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> Half year results 2001
 

First Half 2001 results:
Revenue growth and jump in operating profit and margin


Thomson benefits from its strategic repositioning and diversified business base

Paris, New York July 25, 2001 - The Board of Directors met on July 23rd in New York to review the first half 2001 results of Thomson multimedia. Revenues reached 4.717 billion euros ($4.172 billion), a 16% increase over the first half 2000. The EBIT (Earnings Before Interest and Taxes) margin reached 4,7% (5% before accounting adjustments), compared to 4.1% in the first half 2000. The Group's capacity to achieve further progress over the very strong performance of the first half 2000 illustrates the success of its repositioning along the video value chain, the benefits of its diversified business base and a permanent focus on profitability. This strategy enabled Thomson to continue to progress and to deliver on its EBIT commitments, despite a difficult economic environment.

First Half consolidated results (1)

   
2001
2000
Variation
   
Euro
USD
Euro
USD
  Revenues
4 717
4,172
4 067
3,868
+16%
  EBIT before adjustments*
235
208
167
158
+41%
  EBIT
224
198
167
158
+34%
  EBIT margin
4.7%
4.7%
4,1%
4.1%
  Total financial items
7
6
(24)
(23)
  Other items**
(74)
(65)
(40)
(38)
  Pre-tax result
157
139
103
97
+53%
  Group net result
111
98
84
80
+32%
  Net margin
2.4%
2.4%
2.1%
2.1%

(1) these results have been the subject of a limited review by Thomson's auditors
* 11 million euros of adjustments to conform Technicolor's previous accounting principles to Thomson's more conservative accounting norms.
** other items include restructuring charge, capital gains on tangible assets, goodwill amortization and miscellaneous

Continued revenue growth and focus on EBIT
For the first half 2001, Thomson multimedia's consolidated revenues reached 4,717 million euros, an increase of 16% over the very strong first half 2000, reflecting the development of its Digital Media Solutions division which integrated for the first time the Technicolor and Philips Broadcast businesses. In difficult market conditions, Thomson's revenue growth was also impacted by the Group's decision to focus on EBIT, notably in Displays and Components and Consumer Products.

Thomson's EBIT after adjustments reached 224 million euros, an increase of 57 million euros compared to the first half of 2000. This very strong performance reflects the contribution of the newly-created Digital Media Solutions division. It also reflects the increase of EBIT and EBIT margin prior to the impact of acquisitions (4.3% vs 4.1% in first half 2000). This positive trend was due to continued restructuring and re-engineering programs, the "hold price" policy implemented to increase profitable sales and the Group's diversified business base and good product mix.

First Half revenues by division

  In millions of Euros
2001
2000
Variation
   
  Digital Media Solutions
689
74
n.d
 
Displays and Components
714
769
-7,2%
  Consumer Products
3 106
3 063
+1.4%
  Patents and Licensing
193
154
+25%
  New Media Services
10
1
n.m

First Half EBIT by division

  In millions of Euros
2001
2000
Variation
   
  Digital Media Solutions
43
-1
n.d
 
Displays and Components
81
118
-31%
  Consumer Products
35
23
+52%
  Patents and Licensing
164
121
+36%
  New Media Services
-42
-33
n.m

 

For the first time, the Group reported results for its newly constituted division, Digital Media Solutions, which delivers technologies and solutions for content providers, broadcasters and network operators. This division was strengthened by the acquisition of Technicolor (consolidated as of March 16th), Philips Broadcast (consolidated as of January 1st) and Nextream (consolidated as of February 16th). The integration of these businesses was completed efficiently during the first half 2001, and Digital Media Solutions reported consolidated revenues of 689 million euros and EBIT of 43 million euros.

The consolidation of Technicolor according to Thomson's French GAAP led to accounting adjustments associated with revenue recognition, capitalization of R&D, start-up costs and royalty reserves. These adjustments translated into a negative impact of 11 million euros.

During the first half 2001, Digital Media Solutions demonstrated good resilience overall to the economic downturn, although Technicolor's performance was impacted throughout the period by the Hollywood Screen Actors Guild dispute. Thomson also prepared for the future development of DMS, with a significant expansion of Technicolor's DVD production capacity (+60%) and the extension of its alliance with Microsoft for Xbox. Technicolor was named Xbox technology, manufacturing and distribution partner. Technicolor also continued to expand its digital imaging and digital asset management activities.

Consolidated external revenues of Displays & Components amounted to 714 million euros, a decrease of 7.2% compared to first half 2000. Following a very dynamic first half 2000, the tube business was severely impacted by overcapacity in high-end sizes in the United States, compounded by rising energy and glass prices. These impacts were partly offset by the Group's excellent performance in Europe, with market share gains of 3 points in large and very large-size color TV picture tubes. The optical components business was stable, with the decline in DVD-ROM sales being offset by growing sales for DVD movie. As a result, EBIT amounted to 81 million euros, a decrease of 31% as compared to the first half 2000.

