Interim Report Nepa AB (publ)
Record sales growth in fourth quarter.
This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs.
FOURTH QUARTER, OCTOBER – DECEMBER 2016
- Net sales increased by 25.3% to MSEK 55.2 (44.0)
- Gross profit increased by 14.8% to MSEK 40.3 (35.1)
- EBIT amounted to MSEK 0.4 (2.8)
- Earnings after tax amounted to MSEK 0.6 (3.1)
- Earnings per share amounted to SEK 0.07 (2.70)
FULL YEAR, JANUARY – DECEMBER 2016
- Net sales increased by 19.4% to MSEK 184.4 (154.5)
- Gross profit increased by 16.6% to MSEK 136.7 (117.3)
- EBIT amounted to MSEK 0.5 (2.7)
- Earnings after tax amounted to MSEK -1.0 (2.1)
- Earnings per share amounted to SEK -0.13 (1.93)
IMPORTANT EVENTS
DURING THE PERIOD
- In October 2016, Nepa acquired outstanding 9.9 per cent of the UK subsidiary Nepa UK Ltd, which then became a wholly owned subsidiary.
- Lindsay Parry (formerly Cowan) new MD of Nepa UK since November 2016.
AFTER THE PERIOD ENDED
- Nepa has acquired outstanding 20 percent of the shares in sales subsidiary Nepa India.
- Since founding of Nepa in Finland, the MD for the subsidiary has owned an option to seven percent of the outstanding shares of Nepa Finland. Nepa has acquired the option and the profitable subsidiary remains wholly owned.
- The board of directors have decided to change the date for annual general meeting 2017 to May 31 in order to be able to present the interim report for the first quarter of 2017 on the AGM.
A WORD FROM OUR CEO
2016 has been a special and fantastic year in Nepa’s history. Since inception 11 years ago, we have worked on changing an industry with digital technology and at the same time build a multinational company
Two years after introducing our fastest growing product ever, the ActionHub®, we decided to take the next step in Nepa’s growth journey. To get more resources to realize our growth ambitions, we for the first time ever infused external capital as we made an IPO on the Nasdaq First North exchange on April 26th. An amazing moment for Nepa and everyone that have worked for Nepa’s growth, but also a stepping stone for a new growth journey with the ambition to:
- Continue to grow the home market Sweden and to drive growth in existing international markets Denmark, Finland, India and Norway.
- Invest further in our rapidly growing UK business aiming at further increase growth in Europe’s largest and the world’s second largest market.
- Establish Nepa’s first office in the USA, driven by current clients’ demand of presence on the world’s largest market and the growth opportunities we have identified there.
- Increase investments in Nepa’s proprietary product platform ActionHub® to achieve increased scalability and allow for further growth.
- Invest in expansion teams needed to start up the increasingly big client projects, which at an increasing rate cover more and larger markets
2016 was characterized by four quarters with a steady increase of net sales, 14.4% in Q1, 19.8% in Q2 and 16.3% in Q3. In Q4 Nepa showed a strong growth of 25.3%, above expectations. In total 43 consecutive quarters of steady growth since inception in 2006. Gross profit grew by 14.8 percent in the fourth quarter, which is explained by a few large client deals with high data costs. The fact that the gross profit growth is not as high as the sales growth is explained by a few client assignments in the fourth quarter with high data costs. Going forward, gross profit growth is expected to correspond with sales growth. EBIT amounted to MSEK 0.4, according to expectations, given the investments in expansion and product development that we had planned to execute.
During the third quarter, we focused on creating the prerequisites for growth in the UK under a new MD and also acquired outstanding 9.9 percent of the shares which made Nepa UK a wholly-owned subsidiary. During the beginning of the autumn we have strengthened the expansion team that will drive our internationalization with efficient structures, processes and scalability. We invested in our product development team consisting of system developers and data scientists with the ambition to keep driving the development within our field on a global basis.
In the fourth quarter, we continued to realize our growth agenda and, driven by current clients’ needs, we opened our first office in the USA, in New York. Next step for Nepa USA is to build a local organization that can serve our current client locally and as a next step attract local clients.
