CLARANOVA SE Regulatory News:
Claranova (Paris:CLA):
“In H1 2019-2020, our Group once again combined strong growth and profitability. As announced, we accelerated investment in our three business divisions, future profitability growth levers, and successfully maintained EBITDA1 above €11 million while confirming our net profitability. We also strengthened our financial position during the period, with cash of €91 million and negative net debt despite the recent acquisition of Personal Creations®.
Drawing on these good performances, we are well placed to face the crisis linked to the Covid-19 epidemic. Our priority is to protect the health of our employees, as the Group’s greatest strength is their talent and motivation. The generalization of home working has enabled us to maintain our activities without disrupting our organization and ensures the continuity of our services. For the moment, lock-down measures have had only a limited impact on our activities, which are primarily conducted online. Nonetheless, this epidemic is a game changer for the global economy and while our activities are currently preserved, it is too early to assess and measure the full long-term impact on our results.
Claranova has solid fundamentals with online activities generating high repeat revenue and growth drivers already in operation, placing it in a strong position to seize any upturn in the economy. The Group also has a solid financial structure and significant cash, enabling it to look forward with confidence to the coming periods. With these assets, combined with our agility, our strength of innovation and our know-how, I’m convinced that we will emerge from this crisis stronger.
In the meantime, we fully support the people that are fighting this epidemic every day and recognize the sacrifices they are making for all our health.”
Pierre Cesarini, CEO of the Claranova group
The Claranova group continues its strong growth trajectory, boosting its investment in its three business divisions while protecting profitability in H1 2019-2020 (July - December 2019). The Group reports revenue of €234.3 million (+68% growth, including +19% organic growth) and EBITDA of €11.2 million. The operating margin is 4.8%, with the improvement masked by higher marketing investment. At constant scope, the EBITDA margin is 6.0% at €10.2 million, compared with €10.9 million in the first-half of 2018-2019. As announced, this half-year saw sustained investment in the different Group divisions, providing sources of future growth and profitability, including: the integration of personalized gifts1 activities following the acquisition of Personal Creations® and further geographical expansion of mobile printing1 activities in Europe, the transition of Software1 division activities to a subscription-based proprietary software sales model and the commercial ramp-up of IoT1 activities.
In € million |
Jul. to Dec. 2019
|
Jul. to Dec. 2018
| Change |
Revenue | 234.3 | 139.6 | +68% |
EBITDA2 | 11.2 | 10.9 | +3% |
EBITDA as a % of Revenue | 4.8% | 7.8% | -3 pts |
Recurring Operating Income | 9.7 | 10.7 | - 10% |
Net income/(loss) | 1.5 | 1.5 | -3% |
Adjusted net income2 | 4.3 | 6.6 | - 35% |
Adjusted net income, Group share | 4.0 | 6.7 | - 40% |
Cash flow from operating activities | 37.0 | 19.4 | +91% |
Closing cash position | 91.4 | 72.0 | +27% |
The net profitability of the activities reached a level comparable with that of the same period last year with net income of €1.5 million. Excluding the IFRS 16 impact of the recognition of leases and non-operating and non-recurring items, adjusted net income totaled €4.3 million, compared to €6.6 million in H1 2018-2019.
Mobile: improved profitability of traditional activities and successful integration of Personal Creations® activities
In H1 2019-2020, the Mobile division business virtually doubled in size compared to the previous year, amounting to €186.2 million, i.e. a +90% increase period-on-period. Excluding the Personal Creation® business acquired in August 2019, mobile printing revenue totaled €122.3 million, i.e. up +25% at constant scope period-on-period. EBITDA grew +38%, demonstrating the relevance of this activity’s business model.
In H1 2019-2020, the Mobile division generated an operating margin of 5.4% and EBITDA of €10.1 million, including a €1.0 million contribution from the new Personal Creations® business. At constant scope, the traditional mobile printing activities reported a further improvement in operating margin with EBITDA of €9.1 million, representing 7.4% of revenue, compared to 6.8% in the prior-year period (+0.7 point).
