Interim / Quarterly Report • Aug 27, 2024
Interim / Quarterly Report
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NNIT A/S | Weidekampsgade 14 |DK-2300 Copenhagen S | Denmark | www.nnit.com | Company reg. no.: 21093106
In the second quarter, NNIT captured market share despite still being impacted by the macroeconomic headwind especially in Europe and China. Growth was mainly driven by NNIT continuing to expand its business within its existing customer portfolio whilst also bringing in new customers, and partly due to the timing of Easter.
During Q2 2024, NNIT delivered on several important milestones as part of the new strategic direction initiated last year. The more focused NNIT has also resulted in improved customer relationships being reflected by continued high customer satisfaction scores, and with NNIT also being recognized by Everest Group, an independent consultancy firm, in terms of highest value delivered1 .
NNIT expects the rest of the year to be back-end loaded in terms of revenue growth and profitability to gradually increase quarter over quarter. The backlog and pipeline are intact, leading to the full-year financial outlook being confirmed.
Pär Fors, President and CEO of NNIT, comments "We are pleased to see that our key strategic choice of becoming a pure-play IT consulting business is paying off. Significant wins in early Q3 underlines that we are on the right path. As a whole, the business continued to grow, and profitability increased whilst we continue to take important steps on the transformational journey, we initiated last year."
| NNIT A/S, DKK million | Q2 2024 | Q2 2023 | 6M 2024 | 6M 2023 | FY 2023 |
|---|---|---|---|---|---|
| Revenue | 474.0 | 424.1 | 937.4 | 836.8 | 1,728 |
| Revenue growth, % | 11.8% | 15.3% | 12.0% | 15.6% | 15.2% |
| Revenue growth, organic % | 11.0% | 10.9% | 9.5% | 11.5% | 10.8% |
| Group operating profit excl. special items | 32.0 | 25.0 | 55.9 | 45.0 | 116 |
| Group operating profit margin excl. special items, % | 6.7% | 5.9% | 6.0% | 5.4% | 6.7% |
| Special items | 15.2 | 30.0 | 3.9 | 44.0 | 69 |
| Group operating profit incl. special items | 16.8 | -5.0 | 52.0 | 1.0 | 47 |
| Group operating profit margin incl. special items, % | 3.5% | -1.2% | 5.5% | 0.1% | 2.7% |
Financial Outlook
Everest Group - Life Sciences Digital Services for Mid-market Enterprises PEAK Matrix® Assessment 2024
Executive Summary
1
Business & Regional Performance Review Other Events & Contact
Financial statements Accounting Notes
COMPANY ANNOUNCEMENT 05/2024 | INTERIM FINANCIAL REPORT Q2 2024 | PAGE 2 of 20
In the second quarter, NNIT maintained its strong strategic focus to grow within the Life Science- and Public-Private space. This resulted in DKK 474.0m in total revenue which is DKK 50.1m above last year corresponding to a total revenue growth of 11.8%. Organic growth was 11.0%, which developed in line with expectations. Growth was primarily driven by expansion of engagements in Region Europe and Region DK both bringing in new customers and prolonging contracts, and partly the timing of Easter. The macroeconomic headwind highlighted in connection with the Q1 2024 trading statement continues to impact the business, and the temporary decline in the data migration business continues to dampen the growth especially in Region US. While the data migration business is recovering according to plan, Region US is expected to be negatively impacted the rest of the year.
For Q2 2024, the group operating profit margin excl. special items was 6.7% (Q2 2023 was 5.9%) equal to DKK 32.0m in profit compared with DKK 25.0m, same quarter last year. The improvement in profit and margin compared with last year is driven by stronger cost management and the corrective actions taken in Region Asia to return to profitability.
Special items amounted to DKK 15.2m, which is roughly split between earn-out payments and the restructuring cost related to the actions taken in Region Asia. Group operating profit margin incl. special items was an improvement of 4.7%-points compared with last year and group operating profit incl. special items improved by DKK 21.8m.
NNIT expects to further improve its profitability throughout the year as streamlining of processes and systems will continue to lower cost, including the structural cost reductions made in connection with relocating to new facilities and further improvement of utilization levels. On the customer side, significant wins also signal that NNIT is on the right path.
