Proact IT Group — Earnings Release 2020

Feb 11, 2021

Very strong result and good development in contracted cloud services

October - December 2020

• Revenues decreased by 1 percent to SEK 982 (991) million.
• Adjusted EBITA increased by 36 percent and amounted to SEK 66.4 (48.8) million, corresponding to an adjusted EBITA margin of 6.8 (4.9) percent.
• Profit before tax amounted to SEK 50.8 (22.7) million.
• Profit after tax amounted to SEK 40.1 (21.6) million.
• Profit per share amounted to SEK 4.28 (2.37).
• New contracts relating to cloud services worth SEK 142 (97) million were contracted, a increase by 46 percent.
• During the quarter, the acquisition of Cetus Solution in UK was implemented, which strengthens Proact's offering in cloud and workplace services.
• In November an Extraordinary General Meeting was held which decided on a dividend of SEK 2.50 per share for the financial year 2019. The dividend was paid in the same month.

January - December 2020

• Revenues increased by 7 percent to SEK 3,633 (3,408) million.
• Adjusted EBITA increased by 32 percent and amounted to SEK 219.4 (165.6) million, corresponding to an adjusted EBITA margin of 6.0 (4.9) percent.
• Profit before tax amounted to SEK 167.7 (101.7) million.
• Profit after tax amounted to SEK 132.3 (80.2) million.
• Profit per share amounted to SEK 14.39 (8.75).
• New contracts relating to cloud services worth SEK 331 (341) million were contracted, a decrease by 3 percent.
• The Board of Directors proposes that the Annual General Meeting resolves on a dividend of SEK 4.50 (2.50) per share.

Financial summary

Amounts in SEK million	Oct-Dec 2020	Oct-Dec 2019	Jan-Dec 2020	Jan-Dec 2019
Total revenues	982.1	991.0	3,633.1	3,407.9
Growth, %	–0.9	2.5	6.6	2.7
Growth, currency adjusted, %	2.7	0.2	8.3	0.5
Organic growth, % 1)	–4.4	–2.7	–0.3	1.1
Adjusted EBITA 2)	66.4	48.8	219.4	165.6
Adjusted EBITA margin, %	6.8	4.9	6.0	4.9
Operating profit (EBIT)	53.9	28.9	182.1	105.4
Operating margin (EBIT), %	5.5	2.9	5.0	3.1
Profit before tax	50.8	22.7	167.7	101.7
Net margin, %	5.2	2.3	4.6	3.0
Profit after tax	40.1	21.6	132.3	80.2
Profit margin, %	4.1	2.2	3.6	2.4
Earnings per share (outstanding shares), SEK 3)	4.28	2.37	14.39	8.75
Return on capital employed, % 4)	–	–	17.1	13.2
Cash flow from operations	265.5	208.7	468.1	329.5

1) Organic growth refers to growth excluding acquired and divested companies. 2) EBITA before items affecting comparability.

3) Proact has a long-term performance based share program that could result in dilution of maximum 0.89%. The company has bought back own shares which affects the key ratios above.

4) Calculated only for full year and rolling 12 months.

Proact is Europe's leading independent data centre and cloud services provider. By delivering flexible, accessible and secure IT solutions and services, we help companies and authorities reduce risk and costs, whilst increasing agility, productivity and efficiency. We've completed over 5,000 successful projects around the world, have more than 3,500 customers and currently manage in excess of 100 petabytes of information in the cloud. We employ over 1,000 people with offices across 15 countries in Europe and North America. Founded in 1994, our parent company, Proact IT Group AB (publ), listed on Nasdaq Stockholm in 1999 (under the symbol PACT).

For further information about Proact's activities please visit us at www.proact.eu

Comments from the CEO of Proact

"Very strong result and good development in contracted cloud services."

The fourth quarter of 2020 became yet another successful quarter for Proact, during a year where much has been different from what we have been used to. The profitability in the quarter was strong; gross margins improved somewhat from the third quarter, which in combination with continued low sales and administration expenses resulted in a historically high EBITA margin of 6.8 percent and a record high EBITA of SEK 66 million.

Revenues of SEK 982 (991) million were somewhat lower than last year, also when adjusting for exchange rates and acquisitions. Our markets are characterized by a mix of larger and smaller deals, where single large deals can impact an individual quarter. Underlying demand continues to be good on the markets where we are present, and I am convinced that we have good possibilities to reach our growth targets. Our cloud services continue to grow in line with our strategy. It is particularly positive that we closed new contracts for cloud services of SEK 142 million in the quarter. During previous quarters we have seen some hesitance among customers to enter these types of longer-term commitments during an ongoing pandemic. It is thus encouraging that we yet again were able to close cloud service deals at a high level. We see that the degree of restrictions impacts our customers' willingness to invest short-term. At the same time, the pace of digitalization is accelerating due to changed customer behaviors, increased security demands and the need for modern workplaces, which we see as a lasting trend.

We continue to sharpen our market proposition and have during the quarter launched a further developed version of Proact Hybrid Cloud. The enhanced version provides our customers further increased flexibility when moving data between different platforms according to their demands, while at the same time keeping control over where their data is stored and how it is used.

