Bull: Full-year Results 2005

1 January 1970

- First year of revenue growth since 1999: an increase of 3%

- EBIT[1] reaches EUR38m, ahead of the objectives announced earlier by the Group

- Net profit reaches EUR15.8 million, an increase of 11%[2] on the year

- The company's financial structure remains sound, with net cash of EUR232m

- 'Horizon 2008' strategic plan in place to enable the Group to achieve revenues of between EUR1.7bn and EUR1.9bn including external growth

- Outlook for 2006: the Group is aiming for revenue growth of between 4% and 4.5%, and an operating margin of between EUR40m and EUR45m.

Commenting on today's results, Didier Lamouche, Bull Chairman and Chief Executive Officer, said: "2005 was a year of great transformation for Bull, amply demonstrating the Group's ability to deliver against its commitments and win the confidence of prestigious customers the world over. With its combination of a clear strategic vision and its particular areas of expertise - within the Horizon 2008 strategic plan - I am convinced that Bull will be both an important player and a focal point for information technology in Europe."

Revenues

In 2005, the Group's consolidated revenue was EUR1,173.1m. This represents an annual increase of 3%, and is higher than the growth targets announced by the Group at time of the previous results. This is the result, in particular, of:

- The very satisfying performance achieved by the Products business (EUR579m, representing an annual increase of 11.1%). This is due, amongst other things, to the continued good performance of the Unix server market and the partial recognition of revenues linked to the contract with the French Atomic Energy Authority (CEA)

- Marked progress in the Services business (EUR321m, with an annual growth rate of 4.1%), in a well focused services market in Europe and Latin America. This progress is also the result of the combined effects of reorganization and the introduction of a new sales strategy in the first half of the year, particularly in the area of open technologies.

- An erosion of the maintenance business (EUR274m, leading to a reduction of 11.6% on the year). Against this backdrop, Bull has put in place a worldwide organization structure designed to gradually stabilize this erosion.

The performance improvement plan for the Services business in France has already produced its first results. As regards its involvement in the world of Open Source, Bull has confirmed its commitment as a manufacturer, software publisher and even a services provider.

During 2005, orders taken grew overall by 8%, broken down as follows: +6% in Products and +14% in Services. As a result, the order backlog at the end of 2005 was 8% higher than at the end of 2004.

Operating performance

The Group's gross margin for 2005 was 25.8% of revenues, compared with 27.6% in 2004. The lower margin rate is explained in part by the changing product mix and in part by the impact of the margin conditions for the CEA Tera-10 contract.

EBIT for 2005, excluding non-recurring items, increased to EUR38m, representing 3.2% of revenue: higher than the original objective announced by the Group at the presentation of last half-year results. This takes into account the investment in communications related to the 'Architect of an Open World(TM)' campaign, designed to confirm the Group's strategic positioning and offerings, as a pioneer in bringing together industry standards and open systems.

The optimization of R&D expenditure (EUR51.1m against EUR54m in 2004) linked to the reduction in administrative and sales costs (SG&A) (EUR212.6m in 2005 against EUR220.0m in 2004, representing 18.1% of revenues in 2005 against 19.3% in 2004), enabled the Group to compensate for the reduction in its gross margin.

The Group's rationalization efforts in 2005 involved charges that were partially covered by non-recurring products. These other products and charges were - EUR15.1m, against EUR6.0m in 2004. Operating profit after taking these into account was EUR22.8m in 2005 against EUR47.1m in 2004

Financial expenses and net income

Thanks to the financial restructuring undertaken in 2004, the Group's financial expenses saw a significant improvement, amounting to - EUR2.1m compared with - EUR30.8m in 2004.

After taking financial expenses and a tax charge of EUR4.9m into account, net income for the 2005 financial year reached EUR15.8m, an 11.3% increase on the net income for 2004 before the impact of financial restructuring.

Financial structure

During 2005, the Group improved its financial structure by growing its net equity, and now has a stable net cash position of EUR232m.

Group net equity increased to EUR85m at 31 December 2005 against EUR65m at the end of December 2004 under IFRS rules (EUR58m as originally published).

Gross cash funds were EUR315m at 31 December 2005, compared with EUR283m at 31 December 2004. Coming into line with the new IFRS reporting standards (IAS 39) led the Group to record an additional EUR26m of debt, representing back-to-back leases. Total financial debts stood at EUR83m at 31 December 2005 compared to EUR68m at 31 December 2004 according to IFRS reporting rules (EUR46m as originally published).

