Annual Report Aalberts Industries N.V.

Transcription

1 Annual Report 1996 Aalberts Industries N.V.

2 Annual Report 1996

3 Special Components Dispense Systems Installation Materials

4 Contents 4 Supervisory Board and Management 5 Key data 6 Profile 8 Report of the Supervisory Board 9 Report of the Executive Board 13 Organisation and Employees 14 Special Components 16 Dispense Systems 18 Installation Materials 20 Profit Distribution 23 Financial Annual Report Consolidated balance sheet as at 31 December Consolidated profit and loss account for Consolidated Statement of Changes in Financial Position 28 Principles of consolidation, valuation and determination of the result 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 General Managers Operating Companies A.J. Walstock Adex D. Gross Broen Group P. Versluis DSI Group H. van Brug Kluin S. Siksma Leco J.J. Wammes J.J. Zitman J.L. Huveteau G.J. Suringh T.C.H.J. Vedder U.M. Hehlke / V. Seltenheim Mamesta Group Mifa Group Morel Overeem SDB Seppelfricke Group J. Ruissen VSH Group W. Eißer VTI 4

6 Key Data Result (x NLG 1,000) Total operating income 480, , , , ,826 Net sales 470, , , , ,772 Operating profit 50,981 38,910 29,352 21,624 22,232 Net profit 26,171 20,187 15,343 11,336 12,131 Depreciation 27,913 20,741 16,571 13,689 10,739 Cash flow 54,084 40,928 31,914 25,025 22,870 Capital (x NLG 1,000) Total assets 402, , , , ,175 Group equity 116,671 84,811 71,907 51,678 52,453 Long-term liabilities 101,326 67,565 62,647 44,889 31,776 Tangible fixed assets (x NLG 1,000) Book value 171, , ,994 88,549 67,884 Investments 36,014 29,105 15,391 15,749 17,997 Employees At year-end 2,512 1,644 1,520 1,313 1,006 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) Average 14,165 13,615 13,385 12,510 11,190 Data in guilders per share of NLG 0.10 nominal value 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 three main activities: Special Components, Dispense Systems and Installation Materials. Aalberts Industries occupies strong market positions with 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. Special Components Activities in the field of Special Components comprise development, production and sales of components for highgrade 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. Eurocast: Precision aluminium casting The group Special Components includes: Adex B.V. Kluin Wijhe B.V. Leco Products B.V. Mamesta B.V. Härtereibetrieb Dornstadt GmbH Mifa Aluminium B.V. BGT B.V. Eurocast B.V. GBP B.V. Overeem B.V. SDB Industries B.V. 6

8 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, gases, powders and foam. Dispense systems are sold world-wide. The beer industry is Dispense Systems main customer, while systems are also developed for the industrial sector. In addition to this, the softdrink market is emerging. Dispense systems are also used for industrial and inflammable gases and for medical applications. Fire extinguishers form another highly specialised market segment. The group Dispense Systems includes: Dispense Systems International B.V. DSI Getränkearmaturen GmbH & Co. KG Germefa B.V. VTI Ventil Technik GmbH DSI: Beer taps Seppelfricke: Fittings Installation Materials Activities in the field of Installation Materials comprise development, production and sales of accessories (fittings and taps) used in distribution systems for water, gas, energy, central heating and ventilation and cooling systems Product development and production take place in Europe. Sales are world-wide with a strong concentration in Europe. The Installation Materials group is market leader in the Netherlands, Denmark, Germany and France, while in the field of laboratory accessories the group is one of the leading producers in the world. The group Installation Materials includes: Broen Armatur A/S GAM Armaturen GmbH Morel S.A. Seppelfricke Armaturen GmbH & Co. VSH Fabrieken B.V. VSH Specials B.V. 7

