Zetes Industries achieves its objectives for 2011


Growth of the Goods ID activity and very good profitability of the People ID activity.

Sales amounted to € 220.6 million (vs. € 216.7 million in 2010) and current EBITDA of € 18.6 million (vs. € 19.1 million in 2010).

After the strong growth year of 2010, Zetes had set itself the goal of maintaining the same level of sales revenue and an operating profit of the same order. This it achieved with the nearly 10% sales growth at Goods ID, while setting a new record for the EBITDA contribution of the People ID division.

In addition, the year closed with the best cash flow from operations ever recorded, at € 18.2 million. For this reason Zetes will propose to the General Meeting an ordinary dividend of € 0.55, up from the levels of 2010 (€ 0.47) and 2009 (0.36 €).

Group: Objectives achieved and record cash flow

  • Group sales of € 220.6 million (+1.8% vs. 2010),
  • Gross margin of € 95.5 million (+7.6%),
  • Current EBITDA of € 18.6 million (-2.4%),
  • Cash flow from operations of € 18.2 million

Goods ID: Sustained growth

  • Sales of € 170.7 million (+9.9% vs. 2010),
  • Gross margin of € 68.5 million (+8.7%),
  • Current EBITDA of € 9.9 million (-13.3%),

People ID: Gross margin and EBITDA up strongly

  • Sales of € 49.9 million (-18.9% vs. 2010),
  • Gross margin of € 27.0 million (+5.0%),
  • Current EBITDA of € 12.1 million (+11.8%)


The Group's sales growth of 1.8% in 2011 is remarkable bearing in mind that it follows on a year of substantial growth. Taking 2010 and 2011 together, we arrive at a compound annual growth rate of 14.8%.

In Goods ID, sales revenue grew by more than 10%. In People ID, in the absence of any major and hardware-intensive ‘Build and Transfer’ project, revenue shrank by 19%.

The Group's gross margin also grew in both in absolute and relative terms, from € 88.7 million to 95.5 million and from 40.9% of sales to 43.3%, thanks to the greater added value delivered by Zetes, primarily in the People ID Division.

Operating expenses were up 10.4%, mainly in the Goods ID division, where the development of value-added solutions required the recruitment of qualified employees. Current EBITDA amounted in 2011 to € 18.6 million, down by 2.4% from the previous year. However, seen over a two-year period, operating profitability shows a compound growth rate of around 17%.

At the year of 2011, the Group undertook a reorganization exercise in both divisions in order to address the expected situation in 2012. This produced non-recurring costs of € 1.0 million.

Finally, the net current profit amounted to € 7.0 million, with a net profit of € 6.2 million.

1. Goods ID:

Demand at Goods ID continues to be driven by the quest for productivity gains and the need to meet regulatory requirements for per-item traceability of objects (serialization).

Most projects completed since 2009 have been deployed in existing facilities, either to replace less productive equipment, or to extend existing solutions. Having the necessary critical mass has enabled Zetes to organize itself into vertical markets, with specialist consultants in each field of activity. They know customers' critical processes and are able to offer them automatic identification and mobility solutions to meet the challenges they face.

Retail remains Zetes’ most important sector across Europe. Productivity gains, efficiency and reduced error rates in warehouses are driving activity in this sector. The fact of proposing solutions that combine multiple identification technologies (voice, barcode, RFID) allows the customer to rely on a single supplier, which in turn guarantees the cohesion and proper functioning of the entire solution.

Proof of delivery solutions are proving highly popular in the transport and logistics segment. These combine identification and mobility competences and can go as far as mobile payment, for which Zetes has developed a European solution.

Finally, the pharmaceutical and luxury goods sectors are continuing to invest in unit-based marking and traceability solutions.

In the Central region, the integration of Phi Data NL’s activity with that of Zetes in The Netherlands is bearing fruit and has enabled Zetes to win market share in a competitive market. The Swiss subsidiary has also grown strongly, driven by the postal services and rail transportation markets.

