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TRANSCOM REPORTS FINANCIAL RESULTS FOR THE FOURTH QUARTER AND TWELVE MONTHS ENDED 31 DECEMBER 2011

Q4 2011 financial highlights
  • Net revenue €142.8 million, a 4.0% decrease compared to Q4 2010 (€148.7 million)
  • Gross margin 19.3%, a 3.6 percentage point increase compared to Q4 2010 (15.7%)
  • EBITA €2.7 million compared to €-18.4 million in Q4 2010
  • EPS -0.43 Euro cents compared to -23 Euro cents in Q410
  • The exchange rate impact on revenue was insignificant (+€0.2 million), and the impact on EBIT was positive (+€1.3 million)
Full year financial highlights
  • Net revenue €554.1 million, a 5.9% decrease compared to 2010 (€589.1 million)
  • Gross margin 16.5%, a 2.5 percentage point decrease compared to 2010 (19.0%)
  • EBITA €-25.2 million compared to €-3.7 million in 2010
  • EPS -62 Euro cents compared to -11 Euro cents in 2010
  • The exchange rate impact on revenue was negative (-€4.1 million) and the impact on EBIT was positive (+€1.9 million)
Q4 2011 financial highlights – underlying performance*
  • Net revenue €142.8 million, a 4.0% decrease compared to Q4 2010 (€148.7 million)
  • Gross margin 19.3%, a 0.5 percentage point decrease compared to Q4 2010 (19.8%)
  • EBITA €2.7 million compared to €1.0 million in Q4 2010
  • EPS -0.43 Euro cents compared to 3 Euro cents in Q410
  • The exchange rate impact on revenue was insignificant (+€0.2 million), and the impact on EBIT was positive (+€1.3 million)
Full year financial highlights – underlying performance**
  • Net revenue €554.1 million, a 5.9% decrease compared to 2010 (€589.1 million)
  • Gross margin 18.0%, a 2.0 percentage point decrease compared to 2010 (20.0%)
  • EBITA €7.6 million compared to €15.7 million in 2010
  • EPS -3 Euro cents compared to 15 Euro cents in 2010
  • The exchange rate impact on revenue was negative (-€4.1 million) and the impact on EBIT was positive (+€1.9 million)

* Excluding restructuring and other non-recurring costs in Q410
** Excluding restructuring and other non-recurring costs in 2011 and 2010, as well as the one-off tax provision in Q311


Comments from the President and CEO

 “2011 has been a difficult and turbulent year with disappointing results, for our shareholders and our employees. I am very grateful for your continued support. Clearly, restoring the company to profitability and enhancing shareholder value are our primary goals.

Transcom’s revenue in Q411 was €142.8 million, a 4% decrease compared to the same quarter last year. We have seen a decrease in revenue in three regions: North America & Asia Pacific, South and West & Central. Revenue in the North region was flat, while we saw promising growth in Iberia. The revenue decrease in North America & Asia Pacific does not reflect a change in demand, but is rather a consequence of an increase in the proportion of volumes delivered from our offshore sites in Asia vs. onshore centers in North America. In the South region, we experienced revenue growth in Italy, while we saw a decrease in France mainly as a consequence of the disposal of two sites during 2011. In the West & Central region, revenue was impacted by lower volumes in the debt collection operations. EBITA for Q411 amounted to €2.7 million, up from €1.0 million underlying EBITA in Q410.

From a full year perspective, revenue at €554.1 million decreased by 5.9% compared to 2010. I am pleased to see Iberia and North performing well despite tough economic and business conditions. North America & Asia Pacific is facing significant challenges with changing delivery demands, West & Central results are disappointing and France is facing a lengthy restructuring process.

We enter 2012 with a stronger balance sheet after the recently completed rights issue. The restructuring program announced in the second quarter of 2011 is still underway. The successful completion of these restructuring actions is an important short-term focus area and we are continuing to look for areas for improvement in order to achieve a financial uplift. Our target will always be to optimize our capacity and that will continue to be a focus area throughout 2012 as we review our global delivery footprint. To continuously strive for operational excellence and business development will support growth and profitability. In parallel, we are carrying out a strategic review. We expect to be able to present more details about Transcom’s strategic priorities in the coming months.”

