Zetes Half-Year Results H1 2013

Application of the new business model in Goods ID, excellent prospects in People ID

Regulated communication

The declaration of conformity is included page 20 in the interim condensed consolidated financial statements.

Group sales of € 103.0 million
Stable compared with H1 2012 
Current EBITDA of € 5.5 million
(+3.1% on H1 2012)

Goods ID: Application of the new business model in a challenging environment
Sales of € 81.8 million (-1.0% on H1 2012)
Current EBITDA of € 3.1 million (+37.9% on H1 2012)

People ID: First half brings new long-term contracts
Sales of € 21.2 million (+3.1% on H1 2012), 
Current EBITDA of € 4.0 million (-11.9% on H1 2012)


(1) "Current" excludes restructuring expenses and  non-current income/costs
Attributable to equity holders of the parent company

During the first half of 2013, Zetes has stepped up its efforts to transform the Goods ID Division, evolving its role from that of general player in automatic identification to that of a specialist in six critical identification and mobility solutions.  At the same time, People ID’s business development efforts, some initiated a very long time back, were rewarded with a number of new Build and Operate contracts that will strengthen the Division for several years forward.

Compared with the first half of 2012, Group sales were stable at -0.2%. Goods ID’s sales reduced by 1.0% in an economic climate that remains unfavourable to investment. In People ID, sales grew slightly (+3.1%). The total margin is 42.9% of sales and, in absolute value, € 44.2 million, against € 45.3 million a year earlier.

Current EBITDA amounted to € 5.5 million, up 3.1% from H1 2012, +37.9% in Goods ID and -11.9% in People ID. Group EBITDA grew by 10.7% to € 5.1 million.

1. Goods ID

In the first half, in an unfavourable investment climate in Europe, the division maintained its sales level, while tight control enabled it to improve current EBITDA by nearly 40% compared to the same period in 2012.

The specialization thrust continues in parallel. To better withstand the greater volatility of order-taking, which considerably complicates projects execution planning, Zetes has decided to industrialize its main solutions. The division has carefully analyzed the economic sectors and areas of activity where mobility and automatic identification solutions are the most critical and, therefore, have the potential to generate greater added value for customers. Crossing these data with Zetes' areas of expertise, 6 flagship solutions have been identified.

The industrialization of these 6 solutions* at Group level is enabling Zetes to capitalize on the experience gained in those application softwares that meet the needs of multiple customers in the same industry. It is all about moving from tailored solutions to a more complex product that meets most of the requirements of a specific business. Zetes expects substantial productivity gains from this new approach, with all development work focused on one continuously enriched product for each key solution. In this way the model is beneficial both to clients and to the Goods ID Division.

This strategy enables Zetes to better serve certain economic sectors by targeting them with sophisticated products, while retaining the flexibility to develop specific projects on request.

The use of a common development platform created by the Group makes it possible to support the mobile terminals of several manufacturers and most communication protocols.

Our customers have clearly expressed their interest in these solutions because access to Zetes' expertise is faster and more efficient via products than via human beings.  The number of sales cycles under way for these 6 solutions has increased significantly in the first half and several orders have already been delivered or are in process. 

Some solutions, such as those hosted in the Cloud, lend themselves very well to a lease rather than a sales model. In this case Zetes provides an integrated solution (hardware, software, services) against monthly payment per terminal for a fixed term of 3 to 4 years. In some cases, the leased assets are shown in the balance sheet.  But, eventually, in most cases, based on agreements with the financial institutions, the physical assets will be leased to the client by the latter. Depending on the terms of the lease contracts and financing provisions, income is recognized immediately or over time. In the longer term, the division's recurring revenue share will increase. 

For more details on the solutions, the reader is referred to the 2012 Annual Report.

The R&D expenses (€ 1.2 million, up € 0.3 million on H1 2012) relate to the development of the MCL software platform and of generic software solutions based on the Group's expertise.

2. People ID

Sales of the People ID Division rose by 3.1% to € 21.2 million. These came from the Build and Operate contracts and the election preparation project in Togo. Nearly 80% of sales revenue is linked to long-term contracts.

The various Build and Operate contracts contributed to the division's performance: only the Israeli eID project, the personalization phase of which commenced in July 2013, is a few months behind schedule. It is expected to get up to speed in the second half.

During the period under review, the Belgian municipalities received the equipment needed for ordering the new driving licences and the investment programme is nearing completion. The first driving licences have been issued to Belgian residents and volumes are gradually increasing. .

The People ID Division's ongoing business development efforts continue to provide good geographical diversification and a good distribution of long and short-term contracts. The main developments in H1 2013 were the incoming orders for long-term (Build and Operate) projects: a biometric visa contract in Senegal and a biometric passport contract for Gambia.

In addition, during the summer, Zetes was awarded the ePassport contract for Belgium. The latter, which runs for five years and is worth EUR 33 million (excluding VAT), will be implemented in partnership (50/50) with Gemalto.

These three contracts will contribute to the division's profitability from the second half of 2013 or H2 2014 (Belgian passport). Sales cycles, especially for Build and Operate contracts, can be very long (several years) and generate significant costs, but once they enter the execution phase, these contracts ensure very good forward visibility in the Division for several years ahead.

3. Group

After Corporate expenses (€ 1.6 million), the Group's current EBITDA is € 5.5 million, which is up € 0.2 million on H1 2012, giving an EBITDA/Sales margin of 5.3%, against 5.1% in H1 2012.