9 Report of the Supervisory Board to the Shareholders VTI: Natural gas valve for vehicles We hereby present you with the annual accounts for 1996 of Aalberts Industries N.V. as drawn up by the Executive Board. These, subsequent to auditing by Moret Ernst & Young Accountants, have been agreed by our Board conform the Executive Board s proposal. We propose the approval of the annual accounts for 1996 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 therein included appropriation of profits, a 1996 dividend of NLG 0.45 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 shareholders, can be charged to the share premium reserve or the sundry reserves. After the Annual General Meeting of Shareholders, held on 18 April 1996, Mr P.J. Vinken was re-appointed as a member of the Supervisory Board of the company. Furthermore, Mr A.B. van Luyk was appointed as member of the Supervisory Board of the company. Mr P.W.A. Niessen will retire from the Board at the Annual General Meeting of Shareholders to be held on 17 April 1997, according to the rotation schedule. Mr Niessen is available for re-election. Broen: District heating installation in Odense The Supervisory Board met seven times in 1996, with one meeting taking place at VSH Fabrieken B.V. in Hilversum, the Netherlands. 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, 19 February 1997 P.W.A. Niessen, Chairman A.B. van Luyk F.X. Noz P.J. Vinken 8

10 Report of the Executive Board Aalberts Industries has been able to continue the growth pattern of the past years in While the focus in 1995 was mainly on autonomous growth, acquisitions gave the strongest impulse to Aalberts Industries growth in The forecast of Aalberts Industries being able to continue its growth during a period of less strong economic development that was published at the start of 1996, was upheld. Therefore it pleases the Executive Board that it is able to report on the past year. The net result increased by 30% to NLG 26.2 million, while earnings per share rose by 25% to NLG The turnover increase was in line with the higher result, amounting to 29% at a net turnover of NLG 471 million. Cash flow amounted to NLG 54.1 million, an increase of 32%. Morel S.A. and Härtereibetrieb Dornstadt GmbH were consolidated for twelve months, while the Seppelfricke Group was consolidated for six months. VTI: Balloon gas valve Strategy Aalberts Industries strategy is aimed at growth continuity at higher than average market levels. Aalberts Industries has managed to successfully implement this strategy ever since its introduction on the Amsterdam Stock Exchange, and 1996 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 ten years, 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 between 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. Healthy balance sheet As a result of the expansion-focused strategy and the priority given to the growth of earnings per share, optimal use is made of Aalberts Industries financing capacities. Part of the strategy is to keep a healthy minimum of group equity as 9

11 Seppelfricke: Water accessories percentage of the balance sheet total of at least 30% is aimed at. An incidental departure from this minimum, however, is possible, as was the case in the past year. This will result in a maximum return on the capital invested by the shareholders with no more than a healthy portion of risk. Group equity at year-end 1996 amounted to 29% of the balance sheet total (NLG 117 million), partly as a result of the acquisitions. For 1997, the Executive Board expects this figure to be above 30% again. The net profit as a percentage of average group equity in 1996 amounted to 26%. The strategy, defined as continuity of growth is implemented per group activity, and as such recognisable for all subsidiaries, developing operational targets on the basis of that strategy. In return, these targets contribute to the further development of the overall strategy. During the second half of 1996, the Executive Board evaluated the subdivision of the various group activities which was made in In view of the developments of the past four years, it became obvious that maintaining Interior Systems as a separate group activity offered no real strategic surplus value, and that the relations between this and the other three group activities had become increasingly distant. The Executive Board, after consultations with the Supervisory Board, therefore decided to adapt the subdivision in such a way that the companies that until now were part of the group activity Interior Systems have now been brought under the group activity Special Components. The Executive Board believes that the new subdivision in three group activities is more suited to the existing strategy and priorities. The focus on and individual goals of the companies involved remain as a result of this change. Investments Investment in new technologies is one of the foremost factors for success. Every subsidiary 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. 10

12 Investments include not only property and equipment, but also product and market development, new technologies and training. In 1996, NLG 36 million was invested in tangible fixed assets (1995: NLG 29.1 million). Investments included the building of new production facilities for the surface treatment of aluminium products (anodising) by Mifa Aluminium B.V. and the completion of the expansion of both Broen Armatur A/S s production facility for industrial ball valves and Kluin Wijhe B.V. s production facility for bimetal activities. Härtereibetrieb Dornstadt GmbH, the German heat treatment company, realised a considerable expansion of its production facility in the last quarter of Investments for 1997 are expected to be higher than in In the field of market development, intensive preparations have been made for the start-up of joint ventures in Poland, the US and Malaysia. These will become operational in the first half of Around NLG 17 million was spent on research and development, which was directly debited to the profit and loss account of 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 spreading of subsidiaries 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. During 1996, three companies were acquired. In the first half of the year, the take-overs of Härtereibetrieb Dornstadt GmbH and Morel S.A. were completed successfully. Härtereibetrieb Dornstadt, located in Southern Germany, is specialised in the market for materials refining, a market in which Aalberts Industries already operates through its subsidiary Mamesta. With the take-over of Morel, located in Northern France and active in the installation materials market, Aalberts Industries has made a modest, but strategically very important step on the French market for installation materials. 11

