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Asiakastieto Group's Interim Report 1.1. - 30.9.2018: Asiakastieto and UC - from integration to normal operation

Asiakastieto Group Plc, stock exchange release 8 NOVEMBER 2018 AT 11.00 EET

Asiakastieto Group's Interim Report 1.1. - 30.9.2018: Asiakastieto and UC - from integration to normal operation

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 by acquiring the shares in UC. The combination was completed as announced 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 to the condensed financial statements, Corporate acquisitions.

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 interim 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 interim report. The pro forma financial reporting principles are described in Note 1 to this interim 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

In this summary, the reported figures for the interim period from 1 January to 30 June 2018 as well as the reference data for the periods 1 July to 30 September 2017 and 1 January to 30 September 2017 do not include UC's figures.

July - September 2018 in brief

  • Net sales amounted to EUR 31,4 million (EUR 13,3 million), an increase of 135,4 %.
  • Adjusted EBITDA excluding items affecting comparability was EUR 10,9 million (EUR 6,1 million), an increase of 78,2 %.
  • Adjusted EBIT excluding items affecting comparability and amortisation from fair value adjustments related to the acquisitions was EUR 9,8 million (EUR 5,4 million), an increase of  82,5 %1.
  • Operating profit (EBIT) was EUR 4,4 million (EUR 5,3 million). Operating profit included items affecting comparability of EUR 2,7 million (EUR 0,1 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 2,8 million (EUR 0,0 million) related to the acquisitions.
  • New products and services accounted for 8,6 % (12,9 %) of net sales2.
  • Value-added services accounted for 80,3 % (69,4 %).of net sales3.
  • Free cash flow amounted to EUR 4,1 million (EUR 4,8 million). The impact of items affecting comparability on free cash flow was EUR -3,7 million (EUR -0,1 million)4.
  • Earnings per share were EUR 0,12 (EUR 0,26).
  • Comparable earnings per share were EUR 0,21 (EUR 0,27)5.

January - September 2018 in brief

  • Net sales amounted to EUR 62,2 million (EUR 41,6 million), an increase of 49,5 %.
  • Adjusted EBITDA excluding items affecting comparability was EUR 23,9 million (EUR 18,9 million), an increase of 26,6 %.
  • Adjusted EBIT excluding items affecting comparability and amortisation from fair value adjustments related to the acquisitions was EUR 21,2 million (EUR 16,8 million), an increase of 25,9 %1.
  • Operating profit (EBIT) was EUR 9,6 million (EUR 16,5 million). Operating profit included items affecting comparability of EUR 8,6 million (EUR 0,2 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 3,0 million (EUR 0,1 million) related to the acquisitions.
  • New products and services accounted for 9,3 % (14,6 %) of net sales2.
  • Value-added services accounted for 75,7 % (69,8 %) of net sales3.
  • Free cash flow amounted to EUR 8,0 million (EUR 12,2 million). The impact of items affecting comparability on free cash flow was EUR -5,9 million (EUR -0,1 million)4.
  • Earnings per share were EUR 0,33 (EUR 0,83).
  • Comparable earnings per share were EUR 0,45 (EUR 0,84)5.

KEY FIGURES

1.7.- 1.7.- 1.1.- 1.1.- 1.1.-
EUR million 30.9.2018 30.9.2017 30.9.2018 30.9.2017 31.12.2017
Net sales 31,4 13,3 62,2 41,6 56,2
Net sales growth, % 135,4 14,0 49,5 13,9 14,3
Operating profit (EBIT) 4,4 5,3 9,6 16,5 21,2
EBIT margin, % 14,0 39,4 15,4 39,6 37,8
Adjusted EBITDA6 10,9 6,1 23,9 18,9 24,8
Adjusted EBITDA margin, %6 34,6 45,7 38,4 45,4 44,2
Adjusted operating profit (EBIT)1, 6 9,8 5,4 21,2 16,8 22,0
Adjusted EBIT margin, %1, 6 31,3 40,3 34,0 40,4 39,1
New products and services of net sales, %2 8,6 12,9 9,3 14,6 14,6
Free cash flow4 4,1 4,8 8,0 12,2 16,5
Net debt to adjusted EBITDA, x7pro forma
3,5
2,0 pro forma
3,5
1,9 2,1

____________________________________________________________________
1 The method used for calculating the adjusted operating profit (EBIT), the reported adjusted operating profit (EBIT) of the first quarter, the comparative figures for the period 1 July-30 September 2017, the interim period 1 January-30 September 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 from the period 1 July-30 September 2017, the interim period 1 January-30 September 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. 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.

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 July-30 September 2017, the interim period 1 January-30 September 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, damages paid and external expenses arising from significant regulatory changes.

7 For the third 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 September 2018 by the pro forma adjusted EBITDA of the past 12 months.

In this pro forma summary, the figures for the interim period from 1 January to 30 September 2018 as well as for the corresponding periods  1 January to 30 September 2017 and 1 July to 30 September 2017 have been presented as if the UC transaction had occurred already on 1 January 2017. The figures for the third quarter 1 July to 30 September 2018 have been presented with actual reported figures for the period.

