CHICAGO--July 5, 2006-- Oce N.V. Second quarter highlights:
* Revenues in both business units are developing well.
* Operating income rose by 22.4%; after exceptional items operating income was up by 66%.
* Net income increased by 6.4% to Euro 12.2 million.
* Integration of Oce Imagistics proceeding as planned.
Comments by CEO Rokus van Iperen:
"The favorable development of revenues in the second quarter illustrates the success of our strategy, which is based on expanding our distribution power and introducing innovative printing systems.
"Wide Format Printing Systems again achieved excellent results. Both revenues and operating income developed favorably.
"Digital Document Systems showed healthy revenues growth in all areas. The integration of Oce Imagistics is proceeding as planned. We will achieve the synergy benefits planned for 2006. The integration will have a positive impact on the results for the second six months of this financial year."
Revenues grew by 22.4% in the second quarter of 2006
Total revenues in the second quarter of 2006 increased by 22.4% to Euro 783.6 million. After adjustment for exchange rate effects, the increase amounted to 20.5%.
Non-recurring revenues increased by 24.3%, of which 1.6% was due to exchange rate effects. This increase was largely achieved thanks to the contribution of Oce Imagistics where good progress has been booked with the integration. Sales in the other parts of Oce also increased further.
Recurring revenues increased by 21.6%. The exchange rate effect amounted to 2.1%. Both Business Services and the income from maintenance contracts contributed to this increase.
More aggressive pricing
The gross margin decreased from 41.8% to 41.3%.
This decrease was due to more aggressive pricing in the sales of new printing systems. This brings an increase in the number of machines sold and leads to a bigger machine population. As a result, revenues from service, toners and inks will increase further.
Operating expenses as a percentage of total revenues decreased by 0.5% to 39.0%, also as a consequence of the restructuring program.
As a result, first six months 2006 total cost savings amounted to about Euro 10 million.
Operating income after exceptional items up by 66%
Operating income before depreciation and amortization (EBITDA) was Euro 66.4 million (2005: Euro 49.5 million).
Operating income (EBIT) amounted to Euro 18.0 million, an increase of 22.4% compared to 2005.
The operating income comprises a number of exceptional items that hamper a good comparison with the results for the second quarter of 2005.
The normalized operating income amounted to Euro 24.5 million, an increase of 66.0% compared to the second quarter of 2005 (Euro 14.7 million).
Development of revenues, excluding acquisition and exchange rate effects
To gain a better idea of how revenues developed, excluding the acquisition of Imagistics and exchange rate effects, the indicative figures on page 8 of this press release can be used.
Non-recurring revenues increased by 5.0%. Recurring revenues went up by 1.5%.
This resulted in an indicative increase in revenues of 2.5%.
Interest instruments are reducing financial expense
Financial expense (net) amounted to Euro 6.5 million. This was reduced because of a gain of Euro 4.6 million that was realized on the interest instruments that had been taken out to protect Oce against increases in interest rates. In addition, interest charges were reduced due to the fact that the financing preference shares and a minority holding are no longer classed as debt but have again been classified as total equity following the adaptation of the relevant conditions.
Taxation contributed Euro 0.6 million to the result. This contribution arose because a substantial proportion of income was achieved in countries with a relatively low tax charge. In addition, offsettable losses were largely capitalized.
Net income increased by 6.4% to Euro 12.2 million. Operating income before depreciation and amortization amounted to Euro 0.79 per ordinary share (2005: Euro 0.59).
Net income per ordinary share outstanding amounted to Euro 0.14 (2005: Euro 0.13).
Revenues of Digital Document Systems increase in all areas
Revenues of the Strategic Business Unit Digital Document Systems (DDS) increased by 29.1% to Euro 557.7 million. Of this increase, 1.6% was the result of exchange rate effects.
Non-recurring revenues increased by 31.4%. This increase includes exchange rate effects of 1.1%.
Sales of printing systems in the United States grew strongly thanks to Oce Imagistics. In Europe, too, sales were higher than last year, both in cutsheet and in continuous feed printing systems.
Recurring revenues grew by 28.2% (26.3% excluding exchange rate effects). Revenues from Business Services were up by 3.5% compared to 2005. Operating income of DDS was - Euro 3.2 million. The normalized operating income of DDS amounted to Euro 2.5 million. After adjustment for the amortization of intangible assets (EBITA) the operating income was Euro 9.7 million (2005: Euro 2.2 million).