| NNIT A/S, DKK million | Q2 2024 | Q2 2023 | 6M 2024 | 6M 2023 | FY 2023 |
|---|---|---|---|---|---|
| KEY FINANCIAL HIGHLIGHTS | |||||
| Revenue growth, % | 11.8% | 15.3% | 12.0% | 15.6% | 15.2% |
| Revenue growth, organic YoY, % | 11.0% | 11% | 9.5% | 11.5% | 10.8% |
| Group operating profit margin excl. special items, % | 6.7% | 5.9% | 6.0% | 5.4% | 6.7% |
| Special items from continuing operation | 15 | 30 | 4 | 44 | 69 |
| Group operating profit incl. special items | 17 | -5 | 52 | 1 | 47 |
| Group operating profit margin incl. special items, % | 3.5% | -1.2% | 5.5% | 0.1% | 2.7% |
| Depreciation, amortization and impairment | 13 | 7 | 23 | 20 | 28 |
| OTHER FINANCIAL HIGHLIGHTS | |||||
| Revenue | 474 | 424 | 937 | 837 | 1,727.9 |
| - of which Region Europe | 135 | 119 | 261 | 232 | 465.1 |
| - of which Region US | 88 | 103 | 181 | 202 | 386.7 |
| - of which Region Asia | 37 | 36 | 69 | 74 | 143.9 |
| - of which Region Denmark | 214 | 166 | 426 | 329 | 732.3 |
| Production cost | 353 | 321 | 691 | 623 | 1,283.0 |
| Gross profit | 121 | 103 | 246 | 213 | 444.9 |
| Gross margin, % | 25.5% | 24.3% | 26.3% | 25.5% | 25.7% |
| Regional overhead cost | 46 | 44 | 93 | 83 | 157.5 |
| Regional operating profit | 75 | 60 | 153 | 130 | 287.5 |
| Regional operating profit margin, % | 15.8% | 14.1% | 16.3% | 15.6% | 16.6% |
| Corporate cost | 43 | 35 | 97 | 85 | 171.8 |
| Group operating profit excl. special items | 32 | 25 | 56 | 45 | 115.7 |
| Group operating profit margin excl. special items, % | 6.7% | 5.9% | 6.0% | 5.4% | 6.7% |
| Special items | 15.2 | 30 | 3.9 | 44 | 69 |
| Group operating profit incl. special items | 17 | -5 | 52 | 1 | 47 |
| Group operating profit margin incl. special items, % | 3.5% | -1.2% | 5.5% | 0.1% | 2.7% |
| Executive Business & Regional |
Financial | Other Events & | Financial | Accounting | |
| Summary Performance Review |
Outlook | Contact | Statements | Notes |
COMPANY ANNOUNCEMENT 05/2024 | INTERIM FINANCIAL REPORT Q2 2024 | PAGE 3 of 20
In Q2 2024, the revenue growth for Region Europe was 13.3% corresponding to DKK 135.0m. Organic growth ended at 12.3%. Region Europe continued to see strong demand for digital transformation within the manufacturing space including data and digital area, which was the primary cause for growth, and partly the timing of Easter. During the quarter, Region Europe increased its diversification of services with existing customers emphasizing the strong customer partnership NNIT has built over time. The growth was partly offset by the continued macroeconomic headwind in Europe which is most evident within Research & Development, where the demand for bigger transformations is dampened. Moreover, the temporary decline in the data migration business also affected Region Europe with lower demand for large scale Veeva programs.
Region Europe's group operating profit excl. special items was DKK 8.8m compared with DKK 2.2m in Q2 last year. The margin was 6.5%, which is a 4.7%-point increase. The improvement in profitability is mainly driven by an increasing utilization rate, leveraging the cost base and tight cost control. The margin increase was partly offset by the temporary decline in the data migration business and keeping a minor number of billable employees on the bench as they will be engaged in future projects later this year.
| DKK million | Q2 2024 | Q2 2023 | 6M 2024 | 6M 2023 | FY 2023 |
|---|---|---|---|---|---|
| Revenue | 135.0 | 119.2 | 261.4 | 231.6 | 465 |
| Revenue growth, YoY, % | 13.3% | 0.1% | 12.9% | 0.4% | -0.6% |
| Revenue growth, organic YoY, % | 12.3% | -0.3% | 12.3% | -4.8% | -2.8% |
| Production cost | 101.2 | 93.1 | 198.4 | 177.4 | 330 |
| Gross profit | 33.8 | 26.1 | 63.0 | 54.2 | 135 |
| Gross margin, % | 25.1% | 21.9% | 24.1% | 23.4% | 29.0% |
| Regional overhead cost | 13.8 | 13.8 | 28.8 | 25.7 | 57 |
| Regional operating profit | 20.0 | 12.3 | 34.2 | 28.4 | 78 |
| Regional operating profit margin, % | 14.8% | 10.3% | 13.1% | 12.3% | 16.8% |
| Corporate cost | 11.2 | 10.1 | 23.7 | 25.3 | 47 |
| Group operating profit excl. special items | 8.8 | 2.2 | 10.5 | 3.1 | 32 |
| Group operating profit margin excl. special items, % | 6.5% | 1.8% | 4.0% | 1.4% | 6.9% |
During the second quarter, the revenue performance in Region US continues to be dampened by the temporary decline in the data migration business. Even though the core business of Region US and Excellis Health Solutions both demonstrated growth, the region's revenue growth was negative by 14.5%, and organic growth was negative by 15.2%. Despite the underwhelming performance within the data migration business, the recovery is tracking according to plan. However, the following quarter is expected to be soft with an acceleration expected in the last quarter of the year.
In the other business areas, Region US has continued to strengthen the backlog and pipeline, bringing in 19 new customers and expansions of existing engagements as demand continues to be at a good level. The US team won its largest deal ever in the region with a value of approx. DKK 130m early Q3. The contract, which is with an existing customer and prominent US player, will generate revenue from Q3, and is a testimony to the strong customer relationship NNIT has built over the years.
The group operating profit for the region was DKK 3.7m, equal to a margin of 4.2%, which is a decline of 11.0%-p compared with last year. The primary driver for the lower margin vs last year can be directly
Executive Summary
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attributed to the temporary decline in the migration business. As in Region Europe, some billable employees are kept on the bench to be ready for the second half of the year as they are assigned to future projects. To protect profitability, Region US has made a calibration of the cost base adjusting its capacity to fit current demand in early July.
