Revenue Nedap N.V. in 1st half-year up 20% and operating profit up by 80%
Organic growth in revenue shows robust upward trend in virtually all market groups
The revenue of the N.V. Nederlandsche Apparatenfabriek “Nedap” for the 1st half-year 2012, at € 83.7 million, was 20% up on the same period in 2011 (€ 69.6 million). Nearly all market groups contributed to this organic growth, a growth that had already reached 14% for the whole of 2011. Operating profit increased by 80% to € 8.3 million (1st half-year 2011: € 4.6 million) and the profit after tax by 78% to € 6.6 million (1st half-year 2011: € 3.7 million). The earnings per share finished at € 0.98 (1st half-year 2011:
The growth in revenue came from virtually all market groups, namely Agri, AVI, Healthcare, Library Solutions, Power Supplies, and Retail. Only the market group Security Management was somewhat flat. The robust growth in revenue was achieved despite the phasing out of the supplier activities over the past 3 years. Excluding the revenue from supplier activities, the organic growth in the 1st half-year 2012 was not 20%, but 31%. The number of employees grew in the first six months of this year by 18, primarily in the sales organisations. Per 30 June, Nedap employed 702 employees. The operating profit finished at 10% of revenue, and thus fulfilled the business objectives. The solvency position (the equity excluding undistributed profit) went up in the 1st half-year from 37.3% to 39.8%.
The market group Agri (automation of cattle farming processes that help farmers optimise their business processes and improve animal welfare) maintained the substantial revenue growth that started in 2011 over the past six months. This growth was realised in both the dairy farming and the pig-breeding sectors. Despite the slightly downward trend in milk prices worldwide, the dairy farming industry continued to invest in consolidation. The demand for identification products for the automation of milk and feeding processes increased as a result. The new generation of heat detection systems developed by this market group also made a solid contribution to the growth in revenue. These easy to install systems deliver significant savings for dairy farmers on insemination costs. In the pig-breeding sector, the pork and piglet prices worldwide have gone up over the last year. Despite the equally high increase in feed prices, this development was still an incentive for many pig farmers to upgrade or build new stalls. The demand for pig feeding stations went up primarily in Asia and Western Europe, but interest also grew within North America and South America. Furthermore, particularly in Western Europe, the demand for systems for group accommodation with feeding stations went up because of the new European regulations that will require pregnant sows to be housed in a group as of 1 January 2013. In China, the market group has continued to expand its own sales and support team to take advantage of the growth in this market and to solidify its market leadership as a supplier of pig feeding stations.
The market group AVI (products for vehicle and driver identification as well as wireless parking systems) saw its revenue rise once more in the 1st half-year. The market group thus continued to build on the combination of a complementary product portfolio for vehicle identification with an extensive international dealer network. Over the past half-year, especially the regions of North America, South America, and Western Europe showed substantial growth. The growth in turnover concerned both the conventional TRANSIT product line and the relatively new uPASS product line. Both product lines involve the use of long-distance RFID readers and tags. The revenue from city-access control systems also increased in the past half-year.
The revenue of the market group Healthcare (automation of healthcare professionals’ administration to create more time for care) also continued to grow steadily. This growth was not only generated with new care institutions opting for a Nedap solution, but increasingly from existing clients who wanted to make use of the full range of services offered by this market group. The operating territory of the market group is gradually expanding beyond extramural care to include intramural care, elderly care, and disability care. Carenzorgt.nl, a web portal where clients, care institutions, families, and home carers can exchange information, is moreover helping to meet an ever-growing demand. The PEP® suite (digital timesheet processing) also contributed to the growth in revenue of the market group.
The market group Library Solutions (RFID self-service systems for libraries) showed an increase in revenue in the 1st half-year of 2012. New markets, such as Scandinavia and America, contributed to this increase. The market group no longer concentrates on implementing integrated library projects, acting as a systems integrator combining a mix of in-house components and third-party products. It is now concentrating on the development and supply of a cutting-edge product portfolio, which allows business partners in an increasing number of countries to carry out their tailor-made projects.
The market group Power Supplies (electronic controls based on power electronics for e.g. lighting and autonomous energy systems) exceeded the expectations this 1st half-year with an excellent growth in revenue. This was the result of the considerable investment in product development, marketing, and sales over the past years. This market group now has an almost all-inclusive and robust product portfolio designed to meet the needs of specific market segments. Furthermore, the market group has also managed to further extend its partner network with new sales channels, among other in Germany for energy systems (PowerRouter) and in North America in the lighting segment. The PowerRouter is a system which makes it possible for private homes and estates to generate, store, and consume energy independently and effectively. A fortuitous development in this area is the changes that have been made in the legislation, including in Germany, as a result of which the feeding back of all self-generated energy to the electricity grid will be discouraged. The possibility of being able to manage the consumption and storage of self-generated energy using the PowerRouter will therefore become a very interesting proposition. Both the products for autonomous energy systems and for lighting systems showed an excellent increase in revenue during the 1st half-year.