Johan Eriksson, President and CEO of Transcom

Group Operating Review, Q4 2011

Group quarterly development, underlying business performance

Revenue and new business development

In the fourth quarter of 2011, Transcom reported net revenue of €142.8 million, down by 4.0% compared to the same quarter last year. The disposal of the Roanne and Tulle sites in France during the second quarter of 2011 decreased revenue in the South region by approximately €3.6 million in Q411 compared to Q410. This volume loss was partly offset by continued growth in our installed client base in Italy. Revenue declined compared to Q410 in the North America & Asia Pacific region and in West & Central. Volumes have decreased onshore in North America. This decrease was partly compensated for by the shift to Asia of volumes previously delivered onshore. Our ability to scale operations quickly and efficiently in Asia has strengthened client relationships, and is expected to be a driver of continued revenue growth into 2012 as we continue to ramp up new volumes in Asia. Revenue in the West & Central region declined, mainly due to a decrease in the number of collection cases in Austria and Germany. In the North region, revenue was roughly flat. In the Iberia region, new client wins and higher volumes with our installed base clients led to an increase in revenue.

Currency effects did not have a significant impact on revenue.

Underlying operational performance

Gross margin was 19.3% in Q411, a 0.5 percentage point decrease compared to Q410. This decrease was mainly driven by lower efficiency in the West & Central region where Transcom’s debt collections operations experienced a decrease in the number of collection cases and lower collections performance. Gross margin also decreased in the North and Iberia regions. In the North region, operations support costs increased due to the implementation of a new delivery model with a major client, and the ramp-up of new volumes during the quarter impacted margins negatively in Iberia. Margins strengthened in the North America & Asia Pacific region due to an increased proportion of offshore delivery, and in the South region due to improved operational performance in Italy, as well as higher capacity utilization in France.

Transcom’s EBITA in Q411 amounted to €2.7 million, up from €1.0 million EBITA in Q410. The improvement was driven by the South and North regions and, to a lesser extent, in Iberia. In the South region, EBITA increased despite a negative impact of a €1.5 million provision for VAT exposure in France, driven by lower SG&A costs following the disposal of two sites in France during 2011. In the North region, EBITA was higher in Q411 due to the fact that EBITA in Q410 was negatively impacted by a €1.5 million portfolio write-down in the CMS business.

Group Operating Review, FY 2011

Group development in FY 2011, underlying business performance

Revenue and new business development

Revenue decreased by 5.9%, from €589.1 million in 2010 to €554.1 million in 2011, driven by lower revenue in the North America & Asia Pacific region and in the West & Central region. Onshore revenue decreased significantly in the North America & Asia Pacific region, partly compensated for by increased volumes offshore. In the West & Central region, revenues decreased mainly as a result of challenging economic conditions, leading to lower installed client base volumes and fewer collections cases in Austria and Germany. When adjusting for currency effects, net revenue decreased by 5.2%.

Underlying operational performance

The Group’s underlying gross margin in the full year 2011 was 18.0%, a 2 percentage point decrease compared to 2010 (20.0%). While margins increased in Iberia and were flat in North America & Asia Pacific, margins in the North, South and West & Central regions have been weaker. In the North region, performance was impacted by higher costs due to the implementation of a new delivery model with a key client in the region, and by temporarily increased training costs due to a site consolidation in Sweden and the reallocation of personnel resources due to client mix changes.  In the South region, gross margin fell slightly, partly due to Indexed salary increases in Italy which we could not compensate for, and partly due to the ramp-up of significant new volumes. Lower performance in the West & Central region was mainly the result of less favorable conditions in our debt collection operations, leading to a fall in collections efficiency.

As a consequence of these unfavorable business developments and operational issues, EBITA in the full year 2011 was €7.6 million, a decrease of €8.1 million compared to 2010 (€15.7 million). Despite the rightsizing and operational improvement measures undertaken throughout 2011, which translated into SG&A cost savings, EBITA decreased.


Key events during 2011
Disposal of two sites in France

During the second quarter of 2011, Transcom finalized the disposals of its sites in Roanne and Tulle, with the objective to improve the Group’s competitiveness.

