REVENUES UP 29% TO €137.2 MILLION & NET INCOME UP 33% TO €7.6 MILLION
REVENUES UP 29% TO €137.2 MILLION & NET INCOME UP 33% TO €7.6 MILLION
Luxembourg, 25 April 2006 – Transcom WorldWide S.A. (‘Transcom’) (Stockholmsbörsen: TWWA, TWWB), the European CRM and debt collections specialist, today announced its financial results for the first quarter ended 31 March 2006.
FIRST QUARTER 2006 HIGHLIGHTS
• Net sales up 29% to €137.2m (€106.7m)
• Pre-tax profit up 33% to €10.4m (€7.8m)
• Net income up 33% to €7.6m (€5.7m)
• EPS before dilution increases to €0.10 (€0.08)
• Non Kinnevik related party sales up 41% to €36.6m
• Proposed one-time extraordinary dividend of €0.35 per share, to be voted on at the Annual General Meeting*
*For further details, please see corresponding press release issued this morning.
Commenting on Transcom’s results, Keith Russell, President and Chief Executive Officer, said:
“We have had a very encouraging first quarter. Our external client growth continues to surpass the impressive sales growth achieved with Tele2. The debt collection business is also progressing strongly and was strengthened further in the quarter by two key acquisitions in Europe’s largest markets. We continue to significantly outperform the market and expect this to continue as we continue to execute our strategy.”
Strong Revenue Growth Continues
Transcom, the European CRM and debt collections specialist, recorded strong growth in the first quarter of 2006, delivering 28.6% year on year net sales growth to €137.2 million (€106.7 million). The growth was largely organic, driven by strong performances across all regions and business lines. Transcom signed a number of new CRM contracts in key vertical markets during the quarter. This included the extension of services to Grupo Santander, with new services being offered to ‘Open Bank’, the group’s online banking division, and new work on behalf of ‘Alpha Card’, a joint venture between American Express and Fortis Bank. Transcom also expanded its relationship with Citibank, launching services for the global bank in Hungary, and many of Transcom’s existing clients have increased their demands for services since last year.
Network Expands through Launch of New Centres and Capacity Expansion of Existing Operations
Transcom expanded its operations in Italy in early April, opening a contact centre in Bari, southern Italy, which represents the Company’s fourth organic expansion in this market. The new centre has been developed to both absorb business growth from existing clients, including Tele2, and also to support the development of further external clients. The Bari call centre will initially open with 100 seats and Transcom expects the facility to grow rapidly to approximately 400 seats by the end of this year.
In the first half of April 2006, Transcom sold its 60% stake in its Moroccan operations, TWW SA Morocco (“TWW SA”), to Transcall SA for a cash consideration of €1.2 million. This produced a gain against book value of approximately €200,000 which will be reported in the second quarter of 2006. 85% of the consideration was paid upon completion, with the remaining 15% to be paid in one year’s time. Following the completion of the sale, Transcall SA owns 100% of the operations, which are based in Casablanca. TWW SA provided French language services and had revenues of €5.8 million in 2005, with a pre-tax loss of €657,000. Transcom will subcontract business to Transcall SA from the French market following the transaction.
Transcom’s operations in Tunisia, which provide French and Italian language services, have performed robustly since their launch in October 2005. Based on this strong performance and the relatively advantageous fiscal conditions in Tunisia, Transcom has the opportunity to develop a strategic nearshore solution for the French and Italian markets and intends to rapidly grow its capacity in Tunis. Transcom currently operates approximately 80 seats from the Tunis contact centre and expects to grow the number of seats to 400 by the end of the year.
Transcom also added 50 seats of capacity to its existing contact centres in Zurich, Switzerland and Vienna, Austria.
Collections Business Continues Strong Organic Growth, with Acquisitions in Key Markets
Transcom continued growing its debt collections business during the quarter, both organically and through acquisitions, in line with Transcom’s strategic objective of increasing overall Group margins. Transcom now has debt collection operations in 12 countries, giving it the second largest geographic footprint in Europe. The Company employs the same technology platform in 10 of these 12 operations, a level of consistency that is unique to the industry. The Company is in the process of integrating its collections activities with its CRM infrastructure, which will bring further efficiencies to its collections processes.
During the quarter, Transcom won a number of new collections clients in important vertical markets, including ‘CDON’, a leading Nordic media and entertainment company; ‘Leaseplan’, the automotive leasing group; and ‘Euler Hermes’, a Spanish financial services firm.
