NETGEM (EPA:ALNTG) - Netgem - H1 2018 results

Transparency directive : regulatory news

02/08/2018 07:00

H1 2018 results
Active users' base growth - Strong IPTV slowdown

Paris-La Défense, August 2nd 2018

Results and Financial Position

Consolidated IFRS, in millions of euros
                              H1 2018  H1 2017      Change
Revenue                         23.0     32.9     -30% - 9.8
Net revenue                     11.0     12.9     -15% - 1.9
Ebitda                           2.1      3.0     -30% - 0.9
Current operating income         1.8      2.7     -33% - 0.9
Operating income                 1.8      3.1     -41% - 1.3
Financial income                 0.0    - 0.0      ns. + 0.1
Equity method result           - 1.6    - 0.8     118% - 0.9
Tax                            - 0.5    - 0.9     -45% + 0.4
Net profit                     - 0.3      1.3    -124% - 1.7
Global net profit              - 0.0      0.7     -106% -0.7

Activity in the first half of 2018 was marked by the growth of the total active
user base which reached 2.1 million at the end of June 2018, a gain of 107,000
subscribers over the semester, and by a slowdown much more pronounced than
expected on traditional IPTV business. Many operators appear to be more
cautious about their IPTV investments, especially in countries where ARPUs
(revenue per subscriber) are the lowest and for which returns on investment are
longer.

For the six months ended June 30, 2018, Netgem achieved a consolidated revenue
of EUR 23.0 million, down 30% compared to the first half of 2017.
The Group does not see this trend improving, which legitimizes the strategy of
switching to the OTT undertaken for several years. The rapid slowdown in IPTV
activity could delay the moment when the contribution of OTT activity will
offset this decline.

Net revenue declined more slowly than revenue, due to recurring revenue from
software maintenance and services calculated on the active user base (SaaS
effect). It reached EUR 11.0 million in the first half of 2018, down 15%
compared to the previous year period.

Operating expenses decreased by 14%, from EUR 10.0 million in the first half of
2017 to EUR 8.6 million in the first half of 2018, with no decrease in R&D.

Current operating income for the first half of 2018 was EUR 1.8 million, down
33% compared to the same period in 2017.

Equity method result includes a loss of EUR 1.6 million related to Vitis, whose
turnover is up 78% in the first half of 2018 compared to the first half of
2017, with 15,000 Fiber-to-the-home subscribers as of the date of this press
release.

The tax expense of EUR 0.5 million mainly corresponds to the use of deferred
tax assets relating to tax loss carryforwards (non-cash impact). The Group
recorded a net loss of EUR 0.3 million (Group share) over the period, a loss of
EUR 0.01 per share.

Consolidated IFRS, in millions of euros
                                                             H1 2018   H1
2017
Cash flow related to operations, after tax (A), of which:       3.3       9.3
- Cash flow before tax and changes in working capital           2.2       2.6
- Taxes paid                                                    0.3     - 0.6
- Decrease (increase) in working capital                        0.8       7.3
Cash flow related to investments (B)                            2.4     - 4.5
Operating cash flow (A + B)                                     5.7       4.8
Cash flow related to financing                                - 5.5     - 7.5
Net change in cash                                              0.2     - 2.7

Operations generated EUR 3.3 million in cash during the first half of 2018.

Cash flow related to investments includes repayments of financing solutions
implemented for some customers.

Cash flow related to financing includes a dividend distribution of EUR 2.8
million for the year 2017, a repayment of EUR 1.5 million of factoring backing
the financing mentioned above and share buy back for EUR 1.4 million. The Group
holds approximately 8.2% of its capital in Treasury shares as of June 30, 2018.
The Group's cash balance reached EUR 10.4 million, up EUR 0.2 million over the
semester.

Consolidated IFRS, in millions of euros
                                             30/06/2018   31/12/2017
Shareholders' equity and debt
Shareholders' equity, Group share               24.1          27.7
Current and non-current financial liabilities    4.5           5.9
Analysis of net cash
A. Cash                                         10.4          10.2
B. Current financial liabilities                 3.6           3.0
C. Current net cash (A) - (B)                    6.9           7.2
D. Non-current financial liabilities             0.9           2.9
E. Net cash (C) - (D)                            6.0           4.4

The consolidated financial statements were approved by the Board of Directors
on August 1, 2018. Limited review procedures have been carried out and the
Statutory Auditors' report on the half-year financial information is being
issued.

Significant events, strategy and outlook

Given the slowdown in IPTV business, the company will continue to rationalize
its cost, started in the first semester, by focusing its investments on its
most strategic markets.

In the first half, the company launched its OTT service on the UK market. This
service offers a new generation TV experience and is the only one to offer in a
unified interface, voice-controlled via Alexa, live and replay channels and the
most popular OTT services such as Amazon Video, Youtube, Hayu or Rakuten, on
all the screens of the home.

As a first step, this service is marketed as part of a "bundle" with the sale
of connected equipment (smartTV adapter or smart soundbar). The distribution of
the service is done through networks of Service Providers, and will, before the
end of the year, be licensed in the "retail" networks.

The service and associated equipment have won several awards: "Most innovative
in home device" at TV Connect 2018, The Connies 2018's "Best user experience
beyond tv & video" and "Content Innovation Awards 2017" for "Consumer Equipment
Innovation". The Group intends to continue to expand the range of devices
compatible with its service.

The geographical extension of OTT activity beyond the UK is under study.

Calendar of Financial Communication
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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