Transcom reports financial results for the second quarter

” I am pleased with the profitability enhancement in our core CRM business. Addressing the challenges we continue to face in Chile is our highest priority. I expect that the situation will be stabilized later this year, with a positive impact on Transcom’s margins.” Johan Eriksson, President & CEO Q2 2014 financial highlights · Net revenue €152.0 million, a 8.7% decrease compared to Q2 2013 (€166.5 million). Adjusted for exchange rate impact as well as for divested and closed operations, revenue fell by approximately 2.9% · Gross margin 19.3% a 0.3 percentage point increase compared to Q2 2013 (19.0%) · EBIT €1.4 million compared to €2.9 million in Q2 2013. EBIT was impacted by a €1.1 million cost related to the planned re-domiciliation, and by a €1.3 million cost due to divestments of CMS units · EPS -0.1 Euro cents compared to 0.2 Euro cents in Q2 2013. January – June 2014 financial highlights · Net revenue €312.1 million, a 7.4% decrease compared to the same period 2013 (€336.9 million). Adjusted for exchange rate impact as well as for divested and closed operations, revenue increased by approximately 0.2% · Gross margin 20.0%, flat compared to the same period 2013 (20.0%) · EBIT €6.8 million compared to €8.9 million in the same period 2013 · EPS 0.0 Euro cents compared to 0.2 Euro cents in the same period 2013 Key highlights · Divestments and closures had a significant impact on reported revenue in the quarter · EBIT margin in core CRM business improved by 0.9 percentage points in Q2 2014, from 1.6% to 2.5%, excluding the one-time cost for the re-domiciliation · Strengthening performance in Chile is a top priority for 2014 · Subject to shareholder approval, Transcom will carry out a re-domiciliation to Sweden this year, given the benefits of such a move for the Group and its shareholders. Comments from the President and CEO While I am pleased with the profitability improvement in our core business, strengthening our performance in Chile is a key priority for 2014, which I expect will yield margin improvements this year. Divestments and closures that we have completed during the past year had a significant impact on our reported revenue. While profitability enhancement is currently our top priority, our goal is to continue growing revenue at least in line with overall market growth. Subject to shareholder approval, we will carry out a re-domiciliation from Luxembourg to Sweden this year, given the benefits of such a move for the Group and its shareholders. Transcom’s primary focus area for 2014 is to strengthen margins. We have consequently focused on optimizing capacity utilization in our existing contact centers rather than investing in new capacity for expansion. I am pleased to see the margin improvements we have achieved in our North America & Asia Pacific and North Europe operations. While these profitability enhancements are positive, we continue to face challenges in our Latin American operations, particularly in Chile.  Addressing these is currently our most important priority. We closed the Valdivia site at the end of 2013, in response to falling volumes in the country. Since then, we have been working to address decreasing seat utilization and unsatisfactory efficiency levels at our remaining Chilean site in Concepcion. We will continue to focus on growing revenue with domestic clients, with the objective of reaching break-even in Chile later this year. We are making progress and are optimistic that we will reach our targets. In the North America & Asia Pacific region, we aim to continue improving results through increased efficiency and business development. Revenue impacted by divestments in the CMS business and lower call volumes On a like-for-like basis, adjusting for the effects summarized below, revenue fell by 2.9% compared to Q2 2013. The reported €14.5 million revenue decrease compared to Q2 2013 is comprised of: · €-5.6 million: divestments and site closures that Transcom completed during the year in order to exit non-core areas and focus on the core CRM business in prioritized geographies. The most significant actions impacting the revenue comparison are the sale of a number of CMS units, the sale of our Belgian operations, and the closure of the Valdivia site in Chile. The closure of the loss-making Danish CRM unit also impacted negatively on revenue. · €-4.0 million: negative currency impact. · €-4.9 million: mainly due to lower volumes in Iberia & Latam (Chile), North Europe, and North America & Asia Pacific. Improved profitability in our core customer care business The EBIT margin in our core CRM business improved by 0.9 percentage points, from 1.6% to 2.5%, excluding the one-time cost for the re-domiciliation. This was driven by improvements in the North America & Asia Pacific and North Europe regions. Reported EBIT for the Group in Q2 2014, including the CMS business, amounted to €1.4 million (€2.9 million in Q2 2013). EBIT this quarter was impacted by a €1.1 million cost related to the re-domiciliation, and a €1.3 million capital loss as a result of divestments (CMS Poland, CMS Czech and CMS Austria). SG&A costs as a proportion of revenue have decreased, mainly due to divestments and cost savings, excluding the cost related to the re-domiciliation. The divestment of CMS Austria (subject to regulatory approval) completes the strategic review of our CMS business. A number of country units have already been divested. Other units, which are characterized by services that can be efficiently delivered within the context of our core CRM business, have been restructured and integrated with Transcom’s customer care operations. Transcom’s Board of Directors is convinced that the timing is now right for carrying out a re-domiciliation of the parent company of the Transcom Group to Sweden, given the benefits of such a move for the Group and its shareholders: Transcom’s legal domicile will be aligned with the domicile of its owners, as the majority of Transcom’s shareholders are Swedish; general meetings will be held in Sweden, facilitating shareholder participation; Transcom will no longer be bound by dual legal systems, lowering costs and simplifying the execution of corporate actions; and Transcom’s listing set-up will also be simplified, as we can abandon the SDR system and establish one class of shares. We plan to present the merger plan shortly after the release of this Q2 2014 interim report. The statutory merger and the re-domiciliation are expected to be concluded during the fourth quarter of 2014, subject to shareholder approval. 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 17, 2014. The conference call will be held in English and will also be available as webcast on Transcom’s website, www.transcom.com. Dial-in information 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 About Transcom Transcom is a global customer experience specialist, providing customer care, sales, technical support and credit management services through our extensive network of contact centers and work-at-home agents. We are 29,000 customer experience specialists at 57 contact centers across 24 countries, delivering services in 33 languages to over 400 international brands in various industry verticals. Transcom WorldWide S.A. Class A and Class B shares are listed on the NASDAQ OMX Stockholm Exchange under the symbols TWW SDB A and TWW SDB B.