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Itera — Interim / Quarterly Report 2021
Feb 17, 2022
3639_rns_2022-02-17_09ecd80d-0565-4845-bb43-84fac56adb89.pdf
Interim / Quarterly Report
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- Highlights of the Quarter
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- Business Review
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- Financial Review
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- Outlook
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- Q&A
Arne Mjøs CHIEF EXECUTIVE OFFICER
Bent Hammer CHIEF FINANCIAL OFFICER
Q4 in brief
* Focus for the financial reporting has been placed on the core digital business as the own data centre is being sunset.
Key figures core digital business
02 Business review
Specialist in creating sustainable digital business
At Itera, we share a commitment to make a positive difference in the world. As a society, the most urgent challenge we face is how to live and work sustainably.
Sustainable Digital Business
© Itera & Partners
Creating end-to-end understanding of value creation
| FOCUS | CONVERSATIONS | |||||||
|---|---|---|---|---|---|---|---|---|
| Industry | Business Agenda | Business & Product Agenda | ||||||
| Business Outcome & Potential Disruption |
Digital Agenda | Digital Agenda | ||||||
| Technology | Initiative | Digital Initiative Digital Initiative Digital Initiative |
We operate Digital Initiative here |
|||||
| Partnership-led | Solution | Digital Digital Solution Solution We |
Digital Solution |
Digital Solution |
Digital Solution |
Digital Solution |
Digital Solution |
Digital Solution |
| discussions | Cloud Platform | operate here Cloud Cloud Cloud Cloud Cloud Cloud |
Cloud Cloud Cloud |
Cloud Cloud Cloud |
Cloud Cloud Cloud |
Cloud Cloud Cloud |
Cloud Cloud Cloud |
Cloud Cloud Cloud |
Fighting financial crime with Artificial Intelligence
Itera launched a next generation AI-based offering for anti-money laundering (AML) for Nordic financial services based on a strong partnership with IBM and Red Hat.
Continuous monitoring & screening
Visions for a new era of fighting financial crime are needed
n November, tera published a report together with its partner BM, titled "Fighting Financial Crime With ". To create awareness of our modern solutions for financial crime prevention, Itera and IBM arranged a webinar and a roundtable discussion together with Norway's leading business newspaper, Dagens Næringsliv (DN), with key stakeholders from DNB, ZTL Payment Solution and Vega Integrity participating.
Digital Factory at Scale for data-driven businesses
| Innovation | Faster business innovation through autonomous teams and adoption of cloud services |
CUSTOMER BUSINESS & DIGITAL STRATEGY | ||
|---|---|---|---|---|
| Speed | Business agility and reduced time to-market through efficient DevSecOps teams |
CLOUD CUSTOMER MIGRATION PRODUCT WORKLOADS WORKLOADS |
ANALYTICS & DATAOPS WORKLOADS |
PARTNERS |
| Scale | Efficient use of distributed delivery across borders and public cloud scale |
DIGTAL FACTORY AT SCALE | Microsoft IBM Red Hat Cognite Sales force Confluent Others |
|
| Quality | Secure, predictable and flexible service delivery and operations capability end to end |
CLOUD CENTRE OF EXCELLENCE (CCoE) |
Business events that trigger a transition to cloud
Cloud migration and modernisation strategies
Mastercard accelerates and grows engagement
One of our latest projects was to help Mastercard develop flexible and secure solutions to handle both brand sites and B2B core solutions with all their integrations
An engagement for Mastercard Payment Solutions (MPS).
The solutions are integrated with third-party products, internal core systems, stakeholders and partners, secure logins, e-signing and more.
The solutions are fully based on best practices from Microsoft Azure DevOps and other frameworks.
The partnership with Mastercard is based in Denmark with several expansions across borders during 2021
All solutions have to live up to Mastercard's Golden Standards – which are some of the highest compliance standards in the market
Itera delivered end-toend solutions including development, testing and Cloud and Application Services everything in Azure.
The result is flexible and secure business systems, rapid access to new functionality, and accelerated delivery of innovative solutions and time to market
Cloud migration for faster time to market at a lower cost
Denmark's best known real estate agency had to make a smooth migration to the cloud without disturbing day-today business.
Home is Denmark's most well-known real estate chain, 100% owned by Realkredit Danmark.
The chain consists of approximately 120 franchisees with a total of 180 offices throughout Denmark and more than 900 employees nationwide.
The challenge was not to only lift and shift but handle all third-party products and core solutions, and move them according to a controlled and aligned roadmap.
Itera performed a Cloud Readiness Assessment, developed a business case and evaluated the complexity of the system portfolio.
The result is that time to market for new services has improved.
After more than 20 years as a provider of on-premise managed services for Home, Itera challenged Home two years ago to migrate to the cloud.
