Organic growth in revenue exhibited by virtually all market groups
Nedap achieves growth in revenue of 14% and growth in profit of 25% in 2011
The revenue of the N.V. Nederlandsche Apparatenfabriek "Nedap" for the year 2011, at € 152.3 million, were 14% up on 2010 (€ 133.6 million). Revenue from in-house brand products grew by no less than 20% (2010: 17%). Nearly all market groups contributed to this organic growth. The profit after taxes was up by 25% from € 8.8 in 2010 to € 11.0 million in 2011. As a percentage, the profit amounted to 7.2% of revenue in 2011 (2010: 6.6%). The earnings per share finished at € 1.64 compared to € 1.30 in 2010. Of the profit, 75% will be distributed as dividends. The dividend per share will therefore be € 1.23 (2010: € 0.98).
(€ x million) | 2011 | 2010 |
Revenue | 152.3 | 133.6 |
Total revenue growth in % | 14% | 16% |
Revenue growth in-house products in % | 20% | 17% |
Profit after tax | 11.0 | 8.0 |
Profit after tax in % of revenue | 7,2% | 6,6% |
Earnings per share | €1,64 | €1,30 |
Dividend per share | €1,23 | €0,98 |
Distribution percentage | 75% | 75% |
The growth in revenue came from virtually all market
groups, namely Agri, AVI, Healthcare, Power Supplies,
Retail, and Security Management. As expected, only the
revenue from the Library Solutions group remained flat. The
growth in revenue is even more robust if the phasing out of
the traditional supplier activities of the Specials market
group, which was set in motion in 2009, is taken into
account. A few years ago these supplier activities, amongst
others to the telecom and automotive sectors, were still
good for approximately 20% of the total revenue. During
2011, these activities had been reduced to less than 6% of
revenue, and for 2012 this will go down to almost zero. The
revenue from services (subscriptions and maintenance
contracts) rose further in the year under review to € 15.4
million (2010: € 12.8 million). This was 10.1% of total
revenue (2010: 9.6%).
The transfer of series production to our subsidiary Inventi
B.V. in Neede and the continued investment in the
development of new products, in the improvement of the
marketing material, and the strengthening of the sales
organisation - processes that were intensified in 2009 -
are still in full swing and involve relatively high
expenditure. The persistent shortage of components on the
world market disrupted the production and logistical
processes and consequently led to additional costs.
Additional expenditure was also incurred during 2011 for
the introduction of the new Nedap branding breed. This
additional expenditure meant the goal of achieving an
operating profit of at least 10% of revenue has not yet
been realised. The operating profit finished at 9.1% of
revenue (2010: 8.0%).
The number of permanent employees, following the sizeable
expansion in 2010 (51 new employees), rose further during
the year to a total of 684 (32 new employees, primarily in
marketing, sales, and product development
positions).
In 2011, there was a sharp rise in investment in production
resources, development projects, inventories, and
accommodation. Together with the increase in revenue, this
led to a decline in the balance sheet total, so that
consequently the solvency position (equity excluding
undistributed profit expressed as a percentage of the
balance sheet total) fell from 39.5% at year-end 2010 to
37.3% at the end of the year under review*. The goal of the
company for the medium-term remains a solvency position,
excluding undistributed profit, of around 45%.
Market Developments
Within the market group Agri (IT systems for the dairy
farming industry that help dairy farmers to optimise their
operational processes and to improve animal welfare), the
continuous development of new, innovative products combined
with a strong increase in market visibility resulted in an
excellent growth in revenue in 2011. The willingness to
invest within the cattle farming industry in 2011 varied
considerably from one region to the other, and from one
sector to the other. Thanks to rising milk prices, the
willingness to invest of dairy farmers increased worldwide,
despite the fact animal feed costs went up as well. The
market group was able to expand its position within the pig
farming industry over the last year. The market group
performed especially well in China. In Western Europe, an
increasing number of pig farmers are switching to group
housing with pig feeding stations, the speciality of the
market group, despite the poor economic climate.
