Talenom Plc Business Review January–March 2020 (unaudited): Net sales grew by 17% and operating profit improved by 8% – first quarter in line with objectives
Talenom Plc, Stock exchange release, 27 April 2020 at 13:30
Talenom Plc Business Review January–March 2020 (unaudited): Net sales grew by 17% and operating profit improved by 8% – first quarter in line with objectives
January–March 2020 in brief:
- Net sales 17.4 (14.8) million euros, increase 17.4% (16.1%)
- Operating profit (EBIT) 3.7 (3.4) million euros, 21.4% (23.3%) of net sales
- Net profit 2.8 (2.6) million euros
- Earnings per share 0.07 (0.06) euros
- Talenom revises its guidance for 2020: Net sales for 2020 are expected to amount to 64-68 million euros and operating profit to 12-14 million euros.
| Group | 1– 3/2020 | 1– 3/2019 | Change |
| Net sales, thousands of euro | 17,350 | 14,783 | 2,567 |
| Net sales, increase % | 17.4% | 16.1% | 1.3 percentage points |
| Operating profit (EBIT), thousands of euro | 3,718 | 3,442 | 276 |
| Operating profit (EBIT), as % of net sales | 21.4% | 23.3% | -1.9 percentage points |
| Return on investment (ROI), % (rolling 12 months) | 19.7% | 21.5% | -1.9 percentage points |
| Liquid assets, thousands of euro | 5,268 | 5,330 | -62 |
| Earnings per share, euro | 0.07 | 0.06 | 0.00 |
| Net profit, thousands of euro | 2,806 | 2,585 | 221 |
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
Talenom revises its guidance for 2020:
Net sales for 2020 are expected to amount to 64-68 million euros and operating profit to 12-14 million euros.
The previous guidance published in the Financial Statement Bulletin 2019 on 3 February 2020:
2020 is expected to be in line with 2019 in terms of relative growth in net sales and relative profitability.
CEO Otto-Pekka Huhtala
In the Annual Report, I predicted that in this decade, Talenom’s accountants will become consultants. Now, during the coronavirus pandemic, this journey is coming true. We are telecommuting and working hard in our home offices to help our customers. In practice, this takes the form of seeking different kinds of support measures, cash flow simulation services for our customer companies, credit information services, a manyfold increase in the demand for financing services and above all in the advice we provide to our customers on our own initiative. We have received positive feedback from our customers and key stakeholders for our rapid and open reaction.We want to do our part to foster the wellbeing of entrepreneurs diligently and without compromise also in these exceptional circumstances.
First-quarter net sales were up 17% to 17.4 million euros and operating profit rose by 8% to 3.7 million euros. Our strong growth continued and most of it was organic. Due to the coronavirus pandemic, our entire sales team changed over to a distance sales model. We are pleased to note that sales are still almost in line with plans. The deployment of the latest version of the bookkeeping production line last year has freed up resources for new customers and consulting work. In other words, the main drivers of profitable growth are still going strong. We make routines as easy as possible for our customers. Our bookkeeping production is automated – we also keep in mind that our operations must continue to revolve around taking care of our customers.
We revised our financial outlook. The range of variation is wide due to the uncertainties posed by the coronavirus pandemic. We are pleased that society has made it clear that it wants to keep companies up and running. Thanks to our strong degree of automation and digitalisation and our consultative approach, we are well-adapted to the prevailing conditions. The uncertainties involved in forecasts will increase if these exceptional circumstances continue for a long time into autumn, causing bankruptcies among our customer companies as well as a decline in our sales to new customers and in transaction based invoicing.
We have continued to make further investments in customer interfaces. We released updates to the Talenom mobile App. Its new image processing feature for receipts facilitates customer routines. We are further developing Talenom Online and recently released a new version of the service in which we offer services in line with the new e-Invoicing Directive. At the same time, we have continued to make further investments in automation and new customer acquisition.
As a major new strategic endeavour, we are developing an exceptionally ambitious concept for small customers. We believe it will revolutionise the sector. With respect to service design and technology, product development has now progressed to the point that the first customers are piloting the service in a closed environment. We are convinced that this concept will enable us to solve the financial and administrative needs of small entrepreneurs in a flexible and attractive way. I hope to be able to tell you more about this concept soon.
