Proact IT Group — Interim / Quarterly Report 2021

Aug 14, 2021

Lower sales and good cost control

April - June 2021

• Revenues decreased by 11 percent to SEK 878 (987) million.
• Adjusted EBITA decreased by 18 percent and amounted to SEK 46.0 (56.3) million, corresponding to an adjusted EBITA margin of 5.2 (5.7) percent.
• Profit before tax amounted to SEK 34.0 (40.1) million.
• Profit after tax amounted to SEK 26.3 (31.3) million.
• Profit per share amounted to SEK 0.95 (1.14).
• New contracts relating to cloud services worth SEK 72 (77) million were contracted, a decrease by 7 percent.
• During the quarter, the acquisition of Conoa, a Swedish fast-growing company with specialist expertise within cloud solutions, was announced and completed.

January - June 2021

• Revenues decreased by 3 percent to SEK 1,772 (1,830) million.
• Adjusted EBITA decreased by 11 percent and amounted to SEK 87.6 (98.9) million, corresponding to an adjusted EBITA margin of 4.9 (5.4) percent.
• Profit before tax amounted to SEK 64.8 (73.5) million.
• Profit after tax amounted to SEK 48.8 (57.1) million.
• Profit per share amounted to SEK 1.78 (2.09).
• New contracts relating to cloud services worth SEK 150 (128) million were contracted, an increase by 17 percent.

Financial summary

Amounts in SEK million	Apr-Jun 2021	Apr-Jun 2020	Jan-Jun 2021	Jan-Jun 2020	Rolling 12 2020/2021	Jan-Dec 2020
Total revenues	878.5	986.6	1,772.1	1,830.3	3,574.9	3,633.1
Growth, %	–11.0	22.3	–3.2	6.7	1.5	6,6
of which currency rate effects, %	–1.9	–1.1	–2.8	0.2	–3.2	–1,7
of which effect from acqusitions and divestments %	4.5	7.1	4.2	7.6	1.2	1,3
Organic growth, % 1)	–13.5	15.4	–4.6	–1.1	3.6	1.3
Adjusted EBITA 2)	46.0	56.3	87.6	98.9	208.1	219.4
Adjusted EBITA margin, %	5.2	5.7	4.9	5.4	5.8	6.0
Operating profit (EBIT)	37.8	48.0	71.7	82.1	171.7	182.1
Operating margin (EBIT), %	4.3	4.9	4.0	4.5	4.8	5.0
Profit before tax	34.0	40.1	64.8	73.5	159.0	167.7
Net margin, %	3.9	4.1	3.7	4.0	4.4	4.6
Profit after tax	26.3	31.3	48.8	57.1	124.0	132.3
Profit margin, %	3.0	3.2	2.8	3.1	3.5	3.6
Earnings per share (outstanding shares), SEK 3)	0.95	1.14	1.78	2.09	4.49	4.80
Return on capital employed, % 4)	–	–	–	–	15.6	17.1
Cash flow from operations	246.9	178.8	190.8	148.7	510.2	468.1

1) Organic growth refers to growth excluding currency rate effects and 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 1.34%. The comparative figures have been adjusted for the 1:3 share split that was implemented in May 2021. 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 specialist in data and information management with focus on cloud services and data centre solutions. We help our customers to store, connect, protect, secure and drive value through their data whilst increasing agility, productivity and efficiency.

We've completed thousands of successful projects around the world, have more than 4,000 customers and currently manage hundreds of petabytes of information in the cloud. We employ over 1,000 people in 15 countries across Europe and North America. Founded in 1994, our parent company, Proact IT Group AB (publ), was listed on Nasdaq Stockholm in 1999 (under the symbol PACT).

Comments from the CEO of Proact

"Lower sales and good cost control."

During the second quarter of 2021 we have continued experiencing long sales cycles at our customers, which has negatively affected sales in the quarter, in particular for our systems business. After having addressed the changed user behaviours and new demands that the pandemic has caused, many customers are now careful regarding investment decisions, as it remains unclear how ways of working and structure will change in the longer run. We have also experienced delivery delays connected to semiconductor shortages and long lead times at our suppliers, which has impacted systems sales negatively as well. In total, revenues for the quarter amounted to SEK 878 (987) million, corresponding to a decline of 11,0% and an organic decline of 13.5%. Systems revenues declined by 19 percent, while services revenues increased somewhat. It is positive that our customers continue to see a need for our consulting and support services even when they are more cautious regarding system investments.

In this quarter we saw declines in most of our markets, with negative growth in three of our four Business Units; Nordics & Baltics, West and Central. Our continued view is that the declines primarily are related to longer sales cycles rather than lost business, and that we continue to have a strong position on a growing market. We also work closely with our suppliers to forward minimize the impact of the semiconductor shortage. During the quarter we have continued to work to strengthen our services offering and improve the quality of our service delivery, which is enabling additional growth in coming quarters.

The gross margin increased during the quarter which is a reversal of the trend from previous quarters. We see that the previously initiated measures are having an effect, in combination with favorable pricing. The actions taken in Busines Unit West have been successful and have led to West again showing a profit in the

quarter, although the full effect of the implemented measures are not yet fully visible in the results.

Adjusted EBITA for the quarter was SEK 46.0 (56.3) million. The lower profitability was due to the declining revenues, partly offset by lower sales, general and administration costs as well as improved gross margins compared to last year.

