Talenom Plc, Stock exchange release, 21 October 2019 at 13:30
Talenom Plc business review January–September 2019 (unaudited): Operating profit improves by 25.4% and net sales grow by 18.2% – financial outlook for growth and profitability remains strong
January–September 2019 in brief:
- Net sales EUR 43.0 (36.4) million, an increase of 18.2% (18.6%)
- Operating profit (EBIT) EUR 9.0 (7.1) million, 20.8% (19.4%) of net sales *)
- Net profit EUR 6.6 (5.4) million *)
- Earnings per share EUR 0.95 (0.78)
- The company’s outlook remains strong. 2020 is expected to be in line with 2019 in terms of relative growth in net sales and relative profitability
| Group | 1–9/2019 | 1–9/2018 | Change |
| Net sales, thousands of euro | 43,042 | 36,423 | 6,620 |
| Net sales, increase % | 18.2% | 18.6% | -0.4 percentage points |
| Operating profit, thousands of euro *) | 8,951 | 7,079 | 1,872 |
| Operating profit, as % of net sales *) | 20.8% | 19.4% | 1.4 percentage points |
| Return on investment (ROI), % (rolling 12 months) *) | 20.9% | 20.7% | 0.2 percentage points |
| Liquid assets, thousands of euro | 6,984 | 3,804 | 3,179 |
| Earnings per share, euro | 0.95 | 0.78 | 0.17 |
| Net profit, thousands of euro *) | 6,599 | 5,362 | 1,236 |
*) The Talenom Group adopted IFRS 16 Leases on 1 January 2019, due to which the review periods are not fully comparable. During the period 1–9/2019, the standard had a positive effect on operating profit (+EUR 74 thousand) and a negative effect on net profit (-EUR 62 thousand) and return on investment (-2.4 percentage points). The effects of adopting the standard on the Group’s financial information are described in detail under the section Basis of Preparation.
| Group | 7–9/2019 | 7–9/2018 | Change |
| Net sales, thousands of euro | 13,497 | 11,145 | 2,352 |
| Net sales, increase % | 21.1% | 19.8% | 1.3 percentage points |
| Operating profit (EBIT), thousands of euro **) | 2,351 | 1,852 | 499 |
| Operating profit (EBIT), as % of net sales **) | 17.4% | 16.6% | 0.8 percentage points |
| Return on investment (ROI), % (rolling 12 months) **) | 20.9% | 20.7% | 0.2 percentage points |
| Liquid assets, thousands of euro | 6,984 | 3,804 | 3,179 |
| Earnings per share, euro | 0.24 | 0.21 | 0.03 |
| Net profit, thousands of euro **) | 1,675 | 1,415 | 260 |
**) The Talenom Group adopted IFRS 16 Leases on 1 January 2019, due to which the review periods are not fully comparable. During the period 7–9/2019, the standard had a positive effect on operating profit (+EUR 27 thousand) and a negative effect on net profit (-EUR 20 thousand) and return on investment (-2.4 percentage points). The effects of adopting the standard on the Group’s financial information are described in detail under the section Basis of Preparation.
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
Guidance for 2019 remains unchanged:
The company’s net sales growth percentage is expected to increase from 2018 (18.0% in 2018). Operating profit margin (17.5% in 2018) is expected to increase from 2018.
Guidance for 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
We performed excellently during this review period as well. Operating profit saw year-on-year improvement of 25.4%. Operating profit was 20.8% of net sales (EUR 9.0 million). Net sales during the review period increased year-on-year by 18.2% to EUR 43 million. Over 90% of net sales comprises continuous billing. The third quarter also met our expectations. Operating profit saw year-on-year improvement of 26.9% in the third quarter. Net sales in turn increased by 21.1%.
In our financial guidance we have given, it has been taken into account that the annual payroll reports have been discontinued due to the change in the income register. This has offset and will offset the seasonality around the turn of the year in the monthly billed work. Since this spring, the staffing business has been focused on supporting the core accounting business, and this is reflected in a decline in the volume of the staffing business and at the same time improved profitability.
The financial outlook for growth and profitability remains strong, and we expect our financial outlook for 2020 to be in line with 2019 in terms of growth and profitability.
Our main business drivers have remained the same ever since we were listed on the stock exchange. Our sales are extremely effective and we have been able to further increase our acquisition of new customers. Product development investments targeted at the bookkeeping production line have long underpinned our excellent scalability and profitability development – and will continue to do so.
As the development of the production line reduces the amount of routine work, we see clear indications of how the widespread adoption of a consultative approach to customer work in accounting services further improves customer satisfaction and retention. We are making further investments into strengthening our employees’ expertise in customer work, as we believe that growth in the high-quality advisory services provided by our experts will bolster our long-term competitiveness.
