July 21, 2020 Q2 2020 Presentation
Today’s presenter Jonas Dahlberg President & Chief Executive Officer Transcom since June 2019 Previous roles: CFO, Transcom Holding AB (2019-2020) • CFO, Sweco Group (2012 – 2019) • President, Sweco Russia (2008 – 2012) • Associate Principal, McKinsey (1998 – 2008) • 2
Agenda Q2 highlights • Company and strategy • Financial performance • Summary •
Q2 highlights Strong quarter in the midst of the pandemic – Revenue • from continuing business +11%, EBITDA excl NRI +19% Transcom more relevant than ever – Strong demand and • continued inflow of new contracts from new and existing clients Resilience based on WAH, digital solutions and • diversified footprint – 60% of workforce WAH during Q2 Production bottlenecks and COVID-related NRIs • tampering off from June – Positive outlook for H2, provided no major COVID resurgence Transcom standing stronger than before – Going for • profitable growth through client focus and operational excellence, driven by great culture and leadership 4
Company and strategy
What we do: outsourced customer relationship management We are a global customer care provider …supporting our clients’ digital agenda …delivering services in 33 languages to offering future proof customer facing by combining our core services with international brands in various concepts delivered by our global leading digital capabilities and tools… industries team of local specialists… Services & utilities 26,000 Conversational customer experience specialists commerce serving customers via Utilities BFSI Gov & Media Travel Health- care Digital Gamification channels Commerce & Logistics Core services Call Chat Email Auto- Logistics Retail/ IT/Tech White- motive e-commerce goods Robotic Chatbots Process Automation Telco & Cable Interaction Social media Messaging Analytics Telco Cable 6
Serving Western Europe and Global English markets from four continents Europe Global English • • Delivery across US Markets • Europe UK • • 33 languages Philippines • • On-shore in 8 Off-shore from countries the Philippines Delivery model • • Near- /off-shore Work-at-home in from 10 the US and countries Canada Share of total 33% Europe revenue Global English 67% Q2 2020 LTM Site locations Serviced geographies 7
Transcom’s resilience is based on WAH, digital solutions and a diversified footprint Work at Home flexibility Diversified footprint Increased business resilience Flexibility and scalability from more sites • • Increased business agility & flexibility De-risked footprint - clients’ and Transcom • • Larger talent pool and sourcing capabilities Larger talent pool and sourcing capabilities • • Digital solutions Increased productivity & business resilience • Improved customer experience • Increased sales conversion • 8
Transcom is growing in attractive customer segments Revenue by industry segment, MEUR EBITDA 544 541 Developments during the quarter 532 Q2 2020 LTM Telco 6.8% • 179 Strong demand in commerce and 175 208 & Cable logistics from existing clients • Continued intake of new contracts, of 188 which some COVID-driven 208 6.5% Service 206 & Utilities • COVID-driven delays of tenders and ramp-ups of new contracts Commerce 169 155 14.6% 130 & Logistics • Travel and hospitality subsegment at standstill (<1% of Transcom revenue) 2018 2019 Q2 2020 LTM 9 Note: On July 27, 2018, the group acquired Awesome OS which has been consolidated from this date. 2019 includes Latin America until Feb 2019 (0.9M Sales and -0.1M EBITA). Adj. EBITDA% per industry includes allocation of unallocated/group-wide expenses.
