2021 financial performance and 2022 guidance
Financial performance 2021
In 2021, the Group delivered revenue growth of 27.0% in constant currencies (27.9% in reported currencies) of which 17% was organic (18% reported currencies) and 10.1% was related to the inclusion of Intrasoft from the period 1 November to 31 December 2021.
In August, the Group revised its expectations to organic revenue growth in constant currencies from 15-20% to 18-20% and maintained expectations to adjusted EBITA margin of around 23-25%. In November, following the completion of the acquisition of Intrasoft the Group revised its expectations for non-organic revenue growth from nil to around 9-10% and expectations for non-organic adjusted EBITDA margin of 7-8%.
The demand for digitalisation in Denmark was in 2021 primarily driven by strong demand in the private segment, whereas the public segment realised more modest growth rates as tender activity was lower in 2021 than previous years. Tender activity in the public segment will fluctuate from year to year, which reinforces the relevance of being able to deliver services to both segments. Growth in Denmark was also impacted negatively by the usage of Danish resources on international project assignments during the year.
In Norway and the UK, we also saw strong growth – partly supported by improved utilisation ratios as more larger scale projects are beginning to be a more substantial part of the project portfolios in both entities. In the Netherlands, growth was negatively impacted by the prolonged period with no Government in place, following the election in early 2021 and adjustments to fixed fee projects. 18% Reported organic revenue growth Finally, the COVID-19 variant Omicron led to somewhat lower utilisation in Denmark in 2021, which impacted full year revenue growth negatively by around 1 percentage point.
The integration of all entities into the Netcompany methodology is overall progressing well with the integration of the Norwegian entity being close to complete. Progress continues in the UK entity and the integration is getting better, but there is still work to be done before the UK integration is complete. With the changes made to the management team in the Netherlands, and the early timing hereof we expect an improvement in the Dutch operation during 2022.
In October, Netcompany acquired Intrasoft at a purchase price of DKK 1.375.2m. The performance of Netcompany-Intrasoft for the last two months of 2021, where the company has been in the ownership of Netcompany, was better than expected. More larger projects within the EU commission were won and also projects in Greece under the RRF are now beginning to be released and Netcompany-Intrasoft was awarded the first of those projects in December 2021.
The Group yielded adjusted EBITA margin on the organic part of the business of 23.1% - in line with expectations. The non-organic adjusted EBITDA margin of 9.7% for the two months of November and December was above expectations.
As of 2022, financial guidance will be given for both Netcompany Core and Netcompany-Intrasoft. For Netcompany-Intrasoft adjusted EBITDA will be the main performance indicator for financial performance where as adjusted EBITA remain to be the main financial performance indicator for Netcompany Core.
The financial reporting going forward will be enhanced to reflect this.
To be able to reconcile between the two metrics for 2021 the financial performance for the Netcompany Core and Netcompany-Intrasoft on both performance indicators are shown in the table below.
Guidance for 2022
For 2022, there are several elements to take into consideration. Not only will the non-organic part of the guidance be a significant part of the total guidance following the acquisition of Intrasoft, performance by Netcompany-Intrasoft in November and December 2022 will also, by definition, be organic.
Also, we are discontinuing services in Denmark and the UK related to “subscale” implementation projects of standard software solutions and “stand-alone” programme management engagements as these are non-strategic.
For Netcompany Core we expect continuing entities to grow organically by around 17 to 22%. Service offerings that will not be offered from 2022 and onwards within Netcompany Core will have a negative impact on revenue growth of around 3 percentage points.
Organic revenue growth for Netcompany-Intrasoft is expected to be around 6-10% for the months November and December 2022. The lower organic revenue growth in Netcompany-Intrasoft relative to Netcompany Core is expected to have a dilutive impact on Group organic revenue growth for the full year of around 1 percentage point.
We expect Netcompany-Intrasoft to generate non-organic revenue growth for the period January to October 2022 of around 35-38% before any divestment of non-strategic activities.
Total revenue growth for the Group for 2022 is thus expected to be between 48-56%.
For Netcompany Core we expect adjusted EBITA margin of above 23%. Improved employee benefits regarding parental leave, paid vacation and pension plans in different parts of the Group are to be implemented as of January 2022. These will have a dilutive impact on margins of around 3 percentage points and are fully reflected in our margin expectations.
Adjusted EBITDA margin for Netcompany Core is expected to be above 25%.
Netcompany-Intrasoft is expected to generate adjusted EBITDA margin above 9% for both organic and non-organic revenue generated throughout the year.
Total Adjusted EBITDA margin for the Group is expected to be above 20%.
Free cash flow from operations is expected to increase in absolute terms in 2022. The main part of Netcompany-Intrasoft’s debt has been refinanced at interest rates, which are between 2 to 3.5 percentage points lower utilising Netcompany Group credit facilities.
Leverage, measured as net interest bearing debt including issued guarantees to 12 months adjusted EBITA, is expected to be around 2 at the end of 2022 taking into consideration a share buyback program of DKK 100m to be executed in 2022.
Our expectations for 2022 are reflecting a number of uncertainties, which individually or in conjunction can have a negative impact on our ability to grow our business and our margins.
We base our 2022 expectation on the following, externally determined, main assumptions:
- No negative impact from macroeconomic events and ability to fully adjust prices for inflation
- No significant impact or economic consequences from new COVID-19 related restrictions
- Continued digitalisation throughout Europe
- Successful utilisation of the RRF programme in Greece and Netcompany-Intrasoft to participate in projects awarded and initiated
- Continued ability to attract, educate and retain talent throughout the Group