Welcome to Gofore's results presentation for the first half of the year, 2020. This is actually our first time we do a results presentation in English, so especially welcome to all of you non-Finnish speakers. Presenting today is my colleague, Teppo Talvinko, who is the group CFO for Gofore, and my name is Mikael Nylund. I am the CEO of Gofore Group. During the presentation, you can ask questions on the video platform that you are following the stream on, and Nina from our investor relations team will pick up your questions, and we will take them at the end of the presentation. But you can ask the questions during the presentation if you come up with any questions during.
So at this point of the year, we know that the COVID-19 pandemic had a huge impact globally on society, on people, and on business everywhere, and especially so during the second quarter. Against that background, we are very satisfied with the performance that we had in the first half of the year. Our net sales went up 12% to EUR 37.4 million. Our EBITA went up 14% to EUR 5.8 million, and our employee count went up 9%, and this during a period that coincided with the ramp down of our operations in the United Kingdom and losing of employees related to that. So all in all, a very good result for us for the first half of the year.
As we have already released the numbers for the first quarter, we are, we can also, at this point, say that the especially difficult second quarter was also very satisfactory from a EBITDA perspective. Looking at the situation and the market outlook from a coronavirus perspective, we can, as said, now see that the effects on the first half from a numbers perspective were quite small. They were, of course, huge also for our organization from a day-to-day operations perspective. Everything changed. Everybody moved over to remote work from the offices and so forth. It impacted all of our customers, all in different ways. But from a numbers perspective, not that big of an impact. We have seen projects being canceled.
We have seen some projects being postponed, but due to Gofore's customer portfolio, which is quite heavy on the public sector segment here in Finland, we are, as I see it, a bit safer from the pandemic effects than maybe the whole industry in general. If you look forward for the second half of the year, there is still a lot of uncertainty in the air, as most people in the industry will tell you. In Finland, especially our export-dependent industrial customers that we have are one cause of concern. But again, our portfolio is quite heavy on the public sector, so that's why we have a quite good outlook on the second half of the year.
These two things are now reflected on also in our guidance that we have revised here during the week, that Teppo will go into later in the presentation. If you want to look at the silver lining of this situation and the coronavirus crisis that has hit us globally, I think it's that people have now really learned the value of digital solutions, how they change our everyday life, how they change how we work, how our children go to school, how businesses all over are run. Digital is now the number one alternative in all situations, and this can only, in the longer run, in the long term, mean there will be more investments into digital technology, and that will benefit us.
Now over to Teppo on the financial figures.
Thank you. Okay, our key KPI development during the first half was positive. We were able to keep up the growth in both sales and in profitability. And this has been the case for past 15 years, and we are really satisfied on that development. Increase in net sales compared to last year was 12%. The growth during the first half was mainly organic and did not contain any acquisition at that period. Key drivers behind the organic growth were proactive recruiting, increase in our subcontracting, and positive price development. In terms of profitability, our primary operative profitability indicator, adjusted EBITA, increased 14% from the last year, up to near EUR 6 million. Adjusted EBITA excludes the ramp-down costs of our U.K. business.
Our profitability during the period was good, over 15%, and this is well in line with our long-term profitability target. Reported EBITA was 13.6%, and it was burdened by U.K.-related costs. From our net sales, 89% came from our home market, Finland. Activities outside the Finland brought an 11% share. Positive was that the growth continued despite the U.K. ramp up. And share of our international business remained at the same level than year ago. By sector, the growth among our public sector customers was delightful. It gives us an interesting starting point to our international business. As an example, X-Road technology in Estonia is an opportunity to us in terms of technology and also in terms of doing. Public sector has kept up a speed in digitalization despite of the coronavirus.
We see that the market is developing positively, also in the future. The share of the public sector sales increased from 69%- 73% year-on-year. We managed to grow with our top five customers. Biggest customers operate in government, local government, cities, and private sector branches. We have seen this as having reached a strong strategic trusted partner position among our top customers. Diverse customer portfolio gives us a good position to bring up new growing key customers. Our subcontracting ecosystem is important to us. Our aim is not only to bring value added to our customers, but also to our ecosystem. Net sales that we made with our subcontractors grew up to EUR 6.3 million, almost EUR 1 million more than last year.
Ecosystem is a tool for us to accelerate growth and broaden our offering and also create partnerships. We speak about subcontracting experience. Our development during the first two quarters of the year has been good and clearly above year-on-year. During the second quarter, however, uncertainty among our private sector customers was increasing, and our ability to keep up growth was more challenging. The coming third quarter, well, we really don't know about that yet. Last year, third quarter was challenging. We had some difficulties in few of our customers, and last year started very slowly. The typical pattern in specialist services, summer holidays, and slow move in August were seen at that time. Growth in net sales was organic. As stated before, our key drivers to grow were successful sales and good response in recruiting personnel, as well as increased subcontracting.
