Gemplus

Gemplus Reports Further Sales Growth in the Second Quarter 2006

    Luxembourg (ots/PRNewswire) -

    Second quarter 2006 highlights:

    - Net sales up 4.7% showing good growth in ID & Security and Financial Services.

    - Gross margin at 32.0% reflecting strong price pressure in wireless.

    - Operating margin at 6.4%, sustained by good control of operating expenses.

    - Attributable net income: 15.1 million euros.

    - Distribution of reserves for 164.4 million euros to shareholders.

    - Gemalto combination ongoing: tender offer open until August 14, 2006.

    - Gemalto integration process well on-track.

    Gemplus International S.A. (Euronext: LU0121706294 - GEM and NASDAQ: GEMP), a world leading provider of secure card solutions, today reported results for the second quarter ended June 30, 2006.

@@start.t1@@      In millions of euros                            Q2 2006 Q2 2005    Year-on-year
                                                                                                    change
      Net sales                                                247.3    236.2            +4.7%
      Adjusted for currency fluctuations,                                        -2.4%
      disposals and acquisitions[1]
      Gross profit                                          79.0      80.0              -1.3%
      Gross margin                                          32.0%    33.9%         - 1.9 pt
      Operating expenses                                 63.2      57.6              +9.7%
      Operating income                                    15.8      22.4            -29.4%
      Operating margin                                    6.4%      9.5%          -3.1 pts
      Attributable net income[2]                    15.1      21.8            -30.7%
      Free cash flow[3]                                  -34.3    41.9                NM
      Cash and cash equivalents                      208.3    373.5          -44.2%
                                          Per share data (in euros)
      Earnings per share (fully diluted)        0.02      0.04            -33.5%@@end@@

    Creation of a global leader in digital security: the combination of Axalto and Gemplus to create Gemalto is effective since June 2, 2006, and the integration process is well on-track. The tender offer filed by Gemalto N.V. for the remaining securities issued by Gemplus will remain open until August 14, 2006.

    Second quarter 2006 financial review

    - Income statement

    Second quarter 2006 highlights:

    - Net sales up 4.7% showing good growth in ID & Security and Financial Services.

    - Gross margin at 32.0% reflecting strong price pressure in wireless.

    - Operating margin at 6.4%, sustained by good control of operating expenses.

    - Attributable net income: 15.1 million euros.

    Growth was driven by ID & Security and Financial Services, including good contribution from Setec.

    On a geographical basis, ID & Security and Financial Services drove a 8.3% year-on-year revenue growth in the Americas, after adjusting for currency fluctuations, acquisitions and disposals. Adjusted[4] net sales in Asia increased by 0.9%, year-on-year, and were down 10.4% in EMEA[5], due to Wireless.

    Gross margin was influenced by strong wireless price pressure, a shift in the business mix and the release of a provision for a patent claim.

    Operating margin was 6.4%, sustained by good control of operating expenses. Excluding the reversal of a 5.2 million euros litigation provision  booked last year, operating expenses were up only 0.6% year-over-year  despite the Setec acquisition; as a percentage of sales, they actually  decreased by 1.0 percentage point year-over-year.

    - Balance sheet and cash flow statement

    Second quarter 2006 highlights:

    - Free cash outflow of 34.3 million euros.

    - Net cash outflow of 201.6 million euros reflecting distribution of reserves to shareholders.

    The Group's cash position remains strong at 208.3 million euros. Compared to March 31, 2006, cash is down 201.6 million euros, largely due to a 164.4 million euros outflow related to the distribution of reserves (share premium) to shareholders. Free cash outflow of 34.3 million euros reflects an increase in accounts receivable due to strong sales in June and increased capital expenditures of 19.0 million euros in anticipation of strong volumes for the second half 2006.

    Segment analysis

    - Telecom

    Second quarter 2006 highlights:

    - Record shipments in wireless: volumes up 40% year-on-year, to 120 million units, driven by Asia.

    - Wireless ASP down 29.3% year-on-year, currency adjusted, reflecting fiercer competition following the announcement of the Gemalto combination.

