0RQI Talenom Oyj

Talenom’s Half-year Financial Report 2023: In line with the strategy, Talenom’s growth continued as strong. The growth strategy, together with the challenging economic cycle, weakened profitability.

Talenom Plc, Stock exchange release 21 July 2023 at 9:00 EEST

Talenom’s Half-year Financial Report 2023: In line with the strategy, Talenom’s growth continued as strong. The growth strategy, together with the challenging economic cycle, weakened profitability.

January–June 2023 in brief

• Net sales EUR 63.7 million (52.2), growth 22.1% (25.2)
• EBITDA EUR 17.2 million (18.2), 27.0% (34.8) of net sales
• Operating profit (EBIT) EUR 7.1 million (10.0), 11.2% (19.1) of net sales
• Net profit EUR 4.2 million (7.8)
• Earnings per share EUR 0.09 (0.18)

April–June 2023 in brief

• Net sales EUR 32.4 million (27.0), growth 20.1% (26.2)
• EBITDA EUR 8.9 million (9.3), 27.3% (34.4) of net sales
• Operating profit (EBIT) EUR 3.7 million (5.1), 11.3% (19.0) of net sales
• Net profit EUR 2.2 million (4.1)
• Earnings per share EUR 0.05 (0.09)

Guidance for 2023 (specified)

Talenom estimates that 2023 net sales will be about EUR 125–130 million (previously EUR 120–130 million) and that its euro-denominated EBITDA and operating profit will grow from 2022.

Key figures

Group	1–6/2023	1–6/2022	Change, %	4–6/2023	4–6/2022	Change, %
Net sales, EUR 1,000	63,720	52,188	22.1%	32,409	26,979	20.1%
Net sales, growth %	22.1 %	25.2 %		20.1 %	26.2 %
EBITDA, EUR 1,000	17,228	18,155	-5.1%	8,862	9,291	-4.6%
EBITDA of net sales, %	27.0%	34.8%		27.3%	34.4%
Operating profit (EBIT), EUR 1,000	7,123	9,993	-28.7%	3,665	5,132	-28.6%
Operating profit (EBIT), as % of net sales	11.2%	19.1%		11.3%	19.0%
Return on investment (ROI), % (rolling 12 months)	9.7%	15.7%		9.7%	15.7%
Cash flow from operations, EUR 1,000	14,932	15,663	-4.7%
Interest-bearing net liabilities, EUR 1,000	70,438	43,816	60.8%	70,438	43,816	60.8%
Net gearing ratio, %	126%	87%		126%	87%
Equity ratio, %	32.8%	34.9%		32.8%	34.9%
Net investments, EUR 1,000	24,848	15,438	61.0%	12,207	8,036	51.9%
Liquid assets, EUR 1,000	10,789	25,562	-57.8%	10,789	25,562	-57.8%
Earnings per share, EUR	0.09	0.18	-47.0%	0.05	0.09	-47.9%
Weighted average number of shares during the period	45,004,577	44,070,003	2.1%	45,115,100	44,070,003	2.4%
Net profit, EUR 1,000	4,219	7,799	-45.9%	2,162	4,051	-46.6%

CEO Otto-Pekka Huhtala

The European accounting market is becoming digitalized and consolidated. The EU's e-Invoicing Directive practically forces Member States to oblige companies to implement software that enables sending and receiving e-invoices. In Finland, the e-invoicing rate of SMEs is about 80% while, for example, in Sweden and Spain the development is in its infancy. We have systematically developed our software platform to respond to the changes in the operating environment brought on by digitalization. In view of the digitalization process that has been set in motion, we have chosen strong growth as a strategic focus area. Our strategic focus on international growth will reduce our relative profitability as planned in the short term but also creates good conditions for profitability growth in the coming years.

During the first half of the year, we made determined progress on strategic priorities:

1. Digital sales progressed supported by a unified brand, new website and more attractive productization. The digital purchasing path was simplified. For example, the Talenom software product can be implemented as a self-service.
2. Distribution of banking services progressed and we began distributing Talenom Accounts. This means significant savings and ease of banking for customers. We also believe that Talenom Accounts will advance new customer acquisition.
3. In Sweden, implementation of our own platform has focused on refining functionalities and introducing new features. We have now reached a point in the long and challenging project where we are pleased to say that we are accelerating the introduction of the platform gradually, office by office after the holiday season. The Swedish project has taught us a lot about the introduction of our own platform in a new country. At the same time, we have created an ability to deploy the platform in new countries and a scalable platform architecture. Based on the experience in Finland, the introduction of Talenom’s processes and platform enables reducing routine work to up to a quarter of the current time spent on such tasks.