New contracts for SEK 72 (77) million relating to cloud services were contracted during the quarter, which is a small decline compared to last year. Our assessment is that the dcline is a result of normal fluctuations between quarters. We continue to see a good demand for cloud services, in particular within hybrid infrastructure solutions as well as security and network services.

During the quarter we closed, as previously communicated, the acquisition of Conoa, a Swedish fast-growing company with specialist competence within cloud services. During the quarter we have started the integration in a very good way, and it is pleasing to see that we already have initiated the development of common offerings. We have received a very positive response on the acquisition from both customers and employees, and we see a strong demand for Conoa's competence and services.

In summary, the sales in the quarter were lower than we would have wished, but we still see underlying growth in our market and that we are well positioned relative to our competition. With the engagement and the competence we have among our employees I look forward with confidence.

Kista, 14 July, 2021

Jonas Hasselberg CEO

The Group's development

Revenues and result Second quarter

For the second quarter, total revenues amounted to SEK 878 (987) million, a decrease by 11 percent. Currency rate effects affected by –2 percent, acquisitions and divestments affected by 5 percent. Organically, revenues decreased by 14 percent.

System revenues decreased by 19 percent to SEK 507 (625) million and organically the decrease was 21 percent. Service revenues increased by 2 percent to SEK 370 (362) million and organically revenues decreased by 1 percent. Service revenues accounted for 42 percent of the company´s total revenues for the quarter.

New contracts relating to cloud services worth SEK 72 (77) million were contracted during the quarter. The contracts normally have a term of three to five years. Total revenues from cloud services decreased by 7 percent and amounted to SEK 168 (181) million. Organically they decreased by 4 percent.

The gross margin increased in the quarter, compared with the same period previous year, both in system and service operations.

Sales and administration expenses decreased organically by 8 percent, while revenues decreased organically by 14 percent. Sales and administration expenses decreased in part as a result of the cost savings program implemented in 2020, but also as a result of generally low administration expenses compared to previous year.

Adjusted EBITA decreased by 18 percent compared to previous year and amounted to SEK 46.0 (56.3) million. Adjusted EBITA margin was 5.2 (5.7) percent. Profit before tax amounted to SEK 34.0 (40.1) million.

January - June

For the first six months, total revenues amounted to SEK 1,772 (1,830) million, a decrease by 3 percent. Currency rate effects affected by –3 percent, acquisitions and divestments affected by 4 percent. Organically, revenues decreased by 5 percent.

System revenues decreased by 5 percent to SEK 1,043 (1,102) million and organically the decrease was 7 percent. Service revenues were unchanged SEK 727 (728) million and also organically they were unchanged. Service revenues accounted for 41 percent of the company´s total revenues for the first six months.

New contracts relating to cloud services worth SEK 150 (128) million were contracted during the quarter. The contracts normally have a term of three to five years. Total revenues from cloud services decreased by 6 percent and amounted to SEK 341 (361) million. Organically they decreased by 2 percent.

The gross margin decreased in the quarter, compared with the same period previous year, primarily due to lower gross margin in the service operation during the first quarter this year.

Sales and administration expenses decreased organically by 6 percent, while revenues decreased organically by 5 percent. Sales and administration expenses decreased in part as a result of the implemented cost savings program, but also as a result of reduced travel and selling expenses due to the prevailing pandemic.

Adjusted EBITA decreased by 11 percent compared to previous year and amounted to SEK 87.6 (98.9) million. Adjusted EBITA margin was 4.9 (5.4) percent. Profit before tax amounted to SEK 64.8 (73.5) million.

Revenues by industry

	Apr-Jun	Apr-Jun	Jan-Jun	Jan-Jun	Rolling	Jan-Dec
MSEK	2021	2020	2021	2020	12 mths	2020
Telecom	118	85	234	200	381	348
Bank, Finance	93	61	176	143	322	289
Oil, Energy	48	48	107	87	241	221
Manufacturing	111	134	214	219	444	450
Media	21	8	44	21	85	62
Trading &
Services	157	213	291	385	592	687
Public sector	192	262	445	431	1,047	1,033
Other	138	176	262	344	463	545
Total revenue	878	987	1,772	1,830	3,575	3,633

Revenues Adjusted EBITA

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

Amounts in SEK million	Apr-Jun 2021	Apr-Jun 2020	Jan-Jun 2021	Jan-Jun 2020	Rolling 12 months	Jan-Dec 2020
Total Revenues	878.5	986.6	1,772.1	1,830.3	3,574.9	3,633.1
Cost of goods and services sold, excl. amortizations and depreciations	–649.5	–738.7	–1,316.6	–1,348.8	–2,655.7	–2,687.9
Gross profit excl. amortizations and depreciations	229.0	247.9	455.6	481.6	919.2	945.2
Gross margin excl. amortizations and depreciations, %	26.1	25.1	25.7	26.3	25.7	26.0
Operational expenses excl. amortizations and depreciations	–146.1	–151.7	–294.1	–302.6	–564.3	–572.8
Adjusted EBITDA1)	82.9	96.1	161.4	179.0	354.9	372.4
Adjusted EBITDA margin, %	9.4	9.7	9.1	9.8	9.9	10.3
Deprecations and write-downs of tangible assets	–36.9	–39.8	–73.8	–80.0	–146.8	–153.0
Adjusted EBITA1)	46.0	56.3	87.6	98.9	208.1	219.4
Adjusted EBITA margin, %	5.2	5.7	4.9	5.4	5.8	6.0
Amortizations and write-downs of intangible assets	–7.1	–8.3	–14.7	–16.9	–32.5	–34.6
Items affecting comparability	–1.2	–	–1.2	–	–3.9	–2.8
Operating profit/loss (EBIT)	37.8	48.0	71.7	82.1	171.7	182.1
Operating margin (EBIT), %	4.3	4.9	4.0	4.5	4.8	5.0

1) EBITDA and EBITA before items affecting comparability

Cash flow

Second quarter

Cash flow for the quarter was SEK 115 (118) million, of which SEK 247 (179) million from operating activities.

