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Ease2pay N.V.

Earnings Release Feb 25, 2011

3832_iss_2011-02-24_3f5003a7-8bf8-4782-a567-69ced75b3621.pdf

Earnings Release

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To be distributed on Thursday 24 February 2011 Continental Time 07.30h. U.K. 06.30h. / U.S. Eastern Standard Time 01.30h.

Hectic year for DOCDATA N.V. closed with positive outcome

  • Milestone reached: revenue grown to € 104 million in 2010
  • EBIT (€ 5.0 million) influenced by non-recurring costs to realise growth
  • Strong revenue growth of E-commerce service company in Germany
  • Revenue and results IAI industrial systems excellent
  • Proposal to distribute dividend of € 0.35 per share

DOCDATA N.V. reached an important milestone in 2010, as the revenue has exceeded € 100 million, primarily driven by strong growth in Germany. The year 2010 was a hectic year, especially due to the acquisition and integration of the activities of the former Dohmen Solutions Group and the extreme growth of one of our e-commerce clients in Germany. These factors had a temporary negative impact on profit. IAI industrial systems was able to maintain the high revenue level in 2010 with an excellent profit.

Revenue 2010 2009 Growth
(in thousands, except percentages) %
Docdata E-commerce services (excl. acquisition) 63,737 46,851 + 36%
Acquisition former Dohmen Solutions Group 14,293 - -
Docdata E-commerce services 78,030 46,851 + 67%
Media replication activities 7,804 16,024 -/- 51%
E-commerce service company Docdata 85,834 62,875 + 37%
Technology company IAI industrial systems 18,176 17,594 + 3%
Total 104,010 80,469 + 29%

Michiel Alting von Geusau, CEO van DOCDATA N.V.: "The markets in which we operate showed a strong growth in 2010. Within the e-commerce market a large proportion of our clients performed even better than the market. We are proud that we contributed to the success of our clients. IAI industrial systems reached a revenue level that is structurally higher than the average revenue level of the last five years; we however remain dependent on sometimes complicated tendering processes."

The E-commerce service company Docdata realised a considerable increase in the number of transactions handled in 2010. This is both due to the success of our clients in the Netherlands, including bol.com, De Bijenkorf and V&D, and the success of our clients in Germany, including brands4friends.de and Zalando.de. As a consequence, revenue of the E-commerce service company grew with 37%.

Technology company IAI industrial systems realised a record revenue of € 18.2 million in 2010. In addition, IAI invested further in the organisation and development of innovative production systems for the various markets in which IAI is active. The focus in 2010 was in particular on the development and improvement of applications in production systems.

The permanent staff of the Group increased considerably from 593 employees (570 FTE) at the beginning of the year to 813 employees (759 FTE) at the end of the year. Also in 2010 the management structures within the Group have been strengthened. This was necessary to enable the growth and create a new basis for further growth.

E-commerce service company Docdata again achieved a considerable increase of the number of transactions; in 2010 almost 30 million unique transactions have been processed compared to about 20 million in 2009 (increase 36%). The combined revenue of the e-commerce services (consisting of commerce, fulfilment and payment activities) grew autonomously with almost € 17 million (+ 36%); furthermore the revenue increased with another € 14 million as a result of the acquisition of the activities of the former Dohmen Solutions Group in April 2010. The total revenue of the E-commerce service company Docdata increased with 37% to almost € 86 million.

The e-commerce market in Europe increased approximately 18% in 2010. For 2011 a similar growth is expected resulting in a European e-commerce market that exceeds the market in the United States. Within Europe, the United Kingdom and Germany remain the largest markets. Together with the Benelux this is more than 50% of the market. The growth in the Benelux in 2010 was over 22% and this market represents a value of about € 10 billion. The growth in the United Kingdom was 13% with a value of about € 60 billion. In Germany the growth in 2010 was about 10% and this market represents a value of more than € 50 billion.

Dohmen Solutions

The integration and restructuring of the activities of the former Dohmen Solutions Group will continue for several months in the first half-year 2011. In 2010 these activities contributed to the growth in revenue (€ 14.3 million in 8,5 months) but due to restructuring costs these activities also had a negative impact on the operating profit (-/- € 2.1 million) and hence the profit. For 2011 it is expected that these activities, including limited further restructuring costs, will have a small contribution to the profit.

Thanks to the acquisition of the activities of the former Dohmen Solutions Group in combination with the realised autonomous growth, Docdata significantly strengthened its position on the German e-commerce market and became a known player. Also, for the first time Docdata realised a higher revenue in Germany than in the Dutch market where Docdata holds a top-3 position and is already a known player for a longer time.

Transition completed

Mid 2010 the media replication company in Berlin was divested. In 2000 more than 90% of revenue was realised by media replication activities, in 2010 this was less than 10% of revenue. As from 2011 the replication activities will not have a significant influence on the figures of the Group any more. The transition of Docdata to an E-commerce service company has now successfully been completed.

For 2011, the focus will be on further growth in existing markets, on the one hand through the growth of existing clients and the expansion of the service portfolio, on the other hand by bringing in new clients. Smaller acquisitions to expand our service portfolio can also contribute to the growth. The organisation grew tremendously in 2010 and the management structure has been strengthened at all levels. This provides us with a reinforced basis to meet the challenges of 2011.

The main trends that are relevant for Docdata, are a further transformation from online to mobile online. The expectation is that in 2012 more smartphones will be sold than computers. Also social networks will take an increasingly important position in the communication to consumers, with Facebook as a dominant player with more than 500 million active users and thus being, after Google, the largest traffic source for webshops. On the other hand the cross-border activities of both consumers and suppliers will grow in the coming years.

