ADB Group reports half-year 2011 results

Thursday, August 4th, 2011
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  • H1 revenue reached US$ 172 million, +22% growth year-on-year
  • EBIT before restructuring and M&A expenses in positive territory
  • Operating expenses lower than anticipated
  • Acquired business performing well
  • Restructuring and integration proceeding according to plan
  • New U.S. customers: Charter Communications and Time Warner Cable
  • Cash and treasuries amounting to US$ 65 million

GENEVA — Advanced Digital Broadcast Holdings SA (SIX: ADBN) reported today ADB Group’s unaudited consolidated financial results for the first half of 2011.

The first-half 2011 revenue reached US$ 172 million, compared to US$ 141 million last year for the same period, representing a growth of +21.6% year-on-year. The growth was attributable to the acquired broadband business, as the first half of the year saw the broadcast business declining due to market reasons. Scaling down of the retail business also contributed to the lower sales during the first half. The newly established service business achieved rapid growth compared to last year, but still forms a relatively small amount of the Group revenue and needs further aggressive development.

Gross profit amounted to US$ 50.1 million, or 29.2% of revenue, representing an increase of 2.3% over the first-half of 2010. The gross margin structure of the Group changed due to a new sales mix, comprising now of products both from the digital TV equipment and gateway businesses.

Operating expenses, including the costs for research and development, accounted for US$ 50.8 million in the first-half of 2011, stable compared the US$ 50.6 million of the second half of 2010, but representing an increase of 20.8% year-on-year. The increase is a result of consolidating the new broadband business with its entire cost base and personnel to the Group and does not yet benefit fully from the effect of the ongoing reorganisation efforts. During the first half of 2011, the Group launched several processes to streamline and restructure its operations. This included initiatives related to organizational structure, product lines, markets and headcount. The reorganisation costs amounted to US$ 3.0 million during the period, in line with expectations. The reorganisation process will continue for the rest of the year.

Earnings Before Interest and Taxes (before reorganisation and acquisition expenses) amounted to US$ 0.9 million, or 0.5% of revenue, during the first-half of 2011, compared to US$ 3.7 million for the same period in 2010. Loss per share was US$ 0.84, compared to earnings per share of US$ 0.50 a year before. At the end of June 2011, the Group had a net cash position of US$ 4.2 million, with cash and treasuries amounting to US$ 65.0 million.

Mr. Andrew Rybicki, Group CEO and Chairman, commented: “The results of the first half of 2011 were in line with our expectations in respect of the operating profitability, for which I want to express my thanks to those members of our staff who contributed to it. The overall situation of the broadcast market caused smaller than expected revenue development in the first half of 2011. However, the first positive and clearly visible results of our emerging business in the US (Charter and Time Warner) and India, show a real business potential there. Similarly, our traditional European business has also brought significant new opportunities, to be announced soon. Finally, the launch of the new Services Division, which is a result of rapidly growing contribution of such activities, is strategically very important. This emphasises our move towards full solutions and services, which is the key to success in the long run. We focus on sustainability on the operating performance, not maximising the revenue line at any cost”.

Outlook for 2011

The Group gives the following guidance for the full year 2011:

  • Revenue expected to grow around 15% year-on-year
  • EBIT% (before acquisition and integration costs) expected to be positive

The Group continues to incur certain costs related to integration and restructuring until the end of this year, estimating them to be in a range of USD 5-6 million for the entire year.

Business overview

The acquired broadband business is performing well. The new product and service lines provide tools for the Group to combine expertise from both broadcasting and broadband areas, as the Group sees market increasingly moving to the direction where thorough understanding of the converging technologies is necessary. This is a noteworthy market trend, and responding to it is strategically key. The new business development is also progressing well. Earlier in the year we made a strategic decision to significantly scale down most of the retail-oriented business segment, consisting predominantly of terrestrial products. More emphasis has been put on developing new customers in strategically chosen markets. Consequently, the efforts are now coming to fruition in the US cable market, where the agreements with Charter Communications and Time Warner Cable have been won, establishing the Group’s foothold in the commercial market segment. Business development in Eastern Europe yielded deliveries to Hungarian Business Telecom, benefiting of our advanced hybrid solution technology.

Our customers are increasingly demanding full solutions and services. To cater for this need, we have created a completely new division, dedicated to customer services. This new Services Division will address all customer needs in the after sale area, including the services in the software upgrades and maintenance, reverse logistics, repair, refurbishment and disposal. The goal of the Service Divison is also to expand their activities into management of customer networks, and to explore new and innovative concepts and business models. This is one of the strategically important development points identified.

With the acquisition of the broadband business, the Group customer concentration has decreased significantly. The top ten customers now bring some 70% of our total revenue, with no single customer bringing more than 12.5% of revenue. The Group considers this to be an advantage, and helpful from the financial and strategic planning point of view.

During the first half, high-end product become a overwhelming mainstream of the product portfolio in the digital TV equipment, where 95% of the product sales constituted of high-definition products, with cable and satellite segments enjoying a stronger momentum. This further underlines the importance of staying at the high-end of the product offering, consistent with the Group strategy.

Europe continues being the driving force for our business. Europe constituted 93% of our revenue, with Western Europe contributing 69% and Eastern Europe 24% to the business. Americas brought 6% and Asia Pacific 1% of the revenue during the first half of 2011. This slight shift in geographical weight is largely due to the added broadband business, which traditionally has had most of its customer base in Western Europe.

The Group has received nominations for two prestigious industry awards. For this year’s IBC in Amsterdam, the Group has been shortlisted under the category “Technologies/software that are enhancing the online content experience” for the “Connected TV Portal” solution. This solution represents a clear way forward in the world of connected home, supporting the Group strategy of providing easy-to-use solutions to the customers and subscribers. The Group has also been shortlisted for the 2011 CSI award in the category “Best Customer Premises Technology” for its Multi-Room Solution.

Organisational update

Following the restructuring and reorganisation plan, the Group has decided to establish a separate business division for customer services, in addition to the existing three business divisions. The Services Division is headed by Mr. John Justo, Executive Vice President. He will be joining the Group Executive Committee with immediate effect.

Mr. Philippe Geyres, who resigned from the Board of Directors earlier in the year due to a conflict of interest, has now been freed from the conflict. The Board of Directors decided to call for an Extraordinary General Meeting in August to re-elect him to the Board, subject to shareholders’ approval.

Dividend distribution

In June 2011, the Annual General Meeting of the Shareholders approved the Board’s recommendation to pay a dividend of CHF 1.00 per share. The dividend was paid on 29 July 2011.

Pirelli option exercise

On 2 August, Pirelli & C. informed the Company that it exercised the first tranche of the put option as per agreement. As a result of this event, the Company purchased from Pirelli & C. S.p.a. 133,334 of the Company’s shares for a total consideration of CHF 3,866,686.

Conference call

ADB Group management will hold a telephone conference on that day to discuss the 2011 first half financial results today at 15.00 CET.

To connect to the conference call, participants should dial the following number: +41 (0) 44 580 639
Participant pass code is “ADB”.