@@start.t2@@      In millions of euros                                  Q2         Q2         %    Adjusted(4)
                                                                         2006    2005    change    change
                                                                                                                  (%)
      Wireless products & services net sales    150.6    150.2    +0.3%        -1.7%
      Wireless gross profit                                57.7      60.6      -4.7%
      Wireless gross margin                                38.3%    40.4%  -2.1 pts
      Prepaid phone cards & scratchcards net    11.6      13.0      -10.8%
      sales
      Prepaid phone cards & scratchcards            1.2        0.8      +43.1%
      gross profit
      Prepaid phone cards & scratchcards          10.2%    6.4%    +3.8 pts
      gross margin
      Telecom net sales                                      162.3    163.2    -0.6%        -1.9%
      Telecom gross profit                                 58.9      61.4      -4.1%
      Telecom gross margin                                 36.3%    37.6%  -1.3 pt
      Telecom operating expenses                        38.6      40.3      -4.3%
      As a % of sales                                         23.8%    24.7%  -0.9 pt
      Telecom operating profit                          20.3      21.1      -3.7%
      Operating margin                                        12.5%    12.9%  -0.4 pt@@end@@

    Wireless revenue:

    - Wireless products & services revenue[6] was up 0.3% year-on-year (down 1.7%, currency adjusted), to 150.6 million euros.

    - Wireless shipments grew 40% year-on-year, to 120 million units, largely driven by Asia, notably in China.

    - High-end card shipments (3G and above) grew 165%. They accounted for 14% of the second quarter total, compared to 7% a year ago. However, 3G remains concentrated on a limited number of operators.

    - Wireless average selling price (ASP) was down 4.8% quarter-on-quarter and 29.3% year-on-year, both currency adjusted. Improvement in product mix was fully offset by regional mix and heavy price pressure which intensified following the announcement of the Gemalto combination.

    The decline in Wireless gross margin reflects strong price pressure and regional mix. Wireless gross profit included a 6.1 million euros reversal of a provision for a patent claim.

    - Financial Services

    Second quarter 2006 highlights:

    - Growth driven by the contribution from Setec and the EMV[7] deployment.

@@start.t3@@      In millions of euros                    Q2 2006 Q2 2005 % change  Adjusted(4)
                                                                                                      change (%)
      Net sales                                        55.1      50.3      +9.5%         -1.2%
      Gross profit                                  12.0      10.2      +18.0%
      Gross margin as a % of sales         21.8%    20.3%  +1.5 pt
      Operating expenses                         12.3        7.3      +69.4%
      As a % of sales                              22.3%    14.4%  +7.9 pts
      Operating profit                            -0.3        2.9         NM
      Operating margin as a % of sales  -0.5%    5.8%    -6.3 pts@@end@@

    Payment microprocessor cards continued to grow very strongly, driven by broad activity in EMV deployment, particularly in Latin America and, to a lesser extent, Southern Europe and Asia.

    In total, Gemplus shipped 20.8 million units of payment microprocessor cards, up 24% year-on-year. Payment microprocessor card revenue rose 2% year-on-year. The decline in ASP reflects price pressure as well as a shift in the regional mix.

    Gross margin improved 1.5 percentage point due to lower chip purchasing prices.

    Excluding a reversal of a 5.2 million euros litigation provision booked last year, operating expenses were stable. As a result, operating profit was almost breakeven.

    - Identity and Security

    Second quarter 2006 highlights:

    - Revenue driven by Setec and other Government ID projects.

@@start.t4@@      In millions of euros                    Q2 2006 Q2 2005 % change    Adjusted(4)
                                                                                                        change (%)
      Net sales                                        29.9      22.7      +31.7%         -9.9%
      Gross profit                                    8.1        8.4        -4.1%
      Gross margin as a % of sales         26.9%    37.1%  -10.2 pts
      Operating expenses                         12.3      10.0      +22.7%
      As a % of sales                              41.2%    44.3%  -3.1 pts
      Operating profit                            -4.3      -1.6         NM
      Operating margin as a % of sales -14.2%    -7.3%  -6.9 pts@@end@@

    Revenue was driven by Setec and other Government ID projects. However, very strong sales in the second quarter 2005 led to a comparative decrease in sales, after adjusting for currency fluctuations, acquisitions and disposals.

