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Gemalto

Gemalto First Half 2006 Results

Amsterdam (ots/PRNewswire)

  • Revenue[1] Up 2% at Constant Exchange Rates (-1% at Current Exchange Rates)
  • Operating Margin1 at 3.7%, Reflecting Fierce Competition in Mobile Communication
  • Cash and Cash Equivalents at USD 478 Million
  • Continuing Challenging Industry Environment
  • Synergies and Long-Term Objectives Confirmed
Gemalto (Euronext NL0000400653 - GTO), a leader in digital
security, today announced its results for the half year ended June
30, 2006.
Highlights of the adjusted pro forma income statement1 (all
figures below are at current exchange rates):
    In millions of USD                   H1 2005  H1 2006     Year-on-year
                                                                 change
    Net sales                            1,047.0  1,035.9        -1.1%
    Gross profit                          342.2    313.7         -8.3%
    Gross margin (%)                      32.7%    30.3%       -2.4 ppts
    Operating expenses                    266.1    275.0         +3.4%
    Operating income                       76.1     38.7         -49.1%
    Operating margin (%)                   7.3%     3.7%       -3.6 ppts
    Profit for the period                  65.3     34.4         -47.3%
    Basic earnings per share (USD)         0.67     0.27         -59.5%
The above mentioned adjusted measures exclude business combination
accounting entries, and one-off expenses incurred in connection with
the combination with Gemplus (Nasdaq: GEMP). Gemalto believes these
measures are helpful in understanding its past financial performance
and  its future results. Adjusted financial measures are not meant to
be  considered in isolation or as a substitute for comparable IFRS
measures,  and should be read only in conjunction with the condensed
consolidated  interim financial statements prepared in accordance
with IFRS provided  in appendix.
Olivier Piou, Chief Executive Officer, commented: "I would like to
thank our shareholders for the outstanding success of the public
exchange offer: it demonstrates their endorsement of our vision to
create a global leader in digital security.
The integration is progressing smoothly and Gemalto is fully
focused on capturing growth opportunities and on realizing the
planned synergies that will both materialize progressively. Our work
since execution of the combination allows us to confirm the synergies
and long term financial objectives previously outlined.
Since the beginning of this year competitive pressure has been
intense. We expect that our market environment will remain
challenging in the coming months and we are adjusting to these
demanding circumstances.
Yet, the simultaneous global spread of communications systems,
mobile personal devices, and the internet, all requiring higher
levels of security, plays well for fully realizing our digital
security vision."
The Company's condensed consolidated interim financial
statements (unaudited) are prepared in accordance with International
Financial Reporting Standard (IFRS).
The pro forma income statement for the first half 2006 has been
prepared assuming that the combination with Gemplus had taken place
as of January 1, 2005, allowing the Group to present it in comparison
with the first half of 2005. The one-off, combination related items
are therefore charged to the first half 2005 pro forma income
statement, so that the first half 2006 income statement only reflects
the recurring intangible asset amortization charges resulting from
the accounting treatment of the transaction, as well as the
additional stock compensation charge arising from it.
Additional financial information on an adjusted pro forma basis is
presented that is not in conformity with IFRS, in particular the
presentation of cost of sales, operating expenses and operating
income, operating margin and earnings per share which exclude charges
arising from the accounting treatment of the combination and one-off
combination related expenses. Charges resulting from the accounting
treatment of the transaction consist of amortization of inventory
step-up, additional stock-based compensation due to the revaluation
of Gemplus' stock options as of combination date, amortization and
impairment of intangible assets. One-off combination related expenses
consist of professional advisory services incurred in connection with
the integration, new Gemalto brand and logo creation and worldwide
registration, as well as impairment charges related to capitalized
development costs on projects which are redundant with existing
products or technologies available in Gemplus. The Company believes
that this information, which is not in conformity with IFRS, is
helpful supplemental information in order to better understand its
past and future performance. In addition, the Company's management
uses this information in its own planning. This information provided
by the Company may not be comparable to similarly titled measures
employed by other companies.
The Company provides reconciliation between pro forma and adjusted
pro forma income statements which is displayed in tables at the end
of this press release. The IFRS consolidated income statement for the
first half 2006 shows operating loss of USD 9.7 million and net loss
of USD 6.4 million, and the pro forma income statement shows
operating income of USD 11.8 million and profit for the period of USD
13.4 million.
For a more detailed description of adjustments made to the IFRS
consolidated income statement, please refer to EXPLANATION OF
ADJUSTED AND PRO FORMA MEASURES at the end of this press release.
All comparisons in this document are at current exchange rates,
unless stated otherwise, and describe the evolution of the adjusted
pro forma first half 2006 information compared to that of the first
half 2005.
As of the third quarter 2006, the Company will adopt the euro
as its reporting currency.
As of the first quarter 2007, the Company will report full
financial results on a quarterly basis.
