NETGEM (EPA:ALNTG) - Netgem 2017 results

Transparency directive : regulatory news

09/03/2018 06:00

2017 full year results

Paris-La Défense, March 9th, 2018

Results and Financial Position

EUR Million - consolidated IFRS
                           2017    2016      Change
Revenue                    61.8    74.3    -17% -12.5
Net revenue                24.6    27.5    -11%  -2.9
Ebitda                      6.6     6.8     -2%  -0.2
Current operating income    6.3     5.5    +14%  +0.8
Operating income            7.0     8.7    -19%  -1.7
Financial income            0.2     1.1    -79%  -0.9
Equity method result       -2.0    -0.1      ns  -1.8
Tax                        -0.6    -3.4    -81%  +2.7
Net income                  4.7     6.3    -26%  -1.7

Revenue for 2017 totaled EUR 61.8 million and gross profit EUR 24.6 million,
reflecting a solid performance in Europe and a change in business model outside
Europe. Vitis, the service provider of La Fibre Videofutur in France, is no
longer included in consolidated figures since November 2016(1).

2017 current operating income amounted to EUR 6.3 million, a 14% increase over
2016, confirming the solid return to profitability initiated in 2016. Operating
expenses decreased by 17% to EUR 18.3 million in 2017, notably due to the
deconsolidation of Vitis. The 2% fall in ebitda was also induced by the
deconsolidation of Vitis. Netgem maintained its significant R&D effort in 2017,
comparable to 2016.

Operating income reached EUR 7.0 million in 2017, positively impacted by the
planned capital increases in Vitis, subscribed by Réunicable in 2017 to
finance development. The 2016 operating income included a one time contribution
of +EUR3.9 million related to the deconsolidation of Vitis.

Financial income was +EUR 0.2 million in 2017, of which +EUR 0.9 million from
the investment of the Group's cash balance and EUR -0.7 million from the impact
of foreign exchange.

After taking into account a EUR -0.6 million in income tax charge and the
Group's -EUR 2.0 million share in the losses of Vitis under the equity method,
Netgem recorded a net profit of EUR 4.7 million in 2017 (group share).

(1) If Vitis had not been consolidated in 2016, the consolidated turnover and
gross profit for 2016 would have amounted to respectively EUR 70.3 million and
EUR 26.4 million. Such pro forma financial information addresses a hypothetical
situation and does not represent the company's financial position or results.

EUR Million - consolidated IFRS
                                                            2017     2016
Cash flow related to operations, after tax (A), of which:  +14.0     +4.9
- Cash flow before tax and changes in working capital       +6.4     +7.6
- Taxes paid                                                -0.4     +0.1
- Decrease (increase) in working capital                    +8.0     -2.8
Cash flow related to investments (B)                        -1.5    -11.4
Operating cash flow (A + B)                                 12.5     -6.5
Cash flow related to financing                             -35.1     +2.9
Net change in cash                                         -22.6     -3.6

The Group's operations generated EUR 14.0 million of cash after tax in 2017.
The decrease in working capital of EUR 8.0 million in 2017 was mainly due to
the reimbursement of French VAT credits.

Cash flow related to investments included the implementation of financing
solutions and their repayments.

Cash flow related to financing encompassed -EUR 25.9 million of share buy back,
-EUR 5.7 million of dividends paid in 2017, +EUR 0.7 million of interests
received and -EUR 4.0 million of refund of factoring backing the financings
mentioned above.

Netgem's cash balance at 2017 year end amounted to EUR 10.2 million, a
year-on-year decrease of EUR 22.6 million.

EUR Million - consolidated IFRS
                                     31/12/2017  31/12/2016
Shareholders' equity and debt
Equity, Group share                     27.7        54.2
Current and non-current financial
liabilities                              5.9         9.6
Analysis of net cash
A. Cash                                 10.2        32.8
B. Current financial liabilities         3.0         3.3
C. Current net cash (A) - (B)            7.2        29.5
D. Non-current financial liabilities     2.9         6.3
E. Net cash (C) - (D)                    4.4        23.3

Netgem's financial statements were approved by the Board of Directors on 8
March 2018. Audit work had been completed and the auditors' report is in the
process of being published.

Significant events, strategy and outlook

By end 2018, Netgem will finalise the transformation of its offer and business
model from that of a set-top-box vendor to a TV-as-a-Service provider. Value
now results from content & technology services derived from the usage of the TV
service by the final consumer, while any hardware revenue reflects the direct
or indirect acquisition of a new customer, and is no longer considered a value
driver for the Group.

Netgem expects this transformation to strongly align, for the long term, the
Group and its customers and Distribution Partners and unlocks new development
opportunities as explained below.

As a strategic growth opportunity, Netgem is now in the unique position to
leverage the cloud infrastructure and content aggregation built for its
customers triple play services to address the OTT market.

OTT means that next generation entertainment packages can and will be unbundled
from broadband packages, opening new distribution opportunities. Depending on
each local market situation, the Group will seek to address some of these
opportunities, directly or in partnership with its customers. New opportunities
include TV bundles with mobile packages or TV bundles with consumer devices.

From a financial standpoint, Netgem expects that 2018 will be a turning point,
with the combined impact of the SaaS transformation of the previous years and
the contribution of the new OTT initiatives, initiating a multi-year growth
phase of net revenue (net revenue is defined as revenue minus cost of hardware
sold) and ebitda.

After several years where the Group financial priority was generating cash,
growth is the new primary objective, and senior management cash incentives and
bonuses for 2018 will refer solely to growth targets compared to 2017. As a
consequence, the Board will recommend the General Assembly of Shareholders to
approve a dividend at 0.10 per share.

Netgem continues its share buyback program and owned about 6.3% of its capital
as at December 31st, 2017.

Calendar of Financial Communication
- Revenue and gross profit for Q1'2018: May 3rd, 2018, before market opening
- Annual shareholders' meeting:         May 3rd, 2018
- Revenue and results for H1'2018:      August 3rd, 2018, before market
  opening
- Revenue and gross profit for Q3'2018: October 18th, 2018, before market
                                        opening

About Netgem

Netgem is a Television and Digital Entertainment Service Provider and Connected
Digital devices vendor. Netgem connected devices and content services are used
daily by millions of households around the world, and are operated under the
brands of our Telecom and Entertainment Service Providers distribution
partners. Netgem is long term driven by innovation, simplicity, privacy,
affordability and operational excellence. Netgem is listed on Euronext Paris
Compartment C (ISIN: FR0004154060, Reuters: ETGM.PA, Bloomberg: NTG:FP)
www.netgem.com

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