TRANSCOM REPORTS FINANCIAL RESULTS FOR THE FOURTH QUARTER & FULL YEAR ENDED 31st DECEMBER 2007 Luxembourg, 11th February 2008 - Transcom WorldWide S.A. (‘Transcom' or ‘the Company') (Nordic Exchange: ‘TWW SDB A', ‘TWW SDB B'), the global outsourced services company, today announced its financial results for the fourth quarter and full year ended 31st December 2007. FOURTH QUARTER HIGHLIGHTS • Net sales up 15.0% to €167.6 (€145.8) million • Organic non-Kinnevik related sales up 21.6%, excluding acquisitions and Tele2 divestments • Gross margin improves to 23.4% (21.1%) • EBITA up by 11.1% to €12.0 (€10.8) million • Net income down by 18.8% to €6.9 (€8.5) million • EPS down to €0.09 (€0.12) • 3-year strategic agreement signed with Tiscali in the UK • Sales to Tele2 represented 29% of total Group revenues in December 2007 FULL YEAR HIGHLIGHTS • Net sales up 10.9% to €599.2 (€540.2) million • Organic non-Kinnevik related sales up 15.1%, excluding acquisitions and Tele2 divestments • EBITA down by 1.9% to €37.1 (€37.8) million • Net income down by 13.8% to €24.3 (€28.2) million • EPS down to €0.33 (€0.39) CHIEF EXECUTIVE OFFICER'S STATEMENT Keith Russell, President and Chief Executive Officer of Transcom, said: “This has been a transformational year for Transcom. We have seen substantial reductions in the percentage of revenue derived from Kinnevik Group companies, we have expanded into important new geographic markets, we have further developed our debt collection business, and we rapidly grew our near and offshore services. “Revenues for the full year grew by 10.9%, whilst organic non-Kinnevik related sales increased by 15.1% during the year. Net sales for the fourth quarter were up 15.0% year-on-year, and non-Kinnevik related sales continued to perform well, growing by 21.6% over the fourth quarter last year. This demonstrates our ability to consistently deliver strong revenue development. “In line with our expectations, fourth quarter organic revenues were down by 3.3% primarily due to the planned exiting of lower-margin overflow telemarketing business in the South region and lower volumes from existing clients in Germany and Sweden at the end of the year. Moving into 2008, we intend to further decrease our exposure to overflow telemarketing activities in the South region and also foresee continued decreases in Tele2 volumes in some market areas in line with their divestment program. Over time, however, we intend to mitigate these factors through the continued strong development of our non-Kinnevik related revenues. “We continue to be pleased with the results being delivered by our two most recent acquisitions and are proceeding as planned with the integration of these businesses. We are forecasting potential synergies of approximately €5 million with NuComm, which we estimate will be neutral in 2008, but which will increase the profitability of the Group from 2009 onwards. “IS Inkasso, the debt collection agency that we acquired in Austria, is also continuing to deliver good profitability and growth, and we are utilising the company's contact base in the region to extend our CMS footprint into new Eastern European markets. “A major feature of 2007 for Transcom was the strategic realignment of Tele2's business, and their consequential divestment of a number of European operations for whom Transcom provides outsourced services. This includes our businesses in countries such as France and Italy, where we have been successful in developing long-term relationships with the new owners. We continue to work with other purchasers of Tele2 companies to establish long-term agreements where possible. “In the fourth quarter, Tele2 revenues represented 43.4% of total sales, however, for the month of December 2007, Tele2 revenues represented 29% of total sales. Given that Tele2 revenues stood at 70% of Group sales at the end of 2006, this clearly illustrates the dramatic transformation our business has undergone in the last year. “Our gross margin for the fourth quarter improved to 23.4%, compared to 21.1% in the fourth quarter last year. Key contributors to this improvement included: a higher percentage of near and offshore services; CMS business growth; the continued bottom-line turnaround of the Iberian region; and the reduction in lower-margin overflow telemarketing business in the South region. “In December, Transcom announced the signing of a three-year strategic agreement with Tiscali UK Limited, a rapidly developing broadband operator in the UK offering a ‘triple-play' service. Tiscali will be a key client for us moving forward, and we have been developing a number of new business leads in the UK and US markets for our near and offshore solutions. We expect this line of business to grow strongly