Proact: Fiscal 2Q19 Financial Results

(in SEK million)	2Q18	2Q19	*Growth*	6 mo. 2018	6 mo. 2019	Growth
Revenue	868	806	*-75%*	1,626	1,716	6%
Profit after tax	35.2	12.8	*-64%*	60.5	34.4	-43%

Proact IT Group AB announced its financial results for 2FQ19 ended June 2019.

Second quarter in brief
• Revenue decreased by 7% to SEK 806 (868) million. The growth in local currencies was -8%.
• Adjusted EBITA amounted to SEK 36.7 (54.8) million. Items affecting comparability amounting SEK -9.1 million refers to divestment of subsidiary.
• Profit before tax decreased to SEK 22.3 (46.8) million. Adjusted for items affecting comparability profit before tax amounted to SEK 31.4 (46.8) million.
• Profit after tax amounted to SEK 12.8 (35.2) million.
• Profit per share amounted to 1.40 (3.84) SEK.

First six months in brief
• Revenue increased by 6% to SEK 1,716 (1,626) million. The growth in local currencies was 3%.
• Adjusted EBITA amounted to SEK 79.9 (100.0) million. Items affecting comparability amounted to SEK -20.2 million.
• Profit before tax decreased to SEK 49.0 (80.1) million. Adjusted for items affecting comparability, profit before tax amounted to SEK 69.2 (82.7) million.
• Profit after tax amounted to SEK 34.4 (60.5) million.
• Profit per share amounted to 3.74 (6.60) SEK.
• Return on equity over the last 12 months amounted to 22.5% (31.0%).

Proact 2q19

Report by the Jonas Hasselberg CEO, Proact

Positive trend for cloud services and challenging quarter in Business Unit West

During the second quarter, the company experienced a negative trend for revenue and profits compared to the same period last year. Revenue decreased by 7% to 806 (868) SEK million, which reflects declining sales for the systems business including complementary support and consulting services, mainly in Business Unit West. EBITA, adjusted for non-recurring items, amounted to 37 (55) SEK million, corresponding to an EBITA margin of 4.6 (6.3) per- cent.

We see a continued positive trend for cloud services, where revenue increased 12%, reaching 122 SEK million for the quarter. Overall services revenue decreased by 3%, due to lower support and consulting income. New contracts for cloud services signed during the quarter amounted to 96 (62) SEK million, a 55% increase over last year. During the quarter, systems revenue fell by 9%. For the first half of 2019, systems sales still show a positive trend, with a 9% growth.

The quarterly results for Business Unit West were weaker than anticipated, due to lower systems sales and related support and consulting services income, compared to the same period last year. In the Netherlands, systems sales were solid, while the drop in EBITA was due to reduced gross margins and lower income from the consulting busi- ness. For Germany, systems sales were weak, and combined with investments made to increase market presence in Northern Germany, this resulted in a negative local EBITA.

In Business Unit UK, revenue fell during the quarter, primarily caused by postponed systems contracts. Despite lower systems revenue, EBITA was unchanged compared to the same period last year. In Business Unit Nordics, revenue decreased 1% and the EBITA outcome was weaker. Revenue for Business Unit East increased by 37%, with EBITA maintained.

Despite the negative trend during the second quarter, compared with the same period last year, I have a positive outlook for the company’s future development. Relying on our expert skills and our market leading offering, we have fine opportunities to capitalise on the ongoing market transformation. For an extended period, a new category of hybrid cloud services has been at the centre of overall market growth, and we are actively seeking to leverage this shift. We do this by updating our offering and our skills to meet the changing customer needs. Meanwhile, it is also a key objective for the company to maintain a strong systems business, including complementary support and consulting services. In addition to our focus on organic growth, we actively seek acquisition opportunities in existing and new markets.

In parallel with developing our services offering, we implement efficiency and cost measures in our operations, to ensure profitability. Cost measures will have impact during the second half of 2019. An initiative for increased effi-ciency in our services delivery was previously launched.

During the quarter, the company’s enterprise in Spain was divested to Cibernos SA. The divestment enables an increased focus on the company’s principal markets. A non-recurring cost of 9.1 SEK million related to the divest-ment was accounted for during the quarter.