Q2 20/21

May 25, 2021

Welcome to the Data Group SE conference call on the half year report for the financial year of 20 twentytwenty 21. At the moment, all participants are on mute. The floor will be open for questions after the presentation. If you would like to ask a question, please Press the hand symbol or type your question into the question box. The presentation is also available for download in the Investor Relations section on Datagroup's website. I would now like to welcome Mr. Max Schaber, CEO of Datagroup. Good morning to all. I'm very happy to show you an excellent first half year of Datagroup. We could grow our revenue to 24.4 percent from SEK 170,000,000 Up to SEK 211,000,000, which is a very fast growth. Also, the EBITDA Grows faster with 28.1 percent and we also could Grow significantly the EPS earnings per share, 21.5 percent to EUR 0.130 per share. So what are the real figures beyond that? It was a strong organic growth. We had in all our divisions, in all our companies, A very, very good development of organic growth. We have completed We have consolidated the Port Harbis GMB, which we bought last year complete And we also could help the share of service revenue, fairly above The 80%, so we realized 83.3% and What we also had some special effects out of deferred taxes, which I come to on that later. Next page please. These excellent results Of the first half year brought us to increase our guidance. All data group market units exceeds far our expectations. Also, the restructuring of FES is progressing much better than expected. And we also have 2 successful corporate acquisitions completed, but these figures are not Within the half year figures. So we can expect very good figures for the future, but these 2 successful Physicians are not in the figures we show now. We also have had a very strong sales pipeline and sales success Over the last 6 months, we have also significant extensions to existing customer situations and this altogether led to a strong organic growth. 14 new customers, new cobox customers, 26 contract renewals. To be honest, it is also very, very important to renew the existing Contracts. And these contracts, we could renew a lot of And we also could extend 15 contracts very with very big figures. All this altogether led us to an increase of the guidance. So we guide from now the revenue bigger than €440,000,000 this year And an EBITDA bigger than €61,000,000 You can see we came from €420,000,000 To EUR410,000,000 to EUR420,000,000 revenue. So we are based on the strong organic growth, Very good to reach the 4.20 without Any additional things? And with the new companies we bought, We aim to more than €440,000,000 which we are quite sure to reach. Also on the EBITDA side, we could grow our guidance very good. So we are very fine with these figures. And let's see what the next half year brings. All the signs are going up, but you never know. And so we are You know us since a few years, we are very conservative also with our figures, with our guidances. Next page. Yeah. Corona It was the big thing of the last 18 months of the last 15 to 18 months. And we at some point, we saw some problems Within the corona epidemic and we but the reality is that Corona brought us big order intakes. For example, the equipment of Vaccination centers in Baden Wurttemberg. We got an order late in November last year To equip 60 vaccination centers in Baden Wurttemberg with a Microsoft based digital infrastructure. The project was to design the design of the entire solutions in the public cloud environment, Which is very interesting for us. We are also offering cloud solutions in our own data centers, but We also promised in the last years that we are moving in the direction to a multi cloud hybrid provider. And this is a big project where these skills are used, So we could set up, roll out and operate these the managed clients of the vaccination centers, a few 1,000 of them. We also bring service desk and technical support of these centers with our engineers. And since January 2021, the entire vaccination process is supported by our solutions. The challenge was only 1 month from offer to productive rollout, 8,000 users in over 60 locations. This is possible only on using public cloud Infrastructure. It would be not possible to do that on a local structure and this Shows us that we are very, very good skilled now in the public cloud Offering and realization of public cloud projects. Next page, please. Yes. We also have had some other good projects And good new customers. We have a good order intake with AI, artificial intelligence And automation and mobilization of business processes, we have A nice robotic process automation platform project for telco. We have a retail order from a retail customer, mobile app for a contactless payment. We also have a new order intake from a bank. This is quite interesting project Development of a software robot for back office processes. And we had Some other interesting things like recognition of bills for bonus programs, we have also a recognition of handwritten text Forms and recognition of custom documents for the automation of Brexit procedures. You can see with this project that we are also very successful on the way to help our customers to digitize They are business processes and the best most of these process of these projects Let us to a recurring revenue situation with the customer. This is the thing we aim for. We want to have many, many customers