EQS-News: Correction of a release from 14/08/2023, 07:32 CEST - adesso SE increases sales by 33 % in first six months of 2023 to new half-year record of EUR 546.3 million

In the original version of this release, the pre-tax result of the current period was compared with the consolidated earnings of the previous year. This is corrected within the following release:

adesso SE increases sales by 33 % in first six months of 2023 to new half-year record of EUR 546.3 million / EBITDA contribution in second quarter lower as expected / full-year forecast confirmed

• Sales up 33 % to a new half-year record of EUR 546.3 million
• As expected after the first quarter, EBITDA is lower with EUR 25.2 million (previous year: EUR 38.2 million)
• Significant contribution to earnings anticipated in the second half of 2023
• Capacity utilisation set to pick up again and two additional working days
• Full-year forecast confirmed

In its 2023 half-year report, published today, adesso SE has confirmed its outlook for the year as a whole as issued at the end of the first quarter. Driven by consistently high demand for adessos IT services across all industries, sales revenues rose to a new half-year record of EUR 546.3 million. The company kept up its high pace of growth from financial year 2022, increasing sales by 33 % (of which organically by 31 %). For the first time, adesso has generated sales of half a billion euros in a six-month period and believes it is on track to exceed its growth-oriented sales forecast of more than EUR 1 billion for 2023. As predicted, the ongoing sharp increase in personnel of 32 % on average, coupled with the lowest number of working days in the second quarter, continued to weigh on margins, especially due to the delayed effect of the capacity utilisation measures initiated. EBITDA declined by 34 % year on year to EUR 25.2 million, of which EUR 7.2 million is attributable to the second quarter of 2023. As in the previous financial year, a significant earnings contribution is anticipated in the second six months. For example, capacity utilisation looks set to pick up again with two additional working days. In view of the large number of experts hired in recent quarters and with capacity utilisation already at a decent level in June, the Executive Board expects to reach an EBITDA of EUR 100 million to EUR 110 million by the end of 2023. The forecast for the year as a whole is confirmed on this basis.

Although sales rose by 33 % year on year to EUR 270.1 million in the second quarter of 2023, this three-month period did not, as expected, see an improvement in profitability due to higher personnel costs and only a slight increase in capacity utilisation as well as the lowest number of working days. The half-year EBITDA margin fell from 9.3 % in 2022 to 4.6 %. However, the trend pointing to an upturn in capacity utilisation in the second half of the year is a positive sign.

Demand for IT services and software remains at a high level and is driving momentum that far exceeds the growth in the overall economy. adesso aims to benefit from this with its expanded workforce. As at the reporting date, the total headcount rose by 30 % year on year to 8,856 full-time equivalents at the end of the period. The average number of employees increased by 32 % virtually in line with sales growth. Once again, the high demand for digitalisation services led to significant, double-digit growth in almost all sectors served by adesso. Only the automotive business saw sales remain at the previous years level. The upward trajectory was particularly dynamic in the manufacturing, retail and utilities sectors. The adesso national subsidiary in Germany again recorded the largest increase in sales in absolute terms, and sales involving customers abroad grew disproportionately by 41 %. The company broadened its access to the Italian market in the first half of the year by acquiring WebScience GmbH. It also opened an office in the United Kingdom and gained an initial offshore delivery location in India by way of acquisition.

Price increases and wage Inflation meant that personnel costs rose by 6 % per FTE, or in absolute terms by 40 % in the first half of 2023 to EUR 383.5 million (previous year: 273.2 million). With capacity utilisation remaining below average in the first six months, the increase in personnel costs the largest cost item at adesso in absolute terms led to a decline in EBITDA of 34 % to EUR 25.2 million (previous year: EUR 38.1 million). By contrast, other operating expenses rose at a slower rate than sales, climbing by 23 % to EUR 62.8 million, which had a positive impact on margins. Gross profit developed in proportion to sales. The volume generated in the first half of 2023 through licences and maintenance was also below the value of the first half of 2022 overall. However, the sales pipeline remains promising.

Depreciation and amortisation rose by 29 % compared to the previous year, mainly due to higher depreciation and amortisation of rights of use from rental and leasing relationships and of intangible assets recognised in the course of mergers. Consolidated earnings amounted to EUR -6.3 million (previous year: EUR 10.6 million) and earnings per share came to EUR -0.91 (previous year: EUR 1.63).

Additional figures and information

In the second quarter, delays in the invoicing process following the switch to a new IT system resulted in a greater need for advance financing. This peak was offset in the short term by the raising of appropriate funds externally, which is largely reflected in the following balance sheet figures. Working capital increased disproportionately to sales, climbing by EUR 79.8 million, or 48 % year on year, to EUR 246.1 million. In the first half of 2023, financial liabilities rose by a total of EUR 74.7 million to EUR 181.2 million, considerably above the level of 31 December 2022, due to ongoing repayments and new loans being taken out. As in the previous year, liquid assets stood at EUR 37.8 million as at the reporting date (31 December 2022: EUR 90.9 million). The decline in 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, the dividend payment and purchase price payments for company acquisitions. Net liquidity amounted to EUR -143.4 million as at the reporting date (31 December 2022: EUR -15.6 million; 30 June 2022: EUR -42.7 million). As ground will be made up in the invoicing process using the new system, the temporary effect on the balance sheet figures is expected to gradually subside in the second half of 2023.

Outlook

The macroeconomic conditions have improved slightly in comparison with the forecasts issued for 2023, but are less positive than previously anticipated for 2024. Irrespective of macroeconomic developments, the industry-specific framework conditions for the IT sector in the segments relevant for adesso remain as healthy as before, or have improved further. Strong growth for 2023 and 2024 is anticipated in Germany and around the world in the software and IT services segments, both of which are particularly relevant for adesso. In view of the dynamic increase in sales and the personnel growth in the first six months of 2023, adessos IT services business is set to benefit significantly from this trend in the second half of the year on account of a sustained improvement in capacity utilisation. Overall, the company expects the strong sales growth from the first half of the year to continue, especially as the weak general economic situation has not had a major adverse effect on the IT services business so far. Based on this the Executive Board is reaffirming its full-year sales forecast of more than EUR 1 billion, with EBITDA of between EUR 100 million and EUR 110 million.

The full half-year report, as well as a table comparing key performance indicators over a period of several years, is available at www.adesso-group.de in the Investor Relations section.

adesso Group

With about 8,900 employees and annual sales of EUR 900.3 million in 2022, 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 and Turkey 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 2023 and 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, 2018 and 2020, adesso was ranked first again in 2023