SES-imagotag: H1 2017 Strong sales performance Profitability temporarily affected | Bourse Reflex
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SES-imagotag: H1 2017 Strong sales performance Profitability temporarily affected

Mercredi 30 Aoû 2017 à 20:30

  • Excellent activity levels (€95 M, +11%) and order entries (€104 M, +37%)
  • Profitability temporarily affected by the process of integrating acquisitions and exceptional items – 7.6% EBITDA margin, down 190 basis points
  • Net cash flow more or less stable at €6 M – €59 M in available cash

Message from Thierry Gadou, Chairman and CEO of the SES-imagotag group:

"SES-imagotag posted excellent sales figures in the first semester, further confirming its world-leading position in the sector. These last few months, we have also bolstered the implementation of work for our strategic project Leapfrog, i.e. product innovation, cloud platform and software solutions, industrialization, partnerships and continued expansion to Asia and North America.

With the physical retail digitization sector to develop significantly in the near future, our competitors are trying to gain ground, leading to pressure on prices and margins. In response, we have accelerated the product plan to merge the recently acquired technologies into one ultra-innovative new range ("G2-Fusion") and the "Fire" industrial project to drastically grow cost competitiveness. While this decision negatively impacts short term profitability and deliveries of the current semester, but it will become a serious competitive advantage. Combined with our fast expansion abroad, this decision is already translating into an excellent orders dynamic, forming the basis for solid and strong growth in 2018. This growth will also be backed by 1) the roll-out of many clients launched in 2017, 2) acceleration in the US, China, Japan, Russia and the UK, and 3) the start of new segments (fashion, cosmetics and luxury, logistics and industry, “smart office”).

Our plan for a strategic and capitalistic alliance with group BOE Technology will also strengthen
SES-imagotag from technological, industrial, geographical and shareholding perspectives, all the while strengthening the completion of our Leapfrog 2020 goals."

In €M H1 2017
H1 2016
Sales 95.4 85.9
Variable cost margin 24.9 21.3
% of sales 26.1% 24.8%
EBITDA 7.3 8.2
% of sales 7.6% 9.5%
Current EBIT 3.4 5.0
% of sales 3.5% 5.9%
Operating income (EBIT) 1.0 4.2
% of sales 1.0% 4.8%
Net income 0.7 1.5
As % of sales 0.7% 1.7%

(*) Audit procedures finalized. The Half-Year Financial report will be available mid-September.

(**) The 2016 EBIT and Net Income have been restated to take into account the fair value and the social contributions that were not recorded in respect of the performance-based shares in H1 2016 for an amount of €-0.5m. This consolidation restatement has no impact on cash or shareholders' equity.

Record half-yearly sales and a sharp increase in order entries

In the first half of the year, SES-imagotag posted sales of €95.4 M, an increase of 11% over the first half of 2016. This growth was driven by sales in France (+15%) and abroad (+8%), resulting from a large number of new signings and the ongoing roll-outs.

H1 Sales in €M 2017
2016 N / N-1
France 37.6 32.6 15.3%
% of sales 39.4% 38.0% +1.4pts
International 57.8 53.3 8.4%
% of sales 60.6% 62.0% -1.4pts
Total Sales 95.4 85.9 11.1%

(*) Audit procedures finalized. The Half-Year Financial Report will be available mid-September.

This growth was almost entirely organic, as the two most recent acquisitions, Findbox and Pervasive Displays (PDi), were mainly focused on the new G2-Fusion product line (to be launched in the second half of the year), the expansion of the displays and e-paper product line, and the Fashion Tag project (a unit labelling solution for the fashion industry, offering a combination of digital display, automated inventory and anti-theft features).

Growth momentum continued in the robust French market, as the penetration rate for digital price tags in food and non-food retail continued to rise. In addition, many new market segments (DIY, pharmacies, small businesses, luxury & cosmetics, industry & logistics, “smart offices”, etc.) are beginning to adopt our solutions.

International sales were up by 8%, a result MADE even more remarkable by the fact that 2016 benefited from a very large roll-out contract for Europe[1].

The Group also recorded an order entry of €103.9 M, a significant 37% increase compared to the same period in 2016.

Profitability temporarily affected by integrating new acquisitions and exceptional items

For the first half of the year, SES-imagotag had an EBITDA of €7.3 M (compared to €8.2 M in H1 2016) and an EBIT of about €1 M (€4.2 M in H1 2016). This decrease is due mainly to integrating acquisitions and other one-off items, as well as to a competitive context with increased price pressures.

in €M   H1 2017
  H1 2016
Sales   95.4   85.9   9.5
Variable cost margin   24.9   21.3   3.6
% of sales   26.1%   24.8%   +130 bp
Current operating expenditure   (17.7)   (13.2)   (4.5)
EBITDA   7.3   8.2   (0.9)
% of sales   7.6%   9.5%   -190 bp
Amortizations   (3.9)   (3.1)   (0.8)
Current operating profit   3.4   5.0   (1.6)
Other operating and IFRS 2 expenditures   (2.4)   (0.8)   (1.6)
EBIT   1.0   4.2   (3.2)
% of sales   1.0%   4.8%   -380 bp

(*) Audit procedures finalized. The Half-Year Financial Report will be available mid-September.