In the first half of the year, our net sales grew by 22.1% (25.2) to EUR 63.7 million (52.2). The growth was based on several acquisitions in Sweden and Spain and organic growth in Finland. Net sales were below the targeted level due to the reflection effects of a general economic slowdown and the weak Swedish krona. The general slowdown in the economy resulted in a reduction in volume-based invoicing per customer as customers’ business activity declined, and also in increased business closures. We estimate that the negative effect of these in total on net sales was about 4%.

EBITDA for the first half of the year was EUR 17.2 million (18.2). The EBITDA margin remained strong and was 27.0 (34.8). Operating profit was EUR 7.1 million (10.0) and the EBIT margin was 11.2% (19.1). Relative profitability was depressed by our planned frontloaded investments in growth, wage inflation, the system platform acquired in Spain, as well as integration and other non-recurring costs arising from acquisitions. In the first half of the year, growth investments and the integration and other non-recurring costs of the Spanish platform and acquisitions were over EUR 3 million higher than in the comparison period. We launched significant profitability improvement measures for the whole Group during spring, the most significant actions being temporary suspension of recruitment and cutting our fixed cost structure.

In the first half of the year, net sales in Finland grew by 10.2% (16.4) to EUR 46.7 million (42.4). EBITDA was EUR 16.6 million (16.8) and the EBITDA margin was still excellent at 35.6 (39.6). Overall, net sales growth was slower than we expected due to the effects of the general slowdown in the economy. At the same time, new customer acquisition has been successful and customer prices were raised in line with inflation. In resourcing, we prepared for stronger growth, which together with weaker than expected net sales depressed profitability. In the spring, we launched measures to improve profitability in Finnish operations, and we expect profitability to return to the high level of the previous year in the second half of the year. In automation, we also achieved a significant leap forward when the first monthly accounts were created completely automatically, without any manual steps. This will have a positive impact on Finland's profitability in coming years.

In Sweden, growth continued as strong driven by acquisitions. In the first half of the year, our net sales grew by 50.9% (75.5) to EUR 14.0 million (9.3). Sweden's growth figures were significantly weakened by the weak Swedish krona. EBITDA was EUR 1.3 million (1.3) and the EBITDA margin was 9.6 (13.9). Profitability in Sweden is still being depressed by the planned acceleration of integration and the introduction of our platform, as well as the resourcing required for these activities. In addition, growth and profitability were weakened by the reflection effects of a general economic slowdown. After a period of strong growth, we are now focusing on reaping the economic benefits of a unified approach and the platform. Therefore, we will slow down our acquisition pace for the near future. We estimate that the measures will improve profitability already in the second half of the year.

In Spain, acquisition-driven growth accelerated. We have utilized our experience of becoming established in Sweden and strengthened resources in management on a front-loaded basis while simplifying and accelerating integration processes. In Spain, we also harmonized our product offering to boost growth and launched robotics projects to improve process efficiency. Measured by EBITDA, the Spanish accounting business is profitable but the share of support functions in the business is still high as planned. We expect the Spanish businesses to improve their relative profitability considerably as the business volume grows and Talenom’s efficient processes are implemented. The profitability of the Spanish business is still burdened by the platform business acquired in the autumn 2022. The platform enables customer segmentation, which supports profitable growth. We will continue growing strongly in Spain trying to fully utilize the opportunities offered by the implementation of the EU e-Invoicing Directive. In Italy, we continue to learn about the market and operating environment through the acquisition we completed.

We specify our guidance in terms of net sales. We estimate that our net sales will be about EUR 125–130 million this year (previously 120-130) and that euro-denominated EBITDA and operating profit will grow from 2022.

Webcast

The company's CEO Otto-Pekka Huhtala and CFO Matti Eilonen will present the main points of the release in a live webcast today on 21 July 2023 at 10:00 EEST. The webcast will be in Finnish.

You can watch the webcast live at https://talenom.videosync.fi/osavuosikatsaus-q2-2023 The presentation materials will be published before the start of the briefing on the company’s website.

Talenom PlcBoard of Directors

Further information:Otto-Pekka HuhtalaCEO, Talenom Plc+358 40 703 8554otto-pekka.huhtala@talenom.fi

Talenom in briefTalenom 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 17% between 2005 and 2022. In 2022, Talenom’s net sales was some EUR 102 million and the company has more than 1,300 employees in Finland, Sweden, Spain and Italy at the end of the year. Talenom’s share is quoted on the Main Market of Nasdaq Helsinki. Read more: investors.talenom.com/en

Attachment

• 20230721_Talenom Half-year Financial Report 2023