TomTom NV (the Company) and its subsidiaries (the Group) is the world’s leading supplier of in-car location and navigation products and services. Headquartered in Amsterdam, TomTom has over 3,500 employees and sells its products in more than 40 countries. The commercial activities of the Group are carried out through four customer facing business units – Consumer, Automotive, Business Solutions and Licensing. The first three of these business units sell their navigation products and services to one specific customer group, whilst Licensing sells its content and services to multiple customer groups.
It is our mission to provide all drivers with the world's best navigation experience. We tailor our activities towards multiple audiences and aim to play a leading role on all platforms where our products and services can be of use.
Market and TomTom outlook 2011
Consumer electronics markets have deteriorated in the first half of the year and the retail channel has continued to reduce the level of inventory it is carrying. PND markets have been declining and we expect this trend to continue in the second half of the year. We expect our core combined PND markets to decline at the high end of the previously communicated range of between 15 and 20 percent, particularly as a result of a steep decline in the North American market.
Automotive will continue to grow its systems business as well as its licensing business as expected.
Business Solutions is expected to accelerate its growth in the second half of the year on the back of the roll-out of new contracts and geographical expansion.
Licensing is expected to show flat revenue development compared to last year.
We plan to deliver operating expenses for 2011 of approximately €540 million.
As previously communicated we expect full year revenue of between €1,225 and €1,275 million and earnings per share of between €0.25 and €0.30, excluding impairment.
Financial review for the six month period ended 30 June 2011
Revenues
Total revenues were €579 million in H1 2011 down from €630 million in H1 2010. The decrease is driven by the decrease in Consumer revenue and partially offset by the increase in the revenue of the other three business units. Year on year, Consumer revenue decreased by 20% to €366 million in H1 2011 while Automotive revenue increased by €36 million from €84 million in H1 2010 to €120 million in H1 2011. Licensing revenue increased by €2.6 million to €66 million (H1 2010: €63 million) and Business Solutions reported a revenue increase of €3.5 million to €28 million in H1 2011 (H1 2010: €25 million).
Gross profit
Gross profit decreased to €301 million in H1 2011 from €329 million in H1 2010. The gross margin was stable at 52% compared with H1 2010.
Operating expenses
Operating expenses in H1 2011 were €777 million, an increase of €514 million compared to the same period last year (H1 2010: €263 million). This increase is mainly caused by the impairment charge of €512 million which is further explained in notes 6 and 7 in our interim financial report.
Operating result
The operating result for H1 2011 was a loss of €476 million, a decrease of €542 million compared to last year (H1 2010: €67 million).
Financial expense and income, net
The Group recorded €12 million in interest expenses in H1 2011, a decrease of €5.4 million compared to the previous year (H1 2010: €17 million). The year on year decrease was the result of the reduction in borrowings following the repayment of €210 million in the second half of 2010. The other finance result in H1 2011 of €3.9 million (H1 2010: -€0.8 million) results from our foreign exchange derivatives portfolio and the revaluation of our non-euro denominated monetary balances such as accounts payable, accounts receivable and cash balances, and interest received from tax authorities.
Income taxes (excluding effects of impairment charge)
The net income tax charge in all the jurisdictions in which we operate was €6.2 million in H1 2011, a decrease compared to last year (H1 2010: €11 million). The effective tax rate in H1 2011 was 22.4% compared to 22.5% in H1 2010.
Cash flow
Cash flow generated from operations was a negative €18 million versus a
positive €59 million in the same period last year. The negative cash
flow was driven by the operating result adjusted for non-cash items and
by changes in our working capital. Net interest paid decreased year on
year to €9.1 million in H1 2011 compared to €11 million in H1 2010.
Corporate income tax paid decreased to €3.1 million from €22 million in
the previous year.