In the beginning of the fourth quarter we acquired Cetus Solutions in the UK, which has broadened our offering in cloud and workplace solutions. The integration of Cetus and our UK subsidiary has started and is progressing very well. We have already seen possibilities for cross selling, where we sell Proact's product to Cetus customers and vice versa. The cooperation with our vendors is also of great importance to us, and we continue to work closely with our existing strategic partners, which was confirmed by awards we received in the quarter from our two biggest partners, NetApp and Dell Technologies.

As a result of the strong development of Proact, in spite of the ongoing pandemic, our liquidity has remained strong during the year. In the spring, the dividend proposal for 2019 was withdrawn, but given the positive development, the shareholders decided on a dividend at an extra general meeting in November, which was paid out in the same month. Even after the dividend and the payment of the Cetus acquisition, our liquidity position remains strong which makes us well positioned to continue our acquisition strategy in 2021.

Finally, I want to thank all of our 1,000 employees who with big engagement and customer focus have managed to deliver products and services with high quality during the entire year, and I want to thank our 3,500 customers for their continued confidence. In summary I am very satisfied with the results both for the fourth quarter and the full year of 2020, and I look forward with confidence to a 2021 where we hopefully can return to a more normalized world and where we further can strengthen our position in our exciting markets.

Kista, 11 February, 2021

Jonas Hasselberg CEO

The Group's development

Revenues and result Fourth quarter

For the fourth quarter, total revenues amounted to SEK 982 (991) million, a decrease by 1 percent. In local currencies revenues increased by 3 percent and organically they decreased by 1 percent.

System revenues decreased by 3 percent to SEK 617 (636) million, organically the decrease was 3 percent. Service revenues increased by 3 percent to SEK 365 (354) million, organically they increased by 4 percent. Service revenues amounted to 37 percent of total revenues for the quarter.

New contracts relating to cloud services worth SEK 142 (97) million were contracted during the quarter. The contracts normally have a term of three to five years. Total revenues from cloud services increased by 9 percent and amounted to SEK 178 (164) million, organically they increased by 7 percent.

The gross margin decreased slightly in the quarter, compared to the same period previous year, partly due to lower margins within the service business.

Sales and administration expenses decreased organically by 18 percent, while revenues decreased organically by 1 percent. Selling and administrative expenses decreased partly as a result of the announced cost savings program, but also due to reduced travel and selling expenses due to the prevailing pandemic. In addition, expenses related to restructuring were lower during fourth quarter compared to the same period preious year.

Adjusted EBITA increased by 36 percent compared to previous year and amounted to SEK 66.4 (48.8) million. Adjusted EBITA margin was 6.8 (4.9) percent. Items affecting comparability, related to acquisition, amounted to SEK -2.8 (-11.3) million during the fourth quarter.

Profit before tax amounted to SEK 50.8 (22.7) million.

January - December

Revenues for full year 2020 amounted to SEK 3,633 (3,408) million, an increase by 7 percent. In local currencies revenues increased by 8 percent, organically they increased by 1 percent.

System revenues were unchanged and amounted to SEK 2,192 (2,203) million. Organically they decreased by 1 percent. Service revenues increased by 20 percent to SEK 1,440 (1,203) million, organically they increased by 5 percent. Service revenues amounted to 40 percent of total revenues.

For the full year new contracts relating to cloud services worth SEK 331 (341) million have been concluded. The contracts normally have a term of three to five years. Total revenues from cloud services increased by 37 percent and amounted to SEK 716 (523) million. Organically they increased by 14 percent.

The gross margin decreased slightly for the full year as a result of the acquisition of PeopleWare, whose gross margin are lower than Proact's average margin. Sales and administration expenses decreased organically by 10 percent, while revenues organically increased by 1 percent. The decrease is a combination of the implemented cost savings program and reduced travel and selling expenses due to the prevailing pandemic.

Adjusted EBITA increased by 32 percent and amounted to SEK 219.4 (165.6) million. Adjusted EBITA margin was 6.0 (4.9) percent. Profit before tax amounted to SEK 167.7 (101.7) million.

Revenues by industry

SEK million	Oct-Dec 2020	Oct-Dec 2019	Jan-Dec 2020	Jan-Dec 2019
Telecom	85	85	348	303
Bank, Finance	62	75	289	308
Oil, Energy	75	83	221	226
Manufacturing	110	217	450	529
Media	23	12	62	58
Trading & Services	153	236	687	760
Public sector	310	305	1,033	844
Other	164	–22	545	381
Total revenue	982	991	3,633	3,408

Revenues from cloud services Profit per share and return on equity, rolling 12 months, %

Amounts in SEK million	Oct-Dec 2020	Oct-Dec 2019	Jan-Dec 2020	Jan-Dec 2019
Total Revenues	982.1	991.0	3,633.1	3,407.9
Cost of goods and services sold, excl. amortizations and depreciations	–726.5	–724.8	–2,687.9	–2,508.5
Gross profit excl. amortizations and depreciations	255.7	266.1	945.2	899.3
Gross margin excl. amortizations and depreciations, %	26.0	26.9	26.0	26.4
Operational expenses excl. amortizations and depreciations	–152.1	–176.0	–572.8	–596.1
Adjusted EBITDA1)	103.5	90.1	372.4	303.2
Adjusted EBITDA margin, %	10.5	9.1	10.3	8.9
Deprecations and write-downs of tangible assets	–37.1	–41.3	–153.0	–137.6
Adjusted EBITA1)	66.4	48.8	219.4	165.6
Adjusted EBITA margin, %	6.8	4.9	6.0	4.9
Amortizations and write-downs of intangible assets	–9.7	–8.7	–34.6	–28.7
Items affecting comparability	–2.8	–11.3	–2.8	–31.5
Operating profit/loss (EBIT)	53.9	28.9	182.1	105.4
Operating margin (EBIT), %	5.5	2.9	5.0	3.1

1) EBITDA and EBITA before items affecting comparability

Cash flow

Fourth quarter

Cash flow for the quarter was SEK 91 (166) million, of which SEK 266 (209) million from operating activities.