We carried out one small acquisition during the review period as we acquired the business operations of Addvalue Advisors Oy in February. In addition to pursuing organic growth, we want to be involved in the transformation of the accounting sector. Thanks to our substantial investments in digitalisation and personnel training, we are well poised to accelerate growth through acquisitions as well. Partly for this reason, we have reorganised our financing after the end of the review period. We have now negotiated an additional loan of 10 million euros that can be used for acquisitions and for other projects in support of growth in Finland and Sweden. In addition, we have authorisations to issue shares and use treasury shares for acquisitions. We have positive experiences of operating in the Swedish market and view it as an attractive avenue for growth. In the short term, acquisitions weaken relative profitability, but in the longer term the profitability of the acquired business operations will increase to the same level as existing operations thanks to the scalability benefits of the bookkeeping production line and operating processes.
In January, we were recognised for the third time in a row in the Great Place to Work Finland survey, ranking as the fourth best workplace in the Large Companies category. This is a strong indication of the commitment and motivation of our personnel to keep developing Talenom as a trendsetter in the industry. As someone who has been with Talenom for a long time, I am very proud of this!
Financial development
Key figures
| Group | 1–3/2020 | 1–3/2019 | Change |
| Net sales, thousands of euro | 17,350 | 14,783 | 2,567 |
| Net sales, increase % | 17.4% | 16.1% | 1.3 percentage points |
| Operating profit (EBIT), thousands of euro | 3,718 | 3,442 | 276 |
| Operating profit (EBIT), as % of net sales | 21.4% | 23.3% | -1.9 percentage points |
| Return on investment (ROI), % (rolling 12 months) | 19.7% | 21.5% | -1.9 percentage points |
| Interest-bearing net liabilities, thousands of euro | 31,771 | 26,629 | 5,141 |
| Net gearing ratio, % | 142% | 150% | -8 percentage points |
| Equity ratio, % | 31.1% | 29.7% | 1.4 percentage points |
| Working capital, thousands of euro | -4,609 | -3,912 | -698 |
| Net investments, thousands of euro | 4,059 | 2,335 | 1,724 |
| Liquid assets, thousands of euro | 5,268 | 5,330 | -62 |
| Earnings per share, euro | 0.07 | 0.06 | 0.00 |
| Weighted average number of shares during the period *) | 41,871,790 | 41,221,812 | 649,978 |
| Net profit, thousands of euro | 2,806 | 2,585 | 221 |
*) 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 number by six.
Net sales, profitability and financial performance – January-March 2020
During the period from January to March, Talenom’s net sales increased by 17.4% compared to the corresponding period of the preceding year. Amounting to 17.4 (14.8) million euros, net sales grew by around 2.6 million euros. The growth was mainly due to the increase in the number of accounting service customers.
In the review period, personnel expenses amounted to 8.6 (7.3) million euros, 49.5% (49.3%) of net sales.
Other operating expenses, including materials and services, totalled 2.6 (2.2) million euros, accounting for 14.9% (14.7%) of net sales.
In the review period, operating profit (EBIT) was 3,718 (3,442) thousand euros, 21.4% (23.3%) of net sales, with a net profit of 2,806 (2,585) thousand euros.
Balance sheet, financing and investments
On 31 March 2020, the consolidated balance sheet total was 72.2 (59.9) million euros. The Group’s equity ratio was 31.1% (29.7%) and the net gearing ratio was 142% (150%).
The Group’s interest-bearing financial loans at the end of the review period on 31 March 2020 were 28.0 (23.5) 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 (0.3) 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 6.6 (6.4) million euros and current lease liabilities at 2.0 (1.4) million euros.
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 1.1 (1.0) million euros in the review period. Investments concerning software and digital services amounted to 2.4 (1.0) million euros.
The company’s total net investments in the review period 1 January–31 March 2020 were 4.1 (2.3) million euros.
During the review period, the company acquired the business operations of the accounting firm Addvalue Advisors Oy. The purchase price totalled 268,000 euros, of which 134,000 euros was paid with new Talenom Plc shares subscribed for in a directed share issue. The acquisition accounted for 0.3 million euros of Talenom’s net investments.
