om Solutions Telecom Solutions Tel
s Building Solutions Building Solut
strial Solutions Industrial Solution
Annual Report 2003
Mission
With technologically advanced system concepts,
products and related services, TKH wants to be a
trend-setting niche-player with Telecom, Building
and Industrial Solutions.
Contents
2
Mission
Most important developments 2003
Highlights
Foreword
Profile
Objectives and strategy
The share of Twentsche Kabel Holding
Report from the Supervisory Board
1
3
4
5
6
7
8
12
Report from the Executive Board
General
Developments and trends
Financial developments
Dividend proposal
Risk management
Personnel and organisation
Corporate Governance
Outlook
16
16
18
21
21
24
28
32
32
Overview per group
Technical Trading group
Cable group
Machinery group
33
36
39
42
Annual accounts 2003
Consolidated balance sheet
Consolidated profit and loss account
Consolidated cash flow statement
Accounting principles
Notes to the consolidated balance sheet
Notes to the consolidated profit and
loss account
Company balance sheet
Company profit and loss account
Notes to the company balance sheet and
company profit and loss account
43
44
45
46
47
50
52
54
55
56
Other information
Regulations under the articles of association
concerning the appropriation of profit
Proposed appropriation of profit
Auditor’s report
Stichting Administratiekantoor van
Aandelen N.V. Twentsche Kabel Holding
Stichting Continuïteit TKH
Committee of Shareholders
Group companies / Management /
Addresses
Participations
Central Works Council
Ten year overview
Glossary
59
60
61
62
63
64
65
68
70
71
72
74
Most important developments in 2003
•
Net profit rises € 18.6 million to € 11.9 million.
•
Turnover falls slightly to € 383.9 million, from € 390.1 million; excluding currency
effects slight rise in turnover.
•
Drop in operating costs € 13.6 million due to measures taken to bring operating
costs down and reorganisations implemented.
•
Balance sheet strengthened considerably: solvency rises to 55.6% from 44.3%.
•
Dividend proposal: € 1.00 per (certificate of ) ordinary share (pay out 68%).
•
Added value rises substantially due to emphasis on innovations and total
solutions.
•
Innovations and solutions launched in the past two years accounted for more
than 20% of turnover.
•
Business segment Industrial Solutions added to the core activities, which
amongst others includes the Machinery group.
•
Financial targets sharpened to a ROS of at least 7% and a ROCE of at least 15%,
to be reached within three years.
Highlights
2003
in euro millions
Turnover
in euro millions
600
Operations
Turnover 1)
Operating result
Net result 2)
2002
2001
2000
1999
384
24
12
390
1
(55)
586
34
10
586
51
31
524
47
30
48
11
14
55
22
20
49
26
21
62
59
21
26
40
15
Balance sheet
Shareholders’ equity
Debt
Fixed assets
Current assets
156
125
122
159
143
179
133
189
204
241
203
242
187
243
175
255
174
193
134
233
Ratios
Shareholders’ equity/total assets %
Shareholders’ equity/fixed assets %
55.6
1.3
44.3
1.1
45.9
1.0
43.4
1.1
47.4
1.3
6.2
0.3
5.8
8.6
8.9
10.4
0.4
10.1
17.1
18.2
3.1
8.0
(1.7)
(3.9)
3.2
9.5
5.2
17.1
5.7
17.6
500
Cash flow from operations
Investments
Depreciation
400
300
200
100
0
1999 2000 2001 2002 2003
Operating result
in euro millions
60
Operating result/total operating
income % (ROS)
Operating result/average capital
employed % (ROCE)
Net result/total operating
income % 3)
Net result/shareholders’ equity %
50
40
30
20
Employees
Number at year-end
10
0
3)
2,213
2,402
2,878
2,970
2,671
Per ordinary share of € 1,- 4)
Shareholders’ equity
Net result 3)
Cash flow from operating result
Dividend
19.37
1.48
5.95
1.00
17.68
(0.83)
6.77
0.30
25.19
2.30
6.00
0.93
23.46
3.87
7.76
1.36
22.19
3.80
3.34
1.25
Highest share price
Lowest share price
Share price at year-end
19.45
5.08
17.90
21.50
6.01
9.60
38.45
17.00
18.60
48.50
32.00
35.00
35.50
22.00
34.90
Ordinary shares outstanding at
year-end ultimo (x 1.000) 4)
8,069
8,069
8,112
7,952
7,844
1999 2000 2001 2002 2003
in euros
Shareholders’ equity
in euro millions
250
200
150
100
50
0
4
1999 2000 2001 2002 2003
1) Turnover incl. change to inventory finished products, work in progress and other operating income.
2) Including extraordinary income and expenses.
3) Before extraordinary income and expenses.
4) Calculations are based upon the number of shares held by third parties.
Foreword
In the year 2003, the TKH group saw a clear recovery of profitability. It should be noted that the difficult
market conditions in the construction and telecommunications sectors persisted. Due to the high
priority the TKH group gives to innovations in the growth sectors communications, security, comfort
and care, the company was able to partly offset the effects of the difficult market conditions. Innovations also form a strong basis for future growth.
The year under review saw solid progress in the transformation of TKH into a group of companies
which, increasingly in close cooperation, offers market-focused solutions in the form of Telecom Solutions and Building Solutions. In addition to the aforementioned segments, TKH has decided to add a
third segment, Industrial Solutions, with as a key element the tyre building systems for car and truck
tyre construction industry. The developments in the tyre construction sector offer attractive perspectives for the coming years, partly due to the very innovative solutions we have developed in the past
two years.
