Talenom Plc Business Review January–September 2020 (unaudited)

Net sales grew by 13% and operating profit improved by 17% – New elements for the implementation of the growth strategy

Talenom Plc, Stock exchange release, 26 October 2020 at 13:30

Talenom Plc Business Review January–September 2020 (unaudited): Net sales grew by 13% and operating profit improved by 17% – New elements for the implementation of the growth strategy

January–September 2020 in brief:

• Net sales 48.7 (43.0) million euros, increase 13.1% (18.2%)
• Operating profit (EBIT) 10.5 (9.0) million euros, 21.5% (20.8%) of net sales
• Net profit 7.8 (6.6) million euros
• Earnings per share 0.18 (0.16) euros
• Talenom’s guidance for 2020 remains unchanged: Net sales for 2020 are expected to amount to 64–68 million euros and operating profit to 12–14 million euros.
  
  

Group	1–9/2020	1–9/2019	Change
Net sales, thousands of euro	48,698	43,042	5,656
Net sales, increase %	13.1%	18.2%	-5.1 percentage points
Operating profit (EBIT), thousands of euro	10,456	8,951	1,505
Operating profit (EBIT), as % of net sales	21.5%	20.8%	0.7 percentage points
Return on investment (ROI), % (rolling 12 months)	18.5%	20.9%	-2.4 percentage points
Liquid assets, thousands of euro	7,681	6,984	697
Earnings per share, euro	0.18	0.16	0.02
Net profit, thousands of euro	7,776	6,599	1,178

Group	7–9/2020	7–9/2019	Change
Net sales, thousands of euro	14,845	13,497	1,348
Net sales, increase %	10.0%	21.1%	-11.1 percentage points
Operating profit (EBIT), thousands of euro	3,144	2,351	793
Operating profit (EBIT), as % of net sales	21.2%	17.4%	3.8 percentage points
Return on investment (ROI), % (rolling 12 months)	18.5%	20.9%	-2.4 percentage points
Liquid assets, thousands of euro	7,681	6,984	697
Earnings per share, euro	0.05	0.04	0.01
Net profit, thousands of euro	2,320	1,675	646

This Business Review is not an Interim Financial Report prepared in accordance with the IAS 34 standard. The Company prepares its interim financial reporting in accordance with the Securities Market Act, in addition to which the Company releases Business Reviews for the first three and first nine months of the year. The Business Reviews contain key information regarding the financial position and development of the Talenom Group.

Guidance for 2020 remains unchanged

The guidance for 2020 that Talenom issued on 27 April 2020 remains unchanged:

Net sales for 2020 are expected to amount to 64–68 million euros and operating profit to 12–14 million euros.

CEO Otto-Pekka Huhtala

At Talenom, we are pleased with the excellent progress of the implementation of our strategy for profitable growth. During the past few years, we have taken our first steps in our internationalisation in Sweden and expanded our service range with financing services for our customer companies, for instance. At the same time, we have had strong growth in Finland.

Today, we are reaching an important milestone – the launch of new services that make day-to-day life easier for entrepreneurs. We are now releasing the TiliJaska^TM service in Finland, which we have developed in accordance with our small customer concept. We are also preparing to launch a similar service in Sweden (KontoKalle.se) next year. The new service provides small entrepreneurs with a free accounting application, banking services (IBAN accounts and cards) and accounting services that are scaled to each customer’s needs. We are also launching the Talenom Light Entrepreneur service – we can now offer a service platform that caters to customers ranging from part-time light entrepreneurs to listed companies. Combining the banking services offered by Talenom with accounting services on the same service platform makes daily life easier for entrepreneurs and reduces administrative costs. Our own banking services integrate greater automation into our processes and deepen our customer relationships. The new services will be in beta until the end of the year. During this period, we will limit growth in the number of customers and offer banking services only to selected test customers.

With the new services, we have also clarified our long-term vision: we want to offer unbeatable accounting and banking services to SMEs. Going forward, our strategy will still be based on making day-to-day life easier for our entrepreneur customers, our highly automated operations and proactively taking care of our customers with our skilled personnel. As a pioneer in the digitalisation of the accounting sector, we also want to export our expertise to other European countries and modernise operations in our business, from accounting to consulting. In this, we are supported by the digital transformation of the accounting and banking sector, facilitated in part by legislative changes such as the new e-Invoicing Directive, PSD2 Directive and Basel regulations.

