2007'02.01.Thu
Gemplus Reports Strong Sales Growth for the First Quarter 2006
April 24, 2006
First quarter 2006 highlights:
-- Net sales up 19.3% year-on-year driven by Financial
Services and ID &
Security.
-- Gross margin at 30.5%, down 1.6 percentage point
year-on-year.
-- Operating income up 12.3%, at 8.4 million euros.
-- Attributable net income(1) at 6.3 million euros.
LUXEMBOURG, April 24 /Xinhua-PRNewswire/ -- Gemplus
International S.A. (Euronext: LU0121706294 - GEM and
Nasdaq: GEMP), a world leading provider of secure card
solutions, today reported results for the first quarter
ended March 31, 2006.
In millions of euros Q1 2006 Q1 2005
Year-on-
year change
Net sales 230.3 193.1
+19.3%
Adjusted for currency
fluctuations, disposals
and acquisitions
+5.3%
Gross profit 70.2 61.9
+13.5%
Gross margin 30.5%
32.1% -1.6 ppt
Operating expenses 61.8 54.4
+13.6%
Operating income 8.4 7.5
+12.3%
Operating margin 3.7% 3.9%
-0.2 ppt
Attributable net income 6.3 7.2
-13.7%
Free cash flow (2) -13.8 8.8
NM
Cash and cash equivalents 409.9 395.1
+3.7%
Per share data (in euros)
Earnings per share (fully diluted) 0.01 0.01
NM
Note: The consolidated financial statements of the
Company have been
prepared in accordance with International
Financial Reporting
Standards (IFRS).
Commenting on the performance for the first quarter
2006, Alex Mandl, President and Chief Executive Officer,
said: "Gemplus improved its position in all of its
core businesses. Beside buoyant shipments in Wireless, we
are very satisfied to report robust revenue growth in
Financial Services and ID & Security. These results
validate our strategy and confirm the strong potential of
these segments. Finally, we are optimistic about the
outcome of the proposed Gemalto transaction to create a
world-class leader in digital security."
First quarter 2006 financial review
-- Income statement
First quarter 2006 highlights:
-- Net sales up 19.3% year-on-year driven by
Financial Services and ID &
Security.
-- Gross margin 30.5%, down 1.6 percentage point
year-on-year.
-- Operating income up 12.3%, at 8.4 million euros.
Net sales were up 19.3% driven by Setec and strong
organic growth in Financial Services and ID &
Security.
On a geographical basis, strong demand in all segments
led to adjusted revenue growth of 27.8% in the Americas.
Adjusted(3) revenue in EMEA(4) was up 5.8%, year-on-year,
driven by Financial Services and down 17.5% in Asia,
reflecting price pressure in Wireless.
Gross margin was down 1.6 percentage point
year-on-year, to 30.5%, reflecting the change in the
business mix, Wireless price pressure and purchase
accounting.
As a percentage of sales, operating expenses decreased
to 26.8%, compared to 28.2% a year ago, although in value,
they increased 13.6% year-on-year, to 61.8 million euros,
mainly due to Setec.
Consequently, operating income was up 12.3%, at 8.4
million euros.
Attributable net income for the first quarter was
slightly down 1.0 million euros to 6.3 million euros,
mainly due to minority interests and income tax.
-- Balance sheet and cash flow statement
First quarter 2006 highlights:
-- Free cash outflow of 13.8 million euros reflecting
increase in working
capital.
-- Continuous strong cash position, at 409.9 million
euros.
Working capital was up 18.6 million euros
quarter-on-quarter, but decreased, as a percentage of
sales, to 14% at March 31, 2006, compared with 16% a year
ago.
The Group's cash position remains strong and is down
8.4 million euros compared to December 31, 2005.
Segment analysis
-- Telecom
First quarter 2006 highlights:
-- Record wireless shipments, at 100.6 million
units.
-- Wireless ASP down 33% year-on-year, currency
adjusted.
-- Rebound in prepaid phonecards.