Adjusted pro forma income statement2 analysis
Extract of the adjusted pro forma income statement[2]:
                Six months ended June 30,  Six months ended June 30,
                           2005                       2006
                 USD millions   As a % of   USD millions   As a % of % change
                                   sales                      sales
    Revenue[3]      1,047.0                    1,035.9                 -1.1%
    Gross            342.2         32.7%        313.7         30.3%    -8.3%
    profit
    EBITDA[4]        125.1         11.9%         86.8         8.4%     -30.6%
    Operating        266.1         25.4%        275.0         26.6%    +3.4%
    expenses
    Operating         76.1         7.3%          38.7         3.7%     -49.1%
    income
    Profit for        65.3         6.2%          34.4         3.3%     -47.3%
    the period
At constant exchange rates, revenue was up 2%, reflecting varying
performance between market segments. Solid revenue growth in Identity
& Security and Secure Transactions was fully offset by the effect of
strong price pressure on Mobile Communication revenue. After
adjusting for the acquisition of Setec and currency fluctuations,
revenue was down 2 %.
On a geographic basis, revenue was up 3% in Asia, driven by
Identity & Security and Secure Transactions. In EMEA[5], revenue was
almost stable, while in the Americas revenue was down 6%.
Microprocessor card shipments grew 39% to 561 million units,
sustained by strong demand in all core segments.
Gross margin was 30.3% compared to 32.7% a year ago, due to
the lower performance in Mobile Communication.
Overall, operating expenses were up 3.4% including Setec. Research
& engineering and general & administrative expenses were stable,
while sales & marketing expenses were up 5.6%, due to increased field
marketing and customer support resources in the regions.
Consequently, operating income was USD 38.7 million and
operating margin was 3.7%.
Financial income was USD 7.0 million. The effective tax rate for
the period was 25%. As a result, profit for the period was USD 34.4
million.
Balance sheet and pro forma cash flow
Pro forma free cash flow[6] of the period was an outflow USD 90
million. Capital expenditure amounted to USD 50 million and USD 100
million were used by an increase in working capital requirement.
Payments of costs incurred in connection with the preparation and
execution of the combination amounted to approximately USD 14
million.
After the distribution of reserves (USD 212 million) to the
Gemplus shareholders prior to the execution of the first step of the
combination (EUR 0.26 per share), cash and cash equivalents remain
strong at USD 478 million as of June 30, 2006.
Segment information[7]
Mobile Communication performance impacted by strong price pressure
               Six months ended June 30,   Six months ended June 30,
                         2005                        2006
              USD millions   As a % of    USD millions   As a % of   % change
                               revenue                     revenue
    Revenue       672.8                       600.8                    -10.7%
    Gross         259.7         38.6%         200.4         33.3%      -22.8%
    profit
    Operating     164.7         24.5%         162.4         27.0%      -1.4%
    expenses
    Operating      95.0         14.1%          38.0          6.3%      -60.0%
    income
At constant exchange rates, Mobile Communication revenue was down
9%: the strong volume growth was not sufficient to fully compensate
for extreme price pressure.
SIM cards shipments for the first half 2006 were up 38% to 430
million units, driven by strong demand in Asia and in EMEA. Shipments
in the Americas show limited growth compared with a strong first half
2005.
The average SIM card selling price for the first half 2006 was
down 35% compared to the first half 2005, reflecting the intensified
competitive environment this year. In the first half 2006, the market
was characterized by very strong volume growth in emerging countries
which use a higher proportion of low-end cards, and by delays in
migration to high-end products in other countries.
The average SIM card selling price for the second quarter 2006 was
down 1% at current exchange rates, compared with the first quarter
2006.
Compared with the strong performance of the first half 2005, gross
margin decreased, reflecting the intensified competitive environment
since the beginning of the year.
Secure Transactions (Financial Services and pay-TV)
                 Six months ended June 30,   Six months ended June 30,
                           2005                        2006
                 USD millions   As a % of    USD millions   As a % of     %
                                revenue                     revenue    change
    Revenue[8]     213.9                       234.4                   +9.6%
    Gross           45.4         21.2%          47.7         20.4%     +5.1%
    profit
    Operating       46.4         21.7%          52.6         22.5%     +13.4%
    expenses
    Operating       (1.0)         -0.5%         (4.9)         -2.1%       NM
    income
At constant exchange rates, revenue was up 14%. After adjusting
for the acquisition of Setec and currency fluctuations, revenue was
up 9%.
Microprocessor card shipments for the first half 2006 were up 37%
to 109 million units, driven by on-going EMV[9] deployment,
particularly in Turkey, Latin America, North Asia and Southern
Europe.
Average selling prices decreased reflecting price pressure in
certain markets, as well as a change in the regional mix and a
greater share of modules in the total volume sold.
ID & Security
               Six months ended June 30,   Six months ended June 30,
                         2005                        2006
              USD millions   As a % of    USD millions   As a % of   % change
                               revenue                     revenue
    Revenue[8]     77.0                       130.3                    +69.2%
    Gross          26.4         34.3%          55.4         42.5%     +109.8%
    profit
    Operating      41.3         53.6%          47.9         36.8%      +16.0%
    expenses
    Operating     (14.9)        -19.3%         7.5           5.7%        NM
    income
At constant exchange rates, revenue was up 73%, driven by strong
sales of microprocessor card solutions for e-passports, healthcare
and transportation management, as well as by increased IP licensing
activity. After adjusting for the acquisition of Setec and currency
fluctuations, revenue was up 44%.
Microprocessor cards shipments for the first half 2006 were up 58%
to 22 million units, fuelled by initial deployments of large scale
e-passports programs in France and Portugal and by strong
Transportation activity.
During the first half 2006, the Group won several meaningful and
highly visible contracts for e-passport projects in France, the Czech
Republic, Portugal and Slovenia, and healthcare management in France
and Mexico.
