Annual Report Aalberts Industries N.V.

Transcription

1 Annual Report 1997 Aalberts Industries N.V.

2 Annual Report 1997

3 DSI Beer tap VSH Accessory for gas Nowak Steel castings

4 Contents 4 Supervisory Board and Management 5 Key Data 6 Profile 8 Report of the Supervisory Board 9 Report of the Executive Board 15 Organisation and Employees 16 Special Components 19 Flow Control Systems 20 Profit Distribution 21 Prospects 23 Annual Accounts Consolidated balance sheet as at 31 December Consolidated profit and loss account for Consolidated cash flow statement for Notes to the consolidated annual accounts 29 Notes to the consolidated balance sheet and profit and loss account 32 Company balance sheet as at 31 December Company profit and loss account for Notes to the company balance sheet and profit and loss account 38 Supplementary information 40 Addresses 3

5 Supervisory Board P.W.A. Niessen, Chairman A.B. van Luyk F.X. Noz P.J. Vinken Management J. Aalberts, President B.P. Bolkenstein, Managing Director R.W. Jaquet, Financial Manager J. Eijgendaal, Controller General Managers Operating Companies A.J. Walstock Adex D. Gross Broen group C.J.M. Duivenvoorden R.S. Wamhser DSI group Hauck/Dornstadt H. van Brug Kluin S. Siksma Leco J.J. Wammes H.A. Zantinge / J.J. Zitman J.L. Huveteau Mamesta Mifa group Morel/Haas C. Nowak Nowak G.J. Suringh Overeem T.C.H.J. Vedder SDB U.M. Hehlke / V. Seltenheim Seppelfricke group W.H.T. van Hooff / J. Ruissen VSH group Th. Wollschlaeger VTI 4

6 Key Data Result (x NLG1,000) Total operating income 619, , , , ,224 Net sales 611, , , , ,233 Operating profit 63,787 50,981 38,910 29,352 21,624 Net profit 36,434 26,171 20,187 15,343 11,336 Depreciation 35,936 27,913 20,741 16,571 13,689 Cash flow 72,370 54,084 40,928 31,914 25,025 Capital (x NLG1,000) Total assets 459, , , , ,271 Group equity 153, ,671 84,811 71,907 51,678 Long-term liabilities 104, ,326 67,565 62,647 44,889 Tangible fixed assets (x NLG1,000) Book value 191, , , ,994 88,549 Investments 42,104 36,014 29,105 15,391 15,749 Employees The Netherlands 1,186 1,123 1, Other countries 1,669 1, Total 2,855 2,512 1,644 1,520 1,313 Ratios Operating profit as a percentage of net sales Net profit as a percentage of average group equity Group equity as a percentage of total assets Current ratio Shares issued (x 1,000) Data in guilders per share of NLG 0,10 nominal value Average 15,810 14,165 13,615 13,385 12,510 Group equity Cash flow Net profit Dividend Share price at year-end

7 Profile Aalberts Industries N.V. is an international industrial group of companies with two main activities: Special Components and Flow Control Systems. Aalberts Industries occupies strong market positions in each of these activities. With a small holding company, Aalberts Industries is strongly decentralised with great responsibilities for operational management. Higher turnover and results are realised through autonomous growth and acquisitions. Improvement in earnings per share continues to have priority in this policy. Broen Balancing valve Hauck Oven installation Mifa Radar components 6

8 Special Components Activities in the field of Special Components comprise development, production and sales of components, with increasing added value, for high-grade industrial end products, according to customer specifications. Aalberts Industries is mostly active in Western European markets. A considerable number of market sectors are supplied, notably in the field of telecommunications, computer hardware, process control, aircraft production, defence products, machine construction, aluminium industry, display and interior, and off-shore and medical equipment. The activities in the field of Special Components are divided into Engineering and Material Technology. Engineering These activities comprise development and production of two and three dimensional parts on the basis of advanced metal processing technologies. This also concerns precision extrusion and rollforming of sections, casting of complex parts and fitting precision workings by way of various machining techniques. Material Technology These activities are aimed at improving material characteristics in order to increase durability and/or functionality. This may concern surface treatment techniques which are applied to add a top coating to the existing material, or may concern heat treatment techniques aimed at changing and/or improving the actual structure of the material. Combinations of both technologies are likely to be increasingly used in the future. Flow Control Systems Flow Control Systems comprise the activities in the field of Dispense Systems and accessories for water, gas, heating and cooling (Valves & Fittings). Dispense Systems Activities in the field of Dispense Systems comprise development, production and sales of products for the controlled and measured, pressurised or free release of liquids and gases. Dispense products are sold world-wide. The beer market is the main customer of Dispense Systems, while the market for softdrinks is rising. Also systems are developed for the industrial sector, used for industrial and inflammable gases and for medical applications. Valves & Fittings Activities in the field of Valves & Fittings comprise development, production and sales of these products (including fittings and taps) used in distribution systems for water, gas, energy, central heating and ventilation/cooling systems. Product development and production take place in Europe. Sales are world-wide with a strong concentration in Europe. Aalberts Industries is market leader in the Netherlands, Denmark, Germany and France at her market segments, while in the field of laboratory accessories the group is one of the leading producers in the world. 7

