Q1 2020 PRESENTATION April 22, 2020
Highlights - Q1 2020 Revenue in line with last year in a challenging business environment Revenue of NOK 9.0 billion (NOK 9.1 billion in Q1 2019) ‒ Higher sales of software (up +6.7%) and services (up +5.7%) Gross profit of NOK 2.0 billion (NOK 1.9 billion in Q1 2019) ‒ Gross margin improves from 21.2% to 22.1% EBIT before reorganization costs of NOK 103 million (NOK 116 million in Q1 2019) ‒ Reorganization costs in Denmark of DKK 51 million, as announced on January 30 ‒ Change of managing director and reduction of 67 employees, plus related writedowns and provisions Net debt of NOK 519 million at balance sheet date ‒ Net debt / EBITDA ratio of 0.4, compared with maximum of 2.5 in loan covenant ‒ Net debt balance is NOK 2.6 billion below loan covenant
Revenue breakdown: Q1 2020 Business trends • Slow start to quarter for product revenue, with sales accelerating from March – Low order backlog from public sector exiting Q4 2019 – COVID-19 pandemic drives high demand for remote workplace solutions from March • Sales mix continues to shift toward software and services • Margins improve from last year – Several large hardware and software deals at low margin in Q1 2019 – Low order backlog from public sector exiting Q4 2019 * Currency fluctuations had a positive impact of 4.8% on revenue growth in Q1 2020.
Norway Strong EBIT growth driven by higher sales of services, while operating expenses remain flat from last year REVENUE EBIT 17.1% -8.2% Product revenue -13.4% 2 442 45 2 242 38 Service revenue +11.6% NOK in million NOK in million Gross profit +1.5% Operating expenses +0.3% Q1 19 Q1 20 Q1 19 Q1 20
Sweden EBIT falls due to lower product revenue REVENUE EBIT -8.8% -5.8% Product revenue -7.5% 3 825 112 3 601 102 Service revenue +2.1% SEK in million SEK in million Gross profit -0.6% Operating expenses +0.8% Q1 19 Q1 20 Q1 19 Q1 20
Denmark Cost efficiency program implemented to reduce operating costs Appointment of new managing director and severance of 67 employees REVENUE EBIT* -19 MDKK -9.2% Product revenue -8.5% 1 433 1 302 Q1 19 Q1 20 Service revenue -11.3% DKK in million DKK in million Gross profit -11.0% -20 Operating expenses* -4.4% -39 Q1 19 Q1 20 * Before reorganization costs of MDKK 51, as announced in Q4 2019 presentation.
Finland Rapid growth in revenue and EBIT driven by higher sales of both products and services REVENUE EBIT +30.5% +12.5% Product revenue +12.1% 113 1,6 101 Service revenue +17.9% 1,2 EUR in million EUR in million Gross profit +11.9% Operating expenses +9.8% Q1 19 Q1 20 Q1 19 Q1 20
Baltics EBIT falls due to higher personnel costs in the Baltic region REVENUE EBIT -16.9% +2.2% Product revenue +5.0% 32 0,9 31 0,7 Service revenue -5.0% EUR in million EUR in million Gross profit +8.4% Operating expenses +11.9% Q1 19 Q1 20 Q1 19 Q1 20
Cash flow from operations Cash flow from operations CURRENCY: MNOK Q1 2020 Q1 2019 impacted by: • Seasonal fluctuations in Operating Cash flow, before change in working capital 54 144 working capital Changes in working capital -834 -1,130 – Working capital balance is (excluding sale of receivables) low in Q4, and increases in Q1-Q2 • Changes in the balance of Operating Cash flow, before sale of receivables -780 -986 sold accounts receivable Change in sale of receivables* -418 505 – Fewer sold receivables at end-March, compared with start of quarter Cash flow from operations -1,198 -481 * In accordance with IFRS, cash flow from operations does not include the impact of currency rates on consolidated balances. Changes in currency rates impacted the balance of receivables sold by MNOK -235 in Q1 2020 (MNOK 9 in Q1 2019).
