3stepIT Annual Report 2020 design review June 18 v2 - Report - Page 53
Report of the
Board of Directors
Risks and risk management
The COVID-19 pandemic has had a significant and
far-reaching impact on the global business operating
environment. This unprecedented volatility required the
Group to put in place a number of scenario plans to ensure
the continuity and resilience of our business throughout 2020.
COVID-19 will remain the overriding risk factor for our
business, and others, throughout 2021. With the international
roll out of the vaccine underway, there is some cause for
optimism, however, visibility over future business performance
remains short-term, as uncertainty continues to impact global
trading and business operations. There is still a lack of clarity
around the breadth and duration of business disruptions, but
we continue to actively monitor the extent of the impact to our
operations, financial accounting and reporting.
However, these circumstances have also shifted market
behaviour, with increased demand for both new and
refurbished IT devices, as businesses worldwide made a rapid
and unplanned transition to remote working. This fuelled an
already growing trend towards digital transformation and
mobility, with the PC market recording double-digit growth
and global shipments growing 19.7% year over year . At the
same time, global supply chains have been disrupted, putting
pressure on manufacturers to meet increasing volumes and
placing heightened value on refurbished IT.
Despite the global disruption, we continue our focus
on growing our core IT-related portfolio. Crucially, our
refurbishing centres have been able to remain open and we
have not been impacted by people shortages or supply issues.
Having established a new associated company in 2019, BNP
Paribas 3 Step IT opened three greenfield countries in 2020,
in Germany, Belgium and Netherlands. This now brings the
total number of operating countries to six, including France,
Italy and UK. The associated company will further expand its
activities during 2021.
Group financial overview
The Group acquired 523 new customers and Group revenue for
the year decreased by 3.3 per cent.
The Group's revenue decreased from 685.4 million euros
in 2019 to 662.6 million euros in 2020. Business in Finland
decreased 2.4 per cent to 337.5 million euros, while revenue
from international operations decreased 4.2 per cent to 325.1
million euros. Group EBITDA decreased 13.2 per cent to 30.1
The Group’s revenue decrease was due to the sale of the UK
business in January 2020 to the associated company, BNP
Paribas 3 Step IT. When adjusting for the effect of the sale of
the UK business, total Group revenue increased by 0.4 per
cent vs 2019.
While some customers delayed renewal decisions in the
current environment, strong remarketing trading performance,
with improved margins and tight control of costs, led to a YTY
increase in operating profit.
R&D focused on a refresh of our asset management tool, with
the development of a new version, called Asset IQ®, continuing
throughout 2021. 2020 R&D costs came to EUR 1,842,257 (EUR
3,856,590 in 2019 and EUR 1,699,171 in 2018); equivalent to 3.4
per cent of operational costs (6.9 per cent in 2019 and 3.7 per
cent in 2018).
The outlook is positive for the leasing industry, as people
continue to make the shift away from the traditional CAPEX
model of IT acquisition towards an as-a-service model.
Capitalising on this mega-trend has been part of our strategic
planning for some time, as has the growing influence of the
circular economy on business-critical IT decisions.
The company carries a residual value risk for leased assets. At
the end of the fiscal year, the total exposure was EUR 94,206,115.
Residual value risk is controlled by the Group’s management
team monitoring the development of the market price of
used IT assets compared with anticipated residual values and
continued focus on the efficiency of our refurbishing activities.
End-of-lease revenues developed as planned during the
financial period. 98 per cent of IT devices returned to 3stepIT
after the leasing period were remarketed for reuse.
There have been no significant changes in business activities
after the end of the financial period.
Following an unprecedented year in PC sales in 2020, growth
in the market is expected to slow in 2021, to more stable levels
of single digit growth . The fundamental shift in working
practices will see continuing energy in the technology market
as private business and public enterprise, such as education,
continue to manage the shift.
Growing support for sustainable IT consumption also provides
momentum for the business. As the intensity of the public
opinion grows in favour of action on the climate crisis, the
corporate world is increasingly seeking partners that can
provide sustainable solutions, like our technology lifecycle
management service offer.
Of course, industry supply constraints may affect our business
in various ways. For example:
• Delayed orders delay the start of new business financing.
• Delayed orders force customers to extend their rental
contracts while awaiting refresh products.
• Delayed refresh plans reduce the flow of returned devices for
However, we remain cautiously optimistic about our ability
to mitigate the impact of the global pandemic and continue
our focus on growth of our core business, and through our
associated company BNP Paribas 3 Step IT.
IDC Corporate, Device Market Trends, Personal Computing Devices, ‘https://www.idc.com/promo/pcdforecast’
IDC Media Centre, “The Surge in PC Shipments Is Not Over…”, Dec 2020, ‘https://www.idc.com/getdoc.jsp?containerId=prUS47058120’