Dalenys : half yearly results 2017

Dalenys (ISIN BE0946620946 - Ticker NYS) is releasing its earnings for the first half of 2017, as approved by the Board of Directors on 28 August 2017.

2017 First-half activity

in thousands of euros	S1 2017	S1 2016 (1)	Change
Dalenys	30 809	32 904	-6%
Payment	10 388	8 557	21%
Marketing	2 561	2 493	3%
Telecom	17 860	21 854	-18%

(1) Pro forma excluding Repu7ation (Marketing division), sold with effect from 30 June 2016; reported revenues for H1 2016 totaled €0.4 million and have been restated for comparison

Thibaut Faurès Fustel de Coulanges, Dalenys' Chief Executive Officer :

« The first half of 2017 has brought us closer towards our strategic goals. Building on the progress made with the Payment and Marketing divisions from a technical and commercial perspective, we are forecasting a dynamic performance for the full year in 2017, with extensive synergies, in France and internationally. The proposed alliance with Natixis is moving forward in line with the schedule set and represents an outstanding opportunity for Dalenys, its teams and its customers, particularly in terms of support for their cross-border issues, their omnichannel sales management and marketplace projects in Europe. »

Payment division: continued dynamic growth

Market share gains

The Payment division's revenues climbed to €10.4 million for the period, up +21% from the first half of 2016, with a particularly dynamic second quarter (€5.4 million of revenues, up 33% versus Q2 2016). Dalenys is continuing to achieve market share gains, with a run rate(*) of €3.1 billion at end-July 2017.

Commission rate stabilized in line with the key account market

The average commission rate is down, in line with expectations, stabilizing at 0.81% for the period, compared with 0.88% for the second half of 2016. Driven by growing volumes with major merchants and the very robust level of commercial traction in the in-store payment segment, Dalenys is aligning its average commission rate with the standard levels for industry leaders.

Offer accelerating internationally

Operating expenditure is up 21% to €2.2 million, factoring in the international payment solutions brought online, the diversification of the product range, including a specific investment focused on marketplaces, and the increase in costs relating to security for the technical platforms. As such, Dalenys Payment successfully renewed its PCI DSS level 1 certification for e-commerce and in-store payment in May, achieving a 3.2 certification rating with this security standard. Lastly, the change in staff costs (+17% to €4.2 million) reflects the recruitment drive connected to the 'Power 5' plan, taking on board the robust level of growth.

The Payment business therefore recorded a negative recurring operating income of -€0.9 million for the first half of 2017, compared with +€0.2 million for the first half of 2016.

Marketing division: effectively positioned to achieve profitable growth in synergy with Payment

The Marketing division is reporting first-half revenues of €2.6 million, up 3% from 2016. The gross margin came to €1.5 million, in line with the same trend, up 6% from the first half of 2016. The targeting and retargeting business, in synergy with Payment, is growing, with new customers brought on board in the second quarter and a high number of campaigns signed up for deployment over the coming months. This division's growth is being held back by the expected contraction in the Cashback business for Mailorama, which was reorganized at the end of 2016.

The Marketing business has seen its operating expenditure stabilize following the significant reduction in traffic acquisition costs last year. Staff costs have increased, primarily due to a reallocation of part of the cross-business teams, as well as the strengthening of the Eperflex teams to support the increase in business.

The Marketing business recorded -€0.6 million of recurring operating income at 30 June 2017, compared with -€0.8 million for H1 2016.

Telecoms division: business realigned and balanced, currently being sold off

Following the action plan and realignment of its customer portfolio, the Telecoms division recorded €17.9 million of revenues, contracting 18% compared with the first half of 2016 in line with expectations. The gross margin rate is up 4.5 points to 37.3%, limiting the contraction in the gross margin to 7%, with €6.7 million for the first half of 2017. The realignment has also made it possible to significantly reduce operating costs, down 14% to €5.7 million at 30 June 2017. Staff costs are also down, dropping 8% from the first half of 2016 to €1.3 million. At 30 June 2017, the Telecoms division is reporting -€0.1 million of recurring operating income, a significant improvement compared with H1 2016 (-€0.9 million).

In connection with the announcement of Dalenys' alliance with Natixis on 26 June 2017, the Telecoms business will be divested before Natixis definitively acquires a majority stake in the Dalenys Group. The Group has therefore applied IFRS 5 'Assets Held for Sale and Discontinued Operations' to isolate the Telecoms division's contribution to profit and loss in its half-year financial report.