The most recent phase in the development of the production line enables us to serve ever smaller customers even more profitably, and due to this, we are looking into expanding our customer base to smaller companies.
We trust that our main business drivers – such as making financial administration routines easy to entrepreneurs, automated service production and high-quality care and value-added services – will carry our operations in the future, too. We will thus continue to make investments into the development of the bookkeeping production line and customer interfaces. We have been able to demonstrate that outlays on technological development and growth improve our long-term competitiveness.
New products are assessed based on their scalability and integration into customer transactions. The financial services we launched earlier are a good example of this. The service area is still seeing strong growth.
Our operations in Sweden are progressing according to plan. We are currently implementing the first steps in the automation of service production. We have also productised our service portfolio and started piloting sales under the Talenom brand.
Financial development of the group
Key figures
| Group | 1–9/2019 | Effect of IFRS 16 **) | Adjusted 1–9/2019 | 1–9/2018 | Adjusted change |
| Net sales, thousands of euro | 43,042 | 0 | 43,042 | 36,423 | 6,620 |
| Net sales, increase % | 18.2% | 0.0 percentage points | 18.2% | 18.6% | -0.4 percentage points |
| Operating profit (EBIT), thousands of euro | 8,951 | +74 | 8,877 | 7,079 | 1,798 |
| Operating profit (EBIT), as % of net sales | 20.8% | +0.2 percentage points | 20.6% | 19.4% | 1.2 percentage points |
| Return on investment (ROI), % (rolling 12 months) | 20.9% | -2.4 percentage points | 23.3% | 20.7% | 2.6 percentage points |
| Interest-bearing net liabilities, thousands of euro | 30,214 | +8,598 | 21,616 | 18,923 | 2,693 |
| Net gearing ratio, % | 135% | +39 percentage points | 96% | 107% | -11 percentage points |
| Equity ratio, % | 32.7% | -4.7 percentage points | 37.4% | 37.2% | 0.2 percentage points |
| Working capital, thousands of euro | -2,866 | 0 | -2,866 | -2,379 | -488 |
| Net investments, thousands of euro | 12,045 | 0 | 12,045 | 7,123 | 4,923 |
| Liquid assets, thousands of euro | 6,984 | 0 | 6,984 | 3,804 | 3,179 |
| Earnings per share, euro | 0.95 | -0.01 | 0.96 | 0.78 | 0.18 |
| Weighted average number of shares during the period *) | 6,923,021 | 0 | 6,923,021 | 6,859,713 | 63,307 |
| Net profit, thousands of euro | 6,599 | -62 | 6,661 | 5,362 | 1,299 |
*) Weighted average of treasury shares held by the company during the period has been deducted from the figure
**) The Talenom Group adopted IFRS 16 Leases on 1 January 2019; its impacts are presented in this column
Net sales, profitability and financial performance – January–September 2019
In the period from January to September, Talenom’s net sales increased by 18.2% compared to the corresponding period of the previous year. Net sales grew by about EUR 6.6 million and amounted to EUR 43.0 (36.4) million. The growth was mainly due to the increase in the number of accounting service customers.
Personnel expenses during the review period were EUR 22.1 (19.5) million, amounting to 51.4% (53.5%) of net sales. The ratio of the personnel expenses to net sales decreased year-on-year from 2018.
Other operating expenses, including materials and services, totalled EUR 6.4 million, being 15.0% of net sales. Due to the adoption of IFRS 16 Leases, other operating expenses are not directly comparable in periods 1–9/2018 and 1–9/2019. In the period 1-9/2019, the adoption of the standard decreases other operating expenses by EUR 1.4 million.
In the review period, operating profit (EBIT) was EUR 8,951 thousand (20.8% of net sales), with a net profit of EUR 6,599 thousand. Adoption of IFRS 16 Leases had a positive effect on operating profit (+EUR 74 thousand) and a negative effect on net profit (-EUR 62 thousand). Adjusted operating profit excluding the impacts of IFRS 16 was EUR 8,877 (7,079) thousand (20.6% (19.4%) of net sales) and net profit EUR 6,661 (5,362) thousand.
The improved profitability was due to the improvement in the efficiency of bookkeeping.