9 Report of the Supervisory Board to the Shareholders We hereby present you with the annual accounts for 1997 of Aalberts Industries N.V. as drawn up by the Executive Board. These, subsequent to auditing by Coopers & Lybrand N.V., have been agreed by our Board in accordance with the Executive Board s proposal. We propose the approval of the annual accounts for 1997 in accordance with the papers here submitted, which approval will result in the discharge of the Executive Board and the Supervisory Board, as laid down in the Articles of Association. On approval of the annual accounts and the appropriation of profits included therein, a 1997 dividend of NLG 0.57 per ordinary share of NLG 0.10 nominal value will be paid. The dividend can be paid out in cash or, if so desired by the shareholder in shares to be charged against the share premium account or the other reserves. After the Annual General Meeting of Shareholders, held on 17 April 1997, Mr P.W.A. Niessen was re-appointed as Chairman of the Supervisory Board of the company. Mr F.X. Noz will retire from the Board at the Annual General Meeting of Shareholders to be held on 16 April 1998, according to the rotation schedule. Mr Noz is available for re-election. The Supervisory Board met six times in 1997, with one meeting taking place at Seppelfricke Armaturen in Gelsenkirchen, Germany. As well as the usual attention for the general state of affairs, investments and strategy, the Board extensively discussed the recommendations of the Peters Commission. In consultation with the Executive Board, the Board has come to the conclusion that Aalberts Industries already implements many of these recommendations regarding corporate governance. Some of the recommendations have led to the report you have before you, having been adjusted and completed. Some recommendations dealing explicitly with the workings of the Board itself, are still being studied. The Board is convinced that Aalberts Industries offers its shareholders a sufficiently full insight in the strategy, vision and state of affairs within the company, and that the Board itself meets all the demands in areas of objectivity, integrity and loyalty. The Supervisory Board would like to express its appreciation for the efforts made by the Executive Board and the employees during the year under review. Driebergen, 18 February 1998 P.W.A. Niessen, Chairman A.B.van Luyk F.X. Noz P.J. Vinken 8

10 Report of the Executive Board In 1997, Aalberts Industries was again able to continue the growth pattern of the past years. Aalberts Industries managed to realise the forecast, published at the start of 1997, of the company being able to continue its growth in 1997 on the basis of a strong international position. It is therefore with pleasure that the Executive Board reports on the past year. The net result increased by 39% to NLG 36.4 million, while earnings per share rose by 24% to NLG The turnover increase was 30% at a net turnover of NLG 611 million. Cash flow amounted to NLG 72.4 million, an increase of 34%. Autonomous growth in 1997 came to approximately 7%. The acquired company Härterei Hauck GmbH was consolidated for twelve months, while the acquired French companies Haas-Morel E.U.R.L. and Nowak S.A. were consolidated for six months. Strategy Aalberts Industries strategy is aimed at growth continuity at higher than average market levels. Aalberts Industries has managed to successfully implement this strategy, in the interest of every party involved with the company, ever since its introduction on the Amsterdam Stock Exchange, and 1997 has been another positive year in this development. In implementing this strategy, the goals of Aalberts Industries remain unchanged: Growth of earnings per share Growth of earnings per share is Aalberts Industries primary objective. In the past eleven years since the introduction on the stock exchange, this growth has been, on average, more than 20% per year. Balanced distribution of turnover A balanced distribution of turnover between the various group activities and a large number of products, markets and niches, countries and business contacts, strongly contribute to continuity. This makes Aalberts Industries less dependent on developments within one market segment, thereby also reducing shareholders risks. Growth of turnover outside Europe, regarded a necessity, is in accordance with this goal. Solvency As a result of the expansion-focused strategy and the high priority given to the growth of earnings per share, optimal use is made of Aalberts Industries financing capacities. Part of the strategy is to maintain a healthy minimum of group equity as percentage of the balance sheet total of at least 30%. An incidental departure from this minimum is, however, possible. This will result in a maximum return on the capital invested by the shareholders with no more than a healthy portion of risk. Partly as a result of the acquisitions, shareholders equity at year-end 1997 amounted to 33.4% (1996: 29%) of the balance sheet total. Net profit as a percentage of average group equity in 1997 amounted to 26.9% (1996: 26%). 9

11 The strategy is implemented per group activity, and as such recognisable for all operating companies. These companies develop their own operational targets on the basis of this strategy. In return, these targets contribute to the further development of the overall strategy. The Executive Board, taking into account the interests of all parties involved and the position of the company in its various markets, tries to communicate as clearly and openly as possible with regard to its strategy, goals and policies. The Executive Board believes that in this way it acts in the spirit of clarity for and involvement of the company s shareholders, as aimed for by the Peters Commission. The Executive Board again had a critical look at the current presentation of the various activities. The Board believes that a change of the currently used subdivision from three into two main activities, Special Components and Flow Control Systems, does more justice to the connections of these activities and creates more clarity for the shareholders, also in view of future developments. Attention to the various group activities and the individual targets of the companies involved remain unchanged as a result of this change. Investments Investment in new technologies is one of the foremost success factors for the company. Every operating company invests in its further development on the basis of approved budgets. Investment proposals are quickly reviewed and approved if they meet the financial and commercial criteria of Aalberts Industries. Substantial investments were required to develop new software, among other things in connection with the year 2000 and the introduction of the euro. Also the constant concern for environment led to more investments. In 1997 NLG 42.1 million was invested in means of production. Technology and Market Development The R&D activities are aimed at both product development and the development of improved and new production technologies and methods. Aalberts Industries has invested an amount corresponding with approximately 4% of its total turnover in R&D activities. These costs are directly charged against the profit and loss account. As well as the company s own efforts, some of which have led to patents, the acquisition of know-how and/or obtaining exclusive licences forms part of the company policy. Also in 1997 a number of patents and licences were purchased. Opening up new markets in many cases runs parallel with the development of new products. Applying existing technology to new applications mostly results in a new product. Entering a new geographical market can be done in conjunction with adaptation of the product to local conditions and demands. 10