| DKK million | Q2 2024 | Q2 2023 | 6M 2024 | 6M 2023 | FY 2023 |
|---|---|---|---|---|---|
| Revenue | 88.1 | 103.0 | 180.9 | 201.8 | 387 |
| Revenue growth, YoY, % | -14.5% | 35.8% | -10.3% | 37.5% | 23.9% |
| Revenue growth, organic YoY, % | -15.2% | 38.8% | -10.4% | 36.5% | 27.4% |
| Production cost | 60.9 | 65.6 | 118.3 | 133.5 | 252 |
| Gross profit | 27.2 | 37.4 | 62.6 | 68.3 | 135 |
| Gross margin, % | 30.8% | 36.3% | 34.6% | 33.8% | 34.9% |
| Regional overhead cost | 14.1 | 13.8 | 31.9 | 27.7 | 55 |
| Regional operating profit | 13.1 | 23.5 | 30.7 | 40.6 | 80 |
| Regional operating profit margin, % | 14.9% | 22.9% | 17.0% | 20.1% | 20.7% |
| Corporate cost | 9.4 | 7.9 | 21.2 | 18.9 | 37 |
| Group operating profit excl. special items | 3.7 | 15.7 | 9.5 | 21.7 | 42 |
| Group operating profit margin excl. special items, % | 4.2% | 15.2% | 5.3% | 10.7% | 10.9% |
In Q2, Region Asia returned to growth and positive profitability after two quarters with negative results. The region delivered revenue growth of 3.3% in total DKK 37.3m and organic growth of 6.4%. The step-change in performance is a direct result of the actions taken during the past two quarters when the organization has been rightsized to fit the current market demand. In addition, Region Asia has reorganized its organization where the sales function is now being a part of the delivery units to be closer to market. Furthermore, commercial initiatives have been launched with enhanced focus on sales excellence and pricing. Despite improved momentum, NNIT continues to face headwind from the Chinese macroeconomic climate where NNIT experiences lower demand for external support and customers are hesitant to sign new or expand existing contracts.
The region's group operating profit margin improved significantly from -17.4% in Q2 last year to 3.9% in Q2 2024. The improvement in profitability can be attributed to the actions taken in connection with the turnaround such as the capacity reductions made. In addition, the utilization rate has increased, and staffing of projects has been optimized.
| DKK million | Q2 2024 | Q2 2023 | 6M 2024 | 6M 2023 | FY 2023 |
|---|---|---|---|---|---|
| Revenue | 37.3 | 36.1 | 69.2 | 73.9 | 144 |
| Revenue growth, YoY, % | 3.3% | -2.3% | -6.4% | 6.5% | -8.3% |
| Revenue growth, organic YoY, % | 6.4% | 2.1% | -3.1% | 9.7% | -4.2% |
| Production cost | 26.7 | 35.0 | 55.1 | 71.1 | 135 |
| Gross profit | 10.6 | 1.1 | 14.1 | 2.9 | 9 |
| Gross margin, % | 28.4% | 3.1% | 20.4% | 3.9% | 6.3% |
| Regional overhead cost | 5.7 | 4.0 | 10.9 | 6.9 | 13 |
| Regional operating profit | 4.9 | -2.8 | 3.2 | -4.1 | -4 |
| Regional operating profit margin, % | 13.2% | -7.9% | 4.7% | -5.5% | -2.8% |
| Corporate cost | 3.5 | 3.5 | 7.5 | 8.7 | 14 |
| Group operating profit excl. special items | 1.5 | -6.3 | -4.3 | -12.8 | -18 |
| Group operating profit margin excl. special items, % | 3.9% | -17.4% | -6.2% | -17.3% | -12.5% |
Executive Summary
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Financial Statements Accounting Notes
COMPANY ANNOUNCEMENT 05/2024 | INTERIM FINANCIAL REPORT Q2 2024 | PAGE 5 of 20
During the second quarter, Region Denmark continued to deliver strong total revenue growth of 28.8% reaching DKK 213.6m including revenue generated towards Aeven. Organic growth was 27.3%, which is partly due to NNIT continuing to expand its footprint with Private and Public customers and partly due to the timing of Easter.
In the quarter within the Public space, Region Denmark prolonged its contract with "Danish Veterinary and Food administration (Fødevarestyrelsen)" with two years, won a public tender with "Department of Prisons and Probation (Kriminalforsorgen)" to develop and support systems and expanded within SKI2 agreements by becoming a supplier on the upcoming SKI 02.14 IT Consulting Frame Agreement amongst others. Moreover, Region DK is close to signing a large strategically important contract with an existing public customer. The signing of the contract is planned in the third quarter.
SCALES continued to expand its position as Denmark's largest supplier of Microsoft Dynamics 365 for Finance & Operations (D365FO) to Danish-based companies expanding their collaboration with existing customers. SCALES accounted for around 30% of the region's revenue.
Region Denmark's group operating profit was DKK 18.0m in Q2, which is an increase of DKK 4.5m compared with same quarter last year. The group operating profit margin was 8.4%, which is a 0.3%-p increase vs last year. Even though the profit and margin slightly increased, Region Denmark is still affected by the material number of billable employees spending time on important internal projects such as the finalization of the IT separation from Aeven, which will be completed during the third quarter.
| DKK million | Q2 2024 | Q2 2023 | 6M 2024 | 6M 2023 | FY 2023 |
|---|---|---|---|---|---|
| Revenue | 213.6 | 165.8 | 425.8 | 329.5 | 732 |
| Revenue growth, YoY, % | 28.8% | 22.1% | 29.2% | 18.9% | 29.8% |
| Revenue growth, organic YoY, % | 27.3% | 7.5% | 22.7% | 12.0% | 17.0% |
| Production cost | 164.4 | 127.3 | 319.2 | 241.5 | 566 |
| Gross profit | 49.1 | 38.5 | 106.7 | 88.0 | 166 |
| Gross margin, % | 23.0% | 23.2% | 25.1% | 26.7% | 22.7% |
| Regional overhead cost | 12.1 | 11.9 | 21.6 | 22.8 | 33 |
| Regional operating profit | 37.1 | 26.7 | 85.0 | 65.2 | 133 |
| Regional operating profit margin, % | 17.4% | 16.1% | 20.0% | 19.8% | 18.2% |
| Corporate cost | 19.1 | 13.2 | 44.9 | 32.2 | 73 |
| Group operating profit excl. special items | 18.0 | 13.5 | 40.1 | 33.0 | 60 |
| Group operating profit margin excl. special items, % | 8.4% | 8.1% | 9.4% | 10.0% | 8.2% |
Executive Summary 2 The State and Local Government Procurement Service
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Financial Statements
The current financial outlook announced on 19 February 2024 in connection with the Annual Report 2023, cf. company announcement no. 01/2024, is confirmed. NNIT's organic revenue growth is expected to be around 10% with a group operating profit margin excl. special items of between 8-9%. The organic growth is expected to be back-end loaded meaning low-single digit growth in Q3 and double-digit growth in Q4. Group operating profit margin excl. special items is expected to gradually improve compared with the first half year margin result.