Transcom announced the acquisition of German debt collection agency Dr. Finsterer + Koenigs Inkasso GmbH (“Finsterer”) on 31 January 2006 for a cash consideration of €8 million, with a further €1 million payable depending on performance. Established in 1983, Finsterer is one of the leading debt collection agencies in Germany. The Company reported revenues of €8.5 million in 2005 and expects to record margins in line with the European industry average in 2006. The deal provides Transcom with a strong foothold in one of Europe’s largest markets, significantly raising the Company’s profile in the collections business and increasing its competitive advantages.
On 29 March 2006, Transcom announced that it had acquired 100% of Credit & Business Services Limited (“CBS”), a debt collection company based in the UK, for a cash consideration of £2.25 million (��3.26 million), with a further consideration of £2.25 million (€3.26 million) payable in a performance-based earn out. CBS reported revenues of £3.3 million (€4.8 million) in fiscal year 2005 and also expects to record margins in line with the European industry average for the year. This acquisition further strengthens Transcom’s position and provides the Company with a strong operational base in the important UK market.
The integration of both Finsterer and CBS is progressing well and both companies’ financial performance to date are in line with Transcom’s expectations.
Transcom is also in discussions with potential purchasers of European consumer debt portfolios. Under such partnerships, Transcom would be responsible for collecting funds from the portfolio’s debtors and would only be required to place a small percentage of the portfolio’s value on its balance sheet. Transcom continues to progress towards its target of deriving half of its profits from collections business by the end of 2007.
Strategic Investments Made in Complementary Businesses
As previously announced during the quarter, Transcom acquired 100% of Stockholms Tolkförmedling Aktiebolag (“Tolkförmedling”) for a cash consideration of SEK 24 million (€2.6 million), with a further maximum of SEK 4 million (€425,000) payable depending on performance over the next two years. Tolkförmedling is the leading language interpretation agency in Stockholm and one of the largest players in the Swedish market. Transcom aims to realise the significant synergies between its contact centre infrastructure and the interpretation business by providing clients with translators via telephone lines and the Internet, thereby reducing costs and increasing the efficiency of service. Many European countries currently supply translators for government services, and Transcom see significant growth opportunities for Transvoice in the coming years. Tolkförmedling’s financial performance to date has been in line with Transcom’s expectations and the integration of Tolkformedling with Transvoice is running smoothly.
On 13 April 2006, Transcom announced that it had invested US$ 1.5 million (€1.24 million) in Cloud 10 Corporation (“Cloud 10”), a CRM services provider in the United States utilising agents who work from home and are connected via the Internet to a centralised, state-of-the-art CRM operating platform. The business model provides access to a high calibre workforce who otherwise would not be available within the contact centre job market. This model introduces greater flexibility of employee work schedules, resulting in higher rates of productivity. It also benefits from reduced attrition, lower rates of absenteeism and this, combined with the significantly lower overhead costs of a traditional fixed contact centre operation, results in a highly compelling client proposition. Transcom intends to use the technical environment developed for Cloud 10 throughout its European operations, where there is scope for integrating these services.
Operating Margin Improved by Strong Top Line Performance and Cost Management
Transcom’s operating margin increased to 7.6% (7.3%) in the first quarter as a result of healthy revenue growth and continued focus on cost control. Transcom’s commitment to delivering margin improvements yielded a further reduction in selling, general and administration (SG&A) costs as a percentage of revenue to 12.5% (12.7%) during the quarter. Net interest and other financial items were stable year on year. Transcom reported a 33.3% year on year increase in pre-tax profits to €10.4million (€7.8 million) in the quarter.
Transcom reiterates the positive outlook communicated at the close of 2005. The Company will continue to advance its margin enhancement strategy, acquiring further debt collection companies in Europe and partnering with European debt portfolio purchasing institutions to complement this fast growing and strategically important business segment. In addition, Transcom will continue to expand into new geographic markets, focusing on low-cost countries that can provide nearshore services to high-cost countries, allowing the Company to benefit from labour arbitrage opportunities. Transcom is also in advanced discussions with a number of potential pan-European clients and expects to sign significant further client service agreements during 2006.
Revenues for the quarter were up 28.6% to €137.2 million, compared to €106.7 million in same period last year. The year on year increase in revenue reflects a 41.3% increase in Non Kinnevik related party sales, which increased to €36.6 million (€25.9 million). Sales to Tele2 rose by 26.0% and contributed €95.9 million (€76.1 million) in the quarter. Other Kinnevik related party sales remained stable year on year at €4.7 million (€4.7 million) during the quarter.
