Revenue 22% lower at € 55.5 million. Nedap concludes first six months of 2009 with a modest profit

Under normal economic circumstances, the diversification policy pursued by the company ensures that any reticence in one or more markets can be offset against growth in other markets. However, the current credit crisis and recession are now affecting almost all markets in which Nedap operates. The larger customer groups Agri, Power Supplies, and Specials are worst hit by the current situation.

As revenue is lagging behind strongly, management has speeded up the implementation of its plan to terminate a large portion of the production activities in Groenlo. This means that about 60 employees (48 fte) will be laid off during the course of the second six months of 2009. A social plan has been drawn up for these employees, which was approved recently, on July 3, by both the employees council and the trade unions. Besides from this social plan, Nedap has already parted with a number of employees. The total costs for this reorganization are estimated at € 5.5 million, of which € 0.6 million is affecting negatively the results of the first six months. Savings on an annual basis will amount to approximately € 2.2 million.

Changes were made in management at the start of the current financial year. Mr. W. Badenhop left the company as per May 1 this year by satisfactory mutual agreement. Subsequently, Mr. G.J.M. Ezendam was appointed company director at the shareholders' meeting last May 12.

In early 2009, Nedap Asia Ltd. and Nedap China Ltd. were established. They will reinforce and expand our current activities in the Far East.

At the end of the period under review, 657 people were employed within the Nedap Group, which is an increase of 5 employees compared to the beginning of the year. The expansion mainly involves commercial positions. During the past period, Nedap has negotiated a new CAO (= collective labour agreement) with the trade unions, which will remain in effect until March 31, 2010. In this CAO, a salary increase of 2% was agreed as per July 1, 2009.

Market developments
The market groups Healthcare (computerization of administrative work by care professionals) and AVI (Automatic Vehicle Identification) saw their revenue increase during the first six months. The Healthcare group makes its revenue mainly from computerization products for home care. Recently, it has extended its sphere of activity to include intramural care. At present, the more qualitative aspects of care are registered in care homes and (senior) service flats, providing a good opportunity to supply this market with specially adapted products. Furthermore, the group has successfully developed a new activity for the temporary employment sector, based on its own technology platform. Agreements have been set up with prominent temporary employment organizations, thus the costly processing of the paper forms used to register working hours is a thing of the past. The growth in the market group AVI was based in the first six months mainly on conceptual products, such as city access control and vehicle admission. Sales of individual products are not going as well. However, the world-wide partner network is a good safety net.

During 2007 and 2008, the Agri market group (computerization, management and information systems for the dairy cattle and pig farming sectors) was still profiting from the readiness to invest, especially in the dairy cattle sector. After the initial assumption that the recession would have less repercussion on the agricultural sector, this did not turn out to be the case. In the USA and Eastern Europe, for instance, very few loans are being extended for the construction of new cowsheds / pigsties. Furthermore, the economic decline has additional repercussions for milk prices, which are at an all-time low due to the strongly reduced demand from Asia and Eastern Europe for milk. The cattle farmer is far less willing to make investments, thus revenue made by the group is considerably lower than expected.

And in the groups Power Supplies (electronic controls based on power electronics for light, office computerization, medical scanning equipment, and autonomous energy systems, among others), and Specials (electronic controls for comfort functions in cars and homes, and telecom connecting equipment), revenue - especially in the automotive and maritime sectors - dropped considerably as a consequence of the poor economic situation. These groups still operate almost exclusively as traditional suppliers, with a relatively large dependence on their clients. Nedap has decided to quickly reduce this dependence by introducing its own product lines. In this regard, product lines for energy and light control systems, as well as for systems for the home comfort and care sectors, are at a well-advanced stage.

The other major market groups Retail Support (anti-shoplifting systems, management and information systems for combating stock shrinkage) and Security Management (systems for access control; payment; fire and burglary alarm; observation and biometrics) have seen their revenue drop by 10% during the past period, mainly due to the recession in a number of countries important to them.