For the full year of 2016 net sales increased by 19.4 percent to MSEK 184.4, which is slightly above expectation and can be explained by solid growth in all markets. Growth has been especially strong in Finland (+37 percent) and UK (+31 percent). Gross profit for the year increased by 16.6 percent, in line with expectations. EBIT amounted to MSEK 0.5 during 2016. Compared to 2015 Nepa showed a lower EBIT margin in 2016, which is explained by increased investments in personnel for driving expansion faster and more efficiently, strengthened team in the UK and the USA and investments in product development resources.
In the beginning of 2017 we continued the strategy to have all subsidiaries wholly owned. Previously outstanding 20 percent of the shares in our Indian sales company, as well as outstanding option for MD in Finland to acquire 7 percent in our Finnish subsidiary have been acquired.
The fact that we during 2016 managed to conduct an IPO, start the expansion in the USA and UK and at the same time keep up a good international growth is an achievement. At the same time continue a strong growth and increasing net margins in our Swedish home market is a good testament to our organization’s abilities and lay the foundation for 2017 becoming another successful year.
Finally, I want to give my warmest thanks for a great year to all colleagues, clients, partners and shareholders. We now look forward to another exciting growth year!
Fredrik Östgren
CEO
THE GROUP
THE BUSINESS
VISION
”We change the way decisions are made”.
The digital transformation of our society is pushing companies to become more customer centric. The need to listen to and to understand customers has never been more important for business success. Through innovative solutions and software, Nepa facilitates customer oriented decision making in all parts of Nepa’s clients’ organizations.
BUSINESS CONCEPT
Nepa’s business concept is to help companies become more customer oriented, by bringing the voice of the consumer into companies’ business development and daily decision-making. Nepa combines consumer feedback data with actual behavior data in order to transform traditional insights into financially quantifiable actions.
BUSINESS MODEL
Nepa is a groundbreaking growth company within the research industry that offers innovative solutions and software for delivering actionable insights to clients. Nepa has developed automated processed for continuous data gathering, data analysis and the distribution of actionable insights.
More than 65 percent of Nepa’s revenues stem from subscription revenues defined as agreements that last at least 12 months. Other revenues stem from solving client specific business challenges, always with the ambition to create a long-term subscription business model and/or to develop highly scalable products that can be applied to other clients and in other industry verticals.
The proprietary platform ActionHub® is sold as a combination of:
- A platform license for managing customer feedback with an interface that automatically enriches clients’ current IT infrastructure with behavior data.
- Standardized products – ActionHub® Applications Suite.
- Solving client specific business challenges.
Nepa’s sales strategy entails solving client specific business challenges by utilizing proprietary ready-made and scalable analytics modules, which results in cost effective customization.
DEVELOPMENT OF THE GROUP
REVENUES
Net sales increased in the fourth quarter by 25.3 percent to kSEK 55,157 (44,014) and gross profit increased by 14.8 percent to kSEK 40,260 (35,078).
For the full year of 2016, net sales increased by 19.4 percent to kSEK 184,448 (154,499) and gross profit increased by 16.6 percent to kSEK 136,746 (117,270).
EARNINGS
The group’s EBIT amounted in the fourth quarter to kSEK 413 (2,772) and earnings after tax amounted to kSEK 563 (3,112).
For the full year of 2016, EBIT amounted to kSEK 506 (2,678) and earnings after tax amounted to kSEK ‑1,034 (2,085).
