M&A Announcement

Oct 8, 2021

Press Release

Hello, and welcome to the Ned Company Investor today, I'm pleased to present Andrey Rogasevskiy. Please begin your meeting. Good day, and welcome to this presentation of company's acquisition of IntraSoft, which is a natural continuation to the company announcement that we send out Tuesday around noon at the same matter. My name is Andre Rogachevsky, and I'm the CEO and Co Founder of Ned Company. And I'm joined today by our CFO, Thomas Johansen and by Alexandros Manos, which is CEO of IntraSoft. The topic of today's presentation is our acquisition of Luxembourg based IntraSoft, An acquisition we're excited about and that we will tell you more about on this call. I will present the strategic rationale for the acquisition and elaborate on the large potential we see for digitization in Europe in the coming decade. Alex will then give a presentation of IntraSoft, what markets they serve and how they are organized. He will also discuss the platforms that IntraSoft have, which have made them a leading provider to particularly the EU and also within the tax and customs areas in Europe in a broader perspective. Alex will also present 1 of IntraSoft's key markets, Greece and the large potential for growth that Greece represents. Finally, Thomas will discuss the financial aspects of the acquisition and how we will organize and go to market in the new Ned Company Group. But before we get going, there are some important disclosures that I need you to read through. So could we please have Slide number 3? I will pause for 30 seconds here and let you all have a read through of these important disclosures. And with that, can we please go to Slide 4, please? When founding Ned Company more than 21 years ago, we initially focused on building a strong business in Denmark. In 2016, we redefined our vision to become a Northern European leader and identified 5 countries outside of Denmark We wanted to build a Ned Company presence in Finland, Sweden, Norway, U. K. And the Netherlands. And as of today, we are present in the latter three of those countries. We have grown to more than 3,500 employees, And we are making our inroads into the Swedish market also. We are facing an unprecedented exciting time in Europe, Where all societies are now accelerating and understanding the value of digitization. By digitizing Europe, Responsibly, we fundamentally change societies, businesses and the way we live our lives for the better. The More and more investments will be made into digitalization in each of the member states within the EU. And in addition, the EU will fund and support the significant and substantial investment program over the coming 5 to 10 years. We see this as a great time to take the next natural step for Ned Company and raise our ambition to become the European market leader within digitization and expand our impact. Before I discuss the rationale for acquiring IntraSoft and creating a major contender to the IT throne in Europe, I want to set the scene for the market potential in Europe for the coming decade. So can we go to the next slide, please? The The core addressable market for the 12 countries shown here is more than DKK 450,000,000,000 in 2021. The For the remaining markets within the EU, the core addressable market is $90,000,000,000 so a total market of more than $540,000,000,000 per year. In addition, on top of this already vast and almost uncomprehensibly large market opportunity, the The EU has recently announced its recovery and resilience facility of more than DKK 5,300,000,000 For the coming 5 years, of which 20% will be earmarked to digitization initiatives in the member states. Our assessment of the current market dynamics is that there is a clear opportunity now and the coming 2 to 3 years to the established Ned Company as the company that will be driving much of that digitization throughout all of Europe. To do so, We need a broader presence within the EU and presence in more member states, just as we need additional platforms To accelerate our growth on the full European market, which leads me to the next slide, our rationale for acquiring IntraSoft. So So can we have the next slide, please? By acquiring IntraSoft, we believe that we are creating a credible and trustworthy company That can target all of Europe and the EU in addition. We will be in the leading position within the EU based on interest of strong presence in a number of the large EU directorates. And at the same time, we establish a presence in a number of new countries Within the EU, most notably Belgium, Luxembourg, Spain and of course, Greece. The In addition, we add stronger presence into a number of countries where we and Netcompany are already present and where IntraSoft also have operations. The And all this to be delivered into both the EU and the public institutions in the individual countries utilizing Our GovTech framework that will be significantly improved with this acquisition. Another attraction with IntraSoft Is there a strong presence within the telco, banking and utility verticals? While IntraSoft's recent parent company IntraCom was originally founded out of Telco. IntraSoft has over the last decade, established a banking platform and is currently known as a local market leader within Utility Solutions, too. Summing up, by acquiring IntraSoft, we become better positioned and strengthened to play a vital role In helping European governments, businesses and institutions in their efforts to take the full advantage of digitization, IntraSoft now becoming a part of Ned Company means that we together have more innovative platforms, more competencies the And a wider presence throughout Europe. I am confident that we will play a prominent role in creating and shaping the necessary This will transition that Europe will have to go through in the coming decade. Can we have the next slide, please? So before I hand over to Alex to tell you more about IntraSoft, let me just spend a few more minutes the quarter, we are pleased to announce that the company is on the track to see the acquisition and why the combination with Ned Company makes a lot of strategic sense. Intersoft is currently known as a top 3 IT service provider in terms of size and reach within the EU. This position comes From a history of more than 