Earnings Release • Feb 13, 2009
Earnings Release
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Paris, February 13th, 2009 – 5:40 pm
| Consolidated accounts under IFRS - unaudited (€'000,000) |
Q4 2008 | Q4 2007 | 12 months 2008 |
12 months 2007 |
|---|---|---|---|---|
| Revenues | 46.1 | 60.9 | 206.6 | 219.8 |
| Gross operating margin | 21.4 | 30.3 | 105.1 | 109.1 |
| % of revenues | 46.3% | 49.6% | 50.9% | 49.6% |
| Income from ordinary operations | -2.3 | 6.1 | 17.9 | 26.9 |
| % of revenues | - | 10.0% | 8.7% | 12.2% |
| EBIT | -4.6 | 6.1 | 15.6 | 26.9 |
| % of revenues | - | 10.0% | 7.5% | 12.2% |
| Net income (Group share) | -3.1 | 6.0 | 14.0 | 20.0 |
| % of revenues | - | 9.9% | 6.8% | 9.1% |
| Net earnings per share (in €uros) | -0.24 | 0.46 | 1.08 | 1.56 |
| Diluted net earnings per share (in €uros) | -0.23 | 0.45 | 1.06 | 1.46 |
| €'000,000 | Dec 31, 2008 | Dec 31, 2007 |
|---|---|---|
| Net cash position | 43.4 | 37.4 |
As Henri Seydoux, Parrot's Chairman, CEO and founder comments: "In 2008, we gained market shares, further strengthened our product portfolio, set out our difference and our ability to innovate across all of our ranges. At the same time, we have significantly improved the Group's operational structure and cash flow generation, all factors that will enable us to limit the consequences of the sharp deterioration in the current economic environment and prepare for the recovery under the best possible conditions. Lastly, Parrot is proud to be able to count on a skilled and clearsighted team, determined to meet the challenges for 2009, which, in light of the first indicators, looks set to be an original year".
Following the increase in uncertainties in July, the suddenness and unprecedented scale of the economic and financial crisis in September have directly resulted in a further and sharp deterioration in the macroeconomic context. This assessment applies to Parrot, which saw a significant slowdown in sales over the second half of 2008, and more specifically in Q4, also in light of an unfavorable base effect compared with 2007, as well as highly cautious positions in the retail sector and the marked slowdown in consumption.
Within this context, revenues came to 46.1 million euros in Q4 2008, down 24.3% on Q4 2007. Over the full year, revenues totaled 206.6 million euros, with business down 6% at current exchange rates and 4.6% at constant exchange rates.
Sales performances have been mixed depending on the country, and are being affected by the widespread economic slowdown, particularly in the main developed countries. Over Q4, market conditions deteriorated significantly, particularly in the US, France and Italy, where sales were down in relation to Q4 2007. The UK market has been the exception, with billing bouncing back by +23.3% over the last quarter of the year.
Spain, which accounted for 31.8% of annual sales in 2008 (vs. 40.6% in 2007), has seen a drop in its sales, affecting consolidated performance levels. Excluding Spain, revenue growth would have come out at +7.8% over 2008.
On all the regions, market shares are growing, illustrating that the difficulties linked to the economic environment are independent from the quality of Parrot's products, ranging from 40% in Germany up to 94% in Spain (source: GFK, January to December 2008, as a % of units sold).
Over Q4, installed handsfree kit sales weathered the conditions well on the whole, with a similar level of revenues to Q32008. The new range of MKi handsfree systems, perfectly well suited to fulfill the new needs created by mobility -- with its multiple connections (iPod®, iPhone™ / iTouch®, USB, memory card, line entry) -- has made a strong breakthrough. Its sales already represent nearly 25% of revenues of this product range.
OEM sales increased by 17.9% over the full year, with this strong growth achieved despite a slowdown in the trend over Q4 due to the sharp destocking trend seen in the automobile sector and the end of an historical contract as expected at the start of H2 2008. The major design wins in 2008 (JVC, Pioneer, Hyundai and top European auto manufacturers) are expected to make up for this trend to some extent, with the first billings up over the second half of 2009. Parrot highlights the fact that the OEM business has an excellent level of visibility with an order book over four years, consolidating its ability to maintain a sustained rate of growth over the next few years.