In millions of euros Q1 2006 Q1 2005 %
change Adjusted(3)
change (%)
Wireless products &
services net sales 134.3 132.7
+1.2%
Wireless gross profit 50.2 51.1
-1.8%
Wireless gross margin 37.4% 38.6% -1.2
ppt
Prepaid phone cards &
scratchcards net sales 14.0 11.6
+21.2%
Prepaid phone cards &
scratchcards gross
profit 1.9 1.2
+60.7%
Prepaid phone cards &
scratchcards gross
margin 13.2% 9.9%
+3.3 ppts
Telecom net sales 148.4 144.3
+2.9% -2.4%
Telecom gross profit 52.1 52.3
-0.4%
Telecom gross margin 35.1% 36.3%
-1.2 ppt
Telecom operating expenses
38.3 35.8
+7.0%
As a % of sales 25.8% 24.8%
+1.0 ppt
Telecom operating profit 13.7 16.5
-16.4%
Operating margin 9.3% 11.4%
-2.1 ppts
Wireless revenue:
-- Wireless products & services revenue(5) was up
1.2% year-on-year (down
3.3%, currency adjusted), to 134.3 million euros.
-- Wireless shipments grew 48% year-on-year, to 100.6
million units,
largely driven by emerging countries.
-- High-end card shipments (3G and above) accounted for
14% of the first
quarter total, compared to 10% a year ago.
-- Wireless average selling price (ASP) was down 16%
quarter-on-quarter and
33% year-on-year, both currency adjusted, reflecting
ongoing price
pressure.
The slight decline in Wireless gross margin was due to
product and regional mix, as well as strong price
pressure.
-- Financial Services
First quarter 2006 highlights:
-- Very strong growth in payment microprocessor
cards: shipments up 75%,
to 22.3 million units.
-- EMV(6) roll-out gained further momentum in Latin
America, Southern
Europe and Japan.
In millions of euros Q1 2006 Q1 2005 %
change Adjusted (3)
change (%)
Net sales 56.4 37.9
+48.6% +30.0%
Gross profit 10.5 5.8
+80.6%
Gross margin as
a % of sales 18.6% 15.3% +3.3
ppts
Operating expenses 11.4 10.4
+9.8%
As a % of sales 20.3% 27.4% -7.1
ppts
Operating income -0.9 -4.6 NM
Operating margin as
a % of sales -1.6% -12.1% +10.5
ppts
Revenue reflects strong growth in all sub-segments.
Payment microprocessor card revenue rose 55%
year-on-year. Shipments of payment microprocessor cards
grew 75% to 22.3 million units.
The strong performance in payment cards was mainly
driven by the EMV roll-out, which gained momentum in Latin
America (Mexico, Brazil), Southern Europe (Italy, Portugal,
Greece) and Japan.
As a result, operating income came close to breakeven.
-- Identity and Security
First quarter 2006 highlights:
-- Very strong growth, driven by Government ID and
Corporate Security
projects.
In millions of euros Q1 2006 Q1 2005 %
change Adjusted (3)
change (%)
Net sales 25.6 10.9
+134.3% +26.0%
Gross profit 7.6 3.8
+102.1%
Gross margin as
a % of sales 29.8% 34.6% -4.8
ppts
Operating expenses 12.1 8.2
+47.8%
As a % of sales 47.1% 74.7% -27.6
ppts
Operating income -4.4 -4.4 NM
Operating margin
as a % of sales -17.3% -40.1% +22.8
ppts
Strong growth was driven by a substantial increase in
Government ID projects, notably e-passports and healthcare
solutions, and Corporate Security projects, particularly in
Americas, in addition to those from Setec.
Outlook
The Group continues to see strong momentum in its core
segments and will maintain its focus on cost efficiency.
Gemplus confirms that it is firmly on track to realize
its mid-term objective to achieve a 10% operating margin in
2007.
The Group remains confident in its ability to further
strongly improve its operating income in 2006 taking into
account the usual seasonality effect of stronger organic
growth in the second half than in the first half.
Gemplus also continues to expect the Financial Services
and ID & Security segments to turn profitable in 2006.
Business Highlights
-- Telecom
At the 3GSM World Congress, Gemplus launched its new
software and SIM platform, bridging telecom and PC/internet
communications. Called .sim (DOTSIM), it extends the
traditional SIM roles of authentication and security from
mobile networks to the PC/Internet world and offers
advanced multimedia services across both channels. This is
a solution already generating significant interest from
mobile operators such as Orange, as a way of reinforcing
brand, unifying services across the board and supporting
their digital convergence strategy.
Gemplus's OTA over IP platform, GemConnect OTA, was
selected by Telefonica Moviles Expana for the high speed
delivery of multimedia services and applications for 3G
mobile subscribers.