Restructuring & rightsizing plan

On June 21, 2011, Transcom announced a restructuring & rightsizing plan aimed at adjusting delivery capacity, strengthening global competitiveness and increasing operational efficiency. Restructuring and non-recurring costs amount to approximately €32.8 million. €24.2 million was recorded in Q2 2011, and €8.6 million in Q3 2011 (please see table below). The total net cash impact associated with the restructuring program amounts to €27.1 million, including the negative cash flow impact from onerous contracts. Out of this amount, €9.3 million impacted 2011 cash flow. The cash flow impact is estimated at €13.1 million in 2012, €3.2 million in 2013 and €1.5 million in 2014.

Breakdown of restructuring and other non-recurring costs recorded in Q2 2011 and Q3 2011

(€ m) North West & Central South Iberia North America & Asia Pacific Total
Restructuring costs 1.6 1.0 5.2 1.0 9.4 18.2
Other non-recurring costs 2.9 3.5 3.7 0.9 3.6 14.6
Total 4.5 4.5 8.9 1.9 13.0 32.8

The restructuring plan and the operational improvement measures are expected to translate into annualized gross savings of approximately €10.0 to €12.0 million when fully implemented. Cost savings delivered through the implementation of the program amounted to €1.7 million in the third quarter of 2011, and an additional €0.8 million was delivered in the fourth quarter of 2011. A successful completion of these restructuring actions is an important short-term focus area and we are continuing to look for areas for improvement to achieve a financial uplift.

Tax reassessment

On October 12, 2011, Transcom announced that the company was assessing its tax exposure in light of an adverse ruling regarding a FY2003 tax dispute in one of the EU jurisdictions where it operates. Management, together with its legal advisors, considers that the whole reassessment is not justified from a legal standpoint. A Supreme Court appeal will be filed. However, following the notification of the adverse ruling, Transcom had to reassess its provision and increased the existing tax provision of €1.5 million by €14.1 million in the quarter ended September 30, 2011.

Rights issue and refinancing of credit facility completed

Following the completion of Transcom’s rights issue during December 2011, Transcom has an issued capital of EUR 53,557,907.519 divided into a total of 1,245,532,733 shares of which 622,767,823 are of class A with one voting right each and 622,764,910 are of class B with no voting rights. The total number of voting rights in Transcom excluding Transcom treasury shares is 622,755,130. The voting rights attached to the treasury shares held by Transcom are suspended in accordance with Luxembourg applicable law.

Transcom has agreed with its lenders (DnB NOR Bank ASA, Norge, Filial Sverige, Skandinaviska Enskilda Banken AB (publ) and Svenska Handelsbanken AB (publ)) on a refinancing of the current credit facility, which would have matured in April 2012. The new facility of EUR 125 million is partly amortizing and has a time to maturity of 3 years. The facility includes covenants such as restrictions on leverage and minimum interest coverage and implies further reductions in the company’s leverage.

Investigation of a possible redomiciliation to Sweden

On November 29, 2011, Transcom announced that its Board of Directors is investigating a move of the legal domicile of the publicly listed parent of the Transcom Group from Luxembourg to Sweden. The Board of Directors of Transcom believes that a redomiciliation to Sweden would be a logical step in order to align the Company’s domicile with that of its owners. Further analysis is being made before the Board of Directors will give a recommendation, including an assessment of tax consequences. The redomiciliation would, subject to inter alia shareholder approval, be executed through a statutory cross border merger between Transcom WorldWide S.A. and a Swedish subsidiary which would become the new publicly listed parent of the Transcom Group. 

Management changes

Johan Eriksson was appointed President and CEO of Transcom on November 18, 2011, replacing Pablo Sánchez-Lozano who tendered his resignation in June 2011. During 2011, Isabel Sánchez-Lozano was appointed Vice President & General Manger in the Iberia region, and Jörgen Skoog was appointed Acting General Manager in the North Region. In January 2012, Neil Rae was appointed Acting General Manager in the North America & Asia Pacific Region.


