ADB Group Reports Solid Financial Results for 2009

Revenue for the full year 2009 reached US$ 381.0 million, increasing 5.6% compared to 2008, in line with expectations as communicated in the latest business update in October 2009. The gross profit amounted to US$ 139.0 million or 36.5% of the revenue, also in line with the Group’s expectations for the year and following the anticipated sales mix development.

The Group continued increasing its operational efficiency throughout the year. The operating expenses-to-sales ratio decreased from 33.2% in 2008 to 28.2% in 2009.

Adjusted Earnings Before Interest and Tax grew to a record US$ 27.7 million, or 7.3% of the revenue. This was ahead of the Group expectations. Adjusted Net Profit After Tax reached a record US$ 23.1 million in 2009 or 6.1% of the revenue, compared to US$ 14.9 million in 2008 (continuing operations). This yielded US$ 4.18 adjusted Earnings Per Share, or US$ 4.09 on diluted basis.

The cash generation was strong throughout the 2009, yielding US$ 47 million (after R&D investments). After using a total of US$ 22.3 million for the share buyback programmes, the Group closed the year with a gross cash position (including available-for-sale investments) of US$ 100.3 million (compared to US$ 71.0 million in 2008), net cash position of US$ 69.3 million (compared to US$ 43.8 million in 2008), and a net current asset position of US$ 42.1 million (compared to US$ 38.0 million in 2008). Consequently, the Group enters the year 2010 with a strong balance sheet. Andrew Rybicki, Chairman and CEO of ADB Group, commented: “I’m very pleased with the Group performance during 2009. When we started the year, the macroeconomic outlook was very uncertain. While all the clouds have not entirely vanished, it is very satisfying to note that our staff has gone the extra mile performing in line with management expectations. Cost control was excellent, and development of new products and business even better. I believe this is a remarkable result, and want to sincerely congratulate our entire staff. Increasing operating results and profitability, while simultaneously returning money and creating value for the shareholders, is a rare combination”.

During 2009, the Group conducted a goodwill review of the assets acquired from Vidiom Systems Inc. in early 2006. Based on this, the Group decided to take non-cash, non- recurring impairment charges of US$ 8.2 million, mainly attributable to the lower value of the goodwill, due to a delay in the general tru2way market development in the US, compared to the initial expectations at the time of acquisition. The Group notes that its prospects in the US market remain intact. For the sake of comparability, the Group presents adjusted figures without the impact of the impairment charges.

The reported Earnings Before Interest and Tax, including the effect of the impairment charges, was US$ 19.5 million, or 5.1% of the revenue. The Net Profit After Tax accounted for US$ 15.3 million, or 4.0% of the revenue.

Outlook for 2010

The Group gives the following guidance for the full year 2010: Revenue is expected to grow over 10% in 2010; The Group expects to continue being profitable at an acceptable level

Business overview

High-definition TV (HDTV) products accounted for 79% of product sales revenue, compared to 72% in 2008. Personal Video Recorders (both high and standard definition) represented 58% of the product sales, compared to 39% in 2008. The sales of hybrid products represented 75% of the product sales, and thus confirmed the Group leadership in this area. As a total, the high-end products constituted 85% of the Group overall product sales. The Group notes that these developments confirm the trend towards high-end consumer digital TV equipment.

The year was strong for cable business, which constituted 39% of the Group revenue, the same level than last year. The main driver was the expansion of the existing customer businesses, which in particular benefited from the prevailing consumer trend to focus more on in-house entertainment. Terrestrial business represented 12% of Group revenue, compared 18% in 2008. This business was helped from the increased demand from the Italian market towards the latter part of the year. The satellite business increased to 29% of the revenue, growing from 13% in 2008. IPTV contributed 19% of the Group revenue, compared to 27% in 2008, reflecting overall difficult year in the IPTV environment.

During the year 2009, the Group won the following new customers: TFN (Taiwan), Altibox (Norway), GGA Maur (Switzerland, three Spanish retailers (including Ikusi) and one Eastern European operator. Notably, amongst these, two represented entry to new markets; Taiwan cable, and Spanish retail. The Group was also among the first to introduce a new retail product in Italy for satellite broadcast, which recorded great customer success. Today the Group also announced that Telekom Austria has started deploying advanced connected home features with ADB’s set-top boxes and network software. These include DivX video support and home networking features. The service is the first of its kind in Europe.

The Group received during the year numerous awards and recognitions in the fields of technology development, innovation, consumer experience and corporate development. Most notable from these are awards from IMS Research for the “TV Innovator of the Year 2009”and “Best STB Technology”; EEBC Telecom & Broadcasting “The most innovative product/ solution” award, and the second place in the Swiss Equity Award competition.

During the full year of 2009, Europe represented 84%,, Middle East and Africa 9%, Americas 6% and Asia Pacific 1% of the total Group revenue. Both Western and Eastern European customers grew strongly, Eastern Europe representing 28% of the Group’s total revenue compared to 20% in 2008.

The Group’s efforts in developing advanced software-based features are meeting good market demand. In October, one of the Group’s customers started deploying its latest generation HD User Interface, called Carbo. On top of providing fast response time, Carbo also embeds advanced features such as YouTube™ access capability, for an enhanced multimedia experience. In November, due to its software prowess, the Group was able to demonstrated full interoperability of its set-back box with the two most deployed systems in the US cable industry. The Group’s set-top box software products are now delivered to more and more customers: to date, no less than six customers or markets benefit from a complete set of such products, from middleware to user interface, including home networking.

In 2009, the Group has smoothly expanded and diversified its supplier base of both manufacturing and component suppliers. It has also ramped up two hardware design ODMs, allowing it to increase its design capabilities while maintaining its fixed cost base. This also provides the Group with more cost-efficient design capabilities. All this was achieved in parallel with increased efforts on quality, which the Group sees as a strong differentiator in the industry.

Looking forward, the Group sees a continued shift towards software-based value-adding services on the set-top platforms, driven by both user experience improvements and multimedia convergence. The Group sees this trend as a confirmation of its vision, and providing multiple opportunities going forward.

The Group continued to align its resources in order to achieve further efficiencies in both product development and customer service. The resources of the Group’s affiliate Osmosys have been re-distributed to support other business activities. The Group views this as a tool for serving its customer base in an integrated way, in line with its strategy. After the reorganization, the Software and Services segment falls below the threshold for reporting segments, according to IFRS. Therefore, going forward, the Group will report on one segment only: Digital TV Products and Services.

In early 2010, Mr. Krzysztof Bilinski, Vice President and General Manager for Satellite and Terrestrial Business Unit, Advanced Digital Broadcast SA, has been appointed to the Executive Committee of ADB Group. He has been with ADB Group since 1997, holding various senior management positions and will continue being responsible for one of the Group’s largest business units.

Share buyback

The Group launched a share buyback program on 7 September 2009 on the second trading line with the aim of reducing the share capital by the amount of shares so repurchased. As per the time of this release, the Group has bought back 525.710 shares under the program. Currently the Group is in possession of 1,111,063 of its own shares.

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