TRANSCOM REPORTS 23% INCREASE IN REVENUE AND 24% INCREASE IN PROFIT BEFORE TAX FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2006
TRANSCOM REPORTS 23% INCREASE IN REVENUE AND 24% INCREASE IN PROFIT BEFORE TAX FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2006
Luxembourg, 24 October 2006 - Transcom WorldWide S.A. (‘Transcom’) (Stockholmsbörsen: TWWA, TWWB), the European CRM and debt collections specialist, today announced its financial results for the third quarter and nine months ended 30 September 2006.
THIRD QUARTER HIGHLIGHTS
• Net sales up 20% to €127.1 (€105.7) million
• Profit before tax up 12% to €8.7 (€7.8) million
• Net income up 11% to €6.2 (€5.6) million
• EPS before dilution up 13% to €0.09 (€0.08)
• Non Kinnevik related party sales up 25% to €34.0 million
• Strategic agreement signed with SFR to provide CRM services to its fixed line and ADSL customers in France*
• Restructuring costs of €500,000 taken in Spain and included in Cost of Sales
*This contract is subject to the approval, by the French competition authorities, of the acquisition of Tele2 France's fixed line and ADSL business by SFR.
NINE MONTH HIGHLIGHTS
• Net sales up 23% to €394.4 (€320.4) million
• Profit before tax up 24% to €27.2 (€22.0) million
• Net income up 24% to €19.7 (€15.9) million
• EPS before dilution up 23% to €0.27 (€0.22)
• Non Kinnevik related party sales up 29% to €105.9 million
Keith Russell, President and Chief Executive Officer, commented: “I would like to thank the employees of Transcom for delivering yet another quarter of strong growth. We continue to steadily grow our CRM business, with a focus on near and offshore services that can provide us with margin enhancing new business. Furthermore, our debt collection business continues to develop at a faster rate organically than the CRM business. There have been a number of positive developments recently, such as the beginning of our operations in Chile, which will provide an attractive and profitable long-term solution for servicing the Spanish market, and our strategic agreement with SFR, the new owner of Tele2’s French fixed line and ADSL business, which was announced earlier this month.”
Transcom, the European CRM and debt collections specialist, reported 20.2% year on year net sales growth for the third quarter ended 30 September 2006 to €127.1 million (€105.7 million), and 23.1% growth for the first nine months to €394.4 million (€320.4 million). During the third quarter, the Company signed a number of new CRM contracts in key vertical markets. These included: SKY Italia, the pay-TV television company; ENEL, the Italian utilities firm; and Diners Club in Spain, the international charge card group.
Transcom also continued to extend its network of contact centres during the third quarter in order to capitalise on further growth opportunities. On 18 July 2006, Transcom announced the opening of a new centre in Leuven, Belgium, representing the Company’s second organic development in the country. The Leuven contact centre was opened with 60 seats and is anticipated to reach approximately 125 seats in 2007, with potential for further expansion.
Just after the close of the third quarter, Transcom announced the opening of its first contact centre in Latin America, which is based in Concepción, Chile. The new centre is initially being developed to cater for the Spanish market and it is expected to absorb business growth from existing clients in Spain. In addition to this, the centre is likely to support the US Hispanic market in the future. The Concepción call centre opened with 300 seats and Transcom expects capacity at the facility to grow significantly in 2007.
Transcom incurred €500,000 in direct costs during the third quarter in relation to the restructuring of its Spanish business. These were primarily labour costs associated with the winding down of onshore CRM activities being carried out on behalf of certain clients in Spain, which are in the process of being migrated to Transcom’s new Chilean operations. Further charges are expected in the fourth quarter relating to this exercise.
During the third quarter, Transcom also expanded a number of its existing operations. These included its centre in Halle, Germany, which was increased to 498 seats; the contact centre in Bari, Italy, which has grown rapidly from a base of 100 seats at its opening in May 2006 and now stands at 455 seats; and its operation in Tunis, Tunisia which now has 444 seats, up strongly from 80 seats as at 31 March 2006.
