q2 2018 presentation - transcom sverige holding... · note: 2014– 2016 figures represents...
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Q2 2018 PresentationAugust 27 2018
Strictly private and confidential
OutstandingCustomerExperience
Agenda
2
2 Company overview 5
3 Financial performance 10
4 Summary 16
1 Presenters 3
Presenters
.
1
4
Today’s presenters
Leif MårtenssonChief Financial Officer
Transcom since August 2017
Previous roles:‒ CFO, Hilding Anders
Group (2014 – 2017)‒ CFO, Arjo Huntleigh,
Getinge Group (2009 –2014)
Mattias HolmströmAltor, Director
Board member of:‒ Transcom‒ BTI Studios‒ Meltwater‒ NorthStar Group
Altor since 2011
Previous roles:‒ Senior Consultant,
Booz & Co(2010 – 2011)
Michael WeinreichChief Executive Officer
Transcom since September 2017
Previous roles:‒ VC Partner, FinLeap
(2016 – 2017)‒ CEO, Arvato Financial
Services (2009 – 2016)
Company overview
.
2
31%
68%
1%
Note: 2014–2016 figures represents consolidated TWW accounts adjusted for EO items and D&A, FY 2017 is consolidated at Issuer level, adjusted for EO items and D&A and full year adjusted for the acquisitions of TWW and GVP Communication AB (Xzakt). 1) Group total sales growth adjusted for discontinued/divested operations and Tele2 contract , Adj. EBITDA margin calculated as Adj. EBITDA/Total sales, 2) 2018 LTM Q2
contact centres worldwide; On-shore,
near-Shore, off-shore, plus Work-at-
Home agents
200+Transcom serving a broad set of international clients
around the globe
Offering services in
50Languages spoken in our customer service delivery centres
33LTM Q2 2018 Sales558 €M
2017Altor, a Nordic private
equity firm, full owner as of April 2017
Privately owned since
Employees in 21 countries
29,000
Customers served daily on Transcom implemented campaigns
1.5m+
A Nordic outsourced contact centre champion with a global footprint
6
Transcom introduction in numbers Global footprint and service offering
Key financials1) Sales breakdown 2)
Sales by segment Sales by client vertical
Manila EDSA Manila Pasig
BacolodIloilo
Concepcion
Sweden (HQ)Fredrikstad
Lithuania
TallinnRiga
Groningen
Spain
Portugal
ItalyCroatiaTunisia
BudapestGermany Poland
Leeds
Belgrade
North America:Work At Home Agents
Full service offering in 33 languages in 50 sites across 21 countries
28%
16%
15%
14%
9%
6%
5%2%
5%
TelecomCableBankingGov & HealthcareTech
RetailTransportationMediaOther
English Speaking
Latin AmericaEurope
477 507 496 506 491
617 627 586 584 558
5,3% 5,2% 5,3% 6,5% 6,8%
2014A 2015A 2016A 2017A 2018LTM Q2Tele2 contractSales from discontinued/divested operationsSales adj. for Tele2 and discontinued/divested operationsAdj. EBITDA margin
Boni
New CTO, Stefan Berg, previously VP Connected Consumer Solutions Electrolux, emphasizing our commitment to technology innovation
New global contract with gamification solution provider Athand Digital recruitment process rolled out in several geographies
Increased focus on innovation
Cost reductions realized in line with People, Passion, Performance plan Reallocation of resources to more profitable contracts Relaunch of branding, website and employer branding in September 2018
Transformation process well under way
Key Highlights Quarter 2 2018A new, strengthened Transcom taking shape
New locations to expand Transcom’s European footprint and enhance our nearshore and multilingual services
Ca. 270 seats in Zagreb, Croatia to support predominantly German clients but also other languages
Ca. 100 seats in Novi Sad, Serbia (satellite site to Belgrade) to provide expansion space as well as additional sources of German language
Ramp-up of ca. 300 work at home agents in North America
Organic growth to support strategy
7
Adding of competence in senior sales positions as well as product management to drive new revenue streams and focus on increasing footprint with current clients and building pipeline
New MD in the Nordics, Pernilla Oldmark, with 20 years of experience from telecom and service industry, 19 working for Tele2
Strengthenedorganization
Strengthening of nearshore capabilities by expansion to Albania
• On July 31st, Transcom signed and closed an asset transfer agreement to take over a site in Durres, Albania, currently operated by Transcom’s partner.
• The site in Durres has been delivering services to Transcom clients since 2013. For Transcom, taking over the site with over 500 highly qualified multilingual employees, will strengthen Transcom’s European nearshore and multilingual services.
• The takeover will also strengthen Transcom’s results as well as the relationship with the served customer.
