Growth in revenue continues
Nedap closes first half-year with profit of € 3 million (2009: € 0.6 million).

Groenlo, 29 July 2010

The revenue of the N.V. Nederlandsche Apparatenfabriek "Nedap" at € 61.1 million was 10% up on the same period in 2009 (€ 55.5 million). Over the first half-year, a profit after taxes of € 3.0 million was achieved (first half-year 2009: € 0.6 million). The earnings per share finished at € 0.44 (first half-year 2009: € 0.09).

After the sharp decline in the first half-year of 2009, revenue made a reasonable recovery in the second half-year of 2009 and in the first half-year of 2010. The contribution to this recovery was widespread within the organisation. The market groups Healthcare, Library Solutions, Security Management, and Specials showed a robust increase compared to the same period in 2009. The Retail Support and Power Supplies market groups also performed better. The Agri and AVI groups, which were particularly hit by the recession in the second half of 2009, saw their respective markets recover cautiously.

The results on the first half-year were positively influenced by the measures taken in 2009 to adjust the organisation in line with changing circumstances. One of those measures was the transfer of a major part of the production activities from the main branch in Groenlo to Inventi B.V. in Neede (a 100% subsidiary), to enable more efficient production in series for the various market groups.

By continuing to invest in new products and strengthening the commercial organisation, even in difficult economic times, the number of employees grew during the first half-year, and by no less than 29 to 630 (year-end 2009: 601). A negotiated agreement was concluded with the trade unions at the end of June 2010 concerning a new collective labour agreement (CAO) that will last until 31 March 2011.

This will include a salary increase of 1% and a one-off bonus of 0.25% on 1 July 2010.

Nedap has signed an advance tax ruling with the tax department about the application of the Innovation tax bracket. The Innovation box allows companies to have revenue from innovation taxed at a lower tax rate. Over the period 1 January 2007 (introduction date of the Innovation box) to 30 June 2010, the reduction in the tax liability for Nedap was € 0.7 million, which reduction was processed in the first half-year 2010 .   

Market Developments
The market group Healthcare (computerisation of time registration for the healthcare sector) once more experienced strong growth over last half-year. More and more healthcare institutions are now using its services: an integrated, user-friendly software package for planning, registration, and information that reduces the administrative burden for healthcare institutions and their staff, and enables the delivery of more quality care. The PEP package (computerised time registration for employment agencies) also contributed to the growth of the group. The Library Solutions market group (RFID self-service check-in/checkout systems for libraries) has a strong presence in Belgium, Germany, France, and the Netherlands, and is working on expansion of its sales territories to other countries in Europe and the Middle East. Our systems reduce the administrative burden in libraries as well, thus creating more time for service delivery.

The Security Management market group (systems for access control, payment, fire and intruder alarms, observation and biometrics) continued to perform well, despite the difficult economic situation in its market areas. Permanent production development and targeted marketing led to a further strengthening of its market share. The revenues of the market groups Power Supplies (switch-mode power supplies for lighting, office automation, medical scanning equipment, and solar energy) and Specials (electronic control systems for home comfort and car comfort, as well as telecom switching equipment) showed strong growth. The increase in demand was, however, primarily associated with ‘last-time buys'. This is because Nedap has decided to end its activities in the traditional suppliers market, and to concentrate in these groups entirely on the development and marketing of Nedap's own (finished) products. Two market areas are central to this: lighting and ‘smart grids' (smart decentral electricity grids). The Luxon lamp driver line and the PowerRouter will contribute to revenue in the second-half year 2010.

The market group Retail Support (anti-shoplifting systems, control and information systems to combat stock losses) saw its revenue go up. A number of prestigious orders have been won with major retailers during the past half-year. The intensive marketing in Italy, the Middle East, and Asia has also produced results. The market groups Agri (ICT systems for the dairy and pig farming industry) and AVI (Automatic Vehicle Identification) mainly felt the effects of the recession in the second half of 2009, but saw their respective markets recover somewhat in recent months. Investment in production and marketing had also continued within these groups during the last periods. Revenue of the relatively small market groups Education (access control and computerised attendance registration of students) and Locker Management Systems (electronic locks and management systems for lockers for clothing, luggage, medicines, etc.) stayed more or less at the same level.

