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Gemplus Reports Strong Second Quarter 2005 Results: Operating Income More Than Triples

Luxembourg (ots/PRNewswire)

    Second quarter 2005 highlights:
    - Operating income more than tripled, to 22.4 million euros.
    - Strong revenue growth in all core businesses: up 12.2%
      year-on-year, even in comparison to robust sales in the quarter a
      year ago.
    - Highest gross margin in 4 years: 33.9%, up 1.6 percentage point
      year-on-year.
    - Large improvement in attributable net income: 21.8 million euros.
    - Setec acquisition finalized.
Gemplus International S.A. (Euronext: LU0121706294 - GEM and
NASDAQ: GEMP), the world's leading provider of smart card solutions,
today reported results for the second quarter ended June 30, 2005.
    In millions of euros                  Q2 2005 Q2 2004   Year-on-year
                                                               change
    Net sales                              236.2   210.5       +12.2%
    Adjusted for currency fluctuations,                        +11.3%
    disposals and acquisitions[1]
    Gross profit                           80.0    68.0        +17.6%
    Gross margin                           33.9%   32.3%      +1.6 ppt
    Operating expenses                     57.6    61.2         -5.8%
    Operating income                       22.4     6.8        +227.7%
    Operating margin                       9.5%    3.2%       +6.3 ppts
    Attributable net income                21.8     1.1          NM
    Free cash flow excluding               23.7     5.7        +318.8%
    non-recurring items[2]
    Cash and cash equivalents              373.5   383.1        -2.5%
                           Per share data (in euros)
    Earnings per share (fully diluted)     0.04    0.00          NM
Commenting on the performance for the second quarter 2005, Alex
Mandl, President and Chief Executive Officer, said: "This was the
ninth consecutive quarter of continuous strong progress for Gemplus,
highlighted by a threefold increase in operating income. The top line
grew at a double digit rate, even though we had strong sales for the
quarter a year ago. This confirms the positive outlook we have for
the remainder of the year. We are also very pleased with the strong
customer endorsement of our quantum-leap technology, GemXplore
Generations. Regarding ID & Security, the doubling of revenues
supports our confidence and strong emphasis on this market."
Second quarter 2005 financial review
- Income statement
Second quarter 2005 highlights:
- Strong revenue growth led by the Americas and EMEA[3]: up
      11.3%, adjusted[4].
    - Highest gross margin in 4 years: 33.9%, up 1.6 percentage
      points year-on-year.
    - Operating income more than tripled to 22.4 million euros.
    - Large improvement in attributable net income: 21.8 million
      euros.
Net sales rose 11.3% year-on-year, even compared to robust sales
in the second quarter 2004, which were up 25% year-on-year, after
adjusting for currency fluctuations, acquisitions and disposals.
Sales grew in all core businesses.
On a geographical basis, wireless drove a 50.7% year-on-year
revenue growth in the Americas, after adjusting for currency
fluctuations, acquisitions and disposals. In EMEA, adjusted net sales
increased by 5.4%, year-on-year, and were down 15.7% in Asia.
Gross margin was up 1.6 percentage point year-on-year, to 33.9%,
the highest in 4 years. This was driven by a favorable business mix
and improved manufacturing efficiency.
Operating expenses[5] decreased 5.8% year-on-year to 57.6 million
euros,  mainly due to the reversal of a 5.2 million euros litigation
provision.  Excluding this reversal and the consolidation of Setec,
operating expenses  were stable.
Consequently, operating margin tripled to 9.5%. Excluding the
reversal of the litigation provision, operating margin was 7.3%, up
4.1 percentage points.
Attributable net income grew to 21.8 million euros.
- Balance sheet and cash flow statement
Second quarter 2005 highlights:
- Robust free cash flow before non-recurring items of 23.7
      million euros.
    - Continuous strong cash position, at 373.5 million euros.
The Group's cash position remains strong at 373.5 million euros.
Compared to March 31, 2005, cash is down 21.6 million euros,
reflecting a  58 million euros net outflow related to the acquisition
of Setec, partly  compensated by the release of 22.5 million euros
from an escrow account in  relation to the successful outcome of a
litigation.
Segment analysis
- Telecom
Second quarter 2005 highlights:
- Record sales in wireless: shipments up 44% year-on-year, to
      85.8 million units.
    - Wireless gross margin remains strong: above 40%.
