Half-year Results 2011: Revenue and EBITDA growth in both divisions


Group Sales of € 104.0 million, 
up 17.3% on H1 2010 
Current EBITDA of € 9.0 million 
up 49,1% on H1 2010 

Goods ID: Growing sales and sustained development efforts 
Sales of € 77.8 million (+9,9% on H1 2010) 
Gross margin of 42.1% of sales 
Current EBITDA of € 4.8 million (+15.2% on H1 2010) 

People ID: Very good performance of all activities 
Sales of € 26.2 million (+ 46.8% on H1 2010) 
Current EBITDA of € 5.8 million (+ 74.5% on H1 2010)


The declaration of conformity is contained in the summary consolidated interim financial statements


(1) "Current" means excluding restructuring costs and non-current income/charges) 

The recovery observed in 2010 continues. Group revenue is up 17.3% compared with the first half of 2010. This increase comes from both the Goods ID sector (+9.9% on H1 2010) and the People ID sector (+46.8%). Gross margin, at 44.2% of sales, is down slightly (-0.8%) on 2010 but up in absolute terms to € 46.0 million (+15.2%).

Current EBITDA is € 9.0 million, up 49.1% over the first half of 2010 for the Group as a whole, and 15.2% higher in the Goods ID and no less than 74.5% higher in People ID.

1. Goods ID

Business was brisk during the first half of 2011. Order intake is on forecast, giving, as expected, a strongly improved performance compared with same period last year.

Supply Chain optimization (mainly retail) and traceability, both in the pharmaceutical sector - with printing and labelling - and in the Postal sector - with POD (proof of delivery) solutions permitting full traceability of orders from collection to delivery-, remain the main drivers in this division.

The business model in Goods ID remains that of providing Business to Business solutions which permit significant productivity gains and short-term returns on investment, in combination with maintenance services and supplying consumables for solutions already deployed, which provide Zetes with a recurring volume of business.

In Goods ID, major development work continues in each of automatic recognition (ImageID), speech recognition technology and dedicated terminals.

These different factors explain the high gross margin both as a percentage of sales (42.1%) and in absolute value (€ 32.7 million), up 9.9% from the first half of 2010.

The position of the different Group entities continues to vary from region to region. It is essentially the South (Spain, France, Italy, Portugal and Greece) and Central regions (Belgium, Netherlands, Germany and Switzerland), which have driven growth in 1H 2011.

Neither acquisitions nor exchange rate developments significantly impacted Group sales and earnings levels in the first half of 2011

2. People ID

The strong sales growth (+46.8%) in this division is supported by both the Build and Operate contracts and by the new Build and Transfer projects.

Zetes has also continued its business development efforts here, particularly by extending the range of solutions available (type of secure documents / HW and SW enrolment solutions / specialized hardware).Production of blank identity cards in Israel, which began in 2010, continues in 2011. Already around a million cards had been produced by the end of June. Zetes expects to produce over two million cards for the entire year 2011. The stage of card personalization should begin later this year.

In Belgium, the replacement of identity cards has entered its second year. At the same time, the demand for children's cards (Kids card) remains high (around 200,000 cards in 6 months). Zetes is also continuing the deployment of biometric registration equipment in Belgian embassies. Finally, since the beginning of this year, Zetes has been distributing pet passports, together with managing the animals and their owners database.

After four months troubled by the aftermath of the presidential election in Côte d'Ivoire which sharply slowed activity, issuance of electronic and biometric passports and visas has resumed to an increasingly normal rate. Nevertheless, the contribution of this contract remained positive during the first half and Zetes expects a return in the second half of the year to the 2010 level of activity.

Zetes has also completed several other projects in Africa: delivery of additional biometric kits and maintenance services in the Congo (DRC) for the preparing the electoral register, the AFIS system for Benin, biometric enrolment systems for the military ...

These latter contracts, consisting essentially of services, have a high margin that takes the gross margin for the division to 50.7% and current EBITDA to 22.2%.

After several years of development and investment, the People ID Division today enjoys a good geographic diversification and a balanced mix of long and short term contracts.

