NET PROFIT 2003 EUR 3.8 MILLION IN LINE WITH EXPECTATIONS
03/12/2004
ICT maintains strong position in continuing cautious market
ICT Automatisering N.V. (ICT) saw its net profit rise 10.3% to EUR 3.8 million in 2003, compared with EUR 3.4 million in 2002, in line with the forecast given in the press release of 20 November 2003. Earnings per share increased in line with net profit and came in at EUR 0.45 in 2003, up from EUR 0.40 in 2002. In view of ICT’s strong financial position, the company will pay out the full earnings per share as a dividend, which represents an increase of 12.5%. Turnover was down slightly at EUR 61.7 million in 2003, from EUR 63.0 million in 2002. The key markets in which ICT operates continue to show a mixed picture, with no clear signs of a structural market recovery. In view of the continuing low predictability, it is too early to make a reliable prediction with respect to the expected turnover and profit development in 2004.
Notes to the results
Turnover fell by 2.1% in 2003 to EUR 61.7 million, from EUR 63 million in 2002. Although the capacity utilisation ratio improved, this effect was partly offset by price pressure and the fact that personnel numbers fell in 2003 compared with the previous year. The operating result rose 4.6% to EUR 4.5 million, from EUR 4.3 million in 2002, as a result of continuing cost containment, which put the margin on the level of operating result at 7.3%. The operating result includes two notable items. The first was a one-off charge of EUR 886,000 relating to the severance package of board member Erik Bongers. The second was the release of a net provision of EUR 577,000 relating to the settlement of the termination of two foreign participations, on which no tax was due.
Net profit grew to EUR 3.8 million, up 10.3% from EUR 3.4 million in 2002. This stronger rise in net profit compared with the rise in operating profit, was due to the release of the net provision on which no tax was due. This took the net profit margin to 6.1%.
Personnel costs fell 6.5% to EUR 39.2 million.
Depreciations fell 23.9% to EUR 1.2 million. The other operating costs decreased slightly, by 1.3%, to EUR 13.3 million. Cost savings realised in the past mean that the current costs level is in line with the current scope of activities, while cost are continuously monitored closely.
A further decline in short-term interest rates reduced the balance of interest income and expenses slightly to EUR 648,000, from EUR 785,000 in 2002. The tax burden fell to 25.9% in 2003, from 30% in 2002. This decrease is largely the result of the release of the net provision on which no tax was due.
The shareholders’ equity as a percentage of the balance sheet total came in at 71.4%, compared with 72.6% in 2002. As ICT paid out its entire profit for 2002 in dividends, the equity remained virtually unchanged at EUR 34.8 million. ICT generated a positive net cash flow of EUR 0.9 million in 2003.
Personnel
The average number of employees in FTEs fell to 817 in 2003 from 931 in 2002. This drop was strongly affected by the reorganisation of late 2002. The number of employees (headcount) at year-end 2003 was 805, from 857 at year-end 2002.
Staff turnover in 2003 was limited to 8%. In 2002, staff turnover was 17% including the effects of the reorganisation.
Business in 2003
ICT Embedded
ICT Embedded booked turnover in 2003 of EUR 35.3 million, from EUR 34.6 million in 2002. The number of employees at ICT Embedded at year-end 2003 was 483.
In 2003, we decided that from 2004 onwards we would no longer make a distinction within ICT Embedded between Consumer Systems and MultiMedia (CSMM) and Distributed Systems and Mechatronics (DSM). Instead, the activities will be more focused on market segments, by defining spearheads per market segment. This supports ICT’s strategy aimed at profiling the company as a specialist in its chosen market areas. In addition, this approach will increase the recognition of and opportunities for synergies between the market segments.
Market developments 2003
The market remained cautious. Any recovery in this market will require a structural improvement in consumer confidence. Consumer confidence fluctuated last year. This meant that the efforts of ICT clients also remained focused on cost savings in 2003. ICT has continued to work on ways to support clients in realising cost reductions and controls. For instance, by investing in the client’s domain expertise areas, ICT can often execute projects more efficiently, which in turn reduces the overall costs of the project.
At the end of 2003, ICT opened up a branch in the Munich region (Germany). Many potential clients for ICT’s services are located in this area. At the end of 2003, most formalities had been completed, which meant ICT was able to begin staff recruitment in the course of the first quarter of 2004. The aim is to make the German office an intermediary between clients in Germany and the Dutch software labs.
Market segments
Mobile Communications
This market showed strong growth in 2003. ICT has delivered considerable added value to its clients, particularly for mobile phones for the Asian market. The investment in GPRS/EDGE, a second generation communications protocol and successor to GSM and GPRS, proved to have been a good decision, as there is a great need for this expertise in the market. ICT succeeded in obtaining contracts on the basis of this competence in 2003 and the company sees further opportunities in this area in 2004.
