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-
About ADB Group (SIX: ADBN)
ADB Group (www.adbholdings.com) was founded in 1995 and is a leading developer and supplier of solutions required to view and interact with digital TV broadcast through cable, satellite, terrestrial and IP networks, as well as products and systems for broadband data communication business. The Group today sells a broad range of products and services, including connected home multimedia solutions, software, consumer premises devices, consulting and engineering services and after sales services for digital pay-TV broadcast operators and broadband network operators. The Group's sales are conducted through the brand of ADB (www.adbglobal.com), and the trademarks of i-Can, Epicentro, Carbo and Graphyne.
This press release contains forward-looking statements. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements due to various factors, among which:
- future developments of the world digital TV and broadband markets, in particular the future demand for digital TV and broadband products in the key markets and from key customers served by our Group;
- pricing pressures, competitive market situation;
- our and the industry's capability to successfully and timely innovate and develop challenging technology, and our capability to hire and retain high-level employees;
- changes in the exchange rates between the US$ and the main other operating currencies of the Group, including the Euro, Swiss Franc and the Polish Zloty;
- our ability in an intensive competitive environment, to continue securing orders from existing or new customers and to achieve our pricing expectations for products for which we have or are currently investing into development;
- the ability of our suppliers to meet our demands for supplies, qualitatively or quantitatively, and to offer competitive pricing;
- our gross margin could vary significantly from expectations based on changes in revenue levels, product mix and pricing, changes in unit costs, and the timing and execution of shipments ramp-ups;
- changes in the economic, tax, social or political environment, including import and other duties, military conflict, terrorist activities, as well as natural events such as severe weather, health risks, epidemics or earthquakes in the countries in which we, our key customers and our suppliers operate;
- our ability to obtain required licenses on third-party intellectual property on reasonable terms and conditions, the impact of potential claims by third parties involving intellectual property rights relating to our business, and the outcome of potential related litigations;
- the results of actions by our competitors, including new product offerings and our ability to react thereto.
Advanced Digital Broadcast Holdings SA undertakes no obligation to publicly update or revise any forward-looking statements. Advanced Digital Broadcast Holdings SA reserves the right to amend the information at any time without prior notice.
The information contained in this press release may not be considered as being a substitute for economic, legal, tax or other advice and you are cautioned to base investment decisions or other decisions on the content of this release. You are recommended to consult your investment advisers or other advisers prior to making any decision.
This press release is not an offer of securities for sale or a solicitation to invest in Advanced Digital Broadcast Holdings SA securities. In particular, it is not an offer of securities for sale in the United States of America, its territories and possessions. Securities may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended. Advanced Digital Broadcast Holdings SA does not intend to register its securities in the United States of America.
The information contained in this press release may not be considered as being a substitute for economic, legal, tax or other advice and you are cautioned to base investment decisions or other decisions on the content of this release. You are recommended to consult your investment advisers or other advisers prior to making any decision.
This press release is not an offer of securities for sale or a solicitation to invest in Advanced Digital Broadcast Holdings SA securities. In particular, it is not an offer of securities for sale in the United States of America, its territories and possessions. Securities may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended. Advanced Digital Broadcast Holdings SA does not intend to register its securities in the United States of America.
