Zetes Half-Year Results - H1 2015

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Record first half in both Goods ID and People ID

Group sales of € 128.3 million
Up 8.1% on H1 2014
Current EBITDA of € 13.3 million
Up 64.8% on H1 2014

Goods ID: Very good first half supported by a solid backlog of orders
Sales of € 100.9 million (+14.8% on H1 2014),
Current EDITDA of € 7.9 million (+89.8% on H1 2014),

People ID: growing operating results, supported by high added value projects
Sales of € 27.5 million (-11.0% on H1 2014),
Current EDITDA of € 7.2 million (+31.4% on H1 2014)

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The total gross margin for the half-year reached a record € 58 million, up 16.0% from the previous year. This represents 45.2% of sales (42.2% the previous year), mainly influenced by the product mix of the People ID division.In the first half 2015, sales again grew (internal growth), this time by +8.1% as against H1 2014. These were buoyed by sales growth in the Goods ID division (+14.8% compared to H1 2014), while in the People ID division very high added value projects not involving large hardware deliveries, resulted in an 11% fall in sales compared to H1 2014. 

Current Group EBITDA is € 13.3 million, up 64.8% on the first half of 2014, supported by a record half year in both divisions: € 7.9 million in Goods ID (+89.8%) and € 7.2 million in People ID (+31.4%). The non-current items are not significant and overall Group EBITDA grew by 69.7% to € 13.1 million, the highest first half year ever.  

1.Goods ID

Following the pattern of the two previous years, sales grew in the first half, supported by a solid backlog of orders. The growth is spread over most European countries and buoyed by a small number of large projects, including the deployment of mobile terminals for the Swiss postal sector. 

Zetes continues to refine its 6 traceability solutions, along with its mobility platform that enables the development and implementation of sector-specific applications for all types of mobile devices and communication protocols.

These solutions are summarized in the diagram below:

The standardization of these 6 solutions at Group level makes it possible to capitalize on the experience built up in application softwares that meet the different needs of customers in the same industry. This is all about moving from individually-tailored solutions to a more complex product that meets most of the requirements of a specific business. The expected productivity gains for Zetes are substantial, now that for each key solution the developments are carried out on one platform that is continuously enriched. In this way the model benefits both clients and the Goods ID division.

Major interest continues in the key solutions. These also give better visibility to the Group's various operating entities by permitting a more targeted and structured customer offering.

Their contribution to results and in particular to the gross margin of the division is important: the constant gross margin as a percentage of sales is the combined outcome of lower margins on hardware products and higher margins on solutions sold. The impact is particularly sensitive in a time of rising sales: maintaining the gross margin on sales at 40.5% has enabled the division to generate € 5.3 million of additional gross margin compared to the first half of 2014. In all, the division generated € 40.8 million of added value in the first six months of the year. Operating expenses increased by 5.0% to meet the increased activity reflected in the sales growth.

Current EBITDA is € 7.9 million, up 89.8% and EBITDA is € 7.7 million, or 99.6% better than the year before.

R&D expenditure (€ 1.3 million) relates to the development of the MCL mobility platform and generic software solutions based on the Group's expertise.

Zetes benefited from the weakness of the euro against various currencies: Swiss franc, pound sterling, South African rand and shekel. At constant exchange rates, recurring EBITDA would have been € 7.1 million.

Sales growth is entirely internally generated: Zetes did not make any acquisitions during the first half and the impact of the 2014 acquisitions was not significant.

2.People ID

The decline in revenues of the division (-11.0% compared to H1 2014) is linked to the change in product mix of executed projects. While a large batch of biometric registration kits was delivered to Uganda in the first half 2014, no significant hardware delivery has yet taken place in 2015. Compared to the first half of 2013, which is more comparable in terms of product mix, growth is 29.3%.

Over the period, Zetes carried out various projects with high added value (preparation of the electoral roll in Togo, setting up the biometric enrolment system for social security card holders in the Côte d'Ivoire, ...). There was also substantial activity under the various long-term concession contracts. In total, the division generated a gross margin of € 17.2 million, up significantly (+18.5%) on H1 2014.

Operating expenses (€ 10.1 million) are up 10.7%, reflecting the additional expenses related to the execution of new contracts as well as the early termination of the visa agreement in Senegal. As of 1 May, the Senegalese government abolished the biometric visa requirement in order to support the tourism sector and has therefore terminated Zetes' technical concession. This decision has necessitated the accelerated charging of the capitalized development expenses in respect of this project (IAS 11, non-cash expenses). The indemnity payment is currently under negotiation.

The business of the People ID division is based on continuous business development efforts, aimed at making known Zetes' value proposal in terms of electronic and biometric identity documents, and at benefiting from a good geographical diversification and distribution between long and short-term contracts.

Current EBITDA rose by 31.4% from H1 2014 to € 7.2 million.