Gross margin was up 8.2 percentage points compared with a strong
first half 2005, reflecting high revenue derived from patent
licensing contracts: these are fully offsetting lower margin in the
ID business as the rollout of e-passports in Europe is still in its
early stages.
Public Telephony
               Six months ended June 30,   Six months ended June 30,
                         2005                        2006
              USD millions   As a % of    USD millions   As a % of   % change
                               revenue                     revenue
    Revenue       44.7                        40.1                    -10.3%
    Gross          1.0           2.2%          2.5           6.3%     +164.0%
    profit
    Operating      6.6          14.7%          4.3          10.8%      -33.7%
    expenses
    Operating     (5.6)         -12.5%        (1.8)         -4.5%        NM
    income
Memory cards for Public Telephony now contribute for less than 4%
of Group revenue.
Point-of-Sale Terminals
               Six months ended June 30,   Six months ended June 30,
                         2005                        2006
               USD millions    As a % of   USD millions    As a % of % change
                                 sales                       sales
    Revenue         38.6                        30.2                   -21.6%
    Gross            9.7          25.2%          7.7          25.5%    -20.6%
    profit
    Operating        7.1          18.5%          7.8          25.8%    +9.2%
    expenses
    Operating        2.6          6.7%          (0.1)         -0.3%      NM
    income
The activity in this segment reflects a transition period in
advance of the introduction of a new range of products later this
year.
Outlook
Market conditions have been difficult since the beginning of this
year, and the Company expects it will remain challenging,
particularly in light of the uncertainties in the global economic
environment. With synergies from the combination materializing
progressively, in line with plans, and the significant resources
required this year to converge product roadmaps and processes,
Gemalto expects operating performance in the second half 2006 to be
similar to that of the first half.
The deployment of the electronic passport and ID projects won
in recent months will produce their full effect in 2007.
The Group has taken cost reduction measures beyond the initially
identified synergies, and continues to review the adequacy of its
current configuration in light of these circumstances. On August 31,
2006, Gemalto announced consolidation of its two production centres
in Owing Mills and Montgomeryville in the United States into the
latter's facility, which better meets the future needs of its
business strategy and customers.
Given its technology and market leadership, Gemalto is uniquely
positioned to address the increasing need for security in the digital
world. The Company is confident in its ability to play a leading role
in the digital security industry as it expands on a global scale and
to realize its objective for 2009 of a low teens operating margin.
GEMALTO
                        FIRST HALF 2006 FINANCIAL RESULTS
                 EXPLANATION OF ADJUSTED AND PRO FORMA MEASURES
Due to the combination with Gemplus, Gemalto's financial
statements have undergone significant change, due in particular to
the accounting treatment of this transaction in accordance with IFRS
3 "Business Combination". To supplement the financial statements
presented on an IFRS basis, the Group presents the pro forma and
adjusted pro forma information described in the table below.
Pro forma measures
The pro forma income statement for the first half 2006 has been
prepared assuming that the combination had taken place as of January
1, 2005, allowing the Group to present it in comparison with the
first half 2005. The one-off, combination related items are therefore
charged to the first half 2005 pro forma income statement, so that
the first half 2006 income statement only reflects the recurring
intangible asset amortization charge resulting from the Purchase
Price Allocation and the additional stock-based compensation charge.
Adjusted measures
Adjusted measures exclude certain business combination accounting
entries, and expenses directly incurred in connection with the
combination with Gemplus, that the Group believes are helpful in
understanding its past financial performance and its future results.
Adjusted financial measures are not meant to be considered in
isolation or as a substitute for comparable IFRS measures, and should
be read only in conjunction with condensed consolidated interim
financial statements prepared in accordance with IFRS. Management
regularly uses these supplemental adjusted financial measures
internally to understand, manage and evaluate the business and take
operating decisions. These adjusted measures are among the primary
factors management uses in planning for and forecasting future
periods. Compensation of executives is based in part on the
performance of the business based on these adjusted measures.
Adjusted financial measures reflect adjustments based on the
following items, as well as the related income tax effect:
  • Amortization of inventory step-up: IFRS 3 "Business Combination" requires Gemalto to value work-in progress and finished goods assumed in connection with the combination at net realizable value (the estimated revenue derived from the future sale of these goods less expected selling cost). Therefore, the value of this inventory in the books of Gemplus on combination date was adjusted accordingly (step-up). Thus, subsequent sales of the work-in-progress and finished products carried in Gemplus' inventory at the time of the combination generate a lower margin than if they were manufactured after the acquisition, all other factors being equal. The amortization expense related to this step up is therefore disclosed in the income statement under a separate line below Cost of Sales. The adjustment, eliminating amortization of inventory step-up, is intended to restore the normal margin of such sales. The Group believes this adjustment is useful to investors as a measure of the ongoing performance of its business.
