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Talenom Plc Business Review January–March 2021 (unaudited): An excellent start to the financial year, operating profit was 21.7% and net sales growth 17.0% - Stronger preconditions for growth

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Talenom Plc, Stock Exchange Release, 26 April 2021 at 13:30 EEST


Talenom Plc Business Review January–March 2021 (unaudited): An excellent start to the financial year, operating profit was 21.7% and net sales growth 17.0% - Stronger preconditions for growth


This release is a summary of Talenom Plc’s Business Review for January–March 2021. The complete Business Review is attached to this release as a pdf file. It is also available on the company's website at 
www.talenom.fi/en/investors.


January–March 2021 in brief:

  •  Net sales 20.3 (17.4) million euros, increase 17.0% (17.4%)
  •  Operating profit (EBIT) 4.4 (3.7) million euros, 21.7% (21.4%) of net sales
  •  Net profit 3.3 (2.8) million euros
  •  Earnings per share 0.08 (0.07) euros
  •  On 15 April 2021, Talenom raised its guidance for 2021 regarding net sales. Net sales for 2021 are expected to amount to 80–84 million euros and operating profit is expected to be 14–16 million euros. 

Group1-3/20211-3/2020Change
Net sales, thousands of euro20,30717,3502,958
Net sales, increase %17.0%17.4%-0.3 percentage points
Operating profit (EBIT), thousands of euro4,4123,718694
Operating profit (EBIT), as % of net sales21.7%21.4%0.3 percentage points
Return on investment (ROI), % 
(rolling 12 months)
19.9%19.7%0.2 percentage points
Liquid assets, thousands of euro10,2655,2684,997
Earnings per share, euro0.080.070.01
Net profit, thousands of euro3,3482,806542


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 2021

On 15 April 2021, due to the acquisition of Balance-Team Oy, Talenom revised its financial outlook and raised its guidance for 2021 regarding net sales. 

Guidance for 2021: Net sales for 2021 are expected to amount to 80–84 million euros and operating profit is expected to be 14–16 million euros. 


CEO Otto-Pekka Huhtala

In the first quarter of the year, we continued to resolutely drive the implementation of our strategy of strong and profitable growth. We were particularly delighted by our accounting business in Finland – the development of both its organic growth and profitability without the effect of acquisitions was once again excellent. We also continued to grow through acquisitions, and the integrations of the acquirees proceeded according to plan. The Finnish accounting business is an important cornerstone for us. It creates the preconditions for successful development of the company and international growth. 

In Sweden, we expanded to new locations through acquisitions. At the same time, the completion of the acquisitions strengthened our country management in Sweden. The project to localise the KontoKalle service – equivalent to our TiliJaska service for the small customer segment in Finland – has progressed as planned in Sweden. Our aim is that the first pilot customers can start using the service in the summer, in line with the original schedule. The deployment of KontoKalle is the first step in the introduction of Talenom’s own bookkeeping system in Sweden.

In Finland, we deployed bank accounts and cards in TiliJaska service for the first small entrepreneur customers in March, as planned. At the same time, we took a significant step towards our vision: unbeatable accounting and banking services for SMEs. We are a competitive new challenger in banking services for SMEs. We can open a bank account for a customer in minutes and offer savings on banking service fees with free banking services for the smallest companies. With own accounts and cards, the TiliJaska service is transferring into full production. Our goal is to offer banking services also to Talenom’s current customers during the present year.

Net sales for January-March grew by 17.0% and operating profit improved by 18.7%. In addition to organic growth, net sales grew due to several acquisitions in Finland and Sweden. Operating profit grew especially due to the increase in the degree of automation in our Finnish accounting business. As expected, our relative profitability was weighed down by the weaker profitability of acquired businesses. Our experience of acquisitions and integrations has shown that, on average, the profitability of acquired businesses improves to the level of our core business within around three years. The coronavirus pandemic had a minor impact during the review period. 

In April, after the end of the review period, we strengthened our position as a significant provider of financial management services for nonprofit organisations in Finland by acquiring Balance-Team Oy. At the same time, we once again raised our guidance for 2021 regarding net sales: net sales for 2021 are expected to amount to 80–84 million euros and operating profit is expected to be 14–16 million euros. Our focus is even more strongly on growth. Many accounting firm entrepreneurs feel that the digital transformation of the accounting business and increasing regulation are leading to a situation in which professionals in this field should join forces.

Thanks to the favourable development of our business in Finland, we are also well poised to pursue international growth. Our experiences in Sweden have encouraged us to explore opportunities to expand into new countries, and our goal is to export our services to other European countries, too. Providing accounting and banking services under the same roof is the key to our success, both now and in the future.


