TEKKA GROUP 
By Brignais, July 22nd, 2011
www.tekka.com2010/11 ANNUAL RESULTS
Revenue up 23% to €15m Gross margin improves to 74.4% Operating loss of €3.1m
tekka (FR0010999425, ALTKA), which designs, manufactures and sells innovative medical devices for use in Cranio-Maxillo-Facial Surgery, Orthodontics and Dental Implants, today announces its audited consolidated annual results for the year ended March 31st, 2011.
In thousands of euros | March 31st 2011 | March 31st 2010 |
Revenue Dental implants Cranio-Maxillo-Facial Surgery and Orthodontics Other services % of revenue Operating profit/loss Financial profit/loss Exceptionals Pre-tax profit/loss Consolidated net profit/loss | 14,990 11,439 3,475 76 74.4% (3,125) (441) (252) (3,567) (3,690) | 12,167 9,109 3,001 57 72.3% (1,818) (312) (8) (2,130) (1,984) |
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Further revenue growth over FY 2010/11
Revenue for the Company’s 2010/11 financial year (from April 1st 2010 to March 31st 2011) totalled €15m, up 23.2% on the previous financial year.
Revenue from the Dental Implants segment came to €11.4m, an increase of 25.6%, and revenue from the Cranio-Maxillo-Facial surgery and Orthodontics segment increased by 15.8% to €3.5m, which are both higher growth rates than those of their respective markets. This increase in global revenue was predominantly driven by the strong performance of the Company’s overseas activities (+179% on the year), particularly in Turkey (a new subsidiary created during this fiscal year), Spain and Morocco. As at March 31st 2011, the Company’s overseas revenue represented 22.0% of total revenue, versus 9.7% as at March 31st 2010. However, revenue growth remains lower than the target that the Company had set itself. This is due to a number of factors: lower-than-expected revenue from the Dental implants segment in France, which was notably due to delays in expanding the Company’s sales network, particularly in Paris and the surrounding region, but also in the Aquitaine region of southwest France for part of the year; lower-than-expected sales by overseas distributors.Improvement in the gross margin
The gross margin for the 2010/11 financial year came to €11.1m, or 74.4% of revenue, which was a 2.1 percentage point increase on the previous year. This improvement reflects good control over consumed purchases, which only represented 22% of revenue in 2010/11 compared to 24% the previous year.
Worsening of the operating loss and net loss over FY 2010/11
There was an operating loss of -€3.1m in 2010/11, compared to a loss of -€1.8m the previous year. There are two reasons for the deterioration in the operating loss:
a 32.7% increase in other purchases and external costs associated with the Company’s overseas development, notably with the creation of the Turkish subsidiary in June 2010, the development of the Spanish and Moroccan subsidiaries and outreach activities in Italy and the United Kingdom; a 32.5% increase in personnel costs, in line with the development of the Company’s subsidiaries and the setting up of teams that should bear fruit from the second half of 2011/2012 and the recruitment of a team devoted to the acquisition of machines aimed at insourcing production. The consolidated net loss for the year to March 31st 2011 was -€3.7m, versus -€2.0n over the year to March 31st 2010, with: a financial loss of -€441k at March 31st 2011 versus -€312k a year earlier, because of foreign exchange losses of €109k essentially associated with the negative trend of the new Turkish lira over the year; exceptionals that reached -€252k at March 31st 2011 because of exceptional costs of €283k.Page 2 of 5
Financial structure
As at March 31st 2011, shareholders’ equity totalled €9.1m. The change in Working Capital Requirements over the year was -€1.3m. Operating cash flow came to -€0.7m and the Company’s cash position (cash and marketable securities) stood at €7.9m at the end of the financial year, versus €0.2m a year earlier.
FY 2010/11 milestones
Over the 2010/11 financial year, tekka’s activity notably saw the following:
the Company’s international expansion with:o the creation of two new subsidiaries: the first in Turkey in June 2010, which recorded a very good performance in 2010/11 with revenue of €814K€ in its first 7 months of activity, and the second in the United Kingdom in March 2011, which will be activated during the financial year that began on April 1st 2011;o the opening of three new distribution networks in Thailand, the Lebanon and Tunisia, which now gives the Company a presence in over 20 countries;
o a number of pending registrations, notably in the United States and Canada, as well as in
Mexico and Brazil where distribution contracts have also been signed.
