First Quarter 2006 Revenues Safe Harbor Statement
Certain statements in this presentation, including any discussion of management expectations for future periods, constitute "forward-looking statements" within the meaning of the "safe harbor" of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management's current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements due to changes in global economic and business conditions as well as conditions specific to Thomson’s business, and regulatory factors. More detailed information on the potential factors that could affect the financial results of Thomson is contained in Thomson's filings with the U.S. Securities and Exchange Commission. Agenda
Introduction
1Q06 Divisional Performance
Business Operations: Delivering Key Operational Challenges
Conclusion Introduction
1Q06 Divisional Performance
Business Operations: Delivering Key Operational Challenges
Conclusion Highlights
9Core revenues grew 5% year-on-year at current rates, +1% at constant rates
9Revenue evolution by business in line with expected trends and FY expectations – no change in full year objectives
9Intensive work on process transformation / cost-reduction programs, with initial actions taken in Q1
Page 5 Introduction
1Q06 Divisional Performance
Business Operations: Delivering Key Operational Challenges
Conclusion Divisional Performance
in €m, at cst Revenue Comments currency growth
DVD units lower - as expected Services (2.9)% Film volumes increased Content Services and Network Services grew organically
Systems & Strong contribution from expanded Telecoms and Broadcast & Networks businesses +3.4% Equipment Roll-out of featured satellite & cable boxes begun in 1Q06
Technology +8.1% Further growth from MPEG2
Currency movements had a positive impact on core revenues of €56m Perimeter effects from acquisitions added €134m to core revenues Technical aspects Corporate revenues were €6m vs €11m last year Non-core continuing revenues were €37m vs €€87m lest year
Page 7 Services - Business Review (1/2) 9 Key Service indicators 9 DVD units down 4% to 299m units 9 VHS units at 7.8m in the quarter vs 19.2m in 1Q05 9 Film footage grew 13% to 1.2 billion feet
9 Services provided in the quarter 9 DVD Services: Major titles in the Quarter: The Chronicles Of Narnia (BVHE), King Kong (Universal) and Wallace & Gromit in The Curse of the Were-Rabbit (Dreamworks) 9 Film Services: Major theatrical titles for the Quarter: in North America: Brokeback Mountain (Focus Features – Universal) V for Vendetta (WB), Hoodwinked (Weinstein), plus Ice Age 2 (Fox) and Munich (Dreamworks) in Europe only 9 DI & VFX Post-production: Increasing volumes in Interactive Gaming and International Versioning. 9 ~1300 digital screens equipped to date with SkyArc System
Page 8 Services - Business Review (2/2) 9 Key Services drivers 9 Weaker DVD release slate than in 1Q05 9 More robust film slate benefits Film Services and Content Services 9 Continued investment in retail media networks in US 9 New customers in broadcast play-out services, notably for HD channels
9 Key actions to promote future performance 9 Initial cost reduction actions launched 9 Distribution and G&A rationalisation across DVD Services 9 Remaining VHS facilities 9 Integration within Network Services 9 In-house capabilities for network roll-outs benefiting PRN and Screenvision 9 Investment in HD mastering capabilities 9 Visual Effects in China planned 9 Launch of media asset management projects
Page 9 Systems & Equipment - Business Review (1/2)
9 Key S&E indicators 9 Strong order backlog / book-to-bill ratio in Broadcast & Networks (“Grass Valley”) 9 2.6 million satellite/terrestrial decoders shipped in the quarter (vs 3.4 million in 1Q05)
9 Key drivers of S&E Performance in the quarter 9 Strong set-top box market in Europe for both satellite and cable with satisfactory new product introductions 9 Product mix for satellite STB starting to improve in North America at the end of the quarter 9 Strong pick up of enterprise market across the division (e.g. small softswitches for corporates) 9 Telecoms 9 Market share gains in featured dual play 9 Strong UK and French markets 9 Grass Valley 9 Organic growth and first time contribution from TBM and Canopus 9 Increased contribution from service revenues
Page 10 Systems & Equipment - Business Review (2/2)