TKH will accept its responsibility to comply to the best of its ability with the Corporate Governance
code drawn up by the Tabaksblat committee. TKH has already maintained the standards of good corporate management for some time.
The creativity and team spirit within the TKH group have resulted in new opportunities for growth of
turnover and results. The solution-focused strategy has been successful for TKH and makes the group
an interesting counterpart for customers, shareholders and employees.
On behalf of the Executive Board
Alexander van der Lof, chairman
5
Profile
• Turnover
€ 384 million
• Innovative system
solutions
• Telecom, Building
and Industrial
Solutions
• Internationally
operating group
N.V. Twentsche Kabel Holding (TKH) is an internationally operating group of companies, specialised
in creating and supplying – innovative – systems and networks in information and telecommunication
technology, as well as in the electrical engineering and industrial sectors.
TKH’s activities have been concentrated in three groups: the Technical Trading group, Cable group and
Machinery group.
The emphasis is on supplying total solutions in the segments Telecom Solutions, Building Solutions
and Industrial Solutions. TKH realises its objective of providing the best possible, solution-focused
services to its clients, by adding value in the form of consultancy, together with the development, composition and supply of innovative total solutions based on specialist know-how.
Expansion within these segments will be achieved through a strong focus on technical trading activities (value added reselling). The Cable group is active as a niche player and is shifting its focus
increasingly towards solutions in the form of total systems, often in cooperation with the Technical
Trading group. The Machinery group focuses primarily on the Industrial Solutions segment and specialises in the production of tyre building systems for cars and trucks and automated flexible product
handling systems.
An integrated approach of activities and market segments emphasises and ensures the cohesion
within and between the groups.
Continuing attention to research and development ensures a product and services range which guarantees technologically advanced solutions. These are marketed mainly in north-western and eastern
Europe. TKH also has a growing market position in Asia. In 2003, TKH achieved a turnover of € 383.9
million with 2,213 employees.
6
Objectives and strategy
TKH’s objective is to achieve growth in earnings per share. This will be achieved on the basis of
turnover growth and by striving for a strong position in the high-potential segments (indoor) Telecom
Solutions, Building Solutions and Industrial Solutions. Communications, security, care and comfort are
seen as key growth sectors within these segments. Growth will be realised primarily through a strong
focus on technical trading activities (value added reselling).
Innovative strength is one of the cornerstones for TKH’s further growth. Our target is to generate
around 15 to 20% of turnover through innovations introduced in the previous two years. Constant
attention to innovation based on research and development ensures a product and services range
which guarantees technologically advanced solutions. TKH’s annual investment in research and
development amounts to at least 3% of turnover.
Turnover growth will be achieved both organically and by means of acquisitions. Acquisitions and
successful organic growth in Europe mean that the share of the activities outside the Netherlands is
further increasing. The emphasis in acquisitions is on structurally sound companies with a strong
position in segments that are important to TKH.
• Annual growth
earnings per share
• Innovative strength
one of the cornerstones for further
growth
• Focus technical
trading activities
• Geographically
spread of activities
• Healthy balance
sheet ratios
TKH also recognises the importance of a good spread – also geographically – of its activities.
Geographically, TKH focuses on north-western and eastern Europe and Asia. The Netherlands remains
our most important market.
Part of TKH’s strategy is to make effective use of opportunities for growth and limit (financial) risks.
TKH gives great importance to healthy balance sheet ratios and a strong operational cash flow. TKH
strives for a solvency ratio of at least 40%. A return on sales of at least 7% and a return on capital
employed of at least 15% should be reached within three years.
For the realisation of its objectives and the implementation of its strategy, TKH is aware of its responsibilities and obligations towards all the company’s stakeholders.
7
The share of Twentsche Kabel Holding
Listing
The share N.V. Twentsche Kabel Holding (TKH) is listed on the Euronext Amsterdam stock exchange.
Because of the market capitalisation of the TKH share, the company is included in the Next 150 index
developed by Euronext. TKH is also part of the Euronext Next Prime segment, compelling the company
to comply with related rules with respect to financial reporting. These rules are more stringent than
those of the local supervisors.
Liquidity providers
In order to boost the trading of its share, TKH has contracted with four liquidity providers: ABN AMRO
Bank N.V., Kempen & Co N.V., ING Bank N.V. and Rabo Securities N.V.
The TKH share
The TKH ordinary share has a nominal value of € 1.-. At year-end 2003, there were 8,462,928 paid-up
ordinary shares, of which the company held 393,887.
2003
Number of ordinary shares 1)
Annual turnover in shares
Highest share price
Lowest share price
Net earnings per share
8,069,041
2,950,140
€ 19.20
€ 5.10
€ 1.48
2002
8,069,041
2,965,868
€ 21.50
€ 6.01
€ -0.83 2)
1) Outstanding with third parties
2) Before extraordinary income and expenses
Act on the disclosure of major shareholdings in listed companies
Dividend
in euros
1.5
1.2
5.14%
5.24%
5.33%
5.48%
6.20%
5.49%
5.00%
8.35%
0.9
Stichting Continuïteit TKH has an option on protection preference shares, which allows this foundation to obtain an interest of a maximum of 50% of the total issued capital (see page 56).
0.6
Dividend policy
0.3
0
8
The disclosures known to TKH as per February 2004 are:
Breedinvest B.V.
Darlin N.V.
Delta Lloyd Verzekeringsgroep N.V.
Fidelity Investments
Fortis Utrecht N.V.
Orange Fund N.V.
Smoorenburg B.V.
Tweedy Brown Company LLC
1999 2000 2001 2002 2003
TKH aims for an attractive return for its shareholders which is also reflected in an appropriate
dividend policy. Healthy balance sheet ratios are very important to the continuity of the company.