ADVANCED DIGITAL BROADCAST HOLDINGS SA AND SUBSIDIARIES
CONDENSED Consolidated Income Statement
SIX MONTHS ENDED 30 JUNE 2014 AND 2013
(Expressed in United States Dollars)
First-half | First-half | |
2014 | 2013 | |
(Unaudited) | (Unaudited) | |
$ | $ | |
Revenue | 161,101,527 | 210,414,802 |
Cost of sales | (112,042,535) | (150,863,784) |
Gross profit | 49,058,992 | 59,551,018 |
Gross margin | 30.5% | 28.3% |
Research and development expenses | (19,806,713) | (33,092,066) |
Selling, general and administrative expenses | (24,186,922) | (22,936,456) |
Other income | 370,482 | 2,549,743 |
Other expenses | (1,638,538) | (1,429,319) |
Earnings before interest and tax | 3,797,301 | 4,642,920 |
EBIT margin | 2.4% | 2.2% |
Finance income | 195,310 | 188,746 |
Finance costs | (1,010,936) | (1,278,357) |
Profit before tax | 2,981,675 | 3,553,309 |
PBT margin | 1.9% | 1.7% |
Income tax expense | (1,279,979) | (371,278) |
Profit for the period | 1,701,696 | 3,182,031 |
Profit margin | 1.1% | 1.5% |
Earnings per share | 0.34 | 0.63 |
Earnings before interest, tax depreciation and amortization | 10,929,271 | 16,146,964 |
EBITDA margin | 6.8% | 7.7% |
ADVANCED DIGITAL BROADCAST HOLDINGS SA AND SUBSIDIARIES
cONDENSED Consolidated statement of COMPREHENSIVE INCOME
SIX MONTHS ENDED 30 JUNE 2014 AND 2013 | |
(Expressed in United States Dollars) | |
First-half | First-half | ||
2014 | 2013 | ||
(Unaudited) | (Unaudited) | ||
$ | $ | ||
Movement in available-for-sale investments | (12,965) | (52,821) | |
Credit of deferred tax on movement in available-for-sale investments | 1,015 | 4,135 | |
Movement in cash flow hedges | 1,502,526 | 1,790,836 | |
Charge of deferred tax on movement in cash flow hedges | (130,429) | (166,977) | |
Translation adjustments | (294,733) | (1,059,622) | |
Items that will be subsequently reclassified to income statement | 1,065,414 | 515,551 | |
Other comprehensive income for the period | 1,065,414 | 515,551 | |
Profit for the period | 1,701,696 | 3,182,031 | |
Total comprehensive income for the period | 2,767,110 | 3,697,582 |
ADVANCED DIGITAL BROADCAST HOLDINGS SA AND SUBSIDIARIES
cONDENSED Consolidated statement of CHANGES IN EQUITY
SIX MONTHS ENDED 30 JUNE 2014 AND 2013 | |||||||||||||
(Expressed in United States Dollars) | |||||||||||||
Share | Share | Other | Retained | Treasury | Total | ||||||||
Capital | Premium | Reserves | Earnings | Shares | |||||||||
* Represented for changes in defined benefit pension plan related to prior years
ADVANCED DIGITAL BROADCAST HOLDINGS SA AND SUBSIDIARIES
cONDENSED Consolidated BALANCE SHEET
30 JUNE 2014, 31 DECEMBER 2013, 30 JUNE 2013 | |||||
(Expressed in United States Dollars) | |||||
30 June | 31 December | 30 June | |||
2014 | 2013 | 2013* | |||
(Unaudited) | (Audited) | (Unaudited) | |||
$ | $ | $ | |||
ASSETS | |||||
Non-current assets | |||||
Goodwill | 16,771,505 | 16,873,166 | 25,343,089 | ||
Intangible assets | 16,326,875 | 14,091,927 | 16,619,549 | ||
Property and equipment | 12,814,285 | 13,935,919 | 13,531,544 | ||
Deferred income tax assets | 5,699,986 | 6,386,437 | 5,551,864 | ||
Other non-current assets | 533,525 | 809,981 | 838,896 | ||
Total non-current assets | 52,146,176 | 52,097,430 | 61,884,942 | ||
Current assets | |||||
Inventories, net |
* Represented for changes in defined benefit pension plan related to prior years
continued | 30 June | 31 December | 30 June | ||
2014 | 2013 | 2013* | |||
(Unaudited) | (Audited) | (Unaudited) | |||
$ | $ | $ | |||
EQUITY AND LIABILITIES | |||||
Capital and reserves | |||||
Share capital | 1,193,563 | 1,193,563 | 1,193,563 | ||
Share premium | 53,371,617 | 53,371,617 | 53,371,617 | ||
Other reserves | (1,816,829) | (3,204,394) | (3,425,653) | ||
Retained earnings | 14,136,712 | 12,435,016 | 23,499,079 | ||
