Transcom Annual Report 2019

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Annual Report

2019
Contents
Administration report 1
Financial overview 4
Consolidated financial statements and notes 5
Parent Company financial statements
and notes 29
Signatures of the Board of Directors 39
Auditor’s report 40
Definitions 44

The formal annual accounts and the consolidated accounts comprise pages 1–43.
This is a translation of the original Swedish Annual Report. In the event of differences
between the English translation and the Swedish original, the Swedish Annual Report shall
prevail.
Administration report

Administration report

The Board of Directors and the CEO of Transcom Holding AB (publ),


corporate registration number 556962-4108, hereby submit the Annual
Report and Consolidated Financial Statements for the 2019 financial year.

Transcom is a global customer experience specialist, pro- increase loyalty, retention and customer sales. This is why
viding customer care, sales and technical support through they partner with Transcom, whose core business is to
an extensive network of contact centers and work-at- deliver excellent multi- channel customer service and
home agents. Transcom’s principal role is to positively support.
impact customer loyalty and, thus, revenue through
making ser- vice and support interactions as effortless and
enjoyable as possible for our clients’ customers.
Transcom’s cus- tomer experience specialists engage
with customers in multiple channels, including phone, e-
mail, chat, messag- ing services, and social media
networks.
Transcom serves clients across the globe in virtually
every industry and area of public service. Many of our cli-
ents compete in fast-moving, mass consumer markets
that demand extreme levels of responsiveness to shifting
con- sumer needs and preferences. Transcom has deep
know- how in a wide range of industries, including
telecommuni- cations & media, consumer tech, financial
services,
e-commerce, retail, utilities, and logistics. Customer expe-
rience is a significant differentiator in all these sectors,
and the quality of customer care service delivery
continues to play a major role in influencing customer
choice when deciding which brands to do business with.
Transcom’s operations add value to clients’ businesses by
supporting the creation of outstanding customer
experiences, while reducing cost and helping to drive
growth.
Transcom does this directly, by delivering multi-
channel customer service and support in a cost-effective
way. But Transcom’s goal is also that the Company’s
activities bene- fit other parts of clients’ businesses. For
example,
Transcom’s analytic capabilities can generate insights
that ultimately contribute to the creation of a differentiated
customer experience, setting Transcom’s clients apart in
an increasingly competitive marketplace.
As a global specialist of outsourced customer care
solu- tions, Transcom has an important role in helping to
make sure that end customers form positive perceptions
of their interactions with the companies that Transcom
supports. To many of the Company’s clients, the quality
of their Customer care operations is fundamental to their
ability to execute their service-based strategies to

Transcom Annual Report 1


Market definition – what business are we in?
Customer management comprises the process linking an
organization with its existing and potential customers, and
includes four sub categories: customer selection, customer
acquisition, customer retention, and customer extension.
Services are delivered via five primary channels:
• Telephony, including voice and interactive voice
response (IVR) self-service
• Email response management
• Web chat
• Digital channels (social media, messaging apps)
• Knowledge management for web-based self-service

Help Desk outsourcing involves first and second level help


desk support for information technology services, both for
internal stakeholders in an organization and external
customers. involves first- and second-level
help desk support for information technology services,
both for internal stakeholders in an organization and
external customers.

The Company’s services are delivered through a


struc- tured and proven process with rigorous quality
controls. Continuous improvement practices, focused on
strength- ening service quality and enhancing
operational efficiency, are embedded into daily
operations. The impact of the Company’s service
delivery on customer experience is constantly validated,
e.g. through Customer Satisfaction, Customer Effort and
Net Promoter indices.
2019, Transcom had 26,000 customer experience
specialists at 50 contact centers across 20 countries,
delivering services in 33 languages to international
brands in various industry verticals.
On July 27, 2018, the Group acquired Awesome OS,
which have been consolidated from July 28, 2018.

Financial overview
Income statement
Revenue for 2019 amounted to EUR 541.5 million
(543.6). Gross profit amounted to EUR 116.3 million
(91.1) and Operating result EUR 19.7 million (–12.6).
Operating result excluding non-recurring items
amounted to EUR 28.1 million (22.0). Non-recurring
items amounted to EUR 8.4 million (34.6) and consisted
of operational non-recurring

2 Transcom Annual Report


Administration report Administration report

registered company domiciled in Stockholm, Sweden.


items of EUR –8.5 million, mainly restructuring costs The address
related to the People, Passion, and Performance program
(PPP) and exiting from unprofitable contracts.
Transaction related non-recurring items was EUR 0.1
million, including net results of the divestments in Spain.

Cash flow
Operating cash flow improved and amounted to positive
EUR 51.4 million (2.5). This is mainly a result of higher
profit and improved working capital compared to last year.
Cash flow from investing activities amounted to EUR –18.2
mil- lion (–41.8) and is mainly explained by earnout-
payment for the Awesome acquisition and investments in
new sites in Philippines and Tunisia, countereffected by
the positive cash effect of EUR 6.5 million from the
divestment of part of the Spanish business. Cash flow
from financing activities amounted to EUR –32.1 million
(34.1), as this year was affected by payments of leases
being presented within financing activities, as a result of
IFRS 16. Net impact of repayment of loans and credit
facilities amounted to EUR
–3.5 million (37.6). Cash flow totaled EUR 1.1 million (–
5.2).

Debt & Financing


Net debt/EBITDA amounted to 4.2 (5.3). Net debt was
lower than last year and amounted to EUR 203.7 million
(207.8). Financing in the Group includes five-year EUR
180 million Senior Secured Fixed Rate Notes, EUR 10
million Senior Secured Fixed Rate Notes, as well as a EUR
45 million Super Senior Revolving Credit Facility
Agreement (SSRCF). As per December 31, 2019, EUR 19.2
million of the SSRCF was utilized in loans, excluding
guarantees and credit facility usage. Unused credit
facilities totaled EUR
20.0 million.

Research & Development


Transcom, being a service company, does not carry out any
research activities as defined in IAS 38 Intangible assets.
Development activities mainly consist of the development
of IT solutions. The Company’s service offering and solu-
tions are continuously developed and refined in order to
ensure that Transcom has the right capabilities to keep up
with the rapid pace of change in its industry, bringing new
and innovative service solutions to market quickly.

Parent Company
The Parent Company, Transcom Holding AB, does not
perform CRM services, but employs part of the
corporate management team. The Parent Company is a

Transcom Annual Report 3


of the Company’s headquarter is Hälsingegatan 40,
15th floor, SE-113 43 Stockholm.
Operating result amounted to negative EUR 0.3
million. Profit before appropriations amounted to negative
EUR 7.6 million. Cash flow for the year amounted to
EUR 0.2 million.

Significant events after the reporting period


As of January 1, 2020 Jonas Dahlberg was promoted
from CFO to CEO and President of Transcom.
On February 5, 2020 Transcom extended the
unsecured note of EUR 10 million with twelve months.
The new matu- rity date is July 2021. On March 31, 2020
Transcom signed a new senior secured term loan facility
agreement of EUR 20 million. The maturity date is March
2023.
Transcom is actively monitoring the impacts of the
coronavirus/COVID-19 on its employees, customers and
service offering. During February, 2020, Transcom
imple- mented preventive measures at all sites to
actively ensure the safety of employees and prevent
further spread of the coronavirus. Transcom also
engaged in proactive discus- sions with key clients on
business continuity measures, should a significant
business interruption arise. Transcom deliver customer
services at distance, through 26,000 employees from
about 50 contact centers and through Work-At-Home
(WAH) agents on three continents. Our client portfolio
predominantly consists of companies who deliver their
services without physical interactions. We cur- rently
experience an increase in overall demand due to the
COVID-19 pandemic, primarily in E-commerce, but also
in the Telecom and Financial Services sectors. Transcom
has a very limited exposure to the Travel and Hospitality
sec- tors. Short term, we expect neutral or positive
impact on the aggregated demand of our services.
Transcom’s main risk in this pandemic are
government regulations, impacting workforce
attendance and produc- tion capacity at our contact
centers. We are currently run- ning somewhat below
normal production, due to distur- bances in the
Philippines, Italy and Spain. We are currently shifting
volumes from contact centers to WAH delivery, to
increase our resilience. The possibility to shift to WAH
depends upon type of services delivered, technical envi-
ronment and broadband capacity.
The above general update is based on the current
situation and subject to change as the situation
evolves. At this point, it is too early to assess the long
term impact on Transcom.

Outlook
Transcom has built a foundation with improved EBITDA
margin from 5% to 9% between years 2015 and 2019.

4 Transcom Annual Report


Administration

Now Company’s objective is double digit margin and solid


affected by natural events, wars, terrorist attacks, other
organic growth through client focus and operational excel-
civil disturbances, epidemics, technical failures, etc.
lence, supported by strong leadership.
• The risk of adverse foreign exchange movements, involv-
ing transaction exposure where Transcom invoices
Risks and uncertainties
clients in one currency and incurs costs in another
There are a number of risk factors that may affect
currency.
Transcom’s operations which, to varying degrees, have an
impact on Transcom’s revenue, operations, profitability
Transcom is also exposed to translation exposure due to
and financial position. These risks are monitored and to
conversion of assets, liabilities, revenues and costs
the extent possible, managed by Transcom. The Group’s
denominated in non-reporting currencies, into
risk management and control framework is designed to
Transcom’s reporting currency, which is the Euro.
sup- port the identification, assessment, monitoring,
The main risks arising from the Group’s financial
manage- ment and control of risks that are significant to
instru- ments are liquidity risk, credit/counterparty risk,
the achieve- ment of the Group’s business objectives and
foreign currency risk, and interest rate risk. The Board of
to provide reliable financial information. Key risks specific
Directors reviews and agrees policies for managing each
to Transcom’s operations are:
of these risks. Further information on financial risks is
• The risk of overcapacity situations in the case of
summarized in note 23.
volume reductions or termination of client contracts.
• The risk of significant volume reduction in relation to
Corporate governance report
key clients, since a significant portion of Transcom’s
Corporate governance report has been reported
revenue is generated from a limited number of clients.
separately and is available at
Further- more, since Transcom is highly dependent on
http://www.transcom.com/en/corporate- governance-
the Com- munications and Financial services
report-2019.
industries, any future prolonged downturn in these
industry verticals may lead to volume reductions.
Personnel and sustainability
• The risk of failure to achieve the desired flexibility in
In accordance with Annual Accounts Act 6 Chapter 11§,
staff- ing in each local market. Transcom is also
Transcom Holding AB has chosen to establish the
exposed to the risk of adverse movements in labor
statutory sustainability report as a report separated from
costs, legislation or other conditions related to staffing.
the annual report. The sustainability report is available at
• The risks of Transcom’s clients terminating contracts
http:// www.transcom.com/en/sustainability-2019
before their scheduled expiration dates, or reduce busi-
ness volumes, since some of these contracts do not
Proposed allocation of earnings
require any termination fees or the possibility by
The statements of income and the balance sheets of the
Transcom to invoice any costs to recover client-specific
Parent Company and the Group are subject to adoption
investments. In addition, many client contracts have
by the Annual General Meeting.
per- formance-related bonus and/or penalty provisions
which are driven by Transcom’s performance vis-à-vis
The following amounts in EUR are at the disposal of the
agreed- upon performance metrics. In the event that Parent Company’s Annual General Meeting:
Transcom Share premium reserve 20,501,042
is unable to deliver on the agreed-upon performance Retained earnings 155,569,060
metrics, the Group could face penalties. Profit/loss for the year –7,564,918
• The risk of high staff attrition in some of Transcom’s Total 168,505,184
mar- kets or the inability to attract and retain personnel,
since Transcom’s long-term success largely depends The Board and the CEO propose that the unappropriated
on the ability to attract and develop the right people. earnings at the disposal of the Annual General Meeting be
disposed of as follows:
• The risk of disruption in technological infrastructure due
to host of reasons including natural disaster, lapses Carried forward:
from vendors, operating malfunction, lapses in change Share premium reserve 20,501,042
man- agement procedures, cyber attacks, sabotage, Retained earnings 148,004,142
etc. Furthermore, continuity in Transcom’s operations Total 168,505,184
may be

Transcom Annual Report 3


Consolidated financial

Consolidated financial overview

2019 2018
Revenue (EUR million) 541 544
EBIT (EUR million) 19.7 –12.6
EBIT margin 3.6% –2.3%
EBITA excluding non-recurring items (EUR million) 39.0 31.6
EBITA margin excluding non-recurring items 7.2% 5.8%
EBITDA (EUR million) 40.4 4.8
EBITDA margin 7.5% 0.9%
EBITDA excluding non-recurring items (EUR million) 48.8 39.4
EBITDA margin excluding non-recurring items (EUR million) 9.0% 7.2%
Profit/loss before tax (EUR million) 2.1 –32.2
Profit/loss for the year (EUR million) –0.4 –31.0
Net cash flow from operating activities (EUR million) 51.4 2.5
Return on Equity –0.4% –28.7%
Equity ratio 21.4% 21.9%
Net debt/EBITDA excl non-recurring items 4.2 5.3
(Alternative performance measures see page 44)

4 Transcom Annual Report


Consolidated financial

Consolidated income statement


January to December

EUR thousand Note 2019 2018


Revenue 3, 4 541,459 543,633
Cost of sales 5, 6, 7, 9, 25 –425,114 –452,488
Gross profit 116,346 91,145

Marketing expenses 5, 6, 25 –2,465 –3,066


Administrative expenses 6, 7, 8, 9, 25 –94,277 –99,032
Net loss on disposal of business – 95
Other operating income/expenses 25 105 –1,693
Operating profit/loss 19,709 –12,551

Financial income 10 744 1,094


Financial expenses 7, 10 –18,309 –20,768
Profit/loss before tax 2,143 –32,226

Income tax expense 11 –2,504 1,268


Profit/loss for the year –361 –30,957

Attributable to:
– equity holders of the parent –361 –30,957
– non-controlling interests – –

Transcom Annual Report 5


Consolidated financial

Consolidated statement
of comprehensive
income
January to December

EUR thousand Note 2019 2018


Profit/loss for the year –361 –30,957
Other comprehensive income
Other comprehensive income to be reclassified
to profit or loss in subsequent periods:
Exchange differences on translation of foreign operations 121 183
Net gain on cash flow hedge 363 1
484 184
Other comprehensive income not to be reclassified
to profit or loss in subsequent periods:
Actuarial profit/loss on post employment benefit obligations 18 –730 –40
–730 –40
Other comprehensive income for the year, net of tax –246 144
Total comprehensive income for the year, net of tax –607 –30,813

Attributable to:
– equity holders of the parent –607 –30,813
– non-controlling interests – –

6 Transcom Annual Report


Consolidated financial

Consolidated statement
of financial position
December 31, December 31,
EUR thousand Note 2019 2018
ASSETS
Non-current assets
Goodwill 12 205,226 210,352
Other intangible assets 12 104,564 112,115
Tangible assets 13 21,493 17,923
Right of use assets 7 25,916 –
Deferred tax assets 11 1,305 2,416
Other receivables 3,000 2,163
361,504 344,968
Current assets
Trade receivables 14 59,075 71,123
Income tax receivables 6,252 4,450
Other receivables 15 13,303 10,839
Prepaid expenses and accrued income 15 36,006 37,845
Cash and cash equivalents 14,295 12,884
128,931 137,141
TOTAL ASSETS 490,435 482,109

EQUITY AND LIABILITIES


Equity attributable to equity holders of the parent
Share capital 16 55 55
Share premium reserve 20,501 20,501
Reserves –3,447 –3,201
Retained earnings including net profit/loss for the year 88,011 88,372
Total equity 105,120 105,726

Non-current liabilities
Interest-bearing liabilities 17, 23 201,034 216,725
Employee benefit obligations 18 3,318 2,632
Lease liability 7, 23 16,018 –
Provisions 19 13,659 18,074
Deferred tax liabilities 11 20,989 27,269
255,018 264,700
Current liabilities
Interest-bearing liabilities 17 13,687 1,285
Lease liability 7, 23 11,448 –
Provisions 19 20,746 22,514
Trade payables 18,798 23,761
Income tax payables 6,332 2,344
Other liabilities 20 18,613 21,100
Accrued expenses and prepaid income 21 40,674 40,678
130,297 111,683

Total liabilities 23 385,315 376,382


TOTAL EQUITY AND LIABILITIES 490,435 482,109
Pledged Assets 27

Transcom Annual Report 7


Consolidated financial

Consolidated statement
of changes in equity

Equity attributable to equity holders of the parent


Share Foreign
Share premium Fair value translation Retained
EUR thousand capital reserve reserve reserve earnings Total
As at January 1, 2018 8 20,501 1,201 –4,546 110,841 128,004
Profit/loss for the year – – – – –30,957 –30,957
Issue of bonus shares 47 – – – –47 –
Other comprehensive income
for the year, net of tax – – –39 183 – 144
Total comprehensive income
for the year, net of tax 55 20,501 1,162 –4,363 79,837 97,191
Shareholder contribution – – – – 8,535 8,535
As at December 31, 2018 55 20,501 1,162 –4,363 88,372 105,726