After a sluggish start to the year, the market group AVI
(products for vehicle and driver identification and
wireless parking systems) was able to end the year under
review on a positive note with an increase in revenue. This
growth was thanks in large part to the new uPASS UHF-reader
and SENSIT product lines, in combination with an
intensification of the marketing activities. The largest
increases in revenue were achieved in North America and
South America.
The market group Healthcare (computerisation of time
registration for the healthcare sector, which frees up more
time for care) was once more able to maintain good momentum
in growth and set a new revenue record in 2011. Today, no
less than 50,000 care professionals in the Netherlands make
daily use of Nedap applications. The operating
territory of the market group has now been expanded beyond
extramural care to include intramural care, elderly care,
and disabled care.
The Pep® suite (computerised time registration
for employment agencies) also contributed to the
growth in revenue in 2011. A growing number of employment
agencies, employment agency staff, and host organisations -
especially in the Netherlands and Germany - are now making
use of Pep, which amongst other things has made filling in
paper timesheets a thing of the past.
The market group Library Solutions (RFID self-service check-in/check-out systems for libraries) successfully broadened its strategic focus in 2011. The market group no longer concentrates solely 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 tailor-made projects. Under the slogan "Librix - powered by Nedap", the new product portfolio has given the market group a clearly recognisable face in the international market. The combination of unique products and powerful marketing material has proved successful in the market, and has led to a rapid expansion of our international network. Unfortunately, the good growth in revenue for in-house Nedap products did not entirely compensate for the decline in revenue from projects, and consequently the revenue of the market group in the year under review was down on that for 2010.
The market group Power Supplies (switch-mode power supplies for lighting and renewable energy systems) was able once more to achieve excellent growth in revenue during 2011. The investment in product development and marketing resulted in a well-rounded, robust product portfolio designed to meet the needs of specific market segments. In the year under review, especially automatic switching devices for UV water purification and QL induction lighting showed excellent growth. The revenue for the PowerRouter, which makes it possible for private homes and estates to create and manage an independent and effective energy network, is also growing steadily.
In 2011, Nedap Retail (anti-shoplifting, control, and information systems to combat stock losses) showed good growth in revenue once more. The reinforcement of the partner network and the intensified sales strategy resulted in a higher revenue in Europe. The political instability in the Middle East led to a strong decline in revenue in this region, while on the other hand, after a sharp decline in 2009 and 2010, sales in Russia showed an upward trend once more. The investment in the creation of a widespread sales network in Asia, led from our office in Shanghai, has already resulted in a strong increase in revenue in that region during 2011. In addition to our European clients, who distribute Nedap products from their outlets in this region, local retailers have now also discovered the advantages offered by our systems. From the Nedap branch in Hong Kong, Nedap now offers a wide range of labels and brands that can easily compete with the global competition both in terms of performance and price.
The Security Management market group (systems for access control, registration, payment, fire and intruder alarms, observation, locker management, and biometrics) showed strong growth in its revenue once more in 2011. We stand out from the competition with our continuous product innovation and product expansion. An increasing number of major multinational clients are appreciating the unique features of the AEOS® security management platform. In the year under review, we further reinforced our position as the leading developer and manufacturer of security systems in Europe.
Financial
Revenue went up in 2011 by 14% to € 152.3 million (2010: € 133.6 million). The added value (revenue minus cost of materials plus movement in inventories) ended at € 102.1 million compared to € 90.3 million in 2010. As a percentage of revenue, the added value fell limitedly from 67.6% to 67.0%. This was due, amongst other things, to the composition of the revenue, the pressure on prices in some sectors, and more expensive components as a result of shortages on the world market.
Expenditure on "Subcontracting and other external costs" was up by € 5.2 million compared to 2010. This increase was primarily due to the higher production, but also because of the higher expenditure on product development, marketing, the new branding, and the streamlining of production and logistical processes.