| Announced on 19 Feb 2024 |
|
|---|---|
| NNIT A/S | 2024 outlook confirmed |
| Organic growth | Around 10% |
| Group operating profit margin excl. special items | 8-9% |
This announcement contains forward-looking statements. Words such as 'believe', 'expect', 'may', 'will', 'plan', 'strategy', 'prospect', 'foresee', 'estimate', 'project', 'anticipate', 'can', 'intend', 'outlook', 'guidance', 'target' and other words and terms of similar meaning in connection with any discussion of future operating or financial performance identify forward-looking statements. Statements regarding the future are subject to risks and uncertainties that may result in considerable deviations from the outlook set forth. Furthermore, some of these expectations are based on assumptions regarding future events which may prove incorrect.
Please also refer to the overview of risk factors in the 'risk management' section on page 27-28 of the Annual Report 2023.
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On 10th July, NNIT announced the sale of its vendor loan note to Novo Holdings A/S. The vendor loan note was sold at a book value of DKK 221m with an effective date of 1st July 2024 which has been paid in full.
On 21st August, NNIT announced it has entered into an agreement with an existing large pharma customer in Region US to deliver strategic consulting services in the areas of Quality & Computer System Validation support. NNIT starts to deliver on the project during the third quarter, and the contract runs for three years and is worth approx. DKK 130m with the possibility of extensions.
There have been no other events after the balance sheet date that would have a significant impact on an assessment of NNIT's financial position as of June 30, 2024.
August 27, 2024, at 9:30 AM CEST:
Dial in information:
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NNIT is a leading provider of IT solutions to life sciences internationally, and to the public and private sectors in Denmark.
We focus on high complexity industries and thrive in environments where regulatory demands and complexity are high.
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We advise on and build sustainable digital solutions that work for the patients, citizens, employees, end users or customers.
We strive to build unmatched excellence in the industries we serve, and we use our domain expertise to represent a business first approach – strongly supported by a selection of partner technologies, but always driven by business needs rather than technology.
NNIT consists of group company NNIT A/S and subsidiaries SCALES, Excellis Health Solutions and SL Controls. Together, these companies employ more than 1,700 people in Europe, Asia and USA. Read more at www.nnit.com.
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Financial Statements
| DKK million | 6M 2024 | 6M 2023 | FY 2023 |
|---|---|---|---|
| Financial performance | |||
| Revenue | |||
| Region Europe | 261 | 232 | 465 |
| Region US | 181 | 202 | 387 |
| Region Asia | 69 | 74 | 144 |
| Region Denmark | 426 | 329 | 732 |
| Total revenue | 937 | 837 | 1,728 |
| Production cost | 691 | 602 | 1,283 |
| Gross profit | 246 | 235 | 445 |
| Gross margin | 26.3% | 28.1% | 25.8% |
| EBITDA before special items | 79 | 65 | 144 |
| Depreciations, amortizations and impairment | 23 | 20 | 28 |
| Group operating profit before special items1 | 56 | 45 | 116 |
| Special items, costs1 | 4 | 44 | 69 |
| EBITDA incl. special items | 75 | 21 | 75 |
| Operating profit/loss (EBIT) | 52 | 1 | 47 |
| Net financials | -3 | -34 | -30 |
| Net profit/loss from continuing operations | 34 | -33 | 6 |
| Net profit/loss from discontinued operations | 0 | 129 | 24 |
| Total net profit/loss for the period | 34 | 96 | 30 |
| Investments in tangible assets | -28 | -7 | -4 |
| Investments in intangible assets incl. acquisition of subsidiaries | -8 | -4 | -18 |
| Total assets | 1,903 | 1,998 | 1,977 |
| Equity | 876 | 897 | 827 |
| Dividends paid | 0 | 0 | 0 |
| Interest-bearing debt, net2 | -370 | -84 | -77 |
| Free cash flow from continuing operations | -262 | -201 | -109 |
| Total free cash flow for the period | -262 | 676 | 698 |
| Earnings per share | |||
| Earnings per share (DKK) | 1.41 | -1.31 | 0.24 |
| Diluted earnings per share (DKK) | 1.41 | -1.31 | 0.24 |
| Employees | |||
| Average number of full-time employees, continuing | 1,746 | 1,763 | 1,773 |
| Financial ratios | |||
| Revenue growth | 12.0% | 15.6% | 15.2% |
| Organic growth | 9.5% | 11.5% | 10.8% |
| Gross margin | 26.3% | 28.1% | 25.8% |
| EBITDA margin before special items | 8.4% | 7.8% | 8.3% |
| Group operating profit margin before special items | 6.0% | 5.4% | 6.7% |
| Group operating profit margin | 5.5% | 0.2% | 2.7% |
| Effective tax rate | 30.6% | 1.3% | 64.7% |
| Return on equity3 | -3.6% | -1.0% | 0.7% |
| Solvency ratio | 46.0% | 44.9% | 41.8% |
| Return on invested capital (ROIC)3,4 | -2.5% | -1.0% | 2.9% |
1) Special items comprise costs that cannot be attributed directly to NNIT's ordinary activities and are non-recurring of nature
2) Net interest bearing debt defined as Cash and cash equivalents, Derivative financial instruments, Bank overdraft, leasing Liabilities
3) Financial metrics are moving annual total cost (MAT) relative to ultimo balance
4) Net profit (MAT) / ultimo invested capital
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Intangible increases with DKK 38 million to DKK 742 million on June 30, 2024, from DKK 704 million on December 31, 2023. The increase is primarily due to the ongoing implementation and development of a new ERP system.
