Annual Results 2013

A strong second half of 2013, giving current EBITDA of € 13.5 million for the year as a whole.

Regulated communication

  • Goods ID: significant improvement in the second half.
  • People ID slightly down, but strengthened by long-term contract signings.

Sales amounted to € 211.5 million (vs. € 214.1 million in 2012) and current EBITDA to € 13.5 million (€ 14.1 million in 2012).

The Goods ID Division significantly improved its performance in 2013, particularly in the second half, thanks to good cost control, while pressing on with its flagship solutions strategy.

The People ID division saw its sales revenue decline slightly due to lower activity in short-term projects, which affected the second half performance. The concluding and the preparation in 2013 of several long-term contracts strengthen the company's confidence in the future of its sector.

Cash flow from P&L was a solid € 10.3 million. Cash flow from investment activities (€ -10.7 million) related to the development work in Goods ID and to the preparation of the new long-term contracts in People ID, which produced a particularly high funding need. However, these investments and the underlying contracts reinforce the company's confidence in its ability to generate significant future cash flow. For this reason Zetes will be proposing to the General Meeting an ordinary dividend of € 0.55 per share, equal to that of 2012.

Group sales of € 211.5 million (-1.2% vs. 2012),
Gross margin of € 91.4 million (-2.4%),
Current EBITDA of € 13.5 million (-4.1%),

Goods ID: Strong growth in the second half
Sales of € 171.5 million (-0.2% vs. 2012, up 1.9% at constant exchange rates)
Gross margin of € 68.3 million (-1.4%),
Current EBITDA of € 9.1 million (+22.4%),

People ID: Temporary decline in sales income, but good prospects based on orders taken
Sales of € 40.3 million (-5.5% vs. 2012),
Gross margin of € 23.1 million (-5.2%),
Current EBITDA of € 7.7 million (-22.3%),

The Group's sales (-1.2%) and EBITDA (-1.5%) remained nearly stable over the past year. The contribution of each of the two divisions to these results differs significantly.

The Goods ID Division significantly improved its performance: although sales and gross margin were very similar to those of 2012, current EBITDA increased 22.4% due to good cost control (-4.3%). In the People ID division, the second half of the year produced lower "Build and Transfer" income, resulting in a contraction in sales of 13.5 % and in EBITDA of 31.1%. This evolution is, however, temporary, because in 2013 the division also signed major long-term contracts. These are at the development stage and will support good income growth in 2014.

Current EBITDA amounted in 2013 to € 13.5 million. That of the Goods ID division increased by 22.4% while the People ID division recorded a fall of -22.3%.

The good earnings growth in the second half is due entirely to Goods ID, which recorded a profit well above that of the first half of 2013, and also compared with the second half of 2012 (+15.8%). Only temporary weakness of People ID in the second half stood in the way of earnings growth.
Finally, the net current profit reached € 4.0 million, with a net profit of € 3.4 million (-3.6% compared with 2012).

1. Goods ID

2013 ended much better than it had started: while in the beginning of the year order-taking was slow, from the summer onwards the situation improved, with the arrival of large projects. The impact of the increase in turnover is clearly reflected in current EBITDA, which nearly doubled between the first and second halves.

The retail sector remains an important source of orders. This sector is constantly looking to increase its productivity through better supply chain traceability. Zetes' solutions (Medea and Chronos in particular) provide an answer to the problem and can deliver a rapid return on investment.

Competition between manufacturers continues to place pressure on the margins on mobile terminals and other equipment. The sale of services (life cycle management) and software (in the form of services and, increasingly, licences) allows Zetes to offset this pressure and maintain its margins. Good cost control linked to productivity gains enabled Zetes to improve its performance, even in the absence of income growth.

In this way the EBITDA/sales ratio increased by 1% from 4.3% in 2012 to 5.3% in 2013.
At the same time, the Division continued to invest in its six key solutions. The initial commercial successes in each of these solutions confirm Zetes' strategy. The MCL mobility platform is proving highly successful, giving customers much more effective management of their mobile devices. The first references are now installed in the non-food retail and transport sectors.
In the financial results 2013, the positive impact of the 6 key marketing solutions has countered the constant pressure on prices and margins of the hardware component. However, leading indicators, such as sales cycle tracking, point to clear progress. As previously announced, the first effects of the strategy are expected to be visible in the 2014 financial results. 

Besides their impact on business in the countries concerned, changes in exchange rates, particularly between the South African rand and the euro, were unfavourable to the Goods ID division. At constant exchange rates, revenue would have increased by 1.9% and gross margin by 0.6%. 