20 years of relationship within the EU and a large number of projects delivered. In addition, the backlog with EU Institutions is large and increasing as a testimony to IntraSoft's quality deliveries and valuable relationships within the EU. The The relation into the EU is a strategic important access point to Ned Company and the combined group. The combination of Ned Company's GovTech framework and IntraSoft's strong platforms within customs, tax the Social Security, we'll create a unique position for the group to pursue further growth within the EU. We believe the timing is right for us to make this acquisition now as it significantly increases our combined reach Into the EU and also allows us to tender for the projects to be funded under the RRF as previously mentioned. The The platforms, both in the public sector and equally important in the private sector, will combine with Netcompany's own platforms not only generate a leading platform in the public sector, but will also generate strong foundations the platform within telco, banking, airports and more verticals to follow in the Private segment. The platform in the private segment brought to the group from the acquisition will accelerate the current work of completing the Netcompany platform framework for private sector Along the lines of the current successful offering for the public sector, which we have called the GovTech framework, the competencies brought together the With this acquisition and the geographical reach of the combined group place us in a favorable position, Both from the geographical perspective and from the capabilities and platforms perspectives to expand in our presence To all of Europe, including the DACH region. I will now pass it over to Alex Mannes, the CEO of IntraSoft to give an introduction to the company he's currently leading and that he will continue to lead. So if we turn to the next slide, please, the word is yours, Alex, please. Call today's call. Thank you, Andre, and a good morning to all from me as well. IntraSoft was established over 25 years ago in Luxembourg call, in order to address what we expected then would be a strong demand for IT services by the EU institutions. Since then, the company has been growing year over year, expanding its range of IT offerings from custom software development services to the tens of thousands of EU Commission and Parliament employees, information communication services, expert consulting among others. The key to success was and still is high quality software and services achieved through adherence the most effective and advanced methodologies, attraction of the best talent and the continuous willingness to evolve and innovate. At the same time, the company led the 1st wave of digitalization of the Greek Public Administration, Undertaking some of the most complex and forward looking projects in key ministries. In the enterprise sector, Our focus was initially telco, but has evolved into utilities and banking too. The company has since expanded and is now present in 13 countries, offering its products and solutions for the public and enterprise sectors around the world with its main focus in Europe. Call, we reached approximately €200,000,000 in revenue with €18,000,000 in EBITDA And as recently as June 30, our order backlog reached €900,000,000 Can we have the next slide please? Today, we are focused in 3 market segments and organizing 3 business units across all geographies: the European Institutions, Public Sector and the Enterprise Sector. The heart of our European Institutions business is in Luxembourg and Brussels call, from where we serve the Commission, the Parliament and a continuously growing number of agencies around Europe like the European Union Intellectual Property Office, the European Medicines Agency and the European Chemicals Agency, among many others. We had a large and strong employee base in Greece conference call that complements our Benelux based development force for the EU institutions, putting the latest technologies to work for large, Trans Governmental and Geographically Dispersed Systems, we have recently also been growing our information communications business significantly, Where we support the commission and the agencies to promote their programs and work to the European citizens through digital and other means. In the public sector, we are proud to say that we are the main partner of the Greek administration for IT Systems. Call, we have implemented the key systems for the ministries of finance, including customs and taxation, Ministry of Labor, the Social Security System, the Ministry of Health, the Ministry of Justice, the government clouds, the procurement system among many others. In recent years, we have begun to export the combined know how and subject matter expertise that we have acquired over the years Through delivering large scale systems in key public sector areas such as customs or taxation in a set of offerings and platforms. Based on these platforms, we can bring best practices to governments around Europe and the region, customizing them only to the extent needed locally Greatly accelerating the digital transformation and enhancement of the services they offer to their public. Together with Ned Company, we are already implementing such projects in Denmark related to customs, While similar opportunities are materializing in other countries as well. In Enterprise Solutions, we have experienced rapid growth in the past 5, 6 years, Focusing mostly in the banking, telco and utilities areas. We offer the development of large solutions call, we will now begin the call to discuss our financial results that enable our customers' businesses, our banking product and the suite of solutions around it, as well as system integration services and analytics. In many cases, we combine products and know how from different areas to develop large scale Nobel solutions. One recent example of what this actually means is with our core banking software with solutions for onboarding, acquiring, billing and so forth That has been used to build a complete e wallet solution for a major telco that wants to enter the payments arena. Can we have the next slide please? Our current main product portfolio includes Hermes, our platform for customs, encompassing over 20 years of know how from