with a maximum of recurring revenue And this is what we are aiming for with our salespeople that we can get these projects and after finishing the project I can get these recurring revenue contracts. Next page, please. Yes, SpardaBank counts on Almato, our digitalization partner company And it's a very good customer response. You can see it on the slide. We have made a property portal with Innovativ AI Services Based on the AWS public cloud, we also had development of a service app for banking customers. We have had these back office processes and the support development and support of Customer self-service center for mortgages. You can see if a customer wants to digitize his processes, It is he's very good with Stetagroup on the way. And This bank, Spalda Bank Baden Wurttemberg, is very successful with solutions of Databroup. Next page, please. Yes, what was very surprising for us was That the second lockdown hasn't had any negative impact of our business operations. We could, in opposite to the first lockdown, which brought some negative effects In form of lower sales processes and Yeah, irritated customers. How can we manage Databroup and the customer together If our engineers come to the customer side and what now happened is that our strong customer base With our long term contracts, could deliver stable recurring revenues and all market units, I said it before, are running at a good and increasing profitability. Data Group, no, Please back. Data Group, can I have the last slide? Thank you. Datagroup can could realize a high level of remote work Among the data group workforce, up to 90% of our employees are home office enabled And they use it very, very deeply. This led to lower travel costs And this led to a higher profitability, a higher efficiency of our workforce. So at the end of all, we can say corona, it has not Negative effects for Data Group, but more positive effects. Yes. But what we did is we have had a strong focus on health protection for employees and customers. And the numbers, the figures of People who got the virus is very far below the official figures government gives out. So, our situation, our protection for the health of our customers and employees It's working very well. A strong thank you for all our people who managed that Complicated and but very successful processes. Sales activities I have been shifted to virtual formats. And surprisingly, We expect an increase in new customer wins. At the beginning of the first lockdown, We thought, oh, God, what will be the effect on our sales of new customers? What we see now, it is increasing. Customers new customers are Taking the possibility of virtual formats and this is a very, very good news for us. Next page, please. So, let's come to the figures again. We increased our revenues. We have total revenue 21.3 percent More than the former half year, we have had also A strong growth of material expenses. This is based on some special projects Based on lockdown 2, customers Renewing their IT equipment and we could deliver this. This is not a focus we do in Data Group, but it is a need. The customer Moved the customers moved to an all in one shopping more than they did before. This is the reason why our material expense is growing so fast. Gross profit Also went up very good. And the very good thing is that the personal expenses Only went up for 10%. Gross profit goes up for 17.5%, which means surely that our EBITDA figures come up very fast. Also, the EBIT is Going up 34%, which is a very, very good sign for us. And we are very focused on the development of EBIT. You will see in the next few years that we grow our EBIT massively. Also net income Based on EBT, net income came up 21% And the earnings per share came up also a bit more than 21%. Please remember that in the last half year figures, we have had in this Lucky buy effect from the from Port Harvys. And We also had the risk provision of CHF 5,500,000 so that the net positive effect is around CHF 6 €66,000,000 So, The realistic figures of actual first half year twenty twenty, 2021 is Much better than it is shown in the change percentage. You can see that we Earned in the organic business a lot more than the year before. This is based on improved productivity. And we also could bring down depreciation and Amortization. So the effects are shown in this table. Next page, please. Balance key balance sheet figures are Getting better. We could bring down the goodwill a bit. This is based on amortization of goodwill PPA Amortization. We also could bring down our short Term liabilities a bit. This comes with a bit more long term financial liabilities. We also have bigger finance lease Liabilities, this is based on acquisition of new companies. And we also went up in pension provisions. You remember, there is a big increase in pension provisions out of Port Harbis last year And we also had we also could bring down liabilities to financial A very good cash flow led to increase in cash and cash equivalents And it led to a reduction of liabilities. We could grow what was very important for us, Our equity ratio, some of you had the fear that we Go down in equity ratio. The opposite has realized we could grow the equity ratio A bit against the last year full figures. So it's a bit down against the half year figures last year, but it is up In the full year against the full year figures 2020. Yes. We have an average let me see. We have a return on equity, which went up. And the balance sheet