Netum Group Plc                      Company announcement           5 March 2024 at 08:30 a.m. EET

Netum Group Plc: Netum Group Plc’s financial statements release 1 January–31 December 2023  

This release is a summary of Netum’s financial statements release for January–December 2023. The complete report is attached to this release as a pdf file and available on the company’s website at https://www.netum.fi/en/investors/reports-and-presentations/

Strong growth, but also challenges

Netum Group’s revenue for July–December 2023 increased 45.5% on the comparison period. Organic growth was 17.9%. EBITA was EUR 1.4 (0.8) million or 6.9 (5.5) % of revenue. The Group's revenue for January–December 2023 grew 27.2% from the comparison period. Organic growth was 11.3%. EBITA was EUR 2.3 (2.5) million or 6.3 (8.5) % of revenue.

Unless otherwise stated, the figures in brackets refer to the comparison period and are in the same unit as the figures for the review period. The figures for 2023 contained in this financial statements release are unaudited.

July–December 2023 in brief

• Revenue increased 45.5% on the comparison period and was EUR 20.0 (13.7) million
• EBITDA amounted to EUR 1.4 (0.9) million or 7.2 (6.9) % of revenue
• EBITA was EUR 1.4 (0.8) million or 6.9 (5.5) % of revenue
• Comparable EBITA was EUR 1.5 (0.8) million or 7.7 (5.8) % of revenue
• Operating profit was EUR -0.1 (-0.1) million or -0.7 (-0.8) % of revenue
• Result for the period was EUR -0.8 (-0.3) million or -3.8 (-2.2) % of revenue
• Earnings per share were EUR -0.06 (-0.03)
• On 1 July 2023, Netum DUX and related business operations were transferred to Optimo Systems Oy as a contribution in kind. In connection with the business transfer, Netum Oy became a shareholder in Optimo Systems Oy with 49.8% ownership.
• On 1 September 2023, Netum Group Plc acquired 100% of Buutti Oy

January–December 2023 in brief 

• Revenue increased 27.2% on the comparison period and was EUR 37.1 (29.1) million
• EBITDA was EUR 2.6 (2.8) million or 7.1 (9.7) % of revenue
• EBITA was EUR 2.3 (2.5) million or 6.3 (8.5) % of revenue
• Comparable EBITA was EUR 2.8 (2.6) million or 7.4 (8.8) % of revenue
• Operating profit was EUR -0.2 (0.8) million or -0.6 (2.6) % of revenue
• Result for the period was EUR -1.1 (0.2) million or -2.9 (0.6) % of revenue
• Earnings per share were EUR -0.09 (0.02)
• Number of personnel at the end of the period was 412 (276), growth from the comparison period was 49%
• On 2 January 2023, Netum Group Plc acquired 100% of Studyo Oy
• The Board of Directors of Netum Group Plc proposes to the Annual General Meeting that no dividend be shared for the financial period 1 January–31 December 2023

Group key figures

¹⁾ Items affecting comparability are presented in the table Comparable EBITA.

Outlook for 2024

Netum expects its revenue in the financial year 2024 to be EUR 45–49 million and comparable EBITA to be approximately 8–11 % of revenue.

Netum expects the demand for IT services in the public sector to remain strong but the intensified price competition to bring challenges to the market. The outlook for the corporate sector is weighed down by the general economic situation, which slows down decision-making. Netum expects the measures started during 2023 to improve profitability.

Matti Mujunen, CEO:

”Netum's year 2023 included strong growth and development, but also challenges. At the beginning of the year, we acquired Studyo Oy, which specialises in software products and services for the education sector, and in September, Buutti Oy, which provides IT consulting and training services. As a result of the acquisitions, our operations expanded to the Kuopio economic area and Northern Finland, and our nine offices now cover a large geographical part of Finland. Primarily due to the acquisitions, our number of employees exceeded 400 during the year. To respond to the weakened profitability and uncertain market situation, we started change negotiations at the end of the year, affecting approximately 40 people in the Group's support functions and the Cyber security business unit. The decision was difficult for our personnel and led to the termination of five employees' employment contracts and temporary layoffs affecting 24 employees during 2024.

Our revenue grew to EUR 37.1 million, or 27% from the previous year, partly due to the acquisitions during the year. In the second half of the year, we also grew organically by 18%. In particular, the demand for digital service development and continuity services has been very strong. However, profitability fell short of targets in 2023. Our profitability was impacted by our investments in growth, lower-than-targeted invoicing rates in some service areas and increased salary costs. Towards the end of the year, our profitability decreased also due to the higher-than-expected non-recurring costs related to the transfer of the Netum DUX business to Optimo Systems Oy, as well as a decrease in revenue due to the change negotiations. A turn for the better is already taking place, and the significant profit-improving effects of both transfer of the Netum DUX business and the change negotiations will be fully visible during 2024.