Finally, there was no significant change in consolidation scope in 2013. The only new acquisition was the absorption of the assets and the team of L4 Epsilon into our French subsidiary. This small team has brought in recognized know-how in the logistics processing of e-commerce orders. The software solution is gradually being integrated into the Group's Medea solution. Currently, the full attention of the division is focused on market penetration of the 6 flagship solutions strategy. The concentration of Zetes' expertise in these 6 solutions will later enable it to return to the path of external growth by providing the acquired companies with a unique differentiating feature, valued by customers.

2. People ID

2013 was marked by an important number of new long-term contracts (Belgian passport, biometric visa in Senegal, Gambia passport ...). But with the exception of Senegal, where the system is in place and has been generating revenue since July 2013, other contracts have mobilized large amounts of resources for development and preparation and will begin generating revenue only in the course of 2014.

Major "Build and Transfer" contracts with a high hardware component are missing from the 2013 sales figure. These are generally contracts linked to the preparation of election cycles, for which electoral lists are prepared based on a biometric enrolment of the population. Both the concluding and the execution of the contract take place quickly. Only two "Build and Transfer" projects were completed in 2013, one for Togo and the other for Guinea-Conakry. Both consisted mainly of services, generating limited revenues but with a high margin. 

In 2013, 80% of revenue came from "Build and Operate" contracts, giving a gross margin of 57.4%, reflecting the division's value-added strategy.

These long-term contracts are often concluded with governments that entrust Zetes with creating a population database and issuing the related identity documents or travel documents. Zetes is taking care of the electronic ID card systems in Belgium, Israel and Portugal, as well as driver's licences in Belgium. For a number of years Zetes has also managed for the Côte d'Ivoire the comprehensive biographical and biometric registration of its citizens and the issuance (personalization) of their electronic passports.

In 2013, the Gambian government awarded Zetes the concession for a similar passport system ("Build and Operate" model) in Gambia. And in August 2013, the Belgian Government tasked Zetes with the issuance of passports for Belgian citizens. The past months have been spent preparing these contracts. Document issuance under both contracts will begin in the second quarter of 2014. 

The breakdown of sales by half year clearly reflects the lack of "Build and Transfer" income in the second half. In addition, from July 2013, the division has internalized the secure distribution of identity documents to the Belgian municipalities. Until then, the distribution was provided by a security transportation company, the costs of which were reflected in purchases. This has had the effect of increasing the gross margin in the second half, with, as a corollary, an increase in operating expenses.

3. Group

The costs of the Corporate Division amounted to € 3.3 million (+ 1.3% compared with 2012). The corporate structure remains light. The main tasks of Corporate are strategy definition, financial control and external growth. 

Group sales revenue amounted to over €211 million. Recurring revenue consists of income from long-term contracts ("Build and Operate") in People ID and from maintenance and consumables in Goods ID. Together, they cover more than 40% of consolidated sales revenue.

Non-recurring charges amounted to a net € 0.8 million These relate mainly to the restructuring in Goods ID to align the division with its more software-oriented strategy. 

Depreciation on non-current assets amounted to € 5.0 million, very similar to the figures of 2011 and 2012. Write-downs on inventory (€ 0.6 million) and receivables (€ 0.2 million) are in line with the 2012 figures. Depreciation and R&D amortization totalled € 1.7 million.

EBIT reached € 5.9 million in 2013, 71% of which was generated in the second half.

The net financial result is composed of bank charges (€ 0.274 million, cross-border payments and various guarantees such as bid or performance bonds, along with bank charges linked to investment finance), the foreign exchange result (€ 0.273 million negative) and finally interest expense (€ 0.229 million).

The effective tax rate was 21.6%, giving a total tax charge of € 0.94 million. Finally, net profit was € 3.4 million, down 3.6% on 2012.

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

The net current result per share is € 0.78.


The significant investments in Goods ID (development of solutions, equipment leased to customers) and in People ID (eVisa infrastructure in Senegal and Côte d'Ivoire, production site and backup for the Belgian driving licence, production infrastructure for the Belgian passport, and others) have significantly impacted the Group's balance sheet.

Besides the increase of fixed assets (net increase of € 7 million compared to December 2012), the company has also devoted a significant amount of resources to preparing for the execution of the People ID contracts. This explains the evolution of the deferred charges account (advance payments) and of the one containing construction contracts, together up more than € 1.9 million compared with 2012, these two accounts making it possible to spread the costs of a project over its life, thus ensuring consistent profitability over time.

These efforts have obviously impacted the Group's indebtedness, with "net debt" moving from a positive cash position of € 7.5 million at the end of 2012 to a net debt position of € 3.0 million at the end of 2013. This increase is structural in nature insofar as the increase in funding is linked to specific investments, available liquidity has decreased slightly to € 10.6 million (against € 12.8million in 2012).

