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Talenom Plc Half-Year Report January–June 2021 (unaudited): Net sales increased by 23% and operating profit improved by 17% – Growth accelerated, earnings improved and strategy implementation progressed
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Talenom Plc, Half-Year Financial Report, 2 August 2021 at 13:30 EEST
Talenom Plc Half-Year Report January–June 2021 (unaudited): Net sales increased by 23% and operating profit improved by 17% – Growth accelerated, earnings improved and strategy implementation progressed
This release is a summary of Talenom Plc’s Half-Year Report January–June 2021. The complete Half-Year Report 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–June 2021 in brief:
- Net sales 41.7 (33.9) million euros, increase 23.1% (14.6%)
- Operating profit (EBIT) 8.6 (7.3) million euros, 20.5% (21.6%) of net sales
- Net profit 6.4 (5.5) million euros
- Earnings per share 0.15 (0.13) euros
| Group | 1–6/2021 | 1–6/2020 | Change |
| Net sales, thousands of euro | 41,687 | 33,852 | 7,835 |
| Net sales, increase % | 23.1% | 14.6% | 8.6 percentage points |
| Operating profit (EBIT), thousands of euro | 8,551 | 7,312 | 1,239 |
| Operating profit (EBIT), as % of net sales | 20.5% | 21.6% | -1.1 percentage points |
| Return on investment (ROI), % (rolling 12 months) | 18.4% | 17.9% | 0.5 percentage points |
| Liquid assets, thousands of euro | 10,601 | 9,627 | 974 |
| Earnings per share, euro | 0.15 | 0.13 | 0.02 |
| Net profit, thousands of euro | 6,411 | 5,456 | 955 |
| Group | 4–6/2021 | 4–6/2020 | Change |
| Net sales, thousands of euro | 21,380 | 16,503 | 4,877 |
| Net sales, increase % | 29.6% | 11.8% | 17.8 percentage points |
| Operating profit (EBIT), thousands of euro | 4,138 | 3,594 | 545 |
| Operating profit (EBIT), as % of net sales | 19.4% | 21.8% | -2.4 percentage points |
| Return on investment (ROI), % (rolling 12 months) | 18.4% | 17.9% | 0.5 percentage points |
| Liquid assets, thousands of euro | 10,601 | 9,627 | 974 |
| Earnings per share, euro | 0.07 | 0.06 | 0.01 |
| Net profit, thousands of euro | 3,062 | 2,650 | 412 |
Guidance for 2021 remains unchanged
Guidance for 2021 (revised on 15 April 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 half of 2021, we continued our drive to expand in Sweden in line with our internationalisation strategy. Thanks to the experience gained in Sweden, we are now ready to harness our unique expertise that combines software production and accounting elsewhere in Europe, too. After the end of the review period, we took a decisive step in internationalisation by acquiring the share capital of the accounting firm Avail Services SL in Spain. This acquisition expands our presence into new markets – and adds a growth-oriented team with strong local expertise to our ranks. The acquisition opens up the opportunity for us to grow our business in one of Europe’s largest markets. There are around three million companies in Spain and the country’s accounting market is valued at about 10 billion euros – this provides us with an excellent opportunity to harness our software investments and the potential of digital transformation on an entirely new scale. Spain has an accounting market roughly ten times larger than that of Finland, and the digitalisation of financial management is still taking its first steps there. We believe that we can make use of our current strengths in the Spanish market: our highly automated services, easy routines and care services that make day-to-day life easier for our entrepreneur customers.
We made concerted progress in the implementation of our growth strategy in the first half of 2021. Our profitable growth was strong and our net sales increased by 23% year-on-year. Around two-thirds of the growth came from acquisitions that we carried out in Finland and Sweden in line with our strategy. A third of net sales growth was organic, generated by our own proactive sales efforts. Our new customer acquisition recovered to pre-pandemic levels in late spring. The coronavirus pandemic no longer had a significant impact on our business during the review period.
Our operating profit improved by 17%, especially due to net sales growth and the development of the degree of automation in our Finnish accounting business. Our operating margin fell slightly short of the comparison period. The acquisitions burden our relative profitability. However, in our experience, the profitability of acquirees in Finland can be raised to the level of our core business within around three years of the acquisition. In Sweden, we expect that profitability will improve when we deploy our own software. Excluding the impact of acquisitions, our relative profitability saw year-on-year improvement.
In addition to profitable growth, we also made progress in other areas of our strategy. We deployed our own bank accounts and cards for our small customers in TiliJaska service in cooperation with our partner. In addition, we have submitted an application to obtain our own payment institution authorisation in Finland, so that we can offer our banking services even more cost-effectively. In Sweden, we started piloting KontoKalle – a service similar to TiliJaska – in the summer. With KontoKalle, we are taking the first step in the introduction of Talenom’s own bookkeeping system in Sweden.
In line with our strategy, we continued to invest in our own software and automation development. In Finland, we started the deployment of our renewed customer interface, Talenom Online, and achieved a degree of automation of over 75% in accounting (H1/2020: 68%) and over 50% (0%) in payroll services. The working time savings achieved thanks to automation accelerated our journey of evolving from accountants to consultants, and the net sales from consulting work by our accountants grew substantially during the review period. In our financing services, we are piloting a new working capital loan, utilising the exceptionally comprehensive real-time financial data at our disposal to improve the financeability of our customers. During the pilot, we have found that we still need to develop digital distribution to achieve scalability.