    - Strong improvement in operating margin: up 3.0 percentage
      points to 12.9%, reflecting strong revenue growth in wireless and
      flat operating expenses.
    In millions of euros                  Q2 2005 Q2 2004 % change  Adjusted
                                                                    Change[4]
                                                                        (%)
    Wireless products & services net sales  150.2   135.0   +11.3%    +13.0%
    Wireless gross profit                   60.6    54.2    +11.8%
    Wireless gross margin                   40.4%   40.2%  +0.2 ppt
    Prepaid phone cards & scratchcards net  13.0    19.0    -31.6%      N/A
    sales
    Prepaid phone cards & scratchcards       0.8     0.9     -7.3%
    gross profit
    Prepaid phone cards & scratchcards      6.4%    4.7%   +1.7 ppts
    gross margin
    Telecom net sales                       163.2   154.0    +6.0%     +6.7%
    Telecom gross profit                    61.4    55.1    +11.5%
    Telecom gross margin                    37.6%   35.8%  +1.8 ppts
    Telecom operating expenses              40.3    39.9     +1.2%
    As a % of sales                         24.7%   25.9%  -1.2 ppt
    Telecom operating profit                21.1    15.2    +38.5%
    Operating margin                        12.9%   9.9%   +3.0 ppts
Wireless continues to grow significantly. Adjusted4 revenue
increased 13.0% year-on-year, even compared to strong sales in the
second quarter 2004, which were up 45.5% year-on-year[4].
Wireless shipments grew 44% year-on-year to 85.8 million units,
driven by market share gains in North and Latin America, and in
emerging markets in EMEA.
Wireless product mix continued to improve: the share of high-end
card shipments rose significantly year-on-year, accounting for 48% of
the total in the second quarter 2005, compared with 33% in the second
quarter 2004 and 44% in the first quarter 2005.
Wireless average selling price (ASP) was down 20.6% year-on-year
and 10.9% quarter-on-quarter, both currency adjusted. Product mix
improvement did not fully compensate for strong price pressure.
Wireless gross margin was stable year-on-year, due to stronger
volume, lower chip purchasing prices and improved manufacturing
efficiency, compensating for price pressure.
Telecom gross margin improved 1.8 percentage points year-on-year,
led by  a more favorable business mix.
Operating expenses were almost flat year-on-year. Therefore,
operating profit rose 38.5% and the operating margin was up 3.0
percentage points, to 12.9%.
- Financial Services
Second quarter 2005 highlights:
- Strong revenue growth: +16%, adjusted[4].
    - The EMV[6] deployment continues: broad activity in all regions.
    In millions of euros             Q2 2005 Q2 2004  % change   Adjusted
                                                                 Change[4]
                                                                    (%)
    Net sales                         50.3    44.7     +12.4%     +16.0%
    Gross profit                      10.2     8.8     +15.7%
    Gross margin as a % of sales      20.3%   19.7%   +0.6 ppt
    Operating expenses                 7.3    13.5     -46.2%
    As a % of sales                   14.4%   30.2%  -15.8 ppts
    Operating profit                   2.9    -4.7       NM
    Operating margin as a % of sales  5.8%   -10.5%  +16.3 ppts
Bank cards continued to grow very strongly, driven by broad
activity in EMV deployment across all regions, particularly in the UK
and Turkey. This quarter saw the first EMV shipments by Gemplus to
the Netherlands, Italy and Japan.
In total, Gemplus shipped 16.8 million units of payment
microprocessor cards, up 30% year-on-year. Payment microprocessor
card revenue rose 31% year-on-year.
The decline in operating expenses reflects the impact of the
reversal of a 5.2 million euros provision related to a litigation.
- Identity and Security
Second quarter 2005 highlights:
- Revenue almost doubled, year-on-year.
    - A major milestone was achieved in the UAE national ID project.
    In millions of euros             Q2 2005 Q2 2004  % change   Adjusted
                                                                 Change[4]
                                                                   (%)
    Net sales                         22.7    11.8     +92.1%     +66.5%
    Gross profit                       8.4     4.1    +103.9%
    Gross margin as a % of sales      37.1%   34.9%  +2.2 ppts
    Operating expenses                10.0     7.8     +28.1%
    As a % of sales                   44.3%   66.5%  -22.2 ppts
    Operating profit                  -1.6    -3.7       NM
    Operating margin as a % of sales  -7.3%  -31.6%  +24.3 ppts
Revenue almost doubled, led by shipment of ID cards to the United
Arab Emirates and the acquisition of Setec, which is consolidated
starting June 1st, 2005.
