Advanced Television

Kudelski Group FY revenues dip

February 27, 2019

The Kudelski Group, a specialist in digital security, has announced its 2018 annual results. Total revenues and other operating income decreased from $1,012.1 million to $919.7 million, mainly driven by the Digital TV segment, which posted a $72.1 million net revenue decline.

The Group reported it implemented a comprehensive restructuring programme resulting in a $74.9 million reduction of recurring Digital TV costs. The Group completed most of the restructuring measures related to its French operations in the second half of 2018, including the divestment of SmarDTV operations and the closure of a French R&D site. A further enabler of the 2018 cost reduction was tighter integration of NAGRA and Conax operations. Operational excellence measures across the entire Digital TV organisation allowed for material efficiency improvements. Similarly, the Group streamlined corporate functions supporting Digital TV activities through the simplification and digitisation of key processes, the consolidation of the organisational structure and the migration of selected functions to lower cost locations. Finally, the Group consolidated its operational footprint, resizing underutilised locations and closing satellite offices.

Group OIBDA ex restructuring costs was $76 million, a $6.8 million decrease over the previous year. Overall, the Group generated an operating loss of $7.3 million for the year. Operating income ex restructuring costs was at $32.9 million in 2018 compared to $44.3 million in 2017.

Kudelski achieved strong free cash flow generation of $46.1 million in the second half of 2018.

Outlook for 2019

The traditional pay-TV business is expected to stabilise in 2019. While Digital TV revenues should continue to decline, the Group expects the pace of the top line regression to start tapering off.  In 2018, the Group completed multiyear contract renewals with large pay-TV customers, which is expected to secure revenues over a period of several years. The Group is implementing measures to further reduce Digital TV operating expenses.

With Cybersecurity, the Group will continue to drive the development of higher value product lines and expects continued growth of margin after cost of material. Cybersecurity is expected to continue adding new clients, expanding geographical coverage and, as a result, increasing profitability by leveraging strategic offerings and high-value services.

For 2019, the Group will to continue to invest in the IoT domain, with development costs increasing to reflect the current cost run rate and with revenues still in the single digit million range.

In 2019, Public Access will focus on improving cash flows and restoring a higher level of profitability.

For 2019, the Group expects a stable to slightly higher revenues base and an OIBDA ex restructuring costs in the range of $80 to $95 million.

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