Financial Statements Bulletin 2020: THE PROFITABILITY IN THE SECOND HALF RECOVERED FROM A DIP CAUSED BY COVID-19 AS REVENUE RETURNED TO GROWTH TRACK
Our operating environment in 2020 was very exceptional due to the global pandemic, and it weakened our revenue and profitability. The impact on our profit as significant, but in our view only temporary. After a challenging start to the year, the demand situation improved later in the autumn, and our sales picked up towards the end of the year. The market is still characterized by uncertainty caused by the COVID-19, but hopefully the worst is behind us.
Our revenue in January–December was almost at the previous year’s level at EUR 18.2 (18.5) million. Operating profit excluding goodwill amortization (EBITA) was clearly lower than in the previous year and was approximately EUR 0.8 (1.7) million. Due to the pandemic, some of our customers had to postpone their development projects and temporarily reduce their IT investments, which was reflected in a decline in our profit. However, the pandemic did not affect our service production, the active development of our offering or the recruitment of personnel nor did remoteworking reduce our productivity.
Listing of shares and successful integration of the acquisition support us in moving towards the profitability target
Our listing on the First North Growth Market Finland marketplace maintained by Nasdaq Helsinki in March, at the very beginning of the COVID-19 pandemic, was comparable to a situation where a carefully prepared ski jumper defies conditions and jumps resolutely into thick fog. Our successful initial public offering (IPO) showed that the jump was worthwhile. The IPO was oversubscribed by more than fivefold and brought some 4,000 new shareholders to Bilot. Thanks to the listing, we have, among other things, been able to complete the largest acquisition in our history.
Our medium to long-term growth prospects remain strong. Our financial target is to achieve a revenue of EUR 50 million by 2024, growing organically and through selected acquisitions both in Finland and internationally, and by expanding our target markets and services. During the year, we strengthened our position in Sweden and Poland through recruitments. From Poland, we served customers also in Finland and Sweden.
An important step towards our growth target was the merger with CastorIT, a company that specializes in SAP solutions, we announced in August. We started to operate as one organization from the beginning of October. At the same time, we strengthened our position as strengthen their market position as a full-stack developer of digital business and a recognized expert in ERP systems and business processes. In the futute, this combination will be even more relevant for Bilot and will make us even more competitive as a digitization partner for large and medium-sized companies, in particular. The integration and our common offer have been received positively by our customers.
The integration of CastorIT and Bilot has progressed as planned, although we have lived in exceptional circumstances and worked almost entirely remotely. Our values and the way we operate are very close to each other, which provides a good basis for reconciling corporate cultures: We both have the courage to be pioneers and are committed to an excellent level of service. We have reformed our management team so that we can more closely weld the expertise of Bilot and CastorIT together and create a common operating model in which we want to incorporate best practices from both companies.
I look forward to the future with confidence. We believe that the software development and digital business markets are gradually recovering from the corona pandemic. In the long run, the digitalisation leap accelerated by the pandemic will further strengthen demand for Bilot’s offering based on digital business, customer experience, and process and platform excellence. With CastorIT, our expanded customer base and service offering also better protect us from market disruptions.
The positive feedback we have receive from our customers provides an excellent starting point for 2021. It shows that we have succeeded in our goal of being an enabler of change and a strategic partner for our customers. Our mission is to improve our customers ’commercial excellence by developing a superior service experience. We are well on our way to our vision of being an internationally recognised pioneer in the digital customer experience. I would like to express my warm thanks for the past year to our customers, employees and shareholders. The year 2020 showed our strength and ability to cope with difficult conditions. At the same time, we also initiated a lot of new things, which will take us far into the future.
The Half-Year Report 20.8.2020: MEDIUM-TERM OUTLOOK AND GROWTH TARGETS UNCHANGED IN SPITE OF THE PANDEMIC
“Our listing in early March on the First North Growth Market Finland marketplace maintained by Nasdaq Helsinki Oy fulfilled our expectations in spite of the coronavirus pandemic: the initial public offering (IPO) was oversubscribed by more than fivefold and brought some 4,000 new shareholders to Bilot. Our personnel were also active in participating in the IPO.
The successful IPO was proof that investors have confidence in our strategy as well as the future outlook of the IT industry and the business opportunities presented by the digitalisation, even in these exceptional times.
While the long-term outlook for our industry remains strong, the coronavirus pandemic created a market disruption that also affected Bilot’s financial performance. Our revenue and profitability for January–June decreased compared to the corresponding period last year.
Among our customer base, the cost saving programs and cautious approach to new investments caused by the pandemic slowed down the implementation of our growth strategy. The execution of the company’s internationalization strategy continued in Poland and Sweden in spite of the pandemic.
