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Transcom 2016

This special website replaces the traditional front section of the annual report. You will find information on accomplishments in 2016 and focus areas going forward in operations, business development and finance. We have also published our report on people & sustainability here. If you scroll to the bottom of this page, you will find a link to Transcom’s legal annual report for 2016.

The year in brief

“We signed several new client agreements in 2016, both with new clients and with existing ones.”

Johan Eriksson, President & CEO of Transcom

Improved EBIT margin despite challenging first half of 2016

Our EBIT margin in 2016, excluding non-recurring items, improved to 3.9% (3.7%). In the first two quarters of the year, our results were impacted by an unexpected temporary volume drop in the English-speaking markets & APAC region, as well as by soft volumes in the telecom sector in North Europe. Revenue in 2016 amounted to €586.1 million (626.5). Organic revenue decreased by €27.7 million (-4.4%) compared to last year. Currency effects had a €1.3 million negative effect (-0.2%), and the divestment of CMS Denmark had a €11.4 million negative impact (-1.8%).

586.1

million EUR revenue in 2016

29,000

customer experience specialists and over 100 nationalities

52

contact centers delivering services in 33 languages

20

countries across five continents

While organic revenue growth was negative from a full-year perspective we managed to return to positive organic growth in the fourth quarter (+1.4%), partly as a result of winning new business in the English-speaking markets & APAC region, and partly due to solid growth with non-telecom clients in Europe, which compensated for lower telecom volumes compared to last year. As a result, our EBIT margin significantly improved in the second half of the year. Transcom is now within reach of the target to generate an annual EBIT margin of at least five percent, improving from 2.2 percent in the January-June period to 5.5 percent during July-December 2016.

Transcom’s financial position is strong. At the end of 2016, our net debt/EBITDA ratio was 0.6, compared to 0.6 in December 2015, and is well within the financial covenant threshold and Transcom’s target.

Initiatives to lower cost and raise efficiency

The fact that we have been filling unused capacity with new business volumes is a key factor behind the positive profitability trend in the second half of 2016. But the actions we are implementing in order to improve operational efficiency and cost effectiveness have also contributed in a very meaningful way.

The realignment of our regional management structure in the Continental Europe region, estimated to yield €2.9 million in annual cost savings, was fully implemented during the fourth quarter 2016.

Our Group-wide operational excellence program, designed to drive standardization and efficiency across our global business, also delivered results in line with our expectations. Our internal benchmarking exercise was a particularly important project in this context during 2016. A majority of our sites were scrutinized during the year, focusing on root cause analysis and the identification of best practices. Our benchmarking methodology is an important part of Transcom’s continuous improvement process, strengthening our performance culture by creating a healthy internal competition mindset.

Another key priority for 2016 was to stop the losses in Latin America. Our remaining business in this region is now profitable, as a result of volume increases and efficiency improvements. On January 9, 2017, it was announced that we have successfully closed the divestment of our operations in Peru for an equity value of EUR 1.0 million. Transcom’s contact center in Concepción, Chile is now our only remaining asset in Latin America.

12-month rolling EBIT* margin development, %

*Excluding items affecting comparability

Revenue, EUR million

(€m) 2016
Jan-Dec
2015
Jan-Dec
2014
Jan-Dec
2013
Jan-Dec
2012
Jan-Dec
Revenue 586.1 626.5 616.8 653.2 605.6
EBITDA 31.7 29.1 29.7 24.8 14.1
EBITDA margin 5.4% 4.6% 4.8% 3.8% 2.3%
EBIT 23.4 20.0 21.3 -5.4 -17.6
EBIT margin 4.0% 3.2% 3.5% -0.8% -2.9%
Profit/loss before tax 21.2 17.4 18.8 -12.2 -23.6
Profit/loss for the period 16.1 8.7 6.9 -18.6 -30.6
           
Cash flow from operating activities 5.0 20.6 11.5 9.9 -12.4
           
Return on Equity 12.1% 6.7% 6.0% -15.2% -23.0%
Equity ratio 52.1% 46.2% 39.5% 32.2% 37.1%
Net debt 17.6 18.1 24.6 36.2 24.7
Net debt/EBITDA 0.6 0.6 0.9 1.5 2.0
           
EPS (Euro cents)* 61.5 33.2 26.4 -71.3 -117.4

*EPS has been adjusted to reflect the reverse split as if it had occurred in 2012.