January - December

For the full year, cash flow was SEK 126 (96) million, of which SEK 468 (330) million from operating activities. During the period, amortization of lease liabilities amounted to SEK 133 million.

Investments

During the full year, SEK 105 (94) million has been invested in fixed assets, whereof SEK 50 million in Proact Finance for customer deliveries.

Financial position

Cash and cash equivalent amounted to SEK 468 million as of December 31, 2020, compared to SEK 373 million last year. Of the total overdraft credit facility of SEK 198 million, none was utilized. Bank loans amounted to SEK 212 million and relate to a three-year revolving credit facility. Investments in IT-equipment for the cloud operations are financed through leasing agreements. The Group's equity ratio at the end of the period was 21 (18) percent.

Net debt

SEK million	Dec 31 2020	Sep 30 2020	Dec 31 2019	Sep 30 2019
Cash and cash equivalents	468	396	373	217
Bank overdraft facilities	–	–	–	–7
Liabilities to credit institutions excl. financial leasing liabilities	–212	–230	–232	–111
Net cash (+)/Net debt (–) excl. financial leasing	257	166	142	99
Financial leasing liabilities	–234	–259	–302	–262
Net cash (+)/Net debt (–) incl. financial leasing	22	–92	–161	–163
Unutilized bank overdraft facility	198	250	253	249
Total bank overdraft facility	198	250	253	255

Income tax

The group's tax expense includes total current tax and deferred tax calculated based on applicable tax rates in the respective countries. Reported tax cost for the full year 2020 amounted to SEK 35.4 (21.5) million, corresponding to an efficient tax rate of 21 (21) percent.

Buy-back of own shares

The Annual General Meeting on May 6, 2020 authorized the Board to acquire up to 10 percent of the Company's shares until the next Annual General Meeting. As of December 31, 2020, no shares have been acquired under this authorization.

As of December 31, 2020, the company holds 182,269 shares in own repository, which corresponds to 2.0 percent of the total number of shares.

Employees

The company had 1,022 (1,016) employees as of December 31, 2020, of which the acquisition of Cetus has contributed with 47 employees.

Parent Company in brief

The Parent Company's total revenues for the period amounted to SEK 108.6 (100.9) million. Profit before tax amounted to SEK 54.0 (60.4) million.

The Parent Company's liabilities in a joint group currency account amounted as at 31 December 2020 to SEK 297 (265) million.

At the end of the period, the number of people employed by the parent company totalled 16 (18).

The Parent Company's operations have remained unchanged over the period. There have been no significant transactions with related parties.

Business Units

Nordics UK

Revenue and result Fourth quarter

In Nordics, revenues decreased by 1 percent during the quarter. Revenues from system sales decreased by 1 percent and revenues from service operation increased by 2 percent.

Adjusted EBITA amounted to SEK 32.7 (36.5) million and EBITA margin was 6.5 (7.2) percent for the quarter. In Nordics EBITA margin was negatively affected by lower margin within system sales growth, partly offset by lower sales and administration expenses of 13 percent.

January - December

In Nordics, revenues increased by 2 percent during the full year. Revenues from system sales increased by 1 percent and revenues from service operation increased by 5 percent.

Adjusted EBITA amounted to SEK 118.3 (95.6) million and EBITA margin was 6.8 (5.6) percent.

In Nordics profitability in service operations improved during the period. At the same time sales and administration expenses decreased by 7 percent.

Revenue and result Fourth quarter

In UK, revenues increased by 12 percent during the quarter, when Cetus Solutions reports as a part of the segment from November 1. Organically revenue increased by 4 percent. System revenues increased by 30 percent, while organically increase by 11 percent during the quarter. Revenues from service operation decreased by 2 percent, the same organically.

Adjusted EBITA amounted to SEK 11.2 (6.1) million and EBITA margin was 7.0 (4.2) percent for the quarter. In the UK, the EBITA margin was affected positively by reduced sales and administration costs and by the acquisition of Cetus. Sales and administration costs organically decreased by 10 percent.

January - December

In UK, revenues increased by 7 percent. Organically increased by 5 percent during the full year. System revenues increased by 20 percent, and organically increased by 16 percent. Revenues from the services business decreased by 4 percent, also organically decrease by 4 percent.

Adjusted EBITA amounted to SEK 39.1 (34.3) million and EBITA margin was 6.5 (6.1) percent for the period. In UK, the increased EBITA margin is mainly attributable to reduced sales and administration expenses, which organically decreased by 7 percent.