Despite the very competitive market, the market group Retail (security, management and information systems for retail) saw its revenue grow further over the past half-year. The market group is reaping the rewards of its investment in product innovation and marketing, the development of an extensive partner network, and the establishment of the Global Label Center in Hong Kong. The market group Retail helps retailers to increase their return on investment in their stores with its products, amongst other things with the use of RFID technology. Major international (but also local) organisations can be supported by the market group more or less anywhere in the world. As a result, over the past half-year revenue was up among other in America, the Far East, the Middle East, and Africa.
The revenue of the Security Management market group (access control, registration, payments, fire and intrusion alarms, surveillance, locker management, and biometrics systems) was somewhat flat in the 1st
half-year of 2012. This decline can partly be explained by ending activities in relation to attendance registration systems for students. Another contributory factor was the poor investment climate in the construction and installation industry in the many regions where this market group is active. The activity level within this market group, both in terms of product development and market development, has nonetheless remained high.
Revenue over the 1st half-year 2012, at € 83.7 million, was 20% up on the same period in 2011 (€ 69.6 million). The added value (revenue plus or minus the movement in inventories minus cost of materials) went up by 19% to € 56.5 million (1st half-year 2011: € 47.6 million) As a percentage of revenue, the added value remained almost the same.
Expenditure on “Subcontracting and other external costs” was up by € 3.0 million, amongst other things due to higher production and development costs, higher costs in connection with the strengthening of the commercial activities, and the streamlining of the organisation. Expenditure on "Salaries and social security charges" was up by € 1.9 million due to the usual salary increases, the increase in the number of employees, and severance payments. The normal amortisation and depreciation, including “Impairment of intangible assets”, went up by 5% to € 4.3 million. The amount that was capitalised for non-current assets manufactured in-house stayed more or less the same. On balance, an operating profit remained of € 8.3 million, as opposed to € 4.6 million in the same period in 2011. As a percentage of revenue, the operating profit amounted to 10.0%. Over the 1st half-year 2011, this percentage was 6.6%.
The financing expenses hardly rose at all, and the increase in the need for credit was almost entirely compensated for by the lower interest costs. The share in the profit of our associate Nedap France S.A.S. (Retail-, Security Management-, and library systems) fell by almost € 0.2 million compared with the excellent year of 2011.
After deduction of corporation tax, a profit remained of € 6.6 million, as opposed to € 3.7 million for the same period in 2011. As a percentage of revenue, the profit amounted to 7.9%. Over the 1st half-year 2011, this percentage was 5.3%.
The lower tax liability for the 1st half-year 2012 of 19.5% (the nominal corporate income tax rate in the Netherlands is 25%) was amongst other things due to the application of the innovation box. The innovation box makes it possible for businesses to pay a reduced tax rate on revenue from innovations.
The positive cash flow from operating activities in the 1st half-year was € 14.9 million. € 5.2 million was spent on investing activities and € 8.2 million was paid out in dividends over 2011. Furthermore, repayments on loans were made of € 0.2 million, and € 0.1 million of own shares were sold to the Stichting Medewerkerparticipatie Nedap (Nedap Employee Participation Foundation). On balance, the liquidity position improved as a result by € 1.4 million. The credit facilities at the banks as per 30 June 2012 totalled € 45.8 million; of this, € 37.6 million had been drawn. In addition, there were € 3.1 million of cash and cash equivalents.
The inventories remained more or less at the same level as at year-end 2011 and amounted to 16.9% of revenue (year-end 2011: 18.5%). The average credit terms for trade receivables remained steady at 7.5 weeks. The solvency position (equity excluding undistributed profit divided by the total assets) went up due to the addition of the profit over 2011 to 39.8% (year-end 2011: 37.3%).
Perspectives, risks, and uncertainties
For 2012 as a whole, the executive board expects – notwithstanding unforeseen circumstances – a further growth of the revenue and of the profit, despite the phasing out of the supplier activities. The revenue for 2011 reached € 152.3 million, and the profit after tax was € 11.0 million. Excluding the phased-out supplier activities, the turnover for 2011 amounted to € 142.7 million. The predictability of revenue and profit in the short to middle term is not helped, however, by the uncertain and volatile economic conditions in a number of regions and sectors relevant for Nedap. By continuing to invest in a broad product portfolio and worldwide marketing, Nedap is trying to reduce its susceptibility to such external influences. A description of the most important risks for Nedap is included in the Annual Report for 2011.
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