As at January 1, 2019 55 20,501 1,162 –4,363 88,372 105,726


Profit/loss for the year – – – – –361 –361
Other comprehensive income
for the year, net of tax – – –367 121 – –246
Total comprehensive income
for the year, net of tax – – –367 121 – –246
Shareholder contribution – –
As at December 31, 2019 55 20,501 795 –4,242 88,011 105,120

8 Transcom Annual Report


Consolidated financial

Consolidated statement
of cash flows
January to December

EUR thousand Note 2019 2018


Cash flows from operating activities
Profit/loss before tax 2,143 –32,226
Adjustments to reconcile profit before tax to net cash:
Depreciation and amortization 9 34,725 17,372
Change in provisions including employee benefit obligations 656 12,886
Result from disposal of business 25 –2,162 –
Other non-cash adjustments 210 –208
Net financial items 17,565 19,674
Income taxes paid –7,456 –2,288
Cash flows from operating activities before changes in working capital 45,681 15,211

Changes in working capital


Change in operating receivables 11,733 –2,384
Change in operating liabilities –6,049 –10,332
Changes in working capital 5,684 –12,716
Net cash flow from operating activities 51,366 2,495

Cash flows from investing activities


Investments in tangible assets 13 –11,916 –8,496
Investments in intangible assets 12 –4,606 –307
Acquisition of subsidiaries, net of cash acquired 24 –6,981 –34,033
Disposal of business, net of cash 25 5,879 –
Changes in other non-current assets –816 922
Interest received 255 126
Net cash flow from investing activities –18,183 –41,788

Cash flows from financing activities


Proceeds from borrowings 17, 26 25,506 219,146
Repayment of borrowings 26 –28,973 –181,558
Payment of lease liabilities 7 –11,920 –2
Shareholder contribution – 8,535
Interest paid and other borrowing related costs –16,667 –12,049
Net cash flow from financing activities –32,055 34,072
Net cash flow for the year 1,127 –5,222

Cash and cash equivalents at beginning of the year 12,884 17,249


Net cash flow for the year 1,127 –5,222
Exchange rate differences in cash and cash equivalents 285 856
Cash and cash equivalents at end of the year 14,295 12,884

Transcom Annual Report 9


Notes to the Consolidated financial

Notes to the
consolidated financial
statements
Note 1 Summary of significant accounting and valuation policies
1.1 General term leases and have not been recognized in the balance sheet. The same
Transcom Holding AB (publ) (the “Company” or the “Parent Company”) is for leases of low value.
and its Group companies (together, “Transcom” or the “Group”) is a global
customer experience specialist, providing customer care, sales and techni-
cal support through our extensive network of contact centers and work-at-
home agents. We are 26,000 customer experience specialists at 50 con-
tact centers across 20 countries, delivering services in 33 languages to
international brands in various industry verticals. Transcom Holding AB is
a privately held company.
The Company is a registered company domiciled in Stockholm, Sweden.
The address of the Company’s headquarter is Hälsingegatan 40, SE-113 43
Stockholm.
The consolidated financial statements were authorized for issue by the
Board of Directors on April 6, 2020.
These consolidated financial statements will be submitted for approval
at the Annual General Meeting on April 28, 2020.

1.2 Basis of preparation


Transcom Holding AB (publ) prepares its consolidated financial statements
in accordance with IFRS issued by the International Accounting Standards
Board (IASB) and interpretations of the IFRS Interpretations Committee
(IFRIC) as adopted by the European Union (EU).The consolidated financial
statements pertain to January 1–December 31 for income statement items
and December 31 for balance sheet items.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also requires
management to exercise its judgment in the process of applying the
Group’s accounting policies. The areas involving a higher degree of judg-
ment or complexity, or areas where assumptions and estimates are signi-
ficant to the consolidated financial statements are disclosed in note 2.

1.2.1 Changes in accounting policies and disclosures


New and amended standards that are effective for the first time for
the financial year 2019 and adopted by the Group.
The Group applied IFRS 16 for the first time. IFRS 16 replaces IAS 17
and the associated interpretation statements IFRIC 4.
• IFRS 16 Leases sets out the principles for the recognition, measurement,
presentation and disclosure of leases and requires lessees to account for
all leases under a single on-balance sheet model similar to the accounting
for finance leases under IAS 17. The standard includes two recognition
exemptions for lessees – leases of low-value assets (e.g. personal com-
puters) and short-term leases (i.e. leases with a lease term of 12 months
or less). In the Balance sheet a lessee recognizes an asset representing
the right to use the underlying asset and a liability of the obligation to
pay for that right during the lease period. In the Income statement the
lessees are required to separately recognize the interest expense of the
lease lia- bility and the depreciation expense on the right-of-use asset.
The stand- ard requires more extensive disclosures than under IAS 17.
The standard was effective from 1 January 2019 and the new standard
has an impact both on the Group’s statement of financial position and
disclosures in the Group’s financial statements.
Transcom applied the modified retrospective approach when imple-
menting IFRS 16, meaning that the comparative information for 2018 has
not been restated and instead the opening balance has been adjusted
with the cumulative effect of initially applying the standard as an adjust-
ment of retained earnings.
On adoption of IFRS 16, the Group recognized lease liabilities in rela-
tion to leases that were classified as operating leases under IAS 17. The
liabilities were measured to the present value of the remaining lease
pay- ments, discounted with the incremental borrowing rate at transition
date. The weighted average incremental borrowing rate used was 6,5%.
Right- of-use assets were recognized based on the amount equal to the
related lease liability.
IFRS 16 allows for certain practical expedients upon transition.
Transcom used the following:
– Leases with short remaining terms have been accounted for as short-

1 Transcom Annual Report


Notes to the Consolidated financial
– Initial direct costs have been excluded from the right-of use asset
from the initial recognition.

The Group reviewed the existing lease contracts and in summary the
new standard had the following impact as per January 1, 2019:

MEUR CB 2018 adj Adj OB 2019


Right-of use asset 0 32 32
Equity 106 0 106
Lease liability Non Current 0 18 18
Lease liability Current 0 14 14

On January 1, 2019, the Group adopted International Financial


Reporting Interpretations Committee (“IFRIC”) Interpretation 23,
Uncertainty over Income Tax Treatments. The impact on adoption did
not have any material impact on the consolidated financial statements.
Other new standards and standards in issue but not yet effective
are considered not material for the Group.

1.3 Consolidation
The consolidated financial statements include the Group companies of
which the Group has control. Control is achieved when the Group is
exposed, or has rights, to variable returns from its involvement with
the investee and has the ability to affect those returns through its
power over the investee. There is a presumption that a majority of
voting rights result in control. Group companies are fully consolidated
from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
The consolidated accounts are prepared according to the
acquisition method, which entails acquisitions of subsidiaries being
viewed as transac- tions through which the Group indirectly acquires
the subsidiary’s assets and assumes its liabilities and contingent
liabilities. The Group’s equity therefore includes only the portion of the
subsidiary’s equity added since acquisition. The Group’s cost is
determined through an acquisition analysis in connection with the
acquisition. This analysis determines, in part, the cost of the holdings
or operations and, in part, the fair value of the identifia- ble assets,
liabilities and contingent liabilities assumed on the date of acquisition.
The cost of the subsidiary’s shares or operations consists of the fair
value of the compensation on the transfer date. The cost includes con-
ditional purchase considerations recognized as liabilities at fair value
per the acquisition date.
Business combinations are accounted for using the acquisition method.
Identifiable assets acquired and liabilities assumed are measured
initially at their fair values at the acquisition date. The excess of the
consideration transferred, and the acquisition-date fair value of any
previous equity inter- est in the acquiree, over the fair value of the
identifiable net assets acquired is recognized as goodwill.
Intra-Group receivables and liabilities, revenue and expenses, and
unrealized gains and losses that arise from transactions between
Group companies are eliminated in the consolidated accounts.

1.4 Foreign currency translation


Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’).
The consolidated financial statements are presented in ‘EUR (EUR)’,
which is the Group’s presentation currency.
Foreign currency transactions are translated into the functional cur-
rency using the exchange rates prevailing at the dates of the
transactions or valuation where items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are
recognized in the income statement.
The results and financial position of all the Group companies (none
of which has the currency of a hyper-inflationary economy) that have a
func- tional currency different from the Group’s presentation currency
are trans- lated as follows:

Transcom Annual Report 1


Notes to the Consolidated financial

• assets and liabilities for each statement of financial position presented


are translated at the closing rate at the date of that statement of • adequate technical, financial and other resources to complete the devel-
financial position; opment and to use or sell the software product are available; and
• income and expenses for each income statement are translated at • the expenditure attributable to the software product during its develop-
aver- age exchange rates; and ment can be reliably measured.
• all resulting exchange differences are recognized in other comprehensive
income. Directly attributable costs that are capitalized as part of the software prod-
uct, include the software development employee costs and an appropriate
On consolidation, exchange differences arising from the translation of the portion of relevant overheads.
net investment in foreign operations, and of borrowings and other currency Other development expenditures that do not meet these criteria are
instruments designated as hedges of such investments, are recognized recognized as an expense as incurred. Development costs previously rec-
directly in other comprehensive income. When a foreign operation is par- ognized as an expense are not recognized as an asset in a subsequent
tially disposed of or sold, exchange differences that were recorded in Other period.
comprehensive income are recycled in Other comprehensive income and Computer software development costs recognized as assets are amor-
further recognized in the income statement as part of the gain or loss tized over their estimated useful lives, which is between 3 to 5 years.
on sale.
Goodwill and fair value adjustments arising on the acquisition of a for- 1.7 Impairment of non-financial assets
eign entity are treated as assets and liabilities of the foreign entity and Assets that have an indefinite useful life – for example, goodwill, brand or
translated at the closing rate. Exchange differences arising are recognized intangible assets not ready to use – are not subject to amortization and are
directly in other comprehensive income as the year’s change in the foreign tested annually for impairment, or if events or circumstances change which
translation reserve. may Indicate that there may be need for impairment. Assets that are sub-
ject to amortization are reviewed for impairment whenever events or
1.5 Property, plant and equipment changes in circumstances indicate that the carrying amount may not be
recoverable. The recoverable amount is the higher of an asset’s fair value
All property, plant and equipment are stated at historical cost less depreci-
less costs to sell and value in use.
ation. Historical cost includes expenditure that is directly attributable to the
For the purposes of assessing impairment, assets are grouped at the
acquisition of the items.
lowest levels for which there are separately identifiable cash flows
Subsequent costs are included in the asset’s carrying amount or recog-
(cash-generating units). Transcom’s operations in each segmental region
nized as a separate asset, as appropriate, only when it is probable that
are considered the Group’s cash-generating units in this regard. Non-finan-
future economic benefits associated with the item will flow to the Group
cial assets other than goodwill that suffered an impairment are reviewed
and the cost of the item can be measured reliably. Repairs and mainte-
for possible reversal of the impairment at each reporting date. An impair-
nance are charged to the income statement during the financial period in
ment loss is recognized for the amount by which an asset’s or cash-gener-
which they are incurred.
ating unit’s carrying amount exceeds its recoverable amount.
Depreciation on assets is calculated using the straight-line method to
Impairment losses are recognized in the income statement. Impair-
allocate their cost less their residual values over their estimated useful
ment losses attributable to a cash-generating unit are mainly allocated to
lives, as follows:
goodwill after which they are divided proportionately among other assets in
• Telephone switch 5 years
the unit. The recoverable amount of cash-generating units is the higher of
• Equipements, fixtures and fittings 3–5 years
their fair value less costs to sell and value in use. Value in use is measured
• Computer, hardware and software 3–7 years
by discounting future cash flows using a discounting factor that takes into
• Office improvements and others 3–5 years
account the risk-free rate of interest and the risk associated with the spe-
The assets’ residual values and useful lives are reviewed, and adjusted if cific asset.
Impairment of goodwill is not reversed. Impairment of other assets is
appropriate, at the end of each reporting period. An asset’s carrying
reversed if a change has been made in the assumptions that served as the
amount is written down immediately to its recoverable amount if the
basis for determining the recoverable amount. Impairment is reversed only
asset’s carrying amount is greater than its estimated recoverable amount.
to the extent the carrying value of the assets following the reversal does
not exceed the carrying value that the asset would have had if the
1.6 Intangible assets impairment had not been recognized.
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair 1.8 Financial assets and liabilities
value of the Group’s share of the net identifiable assets of the acquired A financial instrument is defined as any form of agreement giving rise to
sub- sidiary at the date of acquisition. Goodwill on acquisitions of Group a financial asset in a company and a financial liability or equity instrument
compa- nies is included in ‘intangible assets’. Goodwill is carried at cost less in a counterparty. Financial instruments recognized in the balance sheet
accu- mulated impairment losses. Gains and losses on the disposals of an include, on the asset side, cash and bank balances, accounts receivable
entity include the carrying amount of goodwill relating to the entity sold. and other equity instruments, loans receivable. Included among liabilities
and equity are accounts payable, debt and equity instruments in issue,
(b) Customer relationships
earn outs and loan liabilities.
Contractual customer relationships acquired in a business combination are Financial instruments are recognized at amortized cost including trans-
recognized at fair value at the acquisition date. The contractual customer action expenses. An exception is made for financial instruments in the cate-
relations are carried at cost less accumulated amortization and are gory financial assets or liabilities recognized at fair value through profit and
assessed for impairment whenever there is an indication that the asset is loss, that are recognized at fair value excluding transaction costs. Measure-
impaired. Amortization is calculated using the straight-line method over the ment depends on how they are classified, as indicated below.
expected life of the customer relationship which is 9 to 10 years. A financial asset or financial liability is recognized in the balance sheet
when the Company becomes party to the instrument’s contractual terms.
(c) Brand Receivables are recognized when the Company has performed and there is
Brand has been identified with business acquisitions, and valued based on a contractual obligation on the counterparty to pay. Trade receivable are
discounted hypothetical royalty payments which the Company should save recognized in the balance sheet when an invoice has been sent. Liabilities
when being the owner. Brand is included in “intangible assets” and is car- are recognized when the counterparty has performed and there is a con-
ried at cost less accumulated impairment losses. tractual obligation to pay, even if an invoice has not yet been received.
Trade payables are recognized when an invoice is received.
(d) Development costs A financial asset is derecognized from the balance sheet when the
Costs associated with maintaining computer software programs are recog- rights in the agreement are realized, expire or the Company loses control
nized as an expense as incurred. Development costs that are directly attrib- over them. A financial liability is removed from the balance sheet when the
utable to the design and testing of identifiable and unique software prod- obli- gation in the agreement has been discharged or otherwise
ucts controlled by the Group are recognized as intangible assets when the extinguished.
following criteria are met: Financial assets and liabilities are offset and the net amount reported in
• it is technically feasible to complete the software product so it will the statement of financial position when there is a legally enforceable right
be available for use; to offset the recognized amounts and there is an intention to settle on
• management intends to complete the software product and use or sell it; a net basis.
• there is an ability to use or sell the software product;
• it can be demonstrated how the software product will generate probable 1.9 Non-current receivables and other receivables
future economic benefits; Non-current receivables and other receivables fall into the category finan-
cial instruments at amortized cost and are assessed at their discounted

