Interim Management Statement Q1 2020
Release no. 10/2020
Acceptable results in Q1 despite operating in COVID-19 unknown territory
Columbus continued the positive development from 2019 into the first two months of 2020 with growth in revenue. However, in March realities changed and the COVID-19 crisis has affected the results for Q1. Columbus are implementing measures to deal with the situation and has full attention on the wellbeing of employees while serving customers digitally.
In Q1 2020, Columbus delivered growth of 6% amounting to revenues of DKK 510m. EBITDA decreased by 12% amounting to DKK 53m and earnings before tax amounted to DKK 28m. Outlook for 2020 and long-term guidance will be released when having a better insight into the impact and temporary market slowdown.
In accordance with the regulations for listed companies’ submission of interim statements, Columbus A/S hereby submits the interim management statement for the period 01.01.2020-31.03.2020 (3 months).
Growth of 6%
Revenue in Q1 2020 amounted to DKK 510m (Q1 2019: DKK 482m), corresponding to an increase of 6% compared to the same period last year. Organically, Columbus grew by 2%. (isolated for the acquired Advania Business Solutions in Norway).
EBITDA decreased by 12% to DKK 53m primarily due to onboarding of 190 new employees as part of Columbus growth strategy as well as an increase in bad dept provision. Earnings before tax amounted to DKK 28m, corresponding to a decrease of 21%. Revenue and EBITDA are not significantly impacted by currency fluctuations.
2020 started off with a positive continuation of 2019 with overall revenue growth, despite a decline in our US business unit. In general, all Columbus’ business units came off to a good start where especially Dynamics Sweden and Columbus Care showed strong progress.
“We had a positive start to the year with strong progress overall. I am content that we delivered growth despite a radical change in our business environment. We have managed to rapidly adapt our business to the changing situation, and I want to thank our employees for
showing leadership in this difficult situation as well as our customers for their commitment. We foresee a challenging 2020, however I am confident that we will get through this crisis together,” says Thomas Honoré, CEO & President in Columbus.
In the beginning of March, we started to see the impact of the global outbreak of the COVID-19 materializing with customers holding back investments or postponing ongoing projects. Especially our retail segment has been negatively affected due to the close down of societies. Retailers with an omnichannel setup are not as badly hit because they can move part of their business online, which in some cases has led to increased demand for digital commerce or analytics services.
As expected, the food segment has experienced a hectic period with increased demand which in some cases has driven increased demand for digitalization, however in other cases the customers have postponed projects due to lack of resources.
Overall, Columbus expects to see a substantial, short-term negative impact on customer demand in the coming period.
According to local government regulations and lockdowns, Columbus has taken steps to ensure the health and safety of our employees, customers and partners while continuing to serve our customers 100% digitally. As we write the Q1 report, all Columbus employees are working remotely from home with full operation capacity globally.
As a leading digitalization company, we have broad experience serving our customers digitally, and we are experiencing a very positive interaction with customers and employees in between in adjusting to remote working routines.
We are able to deliver digitally from early engagement discussions to project initiation, implementation and
application management. We are currently in close connection with our customers to help them continue their operation during this period.
Growth in Columbus Services
The revenue from Columbus Services business increased by 4%. Organic growth is 2%. The main contributor to the growth is the increased sale of Columbus Care services and a general progress in the services business.
Chargeable hours constituted 52% in Q1 compared to 56% in Q1 2019. The decline is primarily due the adjustment to remote working setup in the beginning of March and is also affected by the postponement or cancellation of projects due to COVID-19 situation. Furthermore, the decline is affected by the onboarding of people.
Despite the decline in chargeable hours, the services business delivered overall growth and progress.
Growth in Recurring Revenue
The sale of cloud services grew by 51% due to the increasing conversion to cloud-based solutions. In addition, the sale of Columbus Care services grew by 26%.
Recurring revenue increased from DKK 106m to DKK 119m, a growth of 12%, which can be explained by good progress in sale of Columbus Care and Cloud. The recurring revenue constituted 23% of the total revenue in Q1 (Q1 2019: 22%).