January - June

Cash flow for the first six months was SEK 19 (28) million, of which SEK 191 (149) million from operating activities. Cash flow from changes in working capital amounted to SEK 46 (–26) million, mainly related to a decrease in accounts receivable by SEK 90 million and an increase in short-term receivables by SEK 49 million. During the period, SEK 84 million was paid for acquired business, net of cash, and repayments of leasing liabilities was made by SEK 60 million.

Investments

During the first six months 2021, SEK 20 (48) million has been invested in fixed assets, of which SEK 4 (28) million in Proact Finance for customer deliveries.

Financial position

Cash and cash equivalents amounted to SEK 500 million as of June 30, 2021, compared to SEK 389 million previous year. Of the total overdraft credit facility of SEK 158 million, none was utilized. Bank loans amounted to SEK 255 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 (20) percent.

Net debt

	Jun 30	Mar 31	Jun 30	Mar 31
SEK million	2021	2021	2020	2020
Cash and cash equivalents	500	393	389	290
Bank overdraft facilities	–	–	–	–
Liabilities to credit institutions excl. financial leasing liabilities	–257	–216	–230	–237
Net cash (+)/Net debt (–) excl. financial
leasing	243	177	159	53
Financial leasing liabilities	–217	–245	–266	–300
Net cash (+)/Net debt (–) incl. financial
leasing	26	–68	–108	–247
Unutilized bank overdraft facility	158	158	245	258
Total bank overdraft facility	158	158	245	258

Income tax

The Group's tax expense includes the sum of current tax and deferred tax calculated on the basis of current tax rates in each country. The reported tax expense for the first six months amounted to SEK 16.0 (16.4) million, corresponding to an efficient tax rate of 25 (22) percent.

Buy-back of own shares

The Annual General Meeting on May 6, 2021 authorized the Board to acquire up to 10 percent of the company's shares until the next Annual General Meeting. As of June 30, 2021, no shares have been acquired within this authorization.

As of June 30, 2021, the company holds 546,807 shares in own repository, which corresponds to 2.0 percent of the total number of shares.

Employees

The company had 1,049 (1,000) employees as of June 30, 2021, of which the acquisition of Cetus and Conoa have contributed with 69 employees.

Parent Company in brief

The Parent Company's total revenues for the first six months amounted to SEK 52.7 (53.9) million. Profit before tax amounted to SEK –0.8 (–13.9) million.

The Parent Company's liabilities in a joint group currency account amounted as at 30 June 2021 to SEK 215 (234) million.

At the end of the period, the number of people employed by the parent company totalled 17 (18).

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

Business Units

Nordics & Baltics

Revenues and result Second Quarter

In Nordics & Baltics, revenues decreased by 14 percent during the quarter and organically the decrease was 17 percent. System revenues decreased by 22 percent and organically the decrease was 24 percent. The decrease is mainly due to low system sales in Norway and a strong comparison quarter 2020 for Sweden. Service revenues increased by 12 percent and organically they increased by 4 percent. Acquisition of Conoa contributed positively especially to consulting revenues.

Adjusted EBITA amounted to SEK 26.0 (44.0) million and EBITA margin was 5.5 (8.0) percent for the quarter. In Nordics & Baltics, EBITA was negatively affected mainly by the decrease in system revenues.

January - June

In Nordics & Baltics, revenues decreased by 2 percent during the first six months and organically the decrease was 3 percent. System revenues decreased by 5 percent and also organically the decrease was 5 percent. System revenues was primarily affected by low system sales in Norway, Finland and the Baltics. Service revenues increased by 6 percent and organically they increased by 2 percent.

Adjusted EBITA amounted to SEK 51.0 (60.8) million and EBITA margin was 5.4 (6.4) percent for the first six months. In Nordics & Baltics EBITA was negatively affected primarily by the decrease in system revenues.

	Apr-Jun	Apr-Jun		Jan-Jun	Jan-Jun		Rolling	Jan-Dec
SEK million	2021	2020	Change, %	2021	2020	Change, %	12 months	2020
System revenues	320	411	–22	652	685	–5	1,318	1 352
Service revenues	152	135	12	283	268	6	549	534
of which support revenue	69	65	6	134	128	5	265	259
of which revenue from cloud services	42	38	9	82	75	10	158	151
of which consulting revenue	41	32	29	67	66	2	126	124
Other	1	0	0	1	1	0	2	1
Total revenues	472	547	–14	937	954	–2	1,869	1,887
Adjusted EBITA	26.0	44.0	–41	51.0	60.8	–16	118.5	128.4
Margin, %	5.5	8.0		5.4	6.4		6.3	6.8

UK

Revenues and result Second quarter

In UK, revenues increased by 33 percent during the quarter, with the acquisition of Cetus Solutions contributing to the increase in combination with organically increased revenues of 18 percent. System revenues increased by 65 percent, while organically the increase was 43 percent, positively affected by some major deals but also a fairly weak second quarter in 2020. Service revenues increased by 9 percent, while organically they decreased by 1 percent.

