Oberthur Card Systems 2004 Full Year Results Show Strong Growth and Promising Future

Fiscal year 2004 was also characterized by strategic investments paving the path for the companys future. Oberthur Card Systems increased its geographical coverage to better serve its customers in regions promised to strong growth such as South East Asia (Thailand, Taiwan, India, China -- where it increased the capacity of its Shenzhen factory), South America (new plant in Brazil), in Europe (new personalization center in Hungary), in the Middle East (Turkey) and in Russia (partnership). During this period, Oberthur Card Systems pursued its efforts in innovation to maintain its technological leadership and match its offering with future customer demands. For instance, the company launched GIGAntIC, the very first high capacity memory USIM card (128MB) in January 2005. Acceleration of activity in the second half of the year Sales for the full year 2004 reached EUR 450.8 M, a 7% year-on-year increase before parity impact and 4.8% at current rate. Publication of the financial statements in US dollars would have revealed a 15.2% increase in sales. During this period, Oberthur Card Systems delivered 148.3 million microprocessor cards, a 16% increase compared with last year, while the average selling price declined by 5.5% at constant exchange rates. Second half sales of EUR 240 M increased sequentially by 13.9%, due to a stronger seasonality and a strong improvement of the product mix in the mobile communications sector. The dynamism in all of the companys activity segments is particularly significant in Q4 compared with Q3: +50.7% in mobile communications, +37.8% in Identity and +26.7% in payment services & solutions. With regards to its market segments, here are the highlights of fiscal year 2004: Payment: Explosion of microprocessor payment cards, especially in the UK, which triggered an increase of +39.6% in shipments and +34.6% in sales. Continued and sustained increase of banking personalization services in Europe resulting in a +18.2% growth. GSM: Significant improvement of the GSM product mix with +77% of 4Q sales made of high-end products (64K and higher) Identity: First significant markets and prestigious references in Identity such as Belgium e-passport, Australian Health card, Singapore e-passport and selection for Thai e-passports. Profitability Control With an EBIT of EUR 40.2 M in 2004 vs. EUR 36.1 M in 2003, the Group has once again improved its profitability -- 8.9% of 2004 sales. This result is even more remarkable as it takes place in a context of increased competition and at a time when the company has increased its foreign investments with returns in terms of sales expected in 2005 and beyond. The improvement in profitability is mainly due to a steady high-level gross margin (+60%). This is the result of the Groups strategy in high-end microprocessor products and the quality of the services and solutions provided to our customers. The good control of personnel costs: 28.7% of sales compared with 29.7 last year and of general expenses -- in spite of expenses triggered by the geographic expansion -- were also contributing factors. Interest paid was also significantly reduced: EUR 4.0 M (vs. EUR 5.6 M in 2003) because of the important debt reduction over the year. Actually, with a cash flow from operating activities of EUR 40 M, the company was able to both finance its growth investments of over EUR 20 M (an increase of +33% over 2003) and reduce its net debt by more than EUR 20 M. The company continued to benefit from a favorable taxation rate as the outlook on future results has allowed the recording of a differed tax asset, mainly in France. As of December 31st, 2004, the company had an equity of more than EUR 198 M with a net debt equity ratio