Sales of Plug&Play products confirm the good trends seen in the previous quarters, with growth picking up pace throughout the year (+69.2% over the year in 2008 and +87.9% in Q4 2008 vs. with Q3 2008). The success of the products launched in 2008, and more specifically the Minikit Slim, a portable and technology-rich Bluetooth handsfree kit (voice recognition, voice synthesis, vibrating audio panel technology, etc.), is being confirmed, while its purchase price (69 euros including VAT) is enabling it to be in line with current consumption behaviors.
Multimedia products performed well over the quarter (6.1% of revenues over Q4 2008, compared with 0.7% in Q3 2008). While benefiting from a favorable seasonal pattern, Parrot is rolling out a stock liquidation strategy on this segment. In time, the Multimedia range will be realigned to focus exclusively on "Parrot By" products, which are benefiting from a less competitive positioning and stronger brand awareness.
The segment for "Other products", which primarily concerns the navigation products historically distributed by the Spanish subsidiary, saw its sales fall by 30.6% over the year and 47.0% in Q4 2008, compared with Q4 2007.
Over the full year in 2008, the gross margin is up 1.3 points to 50.9%. For Q4 2008, Parrot recorded a gross margin of 46.3%. The margin rate reflects the impact of the dollar's rise and the product mix. Excluding the contract for distributing navigation products in Spain, the gross margin on all of Parrot's products came to 48.8% for Q4 2008, still significantly higher than average of the industry.
At December 31st, 2008, income from ordinary operations totaled 17.9 million euros, representing a current operating margin of 8.7%. Current operating expenses over the full year were kept under control, following on from the first results achieved with the cost cutting measures rolled out in Q4.
For Q4, sales and marketing costs are down slightly, coming in at 13.7 million euros (compared with 14.2 million euros in Q4 2007). Research and development costs totaled 5.6 million euros (compared with 5.4 million euros in Q4 2007). Production and quality control costs have increased slightly, in line with the product launch period, while general costs are down 14.8%, reflecting the first results of the cost cutting measures adopted over the period. More specifically, this concerns the 15% reduction in the workforce in Spain, the freeze on hires at Group level, and effective control and prioritization for costs.
At December 31st, 2008, EBIT came to 15.6 million euros, representing a current operating margin of 7.5%. This factors in 2.3 million euros in non-recurring expenses, corresponding to a provision on stocks of Multimedia items (excluding the "Parrot By" range) and on the commitments to purchase components associated with these products.
At December 31st, 2008, net income (Group share) totaled 14.0 million euros, representing a net margin of 6.8%. It includes 2.1 million euros in financial income, compared with a financial expense of -0.6 million euros in 2007, which can be broken down into 1.6 million euros in net financial income and 0.5 million euros in foreign currency translation gains.
The average tax rate over the year represents 20.5%, with a 3.4 million euro research tax credit for 2008. Net earnings per share come out at 1.08 euros (weighted average number of shares outstanding at December 31st, 2008: 12,931,100), compared with 1.56 euros at December 31st, 2007.
Parrot is in a sound financial position to cope with the possibility of a lasting deterioration in the economic context. The Group's closing cash position was up 12.9% to 44.6 million euros at December 31st, 2008, compared with 39.5 million euros at December 31st, 2007. The slight contraction in cash flow over Q4 primarily reflects the 4.1 million euros in treasury share buybacks, taking the level of treasury stock up to 7.1% of the capital.
Cash flow from operations over the year came to 18.6 million euros (compared with 11.2 million euros in 2007), making it possible to finance the year's investments (7.2 million euros in 2008, compared with 11.9 million euros in 2007), which were scaled down significantly in Q4 2008.
The Group does not have any debt and has 114.9 million euros in equity (compared with 106.0 million euros at December 31st, 2007), with 8.7 euros in net assets per share.
In light of the deterioration in the macroeconomic context over the last few months and the resulting lack of visibility, Parrot is approaching 2009 with added vigilance and a strong focus on operating expenses.
Furthermore, for the first half of 2009, Parrot is forecasting a drop of around 10 points in its gross margin compared with the same period in 2008, factoring in the impact of a strong dollar, the isolated slowdown in OEM sales and the change in the product mix in favor of Plug&Play, which is weathering the crisis more effectively.
In view of this, the Group is adapting its cost structure in line with demand, with the savings measures that are currently being rolled out including:
All of these actions should enable the Group to reduce the impacts of the slowdown in business over 2009.