Adjusted EBITA amounted to SEK 10.7 (8.5) million and the EBITA margin was 6.3 (6.7) percent for the quarter. In UK, EBITA margin was positively affected by increased revenues and the acquisition of Cetus, to some extent offset by lower gross margins.

January - June

In UK, revenues increased by 34 percent during the first six months, with the acquisition of Cetus Solutions contributing to the increase in combination with organically increased revenues of 19 percent. System revenues increased by 69 percent, while organically the increase was 44 percent, positively affected by some major deals but also due to a fairly weak start for the comparison year 2020. Service revenues increased by 5 percent, while organically they decreased by 2 percent.

Adjusted EBITA amounted to SEK 22.7 (18.2) million and the EBITA margin was 6.3 (6.8) percent for the first six months. In UK, EBITA margin was positively affected by higher revenues, lower sales and administration expenses and the acquisition of Cetus, to some extent offset by lower gross margins.

	Apr-Jun	Apr-Jun		Jan-Jun	Jan-Jun		Rolling	Jan-Dec
SEK million	2021	2020	Change, %	2021	2020	Change, %	12 months	2020
System revenues	91	55	65	201	119	69	394	312
Service revenues	78	72	9	157	149	5	301	293
of which support
revenue	28	22	26	53	46	16	99	92
of which revenue from
cloud services	42	47	–10	87	97	–10	176	185
of which consulting
revenue	8	3	142	16	7	141	26	17
Other	–	–	–	–	–	–	0	–
Total revenues	169	127	33	358	268	34	695	605
Adjusted EBITA	10.7	8.5	25	22.7	18.2	24	43.5	39.1
Margin, %	6.3	6.7		6.3	6.8		6.3	6.5

West

Revenues and result Second quarter

In West, revenues decreased by 16 percent during the quarter and organically the decrease was 11 percent. System revenues decreased by 29 percent and organically the decrease was 25 percent. Service revenues decreased by 8 percent and organically the decrease was 4 percent.

Adjusted EBITA amounted to SEK 3.3 (7.5) million and EBITA margin was 1.9 (3.7) percent for the quarter.

During the first quarter, long sales cycles and customers' uncertainty regarding Covid-19 brought a sharp decline in system revenues. The decline continued during the second quarter, but slowed significantly. The cost savings program implemented during the first quarter started to show effect which resulted in slightly higher gross margins compared to previous year despite decrease in revenues. Sales and administration expenses increased organically by 1 percent, which in combination with decreased revenues resulted in decreased EBITA margin.

January - June

In West, revenues decreased by 21 percent during the first six months and organically the decrease was 17 percent. System revenues decreased by 44 percent and organically the decrease was 41 percent. Service revenues decreased by 8 percent and organically the decrease was 3 percent.

Adjusted EBITA amounted to SEK 0.6 (20.6) million and EBITA margin was 0.2 (5.1) percent for the first six months.

Long sales cycles and customers' uncertainty regarding Covid-19 brought a sharp decline in system revenues and also service revenues decreased for the same reason. Reduced sales in combination with a changed mix in service sales reduced gross margin, which brought decrease in EBITA despite decrease in sales and administration expenses. Sales and administration expenses decreased organically by 4 percent.

SEK million	Apr-Jun 2021	Apr-Jun 2020	Change, %	Jan-Jun 2021	Jan-Jun 2020	Change, %	Rolling 12 months	Jan-Dec 2020
System revenues	51	72	–29	83	149	–44	189	255
Service revenues	117	128	–8	240	259	–8	500	519
of which support revenue	12	14	–11	25	28	–13	53	57
of which revenue from cloud services	75	85	–12	153	168	–9	326	342
of which consulting revenue	30	29	3	62	62	–1	120	120
Other	0	0	0	0	0	0	0	–
Total revenues	168	199	–16	323	408	–21	689	774
Adjusted EBITA	3.3	7.5	–56	0.6	20.6	–97	9.4	29.5
Margin, %	1.9	3.7		0.2	5.1		1.4	3.8

Central

Revenues and result Second quarter

In Central, revenues decreased by 31 percent during the quarter and organically they decreased by 28 percent, affected by long sale cycles in several customer segments. System revenues decreased by 42 percent and organically the revenues decreased by 40 percent. Service revenues decreased by 6 percent and organically they decreased by 2 percent.

Adjusted EBITA amounted to SEK 5.7 (7.1) million and EBITA margin was 7.0 (6.0) percent for the quarter.

In Central, EBITA was negatively affected by low revenues, which to some extent was offset by reduced sales and administration expenses of 23 percent, which also led to an increase in EBITA margin. Organically, sales and administration expenses decreased by 20 percent.

January - June

In Central, revenues decreased by 19 percent during the first six months and organically they decreased by 14 percent, as a result of decreasing sales during the second quarter. System revenues decreased by 26 percent and organically the revenues decreased by 22 percent. Service revenues decreased by 4 percent and organically they increased by 1 percent.