To date, the sales process is making satisfactory progress, in line with the schedule set for the alliance with Natixis.

Dalenys' financial performance for the first half of 2017

income statemement (in thousands of euros)	H1 2017	H1 2016 Proforma (1)	H1 2016	Change
Revenue	30 809	32 904	33 394	-6%
Gross margin As % of the revenue	13 600 44,1%	14 343 43,6%	14 825 44,4%	-5% +0,6 points
Other operating income	391	260	261	50%
Operating expenses	(8 999)	(9 502)	(9 729)	-5%
Payroll expenses	(9 582)	(7 368)	(7 645)	30%
Of which IFRS 2 impact	(1 564)	0	0
Depreciation and amortisation	38	(946)	(957)	-104%
Recurring operating income As % of the revenue	(4 552) -14,8%	(3 215) -9,8%	(3 246) -9,7%	42%
Non recurring income and expenses	(16 685)	(1 044)	(1 044)	1498%
Operating income As % of the revenue	(21 238) -68,9%	(4 259) -12,9%	(4 290) -12,8%	399%%
Financial income	195	294	294	-34%
Income tax	324	836	851	-61%
Consolidated net income As % of the revenue	(20 720) -67,3%	(3 130) -9,5%	(3 145) -9,4%	562%

(1) Pro forma excluding Repu7ation (Marketing division), sold with effect from 30 June 2016; reported revenues for H1 2016 totaled €0.4 million and have been restated for comparison

Dalenys' consolidated revenues for the first half of 2017 came to €30.8 million, down 6% pro forma compared with the first half of 2016.

The gross margin rate is up slightly to 44.1% (vs. 43.6% pro forma for the first half of 2016).

Operating costs remain effectively under control, down 5% to €9.0 million, reflecting the significant reduction in costs linked to the Telecoms division's realignment, partially offset by product development costs for the Payment division.

Staff costs show a significant increase (+30% to €9.6 million), primarily due to the application of IFRS 2 from 1 January 2017 following the awarding of bonus shares and warrants from the 2016 plan, for a total of €1.6 million. Excluding the impact of IFRS 2, staff costs are up 9%, reflecting the impact of the recruitments completed in 2016 to support the development of the Group's business.

This impact of IFRS 2 has been recognized under the Corporate division, which is reporting -€3.0 million of recurring operating income (-€1.4 million excluding IFRS 2), compared with -€1.7 million for the first half of 2016.

Consolidated recurring operating income came to -€4.6 million, compared with -€3.2 million for H1 2016, in line with the business development plan.

Operating income shows a -€21.2 million loss, primarily as a result of the writeoff of part of the financial receivable linked to the BtoC division's sale in 2015, for the amount of the earnout, i.e. -€17 million. For reference, €47 million of financial receivables had been capitalized with the BtoC division's sale, based on €44 million of capital and €3 million of interest, with the €44 million of capital corresponding to a €27 million vendor loan and €17 million earnout. Following an impairment test based on financial data for the last two years and information provided by the BtoC division's management, the assumptions for the development of the BtoC business, both to date and for future years, no longer justify the value of the earnout being recorded in the Group's accounts. However, the Group has estimated at this stage that it will be able to retain the value of the receivable corresponding to the outstanding vendor loan.

After financial income and expenses and corporate income tax, net income shows a loss of -€20.7 million.

At 30 June 2017, Dalenys' shareholders equity represented €39.6 million, with €28.3 million in cash, based on €9.4 million of its own cash and €18.9 million held for third parties in connection with the Payment business (figures restated for the cash shortfall for the Telecoms business, held for sale).

(*) Run rate = volume of sales received during the final month extrapolated over the full year.

Dalenys' half-year financial report (in French) is online at: https://www.dalenys.com/uploads/Rapport-financier-semestriel-FY17.pdf

Next financial communication

• 2017 third-quarter revenues on 8 November 2017 (after close of trading)

About Dalenys

Founded in 2002 by Jean-Baptiste Descroix-Vernier, Dalenys -NYS- (formerly Rentabiliweb) offers Payment Marketing solutions that aim to increase revenues for online and point-of-sale merchants. These solutions integrate transactional and marketing data to increase the conversion of the customers during their purchasing path. With over 200 employees in France and abroad, publicly traded on Euronext Brussels and Paris (C compartment), the company rigorously applies the ten principles laid out by the UN Global Compact and is eligible to the FCPI investment funds and to the French PEA-PME savings plan.