In determining the dividend to be paid, TKH takes into account the amount of profit the company
needs to retain to realise the medium to long term plans on the basis of a solvency of at least 40%.
Based on the growth targets for the coming years, TKH will aim for a pay-out of between 40% and
70%.
Key dates
25 May 2004
26 May 2004
28 May 2004
4 June 2004
2 September 2004
25 November 2004
10 March 2005
28 April 2005
Trading update Q1 2004
Annual General Meeting of Shareholders
Listing ex-dividend
Dividend payable
Publication half-year results 2004
Trading update Q3 2004
Publication annual results 2004
Annual General Meeting of Shareholders
Options scheme
Option rights to ordinary shares in TKH are awarded to the Executive Board of TKH and the management of its group companies. Further information on this subject will be given on page 57 of this
annual report. As per 1 January 2004, the Executive Board’s options scheme was replaced with a share
scheme (see page 52).
Prevention of insider trading
TKH has drawn up Insider Trading Regulations in accordance with the model of the VEUO
(Dutch Association of Issuing Companies).The Financial Markets Authority has given its approval.
The group of employees to which these regulations apply in view of the information available to them
have agreed in writing to act in accordance with these regulations. TKH’s Insider Trading Regulations
include a ban on trading in TKH shares during a period of two months before the publication of the
annual results and three weeks prior to the publication of the half-year results and trading updates.
Mrs R. Dieperink has been appointed Compliance Officer within TKH and supervises the correct compliance with legislation and regulations in the field of insider trading and other compliance risks.
Investor Relations policy
TKH strives to provide shareholders and potential shareholders to the best of its ability with relevant
financial and other information, in order to give a broader insight into the company and its sector.
To this end, while taking into consideration the relevant limitations, TKH maintains frequent contacts
with institutional and private investors and their intermediaries, such as analysts and financial
journalists. In addition to the annual report, the interim report and through trading updates, TKH
maintains such contacts through meetings, roadshows and company visits.
Investor Relations
J.M.A. van der Lof MBA, chairman of the Executive Board
Tel: +31 53 573 29 01
Fax: +31 53 573 21 80
More information about TKH and its group companies is also available on the company website:
www.tkh.nl, or via the company secretary, Mrs R. Dieperink.
N.V. Twentsche Kabel Holding
Spinnerstraat 15, P.O. Box 5
7480 AA Haaksbergen
Tel: +31 53 573 29 00
Fax: +31 53 573 21 80
e-mail: [email protected]
9
TELECOM SOLUTIONS
FUTURE-PROOF PC NETWORK WITH ‘TKH INSIDE’
Just two years ago, very few people had even heard
of ADSL. But these days the ‘asymmetric digital
subscriber line’ is a permanent part of society. Some
15% of all households already have ADSL, and a
further 30% are set to join them within the next
three years as expected.
But this will not be the end of the story for very long,
because much faster DSL varieties are already
queueing up to pull in the Dutch consumers via the
cable. And that’s not even taking into consideration
Fibre-To-The-Home alternatives as well as wireless
solutions such as WiFi and Wireless Local Loop.
So, suddenly digital television has become very
ordinary. Video-on-demand? Obviously. Ordering
pizza via your TV? No need to miss even a minute
of that football match. Telephone calls via internet?
It simply offers more options.
TKH company Intronics is very active in this market
and has developed various ‘Do It Yourself’ packages.
These allow anyone to create their own PC network
very simply.
Intronics takes care of the purchasing, logistics and
distribution of the packages, provides shop fittings
and staff training courses and organises support
campaigns. And if consumers have any problems at
home, they can rely on Intronics’ smooth after-sales
operation: from a 24-hour helpdesk to a breakdown
service at home or the service via the website.
This is how Intronics is realising the future others
are promising. A future which is starting a lot sooner
than we could have envisaged even a very short
while ago.
Project
DIY ADSL packages
TKH-company
Intronics Barneveld
Working at home with
a fast wireless access to
the internet
Report of the Supervisory Board
Supervisory Board
Chairman
R.B. Lenterman (19-05-1935)
• 1991 first appointment
• 2006 term limit
We are pleased to present you with the annual accounts drawn up by the Executive Board and adopted
by the Supervisory Board for your approval, together with the report of the Executive Board. The
annual accounts were submitted to Deloitte Accountants for auditing. The auditor’s report can be
found on page 62 of the annual report. The Supervisory Board recommends that the General Meeting
of Shareholders approves the annual accounts adopted by the Supervisory Board and agrees to the
dividend proposal included in the annual report on page 21.
Main position
• former chairman of the Executive
Board of Koninklijke Nedlloyd
Groep N.V.
Current positions
• director RBL Management &
Consulting B.V.
• chairman Supervisory Board
Faber Group N.V.
• chairman Supervisory Board
IMC International Marketmakers
Meetings during the year under review
During the year under review, six regular meetings were held with the Executive Board. During these
meetings, a great deal of attention was devoted to TKH’s strategic plan and the profit improvement
and cost reduction plans. The budget and the 2004 investment plan, risk analysis and risk management, personnel policy as well as management development, were also discussed. In view of the
growing strategic importance of the Machinery group within TKH, a visit was paid to subsidiary VMI
in Epe (the Netherlands). This visit not only enabled the Supervisory Board to gain insight in to production and technological developments but also into the innovative strength of the company.
Combination B.V.
• chairman Supervisory Board
Cargonaut B.V.
• chairman Supervisory Board N.V.
In addition to the regular meetings, the Board convened at an extraordinary meeting to discuss its own
functioning and that of the Executive Board.
