KERLINK (EPA:ALKLK) - Kerlink - First-Half 2019 Results

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26/09/2019 17:40

Kerlink - First-Half 2019 Results
Results still impacted by sluggish activity in incumbent operators' market
Business resizing underway to adjust to new market conditions
Stepping up efforts in private operators' segment

PRESS RELEASE
Thorigné-Fouillard, 26 September 2019, 5:40 p.m.

Thorigné-Fouillard, France, 26 September 2019 - Kerlink (AKLK - FR0013156007),
a global specialist in network solutions for the internet of things, is
publishing today its interim results for 2019.

In the first half of 2019, incumbent telecoms operators continued to take a
wait-and-see stance, which automatically undermined Group results. To tackle
this situation, the Group took the necessary steps to adapt its business
organisation to these new market conditions and to step up efforts to expand in
the private operators' segment.

Half-yearly consolidated financial statements

On 24 September 2019, the Board of Directors approved the consolidated
financial statements for the six-month period ending 30 June 2019.

International accounting standard IFRS 16, concerning the treatment of leases
in the consolidated financial statements, came into force on 1 January 2019.
Kerlink Group chose to apply this standard using the simplified retroactive
approach, in which there are no adjustments for the previous year. Note that
the implementation of IFRS 16 requires a change in the presentation of the
consolidated financial statements as approved at 30 June 2019, with the balance
sheet showing a liability in respect of future lease payments and an asset in
respect of rights-of-use. On the income statement, the lease expense previously
recognised under operating costs is now to be recognised partly as a
depreciation charge and partly as a financial cost.

In thousands of euros        H1 2018    H1 2019       Comparable H1
                                        Reported      2019 figures
                                    (incl. IFRS 16)  (excl. IFRS 16)

Revenue                       8,519       6,462           6,462
Gross margin (amount)         4,155       3,036           3,036
Gross margin                    48%         47%             47%
EBITDA                       (1,552)     (3,028)         (3,139)
Operating income             (2,554)     (4,486)         (4,489)
Financial income                (44)        (43)            (39)
Net profit / loss for the
company                      (2,684)     (6,254)         (6,253)

The consolidated financial statements have been audited in accordance with IFRS
standards and the statutory auditor's report certifying those statements is
currently being prepared.

Incumbent telecoms operators taking wait-and-see approach, slight growth in
private operator segment, stable revenue from services

As stated on 12 June 2018 and in subsequent communications, the IoT market
targeted by the company has been affected by delays in the pace of deployment
of major infrastructure projects by incumbent telecoms operators, slowing down
the Group's business and performance. In this context, H1 revenues came to
EUR6.4m, compared with EUR8.5m a year earlier. Revenues from incumbent telecoms
operators totalled EUR1.1m, down from EUR3.4m in H1 2018.

As for the Group's private network operator clients, which are at the
cornerstone of its new expansion strategy, revenues from the segment increased
to EUR5.2m, from EUR4.9m in H1 2018.

Revenues from services contributed EUR1.6m to the total, which is a stable
performance year-on-year.

In international markets, Kerlink generated revenues of EUR2.4m, accounting for
38% of total interim revenue. The EMEA zone (excluding France) accounted for
81% of total revenue. Although contributions from the NCSA (Americas) and APAC
(Asia-Pacific) zones were marginal during the period, these regions still
harbour considerable potential for the Group.

Results testify to slump in activity

This slump in activity pushed EBITDA into negative territory, at -EUR3.0m.
Operating expenses (taking into account IFRS 16) came to EUR6.1m.

Group operating income for the period came to -EUR4.5m. Net income worked out
to -EUR6.3m, after reversals of deferred tax assets in the amount of EUR1.7m.

Shareholders' equity stood at EUR16.9m, down from EUR26.1m at the end of H1
2018. The Group's cash position stood at EUR8.3m.

Business resizing necessary

Kerlink has taken the necessary steps to adapt its business to the new state of
play in its market.

In early September 2019, the Group announced the roll-out of an Employment
Protection Plan. This will affect 24 of the 103 employees of Kerlink France at
31 July 2019, with 2 internal reclassifications. All departures related to the
implementation of the plan should take place before the end of the year. In
addition to the measures affecting its staff, the Group is slashing the number
of subcontractor resources used and is keeping a tight rein on its costs. This
should enable Kerlink to cut its operating expenses by EUR3.5m over the full
year from 2020.

This resizing effort was conducted with a view to preserving Kerlink's
marketing and sales capacities.

An action plan to keep step with transformation in the market

At the end of 2018, the Group launched a proactive plan to adapt to changes in
its market, notably by strengthening its range of offers and its positioning
towards the private operator segment (companies, cities, government
administrations, etc.). The plan has five key strategic priorities:

1) Consolidate the Group's technological edge,
2) Step up growth in the private operator segment. In the short term, market
growth is expected to be fuelled chiefly by private players in favour of
implementing their own IoT network. In this context, Kerlink has embarked on a
strategy specifically aimed at establishing an ecosystem of partners in order
to offer end-to-end vertical solutions,
3) Support incumbent telecoms operators in converting to IoT networks,
4) Strengthen its market penetration in high-potential regions of Asia and the
Americas,
5) Keep on ramping up its offer of services.

The adaptation efforts undertaken so far gives Kerlink the requested financial
visibility needed to pursue this strategy.

About Kerlink Group

Kerlink Group is a leading global provider of end-to-end network solutions for
the Internet of Things (IoT), serving telecom operators, businesses and public
authorities worldwide. Based in Thorigné-Fouillard, France, with a U.S.
subsidiary in Chicago, Kerlink is a leading global provider of LoRaWAN network
equipment, software and services. Its growing suite of turnkey IoT services
includes network planning, design and operational management that maximizes
performance of its market-leading, carrier-grade infrastructure offering. The
Group, widely recognized for its IoT expertise, also continually introduces
innovative value-added services, such as network-based geolocation, remote
end-device management and low-power IoT reference design, which allows its
customers to quickly bring to market IoT-ready devices and to imagine
innovative business models to monetize their deployments. Most recently,
Kerlink introduced an expanded service, solution design, as part of its growing
suite of services for companies and smart cities.

For more information, visit www.kerlink.comor follow us on Twitter
@kerlink_news.

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Q3 2019 revenue: 22 October 2019, after market close
www.kerlink.fr

Investor contact:     Financial Press contact:      Press and Market Analysts

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