 View printer-friendly version | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Back | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 29/10/2008 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CSR PLC Reports Unaudited Results for the Third Quarter ended 26 September 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Click here for financial Tables Financial highlights
* Underlying results exclude charges in R&D for the amortisation of acquired intangible assets in each period. Operational Highlights
Outlook The current macroeconomic environment and resulting uncertainty are inevitably affecting end-consumers and will negatively impact our addressable market. Whilst visibility is limited, we currently expect the downturn to extend well into 2009 and potentially beyond. Reflecting the economic slowdown, the Company currently expects fourth quarter revenue to be in the $140m-$160m range. In addressing the changed economic environment, we are benefiting from our implementation of the strategic review we undertook in the first quarter of this year. This crystallised our strategic focus on the Connectivity Centre. It also delivered an operational assessment designed to focus our activities on delivering the Connectivity Centre and to re-shape and significantly sharpen our operational focus, speed of execution and efficiency. The results of implementing the first phases of this operational assessment are already showing. We are now accelerating implementation of the remaining phases and this is also enabling us to put in place significant further cost rationalisation, without affecting our development and delivery of innovative products that provide best in class performance at market leading price points. We expect to reduce our combined R&D and SG&A expense in 2009 by around $20m from 2008 levels. Our focus on the Connectivity Centre and ability to execute and deliver on our strategy remain unchanged, as does the compelling growth opportunity. Products such as BlueCore7, MusiCore and UniFi are expected to drive that growth and increase our market share. Commenting, Joep van Beurden, Chief Executive Officer, said: “We have posted solid third quarter financial results in line with guidance. Our product development roadmap has also proceeded extremely well. We have made significant progress on our BlueCore7, MusiCore and UniFi chip programs. Our exclusive focus on the Connectivity Centre strategy is increasingly proving to be well founded as the evidence mounts of the compelling growth opportunity it provides. All this is encouraging, as is the widening demand for our products in non-cellular applications, such as gaming, automotive and audio, which demonstrates the growing diversity of future potential demand. “In the short and potentially the medium term, however, we all recognise that the rapidly deteriorating global economic environment is clearly impacting demand for our customers’ products. We are therefore accelerating completion of the operational assessment we undertook earlier this year and we have identified significant further efficiencies we can secure alongside an expected reduction in headcount. We are aligning our business and cost base with the changed economic conditions while reinforcing our ability to develop and deliver innovative new products, grow market share and capitalise on the future growth opportunities available to us. “We have a leading global market position, a strong balance sheet, a low fixed cost base, a world class R&D operation that is more focused and streamlined than ever before and a pipeline of new products that are very well attuned to what our customers want and which will lead the market when they start shipping next year. Coupled with our exclusive focus on the Connectivity Centre, notwithstanding the current economic environment, we fully expect to increase our market share of the global connectivity segment next year, while benefiting from our careful financial management.” Enquiries: Investors Tel: +44 (0) 1223 692 000 US Investors Tel: +1 781 652 8875 Media Tel: +44 (0) 20 7404 5959 UK Webcast The webcast will be available to view on demand from approximately 1pm UK time. To listen to the live audio dial: +44 (0) 1452 561 263 Passcode: CSR Q3 Results. To access the audio replay dial +44 (0) 1452 55 00 00 Passcode: 67210179#. The replay facility will be available for one week after the presentation. US Webcast A conference call for US analysts and investors will be held at 9.00am EST today. A live audio webcast of the presentation will be available on the investor relations pages of the CSR website (www.csr.com ). The webcast will be available to view on demand from approximately 1pm EST time. To listen to the live audio dial (USA Free Call) 1866 223 9754 Passcode: CSR Q3 results. To access the audio replay dial 1866 247 4222 Passcode: 67210691#. The replay facility will be available for one week after the presentation. A recording of the analyst and investor call will also be available on the investor relations pages of the CSR website (www.csr.com ) for six months. Operating Review Cellular Applications