Michiel Alting von Geusau, CEO of DOCDATA N.V.: "The developments and opportunities of Internet are enormous. Because of our extensive experience with e-commerce, the vast scalability of our solutions and international experience we are able to gear up in a short time frame and help our clients, also regarding cross-border activities, realising their growth. Thanks to our scalable solutions we facilitated the extreme growth of some of our clients in 2010, staying ahead of all our competitors."

Technology company IAI industrial systems delivered in 2010 a large number of high quality systems. Furthermore the revenue from our service activities and the delivery of subsystems increased clearly. The revenue of IAI industrial systems was € 18.2 million which is a slight increase compared to 2009 but structurally higher than any year before 2009.

The order book as per year-end 2010 includes orders with a revenue value of € 8.4 million (2009: € 13.7 million). The order book is running behind, which will have an impact on the revenue and results of IAI in 2011. The pipeline however is well filled with prospects; we expect that the major part will only be delivered in 2012. Projects generally have a long lead time in the markets in which IAI operates. IAI only has very limited influence on this.

In the document security market IAI industrial systems is seen as the highest quality supplier of production systems to personalise and/or secure documents issued by governments. IAI has further expanded the product range in the document security market through the development of new systems in the last years, resulting in an entrance in additional markets like the market for decentralised personalisation. In 2010, IAI has invested in R&D for the development of next-generation systems and new applications like for example contactless soldering of solar panels for which we sold a first system in 2010. The organisation has been strengthened, making the company ready for further growth.

Michiel Alting von Geusau, CEO of DOCDATA N.V.: "Our clients are mainly looking for innovative but proven solutions in the markets where we operate. As our product portfolio has been expanded substantially in recent years, we are well positioned to meet the market demands. We also see that clients worldwide know how to find us."

Major features of the financial results for the 2010 year-end

(in millions, except percentages en profit per share) 2010 2009
% %
Revenue
E-commerce service company Docdata 85.8 82.5 62.9 78.1
Technology company IAI industrial systems 18.2 17.5 17.6 21.9
Total 104.0 100.0 80.5 100.0
Gross profit
E-commerce service company Docdata 19.1 22.2 18.2 28.9
Technology company IAI industrial systems 6.9 38.1 7.3 41.9
Total 26.0 25.0 25.5 31.7
Operating profit (EBIT)
E-commerce service company Docdata 1.0 1.2 1.0 1.6
Technology company IAI industrial systems 4.0 22.0 4.9 27.9
Total 5.0 4.8 5.9 7.3
Profit for the year 3.8 3.7 7.7 9.6
Basic earnings per share 0.58 1.18
Diluted earnings per share 0.58 1.18
Balance sheet total 56.0 49.0
Equity 27.6 27.4
Solvency ratio (Equity / Balance sheet total) 49.3% 55.9%

Results and Financial position for the financial year 2010

The revenue of DOCDATA N.V. increased in 2010 with € 23.5 million to € 104 million (+29%). IAI industrial systems realised a slight revenue increase of € 0.6 million (+ 3%). Docdata realised with its e-commerce services commerce, payments and fulfilment an autonomous revenue growth of € 16.9 million (+36%), mainly as a result of the increased number of transactions. The acquisition of the activities of the former Dohmen Solutions Group per 16 April 2010 contributed € 14.3 million to the revenue in 2010. The revenue of the media replication activities decreased with € 8.2 million (-/- 51%) as a result of the further decline of the replication activities, mainly due to the sale of the replication company in Berlin in July 2010.

In 2010 DOCDATA N.V. realised a gross profit of € 26.0 million compared to € 25.5 million in 2009 (+2%). The gross profit margin in 2010 was 25.0% compared to 31.7% in 2009 with a decreased gross profit margin for both lines of business. For Docdata this lower gross profit margin is mainly due to a lower realised efficiency following the extreme growth of some of our largest clients in the Netherlands and Germany. The decrease of the gross profit margin of IAI industrial systems is mainly due to a different revenue mix in 2010 compared to 2009. The lower gross profit margin in 2010 is mainly the result of relatively higher costs for produced and delivered orders containing the development of new applications in the systems of these orders.

In 2010 the operating result before financing result (EBIT) was € 5.0 million compared to € 5.9 million in 2009 (effect: -/- € 0.9 million). The operating result of the technology company IAI industrial systems decreased from € 4.9 million in 2009 to € 4.0 million in 2010 as a result of the lower gross profit and higher organisation costs, primarily due to the increased number of employees. The operating result of the E-commerce service company Docdata remained almost unchanged in 2010 at € 1.0 million. In both years the operating result of the E-commerce service company Docdata included significant non-recurring costs which had a negative impact on the operating result in those years. In 2010 these non-recurring costs were:

  • acquisition and consultancy costs, start-up losses and restructuring costs after the acquisition of the activities of the former Dohmen Solutions Group (effect: € 2.1 million);
  • considerably higher organisations costs to realise the significant growth in Germany (effect: over € 1.5 million).

In 2009, the E-commerce service company Docdata recognised non-recurring expenses of € 2.9 million. These non-recurring expenses related to a number of impairments of goodwill and other intangible assets, the full depreciation of the remaining media replication activities in Germany and the recognition of provisions.