in total is only up 1.4%. Next Slide, please. Very important thing is That we could change our cash flow. So we had A very significant decrease of CapEx. We had 82% Decrease in cash outflow for investment in plant and equipment. This is based we did not need more investments in data centers and we did not need more Investments in other project related costs, which was a plan, but we are better than our own plan in this type of investment. We also went Down in cash outflow for investments in intangible assets, 30% down. And we also have Short term cash investments to avoid negative interest. So, Last year, first time, we paid some negative interest rates. And to avoid that, We lent out some money with positive interest rates. And also, we have cash out for the acquisition Of the outstanding 32% of Port Harbis. You remember, we bought The main share package of Port Harbis last year and And there was an outstanding part of 32%, 25% in the Haspa, Hamburgersparkasse and 7% in the Sparkasse Bremen. And these two Packages of shares we bought in the End of the year 2020. And this brought us to a cash out payment From SEK 6,300,000. So, then The cash flow from operating activities is better than last year. We have A higher net income for the period. We have The depreciation of non current assets, which went a bit up, but in total, the cash flow from Operating activities went up very good. So, we have In the last year, the reason for that is that we have a very high OpEx For bringing the new customers in the financial services sector such as NRW Bank And other banks in the FIS sector, and this costs us last year a lot of money We didn't need again this year. So we have a Good development in this field and will have it also in the future. The very, very focus of our board is to avoid these High investments in OpEx for the new projects. And we have installed a new system, which helps us Exactly to determine what does a new customer cost and It will help us to avoid this negative thing last year happened with FIS. Next page, please. Yes. M and A history, There is something to say for the new 2 companies we bought, DNA. The story behind D and A is that we are negotiating since more than 1 year with this company. The reason for that was that they are working mainly for one big customer, which is the FE Finance Informatic and they do services, IT services for Finance Informatic And this adds very, very good skills to our workforce in the financial sector. And we negotiated last year the contract To buy DNA and there was no long lasting contract with the end customer. And we said, okay, we can close the deal only if we have a long lasting Contract with the end customer and the end customer needed around 1 year To figure out to negotiate the contract with the D and A, so that we have been able In April 2021, to close the deal, which brings us now very high security With this long lasting customer contract for more than 5 years from now for DNA. DNA will develop very fast because the customer FE, Together with the Data Group infrastructure, over complete Germany will Give us the ability to work with FE over the whole country. And in this business case, we see very, very good opportunities for the future. And you will see extremely good figures from this business in the future. A very interesting new company is Murano. This company we bought In May 2021 and here was the negotiation process very fast, very short. I saw the shareholder, the former shareholder of Organo At 30th December of 2021 2020, and we could close the deal In May 2021. Also only 4 to 5 months negotiation for such a Quite big deal. Urano Informacion Systeme GmbH, we bought 70% of the shares In the first step, and we have a purchase option for the remaining 30% after 2 years. This is based on valuation model We figure out with the former shareholders and which give us as data group More security that we don't pay too much money for the company. And so for both of us, Also, the old shareholders and the new shareholder data group gives this type of deal a high security. RANO provides IT services with nearly 300 people and is active in the private and public sector. Company was founded 30 years ago and is a very reliable Partner for the public sector in Hessen and Rheinland Pfalz for many years. This is very interesting for us Because it strengthens the presence of Datagroup in Hessen and Reinhard Pfalz. And Also, interesting solutions are added to our portfolio, for example, in the school sector. School sector is one sector we expect a fast growing IT infrastructure Founded by the public sector. And this, we want to address with OraLor. Okay. Next page, please. D and A, I told you before, we have with DNA 104 employees, Fast growing, the number of employees and we generate revenues in the high single digit €1,000,000 range And it is a very profitable acquisition. Next page, please. Okay. At the moment, data group share is not The top of our peer group, but we hope that we will Be again one of the really best in the sector. We see a very, very brilliant future for Our company and so I hope we can make A good story and I'm sure that we can. And I'm sure if you invest in Data Group, It will be a very good investment for the future. Next page, please. Okay. Upcoming events, I don't want to read down, but we have A lot of new conferences and we see the Q3 figures at So 24th August. And we are working very hard on the success of Datagroup. Next page, please. So