TIDMFST
RNS Number : 4421Y
Frontier Smart Technologies Grp Ltd
09 May 2019
THIS ANNOUNCEMENT CONTAINS INFORMATION WHICH, PRIOR TO ITS
DISCLOSURE, WAS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET
ABUSE REGULATION.
For immediate release 9 May 2019
Frontier Smart Technologies Group Ltd
('Frontier' or the 'Group')
Trading Update
Frontier (AIM: FST) announces a trading update and revised
outlook for the current financial year ending 31 December 2019
('FY-2019').
As set out in the Group's previous announcements, Frontier's
priorities have been to:
-- maximise Digital Radio cashflows
-- control R&D expenditure and leverage ecosystem relationships in Smart Audio
-- establish a new Licensing business, which exploits the
Group's multi-ecosystem software and cloud assets, to address the
opportunities in Smart Audio and Smart IoT
This plan remains in place, providing focus to the Group's
long-term strategy. However, a review of current trading and market
conditions has identified three factors which are expected to have
an adverse impact on the Group's trading performance in the current
financial year:
- an increase in competitive pressures in Digital Radio;
- continued weak sales of the Group's legacy Smart Audio hardware products; and
- the ramp-up timing of the new Smart Audio/IoT licensing business.
As a result, the Board now expects to report for the full
year:
- sales of approximately US$36.6 million;
- an Adjusted EBITDA(1) loss of no worse than US$0.9 million; and
- a Trading EBITDA(2) loss of no worse than US$1.5 million.
Due to the seasonality of the Group's business, the Board
anticipates an H1 2019 Trading EBITDA loss of US$2.2 million
followed by a return to EBITDA profitability in the second half, as
was the case in the last financial year.
Digital Radio
To maximise cashflow, the Digital Radio business has focused
on:
1. optimising its structure and products for the mainstream DAB market
2. creating and promoting the concept of "Smart Radio" offering
DAB, global internet radio and music streaming, through its new
Venice X product
Underlying trends in Digital Radio are encouraging. The key
German market continues to grow (up 17% in the first two months of
the year) and the French market is expected to develop strongly
over the next two years, with new legislation requiring new radio
receivers sold in France to have DAB+ and the launch of national
DAB+ services in 2020.
While market dynamics support further growth opportunities,
competition in the sector has intensified in recent months, with
new entrants using lower prices as a tool to target the entry level
price point segment. Frontier has been successful in retaining Tier
1 global and regional brands, but has lost some forecast
entry-level business. As a result, forward bookings in Q2-2019 have
been below plan and the Board now expects Digital Radio FY-2019
revenues to be c. US$33.1 million (approximately 8% lower than
market expectations).
To counter this competitive threat, the Group has introduced its
own more aggressive pricing, and while full-year revenues and gross
margins are likely to come in below market expectations, this
should help to protect volumes. Gross margins are expected to
remain stable at about 40% this year and next.
As communicated previously, Frontier is introducing a new
solution, Venice X, for smart radios (devices which combine both
DAB+ and internet connectivity). This solution is sold at a higher
price point than standard DAB and offers superior per unit margins.
Venice X is expected to enter mass production in Q2-2019. First
material revenues should be seen in H2-2019 and thereafter the
Board expects "smart radio" to play an increasingly important part
in the Group's product mix, offering growth opportunities and
improved margins.
Smart IoT
The strategic focus of the Smart IoT business has been to:
1. establish a new Licensing business, which exploits the
Group's multi-ecosystem software and cloud assets, to address the
opportunities in Business-to-Business (B2B) Smart IoT/Audio
2. control R&D expenditure and leverage ecosystem
relationships in its legacy hardware-based Smart Audio
business.
Revenues from the Group's legacy Smart Audio hardware business
continue to disappoint due to ongoing aggressive pricing of
first-party smart speakers, which has constrained the market for
products from third-party brands. As a result, the Board now
expects FY-2019 sales for Smart IoT of c. US$3.4 million - 37%
lower than market expectations of US$5.4 million.
For the new software licensing business, the Group has
established a team to address new opportunities for voice-enabled
devices. In support of this initiative, Frontier has entered a
strategic relationship with NXP Semiconductors.
