Earnings Release • Aug 17, 2018
Earnings Release
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| 2018 | 2017 | change | change | 2018 | 2017 | change | 2017 | |
|---|---|---|---|---|---|---|---|---|
| All figures in NOK million | 4-6 | 4-6 | % | 1-6 | 1-6 | % | 1-12 | |
| Sales revenue | 137.6 | 113.5 | 24.1 | 21 % | 268.7 | 232.1 | 16 % | 475.0 |
| Gross profit | 113.8 | 95.8 | 17.9 | 19 % | 224.1 | 198.4 | 13 % | 401.7 |
| EBITDA | 14.7 | 12.9 | 1.7 | 13 % | 29.9 | 29.1 | 3 % | 59.7 |
| EBITDA margin | 10.7 % | 11.4 % | -0.7 % | -0.7 pts | 11.1 % | 12.5 % | -1.4 pts | 12.6 % |
| Operating profit (EBIT) | 9.5 | 7.8 | 1.7 | 22 % | 19.5 | 19.1 | 2 % | 39.3 |
| EBIT margin | 6.9 % | 6.8 % | 0.0 % | 0 pts | 7.2 % | 8.2 % | -1 pts | 8.3 % |
| Profit before tax | 9.3 | 7.5 | 1.8 | 25 % | 17.8 | 18.4 | -3 % | 38.3 |
| Profit for the period | 7.0 | 5.6 | 1.3 | 24 % | 13.5 | 14.0 | -3 % | 29.6 |
| Profit margin | 5.1 % | 5.0 % | 0.1 % | 0.1 pts | 5.0 % | 6.0 % | -1 pts | 6.2 % |
| Net cash flow from operating activities | 21.6 | 5.5 | 16.1 | 293 % | 13.3 | 4.7 | 182 % | 49.7 |
| No. of employees at the end of the period | 486 | 430 | 56 | 13 % | 486 | 430 | 13 % | 491 |
The figures for 2018 have been prepared in accordance with IFRS 15, while the 2017 figures are based on IAS 18.
Itera achieved organic revenue growth of 21% in the second quarter of 2018 relative to the second quarter of 2017. This was driven by growth in the revenue earned for services provided by Itera's own consultants from both its onshore and nearshore locations.
The Group's operating profit (EBIT) for the second quarter of 2018 was NOK 9.4 million (NOK 7.8 million), giving an EBIT margin of 6.9% (6.8%). The second quarter of 2018 was positively impacted by the fact it contained three more working days than the second quarter of 2017 due to the Easter holidays falling earlier in 2018 than in 2017 This is estimated to have had an impact on both revenue and earnings of more than NOK 3 million.
This consolidated interim financial report includes Itera ASA and its subsidiaries, and was prepared in accordance with IAS 34, which covers interim reporting, and the Securities Trading Act. The report has not been audited, and does not contain all the information required in an annual financial report. More information about the accounting principles used can be found in Itera's annual report for 2017.
The figures given in brackets in this report refer to the equivalent period in 2017. The comparable figures for balance sheet items are the figures reported at 30 June 2017.
See Note 4 on alternative performance measures.
Itera adopted the new IFRS 15 Revenue from Contracts with Customers standard with effect from 1 January 2018. The cumulative effect of the initial application of IFRS 15 was recognised as an adjustment to Itera's opening balance sheet as at 1 January 2018, reflecting the introduction of contract assets and liabilities in relation to open contracts for trade and other receivables and trade and other payables respectively, with the costs of obtaining and fulfilling a contract capitalised as other current assets. The comparison figures have not been restated, and the financial statements for Q1 2018 as they would have been had they been prepared on the basis of the accounting policies applied in 2017 have been included in note 3, together with the effect of the new standard on the opening balance sheet as at 1 January 2018.
IFRS 9 Financial Instruments (effective from 1 January 2018) replaces the old incurred loss model with an expected loss model. Itera's assessment is that implementing IFRS 9 will not have a significant impact on its financial statements.
A new accounting standard relating to leasing (IFRS 16) has not yet come into force for the Group and has consequently not been applied when preparing the consolidated accounts for the second quarter of 2018. Itera's assessment of the impact on its financial statements of implementing this standard remains unchanged from that set out in its annual report for 2017.
The Group reports operating revenue of NOK 137.6 million (NOK 113.5 million) for the second quarter of 2018, which represents growth of 21%. Revenue from services delivered by Itera's own consultants grew by 21%, while third-party service revenue was up by 34%. Subscription-related revenue grew by 4%. For the first six months revenue was up 16% to NOK 268.7 million.
Gross profit (revenue – cost of goods sold) was NOK 113.8 million (NOK 95.8 million) in the second quarter and NOK 224.1 million (NOK 198.4 million) in the first six months of 2018. These figures represent growth of 19% for the quarter and 13% for the first six months.
The Group's total operating expenses in the second quarter of 2018 were 21% higher at NOK 128.1 million (NOK 105.7 million), while for the first six months they were up 17% to NOK 249.3 million.
