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ICT REALISES 38% RISE IN NET PROFIT

03/10/2006

Key developments in 2005

• Turnover up 6.4% at EUR 69.1 million in 2005, due to a increase in turnover of 15% at ICT Solutions and stable turnover at ICT Embedded.
• Net profit up 38% at EUR 7.2 million as a result of a higher capacity utilisation level and continued cost containment
• Dividend proposal of EUR 0.64 per ordinary share
• ICT expects a further increase in turnover and net profit for 2006.

Bram Schot, CEO of ICT Groep explains:

“2005 was a satisfactory year for ICT Groep. However, despite the positive signals in various markets, there was as yet no solid recovery and many uncertainties remain in the market. It seems the general picture is now slowly becoming more positive.

In the second half of the year, ICT has made progress in the realisation of its ambition to further boost its market share by making specific acquisitions. For instance, ICT Groep acquired stakes in the Dutch Rialtosoft and German XCC AG.
Attracting the right staff is key to ICT realising organic growth. In Germany, recruitment lagged our ambitions. Last year, we began recruiting staff in India and the first software engineers arrived in Germany in 2006. Together with the now completed acquisition of XCC AG in Karlsruhe, this is an important move towards realising a critical mass of ICT professionals in Germany.”

Explanatory notes to the results

In 2005, turnover rose by 6.4% to € 69.1 million, from € 65.0 million in 2004, due to a 15% increase in turnover at ICT Solutions and stable turnover at ICT Embedded. Unlike in previous years, tariffs showed a slight increase. Higher capacity utilisation levels and continued cost containment contributed to an increase in the operating result of 44.9% to € 9.7 million, from € 6.7 million in 2004. Net profit rose 37.9% to € 7.2 million, from € 5.3 million the previous year. The tax burden rose slightly to 30.8% in 2005, from 30.1% in 2004.

Shareholders’ equity rose to € 39.1 million, primarily due to the higher profit in 2005. In line with our dividend policy, ICT will propose to its shareholders the payment of a dividend of € 0.64 per share, an increase of 18.5% from € 0.54 in 2004.

The cash flow from operations was € 10.8 million. ICT Groep used € 0.3 million for investment activities and € 4.5 million for financing activities, which is largely related to the dividend payment. The above resulted in a positive net cash flow of € 6.0 million.

Personnel

Personnel costs, at € 38.5 million, were virtually unchanged from 2004. The rise in wages as a result of the regular wage update was neu tralised by the slightly lower average staff number in 2005. The average number of employees in FTEs in 2005 was 728, down 4.6% from 763 in 2004.
Staff turnover in 2005, at 9.9%, was slightly than the 11% seen in 2004.

In view of the disappointing pace at which ICT succeeded in recruiting staff for its German operation, ICT went to India in the autumn of 2005 to recruit software engineers. The first Indian professionals arrived in Germany in 2006. We expect around 25 professionals from India to be employed in the German operation in the coming months.

Developments in 2005

With a view to the clear presentation and positioning of ICT Groep in the market, we decided wherever possible to harmonise the naming of the markets on which both divisions focus. This change will be implemented as from 2006, to which this press release is already adopted.

ICT Embedded

Turnover in 2005 was € 36.0 million, compared with € 36.1 million in 2004. Partly due to the transfer of several professionals from ICT Embedded to ICT Solutions, the number of staff in this division declined to 436 as per 31 December 2005, from 475 at year-end 2004.

In 2005, price pressure remained in the market, despite the fact that the market showed a slight continued recovery.  In 2005, through a further focus on product-market combinations (PMCs), ICT Embedded boosted or maintained its market position in a number of market segments, for instance by attracting new clients. In addition, the client base in a number of market segments was broadened strongly, which was a key priority for 2005. In this context, ICT strives for a healthy mix of secondment and outsourcing. This broadening will continue in the current year. Also technological choices has been made, based on market trends. Each choice has been translated into PMCs. By making specific investments in PMCs, ICT can increase its added value and offer its clients solutions to successfully respond to market trends. 

Traffic & Automotive (formerly Automotive)
The growth which began in late 2004, continued in 2005, resulting in solid growth with both existing and new clients. The Automotive industry drastically reduced the number of suppliers. ICT was able to benefit from this development on the basis of its track record and services portfolio. As well as continuing the existing preferred supplierships, ICT also attracted new clients. However, R&D budgets remained under pressure in 2005. In response, ICT sought cooperation with partners with lower cost sites, which resulted in a higher market share.
The infotainment domain showed the largest growth, but the other domains also contributed to the growth.

Communications & Multimedia

Telecom (formerly Mobile Communications)
While the second half of 2004 showed a growth spurt, turnover in this division declined in 2005 due to deteriorated market conditions for a number of ICT’s important clients in this segment. For instance, the activities of ICT’s largest client in this segment were transferred to a third party by its parent company.  However, ICT remains strongly positioned in this market given the current size of the division and the expertise available. ICT responds to the market development, firstly by increasing the efficiency of its in-house developments and, secondly, by seeking cooperation with partners with lower cost sites.  

Home Entertainment
Contrary to expectations and despite the challenging market conditions, turnover in this division remained stable in 2005. This was partly due to the very good client contacts ICT has developed in this segment over the years. In a follow-up to earlier steps in this direction, we also worked to create alternative business models for this segment in which ICT revenues are partly dependent on the success of the products of its clients. This development will continue in 2006.

