(News Bulletin 247) – The group confirms its objectives for 2023 after reporting a strong increase in its half-year results. SES-imagotag revealed positive cash flow generation, which the market greatly appreciates.

If SES-imagotag was somewhat disappointing in July during its half-yearly activity update, the rest of the income statement presents a more attractive appearance.

The specialist in electronic labels has indeed published results above expectations, driven in particular by the latest commercial successes achieved in the United States, notably its historic contract with Walmart in April. Above all, the French group reported positive cash generation, an announcement that certainly hits the mark.

Between January and June 2023, the smart label specialist revealed a sharp increase in gross operating profit (EBITDA), coming to 43.5 million euros compared to 25.3 million euros previously. A trajectory which materializes an increase of 72% over one year.

The corresponding margin is also increasing, standing at 11.4% of an already published turnover of 380.7 million euros, as of June 30, 2023. In the first half of the In 2022, the EBITDA margin stood at 8.9%, an increase of 2.5 points in one year.

The action jumps

SES-imagotag attributes this improvement in its profitability to an increase in the margin rate on variable costs to 24.2% at the end of June compared to 21.4% in the first half of 2022. The company benefited from a return to normal prices electronic components and manufacturing costs, which made it possible to increase the margins generated by the sale of electronic labels.

On value-added services (software, services and solutions excluding electronic labels), SES-imagotag benefited from an increase in purchasing volumes and an improvement in its portfolio of value-added solutions with the acquisitions of Belive and of Memory during the past semester. The group expects its profitability to continue to improve in the second half.

On the Paris Stock Exchange, SES-imagotag takes the lead in the SBF 120, with a share that soars by 12.5% ​​to 125.60 euros, around 3 p.m. Stifel also does not hide its enthusiasm and describes this half-yearly performance as “impressive”. The research office particularly welcomes the increase in the gross margin over one year, which exceeded its expectations by “around 6%”.

“The company was able to significantly increase its gross margin while collecting a significant number of deposits from its customers – in our view, the best evidence of the quality of its value proposition that we can have”, adds the design office.

Above all, the group published a positive free cash flow of 35 million euros as of June 30, 2023, where the group had consumed 13.7 million euros of cash a year earlier. “This positive free cash flow firstly reflects the improvement in the group’s profitability and working capital requirements, which should continue in the second half of the year,” specifies SES-imagotag. For Stifel, this half-year marks above all “the beginning of a new era of liquidity generation”.

“SES-imagotag demonstrates that the last 15 years of cash burn was not due to a hypothetical lower added value of electronic shelf labels (ESL), but rather to a deliberate strategy of investment in market share and construction of a unique and highly innovative solution, according to our point of view”, specifies the design office which remains the buyer of the file with a price target of 190 euros.

2023 objectives confirmed

A little further down in the accounts, net profit is experiencing a dizzying increase. The reason is to be found in the valuation of the fair value of the stock subscription warrants (BSA) allocated to Walmart on June 2 as part of the historic contract signed between the two companies last April.

As of June 30, due to the drop in the SES-imagotag share price, following the attack by the short seller Gotham City at the end of June. the fair value of the BSAs allocated to Walmart decreased by 76 million euros, which represents a financial product of the same value for SES-imagotag. This product leads SES-imagotag to publish a net profit multiplied by 19 to reach 91.5 million euros in the first half of 2023.

“The group will communicate at each closing the effects on turnover and net income” of the revaluation of the fair value of the BSAs”, specifies SES-imagotag.

The company also confirms its turnover target of 800 million euros for the current financial year and still expects an “improvement in its profitability”. SES-imagotag’s confidence in the direction of its business is supported by the latest commercial successes announced by the company. Lapeyre or a Swedish furniture giant whose description closely resembles Ikea recently announced their trust in SES-imagotag.

For the year 2024, SES-imagotag anticipates continued strong growth, particularly driven by the acceleration of its activity in the United States, as well as an increase in its profitability.