1 Transcom Annual Report


Notes to the Consolidated financial

current value if their expected maturity exceeds 12 months. If their maturi-


ties are shorter, they are assessed at accrued cost. loss over the lease period so as to produce a constant periodic rate of
inter- est on the remaining balance of the liability for each period. The
1.10 Trade receivables right-of- use asset is depreciated over the shorter of the asset´s useful life
and the lease term on a straight-line basis.
Trade receivables are classified in the category financial instruments at
The lease liability is measured at a net present value based on the
amortized cost. Trade receivables are amounts due from customers for
fixed lease payments less any lease incentives received, variable lease
services performed in the ordinary course of business. If collection is
pay- ments based on an index or a rate, amounts expected to be payable
expected in one year or less (or in the normal operating cycle of the busi-
by the lessee under residual value guarantees, the exercise price of a
ness if longer), they are classified as current assets. If not, they are pre-
purchase option if the lessee is reasonable certain to exercise that option,
sented as non-current assets.
and pay- ments of penalties for termination the lease, if the lease term
Trade receivables are recognized initially at fair value and subsequently
reflects the lessee exercising that option.
measured at amortized cost using the effective interest method, less provi-
In calculating the present value of lease payments the Group uses
sion for impairment. The anticipated receivable is short, so they are carried
its incremental borrowing rate at the lease commencement date as the
at accrued cost without discounting.
interest rate implicit in the lease is not readily determinable.
Risk concentration is defined by a material part of outstanding trade
The right of use asset is measured at cost less any accumulated depre-
receivables are connected to two of Transcom’s clients. However, the risk
ciation and impairment losses, and adjusted for any remeasurement of
are considered to be low, supported by historically low losses, current con-
lease liabilities. The cost includes the initial measurement of the lease lia-
ditions and forward looking economic conditions. Impairment are deter-
bility, lease payments made at or before the commencement date less any
mined individually. Impairment needs are addressed when indication that
lease incentives received, initial direct costs incurred and restoration costs.
receivables will not be paid or if Transcom becomes aware that the coun-
The Group is using the recognition exemption for short-term leases
terparty has become insolvent. Provisions for impaired receivables are rec-
and low-value leases, e.g. office equipment are classified as low-value
ognized as administrative expenses in the Consolidated Income Statement.
assets and hence not included them in the balance sheet. The payments
Please see note 14 and 23 for further details.
are rec- ognized on a straigt-line basis as an expense in the income
statement.
1.11 Cash and cash equivalents
Cash and cash equivalents includes cash and cash equivalents and imme-
Accounting principles applied until 2018
diately available balances with banks and similar institutions as well as
Until December 31, 2018 Transcom applied IAS 17. The comparative fig-
other short-term liquid investments with original maturities of three months
ures has not been restated.The Group leases certain property, plant and
or less. In the consolidated statement of financial position, bank overdrafts
equipment. Leasing is classified in the consolidated accounts as either
are shown within interest-bearing liabilities in current liabilities.
finance or operating leasing.
When the Group, as lessee, essentially enjoys the economic benefits
1.12 Interest-bearing liabilities and bears the economic risks attributable to the leased asset, it is classi-
Interest-bearing liabilities are classified as financial liabilities at amortized fied as a finance lease. The leased asset is recognized in the balance sheet
cost. Amortized cost is determined based on the effective interest rate cal- as a fixed asset, while the estimated present value of future lease
culated when the liability was assumed. This means that surplus and deficit payments is recognized as a liability. The portion of the lease fee that falls
values as well as direct costs in conjunction with assuming of loans are dis- due for pay- ment within one year is recognized as a current liability, while
tributed over the term of the liability. the remain- der is recognized as a long-term liability. Finance leases are
Non-current interest-bearing liabilities have an anticipated maturity of capitalized at the lease’s commencement at the lower of the fair value of
more than one year, while current interest-bearing liabilities have a the leased prop- erty and the present value of the minimum lease
matu- rity of less than one year. payments.
Minimum lease fees for finance leases are divided between interest
1.13 Trade Payables expense and amortization of the outstanding liability. Interest expense is
Trade payables are classified in the category financial liabilities at amor- divided over the lease term so that each reporting period is charged with an
tized cost. amount corresponding to a fixed interest rate for the liability recognized in
Trade payables have short expected term and are valued at nominal each period. Variable fees are expensed in the period in which they arise.
value. Leases in which a significant portion of the risks and rewards of owner-
ship are retained by the lessor are classified as operating leases. Payments
1.14 Derivatives for cashflow hedges made under operating leases (net of any incentives received from the les-
The derivative instrument for cashflow is classified in the category deriva- sor) are charged to the income statement on a straight-line basis over the
tives for cashflow hedges. The hedging derivative instrument refers to sale period of the lease.
and purchasing of forward contracts for a period of normally 6 to 12
months. 1.17 Current and deferred income tax
The hedging derivative instrument is measured at fair value each The tax expense for the period comprises current and deferred tax. Tax is
period where the effective portion of the change in fair value is deferred in recognized in the income statement, except to the extent that it relates to
Other Comprehensive Income and presented within equity. The difference items recognized in other comprehensive income or directly in equity. In
between the effective portion of the change in the fair value of the deriva- this case, the tax is also recognized in other comprehensive income or
tive hedging instrument and the full change in the fair value (the directly in equity, respectively.
ineffective portion) is recognized in the Income statement. The change in The current income tax charge is calculated on the basis of the tax
fair value of the hedging instrument that is deferred in OCI is reclassified laws enacted or substantively enacted at the reporting date in the
to Income statement in the same period as when the hedged item affects countries where the Company and its Group companies operate and
Income statement, and is recorded within Revenue. generate taxa- ble income. Management periodically evaluates positions
taken in tax returns with respect to situations in which applicable tax
1.15 Other payables, other liabilities, accrued expenses regulation is sub- ject to interpretation. It establishes provisions where
and prepaid income appropriate on the basis of amounts expected to be paid to the tax
Other payables, other liabilities, accrued expenses and prepaid income are authorities.
recognized at amortized cost. Deferred income tax is recognized, using the liability method, on tempo-
rary differences arising between the tax bases of assets and liabilities and
1.16 Leasing their carrying amounts in the consolidated financial statements. However,
From January 1, 2019 the Group applies IFRS 16, Leases that replaces deferred tax liabilities are not recognized if they arise from the initial recog-
IAS 17 and the associated interpretation statement IFRIC 4. Transcom nition of goodwill; deferred income tax is not accounted for if it arises from
applied the modified retrospective approach meaning the restated com- initial recognition of an asset or liability in a transaction other than a busi-
parative amounts for 2018 has not been restated, instead has the opening ness combination that at the time of the transaction affects neither
balance been adjusted with the cumuluative effect of initially applying the accounting nor taxable profit or loss.
standard as an adjustment of retained earnings. The leasing agreements Deferred tax assets and liabilities have been measured at the tax rate
recorded according to the new standard, mainly refers to rental that are expected to apply during the period when the asset is realized or
agreement of sites and offices. The Group is only a lessee not a lessor. the liability is settled, according to the tax rates and tax regulations that
Leases are recognized as a right-of-use asset and a corresponding lia- have been resolved or enacted at the balance-sheet date.
bility at the commencement date of the lease. Each lease payment is Deferred income tax assets are recognized only to the extent that it is
allo- cated between the liability and finance cost which is charged to probable that future taxable profit will be available against which the tem-
profit and porary differences can be utilized.
Deferred income tax is provided on temporary differences arising on
investments in Group companies and associates, except for deferred

Transcom Annual Report 1


Notes to the Consolidated financial
income tax liability where the timing of the reversal of the temporary
differ-

1 Transcom Annual Report


Notes to the Consolidated financial

ence is controlled by the Group and it is probable that the temporary


differ- ence will not reverse in the foreseeable future. 1.23 Revenue recognition
Deferred income tax assets and liabilities are offset when there is a Revenue from contracts with customers is recognized when control of the
legally enforceable right to offset current tax assets against current tax lia- goods or services are transferred to the customer at an amount that
bilities and when the deferred income taxes assets and liabilities relate to reflects the consideration to which the Group expects to be entitled in
income taxes levied by the same taxation authority on either the same exchange for those goods or services. Revenue mainly arises from call
tax- able entity or different taxable entities where there is an intention to services operations.
settle the balances on a net basis. • Revenues related to inbound teleservices are recognized at the time
services are provided on a per-call basis.
1.18 Employee benefits • Revenues on outbound teleservices are recognized at the time services
Group companies operate various pension schemes. The schemes are gen- are provided on either a per-call, per-sale or per-collection basis under a
erally funded through payments to insurance companies or trustee-admin- fully executed contractual agreement and record reductions to revenues
istered funds, determined by periodic actuarial calculations. The Group has for contractual penalties and holdbacks for failure to meet specified mini-
both defined benefit and defined contribution plans. mum service levels and other performance based contingencies.
A defined contribution plan is a pension plan under which the Group
pays fixed contributions into a separate entity. The Group has no legal 1.24 Financial income and expenses
or constructive obligations to pay further contributions if the fund does Financial income and expenses consist of interest income on bank bal-
not hold sufficient assets to pay all employees the benefits relating to ances and receivables and interest-bearing securities, bank fees, interest
employee service in the current and prior periods. expenses on loans, dividend income, exchange rate differences, realized
A defined benefit is typically defined by the amount of pension benefit and unrealized gains on financial investments, and derivatives used in
that an employee will receive on retirement, usually dependent on one or financial operations.
more factors such as age, years of service and compensation. The liability
recognized in the statement of financial position in respect of defined 1.25 Fair value measurement
benefit pension plans is the present value of the defined benefit obligation The Group measures financial instruments, such as, derivatives, at fair
at the end of the reporting period less the fair value of plan assets, value at each balance sheet date. Also, fair values of financial
together with adjustments for unrecognized past-service costs. The instruments measured at amortized cost are disclosed in note 23.
defined benefit obligation is calculated annually by independent actuaries Fair value is the price that would be received to sell an asset or paid to
using the pro- jected unit credit method. The present value of the defined transfer a liability in an orderly transaction between market participants at
benefit obliga- tion is determined by discounting the estimated future cash the measurement date. The fair value measurement is based on the pre-
outflows using interest rates of high-quality corporate bonds that are sumption that the transaction to sell the asset or transfer the liability
denominated in the currency in which the benefits will be paid, and that takes place either:
have terms to maturity approximating to the terms of the related pension • In the principal market for the asset or liability,
obligation. • or in the absence of a principal market, in the most advantageous
Actuarial gains and losses arising from experience adjustments and market for the asset or liability
changes in actuarial assumptions are charged or credited to other compre-
hensive income in the period in which they arise. The principal or the most advantageous market must be accessible to by
Past-service costs are recognized immediately in income, unless the the Group.
changes to the pension plan are conditional on the employees remaining The fair value of an asset or a liability is measured using the assump-
in service for a specified period of time (the vesting period). In this case, tions that market participants would use when pricing the asset or liability,
the past-service costs are amortized on a straight-line basis over the assuming that market participants act in their economic best interest.
vesting period. A fair value measurement into account a market participant’s ability to
The Group’s main defined benefit plans are a termination indemnity generate economic benefits by using the asset in its highest and best use
plan in Italy, a pension plan in Philippines and in the USA. by selling it to another market participant that would use the asset in its
Revenue from contracts with customers is recognized when control of highest and best use.
the goods or services are transferred to the customer at an amount that The Group uses valuation techniques that are appropriate in the circum-
reflects the consideration to which the Group expects to be entitled in stances and for which sufficient data are available to measure fair value,
exchange for those goods and services. The Group pays out various sales maximizing the use of relevant observable inputs and minimizing the use of
commissions to its employees where the Group will initially recognize a unobservable inputs.
contract asset and amortize the asset over the expected customer service All assets and liabilities for which fair value is measured or disclosed in
period. A corresponding liability will initially be recognized based on the the financial statements are categorized within the fair value hierarchy,
assessed commission costs related to the contracts with customers. described as follows, based on the lowest level input that is significant to
the fair value measurement as a whole:
1.19 Share capital • Level 1 – Quoted (unadjusted) market prices in active markets for
Incremental costs directly attributable to the issue of new ordinary shares identi- cal assets or liabilities;
or options are shown in equity as a deduction, net of tax, from the • Level 2 – Valuation techniques for which the lowest level input that is
proceeds. sig- nificant to the fair value measurement is directly or indirectly
observable;
1.20 Dividend • Level 3 – Valuation techniques for which the lowest level input that is
Dividend is recognized as a liability in the Group’s financial statements in sig- nificant to the fair value measurement is unobservable.
the period in which the dividends are approved by the Annual General
Meeting. For assets and liabilities that are recognized in the financial statements on
a recurring basis, the Group determines whether transfers have occurred
1.21 Provisions between Levels in the hierarchy by re-assessing categorization (based on
Provisions for restructuring costs, legal claims and other obligations are the lowest level input that is significant to the fair value measurement as
recognized when: the Group has a present legal or constructive obligation a whole) at the end of each reporting period.
as a result of past events; it is probable that an outflow of resources will
be required to settle the obligation; and the amount has been reliably esti- 1.26 Cash flow statement
mated. Restructuring provisions comprise lease termination penalties and The cash flow statement includes changes in the balance of liquid assets.
employee termination payments. Provisions are not recognized for future The Group’s liquid assets consist of cash and bank balances with original
operating losses. maturities of three months or less.
Provisions are measured at the present value of the expenditures Cash flow is presented according to the indirect method, and divided
expected to be required to settle the obligation using a pre-tax rate that into cash flows from operating activities, investing activities and financing
reflects current market assessments of the time value of money and the activities. Cash flow from investing activities includes only actual disburse-
risks specific to the obligation. ments for investments during the year.
Foreign Group companies’ transactions are translated in the cash flow
1.22 Contingent liabilities statement at the average exchange rate for the period. Acquired and
A contingent liability is recognized when there is a possible obligation that divested Group companies are recognized as cash flow from investing
arises from past events whose existence will be confirmed only by one or activities, net, after deducting liquid assets in the acquired or divested
more uncertain future events or when there is an obligation that is not company.
rec- ognized as a liability or provision because it is not probable that an
outflow of resources will be required.

Transcom Annual Report 1


Notes to the Consolidated financial

1.27 Segment reporting


Operating segments are reported in a manner consistent with the internal vices delivered to clients based in Europe) and Latin America (services
reporting provided to, and is evaluated regularly by, the chief operating delivered to clients based in Latin America). From March 2019 Transcom
decision maker, i.e. the Group’s CEO. Transcom’s operating segments are doesn´t have any operations in Latin America.
English-speaking (services delivered to multinational clients), Europe (ser-

Note 2 Critical accounting estimates and judgements


The preparation of financial statements in conformity with IFRS requires
the use of certain critical accounting estimates. It also requires manage- (b) Provisions
ment to exercise its judgment in the process of applying the Group’s The Group recognizes a provision where there is a present obligation from
accounting policies. The areas involving a higher degree of judgment or a past event, a transfer of economic benefits is probable and the amount
complexity, or areas where assumptions and estimates are significant to of costs of the transfer can be estimated reliably. The Group reviews out-
the consolidated financial statements are described below. standing legal cases, including tax audits, following developments in the
legal proceedings, in order to assess the need for provisions and disclo-
(a) Impairment of goodwill and intangible assets sures in its financial statements. Among the factors considered in making
The Group annually evaluates the carrying value of goodwill and intangible decisions on provisions are the nature of litigation, claim or assessment,
assets for potential impairment by comparing projected discounted cash the legal process and potential level of damages in the jurisdiction in
flows (using a suitable discount rate) associated with such assets to the which the litigation, claim or assessment has been brought, the progress
related carrying value. An impairment test is also carried out should events of the case (including the progress after the date of the financial
or circumstances change which may indicate that there may be need for statements but
impairment. An impairment loss would be recognized when the estimated before those statements are issued), the opinions or views of legal
future discounted cash flow generated by the asset is less than the carrying advisers, experience on similar cases and any decision of the Group’s
amount of the asset. An impairment loss would be measured as the amount management as to how it will respond to the litigation or claim.
by which the carrying value of the asset exceeds the recoverable amount.
The Group performed its annual impairment test during the 4th quarter of (c) Contingent liabilities
2019. Changes in the assumptions and estimates used may have a signifi- The Group has contingent liabilities related to litigations and legal claims
cant effect on the income statement and statement of financial position. arising in the ordinary course of business. The integrated worldwide nature
Please see note 12 for further details including a sensitivity analysis of of Transcom’s operations can give rise to complexity and delays in assess-
some of the assumptions made. ing the Group’s tax position and can lead to the Group occasionally facing
tax audits which in some cases result in disputes with tax authorities.
During these tax audits, local tax authorities may question or challenge
the Group’s tax positions. Disputes with tax authorities can lead to litiga-
tions in front of several courts resulting in lengthy legal proceedings.

1 Transcom Annual Report


Notes to the Consolidated financial

Note 3 Performance obligations


The Group’s client contractual terms are normally 1–3 years, the contrac-
tual periods according to IFRS 15 are shorter and corresponds to the
period covered in the specific volume request from the respective client,
which is stipulated in each contract and is normally a shorter period, e.g.
between 1–6 months. These volume requests are minimum obligation
levels, and both revenue and cash flow are generated during the same
periods. These are identified as the Group’s performance obligations. As
per December 2019 the performance obligations amounts to EUR 54,617
thousand (2018: EUR 49,987 thousand).

