Enfo Oyj’s financial statement bulletin January 1 – December 31, 2018 .

Key points of the financial statement bulletin 
• Turnover decreased by 7.0% in October–December to EUR 33.2 (35.7) million. Turnover for January–December decreased by 4.6% to EUR 125.6 (131.7) million. (2017 figures for continuing operations if not otherwise mentioned).
• The operating margin (EBITDA) excluding non-recurring items was EUR 2.1 (2.6) million in the fourth quarter and EUR 5.1 (6.4) million for January–December. 
• The operating profit (EBIT) was EUR -2.4 (-2.6) million in the fourth quarter. The operating profit for January–December was EUR -2.5 (-5.1) million. 
• The profit before taxes was EUR -2.3 (-2.6) million in the fourth quarter. Profit before taxes since the start of the year amounted to EUR -3.6 (-6.1) million.
• The profit was EUR -2.7 (-3.6) million in October–December and EUR -4.5 (-7.2) million since the start of the year. 
• The earnings per share in the fourth quarter were EUR -4.9 (-8.7) and the earnings per share for the full year were EUR -9.2 (-13.5). 
• Operating cash flow was EUR 0.8 (5.2) million in the fourth quarter, and EUR 2.3 (3.8) million for January–December. 
• Enfo employed an average of 884 employees (911) during the year and a total of 881 employees (888) at the end of the year. 

Enfo’s business
Enfo Oyj is the parent company of Enfo Group. Enfo is a Nordic IT service company enabling data-driven business transformation. Enfo builds and runs data-driven solutions and services with its customers and employs approximately 900 experts in Finland and Sweden.

Outlook for 2019
The Group’s turnover and operating margin (EBITDA) are expected to increase in 2019. The improvement is based on the enhancement of competence acquisition and management, alignment of Sales and Business Areas, as well as improvement of operational efficiency and steering mechanisms. 

Risks and uncertainties
Competition for experts is a major factor in terms of growth, and the main short-term risks are related to recruiting and efficient onboarding of employees. The internal capability to develop competence management, advance tools for maneuverability, and continue to execute renewed story, offering and structure is essential in the short term. Enfo’s growth in the long term will be impacted by the markets’ moves towards bringing together data assets, as well as the pace of the shift towards cloud.

CEO’s review
Seppo Kuula, Enfo’s CEO, comments as follows:

“The year 2018 was a year of unification and solidification at Enfo. Our focus was on building a sustainable business foundation, prioritizing our people and profitability. 

The value of an expert company rests with its people. Thus, we put extra effort into our strategic must-win battle A workplace to love. We began the year by setting our common values and developing processes for a unified culture to reinforce a sense of belonging. We also defined the Enfo leadership philosophy. 

A common story is the foundation for coherent business development. In the second quarter, we advanced our shared story and offering towards a competitive position. We enable data-driven business transformation for a more intelligent Nordics by supporting our customers in mastering the complex scene of hybrid platforms and exponentially increasing amounts of data and number of applications. Our strength lies in our cross-platform expertise and our capability to both build and run digital solutions from business-critical enterprise software systems to discrete digital services. Going forward, our focus will increasingly be on the cloud.

The company structure should support the story. In the third quarter, we implemented a new structure for clarifying value creation. Our four business areas since August are Data platforms, Information management, Applications and Care. Together with our subsidiary Zuite Business Consulting, we advanced the alignment of our offerings around SAP on cloud. With the future market being characterized by cross-platform activity, we decided to close down our data center in Karlskrona and end operations at the business unit Care Transform Karlskrona in Sweden.

Common tools and operational alignment are a prerequisite for maneuverability in a constantly changing market. In the fourth quarter we focused on developing tools to enhance navigation as well as transparency in the organization. We brought our financial processes and tools back in-house, as the cooperation with an external partner did not succeed. During the year, we simplified our legal structure in Sweden. The foundation for competence management as well as sales and business area alignment was set at the end of the year.  

Throughout the year we focused on profitability. After a challenging year in 2017, we managed to get back on track. 

In 2019, operational efficiency continues to be our focus. We will put effort into attrition, utilization and our cloud offering. We have made headway when it comes to culture, offering and story, but need forward-looking transparency to support proactivity in business management. For this purpose, further development of financial as well as a competence management tools and processes is crucial.” 

Turnover and profit
Enfo Group's turnover in October–December decreased 7.0% to EUR 33.2 (35.7) million (figures for 2017 continuing operations if not otherwise mentioned). Full-year turnover decreased by 4.6% to EUR 125.6 (131.7) million. EUR 52.0 million of the turnover was earned in Finland and EUR 73.6 million was earned in Sweden. 

