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Financial Review
Strong results in a challenging year

The Milestone Group achieved a successful outcome in 2020 given the hardships imposed on our business during the year by COVID-19. Invoiced revenue amounted to DKK 1.1billion, corresponding to a decrease of 4 percent. After adjustments for revenue deferrals and the impact of cash flow hedging and sales incentives, net revenue was DKK 1.0 billion. This is a decrease of 1 percent compared with 2019. Operating profit amounted to DKK 112 million, a decrease of 9 percent. Milestone considers this satisfactory considering the business impact of the ongoing pandemic on all regions.

Looking at results in our markets, 2020 has been a very special year. We surpassed expectations during the first two months of 2020. Soon after that, of course, the COVID-19 pandemic resulted in lockdowns with strong containment measures that have affected the business climate in all regions. Despite the challenging conditions, Milestone secured several large customer solutions during 2020, including the two largest solutions in company history. This shows a strong demand for our solutions despite markets and industries having been affected by the pandemic during 2020.

Invoiced revenue in the Americas region amounted to DKK 577 million, corresponding to an increase of 10 percent compared with 2019. The North American market continues to grow despite the difficult business climate. Milestone’s North American region has signed several key projects within the global technology, transport, and entertainment industry.

The Caribbean region and Latin America were impacted by the COVID-19 restrictions and we saw a minor slowdown in sales compared with 2019. A strong fourth quarter showed signs of the business climate improving.The Asia and Pacific region (APAC) continues to be severely impacted by COVID-19, with shutdowns throughout the region that have resulted in a very challenging business environment. Invoiced revenue amounted to DKK 102 million in 2020, representing a decrease of 35 percent compared to the same period last year. All sub-regions have been impacted, with India and Japan being affected the most. Conditions in the South Pacific have been better, with Australia and New Zealand landing several key projects within infrastructure and retail sector. Overall, APAC has remained severely impacted. However, towards the end of the year we saw signs of the situation improving.
Despite the challenging conditions, Milestone secured several large customer solutions during 2020, including the two largest solutions in company history.
In the Europe Middle East and Africa (EMEA) region, invoiced revenue amounted to DKK 435 million, representing a decrease of 11 percent. EMEA was significantly impacted by COVID-19 as a result of shutdowns across Europe. However, the business climate has been improving during the second half of the year and we have seen an emerging optimism.

Markets in Middle East, Germany and Switzerland showed strong growth in 2020 compared with the previous year, with these countries closing key projects within the government healthcare and the transportation sector. Whereas, the rest of EMEA has been adversely affected by the pandemic, with Southern Europe and emerging markets being impacted the most. The business climate in EMEA is improving, although we have not seen a full recovery yet.
Operating expenses
Operating expenses totaled DKK 856.4 million compared with DKK 843.8 million in 2019, representing an increase of 1 percent. The increase is mainly driven by higher costs for personnel and is a consequence of Milestone’s increased focus on driving an innovation agenda and the continued expansion of our sales force. This was partly offset by reduced travel, consultancy, meeting activities, and other staff-related costs due to the pandemic. Operating expenses amounted to 84 percent of revenue compared with 82 percent of revenue in 2019.
Research and development
Research and development expenses amounted to DKK 263.6 million compared with DKK 236.7 million in 2019. This corresponds to a growth of 11 percent as a result of investments in the number of full-time employees, increasing costs for consultants, and depreciation from capitalization of development cost.

Total research and development expenses correspond to 26 percent of net revenue in 2020, an increase from 23 percent in 2019.
Invoiced revenue (DKK million)
Distribution and sales costs
Distribution and sales costs amounted to DKK 506.8 million, compared to DKK 523.5 million in 2019, which represents a decrease of 3 percent. Milestone has continued to invest in building the right organization by adding several new members to our regional sales teams to expand for further growth. This was offset by COVID-19 significantly decreasing travel activities and the cancellation of some of our main marketing events. Total distribution and sales costs corresponded to 50 percent of net revenue, a decrease from 51 percent in 2019.
Administrative expenses
Administrative expenses amounted to DKK 86.0 million compared with DKK 83.6 million in 2019, which corresponds to an increase of 3 percent. The increased investment is driven by expanding our support organization together with projects shaping our company culture and our People First agenda. Total administrative expenses correspond to 8 percent of net revenue, the same level as in 2019.
Income and balance sheet
Operating income (EBIT) of DKK 112 million was recorded for the year, compared with DKK 124 million in 2019.

