TRANSCOM REPORTS FINANCIAL RESULTS FOR THE SECOND QUARTER AND SIX MONTHS ENDED 30 JUNE 2010


TRANSCOM REPORTS FINANCIAL RESULTS FOR THE SECOND QUARTER AND SIX MONTHS
ENDED 30 JUNE 2010

Luxembourg, 21 July 2010 - Transcom WorldWide S.A., the global
outsourced services provider, today announced its financial results for
the second quarter and six months ended 30 June 2010. 
SECOND QUARTER 2010 HIGHLIGHTS
Sequential performance
- Net revenue up 1.2% to €148.8 (€147.0) million
- Gross margin down 1.9pp to 18.9% (20.8%)
- EBITA down 12.0% to €4.4 (€5.0) million
- EPS stable at €0.04 (€0.04)
- Net currency impact: revenue +€4.6 million, EBITA +€0.1 million 
Year-on-year performance
- Net revenue up 9.7% to €148.8 (€135.7) million
- Gross margin down 3.1pp to 18.9% (22.0%)
- EBITA down 38.0% to €4.4 (€7.1) million
- EPS down to €0.04 (€0.09)
- Net currency impact: revenue +€6.2 million, EBITA -€0.7 million 
SIX MONTHS 2010 FINANCIAL HIGHLIGHTS
Year-on-year performance
- Net revenue up 5.4% to €295.8 (€280.6) million
- Gross margin down 2.2pp to 19.8% (22.0%)
- EBITA down 40.1% to €9.4 (€15.7) million
- EPS down to €0.08 (€0.16)
- Net currency impact: revenue +€8.0 million, EBITA -€2.1 million
Major factors influencing the Group's performance in the second quarter
of 2010 included:
1.      Foreign Exchange Movements
On a sequential basis, the currency trading impact on operating profit
(EBIT) in the North America & Asia Pacific region was immaterial in the
second quarter of 2010. Year-on-year, the depreciation of the US dollar
(USD) against the Canadian dollar (CAD) resulted in a net currency
impact of -€1.2 million.
2.      Iberian Region
Adjustments in the book of business in the Iberian region resulted in
severance costs of €0.9 million in the second quarter of 2010.

 

