Neways realised a net profit of EUR 5.1 million in 2005 (2004: EUR 4.7 million), partly because of a strong 4th quarter. Herewith the forecast in November 2005 (at least EUR 4 million) was amply exceeded. Turnover rose by 9.6% to EUR 207.9 million. Growth in turnover was almost fully attributable to the consolidation of Neways Advanced Applications (Stork Electronics), which was acquired in 2004. Turnover on an organic base was slightly lower in 2005 compared to 2004, in particular due to strong decline of demand in the semiconductor industry. Neways’ financial position greatly improved last year, improvements in efficiency were implemented throughout the whole organisation and advantages of synergy were made better use of. With this the company's foundation for growth was further strengthened in 2005 and dividend payments will be resumed.

Turnover
The market for Electronic Manufacturing Services (EMS) improved slowly but steadily over the line as a whole. After the recovery of demand from the semiconductor industry in the second half of 2004, it declined again in 2005 as expected. Turnover from other sectors, such as the medical and industrial sectors, increased further last year. However, on balance this still resulted in a slight drop in organic turnover of 4%.

Because of the full consolidation of Neways Advanced Applications (acquired mid-2004), turnover rose by 9.6% to EUR 207.9 million. Due to the consolidation, turnover per segment gives a somewhat distorted view. Consolidation exerted a positive influence on the turnover from the semiconductor industry and the medical sector in particular.

Results
The increase in turnover is accompanied by a slight drop in gross margin (as % of net turnover) to 40.5% (2004: 41.6%). Partly as a result, the operating profit came in slightly lower at EUR 9.0 million (2004: EUR 9.8 million), which corresponds to 4.3% of turnover (2004: 5.2%). This drop is distorted by non-recurring items (extraordinary income and expenses), including a provision in 2005 of EUR 0.5 million for the reorganisation in the operating company Ripa. Corrected for non-recurring items, there was a slight rise in the operating profit of EUR 9.3 million to EUR 9.5 million, which corresponds to 4.6% of turnover (2004: 4.9%). Apart from Ripa, all operating companies achieved a positive operating result.

Result before tax came in at EUR 7.5 million (2004: EUR 8.4 million). The tax rate was 32.7% compared with 43.6% in 2004. The lower tax rate was due to a one-off write down of the latent tax claim in 2004. The write down was related to the structural lowering of the tax rate in The Netherlands.

Net profit amounted to EUR 5.1 million, compared to a net profit of EUR 4.7 million in 2004. A positive result was achieved in both the first half (EUR 2.6 million) and the second half (EUR 2.5 million) of the financial year.

Net earnings per share and dividend
The net earnings per ordinary share in 2005 amounted to EUR 0.59, a rise of 5.4% compared with the EUR 0.56 per ordinary share in 2004. Dividend payments will be resumed. The proposal is to pay out a dividend of EUR 0.10 per ordinary share, to be received in the form of cash or shares, at the shareholder’s choice.

Key developments
Last year, Neways further strengthened its foundation for further growth. Both operationally and financially, the company is rather better positioned than a few years ago. The year 2005 was marked by improvement in collaboration between the Neways operating companies.

Neways is increasingly acting as a ‘one-stop-provider’ for its customers. In this respect intensive collaboration between the Neways operating companies, based on a practical, customer-oriented approach, is of key importance. It is not only a matter of combining strengths in purchasing, logistics and sales, but also of strengthening working relationships in contacts with new and existing customers. In this way customers are made more aware of the complementary services that Neways is able to offer.

The competitive position and customer-orientation have once more been improved in the reporting year and the activities of Neways are more in tune with the current demands and wishes of the market. Together with the strengthened balance sheet and positive cash flow, this forms the foundation for the healthy, long-term development of Neways.

New market segment
Neways is placing more emphasis on the defence (military) market, a market segment with clear possibilities for growth. A major success was achieved in June with a multi-year order worth EUR 20 million for the development and series production of electronic controls systems for the Dutch Royal Army’s new Infantry Combat vehicle.