Revenue and EBITDA trends for the Mobile division are as follows:
In € million |
Jul. to Dec. 2019
|
Jul. to Dec. 2018
| Change |
Revenue | 122.3 | 97.8 | +25% |
EBITDA | 9.1 | 6.6 | +38% |
EBITDA as a % of Revenue | 7.4% | 6.8% | +0.7 pts |
During the period, the Group strengthened its positions on the European continent by acquiring new market shares in its three main countries (United Kingdom, United States and France) and penetrating new countries such as Poland and Austria. This penetration into new geographical areas illustrates the Group's desire to strengthen its positions in Europe in the mobile photo product printing market, despite the draw on short-term resources (initial marketing investments required to convince, build loyalty and establish brand reputation among new customers).
The Mobile division’s robust growth was also driven by the successful integration of Personal Creations®, acquired in August 2019. This new personalized gift sales business exceeded Group expectations, generating revenue of €63.9 million in only five months3. This high potential activity is currently subject to seasonal trends. The first half-year (July-December) is driven by the year-end holiday season and historically outshines the second period (January-June).
Following the successful completion of the initial integration phase (team relocation, product portfolio strategic review, start of back office pooling, etc.), the division’s teams can now focus on generating technical and commercial synergies, to transpose the unique know-how acquired by the Mobile division in developing mobile commercial offerings to the new personalized gifts business.
As expected, the integration of Personal Creations® together with the first half-year marketing and technological investments weighed on the profitability of the Mobile division. These investments form part of the Claranova growth strategy and will enable it to consolidate the division’s position in Europe and the United States, a future profitability growth lever.
Revenue and EBITDA break down between the Mobile printing and Personal Creations® activities as follows:
Jul. to Dec. 2019 (6 months) In € million | Mobile |
Mobile
| Personal Creations |
Revenue | 186.2 | 122.3 | 63.9 |
EBITDA | 10.1 | 9.1 | 1.0 |
EBITDA as a % of Revenue | 5.4% | 7.4% | 1.6% |
Software: transition launched to a proprietary software publishing model with high repeat revenue; increased margin expected in the mid-term
The Software division, which brings together the Claranova group’s software publishing activities (Security, PDF, Photo), posted first-half revenue of €45.9 million, up + 14%. Claranova continued the transition of its Software activities to the subscription-based sale of proprietary software, offering higher repeat revenue.
This transition was automatically accompanied by an increase in marketing investments, which rose by + 38% to reach 22% of division revenue (compared to 19% in H1 2018-2019). These efforts helped to significantly boost the percentage of repeat revenue, which represented 42% of the division's revenue in the half-year, compared to 35% in the prior-year period. The measures undertaken in this half-year also focused on developing new software versions for the Software division’s three segments. These new versions will be launched in the second half of the year and should fuel the Group’s growth.
In the short-term, this transition to a subscription-based sales model partially masks the true growth in software publishing activities, as the prices of software sold by subscription are comparatively lower than the perpetual licenses that were until recently proposed to the division’s customers. The scheduled decrease in the average basket combined with an increase in marketing investment temporarily limits the division's operating profitability, which is 8.0% of revenue for the period (compared to 15.3% in H1 2018-2019). It nonetheless prepares a significant upturn in profitability in the future.
Efforts made this half-year, which penalize the margin in the short-term, confirm the strategy launched by the Group and aimed at building a recurring and foreseeable activity. This activity’s margin will automatically increase in the long-term.
Revenue and EBITDA trends for the Software division are as follows:
In € million |
Jul. to Dec. 2019
|
Jul. to Dec. 2018
| Change |
Revenue | 45.9 | 40.1 | 14% |
EBITDA | 3.7 | 6.1 | - 40% |
EBITDA as a % of Revenue | 8.0% | 15.3% | -7.2 pts |
IoT: continued commercial roll-out of the Internet of Things division
Claranova’s IoT division reported revenue growth of 28% in H1 2019-2020 to €2.2 million. This revenue includes €1 million from its strategic distribution partnership with the US telecommunications operator Sprint (compared to €0.9 million from this partnership in H1 2018-2019). Excluding this revenue, IoT business revenue increased by +50%. This increase reflects the gradual ramp-up of myDevices solution sales, with 463 customers deploying a myDevices solution and 123 resell partners at the end of March 2020. New partnerships were signed with BASF, Eolane, Henry Schein and Jacob engineering, notably in the preventive maintenance segment, a new high potential market in the industrial, energy and water treatment sectors.
Considering the increase in investments to support the roll-out of these various offerings, the positive impact of which should be visible in the coming years, the IoT division reported EBITDA of -€2.6 million in H1 2019-2020
Although it contributes little to revenue and consumes short-term resources for the Group, the IoT business is a strategic asset and a major medium-term growth driver.
