In 2022, Nedap again showed excellent organic revenue growth. Revenue was up 11% on the previous year. Practically all business units contributed to this. Component shortages and other disruptions in the supplychain slowed down revenue development throughout the financial year. Recurring revenue rose 21% andnow makes up 31% of revenue.

After the COVID-19 outbreak in 2020 and the component shortages thatarose in 2021 and still continue today, 2022 was another challenging year. The war in Ukraine, soaring inflation, and economic stagnation in various regions and industries led to volatile market conditions. In order to find suitable solutions to supply chain disruptions, we again relied heavily on Nedap employees’ inventiveness and perseverance over the past financial year. On top of that, we needed to closely track the volatile conditions in the market segments in which we operate to prevent a situation in which our commitments to our production partners and component supplier were not covered by market demand.

These market developments drove up the cost of sales of our products and internal processes. A large part of these cost increases was offset by raising our sales prices. However, as our customers started to place their orders earlier and place more orders to secure deliveries, our price increases did not have an immediate effect. This, combined with the fact that sales and marketing spending returned to pre-pandemic levels and our decision to continue to invest in recruiting and developing talented people, put a damper on our profit margin.

Despite the volatile market conditions, demand for our solutions remains high. Thanks to our ongoing focus on making our supply chain more robust, more flexible, and more easily scalable, we are increasingly better able to meet this high demand, as shown by the fact that our revenue growth reached 15% in the final quarter of the year.

Nedap as a whole is more than the sum of its business units.

Step Up!

Thanks to our solid financial foundation and our robust portfolio of propositions, we managed to maintain our strategic course even amid these market conditions. We are positive about the progress made during the year in further developing and implementing the strategic plan Step Up!. The core aim of Step Up! is to accelerate the company’s growth through better utilisation of the potential across the organisation and in our portfolio of propositions. In order to make this happen, we want to harness the knowledge, experience, and skills available across our company more effectively and on a broader scale, without compromising on our business units’ entrepreneurship and market focus.

A number of concrete initiatives in areas such as design, data science, marketing, and leadership development have reasserted that Nedap as a whole is more than the sum of its business units. Colleagues with specific expertise in areas such as design, data science, or marketing are increasingly asked to work on a product, design, or campaign in an entirely different market on a project basis alongside their role at one of our business units. This opportunity for employees to combine deepening their current skills and working in different areas is convincing more and more talented people to join Nedap. On top of that, we have already shown that uniting all the knowledge and skills available across Nedap and using it in a targeted manner for one of the propositions really boosts our competitiveness in a market.

Additionally, we are making increasingly targeted choices on a Nedap-wide level as to how we use our people and resources. How a proposition is managed, the performance indicators, and the amount invested in proposition development and commercial strength is now determined by the phase a proposition is in, i.e. Create, Scale, or Core. In 2022, we invested mainly in propositions in the Scale phase at our Healthcare, Livestock Management Cows, and Retail business units, these are the propositions where we see above-average growth potential for the coming years.

In 2022, we took the next step in our strategy development by clustering propositions in key market positions. Key markets are markets that, due to their size, structure and nature, offer prospects for attractive financial results. On top of that, these are markets where we are either already the market leader or have the potential to become the market leader, which is an important strategic objective for us. Existing and new propositions that tap into these key markets must be mutually reinforcing and contribute to market leadership for Nedap.

Nedap’s four key markets are currently Healthcare, Livestock Management Cows, Retail, and Security Management. In these markets, we have built the leading position we aspire to and are focusing our strategy on further expanding our position. The market served by Staffing Solutions, too, is a good fit with Nedap’s knowledge, skills, and culture, offering good prospects for attractive financial results. Our challenge is now to conquer a leading position in this market with our Flux proposition. Especially in the second half of 2022, we gained greater traction in this market thanks to our new product strategy.

The UV driver (Light Controls business unit) and long-range readers (Identification Systems business unit) propositions are not linked to a key market. The main aim for these core propositions is to optimise their profitability. After careful analysis of the nature, structure, and potential of the pig farming market, we decided to bring our investments in the Livestock Management Pigs proposition into line with the limited opportunities that exist in that market. Following this decision, development capacity has meanwhile been transferred to Livestock Management Cows.

Sustainability

Over the past year, we have made major strides in sustainability. Our sustainability policy, which we fine-tuned in 2021, has proven to have a greatly inspiring effect, with the four pillars of this policy, i.e. our employees, our operations, our partners/products, and our customers, guiding the sustainability initiatives at our company. Our aim to maintain a continuing focus on the development of our employees has been translated to new training programmes in a range of different domains and a commitment to ensure that everyone is given sufficient time to work on their personal and professional development every year. Concrete steps were taken towards reducing our carbon emissions by switching to electric vehicles sooner than initially planned and taking extensive energy-saving measures at our offices. Analysis of the complete life cycle of our products showed that energy consumption during the use phase of our products has the biggest environmental impact. This insight has meanwhile led to new product and software adjustments, some of which have significantly cut energy consumption. Smarter packaging and transport of our products has also produced substantial sustainability improvements.
We have made major strides in sustainability. Our sustainability policy has a inspiring effect, and its four pillars guide the initiatives within our company.
Besides delivering cost savings and production improvements, sustainability aspects feature increasingly prominently in our talks with our customers about the impact of our solutions. Our ambition is to gain greater insight into all these sustainability initiatives and to make their impact more tangible and more measurable, It is great to see that our sustainability policy can count on broad support across the company. It is inspiring and encouraging employees to implement practical and concrete improvements themselves. It has, for example, become very easy for everyone on the Nedap Campus to separate waste by disposing of it in our stylish waste furniture. This has already brought residual down by over 50%.

People

The combination of challenging market conditions and our high ambitions from the Step Up! strategy places great demands on our employees. Like in previous years, Nedap employees have shown throughout the financial year that they are deeply involved in our company’s affairs and enormously committed to doing their bit for Nedap’s further growth and development. We are therefore proud of the way our employees are taking their responsibility and using their creativity to overcome what are highly complex problems at times and come up with practical solutions.
Due to COVID-19 restrictions, our Campus in Groenlo was a lot quieter than usual for a considerable time. We used this as an opportunity to carry out a major investment programme over the past few years. Many of the work areas were upgraded to bring them into line with the new requirements that come with the various forms of collaboration used across Nedap. This has resulted in an even more attractive and inspiring work environment that everyone is now using again like before. The high quality of our work environment not only enables our employees to be more productive, it is also an increasingly important reason why new employees choose Nedap.

Outlook

In 2022, we took yet another step forward in refining the strategy and made targeted investments to set our propositions apart from the competition even more clearly and further boost our organisation’s effectiveness. Despite persistently volatile market conditions, we foresee further revenue growth in 2023, unexpected circumstances notwithstanding.

Ruben Wegman, CEO
22 February 2023