Transcom: Interim report 1 January – 30 June 2016
”Soft volumes continued to impact Transcom’s results this quarter. As stated last quarter, implemented measures are expected to yield improvements in the second half of the year.”
Johan Eriksson, President & CEO
Key highlights Q2 2016
- Organic revenue decreased by 8.7%, out of which 3.6% is related to Transcom’s previously disclosed decision not to renew an agreement with an Italian public sector client.
- EBIT margin decreased to 2.1%, mainly due to the volume decrease in the English-speaking markets & APAC region. However, good progress was made during the quarter in terms of increasing capacity utilization in the region, supporting improvements for the second half of the year.
- Cost reduction and operational efficiency programs progressing according to plan.
Q2 2016 financial highlights
- Net revenue €140.0 million, a 10.9% decrease compared to Q2 2015 (€157.0 million). Organic revenue decreased by 8.7%.
- Gross margin 18.6% compared to 19.3% in the same period 2015.
- EBIT in Q2 2016 was €3.0 million (€4.7 million).
- EPS 3.9 Euro cents compared to 4.3 Euro cents in Q2 2015.
YTD 2016 financial highlights
- Net revenue €287.2 million, a 9.7% decrease compared to the same period last year.
- (€317.9 million). Organic revenue decreased by 8.6%.
- Gross margin excluding non-recurring items 18.6% compared to 19.5% in the same period 2015.
- EBIT was €6.8 million (€10.6 million). EBIT excluding non-recurring items was €6.3 million (€10.6 million).
- EPS 7.9 Euro cents compared to 24.9 Euro cents in the same period 2015.
- Net debt/EBITDA 0.6.
Comments from the President and CEO
As anticipated and disclosed in our Q1 2016 interim report, soft volumes continued to impact Transcom’s results this quarter. Improved capacity utilization, mainly in Asia, as well as efficiency improvements and cost savings are expected to drive improvements in the second half of this year.
Organic revenue decreased by €13.3 million (-8.7%) compared to Q2 2015. In the English-speaking markets & APAC region, lower volumes on some client accounts impacted our revenue. In the North Europe region, call volumes with telecom clients in Sweden and Norway were lower than last year. In addition to this, the divestment of CMS Denmark during Q1 2016 had a €3.0 million negative impact on revenue in the quarter. In the Continental Europe region, our previously disclosed decision not to submit a tender for a new agreement with one of our public sector clients in Italy had a €5.6 million (-3.6%) negative impact on the revenue comparison vis-à-vis Q2 2015. In the region, we also saw lower business volumes with some clients in Spain.
Mainly due to soft volumes, Transcom’s EBIT margin development on a rolling 12-month basis deteriorated slightly this quarter. Improving our EBIT margin is our most prioritized target at the moment. The realignment of our regional management structure in the Continental Europe region is progressing according to plan and is starting to yield improvements. The program is expected to yield €2.9 million in annual cost savings, estimated to take full effect during Q4 2016. I expect further efficiency gains in addition to these direct cost savings to be realized in the coming years. In addition to this, our Group-wide operational excellence program is also moving ahead as planned, generating improvements over the coming years, starting in the second half of 2016. The expected margin uplift will also be supported by the fact that several of the growth opportunities that I highlighted in our Q1 2016 report, mainly in the English-speaking markets & APAC region, are expected to materialize in the second half of this year. We have already started to prepare for volume increases on several client accounts.
As disclosed on July 14, we have signed a renewed agreement with Tele2, one of Europe's leading telecom operators. Tele2 is Transcom’s largest client, accounting for roughly 15 percent of revenue. Approximately 2,000 employees are currently dedicated to the Tele2 account, providing multichannel customer service and support to customers in Croatia, Estonia, Germany, Latvia, Lithuania, the Netherlands and Sweden. In the last few years, we have strengthened our partnership with Tele2, with a focus on consistent and efficient delivery of world-class customer service. Together, we have managed to exceed ambitious targets set for customer satisfaction. The new agreement creates a stable platform from which to continue developing the award-winning customer service.
As a result of the positive profitability trend over the last few years, Transcom’s financial position is strong. This allowed Transcom to pay a dividend for 2015, amounting to SEK 1.75 per share. At the end of Q2 2016, our net debt/EBITDA ratio stood at 0.6, compared to 0.7 at the end of Q1 2016 (0.3 in Q2 2015).
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 Tuesday, July 19, 2016. 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 recorded webcast of the event.
This information is information that Transcom WorldWide AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact persons set out below, at 08:00 CET on July 19, 2016.
For further information please contact:
Johan Eriksson, President and CEO +46 70 776 80 22
Ulrik Englund, CFO +46 70 286 85 92
Stefan Pettersson, Head of Group Communications +46 70 776 80 88