Strong Euro Hurts Thomson's Revenue


France's Thomson posted a 2.2 percent decline in core third-quarter media and entertainment services sales on Thursday, as a negative currency effect shaved 60 million euros from revenue.

Thomson has transformed itself since 2004, exiting electronic consumer businesses such as TV manufacturing.

The group's main drivers are the media and entertainment businesses, which include activities such as DVD replication, film post-production, professional broadcasting equipment and TV set-top boxes.

The company, which has said it would soon be free of its last consumer electronics activities, said on Thursday that charges related to this action will lead to a drop in the 2007 net result after discontinued operations.

It also predicted that growth at constant currency in the fourth quarter 2007 would be "slightly higher" than the 2.1 percent achieved in the third quarter.

Sales from core operations declined to 1.370 billion euros from 1.401 billion.

Analysts on expected core sales of 1.423 billion euros, according to the average forecast given in a Reuters poll of six analysts.

The group also kept a target of significant increases in group net profit in 2008 and 2009, with higher sales growth at constant currency, in line or ahead of market growth.

At constant currencies, core sales reached 1.430 billion euros, with the group's three divisions showing growth.

At constant currencies revenue rose 0.7 percent in the services division where growth in digital and electronic services was offset by a decline in physical media, that is film and DVD services.

There were few blockbusters in film and DVD but despite that DVD volumes rose 4.8 percent to 402 million units.

Systems revenue grew 3 percent at constant currency as the broadcast and networks business, which had been a sore spot in the first-half due to weak markets and delay in some products, returned to growth.

"After delays in the first-half the LDK8000 high-definition camera sold well in Q3 2007, and a number of other broadcast products lines ... performed well," the results statement said.

The technology dvision recorded growth of 11.9 percent at constant currency.

Thomson said on Tuesday that it had finalised the sale of its audio-video business outside Europe to Audiovox for just over 40 million euros and that it would shut the business in Europe, except for the Skymaster activities in Germany where discussions with potential purchasers continue.

As reported, the U.S. sale and European closure will result in one-off asset write-offs and charges of some 90 million euros. In addition operating losses and other costs from discontinued operations for the second-half of 2007 are expected to be about 45 million euros.

Thomson said that all the costs will be taken in the second half 2007 and will affect the group's net results after discontinued operations for 2007 but that the impact from 2008 will be "immaterial."