Business Development and Innovation

Transcom doesn’t believe that one size fits all in our industry. Our clients agree. What they tell us is that Transcom’s flexible approach to devising solutions really sets us apart in the marketplace. Our objective is to truly partner with our clients, leveraging best practices that are tailored to the specific needs of each situation.

In 2016, we focused on further strengthening Transcom’s position as a strategic partner for our clients, while creating value in four key areas: building global accounts, creating expertise in selected verticals, driving growth of non-voice services, and securing commercial excellence.

During the year, we established a number of new global client accounts, while also expanding the account teams. This has further strengthened our ability to support our global clients on multiple geographical markets, as evidenced by the fact that we expanded our relationships with several key clients during 2016. At the same time, we have made enhancements from a commercial point of view, renegotiating agreements with some of our clients. We signed several new contracts during the year, both with new clients and with existing ones. We also expanded our contact center network by opening a new site in Bialystok, Poland.

We are making investments in order to sharpen our industry-specific solutions, ensuring that we are able to leverage our deep domain expertise and experience across Transcom’s entire footprint. In parallel, we are focusing on ensuring effective collaboration, training and global sharing of best practices. This initiative aims to enable the creation of additional value together with current clients, while also supporting business development with new clients.

Providing an excellent customer experience is becoming an increasingly important need for our clients. The digitalization trend also sets new standards in terms of the channels that end-users prefer to use when contacting their providers. Shifting consumer behavior is driving rapid growth of multichannel and automated services for customer care. People increasingly expect customer service to be accessible at all times, and they want to be able to resolve their issues via the channel of their choice. As a result, companies have to invest, and consistently engage with customers, in an ever-growing number of channels. Almost a third of Transcom’s revenue is related to non-voice activities, and that number will keep growing.

In addition, rapidly evolving technology solutions allow for more effective and efficient ways of managing contact center services. Transcom is making significant investments in innovation in order to be in the forefront in this rapidly changing environment. We are mobilizing globally to bring our latest offerings to clients, including value-added services like customer journey mapping and analytics, virtual agents and top-notch multi-channel solutions like video chat and instant messaging. Transcom is well-positioned to add value as a partner to our clients on their digitalization journey. I invite you to read the latest issue of the Hello Transcom magazine, which contains a couple of client case examples.

People and sustainability

Every day, our 29,000 customer experience specialists handle a multitude of interactions with our clients’ customers in more than 33 languages all over the world. People truly make all the difference in our business. Our ambition to deliver an excellent customer experience in every single interaction depends on an engaged, skilled and highly motivated workforce. Our ability to attract people with the right attitudes and mindset, in combination with efficient training methods and processes to drive performance, is essential to achieving our goals. This year, Transcom has chosen to produce a sustainability report in accordance with the GRI Standards (Core option) for the first time. The GRI index is available here.

Listening to our stakeholders

At Transcom, we believe it makes sense to focus our sustainability strategy on people, a decision which our stakeholder dialogues and materiality analysis support. In a people-intensive business like ours, long-term success largely depends on the ability to attract, develop and retain the right people.

Transcom conducts stakeholder dialogues and materiality analyses in order to identify which sustainability aspects are considered to be most material. The identification and selection of which stakeholder groups to engage with is based on the degree to which Transcom’s operations depend and have an impact on the stakeholder in question. Transcom’s Group Executive Management team is responsible for defining what stakeholders to engage with. The table below summarizes the most important sustainability issues to each key stakeholder group. Transcom’s Group Executive Management prioritizes amongst material sustainability aspects in order to allocate adequate resources to achieve the highest impact. A number of internal and external factors are analyzed when assessing whether a sustainability topic is material, mainly Transcom’s overall mission and strategy, and the concerns expressed by our stakeholders. Broader interests and topics are also considered, not least in the environmental area.

