Sales of continuous feed systems decreased, partly because of developments in the financial sector, which we had already reported in the first quarter. Our market position remains strong and DDS booked several important and substantial orders. Direct Group, a leader in direct marketing in the United States, bought 47 printers in the second quarter, including the recently introduced Océ VarioStream 8750 and the Océ JetStream 2200 in addition to the Océ VarioPrint 6250. Some of these machines were delivered in the second quarter. In addition Océ in the United Kingdom sold GBP 3.8 million worth of black-and-white and color continuous feed printers to T-Systems, a subsidiary of Deutsche Telekom. These printers form the core of two new print centers which together have a printing capacity of 500 million A-4 sheets per year. These systems will be delivered in the third and fourth quarter.
In the second quarter recurring revenues, excluding fax and the effect of the sale of ODT in January 2008, were in line with those of last year on an organic basis [including fax and ODT –2.3%]. The share in recurring revenues of the color printers and the Océ VarioPrint 6000 series increased again.
Normalized operating income amounted to Euro 0.4 million [2007: Euro 0.3 million]. Including one-off costs the result amounted to –Euro 5.6 million.
Océ Business Services [OBS]
Revenues in OBS amounted to Euro 104.2 million. Organic growth was 5.4%. OBS continues to grow in view of the fact that, despite more difficult economic conditions, customers are still outsourcing their document activities.
In the United Kingdom OBS is taking over printing and distribution activities for the Cambridge Assessment Group, one of the world’s leading examination institutes. This assignment has a duration of 5 years, represents a total value of GBP 40 million and will start to contribute to revenues later this year.
Operating income amounted to Euro 2.5 million [2007: Euro 4.4 million]. The decrease is among others due to higher costs involved in the start-up of major projects with new customers.
Wide Format Printing Systems [WFPS]
Revenues in WFPS amounted to Euro 211.0 million. On an organic basis the decrease was 1.0%. The share of color increased to 32% of revenues [2007: 27%].
The slowdown in the construction sector in the United States is continuing and is now becoming more visible in Europe. As a result WFPS sold fewer wide format printers in this segment than in the previous year. In the wide format graphics market WFPS expanded revenues thanks to the strong product portfolio and the Océ Arizona 250 GT in particular. On balance, non-recurring revenues increased organically by 2.8%.
Recurring revenues decreased by 2.9%. That resulted chiefly from lower print volumes in the design engineering market and fewer Imaging Supplies deliveries. Against this, however, there was an increase in recurring revenues from the Océ Arizona 250 GT population.
Normalized operating income was Euro 17.2 million [2007: Euro 24.9 million] as a result of higher R&D expenditure and extra costs for the start-up of the Océ ColorWave 600. Including one-off items the result was Euro 12.3 million [2007: Euro 24.7 million].
Strategy
Océ’s strategy is focused on three main thrusts: boosting distribution power, offering competitive products and improving business processes.
One of the strategic markets is the graphics sector. At the end of May/early June the four-yearly drupa was held, the trade fair for the graphics market. This is by far the biggest trade fair in this industry in the world. The drupa fair brought confirmation that customers and suppliers share the same vision as regards a more far-reaching digitization of the graphics market. The greater proportion of the print volume world-wide is currently handled by conventional analog printing presses. Only 12% of the volume is printed using digital techniques. Digital printing techniques have strongly improved in recent years, resulting in better print quality and lower costs. They also offer major benefits such as the opportunity for personalization and print-on-demand. This is why an increasing volume is not being produced on analog machines but digitally. In terms of distribution power and product portfolio, DDS and WFPS are well positioned to help customers make the transition to digital printing. If customers make investments despite the current adverse economy, then their investments are in digital technology, which is focused on the future.
Digital Document Systems
