Asiakastieto Group's Financial Statement Release 2018: Becoming the leading digital information service company in the Nordic region

15/02/2019

Asiakastieto Group Plc_Financial Statements 2018_150219

Asiakastieto Group Plc, stock exchange release 15 February 2019 at 11.00 A.M. EET

Asiakastieto Group's Financial Statement Release 2018: Becoming the leading digital information service company in the Nordic region

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. The combination was completed by Asiakastieto Group Plc acquiring the shares in UC during the second quarter, on 29 June 2018. As a result of the transaction, UC AB's consolidated balance sheet has been consolidated as part of Asiakastieto Group Plc's consolidated balance sheet from 30 June 2018 and UC AB's consolidated income statement as part of Asiakastieto Group Plc's consolidated income statement from 1 July 2018. More detailed information on the impacts of the acquisition on the Group's balance sheet are presented under Note 2.3 Corporate Acquisitions in the notes to the condensed financial statements.

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 financial statement release, unaudited pro forma statement of income and pro forma key ratios are shown for the year 2017 and the review period as if the share transaction had been completed already on 1 January 2017. The pro forma financial information is indicated as Pro forma information in each instance where it appears in this financial statement release. The pro forma financial reporting principles are described in Note 1 to this financial statement release.

The 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

In this summary, the reported figures for the review period 1 January-30 June 2018 as well as the comparison figures for the periods 1 October-31 December 2017 and 1 January-31 December 2017 do not include UC's figures.

October - December 2018 in brief

  • Net sales amounted to EUR 35,9 million (EUR 14,6 million), an increase of 146,4 %.
  • Adjusted EBITDA excluding items affecting comparability was EUR 12,2 million (EUR 5,9 million), an increase of 105,7 %.
  • Adjusted EBIT excluding items affecting comparability and amortisation from fair value adjustments related to the acquisitions was EUR 10,9 million (EUR 5,2 million), an increase of 110,9 %1.
  • Operating profit (EBIT) was EUR 7,1 million (EUR 4,7 million). Operating profit included items affecting comparability of EUR 0,8 million (EUR 0,3 million) mainly arising from expenses related to the integration of UC and redundancy-related expenses associated with the restructuring of operations, as well as amortisation from fair value adjustments of EUR 2,9 million (EUR 0,1 million) related to the acquisitions.
  • New products and services accounted for 7,8 % (14,6 %) of net sales2.
  • Value-added services accounted for 80,4 % (67,5 %) of net sales3.
  • Free cash flow amounted to EUR 7,9 million (EUR 4,3 million). The impact of items affecting comparability on free cash flow was EUR -2,6 million (EUR -0,4 million)4.
  • Earnings per share were EUR 0,21 (EUR 0,23).
  • Comparable earnings per share were EUR 0,30 (EUR 0,24)5.

January - December 2018 in brief

  • Net sales amounted to EUR 98,1 million (EUR 56,2 million), an increase of 74,6 %.
  • Adjusted EBITDA excluding items affecting comparability was EUR 36,1 million (EUR 24,8 million), an increase of 45,5 %.
  • Adjusted EBIT excluding items affecting comparability and amortisation from fair value adjustments related to the acquisitions was EUR 32,0 million (EUR 22,0 million), an increase of 45,9 %1.
  • Operating profit (EBIT) was EUR 16,7 million (EUR 21,2 million). Operating profit included items affecting comparability of EUR 9,4 million (EUR 0,5 million) mainly resulting from UC acquisition-related M&A and integration expenses and redundancy-related expenses as well as amortisation from fair value adjustments of EUR 5,9 million (EUR 0,2 million) related to the acquisitions.
  • New products and services accounted for 8,8 % (14,6 %) of net sales2.
  • Value-added services accounted for 77,4 % (69,2 %) of net sales3.
  • Free cash flow amounted to EUR 15,9 million (EUR 16,5 million). The impact of items affecting comparability on free cash flow was EUR -8,5 million (EUR -0,5 million)4.
  • Earnings per share were EUR 0,56 (EUR 1,06).
  • Comparable earnings per share were EUR 0,78 (EUR 1,07)5.
  • The Board of Directors proposes to the Annual General Meeting to be held on 28 March 2019 that funds amounting to EUR 0,95 per share be distributed from the Group's distributable funds.
             