Library Solutions (RFID self-service systems for libraries) performed as expected at the same level as during the first six months of 2008. The revenue from the relatively small groups Education (access control and computerization of registration of absenteeism among students) and Locker Management Systems (locks and management systems for lockers for clothing, luggage, medicines, etc.) dropped behind those of the corresponding period in 2008. The group Election Systems is operating in various countries. New election concepts and citizen consultation systems, among others, are being developed and presented. However, the group has made very little revenue during the first half of the year.

Financial
The revenue for the 1^st half of 2009 was 22% lower at € 55.5 million than that of the corresponding period in 2008 (€ 71.3 million). However, the added value (revenue minus movement in inventories and cost of materials) in percentage of revenue increased by 2% to 68% due to an improved product mix. Expressed in financial figures, the added value dropped by € 9.2 million to € 37.9 million. On balance, the remaining operating expenses, including € 0.6 million spent on reorganization costs were € 0.3 million lower than during the corresponding period in 2008. In addition, during the first six months of 2008 an extra € 2.1 million was written off in intangible assets, finally resulting in a difference of € 6.8 million in operating profit compared to 2008.

Mainly as a result of the change in value of interest protectors, net financing expenses increased by € 0.2 million. The associate Nedap France S.A.S. also suffered from the current recession, with results at over € 0.1 million lower than during the corresponding period in 2008. Due to the reduced profit, it was taxed at 1 percent less, as a consequence of the lower rate in the first tax bracket. The above resulted in a profit after taxes for the first six months of € 0.6 million, which is € 5.4 million less than during the first six months of 2008.

The positive cash flow from operating activities amounted € 4.5 million during the first six months. 4.7 million was spent on investment activities and € 12.5 million on dividend for 2008.

At the end of the first six months of 2009, the credit line available amounted to € 44.2 million; of this amount, € 32.8 million had been drawn. In addition to this, a further € 2.9 million was available in cash and cash equivalents.

Solvency (shareholders´equity excluding undistributed profit divided by total assets) increased from 42.6% at the end of 2008 to 44.3% at the end of the first six months of 2009. Reorganization costs during the second six months of the year are expected to reduce the solvency level by 4 percentage points.

Outlook, risks and uncertainties
Knowledge of the customer's business process and application of new technologies form the basis for the development of new, original and sustainable applications that give the customer a distinctive capability. This qualitative aspect of revenue, as expressed in good added value in percentage of revenue, is of central importance. This has the highest priority and serves to create the solid foundations on which Nedap is continuing to build organic revenue and results growth. Despite these difficult times, Nedap continues to invest in new products, systems, services, and the approach of the market. The total research and development expenditure this year is expected to remain at the same level as in previous years. In the short term, revenue and profit may be influenced by a certain reticence in the market due to economic developments, as we have seen in almost all the market groups in the past period under review. Based on the current market information, we do not expect this to change during the second six months of the year. We expect a healthy organic increase in revenue and profit in the long term.

We have included a summary of the most significant risks for Nedap in the annual report for 2008.

Please find enclosed the half-year report for 2009.

Download half-year report for 2009 (dutch, pdf')

 For further information:

G.J.M. Ezendam
Financial director
Tel.: 00-31-(0)544-471102

PROFILE NEDAP 

Nedap is characterized by an open, innovative and creative company culture aimed at development and entrepreneurship.

Nedap's long-term policy is aimed at creating a durable added value for clients, employees and shareholders. The company plans on achieving this by means of an organic increase in revenue and profit, whereby diversification and innovation, based on the expertise available within Nedap, play a key role.

Nedap concentrates on the development and delivery of distinctive and durable

-           solutions for computerization and management of operating processes, whereby recognition of persons, animals and goods as a rule play an important role and

-           products whereby power and control electronics play an important role.

In order to continue operating in the manner which makes the company strong, and is based on autonomous growth, the financial standards applied by Nedap consist of an operating profit of at least 10% of revenue, a 15% - 20% return on equity, and a solvency ratio of about 45%.

Nedap was founded in 1929 and has been listed on the NYSE Euronext since 1947.