Zetes Half-Year Results - H1 2016

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After a record year in 2015, Zetes reports a very good first half of 2016 for both divisions


Group sales of €121.5 million

- 5.4% on H1 2015

Gross margin rate up at 47.0%

vs 45.2% in H1 2015

Current EBITDA of €12.5 million

- 5.9% on H1 2015

People ID: growing operating results, supported by contracts for the production of secure documents

Sales of €25.4 million (-7.6% on H1 2015)
Current EBITDA of €7.7 million (+6.6% on H1 2015)

Goods ID: operating performance supported by growth of high added value activities

Sales of €96.1 million (-4.7% on H1 2015)
Gross margin rate up (41.6% vs 40.5%)

Current EBITDA of €6.8 million (-14.2% on H1 2015)

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After a record first half of 2015, sales remained at a good level in the first half of 2016: -5.4%, which is the second best historical performance. This development was expected since sales for H1 2015 were buoyed significantly by a small number of large projects, including the deployment of mobile terminals for the Swiss postal sector. Both divisions carried out projects with very high added value, reinforcing the gross margin for the half-year, which reached 47.0% of sales compared to 45.2% in the previous year. This meant that the decrease in sales (-5.4%) only led to a very slight reduction (-1.7%) in the gross margin compared to the previous year. The Group therefore consolidates the clear progress made in the two last years.

The operating costs are stable compared to the first semester 2015 and the Group current EBITDA is €12.5 million (-5.9% compared to the first half of 2015). Across both divisions, the Group managed to stabilize the record performance of the first half of 2015 without the benefit of equivalent large contracts. The non-current items are not significant and overall Group EBITDA is slightly down on last year (-4.9%), at €12.4 million.

1.Goods ID

After several years of significant growth, sales stood still in the first half of 2016. The company anticipated this development, having seen sales shoot up by 15% in the first half of 2015, largely due to the Swiss postal sector rollout (+€10 million on H1 2015). Apart from that contract, organic growth is still going strong.

Zetes’ strategy remains to increase its offer of traceability solutions, including 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:

For the customers, the benefit for the mobility platform lies in the compatibility of technologies and types of devices. The attraction for key solutions crystallizes around process improvements, shorter implementation times and a reduction in industrial risks associated with changes in IT systems. Demand remains high, particularly for ZetesMedea (warehouse management solutions), ZetesAtlas (serialization and identification of individual products) and ZetesChronos (delivery).

These solutions facilitate a more targeted and structured customer offering. They also increase visibility in the Goods ID Division. Actually, the software offer is increasingly linked with the mobility platform, taking the form of Software as a Service (SaaS). This model limits the initial investment for customers, gives them permanent access to the most up-to-date version of the product, and generates a regular income for Zetes.

These solutions make a significant contribution to the results - particularly the gross margin for the division: while sales decreased by €4.8 million for the half year (-4.7%), the gross margin generated by the division in the first half remained virtually stable at €40.0 million, a reduction of just €0.8 million. Operating expenses rose slightly by 0.8%, as OPEX were kept well under control and productivity gains were constantly sought, leading to the declaration of a current EBITDA of €6.8 million. Although this is down on H1 2015 (-€1.1 million), it remains the second best first half result for the Goods ID division. It is also in line with the result for the second half of 2015 (also €6.8 million). Sales growth is entirely internally generated: Zetes made no acquisitions (or disposals) in the first half of 2016.

Following the peak recorded in H1 2015, sales, gross margin and operating profit have followed an upward trend for several years, largely on an organic basis:

Certain currencies such as the pound sterling or the South African rand have depreciated against the euro. At constant exchange rates, the fall in sales is just -2.4% and the gross margin has increased compared with the same period last year. Since income and expenses are mostly incurred in the same currencies, the impact on operating profit is negative, but remains slight.

2.People ID

The decline in revenues of the division (-7.6% compared to H1 2015) is linked to the product mix of executed projects. Compared to the first half of 2015, the vast majority of projects executed were high added value projects (long-term concession contracts, such as social security cards in Côte d’Ivoire). Overall, the division generated a gross margin virtually equivalent to that generated in the first half of 2015, €17.1 million (-0.8%). Zetes is involved in projects for the production of secure documents in the following countries: Belgium, Portugal, Israel, Côte d’Ivoire and Gambia. They involve categories such as travel documents (passport, electronic visa), identity documents (national or social identity card) or licences (driving licence).

Zetes’ heart and added value lie in its capacity to roll out and operate complete, turnkey computer systems. These systems cover all aspects of people authentication: capture of biographical and biometric data, creation of population files, issue of identity documents protected against counterfeiting and control systems. These watertight, secure systems offer every guarantee of the protection of personal data and the use of data capture or identity checking tools on the ground. Zetes offers its solutions in the form of long-term contracts (known as Build and Operate), reducing the risk and investment for Government customers and increasing visibility and predictability of revenue for the Division.

Operating expenses (€9.4 million) are down slightly (-6.1%). This reflects the additional expenses incurred by Zetes in H1 2015 linked with the early termination of the visa agreement in Senegal.

