Q2 2013 financial highlights
- Net revenue €166.5 million, a 13.0% increase compared to Q212 (€147.4 million)
- Gross margin 19.0%, a 0.5 percentage point increase compared to Q212 (18.5%)
- EBIT €2.9 million compared to 1.4 million in Q212
- EPS 0.2 Euro cents compared to (0.1) Euro cents in Q212
- The exchange rate impact on revenue was +€0.1 million, and the impact on EBIT was negligible
Comments from the President and CEO
Transcom’s core business is customer care outsourcing (CRM), supporting our clients in driving revenue and brand loyalty. This business represents over 90 percent of Transcom’s revenues, and it expanded both in terms of sales (+14.8%) and EBIT, which grew from €0.5 million to €2.9 million compared to the second quarter last year. Out of this €2.4 million improvement in our CRM business, €0.9 million is attributable to the deconsolidation of our former French subsidiary. As previously announced, we are evaluating a number of strategic alternatives for our non-core collections business (CMS). This process is progressing, and we will communicate further details as soon as a decision has been reached. We are currently also executing on a number of other important activities to strengthen the company’s strategic position as well as its financial predictability and performance. As a result of these actions, the results this quarter were burdened with temporarily higher corporate costs, mainly legal and professional fees. We expect that these costs will start to reduce from Q4 2013.
Continued strong revenue growth
Revenue in the quarter increased by 13.0% compared to the corresponding period last year. All our regions grew their top-line, while revenue in collections business (CMS) fell. The revenue growth is mainly organic, driven primarily by higher volumes with existing clients. We have also added several new clients over the past year, contributing meaningfully to overall growth. Foreign exchange effects did not have a significant effect on revenue.
EBIT increase driven by Central and South regions
EBIT increased to €2.9 million (€1.4 million in Q212), driven by improved performance in our Central and South regions. We are continuing to focus hard on improving profitability in underperforming regions. Our EBIT performance in the quarter was negatively impacted by higher corporate costs, which increased from €5.0 million in Q212 to €6.0 million this quarter. This increase in corporate costs is of a temporary nature, and is explained by higher expenses for legal and professional services in relation to the closure of Transcom’s former French subsidiary, the evaluation of strategic alternatives for our non-core CMS business unit, and the management of tax claims. We expect corporate costs to begin decreasing in Q413.
As previously announced, we are in the final 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. In this context, Transcom transferred €5.3 million in Q213 to an escrow account in France. This sum represents the estimated cost of a settlement agreement related to the closure of Transcom’s former subsidiary in France. While this payment materially affected our cash flow and net debt in the quarter, net debt still decreased compared to last quarter.
Divestment of Belgian operations and organizational changes
In the context of refocusing the company’s activities on core markets, Transcom has divested its operations in Belgium. The contribution of Transcom’s former Belgian entity to Group results is not material. In the fiscal year 2012, this entity reported revenues amounting to €4.2 million.
Effective July 1, 2013, Transcom’s operations in the Central Region are consolidated into the North and South regions. The Netherlands will be consolidated with the North region, while the rest of the countries in the former Central Region – Croatia, Germany, Hungary and Poland – will be consolidated with the South region. We are making this change in order to make the most of the important client synergies that exist between these regions. In addition, the streamlining and simplifying of our regional structure will yield cost and scale advantages. Starting in the Q3 2013 earnings announcement, our segment reporting will reflect this change. The former South region and all countries except the Netherlands in the former Central region will now combine to create the new Central & South region, under the leadership of Roberto Boggio. The North region, now expanded with the Netherlands, will retain its name and will be led by Christian Hultén. Jörgen Skoog, who headed up our former Central Region, will now focus fully on his important role as Transcom’s Operations & HR Director.
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 10:30am CET (09:30am UK time) on Thursday, July 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
Pass code: 74440945
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