Treasury shares | (13,664,279) | (13,054,302) | (13,054,302) | ||
Total equity | 53,220,784 | 50,741,500 | 61,584,304 | ||
Non-current liabilities | |||||
Long-term bank loans | 2,113,113 | 8,005,126 | 8,512,914 | ||
Retirement benefit obligations | 6,708,637 | 6,605,346 | 6,707,729 | ||
Deferred income tax liabilities | 11,921 | 74,242 | 25,339 | ||
Long-term liabilities | 7,890,852 | 7,977,302 | 7,273,656 | ||
Total non-current liabilities | 16,724,523 | 22,662,016 | 22,519,638 | ||
Current liabilities | |||||
Bank loans | 15,396,230 | 6,092,535 | 4,071,944 | ||
Current portion of long-term bank loans | 677,383 | 3,095,766 | 5,265,287 | ||
Trade and other payables | 69,120,976 | 59,511,271 | 106,953,761 | ||
Accrued expenses | 24,644,846 | 19,635,674 | 22,206,471 | ||
Provisions | 5,500,110 | 5,082,087 | 5,118,770 | ||
Taxes payable | 218,705 | 237,648 | 370,567 | ||
Other current liabilities | 3,501,560 | 6,306,803 | 2,844,390 | ||
Total current liabilities | 119,059,810 | 99,961,784 | 146,831,190 | ||
Total liabilities | 135,784,333 | 122,623,800 | 169,350,828 | ||
Total equity and liabilities | 189,005,117 | 173,365,300 | 230,935,132 |
* Represented for changes in defined benefit pension plan related to prior years
ADVANCED DIGITAL BROADCAST HOLDINGS SA AND SUBSIDIARIES
cONDENSED Consolidated statement of cash flows
SIX MONTHS ENDED 30 JUNE 2014 AND 2013
(Expressed in United States Dollars) | ||||
First-half | First-half | |||
2014 | 2013 | |||
(Unaudited) | (Unaudited) | |||
$ | $ | |||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||
Profit for the period | 1,701,696 | 3,182,031 | ||
Adjustments for: | ||||
Income tax expense | 1,279,979 | 371,278 | ||
Depreciation | 1,510,050 | 1,608,261 | ||
Amortisation | 5,621,920 | 9,895,783 | ||
Finance costs | 1,010,936 | 1,278,357 | ||
Finance income | (195,310) | (188,746) | ||
Provision for inventory | 248,792 | 572,435 | ||
Others | (29,057) | (17,283) | ||
Profit before working capital changes | 11,149,006 | 16,702,116 | ||
Working capital changes: | ||||
Trade and other receivables | (7,099,517) | (1,965,658) | ||
Inventories | 3,543,561 | (4,123,085) | ||
Other current assets | (9,801,138) | (3,842,620) | ||
Trade and other payables | 9,609,705 | 8,726,967 | ||
Accrued expenses | 5,005,313 | (4,890,231) | ||
Provisions | 418,023 | (22,833) | ||
Other current liabilities | (1,302,717) | 184,367 | ||
Others | 293,297 | 285,085 | ||
Cash generated by operating activities | 11,815,533 | 11,054,108 | ||
Interest paid | (1,007,077) | (1,216,961) | ||
Tax paid | (489,924) | (704,824) | ||
Net cash provided by operating activities | 10,318,532 | 9,132,323 |
continued
First-half | First-half | |||
2014 | 2013 | |||
(Unaudited) | (Unaudited) | |||
$ | $ | |||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||
Acquisitions of property and equipment | (745,020) | (497,227) | ||
Proceeds from sale of property and equipment | 276,423 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
Increase (decrease) in bank loans | 993,299 | (2,906,884) | ||
Purchase of treasury shares | (609,977) | - | ||
Net cash provided by (used in) financing activities | 383,322 | (2,906,884) | ||
EFFECT OF CHANGES IN EXCHANGE RATES | (39,861) | (91,268) | ||
NET INCREASE IN CASH | 2,421,285 | 1,893,440 | ||
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD | 34,903,877 | 33,855,185 | ||
CASH AND CASH EQUIVALENTS, END OF THE PERIOD | 37,325,162 | 35,748,625 | ||
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS | ||||
Time deposits not exceeding three months at investment date | 4,919,252 | 5,487,905 | ||
Cash and bank balances | 32,405,910 | 30,260,720 | ||
37,325,162 | 35,748,625 |
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