H1 17 results: a bit weak
EARNINGS/SALES RELEASES
FACT

DMS released its H1 17 results. Sales (already announced on 2 August) reached €12,700k (vs €17,199k), EBITDA €-1,211k (vs €41k), EBIT €-215k (vs €-402k) and the net result €-765k (vs €-459k). Net cash at the end of H1 reached €2.3m vs €2.1m at the end of FY16.


ANALYSIS

As already commented upon, sales were down 4% on a comparable basis, since reported sales take into account the disposal of Alpha Mos, deconsolidated since 1 January 2017, the bulk of which (€12,1442k) stemmed from the historical activity, radiology and densitometry (see our comment dated 2 August). New segments (DMS Wellness and DMS Biotech) only achieved revenues of €258k in H1, which is not a worry, given the fact they are new and the group has since proved able to sign a number of agreements in the period (for DMS Biotech distribution agreements in China, Australia, Thailand, etc., while DMS Wellness has received its first orders in the field of cellulite and lymphatic drainage, to be booked at the beginning of FY18). As far as profitability is concerned, the core DMS Imaging segment has suffered from both lower sales (-4%) and an unfavourable product-mix, which has weighed on EBITDA (lower weight of densitometry) while new segments have generated a negative €-400k EBITDA due to the low level of sales combined with the cost of registrations and commercial efforts. The group’s EBIT integrates a €1.8m capital gain on the disposal of the stake in Alpha Mos and was thus slightly higher than last year, even if this is, by definition, a one-off. Lastly, the net result includes a €600k negative contribution from Alpha Mos, corresponding to the result achieved until the disposal of the stake in this subsidiary (26 June).
Altogether, the results were a bit disappointing, although this was bound to be the case given the fact revenues were also rather weak in H1. This is all the more so since the mix was not favourable either and the group is thus, to date, behind in our forecasts for FY17 in terms of profit. That said, one should not judge too quickly on a quarterly or half-yearly basis since it is clear things can reverse quite quickly and the shape of DMS’s P&L changes fast depending on new contracts signed as well as changes in the mix. As an example of this, H1 16 was boosted by a large order (€1.9m) which makes the comparison basis high for H1 17. Moreover, new segments have so far mainly produced costs, but things are going in the right direction with new contracts signed and revenues should flow into the P&L shortly.


IMPACT

At the end of the day, the H1 17 results were a bit disappointing, although the group is heading in the right direction as far as the new segments are concerned. We may revise our forecasts down for FY17, but this is mainly to capture the fact the group has met our estimates. We still believe the group’s strategy is the right one and should lead to an improved level of results from FY18 onwards.