The 2019 consolidated accounts have been reviewed by our statutory auditors. Their certification report has been issued after finalization of the procedures required for the Annual Report.
Statutory auditor’s report on the consolidated financial statements
A new year of double-digit growth, like for like:
Revenue up 17% and Operating Profit up 44%.
The solidness of Sidetrade’s SaaS model is expected to generate continued growth and profits in financial year 2020.
More than ever, cashflow is the lifeblood of business.
Olivier Novasque, CEO of Sidetrade, had this to say:
“Over the last twenty years, we have ceaselessly built our company on solid foundations. Despite the impact and uncertainty of this crisis, our robust SaaS model is expected to continue delivering high growth and profitability in 2020, which, under the circumstances, would be a victory indeed. The period we are going through is a unique opportunity to demonstrate the resilience of our business model.
What’s more, the crisis is acting as a catalyst for a change that has been underway for nearly a decade: all digital has become the new normal. In this new paradigm, finance teams are the front line in ensuring cashflow, the lifeblood of their companies. More than ever, they are realizing that the latest AI technologies are essential tools to develop digital interactions with their customers and speed up payment. Sidetrade is actively preparing the business community to bounce back, since order-to-cash management is going to be a matter of survival in coming weeks and months.”
A new year of double-digit growth, like for like: revenue up 17% and Operating Profit up 44%.
| SIDETRADE (MILLION EUROS) |
2019 | 2018 | VARIATION (%) |
|---|---|---|---|
| LIKE-FOR-LIKE REVENUE | 25.7 | 22.1 | + 17% |
| BTOC SERVICES | – | 2.0 | – |
| ANNUAL REVENUE | 25.7 | 24.1 | + 7% |
| LIKE-FOR-LIKE OPERATING PROFIT | 2.3 | 1.6 | +44% |
| BTOC SERVICES | – | 0.8 | – |
| OPERATING PROFIT | 2.3 | 2.3 | -3% |
| NET PROFIT | 2.2 | 2.2 | +1% |
In 2019, the booked Annual Recurring Revenue (ARR) from new customers shot up 88%, hitting a record level of €4.8m in new annual subscriptions vs. €2.6m in 2018. These subscriptions provide visibility for Sidetrade’s revenue growth in 2020 and beyond.
Sidetrade’s annual revenue totaled €25.7m, representing remarkable organic growth of 17% vs. 2018, like for like. Let us recall that Sidetrade revenue no longer includes B2C Services, since this business line was phased out, as announced in 2018.
This phenomenal sales growth was buoyed by the core Financials AI business, which reached €21.3m in 2019, up 17%. This acceleration reflects the attractiveness of the latest release of the Financials AI platform. Sales & Marketing AI business is also growing steadily, up 17% in 2019.
Operating profit exceeded expectations (up 44%)
Operating profit reached €2.3m in 2019, up 44% vs. the previous year, like for like. This great performance can be explained by a €2m increase in gross margin, which reached 78% of sales. SaaS subscriptions contributed 94% of this gross margin, confirming the incremental profitability of Sidetrade’s pure SaaS business model.
In 2019, Sidetrade invested an additional €2m in sales and marketing resources to uphold the company’s remarkable growth. In R&D, 2019 saw the convergence of three Sidetrade technologies, further enhancing efficiency.
Earnings incorporate a research tax credit of €2.1m (vs. €1.9m in 2018), as well as activation of €0.25m in marginal R&D expenses (virtually identical to 2018).
A solid financial structure on 31/12/2019
Sidetrade maintains a solid financial structure with gross treasury of €5.3M and financial debt kept down to €0.3M. Sidetrade held 103,000 of its own shares at a value of €6.9M as of 31 December 2019.
Despite the Covid-19 crisis, the robustness of Sidetrade’s 100% SaaS model is expected to drive revenue growth in FY 2020.
In an unprecedented period of uncertainty, Sidetrade has already finalized several budget scenarios in order to test its financial solidness, faced with the impact of the Covid-19 pandemic. Given the severity and scale of the crisis to date, Sidetrade has made extremely conservative hypotheses to construct a “stress test” scenario and adjust investments accordingly. Here were Sidetrade’s current business assumptions:
- Drastic reduction (67% on average) in new subscription contracts (new customers) during the first three quarters of FY2020 vs. budget targets.
- Progressive return to normal, with new orders expected in 2020 Q4, which historically has had little impact on yearly revenue, given that subscription income is recognized pro rata.
Beyond this scenario, as a software vendor of 100% SaaS solutions, Sidetrade can count, more than ever, on the robustness of its subscription model to weather the crisis:
- 89% of revenue is recurrent, and based on multi-year contracts (41.1 months, on average).