Home Entertainment
The year 2003 was characterised by restraint in this market. However, ICT still continued to invest in the development of an embedded MHP stack. MHP stands for MultiMedia Home Platform, the new international standard for multi-media / interactive content. ICT has obtained a position at the top of the MHP market, but is has proven too early to translate this into commercial successes.
Automotive
The year 2003 was a difficult one for this segment. The drop in car sales has resulted in enormous cost cuts, with particularly extensive cost cutting in Research and Development. The development of new systems was frequently postponed.
Semicon
In this market too, the focus in 2003 was on cost reduction. Clients were reluctant to invest and reorganisations were once again seen at a number of clients. Continuing investments in relevant know-how and preferred suppliership have put ICT in a good starting position in this market where, after years of recession, the first signs of recovery seem on the horizon.
Medical
The market for medical systems is characterised by far-reaching automation and integration of smaller medical appliances. In 2003, further digitalisation of medical equipment was once again a key development. These developments ensure that Research & Development expenditure in this segment remains stable, despite the fact that a lot of attention is being devoted to cost reduction and increases in scale in this market, too.
ICT Solutions
ICT Solutions recorded turnover in 2003 of EUR 26.4 million, compared with EUR 28.4 million in 2002. The division employed 282 people at year-end 2003.
Market developments 2003
The market for ICT Solutions is still suffering from pressure on investments, although there were cautious positive signals seen at the end of 2003. The low demand for IT services led to continued strong price competition. Stringent cost monitoring meant ICT was very well equipped to respond to this competition. A competitive price level combined with the proven reliability of the solutions offered by ICT Solutions put ICT in a good starting position in this market.
With effect from 1 October 2003, ICT expanded its 60% stake in Rijnmond Distributie Services B.V. to 100%. The purchase price of the remaining shares was based on the visible shareholders’ equity and no goodwill was paid.
Market segments
Traffic & Transport
Spending in Traffic & Transport strongly depend on the policies of central and local government. The slightly delayed impact of the economic downturn were felt in this market in 2003.
In April 2003, InTraffic was launched, a 50/50 joint venture of ICT Automatisering and Holland Railconsult, with the aim of providing traffic management solutions in the Traffic & Transport market. After a difficult first half of the year, the second half of 2003 saw a recovery in this market.
Industry
The Industry segment once again proved a stable factor in the turnover of ICT Solutions.
Despite clients’ continuing low investments levels, the segment booked growth, both with existing clients and through the acquisition of new clients. A current development in the Industry sector is the centralisation of IT and the standardisation of processes and technology. This is often followed by clients seeking to enter a partnership. For ICT Solutions, this has meant an increase of the number of formal preferred supplierships.
Telecom
Spending in the Telecom sector remains at a low level. ICT put great efforts into creating a strong basic position in 2003 by maintaining existing relations, in order to reap the benefits once the market recovers. We have recently seen the first positive signals pointing to a recovery in this sector. ICT once again sees growth opportunities in the development of services for large public and private networks.
Government
Turnover in this segment remained stable in 2003. ICT sees opportunities in this segment, particularly in the defence sector and is therefore considering increasing the focus on this sector, by making ‘Defence’ a separate spearhead within ICT Solutions.
Strategy
In the past year, ICT has once again clearly benefited from our past strategic choice of a limited number of spearheads. Far-reaching specialisation has put ICT in a good position to offer the added value the market demands, even in the current difficult and volatile market conditions.
In 2004, ICT will continue to increase its focus, as already started for ICT Embedded in the second half of 2003. ICT will focus on two spearheads for each market segment within this division. ICT is also looking for opportunities for a stronger focus within the Solutions division. This process will be completed in the course of 2004.
ICT often acts as a strategic partner in the development process of its clients. It is difficult for ICT to estimate the effects of the trend among large multinationals towards moving part of their activities to low-cost regions. ICT has proven it can also provide added value if ICT is involved in the development processes which are partly executed in such regions. ICT will, nevertheless, assess in 2004 whether it is necessary to launch its own development activities in a region with lower labour costs.
In 2004, ICT will also further develop the office opened in Germany at the end of December 2003. In addition, the company will assess whether the time is ripe to open such front offices in other European countries.
Dividend 2003
In view of the strong balance sheet, ICT will pay out the entire 2003 profit of EUR 0.45 per share in dividend. This is an increase of 12.5% compared with the EUR 0.40 per share paid out over 2002.
Outlook
Cautious signs seems to indicate the beginning of a market recovery. On the other hand, there is uncertainty as to whether this recovery will last, which is also reflected by the proven low continued poor predictability of the development in demand from ICT clients. This means that it is not possible at this stage to make a reliable statement with regard to the development of turnover and profit in 2004. ICT will make further statements as soon as the company has more insig
Enclosed:
- Consolidated profit and loss account 2003
- Consolidated balance sheet as of 31 December 2003
- Consolidated cash flow statement for 2003