  • Additional stock-based compensation charge: As prescribed by IFRS 2 "Share-based payment" and IFRS 3 "Business Combination", vested and unvested stock options or awards granted by an acquirer in exchange for stock options or awards held by employees of the purchased company, or any substantially equivalent commitment by the acquirer to assume the obligations of the acquirer with regards to stock options granted to the latter's employees, as is the case for Gemalto under the Combination Agreement, shall be considered to be part of the purchase price for the acquirer, and the fair value (at the effective date of the acquisition or merger) of the new (acquirer) awards shall be included in the purchase price. It leads to increase the compensation charge related to stock-options granted by Gemplus prior to the acquisition. The adjustment, eliminating the additional stock-based compensation charge, is intended to reflect the compensation charge that Gemplus would expense if the company continued to operate on a standalone basis. The Group believes this adjustment is useful to investors as a measure of the ongoing performance of its business.
  • Amortization and impairment of intangible assets: amortization and impairment of intangible assets created as a result of the combination with Gemplus have been excluded from the adjusted profit for the period. The Group believes this is useful because, prior to this combination in the second quarter of fiscal 2006, it did not incur significant charges of this nature, and the exclusion of this amount helps investors understand the evolution of IFRS operating expenses in periods subsequent to the combination with Gemplus. Investors should note that the use of intangible assets contributed to revenue earned during the period and will contribute to future revenue generation and that these amortization expenses will be recurring.
  • Combination related charges: In the last months, Gemalto incurred material expenses in connection with the combination with Gemplus, which it would not have otherwise incurred. Combination related charges consist of professional advisory services incurred in connection with the integration, new Gemalto brand and logo creation and worldwide registration, as well as impairment charges related to capitalized development costs on projects which are redundant with existing products or technologies available in Gemplus. The Group expects to continue to incur integration-related professional services in the coming months. Gemalto also determined that its investment in a listed company was impaired as a consequence of the combination with Gemplus. The related impairment charge was recorded in Financial income (loss) in the period. Gemalto believes it is useful for investors to understand the effect of these expenses on its cost structure.
Summary
Gemalto provides three sets of income statements:
  • IFRS consolidated income statement, pursuant to its regulatory obligations
  • Pro forma income statement
  • Adjusted pro forma income statement
    Gemalto IFRS         - Includes Gemplus income statement consolidated as
    consolidated income  from June 2, 2006, date on which the first step of
    statement            the combination between Gemalto and Gemplus was
                         executed.
                         - Includes all charges resulting from the accounting
                         treatment of the combination (amortization and
                         impairment of intangible assets, additional
                         stock-based compensation), and one-off charges
                         incurred in connection with the combination with
                         Gemplus (combination related charges), as described
                         in notes 4 and 5 to the condensed consolidated
                         interim financial statements attached to this press
                         release.
    Gemalto pro forma    - Includes Gemplus income statement for the full
    income statement     reported period (6 months).
    Basis of presentation - Combination assumed to have taken place as of
    and assumptions for   January 1, 2005.
    preparation are
    described in note 6   - Consequently, one-off charges incurred in
    to the condensed      connection with the combination with Gemplus
    consolidated interim  (combination related charges), as described in note
    financial statements, 5 to the condensed consolidated interim financial
    which also includes   statements, are booked in fiscal year 2005.
    the reconciliation of
    the pro forma income  - Recurring charges resulting from the accounting
    statement with the    treatment of the combination with Gemplus
    consolidated income   (amortization of intangible assets, additional
    statement             stock-based compensation) are booked in fiscal year
                         2005 and 2006 according to the amortization schedule
                         set as if the combination had taken place on January
                         1, 2005.
    Gemalto adjusted pro  - Includes Gemplus income statement for the full
    forma income          reported period (6 months).
    statement
                          - Combination assumed to have taken place as of
                         January 1, 2005.
                          - Excludes one-off expenses incurred in connection
                         with the combination with Gemplus (combination
                         related charges), as described in note 5 to the
                         condensed consolidated interim financial statements,
                         and all charges resulting from the accounting
                         treatment of the transaction.
The first half 2005 and 2006 pro forma income statements
established in accordance with IFRS are included in the condensed
consolidated interim financial statements attached to this press
release.
Conference call
The company has scheduled a conference call for Wednesday,
September 13, 2006 at 3:00 pm CET (2:00 pm GMT and 9:00 am New-York
time). Callers may participate in the live conference call by
dialling:
+44(0)207-138-0816 or +1-718-354-1171 or +33-1-55-17-41-49.
The slide show will be available on the web site at 10:00 CET
(9:00 GMT).
Replays of the conference call will be available approximately 3
hours after the conclusion of the conference call until September 19,
2006 midnight by dialling:
+44(0)207-806-1970 or +1-718-354-11-12 or +33-1-71-23-02-48,
access code: 8442332.
Earnings calendar
Third quarter 2006 revenue is scheduled to be reported on October
26, 2006, before the opening of Euronext Paris.
Corporate Media Relations                Corporate Communication
    Emmanuelle SABY                          Rémi CALVET
    M.: +33(0)6-09-10-76-10                  M.: +33(0)6-22-72-81-58
     emmanuelle.saby@gemalto.com               remi.calvet@gemalto.com
    Investors Relations                      FINEO
    Stéphane BISSEUIL
    T.: +33(0)1-55-01-50-97                  T.: +33(0)1-56-33-32-31
     stephane.bisseuil@gemalto.com
About Gemalto
Gemalto (Euronext NL 0000400653 GTO) is a leader in digital
security with pro forma 2005 annual revenues of US$2.2 billion
(EUR1.7 billion), operations in 120 countries and 11,000 employees
including 1,500 R&D engineers. The company's solutions make personal
digital interactions secure and easy in a world where everything of
value -from money to identities - is represented as information
communicated over networks.