Revenue and EBITDA trends for the IoT division are as follows:
In € million |
Jul. to Dec. 2019
|
Jul. to Dec. 2018
| Change |
Revenue | 2.2 | 1.7 | + 28% |
EBITDA | (2.6) | (1.9) | + 40% |
EBITDA as a % of Revenue | (118.1)% | (107.9)% | -10.2 pts |
Solid financial position and strengthened investment capacity: +91% increase in cash flow from operating activities to €37 million
Claranova ended H1 2019-2020 with cash of €91.4 million as at December 31, 2019, i.e. a €14.3 million increase compared to June 30, 2019. This increase was backed by cash flow from operating activities of €37.0 million, including €9.1 million in cash flow from operations and €33.7 million in changes in working capital requirement4. During the same six-month period last year, cash flow from operating activities totaled €19.4 million, representing a 91% increase period-on-period to €37.0 million.
Net cash flow used in investing activities of -€32.4 million reflects the settlement of the residual deferred payment due for the acquisition of Adaware, Upclick and SodaPDF (€15.1 million paid on July 3, 20195) and the acquisition of Personal Creations® assets on August 2, 2019 for €16.5 million (US$18.1 million). This last deal, which was partly loan-financed, generated cash flow from financing activities of €9.7 million.
In € million | 12/31/2019 | 12/31/2018 |
Cash flow from operations | 9.1 | 9.6 |
Changes in working capital requirements | 33.7 | 11.6 |
Taxes and net interest paid | (5.7) | (1.8) |
Cash flow from operating activities | 37.0 | 19.4 |
Cash flow used in investing activities | (32.4) | (10.9) |
Cash flow from/(used in) financing activities | 9.7 | (2.7) |
Increase (decrease) in cash | 14.3 | 5.8 |
Opening cash position | 75.4 | 65.7 |
Effect of exchange rate fluctuations on cash | 1.7 | 0.5 |
Closing cash position | 91.4 | 72.0 |
Despite these sustained investments, Claranova has a healthy cash balance of €91.4 million at the end of December. Financial debt9 is €63.9 million, resulting in negative net debt of -€27.5 million, bringing Group gearing6 to -41%. The Group’s financial position is therefore still extremely solid with an undiminished financing capacity securing further growth.
In € million | Dec. 31, 2019 | June 30, 2019 |
Bank debt | 14.2 | 2.7 |
Bonds | 47.9 | 48.4 |
Other financial liabilities | 0.5 | 0.8 |
Accrued interest | 1.3 | 0.0 |
Total financial liabilities 7 | 63.9 | 51.9 |
Available unpledged cash | 91.4 | 75.4 |
Net debt | (27.5) | (23.5) |
Covid-19 epidemic: Claranova group activities protected
The Covid-19 epidemic, that appeared in China in December 2019, triggered a major slowdown in the global economy. At the moment, the Mobile and Software divisions, which generate over 98% of Claranova revenue, have not recorded any impact on their activities. As these are primarily online activities, they are not affected by the travel restrictions of their customers.
During this period of global crisis, the Group’s primary challenge is to protect the health and safety of its employees, while guaranteeing the continued distribution of its products. This is why Management rapidly asked employees to systematically work from home, providing them with collaborative tools to work remotely under the best conditions, while maintaining a close team relationship.
While the impacts are, at this stage, difficult to quantify, the main risks factors linked to this epidemic have been identified8.
They have not yet materialized but include:
- A slowdown in the production of photo products managed by sub-contractors in Europe and the United States;
- Disruption to or even a total stoppage in deliveries, particularly for our Mobile division;
- A change in purchasing behavior.
For now, the impact of this epidemic on the Group's activities appears limited:
- Mobile printing: no impact identified at this stage;
- Personal Creations®: decision to close our plant in Illinois (United States) for several weeks to guarantee the safety of employees. (This closure is at a slack business period, therefore the impact should remain limited for now, given that sales are ongoing and deliveries are only deferred);
- Software: closure of specialized stores where certain division products are sold in France and Germany, with a relatively low impact at Group level. The main online activity would appear stable;
- IoT: slowdown of sales of solutions in hotels and hospitals for the moment. This activity contributes only marginally to Group revenue and the impact should be relatively low.
As of the date of publication of this press release and given the uncertainties surrounding future developments in the situation, it is still too early to determine and assess all the impacts on the Group’s results in 2020.
