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Gemplus

Gemplus Reports Strong Third Quarter 2004 Results

Luxembourg (ots/PRNewswire)

    Third quarter highlights:
    - Group revenue up 13.0% year-on-year and 20.5% year-to-date
    - Operating income before restructuring and goodwill further improved to
      10.5 million euros
    - Net loss, at 8.5 million euros, reflecting the final step of
      restructuring
    - Free cash flow(1) of 9.5 million euros
Gemplus International S.A. (Euronext: LU0121706294 - GEM and
NASDAQ:  GEMP), the world's leading provider of smart card solutions,
today reported  results for the third quarter ended September 30,
2004.
    In millions of euros      Q3    Q2   Quarter-on-quarter  Q3  Year-on-year
                             2004  2004        change       2003     change
    Net sales                214.7 210.5       +2.0%        190.0    +13.0%
    Adjusted for currency                      +2.2%                 +15.5%
    fluctuations, discontinued
    operations and acquisitions
    Gross profit             64.0  68.0        -6.0%        54.4     +17.6%
    Gross margin as a % of   29.8% 32.3%     -2.5 ppts      28.6%  +1.2 ppts
    sales
    Operating income before  10.5   8.5        +23.1%        0.0       NM
    restructuring and
    goodwill
    Net income (loss)        -8.5   1.1          NM         -13.1      NM
                            Per share data (in euros)
    Earnings (loss) per      -0.01 0.00          NM         -0.02      NM
    share (fully diluted)
                         Main items of the Balance Sheet
    Cash and cash            389.2 383.1       +1.6%        356.6    +9.2%
    equivalents
                      Main items of the Cash Flow Statement
    Free cash flow (1)          9.5  -0.6          NM         -39.5      NM
    Net cash flow             6.0  -1.4          NM         -49.8      NM
    Note: The consolidated financial statements of the Company have been
    prepared in accordance with International Financial Reporting Standards
    (IFRS).
Commenting on the performance for the third quarter 2004, Alex
Mandl, President and Chief Executive Officer, said: "We are pleased
to report continuous strong progress for the sixth consecutive
quarter. Revenue is up 20.5% year-to-date. This healthy growth
evidences Gemplus' ability to capture market opportunities and take
advantage of the strong momentum that we see in our core businesses."
    Third quarter 2004 financial review
    - Income statement
    Third quarter 2004 highlights:
      - Revenue up 13.0% year-on-year (+15.5% currency adjusted(2)) and up
        2.0% quarter-on-quarter (+2.2% currency adjusted), year-to-date up
        20.5%
      - Gross margin: 29.8% up 1.2 percentage points year-on-year. Compared
        to previous quarter, it reflects pricing pressure not fully offset
        by mix improvement. Year-to-date gross margin at 31.0%, up 3.9
        percentage points
      - Operating income before restructuring and goodwill(3) up 23.1%
        quarter-on-quarter, to 10.5 million euros; up 65 million euros
        year-to-date to 23.8 million euros
In the third quarter, Gemplus enjoyed strong year-on-year sales
growth, especially in Wireless and Financial Services. On a
geographical basis, revenue in the Americas rose 44.3% and EMEA(4)
grew 15.7%, while Asia was down 8.2%, currency adjusted.
Gross margin was up 1.2 percentage points compared with the third
quarter 2003 mainly driven by Telecom. However, gross margin for the
third quarter was down 2.5 percentage points compared with the second
quarter 2004, to 29.8%. This was mainly driven by pricing pressure
which, unlike in the second quarter, was not fully compensated by an
improvement in product mix. Year-to-date, gross margin was 31.0%, up
3.9 percentage points.
Operating expenses excluding restructuring and goodwill(5)
represented  24.9% of sales during the third quarter, compared to
28.3% for the previous  quarter and 28.6% a year ago. They decreased
10.1% quarter-on-quarter, to  53.5 million euros, reflecting mainly a
reduction in general and  administrative expenses and seasonality.
As a result, operating income before restructuring and goodwill
was up  10.5 million euros year-on-year and 2.0 million euros
quarter-on-quarter.  Year-to-date, operating income before
restructuring and goodwill was 23.8  million euros, up 65.0 million
euros.