The new significant agreements we signed during the year include, for example, an extension agreement with the KEHA Centre on the production of the URA VDI service, a cloud-based data warehouse solution for the University of Vaasa, and software development for the Social Insurance Institution of Finland and Esko Systems. In addition, we signed new cyber security service agreements with, for example, the State Treasury, and carried out information security audits for Istekki.

We have long experience in digital solutions for the education sector, and we already serve about 35 higher education institutions. In 2023, we signed a five-year agreement on the application development of the “Peppi” study management system for Metropolia University of Applied Sciences and won a tender from three universities of applied sciences and one university for the maintenance and further development of the “Peppi” systems.

Through acquisitions, our customer base also expanded. The acquisition of Studyo Oy strengthened our product and service offering in the education sector. Studyo's customers include approximately 60 educational institutions in Finland. Studyo's SaaS products have a total of more than 300,000 end users, and the company is the market leader in electronic diplomas in Finland. Buutti Oy brought us additional growth especially from corporate customers, the largest of which operate in the banking and financial sector, in healthcare and in telecommunications technology. With Buutti, our customers now include Vaisala, Novatron, Detection Technology and Suunto.

During 2023, we continued to develop our sales process and financial control, among other things, and established a new cloud competence center for our customers. To serve our customers even better and with more diverse expertise, we expanded our participation in the partner programmes of large technology companies (AWS, Microsoft, Salesforce) and acquired several new domestic sub-contractors and nearshore partners.

The revolution brought about by artificial intelligence is not only technological, it is transforming business models, processes and the nature of work. We have recognised the potential of AI to create significant value for our customers, improve our operational efficiency and support sustainable growth. This means developing new, intelligent services, utilising data in decision-making more deeply than before, and continuously developing the competence of our employees. In 2023, we launched a program to concretely deepen the integration of AI into our business, streamline processes and create new customer added value. Deeper integration of artificial intelligence into our business is a key part of our strategy. It will be deeply embedded in our culture, and we believe it will be a major factor in our success.

Our target is to be the most trusted partner in the industry and the preferred work community in responsible and safe digital transformation. In 2023, we were the first player in the IT industry to publish a green design guide that aims to promote responsible digital development. The guide is part of Netum's responsibility work, which also included a Green Developer course for the entire personnel. In addition, we published our renewed corporate responsibility programme in autumn 2023 and started preparing for future sustainability reporting requirements.

A fair and pluralistic work community as well as and competent professionals who feel well at work are very important to us. For this reason, we conduct regular employee engagement surveys for our personnel. The results of the personnel survey conducted in September were still at a good level. However, after the cost-saving measures and the subsequent change negotiations, in the survey measuring the eNPS score in January, satisfaction with the employer had significantly decreased. We will do everything we can to rectify this situation.

We are confident going into the new financial year. The demand for IT services in the public sector seems to remain strong, even though price competition poses challenges. The general economic situation has been weighing down the outlook for the corporate sector as decision-making has slowed down. We expect that the efficiency measures taken will significantly will significantly improve our profitability and that our revenue will continue on a strong growth path both organically and supported by acquisitions. In 2024, we estimate revenue to be EUR 45–49 million and comparable EBITA to be approximately 8–11% of revenue.

My warmest thanks for 2023 to all our personnel, customers, partners and investors.”

Webcast for investors and media 

Netum will hold a press conference in Finnish on Tuesday 5 March 2024 at 2:00 p.m. EET. The result will be presented by Matti Mujunen, CEO of Netum Group Plc. The news conference will be held as a live webcast, which can be followed at https://netum.videosync.fi/tulosjulkistus-2023. During the webcast, the public can ask questions in the chat at the address mentioned above. A recording of the webcast will be available on the company's website at https://www.netum.fi/en/investors/reports-and-presentations/ later that day.

For additional information, please contact:

Netum Group Plc
Matti Mujunen, CEO
+358 40 047 6401
matti.mujunen@netum.fi

Certified advisor:

Evli Plc
+358 40 579 6210

Netum Group in brief

Netum is a strongly and profitably growing IT service partner that builds a functional and secure digital society. We help our customers develop their digital business by designing and implementing sustainable digital solutions tailored to their needs – wisely and responsibly. Netum employs more than 400 people, and the company's revenue in 2023 was EUR 37.1 million. Netum Group Plc's shares are listed on Nasdaq Helsinki First North (NETUM). www.netum.fi