over the coming years. “We have a positive outlook moving into 2008, with a few key challenges and a number of exciting opportunities on the horizon. We expect CRM pricing to be largely aligned with labour inflation, however we continue to invest in changes associated with Tele2's ongoing transformation. This includes the alignment of our services to changing volume demands and the consolidation of new relationships with the new owners of Tele2 divestments. This remains a key challenge in 2008 however, in spite of this, we still anticipate profit growth for the year. “We continue to benefit from the development of our offshore services. This is a major opportunity for revenue growth and margin development. In the first quarter of 2008, we expect to open our new centre in Manila, giving us significant capacity to scale up our offshore English language solutions. The Iberian region is also expected to deliver improved results in 2008, with our recently opened second centre in Chile adding further capacity. We continue to drive forward our CMS business, which grew by over 20% organically in 2007, by developing new Eastern European markets and further consolidating our position within key existing markets.” GROUP OPERATING & FINANCIAL REVIEW New Contract Wins in Q4 During the fourth quarter, the Company signed a number of new CRM contracts and extended many existing contracts. Transcom signed a three-year strategic deal with Tiscali UK Limited, under which Transcom will provide CRM and CMS services to Tiscali's active user base of over 3 million customers in the UK, including over 2 million DSL customers. Other new CRM signings in the quarter included BMW, the leading automotive company, in Germany, and Stockholms läns landsting (SLL), the Stockholm City Council, in Sweden. In CMS, Transcom is continuing to partner with Arrow Global on servicing many of their European debt portfolios. The Company has also begun its first factoring contract with Danaweb in Denmark, which has been very successful to date. NuComm Integration & Strategy for 2008 The ongoing integration of NuComm continues to run according to plan, with the operations contributing to the fourth quarter results in line with Transcom's expectations. During the year, Transcom will be taking steps to realise synergies with NuComm, aiming to reduce the overall cost base by approximately €5 million through initiatives such as centralising certain support functions in NuComm's facilities in Manila as well as combining duplications between the organisations. Moving into 2008, NuComm will focus on developing its CMS business in North America, growing home working activities in conjunction with Cloud10, and expanding its offshore services, including Manila and the launching of Spanish language services from Transcom's call centres in Chile. Transcom and NuComm will also seek potential sales synergies where opportunities for cross-selling exist. CMS Development & Debt Purchasing Update CMS remains core to Transcom's strategy of margin development and, in the fourth quarter, the CMS business continued to expand. Transcom CMS is now present in 18 countries and serves a total of 20 country markets, and as such has the second-largest geographic footprint for CMS business in Europe. Debt collection continues to be the fastest growing line of business within Transcom, delivering organic top-line growth of over 20% in 2007. The scope of services offered continues to expand within the Company's existing markets, and includes services such as sales ledger management, reminder services, amicable collections, legal collections, debt surveillance and debt purchasing. The integration of IS Inkasso, which was acquired in September 2007, continues to progress well, with the company providing strong contributions to Transcom's bottom line and further growth opportunities in Eastern European markets. During 2007, Transcom adopted a conservative approach towards debt portfolio purchasing due to the prevailing high prices in the market. Over the course of 2007, Transcom did purchase 10 small portfolios, both with partners and on a stand alone basis, and currently has approximately €500,000 of portfolios on its balance sheet. Moving forward, Transcom remains prudent in its approach to debt purchasing and prefers to enter into such transactions with financial partners where possible. Opportunities are expected to increase somewhat in 2008, however, due to expected corrections in market pricing and reduced competition for debt books. Financial Review Depreciation for the year increased by €2.9 million to €13.3 million, €1.7 million of which was due to the acquisition of NuComm. The remaining €1.2 million increase was largely the result of higher levels of