-- Financial Services
Gemplus launched its range of innovative card bodies,
Plastic Fantastic, which is designed to help banks and
financial institutions set themselves apart from the
competition. The cards range from unusual shapes, perfumed,
tactile and even glow in the dark, and will support
customers in their branding and customer segmentation.
Gemplus' product, GemSense Instant Issuance, also won
an award from the ECPA/ ECR (European Payments Consulting
Association / European Card Review) Payment Innovation
Awards in the category for the most innovative and advanced
payment software/hardware product. This is a personalization
and card issuance solution which allows banks and retailers
to deploy or replace cards on the spot. Each cardholder
walks away with a fully personalized smart payment card
within a matter of minutes.
Continuing to support banks in their migration to EMV,
Gemplus was selected by Indonesian Bank, Bank Buana, to
provide the highest level of secure smart payment cards.
The cards use random data for the generation of each
signature for transactions which makes them difficult to
duplicate. They also offer off-line transaction processing
capabilities which reduce the cost of network
communication.
-- Identity and Security
Gemplus was selected by BearingPoint to supply an
additional 1 million cards to the US Department of Defense
for their Common Access Card program. This is the US
Federal Government's biggest roll-out to date with more 4
million smart ID cards issued to bring strong
authentication for its employees. The cards supplied in the
contract are FIPS 140-2 validated -- a security
pre-requisite for the CAC program.
Gemplus launched its first product aimed at Small and
Medium-sized enterprises. GemEvidence is a One Time
Password token-based solution which improves the security
of remote connections in a cost-effective manner.
Gemplus, with the full integration of Setec, passed the
significant milestone of half a million e-passports
delivered in the last six months. This makes Gemplus the
leading e-passport supplier in the world.
Gemplus's contactless reader technology, GemProx, was
selected and integrated into Saflink's SureAccess(TM)
biometric smart card reader, designed to comply with the US
Government Federal Information Processing Standard (FIPS)
201 requirements. As such, Gemplus provides the technology
for reading the contactless ID cards carried by authorized
personnel in secure facilities such as seaports and
airports.
Earnings calendar
Second quarter 2006 results are scheduled to be
reported on July 26, 2006, before the opening of Euronext
Paris.
Conference Call:
The company has scheduled a conference call for Monday,
24 April 2006 at 2:30 pm CET (1:30 pm GMT and 8:30 am
New-York time). Callers may participate in the live
conference call by dialing:
+44 (0) 207 138 0813 or +1 718 354 1157 or +33 1 55 17
41 44, access code 2815143.
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 http://www.gemplus.com .
Replays of the conference call will be available
approximately 3 hours after the conclusion of the
conference call until May 8th, 2006 midnight by dialing:
+44 (0) 207 806 1970 or +1 718 354 11 12 or +33 1 71 23
02 48, access Code: 2815143#.
About Gemplus
Gemplus International S.A. (Euronext: LU0121706294 -
GEM and NASDAQ: GEMP) is a world leading player in the
secure card industry in both revenue and total shipments
(source: Gartner-Dataquest 2005, Frost & Sullivan,
Datamonitor). It has sold over 5.5 billion smart cards.
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 2005 was 939 million euros.
http://www.gemplus.com
Gemplus, the Gemplus logo, are trademarks and service
marks of Gemplus S.A. and are registered in certain
countries. All other trademarks and service marks, whether
registered or not in specific countries, are the property
of their respective owners.
Some of the statements contained in this release
constitute forward-looking statements. These statements
relate to future events or our future financial performance
and involve known and unknown risks, uncertainties, and
other factors that may cause our or our industry's actual
results, levels of activity, performance or achievements to
be materially different from any future results, levels of
activities, performance, or achievements expressed or
implied by such forward-looking statements. Actual events
or results may differ materially. Although we believe that
the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements.
Factors that could cause actual results to differ
materially from those estimated by the forward-looking
statements contained in this release include, but are not
limited to: trends in wireless communication and mobile
commerce sectors; our ability to develop new technology,
and the effects of competing technologies developed and
expected intense competition generally in our main
segments; profitability of our expansion strategy;
challenges to or loss of our intellectual property rights;
our ability to establish and maintain strategic
relationships in our major businesses; our ability to
develop and take advantage of new software and services;
and the effect of future acquisitions and investments on
our share price. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of
such forward-looking statements. The forward-looking
statements contained in this release speak only as of this
release. We are under no duty to update any of the
forward-looking statements after this date to conform such
statements to actual results or to reflect the occurrence
of anticipated results.
