Exchange rate effects resulted in a 2.2 per cent increase in revenues. On an organic basis, the increase in revenues amounted to 1.4 per cent (excluding lease effects: 3.1 per cent).
Revenues from printing systems (excluding lease effects) continue to develop positively and booked an organic increase of 6.5 per cent. Revenues from services and media were up by 1.4 per cent, thanks in part to Business Services which made a clear contribution to the growth in revenues. Following a number of tough quarters, this business group has successfully returned to growth.
Revenues from servicing contracts remained stable.
The book profit on the sale of the lease portfolio amounted in the fourth quarter to € 1.5 million (2004: € 10.1 million).
The gross margin decreased by 1.4 per cent to 39.3 per cent. This decrease was mainly attributable to lower revenues from leases (-1.1 per cent). The volume/mix effect amounted to -0.2 per cent and the hedging effect was -0.1 per cent.
Operating expenses, excluding exceptional items, decreased from 36.6 per cent to 35.1 per cent as a percentage of revenues. As a result of further cost savings this development will continue.
Océ has concluded a new collective wage agreement with the trade unions and employee representative bodies in the Netherlands. One of the agreements reached as part of this collective bargaining process is that pension benefits will be based on a "career average earnings" system. As a result, an amount of € 68.3 million will be released from the provision for pensions.
In the fourth quarter Océ announced its intention to achieve a further reduction in costs.
In Europe this will mean the discontinuation of around 500 jobs. In the United States measures have also been taken to boost profitability. In part, these will be implemented in parallel with the realisation of the synergy effects resulting from the integration of Imagistics.
To cover these measures in Europe and the US, a total provision of € 33.1 million was set aside in 2005. In 2006 a further provision will be made of around € 15 million. Océ expects that these measures to boost the profitability will generate some € 35 million in the form of synergy and cost savings in 2006.
Operating income amounted to € 68.0 million (2004: € 29.1 million). After adjustment for the release from the pension provision and non-recurring items of € 35.2 million, operating income increased to € 32.8 million (2004: € 29.1 million). Operating income from commercial activities increased from € 9.5 million in 2004 to € 27.0 million. The contribution by Imagistics in 2005 to Océ’s operating income was not material.
Interest charges increased to € 7.2 million due to the costs of financing the acquisition of Imagistics International, Inc. In the next few months the bridging loan that was used to pay for the acquisition will be converted into a long-term financing arrangement.
The tax charge amounted to 16.7 per cent. The tax charge includes the R&D tax credit of € 4.8 million. Without this tax credit, the tax charge would have amounted to 24.6 per cent.
Net income amounted to € 50.3 million (2004: € 25.4 million). Net income per ordinary share outstanding was € 0.60 (2004: € 0.29).
In Digital Document Systems (DDS), revenues in the fourth quarter increased by 10.4 per cent to € 534.3 million (2004: € 484.1 million). On an organic basis revenues were 0.7 per cent higher (excluding lease effects 2.7 per cent). Exchange rate and acquisition effects led to an increase in revenues by 2.1 per cent and 7.6 per cent respectively. Revenues from printing systems, after excluding lease effects, increased organically by 6.7 per cent.
All of the growth in sales was achieved on the basis of products that Océ launched in the past two years. In March 2006 several important new products will be launched during the Océ Open House even. These are expected to generate new impulses for sales.
Revenues from services increased organically by 0.8 per cent compared to 2004 (excluding lease effects). The development of revenues from services has stabilized due to the fact that the increase in maintenance contracts for digital machines now largely compensates for the decreased servicing work on analogue copiers. However, in view of the large number of new placements in 2005, revenues from services are expected to increase in 2006.
Outsourcing of document management activities is still an important trend in the market. It helped Business Services to achieve growth again in the fourth quarter. The operating income of DDS (before exceptional items) amounted to € 16.8 million (2004: € 10.5 million). DDS closed the 2005 financial year with a strong fourth quarter performance.
In Wide Format Printing Systems (WFPS) revenues increased by 5.5 per cent to € 230.1 million (2004: € 218.1 million). The organic increase in revenues was 2.8 per cent (excluding lease effects: 3.9 per cent). Exchange rate effects contributed 2.7 per cent to the revenues increase. Revenues from new printing systems were up by 6.0 per cent (excluding lease effects).
In the technical documents market Océ is achieving growth with black & white and color systems. Sales of color printers in the graphics market has shown a strong increase.
In 2006 Océ will be adding several new color printers to its range in response to the trend towards the increasing use of color in the wide format market. Revenues from services and media, excluding lease effects, were up by 2.8 per cent. Revenues from maintenance contracts and sales of toner and ink cartridges made a strong contribution to the growth in total income.
Operating income before exceptional items was € 16.0 million (2004: € 18.6 million). This decrease is attributable in full to lower revenues from leases. WFPS therefore performed excellently during the quarter and during the full year.
Total revenues in 2005 were 0.9 per cent higher at € 2,677.3 million (2004: € 2,652.5 million). This increase was achieved as a result of the acquisition of Imagistics International, Inc. (1.4 per cent). Exchange rate effects reduced revenues by 0.4 per cent. Excluding lease effects, revenues increased on an organic basis by 2.1 per cent.
Revenues from new printing systems increased by 10.5 per cent but revenues from services and media were 1.1 per cent lower (excluding lease effects). The gross margin was 40.0 per cent (2004: 41.6 per cent). Of the decrease in the margin, 1.4 per cent was attributable to lower lease revenues.
Operating expenses, excluding exceptional items, amounted to 37.2 per cent (2004: 37.4 per cent) as a percentage of revenues.
Operating income was € 110.1 million (2004: € 110.4 million). Excluding the book profit of € 4.7 million on the sale of the lease portfolio, operating income from commercial activities increased by 66 per cent to € 51.6 million (2004: € 31.0 million). Operating income from financial activities amounted to € 18.6 million (2004: € 48.4 million).
Net income increased by 1 per cent to € 78.8 million (2004: € 78.1 million), while the tax charge amounted to 12.7 per cent (2004: 13.2 per cent). Net income per ordinary share was € 0.92 (2004: € 0.89).