Good afternoon. Welcome to Enento's Q2 and half year results briefing. My name is Arto Paananen, and I'm the Investor Relations Officer here at Enento. We will start with the typical agenda, where Jeanette and Elina will go through the results and key highlights of the quarter. Then we will continue with Jeanette's presentation on our newly published strategy and long-term financial targets. The last part of the session will be the traditional Q&A session, where you can ask questions through the chat function in the browser. Now let's kick it off, and Jeanette, please go ahead.
Thank you very much, Arto. Again, welcome to our half year earnings call and presentation. Our leadership has changed since end of Q1. Sari Ek-Petroff, now permanent Director of HR. Heikki Yli-Pekkala, Director of Digital Processes, left the company in June. Victoria Präger, Chief Marketing and Customer Officer, announced her resignation in June, but will also stay now until end of September. Regarding our Q2 highlights, our organic net sales, excluding Tambur, declined by 1.2% at comparable exchange rates and was EUR 39.7 million. At the same time, margin improved to 36.5% thanks to successful implementation of efficiency measures. The net sales development was particularly impacted by the sharply declining consumer credit information volumes in Sweden, while the steady development in Business Insight continued. Overall, the development in Sweden was weaker compared to other markets.
Adjusted EBITDA declined by 2.1%. The margin, as mentioned earlier, improved to 36.5%. Our cash flow was strong, while the net debt ratio was well below our set maximum level. The share of new services continued to develop very positively and was 11.1%. The biggest reason behind the improvement is the renewed certificate offering in Finland. The continued adoption of the daily credit register by our customers in Sweden, as more than half of our customers are now using the new register. We did launch exciting new services during the quarter. Let's come back to those in a moment. Digital Processes is now part of Business Insight. We have two strong business areas going forward.
The reason for the integration was that we see significant growth opportunities and synergies in our compliance offering, and now Business Insight has a Nordic reach with its offering. The NPS from large and strategic business-to-business customers improved from Q1 and remains on a high level. Our quarterly update on the efficiency program, it is continuously proceeding as planned, and more than half of the planned efficiency are already realized on a run rate basis, equaling to roughly EUR 5 million. Main drivers being the reduced number of FTEs during Q1, the Sweden office move, and business process automations. On the IT side, we have identified optimizations also in areas of licenses and service capacity usage. In addition, we have been able to renegotiate service agreements and to reach better terms.
Within IT efficiency, the application service pre-study in Sweden is completed, and we have moved to transition phase, which is expected to be completed by this year end. In regards of business areas and the highlights from Q2, let's start with Business Insight. As mentioned, Business Insight continued on a positive track, as all business lines, except real estate, had growth during the quarter. Overall, the organic growth at comparable FX rates was 4.2%, excluding Tambur. The performance was particularly strong in premium solution and compliance services. Enterprise solutions continued on a good level. The demand for both financial risk and reputational risk services remains strong. Some of the highlights include launching of the first compliance service in Sweden, the PEP and Sanction List Screening Service, which is an online service to screen your counterparties.
We have also added a customer success story, and this one is from Finland. As a banking customer in Finland conducted a comparison of fraud risk detection capabilities in their corporate lending process. With the Corporate Radar service, the customer can detect warning signs that other solutions did not identify. The customer decided to implement the service due to its clear benefits and the decrease in fraud risk. On to Consumer Insight, who definitely had a challenging quarter, especially in Sweden, as consumer lending volumes continued to slow down. Development in Finland was more stable, and direct-to-consumer services continued to grow. Overall, the decline at comparable FX rates was 7.7%. Some of the highlights include the development work of the new Decision Hub. The Nordic solution for our decisioning-...
services is proceeding according to plans, shall be launched first in Finland during the second half of this year, and then gradually the hub shall cover all operating markets, which we will come back to in more detail during next earnings call. On the customer success story within Consumer Insight, we were sharing with you now that we have helped a number of buy now, pay later providers with our consumer credit information solutions, and that is tailored for the e-commerce sector in Sweden. The e-com sector is the fastest growing customer vertical in consumer crediting information services. Focus ahead now to summarize. If we start with the business landscape changes that we are anticipating in Finland and Sweden, we are proceeding with the new solutions which utilize the public credit register and data in Finland.
