INGENICO: INGENICO: 2008 results

 +-------------------------+-------+-------+-------+ |key data (EUR m) | 2006 | 2007 | 2008 | +-------------------------+-------+-------+-------+ |Revenue | 506.5| 567.9| 728.0| +-------------------------+-------+-------+-------+ |Adjusted Gross margin as | 32.1%| 36.7%| 38.4%| |% of revenue | | | | +-------------------------+-------+-------+-------+ |Adjusted Operating profit| 33.4| 65.0| 91.2| +-------------------------+-------+-------+-------+ |as % of revenue | 6.6%| 11.4%| 12.5%| +-------------------------+-------+-------+-------+ |Adjusted net profit | 16.3| 45.2| 55.5| +-------------------------+-------+-------+-------+ |Net cash | (33)| (2.5)| 77.5| +-------------------------+-------+-------+-------+

Philippe Lazare, Ingenico's CEO, commented: "In 2008, we delivered continued growth and a solid adjusted operating margin of 12.5%, delivering financial performance as expected.

2008 was a year of transformation for Ingenico. First, we consolidated our leadership with the successful integration of Sagem Monetel and Landi. Secondly, we launched new innovative products well received by our customers and prospects. Finally, we launched our new business approach on "beyond payment" services. Today's market conditions are challenging and we are focusing on accelerating impact of synergies and driving cost efficiency. With a solid balance sheet and a resilient business model, we are convinced that Ingenico will emerge from this period in an even better competitive position."

Key figures

 +-------------------------+------------+------------+------------------+ |(EUR m) | 2007 | 2008 | Change 2008/2007| +-------------------------+------------+------------+------------------+ |Revenue | 567.9| 728.0| +28%| +-------------------------+------------+------------+------------------+ |Adjusted Gross Margin | 208.2| 279.4| +34%| |([2]) | | | | +-------------------------+------------+------------+------------------+ |Adjusted profit from | 65.0| 91.2| +40%| |ordinary activities (2) | | | | +-------------------------+------------+------------+------------------+ |% of revenue | 11.4%| 12.5%| 1.1bp| +-------------------------+------------+------------+------------------+ |Profit from ordinary | 62.5| 72.0| +15%| |activities (IFRS) | | | | +-------------------------+------------+------------+------------------+ |Other operating income | (5.5)| (14.5)| NA| |and expenses | | | | +-------------------------+------------+------------+------------------+ |Financial result (IFRS) | (8.8)| (7.4)| NA| +-------------------------+------------+------------+------------------+ |Income tax | (8.7)| (13.4)| NA| +-------------------------+------------+------------+------------------+ |Adjusted Net profit (2) | 45.2| 55.5| +23%| +-------------------------+------------+------------+------------------+ |Net profit (IFRS) | 39.5| 36.7| NA| +-------------------------+------------+------------+------------------+ | | 31.12.2007| 31.12.2008| Change| +-------------------------+------------+------------+------------------+ | | | | (EUR m)| +-------------------------+------------+------------+------------------+ |Net Equity (IFRS) | 195.9| 455.1| +259.2| +-------------------------+------------+------------+------------------+ |(net debt) / net cash | (2.5)| 77.5| +80.0| |(IFRS) | | | | +-------------------------+------------+------------+------------------+

Revenue

Despite the economic downturn, the Company continued to grow and increased revenue by 7%([3]) in 2008 over 2007, which is an excellent performance as this revenue increase includes, as expected, a decrease of approximately EUR 20m revenue due to the effect of commercial overlaps resulting from the merger of Sagem Monetel activities with Ingenico.

Growth in 2008 was largely driven by emerging markets but traditional markets also contributed to 2008 growth. All regions, except the United States, reported pro-forma 2008 revenue growth of between 3% and 38% ([4]), with the strongest growth rate supported by EEMEAA (Eastern Europe, Middle East, Africa and South East Asia) and China/Asia Pacific which benefitted from the contribution of Fujian Landi acquired in June 2008.

In 2008, Ingenico focused on consolidating its leadership in terminal innovation. The Company expanded its large portfolio of products with terminals offering contactless and mobility functions, as well as user friendly interfaces (bigger screen, color) to keep its technical advance in the terminal business and to support its strategic move towards services. Ingenico's new "Beyond Payment" strategic vision consists of leveraging POS usage to provide customers with secure, innovative and end-to-end solutions, enabling them to meet the latest challenges in the payments market, decrease operating costs, while building customer loyalty and generating additional revenue.

Finally, the Company also confirmed its leadership in payment solutions and obtained the market's first PCI-PED 2.0 approval for a CounterTop terminal.

Adjusted Gross Margin

Adjusted gross margin amounted to EUR 279.4 million in 2008, as compared to EUR 208.2 million in 2007. Adjusted gross margin represented 38.4% of revenue in 2008 against 36.6% in 2007.