The profit of DOCDATA N.V. for the year 2010 amounts to € 3.8 million compared to € 7.7 million for the year 2009 (effect: -/- € 3.9 million). In addition to the above mentioned development of the operating result in 2010 compared to 2009 (effect: -/- € 0.9 million) and a financing result with higher net finance expenses (effect: -/- € 0.1 million), income taxes had a significant impact. In 2010 the income tax expense was € 1.2 million compared to an income tax income of € 1.7 million in 2009 (effect: -/- € 2.9 million). The recognised income tax income in 2009 contained an income tax credit of around € 4 million. This income tax credit was the result of the recognition of a liquidation loss of over € 15 million in the 2009 corporate income tax return of the Dutch fiscal entity following the completion of the liquidation of the former replication company in the United Kingdom. Without this non-recurring income tax credit, profit in 2010 would have slightly increased compared to 2009.

DOCDATA N.V. maintained its strong financial position with a solvency ratio of 49.3% (31 December 2009: 55.9%) in 2010 against a strongly increased balance sheet total. In relation to the Company's liquidity, the cash surplus position of € 6.1 million as at 31 December 2009 decreased with € 0.3 million to € 5.8 million as at 31 December 2010.

In 2010, DOCDATA realised a net cash from operating activities of € 13.3 million (2009: € 7.4 million) which was influenced to a large extent by cash flows generated from the delivery in February 2010 of the second part of the Bulgarian order by IAI industrial systems B.V. and the receipt of an income tax receivable by the Dutch fiscal entity (€ 2.8 million). Furthermore, DOCDATA N.V. has drawn € 4.0 million from the credit facility with Commerzbank AG in 2010 to finance the following:

  • the acquisition of the assets and business activities of the former Dohmen Solution Group in Germany (total purchase price: € 2.2 million);
  • the working capital of the new legal entities in Germany, which acquired the assets and business activities of the former Dohmen Solutions Group (including the restructuring costs after acquisition of these activities);
  • the investments in the warehousing (amongst others installations and racking) of our fulfilment centres in Germany.

Of these available funds of € 17.3 million, € 3.7 million was spent on the payment of the 2009 dividend. In addition, the Group invested a total amount of almost € 10 million in 2010: € 2.2 million in the acquisition of the activities of the former Dohmen Solutions Group, € 6.2 million in property, plant and equipment (mainly warehousing equipment and investments in IT infrastructure), € 0.8 million in intangibles (predominantly IT platform and development costs by IAI for the development of new systems) and € 0.8 million for the acquisition of non-controlling interests in docdata commerce B.V. and docdata payments B.V. The remaining € 3.7 million resulted in higher cash and cash equivalents per 31 December 2010.

Strategy: Vision 2012: 'Flywheel to Growth'

"It's all about focus and commitment"

E-commerce service company Docdata

We are a focussed E-commerce service company We deliver customer-focused and scalable solutions We guarantee seamless handling of all your unique transactions We are driven to make your e-commerce successful

The major strategic goals for the coming years remain:

  • autonomous growth through successful partnerships with existing clients;
  • winning new clients;
  • expanding the service portfolio, also through strategic partnerships;
  • more prominent route for acquisitions;
  • acting as one company that offers a complete e-commerce service portfolio.

The current risks are mainly in terms of the strategic choice of clients to outsource certain services to external suppliers. In the event that a client will be acquired, this choice is almost always reconsidered with the possibility of losing clients. Because of the rapid developments in the e-commerce market, our clients are not willing to sign long-term contracts.

Technology company IAI industrial systems

We offer high quality production systems and reliability We offer flexible, fast and accurate technological solutions We are driven to offer the most innovative laser and optical solutions

The major strategic goals for the coming years remain:

  • autonomous growth in the document security market by worldwide sales activities and continues development of new systems;
  • realise a position in other market segments by developing innovative laser applications;
  • increase of R&D and product development.

The current risks are mainly in terms of the realisation of orders, as tenders issued by governments are regularly delayed by factors beyond our control. In the new markets where we operate tender processes take longer as new applications need to be extensively tested.

General

As the current strategy 'Vision 2012: Flywheel to Growth' will run until 2012, DOCDATA N.V. will have an external party execute a strategic study in 2011. The outcome of this study will serve as input for the strategic route in the coming years.

Outlook

The focus in 2011 will be kept on growth, both autonomous and trough acquisitions. Acquisitions will mainly be aimed at expansion of our service portfolio.

The focus of the E-commerce service company Docdata is on further development of the service model in the Benelux, Germany and the UK. Based on our current client base, we expect further growth with only a limited impact of non-recurring costs on profit.

The focus for the technology company IAI industrial systems is on the realisation of orders worldwide in existing and specifically defined markets through the development of innovative solutions based on proven systems. Considering the order book as at 31 December 2010, combined with the length of the time between an order and the completion and delivery of systems at the client, we expect lower revenues and results for IAI industrial systems.

Dividend

Management of DOCDATA N.V. will propose to the shareholders at this year's annual General Meeting of Shareholders, in accordance with Article 28 of the Articles of Association of DOCDATA N.V., to decide to distribute to all shareholders of ordinary shares a dividend amount of € 0.35 per ordinary share out of the profit for the year 2010. The distribution will be subject to dividend withholding taxes, unless the shareholder can proof that substantial holding exemption can be claimed.

At 31 December 2010, the issued share capital of DOCDATA N.V. consists of 7,000,000 ordinary shares with a nominal value of € 0.10 each. DOCDATA N.V. currently holds 349,982 (5.00%) of these issued ordinary shares, which are kept in order to fund the personnel options scheme and to finance future acquisitions. Ordinary shares owned by the Company are not entitled to any distribution of profit. When the General Meeting of Shareholders decides to accept this proposal, an amount of € 2.3 million will be distributed in June 2011 as dividend out of the profit for the year 2010 on the ordinary shares, which are held by other shareholders than the Company. The General Meeting of Shareholders shall be held on Wednesday 15 June 2011 in Waalwijk. The dividend distribution will lead to a decrease of the solvency ratio with some percent-points.