Adjusted EBITA amounted to SEK 13.0 (12.8) million and EBITA margin was 7.4 (5.9) percent for the first six months.

In Central, EBITA was positively affected primarily by reduced sales and administration expenses of 24 percent, which led to increased EBITA margin. Organically, sales and administration expenses decreased by 20 percent.

SEK million	Apr-Jun 2021	Apr-Jun 2020	Change, %	Jan-Jun 2021	Jan-Jun 2020	Change, %	Rolling 12 months	Jan-Dec 2020
System revenues	48	83	–42	108	146	–26	217	255
Service revenues	33	36	–6	67	69	–4	136	139
of which support revenue	9	9	–2	19	18	4	38	37
of which revenue from cloud services	18	19	–7	35	37	–5	73	75
of which consulting revenue	7	8	–12	13	14	–10	25	26
Other	1	0	0	1	0	0	2	1
Total revenues	82	119	–31	176	216	–19	355	395
Adjusted EBITA	5.7	7.1	–19	13.0	12.8	2	28.3	28.2
Margin, %	7.0	6.0		7.4	5.9		8.0	7.1

Proact Finance

Revenues and result Second quarter

Proact Finance revenues decreased for the quarter compared to the same period previous year due to a decrease in financed volume and amounted to SEK 13 (34) million. Net financial items amounted to SEK 0.9 (1.1) million. Profit before tax amounted to SEK 2.7 (–1.2) million.

January - June

Proact Finance revenues decreased for the first six months compared to the same period previous year due to a decrease in financed volume and amounted to SEK 25 (57) million. Net financial items amounted to SEK 1.8 (1.8) million. Profit before tax amounted to SEK 6.8 (–0.2) million. Future contracted cash flows from Proact Finance amounted to SEK 142 (171) million, a decrease of 17 percent.

SEK million	Apr-Jun 2021	Apr-Jun 2020	Change, %	Jan-Jun 2021	Jan-Jun 2020	Change, %	Rolling 12 months	Jan-Dec 2020
Revenues	13	34	–62	25	57	–56	73	105
EBIT	1.9	–2.3	–182	5.0	–2.0	–347	6.7	–0.4
Net financial items	0.9	1.1	–21	1.8	1.8	–2	3.8	3.8
Profit before tax	2.7	–1.2	–325	6.8	–0.2	–3581	10.4	3.4

Operating segments

Nordics & Baltics: Denmark, Estonia, Finland, Latvia, Lithuania, Norway, Sweden and USA

• UK: United Kingdom
• West: Belgium, Netherlands and Spain
• Central: Czech Reublic and Germany

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

Jan-Jun 2021 SEK million	Nordics & Baltics	UK	West	Central	Proact Finance	Groupwide	Eliminations	Group
Total revenue	937	358	323	176	25	67	–114	1,772
EBITDA, before items affecting comparability	70.8	46.8	17.2	18.5	5.0	3.0	–	161.4
Depreciations and write-down on tangible fixed assets	–19.8	–24.2	–16.6	–5.5	–	–7.7	–	–73.8
EBITA, before items affecting comparability	51.0	22.7	0.6	13.0	5.0	–4.7	–	87.6
Items affecting comparability	–1.2	–	–	–	–	–	–	–1.2
EBITA	49.9	22.7	0.6	13.0	5.0	–4.7	–	86.5
Amortizations and write-down on intangible fixed assets	–1.4	–4.5	–3.9	–0.9	–	–4.0	–	–14.7
EBIT	48.4	18.2	–3.3	12.1	5.0	–8.7	–	71.7
Net financial items	–1.9	–1.6	–1.4	–0.6	1.8	–3.2	–	–6.9
Profit before tax	46.5	16.6	–4.7	11.5	6.8	–11.9	–	64.8
Tax								–16.0

Comprehensive income for the period 48.8

Jan-Jun 2020 SEK million	Nordics & Baltics	UK	West	Central	Proact Finance	Groupwide	Eliminations	Group
Total revenue	954	268	408	216	57	72	–145	1,830
EBITDA, before items affecting comparability	81.8	44.7	38.4	19.2	–2.0	–3.0	–	179.0
Depreciations and write-down on tangible fixed assets	–21.0	–26.5	–17.7	–6.4	–	–8.5	–	–80.0
EBITA, before items affecting comparability	60.8	18.2	20.6	12.8	–2.0	–11.5	–	98.9
Items affecting comparability	–	–	–	–	–	–	–	–
EBITA	60.8	18.2	20.6	12.8	–2.0	–11.5	–	98.9
Amortizations and write-down on intangible fixed assets	–0.7	–4.4	–7.9	–1.3	–	–2.6	–	–16.9
EBIT	60.1	13.9	12.7	11.5	–2.0	–14.1	–	82.1
Net financial items	–2.9	–1.9	–1.3	–0.1	1.8	–4.2	–	–8.6
Profit before tax	57.2	12.0	11.4	11.4	–0.2	–18.3	–	73.5
Tax								–16.4

Comprehensive income for the period 57.1

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

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 currently not seen any major effects from United Kingdom's exit from the EU, except for changes in currency rates which can impact the financial statements of the group short term.

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 2020, page 26.

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 2020.

Annual General Meeting 6 May 2021

Board members Eva Elmstedt (chairman), Martin Gren, Erik Malmberg, Annikki Schaeferdiek and Thomas Thuresson were re-elected.

