Digia Plc Half-year Financial Report January–June 2022

Digia Plc Stock exchange release 9 August 2022 at 3:00 pm EET

A year of renewal: Net sales for January–June were up by 7.3 per cent and EBITA margin amounted to 8.7 per cent

April–June 2022

• Net sales: EUR 41.2 (38.6) million, up 6.7 per cent
• Operating profit (EBITA): EUR 2.1 (3.5) million, down 38.4 per cent; 
  EBITA margin: 5.2 (9.0) per cent of net sales
• Operating profit: EUR 1.5 (2.7) million, down 43.2 per cent;
  operating margin: 3.7 (7.0) per cent of net sales
• Earnings per share: EUR 0.06 (0.08)
• New management system integrated into operational activities. The deployment of the system significantly burdened the result for April–June.
• Acquisition of MOST Digital Oy on 2 May 2022
• Agreement on the acquisition of the entire share capital of Productivity Leap Oy on 27 June 2022

January–June 2022

• Net sales: EUR 83.7 (78.0) million, up 7.3 per cent
• Operating profit (EBITA): EUR 7.3 (8.7) million, down 16.7 per cent;
  EBITA margin: 8.7 (11.2) per cent of net sales
• Operating profit (EBIT): EUR 6.1 (7.2) million, down 15.1 per cent;
  operating margin: 7.3 (9.2) per cent of net sales
• Earnings per share: EUR 0.19 (0.21)
• Return on investment: 12.6 (15.6) per cent
• Equity ratio: 44.2 (44.4) per cent
• Deployment of the Digia Business Engine management system
• Profit guidance remains unchanged: Digia’s net sales will grow year-on-year and its EBITA margin will be over 10 per cent of net sales.

Unless otherwise stated, the comparison figures provided in parentheses refer to the corresponding period of the previous year.

Group key figures

CEO’s Review:

“2022 is a year of business renewal and investments in growth – it is also the last year in our 2020–2022 strategy period. During the review period, we overhauled our organisation, operating methods and the systems that guide our operations. These measures support our organic and inorganic growth, enhance our competitiveness and improve the quality of our customer implementations. I’m extremely pleased that we have deployed the largest transformation project in Digia’s history – the Digia Business Engine (DBE) management system – as planned.

Our net sales were up 6.7 per cent in April-June and amounted to EUR 41.2 (38.6) million. The second-quarter EBITA margin was 5.2 (9.0) per cent. The margin was significantly impacted by the deployment of the Digia Business Engine: substantial outlays on personnel training were made in April–June, and the time spent on deployment also reduced invoicing rates during the review period.  Profitability was also weakened by the higher-than-normal number of sick leave days. In addition, there were more vacation days in the review period than in the comparison period. In January–June, our net sales were up 7.3 per cent to EUR 83.7 (78.0) million, and the EBITA margin was 8.7 (11.2) per cent. I believe that our profitability will improve in the latter half of the year.

DBE is a digital transformation project and its deployment has required a lot of time and learning new things. It has changed our day-to-day operative activities and the ordinary working methods of each and every Digia employee. In April–June, we capitalised EUR 0.2 million in costs from the project, which had a cost impact of EUR -1.3 million. In January–June, the project had a cost impact of EUR -2.2 million. We have capitalised a total of EUR 3.9 million from this project to date. The cost impact of the project will decrease significantly in the third quarter; after that, we will switch over to ordinary further development. 

In addition to renewing Digia’s internal operations, we made outlays on service offering development and acquisitions to ensure future growth. In May, we expanded our scalable services with Robotics as a Service capabilities by acquiring the entire share capital of MOST Digital Oy. The acquisition strengthens our integration and API business expertise and growth with automation platform services. Post-acquisition integration has progressed smoothly and the first joint deals have already been made.  

On 27 June, we announced that we would acquire the entire share capital in Productivity Leap Oy. The acquisition was completed on 1 July and it bolsters our position not only in knowledge management, but also in the social welfare and healthcare sector in particular – we see opportunities for significant growth in the transformation of this sector. Together with Productivity Leap, we are creating an even stronger offering for this market when competing for transformation projects in the social welfare and healthcare sector and knowledge management.

The major new customer agreement in the Financial Platforms business during the review period was the sale of a fund system solution based on Digia’s own DiFS product to Aktia Fund Management Company Ltd. In addition, we announced the new SaaS-based Back Office service we productised for small operators in the financial sector. The first customer deliveries were made during the review period.

Digia has become a strong partner in the Finnish higher education sector, where our company has many customers. In June, Digia was selected to provide an expert partner service to Aalto University, covering Microsoft solution development, consulting on their application platforms and products, and the maintenance of application platforms and solutions. After the review period, Digia was also selected as a supplier for CSC – IT Center for Science’s Digivisio 2030 project. This is a joint project of all 38 Finnish higher education institutions that aims to create a learning platform that will benefit higher education institutions, students and our society alike. The total value of this project that runs from 2022 to 2026 is about EUR 30–35 million, of which Digia’s share is around EUR 10.5–12.5 million.

Digia has a strong position as a provider of Microsoft D365 systems – Microsoft selected Digia as its Smart Business Solutions/Dynamics 365 Partner of the Year in Finland for the second time in a row. During the review period, we delivered projects to Marimekko, the Kanta-Häme Hospital District and Kalevala Jewelry.

Digia’s business is not exposed to direct Russia-related risks. We are keeping a close eye on the global economic situation and continuously assess risks with respect to customers, partners and cyberthreats.

I would like to warmly thank all Digia employees for your great efforts in the deployment of the new system and the renewal of operating methods. This is an important step on our growth path towards even smoother day-to-day life and more efficient service models.“ 

Events after the review period

Digia Plc and Productivity Leap Oy signed an agreement on 27 June 2022 by which Digia purchased Productivity Leap’s entire capital stock. The acquisition was completed on 1 July 2022.

Briefing invitation

A briefing for analysts will be held at 4:00 pm on Tuesday, 9 August 2022 as a Teams meeting. Attendance instructions have been emailed to participants.

CEO Timo Levoranta will give a webcast on the results starting at 5:15 pm at https://digia.videosync.fi/2022-puolivuosikatsaus

The material and presentation for the event will be available from 4:00 pm on 9 August 2022 on the company’s website: digia.com/en/investors/reports-and-presentations.

Publication of the next financial results

Digia will publish its business review for January–September 2022 at 8:00 am on 28 October 2022.

For further information, please contact:

President & CEO Timo Levoranta, tel. (exchange) +358 (0)10 313 3000

Distribution

Nasdaq Helsinki
Key media
digia.com

Digia is a software and service company that helps its customers renew themselves in the networked world. There are more than 1,300 of us working at Digia. Our roots are in Finland and we operate both in our home country and internationally. We are building a world in which digitalisation makes a difference – together with our customers and partners. Digia’s net sales totalled EUR 156 million in 2021. The company is listed on Nasdaq Helsinki (DIGIA). digia.com