December 4, 2022
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Talenom Plc Business Review January–September 2022: Growth

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Talenom Plc, Stock exchange release on 25 October 2022 at 9:00 EEST

TALENOM PLC BUSINESS REVIEW JANUARY–SEPTEMBER 2022 (UNAUDITED): GROWTH CONTINUED AS STRONG AND STRATEGY IMPLEMENTATION WAS PROMOTED WITH DETERMINATION

JANUARY-SEPTEMBER 2022 IN BRIEF:

  • Net sales EUR 75.8 million (61.1), growth 24.1% (25.4)
  • EBITDA EUR 25.4 million (21.1), 33.6% (34.5) of net sales
  • Operating profit (EBIT) EUR 13.1 million (12.0), 17.2% (19.6) of net sales
  • Net profit EUR 10.0 million (8.9)
  • Earnings per share EUR 0.23 (0.21)

JULY-SEPTEMBER 2022 IN BRIEF:

  • Net sales EUR 23.6 million (19.4), growth 21.7% (30.4)
  • EBITDA EUR 7.3 million (6.7), 30.8% (34.5) of net sales
  • Operating profit (EBIT) EUR 3.1 million (3.4), 13.0% (17.8) of net sales
  • Net profit EUR 2.2 million (2.5)
  • Earnings per share EUR 0.05 (0.06)

KEY FIGURES

 Group 1–9/2022 1–9/2021 Change, % 7–9/2022 7–9/2021 Change, %
Net sales, EUR 1,000 75,763 61,052 24.1% 23,575 19,364 21.7%
Net sales, increase % 24.1% 25.4%   21.7% 30.4%  
EBITDA, EUR 1,000 25,427 21,077 20.6% 7,272 6,679 8.9%
EBITDA of net sales, % 33.6% 34.5%   30.8% 34.5%  
Operating profit (EBIT), EUR 1,000 13,067 11,996 8.9% 3,074 3,445 -10.8%
Operating profit (EBIT), as % of net sales 17.2% 19.6%   13.0% 17.8%  
Return on investment (ROI), % (rolling 12 months) 14.8% 17.8%   14.8% 17.8%  
Interest-bearing net liabilities, EUR 1,000 51,225 39,987 28.1% 51,225 39,987 28.1%
Net gearing ratio, % 96.0% 94.0%   96.0% 94.0%  
Equity ratio, % 35.9% 38.1%   35.9% 38.1%  
Net investments, EUR 1,000 31,919 31,846 0.2% 16,481 8,392 96.4%
Liquid assets, EUR 1,000 17,755 8,625 105.8% 17,755 8,625 105.8%
Earnings per share, EUR 0.23 0.21 9.3% 0.05 0.06 -15.7%
Weighted average number of shares during the period 44,242,888 43,403,560 1.9% 44,242,888 43,403,560 1.9%
Net profit, EUR 1,000 9,964 8,941 11.4% 2,165 2,530 -14.4%


GUIDANCE FOR 2022 UNCHANGED (PUBLISHED 16 DECEMBER 2021)

Talenom expects 2022 net sales to be EUR 100-110 million and operating profit to be EUR 15-18 million.

CEO OTTO-PEKKA HUHTALA: BUSINESS REVIEW JANUARY-SEPTEMBER 2022

Strategy implementation progressed rapidly during the review period. We purchased an own software platform from Spain and started the implementation of own software in Sweden. In addition, we expanded our partnership with Fellow Bank for distributing bank accounts and cards to our customers and made progress in developing the digital distribution channel for small customers. We also continued making acquisitions, investments in organic growth and researching new markets.

In January-September, net sales grew by 24.1% (25.4) to EUR 75.8 million (61.1). The EBITDA margin was 33.6% (34.5) and the EBIT margin 17.2% (19.6). Net sales grew by 21.7% (30.4) in Q3. The EBITDA margin was 30.8% (34.5) and the EBIT margin 13.0% (17.8). Due to strong growth in line with our strategy our relative profitability deteriorated because integration work increased, acquired companies typically have lower profitability and depreciation on acquisitions and software increased. This has been a conscious choice.