SEK million	Oct-Dec 2020	Oct-Dec 2019	Change, %	Jan-Dec 2020	Jan-Dec 2019	Change, %
Revenues	502	507	–1	1,745	1,715	2
Adjusted EBITA	32.7	36.5	–10	118.3	95.6	24
Margin, %	6.5	7.2		6.8	5.6

^{2017 2018 2019 2020} 0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

EBITA per quarter EBITA rolling 12 months

0 10

25

Business Units

West

Revenue and result Fourth quarter

In West, revenues decreased by 8 percent during the quarter, and also organically decrease by 8 percent. System revenues decreased by 27 percent, at the same time service revenues increased by 10 percent.

Adjusted EBITA amounted to SEK 8.6 (7.0) million and EBITA margin was 3.1 (2.3) percent for the quarter.

PeopleWare was acquired in October 2019 and is included in the reporting from October 2019. During the fourth quarter of 2020 a large part of the integration activities was completed, which have had some negative impact on the result. In combination with reduced sales, EBITA margin increased slightly compared to the previous quarters 2020. Sales and administration expenses organically decreased by 14 percent.

January - December

In West, revenues increased by 17 percent during the full year, while organically decrease by 5 percent. System revenues decreased by 14 percent, of which organically decrease by 18 percent. At the same time service revenues increased by 59 percent, while they organically increased by 16 percent.

Adjusted EBITA amounted to SEK 48.9 (22.4) million and EBITA margin was 4.4 (2.3) percent for the period. The improved EBITA margin is mainly due to the effects of previous implemented improvement measures in Germany.

SEK million	Oct-Dec 2020	Oct-Dec 2019	Change, %	Jan-Dec 2020	Jan-Dec 2019	Change, %
Revenues	278	302	–8	1,118	959	17
Adjusted EBITA	8.6	7.0	23	48.9	22.4	118
Margin, %	3.1	2.3		4.4	2.3

East

Revenue and result Fourth quarter

In East, revenues decreased by 23 percent during the quarter. System revenues decreased by 32 percent and service revenues decreased by 3 percent. Adjusted EBITA amounted to SEK 5.6 (3.2) million and EBITA margin was 12.2 (5.4) percent for the quarter.

In East, the EBITA margin was positively affected by reduced sales and administration expenses of 12 percent.

January - December

In East, revenues decreased by 5 percent during the full year. System revenues decreased by 8 percent and service revenues increased by 1 percent.

Adjusted EBITA amounted to SEK 18.8 (15.6) million and EBITA margin was 9.8 (7.7) percent for the full year.

The EBITA margin was positively affected by increased margins and reduced sales and administration expenses of 6 percent.

SEK million	Oct-Dec 2020	Oct-Dec 2019	Change, %	Jan-Dec 2020	Jan-Dec 2019	Change, %
Revenues	45	59	–23	192	202	–5
Adjusted EBITA	5.6	3.2	75	18.8	15.6	20
Margin, %	12.2	5.4		9.8	7.7

Adjusted EBITA Adjusted EBITA

Proact Finance

Revenue and result Fourth quarter

Proact Finance revenues increased for the quarter compared to the same period last year and amounted to SEK 28 (19) million. Net financial items amounted to SEK 0.9 (1.0) million. Profit before tax amounted to SEK 1.9 (–0,6) million.

January - December

Proact Finance revenues increased for the period compared to the same period last year and amounted to SEK 105 (97) million. Net financial items amounted to SEK 3.8 (3.9) million. Profit before tax amounted to SEK 3.4 (2.2) million. Future contracted cash flows from Proact Finance amounted to SEK 171 (162) million, an increase by 5 percent.

SEK million	Oct-Dec 2020	Oct-Dec 2019	Change, %	Jan-Dec 2020	Jan-Dec 2019	Change, %
Revenues	28	19	52	105	97	8
EBIT	1.0	−1.6	163	–0.4	–1.7	76
Net financial items	0.9	1.0	–8	3.8	3.9	–2
Profit before tax	1.9	−0.6	433	3.4	2.2	55

Operating segments

Nordics:	Sweden, Norway, Finland, USA and Denmark
UK:	United Kingdom
East:	Estonia, Latvia, Lithuania, Czech Republic and Slovakia
West:	Netherlands, Belgium, Spain and Germany

Proact Finance: Proact's own in-house finance company is reported separately as this company supports all geographical regions.

Jan-Dec 2020					Proact
SEK million	Nordics	UK	West	East	Finance	Groupwide	Eliminations	Group
Total revenue	1,745	605	1,118	192	105	142	–274	3,633
EBITDA, before items affecting comparability	156.1	88.2	94.3	23.0	–0.4	11.2	–	372.4
Depreciations and write-down on tangible fixed assets	–37.8	–49.2	–45.3	–4.3	–	–16.4	–	–153.0
EBITA, before items affecting comparability	118.3	39.1	48.9	18.8	–0.4	–5.2	–	219.4
Items affecting comparability	–	–2.8	–	–	–	–	–	–2.8
EBITA	118.3	36.3	48.9	18.8	–0.4	–5.2	–	216.7
Amortizations and write-down on intangible fixed assets	–1.5	–9.2	–17.3	–0.8	–	–5.8	–	–34.6
EBIT	116.8	27.1	31.6	18.0	–0.4	–11.0	–	182.1
Net financial items	–3.6	–3.6	–3.8	0.6	3.8	–7.8	–	–14.4
Profit before tax	113.2	23.5	27.9	18.6	3.4	–18.8	–	167.7
Tax								–35.4