Cost of sales was NOK 23.8 million (NOK 17.6 million) in the second quarter of 2018. Cost of sales principally consists of services purchased from sub-consultants, costs related to the Group's data centres, and third-party software licences and hardware that form part of larger deliveries. Cost of sales can vary significantly from quarter to quarter. For the first six months cost of sales was up 33% to NOK 44.7 million.
Personnel expenses were NOK 86.2 million (NOK 70.8 million) in the second quarter of 2018, which represents an increase of 22%. This is partially explained by an increase of 15% in the average number of employees. In addition, there was less capitalisation of labour related to product development. For the first six months personnel expenses were up 17% to NOK 168.3 million.
Other operating expenses were NOK 12.9 million in the second quarter of 2018, which was NOK 0.7 million higher than the same period last year. For the first six months other operating expenses were up 3% to NOK 25.9 million.
Depreciation and amortisation totalled NOK 5.2 million (NOK 5.2 million) in the second quarter and NOK 10.4 million (NOK 10.0 million) for the first six months.
The operating result before depreciation and amortisation (EBITDA) for the second quarter of 2018 was a profit of NOK 14.7 million (NOK 12.9 million), while the operating result (EBIT) was a profit of NOK 9.4 million (NOK 7.8 million). The EBIT margin for the second quarter of 2018 was 6.9% as compared to 6.8% in the second quarter of 2017.
The second quarter of 2018 contained three more working days than the second quarter of 2017 due to the Easter holidays falling earlier in 2018. This is estimated to have had an impact on both revenue and earnings of more than NOK 3 million.
Net financial items were NOK -0.1 million (NOK -0.3 million) in the second quarter of 2018 and NOK -1.6 million (NOK -0.6 million) in the first six months.
The result before tax for the second quarter of 2018 was a profit of NOK 9.3 million (NOK 7.5 million) and for the first six months of 2018 was a profit of NOK 17.8 million (NOK 18.4 million). Accrued tax expense totalled NOK 2.3 million (NOK 1.8 million) for the second quarter and NOK 4.3 million (NOK 4.5 million) for the first six months of 2018.
Cash flow from operating activities was NOK 21.6 million (NOK 5.5 million) in the second quarter of 2018 and NOK 13.3 million (NOK 4.7 million) for the first six months of 2018. This represents the strongest seasonally-adjusted cash conversion rate in the last five years. Cash flow from financing activities was significantly negative
at NOK -42.3 million (NOK -14.8 million) in the second quarter of 2018 as the company distributed a dividend and purchased a net two million of its own shares. The own shares were purchased for an upcoming share purchase programme for key employees and to cover outstanding option programmes.
Work in progress at 30 June 2018 was NOK 9.4 million lower than at 30 June 2017. The decrease was due to the effect of implementing IFRS 15 and was more than offset by the introduction of contract assets of NOK 18.7 million. Accounts receivable from customers and other receivables were respectively NOK 0.6 million and NOK 1.4 million higher than at 30 June 2017.
Accounts payable at 30 June 2018 were NOK 3.7 million higher than at 30 June 2017. Public duties payable was NOK 2.2 million higher than at the end of the second quarter of 2017, while tax payable was NOK 5.3 million, which is NOK 4.3 million lower than at 30 June 2017. Contract liabilities totalling NOK 11.1 million were added due to Itera adopting IFRS 15 in 2018. Other current liabilities were NOK 9.2 million higher.
Bank deposits totalled NOK 15.3 million (NOK 52.5 million) at 30 June 2018, and the Group had an undrawn credit facility of NOK 25 million.
The Group had interest-bearing liabilities totalling NOK 11.3 million (NOK 16.8 million) at 30 June 2018 related to financial lease agreements entered into in order to finance investments related to IT hosting contracts, with NOK 5.8 million of this amount representing current liabilities and NOK 5.5 million being non-current liabilities.
Itera purchased 2,500,000 and sold 499,393 own shares in the second quarter as part of employee share and option programmes. At 30 June 2018 Itera held 2,214,542 own shares.
Equity at 30 June 2018 totalled NOK 20.7 million (NOK 56.1 million). The significant decrease is due to the dividend distributed in the quarter and to Itera purchasing its own shares. The equity ratio was 11.3% (27.9%).
The Group invested a total of NOK 8.0 million (NOK 3.5 million) in the second quarter of 2018 and NOK 13.5 million (NOK 6.2 million) in the first six months of 2018. A significant part of this was related to fittings and furniture for Itera's new office in Kiev.
Investment in Itera's IT hosting activities amounted to NOK 1.9 million (NOK 0.3 million) in the second quarter of 2018 and NOK 2.2 million (NOK 1.2 million) in the first six months of 2018. Leasing accounted for NOK 1.5 million (NOK 0.2 million) of the former amount and NOK 1.7 million (NOK 1.0 million) of the latter amount. Investment in intangible assets (including software developed inhouse for ongoing yearly agreements) totalled NOK 1.6 million (NOK 2.5 million) in the second quarter and NOK 4.7 million (NOK 5.2 million) in the first six months of 2018. Investment in office equipment, furniture and fittings for new office premises amounted to NOK 5.3 million (NOK 0.3 million) in the second quarter and NOK 7.7 (NOK 1.0 million) in the first six months of 2018.