In January-September, Finnish net sales grew by 15.1% (15.3) to EUR 61.2 million (53.1). The EBITDA margin was 39.2% (38.0) and the EBIT margin 21.2% (22.4). The strong performance of the Finnish business is based on the high degree of automation of own software, excellent customer retention and good inflation resilience. The strong cash flow from Finnish operations enables implementation of the growth strategy.

Growth still continued as very strong in Sweden. Net sales grew by 75.5% (196.5) in January-September to EUR 13.6 (7.8) million and EBITDA at 10.9% (11.6) was a typical level for the accounting industry. The Swedish business is in a rapid growth and development phase, where implementation of own automation increasing software has commenced as planned while other integration work continues. Implementation of the software will have a negative effect on profitability in the short term but will turn positive in the longer-term as has been witnessed in Finland. The implementation progresses in stages, one office at the time, and for offices where the implementation has been completed the Finnish profitability level is aimed for within three years.

In our Spanish operations, we have achieved an excellent platform for growth more quickly than anticipated. We have our own digital distribution channel and software to facilitate the daily lives of customers, our own service production and a strong expert unit. All preconditions for strong acceleration of both organic and acquisition-driven growth are in place. In the short term, our investments in Spain weaken the Group’s EBIT, but at the same time open a good growth opportunity in our largest country of operation.

We maintain our 2022 guidance unchanged and expect 2022 net sales to be EUR 100-110 million and the EBIT to be EUR 15-18 million.

STRONGER FOCUS ON ACCELERATING GROWTH – NEW MEDIUM-TERM FINANCIAL TARGETS

The digital transformation in the European accounting and banking sector is happening now, and we want to be part of it. The development is supported by legislation, market trends and changes in consumer behaviour. SMEs are now making financial management platform choices at an accelerating pace and, in our experience, the threshold to change the chosen platform is quite high.

Talenom’s business is in excellent condition, which provides a good basis for accelerating growth in the growing accounting services market. We have a proven strategy and a strong track-record of our performance. In 2000-2015, we built a strong position in Finland, where we managed to combine accounting and software expertise in a unique way. In 2016-2020, the benefits of the digital transformation were visible as a significant improvement in profitability. In the future, we will try to grow ever faster in Europe and replicate the Finnish concept in our operating countries. We believe that our industry is digitalising quickly in Europe. With the introduction of our own software, our goal is to replicate Finland’s profitability trend in Sweden and Spain and in future target countries.

Today, we announced medium-term financial targets, which are:

  • annual net sales growth of over 30%,
  • annual EBITDA growth of over 15%,
  • growing EBIT in euros and
  • increasing dividend per share.

We have chosen a path of strong growth based on further development of active sales, digital sales and acquisitions. Due to our choices, our relative profitability will decrease, but absolute profitability will improve. We believe that in the long-term strong growth is in the interest of customers, employees and shareholders alike.

GROUP’S FINANCIAL PERFORMANCE IN JANUARY–SEPTEMBER 2022

Net sales increased by 24.1% to EUR 75.8 million (61.1). Some two-thirds of the increase in net sales came from acquisitions and one-third organically through growth in customer numbers and sales of value-added services mainly in Finland.

Personnel costs amounted to EUR 39.8 million (32.4) representing 52.6% (53.1) of net sales. Other operating expenses, including materials and services, totalled EUR 11.1 million (8.1) or 14.6% (13.3) of net sales.

EBITDA increased by 21.6% to EUR 25.4 million (21.1) or 33.6% (34.5) of net sales. Operating profit increased by 8.9% to EUR 13.1 million (12.0) or 17.2% (19.6) of net sales. Relative profitability was depressed by lower profitability of the acquired businesses compared to other units, integration costs of acquisitions and higher depreciation. Net profit grew by 11.4% to EUR 10.0 million (8.9).

GROUP’S FINANCIAL PERFORMANCE IN JULY–SEPTEMBER 2022

Net sales increased by 21.7% to EUR 23.6 million (19.4). Some two-thirds of the increase in net sales came from acquisitions and one-third organically through growth in customer numbers and sales of value-added services mainly in Finland.