Luchthaven Lelystad
Vice chairman
A.J. Driessen (25-10-1942)
• 1997 first appointment
• 2005 term limit
Main positions
• Executive Coach Boer & Croon
• former chairman Executive Board
Wavin B.V.
Current positions
As per the General Meeting of Shareholders of 22 May 2003, Mr C.L.F. Vrins stepped down as vice
chairman of the Supervisory Board, having reached the age limit laid down in the articles of association. Mr Vrins had been a member of the Supervisory Board since 1996 and acted as delegate member
of the Supervisory Board in 2001. Prior to his membership of the Supervisory Board, Mr Vrins was
active within the company in a number of positions including Chief Executive Officer. We are grateful
to Mr Vrins for his enormous commitment and the dedication with which he advocated TKH’s interests. We are particularly grateful for the way in which he acted as delegate member of the Board in
2001. The Supervisory Board has decided that, following the departure of Mr Vrins, the Board will consist of five members. Mr A.J. Driessen has succeeded Mr Vrins as vice chairman of the Supervisory
Board.
• member Supervisory Board TBI
Holding B.V.
• member Supervisory Board
Wavin B.V.
Member
P. Morley (13-07-1956)
• 2002 first appointment
• 2006 term limit
Main positions
• CEO Kluwer B.V.
• former Chief Operating
Officer O2
• former member Executive Board
KPN
Current positions
• member Supervisory Board Great
Universal Stores Holland
Holding
• member Supervisory Board
Centre for Telematics and
Information Technology,
12
University of Twente
Corporate Governance
The Supervisory Board has, with great interest, taken cognisance of the definitive version of the
Corporate Governance code. The Board is convinced that compliance with the Corporate Governance
code will lead to the creation of and secure the shareholder value in the longer term.
The Supervisory Board attaches great importance to compliance with the code and accepts its responsibility to follow the strict implementation of same. The compliance and implementation of the code
will be discussed explicitly during the annual meeting.
The tasks of the Supervisory Board, its working methods and interaction with the Executive Board are
laid down in standing rules. In response to the developments in the field of Corporate Governance,
these standing rules, as well as the profile outline of the Supervisory Board were reviewed in the year
under review. All members of the Supervisory Board comply with the criterion that they be independent
of the company.
The Audit Committee of the Supervisory Board devotes particular attention to the independence,
functioning and qualifications of the external accountant. The Audit Committee assists the Supervisory
Board in carrying out the supervisory tasks related to the veracity of the annual accounts, risk management and the administrative organisation. In the year under review, the Audit Committee met on two
occasions. In addition to the regular checks on the internal and external systems for financial reporting
used at TKH, the external accountant also provided an explanation of its audit. The Audit Committee
consists of Messrs A.C.H. van der Wolf (chairman), R.B. Lenterman and A. van der Velden.
Mr J.E. Vaandrager, Chief Financial Officer of TKH, acts as consultant.
• member Global Network
University of Wageningen
• member Supervisory Board
Research Centre of the
Observatory, University of Leiden
• chairman Supervisory Board
Kenniswijk B.V.
Member
A. van der Velden (02-09-1940)
The Appointment & Remuneration Committee’s tasks include preparing the selection and nomination
of candidates for appointment to the Supervisory Board and the Executive Board, and determining the
remuneration of the members of the Executive Board and submitting same to the Supervisory Board
for approval. In the past year, the Appointment & Remuneration Committee met on two occasions.
Said Committee consists of Messrs A.J. Driessen (chairman) and R.B. Lenterman.
• 2001 first appointment
• 2005 term limit
Main position
• former Executive Director Corus
Group plc.
Current positions
The Supervisory Board has respect for the manner in which the Executive Board implemented the
profit improvement project, which has resulted in the desired profit recovery.
The parallel strategic development and transformation of the TKH group in the context of providing
(innovative) total solutions meets with our assent. The Board agrees that the focus on Telecom
Solutions, Building Solutions and Industrial Solutions can result in further growth of the company.
• member Supervisory Board
Stichting Energieonderzoek
Centrum Nederland
• member Supervisory Board
Stork N.V.
• chairman Supervisory Board
Vitens N.V
• chairman Technology Committee
The Supervisory Board expresses its appreciation for the way in which TKH has realised its targets
in various fields, under what were by no means easy external circumstances and expresses great
appreciation to the Executive Board, the management and employees for the positive developments in
the year under review.
employers association VNO-NCW
• vice chairman Committee of
Environmental Impact Reporting
• member Commission
Development Cooperation/
Advisory Council International
issues
Haaksbergen, March 2004
Member
On behalf of the Supervisory Board
R.B. Lenterman, chairman
A.C.H. van der Wolf (06-09-1935)
• 1994 first appointment
• 2006 term limit
Main positions
• emeritus professor of Production
Technology and Automation,
Technical University of Eindhoven
• former director Universitair
Technologisch Instituut
Eindhoven
Current positions
• consultant production technology
and automation
• member CIRP (International
Institution for Production
Engineering Research)
13
BUILDING SOLUTIONS
The futuristic metro in
Sengkang has an intercom system along the
entire line
A BUTTERFLY ON SULAWESI
The skylines in the Far East make an unforgettable
impression on westerners. Anyone who has ever
seen the view of Hong Kong from the water understand what we mean. Or take Sengkang, part of the
city-state of Singapore, as an example. Its skyline
has become even more futuristic with the arrival of
the LRT, the Light Rapid Transit (a light-rail transport
link).
Shaped like a butterfly, the LRT wings its way around
Sengkang high in the sky. The eastern ‘wing’ was
opened in January 2003; the less busy western section will be put into operation at a later date. The
light-rail is connected to Sengkang’s existing NorthEast metro, which effectively forms the body of the
butterfly.