12 Market development in the field of both Special Components and Flow Control Systems comprise long-term projects, the costs of which are directly charged to the profit and loss account of the current year. In 1997, this concerned the start-up of joint ventures in the United States and Poland, the continuing efforts in the field of softdrink tap systems and the study of new coating activities. Training and Education The value of each investment is partly determined by the capability of the employees to make maximum use of the investment for the operating process it was meant for. This means that following the progressive investment policy there is an extensive training and education effort. Based on a good schooling programme, employees are stimulated, by way of continuous training, to make maximum use of their skills and creativity for the specific needs of the company, and to keep up-to-date with regard to the latest developments in their different areas of expertise. Quality Quality is an absolute necessity for all of Aalberts Industries products. This quality can only be enduringly guaranteed by developing and maintaining high-grade quality systems. All subsidiaries operate in accordance with international quality standards, including ISO 9001 and ISO 9002, and many other national departmental quality standards. Acquisitions An integral part of Aalberts Industries growth strategy is the acquisition of strategically interesting companies. The basic assumption in this strategy is that acquisitions will have to make an immediate contribution to earnings per share. A substantial contribution to profit growth is made from the moment that integration of the acquired company is completed. This will, on average, take a period of 18 months. The international spread of operating companies is another important focal point of the acquisition policy. Mutual added value is essential for a successful acquisition. Quality and potential of the company that is to be acquired are more important than its size. This also incorporates striving for minimal risk for Aalberts Industries and, subsequently, its shareholders. 11

13 During 1997, three companies were acquired: Härterei Hauck GmbH, based in Remscheid (Germany) was taken over in the first half of With this acquisition Aalberts Industries realised an important strategic goal within the group activity Special Components. Hauck is one of Europe s leading heat treatment companies and uses highly advanced techniques. The aim is to realise a further geographical spread with a limited number of production facilities while at the same time developing existing and obtaining new technologies. Mid-July 1997 the negotiations regarding the takeover of the activities of Haas S.A. in Mulhouse (France) were successfully completed. Haas-Morel is active in the field of Flow Control Systems, and specialises in fittings and systems. The takeover was realised in the form of the acquisition of the company s assets. Haas-Morel and Morel, acquired in 1996, are active in the same markets and work closely together under the same management. The takeover results in a substantial strengthening of the market position in France. In the second half of 1997 another French company, Nowak S.A., based in Pancé, was acquired. Nowak specialises in casting technology according to the lost wax method for steel. This activity complements the activities of the Mifa group both with regard to technology and with regard to the market. Nowak will also be able to contribute to making the French suppliers markets more accessible to the various Aalberts Industries companies in the field of Special Components. 12

14 VTI Valve Germefa Tool VSH PVC system 13

15 Jeltsin residence (District heating) Mamesta Vacuum oven VTI Gas valve Broen Valve for district heating 14

16 Organisation and Employees Aalberts Industries strong dynamics demand continuous adaptation of its organisation and a high degree of flexibility of its employees in order to keep functioning optimally within this perpetually moving organisation. At the same time, these dynamics offer the employees opportunities to further develop themselves within the organisation and take on new tasks and challenges. Broen A/S expanded its activities considerably in 1997 with two joint ventures. At the start of 1997, Broen, Inc. was started in Alabama in the US, a 50/50 joint venture with two American partners. A small efficient production facility has been operational since April This joint venture is the continuation of a successful co-operation project, set up in 1991, for the sale of Broen products (Ballomax) in the United States. In Poland, the 60% joint venture Broen-DZT S.A. was established, a co-operation project with one of the Polish producers of ball valves for flat block central heating. Broen-DZT produces and sells its products in Poland. Much time has been spent on training the new employees, both from the US and from Poland. Training took place at the new workplace as well as in Denmark. In addition to setting up a total operating organisation, much attention was paid in particular to the lay-out of the new factories. The takeover of Härterei Hauck GmbH has resulted in a change of the organisation of the heat treatment activities. All German activities have been brought under the operational management of Hauck. Integration of the French company Haas, which was acquired in mid was completed by the end of Sales, development and production have been integrated in the Morel organisation, whereby production will take place at two locations, while the other activities are centrally organised by Morel. The number of employees was reduced as a result of this integration. The necessary adaptations of the Seppelfricke organisation, partly as a result of the very strict German legislation, could not be completed and will have to be continued in The still weak conditions in the German construction sector moreover gave an extra impulse for continuing reorganisation plans, aimed in particular at improving productivity. As a result of the increasingly international character of the Aalberts Industries organisation and the subsequent increasingly complex financing cash flows, Aalberts Industries Finance B.V. was set up in This new subsidiary will specifically focus on organising and co-ordinating the various financing instruments within the group. The continuing expansion of the group will also result in a strengthening of the financial department within the holding company. Training and schooling of employees from all disciplines also had a central position in The continuous increase of know-how, skill and creative abilities is one of the pillars of Aalberts Industries investment policy. The number of employees at year-end 1997, also as a result of acquisitions, amounted to 2,855 (1996: 2,512). The continuing success of Aalberts Industries is and will remain the result of the considerable efforts of the employees. Quality, creativity and loyalty of the employees are the indispensable ingredients for the future of Aalberts Industries. The Executive Board would like to thank all employees for making it possible to achieve these results. 15

