- Revenue at €85.9 million, up 115% compared with H1 2015
- Strong growth in current operating profit at €5 million (+525%) and margin at 5.9% of revenue (+400bp)
- Positive operating cash flow (+ €2.7 million)
|SES-imagotag accelerated its growth rate during this first semester of 2016, (+115%), confirming its leadership on the market of electronic labelling systems and digitalization of physical trade.
As announced, the profitability has significantly improved thanks to high sales combined to cost-effectiveness and despite the impact of the dollar on gross margin, which was more marked than in 2015. Half-year current operating income reached €5m, representing 5.9% of sales compared to 1.9% for the first semester of 2015 and 4.1% on average for the 2015 FINANCIAL year.
The improvement of profitability and Working Capital Requirements (WCR) generated a positive operating free cash flow of +€2.7m, notwithstanding strong growth and sustained technological and industrial investments (€4.7m). At the end of June, net cash totaled €17.1m, remaining constant compared to December 31st 2015. This also took into account cash flows linked with external growth including the payment of the remaining balance of imagotag's minority interest.
Prospects for the second semester comfort a level of activity similar to the first, and SES-imagotag should lie at the top end of its annual activity growth forecast.
|P&L (IFRS) in €M||H1 2016||H1 2015||Change||H2 2015|
|Variable cost margin||21.3||14.6||+6.7||18.4|
|% of revenue||24.8%||36.4%||-1,160 bp||25.8%|
|% of revenue||9.5%||7.9%||+160 bp||8.7%|
|% of revenue||9.2%||7.1%||+210 bp||8.6%|
|Current EBIT (COP)||5.0||0.8||+4.2||3.7|
|% of revenue||5.9%||1.9%||+400 bp||5.2%|
|% of revenue||5.4%||0.4%||+500 bp||3.5%|
|% of revenue||2.3%||0.8%||+150 bp||1.4%|
1. Record interim revenue figure
In the first half of the year, SES-imagotag reported a sharp rise in revenue to €85.9 million (+115%), both in France (+68%) and abroad (+159%), compared to the first half of 2015, mainly thanks to an exceptional intensity in a number of roll-outs from major retail groups in France and Germany. New orders were strong in the first half, and came in at €76 million, notably thanks to new contracts signed with the Casino Group, the Sephora brand, and the Jysk Group in Scandinavia.
2. Continuous improvement in profitability
Current operating profit came in at €5 million, i.e. 5.9% of revenue, a clear improvement from the low of H1 2015 (1.9% of revenue) and the previous half (5.2% of revenue).
Variable cost margin
The variable cost margin stood at €21.3 million, up 46% (+€6.7 million) compared with the first half of 2015, thanks to strong growth and despite the unfavourable effect of the rise in the dollar in 2015, which had a stronger impact on the Group in 2016 owing to the end of hedges at more favourable rates. The mark-up in the first half was 25%, down sharply on H1 2015 (36%), but in line with the previous half (26% in H2 2015), due mainly to gains in industrial competitiveness.
Current operating expenses
Current operating expenses rose to €16.3 million in the first half of 2016, an increase of €2.5 million from H1 2015, and up €1.6 million compared with the previous half:
- Reinforcement of teams, particularly internationally
- Expected rise in depreciation and amortization relating to R&D, industrial investments (European assembly units of e-paper ranges) and investments in IT systems.
The ratio of current operating expenses to revenue is constantly improving, falling from 34.5% of revenue in the first half of 2015 to 20.6% in the second half of 2015, and 19% in the first half of 2016.
Current EBITDA was €8.2 million, and has improved for the last three consecutive half-year periods, from 7.9% of revenue in H1 2015 to 8.7% in H2 2015 and 9.5% in H1 2016.
Operating profit (EBIT)
Other operating income and expenses reached -€0.4 million, and included unusual, abnormal and infrequent items, as well as the amortisation of imagotag technology (-€0.2 million).
After taking into account other income and expenses, EBIT came to €4.6 million, an increase of €4.4 million compared with H1 2015 and an increase of €2.1 million compared with the previous semester.
EBITDA totaled €7.9 million, an increase of €5.0 million (+172%) vs. H1 2015, or 9.2% of revenue, a sequential improvement after the Group recorded EBITDA as a percentage of revenue of 7.1% in H1 2015 and 8.6% in H2 2015.
After taking into account the financial result and corporate income tax, net profit for the first half of 2016 was €1.9 million, or 2.3% of revenue.
3.Operating cash flow positive despite strong growth and sustained investments
The rise in EBITDA and the improvement in the WCR ratio generated positive operating free cash flow of €2.7 million, despite strong growth and sustained investments (€4.7 million).
At 30 June 2016, SES-imagotag had net cash of €17.1 million (stable compared with December 31, 2015) after taking into account cash flows linked with external growth, mostly related to the payment of the remaining balance of imagotag's minority interest.
|€ million||H1 2016||H1 2015||FY 2015|
|Change in business WCR||-0.5||3.8||10.7|
|Free Cash Flow||2.7||2.0||11.2|
|Flows related to acquisitions||-2.9||0.0||0.0|
|Flows related to financing transactions||3.0||4.6||7.1|
|Total cash flow||2.8||6.6||18.3|
|Opening free cash flow||32.6||14.3||14.3|
|Closing free cash flow||35.3||20.9||32.6|
|Closing net cash position||17.1||6.8||17.1|
Thierry Gadou, Chairman and Chief Executive Officer of SES-imagotag comments on first half performances and the company's prospects: “The digital transformation of physical trading is now well under way in Europe, favouring the adoption of the digital solutions provided by SES-imagotag, which thus accelerates its growth in the first half. This acceleration comes as a logical result of important contracts signed in the last few months. It is also due to our customers' desire to intensify the speed of roll-outs, testifying to the fact that our solutions are at the forefront of their digital strategy. In France, SES-imagotag put in its all-time best performance whilst the international continues to be the group's main growth engine. Another important development is the strong growth from sales to specialised non-food retail, which represents close to half of the sales. As expected, profitability has improved thanks to growth combined with cost-effectiveness and despite the impact of the rise in the dollar. Thanks to the improvement in our WCR, operating cash flow was positive over the half-year period, notwithstanding strong growth and sustained technological and industrial investment. This cash flow generation fully financed the purchase of the remaining stake to reach 100% of imagotag. Our anticipation for the second half confirms our initial forecast of an annual sales growth between 30% and 50%, more towards the top of that range, as well as a rise in the operating margin compared with the previous year, in line with the first half of the year. ”
About Store Electronic Systems (SES-imagotag trademark)
Store Electronic Systems is a digital solutions specialist for physical retail and world leader of electronic labeling systems. The Group designs and markets all the components of its solutions (software, radio frequency equipment, labels and fasteners), thus providing its customers with a turnkey solution. The range of products and services offered by SES-imagotag allows retailers to manage their stock in real-time, improve store productivity and develop new contactless applications for shoppers.
Store Electronic Systems is listed on compartment B of Euronext™ Paris.
Mnemo Code: SESL - isin Code: FR0010282822 - Reuters: SESL.PA - Bloomberg: SESL
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Marc Willaume / Tristan Roquet Montégon: Phone: +33(0)1 44 71 00 13 / email@example.com