(**) The 2016 EBIT has been restated to take into account the fair value and the social contributions that were not recorded in respect of the performance-based shares in H1 2016 for an amount of €-0.5 m. This consolidation restatement has no impact on cash or shareholders' equity.

The variable cost margin was €24.9 M, up 17% compared to H1 2016.

The variable cost margin improved by 1.3 points, going from 24.8% to 26.1% due to the PDi vertical integration. This improvement is nonetheless lower than expected due to the increased pressure on prices during the half-year.

Current operating expenditures stood at €17.7 M at the end of June 2017, up €4.5 M compared to
 €13.2 M in the first half of 2016. This substantial increase is due to:

  • PDi and Findbox entering the consolidated scope, along with the American subsidiary
    SES-imagotag Inc. (fully consolidated for the first this semester). The effect of integrating expenses accounts for €2 M;
  • Continued international expansion efforts: hiring at subsidiaries (sales reps, project managers, partner management and administration), marketing expenses, the cost of participating in international trade shows, and travel expenses.

This international investment is indispensable in a now globalized market even if it affects short-term profitability because of the time required to reach a critical size in new areas, and produces very encouraging results: the international sales figure therefore increased over the past 6 years from €15 M to €109 M (x7), accounting for 60% of total sales.

Due to the respective increases in the variable cost margin (+€3.6 M) and current operating expenditure (+€4.5 M) described above, the EBITDA stood at €7.3 M, down €0.9 M compared to the first half of 2016.

Amortizations rose by +€0.8 M, from €3.1 M to €3.9 M, as new entities entered the scope and industrial and R&D investments increased. As a result, the current operating profit stood at €3.4 M, a decrease of €1.6 M compared to H1 2016.

One-off and IFRS 2 expenses in the first half were rather high at €2.4 M, due mainly to:

  • Legal and consulting fees arising from external growth transactions (PDi and Findbox), financing operations (Euro-PP investment), and a planned strategic business alliance with BOE Technology Group.
  • Expenses resulting from performance shares (bonus issue), from the definitive allocation of the first segment of the 2012-2017 plan, and from the fair value estimation for the new plan approved by the General Meeting on 11/30/16.
  • Amortizations of intangible assets from acquisitions and the recognition of price supplements in line with the IFRS3 standard.

Given these items, the EBIT for the half-year stood at €1.0 M, compared to €4.2 M for the same period in the previous year.

Net income

Based on the French entity tax losses as of June 30, 2017, €0.9 M deferred taxes have been activated as this tax loss should be offset over a reasonable period of time. After taking into account the FINANCIAL result and corporate tax, net profit for the first semester of 2017 stood at €0.7 M, or 0.7% of sales, compared to €1.5 M at June 30, 2016 (1,7% of sales).

R&D and industrial investments (€5.1 M)

Investments for the first half-year stood at €5.1 M, primarily divided among product & software R&D, new product industrialization and information systems.

SES-imagotag's sales performance confirms the Group's leading position and its successful innovation strategy, which was particularly active in this semester with regard to enhancing the software platform: SES-imagotag completed development on its Cloud platform in the first half-year. Several hundred stores already rely on this solution (especially in the USA) and SES-imagotag signed the first key account roll-out agreement for the Cloud version in the second quarter.

In addition, Apple's recent announcement about its NFC product now makes it possible to significantly increase the ways in-store connectivity can be used to provide more information, services and customization opportunities to shoppers. In 2012, SES-imagotag decided to back NFC and the company now has nearly 30 million smart NFC-ready tags installed in thousands of stores; in the first half-year, the company boosted development of its Shopper Engagement solutions (Storefront, Connect, Findbox). 

Through PDi, SES-imagotag accelerated the expansion of its e-paper product line (launching the 12-inch model, the largest digital price tag on the market). On their side, the Findbox teams completed the first decisive stage of the Fashion Tag project (a unit labelling solution for garments that offers a combination of digital display, automated inventory and security features). This solution, with its excellent market potential, is currently in the operational pilot store phase.

The R&D and industrial teams concentrated their efforts on the new G2-Fusion product line, which incorporates technology from SES-imagotag, PDi and Findbox. The schedule for this product line development was moved up a year to strengthen the Group's competitive advantage at a time of increased price pressures from Asian players.