Group Financial Review
Depreciation & Amortization

Depreciation in the fourth quarter of 2011 was €2.3 million (€3.2 million in Q410) and amortization of intangible assets was €0.7 million, in line with the amount in Q410. The main reason behind the decrease in depreciation is reduced CAPEX and significant write-offs related to the restructuring plan. On a full-year basis, depreciation was €10.8 million in 2011, a €4.0 million decrease compared to 2010 (€14.8 million).

SG&A

SG&A expenses were €25.0 million in the quarter, compared to €28.4 million in Q410. SG&A in Q411 was negatively impacted by a €1.5 million provision for VAT adjustment in France, a €0.5 million write-off of receivables in the North America & Asia Pacific region due to a client filing for bankruptcy, a €0.4 million provision related to a dispute with a client in North America & Asia Pacific, a €0.5 million cost for severance pay to the former CEO, and was positively impacted by a reversal for €1.1 million of the LTIP accrual due to the weak performance in the company, resulting in a reduced potential liability. As a comparison, SG&A in Q410 was negatively impacted by a €1.5 million write-down of our North Region CMS portfolio, IT related investments for €0.8 million and the write-off for bad debt in the West & Central region for €0.4 million. Net of these one-off effects in Q410 and in Q411, SG&A reduced by €2.6 million year-on-year, mainly due to savings achieved through the implementation of the restructuring & rightsizing program.

Excluding one-off effects, SG&A in 2011 was €88.7 million, compared to €100.2 million in 2010. The €11.5 million decrease in SG&A costs stems from savings related to the restructuring program, mainly rent, for €4.3 million (€2.6 million in Q411 and €1.7 million in Q311), €3.4 million in lower costs as a result of the disposal of two sites in France, mainly related to rent & administrative costs and onerous client contracts, and €3.8 million in cost savings related to other operational measures undertaken in 2011 to reduce the support costs in the Group. Out of these savings, we expect €10.0 million to be run-rate savings.

 Working capital

Net working capital was €45.7 million at the end of Q411, a decrease of €30.3 million compared to Q410 (€75.9 million). Approximately half of the decrease has been achieved through a company-wide plan aimed at improving collection of receivables. The other half of the decrease is due to the implementation of a factoring program in Spain and in Italy. Transcom considers that half of the improvement is sustainable in the long run and therefore expects working capital to be between 10% and 12% of annual revenue.

Foreign Exchange Impact

Year-on-year, the quarterly trading impact on revenue was €0.5 million positive and €0.8 million positive on EBIT. This result is primarily caused by a favorable evolution of GBP and CAD in North America and CLP in Iberia. 

Transcom’s results are exposed to the following translation effects: US dollar, Swedish krona, Norwegian krona and Danish krona. The two significant currencies to which Transcom’s revenue and EBITA are most sensitive were USD and SEK. Year-on-year, the full-year translation impact, driven by the USD weakening vs. EUR in 2011, was €4.6 million negative on revenue and €1.0 million positive on EBIT.

For further details on the impact of foreign exchange movements on the Company’s results, please refer to the tables provided in the appendix on page 27.

Debt & Financing

During Q411, Transcom renegotiated its existing Revolving Credit Facility, which was due to expire in April 2012. An agreement was reached with all existing lenders to implement a new, three-year facility to replace the existing one subject to the completion of the rights issue. With the final proceeds of the rights issue received by Transcom on December 30th 2011, the existing facility was fully reimbursed and replaced with the new facility before the end of 2011. As a result, the bank debt which was classified as short term in Q311 is now classified as long term at year-end 2011. The funds generated by the rights issue have served to repay approximately €45 million in debt, resulting in a gross debt position end-of-year of €65.3 million in long term debt compared to €118.5 million at the end of Q410.

The new €125 million facility is composed of a €50.0 million term loan with a three-year tenor and partial amortization starting in 2013, as well as a €75.0 million multicurrency revolving credit facility.

Net financial items amounted to €-0.1 million in Q411, compared to €2.3 million in Q410. Interest expense on the credit facility in Q411 was €1.3 million, compared to €0.6 million in Q410. The higher interest expenses are due to a higher margin paid to the banks. In Q411, net financial items are negative due to a €1.4 million foreign exchange gain.

The Net Debt/EBITDA ratio at the end of Q411 was 0.75, well below the new covenant thresholds.

