Contents. 4 Profile. 7 Key figures. 8 Strategy. 10 Management and supervision. 11 The Aalberts Industries N.V. share

Transcription

1 Annual Report 2001

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3 Contents 4 Profile 7 Key figures 8 Strategy 10 Management and supervision 11 The Aalberts Industries N.V. share 13 Report of the Supervisory Board to the shareholders 14 Report of the Management Board 19 Information on group activities 23 Financial Statements Consolidated balance sheet as at 31 December Consolidated profit and loss account for Consolidated cash flow statement for Notes to the consolidated financial statements 28 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 36 Other information 39 List of group companies 3

4 Profile Aalberts Industries N.V. is an internationally operating industrial group with two main areas of activity, Industrial Services and Flow Control Systems, in each of which it occupies strong market positions. The group has a highly decentralised organisation, with extensive operational management responsibilities at regional level backed up by a central holding company of limited size (10 staff). The company seeks to realise a continuous increase in turnover and results through a combination of organic growth and acquisitions, with increasing earnings per share being the main priority. 4

5 Aalberts Industries N.V. Industrial Services Flow Control Systems Industrial Products Material Technology Dispense Systems Water, Gas & Heating Systems Industrial Services The Industrial Services activities (consisting of Industrial Products and Material Technology) comprise the development, manufacture, treatment and sale of complex components for use in high-grade industrial end products based on customer specifications. The components and services are supplied to a number of market segments, such as the automotive industry, the precision engineering industry, the medical sector, the metalektro (metalworking and electrical engineering) industry, the aircraft construction industry, the defence industry, the aluminium industry and the telecom and semiconductor industries. These activities are mainly concentrated in Europe. Flow Control Systems The activities of Flow Control Systems (comprising Dispense Systems and Water, Gas & Heating Systems) encompass the development, manufacture and sale of distribution systems for water, gas, energy, heating, ventilation and air cooling systems, as well as dispensing equipment for the beer and soft drinks industries. These systems are supplied worldwide to wholesalers, installation contractors, OEMs, laboratories, breweries, gas producers, the heating industry, utilities and the beer and soft drinks industry. For a detailed description of the various group companies and product groups, please refer to the Aalberts Industries website at 5

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7 Key figures Result (x EUR million) Total operating income Turnover Operating profit* Net profit** Depreciation Cash flow** Capital (x EUR million) Total assets Capital base Group equity Long-term liabilities Tangible fixed assets (x EUR million) Net book value Investments Employees at year-end Netherlands 1,546 1,643 1,106 1,169 1,186 Other countries 4,037 2,767 2,656 2,232 1,669 Total 5,583 4,410 3,762 3,401 2,855 Ratios Operating profit* as a % of turnover Interest cover* Net profit** as a % of turnover Capital base as a % of total assets Shares issued (x million) Ordinary shares (average) Cumulative preference shares _ Figures per ordinary share Cash flow** Net profit** Dividend** Share price at year-end * Before amortisation of goodwill. ** Before amortisation of goodwill and after incorporation of the dividend on the cumulative preference shares. 7

8 Strategy The strategy of Aalberts Industries is directed towards securing continuity of growth at a level which exceeds the market average. Aalberts Industries has pursued this strategy successfully since its introduction onto the Euronext Securities Market Amsterdam (in March 1987), in the interests of all parties involved with the company. The objectives ensuing from this strategy remain unchanged: Growth in earnings per share The primary objective is to achieve growth in earnings per share. Since the flotation in 1987 this growth has averaged around 20% per annum; in 2001 the growth of 6% fell short of this average. Balanced turnover distribution The balanced distribution of the turnover across the various group activities, with a very large number of products and production processes in many countries, contributes greatly to the continuity of the business. This reduces the dependence on developments in any one segment, thus reducing the level of risk for shareholders. Capital base of 25% In the light of the strong strategic focus on expansion and the high priority given to growth in earnings per share, maximum use is made of the borrowing capacity of Aalberts Industries. The aim is to maintain a capital base of around 25% of the balance sheet total and to secure interest coverage of at least 4. This enables maximum benefit to be derived from the capital invested by shareholders, with no more than a healthy dose of risk. The strategy is developed centrally within Aalberts Industries for each group activity, and is consequently recognisable for each group company. On the basis of this strategy, each group company formulates its own operational objectives. These objectives in turn contribute to the further development of the strategy. 8