The South region, despite a very difficult macroeconomic situation, achieved a modest sales growth and 2 percentage point improvement in its gross margin on sales by developing value-added solutions for the pharmaceutical and transport sectors.

Finally, the North region suffered considerably from decreased activity in the U.K., reflecting both a wait-and-see economic situation and the end of major deployments by existing retail customers. Pending the conclusion of new large-scale contracts, a cost reduction exercise was undertaken in the second half. This effort was able, however, to make good only 20% of the loss of gross margin. Without this counter-performance in the U.K., and at constant scope, the Goods ID division would have experienced organic growth of its sales revenue and modest EBITDA growth. The improvement effort is continuing in 2012 in order to return to performance levels that match the division’s objectives.

Internal growth and currency effects

In Goods ID, the impact of currency fluctuations is essentially due to the variation of the Swiss franc.

This favourable impact at the sales and gross margin level is offset by a proportional movement of operating expenses. The impact is therefore very limited at the EBITDA level.

Comparing the figures for 2010 and 2011 at constant scope shows that sales growth is a mixture of internal growth (+2.8%) and external growth (7.1%). The breakdown of this internal growth highlights the impact of the slowdown in the U.K., offset by the growth of the Central and South regions.  This offsetting effect is reflected also in gross margin but only partially in operating income, which explains the deterioration in EBITDA.

The contribution of the new business unit in South Africa during the second half is positive and in line with expectations. With the support that the Group can provide to it, particularly through the Competence Centres, Zetes in South Africa will be expanding its portfolio of solutions and will soon be in a position to propose them to its major South African corporate clients.

In conclusion, the Goods ID activity has evolved in a differentiated manner from one region to the next. With the prospect of a more uncertain 2012, Zetes has sought to adapt its structure and especially to improve and multiply its proprietary solutions, so as to increase its added value in the identification solutions it offers. The company is also paying attention to generating a recurring revenue stream from both maintenance and consumables.

2. People ID:

Division People ID continues to reap the benefits of its strategy, aimed at combining contracts providing recurrent income and short-term operations.

The main change between 2010 and 2011 is the distribution over time of the revenues from ‘Build and Transfer’ contracts. These shorter term contracts generally include the delivery of a substantial hardware component (fixed or mobile registration kits) and the performance of services (project management, training, maintenance). 2010 was marked by very large deliveries while 2011 saw a sharp increase in services. It is therefore logical to observe a contraction of income while gross margin grew slightly in absolute terms and by more than 12 points as a percentage of sales revenue.

The other aspect of the strategy is the ‘Build and Operate’ contracts. All these long-term contracts contributed to the result. They are also a very predictable base of revenues and margin for the future.

After the unrest which marked the early months of 2011 in the Côte d'Ivoire, the production of biometric passports resumed at a normal pace in the second half. The outlook for this project remains very positive.

In Portugal and Belgium, the electronic ID card projects are delivering the expected volumes.

Finally, in Israel, the production of blank eID documents has continued. Around two-thirds of the cards have already been produced and the last third will be delivered in 2012. Card personalization should begin in 2012 and continue in the years thereafter.

This good balance between short and long-term contracts makes it possible to cover the business development and R & D efforts. Innovative solutions (biometric enrolment kiosks, e-voting solutions) have been developed and are already proposed in certain tenders. Finally, investment in business development remains important in order to make known Zetes' capabilities and experience in countries which are preparing projects related to identity documents or electoral processes.

Operating expenses for People ID remain well under control thanks to the organization structure, whereby all critical functions like business analysts, IT specialists, project managers, ... are available in-house, whilst non-critical implementation functions are outsourced and recruited as a function of the projects to be undertaken on a project-by-project basis. Increasingly, the People ID division is availing of the resources of Goods ID for undertaking certain large projects, taking advantage of this division’s critical mass and expertise.

Recurring EBITDA has risen for the fourth consecutive year, reaching € 12.1 million, which is 11.8% more than in 2010.

Gross margin was strongly boosted by the services component of the 'Build and Transfer' contracts. This non-structural development explains the exceptionally high EBITDA to sales margin of 24.2%.