Adjusted gross margin continuously increased in the course of 2008, from 37.2% in the first half of 2008 to 39.2% in the second half of 2008.

This result was due to first purchasing gains related to the integration of Sagem Monetel combined with continued margin improvements in "Software and Services". Adjusted gross margin for "Software and Services" increased from 24.9% in 2007 to 33.4% of revenue in 2008 thanks to a better service mix and reduced repair costs due to greater product reliability.

Adjusted operating expenses (opex)

Adjusted operating expenses for the full year 2008 amounted for EUR 188.2 million, as against EUR 143.2 million for 2007. As a result, Adjusted operating expenses costs increased by EUR 45 million in 2008.

The increase of adjusted opex costs was mostly related to two factors:

- EUR 38m for the change in the activity scope. As a reminder, the Company acquired Sagem Monetel in March 2008 and Landi in June 2008

- EUR 6m for the costs incurred to implement the new Services business unit. As a reminder, Ingenico set up a dedicated team for services to implement its "beyond payment" strategy, move up the value chain from terminals towards services and generate more recurring revenue. Ingenico also started to deploy a global network during the first half of 2008 in order to respond to the new global demands of banks and retailers.

The variation of opex in 2008 over 2007 also included EUR 2m for the first synergies arising from the acquisition of Sagem Monetel.

In 2008, Adjusted operating expenses as percentage of revenue represented 25.8% of revenue compared to 25.2% in 2007. Adjusted opex as percentage of revenue declined to 25.3% of revenue in H2'08 from 26.5% of revenue in H1'08.

Adjusted operating profit from ordinary activities

As a result of increased revenue, higher adjusted gross margin and controlled adjusted opex, adjusted operating profit before non recurring items increased to EUR 91.2m in 2008 from EUR 65.0m in 2007, a 40% increase.

Adjusted operating profit before non recurring items has continuously improved since 2006: it represented 6.6% of revenue in 2006, 11.4% in 2007 and 12.5% in 2008. In H2 2008, adjusted operating profit before non recurring items represented 13.9% of revenue.

Profit from ordinary activities (IFRS)

Profit from ordinary activities amounted for EUR 72.0 million in 2008, as against EUR 62.5 million for 2007.Profit from ordinary activities included price purchase allocation of EUR 19.2m (Planet, Sagem Monetel and Landi) in 2008, as against EUR 2.4m in 2007 (Planet).

The reconciliation of IFRS financial statements and unaudited adjusted financial statements is available in Appendix1.

Other operating income and expenses

For 2008, the Company recorded other operating expenses of EUR 14.5m, as against EUR 5.5m in 2007, of which EUR 9.1m were essentially due to restructuring costs in relation to the downsizing of the Barcelona R&D center.

Financial Result

Financial result amounted for -EUR 7.4million in 2008, compared to -EUR 8.8 million in 2007,

The variation of financial result in 2008 compared to 2007 is the combination of the following factors:

- the significant decrease of net finance costs from -EUR 6.0m in 2007 to - EUR 0.6m in 2008 as the Company redeemed its financial debt following the conversion of Oceane bond issue in H1 2008. As of December 31 2008, net cash amounted for EUR 77.5m whereas net debt amounted for EUR 2.5m as of December 31 2007.

- - the increase of foreign exchange gains and losses and other financial expenses from -2.8m to EUR 6.8m as the result of very challenging foreign exchange environment during 2008.

Income tax

For 2008, the Company recorded income tax of EUR 13.4m, as against EUR 8.7m in 2007, representing a tax rate of respectively 27% and 18%.

Net result

Net result amounted to EUR 36.7m in 2008, as against EUR 39.5m in 2007. In 2008, net result decreased because of the combined impact of price purchase allocation (Planet, Sagem Monetel and Landi) and restructuring costs.

Excluding impact of price purchase allocation and restructuring costs, net result would have amounted for EUR 55.5m in 2008 compared to EUR 45.2m in 2007, a 23% increase.

Pro forma net result

By way of comparison, i.e assuming that Sagem Monetel's results had been included for the full year 2008, revenue would have amounted for EUR 780m (i.e. a 7% growth at constant rate), adjusted([5]) operating margin from ordinary activities 12.6%.

The basis of preparation of full year 2008 (unaudited) pro-forma income statement including Ingenico and Sagem Monetel is available in Appendix3.

Cash flow

Net cash flow from operating activities strongly increased from EUR 65.4m in 2007 to EUR 90.8m in 2008 as the Company continued to improve the profitability of operations (before impact of restructuring and tax) and tightly controlled its working capital management during 2008.

After capital expenditures, this cash flow increased to a lesser extend, to EUR 69.5m in 2008 from EUR 52.9m in 2007 as capital expenditures increased, as expected, from EUR 12.5m in 2007 to EUR 21.3m in 2008 as the activity scope expanded and R&D efforts intensified.