9 Industrial Services The strategy for Industrial Products is directed towards the marketing of high-grade specialist technologies for the manufacture of complex, customerspecific products. Technology is given priority over the offering of pure production capacity. The strategy for Material Technology is geared towards building up a European network of service centres for both standard treatments and highly specialised applications. The guiding principle here is that this market is highly regional in nature, with a small radius of activity depending on the geographic and demographic characteristics of the particular region. Aalberts Industries is committed to securing a position among the top three companies operating in each of its various niche markets. Flow Control Systems The strategy for Dispense Systems is geared towards the improvement of existing products and, above all, the development of new products with a view to increasing market share. The strategy for Water, Gas & Heating Systems is developed along two lines. The first of these is volume growth, to be achieved through organic development and acquisitions with a view to further improving the utilisation of the total production capacity and the international distribution network, thus achieving ongoing productivity improvements and cost savings. The second strand of the strategy focuses on strengthening the position in niche markets. This strategy is based on the supply of advanced products which supplement the existing basic product ranges. It is mainly within these niche markets that new technologies are used for the first time. There is both commercial and technological interaction between the basic products and the niche products. Whilst taking into account the interests of all concerned and the position of the company in its various markets, the Management Board seeks to be as open and clear as possible in providing information about its strategy, objectives and the policy to be pursued. 9

10 Management and supervision Supervisory Board P.W.A. Niessen, Chairman C.J. Brakel A.H. Land A.B. van Luyk Management Board J. Aalberts, President & CEO B.P. Bolkenstein, Managing Director J. Eijgendaal, Financial Director R.W. Jaquet, Managing Director, Aalberts Industries Finance B.V. Group Company Management Industrial Services A.J. Walstock Adex P. Kopp / H. Nolte AHC Group R.S. Wamhser Hauck Group H.A. Zantinge / J.J. Zitman Industrial Supply Group J. van Knegsel Van Knegsel J.J. Wammes Mamesta Group B.M. Pinkster / J.J. Pinkster Mogema Group J.Ph. Admont Nowak G.J. Suringh Overeem Group C.J. Baumann TTI Group Flow Control Systems D. Gross Broen Group Th. Wollschlaeger Dispense Systems P.W.M. Hartman / R.J.G. Hartman Hartman Group J.L. Huveteau Morel Group N. Reinhardt Seppelfricke Group U. Hilbert Simplex Wilfer A. Rodrigo Standard Hidráulica W.A. Pelsma VSH Group 10

11 The Aalberts Industries N.V. share Listing The 19.5 million ordinary shares in Aalberts Industries N.V., each having a nominal value of EUR 1.00, are listed on the Euronext Securities Market Amsterdam and traded via the regulated unofficial stock market and via the electronic trading system Xetra, both on the German Börse AG stock exchange in Frankfurt. Since September 2000, Aalberts Industries has also been included in the Next 150 index as adopted by the collaborating stock exchanges of Paris, Brussels and Amsterdam. The Next 150 represents the segment of companies with large and medium-sized capitalisation (the midcap segment) that are listed on the Euronext stock exchange. During the course of 2002, Aalberts Industries is expected to be included in the Next Prime Index, a new industrial index which is being introduced by Euronext. At year-end 2001, the Aalberts Industries N.V. share was listed with a market capitalisation of approximately EUR 430 million. An extraordinary meeting of shareholders was held on 8 May 2001, at which a proposal to amend the Articles of Association was adopted by a majority of votes. Among other things, this amendment involved conversion of the nominal value of the shares from NLG to EUR. At present the nominal value of the ordinary shares is EUR 1.00, and the nominal value of the cumulative preference shares EUR Dividend policy Aalberts Industries intends to pursue its existing dividend policy in the 2002 financial year. At the discretion of individual shareholders, dividend may be taken either entirely in cash or in shares charged to the share premium reserve or charged to the unappropriated profit. In the light of the new regulations governing the treatment of goodwill (capitalisation and amortisation over a maximum of 20 years), the dividend will be fixed on the basis of approximately 25% of the earnings per share before amortisation of goodwill. Shareholders interests More than 70% of the ordinary shares are freely marketable; the remaining shares are in the hands of management and a few major shareholders who have holdings of more than 5%. The 1.8 million cumulative preference shares in Aalberts Industries N.V. are held by the trust office Stichting Administratiekantoor Financieringspreferente Aandelen Aalberts Industries, which has issued depositary receipts for the shares. The depositary receipts are in the hands of a limited number of institutional investors. The following notifications of holdings of more than 5% of the share capital have been received pursuant to the Dutch Disclosure of Major Holdings in Listed Companies Act (WMZ): Ordinary shares Capital holding Aalberts Beheer B.V % ABN AMRO Small Companies Netherlands Fund N.V. 5.07% De Hoge Noot B.V. 5.03% Smoorenburg B.V. 5.12% Cumulative preference shares Capital holding Stichting Administratiekantoor Financieringspreferente Aandelen Aalberts Industries 24.97% Ducatus N.V. 9.05% Fortis Utrecht N.V. 6.59% NIB Capital N.V % The above summary includes only the most recently received notifications of shareholdings up to and including 31 December