    Gross margin was influenced by a less favourable business mix.

    The increase in operating expenses is mainly due to Setec.

    First half 2006 financial review

    - Net sales up 11.3%, driven by ID and Security and Financial Services.

    - Gross margin at 31.2% reflecting strong price pressure in wireless.

    - Operating margin at 5.1%, sustained by good control of operating expenses.

@@start.t5@@      In millions of euros                 H1 2006 H1 2005 % change  Adjusted(4)
                                                                                                  change (%)
      Net sales                                    477.6    429.3    +11.3%        +1.1%
      Of which Telecom                         310.6    307.5    +1.0%         -2.2%
      Of which Financial Services        111.5    88.2      +26.5%      +12.2%
      Of which ID & Security                55.5      33.6      +65.0%        +3.1%
      Gross profit                                149.2    141.9    +5.2%          NA
      Gross margin                                31.2%    33.1%  -1.9 pt         NA
      Operating expenses                      125.0    112.0    +11.6%         NA
      As a % of sales                          26.2%    26.1%  +0.1 pt         NA
      Operating profit                         24.2      29.9      -19.1%
      Operating margin                         5.1%      7.0%    -1.9 pt         NA
      Attributable net income              21.3      29.0      -26.4%@@end@@

    Sales in the first half 2006 grew 11.3% compared to a year ago, driven by ID and Security and Financial Services.

    On a geographical basis, all core activities drove a 15.8% revenue growth in the Americas, after adjusting for currency fluctuations, acquisitions and disposals. Adjusted revenue was down 3.1% in EMEA, and 8.9% in Asia, mainly due to Telecom.

    Gross margin was influenced by strong price pressure in wireless, a shift in the business mix, and Setec purchase accounting, despite the reversal of a provision for a patent claim for a total amount of 9 million euros.

    Operating margin was 5.1%, sustained by good control of operating expenses. Excluding the reversal of a 5.2 million euros litigation provision  booked last year, operating expenses grew 6.7% year-over-year reflecting the  Setec acquisition. As a percentage of sales, operating expenses decreased by  1.1 percentage point year-over-year.

    Outlook

    The Group continues to see strong momentum in its core segments and will maintain its focus on cost efficiency.

    Gemplus confirms that it is actively working to achieve 10% operating margin in 2007, before taking into account the effects of the combination with Gemalto.

    The Group remains confident in its ability to further improve its operating income in 2006 taking into account the usual seasonality effect of stronger organic growth in the second half than in the first half.

    Creation of Gemalto

    On June 2, 2006, Axalto and Gemplus announced a major step of their combination project to create Gemalto. The contribution in kind, by Texas Pacific Group and the Quandt family entities, of their interests in Gemplus International S.A. (in aggregate 43.4% of Gemplus share capital) to Axalto Holding N.V. was completed on the basis of 2 Axalto shares for every 25 Gemplus shares. On the same day, Axalto Holding N.V., renamed Gemalto N.V., filed a public exchange tender offer for the remaining shares and warrants issued by Gemplus. Prior to the contribution in kind, Gemplus had initiated the distribution of reserves (share premium) of EUR0.26 per share to all of its shareholders on record upon market close of the same day.

    On July 6, 2006, the offering document filed by Gemalto received the visa no. 06-252 from the "Autorité des Marchés Financiers" (AMF) in Paris, the French stock market authority. The public exchange tender offer initiated by Gemalto for the shares and warrants issued by Gemplus was opened on July 11, 2006, at the same exchange ratio of 2 Gemalto shares for every 25 Gemplus shares.

    This tender offer will remain open until August 14, 2006. The result of the offer should be published at the latest on August 25, 2006. On the basis of the current indicative timetable, it is envisaged that the settlement will occur on or about August 30, 2006.

    More information is available at: www.gemalto.com.

    This communication does not constitute an offer to purchase or exchange or the solicitation of an offer to sell or exchange any securities of Gemalto or an offer to sell or exchange or the solicitation of an offer to buy or exchange any securities of Gemplus.