Our performance in the review period was strong once again and in line with our expectations. Operating profit for January–September 2020 saw year-on-year improvement of 16.8% and amounted to 10.5 million euros. Operating profit was 21.5% of net sales. Net sales for January–September increased year-on-year by 13.1% to 48.7 million euros. The third quarter also met our expectations. Operating profit for July–September 2020 improved by 33.7% year-on-year and net sales were up 10.0%. The coronavirus has reduced financial activity among our customer base and thereby weakened our transaction-based invoicing. We have performed well in distance sales, even though we have not as yet reached the pre-coronavirus figures for total sales. Net sales growth slackened due to the pandemic, but at the same time we have managed to adjust our costs as automation has progressed. As a result, relative operating profit improved substantially.

This year, we have expanded by means of acquisitions in both Finland and Sweden, and have thus been able to more extensively harness our digitalisation investments. In the third quarter, we grew in Finland by acquiring the business operations of Larsen & Co Accountants Ltd in Helsinki and strengthened the development of our small customer concept and our TiliJaska service by acquiring the software business of Vanaja Technologies Oy in Hämeenlinna. In the Swedish market, we strengthened our position in new locations in Gothenburg and Malmö by acquiring the share capital of Frivision AB, focusing on small customers. The acquisitions had a minor impact on the financial figures for the review period.

In the January-March 2020 Business Review, we reported on coronavirus-related uncertainties concerning the acquisition of new customers, bankruptcies among customer companies and our transaction-based invoicing. In the third quarter, our sales to new customers were at a lower level than in the pre-coronavirus period. The trend in the number of bankruptcies among customer companies was in line with expectations and transaction-based invoicing recovered almost to pre-coronavirus levels after dipping in the previous quarter. The uncertainties posed by the coronavirus remain unchanged both in society and at Talenom. However, our full-year financial outlook has not changed significantly, and our guidance for 2020 net sales and operating profit issued in April remains unchanged.

On 11 November 2020 starting at 9:00 EET, we will hold a Capital Markets Day during which we will present our strategy in greater depth. During the morning, we will present the services we launched today, such as TiliJaska, our banking services and automation solutions. We will also discuss the implementation of our growth strategy with respect to organic growth, internationalisation and acquisitions.

Financial development

Key figures

Group	1–9/2020	1–9/2019	Change
Net sales, thousands of euro	48,698	43,042	5,656
Net sales, increase %	13.1%	18.2%	-5.1 percentage points
Operating profit (EBIT), thousands of euro	10,456	8,951	1,505
Operating profit (EBIT), as % of net sales	21.5%	20.8%	0.7 percentage points
Return on investment (ROI), % (rolling 12 months)	18.5%	20.9%	-2.4 percentage points
Interest-bearing net liabilities, thousands of euro	31,685	30,214	1,471
Net gearing ratio, %	105%	135%	-30 percentage points
Equity ratio, %	37.4%	32.7%	4.7 percentage points
Working capital, thousands of euro	-3,838	-2,866	-972
Net investments, thousands of euro	15,544	12,045	3,499
Liquid assets, thousands of euro	7,681	6,984	697
Earnings per share, euro	0.18	0.16	0.02
Weighted average number of shares during the period*	42,517,688	41,538,125	979,563
Net profit, thousands of euro	7,776	6,599	1,178

*) The number of shares outstanding has been adjusted due to the share issue carried out free of charge during the review period by multiplying the preceding figures by six.

Net sales, profitability and financial performance – January–September 2020

During the period from January to September, Talenom’s net sales increased by 13.1% year-on-year. Amounting to 48.7 (43.0) million euros, net sales grew by around 5.7 million euros. The growth in net sales was mainly due to the increase in the number of accounting service customers. In addition, net sales grew due to acquisitions. Weaker transaction-based invoicing due to the coronavirus pandemic and lower-than-normal sales to new customers slowed down net sales growth.

In January-September, personnel expenses amounted to 24.6 (22.1) million euros, 50.5% (51.4%) of net sales.

Other operating expenses, including materials and services, totalled 6.0 (6.4) million euros, accounting for 12.3% (15.0%) of net sales.