Through cloud migration, Home was able to continuously meet customer expectations of new and improved services. By the end of 2021, Home had finally moved from a traditional operating model to 95% of their systems in the cloud.
Digital transformation towards SaaS solutions
DNV is modernising its digital solutions in the cloud for managing risk, improving safety and asset performance.
DNV is modernising its digital solutions to support customers around the world towards the future of Industry 4.0
The solutions have been continuously developed, but for many of them there was a need to upgrade the technology platform to a modern architecture.
A full fledged Digital Factory at Scale and Cloud Centre of Excellence are used to create new SaaS solutions in Azure with new event driven architecture and new technology stack.
Azure DevOps is applied for efficiency, quality and lice cycle management.
DNV Digital Solutions team up with Itera to accelerate digital transformation by combining deep industry knowledge and digitalisation at scale
leading companies.
he speed of DNV's cloud transformation has increased significantly and the share of applications operated in the cloud is increasing
New office opening in Iceland
After five successful years in the Icelandic market, partnering with ambitious customers like Össur, Landsbankinn and Íslandsbanki, Itera opened a branch office in Reykjavik in the fourth quarter.
The office opening represents a natural next step due to increased market demand for Itera's services in the Icelandic market.
Efficient onboarding of new employees as ONE Itera
With a 22% growth in employees the last 12 months, well-functioning and efficient onboarding processes across all locations are important.
Orientation Day
A practical day to get to know different systems and processes.
Onboarding Day
Insight into the organisation, our delivery model, the business strategy and a deep dive into how it is to be a consultant.
Professional Onboarding
Professional onboarding in the various organisation units, capabilities and practices, including online training and certification programs
Business continuity plan in place for our offices in Ukraine
Despite growing tensions in and around Ukraine, we have a normal operation and activity level at our office in Kyiv.
We have updated our business continuity plans for our personnel and operations in case of further escalations.
Itera office in Kiev is located more than 600 kilometres from the centre of the unrest in the country's eastern regions. We have also increased our office space in Lviv close to the Polish border.
Indeed, our distributed delivery model and high mobility of consultants enable us to work from anywhere as needed, including home as the new hybrid work normal after the pandemic, as well as from other Itera offices in the western part of Ukraine, Slovakia and the Nordics.
Itera in Ukraine
Order intake
Order intake from selected new and existing customers
Book-to-bill ratio*) of 1.5 in Q4 for core digital business and 1.1 for the last 12 months
Customer development
New business
- Existing customers accounted for 86.6% (92.8%) of revenues in Q4 2021
- New customers won over the past year generated revenues of NOK 22.5 (12.1) million in Q4 2021 (13.4% share)
Good visibility
- Share of revenue from top 30 customers 76% (80%)
- High customer concentration signifies
- Strategic relationships
- Full range of services
- Distributed delivery across borders
Revenue customers split (in MNOK)
Largest customers' share of revenue
Top 30 Top 10
* Existing customers defined as customers that were invoiced in the corresponding quarter last year
** New customers defined as customers won since end of corresponding quarter last year
Skilled and innovative employees in core digital business
617 employees at the end of the quarter
- Up by 28 in the quarter
- Up by 113 (55) last twelve months
Nearshore ratio of 53% (49%)
▪ Our distributed delivery model of onshore and nearshore consultants are increasing our price competitiveness as well as providing high scalability through access to a very large talent pool
Number of employees end of quarter by shore
Rolling 12 months net FTE growth
03 Financial review
Financial reporting 2021
Given the discontinuation of the data centre operations, focus for our financial reporting is on the core digital business, including the investment in the Cloud Centre of Excellence.