The Annual General Meeting on 22 May 2018 approved the Board's proposal for an ordinary dividend payment of NOK 0.25 per share and authorised the Board to decide on the payment of an additional dividend later in the year. The share went ex-dividend on 23 May.
The Group's position as a specialist at creating digital business is strong. The range of services it offers is both unique and in demand from the market as a result of digitalisation in all industries. Artificial intelligence (AI), big data and cloud platforms are seeing significant interest and demand not only from small and medium-sized companies with the ability to move fast, but also from large organisations in both the private and public sectors.
In the second quarter of 2018, the Group entered into new or extended agreements with strong brands including UEFA, Santander, yA Bank, Nets, Gjensidige Forsikring, Össur, VPS, KLP, Sbanken and If.
The Group considers the assignment for UEFA in Switzerland as especially significant due to the use of innovative technology and the international scope. UEFA chose Itera to set up the technology platform to handle real-time data at massive scale delivered to the entire eco-system of football in Europe (Champions League, Europa League, Nations League). The data will include persons (management, referees etc.), players, teams, club rankings, league setup, travel logistics, results and live streaming of all matches. The target group is consumers of information related to European football through web, broadcasting and apps, for example supporters, media or betting companies.
In the second quarter Itera was named as one of Norway's most innovative companies across all industries for the third year in a row.
The award is organized by "Innovasjonsmagasinet", which, with its 25,000 readers and national distribution, is Norway's premier innovation magazine. Each year, 25 companies are selected from across all sectors. Many strong brands were among the 25 chosen in 2018, including DNB, Telenor, Maemo, Tine, The Norwegian Tax Administration, Sbanken and DNV GL.
The jury's assessment stated that Itera is: "One of the few remaining listed communications and technology companies and is enjoying impressive success through its focus on innovation. Through its smart and innovative use of both Nordic and international resources, it is optimizing its value contribution and reaping the benefits of open, customer-driven innovation. Itera proves that executive-led innovation is profitable and a smart investment strategy".
To contribute to the Group's growth ambitions, the Group arranges an annual open innovation competition called "Itera Game Changer". The 2018 edition was held in the second quarter. The Group defines a "game changer" as an initiative (idea, partnership, spin off, agreement etc.) that has a realistic potential to significantly increase Itera's revenue over a 12-24 month perspective.
Itera invited the Group's very skilled, highly experienced, commercially insightful and very creative employees to participate in the competition. The employees themselves were free to decide whether they would work alone or as part of a team that they would form with other colleagues or alternatively by inviting external participants. To win, entrants had to come up with a business concept that is scalable and has significant market potential.
A broad range of ideas were presented, and all attendees and participants were able to vote to decide which one would win. The winning idea was an insurance portal that presents and analyses all your insurance terms and policies - regardless of company.
DevOps and digital platforms are strategic focus areas at Itera. During the second quarter, the Group continued its work on building a strong team in these areas in order to ensure it is at the forefront of developing and operating next-generation solutions based on advanced services within AI, big data and IoT that are available on new digital platforms.
The Group is focusing both on horizontal digital platforms like Microsoft Azure, Amazon Web Services (AWS) and Google Cloud as well as on new industry-specific platforms dominated by major companies with the strengths and abilities needed to change industries.
Itera aims to be a beacon of expertise in its core areas. In the second quarter, the CEO of Itera, Arne Mjøs, was invited to present the Group's view on digital platforms at Future Insight 2030, an international conference that took place at Oslo Opera House. The title of Arne Mjøs' address was "Towards the platform economy", and he spoke to several hundred participants about how horizontal and vertical digital platforms will change most industries in the near future. One of the key takeaways was to focus on the leading horizontal platforms that have the most ground-breaking AI, such as Microsoft Azure, Amazon Web Services and Google Cloud to enable new business models.
The European Commission department for Justice and Consumers is responsible for EU policy on justice, consumer rights and gender equality. In the second quarter, the Commission published a list of companies for which the EU BCR cooperation procedure is closed and approval had been granted. Itera is the only company in the Nordics approved as a data processor.
Itera's routines for transferring personal data to countries outside the EU was, after thorough review, approved by the data protection authorities of Norway, Sweden and Denmark in 2017. This is the first time such approval has been granted to a Norwegian company.
The approval is called BCR-P (Binding Corporate Rules for Processors), and provides valuable benefits to both existing and potential customers: Firstly, the Norwegian Data Protection Authority approval confirms that Itera's framework, methods and procedures are in accordance with EU requirements. Secondly, it simplifies important processes for customers, as they no longer have to apply for approval from the data protection authority when they are planning to utilize IT services located in a country outside the EU. Instead, they can cite Itera's approval as a personal data processor, BCR-P. Because Itera also has operations outside Norway, other Nordic or international customers enjoy this advantage as well.
A key part of Itera's strategy is to maintain and develop the Group's largest and most strategic relationships across national borders and areas of expertise. Itera has a strong customer portfolio in the Nordic region, where many customers are served from more than one of Itera's various locations.
The revenue from Itera's 30 largest customers grew by 26% in the second quarter of 2018 and accounted for 80% of the Group's operating revenue, up from 76% in the second quarter of 2017.