With a product portfolio realigned around current trends and addressing various client segments, Parrot is confident that it will be able to effectively capitalize on its markets that are still trending up and prepare for any upturn in the business under the best possible conditions.
| % of revenues | Q4 2008 | 2008 | 2007 |
|---|---|---|---|
| France | 12.7% | 14.5% | 13.4% |
| UK | 10.2% | 7.7% | 7.6% |
| Netherlands and Belgium | 9.6% | 8.2% | 7.0% |
| Germany | 2.8% | 3.0% | 2.6% |
| Spain | 31.5% | 31.8% | 40.6% |
| Italy | 4.2% | 3.8% | 3.8% |
| US | 9.1% | 11.8% | 10.0% |
| Rest of Europe | 6.0% | 6.2% | 6.0% |
| Rest of world | 14.0% | 12.9% | 9.0% |
| % of revenues | Q4 2008 | 2008 | 2007 |
|---|---|---|---|
| OEM | 14.1% | 15.1% | 12.0% |
| Installed kits | 53.4% | 62.5% | 66.5% |
| Plug & Play | 15.3% | 8.2% | 4.6% |
| Multimedia | 6.1% | 2.1% | 4.0% |
| Other | 11.2% | 12.1% | 12.9% |
| €'000 | Q4 2008 | 2008 | 2007 |
|---|---|---|---|
| Revenues | 46,116 | 206,577 | 219,804 |
| Cost of sales | -24,749 | -101,434 | -110,742 |
| Gross margin | 21,367 | 105,143 | 109,062 |
| Gross margin as % of revenues | 46.3% | 50.9% | 49.6% |
| Research and development costs | -5,611 | -22,791 | -19,341 |
| % of revenues | 12.2% | 11% | 8.8% |
| Sales and marketing costs | -13,667 | -46,792 | -45,435 |
| % of revenues | 29.6% | -22.7% | 20.7% |
| General costs | -2,362 | -9,515 | - 10,099 |
| % of revenues | 5.1% | 4.6% | 4.6% |
| Production and quality | - 1,986 | - 8,157 | -7,278 |
| % of revenues | 4.3% | 3.9% | 3.3% |
| Income from ordinary operations | -2,260 | 17,887 | 26,909 |
| % of revenues | -4.9% | 8.7% | 12.2% |
| Non-recurring operating expenses | -2,310 | -2,310 | |
| EBIT | -4,570 | 15,577 | 26,909 |
| % of revenues | -9.9% | 7.5% | 12.2% |
| Cost of net financial debt | 335 | 1,604 | 835 |
| Other financial income and expenses | -90 | 451 | -1,393 |
| Net financial income/loss | 245 | 2,056 | - 558 |
| Corporate income tax | 1,262 | - 3,609 | - 6,386 |
| Net income (Group share) | - 3,062 | 14,024 | 19,965 |
| % of revenues | 6.8% | 9.1% |
| €'000 | Dec 31, 2008 | H1 2008 | Dec 31, 2007 |
|---|---|---|---|
| Non-current assets | 34,307 | 34,025 | 32,993 |
| Goodwill | 21,528 | 20,903 | 21,016 |
| Other intangible fixed assets | 7,495 | 8,072 | 6,962 |
| Tangible fixed assets | 4,548 | 4,430 | 4,437 |
| Financial assets | 299 | 284 | 280 |
| Deferred tax assets | 437 | 336 | 298 |
| Current assets | 131,195 | 129,471 | 117,819 |
| Inventories | 33,518 | 20,660 | 21,106 |
| Trade receivables | 42,540 | 52,017 | 50,095 |
| Other receivables | 10,531 | 5,848 | 7,105 |
| Cash and cash equivalents | 44,606 | 50,945 | 39,514 |
| Total assets | 165,502 | 163,495 | 150,812 |
| €'000 | Dec 31, 2008 | H1 2008 | Dec 31, 2007 |
|---|---|---|---|
| Shareholders' equity | |||
| Share capital | 2,035 | 2,031 | 1,992 |
| Issue and contribution premiums | 60,468 | 60,363 | 59,919 |
| Reserves and retained earnings | 38,026 | 40,907 | 23,657 |
| Earnings for the period | 14,024 | 15,478 | 19,965 |
| Translation gains | 383 | 323 | 492 |
| Equity attributable to Parrot SA shareholders | 114,936 | 119,102 | 106,025 |
| Minority interests | -- | -- | -- |
| Non-current liabilities | 4,922 | 3,137 | 3,379 |
| Long-term financial debt | 0 | 0 | 1,000 |
| Pension provisions and related commitments | 506 | 331 | 304 |
| Deferred tax liabilities | 3,798 | 2,224 | 1,611 |
| Other non-current provisions | 618 | 582 | 465 |
| Current liabilities | 45,643 | 41,256 | 41,408 |