Key financials core digital business
| 2021 | 2020 | change | change | |
|---|---|---|---|---|
| in million Amounts NOK |
10-12 | 10-12 | % | |
| Sales revenue |
158 7 |
135 6 |
23 1 |
17 0 % |
| of sales Cost |
11 4 |
10 3 |
1 1 |
10 9 % |
| profit Gross |
147 3 |
125 3 |
22 0 |
17 5 % |
| margin Gross |
92 8 % |
92 4 % |
0 4 pts |
0 4 pts |
| Personnel expenses |
109 8 |
92 8 |
17 1 |
18 % 4 |
| Other operating expenses |
12 9 |
3 11 |
1 6 |
% 14 1 |
| Depreciation and amortisation |
6 3 |
7 6 |
-1 4 |
-17 7 % |
| Total operating expenses |
140 5 |
122 0 |
18 4 |
15 1 % |
| EBITDA | 24 5 |
21 3 |
3 3 |
15 5 % |
| margin EBITDA |
15 5 % |
15 7 % |
-0 2 pts |
-0 2 pts |
| EBIT | 18 3 |
13 6 |
4 6 |
34 1 % |
| margin EBIT |
11 5 % |
10 0 % |
1 5 pts |
1 5 pts |
| . of employees the end of the period No at |
617 | 504 | 113 | 22 4 % |
- Strong growth of 17% fuelled by some major new accounts and more subcontractors
- Personnel expenses include higher variable compensation relating to performance
- Opex increase from new SK office and ERP implementation costs reclassified from depreciation
- Depreciation down due to office sublease and end-of-life R&D assets
- EBIT up 34% to MNOK 18.3
- EBIT margin of 11.5% (10.0%)
- No. of FTEs up 113 to 617
Revenue and earnings development
- Strong sales growth year over year with 2-year CAGR of 14.5% and 1.1% margin improvement
- Quarterly figures are impacted by number of working days net of vacations
Subscription revenue from data centre operations
- Migrations and transfers (those with no imminent cloud journey) to be completed by end of Q1
- Residual planned exits completed before end of Q2
Segment reporting
| 10-12 2021 |
10-12 2020 |
Growth | Year-to-date growth | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| in million Amounts NOK |
Core digital business (95%) |
Data centre operations (5%) |
Total | Core digital business (81%) |
Data centre operations (19%) |
Total | Core digital business |
Data centre operations |
Total | Core digital business |
Data centre operations |
Total | |
| Sales revenue |
158.7 | 9.0 | 167.8 | 135.6 | 31.7 | 167.3 | 17.0 % |
% -71.5 |
0.3 % |
19.2 % | -65.9 % | 2.9 % | |
| of sales Cost |
11.4 | 4.0 | 15.4 | 10.3 | 7.6 | 17.9 | 10.9 % |
-47.2 % |
-13.7 % |
28.2 % | -51.8 % | -12.1 % | |
| Gross profit |
147.3 | 5.0 | 152.3 | 125.3 | 24.1 | 149.5 | % 17.5 |
-79.2 % |
1.9 % |
18.5 % | -72.2 % | 4.9 % | |
| margin Gross |
92.8 % |
55.8 % |
90.8 % |
92.4 % |
76.2 % |
89.3 % |
0.4 pts |
-20.4 pts |
1.5 pts |
-0.5 pts | -12.7 pts | 1.7 pts | |
| Personnel expenses |
109.8 | 7.3 | 117.1 | 92.8 | 17.7 | 110.5 | 18.4 % |
-59.0 % |
6.0 % |
21.4 % | -47.5 % | 10.8 % | |
| Other operating expenses |
12.9 | 1.5 | 14.5 | 11.3 | 2.3 | 13.6 | 14.1 % |
-32.2 % |
6.4 % |
7.3 % | -12.7 % | 4.6 % | |
| Depreciation and amortisation |
6.3 | 0.8 | 7.1 | 7.6 | 4.8 | 12.4 | % -17.7 |
-82.6 % |
-42.6 % |
-21.4 % | -64.8 % | -33.0 % | |
| Total operating expenses |
140.5 | 13.6 | 154.1 | 122.0 | 32.3 | 154.3 | 15.1 % |
-57.8 % |
-0.1 % |
17.7 % | -48.8 % | 3.9 % | |
| EBITDA | 24.5 | -3.8 | 20.8 | 21.3 | 4.1 | 25.4 | % 15.5 |
-191.8 % |
-18.2 % |
12.4 % | -198.0 % | -17.1 % | |
| margin EBITDA |
15.5 % |
-41.9 % |
12.4 % |
15.7 % |
13.0 % |
15.2 % |
-0.2 pts |
-55 pts |
-2.8 pts |
-1 pts | -48.6 pts | -3.3 pts | |
| EBIT | 18.3 | -4.6 | 13.6 | 13.6 | -0.6 | 13.0 | 34.1 % |
625.1 % |
5.1 % |
30.3 % | -644.1 % | -6.3 % | |
| EBIT margin |
11.5 % |
-51.1 % |
8.1 % |
10.0 % |
-2.0 % |
7.8 % |
1.5 pts |
-49.1 pts |
0.4 pts |
1.1 pts | -49 pts | -0.9 pts |
▪ Data centre operations revenue MNOK 9.0 (-72%)
▪ Decline in data centre operations revenue mitigated by growth in core digital business
Statement of cash flow
| 2021 | 2020 | 2021 | 2020 | ||
|---|---|---|---|---|---|
| Million NOK |
10-12 | 10-12 | 1-12 | 1-12 | |
| (EBITDA) Cash flow from operations |
20 8 |
29 2 |
87 1 |
108 9 |
|
| Change in balance sheet items |
12 1 |
6 5 |
(17 3) |
(9 7) |
|
| cash flow from operating activities Net |
32 8 |
35 6 |
69 7 |
99 2 |
|
| investment activities cash flow from Net |
(7 8) |
(4 8) |
(32 8) |
(17 0) |
|
| Purchase of shares own |
- | - | (23 5) |
(18 2) |
|
| Sale of shares |
- | 2 1 |
12 4 |
8 0 |
|
| Cash settlement of options contract |
- | - | (1 0) |
- | |
| Principal elements of lease payments |
(3 1) |
(4 5) |
(17 5) |
(22 6) |
|
| Instalment of sublease receivable |
0 9 |
- | 3 6 |
- | |
| External dividend paid |
(8 1) |
(31 7) |
(27 9) |
(48 0) |
|
| cash flow from financing activities Net |
(10 2) |
(34 1) |
(53 9) |
(80 9) |
|
| in deposits change bank and cash Net |
9 14 |
(3 3) |
(16 9) |
3 1 |
|
| Bank deposits the end of the period at |
37 5 |
54 4 |
37 5 |
54 4 |
|
| borrowing related leasing New to |
- | - | - | 2 4 |
- Cash flow from operations NOK 32.8 (35.6) million in Q4
Dividend and own shares
- A supplementary dividend of NOK 0.10 was paid in December. Total dividend for 2020 is NOK 0.35 per share.
