KERLINK (EPA:ALKLK) - First-half 2020 results

Transparency directive : regulatory news

24/09/2020 17:45

First-half 2020 results
Results affected by the consequences of the global health crisis
Favourable impact of cost-cutting measures implemented in 2019
Cash balance strengthened by a EUR2.25 million government-guaranteed loan

PRESS RELEASE
Thorigné-Fouillard, 24 September 2020, 5.45 p.m.

Thorigné-Fouillard, France, 24 September 2020 - Kerlink (AKLK - FR0013156007),
a specialist in solutions dedicated to the Internet of Things (IoT), today
released its consolidated earnings for the first half of 2020.

The COVID-19 pandemics affected half-year business activity, with an impact on
earnings for the period. Measures implemented in second-half of 2019 to reduce
operating expenses, and in particular the wage bill, have helped cushion the
consequences of this global health crisis.

Consolidated half-year financial statements

On 22 September 2020, the Board of Directors approved the consolidated
financial statements for the first six months of the year to 30 June 2020.

In thousands of euros          H1 2020        H1 2019

Revenue                          4,765          6,462
Gross margin (amount)            2,551          3,036
Gross margin rate                53.5%          47.0%
Other operating expenses        -4,299         -6,064
EBITDA                          -1,748         -3,028
Depreciation and amortisation    1,736         -1,458
Operating income                -3,484         -4,486
Financial income                   655            -43
Corporation tax                    -21         -1,725
Group net profit/loss           -2,849         -6,254

A limited review has been carried out on the half-year IFRS consolidated
financial statements. The statutory auditor's report on the limited audit has
been issued.

Business levels impacted by the health crisis in the second quarter, especially
in Europe

In an unprecedented economic and health context, the Group's revenue fell by
26% to EUR4.8 million in the first half of 2020.

The impact on the Group's half-yearly revenue was particularly noticeable in
France as soon as lockdown measures were implemented in mid-March (-38% over
the half-year). The decline was only of 6% in international markets, with
growth in the Americas (+11%), stability in Asia-Pacific and a decline of 8% in
the EMEA zone (excluding France).

The decrease in revenue is mainly attributable to lower sales of infrastructure
equipment (-34% vs the comparable period). Service revenues, which are
essentially recurring, were down only by 4% over the period. Customers using
the Group's application solutions benefited from total continuity of service,
with Kerlink's teams leveraging the remote tools requested to supervise
services platforms and keeping them in working order, regardless of their
location.

The change in the product mix in favour of services (33% of total revenue)
resulted in a 6.5% improvement in the margin. The gross margin now represents
53.5% of half-year revenue, compared with 47% in the first half of 2019.

Half-year results understandably affected by the health crisis
Favourable impact of measures implemented before the crisis to regulate the
cost structure

The reduction in the volume of business activity and the consequences of the
health crisis understandably weighed on the period earnings.

On 23 March, with the announcement of its Business Continuity Plan, the Group
took measures to ensure the safety of its employees and preserve the financial
health of the structure. Reasonable use of furlough (temporary unemployment)
measures, the deferral of certain expenses and a significant reduction in
travel expenses and attendance at events and trade-shows made it possible to
limit the impact of the health crisis on the Group's cost structure.

The half-year results also benefited from measures implemented in 2019 to rein
in operating expenses. As a reminder, in the second half of 2019 the Group
implemented an employment safeguard plan. Compared to the same period last
year, the cut in personnel expenses reaches nearly EUR1 million and expenses
related to external personnel were down by EUR250 thousand.

In the six months to 30 June, EBITDA represented a negative amount of EUR1.7
million, compared with a negative EUR3.0 million in the first half of 2019.

Operating income is also improving. The operating loss amounted to EUR3.5
million, compared with EUR4.5 million in the first six months of 2019.

