Continued strong revenue growth and good results
|Financial highlights:||Operational highlights:|
|Goods and services sold totalled ISK 4,425 million in Q2 2021 (up 13.6% from Q2 2020) and ISK 8,599 million in the first half of the year (up 5.2% from H1 2020) [Q2 2020: ISK 3.897 million, H1 2020: ISK 8,174 million]||Strong revenue growth in end-user solutions|
|Gross profit was ISK 1,118 million (25.3%) in Q2 2021 and ISK 2,212 million (25.7%) in the first half of 2021 [Q2 2020: ISK 934 million (24.0%), H1 2020: ISK 1,984 million (24.3%)]||Tempo's Q2 revenue growth above expectations|
|EBIT totalled ISK 158 million (3.65%) in Q2 2021 and ISK 266 million (3.1%) in the first half [Q2 2020: ISK -45 million (-1.1%), H1 2020: ISK 23 million (0.3%)]||Development of geographically separate data centre environment completed|
|EBITDA totalled ISK 357 million (8.1%) in Q2 2021 and ISK 658 million (7.6%) in the first half [Q2 2020: ISK 123 million (3.2%), H1 2020: ISK 360 million (4.4%)]||30% growth in the sale of own software|
|Other comprehensive income was negative by ISK 70 million in Q2 2021 and negative by ISK 88 million in the first half of 2021 [Q2 2020: ISK -50 million, H1 2020: ISK +410 million]||Justly Pay equal pay certification software launched in September|
|Net profit of ISK 84 million in Q2 2021 and ISK 247 million in the first half [Q2 2020: ISK -53 million, H1 2020: ISK 371 million]||Origo acquires 70% stake in Eldhaf|
|Equity ratio of 57.4%, versus 56.5% at year-end 2020|
|Working capital ratio of 1.22, versus 1.27 at year-end 2020|
Jón Björnsson, CEO of Origo hf:
"Origo achieved good results in the second quarter of 2021. A comparison with the previous year is certainly difficult due to changes in the economy, which occurred in the same quarter of last year. Revenue was up 13.6% from the prior-year quarter. The higher revenue can largely be attributed to sales of end-user equipment and a continued increase in the Company's software operations. At the same time, infrastructure sales continued to decline. Operating profit was good in the quarter with the Company delivering 8.1% EBITDA, which is in line with recent quarters and a significant improvement from last year, helping us to achieve the best Q2 result of the past three years. All segments are improved from the prior year. This success is largely built on revenue composition and lower operating costs. It is also pleasing to see a strong quarter at Tempo following a record quarter that was largely driven by changes in the terms of the Atlassian marketplace.
We took the first steps towards sharpening Origo's social focus in the second half of last year, and it is clear that the Company can make a significant contribution when it comes to gender equality, fostering innovation, environmental issues, and the health and well-being of employees. The result of this discussion is also to put technology and society at the forefront of the Company's strategy. The Company has launched a number of projects aimed at improving the community in which it operates. We have been a leader in remote working, been decisive on issues related to the carbon footprint, and have partnered with Klappir on soon offering Origo customers the ability to monitor our ecological footprint in real time. In September, we will also introduce new software (Justly Pay) that will help small and medium-sized organizations to achieve the equal pay certification digitally. Organizations with more than 90 employees must have obtained the certification by the end of this year, and all organizations with more than 25 employees must have it by next year. It is my hope that Origo can become a leader in the development of solutions that improve society. To this end, it is important to create an environment at the Company that fosters innovation. We will focus on simplifying the structure and investing in the staff and technology environment needed to achieve this.
Demand remains good for solutions and products in end-user equipment, as evidenced by the 36% uptick in revenue seen in the quarter on top of a good increase last year, despite considerable challenges on the purchasing side. The unit has undergone major changes in the past year that are now delivering great results. The Company's online store is doing particularly well with sales doubling so far this year. The plan is to strengthen the online store even further. We intend to improve the interface, provide more information and place more emphasis on green issues. End-user solutions are an important part of Origo's operations and we are fully committed to further strengthening this unit and giving it the space it needs to grow. Offering an enhanced and diverse range of products is part of that journey and, to this end, Origo has acquired a 70% stake in Eldhaf ehf., an importer of Apple products. The purpose of the investment is to broaden the product range to meet the wishes of Icelandic companies and institutions.