Even excluding Setec, this quarter is the best quarter ever for
this segment, with a 66.5% revenue growth after adjusting for
currency fluctuations, acquisitions and disposals. This was mainly
driven by substantial high-end card deliveries: UAE and also Royal
Oman Police, the US Department of Defense and Boeing.
The increase in operating expenses is mainly due to Setec.
First half 2005 financial review
- Net sales up 5.3%, despite robust sales a year ago.
    - Gross margin up 1.4 percentage points, to 33.1%.
    - Operating income almost tripled, to 29.9 million euros.
    In millions of euros           H1 2005 H1 2004 % change   Adjusted
                                                              Change[4]
                                                                 (%)
    Net sales                       429.3   407.8    +5.3%      +4.6%
    Of which Telecom                307.5   300.6    +2.3%      +2.3%
    Of which Financial Services     88.2    85.1     +3.7%      +6.8%
    Of which ID & Security          33.6    22.1    +51.8%     +38.7%
    Gross profit                    141.9   129.3    +9.8%       NA
    Gross margin                    33.1%   31.7%  +1.4 ppts     NA
    Operating expenses              112.0   118.9    -5.8%       NA
    As a % of sales                 26.1%   29.2%  -3.1 ppts     NA
    Operating profit                29.9    10.4    +188.1%
    Operating margin                7.0%    2.5%   +4.5 ppts     NA
    Attributable net income         29.0     1.4      NM
Sales in the first half 2005 grew 5.3% compared to a year ago.
All core businesses saw favorable revenue momentum.
On a geographical basis, wireless drove a 27.4% revenue growth in
the Americas, after adjusting for currency fluctuations, acquisitions
and disposals. In EMEA, adjusted revenue increased by 4.6% but was
down 14.6% in Asia.
Gross margin was up 1.4 percentage points year-on-year, to
33.1%, reflecting a favorable business mix and improved manufacturing
efficiency.
Operating expenses decreased 5.8% mainly driven by the reversal of
a  5.2 million euros litigation provision.
Consequently, operating margin almost tripled to 7.0% and
attributable net income quadrupled, to 29.0 million euros.
Outlook
The Group continues to see strong momentum in its core markets.
Notwithstanding the apparent slow start in the first quarter, Gemplus
expects to increase revenue, excluding acquisitions, by around 10% in
2005, despite continuous selling price pressure.
The Company continues to focus on cost efficiency and is confident
to show very strong improvement on operating income in 2005.
The Group also expects the Financial Services and ID & Security
business units to become profitable in 2006.
With excellent second quarter results, the Group proves it is well
on track to realize its mid-term objective of a 10% operating margin
in 2007.
Business Highlights
- Telecom
On the strength of Gemplus' quantum-leap technology, GemXplore
Generations, which was launched in the first quarter 2005, the
Company has been selected as the exclusive development partner by the
T-Mobile group for its next generation card platform. This will be
the basis for T-Mobile's future card and service deployment for its
customers.
The SIM is increasingly valuable when linked to the wider network
infrastructure via Over The Air (OTA) platforms. H3G Australia
demonstrated this when it recently deployed a Gemplus OTA platform to
link into the high end SIMs already at work on their 3G network. The
first use of this platform was to update the preferred roaming lists
in each subscriber's SIM, following a new national roaming agreement
with another Australian operator.
In North America, Gemplus was selected by Cingular to provide
(U)SIMs for their 3G migration. Cingular is currently using Gemplus'
SIMs for Enhanced Network Selection and advanced data services for
its GSM subscribers.
- Financial Services
Deployments of EMV made good headway, with several new contracts.
In Mexico, Banco Azteca selected Gemplus to deliver biometric smart
payment cards, which will store the customer's photographs and
biometric data for identification purposes. In Italy, Setefi (Intesa
Group) chose Gemplus for the country's first mass EMV deployment,
with over one million smart payment cards for debit and credit
payment applications to be supplied. During the second quarter,
Gemplus started the delivery of a new EMV product for JCB, the
largest credit card issuer in Japan.
In addition, MasterCard(R) International granted full
certification to Gemplus for its GemInstant PayPassTM solution. This
strongly positions Gemplus to take full advantage of the increasing
interest from merchants and commercial partners in the MasterCard
Paypass scheme in the US and other contactless payment initiatives
worldwide.
