Chairman Rokus van Iperen: 'The flywheel is turning the right way again'
'Océ turned the corner on the second half of 2005', said Rokus van Iperen. 'The flywheel of revenues from services and media is now turning the right way again. The robust increase of 66% in operating income from commercial activities is an excellent performance. In the United States, the integration of Imagistics is proceeding as planned and we are now in a good position to further improve the way we serve our markets. Océ today is clearly better than last year. We have a wider range of products and services, our distributive strength in the United States and Europe has been substantially boosted and we will launch attractive new products that will further strengthen our market position.'

The recently announced acquisition of Imagistics International Inc. will strengthen our distribution power in the USA, enabling us to achieve one of our most important strategic goals. We expect the operating income from commercial activities in 2005 to be significantly higher than the 2004 result."

Océ provisional results fourth quarter and 2005 financial year*

        Fourth quarter                  Financial year
In million €    2005    2004            organic 2005    2004            organic
                                (excl.                          (excl.
                                lease)                          lease)
Total revenues  764.4   702.2   8.9%    3.1%    2,677.3 2,652.5 0.9%    2.1%
Operating       
income  68.0    29.1    133.7%          110.1   110.4   -0.2%   
Net income      50.3    25.4    98.2%           78.8    78.1    1.0%


Operating 
income from 
commercial 
activities (excl. 
book profit on  27.0    9.5     184.3%          51.6    31.0    66.3%
sale of leases 
and excl. 
exceptional 
income items)


In € per share
Net income      0.60    0.29    102.7%          0.92    0.89    2.7%
Dividend                                        0.58    0.58            




        Fourth quarter  Financial year
In million €    2005    2004    2005    2004
Operating income (EBIT) 68.0    29.1    110.1   110.4
Release from pensions   -68.3           -68.3
Exceptional expenses    33.1            33.1
Operating income excl. 
exceptional items       32.8    29.1    74.9    110.4
Financial activities    4.3     9.5     18.6    48.4
Profit on sale of lease contracts       1.5     10.1    4.7     31.0
Operating income from commercial 
activities (excl. book profit on sale   27.0    9.5     51.6    31.0
of leases)

Fourth quarter 2005: favourable increase in revenues and income
Total revenues in the fourth quarter of 2005 developed favorably and increased by 8.9%. The acquisition of Imagistics International Inc., which has been consolidated as from November 1, 2005, contributed 5.3% to that increase.

Exchange rate effects resulted in a 2.2% increase in revenues. On an organic basis, the increase in revenues amounted to 1.4% (excluding lease effects: 3.1%). Revenues from printing systems (excluding lease effects) continue to develop positively and booked an organic increase of 6.5%. Revenues from services and media were up by 1.4%, thanks in part to Business Services which made a clear contribution to the growth in revenues. Following a number of tough quarters, this business group has successfully returned to growth. Revenues from servicing contracts remained stable.

The book profit on the sale of the lease portfolio amounted in the fourth quarter to € 1.5 million (2004: € 10.1 million).

The gross margin decreased by 1.4% to 39.3%. This decrease was mainly attributable to lower revenues from leases (-1.1%). The volume/mix effect amounted to -0.2% and the hedging effect was -0.1%.

Operating expenses, excluding exceptional items, decreased from 36.6% to 35.1% as a percentage of revenues. As a result of further cost savings this development will continue.

Océ has concluded a new collective wage agreement with the trade unions and employee representative bodies in the Netherlands. One of the agreements reached as part of this collective bargaining process is that pension benefits will be based on a "career average earnings" system. As a result, an amount of € 68.3 million will be released from the provision for pensions.

In the fourth quarter Océ announced its intention to achieve a further reduction in costs. In Europe this will mean the discontinuation of around 500 jobs. In the United States measures have also been taken to boost profitability. In part, these will be implemented in parallel with the realization of the synergy effects resulting from the integration of Imagistics. To cover these measures in Europe and the US, a total provision of € 33.1 million was set aside in 2005. In 2006 a further provision will be made of around € 15 million. Océ expects that these measures to boost the profitability will generate some € 35 million in the form of synergy and cost savings in 2006.

Operating income amounted to € 68.0 million (2004: € 29.1 million). After adjustment for the release from the pension provision and non-recurring items of € 35.2 million, operating income increased to € 32.8 million (2004: € 29.1 million). Operating income from commercial activities increased from € 9.5 million in 2004 to € 27.0 million. The contribution by Imagistics in 2005 to Océ's operating income was not material.

Interest charges increased to € 7.2 million due to the costs of financing the acquisition of Imagistics International Inc. In the next few months the bridging loan that was used to pay for the acquisition will be converted into a long-term financing arrangement.