Tax

The tax charge in Q411 amounted to €2.3 million compared to a €0.2 million tax charge in Q410. The low tax charge in Q410 was the result of the recognition of significant deferred tax assets. The tax charge this quarter is due to a €1.8 million increase in Current Tax in Sweden, Italy and Spain based on increased taxable income in Q411 in these countries, and to a positive settlement of a tax audit covering the period 2006 to 2009, relating to VAT and transfer pricing for an amount of €0.4 million.

The full-year 2011 tax charge amounts to €18.4 million. €14.8 million relates mainly to the tax audit provision booked in Q311 (versus €0.8 million in 2010), €4.7 million current tax (versus €4.5 million in 2010), and €1.1 million net deferred tax Income (versus €3.0 million in 2010).

Transcom, as many other companies, is facing several tax audits in various jurisdictions. Between 2010 and 2011, the Group has been subject to ten tax audits in seven jurisdictions, three of which launched in 2011 and three successfully closed with immaterial tax costs. This situation exerts major pressure on Group tax charges.

Risks relating to intercompany franchise fee arrangements

The Group’s business model currently operates through a franchise fee model meaning that companies within the Group are charged for the provision by Transcom of various services, including Intellectual Property. The franchise fee model as described above is open to challenges by local tax authorities (as it is currently the case in certain jurisdictions), which may have a materially adverse effect on the Company’s business, financial condition and results of operations.

Risks relating to services provided by Transcom WorldWide Philippines Inc.

The Group has the benefit of an income tax holiday in the Philippines, whereby its profits are tax-exempt. The income tax holiday was granted with effect from 2008 for a period of four years, and will expire in 2012 unless extended. On expiry of the income tax holiday, the post tax profits of the group are likely to reduce. Transcom WorldWide Philippines Inc. is an offshore call center which provides services to its own clients and clients of other Group companies, namely to clients on the North American market. Any challenge to the pricing arrangements of the inter-company transactions may lead to a reduction in the Group’s profit after tax.

Segmental operating review, underlying performance

North America & Asia Pacific

October-December 2011

In Q411, revenue decreased by 15.3% in North America & Asia Pacific. We have been facing, throughout the year, a shift in the demand from our installed base clients for more offshore delivery. As a consequence, we experienced significant decreases in volumes delivered onshore that were partly compensated for by an expansion of volumes delivered offshore (Philippines). Nevertheless, the higher volumes offshore only partially compensated the onshore volume erosion, due to a less favorable pricing mix in the region. The positive growth trend in our offshore operations in the Philippines is expected to continue into 2012. As a consequence of the declining volumes onshore, Transcom’s footprint in North America is currently under review.

This shift in offshore vs. onshore delivery is the main driver of the 2.7 percentage point increase in gross margin (24.6% in Q411 compared to 21.9% in Q410). The other main factor explaining the margin improvement is the capacity adjustment and the performance improvement plan delivered through and after the site rationalization program in North America (Canada).

EBITA in the quarter amounted to €-0.5 million, compared to €-0.3 million in Q410. The decrease is partly due to lower revenue as a result of the volume erosion (approximately €1.0 million impact on EBITA). SG&A costs decreased only slightly from €6.3 million to €6.2 million. However, SG&A costs in the quarter were negatively impacted by a €0.5 million write-off of receivables as a result of a client filing for bankruptcy, and by a €0.4 million provision related to a dispute. Additional cost savings in the North America & Asia Pacific region were realized during Q411 through the restructuring & rightsizing program, amounting to €0.3 million.

Full year 2011

Full-year revenues show a 31.0% decrease in the region. At the beginning of 2011, we were anticipating adjustments in our book of business that would lead to further volume erosion. We experienced significant onshore revenue erosion in North America & Asia Pacific, which was partially compensated for by higher volumes offshore, yet generating lower revenue due to the pricing mix.

Despite the significant restructuring program and volume shift onshore vs. offshore, we succeeded in maintaining the gross margin in 2011 at the same level as in 2010 (20.6%). This gross margin could be achieved due to a higher proportion of offshore delivery, as all new volumes in the region have been ramped up in Asia during the year. The positive growth trend in our operations in the Philippines is expected to continue into 2012, as it corresponds to the needs of our installed client base to shift volumes offshore.

