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Netcompany Group Earnings Release 2018
3373_rns_2019-02-06_8139be02-a8f7-4088-932e-1b92b54b7ccf.pdf
Earnings Release
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netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Company announcement - 12 months ended 31 December 2018
Netcompany reports record growth and record operating profit for 2018
Company
announcement
no 2/2019
6 February 2019
Summary
Netcompany realised revenue of DKK 2,053.2m in 2018, corresponding to a reported revenue growth of 45% and an organic revenue growth of 25.5%.
Adjusted EBITA grew by 27.9% to DKK 514.2m compared to DKK 402.0m in 2017, corresponding to an adjusted EBITA margin of 25%.
The average number of full-time employees grew by more than 600 from 1,256 during 2017 to 1,861 during 2018, driven by the continued growth in both Denmark and Norway, as well as the full inclusion of Netcompany UK.
At the beginning of 2019, revenue visibility for the full year increased by 33.8% to DKK 1,579.4m compared to DKK 1,180.0m at the beginning of 2018.
Free cash flow remained strong, and increased from DKK 307.3m in 2017 to DKK 391.3m in 2018, yielding a cash conversion ratio of 75.2% - in line with the level of 2017.
For 2019, Netcompany expects revenue in constant currencies in all geographies to grow between 20% and 25% and Group adjusted EBITA margin in constant currencies of around 26%.
"2018 has been a tremendous year for Netcompany where we passed a number of significant milestones. Revenue grew to above DKK 2 billion with operating profits growing to above half a billion DKK¹. We also welcomed more than 750 new employees during the year and in June we successfully entered the Copenhagen stock exchange as a true Unicorn in a successful IPO.
Looking back at 2018, I am immensely proud of our achievements made possible by all of our fantastic employees, and I look forward to the journey in 2019 and onwards".
André Rogaczewski, Netcompany CEO and Co-founder
¹ Adjusted EBITA
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Performance highlights for Q4 2018
- Revenue increased by 22.5% to DKK 543.3m in reported currencies and by 22.4% in constant currencies.
- Organic revenue increased by 16.8% to DKK 517.8m from DKK 443.4m in Q4 2017.
- Adjusted EBITA margin was 24.1% in reported and constant currencies compared to 26.0% in reported currencies in Q4 2017. The UK operation impacted adjusted EBITA margin negatively by 4.0 percentage points in Q4 2018.
- Profit before tax increased by 50.5% to DKK 91.6m in reported currencies and by 50.2% in constant currencies.
- Revenue visibility for 2019 increased by 33.8% to DKK 1,579.4m compared to DKK 1,180.0m at the beginning of 2018.
- Free cash flow remained strong and increased from DKK 154.8m in Q4 2017 to DKK 163.6m in Q4 2018, yielding a cash conversion ratio of 116.9% compared to 127.4% in Q4 2017.
Financial overview
| DKK million | Q4 2018 (reported) | Q4 2018 (constant)* | Q4 2017 | % change (reported) | Netcompany UK Ltd. (Netcompany UK) Non-organic Impact** | % change (constant) |
|---|---|---|---|---|---|---|
| Revenue | 543.3 | 542.7 | 443.4 | 22.5% | 5.7pp | 22.4% |
| Gross profit | 213.8 | 213.6 | 182.0 | 17.5% | 2.0pp | 17.3% |
| EBITA | 130.6 | 130.4 | 99.0 | 31.9% | 1.9pp | 31.7% |
| EBITA margin | 24.0% | 24.0% | 22.3% | 1.7pp | -0.8pp | 1.7pp |
| Adjusted EBITA | 130.8 | 130.6 | 115.3 | 13.4% | 1.7pp | 13.2% |
| Adjusted EBITA margin | 24.1% | 24.1% | 26.0% | -1.9pp | -0.8pp | -1.9pp |
| Operating profit | 101.8 | 101.6 | 72.2 | 41.0% | 0.2pp | 40.8% |
| Operating profit margin | 18.7% | 18.7% | 16.3% | 2.5pp | -0.9pp | 2.4pp |
| Net profit / loss | 68.4 | 68.2 | 40.6 | 68.3% | -3.8pp | 67.8% |
| Capex | -9.0 | N/A | -8.5 | 6.4% | N/A | N/A |
| Net increase / decrease in cash and cash equivalents | -105.6 | N/A | 73.8 | -243.2% | N/A | N/A |
Constant currencies measured using average exchange rates for Q4 2017
*Netcompany UK, acquired at 26 October 2017, is not fully included in the reported figures for 2017. The impact from UK until 26 October 2018 is shown in the table as Non-Organic impact from UK, whereas impact from 27 October 2018 and going forward will be seen as organic impact.
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
| DKK million | YTD 2018 (reported) | YTD 2018 (constant)* | YTD 2017 | % change (reported) | Netcompany UK Ltd. (Netcompany UK) Non-organic Impact** | % change (constant) |
|---|---|---|---|---|---|---|
| Revenue | 2,053.2 | 2,057.4 | 1,416.1 | 45.0% | 19.5pp | 45.3% |
| Gross profit | 816.5 | 818.1 | 612.7 | 33.3% | 7.8pp | 33.5% |
| EBITA | 479.7 | 480.2 | 369.0 | 30.0% | 4.0pp | 30.1% |
| EBITA margin | 23.4% | 23.3% | 26.1% | -2.7pp | -2.8pp | -2.7pp |
| Adjusted EBITA | 514.2 | 514.7 | 402.0 | 27.9% | 5.5pp | 28.1% |
| Adjusted EBITA margin | 25.0% | 25.0% | 28.4% | -3.3pp | -2.6pp | -3.4pp |
| Operating profit | 364.3 | 364.9 | 273.2 | 33.4% | -2.0pp | 33.6% |
| Operating profit margin | 17.7% | 17.7% | 19.3% | -1.5pp | -3.1pp | -1.6pp |
| Net profit / loss | 181.2 | 181.6 | 141.6 | 28.0% | -12.4pp | 28.2% |
| Capex | -27.2 | N/A | -30.2 | -9.9% | N/A | N/A |
| Net increase / decrease in cash and cash equivalents | -85.3 | N/A | 137.0 | -162.3% | N/A | N/A |
Constant currencies measured using average exchange rates for 2017
*Netcompany UK, acquired at 26 October 2017, is not fully included in the reported figures for 2017. The impact from UK until 26 October 2018 is shown in the table as Non-Organic impact from UK, whereas impact from 27 October 2018 and going forward will be seen as organic impact.
Conference call details
In connection with the publication of the results for Q4 2018, Netcompany will host a conference call on 6 February 2019 at 10.00 CEST. The conference call will be held in English and can be followed live via the company's website; www.netcompany.com
Dial-in details for investors and analysts: DK: 32728042 UK: +44 (0) 2071 928000
Confirmation code: 2679057
Webcast Player URL: ... https://edge.media-server.com/m6/p/aszgxfjx
Additional information
André Rogaczewski, CEO +45 70 13 14 40
Thomas Johansen, CFO +45 51 19 32 24
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Financial highlights and key figures
| DKK million | Q4 2018 | Q4 2017 | YTD 2018 | YTD 2017 | % change YTD |
|---|---|---|---|---|---|
| Income statement | |||||
| Revenue | |||||
| Public | 321.0 | 244.6 | 1,152.1 | 730.2 | 57.8% |
| Private | 222.3 | 198.8 | 901.1 | 685.9 | 31.4% |
| Revenue by segments, total | 543.3 | 443.4 | 2,053.2 | 1,416.1 | 45.0% |
| Development | 304.6 | 211.3 | 1,005.4 | 646.9 | 55.4% |
| Maintenance | 238.7 | 232.1 | 1,047.8 | 769.2 | 36.2% |
| Revenue by types, total | 543.3 | 443.4 | 2,053.2 | 1,416.1 | 45.0% |
| Organic | 517.8 | 353.7 | 1,777.5 | 1,232.0 | 44.3% |
| Acquisition | 25.5 | 89.7 | 275.7 | 184.0 | 49.8% |
| Revenue by growth, total | 543.3 | 443.4 | 2,053.2 | 1,416.1 | 45.0% |
| Special items | -0.1 | -16.3 | -34.5 | -32.9 | 4.7% |
| EBITA | 130.6 | 99.0 | 479.7 | 369.0 | 30.0% |
| Adjusted EBITA | 130.8 | 115.3 | 514.2 | 402.0 | 27.9% |
| Operating profit (EBIT) | 101.8 | 72.2 | 364.3 | 273.2 | 33.4% |
| Net financials | -10.2 | -11.3 | -108.7 | -72.1 | 50.7% |
| Net profit / loss | 68.4 | 40.6 | 181.2 | 141.6 | 28.0% |
| Financial position | |||||
| Capex | -9.0 | -8.5 | -27.2 | -30.2 | -9.9% |
| Total assets | 3,485.4 | 3,469.5 | 3,485.4 | 3,469.5 | 0.5% |
| Equity | 1,806.3 | 1,643.9 | 1,806.3 | 1,643.9 | 9.9% |
| Net increase in cash and cash equivalents | -105.6 | 73.8 | -85.3 | 137.0 | -162.3% |
| Free cash flow | 163.6 | 154.8 | 391.3 | 307.3 | 27.3% |
| Earnings per share | |||||
| Earnings per share (DKK) | 1.38 | 0.82 | 3.65 | 2.92 | 25.0% |
| Diluted Earnings per share (DKK) | 1.38 | 0.82 | 3.65 | 2.92 | 24.9% |
| Employees | |||||
| Average number of full-time employees | 1,979.2 | 1,579.3 | 1,860.7 | 1,256.0 | 48.1% |
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39.48.89.14
| DKK million | Q4 2018 | Q4 2017 | YTD 2018 | YTD 2017 | % change YTD | |
|---|---|---|---|---|---|---|
| Financial ratios | ||||||
| Gross profit margin | 39.4% | 41.1% | 39.8% | 43.3% | -3.5pp | |
| EBITA margin | 24.0% | 22.3% | 23.4% | 26.1% | -2.7pp | |
| Adjusted EBITA margin | 24.1% | 26.0% | 25.0% | 28.4% | -3.3pp | |
| Operating profit margin | 18.7% | 16.3% | 17.7% | 19.3% | -1.5pp | |
| Effective tax rate | 25.4% | 33.2% | 29.1% | 29.6% | -0.4pp | |
| Return on equity | 4.0% | 2.8% | 10.5% | 9.8% | 0.8pp | |
| Solvency ratio | 51.8% | 47.4% | 51.8% | 47.4% | 4.4pp | |
| Financial metrics | ||||||
| Revenue growth | 22.5% | 67.4% | 45.0% | 57.4% | -12.4pp | |
| Operating profit margin | 18.7% | 16.3% | 17.7% | 19.3% | -1.5pp | |
| Retun on invested capital (ROIC) | 2.5% | 1.6% | 6.6% | 5.5% | 1.0pp | |
| Cash conversion ratio | 116.9% | 127.4% | 75.2% | 76.4% | -1.1pp | |
| The ratios have been compiled in accordance with the following calculation formulas: | ||||||
| Free cash flow | EBIT + Depreciation and Amortisation + Non-cash + Change in net working capital | Operating profit margin | Operating profit x 100 Revenue | |||
| EPS | Net profit for the period - Dividends on preferred stock Average outstanding common shares | Return on equity | Net profit for the period x 100 Average equity | |||
| EPS diluted | Net profit / loss for the period - Dividends on preferred stock Average outstanding common shares + RSU | Solvency ratio | Equity x 100 Total assets | |||
| Gross profit margin | Gross profit x 100 Revenue | Return on invested capital (ROIC) | Net profit x 100 Average invested capital | |||
| EBITA margin | EBITA x 100 Revenue | Cash conversion rate | Free cash flow x 100 EBITDA | |||
| Adjusted EBITA margin | (EBITA-Special items) x 100 Revenue |
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Performance overview
| DKK million | Q4 2018 (reported) | Q4 2018 (constant)* | Q4 2017 | % change (reported) | Netcompany UK Ltd. (Netcompany UK) Non-organic Impact | % change (constant) |
|---|---|---|---|---|---|---|
| Revenue | 543.3 | 542.7 | 443.4 | 22.5% | 5.7pp | 22.4% |
| Cost of services | -329.5 | -329.1 | -261.3 | 26.1% | 8.4pp | 25.9% |
| Gross profit | 213.8 | 213.6 | 182.0 | 17.5% | 2.0pp | 17.3% |
| Gross profit margin | 39.4% | 39.4% | 41.1% | -1.7pp | -1.2pp | -1.7pp |
| Sales and marketing costs | -2.5 | -2.5 | -3.2 | -21.6% | 0.3pp | -21.7% |
| Administrative costs | -80.6 | -80.5 | -63.6 | 26.8% | 2.7pp | 26.7% |
| Adjusted EBITA | 130.8 | 130.6 | 115.3 | 13.4% | 1.7pp | 13.2% |
| Adjusted EBITA margin | 24.1% | 24.1% | 26.0% | -1.9pp | -0.8pp | -1.9pp |
| Special items | -0.1 | -0.1 | -16.3 | -99.2% | 0.1pp | -99.2% |