The initial focus of this programme is on software licensing for
soundbars incorporating Dolby's ATMOS technology - a sector
expected to see healthy growth in the next three years. Leveraging
the NXP relationship, the Group has developed an attractive
pipeline of potential customers and has started work on its first
design win. The Board expects the first material revenues for
software licensing in 2020.
The longer-term focus for licensing is to broaden beyond Smart
Audio. The intention is to use the Group's presence in soundbars as
a platform for developing positions in other Smart IoT verticals,
such as hospitality and appliances - sectors which are already
being investigated.
Cash position and mitigation plans
As at 30 April 2019, the Group's gross cash position was US$2.6
million (net debt of US$3.9 million). Frontier is reviewing its
plans for mitigation and the Board is confident that the business
will return to Trading EBITDA profitability in the second half of
2019 and for the full year 2020.
Anthony Sethill, CEO, Frontier Smart Technologies said:
"The short-term trading outlook for the Group is
challenging.
In Digital Radio, increased competition has had a negative
impact on profitability, but the fundamentals of the business line
remain solid. In the medium-term, market volumes are forecast to
grow, driven by increasing sales in Germany and the emergence of
new markets such as France and Belgium.
The Group also has a clear technology advantage through its
cost-optimised silicon, so is well placed to retain market share -
albeit with slightly lower margins. Significantly our Venice-X
based Smart Radio initiative has been well-received by customers
and is expected to have a positive impact on the business when
products using Venice X are launched later this year.
"In Smart IoT, sales of our legacy Smart Audio hardware continue
to disappoint - due to the aggressive pricing of first party
products. As a result, Smart Audio revenues in 2019 are likely to
be significantly lower than in 2018.
"In contrast, prospects for our new Smart IoT software licensing
business are more promising. Leveraging its relationship with NXP,
the Group is developing a healthy pipeline of potential design
wins. This should deliver material growth in licensing revenues in
2020 - initially in ATMOS soundbars and then in other Smart IoT
verticals.
"We remain committed to the Group's core strategic objectives of
maximising Digital Radio cashflows, controlling Smart Audio R&D
expenditure and developing our Smart IoT software licensing
business. In light of the current trading conditions, we will
continue to monitor our progress closely to ensure that the Group's
cash position remains secure."
(1) Adjusted EBITDA is earnings before interest, tax,
depreciation, amortisation, and before restructuring, other
non-recurring costs and certain non-cash items.
(2) Trading EBITDA means Adjusted EBITDA less R&D costs
which have been capitalised in compliance with IAS38
- Ends -
For Further Enquiries:
Frontier Smart Technologies Group Limited +44 (0) 20 7391 0630
Anthony Sethill, Chief Executive Officer
Jonathan Apps, Chief Financial Officer
Patrick Hannon, Vice President, Corporate Development
N+1 Singer (Nominated Adviser and Broker) +44 (0) 20 7496 3000
Lauren Kettle / Ben Farrow
About Frontier Smart Technologies Group Limited
Frontier Smart Technologies is a pioneer in technologies for
Digital Radio and Smart IoT devices.
The Group's customers include many leading consumer audio
brands: Bose, Denon, harman/kardon, JBL, Onkyo, Panasonic, Sony,
Yamaha, Altec Lansing, Blaupunkt, Grundig, Hama, Klipsch, Marshall,
Pioneer, Pure, Roberts, TechniSat, Teufel and many more.
Established in 2001, the Group is headquartered in London, with
engineering, sales and operations teams in Cambridge, Timisoara
(Romania), Hong Kong and Shenzhen. For more information, see
frontiersmart.com.
Forward-looking statements
The information in this release is based on management
information. This announcement includes statements that are forward
looking in nature. Forward looking statements involve known and
unknown risks, assumptions, uncertainties and other factors which
may cause the actual results, performance or achievements of the
Group to be materially different from any future results,
performance or achievements expressed or implied by such forward
looking statements. Except as required by the AIM Rules and
applicable law, the Group undertakes no obligation to update,
revise or change any forward-looking statements to reflect events
or developments occurring after the date of this announcement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
TSTSSWESAFUSEEI
(END) Dow Jones Newswires
May 09, 2019 02:00 ET (06:00 GMT)
Frontier Smart Technolog... (LSE:FST)
Historical Stock Chart
From Jun 2024 to Jul 2024
Frontier Smart Technolog... (LSE:FST)
Historical Stock Chart
From Jul 2023 to Jul 2024