EBITA in 2011 amounted to €-3.2 million, compared to €2.2 million in 2010. SG&A costs decreased from €24.9 million in 2010 to €21.9 million in 2011. Total cost savings in 2011 in the North America & Asia Pacific region delivered through the restructuring & rightsizing program amounted to €1.4 million.

West & Central

October-December 2011

Revenue in Q411 in the West & Central region decreased by 6.4%. The CRM operations experienced slightly lower volumes in the installed client base, primarily in the Netherlands and in Germany. The debt collections operations have seen a decrease in the number of collection cases, mainly in Austria and Germany. However, taking into account that Q410 revenue was positively impacted by a €1.0 million reassessment of accrued revenue in CMS, and that Q411 only includes €0.2 million in accrued revenue reassessment, the year-on-year decrease is 4.1%.

Gross margin was 24.1%, compared to 27.1% in the same period last year. The CRM operations showed improved gross margin levels as a result of continued efficiency improvements. This effect was offset by lower gross margin levels in the debt collection operations compared to the same quarter last year, resulting from the lower level of activity described above, as well as by smaller cases and longer time to collect.

EBITA in the quarter amounted to €1.3 million, compared to €2.0 million in Q410. SG&A costs decreased from €6.9 million in Q410 to €6.1 million in Q411, mainly driven by lower rent costs and additional cost savings in Q411 through the restructuring & rightsizing program, amounting to €0.2 million.

Full year 2011

Results in the region are disappointing. Full year 2011 revenues decreased by 9.4%, primarily due to deteriorating economic conditions, leading to lower installed client base volumes and fewer collections cases in Austria and Germany, as well as to a less positive impact from the year-end reassessment of accrued revenue in the debt collections business. Excluding the accrued revenue impact, the decrease year-on-year, the decrease is 8.8%.

Gross margin decreased by 2.9 percentage points in FY2011, mainly driven by worsening conditions in the debt collection operations. Case volumes have decreased, and the economic climate has impacted debtors’ ability to repay loans, lowering collections performance. Cases tend to be smaller in value and the lead time to collect was slightly longer than in 2010. Gross margin levels in the CRM business remained stable in 2011 compared to 2010.

EBITA amounted to €5.4 million, compared to €10.0 million in FY2011. SG&A costs decreased from €25.1 million in 2010 to €23.1 million in 2011, mainly driven by lower rent costs and operational support costs, as well as by cost savings related to the restructuring & rightsizing program, amounting to €0.4 million in 2011.


Iberia

October-December 2011

Revenue in Q411 in the Iberia region increased by 10.0% compared to the same quarter in 2010. The increase was driven both by new client wins and by new business and additional volumes won with installed base clients. Our sites in Chile are now running at close to full capacity. Volumes handled through Transcom’s recently established contact center in Lima, Peru are gradually being increased.

Gross margin decreased by 1.1 percentage points compared to Q410, primarily driven by the ramp-up of new volumes during the quarter. On a like-for-like basis, revenues in 2011 were impacted by the price renegotiation of a number of major contracts. This pricing difference was partially compensated for by operational performance improvements, and high occupancy rates. 

EBITA in the quarter amounted to €1.3 million, compared to €1.0 million in Q410. SG&A costs decreased slightly from €4.0 million in Q410 to €3.9 million in Q411. Additional cost savings in the Iberia region were realized during Q411 through the restructuring & rightsizing program, amounting to €0.2 million, counterbalanced by slightly higher costs due to the continued ramp-up of new volumes offshore, in Chile as well as in Peru where Transcom recently established a new contact center.

Full year 2011

Full-year revenues increased by 5.3%. New deals accounted for approximately half of the revenue increase, and the rest is due to new business and additional volumes with installed base clients.

Gross margin was 0.5 percentage points higher than in 2010. Operational efficiency and capacity utilization improvements mitigated the effects of price pressure during the year. The continued ramp-up of volumes offshore also contributed positively to margins.

EBITA amounted to €5.1 million, compared to €4.1 million in 2010. SG&A costs increased from €15.8 million in 2010 to €16.3 million in 2011, mainly related to the ramp-up of volumes offshore. Total cost savings in 2011 in the Iberia region delivered through the restructuring & rightsizing program amounted to €0.3 million.


