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Innofactor - Second profit warning for 2018

Innofactor issued a second profit warning, expecting net sales to decline from 2017 and EBITDA to be negative, from previously having expected net sales to be at a similar level to 2017 (EUR 65.7m) and EBITDA in between EUR 0.0-1.3m. Our revised 2018 net sales and EBITDA estimates are at EUR 63.7m and -0.9m respectively. We retain our HOLD-rating with a target price of EUR 0.4.

Lowered guidance for 2018

Innofactor issued its second profit warning for 2018 on January 25th. Innofactor now expects its net sales to decline from 2017 and EBITDA to be negative. Innofactor’s previously expected its net sales to be at a similar level to 2017 and the operating margin to be positive but weaker than in 2017. Innofactor’s net sales and EBITDA in 2017 amounted to EUR 65.7m and EUR 1.3m respectively. The weaker than expected sales is according to Innofactor due to the timing of customer’s purchases related to the Dynasty product family along with lower sales in Denmark. Profitability is affected by the lower sales along with some write offs related to project deliveries, of which to our understanding the lower sales have a bigger impact. Innofactor further held co-operation negotiations during Q4 that is expected to have affected profitability.

Expect improvements in 2019

Following the updated guidance, we have revised our 2018 estimates, with our net sales and EBITDA estimates at EUR 63.7m and EUR -0.9m respectively, with our other estimates largely intact. We expect to see a minor improvement in sales going into 2019 and a more notable profitability improvement, mainly from the organizational changes made in late 2018.

HOLD with a target price of EUR 0.4

On our estimates valuation continues to appear justifiable on EV/EBITDA multiples, as the improvement we expect to see in profitability in 2019 is still well below historically seen levels. We retain our HOLD-rating with a target price of EUR 0.4.

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