KEY FIGURES

  1.10. - 1.10. - 1.1. - 1.1. -
EUR million 31.12.2018 31.12.2017 31.12.2018 31.12.2017
Net sales 35,9 14,6 98,1 56,2
Net sales growth, % 146,4 15,4 74,6 14,3
Operating profit (EBIT) 7,1 4,7 16,7 21,2
EBIT margin, % 19,8 32,6 17,0 37,8
Adjusted EBITDA6 12,2 5,9 36,1 24,8
Adjusted EBITDA margin, %6 34,0 40,8 36,8 44,2
Adjusted operating profit (EBIT)1, 6 10,9 5,2 32,0 22,0
Adjusted EBIT margin, %1, 6 30,2 35,3 32,7 39,1
New products and services of net sales, %2 7,8 14,6 8,8 14,6
Free cash flow4 7,9 4,3 15,9 16,5
Net debt to adjusted EBITDA, x7 pro forma
3,3
2,1 pro forma
3,3
2,1
         
         

____________________________________________________________________
1 The method used for calculating the adjusted operating profit (EBIT), the reported adjusted operating profit (EBIT) for the first quarter and the comparison figures for the period 1 October-31 December 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 used for calculating the share of new products and services, comparison data for the period 1 October-31 December 2017 and the 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. Previously, the share was calculated as the net sales for products and services launched during the past 12 months added by the change in net sales for products and services launched during the preceding 12 months.

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 and the comparison figures for the period 1 October-31 December 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.

5 The comparable earnings per share do not contain amortisation from fair value adjustments related to the acquisitions or their tax impact.

6 The adjusted key ratios are calculated by adjusting the key ratios with the following items affecting comparability: M&A and integration related expenses, redundancy payments, compensations paid and external expenses arising from significant regulatory changes.

7 For the fourth quarter and the review period, the net debt to adjusted EBITDA has been calculated by dividing the net debt of the consolidated statement of financial position at 31 December 2018 by the pro forma adjusted EBITDA of the past 12 months.

The figures in the pro forma summary for the review period 1 January-31 December 2018 and the comparison periods 1 January-31 December 2017 and 1 October-31 December 2017 are presented as pro forma figures, as if the acquisition of UC had taken place already at the beginning of 2017. The second half figures for 1 July-31 December 2018 are presented as actual reported figures.

Pro forma October - December 2018 in brief

  • Net sales amounted to EUR 35,9 million (EUR 34,6 million), an increase of 3,9 % (at comparable exchange rates an increase of 7,1 %).
  • Adjusted EBITDA excluding items affecting comparability was EUR 12,2 million (EUR 10,7 million), an increase of 14,7 % (at comparable exchange rates an increase of 17,4 %).
  • Adjusted EBIT excluding items affecting comparability and amortisation from fair value adjustments related to the acquisitions was EUR 10,9 million (EUR 9,6 million), an increase of 12,7 %.
  • Operating profit (EBIT) was EUR 7,1 million (EUR 5,7 million). Operating profit included items affecting comparability of EUR 0,8 million (EUR 1,1 million) and amortisation from fair value adjustments related to the acquisitions of EUR 2,9 million (EUR 2,8 million).
  • The share of new products and services of net sales was 7,8 % (8,2 %).
  • Earnings per share were EUR 0,21 (EUR 0,16).
  • Comparable earnings per share were EUR 0,30 (EUR 0,26)1.

Pro forma January - December 2018 in brief

  • Net sales amounted to EUR 134,3 million (EUR 129,6 million), an increase of 3,6 % (at comparable exchange rates an increase of 7,3 %).
  • Adjusted EBITDA excluding items affecting comparability was EUR 42,1 million (EUR 43,1 million), a decrease of 2,4 % (at comparable exchange rates an increase of 0,3 %).
  • Adjusted EBIT excluding items affecting comparability and amortisation from fair value adjustments related to the acquisitions amounted to EUR 37,7 million (EUR 39,6 million), a decrease of 5,0 %.
  • Operating profit (EBIT) was EUR 19,2 million (EUR 20,9 million). Operating profit included items affecting comparability of EUR 7,3 million (EUR 7,5 million) and amortisation from fair value adjustments related to the acquisitions of EUR 11,1 million (EUR 11,2 million).
  • The share of new products and services of net sales was 7,8 % (8,3 %).
  • Earnings per share were EUR 0,54 (EUR 0,56).
  • Comparable earnings per share were EUR 0,90 (EUR 0,93)1.

