Talenom Oyj
OMXH:TNOM
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[Foreign Language] [Interpreted] Hello, everybody. You are welcome to Talenom's first year half year report release. [Foreign Language]
Hello, everybody. This is Antti Aho, CFO from Talenom speaking and presenting you the report from the first half of the year. The highlights from the first half, shortly, we kept implementing our strategy. We grew and we could maintain our profitability during the first half of the year and also on the second quarter of the year. We keep our guidance for the future same, stating EUR 64 million to EUR 68 million of net sales and EUR 12 million to EUR 14 million of EBIT. We also carried out share issue for our personnel during the review period, and it went very nicely. We kept on investing on our online system, our customer interfaces and our automation projects and also made 2 small acquisitions during the period. Before going into more detail in those points to summarize our strategy. For those of you who are not familiar with it, we have 3 main points in our strategy. We have had this for several years already. First, we focus on making our customers' life very easy. So Talenom is an accounting office and our customers are small and medium-sized entrepreneurs, who usually don't have their own resources for financial stuff. And usually, they don't want to spend much time in their finances and receipts, so we digitalize their routines regarding their handling of receipts and payroll. And when we have digitalized and made it easy for our customers, this, of course, boosts our sales. We have to bring something new to our customers. And when we get all their accounting information in digital format, we can now make our accountants' life easy by automizing the accounting routines. As you know, there are lots of routines in accounting, many things happen the same way from month-to-month. And by automizing those with modern software and AI and robotization, we can really, really enhance our profitability. And then we can also free our accountants' time for something that customers really appreciate, which is one-on-one conversation, consultation with our customers and all value-added services. So this is what we have been working on even during this first half of the year. So the growth has always been important at Talenom. It keeps us alive and kicking. During the first half, we grew by 15%. The growth was generated actually from 2 sources. And here, I want to point out a fact that like before most of our growth has come from our own sales force has been organic growth. But during this review period, about half of the growth was from acquisitions. So there is a little change in the structure of our growth. The profitability improved quite nicely, too. Our EBIT grew by 11% during the first half and on the second quarter by 14%. With the background for combining growth and profitability comes from the fact that for some 15 years, we have been investing on our process improvement and our own, as we call it, internally production line, which consists of processes and our own software, which we have developed internally. And actually, that's also for us a very important competitive advantage that we have both the software and the service. So we can -- we have basically the whole value chain in our own hands and we can improve the customer service and customer experience as we and our customers wish. As we can see, the relative profitability was slightly weaker than a year before, which basically comes from 2 points. One is that, as I told, half of the growth came from acquisitions. And usually, when we acquire the targets, they run on a little bit lower profitability level, which presses our margins. And on the other hand, we can say during the first 3 years, there's quite a bit of integration work and integration costs. So that also stresses the margin in the post-acquisition period. But in the long run, as we have proven, we can bring the margin on our -- to our normal level. The other point, which had impact on our margin was basically the corona crisis. And the impact came mostly through the fact that we have some transaction-based products like pay slips and invoices and some system fees. And when the volumes of transactions went down, so also our revenue went down a little bit and that had some impact, too. So to summarize the impact of the coronavirus in our finances, as we communicated in our first report this year on Q1, we told that there are 3 main uncertainties that have impact. And one of them is, of course, the sales to new customers. When the crisis started, we made 3 scenarios basically and we, of course, expected that organic sales will drop when you can't meet potential customers face-to-face. So we are running our sales on lower level, of course, than in normal times. But if we look at our estimates that we made earlier in the spring, we have done -- we have gone basically on the upper end of our estimates. So we are quite happy how our sales is doing in these special times. The second uncertainty was the potential bankruptcies of our customers. There, we are quite in the middle in -- within our expectations. So no surprises there in the first half. And the third one, which I actually mentioned already was the transaction-based products. And as I told, the level of invoicing in that business has been rather on the lower end of our estimates. Especially, the number of pay slips went down much faster than during the earlier recessions because of the layoffs. Some other main points highlights from the review period, the acquisitions in Sweden. We purchased Niva Ekonomi's stock. A very important acquisition there. We have been now a little bit more than a year in Swedish market and the market looks promising. We want to strengthen our position there and this was a very good acquisition there. We got very good personnel and can strengthen our base in Sweden. And this also makes it -- we can say, more easy to -- in future, to bring our own software to Swedish market when we have more customer base there. We also made a small acquisition in Vantaa by acquiring Addvalue Advisors , their business operations and integrate it into our Helsinki office. The personnel share issue was a success, we can say. We were just about to postpone it because of the corona crisis but then we still carried it out. And we were very happy to see that it was like 1.7x oversubscribed, which we can say that demonstrates how our personnel, they really believe on the place where they are working and they share the same positive outlook of the future than we do. We have been working on our small customer concept, of which we have told earlier. We are doing piloting there and so far, everything has pretty much gone as planned. We are -- we have quite high internal expectation on this because it will change the way how we can, in future, acquire new customers even throughout digital sales channels. So yes, we see what it means in practice in future, and we look forward telling more about this when we report our Q3 figures. Yes. And we have, of course, been investing this year quite a lot in our customer interface, enhancing the user experience there and also on the software working on the background of our accounting system. And yes, so there is still -- although we have done a lot in automation and robotization, we still see there are a lot of potential for improvement. The financial outlook has not changed. Basically, we keep our guidance same, EUR 64 million to EUR 68 million of net sales and EBIT level between EUR 12 million and EUR 14 million. When we look to the future, we have these main 4 sources of profitable growth as we see them. First one, we have now been 1 year in the Swedish market, and it still seems that we can grow there and it's very important for us to open the Swedish market because we are growing and growing in Finland and pretty soon cover all the main cities in Finland. So we need new market openings there. In Finland, we can accelerate our growth also with -- through our organic growth as we have done so far but also through acquisitions. And in this time, when many accounting offices are wondering what software they are going to use in future, they may consider Talenom as one of their solutions for the software problem. So the time for acquisitions, we believe, will be quite okay in near future. Yes. And then this small company concept. It's about 40% of the total market. This segment where we have not been so active in the past with our sales force. But with the new concept, we believe we can enter that market more efficiently. And of course, we have our existing customers, and we have been working on these value-added services and consultation quite long already and we believe that there is still improvement we can make in selling more to our existing customers and providing more value for them. A couple of words of the business environment and the accounting business to market. As we can see from the past figures even throughout the recessions, the accounting market has been growing. Quite resilient market, we can say. And also, the market is very fragmented, consisting of very, very small offices, which we believe can be a source of growth for Talenom in the future. Thank you very much. And now there is time for questions. We first take the questions from this room, and then we can have the questions that come online. Thank you.
Juha Kinnunen, Inderes. [Foreign Language].
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Jerker Salokivi, Evli. [Foreign Language]
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Okay. Operator, we are ready for questions, if there are some.
[Operator Instructions] Our first question comes from [Panu Lapinski], Danske Bank.
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[Operator Instructions] Okay, there appears to be no further questions. So I hand back to the speakers for any other remarks.
Thank you for the questions.
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