Decision was made that a dividend of SEK 4.50 per share should be paid for the financial year 2020. For the financial year 2019 a dividend of SEK 2.50 per share was paid.

Financial calendar

21 Oct 2021 Interim Report Q3 2021 10 Feb 2022 Year-end Report 2021

The Board of Directors and the managing Director guarantee that this interim report provides a true and fair view of the activities, position and profits of Proact and the Group. No new risks or uncertainty factors have arisen over the first six months of the year, by comparison with those commented upon in the last Annual Report issued.

Kista 14 July 2021 Proact IT Group AB (publ)

Jonas Hasselberg Eva Elmstedt Martin Gren CEO Chairman

Annikki Schaeferdiek Thomas Thuresson Erik Malmberg

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 13:00 (CET) on 14 July 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	Apr-Jun 2021	Apr-Jun 2020	Jan-Jun 2021	Jan-Jun 2020	Rolling 12 months	Jan-Dec 2020
System income	507.5	624.9	1,042.9	1,102.2	2,132.8	2,192.1
Service income	370.0	361.5	727.5	727.5	1,439.7	1,439.7
of which support revenue	118.9	110.5	232.3	220.7	456.3	444.8
of which revenue from cloud services	168.0	181.1	340.8	361.4	694.9	715.5
of which consulting revenue	83.1	70.0	154.4	145.3	288.4	279.4
Other operating income	1.0	0.1	1.8	0.7	2.4	1.3
Total income	878.5	986.6	1,772.1	1,830.3	3,574.9	3,633.1
Cost of goods and services sold	–678.8	–772.1	–1,376.1	–1,415.2	–2,777.6	–2,816.7
Gross profit	199.7	214.5	396.0	415.1	797.3	816.4
Sales and marketing expenses	–99.1	–93.8	–197.5	–192.8	–364.5	–359.9
Administration expenses	–61.7	–72.8	–125.6	–140.2	–257.2	–271.7
Items affecting comparability	–1.2	–	–1.2	–	–3.9	–2.8
Operating profit/loss (EBIT)	37.8	48.0	71.7	82.1	171.7	182.1
Net financial items	–3.8	–7.9	–6.9	–8.6	–12.7	–14.4
Profit before tax	34.0	40.1	64.8	73.5	159.0	167.7
Income tax	–7.7	–8.8	–16.0	–16.4	–35.0	–35.4
Comprehensive income for the period	26.3	31.3	48.8	57.1	124.0	132.3
Other comprehensive income
Items which may be reversed later in the income statement
Change of hedging reserve (net investment in foreign operations)	–3.7	0.9	6.5	0.7	–2.3	–8.0
Tax effect of change of reserve (net investment in foreign operations)	0.8	–0.2	–1.3	–0.2	0.5	1.7
Translation differences from remaining foreign operations	–6.8	–19.9	13.0	–16.1	1.4	–27.8
Total items which may be reversed later in the income statement	–9.6	–19.1	18.2	–15.5	–0.3	–34.1
Total comprehensive income for the period	16.7	12.1	67.0	41.6	123.7	98.3
Comprehensive income attributable to:
Shareholders of the Parent company	26.2	31.3	48.8	57.4	123.1	131.7
Holdings without a controlling influence	0.1	–0.0	–0.0	–0.2	0.9	0.7
Total comprehensive income for the period attributable to:
Shareholders of the Parent company	16.6	12.2	66.9	41.7	122.9	97.7
Holdings without a controlling influence	0.1	–0.0	0.1	–0.1	0.8	0.6

Data per share1)

	Apr-Jun 2021	Apr-Jun 2020	Jan-Jun 2021	Jan-Jun 2020	Rolling 12 months	Jan-Dec 2020
Earnings per share for the period attributable to the shareholders of the parent company, SEK	0.95	1.14	1.78	2.09	4.49	4.80
Equity per share attributable to the shareholders of the parent company, SEK	22.90	20.63	22.90	20.63	22.90	21.93
Cash flow from operations per share, SEK	8.99	6.51	6.95	5.42	18.58	17.05
Number of outstanding shares at end of period	27,454,851	27,454,851	27,454,851	27,454,851	27,454,851	27,454,851
Weighted average number of outstanding shares	27,454,851	27,454,851	27,454,851	27,454,851	27,454,851	27,454,851

1) Proact has a long-term performance based share program that could give rise to dilution of maximum 1.34 percent. The comparative figures have been adjusted for the 1:3 share split that was implemented in May 2021.

Consolidated Balance Sheet in Brief

Amounts in SEK million	30 June 2021	30 June 2020	31 dec 2020
ASSETS
Fixed assets
Goodwill	647.0	506.7	551.7
Other intangible fixed assets	131.6	77.2	112.2
Tangible fixed assets	289.4	346.5	309.8
Other long-term receivables	436.5	423.1	408.8
Deferred tax receivables	20.5	19.7	15.9
Current assets
Inventories	13.3	11.8	13.0
Trade and other receivables	1,004.7	1,114.7	1,044.3
Cash and cash equivalents	499.8	388.6	468.3
Total assets	3,042.7	2,888.2	2,923.9
EQUITY AND LIABILITIES
Equity attributable to the shareholders of the parent company	628.7	566.4	601.9
Equity attributable to holdings without a controlling influence	3.1	1.3	3.1
Total equity	631.8	567.7	605.0
Long-term liabilities
Long-term liabilities, interest-bearing	415.9	419.5	358.9
Long-term liabilities, non-interest-bearing	507.1	458.6	461.1
Deferred tax liabilities	39.3	25.8	33.2
Short-term liabilities
Short-term liabilities, interest-bearing	115.9	124.4	131.0
Short-term liabilities, non-interest-bearing	1,332.8	1,292.2	1,334.7
Total equity and liabilities	3,042.7	2,888.2	2,923.9