The dividend policy of DOCDATA N.V., adopted by the General Meeting of Shareholders, is aimed at realising a high dividend return, for which a payout ratio of at least 50% is the target. The liquidity and solvency required for the execution of the strategy, will also be taken into consideration. Management of DOCDATA N.V. holds the opinion that the very strong liquidity and solvency of the Company enable the proposed dividend distribution of € 0.35 per share.

The dividend proposed by DOCDATA N.V. of € 0.35 per share (in total: € 2.3 million) is lower than the dividend of € 0.55 per share distributed out of the profit for the year 2009 (in total: € 3.7 million). This was due to the 2009 dividend distributed in May 2010 being one-time higher, as the Company realised in 2010 an income tax credit on the liquidation loss for the replication company in the United Kingdom. Compared to the dividend of € 0.30 per share (in total: € 2.0 million) out of the profit for the year 2008 distributed in May 2009, the dividend return has increased.

Accounting principles

The consolidated financial statements of DOCDATA N.V. are prepared in accordance with the International Financial Reporting Standards as adopted by the European Union (hereafter IFRS). For an overview of the significant accounting policies under IFRS, please refer to the 2009 Annual Report that is available at the Company and can also be downloaded from the Company's corporate website, www.docdatanv.com.

Enclosure with financial information

For a detailed review of the 2010 year-end results, please refer to the attached enclosure 'Financial Information for the year ended 31 December 2010' with Appendix.

Meeting for financial press and analysts

This morning, 24 February 2011, management of DOCDATA N.V. will discuss the 2010 year-end results in a meeting for which both financial press and analysts have been invited, to be held at 10.30AM Amsterdam time in the Mercurius room of the Financieel Nieuwscentrum Beursplein 5 of NYSE Euronext Amsterdam (Beursplein 5, 1012 JW Amsterdam, telephone +31-20-5505505). After this meeting, the presentation shown to the financial press and analysts will be made available for downloading from the Company's corporate website, www.docdatanv.com.

Important dates

29 April 2011 Publication of 2010 Annual Report
8 June 2011 Record date (voting rights)
15 June 2011 (*) Annual General Meeting of Shareholders in Waalwijk
16 June 2011 Cum-date
17 June 2011 Ex date
21 June 2011 Record date (dividend rights)
24 June 2011 Dividend payment data
21 July 2011 Publication of 2011 half-year results

(*) Note: new date; the 2009 Annual Report referred to 18 May 2011 as preliminary date

------------------------------------------

The listed DOCDATA N.V. exists of two lines of business:

Technology company IAI industrial systems (www.iai-industrial-systems.com) is a high tech engineering company specialised in developing and building systems for very accurate and high speed processing of all kinds of products and materials. IAI delivers clients globally in the following sectors: securing and personalising of security documents, processing of solar cells and modules and processing of other materials and products.

E-commerce service company Docdata (www.docdata.com) is a European market leader with a strong basis in The Netherlands, Germany and the United Kingdom. Docdata offers a complete e-commerce service portfolio to clients, enabling them to be successful on the internet.

Waalwijk, The Netherlands, 24 February 2011

Further information: DOCDATA N.V., M.F.P.M. Alting von Geusau, CEO, Tel. +31 416 631 100 Corporate website: www.docdatanv.com

Financial Information

The financial information is prepared in accordance with International Financial Reporting Standards as adopted by the European Union (hereafter "IFRS") and its interpretations adopted by the International Accounting Standards Board (IASB).

Revenue

(in thousands, except percentage figures) 2010 2009
Revenue by line of business % %
E-commerce service company Docdata 85,834 82.5 62,875 78.1
Technology company IAI industrial systems 18,176 17.5 17,594 21.9
Total 104,010 100.0 80,469 100.0
  • The combined revenue of the Docdata e-commerce services (commerce, payments and fulfilment) increased with € 31.2 million (67%). This revenue increase is the result of autonomous growth (€ 16.9 million, including a positive foreign currency exchange £ effect of € 0.3 million) and through the acquisition of the activities of the former Dohmen Solutions Group per 16 April 2010 (€ 14.3 million). Two clients each realised more than 10% of the total revenue of the E-commerce service company Docdata. The revenue of the media replication activities decreased with € 8.2 million (51%) in total, of which € 6.1 million as a combined result of the sale of the UK media replication business on 30 January 2009 and the sale of all shares of docdata media GmbH on 21 July 2010; the other € 2.1 million of this revenue decrease was due to declining revenue from the media replication activities in Tilburg.
  • The increase in IAI industrial systems' revenue was realised through the delivery of systems for (amongst others) Bulgaria, India, Morocco and Uzbekistan. Deliveries consisted (amongst others) of BMOne's, SheetMaster systems, CardMasterDesk and ImagePerf® Desk systems and systems for the solar market.

Gross profit

(in thousands, except percentage figures) 2010 2009
Gross profit (margin) by line of business
(margin as % of revenue by line of business)
% %
E-commerce service company Docdata 19,075 22.2 18,184 28.9
Technology company IAI industrial systems 6,918 38.1 7,365 41.9
Total 25,993 25.0 25,549 31.7
  • The Docdata e-commerce services (commerce, payments and fulfilment) contributed € 18.1 million to the gross profit in 2010 compared to € 15.3 million in 2009, mainly due to growth in the number of transactions in the Netherlands and Germany. The acquired activities of the former Dohmen Solutions Group had an effect on the 2010 gross profit of € 2.3 million. The lower Docdata gross profit margin was mainly the result of higher operational costs in Germany. The media replication activities contributed € 1.0 million to the gross profit in 2010 compared to € 2.9 million in 2009.
  • The gross profit of IAI industrial systems decreased with € 0.4 million (6%) primarily due to a different sales mix in 2010 compared to 2009, in combination with a lower gross profit margin for some orders produced and delivered in 2010 due to development costs for new applications in the systems for these orders.