3. Group

The cost of the Corporate Division amounted to € 3.3 million. The Zetes model continues to be based on strong operational divisions and only a light corporate structure. The primary tasks of Corporate are strategy definition, financial control, marketing and external growth.

Group sales revenue amounted to over € 220 million, representing growth of 1.8% compared with 2010. Sales revenue in the Goods ID division grew by nearly 10% to .€ 170.7 million or 77.4% of total sales revenue, while for the non-structural reasons explained above, that of the People ID Division declined by 18.9% to € 49.9 million.

Recurring EBITDA amounted to € 18.6 million, down slightly by 2.4% from the previous year.

The complementarity of the two divisions was evidenced by the support provided by the Goods ID Division for the execution of the largest People ID Division projects.

Non-recurring charges in a net amount of € 1.0 million relate primarily to restructuring to adjust the structures of the country units and the Competence Centre in Goods ID and to improve the organization of business development in People ID.

Depreciation and amortization of non-current assets amounts to € 4.9 million. Half of this increase of € 0.3 million compared with 2010 is explained by the size of the People ID contracts and the depreciation of the resulting production infrastructures, and the other half by the increase in intangible assets in Goods ID (amortization of the ERP systems). Valuation adjustments on inventory (€ 0.5 million) and receivables (€ 0.3 million) are down slightly compared to last year and call for no special comment.

EBIT amounted to € 11.0 million in 2011, which is 6.6% down on 2010.

For the second year in a row, the EBIT contribution of the People ID division exceeded that of Goods ID.

The high volatility of the euro in 2011 had a negative impact on the Group's foreign exchange result (EUR -0.7 million). The latter is strongly affected by the lending/borrowing relationships in different currencies between Group companies, especially in Israel and, to a lesser extent, in the U.K. In Israel, substantial loans have been taken out to finance the eID project. Repayments on these loans began in 2011 and are scheduled to continue in 2012.

The volatility of the euro and the consequences on the foreign exchange result has led the company to increase its vigilance in managing currency risk, with stricter policies introduced in 2012.

The net financial result excluding foreign exchange amounts to a charge of € 0.5 million. It consists of net interest expense (€ 0.2 million) and other financial charges (€0.3 million); the latter relating to cross-border payments and various guarantees (letters of credit, bid bonds, performance bonds).

The tax rate was 29.4%, giving a total tax charge of € 2.6 million. This is close to the rate expected by the company. The net result is a profit of € 6.2 million, down 24.0%, mainly impacted by the reorganization (€ -1.0 million) and the foreign exchange result (€ -0.7 million). 

The current net profit per share is € 1.31, down 19.5% from 2010.


The moderate growth in 2011 favourably impacts the balance sheet. Total assets increased from € 158.3 million to € 163.5 million, which is a limited amount given the growth linked to the acquisitions made during the year. Net working capital needs evolved favourably from € 16.4 to 13.7 million. Inventory remained stable at € 15.4 million, which can be considered a good performance given the acquisitions.

With equity of € 78.4 million on total assets of € 163.5 million, the solvency ratio remains at a very high 47.9%. This ratio is even more remarkable when one bears in mind that the company proceeded in 2011 to distribute a dividend of € 5.4 million and to buy back shares (eliminated in consolidated equity) for € 1.3 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.

This good financial stewardship allows it to present, after investments of over € 13 million, a net cash position of € 8.0 million, down € 2.0 million compared with 2010.

The cash flow from operations is € 18.2 million, which breaks down into € 14.5 million in the income statement (stable compared with 2010) and € 3.7 million from a reduction in working capital needs. The cash tax expense (€ 2.4 million) explains most of the difference between EBITDA and operating cash flow. The decrease in working capital needs reflects the limited sales growth in the second half of 2011.

Investments by Goods ID amount to € 3.1 million, down from previous years, while € 2.1 million of development costs have been capitalized, equivalent to the 2010 amount. Investments by People ID amount to € 1.3 million and consist essentially of improvements to production and personalization equipment in Belgium (€ 1.5 million). EUR 0.4 million of development work has also been capitalized. Finally, limited investments (€ 0.3 million) were made for Corporate.

