Net rises by 40% to EUR 3.3 million in first half 2005

09/09/2005

ICT Automatisering N.V. (ICT) has booked a net profit of EUR 3.3 million in the first half of 2005, an increase of 40% compared with the first half of 2004 (EUR 2.4 million). Earnings per share came in at EUR 0.40 (first half 2004: EUR 0.28). Excluding the effect of IFRS, net profit was up by 46%. Turnover rose by nearly 7%, due mainly to the favourable developments at ICT Solutions, and amounted to EUR 34.6 million in the first half of 2005. After years of falling investments, the markets in which ICT operates showed a slight recovery in the first half of 2005. However, the market continues to be characterised by pressure on budgets for projects and investments at clients. On the basis of these developments, ICT expects the profit in the second half of 2005 to be slightly higher that the profit in the first half of 2005.

Explanatory note to the results

In the first half of 2005, ICT’s turnover rose by almost 7%. ICT Solutions in particular was able to benefit from its good positioning and booked a 12% rise in turnover. Around 26% of the total turnover came from foreign clients.
Largely due to effective costs control and fewer personnel, operating expenses rose less in relative terms. The item other operating expenses rose disproportionately more than turnover, by 8.6% to EUR 7.4 million. This rise was partly due to the increase in recruitment costs. At a slightly lower tax rate (30.7%), net profit rose by 40% and came in at EUR 3.3 million. The net profit margin rose to almost 10% (first half of 2005: 7.3%). Excluding the effect of IFRS, net profit rose by 46%.

As a result of the slight rise in fees at both ICT Embedded and ICT Solutions, plus an improvement in the utilisation rate, turnover per employee (corrected for temporary staff) increased by 12% and came in at EUR 43,921 (first half of 2004: EUR 39,170). Net profit per employee rose by 50% to EUR 4,515 (first half of 2004: EUR 3,008).

ICT’s financial position remains strong. Shareholders’ equity as a percentage of total assets was 70.0% (year-end 2004: 73.1%). Current assets as per 30 June 2005 were virtually the same as on 31 December 2004. Total long term liabilities as per 30 June 2005, as well as per 31 December 2004, is entirely due to the application of IFRS and pertains to the item pensions.

Human resources

The number of employees as per 30 June 2005 fell slightly to 744 (year-end 2004: 747). ICT will devote a great deal of attention in the second half of this year to the recruitment of personnel for its German office. To this end, ICT plans to launch recruitment activities in India. The inflow of new people from this effort will however not occur until at least the first quarter of 2006.

Business developments in the first half of 2005

The developments at both ICT divisions continue to be dominated by great emphasis on cost controls and budget pressure at clients. Despite this, ICT’s total turnover rose by almost 7% to EUR 34.6 million (first half of 2004: EUR 32.4 million), as a result of a slight rise in fees and an improved utilisation rate.

ICT Embedded

Turnover at ICT Embedded increased slightly in the first half of 2005 to EUR 18.3 million (first half 2004: EUR 18.0 million). Partly due to the fact that a number of professionals transferred from ICT Embedded to ICT Solutions, the number of employees in the division fell to 414 as per 30 June 2005, compared with 434 at year-end 2004.

Sectors

Mobile Communications
This sector is characterised by uncertainty, as a result of reorganisations at ICT’s clients and the fact that it is not proving easy to recruit suitable personnel for the German office in Munich. The result of this is that this sector currently accounts for roughly 20% of ICT’s turnover, compared with more than 25% a year earlier.

Home Entertainment
The sector Home Entertainment remains stable. ICT has been successful in winning new clients and orders for this activity This has to some degree offset the partial relocation of activities to Asia by a number of clients. ICT also managed to make agreements with one of its clients in the form of licenses per sold product unit.

Automotive
ICT’s Automotive activities have shown a remarkably strong recovery. The automotive market continues to be characterised by cost cutting, which on the one hand means that fees remain under pressure, while on the other hand there is a demand for ICT’s services which enable clients to reduce costs and to outsource fixed-price projects. ICT has won new clients for this activity and expanded its contracts with existing clients.

Semicon
The market conditions in this sector have improved slightly. Due to the investment made in the past in the relevant know-how and preferred supplierships, ICT is in a good position to profit from this recovery. While in the past ICT focused primarily on the producers of semiconductors, ICT plans to broaden its market focus to the market for professional systems. This will enable ICT to focus on a potentially bigger market, both in terms of clients and regions.

