Groupe Gorgé announces ECA merger alongside 20 percent revenue decrease in H1 2020

Groupe Gorgé, the French engineering group and parent company of 3D printer manufacturer and service provider Prodways Group, has reported a 20 percent revenue decline over H1 2020.

Despite the Group’s reduced revenue, it has announced its intention to complete the merger-absorption of its security technology subsidiary ECA. The move comes as part of the firm’s broader strategy to use its cash reserves of over €80 million, to re-invest in the most profitable areas of its business. 

For the six months ending June 30, 2020, Groupe Gorgé generated €108 million in consolidated revenue, a reduction of 20.2 percent compared to the €135.4 million reported in H1 2019. This figure includes a 35.2 percent drop over Q2 2020, indicating that the firm’s second quarter of 2020 was significantly more challenging than the first. 

The company’s share price decreased steadily in the two weeks prior to the results announcement, dropping from €12.60 to €11.10, as shareholders anticipated an overall decline in revenue. Since the publication of the firm’s financials, its shares have rebounded slightly to €11.36, but it remains to be seen how much its share price will recover. 

In a statement issued alongside the results, the company has stated that its revenue has been “severely affected by the COVID-19 pandemic.” According to Groupe Gorgé, the global lockdown in particular, has had a significant impact on its revenue performance, despite the business continuity plans it introduced earlier in the year. 

Group Gorgé and its 3D printing subsidiary Prodways both suffered revenue declines over H1 2020. Photo via Prodways.
Both Group Gorgé and its 3D printing subsidiary Prodways suffered revenue declines over H1 2020. Photo via Prodways.

Groupe Gorgé’s H1 2020 financial results

Revenue at Groupe Gorgé is reported across three main segments: Smart Safety Systems, Protection of High-Risk Installations, and 3D printing. Smart Safety Systems, which includes the Group’s revenue from its robotics, aerospace, and simulation products, contributes the largest share of the company’s consolidated revenue.

Over the first half of 2020, Smart Safety Systems generated €43.1 million in revenue, a 24.5 percent reduction compared to the €57.1 million reported in H1 2019. The company’s Protection of High-Risk Installations segment also saw a revenue decline in H1 2020, falling to €38.5 million, from the €43.5 million generated over H1 2019. 

Groupe Gorgé’s 3D printing division revenue for H1 2020 was €26.8 million, a 23.9 percent drop compared to the €35.3 million reported in H1 2019. The company’s overall products segment revenue fell a further 30.4 percent in H1 2020, which the firm attributed to the “adverse effects” of the ongoing pandemic.

(in € millions) H1 2020 H1 2019  Change (%)
Smart Safety Systems 43.1 57.1 -24.5
Protection of High-Risk Installations  38.5 43.5 -11.5
3D Printing 26.8 35.3 -23.9

During Q2 2020, Groupe Gorgé’s aerospace business was particularly badly affected by COVID-19, and this has been reflected in the wider sector. Boeing’s numbers were also impacted by the pandemic, while GE’s aviation revenue dropped from $8.5 billion in Q2 2019 to $3.7 billion in Q2 2020. 

Despite its overall drop in revenue, Groupe Gorgé maintains that its 3D printing sales have improved month-by-month, recovering significantly in June. Groupe Gorgé’s traditionally strong audiology and dental revenue streams were badly affected by the closure of medical practices in April. As medical practitioners have begun trading again, the firm has reportedly seen these areas return to near-pre-pandemic trading levels. 

Group Gorge's revenues from its dental and medical businesses were badly hit by the European lockdown. Photo via Group Gorge.
Groupe Gorgé’s revenues from its dental and medical businesses were badly hit by the European lockdown. Photo via Groupe Gorgé.

Is Prodways bouncing back from COVID-19?

Groupe Gorgé’s 3D printing subsidiary Prodways has also reported a decrease in its overall revenue, falling from €35.3 million in H1 2019, to €26.8 million. Although this represents a decline of 23.9 percent, the company’s software distribution activity improved significantly towards the end of Q2 2020. 

Prodways won its largest ever software contract during the second quarter, and its Solidscape subsidiary signed two new deals, to equip its customers in the jewelry sector with several dozen machines. Group Gorgé has also stated that its Systems business showed “strong resilience,” with its Earnings Before Interest and Tax (EBIT) up 5.6 percent during the first half of 2020. 

The Group’s systems sales have been built on an improved order backlog generated during Q2 2020. As of June 30th 2020, the company’s backlog across all its divisions stood at €617 million, which was 2.6 percent higher than it was on March 31st 2020. According to Groupe Gorgé, this “momentum throughout the period” has prepared the group well for a strong recovery in H2 2020. 

Group Gorgé’s expansion potential in H2 2020  

Since the COVID-19 outbreak, Groupe Gorgé has implemented cost savings and industrial facility streamlining initiatives in an attempt to mitigate its impact to some extent. Although the pandemic affected the demand for the company’s products, this was partially offset by government-supported furloughing across all the company’s divisions. 

Over the summer, the Group also conducted an in-depth review into the value of its assets, writing off €8.5 million in inventory, research projects, and goodwill impairment in the process. Moving forwards, the company has committed to continuing with its restructuring and cost-savings initiatives, as well as seeking further government aid in Germany, France and the United States.

As Group Gorgé moves into H2 2020, it remains focused on its industrial activities which involve “high-technological content.” Having recently earned a €20 million contract within its Smart Safety Systems division, the Group now has €80 million in cash reserves, making it well-placed to take advantage of any potential acquisition opportunities. 

With this in mind, Group Gorgé has announced its intention to fully-absorb its subsidiary ECA, bringing potential cost-reductions and eliminating the dual listing of the companies. The deal was approved by the ECA’s board of directors on September 21st 2020, and follows the Group’s acquisition of Interdam, which it completed earlier this year. 

In H2 2020, Group Gorgé has committed to identifying further opportunities for growth, as it attempts to build on its “most promising activities.”

“With nearly €80 million in available cash and cash equivalents, the Group has never been in a better position to seize acquisition opportunities that may arise in the current context,” stated the company. “The Group is refocusing on businesses with high technological content that will also translate into a strengthening of the Group’s most promising activities.”

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Featured image shows the DLP head of a 3D printer produced by Group Gorgé’s subsidiary Prodways. Photo via Prodways.