GROUP INCOME STATEMENTS
| kSEK | Q4 2016 | Q4 2015 | Full year 2016 | Full year 2015[1] | |
| Net sales | 55 157 | 44 014 | 184 448 | 154 499 | |
| Other external income | 1 690 | 1 073 | 2 970 | 1 746 | |
| 56 847 | 45 087 | 187 417 | 156 245 | ||
| Direct costs | -14 897 | -8 936 | -47 702 | -37 229 | |
| Other external costs | -5 649 | -7 228 | -20 663 | -21 546 | |
| Personnel costs | -35 019 | -25 871 | -116 059 | -93 817 | |
| Depreciations | -496 | -116 | -1 477 | -468 | |
| Other operating costs | -373 | -164 | -1 009 | -507 | |
| Earnings Before Interest and Tax |
413 | 2 772 | 506 | 2 678 | |
| Financial income | 803 | -31 | 896 | 95 | |
| Financial costs | -183 | -295 | -363 | -403 | |
| Earnings Before Tax | 1 033 | 2 447 | 1 039 | 2 370 | |
| Tax | -470 | 666 | -2 073 | -286 | |
| Earnings After Tax | 563 | 3 112 | -1 034 | 2 085 | |
| Profit attributable to the parent company’s shareholders | 506 | 2 968 | -852 | 2 121 | |
| Profit attributable to non-controlling interests | 56 | 144 | -182 | -36 | |
| Number of shares, end of period (pcs.) | 7 148 351 | 1 100 000 | 7 148 351 | 1 100 000 | |
| Average number of shares during the period (pcs.) | 7 148 351 | 1 100 000 | 6 313 355 | 1 100 000 | |
| Basic and diluted earnings per share (SEK) | 0.07 | 2.70 | -0.13 | 1.93 |
GROUP BALANCE SHEETS
| ASSETS (kSEK) | December 31, 2016 | December 31, 2015 | |
| Intangible assets | 12 002 | 4 688 | |
| Tangible assets | 1 197 | 1 108 | |
| Financial assets | 1 560 | 3 050 | |
| Sum non-current assets | 14 759 | 8 846 | |
| Trade receivables | 32 711 | 25 414 | |
| Tax receivables | - | 848 | |
| Other current receivables | 2 452 | 720 | |
| Prepayments and accrued income | 6 153 | 2 279 | |
| Cash and cash equivalents | 54 514 | 3 612 | |
| Sum current assets | 95 831 | 32 873 | |
| TOTAL ASSETS | 110 590 | 41 719 | |
| EQUITY (kSEK) | |||
| Shareholders’ equity | 1 430 | 1 100 | |
| Development fund | 8 253 | - | |
| Other capital contributions | 77 750 | 7 940 | |
| Translation difference | 140 | -179 | |
| Retained earnings incl. net profit for the period | -16 799 | -5 869 | |
| Equity, parent company shareholder | 70 774 | 2 992 | |
| Minority interest | -714 | -537 | |
| Total equity | 70 060 | 2 455 | |
| LIABILITIES (kSEK) | |||
| Deferred Tax | 654 | - | |
| Total Long term liabilities | 654 | - | |
| Borrowings, current | - | 8 294 | |
| Trade payables | 14 635 | 8 671 | |
| Tax payables | 137 | - | |
| Other current liabilities | 6 227 | 11 227 | |
| Due to customers | 6 697 | 6 269 | |
| Accrued expenses, deferred income | 12 181 | 4 803 | |
| Total short term liabilities | 39 875 | 39 264 | |
| Total liabilities | 40 529 | 39 264 | |
| TOTAL EQUITY AND LIABILITIES | 110 590 | 41 719 | |
| Pledged (kSEK) | |||
| Chattle | 12 000 | 14 500 | |
| Bank guarantee | 3 110 | 3 050 | |
| Total pledged | 15 110 | 17 550 |
GROUP CASH FLOW STATEMENTS
| kSEK | Full year 2016 | Full year 2015[2] | |
| Operating activities | |||
| Profit before tax | 1 039 | 2 370 | |
| Adjustment of items not included in the cash flow | 2 725 | 259 | |
| Income tax paid | -434 | -367 | |
| Cash flow from operating activities before adjustments of working capital | 3 330 | 2 263 | |
| Cash flow from changes in working capital | |||
| Increase (-) / Decrease (+) of current receivables | -12 903 | -10 032 | |
| Increase (+) / Decrease (-) of current liabilities | 8 769 | 1 520 | |
| Cash flow from operating activities | -805 | -6 250 | |
| Investing activities | |||
| Acquisitions/divestments, group companies | -46 | - | |
