Asiakastieto Group's Half Year Financial Report 1.1. - 30.6.2018: Asiakastieto and UC creating a stronger future together

31/08/2018

Asiakastieto Group Plc_Half Year Financial Report_2018

ASIAKASTIETO GROUP PLC, STOCK EXCHANGE RELEASE ON 31 AUGUST 2018 AT 11.00 A.M. EEST

Asiakastieto Group's Half Year Financial Report 1.1. - 30.6.2018: Asiakastieto and UC creating a stronger future together

SIGNIFICANT EVENTS

The acquisition of UC

Asiakastieto Group Plc announced on 24 April 2018 that it has signed an agreement to combine with UC AB through acquiring the shares in UC. The combination of Asiakastieto Group Plc and UC AB was completed as announced during the second quarter, 29 June 2018, as a result of which UC AB's consolidated balance sheet has been consolidated as part of Asiakastieto Group Plc's consolidated balance sheet. Due to the date of the merger, the consolidated income statement of Asiakastieto Group Plc half year financial report does not include UC AB's consolidated income statement data. More detailed information on the impacts of the acquisition on the Group's balance sheet are presented under the note 2.3. Corporate Acquisitions, in the notes to the consolidated statement of financial position.

UC is one of the leading information service companies in Sweden. The company provides refined business information and comprehensive credit information on both consumers and companies that enable companies and private individuals to make more reliable decisions. The company offers products and services for risk management, decision-making and sales and marketing. UC's customers include banks and financial institutions, other companies, private individuals and the public sector. UC AB net sales amounted to EUR 73,6 million in 2017 and adjusted EBITDA excluding IFRS adjustments and items affecting comparability was EUR 18,3 million.

To demonstrate the impacts of the acquisition on the result of operations and financial position of the Group and to improve the comparability, Asiakastieto Group has prepared unaudited pro forma financial information. In this Half Year Financial Report, unaudited pro forma statement of income and pro forma key ratios are shown for the year 2017 and the interim period as if the share transaction had been completed already on 1 January 2017. The pro forma financial information is titled as Pro forma information in each paragraph where they are presented in this Half Year Financial Report. The pro forma financial reporting principles are described in Note 1 in this Half Year Financial Report.   

Group's new organisational structure

On 20 June 2018, Asiakastieto Group's Board of Directors decided on a new organisational structure. From 1 July 2018 on, Asiakastieto Group's new organisation consists of two types of units: business areas and functional units supporting the business. The business areas are responsible for the Group's service offering and the functional units for the production, maintenance and active development of the operations in their own focus area and business processes. The functional units are Sales Units, Marketing and Communications, IT and Technology, HR, and Finance.

Group's new business areas

Risk Decisions: Companies engaging in corporate and consumer business use decision services and solutions for general risk management, credit risk management, financial management, customer acquisition, decision-making, fraud and credit loss prevention as well as for gaining knowledge of and identifying their customers.

Customer Data Management: Customer management services help sales and marketing professionals to improve the efficiency of their work and to boost customer management by providing target group tools, services for surveying potential customers, register updates and maintenance, as well as various target group extractions.

Digital Processes: Services in this business area include, among others, real estate and apartment information, information about buildings and their valuation as well as solutions that help customers to automate their collateral management processes and digitalise the administration of housing purchases. Services of the business area are also used for compliance purposes, for instance to identify companies' beneficial owners and politically exposed persons

SME and Consumers: Digital services for small and micro companies with easy-to-use applications and user interfaces for the evaluation of risks and sales potential, acquisition of other relevant information on customers and business partners and proof of own creditworthiness. Services for consumers help consumers to understand and better manage their finances, while simultaneously protecting them from identity theft and fraud.

SUMMARY

The figures presented in this Half Year Financial Report are unaudited.

