Enento Group’s Half Year Financial report 1.1. – 30.6.2023

Net sales impacted by declining Swedish consumer credit volumes, while the demand for new services surged, and adjusted EBITDA margin improved

ENENTO GROUP PLC, STOCK EXCHANGE RELEASE 20 JULY 2023 AT 11.00 A.M. EEST

Enento Group’s Half Year Financial report 1.1. – 30.6.2023: Net sales impacted by declining Swedish consumer credit volumes, while the demand for new services surged, and adjusted EBITDA margin improved

SUMMARY

April - June 2023 in brief

• Net sales declined 1,2% excluding the impact from the discontinued Tambur service at comparable exchange rates.
• Net sales amounted to EUR 39,7 million (EUR 43,4 million), a decrease of 8,6% (at comparable exchange rates decrease of 3,5%).
• Adjusted EBITDA was EUR 14,5 million (EUR 15,5 million), a decrease of 6,5% (at comparable exchange rates decrease of 2,1%).
• Adjusted EBITDA margin was 36,5% (35,7%), an increase of 0,8 pp (at comparable exchange rates increase of 0,5 pp).
• Adjusted EBIT was EUR 11,8 million (EUR 12,8 million), a decrease of 7,8% (at comparable exchange rates decrease of 3,6%).
• Operating profit (EBIT) was EUR 8,7 million (EUR 9,7 million).
• The efficiency program targeting at least 8-million-euro efficiencies by the end of 2024, has progressed according to the plan. The measures implemented by the end of the second quarter are estimated to have an annual run-rate impact on the profitability of around EUR 4,8 million.
• Business area Digital Process was integrated with business area Business Insight on 15^th June 2023.
• In Half Year Financial Report 2023, Enento Group has revised its presentation of the interim reports. The changes were made in order to provide material and relevant information to our investors and other stakeholders in a more concise format.
• Enento announced a new strategy for the period 2023-2026 and updated long-term financial targets. 
  
  

January - June 2023 in brief

• Net sales growth excluding the impact from the discontinued Tambur service was 0,5% at comparable exchange rates.
• Net sales amounted to EUR 79,6 million (EUR 84,1 million), a decrease of 5,3% (at comparable exchange rates decrease of 0,7%).
• Adjusted EBITDA was EUR 29,2 million (EUR 29,0 million), an increase of 0,5% (at comparable exchange rates increase of 4,7%).
• Adjusted EBITDA margin was 36,7% (34,5%), an increase of 2,1 pp (at comparable exchange rates an increase of 1,9 pp).
• Adjusted EBIT was EUR 23,8 million (EUR 22,3 million), an increase of 6,8% (at comparable exchange rates increase of 10,9%).
• Operating profit (EBIT) was EUR 15,6 million (EUR 15,8 million).

Adjusted EBITDA excludes items affecting comparability. In April–June 2023, the items affecting comparability amounted to EUR -0,7 million (EUR -0,1 million) and in January–June 2023 to EUR -3,3 million (EUR -0,4 million), including restructuring and other efficiency program-related costs.

Adjusted EBIT excludes items affecting comparability and amortization from fair value adjustments related to acquisitions. In April-June 2023, the amortization from fair value adjustments amounted to EUR -2,4 million (EUR -3,1 million) and in January-June 2023 to EUR -4,8 million (EUR -6,1 million).

