Positive trend for cloud services and challenging quarter in Business Unit West
During the second quarter, the company experienced a negative trend for revenue and profits compared to the same period last year. Revenue decreased by 7 percent to 806 (868) MSEK, which reflects declining sales for the systems business including complementary support and consulting services, mainly in Business Unit West. EBITA, adjusted for non-recurring items, amounted to 37 (55) MSEK, corresponding to an EBITA margin of 4.6 (6.3) percent.
We see a continued positive trend for cloud services, where revenue increased 12 percent, reaching 122 MSEK for the quarter. Overall services revenue decreased by 3 percent, due to lower support and consulting income. New contracts for cloud services signed during the quarter amounted to 96 (62) MSEK, a 55 percent increase over last year. During the quarter, systems revenue fell by 9 percent. For the first half of 2019, systems sales still show a positive trend, with a 9 percent growth.
The quarterly results for Business Unit West were weaker than anticipated, due to lower systems sales and related support and consulting services income, compared to the same period last year. In the Netherlands, systems sales were solid, while the drop in EBITA was due to reduced gross margins and lower income from the consulting business. For Germany, systems sales were weak, and combined with investments made to increase market presence in Northern Germany, this resulted in a negative local EBITA.
In Business Unit UK, revenue fell during the quarter, primarily caused by postponed systems contracts. Despite lower systems revenue, EBITA was unchanged compared to the same period last year. In Business Unit Nordics, revenue decreased 1 percent and the EBITA outcome was weaker. Revenue for Business Unit East increased by 37 percent, with EBITA maintained.
Despite the negative trend during the second quarter, compared with the same period last year, I have a positive outlook for the company’s future development. Relying on our expert skills and our market leading offering, we have fine opportunities to capitalise on the ongoing market transformation. For an extended period, a new category of hybrid cloud services has been at the centre of overall market growth, and we are actively seeking to leverage this shift. We do this by updating our offering and our skills to meet the changing customer needs. Meanwhile, it is also a key objective for the company to maintain a strong systems business, including complementary support and consulting services. In addition to our focus on organic growth, we actively seek acquisition opportunities in existing and new markets.
In parallel with developing our services offering, we implement efficiency and cost measures in our operations, to ensure profitability. Cost measures will have impact during the second half of 2019. An initiative for increased efficiency in our services delivery was previously launched.
During the quarter, the company’s enterprise in Spain was divested to Cibernos SA. The divestment enables an increased focus on the company’s principal markets. A non-recurring cost of 9.1 million SEK related to the divest-ment was accounted for during the quarter.
Kista, 11 July 2019