Financial
Revenue over the first half-year at € 61.1 million was 10% up on the same period in 2009 (€ 55.5 million). The added value (revenue plus or minus movements in inventories minus cost of materials) went up by € 3.2 million to € 41.2 million. As a percentage of revenue the added value dropped by 1% to 67%.These changes were primarily due to an adjustment in the product mix.

Expenditure on "Subcontracting and other external costs" was up by € 1.8 million due to the higher production levels, the relocation of the production activities to Inventi B.V., and the strengthening of the commercial activities.

Expenditure on "Salaries and social security charges" was down on balance by € 0.7 million primarily due to the effects of the reorganisation carried out in 2009.

In the period under review, an additional € 0.4 million was written off on three capitalised development projects due to changed market conditions ("Impairment losses on intangible assets"). Furthermore, € 0.2 million more was invested in new projects ("Non-current assets manufactured in-house").

The above items of expenditure contributed to an increase in operating profit of € 1.9 million. This operating profit, combined with the € 0.1 million lower financing expenses, the € 0.1 million increase in "Share of profit of associate" (Nedap France S.A.S.), and the € 0.2 million reduction in taxes, resulted in a profit after taxes that was € 2.3 million up on the same period in 2009.

The lower tax liability was due to the application of the Innovation box, which resulted in a tax benefit on previous years of € 0.7 million.

The positive cash flow from operating activities in the first half-year was € 0.4 million. € 4.4 million was spent on investing activities and € 1.0 million on the dividend for 2009. Furthermore, repayments on loans were made of € 0.1 million, and € 0.3 of own shares were repurchased for the Stichting Medewerkerparticipatie Nedap (Nedap Employee Participation Foundation). On balance the borrowing requirement consequently rose to € 5.4 million. The credit facilities at the banks as per 30 June 2010 totalled € 43.6 million; of this,
€ 36.5 million had been drawn. In addition, there were € 4.1 million of cash and cash equivalents.

Solvency (equity excluding undistributed profit divided by the total assets) fell to 39.9% (year-end 2009: 44.2%). In particular, higher stock levels and "Trade and other receivables" contributed to a higher balance sheet total. The higher stock levels were due amongst other things to a shortage of components on the world market, so that more had to be purchased in order to safeguard the continuity of production. Furthermore, another factor was the conscious decision to maintain higher stock levels, both temporarily and permanently, at several locations around the world to increase the rapidity and efficiency of supplies. Finally, there was the seasonal influence of extra purchasing due to factories closing down for the holidays.

The increase in "Trade and other receivables" was primarily associated with the higher revenue.

The average credit term for trade receivables remained 8 weeks.   

Perspectives, risks, and uncertainties
Knowledge of the customer's business process and application of new technologies form the basis for new, original, and sustainable applications that allow the customer to distinguish themselves from the competition. This qualitative aspect of the revenue, which is demonstrated by the  high percentage of added value in revenue terms, 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. Nedap will continue to invest, even in these difficult times in new products, systems, services, and marketing. The total expenditure on research and development is expected to stay at the same level this year as for previous years.

The current recovery is still somewhat hesitant. Based on the latest market information, barring unforeseen circumstances, we also expect further growth of revenue and results for the second half-year. There is still, however, considerable uncertainty about the sustainability of the economic recovery across the various markets, plus the gloomy prospect of imminent government cutbacks. In the long term, we expect to see healthy growth in both revenue and profit.

A description of the most important risks for Nedap is included in the report for 2009.

For more information:

G.J.M. Ezendam
Financial Director
Tel.: 0544-471102
http://www.nedap.com

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.