After Corporate expenses (€ 1.8 million, up 14.1% on 2014), the Group's current EBITDA is € 13.3 million, which is up by a significant € 5.2 million on the previous year. This corresponds to an EBITDA/sales margin of 10.4% (compared with 6.8% in H1 2014). As stated above, this progress can be put down to the account of the two divisions, both of which had record first halves.

The non-recurring expenses are insignificant (€ 0.2 million).

Depreciation of fixed assets (€ 3.5 million) was up € 0.7 million. This figure was stable in Goods ID (€ 1.3 million of this being amortization of capitalized development costs in respect of the key solutions), while the increase in People ID is due mainly to the early termination of the contract in Senegal. EBIT reached € 8.2 million, which is up 136.7% on H1 2014.

Net financial expenses break down into a foreign exchange gain of € 0.1 million, mainly due to currency volatility and bank charges and interest expense together totalling € 0.2 million.

The tax rate is 34.0%, giving a total tax charge of € 2.7 million.

Net result for the period (Group share) amounted to € 5.5 million, which is 162.0% higher than in the first half of 2014.


With equity of € 83.9 million out of a balance sheet total of € 190.9 million, the solvency ratio (equity/total assets) stood at 44.0% compared to 43.1% at end-December 2014, despite the dividend payment in the first half.

The individual components of the working capital requirement changed significantly on both sides of the balance sheet. Working capital amounted to € 17.8 million at 30 June 2015, against € 13.2 million at end-December 2014. This increase reflects the growth in the first half and an adjustment from the very low level at the end of December 2014. The company posted a net positive cash position of € 2.9 million against € 1.7 million at end-December 2014, even after the dividend payment in June. This good performance reflects the good results of the first half, as well as treasury share transactions (sale of 35,000 treasury shares and exercise of 26,535 options giving rise to the delivery of an equal number of treasury shares).

The good first half results produced a P&L cash flow of € 9.4 million.

At the same time, the rising level of business necessitated a € 4.1 million increase in working capital. The continuous growth of recent years has been accompanied by permanent attention to additional working capital requirements. Certain large operations at the end of the half-year (large deliveries, etc.) can have a significant impact here, as was the case in late 2014.

In this way cash flow from operations was € 5.1 million.

During the first half, the Group invested a moderate € 3.2 million (as against 5.5 for the 6 months to June 2014). In Goods ID, investments related mainly to the development of the 6 Zetes solutions and the MCL Mobility Platform, accounting for € 1.3 million out of a total € 2.4 million investment.

In People ID, no new major Build and Operate type project was carried out in the first half. The € 0.9 million of investments consist therefore mainly of replacement and optimization investments.

In the first half 2015, Zetes delivered 26,535 treasury shares, following the exercise of options granted at the time of the company IPO (employee stock option plan with an exercise price of € 23). It also sold 35,000 own shares for € 1 million to an institutional investor. In this way, as of 30 June 2015, the Group held 205,401 Zetes Industries shares.

Zetes also paid a gross dividend of € 0.63 per share, totalling € 3.3 million, which is 14.5% more than the previous year.

The main cash movements are as follows:


Although the company has remained attentive to acquisition opportunities, no dossier presented offered the required added value for the Group.

The very clearly defined strategies of the two divisions are currently providing significant internal growth. They are also creating a competence gap between Zetes and potential targets, and in so doing making most acquisition opportunities less attractive.

The Group remains and will continue to remain attentive to all opportunities to accelerate growth where the target offers sufficient added value.


In Goods ID, growth in 2015 will be very significant compared to 2014, thanks to major contracts executed largely in the first half. The second half should benefit from the commercial strategy based on the 6 solutions, which are proving very successful in the retail, postal services and transport sectors. The serialization solution (ZetesAtlas) deployed in production units is also growing strongly, even if its impact on the Division's sales figure remains more limited. These smaller-scale projects generate, on the other hand, high levels of added value, especially from recurring business.

Developing recurring business remains a cornerstone of the strategy, providing an adequate response to customers' need for ongoing support, developing the ongoing relationships with them, and increasing the Division's financial visibility.

In People ID, the current Build and Operate contracts will make a very important contribution to sales and profitability in the second half. Other contracts, more of the short-term type, should be signed and start to produce revenue already in the second half, thus giving the Division a good product mix (short term/long term). Feeding the Division on a regular basis with short-term contracts and concluding new long-term contracts from time to time is the daily objective of the business development team. This team continues to grow and expand so as to be ever closer geographically and technically to its potential customers.

In conclusion, the strategies put in place in both divisions are bearing fruit and are permitting sustained and profitable internally-generated growth, as evidenced by the figures of the first half. The Group is confident of achieving a second half of the same magnitude as the second half of 2014. Added to the first half 2015 results this will produce an annual performance that will be significantly higher than the best results posted until now by Zetes.


The statutory auditor has conducted a limited examination of the interim financial information of Zetes Industries for the six months ended 30 June 2015. The text statutory auditor's report is given below.


2015 result:                             17 March 2016

2015 Annual Report                25 April 2016

Annual General Meeting:         25 May 2016