NEWAYS ELECTRONICS : Recovery turnover and results Neways in first half 2015

PRESS CONFERENCE / ANALYST MEETING: TODAY, WEDNESDAY 26 AUGUST 2015
START: 10.30 - LOCATION: Hotel Casa 400 (Eerste Ringdijk 4, AMSTERDAM)

P R E S S R E L E A S E

NEWAYS ELECTRONICS INTERNATIONAL N.V.

FIRST HALF YEAR RESULTS 2015

Number of pages: 9

Recovery turnover and results Neways in first half 2015

SON (the Netherlands), 26 AUGUST 2015 - NEWAYS ELECTRONICS INTERNATIONAL N.V. (Neways) (Euronext: NEWAY) recorded net turnover of € 189.1 million in the first half of 2015, an increase of 41% (H1 2014: € 133.6 million). The increase was due to the consolidation of BuS Group as of July 2014. Organically, turnover was down 6%, largely due to the relatively strong comparable results in the first half of 2014. Compared to the second half of 2014, Neways recorded an 8% organic increase in turnover. The operating result was up 40% at € 5.9 million (H1 2014: € 4.2 million). The order book stood at € 163.0 million as at end-June 2015 (year-end 2014: € 155.9 million).

Huub van der Vrande, CEO:
"In the first half of 2015, we were able to respond effectively to a recovery in demand from our clients compared to the second half of 2014. In the past six months the renewed Executive Board began the process of identifying potential improvements and initiated the roll-out of a group-wide programme of improvement dubbed 'Up to the next level'. We want to use this programme to further strengthen our position as a one-stop provider in the Electronic Manufacturing Services market. As a result of the acquisition of BuS Group our distribution across market sectors has improved and enables us to respond more effectively to fluctuations in demand. Partly because of this and based on our current order book and feedback from clients, we expect the first half of the year to be a good indication of the level of business in the second half of 2015."

Group results

Turnover and order book
Net turnover increased by 41% to € 189.1 million (H1 2014: € 133.6 million). The acquisition of BuS Group has resulted in a clearly broader distribution of turnover across the various market sectors.

The Electronic Manufacturing Services (EMS) market, and the semi-conductor sector in particular, improved in the first half of 2015 when compared to the second half of 2014, and was clearly more stable. The order book increased by 4.6% to € 163.0 million (year-end 2014: € 155.9 million).

Gross margin
The gross margin came in 37% higher at € 75.6 million (H1 2014: € 55.1 million). As a percentage of turnover, the gross margin declined to 40.0% in the first half of 2015 (H1 2014: 41.2%). This was largely due to the changed mix following the addition of the BuS Group turnover.

Operating expenses
The acquisition of BuS Group raised personnel expenses by 34% to € 52.1 million in the first half of 2015 (H1 2014: € 39.0 million). The average number of FTEs increased by 40% to 2,629 (H1 2014: 1,876), with around 74% of these employed in Western Europe (H1 2014: around 66%) and some 26% in Eastern Europe and Asia (H1 2014: around 34%). Other expenses (including office accommodation costs, production costs and cost of sales) increased to € 14.3 million in the first half of 2015 (H1 2014: € 10.3 million). Depreciation increased to € 3.3 million in the first half of 2015. (H1 2014: € 1.6 million), also as a result of the acquisition of BuS Group.

Operating expenses as a percentage of turnover fell to 36.9% (H1 2014: 38.1%) on the back of cost savings and efficiency improvements introduced.

Operating result and operating margin
The operating result came in 40% higher at € 5.9 million (H1 2014: € 4.2 million). This figure includes the integration costs related to BuS Group, which amounted to around € 0.3 million in the first half of 2015. The operating margin remained unchanged at 3.1% (H1 2014: 3.1%).

Financing costs and tax rate
Financing costs came in at € 1.2 million in the first half of 2015 (H1 2014: € 0.1 million) largely on the back of higher interest charges as a result of the financing of the BuS Group acquisition. The tax rate came in at 26% (H1 2014: 27%).

Net result
Net result from ordinary operations (excluding exceptional income and expenses) came in at € 3.5 million, an increase of 16.7% (H1 2014: € 3.0 million).

Exceptional income and expenses
The exceptional charge of € 0.1 million, on balance, pertains to the extra depreciation of € 0.5 million on intangible fixed assets that resulted from the purchase price allocation and an upward revaluation of € 0.4 million of deferred tax claims in Germany.

Financial position

Shareholders' equity and solvency
Shareholders' equity increased by 6.5% to € 70.3 million at end-June 2015 (year-end 2014: € 66.0 million). The guaranteed equity (including the subordinated convertible bond loan of € 5 million) was € 75.3 million). The solvency (guaranteed equity / total equity) stood at 40.0% at end-June 2015 (year-end 2014: 40.5%). Corrected for the capitalised deferred tax claim and intangible fixed assets, solvency came in at 33.6% and therefore met the banks' solvency requirement of 32.5%.

Net debt
At end-June 2015, Neways had net debt of € 39.5 million (year-end 2014: € 34.8 million). The interest bearing long-term debt stood at € 17.7 million at end-June 2015 (year-end 2014: € 22.1 million) and the interest bearing short-term debt, including the current (current account) credit facility stood at € 23.9 million at end-June 2015 (year-end 2014: € 14.5 million).

Working capital and net cash flow
The working capital (inventories plus receivables less trade payables and other payables) had risen to € 63.7 million at end-June 2015 (year-end 2014: € 53.5 million). This increase from the year-end 2014 figure was largely due to the higher activity levels. As a percentage of net turnover in the first half year, working capital stood at 34% (year-end 2014: 31%).

