Good day, and thank you for standing by. Welcome to the Columbus Annual Report 2021 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a Q&A session. To ask a question during the session, you will need to press star one on your telephone. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link any time during the conference. Please be advised that today's conference is being recorded, Wednesday, the 16th of March 2022. If you require any further assistance, please press star zero. I would now like to turn the conference over to your speaker today, Søren Krogh Knudsen. Please go ahead.
Thank you, operator. Yes, my name is Søren Krogh Knudsen, and I'm the CEO and President of Columbus. I'm joined here today by Hans Henrik Thrane, who is our Group CFO. First off, thank you for joining this afternoon. We look forward to taking you through the 2021 financial results and some very recent updates on our company. If we just go to slide four, I will walk you through the running order of business or the agenda. At today's call, we will start by giving you an update, a very recent update, on our activities in Russia. Following that, we'll be looking at the milestones and financial highlights of 2021.
Hans Henrik will share the full financial review of 2021 after that, and then we will end the presentation with an outlook for 2022, with some long-term guidance, followed by a Q&A session. Yes. Okay. Let's go to slide five to begin the presentation. The first agenda item is an update on our operating activities in Russia. As a consequence of Russia's invasion of Ukraine, Columbus has been investigating options to exit the Russian market. As of today, we have entered into an agreement with the management team whereby we hand over 100% of the ownership of the Russian business to the management of the Russian business.
The agreement is effective as of today and means that the Russian business unit will cease using the Columbus brand immediately. We do consider the handover of the Russian business unit to the management group in Columbus, Russia, the best solution under the given circumstances. With the agreement, we secure a very rapid disentanglement, a complete disentanglement of our Russian activities, and we still think it's the most responsible solution we can give to our former 213 Russian colleagues. The agreed purchase price is DKK 2 million, which will be paid to us in year five and year four after closing, so in two installments.
In 2021, the revenue we saw from the Russian business unit was DKK 68 million, which was 4.5% of group revenue. However, since then, the exchange rate for the ruble already prior to the invasion had gone down by quite a lot. Now after the invasion, of course, that has diminished what we could look into as revenue stream for 2022 in the first place. Somewhat softening the effect. Due to decline of the ruble since the beginning of the year, the carrying value of the Russian business has also declined, of course, from about DKK 20 million- DKK 11 million.
With the agreed purchase price of DKK 2 million, the negative impact on group equity will be DKK 9 million. That is our update on Russian activities. We continue to provide support for associates and their families in Ukraine, and we'll be further looking into that in the hours, weeks and months to come. Moving on to slide six. The milestones and financial highlights of 2021. 2021 was in many ways, including Russia that we just talked about, a year of transformation for Columbus. It was the first year of the Focus23 strategy with the ambition to become a trusted digital advisor for larger enterprise clients in the retail, food, and manufacturing industries.
During the year, we've implemented major changes to our organizations to streamline our business and increase our operating efficiency. Part of focusing our business has been the completion of key divestments. In January, we divested our software company To-Increase in the Netherlands. We've divested some two smaller units in the Baltics. In November, we sold off our small and medium business segment in the U.S. As of today, we have sold the Russian business unit in its entirety, leaving us to focus on our core geographies. In April last year, we also launched a new customer-centric organization, a complete new operating model with global business lines and local market units, rather than just the strong local market units.
This new operating model allows us to apply our global strengths much better. We can basically leverage our global solutions and drive a higher degree of customer focus across the entire organization. In short, we are creating a much more of a One Columbus, one unified Columbus to allow us to operate at scale. To support this new organization, we also implemented a complete new global ERP platform, which is now operating. The new platform has increased our level of financial transparency and our ability to control the business. It also allows for a much better cross-group utilizations between our service units and market units.
The effect that we're looking for here is, of course, to improve the efficiency or the, if you will, the billing rates of the company further, and we're already seeing some of that improvement in the 2021 results. During 2021, we also launched our new company values, which I will just come back to as a separate topic a little bit later. Just from my side, looking into the 2021 financial highlights, we did realize a revenue of DKK 1.482 billion, and that does correspond to an organic growth of 5%.