Liquid assets at 31 March 2020 were 5.3 (5.3) million euros. In addition, the company had unused overdraft limits of 1.0 (1.0) million euros at the end of the review period.
Consolidated comprehensive income statement
| Thousand euro | 1–3/2020 | 1–3/2019 | 1–12/2019 | ||
| Net sales | 17,350 | 14,783 | 57,955 | ||
| Other operating income | 54 | 81 | 372 | ||
| Materials and services | -1,030 | -715 | -3,598 | ||
| Employee benefit expenses | -8,582 | -7,291 | -29,912 | ||
| Depreciation and amortisations | -2,527 | -1,963 | -8,498 | ||
| Other operating expenses | -1,547 | -1,452 | -5,911 | ||
| Operating profit | 3,718 | 3,442 | 10,409 | ||
| Financial income | 22 | 15 | 64 | ||
| Financial expenses | -230 | -211 | -906 | ||
| Net financial expenses | -209 | -195 | -843 | ||
| Profit (loss) before taxes | 3,510 | 3,247 | 9,566 | ||
| Income taxes | -704 | -662 | -1,951 | ||
| Profit (loss) for the financial period | 2,806 | 2,585 | 7,615 | ||
| Other items of comprehensive income | |||||
| Items that may be subsequently transferred to profit or loss | |||||
| Cash flow hedging | 24 | 16 | 60 | ||
| Taxes on items that may be subsequently transferred to profit or loss | -5 | -3 | -12 | ||
| Other comprehensive income for the financial period after tax | 19 | 12 | 48 | ||
| Total comprehensive income for the financial period | 2,825 | 2,597 | 7,663 | ||
| Consolidated balance sheet | |||||
| Thousand euro | 31 Mar. 2020 | 31 Mar. 2019 | 31 Dec. 2019 | ||
| ASSETS | |||||
| Non-current assets | |||||
| Goodwill | 20,728 | 18,420 | 20,728 | ||
| Other intangible assets | 16,632 | 10,944 | 14,930 | ||
| Right-of-use assets | 8,493 | 7,813 | 8,400 | ||
| Property, plant and equipment | 2,633 | 2,322 | 2,584 | ||
| Other non-current financial assets | 237 | 237 | 237 | ||
| Deferred tax assets | 84 | 77 | 67 | ||
| Capitalised contract costs | 10,355 | 8,592 | 10,054 | ||
| Total non-current assets | 59,162 | 48,405 | 57,000 | ||
| Current assets | |||||
| Trade and other receivables | 7,750 | 6,138 | 6,521 | ||
| Current tax assets | 0 | 0 | 34 | ||
| Cash and cash equivalents | 5,268 | 5,330 | 7,786 | ||
| Total current assets | 13,017 | 11,468 | 14,342 | ||
| Total assets | 72,179 | 59,873 | 71,342 | ||
| CAPITAL AND RESERVES | |||||
| Share capital | 80 | 80 | 80 | ||
| Reserve for invested unrestricted equity | 12,353 | 11,025 | 11,234 | ||
| Fair value reserve | -26 | -81 | -45 | ||
| Retained earnings | 9,962 | 6,698 | 12,304 | ||
| Total equity | 22,369 | 17,723 | 23,573 | ||
| LIABILITIES | |||||
| Non-current liabilities | |||||
| Liabilities to credit institutions | 28,000 | 23,500 | 28,000 | ||
| Trade and other payables | 215 | 230 | 215 | ||
| Lease liabilities | 6,574 | 6,399 | 6,553 | ||
| Other non-current financial liabilities | 32 | 101 | 56 | ||
| Deferred tax liabilities | 301 | 50 | 307 | ||
| Provisions | 27 | 0 | 0 | ||
| Total non-current liabilities | 35,148 | 30,280 | 35,130 | ||
| Current liabilities | |||||
| Trade and other payables | 11,838 | 9,960 | 10,208 | ||
| Lease liabilities | 2,021 | 1,440 | 1,940 | ||
| Current tax liabilities | 802 | 470 | 491 | ||
| Total current liabilities | 14,662 | 11,871 | 12,638 | ||
| Total liabilities | 49,810 | 42,150 | 47,769 | ||
| Total equity and liabilities | 72,179 | 59,873 | 71,342 | ||
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. 4
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
Attachment