13 In October 1996, the acquisition of Seppelfricke Armaturen GmbH & Co. was completed. Seppelfricke is market leader in its markets, and is one of the leading producers of installation materials in Europe. With the take-over of Seppelfricke, Aalberts Industries has not only reached a strong position in Germany, but the acquisition also embodies the earlier announced substantial expansion of activities in the field of Installation Materials, that was considered necessary by the Executive Board as part of the overall growth strategy. In the financial year 1996, the remaining 25% of the shares of GAM Armaturen GmbH as well as the remaining 18.75% of the shares of Mamesta B.V. were acquired. Inventories Inventories increased as a result of the acquisitions realised in 1996 and several large orders which could not be completed until the start of For that matter, developments of the size of inventories will receive extra attention in Because an increasing part of turnover will be delivered from inventories, the size of inventories will be structurally larger than in the past. Prospects Profit per share (in guilders) Aalberts Industries strategy has once again proved its value in The continued success is supported by the quality of the employees combined with a clear vision and strategy. With its healthy order position, Aalberts Industries is looking ahead with confidence. For 1997, the aim is a strengthening of autonomous growth, besides the ongoing acquisition activities. Barring unforeseen circumstances, Aalberts Industries will therefore be able to continue its growth in

14 Organisation and Employees In 1996, Aalberts Industries organisation could again be characterised as being highly dynamic. The growth of the various group activities is demanding ever-increasing flexibility and perseverance from every individual employee, in order to keep functioning fully in these steadily changing circumstances. The integration process within VTI, focusing on the concentration of the production in one location in Menden, was completed at year-end As a result of the integration, the number of employees per 1 January 1997 is substantially lower compared to The integration of Härtereibetrieb Dornstadt GmbH, the heat treatment company in Southern Germany acquired in May 1996, and Mamesta B.V. was successful. The Mamesta management is responsible for Härtereibetrieb Dornstadt, which also has a German director. Within the heat treatment facility in Southern Germany, concentration of production in one location was started. This process will be completed at the end of January 1997, and will lead to more efficiency in the production process. The number of employees was also cut at this facility. Integration of the French company Morel S.A., which was also acquired in the first half of 1996, is going well. The management team at Morel was renewed and expanded. Production facility at Morel German company Seppelfricke Armaturen GmbH & Co. has energetically started the implementation of its reorganisation plans, which had been devised early in The programme will be completed in As in previous years, much attention was given in 1996 to training and education for employees from all disciplines. Maintaining and expanding the knowledge of Aalberts Industries employees is an important part of company policy and stimulates the necessary creativity. In 1996, the number of employees, partly as a result of acquisitions, increased to 2,512 (1995: 1,644). All employees have again contributed to the results in 1996, with much commitment and creativity. We would hereby like to thank them for this; without them the continued, successful growth of Aalberts Industries would not be possible. It is also because of their efforts and loyalty, that we view the future with much confidence. 13

15 Special Components The turnover growth of group activity Special Components was mainly due to the acquisition of Härtereibetrieb Dornstadt GmbH in the first half of Autonomous turnover growth was modest, caused mainly by delayed exports to Germany. Demand from the German market increased during the second half of 1996, as a result of which healthy autonomous turnover growth can be expected to be realised in Mamesta: Vacuum oven The acquisition of Härtereibetrieb Dornstadt GmbH fits well in Mamesta s growth strategy of strengthening its European position through strategic co-operation. Characteristic for Mamesta s market are the geographically limitations, caused by high transport costs. The growth strategy is therefore directed at searching for partners in geographically connected market areas. Mamesta and Härtereibetrieb Dornstadt have such connected market areas, which include, as well as the Benelux countries and France, nearly all of Germany. Mamesta and Härtereibetrieb Dornstadt work closely together under a joint management. Mifa: Launching rail 14