Comprehensive income for the period 132.3

Jan-Dec 2019 SEK million	Nordics	UK	West	East	Proact Finance	Groupwide	Eliminations	Group
Total revenue	1,715	565	959	202	97	138	–269	3,408
EBITDA, before items affecting comparability	134.4	85.2	50.4	20.4	–1.5	14.4	–	303.2
Depreciations and write-down on tangible fixed assets	–38.9	–50.9	–28.0	–4.7	–0.1	–14.9	–	–137.6
EBITA, before items affecting comparability	95.6	34.3	22.4	15.6	–1.7	–0.6	–	165.6
Items affecting comparability	–2.1	–1.4	–10.8	–	–	–17.2	–	–31.5
EBITA	93.4	32.9	11.6	15.6	–1.7	–17.8	–	134.2
Amortizations and write-down on intangible fixed assets	–1.5	–8.6	–12.2	–0.8	–	–5.6	–	–28.7
EBIT	92.0	24.3	–0.6	14.9	–1.7	–23.4	–	105.4
Net financial items	–3.5	–3.8	–1.5	–0.1	3.9	1.4	–	–3.7
Profit before tax	88.4	20.5	–2.2	14.8	2.2	–22.0	–	101.7
Tax								–21.5

Comprehensive income for the period 80.2

Market Review

Understanding market trends, identifying new technology with commercial potential, and then building competence around this is something Proact always have been strong in. In this way, we can be at the forefront of the markets development and establish ourselves early in segments where demand is expected to grow. This is a successful cornerstone of our strategy – but we are also seeing some major, widespread trends from the buyers.

For our customers, IT has historically been a tool mainly for rationalisation and efficiency. In particular, with Proact's focus on data centres, sales have largely been driven by new technology with a constantly improving price/performance ratio.

Well-functioning IT delivery is, of course, a prerequisite for any organisation to run efficiently, but the ongoing digital transformation adds a new dimension giving IT an even greater strategic importance.

Cost savings and/or efficiency are no longer the main drivers of customer IT investments. Instead, people are expecting IT to drive business development, business revenue and business growth.

Flexibility and hybrid delivery models

To drive business and business development through IT, there is a strong and widespread vision of a cloud-based IT infrastructure. However, there are very few organisations in Proact's segments that can, or will, put everything into public clouds. This could be for any number of reasons, including data sovereignty, data regulations, organisations' internal policies, security concerns, cost implications and latency issues, to name but a few.

Instead, we are seeing that most of our customers choose a hybrid solution that takes advantage of the benefits of traditional IT infrastructure, managed cloud services, private cloud services and public cloud services. However, this type of hybrid delivery model adds complexity. Organisations face new challenges, especially relating to security and networking – and this opens up new opportunities for systems and cloud integrators with a strong range of services and expertise.

Other information

Events after the balance sheet date

No events of significance to the Group have occurred since the end of the report period.

Transactions with related parties

No transactions between Proact and related parties, which have significantly affected the Group's position and profits, have taken place during the quarter.

Risks and uncertainty factors within the enterprise

The company has in the current situation difficulties to assess consequences' of United Kingdom's forthcoming exit from EU. Short term, currency rate effects will affect the group's financial statements.

The continued spread of covid-19 means that many companies may be in a financially strained situation with liquidity problems, declining sales and in the long run impact on earnings. Against this background, Proact is working in parallel to secure shortterm solutions and to find long-term alternatives in the current situation. Proact currently has a better insight into the short-term consequences of covid-19 and continues to make the assessment that in the short term, the Group can handle the resulting situation as the company has good liquidity and stable financing. The company's ability to continue to supply contracted services such as support and operations services and outsourcing services is good. However, there is still significant uncertainty about the future development of the pandemic and its effect on economies and companies. There are still risks that supply chains will be adversely affected, which in turn can affect the availability of the products and sub-components that the company sells. Proact has not furloughed any staff and has only received governmental contribution in the form of reductions in social security costs to a very limited extent.

Otherwise, no risks or uncertainty factors have altered, compared to those commented upon in the latest Annual Report issued. For a more detailed description of significant risks and uncertainty factors, please see Proact's annual report for 2019, page 28.

Alternative Performance Measures

The company presents financial key figures in the interim report that are not defined according to IFRS. The company believes that these key figures provide valuable supplementary information to investors and the company's management. For definitions of the financial ratios, see the Annual Report 2019.

Annual General meeting

The Annual General Meeting will be held at 4 pm on May 6, 2021. The work of the Nomination Committee before the Annual General Meeting has not yet been completed. For more information, see the company's website www.proact.se.

Financial calendar

22 Apr 2021	Interim Report Q1 2021
6 May 2021	Annual General Meeting 2021
14 Jul 2021	Interim Report Q2 2021
21 Oct 2021	Interim Report Q3 2021
10 Feb 2022	Year-end Report 2021

Kista 11 February 2021 Proact IT Group AB (publ)

Jonas Hasselberg CEO

This interim report has not been audited.

Note

The information in this interim report is such information as Proact IT Group (publ) is obliged to publish pursuant to the EU Market Abuse Regulation, the Securities Market Act, and/or the Act on Trading in Financial Instruments. This information was submitted for publication at 08:00 (CET) on 11 February 2021.

