Ses Imagotag SA

PAR:SESL

Earnings Call Transcript 2020-Q1

[Operator]

Ladies and gentlemen, welcome to the SES-imagotag Conference Call. I'll now hand you over to Thierry Gadou, CEO; and Thierry Lemaître, CFO. Gentlemen, please go ahead.

[Thierry Gadou, Group Chairman, CEO & MD]

Good evening, everyone, and thanks for joining our conference following today's disclosure -- I mean tonight's disclosure of our revenue and activity for the first quarter of the year. We had exactly the same day a month ago, our previous conference. So first, I hope you're all well and safe. I'm assuming you're all in confinement like Thierry Lemaître and myself, at our homes in France and the U.S. I trust, it's the same for you. You can follow the slides if you are connected on the web conference.So to start with, just a quick summary, we basically have managed to stabilize revenue in Q1 in this first quarter. Our order entries were up by 51%. So activity in terms of signing new orders has been good until essentially the beginning of the lockdowns measures and the confinement. The activity has been, as everyone can expect, impacted by both the production delays and the postponement of projects due to the crisis that we have. And in that context, obviously, we've been putting in place a very strict contingency plans. First, to prevent from any risk, health-wise, for our people and our customers and our partners and also to control cost and limit the impact of the COVID crisis in this very uncertain context. We are seeing -- foreseeing now a return to growth, which is expected in H2. So going into a bit more detail, I will -- well, first, just to speak a little bit about the activity itself. We -- as you remember, we have been -- the first wave that hit us was China. And in China, we have a market, which was hurt directly in the beginning of February, and also, we have production. So production is -- has been destructed for 2 months. It's now back in normal -- to normal capacity, nominal capacity. So that's a good thing now.And then the second wave was obviously that we had demand, which began to be affected in all regions, stores closing, lockdown measures, preventing a lot of people to go in stores and projects being stopped or postponed without precise dates in many cases, so -- and mostly everywhere. We did benefit from our global coverage, and we're lucky to have some large projects -- and are lucky to have some large projects going on in regions like the Nordics, Germany and even the U.S. where -- which were a little bit behind the first wave of the pandemic. So that is helping to have this kind of global footprint now and to be able to still have projects going on.Having said that, obviously, this revenue in Q1 is still far below our plans and our prospects in many geographies. Business has really slowed down sharply like never before. A lot of nonfood stores are closed today and will slowly reopen over the next few weeks, hopefully. And grocery stores are struggling to cope with disrupted supply chains and very difficult operating environments and short of labor. So a lot of projects are being really slowed down and rollouts are being postponed. So we're hoping now that Q2 is going to increase. The activity will stay -- will still stay impacted in Q2, even though we expect to grow from Q1, but -- thanks to the production coming back to normal. But still, it will be impacted, and we anticipate probably a slight decrease overall in the first half. However, the order entries is the good news. We had good order entries, I mentioned that. Those -- I mean, even though some retailers are putting on hold some negotiations and investment decisions as everyone can expect, we still benefit from the fact that everyone see, especially in this crisis, digitization as an increasing must operating-wise. Just to illustrate these kind of things, I mean, if you look at the press release of most retailers today, for instance, Target issued its press release yesterday about Q1, and they're all the same, the common factor is the surge in online shopping and the fact that labor cost is increasing. And so that requires really some digitization effort to address that problem. In some of the stores in which our solutions were implemented, the productivity gains have been measured really in a way that's going to boost the adoption in the future when everything comes -- resumes the normal. So there were some good things that we could measure throughout this crisis, and we continue to measure, but obviously, it will take time to come back. So we see H2 continuing the recovery trend of Q2, and we see growth in H2. And right now, we see growth in the -- for the full year. I realize I'm not pushing the slides to the next one. So the current -- so the situation is on supply chain. I mentioned the production shortfalls will still impact -- I mean, the production shortfalls of February and March will still impact the ability to catch up in Q2, of course. But at least that -- on that side, production is now back to normal. Demand will continue to be slowed down. And the return to growth is now foreseeable in H2. Of course, there are some uncertainties and a lot of things can be unpredictable, but this is what we see right now in the forecast. In the discussions we have with our clients, the one thing that is clear is that the nonfood will struggle, and the nonfood retail will be going through hard times. But grocery are going to accelerate digitization in the world. And that is, I think, one of the lesson of this crisis, which we can count on.We have implemented a plan on 2, well, main directions. First is to protect, obviously, our people and our subcontractors and our partners from the risk of the breakout. And so a lot of hygiene, health and safety rules have been implemented, are being implemented, different a little bit from country to country, but we still have to go into stores and to deliver and to have warehousing and activities. And so all these need very strict rules, which will, obviously, be implemented as confinement measures are stopped.And then on the other hand, being in this uncertain context, and we have a cost control, cost stabilization plan to -- again, I think I described that a month ago, freezing, of course, recruitments, freezing all -- a lot of marketing and overhead costs that we can freeze, anticipating holidays in countries, where we can't go for part-time working, and doing, of course, some part-time working for our people, freezing CapEx and tightly managing cash. So this is obviously to protect the content and stabilize our operation in the context of -- at best growth coming back in H2.So I think that's what we can say as of today. I promised and we will continue to update you on a monthly basis about this situation. So we're going to have another press release and call on the 26th of May, so roughly in 1 month from now in order to keep you informed about how we see the business, how we see the customers. In 1 month, we'll probably be much more aware of how the de-confinement is being handled in the different countries in which we operate.So I think it's worth doing that every month now, and July will be too late. So we'll make that -- even though we will not announce any numbers, there is no normally no event from a reporting standpoint, but we will report on the status of business, and how things are going in Q2, how we see H1. And if we are still confident as we are today about growth coming back in H2. So we'll be back...