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NNIT Interim / Quarterly Report 2020
3409_rns_2020-08-13_2cf134ee-19dc-4cf7-968d-581c3dc3e9af.pdf
Interim / Quarterly Report
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nnit
Company announcement, August 13, 2020
Company announcement 10/2020
August 13, 2020
Financial report for the first six months of 2020
Revenue decrease of 4.7% and an operating profit margin before special items of 6.0% in the first six months of 2020
Performance highlights for the second quarter of 2020
- Revenue decreased by 5.7% in Q2 2020 compared to Q2 2019 due to a 26% decline from the Novo Nordisk Group and a 10% decline within the enterprise segment
- Revenue from life sciences Denmark and life sciences international increased by 22% and 18% respectively whilst the public segment contributed with a strong growth of 12%. Revenue within the finance segment declined by 3.4% whilst revenue from the enterprise segment declined by 10% mainly due to the phasing out of the Pandora outsourcing contract
- By the end of Q2 2020, the share of NNIT's revenue from clients outside the Novo Nordisk Group increased to 75% from 68% in Q2 2019
- COVID-19 was seen to mainly impact NNIT's project business in April and May whilst growth returned to more normal levels in June
- Gross profit margin was 13% in Q2 2020 (13% in Q2 2019). The margin was negatively impacted by the declining business with the Novo Nordisk Group and Pandora and as a result of COVID-19. The negative impact was partly offset by the cost restructuring program. An asset review of the useful lifetime of certain assets had a positive margin impact of 1.0pp for the quarter (+0.4pp for the full year)
- Operating profit margin before special items decreased to 5.4% in Q2 2020 from 5.9% in Q2 2019. Operating profit margin after special items for the quarter was 3.6%
- Net profit was DKK 14m in Q2 2020 compared to DKK 34m in Q2 2019 due to restructuring costs of DKK 13m as well as a negative impact from financials
- Order backlog for 2020 at the beginning of Q3 2020 was DKK 2.507m, a decrease of 8.1% compared to the same time last year, negatively impacted by a large decline of 29% from the Novo Nordisk Group
- Outlook for 2020:
The guidance for 2020 is maintained: - Revenue growth of -4% to -8% in constant currencies
- Operating profit margin before special items of 6-8% in constant currencies
- Level of investments (CAPEX) is 5-7% of total revenue
Due to the continued uncertainty regarding the COVID-19 impact on the 2020 activity level there is an increased likelihood that revenue growth and operating profit margin will end in the lower end of the guidance intervals - Due to the underlying cash flow generation and the strong financial position of NNIT, the Board of Directors has decided to pay an interim dividend for 2020 of DKK 2.00 per share corresponding to DKK 49.4 million
Per Kogut, CEO at NNIT comments: "I'm satisfied with the financial performance of the quarter which is in line with our expectations despite COVID-19 and declining revenue from the Novo Nordisk Group and Pandora. This is achieved by solid revenue growth within our life science business growing 20%, as well as execution of the cost restructuring program"
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NNIT A/S
Østmarken 3A
2860 Søborg
Denmark
Telephone: +45 7024 4242
www.nnit.com
CVR No: 21 09 31 06
nnt
Company announcement, August 13, 2020
Financial Overview
DKK million
Revenue
Gross profit margin
Operating profit before special items
Operating profit margin before special items
Special items
Operating profit
Operating profit margin
Net profit
Investments (CAPEX)
Free cash flow
| Q2 2020 (reported) | Q2 2020 (constant)* | Q2 2019* | Pct./pp Change (reported) | Pct./pp Change (constant) |
|---|---|---|---|---|
| 701 | 700 | 744 | -5.7% | -5.9% |
| 13.2% | 13.2% | 13.4% | -0.2pp | -0.3pp |
| 38 | 37 | 44 | -14.1% | -15.5% |
| 5.4% | 5.3% | 5.9% | -0.5pp | -0.6pp |
| 13 | 13 | 0 | n.a. | n.a. |
| 25 | 25 | 44 | -42.9% | -44.3% |
| 3.6% | 3.5% | 5.9% | -2.3pp | -2.4pp |
| 14 | n.a. | 34 | -59.7% | n.a. |
| 36 | n.a. | 37 | -4.9% | n.a. |
| 194 | n.a. | -39 | n.a. | n.a. |
DKK million
Revenue
Gross profit margin
Operating profit before special items
Operating profit margin before special items
Special items
Operating profit
Operating profit margin
Net profit
Investments (CAPEX)
Free cash flow
| 6M 2020 (reported) | 6M 2020 (constant)* | 6M 2019* | Pct./pp Change (reported) | Pct./pp Change (constant) |
|---|---|---|---|---|
| 1,423 | 1,420 | 1,494 | -4.7% | -4.9% |
| 13.8% | 13.8% | 13.7% | 0.1pp | 0.2pp |
| 85 | 86 | 90 | -5.1% | -4.5% |
| 6.0% | 6.0% | 6.0% | 0pp | 0pp |
| 19 | 19 | 0 | n.a. | n.a. |
| 66 | 66 | 90 | -26.6% | -26.1% |
| 4.6% | 4.7% | 6.0% | -1.4pp | -1.3pp |
| 49 | n.a. | 75 | -34.2% | n.a. |
| 77 | n.a. | 94 | -18.1% | n.a. |
| 133 | n.a. | -67 | n.a. | n.a. |
*Constant currencies measured using average exchange rates for Q2 2019
Guidance 2020
The order backlog for 2020 at the beginning of Q3 2020 decreased by DKK 221 million to DKK 2,507 million, or by -8.1%, compared to the order backlog one year earlier.
Further, it should be noted that the backlog development is impacted by a decline in multiyear outsourcing agreements, while business coming from projects with lower backlog visibility increases.
Based on the result for the first six months and the current backlog, NNIT maintains the guidance for 2020:
- Revenue growth of -4% to -8% in constant currencies
- Operating profit margin before special items of 6-8% in constant currencies
- Level of investments (CAPEX) is 5-7% of total revenue
Due to the continued uncertainty regarding the COVID-19 impact on the 2020 activity level there is an increased likelihood that revenue growth and operating profit margin will end in the lower end of the guidance intervals
NNIT A/S
Østmarken 3A
Telephone: +45 7024 4242
2860 Søborg
www.nnit.com
Denmark
CVR No: 21 09 31 06
nnit
Company announcement, August 13, 2020
Revenue growth
Organic in constant currencies as reported*
Operating profit margin
In constant currencies as reported*
Investments / Revenue
Constant currencies measured using average exchange rates for 2019
*Based on exchange rates as of August 6, 2020 as illustrated under key currency assumptions on page 24
Special items are expected to increase from DKK 15-25m to DKK 25-30m due to additional layoffs compared to previous expectations. This is mainly due to lower attrition in the period partly as a result of COVID-19.
About NNIT
NNIT A/S is one of Denmark's leading IT service providers and consultancies. NNIT A/S offers a wide range of IT services and solutions to its customers, primarily in the life sciences sector in Denmark and internationally and to customers in the public, enterprise and finance sectors in Denmark. As of June 30, 2020, NNIT A/S had 3,078 employees. NNIT has approximately 400 clients of which around 150 are located outside Denmark. Some 25% are international life sciences clients. For more information please visit www.nnit.com.
Conference call details
NNIT will host a teleconference August 13, 2020 at 10:30 CET about the financial report for the first six months of 2020. Please visit the NNIT webpage at www.nnit.com to access the teleconference, which can be found under 'Investors - Events & presentations. Presentation material will be available on the website approximately one hour prior to the start of the presentation.
Conference call details
https://nnit.eventcdn.net/2020h1/
Participant telephone numbers:
Denmark: +45 45 7815 0110
United Kingdom: +44 333 300 9269
Sweden: +46 850 558 357
United States: +1 646 722 4956
Financial Calendar 2020
August 17, 2020 Interim dividend ex-dividend date
August 18, 2020 Interim dividend record day
August 19, 2020 Interim dividend payment date
October 29, 2020 Interim report for the first nine months of 2020
Forward-looking statements
This announcement contains forward-looking statements. Words such as 'believe', 'expect', 'may', 'will', 'plan', 'strategy', 'prospect', 'foresee', 'estimate', 'project', 'anticipate', 'can', 'intend', 'outlook', 'guidance', 'target' and other words and terms of similar meaning in connection with any discussion of future operating or financial performance identify forward-looking statements. Statements regarding the future are subject to risks and uncertainties that may result in considerable deviations from the
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NNIT A/S
Østmarken 3A
2860 Søborg
Denmark
Telephone: +45 7024 4242
www.nnit.com
CVR No: 21 09 31 06
nnit
Company announcement, August 13, 2020
outlook set forth. Furthermore, some of these expectations are based on assumptions regarding future events which may prove incorrect.