Gemalto thrives on creating and deploying secure platforms,
portable and secure forms of software in highly personal objects like
smart cards, SIMs, e-passports, readers and tokens. More than a
billion people worldwide use the company's products and services for
telecommunications, banking, e-government, identity management,
multimedia digital right management, IT security and other
applications. Gemalto was formed in June 2006 by the combination of
Axalto and Gemplus.
For more information please visit www.gemalto.com
DISCLAIMER
The Gemalto N.V. securities referred to herein issued in
connection with the exchange offer of Gemalto N.V. for the securities
of Gemplus International S.A., and the Gemalto N.V. shares issued in
connection with the reopening of such exchange offer, have not been
(and are not intended to be) registered under the United States
Securities Act of 1933, as amended, (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 have been and will 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 and its reopening relate to the securities of a
non-US company and are subject to disclosure requirements of a
foreign country that are different from those of the United States.
Financial statements presented have been 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 an investor to enforce its rights and any
claim it may have arising under U.S. federal securities laws, since
Gemalto N.V. and Gemplus International S.A. have their corporate
headquarters outside of the United States, and some or all of their
officers and directors may be residents of foreign countries. An
investor 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.
This release does not constitute an offer to purchase or exchange
or the solicitation of an offer to sell or exchange any securities of
Gemalto N.V. or an offer to sell or exchange or the solicitation of
an offer to buy or exchange any securities of Gemplus International
S.A.
Gemplus security holders are strongly advised to read the offering
circular relating to the exchange offer and related exchange offer
materials regarding the transaction (see below), as well as any
amendments and supplements to those documents because they contain
important information.
The exchange offer and its reopening described herein are not (and
are note intended to be) made, directly or indirectly, in or into the
United Kingdom, Italy, the Netherlands, Canada or Japan or in or into
any other jurisdiction in which such offer would be unlawful prior to
the registration or qualification under the laws of such
jurisdiction. Accordingly, persons who come into possession of this
release should inform themselves of and observe these restrictions.
Copies of the free English translation of the joint French
language offering document which has received visa No. 06-252 of July
6, 2006 from the French Autorité des marchés financiers and of the
documents incorporated by reference thereto are available from the
Internet websites of Gemalto N.V. (www.gemalto.com) and of Gemplus
International S.A. (www.gemplus.com) as well as free of charge upon
request to the following: Gemalto N.V.: Koningsgracht Gebouw 1, Joop
Geesinkweg 541-542, 1096 AX Amsterdam, the Netherlands; Gemplus
International S.A.: 46A, avenue J.F. Kennedy, L-1855 Luxembourg,
Grand Duchy of Luxembourg; Mellon Investor Services LLC, U.S.
Exchange Agent: 480 Washington Boulevard, Attn: Information Agent
Group,AIM # 074-2800, Jersey City, New Jersey 07310, Call Toll Free:
1-866-768-4951.
[1] Prepared on an adjusted pro forma basis, reflecting the
combined activity of Gemalto and Gemplus over the whole first half
year, excluding one-off expenses incurred in connection with the
combination with Gemplus and charges resulting from the accounting
treatment of the transaction, and assuming that the combination had
taken place as of January 1, 2005
[2] Prepared on an adjusted pro forma basis, reflecting the
combined activity of Gemalto and Gemplus over the whole first half
year, excluding one-off expenses incurred in connection with the
combination with Gemplus and charges resulting from the accounting
treatment of the transaction, and assuming that the combination had
taken place as of January 1, 2005.
[3] Setec consolidated as of June 1, 2005.
[4] EBITDA is defined as operating income plus depreciation (USD
36.6 million in H1 2006 vs. USD 36.5 million in H1 2005) and
amortization expenses (USD 11.5 million in H1 2006 vs. USD 12.5
million in H1 2005). These amounts exclude amortization and
impairment charges related to the intangibles assets identified
pursuant to IFRS 3 "Business Combination".
[5] Europe, Middle East, Africa
[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). The pro forma free cash flow
is the combination of Axalto and Gemplus free cash flow for the full
six months ended June 30, 2006.
[7] All segment information provided in this press release is on
an adjusted pro forma basis, reflecting the combined activity of
Gemalto and Gemplus over the whole first half year, excluding one-off
expenses incurred in connection with the combination with Gemplus and
charges resulting from the accounting treatment of the transaction,
and assuming that the combination had taken place as of January 1,
2005.
[8] Compared with the pro forma segment revenue information
reported on July 27, 2006, USD 1.9 million was reclassified from
Secure Transactions to ID & Security.
[9] EMV is a jointly defined set of specifications adopted by
Europay, MasterCard and Visa for the migration of bank cards to smart
card technology.
