Digia Oyj — Interim / Quarterly Report 2021

Aug 6, 2021

Digia Plc Half Year Financial Report 2021

Digia 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 4–6/202 4–6/202 Change,% 1–6/2021 1–6/2020 Change,% 2020

                 1        0

Net sales 38,638 35,193 9.8% 77,995 71,758 8.7% 139,049
Operating 3,481 4,111 -15.3% 8,737 7,295 19.8% 16,000
profit
(EBITA)
- as a % of 9.0% 11.7% 11.2% 10.2% 11.5%
net
sales
Operating 2,711 3,655 -25.8% 7,167 6,384 12.3% 14,102
profit
(EBIT)
- as a % of 7.0% 10.4% 9.2% 8.9% 10.1%
net
sales
Result for 2,003 2,718 -26.3% 5,547 4,905 13.1% 10,627
the
period
- as a % of 5.2% 7.7% 7.1% 6.8% 7.6%
net
sales

Return on 18.1% 18.1% 18.7%
equity, %
Return on 15.6% 15.3% 16.5%
investment, %
Cash flow     17,928 -43.1% 23,589
from 10,209
operations
Interest 16,828 11,553 45.7% 10,531
-bearing
net
liabilities
Net gearing, 27.0% 21.0% 17.3%
%
Equity ratio, 44.4% 44.9% 50.7%
%

Number of 1,329 1,265 5.1% 1,258
personnel at
period-end
Average 1,331 1,265 5.3% 1,327 1,262 5.1% 1,261
number
of personnel
Shareholders' 62,252 55,073 13.0% 60,737
equity
Balance sheet 141,291 124,294 13.7% 121,078
total
Earnings per 0.08 0.10 -26.1% 0.21 0.18 13.1% 0.40
share
Earnings per 0.07 0.10 -26.3% 0.21 0.18 12.6% 0.39
share,
diluted

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 (https://www.climber.se/) 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 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 both in Finland and abroad. We
are building a world in which digitalisation makes a difference – together with
our customers and partners. Digia net sales were EUR 139.0 million in 2020. The
company is listed on Nasdaq Helsinki (DIGIA). digia.com

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