16 The new production facility for surface treatment of aluminium products was brought into operation in the first half of Production is running according to expectation and strong growth is expected for this activity in the coming years. Interesting new orders were obtained from the defence, telecommunication and radar industries, which together form, not only for 1996 but also for the coming years, turnover of high quality. Co-operation between the subsidiaries was continued on a strengthened basis, and several new projects were successfully turned into orders. As in previous years investments were on a high level. Nearly every subsidiary has modernised and expanded its machinery. As well as completing the new production facility for surface treatment in Venlo, the construction of a new production facility in Laupheim, Southern Germany for Härtereibetrieb Dornstadt was started in the last quarter of Overeem: Stand for spectacles (Top Vision Group) Mifa: Wave guide for radar scanner 15

17 Dispense Systems DSI: Softdrink tap system Turnover development at the group activity Dispense Systems in 1996 was strongly influenced by the adaptations within VTI. Based on a thorough analysis of the order book, the product portfolio and the pricing structure of the various product groups, a substantial part of VTI s original turnover was reorganised. On the one hand, this led to a substantial improvement of the quality of turnover, on the other hand, it caused an initial turnover decrease. After the incidental turnover decrease of 1996 VTI expects to again realise turnover growth from March DSI was able to almost completely compensate for VTI s turnover decrease with its realised growth. Within the DSI group, results developed positively. VTI s result development was, due to the reorganisation that was mentioned earlier, very much below expectations. Product development remains one of the most important elements within the growth strategy of the group activity Dispense Systems. As well as to the development of completely new products, such as a home tap system and a new tap valve for the British market, much attention was given to optimisation of the existing product range. This mostly concerned improvement of specific functions, such as sealing, filling, safety et cetera. New systems, for uses such as oxygen supply for divers and medical applications, are as prototype in their completion stage. We expect to receive the first orders for these products in DSI/VTI: Closing valve for gas VTI, apart from the sanitation of turnover realised in Cologne, was able to maintain its market position. Much attention was given in the second half of 1996 to the improvement of the company s export performance. This included starting up sales activities in the Far East through the sales organisation in Singapore. The first results of these efforts are expected to become visible during

18 DSI has again strengthened its market position in Especially in a number of Eastern European markets, DSI managed to gain market leadership. DSI now supplies to more than 50 countries world-wide. An initial large order for softdrink tap systems was obtained in the first half of This again underlines the potential of the still hesitantly developing softdrink market. The development of the softdrink market will remain one of the priorities for the coming years, together with the increasingly global approach of the fastdeveloping beer market, particularly outside of Europe. DSI/VTI: Integrated tap system 17

19 Installation Materials In 1996, Aalberts Industries was able to rise to the challenge that was mentioned for the first time in the company s annual report for 1995: to strengthen its international position quickly, as answer to an increasing concentration tendency. With the acquisition of Morel S.A. in France and Seppelfricke Armaturen GmbH & Co. in Germany, Aalberts Industries has succeeded in giving its activities in the field of installation materials a strong international dimension. At the same time, turnover of the group activity Installation Materials will as a result of these acquisitions more than double in Seppelfricke: House connection for gas With the take-over of Morel, Aalberts Industries not only will acquire its own production facilities in France, but also an extensive sales network, spanning all the major French regions. From the first quarter of 1997, this sales network will be used to sell VSH and Broen products. This strategic acquisition for the first time gives Aalberts Industries full admission to the French market, which is normally very hard to gain entry to. VSH: Connection for central heating PVC sytem Seppelfricke is one of Germany s largest producers of installation materials. In its markets, particularly that for water accessories, Seppelfricke is Germany s market leader. This renowned, more than 75 years old company was fundamentally restructured by its new management, and has gained a good position to achieve further growth of both result and turnover in the coming years. Seppelfricke s integration in the Aalberts Industries Group offers the company more opportunities to expand its export activities. In the meantime, the co-operation between the various companies within the group activity Installation Materials is in full flow. Co-ordinated by the newly formed group council for Installation Materials, consisting of the various directors of the subsidiaries concerned as well as the members of the Executive Board of the holding company, a large number of projects was started. These include joint purchasing of raw materials, sales, concentration and specialisation of production, promotion and product development. Seppelfricke has its own foundry, extrusion press and hot press. This gives the group a new primary, strategical technology which is extremely important for the quality of the end product. Because Seppelfricke does its own casting, it can also make up the various brass alloys. 18