Transcom’s gross margin remained stable year on year at 20.1% in the quarter. Transcom’s gross margin development has been suppressed somewhat by a combination of funding strong revenue growth, investment in small debt collections start-ups and lower profitability from some of its telemarketing activities. In spite of this, the net margin increased from 5.3% in Q1 2005 to 5.5% in Q1 2006 due to further reductions in overhead costs as a percentage of revenue.
Overall operating expenses, before depreciation and goodwill amortisation, amounted to €17.2 million in the quarter, compared to €13.5 million in same period last year. As a percentage of revenues, this amounts to a year on year decrease from 12.7% to 12.5%. Transcom continues to exercise strong discipline in reviewing operating expenses.
Earnings before interest and taxes (EBIT)
First quarter operating income increased by 31.6% year on year from €7.9 million to €10.4 million.
Net income for the quarter was up 33.3% year on year to €7.6 million from €5.7 million.
Cash flow, working capital and liquid funds
Cash flow generated from operating activities increased by 24.1% to €10.3 million for the quarter from €8.3 million in the first quarter of 2005. Capital expenditure decreased by 30.4% to €2.3million (€3.0 million) in the quarter. Transcom’s capital expenditure in the first quarter included preparation for the opening of a new contact centre in Bari, Italy as well as the expansion of the Company’s existing facilities in Zurich, Switzerland and Vienna, Austria. As at 31 March 2006, Transcom had €40.9 million in liquid funds and a net cash position of €36.7 million, compared to liquid funds of €38.1 million and a net cash position of €29.8 million as at the end of March 2005.
2006 Annual General Meeting
The 2006 Annual General Meeting of shareholders (AGM) will be held on 30 May 2006 in Luxembourg. Details on how and when to register, as well as how to have a matter considered at the meeting, will be published well in advance of the AGM.
Nomination Group for the 2006 Annual General Meeting
A Nomination Group of major shareholders in Transcom WorldWide S.A. has been convened in accordance with the resolution of the 2005 Annual General Meeting. The Nomination Group is comprised of Cristina Stenbeck on behalf of Emesco AB and Investment AB Kinnevik; Björn Lind on behalf of SEB Fonder and SEB Trygg Liv; and Annika Andersson on behalf of the Fourth Swedish National Pension Fund. The group currently represents more than 50 per cent of the voting rights in Transcom WorldWide S.A. The composition of the Nomination Group may be changed to reflect any changes in the shareholdings of the major shareholders during the nomination process. Information about the work of the Nomination Group can be found on Transcom’s corporate website at www.transcom.com. The Nomination Group will submit a proposal for the composition of the Board of Directors that will be presented to the 2006 Annual General Meeting for approval.
Shareholders wishing to propose candidates for election to the Transcom Board of Directors should submit their proposals in writing to firstname.lastname@example.org or to The Company Secretary, Transcom WorldWide, 11 Boulevard Royal, L-2449 Luxembourg.
This report has been prepared in accordance International Financial Reporting Standards (IFRS) and has not been subject to review by the Company’s auditors.
Notice of Financial Results
Transcom’s financial results for the first quarter and three months ended 30 June 2006 will be published on 25 July 2006.
Keith Russell, President and CEO
Luxembourg, 25 April 2006
Transcom WorldWide S.A.
75, route de Longwy
L-8080 Bertrange, Luxembourg
+352 27 755 000
Company registration number: RCB59528
For further information please contact:
Keith Russell, President and CEO +352 27 755 000
Noah Schwartz, Investor & Press Enquiries +44 20 7321 5032
Transcom WorldWide S.A. is a rapidly expanding Customer Relationship Management (CRM) solution provider, with 48 service centres employing more than 11,700 people delivering services to 28 countries – Austria, Belgium, Chile, Croatia, Denmark, Estonia, Finland, France, Germany, Hungary, Italy, Latvia, Lithuania, Luxembourg, Morocco, Norway, Poland, Portugal, Romania, Spain, Sweden, Switzerland, the Czech Republic, the Netherlands, Serbia, the UK, the USA and Tunisia.
The company provides CRM solutions for companies in a wide range of industry sectors, including telecommunications and e-commerce, travel & tourism, retail, financial services and utilities. Transcom offers clients a broad array of relationship management services, including inbound communication; telemarketing and outbound; Administrative Tasks; Web servicing; CRM Consultancy Service; Contract Automation; Credit Management Service; Legal Services; and Interpretation Services. Client programs are tailor-made and range from single applications to complex programmes, which are offered on a country-specific or international basis in up to 33 languages.
Transcom WorldWide S.A. ‘A’ and ‘B’ shares are listed on the Stockholmsbörsen O-List under the symbols TWWA and TWWB.
Please see the attached file for the full press release
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