    The exchange offer described above will not be made, directly or indirectly, in or into the United Kingdom, Italy, Netherlands, Canada, Australia, or Japan or in or into any other jurisdiction in which such offer, solicitation, sale or exchange would be unlawful prior to the registration or qualification under the laws of such jurisdiction. Accordingly, persons who come into possession of this communication should inform themselves of and observe these restrictions.

    You are strongly advised to read the offering circular relating to the exchange offer and related exchange offer materials regarding the transaction, as well as any amendments and supplements to those documents because they will contain important information. The prospectus/offer to exchange and the other documents are available are available from the Internet websites of the AMF (www.amf-france.org), of Gemalto N.V. (www.gemalto.com) and of Gemplus International S.A. (www.gemplus.com). You can obtain a free paper copy of the prospectus/offer to exchange and other related documents filed by Gemalto (ex-Axalto) upon request to the following:

    - Gemalto N.V.: Koningsgracht Gebouw 1, Joop Geesinkweg 541-542, 1096 AX Amsterdam, the Netherlands.

    - Axalto International S.A.S: 6 rue de la Verrerie, 92190, Meudon, France.

    - Deutsche Bank: 3 avenue de Friedland, 75008, Paris, France.

    - Gemplus International S.A.: 46A, avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg.

    US investors can obtain a copy of the US prospectus/offer to exchange and related offer materials from Mellon Investors Services LLC by telephoning to: +1-866-768-4951 (Call Toll Free) or: +1-201-680-6590 (Call Collect).

    Notice to US investors

    Any solicitation of offers to buy any Gemplus shares in the United States in the exchange offer will only be made pursuant to a prospectus/offer to exchange and related offer materials that Gemalto will make available to holders of Gemplus securities. Investors and security holders are strongly advised to read the prospectus/offer to exchange and related exchange offer materials, as well as any amendments and supplements to those documents because they will contain important information.

    The Gemalto securities referred to herein that will be issued in connection with the exchange offer have not been, and are not intended to be, registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered or sold, directly or indirectly, into the United States except pursuant to an applicable exemption. The Gemalto securities are intended to be made available within the United States in connection with the exchange offer pursuant to an exemption from the registration requirements of the Securities Act.

    The exchange offer will relate to the securities of a non-U.S. company and will be subject to disclosure requirements of a foreign country that are different from those of the United States. Financial statements included in the prospectus/offer to exchange will be prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of United States companies.

    It may be difficult for you to enforce your rights and any claim you may have arising under U.S. federal securities laws, since Gemalto and Gemplus have their corporate headquarters outside of the United States, and some or all of their officers and directors may be residents of foreign countries. You may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court's judgment.

    Business Highlights

    - Telecom

    Gemplus has been selected by 3 Italia as its exclusive supplier for USIM cards for the first world commercial Mobile TV service which was launched prior to the 2006 FIFA World Cup. GemXplore Generations cards provide high security for TV content delivered to mobile phones and therefore protect 3 Italia's Mobile TV revenue streams.

    Oi is delivering 128Kb SIM cards from Gemplus to all new subscribers in their Brazilian GSM network. Oi launched their GSM network in 2002 and the SIM has always played a key role in marketing their brand and value added services to all their customers which now number more than 9 million. This SIM offers new applications and content that optimize mobile phone use and promote Oi's products and services. 45% of Oi's data traffic now comes from easy-to-use SIM menus.

    - Financial Services

    Gemplus has been chosen by Commonwealth Bank of Australia for Australia's first MasterCard PayPass pilot. The six-month trial will be rolled out in New South Wales, with the first phase involving 33,000 cardholders who will be able to use their MasterCard PayPass cards at more than 150 participating merchants.

    - Identity and Security

    Gemplus has been selected as one of the main suppliers to deliver smart cards and personalization services for next generation e-healthcare nationwide patient cards in France. The contract calls for the supply of a minimum of 8 million cards over two years, with possible extension over two more years.

    Gemplus also won a contract for 3.7 million secure healthcare ID cards, software and services to Seguro Popular, one of the Mexican government's social security organizations, for patient data storage.

