Audited annual results 2021: Confirmation of strong growth in Recurring Operating Profit and Net Profit
2021 confirmed Econocom's strategic refocusing choices
• Revenue down slightly at €2,505m4 amid pressure on supplies and a growing order backlog
• Recurring Operating Profit2 up significantly1 at €135.7m (+16.1%) and margin up1 0.8 percentage points at 5.4%
• Net profit of €70.1m up more sharply by 39.6% driven in particular by reduction in non-recurring operating expenses
• Net Financial Debt3 under control at €66.8m at 31 December 2021, allowing a reduction in the cost of financial debt
• Proposed 14 cent per share refund of issue premium, up 16.7% on the previous year
Increase in Group profitability
The Econocom Group earned revenue of €2,505m4 in 2021, down1 1.0% on 2020. Business slowed in the second half due to increasing pressure on global digital asset supplies. As a result, the Group order backlog was up by around €100m at the end of 2021.
Products & Solutions, the business most impacted by sourcing issues, posted revenue of €1,067m, a limited 2.5% decrease1. The year-end backlog was up by almost €60m.
Services revenues dipped1 3.1% to €516m due to the Group's strategic decision to prioritise higher value-added contracts.
The Technology Management & Financing (TMF) business confirmed its recovery with a 2.2% increase1 in revenue to €921m4 driven by diversification of the customer portfolio, the success of eco-responsible solutions and expansion of the sales force.
Fuelled by the cost-cutting plan in place since early 2019 and an increase in the profitability of new contracts, Recurring Operating Profit2 (ROP) rose sharply1 by 16.1% to €135.7m, reflecting an improvement in recurring operating margin to 5.4% (vs. 4.6% in 2020). Margin growth occurred across all business lines, particularly Services.
Net non-recurring operating expenses of €14.3m were down sharply by €21.5m compared to 2020 due to the completion of the cost-cutting plan implemented in 2019 and 2020.
The net financial expense improved by €3.4m to €9.8m, mainly due to lower interest on debt and the realisation of financial capital gains.
After a €31.7m tax charge and a €7.4m net loss on discontinued operations, consolidated net profit for the year was up sharply by 39.6% to €70.1m. The net margin amounted to 2.8%, up 0.8 percentage points on 2020.
Net debt kept under control
In 2021, the Group recorded free cash flow of €20m, driven by a strong level of cash flows from operating activities (€133m) which allowed the Group, among other things, to finance change in working capital and TMF capital expenditure required to develop the business. Meanwhile, the Group bought up €83m of treasury shares in 2021.
As a result, Net Financial Debt3 amounted to €66.8m at 31 December 2021 compared with a positive net cash3 position of €20m the previous year. Excluding the impact of treasury share buybacks, restated net cash3 for 2021 would amount to €16m, equivalent to that of 2020.
2021 net debt represents 15% of shareholders equity or 0.5 times EBITDA for the year.
The Board of Directors will propose to the next General Meeting an issue premium refund of €0.14 per share, up 16.7% on the refund paid in 2021.
The distribution planned for 2022 would amount to €25.9m5, exceeding the refund of issue premium awarded in 2021 by €3.4m. It would correspond to a payout ratio amounting to 36.9% of net 2021 profit compared to 44.8% for the previous year.
Econocom is on track for a new growth trajectory in 2022
After two years of refocusing on core businesses and high-potential regions, Econocom reaped the initial benefits of its successful transformation in 2021.
In 2022, the Group will draw on its new offerings (Product Care, Recycling, Apps services, etc.) and a full order backlog to boost its growth momentum. In a buoyant market, Econocom will also be able to rely on a strengthened sales force to ensure its development. Provided that supply problems are gradually resolved, Econocom expects to post revenue growth of 4-5% and continued improvement in its recurring operating margin.
The Group has a pipeline of acquisition opportunities that should enable it to complete one or more acquisitions over the coming quarters thanks to its low level of debt.
Next publication: Q1 2022 revenue, 14 April 2022 after market close.
1 On a like-for-like basis (at constant scope and accounting standards).
2 Before amortisation of intangible assets from acquisitions and after restatement in line with IFRS 5 for assets held for sale and discontinued operations.
3 NFD: Net Financial Debt (or Net Cash) including Current and Non-current financial debt as shown in the balance sheet and excluding Cash and cash equivalents.
4 The revenue figures of €2,505m for the Group and €921m for TMF differ from the figures of €2,522m and €938m stated upon publication of provisional data due to the reclassification of €17m of TMF invoices with no impact on recurring operating profit2 or net profit.
5 Based on the number of shares at 31 December 2021 less treasury shares held at that date.
|Recurring operating profit before amortisation of intangible assets from acquisitions||119.6||135.7|
|Recurring operating profit||117.5||133.5|
|Other non-recurring income and expenses||-35.8||-14.3|
|Cost of financial debt||-8.9||-7.0|
|Other financial income and expenses||-4.3||-2.8|
|Profit before tax||68.5||109.4|
|Income tax expense||-18.2||-31.7|
|Profit from continuing operations||50.3||77.7|
|Net profit from discontinued operations, associates and joint ventures||0.0||-7.5|
|Net Profit for the period||50.2||70.1|
2020 figures based on 2021 exchange rates and scope
|2020 on 2021 scope|
|Recurring operating profit before amortisation of intangible assets from acquisitions||119.6||116.9|
|Residual interest in leased assets (non-current)||134||128|
|Other non-current assets||230||221|
|Residual interest in leased assets (current)||41||43|
|Trade and other receivables(1)||894||796|
|Other current assets||137||180|
|Cash and cash equivalents||649||406|
|Assets held for sale||74||69|
|(€m) EQUITY & LIABILITIES||31.12.2020||31.12.2021|
|Equity attributable to owners of the parent||406||386|
|Non-current financial debt(2)||325||303|
|Gross liability for purchase of leased assets (non-current)||76||75|
|Other financial liabilities (non-current)||48||10|
|Other non-current liabilities||107||108|
|Current financial debt(2)||304||170|
|Gross liability for purchase of leased assets (current)||28||23|
|Other financial liabilities (current)||13||47|
|Trade and other payables||992||882|
|Other current liabilities||264||246|
|Liabilities held for sale||30||31|
|TOTAL EQUITY AND LIABILITIES||2,660||2,339|
- Of which own-booked outstanding rentals: €208m at 31 December 2021 versus €186m at 31 December 2020.
- With the addition of cash and cash equivalents of €406m at 31 December 2021 (and €649m at 31 December 2020) and bonds and financial debt, the balance sheet showed net debt of €67m at 31 December 2021 (versus net cash of €20m at 31 December 2020); this financial debt includes €208m at 31 December 2021 (and €186m at 31 December 2020) of own-booked TMF contracts and the anticipated rent from this activity.
The Auditor, EY Réviseurs d'Entreprises SRL, confirmed that its audit work on the consolidated financial statements as of December 31, 2021 which concluded to a Revenue of €2,505million, a Net profit for the period of €70.1million and a total balance sheet of €2,339million are completed as to the substance and did not raise any significant correction. The Auditor will issue an unqualified opinion on the consolidated financial statements prepared under the IFRS accounting GAAP.