Inventories measured in days of turnover remained more or less unchanged at 77 days at end-June 2015 (year-end 2014: 76 days). Neways has launched initiatives to improve the turnover rate of inventories. The company maintains its target of a turnover rate of 60 days for the group.

The number of outstanding accounts receivable days stood at 37 at end-June 2015 (year-end 2014: 36 days). Neways has a tight receivables management system and uses a supplier finance programme for a number of larger clients, which encourages rapid payments. The total provision for dubious debts stood at € 1.1 million at end-June 2015 (year-end 2014: € 1.1 million).

Net cash flow came in at € - 5.5 million in the first half of 2015 (H1 2014: € - 18.5 million). The improvement was largely due to reduced utilization of funds from provisions and lower build up of working capital.

Investments and return on investments
Total investments in tangible and intangible assets amounted to € 2.3 million in the period under review (H1 2014: € 2.8 million). Investments were largely related to replacement investments and investments in the implementation of the ERP programme. The return on invested capital (operating result as a percentage of invested capital) declined to 6% in the first half of 2015 (H1 2014: 7%).

Key strategic and operational developments in H1 2015

BuS Group
Neways began the process of integrating BuS Group in the first half of 2015. The acquisition of BuS Group in July 2014 has made Neways a top-5 player in the European EMS market and has given the company a strong position in the important German market. It also strongly improved the distribution the group's activities across market sectors. This was clearly visible in the first half of 2015, especially in the automotive market sector. BuS Group also adds new technological capacity and expertise and the opportunity to share best practices across the combined group, in fields such as component and system development, process innovation and production and supply chain management. We also expect the combination to increase purchasing power and create sourcing synergy opportunities. The combination can also benefit from Neways' local presence its existing (low-cost) production capacity in Asia, which will improve BuS Group clients' access to competitive and tailor-made solutions.

Start roll-out group-wide improvement programme
The existing group-wide improvement potential and the introduction of the improvement programme 'Up to the next level', of which the integration of BuS Group is part, will position Neways for future challenges. As part of this programme, a number of key priorities were identified, with various initiatives started up in the first half of the year, all of which will contribute to Neways' positioning as one-stop provider in the EMS market:

• Strengthening Neways DNA and leadership
In 2015, Neways launched the DNA Leadership programme. This is a corporate culture programme developed for all Neways employees. The programme includes training courses for managers within the group, because they play a particularly critical role in the promotion and communication of Neways' DNA, in terms of how Neways wants to cooperate internally as a group and with its clients and suppliers.

• Strengthening sales process
Neways serves clients on the basis of the one-stop provider principle. Neways often assumes responsibility for the entire product life cycle in the form of all-inclusive solutions. The more intense cooperation with clients requires a more integral role from Neways. As a result, the key account management role becomes more important and therefore a greater emphasis will be put on the development of market and client know-how.

• Improvement operational performance operating companies
Continuous cooperation between the various operating companies boosts efficiency. Support from well-coordinated and standardised processes and an efficient supply chain will enable Neways to further improve the combined operational performance. To this end, lean enterprise methods are rolled out across the various operating companies.

• Enhancing IT systems
In the second half of 2015, the first implementation of the new ERP system at Neways Advanced Applications (NAA) will start. The introduction of ERP will, among other things, help to optimise the exchangeability of operating companies' data in order to support shared clients more effectively. Following successful implementation at NAA, other operating companies will follow.

• Optimisation purchasing and supply chain
Neways wants to realise a more intense cooperation with its suppliers. This is realised by a reduction of the number of suppliers and develop a relevant dependency, giving suppliers the opportunity to improve service levels. The strategy per sector is determined for which the know-how of suppliers contributes to a more efficient supply chain with added value.

Management priorities and outlook

In the second half of 2015, the emphasis will be on the roll-out of the group-wide improvement programme 'Up to the next level' started in the first half year, aimed at shaping the Neways' one-stop provider model.

In financial terms, Neways remains in a good starting position for the full-year 2015. This enables Neways to anticipate market developments and constantly respond to changing market sentiments.

Based on the order book of € 163.0 million at end-June 2015 (year-end 2014: € 155.9 million) and feedback from clients, Neways is confident that the first half of the year is a good indicator for business levels in the second half of 2015.

PRESS CONFERENCE / ANALYST MEETING
The combined press conference / analyst meeting regarding the first half year results of 2015 will be held today at 10.30 am at Hotel Casa 400, Eerste Ringdijk 4 in Amsterdam.

For more information, please contact:
Huub van der Vrande (CEO) / Paul de Koning (CFO)
Tel: + 31 (0)40 267 9201

Neways Electronics International N.V.
P.O. Box 69, 5690 AB SON
www.neways.nl

Neways Electronics International N.V. (Neways) is an international company active in the EMS (Electronic Manufacturing Services) market. Neways offers its clients custom-made solutions for the complete product life cycle (from product development to after-sales service) of both electronic components and complete (box-built) electronic control systems. Neways operates in a niche of the EMS market and focuses primarily on small to medium-sized specialist series, in which quality, flexibility and time-to-market play a crucial role. Neways products are used in sectors such as the semi-conductor, medical, automotive, telecom and defence industries. Neways has operating companies in the Netherlands, Germany, the Czech Republic, Slovakia and China, with a total of 2,611 employees at year-end 2014. Neways recorded net turnover of € 309 million In 2014. Neways is listed on Euronext Amsterdam (symbol: NEWAY).

Interim report 2015
The official interim report 2015, as currently compulsory under the EU transparency directive, was also published today and is available on the Neways corporate website (www.neways.nl).

Agenda

Addenda:
- Consolidated Profit and Loss Account
- Consolidated Balance Sheet
- Consolidated Cash Flow Statement
- Statement of Changes in Group Equity
- Additional data

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