- The Board has proposed an ordinary dividend of NOK 0.20 per share for 2021 with the opportunity to pay a supplementary dividend later in the year
- Share price was NOK 15.25 at the end of 2021, an increase of 2% (4% incl. dividends) from NOK 15.00 at the end of 2020.
- Current holding of own shares is 1,637,006 shares. Value at 31 December 2021 was MNOK 25.0
-
Consistent high distribution of earnings
-
Equity ratio of 18% (15%) per 31 December 2021
- 21% (18%) excl. IFRS 16 Leasing
- Cash balance of MNOK 37 (MNOK 54)
- Total balance reduced by MNOK 3 to MNOK 221
04 Outlook
Q4 REPORT 2021
Outlook
Modern business in the cloud is the new normal accelerated by sustainability and digitalisation after Covid-19
Strong position through its end-toend services, worldclass distributed delivery and industrial partnerships.
Core digital business will continue to grow at full speed. Profitable growth and cash flow are key focus areas.
Data centres being closed down and reported as discontinued business
Regional expansion in the Nordics for proximity to more customers and talents
33
Top 20 shareholders
| No | Name | % | Nat | Shareholding |
|---|---|---|---|---|
| 1 | MJØS INVEST AS* ARNE |
30 01 |
NOR | 24 663 031 |
| 2 | OP CAPITAL AS |
5 54 |
NOR | 4 551 083 |
| 3 | GIP AS |
5 06 |
NOR | 4 162 000 |
| 4 | EIKESTAD AS |
3 89 |
NOR | 3 200 000 |
| 5 | SEPTIM CONSULTING AS |
3 59 |
NOR | 2 950 000 |
| 6 | BOINVESTERING AS |
3 27 |
NOR | 2 686 968 |
| 7 | Bank DnB NOR ASA |
3 08 |
NOR | 2 527 867 |
| 8 | GAMST INVEST AS |
2 92 |
NOR | 2 400 000 |
| 9 | JØSYRA INVEST AS |
2 68 |
NOR | 2 200 000 |
| 0 1 |
ASA ITERA |
2 06 |
NOR | 692 006 1 |
| 1 1 |
VERDIPAPIRFONDET STOREBRAND VEKST |
1 56 |
NOR | 280 000 1 |
| 1 2 |
HØGBERG | 1 30 |
NOR | 1 068 444 |
| 1 3 |
FRAMAR INVEST AS |
1 18 |
NOR | 967 959 |
| 1 4 |
AANESTAD PANAGRI AS |
1 13 |
NOR | 925 000 |
| 1 5 |
DZ PRIVATBANK S A |
1 10 |
LUX | 900 000 |
| 1 6 |
ALTEA PROPERTY DEVELOPMENT AS |
0 85 |
NOR | 700 000 |
| 1 7 |
GRØSLAND | 0 79 |
NOR | 650 000 |
| 8 1 |
NYVANG | 0 76 |
NOR | 626 400 |
| 1 9 |
JENSEN | 0 76 |
DEN | 625 624 |
| 2 0 |
MORTEN JOHNSEN HOLDING AS |
0 73 |
NOR | 600 000 |
| TOP 20 |
72 25 |
59 376 382 |
*Arne Mjøs Invest AS holds a future contract on 2,600,000 shares. The total controlling interest of Arne Mjøs is thus 27,263,031 shares (33.2%).