- Identity and Security
In France, Gemplus will participate in the French Government's
border control initiative, "Biodev", by supplying its GemBorder
contactless smart card technology. The cards use ICAO-compliant
contactless chip technology for electronic passports and visas and
can be used for contactless authentication.
In the US, Gemplus continues to receive orders from leading
systems integrators such as BearingPoint on behalf of Transportation
Security Administration and EDS on behalf of several U.S. Federal
Government agencies.
- Research and Development
At the JavaOneSM conference in San Francisco, Gemplus announced a
new prototype for the future generation of JavaCardTM products, in a
joint presentation with SUN Microsystems, Inc. Designed for use in
all market sectors, the card represents Gemplus' vision of a
universal node within any network architecture, facilitating the
deployment of complex architectures and the dialogue with
internet-based services.
Earnings calendar
Third quarter 2005 results are scheduled to be reported on
October 26, 2005, before the opening of Euronext Paris.
Conference Call:
The Company has scheduled a conference call for Wednesday, 27 July
2005 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)-207-365-1850 or +1-718-354-1172 or +33-(0)-1-71-23-04-18
    access code 6834417
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,
2005 midnight by dialing:
+44 (0) 207 784 1024 or +1 718 354 11 12 or +33 (0) 1 71 23 02 48
    access Code: 6834417#
About Gemplus
Gemplus International S.A. (Euronext: LU0121706294 - GEM and
NASDAQ: GEMP) is the world's leading player in the smart card
industry in both revenue and total shipments (source:
Gartner-Dataquest (2004), Frost & Sullivan, Datamonitor.). It has
sold over 5 billion smart cards.
With security at its core, and 2400 patents and patent
applications produced by its innovative R&D team, Gemplus delivers a
wide range of portable, personalized solutions in areas including
Identity, Mobile Telecommunications, Public Telephony, Banking,
Retail, Transport, Healthcare, WLAN, Pay-TV, e-government and access
control.
Gemplus' revenue in 2004 was 865 million euros.
www.gemplus.com
For more information:
Press Gemplus
    Jane Strachey
    Tel: +33-(0)-4-42-36-46-61
    Mob: +33-(0)-6-76-49-35-93
    Email: jane.strachey@gemplus.com
    Investor Relations
    Gemplus
    Celine Berthier
    Tel: +41-(0)-22-544-5054
    Email: celine.berthier@gemplus.com
    Edelman
    Stephen Benzikie
    Tel: +44-(0)-207-344-1325
    Mob: +44-(0)-774-003-8929
    Email: stephen.benzikie@edelman.com
    Fineo
    Tel: +33-(0)-1-56-33-32-31
    Email: investors@gemplus.com
(c)2005 Gemplus. All rights reserved. Gemplus, the Gemplus logo,
are trademarks and service marks of Gemplus S.A. and are registered
in certain countries. All other trademarks and service marks, whether
registered or not in specific countries, are the property of their
respective owners.
Some of the statements contained in this release constitute
forward-looking statements. These statements relate to future events
or our future financial performance and involve known and unknown
risks, uncertainties, and other factors that may cause our or our
industry's actual results, levels of activity, performance or
achievements to be materially different from any future results,
levels of activities, performance, or achievements expressed or
implied by such forward-looking statements. Actual events or results
may differ materially. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot
guarantee future results, levels of activity, performance or
achievements. Factors that could cause actual results to differ
materially from those estimated by the forward-looking statements
contained in this release include, but are not limited to: trends in
wireless communication and mobile commerce markets; our ability to
develop new technology, and the effects of competing technologies
developed and expected intense competition generally in our main
markets; profitability of our expansion strategy; challenges to or
loss of our intellectual property rights; our ability to establish
and maintain strategic relationships in our major businesses; our
ability to develop and take advantage of new software and services;
and the effect of future acquisitions and investments on our share
price. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of such
forward-looking statements. The forward-looking statements contained
in this release speak only as of this release. We are under no duty
to update any of the forward-looking statements after this date to
conform such statements to actual results or to reflect the
occurrence of anticipated results.
[1] Setec is consolidated starting June 1st, 2005
[2] Free cash flow excluding non recurring items 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).
[3] Europe, Middle-East, Africa
[4] After adjusting for currency fluctuations, acquisitions and
disposals.
