UPDATE 2-TomTom profit returns but investors focus on weaker H2 margins

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Recasts throughout, adds share move in paragraph 2, analyst comments in pagraph 4, 6-7

- Dutch digital mapping specialist TomTom TOM2.AS said on Wednesday it expected weaker margins in the second half of the year, sending its shares down 10% despite returning to operating profit in the second quarter.

The company, whose customers include Microsoft MSFT.O, Uber UBER.N and Volkswagen VOWG.DE, posted a first-half operating margin of 8% but reaffirmed full-year guidance of around 3%, implying a sharp slowdown in profitability in the second half.

Earnings before interest and taxes (EBIT) turned positive at €8.5 million, beating a consensus of €8 million as cost cuts boosted profitability.

Revenue fell 8% in the second quarter to €134.6 million ($153.8 million), compared with €135 million expected by analysts in a company-provided consensus.

The first-half performance implies second-half margins will be close to break-even, ING analyst Marc Hesselink told Reuters.

He said lower capitalisation was expected to weigh modestly on margins, partially reversing the first-half overperformance.

TomTom's free cash flow swung to an outflow of €8 million in the second quarter from an inflow of €14 million a year earlier.

Hesselink said the deterioration in free cash flow was largely driven by working capital movements and did not alter his longer-term view.

TomTom confirmed its full-year revenue outlook and sees a return to growth in 2027 after a year of transition between old and new contracts.

($1 = 0.8754 euros)