KEY FIGURES

EUR million	1.4. – 30.6.2023	1.4. – 30.6.2022	1.1. – 30.6.2023	1.1. – 30.6.2022	1.1. – 31.12.2022
Net sales	39,7	43,4	79,6	84,1	167,5
Net sales growth/decline, % (comparable fx rates)	-3,5	4,8	-0,7	4,6	5,1
Net sales growth/decline, % (reported fx rates)	-8,6	3,1	-5,3	2,8	2,5
Operating profit (EBIT)	8,7	9,7	15,6	15,8	25,8
EBIT margin, %	21,9	22,3	19,6	18,7	15,4
Adjusted EBITDA	14,5	15,5	29,2	29,0	61,2
Adjusted EBITDA margin, %	36,5	35,7	36,7	34,5	36,6
Adjusted operating profit (EBIT)	11,8	12,8	23,8	22,3	49,1
Adjusted EBIT margin, %	29,8	29,5	29,9	26,5	29,3
New services of net sales, %	11,1	5,1	9,7	5,3	4,6
Free cash flow	5,9	6,4	16,0	13,5	33,9
Net debt to adjusted EBITDA, x	2,4	2,6	2,4	2,6	2,2
Earnings per share, EUR	0,24	0,29	0,41	0,47	0,72
Comparable earnings per share, EUR1	0,31	0,40	0,57	0,68	1,11

¹ Comparable earnings per share does not contain amortization from fair value adjustments related to acquisitions or their tax impact.

FUTURE OUTLOOK (UNCHANGED)

The general macroeconomic environment remains uncertain and unpredictable and is expected to impact negatively on the growth outlook of the Group. The weakening demand for sales and marketing and direct-to-consumer services is expected to negatively impact the net sales development. Enento expects increased demand for risk management and compliance services, which together with the introduction of new services will offset the decline. The discontinuance of the Swedish housing transaction service Tambur from second quarter onwards is estimated to have a negative impact up to -1.5% of the Group’s net sales at comparable exchange rates.

Enento expects cost inflation to increasingly burden the profitability level of the Group and is mitigating the impact by the introduction of the efficiency program.

GUIDANCE (UNCHANGED)

Net Sales: Enento Group expects net sales in 2023 to grow between 0% - 5% excluding the impact from the discontinued Tambur service at comparable exchange rates as compared to 2022.

Adjusted EBITDA: Enento Group expects its adjusted EBITDA margin to be in the range of 36,0% - 37,0%.

Comparable exchange rates mean that the effects of any changes in currencies are eliminated by calculating the figures for the previous period using current period’s exchange rates.

JEANETTE JÄGER, CEO

I am pleased to provide the review for the second quarter of the year, as we reflect on the progress made and the challenges encountered during this period. While the economic environment has been more challenging compared to the first quarter of the year, Enento has shown resilience both in terms of business performance, but also in advancing our strategic initiatives. Additionally, we have a new strategy for the period 2023-2026, accompanied by updated long-term financial targets.

Despite the headwinds especially in the Swedish market, our organic net sales decreased only by 1,2% at comparable exchange rates compared to the same period last year. Consumer Insight experienced challenges during the quarter in both markets, which resulted in declining net sales of 7,7% at comparable exchange rates. We observed a continuing slowdown in consumer lending volumes, particularly in Sweden, as higher interest rates and inflation influenced consumer behavior and mortgage volumes declined sharply in comparison to 2022. In Finland, the development was more stable, and the direct-to-consumer services continued growth trajectory.

The positive driver for the net sales development was Business Insight, with Enterprise Solutions and Premium Solutions continuing to perform on a good level and contributing to an increase in net sales of 4,2% at comparable exchange rates, excluding the discontinued Tambur business in Sweden. In mid-June, we announced the integration of Digital Processes and Business Insight and now with the new structure, Digital Processes net sales is reported in the Business Insight’s results. Compliance services in Finland continued to grow rapidly despite the high comparison figures. The share of new services KPI continued to develop as we expected and reached a level of 11,1%. The successful renewal of the certificate offering in Finland and the implementation of the daily credit register in Sweden by several new customers continued to contribute to this improvement. Additionally, we successfully launched new services in our business information offering. The highlight, given our growth strategy and the selected initiatives, was launching the first service in our compliance offering in Sweden, the PEP and Sanction List Screening Service.