The decrease of DKK 214 million. in non-current other receivables related to a classification of the vendor note from non-current to current.
Other current facilities have decreased after settlement of liabilities primarily related to the divestment. The change in credit facilities is due to the establishment of a new long-term credit facility.
The Group's free cash flow on June 30, 2024 was DKK -262 million, compared to DKK 698 million on December 31, 2023. The free cash flow has been allocated to payment of current liabilities.
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Financial Statements
The Board of Directors and Executive Management ("Management") have reviewed and approved the interim consolidated financial statements of NNIT A/S (NNIT A/S, together with its subsidiaries, the "Group") for the first six months of 2024 with comparative figures for the first six months of 2023. The interim consolidated financial statements have not been audited or reviewed by the company's independent auditors.
The interim consolidated financial statements for the first six months of 2024 have been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union and accounting policies set out in the Annual Report 2023 of NNIT A/S. Furthermore, the interim consolidated financial statement for the first six months of 2024 and Management's review are prepared in accordance with additional Danish disclosure requirements for interim reports of listed companies.
In our opinion, the accounting policies used are appropriate and the overall presentation of the interim consolidated financial statements for the first six months of 2024 are adequate and give a true and fair view of the Group's assets, liabilities and financial position as of June 30, 2024 and of the results of the Group's operations and cash flow for the six months ended June 30, 2024. Furthermore, in our opinion, Management's review includes a true and fair account of the development in the operations and financial circumstances, of the results for the period, and of the financial position of the Group as well as a description of the most significant risks and elements of uncertainty facing the Group in accordance with Danish disclosure requirements for listed companies.
Besides what has been disclosed in the interim consolidated financial statements and Management's review for the first six months of 2024, no changes in the Group's most significant risks and uncertainties have occurred relative to disclosures published in the Annual Report 2023 of NNIT A/S.
Copenhagen, August 26, 2024
| Pär Fors President and CEO |
Carsten Ringius Executive Vice President and CFO |
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|---|---|---|---|---|---|
| Board of Directors | |||||
| Carsten Dilling Chairman |
Eivind Kolding Deputy Chairman |
Jan Winther | |||
| Christian Kanstrup | Caroline Serfass | Nigel Govett | |||
| Frederik Willumsen | Dorte Broch Pedersen | Kim Høyer | |||
| Executive Summary |
Business & Regional Performance Review |
Financial Outlook |
Other Events & Contact |
Financial Statements |
Accounting Notes
COMPANY ANNOUNCEMENT 05/2024 | INTERIM FINANCIAL REPORT Q2 2024 | PAGE 12 of 20
| DKK million | Note | Jun 30, 2024 |
Jun 30, 2023 |
Dec 31, 2023 |
|---|---|---|---|---|
| INCOME STATEMENT | 1 | |||
| Revenue | 937 | 837 | 1,728 | |
| Production cost | 691 | 602 | 1,283 | |
| Gross profit | 246 | 235 | 445 | |
| Sales and marketing costs | 32 | 37 | 63 | |
| Administrative expenses | 158 | 153 | 266 | |
| Operating profit before special items | 56 | 45 | 116 | |
| Special items, costs | 4 | 4 | 44 | 69 |
| Operation profit / loss | 52 | 1 | 47 | |
| Financial income | 10 | 3 | 16 | |
| Financial expenses | 13 | 37 | 46 | |
| Profit/(loss) before income taxes | 49 | -33 | 17 | |
| Income Taxes | 15 | 0 | 11 | |
| Profit/(loss) from continuing operations | 34 | -33 | 6 | |
| Profit/(loss) from discontinuing operations | 3 | 0 | 129 | 24 |
| Net profit/(loss) for the period | 34 | 96 | 30 | |
| Earnings per share from continuing operations | ||||
| Earnings per share | 1.41 | -1.31 | 0.24 | |
| Diluted earnings per share | 1.41 | -1.31 | 0.24 | |
| Earnings per share from total operations | ||||
| Earnings per share | 1.41 | 3.87 | 1.20 | |
| Diluted earnings per share | 1.41 | 3.85 | 1.20 |
| DKK million | Note | Jun 30, 2024 |
Jun 30, 2023 |
Dec 31, 2023 |
|---|---|---|---|---|
| STATEMENT OF COMPREHENSIVE INCOME | ||||
| Net profit/(loss) for the period | 34 | 96 | 30 | |
| Other comprehensive income: | ||||
| Items that will not subsequently be reclassified to the income statement: | ||||
| Remeasurement related to defined benefit pension obligations |
-2 | 0 | 0 | |
| Tax on other comprehensive income defined benefit pension obligations |
0 | 0 | -1 | |
| Items that may be reclassified subsequently to the income statement, when specific conditions are met: |
||||
| Exchange rate adjustments related to subsidaries (net) | 18 | -14 | -19 | |
| Tax related to exchange rate adjustments related to subsidaries (net) |