    Gemplus launched its SafesITe Government solution compliant with the US federal government's FIPS 201 regulations. Gemplus' SafesITe(TM) smart cards and software were first to receive US government certification. They are now ready to help US federal agencies to meet the HSPD-12 requirements for interoperability for government employees and contractors to access federal buildings and IT networks. As set forth in the presidential directive and regulations, all federal agencies must start to issue FIPS 201 compliant identity credentials by October 26 2006.

    Earnings calendar

    Third quarter 2006 results are scheduled to be reported on October 25, 2006, before the opening of Euronext Paris.

    Conference Call:

    The Company has scheduled a conference call for Thursday, 27 July 2006 at 2:00 pm CET (1:00 pm GMT and 8:00 am New-York time). Callers may participate in the live conference call by dialing:

    +44-(0)207-365-1847 or +1-718-354-1153 or +33-(0)1-71-23-04-17

    access code: 1752146

    The slide show will be available on the web site at 12:30 CET (11:30 GMT). The webcast will also be available on the IR section of www.gemplus.com.

    Replays of the conference call will be available approximately 3 hours after the conclusion of the conference call until August 10th, 2006 midnight by dialing:

    +44-(0)207-806-1970, or +1-718-354-1112 or +33(0)1-71-23-02-48

    access Code: 1752146#

    About Gemplus

    Gemplus International S.A. (Euronext: LU0121706294 - GEM and NASDAQ: GEMP) is a world leading player in the secure card industry in both revenue and total shipments (source: Gartner-Dataquest, Frost & Sullivan, Datamonitor).

    Gemplus delivers a wide range of portable, personalized solutions in areas including Identity, Mobile Telecommunications, Public Telephony, Banking, Retail, Transport, Healthcare, WiFi, Pay-TV, e-government, and access control.

    Gemplus's revenue in 2005 was 939 million euros.

    In June 2006, Gemplus and Axalto initiated their combination to form Gemalto, a leader in digital security.

    www.gemplus.com

    www.gemalto.com

    For more information:

@@start.t6@@      Press Gemplus                                    Investor Relations
      Remi Calvet                                        Gemplus
      Tel: +33-6-22-72-81-58                      Céline Berthier
      Email: remi.calvet@gemplus.com         Tel: +41-(0)-22-544-5054
                                                                Email: celine.berthier@gemplus.com
      Edelman
      Frédéric Boullard                              Fineo
      Tel: +33-(0)-1-56-69-73-95                Tel: +33-(0)-1-56-33-32-31
      Email:                                                Email: gemplus@fineo.com
      frederic.boullard@edelman.com@@end@@

    (c)2006 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 sectors; our ability to develop new technology, and the effects of competing technologies developed and expected intense competition generally in our main segments; 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.

    References:

    [1] Setec is consolidated starting June 1st, 2005

    [2] Net income attributable to equity holders

    [3] 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).

    [4] After adjusting for currency fluctuations, acquisitions and disposals.

    [5] Europe, Middle East, Africa

    [6] 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).

    [7] EMV is a jointly defined set of specifications adopted by Europay, MasterCard and Visa for the migration of bank cards to smart card technology.