| EBITA | 130.6 | 130.4 | 99.0 | 31.9% | 1.9pp | 31.7% |
| EBITA margin | 24.0% | 24.0% | 22.3% | 1.7pp | -0.8pp | 1.7pp |
| Amortisation | -28.8 | -28.8 | -26.8 | 7.4% | 6.5pp | 7.4% |
| Operating profit (EBIT) | 101.8 | 101.6 | 72.2 | 41.0% | 0.2pp | 40.8% |
| Operating profit margin | 18.7% | 18.7% | 16.3% | 2.5pp | -0.9pp | 2.4pp |
| Net financials | -10.2 | -10.2 | -11.3 | -10.1% | 8.9pp | -10.1% |
| Profit / loss before tax | 91.6 | 91.4 | 60.9 | 50.5% | -1.4pp | 50.2% |
| Tax | -23.2 | -23.2 | -20.2 | 14.8% | 3.5pp | 14.6% |
| Effective tax rate | 25.4% | 25.4% | 33.2% | -7.9pp | 1.0pp | -7.9pp |
| Net profit / loss | 68.4 | 68.2 | 40.6 | 68.3% | -3.8pp | 67.8% |
*Constant currencies measured using average exchange rates for Q4 2017
Reported revenue increased by 22.5% (constant 22.4%) to DKK 543.3m in Q4 2018 compared to the same period last year. The non-organic impact on revenue growth, which related from the acquisition of Netcompany UK in October 2017, was 5.7 percentage points in the period, resulting in an organic revenue growth of 16.8%. Revenue increased in both Denmark, Norway and UK, despite the fact, that Q4 2018 had 1 working day less compared to the same period last year, as Christmas and the national holidays related hereto, fell mostly outside the weekend in 2018, which reduced revenue growth by approximately 1.5% compared to Q4 2017. In addition, Q4 2017 was impacted by a one-time positive revenue adjustment of DKK 8.0m in the UK, offsetting underlying actual revenue growth in Q4 2018 by 2.3 percentage points in a normalised setting. The revenue adjustment of DKK 8.0m in Q4 2017, was a result of changing the accounting principles from UK GAAP to IFRS in the UK operation, when Netcompany acquired the entity in October 2017.
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
In Q4 2018, the public segment grew by 31.2% to DKK 321.0m, of which 26.9 percentage points was organic revenue growth, while the private segment grew 11.8% to DKK 222.3m, of which 4.2 percentage points was organic revenue growth. The development in the private segment was negatively affected by the one-time revenue adjustment in Q4 2017 of DKK 8.0m, which primarily impacted the private segment. Also the decision to focus on the public segment in both Denmark and Norway, as several of the big public engagements were set in production towards the back-end of 2018, impacted revenue in the private segment negatively. As a result, the main revenue driver in the private segment was the UK operation, while the main revenue driver in the public segment was the Danish and Norwegian business operations.
Cost of services increased by 26.1% (constant 25.9%) to DKK 329.5m in Q4 2018. The higher increase in cost of services relative to revenue growth was, besides the increased activity level in both Denmark and Norway, primarily driven by the fact, that there was 1 working day less in Q4 2018 compared to Q4 2017, which reduced potential revenue, but not the salary costs, as the level of salary costs remains unchanged by the impact of national holidays in a given period of time. In addition to this, the increase in cost of services was driven by the UK operation, which by nature had significantly higher share of cost to serve, due to a higher usage of independent contractors compared to Denmark and Norway. As the UK operation was acquired on 26 October 2017, it only impacted cost of services in Q4 2017 by 2 months and 6 days, while it had full financial impact in Q4 2018. Furthermore, in the UK, revenue growth relative to the increase in cost of services in Q4 2018 compared to Q4 2017, was offset by the one-time adjustment of DKK 8.0m in Q4 2017, making the comparable gross profit margin higher in Q4 2017 compared to Q4 2018.
Gross profit margin decreased by 1.7 percentage points from 41.1% in Q4 2017 to 39.4% in Q4 2018, despite the fact, that the Danish operation increased its gross profit margin by 1.7 percentage points to 45.4% in Q4 2018. The positive contribution in gross profit margin from the Danish operation was offset by a decrease in gross profit margin of 6.0 percentage points in the Norwegian operation and a decrease of 12.8 percentage points in the UK operation. The decrease in the Norwegian gross profit margin was primarily driven by the intake of close to 40 new employees in July and August, representing a relative increase in the workforce by more than 30%. Such a large intake, naturally requires significant time from the rest of the organisation to onboard and train the new employees, which thereby lowered utilisation and thus profitability in Q4 2018 compared to Q4 2017. The decrease in the gross profit margin in the UK operation was, as previously described, primarily driven by the one-time revenue in Q4 2017 of DKK 8.0m. Adjusting for this, gross margin in Q4 2018 decreased by 1.9 percentage point compared to the reported decrease of 12.8 percentage points. In addition, there was 1 working day less in Q4 2018 compared to Q4 2017, which also impacted gross margin negatively.
Sales and marketing costs decreased by 21.6% (constant 21.7%) to DKK 2.5m. The decrease in sales and marketing costs was primarily driven by the timing of marketing events and therefore expenses and the fact that Q4 2017 included costs related to the IPO activities.
Administrative costs increased by 26.8% (constant 26.7%) to DKK 80.6m in Q4 2018. The increase in administrative costs was driven by several factors, of which the most significant was the Group employing an average of 1,979.2 FTEs in Q4 2018 compared to 1,586.8 FTEs in Q4 2017, an increase of 24.7%. This meant, that more consultants in absolute numbers spent time on certification and other course training, as well as increasing the infrastructure costs which are all activities reported as administrative costs. In addition, administrative costs increased due to an increase in remuneration to the Executive Management and Board of Directors "post IPO", aligning it to match market level standards, as well as an increase in administrative staff needed to secure the additional reporting and governance requirements following the IPO of Netcompany. Finally, the increase in administrative costs was driven by an expansion of office space in Denmark and Poland and a new headquarters for the UK operation in London.
Company announcement no 2/2018
Page 7 of 41
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39.48.89 14
Adjusted EBITA increased by 13.4% (constant 13.2%) to DKK 130.8m. This led to an adjusted EBITA margin of 24.1%, which was a decrease of 1.9 percentage points, of which the UK operation accounted for 4.0 percentage points.
Special items decreased by 99.2% in Q4 2018 to DKK 0.1 million. In Q4 2017, DKK 9.6m related to M&A advisory costs while DKK 6.7m related to the IPO of Netcompany.
EBITA increased by 31.9% (constant 31.7%) to DKK 130.6m. This led to an EBITA margin of 24.0%, which was a increase of 1.7 percentage points compared to the same period last year, as the lack of special items costs in Q4 2018 more than covered the dilutive impact from the UK operation on Group EBITA margins.
Amortisation of intangibles recognised upon business combinations in the past increased by 7.4% to DKK 28.8 million in Q4 2018. The increase in amortisation was driven by the purchase of Netcompany UK in October 2017, which had full financial effect in Q4 2018, but only impacted Q4 2017 by 2 months and 6 days, as Netcompany UK was acquired on 25 October 2017.
Operating profit (EBIT) increased by 41.0% (constant 40.8%) to DKK 101.8m. This led to an operating profit margin of 18.7% compared to 16.3% in Q4 2017. The increase in operating profit margin was driven by the increase in EBITA margin and a lower increase in amortisation relative to revenue growth in the same period.
Net financial costs decreased by 10.1% to DKK 10.2m in Q4 2018. The decrease was a result of the refinancing of all external borrowings in connection with the IPO, which led to significantly lower interest rates "post IPO".
The effective tax rate in Q4 2018 was 25.4%, which was a decrease of 7.9 percentage points, compared to the same period last year. The decrease in effective tax rate was primarily driven by the fact, that Q4 2017 was impacted by a negative impact of interest deduction limitation rules adjustments, as well as special items, categorised as non-tax-deductible costs.
The net result in Q4 2018 increased by 68.3% (constant 67.8%) to DKK 68.4m.
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
| DKK million | YTD 2018 (reported) | YTD 2018 (constant)* | YTD 2017 | % change (reported) | Netcompany UK Ltd. (Netcompany UK) Non-organic Impact | % change (constant) |
|---|---|---|---|---|---|---|
| Revenue | 2,053.2 | 2,057.4 | 1,416.1 | 45.0% | 19.5pp | 45.3% |
| Cost of services | -1,236.7 | -1,239.3 | -803.4 | 53.9% | 28.3pp | 54.3% |
| Gross profit | 816.5 | 818.1 | 612.7 | 33.3% | 7.8pp | 33.5% |
| Gross profit margin | 39.8% | 39.8% | 43.3% | -3.5pp | -3.5pp | -3.5pp |
| Sales and marketing costs | -11.9 | -11.9 | -9.7 | 22.3% | 8.2pp | 22.6% |
| Administrative costs | -290.4 | -291.4 | -201.0 | 44.5% | 12.6pp | 45.0% |
| Adjusted EBITA | 514.2 | 514.7 | 402.0 | 27.9% | 5.5pp | 28.1% |
| Adjusted EBITA margin | 25.0% | 25.0% | 28.4% | -3.3pp | -2.6pp | -3.4pp |
| Special items | -34.5 | -34.5 | -32.9 | 4.7% | 22.1pp | 4.7% |
| EBITA | 479.7 | 480.2 | 369.0 | 30.0% | 4.0pp | 30.1% |
| EBITA margin | 23.4% | 23.3% | 26.1% | -2.7pp | -2.8pp | -2.7pp |
| Amortisation | -115.4 | -115.4 | -95.9 | 20.3% | 21.1pp | 20.3% |
| Operating profit (EBIT) | 364.3 | 364.9 | 273.2 | 33.4% | -2.0pp | 33.6% |
| Operating profit margin | 17.7% | 17.7% | 19.3% | -1.5pp | -3.1pp | -1.6pp |
| Net financials | -108.7 | -108.7 | -72.1 | 50.7% | 16.2pp | 50.7% |
| Profit / loss before tax | 255.7 | 256.2 | 201.0 | 27.2% | -8.6pp | 27.4% |
| Tax | -74.5 | -74.6 | -59.4 | 25.3% | 0.6pp | 25.5% |
| Effective tax rate | 29.1% | 29.1% | 29.6% | -0.4pp | 2.0pp | -0.4pp |
| Net profit / loss | 181.2 | 181.6 | 141.6 | 28.0% | -12.4pp | 28.2% |
*Constant currencies measured using average exchange rates for 2017
Revenue increased by 45.0% (constant 45.3%) from DKK 1,416.1m in 2017 to DKK 2,053.2m in 2018, corresponding to an organic revenue growth of 25.5%. The increase in organic revenue, in both the Danish and Norwegian operation, primarily came from the public sector, driven by the large public tender wins in 2017, which was delivered during 2018. In addition to this, several of the large current public customers in the Danish, as well as the Norwegian public segment, prolonged their engagements and some also expanded previously contracted framework agreements.
