Highlights:Total revenues and other operating income at USD 320.1 million
Operating free cash flow at USD 37.7 million
The COVID-19 global pandemic affected the Group's first half results mainly due to project delays and cancellations
Measures taken to mitigate COVID-19 impacts and short-term Group's cost base reduction
Resilience of DTV recurring revenues
Kudelski Security delivered strong performance in EMEA
Innovation to address specific COVID-19 needs in Public Access
Full-year 2020 outlook with an expected EBITDA between USD 45 and 55 million
KEY FIGURES HALF YEAR 2020
(in million USD)
1H2020
1H2019
Revenues & Other Operating Income *
320.1
400.6
OIBDA*
4.9
15.5
Operating Free Cash Flow
37.7
-11.0
*As used herein, OIBDA refers to operating income before depreciation and amortization
Cheseaux-sur-Lausanne, Switzerland and Phoenix (AZ), USA - August 20th, 2020 - The Kudelski Group (SIX: KUD.S), a leading provider of media content protection and value-added service technology, announced today its 2020 half year results.
In the first half 2020, total revenues and other operating income decreased from USD 400.6 million to USD 320.1 million. Net revenues for the Group decreased by 19.9% to USD 316.0 million, a 18.6% evolution in constant currency, reflecting a decline across segments.
The Group generated USD 4.9 million of operating income before depreciation and amortization, a USD 10.6 million decrease over the previous first half.
Operating free cash flow, representing cash flow from operating activities net of investments in tangible and intangible assets, improved by USD 48.8 million from the first half 2019 to reach USD 37.7 million in the first half 2020.
Digital TV revenues decreased by 18.8% to USD 154.7 million, representing a constant currency decline of 17.5%. This was driven by a strong reduction of discretionary short-term spending by operators. Recurring revenues, particularly in advanced pay-TV markets, were resilient. The Digital TV segment generated USD 36.9 million of operating income before depreciation and amortization, representing a USD 3.0 million reduction from the previous first half.
The Group's Cybersecurity business generated USD 63.2 million of gross revenues in the first half 2020, a 13.3% decrease from the first half 2019. Net revenues were at USD 38.7 million. The Cybersecurity segment posted a USD 11.5 million operating loss before depreciation and amortization, an increase of USD 0.8 million from the previous year.
In this first half, IoT generated revenues of USD 1.0 million, mainly from the IoT Center of Excellence, and reduced operating loss before depreciation and amortization by USD 2.6 million to USD 8.9 million, reflecting a more selective development approach and a shift of focus to the commercialization of the available portfolio.
Public Access was significantly affected by COVID-19, with revenues decreasing by 23.6% in the first half 2020 to USD 121.6 million compared to the prior year period. Overall, Public Access generated an operating loss before depreciation and amortization of USD 4.5 million, compared to positive USD 4.7 million in last year's period.
COVID-19 IMPACTS ON THE GROUP'S FIRST HALF RESULTS
The COVID-19 global pandemic affected the Group's first half results.
In Digital TV, most of the Group's large customers have shown resilient total subscriber numbers. However, several operators lowered paywalls for several months to compete with an increase in streaming activities. In addition, many projects scheduled for this year have been either delayed or cancelled, and a number of customers have sought reprieve from monthly support and maintenance payment obligations in order to reduce their operating expenses. The Digital TV business was also negatively impacted by the closure of retail markets, particularly in Italy. Key markets in Asia-Pacific and the Americas continue to remain closed and under lockdown restrictions, resulting in continued pressure on Digital TV revenues in these regions.
The onset of COVID-19 also brought disruption to the Group's Cybersecurity business, affecting the Group's ability to engage with clients, slowing sales activities and delaying delivery of services traditionally delivered in person. This had a greater impact on US revenues, where a large number of clients are in verticals impacted by the pandemic and a higher proportion of services are delivered in person at client locations. The pace of growth and expansion of the Cybersecurity business in Europe was less impacted and has even continued to grow by 46% compared to first half 2019.
Of the Group's business units, Public Access was the most significantly affected by COVID-19, as large customers, including in particular airports, shopping centers and stadiums, postponed new deployments and asset refreshment projects. Service volume dropped to nearly 25% of normal volume in April and May due to shutdowns, reflecting reduced usage of the parking infrastructure. By the end of June, service volumes within Europe were recovering to approximately 90% of the prior year volumes with other regions averaging about 75%.
MEASURES TO MITIGATE COVID-19 IMPACTS AND REDUCE THE GROUP'S COST BASE
With the onset of the pandemic, the Group implemented a set of measures aimed at temporarily reducing its cost base in order to align with the reduced levels of demand in the Public Access and Digital TV segments. Partial unemployment measures in several countries enabled the Group to reduce personnel costs. At the end of June 2020, the Group's headcount was lower by 489 FTEs (Full Time Equivalents) than at the end of December 2019, representing a 14% reduction.
The Group is taking a very selective approach to capital expenditures, resulting in a USD 7.2 million reduction of cash flows