Cash flow after capital expenditures more than offset cash outflows for dividend payments for EUR 10.8m and own share purchases for EUR 24.5m. As of December 31, 2008, the Company held 1,624,290 treasury shares.

Strengthened balance sheet with net cash of EUR 77.5m and total equity of EUR 451.1m

As a result of Ingenico's strong cash generation and Oceane bond issue conversion in 2008, net cash amounted for EUR 77.5m as of December 31 2008, against -EUR 2.5m as of December 31 2007, an increase of EUR 80m in 2008.

Total equity increased significantly, from EUR 195.9m as of December 31 2007 to EUR 451.1m as of December 31 2008, mainly as a result of the contribution of Sagem's businesses and the Oceane bond issue conversion.

Dividend

The Board of Directors will ask the Annual General Meeting on May 15 2009 to approve the payment of a dividend of 0.25 euro per share.

Outlook

Global market conditions have recently worsened but market conditions vary significantly from one country to the other. Based on its local presence in 125 countries, Ingenico believes that it has a good visibility on its business environment. Today, performance in all regions is in line with management's expectations, except for two regions: North and South America which are impacted by the strong reduction in retail market and the timing of customer intake, respectively. In this context, Ingenico expects a low commercial performance in Q1'09 balanced by a strong sequential growth in Q2'09. Ingenico believes that the launch of new innovative terminals in H2'09 along with the ramp up of "beyond payment" services which are very well received by its prospects are opportunities to support growth in the second half of 2009.

In today's challenging market conditions, Ingenico's management is clearly putting high priority to preserving cash and profitability. Management is focusing on accelerating impact of synergies and driving cost efficiencies, as well as continuing to conservatively control cash requirements.

Finally, Ingenico believes that its balanced geographical presence, the contribution of new economies in revenue growth, as well as the launch of innovative terminals and services are key differentiators in today's environment. Ingenico also believes that its business model is resilient and that its flexible fab-less organization and its strong balance sheet are extremely valuable in today's challenging market conditions.

Considering the above trends, the Company anticipates pro forma revenue to be at minimum stable in 2009 and which could grow up to 5%. Adjusted operating margin objective is expected to be between 12.5% and 13.5% in 2009.

CONFERENCE CALL

The company will organize an analysts conference call to review its full year 2008 results on March 12, 2009 at 3.30pm Paris time.

 +-------------------------+ |About Ingenico (ING) | +-------------------------+ |Throughout the world, | |banks and retailers rely | |on Ingenico for secure | |and expedient electronic | |transaction acceptance. | |Ingenico solutions | |leverage proven | |technology, established | |standards and | |unparalleled ergonomics | |to provide optimal | |reliability, versatility | |and usability. This | |comprehensive range of | |products is complemented | |by a global array of | |services and | |partnerships, enabling | |businesses in a number of| |vertical sectors to | |accept transactions | |anywhere their business | |takes them. | +-------------------------+ |For more information | |about Ingenico, please | |visit: [ www.ingenico.com ]. | +-------------------------+ +-------------------------+ +--------------+-----------+---------+ | ISIN code | Bloomberg| Reuters| +--------------+-----------+---------+ | FR0000125346| ING FP| ING.PA| +--------------+-----------+---------+ +--------------+-----------+---------+ +-------------------------+--------------------+ |INGENICO - Investors |INGENICO - Press | |Contact |Contact | +-------------------------+--------------------+ |Catherine Blanchet | Max-Paul Sebag| +-------------------------+--------------------+ |Investor Relations |CEO's Public | |Director |Relations Director | +-------------------------+--------------------+ |catherine.blanchet@ingeni|Max-paul.sebag@ingen| |co.com |ico.com | +-------------------------+--------------------+ |33. 1.46.25.82.20 | 33. 1. 41.44.68.56| +-------------------------+--------------------+ +-------------------------+--------------------+

Upcoming dates

Conference call on 2008 annual results: March 12,2009 at 3.30pm Paris time

Publication of Q1'09 revenue: April 22, 2009

APPENDIX 1

Basis of preparation of financial information

The summary consolidated financial statements presented in Appendix 2 have been prepared in accordance with IAS 34, "Interim Financial Reporting".

Complementary financial data, prepared on an (unaudited) adjusted basis and not in accordance with IFRS is also presented. In particular, adjustments have been made to the cost of sales, as well as the presentation of operating expenses and the profit from ordinary activities, to the operating margin and the net profit, excluding non-recurring expenses in relation to the acquisition, in 2008, of Sagem Monetel, merger-related restructuring expenses or expenses resulting from the accounting treatment of the merger. The latter comprise the amortization of the intangible assets recognized at the time of the merger and the cancellation of the accounting entry for inventories at resale value. Non-recurring expenses in relation to the merger are expenses that would not have been recorded if the merger had not taken place i.e. essential professional fees to ensure the success of the integration process. Merger-related restructuring expenses include costs in relation to the reduction in manning levels at Head Office (particularly termination benefits).