Last year, comparison figures were affected by Silver Planet and Mango Design acquisitions. Adjusted EBITA is our key operative KPI. Adjusted EBITA excludes the cost related to U.K. ramp-down. This cost amounted to EUR 0.7 million, and this is to improve comparability between the years. EBIT is affected by goodwill depreciations according to Finnish GAAP, and goodwill depreciation have increased due to acquisitions made last year. Our earnings per share were EUR 0.2. It was slightly lower than year before due to U.K. and increased depreciation of goodwill. U.K. adjusted EPS was on the level of EUR 0.25... equity ratio and net gearing remained on a strong level, giving us a good basis for further expansion. Return on equity and return on investments were on a good level.
Slight decrease year-on-year was due to increases in balance sheet. FTEs and headcount development have been good, reflecting our target to grow. As mentioned before, growth in the first half of the year was organic, and we have been able to react on that.
Thanks, Teppo. Now we'll talk a little bit about what Gofore is, what our identity is, and some recent events after the first half period. Gofore is a growing and profitable digitalization consultancy. What that means for us is that we are, first of all, a next generation IT consultant. We live from the new technologies, from data, from artificial intelligence, from cloud technology, user-centered digital services, and so forth. Our business model is that of a consultancy. We sell know-how, we sell professional services, and we have close to none of fixed cost project risks in our portfolio. The third thing about what Gofore is, is that from an organization culture and management leadership perspective, we are a modern company.
We live from the very self-organized organization that we are. All of this in relation to the very fast-changing world and the accelerating digitalization development makes us very attractive for our customers, of course. But compared to maybe many of the other players in the market, we also are very. Our identity is very much centered on being an ethical player in the market. It really means a lot for us to make this digital change for the good, and that's why we like to talk about pioneering an ethical digital future.
From a service portfolio perspective, we aim to be a, what we call, a full-stack digitalization consultancy, meaning we offer the end-to-end services to our customers in their journey to become digital in every aspect of their business, of their operations. This means that we can provide them with services from the very starting point of their development life cycle in the form of management consultancy services. We build those digital services, and now, after recent developments, we are also in the quality assurance part of the development life cycle. I will go more deeply into that in a second.
Our aim, our, our vision is always to be growing and profitable, and that's what we have been talking about here, here today also, and, and this year is, is very much continuing on, on our, path of growth that we have set before. But we will also- we, we also want to always be evolving, constantly evolving, and our identity and ideal- ideology here is that, a company like ours is evolving from the ground up, bottom up, and, and that's because of, of the, employees that we have. So this year, what we have been doing is, is, developing the structures so that we also in the future can be evolving through, through our skilled and motivated employees, even though we all the time grow, grow larger. We want to be impactful and responsible.
The slogan for us is to creating positive impact, and this is a very, very important part of our identity. And in addition to paying attention to the footprint we have, for example, from environmental perspective, we are also more and more paying attention to the handprint that we, together with our customers, have in the projects that we do in the digital business sphere. And what we want to do is quantify this impact we have, and we are working on measurements to have a quantification on that. We talk about Gofore Good Growth model . And lastly, we want to be international. And for us, being international does not only mean making business or activities outside of our home market in Finland, it also means from a community perspective.
Our aim is to have an international and diverse community with people from different backgrounds, because we think that that creates value for our customers.... Okay. Since 2017, company acquisitions have been an important part of our growth strategy, and they will continue so in the future also. This week, we announced that Gofore is acquiring Qentinel Finland, digital quality assurance service provider that will complement our service offering quite nicely, which I showed you before. The acquisition of Qentinel Finland will make us one of the leading players in the software quality assurance market in Finland, and this, of course, makes us very proud.
The debt-free purchase price for Qentinel Finland was EUR 8.9 million, and the purchase also includes a additional earn-out purchase price, which we now estimate to be in the region of EUR 1 million-EUR 2 million. The completion of this deal will be done on September 1st. For a few years now, we have seen that the development in the digitalization market goes from a pure software development players more and more into integrated service provider that can also provide the quality assurance part of the development life cycle. This is something that we have been looking into, and now we are really glad that we can add Qentinel Finland to the Gofore service portfolio.