17 Special Components Turnover growth in 1997 amounted to more than 30%. Turnover of group activity Special Components accounts for approximately 35% of Aalberts Industries total turnover. Growth of the group activity Special Components will increasingly develop around so-called technology clusters. From these technology clusters growth will be realised in various adjoining technologies and areas of application. Two technology clusters can be distinguished: Engineering This cluster includes all activities in the field of processing metals such as steel and aluminium. Extrusion, roll-forming, various casting techniques and all machining technologies fall within this cluster. The more than 15% turnover increase within this cluster was mostly achieved by the existing companies. The French company Nowak S.A, which was consolidated for six months, made a modest contribution to total turnover growth. Nearly all markets saw a positive development in The acquisition of Nowak fits within the growth strategy mentioned above. Within the cluster, Nowak will in the foreseeable future mainly co-operate with the Mifa group. Material Technology The cluster Material Technology comprises both surface treatment technologies, such as galvanising, anodising and coatings, and heat treatment technologies aimed at improving the structure of the material itself. There are strong growth prospects, which will be supported in the coming years by an active acquisition policy. The commercial activities within this cluster are characterised by geographic limitations. A better spread of the various production locations is therefore required in order to be able to operate as a fully grown supplier on a European level. The aim is to acquire complementary technologies as well as geographical spread. Surface and heat treatments will thereby increasingly be applied in combination. 16

18 Overeem Roll-forming section Nowak Castings Mifa Wave guide radar 17

19 DSI Dispense head DSI Extractor tube Seppelfricke Valve 18

20 Flow Control Systems The group activity Flow Control Systems comprises Dispense Systems and Valves & Fittings (formerly Installation Materials). Turnover growth amounted to approximately 30% in Turnover of Flow Control Systems accounts for around 65% of Aalberts Industries total turnover. Dispense Systems Despite a number of major breakthroughs at leading European breweries, total turnover development within the group activity Dispense Systems was below expectations. Profitability was substantially improved as a result of strict cost control and higher selling prices. The disappointing turnover development was partly caused by the continuing weakness of the Western European beer market combined with the still hesitant attitude of the softdrink industry. Positive, and important for the coming years, are developments in Eastern Europe and the United States. In Eastern Europe, DSI was able to develop itself as market leader, while the company will have its own sales organisation operational in the United States in A further broadening of the product range will receive extra attention in the coming period. VTI will increase its product range with a so-called clean gas line: valves which will be used for extremely pure (99 6 %) gases. These gases are finding increasingly widespread use in industrial applications (microchip industry), and are also widely used in laboratories. VTI will co-operate with Broen for this application. DSI s product development will also be increasingly aimed at a new generation of products. DSI also aims to broaden its product range. As well as these autonomous developments, the aim of broadening the product range will also be supported by acquisitions. Valves & Fittings A substantial part of the more than 40% turnover growth was realised through autonomous growth. The takeover of Haas, consolidated for six months, and the full consolidation of Seppelfricke account for the other components of the realised turnover growth. The markets in the Benelux, Scandinavia and the United Kingdom experienced a positive development. With the exception of the UK, where Aalberts Industries still has a rather limited presence, Aalberts Industries was able to benefit substantially from this market development. The German market hardly improved in 1997 compared to the previous year. Pressure on prices in the German market is as strong as it was. In this market situation, Seppelfricke managed to maintain its market share but was unable to complete the reorganisation as planned. Within the stable French market Morel, as a result of its forcefully implemented marketing concept, aimed at a clear positioning in the wholesale market, was able to increase its market share considerably. The takeover of Haas, a former competitor, boosted this development to such an extent that Haas- Morel under the name Rex became market leader in its segment. With the set-up of production facilities in the US and Poland, Broen has given the expansion of its international activities an important impulse. The opening of its own sales office in Russia in 1997 has led to better than expected sales results. Broen will continue to open up the Eastern European markets in the coming years. 19