- A record number of bookings in 2019 (88%, hitting a level of €4.8m in new annual subscriptions from deals signed in 2019) will have a significant positive impact on 2020 revenue growth.
- The exceptionally low churn rate in 2019 (3.9%) is expected to continue into 2020, in a setting where cash collection and credit management will be vital issues for all B2C companies.
For these reasons, Sidetrade management has every confidence in the firm’s capacity to grow revenue in 2020, despite even a worst-case scenario.
Investment adjustments to ensure a profitable year
In terms of expenses, Sidetrade is significantly scaling down investments originally planned for the present fiscal year:
- All budgeted hiring frozen until June 2020.
- Opening of US affiliate postponed until September 2020.
- All non-essential costs slashed until 30 June 2020.
These measures, already in force, are generating savings of well over €3m against expenses initially budgeted for 2020. The measures may be extended as needed.
To date, Sidetrade has not needed to use either the exceptional cash support measures made available by governments or the short time working scheme.
Rock solid finances in 2020
As of 24 April 2020, Sidetrade maintains a rock solid financial structure with gross treasury of €7.2m (vs. €5.3m on 31 December 2019). The company’s debt level is virtually nil. Moreover, if necessary, Sidetrade would be eligible for government-backed access to bank loans.
Let us recall that, as of 24 April 2020, Sidetrade still holds 103,000 of its own shares at a value of €6.5M.
In the present context of a global health emergency combined with an economic crisis of historic proportions, how are businesses behaving with their suppliers? Are they really showing solidarity, as they have been urged to do so since the start of the crisis?
To provide objective insights, Sidetrade is launching the very first unpaid invoice tracker, which will be published weekly. Freely accessible to all private and public sector decision-makers, the tracker serves as a score card to remind the business community of the importance of paying suppliers responsibly, so as not to worsen the effects of the crisis on businesses already in difficulty.
Pan-European tracking of late payment for decision-makers and public authorities
Week after week, the Sidetrade tracker reveals the payment behaviour of over 3.7 million enterprises in six European countries: the U.K., France, Spain, Italy, Belgium and the Netherlands. Since 1 January 2020, Sidetrade has analysed over 26 million invoices, amounting to €54bn in B2B transactions. This is a large-scale study, commensurate with the importance of the issue.
According to the experts, overdue invoices in Europe oscillate from year to year at around 10 days. In their study, Sidetrade’s data scientists considered only payment delays that were greater than this mean, i.e. payments more than 10 days overdue. They then retroactively calculated the ratio of late invoices to all outstanding invoices, week by week, since 1 January 2020, and determined the average unpaid invoices from the start of the year to 11 March 2020, when the Covid-19 epidemic was officially declared by the WHO. Deviation from this arithmetic mean up to 11th March is highlighted by the Sidetrade tracker.
An overview of unpaid invoices from the tracker
From 1 January through 11 March 2020, the Sidetrade tracker shows relative stability in late payment− around 20% for all of the countries analysed. Slight deviations in the pre-pandemic period are largely due to the timing of company invoicing and order-to-cash processes (e.g. start of month, end of month, decade). Average unpaid invoices for the period 1 January to 11 March 2020 is used to show how payment behaviour for a given week compares with that before the pandemic.
Needless to say, since 11 March 2020, payment delays have been skyrocketing. Rate of increase in unpaid invoices have shot up +23% in UK, +26% in the Netherlands, +44% in Belgium, +52% in Spain, +56% in France and +80% in Italy. The economic fallout for businesses corelates closely with the development of the pandemic.
An ongoing problem made worse
Let us recall that inter-company credit is a major factor in the economy. Across Europe, businesses are facing insolvency due to declines in revenue and delayed payment. One UK report argues a fifth of SMEs in the UK will collapse due to a lack of cash because of Covid-19. Separate research by the Federation of Small Business says 50,000 businesses a year go under because of delayed payments.
Delays in B2B payment have been an ongoing issue across sectors. Due to Covid 19, the problem has been exasperated. Research from Bacs, and commissioned by Pay.UK in 2019 found that the UK SME late payment debt has risen to a staggering £23.4 billion, up £10.4 billion on the £13 billion owed in 2018. On top of that, the research showed that UK SMEs are now facing a total bill of £4.4 billion a year, just to collect money they are owed. The average late payment debt burden has also increased to £25,000 per company, up from just over £17,000 in 2018. The statistics were largely based on B2B payments.
The UK Government’s Department for Business (BEIS) introduced new measures to tackle late payment in June 2019, including new powers for the Small Business Commissioner, and a dedicated fund to help SMEs purchase technology to help with payments. The Government’s Cabinet Office has also written to public sector bodies recently, telling them to pay suppliers despite the Coronavirus pandemic.