European digital services group SQLI announces today its 2020 annual results, which were approved on March 5th by the Board of Directors chaired by Philippe Donche-Gay. The statutory auditors have conducted their review of the full-year financial statements.
Against a backdrop of an unprecedented pandemic crisis with numerous impacts on customer demand and the company's organisation, the action plan put in place enabled the company to be in line with its forecast communicated alongside the half-year financial statements (above €210m in annual revenue and €6m in recurring operating income).
In 2020, the Group's activity was underpinned by the strong performance of its international business, which recorded growth of 12.8% over the year (€101m). This increase was the result of 4% organic growth and the integration of Redbox Digital, an e-commerce agency based in the United Kingdom and the Middle East, in March 2020. The international business now accounts for 47% of the Group's revenue in 2020 (up by 10 percentage points in one year).
The business in France (down 24% to €115m) was heavily impacted by the Covid-19 crisis, particularly in the transport and financial services sectors, and the streamlining of the offering portfolio since the end of 2019. Measures taken as a response to the crisis have gradually improved the employment rate, which rose from a low point of 75% in the second quarter to 80% in the last quarter.
The growth in the international business had a positive impact on the recurring operating margin outside France, which increased 0.3 percentage points to 10.4% of revenue. In France, the sharp downturn in activity generated a recurring operating loss of €3.3m, or -2.9% of revenue. SQLI ended the financial year with consolidated recurring operating income of €7.2m (€6.0m in forecast), which includes the impact of government support measures during the crisis (€3.0m).
With the net amount of non-recurring operating income and expenses totalling €0.3m (-€3.5m in 2019), EBIT amounted to €7.5m compared to €9.7m a year earlier.
Taking into account the cost of net financial debt (€2.3m) and an income tax expense of €4.9m (including the cancellation of deferred taxes for €1.4m), the Group's net income came to €0.2m.
Cash generation through operations was driven by positive operating cash flow (€6.2m before the impact of IFRS 16) and by a €12.1m reduction in working capital requirements. This strict financial discipline, combined with raising additional funds via a state-guaranteed loan of €25.0m, enabled SQLI to post gross cash of €39.8m at the end of the year (€20.1m at end-2019), while significantly reducing its use of factoring.
Net financial debt, excluding lease obligations (IFRS 16)*, stood at €15.7m, down significantly compared to 30 June 2020 (€21.3m) and close to its level of 31 December 2019 (€14.5m), which is in line with its targets and did not require the use of factoring (decreased by €12m in one year). The debt ratio therefore remains under control at 17% of equity (€94.3m) and 1.7 times EBITDA.
SQLI will convert the state-guaranteed loan into medium-term financial debt to support further expansion.
In recent months, SQLI's management has focused on optimising its market focus and organisation to reposition itself onto a path of profitable growth. In 2021, the Group is aiming at resuming growth in France in the second quarter and maintaining the positive momentum internationally, with the overall goal to increase its consolidated revenues at a high single digit trend in the second half of 2021 and increase its consolidated recurring operating margin by 2 percentage points on a full year bases.
Beyond 2021, SQLI intends to take advantage of the vast opportunities offered by the European digital experience market, fuelled by the growth of experience platforms, e-commerce and digitisation of the workplace. This will enable the Group to achieve steady organic growth and continuously improve its recurring operating margin.
In 2021, the Group will also prepare a new external growth cycle, which is expected to begin in 2022, targeting companies in France and abroad of significant size.
SQLI will announce its Q1 2021 revenue on 27 April 2021 after the close of trading.
[*Lease liabilities due over more than one year amounted to €19.0m, while those due in less than one year came to €8.3m]