CHIEF EXECUTIVE OFFICER'S STATEMENT
Pablo Sanchez-Lozano, President and Chief Executive Officer of Transcom,
said:
“In the second quarter of 2010, we reported revenues of €148.8 million,
a sequential growth of 1.2% and year-on-year growth of 9.7%. When
excluding currency impact, second quarter revenues were down by 1.9%
sequentially and up by 5.1% year-on-year.
“The CRM business grew sequentially by 1.4% in the second quarter,
whereas the CMS business remained flat compared to Q110. Year-on-year,
the CRM revenue was up by 14.8%, with growth in all countries except the
South region, while CMS revenue declined by 13.2%. Net of currency
impact, CRM revenue was down by 2.2% sequentially and up 9.5%
year-on-year.
“We continue to focus on sales, and are pleased to report significant
wins during the quarter. We also see pressure on our installed base
volumes due to several new tenders for existing contracts. Our growth
profile for the rest of the year will therefore depend on the evolution
of our new business sales success rate and the resulting mix with the
installed base business.
“The Group's gross margin was 18.9% in the second quarter, a sequential
erosion of 1.9pp and 3.1pp below last year's average. This sequential
erosion should be viewed in the context of strong gross margins in Q110
across all regions excluding North America & Asia Pacific. In the second
quarter, the North America & Asia Pacific region's gross margin
increased by 3.8pp to 20.7% as a result of management's operational
improvement plans.
“Performance in the South region remained very similar to Q110 and
previous quarters, when excluding the positive one-off effects reported
last quarter. We experienced margin erosion in the West & Central and
Iberian regions. Our outbound business in Germany eroded during the
quarter due to consumption behaviour, and we also incurred ramp-up costs
related to our CMS business growth in the West & Central region. In
Iberia, we were impacted by a €0.9 million severance cost related to
changes in our book of business. When comparing Q210 with last year's
average (excluding the North America & Asia Pacific region), the Group
as a whole experienced a 1.5pp margin erosion. A third of this erosion
is explained by the severance costs in Iberia. And, although not
material on a quarter-on-quarter basis, the appreciation of the CAD
against the USD continued to impact the margins of our North America &
Asia Pacific business on a year-on-year basis (€1.4 million).
“SG&A expenses for the quarter were €23.7 million, lower than last
year's quarterly average of €24 million. Looking at our H110 run-rate,
SG&A costs were impacted by the investments in our sales organisation,
as well as the higher infrastructure costs related to the ramp-up of our
North America & Asia Pacific business. Optimising our SG&A cost
structure remains a key focus area for the Company.
“Group EBITA was €4.4 million, and was mainly influenced by the events
described above. We closed the quarter with EPS at €0.04, in line with
last quarter.
“We remain focused on the execution of our strategy. We are pleased with
the progress of our North America & Asia Pacific operations during the
quarter. The current difficult economic conditions and outlook in Iberia
and the West & Central region have impacted our business results in the
short-term. We continue to execute our recovery plan in France and will
do so for the remainder of the year. Overall, we will keep focusing on
our key operational objectives, as we continue to progress on our
journey.”
GROUP OPERATING & FINANCIAL REVIEW
Revenue & New Business Development
In the second quarter of 2010, Transcom reported net revenue of €148.8
million, up by 1.2% and 9.7% compared to Q110 (€147.0 million) and Q209
(€135.7 million) respectively. Adjusting for currency effects, revenue
in Q210 was €144.2 million. This sequential reduction of 1.9% was
primarily due to volume reductions in the North America & Asia Pacific
region.
During the quarter, Transcom signed a number of new contracts with CRM
clients, including Endesa in Portugal, Jazz Telecom in Spain, Lekker
Energie GmbH in Germany, AOL in North America, Lendo in Sweden and CPP
Protección y Servicios de Asistencia in Iberia and the South region, as
well as CMS clients such as TDX Group in the UK and British Telecom in
Italy.
CRM Sector
CRM revenue in the second quarter of 2010 was €127.1 million, up by 1.4%
and 14.8% compared to Q110 (€125.3 million) and Q209 (€110.7 million)
respectively. Net of currency translation impacts, revenue was down by
2.2% sequentially and 9.5% year on year, primarily as a result of lower
volumes within the installed base in the North America & Asia Pacific
region.
The CRM gross margin was 17.9% in Q210, down from 19.6% in Q110 and
21.1% in Q209. The sequential decrease was a consequence of two effects:
lower performance in the German outbound business during the quarter and
severance costs related to adjustments in Iberia's book of business. The
North America & Asia Pacific region's gross margin was up by 3.8pp
following the recovery plan started at the end of the last quarter, and
the North region continued to deliver strong performance. In the South
region, the gross margin returned to its previous run-rate, following
the one-off adjustment reported in Q110.
CMS Sector
CMS revenue in the second quarter of 2010 was €21.7 million, which was
stable when compared to Q110 (€21.7 million) and 13.2% lower than in
Q209 (€25.0 million). Improved collection rates following a challenging
Q110 resulted in increased revenue in the West & Central region;
however, this was offset by reduced volumes in the Iberian region.
The CMS gross margin decreased to 24.4% in the second quarter, compared
to 27.9% in Q110 and 26.0% in Q209. The sequential gross margin decrease
was the result of increased costs associated with severance costs
related to capacity adjustments following the termination of the
abovementioned services in Iberia, increased expenditure on collection
efforts in the West & Central region following case volume growth, and
the low success rates on the collection of the Norwegian debt portfolio.
As at the end of June, Transcom's debt portfolios represented a €7.0
million asset on the Company's balance sheet.
Financial Review
Depreciation & Amortisation
Depreciation in the second quarter of 2010 was €3.9 million, and
Transcom had a cost of €0.7 million in relation to the amortisation of
intangible assets.
SG&A
SG&A decreased by €1.8 million in Q210 to €23.7 million, compared to
€25.5 million in Q110. While Transcom continues to manage and optimise
its SG&A-related costs, the Company faces the pressure of increasing
sales and infrastructure investments within its SG&A run-rate. The
sequential decrease in the quarter reflects the results of the Group's
cost optimisation programme.
Working Capital
Working capital in Q210 was at the same level as that reported in Q110,
breaking the trend of four quarters of increasing working capital.
Management continues to focus on reducing working capital consumption
and mitigating potential currency impacts on the Company's financial
statements.
Exchange Rate Impact
Exchange rate movements had an impact on the translation of Transcom's
non-Euro denominated reporting figures. From a sequential perspective,
