Ladies and gentlemen, welcome to the Broadways Group Half Year twenty twenty one Results Conference Call. I'll now hand over to Mr. Rafael Gorgi, CEO and Chairman of Broadways Group. Sir, please go ahead.
Thank you very much. So we are proud to present you the our H1 figures and starting on Slide 3, the key figures of H1 achieving record results because as you can see for the first time, we are posting a positive operating income of €900,000 Record EBITDA margin with €4,500,000 dollars and strong revenue growth compared to last year, plus 27% with highly recurring profile. I switch directly to Slide 5. I think it's important to recall that looking at Sustainable Development Goals number 12, 3 d printing and the activity of Broadways has a positive impact on the manufacturing industry for different reasons. First, it's a more efficient production process, up to 80% reduction in CO2 emission compared to other traditional conventional manufacturing.
The fact that you can print on demand, reduce or eliminate the need for large physical inventory and the fact that you can localize or localize manufacturing, reduce the logistics and bring the production close to the customer. So you reduce transport from delocalized low cost factories. On Slide 6, Broadways is a reference player relying on 3 strategic pillars. 1st, we are positioned on the world value chain of 3 d printing from part design to manufacturing, enabling our client to 3 d print by themselves or printing on our side for them. We focus on plastic.
We think that first, it is the largest market in additive manufacturing, but more important with the highest added value and more interesting business model. And last point, we focus on industrial and mass production compared to the initial usage of 3 d printing, which was rapid prototyping. We focus on industrial and medical application, the application which are demanding and high productivity and accuracy and precision. On Slide 7, you have our 2 divisions. 1st, system providing turnkey solution for 3 d printing, which represents 60% of the revenue, comprising software, materials and printer.
And on the other side, the product division, we are now one of the largest 3 d printing service in Europe. This represents 40% of the revenue. We now have a fleet of 52 printers in France and Germany, thanks to the acquisition of the German company, Criavis. I will come back on it later, offering a large range of technologies and brand. We do the design and printing on demand and also we sell some custom medical device in audiology, podiatry and dental.
On Slide 8, Broadways is a global player, especially for its machine and material business. France represent only 20% of the turnover. The biggest market is North America and Germany represent 24%. Our teams are located in France, Germany and the U. S, close to the markets and close to our customer.
I will switch now on Slide 10, because a major step has been achieved over the last year and beginning of this year, and we were able now to present a quite transformed company, more efficient, typically the recruitment of teams and technology, which were located in 4 different locations in France and now are regrouped in one new site in Annecy, makes with 3 d printing fleet, engineering and design service and production of SLS printer. And this organization is more efficient and the cost reduction of cost impact is quite significant. And also interesting to focus because you remember that ESG preoccupation is important. We have transformed this former industrial site into a low carbon building, recovering the heat of the machine to heat the facility. This project was carried by a significant majority of local companies.
On the business model side, it's important to highlight that Prodwesa has a highly recurring and growing revenue profile. The growth is there. I mentioned 27% of growth this year, but it happened that it's the average growth rate that we have since 2015. If we compare H1 20 15 to H1 2021, the average growth is exactly 27% per year, combination of organic and external growth. And the recurring profile is also has significantly improved from 25% to roughly 60%, combination of fully recurring business like the material or software maintenance, but also a highly recurring or reoccurring business from medical device.
On Slide 12, We have we think important to notice compared to the startup environment in which we evolve. We have disciplined financial policy to support a healthy balance sheet. Cash flow from operation, which was positive in 2019 and again, positive back in first half of this year. The positive net cash position is still plus €3,700,000 net cash and 20,000,000 valuable. Our investment in R and D are focused 10% of machine and material revenue, which are the only activities requiring significant R and D.
And the overall investment policy is disciplined between €2,000,000 to €3,000,000 gross investment on a stabilized basis in R and D and CapEx, partly offset by government subsidies and tax credits. As I mentioned previously, the ASG strategy is accelerating. It's an important focus on the offside. You see the improvement on the Gaia rating. The governance also is significantly compliant with the middle next code, 50% of women in the board and roughly 40% of independent board member.
The shareholder structure is there. Groupe Gorgi is owning 57% of the shares and the rest is free flow, sorry, with TIMALAC, Safran and BB still on board. I will leave the floor to Laurent, who will present the financial performance. Thank you, Rafael.
So as previously mentioned, the group recorded strong growth in its activity during the first half of twenty twenty one. The number reached €34,000,000 of which about €22,000,000 for the division system the system division, sorry, and about €13,000,000 from the product divisions. The growth, about 27%, as mentioned by Rafael, came roughly equally from the both divisions, with weaker growth in the software and material businesses, gross little affected in 2020 H1 by the health crisis and now over their 2019 level. The medical business, which was heavily impacted by COVID in 2020, grew by 56% over the last year. Next page 16, in line with the growth in turnover.
EBITDA increased significantly in the first half of the year, reaching 13% of the turnover, almost double that of the previous 2 years. This doubling came from the 2 divisions. In addition of the increase in turnover, it's also the result of the restructuring carried out last year, which showed strong fixed cost reduction. This EBITDA increase again is well for coming years. Slide 17.