Restructuring expenses were 8.6 million euros comprising a
provision of  14.3 million euros related to the planned restructuring
of operations in  Germany, partly compensated by a net reversal of
5.7 million euros mainly  related to the previous restructuring plan.
Consistent with previous  announcements, this provision reflects the
final step of the restructuring  plan which was presented in December
2002.
Operating loss was therefore 0.1 million euros including 1.9
million  euros of goodwill amortization.
Income tax charges were 6.6 million euros, of which 5.1 million
euros are one-time mostly non-cash items. This includes mainly a
charge of 3.0 million euros relating to the discounting of a carry
back of tax losses in France, and a partial write-down of deferred
tax assets.
The net loss for the third quarter, therefore, reflects
restructuring expenses and mostly non-cash income-tax charges.
- Balance sheet and cash flow statement
Third quarter 2004 highlights:
  • Free cash flow of 9.5 million euros(6)
  • Improved strong cash position at 389 million euros
The Group's cash position remains strong and is up 6.0 million
euros  compared to June 30, 2004, despite restructuring outflows of
2.7 million  euros. This increase was driven largely by the improved
level of profit from  operations.
    Segment analysis
    - Telecom
    Third quarter 2004 highlights:
      - Wireless revenue up 19.9% year-on-year (+23.1% currency adjusted)
      - Wireless shipments up 28.7% year-on-year, to 61.2 million units
    In millions of euros      Q3    Q2   Quarter-on-quarter  Q3  Year-on-year
                             2004  2004        change       2003     change
    Net sales                153.2 154.0       -0.5%        132.3    +15.8%
    Adjusted for currency                      -0.3%                 +18.7%
    fluctuations, discontinued
    operations & acquisitions
    Gross profit             51.7  55.1        -6.3%        39.7     +30.1%
    Gross margin as a % of   33.7% 35.8%     -2.1 ppts      30.0%  +3.7 ppts
    sales
    Revenue reflects the strong performance of wireless:
    - Wireless products & services revenue(7) was up 19.9% year-on-year
      (+23.1% currency adjusted), to 131.1 million euros, and up 37.7%
      year-to-date (+44.1% currency adjusted), to 393.3 million euros.
    - Third quarter wireless shipments grew 28.7% year-on-year to 61.2
      million units, and 2.7% quarter-on-quarter. Sales were particularly
      strong in Eastern Europe, Africa and Americas.
    - While the second quarter showed a strong improvement in product mix,
      the third quarter reflects a pause in this trend. High-end card
      shipments (including 64kb and above, as well as 3G) accounted for 29.9%
      of the total in the third quarter compared to 33.4% in the second
      quarter and 21.5% in the first quarter. This reflects strong growth in
      regions such as Eastern Europe and Africa, where the market is less
      oriented toward high-end cards, and the decision by some large
      operators to postpone orders to the fourth quarter, particularly of
      64 Kb cards.
    - Wireless average selling price (ASP) was down 4.6% sequentially and
      2.7% year-on-year, both currency adjusted, as pricing pressure was not
      fully compensated by mix improvement, unlike in the second quarter.
    - Financial Services
    Third quarter 2004 highlights:
      - Revenue up 10.7% year-on-year (+11.9% currency adjusted), driven by
        the EMV(8) migration
      - EMV roll out gained momentum in France, Turkey, Malaysia and
        Singapore
    In millions of euros      Q3    Q2   Quarter-on-quarter  Q3  Year-on-year
                             2004  2004        change       2003     change
    Net sales                53.0  44.7        +18.5%       47.9     +10.7%
    Adjusted for currency                      +18.8%                +11.9%
    fluctuations, discontinued
    operations & acquisitions
    Gross profit             10.1   8.8        +14.2%       12.6     -20.5%
    Gross margin as a % of   19.0% 19.7%      -0.7 ppt      26.4%  -7.4 ppts
    sales
Revenue growth was primarily driven by the EMV migration. Payment
microprocessor card revenue rose 24% year-on-year and 47%
quarter-on-quarter.
Shipments were strengthened by a one-time customer renewal program
in the UK and favorable seasonality in Germany. The EMV roll-out
gained momentum in Continental Europe (France & Turkey) and Asia
(Malaysia & Singapore).
Payment microprocessor card revenue growth was partly offset,
however, by lower sales in other segments.