In regards to Sweden, the outcome from the investigation report to prevent over-indebtedness was published now in early July. Several measures are proposed, such as interest rate and cost cap for consumer loans, and we believe those are good proposals to have an impact on the problem with over-indebtedness. The investigation also proposed a license-based credit register. Now, a referral process started and continues until 6th of November, then legal counsel referral period, and a decision which proposals will be accepted for next phase. Our strong position, which is based on value-adding services and intelligence built over decades, will nevertheless remain for years, and we are preparing proactively for different scenarios. Over to strategy, just very shortly, because we will come back to this after we have heard also how we are doing financially from our CFO.
Just shortly, I'm going to say that we will now start focusing on the strategy implementation. What do I mean by that? Well, we will ensure our organizational structure, processes, KPIs to support and enable the strategy implementation. Of course, we will also allocate investments, tech, and people to ensure that we have the right resources in place to drive our strategy forward. That was all from me for now. Thank you, and over to you, Elina.
Thank you. Very warm welcome on my behalf as well to this half-year financial report release. I will start by repeating some of the financial key highlights, go into more detail in revenue and profitability development. Let's start with some highlights. Our net sales, it reached EUR 39.7 million, which was decent, taken into account the heavy negative impacts from the macro situation, weakening kronas, and also the discontinuance of the Tambur business. Our net sales declined slightly, excluding the Tambur impact, by some -1.2%. Revenue development continued, however, to be on good level, both in business information and compliance services. Also, new services increased significantly and were above 10% of the total revenue.
Where we then struggled was obviously the consumer credit and real estate businesses, and overall, the development in the Swedish markets was weak, following the weak macro situation. Especially heavy negative impact came from the consumer credit business, where transaction volumes declined in both markets, but especially, as said, in Sweden, and that pushed then the group's sales development to be negative. Adjusted EBITDA that declined slightly, but even with slightly weakening sales mix, the adjusted EBITDA margin on the other hand, expanded and reached 36.5%. This development was obviously thanks to our efficiency measures and the following lowering costs. Adjusted EBIT that development followed basically the development in EBITDA and the financial position that remained strong. Let's continue then with some details on the revenue development.
he Business Insight revenues, it includes our business information services, enterprise premium services, but also real estate and compliance services that were previously reported on the Digital Processes. It also includes the discontinuous impact from Tambur business, and that actually turned then the Business Insight development into flat. Excluding the Tambur impact, the Business Insight revenue increased by 4.2%. Business information services, including the Finnish enterprise premium services, as well as the Norwegian and Danish businesses, those continue to grow. Enterprise services development was supported by the risk management services and good demand in those. However, the development was somewhat moderated by the fact that we had one banking day less, and we also had an incident in Finland causing the services to be down for one additional day
On the premium business side, as there the development was supported by new services both in Finland and Norway. In premium
The development in the smaller business lines, consumer marketing, direct consumer, that was rather steady, and in Finland, the direct consumer business continued to grow. Moving on to the profitability development in more detail. Adjusted EBITDA, EUR 14.5 million declined following the challenging market situation, decreasing consumer credit volumes, and obviously the decrease in the highly scalable Swedish consumer credit business, as well as then due to heavily weakened Swedish and Norwegian kronas. However, thanks to profitability improvement actions, our margin continued to expand by 0.5 percentage points and reached 36.5% level. Going through the profitability development, then line by line. Starting from the materials and services, data acquisition costs, those declined in line with the declining revenues in consumer credit and real estate businesses, especially in Finland.
Gross margin, that somewhat declined following the fact that the sales declined heavily also in the some of the most scalable areas, like Swedish consumer credit business. Personnel costs, those declined by some EUR 300,000 following the savings actions and restructurings that took place mainly in Q1. Those positive impacts were then partially mitigated by the salary inflation, and also in Q2, there was a one-off collective labor agreement compensation paid in Finland. The successful savings actions, those are also very much visible in the other operating expenses, which decreased by EUR 1.1 million compared to prior year. Approximately one third of these savings can be considered as permanent type of savings, and rest are then more temporary or timing-related ones.