The EBITDA excluding non-recurring items was EUR 2.1 (2.6) million in the fourth quarter and EUR 5.1 (6.4) million for January–December. The operating profit (EBIT) for the fourth quarter was EUR -2.4 million, or -7.2% of turnover (EUR -2.6 million or -7.3%). Full-year operating profit was EUR -2.5 million or -2.0% of turnover (EUR -5.1 million or -3.9%). 

The profit before taxes was EUR -2.3 (-2.6) million in the fourth quarter. Full-year profit before taxes was EUR -3.6 (-6.1) million. Profit in the review period amounted to EUR -2.7 (-3.6) million in the fourth quarter, and EUR -4.5 (-7.2) million since the start of the year. The earnings per share in the fourth quarter were EUR -4.9 (-8.7) and the earnings per share for the full year were EUR -9.2 (-13.5). The Group’s net financing expenses were EUR 0.1 (0.0) million in the fourth quarter and EUR -1.2 (-0.9) million for the full year.

In 2018, Enfo focused on profitability and a sustainable business foundation. EBITDA excluding non-recurring items was moderate at EUR 5.1 million (6.4), however not fully in line with the target. The profit was affected by non-recurring items related to closing down the business unit Care Transform Karlskrona in Sweden as well ending the outsourcing project related to financial processes and tools. Both measures were needed for a sustainable business foundation. There were no substantial deviations in the development of profitability and the direction was right over the year, even if monthly volatility was a challenge.

Financing and investments 
Enfo’s net investments in the financial year amounted to EUR 1.7 (1.8) million. The company’s equity ratio at the end of the financial year was 43.8% (46.6). Interest-bearing net liabilities at the end of December amounted to EUR 32.0 (30.1) million and net gearing was 69.5% (57.4). During the year Enfo made an investment into a private cloud platform to enable the use of native public cloud services. This was financed from cash flow, not burdening the balance sheet. At the end of the financial year, the Group was in breach of one of the covenants of its financiers’ agreement requiring the Group’s interest-bearing net liabilities/operating margin EBITDA to be less than 3.5, and thus the Group has classified the loans covered by the covenant as current liabilities on the balance sheet date. The Group has received an approval from its financiers for the covenant breach.

Changes in the Management Team
From February 2019, the Group’s Management Team comprises: Seppo Kuula (CEO), Lars Aabol (EVP, Care), Nina Annila (EVP, Data platforms), Björn Arkenfall (EVP, Applications), Erik Brügge (EVP, Sales), Antti Hemmilä (General Counsel), Christian Homén (CFO), Sami Kähkönen (EVP, Information management) and Henrik Norell (SVP, People operations).

Personnel
Enfo employed an average of 884 employees (911) during the year and a total of 881 employees (888) at the end of the year (2017 figures for continuing operations). On average, 321 (318) employees were in Finland and 561 (594) in Sweden. 

Events since the review period
Björn Arkenfall joined Enfo Group’s Management Team on February 1, 2019, in the role of EVP, Applications, succeeding Hans Sollerman. 

Shares
On December 31, 2018, Enfo Oyj had a total of 679,251 shares. According to the company’s list of owners, the company had a total of 136 shareholders at the end of the financial year, including the company itself. However, this figure does not include foreign shareholders whose shares are nominee-registered. At the end of the financial year, the company held 13,386 treasury shares (1.97% of all of the shares). The company has one series of shares, and the shares are connected to Euroclear Finland Oy’s book-entry system.

At the end of 2018, the company’s ten largest shareholders were Osuuskunta KPY, Ilmarinen Mutual Pension Insurance Company, Rongo Cap Oy, the Gösta Serlachius Fine Arts Foundation, Seppo Kuula, Keskisuomalainen Oyj, Einari Vidgrén Oy, Lululemon Oy, Hannu Isotalo Oy and Kallax Oy. Osuuskunta KPY holds 83.56% of Enfo’s shares.

Proposal of the Board of Directors on the use of retained earnings
On December 31, 2018 the parent company had distributable assets totaling EUR 60,740,970.35. The Board of Directors proposes to the Annual General Meeting that no dividend will be paid for the year 2018.

Timetable for financial reporting in 2019
The financial statement bulletin for 2018, including tables, is published on Enfo’s website at 10 a.m. (EET) on February 27, 2019. The annual report will be published on March 6, 2019. Enfo Oyj's Annual General Meeting will be held on March 27, 2019.

The interim report for Q1/2019 will be published on April 24, Q2 on August 27, and Q3 on October 24, 2019.

Accounting Principles
This financial statement bulletin has been prepared in accordance with the recognition and measurement principles of the International Financial Reporting Standards (IFRS) and the accounting principles published in the 2018 financial statements. The figures in the tables have been rounded to the nearest million euros so they may not add up to precise totals. The figures presented in the tables are unaudited.

Please read the complete Interim report with tables here  

Additional information
Seppo Kuula, CEO
+358 40 370 0032

Christian Homén, CFO
+358 40 750 6902