During the first half 2001, the Group took several initiatives to strengthen its Displays & Components division:
. Within the framework of the TIGER program, optimization of CRT manufacturing operations in North America, with the closure of its large tube factory in Scranton (US) and the opening of its VLS plant in Mexicali (Mexico);
. Agreement in March 2001 for the extension of its cooperation with NEC in plasma displays;
. Preparation for mass launch of the Xbox.

Consumer Products posted revenues of 3.106 billion euros, an increase of 1.4% over the first half 2000. TV/Video sales in the US were impacted by difficult market conditions for certain product categories (VCR, lower-end TVs) partially offset by continued growth in digital products like digital TVs and DVD players. Thomson sales were negatively impacted by the "hold price" policy designed to protect its profitability. In the second quarter 2001, Thomson decided to revise in the US its consumer products sales growth objectives to protect margins. In Europe, Thomson enjoyed significant revenue growth, supported by the success of its high-end products and particularly its THOMSON Scenium brand. Set-top boxes sales reached 3.1 million units, with a doubling of cable modem and decoder sales in Europe and a 38% increase in Latin America. This performance enabled the Group to offset the anticipated decline in sales of DIRECTV systems of which Thomson gained further market share during the period. Audio product sales continued to grow strongly (+31%), in the US and in Europe.

EBIT reached 35 million euros, a 52% increase over the first half of 2000 driven by the initiation of the Group's Consumer Product repositioning strategy towards value market share and a permanent focus on restructuring and profitability improvement.

At the end of the first half of 2001, Thomson implemented in its Consumer Products division a profound reorganization effective July 3. TV/Video activity will be managed on a worldwide basis as is the case already for all other Thomson's business categories. RCA Scenium was introduced at the end of the semester to fuel the repositioning of the RCA brand, consolidating Thomson's worldwide branding strategy.

The Group also strengthened its Broadband Access Product business line, with the announced acquisition of the DSL modem activity of Alcatel.

Revenues of Patents and Licensing amounted to 193 million euros in the first half 2001, a 25% increase compared to first half 2000. This performance reflects good conditions for most drivers of the business, notably in new programs. EBIT reached 164 million euros, an 85% EBIT margin.

New Media Services registered revenues of 10 million euros in the first half 2001, compared with 9 million euros for the full year 2000. At the end of June 2001, the Group had built a 5.4 million installed base of EPG-equipped televisions in the United States and launched its TAK interactive television service in France. EBIT was a loss of (42) million euros.

* * *

Group Net Result of 111 million euros, or 2.4% of revenues
The consolidated net result included the following items:
. Total Financial items of +7 million euros, compared to (24) million euros in 2000. This improvement was driven by a reduction in net interest expenses and a positive exchange result.

. Non-current result of (74) million euros, made up essentially of a provision of (63) million euros to cover restructuring costs in the Display & Components and Consumer Products divisions.

. Income tax amounted to (67) million euros, a significant increase compared to (28) million euros in 2000. This increase results largely from the end of the tax indemnification agreement with Thomson SA and the impact of Technicolor's integration.

Sound balance sheet situation
Thomson ends the first-half with a net debt of 392 million euros, and shareholders funds of
3.858 billion euros, a gearing ratio of 10%. Cash raised during the autumn 2000 capital increase was utilized, inter alia, to finance the Technicolor and Philips Broadcast acquisitions.

Prospects for the second half 2001
Thomson expects the same difficult trading environment to continue for the rest of the year, and possibly into 2002. The full year 2001 outlook is for revenue growth of around 20% and EBIT growth similar to the first half level, to target 6.5% to 7% EBIT margin.

Certain statements in this press release, including any discussion of management expectations for future periods, constitute "forward-looking statements" within the meaning of the "safe harbor" of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management's current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements due to changes in global economic, business, competitive market and regulatory factors. More detail information on the potential factors that could affect the financial results of THOMSON multimedia is contained in the Thomson multimedia's filings with the U.S. Securities and Exchange Commission.

About Thomson multimedia
With sales of 9.1 billion euros (U.S. $ 8.3 billion) in 2000 and 73,000 employees in more than 30 countries, Thomson multimedia (Paris Euroclear: 18453) (NYSE: TMS), provides a wide range of video (and enabling) technologies, systems, finished products and services to consumers and professionals in the entertainment and media industries. To advance and enable the digital media transition, Thomson multimedia has five principal activities: Digital Media Solutions, Displays and Components, Consumer Products, Patents and Licensing and New Media Services. The company distributes its products and services under the THOMSON, RCA and TECHNICOLOR brand names. For more information: www.thomson-multimedia.com.


Press relations :
Marc Meyer tel : 331.41.86.5003
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