North

October-December 2011

Revenue in the North region was flat compared to Q410, despite the significant impact on revenue driven by the implementation of a new delivery model with a major client in the region during 2011. In addition, we experienced volume reductions with one particular client in the media sector during the year, which also contributed to the revenue decline. However, new volumes with installed base clients combined with a positive foreign exchange impact contributed to the resilience of revenues.

Gross margin in the fourth quarter decreased by 1.4 percentage points compared to the same period in 2010. The implementation of the new delivery model mentioned above affected margins negatively, mainly through higher operations support costs. Salary increases, which we could not fully compensate for, also impacted on margins.

EBITA in the North region increased by €0.9 million compared to Q410. There was a negative €0.6 million impact due to lower gross margin. However, the comparison is affected by the €1.5 million portfolio write-down in the CMS business, taken in Q410. Additional cost savings in the North region were realized during Q411 through the restructuring & rightsizing program, amounting to €0.1 million.

Full year 2011

Revenue in 2011 amounted to €145.4 million in the region, compared to €144.8 in 2010. Despite the loss of volume with one particular client in the media sector, and the impact from the implementation of a new Master Service Agreement with a major client as described above, Transcom’s revenue increased slightly compared to 2010. The resilience of revenue was mainly due to revenue increases with other clients, predominantly in the telecom and media sectors. New interpretation business with clients in the public sector also contributed to growth. Net of currency effects, revenue decreased by 0.6%.

Gross margin was 16.5% in 2011 compared to 20.2% in 2010. This decrease was mainly driven by increased costs due to the implementation of the new delivery model with a key client, as mentioned above. The implementation necessitated changes to operational processes during the year, leading to temporary inefficiencies and increased costs in Q111 as well as in Q211. During the third and fourth quarters, these effects dropped off as the new client delivery organization was more firmly established and calibrated to the new conditions. We believe that all efficiency and operational improvements managing the new delivery model with this particular client have now been implemented and we do not expect any further margin improvements going forward. Training costs temporarily increased during the year, partly as a result of the closure of the site at Kungsör and the establishment of a new contact center at Eskilstuna in Sweden, and partly due to the ramping-down of volumes with one client in the media sector and the transition of personnel to other clients.

EBITA was €7.7 million in 2011, compared to €10.8 million in 2010. SG&A costs decreased from €18.4 million to €16.3 million. The comparison with 2010 should take into account portfolio write-downs in the CMS business taken during 2010, amounting to €1.5 million as well as additional operational costs incurred in our debt collection operations. Total cost savings in 2011 in the North region delivered through the restructuring & rightsizing program amounted to €0.2 million. Additional cost savings through site consolidations will be delivered in the first half of 2012.


South

October-December 2011

Revenue in the South region decreased 8.2% compared to Q410. The disposal of the French sites in Roanne and Tulle during the second quarter of 2011 decreased revenues by approximately €3.6 million in Q411 compared to Q410. This volume loss was partly offset by continued growth in our installed client base in Italy.

Gross margin increased by 2.5 percentage points compared to Q410, partly due to improved capacity utilization in France following the disposal of the loss making sites in Roanne and Tulle, and predominantly to operational performance improvement in Italy.

EBITA in the quarter improved by €1.3 million, compared to Q410, despite the negative impact of a €1.5 million provision for VAT exposure in France. Excluding this impact, SG&A costs in the region decreased by €2.4 million. SG&A costs in France decreased as a result of the disposal of the Roanne and Tulle sites. However, SG&A costs were slightly higher in Italy compared to Q410, due to the ramp-up of new volumes.

Full year 2011

Revenue in the full year 2011 increased by €11.6 million compared to 2010. Excluding the €7.4 million revenue reduction following the disposal of the Roanne and Tulle sites in France, the South region increased revenue by €19.0 million (23.5% increase), due to the significant ramp-up of new volumes related to the major new contract with INPS-INAIL in Italy, won in 2010.

Gross margin in the region was 0.6 percentage points below the 2010 average. While gross margin improved in France, margins in Italy decreased, partly due to Indexed salary increases which we could not compensate for. The ramp-up of significant new volumes in Italy during the year also impacted negatively on margins.

