Telindus Announces Results, Strategy

HEVERLEE, Belgium -- Telindus reconfirms its operating result of EUR -7.9 million, on operating revenues of EUR 524 million, as communicated on 10 October last year. The fact that operating revenues are lower than announced at the end of Q3 is due entirely to lower product sales.

The net cash position increased from EUR 60 million at the end of 2002 to EUR 65 million, despite the weak market situation and an additional EUR 21 million investment for completing the new building.The Board of Directors will be proposing to the General Meeting that it pay a gross dividend of EUR 0.12 per share in respect of 2003, and also that it cancels 736,930 own shares.

The fall in operating revenues to EUR 524 million (EUR 567 million in 2002) is due entirely to the almost EUR 50 million fall in product sales. EUR 37 million of this fall is explained by the negative development of the EUR/USD parity.

Service revenues rose by 6% in 2003, and now account for a net 35% of turnover, as against 31% in 2002.

Belgium and the United Kingdom undoubtedly express the strongest service profile within Telindus Group, with services representing in excess of 50% of turnover. Weak European countries, in terms of both services mix and results, are Germany, Italy and Switzerland.

The further fall in product sales came totally from the European market. Product sales grew in S.E. Asia with the strong expansion of the Chinese market.

The relative fall of Benelux turnover is due mainly to the weak economic conditions prevailing in the Netherlands since mid-2003. In Belgium and Luxembourg, Telindus has done a good job of protecting its lead position. The weighting of the European Union (excl. Benelux) has increased slightly, even though Telindus's performance remains weak in Germany and Italy, where it continues to post negative operating results. On the other hand, Telindus is experiencing a recovery in turnover and profitability in Portugal and the United Kingdom, and to a lesser extent in France. Spain led the pack, confirming its strong profitability once again in 2003.

C. Financial and Extraordinary Results

The financial result of EUR 5.2 million was positively influenced by the EUR 4.8 million reversal of write-downs recorded in previous years on the 986,003 own shares that Telindus Group held in portfolio on 31 December 2003.

In addition Telindus, as in previous years, recorded depreciation of EUR 2.5 million on its positive consolidation differences (goodwill).

The extraordinary result of EUR -3.8 million in 2003 reflects both the restructuring costs and a limited EUR 0.5 million write-down on financial participations.

The main countries in which Telindus continued its restructuring efforts are Italy, Germany, France, the Netherlands and Hungary. In Italy, Telindus has had a new management since December 2003. In France and Germany, structures have been made more centralized, leading to redundancies. The restructuring in the Netherlands was prompted primarily by the sluggish market.

During 2003 the group’s headcount was pared back by 92 persons. This figure is the result of spontaneous resignations, restructurings and the recruitment of 123 new employees. Headcount at the end of 2003 was 2,194, as against 2,286 at the end of 2002.

At end-December 2003 Telindus had a net cash position of EUR 65 million (EUR 1.64 per share) as against EUR 60 million at the end of 2002. This improved cash situation is due first and foremost to better working capital management. This result is all the more remarkable when one realizes that the group invested EUR 21 million during the past financial year in the new corporate headquarters in Belgium. Until now this has been financed entirely out of internal funds.

E. Non-consolidated companies

In addition to its network activities, Telindus also has a significant financial participation in Mobistar (4.7%). This share represents, based on the market price on 12 February 2004 (EUR 53) a value of EUR 155 million (EUR 4.0 per Telindus Group share). For Telindus Group this participation represents an unexpressed capital gain of EUR 138 million.

F. Dividend and share buy-back

At 31 December 2003 Telindus held 986,003 own shares in portfolio, corresponding to 2.48% of the outstanding shares. These shares were purchased on the market, under the supervision of the Board of Directors. They are recorded in the company’s books at their historical purchase price.

During 2003 Telindus Group purchased a net 242,515 own shares at an average price of EUR 4.85. On 23 June 2003, 700,000 own shares were cancelled by resolution of an Extraordinary General Meeting of Telindus Group, reducing the number of outstanding shares from 40,436,930 to 39,736,930.

In 2004 Telindus Group purchased an additional 14,837 own shares at an average price of EUR 8.12, bringing the total number of own shares in portfolio on 13 February 2004 to 1,000,840, or 2.52% of the outstanding shares.

The Board of Directors of Telindus Group will be proposing to the General Meeting of 28 May 2004 that it declare a gross dividend of EUR 0.12 per share, as explicit confirmation of confidence in the company’s future.

A proposal will also be made to the General Meeting to cancel in the course of 2004 an additional 736,930 own shares held in portfolio (1.86% of outstanding shares). This will reduce the number of outstanding shares to precisely 39,000,000.

The Board of Directors at the same time confirms its intention of continuing the share buy-back programme.