We organize specific stakeholder dialogues with our employees, e.g.  through web-based surveys and feedback meetings. In addition to this, we conduct an annual employee satisfaction survey, “Voice of Our Employees”, which is open to all employees, including temps and agency workers. Gathering feedback from our employees on their satisfaction is critical in order to continuously improve our workplace and make it a great place to work. The results of the survey are analyzed and discussed on the local as well as on the global level, and action plans are created in order to address the findings.

The list below summarizes the most important sustainability issues to each key stakeholder group.

Most important aspects to each stakeholder group

Employees

  • Be an equal opportunity employer
  • Be transparent with financial reporting
  • Work proactively with anticorruption

Owners

  • Provide continuous training for employees
  • Be transparent with financial reporting
  • Have fair and transparent recruitment practices

Investors

  • Provide continuous training for employees
  • Focus on fair working conditions for employees
  • Ensure high degree of customer satisfaction
  • Focus on health and safety management for employees

Equity analysts

  • Be transparent with financial reporting
  • Focus on fair working conditions for employees
  • Be an equal opportunity employer

ESG analysts

  • Focus on fair working conditions for employees
  • Uphold freedom of association and right to collective bargaining
  • Ensure high degree of customer satisfaction

Clients

  • Have fair and transparent recruitment practices
  • Be an equal opportunity employer
  • Focus on fair working conditions for employees

Transcom Cares – our global sustainability program

At Transcom, sustainability means that we always do our utmost to do the right thing by our clients, our people and our communities. We are convinced that our commitment to sustainability also helps us to attract, retain and develop the best people, which is critical to our long-term success.

Transcom Cares is the overarching governance program for Transcom’s sustainability activities, which are an integral part of our day-to-day business. Transcom Cares was initially started several years ago as a concept for our community engagement activities in the Philippines. In 2013, Transcom Cares was established as a global program with a broadened scope in order to provide strengthened governance and coordination for Transcom’s sustainability focus areas: people development, equality & diversity, and community engagement. While the overall focus of our sustainability efforts remains unchanged, we reviewed and calibrated our priorities during 2016, as summarized in the position pyramid below.

In 2016, we also strengthened the program’s governance and processes for target follow-up. Each material sustainability topic has a topic owner, responsible for the implementation of agreed actions, and the collection and compilation of data on key sustainability KPIs. Topic owners also have an important role in engaging their team members, communicating the value and purpose of Transcom’s sustainability initiatives. In addition, Transcom’s Head of Internal Audit, who reports directly to the audit committee and the Board of Directors, has a formal role in the company’s sustainability governance structure. Internal audit is responsible for following up on agreed activities and targets, and also evaluates the effectiveness of the management approach for each material sustainability topic based on results achieved.

UN Global Compact

In addition to the focus areas of our sustainability program, Transcom fully supports the ten principles of the UN Global Compact with respect to human rights, labor rights, environmental care and anti-corruption work. These principles are an integral part of our corporate strategy, business culture and day-to-day operations. Therefore, as part of our on-going pledge to deliver an outstanding customer experience in a global sustainable society, Transcom is a signatory of the UN Global Compact. We are whole-heartedly committed to ensuring that we comply with the UN Global Compact and its principles.

Reinforcing our company culture

Our core values – Passion, Excellence and Innovation – guide us as a company and the behavior of the professionals who make up our workforce. But a company’s culture is more than a set of guiding principles. It is brought to life by the employees who embody the values on a daily basis. Given that we hire thousands of new people every year, it is important that we continuously reinforce and communicate our company culture. This is why we, during 2016, focused on clarifying our employee value proposition, leadership style, and core values.

The objective of this effort is to make sure that our organizational culture supports strategy implementation.  We view culture as an important enabler in achieving business success, and being recognized as a global leader in customer experience. For this reason, we believe that it is important that our leaders take active part in shaping our culture, ensuring that it benefits Transcom’s goals and also our employees.

