Netum Group Plc                Company announcement                       15 August 2023 at 09:00 a.m. EEST

Netum Group Plc: Netum Group Plc’s half-year report 1 January–30 June 2023

This release is a summary of Netum’s half-year report for January–June 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/

Growth strategy progressed supported by corporate transactions

The implementation of the growth strategy progressed, supported especially by corporate transactions, efficient recruitment and sales development. The Group’s revenue for January–June 2023 grew 10.9% from the comparison period. Organic growth was 6.2%. Inorganic growth based on the acquisition of Studyo Oy on 2 January 2023 was 4.7%. Growth investments, increased costs and delays in customer project start-ups decreased profitability, and EBITA amounted to EUR 1.0 (1.7) million or 5.7 (11.2) % 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 reporting period. The figures for 2023 included in this half-year report are unaudited.

January–June 2023 in brief

• On 2 January 2023, Netum Group Plc acquired 100% of Studyo Oy
• On 30 June 2023 Netum Oy, a subsidiary of Netum Group Plc, and Optimo Systems Oy agreed on a transaction in which Netum DUX and related business operations were transferred on 1 July 2023 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 approximately 49% ownership.
• Revenue increased 10.9% from the comparison period to EUR 17.1 (15.4) million
• EBITDA amounted to EUR 1.2 (1.9) million or 6.9 (12.1) % of revenue
• EBITA was EUR 1.0 (1.7) million or 5.7 (11.2) % of revenue
• Comparable EBITA was EUR 1.2 (1.8) million, or 7.1 (11.4) % of revenue
• Operating profit was EUR -0.1 (0.9) million, or -0.6 (5.6) % of revenue
• Result for the reporting period was EUR -0.3 (0.5) million, or -1.8 (3.2) % of revenue,
  and comparable result excluding goodwill amortisation was EUR 1.0 (1.4) million,
  or 5.6 (8.9) % of revenue
• Comparable earnings per share excluding goodwill amortisation were EUR 0.08 (0.12)
• Number of employees at the end of the period was 323 (263)
• After the reporting period, on 14 July 2023, Netum announced that it had signed an agreement with the main shareholders of IT service company Buutti Oy whereby it will acquire the entire share capital of Buutti Oy.

Group key figures

¹⁾ Items affecting comparability are presented in the table Comparable profit excluding goodwill amortisation.

Outlook for 2023

The outlook for the IT services market for the rest of 2023 has partially weakened during the first half of the year. In particular the corporate sector faces uncertainty due to global economic and political challenges. In the public sector, demand remains strong, but price competition has intensified. Despite the market situation, Netum's business is expected to develop favourably due to the strong order backlog of public administration customers, improving invoicing rates, reduced recruitment needs and the transfer of the Netum DUX business.

Netum continues to expect its revenue to grow at least 20% from the previous year and EBITA to be at least 10% of revenue in the financial year 2023.

On 14 July 2023, Netum announced the acquisition of Buutti Oy, the closing date of which is 1 September 2023. As a result of the acquisition, Netum’s outlook for 2023 will be updated and published as soon as possible after the closing of the transaction.

Matti Mujunen, CEO:

”Netum's business developed well in the first half of the year, although our profitability was on a lower level than targeted. The implementation of our growth strategy progressed strongly on several fronts, supported especially by corporate transactions, efficient recruitment and sales development.

In the first half of 2023, our revenue grew by approximately 11 percent year on year and was EUR 17.1 million. In the comparison period, the subcontracting-oriented government framework agreement expired, which significantly increased revenue for the comparison period. EBITA was 5.7 per cent and comparable EBITA 7.1 per cent of revenue. Our profitability was impacted by our growth investments in recruitment and strengthening our sales organisation, lower-than-targeted invoicing rates in some service areas and increased salary costs.

In January, we strengthened our product and service offering in the education sector and expanded our network of offices to the Kuopio economic area by acquiring Studyo Oy. After the review period in July, we announced the acquisition of Buutti Oy, which employs 110 people. The acquisition will expand our operations to the Oulu region. In line with our targets, Buutti will provide us with further growth, especially from corporate customers, and expand our service offering, for example, in the development of embedded systems and training services. On 1 July, we transferred the Netum DUX business to Optimo Systems Oy that became an associated company of Netum Oy.