- Identity and Security
Third quarter 2004 highlights:
- Revenue down 13.9% year-on-year (-10.7% currency adjusted),
        reflecting project cycles
    In millions of euros      Q3    Q2   Quarter-on-quarter  Q3  Year-on-year
                             2004  2004        change       2003     change
    Net sales                 8.5  11.8        -28.2%        9.8     -13.9%
    Adjusted for currency                      -28.2%                -10.7%
    fluctuations, discontinued
    operations & acquisitions
    Gross profit              2.2   4.1        -45.4%        2.0     +11.2%
    Gross margin as a % of   26.6% 34.9%     -8.3 ppts      20.6%  +6.0 ppts
    sales
While the second quarter showed strong sales of subsystems, the
third quarter reflects a low in project cycles. Because Identity and
Security is still an emerging market and the Company recognizes
revenue from software and systems under the percentage of completion
method, a linear trend in quarterly revenue should not be expected
due to the often long completion cycles for these projects.
Gemplus continues to recognize a large number of market
opportunities which confirms the growth potential of this business.
Outlook
For the remainder of the year, the Company's financial
performance should continue to benefit from favorable market trends,
notwithstanding continuous selling price pressure.
Considering the third quarter results and given the current
outlook for exchange rates, Gemplus revises upward its operating
income before restructuring and goodwill guidance for 2004, from 30
million euros to 35 million euros.
For 2005, the Group continues to see strong momentum in its core
markets and will pursue its focus on cost efficiency. Gemplus
therefore expects a further improvement in operating income before
restructuring and goodwill.
Accounting methods  Gemplus' financial statements are prepared in
accordance with IFRS since the Company's initial public offering in
2000. Therefore, the Company will implement certain IFRS changes
which are applicable as of January 1, 2005. The main changes will be:
- Stock options compensation accounting (IFRS 2): stock-based
      compensation will be expensed in cost of sales and operating expenses.
      The expense will be measured at grant date, based on the fair market
      value of the related options, using either a Black & Scholes or a
      binominal-like model, and will be recognized over the vesting period of
      the options
    - Goodwill amortization (IAS36): Goodwill on acquisitions will no longer
      be amortized but will be tested for impairment
Business Highlights
- Telecom
In North America, ATT Wireless expanded its UMTS network to reach
6 US cities and Cingular announced a request for proposal for UMTS
equipment. In addition, Gemplus successfully launched a SIM-server
solution which relies on a SIM applet that monitors handset
information.
In Latin America, many operators confirmed their migration to
high-end cards (64Kb and above) and adoption of OTA technology
continued to expand with the successful installation of 4 device
management platforms.
In China, the role of the card is increasingly recognized as going
beyond the traditional scope of authentication and identification,
with China Mobile using the SIM to promote services to particular
market segments, including youth and VIP. Services based on SMS, such
as SMS Organizer, served to increase SMS data revenue from targeted
youth market segments.
For the 3G market, Gemplus continued to deliver USIM cards for
first launches across the world, with mass deliveries to Sweden and
Germany.
Gemplus invested in SoloMio, a visionary leader in next-generation
Smart Call services and technology, to bring call completion
solutions to operators. Combining the smart card technology with
SoloMio's solutions enables mobile operators to successfully drive
more calls to a billable conclusion, increasing the operator's
profitability and the average revenue per user by capturing revenue
normally lost to uncompleted calls. In addition, these
operator-branded services enhance customer satisfaction and loyalty.
- Identity and Security
Gemplus was presented the 2004 Frost & Sullivan Award for Market
Leadership in the smart card reader market. A leading player in this
market, Gemplus had significant growth in 2003 smart card reader unit
shipments, which enabled the Company to become the leading player in
this highly competitive market segment (source: 2004 Frost &
Sullivan).
Earnings calendar
Fourth quarter and fiscal year 2004 results are scheduled to be
reported on February 9, 2005, before the opening of Euronext Paris.
Conference Call:
The company has scheduled a conference call for Wednesday, 27
October 2004 at 3:00 pm CET (2:00 pm London time and 9:00 am New-York
time). Callers may participate in the live conference call by
dialing:
+44 (0) 207 784 1020 or +1 718 354 1157, access code 310896.