On 3 October 2006, Transcom announced that it had signed a strategic agreement with Société Française du Radiotéléphone (SFR) for the supply of CRM services in France. This contract is subject to the approval, by the French competition authorities, of the acquisition of Tele2 France's fixed and ADSL business by SFR. The contract will include the provision of customer support and sales services for the fixed line and ADSL customers of Tele2 France. The agreement makes SFR one of Transcom’s largest and most important clients and will significantly reduce the percentage of revenues derived from the Company’s largest client, Tele2. Transcom estimates that, should the deal be approved, the change of ownership will decrease the percentage of revenues generated by Tele2 by approximately 9% - 11% moving forward. The Company will report SFR revenues in the External revenue category as and when the deal is approved by the competition authorities.
Transcom continued to rapidly grow its debt collection business during the third quarter, in line with the Company’s strategic goal of increasing overall Group margins. During the quarter, Transcom added a number of new collections clients in important vertical markets.
Transcom continues to actively pursue with its partners the joint purchase of European consumer debt portfolios. The Company and its partners have bid on a number of debt portfolios to date, but due to the current pricing environment for these types of portfolios, they have not yet completed such a transaction. Transcom will update the market as and when such a portfolio is jointly purchased.
Transcom remains committed to reaching its goal of deriving half of the Company’s profits from debt collections activities by the end of 2007. A number of factors are necessary in order to attain this goal. These include a continued strong organic development of the business, the completion of further European debt collection acquisitions and the purchase of consumer debt portfolios in conjunction with the Company’s financial partners, as outlined above.
Transcom’s pre-tax margin decreased year on year in the third quarter to 6.8% (7.4%), and remained stable at 6.9% for the first nine months of the year. Excluding the Spanish restructuring charges, the pre-tax margin decreased only slightly to 7.2% for the quarter and rose slightly to 7.0% for the first nine months.
The Company was able to achieve a further reduction in selling, general and administration (SG&A) costs as a percentage of revenue to 13.8% (14.3%) during the third quarter and to 13.3% (13.6%) for the first nine months.
Net interest and other financial items were stable year on year for both the third quarter and first nine months and Transcom therefore reported an 11.5% year on year increase in pre-tax profits to €8.7 million (€7.8 million) in the third quarter and an increase of 23.6% to €27.2 million (€22.0 million) for the first nine months. Similarly excluding the Spanish restructuring charges, pre-tax profits increased by 17.9% to €9.2 million in the quarter and rose by 26% to €27.7 million for the first nine months.
Transcom continues to have a positive outlook for both its CRM and debt collection businesses for the remainder of the fiscal year. CRM pricing remains stable and the Company sees no signs of a significant change in the pricing environment in the near-term. Transcom also remains focused on its strategy of margin enhancement through the rapid growth of its debt collection business and a higher concentration of near and offshore CRM business. Although European debt portfolios are currently being sold at prices above which the Company considers reasonable, Transcom will continue pursuing such portfolios with its financial partners as this provides a good route for the organic development of the debt collection business.
*The below figures include the €500,000 in Spanish restructuring charges incurred in the third quarter.
Transcom’s revenues increased by 20.2% in the third quarter to €127.1 million (€105.7 million) and were up by 23.1% year on year to €394.4 million (€320.4 million) for the first nine months. The third quarter result was accounted for by an increase of 25.0% in Non Kinnevik related party revenue, a 19.4% increase in sales to Tele2 and a 4.5% increase in other Kinnevik Group related party revenue.
Transcom’s gross margin declined slightly to 20.7% (21.8%) for the quarter and to 20.2% (20.6%) for the first nine months. The Company’s gross margin development was somewhat suppressed in the third quarter due to the continued funding of investments in new debt collection operations, continued lower profitability in certain telemarketing activities due to a tightening of prices in the market, and the restructuring of the Spanish business, the charge for which amounted to €500,000.