-2 | 1 | 2 | |
| Other comprehensive income, net of tax | 14 | -13 | -18 | |
| Total comprehensive income | 48 | 83 | 12 | |
| Total comprehensive income arises from: | ||||
| Discontinued operations | 0 | 129 | 24 | |
| Continuing operations | 48 | -46 | -12 |
Executive Summary Financial Outlook
Financial Statements
| DKK million | Note | Jun 30, 2024 |
Jun 30, 2023 |
Dec 31, 2023 |
|---|---|---|---|---|
| ASSETS | ||||
| Intangible assets | 742 | 694 | 704 | |
| Tangible assets | 12 | 18 | 8 | |
| Lease assets | 50 | 34 | 45 | |
| Transition cost | 13 | 12 | 14 | |
| Deferred tax | 42 | 93 | 78 | |
| Deposits | 37 | 27 | 31 | |
| Trade receivables | 11 | 58 | 25 | |
| Other receivables | 5 | 0 | 213 | 214 |
| Total non-current assets | 907 | 1,149 | 1,119 | |
| Ínventories | 2 | 3 | 2 | |
| Transition cost | 3 | 2 | 3 | |
| Trade receivables | 5 | 518 | 433 | 451 |
| Work in progress | 5 | 19 | 124 | 67 |
| Other receivables | 237 | 23 | 44 | |
| Pre-payments | 44 | 93 | 27 | |
| Tax receivable | 11 | 19 | 10 | |
| Cash and cash equivalents | 162 | 158 | 254 | |
| Total current assets | 996 | 855 | 858 | |
| Total assets | 1,903 | 2,004 | 1,977 | |
| DKK million | Jun 30, 2024 |
Jun 30, 2023 |
Dec 31, 2023 |
|
| EQUITY AND LIABILITIES | ||||
| Share capital | 250 | 250 | 250 | |
| Treasury shares | -1 | 2 | -1 | |
| Retained earnings | 601 | 619 | 556 | |
| Other reserves | 26 | 26 | 22 | |
| Total equity | 876 | 897 | 827 | |
| Leasing liability | 29 | 34 | 13 | |
| Employee benefit obligation | 11 | 3 | 6 | |
| Provisions | 28 | 27 | 27 | |
| Trade payables | 2 | 23 | 12 | |
| Other non-current liabilities | 10 | 10 | 10 | |
| Credit facilities | 271 | 0 | 267 | |
| Total non-current liabilities | 351 | 97 | 335 | |
| Prepayments received, transition cost | 18 | 16 | 20 | |
| Prepayments received, work in progress | 5 | 51 | 60 | 74 |
| Deferred income | 0 | 0 | 67 | |
| Leasing liabilities | 32 | 56 | 51 | |
| Employee benefit obligations | 6 | 38 | 57 | |
| Provisions | 10 | 0 | 15 | |
| Trade payables | 102 | 56 | 98 | |
| Employee cost payable | 113 | 160 | 122 | |
| Tax payables | 33 | 151 | 70 | |
| Other current liabilities | 111 | 315 | 241 | |
| Credit facilities | 200 | 158 | 0 | |
| Total current liabilities | 676 | 1,010 | 815 | |
| Total liabilities | 1,903 | 2,004 | 1,977 | |
Contigent liabilities and legal procedings 6
Executive Summary
Financial Outlook
Other Events & Contact
Financial Statements Accounting Notes
COMPANY ANNOUNCEMENT 05/2024 | INTERIM FINANCIAL REPORT Q2 2024 | PAGE 14 of 20
Business & Regional Performance Review
| DKK million | Note | Jun 30, 2024 | Jun 30, 2023 | Dec 31, 2023 |
|---|---|---|---|---|
| STATEMENT OF CASH FLOW | ||||
| Net profit / loss for the period | 34 | 96 | 30 | |
| Reversal of non-cash items | 47 | -74 | -14 | |
| Interest received/paid | -9 | -34 | -40 | |
| Income taxes paid | -16 | 59 | 36 | |
| Cash flow before change in working capital | 56 | 47 | 12 | |
| Changes in working capital | -284 | -337 | -214 | |
| Cash flow from operating activities | -228 | -290 | -202 | |
| Cash flow from operating activities, discontinued | 0 | -94 | -97 | |
| Cash flow from operating activities, continuing | -228 | -196 | -105 | |
| Capitalization of intangible assets | -28 | -9 | -24 | |
| Purchase of tangible assets | -8 | -46 | -46 | |
| Sale of tangible assets | 0 | 0 | 2 | |
| Divestment of instrastructure business | 0 | 1,021 | 1,001 | |
| Sublease payment received | 2 | 0 | 18 | |
| Adjustment acquisition cost | 0 | 0 | -51 | |
| Loan related to aquisition of subsidaries | 0 | 0 | 0 | |
| Cash flow from investing activities | -34 | 966 | 900 | |
| Cash flow from investing activities, discontinued | 0 | 971 | 904 | |
| Cash flow from investing activities, continuing | -34 | -5 | -4 | |
| Dividends paid | 0 | 0 | 0 | |
| Deposit (paid)/received | -6 | 8 | 4 | |
| Installments on lease liabilities | -27 | -36 | -66 | |
| Draw/(repaid) on credit facitities | 204 | -698 | -590 | |
| Cash flow from financing activities | 171 | -726 | -652 | |
| Cash flow from financing activities, continuing | 171 | -726 | -652 | |
| Net cash flow | -91 | -50 | 46 | |
| Cash and cash equivalents at the beginning of the period | 254 | 208 | 208 | |
| Cash and cash equivalents at the end of the period | 163 | 158 | 254 | |
| Additional information 1 : |
||||
| Cash and cash equivalents, assets | 163 | 158 | 254 | |
| Drawn on credit facilities | -471 | -158 | -267 | |
| Committed credit facilities | 500 | 450 | 300 | |
| Financial resources at the end of the period | 192 | 450 | 287 | |
| Cash flow from operating activities | -228 | -290 | -202 | |
| Cash flow from investing activities | -34 | 966 | 900 | |
| Free cash flow | -262 | 676 | 698 |
Financial resources at the end of the period' is defined as the sum of cash and cash equivalents at the end of the period and undrawn commited credit facilities. Free cash flow is defined as 'cash flow from operating activities' less 'cash flow from investing activities'.