The slide show will be available on the web site at 1:30 pm CET
(12:30 London time). The live conference call will also be available
on the IR section of www.gemplus.com.
Replays of the conference call will be available approximately 5
hours after the conclusion of the conference call until 2 November
2004 midnight by dialing:
+44 (0) 207 984 7578 or +1 718 354 11 12, access Code: 310896#.
About Gemplus
Gemplus International S.A. (Euronext: LU0121706294 - GEM and
NASDAQ: GEMP) is the world's leading player in the smart card
industry in both revenue and total shipments (source:
Gartner-Dataquest (2004), Frost & Sullivan, Datamonitor.). It has
sold over 4 billion smart cards.
With security at its core, and 2400 patents produced by its
innovative R&D team, Gemplus delivers a wide range of portable,
personalized solutions in areas including Identity, Mobile
Telecommunications, Public Telephony, Banking, Retail, Transport,
Healthcare, WLAN, Pay-TV, e-government, and access control.
Gemplus' revenue in 2003 was 749 million euros.
www.gemplus.com
(c)2004 Gemplus. All rights reserved. Gemplus, the Gemplus logo,
are trademarks and service marks of Gemplus S.A. and are registered
in certain countries. All other trademarks and service marks, whether
registered or not in specific countries, are the property of their
respective owners.
Some of the statements contained in this release constitute
forward-looking statements. These statements relate to future events
or our future financial performance and involve known and unknown
risks, uncertainties, and other factors that may cause our or our
industry's actual results, levels of activity, performance or
achievements to be materially different from any future results,
levels of activities, performance, or achievements expressed or
implied by such forward-looking statements. Actual events or results
may differ materially. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot
guarantee future results, levels of activity, performance or
achievements. Factors that could cause actual results to differ
materially from those estimated by the forward-looking statements
contained in this release include, but are not limited to: trends in
wireless communication and mobile commerce markets; our ability to
develop new technology, and the effects of competing technologies
developed and expected intense competition generally in our main
markets; profitability of our expansion strategy; challenges to or
loss of our intellectual property rights; our ability to establish
and maintain strategic relationships in our major businesses; our
ability to develop and take advantage of new software and services;
and the effect of future acquisitions and investments on our share
price. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of such
forward-looking statements. The forward-looking statements contained
in this release speak only as of this release. We are under no duty
to update any of the forward-looking statements after this date to
conform such statements to actual results or to reflect the
occurrence of anticipated results.
                            Gemplus International SA
                    Press Release - Financial statements
                For the quarterly period ended September 30, 2004
    Condensed Consolidated Statements of Income
                     (In thousands of euros, except share and per share data)
                                  Three months ended       Nine months ended
                                      September 30,           September 30,
                                    2004        2003        2004        2003
                                     (unaudited)             (unaudited)
    Net sales                    214,665     189,974     622,492     516,594
    Cost of sales               (150,702)   (135,603)   (429,255)   (376,732)
    Gross Profit                  63,963      54,371     193,237     139,862
    Research and development
     expenses                    (15,253)    (15,850)    (47,699)    (52,979)
    Selling and marketing
     expenses                    (23,982)    (23,230)    (74,364)    (73,692)
    General and administrative
     expenses                    (14,250)    (15,264)    (47,411)    (54,411)
    Restructuring expenses        (8,638)     (7,242)     (8,611)    (52,701)
    Operating income (loss)
     before goodwill               1,840      (7,215)     15,152     (93,921)
     amortization and impairment
    Goodwill amortization and
     impairment                   (1,926)     (1,969)     (5,748)    (31,135)
    Operating income (loss)          (86)     (9,184)      9,404    (125,056)
    Financial income (expense),
     net                           1,482       1,649       4,289       6,984
    Other income (expense), net   (3,380)     (4,566)    (10,548)    (11,552)
    Income (loss) before taxes    (1,984)    (12,101)      3,145    (129,624)
    Income taxes provision        (6,551)       (950)    (10,277)     (3,717)
    Net loss                      (8,535)    (13,051)     (7,132)   (133,341)
    Net loss per share
      Basic                        (0.01)      (0.02)      (0.01)      (0.22)
      Diluted                      (0.01)      (0.02)      (0.01)      (0.22)
    Shares used in net loss per
     share calculation
      Basic                606,882,853  605,614,830  606,584,841  605,643,561