Please also refer to the overview of risk factors in the 'risk management' section on page 29-31 in the Annual Report 2019.
Contacts for further information
Investor relations:
Jens Binger
Head of Investor Relations
Tel: +45 3079 9222
[email protected]
Media relations:
Tina Joanne Hindsbo
NNIT Communications
Tel: +45 3077 9578
[email protected]
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N NIT A/S
Østmarken 3A
2860 Søborg
Denmark
Telephone: +45 7024 4242
www.nnit.com
CVR No: 21 09 31 06
nnt
Company announcement, August 13, 2020
Financial figures and highlights
| DKK million, reported currencies | Q2 2020 | Q2 2019 | 6M 2020 | 6M 2019 | Change 6M | Total 2019 |
|---|---|---|---|---|---|---|
| Financial performance | ||||||
| Revenue | ||||||
| Novo Nordisk Group | 174.0 | 235.3 | 359.8 | 494.1 | -27.2% | 954.9 |
| Life sciences international | 106.5 | 90.1 | 198.1 | 167.5 | 18.3% | 360.9 |
| Life sciences Denmark | 67.5 | 55.6 | 135.5 | 109.4 | 23.9% | 230.0 |
| Life sciences | 349.0 | 381.0 | 693.4 | 771.0 | -10.1% | 1,545.8 |
| Enterprise | 169.7 | 189.5 | 376.2 | 387.8 | -3.0% | 802.3 |
| Public | 107.4 | 96.0 | 212.5 | 185.5 | 14.6% | 392.2 |
| Finance | 74.7 | 77.1 | 140.9 | 149.4 | -5.7% | 317.6 |
| Private & Public | 351.0 | 362.6 | 729.6 | 722.7 | 1.0% | 1,512.1 |
| Total revenue | 700.0 | 743.7 | 1,423.0 | 1,493.7 | -4.7% | 3,057.9 |
| EBITDA | 99.7 | 110.7 | 210.0 | 221.8 | -5.3% | 497.6 |
| Depreciations and amortizations | 61.0 | 66.6 | 125.0 | 132.2 | -5.5% | 258.8 |
| Operating profit before special items1 | 37.0 | 44.1 | 85.0 | 89.6 | -5.1% | 238.7 |
| Special items1 | 12.7 | 0.0 | 19.3 | 0.0 | n.a. | 23.8 |
| Operating profit | 25.2 | 44.1 | 65.8 | 89.6 | -26.6% | 215.0 |
| Net financials | -6.0 | -0.8 | 0.0 | 5.0 | -99.7% | 16.1 |
| Net profit | 13.8 | 34.4 | 49.1 | 74.6 | -34.2% | 182.7 |
| Investments in tangible assets | 25.9 | 31.3 | 60.2 | 84.3 | -28.7% | 134.1 |
| Investments in intangible assets and acquisition in subsidiaries | 9.6 | 73.6 | 77.2 | 75.0 | 2.9% | 87.9 |
| Total assets | 2,470.5 | 2,666.0 | 2,470.5 | 2,666.0 | -7.3% | 2,612.7 |
| Equity | 1,176.0 | 1,096.8 | 1,176.0 | 1,096.8 | 7.3% | 1,169.4 |
| Dividends paid | 0.0 | 0.0 | 49.4 | 63.9 | -22.8% | 113.1 |
| Free cash flow | 194.4 | -38.6 | 177.5 | -67.0 | n.a. | 241.7 |
| Earnings per share | ||||||
| Earnings per share (DKK) | 0.57 | 1.40 | 2.00 | 3.03 | -34.0% | 7.43 |
| Diluted earnings per share (DKK) | 0.56 | 1.39 | 1.98 | 3.01 | -34.2% | 7.36 |
| Employees | ||||||
| Average number of full-time employees | 3,077 | 3,237 | 3,097 | 3,249 | -4.7% | 3,237 |
| Financial ratios | ||||||
| Revenue growth | -5.7% | -1.2% | -1.9% | 2.9% | -4.9pp | 1.7% |
| Gross profit margin | 13.2% | 13.4% | 13.8% | 13.7% | 0.1pp | 15.5% |
| EBITDA margin | 14.2% | 14.9% | 14.8% | 14.9% | -0.1pp | 16.3% |
| Operating profit margin before special items | 5.4% | 5.9% | 6.0% | 6.0% | 0pp | 7.8% |
| Operating profit margin | 3.6% | -1.2% | 4.6% | 6.0% | -1.4pp | 7.8% |
| Effective tax rate | 27.4% | 20.7% | 25.4% | 21.2% | 4.1pp | 21.0% |
| Investments/Revenue | 5.1% | 5.0% | 5.4% | 6.3% | -0.9pp | 5.4% |
| Return on equity2 | 13.8% | 19.9% | 13.8% | 19.9% | -6.1pp | 16.2% |
| Solvency ratio | 47.6% | 41.1% | 47.6% | 41.1% | 6.5pp | 44.8% |
| Return on invested capital (ROIC)2,3 | 9.0% | 14.1% | 9.0% | 14.1% | -5.2pp | 10.4% |
| Cash to earnings2 | 309.3% | -4.3% | 309.3% | -4.3% | 313.6pp | 132.3% |
| Cash to earnings (three-year average)2 | 89.4% | 20.0% | 89.4% | 20.0% | 69.4pp | 55.9% |
| Additional numbers4 | ||||||
| Order entry backlog for the current year | 2,507 | 2,516 | 2,507 | 2,516 | -0.4% | - |
1) Special items comprises restructuring costs related to the cost restructuring plan and other special events
2) Financial metrics are moving annual total (MAT), i.e. annualized. Cash to earnings (three-year-average) is calculated using the past 36 months
3) Net profit/average invested capital
4) Backlog represents anticipated revenue from contracts or orders executed but not yet completed or performed in full, and the revenue that is expected to be recognized in the future
NNIT A/S
Østmarken 3A
Telephone: +45 7024 4242
2860 Søborg
www.nnit.com
Denmark
CVR No: 21 09 31 06
NIT
Company announcement, August 13, 2020
COVID-19 update
Since the outbreak of the COVID-19 pandemic, NNIT has continuously secured stable IT operations for our customers.
Project business was impacted by COVID-19 in the last two weeks of March as well as April and May, but project activity picked up again in June and showed a strong growth compared to June 2019. COVID-19 had the largest negative impact on NNIT's life sciences business in China while most of the other life sciences business was more resilient. In Denmark especially Scales was impacted by customers reducing their project activity. It is still too early to conclude that project business has come back to a normal level despite stronger performance in June.
Business highlights
Key wins since the Q1 2020 company announcement:
- IT-infrastructure and SAP basis operations agreement with the Danish Defense representing a low triple-digit DKK million amount over a seven-year-period (company announcement 8/2020)
- IT-infrastructure operations agreement with dedicated private cloud solution for Saint-Gobain Nordic representing a low triple-digit DKK million amount over a five-year-period
- Extension of the IT-infrastructure operations agreement with focus on hybrid cloud and automation with PFA representing a low triple-digit DKK million amount for the additional period 2024-2025
- Veeva Quality Docs system integration, validation, migration and project services with a top20 global pharma company representing a mid double-digit DKK million amount over a three-year-period
- Implementation and application maintenance of new billing solutions with Eniig (Norlys) representing a mid double-digit DKK million amount over a five-year-period
Veeva extended partnership
NNIT becomes a Veeva Premiere Services Partner for the Veeva Development Cloud which is the highest partner acknowledgement by Veeva. This is a recognition of NNIT's customer engagements for applications in Vault RIM, Vault Clinical and Vault Quality suites for life sciences customers globally.
The new partner status will enhance NNIT's ability to support customers to an even higher degree within this, for NNIT, important area.
Business and cost restructuring plan
The business and cost restructuring plan progressed in line with expectations Q2 2020. The automation initiatives set forth in the cost restructuring plan also progressed as expected in order to enable continued high-quality services and stable operation towards the customers.
Utilization in Q2 2020 was impacted by COVID-19 resulting in a slight underperformance compared to target listed in the cost restructuring plan.