[5] Includes 2.1 million euros of goodwill amortization and
restructuring expenses in the second quarter 2004, and the expensing
of stock options from the first quarter 2005.
[6] EMV is a jointly defined set of specifications adopted by
Europay, MasterCard and Visa for the migration of bank cards to smart
card technology.
Gemplus International SA
                    Press Release - Financial statements
                  For the quarterly period ended June 30, 2005
    Consolidated Statements of Income
                                                                     (in
                                                            thousands of
                                                                  euros,
                                                                  except
                                                              shares and
                                                               per share
                                                                amounts)
                        Three months ended         Six months ended
                             June 30,                  June 30,
                         2005         2004         2005         2004
                            (unaudited)               (unaudited)
    Net sales             236,158      210,538      429,260      407,827
    Cost of sales       (156,129)    (142,512)    (287,339)    (278,553)
    Gross Profit           80,029       68,026      141,921      129,274
    Research and         (16,421)     (16,341)     (29,403)     (32,446)
    development
    expenses
    Selling and          (28,679)     (26,152)     (54,387)     (50,382)
    marketing
    expenses
    General and          (12,352)     (16,623)     (28,453)     (32,284)
    administrative
    expenses
    Restructuring             478        (161)          916           27
    expenses
    Other operating         (666)            -        (718)            -
    income
    (expense), net
    Goodwill                    -      (1,919)            -      (3,822)
    amortization and
    impairment
    Operating income       22,389        6,830       29,876       10,367
    Financial income        1,681        1,474        3,477        2,807
    (expense), net
    Share of profit           (9)      (1,189)        (833)      (3,956)
    (loss) of
    associates
    Other                   (266)      (3,039)           98      (2,754)
    non-operating
    income
    (expense), net
    Income before          23,795        4,076       32,618        6,464
    taxes
    Income tax            (1,242)      (2,251)      (2,946)      (3,726)
    expense
    NET INCOME             22,553        1,825       29,672        2,738
    Attributable to:
    Equity holders         21,760        1,073       29,003        1,403
    of the Company
    Minority                  793          752          669        1,335
    interest
    Net income per share attributable to equity holders of the
    Company (in euros)
    Basic                    0.04         0.00         0.05         0.00
    Diluted                  0.04         0.00         0.05         0.00
    Shares used in net income per share
    calculation:
    Basic             611,014,686  606,862,474  609,027,112  606,435,835
    Diluted           624,130,718  619,719,484  623,269,017  621,135,793
    Due to the adoption of IAS 1 (revised 2003) Presentation of
    Financial Statements, the Company has modified its Consolidated Balance
    Sheet and its Consolidated Statement of Income.
    Please refer to Note 2.23 "Comparatives" of our 2004 Annual
    Report for further details.
    Consolidated Balance Sheets
                                                  (in thousands
                                                      of euros)
                                    June 30, 2005    December 31,
                                                        2004
                                    (unaudited)
    ASSETS
    Current assets:
    Cash and cash equivalents           373,527         388,430
    Trade accounts receivable,          181,396         148,512
    net
    Inventory, net                      111,790         115,610
    Derivative financial                  3,407          33,387
    instruments
    Other current receivables            75,420          66,160
    Total current assets                745,540         752,099
    Non-current assets:
    Property, plant and                 157,212         148,916
    equipment, net
    Customer contracts and               17,911               -
    technology, net
    Goodwill, net                        87,664          28,197
    Deferred development costs,          20,487          19,222
    net
    Other intangible assets, net          7,243           8,965
    Deferred tax assets                   7,270           6,264
    Investments in associates            18,970          12,864
    Available-for-sale financial          5,178           4,752
    assets, net
    Other non-current                    46,087          43,900
    receivables, net
    Total non-current assets            368,022         273,080
    TOTAL ASSETS                      1,113,562       1,025,179
    LIABILITIES
    Current liabilities:
    Accounts payable                    107,711          94,025
    Salaries, wages and related          50,078          55,199
    items
    Current portion of provisions        76,901          50,217
    and other liabilities
    Current income tax                   30,322          25,708
    liabilities
    Current obligations under             5,833           6,005
    finance leases
    Total current liabilities           270,845         231,154
    Non-current liabilities:
    Non-current obligations under        30,650          33,663
    finance leases
    Non-current portion of               26,131          25,696
    provisions
    Other non-current liabilities        16,786          13,353
    Total non-current liabilities        73,567          72,712
    Shareholders' equity:
    Ordinary shares                     132,925         128,643
    Additional paid-in capital        1,068,100       1,031,558
    Retained earnings                 (434,771)       (459,560)
    Other comprehensive income          (6,748)          11,956
    Less, cost of treasury shares       (1,985)         (1,985)
    Equity attributable to equity       757,521         710,612
    holders of the Company
    Minority interest                    11,629          10,701
    Total shareholders' equity          769,150         721,313
    TOTAL LIABILITIES AND             1,113,562       1,025,179
    SHAREHOLDERS' EQUITY
    Due to the adoption of IAS 1 (revised 2003) Presentation of Financial
    Statements, the Company has modified its Consolidated Balance Sheet and
    its Consolidated Statement of Income.