The Group is witnessing a clear tendency for more and more Nordic customers to purchase a wider range of services from Itera across international borders. Nearshoring and cloud services are natural drivers of this, but we are also seeing a greater tendency for personnel resources to be mobile and for project teams to be distributed across international borders in the Nordic region. This is making local presence less critical.
A good example of this scalability is Itera's entry model into the Icelandic market that is now served by more than 45 of Itera's consultants who work in a number of the company's different locations.
In addition to working in a very focused way on continuous recruitment, Itera annually runs a summer internship program targeted at students at major universities. This program is a strategic instrument for building relationships with the most talented students at an early stage in their education, with some students offered positions at Itera as early as after their second or third years of their Master's program. In the second quarter, Itera welcomed 27 students from NTNU, the University of Oslo, Copenhagen Business School, NHH and OsloMet. The students were divided into groups, each led by one of Itera's project managers, and were challenged to solve strategic issues for four of the Group's customers.
The Group's headcount at the end of the second quarter of 2018 was 486 as compared to 430 at the end of the second quarter of 2017.
The proportion of Itera's capacity that is located nearshore (its nearshore ratio) was 44% (39%) at the end of the second quarter. The Group has development centres in Slovakia and Ukraine, and is approaching its long term strategic target of achieving a nearshore ratio of more than 50%.
Itera's activities are influenced by a number of different factors, both within and outside of the company's control. As a service company, Itera faces business risks associated with competition and pressure on prices, project overruns, recruitment, loss of key employees, customers' performance and bad debts. Market-related risks include risks related to the business cycle. Financial risks include currency fluctuations against the Norwegian krone (NOK), principally in relation to the Danish krone (DKK), the US dollar (USD) and the euro (EUR). In addition, interest rate changes will affect the returns earned by the Group on its bank deposits, as well as leasing costs and the cost of credit facilities.
The Group is exposed through its nearshore activities in Ukraine to additional risk factors such as country risk, data security and corruption. Itera has a zero-tolerance policy on corruption and therefore does not deliver services to the public or private sectors in Ukraine.
More information about risks and uncertainties can be found in Itera's annual report for 2017.
The company's overall strategy of developing large, long-term customer relationships, increasing the number of project deliveries which involve the full range of the Group's services, using nearshore resources and focusing on operational efficiency remains unchanged.
Itera develops its range of services to meet customers' requirements, and its services are based on combining communication and technology.
The interim report for the third quarter of 2018 will be published and presented on 19 October 2018.
We hereby confirm that, to the best of our knowledge, the summarised half-yearly financial statements for the period 1 January to 30 June 2018 have been prepared in accordance with IAS 34 Interim Financial Accounting, and that the information they contain gives a true and fair view of the assets, liabilities, financial position and profit or loss of the group taken as a whole.
We also confirm that, to the best of our knowledge, the summarised half-yearly financial statements give a true and fair view of the information mentioned in Section 5-6, fourth paragraph, of the Securities Trading Act.
Oslo, 17 August 2018 The Board of Directors of Itera ASA
Morten Thorkildsen Chairman
Jan-Erik Karlsson Board Member
Erik Berg Solheim Board Member/Employee Representative
Arne Mjøs CEO
Mimi K. Berdal Board Member