@@start.t7@@                                            Gemplus International SA
                                Press Release - Financial statements
                            For the quarterly period ended June 30, 2006
          Gemplus
      International
              SA
      Consolidated
      Statements of
      Income
                          (in thousands of euros, except shares and per share amounts)
                                          Three months ended                         Six months ended
                                                  June 30,                                        June 30,
                                        2006                        2005            2006         2005
                                                (unaudited)                            (unaudited)
      Net sales                      247,265                 236,158        477,597         429,260
      Cost of sales              -168,263                -156,129      -328,367        -287,339
      Gross Profit                  79,002                  80,029        149,230         141,921
      Research and
      development expenses    -16,186                 -16,421        -32,144         -29,403
      Selling and
      marketing expenses        -31,284                 -28,679        -62,292         -54,387
      General and
      administrative
      expenses                        -16,775                 -12,352        -32,386         -28,453
      Restructuring
      expenses                              404                        478              471                916
      Other operating
      income (expense),
      net                                      636                      -666            1327              -718
      Goodwill
      amortization and
      impairment                              -                          -                 -                  -
      Operating income            15,797                  22,389         24,206          29,876
      Financial income
      (expense), net                 2,300                    1,681          4,551            3,477
      Share of profit
      (loss) of associates          -57                         -9                63              -833
      Other non-operating
      income (expense),
      net                                      432                      -266            -147                 98
      Income before taxes        18,472                  23,795         28,673          32,618
      Income tax expense         -3,619                  -1,242         -6,738          -2,946
      NET INCOME                      14,853                  22,553         21,935          29,672
      Attributable to:
      Equity holders of
      the Company                    15,092                  21,760         21,344          29,003
      Minority interest              -239                        793              591                669
      Net income per share
      attributable to
      equity holders of
      the Company (in
      euros)
      Basic                                 0.02                      0.04            0.03              0.05
      Diluted                              0.02                      0.04            0.03              0.05
      Shares used in net
      income per share
      calculation:
      Basic                      631,327,771          611,014,686 630,367,494  609,027,112
      Diluted                  650,564,398          624,130,718 650,367,494  623,269,017@@end@@

    Consolidated Balance Sheets

@@start.t8@@                                                                                  (in thousands of euros)
                                                                      June 30,            December 31, 2005
                                                                        2006
                                                                                 (unaudited)
      ASSETS
      Current assets:
      Cash and cash equivalents                         208,336                            418,365
      Trade accounts receivable, net                 201,045                            183,022
      Inventory, net                                          119,093                            107,673
      Derivative financial instruments                 7,403                                4,187
      Other current receivables                          55,028                              82,128
      Total current assets                                 590,905                            795,375
      Non-current assets:
      Property, plant and equipment, net          167,747                            158,284
      Goodwill, net                                              92,160                              90,826
      Deferred development costs, net                 21,215                              21,227
      Other intangible assets, net                      18,240                              23,600
      Deferred income tax assets                         27,151                              32,788
      Investments in associates                          13,603                              16,309
      Available-for-sale financial assets, net    2,469                                2,469
      Other non-current receivables, net            44,407                              40,846
      Total non-current assets                          386,992                            386,349
      TOTAL ASSETS                                              977,897                         1,181,724
      LIABILITIES
      Current liabilities:
      Accounts payable                                        109,331                            106,085
      Derivative financial instruments                 2,592                                2,592
      Salaries, wages and related items              46,800                              62,641
      Current portion of provisions and
      other liabilities                                        39,550                              73,434
      Current income tax liabilities                    4,727                                5,228
      Other current tax liabilities                    17,188                              20,821
      Current obligations under finance leases    5,397                                5,539
      Total current liabilities                         225,585                            276,340
      Non-current liabilities:
      Non-current obligations under
      finance leases                                            23,695                              26,425
      Non-current portion of provisions              15,111                              23,482
      Other non-current liabilities                    12,090                              13,417
      Deferred income tax liabilities                  2,693                                4,354
      Total non-current liabilities                    53,589                              67,678
      Shareholders' equity:
      Ordinary shares                                         134,001                            133,466
      Additional paid-in capital                        903,535                         1,063,145
      Retained earnings                                    (342,769)                        (365,940)
      Other comprehensive income                         (6,904)                          (4,407)
      Less, cost of treasury shares                    (1,395)                          (1,395)
      Equity attributable to equity
      holders of the Company                              686,468                            824,869
      Minority interest                                        12,255                              12,837
      Total shareholders' equity                        698,723                            837,706
      TOTAL LIABILITIES AND
      SHAREHOLDERS' EQUITY                                 977,897                         1,181,724@@end@@

