Innofactor - Sustaining successful turnaround

Innofactor’s Q4 results were slightly below our expectations, with net sales of EUR 17.4m (Evli 17.0m) and EBITDA of EUR 1.6m (Evli 2.0m). The business development remains favourable through a continued healthy order backlog and revenue mix. With significant improvements in cash generation and a reasonable financial situation M&A activity could again be on the table to supplement the service offering in the Nordics and speed up growth.

Continued healthier profitability

Innofactor’s Q4 results were slightly shy of our expectations. Net sales grew 9.7% from the relatively weak comparison period to EUR 17.4m (Evli 17.0m) while EBITDA amounted to EUR 1.6m (Evli EUR 2.0m). Innofactor expects net sales and EBITDA in 2020 to increase from 2019. The order backlog remained at a good level of EUR 49.8m. Q4 saw no new significant orders but several orders have already been received during early 2020. The net sales mix remains favourable through a continued higher level of recurring revenue.

M&A activity could pick up

We continue to expect limited near-term growth (2020E: 4%) with the longer duration of the order backlog while expecting some further pick-up in margins (2020E: +1.2%p EBITDA-%). Wage inflation through changes to the Competitiveness Pact may pose a risk while the margin improvement potential remains supported by the to our understanding current suboptimal billing rates. With the improved cash generation and not particularly challenging financial position M&A activity could likely pick up again to supplement the offering of Innofactor’s pan-Nordic platform and accelerate growth.

BUY with a target price of EUR 0.90 (0.85)

Innofactor is in our view continuing to show good progress in building up a healthier business. With valuation not overly stretched we retain our BUY-rating and raise our target price to EUR 0.90 (0.85).

Open Report