Shareholding

In 2005, the Group's shareholder base underwent considerable change, and in particular:

- The French State finalized its total withdrawal from any ownership of the Group in January 2005

- NEC, a long-term partner of the Group, reduced its holding in Bull from 10.1% to 3% in September 2005, and transformed its financial partnership into an industrial partnership focused on the security and identity management market

- At 31 December 2005, the Group's floating equity represented some 85% of the issued share capital, and was held mainly by institutional investors from France and other countries.

In addition, the Group carried out a 10/1 reverse stock split on 19 December 2005. This initiative will continue until 19 December 2007, with the Group's current issued share capital being some 96.8 million consolidated shares.

2005 highlights

The 2005 action plan, set in motion in the first half of 2005, delivered its first positive results as the new management team took over and the Group was reorganized. Among the key targets for improvement, the Services business in France continues its recovery program in line with its roadmap. Italy has partly achieved its objectives with a new-found sales momentum and a break-even operating result for the month of December 2005. However, given the recent deterioration of the economic climate in Italy, it will be difficult to achieve the desired break-even in this country in 2006. Taking into account the lower levels of business recorded in 2005, the Group's Maintenance activities are the subject of specific performance improvement measures.

During the last quarter of 2005, Bull won the biggest systems integration contract in its history - in partnership with Lockheed Martin - to deliver the address recognition system designed to optimize automated mail sorting for the French Post Office. The company also successfully deployed Europe's number one supercomputer, Tera-10, which will be used to host the simulations for France's nuclear weapons tests.

What's more, Bull further strengthened its strategy for developing the NovaScale server family, by signing an OEM (Original Equipment Manufacturer) agreement with HCL in India.

In the security area, the Brazilian federal police force awarded Bull a project to deploy a system for controlling and authenticating biometric passports.

The Belgian Justice Ministry awarded Bull a seven-year contract to upgrade its IT equipment.

Horizon 2008

With its 'Horizon 2008' strategic plan, Bull is affirming its ambitious goals, focused on three key points:

- To accelerate the growth of its services business so that it eventually becomes the major source of the Group's revenues

- To enhance operational efficiency in the business, to bring it up to the same level as the best in the industry

- To reshape the profile of the company as a result.

A positive combination

Bull intends to ensure the success of 'Horizon 2008' by first building on its existing strengths: its installed base of GCOS servers and the loyalty of its customers.

As a pioneer in Open Source, Bull will use its ten-year experience and expertise in open systems technologies as a driver of future growth. To achieve this, Bull will capitalize on its unique positioning throughout the entire value chain (from servers to operating systems to services).

Finally, as a vital accelerator of growth, the company's sales and distribution network - covering some 60 countries - will be optimized to improve its productivity.

A targeted approach to organic growth...

To meet this ambition, Bull will focus on seven key offerings and a number of offerings that will be 'rationalized' to enhance their profitability. These offerings will be complemented by careful targeting of markets with high growth potential, such as High-Performance Computing (HPC), data storage solutions, security, Open Source-related services, and systems integration services in certain target markets such as defense.

As a result, Bull has set itself the objective of delivering revenues of between EUR1,300m and EUR1,400m by 2008, excluding any acquisitions, representing an average annual rate of organic growth of between 4% and 6%.

... delivering increased profitability

With the predicted growth in revenues, particularly from Services, improved efficiency in R&D and, finally, a program of reducing the Group's general and administrative costs, Bull is anticipating being able to deliver an operating profit of between EUR67m and EUR75m in 2008.

The Group's financial position means that it is in a good position to explore opportunities for external growth which could bring in additional revenues of the order of EUR400m to EUR500m between now and 2008, with a target post-acquisition operating margin of at least 6% in 2008.

Outlook

For the 2006 financial year, Bull envisages a growth in revenues of between 4% and 4.5%, and an EBIT of between EUR40m and EUR45m, with greater seasonal variation in favor of the second half of the year. These targets will be adjusted as appropriate during the course of the financial year, in view of any opportunities for external growth which may arise..

Contacts

Press contacts:

Bull - Anne-Marie Jourdain - Phone: +33(0)1-30-80-32-52

E-mail: anne-marie.jourdain@bull.net

Financial Dynamics - Elodie Marchand - Phone: +33(0)1-47-03-68-17

E-mail - elodie.marchand@fd.com

Investors Relations:

Patrick Massoni - Phone: +33-(0)1-30-80-32-36

E-mail: patrick.massoni@bull.net

EUR millions, IFRS standards 2005 2004

Revenue 1 173,1 1 138,7

Gross Margin 302,2 314,7