Hello and welcome to this NNIT Q1 presentation for 2024. For the first part of this call, all participants are in a listen-only mode. Afterwards, there'll be a question-and-answer session. To ask a question during the Q&A, please five-star on your telephone keypad. This call is being recorded. I'll now hand the call over to the speakers. Please begin.
Thank you, Operator, and good afternoon, everybody. Thank you for joining this webcast. My name is Pär Fors, and I'm the CEO of NNIT. With me today, I have our CFO, Carsten Ringius. Together, we will present the results for the first quarter, which we released this morning. Please turn to slide two. I will walk through the key business highlights, including the regional performances. After that part, Carsten will go through the group results, including our financial outlook for the full year. Please pay attention to the disclaimer. Let's turn to slide number three. Last year, we initiated our new strategy called the New Beginning after the divestment of our infrastructure business. During the first quarter of the year, we have showed good strategic progress as we are becoming a more focused company.
We are dialing in because we are to become more commercially savvy, meaning building a stronger commercial mindset across the organization post the investment divestment. We are also in the final stage of the entire separation from Aeven, which is a step change for NNIT. What also proves that we are on the right track is the business performance. We are growing our total business and taking market shares in key regions such as Denmark and Europe, and we are expanding within the public space and the Life Sciences area. We have continued to build on our strong relationship with customers and also improved our customer satisfaction, where we are sitting on a 4.6 on a scale to 5. Last year, we were at 4.3. Another important metric where we have improved is attrition.
We are currently trading at a 14% attrition rate, which also improved the resilience of our organization. We can see that we are in a better place now compared with a year ago. That does not mean that everything is perfect, but we are definitely heading in the right direction. We are also in the middle of a simplification of the backbone of NNIT to become a more efficient company. Carsten will go through those details later. All in all, we strongly believe that we have progressed well, and we are doing the right things to support the long-term ambitions of the company. Please turn to slide four. On an overall level, the first quarter result ended as planned. We have managed to grow the business despite the headwind from the macroeconomic situation in Europe and Asia, including the timing of Easter.
Total revenue growth was 12.2% compared with last year, with revenue ending at DKK 463 million. This is actually the highest quarterly revenue recorded for NNIT since the divestment and compared with the restated figures back to 2022. Organic growth was 80% driven by Region Denmark and Europe, and partly upset by the slow start of the year in Region U.S. and the deterioration of the business in Region Asia. I'll go into more details on the following slides. Group operating profit, excluding special items, increased by around DKK 4 million compared with last year, where margin was 5.2%. Carsten, we give you a more detailed view on the profitability development later on in the presentation.
Lastly, we have maintained our full-year outlook as the first quarter performance was in line with our plans and because we have a solid backlog and pipeline for the rest of the year. Please turn to slide five for the regional performance. During the first quarter, Region Europe managed to grow its business to DKK 126 million. This translates to an organic growth of 12.2%. We're happy with the growth as Region Europe has somewhat been negatively impacted by the macroeconomic challenges across many European countries and the timing of Easter and the challenging start of the year for our data migration business, which we call Migration Powerhouse. The growth is primarily driven by our ability to expand our engagement with existing customers. Even though we saw solid organic growth, profitability was slightly below last year's level, ending at 1.3%.
Our strategic choice in Region Europe is to win in life science, shows promising signs due to the growth, but profitability has been lacking. Besides the timing of Easter, we have people with lower billability utilization rate than normally. We have kept our people as our order entry has progressed, and we do see further work ahead to drive the utilization up without increasing our manning. We are also continuously scrutinizing the cost base as we need to obtain more leverage on our regional overhead costs to unlock the profitability potential. We expect to see gradual improvement in the profit margin throughout the year. Please turn to the next slide concerning Region U.S. performance. Despite that we have observed improved performance month by month in Region U.S., the year has started slow with a negative organic growth of 5.5%.
As our other business areas delivered improved performance across two out of three areas, the main reason for the decline is due to the temporary large decline in the data migration business. It significantly suffered due to delayed or postponed projects. These challenges in the data migration business are seen to be temporary and resulting from changing in the customer's approach to data migration efforts and tools. This has enabled diversification and slight recalibration of NNIT's offering. We were somewhat aware of that as a backlog and pipeline were soft coming into the year, and now we're seeing a change to the rest of the year as more Veeva-related projects are returning to our business. The overall backlog and pipeline of Region U.S. look solid and promising for the rest of the year.
We have managed to reduce our cost base mainly by lowering the number of subcontractors, and together with the tight cost control, we almost managed to make up for the revenue decline in the data migration business on the bottom line. However, margin ended at 6.3% compared with 7.2% last year. Please turn to the next slide. That covers Region Asia. The quarter performance in Region Asia was weaker than we initially planned for. The business declined 12% organically, largely due to macroeconomic challenges in China. We have experienced low demand for service support and hesitance from our customer to expand existing agreements. Besides the action we took during the end of last year, we have now taken further mitigation action to improve and right-size the business to cater for the current market demand.
