UPDATE: TomTom Posts 4Q Loss, Warns Of Debt Covenants Breach
February 24 2009 - 5:35AM
Dow Jones News
Shares in TomTom NV (38705.AE) fell Tuesday after the navigation
solutions provider reported a fourth-quarter net loss, announced
further cost cuts and cautioned that under certain conditions it
could breach its loan covenants.
"Based upon the group's plans for 2009, management expects to
comply with the loan covenants. However, given the uncertainties in
the wider macro-economic environment and their knock-on effect on
consumer spending, scenarios can be envisaged where the loan
covenants could be breached," said TomTom Chief Executive Harold
Goddijn in a statement.
"As a result, the company continues to evaluate options aimed at
remaining within its loan covenants under a variety of possible
scenarios, which could include renegotiating the terms of the
facility in isolation or in combination with other actions," he
said.
In an interview with Dow Jones, Goddijn wouldn't elaborate on
what "other actions" could mean, but some analysts speculate that
should TomTom breach debt covenants it might consider launching a
rights issue, taking out a third-party loan, selling a stake in
TeleAtlas or issuing a convertible bond.
TomTom's net debt was reduced by EUR213 million from the third
quarter and at the end of the fourth quarter stood at EUR1.12
billion.
The company's shares in early trading fell as much as 12.5% but
recovered some ground and at 0959 GMT traded down EUR0.34, or
10.4%, at EUR2.93 while the benchmark AEX index traded down
1.8%.
TomTom competes in the portable navigation device market with
Cayman Islands-based Garmin Ltd. (GRMN), which Monday reported a
49% fall in fourth-quarter net profit on falling sales. It also
warned of the extremely volatile environment and declined to give a
2009 outlook.
Some of the industries TomTom supplies have been hit hard by the
economic slowdown. Makers of electronic devices have suffered
slowing sales as consumer demand waned. Automakers, for whom TomTom
supplies navigation devices and which form a lynchpin of its global
strategy, are also struggling amid a worldwide slump in demand.
The company posted a net loss of EUR989 million for the three
months to Dec. 31, hit by an impairment charge and lower sales,
compared to a net profit of EUR107 million in the same period a
year earlier.
TomTom booked a EUR1.1 billion impairment charge for TeleAtlas,
the digital-map maker it bought last year for EUR2.9 billion. The
company in January warned that it wouldn't make its 2008 revenue
target and said it would take an impairment charge for
TeleAtlas.
Fourth-quarter sales fell 17% year-on-year to EUR528 million but
were in line with analysts' forecasts. Sales fell 23% from the
third-quarter when sales were EUR429 million. Although TomTom
declined to give specific guidance for 2009, it said it expects
TomTom to sell between 11 million and 12 million personal
navigation devices, which should amount to between EUR1.4 billion
and EUR1.6 billion in revenue.
Earnings before interest and tax, or Ebit, swung to a loss of
EUR994 million from a profit of EUR144 million, missing analysts'
expectations for Ebit of EUR65 million.
TomTom said it expects to make EUR60 million in cost savings, or
10% in operating expenses, in 2009.
Company Web site: www.tomtom.com
-By Roberta B. Cowan; Dow Jones Newswires; +3120-571-5200; roberta.cowan@dowjones.com