Operating profit before financing result (EBIT) Selling & Administrative expenses Other operating income and expenses

(in thousands, except percentage figures) 2010 2009
Operating profit (margin) by line of business
(margin as % of revenue by line of business)
% %
E-commerce service company Docdata 1,020 1.2 973 1.6
Technology company IAI industrial systems 3,992 22.0 4,913 27.9
Total 5,012 4.8 5,886 7.3
Selling & Administrative expenses (as % of revenue)
Selling expenses (5,600) (5.4) (4,530) (5.6)
Administrative expenses (15,182) (14.6) (12,073) (15.0)
Total (20,782) (20.0) (16,603) (20.6)
Selling & Administrative expenses by line of
business (as % of revenue by line of business)
E-commerce service company Docdata (17,787) (20.7) (14,151) (22.5)
Technology company IAI industrial systems (2,995) (16.5) (2,452) (14.0)
Total (20,782) (20.0) (16,603) (20.6)
Other operating income and expenses
(as % of revenue)
Other operating income 458 0.4 160 0.2
Other operating expenses (657) (0.6) (3,220) (4.0)
Net other operating expenses (199) (0.2) (3,060) (3.8)
  • The operating profit of the Docdata e-commerce services (commerce, payments and fulfilment) in 2010 amounted to € 1.5 million compared to € 1.7 million in 2009. In 2010, EBIT contains substantial non-recurring restructuring costs and start-up losses following the acquisition of the activities of the former Dohmen Solutions Group. These expenses were essential in order to reduce the cost base of the acquired activities, and are recognised both under selling and administrative expenses. Some of the acquired activities already contributed to profit in 2010. The total effect on EBIT amounts to a loss of around € 2.1 million in 2010, compared to € 2.0 million non-recurring operating expenses in 2009. The media replication activities realised a loss of € 0.5 million in 2010 (2009: € 0.7 million).
  • The decrease in operating profit of IAI industrial systems in 2010 is the combined result of a lower gross profit and higher selling and administrative expenses due to higher organisation costs for expansion of the number of employees.
  • In 2009, other operating expenses were recorded by Docdata for a total amount of € 3.2 million. These other operating expenses mainly consisted of non-recurring expenses in 2009 for an amount of € 2.9 million, including impairment charges for IT platforms in the UK (€ 0.7 million), impairment charges for goodwill paid on acquisition of docdata e-business GmbH in Münster, Germany (€ 0.7 million), the full write-off of the media replication activities in Germany (€ 0.9 million) and the addition to provisions (€ 0.6 million in total).

Net financing income / (expenses)

Net financing expenses in 2010 amounted to € 40 thousand compared to net financing income of € 0.1 million in 2009. This decrease of € 0.15 million is the combined effect of higher net bank interest expenses resulting from financing the acquisition of the activities of the former Dohmen Solutions Group in Germany through a bank overdraft from Commerzbank AG and a somewhat lower foreign currency exchange result in 2010 compared to 2009 related to the British pound.

Income tax expense

DOCDATA's effective tax rate in 2010 was 23.4% with an income tax expense of € 1.2 million on a profit before income tax of € 5.0 million. In 2009, the profit before income tax amounted to € 6.0 million and the income tax profit amounted to € 1.7 million (effective tax rate: negative 27.5%, representing a tax credit), mainly due to recording an income tax credit of around € 4 million on the liquidation loss of over € 15 million following the completion of the liquidation of docdata media Ltd. in the UK.

The income tax expense of € 1.2 million in 2010 is the combined result of the following tax treatments of the results per country:

  • In the Netherlands, income taxes are recorded at a corporate income tax rate of 25.5% on the taxable income for the Dutch fiscal entity as well as for the Dutch subsidiaries that are not part of this fiscal entity (2009: 25.5%). Furthermore, an income tax profit of € 0.3 million was realised for non-recognised tax assets of the Dutch fiscal entity related to the valuation of the deferred tax asset on the UK liquidation loss.
  • In the United Kingdom, income taxes are recorded against a corporate income tax rate of 28.0% (2009: 28.0%). Furthermore, an income tax profit was realised of € 0.1 million on nonrecognised net operating losses from 2009.
  • In Germany, income taxes are recorded at a corporate income tax rate of in general between 26% and around 30% on taxable income for the German entities when and where applicable, depending on the actual region in Germany of their legal seat (e.g. Berlin, Munich or Münster region). No income tax has been recorded in 2010 on some non-tax deductible expenses, and the income tax on the 2010 net operating loss of a part of former Dohmen Solutions business has been valued to a limited extent; in total, the combined effect resulted in a tax loss of € 0.4 million.

Liquidity and capital resources

The General Annual Meeting of Shareholders held on 12 May 2010 approved the proposal to distribute a dividend of € 0.55 per ordinary share outstanding (excluding own shares held by the Company), which had a decreasing impact of € 3.7 million on retained earnings within the equity of the Company in 2010.

In 2010, the Group realised net cash from operating activities of € 13.3 million (2009: € 7.4 million). Major items resulting in this high net cash from operating activities were the delivery by IAI industrial systems B.V. in February 2010 of the remaining part of the Bulgarian order, as well as the repayment by the Dutch tax authorities of € 1.3 million prepaid income taxes for the year 2009 due to the recording by the Dutch fiscal entity of an income tax credit on the liquidation loss for docdata media Ltd. in the UK, as well as € 1.5 million of the carry back to income taxes from 2006.