We have reduced our workforce, mainly billable employees, by more than 40 people and cut other SG&A-related costs dramatically to improve profitability. There will be a positive effect on profitability during Q2, but the effect of our action is expected in the second half of the year. Please turn to slide eight for an update on the performance of Region Denmark. The revenue in Region Denmark grew by 29%, ending at DKK 212 million despite the timing of Easter. The growth was driven by all business areas, including our group company, SCALES. Especially the public business continued its good momentum from last year and now accounts for around 30% of the business in Region Denmark. The organic growth was 18% if we exclude the revenue generated towards Aeven.
The good development in the organic growth is a testament to a strategic direction for Region Denmark, with win in public being a key piece. The region's operating profit grew from DKK 70 million in Q1 2023 to DKK 22 million in this quarter due to top-line improvement and the focus on the cost base. Even though the profit increased, we also have a material amount of billable employees being dedicated to internal projects such as the infra separation from Aeven. This has, of course, resulted in less leverage on the cost base compared to under normal circumstances. All in all, we see further opportunities to increase profitability through improvements in billable utilization and the sourcing mix. Please turn to the next slide.
This concludes my part of the presentation, and I will now hand over to Carsten for the group financial performance, comments on how we are improving our business and the financial outlook. Carsten, please.
Thank you, Pär. Please turn to the next slide. Our overall financial performance is in line with our plan. For the first quarter, the group revenue ended at DKK 463 million, entailing a total revenue growth of 12.2% compared with the same quarter last year. The revenue grew organically by 8%, and the main difference to local revenue growth is mainly due to the sales towards Aeven as it's being booked as inorganic. Foreign exchange had a minor negative effect of 0.3 percentage points. The growth has comprised us of bringing in new customers and especially expanding our existing engagement despite a challenging macroeconomic environment and timing of Easter. The group operating profit, excluding special items, increased from DKK 20 million - DKK 24 million, which is partly driven by the increase in sales and a continued strong focus on cost and utilization.
We continue to follow our plan of reducing cost across the business and streamlining ways of working to become more efficient in NNIT. As an effect, the margin increased from 4.8% - 5.2% during the quarter. As Pär mentioned, we have taken further actions to improve profitability for the rest of the year with the most drastic measures taken in Region Asia. Please turn to slide 11. We expect stepwise improvement to the business to drive profitable growth. As Pär mentioned, we are upgrading the backbone of NNIT. Of larger things, I want to highlight that we're in the final stage of implementing our new ERP platform and our new HR system. These systems are of high importance for NNIT to enable future growth, deliver synergies, and drive efficiency across the company.
The new operating model we launched in connection with the Aeven divestment or the infrastructure divestment is fully up and running. We are seeing the benefits of it, meaning we are closer to our customers, and we have achieved better transparency into how the company progresses, which is leading to enhanced performance management. We will, of course, continue to refine and improve the way we work, but we have taken a step change during the last year. I also want to highlight that we are relocating offices. We moved into new offices in China, and this summer, we will move offices in Czech and Copenhagen. This will both reduce our facility costs but also support our ambition of becoming or being an employer of choice. All of these three things I have mentioned are part of us delivering on our visions for 2026.
These levers will support our way of working, become more efficient, and increase profitability down the line. Please turn to the next slide about the financial outlook. We have maintained our full-year outlook for 2024, meaning around 10% organic revenue growth and a group operating profit margin, excluding special items, between 8%-9%. We are well aware of the performance for the rest of the year implies an acceleration in both organic growth and profit margin. Based on the first quarter performance ended in line with plan, the solid backlog and pipeline we are looking into for the rest of the year and the seasonality of our business, we remain confident in our outlook. Please turn to the next slide. Before we head into the Q&A, we will conclude the presentation with some closing remarks. Please turn to slide 13.
During the first three months of the year, we have continued to progress well on our new beginning strategy. We are doing a range of good things to improve the business and the backbone of NNIT to set up ourselves for future profitable growth. On an overall level, the Q1 performance ended as planned. On one hand, we saw strong performance coming out of Region Denmark, and on the other hand, a deterioration of our Region Asia business. The scattered performance across regions has led to actions taken to improve profitability by reducing costs and optimizing billable utilization. Lastly, we remain confident on our outlook due to all of the improvements we are seeing within the business and due to the solid backlog and pipeline. Therefore, we have maintained a full-year outlook. This concludes the presentation for today. Thank you for joining the call.
Now we will open the line and take your questions. Operator, please turn to the next slide and open for questions.
Thank you. If you wish to ask a question, please press five-star on your telephone keypad. To withdraw your question, you may do so by pressing five-star again. There will be a brief pause while questions are being registered.
There appears to be no questions on the line, so I will hand it back to the speakers for any closing remarks.
Okay. Then thank you.
We have a question from Poul Jessen. Sorry for interrupting. We have a question from Poul Jessen from Danske Bank. Please go ahead. Your line will now be unmuted.
Yes. Thank you. I have a few questions. The European margins, there has been some quite volatility in that one in the recent quarters. Can you give a little more flavor on the gross margin performance if you look at it going from 22 and then to 30 and 31, and now you're down in 23? Is that easily impacted, or what is impacting the gross margin here?