8
Adding competence within e-commerce and digital with acquisition of Awesome OS• On July 27th, Transcom signed and closed the acquisition of Awesome OS, a leading niche e-
commerce customer experience specialist providing customer experience and business process solutions to leading and fast-growing US e-commerce clients from its operations in Davao, Philippines. Awesome OS has approximately 2,000 team members. A vast majority of their offerings are digital/non-voice services such as emails, chat, and back office support.
• Awesome’s track record of partnering with US e-commerce companies from a very early stage, combined with Transcom’s global footprint and robust delivery models, is a great opportunity to support high growth companies through their global expansion. For Transcom, this acquisition will also strengthen our digital capabilities and increase our global focus on the e-commerce industry.
• Awesome OS had revenues of 25 MUSD in 2017, and have shown very good growth over the last years, with a CAGR of 34% since 2015. The acquisition will strengthen the blended margins of the group.
• The acquisition is financed by cash on the balance sheet and the issuance of an unsecured note of 10 MEUR under the general basket of permitted financial indebtedness. The seller are also investing a significant amount in Transcom.
9
Financial Performance
.
3
Financial development
11
Sales and EBITDA development
617 627586 584
558
33 32 31 38 38
5,3% 5,2% 5,3%6,5% 6,8%
2014A 2015A 2016A 2017A 2018LTM
EURm
Sales Adj. EBITDA Adj. EBITDA %
Summary of historical P&L
Sales down since 2015 due to discontinued/divested services and purposely discontinued businesses. Q2 affected by final ramp-down of North American Bricks & Mortar business and ramp-down of a Nordic Telecom client. Gross profit margin improving on the back of costs trending down as a result of initiated cost savings program and depreciation from lower capex Continuous EBITDA improvement thanks to efficiency improvement actions being realised with more improvements to come in the following quarters Extraordinary items affected by restructuring costs from improvement program and from reservations in Spain related to a dispute regarding social fees for
consultants.
EURm 2014A 2015A 2016A 2017A 2018LTM
Sales 616.8 626.5 586.1 584.0 558.0
Cost of sales -481.9 -492.7 -458.7 -456.3 -434.8D&A1) -7.4 -8,9 -8.0 -8.2 -7.5Gross profit 127.6 125.0 119.4 119.5 115.7% margin 20.7% 19.9% 20.4% 20.5% 20.7%SG&A -102.1 -101.6 -96.2 -89.5 -85.2Adj. EBITA 25.5 23.4 23.1 30.0 30.4% margin 4.1% 3.7% 3.9% 5.1% 5.5%Adj. EBITDA 32.9 32.3 31.2 38.2 38.0% margin 5.3% 5.2% 5.3% 6.5% 6.8%
Solid EBITDA margin improvement proof for successful acceleration of strategic initiatives
1) M&A amortisation not included in D&A. 2) Costs for consultancy transformation support was included as transactional in 2017 but moved to operational in 2018 since the consultants are supporting the cost saving program PPP.
Extraordinary items (EURm) 2014A 2015A 2016A 2017A 2018
LTM
Transaction related EO items 2.6 0.9 -3.5 9.6 7.9
Operational EO items2) 0.5 2.3 3.1 10.3 29.3
Total EO items 3.1 3.2 -0.5 20.0 37.2
NWC development
12
Quarterly Net Working Capital
Working capital relatively stable over time with some seasonal variations. Q2 is typically the lowest quarter in terms of NWC as % of sales.
Movements between quarters are mainly referring to timing effects of collections
Net working capital trending down as share of sales
Note: 2014–2016 figures represents consolidated TWW accounts, 2017 -2018 figures are consolidated at Issuer level. Q2,Q3 ,Q4 2017 and 2018 include the acquisition of GVP Communication AB (Xzakt).
-150
-100
-50
0
50
100
150
200
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Trade receivables Trade payablesPrepaid expenses and accrued income Accrued expenses and prepaid incomeOther receivables - Current Other liabilities - CurrentNet Working capital
7.5% 6.3% 6.9% 5.3% 6.5% 3.4% 5.4% 4.8% 4.9% 3.0% 5.4% 5.3% 6.1% 4.0% 4.3%
% NWC as % of LTM Sales
4.7%
EURm
5.4% 3,9%
EURm 2014A 2015A 2016A 2017A 2018LTM
Tangible capex -6.6 -8.8 -6.6 -6.5 -5.2
Intangible capex -1.7 -1.2 -2.0 -0.7 -0.9
Total capex -8.3 -10.0 -8.5 -7.2 -6.1
% of Depreciation & Amortisation 112.0% 112.2% 106.4% 88.3% 81.1%
% of Sales 1.3% 1.6% 1.5% 1.3% 1.1%
6,68,8
6,6 6,5 5,2
1,7
1,2
2,00,7
0,9
8,310,0
8,57,2
6,1
2014A 2015A 2016A 2017A 2018LTM
Tangible capex Intangible capex
Capital expenditures
13
Investments are mainly within IT equipment and other assets connected with the company’s site buildings
In 2018 the level of investment is temporarily lower due to recycling of assets from structural changes
Investments also benefits from the continuous development with lower hardware and software cost
Operational capex development1)
Comments
Capital light business model evident by low capex needs
Note: 2014–2016 figures represents consolidated TWW accounts, FY 2017 and 2018is consolidated at Issuer level, adjusted for EO items and D&A and full year adjusted for the acquisitions of TWW and GVP Communication AB (Xzakt). 1) Capex and is excluding M&A in order to represent operational capex, 2) Depreciation & Amortisation excluding M&A amortisation.