    Please refer to Note 2.23 "Comparatives" of our 2004 Annual Report for
    further details.
    Consolidated Statements of Cash Flows
                                                    (in thousands of euros)
                                                 Six months ended
                                                     June 30,
                                              2005                    2004
                                                    (unaudited)
    Cash flows from operating
    activities:
    Net income                               29,672                   2,738
    Adjustments to reconcile net income
    to net cash from operating
    activities:
    Depreciation, amortization and           18,990                  28,914
    impairment
    Changes in non-current portion of
    provisions and other liabilities,
    excluding restructuring                     484                   (144)
    Deferred income taxes                   (1,478)                   1,670
    (Gain) / loss on sale and disposal          418                     787
    of assets
    Share of (profit) loss of                   772                   3,956
    associates
    Other, net                              (1,471)                 (2,340)
    Changes in operating assets and
    liabilities:
    Trade accounts receivable and          (10,161)                   4,485
    related current liabilities
    Trade accounts payable and related        4,375                  16,125
    current assets
    Inventories                              16,248                (24,609)
    Value-added and income taxes            (2,653)                  11,764
    Salaries, wages and other              (11,445)                   3,286
    Restricted cash                          23,427                (21,952)
    Restructuring reserve payable           (9,226)                (19,410)
    Litigation expense payable                    -                       -
    Management severance expense                  -                       -
    Provision for a loan to a former              -                       -
    director and executive
    Net cash (used for) from operating       57,952                   5,270
    activities
    Cash flows from investing
    activities:
    Sale / (Purchase) of activities net    (60,123)
    of cash disposed / acquired                                           -
    Other investments                         (758)                   (901)
    Purchase of property, plant and         (8,981)                 (9,677)
    equipment
    Purchase of other assets                  (850)                   (970)
    Change in non-trade accounts              2,612                   (288)
    payable and other
    Net cash used for investing            (68,100)                (11,836)
    activities
    Cash flows from financing
    activities:
    Proceeds from exercise of share           1,256                   1,288
    options
    Payments on long-term borrowings
    Payments on long-term borrowings          (138)                       -
    Proceeds from sales-leaseback                 -                     957
    operations
    Principal payments on obligations       (2,952)                 (2,857)
    under finance leases
    Increase (decrease) in bank               (241)                     831
    overdrafts
    Dividends paid by subsidiaries to       (1,048)                 (1,214)
    minority shareholders
    Changes in non-trade accounts               133                       -
    payables on financing activities
    Change in treasury shares                     -                       -
    Interests receivable on loans to              -                       -
    senior management
    Net cash (used for) from financing      (2,990)                   (995)
    activites
    Effect of exchange rate changes on      (1,765)                      14
    cash
    Net increase (decrease) in cash and    (13,138)                 (7,561)
    cash equivalents
    Cash and cash equivalents,              388,430                 390,684
    beginning of the period
    Cash and cash equivalents, end of       373,527                 383,137
    the period
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 2005 compared with Second Quarter 2004
2.1.1) Operating Segments
    Three months ended                               (in millions of euros)
                         June          June
                          30,           30,             Adjusted change (%)
    Net sales            2005          2004   % change                  (1)
    Telecommunications  163.2         154.0       6%                     7%
    Financial Services   50.3          44.7      13%                    16%
    Identity and
    Security             22.7          11.8      92%                    67%
    Total               236.2         210.5      12%                    11%
                                                     (in millions of euros)
                         June  (% of   June    (% of
                          30,    net    30,      net
    Gross profit         2005 sales)   2004   sales)               % change
    Telecommunications   61.4    38%   55.1      36%                    12%
    Financial Services   10.2    20%    8.8      20%                    16%
    Identity and
    Security              8.4    37%    4.1      35%                   104%
    Total                80.0    34%   68.0      32%                    18%