Furthermore, the Group has drawn € 4.0 million from the credit facility with Dresdner Bank AG (now part of Commerzbank AG) in 2010 to finance the following:

  • the acquisition (total purchase price of the assets acquired: € 2.2 million) and post-transaction working capital and restructuring of the activities of the former Dohmen Solutions Group;
  • the investments in warehousing in Germany.

Of these total available funds of € 17.3 million, € 3.7 million was spent on the payment of the 2009 dividend. In addition, the Group invested a total amount of nearly € 10 million in 2010: € 2.2 million for the assets acquired of the former Dohmen Solutions Group, € 6.2 million in property, plant and equipment (mainly warehousing equipment and investments in IT infrastructure), € 0.8 million in intangibles (predominantly IT development costs and development costs by IAI for a new security system) and € 0.8 million for the acquisition of non-controlling interests in docdata commerce B.V. and docdata payments B.V. The remaining € 3.7 million has resulted in higher cash and cash equivalents per 31 December 2010 (€ 9.8 million) compared to 31 December 2009 (€ 6.1 million).

In 2010 1,500 share options were exercised from the 2006 series at a price of € 8.10 per share. The underlying shares have been delivered by the Company from the own shares in possession of the Company. The proceeds of € 13 thousand have been credited to equity under reserves, as the purchase of own shares has been charged to reserves in the past. Per 31 December 2010, the Company owned 349,982 own shares (5.00%), which number is the same as the number of own shares currently owned by the Company per 24 February 2011.

Waalwijk, 24 February 2011

Consolidated Financial Statements

1. Consolidated Balance Sheet

Balance sheet before appropriation of profit.

31 December
2010
31 December
2009
(in thousands)
Assets
Property, plant and equipment 10,431 6,221
Intangible assets 9,690 8,633
Investments in associates 62 62
Other investments 95 100
Trade and other receivables 200 200
Deferred tax assets 1,001 1,130
Total non-current assets 21,479 16,346
Inventories 5,436 6,861
Income tax receivables 407 3,038
Trade and other receivables 18,840 15,566
Cash and cash equivalents 9,790 6,147
Assets classified as held for sale - 1,054
Total current assets 34,473 32,666
Total assets 55,952 49,012
Equity
Share capital 700 700
Share premium 16,854 16,854
Translation reserves (669) (1,030)
Reserve for own shares (2,810) (2,940)
Retained earnings (from prior years) 9,474 5,889
Unappropriated profits (Profit for the period) 3,853 7,831
Total equity attributable to equity holders of the parent 27,402 27,304
Non-controlling interest 156 107
Total equity 27,558 27,411
Liabilities
Interest-bearing loans and other borrowings - 313
Deferred tax liabilities 530 288
Total non-current liabilities 530 601
Bank overdrafts 4,000 -
Interest-bearing loans and other borrowings 190 -
Income tax payable 453 340
Trade and other payables 22,781 18,668
Provisions 440 1,039
Liabilities classified as held for sale - 953
Total current liabilities 27,864 21,000
Total liabilities 28,394 21,601
Total equity and liabilities 55,952 49,012

2. Consolidated Income Statement

2010 2009
(in thousands, except earnings per share and average shares
outstanding)
% %
Revenue 104,010 100.0 80,469 100.0
Cost of sales (78,017) (75.0) (54,920) (68.3)
Gross profit 25,993 25.0 25,549 31.7
Other operating income 458 0.4 160 0.2
Selling expenses (5,600) (5.4) (4,530) (5.6)
Administrative expenses (15,182) (14.6) (12,073) (15.0)
Other operating expenses (657) (0.6) (3,220) (4.0)
Operating profit before financing result 5,012 4.8 5,886 7.3
Financial income 215 0.2 301 0.4
Financial expenses (255) (0.2) (195) (0.2)
Net financing (expenses) / income (40) - 106 0.2
Share of profits of associates - - 37 -
Profit before income tax 4,972 4.8 6,029 7.5
Income tax (expense) / profit (1,162) (1.1) 1,660 2.1
Profit for the period 3,810 3.7 7,689 9.6
Attributable to:
Equity holders of the parent 3,853 3.7 7,831 9.7
Non-controlling interest (43) - (142) 0.1
Profit for the period 3,810 3.7 7,689 9.6
Earnings per share
Basic earnings per share 0.58 1.18
Diluted earnings per share 0.58 1.18