The division’s current EBITDA rose by 6.6% from H1 2015 to €7.7 million.


After Corporate charges (€1.9 million), the Group’s current EBITDA is €12.5 million, which is down by €0.8 million on the previous year. This corresponds to an EBITDA/sales margin of 10.3% (10.4% for the first half of 2015). As stated above, the evolution of the Goods ID division is offset by further growth in People ID, which achieved a record first half.

The non-recurring expenses are insignificant (€0.1 million).

Depreciation of fixed assets (€2.7 million) was down by €0.8 million (€0.4 million in each division). In Goods ID, €1.3 million of this was amortization of capitalized development costs in respect of key solutions, in line with H1 2015. Reductions in value for inventories (€0.3 million) and trade receivables (€0.3 million) were up slightly compared to H1 2015 (+€0.4 million in total). For People ID, the decision of the Senegalese government to stop electronic visas in the first half of 2015 led to the accelerated depreciation of investments. Finally, EBIT is €7.7 million, Zetes’ second best first half after the figure of €8.2 million for the first half of 2015.

Financial expenses break down into a foreign exchange loss of €0.7 million, mainly due to currency volatility and bank charges and interest together totalling €0.3 million. Financial income was lower at €0.3 million.

The tax rate is 32.4%, giving a total tax charge of €2.3 million, down compared to H1 2015 (34,0%).

Net result for the period (Group share) amounted to €4.9 million, which is 11.8% lower than in the first half of 2015.


With equity of €89.8 million out of a balance sheet total of €186.5 million, the solvency ratio (equity/total assets) stood at 48.2% compared to 47.5% at end-December 2015, in view of the dividend payment in the first half (€4.2 million).

The individual components of the working capital requirement changed significantly on both sides of the balance sheet. Working capital amounted to €24.1 million, against €14.1 million at end-December 2015). This reflects outstanding transactions at the end of the half. The company posted a net positive cash position of €0.7 million against €9.6 million at end-December 2015. This - temporary - reduction is due a.o. to the dividend payment in June.

The good first half results produced a P&L cash flow of €9.8 million. This represents a slight increase compared to the P&L cash flow for the first half of 2015 (€9.4 million).

At the same time, as for the first half of the previous year, the rising level of business has led to an increase in working capital of €9.7 million at the end of the period (€4.1 million in H1 2015), a large part of which is temporary and non structural, linked to important recent or current deliveries. For the period under review, cash flow from operations was €0.1 million.

During the first half, the Group invested €4.1 million (as against €3.3 million in H1 2015). In Goods ID, investments related mainly to the development of the 6 Zetes solutions and the MCL Mobility Platform, accounting for €1.4 million € (€1.3 million H1 2015. In total, they represented €3.0 million (€2.4 million of investments in H1 2015).

In People ID, no new major Build and Operate type project was carried out in the first half. Therefore, the €1.1 million investments (€0.9 million H1 2015) mainly consist of replacement and optimization investments. As technologies evolve, the Division has to invest to remain at the cutting edge in terms of quality.

As far as the cash flows relating to financing activities are concerned, in the first half, Zetes delivered 71,398 treasury shares, following the exercise of options granted to employees at the time of the IPO and also acquired 53,016 treasury shares. Overall, these transactions represent a cash out of €0.4 million. As of 30 June 2016, the Group held 155,860 Zetes Industries shares.

The company also paid a gross dividend of €0.80 per share, totalling €4.2 million, which is 27% more than the previous year.

The main cash movements are as follows:


The company made no acquisitions in the first half of 2016.

However, it remains attentive to acquisition opportunities and regularly considers new possibilities. In particular, Zetes considers the added value such acquisitions could bring to the Group - especially advantageous technologies in terms of emergence and growth.


In Goods ID, 2016 is a year of consolidation, at a very good historical level. Following two years (2014 and 2015) of strong sales growth, Zetes anticipates a year in which the gross margin generated will be supported by projects incorporating Zetes solutions, in the postal services, transport and serialization sectors in particular. Although sales for 2016 might be slightly down on those for 2015, the value added created and the EBITDA performance should be in line with those for 2015. It should be remembered that performance in the first half of 2015 was buoyed by the execution of a major contract and the Division set itself the objective of achieving comparable revenue to that achieved in 2015 - without the advantage of a rollout equivalent to that in the first half of 2015.

In People ID, the current Build and Operate contracts have made a major contribution to revenue and profitability, leading to the division reporting its best performance ever for a first half. 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,  seeking a good geographical diversification as well as a balance between long and short-term contracts. Africa remains a priority, in view of the widespread need for population identification, which is frequently an essential factor in the success of development programmes. Efforts are also focussed on Central and South America, where very promising opportunities have been identified.

In conclusion, the strategies put in place in both divisions continue to bear fruit. Zetes confirms that, in 2016, it expects the profitability of the operations in both divisions to match that in 2015.


The statutory auditor has conducted a limited examination of the interim financial information of Zetes Industries for the six months ended 30 June 2016. The text of the statutory auditor’s report is set out below.


2016 results:                           16 March 2017

2016 Annual report:                28 April 2017

Annual General Meeting:        31 May 2017