Happy New Year.
Hi, happy New Year.
Happy New Year.
Happy New Year. All right, let's get started. Welcome all to our Q4 Pre-Silent Analyst call. Here today, I have with me our CEO Jeanette and then our CFO Elina, who will walk through the market and market development, our strategy, as well as, you know, how are we doing in terms of the financial performance. Without further ado, I will hand over to Jeanette, please.
Thank you, Henrik. Good to see you all again, and happy New Year for me too. I found engagement here on your side a little bit low here on the Happy New Year. I don't know if it's Monday morning or where it is, but, you know, let's see if we can get the energy levels up here, so regarding some notes on the market and the market update, unfortunately, there are actually no major changes in the macroeconomic and market environment in Q4 of 2024. The market continues to be sluggish, particularly for the consumer credit information services, and that is both in Sweden and Finland, and the demand for our business and asset information services is more steady, I would put it. Consumer confidence continues to be weak, especially in Finland, but it has improved since the low point seen in 2023.
In Sweden, consumer confidence is on a high level, but it is still not visible in the consumer credit information demand. The activity continues to be low in the Swedish loan broker segment, which you now know and have learned during the year is a very important part of driving the volumes for us due to the setup of the broker and Enento UC cooperation. The number of inquiries by loan brokers has declined also in H2 of 2024 compared to the previous year. The combination of one, lower amount of consumer loan inquiries in broker channel, and two, lower amount of bidder participants is, of course, an unfortunate combination here.
If I continue then to the Swedish regulation update, as earlier mentioned, in week 48, the Swedish Parliament approved, as planned, the proposal for the new regulation presented following the over-indebtedness inquiry, including the interest rate and cost cap. And this new regulation will come into effect this year on 1st of March in 2025. And as we already knew and have communicated, the government debt register was not one of the proposed measures and was therefore not part of the decision. Hence, decisions made by the Swedish Parliament were, as expected, and in line with our expectations, and I would say then in line with our expectations short- to medium-term. Like previously stated, we believe that the new regulation is a good outcome for Swedish society and also for Enento over time.
Our view is that the new regulation will cause a negative impact on the Swedish consumer lending market volumes, especially for unsecured lending with higher interest rates. The interest rate deduction limitation will also impact unsecured loans and lenders more widely in Sweden. We also believe that the new regulation will cause a negative volume and revenue impact in our consumer credit information business in Sweden 2025. In addition, there are uncertainties regarding regulation of the brokers connected to under what kind of license they are expected to operate forward. On the other hand, as we know, interest rates have decreased. Consumer confidence should support the demand forward. We do not disclose any kind of estimate of the financial impact on this stage. We will go back to this in connection with our Q4 result and potential guidance for 25.
I move over to some of the highlights now of the strategy execution, and then we will, of course, come back to the financials as Elina takes this forward. When it comes to our strategy execution, we have new services launched. We have a new Anti-fraud score, which we believe is definitely essential. As we can see, that fraud is an area which is increasing and is a challenge for the whole society and, of course, for the financial sector in particular. So this Anti-fraud score is something we have developed actually also faster than we thought we could. Now, when it comes to the PSD improvements, those for the loan brokers are also in place. We have also launched the first version of our business information UC Insight GUI for Sweden.
Compliance services have been in focus for us, and we're preparing several launches in the near future to strengthen our Nordic offering, such as beneficial owner data in Sweden. This will be a unique data set that we will be able to offer to the market. We have also concluded on the allabolag.se modernization, and the migration is completed now. We continue with the infrastructure consolidation program. There are still one-off costs in Q4 2024 and in H1 2025 accordingly. These one-off costs will be some millions of euros, both in Q4 2024 and in H1 2025. Full benefit impact of the permanent cost efficiencies will realize gradually in the profit and loss in 2025-2026. At the same time, I also want to underline that we face continuous cost pressure in the baseline in areas such as data and IT supplier costs.
With that, I'm giving the word over to you, Elina.