Non-recurring charges of € 0.3 million relate mostly to restructuring at the UK subsidiary.

Depreciation of fixed assets (€ 2.5 million) is similar to H1 2012 (up € 0.1 million). In Goods ID depreciation is growing in line with the investments made in recent years (ERP/Infrastructure). Depreciation in People ID, to a large extent proportional to the production volumes of Build and Operate contracts, is down slightly on H1 2012. The write-down on stock is € 0.2 million.  EBIT reached € 1.4 million, which is up slightly (€ + 0.1 million) on H1 2012.

Net financial expenses break down into a foreign exchange loss of € 0.2 million, linked essentially to the volatility of the dollar, and bank charges and interest expenses together amounting to € 0.2 million.

The tax rate is 14%, giving a total tax charge of € 0.1 million. The abnormally low tax rate is explained by the establishing of a deferred tax asset. This compares with the normalized tax rate for the Group of around 30%.

The net result for the period (Group share) is € 0.9 million, up slightly from the first half of 2012.

(1) "Current" excludes restructuring expenses and non-current income/costs
(2) Weighted average number of outstanding shares
(3) Attributable to equity holders of the parent company

At 30 June 2013, the number of options outstanding was 184.669. To the extent that the weighted average share price does not exceed the exercise price, options issued are not included in calculating the dilution effect.


With equity of € 74.7 million on a balance sheet total of € 154.7 million, the solvency ratio (equity/total assets) stood at 48.3% as against 48.8% at end-December 2012. The different working capital components have evolved normally, with working capital at 30 June 2013 of € 12.7 million.

The net cash position (€ +1.7 million) is, as expected, significantly lower than in December 2012 (€ +7.5 million), given the ambitious investment programme for the first half that required considerable resources. On top of this comes approximately € 3.1 million returned to shareholders in the form of dividends (€ 2.9 million) and own share purchases (€ 0.2 million).

In People ID, the Build and Operate contracts concluded late last year (Belgian driving licence) and in early 2013 (Senegalese visa) have called for significant investment. In this model, Zetes picks up all the development and infrastructure investment necessary for executing the contract.  All these investments occur at the beginning of the project. In return, the customer is committed on the term of the contract (typically 5 to 10 years), the volume of documents to be issued, and price. During the investment and launch phases, the cash-out is larger than the cash-in. The trend is reversed when production volumes normalize.

Of total investment of € 5.4 million, excluding acquisitions, 42% was in the People ID Division.

The majority of spending on Goods ID is devoted to R&D. An amount of € 1.2 million is was capitalized during the period under review. This relates to the development of the MCL platform and the industrialization of the 6 solutions.

In the first half of 2013, Zetes generated a P&L cash flow of € 3.8 million, against € 3.3 million in H1 2012. Cash flow from operations is € 3.1 million. The lower figure compared with € 4.9 million in H1 2012 is due in part to the € 0.7 million need for additional working capital. 

Cash flow from investment is € -5.4 million, reflecting the investment programme related to the new Build and Operate contracts in People ID and investments and development work in Goods ID.

The cash flow from financing consists on the one hand of a cash-out of € -3.1 million distributed to shareholders in the form of dividends (€ 2.9 million) and share buy-backs (€ 0.2 million) and, on the other, of a net cash-in of $ 2 million from banks and leasing companies to finance the investments discussed above.


During the first half, Zetes acquired the assets of the L4 Epsilon, a French company in receivership, for € 0.2 million. Zetes has taken over a team of 10 specialists in e-commerce logistics processes along with the entire intellectual property and the customer base. The software developed will be included in the ZetesMedea solution (warehouse operations) offering.

Elsewhere, Zetes purchased 15% of the shares of Zetes Industries Israel for € 0.2 million. These were acquired from the partner which initiated the Goods ID activity in Israel and who retains, after the operation, 15% of the share.


In Goods ID, the economic environment is far from conducive to investment. Decision cycles remain slow and margins on hardware are under pressure. In the pioneer countries, however, the specialization on the 6 key solutions is making it possible to improve margins. The full effect of this strategy in facts and figures is expected in 2014.

A number of sales cycles relating to major projects in the retail and parcel delivery sectors are under way.  In the second half, the signature  - and the execution of some of the projects - should improve the sales figures and the results of the Division compared with the first half.

In People ID, the recent signing of four Build and Operate contracts (driver's licences and passports in Belgium, visas in Senegal and passports in Gambia) will increase the division's recurring revenue in the coming years - and hence its profitability. In the first half, efforts were concentrated on these long-term contracts, somewhat at the expense of order-taking for short-term projects. Right now the situation does not as yet ensure a second half as good as the first half.  

By way of conclusion, in Goods ID, the process of transformation is under way, but in an economic environment that is not conducive to investment. The positive impact is expected in 2014.

In People ID, the outlook has improved further in the medium term with the signing of long-term contracts, and the Division is now concentrating its efforts on concluding a few shorter-term projects, which should lead to a second half-year in line with the first one with regard to the results.

The Group continues to generate a steady cash flow from operations. The investment programme will be less heavy in the second half than in the first.


The statutory auditor has conducted a limited review of the interim financial information of Zetes Industries for the six months ended 30 June 2013. The text statutory auditor's report following a limited review is given below.


2013 result: 21 March 2014

2013 Annual Report: 28 April 2014

Ordinary General Meeting: 28 May 2014