2.1 Progress on our strategy
In 2024, we continued to implement the strategic cornerstones for achieving structural organic growth. Our purpose Technology for Life and ambition of achieving market leadership are firmly embedded in our organization. Our key market focus has resulted in a balanced portfolio, while new ways of working are strengthening cross-market collaboration.
Key market focus
We focus on our key markets, where we see a clear path to market leadership, and we concentrate our investments on solutions that offer tangible value for our customers. We have succeeded in creating a balanced and diverse portfolio that is aligned with our long-term growth objectives. Our annual report reflects this. In addition to establishing strong positions in our key markets, we continued to optimize and make strategic investments in our UV and Reader portfolios, initiating the integration of the Reader portfolio into our business unit Security.
The multi-year process of evaluating the growth potential of our solutions and creating focus required us to make difficult decisions, such as scaling down or phasing out non-key market activities, to reduce the complexity of our organization. In the process, we have created a more agile organization that is capable of adapting to market changes. Gross margins have improved, which is a key step toward achieving our financial objectives. At the same time, we have established a strong pipeline of innovative solutions.
Milestones
We achieved several milestones in 2024. We reached €100 million in annual recurring revenue (ARR). Our recurring revenue (revenue from software subscriptions (licenses) and services) has grown steadily and organically, reaching €100.2 million in 2024. This is the result of a strategic shift toward recurring (SaaS) business models and our investments in Create & Scale solutions.
At the end of the year, growth strategies were in place for each key market. These growth strategies embody our purpose Technology for Life, our leading position in Digital Twin Technology and decades of experience in our markets. Our experience, credibility and global reach put us in the position to signal paradigm shifts and seize opportunities. Examples of our strategy in action include:
Leveraging the Ons® Suite and MediKIT to maintain a leading position in the Dutch healthcare market and facilitate the transition to network care, while creating solutions such as the Nedap Luna to diversify the portfolio.
Scaling Pace, our digital twin solution for the expanding physical identity and access management (PIAM) market.
Integrating computer vision into the Nedap Now platform to strengthen Nedap's position in the livestock market, while introducing new business models for organic growth.
Capturing growth opportunities driven by the retail market's rapid adoption of RFID and leveraging Digital Twin Technology for automation and traceability across the supply chain.
Section 2.4 of this annual report includes additional information on key market developments.
We remained dedicated to leveraging the collective experience, expertise and capabilities within the Nedap organization, with a focus on cross-market collaboration. Examples in 2024 were the introduction of communities for knowledge-sharing, such as Mastering the SaaS business.
Progress on financial targets
The Step Up! process sets the following financial targets toward 2025:
Revenue that develops toward annual high-single-digit autonomous growth.
In 2024, revenue was down 4% compared to 2023. Excluding the impact of the strategic decision to scale down certain solutions, which represented an amount of €11.8 million in 2024 (€17.1 million in 2023), total revenue was down 2%. This lower revenue is mainly driven by slow market conditions within Livestock, as well as a strong comparison base related to catch-up deliveries in 2023.An operating margin, excluding one-off items, that rises toward 15%.
In 2024, the operating margin came in at 9.5%, compared to 10.4% in 2023. The lower revenue in combination with the costs associated with scaling down non-strategic activities has put pressure on our EBIT margin in the short term. We have limited our cost increases while continuing to invest in our scale solutions, a strategic choice reflecting our commitment to long-term growth and market leadership. We reiterate our ambition to grow our EBIT margin toward 15%, albeit with a one-year delay.Return on invested capital (ROIC) that outgrows profitability.
ROIC declined to 26% in 2024 from 31% in 2023, mainly driven by lower operating profit and higher invested capital.