21 Profit Distribution As a result of the issue of one million shares used for among other things the acquisition of Härterei Hauck GmbH, stock dividend and the exercising of stock options, the total number of shares as at year-end 1997 increased to more than 16 million. Based on the average number of outstanding shares, earnings per share over 1997 amounted to NLG 2.30 (1996: NLG 1.85). At the Annual General Meeting of Shareholders, shareholders will be asked to determine the 1997 dividend at NLG 0.57 in cash per share of NLG 0.10 nominal value, or, if so desired by the shareholder, in shares chargeable to the tax-exempt share premium account or to the other reserves (1996: NLG 0.45 in cash or 1% in shares). This will increase the dividend by more than 26%. Net sales Operating profit (x NLG 1,000) (x NLG 1,000) Net profit (x NLG 1,000) 650,000 65, ,000 60, ,000 55, ,000 50, ,000 45, ,000 40, ,000 35, ,000 30, , , , ,000 50,000 25,000 20,000 15,000 10,000 5,

22 Prospects The quality of its employees combined with a clear vision and strategy have enabled Aalberts Industries to meet its targets again in Ever moving and looking for new opportunities and possibilities and realising that, despite the successes, much can still be improved, Aalberts Industries is looking into the future with confidence. Barring unforeseen circumstances, Aalberts Industries will be able to realise the continuity of its growth in Driebergen, 18 February 1998 J. Aalberts, President B.P. Bolkenstein, Managing Director Cash flow (x NLG 1,000) Dividend in NLG Investments (x NLG 1,000) 75, ,000 65,000 60,000 55, , ,000 40,000 35,000 30, ,000 20,000 15,000 10,000 5,

23 Profit per share in NLG Stock exchange in NLG

24 Annual Accounts

25 Consolidated balance sheet as at 31 December 1997 before profit appropriation (x NLG 1,000) Assets 31 December December 1996 Fixed assets: Tangible fixed assets Land and buildings 72,536 68,025 Machinery and equipment 104,675 87,243 Other tangible fixed assets 13,001 12,068 Tangible fixed assets under construction 1,691 3, , ,102 Financial fixed assets 1,792 1, , ,126 Current assets: Stocks Raw materials 42,828 42,375 Work in progress 64,613 60,333 Finished goods 62,513 56,239 Other stocks 9,509 10, , ,337 Debtors Trade debtors 75,970 53,125 Other debtors, prepayments and accrued income 10,547 7,640 86,517 60,765 Cash at bank and in hand , ,234 Total assets 459, ,360 24

26 Liabilities 31 December December 1996 Group equity Shareholders equity 150, ,671 Minority interest 3, , ,671 Provisions Pensions 6,436 11,383 Deferred taxes 12,738 10,735 Other provisions 4,449 5,756 23,623 27,874 Long-term liabilities 104, ,326 Current liabilities Credit institutions 55,110 58,138 Repayment commitment on long-term liabilities 25,746 19,510 Trade creditors 46,242 35,553 Taxes and social security charges 12,147 17,688 Other liabilities, accruals and deferred income 38,959 25, , ,489 Total liabilities 459, ,360 25

27 Consolidated profit and loss account for 1997 (x NLG 1,000) Net sales 611, ,940 Movement in stocks of finished and semi-finished goods 4,636 6,629 Own production capitalised Other operating income 3,248 2,464 8,155 9,848 Total operating income 619, ,788 Raw materials 187, ,630 Work subcontracted 15,841 13,421 Wages and salaries 171, ,878 Social security charges 26,111 17,755 Depreciation on tangible fixed assets 35,936 27,913 Other operating expenses 119,190 83,210 Total operating expenses 555, ,807 Operating profit 63,787 50,981 Interest payable 11,542 11,299 Profit on ordinary activities before taxation 52,245 39,682 Taxes on profit on ordinary activities 15,264 13,515 Profit on ordinary activities after taxation 36,981 26,167 Share in result on subsidiaries 4 Minority interest 547 Net profit 36,434 26,171 26

28 Consolidated cash flow statement for 1997 (x NLG 1.000) Cash flow from operating activities Operating profit 63,787 50,985 Depreciation on tangible fixed assets 35,936 27,913 Changes in provisions 2, Changes in working capital: Change in debtors -16,126 10,381 Change in stocks -6,291-7,991 Change in current liabilities 2,548-20,855 Changes in working capital -19,869-18,465 Cash flow from operating activities 82,579 60,642 Interest payable -11,542-11,299 Taxation -20,618-13,077-32,160-24,376 Cash flow from operating activities 50,419 36,266 Cash flow from investing activities Acquisition of group companies -75,714-67,826 Investments in tangible fixed assets -43,905-35,890 Disposals of tangible fixed assets 2,852 9,307 Investments in financial fixed assets Cash flow from investing activities -117,533-94,594 Cash flow from financing activities Receipt from long-term liabilities 36,625 26,327 Issue of shares 54,914 37,479 Repayments on long-term liabilities -23,415-34,889 Distribution of dividends Change in minority interest 2,949 Cash flow from financing activities 70,135 28,571 Net cash flow 3,021-29,757 27