The coronavirus crisis has driven many industries to initiate adjustment measures and cuts in external service purchasing, and some of Bilot’s customers have also been forced to postpone decisions on starting projects due to the prevailing uncertainty. Projects have mostly been delayed and services have been temporarily adjusted, which means that agreements have not been definitively cancelled. I want to take this opportunity to thank our customers for their cooperation and flexibility in the face of the mutual challenge. One positive aspect of the coronavirus spring is that it reinforced our view of the strong relationship of trust between Bilot and its customers. Much of the credit also belongs to Bilot’s employees, whose commitment, flexibility, and ability to take responsibility were further highlighted in the exceptional circumstances.
The pandemic has affected demand to varying degrees in different customer segments. In certain customer segments, the decline in the demand for IT services began suddenly already early in the spring, while in others, the effects of the global crisis were barely noticeable even at the end of the review period, as projects continued largely as before. We believe that the situation will return to normal gradually as the market recovers and we expect demand to recover at slightly different rates in different industries. The suspension of development projects due to the pandemic has created a backlog in development projects among our customer base. Based on our experiences from previous economic downturns, we expect that this backlog will start to clear rather quickly when investment confidence among customers returns, provided that the restrictions caused by the coronavirus pandemic are gradually lifted. Early signs of this were already evident toward the end of the review period.
We will continue to operate in accordance with our strategy and ensure that customer deliveries and our operating activities continue with minimal disruption. To protect the health of our employees and customers, we switched to remote work at all of our offices in mid-March. The shift to remote work has not had a significant impact on our productivity or service production.
To prepare for the potential prolonged uncertainty, we initiated temporary adjustment measures concerning our personnel in April. This took the form of part-time temporary layoffs that concerned part of our personnel, and no employees were made redundant.
We continued the active development of our offering and services under the exceptional circumstances. While the dip in our customers’ investment activity was reflected in the project business, we also won new accounts. In the spring, we also started the largest acquisition process in our history, leading to an agreement signed by Bilot in August on acquiring the share capital of CastorIT. This acquisition will make us even more competitive, particularly as a digitalization partner for large and medium-sized companies. The use of our own shares to pay the acquisition price helps engage the commitment of the key employees of the acquired company and leaves the company’s strong cash reserves to be used for potential future acquisitions.Predicting the coming months is difficult: the market situation remains challenging and a potential second wave of the coronavirus pandemic may still lead to uncertainty in the short term. Nevertheless, our medium-term outlook and competitive advantages remain unchanged in spite of the impacts of the COVID-19 pandemic.
We are confident that Bilot is in an excellent position to achieve profitable growth in the future. We have a large and growing customer base, a diverse service portfolio and strong partnerships. Our employees are leading experts in their field. In addition to benefiting from internationalization and operating in a high-growth market, the CastorIT acquisition will bring in more than 60 new colleagues and an even more diverse service portfolio, enabling us to offer an even broader range of digitalization services and solutions for various stages of the customer path.”
The Marketing Brochure IPO 2.3.2020: CEO’S GREETINGS
Nine years ago, I got the opportunity to get involved in a unique journey to develop Bilot which was promisingly poised for growth.
Bilot was born in 2005 out of a passion for creating the best workplace for the best talent within the industry. The core concept was to found a software and IT services company where people work genuinely together as a team and committed to helping clients accomplish their goals without feeling overwhelmed by the responsibilities of a forerunner.
It was easy for me to relate to the company’s enduring values, customer-centricity and committed attitude. At that time, Bilot already had a respectable number of large and loyal customers for whom we implemented demanding IT projects by improving decision maker’s data excellence and enabling better sales and business processes.
After 15 years of profitable growth, the customers we had then are still with us. Our strong foothold in the Finnish IT services market is testimony of the appreciation of our broad, loyal and expanding customer base and of our good reputation.
Our recipe for success works also abroad. In 2014, we started our internationalisation in Poland, where we entered a large and rapidly developing market with growing demand for Bilot’s offering. Last year, we launched our business activities in Sweden and our start there has been promising.
Despite all this, we are not widely known. We have focused on our core business while letting others make a racket. We are humbly proud of our success but we feel that it is simply the result of delivering on our promises and being trusted on. We are known for our top-level expertise and for tackling even the most challenging projects without compromises.
Our vision is to be an internationally renowned forerunner in digital customer experience as well as a strategic partner to our clients. We want to be known for our ability to identify the most important innovations and translate into competitive advantage for our customers. We have systematically expanded our range of solutions and services focusing market-leading software. We have executed on our growth strategy with steady determination and the IPO is the next logical step in making our vision a reality.
We are well poised for the next growth phase in an industry that has enormous potential for leveraging online trading between businesses, digital customer experience, data, artificial intelligence and advanced analytics.
Our versatile expertise and broad service portfolio, growing customer base, strong partnerships and our clear growth strategy are excellent qualifications for success. Above all, our success stems from our outstanding experts. Approximately one third of our personnel also own shares in the company. We are committed to actively developing the company in the future as well.
The first and most important goal of the IPO is to support our strategic growth, facilitate our internationalisation, support the expansion of our service offering, improve our recognition and to sustain our reputation.
I invite you to join us in writing the next chapter in the company’s growth story. So seize the opportunity and invest in digital business!