A new global intranet platform, One Transcom, was launched during 2016, which facilitates communication and employee engagement, and promotes a shared understanding of the company’s strategy, goals and culture. Sustainability is an integral part of Transcom’s strategy and culture, not least our standards for ethical behavior. In 2016, we invested in strengthening communication and training in this area (see below).

Code of Business Conduct

Transcom’s Code of Business Conduct is a summary of our ethical platform, outlining the high standards of honesty, integrity and ethical conduct that we expect from all our employees. An introduction to the Code of Business Conduct is part of the each employee’s induction. Historically, all our managers have received regular refresher training to ensure awareness of all principles in the code. In 2016, we decided to extend the scope of the training to include all employees. As a result of this decision, we delivered a web-based training course during the year, which 100 percent of our employees successfully completed. In addition to the policy documents, employees were presented with a number of hypothetical situations illustrating key principles. Everyone had to complete a quiz to confirm their knowledge and understanding.

Sustainability at Transcom is an integral part of safeguarding not only our values but also the reputation of the clients that choose to partner with us.

To combat all forms of corruption, we have the following governing documents in place: Supplier Code of Business Conduct, Code of Business Conduct for employees and our Whistleblower reporting policy & mechanism. We have received positive feedback from the investor community, our employees and our partners on our dedicated efforts to uphold the highest ethical standards in our operations and to push the boundaries of responsibility throughout our value chain. Transcom makes a corruption risk assessment annually, covering all countries of operation, based on Transparency International’s corruption perception index.

A sustainable supply chain

Transcom adheres to principles of sustainable procurement, and we have processes to evaluate the sustainability performance of our suppliers.

Transcom’s supply chain consists of its operating functions and facilities, as well as its extensive network of vendors and strategic partners. This network is mainly comprised of suppliers in three categories: IT, temporary staff and recruitment agencies, and facilities-related suppliers. Roughly two-thirds of Transcom’s suppliers are located in Europe, with the remainder situated mainly in North America and the Asia-Pacific region.

We have assessed the inherent overall CSR risks at a medium level from a supply chain perspective based on the principles of the UN Global Compact. Respect for human rights as well as equal and fair working conditions for all employees are among the top priorities.

We regularly carry out sustainability assessments of our key vendors by a third party through web-based self-assessments covering all ten principles of the UN Global Compact on human rights, labor rights, environmental care, anti-corruption and information on their implementation of ethical governance practices. A systematic evaluation of the responses is done to ensure a fair judgment on the replies against internationally ratified conventions and declarations and OECD guidelines for multinational companies.

The supplier assessment process enables us to take quick action if any malpractice or breach of our supplier code of conduct is identified. Our escalation process consists of three main steps; dialogue and learning, visits and relationship building and, as a last step, contract termination.

People
development

High performing, skilled and motivated people are the key ingredient in providing excellent customer experience, and it is therefore critical that we have a process to support high performance as well as the ability to attract new employees and retain our talents.

→ Read more

Equal
Opportunities

We believe that being an employer that provides equal opportunities to all is an important key to our future success. It is our people’s skills, knowledge and attitudes that matter. We have zero tolerance for discrimination.

→ Read more

Community
engagement

Local community engagement is how Transcom Cares started. People want to work for a company that has a sustainable approach to business and that contributes to building communities

→ Read more

Environmental care at Transcom

While Transcom’s operations have a relatively limited environmental impact, we strive to reduce the effect our own operations have on the environment, with a particular focus on reducing e-waste, limiting business travel and decreasing energy consumption in our facilities. We conduct training and support local initiatives with our employees in order to encourage greater environmental responsibility in our workplaces. Our employees are committed to minimizing the impact and to working together to contribute to a better environment. Our environmental policy guides us in lowering emissions from air travel, supports us in selecting goods and services produced with respect for the nature and is a tool to push our environmental demands throughout our supply chain. Transcom follows the precautionary principle by managing risks of negative social and environmental impact in accordance with international guidelines.