These investments were made out of the company’s own resources, while part of the acquisitions in 2011 were financed by borrowing (Zetes South in Africa, see below).

The Group continues to generate substantial cash flows. A significant portion of these are devoted to the development and expansion of the company, to servicing the dividend and to repurchasing shares. The balance is held in anticipation of acquisition opportunities, as mentioned above.

In 2011, the Group acquired own shares worth € 1.3 million. At 31 December 2011 it held 97,657 treasury shares.


In the first half, Zetes acquired two small companies to strengthen its technological expertise in Print and Apply and RFID. Anvos, an in-line label printing/application specialist, strengthens the group's system integration capacities in in Germany, a country that still has a very strong manufacturing industry. In Belgium, the company RFIDea brings in its RFID expertise, along with some very good references in the pharmaceutical sector in particular.

The combination of Integra and Zetes in Italy has given the Group critical mass and adequate coverage of northern Italy, the country's most industrialized region. 2011 closed with a doubling of local revenue and a return to good profitability while prospects for 2012 remain favourable.

In July, Zetes acquired the Proscan company in South Africa. The leader in its home market, Zetes in South Africa will serve as a bridgehead for developing the Goods ID activities throughout sub-Saharan Africa and as the basis for a permanent People ID structure. This € 5.0 million acquisition was partially financed by a bank loan (€ 3.5 million). Zetes South Africa contributed sales of € 9 million during the second half.


The pipeline of outstanding bids in the Goods ID Division remains well filled in all countries and covers all sectors of activity. But in an economic context marked by uncertainty, decision-making is becoming slower. Order-taking is affected and visibility is reduced. The Division can, however, rely on a very substantial contribution of recurring revenue (maintenance and consumables), which represents 30% of sales and an even higher share of the margin, and on the effect of the existence of traceability legislation in various sectors of activity. It is in these activities (serialization and item-by-item identification) that Zetes is investing as a matter of priority and will continue to invest to expand its range of solutions starting from its existing references. Zetes has particularly appropriate proprietary technologies in this area including Image ID’s multi barcode reading solution and expertise in in-line label printing/application (Print & Apply).

Zetes is confident that the pharmaceuticals, luxury goods and food processing industries among others will be looking for high added value solutions for many years to come.

Moreover, Zetes is planning to continue its expansion outside Western Europe, also to strengthen its presence on an opportunistic basis in certain European markets. The meagre growth prospects of the Western Europe economy are an incentive to Zetes to investigate other markets. Several potential acquisitions are currently under review.

In People ID, thanks to its long-term contracts, Zetes retains good visibility as to its financial outlook. In 2012, all long-term contracts will contribute to the sales and profit of the Division: in Belgium, Portugal and Israel, the issuance of electronic identity cards will continue, and in Côte d’Ivoire, production of biometric passports has returned to a normal rhythm after the disorders of early 2011.

Zetes continues to undertake small short-term contracts in both Africa and Europe. In 'Build and Transfer', the Division has identified and at times responded to calls for tenders for elector enrolment projects, on which decisions are expected in the coming months.

Besides these projects, business development has also focused on opportunities for ‘Build and Operate’ contracts. Bids have already been made for several projects, in both Europe and Africa. The amounts involved are in some cases very large, but given the usual lead time of such projects, their contribution to 2012 earnings is likely to remain very limited. They are nonetheless very important for the medium-term development of the Division. The prospects in this Division are very good and internal growth is being prioritized over growth by acquisition.


Investing in Zetes shares has risks attached. These were described in the 2010 annual report and remain valid.


The Board of Directors will be proposing to the Ordinary General Meeting that it declare a gross ordinary dividend per share of € 0.55 (an increase of 17%).


The financial statements presented below are a summary of the annual report which will be available on 27 April 2012. 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.


Ordinary General Meeting: 30 May 2012
Publication of the Annual Report: 27 April 2012

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