Pro forma  July - September 2018 in brief

  • Net sales amounted to EUR 31,4 million (EUR 31,1 million), an increase of 1,0 % (at comparable exchange rates an increase of 6,0 %).
  • Adjusted EBITDA excluding items affecting comparability was EUR 10,9 million (EUR 11,6 million), a decrease of 6,4 % (at comparable exchange rates a decrease of 2,6 %).
  • Adjusted EBIT excluding items affecting comparability and amortisation from fair value adjustments related to the acquisitions amounted to EUR 9,8 million (EUR 10,8 million), a decrease of 8,9 %.
  • Operating profit (EBIT) was EUR 4,4 million (EUR 7,6 million). Operating profit included items affecting comparability of EUR 2,7 million (EUR 0,4 million) and amortisation from fair value adjustments related to the acquisitions of EUR 2,8 million (EUR 2,8 million).
  • The share of new products and services of net sales was 8,6 % (7,6 %).
  • Earnings per share were EUR 0,12 (EUR 0,23).
  • Comparable earnings per share were EUR 0,21 (EUR 0,32)1.

Pro forma January - September 2018 in brief

  • Net sales amounted to EUR 98,4 million (EUR 95,0 million), an increase of 3,5 % (at comparable exchange rates an increase of 7,3 %).
  • Adjusted EBITDA excluding items affecting comparability was EUR 29,8 million (EUR 32,4 million), a decrease of 8,0 % (at comparable exchange rates a decrease of 5,4 %).
  • Adjusted EBIT excluding items affecting comparability and amortisation from fair value adjustments related to the acquisitions amounted to EUR 26,8 million (EUR 30,0 million), a decrease of 10,7 %.
  • Operating profit (EBIT) was EUR 12,1 million (EUR 15,2 million). Operating profit included items affecting comparability of EUR 6,5 million (EUR 6,4 million) and amortisation from fair value adjustments related to the acquisitions of EUR 8,2 million (EUR 8,4 million).
  • The share of new products and services of net sales was 7,8 % (8,3 %).
  • Earnings per share were EUR 0,33 (EUR 0,40).
  • Comparable earnings per share were EUR 0,60 (EUR 0,67)1.

PRO FORMA KEY FIGURES

EUR million 1.7.-
30.9.2018
1.7.-
30.9.2017
1.1.-
30.9.2018
1.1.-
30.9.2017
1.1.-
31.12.2017
Net sales 31,4 31,1 98,4 95,0 129,6
Net sales growth, % 1,0 n/a 3,5 n/a n/a
Operating profit (EBIT) 4,4 7,6 12,1 15,2 20,9
EBIT margin, % 14,0 24,5 12,3 16,0 16,1
Adjusted EBITDA 10,9 11,6 29,8 32,4 43,1
Adjusted EBITDA margin, % 34,6 37,3 30,3 34,1 33,2
Adjusted operating profit (EBIT) 9,8 10,8 26,8 30,0 39,6
Adjusted EBIT margin, % 31,3 34,6 27,3 31,6 30,6
New products and services of net sales, % 8,6 7,6 7,8 8,3 8,3
Net debt to adjusted EBITDA, x2 3,5 n/a 3,5 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 on 30 June 2018 by the pro forma adjusted EBITDA of the past 12 months.

JUKKA RUUSKA, CEO

"The third quarter of 2018 was a quarter of moderate growth for Asiakastieto Group.  Net sales increased at comparable exchange rates by 6 % to EUR 31,4 million (EUR 29,6 million). The Group's net sales were increased in both markets by the new launched services, which accounted for 8,6 % of net sales for the third quarter. Adjusted EBITDA decreased at comparable exchange rates by 2,6 % to EUR 10,9 million (EUR 11,2 million). The Group's growth in consumer information services, the high share of operational projects' expenses of overall development projects and increased personnel costs contributed to the decrease.

Our merger with the Swedish UC AB, carried out in June, has progressed as planned. After a successful integration planning phase, we have started normal operation on 1 October 2018 in accordance with the new organisation. Even though the integration phase involved less service development compared with the previous financial year, we introduced some important compliance and consumer information services in the Swedish market.

Positive credit information is very valuable with respect to responsible credit granting and putting a stop to circle of debt. This is supported by the Group's efficient systems in both countries. In the Consumer Credit Inquiry System developed by Asiakastieto, an applicant's open credits can already be checked at the applicant's consent, even though the positive credit register proposed to be established in Finland does not yet exist. The inquiry system discloses any alarmingly high debt loads of a person as well as any problems with due repayment of existing debts. The coverage of the system will still improve, once most Finnish banks are included in the inquiry system.

The Credit Register maintained by UC in Sweden contains both payment default information and positive data related to a person's open credits.  Thanks to the register, the number of people with payment defaults has decreased in recent years, even though consumers have incurred more debt at the same time. The update level of UC's credit information file will be raised from monthly to daily level.

FUTURE OUTLOOK

Asiakastieto Group Plc expects its operating environment to remain stable in 2018 in its key markets, Finland and Sweden. The company expects to be 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 economies 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 as well as in the listing prospectus prepared by the Company and approved by the Financial Supervisory Authority on 10 September 2018, also available on the Company's investor pages.

Helsinki, 8 November 2018

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. 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.




This announcement is distributed by West Corporation on behalf of West Corporation clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Asiakastieto Group Oyj via Globenewswire

Copyright © Thomson Reuters 2018. All rights reserved.
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