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Published: 2022-08-30 20:21:00 CEST
Origo hf.
Half Year financial report

Origo hf.: 7.7% Revenue Growth in First Half of 2022

Origo hf.: Interim Results – Q2 2022

Financial highlights:Operational highlights:
Goods and services sold totalled ISK 4,516 million in the second quarter of 2022 (up 2.1% from Q2 2021) and ISK 9,262 million in the first half of the year (up 7.7% from 1H 2021) [Q2 2021: ISK 4,425 million, 1H 2021: ISK 8,599 million]7.7% revenue growth and good earnings in the first half of the year
Gross profit was ISK 1,215 million (26.9%) in the second quarter of 2022 and ISK 2,506 million (27.1%) in the first half of the year [Q2 2021: ISK 1,118 million (25.3%), 1H 2021: ISK 2,506 million (25.7%)]10.4% increase in sales of end-user equipment
EBITDA totalled ISK 370 million (8.2%) in the second quarter of 2022 and ISK 708 million (7.6%) in the first half of the year [Q2 2021: 357 million (8.1%), 1H 2021: ISK 658 million (7.6%)]2.1% revenue increase at software units
EBIT totalled ISK 119 million (2.6%) in the second quarter of 2022 and ISK 223 million (2.4%) in the first half of the year [Q2 2021: ISK 158 million (3.6%), 1H 2021: ISK 266 million (3.1%)]10.3% revenue increase at managed services and infrastructure
The impact of an associate was ISK 261 million in the quarter and ISK 427 million in the first half of the year. Tempo delivered 25% revenue growth and total revenue of USD 46 million in first half of the year. The company's adjusted EBITDA amounted to 28% over the same period.Strong quarter at Tempo
Other comprehensive income was positive by ISK 119 million in the second quarter of 2022 and positive by ISK 26 million in the first half of 2022 [Q2 2021: - ISK 70 million, 1H 2021: - ISK 88 million] 
Net profit of ISK 416 million in the second quarter of 2022 and ISK 562 million in the first half of the year [Q2 2021: ISK 84 million, 1H 2021: ISK 247 million] 
Origo repurchased shares for around ISK 300 million in the first half of 2022 
Equity ratio of 60.0%, versus 56.9% at year-end 2021 
Working capital ratio of 1.48, versus 1.42 at year-end 2021 

Jón Björnsson. CEO of Origo hf:
"The first half 2022 results were quite good, with revenue up 7.7% from the same period last year. It is our assessment that demand fell somewhat at the beginning of the summer due to market conditions, but now, in late summer, it seems to have recovered. The first half operating earnings are satisfactory, with EBITDA improving by more than 7.6% from the first half of last year. It is also pleasing to see Tempo's good results following the acquisition of ALM and Roadmunk, as the company continues to deliver good revenue growth despite a degree of uncertainty in the global markets.
 
There continues to be good demand for products and solutions in End-User Equipment, with sales increasing by 10.4% in the first half of the year. Product flow has been somewhat irregular since the war in Ukraine and Covid and therefore a considerable portion of our revenue will shift to the second half of the year; we are currently seeing a similar turnover increase in the first weeks of the third quarter as we experienced at the beginning of the year. The unit is performing well, with EBITDA up more than 15% over last year. The outlook is overall quite good, the product flow seems to be getting more normal and the tourism industry is experiencing a considerable uptick in business.
 
Origo's Service Solutions unit has been in a transformation phase over the last 12-18 months, with changes to the product and service offering delivering improved results as well as creating several good opportunities for growth. The first half delivered a 3% increase in revenue and a 138% improvement in EBITDA profitability. Priorities have been better defined and a stronger framework has been created around service delivery, combined with better utilization of the opportunities presented by the transformation needs of our customers. Today, customers are much more aware of the importance of IT security and the demands on service providers are ever increasing. Origo intends to be the first choice when it comes to secure operations, and with that in mind we will ensure that our message to the market serves that objective.
 