29 Notes to the consolidated annual accounts Consolidation principles The consolidated annual accounts include the financial data of Aalberts Industries N.V. and its group companies in accordance with the uniform valuation principles and using the integral consolidation method. Inter-company balances and inter-company transactions have been eliminated. Newly acquired group companies are included at their net asset value upon consolidation. Where the acquisition price differs from the net asset value the difference is debited or credited directly to shareholders equity. Minority interests in the group result and in the group equity are accounted for separately. For an overview of the significant group companies included in the consolidation, reference is made to the addresses on page 40. Principles for the translation of foreign currencies The annual accounts of group companies established outside the Netherlands are translated at rates ruling at the end of the financial year. Exchange rate differences are credited or debited to shareholders equity. Accounts receivable and liabilities stated in foreign currencies are translated into guilders at the exchange rates ruling at the end of the financial year. Principles for the valuation of assets and liabilities General - Assets and liabilities are carried at par value. Tangible fixed assets - Tangible fixed assets are carried at cost value less investment premiums and less accumulated depreciation based on the estimated economic life of the assets concerned. Depreciation is determined according to the straight-line method. Financial fixed assets - Investments in companies whose annual accounts are not included in the consolidation are carried at net asset value. Stocks - Stocks of raw materials are valued at the lower of purchase price and market value. Work in progress and finished products manufactured to order are carried at market value less future costs. If produced on stock, work in progress and finished products are valued at full manufacturing cost. A provision for obsolescence has been deducted where necessary. Debtors - Receivables are carried at par value less a provision for bad and doubtful debts. Provisions - The provision for pensions relates to pension commitments determined on an actuarial basis. The provision for deferred tax liabilities relates to corporation tax payable in the future as a result of differences between the valuation of assets and liabilities in the annual accounts and for tax purposes. This provision is calculated at the nominal rate, except for land and buildings for which provision has been accounted using the market value. The other provisions have been made in connection with liabilities and risks related to normal business operations. The provisions are mainly long-term. Principles for the determination of the result Notes to the consolidated cash flow statement Net sales - Net sales include the proceeds of the sale of goods and services to third parties excluding turnover taxes, discounts and bonuses. Other operating income - This item includes the proceeds of the sale of tangible fixed assets, as well as development grants. Depreciation of tangible fixed assets - Depreciation of tangible fixed assets, determined according to the straight-line method, is based on the expected economic life of the asset concerned. Taxation - Taxes on profits are stated as the tax charge calculated on the pre-tax result at the applicable rate. The calculation takes into account tax-exempt profit constituents, utilisable loss-carry forwards and fully or partly deductible costs. Result of subsidiaries - The result of subsidiaries is accounted as the share in the net profit of subsidiaries not included in the consolidation, and the profit realised on the disposal of subsidiaries. The cash flow statement is drawn up using the indirect method. The cost of the acquired group companies, less the available cash, is recorded under cash flow from investing activities. The changes in assets and liabilities following from acquisitions have been eliminated from the cash flows in consideration of these assets and liabilities. These changes have been incorporated in the cash flow from investing activities under Acquisition of group companies. The net cash flow consists of the net change of cash and credit institutions balances. 28

30 Notes to the consolidated balance sheet and profit and loss account Tangible fixed assets (x NLG 1,000) Land Machinery Other Tangible Total and and tangible fixed buildings equipment fixed assets assets under construction Balance as at the beginning of the financial year 68,025 87,243 12,068 3, ,102 Acquisitions 4,009 13, ,485 Investments 5,541 31,464 7,178-2,079 42,104 Disposals 239 1, ,852 77, ,211 18,601 1, ,839 Depreciation 4,800 25,536 5,600 35,936 Balance as at the end of the financial year 72, ,675 13,001 1, ,903 Consisting of: Acquisition value 125, ,538 45,477 1, ,911 Accumulated depreciation 52, ,863 32, ,008 Net book value 72, ,675 13,001 1, ,903 Buildings are depreciated over a maximum period of 33 years. Machinery and equipment are depreciated over periods ranging from 5 to 15 years. Other fixed assets are depreciated over a period from 3 to 5 years. At year-end, group companies had investment commitments outstanding in respect of tangible fixed assets to an amount of NLG 8,403. NLG 1,691 has been capitalised in the balance sheet as advance payment. Financial fixed assets This includes the non-consolidated 100% group companies: - DSI (China) Ltd., Hong Kong - DSI S.A.R.L., Strasbourg, France - Seppelfricke Austria Ges. m.b.h., Vienna, Austria This also includes receivables in respect of these companies. 29

31 Long-term liabilities 31 December December 1996 Term ranging from one to five years 88,969 78,865 Term longer than five years 15,282 22,461 Balance as at the end of the financial year 104, ,326 The long-term liabilities consist of loans from credit institutions with interest rates ranging from 4.25% to 8.5%. The repayment commitment within one year is NLG 25,746 (at year-end 1996: NLG 19,510) and is included in the current liabilities. Current liabilities Credit institutions A sum of NLG 33,588 in respect of cash loans is shown below. Off-balance sheet commitments It has been agreed with the Dutch bank relations that no securities will be provided to third parties without the banks permission. The real property of the German group companies in Prenzlau and Laupheim as well as the real property in Denmark are secured through a mortgage. At the end of the year under review, the group has provided guarantees to a total amount of NLG 275. At year-end 1997 the annual commitments under lease and rent commitments are as follows: Expiring within one year 285 Expiring between one and five years 3,969 Expiring after five years 450 Annual commitment 4,704 30