your contact person for Investor Relations is Claudia is helping you with any questions you might have. And now, I'm I will be glad to answer your following questions. Thank you. Thank you, Mr. Schabe. The floor is now open for questions. If you would like to ask a question, please press the handset ball. You will then be unmuted and able to ask your question. Alternatively, you can type your question into the question box. We have, 3 questions From Mr. Edwin de Jong. The first is, what was organic growth in Q2? In Q1, it was 10%. I will give that question to the back office. The second question is productivity went up in the first half year. Is that going to be lower in the second half year as the lockdown stayed away? No, we don't see I will answer it directly. We don't see a bad development of Our efficiency, we see that it is growing In the future, over a longer period, it might have sometimes a bit a swing. But in total, we will increase our productivity. And the third No. We don't have a direct relation with the travel Of the consultants, OpEx is based on How much we have to work in a project to bring it to a recurring situation And that will grow a bit if we have bigger new projects. But in total, we will Remain on a low level like we showed it now because it's always a bit a swing. Some projects are a bit more need a bit more OpEx. Most of them, we are aiming, we focus On these projects, we need lower OpEx. But it is in total, we are on a good way in this field. The next question is from Mr. Kurt Waller. Yeah. Yeah. Hello. Hopefully, you can hear me. And thanks for taking my questions. The first one would be, can you give us The consolidation effect of Urano and DMA in the current year, I come to at least around €25,000,000 revenue effect. And the EBITDA effect should also be more than €2,000,000 based on my estimates. Is that a right ballpark? The EBITDA effect, yes. But the revenue effect, we cannot give you exactly because We are consolidating only 5 months, not 6 months and we there is no exact projection How the revenue will develop of these both companies because it's also a bit swinging around. We cannot count the Yearly revenue divides 12%, so we have some seasonal Effects. So it would be better to see around 20, probably a bit lower Then 20 in revenues, the EBITA effect is okay, you expect. Okay. Thank you. And a technical question regarding the tax rate. It seems that you had a tailwind from the D and A acquisition that you Good use tax loss carry forward. Can you give us an idea about the expected tax rate in the current fiscal year and what how we should think Based on the current scale and scope regarding tax rates in the coming years beyond 2020, 2021. Yes. Mr. Roelho, this is a very hard question. We also Ask ourselves, we are not quite we are not really sure how this effect We'll bring down the balance sheet, but we have a high A position of tax possibilities, let me say it in this way. And it depends a bit How good D and A is working? We are putting D and A under The FIS. And so we can realize some tax From this, but we are not able to give an exact Projection, but it will be very good. Let me say this and let's come probably And the Q3 results, we know it exactly or more exact right now. It will not get it will not go in Yes. But it will bring our tax rate down In total and in percentage, I cannot say. Got it. Just Just to clarify, Mr. Schabe, is that something that is only impacting this year or also the Yes. Apart, let me say, 50%, 60%, we will see this year and next year, we will see also of 40% to 50%. Thank you. Yeah. And regarding the operating cash flow, it was quite good. In in H1, was there any tailwind from Acquisitions you did and if so could you can you please quantify it? No, no. Nothing. No figures of the acquisitions Here in these figures. We did not see any. Yes. It is completely operating based. Okay. And on the CapEx side, if I remember correctly, in the Q4 call, you expected around €18,000,000 CapEx in the current year. You're now at 1,600,000. Is the 18,000,000 still a valid number or is that going to be below this all number? We hope that we can do it below, but we are not sure at the moment. But we are working very hard. You see that the figures We are working very hard on the CapEx. We are shifting in investments. And so some of these shifts have had big effects that we went down so far. But it can be that some of this shifting comes up in the second half. We are not sure at the moment. It depends also on liferzeiten of the equipment and it depends on how fast We can increase the new projects. We can realize the new projects. So would the €18,000,000 still be something that we should put in our models? Let me answer that later. I give that question please to the back office. Okay. And The last question would be you made some provisions last year or quite substantial provisions. Can you share with us whether you're Planning to resolve the provisions from last year and whether that's and to which extent that is factored into your guidance for this year? Yes. Last year, we made a model of 3 years period with these FIS provisions. And we did For this, for the actual year, let me say around €5,000,000, 5,500,000 Next year, euros 3,000,000 and again, another €2,000,000 also in the 3rd year. And this year, in this half year figures, we have had €2,200,000 used in the provisions. So we have another 3 more than 3,000,000 we can use if we need it this year, in the