12 Stock market information Highest share price in EUR Lowest share price in EUR Closing price at year-end in EUR Price/earnings ratio Average stock market turnover (number of shares, single count) 24,958 34,766 35,654 22,241 Number of shares in issue at year-end (x million) Average number of ordinary shares in issue (x million) Market capitalisation at year-end (x EUR million) Share price movements in the year under review Aalberts Industries AEX Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Share options Aalberts Industries operates a share option scheme for the management. Under the terms of this scheme, which has been checked by the Securities Board of the Netherlands (STE), there were 52,050 options outstanding at year-end 2001 (2000: 29,300). Financial agenda (subject to change) Mid-March 2002 Announcement of stock dividend exchange ratio 22 April 2002 General Meeting of Shareholders in the Okura Hotel, Amsterdam. Start: hours 24 April 2002 Ex-dividend listing 29 April 2002 Making payable of dividend 16 August 2002 Publication of interim figures 2002 (before start of trading) 12

13 Report of the Supervisory Board to the shareholders We have pleasure in presenting herewith the financial statements 2001 of Aalberts Industries N.V., as drawn up by the Management Board. Following an audit by PricewaterhouseCoopers N.V., these financial statements have been adopted by our Board pursuant to a proposal by the Management Board. We invite you to adopt the financial statements 2001 in accordance with the documents submitted. Such adoption will serve to ratify the actions of the Management Board during the financial year 2001 and the members of the Supervisory Board for their supervision thereof, pursuant to Article 29 paragraph 6 of the Articles of Association. Adoption of the financial statements and the profit appropriation included therein will result in the payment of a dividend for the reporting year 2001 of EUR 0.48 per ordinary share having a nominal value of EUR At the discretion of individual shareholders, this dividend may be taken either entirely in cash or in shares charged to the share premium reserve or charged to the unappropriated profit. The Supervisory Board met on seven occasions in One company visit was made to the group company Mogema in t Harde. As is customary, the Supervisory Board will again visit a number of group companies in In addition to its ongoing attention for the course of business within the various group activities, our Board devoted particular attention to the continued financing of the planned growth. Special attention was also given to the organisation, the decentralised structure with accompanying financial control and the rate of growth to be pursued. The Supervisory Board regards the continuity and consistency of the policy now and in the future as highly important in this context. The Supervisory Board would like to express its appreciation for the dedication and commitment of the Management Board and, in particular, the employees who, under less favourable conditions, again gave their full commitment to Aalberts Industries in the 2001 reporting year and without whom the results achieved would not have been possible. Langbroek, 22 February 2002 P.W.A. Niessen, Chairman C.J. Brakel A.H. Land A.B. van Luyk 13

14 Report of the Management Board Turnover (x EUR million) Aalberts Industries achieved a further profit increase in 2001, despite markedly less favourable market conditions. Net profit (before amortisation of goodwill) grew by more than 7% in 2001, to EUR 37.8 million. Cash flow totalled EUR 70.6 million, 15% more than in the previous year. Operating profit came in at EUR 68.9 million, an increase of 16%. Earnings per ordinary share amounted to EUR 1.94, 6% higher than in Turnover rose to EUR million, an increase of 27%. Organic sales growth was approximately 4%. Aalberts Industries faced challenging market conditions in a number of key markets in In particular, developments in the semiconductor and related industries and in the German construction industry depressed turnover in these markets. Although the weakened economic trend also began to have an impact in some other market segments during the final quarter, taking 2001 as a whole the performance in many of the key markets for Aalberts Industries was positive The negative impact of these developments on the Group s profitability was largely eliminated due to timely and adequate cost savings and organisational adjustment. Coordinated purchasing efforts contributed to the cost savings and good progress was made in the area of cross-selling. These themes will continue to receive management s undiminished attention over the coming years Operating profit* (x EUR million) Net profit** (x EUR million) Investments Capital spending came to over EUR 46 million in 2001 and is one of Aalberts Industries key success factors. Investments implied replacement, capacity expansion and new production technologies. Investments were also made in environmental and automation projects. Furthermore seven new European production facilities were completed in the year under review. The costs involved in bringing these new facilities on-stream were taken to the profit and loss account for For investments in real property mainly operational lease constructions were used. This substantial capacity expansion will enable Aalberts Industries to respond adequately to future organic growth Cash flow** (x EUR million) Investments (x EUR million) * Before amortisation of goodwill. ** Before amortisation of goodwill and after incorporation of the dividend on the cumulative preference shares 14

15 In 2001 approximately 2.5% of turnover was invested in activities in the areas of market-specific product development and new and improved production technologies and methods. As always, these costs were charged directly to the profit and loss account. The company s own research and development efforts are supplemented by the acquisition or takeover of patents and/or exclusive licences. Technology and market development New products are developed primarily for new market segments. Entering a new geographical market may be accompanied by modification of a product to suit local circumstances and standards. Turnover (x EUR million) 2001 % 2000 % By geographic breakdown: Germany Netherlands United Kingdom France USA Eastern Europe Spain Denmark Belgium Sweden Austria Switzerland Italy Other European countries Other non-european countries Total Market development, both in Industrial Services and in Flow Control Systems, comprises long-term projects, the costs of which are charged directly to the profit and loss account for the current year. The use of the Internet via interactive websites was also developed further in the year under review. The activities in the area of information technology are focused mainly on the exchange of information on sales, marketing, (data) communication with customers and production support. 15

