adesso sees ongoing strong organic growth in the first half of 2020 despite pandemic and records an increase in operating earnings

- Sales up 15 % to EUR 246.1 million

- EBITDA increases disproportionately by 20 % to EUR 21.6 million (previous year: EUR 18.0 million)

- Second half of the year expected to be stronger due to licensing revenues and a higher number of working days

- Overall annual forecast confirmed

With the presentation of its half-year report, adesso SE has confirmed the growth-oriented sales and earnings forecast for 2020 despite the COVID-19 pandemic. The adesso Group increased sales in the first half of 2020 as compared to the previous year almost entirely organically by 15 % to reach a new half-year high of EUR 246.1 million. In contrast to the same period of the previous year, growth was primarily achieved in the IT services segment. The weaker capacity utilisation in some industries in the second quarter due to the COVID 19 pandemic was compensated for by factors such as temporary short-time work and cost savings. Overall, adesso's business model proved to be comparatively resilient in the first half of 2020, with the result that sales growth is expected to continue in the second half of the year. EBITDA is expected to increase compared to the first half of the year due to the higher number of working days as well as licensing and SaaS revenues. The forecast for the year as a whole is confirmed on this basis.

The adesso Group increased sales in the first half of 2020 by 15 % year on year to EUR 246.1 million. Of that growth, 14 percentage points were achieved organically. This enabled adesso to once again easily exceed its target of outperforming overall market growth organically by at least a factor of two. All established adesso subsidiaries have recorded year-on-year increases in sales. The companies in Spain and Turkey in particular were able to further improve their revenues very significantly in percentage terms compared to the previous year. The adesso national subsidiary in Germany recorded the largest increase in sales in absolute terms. Here, adesso has profited from a sharp rise in the number of employees in the last two years and a high volume of new projects secured across many core sectors. Growth in sales was particularly noticeable in the healthcare, manufacturing industry and public administration sectors.

The number of employees continued to rise. The number of full-time equivalents at the end of the period increased by 15 % compared to the previous year from 3,715 to 4,259.

While the in|sure product family for the insurance industry generated the highest licensing revenues in a quarter in the second quarter of 2019 in the previous year, licensing revenues were weaker in the half of 2020, as expected. By contrast, no significant licensing revenues were generated from new contracts in this area in the first half of 2020, partly due to measures adopted to support the economy, such as the reduction in the value-added tax rate in the second half of 2020. Service sales and income from maintenance are slightly higher than in the previous year. Significant licensing revenues will not be realised until the second half of the year.

Within the first half of the year, EUR 125.6 million in sales was generated in the first quarter and EUR 120.5 million in the second quarter (previous year: EUR 103.4 million and EUR 109.9 million).

Earnings situation

Total operating earnings before interest, taxes, depreciation and amortisation (EBITDA) of the adesso Group came to EUR 21.6 million in the first half of 2020, up 20 % on the previous year's figure. Despite the COVID-19 pandemic and the associated restrictions on social contacts in the public domain to protect health and life, the adesso Group was able to maintain its ability to deliver. The Group was able to absorb slight declines in capacity utilisation by means of temporary short-time work and cost savings, among other things. The restrictions also led to savings in other operating expenses (especially travel expenses), which had a compensatory effect on earnings. Other operating expenses fell by a total of 11 % year on year, or 25 % per employee.

All adesso subsidiaries generated positive earnings contributions, except for those newly founded in the previous year in Hungary and the Netherlands.

In the first half of 2020, EBITDA stood at EUR 12.2 million in the first quarter (previous year: EUR 8.6 million) and EUR 9.4 million in the second quarter (previous year: EUR 9.4 million). Compared to the previous year, depreciation and amortisation rose by 19 %, mainly due to higher depreciation and amortisation for capitalised leases. Pre-tax profit amounts to EUR 7.7 million as compared to EUR 6.5 million in the previous year. Earnings per share increased by 35 % to EUR 0.89 (previous year: EUR 0.66). The significantly reduced calculated tax rate of 29 % (previous year: 37 %) had a positive effect here.

As of the reporting date, adesso had liquid assets of EUR 34.8 million (previous year: EUR 27.9 million, 31 December 2019: EUR 46.4 million). The decline in liquid assets over the first half of the year corresponds in structural terms to the development of liquidity in previous years and primarily resulted from the scheduled payment of variable salary components for the previous year and the dividend payment. In spite of the increase in sales, trade accounts receivable fell slightly by 3 %, or EUR 2.6 million, to EUR 83.7 million. This is still attributable to intensified receivables management in Germany. Financial liabilities decreased by EUR 3.0 million net to EUR 55.0 million in the first half of 2020 as compared to 31 December 2019 as a result of ongoing repayments and new loans being taken out, while net liquidity came to EUR -20.1 million as of the reporting date (30 June 2019: EUR -34.7 million, 31 December 2019: EUR -11.6 million).

Outlook

Despite the restrictions caused by the COVID-19 pandemic, adesso was able to maintain a high dynamic of sales development that exceeded the market as a whole in the first half of 2020. With few exceptions, the core industries served by adesso are only moderately affected by COVID-19 effects. adesso's business should also benefit in the second half of 2020 as easing proceeds and in view of the widely agreed prevention measures. The temporary short-time working schemes were gradually phased out completely at the beginning of the second half of the year. The second half of the year also has more working days, from which the IT service business in particular will benefit. Following the conclusion of a contract with Süddeutsche Krankenversicherung (SDK) for the in|sure product family at the beginning of the second half of the year, the IT solutions segment is expected to make a higher contribution to sales in the second half of the year, primarily as a result of further licence sales. The reduction in value-added tax agreed for the second half of 2020 provides companies that are not entitled to deduct input tax, particularly insurance companies and banks, with an incentive to continue investing in digitalisation. All in all, because revenue growth is expected to continue in the second half of the year, the sales target for 2020 of more than EUR 490 million seems to be feasible. In the second half of 2020, EBITDA is expected to increase due to the higher number of working days as well as licensing and SaaS revenues. The full-year EBITDA forecast for 2020 of over EUR 50 million (first half of 2020: EUR 21.6 million) and the target of an EBITDA margin of at least 10.0 % (first half of 2020: 8.8 %) continue to apply.

The complete half-year report and a tabular overview of key figures are available in the Investor Relations section of the adesso website at www.adesso-group.de.

adesso Group
With more than 4,200 employees and annual sales of EUR 449.7 million in 2019, adesso Group is one of the largest German IT service providers with outstanding growth opportunities. At its own locations in Germany, other locations in Europe, Turkey and the USA as well as at numerous local customers adesso offers consulting and software development services for optimising core business processes. adesso also offers ready-to-use software products for standard applications. The development of an own, industry-specific product portfolio opens up additional growth and earnings opportunities and is another key element of the adesso strategy. In 2020, adesso was awarded the title of the best employer of its size in Germany across all industries. After having already achieved first place among IT employers in 2016 and 2018, adesso was ranked first again in 2020.

Contact:
Martin Möllmann
Manager Investor Relations
Tel.: +49 231 7000-7000
E-Mail: [email protected]