    Gemalto IFRS Consolidated income statement
    All amounts in USD thousands (except where otherwise stated)
                                       Six months ended June 30
                                           2005           2006   % change
    Sales                                498,200        578,446    +16.1%
    Cost of sales                       (329,995)      (408,372)   +23.8%
    Amortization of
    inventory step-up                                    (5,153)      N/M
    Gross profit                         168,205        164,921    -2.0%
    Gross margin                         33.8%          28.5%
    Operating expenses:
    Research and engineering             (35,432)       (37,397)    +5.5%
    Sales and marketing                  (56,554)       (70,584)   +24.8%
    General and administrative           (31,070)       (38,106)   +22.6%
    Other income, net                      1,914        (2,328)      N/M
    Combination related
    expenses(x)                                         (8,671)      N/M
    Amortization and
    impairment
    of intangible assets(xx)                           (17,521)      N/M
    Operating income (loss)               47,063        (9,686)      N/M
    Operating margin                      9.4%          -1.7%
    Financial income
    (expenses), net                          401          1,320      N/M
    Share of profit (losses)
    of associates                           (196)           157      N/M
    Profit (loss) before
    income tax                            47,268        (8,209)      N/M
    Income tax expense                   (14,018)        1,848       N/M
    Profit (loss) for
    the period                            33,250        (6,361)      N/M
    Attributable to:
    Equity holders of
    the company                           31,914        (5,620)      N/M
    Minority interest                      1,336          (741)      N/M
    Basic earnings (loss)
    per share (in USD)                      0.79         (0.13)      N/M
    Diluted earnings (loss)
    per share (in USD)                      0.77         (0.13)      N/M
    In thousands :
    Basic average number of
    shares outstanding                    40,440         43,917    +8.6%
    Diluted average number
    of shares outstanding                 41,558         44,796    +7.8%
    (x) Combination related expenses:                    (8,671)
    - Integration consultant fees                        (3,376)
    - Gemalto brand and logo creation
      and registration                                   (1,111)
    - Capitalized costs related to
      redundant devlpt. projects                         (4,184)
    (xx) Amortization and impairment
    of intangible assets:                               (17,521)
    - Gemplus brand name impairment                     (12,596)
    - Gemplus Customer Relationships                       (595)
    - Gemplus existing Technology                        (4,330)
    Gemalto pro forma income statement
    (assuming the combination was executed on January 1, 2005)
    All amounts in USD thousands (except where otherwise stated)
                                      Six months ended June 30
                                           2005           2006   % change
    Sales                               1,046,983    1,035,881    -1.1%
    Cost of sales                       (705,514)    (720,383)    +2.1%
    Amortization of inventory step-up    (18,492)           0   -100.0%
    Gross profit                         322,977      315,498     -2.3%
    Gross margin                           30.8%        30.5%
    Operating expenses:
    Research and engineering             (72,920)     (71,469)    -2.0%
    Sales and marketing                 (127,554)    (132,360)    +3.8%
    General and administrative           (72,373)     (71,596)    -1.1%
    Other income, net                      2,193         (189)     N/M
    Combination related expenses(x)      (10,805)           0   -100.0%
    Amortization and impairment of
    intangible assets(xx)                (43,305)     (28,040)   -35.2%
    Operating income (loss)               (1,787)      11,844      N/M
    Operating margin                       -0.2%         1.1%
    Financial income (expenses), net       2,680        6,973   +160.2%
    Share of profit (losses)
    of associates                         (1,306)         327      N/M
    Profit before income tax                (413)      19,144      N/M
    Income tax expense                     6,801       (3,970)     N/M
    Profit for the period                  6,388       15,174      N/M
    Attributable to:
    Equity holders of the company         10,358        8,739   -15.6%
    Minority interest                     (3,970)       6,435      N/M
    Basic earnings per share (in USD)       0.17         0.14   -15.6%
    In thousands:
    Basic average number of shares
    outstanding ('000)                    62,425       62,399    -0.0%
    (x) Combination related expenses:    (10,805)           0
    - Integration consultant fees         (3,408)           0
    - Gemalto brand and logo
      creation and registration           (1,111)           0
    - Capitalized costs related to
      redundant devlpt. projects          (6,286)           0
    (xx) Amortization and impairment
    of intangible assets:                (43,305)     (28,040)
    - Gemplus brand name impairment      (13,333)           0
    - Gemplus Customer Relationships      (3,618)      (3,385)
    - Gemplus existing Technology        (26,354)     (24,655)
    Gemalto adjusted(x) pro forma income statement
    (assuming the combination was executed on January 1, 2005)
    All amounts in USD thousands (except where otherwise stated)
                                    Six months ended June 30
                                    2005               2006          % change
    Sales                      1,046,983          1,035,881             -1.1%
    Cost of sales               (704,794)          (722,154)            +2.5%
    Gross profit                 342,189            313,727             -8.3%
    Gross margin                   32.7%              30.3%
    Operating expenses:
    Research and engineering    (72,623)           (72,417)             -0.3%
    Sales and marketing        (124,934)          (131,873)             +5.6%
    General and administrative   70,763)           (70,566)             -0.3%
    Other income, net             2,193               (189)              N/M
    Operating income             76,062             38,682             -49.1%
    Operating margin               7.3%               3.7%
    Financial income
    (expenses), net               5,102              6,973             +36.7%
    Share of profit (losses)
    of associates                (1,306)               327               N/M
    Profit before income tax     79,858             45,982             -42.4%