On the permanent efficiencies, we have optimized our IT operations, maintenance operations, and reduced usage of consultants. We have also moved to smaller premises in Sweden. On the temporary side, we have optimized our marketing efforts and also then pre-study type of activities and similar type of activities impacted the comparisons positively. Finally, production for our own use, that was lower compared to prior year, following both the portfolio optimization and then focus on IT-related efficiency measures. For example, the pre-study related to offshoring and nearshoring, the Swedish maintenance and development operations. What then comes to the reported figures with reported FX rates? Obviously, those were heavily impacted by the weak Swedish and Norwegian kronas. Let's move on to the free cash flow development, and that was good.
Free cash flow was EUR 5.9 million in Q2 and close to prior year levels, despite higher one-off payments related to the restructurings. Free cash flow was also impacted negatively by the higher tax payments, whereas then lower investments offset that impact. Cash conversion improved both in Q2 and in the first half of the year, and in H1, our cash conversion post-taxes is slightly above 60% level. Finally, few words on the key figures and financial position. Our financial position, as said, continues to be strong. Net debt to adjusted EBITDA 2.4, and after dividend payments, purchase of own shares, we have some EUR 5.9 million of cash at our hands on top of fully unused credit lines.
Gross investments, somewhat lower than prior year, as said, following the prioritization and focus on IT efficiency-related activities. Finally, what comes to the financial outlook. We have kept that, we have kept our guidance intact. We continue to forecast 0%-5% growth for the full year, excluding Tambur impact, and we assume adjusted EBITDA margin to be between 36%-37%. Now, let's continue with the exciting stuff, our new strategy, and pathway to growth, and margin expansion to 40% by 2026. Please, Jeanette, continue.
Thank you very much, Elina. No problem. I have the pleasure to present the highlights from our new strategy, and as you noticed, our board also confirmed the long- term financial targets for 2024 to 2026. Our renewed strategy is based on conclusions we have made during the last year, connected to how to drive operational efficiency, the reshaped Nordic business platform, and our deep dive during this spring in regards of how the market is developing. We plan to deliver consistent growth and EBITDA margin expansion in the coming years. Our initiatives, together with the market development, will support the growth and profitability development.
We will retain and strengthen our leading position in the Nordics through our four focus areas. Operational excellence has been a number one area for us the last year, as we needed to handle the changing macro transformation and for future investments. We are aiming to deliver 5%-10% average annual net sale growth, with around 40% adjusted EBITDA margins in 2026. New services are expected to have a significant impact to our growth. We have a target of around 10% share from net sales coming from new services in 2026. We believe we have a solid growth plan based on market and customer input. We expect our organic growth coming from market growth and pricing adjustment. Also from increasing market penetration and new customer verticals. Those are like telecom, utilities, and e-commerce.
We will invest in modern delivery channels and digitalization of our sales and marketing, making it easy to sell and easy to buy. More growth is going to come from new services, which we have already started to provide, like ESG and compliance, B2C data, and fraud. We are in a good position, as we already have the competence and the capabilities, and we have started to offer those services. M&A is an additional upside. We continuously screen for M&As that could strengthen us in either customer base data or tech competence. The Nordic markets are expected to develop rather stable when it comes to GDP, lending, and investment volumes.
The Data as a Service market in Europe is forecasted to grow at more than 8%, it is a fundamental driver of growth and increasing availability of data, which also leads to new cases and new use cases. The amount of data is exploding, our customers want to make data-driven decisions for decrease of risk or for further efficiency. Our customer needs us to help them to turn the raw data into quality and intelligence by building the predictions and conclusions on top of that data. As a specific area, compliance is growing even faster than data business in general, due to tightening regulation and requirements. AML and KYC sectors are forecasted to grow high double-digit in the next years. ESG expected to increase rapidly due to climate politics, investment policies, et cetera.