    Consolidated Statements of Cash Flows

@@start.t9@@                                                                                      (in thousands of euros)
                                                                                          Six months
                                                                                              ended
                                                                                            June 30,
                                                                                2006                        2005
                                                                                              (unaudited)
      Cash flows from operating activities:
      Net income                                                  21,935                              29,672
      Adjustments to reconcile net income
      to net cash from operating
      activities:
      Depreciation, amortization
      and impairment                                            21,305                              18,990
      Changes in non-current portion
      of provisions and other
      liabilities, excluding restructuring        (8,636)                                  484
      Deferred income taxes                                  3,335                            (1,478)
      (Gain) / loss on sale and
      disposal of assets                                              -                                  418
      Share of (profit) loss of associates            ,210                                  772
      Share-based compensation                              1,828                                 1666
      Other, net                                                  (,124)                            (1,471)
      Changes in operating assets
      and liabilities:
      Trade accounts receivable and
      related current liabilities                    (24,946)                          (10,161)
      Trade accounts payable and
      related current assets                                (,347)                                4,375
      Inventories                                              (13,094)                              16,248
      Value-added and income taxes                    (6,243)                            (2,653)
      Salaries, wages and other                        (14,773)                          (13,111)
      Restricted cash                                            2,000                              23,427
      Restructuring reserve payable                  (2,224)                            (9,226)
      Litigation expense payable                                 -                                      -
      Management severance expense                              -                                      -
      Provision for a loan to a
      former director and executive                            -                                      -
      Net cash (used for) from
      operating activities                                (19,774)                              57,952
      Cash flows from investing activities:
      Sale / (Purchase) of activities
      net of cash disposed / acquired                  4,632                          (60,123)
      Other investments                                      (2,513)                                (758)
      Purchase of property,
      plant and equipment                                 (27,582)                            (8,981)
      Purchase of other assets                          (1,584)                                (850)
      Change in non-trade
      accounts payable and other                            ,878                                 2612
      Net cash used for investing activities  (26,169)                          (68,100)
      Cash flows from financing activities:
      Proceeds from exercise of share options      5,321                                1,256
      Payments on long-term borrowings
      Payments on long-term borrowings                  (60)                              (,138)
      Proceeds from sales-leaseback operations          -                                      -
      Principal payments on obligations
      under finance leases                                 (2,872)                            (2,952)
      Increase (decrease) in bank overdrafts        (979)                                (241)
      Dividends paid by subsidiaries
      to minority shareholders                          (1,881)                            (1,048)
      Changes in non-trade accounts
      payables on financing activities                      35                                  133
      Change in treasury shares                                  -                                      -
      Interests receivable on
      loans to senior management                                 -                                      -
      Cash paid to Shareholders                      (164,396)
      Net cash (used for) from
      financing activites                                (164,832)                            (2,990)
      Effect of exchange rate changes on cash        ,746                              (1765)
      Net increase (decrease) in
      cash and cash equivalents                      (210,775)                          (13,138)
      Cash and cash equivalents,
      beginning of the period                            418,365                            388,430
      Cash and cash equivalents,
      end of the period                                      208,336                            373,527@@end@@

    1) Accounting principles:

    The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS).

    2) Segment information

    2.1) Second Quarter 2006 compared with Second Quarter 2005

    2.1.1) Operating Segments

@@start.t10@@      Three months ended                                                    (in millions of euros)
                                      June 30,                  June 30,
      Net sales                    2006                    2005    % change         Adjusted
                                                                                                    change (%) (1)
      Telecommunications      162.3                  163.2            -1%            -2%
      Financial Services        55.1                    50.3            10%            -1%
      Identity and Security  29.9                    22.7            32%          -10%
      Total                          247.3                  236.2              5%            -2%
                                                                                        (in millions of euros)
                                      June 30,  (% of net June 30,  (% of net
      Gross profit                 2006        sales)  2005        sales)        % change
      Telecommunications        58.9            36%  61.4            38%            -4%
      Financial Services        12.0            22%  10.2            20%            18%
      Identity and Security    8.1            27%    8.4            37%            -4%
      Total                            79.0            32%  80.0            34%            -1%
                                                                                        (in millions of euros)
                                      June 30,  (% of net June 30,  (% of net
      Operating expenses        2006        sales)  2005        sales)        % change
      Telecommunications    (38.6)            24% (40.3)            25%          -4%
      Financial Services    (12.3)            22%  (7.3)            14%          69%
      Identity and Security(12.3)            41% (10.0)            44%          23%
      Total                         (63.2)            26% (57.6)            24%          10%
                                                                                        (in millions of euros)
                                      June 30,                  June 30,        Change in Operating
                                                                                                      income
      Operating income (loss) 2006                    2005                         (loss)
      Telecommunications        20.3                    21.1                            (0.8)
      Financial Services      (0.3)                      2.9                            (3.2)
      Identity and Security (4.3)                    (1.6)                          (2.7)
      Total                            15.8                    22.4                            -6.6
      (1) Adjusted for currency fluctuations, disposals & acquisitions@@end@@