Cost of services increased by 53.9% (constant 54.3%) to DKK 1,236.7m in 2018. The higher increase in cost of services relative to the revenue growth was principally driven by the UK operation, which generated a higher cost to serve than the Danish and Norwegian operation, since the UK operation utilised a higher proportion of independent contractors compared to the other business operations. In addition, the UK operation impacted 2018 with full financial effect, while only impacting 2017 with 2 months and 6 days in 2017. As a result, gross profit margin
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
decreased from 43.3% in 2017 to 39.8% in 2018, of which the UK operation reduced gross profit margin by 4.4 percentage points. An offsetting factor to this development, was driven by the Danish operation, which increased its gross profit margin from 44.7% in 2017 to 45.3%, primarily driven by the business operation lowering the amount of freelancers in 2018 compared to 2017, as well as an increased revenue per hour on public projects in the second half of 2018. The increased revenue per hour in the second half of 2018 on public projects, was a result of the projects changing status from development to maintenance, while the lower amount of freelancers was a result of the overall aim, to lower the organic revenue growth to a more sustainable level of around 20-25%. This strategy was implemented in Q3 2018 and Q4 2018, hence the need for freelancers to the cover for the lack of own employees was significantly reduced towards the backend of 2018.
Sales and marketing costs increased by 22.3% (constant 22.6%) to DKK 11.9m. The increase in sales and marketings costs was primarily driven by advisory costs in relation to the listing of Netcompany in the first half of 2018.
Administrative costs increased by 44.5% (constant 45.0%) to DKK 290.4m. The increase in administration costs was driven by several factors, of which the most significant came from the Group employing an average of 1,860.7 FTEs in 2018 compared to 1,256.0 FTEs in 2017, which was an increase of 48.1%. Administrative costs increased as more consultants in absolute numbers spent time on certification and other course training, as well as increasing infrastructure costs such as canteen services etc. In addition, administrative costs increased due to an increase in remuneration to the Executive Management and Board of Directors "post IPO", aligning it to match market level standards, as well as an increase in administrative staff needed to secure the additional reporting and governance requirements following the IPO. Finally, the increase in administrative costs was driven by an expansion of office space in Denmark and Poland, as well as an organisational restructuring of the UK operation, which meant closing of the offices in Reading in UK and Hanoi in Vietnam and instead the opening of a new headquarters for the UK operation in London.
Adjusted EBITA increased by 27.9% (constant 28.1%) to DKK 514.2m. This led to an adjusted EBITA margin of 25.0% in 2018, which was a decrease of 3.3 percentage points compared to 28.4% in 2017. The decrease in EBITA margin was driven by the decrease in gross profit margin, of which the UK operation reduced the adjusted EBITA margin by 3.6 percentage points.
Special items increased by 4.7% to DKK 34.5m in 2018. Of this, DKK 33.0m related to the IPO and activities related hereto, while the remaining DKK 1.5m was related to M&A activities. In 2017, DKK 19.2m related to the IPO activities, while DKK 13.7m related to M&A activities, including the acquisition of Netcompany UK.
EBITA increased by 30.0% (constant 30.1%) to DKK 479.7m. This led to an EBITA margin of 23.4%, which was a decrease of 2.7 percentage points compared to 2017. The decrease in EBITA margin was driven by the negative impact on adjusted EBITA margin from the UK operation.
Operating profit (EBIT) increased by 33.4% (constant 33.6%) to DKK 364.3m. This led to an operating profit margin of 17.7% in 2018, which was a decrease of 1.5 percentage points compared to 2017.
Net financial costs increased by 50.7% to DKK 108.7m. The increase in net financial costs was primarily driven by the refinancing of the Group in connection with the IPO, in which capitalised loan costs and termination of derivative contracts relating to past borrowings was expensed. As a result, DKK 34.9m was expensed through financial expenses and DKK 19.6m through other comprehensive income, all relating to the refinancing. Adjusted for this, net financial costs increased by 2.3% to DKK 73.8m, primarily driven by the acquisition of Netcompany UK, which
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
was partly financed with additional borrowings. This development was however partly offset by the fact, that the refinancing "post IPO", led to significantly lower interest rates in 2018 compared to the same period last year.
Profit before tax increased by 27.2% (constant 27.4%) to DKK 255.7m. The increase in profit before tax was primarily driven by the increase in operating profit, which was somewhat offset by the increase in net financial costs from 2017 to 2018.
The effective tax rate in 2018 was 29.1%, which was 0.4 percentage point lower than the effective tax rate in 2017 at 29.6%. The decrease in effective tax rate was primarily driven by the fact, that the Group was less impacted by the interest deduction limitation rules in 2018 compared to 2017. This development was offset by a higher amount of special items in 2018 compared to 2017, as special items are categorised as non-tax-deductible costs.
Net profit increased by 28.0% (constant 28.2%) to DKK 181.2m.
Company announcement no 2/2018
Page 11 of 41
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Business Segments
Public
| DKK million | Q4 2018 | Q4 2017 | % change (reported) | Netcompany UK Ltd. (Netcompany UK) Non-organic Impact |
|---|---|---|---|---|
| Revenue | 321.0 | 244.6 | 31.2% | 4.3pp |
| Cost of service | -191.9 | -165.7 | 15.8% | 5.1pp |
| Gross profit | 129.1 | 78.9 | 63.5% | 2.4pp |
| Gross profit margin | 40.2% | 32.3% | 7.9pp | -0.7pp |
| Allocated costs | -52.5 | -37.7 | 39.3% | 1.2pp |
| Adjusted EBITA | 76.5 | 41.2 | 85.7% | 3.5pp |
| Adjusted EBITA margin | 23.8% | 16.8% | 7.0pp | -0.3pp |
| Special items | -0.1 | -10.3 | -99.3% | 0.1pp |
| EBITA | 76.4 | 30.9 | 147.6% | 4.7pp |
| EBITA margin | 23.8% | 12.6% | 11.2pp | -0.3pp |
| Amortisation | -16.9 | -17.0 | -0.4% | 2.8pp |
| Operating profit | 59.5 | 13.9 | 329.0% | 7.0pp |
| Operating profit margin | 18.5% | 5.7% | 12.9pp | -0.3pp |
Public segment revenue increased by 31.2% to DKK 321.0m, of which 26.9 percentage points came from organic revenue growth. The increase in revenue was primarily driven by high activity on public customers as several of the large public customers prolonged their framework agreements and expanded previously contracted framework agreements. The increase in revenue in Q4 2018, followed the same trend as in Q3 2018 with high activity at Danish customers such as the Danish Ministry of Taxation, ATP, KOMBIT, the Danish Business Authority and the Danish Working Environment Authority, but also the Norwegian and English customers such as Oslo Municipality, the Norwegian Toll Service and the British Home Office and Department for Work and Pension contributed positively to the significant revenue growth.
Cost of services increased by 15.8% to DKK 191.9m, which was lower than the relative increase in revenue growth. As a result, gross profit margin increased by 7.9 percentage points from 32.3% in Q4 2017 to 40.2% in Q4 2018. The increase in gross profit margin was a result of more projects in the public sector changing status from development to maintenance in the second half of 2018, thereby increasing revenue per hour compared to the same period last year. The change from development to maintenance was principally driven by several large production settings in the Danish public sector in the second half of 2018.
Allocated costs increased by 39.3% in Q4 2018 to DKK 52.5m, which was a higher relative increase compared to the combined increase in administration costs and sales and marketing at Group level. This development was primarily driven by a higher level of activity in the public sector compared to the private sector in Q4 2018.
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Adjusted EBITA increased by 85.7% to DKK 76.5m, which led to an adjusted EBITA margin of 23.8% compared to 16.8% in Q4 2017. The increase in EBITA margin was driven by the increase in gross profit margin, which was partly offset by the higher relative increase in allocated segment costs compared to revenue growth.
EBITA increased by 147.6% to DKK 76.4m, which led to an EBITA margin of 23.8%, an increase of 11.2 percentage points compared to the same period last year, primarily driven by the higher adjusted EBITA margin and lower amount of special items in Q4 2018 compared to the same period last year.
Operating profit (EBIT) increased by 329.0% to DKK 59.5m in Q4 2018. This led to an operating profit margin of 18.5%, which was an increase of 12.9 percentage points, driven by the increase in EBITA margin and a lower relative increase in amortisation compared to revenue growth.
| DKK million | YTD 2018 | YTD 2017 | % change (reported) | Netcompany UK Ltd (Netcompany UK) |
|---|---|---|---|---|
| Non-organic Impact | ||||
| Revenue | 1,152.1 | 730.2 | 57.8% | 9.8pp |
| Cost of service | -692.1 | -453.7 | 52.6% | 12.2pp |
| Gross profit | 459.9 | 276.5 | 66.4% | 5.9pp |
| Gross profit margin | 39.9% | 37.9% | 2.1pp | -1.1pp |
| Allocated costs | -185.3 | -119.6 | 55.0% | 4.2pp |
| Adjusted EBITA | 274.6 | 156.9 | 75.1% | 7.1pp |
| Adjusted EBITA margin | 23.8% | 21.5% | 2.4pp | -0.6pp |
| Special items | -19.2 | -19.7 | -2.8% | 6.5pp |
| EBITA | 255.4 | 137.1 | 86.3% | 7.2pp |
| EBITA margin | 22.2% | 18.8% | 3.4pp | -0.6pp |
| Amortisation | -65.2 | -53.7 | 21.4% | 7.3pp |
| Operating profit | 190.2 | 83.4 | 128.1% | 7.1pp |
| Operating profit margin | 16.5% | 11.4% | 5.1pp | -0.5pp |
Revenue in the public segment increased by 57.8% to DKK 1,152.1m in 2018. The increase in revenue was primarily driven by high activity at both Danish and Norwegian public customers, following the large public tender wins in 2017.
Gross profit margin increased by 2.1 percentage points from 37.9% in 2017 to 39.9% in 2018. The increase in gross profit margin, was a result of a relatively higher share of public projects in maintenance compared to development in 2018, thereby increasing revenue per hour compared to 2017. This development, was principally driven by several large production settings in the Danish public sector towards the back-end of 2018.