Columbus Software same level as last year
The revenue from Columbus Software business is at the same level as last year, amounting to DKK 22m.
Columbus Cloud grew by 39%, while sales of Columbus licenses decreased by 23% due to the cloud conversion. Maintenance declined by 6%.
Progress in 9 Doors to Digital Leadership®
In Q1 we launched a Cloud Factory initiative, where we partnered with
Microsoft to conduct an assessment and migrate more large accounts to the cloud. When businesses started seeing the aftereffects of the COVID-19 pandemic, Columbus worked proactively to identify offerings that would help businesses keep their lights on.
In line with our commitment to the UN Sustainability Goals, we also launched new offerings on energy and waste management, route optimization, and sustainable operations that will help our customers run are more sustainable operations.
Risk management
In order to address the short-term uncertainty, we have initiated a Business Continuity Plan to mitigate risk and keep our business in good health during this challenging period.
Columbus has executed capacity adjustments across business units to address the temporary decline in demand. In addition, we are closely monitoring the resource allocation and increasing global sourcing. We have also applied different COVID-19 aid packages around the world to minimize the business impact.
As announced in February, the Executive Board and the Board of Directors have reduced their salaries by 30% for the remaining of 2020. In addition, we have announced a global hiring freeze and other measures.
On the sales and marketing side, we have initiated a range of activities to drive growth despite a changed business structure. We have launched a comprehensive catalogue of services to support our customers in these unusual times that can help them operate remotely and keep their business safe and running, and we are executing global digital marketing campaigns with good traction.
Expectations for 2020
In the first two months of 2020, we have seen a general growth in our business. Now, realities have changed radically. Due to the current market uncertainty caused by the COVID-19, we expect a negative impact on our business and financial performance in the coming quarters.
Given the rapid day-to-day developments in our main markets, we are currently unable to accurately assess the magnitude of this short-term impact, including the duration of the expected temporary market contraction.
As stated in company release no. 6, 2020, we have therefore decided not to announce the expectations for 2020 and our long-term guidance until we have a better insight into the impact on our business.
As the situation normalizes, we expect to start picking up in a growing market.
We do expect that the conversion from on-premise solutions to cloud will be growing significantly over the next five years and we also expect digitalization efforts to pick up when the world is settling and returning to more normal modus. However, it is still unclear when and how the investment appetite will fully return.
Columbus is already well positioned and at the forefront in the market within cloud (e.g. Dynamics 365, M3 Cloud Suite) with a well-developed global delivery setup specialized in upgrading customer to a cloud solution
In 2020, cloud will be a prioritized growth opportunity for Columbus, thus helping our customers in the migration to cloud with the up- and cross sell the 9 Doors to Digital Leadership® it entails.
In addition, our focus will be to leverage the opportunities to up- and cross sell the 9 Doors to Digital Leadership® services to the installed customer base.
Investor presentation
Columbus’ Executive Board will present the results for 2020 at a conference call today at 14:00 CET.
Please use the following dial-in numbers:
Denmark: +45 32720417
UK/international: +44 (0) 2071 928338
US: +1 646 741 3167
Conference ID: 5258489
It is also possible to follow the online webcast via this link: https://edge.media-server.com/mmc/p/pxuepg8i
A recorded version of the presentation will be available on the website after the webcast has concluded: https://edge.media-server.com/mmc/p/pxuepg8i
| DKK ´000 | YTD 2020 | YTD 2019 | 2019 |
| Columbus Software licenses | 2,802 | 3,649 | 38,449 |
| Columbus Software subscriptions | 13,891 | 14,775 | 55,527 |
| Columbus Cloud | 5,562 | 4,009 | 24,002 |
| External licenses | 27,224 | 17,020 | 75,153 |
| External subscriptions | 45,528 | 45,861 | 200,588 |
| External cloud | 11,170 | 7,102 | 35,511 |
| Services | 396,584 | 379,729 | 1,468,533 |
| Other | 7,350 | 10,328 | 33,921 |
| Total net revenue | 510,111 | 482,473 | 1,931,684 |
| EBITDA before share-based payment | 54,505 | 61,467 | 243,540 |
| Share-based payment | -1,216 | -998 | -5,470 |
| EBITDA | 53,289 | 60,469 | 238,070 |
Latest developments
No events or transactions with a material effect on the company’s financial position have occurred since the balance sheet date.