16 Acquisitions A total of six acquisitions was effected in These acquisitions brought in turnover of approximately EUR 120 million, approximately 75% of which was consolidated in The acquisition of AHC Group in early 2001 marked a substantial expansion of Material Technology. All surface treatment activities have since been placed under the responsibility of the AHC management, which is consequently also responsible for the further growth of this activity. As part of this growth strategy, two further companies were acquired later in the year: PBC Dopheide, a specialist in industrial paintings, and Acorn, which specialises in surface treatment, including silver coatings. The German-based heat treatment company Durotec was also acquired. Durotec (which now operates under the name Härterei Hauck Rhein-Main) specialises in the heat treatment of high-performance shafts. In line with the strategy for Water, Gas & Heating Systems, which is geared among other things to increasing the geographical spread of the activities and securing full coverage of the European market, the Spanish company Standard Hidráulica, based in Barcelona, was acquired in the second half of the year. This acquisition not only gives Aalberts Industries an important market position in Spain, Portugal and Latin America, but also adds a number of new product ranges to its overall portfolio. Moreover, the Aalberts Industries Group will have access to contacts in China, with which Standard Hidráulica has a relationship going back many years. The 51% participating interest in Meibes helps Aalberts Industries fulfil its strategy of offering complete systems as well as components to the market. Meibes specialises mainly in advanced heating control systems. Aalberts Industries acquired the final 10% of the shares in Härterei Hauck in 2001, giving it 100% ownership. The 20% minority interest in NADS was also acquired, again giving Aalberts Industries ownership of all the shares. Expansion of the strategic positions occupied by Aalberts Industries in its selected markets will again be supported in 2002 with a number of acquisitions. On the basis of a well-defined strategy and clear acquisition aims, selective advantage will continue to be taken of acquisition opportunities which present themselves. Post-balance sheet events In the course of February 2002 Aalberts Industries expanded its interest in Meibes to 76% and in Durotec (now Härterei Hauck Rhein-Main) to 90%. 16

17 The global economic slowdown put a considerable amount of pressure on the organisation, particularly in the second half of the year. The need arose in several areas to adapt the organisation to the changed market circumstances in order to boost efficiency. Personnel and organisation During the third quarter it became clear that structural developments on the German market were such that the measures taken to that date in 2001 were not going to be adequate. In order to maintain the long-term profitability of the German activities in Water, Gas & Heating Systems and to streamline the organisation, the Group embarked on a far-reaching centralisation programme for the production activities; as part of this process, less profitable production units will be merged and/or closed. This centralisation will lead to a further reduction in the number of employees. Implementation of these measures will continue throughout 2002 and the first quarter of A good deal of attention was again devoted in the year under review to the integration of the newly acquired companies. The personnel and organisation policy is directed towards enabling these companies to retain their own identity as far as possible within the framework of the growth targets formulated by Aalberts Industries. The management of AHC Group was given responsibility for all surface treatment activities within the Group. The further development of these activities will also fall under the responsibility of this management. Ultimate responsibility for the interest acquired in Meibes in the second half of 2001 lies with the management of Broen. Broen has transferred its management responsibility for Conti Sanitärarmaturen in Germany to the management of VSH Fittings & Systems. A number of changes took place at management level within the various companies during the year under review. On 1 December 2001 the activities of NADS were moved in their entirety to San Antonio, Texas, where Taprite-Fassco is also based. There was a net increase in the number of employees in 2001, mainly as a result of acquisitions, to 5,583 (at year-end 2000: 4,410). Geographic breakdown of personnel Germany 2,388 1,379 Netherlands 1,546 1,643 United Kingdom Denmark France Spain Other Total 5,583 4,410 17