Contact

Jonas Hasselberg, CEO +46 722 13 55 56 jonas.hasselberg@proact.eu Kistagången 2, Kista Linda Höljö, CFO +46 725 07 40 85 linda.holjo@proact.eu Tel. +46 8 410 666 00

Proact IT Group AB

www.proact.eu

Org.no: 556494-3446 Reg. Office: Stockholm

Financial reports

Consolidated statement of comprehensive income

Amounts in SEK million	Oct-Dec 2020	Oct-Dec 2019	Jan-Dec 2020	Jan-Dec 2019
System income	617.0	635.9	2,192.1	2,203.1
Service income	364.7	354.4	1,439.7	1,203.0
Other operating income	0.5	0.6	1.3	1.8
Total income	982.1	991.0	3,633.1	3,407.9
Cost of goods and services sold	–758.7	–759.0	–2,816.7	–2,619.2
Gross profit	223.5	231.9	816.4	788.6
Sales and marketing expenses	–93.1	–120.8	–359.9	–406.0
Administration expenses	–73.6	–71.0	–271.7	–245.8
Items affecting comparability	–2.8	–11.3	–2.8	–22.4
Disposal of subsidiary	–	–	–	–9.1
Operating profit/loss (EBIT)	53.9	28.9	182.1	105.4
Net financial items	–3.2	–6.2	–14.4	–3.7
Profit before tax	50.8	22.7	167.7	101.7
Income tax	–10.7	–1.1	–35.4	–21.5
Comprehensive income for the period	40.1	21.6	132.3	80.2
Other comprehensive income
Items which may be reversed later in the income statement
Change of hedging reserve (net investment in foreign operations)	–8.7	–0.1	–8.0	–0.9
Tax effect of change of reserve (net investment in foreign operations)	1.9	0.0	1.7	0.2
Translation differences from remaining foreign operations	–13.6	–5.6	–27.8	15.0
Total items which may be reversed later in the income statement	–20.4	–5.7	–34.1	14.3
Total comprehensive income for the period	19.7	15.8	98.3	94.4
Comprehensive income attributable to:
Shareholders of the Parent company	39.2	21.7	131.7	80.1
Holdings without a controlling influence	0.9	–0.2	0.7	0.1
Total comprehensive income for the period attributable to:
Shareholders of the Parent company	18.9	16.0	97.7	94.3
Holdings without a controlling influence	0.8	–0.2	0.6	0.1

Data per share1)

	Oct-Dec 2020	Oct-Dec 2019	Jan-Dec 2020	Jan-Dec 2019
Earnings per share for the period attributable to the shareholders of the parent company, SEK	4.28	2.37	14.39	8.75
Equity per share attributable to the shareholders of the
parent company, SEK	65.78	57.28	65.78	57.28
Cash flow from operations per share, SEK	29.01	22.81	51.15	36.01
Number of outstanding shares at end of period	9,151,617	9,151,617	9,151,617	9,151,617
Weighted average number of outstanding shares	9,151,617	9,151,617	9,151,617	9,151,617

1) Proact has a long-term performance based share program that could give rise to dilution of maximum 0.89 percent.

Consolidated Balance Sheet in Brief

Amounts in SEK million	31 Dec 2020	31 Dec 2019
ASSETS
Fixed assets
Goodwill	551.7	516.4
Other intangible fixed assets	112.2	93.2
Tangible fixed assets	309.8	384.3
Other long-term receivables	408.8	350.9
Deferred tax receivables	15.9	16.2
Current assets
Inventories	13.0	20.2
Trade and other receivables	1,044.3	1,122.2
Cash and cash equivalents	468.3	373.2
Total assets	2,923.9	2,876.7
EQUITY AND LIABILITIES
Equity attributable to the shareholders of the parent company	601.9	524.2
Equity attributable to holdings without a controlling influence	3.1	1.7
Total equity	605.0	525.9
Long-term liabilities
Long-term liabilities, interest-bearing	358.9	453.3
Long-term liabilities, non-interest-bearing	461.1	379.4
Deferred tax liabilities	33.2	28.1
Short-term liabilities
Short-term liabilities, interest-bearing	131.0	127.6
Short-term liabilities, non-interest-bearing	1,334.7	1,362.4
Total equity and liabilities	2,923.9	2,876.7

Consolidated Statement of Changes in Equity

Amounts in SEK million	Jan-Dec 2020	Jan-Dec 2019
At beginning of period	525.9	469.6
Total comprehensive income for the period	98.3	94.4
Dividend	–22.9	–38.0
Dividend to holdings without a controlling influence	–0.2	–0.3
Financial liability to holdings without a controlling influence	2.4	0.0
Share savings and share option programs	1.5	0.0
At end of period	605.0	525.9

Holdings without a controlling influence: Proact Lietuva UAB 26.14 percent and Proact Czech Republic, s.r.o. 14.7 percent.