                                                     (in millions of euros)
                         June  (% of   June    (% of
                          30,    net    30,      net
    Operating expenses   2005 sales)   2004   sales)               % change
    Telecommunications (40.3)    25% (39.9)      26%                     1%
    Financial Services  (7.3)    14% (13.5)      30%                   -46%
    Identity and
    Security           (10.0)    44%  (7.8)      66%                    28%
    Total              (57.6)    24% (61.2)      29%                    -6%
                                                     (in millions of euros)
                         June          June
    Operating income      30,           30,             Change in Operating
    (loss)               2005          2004                   income (loss)
    Telecommunications   21.1          15.2                             5.9
    Financial Services    2.9         (4.7)                             7.6
    Identity and
    Security            (1.6)         (3.7)                             2.1
    Total                22.4           6.8                            15.6
    (1) Adjusted for currency fluctuations, disposals & acquisitions
    2.1.2) Geographical Segments
    Three months ended                               (in millions of euros)
                         June          June
                          30,           30,             Adjusted change (%)
    Net sales            2005          2004 % change                    (1)
    Europe, Middle
    East and Africa     121.0         109.6      10%                     5%
    Asia                 41.6          50.1     -17%                   -16%
    Americas             73.6          50.8      45%                    51%
    Total               236.2         210.5      12%                    11%
    2.2) First-half 2005 compared with First-half 2004
    2.2.1) Operating Segments
    Six months ended                                   (in millions of euros)
                          June           June
                           30,            30,             Adjusted change (%)
    Net sales             2005           2004   % change                  (1)
    Telecommunications   307.5          300.6       2%                     2%
    Financial Services    88.2           85.1       4%                     7%
    Identity and
    Security              33.6           22.1      52%                    39%
    Total                429.3          407.8       5%                     5%
                                                       (in millions of euros)
                          June  (% of    June    (% of
                           30,    net     30,      net
    Gross profit          2005 sales)    2004   sales)               % change
    Telecommunications   113.7    37%   104.8      35%                     9%
    Financial Services    16.0    18%    18.0      21%                   -11%
    Identity and
    Security              12.2    36%     6.5      29%                    87%
    Total                141.9    33%   129.3      32%                    10%
                                                       (in millions of euros)
                          June  (% of    June    (% of
                           30,    net     30,      net
    Operating expenses    2005 sales)    2004   sales)               % change
    Telecommunications  (76.1)    25%  (77.7)      26%                    -2%
    Financial Services  (17.7)    20%  (25.4)      30%                   -30%
    Identity and
    Security            (18.2)    54%  (15.8)      72%                    15%
    Total              (112.0)    26% (118.9)      29%                    -6%
                                                       (in millions of euros)
                          June           June
    Operating income       30,            30,             Change in Operating
    (loss)                2005           2004                   income (loss)
    Telecommunications    37.6           27.1                            10.5
    Financial Services   (1.7)          (7.4)                             5.7
    Identity and
    Security             (6.0)          (9.3)                             3.3
    Total                 29.9           10.4                            19.5
    (1) Adjusted for currency fluctuations, disposals & acquisitions
    2.2.2) Geographical Segments
    Six months ended                                   (in millions of euros)
                          June           June
                           30,            30,             Adjusted change (%)
    Net sales             2005           2004   % change                  (1)
    Europe, Middle
    East and Africa      220.4          206.0       7%                     5%
    Asia                  87.9          103.2     -15%                   -15%
    Americas             121.0           98.6      23%                    27%
    Total                429.3          407.8       5%                     5%

Contact:

Press Gemplus: Jane Strachey, Tel: +33-(0)-4-42-36-46-61, Mob:
+33-(0)-6-76-49-35-93, Email: jane.strachey@gemplus.com; Investor
Relations, Gemplus, Celine Berthier, Tel: +41-(0)-22-544-5054, Email:
celine.berthier@gemplus.com; Edelman, Stephen Benzikie, Tel:
+44-(0)-207-344-1325, Mob: +44-(0)-774-003-8929, Email:
stephen.benzikie@edelman.com; Fineo, Tel: +33-(0)-1-56-33-32-31,
Email: investors@gemplus.com

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