SG&A costs for the third quarter increased by €2.5 million year on year to €17.6 million. This represents a reduction in SG&A as a percentage of revenue from 14.3% to 13.8% for the quarter. SG&A costs for the first nine months of the year also decreased as a percentage of revenue from 13.6% to 13.3%. Transcom remains committed to maintaining a strong discipline in controlling all operating expenses.
Earnings before interest and taxes (EBIT)
Transcom’s operating income for the third quarter increased by 10.1% to €8.7 million (€7.9 million) and by 21.1% to €27.0 million (€22.3 million) for the first nine months.
Net income in the third quarter increased by 10.7% year on year to €6.2 million (€5.6 million), whilst net income for the first nine months of the year increased by 23.9% to €19.7 million (€15.9 million). Transcom’s net margin for the third quarter decreased year on year from 5.3% to 4.9% and was stable at 5.0% (5.0%) for the first nine months.
Cash flow, working capital and liquid funds
Transcom generated a 13.6% year on year increase in cash flow from operations to €26.8 million (€23.6 million) for the first nine months. Capital expenditure increased to €11.8 million (€7.8 million) in the first nine months and represented only 3.0% (2.4%) of net sales in the first nine months. Capital expenditure during the quarter included the opening of new centres in Leuven, Belgium and Concepción, Chile. Further capital was also invested during the quarter in expanding Transcom’s existing centres in Halle, Bari and Tunis.
Working capital outflow increased from €1.1 million to €3.9 million in the first nine months as a result of increased exposure to Southern Europe, which traditionally has a higher number of debtor days. Transcom had €34.0 million in liquid funds at the end of the reporting period and net cash of €14.8 million, compared to €46.9 million and €38.6 million at the close of the first nine months in 2005.
Transcom Annual General Meeting 2007
The 2007 Annual General Meeting will be held on 29 May 2007 in Luxembourg.
Shareholders wishing to have a matter considered at the Annual General Meeting should submit their proposals in writing to email@example.com or to The Company Secretary, Transcom WorldWide, 11 Boulevard Royal, L-2449 Luxembourg, at least seven weeks before the Annual General Meeting in order to guarantee that the proposal may be included in the notice to the meeting.
Further details on how and when to register will be published in advance of the Annual General Meeting.
Nomination Committee for the 2007 Annual General Meeting
A Nomination Committee of major shareholders in Transcom has been convened in accordance with the resolution of the 2006 Annual General Meeting. The Nomination Committee is comprised of Cristina Stenbeck on behalf of Emesco AB and Investment AB Kinnevik; Mats Lagerqvist on behalf of Robur Fonder; Bjorn Lind on behalf of SEB Fonder and SEB Trygg Liv; and Lars Hockenstrom on behalf of Catella Kapitalforvaltning and Catella Fonder, who together represent more than 50% of the voting rights in Transcom. The composition of the Nomination Committee 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 Committee can be found on Transcom’s corporate website at www.transcom.com.
The Nomination Committee will submit a proposal for the composition of the Board of Directors, remuneration for the Board of Directors, the appointment of the auditor, and proposal on the Chairman of the Company which will be presented to the 2007 Annual General Meeting for approval. Shareholders wishing to propose candidates for election to the Board of Directors of Transcom should submit their proposals in writing to firstname.lastname@example.org or to The Company Secretary, Transcom WorldWide, 11 Boulevard Royal, L-2449 Luxembourg.
Transcom’s financial results for the fourth quarter and twelve months ended 31 December 2005 will be published on 12 February 2007.
Keith Russell, President and CEO
Luxembourg, 23 October 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 visit www.transcom.com or contact:
Keith Russell, President and CEO +352 27 755 000
Noah Schwartz, Investor Relations +44 20 7321 5032
For tabular financial information, please contact Shared Value at +44 (0)20 7321 5010.
Transcom WorldWide S.A. is a rapidly expanding Customer Relationship Management (CRM) solution provider, with over 50 service centres employing more than 12,800 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.
This information was brought to you by Waymaker http://www.waymaker.net
The following files are available for download: