Trumbull, CT, January 14, 2008 – Océ N.V. - Revenues increased to Euro 838.4 million in the fourth quarter. On an organic basis the growth was 5.5% [including exchange rate effects +0.8%]. This is the third successive quarter of good growth in revenues. The share of color increased to 23% of revenues [2006: 17%].
Non-recurring revenues grew organically by 14.2% [including exchange rate effects by 9.9%]. As a result there was an increase in the number of printing systems installed in the market.
Recurring revenues excluding fax increased on an organic basis by 2.2% [including fax 1.1%]. Including the decline in the fax business and exchange rate effects recurring revenues decreased by 3.9%.
Excluding one-off items, the gross margin amounted to 41.1% [2006: 41.3%]. In the fourth quarter of 2007 the gross margin was depressed by a one-off extra depreciation of Euro 15.3 million on production assets due to the relocation of manufacturing to Asia and the growing share of third-party products in revenues. On the other hand there was a one-off income item of Euro 15.0 million resulting from the sale of office buildings, of which Euro 4.3 million was included in the gross margin and Euro 10.7 million was used to reduce operating expenses.
Including these one-off items which worked out at Euro 11.0 million net, gross margin amounted to 39.8% of revenues [2006: 41.3%].
Operating expenses decreased by 2.1 percentage points to 33.9% of revenues, partly as a result of the said extra income item of Euro 10.7 million. Excluding this income item, operating expenses decreased by 0.5 percentage point to 35.2% [2006: 35.7%].
The higher revenues and the lower operating expenses meant that operating income rose by 13.7% to Euro 49.8 million [2006: Euro 43.8 million]. On balance operating income was not materially effected by the extra depreciation and by the sale of buildings. In the fourth quarter, however, the operating income was influenced by a lower level of capitalized R&D costs than in the fourth quarter of 2006 [+/- Euro 3.9 million].       
Financial expenses [net] amounted to Euro 11.5 million [2006: Euro 12.9 million].
Taxation amounted to Euro 2.5 million [2006: Euro 4.2 million].
On balance, net income rose by 34.2% to Euro 35.8 million [2006: Euro 26.7 million].
Earnings per ordinary share for net income attributable to shareholderincreased to Euro 0.41 per share [2006: Euro 0.30].
DDS revenues: 4.2% organic growth
Revenues in the Strategic Business Unit Digital Document Systems [DDS] amounted to Euro 593.0 million. On an organic basis the growth was 4.2%. As had been anticipated, the decline in the fax business continued [34% decrease compared to the fourth quarter of 2006]. DDS revenues excluding fax increased organically by 5.2%.
The share of color rose to 19% of revenues [2006: 15%].
Non-recurring revenues increased by 10.6% on an organic basis. DDS realized this increase mainly thanks to growth in the office environment, good sales of the Océ VarioPrint 6000 series and considerably higher revenues from the sale of color printers.
The increased sales of new printers have strengthened the basis for the growth in recurring revenues, especially in color.
In the fourth quarter recurring revenues, excluding the fax business, increased organically by 2.6% compared to the fourth quarter of 2006 [including fax by 1.0%]. The share of the Océ VarioPrint 6000 series and the color printers in recurring revenues increased strongly in percentage terms, though its absolute size was still limited in the fourth quarter. In the forthcoming quarters this share will grow further.
Océ Business Services [OBS] achieved an organic growth in revenues of 5.9%.
Excluding one-off items, operating income amounted to Euro 23.0 million [2006: Euro 23.2 million].
Including one-off items, operating income amounted to Euro 18.5 million [2006: Euro 20.1 million].
WFPS revenues: 9.0% organic growth
Revenues in the Strategic Business Unit Wide Format Printing Systems [WFPS] increased to Euro 245.4 million. Organic growth in revenues amounted to 9.0%. The share of color increased to 33% of revenues [2006: 24%].
Non-recurring revenues rose by 22.8% on an organic basis thanks to excellent sales in the drawing office and display graphics markets.
Recurring revenues increased organically by 1.4%. The influence of the Océ Arizona 250 GT on recurring revenues was still limited in size in the fourth quarter. It will make an increased contribution in the next few quarters.
Excluding one-off items operating income amounted to Euro 27.1 million [2006: Euro 23.0 million].
Provisional results 2007 financial year
In 2007 total revenues increased by 3.4% on an organic basis [including exchange rate effects –0.4%]. Excluding fax the increase amounted to 4.4%. Non-recurring revenues increased by 10.6% and recurring revenues by 0.4%. Excluding fax, the increase in recurring revenues amounted to 1.7%.
The gross margin was 40.8% [2006: 40.8%]. Excluding one-off items, the gross margin increased to 41.2% [2006: 40.8%].
Operating expenses as a percentage of revenues amounted to 36.9% [2006: 37.5%]. Excluding one-off items relative operating expenses decreased to 37.2% [2006: 37.5%].
Until the end of the financial year 2007 part of the Océ’s Group logistics expenses were reported under operating expenses. As of December 1, 2007 this part of the logistics expenses will be reported under gross margin.
Operating income increased by 18.5% to Euro 121.2 million [2006: Euro 102.2 million]. Operating income of DDS increased by 30.5% to Euro 25.2 million [2006: Euro 19.2 million]. Operating income of WFPS increased by 15.7% to Euro 96.0 million [2006: Euro 83.0 million].
Net income climbed by 38.1% to Euro 78.9 million [2006: Euro 57.1 million].
Earnings per ordinary share for net income attributable to shareholders increased by 39.3% to Euro 0.88 [2006: Euro 0.63].
Balance sheet and cash flow
The balance sheet total at the end of the 2007 financial year decreased to Euro 2,491 million [2006: Euro 2,606 million]. This was chiefly due to a reduction in working capital and exchange rate effects. Net Capital Employed amounted to Euro 1,145 million at the end of 2007 [2006: Euro 1,340 million].
Free cash flow in the fourth quarter was Euro 208 million. This excellent cash flow level mainly resulted from the increase in net income, a reduction in working capital and one-off proceeds of Euro 39 million from the sale of office buildings. For the year as a whole free cash flow increased to Euro 191 million [2006: Euro 119 million].
Strategy
Implementation of our strategic actions is on track. In 2008 Océ will again be taking further major steps in the three core areas of the strategy: distribution power, competitive products and optimization of business processes.
Digital Document Systems
DDS will strengthen its distribution through further growth in Océ Imagistics and the faster roll-out of its office activities in Europe. DDS will also strengthen its direct sales organization and will, in several important geographical markets, make a start in 2008 on the distribution of the unique Océ VarioPrint 6000 series via Konica Minolta.
The competitive strength of the DDS product portfolio continues to be based on a balanced mix of the company’s own products and OEM products. In 2007 DDS expanded its product range by adding a number of new, high-speed color and black-and-white printing systems. Océ is further strengthening its product range by expanding the OEM partnership with Konica Minolta, as a result of which Océ will start to sell the full Konica Minolta range world-wide. In addition Océ and Konica Minolta will cooperate on product development for high volume cutsheet printers. Thanks to our competitive product portfolio we are strengthening our market position and continuing to drive our growth in the office market and the graphic arts sector.
Océ Business Services
With revenues of Euro 424 million in 2007, Océ Business Services [OBS] is a major player in the market for document outsourcing and forms a integral part of Océ’s strategy. Against this background Océ has converted OBS into a separate Strategic Business Unit with effect from the 2008 financial year so that it can serve this market with even greater focus and energy.
OBS will continue to concentrate on the shift toward high value document-related services. This will amongst others be done by, developing together with partners, new document related services concepts at the announced Document Services Valley.
Wide Format Printing Systems
WFPS will enhance its distribution power by strengthening the direct sales organization and by starting to distribute the successful Océ TCS color systems via Fuji Xerox in Asia with effect from 2008. Continuation of the strong growth in display graphics will also be realized via the successful Fujifilm Sericol partnership.
In 2008 WFPS will expand its portfolio by adding printing systems that are based on the company’s new own innovative color technology. The portfolio will also be further strengthened by new in-house products, based on existing technologies, and by products sourced from third parties.
Improvement of business processes
Océ is improving its business processes via a number of centrally coordinated projects. In 2007 cost savings of Euro 38 million were achieved compared to 2006. These projects will also be continued in 2008 and are aimed at realizing a cost saving of Euro 50 million compared to 2007. The mentioned cost savings are exclusive volume changes and inflation.
Financial objectives
The company’s financial objectives are: an average organic growth in revenues of at least 5% per year, maintaining the relative gross margin, a Return on Capital Employed [RoCE] of at least 13% in 2010 and healthy balance sheet ratios.
In 2007 the growth in revenues, excluding fax, amounted to 4.4% The growth during the first half year amounted to 2.5% and in the second half year to 6.2%. The relative gross margin remained stable, whilst the RoCE increased to 7.3% [2006: 5.6%]. Lastly, the net debt/EBITDA ratio improved to 1.4 [2006: 2.1] at the end of 2007.
This means that we are on track to realize our financial objectives.
Proposed dividend for 2007: Euro 0.64 per ordinary share [2006: Euro 0.58]
Océ proposes to shareholders that the dividend be increased to Euro 0.64 per ordinary share. This increase is in line with the dividend policy that was approved by shareholders at the Annual General Meeting in April 2006 and reflects our confidence in the realization of the strategic plan. If this proposal is accepted, the final dividend per ordinary share for 2007 will amount to Euro 0.49 in cash. The interim dividend for 2007 amounted to Euro 0.15 per ordinary share.
April 23, 2008: General Meeting of Shareholders
The Annual General Meeting of Shareholders will be held on April 23, 2008 in Venlo. The agenda for the meeting will be published on March 26, 2008.
The annual report will be available on-line on February 1, 2008 on our website www.investor.oce.com
Outlook
Implementation of the strategic plan and realization of the financial objectives are on track. We are strengthening our distribution power, also thanks to the partnerships that we have announced with Konica Minolta and Fuji Xerox. In addition we will add new competitive own products and printers sourced from partners to our portfolio. These factors, in combination with tight cost control, are strengthening Océ’s market position. We feel it is too early to issue a prediction for 2008.