second half year. And and and the remaining provisions, I think you also did quite substantial, provisions outside of this last year, which could be, of course, be reversed This year. Is that in factored into your guidance, Mr. Schaber or not? We Normally, we use what we Right. But this question, I have to pass to the back office also. Can you Mr. Waller, can you say Which provisions do you mean? Yes, I will do so. Yeah. We do it then, off the record. Okay. Okay. Thank you. Thank you very much. Thank you. The next question is from Mr. Andreas Wolf. Hi. Thank you for taking my question. Can you hear me? Yes, very good. Yes, thank you. So my question is in general on the share of the public sector within your revenues. Obviously, it had a countercyclical effect this year, maybe last year as well. Maybe you could elaborate on this topic. And then is there something like an order backlog That you're measuring order book that you can share the view about with us. And lastly, on the measures that you have implemented to monitor new clients, Could you provide some more insight into how these measures are created? What these are just To give us more comfort here. Thank you. Yes. First, the public clients, What we see is that public clients spend much more money in IT infrastructure And in IT Solutions than they did before. Money is setting It's spend easier and in bigger amounts. And this is Surely, based on the COVID thing, But what we see is that there is a mind change in total. So We don't see a very fast reduction of these spendings. But in opposite, we see that spendings will go up over the time, But the onetime COVID effect might swing A bit down, but in total, we will see much more spending in public sector than we did before. And Datagroup is now positioned very, very well with Urano Informazione Systeme and with our Stuttgart Branch, we are now one of the biggest suppliers for the public sector In Infrastructure Solutions in Germany, we are very good in also in services, not in hardware Delivery, but in services. Okay. And the second question was how we measure Our order intake, what we are doing at the moment, we implemented 1 year ago, We implemented Eilen for Tripsvorste, Sales Chief Officer. And this brings us to a better view how sales in total are going. And what we see is that the thing I always promised years before that we grow within our customership very good. And this is also surely based On the different new idea that customer has to invest More money in a good working infrastructure, IT infrastructure. Also, what we see is that there is a lot of more investment in security things. We accelerate the development of our security operating center, SOC, And all these other things around security. And that brings us to And faster organic growth in our existing customership, But also in very interesting new customers. For example, we did a Big new customer, HELLA. HELLA is not yet in the figures to see, but it will bring Significantly growing revenues In the Koln facility of Datagroup. And this is a big customer. And I was all after the FES disaster, I was Very a threat against big customers. And so we did very, very hard work To make the new HELLA contract profitable and to make it secure. And we are sure that we can manage this contract very well. And this shows you that on the sales side, we expect Fast growth for the next period, let me say. Does that answer your question, Ulf? Yes. Thank you. And then I might have missed The answer to my next question. So were there any special effects resulting from recent acquisitions in the bottom line? I guess, no. And probably there won't be any in the upcoming quarters. Just Yes. To be sure, on this side, could you also provide the answer here? And then on the CapEx side, have you found new ways To organize CapEx? Or is this just project related that you Need less investments for the projects that you are carrying out, less data center investments, etcetera? Thank you. Okay. First of all, there is no hocus pocus in our CapEx side. It is really What you meant, we have lower CapEx because we did A bit different type of projects. We did not make these huge projects with Datagroup owned hardware. And we focus on these type of projects in the future. We don't want to Invest these huge amounts of money into customers' hardware, the customer related hardware From two reasons. One reason is to help the CapEx down, to have held it low. And the second reason is that the profitability in dedicated hardware Investments is not as good as it is in our cloud centers. We can have a much, much better efficiency if we invest in our cloud centers than when than if we invest in dedicated customer situations. 