Isolectra Singapore has pulled off a remarkable feat
with the installation of an all-encompassing intercom system. Every single station and information
point, as well as every elevator and ticket dispenser,
has been fitted with speakers and microphones
which are perfectly adapted to each other and to
existing systems.
Quite handy if someone along the 11-kilometer
long track needs assistance. And vice versa: the
thousands of travellers using Sengkang’s public
transport system every day receive every message
from the dispatch loud and clear.
The system has proven very successful. The project
in Sengkang has set an example which will be
followed elsewhere is Asia, both above and below
the ground, following the butterfly ...
Project
The LRT in Sengkang
TKH-company
Isolectra Singapore
Report of the Executive Board
General
Executive Board
A strong emphasis on the renewal of our portfolio of activities and providing added value to our
customers as a solutions-focused partner enabled us to record virtually unchanged turnover compared
with 2002, despite difficult market conditions.
New developments offering opportunities in the growth sectors of communications, security, care and
comfort compensated for the negative developments in the construction and installation sector. TKH
was able to generate more than 20% of its turnover from innovations and solutions introduced in the
past two years. This has given TKH a strong basis for further development of client relations and the
strengthening of the TKH’s position in its most important market sectors.
J.M.A. van der Lof
Chief Executive Officer
J.E. Vaandrager
Chief Financial Officer
Staff TKH
Technical Trading group
P.G. Visser (45)
Financial Affairs
H.A.M. Gerard (39)
G.W. Borghuis (52)
Personnel and Organisation
D.W.S. Gigengack (50)
Company secretary
R. Dieperink-Gielink (34)
Strategic Committee
J.M.A. van der Lof – TKH (45)
J.E. Vaandrager – TKH (60)
H.A.M. Gerard – TKH (39)
P.G. Visser – TKH (45)
A.J.M. van Schie - TKF (58)
L. Klick – E&E (56)
J.J. Spanjer – VMI (60)
16
By anticipating the continuation of difficult market conditions, the reorganisation measures TKH introduced in 2001 and 2002 enabled the company to bring costs in line with these market conditions. In
2003, we were once again able to work on the future of the company on a solid basis. A clear positive
influence on the development of results came from the maximum attention we devoted to further
improvements in the field of internal sales, strategic purchasing, expansion of activities in new markets with innovative solutions, as well as the focus on sales force effectiveness and production
efficiency. The special attention devoted to the realisation of these improvements can be traced back
to a great extent to the excellent way in which a TKH team, together with McKinsey, put together a plan
- in the fourth quarter of 2002 - to implement a large number of improvements in the defined profit
improvement project called ‘Winter’. Through strict adherence to this implementation plan, we were
able to realise the profit improvement opportunities outlined. This programme will continue in 2004.
TKH also considers value creation for its shareholders of paramount importance. It therefore strives
to realise a maximum return on invested capital, while using an active investment and divestments
policy. The solutions-based business segmentation is becoming increasingly important to the company, in addition to the division into the groups Technical Trading, Cable and Machinery. In addition to
the existing segments Telecom Solutions and Building Solutions, we decided, after careful consideration, to add the third segment Industrial Solutions, which includes the Machinery group. The prospects for the tyre building systems segment for the medium and longer term are very positive and its
growth potential within the TKH group will lead to more value creation. A redesign of these activities
in recent years has meant that they are more in line with TKH’s objectives and strategy. In addition,
TKH has greatly reduced the cyclical nature of these activities in recent years by adding new products
to the range for other markets, such as the successfully introduced truck tyre building system. In addition, the capital-intensity has been reduced substantially by maximising the outsourcing of the production of components for these systems. The scope of Industrial Solutions has increased considerably
within the TKH group and now accounts for more than 40% of turnover, representing a substantial
share of both turnover and profit.
��
���
��
���
��
�
�
Strategic progress
���
TKH booked solid progress in the implementation of its strategy in many areas. This is clearly confirmed in the successes in the order intake for system solutions and ���
the growing share of such solutions within the TKH group. The positive margin development also indicates that we can book good
results with our chosen path. This also provides enormous benefits to our customers, making it a
���
healthy win-win situation.
The transformation from product supplier to solutions supplier is a process
of many years. TKH began
���
intensive work on this transformation in the mid-1990’s. Given the present composition of activities,
it can be said that by now around 70% of turnover is realised from solutions. TKH has considerably
��
increased the coherence between the companies by organising activities in clusters and introducing
product management across the companies. Offering targeted solutions by combining the available
�
know-how and activities across the various companies has led to successful
contracts.
Intensive cross-pollination has been created both regionally and internationally through the introduction of proven successful solutions to other TKH companies. TKH is also making more effective
use of the potential for organic growth and the fact that each company no longer has to reinvent the
wheel every time is creating more opportunities for growth. In terms of our suppliers, this provides a
better basis and has led to an increase in scale, creating mutual benefits. TKH aims eventually to have
an overlap of at least 60% in its portfolio in the various countries in which we are active. In 2003, this
percentage stood at 35% and we began to see the positive results of a strictly organised approach to
achieve these goals.
Providing system solutions offers great added value to the clients TKH is targeting. These solutions
focus on the supply of a combination of components, which requires a high level of technical knowhow. The three business segments on which the group focuses its system solutions are Telecom
Solutions, Building Solutions and Industrial Solutions. In these solutions it is also important to add
value in the form of logistical solutions, organisational solutions, engineering and customer-support
through helpdesk functions for our customers’ own end-users. Creativity and innovations are key
concepts in the solutions TKH offers. We also take into account the total cost of the installation and
functioning of a system.
