Financial Report for the 1st half of 2014

Sales of EUR 64.8 million vs. EUR 63.0 million in H1 2013
Operating profit of KEur 517 vs. KEur 130 in H1 2013.
EBITDA of EUR 1.982 million compared with EUR 1.643 in H 2013.
Net profit of KEur 13 compared with KEur 161 net loss in H1 2013.
Order book of EUR 90 million at end-H1 2014 (EUR 84 million at end-2013).

Connect Group NV (Euronext Brussels: CONN) announces 1st half-year 2014 sales of EUR 64.8 million.  Sales for the comparable period of 2013 were EUR 63.0 million.  Gross margin, at 11.7 percent, was slightly better than in 2013 (11.5 percent).  Such margin changes are the result of product mix. Research and development costs, general and administrative expenses and selling expenses are fully in line with the previous year.

Operating profit was KEur 517 positive in the first six months of the year (KEur 130 in 2013).

Net financial charges amounted to KEur 502 (KEur 291 in 2013).  This increase is the result of foreign exchange losses mainly on the dollar (KEur 90 loss compared with KEur 15 gain in 2013) and increased financing costs (higher interest rate based on EBITDA/financial debt ratio).

The order book evolved positively, ending the first half at EUR 90 million compared with EUR 84 million at end-2013. The order book consists of formal commitments by customers, but is subject to adjustments in numbers and timing, and cannot therefore serve as a financial indicator of future results.

The increase in trade receivables reflects the payment behaviour of a small number of customers that met their payment obligations only after the end of the month.   Trade receivables do not contain known increased collection risks.
The fixed assets have increased mainly due to the investment in a new production line at our mounting plant in Poperinge. This line will replace two obsolete production lines and increase efficiency.

The risk assessment can be found in the annual report and is available on the Internet (

The most significant risks for the company are:
• Production is completely dependent on the availability of all components at the moment that production starts up. If component availability slows down, sales too will be delayed.
• Currency risk:
 The group buys a portion of its components in dollars/yen, the exchange rate risk on which is only partially covered in the selling price.
 Production takes place partly in Romania and the Czech Republic: large fluctuations of these currencies against the Euro can impact costs.
 Since foreign currency needs cannot be accurately timed, the group does not cover its foreign currency positions.
• The group has a credit agreement with its bankers that includes a minimum solvency ratio covenant, equity and cash flow.
• Customer insolvency can have a major impact on the results.
• Risk of order postponements, leading to a temporary under-coverage of costs incurred.

Significant events in first half 2014

At the start of 2014 Connect Group obtained the ISO 13485 medical certificate for its facility in Poperinge, Belgium. This quality standard is intended for suppliers of medical equipment and devices wishing to demonstrate compliance with legislative and customer requirements. The ISO 3485 certification opens up for Connect Group the technologically demanding market of medical equipment and confirms the quality of this production unit, which previously also earned various quality labels.

At the start of 2014 Connect Group was validated as a supplier by Deutsche Bahn and RATP (Régie Autonome des Transports Parisiens). Deutsche Bahn validated Connect Group to supply and maintain auxiliary converters and different electrical modules, while Connect Group was approved to supply HVAC (heating, ventilation, air conditioning) modules for the RATP’s new double-decker trains.
Validation by these two operators enables Connect Group to enter serial production of a number of strategic products in the Railway market and reinforces its references in the railway market.

In May 2014 Connect Group announced it had renewed the frame agreement, started in 2010, with Faiveley Transport, an important international manufacturer and supplier of railway equipment. As well as electronics, Connect Group also supplies cable assemblies and services to Faiveley Transport.

In June 2014 Connect Group announced it had concluded a framework agreement with Nedap in Groenlo. Under this agreement, both parties agreed to continue their cooperation which started in 2011. During this period, the range of assignments undertaken by Connect Group has gradually grown, both in volume and in type of products. Alongside electronics, Connect Group also supplies cable assemblies and services to Nedap.

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