TactSuit and multiple customers around Europe, Including the Netherlands, UK and Greece among others. Ikaros, our platform for revenue collection and taxpayer compliance, Encompassing our experience from systems deployed in among others Denmark, Greece and a number of non European countries. Perseus, a configurable and functionally complete social security product designed to fully automate the business processes within a social security organization. In the interest of compliance, a risk management platform that can combine rules based knowledge and predictive analytic models call with the experience and expertise of key personnel. This product has been sold either standalone or as part of a revenue management, Customs or Social Security System to over 35 customers worldwide. Last but not least, Profits, Our mature core banking platform that has been continuously evolving over the past 20 years, offering the security, Quality, resilience and scalability required from the biggest traditional bank to the smallest new EMI. Can we go to the next slide, please? As Andrey said, I will talk to our home market, Greece, call, which I will do now. Right now is a great period for Greece as it is becoming a part of the big digitalization wave conference call that is gaining momentum in Europe. Greece was the 2nd member state within the EU to submit its digital Bible To the European Commission, a well thought out and documented blueprint for the complete overhaul of the public administration IC systems. The The approved program funded fully by the EU is €2,770,000,000 and it has started unfolding trusted partner of the Greek Administration for IT, IntraSoft is well placed to undertake a large part of this digital transformation effort, call, having already been part of the consultation and planning phases. IntraSoft's market position and product portfolio conference call, when combined with Ned Company's GovTech platform and experience in leading the modernization of the most advanced country in IT worldwide, Denmark, is expected to act as a catalyst for the rapid and successful digital transformation of the Greek Public Administration. I personally am a strong believer in the incredible value that is created from the combination of these two companies conference call, and look forward to achieving the ambition for Europe that Andre set out at the beginning of this presentation. Conference call, this concludes my presentation of IntraSoft, and I will hand over the word to Ned Company's CFO, Thomas Johansen. Thank you for that, Alex. And if we move to the next slide, please, Slide number 12. Thanks. The The acquisition of Intrisloft will be structured primarily as a cash transaction with a small proportion of the purchase price to be paid in the means of Ned Company shares, the cash element of the transaction before adjusting for net debt is €217,000,000 or 1,620,000,000 And the share element is €18,000,000 or 134,000,000. A total enterprise value of €235,000,000 quarter, we have reached DKK 1,750,000,000 on a net debt free basis. The cash element of the transaction has been secured With a combination of existing credit lines and an acquisition bridge loan of DKK1.2 billion and our leverage will be Well within the current covenant. The Ned Company shares to be delivered will be taken from the pool of treasury shares. The And before the transaction, the company owns around 950,000 treasury shares and the treasury shares to be delivered In connection with the transaction is around 200,000 shares depending naturally on the share price at completion. The The impact from the acquisition on Ned Company's financial performance is dependent on the timing of the closing of the transaction. Call, we will naturally comment on the financial impact on the 2021 financial performance once the transaction is completed. IntraSoft will continue to operate its current business as a stand alone unit within the Ned Company Group of Companies. That also implies that the aspirations that we communicated for the Ned Company Group before this acquisition And can we have the next slide, please? Based on 2020 numbers for the 2 groups, the joint financial profile of the new Ned Company Group is shown here. Revenue would be DKK4.3 billion, and this is still 2020 numbers, With adjusted EBITDA of DKK 944,000,000 and adjusted EBITDA of DKK 844,000,000, the The group will employ more than 6,000 employees and be present in a number of European countries as well as some countries outside of Europe. Revenue from Denmark would be roughly half of the group's total revenue with Belgium and Luxembourg, which is mainly EU related the year, we expect to continue to execute 18% of revenue and Greece to constitute around 11% of revenue. Roughly 2 thirds of the group's revenue would be public sector, Including the EU and the remaining part of the revenue will be private sector. And can we have the next slide, please? Taking a closer look at the contribution to the financial profile of Ned Company that this acquisition has, we note that IntraSoft the It has increased by 2,820 or 87%. Again, this is based on 2020 numbers. These two financial metrics also indicates that IntraSoft has a different financial profile than Ned Company. Looking at margins, IntraSoft add DKK134 1,000,000 in EBITDA and Brains total EBITDA to DKK944 1,000,000. In the current Ned Company financial reporting, We have not been reporting on EBITDA level since we have had no capitalized R and D cost for own developed software. IntraSoft, on the other hand, have capitalized software related to their own developed software solutions and platforms following the criteria set out in IFRS 15. When looking at adjusted EBITA, IntraSoft adds another 13%, bringing the 2020 adjusted EBITA to DKK 844,000,000 quarter, on a pro form a basis, we will continue to report on both the old Ned Company and the combined Ned Company Group for a period of time to allow for continued transparency of the financial performance of the old part of Ned Company and the new Ned Company Group. So can we move to the next slide, please? As already mentioned a couple of times during this presentation, our ambition is for the current IntraSoft business to continue Ned Company methodology. A company with the size of IntraSoft already has its own procedures, its