Medical
This sector is suffering from difficult market conditions, with the pressure from clients to control costs steadily increasing. By investing continually in know-how and by focusing on certain specialisations, ICT is able to distinguish itself as a true partner to its clients. The turnover in this sector remained stable in the first half of 2005.

ICT Solutions

Turnover at ICT Solutions rose by 12% to EUR 16.2 million in the first half of 2005 (first half 2004: EUR 14.5 million). The number of employees in this division as per 30 June 2005 increased to 261 (year-end 2004: 251), partly due to the inflow from the division ICT Embedded.

Sectors

Traffic & Transport
This sector has benefited from continued preparedness to invest in railway tracks via its joint venture InTraffic. ICT is currently focusing on penetrating other segments within this sector .

Industry
The clients for ICT services in this sector are suffering from strong competition from low-wage countries, which is in turn putting pressure on ICT’s fees. ICT is responding to this by focusing on less price-sensitive market segments. In addition, there is a visible trend towards the use of standard packages, which is reducing the demand for made-to-measure solutions. This loss of made-to-measure services has been offset to a large degree by the integration of these packages at clients.

Telecom & Defence
This sector had a satisfactory first half. Due in part to the preferred supplierships acquired in 2004, this activity has been able to respond effectively to the demand for technological changes. The large number of technological changes within this sector does however mean that it is not always possible meet the wishes of clients. ICT is therefore working hard on further strengthening and expanding its client base for this activity.

Energy & Logistics
ICT’s activities for the Energy market are still at the orientation stage. The company is putting a lot of energy in the expansion of its commercial contacts. ICT has obtained a number of Logistics contracts in the Port of Rotterdam.

Strategy
ICT’s strategy focuses on the expansion of its position in its chosen markets. For ICT Embedded, this means that many business developments will to a large extent take place outside the Netherlands. Also, ICT’s is looking to work as much as possible with local people in these markets. As a result of this, ICT will in the future be opening more foreign offices. In this context, the coming months are likely to see the opening of a second German office in the region of Stuttgart. In view of the limited availability of personnel at the German office in Munic h, ICT is considering a potential acquisition in Germany.
In addition, in the coming months the company will make a final decision on whether to open an office in Slovakia, partly to be able to respond to the focus among ICT clients on reducing costs.

One of ICT’s distinguishing characteristics is its emphasis on value-added services. This has enabled ICT in recent years to build up a position as a partner in the R&D activities of its clients. There has proven to be a large demand for this know-how and expertise. ICT is currently investigating the possibility of raising the market profile of this know-how as a separate service.

IFRS

The first half figures have been drawn up on the basis of IFRS. The impact of the application of IFRS on the company’s figures, on the basis of the current rules and interpretation of IFRS is shown in the explanatory note attached as an addendum to this press release. As stated above, the impact of IFRS on result and equity for ICT is limited to the item pensions. The company has estimated impact of IFRS to the best of its ability at this moment, which led to a rise in profit after tax in the first half of 2004 of EUR 87,000. The application of IFRS has had no effect on the results for the first half of 2005. It is important to mention that in the consultations with various experts and advisers, it has not been possible to arrive at a single standpoint on all issues with regard to pensions. This does mean that upon the application of IFRS, the expenses and asset changes related to the item pensions may undergo further changes.

Outlook

After years of falling investment, the markets in which ICT operates saw a slight recovery in the first half of 2005. However, the market continues to be characterised by pressure on budgets for projects and on investments at clients. The takeover of an important client by another company will have no material impact in 2005 according to current insights. Based on this, ICT expects the profit in the second half of 2005 to be slightly higher than the profit in the first half of 2005.

Profile ICT

ICT’s activities are divided into the divisions ICT Embedded and ICT Solutions. ICT Embedded is market leader in the field of embedded software, where it supplies software-related services. ICT Solutions focuses on the entire software development process for information systems, which control a primary, process or provide information on it. The software development comprises mainly client-specific systems. ICT’s projects are executed both in-house and at the clients’ own premises. ICT operates from five locations, in Barendrecht, Eindhoven, Deventer, Groningen and Munich (Germany).

Addenda:
- consolidated profit and loss account for the first half of 2005
- consolidated balance sheet as per 30 June 2005
- consolidated cash flow statement for the first half of 2005
- comparison shareholders’ equity as per 1 January 2004 and comparison net profit for the first half of 2004 (under IFRS)