Consolidated Statement of Changes in Equity

Amounts in SEK million	Jan-Jun 2021	Jan-Jun 2020	Jan-Dec 2020
At beginning of period	605.0	525.9	525.9
Total comprehensive income for the period	67.0	41.6	98.3
Dividend	–41.2	–	–22.9
Dividend to holdings without a controlling influence	-	–0.1	–0.2
Financial liability to holdings without a controlling influence	-	–	2.4
Share savings and share option programs	1.0	0.3	1.5
At end of period	631.8	567.6	605.0

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	Apr-Jun 2021	Apr-Jun 2020	Jan-Jun 2021	Jan-Jun 2020	Rolling 12 months	Jan-Dec 2020
Cash flow from operating activities before changes in working capital	70.5	92.3	144.9	174.3	332.4	361.8
Cash flow from changes in working capital	176.4	86.5	45.9	–25.6	177.8	106.3
Cash flow from operating activities	246.9	178.8	190.8	148.7	510.2	468.1
Cash flow from investing activities	–91.7	–21.3	–101.3	–46.6	–203.4	–148.7
Cash flow from financing activities	–40.4	–40.0	–70.9	–73.9	–190.4	–193.4
Total cash flow for the period	114.8	117.5	18.6	28.2	116.4	126.0
Cash and cash equivalents at beginning of the period	392.7	289.8	468.3	373.2	388.6	373.2
Currency translation difference in cash and cash equivalents	–7.8	–18.7	12.8	–12.8	–5.2	–30.8
Cash and cash equivalents at end of the period	499.8	388.6	499.8	388.6	499.8	468.3

Key ratios

	Apr-Jun 2021	Apr-Jun 2020	Jan-Jun 2021	Jan-Jun 2020	Rolling 12 months	Jan-Dec 2020
Total revenue, SEK millions	878	987	1,772	1,830	3,575	3,633
of which attributable to acquisition and divestments, SEK millions	44	71	78	145	250	318
of which currency effects, SEK millions	–19	–9	–52	3	–114	–59
Total revenue, organic, SEK million	853	924	1,746	1,682	3,438	3,373
Organic growth total revenue, %	–13.5	15.4	–4.6	–1.1	3.6	1.3
System revenue, SEK millions	507	625	1,043	1,102	2,133	2,192
of which attributable to acquisition and divestments, SEK millions	23	9	46	20	87	61
of which currency effects, SEK millions	–8	–7	–26	–1	–62	–38
Total system revenue, organic, SEK million	493	622	1,022	1,084	2,108	2,169
Organic growth system revenue, %	–21.1	19.8	–7.4	–4.9	–0.9	–0.6
Service revenue, SEK millions	370	362	727	728	1,440	1,440
of which attributable to acquisition and divestments, SEK millions	21	62	29	128	155	254
of which currency effects, SEK millions	–10	–2	–26	5	–52	–21
Total service revenue, SEK millions	359	302	725	595	1,336	1,206
Organic growth service revenue, %	–0.7	7.2	–0.4	6.5	10.7	4.9
EBITDA, SEK million	81.7	96.1	160.3	179.0	351.0	369.6
EBITDA margin, %	9.3	9.7	9.0	9.8	9.8	10.2
Depreciation and write-down on tangible assets, SEK million	–36.9	–39.8	–73.8	–80.0	–146.8	–153.0
EBITA, SEK million	44.8	56.3	86.5	98.9	204.2	216.7
EBITA margin, %	5.1	5.7	4.9	5.4	5.7	6.0
Depreciation and write-down on intangible assets, SEK million	–7.1	–8.3	–14.7	–16.9	–32.5	–34.6
EBIT, SEK million	37.8	48.0	71.7	82.1	171.7	182.1
EBIT margin, %	4.3	4.9	4.0	4.5	4.8	5.0
Profit before tax, SEK million	34.0	40.1	64.8	73.5	159.0	167.7
Net margin, %	3.9	4.1	3.7	4.0	4.4	4.6
Profit after tax, SEK million	26.3	31.3	48.8	57.1	124.0	132.3
Profit margin, %	3.0	3.2	2.8	3.1	3.5	3.6
Equity	631.8	567.7	631.8	567.7	631.8	605.0
Total assets	3,042.7	2,888.2	3,042.7	2,888.2	3,042.7	2,923.9
Equity ratio, %	20.8	19.7	20.8	19.7	20.8	20.7
Capital turnover rate, times	0.3	0.3	0.6	0.6	1.2	1.3
Return on equity, % 1)	–	–	–	–	20.7	23.4
Financial costs included in net financial items, SEK million	5.1	9.4	9.5	12.2	18.0	20.7
Capital employed	1,163.6	1,111.6	1,163.6	1,111.6	1,163.6	1,094.9
Return on capital employed, % 1)	–	–	–	–	15.6	17.1
Investments in fixed assets, SEK million	133.8	36.3	178.6	85.2	362.6	269.1
Profit before tax per employee, SEK thousands	32.3	41.2	62.2	74.9	155.5	172.3
Average number of employees	1,052	973	1,043	981	1,023	973

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 2020.