      Diluted              606,882,853  605,614,830  606,584,841  605,643,561
Condensed Consolidated Balance Sheets
                                                       (in thousands of euros)
                                              September 30,     December 31,
                                                      2004             2003
    Assets                                      (unaudited)
    Current assets:
    Cash and cash equivalents                       389,186         390,684
    Trade accounts receivable, net                  153,287         154,727
    Inventory, net                                  141,046          98,673
    Other current assets                             70,970          82,675
    Total current assets                            754,489         726,759
    Non-current assets:
    Property, plant and equipment, net              155,941         175,706
    Goodwill, net                                    28,436          37,727
    Other non-current assets                        120,864         113,047
    Total non-current assets                        305,241         326,480
    Total assets                                  1,059,730       1,053,239
    Liabilities
    Current liabilities:
    Accounts payable                                105,024          95,582
    Accrued liabilities and other                   166,889         135,505
    Current obligations under capital leases          5,971           5,928
    Total current liabilities                       277,884         237,015
    Non-current liabilities:
    Long-term obligations under capital leases       35,474          38,893
    Other non-current liabilities                    47,137          70,246
    Total non-current liabilities                    82,611         109,139
    Minority interest                                12,699          12,073
    Shareholders' equity:
    Ordinary shares                                 128,567         127,889
    Paid in capital                               1,031,491       1,028,849
    Retained earnings                             (471,366)       (464,221)
    Other comprehensive income                        (171)           4,570
    Less, cost of treasury shares                   (1,985)         (2,075)
    Total shareholders' equity                      686,536         695,012
    Total liabilities and shareholders' equity    1,059,730       1,053,239
Condensed Consolidated Statements of Cash Flows
                                                      (in thousands of euros)
                                              Nine months ended September 30,
                                                           2004          2003
                                                    (unaudited)   (unaudited)
    Cash flows from operating activities:              (7,132)      (133,341)
    Net loss
      Depreciation and amortization                      43,905        76,603
      Loss on sale and disposals of assets                  827           454
      Other adjustments to reconcile net income
       to net cash from                                   8,365         9,324
      operating activities
      Change in trade accounts receivable and
       related accounts                                 (3,123)         1,439
      Change in trade accounts payable and
       related accounts                                  23,491         4,780
      Change in inventories                            (38,599)      (13,436)
      Other changes in operating activities              25,472         1,676
      Reduction of workforce and other exit
       costs, provision                                   7,649        47,635
      Reduction of workforce and other exit
       costs, cash outflow                             (21,659)      (45,709)
      Restricted cash on litigation                    (21,952)             -
      Litigation expenses                                     -             -
      Management severance expenses                           -             -
    Net cash (used in) from operating activities         17,244      (50,575)
    Cash flows from investing activities:
      Sale / (Purchase) of activities net of cash
       disposed / (acquired)                                  -          114
      Purchase of property, plant and equipment        (15,239)      (9,378)
      Other changes in investing activities             (1,785)      (2,857)
    Net cash used in investing activities              (17,024)     (12,121)
    Cash flows from financing activities:
      Proceeds from sales-leaseback operations              957            -
      Other changes in financing activities             (3,886)      (3,282)
    Net cash used in financing activities               (2,929)      (3,282)
       Effect of exchange rate changes on cash            1,211        5,302
       Net decrease in cash and cash equivalents        (2,709)     (65,978)
       Cash and cash equivalents, beginning of period   390,684      417,226
    Cash and cash equivalents, end of period            389,186      356,550
    1) Accounting principles:
    The consolidated financial statements of the Company have been prepared
    in accordance with International Financial Reporting Standards (IFRS).