April - June 2018 in short

  • Net sales amounted to EUR 15,7 million (EUR 14,4 million), an increase of 8,9 %.
  • Adjusted EBITDA excluding items affecting comparability was EUR 6,6 million (EUR 6,6 million), an increase of 0,6 %.
  • Adjusted EBIT excluding items affecting comparability and amortisation from fair value adjustments related to the acquisitions was EUR 5,7 million (EUR 5,9 million), a decrease of 2,4 %1.
  • Operating proft (EBIT) was EUR 1,0 million (EUR 5,8 million). Operating profit included items affecting comparability of EUR 4,6 million (EUR 0,1 million) mainly resulting from M&A and integration expenses relating to acquisition of UC and amortisation from fair value adjustments related to the acquisitions EUR 0,1 million (EUR 0,0 million).
  • New products and services share of net sales was 10,5 % (15,6 %)2.
  • Value-added services share of net sales was 71,5 % (70,6 %)3.
  • Free cash flow amounted to EUR 2,4 million (EUR 3,9 million). The impact of items affecting comparability on free cash flow was EUR -1,7 million (EUR -0,1 million)4.
  • Earnings per share were EUR -0,00 (EUR 0,29).

January - June 2018 in short

  • Net sales amounted to EUR 30,8 million (EUR 28,3 million), an increase of 8,9 %.
  • Adjusted EBITDA excluding items affecting comparability was EUR 13,0 million (EUR 12,8 million), an increase of 2,0 %.
  • Adjusted EBIT excluding items affecting comparability and amortisation from fair value adjustments related to the acquisitions was EUR 11,4 million (EUR 11,4 million), a decrease of 0,7 %1.
  • Operating profit (EBIT) was EUR 5,2 million (EUR 11,2 million). Operating profit included items affecting comparability of EUR 5,9 million (EUR 0,1 million) mainly resulting from M&A and integration expenses relating to acquisition of UC and amortisation from fair value adjustments related to the acquisitions EUR 0,2 million (EUR 0,1 million).
  • New products and services share of net sales was 10,1 % (15,3 %)2.
  • Value-added services share of net sales was 71,0 % (70,0 %)3.
  • Free cash flow amounted to EUR 4,0 million (EUR 7,4 million). The impact of items affecting comparability on free cash flow was EUR -2,2 million (EUR -0,1 million)4.
  • Earnings per share were EUR 0,20 (EUR 0,57).

KEY FIGURES

    1.4. -   1.4. -   1.1. - 1.1. - 1.1. -
EUR million 30.6.2018 30.6.2017 30.6.2018 30.6.2017 31.12.2017
Net sales 15,7 14,4 30,8 28,3 56,2
Net sales growth, % 8,9 12,2 8,9 13,8 14,3
Operating profit (EBIT) 1,0 5,8 5,2 11,2 21,2
EBIT margin, % 6,3 40,0 16,8 39,7 37,8
Adjusted EBITDA5 6,6 6,6 13,0 12,8 24,8
Adjusted EBITDA margin, %5 42,0 45,5 42,3 45,2 44,2
Adjusted operating profit (EBIT)1, 5 5,7 5,9 11,4 11,4 22,0
Adjusted EBIT margin, %1, 5 36,6 40,8 36,9 40,4 39,1
New products and services of net sales, %2 10,5 15,6 10,1 15,3 14,6
Free cash flow4 2,4 3,9 4,0 7,4 16,5
Net debt to adjusted EBITDA, x6 pro forma
3,6
2,0 pro forma
3,6
2,1 2,1
           
           

____________________________________________________________________
1 The method used for calculating the adjusted operating profit (EBIT), the comparative figures for the period 1 April - 30 June 2017, half year period 1 January - 30 June 2017 and the financial year 2017 have been changed from 1 April 2018 so that also amortisation from fair value adjustments related to the acquisitions, and external expenses arising from significant regulatory changes are taken into account as items to be adjusted.

2 The method for calculating the share of new products and services, comparison data from the period 1 April - 30 June 2017, half year period 1 January - 30 June 2017 and financial year 2017 have been changed starting from 1 January 2018 so that the share includes the total sales of products launched during the past 24 months. Earlier, the share was calculated as the net sales of products and services launched during the past 12 months and added by the change in net sales of products and services launched during the preceding 12 months. The figures in accordance with the old calculation method in the second quarter 1 April - 30 June 2018 are 1,6 %, in the comparison period 1 April - 30 June 2017 10,4 %, in the half year period 1 January - 30 June 2018 2,6 %, in the comparison period 1 January - 30 June 2017 9,2 % and in the financial year 2017 9,2 %.

