TomTom 2008 Annual Report Download

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ANNUAL REPORT AND ACCOUNTS

ROUTING
LEADING
CONNECTING
PEOPLE
QUALITY
INNOVATION
GUIDANCE SERVICES
DIGITAL MAPPING
>

Table of contents

  • Page 1
    ANNUAL REPORT AND ACCOUNTS  ROUTING LEADING QUALITY CONNECTING INNOVATION PEOPLE GUIDANCE SERVICES DIGITAL MAPPING >

  • Page 2
    ... market share, including TomTom's competitive position, contained in this document are based on outside sources such as specialised research institutes, industry and dealer panels in combination with management estimates. Where full-year information regarding 2008 is not yet available to TomTom...

  • Page 3
    ... OF NAVIGATION SOLUTIONS AND DIGITAL MAPS, FOCUSING ON IMPROVING PEOPLE'S LIVES BY USING OUR COMBINED KNOWLEDGE AND EXPERTISE IN THE FIELD OF ROUTING, DIGITAL MAPPING, AND GUIDANCE SERVICES. â,¬billion 1.75 GROUP REVENUE â,¬billion 1.55 REVENUE TOMTOM BUSINESS â,¬ 289 million REVENUE TELE ATLAS...

  • Page 4
    ... our new GO LIVE Series in five European countries, delivering a bundle of connected services, like HD Trafficâ„¢, Local Search with Google and weather information, to our customers. We were able to make our real-time traffic service available to 50% of our European customer base by the end of 2008...

  • Page 5
    ... the shared development centres we have brought together the core competencies of the Group: digital mapping, routing and guidance services. The strength of the combination of these three competencies started to become visible in 2008. The first maps that incorporate the feedback from our community...

  • Page 6
    ... in navigation system. We have 3,500 employees working in offices in Europe, North America, the Middle East, Africa and Asia Pacific. OUR GROUP STRUCTURE: In 2008 we completed the acquisition of Tele Atlas transforming the Group into a broader navigation solutions, content and services company. To...

  • Page 7
    .... To keep pace with these changes we use the feedback that we get from the millions of people in communities like those from TomTom and Vodafone. Connected devices will further speed up the information sharing process by enabling us to launch real-time services. As the importance of our products and...

  • Page 8
    ... increase the addressable market and monetise our unique content and services offerings. These services, which are currently available in our LIVE Services bundle, set us further ahead of competition. It offers, amongst others, the best real-time traffic information available, a live Google search...

  • Page 9
    ... SERVICES. BEST TRAFFIC INFORMATION THE BEST PRODUCTS AND SERVICES TOMTOM IS LEADING THE NAVIGATION INDUSTRY IN INNOVATION AND IN THE QUALITY OF OUR PRODUCTS AND SERVICES. BY INTRODUCING MAP SHARE, HD TRAFFIC AND IQ ROUTES ON OUR PNDS WE ARE TRANSFORMING SATELLITE NAVIGATION FROM A 'DON'T-GET-LOST...

  • Page 10
    ...ADD NEW CONTENT AND TO VALIDATE CHANGES TO OUR MAPS. WE STARTED USING COMMUNITY-GENERATED INFORMATION IN 2006 WITH MAP INSIGHT, A SYSTEM THAT ALLOWS ANYONE TO REPORT A CHANGE TO TELE ATLAS. OF A DIFFERENT MAGNITUDE IS THE SHEER AMOUNT OF COMMUNITY DATA THAT WE RECEIVE FROM THE GROUP'S BUSINESS UNITS...

  • Page 11
    ... Henry MD Tele Atlas PROFILE: THE TELE ATLAS BUSINESS UNIT PROVIDES THE DIGITAL MAPS AND DYNAMIC CONTENT THAT POWER MANY OF THE WORLD'S MOST IMPORTANT NAVIGATION AND LOCATION-BASED SERVICES. We offer digital maps of approximately 80 countries in Europe, North and South America, the Middle East and...