Note 4 Segment information


EUR thousand 2019
Latin Total
English–speaking Europe America Group
Revenue from external customers 184,964 355,628 867 541,459
EBITA excl. non-recurring items 23,325 15,787 –75 39,038
Transaction-related amortization –10,927
Non-recurring items –8,402
EBIT 19,709
Net financial items –17,565
Profit/loss before tax 2,143

EUR thousand 2018


Revenue from external customers 166,370 371,624 5,639 543,633
EBITA excl. non-recurring items 14,955 17,199 –591 31,563
Transaction-related amortization –9,539
Non-recurring items –34,575
EBIT –12,551
Net financial items –19,674
Profit/loss before tax –32,226

The Group reportable segments are composed as follows:


Revenues from the largest single customers amounted to EUR 42,818
• English-speaking segment: services delivered to multinational clients.
thousand, referring to Europe segment and revenues from the second
• Europe segment: services delivered to clients based in Europe.
larg- est client amounted to EUR 41,626 thousand also in the Europe
• Latin America segment: services delivered to clients based
segment (2018: EUR 61,530 thousand, Europe segment, EUR 42,271
in Latin America.
thousand English-speaking segment). External revenue for Sweden
amounted to EUR 109,159 thousand (2018: EUR 121,640 thousand) and
As of January 1, 2019 there was a minor organization change in the Group,
total assets
a movement between the English speaking and the Europe segment. As in Sweden amounted to EUR 697,493 thousand (2018: EUR 731,914
such, 2018 figures have been restated accordingly. In March 2019 the thousand).
Chilean operation was divested, and de-consolidated from that date. The Goodwill per segment is reflected in note 12.
transaction concludes the divestment of Transcom´s operations in the Latin
America segment.

Note 5 Expenses by nature


Note 6 Employees
EUR thousand 2019 2018
Production costs –19,181 –19,712 Salaries, other remuneration and social security charges
Personnel expenses –423,810 –449,887 EUR thousand 2019 2018
Other –44,139 –67,616 Salaries and other remunerations –337,266 –349,017
Amortization and depreciation –34,725 –17,372 Social security charges –58,926 –70,764
Expenses charged to the income Pension expenses –11,370 –10,436
statement –521,855 –554,586 Total –407,562 –430,217

Salaries, other remuneration and social security charges are


recognized in the following line items in the income statement
EUR thousand 2019 2018
Cost of sales –369,121 –397,090
Marketing expenses –1,272 –2,313
Administrative expenses –37,169 –30,815
Total –407,562 –430,217

Transcom Annual Report 1


Notes to the Consolidated financial

Note 6 Employees, cont.


Average number of employees
2019 2018
Women Men Total Women Men Total
Albania 283 223 506 381 283 664
Chile – – – 314 210 524
Estonia 150 139 289 179 153 332
Philippines 5,523 5,243 10,766 4,663 4,384 9,047
Italy 628 196 824 505 199 705
Canada 59 36 95 75 48 123
Croatia 636 274 910 582 242 824
Latvia 208 133 341 198 132 330
Lithuania 563 302 865 620 329 949
The Netherlands 147 241 388 151 248 399
Norway 81 97 178 90 109 199
Poland 584 304 888 497 260 757
Portugal 233 82 315 305 100 405
Serbia 389 243 632 297 113 410
Spain 2,493 790 3,283 3,118 942 4,060
United Kingdom 14 15 29 16 25 41
Sweden 599 752 1,352 723 913 1,636
Switzerland – 1 1 – 1 1
Tunisia 699 485 1,184 351 502 853
Germany 395 360 755 434 432 866
Hungary 125 101 226 149 99 248
United States 675 293 968 665 292 957
Total1 14,484 10,310 24,795 14,314 10,016 24,330
1) Total average number of employees excludes agency staff.

Women in Board and Executive management, %


2018
2019 2018
Variable
Board of Directors – Base compen Other Pension
Executive management 31% 38% EUR thousand salary sation benefits1 fees Total
President
Remuneration to the Board and CEO:
EUR thousand 2019 2018 Michael Weinreich –523 –200 –22 – 745
Chairman of the Board: Other members of
Fredrik Cappelen –50 –50 Executive man
agement:
Other members of the Board:
7 positions –997 –169 –105 –212 –1,483
Alfred von Platen –30 –30
Total –1,520 –369 –127 –212 –2,228
Eivind Roald –30 –30
1) Refers to allowances, company car, medical insurance etc.
Fredrik Nylander –30 –30
Mattias Holmström –30 –30 During 2019 the Executive management consisted of the following per-
Klas Johansson –30 –30 sons: Michael Weinreich, Leif Mårtensson (CFO until June 2019), Jonas
Total –200 –200 Dahlberg (CFO from July 2019), Cecilia Forzelius (until March 2019), Chris-
tian Hultén (until July 2019), Eva Wikmark-Wallin (from September 2019),
Stefan Berg, Helene Ruda, Steffen Bagge (from August 2019), Gianluca
Remuneration and other benefits to Executive management Gemma, Juan Brun, Pernilla Oldmark, Robert Kressing, Oliver Cook, Alex-
2019 andra Dahan and Mark Lyndsell.
The following guidelines were applied on remuneration for senior exec-
Variable
Base compen Other Pension utives within the Group which currently include fourteen members of the
EUR thousand salary sation benefits1 fees Total Executive management of Transcom (“Executive Managers”), as well as
President members of the Board of Directors to the extent they are remunerated
out- side their directorship. The remuneration to the Executive Managers
and CEO:
con- sists of fixed salary and variable salary. The fixed salary and the
Michael Weinreich –515 –298 –27 – –840 bonus per- centage may vary amongst Executive Managers according to
Other members of their level of responsibility or seniority. The level of variable salary is in
Executive man accordance with market practice and depends on the level of responsibility
agement: and seniority and calculated according to a combination of results
15 positions –1,943 –349 –229 –478 –2,999 achieved and individ- ual performances. Other benefit constitutes of a
limited amount in relation to the total remuneration and corresponds to
Total –2,458 –647 –256 –478 –3,839
the local practice. In the event of notice of termination of employment
1) Refers to allowances, company car, medical insurance etc. being served by Transcom, there is entitlement to salary during such
notice period according to law governing in respective employment
relationship.
In the event of notice of termination of employment being served by
the Company, Executive Managers are entitled to salary during a period in
a range of maximum 12 months.

1 Transcom Annual Report


Notes to the Consolidated financial

The Executive Managers is entitled to pension commitments based on


those that are customary in the country in which they are employed. The Operating leasing costs as lessee
Executive Managers are offered defined contribution pension plans, with EUR thousand 2018
premiums amounting in a range to a maximum of 30 percent of the fixed
Premises –18,702
salary that are paid to insurance companies. Members of the Board of
Directors, may in certain cases receive a fee for services performed within IT Equipment 36
their respective areas of expertise, outside of their duties on the Board of Office equipment 242
Directors. Compensation for these services shall be paid at market terms Cars 745
and be approved by the Board of Directors. In special circumstances, the
Board of Directors may deviate from the above guidelines. In such case, Others 105
the Board of Directors is obligated to give account for the reason for the Total –19,830
devia- tion on the following annual general meeting of shareholders. The
Board of Directors’ view is that the remuneration to the CEO and the other Generally, the Group’s lease contracts require deposits and certain
members in the Executive management strikes an appropriate balance provisions for inflation-indexed rental increases.
between motivating the members of the Executive management and
achieving a well-balanced competitive compensation that aligns the Future payments for non cancellable leases as
members’ incen- tives with the interests of Transcom and the owners. at December 31, 2018
Less than Between one
EUR thousand one year and five years Total
Premises –12,652 –27,627 –40,279
Note 7 Leases IT Equipment –716 –696 –1,412
Office equipment –156 –144 –300
Amounts recognised in the balance sheet Cars –372 –361 –733
Rightofuse asset Premises IT equipment Other –12 –16 –28
As at January 1, 2019 31,674 494 Total –13,908 –28,844 –42,752
Additions1 8,959 427
Changes2 –2,774 – Assets utilized under finance leases as a lessee
Depreciation –12,542 –371 EUR thousand 2018
Translation differences 40 8 Cost 32
As at December 31, 2019 25,358 558 Accumulated depreciation 32
Carrying value –
Lease liability Premises IT equipment
As at January 1, 2019 31,674 494 There are no uncancellable leasing contracts that has duration further
Additions1 8,959 427 than 5 years.
Changes2 –2,219 –
Accretion of interest 2,120 32
Payments .–13,685 –387
Note 8 Remuneration to auditors
Translate differences 42 8
As at December 31, 2019 26,892 574
EUR thousand 2019 2018
Ernst & Young
Non-current lease liability 15,673 345
Audit services –893 –767
Current lease liability 11,218 230 Audit services outside the assignment –3 –
1) Extension of contracts a total of 1,4 million per the year. Tax advice – –6
2) Primarily relates to termination of contracts.
Other audit firms
The maturity analysis of lease liabilities disclosed in note 23. Audit services –92 –76
Total –988 –849
Amounts recognised in the income statement
Audit services refer to the statutory audit, i.e. the reviewing of the annual
20 report, the accounts and the administration by the Board of Directors and
Depreciation right of use assets, Premises Managing Director.
–12,542
Depreciation right of use aseets, IT equipment Audit services also include any other tasks that the company's auditor
–371
Interest expense on lease liability is required to perform.
–2,152 Audit services outside the assignment involve quality assurance
Expense relating to short-term leases
–2,999 measures, that is to say, in part, any review of management, the Articles of
Expense relating to leases of low-value Association, statuses or agreements intended to result in a report, certifi-
–1,371
Variable lease payments cate or other document addressed to a party other than the principal and,
–529 in part, advice or other assistance occasioned by observations made during
The table below shows the reconciliation of IAS 17 operating lease com- an audit. Reviews of interim financial reports are included in the audit
mitments and IFRS 16 lease liabilities. activ- ities outside the assignment. Tax advice includes advice on income
taxes and VAT.

MEUR January 1, 2019


Total lease commitments as of December 31, 2018 43
Impact of discounting remaining lease payments 7
Recognition exemption for short-term leases and low
value leases 4
Lease liability in consolidated statement of financial
position at January 1, 2019 32

Transcom Annual Report 1


Notes to the Consolidated financial

Note 9 Amortization, depreciation


Note 10 Financial income and expenses
and impairment
Financial income
Amortization and depreciation
EUR thousand 2019 2018
EUR thousand 2019 2018
Interest income on bank deposits 255 548
Customer relationships –10,927 –9,539
Other financial income 489 546
Development costs –886 –843
Total 744 1,094
Other intangibles –1,758 –93
Telephone switch –555 –427
Financial expenses
Fixture and fittings –1,200 –912
EUR thousand 2019 2018
Computer hardware and software –3,910 –3,255
Interest expense on bank borrowings –14,472 –12,479
Office improvements –2,577 –2,302
Interest expense on lease liabilities –2,152 –
Right-of-use assets –12,913 – Other financing costs1 –1,208 –7,926
Total –34,725 –17,372 Bank fees –121 –362
Amortization, depreciation and impairment are recognized in the following Foreign exchange loss –357 –1
line items in the income statement: Total –18,309 –20,768
1) 2018 includes costs of EUR 4.8 million relating to the previous financing agreement. The
EUR thousand 2019 2018 previous financing agreement was replaced by a Senior Secured Fixed Rate Notes in March
2018, why the full amount was recorded and presented as Other financing costs.
Cost of sales –22,184 –17,372
Administrative expenses –12,542 –
Total –34,725 –17,372

Note 11 Taxes
Income tax expense
EUR thousand 2019 2018
Current income tax on profit/loss for the year includes corporate income
Current income tax on profit/loss for the –8,099 –3,507 tax of EUR 7,499 thousand (2018: EUR 3,967 thousand) and witholding tax
year –1,868 –1,418 of EUR 600 thousand (2018: EUR 958 thousand). The deferred tax benefit
Adjustments in respect of prior years is related to amortization of intangible assets and recognition of deferred
Current taxes –9,967 –4,924 tax assets on losses in four entities. Adjustments in respect of prior years
mainly represent a correction of deferred tax liability related to intangible
assets and a provisions with respect to claims brought against the Group
Current year origination and reversal by tax authorities in one jurisdiction.
of temporary differences 5,420 6,931 As at December 31, 2019 eight Group entities were subject to tax
Adjustments in respect of prior years 2,043 –738 audits. Some of these tax inquiries have resulted in reassessments, while
Deferred taxes 7,463 6,193 others are still at an early stage and no reassessments have yet been
Income tax expense –2,504 1,268 raised. As at December 31, 2019 the provision related to tax audits
amounts to EUR 3,897 thousand (2018: EUR 4,027 thousand).

Effective tax rate


A reconciliation of the statutory tax rate to the Company’s effective tax rate applicable to income from continuous operations was:

EUR thousand 2019 % 2018 %


Profit/loss before tax 2,143 –32,226
Calculated tax based on tax rate in Sweden 21.4 % –459 –21.4 7,090 –22.0
Foreign tax rate differential 3,161 147.5 555 –1.7
Tax exempt income 22 1.0 2,588 –8.0
Non-deductible expenses –3,731 –174.1 –2,671 8.3
Losses previously recognized impaired current year – – – –
Prior year losses recognized this year 6,124 285.8 2,325 –7.2
Losses for which no tax benefit is recognized –5,145 –240.1 –9,375 29.1
Adjustments in respect of prior years –11 –0.5 –2,156 6.7
Change in tax rates – – 410 –1.3
Withholding tax –600 –28.0 –958 3.0
Other tax not at standard rate1 –1,242 –58.0 –988 3.1
Other2 –624 –29.1 –4,449 –13.8
Income tax expense –2,504 –116.9 1,268 –3.9
1) Other tax not at standard rate mainly relates to regional business tax.
2) Other is mainly due to three entities' foreign exchange result in local currency which does not affect their functional currency profit before tax.

2 Transcom Annual Report


Notes to the Consolidated financial

Note 11 Taxes, cont.


Deferred tax assets
EUR thousand Tangible assets Tax losses Other Netting Total
As at January 1, 2019 550 3,910 1,031 –3,076 2,415
Opening balance adjustment 7 –1,375 1,376 – 8
Income statement movement –81 4,714 –1,538 – 3,095
Disposal of business –8 –126 –99 – –233
Addition – – –48 – –48
Reclassification – – 20 – 20
Netting of assets/liabilities – – – –3,953 3,953
As at December 31, 2019 468 7,123 742 –7,029 1,305

EUR thousand Tangible assets Tax losses Other Netting Total


As at January 1, 2018 621 108 814 –838 704
Opening balance adjustment 14 3 –29 26 14
Income statement movement –85 3,800 256 – 3,970
Change in accounting policy – – –8 – –8
Netting of assets/liabilities – – –1 –2,264 –2,266
As at December 31, 2018 550 3,910 1,031 –3,076 2,415

Deferred tax liabilities


EUR thousand Tangible assets Intangible assets Other Netting Total
As at January 1, 2019 – 29,222 1,123 –3,075 27,269
Opening balance adjustments – 98 – – 98
Income statement movement – –4,795 428 – –4,367
Disposal of business – –224 –233 – –457
Reclassification – – 2,400 – 2,400
Netting of assets/liabilities – – – –3,953 –3,953
As at December 31, 2019 – 24,301 3,717 –7,028 20,989

EUR thousand Tangible assets Intangible assets Other Netting Total


As at January 1, 2018 – 24,418 462 –838 24,042
Acquisions – 7,848 – – 7,848
Opening balance adjustments – –833 –22 26 –829
Income statement movement – –2,211 683 – –1,527
Netting of assets/liabilities – – –1 2,264 –2,265
As at December 31, 2018 – 29,222 1,123 –3,075 27,269

Deferred tax assets are recognized for tax losses carried forward to the extent that the realization of the related tax benefit through future taxable profit is
probable. The Group did not recognize deferred tax assets for losses amounting to EUR 52,327 thousand (2018: EUR 76,463 thousand). 5,062 thousand
(2018: EUR 38,159 thousand) of these losses have no expiration date. The corresponding deferred tax assets for the losses would have been 13,551 EUR
thousand (2018: EUR 18,970 thousand) based on each country expected tax rate.

Note 12 Goodwill and other intangible assets


Customer Development
EUR thousand Goodwill relationships Brand cost Others Total
Cost
As at January 1, 2019 210,352 101,184 23,206 15,596 3,193 353,530
Acquisitions1 –2,520 – – – – –2,520
Investments – – – 2,074 4,662 6,736
Disposals – – – –82 –17 –99
Disposal of business –2,761 –877 – – – –3,638
Translation differences 156 454 –85 14 –2 537
As at December 31, 2019 205,226 100,760 23,122 17,603 7,835 354,547

Accumulated amortization
and impairment
As at January 1, 2019 – –15,092 – –13,200 –2,772 –31,064
Amortization for the year – –10,927 – –886 –1,758 –13,571
Translation differences – –120 – – –2 –122
As at December 31, 2019 – –26,139 – –14,086 –4,531 –44,757
Carrying value as at December 31, 2019 205,226 74,621 23,122 3,517 3,304 309,790
1) Goodwill and Customer relationships refers to surplus value added from the acquisitions of Awesome OS and Albania operations in 2018. During 2019 an adjustment on Goodwill was done
after final review of the acquired net assets.

