Zetes Annual Results 2009 - Regulated Communication

Solid performance in 2009:  Very good performance in People ID and Goods ID stronger and ready for the economic recovery

Despite lower sales revenues owing to the economic crisis, Zetes has remained solidly profitable with a current EBITDA of € 13.6 (8.1% EBITDA/sales),  a net current profit for the year of € 5.7 million and an operating cash flow of € 14.7 million, which is double the 2008 figure.

Zetes will be proposing to the Shareholders’ Meeting that it declares a dividend of € 0.36 per share, identical to 2007 and 2008.

Group: solid performance
Group sales of € 167.5 million (-5.7%),  
Gross margin of € 76.5 million, down slightly on 2008 (-1.2%)
Current EBITDA down 10.6% to EUR 13.6 million 
Net current profit of € 5.7 million 
Net profit for 2009 of € 5.1 million, down just € 0.9 million (-14.5%).

Goods ID: slower sales offset by higher margin
Sales of € 131.6 million (-11.2% compared with 2008)
Gross margin up 1.3 points to 44.0% of sales
Current EBITDA of € 9.9 million (-31.2% compared with 2008)

People ID: excellent revenue and profitability growth
Sales of € 35.8 million, up 22.1% on 2008
Current EBITDA of € 6.4 million (+70.4% compared with 2008)

I Income Statement

Zetes has resisted the crisis remarkably well thanks to the diversification of its activities between Goods and People ID and its diverse Goods ID client base. Total sales revenue shrank by 5.7% compared with 2008, with gross margin on continuing to improve, from 43.6% in 2008 to 45.7% in 2009. This increase has largely offset the decline in sales, with gross margin down just 1.2%. This performance reflects the combination of three factors:

  • deployment of high added value solutions (Goods ID)
  • good activity levels in maintenance and support (Goods ID)
  • the greater weighting of the People ID activities in total group revenue.

The decline in sales does therefore not weigh too heavily on profitability indicators. Current EBITDA is down 10.6% on 2008 at € 13.6 million, and EBIT is down 13.3% at € 7.4 million.

The Group's net profit amounts to € 5.1 million, a net decrease of just € 0.9 million compared with 2008.

1. Goods ID

The economic crisis has limited company investment budgets right through 2009. Zetes fought the slowing of many projects by proposing solutions with a higher software component to maintain a good gross margin level. The professional services teams stayed very busy, at pretty much pre-crisis levels, and maintenance, support and supply of consumables activities remained stable.

In terms of sector, Retail, supported by private consumption, continued to invest in optimising the supply chain to generate productivity and quality gains.

Customers in transport and industrial production were the most affected by the economic downturn. In this latter sector, customer investments focused mainly on compliance with regulatory requirements for traceability (pharmaceuticals, food products).  The acquisition of Bopack Systems Print & Apply activity in early 2009 reflects Zetes’ desire to strengthen its position in this specific market. More generally, while demand for solutions with a high software component remained high, this was not the case for large-ticket hardware deployments, particularly in major countries such as Germany and France. It is mainly this lack of deployments that explains the fall in sales revenue.

Gross margin was less affected than sales revenue given that these hardware roll-outs are traditionally achieved with a much smaller gross margin than the average for the division.

Almost stable in absolute terms compared to 2008, gross margin as a percentage of sales is once again moving upward, from 37.8% of sales in 2005 to 45.7% of sales today. This increase significantly cushions the impact of lower sales revenue.

This trend is not accidental but reflects a strategy applied over the past 5 years that focuses on the in-house development of software solutions that provide an adequate response to customer needs. In addition, Zetes focused its acquisition efforts in 2009 on entities possessing unique technology and know-how: 

  • The label ‘print & apply’ activity of Bopack Systems, which allows Zetes to address the market for individual product labelling, a feature increasingly required by new regulations in the pharmaceutical and agribusiness sectors. At the end of January 2009 Zetes acquired Bopack’s ‘Print & Apply’ activities in Belgium and the Netherlands. Zetes took this decision despite the risk that this takeover represented in a difficult economic environment and notwithstanding an almost non-existent order book. The wager is paying off: from this year this activity is making a positive contribution to Group EBITDA, thanks in particular to the support of the sales networks of the Belgian, Dutch and French subsidiaries. On the other hand, with 35 persons coming on board in Belgium and the Netherlands, equal to about 5% of the Goods ID payroll, this acquisition substantially impacts Group operating expenses. Without it, the operating expenses of the Goods ID division would have fallen about 7%.
  • Image ID’s image-based technology enabling instant recording of hundreds of barcodes. Zetes believes that ImageID solutions (monitoring and tracking large volumes of products) offer high potential in the supply chain. Zetes’ ability to market new solutions via its subsidiaries, present in 13 countries, is a significant competitive advantage that the company is regularly strengthening. By integrating these new solutions into its portfolio, Zetes significantly increases its added value to customers.

