Financial Report for the 1st half of 2018

H1 2018 sales of EUR 75.8 million, vs. EUR 59.4 million in H1 2017.

Net EBITDA of EUR 4,097K in H1 2018, vs. EBITDA of EUR 1,838K in H1 2017.

Operating profit of EUR 3,007K in H1 2018, vs. a profit of EUR 525 K in H1 2017.

Net profit of EUR 2,410K in H1 2018, vs. a profit of EUR 247K in H1 2017

Orders at the end of H1 2018 stand at EUR 113.4 million, vs. EUR 116.5 million at the end of 2017.

Management discussion and analysis of the results

Jeroen Tuik (CEO):

The economic indicators remain cautiously optimistic. Operating as a subcontractor, Connect Group is currently experiencing increasing sales growth among its customers, though the strengthening US dollar has negatively impacted the results of several projects.
Compared to H1 2017, H1 2018 sales have risen 28%, and nearly 40% compared to H2 2016.

Our mission remains unchanged; Connect Group intends to continue contributing to the success of its customers.
More than ever before, we are investing in people, resources and machines. Last year a major investment programme for the coming years was approved by the banks, confirming their confidence in the Connect Group strategy.

Looking back over the last 6 months, we were able to grow despite the difficult situation on the components market (shortages). Quite the contrary, this situation spurred us to further optimise our processes, thereby stimulating growth. In addition, several new customers were acquired, allowing both our cable and electronics divisions to present good growth figures.
The above-mentioned shortages on the component market, newly acquired customers and the growth figures in both divisions have led us to increase our inventories.

During Q3 2018, we expect to commission nearly 8,000 m² of new production premises in our Romanian subsidiary. The low unemployment figures in the countries where we are represented present us with major challenges for future growth. Up to now however, we are managing to find the right balance between resources, people and automation.

H1 results

Connect Group NV (Euronext Brussel: CONN) reports sales of EUR 75.8 million for H1 2018, compared with sales of EUR 59.4 million in H1 2017. This 28% increase was realised with existing and a number of new customers. More than ever, our focus is on customers in niche markets where Connect can provide the greatest added value.
The success of Connect as a subcontractor is very much dependent on the growth achieved by its customers.

H1 2016 H2 2016 H1 2017 H2 2017 H1 2018
62.0 million 54.8 million 59.4 million 65.5 million 75.8 million

The gross margin was 12.3 percent, against 10.2 percent in 2017. Research and development expenses and general and administrative expenses remained stable at respectively 1.0% and 4.0% of sales. Sales expenses (3.5% of turnover) were down 0.4 percentage points.

Operating profit amounted to EUR 3,007 K in H1 2018, vs EUR 525 K in H1 2017.

Net financial expenses amounted to EUR 576 K (vs. EUR 276 K in 2017). Debt financing costs were in line with the costs booked in H1 2017. The increase in net financial expenses is mainly attributable to the strong rise in the value of the US dollar in the first half of 2018. To a limited extent, Connect Group is able to pass on these exchange rate fluctuations to its customers.

Orders dropped from EUR 116.5 million at the end of 2017 to EUR 113.4 million at the end of H1 2018. The order book contains formal commitments from customers, but may be subject to adjustments in quantities and delivery deadlines. For this reason, it cannot be used as a financial indicator of future results.

In the course of H1 2018, investment projects amounting to a total of EUR 2.4 million were carried out (vs. EUR 0.6 million in 2017). They related mainly to replacement machines, production automation and expansion in the various factories.

Inventories increased from EUR 32.8 million to EUR 38.5 million. This increase is mainly due to the introduction of various new projects set to be realised in the second half of the year. Also, component availability and delivery times are deteriorating in the supply chain, leading to a situation where most of the material needed to produce an order is kept in stock. The unavailability of just a few components can however mean that production cannot be started. No significant write-downs on inventories were recorded in H1 2018.

The increase in trade receivables is due to a high level of invoicing in May and June 2018. They contain no known increased collection risk.

Total financial debts increased by EUR 0.5 million from EUR 20 million at the end of 2017 to EUR 20.5 million at the end of H1 2018. This increase is the result of the higher working capital requirement in 2018 (increased inventories and trade receivables). As of 30 June 2018, the Group met all required bank covenants.

Shareholders’ equity increased from EUR 23.1 million to EUR 25.6 million as a result of the net profit for the period. The group's solvency ratio dropped however from 31.6% to 30.0% as a result of the increased balance sheet total.

The risk analysis is to be found in the Annual Report and is available on our website (

The most significant risks for the company are:

  • Production is completely dependent on the availability of all components at the start of production. The unavailability of components may lead to sales being delayed.
  • Currency risk:
  • The group buys a portion of its components in dollars/yen, of which the exchange rate risk is only partially covered in the selling price.
  • Production takes place mainly in Romania and the Czech Republic: major fluctuations of these currencies against the Euro can have an impact on costs.
  • As currency needs cannot be exactly timed, the group can only hedge foreign currencies to a limited extent.
  • The group has a credit agreement with its bankers coupled to a number of bank ratios including solvency, equity and cash flow. Customer insolvency can have a significant impact on results.
  • There is a risk of orders being postponed, leading to a temporary under-coverage of costs incurred.
  • The group is dependent on a number of customers each accounting for more than 10% of sales. Should any one of them terminate its business relationship, this will impact results;
  • The Group is involved in an ongoing dispute with the VAT authorities in Romania which could have a negative impact on the result in the long term. Compared to the status on 31 December 2017 (discussed in the 2017 Annual Report), there has been no significant change to the status of the case in the course of the first half of 2018.

Significant events in the first half of 2018

No significant events occurred in the first six months of 2018.


The full financial report can be found on our Investor Relations website here.