3 The services of Emaileri Oy have been included in value added services starting 1 April 2018 and they have been retroactively added to reported first quarter value added services.

4 The method used for calculating the free cash flow, the comparative figures for the period 1 April - 30 June 2017, the half year period 1 January - 30 June 2017 and the financial year 2017 have been changed from 1 January 2018 so that the impact of paid taxes is no longer added to the cash flow of business operations. The figures according to the former calculation method are EUR 3,4 million in the second quarter, EUR 5,5 million in the comparative period 1 April - 30 June 2017, EUR 5,8 million in the half year period 1 January - 30 June 2018, EUR 9,0 million in the comparative period 1 January - 30 June 2017, and EUR 20,3 million in the financial year 2017. The impact of items affecting comparability on free cash flow was EUR -1,7 million in the second quarter, EUR -0,1 million in the comparative period 1 April - 30 June 2017, EUR -2,2 million in the half year period 1 January - 30 June 2018, EUR -0,1 million in the comparative period 1 January - 30 June 2017, and EUR -0,5 million in the financial year 2017.

5 The adjusted performance measures are calculated by adjusting the performance measures with the following items affecting comparability: M&A and integration related expenses, redundancy payments, compensations paid, and external expenses arising from significant regulatory changes. The amount of the above stated items affecting comparability was EUR 4,6 million in the second quarter 1 April - 30 June 2018, EUR 0,1 million in the comparative period 1 April - 30 June 2017, EUR 5,9 million in the half year period 1 January - 30 June 2018, EUR 0,1 million in the comparative period 1 January - 30 June 2017, and EUR 0,5 million in the financial year 2017. Adjusted EBIT excludes also amortisation from fair value adjustments related to the acquisitions.

6 For the second quarter and the interim period, the net debt to adjusted EBITDA has been calculated by dividing the net debt of the consolidated statement of financial position at 30 June 2018 by the pro forma adjusted EBITDA of the past 12 months.

Pro forma April - June 2018 in short

  • Net sales amounted to EUR 34,1 million (EUR 31,9 million), an increase of 6,8 % (at comparable exchange rates an increase of 10,6 %).
  • Adjusted EBITDA excluding items affecting comparability was EUR 9,7 million (EUR 10,1 million), a decrease of 4,1 % (at comparable exchange rates a decrease of 2,0 %).
  • Adjusted EBIT excluding items affecting comparability and amortisation from fair value adjustments related to the acquisitions amounted to EUR 8,7 million (EUR 9,3 million), a decrease of 6,8 %.
  • Operating profit (EBIT) was EUR 3,2 million (EUR 5,8 million). Operating profit included items affecting comparability of EUR 2,8 million (EUR 0,7 million) and amortisation from fair value adjustments related to the acquisitions of EUR 2,7 million (EUR 2,8 million).
  • The share of new products and services of net sales was 8,2 % (9,0 %).
  • The earnings per share were EUR 0,08 (EUR 0,17).
  • The comparable earnings per share were EUR 0,17 (EUR 0,26)1.

Pro forma January - June 2018 in short

  • Net sales amounted to EUR 66,9 million (EUR 63,9 million), an increase of 4,7 % (at comparable exchange rates increase of 8,0 %).
  • Adjusted EBITDA excluding items affecting comparability was EUR 19,0 million (EUR 20,8 million), a decrease of 8,8 % (at comparable exchange rates 6,9 %).
  • Adjusted EBIT excluding items affecting comparability and amortisation from fair value adjustments related to the acquisitions amounted to EUR 17,0 million (EUR 19,2 million), a decrease of 11,7 %.
  • Operating profit (EBIT) was EUR 7,7 million (EUR 7,6 million). Operating profit included items affecting comparability of EUR 3,8 million (EUR 6,0 million) and amortisation from fair value adjustments related to the acquistions of EUR 5,5 million (EUR 5,6 million).
  • The share of new products and services of net sales was 7,5 % (8,7 %).
  • The earnings per share were EUR 0,21 (EUR 0,17).
  • The comparable earnings per share were EUR 0,39 (EUR 0,35)1.