Identified credit and business information addressable market in the Nordics is EUR 600 million. The market is growing. Our leading position in the credit market in Finland and Sweden puts us in a good position to expand and develop our current offering, but also expand into these newly growing areas with large potential, especially in the Swedish markets, both with the current but also new customer verticals. We primarily compete with few tier one information providers, since barriers of entry in this business are high, both due to commercial and technical reasons. Within business information, we see opportunity for growth across the Nordics, but especially in Sweden, where we have lots of untapped potential. In general business information, all markets are fragmented. We definitely believe we can continue to gain market share and build our position. Credit is at the core of our offering.
We have unique data, unique industry competence, and market-leading services. We will continue to develop the credit services in line with the market and customer needs. We expect stable growth in the credit business, both in consumer and business. We plan to continue to leverage our positioning and high market share with new value adding and modernized services to further strengthen our offering. We see significant growth potential in the areas of compliance, ESG, and master data within both existing and new customer segments. We have already started to develop and sell our ESG offering in Sweden and Finland. We see limited to even low local competition. ESG could become a license to play, especially within sustainable lending and in combination with other compliance-related data. In compliance, Enento is well positioned.
We have developed compliance offering, like, for example, data within PEP and Sanction List for years in Finland, and now we just launched those also in Sweden. Master data, meaning data that is used for different purposes and not necessarily combined with insight analytics, is highly synergetic, and we are aiming to reinforce and expand our position. We see this as a continuously growing market as data demand increases. To conclude, we have a clear roadmap to margin expansion consisting of the 4 areas of scalable growth, remodeled sales and distribution, Nordic consolidation of capabilities, and cost efficiency. We talked already about our growth opportunities, and we are focusing on scalable growth in the strategy period through pricing actions, increased market penetration, and obviously also with scalable new services.
Our business model is in general, very scalable. That is thanks to our ability to efficiently reuse data and tech. Therefore, growth tends to come with high margins. We are planning to reshape our sales model, where one of the key initiatives include converting customers from annual offers with high annual customer acquisition cost to continued subscription to enable sales focus on growth areas. We also aim to optimize usage of partnerships and improve our online sales capabilities to deliver on both growth and profitability. We will continue to invest in marketing operations and sales capabilities, also to delivery channels. As a next step, our focus is on building a Nordic user interface, starting from Sweden, with Nordic vision.
The user interface will support our ambition to build seamless customer journey with easy to buy and easy to use. It will help us to serve both enterprise and the SME segment. We will, of course, continue to consolidate our capabilities with gradual decommission of legacy systems, as we have earlier shared with you. At the same time, we are realizing cost efficiencies with several identified areas, both on our current efficiency program, where full impact of our profit will be visible from 2025 and onwards. By that, I say thank you on my behalf, and now let's see if we have some questions. Please join me.
Yes, we have questions indeed.
Okay, we do.
Yeah, we do.
Yeah.
Maybe we could start with the questions from the live audience. Matti, please go ahead.
Hi, good afternoon. It's Matti Riikonen, Carnegie. Couple of questions. First of all, during Q2, how was the trend? I mean, that was it the same weakness throughout Q2, or did it decline towards the end of the quarter?
I can start-
Mm
... by commenting on the Swedish side. The acceleration started at the end of the Q1.
Mm
... in Q2, the Swedish development was rather stable, so to say.
Mm.
Stable, weak. In Finland, it was more. We cannot say what the trend is, because it was varying even between months, quite heavily, so on the Finnish consumer credit side. There it is more difficult to comment on a trend.
Yeah. To come back to what you're asking for, it happened actually quite much, as soon as Q1 had stopped, but then stable on that level.
All right, thank you. We have seen that pattern in so many businesses, that I just wanted-
Mm
... confirm that it's the same also for you.
Mm.
Yes.
Right, a couple of technical things. Regarding the new financial targets, was the old gearing target net debt to adjusted EBITDA or reported EBITDA?
It was adjusted.
It was adjusted?
Yeah, remaining the same.
It's basically unchanged.
Yes
from the previous one?
Exactly.