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Private
| DKK million | Q4 2018 | Q4 2017 | % change (reported) | Netcompany UK Ltd (Netcompany UK) Non-organic Impact |
|---|---|---|---|---|
| Revenue | 222.3 | 198.8 | 11.8% | 7.6pp |
| Cost of service | -137.5 | -95.6 | 43.8% | 13.9pp |
| Gross profit | 84.7 | 103.1 | -17.8% | 1.7pp |
| Gross profit margin | 38.1% | 51.9% | -13.8pp | -1.9pp |
| Allocated costs | -30.5 | -29.0 | 5.2% | 4.3pp |
| Adjusted EBITA | 54.2 | 74.1 | -26.8% | 0.6pp |
| Adjusted EBITA margin | 24.4% | 37.3% | -12.9pp | -1.5pp |
| Special items | -0.1 | -6.0 | -99.2% | 0.3pp |
| EBITA | 54.2 | 68.1 | -20.5% | 0.7pp |
| EBITA margin | 24.4% | 34.3% | -9.9pp | -1.6pp |
| Amortisation | -11.9 | -9.8 | 21.0% | 12.9pp |
| Operating profit | 42.3 | 58.3 | -27.5% | -1.4pp |
| Operating profit margin | 19.0% | 29.3% | -10.3pp | -1.8pp |
Private segment revenue increased by 11.8% to DKK 222.3m in Q4 2018. The increase in revenue was driven by the UK operation, which contributed 26.6 percentage points of the total growth of 11.8% in Q4 2018. The non-organic impact from the UK is limited to revenue for the period up til 25 October only while the revenue growth generated in the full 4th quarter in 2018 counts towards total revenue growth, which is the reason that the total growth impact from the UK operation is higher than the non-organic impact.
Cost of services increased by 43.8% to DKK 137.5m in Q4 2018, which was higher than the relative revenue growth in the same period. The primary driver behind this development was the UK operation, which generated a much higher cost to serve than the other operations in Denmark and Norway, as the UK operation utilised a higher proportion of independent external contractors. As a result, gross profit margin decreased by 13.8 percentage points from 51.9% in Q4 2017 to 38.1% in Q4 2018, of which the UK operation reduced gross profit margin by 10.6 percentage points. The remaining decrease was driven by the Norwegian operation, due to a high intake of approximately 40 new employees in July and August, corresponding to an increase in the Norwegian workforce of approximately 30% at the time.
Allocated segment costs increased by 5.2% to DKK 30.5m in Q4 2018. The lower increase in allocated segments costs relative to revenue growth, was primarily driven by the fact, that there was negative revenue growth in the Danish private sector, which on the other hand generated most of the increase in administrative costs, hence the increase in allocated costs were lower than the increase in revenue.
Adjusted EBITA decreased by 26.8% to DKK 54.2m in Q4 2018. This led to an adjusted EBITA margin of 24.4%, which was a decrease of 12.9 percentage points compared to an adjusted EBITA margin of 37.3% in Q4 2017. This development was primarily driven by the decrease in gross
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
profit margin. Adjusted for the UK operation in 2018, the adjusted EBITA margin decreased by 2.7 percentage points from 37.3% to 34.6% driven by a negative development in the gross profit margin in the Norwegian operation.
EBITA decreased by 20.5% to DKK 54.2m, which led to an EBITA margin of 24.4%, a decrease of 9.9 percentage points compared to the same period last year and driven by the decrease in adjusted EBITA margin, which was somewhat offset by Q4 2018 having a lower amount of special items.
Operating profit (EBIT) decreased by 27.5% to DKK 42.3m in Q4 2018. This led to an operating profit margin of 19.0%, which was a decrease of 10.3 percentage points and driven by the decrease in EBITA margin. This development was somewhat offset by a lower relative increase in amortisation compared to revenue growth in the same period.
| DKK million | YTD 2018 | YTD 2017 | % change (reported) | Netcompany UK Ltd (Netcompany UK) |
|---|---|---|---|---|
| Non-organic Impact | ||||
| Revenue | 901.1 | 685.9 | 31.4% | 29.8pp |
| Cost of service | -544.6 | -349.7 | 55.7% | 49.3pp |
| Gross profit | 356.6 | 336.3 | 6.0% | 9.5pp |
| Gross profit margin | 39.6% | 49.0% | -9.5pp | -7.0pp |
| Allocated costs | -117.0 | -91.1 | 28.3% | 23.1pp |
| Adjusted EBITA | 239.6 | 245.1 | -2.2% | 4.4pp |
| Adjusted EBITA margin | 26.6% | 35.7% | -9.1pp | -6.2pp |
| Special items | -15.3 | -13.2 | 16.0% | 45.4pp |
| EBITA | 224.3 | 231.9 | -3.3% | 2.1pp |
| EBITA margin | 24.9% | 33.8% | -8.9pp | -6.6pp |
| Amortisation | -50.1 | -42.1 | 19.0% | 38.6pp |
| Operating profit | 174.1 | 189.8 | -8.2% | -6.0pp |
| Operating profit margin | 19.3% | 27.7% | -8.3pp | -7.3pp |
Revenue in the private segment increased by 31.4% to DKK 901.1m in 2018, primarily driven by high activity in the UK operation, which contributed to 35.3 percentage points of the total revenue growth of 31.4% in 2018, while the development in the private sector in Denmark and Norway was a consequence of the deliberate decision to focus on the public segment in those two countries.
Gross profit margin decreased by 9.5 percentage points to 39.6% in 2018. Adjusted for the fact, that the UK operation impacted the 2018 with full financial effect compared to only 2 months and 6 days in 2017, gross profit margin decreased by 2.5 percentage points, primarily driven by more projects in development in 2018 compared to the same period last year, which had a relative higher share of projects in maintenance.
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Revenue types
The relative split between development and maintenance, shifted towards a higher proportion of development in Q4 2018 compared to Q4 2017. As such, development increased by 8.4 percentage points to 56.1% in Q4 2018, primarily driven by the increase in development projects in the UK operation. This development was partly offset by the increase in maintenance in the public sector in Denmark, as several large public projects in the Danish operation were set in production towards the second half of 2018, thereby increasing profitability in the public sector in the same period.
The relative split between development and maintenance, shifted towards a lower proportion of maintenance in 2018 compared to 2017. As such, development increased from 45.7% in 2017 to 49.0% in 2018 and maintenance decreased from 54.3% in 2017 to 51.0% in 2018.
The increase in development was driven by the private sector, as the UK operation had a larger proportion of projects in development in 2018 compared to 2017. This increase in development, at Group level, was somewhat offset by a significant increase in maintenance in the public sector, as several large public projects in the Danish operation were set in production towards the back-end of 2018.
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Information related to operating entities
Segment information related to operating entities:
| DKK million | Constant(2017 rate) | Q4 2018 | |||
|---|---|---|---|---|---|
| Denmark | Norway | United Kingdom | Total | ||
| Revenue from external customers | 408.0 | 47.1 | 87.6 | 542.7 | |
| Gross profit | 185.2 | 16.5 | 11.8 | 213.6 | |
| Gross profit Margin | 45.4% | 35.1% | 13.5% | 39.4% | |
| Local admin costs | -57.8 | -9.3 | -6.9 | -73.9 | |
| Adjusted EBITA before allocated cost from HQ | 127.5 | 7.3 | 4.9 | 139.7 | |
| Adjusted EBITA margin before allocated cost from HQ | 31.2% | 15.5% | 5.6% | 25.7% | |
| Allocated costs from HQ | -6.3 | -0.7 | -2.0 | -9.1 | |
| Special Items, allocated | -0.1 | 0.0 | 0.0 | -0.1 | |
| EBITA | 121.1 | 6.5 | 2.9 | 130.4 | |
| DKK million | Reported | Q4 2017 | |||
| Denmark | Norway | United Kingdom | Total | ||
| Revenue from external customers | 341.9 | 39.6 | 61.9 | 443.4 | |
| Gross profit | 149.4 | 16.3 | 16.3 | 182.0 | |
| Gross profit Margin | 43.7% | 41.3% | 26.3% | 41.1% | |
| Local admin costs | -51.8 | -5.7 | -3.9 | -61.4 | |
| Adjusted EBITA before allocated cost from HQ | 97.6 | 10.7 | 12.4 | 120.6 | |
| Adjusted EBITA margin before allocated cost from HQ | 28.5% | 27.0% | 20.0% | 27.2% | |
| Allocated costs from HQ | -4.8 | -0.5 | 0.0 | -5.3 | |
| Special Items, allocated | -14.8 | -1.5 | 0.0 | -16.3 | |
| EBITA | 78.0 | 8.7 | 12.4 | 99.0 |
Revenue in constant currencies increased by 22.4% to DKK 542.7m. Revenue in constant currencies in the Danish operation increased by 19.3% to DKK 408.0m and the Norwegian operation increased by 19.0% to DKK 47.1m, while revenue in the UK operation grew by 41.6% to DKK 87.6m and by 62.6%, when adjusted for the revenue adjustment made in Q4 2017 of DKK 8.0m. Q4 2018 had 1 working day less compared to the same period last year, as Christmas and the national holidays related hereto, fell mostly outside the weekend in 2018, which reduced revenue growth by approximately 1.5% compared to Q4 2017 in all geographies.
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Gross profit in constant currencies increased by 17.3% to DKK 213.6m in Q4 2018, which led to a gross profit margin of 39.4% compared to 41.1% in the same period last year. The increase in gross profit margin in the Danish operation of 1.7 percentage points, was more than offset by the decrease in the Norwegian gross profit margin of 6.2 percentage points and the decrease of 12.8 percentage points in the UK operation.
The increase in the Danish gross profit margin was primarily driven a relatively larger share of maintenance in the Danish public sector in the second half of 2018, thereby increasing revenue per hour compared to the same period last year. This development was driven by several large production settings in the Danish public sector in the second half of 2018, which thereby changed status from development to maintenance.
The decrease in the Norwegian gross profit margin was primarily driven by the intake of close to 40 new employees in July and August, representing a relative increase in the workforce of more than 30%. Such a large intake, naturally requires significant time from the rest of the organisation to onboard and train the new employees, which thereby lowered utilisation and thereby profitability in the second half of 2018 compared to the second half of 2017.
The decrease in the UK gross profit margin was a result of a one-time positive revenue adjustment in Q4 2017 of DKK 8.0m, making comparison against Q4 2017 un balanced. This adjustment was a result of changing the accounting principles from UK GAAP to IFRS in the UK operation, at the time Netcompany acquired the entity in October 2017.
Adjusted EBITA before allocated costs from HQ increased by 15.8% to DKK 139.7m in Q4 2018. Adjusted EBITA margin before allocated costs from HQ increased in the Danish operation and decreased in the Norwegian and UK operation. The Danish operation increased margins on a combination of higher a gross margin and relatively lower administration costs compared to 2017, whereas the decrease in the adjusted EBITA before allocated costs from HQ, in both the Norwegian and UK, was primarily driven by a lower gross margin and increased administrative costs. The decrease in Norway, was a result of the significant intake of new employees in July and August operation, while the decrease in margins in UK in Q4 2018, was driven by the restructuring of the organisation and the opening of a new headquarter in London, as well as the revenue adjustment in Q4 2017.
EBITA increased by 31.7% to DKK 130.4m in Q4 2018 and was negatively impacted by the increase in allocated costs from HQ. This development was however offset by the decrease in special items in the same period. Special items in Q4 2018 related to M&A activities, while HQ costs included costs from non-operating entities, as well as remuneration to the Executive Management and Board of Directors, which increased due to a market level adjustment of remuneration packages "post IPO".