the deployment of the Universal surgical kit, which is compatible with the entire range of tekka implants. This kit has been very successful, representing some 75% of the implants delivered over 2010/11. the launch of the T-Quest range in dental implantology, a range of implants specifically designed for the Spanish market with hybrid connector technology combining a conical seat, internal hexagon and Platform Switching. Since April 1st 2011, the Company has pursued its international development by creating, firstly, a subsidiary in Italy, Europe’s leading dental implant market in terms of value and volume with close to 1.3 million dental implants inserted in 2010. This subsidiary currently has 5 sales staff, all from the maxillo- facial and dental domain, and a network of agents enabling the Company to cover the entire country. Secondly, by transforming the Belgian sales office into a subsidiary, the Company is putting in place an organisation that is adapted to this market’s potential, where the penetration rate is 63 implants inserted per 10,000 inhabitants, versus 56 in France (Source: Millennium Research Group). These two subsidiaries should allow the Company to increase its overseas revenue over the current financial year. Furthermore, in May the Company acquired 5 dental milling machines aimed at insourcing part of its production and developing a range of prosthetic solutions. These machines have been operational since June, and should allow the Company to achieve a significant reduction in its production outsourcing costs over the coming years. The Company already carries out around 25% of its production. The acquisition of a further 5 machines for cutting out collars should follow in 2011/12, which will enable the Company to cover more than 70% of its production.Page 3 of 5
Measures to improve profitability over the coming years
In order to return to profitability, the Company has decided to implement the following measures for the coming financial years:
substantial restrictions in communication and marketing expenditure; further insourcing of production, which will allow the Company to be more autonomous and to significantly reduce its outsourcing costs; a pause in the international development schedule; the rationalisation of operating costs; the reorganisation of the sales teams in France and strengthening the team in the high-potential Paris region; a reduction in personnel costs and the workforce in support departments.Outlook
Operating profit for the first half of the Company’s 2011/12 financial year will be significantly affected by the implementation of the aforementioned measures. The Company is therefore anticipating a worsening of its operating losses over the first half of the year, followed by an improvement in profitability over the second half.
Moreover, since the end of the Company’s 2010/11 financial year, its cash position has deteriorated and is not comparable to the figure that appears in the Company’s accounts as at March 31st 2011. This decline is due to the combination of a number of factors that occurred at the end of the 2010/11 financial year and since the start of the 2011/12 financial year, and notably revenue growth that has been below the Company’s objectives as well as Working Capital Requirements within the Company’s subsidiaries that are greater than initially forecast. To counter this situation, a number of actions are currently being implemented: a plan to reduce structural costs; the renegotiation of loan and credit line terms; the refinancing of investments; the setting up of Working Capital Requirements financing with the implementation of factoring overseas. Thierry ROTA, Founder and CEO of tekka, comments: “The 2010/11 financial year saw a significant increase in our revenue, notably driven by our international activities, and an improvement in our gross margin. Despite this progress, annual performances were below expectations, particularly over the final quarter of the year. We have therefore decided to implement drastic corrective measures for the coming financial years in order to improve our profitability. These measures have already been put into practice during the first quarter of our 2011/12 financial year, which has seen revenue grow by over 20%. We are now focusing on implementing this recovery package, the sole aim of which is to enable us to see a return to profitability and to record positive operating cash flow.”Page 4 of 5
Contacts
tekka NewCap.
Press Relations Financial Communication & Investor Relations
Nathalie Genestoux Axelle Vuillermet / Julien Brosillon Tel: +33 (0)4 78 56 97 00 Tel: +33 (0)1 44 71 94 94 tekka@tekka.com tekka@newcap.fr
About tekka (www.tekka.com)
Established in 2000, tekka designs, manufactures and sells innovative medical devices for Cranio-Maxillo-Facial
Surgery, Orthodontics and Dental Implants. Thanks to its disruptive approach based on an original sales strategy, an attractive price positioning and unparalleled service standards, tekka has taken only five years to establish itself as France’s No. 1 specialist in Cranio-Maxillo-Facial Surgery and No. 2 in Dental Implants (based on volumes)(1). tekka is listed on the market Alternext of NYSE Euronext Paris since February 14th, 2011.
tekka - ZI de Sacuny - 118, av Marcel Mérieux - 69530 Brignais - France - www.tekka.com
(1) Source: Company
Name: TEKKA GROUP
ISIN code: FR0010999425
Ticker: ALTKA
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