PRO FORMA KEY FIGURES

    1.4. -   1.4. -   1.1. - 1.1. - 1.1. -
EUR million 30.6.2018 30.6.2017 30.6.2018 30.6.2017 31.12.2017
Net sales 34,1 31,9 66,9 63,9 129,6
Net sales growth, % 6,8 n/a 4,7 n/a n/a
Operating profit (EBIT) 3,2 5,8 7,7 7,6 20,9
EBIT margin, % 9,5 18,2 11,5 11,9 16,1
Adjusted EBITDA 9,7 10,1 19,0 20,8 43,1
Adjusted EBITDA margin, % 28,5 31,7 28,3 32,6 33,2
Adjusted operating profit (EBIT) 8,7 9,3 17,0 19,2 39,6
Adjusted EBIT margin, % 25,5 29,2 25,4 30,1 30,6
New products and services of net sales, % 8,2 9,0 7,5 8,7 8,3
Net debt to adjusted EBITDA, x2 3,6 n/a 3,6 n/a n/a

____________________________________________________________________
1 The comparable pro forma earnings per share does not contain amortisation from fair value adjustments related to the acquisitions or their tax impact.

2 The net debt to adjusted EBITDA has been calculated by dividing the net debt of Asiakastieto Group's consolidated statement of financial position at 30 June 2018 by the pro forma adjusted EBITDA of the past 12 months.

JUKKA RUUSKA, CEO

"For Asiakastieto Group, the second quarter of 2018 was solid in terms of growth, but exceptional from the perspective of future business development. The completed combination with UC AB will more than double our net sales. At the same time, the transaction costs of the combination had a significant impact on the profitability of business in the second quarter. The net sales grew 8,9 % to EUR 15,7 million (EUR 14,4 million). After the non-recurring M&A and integration expenses related to the combination, the operating profit (EBIT) was EUR 1,0 million (EUR 5,8 million).

The combination with UC creates good opportunities for Asiakastieto Group to continue as one of the leading providers of digital services and data innovations. Our knowledge base is now even stronger, and we have more resources, accelerating the development of innovative and cost-effective services. We also have better possibilities in the future to invest, for example, in digital innovations, data refinement and artificial intelligence. Integration work goes on as planned and our aim is that the new, combined organisation will be in operation on 1 October 2018.  

Our experience and service development history in forecasting the payment default risk goes back to more than a hundred years. In the future, we can offer our clients services also for the second dimension of risk management, minimization of losses, for example, by helping them to assess, reliably and in real time, the value of collaterals, such as real estates and shares in condominiums. Our service, which automatically transfers apartment information included in landlord's certificates in digital form from housing companies to banks has already been tested successfully with production material together with Nordea as the piloting bank this spring. Comprehensive digital housing company and apartment information services for banks and estate agents will be implemented in 2018." 

FUTURE OUTLOOK

Asiakastieto Group Plc expects its operating environment to remain stable in 2018 in its key markets Finland and Sweden, and that it is able to initiate actions in the second half of the financial year to start to realise synergy benefits from the combination with UC AB.

The outlook is subject to risks related to, among other factors, the development of the Finnish and Swedish economy and the business operations of the Group. The most significant risks related to business operations include, for example, risks related to the success of product and service development activities, launches of new products and services and risks related to competitive tenders and to losing significant customer accounts.

Asiakastieto Group's business risks have been described in more detail on the Company's investor pages at investors.asiakastieto.fi.

ASIAKASTIETO GROUP PLC
Board of Directors

Additional information:
Jukka Ruuska
CEO
tel. +358 10 270 7111

Distribution:
Nasdaq Helsinki Ltd
major media
investors.asiakastieto.fi

Asiakastieto Group is one of the leading providers of digital business and consumer information services in the Nordic countries. The Group's products and services are primarily used for risk management, finance and administration, decision-making and sales and marketing purposes. We are operating in Sweden under the brand UC and in Finland under the brand Asiakastieto. Asiakastieto and UC combined on 29 June 2018. Our pro forma annual net sales for 2017 was EUR 130 million and the number of employees was approximately 500. The Group serves several industries, the largest ones including finance and banking as well as wholesale and retail sectors and expert service companies. Asiakastieto Group is listed on Nasdaq Helsinki with the ticker ATG1V. More information about Asiakastieto Group is available at www.asiakastieto.fi and www.uc.se.