18 The continued success of Aalberts Industries is and continues to be achieved thanks to the great efforts of its staff. The quality, creativity and loyalty of the employees are the indispensable ingredients for the future of Aalberts Industries. The Management Board would like to take this opportunity to thank all employees once again for the results achieved Profit appropriation Earnings per ordinary share** (in EUR) Dividend** (in EUR) ** Before amortisation of goodwill and after incorporation of the dividend on the cumulative preference shares. The number of ordinary shares increased at year-end 2001 to 19.5 million as a result of the distribution of stock dividend and the issue of jubilee shares. Based on the average number of shares in issue, earnings per ordinary share (before amortisation of goodwill) amounted to EUR The General Meeting of Shareholders will be invited to fix the dividend for 2001 at EUR 0.48 in cash per ordinary share having a nominal value of EUR 1.00 or, at the discretion of the shareholder, in ordinary shares charged to the tax-free distributable share premium reserve or charged to the unappropriated profit. This represents an increase in the dividend of 5%. The percentage of the stock dividend will be announced in mid-march Outlook With a growth in turnover and profit in 2001, which was a turbulent year in many respects, Aalberts Industries has proved that its strategy safeguards continuity of growth even in less favourable market conditions. Continued application of this strategy in combination with the widely anticipated upturn in international economic activity in the course of the current year could lead to an increase in growth for full-year Langbroek, 22 February 2002 J. Aalberts, President & CEO B.P. Bolkenstein, Managing Director 18

19 Information on group activities Industrial Services Industrial Services recorded turnover growth of approximately 52% in With turnover of approximately EUR 296 million (2000: EUR 195 million), Industrial Services accounts for some 49% of the total turnover of Aalberts Industries. The operating profit turned out at more than 15% of turnover. There was a net increase in the total number of employees to 3,016 (average 2,944), mainly as a result of acquisitions. Investments in 2001 amounted to EUR 29 million. Key figures (x EUR million) Turnover Operating profit* Operating profit* as a percentage of turnover Investments Average number of employees (x1) 2,944 1,906 * Before amortisation of goodwill. Industrial products Many group companies were faced with reduced demand in 2001, with a particularly marked fall in the telecom and semiconductor sectors. As a result of these market developments, greater emphasis was placed on cost control and adapting the various organisations to the changed turnover levels. The sales activities received a healthy impetus to develop new markets and clients. Despite the slight delay caused by the relatively long sales cycles, the initial results of these sales efforts are becoming visible. Organisationally, several activities were placed under the ultimate responsibility of a single management team in This not only increases the strength of both the holding company and the group companies, but also fosters mutual cooperation. 19

20 Material Technology Material Technology performed well in the year under review, though the heat treatment activities in a number of markets (including the UK and Germany) were faced with reduced demand in the second half of the year. However, the high level and quality of service helped to maintain profitability at a healthy level even in this climate. The acquisition of AHC Group forms the basis for the development of a European network of surface treatment activities. The bringing together of surface treatment and material refining activities in a European network, comprising 38 locations at year-end 2001, gives Aalberts Industries a unique position in the market. Further strengthening of the European network will be one of the priorities in the acquisition programme for 2002 and subsequent years. The organic growth is driven mainly by the development of new process technologies for existing applications and the application of existing processes to new products. A continuous stream of new projects will go a long way towards offsetting the impact of the present economic climate. 20

21 Flow Control Systems Flow Control Systems recorded turnover growth of approximately 10% in With turnover of more than EUR 308 million (2000: EUR 280 million), Flow Control Systems accounts for 51% of the total turnover of Aalberts Industries. The operating profit turned out at approximately 8% of turnover. There was a net increase in the number of employees to 2,553 (average 2,364); this increase was attributable entirely to acquisitions in Investments in 2001 amounted to more than EUR 16 million. Key figures (x EUR million) Turnover Operating profit* Operating profit* as a percentage of turnover Investments Average number of employees (x1) 2,364 2,228 * Before amortisation of goodwill. Dispense Systems The concentration of virtually all European activities at a single location had a major impact on the operations of Dispense Systems in This move, which is important for the future, depressed the result in 2001 to a greater extent than anticipated. In addition to extra costs, particularly for personnel, the relocation led to considerable efficiency losses. The project was completed in January The market showed a stable trend in The newly streamlined organisation and a healthy market outlook will lead to improved profitability in The long-running patent battle with the Danish competitor was positively settled in January 2002, which means that Aalberts Industries now has unlimited access to the disputed technologies and inventions. Following an initial downturn in the American market, the first signs of recovery were seen in the final quarter of the year under review. This trend was supported by developments in early

22 Water, Gas & Heating Systems Developments in the markets for Water, Gas & Heating Systems presented a mixed picture. All German activities suffered from the persistently weak construction industry in Germany. The estimated 20% shrinkage of this market led to considerable falls in turnover for the German group companies. The group companies concerned will have to make structural adjustments to adapt to the lower level of activities. Virtually all other markets underwent positive developments, with growth in the UK, Russia, Poland and the Benelux, among others. In addition, the acquisition of the Spanish company Standard Hidráulica opened up the markets in Spain, Portugal and Latin America. The synergy effects between Standard Hidráulica and the other companies could be considerable in the years ahead. Anti-legionella systems were successfully introduced in the Netherlands by a newly formed dedicated sales organisation. Sales of the new carbon steel fittings also developed well. The strong growth in sales in the Russian market prompted the Group to decide to launch its own production activities in Moscow in The acquisition of Meibes brought a considerable expansion of the product portfolio of Water, Gas & Heating Systems, with the addition of heating measurement and control systems. The new production facility in Poland came on-stream in mid-december and will already be operating at full capacity in Further expansion in Eastern Europe is planned for the coming years. 22

