Q1 2013 financial highlights
- Net revenue €170.5 million, a 15.9% increase compared to Q112 (€147.1 million)
- Gross margin 20.9%, a 3.1 percentage point increase compared to Q112 (17.8%)
- EBIT €6.1 million compared to €1.1 million in Q112
- EPS 0.0 Euro cents compared to -0.1 Euro cents in Q112
- The exchange rate impact on revenue was +€1.4 million, and the impact on EBIT was +€0.2 million
Comments from the President and CEO
Strong revenue growth
Revenue in the quarter increased by 15.9% compared to the same period last year, with all of our units contributing positively to the top-line. Foreign exchange effects added 1.4% to overall growth. While the growth is mainly the result of expansion with existing clients, we have added several new clients in various industry sectors during the past twelve months, bringing the total number of Transcom clients to over 400 globally. Our reported revenue in the quarter also benefited from compensation received for transferring the right to collect on a Swedish debt portfolio (see below).
EBIT increase in the quarter mainly driven by CMS
We reported EBIT of €6.1 million, compared to €1.1 million in Q112. EBIT was positively impacted by €3.8 million as a result of compensation that Transcom has received in exchange for transferring our right to collect on a Swedish debt portfolio to another party.
EBIT in Q113 was positively impacted by €6.0 million due to a non-cash capital gain following the deconsolidation of our former French subsidiary. This was offset by €6.0 million in restructuring and other non-recurring costs in the quarter, as outlined below:
- The estimated cost for a settlement agreement related to the closure of Transcom’s former subsidiary in France, accounting for the larger part of the €6.0 million in non-recurring costs booked in the quarter. Transcom is currently in the process of negotiating the terms and conditions upon which Transcom will be released from any further liabilities with respect to the liquidation of our former French subsidiary. We expect to be able to announce the final outcome of the negotiations during the second quarter of 2013.
- Costs related to the previously announced move of the Finance organization from Luxembourg. The Group Finance organization is in the process of being moved to our Management office in Stockholm, while the regional accounting and finance responsibilities currently performed by our staff in Luxembourg are being transferred to each respective region in order to integrate more closely with regional management teams. This transition will be a gradual one, with the objective of completing the move during the second half of 2013. As a result of consolidating resources, we expect a reduction in run-rate costs for the Finance function.
- The closure of Transcom’s CRM business in Denmark. The CRM operations in Denmark have been loss-making for an extended period of time. The overall market situation in the country is challenging and we do not expect conditions to improve sufficiently in order to reach profitability within a reasonable time. Danish CRM operations account for just over one percent of revenue in the North region, but recorded a €0.7 million loss in 2012.
- In addition to the items above, we have decided to take additional steps in order to improve our capacity utilization in North America, which is still below target. The actions taken in 2012 and Q1 2013 will allow us to realize continued margin improvements throughout 2013.
In total, the positive impact on our quarterly EBIT run rate of the actions described above – once completed – amounts to €2.3 million, with a positive quarterly cash-flow effect of €3.9 million.
From an operational perspective, we saw improvements in our South and Central regions, while EBIT decreased in the North, Iberia and North America & Asia Pacific regions. Higher efficiency in Germany and higher volumes overall contributed to the performance improvement in the Central region. In South, higher offshore volumes and lower costs related to our former French subsidiary had a positive effect on margins. In the North America & Asia Pacific region, we expect to realize further margin improvements both offshore and onshore in the coming months as a result of increased capacity utilization. In Iberia, EBIT suffered from the fact that we had three working days less than in the same quarter last year. In addition, we invested to raise capacity at our Peru site. In North, lower volumes than anticipated during parts of the quarter impacted negatively on efficiency. Volumes in the telecom sector in the North region fell significantly short of forecasts, leading to a situation of overstaffing. We were able to gradually adjust staffing throughout the quarter.
As previously announced, Transcom’s Board of Directors is currently evaluating a number of strategic alternatives for our Credit Management Services (CMS) business unit. This process is progressing, and we will communicate further details as soon as a decision has been reached.
Johan Eriksson, President and CEO of Transcom
The interim report is also available for download on www.transcom.com
Results Conference Call and Webcast
Transcom will host a conference call at 10.30 am CET (09:30 am UK time) on Thursday, April 18, 2013. The conference call will be held in English and will also be available as webcast on Transcom’s website, www.transcom.com.
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
For a replay of the results conference call, please visit www.transcom.com to view the webcast of the event.
For further information please contact:
Johan Eriksson, President and CEO +46 70 776 80 22
Stefan Pettersson, Head of Group Communications +46 70 776 80 88