EBITDA increased by 8.9% to EUR 7.3 million (6.7) or 30.8% (34.5) of net sales. Operating profit decreased by 10.8% to EUR 3.1 million (3.4) or 13.0% (17.8) of net sales. Relative profitability was depressed by lower profitability of the acquired businesses compared to other units, integration and other costs of acquisitions, investments in growth-supporting structures, and higher depreciation due to increased software and acquisition investment levels. Net profit decreased by 14.4% to EUR 2.2 million (2.5).

COUNTRY-SPECIFIC FINANCIAL DEVELOPMENT

FINLAND

  1–9/2022 1–9/2021 Change, % 7–9/2022 7–9/2021 Change, %
Net sales, EUR 1,000 61,189 53,148 15.1% 18,821 16,759 12.3%
Net sales growth, % 15.1% 15.3%   12.3% 21.2%  
EBITDA, EUR 1000 24,017 20,205 18.9% 7,013 6,380 9.9%
EBITDA of net sales, % 39.2% 38.0%   37.3% 38.1%  
Depreciation and amortisations, EUR 1,000 -11,042 -8,306 32.9% -3,734 -2,927 27.6%
Operating profit, EUR 1,000 12,975 11,899 9.0% 3,279 3,453 -5,0%
Operating profit of net sales, % 21.2% 22.4%   17.4% 20.6%  


JANUARY-SEPTEMBER 2022

Net sales increased by 15.1% to EUR 61.2 million (53.1). Two-thirds of net sales growth was organic and one-third came from acquisitions. Organic growth was driven by increased customer numbers and sales of value-added services.

EBITDA was at an excellent level. Automation development had a positive and acquisitions a negative effect on relative profitability.

JULY-SEPTEMBER 2022

Net sales increased by 12.3% to EUR 18.8 million (16.8). Around 80% of the growth was organic and 20% came from acquisitions. Organic growth was driven by increased customer numbers and sales of value-added services.

Automation development had a positive and acquisitions and increased depreciation levels a negative effect on relative profitability.

SWEDEN

  1–9/2022 1–9/2021 Change, % 7–9/2022 7–9/2021 Change, %
Net sales, EUR 1,000 13,605 7,754 75.5% 4,307 2,455 75.4%
Net sales growth, % 75.5% 196.5%   75.4% 141.8%  
EBITDA, EUR 1000 1,481 899 64.8% 218 327 -33.2%
EBITDA of net sales, % 10.9% 11.6%   5.1% 13.3%  
Depreciation and amortisations, EUR 1,000 -1,239 -768 61.5% -434 -300 44.7%
Operating profit, EUR 1,000 242 131 84.3% -216 27 -902.3%
Operating profit of net sales, % 1.8% 1.7%   -5.0% 1.1%  


JANUARY-SEPTEMBER 2022

Net sales increased by 75.5% to EUR 13.6 million (7.8). Net sales growth came mainly from acquisitions.

EBITDA increased from the comparison period. Relative profitability has been depressed by our sales investments, setting up support functions, developing management structures and implementation of own software.

JULY-SEPTEMBER 2022

Net sales increased by 75.4% to EUR 4.3 million (2.5). Net sales growth came mainly from acquisitions.

EBITDA declined from the comparison period. Relative profitability has been depressed by our investments in sales, building support functions and developing management structures. Implementation of own software was particularly visible in July-September.