Business segments
2003 in %
2002 2003
Telecom Solutions
32.5 30.8
Building Solutions
26.6 25.1
Industrial Solutions
40.9 44.1
The strength of the
TKH group is its
ability to develop
markets for new
solutions
TKH is searching primarily new solutions in an early stage of the life cycle. The strength of the TKH
group is developing markets for new solutions. High-grade technical know-how combined with market
knowledge ensures that TKH is able to develop these markets. An important added value for the TKH
group, which also results in special positions in the markets in which TKH operates.
17
Developments and trends
General
Basic technologies
from the various
operating companies are formed
total solutions
As a result of the worldwide economic situation, many of our clients have introduced cost-cutting
measures and redefined their core business. A number of issues, which have been on the agenda for
some years, such as outsourcing and supply chain optimisation, have now been given a higher priority
by many of TKH’s clients. Sub-specialisations are disappearing and have to be found externally.
A number of years ago, TKH chose to take a path towards growth into a coherent group of companies
which together supply total solutions in the form of value added reselling. This allows TKH to respond
to these developments very effectively and the company will continue to develop in this direction.
The three business segments Telecom Solutions, Building Solutions and Industrial Solutions combine
basic technologies from the various operating companies to form total solutions. Specialists in the
field of process development, technology, marketing and logistics add consultancy, engineering and
support and ultimately provide a tailor-made total solution.
Telecom Solutions comprises solutions for both outdoor telecom and indoor telecom (ICT) markets.
After a drop in investment levels in 2001 and 2002 in the outdoor telecom market, TKH’s turnover in
this market in 2003 remained virtually unchanged. In the indoor telecom market, TKH managed to
respond to very promising opportunities, such as the provision of solutions for connections to broadband internet and the supply of telephones and wireless solutions in the consumer market. Telecom
Solutions accounted for 30.8% of TKH’s overall turnover, compared with 32.5% in 2002.
Building Solutions comprise solutions for the indoor telecom and electrical engineering markets.
Although the activities in the utility sector have been at an extremely low level due to the worldwide
economic downturn and resultant low occupancy of offices and business premises, TKH secured a
large number of interesting contracts in the year under review. These enabled us to combine a multitude of technical products to realise the solutions our clients were looking for. Building Solutions
accounted for 25.1% of TKH’s overall turnover in 2003, compared with 26.6% in 2002.
The third segment, Industrial Solutions, which became a core activity in 2003, comprising advanced
solutions for production automation and for the production of tyre building systems, developed particularly well in the year under review. Industrial Solutions contributed 44.1% of TKH’s overall turnover in
2003, compared with 40.9% in 2002.
TKH Cluster matrix
Market
Raw material production
Development
production & assembly
Value added reselling
Solutions & Value
added Services
Outdoor Telecom
Preform &
fibre production
Optical fibre &
copper cable
Telecom
distribution
Telecom Solutions
TFO
Indoor Telecom (ICT)
Preform &
fibre production
Optical fibre &
copper cable
Telecom
distribution
Installation cable &
power cable
TKF
Eldra
Specialty
Specialty cable
Industry
Tyre building systems &
product handling
VMI
systems
EBM
Electrical
engineering
wholesale
VMC
Elspec
Isolectra
Intronics
VMC
Elspec
Isolectra
TKF
Isolectra
Elspec
VMC
C&C
Intronics
30.8%
Building Solutions
Isolectra
EKB
VMC
Elspec
C&C
Intronics
25.1%
Industrial Solutions
Specialty cable
TKD
Jobarco
Capable
E&E
Eldra
TKF
EKB
18
C&C
TKF
ZTC
TFO
Electrical engineering
VMC
Elspec
Isolectra
C&C
TFO
TKF
Control systems
EKB
EKB
VMI
E&E
TKF
EBM
TKD
44.1%
Telecom Solutions
Communication between people is still a growing need, both in business and for private purposes.
Various technologies are now used to convey information quickly and reliably from one location to
the other. The need for data transport capacity is therefore continuing to grow. This is partly due to:
• A growing number of users across the world, particularly since the arrival of mobile telephony;
• The increasing use of services such as instant messaging (SMS), video-conferencing and photo
transmission;
• The integration of image, data and speech in various applications;
• The rapid growth in the number of internet users with broadband connections;
The rapid market penetration of broadband connections in particular offers TKH opportunities. TKH
has the know-how and the means to build new networks and upgrade existing networks.
In addition, TKH can take up promising market positions in the supply of communications solutions
for consumers’ homes. A logical consequence of the rapid spread of broadband is the need to link the
services received via these connections to PC’s, televisions, radios and telephones in a simple way.
This development will continue across the globe. Different (new) technologies will be used to develop
communications links and enable applications such as:
• DSL technology via the existing copper cable infrastructure;
• ‘Fibre-To-The-Home’ (FTTH), in which the final piece of the network to the user is fitted with optical
fibre;
• Data transport via the existing coax cables of cable television providers via special modems;
• Wireless technologies, including WLL, WiFi, GSM and CDMA, Blue Tooth and Dect.
The rapid market
penetration of
broadband connections offers TKH
opportunities
Communications will continue to be conducted across a combination of various network technologies.
Both providers and users will eventually opt for the most efficient, cost-effective and user-friendly
solutions and concepts. TKH is anticipating these developments and is focusing on supplying the best
possible (technical) solutions. These are often a combination of a cable solution and a wireless solution. The objective is to provide a low-cost, sustainable solution geared to the future. In this context,
TKH provides advice on the basis of on specialised know-how.