    2) Business segment reporting
    Third Quarter 2004 Compared with third Quarter 2003
    Net sales                                 Three months ended
                                                 September 30,
                                                2004     2003       % change
                                             (Millions of euros)
    Telecommunications........................ 153.2    132.3          16%
    Financial Services .......................  53.0     47.9          11%
    Identity and Security ....................   8.5      9.8         (13%)
    Total..................................... 214.7    190.0          13%
    Gross profit                               Three months ended
                                                 September 30,
                                                2004     2003       % change
                                             (Millions of euros)
    Telecommunications .......................  51.7     39.7          30%
    Financial Services .......................  10.1     12.7         (20%)
    Identity and Security ....................   2.2      2.0          10%
    Total...................................... 64.0     54.4          18%
    Nine Months 2004 Compared with Nine Months 2003
    Net sales                                 Nine months ended
                                                 September 30,
                                                2004     2003       % change
                                             (Millions of euros)
    Telecommunications........................ 453.9    366.2          24%
    Financial Services ....................... 138.0    123.0          12%
    Identity and Security ....................  30.6     27.4          12%
    Total..................................... 622.5    516.6          20%
    Gross profit                              Nine months ended
                                                 September 30,
                                                2004     2003       % change
                                             (Millions of euros)
    Telecommunications ....................... 156.5    109.2          43%
    Financial Services .......................  28.0     24.8          13%
    Identity and Security ....................   8.7      5.9          47%
    Total..................................... 193.2    139.9          38%
    3) Geographic reporting
    Third Quarter 2004 Compared with Third Quarter 2003
    Net sales                              Three months ended
                                                 September 30,
                                                2004     2003       % change
                                             (Millions of euros)
    Europe, Middle East and Africa............ 115.0     98.0          17%
    Asia......................................  44.5     50.9         (13%)
    Americas..................................  55.2     41.1          34%
    Total..................................... 214.7    190.0          13%
    Nine Months 2004 Compared with Nine Months 2003
    Net sales                                 Nine months ended
                                                 September 30,
                                                2004     2003       % change
                                             (Millions of euros)
    Europe, Middle East and Africa............ 320.9    277.3          16%
    Asia...................................... 147.8    130.3          13%
    Americas.................................. 153.8    109.0          41%
    Total..................................... 622.5    516.6          20%
[1] Free cash flow is defined as net cash flow from operating
activities less the purchase of property, plant and equipment and
other investments related to the operating cycle (excluding
acquisitions and financial investments).
[2] After adjusting for currency fluctuations, discontinued
operations and acquisitions.
[3] Operating income (loss) before goodwill amortization and
impairement, excluding restructuring expenses, is referred to as
operating income (loss) before restructuring and goodwill. Management
believes that presentation of this subtotal is relevant to
understanding Gemplus' financial performance. This pro forma measure
of performance should be read in conjunction with financial
statements prepared under Generally Accepted Accounting Principles.
[4] Europe, Middle-East and Africa
[5] Operating expenses excluding restructuring and goodwill
include research and development expenses, selling and marketing
expenses, and general and administrative expenses.
[6] Free cash flow is defined as net cash flow from operating
activities less the purchase of property, plant and equipment and
other investments related to the operating cycle (excluding
acquisitions and financial investments).
[7] Wireless products & services revenue comprises wireless
microprocessor cards and related applications (embedded software and
Over The Air platforms) and services (system integration and operated
services).
[8] EMV is a jointly defined set of specifications adopted by
Europay, MasterCard and Visa at the end of 1997 for the migration of
bank cards to smart card technology.

Contact:

For more information: Press Gemplus, Jane Strachey, Tel:
+33-(0)4-42-36-46-61, Mob : +33-(0)6-79-46-35-93, Email:
jane.strachey@gemplus.com; Investor Relations, Gemplus, Celine
Berthier, Tel: +41-(0)22-544-5054, Email:
celine.berthier@gemplus.com; Fineo, Tel: +33-(0)1-56-33-32-31, Email:
investors@gemplus.com; Edelman, Stephen Benzikie, Tel:
+44-(0)207-344-1325, Mob: +44-(0)774-003-8929, Email:
stephen.benzikie@edelman.com

Weitere Storys: Gemplus
Weitere Storys: Gemplus
  • 28.07.2004 – 07:01

    Gemplus Reports Second Quarter 2004 Results

    Luxembourg (ots/PRNewswire) - - Second quarter highlights: - Group revenue, up 22.1% year-on-year, sustained across all business segments and geographies. - Operating income further improved to 8.5 million euros (up 22.4 million euros year-on-year), before restructuring and goodwill(1). - Net income at 1.1 million euros (up 83.4 million euros year-on-year). - Cash remains strong at 383.1 million ...