9 Key actions to promote future performance
9 APAC (TataSky, PVRs with Astro, Austar and StarHub) and LATAM (higher volumes with NetBrazil)
9 3 HD STBs launched in Q1 9 HD receiver box for US market 9 HD MPEG4 for French market – a market first
9 Enhanced customisation of platforms in Telco products
9 IP TV and Mobile TV 9 Customers range from France Telecom, Telekom Austria to Scandinavian and North American telecom companies 9 In Mobile TV, we are involved in more than 15 trials worldwide
9 Grass Valley product successes 9 Digital News Production offering 9 HD-MPEG4 encoders 9 Products for mobiles video services 9 NAB showcase for new products
Page 11 Technology - Business Review
9 Key Thomson indicators 9 902 Licensing contracts outstanding at end-March 9 Revenues from licensing programs – around 82% digital in the quarter
9 Key drivers of Technology performance in the quarter 9 Growth continued in MPEG-2 9 Solid performance in Tuners as digital TV market expands
9 Key actions to promote future performance 9 Further progress in LCD program, both in licensing and in patent portfolio 9 First trials of watermarking technology 9 Inauguration of Burbank advanced media lab
Page 12 Balance sheet and cashflow
9 Debt profile 9 US$450m raised at 3, 5, 7 & 10 year maturities 9 Refinances existing short-term debt
9 AV/Accessories sale 9 Process on track – into phase 2 9 Expected timetable for H1 announcement maintained
Page 13 Agenda
Introduction
1Q06 Divisional Performance
Business Operations: Delivering Key Operational Challenges
Conclusion Key operational challenges 2006 / 2007
9 Drive operational leverage and integration synergies in booster businesses
9 Facilitate in key businesses adaptation to new business models (e.g. DVD Services)
9 Improve overall R&D effectiveness including time to market
9 Improve cash flow and reduce cost-to-serve through improved supply chain
Process Transformation Initiative is the main vehicle for change
Page 15 2005 first PTI rollouts
Change over time cut Productivity Increase 5 programs generated over by 55% Manufacturing CAPEX reduction €7.5m in gains Daily throughput increased by 50%
Better Resource 29 programs generated over Time to market R&D Innovation Utilization €1.6m in gains Improvement of 8-12 weeks vs. schedule
DVD Services raw Inventories & Inventory reduction 25 programs generated over material inventory SC improvement €45.4m in gains Logistics reduced by -32.5% vs. 2004
Support 4 diagnostic programs Costs optimization Functions launched
72 programs involving more than 650 Thomson employees
Page 16 2006 main assessments and actions
• Pilots expanded to all sites Manufacturing • Focus on operating metrics in Film and DVD services
• Deploy at all major R&D facilities R&D • Design-To-Cost key programs introduced Innovation • Specific focus on critical new product introductions Immediate actions implemented • Grass Valley Supply Chain reengineering program Inventories & • Telco Supply Chain enhancement program Logistics • Worldwide freight assessment
• Projects launched in DVD and Film & Content Services Support • Analysis underway in central overheads, Telecoms / Functions Communications and IT
Page 17 Integration progress – main focus areas
9 Network Services 9 Sourcing of hardware for PRN 9 Installation and maintenance teams 9 G&A costs 9 Joint sales and marketing initiatives between PRN and Screenvision 9 Capex optimisation
9 Telecoms 9 Formation of a single advanced development unit based around Inventel 9 Merger of telephony and telecoms activities in Europe
9 Broadcast & Networks (Grass Valley) 9 Component sourcing 9 Real Estate optimisation 9 Joint sales and marketing initiatives around telecoms and IPTV 9 Public company costs for Canopus
Page 18 Agenda
Introduction
1Q06 Divisional Performance
Business Operations: Delivering Key Operational Challenges
Conclusion Concluding comments
9 Q1 revenues reflect expected trends
9 Boosters continue to show good organic revenue growth
9 Mature businesses declined against a difficult y-o-y comparison
9 Cost and integration actions are launched and underway
9 Restructuring will be largely taken in Q1/H1 for maximised FY benefit
9 Further plans and actions are being worked on
9 No changes to full year objectives
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