The world is, of course, not least due to the coronavirus pandemic, is more and more dependent on software. That software needs to be high-quality software. The design, development, and testing cycles are faster and faster, and integrated teams and integrated approaches to the software development are in high demand. And because of the increasing speed and the increasing complexity in all of the IT landscapes, testing automation is the only solution to handle this change. And Qentinel Finland is very strong in especially the testing automation sphere, so a very good acquisitions for us. Some points about the rationale of the deal. First of all, Qentinel Finland is a well-known, good-performing, from a financial perspective also, company with a very good track record.
This is something that is very important for us. We are buying a business that is a working business and a business that we, from a Gofore Group standpoint, can support in their growth to the next level. Gofore Group's support services will accelerate the growth of Qentinel Finland in the future. The other point is that we can broaden our service portfolio in ways that we have been looking to do for a few years now, which, of course, will drive our cooperation with our key clients into a deeper one, and we can provide them with more value from a one service provider.
And looking at the future, this also improves our ability to take on larger scale software projects than today, and from a principal provider role, which is very important for us growing to the next level. Qentinel Finland will remain an independent company in the group. We will support this from Gofore Group support services, and we will complete handover and integration with Gofore Group during the second half of the year. And from a group perspective, I think this deal we have now made very nicely illustrates that we are on the growth path that we have set, and therefore, we are very glad and proud that we can announce this deal. And now Teppo will talk you through our revised guidance for the rest of the year.
Yeah. Thank you, Miikka. Okay, we have given out updated guidance for the year 2020, and that concerns net sales. Due to the development in the first half and just made Qentinel acquisition and also unclear coronavirus situation, we have given a range of EUR 70 million-EUR 76 million for our net sales. The adjusted EBITA is kept intact.
I would like to remind you all that we are also targeting an EBITA margin of 15%, and looking beyond the COVID-19 crisis, looking in the long term, we do believe that the market segment that we are serving, it will still be a fast-growing market segment, and we want to grow faster than this market does in the long term. So that is our long-term financial targets. Okay, thank you for listening, and now we are happy to take questions from you.
Yes, good afternoon also, also from me. My name is Nina Pavén , and I'm responsible of the IR communications here at Gofore. I'll go ahead and read the typed online questions. First, Jerker Salokivi from Evli. So these are corona-related questions, all three, so let's start with one, with the first. Did the problems relating to profit delays and cancellations run throughout the second quarter, and has the trend been improving, worsening towards the later stages of the quarter and July?
Those cancellations and postponements are one-off situations, so I don't think we can see a trend actually there yet. But of course, for the first half in its entirety, the first reaction from the market was, of course, in many situations, you could maybe call it panic. So when we and our customers got over that panic, I think we are on the whole, we have seen positive development during the second quarter until summer. But of course, now it's again, the situation from a health perspective, at least, is worsening in Finland, so that could change things. But I think up until now, we have seen a positive development there.
We do, however, understand that the part of our customer portfolio that is very export-dependent has maybe not seen the worst effects and the impacts of the crisis yet. So that might be something that we are going to see in the third quarter or later.
The second question: What was the impact of the pandemic on Gofore's cost base in the first half of the year through, for instance, decreases in travel expenses?
Would you, Teppo, like to take this?
Yeah. Okay, it has had a slight positive effect if we take a look at the other operating expenses. So, there has been a slight positive effect.
The last question from Jerker Salokivi: Were any of Gofore's customer segments in the private sector particularly hard hit by the pandemic, and do these constitute any notable part of the Gofore revenue?
Because of our customer portfolio, the answer is, no. None of our customers were that hard hit.
One last question from Jerker just came in.
Okay.
So this will be now the last. How, how has Qentinel Finland's development looks like in the past few years, and, and what are the expectations for the business in 2020?
Qentinel Finland has been growing for the third year now. Through the last two years, they have reported very nice, over 10% annual growth, and they have been improving in their profitability, too. We are estimating that the effect of Qentinel Finland acquisition on the Gofore, on Gofore Group from September forward, that will be reported as part of Gofore Group, is EUR 4 million. It has to be said that Qentinel Group, Qentinel Finland, is a bit harder hit by the coronavirus situation than what the rest of the Gofore Group business is. So there is a bit more uncertainty on Qentinel Finland's part for the rest of the year.
Thank you. The next set of questions comes from Joni Grönqvist from Inderes. There are actually several questions, and they could be grouped into four. I'll start with the first. Those are questions concerning the outlook. Could you comment on the outlook and what has changed during the last three months? And could you elaborate a bit more, the situation for the public sector, keeping in mind the budget for the next year, that might have some pressure?