Building Solutions
Whether it is an office building, a private home, a metro station, tunnel or care facility, these environments are seeing many technological developments and innovations. These often have a huge impact on
the comfort, security, communications options and, last but not least, the costs.
The need for technological developments is supported by a number of trends:
• A growing need for flexible (work) places means there is a demand for equally flexible infrastructure.
From the moment the need for an application arises, it has to be possible to connect that application.
For instance, in an office building there may initially be a need for a normal PC network, while at some
point in the future a need emerges for a network with much greater capacity, for example the need for a
new CAD system in the design studio.
• Companies in the construction and installation sector are looking for opportunities to provide added
value. In addition to the initial construction, there companies are increasingly offering the maintenance
of a building in so-called ‘Build & Operate’-constructions. Park management (the management of
public areas), including the offer to build and maintain ‘intelligent square meters’ continues to grow.
There is also a growing need to take into account future changes in the required functionalities at the
design stages. This allows for reduction of the costs in the exploitation stages.
19
•
Mobility is growing increasingly important. We want to be informed while we travel and, most of all,
use our own means of communication. There is a sharp increase in the demand for the latest communications media, such as flat screens for departure and arrival times, technologies to guarantee the
operations of our own GSM, laptops and PDAs, as well as advanced solutions to pay for transport via
telecommunications technologies.
TKH is anticipating these developments and can supply the best possible technical solutions.
It specialises in providing specific applications and solutions in a number of segments in which
availability and reliability are vital.
TKH can supply the entire infrastructure for these applications: from intercom systems, security
cameras, access controls, speech and data networks, as well as the entire building automation to control
all functionalities and optimise energy use.
We have also designed and implemented an integrated set of components, systems and functionalities
for the home market, with which it is possible in the extended version to realise ‘intelligent living’ or
domotica, under the name Realive®.
For the health care sector, TKH designs and supplies, amongst other things, systems for communications between patients and their social workers and between detainees and their guards in prisons.
Industrial Solutions
Through one of its operating companies (VMI), TKH is the worldwide market leader in the field of tyre
building systems. The tyre industry in particular is increasingly opening its doors to outside technologies. The key role TKH plays in this context has resulted in a stronger market position. TKH has also
succeeded in developing a successful portfolio, with the core activity of designing and building
advanced operating systems for the machine construction and processing industries.
Through one of its
operating companies, TKH is the
worldwide market
leader in the field
of tyre building
systems
20
Trends in the segment Industrial Solutions are:
• Increasing production-efficiency;
• Continuous improvements to existing equipment;
• Increasing the results of the producer, for instance by directing the flow of materials and partproducts and reducing waste flows;
• Linking production automation to the ERP systems using Manufacturing Enterprise Systems (MES);
• Solid man/machine interfaces using industry PCs and redundant PC networks;
• Energy management.
TKH is convinced that these trends will continue across the globe. Combining and integrating various
basic technologies will ensure extra functionality, low initial costs and readiness for the future.
���
Financial developments
���
���
����
���
Turnover in the year under review amounted to € 383.9 million, a drop of 1,6% from € 390.1 million in
2002. Despite difficult market conditions and negative currency effects, TKH was able to limit the drop
��
in turnover. Excluding the currency effect
of € 8.3 million, turnover was up € 2.2 million.
Geographical
distribution of
turnover 2003 in %
����
���
The added value rose by € 9.2 million� to € 169.7 million. The large number of innovations and introductions of new products together account for around 20% of turnover.
���
The measures taken to bring operating costs down and the reorganisations implemented resulted in
a drop in total operating costs of € 13.6 million or 8.5%. Personnel expenses were down 8.1% at
€ 89.9 million. Depreciation fell by € 4.7 million, largely due to the write off of optical fibre related
assets at year-end 2002. Despite a one-off reorganisation charge of € 0.9 million in the Machinery
group, other operating costs were also down.
���
2002 2003
EU
The improvement of added value and the clear cost-reduction led to an improvement of € 22.7 million
in the operating result before extraordinary depreciations to € 23.9 million in 2003, from € 1.2 million
in 2002. All three TKH groups booked a positive operating result.
�
The Netherlands 50 48
29 31
Rest of Europe
4
5
USA
4
5
Asia
12
9
1
2
Other
The positive cash flow from operations of € 41.7 million was helped by further reduction of inventories
and receivables. The focused strategy on a continued reduction of working capital helped to a further
drop in the need for external financing, which contributed to a drop in the balance of financial income
and expenses to € 4.0 million in 2003, from € 5.3 million in 2002. Net investments, at € 8.4 million,
remained well below the depreciation level of € 13.7 million.
Non-deductible losses in China and non-compensable financing costs relating to foreign participations
put the average tax burden at 40%.
The 2003 net profit amounted to € 11.9 million, an improvement of € 18.6 million compared with a
loss of € 6.7 million in 20021). Earnings per share came in at € 1.48 in 2003, from a loss per share of
€ 0.83 in 20021).
The balance sheet total as per 31 December 2003 was reduced by € 40.7 million to € 280.9 million,
(year-end 2002: € 321.6 million). Solvency rose to 55.6%, a considerable strengthening compared to
44.3% at year-end 2002.
Other ratios of importance to the financing of the company also improved. The interest coverage ratio
was 5.9 and the balance of net bank debts divided by the profit before tax and depreciation stood at
1.4, which is well below the maximum stipulated by the banks with respect to their willingness to
provide financing.
Dividend proposal
The General Meeting of Shareholders, scheduled for 26 May 2004, will be asked to approve
the payment of a dividend of € 1.00 per (certificate of ) ordinary share (2002: € 0.30). The dividend
will be payable in cash.
1) Before extraordinary income and expenses.