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NNIT A/S
Østmarken 3A
2860 Søborg
Denmark
Telephone: +45 7024 4242
www.nnit.com
CVR No: 21 09 31 06
nnt
Company announcement, August 13, 2020
Performance overview
| DKK million
(reported currencies) | Q2 2020 | Q2 2019 | Change
(reported) | 2019 |
| --- | --- | --- | --- | --- |
| Revenue | 700.9 | 743.7 | -5.7% | 3,057.9 |
| Cost of goods sold | 608.1 | 643.7 | -5.5% | 2,582.6 |
| Gross profit | 92.8 | 99.9 | -7.1% | 475.3 |
| Gross profit margin | 13.2% | 13.4% | -0.2pp | 15.5% |
| Sales and marketing costs | 30.9 | 31.4 | -1.6% | 131.5 |
| Administrative expenses | 24.0 | 24.4 | -1.6% | 105.1 |
| Operating profit before special items | 37.9 | 44.1 | -14.1% | 238.7 |
| Operating profit margin before special items | 5.4% | 5.9% | -0.5pp | 7.8% |
| Special items | 12.7 | 0.0 | n.a. | 23.8 |
| Operating profit | 25.2 | 44.1 | -42.9% | 215.0 |
| Operating profit margin | 3.6% | 5.9% | -2.3pp | 7.0% |
| Net financials | -6.1 | -0.8 | 689.7% | 16.1 |
| Profit before tax | 19.1 | 43.3 | -56.0% | 231.1 |
| Tax | 5.2 | 9.0 | -41.8% | 48.4 |
| Effective tax rate | 27.4% | 20.7% | 6.7pp | 21.0% |
| Net profit | 13.8 | 34.4 | -59.7% | 182.7 |
| DKK million
(reported currencies) | 6M 2020 | 6M 2019 | Change
(reported) | 2019 |
| --- | --- | --- | --- | --- |
| Revenue | 1,423.0 | 1,493.7 | -4.7% | 3,057.9 |
| Cost of goods sold | 1,226.6 | 1,289.2 | -4.9% | 2,582.6 |
| Gross profit | 196.4 | 204.5 | -4.0% | 475.3 |
| Gross profit margin | 13.8% | 13.7% | 0.1pp | 15.5% |
| Sales and marketing costs | 61.9 | 63.5 | -2.5% | 131.5 |
| Administrative expenses | 49.4 | 51.4 | -3.8% | 105.1 |
| Operating profit before special items | 85.0 | 89.6 | -5.1% | 238.7 |
| Operating profit margin before special items | 6.0% | 6.0% | 0pp | 7.8% |
| Special items | 19.3 | 0.0 | n.a. | 23.8 |
| Operating profit | 65.8 | 89.6 | -26.6% | 215.0 |
| Operating profit margin | 4.6% | 6.0% | -1.4pp | 7.0% |
| Net financials | 0.0 | 5.0 | -99.7% | 16.1 |
| Profit before tax | 65.8 | 94.7 | -30.5% | 231.1 |
| Tax | 16.7 | 20.1 | -17.0% | 48.4 |
| Effective tax rate | 25.4% | 21.2% | 4.1pp | 21.0% |
| Net profit | 49.1 | 74.6 | -34.2% | 182.7 |
Revenue in reported currencies decreased by 5.7% in Q2 2020 (-5.9% in constant currencies) mainly impacted by a 26% decline from the Novo Nordisk group and 10% decline in the enterprise segment due to the facing-out of the Pandora outsourcing agreement. The decline was partly offset by growth in life sciences Denmark and life sciences international of 22% and 18% respectively whilst the public segment also had a strong growth of 12%. Revenue from the finance segment declined with 3.4%.
Revenue growth in Q2 2020 was driven by projects outside the Novo Nordisk Group while revenue from service level agreements declined.
6M 2020 revenue in reported currencies decreased by -4.7% (-4.9% in constant currencies) due to a 27% decline from the Novo Nordisk group. The decline was partly offset by growth in life sciences Denmark and life sciences international of 24% and 18% respectively whilst the public segment also had strong growth of 15%. Revenue from the finance and enterprise segments declined by 5.7% and 3.0% respectively. Excluding business from the Novo Nordisk Group, revenue growth was 6.3% (5.2% organic) in 6M 2020.
Cost of goods sold decreased by 5.5% in Q2 2020 and 4.9% 6M 2020 compared to the same period last year. The decrease in cost is mainly due to the implementation of the cost restructuring program.
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NNIT A/S
Østmarken 3A
Telephone: +45 7024 4242
2860 Søborg
www.nnit.com
Denmark
CVR No: 21 09 31 06
NIT
Company announcement, August 13, 2020
Gross profit decreased by 7.1% in Q2 2020 and 4.0% in 6M 2020 leading to a gross profit margin in reported currencies of 13.2% in Q2 2020 compared to 13.4% in Q2 2019. In 6M 2020 gross profit margin increased to 13.8% from 13.7% in 6M 2019. In the life sciences segment gross profit margin in 6M 2020 decreased by net 3.5pp due to the loss of the large application maintenance agreement and price reduction on the renewed operation maintenance agreement with the Novo Nordisk Group which were only partly mitigated by the cost restructuring program. The margin decrease in the life sciences segment was offset by a gross profit margin increase of 4.3pp in the private & public segment as a result of revenue growth and the execution of the cost restructuring plan. For further details, see the segmental analysis on the next pages.
Sales and marketing costs declined by 1.6% in Q2 2020 and 2.5% in 6M 2020 compared to the same periods last year due to staff reductions as part of the cost restructuring plan.
Administrative expenses decreased by 1.6% in Q2 2020 and 3.8% in 6M 2020 compared to the same periods last year due to cost reductions as part of the cost restructuring plan.
Operating profit before special items decreased by DKK 6.2m in Q2 2020 and 4.6m 6M 2020 compared to same period last year. This corresponds to an operating profit margin before special items of 5.4% in Q2 2020 (5.9% in Q2 2019) and 6.0% 6M 2020 (6.0% 6M 2019).
As a consequence of an asset review and slower technological development of server components NNIT has increased the useful lifetime for certain servers from 3 years to 5 years. An asset review of Datacenter assets based on the first 9 years of operations in NNIT's data center in Bagsværd has led to a change in the useful lifetime of data center components from 12-20 years to 20-30 years. The changes have positively affected operating profit margin in 6M 2020 by 0.7pp and will have a full year impact of around 0.4pp (see note 1).
Net financials in Q2 2020 were negative with DKK 6.1m which is a decrease of DKK 5.3m compared to Q2 2019. Net financials 6M 2020 was 0.0 compared to 5.0 6M 2019. The negative development in Q2 2020 compared to same period last year was due to currency fluctuations where especially USD receivables on the balance sheet in Denmark were negatively impacted. This kind of balance sheet exposure is not covered by NNIT's cash flow hedges.
The effective tax rate for Q2 2020 was 27%, an increase of 6.7pp compared to Q2 2019 due to Q2 2020 being affected by a negative adjustment regarding previous years. In 6M 2020 the effective tax rate was 25%, up by 4.1pp compared to 6M 2019. This is also explained by the negative adjustment regarding previous years.
Net profit in Q2 2020 was DKK 14m compared to DKK 34m in Q2 2019. Net profit was impacted by special items of DKK 13m (DKK 0.0m in Q2 2019) and lower net financials.
For a detailed performance overview in both reported and constant currencies please see note 8. Comparisons in this financial report are hereafter in reported currencies. NNIT's major currencies have appreciated giving operating profit margin in 6M 2020 a headwind of 0.6pp mainly due to the appreciation of CNY and PHP (average Q2 2020 compared to average 2019 exchange rates) which increases the cost of NNIT's offshore centers in DKK. Revenue growth was impacted positively by 0.2pp mainly due to appreciation of USD (average Q2 2020 compared to average 2019 exchange rates).