20 This gives the company extensive knowledge of materials, which can be used by the whole group. Apart from the acquisitions, autonomous developments were also positive in After a difficult start, caused by the severe winter of the first months of 1996, both Broen and VSH were able to make up much of the lost turnover during All the markets developed positively, with the exception of the British market. Much attention was given to market development in several Eastern European markets. As well as in the existing markets, such as Poland, Broen in particular developed activities in markets that had not been entered before. In the Far East, sales developed positively. As per 1 January 1997, a new sales organisation has been set up in Malaysia. There, a joint venture will be set up in the first half of 1997, for the production of ball valves for the local market. A new strategy for laboratory accessories was developed in the second half of 1996, aimed at building on Aalberts Industries leading position in this market. In order to support this strategy, 1996 saw the start of a completely new technology for laboratory accessories, which is expected to be ready to be introduced in two years time. VSH: PVC system for central heating 19

21 Profit Distribution As a result of the decision to split the shares 1:5, approved in the Extraordinary General Meeting of Shareholders held on 12 November 1996, the shares were split on 12 December 1996, resulting in the nominal value of the shares to change to NLG Based on the average number of outstanding shares, earnings per share over 1996 amounted to NLG 1.85 (1995: NLG 1.48). Net sales (x NLG 1,000) Operating profit (x NLG 1,000) Net profit (x NLG 1,000) 500,000 60, ,000 55, ,000 50,000 45, ,000 40, ,000 35, ,000 30, ,000 25,000 20, ,000 15, ,000 10,000 50,000 5,

22 At the Annual General Meeting of Shareholders, shareholders will be asked to determine the 1996 dividend at NLG 0.45 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 (1995: NLG 0.38 in cash or 1.54% in shares). This will increase the dividend by more than 18%. Driebergen, 19 February 1997 J. Aalberts, President B.P. Bolkenstein, Managing Director Cash flow (x NLG 1,000) Dividend (in NLG) Investments (x NLG 1,000) 60, , , , ,000 35, , , , ,000 10, ,

23 Net sales per group (x NLG million) Net sales per area in 1996 (x NLG million) Special Components Dispense Systems Installation Materials Other European countries 42 Eastern Europe 12 Countries outside Europe 17 Germany 163 Total NLG 471 million United Kingdom 20 The Netherlands Scandinavia 34 France 27 22

24 Financial Annual Report

25 Consolidated balance sheet as at 31 December 1996 before profit appropriation (x NLG 1,000) Assets 31 December December 1995 Fixed assets: Tangible fixed assets Land and buildings 68,025 49,869 Machinery and equipment 87,243 56,839 Other tangible fixed assets 12,068 10,219 Tangible fixed assets under construction 3,766 2, , ,981 Financial fixed assets 1, , ,707 Current assets: Stocks Raw materials 42,375 27,745 Work in progress 60,333 29,057 Finished goods 56,239 36,906 Other stocks 10,390 7, , ,532 Debtors Trade debtors 53,125 45,060 Other debtors, prepayments and accrued income 7,640 5,648 60,765 50,708 Cash at bank and in hand , ,305 Total assets 402, ,012 24

26 31 December December 1995 Liabilities Group equity Shareholders equity 116,671 84,106 Minority interest ,671 84,811 Provisions Pensions 11,383 2,293 Deferred taxes 10,735 8,462 Other provisions 5,756 5,979 27,874 16,734 Long-term liabilities 101,326 67,565 Current liabilities Credit institutions 58,138 28,314 Repayment commitment on long-term liabilities 19,510 17,209 Trade creditors 35,553 28,744 Taxes and social security charges 17,688 12,583 Other liabilities, accruals and deferred income 25,600 16, , ,902 Total liabilities 402, ,012 25

27 Consolidated profit and loss account for 1996 (x NLG 1,000) Net sales 470, ,626 Movement in stocks of finished and semi-finished goods 6,629 7,855 Own production capitalised Other operating income 2,464 1,919 9,848 10,166 Total operating income 480, ,792 Raw materials 151, ,540 Work subcontracted 13,421 12,356 Wages and salaries 135, ,888 Social security costs 17,755 11,944 Tangible fixed asset depreciation 27,913 20,741 Other operating expenses 83,210 58,413 Total operating expenses 429, ,882 Operating profit 50,981 38,910 Interest 11,299 7,596 Profit on ordinary activities before taxation 39,682 31,314 Taxes on ordinary activities 13,515 11,105 Profit on ordinary activities after taxation 26,167 20,209 Share in result on subsidiaries Minority interest 386 Net profit 26,171 20,187 26