While the year started actually with negative growth in Q1, if you remember, we did see quite significant growth of 11% in Q3 and 15% in Q4. We are gaining some momentum, and we're really happy to be back at delivering organic growth after I believe many years. This is a core part of the Focus23 strategy. The normalized EBITDA increased by 22% from DKK 90 million- DKK 109 million, resulting in an EBITDA margin of 7.4%.
I think given the transformational efforts that we undertook in 2021, we are satisfied with the EBITDA margin level as expected by us. I would say all in all, as a management team, we consider the consolidated results for 2021 in line with our expectations. Most importantly, we can see ourselves now being back in organic growth and a clear path to further improvements. Coming back to the values, I think it's important to start with that we have always been, but we are even more so today, a people business. So our entire business is built on talented people. We're serving customers all over the world.
The values of our company is extremely important to these people. With many acquisitions during recent years and a new strategy, we saw a need to strengthen our One Columbus culture across the globe. Therefore, we launched and completed a global values program to define our common values. With the program, we identified and adapted four core company values. The first one is to stay curious. The second one is to collaborate. The third one is to build trust. The fourth one is to deliver, to be very focused on delivering customer success, which is both our success with the customer and the customer's success with the products we deliver.
I think all of these four make perfect sense on their own, but for us, they probably make more sense because they also represent some strong improvement areas for us, and they're completely necessary for us to deliver on our strategy going forward. We're all very excited about the result of the program, and especially I think we as management team have been impressed by the commitment and great level of involvement from almost all of our 1,800 employees. This has been a bottom-up exercise with involvement from all our employees. Basically, all we had to do was synthesize the result and present it back. It's really owned by the organization rather than just being defined by us and communicated.
Now, of course, the next step will be to fully live by at all times, and I think we've tested that today with our decision in Russia to live these values. Also we're working on expanding them into some very firm leadership principles that our leaders across the firm can operate by. That should further drive speed and the ability to have decentralized and sound decision-making all over the company, so nobody has to wait for us. I will now hand over the presentation to Hans Henrik Thrane, who will cover the financial update in detail.
Thank you, Søren. Yes, as on slide eight, you have the overall income statement.
As mentioned, revenue also grew organically by 5%. Service revenue rose by 7%. As this is a strategic focus areas, this is where it is important to us to grow our business. Other external costs decreased by 10% to DKK 123 million. This reduction is primarily related to lower costs for external consultants and less internal travel as 2021 was also a year heavily impacted by COVID and work from home and much less travel. Columbus realized a profit before tax of DKK 55 million, an increase of DKK 21 million compared to 2021.
The increase is driven by EBITDA growth as well as less financial expenses due to less currency adjustments in 2021 compared to 2020. Profit after tax from discontinued operations amounts to DKK 697 million in 2021. That of course sort of overshadows the remaining results. The results from this what is called discontinued operations is by and large the realized gain from when we divested our software business in January 2021. Now we move to the next slide, to slide nine, where we see growth in service business. Again, service revenue increased by 7% to DKK 1.3 billion.
In the above chart, you can see the service revenue split in our global business lines. The biggest growth rates are delivered by Digital Commerce, Data & Analytics, and Customer Experience & Engagement. They are still incumbents or small business lines, but they are growing heavily. In general, the increase is driven by all our business line, and I will shortly sort of go through each of them. Cloud ERP, the biggest one, grew by 1.1% to DKK 689 million. This business is covering what we call both our Dynamics 365 and our M3 Cloud ERP businesses.
