Nyherji announces positive half year results with EBITDA of ISK 439 million and net profit of ISK 111 million

Nyherji Group (NYHR.IC), Iceland’s leading IT services provider, announces its results for the second quarter and first half of 2016.

Financial Highlights:

• Product and service revenue stood at ISK 3.79 billion for the second quarter, an increase in revenue of 12% as compared with Q2 2015, and ISK 7.13 billion for the first of the half year, a year-on-year improvement of 7.2%, as compared with H1 2015 [Q2 2015: ISK 3.39 billion, H1 2015: ISK 6.65 billion]
• Gross profit amounted to ISK 931 million (24.5%) in the second quarter and ISK 1.82 billion (25.5%) in the first half of 2016 [Q2 2015: ISK 830 million (24.5%), H1 2015: ISK 1.64 billion (24.6% )]
• EBITDA amounted to ISK 259 million (6.8%) in the second quarter and ISK 439 million in the first half of the year [Q2 2015: ISK 227 million (6.7%), H1 2015: ISK 452 million (6.8%)]
• Net profit in Q2 totalled ISK 73 million and ISK 111 million for the first half of the year [Q2 2015: ISK 69 million, H1 2015: ISK 111 million]
• Slight improvement of equity ratio of 30.8% at quarter-end from 29.5% at the end of the last quarter
• Nyherji hf. has retained US advisory firm AGC Partners LLC to support the preparation of the process for a potential sale of Tempo ehf.

"Nyherji has demonstrated improved quarter-on-quarter net performance, although overall our first half results have been marked by cost increases from wage renegotiations,” commented Finnur Oddsson, Group Chief Executive, "The Group achieved a net profit of ISK 73 million in the second quarter and ISK 111 million for the first six months of the year, which is comparable with the first half of 2015.

The Group's operations remain promising and software-related activities are flourishing, both at a Group and a subsidiary level. Tempo’s income increased by almost 40% in US dollar terms and its customer base is growing rapidly. To support this trend, we have bolstered Tempo’s international operations with staff increases in Montreal and by opening new offices in San Francisco. TM Software’s revenue increased by a quarter, with excellent demand for solutions across all sub-specializations of the company. Applicon Sweden also showed increased income and a strong performance with the business engaged in substantial and exciting projects, especially in the field of core banking solutions.

Sales of software solutions by the Nyherji parent company have been growing with an increased focus on third party solutions, as witnessed by Nyherji being named partner of the year by Microsoft for the first time. Sales of computers and related equipment performed well, particularly in audio solutions and new hosting solutions, which the company offers in collaboration with Verne Global.

After a challenging first quarter, we are quite satisfied with the overall result. Our order book remains strong, with very interesting opportunities being presented by overseas subsidiaries and pleasing prospects for the Group as a whole. Wage increases from union-led agreements at the start of the year will continue to remain a challenge to Nyherji and we will continue to look for optimisation of our cost base.”

OPERATING RESULTS, H1 2016

• Sales of goods and services amounted to ISK 7.13 billion for the first half of 2016, compared with ISK 6.65 billion over the same period in 2015, an increase of 7.2% year-on-year
• Gross profit amounted to ISK 1.82 billion (25.5%) in the first half of 2016, compared with ISK 1.64 billion (24.6%) during the same period in 2015
• Operating expenses were 1,618 million for the first half of 2016 (22.7% of revenues), compared to 1.346 million (20.2% of revenues) in the first half 2015
• Salaries and related expenses as a percentage of revenue was 37.9% in the first half, compared to 35.7% in the first half of 2015
• EBITDA amounted to 439 million (6.2%) in the first half, compared with 452 million (6.8%) in the same period in 2015
• Net profit in the first quarter of 2016 amounted to 111 million, the same total profit and the same period in 2015

