Transcom: Year-end report 2015

”The closure of our loss-making site in Colombia and the simplification of our regional and management structure will support margin improvements going forward.”

Johan Eriksson, President & CEO

Key highlights Q4 2015

• Organic growth was negative 4.1%. Transcom’s previously disclosed decision not to renew an agreement with an Italian public sector client had a negative 3.5% impact on growth in the quarter.
• EBIT margin in Q4 2015 was 2.6% (5.8% in Q4 2014). EBIT margin excluding non-recurring items was 4.1% (5.8% in Q4 2014).
• Profitability improved in the North America & Asia Pacific region, while we saw a negative development in the Iberia & Latam region.
• As announced on January 18, 2016, we are closing our loss-making site in Colombia. A restructuring cost of €2.3 million has been recognized in the Q4 2015. Also, Transcom’s management structure will be simplified in order to improve efficiency. These actions will benefit margins in the years ahead.
• Net debt/EBITDA 0.6, compared to 0.9 in Q4 2014.
• The Board of Directors recommends a dividend for 2015 amounting to SEK 1.75 per share.

Q4 2015 financial highlights

• Net revenue €156.9 million, a 1.2% decrease compared to Q4 2014 (€158.7 million). Organic growth was negative 4.1%.
• Gross margin excluding non-recurring items 20.3% compared to 21.9% in the same period 2014.
• EBIT in Q4 2015 was €4.1 million (€9.2 million). EBIT excluding non-recurring items was €6.5 million compared to €9.2 million in Q4 2014.
• EPS 1.0 Euro cents compared to 14.5 Euro cents in Q4 2014. EPS was impacted by a €2.5 million provision, related to a tax audit.

YTD 2015 financial highlights

• Net revenue €626.5 million, a 1.6% increase (€616.8 million). Organic growth was 0.5%.
• Gross margin excluding non-recurring items 19.9% compared to 20.7% in the same period 2014.
• EBIT was €20.0 million (€21.3 million).  EBIT excluding non-recurring items was €23.2 million (€21.3 million).
• EPS 33.2 Euro cents compared to 26.4 Euro cents in the same period 2014.

Comments from the President and CEO

We are making progress towards our financial targets. The closure of our loss-making site in Colombia and the simplification of our regional and management structure will support margin improvements going forward.

Organic growth decline in Q4 2015

Organic growth was negative 4.1% compared to Q4 2014. This was mainly due to Transcom’s decision not to bid for a renewed agreement with an Italian public sector client. From a full-year perspective, organic growth was +0.5%.

4.1% EBIT margin in Q4 2015, excluding non-recurring items

Our EBIT margin in the quarter was 4.1%, excluding non-recurring items.

As a result of the positive profitability trend, Transcom’s balance sheet is strong. At the end of 2015, our net debt/EBITDA ratio stood at 0.6, compared to 0.9 in December 2014.

Transcom’s EBIT margin on a rolling 12-month basis, excluding non-recurring items, has steadily improved. The slight decline in the measure this quarter is due to the fact that Q4 last year was exceptionally strong, and that we saw a weaker development in the Iberia & Latam region. We are implementing a number of changes, described below, which will support our continued positive progression towards our mid-term financial targets, in particular in terms of improved EBIT, which is our most fundamental and prioritized target at the moment.

Exiting Colombia, reviewing remaining Latin American business and streamlining management structure

As announced on January 18, 2016, we have decided to close our loss-making contact center in Cali, Colombia and to evaluate strategic alternatives for our remaining Latin American business in Chile and Peru. Transcom is a marginal player in Latin America, and we have chosen to focus on other markets, where our potential for generating profitable growth is greater. Since 2013, Transcom has generated losses in Latin America totaling €15.6 million. Out of this amount, €4.7 million is attributable to Colombia. In 2015, revenue in Latin America amounted to €13.1 million, while losses totaled €3.7 million, €2.0 million of which refers to Colombia. Stopping these losses is a key priority in 2016.

We have also announced a number of organizational changes, which will simplify our regional and management structure, focusing our resources on prioritized growth areas. Starting January 1, Transcom’s global business is managed within three operating units, in addition to the Latin American organization currently under review: North Europe, Continental Europe, and English-speaking markets & APAC. This reorganization will yield cost advantages as well as enhance the opportunity to drive standardization and efficiency across our global business. Annual cost savings to be realized are estimated at €2.9 million, and are expected to take full effect in the fourth quarter of 2016. Further efficiency gains in addition to these direct cost savings are expected to be realized in the coming years, supporting Transcom’s mid-term financial objectives. A non-recurring restructuring cost amounting to approximately €2.7 million, related to these organizational changes will be recorded in the first quarter of 2016. Starting in the Q1 2016 interim report, our segment reporting will reflect our new regional and management structure. We will release pro forma comparable figures before the publication of Q1 2016 results.

Important focus areas for Transcom in the coming years are to ensure that we have efficient and effective regional and corporate functions, that our sites deliver superior performance through operational excellence, that we excel in contract and account management, and that we win long-term profitable business in line with Transcom’s commercial and operational set-up.

Johan Eriksson, President and CEO of Transcom

The interim report is also available for download on www.transcom.com

Results Conference Call and Webcast

Transcom will host a conference call at 10:30am CET (09:30am UK time) on Friday, February 5, 2016. The conference call will be held in English and will also be available as webcast on Transcom’s website, www.transcom.com.

Dial-in information

To ensure that you are connected to the conference call, please dial in a few minutes before the start in order to register your attendance. No pass code is required.

Sweden: +46 8 505 564 74

UK: +44 203 364 5374

US: +1 855 753 2230

For a replay of the results conference call, please visit www.transcom.com to view the recorded webcast of the event.

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Transcom WorldWide AB (publ) discloses the information provided herein pursuant to the Securities Market Act and/or the Financial Instruments Trading Act. The information was submitted for publication on February 5, 2016 at 08:00 AM CET.

For further information please contact:

Johan Eriksson, President and CEO              +46 70 776 80 22

Ulrik Englund, CFO                                                     +46 70 286 85 92       

Stefan Pettersson, Head of Group Communications  +46 70 776 80 88

About Transcom

Transcom is a global customer experience specialist, providing customer care, sales, technical support and collections services through our extensive network of contact centers and work-at-home agents. We are 30,000 customer experience specialists at 54 contact centers across 23 countries, delivering services in 33 languages to international brands in various industry verticals. Transcom WorldWide AB’s share is listed on the Nasdaq Stockholm Exchange under the ticker symbol TWW.