Thank you, Jeanette. Continuing where Jeanette left off, net sales, as stated, the situation continues challenging due to sluggish demand for consumer credit services both in Sweden and Finland. Good development in the Finnish and Norwegian business information services has not been enough to offset this decline in volumes. As said, the consumer insight has continued to struggle in consumer credit information services, and we have not had any material project or other one-off revenues that could have offset this decline. As Jeanette stated, the main reason behind in Sweden is the very low volumes within broker segment, and then in Finland, obviously, the consumer confidence continues to be on a very low level. Also in Finland, we are seeing a weaker sales mix within the consumer credit information services trending towards more basic services with lower margin.
This is the same situation as we stated in Q3. On the positive note, Business Insight continues to show solid performance. Business Insight volumes have been developing well, and demand has been developing well both in Finland and Norway, whereas then in Sweden, the situation also here continues to be more challenging, especially we see challenges on the SME side. On group level, enterprise and SME services performance has been stable, while we have continued to see good growth and demand for our real estate services. Also, the compliance development has been really good. What comes to then profitability, profitability development has continued challenging likewise due to declining volumes in consumer credit, weaker sales mix, and increasing data costs following both the sales mix and then significant price increases by government here in Finland.
We have also started to increase our own activity levels within marketing, obviously aiming to support future growth. This is also something we have stated already before in Q3. What is also good to note is that the infrastructure consolidation, it is obviously an ongoing project, and it has now in the last quarter of the year impacted also our service development levels, meaning that the production for own use is also lower now in Q4 than what is the usual level for that since the focus has been heavily on the infrastructure activities. What comes to efficiencies in general, as said, the focus is in that big project, and we have not realized any new efficiencies during Q4.
Otherwise, costs have been in good control, and as we have stated also previously in connection with the Q3 release, if we look at the staff costs and other operating expenses, those year on year are roughly on flat level as planned. However, as stated, repeating both, we see high pressure both in data cost side, but then also the lower production for own use impacts the profitability in addition, obviously, to volumes and sales. What then comes to 2025 outlook, we obviously continue to follow the development, but also invest in new sales and go-to-market activities to drive growth on areas where we see potential. However, we will then come back to the outlook in more detail in connection with releasing 2024 results in February. Thank you. This was what I had to say about the current trading, so to say, and demand. Henrik, please.
Thank you, Jeanette and Elina, and now I think we have a bit of time for any questions. So I don't see anything in the chat, but I go in order of the hands, so I think Sanna, you were first.
Yeah, thank you. I had one question, then others may follow, and I perhaps come back later. But yeah, regarding the consumer insights volumes, you went through quite well already, but I was thinking about the level of price increases in Q4 and going forward. Are they able to offset the volume decline to some extent?
We haven't taken any new pricing actions now in Q4. So currently, the volumes are on so low level that we don't see that we are able to offset this with price actions. And as said, no new price actions have been taken now in Q4. As I also mentioned, at the same time, what makes the situation even more challenging is that the sales mix within consumer credit, especially in Finland, but also to some extent in Sweden, is also becoming weaker, meaning that we sell more of sort of basic services and data where the margins are lower because the quality of applicants is lower. And this means that the customers don't need extensive analysis to, in the same extent, to basically decline the applications.
All right. Thanks. If I may follow up, if I remember correctly, during Q3 results conference, you mentioned that the CI revenue would be relatively flat on absolute euro level. So if I'm reading this correctly, the volume situation implies that this might not be the case anymore. So that euro level, the revenues might decline Q on Q.
Yes. I don't actually recall stating that kind of development for Q4. But yes, the challenging situation continues and negative volume development.
What we stated was that quarter to quarter revenues are showing signs of stabilization.
Right. That could have been the statement, yeah.
Yes, but unfortunately, not euro wise.
Right. Thank you. Yeah.
Then I believe it's Matti, your turn.
Yes. Hi, good morning. If you compare your message now to what you said after Q3, it sounds like there hasn't been any kind of positive top-line surprises, or your top-line message is basically a bit more soft or at best flat compared to what you said after Q3. So is this a correct interpretation of what you said? I didn't basically record any kind of positive messages compared to even in Norway or Denmark, where you had kind of growth in Q3 and have had growth in the whole year. Basically, that growth doesn't seem to accelerate. So basically, all what you said was to the negative direction. Is that so? So just want to make it clear.
Jeanette, you're muted.