own methods and career plans the That will not be easily integrated into the Ned Company methodology. And hence, IntraSoft needs to be able to create value on current offerings On a stand alone basis, going forward, we believe that the acquisition will add new and exciting projects within both the EU and across member countries in Europe. On a day to day basis, Alex will remain the CEO of the Entrestoft Group and Andre will clearly remain Group CEO of Ned Company. The Can we go to the next slide, please? To sum it all up, we firmly believe that the acquisition of IntraSoft the We believe we can gain significant market share Based on our combined offerings and domain knowledge, and we believe that we will be playing a leading role in the digitalization of Europe in the coming decade, call, both in the public and in the private area. And with that, we have concluded our presentation. So if we move to the next slide then, and we will open up the call for questions. Our first question comes from the line of George Webb from Morgan Stanley. Please go ahead. Good morning, Andre and Thomas the And also to Alex and congratulations on announcing this deal. I have a few different questions, please. So firstly on the financials. The Just on the financial profile of IntriSoft, looking back at its history, it's been a little bit inconsistent in terms of growth year to year and profitability has also tended to be A bit lower considering the market part of the market they're focusing on. So I guess a few questions on the financial side. What proportion of interest office revenue Would you kind of consider to be digital? What in your view is driving the relatively low level of gross margin profitability considering the work they're involved in? And on a forward looking basis, what's the financial framework around growth and margins you expect from IntraSoft? Secondly, can you just discuss a little bit about how you see the cultural fit of IntraSoft within the broader group. And then lastly, you mentioned that IntraSoft will continue to operate on a relatively standalone basis. On On the Netcompany side, what's the reasoning for that stand alone strategy over a deeper integration? Thank you. Thanks, George. I'll kick out with the initial question you asked on the financial profile. So overall, IntraSoft and what kind of revenue IntraSoft has generated being digital. On a broad scale, IntraSoft is generating digital solutions and revenue is what we would label as digital in the digital segment. The The profile of IntraSoft for various reasons is different that of Netcompany. There's a different profile in terms of Staffing, where the proportion of independent contractors, especially within the EU is higher than what we historically see. And there are some Tax reasons for that, which is a normal way of working within the EU. But apart from that, the performance of Intersoft has been Stable over the last 4 or 5 years. It's been steadily growing and it's been adding significant amount of backlog the Into the order backlog, particularly within the EU institutions. And that backlog represents a fairly amount of sticky business the year, we expect to be executed on going forward. I think on the cultural fit, I'll leave that to Andre. Well, when it comes to cultural fit, I mean, what is great about it is that we are both technology companies, and we have A lot of really great engineers and technology people there, which share technology vision. Having that said, There's also a reason why we do this on a stand alone basis, and that's because IntraSoft is actually quite large company with Great platforms that they have been building for many years. What we will focus on is the window of opportunity there is in Europe to gain market share and And deliver new projects together as the one we see us delivering actually in Denmark, for instance. So we will go out together the With platforms both from IntraSoft and Netcompany and build new systems together, and hence, we will, of course, get closer in those projects the and use the Netcompany methodology on those engagements and slowly but surely Integrate that way, but we will not spend a lot of time on internal matters trying to push in culture from Netcompany 2 to the large Greek development parts because that's basically not our focus at the moment. Our focus is to go out and take market share. And I think the platforms we're going to build on that Alex mentioned are actually Very well fit to do that. So that's how we're going to go around it. And I hope that answers your question. That's very helpful. Actually just one follow-up one, maybe for Thomas on the other side. I mean, you mentioned non core assets potential to be disposed of. What sort of magnitude? Is that a small piece pie, you will be pleased. That is, George, a small piece of the pie. But as you look and I'll loop Alex in also. But as you look At the Intelsoft business, there are areas which is not core Europe, but that's some of the things that we will look at the In the future, that's not something that has been carved out or decided or whatever. That's something we'll look at together with Alex and the management team in Intersoft. I also wanted to give Alex just a few words on the cultural fit and the experiences that Alex has with IntraSoft and working together with Ned Company. Thanks, Thomas. I think the way we work together is really one of the main drivers We've known each other for about 4 years now and we have We've been deploying large scale projects, so tens, if not hundreds of people involved. We have found a very nice match where we, in the projects that we cooperated, we brought our own products. And then the project team is led by Ned Company and we add expertise where needed. The So I'm beyond comfortable with the culture. It's been great. We've worked with many partners around Europe and around the world, and sometimes the communication is better, sometimes it's worse. The With Ned Company, it's just been steadily good and we have managed to work through difficult situations with the customer. We have managed to run our projects efficiently and my teams that have been working with Ned Company have always the And real appreciation, which is really difficult when you're talking about developers and engineers, right? Usually