| Acquisitions/divestments, tangible assets | -592 | -696 | |
| Acquisitions/divestments, intangible assets | -8 397 | -4 688 | |
| Acquisitions/divestments, financial assets | -43 | -3 050 | |
| Cash flow from investing activities | -9 079 | -8 434 | |
| Financing activities | |||
| Rights issue | 69 080 | - | |
| New borrowings | - | 5 580 | |
| Amortization of loans | -8 294 | - | |
| Cash flow from financing activities | 60 785 | 5 580 | |
| Net cash flow for the period | 50 902 | -9 104 | |
| Cash and cash equivalents at the beginning of the period | 3 612 | 12 716 | |
| Cash and cash equivalents at the end of the period | 54 514 | 3 612 |
GROUP KEY PERFORMANCE INDICATORS
| Q4 2016 | Q4 2015 | Full year 2016 | Full year 2015[3] | ||
| Net sales growth rate (%) | 25.3 | n/a | 19.4 | 24.5 | |
| EBITDA (kSEK) | 908 | 2 888 | 1 983 | 3 146 | |
| EBITDA margin (%) | 1.6 | 6.6 | 1.1 | 2.0 | |
| EBIT margin (%) | 0.7 | 6.3 | 0.3 | 1.7 | |
| Profit margin (%) | 1.9 | 5.6 | 0.6 | 1.5 | |
| Total assets (kSEK) | 110 590 | 41 719 | 110 590 | 41 719 | |
| Equity / Assets ratio (%) | 63.4 | 5.9 | 63.4 | 5.9 | |
| No. of shares, end of period (pcs.) | 7 148 351 | 1 100 000 | 7 148 351 | 1 100 000 | |
| No. of shares, average during period (pcs.) | 7 148 351 | 1 100 000 | 6 313 355 | 1 100 000 | |
| Earnings per share (SEK) | 0.07 | 2.70 | -0.13 | 1.93 | |
| Equity per share (SEK) | 9.90 | 2.72 | 9.90 | 2.72 | |
| Dividend per share (SEK) | n/a | n/a | 0.00[4] | 0.00 | |
| No. of employees, average (pcs.) | 210 | 147 | 187 | 161 |
Definitions
Growth rate. Percent of growth in net sales compared to a previous period.
EBITDA. Earnings before interest, taxes, depreciation and amortization.
EBITDA margin. EBITDA as a percentage of net sales.
EBIT margin. EBIT as a percentage of net sales.
Profit margin. Earnings before tax as a percent of net sales.
Equity / Assets ratio. Equity as a percentage of total assets.
Earnings per share. Profit attributable to the parent company’s shareholders divided by average number of outstanding shares.
Equity per share. Equity divided by number of outstanding shares.
Dividend per share. Dividend for the period divided by the number of outstanding shares at the time of dividend.
No. of employees, average. Number of FTE’s on average during the period.
PARENT COMPANY
INCOME STATEMENTS, PARENT COMPANY
| kSEK | Q4 2016 | Q4 2015 | Full year 2016 | Full year 2015[5] | ||||
| Net sales | 2 358 | - | 10 909 | - | ||||
| Other external income | 851 | 491 | 957 | 3 082 | ||||
| 3 209 | 491 | 11 866 | 3 082 | |||||
| Direct costs | -1 143 | - | -2 398 | - | ||||
| Other external costs | -1 011 | -312 | -2 255 | -1 777 | ||||
| Personnel costs | -2 655 | -4 119 | -13 420 | -6 029 | ||||
| Depreciations | -4 | -4 | -16 | -16 | ||||
| Other operating costs | -3 | - | -3 | - | ||||
| Earnings Before Interest and Tax | -1 606 | -3 945 | -6 226 | -4 740 | ||||
| Results from shares in group companies | 818 | 4 928 | 818 | 4 928 | ||||
| Financial income | 50 | 1 | 50 | 1 | ||||
| Financial costs | 0 | -5 | -65 | -44 | ||||
| Earnings After Financial Items | -739 | 979 | -5 423 | 145 | ||||
| Group contributions received | 1 224 | - | 1 224 | - | ||||
| Earnings Before Tax | 486 | 979 | -4 199 | 145 | ||||
| Tax | 4 | - | -20 | -43 | ||||
| Earnings After Tax | 489 | 979 | -4 219 | 102 | ||||
BALANCE SHEETS, PARENT COMPANY
| ASSETS (kSEK) | December 31, 2016 | December 31, 2015 | |
| Tangible assets | 19 | 35 | |
| Financial assets | 15 059 | 17 479 | |
| Sum non-current assets | 15 078 | 17 514 | |
