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Gemplus reports Q2 results
Company Successfully Implements Restructuring Program and Builds Financial Services Business
LUXEMBOURG, (August 1, 2001) -- Gemplus International S.A. (Euronext: Sicovam 5768 and NASDAQ:GEMP) today reported results for the second quarter ended June 30, 2001.
Revenue for the second quarter was 252 million Euros, down 8% from the same quarter a year ago. Operating loss, before restructuring, was 12 million Euros, compared with an operating profit of 34 million Euros for the same quarter a year ago. Operating loss, after restructuring, was 41 million Euros. Net loss for the second quarter, including restructuring, was 40 million Euros, or 0.06 Euro per fully diluted share. Net loss for the quarter, excluding restructuring, was 21 million Euros, or 0.03 Euro per diluted share.
Strategic repositioning
"Our second quarter operating results reflect the progress we have made in strategically repositioning the company," said Antonio Perez, president and CEO. "We have adjusted and realigned our resources to exploit the opportunities in the Telecommunications, Financial Services and E-Business Security Applications markets."
Successful restructuring
The company announced that it had successfully implemented its planned restructuring program. "This is a major step forward to increase our financial competitiveness," added Perez. "This restructuring will reduce headcount by 567 people by the end of 2001 and save the company 40 million Euros in annual expenses, with about 17 million of the savings occurring in the second half of the year." The company noted that it would be taking a 28 million Euro restructuring charge. No social plan was implemented in France.
Perez also noted that the sale of its SkiData operation complements its restructuring programs and would enhance the company's strategic focus. Gemplus announced an agreement to sell Skidata to Kudelski S.A. in June and expects to finalize the transaction shortly.
Rapid growth and margin improvement for Financial Services business
"I am also very pleased with the continued rapid growth and margin improvement that we are seeing in our Financial Services Business," added Perez. Earlier this week, the company announced that this business unit had recently been awarded a major contract with the Target Corporation. "These recent developments demonstrate that our strategy is on track. The contract with Target Corporation, the fourth largest general merchandise retailer in the U.S., is particularly interesting as it marks a significant milestone in the adoption of smart card based solutions in the U.S. retail sector."
The company indicated that its reported results included a favorable 10 million Euro royalty expense adjustment. "While we achieved our goal of restructuring to improve our cost base and competitiveness, we had to deal with the challenging Telecommunications market and resulting softness in our GSM business," commented Perez. "The impact of the business mix shift from Telecommunications and GSM to Financial Services has been felt in gross margin. However, the underlying rapid growth and significant margin improvement in our Financial Services business are very exciting."
Market leadership
"We expect to maintain our leadership market share in the SIM card market and are encouraged by signs that the excess SIM inventory at operators are coming down," added Perez. "We should see a more reasonable balance between inventory and end-user demand by the end of the year." The company now believes that the market for GSM SIM cards is around 300 million units which based upon historical correlation implies a total number of mobile handsets shipped by manufacturers this year to be 375-380 million units.
Looking forward, Gemplus indicated that it expects third quarter revenue to grow 7% sequentially with operating losses of about 13-18 million Euros. For the year 2001, the company expects revenue will be flat to down compared to the year 2000 with operating profit, before restructuring, at about 5 million Euros.
Cash and cash equivalents were 430 million Euros at June 30, 2001. The company's financial results were derived from its consolidated financial statements, which have been prepared in accordance with International Accounting Standards (IAS).
Conference Call
The company will hold a conference call later today starting at 2:00 p.m. (Paris time). A slide presentation that will be used during the conference call is available at: www.gemplus.com/investors.
The media can listen to the live conference call on the Internet at www.streetfusion.com or by dialing:
Europe: 44 (0) 20 8781 0579
North America: 1 800 966 6338
Replays of the conference call will be available two hours after the call on the Internet at www.streetfusion.com or by telephone until August 15, 2001. The replay telephone number and access code are:
Worldwide: 44 (0) 20 8288 4459 (Access Code: 699212)
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About Gemplus
GEMPLUS: the world's number one provider of solutions empowered by Smart Cards (Gartner Dataquest 2001).
Gemplus helps its clients offer an exceptional range of portable, personalized solutions that bring security and convenience to people's lives. These include mobile internet access, inter-operable banking facilities, e-commerce and a wealth of other applications.
Gemplus is the only completely dedicated, truly global player in the Smart Card industry, with the largest R&D team, unrivalled experience, and an outstanding track record of technological innovation.
Gemplus trades its shares on Euronext Paris S.A. First Market and on the Nasdaq Stock Market® as GEMP in the form of ADSs. Its revenue in 2000 was 1.205 billion Euros. It employs 7800 people in 37 countries throughout the world.
Gemplus: Your Passport to the Digital Age
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Press contacts
Press
Gemplus
Marielle Bricman
Tel: 33 4 42 36 55 96
marielle.bricman@gemplus.com
Investor Relations
Gemplus
Michael Look
Tel : 00 1 650 654 2940
michael.look@gemplus.com
French Retail Investors
Gavin Anderson & Co
Florence Laroche
Tel: 33 1 53 83 31 72
Some of the statements contained in this release or our conference call of August 1, 2001 constitute forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934. The statements relate to the 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 materially differ 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 or our conference call include, but are not limited to: trends in wireless communication and financial services markets and trends in the growth of mobile commerce, mobile banking and internet business; our ability to develop and market new chip card technologies to meet market demands and the effects of the adoption of competing technologies in our target markets, particularly in the telecommunications industry and expected intense competition generally in our main markets; profitability of our market expansion strategy; challenges to or loss of our intellectual property rights regarding chip card technologies; our ability to establish and maintain strategic relationships in our major businesses (i.e. with wireless network operators, financial service providers, internet business infrastructure providers and security technology developers); our ability to develop and take advantage of new software and services; the effect of future acquisitions and investments on our share price; the effect of industry wide chip shortages; defects in our products or errors in our services and our ability to attract and maintain qualified executives and personnel, particularly in our research and development division. You are cautioned not to place undue reliance on the forward-looking statements. 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.