  • Page 12
    ... MD WORK PROFILE: TOMTOM'S WORK BUSINESS UNIT OFFERS PROFESSIONAL SOLUTIONS FOR COMMERCIAL FLEETS. Our connected navigation products and services allow enterprises to monitor, manage and communicate with their drivers and fleets of vehicles, thereby increasing the overall efficiency, safety and...

  • Page 13
    ... companies with low-cost, high quality in-car navigation we are transforming the industry." Giles Shrimpton MD Automotive PROFILE: TOMTOM'S AUTOMOTIVE BUSINESS UNIT DEVELOPS AND SELLS NAVIGATION SYSTEMS AND SERVICES TO CAR MANUFACTURERS AND THEIR SUPPLIERS WORLDWIDE. The potential customer base...

  • Page 14
    ... of our user community. In Europe, we continued to enjoy a stable leading market share of close to 50%. In North America we continue to hold a strong number two position with over 20% market share. TELE ATLAS On 5 June 2008 the acquisition of Tele Atlas was completed, a process that started in 2007...

  • Page 15
    ... Tele Atlas Urban Maps for in-city navigation), routing (in 2008 we launched TomTom IQ Routes and Tele Atlas Speed Profiles) and dynamic information like Traffic and fuel prices (in 2008 we launched LIVE Services in five countries). CUSTOMER SUPPORT We believe our products are the best available...

  • Page 16
    ... share of â,¬1.16. Cash generated from operations continued to be strong at â,¬463 million, compared to â,¬535 million in the previous year. We ended the year with a net debt position of â,¬1,109 million. (in â,¬ millions) 2008 2007 Change TomTom Tele Atlas Intercompany Revenue TomTom Group TomTom...

  • Page 17
    ...in sales prices for PNDs, mainly driven by component price reductions, and the increased importance of the North American market where our ASPs were lower due to a product mix that contained relatively more of our value range products. 2008 2007 Change Europe North America Rest of world 2007 GROUP...

  • Page 18
    16 / MANAGEMENT BOARD REPORT TomTom geography TomTom operating expenses In 2008, TomTom generated revenue in EMEA, North America and Asia Pacific. Except for North America all regions showed a decrease in sales. The proportion of sales outside EMEA rose to 29% in 2008, up from 20% in 2007. Sales...

  • Page 19
    ... of technology & database 2 Excluding stock compensation charges (SOC) R&D expenses In 2008, Tele Atlas generated revenue in EMEA, North America and Asia Pacific. EMEA sales were down year-on-year however this was partly compensated by increased sales in North America and the rest of world. The...

  • Page 20
    18 / MANAGEMENT BOARD REPORT GROUP STOCK COMPENSATION CHARGES TAXATION The company offers a number of share-based compensation plans to employees. Charges resulting from these plans are calculated in accordance with IFRS 2 "Share based payments". The equity settled plans result in a non-cash ...

  • Page 21
    ... the full valuation of the acquired business of Tele Atlas as established at the time of the acquisition. At year end the Group shows a goodwill balance of â,¬855 million relating to the Tele Atlas acquisition. Our net assets and total assets have decreased mainly as a result of the impairment...

  • Page 22
    ... BOARD REPORT HUMAN RESOURCES In 2008, the Group saw a growth of our workforce from 1,337 to 3,498 employees, mainly due to the acquisition of Tele Atlas. The TomTom business, excluding Tele Atlas, grew by 23.3% to 1,676. During the year we opened new operations in South Korea, Japan, South Africa...

  • Page 23
    ... - the UK, France, Germany and Switzerland during 2008. This means that even more users can access traffic information, which combines a number of sources, including the data from mobile phones in the country, to deliver a premium service live to the new GO x40 devices. The HD Traffic service offers...

  • Page 24
    ...throughout the Group. Products launched in 2008 WEBFLEET Our TomTom WORK business unit launched its new and enhanced WEBFLEET service, a market-leading on-line fleet management, order tracking and reporting service accessible 24 hours a day from any internet-enabled PC. Fleet managers benefit from...