Major changes have taken place in the IT environment of companies as they increasingly rely on the cloud and place less emphasis on operating their own data centres. This has changed the nature of infrastructure sales at Origo, which are now fewer in number but at the same larger in size. The decline in revenue from managed services is entirely due to the decline in infrastructure sales, whereas the unit's other sources of income are up from last year. Origo's service solutions are undergoing a process of change to strengthen the product range and services. We have taken the first steps in that process with a significant strengthening of knowledge and the range of products that Origo can now offer.
Syndis Öryggislausnir is now operating as an independent company, with 20 specialists in the field of IT security, following its merger with Origo's security solutions earlier this year. This is a robust unit that offers comprehensive digital security services and consulting, and develops protection against cyber attacks and data and identity theft, among other services. Syndis has a strong societal vision to increase the safety awareness of the public, companies and institutions and now has the economies of scale to take on more large projects as well as work systematically on product development. Emphasis on automation and cloud solutions for customers is the key focus of Origo's managed services. Automation will result in less manual work, increased speed and enhanced security for customers. The division has been adding staff with expertise in cloud solutions to better meet the demand and ensure a smooth transition to the cloud for our customers. Emphasis is placed on consultation on the utilization of cloud solutions, with a focus on safety, efficiency and that the solutions in question support customers' operations as much as possible. Managed services are rapidly changing thanks to cloud computing, and we are meeting these changes with systematic development and adaptation of solution offerings and customer consultation. We will reduce the operation of specialised IT systems where there are no economies of scale or opportunities for improvement.
At the same time, we have completed the development of Origo's geographically separate data centre environment. We believe that this investment will prove worthwhile as more and more organizations are realising the benefit of a duplication of critical systems and secure data storage.
The Company's software units are seeing continued growth. Origo continues to strengthen its position in third-party enterprise software, not least through the continuous development of its own solutions within enterprise software such as SAP, SAP S/4Hana and Microsoft Business Central. During the period, we added five new software products for Business Central to the Microsoft marketplace and have been successful in developing and selling additional products for SAP. Emphasis is placed on the development of cloud solutions that are easy to implement and where strong integration of development and operations yields great benefits. Own software, which is fairly well defined around the healthcare sector, human resources solutions, quality systems and solutions for the travel industry, has performed well, with about a 30% increase in revenue between years. The greatest growth is within the start-up segment, or 49%, where we offer six different solutions at a fairly broad stage of development. Kjarni, our human resources and payroll system, is a clear example of a leading cloud solution in Iceland, where the product range and number of customers continue to increase. We have also been successful in strengthening knowledge and securing projects in the field of business intelligence, in addition to which new and exciting solutions in that field are emerging. In health solutions, it is exciting to see the development of the home nursing app Smásaga, which has been enthusiastically received by users. It is used by all major clinics in Iceland and has proven to improve their services. The same can be said for Justly Pay, the equal pay certification software discussed earlier.
Tempo's second quarter was very strong and exceeded expectations. Sales were up 35% from the same quarter last year and EBITDA rose 51%, which is partly explained by lower costs due to delays in hiring. Tempo aims to be a leader in the field of digital time tracking and also gain a foothold outside the Atlassian marketplace. The company continues to work on product development, especially connections and further automation, as well as stepping up its efforts to get even more customers to try the software.
Origo expects a good continuation from the second quarter into the third quarter of the year. The Company's efforts to make units more independent and increase flexibility and efficiency have the goal of building a stronger company and improved operations. With a strategic approach to sales and marketing, we will be able to utilize the economies of scale that the Company has at its disposal and further build on our strong position as a service company with a future in helping enterprises and consumers to cope with and take advantage of the opportunities and changes that the digital environment provides. At the same time, we are very excited about projects related to information security and believe it is vital to help organizations increase their security awareness and address digital security issues, just as they address other security issues."