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NNIT A/S
Østmarken 3A
2860 Søborg
Denmark
Telephone: +45 7024 4242
www.nnit.com
CVR No: 21 09 31 06
NINT
Company announcement, August 13, 2020
Life Sciences
| DKK million
(reported currencies) | Q2 2020 | Q2 2019 | Change | 2019 |
| --- | --- | --- | --- | --- |
| Novo Nordisk Group | 174.9 | 235.3 | -25.6% | 954.9 |
| Life sciences international | 106.5 | 90.1 | 18.2% | 360.9 |
| Life sciences Denmark | 67.9 | 55.6 | 22.1% | 230.0 |
| Revenue | 349.4 | 381.0 | -8.3% | 1,545.8 |
| Cost of goods sold | 292.9 | 308.4 | -5.0% | 1,211.9 |
| Gross profit | 56.5 | 72.7 | -22.3% | 333.9 |
| Gross profit margin | 16.2% | 19.1% | -2.9pp | 21.6% |
| Allocated costs | 30.1 | 31.6 | -4.8% | 130.9 |
| Operating profit before special items | 26.4 | 41.1 | -35.7% | 203.0 |
| Operating profit margin before special items | 7.6% | 10.8% | -3.2pp | 13.1% |
| Special items | 5.9 | 0.0 | n.a. | 11.5 |
| Operating profit | 20.6 | 41.1 | -49.9% | 191.5 |
| Operating profit margin | 5.9% | 10.8% | -4.9pp | 12.4% |
| DKK million
(reported currencies) | 6M 2020 | 6M 2019 | Change | 2019 |
| --- | --- | --- | --- | --- |
| Novo Nordisk Group | 359.8 | 494.1 | -27.2% | 954.9 |
| Life sciences international | 198.1 | 167.5 | 18.3% | 360.9 |
| Life sciences Denmark | 135.5 | 109.4 | 23.9% | 230.0 |
| Revenue | 693.4 | 771.0 | -10.1% | 1,545.8 |
| Cost of goods sold | 574.8 | 612.2 | -6.1% | 1,211.9 |
| Gross profit | 118.6 | 158.8 | -25.3% | 333.9 |
| Gross profit margin | 17.1% | 20.6% | -3.5pp | 21.6% |
| Allocated costs | 61.1 | 65.2 | -6.3% | 130.9 |
| Operating profit before special items | 57.5 | 93.6 | -38.6% | 203.0 |
| Operating profit margin before special items | 8.3% | 12.1% | -3.9pp | 13.1% |
| Special items | 9.2 | 0.0 | n.a. | 11.5 |
| Operating profit | 48.3 | 93.6 | -48.4% | 191.5 |
| Operating profit margin | 7.0% | 12.1% | -5.2pp | 12.4% |
Revenue
Total life sciences revenue decreased by 8.3% in Q2 2020 compared to the same period last year due to a decline of 26% from the Novo Nordisk Group. Revenue from projects increased by 8.3% in Q2 2020 while revenue from service level agreements decreased by 24% driven by the Novo Nordisk Group. Total life sciences revenue decreased 10% in 6M 2020 compared to 6M 2019 due to the reasons mentioned above. Further details on revenue and profit development are explained below.
Novo Nordisk Group:
Revenue from the Novo Nordisk Group decreased by 26% in Q2 2020 and 27% 6M 2020 compared to the same periods last year. Revenue is as expected significantly impacted by the loss of the large application maintenance agreement and the renewed operation maintenance agreement which both impacts the revenue and profitability from January 1, 2020. Further, project revenue continued to decrease with 13% compared to Q2 2019 and 17% compared to 6M 2019.
As a consequence of the continued large decline in revenue from the Novo Nordisk Group and high growth from other clients, the share of NNIT's revenue from clients outside the Novo Nordisk Group increased to 75% in Q2 2020 from 68% in Q2 2019.
9 of 26
NNIT A/S
Østmarken 3A
Telephone: +45 7024 4242
2860 Søborg
www.nnit.com
Denmark
CVR No: 21 09 31 06
nnit
Company announcement, August 13, 2020
NNIT's dependency on the Novo Nordisk Group is thus continuing the decreasing trend. However, the Novo Nordisk Group is still NNIT's largest and most important customer.
Life sciences international:
Revenue from international life sciences increased by 18% in Q2 2020 compared to the same period last year driven by strong growth in Europe and US. China was still heavily impacted by COVID-19 in Q2 2020 with a revenue decline of 26% compared to the same period last year. The growth in EU and US is driven by revenue from Valiance, Veeva related projects and other technology areas such as paperless validation (MES), Research & Early Development (pRED). Revenue increased by 18% 6M 2020 compared to 6M 2019.
Danish life sciences:
Revenue from Danish life sciences increased by 22% in Q2 2020 compared to Q2 2019 mainly driven by the Association of Danish Pharmacies. Further, additional activities with AJ Vaccines and Genmab contributed to the growth in Q2 2020. Revenue increased by 24% 6M 2020 compared to 6M 2019.
Gross profit and operating profit
In Q2 2020 gross profit margin was 16%, a decrease of 2.9pp compared to Q2 2019. Gross profit margin in 6M 2020 was 17%, a decrease of 3.5pp compared to 6M 2019. The gross profit decline was due to the loss of the application maintenance agreement and price reductions on the prolonged operations maintenance agreement with the Novo Nordisk Group. The cost restructuring program has been executed as planned but could not fully compensate for the significant loss of business from the Novo Nordisk Group. However, gross profit margin in other life sciences showed a healthy increase in Q2 2020 and 6M 2020 compared to same periods last year supported by the cost restructuring program and high growth in the project business.
Operating profit margin before special items was 7.6% in Q2 2020 (11% in Q2 2019) and 8.3% 6M 2020 (12% 6M 2019).
Private & Public
| DKK million
(reported currencies) | Q2 2020 | Q2 2019 | Change | 2019 |
| --- | --- | --- | --- | --- |
| Enterprise | 169.7 | 189.5 | -10.4% | 802.3 |
| Public | 107.4 | 96.0 | 11.9% | 392.2 |
| Finance | 74.5 | 77.1 | -3.4% | 317.6 |
| Revenue | 351.6 | 362.6 | -3.1% | 1,512.1 |
| Cost of goods sold | 315.2 | 335.3 | -6.0% | 1,370.7 |
| Gross profit | 36.4 | 27.3 | 33.2% | 141.4 |
| Gross profit margin | 10.3% | 7.5% | 2.8pp | 9.4% |
| Allocated costs | 24.9 | 24.2 | 2.7% | 105.7 |
| Operating profit before special items | 11.5 | 3.0 | 276.9% | 35.7 |
| Operating profit margin before special items | 3.3% | 0.8% | 2.4pp | 2.4% |
| Special items | 6.8 | 0.0 | n.a. | 12.3 |
| Operating profit | 4.6 | 3.0 | 52.5% | 23.4 |
| Operating profit margin | 1.3% | 0.8% | 0.5pp | 1.5% |
10 of 26
NNIT A/S
Østmarken 3A
Telephone: +45 7024 4242
2860 Søborg
www.nnit.com
Denmark
CVR No: 21 09 31 06
nnt
Company announcement, August 13, 2020
| DKK million
(reported currencies) | 6M 2020 | 6M 2019 | Change | 2019 |
| --- | --- | --- | --- | --- |
| Enterprise | 376.2 | 387.8 | -3.0% | 802.3 |
| Public | 212.5 | 185.5 | 14.6% | 392.2 |
| Finance | 140.9 | 149.4 | -5.7% | 317.6 |
| Revenue | 729.6 | 722.7 | 1.0% | 1,512.1 |
| Cost of goods sold | 651.8 | 677.0 | -3.7% | 1,370.7 |
| Gross profit | 77.8 | 45.7 | 70.3% | 141.4 |
| Gross profit margin | 10.7% | 6.3% | 4.3pp | 9.4% |
| Allocated costs | 50.2 | 49.7 | 1.1% | 105.7 |
| Operating profit before special items | 27.6 | -4.0 | n.a. | 35.7 |
| Operating profit margin before special items | 3.8% | -0.6% | 4.3pp | 2.4% |
| Special items | 10.1 | 0.0 | n.a. | 12.3 |
| Operating profit | 17.4 | -4.0 | -535.9% | 23.4 |
| Operating profit margin | 2.4% | -0.6% | 2.9pp | 1.5% |
Revenue
Revenue from Private & Public customers decreased by 3.1% in Q2 2020 and increased by 1.0% in 6M 2020 compared to the same periods last year.
Revenue on projects in the private & public segment in Q2 2020 increased by 7.9% while revenue from service level agreements decreased by 12% due to the phasing out of the Pandora outsourcing agreement. Further details on revenue and profit development are explained below.
Enterprise customers:
Revenue decreased by 10% in Q2 2020 and by 3.0% 6M 2020 compared to the same periods last year. The decline in Q2 2020 was due to the phasing out of the Pandora outsourcing agreement partly countered by growth from new customers in 2020 such as Radius Elnet and Eniig.
Public customers:
Revenue increased by 12% in Q2 2020 and by 15% 6M 2020 compared to the same periods last year. The revenue increase in Q2 2020 was driven by additional business with UFST (The Ministry of Taxation), ATP and Direktoratet for E-helse (Norwegian customer), while project activities with a number of small customers decreased.
Finance customers:
Revenue decreased by 3.4% in Q2 2020 and by 5.7% 6M 2020 compared to the same periods last year. The revenue decline in Q2 2020 was mainly due to the expiry of the contract with Alka (acquired by Tryg) and the insurance application company MIA. Business with PFA and AP Pension increased.
Gross profit and operating profit
In Q2 2020 gross profit margin was 10%, an increase of 2.8pp compared to Q2 2019. The gross profit margin 6M 2020 was 11%, an increase of 4.3pp compared to 6M 2019.
The higher gross- and operating profit margin in Q2 2020 was driven by the cost restructuring plan as well as improved project execution and sales excellence.