Maybe to the strategy and the financial targets, many of them were the same, so actually nothing changes except that now you have a firm profitability target instead of just saying that profit will grow faster than top line.
Mm.
Is there essentially any change in the financial targets compared to the old ones?
The financial targets, exactly like you say, the change in financial targets is mainly connected to that we are clarifying our improvements in the margin and expansion to 40%. Very much about what is now, if I may say, new or clarified, is rather, how do we get there? Our self-confidence to actually reveal this new updated margin, I would say, is not only based on how we see that we will continue to grow, but it's also very much based on what we have already achieved when it comes to operational efficiency, the efficiency program, and that we have a clear path on how we continue on that one. In the end, you know, strategy is usually always about execution.
Commenting that also the new services target is clarified. Previously, we used to have annually growing share of new services, but now we have set a.
Yeah, the 10%.
... 10% target there as well.
That's somewhat
Yeah
... from earlier.
Right. Sorry, I have to read my notes here. Yes, within the Consumer Insight, when you talked about the buy now, pay later vertical, could you kind of describe that, the importance of that?
Mm
... to the segment?
Mm.
I mean, does it play a big difference in the vertical? Well, obviously, it couldn't, because otherwise the numbers would look different.
Yeah.
But-
Yeah
... just, how has it developed? How do you expect it to develop going forward?
Yes, yes. You're right. I mean, it hasn't made a big difference yet, but we see that this is a vertical that is growing also. The e-commerce is continued to grows. We also see that our services fit very well with the e-commerce sector, and we are continuously developing so that we have different services, which is having different price levels so that they can use them for the... If you would say so, what kind of risk level they want to, you know, pay for. A larger purchase, of course, means a larger risk, and then that has one service, and then the smaller ones have other services. This is also very much connected to how the regulation is set up in the Swedish consumer side in Sweden.
To put it short, we see e-commerce sector as an important new vertical for us on the Swedish market, and we see that both because we see we have compelling services, so we think we have a good chance to do well in the service, and the other one is that it is continues to grow.
Okay. One question to Elina. When you talked about the cost savings, I think you mentioned something like one third of savings being permanent. Did I hear that right?
Yes, I was referring to the other operating expenses, the EUR 1.1 million decrease in that.
Right. If we look at the whole cost savings program, should we expect that what part of those is going to be permanent, or is it all going to be permanent?
When we talk about the efficiency program, those are all going to be permanent, the EUR 8 million that we talk about. On top of that, we have adjusted our temporary cost base, for example, the marketing spend. Obviously we do have, you know, timing issues with, you know, pre-studies and stuff that impact then, especially the other operating expenses. The EUR 8 million efficiency benefits, those are fully permanent. For example, if we talk about the personal cost savings, those are obviously fully permanent. To clarify that.
All right. Thank you. That was all from me.
Thank you.
Thank you very much. Okay, let's move on to the online questions then.
Yes.
Let me try to combine a few of these into 1, because there's plenty of questions, and we are limited with time.
Okay.
Let's start with the credit registers, both in Finland and Sweden.
Yeah.
If we start with Finland, could you somehow estimate the impact coming from the Finnish register, which is about to be introduced next year to our business? Do we see a risk that if our offering that is now being developed using that data, it doesn't really serve the purpose? Do we see this as a significant risk for our business in Finland?
Well, now, regarding the Positive Credit Register, it has evolved, so we have a fairly good idea of how this will actually work, as well as also how we will work together with the data and how we develop the system. The system is going into, you know, going into play now, so we are also coming quite far with our development. We feel confident, actually, that we can continue, and that we don't see any major risk within the Finnish area of this.
I don't know if you want to add to that one, but, you know, all in all, we feel that we have a solution where we can work with the customers to make sure that we can either be their first choice for an easy credit check, or, if, needed and wanted, that we can use with a combination of the data like we usually do, not one source, but different sources, combine those, and then again, which is usually very important, is also to build intelligence on top of that. Both to qualify the data and intelligence, and that is still needed.
Yeah-
Very good.
... and commenting on that obviously we have had a lot of discussions with our customers. We have been developing this, you know.
