From the CEO
Matti Mujunen, CEO, in the half-year report 2023:
”Netum's business developed well in the first half of the year, although our profitability was on a lower level than targeted. The implementation of our growth strategy progressed strongly on several fronts, supported especially by corporate transactions, efficient recruitment and sales development.
In the first half of 2023, our revenue grew by approximately 11 percent year on year and was EUR 17.1 million. In the comparison period, the subcontracting-oriented government framework agreement expired, which significantly increased revenue for the comparison period. EBITA was 5.7 per cent and comparable EBITA 7.1 per cent of revenue. Our profitability was impacted by our growth investments in recruitment and strengthening our sales organisation, lower-than-targeted invoicing rates in some service areas and increased salary costs.
In January, we strengthened our product and service offering in the education sector and expanded our network of offices to the Kuopio economic area by acquiring Studyo Oy. After the review period in July, we announced the acquisition of Buutti Oy, which employs 110 people. The acquisition will expand our operations to the Oulu region. In line with our targets, Buutti will provide us with further growth, especially from corporate customers, and expand our service offering, for example, in the development of embedded systems and training services. On 1 July, we transferred the Netum DUX business to Optimo Systems Oy that became an associated company of Netum Oy.
Our recruitment work continued strong in the first half of the year, and by the end of June there were already 323 of us. With the acquisition of Studyo, we gained 14 new Netum employees, and our total number of employees increased by 47 during the first half of the year. We continued to work in a hybrid model that has proven to work well, and we also aim to support working at the office, for example by organising joint events.
During the first half of the year, we have also invested especially in enhancing the growth of our sales organisation, new customer acquisition and customer service. We recruited several experienced sales professionals to our team, appointed a new sales director and organised customer relationship management into industry teams. Maintaining the high level of trust and satisfaction of our customers is one of the cornerstones of our strategy. We measure customer satisfaction continuously, and at the end of June our NPS score was 64.
The partnership activities we reorganised at the end of 2022 have also developed promisingly during the first half of the year. We have developed and expanded participation in partnership programs of large technology partnerships. In addition, we implemented a special competence acceleration program with an international technology partner and acquired a significant number of new domestic subcontractors and nearshore partnerships. This allows us to offer even more di-verse expertise to customer projects. A partnership model was developed for the development of the Group's partnership activities, the implementation of which is planned during 2023.
In a changing world, we also need to change to become an increasingly significant player in the digital field. We have invested heavily in marketing development by increasing visibility, improving processes and tools, and building a brand as a wise changemaker.
The new significant agreements we signed during the first half of the year include, for example, an agreement on the application development of the Peppi system for Metropolia University of Applied Sciences, a cloud-based data warehouse solution for the University of Vaasa, management consulting services for VTT Technical Research Centre of Finland and expert services for the RDI ecosystem for the wellbeing services county of Central Uusimaa. In addition, we signed several new cyber security service agreements, including State Treasury, Ministry of Education and Culture and IT Center for Science CSC.
We are involved in significant national IT projects, the most important of which include EURA 2021 and TE-Digi. Also according to public information, EURA 2021 has had scheduling challenges. These challenges have been overcome in good cooperation with our customer, and the project is progressing in a controlled manner. In the first implementation of the major system reform of TE Services at the beginning of March, the functionalities related to unemployment security were transferred to production. We were able to successfully carry out this very complex and challenging implementation together with our customer. The development of TE-Digi continues strongly. Several additional implementations will be done this year and next, which will replace the current customer information system with a completely new one and enable the transfer of TE services to municipalities from the beginning of 2025.
Responsible business operations are very important to us at Netum, and our sustainability work supports our growth strategy. A top-notch work community and employee experience are an essential part of our goals and an object of continuous development. A good employee experience is evidenced by the good employee promoter score eNPS and our ranking in tenth place in the category of medium-sized companies in the Best Workplaces 2023 list in Finland. In addition, we have done a lot of work to engage our employees, for example through training opportunities. The good results of HR and employee engagement are also evidenced by the low employee turnover rate.
We also developed our environmental responsibility purposefully. In June 2023, we received our third Green Office certificate for our Helsinki office, and we will continue to certify the other locations. In addition, we offer our personnel Green Operator online training, which helps us ensure that all Netum employees know how to make right, responsible and sustainable choices in both customer and internal projects. We have also started the Group's carbon footprint calculation, which for its part will lay the foundation for future sustainability reporting in accordance with the EU directive.
The outlook for the IT services market for the rest of 2023 has partially weakened during the first half of the year. In particular the corporate sector faces uncertainty due to global economic and political challenges. In the public sector, demand remains strong, but price competition has intensified. Despite the market situation, Netum's business is expected to develop favourably due to the strong order backlog of public administration customers, improving invoicing rates, reduced recruitment needs and the transfer of the Netum DUX business, and our guidance for 2023 remains unchanged. With the acquisition of Buutti, we will update our guidance for 2023 and publish it as soon as possible after the closing date of the transaction, 1 September 2023.