Transcom Annual Report 2


Notes to the Consolidated financial

Note 12 Goodwill and other intangible assets, cont.


Customer Development
EUR thousand Goodwill relationships Brand cost Others Total
Cost
As at January 1, 2018 174,085 74,921 23,399 15,416 3,093 290,914
Acquisitions1 36,353 25,574 – – – 61,927
Investments – – 39 181 87 307
Translation differences –86 689 –231 –1 12 383
As at December 31, 2018 210,352 101,184 23,206 15,596 3,193 353,531

Accumulated amortization
and impairment
As at January 1, 2018 – –5,262 – –12,347 –2,671 –20,280
Amortization for the year – –9,539 – –843 –93 –10,475
Translation differences – –291 – –10 –8 309
As at December 31, 2018 – –15,092 – –13,200 –2,772 –31,064
Carrying value as at December 31, 2018 210,352 86,091 23,206 2,396 421 322,467
1) Goodwill and Customer relationships refers to surplus value added from the acquisitions of Awesome OS and Albania operations.

Goodwill
Impairment testing for cash generating units. Customer relationships and development costs
The impairment test gave no indication of a need for goodwill impairment. Customer relationships mainly consist of intangible assets that were identi-
The Group treats the geographical regions as cash-generating units in fied during the past acquisitions based on the discounted cash flows
the sense referred to in IAS 36 Impairment of assets. In 2019 Awesome expected to be derived from the use and eventual sale of the asset, deter-
has been tested together with English-speaking. The carrying amounts of mined at the date of acquisition.
goodwill allocated to each cash-generating unit are: Development costs consist of amounts identified by executive manage-
ment’s where it is considered that technological and economical feasibility
exists, usually determined by reference to the achievement of defined mile-
EUR thousand 2019 2018
stones according to an established project management model. These
English-speaking 63,903 66,033 costs relate to development of assets for the use in the Group, no
Europe 141,323 144,319 indication of any loss in value.
Total 205,226 210,352
Brand
The calculation of the value in use was based on the following main
EUR thousand 2019 2018
assumptions:
Cash flows were projected based on past experience, actual operating English-speaking 5,535 5,541
results and the 3-year financial plans approved by the Board of Directors. Europe 17,587 17,666
Beyond the specifically forecasted period of three years, the Company Total 23,122 23,206
extrapolates cash flows based on estimated constant growth rates of 2.1
percent depending on executive management’s understanding of the Reported brands consists mainly of the brands Transcom and Xzakt and is
market. The anticipated annual revenue growth included in the cash-flow allocated to each cash-generating unit.
projections has been based on historical experience and expectations of
future changes in the market conditions. Market conditions take into
account the nature of risk and executive management’s estimations of
change within this market. These rates do not exceed the average long-
term growth rates for the relevant markets. The anticipated annual margin
growth totaled 1%.
Pre-tax discount rates 10.3 percent to 11.25 percent; Europe 11.25
percent (2018: 10.6) and English-speaking 10.3 percent (2018: Eng-
lish-speaking 11.7 and Awesome 8.4) were applied in determining the
recoverable amounts of the units. The discount rates is estimated based on
past experience, industry average weighted cost of capital and Group’s
industry related beta adjusted to reflect executive management’s assess-
ment of specific risks related to the unit. Reasonably possible changes in
key assumptions (such as discount rates, Revenue/Operating margin and
terminal growth rate) would not trigger any impairment loss to be recog-
nized.

2 Transcom Annual Report


Notes to the Consolidated financial

Note 13 Tangible assets


Telephone Fixtures and Computer hardware Office
EUR thousand switch fittings and software improvements Total
Cost
As at January 1, 2019 26,086 27,190 54,434 27,332 135,042
Investments 796 1,488 4,384 5,135 11,803
Disposals –250 –173 –1,132 –1,409 –2,964
Disposal of business – –1,747 – – –1,747
Translation differences 125 229 568 434 1,356
As at December 31, 2019 26,757 26,988 58,253 31,492 143,490

Accumulated amortization
and impairment
As at January 1, 2019 –24,688 –24,680 –45,819 –21,932 –117,118
Depreciation for the year –555 –1,200 –3,910 –2,577 –8,243
Disposals 250 163 914 1,367 2,693
Dispsal of business – 1,747 – – 1,747
Translation differences –127 –223 –429 –298 –1,077
As at December 31, 2019 –25,120 –24,192 –49,246 –23,440 –121,998
Carrying value as at December 31, 2019 1,637 2,796 9,007 8,053 21,493

Cost
As at January 1, 2018 25,175 25,595 47,520 24,046 122,337
Acquisition of a subsidiary – 511 2,068 1,953 4,531
Investments 720 1,273 4,900 1,603 8,496
Disposals –169 –251 –854 –1,048 –2,321
Reclassifications 59 –37 –42 20 –
Translation differences 301 100 841 758 2,000
As at December 31, 2018 26,086 27,190 54,434 27,332 135,042

Accumulated amortization
and impairment
As at January 1, 2018 –24,092 –23,556 –41,542 –18,817 –108,008
Acquisition of a subsidiary – –359 –1,005 –735 –2,100
Depreciation for the year –427 –912 –3,255 –2,302 –6,896
Disposals 152 213 629 518 1,513
Reclassifications –16 33 –7 –10 –
Translation differences –304 –99 –639 –586 –1,627
As at December 31, 2018 –24,688 –24,680 –45,819 –21,932 –117,119
Carrying value as at December 31, 2018 1,398 2,510 8,615 5,399 17,923

Transcom Annual Report 2


Notes to the Consolidated financial

Note 14 Trade receivables


Note 16 Equity
EUR thousand 2019 2018
Share capital
Trade receivables gross 59,534 71,425 Transcom's share capital as of December 31, 2019 was distributed among
Expected credit losses –459 –302 11,937,773 shares (2018: 11,937,773) with a nominal value of EUR cent
Trade receivables net 59,075 71,123 0.0046 per share (2018: EUR cent 0.0046). All shares entitle to one vote
each.
The carrying value less expected credit losses is assumed to approximate In January 2018 an issue of bonus shares took place. The company´s
the fair value. share capital was increased by 47,240 EUR to 55,000 EUR.
The two largest trade receivable balances represent 20 percent of the
total balance.

Expected credit losses Note 17 Interestbearing liabilities


EUR thousand 2019 2018
As at January 1 –302 –189 EUR thousand 2019 2018
Provisions recorded –155 –117 EUR revolving credit facility 3,000 6,200
Provisions used – 3 USD revolving credit facility 16,246 19,214
EUR fixed rate note (Unsecured) 10,000 10,000
Translation differences –1 1
EUR fixed rate note (Secured) 180,000 180,000
As at December 31 –459 –302
Amortized costs –756 –995
Other loans 6,230 3,592
Overview of the ageing of trade receivables
Total 214,721 218,011
EUR thousand 2019 2018
<30 days 5,999 9,941 Total 214,721 218,011
30–60 days 445 1,975 Non-current interest-bearing liabilities 201,034 216,725
60–90 days 274 456 Current interest-bearing liabilities 13,687 1,285
90–120 days 134 502
Total 214,721 218,011
>120 days 1,764 980
Total 8,616 13,854 EUR thousand 2019 2018
Non-current lease liabilites 16,018 –
The Group operates in several jurisdictions and payment terms vary upon
this, as well as on a client by client basis. Therefore, based upon the maxi- Currrent lease liabilites 11,448 –
mum payment terms, trade receivables of EUR 2,158 thousand are past Total 25,916 –
due more than 30 days but not provided for (2018: EUR 3,913). These
relates to independent customers for whom there is no recent history of EUR thousand 2019 2018
default. Details of credit risk are included in note 23. Unused credit facilities1 19,952 22,047
Total 19,952 22,047
1) Unused credit facilities includes unused cash pool limits.

Note 15 Other receivables and prepaid On March, 2018, Transcom replaced the previous financing agreement by
expenses and accrued EUR 180,000 thousand Senior Secured Fixed Rate Notes (SSFRN) listed on
Nasdaq, maturing in March 2023, as well as on the 19th of March 2018, a
income EUR 45,000 thousand Super Senior Revolving Credit Facility (SSRCF)
Agreement with Nordea and Danske Bank, both held by the Parent com-
Other receivables pany, maturing in September 2022. Interest rates in the revolving facility
EUR thousand 2019 2018 are based on LIBOR, STIBOR and EURIBOR plus margins. For the SSRCF
VAT recoverable 4,689 5,004 the Company is committed to meet certain test conditions. There was no
breach of covenants in 2019. In addition, a Senior Unsecured Fixed Rate
Amount due from public authorities 2,453 2,598
Notes (SUFRN), of EUR 10,000 thousand, was issued on July 24 2018. The
Client deposit related assets 571 370 maturity date is July, 2020. The SUFRN has been extended after the
Other receivables1 5,590 2,867 report- ing period. See note 29.
In the event of a change of control the SSRCF will need to be cancelled
Total 13,303 10,839
and be replaced by a new credit facility and the holders of SSFRN and SUFRN
1) Other receivables mainly relates to advanced payments and revaluation of derivatives have the right to request a repurchase of the Notes.
As per July 16, 2018, Transcom is financed by Santander of EUR 2,500
thousand and on December 21,2018 by BBVA of EUR 1,000 thousand.
Prepaid expenses and accrued income
EUR thousand 2019 2018 The table below shows the maturity profile of the Groups’s interest
Prepaid expenses 4,292 4,083 bearing liabilites including interests. For maturity profile for lease liabilities
Accrued income 31,715 33,762 see note 23.
Total 36,006 37,845
EUR thousand 2019 2018
All prepaid expenses and accrued income are expected to be settled within
12 months. Less than six months 3,247 10
Between six and twelve months 11,037 1,338
Between one and two years 277 13,589
Between two and five years 241,712 262,373
Total 256,273 277,309

2 Transcom Annual Report


Notes to the Consolidated financial

Note 18 Employee benefit obligations


The Group has employee benefit schemes in Italy, Phillippines and USA in
relation to termination indemnity and defined benefit pensions. A full actu- Reconciliation to the statement of financial position
arial valuation was carried out to December 31, 2019 by a qualified, EUR thousand 2019 2018
inde- pendent actuary. There are no plan assets in connection with the 1,758
Italy Philippines USA 2,017
pension plans in Italy, Philippines nor the USA. 1,559
Present value of scheme liabilities 612
1 2
2,631
3,318

Analysis of the amount charged to operating profit


2019 2018
EUR thousand Italy Philippines USA Total Italy Philippines USA Total
Current service cost – 196 – 196 – 183 – 183
Past service cost –108 – – –108 –174 –147 – –321
Total operating charge –108 196 – 88 –174 36 – –138

Analysis of the amount credited to other finance costs


2019 2018
EUR thousand Italy Philippines USA Total Italy Philippines USA Total
Interest on pension scheme
liabilities 2 46 – 48 21 10 – 31
Total finance cost 2 46 – 48 21 10 – 31

Major assumptions used by the actuary for the calculation of the defined benefit pension scheme
2019 2018
% Italy Philippines USA Italy Philippines USA
Rate of increase in salaries 2.0 2.0 – 2.0 2.0 –
Discount rate 0.7–0.8 5.5 – 1.7–1.9 7.7 –

Assumptions regarding future mortality experience are set in accordance with published statistics and experience in each territory.

Amount recognized in the statement of financial position – movement in deficit during the year
2019 2018
EUR thousand Italy Philippines USA Total Italy Philippines USA Total
As at January 1 2,017 612 2 2,631 2,354 231 – 2,584
Movement in the year
Acquired employee benefit
obligations – – – – – 122 2 124
Current service cost and
settlements – 196 –1 195 – 183 – 183
Reclassification to asset – – – – – – – –
Interest cost 2 46 – 48 21 10 – 31
Past service cost –108 – – –108 –174 –147 – –321
Contributions – –100 – –100 – 195 – 195
Actuarial gains/losses –17 747 – 730 –22 –18 – –40
Benefits paid –136 – – –136 –162 – – –162
Translation difference 57 57 – 36 – 36
As at December 31 1,758 1,559 1 3,318 2,017 612 2 2,631

The Italian liability would increase with EUR 39 thousand if the discount rate would be lowered by 0.5 percent. An increase with the same percentage
would lower the liability with EUR 35 thousand.
The liability in the Philippines would increase with EUR 162 thousand if the discount rate would be lowered by 1 percentage point. An increase with
the same percentage would lower the liability with EUR 189 thousand. If the inflation rate assumption in the Philippines would increase with 1 percentage
point the liability would be EUR 168 thousand higher, the corresponding decrease would lower the liability with EUR 194 thousand.

Transcom Annual Report 2


Notes to the Consolidated financial

Note 19 Provisions
Note 21 Accrued expenses and
prepaid income
Legal and Restruc
EUR thousand tax claims turing Other Total EUR thousand 2019 2018
As at January 1, 2019 12,028 3,429 25,133 40,588 Accrued personnel expenses 23,875 22,813
Provisions made2 1,695 3,066 2,047 6,808 Other accrued expenses1 16,643 17,703
Provisions used – –3,547 –7,090 –10,637 Deferred income 156 162
Provisions reversed – –2,049 –131 –2,180 Total 40,674 40,678
Reclass within 1) Other accrued expenses are mainly related to temporary agents, subcontractors
current liabilites3 –1,800 1,178 – –622 and rents.
Translation differences –1 –4 451 447
As at December 31, 20191 11,922 2,073 20,409 34,404

Non-current provisions – – 13,659 13,659 Note 22 Commitments and contingencies


Current provisions 11,922 2,073 6,751 20,746 The Group has contingent liabilities related to litigations and legal claims
Total 11,922 2,073 20,409 34,404 arising in the ordinary course of business. The integrated worldwide
nature of the Group’s operations can give rise to complexity and delays
Legal and Restruc in assess- ing the Group’s tax position and can lead to the Group
EUR thousand tax claims turing Others Total occasionally facing tax audits which in some cases result in disputes with
tax authorities. Dur-
As at January 1, 2018 1,247 842 1,985 4,074 ing these tax audits, local tax authorities may question or challenge the
Provisions made2 10,781 5,085 24,502 40,368 Group’s tax positions. Disputes with tax authorities can lead to litigations in
front of several courts resulting in lengthy legal proceedings. As at Decem-
Provisions used – –2,474 –6 –2,480
ber 31, 2019, eight Group entities are subject to tax audits. Some of
Provisions reversed – – –1,377 –1,377 these tax inquiries have resulted in reassessments, while others are still
Translation differences – –24 27 3 at an early stage and no reassessments have yet been raised. As at
As at December 31, 20181 12,028 3,429 25,131 40,588 December 31, 2019 the provision amounts to EUR 3,897 thousand related
to tax audits (December 31, 2018: 4,027). See also note 19.
The group has no material contingent liabilities as at December 31,
Non-current provisions – – 18,074 18,074 2019. In addition to the above tax risks, the Group may be subject to
Current provisions 12,028 3,428 7,059 22,514 other tax claims for which the risk of future economic outflows is currently
evalu- ated to be remote.
Total 12,028 3,428 25,133 40,588
1) The Group had as at December 31, 2019 a provision of EUR 3,897 thousand relating
to several tax audits (EUR 4,027 as at December 31,2018). For further information,
see note 11 and 22.
2) Other provisions are mainly related to earn-outs in relation to the acquisition of
Awesome OS.
3) A reclass from provision to Income tax payables and a reclass from other libilities
to provisions.

Provision which will be paid later than 12 months have been classified
as non-current provisions.