OTHER COUNTRIES

  1–9/2022 1–9/2021 Change, % 7–9/2022 7–9/2021 Change, %
Net sales, EUR 1,000 969 150 546.2% 447 150 198.0%
Net sales growth, % 546.2%     198.0%    
EBITDA, EUR 1000 -71 -27 161.4% 41 -27 -249.5%
EBITDA of net sales, % -7.3% -18.1%   9.1% -18.1%  
Depreciation and amortisations, EUR 1,000 -79 -8 902.9% -30 -8 279.3%
Operating profit, EUR 1,000 -150 -35 -328.1% 11 -35 130.6%
Operating profit of net sales, % -15.4% -23.3%   2.4% -23.3%  


JANUARY-SEPTEMBER 2022

Talenom expanded to the Spanish accounting business market through an acquisition in July 2021 and started operating there on 1 August 2021. After the deal, we have analysed Spanish accounting processes in more detail. We launched market research on how to utilise our scalable product on the Spanish market and started developing a digital sales channel. We carried out the Nomo platform deal that became part of Talenom as of 1 October 2022. We also made two acquisitions to strengthen our accounting business. In addition to the agreed transactions, we continuously research the market to strengthen our accounting business through acquisitions. We increase our investments in digital sales in all our business areas.

INVESTMENTS AND BUSINESS ACQUISITIONS

Net investments during the review period totalled EUR 31.9 (31.8) million.

 Investments 1 Jan30 Sep 2022 1 Jan30 Sep 2021 Change
New customer agreements, EUR 1,000 2,422 2,799 -377
Software and digital services, EUR 1,000 8,434 8,200 234
Acquisitions in Finland, EUR 1,000 *) 857 8,077 -7,220
Acquisitions abroad, EUR 1,000 **) 19,623 11,719 7,904
Other investments 583 1,051 -468
Total net investments, EUR 1,000 31,919 31,846 73

*) includes an estimated EUR 116,000 (770,000) in recorded additional deal prices
**) includes an estimated EUR 5,184,000 (3,858,000) in recorded additional deal prices

Business acquisitions during the review period:

  • Accodome Oy, Finland
  • Tilitoimisto Kuopion Tili-Consults Oy, Finland
  • Saarijärven Tilipalvelu Oy, Finland
  • PJ Yrityspalvelu Oy, Finland
  • ACompany Asesoraria Y Gestion de Empresas SL, Spain
  • Tilipalvelu Elisa Ruinu Oy, Finland

Share transactions during the review period:

  • MH Konsult Väst AB, Sweden
  • Kjell Wengbrand Redovisnings AB, Sweden
  • Lindgren & Lindgren Ekonomi AB, Sweden
  • Confido Redovisning AB, Sweden
  • Redovisningsbyrån Öckerö AB, Sweden
  • Mazars Redovisning AB, Sweden
  • Gestoria Teruel SL, Spain

Purchase prices, net sales and operating profit of the acquisition targets during the review period:

EUR 1,000 Share transactions Business acquisitions
Total purchase prices 13,531 1,463
Maximum contingent consideration 9,625 116
Net sales, previous 12 months at time of purchase, total 11,981 2,597
Operating profit, previous 12 months at time of purchase, total 1,595 364

In acquisitions, part of the purchase price was paid with new Talenom Plc shares subscribed for in directed issues. A total of 221,486 shares were subscribed for in directed share issues related to acquisitions during the review period

TALENOM’S BUSINESS REVIEW AND STRATEGY REVIEW

Talenom will talk more about its Q3 result, strategy and financial targets in an event that starts today, 25 October 2022 at 10:00 EEST. The review will be in English and can be followed either by webcast at https://talenom.videosync.fi/2022-q3 or at the company’s premises in Sanomatalo (Töölönlahdenkatu 2, 00100 Helsinki).

Pre-registration is required for on-site participation. A recording of the webcast will be available after the event on the company’s website https://sijoittajat.talenom.fi/en/

TALENOM PLC
Board of Directors

ADDITIONAL INFORMATION:

Otto-Pekka Huhtala
CEO, Talenom Plc
+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 daily 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, account and payment traffic services. Our vision is to provide superior accounting, account and payment traffic services for SMEs.

Talenom’s growth history is strong – average annual net sales growth was approximately 16.2% between 2005 and 2021. In 2021, Talenom had on average 1,012 employees in Finland, Sweden and Spain at a total of 52 locations. Talenom’s share is quoted on the Main Market of Nasdaq Helsinki.

Read more: sijoittajat.talenom.fi/en/

  • Talenom Business Review Q3 2022



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