    2.1.2) Geographical Segments

@@start.t11@@      Three months ended                                                    (in millions of euros)
                                                         June    June
                                                          30,      30,                 Adjusted change (%)
      Net sales                                    2006    2005 % change                            (1)
      Europe, Middle East and Africa 122.7  121.0          1%                          -10%
      Asia                                            43.0    41.6          3%                              1%
      Americas                                      81.6    73.6         11%                              8%
      Total                                         247.3  236.2          5%                            -2%@@end@@

    2.2) First-half 2006 compared with First-half 2005

    2.2.1) Operating Segments

@@start.t12@@      Six months ended                                                        (in millions of euros)
                                                 June 30,              June 30,                    Adjusted
                                                                                                          change (%)
      Net sales                                  2006                    2005 % change              (1)
      Telecommunications                  310.6                  307.5          1%          2%
      Financial Services                  111.5                    88.2         26%         12%
      Identity and Security                55.5                    33.6         65%          3%
      Total                                        477.6                  429.3         11%          1%
                                                                                        (in millions of euros)
                                                                 (% of                      (% of
                                                 June 30,      net  June 30,         net
      Gross profit                              2006 sales)         2005    sales)      % change
      Telecommunications                  111.0      36%        113.7         37%         -2%
      Financial Services                    22.5      20%         16.0         18%         41%
      Identity and Security                15.7      28%         12.2         36%         29%
      Total                                        149.2      31%        141.9         33%          5%
                                                                                        (in millions of euros)
                                                                 (% of                      (% of
                                                 June 30,      net  June 30,         net
      Operating expenses                    2006 sales)         2005    sales)      % change
      Telecommunications                 (76.9)      25%      (76.1)         25%          1%
      Financial Services                 (23.7)      21%      (17.7)         20%         34%
      Identity and Security            (24.4)      44%      (18.2)         54%         34%
      Total                                    (125.0)      26%    (112.0)         26%         12%
                                                                                        (in millions of euros)
                                                 June 30,              June 30,  Change in Operating
      Operating income (loss)            2006                    2005        income (loss)
      Telecommunications                    34.1                    37.6              (3.5)
      Financial Services                  (1.2)                  (1.7)                0.5
      Identity and Security              (8.7)                  (6.0)              (2.7)
      Total                                         24.2                    29.9              -5.7
      (1) Adjusted for currency fluctuations, disposals & acquisitions@@end@@

    2.2.2) Geographical Segments

@@start.t13@@      Six months ended                                                        (in millions of euros)
                                                         June    June
                                                          30,      30,                 Adjusted change (%)
      Net sales                                    2006    2005 % change                            (1)
      Europe, Middle East and Africa 244.7  220.4         11%                 -3%
      Asia                                            84.2    87.9         -4%                 -9%
      Americas                                    148.7  121.0         23%                 16%
      Total                                         477.6  429.3         11%                  1%@@end@@

    (1) Adjusted for currency fluctuations, disposals & acquisitions

ots Originaltext: Gemplus
Im Internet recherchierbar: http://www.presseportal.ch

Contact:
Press Gemplus, Remi Calvet, Tel: +33-6-22-72-81-58, Email:
remi.calvet@gemplus.com, Edelman, Frédéric Boullard, Tel:
+33-(0)-1-56-69-73-95, Email: frederic.boullard@edelman.com, Investor
Relations, Gemplus, Céline Berthier, Tel: +41-(0)-22-544-5054, Email:
celine.berthier@gemplus.com, Fineo, Tel: +33-(0)-1-56-33-32-31,
Email: gemplus@fineo.com



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