TomTom wins second contract with Volkswagen, shares jump

Reuters News
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Posted: Feb 12, 2015 2:48 AM

AMSTERDAM (Reuters) - TomTom, the Dutch navigation equipment company, has won a second big contract with Volkswagen, this time to supply traffic software for the German carmaker's European fleet, it said on Thursday.

The company also set a new sales target for 2015, saying it expects turnover of 1 billion euros ($1.13 billion), up from 950 million euros in 2014 and implying growth of 5.2 percent.

Its shares jumped 8.6 percent to 6.39 euros in early Amsterdam trading.

TomTom said the new Volkswagen deal would be to deliver real-time traffic information to its cars "across Europe," beginning with Audi and Volkswagen models.

The company did not supply financial figures, but a similar deal in January led to a reappraisal of the Dutch company's prospects by many analysts.

On Jan. 6 TomTom struck a deal with Volkswagen to supply maps for its in-dashbord navigation systems in its cars in the United States, replacing Nokia.

TomTom shares have risen 30 percent over the past year, compared with a rise of 16 percent in the benchmark AEX index of leading 25 Dutch companies.

Volkswagen sells around 350,000 cars in the United States annually, and around 3 million in Europe.

Analyst Marc Zwartsenburg of ING equity research said the latest deal was equally important. "What we said in January is 'once you're in, you're in', and this is the evidence."

He estimated TomTom's traffic software sells for only a quarter as much as its mapping software, but Volkswagen's European market is much larger and at first glance the two deals were roughly comparable in terms of importance.

He said it also raised the hope of a deal with Volkswagen for maps in cars outside the United States.

ING rates TomTom shares a buy.

TomTom reported fourth-quarter earnings that showed an adjusted net result of 9.7 million euros ($11 million), down from 13.6 million in the same period a year earlier. Sales fell 8 percent to 172 million euros.

"There are some positives and some negatives in today’s update from TomTom," said ABN Amro analyst Marc Hesselink. "But in our view all is outweighed by the revenue guidance."

Hesselink noted the company's backlog of orders for its automobile division had risen from 170 million euros at the end of the third quarter to 220 million at year-end.

"We expected an improved update of this number given the recent win of the Volkswagen contract, but it is still a nice positive," he said. ABN Amro also rates TomTom a buy.

(Reporting by Toby Sterling; Editing by Mark Potter)