  • Page 25
    ...: TomTom HD Traffic service for the most accurate and up to date traffic information en route, now available for the first time in the UK, Germany, France, Switzerland, as well as in the Netherlands TomTom Safety Alerts including real-time safety camera reporting and sharing, meaning users can keep...

  • Page 26
    ... centre) Ben van der Veer (bottom right) The Management Board is responsible for the day-to-day management of our operations under the supervision of the Supervisory Board. The Management Board is required to keep the Supervisory Board informed, to consult with its members on important matters...

  • Page 27
    ...continued his work on digital map databases and routing. In 1989 I&M was integrated into the Dutch Tele Atlas group and as of 1990 Alain headed the Tele Atlas group, successfully introducing the company on the Frankfurt and the Amsterdam Stock Exchanges. In 2008, TomTom acquired Tele Atlas and Alain...

  • Page 28
    ... Supervisory Board held its annual induction and governance day, which included a presentation on the Group's strategy and the strategy of the business units. The proposed amendments to the structure of the Stichting Continuïteit TomTom were discussed among the Supervisory Board members during the...

  • Page 29
    ... company's strategy and performance. The Supervisory Board evaluates the remuneration structure regularly in order to ensure that it meets the objective of the Remuneration Policy. Application in 2008 • Members of the Management Board are eligible to participate in the company's 2007 Share-Based...

  • Page 30
    ... as a member of the Management Board for a period of four years. Alain De Taeye's employment agreement and individual remuneration at TomTom have been based on the Remuneration Policy and market practice, taking into account his former Tele Atlas employment conditions and years of service. The...

  • Page 31
    ... the forthcoming years was discussed and agreed. The Internal Audit Plan includes flexibility to accommodate possible changing business needs and takes into account all the business units, divisions and geographies in the company. Independence During 2008, the Supervisory Board met three times with...

  • Page 32
    ... meeting his expertise and knowledge of Tele Atlas were the main reasons for his appointment as member of the Management Board. Therefore, in determining his remuneration his position as former Chief Executive Officer of Tele Atlas and his remuneration at that time was considered. 3. At our...

  • Page 33
    ... was appointed as a member of the Management Board. Currently, the Management Board consists of Harold Goddijn - Chief Executive Officer Marina Wyatt - Chief Financial Officer Alain De Taeye - member of the Management Board. The Articles of Association provide that the number of members of the...

  • Page 34
    ... authorised to receive any payments under our pension or bonus schemes or under our option or share plans. For detailed information about the individual remuneration of members of the Supervisory Board see the notes to the Financial Statements of TomTom NV included in this Annual Report, on page 48...

  • Page 35
    ... prior approval of the Supervisory Board. If so designated by the General Meeting of Shareholders or our Articles of Association, the company may issue ordinary shares, or grant rights to subscribe for ordinary shares, pursuant to a resolution of the Management Board, subject to the prior approval...

  • Page 36
    ... share capital (excluding issued and outstanding preference shares) of the company. In addition to the aforementioned amendment to the Foundation's Articles of Association, the Management Board's right to terminate the Option Agreement has been cancelled by an amendment to the Option Agreement dated...

  • Page 37
    ... preference shares may help the Management Board and the Supervisory Board to determine their position in relation to a bidder and its plans, to enter into a constructive dialogue with the bidder and to gain time to explore possible alternatives all in the interest of the company. During the Annual...

  • Page 38
    ... in no way reflects an order of importance, vulnerability or materiality. The market for satellite navigation products in each of the geographic markets in which we operate is highly dynamic and competitive. Currently the company is structured into four business units; TomTom, Tele Atlas, WORK and...

  • Page 39
    ...-to-use, high-quality portable navigation products and services. Tele Atlas integration Human resources The success of our business depends on attracting, integrating and retaining qualified personnel in all business units and supporting development centres. The loss of key members of management...

  • Page 40
    ...our business. We continually evaluate the risks associated with outsourcing our supply chain. Our engineering and quality assurance departments perform regular audits and ongoing reviews of our manufacturing partners and component suppliers. The supply disruption risk for our highest volume products...