everybody thinks they're better than the other. But with Ned Company, I think we found a natural partner, and I'm very, very comfortable About moving out to Europe and winning new customers and delivering together. That's very helpful. Thank you. And the next question comes from the line of Klaus Elmer from Nordea. Please go ahead. Thank you. Yes, I have two questions and I will do it 1 by 1. The first is about the future delivery model. How will you actually structure this? As IntraSoft will be operated as a standalone business, will Ned Company transfer existing employees to IntraSoft? And a part of this question is also, is there a structured reason why Intercom's lower revenue per employee compared to Ned Company? That'll be the first question. Well, I mean, when it comes to the future delivery model, we will not For employees into the interest of what will happen is as Alex also described, we will deliver projects together, which we already have been done. It has been done for 3 to 4 years. We will staff them accordingly, depending on which platforms we will use and how we will do that on a particular new customer. And with regards to your second question? So on the structural part of revenue per employee, Just like within Ned Company Group, Klaus, we also have a little bit of a different revenue per employee from 1 unit to the other. So it's true that revenue per employee in the interest of group is lower than what it is in Ned Company. To a certain extent, it has to do with how existing businesses and existing projects are being delivered, which will be for joint new projects the So one thing is the past and then the future will for joint models look different. Okay. So maybe a follow-up on this. One of the strengths of Ned Company has been a smooth Delivery of the orders that has been won over the last number of years, how do how has the IntuSoft done In the past, have we seen a same smooth delivery and how to make sure that this fast growing backlog do not involve any As was discussed during the presentation, a very big part of this backlog comes from framework agreements with the European Institutions. Now that is business that the company has been running for the past 25 years. We are within the top three companies. The One of the most experienced ones and I'm happy and proud to say that we have never failed a project There. So these projects are framework contract. They run for a number of years, up to 5 years, 6 years. And they employ very big teams, which for us, there are teams that come from All different places. I mean, they can be part of it can be in Brussels, part of it in Luxembourg, part of it in Greece, part of it in Romania. So We just staff the teams appropriately in order to be able to deliver the project. The quality standards that you need to meet In order to be a supplier in the European institutions are extremely high. The process is very meticulous. The difficulty and the customer is a knowledgeable customer, a demanding customer And he is also serving a number of member states, right? So the pressure has always been there To be able to deliver on time, to deliver on quality and to deliver on price. That is the experience that we have managed To transfuse to our entire organization, be it in the public administration or in the enterprise sector. The And this is the type and this is the way we deliver our projects. And actually, this is the The brand that we managed to build that we are solid. We will deliver. So, yes. That sounds pretty reassuring. So it's been a fantastic journey in your backlog at least. Can you provide a bit of color to the timing of the backlog? Should we expect revenue to progress in the same speed as your backlog? That will be my final question. And then on the back leg and on the future outlook, Claus, you'll not be press release that our comment to that is that we will not really comment on that now since we're not guiding for what the impact on the transaction is going to be on Ned Company now in 2021 as of yet, but also not in 2022 and onwards. However, though, a good part of the backlog the part of the backlog is on a more longer term, which is 5, 6, 7 years like Alex also alluded to. And also as Alex mentioned, the backlog on IntraSoft at the beginning of the year close to €700,000,000 has grown to €900,000,000 At of 30th June, clearly, when we have been discussing with IntraSoft and part of the work that we have done in our due diligence Has been related to verifying the quality of the backlog. As Alex said, the The backlog in the EU is more on a framework agreement perspective. Naturally, that spurred Some interest in us because clearly in Denmark, a framework agreement is not a guaranteed revenue. However, the EU works differently. And like it or not, but the EU works on a more cash budget perspective. So whatever is in a given directorate as a budget, the They will spend if they don't spend it, they will lose it and then they will have a lower budget the year after. So what we have done to Feel comfortable that the backlog is truly a backlog that we can substantiate. So we've went all the way back to 2012 and then done detailed analysis on how much of backlog in a given year have subsequently been realized into revenue. And that analysis shows from 2012 till 2020, a realization of between 98% and 105% between different customers. So backlog is really backlog and it's both short, medium, but also long term without going into more detail on that. And I'm sure you can appreciate that. That is just perfect. Thank you so much. And the next question comes from the line of Frederic Rolland from Bank of America. Please go ahead. Hi, good morning. Thanks for taking the question. 