3. Group

After Corporate expenses (€ 1.6 million), recurring EBITDA of the Group is € 9.0 million. This is up € 3.0 million over 2010, giving an EBITDA / Sales margin of 8.7% (compared with 6.8% in H1 2010).

Net non-recurring charges of € 0.2 million consist mainly of restructuring costs and the external costs related to the acquisition of Proscan effective in July 2011. The restructuring costs relate to the regrouping on a single site of the activities of the French subsidiary and to the reorganization of the management team in Greece.

Depreciation of fixed assets (€ 2.3 million) was up € 0.5 million from the first half of 2010. In People ID, depreciation is proportional to the production volumes of the "Build and Operate" contracts, which were very high in several countries. Lower write-downs on stock (€ 0.2 million) reflect the work done in previous years on procurement and inventories. EBIT increased by 59.4% over H1 2010 to reach € 4.9 million in H1 2011. The increase recorded in Goods ID and, especially, in People ID, is expressed in full in the Group's operating profit.

Net financing costs come out at € 0.7 million, influenced by foreign exchange losses of € 0.1 million.

The tax rate is 34.1%, giving total tax of € 1.4 million. The unusually high tax rate during this first half reflects an exceptional concentration of pre-tax results in countries where corporate tax rates are highest. On a normalized basis, the Group expects a tax rate approaching 30%.

Net current result for the period (Group share) stood at € 2.8 million, up 20.2% over the first half of 2010. 

(1) "Current" means excluding restructuring and non-current charges and income 
(2) Weighted average number outstanding 
(3) Portion attributable to shareholders of the company 

At 30 June 2011, 184,669 options were outstanding. To the extent that the weighted average price of the share does not exceed the exercise price, the options issued are not taken into account in calculating the dilution effect.


With equity of € 74.9 million on total assets of € 145.9 million, the solvency ratio (equity/assets) is above 50% (51.36%). The components of working capital need have returned to a moderate level after rising suddenly owing to the very high level of sales in December 2010.

The net cash position (€ 6.7 million) is down compared with end-December 2010 (€ 10.1 million), but this is after returning nearly € 6.0 million to shareholders in the form of dividends (€ 5.3 million) and treasury share purchases (€ 0.6 million). This position at 30 June 2011 consists mainly of € 10.5 million of cash and of € 0.7 million of liquidity pledged by way of guarantee, less bank and leasing debt of € 4.4 million.

Zetes has generated a solid cash flow from operations (+ € 7.6 million) during the past six months, with a € 6.4 million contribution from the income statement (against 4.2 million in 2010, an increase of 80%), while working capital need has reduced by € 1.1 million (against an additional requirement of € 2.7 million in 2010).

Zetes has lines of credit available to it to finance its working capital needs, together with framework agreements with its bankers for financing long-term contracts and acquisitions. The Group's good and growing profitability and strong balance sheet (net cash and solvency) guarantee permanent access to these credit facilities.

The People ID Division is continuing to invest (€ 0.7 million) in improving its production facilities for new and existing customers. These investments cover the areas of innovative solutions, IT security, quality improvement and also productivity gains.

Investments by the Goods ID Division (€ 1.2 million) are focused on infrastructure and IT security, improving ERP systems and the acquisition of vehicles. In addition, € 1.1 million of development costs have been capitalized. Capitalized developments relate to software products and to specialist mobile terminals marketed by the Group companies but also by third parties. The cost of development work by the Competence Centre teams and the services of Professional Services in different countries is charged in the year in which it is incurred, because these are not marketed as products having a price list and a specific business plan. It is this development work that provides the essence of the added value of Zetes and really differentiates the Group in customers' eyes. The sharing of this know-how and these developments are the basis for the success of the solutions, with each entity sharing its experience and best practices with other Group companies.