Yeah
... based on the customer discussions. In that sense also, I see the risk very limited.
Yes, maybe just one detailed question. The person here is asking about the price for the customers to use the data through.
Mm
... governmental credit register, and, he seems to believe that it's for free, but that's not our understanding.
No.
No.
It's not for free.
Mm.
We do have an indication what we believe, but it's not confirmed yet.
Right.
We think it will be around EUR 2, but not confirmed yet.
Mm.
Yes. Very good. Let's move on to Sweden and the same topic over there.
Yeah.
How do we see the different scenarios right now and the impact to our business?
Mm
... going forward? Of course, it's very speculative, so.
Yes.
Yeah.
To start with, I think it's to say what is actually obvious, that it is very, very early stage still. We have an investigation where proposed several actions in order to decrease over-indebtedness. As I mentioned here earlier, we are in the process of a referral. If the referral goes further, that goes into that you will also have a legal counsel period, then they make decisions on what are the actual proposals that come into play. It means that I want to underline that we are in a very early stage of this. Nevertheless, even though we are in an earlier stage, we are proactive in the way that we are looking into what would it mean with the licensed model.
What is very difficult to look into, that is the how, because this can be done in very many ways. To start with, it is a matter of will it be there? Then secondly, how will it be implemented? What we look into when we say scenarios, it is that we are looking into what are the different scenarios, and what we are doing already. Nevertheless, and which I think is the most important part of it, is to continue to be as competitive as possible towards so that you're giving the customers the value-added services. For one thing, we are continuing to invest. I mentioned today the Nordic Decision Hub-
Mm.
That is something we have now launched in Finland, we are continuing to Sweden. We are all the time developing our intelligence on top of that data. Again, I can't underline enough that when we are talking about these credit registers, it is pure data, only data. What we are good at, again, is to combine the different data sources and build intelligence on those.
Mm.
They are very much working together with us when it comes to drive the value-added services on top of the data. The registers is not enough as an end product.
Right. Very good. Hopefully this clarifies, and of course, we will, well, inform the market whenever there's something happening.
Absolutely.
Yeah, good. That's it regarding the credit registers. Plenty of questions regarding the strategy, but perhaps we first take the more near-term questions, and this one goes to, perhaps to Elina. We are now saying basically that we maintain or we accelerate the organic growth going forward if we are believing in the guidance as we are. What gives us the confidence to assume that the market will sort of be there and there's no further deterioration of the consumer business, for instance?
Yes. We are now after H1 at 0.5%.
Yes
... growth level, excluding Tambur. Basically, to keep the 0%- 5% rate would require choir a flat development. Of course, we continue to see risks in terms of the consumer credit volumes. Of course, we also have a lot of good activities that we are taking, aiming to focus our efforts in the areas where we see growth currently. For example, the Norwegian business, to mention a few, or premium business in general, likewise. Combine that with the various launches of new services, and also taking into account that, for example, the real estate sector started to weaken already in the second half of the last year. We continue to believe that we are able to deliver on the revenue guidance.
Anything you would like to add or?
No, I think that she covered it all.
Very good.
I think that the important thing here is also to hear that we are taking proactive actions also. Macro is one thing.
Mm
... and that is difficult to control.
Yes.
We are also doing quite a lot of activities which were mentioned, with new launches and driving sales of both those which are already on the market, which are a couple of new ones, as we also told about in Q1.
Mm-hmm.
In addition to that, we also see another ones coming on.
Good
we will continue to drive the sales.
Yes. good. Let me see if there's anything else that sort of touches the same area. No, I guess we can move on to strategy then. Are we planning now to introduce anything else in terms of cost savings or new measures beyond the current efficiency program in order to achieve the margin level in 2026?
Well, I would say that we still have a couple of fairly large initiatives in the pipe in connection to the existing program. I mean, we are now executing, as we said, in the rest of the year under a transition phase, we are starting to actually already in the autumn, look into the infrastructure as well. I would say that we are indeed ambitious when it comes to efficiency in general. I think also our organization, and I would like to actually address that also here, if any of our colleagues are looking. I think that we also have a very engaged organization, who themselves are also finding new ways to drive operational efficiency. We have actually a lead thumbnail on efficiencies as well, not only on sales.
