In 2020, our 9,200 employees in 18 countries swung into action like never before to help firms tackle the health crisis by introducing remote working solutions that were immediately operational.
Our general contractor business model, which is unique in Europe, helped us speed up the most ambitious projects, from equipment and services to tailor-made financing solutions. This commitment has resulted in outstanding resilience, with our net profit up and our cash flow balanced once again.
We are now ready to get back on the path of sustainable growth. In 2021, we are pursuing initiatives in digital technology that are responsible, inclusive and circular, with ever more innovant solutions and around one million items of equipment reconditioned by 2025.
• Revenue impacted by health crisis, down1 11.3% at €2,559m
• Recurring Operating Profit2 slightly up1 at €122.5m (+2.2%) and margin up1 by 0.6 bp
• €272m reduction in net financial debt3 giving a positive net cash position3 of €20m at 31 December 2020
• Proposed 12 cent per share refund of issue premium, in line with the dividend paid in 2020
Strong resilience in operating performance
The Econocom Group earned revenue of €2,559m in 2020, down1 11.3% on 2019. Most of the fall was due to the health crisis, which led to delays in implementing some projects for clients and a slowdown in contracting new business. This downward trend eased however toward the end of the year (decline of just 8.4%1 in Q4 2020).
Digital Services & Solutions (DSS, comprising the Products & Solutions and Services segments) reported revenue of €1,646m, down by more modest 5.9%1. Thanks to an especially strong Q4 2020 with growth1 of 8.3%, Products & Solutions reported a full-year fall in revenue of 5.1%. Services revenue for 2020 was down1 7.5% but remained relatively stable1 in Q4.
Technology Management & Financing (TMF) was harder hit, with revenue of €913m, down 19.6%1. Two main factors held back TMF’s development in 2020: companies were taking a wait-and-see approach to their financing decisions, and Econocom decided to reduce the volume of equity-financed transactions.
Despite the drop in revenue, Recurring Operating Profit2 (ROP) grew slightly1, by 2.2% to €122.5m, reflecting an improvement in recurring operating margin to 4.8% (vs. 4.2% in 2019). To achieve this performance, the Group met in 2020 the objective of its plan to reduce structural costs of 97 million euros while benefitting from the continuous improvement in Services margins and a focus on projects with higher added value.
DSS ROP2 rose1 12.5% to €85.5m, thanks to a strong increase3 in Services ROP2 (+25.4% compared1 to 2019) and continuing improvement in Products & Solutions (+4.3%). TMF ROP2 was €37.0m, down1 15.8%. Despite the background fall in revenue, TMF was able to increase its recurring operating margin (4.1% in 2020 vs. 3.9% in 2019).
The Group booked €36.2m of net non-recurring expenses in 2020 (compared to €24.5m in 2019) notably related to restructuring costs and Covid-19 impacts.
After tightly controlled financial expenses, tax expense and a modest positive contribution from discontinued operations, consolidated net income for the year was up slightly at €50.2m. In a badly struggling economy in 2020, Econocom’s business model proved its strong resilience.
Deleveraging objective achieved
In 2020, the Group generated free cash flow of €179m, up €116m on 2019, thanks in large part to the structural improvement in working capital. Econocom also booked €125m in net proceeds from the disposal of non-strategic assets.
This reduced net financial debt3 by €272m over the year leaving the Group with a positive net cash position3 of €20m at 31 December 2020.
Despite the health and economic crisis, the Group successfully met its deleveraging objective set two years ago, giving it maximum flexibility and the confidence to approach the next growth cycle with solid fundamentals.
The Board of Directors will propose an issue premium refund of €0.12 per share, equivalent to the dividend paid in 2020, to the next General Meeting.
Continuing its long-standing policy of returning value to shareholders, in 2020 the Group bought up €26m of treasury shares. At 24 February 2021, Econocom directly held 12.3 million shares, 5.6% of the share capital, and indirectly held 13.3 million, 6.0% of the capital, via its subsidiary BIS BV.
Gradual return to growth expected in 2021
Over the last two years, Econocom has been focused on a transformation plan for its operating structure to improve its agility and competitiveness. This phase of consolidation was essential to get the Group into the best possible shape to face the future.
The Group’s objectives of cutting structural costs, streamlining the portfolio of activities and substantial deleveraging were successfully achieved in 2020. Econocom is now fit and ready to restart sustainable growth, both organic and through targeted acquisitions, while monitoring its costs and indebtedness.
Despite an uncertain economic climate still impacted by the health crisis, the Group thus confirms its objective of returning to solid growth in 2021.
Next publication: revenue Q1 2021 on 22 April 2021 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 excluding impact of IFRS 16 on leases and rentals for which Econocom is a tenant.