Expansion of interests Hoyte and Q-Nova
In the middle of 2005 Neways expanded its interest in the operating company Hoyte to 100% in order to intensify the collaboration between Hoyte, specialising in development, and the other Neways operating companies. In addition, Neways expanded its stake in the Slovakian production company Q-Nova to 100% in mid-2005, in relation to the strategy to selectively extend production activities in low-wage countries. Last year, the number of Neways employees in Eastern Europe and China rose by 12% to 754 by the end of 2005.

Integration of Neways Advanced Applications
The extensive integration process of Neways Advanced Applications was completed in the autumn of 2005. Purchasing was integrated within the Neways group and component management was brought fully into line with the Uniform Article Coding (UAC) system adopted by Neways. At the end of 2005, the development activities of Neways Advanced Applications and Hoyte were combined under the new name, Neways Technologies. The purpose of this combining of knowledge and capacity is to further back up the ‘one-stop-provider’ strategy and intensify the collaboration between Neways operating companies and customers.

Streamlining of Ripa organisation
In September it was decided to reorganise operating company Ripa in Son (now successfully completed), because of declining turnover and results. The efficiency drive consisted of a radical improvement in the logistical process, an adaptation of the business organisation and a reduction in the workforce of about 20.

Move to lead-free production
After 1 July 2006 it will not be permitted, for environmental considerations, to produce any more electronic parts containing lead in the European Union. This signifies a revolutionary change for the electronics industry. Last year, Neways devoted a lot of attention to the move to lead-free production. Currently, all Neways operating companies are ready for the move to lead-free production.

Financial position
In 2005, the financial position greatly improved and offers a healthy foundation for further growth in the coming years. Guaranteed equity has been strengthened, debts reduced and the working capital decreased by a strict management of accounts receivable and inventories. The solvency rate (guaranteed equity / balance sheet total) amounted to 40% at the end of 2005, a steep rise compared with the 30.3% of 2004.

Net cash flow was also very strong, with EUR 11.5 million (2004: EUR 8.8 million). This was mainly due to the positive net result, the reduction in the working capital and the restrictive investment policy. The considerable reduction in the debt position and improvement of conditions meant that the interest charges came in lower than in 2004.

Neways is delighted by the progress made in 2005 with regard to the financial position. Together with the operational improvements made, there is now a healthy foundation for implementing Neways’ long-term growth strategy.

Anticipating events in 2006, on 3 April 2006 a subordinated convertible bond loan of EUR 3 million (conversion price EUR 5.25) will be converted into equity. Therefore, the number of outstanding ordinary shares will increase by 571.429.

IFRS
In the financial year 2005, Neways reported in accordance with the International Financial Reporting Standards (IFRS) regulations. For this, the latest updates of the IFRS standards were used. The influence on the comparative figures for 2004 as regards the Profit & Loss account are not significant. With regard to the balance sheet, the IFRS led to a drop in the guaranteed equity of EUR 2 million as of 1 January 2005, with which solvency (guaranteed equity / balance sheet total) stood at 30.3%. The valuation of inventories dropped by EUR1.3 million as of 1 January 2005 under the effects of IFRS. Provisions for Pensions and Pre-pensions increased by EUR 1.3 million on 1 January 2005, based on the ‘defined benefit plan’. In this press release, the equivalent 2004 figures are adjusted for application of IFRS.

Outlook 2006
Further improvement of collaboration between the Neways operating companies will be top of the agenda in 2006. In addition to better use of the benefits of synergy, there are still sufficient possibilities within the organisation to implement improvements in efficiency and sharpen up operational management. In addition, Neways will not only be aiming to provide higher added value to customers as a ‘one-stop-provider’ in the EMS market, but also to further improve quality, reliability of delivery and innovative capabilities.

At the start of 2006, Neways is in a much better position than it was several years ago. Good progress has been made operationally and, together with the greatly-improved financial position, this is a healthy basis for further growth in the coming years. The order portfolio was well filled at the beginning of 2006. There is increasing demand from both the semiconductor industry and from other market segments. However, the outlook on developments in the EMS market still remains limited to no more than a few months. It is therefore too early to make an announcement on expected profit for 2006.