Ib Kunøe Chairman Columbus A/S | Thomas Honoré CEO & President Columbus A/S |
| For further information, please contact: CEO & President, Thomas Honoré: +45 70 20 50 00 | |
| Income statement |
| DKK ´000 | YTD 2020 | YTD 2019 | 2019 |
| Net revenue | 510,111 | 482,473 | 1,931,684 |
| External project costs | -101,983 | -95,827 | -437,107 |
| Gross profit | 408,128 | 386,646 | 1,494,577 |
| Staff expenses and remuneration | -301,325 | -283,935 | -1,136,911 |
| Other external costs | -52,302 | -41,739 | -192,567 |
| Other operating income | 14 | 497 | 78,474 |
| Other operating costs | -10 | -2 | -33 |
| EBITDA before share-based payment | 54,505 | 61,467 | 243,540 |
| Share-based payment | -1,216 | -998 | -5,470 |
| EBITDA | 53,289 | 60,469 | 238,070 |
| Depreciation, amortization and impairment | -23,522 | -22,092 | -178,882 |
| Operating profit (EBIT) | 29,767 | 38,377 | 59,188 |
| Financial income | 544 | 760 | 590 |
| Financial expenses | -1,972 | -3,411 | -11,042 |
| Profit before tax | 28,339 | 35,726 | 48,736 |
| Balance sheet |
| DKK ´000 | YTD 2020 | YTD 2019 | 2019 |
| ASSETS | |||
| Goodwill | 833,786 | 935,109 | 845,774 |
| Customer base | 54,221 | 60,871 | 50,933 |
| Other intangible assets | 10,012 | 6,289 | 10,565 |
| Development projects finalized | 72,569 | 71,985 | 78,852 |
| Development projects in progress | 13,813 | 9,767 | 6,066 |
| Property, plant and equipment | 11,694 | 23,811 | 12,248 |
| Right-of-use assets | 98,991 | 101,052 | 85,927 |
| Deferred tax assets | 27,981 | 22,031 | 26,737 |
| Other receivables | 7,660 | 7,493 | 7,466 |
| Total non-current assets | 1,130,726 | 1,238,407 | 1,124,568 |
| Inventories | 0 | 66 | 0 |
| Trade receivables | 287,477 | 334,499 | 307,231 |
| Contract assets | 34,899 | 38,879 | 28,605 |
| Corporate tax receivables | 7,338 | 7,659 | 1,360 |
| Deferred tax assets | 4,878 | 7,595 | 2,812 |
| Other receivables | 8,619 | 19,640 | 16,564 |
| Prepayments | 23,923 | 23,836 | 26,113 |
| Receivables | 367,134 | 432,108 | 382,685 |
| Cash | 118,746 | 114,085 | 147,264 |
| Total current assets | 485,880 | 546,258 | 529,949 |
| TOTAL ASSETS | 1,616,606 | 1,784,665 | 1,654,517 |
| Balance sheet |
| DKK ´000 | YTD 2020 | YTD 2019 | 2019 |
| EQUITY AND LIABILITIES | |||
| Share capital | 155,778 | 155,778 | 155,778 |
| Reserves on foreign currency translation | -84,587 | -26,475 | -40,365 |
| Retained profit | 584,531 | 558,071 | 549,941 |
| Group shareholders' equity | 655,722 | 687,374 | 665,354 |
| Minority interests | 2,924 | 3,281 | 3,126 |
| Equity | 658,646 | 690,655 | 668,480 |
| Deferred tax | 22,085 | 20,040 | 26,296 |
| Other provisions | 40,716 | 14,825 | 28,635 |
| Contingent consideration | 0 | 219,508 | 157,850 |
| Debt to credit institutions | 169,708 | 183,230 | 176,000 |
| Lease liability right-of-use assets | 74,460 | 70,602 | 58,911 |
| Non-current liabilities | 306,969 | 508,205 | 447,692 |
| Debt to credit institutions | 2,750 | 13,738 | 0 |
| Contingent consideration | 161,037 | 87,156 | 0 |
| Contract liabilities | 18,489 | 25,798 | 17,727 |