Gyrid Skalleberg Ingerø Board Member
Charlotte Bech Blindheim Board Member/Employee Representative
| 2018 | 2017 | change | change | 2018 | 2017 | change | 2017 | |
|---|---|---|---|---|---|---|---|---|
| All figures in NOK 1000 | 4-6 | 4-6 | % | 1-6 | 1-6 | % | 1-12 | |
| Sales revenue | 137 571 | 113 497 | 24 074 | 21 % | 268 722 | 232 066 | 16 % | 475 025 |
| Operating expenses | ||||||||
| Cost of sales | 23 810 | 17 649 | 6 161 | 35 % | 44 667 | 33 625 | 33 % | 73 360 |
| Gross Profit | 113 760 | 95 848 | 17 912 | 19 % | 224 055 | 198 441 | 13 % | 401 666 |
| Gross Margin | 83 % | 84 % | -2 % | -1.8 pts | 83 % | 86 % | 85 % | |
| Personnel expenses | 86 206 | 70 768 | 15 437 | 22 % | 168 252 | 144 219 | 17 % | 294 316 |
| Depreciation | 5 228 | 5 162 | 67 | 1 % | 10 428 | 10 027 | 4 % | 20 335 |
| Other operating expenses | 12 877 | 12 146 | 731 | 6 % | 25 910 | 25 140 | 3 % | 47 682 |
| Total operating expenses | 128 121 | 105 725 | 22 396 | 21 % | 249 257 | 213 012 | 17 % | 435 692 |
| Operating profit | 9 450 | 7 772 | 1 678 | 22 % | 19 465 | 19 055 | 2 % | 39 333 |
| Financial items | ||||||||
| Other financial income | 63 | 169 | -106 | -63 % | 218 | 434 | -50 % | 713 |
| Other financial expenses | 202 | 469 | -267 | -57 % | 1 837 | 1 045 | 76 % | 1 721 |
| Net financial items | -139 | -300 | 162 | 54 % | -1 619 | -611 | -165 % | -1 008 |
| Ordinary profit before tax | 9 311 | 7 471 | 1 839 | 25 % | 17 846 | 18 443 | -3 % | 38 325 |
| Tax expense | 2 336 | 1 833 | 503 | 27 % | 4 338 | 4 462 | -3 % | 8 691 |
| Profit for the period | 6 975 | 5 638 | 1 337 | 24 % | 13 508 | 13 982 | -3 % | 29 635 |
| Earnings per share | 0.09 | 0.07 | 0.02 | 25 % | 0.17 | 0.17 | -3 % | 0.36 |
| Fully diluted earnings per share | 0.08 | 0.07 | 0.02 | 24 % | 0.16 | 0.17 | -4 % | 0.36 |
| Statement of other income and costs | ||||||||
| Currency translation differences | -197 | 74 | -271 | -365 % | -394 | 339 | -216 % | 693 |
| Profit for the period | 6 975 | 5 638 | 1 337 | 24 % | 13 508 | 13 982 | -3 % | 29 635 |
| Total profit | 6 778 | 5 713 | 1 065 | 19 % | 13 114 | 14 320 | -8 % | 30 328 |
| Attributable to: | ||||||||
| Shareholders in parent company | 6 778 | 5 713 | 1 065 | 19 % | 13 114 | 14 320 | -8 % | 30 328 |
| 2018 | 2017 | change | change | 2017 | |
|---|---|---|---|---|---|
| All figures in NOK 1000 Note |
30 Jun | 30 Jun | % | 31 Dec | |
| ASSETS | |||||
| Non-current assets | |||||
| Deferred tax assets | 3490 | 3 3 7 9 | 111 | 3% | 3023 |
| Other intangible assets | 23 4 36 | 17576 | 5860 | 33 % | 22 27 2 |
| Fixed assets | 24 752 | 23 0 24 | 1728 | 8% | 21 2 35 |
| Total non-current assets | 51 678 | 43 979 | 7699 | 18% | 46 530 |
| Current assets | |||||
| Work in progress | 4 3 4 4 | 13719 | $-9374$ | $-68%$ | 15794 |
| Accounts receivable | 71016 | 70 4 25 | 591 | 1% | 70 364 |
| 3 Contract assets |
18731 | $\bf{0}$ | 18731 | 0% | 0 |
| Other receivables | 21837 | 20 39 3 | 1444 | 7 % | 21 230 |
| Bank deposits | 15 3 36 | 52 493 | $-37157$ | $-71%$ | 59854 |
| Total current assets | 131 264 | 157 030 | $-25765$ | $-16%$ | 167 241 |
| TOTAL ASSETS | 182 942 | 201 008 | $-18066$ | $-9%$ | 213771 |
| EQUITY AND LIABILITIES | |||||
| Equity Share capital |
24 656 | 24 656 | 0 | 0% | 24 656 |
| Other equity | $-17461$ | 17431 | $-34892$ | $-200%$ | $-3653$ |
| Net profit for the period | 13 508 | 13 982 | -473 | $-3%$ | 29 635 |
| Total equity | 20703 | 56 069 | -35 365 | $-63%$ | 50 638 |
| Non-current liabilities | |||||
| Non-current interest bearing liabilities | 5510 | 10 0 56 | $-4546$ | $-45%$ | 6799 |
| Total non-current liabilities | 5510 | 10 056 | -4546 | $-45%$ | 6799 |
| Current liabilities | |||||
| Accounts payable | 24 530 | 20839 | 3691 | 18% | 20710 |
| Tax payable | 5 2 8 6 | 9547 | $-4261$ | $-45%$ | 8531 |
| Public duties payable | 27611 | 25 4 38 | 2 1 7 3 | 9% | 33 041 |
| 3 Contract liabilities |
11 050 | 0 | 11 050 | 0% | 0 |
| Other short-term liabilities | 88 252 | 79 0 59 | 9 1 9 3 | 12% | 94 052 |
| Total current liabilities | 156 728 | 134 883 | 21845 | 16 % | 156 334 |
| Total liabilities | 162 239 | 144 939 | 17 299 | 12% | 163 133 |