Gemplus International SA
Press Release - Financial statements
For the quarterly period ended March 31, 2006
Consolidated Statements of Income
(in thousands of euros, except shares and
per share amounts)
Three
months ended
March 31,
2006
2005
(unaudited)
Net sales 230,332
193,102
Cost of sales (160,104)
(131,210)
Gross profit 70,228
61,892
Research and development expenses (15,958)
(12,981)
Selling and marketing expenses (31,008)
(25,707)
General and administrative expenses (15,611)
(16,101)
Restructuring reversals 67
438
Other operating income (expense), net 691
(52)
Goodwill amortization and impairment -
-
Operating income 8,409
7,489
Financial income (expense), net 2,251
1,795
Share of profit (loss) of associates 120
(824)
Other non-operating income (expense), net (578)
362
Income before taxes 10,202
8,822
Income tax expense (3,119)
(1,704)
NET INCOME 7,083
7,118
Attributable to:
Equity holders of the Company 6,252
7,242
Minority interest 831
(124)
Net income per share attributable to equity
holders of the Company (in euros)
Basic 0.01
0.01
Diluted 0.01
0.01
Shares used in net income per share
calculation:
Basic 630,137,679
607,039,538
Diluted 649,357,638
622,407,315
Consolidated Balance Sheets
(in
thousands of euros)
March 31, 2006
December 31, 2005
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents 409,927
418,365
Trade accounts receivable, net 167,115
183,022
Inventory, net 121,394
107,673
Derivative financial instruments 6,296
4,187
Other current receivables 53,759
82,128
Total current assets 758,491
795,375
Non-current assets:
Property, plant and equipment, net 158,237
158,284
Goodwill, net 90,789
90,826
Deferred development costs, net 20,948
21,227
Other intangible assets, net 21,497
23,600
Deferred income tax assets 29,756
32,788
Investments in associates 14,089
16,309
Available-for-sale financial assets, net 2,477
2,469
Other non-current receivables, net 41,360
40,846
Total non-current assets 379,153
386,349
TOTAL ASSETS 1,137,644
1,181,724
LIABILITIES
Current liabilities:
Accounts payable 105,187
106,085
Derivative financial instruments 4,525
2,592
Salaries, wages and related items 45,812
62,641
Current portion of provisions and other
liabilities 42,528
73,434
Current income tax liabilities 4,680
5,228
Other current tax liabilities 20,328
20,821
Current obligations under finance leases 5,383
5,539
Total current liabilities 228,443
276,340
Non-current liabilities:
Non-current obligations under finance leases 25,052
26,425
Non-current portion of provisions 20,654
23,482
Other non-current liabilities 13,176
13,417
Deferred income tax liabilities 3,520
4,354
Total non-current liabilities 62,402
67,678
Shareholders' equity:
Ordinary shares 133,733
133,466
Additional paid-in capital 1,064,235
1,063,145
Retained earnings (358,775)
(365,940)
Other comprehensive income (4,622)
(4,407)
Less, cost of treasury shares (1,395)
(1,395)
Equity attributable to equity holders of
the Company 833,176
824,869
Minority interest 13,623
12,837
Total shareholders' equity 846,799
837,706
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 1,137,644
1,181,724
Consolidated Statements of Cash Flows
(in
thousands of euros)
Three months ended
March 31,
2006
2005
(unaudited)
Cash flow from operating activities :
Net income (loss) 7,083
7,118
Adjustments to reconcile net income
(loss) to net cash from operating activities:
Depreciation, amortization and impairment 10,550
9,326
Changes in non-current portion of provisions
and other liabilities, excluding restructuring (2,612)
(446)
Deferred income taxes (benefit) expense 1,887
(339)
(Gain) / loss on sale and disposal of assets -
132
Share of (profit) loss of associates (50)
824
Share-based compensation 914
805
Other, net 198
(937)
Changes in operating assets and liabilities:
Trade accounts receivable and related current
liabilities 13,706
14,084
Trade accounts payable and related current
assets (2,592)
