EVS

2007 is another record year with sales up by 22% to 94.7 million EUR 

Dear Shareholders,

After a year of strong growth in 2006, notably fuelled by some major sporting events, the 2007 financial year looked as though it was going to be a transition year before another year of growth in 2008. It was nothing of the sort. Thanks to our diversification strategy, the total commitment of our employees worldwide and the continued expansion of our teams, particularly R&D and our teams in the field, 2007 was another record year, with sales up by more than 22% at constant exchange rate and excluding rental contracts relating to the sporting events in 2006. The growth in our activities in the studio productions (+25% in 2007) helped to reduce our dependence on major sporting events, and represents a key growth driver for EVS. Strengthening our organisation in 2007, notably through hiring new staff, resulted in a 27% increase in operating costs, but the significant growth in sales enabled us to maintain the operating margin at 65%, stable compared with 2006.

Given the good results in 2007, our confidence in the company’s future prospects and our objective to optimise the shareholders’ return through the distribution of dividends and/or the buyback of own shares, the Board of Directors proposes to increase the dividend by 35.7%: the total gross dividend is therefore EUR 2.28 per share (including the interim dividend of EUR 0.80). These good results in 2007 are the fruit of our strategy focussing on developing global solutions for our customers, which include servers and applications, supported by a highly regarded level of service. Everything begins with listening to our customers carefully, identifying their operating procedures and anticipating their needs. This allows us to offer them creative and reliable solutions so that they, in turn, can serve millions of television viewers. The product is at the heart of our concerns. Our “Speed to Air” strategy, initiated several years ago, has resulted in a global solution for live sport production, from outside production to the studio environment within the television stations themselves. Production is becoming more flexible, more efficient and faster, which makes it possible for the best live images to be offered quickly to television viewers. Products such as the HD XT[2]® server in [LSM] configuration are the warhorses of many sports event productions, while [IP]Director® is becoming a reference application platform which favourably supplements the range of existing products. The strong interaction between the customers and our development teams will continue to be an essential asset for ensuring our growth. Then, our customer service. Today, more than 5,000 operators worldwide use our equipment and applications on a daily basis, often in time-critical environments, which is the case for the majority of live broadcasts of major events to hundreds of millions of television viewers. Our teams train, advise and assist our customers, whether they are operators, engineers, directors or production managers. One of our priorities is to provide a rapid and effective solution to our customers’ concerns.

2008 should be another year of growth for EVS, supported in particular by two major sporting events, the Euro 2008 football tournament in Switzerland and Austria in June, and the Olympic Games in Beijing in August. EVS does not consider these events an end in themselves, but they are an opportunity to demonstrate our expertise and highlight our state-of-the-art technologies as well as some new product developments. More than 200 television stations will be broadcasting the sporting exploits in Beijing, whether in a live production configuration or via highlights programmes produced in equipped studios in China or in the various countries broadcasting the games. All the production will be done in high definition. This event is an accelerator for our activities in production studios.

EVS has several growth drivers for the coming years, starting with the take-off of high definition television (HDTV) in Europe. As in the United States and Asia, HD sport is proving to be a content favoured by television viewers for adopting the new HDTV format. The most recent researches confirm the increase in the penetration of HD Ready screens in homes, in both the United States (40%) and in Europe (between 15 and 20%). These structural trends will have to go hand in hand with an increase in the production of high definition images. Next, the replacement of cassette recorders is without doubt the most important growth engine for EVS, and it will continue to remain very important for some years. Currently, 70% of professional video recorders are still cassette-based. This percentage should fall to 30% in 5 to 6 years. The television industry is gradually migrating from analogue to digital, and there are still many new markets to be explored and developed. This migration will bring greater efficiency and considerable time savings in the image production process. Then, an increasing number of sporting events have an international scope, which tends to bring our technologies into widespread use. Finally, our deliberate intention to tackle the studio production market, and in particular near-live and multi-camera productions, already enables us to make a third of our sales in this promising segment.

One of the major challenges for our company has been and will remain the management of our rapid growth. In 2007, we again hired more than 20 people, ending the year with 188 employees worldwide, of which 149 are at the company’s headquarters in Liège (Belgium) and 39 are in our 11 offices throughout the world. Our recruitment of additional staff in Research & Development, Sales and Support enables us to continue our growth while maintaining our leadership position in our niche markets. Each year, the sum of the talents and skills of our staff, old and new, and their expertise and experience increase our company’s potential considerably. This trend will continue in 2008.

Our 47.2% subsidiary XDC, for its part, suffered in 2007 from a digital cinema market in Europe which has not really taken off yet. With more than 300 screens equipped with its products, XDC is an important player in this sector. Firstly, the company assists operators by digitising their projections, and, secondly, it assists film distributors by offering to encode, transport and ensure the quality control of digital copies at a cost that is much lower than the current cost for 35 mm copies. The deployment of the new JPEG2000-MPEG2 digital server in 3D mode, which meets the most exacting standards, will reinforce XDC’s strengths in this sector even further. EVS continues to support XDC’s deployment efforts despite the fact that it has diluted its holding in this subsidiary, a service company for the cinema industry, in order to concentrate fully on its own business, the development of technologies for the television industry.

The Board of Directors and the management of EVS have full confidence in the future of the company. All the efforts made in recent years seem to be bearing fruit, and we are putting in place the foundations for our future successes. EVS operates in a competitive environment which is undergoing rapid transformation in terms of technology. But all this is only possible thanks to all those who support our company and have faith in us: our dynamic and motivated employees who fly the flag for EVS worldwide and, of course, our many customers who, along with our teams and our technologies, give tangible expression to the significant changes in HD digital television. We would also like to thank our suppliers and our shareholders for their trust, their understanding and their encouragement. EVS is thus confident of being part of the future revolutions in the world of television and sports broadcasting.

In this Olympic year, let’s do some sport and exceed our expectations!