Company announcement no 2/2018
Page 18 of 41
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
| DKK million | Constant (2017 rate) | YTD 2018 | |||
|---|---|---|---|---|---|
| Denmark | Norway | United Kingdom | Total | ||
| Revenue from external customers | 1,543.8 | 175.8 | 337.8 | 2,057.4 | |
| Gross profit | 699.2 | 62.6 | 56.3 | 818.1 | |
| Gross profit Margin | 45.3% | 35.6% | 16.7% | 39.8% | |
| Local admin costs | -218.7 | -29.1 | -27.1 | -274.9 | |
| Adjusted EBITA before allocated cost from HQ | 480.6 | 33.4 | 29.2 | 543.2 | |
| Adjusted EBITA margin before allocated cost from HQ | 31.1% | 19.0% | 8.6% | 26.4% | |
| Allocated costs from HQ | -20.0 | -2.2 | -6.3 | -28.5 | |
| Special Items, allocated | -24.6 | -2.6 | -7.3 | -34.5 | |
| EBITA | 436.0 | 28.7 | 15.6 | 480.2 | |
| DKK million | Reported | YTD 2017 | |||
| Denmark | Norway | United Kingdom | Total | ||
| Revenue from external customers | 1,220.3 | 133.9 | 61.9 | 1,416.1 | |
| Gross profit | 545.3 | 51.2 | 16.3 | 612.7 | |
| Gross profit Margin | 44.7% | 38.2% | 26.3% | 43.3% | |
| Local admin costs | -174.0 | -19.1 | -3.9 | -196.9 | |
| Adjusted EBITA before allocated cost from HQ | 371.3 | 32.1 | 12.4 | 415.8 | |
| Adjusted EBITA margin before allocated cost from HQ | 30.4% | 24.0% | 20.0% | 29.4% | |
| Allocated costs from HQ | -12.5 | -1.3 | 0.0 | -13.8 | |
| Special Items, allocated | -29.8 | -3.1 | 0.0 | -32.9 | |
| EBITA | 329.0 | 27.7 | 12.4 | 369.0 |
Revenue in constant currencies increased by DKK 641.3m corresponding to 45.3% from DKK 1,416.1m in 2017 to DKK 2,057.4m in 2018, of which non-organic revenue in constant currencies from the UK operation amounted to DKK 275.7m. Revenue in constant currencies in the Danish operation increased by 26.5% from DKK 1,220.3m to DKK 1,543.8m, while revenue in the Norwegian operation increased by 31.3% from DKK 133.9m to DKK 175.8m. Compared to the normalised UK revenue for 2017 of DKK 286.3m, revenue in the UK operation grew by 18.0% in 2018.
Gross profit in constant currencies increased by 33.5% from DKK 612.7m in 2017 to DKK 818.1m in 2018. This led to a gross profit margin of 39.8%, which was a decrease of 3.5 percentage points compared to 2017, despite the fact that the Danish operation increased its gross profit margin by 0.6 percentage point to 45.3% in 2018 compared to 2017. The positive contribution in gross profit margin from the Danish operation was offset by a decrease in gross profit margin of 2.6 percentage points in the Norwegian operation and a decrease of 9.6 percentage points
Company announcement no 2/2018
Page 19 of 41
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
in the UK operation. The decrease in the Norwegian gross profit margin was primarily driven by the intake of close to 40 new employees in July and August, representing a relative increase in the workforce by more than 30%.
The decrease in the gross profit margin for the UK operation was a result of a one-time positive revenue adjustment in Q4 2017 of DKK 8.0m. This adjustment was a result of changing the accounting principles from UK GAAP to IFRS in the UK operation. Adjusted for this one-time adjustment, gross profit margin for the UK operation in 2018 increased by 1.3 percentage points from 15.4% in 2017 to 16.7% in 2018.
Adjusted EBITA before allocated costs from HQ increased by 30.6% to DKK 543.2m in 2018. The Danish operation increased margins on a combination of higher gross margins and relatively lower administrative costs compared to 2017. The decrease in the adjusted EBITA in the Norwegian operation was primarily driven by lower gross margins and increased administrative costs following a revenue growth of more than 31% in 2018. The decrease in the adjusted EBITA margin before allocated costs in the UK operation was primarily driven by the earlier mentioned one-time adjustment caused by changing the accounting principles from UK GAAP to IFRS in October 2017. Adjusting for the impact from changes in accounting principles, adjusted EBITA margin before allocated costs would have been 8.2% in 2017 and thus the UK operation increased margins by 0.4 percentage point on the local UK based operation to 8.6% in 2018.
Company announcement no 2/2018
Page 20 of 41
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Currency exposures
| Local currency million | Q4 2018 | ||||
|---|---|---|---|---|---|
| DKK | NOK | GBP | VND | PLN | |
| Revenue | 408.0 | 61.1 | 10.4 | 0.0 | 0.0 |
| EBIT | 94.3 | 5.7 | 0.0 | 1,386.6 | 1.4 |
| Net result | 65.1 | 5.3 | -0.4 | 1,343.3 | 1.2 |
| Local currency million | YTD 2018 | ||||
| --- | --- | --- | --- | --- | --- |
| DKK | NOK | GBP | VND | PLN | |
| Revenue | 1,543.8 | 220.9 | 40.2 | 0.0 | 0.0 |
| EBIT | 320.7 | 30.8 | 1.2 | 6,888.3 | 4.1 |
| Net result | 148.5 | 24.5 | 0.7 | 5,920.2 | 3.0 |
The Group is exposed to exchange rate risk in the countries where the Group has its sales activities outside Denmark, which means Norway and UK and to a lesser extent, exchange rate risk in Poland and Vietnam, which is used as sourcing centres and therefore do not have an exchange rate risk related to sales activities, but only net costs exposures. As most of the Group's sales are in DKK it implies limited foreign exchange risk due to the ultimate parent company's functional and reporting currency being in DKK.
Netcompany's policy is to hedge any exchange risk net exposure, that would yield a +2/-2 percentage points EBIT margin impact from a +10%/-10% change in that given currency. The graphs below show the currency exchange rates used for Netcompany's main currencies.
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Revenue visibility
Revenue visibility, DKKm
Netcompany measures revenue visibility on a 12-month rolling basis, based on two main input parameters, which is defined as total value of committed engagements, which comprise of fixed price engagements and service agreements, while ongoing time and material engagements with a high likelihood of conversion and/or prolongation are defined as total value of planned continued engagements.
The public segment has a high degree of visibility from already known tenders and is typically driven by long, multi-year tender contracts with a significant share of maintenance and operations revenue. In contrast, private segment contracts typically have a duration of approximately 12 to 18 months reflecting a fundamental difference in the purchasing pattern for private sector segment customers compared to public sector segment customers.
At the beginning of 2019, revenue visibility for 2019 amounted to DKK 1,579.4m. Of this, contractual committed revenue amounted to DKK 669.0m and planned continued engagements amounted to DKK 910.4m. Revenue visibility in the public segment amounted to DKK 936.6m, of which contractual committed revenue amounted to DKK 475.3m and planned continued engagements amounted to DKK 461.3m. Revenue visibility in the private segment amounted to DKK 642.7m, of which, contractual committed revenue amounted to DKK 193.7m and planned continued engagements amounted to DKK 449.0m.
Compared to 2018 revenue visibility improved $33.8\%$ from DKK 1,180.0m to DKK 1,579.4m for 2019.
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Employees
Netcompany employed an average of 1,979.2 FTEs in Q4 2018 and 1,860.7 FTEs in 2018, which was an increase of more than 390 FTEs and 600 FTEs respectively, compared to the same periods last year. The increase in FTEs was driven by a high intake of new employees in all countries including Poland and Vietnam, as a result of high activity in all three business operations in Denmark, Norway and UK.
The attrition rate in 2018 was 25.0%, which was a increase of 9.8 percentage points compared to 2017. The increase was primarily driven by the deliberate decision to close down the office in Hanoi Vietnam, which drove the attrition rate up in the second half of 2018. Corrected for this, and the fact that the attrition rate is slightly higher in UK and Vietnam compared to Denmark, Norway and Poland, the attrition rate 18.1% which is was in line with the level in 2017 in all countries.
Average FTEs increased to 1,979 during Q4 2018
Average FTEs increased to 1,861 during 2018
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Cash flow and other significant balance sheet items
Free cash flow, cash conversion ratio and balance sheet
Overall, the free cash flow remained strong during Q4 2018, as the free cash flow increased to DKK 163.6m in Q4 2018 compared DKK 154.8m in Q4 2017, which generated a cash conversion ratio of 116.9% compared to 127.4% in Q4 2017. The decrease in cash conversion ratio, was caused by increase in work progress driven by the continued work on several large fixed price projects.
In 2018, Netcompany generated a free cash flow of DKK 391.3m, which led to a cash conversion ratio of 75.2% compared to 76.4% in 2017. The decrease in cash conversion ratio was primarily driven by an increase in work in progress, due the continued work on several large fixed price projects, especially during the last quarter of 2018. This development was however partly offset by an improvement of days sales outstanding, which fell from 115 days in 2017 to 81 days in 2018. As a result of this, trade receivables only increased by 2.7% compared to a revenue growth of 45.0% in the same period.
Funding and liquidity
At 7 June 2018, Netcompany entered into a new bank agreement, which consist of committed facilities constituting a total amount of DKK 1,500m and an additional facility of DKK 400m, available only for new acquisitions. The new bank agreement provides reduced interest rates as well as reduced covenants. In November 2018 and December 2018, Netcompany made voluntary repayments of DKK 50m and DKK 75m respectively, reducing the total borrowings from DKK 1,240m to DKK 1,115m.
In January 2019, payment guarantees with a fair value of DKK 140m was terminated in agreement with the customers to whom the guarantees had been issued, as Netcompany's insurance coverage on general product liability was increased from DKK 10m to DKK 100m.
Based on the expectations for 2019, Netcompany expects to generate sufficient free cash flow from operations, to meet all covenants related to the current financing arrangements. Cash will be used to deleverage the Group, but also used on potential acquisitions.
Risk management
Please refer to the overview of risk factors provided by the Group in the annual report for 2018.
Events after the balance sheet date
No events have occurred after the balance sheet date to this date, which would influence the evaluation of this report.
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Outlook for 2019
Based on the revenue visibility for 2019 and the general expectations to the continued positive development of the market conditions in all the markets where Netcompany is active, Netcompany expects to maintain its historic growth rates.
Netcompany expects organic revenue growth in constant currencies to be between 20% and 25% in both Denmark, Norway and the UK. Adjusted EBITA margin for the Group is expected to be around 26% before any impact of new acquisitions.
| Targets 2019 | Actual performance 2018 | |
|---|---|---|
| Organic revenue growth in constant currencies | 20-25% | 25.8% |
| Adjusted EBITA margin in constant currencies | ~26% | 25.0% |
Other information
Shareholder information
Capital
Netcompany's share capital is DKK 50m divided into 50 million shares. Netcompany holds 322,580 treasury shares equivalent to 0.6% of the share capital.
Share-based incentive schemes/restricted stock units
In total, 142,055 RSU's were granted during 2018, of which 33,637 were granted to Executive Management and 108,418 were granted to other Key Management Personnel and other employees. The fair value of the RSUs at grant was DKK 22.0m. The cost associated related hereto is expensed over the vesting period. In connection with the IPO, Netcompany entered into an agreement with Danske Bank, whereby Danske Bank on behalf of Netcompany, acquired shares for DKK 50m, at the IPO price of DKK 155 per share equalling 322,580 shares to be delivered in the future as restricted stock units vest during various LTIP.