23 Financial Statements 2001

24 Consolidated balance sheet as at 31 December 2001 before profit appropriation (x EUR 1,000) Assets Fixed assets: Intangible fixed assets Goodwill 95,613 Tangible fixed assets Land and buildings 76,870 59,370 Plant and equipment 112,050 92,921 Other fixed assets 11,066 8,572 Fixed assets under construction 5,245 8, , ,510 Financial fixed assets 1,322 2,605 Current assets: Stocks 302, ,115 Raw materials and consumables 37,185 31,628 Work in progress 42,508 40,009 Finished products and goods for resale 45,875 45,998 Other stocks 6,179 6,107 Debtors 131, ,742 Trade debtors 85,950 73,068 Other debtors, prepayments and accrued income 16,451 12, ,401 85,436 Cash at bank and in hand , ,242 Liabilities Total assets 536, ,357 Group equity* Shareholders equity 90,161 60,772 Minority interests 751 1,354 Provisions 90,912 62,126 Pensions 6,376 3,876 Deferred taxation 5,813 6,033 Other provisions 5,620 4,733 Long-term liabilities 17,809 14,642 Subordinated loan* 45,500 34,034 Other loans 136,705 98,613 Current liabilities 182, ,647 Credit institutions 75,024 65,019 Current portion of long-term liabilities 50,964 29,053 Trade creditors 47,110 41,258 Taxation and social security charges 12,346 7,838 Other amounts owed, accruals and deferred income 60,029 28, , ,942 Total group equity and liabilities 536, ,357 * These items make up the capital base. 24

25 Consolidated profit and loss account for 2001 (x EUR 1,000) Turnover 603, ,398 Movement in stocks of finished products and work in progress 5,441 4,277 Own production capitalised Other operating income 4,591 3,584 10,434 8,167 Total operating income 614, ,565 Costs of raw materials and consumables 169, ,485 Costs of subcontracted work 24,624 14,880 Personnel expenses 212, ,187 Depreciation of tangible fixed assets 32,853 26,120 Amortisation of goodwill 3,900 Other operating expenses 105,358 82,584 Total operating expenses 549, ,256 Operating profit 65,006 59,309 Interest charges 16,438 9,062 Group profit on ordinary activities before tax 48,568 50,247 Tax on profit on ordinary activities 12,113 12,357 Share in result of participating interests 183 Group profit on ordinary activities after tax 36,638 37,890 Minority interests Net profit 35,991 37,224 Dividend on cumulative preference shares 2,122 1,978 Net profit for ordinary shareholders 33,869 35,246 Net profit before amortisation of goodwill 37,769 35,246 25

26 Consolidated cash flow statement for 2001 (x EUR 1,000) Cash flow from operating activities Operating profit 65,006 59,308 Depreciation of tangible fixed assets 32,853 26,120 Amortisation of goodwill 3,900 Changes in provisions (476) (643) Changes in working capital Change in debtors 3,350 (6,381) Change in stocks 2,631 (9,369) Change in current liabilities (9,194) (5,835) Changes in working capital (3,213) (21,585) Cash flow from operations 98,070 63,200 Interest charges (16,438) (9,062) Tax on profit (15,030) (10,827) Cash flow from operating activities 66,602 43,311 Cash flow from investing activities Disposals/acquisitions of group companies (78,451) (81,156) Investments in tangible fixed assets (46,464) (35,506) Disposals of tangible fixed assets 3,701 2,191 Exchange differences on tangible fixed assets (1,450) (2,428) Investments in financial fixed assets 1, Cash flow from investing activities (120,958) (116,756) Cash flow from financing activities Long-term liabilities contracted 85,099 68,446 Share issue Repayments on long-term liabilities (32,792) (25,231) Dividend paid (5,328) (3,900) Change in minority interests (1,426) (992) Exchange differences and other movements (1,195) 3,661 Cash flow from financing activities 44,371 42,589 Net cash flow (9,985) (30,856) 26