revenue and EBIT increased by €4.6 million and €0.2 million respectively
as a result of currency movements. On a year-to-date basis, revenue and
EBIT were €17.8 million and €0.9 million higher when compared to H109 as
a result of currency movements. These movements are detailed in the
table below.
Following Q110, in which significant exchange movements resulting from
USD/CAD parity were witnessed, the Company's hedging policies were
successful in ensuring that no such movements occurred in Q210.
Debt & Financing
As at 30 June 2010, Transcom had gross debt of €133.1 million and net
debt of €85.7 million. This represented a significant decrease from the
Q110 net debt position (€105.6 million) due to the release of the
short-term financing arrangement detailed in Q110, as well as improved
cash collection of customer debts. The resulting EBITDA ratio at the
close of Q210 was 2.3, which was comparable with the operating range for
2009.
The interest payable on Transcom's long-term credit facility was €0.5
million in the second quarter of 2010 and was stable when compared to
Q110.
Tax Rate
The average tax rate in the second quarter was 20%, which was in line
with the rate reported in Q110.
SEGMENTAL OPERATING REVIEW
North America & Asia Pacific
Revenue in the North America & Asia Pacific region was €35.8 million in
the second quarter of 2010, an increase of 1.7% and 38.8% compared to
Q110 (€35.2 million) and Q209 (€25.8 million)  respectively. Positive
currency translation gains served to increase revenues by €3.3 million
on a sequential basis. There were no other material currency impacts in
the quarter due to Transcom's hedging policy, which ensured a consistent
USD/CAD parity for the Company. Adjusting for this currency impact,
revenue in Q210 was €32.5 million, representing a sequential decrease as
a result of volume erosion amongst the Company's installed base.
The region's gross margin expanded on a sequential basis to 20.7% in the
second quarter of 2010, compared to 16.9% in Q110. This was driven by an
increased focus on operational efficiency which was executed in line
with the Company's plan for the region. The Company expects the gross
margin to return to the mid-20 percent level over the coming quarters
and will continue to execute its plans to achieve this. EBITA in the
second quarter was €0.9 million, up from a loss of 0.2 million in Q110
and down from €4.5 million in Q209, taking into account a net negative
currency impact of €1.2 million.
West & Central
Revenue in the West & Central region was €32.3 million in the second
quarter of 2010, an increase of 2.2% (€31.6 million) and 2.5% (€31.5
million) compared to Q110 and Q209 respectively. The region's CRM
operations reported sequential growth as a result of increased volumes
from both the installed base and new clients. In the CMS sector,
collection rates trended upwards compared to the previous quarter,
resulting in a sequential revenue increase.
The region's gross margin decreased to 25.4% in the second quarter of
2010, compared to 30.4% in Q110 and 27.9% in Q209. The gross margin in
the CRM segment was impacted by the performance of the outbound business
in Germany, and increased ramp-up costs were also incurred as a result
of expanding volumes in the CMS business.
EBITA in the second quarter was €2.4 million, a decrease of 25% (€3.2
million) and 20% (€3.0 million) compared to Q110 and Q209 respectively.
Iberia
Revenue in the Iberian region was €26.0 million in the second quarter of
2010, down by 5.8% and up by 2.8% when compared to Q110 (€27.6 million)
and Q209 (€25.3 million) respectively. The sequential revenue decrease
was primarily due to performance in the CRM sector, which decreased
mainly as a result of volume mix changes within the installed base.
The region's gross margin was 15.4% in the second quarter of 2010,
compared to 21.7% in Q110 and 20.9% in Q209. The sequential gross margin
decrease was a result of the abovementioned volume reduction and related
severance costs of €0.9 million. SG&A reduced this impact, with EBITA
for the region decreasing sequentially by €1.4 million to €0.4 million
in Q210.
North
Revenue in the North region was €35.0 million in the second quarter of
2010, an increase of 5.7% and 12.5% compared to Q110 (€33.0 million) and
Q209 (€31.1 million) respectively. The CRM sector reported revenue
growth, whereas the CMS business remained relatively stable. Revenue
growth in the CRM sector arose through an expansion of volumes amongst
installed base clients in the region. Net of currency effects, revenue
increased by €0.9 million sequentially.
The region's gross margin increased to 19.7% in the second quarter of
2010, up from 19.4% in Q110 and 16.1% in Q209. The sequential gross
margin expansion was a result of  operational improvements in managing
the ramp-up of customer volumes. As a result, the North region reported
EBITA of €2.9 million in the quarter, compared to €2.1 million in Q110
and €0.7 million in Q209.
South
Revenue in the South region was €19.7 million in the second quarter of
2010, which was relatively flat when compared to Q110 (€19.6 million)
and down by 10.5% compared to Q209 (€22.0 million).
The region's gross margin was 8.1% in the second quarter of 2010,
compared to 13.8% in Q110 and 9.5% in Q209. Adjusting for the €0.7
million one-off gain reported in Q110, gross profit fell from €2.0
million to €1.6 million. This decrease was driven by seasonal cost
behavior.
The region reported EBITA of -€2.2 million in Q210, compared to -€1.9
million in Q110. When adjusting again for the €0.7 million positive
one-off reported in Q110, like-for-like EBITA moved from -€2.6 million
to -€2.2 million, reflecting improvements in SG&A expenditure in the
quarter. Transcom's plans for the region remain in line with the
strategy that has been executed for the last three quarters, and the
Company will continue to implement the same strategy for the second half
of the year. Transcom remains committed to the French business while
carrying out its regional recovery programme.
OTHER INFORMATION
For full tabular financial information, please see the attached PDF file
or download a full copy of this statement on Transcom's website under
the 'Investor' tab.
Notice of Financial Results
Transcom's financial results for the third quarter and nine months ended
30 September 2010 will be published on 20 October 2010.
Transcom Board of Directors
21 July 2010
Transcom WorldWide S.A.
45 rue des Scillas
L-2529 Howald
Luxembourg
+352 27 755 000
www.transcom.com
 (http://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, the Czech Republic,
Estonia, Germany, Hungary, Latvia, Lithuania, Luxembourg, the
Netherlands, Poland, Romania, Serbia, Slovakia, Switzerland and the
United Kingdom
  · South: France, Italy and Tunisia
  · Iberia: Chile, Portugal and Spain
  · North America & Asia Pacific: Canada, Philippines and the United
States of America 

#  #  #

For further information please contact:
Pablo Sanchez-Lozano, President and CEO                            
            +352 27 755 000
Noah Schwartz, Investor & Press Enquiries                             
            +44 207 321 5010
                                                                        
                                    transcom@sharedvalue.net

Attachments

07212015.pdf