TomTom 2009 Annual Report Download - page 21

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SG&A expenses
The group’s SG&A function has been designed to
create value for the group by leveraging the scale
of the group and by creating efficiencies. SG&A
expenses include the costs of personnel engaged
in sales activities, customer support, IT, HR, legal,
office and other general expenses. SG&A expenses
decreased by 16% to €189 million in 2009, down
from €225 million in 2008. Several functions were
moved to the group-wide shared service centres
during the year. The decrease was mainly driven
by our cost reduction programme but there was
also a benefit of some one-off releases.
STOCK COMPENSATION CHARGES
The company provides 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
accounting charge and relate to the granting of
share options. The charge for share options is
recognised evenly over the vesting period of the
share options granted. In 2009, this led to a charge
of €9 million (2008: €15 million). In 2007 and 2008
TomTom adopted a cash settled share based
incentive plan for which the charges are determined
by a valuation model. Based upon this valuation
model TomTom estimates the fair value of the
liability on our balance sheet. In 2009 TomTom
recorded a charge of €1.4 million compared to
a release of €1.4 million in 2008.
FINANCIAL INCOME AND EXPENSES
The net interest expense for 2009 amounted to
€71 million (2008: €103 million). The reduced
interest expense is explained by the lower average
Euribor rate in 2009 compared to 2008, the debt
repayment and a €3 million gain resulting from
buying back part of the outstanding debt at a discount.
This decrease was partly offset by the accelerated
amortisation of part of the capitalised transaction
costs on the borrowings (€13 million) which was a
result of the accelerated debt repayment.
The other finance result shows a loss of €41 million,
which arose mainly from foreign exchange contracts
that were put in place to cover the committed and
anticipated exposure in non-functional currencies
as TomTom hedges its GB pound sales and net
exposure related to its US dollar sales and purchases.
TomTom’s foreign exchange risk management policy
is approved by the Supervisory Board. Contracts are
put in place to cover committed and anticipated
exposures in non-functional currencies. The company
revalues all derivative contracts, as well as cash
and other assets and liabilities denominated in
currencies other than the functional currency, to
market value at the end of each period.
TAXATION
Income taxes amounted to €28 million compared to
€70 million in 2008. The effective tax rate was 22.8%
in 2009 compared to 32.8% in 2008. In absolute terms,
the tax charge decreased €42 million compared to
the previous year mainly as a result of lower profits
and income which was exempted from tax.
NET RESULT
The result for 2009 was €94 million, €49 million
lower than in 2008. This is mainly the result of the
lower gross profit and loss in financial income on
our derivative portfolio compared to the previous
year, partly compensated by cost savings in
operating expenses.
ACQUISITIONS
In December 2009 TomTom acquired ilocal. ilocal
owns a database of categorised and geo referenced
business listings in the Netherlands and Belgium
and has technologies in place to maintain the
quality and freshness of this database. This
technology will complement TomTom’s existing
in-house and sourced Points of Interest datasets
which, in turn, will enrich the quality of TomTom’s
navigation content.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow generated from operations remained
strong at €430 million compared to €463 million
in 2008. The cash generated by operations was
driven by a reported operating profit of €221 million
and a reduction of working capital, which resulted
in a cash inflow of €116 million. The working
capital decreased mainly due to strong inventory
management as inventories decreased year on
year from €145 million to €67 million and a
strengthened position towards our suppliers
which delivered €49 million of cash.