G. Transition to IFRS

Telindus has committed to undertaking its financial reporting, starting in 2004, in accordance with the IFRS valuation rules. In addition, starting in the present financial year, the group will be publishing quarterly business updates.Preparatory to the transition to IFRS, Telindus Group has, among other things, valued the recorded goodwill in accordance with the IFRS system. The goodwill existing at the end of 2003 has passed this ‘impairment testing’ without any need for further write-downs.

H. Outlook for 2004

Although Telindus remains vigilant with respect to business development in 2004, a modest recovery in business activity is perceivable in a number of countries. This fragile recovery, albeit tempered by the strong position of the EUR against the USD, leads Telindus to believe that it will achieve a 5% growth in turnover in 2004, combined with a modest operating result.

In a separate release:The Telindus Group Board of Directors gave its approval for the implementation of the ‘FLAGSHIP 2006’ three year strategic plan. FLAGSHIP 2003 is the outcome of the strategic exercise which was the first task of the new Group Executive Committee that took over in October 2003. This analysis showed that in today’s situation an independent strategy can generate the greatest shareholder value.

FLAGSHIP 2006 will expand Telindus, over a three-year period, into an international, independent specialist in ICT solutions and services. Telindus has opted for Europe, but is also convinced that it can create added value in Asia. The company is aiming for long-term profitability and growth, central to which is the creation of long-term shareholder value.

The Telindus international FLAGSHIP mission is:
“To be the independent trusted advisor and sourcing partner who translates business needs into Secure Networked ICT Solutions and Services.”

Table 1:

The improvement in operating result will be driven essentially by organic growth and greater efficiency. Telindus also intends to invest in specific regions and competencies, in order to further extend its position as trusted advisor & sourcing partner.

FLAGSHIP 2006 is a concept with substance. It combines all aspects that are crucial for achieving the above objectives.

FLAGSHIP 2006

F = FOCUS Secure Networked ICT Solutions and Services
L = LOYALTY Towards customers, employees and shareholders
A = ALLIANCES & ADVISOR Dynamic in Alliances - Customer Intimacy
G = GROWTH Growing organic and through acquisitions
S = SOLUTIONS & SERVICES Annuity services potential in everything we do
H = HUMAN CAPITAL Know-how management and satisfaction
I = INNOVATION & InControl Innovation focussed on our customers’ future
P = PROFITABILITY Profit enhancing and efficiency improving

Telindus CEO Ronald Everaert: “Telindus’s unique strength is its personnel with their excellent knowledge of network infrastructures and services. We also have a strong customer portfolio with leading companies who for years have entrusted Telindus with their entire communication networks and network security. The challenge for the management team in the coming years - which will see substantial growth in challenging but also complex networked ICT opportunities - is to draw further profit from Telindus's strengths and to extend these efficiently and effectively to the key growth regions.”

Achieving a profitable activity mix

Within a very few years, Telindus's activity mix (of network products and network services), in terms of sales, has evolved from a 25% service content in 2001 to 35% in 2003. But Flagship 2006 is seeking to go still further. In 2006 services should represent more than 50% of overall sales. It is solely with this activity that Telindus can in future achieve the highest added value.

In order to achieve this percentage, management will further optimize and strengthen the entire organization, from development through to sales and implementation. Growth in service revenues will come both from an increased offering of non-product-related services and for an extended offering of annuity services and solutions.

Telindus VP Strategy Carmen Cordier: “At a time where return on investment (ROI) and operational excellence are crucial, where equipment is becoming digitally intelligent and our customers’ core business processes are becoming networked, enterprises need a partner like Telindus that can think with them on an international scale and can react to their future network needs. They also need an innovative partner with a service focus, that enjoys the necessary flexibility with regard to in-/co-/out-sourcing formulas. Only in this way can we present our customers with services and/or solutions agreements that meet their business needs and their budget availabilities.”

Alliances and Acquisitions

In terms of extending its services offering, Telindus will further strengthen its position through strategic alliances with both international and national market players. The cooperation with EDS for the 5-year project for the Flemish Government is an example of such combining of complementary competences.

In terms of acquisitions Telindus will be studying a number of specific opportunities. Possible investments in external growth will contribute both to building up a fully integrated international group and to further strengthen the position of Trusted Advisor & Sourcing Partner. In a number of countries, where Telindus has good growth prospects and a strong management team, Telindus is looking to accelerate growth. Such growth will be achieved both organically and through acquisitions provided the right opportunities can be found. Acquisitions could add 10% to sales in both 2004 and 2005. includes acquisitions in 2004 and 2005, adding each year +/- 10% of yearly annual turnover. For 2004, the acquired growth is expected to be included as from the second half of 2004, therefore adding 5 % of turnover.

Financial strategy

The Board of Directors wishes to underscore its confidence in the potential of the FLAGSHIP 2006 strategic plan.

For this reason it will be proposing to the General Meeting to:

For the coming years the Board also confirms its commitment to shareholders by endorsing its plan to buy back own shares .

Telindus Group NV