Executive Summary Financial Outlook
Other Events & Contact
Financial Statements
| DKK million | Share capital |
Treasury shares |
Retained earnings |
Currency revaluation |
Tax | Total other reserves |
Proposed dividends |
Total |
|---|---|---|---|---|---|---|---|---|
| EQUITY - June 30, 2024 | ||||||||
| Balance at the beginning of the period | 250 | -1 | 556 | 27 | -5 | 22 | 0 | 827 |
| Net profit/loss for the period | 0 | 0 | 34 | 0 | 0 | 0 | 0 | 34 |
| Other comprehensive income for the period | 0 | 0 | -2 | 18 | -2 | 16 | 0 | 14 |
| Total comprehensive income for the period | 0 | 0 | 32 | 18 | -2 | 16 | 0 | 48 |
| Transactions with owners: | ||||||||
| Transfer of treasury shares | 0 | 0 | 1 | 0 | 0 | 0 | 0 | 1 |
| Dividends paid | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Balance at the end of the period | 250 | -1 | 589 | 45 | -7 | 38 | 0 | 876 |
| DKK million | Share capital |
Treasury shares |
Retained earnings |
Currency revaluation |
Tax | Total other reserves |
Proposed dividends |
Total |
|---|---|---|---|---|---|---|---|---|
| EQUITY - December 31, 2023 | ||||||||
| Balance at the beginning of the period | 250 | -1 | 526 | 46 | -7 | 39 | 0 | 814 |
| Net profit/loss for the period | 0 | 0 | 30 | 0 | 0 | 0 | 0 | 30 |
| Other comprehensive income for the period | 0 | 0 | -1 | -19 | 2 | -17 | 0 | -18 |
| Total comprehensive income for the period | 0 | 0 | 29 | -19 | 2 | -17 | 0 | 12 |
| Transactions with owners: | ||||||||
| Share-based payments | 0 | 0 | 1 | 0 | 0 | 0 | 0 | 1 |
| Dividends paid | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Balance at the end of the period | 250 | -1 | 556 | 27 | -5 | 22 | 0 | 827 |
| DKK million | Share capital |
Treasury shares |
Retained earnings |
Currency revaluation |
Tax | Total other reserves |
Proposed dividends |
Total |
|---|---|---|---|---|---|---|---|---|
| EQUITY - June 30, 2023 | ||||||||
| Balance at the beginning of the period | 250 | -1 | 526 | 46 | -7 | 39 | 0 | 814 |
| Net profit for the period | 0 | 0 | 96 | 0 | 0 | 0 | 0 | 96 |
| Other comprehensive income for the period | 0 | 0 | 0 | -14 | 1 | -13 | 0 | -13 |
| Total comprehensive income for the period | 0 | 0 | 96 | -14 | 1 | -13 | 0 | 83 |
| Transactions with owners: | ||||||||
| Transfer of treasury shares | 0 | 4 | -4 | 0 | 0 | 0 | 0 | 0 |
| Dividends paid | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Balance at the end of the period | 250 | 3 | 618 | 32 | -6 | 26 | 0 | 897 |
Executive Summary
Business & Regional Performance Review
Financial Outlook
Other Events & Contact
Financial Statements
The consolidated financial statements for the first six months of 2024 are prepared in accordance with IAS 34 'Interim Financial Reporting' and based on the same accounting policies for recognition and measurement as were applied in the Annual Report 2023.
The financial reporting including the consolidated financial statements for the first six months of 2024 and Management's review have been prepared in accordance with additional Danish disclosure requirements for interim reports of listed companies.
See pages 49 to 56 of the Annual Report 2023 for a comprehensive description of the accounting policies applied for recognition and measurement.
Executive Summary
Business & Regional Performance Review
Financial Outlook
Other Events & Contact
Financial Statements
NNIT consists of four regions, which individually are considered an operating segment:
The four regional P&Ls include allocated corporate cost such as legal, human resources, finance and global delivery centers. The operating segments reflect the internal reporting that is reviewed by the "Chief Operating Decision makers" consisting of the Executive Management and the Board of Directors. The internal reporting includes communication of revenue, costs and operating results for each of the operating segments. No reporting is made on assets.