The tax charge amounted to 16.7%. The tax charge includes the R&D tax credit of € 4.8 million. Without this tax credit, the tax charge would have amounted to 24.6%.

Net income amounted to € 50.3 million (2004: € 25.4 million).

Net income per ordinary share outstanding was € 0.60 (2004: € 0.29).

Fourth quarter 2005: good results for Digital Document Systems
In Digital Document Systems (DDS), revenues in the fourth quarter increased by 10.4% to € 534.3 million (2004: € 484.1 million). On an organic basis revenues were 0.7% higher (excluding lease effects 2.7%). Exchange rate and acquisition effects led to an increase in revenues by 2.1% and 7.6% respectively. Revenues from printing systems, after excluding lease effects, increased organically by 6.7%.

All of the growth in sales was achieved on the basis of products that Océ launched in the past two years. In March 2006 several important new products will be launched during the Océ Open House even. These are expected to generate new impulses for sales.

Revenues from services increased organically by 0.8% compared to 2004 (excluding lease effects). The development of revenues from services has stabilized due to the fact that the increase in maintenance contracts for digital machines now largely compensates for the decreased servicing work on analogue copiers. However, in view of the large number of new placements in 2005, revenues from services are expected to increase in 2006.

Color is becoming increasingly important in DDS. In 2005 the Océ CPS 800/900 booked the strongest growth in sales compared to all other product lines. The number of color machines installed on customer premises has meanwhile increased to such an extent that revenues from servicing contracts for color machines form a solid basis for the recovery in revenues from service.

Outsourcing of document management activities is still an important trend in the market. It helped Business Services to achieve growth again in the fourth quarter. The operating income of DDS (before exceptional items) amounted to € 16.8 million (2004: € 10.5 million). DDS closed the 2005 financial year with a strong fourth quarter performance.

Fourth quarter 2005: strong performance by Wide Format Printing Systems
In Wide Format Printing Systems (WFPS) revenues increased by 5.5% to € 230.1 million (2004: € 218.1 million). The organic increase in revenues was 2.8% (excluding lease effects: 3.9%). Exchange rate effects contributed 2.7% to the revenues increase.

Revenues from new printing systems were up by 6.0% (excluding lease effects). In the technical documents market Océ is achieving growth with both black-and-white and color systems. Sales of color printers in the graphics market has shown a strong increase.

In 2006 Océ will be adding several new color printers to its range in response to the trend towards the increasing use of color in the wide format market. Revenues from services and media, excluding lease effects, were up by 2.8%. Revenues from maintenance contracts and sales of toner and ink cartridges made a strong contribution to the growth in total income.

Operating income before exceptional items was € 16.0 million (2004: € 18.6 million). This decrease is attributable in full to lower revenues from leases. WFPS therefore performed excellently during the quarter and during the full year.

Provisional results 2005 financial year
Total revenues in 2005 were 0.9% higher at € 2,677.3 million (2004: € 2,652.5 million). This increase was achieved as a result of the acquisition of Imagistics International Inc. (1.4%). Exchange rate effects reduced revenues by 0.4%. Excluding lease effects, revenues increased on an organic basis by 2.1%.

Revenues from new printing systems increased by 10.5% but revenues from services and media were 1.1% lower (excluding lease effects). The gross margin was 40.0% (2004: 41.6%). Of the decrease in the margin, 1.4% was attributable to lower lease revenues.

Operating expenses, excluding exceptional items, amounted to 37.2% (2004: 37.4%) as a percentage of revenues.

Operating income was €110.1 million (2004: € 110.4 million). Excluding the book profit of € 4.7 million on the sale of the lease portfolio, operating income from commercial activities increased by 66% to € 51.6 million (2004: € 31.0 million). Operating income from financial activities amounted to € 18.6 million (2004: € 48.4 million).

Net income increased by 1% to € 78.8 million (2004: € 78.1 million), while the tax charge amounted to 12.7% (2004: 13.2%).

Net income per ordinary share was € 0.92 (2004: € 0.89).

Integration of Imagistics International Inc. proceeding as planned
The acquisition of Imagistics offers Océ a unique opportunity to penetrate the office and printroom market in America. As from January 1, 2006 the combination operating under the name Océ Imagistics Inc. has been offering a wider range of products and services to existing and new customers.

The revenues of Océ in the US have now grown to $ 1.7 billion and therefore account for around 43% Océ's total revenues. The Océ-Imagistics combination has given Océ an excellent basic position to achieve a strong development in our biggest market: the United States.