| Trade receivables | 90 | - | |
| Loans to Group companies | 29 365 | 915 | |
| Tax receivables | 670 | 637 | |
| Other current receivables | 217 | 13 | |
| Prepayments and accrued income | 192 | 68 | |
| Cash and cash equivalents | 37 285 | 1 | |
| Sum current assets | 67 817 | 1 635 | |
| TOTAL ASSETS | 82 896 | 19 148 | |
| EQUITY (kSEK) | |||
| Shareholders’ equity | 1 430 | 1 100 | |
| Share premium reserve | 77 750 | 9 000 | |
| Retained earnings | 3 442 | 3 340 | |
| Net profit for the period | -4 219 | 102 | |
| Total equity | 78 403 | 13 542 | |
| Tax allocation reserve | 200 | 200 | |
| Untaxed reserves | 200 | 200 | |
| LIABILITIES (kSEK) | |||
| Borrowings, current | - | 1 173 | |
| Borrowings from credit institutions | - | 136 | |
| Trade payables | 740 | 67 | |
| Borrowings from Group companies | 1 416 | 286 | |
| Tax payables | - | 79 | |
| Other current liabilities | 289 | 2 511 | |
| Due to customers | - | 113 | |
| Accrued expenses, deferred income | 1 848 | 1 041 | |
| Total liabilities | 4 293 | 5 406 | |
| TOTAL EQUITY AND LIABILITIES | 82 896 | 19 148 | |
| Pledged (kSEK) | |||
| Complementary for liabilities in BlueCarrot KB | - | 6 359 | |
| Total pledged | - | 6 359 |
NOTE: Changes in equity in summary
| THE GROUP, kSEK | Share- holders’ equity |
Other capital contribu-tions | Develop-ment fund |
Transla-tion difference | Retained earnings incl. net profit of the period |
Minority interest | Total equity | ||||
| THE GROUP 2015 | |||||||||||
| Opening balance of equity January 1, 2015 |
100 | - | - | -7 | 941 | -492 | 542 | ||||
| Net profit of the period | - | - | - | -3 | 2 123 | -36 | 2 085 | ||||
| Translation difference | - | - | - | -169 | 7 | -9 | -172 | ||||
| Other capital contributions | 7 940 | -8 940 | -1 000 | ||||||||
| Rights issue | 1 000 | - | - | - | - | - | 1 000 | ||||
| Closing balance of equity December 31, 2015 | 1 100 | 7 940 | - | -179 | -5 869 | -537 | 2 455 | ||||
| THE GROUP 2016 | |||||||||||
| Opening balance of equity January 1, 2016 |
1 100 | 7 940 | - | -179 | -5 869 | -537 | 2 455 | ||||
| Net profit of the period | - | - | - | - | -852 | -182 | -1 034 | ||||
| Translation difference | - | - | - | 319 | -764 | 5 | -441 | ||||
| Development fund | - | - | 8 253 | - | -8 253 | - | - | ||||
| Other capital contributions | - | 1 060 | - | - | -1 060 | - | - | ||||
| Rights issue | 330 | 68 750 | - | - | - | - | 69 080 | ||||
| Closing balance of equity December 31, 2016 | 1 430 | 77 750 | 8 253 | 140 | -16 799 | -714 | 70 060 | ||||
| PARENT COMPANY, kSEK | Shareholders’ equity | Other capital contributions | Share premium reserve | Retained earnings incl. net profit of the period |
Total equity | ||||||
| PARENT COMPANY 2015 | |||||||||||
| Opening balance of equity January 1, 2015 |
100 | - | - | 3 340 | 3 440 | ||||||
| Net profit of the period | - | - | - | 102 | 102 | ||||||
| Rights issue | 1 000 | - | 9 000 | - | 10 000 | ||||||
| Closing balance of equity December 31, 2015 | 1 100 | - | 9 000 | 3 442 | 13 542 | ||||||
| PARENT COMPANY 2016 | |||||||||||
| Opening balance of equity January 1, 2016 |
1 100 | - | 9 000 | 3 442 | 13 542 | ||||||
| Net profit of the period | - | - | - | -4 219 | -4 219 | ||||||
| Rights issue | 330 | 68 750 | - | - | 69 080 | ||||||
| Closing balance of equity December 31, 2016 | 1 430 | 68 750 | 9 000 | -777 | 78 403 | ||||||
THE SHARE
The share capital f Nepa AB (publ) amounted, on December 31, 2016 to SEK 1,429,670.20 divided into 7,148,351 shares, each with a nominal value of SEK 0.20.