CAPEX related depreciation compared to last year. Transcom had an amortisation expense of €1.1 million related to the amortisation of intangible assets of NuComm and IS Inkasso following the consolidation of both companies in August 2007 and September 2007, respectively. The Company had net interest payments of €3.1 million for the full year due to the interest payable on its corporate loan facility. The tax rate for 2007 remained stable at 26%, and the Company expects to retain a similar tax rate in 2008. Net cash flow provided by operations for the full year 2007 was €38.7 million, compared to €31.5 million for the same period last year, an increase of 23%. Transcom had net debt of €42.6 million as at 31st December 2007 compared to a net cash position of €18.2 million at the close of 2006. SEGMENTAL OPERATING REVIEW North For the full year 2007, the North region delivered double-digit top line growth, with an increase of 12.0% year on year. For the fourth quarter, revenue growth was 6.2%, due primarily to a significant reduction in Tele2 volumes in Sweden and a planned decrease in outbound activities. During the fourth quarter, Transcom signed a four-year agreement with Stockholms läns landsting, or SLL (Stockholm County Council). Under the terms of the agreement, Transcom has assumed responsibility for the call centres of eight of the largest hospitals in the Stockholm area. Transcom took over the CRM activities of these hospitals from the beginning of 2008. The agreement between Transcom and SLL is one of the largest of its kind within the Swedish public sector. Transcom also began its first factoring project in Denmark, with Danaweb, during the quarter. This project is running well and is yet another example of Transcom's ability to implement new and attractive programmes for clients in the CMS industry. There is likely to be a reduction in volumes in Denmark in 2008 due to Telenor's decision to migrate work into in-house facilities over the year. No restructuring expenses are expected on account of this however and Transcom, over time, expects to replace revenues with other client activity. Looking ahead to 2008, Transcom forecasts flat revenues in Sweden compared with 2007 but expects non-Kinnevik related revenues to develop strongly. West & Central The West & Central region delivered revenue growth of 16.0% for the full year, whilst revenues in the fourth quarter increased by 28.8%. Contributing to this strong fourth quarter growth were the Dresden (Germany) and Emmen (Netherlands) contact centres which were opened in the first half of the year. Transcom's recent CMS acquisitions also produced good results, generating strong sales for the quarter. The West & Central region continues to exhibit the highest margins within the Group based on the high proportion of nearshore services provided in the region as well as the growing portfolio of CMS business. The addition of the IS Inkasso (Austria) and CENT (Poland) acquisitions during the year also helped contribute to the strong gross and operating margins in the region. Transcom expects the West & Central region to deliver strong top and bottom line growth in 2008, although sales volumes are expected to be significantly lower in Germany due to reduction of marketing activity with existing clients. This issue will require a realignment of services, which is expected to generate a cost to the business of between €4 million and €6 million in 2008. In spite of this, the region is expected to generate a higher profit contribution than in 2007. Over time, Transcom expects to mitigate this downturn in volumes with strong new client development. South Sales in the South region were in line with Transcom's expectations for the full year and fourth quarter, down by 6.1% and 22.3% respectively. This slowdown in revenues is largely the result of the exiting of lower-margin overflow telemarketing activities in the region during the third and fourth quarters. In the fourth quarter, these telemarketing revenues were down by approximately €9 million when compared against the fourth quarter of 2006. This was somewhat mitigated by a strong performance from the Tunisian business, which is focused on providing nearshore services to the French and Italian markets, and continues to deliver strong margins. The South region has undergone a major transformation this year, as Tele2 divested its businesses in France and Italy, and Transcom began working with two new major clients in these countries. Transcom remains focused on ensuring these new client relationships function well. Volumes in the French fixed line and ADSL business declined year-on-year in the fourth quarter of 2007 and further bottom line impact is expected in 2008 as Transcom continues to align