Yeah. Okay, so if we look at the public sector segment, what of course happened has happened to all organizations, I suspect, is that the acute crisis and going into remote work and putting a lot of effort in operational matters, of course, in many of our customers, that impacted on the development projects that are the ones that we are involved in. And not all things progressed as planned. But if you look at it on, take a step back and from a higher perspective, I think the situation has not changed radically. Development plans for most of the public sector customers.
So what we see for the second half is pretty much the same big development projects going on that were during the first half. And we have also seen that, without taking into account some postponements of a month or two, new big projects are also starting. So in the public sector's customers, we don't see a huge impact during the second half of the year. Of course, it has to be said that in the long term, of course, the public sector customers' ability to invest in digital development is dependent on the economy and how much money they have to spend.
Yeah. The next two questions relate to our international business. Can you elaborate a bit on international operations performance? Good growth despite closing Great Britain operations and corona. Could you comment which countries are growing?
The first contact we as a company had with the coronavirus crisis was via our international operations. It was, of course, very hard on Italy, where we have a big customer, and that was also our first contact we had with the coronavirus situation. It has impacted the international business in a negative way during the first half. Our business in Germany, I think the reaction to the coronavirus there, compared to Finland, was in some ways harsher. Maybe has to do with both the impact of the pandemic there, but also on how well-prepared German society and people are to remote work conditions. But they also have been recovering quite quickly.
We have made some substantial deals already after the worst part of the crisis. We are optimistic about the German market, too.
The next two questions relate to corona again. Can you comment on your current ways of working? That means working from home or office, and what's your plan if the restrictions get tougher again? And on costs, how much lower was travel and marketing costs due to corona in the first half?
Well, I think Teppo answered the last part of the question already. As of now, and returning from the Finnish vacations, we have a bit of a, should I say, hybrid strategy to day-to-day operations. We have people working at the offices, or have had people working at the offices, but now, due to Finnish government guidelines, we will go into a remote-first policy in the Helsinki region. But our other offices, for example, in Tampere, will remain in for the time being. And we are, of course, ready to change that in this kind of hybrid operation, where we also use the offices, but we don't have as much people there as normally, naturally.
And then the last set of questions relate to acquisitions. Question from [Name] , regarding Silver Planet and Qentinel. So let's take the Silver Planet questions first. What are the reasons why you now choose to integrate Silver Planet? And how big synergies have you received from the Silver Planet acquisition?
Yeah. Okay. Silver Planet, compared to Qentinel Finland, was a different case. They are both, or were at the time of acquisition and have continued after that, very good-performing companies. So in that way, similar, but from a service offering and from a group of portfolio point of view, very different. So Silver Planet is focusing on the management consultancy and advisory business that we also have in the group parent company. And so what we are doing now is putting those offerings together and with the aim of having a bigger impact in the market.
Together with Silver Planet, Gofore Group has some 200 consultants in that advisory business, and I think we are the leading one for the public sector in the digital transformation advisory business. So, I'm really thrilled to see what kind of impact we can make in the market during the rest of the year and the coming years.
Yeah, moving on to Qentinel acquisition. Can you elaborate or comment a bit more on what kind of synergies you're expecting?
So, we actually discussed the synergies or the cooperation both on this slide with how the world is changing, how we see that development in especially the larger-scale software project is changing into a more integrated approach, and that's something that we want to be able to deliver to our customers. And, of course, we have customer portfolio together that we will... We believe we have a lot of cross-selling opportunities, and so that's going to be or what we are aiming at on a shorter term time frame... things that we want to do with the customers.
Tax rate was high. What's affecting there?
Tax rate?
Yeah, tax rate.
Well, it's affected by U.K. But it's still in line, so because we are following Finnish GAAP, so that makes it react in that way.
That was all the questions from Joni Grönqvist. I know last questions just came in. Do you still plan to continue recruiting?
Yes. As said, we are a growth company, and with our business model, growing means recruiting. So sure, we are recruiting, and we will continue recruiting. Of course, how the business develop, how sales develop during the second half, that will affect, and we will keep a close eye on that and how much we can recruit. And the recruitment market has also changed somewhat from the earlier dynamics, where companies in our business could not recruit enough skilled workforce to a situation where, at least from our standpoint, it seems that the market has changed to us having a bit of a better possibility to choose who we and how many we recruit.
So there's quite a big change in the recruitment market, at least for the time being. We don't know how that will hold on after the coronavirus pandemic, but at least for the time being.
There are no further questions.
Okay. Thank you, everyone, for the interesting and several questions. So yeah, thanks.