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 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.
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.