Next phase is about profitable growth – Achieving double digit margins and solid organic growth Client focus Operational excellence Culture and leadership Leadership for people performance Strengthen market presence Operational performance • • • in North America management Clear, decentralized accountability Best practices for productivity, • • Accelerate sales in Europe recruiting, retention and workplace and lean OH • presence Client-by-client improvement Culture of client and customer • • Develop and protect existing clients approach centricity • 10
Financial performance
Strong quarter in the midst of COVID-19 • Strong revenue growth in continuing business – Revenue 132.2 MEUR (134.0) – 11% growth, adjusted for INPS exit and divestiture in Spain • Q2 EBITDA ex NRI +19% – 11.5 MEUR, +1.8 MEUR – 8.7%, +1.5pp • NRI: -7.2 MEUR (-3.1) • Net debt/EBITDA 4.5x (Mar 2020: 4.2x) 1) 12 1) Net debt / EBITDA 2020 calculated in line with the definition of Leverage Ratio in the terms and conditions of the outstanding senior secured notes based on an EBITDA of EUR 45.6m (not including non-recurring items in excess of 15% of EBITDA) and Net Interest Bearing Debt of EUR 206.4m (excluding Subordinated Loans and pension liabilities)
Strong EBITDA and growth on top line, adjusting for last year divested and exited business Sales and EBITDA development 1) Summary of historical P&L 1) EURm 2020 2019 2020 2019 2020 EURm 2016 2017 2018 2019 LTM Q2 YTD Q2 YTD Q2 Q2 586 584 Sales 584.0 543.6 541.5 532.3 269.1 260.0 134.0 132.2 586.1 544 541 532 Cost of sales -458.7 -456.3 -419.3 -399.3 -387.1 -202.0 -189.9 -101.5 -96.2 D&A 2) -8.0 -8.2 -7.7 -10.9 -12.1 -4.5 -5.7 -2.4 -2.8 (11.9%) D&A leasing -0.4 -0.4 -0.2 -0.2 -0.0 -0.1 9,2% 9,0% 119.5 116.7 130.9 132.8 62.5 64.3 30.0 33.2 Gross profit 119.4 % margin 20.5% 21.5% 24.2% 24.9% 23.2% 24.7% 22.4% 25.1% 20.4% 7,2% 6,5% SG&A -96.2 -89.5 -85.1 -79.3 -82.1 -38.8 -41.6 -20.2 -21.3 5,3% D&A leasing -12.5 -12.5 -6.0 -6.0 -2.1 -2.8 Adj. EBITA 1) 23.1 30.0 31.6 39.0 38.2 17.6 16.7 7.8 9.0 49 49 38 39 31 % margin 3.9% 5.1% 5.8% 7.2% 7.2% 6.6% 6.4% 5.8% 6.8% Adj. EBITDA 1) 62.8 63.1 28.3 28.5 12.2 14.7 2016A 2017A 2018A 2019A 2020LTM % margin 11.6% 11.9% 10.5% 11.0% 9.1% 11.1% Sales Adj. EBITDA excl IFRS 16 Adj. EBITDA 38.2 39.4 48.8 48.9 21.6 21.6 9.7 11.5 31.2 excl. IFRS 16 Adj. EBITDA excl IFRS 16 % % margin 6.5% 7.2% 9.0% 9.2% 8.0% 8.3% 7.2% 8.7% 5.3% 13 1) 2016 figures represents consolidated TWW accounts, 2017-2018 is consolidated at Issuer level, and adjusted for the acquisitions of TWW and Xzakt group. On July 27, 2018, the group acquired Awesome OS which has been consolidated from this date. 2019 and onwards are fully including recording of IFRS 16 Leases, no retroactive calculation done for comparison periods. 2) M&A amortization not included in D&A.
NRI increasing due to COVID and accelerated transformation efforts Q2 NRI EUR -7.2 million Non-recurring items, EUR millions 50 LTM • Of which -3.6 relating to COVID By quarter 45 business continuity cost 40 37.3 34.5 34.4 • Of which -3.0 relating to Transcom’s 35 32.5 operational and commercial 30 transformation 23.8 25 20.0 • Of which EUR -0.5 million transactional 20 16.6 15.0 15 11.5 9.5 10.1 8.4 20.6 10 6.0 7.2 NRI totaled EUR 13.2 million for 2020 5 2.2 7.0 7.2 1.6 LTM 6.0 4.3 0.8 0.5 3.5 3.6 4.0 3.1 2.2 0 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 14 Note: FY 2017 is consolidated at Issuer level and full year adjusted for the acquisitions of TWW group and Xzakt group.
Solid cash flow in the quarter • Q2 operating cash flow 2019 2020 2019 2020 2019 EURm Q2 YTD Q2 YTD Q2 Q2 Jan – Dec amounted to EUR 13.6 million (4.6) Profit/loss before tax 2,143 -3,345 -7,855 -2,437 -6,932 Adjustments for non cash items 33,429 19,220 16,887 12,009 8,817 Net financial items 17,565 8,429 10,373 4,388 6,081 • Q2 working capital change Income taxes paid -7,456 -2,834 -642 -2,171 -516 amounted to EUR 6.2 Changes in working capital 5,684 -3,819 2,160 -7,216 6,157 million (-7.2) Operating cash flow 51,366 17,651 20,924 4,573 13,606 Investments -16,522 -5,182 -6,950 -2,837 -3,807 • Working capital developing Acquisitions/disposals of business, -1,101 5,936 -6,781 6,540 -6,781 net of cash positively – Partly swing of Other -560 -84 -3 9 -29 temporary nature, partly tax Cash flow from investing activities -18,183 670 -13,733 3,712 -10,617 deferrals enabled by government support Cash flow from financing activities -32,055 -7,120 -12,123 -4,880 -10,881 Cash flow for the period 1,127 11,201 -4,933 3,405 -7,892 programs 15
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