- EBIT margin in the core CRM business improved by 0.9 percentage points in Q3 2014, from 2.6% to 3.5%
- Performance improvements in the North Europe, North America & Asia Pacific and Central & South Europe regions
- Performance in the Iberia & Latam region has improved compared to Q2 2014, and is expected to continue improving in the next quarters
- Divestment of CMS Austria completes the strategic review of Transcom’s CMS business unit.
”I am pleased with the significant margin improvement in Q3. We are continuing to execute on our key priorities, and remain focused on further enhancing our profitability.”
Johan Eriksson, President & CEO
Q3 2014 financial highlights
- Revenue €146.0 million (€156.0 million in Q3 2013). Adjusted for exchange rate impact and divested operations, revenue fell by approximately 1.4%
- Gross margin 20.8%, a 0.6 percentage point increase compared to Q3 2013 (20.2%)
- EBIT €5.3 million (3.6%) compared to €4.6 million (2.9%) in Q3 2013
- EPS 0.2 Euro cents compared to 0.1 Euro cents in Q3 2013.
January – September 2014 financial highlights
- Revenue €458.1 million (€492.9 million). Adjusted for exchange rate impact and divested and closed operations, revenue was essentially flat
- Gross margin 20.3%, a 0.3 percentage point increase compared to the same period 2013 (20.0%)
- EBIT €12.1 million (2.6%) compared to €13.5 million (2.7%) in the same period 2013
- EPS 0.2 Euro cents compared to 0.3 Euro cents in the same period 2013.
Comments from the President and CEO
We saw a significant margin improvement in Q3, even as our Iberia & Latam region faced a challenging quarter due to low efficiency in Chile. Performance in our Chilean operation improved gradually during Q3 however, and I expect that the unit will continue improving in the next quarters. The divestment of CMS Austria during the quarter completes the strategic review of our Credit Management Services business unit, and we are now focusing fully on further enhancing profitability in our core customer care business.
Revenue decrease mainly due to divestments in the CMS business during the year
On a like-for-like basis, adjusting for divestments and currency effects, revenue fell slightly by €2.1 million (1.4%) compared to Q3 2013. While business volumes have fallen in the North Europe and Iberia & Latam regions compared to last year, we expanded volumes with our clients in the North America & Asia Pacific and the Central & South Europe regions.
The greater part (€6.8 million) of the remaining €7.9 million in reported revenue decrease is attributable to the divestment of a number of Credit Management Services (CMS) units during the year. Currency movements had a €1.1 million negative effect on revenue.
Continued profitability improvements in our core customer care business
Our strong focus on improving profitability is yielding results both in terms of gross and operating margin. The EBIT margin in our core CRM business increased by 0.9 percentage points, from 2.6% to 3.5%.
This increase in profitability is driven by performance improvements in our North America & Asia Pacific and North Europe regions. I am happy to report that our North American operation is now profitable, and that the positive development in Asia Pacific continues. In our North Europe region, efficiency has improved with a corresponding positive effect on margins. We also report a slight positive margin development in our Central & South Europe region.
I am pleased that we saw good margin progression overall even though performance in the Iberia & Latam region worsened compared to last year. The decrease in this region is mainly due to the challenges faced by our Chilean operation in terms of insufficient volumes and efficiency. Compared to Q2 2014, we see an improvement in Chile, and we are continuing to focus on addressing the situation. I expect a significant improvement in the next quarters.
Strategic review of CMS completed and re-domiciliation progressing according to plan
During Q3, we finalized the divestment of CMS Austria. This completes the strategic review of our Credit Management Services (CMS) operations. A number of other CMS country units have been divested during the year, while parts of the business have been integrated with our CRM operations. Starting in our Q4 2014 report, CMS will no longer be reported as a separate business unit.
On September 25, we announced that the Swedish Companies Registration Office has granted Transcom permission to implement the merger plan which will execute the re-domiciliation of the parent company of the Transcom Group from Luxembourg to Sweden. The process of preparing for the implementation of the re-domiciliation and the merger is progressing according to plan. The final registration of the merger is expected to occur on November 26, and we anticipate that November 28 will be the first day of trading in the ordinary shares of Transcom WorldWide AB on Nasdaq Stockholm (under the ticker TWW). As previously announced, a 1:50 reverse split of the ordinary shares of Transcom WorldWide AB (publ) is intended to be executed shortly after the implementation of the merger.
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, October 23, 2014. The conference call will be held in English and will also be available as a live webcast.
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 recorded 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