    Income tax expense          (14,524)           (11,540)            -20.5%
    Profit for the period        65,334             34,442             -47.3%
    Attributable :
    Equity holders of
    the company                  41,803             16,903             -59.6%
    Minority interest            23,531             17,539             -25.5%
    Basic earnings per
    share (in USD)                 0.67               0.27             -59.5%
    In thousands:
    Basic average number of
    shares outstanding           62,425             62,399              -0.0%
    (x) excluding one-off expenses incurred in connection with the
    combination with Gemplus and charges resulting from the
    accounting treatment of the transaction
    Gemalto adjusted pro forma income statement
    (assuming the combination was executed on January 1, 2005)
    Reconciliation from pro forma to adjusted pro forma
    Six months ended June 30, 2006
    All amounts in        IFRS     Amortization of   Additional  Combination
    US$ thousands                   inventory       stock based      related
                                      step-up      compensation     expenses
    Sales                 1,035,881
    Cost of sales         (720,383)                         277
    Gross profit            315,498           0             277           0
    Operating
    expenses:
    Research and
    engineering            (71,469)                          38        -662
    Sales and
    marketing             (132,360)                         487
    General and
    administrative         (71,596)                        1030
    Other income,
    net                       (189)
    Combination
    related (x)                   0
    Amortization
    and impairment
    of intangible
    assets (xx)            (28,040)
    Operating
    income                   11,844            0          1,832       (662)
    Financial
    income
    (expenses), net           6,973
    Share of profit
    (losses) of
    associates                  327
    Profit before
    income tax               19,144            0          1,832       (662)
    Income tax
    expense                 (3,970)                                    228
    Profit (loss)
    for the period           15,174            0          1,832       (434)
    Attributable
    to:
    Equity holders
    of the company            8,739                         800       (434)
    Minority
    interest                  6,435                       1,032
All amounts in US$            Amort. or impairment    Adjusted
    thousands                     of intangible assets
    Sales                                                  1,035,881
    Cost of sales                            -2048          (722,154)
    Gross profit                            (2,048)          313,727
    Operating expenses:
    Research and engineering                  -324          (72,417)
    Sales and marketing                                    (131,873)
    General and administrative                              (70,566)
    Other income, net                                          (189)
    Combination related (x)                                        0
    Amortization and impairment of
    intangible assets (xx)                  28,040                 0
    Operating income                        25,668            38,682
    Financial income (expenses), net                           6,973
    Share of profit (losses) of
    associates                                                   327
    Profit before income tax                25,668            45,982
    Income tax expense                       -7798          (11,540)
    Profit (loss) for the period            17,870            34,442
    Attributable to:
    Equity holders of the company            7,798            16,903
    Minority interest                       10,072            17,539
    (assuming the combination was executed on January 1, 2005)
    Six months ended June 30, 2005
    All amounts in US$         Pro forma    Amortization of   Additional
    thousands                                  inventory      stock based
                                                step-up      compensation
    Sales                      1,046,983
    Cost of sales               (705,514)                          1,401
    Amortization of
    inventory step-up            (18,492)         18,492
    Gross profit                 322,977          18,492           1,401
    Operating expenses:
    Research and
    engineering                  (72,920)                            536
    Sales and marketing         (127,554)                          2,620
    General and
    administrative               (72,373)                          1,610
    Other income, net              2,193
    Combination related(x)       (10,805)
    Amortization and
    impairment of
    intangible assets
    (xx)                         (43,305)
    Operating income              (1,787)         18,492           6,167
    Financial income
    (expenses), net                2,680
    Share of profit
    (losses) of
    associates                    (1,306)
    Profit before income
    tax                             (413)         18,492           6,167
    Income tax expense             6,801          (5,566)
    Profit (loss) for
    the period                     6,388          12,926           6,167
    Attributable to:
    Equity holders of
    the company                   10,358           5,641           2,691
    Minority interest             (3,970)          7,285           3,476
    (x) Combination related costs include integration consultant fees and
     write-off of capitalized development costs
    (xx) Intangible assets identified and recognized in accordance with IFRS
    3 Business Combination
    All amounts in US$ thousands     Combination    Amort. or    Adjusted pro
                                       related    impairment of         forma
                                       expenses     intangible
                                                      assets
    Sales                                                         1,046,983
    Cost of sales                                        (681)     (704,794)
    Amortization of inventory
    step-up                                                               0
    Gross profit                               0         (681)      342,189
    Operating expenses:
    Research and engineering                (182)         (57)      (72,623)
    Sales and marketing                                            (124,934)
    General and administrative                                      (70,763)
    Other income, net                                                 2,193
    Combination related (x)               10,805                          0
    Amortization and impairment of
    intangible assets (xx)                             43,305             0
