TomTom 2005 Annual Report Download - page 43
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Operatingexpenses
Operatingexpensesconsistofresearchand
developmentcosts,marketingexpenditure,selling,
generalandadministrativeexpensesandstock
compensationexpenses.Operatingexpensesasa
percentageofrevenuefellto16.1%in2005from21.7%
in2004asthegrowthofthebusinessenabledusto
achievegoodeconomiesofscale.
Researchanddevelopmentcostsincludepayroll
expensesforourresearchanddevelopmentteams,third-
partysoftwarecostsandtheamortisationofresearch
anddevelopmentrelatedtangiblefixedassets.Wenow
haveresearchanddevelopmentteamsinAmsterdam,
London,Taipei,LeipzigandEdinburgh.Inaccordance
withIAS38–IntangibleAssets,wecapitaliseinternal
softwaredevelopmentcostsarisingfromthecreation
andupdateofthecompany’scoresoftwaretechnology.
Inadditionweincludethecostsofthird-party
manufacturingdesignactivitieswithinresearchand
developmentexpenditure.
Weinvested
63.6millioninadvertisingandmarketing
expenditurein2005.Thisrepresentedalmost9%of
revenueandanincreaseof
44.2millionover2004.This
investmenthelpedustoconsolidateourEuropean
marketleadershippositionandtomakegoodprogressin
buildingourmarketpositioninNorthAmerica.
Selling,generalandadministrativeexpensesinclude
personnelexpensesforoursellingandadministrative
staff,officeexpensesandothergeneralexpenses.Asa
percentageofrevenuethesecostsdecreasedfrom8.7%
ofrevenuein2004to5.3%in2005.Inabsoluteterms
thecostsincreasedto
38.0millionfrom
16.8million
asaresultofthegrowthofthecompany.Ourheadcount
(excludingtemporaryemployees)increasedto435atthe
endof2005from196attheendof2004.
Stockcompensationcharges
Thisexpenseisanoncashaccountingchargerequiredby
IFRS2–SharebasedPayments,anditrelatestothe
grantofshareoptions.Thischargeiscalculatedunderthe
requirementsoftheIFRSandrecognised
evenlyoverthe
vestingperiodoftheshareoptions.
In2005werecognisedachargeof
5.2millionofwhich
3.6millionwasrelatedtonewshareoptionsgranted
in2005.
Financialincomeandexpenses
Werecordedanetgainof
14.7millionin2005,which
wasmainlyfromgainsonforwardforeignexchange
contractstopurchaseUSdollarsinordertopayourmost
significantcontractmanufacturers.Werevalueallforward
contractstomarketvalueattheendofeachperiod
whetherornottheyhavematured.Thisgaintherefore
consistsofbothrealised(
11million)andunrealised
(
3.7million)gains.
Taxation
Theincometaxchargeonourordinaryactivitiesinallthe
jurisdictionsinwhichweoperateincreasedto
67
millionin2005from
15millionin2004.Thiswas
primarilyduetoincreasedprofits.Theeffectivetaxrate
decreasedto32%from35%in2004mainlyduetothe
lowerincometaxrateappliedinTheNetherlands.
Netprofit
Netprofitincreasedto
143millionin2005from
28
millionin2004.Thisrepresentednearly20%ofrevenue
upfrom15%in2004.