In addition to the performance in terms of turnover and EBITDA seen before, operating profit from ordinary activities also increased to €2,200,000 up by €5,100,000 partly due to some write off booked last year. The operating results by reaching almost €1,000,000 is positive for the first time in the history of projects despite some costs related to the restructuring initiative last year. It should be noted as well that this performance was up by a forgiveness of €900,000 under the U. S. CAROL Act.
I will give the floor back to Raphael
for the outlook. Thank you, Laurent. And then we switch to Slide 19. We think that Broadways has still strong potential for industrial application and new development of new application for 3 d printing. Typically, you know that we are already on the orthodontic and dentistry market, jewelry, rapid prototyping and some new markets are emerging.
Audiology is growing significantly, podiatry also And new potential market in optic or precision casting, especially for aeronautics application. It's something that we communicate on it frequently. No special development or no news on this, but we still are convinced that the potential is there. One focus on Slide 20 on what is our biggest market, the market of clear aligners, which is a new 3 d printed orthodontic application. We put here the comparison between the growth of dentistry player and clear aligner player.
The difference is quite significant. This market is booming, and we are benefiting from it. It is booming, and we think that it is bigger than what we expected a few years ago. A significant portion of the growth of the machine of the sales of the machine and the growth of the material are coming from this specific application, which as you remember is the biggest application of 3 d printing in the world, all the material and all market overall, I mean. Okay.
And now focus on the last development, which was not in H1, but was the sign of the restart of acquisition process. We acquired the German company, Kratis, in July and in the strategy of accelerating the development of the product division. The integration of Krebis is well on track. Krebis is one of the top 3 d experts in Germany. His founder, Ralf Duck, is an expert of this industry since probably 20 years.
The company is not that big, but I would say significant, a fleet of 11 printer from 5 different technologies. And for your information, we knew Kravis for many years because he was one of the first German customer to buy 1 of our machine. His highly diversified base of client generates roughly €3,000,000 revenue last year and 50% are coming from serial production. The complementarity with widening Broadway's offer with new technologies, but probably more important, significant synergies potential. And Firdapse has already started sell the initial capacity.
Initial is the name of our 3 d printing service in France in ANSI. So we are quite confident that those synergies could produce interesting results. And to conclude, we think it's time to be a little bit more precise about our guidance, which was previously 2 digit growth. We are now confident that it could be around 20% growth, obviously subject to the evolution of the sanitary context. And about profit, we think that we can sustain the same trend in H2 compared to H1 2021.
This presentation is finished. Our next release will be for Q3 2021 activity, October 28. And now we are ready to answer to the question you may have. Thank you.
Thank you, sir. So we have one first question from Mr. Aurelien Sylvignon from
Yes, good evening and thank you for taking my question. I have 3 actually. First, could you give us more color on the guidance upgrade on the top line on the 20% for the full year? I mean, is it a better trend on 3 d matching orders? Or is it mainly related to the strong dynamic in material, especially.
Then do you think that H1 EBITDA included the full effect of the cost saving measures? The positive impact can be very higher on H2 cost structure? And last question on M and A specifically, after the acquisition of Krebis that you just talked about, could you consider a bigger M and A operation in the coming months or quarters or regarding Broadway's LHC balance sheet? Thank you.
Okay. So your first question was about the growth and where does it come from. I would say several activities. For sure, material are performing well. On one side from the installed base, which is growing.
And on the other side, also on the growth of our partners to whom we sell the resin. 2nd, the software integration division is also performing well. And last, the medical application, especially audiology, is performing well also, driven by the new regulation in France driving this market because now the level of reimbursement of hearing aids has significantly increased. Your last question was external growth, and I talked about your last question because I don't remember the second one. But Laurent will answer to that.
About acquisition, we are not looking at big acquisition for the moment. We could, but we have nothing active on this side. We are facing a significant problem is that the valuation are significantly high and higher than the one of Broadway. So when we are dealing with most of the valuations, especially when you look at the U. S, are 2 or 3 times the valuation of Broadways, which is a kind of drawback when you are targeting bigger acquisition.
And your point was about the also the effect of cost reduction. Most of the effect is already in H1, yes.
The full impact will be on H2.
Okay. Thank you. It's very clear. Maybe an additional question going back on the EarWing Aid that you just mentioned. Do you have an idea of your market share in this segment?
Yes, between 70% to 80% in France.
Okay.
And this is a local business. We are almost selling nothing outside France.
Okay. Thank you very much.
Okay. Thank
you, sir. Next question is from Mr. Patrick Swamington from Exane BNP Paribas. Sir, please
go ahead. Hi, gentlemen. Thank you very much for taking my questions. I had 3 as well for the time being. The first question was on sustainability.
So you clearly made some very notable progress during the first half of the year to improve your Gai score by 8 points. Could you walk through any of the other measures that you have in play? And what could be the potential in the coming years to improve that score?
Yes. Okay. You want to have your 3 questions now or we do it 1 by 1?
Sure. Okay. I can ask the other 2 as well. The second question was on audiology. So I appreciate that there's been some changes in legislation and how consumers can recoup the cost of hearing aids.
