Earnings Release • May 8, 2019
Earnings Release
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Zalaris sets profitability target and action plan for 2019
Zalaris' Q1/19 revenues reached NOK 192.4 million, a 3% growth compared to Q1/18. Several group-wide actions have been identified to improve on the 3% EBIT-margin achieved in the first quarter, and a target margin of 10% has been set for Q4/19.
The first quarter of 2019 is marked by continued revenue growth and the successful launch of new contracts with top-tier clients, but also profitability below target levels.
“We aim to continue being a growth company. However, our short-term priority is to return to the margin level that we had prior to our acquisitions – and our target is to produce a consistent 10% adjusted EBIT by the last quarter of 2019”, says Hans-Petter Mellerud, Zalaris’ CEO and founder.
The following actions have been initiated to reach the profitability target:
• Centralizing support functions as Finance, HR and IT to accelerate process improvements, synergy realization and cost reductions
• Reducing costs for external advisors and downsizing administrative functions
• Converting internal resource usage to market-facing capacity
• Focusing sales efforts to improve scale utilization
• Increasing offshore capability utilization
Capacity shortage
Zalaris’ Q1/19 revenues reached NOK 192.4 million (NOK 186.2 million), a 3.3% organic growth compared to the same quarter previous year. In terms of busines segments, Managed Services (previously HR Outsourcing & Cloud Services) grew revenues by 3.6% year-on-year, while revenues in the Professional Services segment (previously Consulting) increased by 4.2%.
Group operating profit in Q1/19 was NOK 6.5 million, representing a 3.4% margin (NOK 11.4 million and 6.1%).
“A shortage of consulting capacity in Professional Services led to increased expenses for external services. The demand for Professional Services has shown a positive development and currently exceeds capacity in the German market. Thus, we expect to be actively recruiting skilled consultants throughout 2019”, Mellerud says.
Strategic partnership
In Q1/19 Zalaris successfully started delivering Managed Services for customers like DNB, Kongsberg Group and Aker BP, with a total annual contract value of approximately NOK 20 million. A renewal of a framework agreement was also announced with the German Federal Administration, for application maintenance of their personnel and payroll system which pays close to 300,000 employees, civil servants and pension recipients on a monthly basis.
In January, Zalaris signed a letter of intent (LOI) with the municipality of Bø in Northern Norway.
“The goal of this strategic partnership is to prepare and implement a municipal solution covering the same scope of services as Zalaris offers to the private sector”, Mellerud says.
Better aligned with customers
The rebranding of Zalaris’ business segments into Managed Services and Professional Services is a natural consequence of how the company’s business is evolving in the markets in which it operates.
“By streamlining our organization towards coherent customer offerings, we are able to improve the utilization of capacity both within our sales and service organization and align with customer needs across our regions. This again enables us to focus on opportunities, improve efficiency and better utilize our offshore capabilities, which will improve both the top- and bottom line”, says Mellerud.
Contact
Hans-Petter Mellerud, CEO and founder
Mobile: +47 928 97 276
E-mail: [email protected]
Nina Stemshaug, CFO
Mobile: +47 982 60 394
E-mail: [email protected]
About Zalaris
Zalaris excels in delivering comprehensive cloud- based HR and payroll services. The company is certified as a SAP Business Process Outsourcing (BPO) Partner and is a leading
SAP Human Capital Management (HCM) and SuccessFactors consulting partner. Founded in 2000, Zalaris today operates in Denmark, Estonia, Finland, India, Latvia, Lithuania,
Norway, Poland, Sweden, Germany, Spain, the UK and Ireland including local-language service centers with extensive expertise in HR- related laws and regulations. Learn more about Zalaris at www.zalaris.com
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