EBITA for the full year improved by €3.8 million. SG&A costs decreased by €3.5 million, from €18.1 million in 2010 to €14.6 million in 2011, mainly driven by the site disposals in France during Q211. In addition to this, additional cost savings in 2011 in the South region delivered through the restructuring & rightsizing program amounted to €0.2 million. We are facing a lengthy restructuring process in France. 


Other information

The financial information in this report has been prepared in accordance with International Financial Reporting Standards (“IFRS”) as endorsed by the European Union. While the interim financial information included in this announcement has been prepared in accordance with IFRS applicable to interim periods, this announcement does not contain sufficient information to constitute an interim financial report as defined in International Accounting Standards 34, “Interim Financial Reporting”. Unless otherwise noted, the numbers in the press release have not been audited. The financial information and certain other information presented in a number of tables in this press release have been rounded to the nearest whole number or the nearest decimal. Therefore, the sum of the numbers in a column may not conform exactly to the total figure given for that column. In addition, certain percentages presented in the tables in this press release reflect calculations based upon the underlying information prior to rounding and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based upon the rounded numbers.

Results Conference Call and Webcast

Transcom will host a conference call at 10.30 am CET (09:30 am UK time) on Tuesday, February 7, 2012. The conference call will be held in English and will also be available as webcast on Transcom’s website, www.transcom.com.

Dial-in information

To ensure that you are connected to the conference call, please dial in a few minutes before the start in order to register your attendance.

Sweden: 08-503 364 34

UK: +44 (0) 1452 555 566

US: +1 631 510 7498

Passcode: 39877568

For a replay of the results conference call, please visit www.transcom.com to view the webcast of the event.

Transcom WorldWide S.A. 2012 Annual General Meeting

The 2012 Annual General Meeting will be held on May 30, 2012 in Luxembourg. Shareholders who hold at least 5% of the issued share capital, and who wish to have matters considered at the Annual General Meeting, should submit their proposal in writing to agm@transcom.com or by registered mail to the Company Secretary, Transcom WorldWide S.A., 45 rue des Scillas, L-2529 Howald, Luxembourg, at least 2 months prior to the Meeting in order 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 Meeting.

Nomination Committee for the 2012 Annual General Meeting

A Nomination Committee of major shareholders in Transcom has been formed in accordance with the resolution of the 2011 Annual General Meeting. The Nomination Committee is comprised of Cristina Stenbeck on behalf of Investment AB Kinnevik, Stefan Charette on behalf of Investment AB Öresund, Tomas Ramsälv on behalf of ODIN Fund Management, and Caroline af Ugglas on behalf of Skandia Liv.

Information about the work of the Nomination Committee can be found on Transcom’s corporate website at: www.transcom.com.

Shareholders wishing to propose candidates for election to the Board of Directors of Transcom WorldWide S.A. should submit their proposal in writing to agm@transcom.com or to the Company Secretary, Transcom WorldWide S.A., 45 rue des Scillas, L-2529 Howald, Luxembourg.

Notice of Financial Results

Transcom's financial results for the first quarter 2012 will be published on 19 April 2012.

Johan Eriksson

7 February 2012

Transcom WorldWide S.A.

45 rue des Scillas

L-2529 Howald

Luxembourg

+352 27 755 000

www.transcom.com

Company registration number: RCS B59528

Notes to Editors:

The following provides a breakdown of which countries are included in each geographical region.

  • North: Denmark, Norway and Sweden
  • West & Central: Austria, Belgium, Croatia, the Czech Republic, Estonia, Germany, Hungary, Latvia, Lithuania, Luxembourg, the Netherlands, Poland, Romania, Serbia, Slovakia, Switzerland and the United Kingdom
  • South: France, Italy and Tunisia
  • Iberia: Chile, Peru, Portugal and Spain
  • North America & Asia Pacific: Canada, Philippines and the United States of America

For further information please contact:

Johan Eriksson, President and CEO                                              +46 70 776 80 22

Aïssa Azzouzi, CFO                                                                          +352 27 755 013

Stefan Pettersson, Head of Investor Relations                             +46 70 776 80 88