which enables Innofactor to sell significantly more Microsoft licenses. Our goal is to clearly increase our net sales through this arrangement.

Innofactor's order book continued to develop favorably during the second quarter of the year. We think that Innofactor has good prerequisites to continue growing its business operations profitably in 2015. Innofactor is still actively looking for new strategic partnerships in the Nordic Countries. The group will seek growth, which can be organic or based on mergers or acquisitions.

Market outlook and business environment

Main forces affecting the markets are the transfer of software into the cloud, increased significance of social media, mobile devices and Internet of Things, data analytics and machine learning, and data security and protection. A clear change in the purchase habits of customers has been observed as these business changes are taking place. The customers expect the IT provider to focus more on business benefits instead of technology benefits. The customers want the providers to have solutions that are ready for use without a need to make changes, and they want to be able to buy more continuous services instead of large one-off projects.

Innofactor estimates that the growth of IT service market in 2015 will be 0-1% in Finland and 1-3% in other Nordic Countries. The estimate is based on research institutes' forecasts and Innofactor's outlook on markets.

As concerns Microsoft-based solutions, competition in the Nordic Countries is divided between different kinds of parties. The first group is formed by large companies that operate in all of the Nordic Countries. Typically, these companies offer a wide range of IT solutions for companies and organizations, using several competing technologies of which Microsoft technology is one option. The second group is formed by companies that focus on a narrower solution area in the Nordic level. These companies also offer IT solutions for companies and organizations using several competing technologies of which Microsoft technology is typically just one option. The third group is formed by companies operating in just one country. These small or medium-sized companies often focus on one solution area, client and/or field.

Innofactor has made a strategic choice by focusing on solutions implemented with and utilizing the Microsoft platforms and by selecting as its solution areas the ones in which Microsoft's growth and offering, and thus its partners' and ecosystem's growth, has exceeded the general average growth of IT service and software markets many times over. Innofactor is primarily focused on Nordic large and medium-sized companies and government organizations, which have high standards in their IT solution acquisitions. Innofactor develops solutions, products and services suitable for this group by itself and in cooperation with its partners. Innofactor's strategy supports well the change in the markets. Innofactor believes it can gain market share from its competitors and utilize possible IT market growth in the future.

Microsoft's partner network in the Nordic Countries, and also elsewhere in Europe, is quite fragmented and mainly consists of a large number of small and medium-sized local providers. For Innofactor, this provides interesting potential for consolidation and globalization. Innofactor's good reputation, unique proofs of rapid and profitable growth and successful acquisitions together with business culture with entrepreneurial spirit make it a very attractive partner when making reorganizations in the field in the Nordic Countries.


Espoo, July 21, 2015

INNOFACTOR PLC

Board of Directors

Additional information:

CEO Sami Ensio, Innofactor Plc
Tel. +358 50 584 2029

Briefings concerning the Interim Report January 1-June 30, 2015

On July 21, 2015, at 9:00 Finnish time, Innofactor will hold a briefing concerning the Interim Report in Finnish for the media, investors and analysts at the company's premises at Keilaranta 9, Espoo. The report will be presented by CEO Sami Ensio and CFO Janne Martola. The presentations of the briefing will be available on Innofactor's web site after the briefing.

We ask you to register for the briefing beforehand by sending email to .

If required, Innofactor will also hold a conference call in English for analysts, media and investors on July 21, 2015, at 16:00 Finnish time. Registrations to before 12:00 Finnish time on Monday, July 20, 2015.

Finan cial releases in 2015

The schedule for financial releases in 2015 is as follows:

October 6-19, 2015: Silent period

Attachment: Innofactor Plc's interim report for January 1-June 30, 2015 (IFRS)

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