So what I wanted to understand was because this is quite a new initiative, have you reached the full peak of order flow yet given that you have such a massive market share? Or is it still going to grow in the coming quarters to reach its full potential? And then the third question was on expansion into new areas such as optics. What would it take to execute on growth? So do you have the capacity available?
Is it all about just marketing your capabilities to potential customers or waiting for the market to grow? Some color there would be useful. Thank you.
Okay. I will take the last two one and Hugo will answer your question about sustainability. New expansion in new markets like optics depends on many parameters, but most of the key factors are located in the market itself and in the player. The technology is ready. We still have some improvements.
But in an industrial process, it takes very long time to validate all the parameters. Typically, on the optics side, I already have seen some lenses which are perfectly transparent. But the question is, will they remain transparent after 3 years under the sun typically? Or will they resist to different shocks or things like that. So I think that we are not so close to a launch of this application, but the good news is that the partner we have, which is Silar, has confirmed that the only technology which is able to reach this target is the Broadway's Moving Light.
So I have no clear view on this. But to answer, if this technology was adopted at large scale, yes, we would be able to produce and deliver because we will probably have time to prepare ourselves. On the Audiology side, I don't know if the peak is reached. It is still growing for the moment, and we are facing some internal difficulties to ramp up the production, but not huge difficulties. So I cannot tell you that.
But we don't see, for the moment, a downturn in this flow. I think that the market is supposed to double or something like that, thanks to this new regulation. And for sustainability, Goh will take the answer.
On as you noted, we improved our grade significantly in the past year. What we are working on now to go further is on several targets, context targets on each of the topics of environmental, social and governance, especially environmental and social actually to implement at 5 years horizon. So it would be a target on reduction of carbon emissions and reduction of the turnover specifically in our which is a major topic in the company.
Thank you. And I would add one general comment on this topic. We understand more clearly your concern, I mean, you on the analyst side or investor. And the conclusion would be, we want to help you to improve the grades of your funds. So basically, we will work on this because it's an important topic for the company and we have also to match the criteria to improve the grade because better grade meet more means more investor potentially interested in Broadway.
So we will work hard on this and this will deliver results.
Excellent. Thank you.
Thank you, sir. We have no other questions. Next question is from Mr. Auguste Stanfossier from Bartolomex. Sir, please go ahead.
Yes. Thank you. Just one question regarding the path of recurring revenues in the mix. Can you give us some color about the evolution of this part in the short term, meaning 2022 2020 3? Thank you.
To be honest, I don't have the answer, but my guess is that it has evolved steadily, I mean, in a normal pace. The more we sell material, the more we sell software, the more we have recurring business. And because those businesses are growing a little bit faster than machine, for example, or less recurring part of our business. But I don't expect it reach in the coming years significantly higher level than that.
Okay. Thank you. That's very clear.
No. The only evolution that we could see in the coming years would be if the serial production represent in the higher part of the part production activity. And we are working on it. Okay.
Thank you.
Thank you.
Thank you, sir. Next question is from Mr. Katik Swaminathan from Exane BNP Paribas. Please go ahead.
Hi. Just to move back with 2 more. So the first was just a little bit of clarification on the profit or margin guidance. So do I understand this as the contribution margin because I presume there should be some operational leverage factors to consider for the second half? Or is this on a reported EBITDA margin basis?
And then the second question is probably a little bit more complicated, but I wanted to understand whether the Materials division is still ramping up its sales to the installed base of machines that you have sold? Just as an idea of how we can understand the lead time from installing a machine and what the potential sales are a given machine from your Materials division.
Okay. Understood. Okay. Your first question about profit margin, we expect a quite not such big difference in overall value of the turnover on the H1. So in terms of percentage or absolute value, we are talking means more or less the same.
I don't know if it answer to your question. And the second question about the ramp up of material sale after installed base. I have to clarify something. The increase of material comes from 3 different origins. First one is the increase of the number of installed machine.
2nd is the increase of the production of our client. Typically, this is what we had last year. Customer didn't purchase many machines, but they increased the usage of their machine, typically working into shifts. And the 3rd growth potential is coming from the 3rd party player who are buying our resin to put in their machine because those players are not able to develop by themselves those resin and they are buying our resin or recommending our resin for their customer. But typically, once you have sold the machine, it might take, let's say, 3 months before they handle the machine properly at full capacity.
And then after, they can increase again the level of consumption by producing more or improving their design or working in many, many shifts shift, 1 or 2 shift per day. This is the answer I have for this.
Got it. That's very clear. Thank you very much.
Thank you.
Thank you, sir. We have no other questions. We have another question from Mr. Toma Ronno from Gilbert DuPont. Sir, please go ahead.
Yes. Okay. Thank you. Just one question for me on your 2021 guidance. Can you give us the potential impact of Klabinet in this in the guidance of first 20% growth?
Thank you.
Yes. Krebis, we expect that Krebis will contribute from something like €1,500,000 on H2.
Okay. Thank
you. We have no other questions. Back to you for the conclusion.
Well, thank you all of you for attending this presentation. And our next meeting is on October 28 for the Q3 report. Thank you. Goodbye.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.