Acquisitions during the period 
In line with its strategy in this area, and as announced in the 2010 Annual Report, Zetes has acquired the German company Anvos. This small company (7 employees) specializes in Print & Apply and reinforces the Group’s competencies in Germany, where industrial manufacturing remains important. During the first half of 2011, the Group also acquired RFIDEA (Belgium). In this way, a team of highly skilled specialists joined Zetes at the end of May. RFIDEA specializes in RFID technology and its acquisition is, as with Anvos, part of the strategy of building the Group's competences. Finally, Zetes Italy was strengthened by the taking over of a 6-person team specializing in Goods ID, which gives it the critical mass to serve customers in the North of Italy.

These acquisitions have had no significant effect on the income statement in the first half of 2011. They generated an additional goodwill of EUR 1.4 million which is included in the balance sheet at 30 June 2011.

Acquisition after closing date 
In early July, the Group acquired the company Proscan in South Africa for € 5.2 million. With this acquisition, coming after the period under review, Zetes extends its geographical coverage in the Goods ID field and sets foot on a new continent where it was present until now only with its People ID activity. With 170 employees across four sites (Johannesburg, Cape Town, Durban and Port Elizabeth), ProScan has recognized expertise in supply chain, automatic data collection and mobility solutions. It achieved sales in 2010 of around € 15 million, with EBITDA of € 1 million, and was debt-free.


In Goods ID, the focus has been in recent years on the internal development of high-performance software solutions and on acquiring companies possessing particular technological know-how. These two strategies have enabled Zetes to provide high added value solutions to its customers and differentiate itself from competitors. In a sluggish macroeconomic environment, this has enabled it to gain market share and maintain its margins. Gross margin in the first half was an excellent 42.1%, a level that it should be possible to maintain in the future.

The acquisitions made in the first half are sharply focused on the acquisition of skills: Print & Apply in Germany (a very important market, because highly industrialized) with Anvos and RFID with RFIDEA, combining the latter’s leading edge expertise in this technology with Zetes' market penetration. These acquisitions’ added value and, therefore, their gross margin, are in line with the Group’s standards.

In addition the acquisition of Proscan, a leader on its domestic market, gives Zetes access to a zone (sub-Saharan Africa) which offers strong development potential, with double digit growth rates expected for South Africa and the sub-region (South African Development Community), where the needs for traceability and supply chain quality are enormous. Here the combination of Proscan's market share and Zetes' portfolio of technical solutions offers very substantial growth potential. Proscan is expected to make a positive contribution to EBITDA already in the second half of 2011.

With its strong balance sheet and its ambitions, Zetes remains attentive to any opportunity to strengthen its geographical presence or to acquire differentiating skills.

In Goods ID, Zetes does not expect a repeat of the growth seen in the second half of 2010, given the current macroeconomic uncertainty weighing on investment decisions by corporate clients.

In People ID, the contribution of the "Build and Operate" contracts will, in the second half, be comparable to the first half of the year in Israel, Portugal and Belgium. In Côte d'Ivoire, the political stabilization of the country is allowing passport issuance to return to normal volumes, with this contract making a positive earnings contribution.

In the second half, the Division is continuing to provide maintenance for the electoral registration kits and is implementing an AFIS (biometric de-duplication) system for the Republic of Congo.

Other service contracts are also running for other African countries.

Zetes is also awaiting the outcome for several calls for tenders in Europe for electronic documents or biometric solutions, for which it has submitted bids.

The visibility of the People ID division is ensured today by its current "Build and Operate" contracts, with their lengthy sales cycles and significant investment requirements. The profitability of this division is assured by the combination of these predictable long-term contracts with other short-term "Build and Transfer" products, which are decided more quickly and less capital-intensive.

By way of conclusion, despite the current macro-economic circumstances the growing contribution of People ID and the recurrent business in Goods ID ensure the the stability of Zetes’ results and allow the Group to maintain its objective of keeping revenue and current EBITDA in line with last year’s levels.


The auditor has undertaken a limited review of the interim financial information of Zetes Industries for the six months ended 30 June 2011. The text of the Auditor's report following the limited review is given below.


Results for 2011: third week of March 2012 
2011 Annual Report: last week of April 2012 
Annual General Meeting: 30 May 2012

Brussels, 29 August 2011

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