Yes. Thank you. I can just give a first comment, and then you, Elina, can continue. I think you have a good interpretation of our message, Matti, though I would like to underline that we are still growing in Norway and Denmark. So Norway, Denmark, I think continues the trend, though as we all know, it is of such an amount that it doesn't give an effect on the total group. Now, Elina, please, you can continue back to any additional.
Yes. So you are definitely correct in that sense. But as Jeanette put it, we continue to see good growth in Norway, Denmark. We also see very nice growth in Finnish business information services. But the challenging situation in Sweden overall, both in Business Insight and Consumer Insight, as well as then the challenging situation in consumer credit in Finland, continues heavily offset any positives, unfortunately. So that is unfortunately the message, yes.
And I think it's important then to repeat, as has been mentioned also before, that this, of course, even though we have rays of light, so to say, in areas, we also all know, and we have earlier also communicated that this means that we have a negative sales mix on profitability as the consumer credit is very much based on fixed cost.
Yes. Thank you. I was referring to Norway and Denmark just to kind of communicate that we do understand that there has been growth. But the growth in Q4 has not been kind of better than what you already anticipated in Q3. So in that sense, no net change. Now, if this is the case for 2024, and you, of course, don't want to comment on 2025, but do you see that there would be any reason to expect an improvement at some point in 2025? I mean, how much further do you see your business volumes developing? And based on what you said, it doesn't feel that that way that there would be anything changing in the kind of fundamental demand situation. And that can be that the same situation can prevail for quite some time.
Would you agree, or do you think that there would be some triggers to the positive side in 2025 that you might be seeing earlier when we actually see that in numbers? Sorry, complicated question, but.
Yeah. Well, I mean, not going into details, obviously, with the outlook, then we all know how the situation here in Finland is. Consumer confidence on very low level. What would it take that to change is, of course, a million-dollar question. We do have constant discussions with our customers. And for example, also here in Finland, we have customers who have on consumer credit lending side, their operations on hold. Some are more optimistic than others, but obviously, all of them are also following the situation and are considering when it might be a reasonable time to sort of continue operations here in Finland. But as said, I think that the Finnish economy and consumer confidence is clearly a big question mark at the moment. Then in Sweden, Jeanette, would you like to comment on that?
Yeah, sure. I think that we can all read from the papers that if we put together all the different initiatives in the different countries, Finland, Sweden, Norway even, you would actually expect that consumer consent would increase more than we see it is doing. I mean, if you, in addition to what was actually already elaborated on Finland from Elina, we have several positives when it comes to consumer consent in Sweden. It's about taxes, it's about interest rates, etc. But both Sweden and actually Norway, we are surprisingly cautious still. But what is even more important, which I think we should come back to when it comes to our business, is the consumer credit business. We don't see any signs of consumer credit, and especially no signs of broker channel increases. And that has an effect.
And that is an important part, which I think we should take into account. Now, in addition to that, what we have also earlier stated is that the regulation changes in Sweden taking place now in March 2025, those are extensive and very difficult to conclude on what are the actual effect of that one. In addition, as I mentioned earlier, there are also uncertainties under what license we will see the brokers have as the conclusion. That is not yet clear. Of course, that means an unclear situation for brokers. And that, of course, also means that there is unclarity in how much you choose to invest. And that means that there are unclarity in volumes.
All right. Thank you. One final one before I stop. If we think that your top line is going to go down in 2025, do you plan that, or do you think that you would need to do further cost cuttings just to kind of save the margins from declining also in 2025? Or do you think that you would just bite the bullet and take the margin decline and then be prepared for the next upturn whenever it happens to come? What's your kind of thinking of this situation?
Now, this is very much, Matti. I mean, I want to answer this in the best way possible at this point. As mentioned, we can't talk that much about the future. So if I am just sharing, how do we see that this will develop? I mean, we need to be, we need to continue, if I may say so, to be agile because it is very difficult to see how this is developing. So in that sense, we need to be agile, and we will need to be agile, I think, in our planning, both on the cost and the price side. We all know also that we have been doing extensive work on the cost side. So I mean, there are always possibilities to continue, but I think we should also just keep in mind that this extensive work has been done on the cost side.
