Financial performance against original guidance

 

Entering 2023, we highlighted the potential spillover effects from the uncertain macro and geopolitical environments on our financial performance. Unfortunately, those risks prevailed and impacted our revenue and margin for the year.

Group revenue grew 10.7% – well within our original guidance of 8%-12% revenue growth for the year and slightly better than the narrowed guidance of 8%-10% revenue growth, which was communicated in connection with our Q3 2023 report. The growth was driven by strong performance in the international part of the Group. Offsetting some of that growth was the performance in the Danish operation that ended up realising revenue in line with 2022, caused by the negative impact from macro- and geopolitical environments, particular in the Danish private segment.

The changed revenue mix – with more growth from the international part of the Group and no growth from the Danish part of the Group – had a negative impact on margins, as higher margin revenue was substituted with lower margin revenue. In addition, the ongoing right-sizing of the employee pyramid structure in Denmark, the costs related to the enhanced Go-To-Market approach and the move into new headquarters in both Denmark and Greece diluted the margin further in the Group. Finally, the Danish and Norwegian operation realised lower than anticipated utilisation ratios which also had a negative impact on margins.

As a result, adjusted EBITDA margin in constant currencies ended at 14.9% – in line with the original guided range of 15% to 18% and the narrowed guidance towards the lower end of the guided range, given in connection with the Q3 2023 report. Provision for severance payment realised in Q4 2023 amounted to DKK 14.2m and impacted margin negatively by 0.2 percentage points. EBITDA margin before severance payments was consequently 15.1%.

 

Guidance for 2024

Our financial guidance for the Group for 2024 is based on an assumption that macro and geopolitical uncertainty to some extent continues. However, we do not expect that uncertainty will continue to pause decision processes in the private segment in Denmark as experienced in 2023. We also expect a higher level of activity in the public sector in Denmark in 2024, driven by legislative changes and new tenders.

For Netcompany-Intrasoft we do not expect the same level of revenue growth in 2024 as realised in 2023, as most of the growth in the previous year was driven by a significant ramp up in projects under the Recovery and Resilience Facility in Greece. While these are expected to be at a continued high level in 2024, they are not expected to drive significant revenue growth.

As communicated during 2023, the projects under the DALAS framework in the UK are expected to be yielding revenue from the end of June and onwards. Revenue growth in the UK will thus be back-end loaded in 2024.

For Norway and the Netherlands revenue growth is expected to build up gradually during the year with some acceleration to be expected during Q1 2024 in Norway following the win of the Avinor contract.

The proportion of license revenue as a percentage of total revenue is expected to be at around the same level in 2024 as realised in 2023.

Based on these assumptions we expect revenue to grow between 7% and 10% in 2024.

During 2023, a number of activities related to right-sizing of the pyramid structure in particular in Denmark was carried out and to a large extent completed. Combined with an expected higher level of activity and more projects being initiated, this is likely to impact margins positively. In addition, the increase in costs related to the enhanced Go-To-Market initiatives incurred in 2023 will be at similar absolute level in 2024 and thus not have a dilute impact on margins in 2024. The costs related to moving into new headquarters in 2023 in Copenhagen and Athens will not have a negative impact on margins in 2024 as they had in 2023.

Consequently, we expect adjusted EBITDA margin of between 15% and 18% in 2024.