Condensed Consolidated Statement of Income
(in millions of Euros, except share and per share detail)
Three months ended Six months ended
June 2001 June 2000 June 2001 June 2000
(unaudited) (unaudited)
Net sales 252 ,3 275 ,0 545,9 506,8
Cost of sales - 159,6 - 175 ,7 - 353,3 - 324 ,5
Gross Profit 92,7 99,3 192,6 182,3
R&D expenses - 32 ,6 - 21,2 - 62,3 -39,0
Reversal of credit allowances 12,5 12,5
Selling and marketing expenses - 46 ,9 - 37,5 - 92 ,6 - 72,0
General and administrative expenses - 25,5 - 18,8 - 52,6 - 36,0
Operating income before restructuring - 12,4 34,2 - 14,9 47,8
Restructuring expenses - 28,5 - 28,5
Operating income after restructuring - 40,8 34,2 - 43,4 47,8
Interest income and (expense), net 1,7 0,3 10,1 -
Other income (expense), net - 9,7 - 3,5 - 14,6 5,4
Income (loss) before taxes and goodwill amortiz - 48,7 31,1 - 47,9 53,2
Provision for income taxes 15,6 - 5,7 15,4 - 11,6
Net income (loss) before goodwill amortization - 33,1 25 ,4 - 32,5 41,5
Goodwill amortization - 6,7 - 2,1 - 14,4 - 3,7
Net income (loss) - 39,8 23,3 -46,9 37,8
Net income (loss) per share
basic -0,06 0,05 -0,07 0,09
diluted -0,06 0,05 -0,07 0,09
Shares used in net income (loss) per share calculation
basic 641 804 505 460 747 400 640 258 293 421 447 546
diluted 654 116 399 486 456 740 674 758 351 442 533 411
Condensed Consolidated Balance Sheets
Assets 30 June 2001
(unaudited) 31 December 2000
Current Assets
Cash and cash equivalence 429,9 636,3
Trade accounts receivable, net 250,8 311,3
Invetory, net 229,5 174 ,1
Other current assets 114,7 97,4
Total current assets 1025,0 1219,0
Non current assets
Property, plant and equipment, net 289,4 249,9
Goodwill 151,2 155,8
Other non current assets 314,3 284,2
Total non current assets 754,9 690,0
Total Assets 1779,9 1909,0
Liabilities
Accounts payable 177,5 261,0
Accrued liabilities and other 182,0 156,6
Current portion of long term debt 0,2 1,9
Current obligations under capital leases 3,5 3,4
Current liabilities 363,1 422,9
Long term obligations under capital leases 30,2 31,9
Long term debt, less current portion 2,2 5,9
Other non current liabilities 35,7 46,0
Non current liabilities 68,1 83,8
Minority interest 13,8 17,3
Shareholders’ equity
Ordinary shares 126,6 124,3
Paid in Capital 1028,1 1026,1
Retained earnings 179,3 236,0
Other comprehensive income 2,4 0,4
Less, cost of treasury shares - 1,5 - 1,7
Total shareholder’s equity 1334,8 1385,0
Total liabilities and shareholder’s equity 1779,9 1909,0
Business Segment Reporting
Second Quarter 2001 Compared with Second Quarter 2000
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Revenues Three months
ended June 30
2001 2000 % change
(millions of euros)
Telecommunications 166.7 208.7 (20%)
Network systems 55.9 34.7 61%
Skidata 15.0 13.8 8%
Other 29.7 31.7 (6%)
Total 252.3 275.0 (8%)
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Gross margin Three months
ended June 30
2001 2000 % change
(millions of euros)
Telecommunications 66.7 84.0 (21%)
Network systems 22.7 13.0 75%
Skidata 7.2 5.7 27%
Other 3.3 2.2 48%
Total 92.7 99.3 (7%)
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Six Months 2001 Compared with six Months 2000
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Revenues Six months
ended June 30
2001 2000 % change
(millions of euros)
Telecommunications 380.0 379.2 0%
Network systems 107.6 70.2 53%
Skidata 31.2 30.0 4%
Other 58.2 57.3 2%
Total 545.9 506.8 8%
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Gross margin Six months
ended June 30
2001 2000 % change
(millions of euros)
Telecommunications 151.1 154.8 (2%)
Network systems 36.4 23.7 54%
Skidata 13.0 12.5 5%
Other 5.1 3.8 33%
Total 192.6 182.3 6%
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Geographic Reporting
Second Quarter 2001 Compared with Second Quarter 2000
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Revenues Three months
endedJune 30
2001 2000 % change
(millions of euros)
Europe, Middle East and Africa 123.0 152.8 (20%)
Asia 74.6 84.4 (12%)
Americas 54.7 37.8 45%
Total 252.3 275.0 (8%)
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Six Months 2001 Compared with six Months 2000
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Revenues Six months
ended June 30
2001 2000 % change
(millions of euros)
Europe, Middle East and Africa 279.5 296.6 (6%)
Asia 171.9 137.5 25%
Americas 94.5 72.7 30%
Total 545.9 506.8 8%
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©2001 Gemplus All rights reserved. Gemplus,
the Gemplus logo and GemSense 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.
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