So just to keep that in mind. It is, I think, my answer is at this point, I think, suitably unclear or clear.
All right. Thanks for this.
Thanks.
All right. Then I believe Kimmo, you are the next one.
Yes. Yes. About the cost base. So personal costs are, of course, a vital part of your OpEx, and we know all the unions are asking quite a huge price increases in Finland. So what is the case in Sweden at the moment? What kind of expectations do you have in salary inflation?
I would say that we are having, unfortunately, cost increases both in Finland, Sweden, and Norway, where Norway is usually always the one with the highest increases, though we have, of course, as mentioned earlier, percentage-wise, a smaller business in Norway. So in that sense, it doesn't have the impact. But indeed, costs from salaries have impact on us, have had, continue to have, as mentioned also earlier. In addition to that, we have been also suffering from increases in data costs, especially in Finland. And even though, as also had been mentioned to you earlier, it has been possible for us to bring those costs forward, but still, it has a margin impact. And in addition to that, we can also see that the IT sector, they are not shy in increasing the costs continuously.
Yes. To conclude, similar high pressure from unions in all Nordic countries are seen.
Okay. Thanks.
All right. Then I think, Jaakko, you are the next one.
Yes. Thank you. Regarding the business insights in Sweden, you mentioned that Norway is going pretty well and also Finland, but what is your own assessment behind the bit more muted performance in Sweden? Has there been any changes in the competitive landscape, or why is it like that?
No. Please, Elina.
Yeah. I can start, and please, Jeanette, then continue. But firstly, it's good to note that our customer base in Sweden is somewhat different compared to Finland. In Sweden, we are, on the enterprise side, heavily dependent on large financial sector clients. And obviously, also in Sweden, companies are not investing. And banks don't have similar need for specifically managing credit risk in that sense, or we'd say measures. Whereas in Finland, where we have large customer base, mid-market corporates who have increased need to manage the credit risk, for example, who can I sell with invoice, that creates a lot of stability in the demand for our services in general. Also, of course, the wider offering supports the Finnish development. So that is one part. Of course, then in SME side, we have not seen our, for example, premium sales picking up in Sweden, the ad sales part.
And then on the SME side, there we have seen declining development in the Swedish markets. In Q4, we always have sort of certain one-off sales taking place in Sweden. So this type of one-off reports, yearly industry reports, and the sales for that specific product have been lower compared to prior year. And most likely, the reasonable explanation, again, is that companies are taking savings. SMEs are also taking savings wherever they can. Of course, at the same time, we are also having sales efficiency activities ongoing with our sales partners. So that also impacts the sales development somewhat in Sweden. Jeanette, please, if you continue still.
Yeah. Yeah. I can more or less just repeat and summarize what you said and maybe also say something about the sales efficiency, which we have mentioned earlier. But in short, yes, the market conditions is, of course, so that this SME is taking cost efficiency highly on the agenda still. The one-off costs doesn't this year give the effect that usually does. When it comes to our development, if we take that into account, as we have already earlier mentioned, we have also launched now the platform, the Nordic platform for this SME business. We call it NUX. And it has meant that we have actually now, at last, after years of development, reached a Nordic platform for our SME sales. It's really good. But it also means that we have focused a lot of our development into this platform rather than the top services.
We have a good, steady, modern technology, and we will also reach cost efficiencies with this in time. But we haven't really seen any new services being built on that for this business sales in the Swedish market as of yet. When it comes to the sales efficiency, we have also mentioned for you earlier that we are having an extensive program of how we work with sales efficiency. And when we are doing that forward, we will focus on how to increase our margin in this business forward rather than just looking at what will drive the volume. So can we get a better sales efficiency and margin on top of the now modernized technology, then that is a good place for takeoff on this business later on.
Okay. Thank you. Very good and makes sense. Then just to confirm what you said about the brokers in Sweden, you mentioned that the regulators will require some sort of a license going forward.
Yeah, it seems like it, yes.
They don't currently have that. There is not. So they have to apply for some kind of a license if they want to go.