32 Net sales Geographical breakdown: 1997 % 1996 % Germany 249, , The Netherlands 159, , France 44, ,860 6 Denmark 24, ,739 4 Belgium 22, ,381 3 United Kingdom 21, ,255 4 Sweden 15, ,059 3 Eastern Europe 13, ,573 3 Austria 7, ,480 1 Switzerland 7, ,206 1 Italy 6, ,903 1 Other European countries 14, ,832 2 Countries outside Europe 25, ,143 4 Total 611, , Social security charges These include retirement benefit costs of NLG 5,761 (in 1996: NLG 5,110). Depreciation on tangible fixed assets Land and buildings 4,800 4,028 Machinery and equipment 25,536 18,753 Other tangible fixed assets 5,600 5,132 Total 35,936 27,913 Cash flow Net profit 36,434 26,171 Depreciation on tangible fixed assets 35,936 27,913 Number of employees Remuneration of the Executive Board Remuneration of the Supervisory Board Total 72,370 54,084 Cash flow in % of net sales 11,8 11,5 In the year under review, the average number of full-time employees amounted to 2,776 (1996: 2,208). In 1997, remuneration of the Executive Board amounted to NLG 1,051 (1996: NLG 891). In 1997, remuneration of the Supervisory Board members amounted to NLG 131 (1996: NLG 95). 31

33 Company balance sheet as at 31 December 1997 before profit appropriation (x NLG 1,000) Assets 31 December December 1996 Fixed assets: Tangible fixed assets Other tangible fixed assets Financial fixed assets Participating interests in group companies 152,839 25,672 Amounts receivable from group companies 94, , , , ,105 Current assets: Debtors Other debtors, prepayments and accrued income 1, Cash at bank and in hand 1, , Total assets 155, ,660 32

34 Liabilities 31 December December 1996 Shareholders equity Issued capital 1,606 1,491 Share premium account 131,015 76,214 Other reserves ,795 Retained earnings 36,434 26,171 Provisions 150, ,671 Deferred taxes 1,480 2,634 Current liabilities Trade creditors Liabilities to group companies 2,310 Taxes and social security charges Other liabilities, accruals and deferred income 1, ,201 1,355 Total liabilities 155, ,660 33

35 Company profit and loss account for 1997 (x NLG 1,000) Net profit of subsidiaries 32,934 21,034 Net company profit 3,500 5,137 Net profit 36,434 26,171 34

36 Notes to the company balance sheet and profit and loss account Principles of valuation The principles of valuation of the assets and liabilities shown on the company balance sheet are similar to those used for the consolidated balance sheet. Likewise, the method of profit determination is based on the same valuation principles as used for the consolidated profit and loss account. For further details, please refer to the notes accompanying these statements. Tangible fixed assets (x NLG 1,000) Other tangible fixed assets Balance as at the beginning of the financial year 392 Investments 387 Disposals Depreciation 241 Balance as at the end of the financial year 470 Consisting of: Acquisition value 1,103 Accumulated depreciation 633 Net book value 470 Financial fixed assets (x NLG 1,000) Participating Amounts Total interests in group receivable from companies group companies Balance as at the beginning of the financial year 25,672 94, ,713 Share in the 1997 profit 32,934 32,934 Distribution of dividends -10,870-10,870 Capitalisation respectively repayments 105,103-94,041 11,062 Balance as at the end of the financial year 152, ,839 The interests in group companies are valued at net asset value in accordance with the principles of valuation applicable for the consolidated financial annual report. 35

37 Shareholders equity The authorised share capital amounts to NLG 3,750,000 divided into 37.5 million shares of NLG 0.10 par value each. The issued capital increased by NLG 114,831 during the year as a result of: the declaration of a stock dividend over the year 1996 (128,309 shares) a share issue (1 million shares) the exercise of stock option rights (20,000 shares) On 31 December 1997, 16,063,559 ordinary shares and 100 priority shares were issued. The ordinary shares included 12,670,149 bearer shares and 3,393,410 registered shares. At year-end stock option rights granted to management at par value amount to NLG 15,350 (1996: NLG 16,150). The validity of these options is five years. Share premium account (x NLG 1,000) Balance as at the beginning of the financial year 76,214 38,861 Issue of shares 54,498 35,700 Exercise of stock option rights 314 1,669 Stock dividend over 1996 and 1995, respectively Balance as at the end of the financial year 131,015 76,214 Out of the share premium account, NLG 130,465 can be distributed free of tax. Other reserves (x NLG 1,000) Balance as at the beginning of the financial year 12,795 24,569 Profit appropriation 1996 and 1995, respectively 26,171 19,314 Goodwill -56,731-30,831 Stock dividend over 1996 and 1995, respectively -2-3 Cash dividend over 1996 and 1995, respectively Exchange rate differences Other changes -5-5 Balance as at the end of the financial year -18,829 12,795 36

38 Profit and loss account The company s financial data of Aalberts Industries N.V. have been incorporated into the consolidated annual accounts. To avoid overlap, the profit and loss account of Aalberts Industries N.V. is shown in a summarised format. Liability The company has guaranteed the liabilities of its Dutch group companies in accordance with the provisions of article 403, paragraph 1, Title 9, Book 2 of the Dutch Civil Code. As a consequence these companies will be exempt from filing requirements. Driebergen, 18 February 1998 The Executive Board The Supervisory Board J. Aalberts, President P.W.A. Niessen, Chairman B.P. Bolkenstein, Managing Director A.B. van Luyk F.X. Noz P.J. Vinken 37