In the year under review, the number of employees went up by 32 to 684 at the end of the year. On average, there were 41 more employees than in 2010. The increase in the number of employees, the increases under the collective labour agreement, and the higher variable remuneration resulted in an increase of expenditure on salaries and social security charges of € 3.5 million.
The normal amortisation and depreciation in the year under review was up on 2010 by € 0.6 million, and the "Impairment of intangible assets" were € 0.4 million down on 2010. In total, in 2011 € 0.5 million more in non-current assets manufactured in-house was capitalised than in 2010. This mainly concerned development projects.
The operating profit for 2011 ended at € 13.9 million, 9.1%
of revenue. The operating profit for 2010 was
€ 10.6 million, which amounted to 8.0% of revenue. This
percentage increase was almost entirely attributable to the
increase in revenue.
The net financing expenses were up by € 0.1 million as a result of the higher borrowing requirement. The share of profit of the associate was € 0.1 million higher compared to 2010, primarily due to the increase in its revenue.
The tax liability of the Nedap Group (excluding the associate) during the year under review amounted to 21%, partly due to the tax benefits under the innovation incentive scheme. The nominal corporation tax rate in the Netherlands is 25%. In 2010, the tax liability was only 17%. This included a one-off tax gain of € 0.7 million from previous years. The innovation incentive scheme allows companies to have revenue from innovation, via a lower tax threshold, taxed at a lower rate. In the year under review, the agreement with the tax department was extended until 31 December 2015.
The above figures resulted in a profit for the year under review of € 11.0 million (2010: € 8.8 million). This was 7.2% (2010: 6.6%) of revenue, and an increase of 25% compared to the previous year.
In 2011, considerable investment was made in both
non-current and current assets. The total investment in
property, plant, and equipment, including amongst other
things a new SMD production line and modifications to the
accommodation at various locations, was € 9.4 million. The
total amortisation and depreciation was
€ 6.9 million. The total investment in intangible assets,
primarily development costs, was € 3.1 million, € 1.9
million higher than the amortisation and depreciation. The
increase in inventory levels was amongst other things due
to the decision to maintain higher inventory levels of
finished products at several locations around the world to
increase the rapidity and efficiency of supplies. Temporary
factors, such as the shortage of components, also
encouraged the maintenance of higher inventory levels.
Furthermore, the higher revenue resulted in an increased
investment in trade receivables. The average credit period
for trade receivables, measured in weeks, went up slightly
from 7.5 in 2010 to 7.7 in 2011.
The total investment in non-current assets, operating capital, and the dividend paid over 2010 could not be financed entirely from the cash flow in 2011. At the year end, an additional € 6.7 million in credit facilities had been drawn. The credit facilities at year-end 2011 amounted to € 46.0 million, of which € 39.3 million was utilised. Cash and cash equivalents amounted to € 3.3 million. In the year under review, the term of the standby roll-over facility, of € 14.0 million, was extended to 1 February 2013.
Outlook
Knowledge of customers´ business processes and the application of new technologies form the basis for the development of new, original, and sustainable applications that offer customers a unique selling point. This qualitative aspect of the revenue, expressed by the high percentage of added value in revenue terms, is a key factor. It has the highest priority and ensures a solid foundation on which Nedap is continuing to build organic growth in revenue and results.
Over the past few years, we have persistently worked on capturing and expanding positions in markets with an attractive growth potential. With our cutting-edge product portfolio and high-impact sales and marketing, we expect a solid upward trend in revenue and profit in the long term.
For 2012, we expect - notwithstanding unforeseen circumstances - further growth in revenue from Nedap products. In light of the uncertain economic conditions, it is not yet clear whether this growth will be able to fully compensate for the loss of almost € 10 million in revenue from the phasing out of the supplier activities of the Specials market group.
The annual report for 2011 will appear in the first half of March, and the Annual General Meeting of Shareholders will be held on Tuesday, 17 April 2012, in the Netherlands Maritime Museum, Kattenburgerplein 1, 1018 KK Amsterdam.
*Including undistributed profit, the solvency position at the end of the year under review was 46.0% (2010: 47.2%).
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