Mm.
Yes.
Good.
I could comment on that.
Yeah
that we definitely do have items that expand in the horizon, so already in the pipe. So it's not purely the efficiency program. For example, you mentioned the sales efficiency related items, what comes to the acquisition, customer acquisition cost and related actions and distribution channels.
Yes
... and similar.
Mm.
those impacts seeing beyond the, mainly beyond the efficiency program.
Yeah.
Yes, not only the current program, but additional items as well. Obviously in IT area, we continuously look what we can, you know, decommission when we build something new, so it's also a continuous effort.
Very good. A clarification maybe, the 5 to 10% growth target, is it organic or including acquisitions?
The 5 to 10 is, we plan that on the organic.
Yes. Good. Then price adjustments, as one of the drivers for growth and margin, of course. What is the current state, and how the customers have now responded to this, price adjustment, initiative that we have been.
Mm
... every single time in these sessions as well?
Yes, it continues in the same, I would say in the same way, also forward. We have managed to actually, which is important when it comes to price adjustments, that makes a difference on the total revenue for us to make the changes into all our contracts. It is proceeding according to plan.
Good. Yes, we noted that, we will invest in the prioritized growth areas.
Mm.
Can you discuss on the timing and the significance of the investments required, and also would those investments be OpEx or CapEx related?
Both obviously. We obviously aim to then mitigate and offset the upfront OpEx impacts with our savings actions, so that we can keep sustainable profitability and financial track throughout this strategy period.
Mm-hmm.
comes to the CapEx, so we estimate the CapEx levels to be somewhere between 7%-10% of revenue during the strategy period, probably somewhat higher in the first years.
Good. I think that answers also the timing questions then.
Yes.
Yep. Very good. Driving scalability and the margin expansion, so the question is that can we remind the audience on the previously discussed double costs, which are connected to the IT platform transformation project? If we now have identified tools to mitigate these costs-
Mm
or is the plan to drive the efficiencies elsewhere?
Mm
during the transition?
I think that, we feel quite confident with the costs we have now. If we look back at last year, what we did was that we, as we said, we reshaped the transformation plan, it would be more financially sustainable for us. We think we have a good control of what double costs we are also taking on.
Mm.
On the other hand, again, we're coming back into how we are driving efficiency in order to be able to do the investments, but also to carry on the cost that we are deliberately taking on. It's a matter of planning for the execution, and to continue to be very disciplined, I would say, in also making the commissions along the way.
Mm. Very good. Yeah, and then last one, I guess, about the efficiency measures, so you were referring to sales efficiency, so what does it actually mean?
Well, we say one thing, I think that was also already mentioned by you now here, is that we want to move over to a business model where in some areas of the Enento Group, we are today having a non-continuous, so to say. It is 12 months, and then you have another acquisition cost for continuing. What we see is that we want to go to a model where this is, yes, continue month by month, that you're not having the acquisition cost as such. We call it evergreen model. That is one thing.
Another thing which I have been talking about here also now, which I think is very important, both of how we improve, but also for customer satisfaction, that is that we digitalize to a larger extent our sales and marketing. When it comes to digitalizing it of course also means that you can release time, sales time, for those contracts which are somewhat larger and which needs more of the dialogue. What we see is that we want to further increase the digitalization, which usually also is, especially within the SME segment, is very much something which the customer also would like to see. Instead of having the CRM optimized or not at all, we want to continue to make more efficiency into that.
Mm.
That's what it's all about. We will continue to look into also, what kind of sales are we driving with our own sales force, and what kind of partnerships do we have for what services? That is something we will also continue to monitor, how we want to play that to have the best efficiency in it.
Good. Very good. Can you elaborate a little bit on the master data services that we mentioned as one of the prioritized growth areas? Do we have any kind of offering today on that area, and who are the customers that we are targeting with this offering?