3. Consolidated Statement of Cash Flows

2010 2009
(in thousands)
Cash flows from operating activities
Profit for the period 3,810 7,689
Adjustments for:
Depreciation and amortisation 3,631 5,223
Costs share options and delivered shares 117 137
Financial expenses 255 195
Financial income (215) (301)
Share of profits of associates - (37)
Income tax expense / (income) 1,162 (1,660)
Cash flows from operating activities before changes in
working capital and provisions
8,760 11,246
Increase in trade and other receivables
and assets held for sale (2,176) (3,003)
Decrease / (Increase) in inventories 1,820 (3,268)
Increase in trade and other payables and
liabilities held for sale
3,660 3,048
(Decrease) / Increase in provisions and employee benefits (599) 846
Cash generated from the operations 11,465 8,869
Interest paid (254) (266)
Interest received 171 209
Income taxes paid (1,000) (1,772)
Income taxes received 2,883 320
Net cash from operating activities 13,265 7,360
Cash flows from investing activities
Acquisition of property, plant and equipment (6,164) (2,703)
Acquisition of subsidiaries and business (2,220) (150)
Acquisition of intangible assets (835) (67)
Acquisition of associates and other investments - (62)
Proceeds from sale of property, plant and equipment 53 118
Net cash from investing activities (9,166) (2,864)
Cash flows from financing activities
Proceeds from / (Repayment of) bank overdrafts 4,000 (325)
Dividends paid (3,658) (2,031)
Acquisition of non-controlling interests (780) (656)
Proceeds from exercise of share options 13 141
Repayment of interest-bearing loans and other borrowings - (60)
Loans provided to associates and other investments - (200)
Net cash from financing activities (425) (3,131)
Net (decrease) increase in cash and cash equivalents 3,674 1,365
Cash and cash equivalents at the beginning of the period 6,147 6,034
Bank overdrafts balanced with cash and cash equivalents - (1,350)
Effect of exchange rate fluctuations on cash held (31) 98
Cash and cash equivalents at the end of the period 9,790 6,147

4. Consolidated Statement of Shareholders' Equity

Total equity
Share Share Retained attributable to
equity holders
Non
controlling
Total
capital premium Reserves earnings of the parent interest equity
(in thousands)
(Note 1) (Note 2)
Equity Statement 2009
Balance at 1 January 2009 700 16,854 (4,531) 7,882 20,905 292 21,197
Dividend distribution - - - (1,993) (1,993) (38) (2,031)
Exercised share options - - 141 - 141 - 141
Delivered shares for remuneration - - 37 - 37 - 37
Costs share options - - 100 - 100 - 100
Consolidation of former associate - - - - - (5) (5)
Profit for the period - - - 7,831 7,831 (142) 7,689
Other changes in total recognised
income and expense for the period - - 283 - 283 - 283
Balance at 31 December 2009 700 16,854 (3,970) 13,720 27,304 107 27,411
Equity Statement 2010
Balance at 1 January 2010 700 16,854 (3,970) 13,720 27,304 107 27,411
Dividend distribution - - - (3,658) (3,658) - (3,658)
Realised translation differences - - 270 (270) - - -
Exercised share options - - 13 - 13 - 13
Costs share options - - 117 - 117 - 117
Acquisition of non-controlling
interest - - - (318) (318) 92 (226)
Profit for the period - - - 3,853 3,853 (43) 3,810
Other changes in total recognised
income and expense for the period - - 91 - 91 - 91
Balance at 31 December 2010 700 16,854 (3,479) 13,327 27,402 156 27,558

Note 1

Reserves in the Consolidated Statement of Shareholders' Equity consists of the balances for Translation reserves and Reserve for own shares.

Note 2

Retained earnings in the Consolidated Statement of Shareholders' Equity consists of the balances for Retained earnings (from prior years) and Unappropriated profits, equal to the Profit for the period for both financial years ended 31 December 2010 respectively 31 December 2009.

2010 2009
(in thousands)
Foreign exchange translation differences, net of tax 91 283
Income recognised directly in equity 91 283
Profit for the period 3,810 7,689
Total recognised income and expense for the period 3,901 7,972
Attributable to:
Equity holders of the parent 3,944 8,114
Non-controlling interest (43) (142)
Total recognised income and expense for the period 3,901 7,972

5. Consolidated Statement of recognised Income and Expense

6. Notes to the Consolidated Financial Statements

6.1 Reporting entity

DOCDATA N.V. (referred to as "DOCDATA" or the "Company") is a company domiciled in Waalwijk, the Netherlands. The consolidated financial statements of DOCDATA N.V. as at and for the year ended 31 December 2010 comprise DOCDATA N.V. and its subsidiaries (together referred to as the "Group") and the Group's interest in associates and jointly controlled entities.

The consolidated financials statements of the Group as at and for the year ended 31 December 2009 are available upon request from the Company's registered office at Energieweg 2, 5145 NW in Waalwijk, the Netherlands, or at the Company's corporate website, www.docdatanv.com .

6.2 Statement of compliance

These consolidated financial statements do not include all of the information required for full annual financial statements, and should therefore be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2009.

6.3 Significant accounting policies

The consolidated financial statements of the Group are prepared in accordance with the International Financial Reporting Standards as adopted by the European Union ("IFRS"). The accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2009. For a summary of the significant accounting policies under IFRS, please refer to the Group's Annual Report for the financial year ended 31 December 2009.

6.4 Management representations

In the opinion of the management, these consolidated financial statements include all adjustments necessary for a fair presentation of the financial position, operating results and cash flows of all reporting periods herein. All such adjustments are of a normal recurring nature, except for nonrecurring expenses related to the acquisition of the assets of the former Dohmen Solutions Group (including acquisition costs, advisory fees, restructuring expenses, etc.) recorded in the financial

year ended 31 December 2010, and non-recurring adjustments for the following topics recorded in the financial year ended 31 December 2009:

  • impairments of goodwill and other intangibles;
  • impairment of assets and liabilities reported as assets and liabilities classified as held for sale;
  • valuation of corporate income tax assets and profits, resulting from the liquidation of former subsidiaries.