  • Page 41
    ... forecast sales and purchases over the next nine months. We use foreign exchange plain vanilla options and foreign exchange forward contracts to hedge our currency risk, all with a maturity of less than one year from the reporting date. A 2.5% strengthening of the euro against the currencies listed...

  • Page 42
    ... long-term shared technologies roadmap for driving the engineering resources across all business units restructuring Tele Atlas from a regional to centralised organisation implementation of a new Enterprise Resource Planning system for the TomTom PND and WORK business units launch of a new financial...

  • Page 43
    ... With the TomTom Group now reaching out to other navigation markets through its business units, this community involvement provides us with an edge - for example, reports uploaded from the Map Share community worldwide are now used by Tele Atlas to further improve their map offering. With satellite...

  • Page 44
    ... SOCIAL RESPONSIBILITY AT TOMTOM (CONTINUED) OPEN RELATIONSHIP WITH THE SUPPLY CHAIN TomTom's Ethical Trading Code of Practice We are constantly in touch with our various suppliers around the world, taking responsibility for labour and human rights practices throughout the supply chain, using...

  • Page 45
    ... Statements of TomTom NV COMPANY FINANCIAL STATEMENTS OF TOMTOM NV 75 76 77 78 79 80 81 Company income statement of TomTom NV Company balance sheet of TomTom NV Notes to the company Financial Statements Other information Auditor's report to the Financial Statements INVESTOR INFORMATION KEY FIGURES...

  • Page 46
    44 / CONSOLIDATED INCOME STATEMENT OF TOMTOM NV for the year ended 31 December (â,¬ in thousands) Notes 5 6 20082 2007 Revenue Cost of sales Gross result Operating expenses Research and development expenses Amortisation of technology and databases Marketing expenses Selling, general and ...

  • Page 47
    ... BALANCE SHEET OF TOMTOM NV as of 31 December (â,¬ in thousands) Notes 2008 2007 / 45 Assets Non-current assets Goodwill Other intangible assets Property, plant and equipment Investments in associates Deferred tax assets Total non-current assets Current assets Inventories Trade receivables Other...

  • Page 48
    ... stock compensation reserve Changes in working capital: Change in inventories Change in receivables and prepayments Change in current liabilities (excluding provisions) Cash generated from operations Interest received Interest paid Corporate income taxes paid Net cash flow from operating activities...

  • Page 49
    ... of results According to the company's Articles of Association, the company's reserves, including share premium, may be distributed to shareholders, provided that total shareholders' equity exceeds the called-up and paid-up capital of the company, increased by legal and statutory reserves...

  • Page 50
    ... in Amsterdam, the Netherlands. The activities of the company include the development and sale of navigation solutions and digital maps. The primary focus of these activities is on personal navigation. The consolidated Financial Statements of the company for the year ended 31 December 2008 comprise...

  • Page 51
    ... TomTom Development Germany GmbH Tele Atlas BV Tele Atlas GmbH Tele Atlas Data Gent NV Phonetic Topographics NV Tele Atlas Canada Navigation Information Company Ltd. Sipolment Holding Ltd. Bolgota Holding Ltd. Tele Atlas Scandinavia ApS Tele Atlas Finland OY Tele Atlas France SARL Tele Atlas Germany...

  • Page 52
    ... by the licensing of geographic content of the Tele Atlas database to customers. Licensing takes the form of selling products (CD's and DVD's) to end users for perpetual use or for a fixed period of time. Revenue is recognised when the product is sold to the end-user. Where the data is licensed for...

  • Page 53
    ...) Multiple element arrangements Bundled sales or multiple-element arrangements require the Group to deliver equipment (e.g. navigation hardware) and/or a number of services (e.g. traffic information services) under one agreement, or under a series of agreements which are commercially linked. In such...

  • Page 54
    .... Stock compensation expense The Group operates a number of equity-settled share option plans, as well as a cash-settled performance share plan. Share option plan The Group issued share options, which qualify as equity-settled share-based payments, to eligible employees, including members of...

  • Page 55
    ... to the Group's core software technology are expensed as research and development costs, as incurred on the basis that on average these costs have a useful economic life of less than one year. Internally-generated databases are capitalised until a level of completion is reached and activities focus...