My warmest thanks for the first six months of the year to our committed personnel, all our part-ners, customers and investors.”
Matti Mujunen, CEO, in the financial statements release 2022:
"Although the year 2022 was surprisingly challenging, we reached our revenue growth target in line with our guidance. Our growth was supported by continued good demand in the IT services market. Public administration customers were particularly active, and geopolitical or economic development did not have a significant impact on public sector IT projects. The growth is an indication that our customers trust us, and it is also reflected in the results of customer satisfaction measurements. Our revenue grew 30 per cent year on year and amounted to EUR 29.1 million.
Revenue increased primarily due to the long framework agreements with our current customers, but during the year we also signed significant new agreements with, for example, Kuntien Tiera Oy, Istekki Oy, 2M IT Oy and LapIT Oy, which operate in the health and social services sector. We also signed agreements on continuous service with the KEHA Centre and on the development services of the “Peppi” student administration system with Haaga-Helia University of Applied Sciences. In addition, we received several smaller new contracts from municipalities, the education sector and companies. New important customers for us were Kela, the City of Lahti, the University of Oulu and Jukkatalo Oy. For corporate customers, we are particularly pleased with the agreement on integration services for Colliers in their entire EMEA region.
In 2022, we continued to invest in growth in line with our targets with a special focus on recruitment and awareness growth. Our invoicing rates were challenged by front-loaded recruitments, internal development projects and sick leaves of personnel due to the coronavirus. The decline in our profitability in 2022 was due to product development costs and higher general costs, as well as a higher than usual subcontracting volume in the first half of the year. EBITA was 8.5 per cent of revenue.
To strengthen our ability to reach our medium-term profitable growth targets in line with our strategy, we clarified and simplified the Group's organisational structure by merging all acquired companies acquired through acquisitions into Netum Oy under a common brand. In addition, we will continue to serve our customers with industry-specific teams. With the changes, we aim to improve the efficiency of customer service and customer relationship management, as well as to further improve job satisfaction.
Our number of employees increased by 59 during the year, and by the end of the year there was already 276 of us. We opened new offices in Jyväskylä and Hämeenlinna and moved to new premises in the Kampin Huippu property in Helsinki. With the acquisition of Studyo Oy in January 2023, our operations also expanded to the Kuopio economic region, and we further strengthened our product and service offering in the education sector.
Our goal is to be the preferred work community in our industry, and here we are on a good path. In 2022, our personnel turnover rate was still low, 8 per cent. During the year, we focused especially on job satisfaction, and in the spring of 2022, we received the Great Place to Work award.
In September, 145 staff members participated in the personnel share issue, which is also a testament to our personnel's commitment to Netum and its goals. The new employee incentive package also includes a share-based incentive plan for the extended management team, which commits and guides the management to the implementation of our growth strategy.
Our corporate responsibility programme has been in operation since 2021. During the year, we received the Green Office certificate also for our second office in Tampere, and we will continue to certify other offices. Our goal is to increase the diversity of our personnel. Our age range is already wide, and in 2022, the share of women in our personnel increased to 18 per cent from the previous year's 14. Our employee net promoter score (eNPS) was 58, up from 46 the year before. We are currently updating our responsibility programme, which is expected to be published during the first half of this year.
In spring 2022, we updated our strategy. As part of our strategy, we intend to strengthen our brand, expand our operations regionally in Finland and continue to invest in our work community, and we have succeeded well in this in 2022. In 2022, approximately one-fifth of our revenue came from corporate sales. In the implementation of our strategy, this year we will focus especially on developing our corporate customer business and partnerships, which is supported by the changes we have made to our organisational structure.
Our medium-term financial targets updated in spring 2022 remain unchanged. We continue to aim for a revenue of EUR 50 million by 2025, profitable growth and EBITA of at least 14 per cent of revenue. Overall, the outlook for the IT services market for 2023 is positive, and especially the development of digital services and the demand for data and analytics services and cyber security ser-vices are expected to remain good. We estimate that our revenue will grow in 2023 by at least 20% from the previous year. EBITA is estimated to be at least 10% of net sales.
My warmest thanks for the past year to our committed personnel, all our partners and customers, as well as our investors."