    Operating income                      10,623       42,567        76,062
    Financial income (expenses),
    net                                    2,422                      5,102
    Share of profit (losses) of
    associates                                                       (1,306)
    Profit before income tax              13,045       42,567        79,858
    Income tax expense                   (2,894)      (12,865)       (14,524)
    Profit (loss) for the period         10,151        29,702         65,334
    Attributable to:
    Equity holders of the company        10,151        12,962         41,803
    Minority interest                                  16,740         23,531
    (x) Combination related costs include integration consultant fees and
    write-off of capitalized development costs
    (xx) Intangible assets identified and recognized in accordance with
    IFRS 3 Business Combination
AMSTERDAM, September 13 /PRNewswire/ --
Pro forma cash position variation schedule
    In USD millions                                  H1 2005     H1 2006
    Beginning net cash(x) as of January 1.              713         745
    Cash generated by (used in) operating activities    111         (33)
    including decrease of (increase) in working           4        (100)
    capital requirement
    Capital expenditure and acquisition of              (29)        (50)
    intangibles
    Setec acquisition                                   (75)
    Other cash generated by investing activities         26           7
    Cash used in connection with the combination                    (14)
    Cash generated by (used in) operating and            33         (90)
    investing activities
    June 2, 2006, distribution to Gemplus                          (212)
    shareholders
    Other cash used in financing activities,             (9)         (5)
    excluding proceeds & repayments of borrowings
    Other (translation adjustment mainly)               (67)         29
    Ending net cash(x) as of June 30.                   670         467
    Current and non-current borrowings, excluding                    11
    finance lease
    Cash & Cash equivalents as of June 30, 2006                     478
    Pro forma revenue
    In USD
    millions
                   Q2    Q2     %       %                        %       %
                  2005  2006 change  change  H1 2005 H1 2006  change  change
                               at      at                       at      at
                             current constant                current constant
                            exchange exchange               exchange exchange
                             rates    rates                  rates    rates
    Mobile       358.8 326.0  -9.1%     -9%     672.8   600.8   -10.7%   -9%
    Communication
    Secure       118.4 125.0  +5.6%     +8%     213.9   234.4   +9.6%   +14%
    Transactions
    ID & Security 47.0  66.9  +42.4%    +43%    77.0    130.3   +69.2%  +73%
    Public        21.1  18.6   -11.4%   -12%    44.7    40.1   -10.3%    -9%
    Telephony
    POS Terminals 17.7  13.8   -22.4%   -22%    38.6    30.2   -21.6%   -17%
    Total        562.9 550.3   -2.2%     -2% 1,047.0 1,035.9    -1.1%    +2%
AMSTERDAM, September 13 /PRNewswire/ --
Compared with the pro forma segment revenue information reported
on July 27, 2006, USD 1.9 million was reclassified from Secure
Transactions to ID & Security
Recurring charges resulting from the accounting treatment of the
combination with Gemplus
                        In the pro forma
                       income statements
                     H1 2005         H1 2006
                  in USD  in EUR  in USD  in EUR
                  million million million million
    Additional      6.2     4.7     1.8     1.5
    stock-based
    compensation
    resulting
    from the
    combination
    COGS            1.4     1.1     0.3     0.2
    R&E             0.5     0.4     0.0     0.0
    S&M             2.6     2.0     0.5     0.4
    G&A             1.6     1.2     1.0     0.8
    Amortization   43.3    32.8    28.0    23.0
    and
    impairment
    of
    identified
    intangible
    assets
    recognized
    as a
    consequence
    of the
    combination
                                          Forecast
              H2 2006 H1 2007 H2 2007 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010
    Additional    2.8     1.6     0.6     0.3    (0.0)   (0.1)   (0.0)
    stock-based
    compensation
    resulting
    from the
    combination
    COGS          0.4     0.2     0.1     0.0    (0.0)   (0.0)   (0.0)
    R&E           0.1     0.0     0.0     0.0    (0.0)   (0.0)   (0.0)
    S&M           0.7     0.4     0.1     0.1    (0.0)   (0.0)   (0.0)
    G&A           1.6     0.9     0.3     0.2    (0.0)   (0.0)   (0.0)
    Amortization 23.0    23.0    23.0     6.5     6.5     6.5     6.5     5.4
    and
    impairment
    of
    identified
    intangible
    assets
    recognized
    as a
    consequence
    of the
    combination

Contact:

Corporate Media Relations, Emmanuelle SABY, M.: +33(0)6-09-10-76-10,
emmanuelle.saby@gemalto.com; Corporate Communication, Rémi CALVET,
M.: +33(0)6-22-72-81-58,remi.calvet@gemalto.com; Investors Relations,
Stéphane BISSEUIL, T.: +33(0)1-55-01-50-97,
stephane.bisseuil@gemalto.com; FINEO, T.: +33(0)1-56-33-32-31

Weitere Storys: Gemalto
Weitere Storys: Gemalto
  • 13.09.2006 – 08:27

    Gemplus Trading Update

    Luxembourg (ots/PRNewswire) - Gemplus International S.A. (Euronext LU0121706294 - GEM and NASDAQ:GEMP), a world leading player in the secure card industry and a subsidiary of Gemalto N.V. (Euronext NL0000400653 - GTO), announces today that it no longer expects to meet its financial performance outlook for 2006. The Company cited market conditions that will remain challenging and uncertainties in the global economic environment. Because of the level of its integration ...

  • 31.08.2006 – 07:02

    Poland Selects Gemalto Technology for its Electronic Passport Program

    Amsterdam and Warsaw (ots/PRNewswire) - - Gemalto to Equip Poland With Over 1.5 Million e-Passport Inlays by the end of 2007 Gemalto (Euronext NL 0000400653 GTO), a leader in digital security, today announced it will supply its Setec(x) e-passport solution for the future Polish electronic passports. The first commercial deliveries started in July, and ...

  • 04.08.2006 – 07:03

    Gemalto Receives Order for U.S. Electronic Passport

    Washington, District of Columbia (ots/PRNewswire) - Gemalto (Euronext NL 0000400653 GTO), a world leader in digital security, announced today that the United States of America Government Printing Office (GPO) placed its first order with the company, following Gemalto's electronic passport technology qualification completion. The GPO and U.S. Department of State evaluated the Gemalto solution at their testing facilities ...