| Trade payables | 59,937 | 75,312 | 85,618 |
| Corporate tax payables | 12,567 | 5,582 | 5,127 |
| Other Payables | 283,122 | 263,276 | 314,141 |
| Accruals | 79,446 | 79,327 | 82,872 |
| Lease liability right-of-use assets | 33,643 | 35,616 | 32,860 |
| Current liabilities | 650,991 | 585,805 | 538,345 |
| Total liabilities | 957,960 | 1,094,010 | 986,037 |
| TOTAL EQUITY AND LIABILITIES | 1,616,606 | 1,784,665 | 1,654,517 |
| Segment data |
In order to support decisions about allocation of resources and assessment of performance of the segments, the Group’s internal reporting to the Board of Directors of the Parent Company is based on the following grouping of operating segments:
| Strategic business areas | Description | Geographical segment | ||||
| ISV (Independent Software Vendor) | Development and sale of industry-specific software within Columbus' three focus industries: Retail, food and manufacturing | No specific area | ||||
| Consultancy | Sale, implementation and service of standard business systems. | Western Europe Eastern Europe North America | ||||
| Information about the Group’s segments is stated below. | ||||||
| Consultancy | ||||||
| DKK ´000 | ISV | Western Europe | Eastern Europe | North America | HQ, GDC and Eliminations | Total |
| YTD 2020 | ||||||
| Columbus Software licenses | 1,689 | 889 | 254 | 301 | -331 | 2,802 |
| Columbus Software subscriptions | 11,221 | 4,530 | 280 | 1,287 | -3,427 | 13,891 |
| Columbus cloud | 4,748 | 1,696 | 359 | 0 | -1,241 | 5,562 |
| External licenses | 738 | 16,189 | 3,255 | 6,039 | 1,003 | 27,224 |
| External subscriptions | 2,422 | 20,281 | 4,197 | 20,174 | -1,546 | 45,528 |
| External cloud | 520 | 4,738 | 381 | 4,678 | 853 | 11,170 |
| Services | 16,907 | 326,567 | 27,867 | 37,712 | -12,469 | 396,584 |
| Other | 391 | 7,176 | 201 | 587 | -1,005 | 7,350 |
| Total net revenue | 38,636 | 382,066 | 36,794 | 70,778 | -18,163 | 510,111 |
| Gross profit | 33,032 | 300,199 | 29,029 | 44,026 | 1,842 | 408,128 |
| EBITDA | 17,500 | 45,924 | 2,009 | 1,187 | -13,331 | 53,289 |
| Consultancy | ||||||
| DKK ´000 | ISV | Western Europe | Eastern Europe | North America | HQ, GDC and Eliminations | Total |
| YTD 2019 | ||||||
| Columbus Software licenses | 2,624 | 1,369 | 128 | 390 | -862 | 3,649 |
| Columbus Software subscriptions | 12,412 | 4,213 | 208 | 1,282 | -3,340 | 14,775 |
| Columbus cloud | 3,102 | 1,787 | 118 | 0 | -998 | 4,009 |
| External licenses | 624 | 10,051 | 2,360 | 4,575 | -590 | 17,020 |
| External subscriptions | 1,963 | 19,968 | 3,515 | 21,705 | -1,290 | 45,861 |
| External cloud | 504 | 2,599 | 199 | 3,800 | 0 | 7,102 |
| Services | 13,221 | 306,024 | 25,506 | 44,531 | -9,553 | 379,729 |
| Other | 236 | 9,282 | 435 | 1,101 | -726 | 10,328 |
| Total net revenue | 34,686 | 355,293 | 32,469 | 77,384 | -17,359 | 482,473 |
| Gross profit | 30,759 | 273,728 | 26,447 | 49,952 | 5,760 | 386,646 |
| EBITDA | 15,506 | 50,845 | 2,589 | 1,202 | -9,673 | 60,469 |
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