Healthcare (formerly Medical)
In 2 005, this division showed a decline in turnover due to a number of long-running projects which were completed in 2005 were not followed up immediately.  
In this changing market, ICT will focus increasingly on the optimisation of information flows and the integration of automation systems in the care sector. In addition, the demand for DICOM expertise, aimed at connecting systems, is also expected to continue. ICT will continue to invest in this technology to meet that demand.

Manufacturing (formerly Semicon)
In 2005, the demand for software capacity in this segment increased. ICT was able to benefit from this increase because of its large market share and preferred supplierships. We also attracted a number of new clients in this market.

ICT Solutions

ICT Solutions realised turnover of € 33.1 million in 2005, up 14.7% from € 28.9 million in 2004. Partly due to the fact that a number of professionals moved from ICT Embedded to ICT Solutions, the number of employees in this division increased to 307 as per 31 December 2005, from 288 at year-end 2004.

In 2005, ICT Solutions increased cooperation with other suppliers and services providers in the market to arrive at integrated total solutions. These solutions are increasingly developed on the basis of standard packages complemented with tailor-made work.  
In addition, in 2005 we also conducted research into the market and technological trends which determine the requirements of ICT’s clients. The results have been translated into product-market combinations (PMCs). In early 2005, we also introduced our policy to focus more on large clients in order to increase the efficiency of our sales organisation. This has resulted in new, potentially large, clients and an increase in the relative share of large clients in turnover.

Communications & Multimedia (formerly Telecom & Defence)
Communications & Multimedia showed considerable growth in the past year. One key trend in this context is the convergence of networks and services, with the Internet Protocol (IP) as the underlying technology. Telecom operators and cable operators have begun preparing their networks for “Voice over IP” (VoIP) and multimedia applications. By collaborating with suppliers in this field, ICT has created a good position for the roll-out of these services.

Defence (formerly Telecom & Defence)
In the defence market, ICT expanded its position slightly in 2005. ICT worked on solutions in the field of information and decision-support systems.

Energy & Utilities (formerly Energy & Logistics)
In 2005, the Energy & Utilities division began setting up a relationship network and concretising technical automation solutions. Last year saw us realise our first modest successes. Distinguishing capabilities in this context are total solutions which also contain embedded software technology, in cooperation with ICT Embedded. The first aim in this division is to build sufficient market and material expertise, making ICT a logical partner for its clients in this segment too. 

Logistics (formerly Energy & Logistics)
ICT successfully further expanded its position in 2005. The growth was realised primarily from projects in the port of Rotterdam. In addition to the further expansion of the activities in the mainports (sea and airports), ICT will focus on further broadening the services towards other logistical segments, such as auctions and logistics services providers.

Manufacturing (formerly Industry)
Within the traditional industry segment, ICT realised a slight growth in 2005. Clients in this segment are facing stiff competition from lower cost sites, which puts pressure on ICT’s tariffs. ICT is responding to this development by focussing on less price-sensitive sub-markets.

In addition, the trend in which industrial automation solutions are produced on the basis of standard p a ckages complemented with tailor-made work, continued in 2005. ICT Solutions has responded to this trend through technology choices in its industrial PMCs and further focus on system integration.

Traffic & Automotive (formerly Traffic & Transport)
In this segment, ICT is active primarily through its subsidiary InTraffic. The total of activities of this division and the joint-venture InTraffic showed considerable growth in 2005. In addition to the expansion of activities for ProRail in the field of process management and traffic management for Rail, 2005 also saw successful non-rail related projects.

Strategy

ICT’s strategy remains focused on further expansion of its position in its chosen markets. The objective in this context is to become one of the leading players in these selected markets. This requires critical mass. In addition to organic growth, ICT is also specifically looking for acquisitions which can make a valuable contribution to the realisation of this objective.  

For ICT Solutions, the focus will be on the Netherlands, while for ICT Embedded we will also be expressly looking across the border. Since ICT has acquired a second operation in Germany, through the acquisition of XCC, ICT will focus on opening a third operation in northern Germany or in the London (UK) region. This is not expected to be realised before late 2006 or early 2007.
As communicated earlier, ICT is considering opening an office in a lower cost country. A definitive decision on this issue will be taken in the course of 2006. ICT is looking at countries in the central and eastern European regions.

A number of trends can be noted in the field of system development. For instance, products are become more technically complex and because of the increasing functionality, clients are demanding higher performance and higher availability, as well as a quicker delivery of these products. In order to put this development on the right track, ICT will have to devote extra attention to matters such as requirement management, architecture, quality assurance, configuration management and testing. ICT sees opportunities in providing these services, with a high added value, in the form of consultancy and training services and is currently considering how we should develop these activities.

Dividend 2005

In line with our dividend policy, ICT will propose to its shareholders the payment of a dividend of EUR 0.64, which is a pay-out ratio of 73%.

Outlook

Although there is as yet still no overall solid recovery in the markets in which ICT is active, there are signals suggesting a continuation of the market improvement which began in 2005. Combined with the specific strategic focus and continued cost containment, ICT expects to realise a further increase in turnover and net profit in 2006.

Enclosed:
- Consolidated profit and loss account 2005
- Consolidated balance sheet as of 31 December 2005
- Consolidated cash flow statement for 2005