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Oce Announces 1st Half Results, Revenue Increases 4%, Ikon Channel Sluggish

Friday, July 06, 2001

Press release from the issuing company

* Revenues euro 1,584 million (+ 4%) * Operating income euro 114 million (-/- 14%) * Net income euro 53.2 million (-/- 26%) * Slowdown in growth of machine sales * Higher revenues from software and service First six months 2001 For the first six months of 2001 Oce's revenues amounted to euro 1,584 million, 4% higher than in 2000. Autonomous growth in revenues was 1%. Wide Format Printing Systems achieved revenues of euro 441 million, 5% higher compared to 2000. Autonomous growth amounted to 2%. Revenues in Document Printing Systems rose by 1% to euro 753 million. Autonomous revenues went down by 1%. Production Printing Systems realised revenues of euro 390 million. This is an increase of 7% compared to 2000, of which 2% was autononomous. The gross margin was practically the same as in the prior year but as a percentage of revenues it decreased from 42.5% to 40.9%. For the first six months the increase in operating expenses was 3% and the decrease in operating income was 14% as compared to the same period of 2000. The relatively slight increase in expenses reflects the results of restructuring measures taken in previous years which form a solid basis for renewed revenues growth. Due to the increase in financial and tax charges, net income was 26% lower than in 2000 and amounted to euro 53.2 million. Cash flow (net income plus depreciation) was euro 146.7 million (2000: euro 169.7 million). Based on the average number of ordinary shares outstanding of euro 0.50 nominal each, net income amounted to euro 0.60 (2000: euro 0.84) and cash flow was euro 1.69 (2000: euro 2.01). Second quarter 2001 Oce booked revenues of euro 809 million in the 2nd quarter of 2001, virtually the same as in 2000. The autonomous decrease in revenues amounted to 1%. Operating income for the quarter declined by 22% to euro 55.5 million and net income by 37% to euro 25.1 million. The principal factor that affected the revenues development was the declining level of investments in Oce's main sales markets; the result is that sales cycles last longer. That slowed down the growth in sales, particularly of the range of machines. Revenues from service and software increased. However, the company's relative competitive position remained unaffected in all markets. Market shipments of the Oce DPS400 are proceeding according to schedule and the Oce CPS700 colour printer will be shipped to customers, as planned, from July onwards. The range of services and software has also been expanded and updated. The downturn in economic growth and the related slowdown in demand were sharper than expected during the second quarter. In all business units revenues from machines were lower than in 2000. This, together with the start-up and launch costs for the new products, brought pressure to bear on manufacturing results and therefore on the gross margin. None the less, compared to the first quarter of 2001, the gross margin percentage went up from 40.7% to 41.0% (2000: 42.5%). Operating expenses, including marketing launch costs, increased by 2% compared to the second quarter of 2000. Due to the developments described above, operating income was 22% lower than in 2000. Interest charges were substantially higher than last year; this is mainly due to the financing in US$ and the related derivatives contracts. A higher tax charge (31% as against 28.4% in the second quarter of 2000) is attributable to the growing proportion of income that stems from countries with a relatively high rate of taxation. Interest charges and tax charges meant that during the quarter net income from ordinary activities was 37% lower than in the corresponding period of 2000. Cash flow (net income plus depreciation) amounted to euro 72.3 million during the second quarter (2000: euro 89.4 million). Based on the average number of ordinary shares outstanding of euro 0.50 nominal each, net income amounted to euro 0.28 (2000: euro 0.47) and cash flow was euro 0.83 (2000: euro 1.05). Developments in Oce's markets during the second quarter Developments in the three markets in which Oce operates reveal the same picture, i.e. one in which revenues are lagging behind our expectations. Compared to last year, this was reflected during the second quarter in a slight increase in revenues in the wide format market and a stabilisation of revenues in production printing. For the office market, however, the outcome was a decline in Oce's revenues as compared to the previous year. In Wide Format Printing Systems revenues increased by 3% to euro 231 million. Exchange rates had a positive effect of 2%. The autonomous growth was largely attributable to increased earnings from service and software and to sales of the Oce TDS600. Following this year's introduction of new machines (the Oce TDS400/800) together with the successful Oce TDS600 and the accompanying new software, Oce's competitive position in this market has been substantially strengthened. In Display Graphics (wide format colour) Oce's position further improved during the quarter, with revenues growing by 17%. In Document Printing Systems (the office market) revenues fell by 2% to euro 380 million. The autonomous decrease in revenues amounted to 3% and was due to a static office market both in the United States and Europe; in particular sales via Ikon (in the USA) declined considerably. However, Oce was able to maintain its position in the sectors of this market that are of relevance for the company. The Oce DPS400, whose shipment to market has meanwhile started and which will become available in bigger numbers in the second half year, and the Oce CPS700 for the colour market will enable Oce to strengthen its position considerably. Revenues from Facility Services are still increasing at a fast pace (+29%). In Production Printing Systems (high volume printing) revenues increased by 3% to euro 198 million; 2% of this increase stemmed from exchange rate effects and 1% from acquisitions. The growth in revenues took place mainly in the United States. The Production Printing Systems market is also showing a noticeable shift towards software and services. Oce's position as market leader in web printing (very high volume printers in a multi-machine environment) was recently reinforced through innovative solutions for use in such areas as electronic book and newspaper production. Despite a recent, big order in the United States, the previously reported general slowdown in machine orders does not yet seem to have come to an end. Balance sheet The balance sheet total increased during the first half of 2001 by euro 90 million. Of this, around euro 25 million is the result of exchange rate effects, euro 98 million is due to a reclassification of tax exposures, whilst debtors decreased by euro 34 million. Group equity amounted to euro 1,087 million at the end of May (2000 year end: euro 1,031 million); this is equivalent to 33% of the balance sheet total. Prospects The new products introduced in the first six months of 2001 will start contributing to the result in the second half of this year. However, it will not be possible to make up for the shortfall in the results of the first two quarters. Consequently the level of income for the 2001 financial year will not equal the results of 2000. In view of the continued uncertainty about further economic developments, the Board of Executive Directors is not making an income forecast for the 2001 financial year.




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