| Region | Region | Region | Region | ||
|---|---|---|---|---|---|
| DKK million | Denmark | Europe | Asia | US | Total |
| 6M 2024 | |||||
| Revenue | 425,8 | 261,4 | 69,2 | 180,9 | 937,4 |
| Production cost | 319,2 | 198,4 | 55,1 | 118,3 | 690,9 |
| Gross profit | 106,7 | 63,0 | 14,1 | 62,6 | 246,4 |
| Gross profit Margin | 25,1% | 24,1% | 20,4% | 34,6% | 26,3% |
| Regional operating profit | 85,0 | 34,2 | 3,2 | 30,7 | 153,2 |
| Regional operating profit margin | 20,0% | 13,1% | 4,7% | 17,0% | 16,3% |
| Group operating profit1 | 40,1 | 10,5 | -4,3 | 9,5 | 55,9 |
| Group operating profit margin | 9,4% | 4,0% | -6,2% | 5,3% | 6,0% |
| 6M 2023 | |||||
| Revenue | 329,5 | 231,6 | 73,9 | 201,8 | 836,8 |
| Production cost | 226,4 | 174,1 | 71,1 | 130,3 | 601,8 |
| Gross profit | 103,1 | 57,5 | 2,9 | 71,5 | 234,9 |
| Gross profit Margin | 31,3% | 24,8% | 3,9% | 35,4% | 28,1% |
| Regional operating profit | 80,7 | 31,1 | -3,6 | 43,8 | 152,1 |
| Regional operating profit margin | 24,5% | 13,5% | -4,8% | 21,7% | 18,2% |
| Group operating profit1 | 40,2 | -0,5 | -14,5 | 20,0 | 45,3 |
| Group operating profit margin | 12,2% | -0,2% | -19,6% | 9,9% | 5,4% |
| FY 2023 | |||||
| Revenue | 732,3 | 465,1 | 143,9 | 386,7 | 1.728,0 |
| Production cost | 566,1 | 329,8 | 135,0 | 252,0 | 1.282,9 |
| Gross profit | 166,2 | 135,3 | 8,9 | 134,7 | 445,1 |
| Gross profit Margin | 22,7% | 29,0% | 6,3% | 34,9% | 25,8% |
| Regional operating profit | 133,0 | 78,4 | -3,8 | 79,9 | 287,4 |
| Regional operating profit margin | 18,2% | 16,8% | -2,8% | 20,7% | 16,6% |
| Group operating profit1 | 59,6 | 31,9 | -18,1 | 42,4 | 115,9 |
| Group operating profit margin | 8,2% | 6,9% | -12,5% | 10,9% | 6,7% |
1 When deducting special items and net financials consolidated profit before income taxes is obtained.
In June 2022, it was announced that NNIT was divesting the Infrastructure Operations business (Hybrid Cloud Solutions and selected parts of Cloud & Digital Solutions). In 2023, all costs related to the divestment are considered separation costs related to negotiations with the buyer and are recognized in special items in the discontinued operations, and all costs regarding the transaction are recognized in the gain statement.
Executive Summary Financial Outlook
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Financial Statements
In the financial report for the first six months of 2023, the discontinued operations include the period from January to April 2023 and gain from sale of the discontinued operations. The result of the business classified within discontinued operations is a profit of DKK 129 million. Profits from discontinued operations include gain on sale of discontinued operations after tax of DKK 138 million. Carveout and separation costs related to the divestment of DKK 81 million are recognized in special items.
Cash flow from investing activities from discontinued operations in the financial report for the first six months of 2023 includes cash consideration from divestment of the infrastructure business of DKK 1,021 million. The cash consideration excludes a vendor note of DKK 200 million, which will be repaid no later than six years after closing.
The Vendor note has been sold in July 2024, see further in note 8, and is classified as Other receivables, current in the balance sheet on 30th June 2024.
| DKK million | Jun 30, 2024 |
Jun 30, 2023 |
Dec 31, 2023 |
|---|---|---|---|
| Special items | |||
| Related to: | |||
| Gain from subleases | -15 | ||
| Employee benefit cost (contingent consideration agreement) | 16 | 32 | 52 |
| Restructuring cost | 8 | 12 | 31 |
| Cost regarding acquisition and disposal of operations (Income) | -20 | 81 | 103 |
| Total special items | 4 | 125 | 171 |
| Total special items, discontinuing operations | 0 | 81 | 102 |
| Total special items, continuing operations | 4 | 44 | 69 |
| If special items had been recognized in operating profit before special items, |
|||
| they would have been included in the following items: | |||
| Cost of goods sold | -12 | 5 | 3 |
| Sales and marketing costs | 0 | 0 | 0 |
| Administratrive expenses | 16 | 39 | 66 |
| Cash flow from operating activities | 4 | 44 | 69 |
| DKK million | Jun 30, 2024 |
Jun 30, 2023 |
Dec 31, 2023 |
||
|---|---|---|---|---|---|
| Related party transactions | |||||
| Assets | |||||
| Receivables from related parties | 71 | 53 | 64 | ||
| Work in progress related parties | 4 | 24 | 2 | ||
| Liabilities | |||||
| Liabilities to related parties | 1 | 1 | 1 | ||
| Prepayments from related parties | 3 | 10 | 17 | ||
| Executive Summary |
Business & Regional Performance Review |
Financial Outlook |
Other Events & Contact |
Financial Statements |
Accounting Notes |
COMPANY ANNOUNCEMENT 05/2024 | INTERIM FINANCIAL REPORT Q2 2024 | PAGE 19 of 20
Contingent liabilities and legal proceedings
The Group is occasionally involved in legal, customer and tax disputes in certain countries. Such disputes are by nature subject to considerable uncertainty. None of these cases are expected to have a material impact on the financial position of NNIT.
| Currency sensitivities |
|---|
| Estimated annual impact of NNIT's operating profit of a 10% increase in the outlined currencies against DKK |
|
|---|---|
| EUR | 2 |
| CNY | 2 |
| CZK | -3 |
| PHP | -7 |
| CHF | 1 |
| USD | 15 |
| DKK per 100 | 2022 average exchange rates |
2023 average exchange rates |
2024 average exchange rates |
|---|---|---|---|
| CNY | 104.44 | 99.61 | 95.61 |
| EUR | 744.08 | 744.61 | 745.80 |
| CZK | 30.21 | 31.43 | 29.82 |
| PHP | 12.87 | 12.49 | 12.12 |
| CHF | 717.56 | 754.92 | 775.94 |
| USD | 663.02 | 689.35 | 689.80 |
NNIT has a net cost exposure in the Czech koruna and the Philippine peso. Therefore, a depreciation of these currencies versus Danish kroner has a positive impact on reported operating profit, whereas an increase will have the reverse effect.
For the other main currencies, NNIT has a net profit exposure. Therefore, an increase of EUR, CNY, CHF, and USD versus Danish kroner has a positive impact on reported operating profit, whereas a decrease will have the reverse effect.
The effect from currency development in H1 2024 gives a positive impact of DKK 1.4 million.
| Executive | |
|---|---|
| Summary |
Business & Regional Performance Review
Financial Outlook
Other Events & Contact
Financial Statements
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