28 Consolidated Statement of Changes in Financial Position (x NLG 1,000) Source Net profit 26,171 20,187 Depreciation 27,913 20,741 Cash flow 54,084 40,928 Disposals of tangible fixed assets 9,307 1,079 Issued shares 37,479 Increase in minority interest 323 Increase in provisions Loans payable 26,327 22,240 Application 127,406 65,056 Additions to tangible fixed assets 36,014 29,105 Additions to financial fixed assets Acquisitions 28,890 8,245 Cash dividend distribution Repayments on long-term liabilities 35,406 14,223 Other changes ,749 52,125 Change in working capital 26,657 12,931 Made up of Increase in stocks 7,991 12,497 Increase in debtors 2,974 Decrease in current liabilities 29,139 37,130 15,471 Decrease in cash at bank and in hand 92 1,407 Decrease in debtors 10,381 _ Increase in current liabilities 1,133 10,473 2,540 26,657 12,931 Working capital as at 1 January 49,403 46,859 Effect of acquisitions 1,799 7,288 Changes in the short-term portion of long-term liabilities 516 3,099 Working capital as at 31 December 73,745 49,403 27

29 Principles of consolidation, valuation and determination of the result Consolidation principles The consolidated accounts combine the financial data for Aalberts Industries N.V. and its subsidiary companies in accordance with the uniform valuation principles and using the integral consolidation method. The relative financial weights of the various subsidiaries, and inter-company deliveries of goods and services have been eliminated. New acquisitions are carried at their net asset value. Where the acquisition price is different from the net asset value the difference is debited or credited directly to shareholders equity. Minority interests in the group result and in group equity are carried separately. For an overview of the subsidiaries included in the consolidation, see page 36. Principles for the translation of foreign currencies The annual accounts of subsidiaries 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 debts 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 (excluding Investment Account Act grants received) and less accumulated depreciation based on the estimated economic life of the assets concerned. The depreciations are determined according to the straight-line method. Financial fixed assets Capital investment in companies whose annual accounts are not included in the consolidation is 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. Valuation of own production is based on manufacturing costs. 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 the land and buildings for which provision has been made based on the market value. The other provisions have been made in connection with liabilities and risks related to normal business operations, the size of which cannot be exactly determined. The provisions are mainly long-term. Principles for the determination of the result 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 carried as the share in the net profit of subsidiaries not included in the consolidation, and the profit realised on the disposal of subsidiaries. 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 49,869 56,839 10,219 2, ,981 Acquisitions 24,147 26,770 2, ,327 Investments ,969 25,266 5,363 1,416 36,014 Disposals ,932 2, ,307 72, ,996 17,200 3, ,015 Depreciation ,028 18,753 5,132 27,913 Balance at the end of the financial year 68,025 87,243 12,068 3, ,102 Consisting of: Acquisition value 107, ,033 43,440 3, ,310 Accumulated depreciation 39, ,790 31, ,208 Net asset value 68,025 87,243 12,068 3, ,102 Buildings are written off over a maximum period of 33 years. Machinery and equipment are written off over periods ranging from 5 to 15 years. Other fixed assets are written off over a period from 3 to 5 years. On the balance sheet date, Group companies had investment commitments outstanding in respect of tangible fixed assets to an amount of NLG 10,938,000. NLG 3,766,000 has been capitalised in the balance sheet as advance payment. Financial fixed assets The non-consolidated 100% subsidiaries are: - DSI (China) Ltd., Hong Kong - DSI S.A.R.L., Strasbourg, France - Magnalab Inc., Oley, U.S.A. - Seppelfricke Austria Ges. m.b.h., Vienna, Austria This item also includes receivables in respect of these companies. 29