Matti Mujunen, CEO, in the half-year report 2022:
“In the first half of 2022, our revenue was EUR 15.4 million, an increase of 48% from the previous year. 25% of the growth came from the acquisition of Cerion Solutions in October 2021, but organic growth was also strong, 23% year-on-year. This growth was due to increased workloads under long framework agreements and to the continued high level of demand. We also received new orders, the most significant of which were the professional knowledge management services commissioned by Kuntien Tiera Oy for the Kainuu Joint Municipal Authority for Social and Health Care (Kainuu Health and Social Services) and the “Peppi” student administration system maintenance and development project for Haaga-Helia University of Applied Sciences.
The demand for “Netum DUX”, Netum's own solution focusing on IT asset management, has developed favourably. At the beginning of the year, we signed a cooperation agreement with Divicon, and in July we received a new, very significant agreement with a large customer in the health and social services sector.
EBITA for the first half of the year decreased from the comparison period due to growth investments and a higher than usual volume of subcontracting and was 11% of net sales. Competition for skilled workers has intensified, and every successful recruitment requires more effort and work than before. The coronavirus incidence rate has also been high, which contributed to our profitability.
The number of our employees increased by 46 in the first half of the year, and at the end of June there were 263 Netum employees. In February, we opened a new office in Jyväskylä, and later our operations expanded to Hämeenlinna. In Helsinki, we moved to new, comfortable premises in the Kampin Huippu property during the spring.
We still have low personnel turnover. The satisfaction of our employees is evidenced by the Great Place to Work recognition we have received. Netum participated for the first time in the Best Workplaces in Finland survey and in spring 2022 was ranked 16th in the category of medium-sized companies. According to the survey, 93% of our employees think that Netum as a whole is a really good place to work.
In the spring, we started planning an employee incentive package, as it is very important to us that our personnel are committed to Netum's goals. The incentive package includes both a share-based incentive plan for the extended management team and a personnel issue.
To strengthen our ability to implement the medium-term profitable growth targets in line with our strategy, we have launched an organisational restructuring project in the spring. Its aim is to clarify and simplify the Group's organisational structure, to improve customer service and customer relationship management, to further improve job satisfaction and to unify all operations under the Netum brand.
During the spring, there were an exceptionally large number of tenders for public sector IT services. Overall, the outlook for the IT services market for 2022 remains positive, and the development of digital services and the demand for data, analytics and cyber security services in particular are expected to strengthen. Russia's invasion of Ukraine has increased the demand for cyber security services, but it has also created political and economic threats. The prolongation of the war has already had a strong impact on the global economy, for example in the form of rising inflation, which has an impact on wage and other costs and thus on our profitability. We further estimate that in the financial year 2022, our revenue will grow by at least 30% from the previous year. EBITA is estimated to be approximately 12–14% of revenue.”
On 2nd June 2021, in connection with the IPO and listing:
“When I joined Netum in 2016, I was instantly impressed by the personnel’s strong professionalism and unwavering focus on customer service.
At that time, we were 50 people working at Netum. We have since then grown strongly, and today we are more than 160. For us at Netum, the customer is always number one, and we do our utmost for the customer. This is demonstrated in Netum’s long-term customer relationships: our customers trust us, and they are very happy with our services.
We want to be the enabler of change and responsible digital transformation for our customers, the most trusted digital partner. Our responsible services are highlighted in socially significant projects where we help our customers to develop their operations through digitalisation and through focusing on digital security. Our business idea is to build new things by wisely utilising the customers’ existing IT assets so that the solutions are sustainable, maintainable and cost efficient. We call this Legacy to Digi® – the concept and operational model of sustainable digitalisation whereupon all Netum’s services are built.
Responsibility means to us also that we want to offer a fair and pluralistic working community to our employees. It is also important for us to grow the share of female employees despite the commonly known challenges in the industry. Above all, we aim to be the preferred employer in the IT industry, a top-notch working community where the employees prosper. We are proceeding quickly on this track: in the beginning of the year, we were granted the Great Place to Work certification. In the related employee survey, over 90 per cent of the personnel said that Netum as a whole is an excellent place to work.
Digital services are proliferating on all levels of the society both in public administration and in companies. This makes the services more user-friendly and easier to use. Digitalisation makes services more efficient and easier available and makes public administration overall lighter. The same goes for companies and us. Therefore, we constantly innovate and develop our own operations.
As the significance and amount of data grow with digitalisation, also the need for cyber security and data protection grows. We meet this challenge through strengthening and further developing our cyber security services that have been part of our service portfolio from the early days of the company. In addition to digital and cyber security services, we foresee that the need for data and analytics services will continue to grow. As our demand outlook is positive, we expect our revenue and operating profit to grow this year in comparison to the previous reporting period.
Netum has grown strongly and profitably in the last few years. We are now in such a phase in our implementing our strategy that listing in the First North marketplace is a natural step for us. It will support us in speeding up our growth both organically and through acquisitions. Digitalisation is a huge industrial change offering great opportunities.
Warmest thanks to all those who participated in Netumin public offering!”