Yeah. We have several sort of explanations for the development in the gross margin. Firstly, we have our Migration Powerhouse, which has not really been performing as expected. We have seen some reduced pipeline for that business now materializing in a lower gross margin, both in, actually, Europe and in the U.S. as well. Of course, the Easter has an effect, as you also hint at. And then thirdly, we see that with the growth that we have seen in top line, we see, though, these growth areas materialize in slightly different areas if you compare with our capacity, meaning that we have a mixed effect. So in some areas where we have a higher capacity, we have seen less activity. So it is also a matter about different sort of utilization levels across the different areas in our business in Europe.
And added to that, if you take the market poll, you can say that there is a kind of split market in Europe because our Europe includes, of course, the Danish business and also the Life Sciences business in the rest of Europe. And I mean, Denmark is a big exception where, of course, of no reason, there is a very high demand in the market, not the least from Novo, but also some other clients, while outside Denmark, there is, in general, a much more hesitant market climate and some more macroeconomic headwind. And then on top of that, once again, we had the more specific challenges within our data migration business, which has not that much to do maybe with the macroeconomic situation. It's more structural challenges.
How should we then look at the growth in Europe, I think, with Novo and other Danish? Is the 13% growth been sustainable, or are you impacted short-term by some very high activity that will level off?
No, we expect the growth to be sustainable. What we will do is, of course, balance our capacity to match the pipeline. We should also look into increasing our profitability.
The same more or less comes for the Danish market where you have, if we include the Aeven part, 29% growth, and you had a very strong 23% as well. Should we expect in the coming quarters that the growth levels in Denmark will come down?
Well, first of all, we will, at the end of April, not have any more inorganic revenue growth. We expect the growth to continue. We see a strong pipeline for the rest of the year as well to continue our growth journey also in Region Denmark. We have seen a good level of order entry also in Q1, so we are still positive on the future growth in Region Denmark as well.
Then the corporate cost, it's coming back to the volatility we see in the numbers. If you take last year, it's DKK 51 million, DKK 36 million, DKK 54 million, DKK 32 million. Should we expect some more stability both in corporate and regional costs going forward, but with a downward trend?
We should see a more stable development, a downward trend. We have some, you can say, non-recurring corporate costs here in the first half related to both the office relocation that we are doing in several locations, and we also have some major projects like the ERP implementation and the HR Cornerstone implementation driving non-recurring one-off costs that will fade out in the second half of the year. So we expect a lower level of corporate costs going forward and also a more stable development as we complete these big transformative projects.
The cost of moving offices, is that hitting both regional cost and corporate cost? I was thinking that a large part of the cost in Copenhagen of moving must also be in the regional part of the cost side.
Yes. You will see both an effect on Region Denmark, regional cost, and also a slight impact on Region Europe's regional costs and, of course, an impact on corporate costs.
Okay. And then a question to you, Pär. You write that you have very promising both order backlog but also a pipeline looking into if it's just to compare the two other Danish. If you take Netcompany, they also have a very positive view, but that's topic section. But that's also Denmark. I guess you're looking into the same pipeline in Denmark as they are. But then we also have a Trifork earlier today talking about postponements and a very soft market right now, and they just guide for flat. At least that's what they indicate going forward. But you seem much more optimistic than many of your peers right now. So what's the reason?
I mean, I can comment on our operation and not the peers. But from our perspective, we see a very solid growth. It was 18% organic growth in our Danish business, and we are positive also versus the future. And of course, one reason maybe if you compare with others. I mean, we are smaller players in the public market than some of our competitors, not the least the big one, so to speak. So we have a smaller base to grow in order to produce the kind of positive market outlook used mathematically. But we are very positive both on expanding our existing agreements. So I would say the growing business in Q1 is to a very large degree that we have been expanding our present engagement.
Well, as we mentioned a few, I mean, the big wins in Nationalbanken and also the expansion in ATP and some others are really expanding nicely. We continue to see good opportunities for growth. On top of that, there is a pipeline that looks nice. We are trying to be smart and selective and go for the cases where we have the biggest chances to win, which is not all of them. But we are confident that we are looking into a qualified pipeline that will continue to see growth momentum in the Danish public sector. Also, you should remember that the Danish business also contains a fairly large part to the private sector based on our Microsoft business, which, of course, where SCALES is a big part.
They had a slight slow start to this year but had been picking up performance in the later part of the quarter. They also had an increase, a good pipeline looking into the rest of the year. Overall, on the Danish business, both on the private and public, we remain confident.
Okay. Perfect. Thank you, guys.
Yeah. Thanks, Poul. Thank you.
Thank you, Poul. As a reminder, if you have a question for the speakers, please press five-star on your telephone keypad. We'll have a brief pause while questions are being registered. As there appears to be no questions on the line, I will hand it back to the speakers for any closing remarks.
Yeah. Thank you all for joining your call, and thank you for your questioning and listening in. Please do not hesitate to reach out to either me or Carsten if you have any further questions. Have a great day.