Financial calendar:
2019/2020 Q3 revenue: May 13, 2020
Telephone number for individual shareholders: 0805 29 10 00 (standard rate).
Line open on Tuesdays to Thursdays between 2 p.m. and 4 p.m.
About Claranova:
A high-growth technological group, Claranova is an international player that is firmly positioned in the long term, drawing on resilient business models for high-growth potential markets. As the leader in personalized digital printing (Mobile), Claranova also sets itself apart through its technological expertise in software publishing (Software) and the Internet of Things (IoT). These three business divisions share a common vision: simplify access to new technologies using reliable solutions, combining innovation and ease of use. Drawing on this vision, for the past four years Claranova has enjoyed an average annual growth trajectory of + 30% while improving its profitability, both through organic and external growth. The Group generated revenue of €234.3 million in H1 2019-2020, for an operating margin of 5%.
For more information on the Claranova group: https://www.claranova.com or https://twitter.com/claranova_group
Disclaimer:
This document contains forward-looking information that may only be interpreted at the date of its communication and Claranova refuses any intention or obligation to provide, update or revise any forward-looking statements, as a result of new information, future events or other factors.
Appendix
Appendix 1: Consolidated Income Statement
In € million |
Jul. to Dec. 2019
|
Jul. to Dec. 2018
|
Net revenue | 234.3 | 139.6 |
Raw materials and purchases of goods | (73.5) | (39.4) |
Other purchases and external expenses | (113.1) | (64.0) |
Taxes, duties and similar payments | (0.3) | (0.1) |
Employee expenses | (26.8) | (17.8) |
Depreciation, amortization and provisions (net of reversals) | (3.0) | (0.4) |
Other recurring operating income and expenses | (7.9) | (7.1) |
Recurring Operating Income | 9.7 | 10.7 |
Other operating income and expenses | (3.0) | (4.2) |
Operating income | 6.8 | 6.6 |
Net financial income (expense) | (2.3) | (2.4) |
Tax expense | (2.9) | (2.7) |
Net income/(loss) | 1.5 | 1.5 |
Net income, Group share | 1.2 | 1.6 |
Appendix 2: Earnings per share
In € million |
Jul. to Dec. 2019
|
Jul. to Dec. 2018
|
Number of shares outstanding9 (in units) | 39,200,753 | 39,119,254 |
Number of shares outstanding after potential dilution (in units) | 39,905,820 | 39,905,823 |
|
|
|
Net income per share | €0.04 | €0.04 |
Adjusted net income per share | €0.11 | €0.17 |
Net income, Group share, per share | €0.03 | €0.04 |
Adjusted net income, Group share, per share | €0.10 | €0.17 |
|
|
|
Net income per share after potential dilution | €0.04 | €0.04 |
Adjusted net income per share after potential dilution | €0.11 | €0.17 |
Net income per share, Group share, after potential dilution | €0.03 | €0.04 |
Adjusted net income, Group share, per share after potential dilution | €0.10 | €0.17 |
Appendix 3: Calculation of EBITDA and Adjusted net income
EBITDA and Adjusted net income are non-GAAP measures and should be viewed as additional information. They do not replace Group IFRS aggregates. Claranova’s Management considers these measures to be relevant indicators of the Group’s operating and financial performance. It presents them for information purposes, as they enable most non-operating and non-recurring items to be excluded from the measurement of business performance.
The transition from Recurring Operating Income to EBITDA is as follows:
In € million |
Jul. to Dec. 2019
|
Jul. to Dec. 2018
|
Recurring Operating Income | 9.7 | 10.7 |
Share-based payments, including social security expenses | 0.0 | (0.3) |
Depreciation and amortization | 3.0 | 0.4 |
IFRS 16 Leases | (1.6) | |
EBITDA | 11.2 | 10.9 |
The transition from Net Income to Adjusted Net income is as follows:
In € million |
Jul. to Dec. 2019
|
Jul. to Dec. 2018
|
Net income/(loss) | 1.5 | 1.5 |
Share-based payments, including social security expenses | 0.0 | (0.3) |
Fair value remeasurement of financial instruments | (0.3) | 1.2 |
Other operating income and expenses | 3.0 | 4.2 |
IFRS 16 Leases | 0.2 |
|
Adjusted net income | 4.3 | 6.6 |
Appendix 4: Simplified Statement of Financial Position
Claranova’s Statement of Financial Position increased from €176.1 million to €224.8 million between the end of June 2019 and the end of December 2019. This rise reflects the Group’s organic growth and the integration of the personalized gifts business Personal Creations® acquired on August 2, 2019.