The small growth is mainly due to lower M3 revenue in Sweden that was offset by strong growth in Dynamics 365 business in Norway and Sweden. Columbus Care delivered a growth of 7.3% to DKK 261 million. The revenue growth is mainly from increased revenue in Norway and U.K. Digital Commerce growing 22.7% to DKK 157 million is actually coming from all our markets. Data & Analytics increased by 16.1% to DKK 38 million, and here the revenue is driven by Denmark, Norway and Sweden. Lastly, Customer Experience & Engagement grew by 26.3% to DKK 30 million, and this revenue increase is delivered by Norway, Sweden and the U.K. Next slide. Now back to sort of the
Now back to our what we call the recurring revenue. Recurring revenue rose by 12% to DKK 390 million. The recurring revenue now constitutes 22% of total revenue for 2021, an increase of 2 percentage points from last year. Year to date, the development in the recurring revenue shows good overall progress. Cloud products grew by 41%, and Columbus Care contracts, which is our service contracts, they grew by 19%. However, the subscription declined by 10% as these are related to the old perpetual licenses and is part of the overall cloud conversion. So this is an expected development then that the subscription part will continue decline over time. We consider the overall development in our recurring revenue satisfactory.
Now we move to the next slide. This customer work is our biggest KPI in our service business, and our chargeability increased from 54% last year to 57% in this year or in 2021. This sort of KPI is a very important driver for both growth in our service business but also our overall profitability. During 2021, we have onboarded many new colleagues while continuing to increase the customer work. The explanation is a strong focus on fast onboarding and a steep learning curve, which ensures that many of our new consultants were quickly able to deliver on customer projects. We consider the development satisfactory. Now I move on to Markets & Units on slide number 13.
Now when we look at the business from a geographical point of view or market point of view, you can see that especially our market unit in Norway delivered a strong revenue growth of 47%. The way we show the market numbers here is the revenue in the market, and not sort of revenue across markets from one legal entity to another. This is purely revenue in the markets. Our U.K. business also delivered growth in 2021. However, Sweden and Denmark did not deliver as expected. In Denmark, we have been challenged in both our Cloud ERP D365 business and in our care business, where two large contracts were discontinued. In Sweden, we have been challenged in our Cloud ERP M3 business.
During 2021, we have invested heavily in reversing this trend, and we actually here in the beginning of 2022 see a turn of the trend, as we start seeing growth in both Sweden and in Denmark for the first two months of 2022. The growth in Columbus Norway is mainly driven by our baseline Dynamics 365, Columbus Care and digital commerce, but all business lines are growing. All EBITDA normalized has increased by DKK 20 million, and the increase is primarily driven by increase in the U.S., where EBITDA increased by 66% due to cost adjustment of the business after our divestment of the SMB business mentioned by Søren earlier in this call. That was sort of the walkthrough of our P&L and our segments.
Now I'll hand back the conference to Søren.
Thank you very much. I will now cover the outlook for 2022 on slide 15 as the last topic just before we go to questions. 2022 will be focused on bringing our operating model further to life. As I said, we've invested in this in sort of rewiring our operating model completely. As we bring that to life, that's our way of driving further organic growth. We will also continue our focus to streamline the operations further and bring up the efficiency and profitability of the company.
As Hans Henrik just showed you before, the increase from 54%- 57%, so 3 percentage points in what we call customer work, which is sort of the chargeability of everything we have, not just the consultants. We need to drive that further north. We will expand and grow our key solutions into more of our geographical markets. There's a significant potential in that, and we'll focus on growing a broader range of our business-critical solutions portfolio. We also continue to invest in building our digital advisory capabilities. That's a bit of a longer-term investment for us. We need that to roll out in more areas of our business. We also develop propositions around sustainability, which our customers show us there's a big demand for.
Columbus ambition during the current strategy period is to gradually increase our profitable growth to a minimum of 10% annually by 2023. It's a level that we're starting to hit as of Q3 last year and Q4. We can see ourselves landing on that level. The revenue now excluding Russia next year is expected to be in the range of DKK 1.525 billion-DKK 1.625 billion, corresponding to an organic growth of 8%-15% respectively, and that's excluding now Russia, which we've just removed today from the numbers.