Net debt Net debt / EBITDA ratio* of 0.4 is NOK 2.6 billion below loan covenants CURRENCY: MNOK Q1 2020 Q1 2019 Net debt* -519 -620 EBITDA - rolling 4 Q* 1,265 1,113 Net debt / EBITDA, end of quarter (ratio) 0.4 0.6 Loan covenant: -- Maximum Net Debt / EBITDA (ratio) 2.5 2.5 -- Maximum Net Debt balance -3,162 -2,782 Gap between Net Debt and Loan Covenant 2,643 2,163 *Net debt and rolling 4 quarter EBITDA as defined in Atea's loan covenants See Note 12 in Interim Financial Statements for further definition
COVID-19 action plan • Large organizations require IT investments / support as their workforce adapts to remote operations Sales opportunity • Sales (order inflow) in Q1 was up 10% from last year as order backlog increased in digital workplace • Supply chain disruptions have not been a significant issue to date • Severance of 100+ employees during Q1 • 500+ employees placed on furlough programs (temporary leave) Dynamic cost control • 1500+ employees have accepted a 10% cut in fixed salary during Q2, including all top management • Other operating expenses falls (lower cost of travel, events and meetings, etc.) • No payment of dividend in May Secure • Major vendors have extended payment terms during the coming months balance sheet • Additional debt capacity is available, as Atea is well within loan covenants • Government guidelines implemented to ensure workplace safety • 80% of Atea employees have been working from home since March 16 Employee safety • Strong communication and management processes to operate from remote locations, as long as advised by national governments
Survey: Employee satisfaction with home office A large majority is comfortable with the new work situation 80% Key findings of survey 70% • Home office is a new working condition for half of the population 60% • The majority is comfortable working from home 50% • In order to prevent queues and congestion, many are willing to keep working from home 40% • As many as 42 % believe they work as efficiently 30% from home as from their office 20% • 70 % of those who are uncomfortable with working from home have no prior experience 10% with home office 0% I don´t usually I like to work from I would work I do believe it is I do not like to work from home home more from home as efficient to work from home to help prevent work from home queue and as from the office congestion * Source: NORSTAT/Boldt market survey for Atea, April 2020
Survey: Need for IT investment and support Additional support is required to ensure productivity and IT security 90% Key findings of survey 80% • The level of trust is high – that can make us vulnerable 70% • A large majority does not worry about privacy or IT- 60% security issues 50% • Employers do not guide employees in these issues 40% • The majority have not received training on how to 30% work from home 20% • A large number are not getting the resources they need from their employers 10% • Most find digital meetings easy to handle, but many 0% I do not worry about My employer have I have not recieved My employer don´t I have experienced also report problems data attacs and IT- not provided me with proper training on pay for necessary problems with digital security while extra information how to work from equipment at home meetings working from home regarding IT-security home in conjunction with the crisis * Source: NORSTAT/Boldt market survey for Atea, April 2020
Atea is well-positioned for the market environment Large organizations are increasingly dependent on IT solutions for their operations ‒ Urgent requirement to invest in remote workplace solutions COVID-19 pandemic forces large organization to rethink their IT infrastructure ‒ Will drive further large digitalization projects Atea’s customer base provides a stable source of revenue during a cyclical downturn ‒ Over 60% of revenue is from public sector ‒ Approximately 25% of revenue is from large corporations in the Nordic region Sales have accelerated in March ‒ March revenue ahead of last year ‒ High order inflow, with strong order backlog entering Q2 Actions taken to improve profitability in Denmark ‒ New management and DKK 35 million lower cost in Q2 ‒ Confident we now have taken the necessary action to see solid progress
Q1 2020 FACT PACK
Highlights – Group Q1 Q1 Full year NOK in million 2020 2019 2019 Group revenue 9,043 9,138 36,655 Group margin 1,997 1,938 7,758 Gross margin (%) 22.1% 21.2% 21.2% EBIT before reorganization costs 103 116 747 Reorganization costs 71 0 0 Net profit 6 79 530 Earnings per share (NOK) 0.05 0.73 4.84 Diluted earnings per share (NOK) 0.05 0.72 4.78 Cash flow from operations -1,198 -481 1,897 Free cash flow -1,307 -570 1,644 31 Mar 2020 31 Mar 2019 31 Dec 2019 Net financial position -519 -620 657 Liquidity reserve 2,643 2,163 3,995 Working capital -1,278 -996 -2,419 Working capital in relation to annualized revenue (%) -3.5 % -2.7 % -6.6% Equity ratio (%) 27.8 % 26.6 % 22.4% Number of full-time employees 7,505 7,362 7,585
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