In the months of November and December many task groups concentrated on working out the details of the integration plans in the commercial and financial areas. The integration is proceeding as planned, and we are confident that the plans drawn up so far will enable the anticipated cost savings and synergy benefits of € 15 million to be achieved in 2006.

Relocation of manufacturing on schedule
The relocation of machine manufacturing from the Netherlands to Asia is progressing as planned. The reduction in manufacturing costs is being achieved without Océ having to compromise on its high quality standards. Of the original Venlo production value, 20% was manufactured in Asia and Central Europe in 2005. In 2006 this percentage will increase to 50%.

Revenues growth results in bigger lease portfolio
Because of the growth in revenues, the total lease portfolio (for own account and outsourced) of Océ is increasing. At the end of 2005 financial lease receivables on the balance sheet amounted to € 343 million. This is 38% of the total lease portfolio of Océ. The remainder of the portfolio (62%) has been placed with third parties. At the end of 2004, that percentage was 55%. The further sale of leases to Océ's lease partners will bring a further decrease in lease receivables on the Océ balance sheet during the course of 2006.

Commercial versus financial results

In million €    Fourth quarter
        2005    2004
Commercial activities           
Revenues        755.7   690.2
Operating income        28.5*   19.6
Book profit on sale of          
lease contracts 1.5     10.1
Operating income excl.          
sale of lease contracts 27.0    9.5
                
Financial activities            
Revenues        8.7     12.0
Operating income        4.3     9.5
        

Balance sheet and cash flow
The balance sheet total amounted to € 2,819 million at the end of the financial year. At the end of the 2004 financial year the balance sheet total was € 2,233 million. The increase in the balance sheet total resulted from the acquisition of the assets of Imagistics amounting to a total of € 767 million. The intangible assets acquired with the Imagistics purchase amounted to € 498 million. This item includes goodwill of € 345.6 million. The other components in the intangible assets are items: i.e. brand name € 7.0 million, customers and contracts € 123.4 million and software €21.8 million. In 2006 depreciation on these intangible assets will amount to € 16.6 million (€ 1 = $ 1.20). Excluding Imagistics, the balance sheet total amounted to € 2,052 million.

Free cash flow was € 508 million negative. Excluding the acquisition of Imagistics, free cash flow was € 124 million positive. Net debt increased from € 168 million at the 2004 year end to € 753 million. The solvency ratio was 29.0% (2004: 33.7%).

Dividend proposal 2005: € 0.58 per ordinary share
Océ will propose to shareholders a dividend for the 2005 financial year amounting to € 0.58 per ordinary share of € 0.50 nominal. If this proposal is adopted, the final dividend per ordinary share for 2005 will amount to € 0.43 in cash. The interim dividend for 2005 amounted to € 0.15 per ordinary share.

April 20, 2006: General Meeting of Shareholders
The Annual General Meeting of Shareholders will be held in Venlo on April 20, 2006. The agenda for the meeting will be published on March 23, 2006. The annual report will be available online as from February 1, 2006 on www.investor.oce.com.

Prospects for 2006
The Board of Executive Directors takes the view that it is too early to give a forecast for 2006. However, we do expect that the results will be favorably influenced by the increase in revenues, both on an organic basis and as a result of the acquisition of Imagistics.

Savings yielded through the integration of Imagistics and the restructuring operations in Europe and the United States will lead to a gradual reduction in operating expenses during the year. These will be offset by extra investments in R&D, amortization on intangible assets and lower revenues from leases.

The Board of Executive Directors of Océ N.V.
January 16, 2006

The full report can be downloaded at the international website http://www.oce.com/en/Investor/QR/2005-Q4.htm

About Océ
Océ is a leading provider of digital document management technology and services. The company’s solutions are based on Océ’s advanced software applications that deliver documents and data over internal networks and the Internet to printing devices and archives ­ locally and around the world. Supporting the workflow solutions are Océ digital printers and scanners, considered the most reliable and productive in the world. Océ also offers a wide range of display graphics, consulting and outsourcing solutions.

Océ N.V. (NASDAQ: OCENY), headquartered in The Netherlands, with a workforce of around 24,000 people and pro forma annual revenues of € 3.1 billion ($ 3.7 billion), active in nearly eighty countries, maintains research and manufacturing centers in the Netherlands, the United States, Germany, France, Belgium, the Czech Republic, and Romania. For more information about Océ, visit www.oceusa.com. Outside the U.S., consult www.oce.com.

Océ North America, Inc.
5450 North Cumberland Ave.
Chicago, IL 60656
Phone: 312-714-8500
Website URL: www.oceusa.com