BALANCE SHEET 30.06.2016

• Current assets decreased by ISK 459 million from the close of 2015, from ISK 3.72 billion to ISK 3.26 billion. Cash flow was reduced by ISK 326 million for the period on account of payment of interest-bearing loans and investments financed from operations. Trade and other receivables were lowered by ISK 184 million for the period
• The equity ratio is 30.8% for the end of June 2016, a slight increase from 28.0% at the end of 2015
• Current ratio stood at 1.41 at the end of June 2016, down from 1.52 at the end of 2015
• Interest-bearing long-term liabilities are ISK 2.28 billion, a decrease of ISK 237 million from the end of 2015

CASH FLOW 30.06.2016

• Cash flow from operations stood at ISK 506 million at the end of first half of 2016, as compared with ISK 274 million for the close of H1 2015
• Investments were ISK 493 million in the first half of 2016, compared with ISK 226 million for the same period last year. Differences can largely be attributed to significantly higher investment in operating funds in the first half of 2016 and an increase in the capitalization of intangible assets.
• Financing activities are negative by ISK 334 million in the period compared to ISK 3 million last year. The difference lies mainly in the payment of interest-bearing loans that occurred in the first half of 2016 and the increase in overdraft last year to ISK 108 million, but no change occurred in the first half of 2016.
• Cash at the end of the period amounted to ISK 483 million compared with ISK 123 million at the end of the first quarter 2015

OPERATING RESULTS FOR Q2, 2016

• Sales of goods and services amounted to ISK 3.79 billion in the second quarter, compared with ISK 3.39 billion in the same period in 2015, an increase of 12% year-on-year
• Gross profit amounted to ISK 931 million (24.5%) in the second quarter, compared with ISK 830 million (24.5%) in the second quarter of the previous year
• Operating expenses were ISK 800 million in the second quarter (21.1% of revenues), compared with ISK 685 million (20.2% of revenues) in the same period in 2015
• Net financial expenses totalled ISK 38 million in the second quarter, compared to ISK 80 million for the same period last year
• EBITDA amounted to ISK 259 million (6.8%) in the second quarter, compared with ISK 227 million (6.7%) in the same period last year
• Net profit in the second quarter was ISK 73 million

Revenue growth at the parent company level

Nyherji, the parent company, exceeded projections in the second quarter after a dip in the first quarter. Most areas of the company's operations showed growth over the quarter. Proportionally, the greatest growth occurred in software solutions and audio-visual equipment. With increased emphasis on software solutions Nyherji was proud to be chosen as Microsoft’s Iceland Partner of the Year for the first time.

The company relocated its hosting services to data centres at Verne Global during the period and is now able to offer enhanced service offerings and outstanding hosting solutions, enabling the company to bid ever more competitively towards both domestic and foreign customers.

While labour costs have soared year-on-year due to union-led wage agreements the company has invested heavily to strengthen the solutions that it offers. The company has invested in a new generator room in Verne, new meeting and staff facilities in Reykjavik and has also been boosted by investment in software solutions.

The Group has focused on increasing sales of Lenovo computers to individuals as well as Sony TVs and camera equipment, from both Sony and Canon.

The outlook for the parent company sales remains positive.

TM Software ehf.: Income growth and improved performance

Total revenue from TM Software, which specializes in proprietary software development and custom solutions for customers, was 24% higher in the first half compared with the same period last year. There was strong demand for professional services and solutions across all three specialty areas, comprising healthcare, travel solutions, websites and special solutions. Meanwhile, operating expenses remained level and performance improved considerably.

Prospects for the second half of the year are looking positive in light of a solid sales pipeline and opportunities from software license sales.

Tempo ehf.: Growth and consolidation of international operations

Tempo, which develops time tracking, reporting and project management solutions, had revenues of USD $3.2 million for the second quarter, an almost 40% increase from the previous year. Revenues from cloud solutions increased by 81% compared with the same period last year.

May was a record month in terms of the number of trials and 750 new licenses were sold to customers in the quarter, a 50% increase from the previous year. The company now counts over 9000 customers covering more than 100 countries. New customers include insurance company Geico, Liverpool Football Club, Texas Instruments and Under Armour.