EURm
EURm 2014A 2015A 2016A 2017A 2018LTM
Adjusted EBITDA 32.9 32.3 31.2 38.2 38.0
Change in NWC -6.2 -0.9 -12.9 -1.1 2.7
Capex -8.3 -10.0 -8.5 -7.2 -6.1
Operating Free Cash Flow 18.4 21.5 9.7 29.9 34.6
Operating Free Cash Flow (%) 56.1% 66.5% 31.1% 78.3% 91.1%
56,1% 66,5%31,1%
78,3% 91,1%
-22-12-28
182838
2014A 2015A 2016A 2017A 2018LTM
Adjusted EBITDA Change in NWC Capex Op. Free Cash Flow (%)
Operating free cash flow
14
Operating cash flow development1)
Solid operating free cash flow of +60% on average since 2014
Note: 2014 – 2016 figures represents consolidated TWW accounts, FY 2017-2018 is consolidated at Issuer level, adjusted for EO items and D&A and full year adjusted for the acquisitions of TWW and GVP Communication AB (Xzakt). Please refer to Supporting financials in IM. 1) Operating cash flow excludes change in provisions, result from disposal of business, non-cash adjustments and income taxes paid and includes adjusted EBITDA, change in NWC and operational capex (excluding M&A).
EURm
Cash flow is relatively stable over time with a continuous improvement.
Working capital movements between the years are mainly coming from timing of collections
In 2016 the company had a negative working capital, due to both timing of collections as well as payment of previous year restructuring costs
Comments
Progressing on identified initiatives for improved profitability
15
Savings are rapidly progressing and expected to further increase in short term
Cost program has as per Q2 2018 realised EUR 16.1m in annualised cost savings
Identified areas Target Identified today
Realised 2017 1)
Realised 2018 2) Status
English speaking segment EUR 12.3m EUR 12.7m EUR 5.0M EUR 8.4m
First wave of cost savings was implemented before end of 2017. Second wave was decided in Q4 2017. The main item is the closure of the North America sites that will generate approx. 1.6 M in cost savings, starting from Q2 2018. Other savings includes transfer of support functions from North America to the Philippines and rightsizing of the organisation.
Europe segment EUR 10.6m EUR 9.0m EUR 6.0m EUR 7.5m
First wave of cost savings successfully implemented in 2017. Second wave was decided in Q4 2017 and most of it has now been implemented. The biggest impact comes from the delayering program as a result of the new organisation.
Central functions EUR 10.2m EUR 5.8m EUR 0.0m EUR 1.5m
The main realised saving comes from cost reductions in HR. Further cost reductions planned in IT and operations from automatization and Shared Service Centers.
Investments EUR -1.3mInvestment in innovation, RPA, digitalisation and in Centres of Excellence for HR and Operations
Total EUR 33.1m EUR 27.5m EUR 11.0m EUR 16.1m
1) Realised 2017 was the annualised savings decided in 2017.2) Realised by Q2 annualised effect.
Summary
.
4
Summary Transcom
17
Attractive and growing market proven to be resilient over time
1
Driven by significant trendsi.e. increased outsourcing and higher value services
EUR 51bnTotal Addressable Market (2016A)
Growing at 4-5% p.a.CAGR (2010-2016A and 2017-2021F)
Diversified business model with blue-chip client base
2
16Number of targeted verticals
1.5m+Number of customers served on a daily basis
<27%Top 3 client concentration
Leading market position with sticky client relationships driven by industry
leading client endorsement
3
> 20% growth With global account management in 2018
13 yearsAverage length of relationships with top 10 clients
97%Retention rate (FY 2017)
Stable and cash generative business with highly
flexible cost base
4
30%Ramp up of Work at home agents in 2018
91.1%Cash conversion (LTM 2018)
90%Total cost base flexibility
Implemented strategy program to build platform for success supported by selective value accretive acquisition
strategy
6
2 M&A transactionssigned and closed in July 2018
More M&A targetsProcesses on-going in multiple regions and verticals
Focus on growth verticalsStrong growth in tech, logistics and retail
Clearly identified initiatives for improved profitability
5
PPP Strategy program emphasising
People, Passion and Performance
EUR 33.1mTargeted tangible results to be realised
EUR 16.1mTangible results realised on an annualised basis
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