We also promote environmentally friendly technologies and equipment. The fact that Transcom’s business model is IT enabled means that IT- or e-waste management is an important issue for the company. Transcom’s objective is to acquire, manage and dispose of electronic and electrical equipment in an environmentally-friendly manner. We adhere to the Directive on waste electrical and electronic equipment (WEEE Directive) and other country-specific e-waste regulations. Wherever possible, we aim to procure hardware from ENERGY STAR-labeled vendors. We also try to minimize the generation of e-waste by extending the useful life of computers. Most of our country organizations already dispose of e-waste via specialized e-waste management companies.

We are committed to encouraging, educating and promoting a sustainable business model that keeps environmental impact at a minimum and reduces the carbon emissions at a steady pace for us today and, most importantly, for generations to come.

Carbon emissions

  2016 2015
CO2 emissions, business travel (tonnes) 882.4 1,017
CO2 emissions, per employee (tonnes/employee) 0.031 0.034
CO2 emissions, by Revenue (tonnes/million euros) 1.51 1.62

 

Transcom continues to make efforts to minimize our carbon emissions, e.g. by reviewing the meeting needs in the company and creating suitable alternatives to travel. In 2016, electricity consumption in our facilities was essentially flat compared to 2015, while CO2 emissions from business travel decreased by 13 percent. CO2 emissions per employee were also slightly lower compared to 2015 (from 0.034 ton per employee to 0.031 ton).

2015 2016
Electricity consumtion by employee (kWh/ employee)* 1206 1227
Electricity consumtion by revenue (kWh/million euros)* 54292 58001
* Electricity consumtion in contact centers. Excluding Latin American operations.

We are committed to encouraging, educating and promoting a sustainable business model that keeps environmental impact at a minimum and reduces the carbon emissions at a steady pace for us today and, most importantly, for generations to come.

Data protection and security

Customer data

Our clients trust us with access to information about their key assets, i.e. their customers. With the evolution of the industry, we have experienced that more and more customer data resides on client’s networks and systems. Service providers like Transcom are provided with managed access, thereby reducing the inherent risk. There are cases where Transcom stores and processes personally identifiable information of customers in accordance with client contracts.

 

Client/vendor data

We store and process personal data related to our clients and vendors in the normal course of business, e.g. for invoicing, payments and managing collections.

 

Employee data

We store and process personal data related to our employees in the normal course of business, e.g. for staffing, scheduling, managing and improving performance, which is integral to our business model and our value proposition of delivering outstanding customer experience.

 

Controls and measures

Our Code of Business Conduct, Information Security policy, Privacy policy, along with other policies provide a robust framework for the protection of personally identifiable information. We have implemented various measures to handle and safeguard data appropriately, including but not restricted to information security controls (e.g. access controls, password controls, virus and malware protection, etc.), physical controls (e.g. restricting physical access, paperless environment, etc.) and controls in the area of human resource management (e.g. background checks of applicants).  Furthermore, regulatory controls, e.g. PCI-DSS, are also implemented where relevant in order to protect confidential and sensitive information. We also provide periodic information security awareness trainings and Code of Business Conduct training sessions for all our employees in order to reinforce awareness of:

  • Ethical standards and values
  • Regulatory and client requirements
  • Types of security incidents that may arise
  • Preventive controls, i.e. how to prevent incidents from happening
  • Which actions to take if such security Incidents were to occur

We also carry out assessments and mock drills to evaluate awareness and enhance preparedness.

This year, Transcom has chosen to produce a sustainability report in accordance with the GRI Standards (Core option) for the first time.

The GRI index is available here.

Further reading

Transcom’s annual report for 2016 is available for download here.

The Swedish version can be downloaded here.

The Hello Transcom magazine is available for download here.

My Transcom Experience
is our corporate blog, where we share stories from around Transcom.

Transcom’s Communication on Progress 2016 can be downloaded here

www.transcom.com
is our corporate website.