11 of 26
NNIT A/S
Østmarken 3A
Telephone: +45 7024 4242
2860 Søborg
www.nnit.com
Denmark
CVR No: 21 09 31 06
NIT
Company announcement, August 13, 2020
Order backlog
Backlog for the year, beginning of quarter
At the beginning of Q3 2020, NNIT's order entry backlog for 2020 amounted to DKK 2,507 million, which was a decrease of 8.1% compared to last year. The backlog from life sciences clients excluding the Novo Nordisk Group increased by 20% driven by international life sciences while the Novo Nordisk Group declined by 29% due to the loss of the large application maintenance contract and a considerable price reduction on the prolonged operation maintenance agreement. Private & public decreased by 4.6% mainly due to expiry of the Pandora outsourcing contract and COVID-19.
The high growth in NNIT's project business with low backlog visibility and a declining/stagnating multiyear outsourcing business makes the backlog numbers less useful as a predictor for revenue growth. Therefore, the backlog for the current year should be interpreted with caution.
Employees, end-of-period
12 of 26
NNIT A/S
Østmarken 3A
2860 Søborg
Denmark
Telephone: +45 7024 4242
www.nnit.com
CVR No: 21 09 31 06
nnt
Company announcement, August 13, 2020
As a consequence of the cost restructuring program and the loss of business with the Novo Nordisk Group and Pandora the number of employees decreased by 204 FTEs corresponding to -6.2% compared to the same time last year. The decrease was driven by China (-123 FTEs), Denmark (-71 FTEs) and Czech (-39 FTEs) while FTEs in our international offices (excluding outsourcing centers) increased by 33 FTEs in order to support the strong growth in international life sciences.
Balance sheet
Total assets at June 30, 2020 decreased by DKK 193m to DKK 2,473m compared to DKK 2,666m at June 30, 2019 primarily due to a decrease in tangible assets, lease assets, contracts assets and other receivables.
Net cash and cash equivalents amounted to DKK -28m at June 30, 2020, an increase of DKK 289m compared June 30, 2019. The increase was mainly driven by cash flows from operating activities partly countered by payments related to acquisitions (DKK 53m), payment of interim dividend for 2019 (DKK 49m) and ordinary dividend for 2019 (DKK 49m).
Equity at June 30, 2020 amounted to DKK 1,178m, an increase of DKK 81m compared to June 30, 2019. The improvement was mainly due to net profits for the period offset by the payment of interim dividend for 2019 (DKK 49m) and ordinary dividend for 2019 (DKK 49m).
Investments
Investments excluding investments related to acquisition of subsidiaries amounted to DKK 35m in Q2 2020 compared to DKK 39m in Q2 2019.
The free cash flow for Q2 2020 was positive DKK 194m which was DKK 233m above Q2 2019 due to higher cash flow from operating activities and lower investments due to the acquisition of HGP Group in Q2 2019. The higher cash flow from operating activities can partly be explained by the postponement of payment of payroll tax and VAT (DKK 146m) in connection with the COVID-19 initiatives in Denmark.
NNIT has not entered into new factoring agreements in H1 2020. It should be noted that Q4 2019 was positively impacted by entering new factoring agreements (company announcement 2/2020)
13 of 26
NNIT A/S
Østmarken 3A
Telephone: +45 7024 4242
2860 Søborg
www.nnit.com
Denmark
CVR No: 21 09 31 06
NNIT
Company announcement, August 13, 2020
Events after balance sheet date
There have been no events after the balance sheet date which would have a significant impact on an assessment of NNIT's financial position as of June 30, 2020
NNIT A/S
Østmarken 3A
2860 Søborg
Denmark
Telephone: +45 7024 4242
www.nnit.com
CVR No: 21 09 31 06
NIT
Company announcement, August 13, 2020
Management statement
Statement by the Board of Directors and the Executive Management on the unaudited interim consolidated financial statements of NNIT A/S as at and for the six months ended June 30, 2020
The Board of Directors and Executive Management ("Management") have reviewed and approved the interim consolidated financial statements of NNIT A/S (NNIT A/S, together with its subsidiaries, the "Group") for the first six months of 2020 with comparative figures for the first six months of 2019. The interim consolidated financial statements have not been audited or reviewed by the company's independent auditors.
The interim consolidated financial statements for the first six months of 2020 have been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union and accounting policies set out in the annual report for 2019 of NNIT A/S. Furthermore, the interim consolidated financial statement for the first six months of 2020 and Management's review are prepared in accordance with additional Danish disclosure requirements for interim reports of listed companies.
In our opinion, the accounting policies used are appropriate and the overall presentation of the interim consolidated financial statements for the first six months of 2020 are adequate and give a true and fair view of the Group's assets, liabilities and financial position as at June 30, 2020 and of the results of the Group's operations and cash flow for the six months ended June 30, 2020. Furthermore, in our opinion, Management's review includes a true and fair account of the development in the operations and financial circumstances, of the results for the period and of the financial position of the Group as well as a description of the most significant risks and elements of uncertainty facing the Group in accordance with Danish disclosure requirements for listed companies.
Besides what has been disclosed in the interim consolidated financial statements and Management's review for the first six months of 2020, no changes in the Group's most significant risks and uncertainties have occurred relative to what was disclosed in the Annual Report for 2019 of NNIT A/S.
Søborg, August 13, 2020
Executive management
Per Kogut
CEO
Pernille Fabricius
CFO
Board of Directors
Carsten Dilling
Chairman
Peter H. J. Haahr
Deputy Chairman
Anne Broeng
Eivind Kolding
Christian Kanstrup
Caroline Serfass
Anders Vidstrup
Camilla K. K. Christensen
Trine Io Bjerregaard
15 of 26
NNIT A/S
Østmarken 3A
2860 Søborg
Denmark
Telephone: +45 7024 4242
www.nnit.com
CVR No: 21 09 31 06
nnt
Company announcement, August 13, 2020
Consolidated financial statements
Income statement and Statement of comprehensive income
DKK million
Income statement
Revenue
Cost of goods sold
Gross profit
Sales and marketing costs
Administrative expenses
Operating profit before special items
Special items*
Operating profit
Financial income
Financial expenses
Profit before income taxes
Income taxes
Net profit for the period
*Special items comprises restructuring costs related to the cost restructuring plan and other special events
| Note | Q2 2020 | Q2 2019 | 6M 2020 | 6M 2019 | 12M 2019 |
|---|---|---|---|---|---|
| 1 | |||||
| 2 | 701 | 744 | 1,423 | 1,494 | 3,058 |
| 600 | 644 | 1,227 | 1,289 | 2,583 | |
| 83 | 100 | 196 | 205 | 475 | |
| 24 | 32 | 69 | 64 | 131 | |
| 21 | 24 | 40 | 51 | 105 | |
| 30 | 44 | 85 | 90 | 239 | |
| 3 | 10 | 0 | 17 | 0 | 24 |
| 20 | 44 | 66 | 90 | 215 | |
| -2 | 3 | 8 | 12 | 32 | |
| 0 | 4 | 9 | 7 | 16 | |
| 20 | 43 | 66 | 95 | 231 | |
| 0 | 9 | 17 | 20 | 48 | |
| 15 | 34 | 49 | 75 | 183 |
Earnings per share
Earnings per share
Diluted earnings per share
| DKK | DKK | DKK | DKK | DKK |
|---|---|---|---|---|
| 0.53 | 1.40 | 2.00 | 3.03 | 7.43 |
| 0.96 | 1.39 | 1.98 | 3.01 | 7.36 |
Statement of comprehensive income
DKK million
Net profit for the period
Other comprehensive income:
Items that will not be reclassified subsequently to the Income statement:
Remeasurement related to pension obligations
Tax on other comprehensive income