2, if I may. First of all, around the synergy approach, is the opportunity the Primarily around revenue upsell and trying to leverage the relationship that Crestoft has with the institution and Try to apply the GovTech model there or is there also an angle around the cost and the fact that the Some of the IntraSoft very large employee base will also be used to solve some of the freelance issues that Netcompany And then secondly, if you could come back on this point on margin differential. You mentioned contractor use Being a driver of that. So should we assume this is a structural feature that will stay with you in the future? And Can you explain why if contractors are more expensive leading to a lower margin? Why was it not reflected in the absolute revenue profitability the That you extract from those contracts. Any color there would be very useful. Thank you. Well, when it comes to the synergies, 1st and foremost, I think one has to realize that going into a market like the European market that goes for any country, Actually also Denmark, where we've been for 21 years, it is extremely important to be relevant, coming with components, Something that is prefabricated or pretested, something that can be shown or demoed, a platform, platforms are becoming the thing. Whereas before, it was all about very, very standardized software products, platforms and ways in to start being productive fast the is the key. And also we see countries sharing experiences in a way we've never seen before. So we have both private companies, but also government sharing experiences and platforms, actually, I'd say almost half of the wins Netcompany experienced over the last 1, 2 years has been based on this platform approach. The Acquiring InteSoft and bringing in those things that we were missing in the GovTech framework, together we really comprise almost every aspect of a modern government and we also comprise a lot of private verticals. The And we will work on those sales synergies first, and then we will deliver as we already started to do before this acquisition, we will deliver project by project, customer by customer, more and more deliveries within the same the The same way we've been delivering Ned Company projects throughout the 21 years. Will that yield satisfactory Factory customers and also will that yield employees who know the Ned Company methodology and how we do things together as we're already doing on some projects? Yes, but it will be driven by customer by customer, country by country sales. It will be the customers' engagements that will drive this. And then slowly but surely, we will merge more and more into the same culture. But that will take time because we will do it customer by customer, and it is the sales synergy and the platforms that will drive that. The And I think the window of opportunity to do that is perfect at the moment. And when it comes to this margin structural thing Yes. So there's a question the quarter, we have a very strong quarter on the margin, which was also a little bit on the question that George had earlier. And we cannot comment too deeply on What our expectations is and what our guidance is for how this transaction will impact the business going forward. Clearly, when you look at the numbers and if you just do it on a face down value, it will have a dilutive impact on margins. However, it will have a accretive impact on reported revenue. I think it's important also to remember that In the IT Services business in general, the operator or the margin as the shown in the market, it is typically around 10%, 15%. So in that aspect, we're not overly concerned with the performance of IntraSoft the On the contrary, we are on Ned Company, especially Ned Company Denmark, standing out on a fairly unique position the So remember that when we compare margins. But like Andre said, this is not really a transaction which is driven by cost synergies or whatever, this is a transaction which is driven by generating the leading player in Europe, which means that the pie that we're going to We'll be taking and the share we're going to be share taking is going to be significantly increased, which will lead to also a Potential good impact on our earnings. So we'll leave it there on that. And it's not possible for us to comment too much more on the margins. Apologies for that. Okay. Thank you very much. And the next question comes from the line of Paul Jessen from Danske Bank. Please go ahead. The Yes. Thank you. I have two questions. First Alex, maybe I have missed it. But I was just wondering if I look at industry for several years, Intrashoft has not been growing on the reported group top line. Can you comment something about has there been a mix shift below the group line or why has there no margin growth towards 2019 and then suddenly it takes off, has there been a change in the way you work or company focus or whatever? Thank you. Yes. I'll start here and Alex can chip in. But there are just like with our business, there are some lumpiness in terms of when big contracts are won and when they are ramped up and ramped down. And some big contracts have had the significant impact on revenues in 1 year and then being delivered and then it's a little bit of a relative Slower growth in another year. So that is also what's been the case in IntraSoft. And the I think the more important thing is to look at what the pipeline in and what the backlog looks at there, Paul. Sure, there's been some fluctuations and we can also find some time in the Ned Company story where there's been some fluctuation. And that is also what is happening In terms of and I mean, Alex can give a little more clout to it without going into specific details on the last 5 years, but Just the overall seasonality or what you've seen, Alex? If I may comment, if you look at the backlog, there's been no growth from 2014 to 2019 and then it takes off. And if you take revenue, of course, it's longer, but Revenue has gone more or less been flattish. So if I compare to you, you have had lumpiness, but you've had growth, Steady growth, strong growth for many years. Here, it's been flattish. So what's how is the business actually structured? Let's answer you, Alex. You are saying that the backlog has been flat from 14 to that's not the I'm not sure where you're getting this. But if I can comment if I can build on what Thomas was saying before, of course, there's the The EU market, which is a big part of our revenue, is a market where every 5 or 7 years, you have big contracts being reissued. Now being able to win one of these very big contracts changes your profile Significantly, okay. Our focus has been to make sure we always maintain the big contracts we had And continuously strive to win new ones. I am going to say one detail and I don't know if Thomas is going to Excuse me for this, but as a matter of fact, our revenue has been growing year over year. There is