Now the EBITDA is expected to be in the range of DKK 120 million-DKK 145 million, which corresponds to a growth of 16%-21%. That concludes the guidance and outlook for 2022. With that, I think we should open up the lines and I think the chat room has been open all the time, and take any questions.
Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, please press the hash key. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link. Once again, if you wish to ask a question, please press star one on your telephone. There seems to be no questions from the phone lines at this time.
Okay. Let me just read out Michael's. Hello, Michael, and I'll just read out your question aloud. Thanks for the business update. Can you please talk about the business potential you see within digital sustainability, and to which extent we should anticipate this to be an important growth driver going forward? Right. Michael, what I would say is that, so obviously sustainability as a general topic has a lot of traction everywhere right now. And given the nature of one of our biggest business area, you know, the three letters ERP, Enterprise Resource Planning. I guess we've always been involved in sort of the agenda of being more efficient and reducing waste. And we're just seeing.
I would say we're seeing an increased demand and interest in this, but it's also a different way of positioning our projects to the clients. So overall I do see it as a growth driver, but I also see it as sort of a tweaked agenda for many of our customers that they continuously need to demonstrate that they're doing everything they can to operate more in a more sustainable way. Our systems can help them to improve there, and our systems can also help them document it. Many of them are undergoing much more rigorous requirements for reporting, and those reports can come out of our systems. Then Doug is asking us, well, that's a good question. Will we go north of 60% in 2022?
You want that one, Hans Henrik Thrane?
Yes. We are considering sort of changing that KPI to sort of an efficiency. If I translate it into this metrics we're showing here, it is definitely going to be improved by another three percentage points for 2022, because that is a key focus areas to improve both the growth and the profitability.
Yeah.
A clear yes.
Yeah. I would agree. The answer is definitely yes, Doug. I think I'll just spend a minute in trying to explain what we're after here. The customer work percentage, which you're used to seeing, and we will continue to provide it, but it basically covers two things. It covers the efficiency or the chargeability of all the resources that we have that are meant to be used as chargeable resources. But it also tells you something about our overhead percentage, and it's all crammed into one number. That's why if you see improvements, you can't know exactly whether it was due to better chargeability or lower overhead.
As we go forward, we will also be presenting you with a more raw version, which tells you what's the efficiency of everybody who's meant to be invoiced towards the customers. That will be a much higher number, and then we will provide you with an overhead percentage, which you can then evaluate separately. That was a very long one.
Yeah.
Given that you answered yes to the question.
Very good explanation.
Can you put some word on the loss of the big contracts in-
Okay. Contracts.
-Denmark? What was the reason, and do you know which supplier took over? Can you-
Yeah. I think one of them was due to a customer that went on SAP, so sort of left the technology we sort of are supporting. I simply cannot recall the reason for the other one. The one converting to SAP was also the biggest one.
Okay.
Yeah.
I will read this one so you can think about it because it's for you.
Yes.
Anton. Like, a request for you. Again, in 2021 but also in 2022, divestments will change the historical numbers, making it difficult to know what to expect in quarterly revenues and earnings for the coming quarters. When you make transactions impacting historical numbers, could you please then report related, or restated numbers for the last eight quarters in the connection? That's from Michael again.
Thank you, Michael. You have asked this question earlier, I remember. We have taken notice of your ask, and it is important that we show this transparency. The honest reply here is that with all the transactions we've been through and key personnel on parental leave, it has simply not been possible within the time available to produce these restated numbers. I will put it on our to-do list so we can provide it going forward, Michael. We help ease the reading of our reports.
Right. I think we're at the end of time. If there's one last question, we will take it.
If you wish to ask a question, please press star one. There are no questions.
All right. Okay. I thank you all for your time this afternoon. I think there was a lot of events falling into place just before this call. If you have any further questions, sort of once you've had sufficient time to digest that, Anton, Nick and I are more than happy to take individual conversations with you as well. All right. Thank you and we wish everybody a good day.
This concludes today's conference call. Thank you for participating. You may now disconnect.