Tempo opened a new office in San Francisco during the quarter and continues to build its team in Montreal, now employing 11 people. In tandem with this activity the Iceland office was restructured and headcount slightly decreased, for travel and transport projects among other areas. The purpose of the changes is to adapt the company's activities better to customer needs and position it in closer proximity to its largest geographic target market. Over 90 people are now working in Tempo, including 14 in North America. It is anticipated that Tempo’s team in North America will continue to grow alongside continued growth in revenue and new customer accounts.

Nýherji hf. has retained AGC Partners LLC to support the preparation of a potential sale of Tempo. Decisions regarding the sales process, whether it will be initiated or not, including possible timing and implementation have not yet been made.

Applicon in Iceland performed below expectations

The performance of the software company Applicon Iceland was below expectations in the first half. Great emphasis has been placed on the continued development of human resources solutions and compensation plans during the period, reflecting the company's performance. More new customers signed up for the Kjarni HR solution, which ensures a stable long-term fee income.

The project portfolio remains good and prospects for sales of the company's solutions are good in the second half.

Applicon AB in Sweden achieves positive results

Applicon in Sweden saw a significant improvement in its operating performance in the second quarter and first half. Total revenue increased by 17% during the first six months of the year compared to the same period last year. Better utilization of specialist resources, higher billable hourly rates and increased demand for experts are the principle reasons for the improvement of the company results over the period.

The company has a solid project pipeline, especially from contract renewal by existing customers and new implementation projects for SAP core banking solutions.

Group Prospects

The outlook for Nyherji Group is favourable in light of a strong pipeline and the pick-up in performance in the second quarter.

Shareholders

The market value of the company at the end of the second quarter of 2016 was ISK 7.695 billion. The closing price of shares in the quarter was ISK 17.10 per share. Outstanding shares issued as of June 30, 2016 were 450 million and 377 employees were shareholders.

Analyst and Investor Presentation on August 25, 2016

A presentation for investors and analysts will be held on Thursday, August 25, 2016 at the company's headquarters at Borgartun 37 in Reykjavik, starting at 08:30 local time. Finnur Oddsson, Group CEO, will present the results which will be streamed live via the company's website. The presentation of the meeting will be accessible at the company's website, www.nyherji.is, after the meeting.

Financial Calendar 2016

Scheduled publication dates for the financial year 2016:

• 10/26/2016 Third quarter 2016
• 01/31/2017 Fourth quarter and full-year 2016
• 03/03/2017 Annual General Meeting 2016

Approval of Financial Results

This interim statement was approved by Nýherji hf. on the 24th August 2016, in accordance with International Financial Reporting Standards (IFRS). The interim financial report has neither been audited nor reviewed by the Company's auditors.

###

About Nyherji hf.

Nyherji hf. (NASDAQ OMX: NYHR.IC) is an established listed Nordic IT services provider with offices in Iceland and Sweden. For over two decades the company has been a world-class technology supplier, application developer, systems integrator, facilities manager and expert business process consultancy, with corporate roots that can be traced back to 1899 and the inception of "office machines”. Nyherji aims to be the technology partner of choice for businesses, from the smallest to the largest enterprises. With expertise in understanding and linking the needs of enterprise customers to competitive technology solutions, Nyherji uses its deep knowledge of mission-critical processes, hardware and application requirements, to focus on government and industries sectors with high support needs such as healthcare, ?nancial services, logistics and aviation.

The board comprises Benedikt Johannesson, Chairman, Hildur Dungal, Emilia Thordardottir and Emil Kristjansson, with Gudmundur Jonsson as an alternate member; Finnur Oddsson is the Group CEO of Nyherji.

For more information, please visit www.nyherji.is/english/investor-relations/

Forward Looking Statements

Statements in this press release that are not based on historical facts are forward-looking statements. Although such statements are based on management’s current estimates and expectations, forward-looking statements are inherently uncertain. We therefore caution the reader that there are a variety of factors that could cause business conditions and results to differ materially from what is contained in our forward-looking statements, and that we do not undertake to update any forward-looking statements. All forward-looking statements are qualified in their entirety by this cautionary statement.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160830006038/en/