Financial development

Key figures

Group1-3/20211-3/2020Change 
Net sales, thousands of euro20,30717,3502,958
Net sales, increase %17.0%17.4%-0.3 percentage points
Operating profit (EBIT), thousands of euro4,4123,718694
Operating profit (EBIT), as % of net sales21.7%21.4%0.3 percentage points
Return on investment (ROI), % 
(rolling 12 months)
19.9%19.7%0.2 percentage points
Interest-bearing net liabilities, thousands of euro35,64331,7713,872
Net gearing ratio, %115%142%-27 percentage points
Equity ratio, %32.3%31.1%1.2 percentage points
Working capital, thousands of euro-6,564-4,609-1,955
Net investments, thousands of euro 9,7844,0595,725
Liquid assets, thousands of euro10,2655,2684,997
Earnings per share, euro0.080.070.01
Weighted average number of shares during the period43,195,63641,871,7901,323,846
Net profit, thousands of euro3,3482,806542



Net sales, profitability and financial performance – January–March 2021

During the period from January to March, Talenom’s net sales increased by 17.0% (17.4%) year-on-year. Amounting to 20.3 (17.4) million euros, net sales grew by around 3.0 (2.6) million euros. Net sales grew due to organic growth and an increase in the number of accounting service customers as well as acquisitions in Finland and Sweden. About two-thirds of growth was generated by acquisitions and one-third by proactive new customer acquisition efforts. Net sales growth in the review period was slowed down by lower invoicing of transaction-based products and a slowdown in new customer acquisition due to coronavirus pandemic-related restrictions. However, the coronavirus pandemic had a minor impact during the review period. 

In the review period, personnel expenses amounted to 10.8 (8.6) million euros, 53.2% (49.5%) of net sales.

Other operating expenses, including materials and services, totalled 2.4 (2.6) million euros, accounting for 11.7% (14.9%) of net sales.

During the review period, operating profit (EBIT) was 4.4 (3.7) million euros, 21.7% (21.4%) of net sales. Net profit was 3.3 (2.8) million euros. Operating profit improved by 18.7%. Development of the degree of automation in the Finnish accounting business and savings on fixed costs had a favourable impact on relative profitability. As Talenom’s growth is based on acquisitions to a greater extent than before, the weaker profitability of the acquirees and integration costs burdened relative profitability. The profitability of businesses acquired by Talenom has typically been lower than that of other operations for around three years after the acquisition date on average, after which it has risen to the level of other units. 

Balance sheet, financing and investments 

On 31 March 2021, the consolidated balance sheet total was 96.3 (72.2) million euros. The Group’s equity ratio was 32.3% (31.1%) and the net gearing ratio was 115% (142%).

The Group’s interest-bearing financial loans at the end of the review period were 37.0 (28.0) million euros, excluding instalment debts. Other non-current interest-bearing liabilities (instalment debts) were 0.3 (0.2) million euros and other current interest-bearing liabilities (instalment debts) were 0.2 (0.2) 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 6.0 (6.6) million euros and current lease liabilities at 2.5 (2.0) 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 0.9 (1.1) million euros in the review period. Investments concerning software and digital services amounted to 2.8 (2.4) million euros.

During the review period, Talenom carried out several acquisitions in Finland and Sweden, in Sweden as share transactions and in Finland as asset deals. The purchase prices of the share transactions carried out in Sweden during the review period totalled 4.4 million euros, including the recognition of additional purchase prices, and the purchase prices of asset deals in Finland amounted to 1.2 million euros, including recognition of additional purchase prices. In acquisitions, part of the purchase price was paid with new Talenom Plc shares subscribed for in a directed issue. Acquisitions accounted for 5.5 (0.3) million euros of Talenom’s net investments. More information on acquisitions is presented under “Significant events in the review period”.

The company’s total net investments in the review period 1 January–31 March 2021 were 9.8 (4.1) million euros. 

Talenom’s liquid assets at 31 March 2021 were 10.3 (5.3) million euros. In addition, the company had unused overdraft limits of 3.0 (1.0) million euros at the end of the review period.


Disclaimer

Certain statements in this release contain forward-looking statements based on the company's and management's views at the time they were made. For this reason, they involve risks and uncertainties. The future development 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 is an agile and progressive accounting firm established in 1972. Our business idea is to make day-to-day life easier for entrepreneurs with the easiest-to-use digital tools on the market and highly automated services. In addition to comprehensive accounting services, we support our customers’ business with a wide range of expert services as well as financing and banking services. Our vision is to provide unbeatable accounting and banking services for SMEs.

Talenom has a history of strong growth – the average annual increase in net sales was approximately 15.5% between 2005 and 2020. At the end of March 2021, Talenom had 932 employees in Finland and Sweden at a total of 55 locations. Talenom’s share is quoted on the main list of the Helsinki Stock Exchange.

DISTRIBUTION:
Nasdaq Helsinki
Main media
www.talenom.fi

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