| TOTAL EQUITY AND LIABILITIES | 182 942 | 201 008 | $-18066$ | $-9%$ | 213771 |
| Equity ratio | 11.3% | 27.9% | $-16.6$ pts | 23.7% |
| 2018 | 2017 | change | change | 2018 | 2017 | change | 2017 | |
|---|---|---|---|---|---|---|---|---|
| All figures in NOK 1000 | 4-6 | 4-6 | % | $1-6$ | $1-6$ | ℅ | $1 - 12$ | |
| Cash flow from operating activities | ||||||||
| Profit before taxes | 9311 | 7471 | 1839 | 306 % | 17846 | 18 4 43 | $-3%$ | 38 3 25 |
| Tax paid | $-3405$ | $-1397$ | $-2008$ | 30% | $-7864$ | $-3099$ | $-154%$ | $-8708$ |
| Depreciation | 5 2 2 8 | 5 1 6 2 | 67 | 7644 % | 10 4 28 | 10 0 27 | 4 % | 20 335 |
| Change in work in progress | 5821 | 7 2 7 3 | $-1452$ | 601 % | 5 3 3 2 | 593 | 800 % | $-1482$ |
| Change in accounts receivable | 6818 | $-6737$ | 13 5 5 5 | $-150%$ | $-652$ | $-14486$ | 96% | $-14425$ |
| Change in accounts payable | 3378 | 2567 | 811 | 216% | 3820 | $-3603$ | 206 % | $-3732$ |
| Change in other accruals | $-5050$ | $-9706$ | 4656 | $-308%$ | $-15252$ | $-3181$ | $-379%$ | 18713 |
| Effect of currency changes | $-528$ | 858 | $-1386$ | 162% | $-314$ | 33 | $-1060%$ | 639 |
| Net cash flow from operating activities | 21 573 | 5491 | 16 082 | $-66%$ | 13 345 | 4726 | 182% | 49 664 |
| Cash flow from investment activities | ||||||||
| Investment in fixed assets | $-6445$ | $-982$ | $-5462$ | 82% | $-8853$ | $-1013$ | $-774%$ | $-6041$ |
| Investment in intangible assets | $-1553$ | $-2500$ | 947 | $-364%$ | $-4654$ | $-5185$ | 10% | $-13418$ |
| Net cash flow from investment activities | $-7998$ | $-3483$ | $-4515$ | 23 % | $-13507$ | $-6198$ | $-118%$ | $-19458$ |
| Cash flow from financing activities | ||||||||
| Purchase of own shares | $-22556$ | $-1590$ | $-20966$ | 92% | $-22556$ | $-1590$ | $-1319%$ | $-1590$ |
| Sales of own shares | 2868 | 3643 | -775 | 570 % | 2868 | 3643 | $-21%$ | 3 2 9 8 |
| Borrowings repaid | $-2076$ | $-2226$ | 150 | $-1586%$ | $-4164$ | $-4543$ | 8% | $-8114$ |
| Dividend | $-20493$ | $-14620$ | $-5873$ | $-149%$ | $-20493$ | $-14620$ | $-40%$ | $-35113$ |
| Net cash flow from financing activities | $-42257$ | $-14792$ | $-27465$ | 46 % | -44 345 | $-17110$ | $-159%$ | -41 519 |
| Currency effect on cash | 4 | $-21$ | 25 | $-184%$ | $-12$ | $-17$ | 33 % | 75 |
| Net cash flow | $-28678$ | $-12805$ | $-15873$ | 19 % | $-44518$ | $-18599$ | $-139%$ | $-11238$ |
| Bank deposits at the beginning of the period | 44 013 | 65 298 | $-21285$ | 407 % | 59854 | 71 092 | $-16%$ | 71 092 |
| Bank deposits at the end of the period | 15 3 37 | 52 493 | $-37157$ | 241 % | 15 3 36 | 52 493 | $-71%$ | 59 854 |
| New borrowing related to leasing | 1478 | 227 | 1 251 | $-82%$ | 1651 | 1027 | 61% | 1577 |
| Share | Ow n |
Other | Translation | Other | Total | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| All figures in NOK 1000 | capital | shares | equity | differences | equity | equity | ||||
| Shareholders' equity as of 31 Dec 2016 | 24 656 | -290 | 480 | -928 | 30 397 | 54 315 | ||||
| Comprehensive income for the year 2017 | 0 | 0 | 0 | 693 | 29 635 | 30 328 | ||||
| Option costs | 0 | 0 | 216 | 0 | -1 134 | -918 | ||||
| Employee share purchase programme | 0 | 0 | 318 | 0 | 0 | 318 | ||||
| Purchase of ow n shares |
0 | -75 | 0 | 0 | -1 515 | -1 590 | ||||
| Sale of ow n shares |
0 | 300 | 0 | 0 | 2 998 | 3 298 | ||||
| Dividend | 0 | 0 | 0 | 0 | -35 113 | -35 113 | ||||
| Shareholders' equity as of 31 Dec 2017 | 24 656 | -64 | 1 014 | -235 | 25 268 | 50 637 | ||||
| Implementation of IFRS 15 | 0 | 0 | 0 | 0 | -2 961 | -2 961 | ||||
| Comprehensive income year to date 2018 | 0 | 0 | 0 | -302 | 13 508 | 13 206 | ||||
| Option and employee share purchase programmes | 0 | 150 | 2 718 | 0 | 0 | 2 868 | ||||
| Purchase of ow n shares |
0 | -750 | 0 | 0 | -21 806 | -22 556 | ||||
| Dividend | 0 | 0 | 0 | 0 | -20 493 | -20 493 | ||||
| Shareholders' equity as of 30 Jun 2018 | 24 656 | -664 | 3 733 | -537 | -6 484 | 20 703 |
There have been no material transactions with related parties during the reporting period 1 January 2018 to 30 June 2018.
There have been no events after 30 June 2018 that would have a material effect on the interim accounts.
