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Option reports First Half Year 2010 results
Option reported revenues of EUR 30.9 million in the first half of 2010. This number includes second quarter revenue of EUR 17.8 million which represents an improvement compared to the first quarter revenues of EUR 13.1 million. The market for Option remains challenging primarily due to the unfair trade practices of Chinese competitors and the uncertain economic outlook.
For the first time, there are signs that the pace of growth in the commodity USB segment in established markets might be slowing. In addition, continued pricing pressure from Chinese competitors has significantly impacted the Company's expected USB sales.
The Company believes that the selling practices of these Chinese competitors is and has been illegal under EU law. The European Commission has opened antidumping and safeguard investigations, with immediate registration on June 30, of WWAN modem imports from China.
In addition, in August, the Company filed an anti-subsidy claim at the European Commission. The European Commission is currently handling all claims. Option continues to believe it is very important for Europe to foster a competitive environment where fair market practices and respect for relevant legislation protect the interests of all parties active in the market.
Coping with these challenges the Company embarked on an industrial transformation in late 2009 that is continuing in 2010. The Company believes in the strategic pillars it identified at that time that utilize the Company's core strengths as it moves away from the highly commoditized parts of the market:
1. Mobile Security Solutions: 3G connected security USB modems and 3G connected security cameras for banking, government and enterprises. The Company will launch the mIDentity 3G in the fourth quarter as planned;
2.Embedded Solutions: 3G modules for automotive and industrial applications where the Company continues to see interest in our next generation 3G/4G embedded modules both in Asia and North America;
3.Software: Highly customizable Connection Manager and other connectivity software and middleware. Two new Managed Services software solutions will be launched with customers in the second half of the year;
4.Personalised USB modems with the Company's innovative iCON XY solution including hardware & software personalization and a customized supply chain. The iCON 461 with GPS continues its steady pace with leading US operator AT&T. The iCON XY is in test with several European operators and a new 21Mbps USB modem is to be launched in October.
While the Company is beginning to have a good sales pipeline and interesting opportunities in each of these pillars, they are not expected to provide meaningful revenue until early 2011. Therefore, the Company believes that unless some of this pipeline is accelerated into the fourth quarter of 2010, it is uncertain that the Company will achieve growth in the second half of 2010 compared to the first half of the year.
Financial Highlights of the half fiscal year 2010
- Total revenues for the first half year of 2010 were EUR 30.9 million compared with EUR 92.0 million realized in the first half year of 2009.
- Gross margin for the first half year was 18.4% on total revenues compared with gross margin of 23.4% for the first half year 2009. In the first half of the year, extraordinary adjustments were made to the cost of goods sold without which the gross margin would have been 30.0%.
- Compared to the first half year 2009, operating expenses decreased with EUR 14 million from EUR 40.7 million (2009 excluding restructuring charges) to EUR 26.7 million. The reduced expenses are the result of the restructuring exercises, initiated in 2009, combined with lower sales related costs. The operating expenses for the first half year 2010 include impairments on capitalized development costs for an amount of EUR 6.1 million. Positively, Option reached a settlement regarding a patent dispute that allowed it to completely reverse a provision of EUR 3.9 million related to that dispute.
- The half year EBIT amounted to EUR -21.0 million or -68.2% on total revenues compared with EUR -20.4 million or -22.2% during the corresponding period in 2009.
- Net result for the first half year 2010 amounted to EUR -20.5 million, or EUR -0.25 per basic share. This compares with a net result of EUR -16.8 million, or EUR -0.41 per basic share in the first half of 2009. The first half year 2010 net result was positively impacted by taxes of EUR 1.4 million and negatively impacted by a financial result of EUR -0.9 million. EUR 0.7million of the negative financial result was due to the weakening of the US dollar against the Euro.
- The Group's balance sheet includes EUR 7.7 million in cash, EUR 2.1 million in restricted cash (mainly guarantees to third parties) and reduced inventory levels to EUR 15.5 million. Per June 2010 an amount of EUR 6.7 million has been drawn from the existing credit lines. The accounts payable position decreased with EUR 6.2 million compared to year end 2009.
For the entire press release in English or Dutch, including tables, click on the link below
Option reports First Half Year 2010 results: http://hugin.info/133962/R/1441400/385738.pdf
Option rapporteert resultaten van het eerste halfjaar: 2010 http://hugin.info/133962/R/1441400/385740.pdf
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