ADVANCED DIGITAL BROADCAST HOLDINGS SA ADB Group reports its half-year 2014 results
- Revenue reaching US$ 161.1 million
- Profit after tax at US$ 1.7 million or 1.1% of revenue
- EBITDA at US$ 10.9 million or 6.8% of revenue
- EBIT at US$ 3.8 million or 2.4% of revenue
- Sound cash flow generation
Geneva - 7 August 2014
Advanced Digital Broadcast Holdings SA (SIX: ADBN) reported today its unaudited consolidated financial results for the first-half-2014.
The first-half 2014 revenue reached US$ 161.1 million, a decline of 23.4% compared to the same period of last year, but almost in line with the US$ 163.1 million of the second-half 2013. The main reason for the decline was the contingent situation of certain Group's top customers, whose activities were temporarily reduced due to mergers and/or acquisitions. Furthermore, the Group is not pursuing growth of the revenue line but has put a strategic emphasis on growing profitability by strengthening its operating margins.
This strategy is now showing its first fruits. The gross profit amounted to US$ 49.1 million, or 30.5% of the revenue. Compared to gross profit of US$ 59.6 million for the same period of last year, this represents a decline of 17.6%, but in terms of gross margin, the first-half 2014 improved by 2.2%, compared to the level of 28.3% of first-half 2013. The margin improvement shows the results of the increasing focus on software, systems and services (so-called "Triple-S"), while moving the hardware design and sourcing activities increasingly to ODM and JDM partners.
The Group has significantly reorganized its activities in the areas of research and development as well as sales, marketing and operations: thus a direct comparison of these overheads year-on-year is not meaningful. The combined R&D and G&A expenses of the Group amounted to US$ 44.0 million during first-half 2014, which is a decline of 21.5% compared to the US$ 56.0 million for first-half 2013. This decline is largely attributable to increased operational efficiencies and lower amortizations of intangibles. Reorganization expenses of US$ 1.2 million are included in the total overheads expenses. It should be noted that no reorganization expenses were incurred in first-half 2013.
Consequently, the EBIT margin improved from 2.2% in the first-half 2013 to 2.4% in the first-half 2014. Due to lower amortizations, the EBITDA declined from US$ 16.1 million, or 7.7% of revenue in the first-half 2013, to US$ 10.9 million, or 6.8% of revenue, in first-half 2014. However, better margins and operational efficiencies achieved in the first-half 2014 raised the EBITDA by 10.7%, from the US$ 9.9 million, or 6.1% of revenue, recorded in second-half 2013.
As a result of all of the above, the Group recorded a Profit Before Tax of US$ 3.0 million or 1.9% of revenue, a slight improvement from the 1.7% of revenue of the first-half 2013 and significantly better than the loss registered in second-half 2013.
After higher than usual tax charges, which consist mainly of non-cash expenses, the Group recorded a profit for the period of US$ 1.7 million or 1.1% of revenue, compared to a profit of US$ 3.2 million or 1.5% of revenue for the same period last year, and a loss in the second-half 2013. This represents an EPS (Earnings Per Share) of US$ 0.34, compared to US$ 0.63 during first-half 2013.
Cash flow generation remains robust. The Group closed the semester with a net cash position of US$ 32.9 million, which represents an increase of US$ 5.5 million compared to first-half 2013, and a further increase of U$ 1.5 million compared to year-end 2013. Total cash and treasury investments increased to US$ 51.1 million, and net current assets amounted to US$ 17.8 million. Favorable changes in working capital, in particular with inventory and trade payables, reflect the strategic move to the ODM and JDM models and thus the reduced needs for working capital.
Mr. Andrew Rybicki, Group Chairman, commented: "We knew that the first-half 2014 would be challenging due to the business slow-down coming from the latter part of last year. Therefore, the revenue decline cames as no surprise. I am pleased to note however, that under Mr. Balchin's leadership, the organization has significantly improved, became more efficient and more adapted to our strategic goals and business needs. There is still a long way in front of us before we attain our objectives, but already this first-half year results indicate that we are on a right track. This makes a good basis going forward."
Mr. Peter Balchin, Group CEO, commented: "It was no doubt an effort to get where we are, and I would like to thank all the staff for their support. What matters to me a great deal is also to have seen the staff dedication towards our customers. This is the foundation of a truly excellent customer-oriented organization. Transitioning the company all the way to software, systems and services is not easy, but the customers are the heart of it and I'm glad to see this key element is in place."
Business overview
General trends
The general trends in the market are two-fold. On one hand, the demand for digital pay-TV services worldwide remains robust. Moreover, the amount of connected devices is increasing rapidly, and multi-screen trend is expanding to all areas of fast-growing media consumption. On the other hand, both the device manufacturers as well as the service providers are under significant margin pressure as the subscribers expect either more cost effective products or more functionalities for the same price. As the production costs do not decrease at the same rate, the margins are under visible squeeze. ADB Group has identified this already some time ago and is decisively re-focusing the company on the software products, systems and engineering services sector. Achieving the goals will still require a significant amount of further work, but the transition elements are now firmly in place.
Group business during first-half 2014
During first-half 2014, the top ten customers accounted for 74% to the total revenue, down from 81% in first-half 2013. Europe continues to be the largest platform for the Group's business. Total of Europe constituted 91% of revenue, with Western Europe contributing 79% and Eastern Europe amounting to 12% of the business. Americas increased to over 9%, and Asia Pacific amounted to 0.2% of the revenue during the first-half 2014.
The digital television products sold to the broadcast operators accounted for 57% of our revenue during first-half 2013. The demand was generated by both cable and satellite broadcasters in Northern Europe, Benelux and the United States. Products sold to broadband operators amounted to 30% of our overall revenue. The demand came mostly from the Central Europe and Italy. Software, systems and services accounted for around 13% of our revenue.
Organizational update
The Group has streamlined its operations worldwide, benefiting from its increasing overall efficiency. Due to the regional instability, the Group also decided to close down its Ukraine office and has started to relocate respective activities to its other offices.
Conference call
The management of ADB Group will hold a conference call to comment on this press release today at 11.00 CET. Participants shall dial the number +41 (0) 44 580 7718 with a participant passcode "ADB".
This press release and further information on ADB Group can be found on the Group's the Group website at www.adbholdings.com
For further information please contact:
Tina Nyfors
Investor Relations/Group Communications
Tel: +41 22 592 8433
t.nyfors@adbglobal.com
-end-
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