Handsets Demand in the third quarter was increasingly impacted by the general economic slowdown, which we expect will continue in the fourth quarter and into 2009. Notwithstanding that slowdown, the Company has made excellent progress designing in our next-generation Bluetooth chip, BlueCore7 which combines Bluetooth with FM Transmit, FM Receive, Bluetooth low energy and GPS RF. We are very confident that this world-leading product will help increase our market share in Bluetooth FM combination products. The Company continues to pass critical milestones with our leading customer. We expect to enter mass production at the end of the first quarter in 2009 with significant revenue to ramp in the second half of 2009. MusiCore, our combination Bluetooth with Audio Codec chip is benefiting from the ever increasing interest among Tier 1 phone manufacturers in music phones. This reflects the hard-to-beat characteristics of the product: 100 hours music playback time, increased audio quality and a $2-$3 bill of materials cost reduction versus competitor products. The product is performing to specification and the development program is on schedule. We expect multiple revenue streams from leading manufacturers in the second half of 2009. Our Wi-Fi business has made good progress with more design wins in the pipeline. Building on our experience, UniFi3 will have 802.11abgn functionality and be smaller than any competitor part as well as having world leading co-existence with Bluetooth and low power consumption. It taped out at the end of the third quarter, and the product is doing well in its initial tests. This brings us closer to achieving another key part of our roadmap of next generation products. Headsets The headset market continues to be a strong one for CSR, due to our technological superiority and innovation. We estimate our market share to be around 80%. Our products are particularly strong in the high-end where our customers demand the best audio quality and connectivity performance coupled with the greatest range of features for their devices. CSR wins almost all designs in this important segment. Demand for headsets in the third quarter was positively impacted by the introduction in June of hands free driving legislation in California and Washington State in the US. As the market leader in hands free headsets, CSR captured the lion’s share of the additional demand. We also shipped a larger number of higher end products than usual to meet the demand. There continues to be strong competitive pressure in the ultra low-end market and CSR also continues to see competition from Bluetooth vendors attempting to break into the low cost segment. Our BlueVox2 and BlueVox DSP solutions have been specifically created to enable us to continue to compete effectively in these markets. Additionally in the quarter we launched BlueTunes ROM, a low cost stereo headset chip designed to enable manufacturers to build cheaper stereo headset units for their customers and drive product adoption. We continue to see new headset market opportunities open up to us. For example, mono headsets began to expand beyond the traditional hands free voice call market into gaming applications. In the third quarter, we started shipping our headset product to a leading games console manufacturer for a mono headset designed for use with its gaming machines. Non-cellular applications Our PC, Automotive and Consumer division (“PAC”), had a strong quarter with wireless connectivity requirements growing across many consumer devices. Consumer products are evolving to have wireless connectivity as standard, and the total available market and subsequent attach rates are growing. CSR is providing new solutions to address this very diverse market segment, offering flexibility in terms of software architecture, whilst still remaining ROM based in order to reduce integration costs. Leading design wins for these new solutions include digital photograph frames, LCD televisions from leading Korean manufacturers and a variety of health and “wellness” products including a Bluetooth enabled sports training system by Polar. CSR still has a very strong presence in the gaming segment. Low latency is a key requirement from customers in this market and CSR’s Fast Stream ™ software ensures that the audio and video are synchronised to enhance the user experience. We are seeing a trend to have multiple simultaneous uses for Bluetooth in hand held gaming and consumers will see this in the market in 2009. The automotive segment, in which the Company is the market leader for providing Bluetooth solutions, has seen strong growth as attach rates continue to increase quickly. While global demand for cars is expected to be impacted by the general economic slowdown, we believe that a greater percentage of those cars built will include Bluetooth functionality as manufacturers offer higher specification levels in order to try to attract additional custom. Significant wins during the period include a leading automotive manufacturer based in France, and a second major German-based car manufacturer to add to our first German customer in