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Oce Announces Second Quarter 2007 Results

Press release from the issuing company

July 3, 2007 -- Oce Earnings Highlights:

-- Organic revenue growth of 2.1%

-- Sales of printing systems (non-recurring revenues) 9.2% higher on organic basis

-- Recurring revenues excluding fax increased 0.6% on an organic basis

-- Gross margin up from 40.0% to 41.3%

-- Operating income increased by 60%

-- Excellent financial results for WFPS

-- Further improvement in DDS results expected

Comments by Rokus van Iperen, chairman of the Board of Executive Directors:

"In the second quarter our sales of printing systems were significantly higher than last year, both in DDS and in WFPS. This results from our focus on growing the business by investing in distribution and product development. We have also booked the first successes with sales of OEM products in Europe. We expect that in the second half of the year we will also have higher sales than last year. The recurring revenues were, amongst others, impacted by the anticipated decline of the fax business. The increased sales of printing systems will give a positive impulse to recurring revenues. The implementation of our Strategic Plan 2007-2010 has started well."

Total revenues in the second quarter were Euro 777.1 million and increased organically by 2.1% as compared to the second quarter of 2006 (including exchange rate effects -0.8%).

Since January both DDS and WFPS have introduced new printing systems. Also our distribution power has been strengthened. These are important steps in implementing the strategy 2007-2010. As a result Oce's non-recurring revenues in the second quarter increased organically by 9.2% (including exchange rate effects by 6.5%), the highest increase in the past nine quarters. This has increased the number of printing systems installed in the market, which improved the utilization degree of the service organization.

Recurring revenues decreased on an organic basis by 0.8% compared to the second quarter of 2006 (including exchange rate effects: -3.7%). This decrease was mainly attributable to the decline in Imagistics' legacy fax business. Excluding fax, recurring revenues increased organically by 0.6%.

The gross margin increased by 1.3 percentage points to 41.3% of revenues. This increase was realized thanks to an improved product mix - and specifically the strong product portfolio - in both Strategic Business Units.

Operating expenses remained stable at 37.6% of revenues (2006: 37.7%).

Because of the improved gross margin and the control of operating expenses Oce increased its operating income by 60% to Euro 28.9 million (2006: Euro 18.0 million).

Strategic Business Unit Digital Document Systems

In the Strategic Business Unit Digital Document Systems (DDS) the first positive results of the strategy were achieved.

Total revenues in DDS increased organically by 1.8% compared to the second quarter of 2006 and amounted to Euro 551.3 million. As expected, the fax business continued to decline organically, falling by 38% in the second quarter. The revenues of DDS, excluding fax, increased by 3.4%.

Non-recurring revenues increased organically by 9.1%. This increase was achieved through solid growth of the Oce Imagistics business, a strong start of the OEM business in Europe and increasing sales of the high volume black and white printing systems in the Oce VarioPrint 6000 series which produce up to 250 duplex prints per minute in one single pass. Thanks to the strong sales of printing systems DDS substantially strengthened its order backlog at the end of the second quarter of 2007 as compared to the end of the second quarter of 2006 and the first quarter of 2007.

In the second quarter DDS was successful with international tenders, for example for the European Commission and for SUEZ, a major publicly listed utilities group. The printing systems, including service and consumables, that Oce supplies to these customers will produce hundreds of millions of prints each year.

Several products received major industry awards. These achievements underline the stronger distribution power of DDS and the increased competitive strength of its product portfolio.

Recurring revenues, excluding the fax business, increased organically by 1.0% (including fax -0.9%).

Oce Business Services grew its revenues by more than 8%. In part this growth was achieved organically, whilst another part stemmed from business synergies with Oce Imagistics.

A higher margin was achieved as a result of an improved product mix and greater efficiency in the service organization.

The higher level of new market placements by Oce Imagistics, the OEM printing systems and the Oce VarioPrint 6000 printing systems will have a positive impact on recurring revenues.

