ADB Group Reports Record First-Half 2008 Financial Results
Published: 06:30 12.08.2008 GMT+2 /HUGIN /Source: ADB Holdings S.A. /SWX: ADBN /ISIN: CH0021194664
ADB Group Reports Record First-Half 2008 Financial Results
First-half year results at the record level
Revenue grew 40% compared to first-half 2007
EBIT reached 6.5% of revenue
Gross margin increased 68% from first-half 2007
67% of Digital TV Equipment revenue from high definition TV products
Five new customer wins announced during the first-half
High visibility for the rest of the year
Increased guidance for full year 2008
Geneva - August 12, 2008, 07:00 a.m. (CET)
ADB Holdings SA (SWX: ADBN) reported today ADB Group's unaudited consolidated financial results for the first half of the year 2008.
Revenue for the first-half 2008 reached US$ 169.9 million, increasing 40% compared to the same period in 2007. Gross profit increased to a record level of US$ 67.7 million or 39.9% of revenue, increasing 68% over the first-half of 2007, and ahead of the Group's expectations. This development had three main contributors: greater efficiency in the operating activities due to significantly improved supply chain management; successful cost reduction programs, and a favorable sales mix during the first-half of the year, with higher contributions from high-end products. Operating expenses, including the costs of research and development, accounted for US$ 59.5 million in the first half of 2008, representing an increase of 41% year-on-year, as a result of increased royalty costs due to larger sales volume, employee compensation plan and unfavorable foreign exchange development in European currencies. Earnings Before Interest and Taxes rose to US$ 11.1 million or 6.5% of the revenue during the first-half of 2008, compared to a loss of US$ 0.8 million for the same period in 2007. Net profit from continuing operations reached US$ 7.6 million or 4.5% of the revenue, and a final net profit after a correction for discontinued operations was US$ 4.7 million.
The Group net cash generation from operating activities during the first-half of 2008 exceeded US$ 52 million. As a result, the Group had a net cash position of US$ 28.3 million at the end of June, with cash and reserves totaling US$ 67.7 million. The Group has also introduced a hedging plan for the rest of the year.
Andrew Rybicki, Chairman and CEO of ADB Group, commented: "I am very pleased with our overall results during the first half of 2008. After two years of a very hard work the company is finally getting back to the performance track. The main drivers for the growth were continuing and solid demand for high-definition TV products combined with successful customer base expansion, helped by the European Football Championship and the Beijing Olympic Games. Increased profitability was largely a result of improved efficiencies, favorable product mix and streamlined supply chain operations. It is also an impressive achievement from our staff whom I wholeheartedly congratulate for this. We are now set for the second half of 2008."
Outlook for 2008
ADB Group regards the second half of 2008 with reasonable confidence, but remains cautious due to external macroeconomic factors. The Group increases its full year guidance for continuing operations to be as follows:
Revenue growth range 12-16% (up from 9-13%)
Gross margin range of 36-38% (up from 33-36%)
Earnings before interest and taxes range 4-6% (up from 3-5%)
Business segment performance
Digital TV Equipment segment
The Digital TV Equipment yielded US$ 166 million of revenue during the first-half of 2008, and delivered Earnings Before Interest and Taxes of US$ 16 million, or 9.7% of revenue.
High-definition TV (HDTV) product sales accounted for 67% of the Digital TV Equipment revenue, up from 49% in the first half of 2007 and 57% in the entire year 2007. Personal Video Recorders (both high and standard definition) represented 29% of the Digital TV Equipment revenue, compared to 22% in the first half of 2007 and 26% of the full year 2007.
The first half of the year was particularly strong for IPTV segment, which constituted 31% of the Group revenue. The main drivers were both excellent performance of ADB's products as well as rapid pace of deployment at recently acquired customers. Terrestrial segment represented 20% of Group revenue, compared to 12% in 2007. This segment's share of revenue increased due to strong take-up in Northern Europe and solid demand in Italy. Cable maintains its position as the largest segment of the Group, representing 35% of the overall sales. Satellite segmental sales represented 11% of the overall Group revenue, delivering mainly high-end products.
The Group technology received significant recognition during the first-half of the year. In March, the IPTV World Forum awarded ADB Group with "Best IPTV Customer Premise Equipment Technology", for the second year in a row. It is exceptional for the same company to be able to win the award two subsequent times.
In May the Group obtained a first CableLabs' "tru2way(TM)" (formerly known as OCAP) certification for its new box model specially designed for the US cable market. Building on this achievement, in June ADB Group signed a Memorandum of Understanding with the leading US cable operators and major consumer electronics companies for the committed development of "tru2way", the new interactive technology platform for the US cable market. This is a significant milestone in the Group North American strategy.
Software and Services segment
The Software and Services recorded revenue of US$ 9.4 million, out of which US$ 4.4 million were intergroup sales. The segment recorded a Loss Before Interest and Taxes of US$ 4.9 million. Revenue fell short of the Group expectations due to a faster than anticipated reduction of development services demand from one customer in US. Therefore the Group has decided to accelerate the reorganization of its Software and Services activities in the US to focus mainly on supporting Group's North American growth strategies.
The Software and Services segment remains a powerful facilitator in building the Group overall business, and plays an important role in the Group overall strategy. Following the official adoption of open-standard middleware by the US cable, the Group is currently seeing an increased interest and commitments to deploying such technologies in North America. Therefore, the Group intends to continue its investment in this segment to develop a complete product and services offering and targeting its self-sustainability and profitability.
Revenue analysis per region and customer base
During the first half of 2008, Europe, Middle East and Africa accounted for 92% of revenue while Asia Pacific represented 2% and the Americas 6%. Both West and East European customers accounted for a large part of the growth, Eastern Europe representing 18% of the Group's total revenue. The top 10 customers of the Group grew strongly during the first half of 2008, representing 88% of revenue. No customer represented more than 18% of the Group's revenue. Many new customers are in the early stage of their development, representing a great potential for the Group going forward. Overall, Group's customer base continues to evolve favourably with a well balanced mix of recurring and new customers: close to half of the Group's top 10 customers in first-half 2008 have maintained their position for three years or more.
During the first-half of 2008, Mr. François Pogodalla was nominated CEO of Advanced Digital Broadcast S.A., the Group's affiliate operating the Digital TV Equipment activities. He also continues holding the position of ADB Group's Deputy CEO. Ms. Tina Nyfors was appointed Executive Vice President, Corporate Development, and Mr. Janusz Szajna was appointed President of ADB Group Eastern Europe. The Group's US activities were strengthened by Mr. Tim Schermerhorn, who joined in May to lead the US cable set-top box business unit as General Manager, ADB Americas.
During the first half of the year, ADB Group continued its buyback programme by acquiring 36,500 shares at an average price of CHF 29.90 per share. In July, the Company purchased 52,764 shares at an average price of CHF 30.29 per share. Subsequently the number of shares held in treasury at the time of this release is 253,353.
Following the decision to abandon the New Initiatives business segment, announced at the beginning of year 2008, and the application of IFRS 5: "Non-current Assets Held for Sale and Discontinued Operations", financial data is reported only in respect of the continuing operations of the Group unless otherwise indicated. Analysis and comparison to previous periods are also made with reference to the continuing operations only.
The management of ADB Group will hold a conference call to discuss first-half 2008 financial results and outlook for the full year, today at 15:00 CET.
To connect to this conference, participants will be required to dial: +41 (0) 44 580 33 41.
To ask a question, participants will be required to dial: 01
The main financial statements for the first half of 2008 are attached to this press release. This press release and further information on ADB Group can be found on the Group's website at http://www.adbholdings.com