Additional information on the holdings of Netcompany shares and restricted stock units by members of the Board of Directors and Executive Management Board is disclosed in the remuneration report and in note 8 to the financial statements.
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Statement of the Board of Directors and Executive Management
Today, the Board of Directors and Executive Management considered and approved the interim consolidated financial statements for Netcompany Group A/S ("Netcompany" or "the company" and together with all its subsidiaries "the Group") for the period 1 October 2018 to 31 December 2018. The Q4 2018 report has not been audited or reviewed by the company's independent auditors.
The interim consolidated financial statements have been prepared in accordance with IAS 34 as adopted by the EU and additional Danish regulations for the presentation of interim reports by listed companies. Furthermore, the interim report has been prepared in accordance with the accounting policies set out in the Group's Annual Report for 2018.
In our opinion, the accounting policies used are appropriate, and the overall presentation of the interim consolidated financial statements gives a true and fair view of the Group's assets, liabilities and financial position as at 31 December 2018 and of the results of the Group's operations and cash flows for the period 1 October 2018 to 31 December 2018.
We further consider that the Management's Review in the preceding pages includes a true and fair account of the development and performance of the Group, the results for the period and the financial position, as well as a description of the principal risks and uncertainties that the Group faces in accordance with Danish disclosure requirements for listed companies.
Copenhagen, 6 February 2019
Executive Management:
André Rogaczewski
CEO
Claus Jørgensen
COO
Thomas Johansen
CFO
Board of Directors:
Pekka Ala-Pietilä
Chairman of the Board
Thomas Broe-Andersen
Vice Chairman of the Board
Juhá Christensen
Carsten Gomard
Pernille Fabricius
Bo Rygaard
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Consolidated interim financial statements and notes
Income statement and Statement of comprehensive income
| DKK thousands | Note | Q4 2018 | Q4 2017 | YTD 2018 | YTD 2017 |
|---|---|---|---|---|---|
| Income statement | |||||
| Revenue | 1 | 543,275 | 443,359 | 2,053,216 | 1,416,085 |
| Cost of services | 2 | -329,464 | -261,327 | -1,236,699 | -803,384 |
| Gross profit | 213,812 | 182,032 | 816,516 | 612,701 | |
| Sales and marketing costs | -2,482 | -3,167 | -11,871 | -9,707 | |
| Administrative costs | 3 | -80,557 | -63,555 | -290,428 | -201,023 |
| Special items | 4 | -126 | -16,281 | -34,488 | -32,928 |
| EBITA | 130,647 | 99,029 | 479,729 | 369,042 | |
| Amortisation | -28,847 | -26,848 | -115,389 | -95,890 | |
| Operating profit (EBIT) | 101,800 | 72,181 | 364,340 | 273,152 | |
| Financial income | 781 | 9,142 | 22,245 | 10,189 | |
| Financial expenses | -10,935 | -20,437 | -130,903 | -82,304 | |
| Profit / loss before tax | 91,646 | 60,886 | 255,682 | 201,037 | |
| Tax on the profit for the period | -23,233 | -20,238 | -74,465 | -59,428 | |
| Net profit / loss for the period | 68,413 | 40,649 | 181,217 | 141,608 | |
| Earnings per share | |||||
| Earnings per share (DKK) | 1.38 | 0.82 | 3.65 | 2.92 | |
| Diluted Earnings per share (DKK) | 1.38 | 0.82 | 3.65 | 2.92 | |
| Statement of comprehensive income | |||||
| Net profit / loss for the period | 68,413 | 40,649 | 181,217 | 141,608 | |
| Other comprehensive income: | |||||
| Cash flow hedging, net fair value gain / (loss) | 0 | 12,197 | 38,475 | 12,564 | |
| Foreign currency translation subsidiaries | 1,462 | 239 | 817 | -2,847 | |
| Change in deferred cost of hedging | 0 | -12,126 | -13,348 | -9,716 | |
| Tax of other comprehensive income | 0 | -15 | -5,528 | -627 | |
| Other comprehensive income, net of tax | 1,462 | 294 | 20,415 | -625 | |
| Total comprehensive income | 69,875 | 40,943 | 201,632 | 140,983 |
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Balance Sheet
| DKK thousands | Note | Dec 31
2018 | Dec 31
2017 |
| --- | --- | --- | --- |
| Assets | | | |
| Intangible assets | | 2,484,441 | 2,603,918 |
| Tangible assets | | 117,284 | 54,507 |
| Deferred tax assets | | 1,162 | 0 |
| Other receivables | | 13,053 | 8,776 |
| Total non-current assets | | 2,615,940 | 2,667,202 |
| Trade receivables | 7 | 457,518 | 445,363 |
| Contract work in progress | 8 | 284,717 | 139,166 |
| Other receivables | | 19,512 | 23,287 |
| Cash | | 107,666 | 194,479 |
| Total current assets | | 869,412 | 802,296 |
| Total assets | | 3,485,352 | 3,469,497 |
Company announcement no 2/2018
Page 28 of 41
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Balance Sheet
| DKK thousands | Note | Dec. 31 2018 | Dec. 31 2017 |
|---|---|---|---|
| Equity and liabilities | |||
| Share capital | 50,000 | 49,637 | |
| Cash flow hedging reserve | 0 | -30,011 | |
| Exchange differences on translating foreign subsidiaries | -2,116 | -2,932 | |
| Deferred cost of hedging reserve | 0 | 10,412 | |
| Retained earnings | 1,758,365 | 1,616,745 | |
| Total equity | 1,806,251 | 1,643,851 | |
| Borrowings | 9 | 1,105,780 | 1,264,895 |
| Leasing | 54,149 | 17,609 | |
| Deferred tax liability | 89,387 | 112,418 | |
| Total non-current liabilities | 1,249,316 | 1,394,922 | |
| Leasing | 29,325 | 13,610 | |
| Prepayments received from customers | 8 | 29,610 | 36,246 |
| Trade payables | 54,185 | 50,552 | |
| Other payables | 10 | 266,089 | 223,087 |
| Provisions | 11 | 36,087 | 30,396 |
| Income tax payable | 14,490 | 76,833 | |
| Total current liabilities | 429,785 | 430,723 | |
| Total liabilities | 1,679,101 | 1,825,646 | |
| Total equity and liabilities | 3,485,352 | 3,469,497 | |
| Financial figures and highlights | 12 | ||
| Income Statement classified by function | 13 | ||
| Collateral provided and contingent liabilities | 14 | ||
| Related party transactions | 15 | ||
| Accounting policies | 16 |
Company announcement no 2/2018
Page 29 of 41
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Cash Flow statement
| DKK thousands | Q4 2018 | Q4 2017 | YTD 2018 | YTD 2017 |
|---|---|---|---|---|
| Operating profit (EBIT) | 101,800 | 72,181 | 364,340 | 273,152 |
| Depreciation and amortisation | 38,149 | 49,341 | 155,737 | 129,213 |
| Non-cash | 1,546 | 0 | 3,818 | 0 |
| Working capital changes | 22,082 | 33,325 | -132,597 | -95,046 |
| Free cash flow | 163,576 | 154,847 | 391,297 | 307,319 |
| Income taxes paid | -120,514 | -13,845 | -166,935 | -35,356 |
| Financial income received | -971 | 274 | 21,036 | 1,179 |
| Financial expenses paid | -10,469 | -35,628 | -58,959 | -77,805 |
| Cash flow from operating activities | 31,622 | 105,647 | 186,440 | 195,337 |
| Net cash outflow on acquisition of subsidiaries | 0 | -120,260 | 0 | -120,260 |
| Acquisition of intangible assets | 0 | -998 | 0 | -11,103 |
| Acquisition of property, plant and equipment | -8,839 | -6,785 | -22,866 | -16,744 |
| Other receivables (deposits) | -210 | -723 | -4,336 | -2,344 |
| Cash flow from investment activities | -9,049 | -128,766 | -27,202 | -150,451 |
| Proceeds from issue of share capital | 0 | 9,304 | 6,949 | 16,728 |
| Proceeds from borrowings | 0 | 92,000 | 1,229,539 | 92,000 |
| Repayment of borrowings | -128,200 | -4,419 | -1,481,039 | -16,573 |
| Cash flow from financing activities | -128,200 | 96,884 | -244,551 | 92,155 |
| Net increase in cash and cash equivalents | -105,627 | 73,766 | -85,314 | 137,041 |
| Cash and cash equivalents at the beginning | 215,899 | 93,718 | 194,479 | 31,988 |
| Cash and cash equivalents balances acquired | 0 | 26,287 | 0 | 26,287 |
| Effect of exchange rate changes on the balance cash held in foreign currencies | -2,605 | 709 | -1,501 | -836 |
| Cash and cash equivalents at the end | 107,666 | 194,479 | 107,666 | 194,479 |
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Statement of changes in Equity
| DKK thousands | Share capital | Fair value adjustment of interest rate swap | Currency | Deferred cost of hedging reserve | Retained earnings | Total |
|---|---|---|---|---|---|---|
| Equity at 1 October 2017 | 48,172 | -39,524 | -3,172 | 19,870 | 1,342,622 | 1,367,967 |
| Capital increase | 1,465 | 0 | 0 | 0 | 233,474 | 234,939 |
| Profit for the period | 0 | 0 | 0 | 0 | 40,649 | 40,649 |
| Other comprehensive income | 0 | 9,513 | 239 | -9,459 | 0 | 294 |
| Equity at 31 December 2017 | 49,637 | -30,011 | -2,932 | 10,412 | 1,616,745 | 1,643,851 |
| Equity at 1 January 2017 | 69,283 | -39,811 | -85 | 17,990 | 1,213,125 | 1,260,502 |
| Capital increase | 1,611 | 0 | 0 | 0 | 240,754 | 242,365 |
| Effect as of 1 January 2017 of the exchange of shares in Netcompany for shares in NC TopCo | -21,258 | 0 | 0 | 0 | 21,258 | 0 |
| Profit for the period | 0 | 0 | 0 | 0 | 141,608 | 141,608 |
| Other comprehensive income | 0 | 9,800 | -2,847 | -7,578 | 0 | -625 |
| Equity at 31 December 2017 | 49,637 | -30,011 | -2,932 | 10,412 | 1,616,745 | 1,643,851 |
| DKK thousands | Share capital | Fair value adjustment of interest rate swap | Currency | Deferred cost of hedging reserve | Retained earnings | Total |
| --- | --- | --- | --- | --- | --- | --- |
