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Consumer business & financial review


3.4.1

strategic priorities

• Grow our Sports wearable brand in Europe
• Exploit niche opportunities in Drive taking advantage of our device platforms and capabilities

3.4.2 Consumer business review

In 2016, a significant amount of new products were launched that establish TomTom as a credible multi-product sports and fitness consumer electronics brand.

SPORTS

In 2016, we completely refreshed our Sports product ranges and introduced a new portfolio of fitness and sports products. We also reached over one million users on the MySports platform.

In the first quarter, we launched TomTom Golfer 2, our second generation GPS sports watch designed to help golfers improve their game by using automatic shot detection and give detailed post-round analysis. A golfer can see golf course data such as distance to hazards and green, and keep track of the score, distance and time of their round.

In the second half of 2016, we refreshed our Running and Fitness product range with the next generation sports watches that now include route exploration. They came with new, slimmer, sleeker straps in a range of colours to wear every day. Our fitness product offering is extended with the TomTom Touch, our first fitness tracker that combines body composition analysis with steps, sleep and all day heart-rate tracking right from the wrist. With the push of a button, it measures the percentage of body fat and muscle mass in your body. We also introduced the new GPS Outdoor Watch, the Adventurer, designed for outdoor activities with dedicated sports modes for hiking, trail running, skiing and snowboarding and is equipped with a built-in heart-rate monitor, barometer, compass and automatic lift detection for snow sports.

We also introduced our new sub-brand, TomTom Sports, and our first brand campaign 'Get Going' was launched in the fourth quarter across all media with the objective to drive top-of-mind awareness across key markets.

DRIVE

In the first quarter, we launched the TomTom RIDER 410, our new generation PNDs for motorcyclists. The RIDER 410 'Great Rides Edition' came with a range of new features, including Lifetime World Maps, Lifetime TomTom Traffic, route planning with TomTom MyDrive, hands-free calling and round trip planning. We also introduced the GO Mobile app with on-board maps, TomTom Traffic, routing and speed camera warnings in countries where available. We introduced this through a freemium model allowing the customer to use the app for a certain monthly distance and sign up for a full subscription via an in-app purchase.

In the second quarter, we launched three new TomTom PNDs within the TomTom START range, and also two new TomTom PNDs in the VIA range, with Bluetooth® hands-free calling options and the option for smart phone connected traffic service. We introduced TomTom Traffic Checker on the MyDrive App, targeting 'commuters'. Additionally, we introduced TomTom Jam Ahead Warnings on the Speed Cameras App, alerting drivers to rapidly slowing, or stationary, traffic on the highway ahead. We also announced the availability of truck trip planning, enabling professional drivers to save on driving time by conveniently planning a route anytime, and anywhere, with TomTom MyDrive.

In September, we launched the new TomTom VIO, the world's first smartphone connected navigation device designed for scooters. We also launched a new GO PND range with Siri voice recognition software and Google Voice Search™ service integration, Bluetooth hands-free calling and smart phone notifications as well as built-in Wi-Fi to enable on-device content management that does not need wires nor desktop computers. We also started shipping the TomTom TRUCKER 600 in North America designed for professional truckers that want a companion device to help reduce worry from the job. Truck drivers can get vehicle-relevant navigation that takes into account truck weight, type, size and cargo to find the perfect route. Finally we introduced the Curfer product which is a performance tracker for cars and consists of an OBD (on-board diagnostics) adapter and a smartphone app connected seamlessly to give instant feedback on both driving technique and the car's performance.

3.4.3 Consumer financial review

Consumer revenue for the year was €563 million compared with €624 million in 2015. The decrease was driven by lower PND revenue, partially offset by a strong growth in Sports revenue.

As we continued to build a multi-product Sports business and expand our product and service offerings in this category, Sports revenue increased by 53% from €69 million last year to €106 million this year. We shipped over one million sports devices in 2016 (2015: 600,000). This growth was the result of the launch of our new range GPS sports watches and the TomTom Touch activity tracker.

Consumer PND markets were weak during 2016. The European PND market experienced a faster rate of unit decline compared with the first half of the year. This market in units was down by 19% for the year as a whole. We managed to keep our leading market position in Europe.

The Automotive hardware revenue declined by 16% year on year to €61 million due to discontinuation of a legacy platform, that went end of life in the second half of 2016.

Consumer segment EBITDA for the year was €5.9 million (2015: €14 million) and the EBIT  was -€3.9 million (2015: €2.6 million). This decline in profitability reflects the overall decline in PND revenue, partially offset by the growth in Sports. At the end of 2016, we rationalised the Consumer organisation to align our cost base with the revenue development.

Table_1 Key Figures Consumer

(€ in millions, unless stated otherwise) 2016 2015 y.o.y. change1
Consumer products 502.0 551.2 -9%
Automotive hardware 61.2 72.4 -15%
Total Revenue 563.2 623.6 -10%
EBITDA2 5.9 14.1 -58%
EBITDA margin (%) 1% 2%  
Operating result (EBIT)2 -3.9 2.6  
EBIT margin (%) -1% 0%  
KEY PND MARKET DATA      
Market size Europe (# units sold in millions)3 5.0 6.8 -19%
TomTom market share (%) 53% 52%  
 
1. Change percentages and totals calculated before rounding.
2. The EBIT and EBITDA measure and reconciliation to our income statement is further explained in note 4 of the consolidated financial statements.
3. Europe refers to the following 12 countries: AT, BE, CH, CZ, DE, ES, FR, GB, IT, NL, PL and SE.

Business outlook

In 2017, we will focus on expanding and enhancing our range of products, apps and services in the Sports category and establish ourselves as a credible sports and fitness consumer electronics brand. We will bring new features to the MySports app, GPS watches and activity trackers to improve overall user experience that contributes to a healthier life.

We aim to grow Drive specialist product sales in the niche markets whilst extracting the value from the PND category, which we believe will remain a meaningful category on its own for the foreseeable future.