Despite the moderate development in net sales, we maintained our focus on profitability improvement actions and the adjusted EBITDA margin increased to 36,5% and the adjusted EBITDA declined slightly compared to the year before at comparable exchange rates. Our commitment to optimizing operations and seeking efficiencies while delivering high-quality services to our customers has yielded positive results. Furthermore, we continue to generate strong cash flow, and operate with a strong balance sheet, enabling us to invest in growth initiatives and modernization.

I am delighted to announce Enento's new strategy for the period 2023-2026. Our firm commitment is to drive our business forward and generate sustainable value for our shareholders. The updated strategy aligns seamlessly with identified market trends and customer demands, placing emphasis on developing selected new offerings, further penetration of existing customer base and expanding into untapped customer verticals. With a keen focus on automation and digitalization efforts, we are driving enhanced customer experience and streamlining internal operations and processes. We will intensify our focus on enabling seamless customer journey with ‘Easy to sell, Easy to buy and Easy to use’ principle. The pillars of Enento's future success lie in our proficient and dedicated people, our culture of innovation with a persistent focus on quality, successful execution of the technology transformation journey and our enduring customer relationships. While market growth, price adjustments, and expanded market penetration contribute to our growth, we anticipate a significant portion of it stemming from new services. We plan to continue to develop innovative services that cater to evolving customer needs and drive growth in areas such as ESG, compliance, and master data. By fostering innovation and making targeted investments in growth areas, we aim to accelerate our growth trajectory and increase the proportion of net sales from new services to around 10% by the end of 2026. With this new strategy, Enento’s long-term financial targets were also updated. Those targets represent our perspective on creating long-term value, guided by our strategic choices. Despite the prevailing uncertain macroeconomic environment, we remain confident in our ability to achieve profitable organic growth of 5-10% on average on an annual basis and for our adjusted EBITDA margin to reach around 40% level by 2026.

In Sweden, the government has published an investigation report on different measures that could potentially impact over-indebtedness in the Swedish society. One of the proposals is a license-based credit register which, from our perspective is not the solution for how to impact fast and efficiently the areas which are causing most of the issues. Sweden already possesses one of the most comprehensive and accurate credit registers globally, providing high-quality credit reports on individuals. The legislative process ahead is expected to take years, and the outcome remains uncertain. We are closely monitoring the situation and preparing for potential scenarios. Enento is taking measures to ensure we are well positioned to navigate any potential changes that may arise in the coming years. Enento has always prioritized engaging with relevant stakeholders, including regulatory authorities, to gain a clearer understanding of the potential impact and actively participate in shaping the regulatory environment.

As we look forward, we believe in the resilience of our business model and the strength of our offerings. We have an updated strategy that will guide our priorities and path forward. We remain confident in our ability to adapt and overcome potential challenges, while delivering sustainable growth and value to our shareholders, customers, and employees.

WEBCAST AND CONFERENCE CALL

Webcast for analysts, investors and media will be arranged on Thursday, 20 July 2023, starting at 2.00 p.m. (EEST). CEO Jeanette Jäger and CFO Elina Stråhlman will present the results in English.

The webcast can be followed at: https://enento.videosync.fi/q2-2023

The presentation material and the webcast recording will be available on Enento’s investor website.

Helsinki, 20 July 2023

ENENTO GROUP PLC
Board of Directors

For further information:
Jeanette Jäger
CEO
Tel. [phone]

Distribution:
Nasdaq Helsinki
Major media
enento.com/investors

Enento Group is a Nordic knowledge company powering society with intelligence since 1905. We collect and transform data into intelligence and knowledge used in interactions between people, businesses, and societies. Our digital services, data and information empower companies and consumers in their daily digital decision processes, as well as financial processes and sales and marketing processes. Approximately 393 people are working for Enento Group in Finland, Norway, Sweden, and Denmark. The Group’s net sales for 2022 was 167.5 MEUR. Enento Group is listed on Nasdaq Helsinki with the trading code ENENTO.

Attachment

• Enento Group Half Year Financial Report Q2 2023