6.5 Consolidation

In the consolidated financial statements for the year ended 31 December 2010, the following treatment has been applied for the following incorporation and acquisition:

  • IAI excimer systems B.V.: per 1 April 2010, IAI industrial systems B.V. has incorporated a new legal entity for a Dutch subsidiary, IAI excimer systems B.V. in Veldhoven. The balance sheet and income statement of IAI excimer systems B.V. have been included in the DOCDATA consolidation starting per the date of incorporation;
  • Docdata Assets GmbH, Docdata e-Commerce Services GmbH, Docdata Fashion Services GmbH: these three new German subsidiaries, wholly owned by docdata germany GmbH, have been incorporated (based on new shelf companies, "Blitz GmbH") to provide the legal structure enabling the acquisition of the activities of the former Dohmen Solutions Group per 16 April 2010. The balance sheet and income statement of these three GmbH's have been included in the DOCDATA consolidation starting per this date;
  • Docdata media GmbH: all shares in this German subsidiary, wholly owned by docdata germany GmbH and part of the E-commerce service company Docdata, were sold on 21 July 2010 to the German investment fund Deutsche Unternehmensbeteiligungen GmbH (DUBAG) in Munich. The balance sheet and income statement of docdata media GmbH were excluded from the DOCDATA consolidation starting per this date. The media replication activities of this German subsidiary were fully written off at fair value by the Group per the end of the 2009 financial year. The remaining book value of these assets and liabilities are reported as assets and liabilities classified as held for sale in the Group's Annual Report for the financial year ended 31 December 2009.

In the consolidated financial statements for the year ended 31 December 2009, the following treatment has been applied for the following incorporation and acquisition:

  • IAI industrial systems GmbH: per 12 January 2009, IAI industrial systems B.V. has incorporated a new legal entity for its Germany subsidiary, IAI industrial systems GmbH in Berlin. The balance sheet and income statement of IAI industrial systems GmbH have been included in the DOCDATA consolidation starting per the date of incorporation;
  • Pegasus Mail GmbH: on 9 January 2009, docdata e-business GmbH has acquired all issued shares of Pegasus Mail GmbH in Münster (Germany). This company operates fulfilment services related to print and mail. The balance sheet and income statement of Pegasus Mail GmbH have been included in the DOCDATA consolidation starting per the acquisition date.

6.6 Property, plant and equipment

31 December
2010
31 December
2009
(in thousands)
Land and buildings 1,263 1,347
Machinery and equipment 6,503 2,935
Office equipment and other 2,665 1,881
10,431 6,163
Under construction - 58
Total 10,431 6,221

The book value of property, plant and equipment has increased with € 4.2 million in 2010 due to capital expenditure for € 6.7 million and depreciation charges for € 2.5 million. Included in capital expenditure in 2010 is the purchase price of in total € 0.5 million paid at acquisition for the equipment bought of the former Dohmen Solutions Group, and € 0.6 million investments by IAI

industrial systems in buildings and laser production equipment. The remainder of about € 5.6 million relates to investments in the fulfilment warehouses of the Group and is predominantly spent in Germany for the warehouses located in the Berlin and Munich regions.

6.7 Intangible assets

31 December
2010
31 December
2009
(in thousands)
Goodwill 6,723 6,626
Software (IT platforms) 1,973 1,539
Customer contracts 703 468
Development costs 255 -
Other 36 -
Total 9,690 8,633

The book value for intangible assets has increased with € 1.1 million in 2010, due to the following:

  • capital expenditure in IT platforms, customer contracts and development costs (€ 2.1 million in total), predominantly for the acquisition of the IT-platform and customer contracts of the former Dohmen Solutions Group (€ 1.3 million in total at acquisition) and investments in the IT-platforms for Docdata commerce and payments (€ 0.5 million in total). Also, IAI industrial systems has invested € 0.3 million in development costs for the production of a new type of systems for the security market;
  • amortisation charges for IT platforms and customer contracts (€ 1.1 million in total);
  • currency exchange profits (€ 0.1 million) on the valuation of the intangible assets with an original value in British pounds (i.e. goodwill and customer contracts related to the Braywood and Hitura acquisitions).

6.8 Inventories

31 December
2010
31 December
2009
(in thousands)
Raw and auxiliary materials 1,260 720
Work in progress 3,671 6,066
Finished goods 505 75
Total 5,436 6,861

The book value of inventories decreased € 1.4 million in 2010, which is the combined effect of acquired inventories of the former Dohmen Solutions Group (€ 0.4 million), decreased work in progress at IAI industrial systems (€ 2.4 million) and increased general inventory levels for raw and auxiliary materials, given the grown business activities of the Group in 2010 (€ 0.6 million).

IAI industrial systems' order book developed in 2010 from € 13.7 million at 31 December 2009 to € 8.4 million at 31 December 2010 resulting from systems' deliveries in 2010 with revenue of € 18.2 million and new orders booked with a total sales value of € 12.9 million.

E-commerce
service company
Docdata
Technology
company IAI
industrial systems
(in thousands, except earnings per share and average shares
outstanding)
% %
Revenue 85,834 100.0 18,176 100.0
Cost of sales (66,759) (77.8) (11,258) (61.9)
Gross profit 19,075 22.2 6,918 38.1
Other operating income 389 0.5 69 0.4
Selling expenses (4,764) (5.5) (836) (4.6)
Administrative expenses (13,023) (15.2) (2,159) (11.9)
Other operating expenses (657) (0.8) - -
Operating profit before financing result 1,020 1.2 3,992 22.0
Financial income 151 0.2 64 0.4
Financial expenses (187) (0.2) (68) (0.4)
Net financing expenses (36) - (4) -
Share of profits of associates - - - -
Profit before income tax 984 1.2 3,988 22.0
Income tax expense (224) (0.3) (938) (5.2)
Profit for the period 760 0.9 3,050 16.8
Attributable to:
Equity holders of the parent 803 0.9 3,050 16.8
Non-controlling interest (43) - - -
Profit for the period 760 0.9 3,050 16.8

6.9 Segmented Consolidated Income Statement 2010

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