CEO's statement

Strong development in profitability driven by higher gross margin

Kista, 21 October 2021
Jonas Hasselberg

Proact’s third quarter of 2021 generated the strongest third quarter EBITA result in the history of Proact. High gross margins and a high proportion of services resulted in a strong increase in profit compared to last year, despite somewhat lower revenues. Adjusted EBITA for the quarter amounted to SEK 59,8 (54,1) million, corresponding to an EBITA margin of 7,4 (6,6) percent.

Net sales during the quarter amounted to SEK 810 (821) million, corresponding to a decrease of 1 percent. Organically, the decrease in net sales was 9 percent. It is primarily the systems sales that has decreased, with an organic decline of 16 percent, to a large degree impacted by a decline in BU UK, where a large deal with NHS Blood and Transplant was delivered in the third quarter of 2020. Services revenues were organically unchanged and grew by 6 percent through the acquisitions of Cetus and Conoa. We see a healthy demand in several of our markets, while some countries still have challenges with long sales cycles and hesitant customers. Even though the growth in the quarter and for the first nine months is lower than our long-term targets we don’t see any indications that this is due to changes in longer term demand, and our continued assessment is rather that this is a consequence of short-term effects, primarily due to the pandemic.

New contracts for cloud services of SEK 74 (61) million were contracted during the quarter, an increase of 23 percent. In the quarter, revenues from cloud services returned to growth with an organic growth of 2 percent, due to the new contracts we closed earlier in the year.

It is very positive that our gross margin in the quarter is higher, and that we thereby more than compensate for the decline in revenues. It is primarily a result of high systems gross margins, but also due to a higher proportion of services revenues. All our business units show an increased EBITA margin compared to both last year and the previous quarter. In BU West where we have had challenges with profitability earlier in the year, we see a clear effect of the actions we have taken, with an organic growth of 1 percent in the quarter combined with a good profitability development.

To turn around the sales development we continue to invest in our employees, both within sales and in sales related resources, as well as in our service delivery. We see this as the key to generate growth going forward according to our longer-term targets.

The integration of our latest acquisitions continues according to plan and both Cetus in the UK and Conoa in Sweden now operate fully, or partly, under the Proact brand. Commercially the development is positive with clear synergies, where a good example is the modernized IT infrastructure of the Swedish customer AFA Försäkring, enabling accelerated application development. AFA Försäkring is supported by Proact and Conoa to put their application development on a container-based platform which enables shortening of the development time for new services from months to a few hours.

We also continue to work close to our suppliers and partners, and were awarded several notable awards during the quarter, among others the Netapp EMEA Solution Partner of the Year and the Cohesity EMEA Impact Marketing Partner of the Year, which we are very proud of.