The IASB has issued a new standard on the recognition of revenue, IFRS 15 Revenue from Contracts with Customers. IFRS 15 replaces IAS 18, which covers contracts for goods and services, and IAS 11 (Construction Contracts). Itera adopted IFRS 15 with effect from 1 January 2018.
The new standard is based on the principle of recognising revenue when control of goods or services transfers to a customer. The notion of control replaces the existing notion of risks and rewards. The most important change to current practice is that revenue from consulting services rendered that relate to subscription contracts in some cases will be recognised over the contract period for the subscription contract and not at point in time when the services are delivered as was previously the case. Under IFRS 15, control is considered to have been transferred when the subscription contracts are fulfilled, not when the services are rendered. The costs of fulfilling a contract, such as costs related to delivering the services mentioned, were under the previous accounting policy expensed as incurred. IFRS 15 requires such costs to be capitalised as contract assets if the amortisation period is more than 12 months. The amortisation period is the expected contract period, including renewals. Payments from customers for delivering these services are under IFRS considered prepayments and classified as contract liabilities under current liabilities. Itera has reconsidered its approach and will use the prospective approach in adopting the standard, which means that the cumulative impact of adopting the standard has been recognised in retained earnings at 1 January 2018. The new accounting standard will have some impact on the timing of when Itera recognises revenue, the cost of resources and tax. In addition, certain line items in the statement of financial position have changed, mainly in relation to contract assets and liabilities.
The tables below show the impact of IFRS 15 on the statement of consolidated income for 2018 and on the statement of financial position as at 30 June 2018. The impact on retained earnings at 1 January 2018 from the change in accounting principles has been estimated to be NOK -3.0 million.
| Condensed statement of income | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| All figures in NOK 1000 | Old Principles 4-6 2018 |
Effect o f IFRS 15 |
New Principles 4-6 2018 |
Old Principles 1-6 2018 |
Effect o f IFRS 15 |
New Principles 1-6 2018 |
||||
| Sales revenue | 137 558 | 13 | 137 571 | 269 221 | -499 | 268 722 | ||||
| Cost of sales | 24 045 | -234 | 23 810 | 45 245 | -578 | 44 667 | ||||
| Personnel expenses | 86 018 | 188 | 86 206 | 168 677 | -425 | 168 252 | ||||
| Depreciation | 5 228 | - | 5 228 | 10 428 | - | 10 428 | ||||
| Other operating expenses | 12 877 | - | 12 877 | 25 910 | - | 25 910 | ||||
| Operating profit | 9 390 | 60 | 9 450 | 18 961 | 504 | 19 465 | ||||
| Net financial items | -52 | -86 | -139 | -1 446 | -173 | -1 619 | ||||
| Ordinary profit before tax | 9 338 | -27 | 9 311 | 17 515 | 331 | 17 846 | ||||
| Tax expense | 2 342 | - 6 |
2 336 | 4 262 | 76 | 4 338 | ||||
| Profit for the period | 6 995 | -21 | 6 975 | 13 253 | 255 | 13 508 |
| Condensed statement of financial position | |||
|---|---|---|---|
| Old Principles |
Effect o f |
New Principles |
|
| All figures in NOK 1000 | 30 Jun 2018 | IFRS 15 | 30 Jun 2018 |
| ASSETS | |||
| Deferred tax assets | 2 682 | 808 | 3 490 |
| Other intangible assets | 23 436 | 0 | 23 436 |
| Fixed assets | 24 752 | 0 | 24 752 |
| Total non-current assets | 50 869 | 808 | 51 678 |
| Work in progress | 15 236 | -10 892 | 4 344 |
| Accounts receivable | 71 016 | 0 | 71 016 |
| Contract assets | 0 | 18 731 | 18 731 |
| Other receivables | 21 837 | 0 | 21 837 |
| Bank deposits | 15 336 | 0 | 15 336 |
| Total current assets | 123 426 | 7 839 | 131 264 |
| TOTAL ASSETS | 174 295 | 8 647 | 182 942 |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Total equity | 23 409 | -2 706 | 20 703 |
| Non-current interest bearing liabilities | 5 510 | 0 | 5 510 |
| Total non-current liabilities | 5 510 | 0 | 5 510 |
| Accounts payable | 24 530 | 0 | 24 530 |
| Tax payable | 5 286 | 0 | 5 286 |
| Public duties payable | 27 611 | 0 | 27 611 |
| Contract liabilities | 0 | 11 050 | 11 050 |
| Other short-term liabilities | 87 949 | 303 | 88 252 |
| Total current liabilities | 145 376 | 11 353 | 156 728 |
| TOTAL EQUITY AND LIABILITIES | 174 295 | 8 647 | 182 942 |
| Equity ratio | 13.4 % | -2.1 pts | 11.3 % |
In accordance with the guidelines issued by the European Securities and Markets Authority on alternative performance measures (APMs), Itera is publishing definitions for the alternative performance measures used by the company. Alternative performance measures, i.e. performance measures not based on financial reporting standards, provide the company's management, investors and other external users with additional relevant information on the company's operations by excluding matters that may not be indicative of the company's operating result or cash flow. Itera has adopted non-recurring costs, EBITDA, EBITDA margin, EBIT, EBIT margin and equity ratio as alternative performance measures both because the company thinks these measures will increase the level of understanding of the company's operational performance and because these represent performance measures that are often used by analysts and investors and other external parties.