The decrease of 9 percent was a consequence of the ongoing pandemic impacting sales, the increase in our development capacity, and investment in new headcounts to fuel future growth. Profit before corporate tax was DKK 67 million in 2020, compared to DKK 130 million in 2019, corresponding to a decrease of 49 percent. The decrease in profit before corporate tax was predominantly a consequence of the decrease in US dollar to Danish kroner exchange rate. Milestone delivered a satisfactory financial result with profits in line with expectations despite the uncertainties as a result of the COVID-19 pandemic.

The total value on our balance sheet as of December 31, 2020, was DKK 1,546 million, compared with DKK 1,479 million on December 31, 2019. The total equity amounted to DKK 750 million at the end of 2020, compared with DKK 725 million at the end of 2019. Cash at bank and in hand as of December 31, 2020, was DKK 313 million, compared with DKK 347 million on December 31, 2019. As a result, Milestone’s financial position is considered strong and healthy.
The numbers

Consolidated key figures.

In 2019, we adopted IFRS 15 and 16 in our financial statements. As a consequence, the key figures and financial ratios are not fully comparable throughout the five-year period.

No comparative information has been restated because the simplified approach has been applied.
DKK'000 2020 2019 2018 2017 2016
Income statement
Net revenue 1,016,793 1,026,494 934,445 881,138 709,037
Gross margin 968,315 967,305 858,117 808,756 651,126
Operating income (EBIT) 111,891 123,534 194,474 170,671 49,276
Net financials -45,244 6,226 14,356 -16,743 1,048
Profit before corporate tax 66,647 129,760 208,830 153,928 50,324
Net income 53,631 98,284 170,815 116,722 41,349
Balance sheet
Balance sheet total 1,546,208 1,478,862 1,200,850 931,561 748,517
Investment in tangible assets excluding lease assets 30,403 26,964 28,449 13,793 11,450
Receivables from Group enterprises 497,056 382,572 346,922 229,123 134,731
Cash at bank and in hand 312,697 346,741 249,068 201,466 153,483
Equity 749,623 724,574 630,475 482,852 339,695
Cash flow statement
Cash flow operating activities 181,832 237,760 130,772 140,166 2,392
Cash flow investing activities -123,818 -114,578 -82,049 -95,223 -96,380
Cash flow financing activities -89,899 -26,004 0 0 0
Change in cash and cash equivalents -31,885 97,178 48,723 44,943 -93,988
Average number of full-time-employees 866 776 658 586 569
Number of employees at year-end 934 865 733 635 599
Key figures
Invoiced revenue 1,113,885 1,165,573 1,031,946 938,698 805,260
Gross margin 95.2% 94.2% 91.8% 91.8% 91.8%
EBIT margin 11.0% 12.0% 20.8% 19.4% 6.9%
Financial solidity 2.1 2.0 1.9 1.9 2.2
Return on equity 7.3% 14.5% 30.7% 28.4% 13.1%
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the numbers
The Executive Management Team believes that there are good business opportunities going forward. EBIT for 2021 is expected to be at the same level as 2020, although our markets are currently negatively impacted by the pandemic across all regions. In 2020, we have seen that once the restrictions have been lifted, sales have picked up.
During 2020, Milestone has demonstrated that we have a strong COVID-19 continuity plan. Throughout the year we have been in control of our profitability and we expect to continue the COVID-19 continuity plan as long as needed. As a global company with customers around the world, Milestone is subject to varying market conditions. Lockdowns and mobility restrictions have continued to impact customers, partners, and employees in 2021 and in light of the current developments in the COVID-19 pandemic, we underline that our assumptions are significantly more uncertain than normal.