Thomson Full Year 2007 Results and Fourth Quarter Revenues

Thursday, February 14th, 2008
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“¢ A slow fourth quarter for revenues limited growth in 2007 Core Business revenues to 2.1% at constant currency and impacted 2007 Core Business EBIT which came in at €346 million
“¢ Core Business free cash flow for 2007 was robust at €387 million, leading to a significant improvement in net Group operating and investing cash flow to a net inflow of €142 million in 2007 from an outflow of €(51) million in 2006
“¢ Net debt reduced by €113 million and aggregate net financial liabilities by €282 million compared to end-2006
“¢ A net loss of €(23) million for the full year – following exit from AVA businesses
“¢ Board proposes a dividend of €0.33
“¢ Following the exit from the AVA businesses in December 2007, the Group will revert to a split Chairman/Chief Executive Officer structure, with Frank E. Dangeard as Chairman.
“¢ Group focus for 2008 is on cash generation and cost reduction, whilst pursuing opportunities for profitable organic growth

Access Products

Revenues grew in 2007 with cable, satellite and telecom customers. Cable registered volume growth with 2.3 million cable set-top boxes (2006: 2.0 million) and improved mix, while the volume decrease in satellite set-top boxes to 10.1 million in 2007 from 11.1 million in 2006 was more than outweighed by the improved mix with an increased proportion of HD boxes. 11.1 million access products for telecom operators were sold (2006: 10.0 million), with the volume increase being offset to some extent by price declines. Overall, a total of 23.4 million set-top boxes, DSL modems and gateways were sold in 2007, a slight increase on the 2006 total of 23.2 million units, but with an improved mix overall. In addition the Group began delivering eMTAs in the US (dual play modems for cable customers).

In Satellite, volumes in the US slightly decreased year on year but the proportion of high definition devices grew. The growing transition to HD products (including HD PVRs) sustained ASPs and largely offset unfavourable volume effects and ongoing price declines. DIRECTV remained the largest customer of the division business, and in 2007, Thomson reached the milestone of over one million MPEG-4 HD and MPEG-4 HD DVR receivers shipped to DIRECTV, illustrating customer recognition of our ability to support their transition to high-definition TV. Furthermore, Thomson also jointly developed with DIRECTV the MFH3™ (Multi-Family Housing) distribution system designed to solve satellite distribution issues in dense living spaces such as apartment complexes. However the business continued to expand in other markets, especially in Latin America, and also pursued its development with Asian satellite broadcasters, notably India’s TataSky and Malaysia’s Astro.

Sales of cable access products grew significantly year-on-year. Successes included the delivery of integrated triple play boxes to Portugal’s TV Cabo (ZON Multimédia) and the shipment of eMTAs (dual-play modems) to Comcast in the United States. Overall, the Group consolidated its leadership in EMEA and Latin America. We reached a customer base of over 100 customers at the end of 2007 (including three of the largest operators in western world: Comcast, Liberty Global and Kabel Deutschland).

Thomson’s business with telecom customers continued to grow during 2007. The rollout of the France Telecom Livebox™ continued successfully in 2007 with introduction of a more sophisticated device. Overall, improved volumes continued to offset price erosion. In addition our telephony & home networking business increased volumes in DECT (Digital Enhanced Cordless Telecommunications) largely offsetting price erosion. Increased sales of connected products for the ecosystem around the home gateway, such as the voice-over-IP Hub Phone for BT will be important for the future development of this business.