Consolidated Cash Flow Statement in Brief

Amounts in SEK million	Oct-Dec 2020	Oct-Dec 2019	Jan-Dec 2020	Jan-Dec 2019
Cash flow from operating activities before changes in working capital	90.6	80.9	361.8	267.1
Cash flow from changes in working capital	174.9	127.8	106.3	62.4
Cash flow from operating activities	265.5	208.7	468.1	329.5
Cash flow from investing activities	–86.5	–128.5	–148.7	–206.2
Cash flow from financing activities	–88.3	85.3	–193.4	–27.6
Total cash flow for the period	90.7	165.5	126.0	95.7
Cash and cash equivalents at beginning of the period	396.0	216.6	373.2	269.9
Currency translation difference in cash and cash equivalents	–18.4	–9.0	–30.8	7.5
Cash and cash equivalents at end of the period	468.3	373.2	468.3	373.2

Key ratios

	Oct-Dec 2020	Oct-Dec 2019	Jan-Dec 2020	Jan-Dec 2019
Total revenue, SEK millions	982	991	3,633	3,408
of which currency effect total revenues, SEK million	–36	22	–59	72
Currency adjusted total revenues, SEK million	1,018	969	3,692	3,336
Currency adjusted growth total revenues, %	2.7	0.2	8.3	0.5
System revenues, SEK millions	617	636	2,192	2,203
of which currency effect system revenues, SEK million	–21	12	–38	42
Currency adjusted system revenues, SEK million	638	624	2,230	2,161
Currency adjusted growth total revenues, %	0.3	–7.0	1.2	–0.6
Services revenues, SEK millions	365	354	1,440	1,203
of which currency effect services revenues, SEK million	–15	10	–21	30
Currency adjusted services revenues, SEK million	380	344	1,460	1,173
Currency adjusted growth total revenues, %	7.2	16.6	21.4	3.0
EBITDA, SEK million	100.8	78.9	369.6	271.7
EBITDA margin, %	10.3	8.0	10.2	8.0
Depreciation and write-down on tangible assets, SEK million	–37.1	–41.3	–153.0	–137.6
EBITA, SEK million	63.6	37.6	216.7	134.2
EBITA margin, %	6.5	3.8	6.0	3.9
Depreciation and write-down on intangible assets, SEK million	–9.7	–8.7	–34.6	–28.7
EBIT, SEK million	53.9	28.9	182.1	105.4
EBIT margin, %	5.5	2.9	5.0	3.1
Profit before tax, SEK million	50.8	22.7	167.7	101.7
Net margin, %	5.2	2.3	4.6	3.0
Profit after tax, SEK million	40.1	21.6	132.3	80.2
Profit margin, %	4.1	2.2	3.6	2.4
Equity	605.0	525.9	605.0	525.9
Total assets	2,923.9	2,876.7	2,923.9	2,876.7
Equity ratio, %	20.7	18.3	20.7	18.3
Capital turnover rate, times	0.3	0.4	1.3	1.3
Return on equity, % 1)	–	–	23.4	16.1
Financial costs included in net financial items, SEK million	4.5	8.1	20.7	11.3
Capital employed	1,094.9	1,106.8	1,094.9	1,106.8
Return on capital employed, % 1)	–	–	17.1	13.2
Investments in fixed assets, SEK million	147.1	256.4	269.1	440.7
Profit before tax per employee, SEK thousands	52.4	25.1	172.3	122.0
Average number of employees	970	904	973	834

1) Calculated only for full year and rolling 12 months.

For a five-year summary, see Note 2. Definitions of key ratios, see Annual Report 2019.

Key figures Proact reports and monitors the business by are common key figures used by the industry and by companies' listed on Nasdaq Stockholm.

Parent Company´s Income Statement, in brief

Amounts in SEK million	Jan-Dec 2020	Jan-Dec 2019
Net sales	108.6	100.9
Cost of goods and services sold	–	–
Gross profit	108.6	100.9
Administration expenses	–120.7	–125.8
Operating profit	–12.2	–24.8
Net financial items	36.2	64.6
Profit after financial items	24.0	39.8
Provisions	30.0	20.6
Profit before tax	54.0	60.4
Income tax	–1.6	0.2
Comprehensive income for the period	52.5	60.6

Parent Company´s Balance Sheet, in brief

Amounts in SEK million	31 Dec 2019	31 Dec 2019
ASSETS
Fixed assets	765.9	791.5
Current assets	205.5	140.7
Total assets	971.4	932.2
EQUITY AND LIABILITIES
Restricted Equity	76.6	54.8
Non-restricted Equity	319.1	309.9
Equity	395.7	364.6
Long-term liabilities	222.9	242.9
Short-term liabilities	352.8	324.8
Total equity and liabilities	971.4	932.2

Explanatory information

Note 1 Accounting principles

The consolidated accounts for the interim report have been compiled in accordance with International Financial Reporting Standards (IFRS) as endorsed by the EU, and the Swedish Annual Accounts Act. The Parent Company's accounts have been compiled in accordance with the Annual Accounts Act and the Swedish Financial Reporting Board's recommendation RFR 2 (Accounting for Legal Entities). The Group applies the same accounting principles as those described in the annual report for 2019, with the exception of the additional accounting principle for government grants. Government grants are reported in the financial statements when there is reasonable certainty the grant will be received and that the company will meet the conditions associated with the grant. Government grants relating to cost coverage are systematically accrued and reported as income in the profit for the year in the same way and over the same periods as the costs the grants are intended to compensate for. The grants are reported as deductions from corresponding costs such as cost reduction.