Non-recurring costs are significant costs that are not expected to reoccur under normal circumstances.
EBITDA is short for earnings before interest, tax, depreciation and amortisation. It is calculated as profit for the period before (i) tax expense, (ii) financial income and expenses and (iii) depreciation and amortisation.
EBITDA margin is calculated as EBITDA as a proportion of operating revenue.
EBIT is short for earnings before interest and tax and is calculated as profit for the period before (i) tax expense and (ii) financial income and expenses.
EBIT margin is calculated as EBIT as a proportion of operating revenue.
Equity ratio is calculated as total equity as a proportion of total equity and liabilities.
| 2018 | 2017 | change | 2018 | 2017 | change | |
|---|---|---|---|---|---|---|
| All figures in NOK 1000 | 4-6 | $4-6$ | % | $1 - 6$ | $1-6$ | % |
| Profit & Loss | ||||||
| Sales revenue | 137 571 | 113 497 | 21% | 268722 | 232 066 | 16 % |
| Gross profit 1 | 113760 | 95 848 | 19 % | 224 055 | 198 441 | 13% |
| EBITDA | 14 6 78 | 12933 | 13% | 29893 | 29 08 2 | 3% |
| EBITDA margin | 10.7% | 11.4% | $-0.7$ pts | 11.1% | 12.5% | $-1.4$ pts |
| Operating profit (EBIT) | 9450 | 7 772 | 22 % | 19 4 65 | 19 0 55 | 2% |
| EBIT margin | 6.9% | 6.8% | 0 pts | 7.2% | 8.2% | $-1$ pts |
| Profit before taxes | 9311 | 7471 | 25% | 17846 | 18 4 43 | $-3%$ |
| Profit for the period | 6975 | 5638 | 24 % | 13 508 | 13 982 | $-3%$ |
| Balance sheet | ||||||
| Non-current assets | 51 678 | 43 979 | 18% | 51 678 | 43 979 | 18% |
| Bank deposits | 15 3 36 | 52 493 | $-71%$ | 15 3 36 | 52 493 | -71 % |
| Other current assets | 115928 | 104 537 | 11% | 115928 | 104 537 | 11 % |
| Total assets | 182 942 | 201 008 | $-9%$ | 182 942 | 201 008 | $-9%$ |
| Equity | 20 703 | 56 069 | $-63%$ | 20 703 | 56 069 | $-63%$ |
| Total current liabilities | 156 728 | 134 883 | 16% | 156728 | 134 883 | 16% |
| Equity ratio | 11.3% | 27.9% | $-16.6$ pts | 11.3% | 27.9% | $-16.6$ pts |
| Current ratio | 0.84 | 1.16 | $-28%$ | 0.84 | 1.16 | $-28%$ |
| Cash flow | ||||||
| Net cash flow from operating activities | 21 573 | 5491 | 293% | 13 3 45 | 4726 | 182% |
| Net cash flow | $-28678$ | $-12805$ | -124 % | -44 518 | $-18599$ | -139 % |
| Share information | ||||||
| Number of shares | 82 186 624 | 82 186 624 | 0% | 82 186 624 | 82 186 624 | 0% |
| Weighted average basic shares outstanding | 80 972 386 | 81 596 934 | $-1%$ | 81 472 537 | 81 409 057 | 0% |
| Weighted average diluted shares outstanding | 82 132 421 | 82 606 168 | $-1%$ | 82 519 705 | 82 384 648 | 0% |
| Profit per share | 0.09 | 0.07 | 25% | 0.17 | 0.17 | $-3%$ |
| Diluted Profit per share | 0.08 | 0.07 | 24 % | 0.16 | 0.17 | $-4%$ |
| EBITDA per share | 0.18 | 0.16 | 14 % | 0.37 | 0.36 | 3% |
| Equity per share | 0.26 | 0.69 | $-63%$ | 0.25 | 0.69 | $-63%$ |
| Dividend per share | 0.25 | 0.18 | 39 % | 0.25 | 0.18 | 39 % |
| Employees | ||||||
| Number of employees at the end of the period | 486 | 430 | 13% | 486 | 430 | 13% |
| Average number of employees | 486 | 424 | 15% | 487 | 418 | 17% |
| Operating revenue per employee | 283 | 268 | 6% | 552 | 556 | $-1%$ |
| Gross profit 1 per employee | 234 | 226 | 4 % | 460 | 475 | $-3%$ |
| Personnel expenses per employee | 177 | 167 | 6% | 345 | 345 | 0% |
| Other operating expenses per employee | 27 | 29 | $-8%$ | 53 | 60 | $-12%$ |
| EBITDA per employee | 30 | 31 | $-1%$ | 61 | 70 | $-12%$ |
| EBIT per employee | 19 | 18 | 6 % | 40 | 46 | $-12%$ |
EBITDA NOK million
Revenues
Employees End of period
EBITDA margin
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