Note 20 Other liabilities


EUR thousand 2019 2018
VAT payable 4,139 5,203
Social costs 7,138 7,742
Liabilities to public authorities 2,919 4,718
Amounts payable to employees 2,887 2,554
Other current liabilities 1,530 883
Total 18,613 21,100

2 Transcom Annual Report


Notes to the Consolidated financial

Note 23 Financial instrument risk management objectives and policies


The main risks arising from the Group’s financial instruments are liquidity
risk, credit / counterparty risk, foreign currency risk, and interest rate risk. Audit Committee. Main exposure for the Group is in the Philippines with
The Board of Directors reviews and agrees policies for managing each of exposures in PHP vs USD. In 2019, 40 percent of the anticipated net flow of
these risks which are summarized below. sales and costs has been hedged by purchasing of forward contracts for
a period of 12 months.
Management controls and procedures Translation risk, results from the conversion of assets, liabilities, reve-
The Board has overall responsibility for the determination of the Group’s nues and costs denominated in non-Euro reporting currencies, into the
risk management objectives and policies with the objective to set policies Group reporting currency, which is the Euro. In 2019, 48.4 percent of the
that seek to reduce risk as far as possible, without unduly affecting the Group’s sales were denominated in currencies other than the reporting
Group’s competitiveness and flexibility. It has delegated the authority for cur- rency of the Group. The Board has decided not to hedge these
designing and operating the associated processes to the Group’s exposures as they do not constitute a direct cash flow exposure.
treasury department. In terms of shareholders’ equity in the Group, a +/–10 percent change
Risk exposures are monitored and reported to management on a quar- per December 31, 2019 of the exchange rate for the USD vs EUR would
terly basis, together with required actions when tolerance limits are have affected shareholders’ equity in the Group with EUR –
exceeded. 12,824/15,673 thousand and EUR –11,893/14 535 thousand against
For the presentation of market risks, IFRS 7.40 requires sensitivity SEK. Exposures in other currencies would have had an immaterial impact for
anal- ysis that shows the effects of hypothetical changes of relevant risk the Group.
varia- bles on the income statement and shareholders’ equity. On the net income for the group, a +/–10 percent change per 2019
aver- age exchange rate for the USD vs EUR would have the Group’s net
Interest rate risk income of EUR –920/1 125 thousand and EUR –123/150 thousand against
The Group’s exposure to the risk of changes in market interest rates SEK. Exposures in other currencies have an immaterial impact for the Group.
relates primarily to the Group’s revolving credit facility. The interest on
each loan under the facility agreement for each term is calculated as the Credit/counterparty risk
aggregate of the Interbank offered rate (IBOR) plus a margin based on the With respect to credit risk arising from the financial assets of the Group,
basis of the consolidated total net debt to consolidated EBITDA. Interest which comprise balances from credit sales and cash and cash equivalents,
rate risk is not hedged, neither through derivative financial instruments or the Group’s exposure to credit risk arises from default of the counterparty,
otherwise. If the EUR interest rates increase by 10 percent it will have an with a maximum exposure equal to the carrying value of these instruments.
effect on the profit before tax by EUR 218 thousand, if the USD interest Prior to accepting new accounts and wherever practicable, credit
rates increase by 10 percent it will have an effect on the profit before tax checks are performed using a reputable external source. Credit risk is
by EUR 94 thou- sand. This with all other variables held constant of the reviewed monthly by Executive management, and corrective action is taken
Group’s profit before tax (through the impact on floating rate borrowings). if pre-agreed limits are exceeded. Bank counterparty risk is mitigated by
There is no material impact on the Group’s equity. concentrating the Group’s cash management activity with a limited number
of top tier banks in each of the Group’s regions.
Foreign exchange risk Further analysis on gross trade debtors, provisions and ageing of net
The following main exchange rates have been used to translate the trans- trade debtors are provided in note 1.10 and note 14. The maximum expo-
actions in foreign currency to Euro in the financial statements. sure to credit risk is represented by the carrying amount of each financial
asset on the statement of financial position.
Foreign exchange rates
2019
Liquidity risk
2018 Liquidity risk entails the risk that there is insufficient cash and cash equiva-
AverageClosing
raterate lents and marketable securities or agreed credit opportunities to close the
market positions. Liquidity risk arises from the Group’s management of its
Average Closing working capital as well as the finance charges and principal repayments on
Currency rate rate its debt instruments.
US Dollar, USD 1.12
57.9156.90 1.12 1.18 1.15 The Group monitors this risk using a consolidated cash flow model in
Swedish Krona, SEK 10.56 10.45 10.26 10.25 order to identify peaks and needs in liquidity and identify benefits which
can be attained by controlled placement and utilization of available funds.
Philippine peso, PHP 61.94 60.11 A significant mitigating factor of the Group’s liquidity risk is the unused
As an international company, the Group is subject to foreign exchange risks proportion of the Revolving Credit facility agreement as disclosed in note
of two different types: 14, as well as other financing sources which may be implemented from
Transactional risk, which may occur when the Group invoices clients time to time by the Group. The unused proportion of the Credit Facility at
in one currency and must pay its costs in another currency. The Group December 31, 2019 was EUR 19,952 thousand including unutilized cash
seeks to minimize these movements by matching the currency of revenue pool limit (2018: 1,416 excluding unutilized cash pool limit).
with the currency of costs, by negotiating pricing adjustments and/or The liquidity risk is deemed stable and the Board of Directors believes
indexation of contracts to foreign exchange rates, and by implementing that the capital required to meet the company’s commitments will be avail-
hedging instru- ments on a case-by-case basis, under close supervision of able during the 2020 fiscal year.
the Board and

Transcom Annual Report 2


Notes to the Consolidated financial

Note 23 Financial instrument risk management objectives and policies, cont.


Classification of the Group’s financial assets and liabilities
2019 2018
Financial Financial Deriva Financial Financial Deriva
instruments instruments tives for Total instruments instruments tives for Total
at amortized at fair value cashflow carrying Fair at amortized at fair value cashflow carrying Fair
EUR thousand cost to the P&L1 hedges amount value1 cost to the P&L1 hedges amount value1
Financial assets
Other receivables 3,000 – – 3,000 3,000 2,163 – – 2,163 2,163
Total noncurrent
financial assets 3,000 – – 3,000 3,000 2,163 – – 2,163 2,163
Trade receivables 59,075 – – 59,075 59,075 71,123 – – 71,123 71,123
Other receivables incl.
accrued income 42,356 – 881 43,238 43,238 44,304 – 297 44,601 44,601
Cash and cash
equivalents 14,295 – – 14,295 14,295 12,884 – – 12,884 12,884
Total current
financial assets 115,726 – 881 116,608 116,608 128,311 – 297 128,608 128,608
Total financial assets 118,727 – 881 119,608 119,608 130,474 – 297 130,771 130,771

Financial liabilities
Interest-bearing
liabilities 201,034 – – 201,034 241,989 216,725 – – 216,725 274,981
Lease liabilities 16,018 – – 16,018 16,018 – – – – –
Provisions 143 13,516 – 13,659 13,659 145 17,929 – 18,074 18,074
Total noncurrent
financial liabilities 217,195 13,516 – 230,711 271,666 216,871 17,929 – 234,799 293,055
Interest-bearing
liabilities 13,687 – – 13,687 14,284 1,285 – – 1,285 1,350
Lease liabilities 11,448 – – 11,448 11,448 – – – – –
Provisions 14,350 6,396 – 20,746 20,746 16,239 6,275 – 22,514 22,514
Trade payables 18,798 – – 18,798 18,798 23,761 – – 23,761 23,761
Other liabilities incl.
accrued expenses 44,921 – – 44,921 44,921 43,934 – – 43,934 43,934
Total current financial
liabilities 103,204 6,396 – 109,600 110,197 85,219 6,275 – 91,494 91,559
Total financial liabilities 320,399 19,912 – 340,311 381,863 302,090 24,204 – 326,294 384,614
1) The fair values of the provisions and interest bearing liabilities have been calculated using a DCF model. The valuation requires management to make certain assumptions about the model
inputs, including forecast cash flows, the discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in man-
agement’s estimate of fair value for these interest bearing liabilities. Provisions refers to maximum potential earn-out in the acquisition of Awesome OS. These are based on certain EBITDA
targets for years 2018–2019.The nominal amount of the provision is USD 31,545 thousand in 2018. During 2019 first earn out of EUR 6,726 thousand was paid out, and the provison has
since been revalued to EUR 19,912 thousand as per December 2019 (including both fair value revaluation and foreign exchange effect). The fair values of the derivatives for cashflow
hedges are derived from quoted market prices in active markets.

2 Transcom Annual Report


Notes to the Consolidated financial

Note 23 Financial instrument risk management objectives and policies, cont.


Maturity profile of the Group’s financial assets and liabilities based on contractual undiscounted payments
2019 2018
EUR thousand <1 year 1–5 years Fair value <1 year 1–5 years Fair value
Financial assets
Other receivables – 3,000 3,000 – 2,163 2,163
Total noncurrent financial assets – 3,000 3,000 – 2,163 2,163
Trade receivables 59,075 – 59,075 71,123 – 71,123
Other receivables incl. accrued income 43,238 – 43,238 44,601 – 44,601
Cash and cash equivalents 14,295 – 14,295 12,884 – 12,884
Total current financial assets 116,608 – 116,608 128,608 – 128,608
Total financial assets 116,608 3,000 119,608 128,608 2,163 130,771

Financial liabilities
Interest-bearing liabilities – 241,989 241,989 – 274,981 274,981
Lease liabilities – 16,018 16,018 – – –
Provisions – 13,659 13,659 – 18,074 18,074
Total noncurrent financial liabilities – 271,666 271,666 – 293,055 293,055
Interest-bearing liabilities 14,284 – 14,284 1,350 – 1,350
Lease liabilities 11,448 – 11,448 – – –
Provisions 20,746 – 20,746 22,514 – 22,514
Trade payables 18,798 – 18,798 23,761 – 23,761
Other liabilities incl. accrued expenses 44,921 – 44,921 43,934 – 43,934
Total current financial liabilities 110,197 – 110,197 91,559 – 91,559
Total financial liabilities 110,197 271,666 381,863 91,559 293,055 384,614

Note 24 Acquisition of subsidiaries


On July 27th, 2018, Transcom acquired Awesome OS, a leading niche
e-commerce customer experience specialist providing services to Acquired goodwill refers to underlying stable earnings trend the
leading and fast-growing US e-commerce clients from its operations in companies have had the last years, the deemed potential earning
Davao, Philippines. In the final review of the acquired net assets, an development con- nected to future customers and synergies and the
adjustment was made amounting to EUR 2.9 million, affecting Goodwill workforce in the acquired companies. If Awesome OS would have been
with the same amount. consolidated from January 1, 2018 the revenue would amount to EUR 557
million and profit before tax EUR –28 million. Transaction related costs
referring to the acqusition of Awesome OS amounts to EUR 2,955
2019 2019 2018
thousand, see note 25.
EUR thousand Dec 31 Jan–Dec Dec 31
On July 31, 2018 the Group took over a site in Durres, Albania,
Consideration paid in cash 42,328 6,726 35,602 through an asset transfer. Consideration paid was EUR 950 thousand.
Cash acquired –1,569 – –1,569 Net assets acquired is EUR 200 thousand and goodwill EUR 750
Cash flow from acquisition thousand.
of subsidiaries, net of cash
acquired 40,759 6,726 34,033
Total consideration1 58,262 – 58,262
Purchase price allocation:
Acquired net assets 7,415 2,851 4,564
Goodwill 32,752 –2,851 35,603
Customer relationships 25,777 – 25,777
Deferred tax liability –7,682 – –7,682
Total 58,262 – 58,262
1) 2018 includes consideration paid in cash (EUR 35,602 thousand) and provision for
maximum potential earn-outs (with a fair-value amounting to EUR 22,660 thousand). As
per December 2019 consideration paid is EUR 42,328 thousand and the remaining provi-
sions amounts to EUR 19,912 thousand (including both fair value revaluation and foreign
exchange effect.)

Transcom Annual Report 2


Notes to the Consolidated financial

Note 25 Significant disposals and nonrecurring items


Disposal of business
EUR thousand 2019 2018
Operational nonrecurring items
Operational non-recurring items are related to restructuring cost due to
Sales price 6,900 – a number of changes in the Group’s regional and management
Net asset value 4,244 – structure.
Transction cost 493 – EUR thousand 2019 2018
Post-settlement adjustment – –124 Cost of sales –3,641 –15,958
Net capital gain/loss 2,162 –124 Marketing expenses –30 –419
Net cash flow from disposal of business 5,879 – Administrative expenses –4,718 –11,400
Other operating income/expenses –88 –501
In March 2019 the Chilean operation was divested with a cash effect EUR
–0.6 million. The transaction concludes the divestment of Transcom’s Total –8,477 –28,278
operations in Latin America. During Q2 2019 Transcom divested part of
the business in Spain, with a cash effect of EUR 6.5 million and a net gain Transaction related nonrecurring items
of EUR 3,0 million. Divested net assets amounted to EUR 3.4m, including The Group has also recorded items affecting comparability costs
Goodwill and Customer relationship asset values. In 2018 a loss amounting related to acquisitions 2019 and 2018 and also fair value revaluation of
to EUR 124 thousand, was recorded relating to the closure of Colombia earn-out provisions recorded.
2017.
EUR thousand 2019 2018
Nonrecurring items Administrative expenses –14 –5,31
EUR thousand 2019 2018 Other operating income/expenses 89 –986
Operational non-recurring items –8,477 –28,278 Total 75 –6,297
Transaction related non-recurring items 75 –6,297
Total –8,402 –34,575

Note 26 Changes in liabilities arising from financing activities


Opening Balance in acquired Net cash Foreign exchange Other non cash Closing
2019, EUR thousand balance subsidiaries flows1 movement flow changes balance
Borrowings 217,940 – –3,581 177 – 214,536
Other loans 71 – 114 – – 185
Total 218,010 – –3,467 177 – 214,721

Opening Balance in acquired Net cash Foreign exchange Other non cash Closing
2018, EUR thousand balance subsidiaries flows movement flow changes balance
Borrowings 176,376 18 37,588 190 3,768 217,940
Other loans 71 – – – – 71
Financial Leases 4 – –2 – –2 –
Total 176,451 18 37,586 190 3,766 218,010
1) See consolidated statement of cash flows.

Note 27 Pledged assets and guarantees


There are share pledges in material companies used as security for the
Note 28 Related party transactions
financing of EUR 215,264 thousand (2018: 209,473). A part of the SSRCF
Altor has invoiced consulting and legal fees of EUR 216 thousand. For
is used to cover bank guarantees and cash pool limits.
2018 Altor invoiced consulting fees and legal fees of EUR 3,183 thousand.
At December 31, 2019 the Group had outstanding bank guarantees for
Trans- actions with other Group Companies outside the Transcom Group
an amount of EUR 4,686 thousand (2018: 811 thousand) of which EUR
are sales of EUR 2,308 thousand, receivables of EUR 1,780 thousand, and
3,886 is under the SSRCF. The Company is also supporting its Group com-
loans of EUR 2,145 thousand. Please also refer to note 6 for other related
panies through guarantees issued in the normal course of business.
party transactions.

Note 29 Events after the reporting period


As of January 1, 2020 Jonas Dahlberg was promoted from CFO to CEO and
President of Transcom.
agents on three continents. Our client portfolio predominantly consists of
On 5 February, 2020 Transcom extended the unsecured note of EUR 10
companies who deliver their services without physical interactions. We
million with twelve months. The new maturity date is July 2021. On
currently experience an increase in overall demand due to the COVID-19
March 31, 2020 Transcom signed a new senior secured term loan facility
pandemic, primarily in E-commerce, but also in the Telecom and Financial
agree- ment of EUR 20 million.
Services sectors. Transcom has a very limited exposure to the Travel and
The maturity date is March 2023.
Hospitality sectors. Short term, we expect neutral or positive impact on the
aggregated demand of our services.
Transcom is actively monitoring the impacts of the coronavirus/COVID-
Transcom’s main risk in this pandemic are government regulations,
19 on its employees, customers and service offering. During February,
impacting workforce attendance and production capacity at our contact
2020, Transcom implemented preventive measures at all sites to
centers. We are currently running somewhat below normal production, due
actively ensure the safety of employees and prevent further spread of the
to disturbances in the Philippines, Italy and Spain. We are currently shifting
coronavirus.
volumes from contact centers to WAH delivery, to increase our resilience.
Transcom also engaged in proactive discussions with key clients on busi-
The possibility to shift to WAH depends upon type of services delivered,
ness continuity measures, should a significant business interruption arise.
technical environment and broadband capacity. The above general update
Transcom deliver customer services at distance, through 26,000 employ-
is based on the current situation and subject to change as the situation
ees from about 50 contact centers and through Work-At-Home (WAH)
volves. At this point, it is too early to assess the long term impact on

3 Transcom Annual Report


Transcom.
Notes to the Consolidated financial

Transcom Annual Report 3


Parent Company financial

Parent Company – Income statement


January to December

EUR thousand Note 2019 2018


Revenue A2 2,948 978
Cost of sales A2 – –
Gross profit 2,948 978

Administrative expenses A3, A4 –3,264 –4,179


Other operating expenses –29 –
Operating profit/loss –345 –3,201

Dividends from Group companies – 56,474


Interest income and similar items A5 6,323 2,124
Interest expenses and similar items A5 –13,543 –14,244
Profit/loss before appropriations –7,565 41,155

Income tax expense A6 – –


Profit/loss for the year1 –7,565 41,155
1) Net profit corresponds with total comprehensive income.