Balance sheet, financing and investments
Consolidated balance sheet
| Thousands of euro | 30 September 2019 | Effect of IFRS 16 *) | Adjusted 30 September 2019 | 30 September 2018 | 31 December 2018 | |
| ASSETS | ||||||
| Non-current assets | ||||||
| Goodwill | 20,728 | 20,728 | 18,420 | 18,420 | ||
| Other intangible assets | 13,948 | 13,948 | 10,103 | 10,493 | ||
| Property, plant and equipment | 11,112 | +8,520 | 2,592 | 2,277 | 2,248 | |
| Other non-current financial assets | 306 | 306 | 237 | 237 | ||
| Deferred tax assets | 83 | +16 | 67 | 68 | 62 | |
| Capitalised contract costs | 9,734 | 9,734 | 7,904 | 8,357 | ||
| Total non-current assets | 55,910 | +8,535 | 47,375 | 39,009 | 39,817 | |
| Current assets | ||||||
| Trade and other receivables | 5,858 | 5,858 | 4,948 | 5,473 | ||
| Current tax assets | 148 | 148 | 0 | 11 | ||
| Cash and cash equivalents | 6,984 | 6,984 | 3,804 | 5,914 | ||
| Total current assets | 12,989 | 0 | 12,989 | 8,752 | 11,398 | |
| Total assets | 68,899 | +8,535 | 60,364 | 47,761 | 51,215 | |
| CAPITAL AND RESERVES | ||||||
| Share capital | 80 | 80 | 80 | 80 | ||
| Reserve for invested unrestricted equity | 13,009 | 13,009 | 10,850 | 10,850 | ||
| Fair value reserve | -68 | -68 | -93 | -93 | ||
| Retained earnings | 9,400 | -62 | 9,462 | 6,825 | 7,850 | |
| Total equity | 22,421 | -62 | 22,483 | 17,663 | 18,688 | |
| LIABILITIES | ||||||
| Non-current liabilities | ||||||
| Liabilities to credit institutions | 28,000 | 28,000 | 22,000 | 23,500 | ||
| Trade and other payables | 202 | 202 | 299 | 230 | ||
| Other non-current financial liabilities | 6,997 | +6,912 | 85 | 116 | 116 | |
| Deferred tax liabilities | 292 | 292 | 44 | 50 | ||
| Total non-current liabilities | 35,491 | +6,912 | 28,579 | 22,459 | 23,896 | |
| Current liabilities | ||||||
| Financial liabilities | 0 | 0 | 0 | 0 | ||
| Trade and other payables | 8,303 | 8,303 | 6,836 | 7,728 | ||
| Other current financial liabilities | 1,762 | +1,686 | 76 | 0 | 0 | |
| Current tax liabilities | 921 | 921 | 803 | 903 | ||
| Total current liabilities | 10,987 | +1,686 | 9,301 | 7,639 | 8,631 | |
| Total liabilities | 46,478 | +8,598 | 37,881 | 30,098 | 32,528 | |
| Total equity and liabilities | 68,899 | +8,535 | 60,364 | 47,761 | 51,215 | |
*) The Talenom Group adopted IFRS 16 Leases on 1 January 2019; its impacts are presented in this column.
On 30 September 2019, the consolidated balance sheet total was EUR 68.9 (47.8) million. The Group had an equity ratio of 32.7% and a net gearing ratio of 135%.
With the adoption of IFRS 16, the Group’s equity ratio has decreased by 4.7 percentage points, and its net gearing ratio increased by 39 percentage points. Equity ratio adjusted to ignore the effects of IFRS 16 stood at 37.4% (37.2%) and net gearing ratio at 96% (107%).
On 30 September 2019, the Group’s interest-bearing financial loans were EUR 28.0 million, excluding instalment debts. Other non-current interest-bearing liabilities (instalment debts) stood at EUR 0.2 million, with other current interest-bearing liabilities (instalment debts) amounting to EUR 0.2 million.
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 EUR 6.9 million and current lease liabilities at EUR 1.7 million on 30 September 2019.
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 EUR 3.3 (2.6) million in the review period. Investments concerning software and digital services amounted to EUR 3.4 (2.9) million.
The company’s total net investments during the period 1 January-30 September 2019 were EUR 12.0 (7.1) million.
During the review period, the company acquired the share capital of Wakers Consulting Ab in Stockholm and the business operations of Oy Wasa tilit Ab and Företagstjänster Ab Oy. These transactions accounted for EUR 4.2 million of net investments and half was paid for with new Talenom Plc shares subscribed for in a directed issue.
On 30 September 2019, liquid assets amounted to EUR 7.0 (3.8) million. In addition, the company’s unused overdraft limits stood at EUR 1.0 million on 30 September 2019.
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. +358 40 703 8554
otto-pekka.huhtala@talenom.fi
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.
In 2018, Talenom Group reported net sales of 48.9 million euros, representing an increase of 18.0 % compared to 2017. Talenom possesses a strong history of growth – Talenom reached an average annual net sales growth of 15.5% in the fiscal years 2005 - 2018.
DISTRIBUTION:
Nasdaq Helsinki
Main media
www.talenom.fi
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