2nd first question was, are there any special effects, Any out of the acquisitions of DNA and Prothab and Urano, What we see now, we are not quite through not completely through with the PPA allocation. But what we can see is a smaller effect from D and A, could be a lucky buy, but not very big. And Urano, there are no effects at the moment we see. Great. Thank you. Okay. The next question is from Tim Wunderlich. Yeah, good morning. Good morning. I hope you can. Yeah, good morning, Mr. Schaber. My question is on the revenue with vaccination centers. Could you give me the number how much that was in the first half of This year, in the first half of your fiscal year? And then also how you expect this to develop going forward? I mean is there Current component or what does this look like? Thank you. Good question, Tim. Thank you. For the first half year, Let me see. It's in our figures now around €6,000,000 revenues, €5,000,000 to €6,000,000 revenues. What we expect for the second half is another 3 to 5, it's not exactly designed now. What we expect is that Not the vaccination centers, but similar solutions For health services will give us Recurring revenue stream over the next years. It will come a bit down. The main investment, Which was around these 2 half years, last half year and actual half year will come a bit down, But it will be assets through new projects So that we don't fear very hard going down figures in this sector. Okay. Makes sense. Yeah. Thank you. And then also, I mean, this is a bit of a follow-up Because your free cash flow looked quite nice in the first half of the year. And I would be interested in knowing And this has been discussed before partly, right. So operating cash flow looked good, but also you had very, very low CapEx. So when we're now I think it was €21,000,000 of free cash flow users generated in the first half. So also My question would be, how do you see this developing for the full year? Yes. I cannot give you an exact answer. As I figured out before, Some of the effects for this low CapEx in the first half year, I explained to you before, it Was some kind of shifting investments because of Slow project realization phases and some other Very reduced speed And more thinking how we can do it with lower spendings, but Some of them will come in the second half year, but please do not expect a very, very high CapEx, we will be on a low level, but not as low as in the first half year. Okay. Makes sense. Thank you. And then I mean now we are almost done with the month of May. Can you give us an update on Current trading, I mean, how does the demand look over the last 2 to 3 weeks? Yes, very good, Very good. We could I cannot say what happens over the last 2, 3 weeks, But we have now completed April, and April figures are brilliant, Just brilliant. Okay. Thanks so much. That's it from my side. Thank you. We have an answer from the back office So the question of what was organic growth in Q2? Organic growth in Q2 was 5.4%. Okay. Very good. Thank you. The next question is from Mr. Janik Sehring. Hi. Yeah. Thank you very much for taking my question. Just a quick follow-up. In Q1, we So elevated material expenses, I think that was also related to the vaccination centers. Now in Q2, This was a bit lower again. Could you provide some color on what to expect on this for the remainder of the year, maybe also taking into account The acquisition of Urano, which probably has roughly 50% of hardware sales, maybe that also has an impact on your material expenses, That would be very helpful. Thank you. Yeah. Material expenses will go down surely if Tenation centers are added and equipped. We have some 1,000,000 less Investments in hardware and sales in hardware. And so, I think we will come back To a level of around 20% to around 20%, Let me say, no, no, it's around 15% from our revenues. We expect now €440,000,000 in the total year and it should be around, Let me between SEK 70,000,000 and SEK 80,000,000 in total hardware sales and trade sale in the whole year. So Also, Urano will bring a bit more hardware sales, but The company is developing very fast to, let me say, more pure service provider. They come from a classical system house business And they are developing into a service provider business and this will go up. We expect Year to year, 5% more services, so that we can expect that we have in a few years The level of data group in total might be a bit more. Data group has companies like Bremen And like Stuttgart, which are in the 30s or 40 percentage, but some of our companies have 100% services. So it will count up to the quite normal data group figures in the future. We don't want to change to a hardware reseller. Does that answer your question? Yes. Thank you very much. Thank you. We now have a follow-up question from Mr. Knut Rolland. Yeah. Thank you. Just to clarify, on the €5,000,000 to €6,000,000 revenues from the vaccination center, was that relating to service and maintenance? Or did that include the hardware contribution, Mr. Schauer? It is including hardware. It is including hardware. And I'm just trying to get the numbers right. If I look at material expense Being down 11,000,000 quarter over quarter and trade revenues just down roughly 8,000,000. So how is that aligned? Have there been any other Yes, sure. We have had, surely, some other hardware sales In the customer side, if you see if you have to move Your complete infrastructure to make your employees able to work From home offices, you have to invest in hardware for them. And these effects are also in our we delivered hardware for In this way, but it's a mixture of all. And the vaccination centers, you should see That we deliver only a piece of hardware. The main part of the hardware used in these vaccination centers It's not delivered via our books. We install it. We make services there and A bit of hardware, for example, some printers and some other things, but not the main Are there any further questions? Then please type your question into the question box or let us know via the hand signal. Thank you for participating in our conference call. The call will be made available on Datagroup's website. Very good. Thanks for your questions and thanks for your interest. Thank you.