Q1 2014 financial highlights
- Net revenue €160.1 million, a 6.1% decrease compared to Q1 2013 (€170.5 million). Adjusted for exchange rate impact and divested and closed operations, revenue grew by approximately 2.8%
- Gross margin 20.7% a 0.2 percentage point decrease compared to Q1 2013 (20.9%)
- EBIT €5.4 million compared to €6.1 million in Q1 2013
- EPS 0.1 Euro cents compared to 0.0 Euro cents in Q1 2013
- The exchange rate impact on revenue was negative €4.1 million, while the impact on EBIT was marginal.
Comments from the President and CEO
I am pleased with the progress we are making in terms of enhancing Transcom’s performance, and our financials for the first quarter confirm the positive development. Our focus for 2014 is to continue to enhance Transcom’s financial results. While our goal is to continue to grow revenue at least in line with the overall market, our primary focus for the year is clearly to further strengthen our margins. In this context, we have formulated three key priorities for 2014: improving results in North America through increased efficiency and business development, strengthening operational performance in the North Europe region, and driving efficiency and growth in Latin America.
Revenue increased on a like-for-like basis in Q1 2014
On a like-for-like basis, adjusting for the effects described below, we grew our revenue by approximately 2.8%. The reported €10.4 million revenue decrease compared to Q1 2013 is comprised of:
- €-10.6 million: divestments and closures that Transcom completed during the year in order to exit unprofitable entities and focus on the core CRM business in prioritized geographies. The most significant events impacting our reported revenue are the sale of CMS Germany at the end of 2013, the closure of our Valdivia site in Chile in November 2013, the sale of Transcom’s Belgian operation in the second quarter of 2013, the downsizing of the Canadian operation, and the deconsolidation of Transcom’s former French subsidiary on March 1, 2013.
- €-4.1 million: negative currency impact.
- €+4.3 million: growth, mainly in North Europe and Central & South Europe.
Improved EBIT margin in our core CRM business
In our core CRM business, EBIT in Q1 2014 was €3.4 million, (€1.8 million in Q1 2013). Our CRM EBIT margin in Q1 2014 was 2.3% (1.2%). Cost savings in North America and North Europe as well as profitable growth and efficiency improvements in the Central & South Europe region contributed the most to this performance improvement.
Update on the Credit Management Services (CMS) business unit
The strategic review of Transcom’s Credit Management Services (CMS) business unit is progressing. Following the divestment of CMS Germany at the end of 2013, and the integration of CMS UK with the Central & South Europe region (effective January 1, 2014), Transcom’s CMS business unit comprises operations in six European countries: Austria, the Czech Republic, Denmark, Norway, Poland and Sweden. As a result of rationalization and reorganization in the CMS business, we incurred a €0.5 million cost in the quarter.
Sweden and Norway
The CMS units in Sweden and Norway will be rationalized and reorganized in order to be integrated with Transcom’s core CRM operations in the North Europe region. Starting in Q2 2014, Transcom’s segment reporting will reflect this change. The part of the business that will be combined with our CRM operations is characterized by services that can be efficiently delivered within the context of our CRM business model. In 2013, the CMS units in Sweden and Norway together generated €10.1 million in revenue. In Q1 2014, revenue amounted to €2.3 million, compared to €6.1 million in Q1 2013. Revenue in Q1 2013 includes €3.8 million in compensation for selling the right to collect on a portfolio to another party (corresponding effect in Q1 2014: €0.9 million). These divestments of the right to collect on certain debt portfolios were a step in executing on the strategy to exit the non-core CMS business.
CMS Denmark will continue to be managed and further developed within Transcom. CMS Denmark generated €9.4 million in revenue in 2013.
Austria, the Czech Republic and Poland
The strategic review for these country units is still underway. We will communicate further details as soon as a decision has been reached. These CMS units together generated €22.7 million in revenue in 2013.
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 Friday, April 25, 2014. 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. No pass code is required
Sweden: +46 8 505 564 74
UK: +44 203 364 5374
US: +1 855 753 2230
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
Pär Christiansen, CFO +46 70 776 80 16
Stefan Pettersson, Head of Group Communications +46 70 776 80 88