Telelink Business Services Group expects 2x in top and bottom line by 2025 organically

Ivan Zhitiyanov, CEO of Telelink Business Services Group (Photo: Telelink)

Ivan Zhitiyanov, CEO of Telelink Business Services Group (Photo: Telelink)

The leading Bulgarian system integrator, Telelink Business Services Group (TBS) expects to double both top and bottom line by 2025 with respective 27% and 16% y/y growth in 2021 alone, according to the Company’s 2021-2025 financial outlook and strategic development, presented by the group’s CEO Ivan Zhitiyanov on a digital event held on March 23rd, 2021.

The Company’s projections are based on organic growth, yet it may consider M&A across product areas and geographies. TBS Group is exploring a couple of companies but nothing concrete yet, said Zhitiyanov.

TBS Group forecast for 2021

In 2021, the Company expects its revenue to increase by 27% y/y to EUR 88.2m driven mostly by growth in Bulgaria (26% y/y to EUR 57.4m) and South-Western Balkans (181% y/y to EUR 18m). In terms of technological groups, the Service Provider Specific (SPS) solutions will remain the largest contributor in 2021 at EUR 21.8m with 1% y/y expected rise, followed by Modern Workplace (MW) with EUR 21.m and an 88% y/y expected surge supported by the Covid pandemic demand for remote office coloration solutions. Hybrid cloud (HC) and Information Security (IS) are expected to expand considerably with the former adding 26% y/y (EUR19m) while the latter surging 66% y/y (EUR 4.3m). Key corporate related sales in the Enterprise Connectivity (EC) segment are the one expected to shrink in 2021, 11% y/y to EUR 15.9m as a result of postponed large investments from the private sector due to the pandemic. The Company also expects to gain momentum in smaller but promising segments like Application Services (AS) and newly introduced Hyper Automation. The Group plans to fuel its 2021 top line growth with 36% y/y increase in SG&A expenses (EUR 8.8m) that will slightly decelerate profitability. EBITDA is expected to grow 15% y/y to EUR 10.1m erasing 1.2 p.p. from its margin to 11.4%. Net profit will increase 16% y/y to EUR 7.5m with net margin losing 0.8 p.p. to 8.5%.

5 years ahead

For the 2021-2025 period, revenue is expected to keep its uptrend with a 17% CAGR driven by organic growth across markets and products, including entering new markets like Romania, Germany and the USA. Top and bottom line are expected to double to EUR 150m and EUR 15m, respectively by the end of 2025. Bulgaria, MidWestern Balkans and SouthWesternBalkans are expected to advance with a corresponding CAGR of 11%, 12% and 31%, while the new entrance to Romania, Germany and USA is expected to contribute a sizable EUR 25m, or 17% of total revenue in 2025. The Group expects growth across every technological group for the period with EC (EUR 41.4m) and HC (34.2m) to take the leader position from SPS (EUR 27.4m) by 2025 in terms of sales. The largest growth for 2021-2025 is expected from AS (EUR 6.3m) with 107% CAGR followed by IS (EUR 18.2m) with 48% CAGR. Profitability is expected to slow down until 2022 after which margins will recover and by 2025 it will surpass its 2020’s levels. EBITDA is expected to reach EUR 21.3m by 2025, 19% CAGR, with margin of 14.1%, 1.5 p.p up from record 2020 level. Net profit will surge by 18% CAGR to EUR 15m, adding to its margin 0.7 p.p to 10% compared to 2020.

Strategy for growth

TBS Group also outlined four strategic initiatives that will drive the Company’s growth. The first one being the Group’s plan to capitalizing on it expertise and references, and expand with managed services solutions into Western Europe and USA, following the growing global market trend to outsource IT services due to cost reduction and shared risk of new tech adoption. The second milestone is to continue to differentiate with Information Security services and products in SEE, where TBS feels is among the few in the region to offer sizable dedicated team and vendor portfolio. The third priority for the period is to meet the public cloud demand in the region capitalizing on its sizable expertize. The last strategic initiative for the Company is to build Hyper Atuomation (HA) expertise which the Group believes to be the next, more comprehensive step towards complete digital transformation.

Check Q4 2020 corporate earnings