The CEO of Nordic powerhouse Atea, Steinar Sonsteby (pictured), has spoken of his disappointment over the VAR's Q1 2019 profits.
The Oslo-headquartered firm logged revenues of NOK 9.14m (€942.27m), up 9.6 per cent year on year.
However, EBIT fell by 5.7 per cent to NOK 116m (€11.96m).
In a video presentation to investors, Sonsteby said that lower gross margins and higher operating expenses offset revenue growth.
"So EBIT is not good enough," he said.
"We are not 100 per cent satisfied with the results, especially in Norway and Denmark.
"We are confident, though, that we are investing in the right areas and that we are on the right way and we are also confident that we will see this already proven for even better development on EBIT already in Q2."
Atea's EBIT decline was concentrated in Norway, due to "several large deliveries at very low gross margin during the quarter".
Hiring too fast
Sonsteby pointed to Atea's recruitment drive over the last year as another specific cause for the lower-than-expected EBIT.
"It's the build-up of people over the last nine months that have played as a little bit of a trick.
"As we have said many times that getting people is difficult, it has proved to be less difficult over last six months and so it might have happened a little bit too quickly."
Sonsteby confirmed to CPI that the company's headcount has shot up by just under 500 people in nine months.
Personnel costs set back the company NOK 1.45m in Q1.
However, Atea's CFO Robert Giori said that the headcount increase has primarily been in services, which he called "a strategic growth area for the company".
Sonsteby told investors that this is already bringing in a tangible benefit to the company's services segment.
"We are especially happy with the development of the services business, which grew almost 10 per cent, which is difficult when it relies on people," he said.
Atea Denmark's recovery
Commenting on his firm's Q4 2018 results in February, Sonsteby conceded that the VAR's bottom line is still suffering due to its scandal-tainted Danish arm.
At the time, CPI suggested that the firm's public sector customers would help turn its luck around.
However, Atea's Q1 report reveals that this reputational recovery is taking longer than expected.
"Atea Denmark is in the process of recovering from the court conviction. EBIT continued to fall from last year's level during Q1 2019, but at a much lower rate than in prior quarters," the report read.
Nonetheless, as the undisputed kingpin of the Nordic and Baltic regions, Atea claims to account for 18 per cent of the market in the seven countries in which it operates.
Its top 10 strategic vendor partners include Apple, Citrix, Cisco, Dell EMC, HP, HPE, IBM, VMware and Lenovo.
In its Q1 report, Atea made several references to strategically pivoting towards services. In Q1, its services segment made up 18.28 per cent of the company's revenues, with hardware making up 53.32 per cent, and software, 28.39 per cent.
Atea's hardware revenues used to account for 90 per cent of its total sales around 10 years ago.
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