In € million | 12/31/2019 | 06/30/2019 |
Goodwill | 64.3 | 63.0 |
Other non-current assets | 32.0 | 12.1 |
Current assets (excl. cash) | 37.1 | 25.5 |
Cash and cash equivalents | 91.4 | 75.4 |
Total assets | 224.8 | 176.1 |
|
|
|
Equity | 67.1 | 63.6 |
Financial liabilities | 63.9 | 51.9 |
Lease liabilities | 10.2 |
|
Non-current liabilities | 2.7 | 2.8 |
Current liabilities | 80.9 | 57.8 |
Total equity and liabilities | 224.8 | 176.1 |
Appendix 5: Impact of IFRS 16 on leases
On January 13, 2016, the IASB published IFRS 16 on the recognition of leases, replacing IAS 17. The Group transitioned to IFRS 16 on July 1, 2019, using the simplified retrospective method. The impacts on the Income Statement, the Statement of Financial Position and the Statement of Cash Flows are presented below. Further information on the impacts of the application of IFRS 16 on the Group financial statements can be found in Note 15 in the 2019-2020 Half-Year Financial Report.
In € million |
Jul. to Dec. 2019
|
Cancellation of lease expenses | 1.6 |
Depreciation of right-of-use assets | (1.4) |
Interest on lease liabilities | (0.3) |
Impact on net income | (0.2) |
|
|
Non-current lease assets | 10.2 |
Impact on total assets | 10.2 |
Non-current lease liabilities | 7.4 |
Current lease liabilities | 2.8 |
Impact on total liabilities | 10.2 |
|
|
Impact on closing cash | 0.0 |
Glossary
Organic growth: Organic growth is equal to the increase in revenue at constant consolidation scope and exchange rates.
Gearing: Net debt (bank debt + bonds + accrued interest - available cash) to Equity ratio
EBITDA: Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP aggregate used to measure the operating performance of the businesses. It corresponds to earnings before depreciation, amortization and share-based payments (including related social security expenses), and the IFRS 16 impact on the recognition of leases. The EBITDA calculation is presented in the Appendix to this press release.
Adjusted net income: Adjusted net income is equal to Net income before the impact of share-based payments (including the related social security expenses), other operating income and expenses and fair value remeasurement of financial instruments and excluding the IFRS 16 impact on the recognition of leases (€0.2 million in Adjusted net income in H1 2019-2020). The Adjusted net income calculation is presented in the Appendix to this press release.
Software: The “Internet” division has become the “Software” division to better reflect the transition of the division's activities to proprietary software publishing and distribution.
IoT: Internet of Things
BtC: Business-to-Consumer. A direct commercial relationship between a company and a private individual.
1 Please refer to the glossary at the end of the press release.
2 EBITDA and Adjusted net income are non-GAAP measures and should be viewed as additional information. They do not replace Group IFRS aggregates. Claranova’s Management considers these measures to be relevant indicators of the Group’s operating and financial performance. It presents them for information purposes, as they enable most non-operating and non-recurring items to be excluded from the measurement of business performance.
3 Relevant information on business trends cannot be provided for this acquisition due to its specific nature (company subject to Chapter 11 proceedings in the United States) and the absence of audited accounts for the period prior to acquisition.
4 The cash flow generated by the change in working capital requirements reflects the growth of the Mobile division (organic and external), the seasonal nature of these businesses (significant activity during the year-end holiday period involving a non-standard peak in cash at the end of December) and their specific business model (BtC[4] distribution which naturally operates with negative WCR, including for the Personal Creations® business where production is managed internally).
5 See Note 4 of the 2018-2019 URD.
6 Please refer to the glossary at the end of the press release.
7 Excluding lease liabilities resulting from the adoption of IFRS 16.
8 All risks and uncertainties linked to the Covid-19 epidemic are presented in our half-year financial report.
9 The number of outstanding shares used to calculate Adjusted net income per share was restated in H1 2018-2019 and H1 2017-2018 to take into account the reverse stock split in H1 2019-2020. See note 1 to chapter 2 in our half-year financial report.
CODES
Ticker: CLA
ISIN: FR0013426004
www.claranova.com
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