| Equity at 1 October 2018 | 50,000 | 0 | -3,578 | 0 | 1,688,407 | 1,734,830 |
| Share based remuneration | 0 | 0 | 0 | 0 | 1,546 | 1,546 |
| Profit for the period | 0 | 0 | 0 | 0 | 68,413 | 68,413 |
| Other comprehensive income | 0 | 0 | 1,462 | 0 | 0 | 1,462 |
| Equity at 31 December 2018 | 50,000 | 0 | -2,116 | 0 | 1,758,365 | 1,806,251 |
| Equity at 1 January 2018 | 49,637 | -30,011 | -2,932 | 10,412 | 1,616,745 | 1,643,850 |
| Capital increase | 363 | 0 | 0 | 0 | 6,585 | 6,949 |
| Obligation to purchase treasury shares | 0 | 0 | 0 | 0 | -50,000 | -50,000 |
| Share based remuneration | 0 | 0 | 0 | 0 | 3,818 | 3,818 |
| Profit for the period | 0 | 0 | 0 | 0 | 181,217 | 181,217 |
| Other comprehensive income | 0 | 30,011 | 817 | -10,412 | 0 | 20,415 |
| Equity at 31 December 2018 | 50,000 | 0 | -2,116 | 0 | 1,758,365 | 1,806,251 |
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Notes
Note 1 - Segment information
Segment information related to geographical areas:
| DKK thousands | Q4 2018 | ||||||
|---|---|---|---|---|---|---|---|
| Denmark | Norway | Poland | United Kingdom | Vietnam | Elimination | Total | |
| Revenue from external | 407,967 | 47,405 | 0 | 87,904 | 0 | 0 | 543,275 |
| Revenue from internal sales | 15,791 | 127 | 23,318 | 30 | 4,758 | -44,024 | 0 |
| Revenue legal entities | 423,757 | 47,532 | 23,318 | 87,934 | 4,758 | -44,024 | 543,275 |
| Internal cost allocation | -30,645 | -3,537 | -648 | -9,156 | -89 | 44,075 | 0 |
| Other costs | -269,556 | -39,430 | -20,590 | -78,722 | -4,281 | -50 | -412,628 |
| EBITA legal entities | 123,557 | 4,565 | 2,080 | 56 | 389 | 0 | 130,647 |
| DKK thousands | Q4 2017 | ||||||
| Denmark | Norway | Poland | United Kingdom | Vietnam | Elimination | Total | |
| Revenue from external | 341,945 | 39,559 | 0 | 61,855 | 0 | 0 | 443,359 |
| Revenue from internal sales | 10,614 | 0 | 35,089 | 0 | 3,116 | -48,819 | 0 |
| Revenue legal entities | 352,559 | 39,559 | 35,089 | 61,855 | 3,116 | -48,819 | 443,359 |
| Internal cost allocation | -36,156 | -3,760 | -5,788 | -3,086 | 0 | 48,790 | 0 |
| Other costs | -250,630 | -28,185 | -16,011 | -46,706 | -2,827 | 29 | -344,330 |
| EBITA legal entities | 65,773 | 7,614 | 13,289 | 12,063 | 289 | 0 | 99,029 |
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Note 1 - Segment information (continued)
| DKK thousands | YTD 2018 | ||||||
|---|---|---|---|---|---|---|---|
| Denmark | Norway | Poland | United Kingdom | Vietnam | Elimination | Total | |
| Revenue from external | 1,543,764 | 171,312 | 0 | 338,139 | 0 | 0 | 2,053,216 |
| Revenue from internal sales | 45,096 | 1,215 | 91,757 | 1,000 | 20,395 | -159,463 | 0 |
| Revenue legal entities | 1,588,861 | 172,527 | 91,757 | 339,139 | 20,395 | -159,463 | 2,053,216 |
| Internal cost allocation | -105,682 | -11,972 | -2,679 | -38,623 | -557 | 159,512 | 0 |
| Other costs | -1,043,003 | -136,638 | -85,348 | -290,495 | -17,953 | -50 | -1,573,487 |
| EBITA legal entities | 440,175 | 23,917 | 3,730 | 10,020 | 1,886 | 0 | 479,729 |
| Non-current assets | 2,581,955 | 5,745 | 14,569 | 12,132 | 1,539 | 0 | 2,615,940 |
| DKK thousands | YTD 2017 | ||||||
| Denmark | Norway | Poland | United Kingdom | Vietnam | Elimination | Total | |
| Revenue from external | 1,220,311 | 133,919 | 0 | 61,855 | 0 | 0 | 1,416,085 |
| Revenue from internal sales | 15,586 | 0 | 114,218 | 0 | 3,116 | -132,920 | 0 |
| Revenue legal entities | 1,235,897 | 133,919 | 114,218 | 61,855 | 3,116 | -132,920 | 1,416,085 |
| Internal cost allocation | -120,006 | -3,760 | -6,039 | -3,086 | 0 | 132,891 | 0 |
| Other costs | -837,147 | -99,267 | -61,125 | -46,706 | -2,827 | 29 | -1,047,043 |
| EBITA legal entities | 278,743 | 30,892 | 47,054 | 12,063 | 289 | 0 | 369,042 |
| Non-current assets | 2,641,591 | 7,630 | 15,763 | 1,523 | 694 | 0 | 2,667,202 |
Note 2 - Cost of services
| DKK thousands | Q4 2018 | Q4 2017 | YTD 2018 | YTD 2017 |
|---|---|---|---|---|
| Cost of services | -96,552 | -76,509 | -371,496 | -168,585 |
| Salaries | -230,322 | -182,221 | -853,669 | -624,070 |
| Depreciation | -2,589 | -2,597 | -11,534 | -10,728 |
| Cost of services total | -329,464 | -261,327 | -1,236,699 | -803,384 |
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Note 3 - Administrative costs
| DKK thousands | Q4 2018 | Q4 2017 | YTD 2018 | YTD 2017 |
|---|---|---|---|---|
| Administrative costs | -41,934 | -22,377 | -155,763 | -113,402 |
| Salaries | -31,910 | -21,281 | -105,851 | -65,026 |
| Depreciation | -6,712 | -19,897 | -28,815 | -22,595 |
| Administrative costs total | -80,557 | -63,555 | -290,428 | -201,023 |
Note 4 - Special items
| DKK thousands | Q4 2018 | Q4 2017 | Q4 2018 | Q4 2017 |
|---|---|---|---|---|
| Costs related to transaction with FSN | 0 | -1,719 | 0 | -1,719 |
| Costs related to transaction with FSN total | 0 | -1,719 | 0 | -1,719 |
| Costs related to IPO | 0 | -4,983 | -33,002 | -17,462 |
| Costs related to M&A | -126 | -9,580 | -1,486 | -13,747 |
| Costs related to IPO and M&A total | -126 | -14,563 | -34,488 | -31,210 |
| Costs total | -126 | -16,281 | -34,488 | -32,928 |
Note 5 - Financial income and expenses
| DKK thousands | Q4 2018 | Q4 2017 | YTD 2018 | YTD 2017 |
|---|---|---|---|---|
| Financial Income | ||||
| Interest on corporate income tax | -391 | 69 | 3 | 211 |
| Exchange rate adjustments | -101 | 8,110 | 8,329 | 8,799 |
| Other financial income | 1,273 | 963 | 13,912 | 1,179 |
| Financial income total | 781 | 9,142 | 22,245 | 10,189 |
| Financial expenses | ||||
| Income tax surcharge | -2,411 | 427 | 0 | 2,257 |
| Interest expense, bank loan | 7,307 | 15,697 | 38,881 | 62,439 |
| Interest expense, leasing | 675 | 219 | 1,244 | 853 |
| Exchange rate adjustments | 4,835 | 1,274 | 14,446 | 7,702 |
| Other financial expenses | 529 | 2,819 | 76,332 | 9,053 |
| Financial expenses total | 10,935 | 20,437 | 130,903 | 82,304 |
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Note 6 – Earnings per share
| DKK thousands | Q4 2018 | Q4 2017 | YTD 2018 | YTD 2017 |
|---|---|---|---|---|
| Profit | 68,413 | 40,649 | 181,217 | 141,608 |
| Average number of shares | 50,000 | 49,637 | 49,869 | 48,518 |
| Average number of treasury shares | 323 | 0 | 182 | 0 |
| Average number of shares in circulation | 49,677 | 49,637 | 49,687 | 48,518 |
| Average number of diluted impact of outstanding restricted stock units | 53 | 0 | 29 | 0 |
| Average number of diluted shares in circulation | 49,731 | 49,637 | 49,716 | 48,518 |
| Earnings per share - EPS | 1.38 | 0.82 | 3.65 | 2.92 |
| Diluted earnings per share - EPS-D | 1.38 | 0.82 | 3.65 | 2.92 |
Note 7 – Trade receivables
| DKK thousands | Dec. 31 2018 | Dec. 31 2017 |
|---|---|---|
| Not overdue | 274,666 | 314,867 |
| 0-30 days overdue | 170,024 | 75,018 |
| 31-60 days overdue | 11,796 | 22,501 |
| 61-90 days overdue | 273 | 12,155 |
| Over 90 days overdue | 759 | 20,822 |
| Total | 457,518 | 445,363 |
The Group is continuously conducting individual assessments of bad debts. If this leads to an assessment that the Group will not be able to collect the amount accounted for, an allowance for bad debt is made. At 31 December 2018, the Group has recognised bad debt provision of DKK 0.0 million (31 December 2017: DKK 0.0 million), and no bad debt losses have been incurred during Q4 2018.
The credit quality of trade receivables at 31 December 2018, is considered satisfactory.
Note 8 – Contract work in progress
| DKK thousands | Dec. 31 2018 | Dec. 31 2017 |
|---|---|---|
| Net value – stated on a contract-per-contract basis – is presented in the balance sheet as follows: | ||
| Contract work in progress | 284,717 | 139,166 |
| Prepayments received from customers | -29,610 | -36,246 |
| Total contract work in progress | 255,107 | 102,920 |
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Note 9 - Borrowings
| DKK thousands | Currency | Maturity | Fixed or floating interest | Loan cost | Nominal value | Carrying amount |
|---|---|---|---|---|---|---|
| Bank loan | DKK | 2023 | Floating | 9,402 | 1,115,182 | 1,105,780 |
| 31 December 2018 | 9,402 | 1,115,182 | 1,105,780 | |||
| Bank loan | EUR | 2023 | Floating | 27,559 | 1,105,121 | 1,077,562 |
| Bank loan | NOK | 2023 | Floating | 5,247 | 105,167 | 99,920 |
| Bank loan | DKK | 2023 | Floating | 4,587 | 92,000 | 87,413 |
| 31 December 2017 | 37,393 | 1,302,288 | 1,264,895 |
Note 10 - Other payables
| DKK thousands | Dec. 31 2018 | Dec. 31 2017 |
|---|---|---|
| Interest and currency rate swap, fair value | 0 | 28,007 |
| Wages and salaries, payroll taxes, social security costs, etc payable | 43,822 | 39,261 |
| Holiday pay obligation | 96,739 | 70,618 |
| VAT and duties | 43,406 | 57,607 |
| Obligation to purchase treasury shares | 50,000 | 0 |
| Other costs payable | 32,122 | 27,593 |
| Total | 266,089 | 223,087 |
The Group has entered into an agreement with Danske Bank to purchase 322,580 shares at a price of 155 per each equal to the IPO price for the shares, totally DKK 50 million. The agreement will be settled in April 2019 at which time the shares will be delivered to the Group. The shares will be used to honour the Group's commitments under its RSU and LTIP programs.
Other costs include accruals for fee, administration, sales and other items. Other accruals liabilities have a remaining term of up to one year.