Ingenico considers that these indicators are nevertheless useful inasmuch as they provide extra information enabling a clearer assessment of the company's past and future financial performance. In addition, the company's management uses such indicators in the planning and assessment of its operational performance. This information may not be comparable to similar information disclosed by other companies, even if it goes under the same heading.

IFRS results and reconciliation between adjusted results and IFRS

In tables below, the company provides information enabling reconciliation between the IFRS income statement and the adjusted (unaudited) income statement for the full year 2008 and for the full year 2007. This reconciliation includes EUR 11.4m of amortization and intangible fixed assets, EUR 7.7m related to inventory revaluation and EUR 9.1m of restructuring costs.

A more detailed description of the adjustments made to the IFRS income statement can be found below.

Consolidated income statement for full year 2008

Reconciliation of the IFRS financial statements and the (unaudited) adjusted financial statements

Consolidated income statement for full year 2007

Reconciliation of the IFRS financial statements and the (unaudited) adjusted financial statements

APPENDIX 2: Income statement, balance sheet and cash flow statement

A complete set of IFRS financial statements can be found on www. ingenico.com

AUDITED CONSOLIDATED INCOME STATEMENT

2. AUDITED CONSOLIDATED BALANCE SHEET

3. AUDITED CONSOLIDATED CASH FLOW STATEMENTS

APPENDIX 3: Pro forma (unaudited) consolidated income statement of Ingenico and Sagem Payment terminals for the period January 1 to December 31, 2008

Description of the pro forma adjustments stated in the unaudited consolidated income statement

(1) The transactions carried out by Sagem Monétique between January 1, and March 31, 2008 were included in the unaudited pro forma consolidated income statement.

(2) Sagem Monétique's inventories were measured at fair value on March 31, 2008, leading to an adjustment in value of EUR 6.1m before tax. Inventories were not measured at fair value at December 31, 2007 for pro forma information requirements, as the level of inventories was similar (EUR 20.6m at December 31, 2007 and EUR 21.7m at March 31, 2008). Accordingly, the adjustment in value carried out at March 31, 2008 was kept unchanged at January 1, 2008.

This adjustment is included in Ingenico's consolidated data covering the period from January 1, to December 31, 2008.

(3) Research and Development (R&D) expenses incurred by Sagem Monétique were expensed as incurred. These expenses are closely monitored (type of costs incurred, including internal development hours; amount of costs by kind, date they are available for use, etc.). Given that the amortization term of R&D expenses that can be capitalized is 3 years according to Ingenico's accounting principles, an analysis was carried out of the projects developed since 2005 in order to study whether they could be converted into intangible assets. Out of the 33 relevant projects in the period January 1, 2005 - March 31, 2008, 21 would have been recognized according to Ingenico's criteria. The amount of expenses recorded in the first quarter of 2008 at Sagem Monétique with respect to these projects was neutralized in the unaudited pro forma consolidated income statement. The theoretical amortization of recognized projects, calculated over a 5-year term from the launch of the project, is included in the amortization of intangible assets recognized within the framework of the business combination.

(4) The adjustments relative to intangible assets correspond to the depreciation and amortization in the first quarter of 2008 of intangible assets recognized within the framework of the business combination, i.e. on the one hand, the client base and, on the other hand, technologies whether existing or under development, including the R&D expenses related to the 21 projects that had been expensed at Sagem Monétique. This depreciation and amortization expense, calculated according to the terms described in the Opening Balance Sheet Note of Sagem Monétique, amounts to EUR 2.9m before tax and EUR 1.9m after recognition of the related deferred tax for the first quarter of 2008.

To facilitate comparison with 2007 financial statements, some data in this press release refer to the adjusted income statement for 2008 and the adjusted income statement for 2007. The adjusted financial statements differ from the IFRS financial statements in that they do not include acquisition related items nor acquisition related restructuring expenses. The basis of preparation for the adjusted financial statements is available in Appendix 1.

[1] Adjusted operating margin, before Price Purchase Allocation and restructuring costs

[2] Adjusted figures, before Price Purchase Allocation and restructuring costs

[3] Growth calculated on pro-forma 2007 and 2008 revenue, including Sagem Monetel, at constant exchange rates

[4] Excluding the effect of expected commercial overlaps related to the acquisition of Sagem Monetel which were mainly reported in Southern Europe.

[5] Adjusted figures, before Price Purchase Allocation and restructuring costs

This information is provided by HUGIN

Contributing Sources

Market Wire

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INGENICO: INGENICO: 2008 results