Internal growth and currency effects 

Business progress varies from country to country. As indicated at the end of the first half, the United Kingdom continues to grow significantly, even if the impact of this recovery is partially masked by changes in the exchange rate of the pound against the euro (at constant exchange rates, the impact on the sales of the division is about 2.3%). By contrast, the German business has slowed down considerably, requiring us to take restructuring measures. Generally, Zetes remains attentive to maintaining a proper balance between market potential and its level of operating expenses.

As indicated above, the impact of the decline of GBP against the euro is about 2.3% of sales. The average exchange rate for 2009 is 1.12 as against 1.26 in 2008. As stated earlier, the acquisitions made in 2009 have focused on technology rather than on geographical coverage. The impact of these acquisitions on the income statement in 2009 is limited since at constant consolidation scope and excluding currency effects, we obtain the following developments:

In conclusion, the Goods ID activity exhibited strong resistance to the 2009 crisis. During the year Zetes once again improved its competitive position, acquiring technologies that considerably enhance its portfolio of solutions and gaining market share in countries where it is present.

Finally, in early 2010, the Company acquired 51% of Netwave (Athens, Greece), with the aim of gaining additional geographic coverage. Zetes’ business model here is to enable its new subsidiary to offer the Group’s various solutions as fast as possible and to take advantage of existing synergies on large international accounts.

2. People ID

The People ID division had a very good 2009.

Long-term Build & Operate contracts

These contracts contributed to the overall good performance of the division, despite a temporary lull in the second half mainly due to the end of the first deployment of electronic ID cards in Belgium. Today, all Belgian citizens hold an electronic card. The eID project is therefore now entering a replacement phase: in 2010, citizens who received their cards (with a validity of 5 years) in 2005 will be invited to replace them. In 2009, the distribution of foreigners’ residence permits continued and the identity card for kids (kids-ID) has become widespread, with over 190,000 kids-ID cards supplied by the end of 2009. In Portugal, the distribution of electronic ID cards is progressing slightly more slowly than expected.  In Côte d'Ivoire, the biometric enrolment of Ivorian citizens and the personalisation of their passports are continuing, with production now at cruising speed.  During the second half of 2009, Zetes introduced solutions for issuing diplomatic passports and biometric visas in Ivorian embassies. Finally, in Israel, the production unit is now almost operational, with production of the first blank cards expected in the first half of 2010.

Build & Transfer contracts

The People ID division has undertaken several Build & Transfer type contracts: an election enrolment solution in Togo, enrolment of civil servants in Burundi, establishment of a social identity card structure in Gabon and the beginning of the mission to update the electoral register in the Congo (DRC). All these contracts are the outcome of an intensive business development effort. These efforts, undertaken in 2008 and which led to a strong performance in the first half of 2009, penalised the division’s performance in 2008, reducing the EBITDA / Sales ratio.

In 2009, the division’s sales revenues amounted to € 35.8 million, up 22.1% over 2008. Current EBITDA rose 70.4% to € 6.4 million.

The economic environment does not really impact activity levels in People ID, which helps balance the Group's results.

Zetes is aiming to accumulate Build & Operate contracts in order to increase its visibility and the predictability of its revenues. In 2009, it was the Build & Transfer contracts that supported the growth of the division. These contracts are the outcome of significant business development efforts over several years.

3. Group

Zetes has rigorously controlled Corporate expenses, which are down over the corresponding period in 2008 to € 2.7 million (-6.9%). The corporate function has the essential but limited function of defining Group strategy, controlling the divisions and subsidiaries and steering the policy of expansion through acquisition.

In this area, although activity has been intense, finalised acquisitions have been limited to Bopack Systems’ Print & Apply activity, the acquisition of the ImageID activity (tracking and traceability solutions for large product volumes) and, in early 2010, the acquisition of Netwave. The other proposed transactions did not come through, either because of excessive uncertainty as to future targets, or because the target company’s activity presented problems of integration with that of Zetes, or because the financial and pricing conditions were not right.

The Group’s current EBITDA is € 13.6 million, equivalent to an 8.1% EBITDA / sales margin, as against 8.6% in 2008.

Non-recurring charges in a net amount of € 0.7 million relate primarily to restructuring. In Germany in particular Zetes has decided to reorganize its operations to better meet the needs of an economy heavily affected by the crisis. Other limited restructurings took place in Ireland and France.

Depreciation of fixed assets amounted to € 3.5 million and is in line with the 2008 figure (€ 3.4 million). By contrast, inventory write-downs (€ 0.67 million) were lower thanks to the more active inventory management introduced over the past several years, and which is bearing fruit. 

EBIT reached € 7.4 million for 2009, a decrease of 13.3% compared with 2008. 

Net financial expenses amounted to € 0.78 million, largely due to a negative foreign exchange result (€ -0.35 million).

Income taxes amount to € 1.56 million, including 0.47 million non-cash, giving an overall tax rate of 23.3%. The net profit is € 5.1 million, down just a limited amount on 2008 (€ -0.9 million or -14.5%).