Yeah. The uncertainty is what kind of license is needed for the broker segment forward. And there is a lot of noise about that kind of regulation could be even up to the level of a bank license. And of course, that is a big change from today's. I'm not saying anything about the likelihood of that one, just to mention. But as you can understand, it means that it is a lot of noise regarding what is the regulation forward. And as that is not clear yet, then it means also that there is a little bit of a hold set up for the brokers at the moment.
Right. And as a follow-up, could you remind us about the broker markets? How large was it? How many players there are in the markets? five, 10, 30?
I think the most important part is that we have a number of brokers which are the ones with the big volumes. I think we are following constantly about 10 of them at least. I would say that the top four is making the difference.
All right. That's good. Thanks. That's all from my side.
Good. I think, Daniel, you are next. And just bear in mind that we have maybe roughly five minutes left, so.
Yeah. Thanks. Just a couple of quick ones from me. I mean, I know you won't comment the guidance, but should we expect a numerical guidance or trying to get that, or are you sticking with the more vague verbal one going into 2025?
That is too early to comment at the moment. I'm sure we will have interesting discussions also with the board about that, but cannot state anything at this stage.
Okay. I mean, then the second question on the sales mix, I mean, we have talked about this a lot, and of course, you just say it has been weaker. Could you disclose maybe how large are the gross margin differences between maybe the best product and the worst product, for example, in the Consumer Insight? So we could get some sense on the sensitivity, this commentary.
I mean, the best product, the gross margin is pretty much close to 100%. There are no, in some sense, the variable costs are really low or even non-existent when it comes to several value-added products or the whole Swedish consumer credit business overall. When we look at sort of, for example, the very basic data in Finland, for example, financial sector purchases, population register information, basic population register information from us, and there the margin is then closer to, well, it's very low. So it's even below 10%. So there is a huge variance within the consumer insight margins.
But I guess those two products, I mean, the 100% and the close to zero, they are not interchangeable from the point of view of the customer or.
Sorry, they are not.
Interchangeable. So the customer needs to choose either the 100% gross margin product or they can drop the zero one from your point of view, or is it so that?
The differences are between markets. So in Sweden, we have a really limited amount of variable costs overall to start with. Then in Finland, the customers, of course, well, first, if you think about the process, so first you check the basic data of the credit applicant, and then you check if the person has credit remarks. And of course, if that returns as, "Okay, the person has credit remarks," you can already take the decision that, "Hey, I will not give this person a loan." But then if that becomes clean, then you start using more value-added products with some high-margin products. So then you start using scorings and such. And those then are basically, again, very profitable and high-margin products. But as we have stated, now the situation in Finland is that the credit applicant population is weaker.
So this means that our customers only, to a larger extent, only need to check the very basic data and credit remarks to turn the applicants down.
Yeah. We can continue this at a better time, but that's good for now. Thanks.
That is good. And I think it's also good for you all to bring with you what Elina said here in the beginning about the consumer credit Sweden, which is about almost 100%, and then connect that to what you have seen as a trend during the year that is relevant and important.
Good. And then maybe the last question, Matti.
Yeah, just briefly. When you talk about the brokers' license regulation change in Sweden, is it going to be so that the brokers cannot continue their operations after a certain deadline, or is it so that they just need to apply an applicable license at some point in order to continue operations, let's say, next year or however it works? So it's not kind of total complete pause. It's just that they need to consider that they need a license, and sometimes kind of preparing for the license might be burdensome for them.
You know, now this is speculating from my side because there is no information, which of course is, again, causing this uncertainty. But the usual way to introduce these kind of changes is, of course, that you get an X amount of time to adapt to the license and the need of the license. And that means also that you need to have time to make the application and for the authority to take part of the application and give a return, etc. So I think I would expect that that will be reasonable in how they put that into place. I think the most difficult part right now is what is needed as a level for a broker going forward when it comes to everything from handling compliance processes, resilience, etc., which is very much connected to what kind of license there will be. So we will see.
So there is, in general, uncertainty into these areas. And that means uncertainties for the broker and the broker owners.
Right. Okay. Thank you. That's clear.
Thank you.
All right. I believe no further questions. And so we can probably close the call, and we will talk more then in our Q4 result release. Thank you.
Thank you all. Thank you.
Thank you.
Thank you.
Happy New Year.
Happy New Year.
Happy New Year.