Total revenues decreased organically by 1.5% if the non-core fax business is excluded. Non-recurring revenues, sales of printing systems and software, decreased 2.7%, due to continuing adverse conditions in the financial services and the construction sector. Recurring revenues excluding fax decreased 0.9%. During 2008 Océ acquired Intersoft whilst Arkwright and Océ Document Technologies were divested. Excluding these transactions recurring revenues were stable. Recurring revenues include services as well as sales of toners, inks and media, and represent some 70% of total revenues. An increasing part, currently 26%, of our total revenues relates to color.
Normalized operating income, representing the continuing business, amounted to Euro 16.8 million (2007: Euro 21.2 million), including a negative currency exchange impact of Euro 6 million. One-off items amounted to Euro 28.0 million of which Euro 10.2 million were restructuring charges; the remainder related to the sale of the loss making coating business of Arkwright, being a Euro 4.6 million book loss and the realization of Euro 13.2 million currency translation differences. Under IFRS, translation results on equity in subsidiaries denominated in non-euro currencies are recognized directly in Equity under the heading ‘Currency Translation Differences’. Upon disposal of the subsidiary the accumulated translation results are realized via the Income Statement. This IFRS accounting rule has no impact on Equity or cash flow.
In Digital Document Systems (DDS) revenues generated by continuous feed systems declined as a consequence of the continued turmoil in the financial markets. DDS increased its revenues in cutsheet printing, driven by continued growth in the office and print room segment. As a result DDS improved its normalized operating income.
Océ Business Services (OBS) continued its revenue growth. Normalized operating income decreased, driven by continued investments at large new contracts as well as the slowdown of litigation services activities in the US.
The slowdown in the construction sector impacted revenues in Technical Document Systems and Imaging Supplies. Wide Format Printing Systems (WFPS) grew its revenues in the display graphics markets due to the success of its product portfolio. Normalized operating income declined as a result of lower revenues and start-up costs of the Océ ColorWave 600.
We started the fourth quarter of 2008 with an order backlog comparable with last year. Continued cost savings are expected to amount to Euro 21 million in the fourth quarter. Supported by a strong focus on improving all working capital elements and by the anticipated sale of finance lease receivables, we expect a positive free cash flow for the 2008 full year.
Results Océ Group
Exchange rate effects
As an internationally operating company, Océ generates approximately 60% of its revenues outside the euro zone and is therefore exposed to fluctuations in exchange rates, especially the US dollar (USD) and the Pound sterling (GBP). In the third quarter the very strong euro, which rose against the USD by 10.9% and the GBP by 14.8%, impacted the financial results. Océ acts to reduce exchange rate exposures amongst others via exchange rate hedges, relocating manufacturing activities and increased procurement in non-euro currencies.
Revenues
Total revenues in the third quarter amounted to Euro 700.1 million, a decrease of 7.1%.
Excluding exchange rate effects and the non-core fax business, revenues decreased organically by 1.5%.
Our share of color continues to grow and now accounts for 26% of revenues, up from 20% in the same period last year. The focus of our new product introductions is to continue to bring more color products to market in all of our business segments. Over the past year Océ launched the full color Océ JetStream series and Océ ColorStream 10000 continuous feed printers, the Océ ColorWave 600 and Océ Arizona 200 GT wide format printers, the Océ CS 650/620 cutsheet printers and various other color products serving the office market. Océ expects that color will continue to grow at a rapid pace and will become a much larger part of the revenue stream going forward.
Non-recurring revenues amounted to Euro 219.5 million, decreasing by 7.2%. The adverse conditions in the financial services and the construction sector impacted sales, resulting in an organic revenue decrease of 2.7%, compared to the very strong third quarter of 2007 (in which non-recurring revenues rose 17.9%).
Recurring revenues amounted to Euro 480.6 million, decreasing by 7.0%. Excluding fax, organic recurring revenues decreased 0.9%. Excluding the acquisitions and divestments, the recurring revenues were stable.
One-off items due to restructuring and Arkwright divestment
