Kudelski steady progress

The Kudelski Group, owner of Nagravision and Open TV, announced its 2010 results with total revenues revenues flat but EBITDA up 25 per cent at CHF173 million (€135m). There was strong organic growth in the Digital TV division, posting a sales growth of 6.8 per cent. This was in contrast with weaker growth rates in the Middleware, Advertising and Public Access segments, posting growth of 0.5 per cent and 2.1 per cent respectively.

In a challenging environment characterized by plummeting exchange rates against the CHF, with the EUR average rate down 8.6 per cent and year-end rate down 15.8 per cent, the USD average rate down 4.2 per cent and the year-end rate down 9.2 per cent, Kudelski managed to deliver an operating income before depreciation and amortization of CHF 173 million, representing a best ever for the Group, a CHF 110.0 million operating income for the full year, compared to CHF 73.3 million in 2009, an increase of 50 per cent.

A very strong first half with growth of over 20 per cent drove Digital TV full year results. Digital TV operating income for the year climbed from CHF 67.5 million to CHF 129.5 million, representing a 91.8 per cent increase and an operating margin of 18.9 per cent. Overall, Digital TV profitability was ahead of target, as the core conditional access continued to deliver a strong performance and segment results benefitted from the improved profitability of new business areas.

With the full acquisition of OpenTV completed at the beginning of 2010, the Group launched a turnaround plan, with a reconfiguration of the product roadmap. This program resulted in a ramp-up of R&D investments aimed at accelerating the deployment of the next generation Group middleware solution. With a material headcount increase, this ramp-up mainly took place in the first half year, resulting in an operating loss of CHF6 million for the first half. Further, the recognition of one-off government grants supported segment profitability. In the second half of 2010, the operating loss was reduced to CHF0.4 million, while the development of the next generation solutions continued to progress as planned.

In a difficult environment, Public Access delivered a 2.1 per cent revenue growth in constant currency and an operating income of CHF8.8 million.

Over the last months, the Kudelski Group has continued to win new contracts and to expand its footprint:

Nagra will assist MCV, a joint-venture comprising 12 major broadcast groups, in managing its standards-based conditional access, enabling broadcasters to encrypt content and evaluate many business models. Additionally, MCV has partnered with MobiTV, the leading mobile television company, to build a number of consumer applications which will be available as part of the MCV platform consumer launch in late 2011. Using MobiTV’s software on mobile DTV-enabled devices, and based on Nagra’s technology, consumers will be able to access live TV and program information.

Nagra, together with six other leading consumer electronics companies formed the AllVid Tech Company Alliance to lobby the Federal Communications Commission to continue the pursuit of the proposed AllVid open set-top box policy for the pay TV industry. The AllVid policy would bring an end to the tradition of proprietary set-top boxes in the pay TV market. The alliance believes that this will spur innovation and new investment in the sector, while bringing new content to consumers.

Furthermore, the Kudelski Group signed an agreement with Cable One, one of the top cable service providers in the US, to enable the rollout of the operator’s new digital television service.

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