Financial instruments

Proact's financial instruments consist of derivatives, accounts receivable, cash and cash equivalents, accounts payable, accrued trade creditors and interest-bearing liabilities. Derivative instruments are recognized in the balance sheet as per the contract date and are valued at fair value, both initially and in subsequent revaluations. All derivatives are reported continuously at fair value with the value changes reported in the statement of comprehensive income within cost sold for those derivatives that are linked to accounts payable and financial items for the derivatives that are linked to financial leasing contracts. Derivatives are valued at fair value within level 2, i.e. fair value determined on the basis of valuation techniques with observable market data, either directly (as price) or indirectly (hence to price). All other financial assets have been classified as loans and receivables, which includes accounts receivable and cash and cash equivalents. All other financial liabilities have been classified as other financial liabilities valued at amortized cost, which includes accounts payable, accrued supplier costs and liabilities to credit institutions. Liabilities to credit institutions run at variable interest rates, and reported interest rates are on a par with current interest on liabilities to credit institutions and other financial assets and liabilities with short maturities. Based on this, the book values of all financial assets and liabilities are judged to be a reasonable estimate of fair value.

Note 2 Five-year summary

	Jan-Dec 2020	Jan-Dec 2019	Jan-Dec 2018	Jan-Dec 2017	Jan-Dec 2016 1)
Total revenue, SEK million	3,633	3,408	3,318	3,243	2,922
EBITDA, SEK million	369.6	271.7	231.1	218.8	191.4
EBITDA margin, %	10.2	8.0	7.0	6.7	6.6
EBITA, SEK million	216.7	134.2	200.5	188.1	163.9
EBITA margin, %	6.0	3.9	6.0	5.8	5.6
EBIT, SEK million	182.1	105.4	164.5	155.6	137.2
EBIT margin, %	5.0	3.1	5.0	4.8	4.7
Profit before tax, SEK million	167.7	101.7	167.8	151.1	133.7
Net margin, %	4.6	3.0	5.1	4.7	4.6
Profit after tax, SEK million	132.3	80.2	127.3	114.0	96.7
Profit margin, %	3.6	2.4	3.8	3.5	3.3
Equity ratio, %	20.7	18.3	21.2	19.8	18.4
Capital turnover rate, times	1.3	1.3	1.6	1.7	1.7
Return on equity, %	23.4	16.1	29.8	31.8	29.8
Return on capital employed, %	17.1	13.2	29.5	29.2	27.2
Dividend to shareholders of the Parent company, SEK million 2)	22.9	38.0	34.3	32.4	25.1
Investments in fixed assets, SEK million	269.1	440.7	83.8	166.7	60.5
Financial costs included in net financial items, SEK millions	20.7	11.3	3.9	11.4	8.3
Profit before tax per employee, SEK thousands	172	122	211	189	185
Average number of employees	973	834	797	799	723
Earnings per share for the period, SEK 3)	14.39	8.75	13.87	12.22	10.32

1) Years prior to 2017 has not been recalculated according to new accounting principles (IFRS 15), which are applied as from January 2018.

2) Relates to the year in which the dividend was executed. For business year 2019 a dividend of SEK 2.50 (4.15), total SEK 22.9 million, was made.

3) Calculated on the basis of the weighted average number of outstanding shares. Proact has a long-term performance based share program that could give rise to dilution of maximum 0.89 percent.

Note 3 Acquired companies net assets at the time of acquistion

	Oct 2020
Intangible fixed assets	–
Tangible fixed assets	6
Financial fixed assets	9
Trade and other receivables	24
Cash and cash equivalents	47
Long-term liabilities	–12
Accounts payable and other short-term liabilities	–51
Net identifiable assets	24
Goodwill	62
Fair value adjustment acquired intangible assets	34
Fair value adjustment acquired prepaid income	5
Deferred tax related to acquired assets	–7
Purchase price	118
Deduct:
Acquired cash	–47
Deferred payment of part of consideration	–25

Own shares used in acquisition – Net outflow of cash 45 The acquisition relates to 100 percent of the shares and votes in Cetus Solutions Ltd. The acquisition was completed on October 22, 2020.

Total acquisition costs charged to earnings in 2020 amounted to SEK 2.8 million.

Of the total purchase price of GBP 9.8 million, 80 percent, GBP 7.8 million, was paid in cash at the time of acquisition. Seven percent of the purchase price will be settled six months after the acquisition date, seven percent after 12 months and the remaining 18 months after the acquisition date.

In the acquisition, the purchase price was higher than the recognised assets of the acquired business, which resulted in the acquisition analysis giving rise to intangible assets.

Goodwill in this acquisition is motivated by the fact that it is a profitable company that strengthens Proact's presence in the UK market and adds additional expertise to deliver cloud- and workplace services to medium and large companies and authorities in UK.

Founded in 2001, Cetus is a privately-owned company with 47 employees and more than 100 active customers.

Through the acquisition, with the combined service portfolio and expertise from both companies, Proact can provide a more complete offer to both existing and new customers.

The acquisition of Cetus also contributes to Proact's strategic goals for increased sales and improved EBITA margin, in line with the Group's updated strategy and financial goals.

The acquisition was completed on October 22, 2020 and for the full year 2020, Cetus contributed SEK 25 million in revenue and SEK 2 million in operating profit. On a full-year basis, Cetus is expected to contribute to the Group's sales of approximately SEK 160 million and an operating profit of approximately SEK 8 million.