(15,735)
Inventories (13,970)
8,946
Value-added and income taxes (2,395)
1,354
Salaries, wages and other (17,199)
(8,929)
Restructuring reserve payable (1,587)
(3,611)
Net cash (used for) from operating activities (6,067)
12,592
Cash flows from investing activities:
(Purchase)/Sale of activities net of cash
(acquired)/disposed 4,632
-
Purchase of property, plant and equipment (8,597)
(4,439)
Purchase of other assets (538)
(197)
Change in non-trade accounts payable
and other 1,414
846
Net cash used for investing activities (3,089)
(3,790)
Cash flows from financing activities:
Proceeds from exercise of stock options 1,358
-
Payments on borrowings (30)
-
Principal payments on obligations under
finance leases (1,529)
(1,472)
Increase (decrease) in bank overdrafts (683)
(1,555)
Dividends paid by subsidiaries to minority
shareholders (270)
-
Changes in non-trade accounts payables on
financing activities 2,099
779
Net cash (used for) from financing activities 945
(2,248)
Effect of exchange rate changes on
cash (227)
114
Net increase (decrease) in cash (8,211)
6,554
Cash and cash equivalents, beginning of
the period 418,365
388,430
Cash and cash equivalents, end of the period 409,927
395,098
1) Accounting principles:
The consolidated financial statements of the Company
have been prepared in accordance with International
Financial Reporting Standards (IFRS).
2) Segment information
First Quarter 2006 compared with First Quarter 2005
2.1) Operating Segments
(in
millions of euros)
Three months ended
Adjusted
Net sales March 31, March 31,
%change change(%)(*)
2006 2005
Telecommunications 148.4 144.3
3% -2%
Financial Services 56.4 37.9
49% 30%
Identity and Security 25.6 10.9
134% 26%
Total 230.3 193.1
19% 5%
(in
millions of euros)
Gross profit March 31, (% of net March
31, (% of net
2006 sales) 2005
sales) % change
Telecommunications 52.1 35% 52.3
36% 0%
Financial Services 10.5 19% 5.8
15% 81%
Identity and Security 7.6 30% 3.8
35% 102%
Total 70.2 30% 61.9
32% 13%
(in
millions of euros)
Operating expenses March 31, (% of net
2006 sales) March 31,
(% of net
2005
sales) % change
Telecommunications (38.3) 26% (35.8)
25% 7%
Financial Services (11.4) 20% (10.4)
27% 10%
Identity and Security (12.1) 47% (8.2)
75% 48%
Total (61.8) 27% (54.4)
28% 14%
(in
millions of euros)
Change in
March 31, March 31,
Operating
Operating income (loss) 2006 2005
income (loss)
Telecommunications 13.7 16.5
(2.7)
Financial Services (0.9) (4.6)
3.7
Identity and Security (4.4) (4.4)
(0.0)
Total 8.4 7.5
0.9
(*) Adjusted for currency fluctuations, disposals &
acquisitions
2.2) Geographical Segments
Three months ended (in
millions of euros)
Net sales March 31, March 31,
Adjusted
2006 2005 %
change change(%)(*)
Europe, Middle East
and Africa 121.9 99.3
23% 6%
Asia 41.3 46.4
-11% -18%
Americas 67.1 47.4
42% 28%
Total 230.3 193.1
19% 5%
(*) Adjusted for currency fluctuations, disposals &
acquisitions
(1) Net income attributable to equity holders of the
Company.
(2) 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 (and
excluding acquisitions
and financial investments).
(3) Adjusted for currency fluctuations, disposals &
acquisitions
(4) Europe, Middle East and Africa
(5) Wireless products & services revenue comprises
wireless microprocessor
cards and related applications (embedded software
and Over The Air
platforms) and services (system integration and
operated services).
(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.
For more information, please contact:
Press
Gemplus
Jane Strachey
Tel: +33-4-4236-4661
Mob: +33-6-7946-3593
Email: jane.strachey@gemplus.com
Edelman
Frederic Boullard
Tel: +33-1-5669-7395
Email: frederic.boullard@edelman.com
Investor Relations
Gemplus
Celine Berthier
Tel: +41-22-544-5054
Email: celine.berthier@gemplus.com
Fineo
Tel: +33-1-5633-32-31
Email: investors@gemplus.com
SOURCE Gemplus S.A.
PR
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