In January-September, operating profit (EBIT) was 10.5 (9.0) million euros, 21.5% (20.8%) of net sales, and net profit was 7.8 (6.6) million euros. Operating profit improved by 16.8%. Profitability in the review period was burdened both by lower invoicing of transaction-based products due to the coronavirus pandemic and by the weaker profitability of acquired businesses, but savings on fixed costs and enhanced automation had a favourable effect on the trend in profitability.

During the period from July to September, Talenom’s net sales increased by 10.0% year-on-year. Amounting to 14.8 (13.5) million euros, net sales grew by around 1.3 million euros. In July–September, operating profit (EBIT) was 3.1 (2.4) million euros, 21.2% (17.4%) of net sales, and net profit was 2.3 (1.7) million euros. Operating profit (EBIT) for July–September improved by 33.7% year-on-year.

Balance sheet, financing and investments

On 30 September 2020, the consolidated balance sheet total was 81.0 (68.9) million euros. The Group’s equity ratio was 37.4% (32.7%) and the net gearing ratio was 105% (135%).

The Group’s interest-bearing financial loans at the end of the review period were 30.0 (28.0) million euros, excluding instalment debts. Other non-current interest-bearing liabilities (instalment debts) were 0.2 (0.2) million euros and other current interest-bearing liabilities (instalment debts) were 0.2 (0.2) million euros. 

In accordance with IFRS 16 Leases, as of 1 January 2019, the Group recognises leases of business premises in the balance sheet mainly as assets and liabilities. In accordance with IFRS 16, non-current lease liabilities stood at 6.2 (6.9) million euros and current lease liabilities at 2.8 (1.7) million euros on 30 September 2020.

The Group recognises the costs of new customer contracts, such as costs of obtaining and fulfilling a contract, as investments as specified in IFRS 15. These costs are presented in the balance sheet under “capitalised contract costs”. Furthermore, the Group recognises a part of the development costs related to software and digital services as investments according to the requirements outlined in IAS 38. These costs are presented in the balance sheet under “other intangible assets”. Investments stemming from new customer contracts amounted to 3.2 (3.3) million euros in the review period. Investments concerning software and digital services amounted to 7.1 (3.4) million euros.

The company’s total net investments in the review period 1 January–30 September 2020 were 15.5 (12.0) million euros. 

In February 2020, the company acquired the business operations of the accounting company Addvalue Advisors Oy, in May the share capital of Niva Ekonomi AB, in August the software business of Vanaja Technologies Oy and in September the entire share capital of Frivision AB and the entire business of Larsen & Co Accountants Ltd.

The purchase price of Addvalue Advisors Oy totalled 0.3 million euros, the purchase price of Niva Ekonomi AB totalled 1.3 million euros, the purchase price of Vanaja Technologies Oy was 0.4 million euros, the purchase price of Frivision AB totalled 1.4 million euros and the purchase price of Larsen & Co Accountants Ltd totalled 1 million euros. In the acquisitions, part of the purchase price was paid with new Talenom Plc shares subscribed for in a directed issue. These business acquisitions accounted for 4.4 (4.2) million euros of Talenom’s net investments.

Liquid assets at 30 September 2020 were 7.7 (7.0) million euros. In addition, the company had unused overdraft limits of 3.0 (1.0) million euros at the end of the review period.


Disclaimer
Certain statements in this bulletin are forecasts based on the company's and management's views at the time the forecasts were made. For this reason, they involve risks and uncertainties. The forecasts may also change, if significant changes occur in the general economic situation or the company's business environment.

TALENOM PLC
BOARD OF DIRECTORS

Further information:
Otto-Pekka Huhtala
CEO, Talenom Plc
tel. [phone]
[e-mail]

Talenom Plc is an accounting firm established in 1972. Talenom offers a wide range of accounting services as well as other expert and advisory services to support its clients’ business. The company has its own software development and it provides its clients with electronic financing tools.

Talenom Group’s net sales in 2019 amounted to EUR 58.0 million, with an increase of 18.6% compared to 2018. Talenom has a history of strong growth – the average annual increase in net sales was approximately 15.7% between 2005 and 2019.

DISTRIBUTION:
Nasdaq Helsinki
Main media
www.talenom.fi

Attachment

• Talenom Business Review January-September 2020