27 Notes to the consolidated financial statements The financial information of Aalberts Industries N.V. and its group companies are consolidated in full on the basis of uniform accounting policies and using the full consolidation method. Inter-company balances and inter-company transactions are 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 capitalised as goodwill and subsequently amortised over a period of 20 years. Minority interests in group result and in group equity are stated separately. Consolidation principles Principles for the translation of foreign currencies The financial statements of group companies established outside the Netherlands are translated at rates ruling at the end of the financial year. Exchange differences are taken to shareholders equity. Debtors and liabilities denominated in foreign currencies are converted into euros at the exchange rates ruling at the end of the financial year. These exchange differences are taken to the profit and loss account. Accounting policies for assets and liabilities General - Assets and liabilities are carried at face value, as far as not indicated otherwise. Intangible fixed assets - Where the acquisition price of newly acquired group companies differs from the net asset value, the difference is capitalised as goodwill and subsequently amortised over a period of 20 years. Tangible fixed assets - Tangible fixed assets are carried at cost value less investment premiums and less accumulated depreciation based on the estimated useful life of the assets concerned. Depreciation is calculated using the straight-line method. Financial fixed assets - Investments in companies whose financial statements are not included in the consolidation are carried at net asset value. Stocks - Stocks of raw materials and consumables are carried at the net realisable cost. 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 stated at full manufacturing cost. A provision for obsolescence has been deducted where necessary. Debtors - Receivables are carried at face value less a provision for doubtful debts. Provisions - The provision for pensions relates to pension commitments stated at actuarial value. 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 financial statements and for tax purposes. This provision is calculated at the nominal rate, except for the land and buildings for which the provision is stated at its present value (20%). The other provisions have been made in connection with liabilities and risks related to normal business operations. The provisions are mainly long-term. Accounting policies for profit and loss account Turnover - Turnover includes the proceeds of the sale of goods and services to third parties net of turnover taxes, discounts and bonuses. Other operating income - This item includes the book profits arising from the sale of tangible fixed assets, as well as development grants. Depreciation of tangible fixed assets - Depreciation of tangible fixed assets, calculated using the straight-line method, is based on the expected useful life of the assets concerned. Amortisation of goodwill - The amortisation of goodwill is calculated using the straight-line method over a period of 20 years. Other operating expenses - The R&D expenses are charged directly to the profit and loss account. Taxation - Tax is based on the pre-tax profit at the ruling tax rate, taking into account any tax-exempt profit, tax deductible losses and fully or partly deductible costs. Share in result of participating interests - This item represents the share in the net profit of participating interests not included in the consolidation, and the profit realised on the disposal of participating interests. Notes to the consolidated cash flow statement 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 as a result of acquisitions are eliminated from the cash flows arising from these assets and liabilities. These changes have been incorporated in the cash flow from investment activities under Disposals/acquisitions of group companies. The net cash flow consists of the net change of cash and credit institutions balances in comparison with the previous year under review. 27

28 Notes to the consolidated balance sheet and profit and loss account (x EUR 1,000) Intangible fixed assets Goodwill Net book value as at the beginning of the financial year Changes in net book value Acquisitions 99,513 Amortisation (3,900) Net book value as at the end of the financial year 95,613 Cost 99,513 Accumulated amortisation (3,900) 95,613 Tangible fixed assets Land and Plant and Other Fixed assets Total buildings equipment fixed under conassets struction Net book value as at the beginning of the financial year Cost 95, ,250 31,427 8, ,770 Accumulated depreciation (36,076) (200,329) (22,855) (259,260) Changes in net book value 59,370 92,921 8,572 8, ,510 Acquisitions 12,513 9,314 1, ,471 Investments 10,419 34,542 5,680 (4,287) 46,354 Disposals (1,755) (1,631) (315) (3,701) Depreciation (4,051) (24,096) (4,706) (32,853) Exchange differences 374 1, ,450 Net book value as at the end of the financial year Cost 17, ,040 19, ,935 2,494 49,345 (3,402) 5,245 35, ,565 Accumulated depreciation (46,170) (257,885) (38,279) (342,334) 76, ,050 11,066 5, ,231 Depreciation is applied to buildings over a period no more than 33 years. Plant 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 EUR 8,332, of which EUR 5,245 has been capitalised in the balance sheet as advance payment. Financial fixed assets Participating Amounts receivable Total interests from participating interests Balance as at the beginning of the financial year 1,127 1,478 2,605 Acquisitions Disposals and other movements (749) (826) (1,575) Balance as at the end of the financial year ,322 This includes participating interests in and amounts receivable from non-consolidated group companies. 28

29 Group equity Shareholders equity For notes on shareholders equity please refer to the notes to the company balance sheet. Minority interests Balance as at the beginning of the financial year 1,354 1,680 Acquisitions (756) (482) Distribution of dividend (529) (579) Exchange differences Profit for the year Balance as at the end of the financial year 751 1,354 Subordinated loan In the year under review the subordinated loan was raised from EUR 34,034 to EUR 45,500. This loan may be redeemed early from the proceeds of any future share issues. The term of the loan is three years and the interest rate depends on the period. At year-end 2001, the interest rate stood at 5.32%; this rate is fixed until 2 April Long-term liabilities Other loans Due within one to five years 109,913 86,955 Due after five years 26,792 11,658 Balance as at the end of the financial year 136,705 98,613 The long-term liabilities consist of loans from credit institutions with interest rates ranging from 3.0% to 7.7%. The repayment commitment due within one year is EUR 50,964 (at year-end 2000: EUR 29,053) and is included in the current liabilities. Credit institutions A sum of EUR 23,746 in respect of cash loans is included. Other amounts owed, accruals and deferred income This includes some payment commitments in connection with recent acquisitions. Current liabilities 29