Items that will be reclassified subsequently to the Income statement, when specific conditions are met:
Currency revaluation related to subsidiaries (net)
Recycled to financial items
Unrealized value adjustments
Cash flow hedges
Tax on other comprehensive income related to cash flow hedges
Other comprehensive income, net of tax
Total comprehensive income
| 1 | 34 | 49 | 75 | 183 |
|---|---|---|---|---|
| 0 | 0 | 0 | 0 | 9 |
| 0 | 0 | 1 | 0 | -1 |
| 0 | -2 | -2 | 1 | 1 |
| 0 | 5 | 8 | 11 | 21 |
| -5 | -10 | -18 | -10 | -20 |
| -8 | -5 | -10 | 1 | 1 |
| -2 | 1 | 6 | 0 | 1 |
| -6 | -6 | -11 | 2 | 11 |
| 0 | 28 | 38 | 77 | 194 |
NNIT A/S
Østmarken 3A
Telephone: +45 7024 4242
2860 Søborg
www.nnit.com
Denmark
CVR No: 21 09 31 06
NIT
Company announcement, August 13, 2020
Balance sheet
Assets
| DKK million | Note | June 30, 2020 | June 30, 2019 | Dec 31, 2019 |
|---|---|---|---|---|
| Intangible assets | 527 | 516 | 524 | |
| Tangible assets | 557 | 596 | 576 | |
| Lease assets | 271 | 340 | 316 | |
| Contract assets | 58 | 92 | 69 | |
| Deferred tax | 26 | 25 | 32 | |
| Deposits | 32 | 33 | 34 | |
| Total non-current assets | 1,471 | 1,602 | 1,551 | |
| Inventories | 1 | 2 | 2 | |
| Contract assets | 45 | 57 | 53 | |
| Trade receivables | 4 | 505 | 501 | 627 |
| Work in progress | 4 | 163 | 159 | 140 |
| Other receivables | 22 | 99 | 11 | |
| Pre-payments | 113 | 111 | 84 | |
| Tax receivable | 26 | 22 | 11 | |
| Derivative financial instruments | 5 | 13 | 12 | |
| Cash and cash equivalents | 120 | 100 | 122 | |
| Total current assets | 1,000 | 1,064 | 1,062 | |
| Total assets | 2,471 | 2,666 | 2,613 |
Equity and liabilities
| DKK million | Note | June 30, 2020 | June 30, 2019 | Dec 31, 2019 |
|---|---|---|---|---|
| Share capital | 250 | 250 | 250 | |
| Treasury shares | -3 | -4 | -4 | |
| Retained earnings | 877 | 788 | 860 | |
| Other reserves | 3 | 14 | 14 | |
| Proposed dividends | 49 | 49 | 49 | |
| Total equity | 1,176 | 1,097 | 1,169 | |
| Leasing liability | 204 | 276 | 236 | |
| Deferred tax | 0 | 1 | 0 | |
| Employee benefit obligation | 125 | 20 | 82 | |
| Contingent consideration (earn out) | 43 | 134 | 43 | |
| Provisions | 25 | 24 | 28 | |
| Long term loan | 28 | 0 | 28 | |
| Bank overdraft | 148 | 417 | 231 | |
| Total non-current liabilities | 573 | 872 | 648 | |
| Prepayments received, contract assets | 20 | 69 | 42 | |
| Prepayments received, work in progress | 4 | 97 | 68 | 98 |
| Leasing liability | 81 | 77 | 90 | |
| Trade payables | 93 | 117 | 88 | |
| Employee cost payable | 142 | 230 | 228 | |
| Tax payables | 9 | 10 | 9 | |
| Other current liabilities | 255 | 125 | 155 | |
| Derivative financial instruments | 5 | 1 | 1 | |
| Contingent consideration (earn out) | 17 | 0 | 81 | |
| Provisions | 3 | 0 | 4 | |
| Total current liabilities | 722 | 697 | 796 | |
| Total equity and liabilities | 2,471 | 2,666 | 2,613 | |
| Contingent liabilities and legal proceedings | 5 | |||
| Currency hedging | 6 |
17 of 26
NNIT A/S
Østmarken 3A
Telephone: +45 7024 4242
2860 Søborg
www.nnit.com
Denmark
CVR No: 21 09 31 06
nnt
Company announcement, August 13, 2020
Statement of cash flow
| DKK million | Q2 2020 | Q2 2019 | 6M 2020 | 6M 2019 | 12M 2019 | |
|---|---|---|---|---|---|---|
| Net profit for the period | Note | 14 | 34 | 49 | 75 | 183 |
| Reversal of non-cash items | 94 | 85 | 204 | 167 | 439 | |
| Interest received | 0 | 0 | 0 | 0 | 0 | |
| Interest paid | -5 | -4 | -8 | -7 | -16 | |
| Income taxes paid | -2 | 0 | -23 | -29 | -50 | |
| Cash flow before change in working capital | 99 | 115 | 222 | 206 | 556 | |
| Changes in working capital | 131 | -49 | 91 | -114 | -91 | |
| Cash flow from operating activities | 230 | 66 | 313 | 92 | 465 | |
| Capitalization of intangible assets | -10 | -6 | -17 | -9 | -33 | |
| Purchase of tangible assets | -28 | -37 | -45 | -74 | -135 | |
| Change in trade payables related to investments | 3 | 4 | -15 | -11 | 1 | |
| Payment of deposits | 1 | 0 | 1 | 0 | 0 | |
| Acquisition cost refunded | 0 | 2 | 0 | 0 | 2 | |
| Acquisition of subsidiary | 0 | -68 | 0 | -65 | -58 | |
| Payment of earn-out | 0 | 0 | -60 | 0 | 0 | |
| Cash flow from investing activities | -36 | -105 | -136 | -159 | -223 | |
| Dividends paid | 0 | 0 | -49 | -64 | -113 | |
| Purchase of treasury shares | 0 | 0 | 0 | -5 | -5 | |
| Installments on lease liabilities | -24 | -25 | -47 | -47 | -93 | |
| Long term loan | 0 | 0 | 0 | 0 | -5 | |
| Bank overdraft | -100 | 87 | -83 | 175 | -12 | |
| Cash flow from financing activities | -104 | 62 | -179 | 59 | -228 | |
| Net cash flow | 0 | 23 | -2 | -8 | 14 | |
| Cash and cash equivalents at the beginning of the period | 120 | 77 | 122 | 108 | 108 | |
| Cash and cash equivalents at the end of the period | 120 | 100 | 120 | 100 | 122 | |
| Additional information¹: | ||||||
| Cash and cash equivalents | 120 | 100 | 120 | 100 | 122 | |
| Bank overdraft | -140 | -417 | -148 | -417 | -231 | |
| Committed credit facilities | 540 | 540 | 900 | 540 | 900 | |
| Financial resources at the end of the period | 872 | 223 | 873 | 223 | 791 | |
| Cash flow from operating activities | 230 | 66 | 313 | 92 | 465 | |
| Cash flow from investing activities | -28 | -105 | -136 | -159 | -223 | |
| Free cash flow | 194 | -39 | 177 | -67 | 242 |
¹ Additional non-IFRS measures. 'Financial resources at the end of the period' is defined as the sum of cash and cash equivalents at the end of the period and undrawn committed credit facilities. Free cash flow is defined as 'cash flow from operating activities' less 'cash flow from investing activities'.
18 of 26
NNIT A/S
Østmarken 3A
Telephone: +45 7024 4242
2860 Søborg
www.nnit.com
Denmark
CVR No: 21 09 31 06
nnt
Company announcement, August 13, 2020
Statement of changes in equity
| DKK million | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| June 30, 2020 | Share capital | Treasury shares | Retained earnings | Other reserves | Total other reserves | Proposed dividends | Total | ||
| Currency revaluation | Cash flow hedges | Tax | |||||||
| Balance at the beginning of the period | 250 | -4 | 860 | 7 | 9 | -2 | 14 | 49 | 1,169 |
| Net profit for the period | 0 | 0 | 49 | 0 | 0 | 0 | 0 | 0 | 49 |
| Other comprehensive income for the period | 0 | 0 | 0 | -2 | -10 | 1 | -11 | 0 | -11 |
| Total comprehensive income for the period | 0 | 0 | 49 | -2 | -10 | 1 | -11 | 0 | 38 |
| Transactions with owners: | |||||||||
| Transfer of treasury shares | 0 | 1 | 8 | 0 | 0 | 0 | 0 | 0 | 9 |
| Share-based payments | 0 | 0 | 8 | 0 | 0 | 0 | 0 | 0 | 8 |
| Deferred tax on share-based payments | 0 | 0 | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
| Dividends paid | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -49 | -49 |
| Proposed interim dividend for 2020 | 0 | 0 | -49 | 0 | 0 | 0 | 0 | 49 | -49 |
| Balance at the end of the period | 250 | -3 | 877 | 5 | -1 | -1 | 3 | 9 | 1,172 |
| DKK million | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| December 31, 2019 | Share capital | Treasury shares | Retained earnings | Other reserves | Total other reserves | Proposed dividends | Total | ||
| Currency revaluation | Cash flow hedges | Tax | |||||||
| Balance at the beginning of the period | 250 | -5 | 764 | 6 | 8 | -2 | 12 | 64 | 1,085 |
| Net profit for the period | 0 | 0 | 183 | 0 | 0 | 0 | 0 | 0 | 183 |
| Other comprehensive income for the period | 0 | 0 | 9 | 1 | 1 | 0 | 2 | 0 | 11 |
| Total comprehensive income for the period | 0 | 0 | 192 | 1 | 1 | 0 | 2 | 0 | 194 |
| Transactions with owners: | |||||||||
| Purchase of treasury shares | 0 | 0 | -5 | 0 | 0 | 0 | 0 | 0 | -5 |
| Transfer of treasury shares | 0 | 1 | -1 | 0 | 0 | 0 | 0 | 0 | 0 |
| Share-based payments | 0 | 0 | 13 | 0 | 0 | 0 | 0 | 0 | 13 |
| Deferred tax on share-based payments | 0 | 0 | -5 | 0 | 0 | 0 | 0 | 0 | -5 |