this segment, which has recently confirmed CSR as its continued sole supplier in 2009. CSR’s partnership with Intel has now provided PC customers and OEMs with the ability to offer their customers a 30 minute battery life saving. To ensure ease of integration, CSR has launched a new PC ‘Slim module’ design with a new ROM device that incorporates the CSR/Intel advanced power management functionality. The module has been well received and we expect to see this functionality rolled out into the market in products in 2009. Partnerships Our partnership strategy is instrumental to capturing additional sales in combination with leading developers. The Company has announced a significant partnership in the quarter with SRS Labs to create PureSpeech™ to improve sound clarity in headsets. This adds to our existing relationships with Acoustic Technologies, DynamicHearing, Sonaptic, QSound Labs, Phitex and APT. In our PAC division we have entered a partnership with Freescale to be their wireless partner. A newly announced partnership with Raza Microelectronics will help us offer an eGPS solution to our customers. eGPS is an advanced form of autonomous GPS, which uses cellular networks in order to increase the speed of first locking with satellites and also to maximise location positioning within buildings and built up areas. The Company sees further interest from potential partners in new areas for us such as health and “wellness” products. Financial Review Income Statement Revenue Shipments of products in Q3 were higher due to traditional seasonal trends. Revenue from CSR’s top five customers in the quarter represented 51% of total revenue (Q2 2008: 48%, Q3 2007: 50%). This increase is in line with our expectations and consistent with our success in winning business across our customer base. Our largest customer represented 17% of total revenue (Q2 2008: 19%, Q3 2007: 22%). Gross Profit Operating Expenses Share-based payment charges, recorded under IFRS 2, were $2.2 million for Q3 2008 representing an increase of $0.2 million when compared with Q2 2008 (Q3 2007: $1.4 million). Operating Profit Underlying operating margin was 15.6%, compared with 12.2% in Q2 2008 (Q3 2007: 23.9%). Operating margin was 15.0% in Q3 2008, compared with 11.5% in Q2 2008 (Q3 2007: 23.2%). Earnings and Taxation Finance costs were $1.3 million in Q3 2008, compared with $0.3 million in Q2 2008 (Q3 2007: $0.3 million). The increase is due to exchange losses incurred on non-US dollar cash balances due to the significant reduction in the Sterling to Dollar exchange rate. Included within finance costs in Q3 2008 was $0.3 million related to the unwinding of the discount applied to the contingent consideration for the acquisition of NordNav Technologies AB (Q2 2008: $0.3 million; Q3 2007 $0.4 million). The underlying effective tax rate for Q3 2008 was 23.4%. This rate was below the current UK statutory rate of 28% principally due to the availability of enhanced tax relief on R&D expenditure. To manage its exposure to foreign exchange, CSR enters into US dollar forward contracts. CSR’s average US dollar contract rate for 2008 is set at $1.98 (2007: $1.89). CSR covers a substantial proportion of its UK sterling denominated operating expenses with US dollar forward contracts. Underlying diluted earnings per share for Q3 2008 were $0.19 per share, compared with $0.14 per share for Q2 2008 (Q3 2007: $0.31). Diluted earnings per share (including the impact of the non-underlying operating expense items noted above) for Q3 2008 were $0.18, compared with $0.13 in Q2 2008 (Q3 2007: $0.30). Balance Sheet and Cash Flow Net cash inflow from operating activities was $17.4 million in Q3 2008, compared with $8.5 million in Q2 2008 (Q3 2007: $39.8 million). Cash outflow on capital expenditure, including finance lease repayments, was $3.6 million in Q3 2008, compared to $9.4 million in Q2 2008. Closing inventory was $80.7 million at 26 September 2008, compared with $92.3 million at 27 June 2008 (28 September 2007: $103.0 million). Inventory at the quarter end was managed to 9 weeks of historic cost of sales, compared with 12 weeks at 27 June 2008. Accounts receivable increased to $110.8 million at 26 September 2008 from $96.2 million at 27 June 2008 (28 September 2007: $93.0 million). Days sales outstanding was 44 days, compared with 45 days at 27 June 2008 (26 September 2007: 38 days), in line with our standard terms. People About CSRCSR is the leading global provider of personal wireless technology and its product portfolio covers Bluetooth, GPS, FM and Wi-Fi (IEEE802.11). CSR offers developed hardware/software solutions based around its silicon platforms that incorporate fully integrated radio, baseband and microcontroller elements. CSR’s customers include industry leaders such as Apple, BMW, Dell, LG, Motorola, NEC, Nokia, Panasonic, RIM, Samsung, Sharp, Sony, TomTom and Toshiba. CSR has its headquarters and offices in Cambridge, UK, and offices in Japan, Korea, Taiwan, China, India, France, Denmark, Sweden and both Dallas and Detroit in the USA. More information can be found at www.csr.com. Forward looking statements
|