a time, I think, in 2018, Where a certain amount of through revenue for partners stopped being recognized and that was about 13,000,000 If you adjust for that one way or the other, then we have been demonstrating steady revenue growth year over year, not the amazing 20% the My friends have been achieving, but a significant amount for our business. And just to be certain, if I look at the Intercom report and take the segment for IntraSoft International, those numbers given there, Are there numbers that we can actually use because then growth has been minus 6, minus 2, minus 1 and then suddenly it's growing in 2019 2020 quite well? I'm not sure what you're looking at, sorry. The revenue numbers that you can use, Paul, is the one that we have Add it in the appendix, and they are audited for Intrsoft and they and we can issue you audited reports if you doubt that. The But the revenue that's there is $169,000,000 growing to $178,000,000 growing to $197,300,000 Those are the numbers. Okay. Then my second question is on your Slide 15 with the joint efforts. Of Of course, you have 2 operations here. 1 is Ned Company and the other one is Centrosoft. But then you talk about joint efforts. How should we think about if you win a contract for XO or Y in the future, Should we see that as being IntraSoft or should we and then assuming IntraSoft margins or will it be Done by Ned Company mindset and thereby on Ned Company profitability. How should we look at that looking forward? Well, I mean, that will our aim is to win projects, where exactly as we were doing at the moment Together and drive that more and more through Net Company methodologies. Now it will not happen overnight. There will, of course, also be things that IntraSoft the So our focus will be on winning large Scale critical, mission critical systems and that will be we will deliver together as we see it already happening. And that will be done by with Ned Company management, done by the Ned Company methodology and hence also the results we normally see in a Ned Company project. The But it will be a transition because we will not go in and take over and all the entire interest of the engagements right now and start putting in Ned Company management on those. We will continue those the way they work because they're actually Delivering high quality on many of these projects, and especially in the EU institutions, a continuous long flow of deliveries. So we will concentrate on winning new stuff and deliver that together in the way that we've seen Netcompany deliver for the last 21 years. The good example of that, Paul, is the example that Alex also mentioned in his presentation. The project we currently do together the Within customs in Denmark, that is a joint project, and that is reported currently in our books In the public sector, and it is yielding satisfactory margins. So that is the approach we will have, and that is what we mean with joint. It's also just important for us to say that the Intersoft is a company which has a bigger size. The And therefore, like Andre is alluding to, this is not just something which will happen overnight, And that's why it's important that Current business will continue as is. That does mean that we will not, of course, talk to each other and help each other because, of course, we will. The But the underlying assumption is that it will continue as is and then we'll see what we can do to help each other. And then all new projects, exciting projects in EU, in public sector and private sector for that matter, will be joint efforts. I hope that answers the question. Yes, pardon me. We can take that later on. Thank you. The next question comes from the line of Yuwei Zhou from SV. Please go ahead. Hi, gentlemen. Thank you for taking my question. I have 3 here. And firstly, maybe could you talk a little bit about the labor market in Greece and then Belluks. The We see IntraSoft has used a high level of subcontractors. Is it fair to assume there is a larger labor shortage in this market? Do you want to ask all questions or you want to go 1 by 1? Let's go 1 by 1, sorry. Yes. The The large number of freelancers is actually in Belgium and Luxembourg. It is not in the Greek market. The In the Greek market, there is a strong demand as with most IT markets In Europe or the planet, but there is still good supply. Okay. And then how could the Bell looks the Yes. Do you find a challenge in labor shortage here? I think there's a If I had to compare in Belgium, I think we're doing pretty well in finding people. In Luxembourg, it may be a little bit quarter, but really talking about the conditions given the COVID situation of the last year and a half, I think that will need To sort of settle down and to see how the governments will treat him because as you know in Luxembourg and Belgium, a lot of people drive in from other countries. So the supply demand thing needs to be settled down a bit Over the coming months, years, if everything goes well, COVID wise, and then we'll be able to really have a picture. Right now, any Resources we need to find, we find. I'm not saying they're sitting outside our door, but we find them. Great. Very, very clear. My second question here, maybe to Andrew. So you mentioned to address the large potential here with the European Commission, You need to have more presence in more markets. Is it fair to assume that this acquisition would be only the beginning? Do you see need to acquire more companies or have foothold in more markets here? It's fair to say that as we also said in 2020 at our Capital Markets Day, We have the strategy of either growing organically, which we continuously, of course, do in many of our markets. We cannot buy a small company and try and change it to a Ned Company, which we spent some time on, as you know, both Norway and Netherlands and U. K. And then the final leg in our strategy was presentation at Capital Markets Day 2020 was to buy, acquire companies that can lead, give us platforms And use those platforms, just like we do with the airport platform that we invested in 1.5 year ago, Use the platform itself to go into a vertical customer and do a sell and do a project the And a maintenance and operational phase with that customer. So this is definitely something that the That is filling up more and more of our sales