Nepa AB (publ) is listed on the Nasdaq First North stock exchange since April 26th, 2016 under the ticker NEPA.
A trading unit consists of onehoundredandten (110) shares. All shares are of the same series and have the same voting rights and dividends rights.
Ten largest shareholders as of December 31, 2016 Number of shares Share/Votes
Ulrich Boyer 1,764,204 24.7%
Fredrik Östgren 950,895 13.3%
P-O Westerlund 675,765 9.5%
Niclas Öhman 441,236 6.2%
AMF Aktiefond Småbolag 263,736 3.7%
Handelsbanken Fonder AB 250,000 3.5%
Didner & Gerge Small and Microcap 236,978 3.3%
Hans Skruvfors 225,000 3.1%
Öhman Global Growth 219,780 3.1%
Bo Mattsson, via company 204,366 2.9%
Other shareholders 1,916,391 26.8%
Total number of shares 7,148,351 100.0%
ACCOUNTING PRINCIPLES
The Group accounts have been established according to Swedish GAAP (Årsredovisningslagen and Bokföringsnämndens allmänna råd 2012:1 Årsredovisning och koncernredovisning (K3)). The Group consists of the parent company Nepa AB (publ) and eight subsidiaries, six of which non-Swedish. Accounting principles and valuation principles correspond to the ones used in the latest annual report.
RISKS AND UNCERTAINCIES
Nepa faces a number of business risks and market risks, including the dependency of qualified personnel, the ability to handle growth and technological development.
AUDITING
This interim report has not been audited by the company’s auditors.
CERTIFIED ADVISER
Erik Penser Bank is Nepa’s Certified Adviser.
FINANCIAL CALENDAR
Annual general meeting 2017 31 May 2017 (note: new date)
Interim report 1 January – 31 March 2017 31 May 2017
Interim report 1 April – 30 June 2017 31 August 2017
Interim report 1 July – 30 September 2017 30 November 2017
Year-end report 2017 28 March 2018
ANNUAL GENERAL MEETING AND DIVIDENDS
Annual general meeting will be held on 31 May 2017 in Stockholm. The annual report will be published on 17 May 2017 and will be available at the head office.
The Board of Directors have decided to propose to the annual general meeting that no dividends will be paid for fiscal year 2016.
CERTIFICATION
The Board of Directors and the CEO certify that this interim report provides a correct depiction of the Group’s and parent company’s businesses, standings and results, and that it describes the relevant risk factors and uncertainties the company is facing.
Stockholm, 31 March 2017
The Board of Directors of Nepa AB (publ)
Ulrich Boyer Bo Mattsson P-O Westerlund
Chairman of the board Board member Board member
Niclas Öhman Fredrik Östgren
Board member CEO
For further information, please contact:
Fredrik Östgren, CEO P-O Westerlund, EVP and CFO
+46 733 345 069 +46 706 404 824
fredrik.ostgren@nepa.com p-o.westerlund@nepa.com
This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs.
[1] Pro forma after the acquisition of Nepa Sweden AB in accordance with the Annual Report, note 17.
[2] Pro forma after the acquisition of Nepa Sweden AB in accordance with note 19 in the annual report.
[3] Pro forma after the acquisition of Nepa Sweden AB in accordance with note 19 in the annual report.
[4] Suggested.
[5] Pro forma after the acquisition of Nepa Sweden AB in accordance with note 19 in the annual report.
Nepa is one of the fastest growing companies in Swedish history, enabling organisations to improve their business performance by becoming customer centric at their fingertips. By merging behavioural data with customer feedback data in our ActionHub® platform, our clients can turn the voice and the footprints of the consumer into financial KPI’s and provide it to the right stakeholder in real-time.
Nepa serves some of the world’s most reputable brands in 50+ countries with local presence in China (rep), Denmark, Finland, India, Norway, Singapore (rep), Sweden, the UK and the US.
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