The G2-Fusion product line will begin the industrialization phase in the third quarter and will combine all the features of the technology obtained through our recent acquisitions: multicolor e-paper, high-speed flashing LEDs, HF bi-mode radio, active NFC, Easylock2 high-security mountings, automatic geolocation, embedded sensors, open IoT retail infrastructure, and more. The G2-Fusion product line implementation is being linked with an industrial improvement plan that will make it possible to add significant cost competitiveness gains to the other product benefits, thanks in large part to BOE group's expertise with which a first industrial partnership has been signed for this range of product.

Net cash position stable in the first half-year and Euro-PP deal success

Net cash consumption for the first half-year stood at -€0.6 M, compared to a consumption of
-€10.8 M in 2016, leaving the net cash flow more or less stable at +€5.7 M, compared to €6.3 M at the end of 2016.

Thanks to the success of the Euro-PP operation, designed to strengthen financing for the Leapfrog 2020 strategic plan without any dilutive effects and to diversify the group's financing sources, the total available cash increased from €33 M to €59 M.

Table of Cash Flow Variations - in €M 2017 (*)  FY 2016
EBITDA 7.3 16.6
Investments in tangible and intangible assets (Capex) -5.1 -9.3
Change in working capital requirement -2.9 -6.7
Financial investments net of acquired cash position +2.3 -7.0
Other financial income/expenses +0.2 -1.6
Income tax -1.1 -1.2
Other one-off items/other -1.3 -1.6
Change in net cash position -0.6 -10.8

(*) Audit procedures finalized. The Half-Year Financial Report will be available mid-September.

The ratio of the operating WCR to sales held steady at 24%, similar to December 31, 2016.

Financial investments stemming from acquisitions produced a positive €2.3 M balance after taking into account the net acquired cash position.


As previously announced, activity over the second semester will be hampered by the industrialization schedule for the G2-Fusion project and the fact that some clients have chosen to transfer their orders to this new product line. Nevertheless, competitive advantages expected from G2-Fusion should translate into a strong push forward as was seen with the launch of G1 (first e-paper/HF product line) in 2014. Moreover, this new line of smart digital tags will benefit from the very fruitful addition of numerous software add-ons.

This decision to accelerate the product transition, though disadvantageous in the short term, aligns with SES-imagotag's determination to cement its leading position and its market share at a time when the digital price tag market is transitioning to a global adoption. These goals take priority over short-term profitability, considering the potential medium-term stakes. 

Leapfrog 2020 objectives reaffirmed

This year, the digital price tag market has entered a new phase in its global expansion. This technology serves as a key building block to digitalize physical stores, right in the heart of the internet of Things (IoT) wave. It is being carried forward by the omni channel revolution which, judging by recent events, is showing signs of acceleration in 2017 (Amazon acquiring Whole Foods, strategic partnership between Walmart and Google, etc.). Indeed, ABI Research's most recent study predicts the market will explode within five years with an estimated value of over $5 bn in 2022. The previous ABI study from 2014 estimated the market at $1.8 bn in 2019.

To maintain and strengthen its leading position in the future very large market of the physical commerce digitalization (IoT retail), SES-imagotag is deploying an offensive strategy on multiple fronts: acceleration of product and software innovation, industrial acceleration, and international development in Asia and America. This offensive strategy is already translating into a very brisk pace of orders and paving the way to greatly boost our sales in 2018.

The alliance with BOE Technology fits into the approach of SES-imagotag, strengthening the company's technological progress in smart displays and the IoT, its presence in China and in Asia, as well as its industrial expertise.

This overall strategy consolidates the “Leapfrog 2020” objectives with revenue in the range of €400 to €500 M (CAGR 2015-2020 > 30%) and an EBITDA margin between 15% and 20%.

About SES-imagotag

For 25 years, SES-imagotag is the trusted partner of retailers for the use of digital technology in stores. SES-imagotag, the worldwide leader in smart digital labels and pricing automation, develops a comprehensive IoT and digital platform that delivers a complete set of services to retailers. The SES-imagotag solution enables retailers to connect and digitize their physical stores; automate low-value-added processes; improve operational efficiency; inform and serve customers; ensure information integrity to continuously optimize on-hand inventory; prevent stock-outs and waste and create an omni-channel service platform that builds loyalty and meets evolving consumer expectations.

SES-imagotag is listed on compartment B of Euronext™ Paris

Mnemo code: SESL – isin code: FR0010282822 – Reuters: SESL.PA – Bloomberg: SESL


NewCap - Investor Relations & Financial Communication

Marc Willaume/Tristan Roquet Montégon: Tel: +33 (0)1 44 71 00 13 /


[1]MediaMarkt-Saturn has been renamed CECONOMY following the spin-off of Groupe Metro.

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