30 Off-balance sheet commitments and provided securities It has been agreed with banks that no security will be provided to third parties without the banks permission. The real estate of some German group companies as well as the real property in Denmark and any machinery in Amboise, France are encumbered by a mortgage. A number of financial covenants were also entered into with financial institutions. At the end of the year under review, the group had provided guarantees to a total amount of EUR 4,240. In connection with recent acquisitions, there are commitments to make additional payments, depending on the future financial developments of the companies concerned. At year-end 2001, the total commitments under lease and rent commitments are as follows: Expiring within one year 9,986 6,006 Expiring between one and five years 26,080 14,629 Expiring after five years 24,170 15,582 Total commitment 60,236 36,217 Information per group activity Industrial Services Turnover 295, ,805 Operating profit* 45,232 34,758 Operating profit* as a percentage of turnover Investments 28,967 24,481 Average number of employees (x1) 2,944 1,906 * Before amortisation of goodwill. Flow Control Systems Turnover 308, ,593 Operating profit* 23,885 27,694 Operating profit* as a percentage of turnover Investments 16,309 11,244 Average number of employees (x1) 2,364 2,228 * Before amortisation of goodwill. 30

31 Personnel expenses Wages and salaries 169, ,338 Social security charges 25,849 19,429 Pension charges 7,671 5,726 Other personnel expenses 9,226 4,694 Total 212, ,187 Number of employees In the year under review, the average number of full-time employees amounted to 5,322 (2000: 4,149). Remuneration of the Executive Board In 2001, total remuneration of the Executive Board amounted to EUR 816 (2000: EUR 621). Remuneration of the Supervisory Board In 2001, total remuneration of the Supervisory Board members amounted to EUR 73 (2000: EUR 78). The effective tax rate (before amortisation of goodwill) in the year under review amounted to 23.1% (2000: 24.6%) as a result of the use of fiscal facilities and tax deductible losses. Taxation The average dividend on the cumulative preference shares in the year under review amounted to 5.2%. Dividend on cumulative preference shares Foreign currency risk management In order to hedge the risk from certain purchasing and sales transactions, the Aalberts Industries Group enters into currency forward contracts. This prevents future net cash flows being adversely influenced by changing exchange rates in which the transactions were closed. These are mainly US dollar and British Pound Sterling contracts. At year-end 2001, this involved an approximate amount of EUR 3,736. Interest rate risk management Financing is mostly based on a combination of fixed and variable interest rate percentages. Interest rate instruments are only applied on the basis of underlying positions. Future Rate Agreements and interest swaps are used for the management of interest rate risks. Financial instruments and risk management 31

32 Company balance sheet as at 31 December 2001 before profit appropriation (x EUR 1,000) Assets Fixed assets: Intangible fixed assets Goodwill 744 Tangible fixed assets Other fixed assets Financial fixed assets Participating interests in group companies 110,886 78,214 Current assets: 111,823 78,441 Debtors Other debtors, prepayments and accrued income 11,261 4,436 Total assets 123,084 82,877 Liabilities Shareholders equity Issued capital 24,871 1,117 Share premium account 94, ,240 Cumulative preference shares 34,236 40,595 Other reserves (97,674) (128,426) Unappropriated profit 33,869 35,246 90,161 60,772 Provisions Deferred taxation Current liabilities Credit institutions 21,740 6,682 Trade creditors Amounts owed to group companies 7,045 11,247 Taxation and social security charges Other amounts owed, accruals and deferred income 3,853 2,966 32,721 21,276 Total shareholders equity and liabilities 123,084 82,877 Company profit and loss account for 2001 (x EUR 1,000) Net profits of participating interests 35,666 37,163 Net company profit after tax Net profit 35,991 37,223 32

33 Notes to the company balance sheet and profit and loss account (x EUR 1,000) 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. Accounting policies This goodwill relates to group companies directly held by Aalberts Industries N.V. Intangible fixed assets Tangible fixed assets Other fixed assets Net book value as at the beginning of the financial year Cost 634 Accumulated depreciation (407) Changes in net book value Investments 75 Depreciation (109) 227 (34) Net book value as at the end of the financial year Cost 615 Accumulated depreciation (422) 193 Financial fixed assets Participating interests in group companies Balance as at the beginning of the financial year 78,214 Share in the 2001 profit 35,666 Increase in capital 5,992 Acquisition new participating interests 373 Dividends paid (9,484) Exchange differences and other movements 125 Balance as at the end of the financial year 110,886 The participating interests are stated at net asset value in accordance with the accounting policies applicable to the consolidated financial statements. 33