Our recruitment work continued strong in the first half of the year, and by the end of June there were already 323 of us. With the acquisition of Studyo, we gained 14 new Netum employees, and our total number of employees increased by 47 during the first half of the year. We continued to work in a hybrid model that has proven to work well, and we also aim to support working at the office, for example by organising joint events.

During the first half of the year, we have also invested especially in enhancing the growth of our sales organisation, new customer acquisition and customer service. We recruited several experienced sales professionals to our team, appointed a new sales director and organised customer relationship management into industry teams. Maintaining the high level of trust and satisfaction of our customers is one of the cornerstones of our strategy. We measure customer satisfaction continuously, and at the end of June our NPS score was 64.

The partnership activities we reorganised at the end of 2022 have also developed promisingly during the first half of the year. We have developed and expanded participation in partnership programs of large technology partnerships. In addition, we implemented a special competence acceleration program with an international technology partner and acquired a significant number of new domestic subcontractors and nearshore partnerships. This allows us to offer even more di-verse expertise to customer projects. A partnership model was developed for the development of the Group's partnership activities, the implementation of which is planned during 2023.

In a changing world, we also need to change to become an increasingly significant player in the digital field. We have invested heavily in marketing development by increasing visibility, improving processes and tools, and building a brand as a wise changemaker.

The new significant agreements we signed during the first half of the year include, for example, an agreement on the application development of the Peppi system for Metropolia University of Applied Sciences, a cloud-based data warehouse solution for the University of Vaasa, management consulting services for VTT Technical Research Centre of Finland and expert services for the RDI ecosystem for the wellbeing services county of Central Uusimaa. In addition, we signed several new cyber security service agreements, including State Treasury, Ministry of Education and Culture and IT Center for Science CSC.

We are involved in significant national IT projects, the most important of which include EURA 2021 and TE-Digi. Also according to public information, EURA 2021 has had scheduling challenges. These challenges have been overcome in good cooperation with our customer, and the project is progressing in a controlled manner. In the first implementation of the major system reform of TE Services at the beginning of March, the functionalities related to unemployment security were transferred to production. We were able to successfully carry out this very complex and challenging implementation together with our customer. The development of TE-Digi continues strongly. Several additional implementations will be done this year and next, which will replace the current customer information system with a completely new one and enable the transfer of TE services to municipalities from the beginning of 2025.

Responsible business operations are very important to us at Netum, and our sustainability work supports our growth strategy. A top-notch work community and employee experience are an essential part of our goals and an object of continuous development. A good employee experience is evidenced by the good employee promoter score eNPS and our ranking in tenth place in the category of medium-sized companies in the Best Workplaces 2023 list in Finland. In addition, we have done a lot of work to engage our employees, for example through training opportunities. The good results of HR and employee engagement are also evidenced by the low employee turnover rate.

We also developed our environmental responsibility purposefully. In June 2023, we received our third Green Office certificate for our Helsinki office, and we will continue to certify the other locations. In addition, we offer our personnel Green Operator online training, which helps us ensure that all Netum employees know how to make right, responsible and sustainable choices in both customer and internal projects. We have also started the Group's carbon footprint calculation, which for its part will lay the foundation for future sustainability reporting in accordance with the EU directive.

The outlook for the IT services market for the rest of 2023 has partially weakened during the first half of the year. In particular the corporate sector faces uncertainty due to global economic and political challenges. In the public sector, demand remains strong, but price competition has intensified. Despite the market situation, Netum's business is expected to develop favourably due to the strong order backlog of public administration customers, improving invoicing rates, reduced recruitment needs and the transfer of the Netum DUX business, and our guidance for 2023 remains unchanged. With the acquisition of Buutti, we will update our guidance for 2023 and publish it as soon as possible after the closing date of the transaction, 1 September 2023.

My warmest thanks for the first six months of the year to our committed personnel, all our part-ners, customers and investors.”

Webcast for investors and media

The company will hold a press conference in Finnish on Tuesday 15 August 2023 at 2:00 p.m. EEST. 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/tulokset-h1-2023. 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 Oyj
+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 300 people, and the company's revenue in 2022 was EUR 29.1 million. Netum Group Plc's shares are listed on Nasdaq Helsinki First North (NETUM). www.netum.fi