Total assets increased by € 4.2 million from € 159.0 million to € 163.2 million. The net working capital requirement also increased to € 15.9 million against € 12.7 million at end-2012, mainly due to the impact of construction contracts. Inventory was slightly lower at € 14.3 million, which is a good performance in a stable sales situation.

With equity of € 77.1 million on total assets of € 163.2 million, the solvency ratio remains at a very high 47.23% (48.8% in 2012 and 47.9% in 2011). This ratio remains remarkable insofar as the company decided, given management's confidence in the prospects of the Group, to distribute in 2013 a dividend of € 2.9 million. Zetes attaches great importance to having a strong balance sheet structure as this allows it to bid for and, where appropriate, absorb very large deals.

The cash flow from operations is € 4.0 million, consisting of € 10.3 million generated in the income statement offset by the € 6.3 million increase in working capital. This significant increase is linked in particular to:

  • the increase in construction contracts and prepaid expenses for the People ID projects (€ 1.9 million)
  • Equipment leased out (€ 2.1 million of LT receivables, included in the working capital need)
  • Faster payment of suppliers (€ 2.3 million).

Investments by Goods ID reached € 5.8 million, again up from previous years (€ 4.1 million in 2012). These investments break down into equipment for internal use (€ 2.4 million), assets related to operating leases (€ 0.6 million) and financial acquisitions (€ 0.3 million). Development costs were also capitalized in an amount of € 2.6 million (against 1.8 million in 2012). These are linked to the Group's 6 flagship solutions. In People ID, investments are of course related to the preparation of the implementation of the various long-term contracts. They are up significantly to € 4.8 million against € 1.2 million in 2012.

In total, investments total € 10.7 million, a historically high level. They have been funded partly by bank borrowing, with the balance being funded from equity. Management's confidence in the Group's ability to generate significant cash flows has led it to propose to the General Meeting to maintain the current dividend policy.

In 2013, the Group acquired own shares worth € 0.2 million. At 31 December 2013 it held 234,322 treasury shares (4.35%).


The priority for the year was the preparation of the Build and Operate contracts in People ID and the development of specialized solutions in Goods ID. External growth was therefore temporarily placed on hold. In the first half, Zetes made an asset deal, taking over a team of 10 specialists in logistics processes related to e-commerce, along with the intellectual property and customer base of the company L4 Epsilon in France (€ 0.2 million). Zetes also purchased 15% of the shares of Zetes Industries Israel for an amount of € 0.2 million. The shares were acquired from the partner who launched the Goods ID activity in Israel and who, after the operation, still holds 15% of the shares.


Goods ID Division has started 2014 with a stronger first quarter than in the previous two years. The macroeconomic indicators are improving and customers seem more ready to invest. All sectors are involved, even if the retail sector continues to drive investment. The strategy is in place in all countries and Zetes is looking for the first fruits, as planned, this year already. Market interest for the various solutions remains substantial, and Zetes will continue to invest in new functionalities in order to make them as attractive as possible.

Zetes can also rely on its recurring business (25 to 30% of income depending on the degree of maturity of subsidiaries). Based until now on maintenance and repair, as well as the sale of consumables (labels, ribbons, etc.), it is already, in some countries, reinforced by the rental income from solutions (managed services).

In People ID, visibility remains very good on all long-term contracts ("Build and Operate"). Production of the Gambian and Belgian passports is scheduled to start in the second quarter of 2014. All the other contracts are expected to contribute to the good performance of the division.

At the start of this year, Zetes is executing a contract to deliver biometric kits ("Build and Transfer") for the Republic of Uganda. Other smaller projects are also running. Together, they contribute to the achievement of the budgetary targets for 2014.

In summary, the good performance of Goods ID combined with a combination of short and long-term contracts in People ID should produce noticeably better results in H1 2014 than the same period in 2013.


Investing in Zetes shares has risks attached. These were described in the 2012 annual report and remain valid.


The Board of Directors will be proposing to the Ordinary General Meeting that it declare a gross ordinary dividend of € 0.55 per share. This is unchanged from the previous year.


The financial statements presented below are a summary of the annual report which will be available on 28 April 2014. They are drawn up in euros and are in conformity with IFRS standards as adopted by the European Union.


The audit of the annual accounts is under way. The Statutory Auditor has confirmed that his audit procedures, which are substantially completed, have not revealed the need for any material correction to the accounting information contained in the press release.


Publication of the Annual Report: 28 April 2014
Ordinary General Meeting: 28 May 2014

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