31 Long-term liabilities (x NLG 1,000) 31 December December 1995 Dutch credit institutions 61,144 50,853 German credit institutions 50,330 27,569 Danish credit institutions 7,523 5,492 French credit institutions 1,839 _ 120,836 83,914 Annual redemption 19,510 16,349 Balance as at the end of the financial year 101,326 67,565 - Dutch credit institutions : eleven loans with terms ranging from 5 to 18 years, at interest rates ranging from 3.39% to 8.75%. Repayment commitment in 1997: NLG 9,286, German credit institutions : eleven loans with terms ranging from 4 to 20 years, at interest rates ranging from 5.8% to 8.62%. Repayment commitment in 1997: NLG 8,708, Danish credit institutions : three loans with terms ranging from 5 to 20 years, at interest rates ranging from 5.94% to 7.7%. Repayment commitment in 1997: NLG 1,231, French credit institutions : three loans with terms of 10 years, at interest rates ranging from 8.25% to 9.0%. Repayment commitment in 1997: NLG 285,000. Of these loans a sum of NLG 22,461,000 has a remaining term of more than 5 years. Current liabilities Credit institutions A sum of NLG 29,688,000 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 subsidiaries in Prenzlau and Laupheim as well as the real property in Denmark are secured by a mortgage. At the end of the year under review, the company has provided sureties to a total amount of NLG 379,

32 Net sales (x NLG 1,000) Geographical breakdown: 1996 % 1995 % Germany 163, , The Netherlands 156, , France 26, ,451 2 United Kingdom 20, ,169 5 Denmark 18, ,253 4 Sweden 15, ,617 4 Belgium 14, ,825 4 Eastern Europe 11, ,231 2 Austria 6, ,984 1 Switzerland 6, ,840 2 Other European countries 14, ,043 4 Countries outside Europe 17, ,021 4 Total 470, , Social security charges This includes retirement benefit costs of NLG 5,110,000 (in 1995: NLG 4,556,000). Depreciation on tangible fixed assets (x NLG 1,000) Land and buildings 4,028 3,123 Machinery and equipment 18,753 13,757 Other tangible fixed assets 5,132 3,988 27,913 20,868 Release of Investment Account Act grants 127 Total 27,913 20,741 Cash flow (x NLG 1,000) Net profit 26,171 20,187 Depreciation on tangible fixed assets 27,913 20,741 Total 54,084 40,928 Cash flow in % of net sales Number of employees In the year under review, the average number of full-time employees amounted to 2,208 (1995: 1,645). Remuneration of the Executive Board In 1996, remuneration of the Executive Board amounted to NLG 891,000 (1995: NLG 856,000). Remuneration of the Supervisory Board In 1996, remuneration of the Supervisory Board members amounted to NLG 95,000 (1995: NLG 92,000). 31

33 Company balance sheet as at 31 December 1996 before profit appropriation (x NLG 1,000) Assets 31 December December 1995 Fixed assets: Tangible fixed assets Other tangible fixed assets Financial fixed assets Participating interests in group companies 25,672 34,355 Amounts receivable from group companies 94,041 49, ,713 83, ,105 84,220 Current assets: Debtors Other debtors, prepayments and accrued income Cash at bank and in hand ,194 Total assets 120,660 85,414 32

34 31 December December 1995 Liabilities Shareholders equity Issued capital 1,491 1,362 Share premium account 76,214 38,861 Other reserves 12,795 24,569 Retained earnings 26,171 19, ,671 84,106 Provisions Deferred taxes 2, Current liabilities Trade creditors Taxes and social security charges Other liabilities, accruals and deferred income , Total liabilities 120,660 85,414 33

35 Company profit and loss account for 1996 (x NLG 1,000) Net profit of subsidiaries 21,034 19,081 Net company profit 5, Net profit 26,171 19,314 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 450 Investments Disposals Depreciation Balance as at the end of the financial year 392 Consisting of: Acquisition value 1,017 Accumulated depreciation 625 Net asset value 392 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 34,355 49,415 83,770 Share in the 1996 profit 21,034 21,034 Distribution of dividends 22,500 22,500 Other changes 7,217 44,626 37,409 Balance as at the end of the financial year 25,672 94, ,713 35