Note 11 - Provision
| DKK thousands | Dec. 31 2018 | Dec. 31 2017 |
|---|---|---|
| Onerous contracts and warranty obligations beginning of period | 30,396 | 8,899 |
| Additions, acquisition of subsidiaries | 0 | 0 |
| Used in the period | -5,000 | -6,353 |
| Provisions for the period | 10,691 | 27,850 |
| Onerous contracts and warranty obligations end of period | 36,087 | 30,396 |
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Note 12 – Financial figures and highlights
| DKK million | Q4 2018 | Q3 2018 | Q2 2018 | Q1 2018 | Q4 2017 | Q3 2017 | Q2 2017 | Q1 2017 |
|---|---|---|---|---|---|---|---|---|
| Income statement | ||||||||
| Revenue | ||||||||
| Public | 321.0 | 277.5 | 267.8 | 285.8 | 244.6 | 187.8 | 145.2 | 152.6 |
| Private | 222.3 | 212.8 | 234.8 | 231.2 | 198.8 | 149.7 | 157.1 | 180.3 |
| Revenue by segments, total | 543.3 | 490.3 | 502.6 | 517.0 | 443.4 | 337.5 | 302.3 | 332.9 |
| Development | 304.6 | 260.2 | 217.4 | 223.2 | 211.3 | 162.6 | 132.4 | 140.6 |
| Maintenance | 238.7 | 230.1 | 285.2 | 293.8 | 232.1 | 174.9 | 170.0 | 192.3 |
| Revenue by types, total | 543.3 | 490.3 | 502.6 | 517.0 | 443.4 | 337.5 | 302.3 | 332.9 |
| Organic | 517.8 | 406.2 | 413.6 | 439.9 | 353.7 | 306.5 | 274.0 | 297.8 |
| Acquisition | 25.5 | 84.1 | 89.0 | 77.1 | 89.7 | 30.9 | 28.3 | 35.1 |
| Revenue by growth, total | 543.3 | 490.3 | 502.6 | 517.0 | 443.4 | 337.5 | 302.3 | 332.9 |
| Special items | -0.1 | 0.0 | -26.6 | -7.7 | -16.3 | -14.4 | -2.2 | 0.0 |
| EBITA | 130.6 | 136.3 | 92.7 | 120.1 | 99.0 | 102.5 | 71.8 | 95.7 |
| Adjusted EBITA | 130.8 | 136.4 | 119.3 | 127.8 | 115.3 | 117.0 | 74.0 | 95.7 |
| Operating profit (EBIT) | 101.8 | 107.5 | 63.8 | 91.2 | 72.2 | 80.0 | 49.2 | 71.8 |
| Net financials | -10.2 | -8.4 | -65.4 | -24.7 | -11.3 | -18.2 | -18.8 | -23.9 |
| Net profit / loss | 68.4 | 78.3 | -16.6 | 51.2 | 40.6 | 43.0 | 22.0 | 35.9 |
| Financial position | ||||||||
| Capex | -9.0 | -8.5 | -5.1 | -4.6 | -8.5 | -2.8 | -13.9 | -4.9 |
| Total assets | 3,485.4 | 3,537.4 | 3,477.5 | 3,426.8 | 3,469.5 | 2,973.4 | 2,943.4 | 2,841.5 |
| Equity | 1,806.3 | 1,734.8 | 1,652.9 | 1,702.6 | 1,643.9 | 1,368.0 | 1,324.9 | 1,302.3 |
| Net increase in cash and cash equivalents | -105.6 | 42.9 | 18.6 | -41.2 | 73.8 | 39.5 | -15.1 | 38.9 |
| Free cash flow | 163.6 | 69.2 | 63.9 | 94.7 | 154.8 | 58.9 | 14.7 | 78.9 |
| Earnings per share | ||||||||
| Earnings per share (DKK) | 1.38 | 1.61 | -0.33 | 1.03 | 0.83 | 0.89 | 0.46 | 0.75 |
| Diluted Earnings per share (DKK) | 1.38 | 1.61 | -0.33 | 1.03 | 0.83 | 0.89 | 0.46 | 0.75 |
| Employees | ||||||||
| Average number of full-time employees | 1,979.2 | 1,842.6 | 1,817.6 | 1,766.3 | 1,579.3 | 1,167.9 | 1,075.1 | 1,005.9 |
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Note 12 – Financial figures and highlights (continued)
| DKK million | Q4 2018 | Q3 2018 | Q2 2018 | Q1 2018 | Q4 2017 | Q3 2017 | Q2 2017 | Q1 2017 |
|---|---|---|---|---|---|---|---|---|
| Financial ratios | ||||||||
| Gross profit margin | 39.4% | 42.4% | 39.1% | 38.3% | 41.1% | 49.3% | 40.9% | 42.2% |
| EBITA margin | 24.0% | 27.8% | 18.4% | 23.2% | 22.3% | 30.4% | 23.7% | 28.7% |
| Adjusted EBITA margin | 24.1% | 27.8% | 23.7% | 24.7% | 26.0% | 34.7% | 24.5% | 28.8% |
| Operating profit margin | 18.7% | 21.9% | 12.7% | 17.6% | 16.3% | 23.7% | 16.3% | 21.6% |
| Effective tax rate | 25.4% | 21.0% | -986.8% | 23.1% | 33.2% | 30.3% | 27.7% | 25.2% |
| Return on equity | 4.0% | 5.1% | -1.1% | 3.5% | 2.8% | 3.3% | 1.7% | 2.9% |
| Solvency ratio | 51.8% | 49.0% | 47.5% | 49.7% | 47.4% | 46.0% | 45.0% | 45.8% |
| Financial metrics | ||||||||
| Revenue growth | 22.5% | 45.3% | 66.2% | 55.3% | 67.4% | 49.3% | 48.4% | 62.4% |
| Operating profit margin | 18.7% | 21.9% | 12.7% | 17.6% | 16.3% | 23.7% | 16.3% | 21.6% |
| Retun on invested capital (ROIC) | 2.5% | 3.0% | -0.6% | 2.0% | 1.6% | 1.8% | 0.9% | 1.5% |
| Cash conversion ratio | 116.9% | 46.9% | 62.1% | 73.0% | 127.4% | 55.5% | 19.5% | 79.2% |
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Granningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Note 13 – Income Statement classified by function
| DKK thousands | Q4 2018 | Q4 2017 | YTD 2018 | YTD 2017 |
|---|---|---|---|---|
| Income statement | ||||
| Revenue | 543,275 | 443,359 | 2,053,216 | 1,416,085 |
| Cost of services, incl. depreciation and amortisation | -329,464 | -261,327 | -1,236,699 | -803,384 |
| Gross profit | 213,812 | 182,032 | 816,516 | 612,701 |
| Sales and marketing costs, incl. depreciation and amortisation | -2,482 | -3,167 | -11,871 | -9,707 |
| Administrative costs, incl. depreciation and amortisation | -109,530 | -106,684 | -440,306 | -329,842 |
| Operating profit (EBIT) | 101,800 | 72,181 | 364,340 | 273,152 |
| Financial income | 781 | 9,142 | 22,245 | 10,189 |
| Financial expenses | -10,935 | -20,437 | -130,903 | -82,304 |
| Profit / loss before tax | 91,646 | 60,886 | 255,682 | 201,037 |
| Tax on the profit for the period | -23,233 | -20,238 | -74,465 | -59,428 |
| Net profit / loss for the period | 68,413 | 40,649 | 181,217 | 141,608 |
| Depreciation and Amortisation have been presented as follows in the income statement: | ||||
| Cost of services | -2,589 | -2,597 | -11,534 | -10,728 |
| Administrative costs depreciation | -6,712 | -19,897 | -28,815 | -22,595 |
| Administrative costs amortisation | -28,847 | -26,848 | -115,389 | -95,890 |
| Depreciation and amortisation | -38,149 | -49,341 | -155,737 | -129,213 |
Note 14 – Collateral provided and contingent liabilities
There have been no changes in collateral provided and contingent liabilities during Q4 2018 compared to the annual report for 2017.
Note 15 – Related party transactions
Transactions with related parties:
The Group has had the following transactions with other companies controlled by the Significant Shareholders:
| DKK thousands | Q4 2018 | Q4 2017 | YTD 2018 | YTD 2017 |
|---|---|---|---|---|
| Revenue | 3,734 | 1,466 | 10,039 | 2,750 |
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Note 16 - Accounting policies
Netcompany Group A/S was founded by the then majority shareholder of NC TopCo A/S on 16 April 2018 and was dormant until 7 June 2018. On 7 June 2018, all shareholders of NC TopCo A/S exchanged their shares in NC TopCo A/S for new shares in Netcompany Group A/S via a share-for-share exchange and from which date Netcompany Group A/S became the parent company of the Group. Netcompany Group A/S is regarded in reality to be a continuation of the former NC TopCo A/S Group and considering that the shareholder structure until to the completion of the IPO was identical with NC TopCo A/S, the share-for-share exchange has been regarded as a transaction between common control parties exempted from IFRS 3 "Business Combinations". On this basis, the consolidated financial statements of Netcompany Group A/S are prepared on basis of the historical financial information of NC TopCo A/S as if Netcompany Group A/S had always been the parent of the Group and hence no revaluations of the underlying identifiable assets and liabilities of the NC TopCo A/S Group has been reflected in the consolidated financial statements of Netcompany Group A/S.
The annual consolidated financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union. The interim consolidated financial statements included in this Q4 2018 financial report has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union. The accounting policies applied are consistent with those applied in the consolidated annual financial statements for 2018 for Netcompany Group A/S.
Financial Calendar
- 29 January 2019: Deadline for the shareholders to submit proposals for the agenda of the Annual General Meeting 2019
- 6 February 2019: Annual Report for the financial year 2018
- 13 March 2019: Annual general Meeting 2019
- 8 May 2019: Interim report for the first 3 months of 2019
- 21 August 2019: Interim report for the first 6 months of 2019
- 6 November 2019: Interim report for the first 9 months of 2019
Company announcement no 2/2018
Netcompany reports record growth and record operating profit for 2018
netcompany
Netcompany Group A/S
Grønningen 17, 1270 Copenhagen
Company Registration no. 39 48 89 14
Disclaimer
This report contains forward-looking statements including, but not limited to, the statements and expectations contained in the outlook section. Forward-looking statements are statements (other than statements of historical fact) relating to future events and Netcompany's anticipated or planned financial and operational performance.
The words 'may', 'will', 'will continue', 'should', 'expect', 'foresee', 'anticipate', 'believe', 'estimate', 'plan', 'predict', 'intend' or variations of these words, including negatives thereof, as well as other statements regarding matters that are not historical fact or regarding future events or prospects, constitute forward-looking statements.
Netcompany has based these forward-looking statements on its current views with respect to future events and financial performance. These views involve a number of risks and uncertainties, which could cause actual results to differ materially from those predicted in the forward-looking statements and from the past performance of Netcompany.
Although Netcompany believes that the estimates and projections reflected in the forward-looking statements are reasonable, they may prove materially incorrect, and actual results may materially differ, e.g. as the result of risks related to the industry in general or Netcompany in particular, including those described in Netcompany Group A/S' Annual Report 2018 and other information made available by Netcompany.
Factors that may affect future results include, but are not limited to, global and economic conditions, including currency exchange rate and interest rate fluctuations, delay or failure of projects related to research and/or development, unexpected contract breaches or terminations, unplanned loss of patents, government-mandated or market-driven price decreases for Netcompany's products, introduction of competing products, reliance on information technology, Netcompany's ability to successfully market current and new products, exposure to product liability, litigation and investigations, regulatory developments, actual or perceived failure to adhere to ethical marketing practices, unexpected growth in costs and expenses, failure to recruit and retain the right employees, and failure to maintain a culture of compliance.
As a result, forward-looking statements should not be relied on as a prediction of actual results. Netcompany undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.
The Annual Report 2018 of Netcompany Group A/S is available at www.netcompany.com
About Netcompany
Netcompany delivers business critical IT solutions and consultancy that help our customers to achieve significant business benefits in a digitized world. Netcompany also helps our customers to manage and operate IT solutions both on location and in the cloud.
Company announcement no 2/2018