| Dividends paid | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -113 | -113 |
| Interim dividend for 2018 | 0 | 0 | -49 | 0 | 0 | 0 | 0 | 49 | 0 |
| Proposed dividend for 2018 | 0 | 0 | -49 | 0 | 0 | 0 | 0 | 49 | 0 |
| Total dividends for 2018 | 0 | 0 | -98 | 0 | 0 | 0 | 0 | 98 | 0 |
| Balance at the end of the period | 250 | -4 | 860 | 7 | 9 | -2 | 14 | 49 | 1,169 |
| DKK million | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| June 30, 2019 | Share capital | Treasury shares | Retained earnings | Other reserves | Total other reserves | Proposed dividends | Total | ||
| Currency revaluation | Cash flow hedges | Tax | |||||||
| Balance at the beginning of the period | 250 | -5 | 764 | 6 | 8 | -2 | 12 | 64 | 1,085 |
| Net profit for the period | 0 | 0 | 75 | 0 | 0 | 0 | 0 | 0 | -75 |
| Other comprehensive income for the period | 0 | 0 | 0 | 1 | 1 | 0 | 2 | 0 | 2 |
| Total comprehensive income for the period | 0 | 0 | 75 | 1 | 1 | 0 | 2 | 0 | 77 |
| Transactions with owners: | |||||||||
| Purchase of treasury shares | 0 | 0 | -5 | 0 | 0 | 0 | 0 | 0 | -5 |
| Transfer of treasury shares | 0 | 1 | -1 | 0 | 0 | 0 | 0 | 0 | 0 |
| Share-based payments | 0 | 0 | 7 | 0 | 0 | 0 | 0 | 0 | 7 |
| Deferred tax on share-based payments | 0 | 0 | -3 | 0 | 0 | 0 | 0 | 0 | -3 |
| Dividends paid | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -64 | -64 |
| Proposed interim dividend for 2019 | 0 | 0 | -49 | 0 | 0 | 0 | 0 | 49 | 0 |
| Balance at the end of the period | 250 | -4 | 788 | 7 | 9 | -2 | 14 | 49 | 1,097 |
19 of 26
NNIT A/S
Østmarken 3A
Telephone: +45 7024 4242
2860 Søborg
www.nnit.com
Denmark
CVR No: 21 09 31 06
NIT
Company announcement, August 13, 2020
Notes
Note 1
Accounting policies
The consolidated financial statements for the first six months of 2020 have been prepared in accordance with IAS 34 'Interim Financial Reporting' and on the basis of the same accounting policies for recognition and measurement as were applied in the Annual Report 2019 except what is mentioned below.
Change in accounting estimates
As a consequence of an asset review and slower technological development of server components NNIT has increased the useful lifetime for certain servers from 3 years to 5 years. An asset review of Datacenter assets based on the first 9 years of operations in NNIT's data center in Bagsværd has led to a change in the useful lifetime of data center components from 12-20 years to 20-30 years.
The changes have positively affected net profit in Q1 2020 by 3.8 million and Q2 2020 by 6.7 million.
The financial reporting including the consolidated financial statements for the first three months of 2020 and Management's review have been prepared in accordance with additional Danish disclosure requirements for interim report of listed companies.
See pages 57 to 62 of the Annual Report 2019 for a comprehensive description of the accounting policies applied for recognition and measurement.
20 of 26
NNIT A/S
Østmarken 3A
2860 Søborg
Denmark
Telephone: +45 7024 4242
www.nnit.com
CVR No: 21 09 31 06
NIT
Company announcement, August 13, 2020
Note 2
Quarterly numbers
| DKK million | 2020 | 2019 | ||||
|---|---|---|---|---|---|---|
| Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
| Revenue | 701 | 722 | 801 | 763 | 744 | 750 |
| Cost of goods sold | 608 | 619 | 657 | 637 | 644 | 645 |
| Gross profit | 93 | 103 | 144 | 127 | 100 | 105 |
| Sales and marketing costs | 31 | 31 | 34 | 33 | 31 | 32 |
| Administrative expenses | 24 | 25 | 29 | 25 | 24 | 27 |
| Operating profit before special items | 38 | 47 | 81 | 69 | 44 | 46 |
| Special items* | 12 | 7 | 8 | 16 | 0 | 0 |
| Operating profit | 26 | 40 | 73 | 53 | 44 | 46 |
| Net financials | -6 | 6 | 4 | 7 | -1 | 6 |
| Profit before income taxes | 20 | 46 | 77 | 59 | 43 | 51 |
| Income taxes | 6 | 11 | 18 | 9 | 9 | 11 |
| Net profit for the period | 14 | 35 | 59 | 50 | 34 | 40 |
*Special items comprises restructuring costs related to the cost restructuring plan and other special events
Segment disclosures
| DKK million | 2020 | 2019 | ||||
|---|---|---|---|---|---|---|
| Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
| Revenue by customer group | ||||||
| Novo Nordisk Group | 175 | 185 | 237 | 223 | 235 | 259 |
| Life sciences international | 106 | 92 | 99 | 95 | 90 | 77 |
| Life sciences Denmark | 68 | 67 | 64 | 57 | 56 | 54 |
| Life sciences | 349 | 344 | 400 | 375 | 381 | 390 |
| Enterprise | 170 | 206 | 203 | 212 | 190 | 198 |
| Public | 107 | 105 | 109 | 98 | 96 | 90 |
| Finance | 75 | 67 | 89 | 78 | 77 | 72 |
| Private & public | 352 | 378 | 401 | 388 | 363 | 360 |
| Total revenue | 701 | 722 | 801 | 763 | 744 | 750 |
| Gross profit by business unit | ||||||
| Life sciences | 51 | 62 | 97 | 78 | 73 | 86 |
| Private & public | 42 | 41 | 48 | 48 | 27 | 18 |
| Total Gross profit | 93 | 103 | 144 | 127 | 100 | 105 |
| Operating profit by business unit | ||||||
| Life sciences | 21 | 31 | 63 | 46 | 41 | 53 |
| Private & public | 17 | 16 | 18 | 22 | 3 | -7 |
| Total operating profit before special items | 38 | 47 | 81 | 69 | 44 | 46 |
The Danish operations generated 79.5% of NNIT's revenue in the first six months of 2020 and 82.7% in the same period last year based on the location of customer purchase orders. As a consequence of the predominantly Danish revenue, we will not disclose a geographical revenue split.
NNIT A/S
Østmarken 3A
Telephone: +45 7024 4242
2860 Søborg
www.nnit.com
Denmark
CVR No: 21 09 31 06
NIT
Company announcement, August 13, 2020
Note 3
Special items
Special items comprise costs that cannot be attributed directly to NNIT's ordinary activities and are non-recurring of nature.
The costs relate to significant restructuring of the cost base and processes as well as restructuring costs related to resignation of employees due to lost contracts.
The costs comprise staff related costs as well as external costs to advisors.
Therefore, the costs are separately disclosed to allow a view of the underlying business performance and in order to compare the underlying business performance to the guidance provided by NNIT.
Q2 2020 was affected by DKK 12 million and YTD June 30, 2020 by DKK 19 million.
Note 4
Related party transactions
| DKK million | June 30, 2020 | June 30, 2019 | Dec 31, 2019 |
|---|---|---|---|
| Assets | |||
| Receivables from related parties | 30 | 72 | 146 |
| Work in progress related parties | 55 | 37 | 54 |
| Liabilities | |||
| Liabilities to related parties | 0 | 15 | 0 |
| Prepayments from related parties | 45 | 14 | 20 |
Note 5
Contingent liabilities and legal proceedings
Contingent liabilities
None
Legal proceedings
None
Note 6
Currency hedging
NNIT's objective is at any time to limit the company's financial risks.
NNIT is exposed to exchange rate risks in the countries where NNIT has its main activities. The majority of NNIT's sales are in DKK and EUR, implying limited foreign exchange risk, due to the parent company's functional currency being DKK and Denmark's fixed-rate policy towards EUR. NNIT's foreign exchange risk therefore primarily stems from transactions carried out in the currencies of other countries in which NNIT mainly operates: primarily the Chinese yuan, and, to a lesser extent, the Czech koruna, the Philippine peso, the Swiss franc and the British pound.
22 of 26
NNIT A/S
Østmarken 3A
Telephone: +45 7024 4242
2860 Søborg
www.nnit.com
Denmark
CVR No: 21 09 31 06
NNIT
Company announcement, August 13, 2020
At present NNIT's sales in Chinese yuan, Czech koruna, and Swiss franc are not sufficiently to balance these currency risks. To manage foreign exchange rate risks, NNIT has entered into hedging contracts to hedge major foreign currency balances in Chinese yuan, Czech koruna and the Philippine peso. Due to the size of the exposure Swiss franc is not hedged.