Transcom Annual Report


2
Parent Company financial

Parent Company – Balance sheet


December 31, December 31,
EUR thousand Note 2019 2018
ASSETS
Non-current assets
Financial assets
Shares in Group companies A7 278,919 278,919
Receivables from Group companies 82,174 90,959
Total financial assets A10 361,093 369,878
Total non-current assets 361,093 369,878

Current assets
Receivables from Group companies 3,589 4,014
Other receivables – 303
Prepaid expenses and accrued income 61 287
Total receivables 3,650 4,604
Cash and cash equivalents 244 10
Total current assets A10 3,894 4,614
TOTAL ASSETS 364,987 374,492

EQUITY AND LIABILITIES


Equity
Restricted equity
Share capital (11,937,773 shares, quota value EUR 0.00065 per share) A8 55 55
Total restricted equity 55 55
Unrestricted equity
Share premium reserve 20,501 20,501
Retained earnings 155,569 114,414
Net result –7,565 41,155
Total unrestricted equity 168,505 176,070
Total equity A8 168,560 176,125

Non-current liabilities
Interest-bearing liabilities A9 183,405 195,222
Total non-current liabilities A10 183,405 195,222

Current liabilities
Interest-bearing liabilities A9 10,000 –
Trade payables 58 149
Liabilities to Group companies – 9
Other liabilities 425 399
Accrued expenses and prepaid income 2,539 2,588
Total current liabilities A10 13,022 3,145
Total liabilities 196,427 198,367
TOTAL EQUITY AND LIABILITIES 364,987 374,492
Pledged Assets A11

3 Transcom Annual Report


Parent Company financial

Parent Company –
Statement of changes in equity
Total Retained
number Share earnings incl.
of shares Share premium Profit/loss for Total
EUR thousand Note (thousand) capital reserve the year equity
As at January 1, 2018 11,938 8 20,501 105,926 126,435
Profit/loss for the year – – – 41,155 41,155
Issue of bonus shares A8 – 47 – –47 –
Shareholder contribution A7 – – – 8,535 8,535
As at December 31, 2018 11,938 55 20,501 155,569 176,125

As at January 1, 2019 11,938 55 20,501 155,569 176,125


Profit/loss for the year – – – –7,565 –7,565
As at December 31, 2019 11,938 55 20,501 148,004 168,560

Transcom Annual Report


3
Parent Company financial

Parent Company –
Statement of cash
flows
January to December

EUR thousand Note 2019 2018


Cash flows from operating activities
Profit/loss before appropriations –7,565 41,155
Adjustments to reconcile profit before appropriations to net cash:
Net financial items 7,220 –43,404
Other non-cash adjustments 70 –201
Income taxes paid – –
Cash flows from operating activities before changes in working capital –275 –2,450

Changes in working capital


Change in operating 954 –3,372
receivables Change in operating –166 –17
liabilities
Changes in working capital 788 –3,390
Net cash flow from operating activities 513 –5,840

Cash flows from investing activities


Investment in Group companies A7 – –8,535
Dividends received from Group companies – 56,474
Interest received 6,313 1,858
Change in long-term receivables from Group companies 8,785 –86,263
Net cash flow from investing activities 15,098 –36,467

Cash flows from financing activities


Proceeds from borrowings A9 974 196,200
Repayment of borrowings A9 –3,200 –152,030
Interest paid and other borrowing related costs –13,151 –10,669
Shareholder contribution – 8,535
Net cash flow from financing activities –15,377 42,036
Net cash flow for the year 234 –270

Cash and cash equivalents at beginning of the year 10 280


Net cash flow for the year 234 –270
Cash and cash equivalents at end of the year1 244 10
1) Cash and cash equivalents at the end of the year consists in total of cash.

3 Transcom Annual Report


Notes to the Parent Company financial

Parent Company
Notes to the financial statements
Note A1 Parent Company’s Note A3 Employees
accounting and valuation
Salaries, other remuneration and social security charges
policies
2019
Transcom Holding AB (“Parent Company”) corporate id number 556962- Board of Directors
4108 is a registered company domiciled in Stockholm, Sweden. The and Executive Other
address of the Company’s headquarter is Hälsingegatan 40, SE-113 43 EUR thousand management employees Total
Stockholm. Salaries –1,125 –282 –1,407
The Parent Company has prepared and presented the annual report Other remunerations –17 – –17
according to the Annual Accounts Act (1995:1554) and recommendation
RFR 2 Accounting for legal entities from the Swedish Financial Reporting Pension expenses – –58 –58
Board. RFR 2 means that the Parent Company, in the annual report for the Social security charges –349 –106 –455
legal entity, must apply all EU-approved IFRS and statements as far as
Total –1,491 –446 –1,937
possible within the framework of the Annual Accounts Act and taking into
account the connection between reporting and taxation. The
recommendation specifies exemptions and additions relative to IFRS. 2018
Board of Directors
The financial statements pertain January 1–December 31 for income
statement items and December 31 for balance sheet items.
The financial statements are presented in Euros which is the Company’s and Executive Other
presentation currency, rounded in thousand of Euro.
EUR thousand management employees Total
The Parent Company applies the same accounting principles as the
Group except in the cases stated below. Salaries –858 – –858
Other remunerations –22 – –22
Group companies
Shares in Group companies are recognized by the Parent Company at cost, Social security charges –270 – –270
including transaction costs less any impairment. Total –1,150 – –1,150
Personnel expenses are recognized in the Administrative expenses line in
the Income statement.
Salaries, including other remuneration and social charges were fully
Note A2 Intra-group revenues recharged to Transcom Worldwide AB and was netted on the same row
in the Income statement.
and cost of sales Salaries, other remuneration and other entitlements to the Board,
CEO and other Senior Executives, see note 6 for the Group.
During 2019, intra-group sales amounted to EUR 2,948 thousand related to
administative costs and services. In 2018 there was an intra-group sale of
EUR 978 thousand related to administration cost.
Average number of employees
2019
Women Men Total
Sweden 1 5 6
Total 1 5 6

2018
Women Men Total
Sweden – 1 1
Total – 1 1

Transcom Annual Report 3


Notes to the Parent Company financial

Note A4 Remuneration to auditors


Note A6 Taxes
EUR thousand 2019 2018
Income tax expense
Ernst & Young During 2018 and 2019 no income tax expense has been recorded.
Audit services –4 –4
Other audit firms Effective tax rate
A reconciliation of the statutory tax rate to the Company’s effective tax
Audit services – – rate applicable to income from continuous operations was:
Total –4 –4

Note A5 Interest
income/expense and
similar items
Interest income and similar items
EUR thousand 2019 2018
Interest income Group companies 7,266 1,872
Foreign exchange loss, net 118 252
Total 7,384 2,124

Interest expenses and similar items

3 Transcom Annual Report


Notes to the Parent Company financial
EUR thousand 2019 2018
Profit/Loss before tax –7,565 41,155
Calculated tax based on tax rate
in Sweden 21.40 % 1,619 –9,054
Dividends not taxable – 12,424
Tax losses from prior years utilized – 12
Change in tax rate in deferred tax assets – –172
Adjustment of deferred tax in respect of
prior years – –12
Losses for which no tax benefit is recognized –1,619 –2,197
Non deductable expenses – –691
Other taxes – –311
Income tax expense – –
EUR thousand 2019 2018
Interest expense on bank borrowings –12,856 –10,939
Other financing costs –512 –3,305
Foreign exchange gain, net –175 –
Total 13,543 –14,244

Transcom Annual Report 3


Notes to the Parent Company financial

Note A7 Investments in Group companies


December 31, 2019
Country of Corporate Booked value Capital/voting
Group Company incorporation Domicile identity number EUR thousand interest (%)
Transcom WorldWide AB Sweden Stockholm 556880-1277 239,120 100
Transcom WorldWide Albania SHPK Albania Duress
Transcom WorldWide Belgium S.A. Belgium Milmort
Transcom WorldWide (North America) Inc. Canada St. Catharine's
Transcom Insurance Agency Inc. Canada St. Catharine's
Transcom WorldWide d.o.o. Croatia Osijek
IK Transcom Europe GmbH Germany Düsseldorf
Transcom WorldWide GmbH Germany Rostock
Transcom Halle GmbH Germany Halle
Transcom Rostock GmbH Germany Rostock
Transcom Services GmbH Germany Rostock
Transcom Hungary Kft. Hungary Budapest
Transcom WorldWide SpA Italy Milan
Transcom Worldwide Italy Holding Srl Italy Milan
Transcom Worldwide Italy Srl Italy Milan
SIA Transcom WorldWide Latvia Latvia Riga
Transcom WorldWide Vilnius UAB Lithuania Vilnius
Transcom Europe Holding B.V. The Netherlands Amsterdam
Transcom AB Sweden Karlskoga 556201-3234
Transcom Denmark A/S Denmark Vordingborg
Transcom Eesti OÜ Estonia Tallinn
Transcom Norge AS Norway Rolvsoy
Transcom WorldWide B.V. The Netherlands Groningen
Transcom WorldWide (Australia) Pty Ltd Australia Sydney
Transcom WorldWide (Philippines) Holding, Inc. Philippines Pasig City
Transcom WorldWide (Philippines), Inc. Philippines Pasig City
Offsourcing Philippines Inc. Philippines Davao
BeAwesome Inc. Philippines Davao
Transcom WorldWide Poland Sp. z o.o. Poland Olsztyn
TWW Serviços de Helpline e de Atendimento Vila Nova de
Telefónico Lda Famalicão Portugal Famalicão
Transcom Worldwide D.O.O. Beograd Serbia Beograd
Transcom WorldWide Spain S.L.U. Spain Madrid
Transcom Worldwide Global S.L. Spain Madrid
Transcom Contact Center Spain S.L.U Spain Madrid
Transcom Nuevos Métodos Gestión, S.L.U Spain Madrid
Transvoice Sweden AB Sweden Karlskoga 556653-6370
Transvoice AB Sweden Stockholm 556482-8654
Tolk- och språktjänst i Östergötland AB Sweden Norrköping 556658-1368
Transcom WorldWide AG Switzerland Zurich
Transcom WorldWideTunisie Sarl Tunisia Tunis
Transcom WorldWide (UK) Limited 1
United Kingdom St Albans, Herts
Top Up Mortgages Limited 1
United Kingdom St Albans, Herts
Newman & Company Limited United Kingdom Leeds
Cloud 10 Corp United States Denver
Transcom WorldWide (US) Inc. United States Delaware
Awesome OS Inc. United States Los Angeles
GVP Communication AB Sweden Stockholm
556943-3294 39,799 100
Xzakt Kundrelation AB Sweden Stockholm
556588-8913
LEG Communication AB Sweden Stockholm
556748-8951
AGF Communication AB Sweden Stockholm
556888-0586
Total 278,919
1) The Group companies Transcom WorldWide (UK) Limited (registration number 02785250) and Top Up Mortgages Limited (registration number 02203000) in United Kingdom take advantage
of the audit exemption under the section 479a of the Companies Act 2006.

No non-controlling interest exists in any company.

3 Transcom Annual Report


Notes to the Parent Company financial

Note A7 Investments in Group


companies, cont. Note A9 Interest-bearing liabilities
Cost EUR thousand 2019 2018
EUR thousand 2019 2018 EUR revolving credit facility 3,000 6,200
As at January 1 278,919 270,338 EUR Fixed rate note (Unsecured) 10,000 10,000
Investments in Group companies – 45 EUR Fixed rate note (Secured) 180,000 180,000
Share contribution – 8,535 Amortized costs –744 –978
As at December 31 278,919 278,919 Other loans 1,148
Total 193,405 195,222
In 2018 the company increased in investments in Group companies
through additional acquisition costs related to the acquistion in 2017. Non-current interest-bearing liabilities 183,405
Current interest-bearing liabilities 10,000 195,222
Total 193,405 195,222
On March 15, 2018, Transcom replaced the previous financing agreement
by a EUR 180,000 thousand Senior Secured Fixed Rate Notes (SSFRN) as
Note A8 Equity well as, on the 19th of March, a EUR 45,000 thousand Super Senior
Revolv- ing Credit Facility (SSRCF) Agreement with Nordea and Danske
Transcom’s share capital as of 31 December 2019 is distributed among Bank. Inter- est rates in the revolving facility are based on LIBOR, STIBOR
11,937,773 shares with a nominal value of EUR cent 0.0046 per share and EURI- BOR plus margins. For the SSRCF the Company is committed to
(2018: EUR 0.00046). All shares entitle to one vote each. meet certain test conditions. There was no breach of covenants in 2019. In
In January 2018 an issue of bonus shares took place. The company´s the event of change of control, the facility will need to be cancelled and
share capital was increased by 47,240 EUR to 55,000 EUR. needed to be replaced by a new credit facility.
On July 24, 2018, there was a new financing, Senior Unsecured Fixed
Reate Notes (SURFN), of EUR 10,000 thousand.
There are share pledges in material companies used as security for the
financing EUR 278,919 thousand. A part of the SSRCF is used to cover
bank guarantees and cash pool limits.
In the event of a change of control the SSRCF will need to be cancelled
and be replaced by a new credit facility and the holders of SSFRN and
SUFRN have the right to request a repurchase of the Notes.
As of December 31, 2019 the loan under the SSRCF amounted to EUR
3,000 (all non-current), excluding usage of cash pool and other local lend-
ing. (December 31, 2018, EUR 6,200 thousand).
The table below shows the maturity profile of the Company’s interest-
bearing liabilities including interests.

Transcom Annual Report 3


Notes to the Parent Company financial
2019 2018
Carrying Carrying
EUR thousand amount amount
Between six and twelve months 10,572 –
Between one and two years – 11,583
Between two and seven years 222,910 236,985
Total 233,482 248,569

3 Transcom Annual Report


Notes to the Parent Company financial

Note A10 Financial instrument risk management objectives and policies


Financial risks are mainly market risks (incl. currency risk and interest rate
risk), credit risk and liquidity risk. The risk management policy, adopted by exposed to exchange-rate risk pertaining primarily to receivables and
the Board of Directors, aims to minimize the adverse impact on financial liabilities to Group companies. Should exchange rates for all currencies
results and positions. be 5 percent higher/lower, the impact on earnings would be –/+ EUR
7,8 thousand euro based on exposure on the balance-sheet date.
Interest rate risk
Interest rate risk pertains to changes to the market rate of interest impact Credit risk
the company’s net interest. The company has mainly financial liabilities The company strives for the best possible credit rating for the
that are interest-bearing and very little interest-bearing assets. Calculated company’s counterparties. The vast proportion of financial receivables
on the financial interest-bearing liabilities at December 31, 2019, a 10 per- were against Group companies.
cent change in the market interest rate would impact the company’s earn-
ings by EUR –/+ 116 thousand euro. Liquidity risk
Liquidity risk entails the risk that there is insufficient cash and cash equiva-
Currency risk lents and marketable securities or agreed credit opportunities to close the
Sales occur mainly in the accounting currency EUR while the purchases market positions. The liquidity risk is deemed stable and the Board of
mainly are in SEK and EUR. At the end of the year, the company was Directors believes that the capital required to meet the company’s commit-
ments will be available during the 2020 fiscal year.

Classification of the financial assets and liabilities


2019 2018
Financial Financial
instruments at Total carrying Fair instruments at Total carrying Fair
EUR thousand amortized costs amount value1 amortized costs amount value1
Financial assets
Trade receivables 3,589 3,589 3,589 – – –
Other receivables incl. accrued income 21 21 21 511 511 511
Cash and cash equivalents 244 244 244 10 10 10
Total current financial assets 3,854 3,854 3,854 521 521 521
Total financial assets 3,854 3,854 3,854 521 521 521

Financial liabilities
Interest-bearing liabilities 183,405 183,405 222,910 195,222 195,222 247,591
Total non-current financial liabilities 183,405 183,405 222,910 195,222 195,222 247,591
Interest-bearing liabilities 10,000 10,000 10,572 – – –
Trade payables 58 58 58 149 149 149
Other liabilities incl. accrued expenses 2,702 2,702 2,702 2,675 2,675 2,675
Total current financial liabilities 12,760 12,760 13,332 2,824 2,824 2,824
Total financial liabilities 196,165 196,165 236,242 198,046 198,046 250,415
1) The fair values of the interest bearing liabilities have been estimated using a DCF model. The valuation requires management to make certain assumptions about the model inputs, including
forecast cash flows, the discount rate, credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management’s estimate
of fair value for these interest bearing liabilities. The fair values of the derivatives for cashflow hedges are derived from quoted market prices in active markets.

Maturity profile of the financial assets and liabilities based on contractual undiscounted payments
2019 2018
EUR thousand <1 year 1–5 years Fair value <1 year 1–5 years Fair value
Financial assets
Trade receivables 3,589 – 3,589 – – –
Other receivables incl. accrued income 21 – 21 511 – 511
Cash and cash equivalents 244 – 244 10 – 10
Total current financial assets 3,854 – 3,589 521 – 521
Total financial assets 3,589 – 3,589 521 – 521

Financial liabilities
Interest-bearing liabilities – 183,405 222,910 – 247,591 247,591
Total non-current financial liabilities 183,405 222,910 – 247,591 247,591
Interest-bearing liabilities 10,000 – 10,572 – – –
Trade payables 58 – 58 149 – 149
Other liabilities incl. accrued expenses 2,702 – 2,702 2,675 – 2,675
Total current financial liabilities 12,760 – 13,332 2,824 – 2,824
Total financial liabilities 12,760 183,405 236,242 2,824 247,591 250,415

Transcom Annual Report 3


Notes to the Parent Company financial

Note A11 Pledged assets and Guarantees


There are share pledges in material companies used as security for the
financing EUR 278,919 thousand (2018: 278,919). A part of the SSRCF is
used to cover bank guarantees and cash pool limits. There was no
guaran- tees as per December 2019.