The operating income of DDS amounted to Euro 4.2 million (2006: - Euro 3.2 million). The increase was realized as a result of an improvement in the gross margin and lower operating expenses.

The results of DDS are still not at the desired level, but the improvements that have meanwhile been achieved are fully in line with the initiated strategy.

Strategic Business Unit Wide Format Printing Systems

The Strategic Business Unit Wide Format Printing Systems (WFPS) once more realized excellent financial results.

Total revenues in WFPS grew organically by 2.7% to Euro 225.8 million. Non-recurring revenues showed organic growth of 9.3%. Technical Document Systems booked excellent sales in both black and white and color printing systems. The innovative power of Technical Document Systems received further recognition in the form of four industry awards.

Within Display Graphics Systems production of the Oce Arizona 250 GT has been ramped up further. This system, which was developed by Oce, can print images of photographic quality for indoor and outdoor use and its sales - by both Oce and its strategic partner Fujifilm - are excellent. As a result, the order backlog of Display Graphics Systems has increased. The Oce Arizona 250 GT still had a limited influence on revenues in the second quarter but this will grow over the forthcoming quarters.

Recurring revenues of WFPS decreased by 0.5% on an organic basis. Both Technical Document Systems and Display Graphics Systems increased their recurring revenues due to growing sales of inks. The decrease in the recurring revenues of WFPS was due to Imaging Supplies' stronger focus on high margin products. This related to the A4-tender business.

The operating income of WFPS amounted to Euro 24.7 million (2006: Euro 21.2 million). This operating income of 10.9% of revenues was achieved due to an organic increase in revenues and an improvement in the relative gross margin.

The developments in WFPS are fully in line with the initiated strategy.

Balance sheet and cash flow

The balance sheet total amounted to Euro 2,611 million and was in line with the end of the 2006 financial year (Euro 2,605 million). A decrease of Euro 43 million was realized as compared to the end of the second quarter of 2006 (Euro 2,654 million), mainly due to lower taxes assets and finance lease debtors.

The decrease in the balance sheet total meant that Net Capital Employed decreased by Euro 72 million to Euro 1,394 million compared to the end of the second quarter of 2006 (Euro 1,466 million). Because of the improved results and the balance sheet position the Return on Capital Employed rose to 6.3% (2006 full year: 5.6%).

Cash flow from operating activities during the first half year was Euro 19 million. The free cash flow over the first six months was - Euro 41 million (2006: - Euro 30 million). This was due in particular to lower proceeds from sales of the finance lease portfolio.

Operational excellence projects

Part of the strategic plan 2007 - 2010 are four "operational excellence" projects. Regarding the improvement in logistics processes and the improvement in the purchasing conditions for non-product-related goods and services the first savings have been already realized. On an annual basis these savings amount to Euro 8 million and Euro 12 million respectively. In addition the business case for the optimization and harmonization of business processes and of the underlying ICT (Information and Communications Technologies) has been completed. The estimated saving potential as from 2010 in the business case is Euro 45 million. The fourth project relates to the structural reduction of working capital.

Termination of NASDAQ listing

Oce has voluntarily terminated the listing of its American Depositary Receipts (ADRs) on NASDAQ. Ordinary shares in Oce will continue to be listed on the Amsterdam stock exchange (Euronext), whilst the ADRs can still be traded in the United States via the over-the-counter bulletin board. Oce will continue, as before, to organize meetings for investors and analysts as well as roadshows, including those in the United States.

Corporate Sustainability Report published

In June Oce published its third Corporate Sustainability Report. The report describes Oce's approach to sustainable business practices in 2006. This year the report was subjected to external verification for the first time. Oce makes products that are environmentally friendly thanks to their lengthy useful lifetime and Oce seeks to combine innovation and sustainability.

Outlook 2007

We expect a further improvement in the results of DDS on the basis of our increased distribution power, the increased competitive strength of our product portfolio, as well as the growth in Business Services.

WFPS is expected to maintain the high level of results on the basis the competitive strength of our product portfolio and the anticipated Display Graphics Systems growth.