II. Balance sheet, investments and cash flow STATEMENT

With equity capital of € 70.3 million out of a total balance sheet of € 131.0 million, the equity ratio is a very high 53.7%.  Sound balance sheet management is enabling Zetes to show impressive debt and liquidity ratios. The net cash position has improved to € 13.0 million, strengthening the position of the Zetes Group and allowing it to continue its internal and external growth. Zetes remains resolutely on the lookout for opportunities in new markets, new technologies and new territories.

The business activity generated a cash flow of € 14.7 million, € 10.85 million from the income statement and € 3.8 million from a reduction in working capital needs, attributable primarily to the reduction in accounts receivable.

Investments by Goods ID was € 1.0 million, which is below the Group’s policy (1% of sales in this division) and follows on the lack of revenue growth. Investments in People ID amount to € 3.25 million and are mainly related to investment in a new infrastructure for the production and personalization of electronic identity cards in Israel (€ 1.6 million) and investment in Belgian production equipment to increase production capacity for the coming years (€ 1.4 million).

In 2009, acquisitions were made out of equity (Bopack Systems, ImageID). Given the high cost of debt, Zetes will focus on the future on self-financing.  It will take care, however, to maintain sufficient reserve liquidity to enable it to respond to any opportunities, in particular acquisitions, which will inevitably arise.

During the last six months, the company has paid to its shareholders a total of € 2.4 million in the form of dividends (€ 1.9 million) and redemption of treasury shares (€ 0.5 million).

Once again, the Group has demonstrated its ability to generate significant cash flows, a substantial portion of which is devoted to the development and expansion of the company and another to servicing the dividend and repurchasing shares opportunistically. The balance is being held in reserve for the expansion opportunities as mentioned above.

The company’s net cash position (ST) stood at the end of December 2009 at € 15.7 million, made up of cash assets of € 18.1 million and bank and lease debt of € 2.4 million.


During 2009, the company looked at various opportunities. As mentioned above (see segment information - Goods ID), only the acquisitions of the Bopack Systems’ Print & Apply activity and the ImageID activity could be done on terms acceptable to the Group and its shareholders . In early 2010, Zetes also took a 51% stake in Netwave (Athens, Greece). It is also planned to acquire the minority shares (49%) at the end of 3 years, based on performance between now and 2013.

In considering acquisitions, Zetes is attentive to the integration efforts will be required, whether to reboost sales or to convince its employees of the benefits of a new technology. In this perspective, Zetes takes care to apply its best available resources in its acquisition activities, both in the evaluation phase (available PI, quality of solutions, quality of teams) and in the purchase phase (due diligence, negotiating, financing). Zetes is particularly attentive to the acquired company being able to align as quickly as possible to the Group’s strategic direction ... and contribute to profit.

Other potential acquisitions are still under examination. Zetes continues, however, to focus on targets that will find their place in the Group’s strategy and organization and at a price that can create post-acquisition value.


Even though the crisis is not yet over, many companies are beginning to think again about investing. Gradually projects of more significant scale are returning to the surface, often aimed at increasing the productivity of the supply chain and ensuring compliance with new regulations in the food industry, and in particular in pharmaceuticals.

Goods ID Division has proven the relevance of its economic model based on a substantial services component and a stable base of recurring business. Indeed, in all subsidiaries, the largest decline was felt in hardware, which carries a lower margin, while sales of software and services remained constant, and even increased in many countries.

This strategy of value-added solutions, introduced primarily for purposes of differentiation, is bearing fruit in times of economic downturn.

Even if order intake is not back to pre-crisis levels, the division has proven its ability to maintain a good level of margin at a lower sales revenue level. If the renewal of confidence is confirmed, Zetes will benefit fully from the recovery thanks to its ongoing relationship with its customers and a portfolio of increasingly comprehensive solutions which are relevant to the problems faced by its customers.

Having a European network that can offer the same quality of service in all countries is definitely an advantage recognised by customers. It can also generate economies of scale in R&D.

In People ID, most contracts are long term projects funded by states (or their citizens) or by supranational institutions. In 2010, all the Build & Operate type contracts will generate income and contribute to earnings (Belgian ID and health cards, ID card in Portugal, Ivorian passport, identity card in Israel).

The business development efforts remain very high because sales and decision cycles are extremely long and often difficult to predict.

But many projects are under tender, both in Europe and Africa, requiring the mobilisation of significant resources to formulate an adequate and attractive response.

It is by continuing to multiply the number of sales cycles that the People ID division is seeking to continue to manage the predictability of this market.

To conclude,  the company is expecting better results in 2010 compared to 2009.


Investing in Zetes shares has risks attached. These were described in the 2008 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 € 0.36 per share.


The financial statements presented below constitute a summary of the annual report which will be available on 23 April 2010. 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 Auditor has confirmed that its auditing work, which is essentially complete, has not revealed the need for any significant correction to the accounting information contained in the press release.


Ordinary General Meeting: 26 May 2010