39 Supplementary information Statutory rule relating to appropriation of profit The articles of association contain the following stipulation regarding the appropriation of profit: Article Distribution of profits by the company to shareholders and other parties entitled to the distributable profit may take place only insofar as the equity capital of the company exceeds the sum of the paid up and called up part of the issued capital plus the reserves which have to be kept by law. 2. Such of the profit as may be distributed shall be used first of all to pay the percentage, specified below, of the nominal sum paid up on the shares to the holders of preference shares and the priority shares. The above mentioned percentage is the percentage of the average continuation rate established by the Stock Exchange Association, applicable in the financial year over which the dividend is payable, increased by one and a half per cent. Preference shares and priority shares do not entitle the holders to further profit. 3. The Executive Board shall be empowered, after approval by the Supervisory Board, to add all or part of the profit remaining after application of the above paragraph to the reserves. 4. Any residual profit after allocation to the reserves, as stipulated in the above paragraph, may be disposed of by the Annual General Meeting of Shareholders. 5. Insofar as the Annual General Meeting of Shareholders decides against distribution over any financial year, the profit shall be added to the reserves. 6. The Executive Board shall be empowered, with the approval of the Supervisory Board, to decide to make payment of an interim dividend, provided that the requirements of the first paragraph of this article have been met, as shown in an interim statement of assets as referred to in section 105, paragraph 4 Book 1 of the Dutch Civil Code. This statement of assets must be filed at the office of the Register of Commercial Enterprises within eight days of the day in which the resolution to pay the interim dividend is announced. Distribution of the interim dividend shall be equally subject to the stipulations of paragraph 8 of this article. 7. The Annual General Meeting of Shareholders shall be empowered, on the recommendation of the Executive Board as approved by the Supervisory Board, to distribute the profit - or a reserve eligible for distribution - in the form of shares in the company, or in the form of certificates of such shares, without prejudice to article 5 of these articles of association. 8. Profit distributions shall be payable within one month after the resolution to this effect by the Annual General Meeting of Shareholders, which resolution shall be published in at least one national newspaper and, if the shares in the company are officially listed, in the Stock Exchange List as well. 9. Any profit distributions not collected within five years of the day on which they became payable shall revert to the company. Appropriation of profit 1996 In accordance with the resolution of the Annual General Meeting of Shareholders held on 17 April 1997, the appropriation of profit 1996 has taken place in conformity with the proposed appropriation of profit stated in the 1996 Annual Accounts. Proposal for distribution of profits The Executive Board proposes to declare a dividend of NLG 0.57 in cash per share of NLG 0.10 par value, or, at the choice of the shareholders, in shares. At the shareholder s option, payment in shares will be charged to the other reserves or to the tax-exempt share premium account. Any residual profit shall be added to shareholders equity. 38

40 Auditor s report Special statutory rights in respect of voting power A total of 100 issued and paid-up priority shares are held by the Stichting Prioriteit Aalberts Industries N.V., whose Management Board consists of the company s Executive and Supervisory Board. Priority shareholders have the following powers: - authorisation of every decision to issue shares, - authorisation of every decision to limit or exclude the preferential rights of shareholders in the event of an issue of ordinary shares, - authorisation of every decision to buy paid-up shares in shareholders equity or certification thereof without payment or subject to conditions, - authorisation of every decision to dispose of companyheld shares, - authorisation of every decision to reduce the issued capital through the cancellation of shares or through a decrease in the par value of shares by amending the articles of association, - authorisation of the transfer of preference shares, - determination of the number of members of the Executive Board. Additional functions of the members of the Supervisory Board The members of the Supervisory Board also have the following relevant positions: P.W.A. Niessen, Chairman of the Supervisory Board Supervisory Board ASA Holding B.V., Chairman Supervisory Board Helvoet Holding N.V., Chairman Supervisory Board Machinefabriek Meyn B.V., Chairman Supervisory Board Vege-Motoren B.V., Chairman Supervisory Board Wegener-Arcade N.V., Member Introduction We have audited the accompanying 1997 annual accounts of Aalberts Industries N.V., Driebergen as included in this report. These annual accounts are the responsibility of the company s management. Our responsibility is to express an opinion on these annual accounts based on our audit. Scope We conducted our audit in accordance with auditing standards generally accepted in the Netherlands. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the annual accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the annual accounts. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall annual accounts presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, the annual accounts give a true and fair view of the financial position of the company as of 31 December 1997 and of the result for the year then ended in accordance with accounting principles generally accepted in the Netherlands and comply with the financial reporting requirements included in Part 9, Book 2 of the Dutch Civil Code. Utrecht, 18 February 1998 Coopers & Lybrand N.V. A.B. van Luyk, Member of the Supervisory Board Supervisory Board Kenya Airways, Kenya Supervisory Board Braathens S.A.F.E., Oslo F.X. Noz, Member of the Supervisory Board President Noz Holding Co., Inc. President NIC B.V. Chairman California Superior Inc. P.J. Vinken, Member of the Supervisory Board Supervisory Board Elsevier N.V., Chairman Non-executive dir. Reed Elsevier Plc., London 39