37 The following companies in which the company, directly or indirectly, holds 100% of the issued capital, are shown under the item Participating interests in group companies. Operating companies: - Adex B.V., Venlo, The Netherlands - BGT B.V., Eindhoven, The Netherlands - Broen Armatur A/S, Assens, Denmark - Broen Armaturen GmbH, Hilden, Germany - Broen Valves Limited, Tipton, United Kingdom - Broen Singapore Pte Ltd., Singapore - Dispense Systems International B.V., Hilversum, The Netherlands - DSI Getränkearmaturen GmbH & Co. KG, Cologne, Germany - DSI Getränkearmaturen GmbH, Hausen, Germany - DSI (China) Ltd., Hong Kong - DSI S.A.R.L., Strasbourg, France - Eurocast B.V., Apeldoorn, The Netherlands - GAM Armaturen GmbH, Gernsheim, Germany - GBP B.V., Wanssum, The Netherlands - Germefa B.V., Heiloo, The Netherlands - Härtereibetrieb Dornstadt GmbH, Laupheim, Germany - Kluin Wijhe B.V., Wijhe, The Netherlands - Leco Products B.V., Veenendaal, The Netherlands - Magnalab Inc., Oley, U.S.A. - Mamesta B.V., Lomm, The Netherlands - Mifa Aluminium B.V., Venlo, The Netherlands - Mifa Aluminium GmbH, Düsseldorf, Germany - Mifa Aluminium Precision Ltd., London, United Kingdom - Morel S.A., Arrest, France - Overeem B.V., Scherpenzeel, The Netherlands - SDB Industries B.V., s-hertogenbosch, The Netherlands - Seppelfricke Armaturen GmbH & Co., Gelsenkirchen, Germany - Seppelfricke Armaturen GmbH, Prenzlau, Germany - Seppelfricke Armaturen Geschäftsführungs GmbH, Gelsenkirchen, Germany - Seppelfricke Austria Ges. m.b.h., Vienna, Austria - VSH Fabrieken B.V., Hilversum, The Netherlands - VSH Specials B.V., Venlo, The Netherlands - VTI Ventil Technik GmbH, Menden, Germany Non-operating companies: - Aalberts Industries Deutschland GmbH, Cologne, Germany - Aalberts Industries Nederland B.V., Driebergen, The Netherlands - Aalberts Industries International B.V., Driebergen, The Netherlands - Verwaltungsgesellschaft Seppelfricke mbh, Gelsenkirchen, Germany All interests are carried at their net asset value, calculated in accordance with the same principles of valuation as applied in respect of the holding company. Shareholders equity The authorised 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 129,807 during the year as a result of: the declaration of a stock dividend over the year 1995 (195,565 shares) a share issue (1 million shares) the exercise of stock option rights (102,500 rights) On 31 December 1996, 14,915,250 ordinary shares and 100 priority shares were issued. The ordinary shares included 11,545,535 bearer shares and 3,369,715 registered shares. At the end of the financial year, the management was granted stock option rights with a par value of NLG 16,

38 Share premium account (x NLG 1,000) Balance as at the beginning of the financial year 38,861 38,881 Net addition as a result of a share issue 35,700 Exercise of stock option rights 1,669 76,230 38,881 Stock dividend over 1995 and 1994, respectively Balance as at the end of the financial year 76,214 38,861 Out of the share premium account, a sum of NLG 75,664,000 may be distributed free of tax. Other reserves (x NLG 1,000) Balance as at the beginning of the financial year 24,569 16,193 Appreciation of profit 1995 and 1994, respectively 19,314 15,343 43,883 31,536 Paid goodwill 30,831 6,447 Stock dividend over 1995 and 1994, respectively 3 3 Cash dividend over 1995 and 1994, respectively Other changes Balance as at the end of the financial year 12,795 24,569 Profit and loss account The corporate financial data of Aalberts Industries N.V. have been incorporated into the annual accounts. To avoid overlap, the profit and loss account of Aalberts Industries N.V. is shown in a summarised form. The discrepancy between the consolidated result and company result for 1995 is caused by the acquisition of Mamesta B.V. in In the consolidated result, the acquisition has been consolidated for the whole year, whereas in the company accounts the result was incorporated from the date of acquisition. Liability In view of the company s liability guarantee in pursuance of section 403, paragraph 1, Title 9, Book 2 of the Dutch Civil Code in respect of all Dutch subsidiaries, the subsidiaries have filed exemption from the regulations pertaining to publication of their annual accounts. Driebergen, 19 February 1997 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 1995 In accordance with the resolution of the Annual General Meeting of Shareholders held on 18 April 1996, the appropriation of profit 1995 has taken place in conformity with the proposed appropriation of profit stated in the 1995 Annual Accounts. Proposal for distribution of profits The Executive Board proposes to declare a dividend of NLG 0.45 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. 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. 38