Depreciation and amortisation expenses (EUR1.7 million) include EUR644 thousand
in additional impairment on the goodwill of Wyres. Its net value was
accordingly reduced to EUR256 thousand as of 30 June 2020. From an accounting
perspective, this entry represents a non-cash allocation that weighs on
operating income for the period.
In addition, the finalisation of the acquisition of Wyres for EUR80 thousand in
February 2020 resulted in a reassessment of the earnout on the purchase of the
balance of the Wyres shares, which in the first half generated a gain of EUR670
thousand, recognised as financial income.

With tax virtually at zero, the net loss was ultimately EUR2.8 million,
compared with a loss of EUR6.3 million in the first half of 2019.

Balance sheet

The Group had shareholders' equity of EUR9.6 million as of 30 June 2020,
compared with EUR12.5 million as of 31 December 2019. The change is due
primarily to the loss of EUR2.8 million.
The drop in activity resulted in positive change of EUR508 thousand in working
capital.

At the start of 2020, the Group took out medium-term loans from BPI France and
its long- standing banking partners in a total amount of EUR2.75 million.
As of 30 June 2020, the Group's cash position, which was EUR6.2 million (EUR5.6
million excluding the factor), was therefore higher than as of 31 December
2019, which was EUR5.3 million.

Receipt of a EUR2.25 million government-guaranteed loan

Kerlink also requested assistance from banks within the framework of the
government- guaranteed loan scheme, and in September obtained agreements in a
total amount of EUR2.25 million.

Uncertainties remain despite signs of an improvement

The second half of the year opened with an improvement in activity compared
with the downturn of the health crisis. Third-quarter revenue is expected to be
close to that of the same period in 2019.
However, uncertainty persists as to business trends over the last period of the
year.

Kerlink is nevertheless pursuing its development strategy based on a
determination to step up the pace of its development in the segment of private
network operators by bringing out simplified and integrated offers, and by
expanding the number of distribution and value- added partners worldwide. The
Group is particularly targeting the Smart Metering, Asset Tracking and Smart
Building segments.

In addition, in the spring, the Group rose to the challenge of designing, in
partnership with Microshare, the Universal Contact Tracing(TM) solution, a
local contact traceability solution to fight against the spread of the COVID-19
epidemic in the workplace.

In conclusion, while prudence remains in order with a health crisis affecting
the Group's key customer segments worldwide, Kerlink remains confident in its
ability to make it through this unprecedented period while staying focused on
the implementation of its strategy. The Group can now rely on a cash balance
strengthened by recent borrowings and a reduced cost structure compared with
that of previous years.

These aspects should enable it to regain favourable momentum as soon as the
situation starts returning to normal.

About Kerlink

Kerlink Group is a leading global provider of connectivity solutions for
designing, launching, and operating public & private Internet of Things
networks. Its comprehensive product portfolio includes industrial-grade network
equipment, best-of-breed network core, operations and management software,
value-added applications and expert professional services, backed by strong R&D
capabilities. Kerlink specializes in enabling future-proof intelligent IoT
connectivity for key verticals such as fleet management, transportation &
logistics, retail, asset tracking, and smart metering, as well as smart
agriculture & environment, and smart cities, buildings, and factories. More
than 120,000 Kerlink installations have been rolled out with more than 330
clients in 69 countries. Based in France, with subsidiaries in the US,
Singapore, India, and Japan, Kerlink is a founding and board member of the LoRa
Alliance(TM) and the uCIFI Alliance(TM). It is listed on Euronext Growth Paris
under the symbol ALKLK.

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

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                                  Q3 2020 revenue
                       22 October 2020, after market close

                                  www.kerlink.com

Investors contact:
Actifin
Benjamin Lehari
+33 (0)1 56 88 11 25
blehari@actifin.fr

Financial press contact:
Actifin
Isabelle Dray
+33 (0)1 56 88 11 29
idray@actifin.fr

Kerlink press & market analysts contact:
Mahoney Lyle
Sarah Lyle
+33 (0)6 75 85 60 42
slyle@mahoneylyle.com

www.kerlink.com  Linkedin kerlink   Twitter @kerlink_news  You Tube  kerlink

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