The measures taken in DDS, which entailed considerable restructuring costs in the first half of the year, will bring an improvement in the results of this Business Unit in the second six months.
Excellent results again booked by Wide Format Printing Systems
In the Strategic Business Unit Wide Format Printing Systems (WFPS) total revenues grew by 8.4% to Euro 225.9 million (5.9% excluding exchange rate effects).
Non-recurring revenues increased by 11.6%, of which 2.7% stemmed from exchange rates.
The increase in sales of printing systems was achieved both in the technical document market and in the graphics market.
Color printers are showing the strongest growth, but also demand for black-and-white printers in the engineering market developed favorably.
Recurring revenues, i.e. the income from maintenance contracts and sales of toner, ink and media increased by 7.0% (4.5% excluding exchange rate effects).
Operating income of WFPS amounted to Euro 21.2 million (2005: Euro 13.8 million), an increase of 53.8%. The normalized operating income amounted to Euro 22.0 million.
Revenues for the first six months of 2006 grew by 21.7% to Euro 1.5 billion
Total revenues in the first six months of 2006 increased by 21.7%, of which 3.0% resulted from exchange rate effects.
Non-recurring revenues increased by 20.3%, or by 17.6% if exchange rate effects are excluded.
Recurring revenues increased by 22.3%, including 3.2% in the form of a positive exchange rate effect.
The gross margin went up by 0.3% from 41.8% to 42.1%.
Operating expense as a percentage of revenues decreased by 0.2% to 39.4%.
Operating income amounted to Euro 41.7 million (2005: Euro 28.7 million), an increase of 45.2%.
Net income was Euro 24.1 million (2005: Euro 19.8 million), an increase of 21.8%.
EBITDA amounted to Euro 142.0 million, a 45.1% increase compared to 2005.
Net income per ordinary share amounted to Euro 0.28 (2005: Euro 0.22).
Integration of Imagistics proceeding as planned
The sales activities of the Corporate Printing Business Group in the United States have been fully integrated within Oce Imagistics.
In this way the synergy benefits between the two businesses are being optimally utilized.
The organization is also preparing the roll-out of the Oce VarioPrint 6250 in the American market.
The savings on personnel costs and accommodation costs are progressing well. The savings that are expected for 2006 as a result of these measures will be realized.
Oce North America and Oce Imagistics will in due course start to use one single IT system. This will allow working methods to be further harmonized and enable further cost savings to be achieved.
The expectation is that no one-off impairment charge will arise with regard to the capitalized IT costs.
Balance sheet and cash flow
During the second quarter the conditions applicable to the financing preference shares were modified, which means that these shares are classed as part of total equity under IFRS.
As a result, shareholders' equity increased by Euro 56.7 million.
The balance sheet total amounted to Euro 2,650 million, a decrease of Euro 191 million compared to the balance sheet at the end of 2005. This shorter balance sheet was mainly attributable to a decrease in accounts receivable (Euro 62 million), the reduction of Euro 95 million in cash and cash equivalents and the sale of the lease portfolio (Euro 16 million).
The solvency ratio (total equity/total assets) amounted to 27%.
The cash flow from operating activities in the first six months was Euro 24 million.
In the second quarter Euro 28 million was spent on investments in intangible assets. These investments principally related to long-term investments in patent rights.
The free cash flow in the second quarter was Euro 33 million. Over the first 6 months this amounted to Euro 30 million negative (2005: Euro 17 million negative).
The free cash flow for 2006 is expected to be positive.
Corporate Sustainability Report published
In June Oce published its second Corporate Sustainability Report. This report describes how Oce applied sustainable business practices in 2005.
Oce manufactures products that are environmentally friendly because of their long useful lifetime and the re-use of components. The company seeks to measure the progress of improvements in the area of sustainability each year via clearly quantifiable indicators.
Prospects for 2006
The positive development of revenues is expected to continue in the second half of the year, as sales of printing systems as well as revenues from services will keep on developing well.
Operating income of the second six months of the year will be influenced by higher R&D costs and by amortization of intangible assets. On the other hand, the savings resulting from the restructuring measures in Europe and the United States, and also the synergies generated by the integration of Oce Imagistics, will make a stronger contribution to the result.
Concrete prediction of the result for the full 2006 financial year will not be given yet.
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