Cumulative profit on derivative financial instruments regarding future cash flow per June 30, 2020 is recognized in Equity (Other comprehensive income) with an amount of DKK -10m before tax (DKK 8m after tax).
23 of 26
NNIT A/S
Østmarken 3A
Telephone: +45 7024 4242
2860 Søborg
www.nnit.com
Denmark
CVR No: 21 09 31 06
nnt
Company announcement, August 13, 2020
Note 7
Currency sensitivities
| Estimated annual impact on NNIT's operating profit of a 10% increase in the outlined currencies against DKK* | Hedging period (months) | |
|---|---|---|
| EUR | DKK 28 million | - |
| CNY | DKK -16 million | 14 |
| CZK | DKK -10 million | 14 |
| PHP | DKK -7 million | 14 |
| USD | DKK 5 million | - |
| CHF | DKK -1 million | - |
Hedging gains and losses do not impact operating profit as they are recognized under net financials. For further details on hedging, please see note 6 above.
* The above sensitivities address hypothetical situations and are provided for illustrative purposes only. The sensitivities assume the business develops consistent with the current 2020 business plan.
Key currency assumptions
| DKK per 100 | 2018 average exchange rates | 2019 average exchange rates | YTD 2020 average exchange rates at August 6, 2020 | Current exchange rates at August 6, 2020 |
|---|---|---|---|---|
| CNY | 95.78 | 93.82 | 95.68 | 90.55 |
| EUR | 745.68 | 746.60 | 746.19 | 745.00 |
| CZK | 27.34 | 29.08 | 28.37 | 28.45 |
| PHP | 13.46 | 12.88 | 13.33 | 12.82 |
| CHF | 703.67 | 671.37 | 700.34 | 692.64 |
| USD | 683.48 | 667.03 | 672.09 | 628.82 |
Currency development
NNIT has a net cost exposure in the Chinese yuan, the Czech koruna, the Philippine peso and the Swiss franc. Therefore, a depreciation of these currencies versus Danish kroner has a positive impact on reported operating profit, whereas an increase will have the reverse effect.
24 of 26
NNIT A/S
Østmarken 3A
2860 Søborg
Denmark
Telephone: +45 7024 4242
www.nnit.com
CVR No: 21 09 31 06
nnt
Company announcement, August 13, 2020
NNIT has hedged 90% of its net exposure in Chinese yuan (CNY hedged with CNH (CNY offshore)) and Czech koruna (CZK) for the coming 14 months.
Note 8
Performance in constant and reported currencies
Performance overview
| DKK million
(reported currencies) | Q2 2020 | Q2 2020
(constant) | Q2 2019 | Change
(reported) | Change
(constant) |
| --- | --- | --- | --- | --- | --- |
| Revenue | 700.9 | 700.1 | 743.7 | -5.7% | -5.9% |
| Cost of goods sold | 608.1 | 608.0 | 643.7 | -5.5% | -5.6% |
| Gross profit | 92.8 | 92.1 | 99.9 | -7.1% | -7.8% |
| Gross profit margin | 13.2% | 13.2% | 13.4% | -0.2pp | -0.3pp |
| Sales and marketing costs | 30.9 | 30.9 | 31.4 | -1.6% | -1.9% |
| Administrative expenses | 24.0 | 24.0 | 24.4 | -1.6% | -1.5% |
| Operating profit before special items | 37.9 | 37.3 | 44.1 | -14.1% | -15.5% |
| Operating profit margin before special items | 5.4% | 5.3% | 5.9% | -0.5pp | -0.6pp |
| Special items | 12.7 | 12.7 | 0.0 | n.a. | n.a. |
| Operating profit | 25.2 | 24.6 | 44.1 | -42.9% | -44.3% |
| Operating profit margin | 3.6% | 3.5% | 5.9% | -2.3pp | -2.4pp |
| Net financials | -6.1 | n.a. | -0.8 | 689.7% | n.a. |
| Profit before tax | 19.1 | n.a. | 43.3 | -56.0% | n.a. |
| Tax | 5.2 | n.a. | 9.0 | -41.8% | n.a. |
| Effective tax rate | 27.4% | n.a. | 20.7% | 6.7pp | n.a. |
| Net profit | 13.8 | n.a. | 34.4 | -59.7% | n.a. |
| DKK million
(reported currencies) | 6M 2020 | 6M 2020
(constant) | 6M 2019 | Change
(reported) | Change
(constant) |
| --- | --- | --- | --- | --- | --- |
| Revenue | 1,423.0 | 1,420.3 | 1,493.7 | -4.7% | -4.9% |
| Cost of goods sold | 1,226.6 | 1,223.7 | 1,289.2 | -4.9% | -5.1% |
| Gross profit | 196.4 | 196.6 | 204.5 | -4.0% | -3.9% |
| Gross profit margin | 13.8% | 13.8% | 13.7% | 0.1pp | 0.2pp |
| Sales and marketing costs | 61.9 | 61.7 | 63.5 | -2.5% | -2.9% |
| Administrative expenses | 49.4 | 49.3 | 51.4 | -3.8% | -4.0% |
| Operating profit before special items | 85.0 | 85.6 | 89.6 | -5.1% | -4.5% |
| Operating profit margin before special items | 6.0% | 6.0% | 6.0% | 0pp | 0pp |
| Special items | 19.3 | 19.3 | 0.0 | n.a. | n.a. |
| Operating profit | 65.8 | 66.2 | 89.6 | -26.6% | -26.1% |
| Operating profit margin | 4.6% | 4.7% | 6.0% | -1.4pp | -1.3pp |
| Net financials | 0.0 | n.a. | 5.0 | -99.7% | n.a. |
| Profit before tax | 65.8 | n.a. | 94.7 | -30.5% | n.a. |
| Tax | 16.7 | n.a. | 20.1 | -17.0% | n.a. |
| Effective tax rate | 25.4% | n.a. | 21.2% | 4.1pp | n.a. |
| Net profit | 49.1 | n.a. | 74.6 | -34.2% | n.a. |
*Constant currencies measured using average exchange rates for Q2 2019.
Revenue distribution
| DKKm
(reported currencies) | Q2 2020 | Q2 2020
(constant*) | Q2 2019 | Pct Change
(reported) | Pct Change
(constant) |
| --- | --- | --- | --- | --- | --- |
| Novo Nordisk Group | 174.9 | 175.1 | 235.3 | -25.6% | -25.6% |
| Life sciences international | 106.5 | 101.8 | 90.1 | 18.2% | 13.0% |
| Life sciences Denmark | 67.9 | 71.0 | 55.6 | 22.1% | 27.7% |
| Life sciences | 349.4 | 347.9 | 381.0 | -8.3% | -8.7% |
| Enterprise | 169.7 | 169.8 | 189.5 | -10.4% | -10.4% |
| Public | 107.4 | 107.9 | 96.0 | 11.9% | 12.4% |
| Finance | 74.5 | 74.5 | 77.1 | -3.4% | -3.4% |
| Private & Public | 351.6 | 352.2 | 362.6 | -3.1% | -2.9% |
| Total | 700.9 | 700.1 | 743.7 | -5.7% | -5.9% |
25 of 26
NNIT A/S
Østmarken 3A
2860 Søborg
Denmark
Telephone: +45 7024 4242
www.nnit.com
CVR No: 21 09 31 06
nnt
Company announcement, August 13, 2020
| DKKm
(reported currencies) | 6M 2020 | 6M 2020
(constant*) | 6M 2019 | Pct Change
(reported) | Pct Change
(constant) |
| --- | --- | --- | --- | --- | --- |
| Novo Nordisk Group | 359.8 | 359.8 | 494.1 | -27.2% | -27.2% |
| Life sciences international | 198.1 | 192.1 | 167.5 | 18.3% | 14.7% |
| Life sciences Denmark | 135.5 | 137.9 | 109.4 | 23.9% | 26.1% |
| Life sciences | 693.4 | 689.9 | 771.0 | -10.1% | -10.5% |
| Enterprise | 376.2 | 376.2 | 387.8 | -3.0% | -3.0% |
| Public | 212.5 | 213.3 | 185.5 | 14.6% | 15.0% |
| Finance | 140.9 | 140.9 | 149.4 | -5.7% | -5.7% |
| Private & Public | 729.6 | 730.4 | 722.7 | 1.0% | 1.1% |
| Total | 1,423.0 | 1,420.3 | 1,493.7 | -4.7% | -4.9% |
*Constant currencies measured using average exchange rates for Q2 2019.
NNIT A/S
Østmarken 3A
Telephone: +45 7024 4242
2860 Søborg
www.nnit.com
Denmark
CVR No: 21 09 31 06