PRO FORMA KEY FIGURES

  1.10. - 1.10. - 1.1. - 1.1. -
EUR million 31.12.2018 31.12.2017 31.12.2018 31.12.2017
Net sales 35,9 34,6 134,3 129,6
Net sales growth, % 3,9 n/a 3,6 n/a
Operating profit (EBIT) 7,1 5,7 19,2 20,9
EBIT margin, % 19,8 16,5 14,3 16,1
Adjusted EBITDA 12,2 10,7 42,1 43,1
Adjusted EBITDA margin, % 34,0 30,8 31,3 33,2
Adjusted operating profit (EBIT) 10,9 9,6 37,7 39,6
Adjusted EBIT margin, % 30,2 27,9 28,1 30,6
New products and services of net sales, % 7,8 8,2 7,8 8,3
Net debt to adjusted EBITDA, x2 3,3 n/a 3,3 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 31 December 2018 by the pro forma adjusted EBITDA of the past 12 months.

JUKKA RUUSKA, CEO

"Asiakastieto Group grew in line with our expectations in the final quarter of the financial year 2018.  Net sales increased at comparable exchange rates by 7,1 % to EUR 35,9 million. The Group's net sales were increased by new services launched in both markets, which accounted for 7,8 % of the net sales for the fourth quarter. In addition, growth was achieved particularly in the consumer credit services of the Risk Decisions business area. Adjusted EBITDA saw exceptionally strong growth of 17,4 % at comparable exchange rates and amounted to EUR 12,2 million. The factors behind the increase included the lower level of personnel expenses, which was due to efficiency improvement measures and the large number of vacancies.

The pro forma net sales of Asiakastieto Group Plc for the financial year 2018 amounted to EUR 134,3 million, an increase of 7,3 % at comparable exchange rates. The share of new products and services of net sales for the year was 7,8 % (8,3 %). The euro-denominated EBITDA remained on a par with 2017 at comparable exchange rates, while adjusted EBITDA increased by 0,3 per cent to EUR 42,1 million.

The year 2018 will be remembered for the merger between Asiakastieto and the Swedish company UC AB, which was completed at the end of June. The merger represents a strategically important step for Asiakastieto. It creates a strong and balanced foundation for the Group to grow to become one of the leading Nordic producers of digital services and data innovations. The merger has progressed as planned and, following a successful integration planning phase, we resumed normal operations under the new organisational structure on 1 October 2018.

Although the amount of service development was lower than in 2017 due to the integration phase, we launched 19 new services in the Finnish and Swedish markets in the second half of 2018 in response to our customers' needs.  Among other things, we strengthened our Nordic compliance service offering by launching the Beneficial Owner service in the Swedish market. As part of the prevention of money laundering and terrorist financing, it is necessary to identify the beneficial owners of companies. Determining the identities of the people behind enterprises is a laborious and difficult task when done manually, but our service makes the process automatic. Another significant service is Growth Indicator. Based on statistical modelling, it uses structured and unstructured data to predict the rate at which a company's net sales will increase in the future.

The scope of positive credit information-which is essential for responsible lending-will take a major step forward in Finland, with several banks set to join the Consumer Credit Inquiry System maintained by Asiakastieto Group. Aktia Bank, Bonum Bank (the central credit institution of POP Banks) and nearly 40 consumer credit companies are already using the system. Danske Bank A/S Finnish branch, Danske Finance Oy and the Central Bank of Savings Banks have also indicated their intention to join the system."

FUTURE OUTLOOK

Net sales: Asiakastieto Group expects its net sales growth in 2019 to be in the middle of the range of its long-term target (5-10 %) or slightly below it compared to the previous year's pro forma net sales.

EBITDA: Asiakastieto Group expects its adjusted EBITDA, excluding the effect of IFRS 16 transition, to grow in 2019 at a percentage rate that exceeds the rate of net sales growth compared to the previous year's pro forma adjusted EBITDA.

Capital expenditure: Asiakastieto Group expects its capitalised product development and software expenses in 2019 to exceed the previous year's level on a pro forma basis.

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 and in the company's listing prospectus, approved by the Financial Supervisory Authority on 10 September 2018 and also available on the investor pages of the company website.

Helsinki, 15 February 2019

ASIAKASTIETO GROUP PLC
Board of Directors

For further information:
Jukka Ruuska
CEO
Asiakastieto Group Plc
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 Finland under the brand Suomen Asiakastieto and in Sweden under the brand UC. Our pro forma annual net sales for 2017 was EUR 134 million and the number of employees was approximately 450. 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.