The element that distinguishes the results of 2021 from the previous ones is the contribution of the financial profit to the gross profit: if in the previous years the financial activity generates costs, which were deducted from the operating result, generating a lower gross profit than the operational one, in 2021 the investments made in previous ones have borne yield – generating financial profits that have increased the profit generated from the current activity:RON 9.1 million as a financial profit, and a RON 7.3 million-worth operational profit.
|
2021 |
2020 |
|
| Operational |
7.345 |
5.930 |
| Minority shareholding |
775 |
-171 |
| Financial |
9.115 |
– 2.700 |
| SOP adjustment |
– 1.067 |
– 1.574 |
| Gross profit |
16.169 |
1.485 |
We believe that a successful investment activity can significantly enhance both the group’s growth plan and, above all, generate a state of anti-fragility. The accounting regulations strictly stipulate how the investment results are accounted for, having the potential to sometimes generate significant fluctuations of these values “on paper”, in a very different way from how investors naturally expect this activity to be accounted for by Profit.”
Here are some examples: the investment made by the Group in the Gecad Net company in 2017 cost RON 2.2 million, which I recovered from the sale of the Autodesk division to Graphein in 2021. We thus have recovered our investment and we still have a company that brings in revenues of RON 90 million and an operating profit of 5 million. From the point of view of the capital we have ‘at risk’ we could consider it an infinite return! A similar situation is encountered in the case of the investment in the Elian company, where the dividends received so far exceeded the value of the amount initially paid, but we continue to have a functional and profitable company.
In the case of Softbinator, we recovered in 9 months two thirds of the amount paid in cash, and we continue to own 19% of a listed company, valued at RON 80 million. If the market value of CODE shares decreases over a certain quarter, it will be accounted for as a financial loss in that quarter, even if we do not sell any shares. On the other hand, if we analyse the situation of any investor in the personal portfolio – we paid approximately RON 1.35 million for our holding of CODE shares, so in fact any sale would be profitable.
In the case of GRX, we paid a first tranche of 5 million RON to the founders, and we recovered from other investors almost RON 3.5 million, keeping another 60% of a company with RON 8 million consolidated income and RON 4 million profit. Our investment position is very solid instead, with very little downside and very much upside.
One of the ideas encountered in the public space is that the results of 2021 are positively influenced by unique elements – one-off type. In the above we have shown that although any sale of assets is unrepeatable in itself, the fact that we have a continuous investment activity continuously generates opportunities, and strengthens and enhances the financial results. Within our group the activity of capital allocation has always been a strong differentiator, and we consider it to continue to be an important element in the future, even if not one with linear results.
The following is worth mentioning with respect to the operational results:
|
31.Dec.21 |
31.Dec.20 |
Evolution |
|
| Revenues from contracts with clients |
112,590,990 |
109,191,760 |
3.1% |
| Revenues from the provision of services |
38,634,040 |
32,064,815 |
20.5% |
| Sale of goods |
73,956,950 |
77,126,944 |
-4.1% |
| Cost of sales |
88,112,151 |
87,725,366 |
0.4% |
| Cost for selling goods/materials |
63,928,560 |
69,182,472 |
-7.6% |
| Cloud services |
5,491,123 |
5,178,219 |
6.0% |
| Staff expenditure |
18,692,467 |
13,364,674 |
39.9% |
| Gross margin |
24,478,839 |
21,466,394 |
14% |
| Other revenues |
4,071,104 |
451.828 |
801% |
| Sales/distribution expenses |
9,534,117 |
7,508,988 |
27% |
| Staff expenditure |
7,728,820 |
6,369,092 |
21.3% |
| Advertisement |
1,805,297 |
1,139,895 |
58.4% |
| Administrative expenses
(out of which) |
11,670,416 |
8,478,631 |
37.6% |
| Staff expenditure |
4,910,400 |
4,572,116 |
7.4% |
| Amortization |
2,388,267 |
1,993,939 |
19.8% |
| Other third party services |
2,301,778 |
957.998 |
140.3% |
| EBIT |
7,345,410 |
5,930,604 |
23.9% |
- Revenues from customer relations increased by 3% to 112.6 million, and the focus on services generated a much faster increase in gross margin – by 14% – to RON 24.5 million. We have shown many times how this multiplier effect works, so we will not explain it again, it is only worth mentioning for shareholders who notice the effect for the first time, as a reading suggestion – because it is one of the reasons why we are constantly looking to increase accelerated.
- Within direct expenditures, there is a significant increase in human resources costs (“resold hours/worker”) – by 40% aggregate, which is composed of an increase of 63% in the education division, and 30% in within the technology division. For the Education Division, RON 2 million out of 2.6 million difference come from the fact that the expenses from Equatorial and CLC were not consolidated in fiscal. In case of the Technology Division, the nominal increase of RON 2.7 million is mainly generated by the addition of RON 1.8 million costs from companies that previously did not enter into consolidation. The rest of the evolution is given by the increase by 12% of the hourly rates we pay.
- Sales costs increased by 27%, mainly influenced by the education division, where the increase is 64% in the case of expenses related to the sales team (from RON 1.7 to 2.8 million) the significant increase in the number of human resources involved (additional amount of RON 200.00), the inclusion of new companies in the consolidation perimeter (additional amount of RON 250,000 ) and the increase in hourly rates. Plus an increase of 85% in marketing expenses, up to RON 1.1 million.
- Within the indirect, administrative expenses, there are two elements with a significant positive evolution:
- Increase in depreciation from 557 thousand to RON 1.3 million in the case of the education division – with the inclusion in the consolidation perimeter of Equatorial Gaming, which records expenses with the amortization of various games
- Increasing the position of “other services performed by third parties” – from RON 1 to 2.3 million, amid the costs of accounting and auditing from RON 300 thousand to RON 700 thousand , but also the costs related to the internal IT infrastructure from RON 260 thousand to RON 525 thousand.
As a result, the operating profit increased by 24%, to the value of RON 7.35 million – we consider that this evolution confirms the trend started after 2019 – when we “digested” the largest acquisition so far – Crescendo. We mention that there is no year in which you have not registered an operating profit!