  • Page 56
    ...-line basis over the estimated useful economic lives of the assets as follows: Databases and tools Brand name Customer relationships 10-20 years 20 years 20-27 years. Customer relationships include customers for Tele Atlas maps, there is a high cost to change map providers and historically there is...

  • Page 57
    ... stock. Net realisable value represents the estimated selling price less an estimate of the costs of completion and direct selling costs. Trade receivables Trade receivables are initially recognised at fair value, and subsequently measured at amortised cost (if the time value is material), using...

  • Page 58
    ... revenue and cost of sales. The Group reduces revenue for estimates of sales incentives. We offer sales incentives, including channel rebates and end-user rebates for our products. The estimate is based on our historical experience taking into account future expectations on rebate payments. If there...

  • Page 59
    ..., based upon the likely timing and level of future taxable profits together with future tax planning strategies. / 57 7. 8. 5. SEGMENT REPORTING The Group has two core divisions, TomTom and Tele Atlas. TomTom generates revenue primarily from the sale of personal navigation devices whilst Tele...

  • Page 60
    ... emoluments do not include share-based payment costs. An overview of share-based payments is given in the tables below. 2 Alexander Ribbink resigned in June 2008 and Alain De Taeye (formerly managing director of Tele Atlas) was appointed in September 2008. The fixed salary paid to Alain De Taeye...

  • Page 61
    ... The following tables summarise information about share options and performance shares granted to members of the Management Board. Stock option plan Outstanding 1 Jan 2008 Granted in 2008 Exercised in 2008 Forfeited in 2008 Outstanding 31 Dec 2008 Exercise price in euro Expiry date / 59 Alexander...

  • Page 62
    ... TO THE CONSOLIDATED FINANCIAL STATEMENTS OF TOMTOM NV 8. ADDITIONAL INFORMATION REGARDING OPERATING EXPENSES (continued) Average number of employees The average number of employees in 2008 was 2,703 (2007: 1,078). At 31 December 2008, the Group had 3,498 (2007: 1,337) employees. Operating expenses...

  • Page 63
    ... is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company's shares), based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated...

  • Page 64
    ...tact in that superior content and cost efficiency will expand the Tele Atlas presence in world markets as well as providing benefits to users through new features, more regular updates, faster coverage expansion, enhanced integration of customer feedback and increasing our position in the automotive...

  • Page 65
    ...market size, market shares and future expectations of industry analysts. The key assumptions used for the fair value less cost to sell calculation are as follows. TomTom Tele Atlas / 63 Revenue - perpetual growth Operating expenses - perpetual growth1 Discount... 2008 Investment cost Accumulated...

  • Page 66
    ... n/a n/a 1 Data was not yet available. 2 All associates have a 31 March year-end, data for calculating the result associate, based on the equity method, is obtained from January through to December. 3 Infotech is regarded as an associate as Tele Atlas is represented in the Board of Directors. 15...

  • Page 67
    ... FINANCIAL STATEMENTS OF TOMTOM NV 16. TRADE RECEIVABLES (continued) The following summarises the movement in the provision for doubtful trade accounts receivable. (â,¬ in thousands) 2008 2007 / 65 Balance as at 31 December Additional receivables impairment Receivables written off during the year...

  • Page 68
    ... included in other liabilities) compared to a net asset of â,¬25.0 million in 2007. At the balance sheet date, the notional value of outstanding foreign exchange option and forward contracts to which the Group was committed was as follows. (â,¬ in thousands) 2008 2007 Rights and obligations to buy...

  • Page 69
    ..., starting three years after the date of the grant. Options expire seven years after the date of grant. The options will be covered at the time of exercise by issuing new shares. The following table summarises information about the stock options outstanding at 31 December 2008. Number outstanding at...

  • Page 70
    ... TomTom NV stock. The share price on the date of grant for options granted after the IPO is determined as the three-day average of the stock price, prior to the date of the grant. The Black and Scholes option valuation model was developed for use in estimating the fair value of traded options that...