Talenom’s customer satisfaction continued to develop favourably. In Finland, our net promoter score (NPS), which measures customer loyalty and willingness to recommend, was 55 (48) during the review period, which was favourably reflected in customer retention. I would like to thank our excellent personnel for their commitment and motivation to working for our customers. In the spring, Talenom was once again recognised as one of the best workplaces in Finland in the survey carried out by the Great Place to Work Institute. In order to further deepen our understanding of our personnel, we have replaced the GPTW survey with the Siqni personnel survey.
Acquisitions, the favourable development of organic growth, the waning of the impacts of the coronavirus pandemic and the improved customer retention lay an excellent foundation for operations in the latter part of the year. Our financial outlook for 2021 has not changed, and we will keep our guidance issued on 15 April 2021 unchanged.
Financial development
Key figures
| Group | 1–6/2021 | 1–6/2020 | Change |
| Net sales, thousands of euro | 41,687 | 33,852 | 7,835 |
| Net sales, increase % | 23.1% | 14.6% | 8.6 percentage points |
| Operating profit (EBIT), thousands of euro | 8,551 | 7,312 | 1,239 |
| Operating profit (EBIT), as % of net sales | 20.5% | 21.6% | -1.1 percentage points |
| Return on investment (ROI), % (rolling 12 months) | 18.4% | 17.9% | 0.5 percentage points |
| Interest-bearing net liabilities, thousands of euro | 38,141 | 29,365 | 8,777 |
| Net gearing ratio, % | 100% | 110% | -10 percentage points |
| Equity ratio, % | 35.6% | 34.3% | 1.3 percentage points |
| Working capital, thousands of euro | -6,678 | -5,240 | -1,438 |
| Net investments, thousands of euro | 23,454 | 9,027 | 14,427 |
| Liquid assets, thousands of euro | 10,601 | 9,627 | 974 |
| Earnings per share, euro | 0.15 | 0.13 | 0.02 |
| Weighted average number of shares during the period | 43,306,302 | 42,303,612 | 1,002,690 |
| Net profit, thousands of euro | 6,411 | 5,456 | 955 |
Net sales, profitability and financial performance, January–June 2021
During the period from January to June, Talenom’s net sales increased by 23.1% year-on-year. Amounting to 41.7 (33.9) million euros, net sales grew by around 7.8 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 organically by proactive new customer acquisition efforts. New customer acquisition recovered to pre-pandemic levels in late spring and the pandemic no longer had a significant impact on business in the review period.
In January–June, personnel expenses amounted to 22.4 (17.3) million euros, 53.7% (51.2%) of net sales. Personnel expenses grew due to acquisitions as well as higher occupational pension and social security contributions.
Other operating expenses, including materials and services, totalled 5.2 (4.2) million euros, accounting for 12.4% (12.3%) of net sales.
In January–June, operating profit (EBIT) was 8.6 (7.3) million euros, 20.5% (21.6%) of net sales. Net profit was 6.4 (5.5) million euros. Operating profit increased by 16.9%, especially due to net sales growth and the development of the degree of automation in the Finnish accounting business. Savings on fixed costs also had a favourable impact on the development of operating profit. 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. In Finland, 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 core business
During the period from April to June, Talenom’s net sales increased by 29.6% year-on-year. Amounting to 21.4 (16.5) million euros, net sales grew by around 4.9 million euros. In April–June, operating profit (EBIT) was 4.1 (3.6) million euros, 19.4% (21.8%) of net sales, and net profit was 3.1 (2.7) million euros. Operating profit (EBIT) for April–June improved by 15.2% year-on-year.
Balance sheet, financing and investments
On 30 June 2021, the consolidated balance sheet total was 107.6 (78.0) million euros. The Group’s equity ratio was 35.6% (34.3%) and the net gearing ratio was 100% (110%).
The Group’s interest-bearing financial loans at the end of the review period were 40.0 (30.0) 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 June, Talenom agreed with Danske Bank A/S, Finland branch on a 40 million euro collateralised loan and a 10 million euro finance limit for potential acquisitions and projects in support of growth. Thanks to this arrangement, Talenom’s annual financing costs will decline by a total of around 0.18 million euros. The loan period is three years and it can be extended twice by a period of one year each with the separate consent of the bank. With this new loan, Talenom repaid its collateralised loan and finance limit from Danske Bank, which totalled 37 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 on 30 June 2021 stood at 5.7 (6.3) million euros and current lease liabilities at 2.6 (2.2) 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 1.9 (2.2) million euros in the review period. Investments concerning software and digital services amounted to 5.7 (4.9) million euros.
During the review period, Talenom acquired five business entities in Finland and Sweden as share transactions as well as six business entities through asset deals. The purchase prices of the share transactions carried out during the review period totalled 12.6 million euros, including the recognition of contingent consideration, and the purchase prices of asset deals amounted to 1.7 million euros, including contingent consideration. In the acquisitions, part of the purchase price was paid with new Talenom shares subscribed for in directed issues. Acquisitions accounted for 14.2 (1.6) million euros of Talenom’s net investments. More information on acquisitions is presented under “Significant events in the review period” and “Business acquisitions in 2021”.
Net investments in the review period 1 January–30 June 2021 totalled 23.5 (9.0) million euros.
Liquid assets at 30 June 2021 were 10.6 (9.6) million euros.
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 June 2021, Talenom had 1,057 (841) employees in Finland and Sweden, at a total of 63 locations. Talenom’s share is quoted on the main list of the Helsinki Stock Exchange.
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