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-Jun 2021	Jan-Jun 2020	Jan-Dec 2020
Net sales	52.7	53.9	108.6
Cost of goods and services sold	–	–	–
Gross profit	52.7	53.9	108.6
Administration expenses	–61.8	–68.5	–120.7
Operating profit	–9.1	–14.6	–12.2
Net financial items	8.3	0.7	36.2
Profit after financial items	–0.8	–13.9	24.0
Provisions	–	–	30.0
Profit before tax	–0.8	–13.9	54.0
Income tax	0.7	3.6	–1.6
Comprehensive income for the period	–0.1	–10.3	52.5

Parent Company´s Balance Sheet, in brief

30 June 2021	30 June 2020	31 dec 2020
837.3	770.3	765.9
113.0	119.9	205.5
950.3	890.2	971.4
79.3	55.4	76.6
276.0	299.2	319.1
355.3	354.6	395.7
267.2	241.2	222.9
327.8	294.5	352.8
950.3	890.2	971.4

Explanatory information

Note 1 Accounting principles

The consolidated accounts for the interim report have been compiled in accordance with IAS 34 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 2020, 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

	Jul-Jun 2020/2021	Jan-Dec 2020	Jan-Dec 2019	Jan-Dec 2018	Jan-Dec 2017
Total revenue, SEK million	3,575	3,633	3,408	3 318	3 243
EBITDA, SEK million	351.0	369.6	271.7	231.1	218.8
EBITDA margin, %	9.8	10.2	8.0	7.0	6.7
EBITA, SEK million	204.2	216.7	134.2	200.5	188.1
EBITA margin, %	5.7	6.0	3.9	6.0	5.8
EBIT, SEK million	171.7	182.1	105.4	164.5	155.6
EBIT margin, %	4.8	5.0	3.1	5.0	4.8
Profit before tax, SEK million	159.0	167.7	101.7	167.8	151.1
Net margin, %	4.4	4.6	3.0	5.1	4.7
Profit after tax, SEK million	124.0	132.3	80.2	127.3	114.0
Profit margin, %	3.5	3.6	2.4	3.8	3.5
Equity ratio, %	20.8	20.7	18.3	21.2	19.8
Capital turnover rate, times	1.2	1.3	1.3	1.6	1.7
Return on equity, %	20.7	23.4	16.1	29.8	31.8
Return on capital employed, %	15.6	17.1	13.2	29.5	29.2
Dividend to shareholders of the Parent company, SEK million 1)	41.2	22.9	38.0	34.3	32.4
Investments in fixed assets, SEK million	362.6	269.1	440.7	83.8	166.7
Financial costs included in net financial items, SEK millions	18.0	20.7	11.3	3.9	11.4
Profit before tax per employee, SEK thousands	155	172	122	211	189
Average number of employees	1,023	973	834	797	799
Earnings per share for the period, SEK 2)	4.49	4,80	2,92	4,62	4,07

1) Relates to the year in which the dividend was executed. For business year 2020 a dividend of SEK 4.50, total SEK 41.2 million, was made.

2) Calculated on the basis of the weighted average number of outstanding shares. The comparative figures have been adjusted for the 1:3 share split that was implemented in May 2021. Proact has a long-term performance based share program that could give rise to dilution of maximum 1.34 percent.

Note 3 Acquired companies net assets at the time of acquistion

	Apr 2021
Intangible fixed assets	–
Tangible fixed assets	2
Financial fixed assets	–
Trade and other receivables	10
Cash and cash equivalents	15
Long-term liabilities	–3
Accounts payable and other short-term liabilities	–8
Net identifiable assets	16
Goodwill	81
Fair value adjustment acquired intangible assets	29
Deferred tax related to acquired assets	–6
Purchase price	120
Deduct:
Acquired cash	–15
Deferred payment of part of consideration	–21

Net outflow of cash 84

The acquisition relates to 100 percent of the shares and votes in Conoa AB. The acquisition was completed on April 12, 2021.

Total acquisition costs charged to earnings in 2021 amounted to SEK 1.2 million.

Of the total purchase price of SEK 120 million, SEK 99 million was paid in cash at the time of acquisition, the rest of the purchase price will be settled 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 the acquisition is an important part of Proact's growth strategy with the ambition to broaden the offering and expand its presence in the company's key markets. The pace of innovation among the company's customers drives a clear demand for new types of IT infrastructure solutions that simplify and streamline the development of so-called cloud native applications.

Conoa, founded in 2012, is a privately-owned company with 28 employees and has thanks to its strong growth been awarded the Gazell business award for five consecutive years (2016-2020) by Dagens industri and to Super company by Veckans Affärer.

Through the acquisition of Conoa, Proact strengthens its offering and expertise in modern platforms such as Kubernetes and container technologies.

The acquisition was completed on April 12, 2021 and for second quarter 2021 Conoa contributed with SEK 22 million in revenue and SEK 1 million in operating profit. On a full-year basis, Conoa is expected to contribute to the Group's sales of approximately SEK 80 million and an operating profit of approximately SEK 11 million.