In addition to these changes to the core operations of Service Solutions, we have invested in three growth companies related to digital infrastructure:

  • Syndis is a leader in IT security consulting and, like other Origo companies, has been focused on building a more scalable operation alongside an excellent consulting business. Syndis has established a security centre in Poland that maintains 24/7 security services for a large number of enterprises. Syndis has also invested in developing software that evaluates how vulnerable enterprises are to hacking. Initial testing of the solution will begin in the autumn.
  • The company Responsible Compute was founded with Borelais Data Center and in collaboration with the US company Rescale, which specialises in cloud supercomputing. Responsible Compute's strategy is to provide sustainable HPC infrastructure services with the best carbon reporting available, based on established and standardised calculation methods. This allows our customers to reduce their environmental footprint, assess emission trends and weigh possible options towards carbon neutrality. The company, which has been doing testing in recent months, has now obtained its first customer.
  • Datalab is a start-up company that focuses on providing improved data exploitation through ever smarter solutions. The company is in a unique position in the Icelandic market and is currently introducing solutions for Icelandic enterprises that provide better information on the status of business relationships. The solution is called Lífsmörk, and Datalab also creates customised date stories that make it easier for enterprises to reach customers in a more personal and memorable way.

Software sales continue to grow with revenue up 2.1% in the first half of the year. However, as in End-User Equipment, we noticed a slight decrease in demand at the start of summer. This can probably be attributed to increased summer holidays following Covid. Nevertheless, own software subscription revenue grew more than other software revenue in both quarters of the first half of the year, and there was particularly strong revenue growth in core areas such as HR solutions, quality management systems, banking solutions and financial solutions. During this period, we concluded contracts with large organizations such as Digital Iceland, KPMG, Öryggismiðstöðin, the Icelandic Meteorological Office, the Icelandic Welfare Office and the Town of Hafnarfjörður.
 
Applicon is in a similar position as last year. Revenue declined slightly due to one-time license sales last year, but the operating results are similar due to higher consulting revenue. Applicon has traditionally generated most of its revenue from license sales and consultancy within the banking sector. In recent years, the company has increased its focus on financial leasing companies and treasury management in general industries. The project status for the second half of the year is quite good. Applicon is also currently working on the development of two software products with the aim of changing its revenue composition for the future. Investment in new products was about ISK 20 million higher compared to first half of 2021.
 
Tempo performed well in the first half of the year, delivering 25% revenue growth and total revenue of USD 46 million. The company's adjusted EBITDA amounted to 28% over the same period. The company's revenue figures now reflect last year's acquisition of ALM Works and Roadmunk; over the past months, the company has been focused on the consolidation of the three businesses along with the restructuring of Roadmunk's operations. The marketing, sales, operations and finance teams of the three companies are now working together, and the next phase is achieving the same for their product and software teams. The year has been somewhat affected by the market uncertainty created by the war in Ukraine and the company has had to put considerable energy and effort into relocating ALM's Russia operations, causing some delays. This has resulted in more caution in the company's operations. However, the company continues to see a good trend in subscription income and its profitability targets are being met. The company continues to focus on increasing revenue with special emphasis on cross-selling between units and further strengthening of relationships with partners.
 
The outlook for our operations is good despite some signs of a slowdown in the IT market at the beginning of summer. We are in the implementation phase of the strategy we developed last year and have the building blocks for success, which will further strengthen the Company going forward - for the benefit of our customers, employees and shareholders. In the short term, we are exploring the opportunities created by the transformation of our Managed Services and Infrastructure division: To achieve increased productization so that we can more easily maintain the quality of our services, lower prices, create a stronger framework for business software development, as well as making use of our strength in the end-user equipment market. In the long term, we are working according to clear future goals and will continue to develop our staff and technical environment to deliver products that improve life. The Company is operationally sound and is well placed to adjust to any adverse changes to the current favourable IT environment."


Origo Hf Consolidated Financial Statements 30 06 2022.pdf
Origo Hf Press Release Q2 2022.pdf
Origo Hf Investor Presentation Q2 2022.pdf