strategies across our markets. We see that happening more and more. When we approach customers, we'd almost always Come with some sort of platform or something that is there. And I think that will continue that development. And when looking into potential growth in the future, we will definitely also look into that 3rd leg of our strategy, acquiring more platform companies, yes. Okay, great. Thanks. And my last question here is on the competitive landscape. Maybe you could add a bit on the You mentioned you are a top 3 company. Could you maybe add a bit of color here? The So you're asking about the competitors mainly within the EU institutions? Yes, exactly. The The EU Institutions is a very interesting market given its size. So you would expect to see most IT names that you know in that market. It's also a quite healthy market. It's over SEK 1,000,000,000 per year that is spent in IT. The We have consistently managed to be within the top 3. Is your question who are the other 2 or the other 2? The They alternate. Atos is quite strong there and then NTP Everest Has been gaining significant ground in the past few years, while some others that used to be much bigger the are shrinking or exiting like Unisys from the U. S. So if you ask me today who the biggest ones are, I would say Tatos And then it's us and maybe Everest, NTT Everett. Perfect. Very clear. Thanks. I'll jump back to the queue. The next question comes from the line of Balaji Viswanathan from Citigroup. Please go ahead. I note that This is Thomas. We cannot hear your question, Valerie. Sorry, I was saying that in terms of IntraSoft's own midterm financial ambitions, the parent company IntraCom has stated in its annual report an expectation of mid to long term revenue growth rate of the 8% and EBITDA margin of 8% to 10%, will that be a fair number to work with? The We don't have any meaningful comments on the guidance for the future, Valerie. So the The transaction is not completed as of yet. We expect it to complete In Q4, once complete, we will update our impact or the impact on the 2021 books. And then We will also, at one point in time, look at what we expect from 2022 and onwards. But the short- to medium term guidance, I'm not going to comment on the At this point in time. Sure. And then in terms of, again, the business activation of IntraSoft margins are on the lower side and it's basically fair to assume that there will be some effort Going into ramping up the margin, we have tried to consolidate your footprint as well with thinking about material and structural exercises in the upcoming years. Yes. Like Andre started, I'm the call, what we really find appealing and attractive of this acquisition is not so much driven by the transaction and the synergies are going to be top line. Of course, when we do projects together, those projects that we do together will have a Better financial performance, but that is not the main attractiveness of this transaction. It will come as we grow. But right now, we just get a phenomenal opportunity to have much more access towards EU institutions, Towards member states within the EU and also to private institutions throughout Europe by utilizing the the reach that Intercontinental come with, the frameworks and the solutions and then combining them with Ned Company capabilities and frameworks. The And we have just one final question from Jean Marc Acconte from Deutsche Bank. Please go ahead. Hi, Andrea, Antonoff and Alex. Thank you for taking my questions. I only have a few here, quite short ones. One is just around the contractors. So I recall roughly the average loan number previously Ned Company was on a normalized period of roughly 40%. I was wondering how much higher will that go now that you have also interest in the consideration the As a sort of a normalized level. The second question is around the gov tax framework. You mentioned previously it would be significantly improved With this acquisition, could you perhaps share a little bit color on how is there some sort of integration with their own platform that is quite similar to yours? And just a final question around pricing differentials. Is there much of a pricing differential with Netcompany and quarter, with regards to public contract tenders, could that also be a slight hit at the core of the lower margins on top of the course of the higher number of freelancers? The Now when it comes to the level of contractors in the for interest of delivering and Alex, you can actually allude to this if you want, but we need them at the moment delivering those the selling new engagements where we deliver by the Netcompany methodology, we will not use a lot of contractors. But of course, Existing contracts where we use contractors at the moment, we will continue that in those customers. When it comes to the GovTech framework, there's no Doubt that many of the solutions that Alex went through in the presentations are actually very good complement to our gov tech framework itself. Of course, you need to look especially into tax and customers customs where I think the product suite is It's very well developed and adheres to European standards, and we are using it they are using it already in various countries, and we will be using it together. And finally, when it comes to pricing differentials, I mean, I have to say, depending on which customers you approach and which projects, I mean, there is a market for this. And there is one price basically, and that's the competitive price. In some countries, prices are a bit higher. In some countries, they are a bit lower. But when it comes to the EU in general, the There is a certain price for types of systems, and these systems are quite complex. And depending on the geography, of course, Some prices can go up. In Norway, it's more expensive to build IT systems than it is in probably is in Poland or in Czech or whatever. However, many of these systems are very complex in nature. They're extremely important for both countries and governments. And so they are large engagements by default. The And I think that's as close as I can get to it. Fair enough. Thank you. Call, and as there are no further audio questions, I'll hand it back to the speakers for closing remarks. Well, thank you, gentlemen, and hope you have a nice day and a nice weekend.