  • Page 71
    ... credit facility to fund the Tele Atlas acquisition. Transaction costs related to the facility amounted to â,¬44.7 million. The facility terminates on 31 December 2012 and has an annual repayment schedule. The interest is in line with market conditions and based on Euribor with a spread that...

  • Page 72
    ...-17,298 -207,654 4,903 -196,098 1 In June 2008 the Group acquired Tele Atlas. Based on the purchase price allocation performed by an independent third party, the value of the database and tools increased and new intangibles such as brand name and customer relationships were recognised, resulting in...

  • Page 73
    ...the sale and purchase agreements, the former shareholders of the acquired companies are entitled to an additional purchase price instalment, depending on the performance of the acquired companies and related technologies during the year 2008. Based upon management's best estimate, the Group provided...

  • Page 74
    ...at 31 December 2008, the Group had open purchase commitments with our contract manufacturers for certain products and components. Based on our forecasts of the number of units we will require, our contract manufacturers order the requisite component parts from their suppliers. Our manufacturers have...

  • Page 75
    ...â,¬816 million. Since TomTom NV did not obtain control over Tele Atlas at that time, the transaction was classified as an investment in associate. In June 2008 the Group acquired the remaining shares of Tele Atlas, a global provider of digital map technology. The acquired business contributed â,¬121...

  • Page 76
    ... BY CATEGORY The accounting policies for financial instruments have been applied to the line items below. Assets at fair Loans and value through receivables profit and loss (â,¬ in thousands) Total 31 December 2008 Assets as per balance sheet date Other financial assets Trade receivables Cash and...

  • Page 77
    COMPANY INCOME STATEMENT OF TOMTOM NV for the year ended 31 December (before proposed appropriation of result) (â,¬ in thousands) Notes 2 3 4 2008 2007 / 75 Result of subsidiaries after taxation Result of associate Other income and expenses after tax Net result -802,388 -13,455 -56,742 -872,585 ...

  • Page 78
    76 / COMPANY BALANCE SHEET OF TOMTOM NV as of 31 December (â,¬ in thousands) Notes 2008 2007 Assets Non-current assets Investments in subsidiaries Investments in associate Deferred tax asset Financial instrument Total non-current assets Current assets Receivables Intercompany receivable Cash and ...

  • Page 79
    ... on the company's outstanding cash balances. For the remuneration of the Management Board and Supervisory Board, please refer to note 7 of the consolidated Financial Statements. 5. SHAREHOLDERS' EQUITY For the statement of changes in consolidated equity for the year ended 31 December 2008, please...

  • Page 80
    ... declarations of joint and several liabilities for various Group companies, in compliance with Section 403, book 2 of the Dutch Civil Code. Declarations were issued during the year for TomTom International BV and Tele Atlas BV. OTHER INFORMATION STATUTORY PROVISION WITH RESPECT TO APPROPRIATION OF...

  • Page 81
    ... to the company Financial Statements In our opinion, the company Financial Statements give a true and fair view of the financial position of TomTom NV as at 31 December 2008, and of its result for the year then ended in accordance with Part 9 of Book 2 of the Netherlands Civil Code. Report on other...

  • Page 82
    ... up until March 2007, TomTom issued share options to eligible employees, including members of management. This was replaced by a share-based compensation plan. SHARE PRICE DEVELOPMENT The closing price of the shares at 31 December was: 2008 2007 2006 2005 Share price Volume (million) â,¬5.20 480...

  • Page 83
    ... OVERVIEW TomTom Group (in â,¬ millions) 2008 Q4 '08 Q3 '08 Q2 '08 Q1 '08 2007 2006 2005 2004 / 81 Income and expenses Revenue TomTom Tele Atlas Gross profit Operating result1 Net result1 Data per share Earnings per share (in â,¬) - basic1 Earnings per share (in â,¬) - diluted1 Shares outstanding...

  • Page 84
    TomTom NV Oosterdoksstraat 114 1011 DK Amsterdam The Netherlands Tel: +31 (0)20 757 5000 www.TomTom.com