its operations with SFR's business strategy. Moving into 2008, the Company is planning to further reduce its exposure to overflow telemarketing activities in the region, which will lower revenues but will have little bottom-line impact due to the lower margins exhibited in this line of business. The nearshore Tunisian business is forecasted to continue delivering solid contributions to the region's bottom-line. Iberia The Iberian region continued to deliver improved results in the fourth quarter, and the turnaround programme continues to progress well. For the full year, sales were roughly flat, and for the fourth quarter revenues improved by 13.1% year-on-year. The region was also profitable in the fourth quarter, delivering an operating profit of €100,000 against a loss of €1.3 million in the fourth quarter of 2006. Transcom launched its second contact centre in Chile in September 2007, and development of this site has been progressing extremely well. Transcom has closed non-profitable operations in Spain and there has been positive sales momentum in both Spain and Portugal during the fourth quarter. The Company is continuing to provide services for Tele2's divested business in Portugal and the relationship with Sonaecom is developing well. For 2008, Transcom expects the Iberian region's bottom line to continue improving due to further strong contributions from its Latin American operations. The Company will also continue to evaluate further opportunities in Latin America, such as nearshore Spanish language solutions for the North American market. North America & Asia Pacific Sales in the North American region developed in line with Transcom's expectations during the fourth quarter. The integration of NuComm into the Transcom Group is progressing well and the Company expects to generate cost savings of approximately €5 million, which is expected to benefit the P&L fully in 2009 and to be neutral in 2008. Cloud10 continues to develop strong new sales and broke even in December 2007. Moving forward, Transcom expects to benefit from potential sales and operational synergies between NuComm and Cloud10. The new Manila centre is expected to be launched in the first quarter of 2008, providing an excellent platform to accelerate Transcom's offshore business. OTHER INFORMATION Notice of Financial Results Transcom's financial results for the first quarter ended 31 March 2008 will be published on 21st April 2008. Transcom Board of Directors 11th February 2008 Transcom WorldWide S.A. 177 rue de Luxembourg L-8077 Bertrange Luxembourg +352 27 755 000 www.transcom.com Company registration number: RCS B59528 Notes to Editors: The following provides a breakdown of which countries are included in each geographical region. • North: Denmark, Norway and Sweden • West & Central: Austria, Belgium, Croatia, Czech Republic, Estonia, Germany, Hungary, Latvia, Lithuania, Luxembourg, the Netherlands, Poland, Romania, Serbia, Slovakia, Switzerland, the United Kingdom • South: France, Italy, Tunisia • Iberia: Chile, Portugal, Spain • North America & Asia Pacific: Canada, Philippines, USA # # # For tabular financial information please see attached document or contact Shared Value. For further information please contact: Keith Russell, President and CEO +352 27 755 000 Noah Schwartz, Investor & Press Enquiries +44 20 7321 5032 About Transcom Transcom WorldWide S.A. is a rapidly expanding Customer Relationship Management (CRM) solution provider, with 73 sites employing more than 17,200 people delivering services from 29 countries - Austria, Belgium, Canada, Chile, Croatia, Czech Republic, Denmark, Estonia, France, Germany, Hungary, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Norway, the Philippines, Poland, Portugal, Romania, Serbia, Slovakia, Spain, Sweden, Switzerland, Tunisia, the UK and the USA. The company provides CRM solutions for companies in a wide range of industry sectors, including telecommunications and e-commerce, travel & tourism, retail, financial services and utilities. Transcom offers clients a broad array of relationship management services, including inbound communication; telemarketing and outbound; Administrative Tasks; Web servicing; CRM Consultancy Service; Contract Automation; Credit Management Service; Legal Services; and Interpretation Services. Client programs are tailor-made and range from single applications to complex programmes, which are offered on a country-specific or international basis in up to 33 languages. Transcom WorldWide S.A. class A and B shares are listed on the Nordic Exchange Mid Cap list under the symbols ‘TWW SDB A' and ‘TWW SDB B'.
TRANSCOM REPORTS FINANCIAL RESULTS FOR THE FOURTH QUARTER & FULL YEAR ENDED 31st DECEMBER 2007
| Source: Transcom WorldWide S.A.