To start with, when we are looking into, because we've been looking into a lot of market data, as a part of this process, which we started up with doing in the beginning of this year, we see that there is a continuous need for master data. Our definition here now is that master data is not. We don't always know to what's the reason why you're buying it, and what we also see is that there is an increasing need of it connected to that our customers are doing more of a digitalization automation of their own system. What they are doing is that they are buying it to fuel the system with data. In that sense, that could be to any kind of customer.
I think we are better off in Finland, where we have customers on this. We have already, you know, a good start. We also have actually an interface in Finland to distribute it, which we now will also start up then in Sweden. It is, I would say, it's a fairly mature business already, master data. It isn't so that you build intelligence on it, but of course, to reuse the data, which we can do, build scale on this.
Mm.
Even though it's not necessarily an area which price increases, it can actually be other way around. We are still doing it with scale.
Good. Very good. Okay, two more. What kind of revenues do we have today in the prioritized growth area, meaning ESG and compliance and master data? Elina?
ESG revenues continue to be limited. Of course, somewhat more in Finland, as we have already long history with the ESG services, and those are growing with double-digit rates, but however, still rather low baseline. The same then comes to compliance business. Obviously, we do have a good business in Finland already, and it has been growing double digit for, I don't know how many quarters now. We see very high growth in that area in Finland. In Sweden, we have just only, you know, launched the first service in that area. The master data, I said, we have a strong offering in Finland in place and good amount of revenues in enterprise services.
For instance, already come from also master data services, but now we basically aim to, let's say, not copy, but, you know, use the same model also for the Swedish markets where we haven't been focusing on that.
Good. Continuing on the same matter a little bit, what are the competitive advantages in ESG and in compliance that we see?
To start with, we have fairly low competition in ESG on the Nordic market, so at this point, we have been the company who's been driving ESG local data, local services. Of course, that is a very good starting point. When it comes to the compliance and as I also mentioned earlier, when it comes to Business Insight, this is a somewhat more fragmented landscape. Nevertheless, I would say that we are very well off with our position that we have in both Sweden and Finland, because when it comes to this compliance, which is very much about reputational risk, it's about, you know, keeping to, making sure that you're following laws and regulations that are very close to our, I would say, brand, also very close to our existing customer base.
It is a quite natural step forward for us to continue to grow in.
Yes. the synergies are there.
Yeah
They are concrete. Yes. Good. You already mentioned the competitive landscape.
Mm
in those areas, so it's pretty fragmented-.
Mm
... in the compliance area. Very good. No more questions. That was it.
Okay.
Actually, there's one from the audience, so Matti, please go ahead.
Hi, it's Matti Riikonen, Carnegie. Two questions more, if I may. First of all, regarding competition, have you noticed competition to intensify during the last quarters, and has that been affecting your business performance in any way?
I can answer you like this: we have not lost any of our customers. All large and strategic customers, we continue and rather we enlarge. We have not seen any churn on, you know, not even connected to the macro at this point, which has been unusual. I wouldn't say that we are in any way losing to the competition.
How about pricing? Have you made anything to your pricing related to competition?
We haven't. Now, we have done price adjustments, which we have done in many of our premium services, and that has been done also for several years. Now, that has not, as we've seen, anything connected to how we have seen that the competition have been doing. Those we have been doing because we see that it is something which is fit for the situation, so not following competition in that sense.
Right. Thank you. Then finally, if we think about the cost savings that you have made, is it correct to assume that a larger share of those has been done for the Swedish business and less so for the Finnish business?
Well, yes. You could actually assume that.
All right.
Yes, especially in the IT field.
Yeah
... we have more scattered landscape.
Mm
... and operations in the Swedish side
Yes
That's where the key efficiencies in terms of IT also come from.
All right. Thank you.
Yep. Thank you, Matti. Let me check once again. No questions online, I think we are concluding the call. Thank you very much for participation, for all the good questions, and I guess it's time to wish everyone a good summer the rest of the summer.
Indeed.
Wish you all a very nice summer. Thank you for taking time, and thank you for all the questions. Thank you.
Thank you. Bye-bye.
Bye.