| Short-term financial debt | 1,172 | 1,136 | 1,137 |
| Derivatives | 0 | 0 | 0 |
| Current provisions | 2,429 | 1,133 | 1,202 |
| Trade payables | 31,887 | 26,498 | 28,332 |
| Current tax liability | 1,655 | 3,111 | 1,749 |
| Other current liabilities | 8,501 | 9,378 | 8,988 |
| Total shareholders' equity and liabilities | 165,502 | 163,495 | 150,812 |
| €'000 | Dec 31, 2008 | H1 2008 | Dec 31, 2007 |
|---|---|---|---|
| Operating cash flow | |||
| Earnings for the period | 14,024 | 15,478 | 19,965 |
| Depreciation and amortization | 6,948 | 3,307 | 5,395 |
| Capital gains and losses on disposals | 101 | 9 | 20 |
| Tax charges | 3,609 | 4,446 | 6,386 |
| Cost of share-based payments | 2,086 | 987 | 2,471 |
| Cost of net financial debt | -1,604 | -832 | -835 |
| Cash flow from operations before tax and cost of net financial | 25,164 | 23,396 | 33,402 |
| debt | |||
| Change in working capital | -2,270 | -2,045 | -15,341 |
| Tax paid | -4,250 | -1,768 | -6,884 |
| Net cash from operating activities (a) | 18,644 | 19,582 | 11,177 |
| Investing cash flow | |||
| Acquisition of tangible and intangible fixed assets | -7,027 | -4,365 | -9,368 |
| Acquisition of subsidiaries, net of cash acquired (1) | -154 | 0 | -2,477 |
| Acquisition of long-term financial investments | -20 | - | -78 |
| Disposal of tangible and intangible fixed assets | 1 | 1 | 12 |
| Cash flow from investment activities (b) | -7,200 | -4,364 | -11,910 |
| Financing cash flow | |||
| Equity contributions | 592 | 483 | 6,371 |
| Cost of net financial debt | 1,604 | 832 | 835 |
| Repayment of short-term financial debt (net) | -1,001 | -1,001 | -1,000 |
| Repayment of other debt | 0 | 0 | -13,992 |
| Acquisition of treasury stock | -7,790 | -3,735 | -383 |
| Cash flow from financing activities (c) | -6,596 | -3,422 | -8,170 |
| Net change in cash position (d = a+b+c) | 4,848 | 11,797 | -8,902 |
| Net exchange rate differences | 244 | -365 | -257 |
| Cash and cash equivalents at year-start | 39,514 | 39,514 | 48,674 |
| Cash and cash equivalents at year-end | 44,606 | 50,945 | 39,514 |
Parrot, a global leader in wireless devices for mobile phones, stands on the cutting edge of innovation. The company was founded in 1994 by Henri Seydoux as part of his determination to drive the inevitable breakthrough of mobile phones into everyday lif e by creating high-quality, user-friendly wireless devices for easy living. Parrot has developed the most extensive range of hands-free kits on the market for cars, motorbikes and scooters, including wireless multimedia products geared towards audiovisual applications. In 2008, Parrot launched a new prestige line of high-end products bearing the hallmark of renowned artists. Parrot, headquartered in Paris, currently employs 500 people worldwide and generates 85% of its sales overseas. Parrot is listed on NYSE Euronext Paris since 2006. Eurolist C: FR0004038263 - PARRO
®The Bluetooth word mark and logos are owned by the Bluetooth SIG, Inc. and any use of such marks by Parrot S.A. is under license. Other trademarks and trade names are those of their respective owners. Tous droits réservés. Les marques PARROT figurant sur ce document sont la propriété exclusive de la société PARROT. Toutes les autres marques sont la propriété de leurs détenteurs respectifs et sont utilisées sous licence par la société PARROT
CONTACTS
Investor and Analyst Relations – Press Relations Marie Ein / Cyril Combe T: +33(0) 1 53 65 68 68 [email protected]
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