Note A12 Related party transactions


Altor has invoiced consulting and legal fees of EUR 216 thousand. There
are also loans from Group companies outside the Transcom Group of EUR
1,195 thousand. Please also refer to note 6 and A3 for other related party
transactions.

Not A13 Proposed allocation of earnings


The statements of income and the balance sheets of the Parent Company
and the Group are subject to adoption by the Annual General Meeting.

The following amounts in EUR are at the disposal of the Parent Company’s
Annual General Meeting:
Share premium reserve 20,501,042
Retained earnings 155,569,060
Profit/loss for the year –7,564,918
Total 168,505,184

The Board and the CEO propose that the unappropriated earnings at the
disposal of the Annual General Meeting be disposed of as follows:

Carried forward:
Share premium reserve 20,501,042
Retained earnings 148,004,142
Total 168,505,184

4 Transcom Annual Report


Signatures of the Board of Directors

The undersigned certify that the consolidated accounts


financial positions and results of the Group and the
and the annual report have been prepared in
Parent Company, and that the Administration Report
accordance with International Financial Reporting
gives a fair review of the development of the
Standards (“IFRS”), as adopted for use in the European
operations, financial positions and results of the Group
Union, for the Group and the Annual Accounts Act and
and the Parent Company and describes substantial risks
RFR2 for the Parent Company, and generally accepted
and uncertainties that the Group companies face.
accounting principles respectively, and give a true and
fair view of the

Stockholm, April 6, 2020

Fredrik Cappelen
Chairman of the Board

Klas Johansson Mattias Holmström Alfred Von Platen


Member of the Board Member of the Board Member of the Board

Eivind Roald Brent J. Welsh


Member of the Board Member of the Board

Jonas Dahlberg
President & CEO

Our audit report has been submitted on April 6, 2020

Ernst & Young


AB Erik
Sandström
Authorized Public Accountant

Transcom Annual Report 3


Auditor’s

Auditor’s report
This is a translation from the Swedish original.

To the general meeting of the shareholders of Transcom Holding AB,


corporate identity number 556962-4108

Report on the annual


standards are further described in the Auditor’s
accounts and consolidated
Responsi- bilities section. We are independent of the
accounts Opinions
parent com- pany and the group in accordance with
We have audited the annual accounts and consolidated
professional ethics for accountants in Sweden and have
accounts of Transcom Holding AB (publ) for the year
otherwise fulfilled our ethical responsibilities in
2019.
accordance with these requirements. This includes that,
In our opinion, the annual accounts have been pre-
based on the best of our knowledge and belief, no
pared in accordance with the Annual Accounts Act and
prohibited services referred to in the Audit Regulation
present fairly, in all material respects, the financial posi-
(537/2014) Article 5.1 have been provided to the audited
tion of the parent company as of 31 December 2019
company or, where applicable, its
and its financial performance and cash flow for the year
parent company or its controlled companies within the
then ended in accordance with the Annual Accounts Act.
EU. We believe that the audit evidence we have obtained
The consolidated accounts have been prepared in
is sufficient and appropriate to provide a basis for our
accord- ance with the Annual Accounts Act and present
opinions.
fairly, in all material respects, the financial position of
the group as of 31 December 2019 and their financial
Key Audit Matters
performance and cash flow for the year then ended in
Key audit matters of the audit are those matters that, in
accordance with International Financial Reporting
our professional judgment, were of most significance in
Standards (IFRS), as adopted by the EU, and the Annual
our audit of the annual accounts and consolidated
Accounts Act. The statutory administration report is
accounts of the current period. These matters were
consistent with the other parts of the annual accounts
addressed in the context of our audit of, and in forming
and consolidated accounts.
our opinion thereon, the annual accounts and
We therefore recommend that the general meeting
consolidated accounts as a whole, but we do not
of shareholders adopts the income statement and
provide a separate opinion on these matters. For each
balance sheet for the parent company and the group.
matter below, our description of how our audit
Our opinions in this report on the annual accounts
addressed the matter is provided in that context.
and consolidated accounts are consistent with the
We have fulfilled the responsibilities described in the
content of the additional report that has been submitted
Auditor’s responsibilities for the audit of the financial
to the par- ent company’s audit committee in
statements section of our report, including in relation to
accordance with the Audit Regulation (537/2014) Article
these matters. Accordingly, our audit included the
11.
perfor- mance of procedures designed to respond to our
assess- ment of the risks of material misstatement of
Basis for Opinions
the financial statements. The results of our audit
We conducted our audit in accordance with
procedures, including the procedures performed to
International Standards on Auditing (ISA) and generally
address the matters below, provide the basis for our
accepted audit- ing standards in Sweden. Our
audit opinion on the accompany- ing financial
responsibilities under those
statements.

4 Transcom Annual Report


Auditor’s

Valuation of intangible assets


Description How our audit addressed this key audit matter

Goodwill, brands and customer relationships in the group amount to


EUR 303 million at December 31, 2019. Note 12 describes that the val- In our audit for the financial year 2019, we have evaluated the
ues are allocated to cash generating units and note 2 states that an Company’s process for preparing impairment tests and the identi-
impairment test is carried out annually and when there are indicators fication of cash generating units. We have reviewed the valuation
that the carrying value is higher than the recoverable amount. The models applied in the impairment tests as well as the significant
recoverable amount is determined by discounting future cash flows estimates. We have evaluated the assumptions about future cash
which are based on the financial forecasts for the next three years, as flows, that form the basis of the impairment test, by comparing
approved by the Board of Directors, and an estimated constant growth actual historical outcome with forecasts and performed sensitivity
rate after the forecast period. The calculation of the recoverable analyzes. Furthermore, we have evaluated the applied discount
amount requires significant estimates regarding future cash flows, con- rate and assumptions about long-term growth after the forecast
stant growth rate and discount rate. As described in note 12, the period. In these procedures we have also involved our valuation
impair- ment tests did not result in any impairment in 2019. specialists.
Due to the estimates made in connection with the impairment tests, We have also assessed the appropriateness of disclosures in the
and the significant carrying values, we have considered this to be a key financial statements.
audit matter in the audit.

Responsibilities of the Board of Directors misstatement, whether


and the Managing Director
The Board of Directors and the Managing Director are
responsible for the preparation of the annual accounts
and consolidated accounts and that they give a fair
pres- entation in accordance with the Annual Accounts
Act and, concerning the consolidated accounts, in
accordance with IFRS as adopted by the EU. The Board
of Directors and the Managing Director are also
responsible for such internal control as they determine is
necessary to enable the preparation of annual accounts
and consolidated accounts that are free from material
misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated
accounts, The Board of Directors and the Managing
Direc- tor are responsible for the assessment of the
company’s and the group’s ability to continue as a going
concern.
They disclose, as applicable, matters related to going
concern and using the going concern basis of
accounting. The going concern basis of accounting is
however not applied if the Board of Directors and the
Managing Direc- tor intends to liquidate the company, to
cease operations, or has no realistic alternative but to
do so.
The Audit Committee shall, without prejudice to the
Board of Director’s responsibilities and tasks in
general, among other things oversee the company’s
financial reporting process.

Auditor’s responsibility
Our objectives are to obtain reasonable assurance
about whether the annual accounts and consolidated
accounts as a whole are free from material

Transcom Annual Report 4


Auditor’s
due to fraud or error, and to issue an auditor’s report
that includes our opinions. Reasonable assurance is a
high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs and generally
accepted auditing standards in Sweden will always
detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of
these annual accounts and consoli- dated accounts.
As part of an audit in accordance with ISAs, we
exer- cise professional judgment and maintain
professional skepticism throughout the audit. We
also:
• Identify and assess the risks of material
misstatement of the annual accounts and
consolidated accounts, whether due to fraud or
error, design and perform audit procedures
responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis
for our opinions. The risk of not detecting a mate-
rial misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions,
misrepresentations, or the override of internal
control.
• Obtain an understanding of the company’s internal
con- trol relevant to our audit in order to design
audit proce- dures that are appropriate in the
circumstances, but not for the purpose of expressing
an opinion on the effec- tiveness of the company’s
internal control.
• Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting
estimates

4 Transcom Annual Report


Auditor’s

and related disclosures made by the Board of Directors requirements regarding independence, and to communi-
and the Managing Director. cate with them all relationships and other matters that
• Conclude on the appropriateness of the Board of may reasonably be thought to bear on our independence,
Direc- tors’ and the Managing Director’s use of the and where applicable, related safeguards.
going con- cern basis of accounting in preparing the From the matters communicated with the Board of
annual accounts and consolidated accounts. We also Directors, we determine those matters that were of
draw a conclusion, based on the audit evidence most significance in the audit of the annual accounts
obtained, as to whether any material uncertainty and consolidated accounts, including the most
exists related to events or conditions that may cast important assessed risks for material misstatement, and
significant doubt on the company’s and the group’s are there- fore the key audit matters. We describe
ability to continue as a going concern. If we conclude these matters in the auditor’s report unless law or
that a material uncer- tainty exists, we are required to regulation precludes disclosure about the matter.
draw attention in our auditor’s report to the related
disclosures in the annual accounts and consolidated Report on other legal and regulatory
accounts or, if such disclo- sures are inadequate, to requirements
modify our opinion about the annual accounts and Opinions
consolidated accounts. Our con- clusions are based on In addition to our audit of the annual accounts and
the audit evidence obtained up to the date of our con- solidated accounts, we have also audited the
auditor’s report. However, future events or conditions administra- tion of the Board of Directors and the
may cause a company and a group to cease to Managing Director of Transcom Holding AB (publ) for
continue as a going concern. the year 2019 and the proposed appropriations of the
• Evaluate the overall presentation, structure and content company’s profit or loss.
of the annual accounts and consolidated accounts, We recommend to the general meeting of sharehold-
including the disclosures, and whether the annual ers that the profit be appropriated in accordance with
accounts and consolidated accounts represent the the proposal in the statutory administration report and
underlying transactions and events in a manner that that the members of the Board of Directors and the
achieves fair presentation. Managing Director be discharged from liability for the
• Obtain sufficient and appropriate audit evidence financial year.
regard- ing the financial information of the entities or
business activities within the group to express an Basis for opinions
opinion on the consolidated accounts. We are We conducted the audit in accordance with generally
responsible for the direc- tion, supervision and accepted auditing standards in Sweden. Our responsibili-
performance of the group audit. We remain solely ties under those standards are further described in the
responsible for our opinions. Auditor’s Responsibilities section. We are independent of
the parent company and the group in accordance with
We must inform the Board of Directors of, among other professional ethics for accountants in Sweden and have
matters, the planned scope and timing of the audit. We otherwise fulfilled our ethical responsibilities in accord-
must also inform of significant audit findings during our ance with these requirements.
audit, including any significant deficiencies in internal We believe that the audit evidence we have obtained is
control that we identified. sufficient and appropriate to provide a basis for our
We must also provide the Board of Directors with a opinions.
statement that we have complied with relevant ethical

Transcom Annual Report 4


Auditor’s

Responsibilities of the Board of Directors Our objective concerning the audit of the proposed
and the Managing Director appropriations of the company’s profit or loss, and
The Board of Directors is responsible for the proposal thereby our opinion about this, is to assess with
for appropriations of the company’s profit or loss. At reasona- ble degree of assurance whether the proposal
the pro- posal of a dividend, this includes an is in accordance with the Companies Act.
assessment of whether the dividend is justifiable Reasonable assurance is a high level of assurance,
considering the requirements which the company’s and but is not a guarantee that an audit conducted in
the group’s type of operations, size and risks place on accordance with generally accepted auditing standards
the size of the par- ent company’s and the group’s in Sweden will always detect actions or omissions that
equity, consolidation requirements, liquidity and can give rise to liability to the company, or that the
position in general. proposed appropri- ations of the company’s profit or
The Board of Directors is responsible for the compa- loss are not in accord- ance with the Companies Act.
ny’s organization and the administration of the As part of an audit in accordance with generally
company’s affairs. This includes among other things accepted auditing standards in Sweden, we exercise
continuous assessment of the company’s and the pro- fessional judgment and maintain professional
group’s financial situation and ensuring that the skepticism throughout the audit. The examination of the
company’s organization is designed so that the administra- tion and the proposed appropriations of the
accounting, management of assets and the company’s company’s profit or loss is based primarily on the audit
financial affairs otherwise are con- trolled in a of the accounts. Additional audit procedures performed
reassuring manner. The Managing Director shall manage are based on our professional judgment with starting
the ongoing administration according to the Board of point in risk and materiality. This means that we focus
Directors’ guidelines and instructions and among other the exami- nation on such actions, areas and
matters take measures that are necessary to fulfill the relationships that are material for the operations and
company’s accounting in accordance with law and where deviations and vio- lations would have particular
handle the management of assets in a reassuring importance for the compa- ny’s situation. We examine
manner. and test decisions under- taken, support for decisions,
actions taken and other circumstances that are relevant
Auditor’s responsibility to our opinion concerning discharge from liability. As a
Our objective concerning the audit of the basis for our opinion on the Board of Directors’ proposed
administration, and thereby our opinion about appropriations of the com- pany’s profit or loss we
discharge from liability, is to obtain audit evidence to examined whether the proposal is in accordance with
assess with a reasonable degree of assurance whether the Companies Act.
any member of the Board of Directors or the Managing Ernst & Young AB, Jakobsbergsgatan 24, PO Box
Director in any material respect: 7850, SE-103 99, Stockholm, was appointed auditor of
• has undertaken any action or been guilty of any Transcom Holding AB by the general meeting of the
omission which can give rise to liability to the shareholders on the 20 April 2019 and has been the
company, or com- pany’s auditor since 2017.
• in any other way has acted in contravention of the
Companies Act, the Annual Accounts Act or the
Articles of Association.

Stockholm 6 April,
2020 Ernst & Young AB

Erik Sandström
Authorized Public Accountant

4 Transcom Annual Report


Definitions

Alternative performance measures

The purpose of Transcom’s alternative performance


EBITDA excluding non-recurring items: is defined
measurements is to disclose additional information to
as EBITDA excluding the non-recurring items as
support a more comprehensive year-on-year comparison
defined above. It is calculated excluding the effect of
and provide an indication of the Group’s performance
IFRS 16 Leases.
and financial position. These alternative performance
meas- urements defined below are considered to be
Net debt: is defined as interest-bearing liabilities and
widely accepted.
employee benefit obligations, excluding leasing debt
according to IFRS 16, less cash and cash equivalents
Organic growth: change in revenue for comparable
per balance sheet day.
units, excluding currency effects with purpose to provide
a more transparent year-on-year comparison for
Net debt/EBITDA excluding non-recurring items: is
Transcom’s business.
defined as interest-bearing liabilities and employee ben-
efit obligations, less cash and cash equivalents as per
EBIT: corresponds to the Operating profit/loss presented
balance sheet day divided by EBITDA excl non-recurring
in the Condensed Consolidated Income Statement.
items (LTM).

EBITA: is defined as Operating profit/loss, adding back


LTM: refers to the timeframe of the immediately
the recorded transaction-related amortization.
preced- ing last twelve months.

Non-recurring items: are defined as rare events or


Return on Equity: net income (rolling 12 months)
activ- ities that are not part of normal business
divided by average equity (average calculation based on
operations, mainly restructuring activities.
equity per balance sheet day the last five quarters).

EBITA excluding non-recurring items: is calculated by


Equity ratio: total shareholders’ equity divided by total
excluding the non-recurring items from Transcom’s
assets per balance sheet day.
Oper- ating profit/loss. The purpose of disclosing
Transcom’s EBIT excluding non-recurring items is to SSFRN: Senior Secured Fixed Rate Notes
provide more transparent year-on-year comparison
excluding events that are not considered part of SSRCF: Super Senior Revolving Credit Facility
Transcom’s normal busi- ness, such as restructuring cost
and net gain or loss from disposed business. SURFN: Senior Unsecured Fixed Rate Notes

EBITDA: is defined as Operating profit/loss,


adding back the recorded depreciation on fixed
assets and amortization.

4 Transcom Annual Report


Transcom Holding AB (publ)
Hälsingegatan 40
SE-113 43 Stockholm
Sweden
Company registration number: 556962-4108
www.transcom.com

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