21
INDUSTRIAL SOLUTIONS
IN BUSINESS WITH THE TATARS
Nizhnekamsk in Tatarstan is a typical former Soviet
Union region. It began with the construction of a
petro-chemical plant and a car tyre factory in the
middle of nowhere, between birch forests and
muddy plains. Obviously these needed people to
work there. So a city was built. Then a tram system
was constructed to get people to the factories in the
morning and carry the workers home in the afternoons. And that was the excitement for the day.
Obviously, things have changed here too. For
instance, the car tyre factory, Nizhnekamskshina,
developed western ambitions. The standard Tatar
car tyre had not been able to pass a single safety
test anyway. The board got down to business and
decided to give the operation an all-in quality boost.
They invested in the latest tyre production systems,
and had therefore opted for VMI. Pirelli supplied
the know-how. In one fell swoop, the plant was the
proud owner of four of the latest tyre construction
machines and four machines to produce semifinished products.
The result is worth all the effort: production will
increase by two million perfect tyres a year. And VMI
proves once again that its name rings crystal clear
everywhere in the world: also in the steppe-wind of
Tatarstan.
Project
The most up-to-date
tyre-making machine
to Nizhnekamsk
TKH-company
VMI Epe Holland
In Tatarstan
they invested in
the latest tyre
production systems
Risk management
General
TKH’s risk management policy is an integral part of its business management and is therefore a
continuous point of attention for the company. The core activities, geographical spread and diversity
of clients and suppliers moderate the influence of cyclical and incidental windfalls and setbacks. Risks
are rendered as manageable as possible by making well-considered choices and spreading activities
across various markets.
Currency
Due to the increasing internationalisation of purchase, sales and production, exchange rate risks are
increasing, in particular with regard to the Chinese Yuan and the US dollar. Where possible, receipts in
foreign currencies are used by the group companies for payments in the same currency. Where possible the currency remaining risks are managed. When this is deemed necessary, the remaining currency
risk are limited by the use of derivatives-based financial products. The Executive Board is closely
involved in both the formation and execution of this policy. The aim is to finance foreign investments
with local currency, thereby avoiding translation risks as much as possible.
Interest
TKH has an active
policy with regard
to maintaining
sound balance
sheet ratios
The interest policy is determined at TKH level, while striving for a balance between the development of
TKH’s financing needs and the expected short, medium and long-term development of interest rates.
In addition, balances with credit institutions are compensated, to minimise interest charges. The execution of this policy occurs in compliance with strict rules and in close consultation with the Executive
Board.
Balance sheet
TKH has an active policy with regard to maintaining sound balance sheet ratios, which is evidenced
by its solvency and the incorporated long-term external financing. Leasing and off-balance financial
constructions are avoided as much as possible, with the exception of the fleet of cars. Solidity is also
underlined by means of an accelerated depreciation regime.
Raw materials
The risks with regard to the availability and price development of raw materials are limited as much as
possible by buying raw materials from several carefully selected suppliers, as well as by entering into
multi-year contracts for the supply of raw materials important to TKH. In addition, we close contracts
with our suppliers, for larger and longer-term projects, with respect to the coverage of and/or charges
for extreme fluctuations in raw materials prices.
Pensions
With respect to the non-industry wide pension schemes, TKH has taken out a collective pension
contract for the Dutch subsidiaries with Nationale Nederlanden on the basis of a so-called guarantee
contract. One of the components of this contract is that interest profit-sharing occurs on the basis of
a separate investment deposit. Developments in interest rates and prices of the share portfolio are the
basis for the surplus interest payable to TKH. Nationale Nederlanden guarantees that the pensions
built up will be paid out for life to the participants in question, naturally on the condition that TKH has
met its premium payment obligations. A disappointing development of the investment portfolio does
not affect Nationale Nederlanden’s payment guarantee.
24
Market
In north-western and eastern Europe and in Asia, TKH is increasingly acting as a system solutions
supplier. This leads to more strategic relations with clients and suppliers, which results in a limitation
of the market risk. This trend is a response to our clients’ aim to limit the number of their suppliers
due to cost-cutting potential and more effective product developments.
Competition
TKH increasingly focuses on niche markets and offers increasingly customized total solutions, limiting
the competition per product market combination.
Technology
The activities of the development departments of the various companies within the TKH group are
always geared towards the development of optimum technology, which is reliable and at the same time
guarantees TKH’s strong competitive position.
Environment
TKH ’s environmental policy is primarily aimed at the prevention or limitation of the negative
impact of its activities and products on the environment. To this end, we closely monitor compliance
with environmental legislation. All the production companies strive for a policy in accordance with ISO
14001. This underlines the objective of not only creating and delivering a high-quality product but also
protecting the environment as much as possible.
25
TELECOM SOLUTIONS
THE STRENGTH OF A 576-FOLD OPTICAL FIBRE CABLE
TKF is busy. While the cable producer managed to
connect 5,000 homes in Rotterdam for broadband
in 2002, last year they succeeded in securing
prestigious contracts in Enschede and in Almere
(both in the Netherlands).
The city of Almere wants to prepare for the digital
future by giving residents and companies access to
broadband services such as super-fast internet,
radio and television and digital telephony. To gain
experience and iron-out any teething problems, the
city launched the ‘Almere Fibre Pilot’, covering 1,700
homes and 500 companies.
After completion of the pilot project, the next step
will be the future Business, Science & Lifestyle Park
‘Innomere’. This is where Almere’s character as a
know-how city will really take shape.
Almere intends to put optical fibre cable throughout
the entire city in the coming four years. And that
means 72,000 homes. TKF is very much a contender
for a position in the project.
So why, finally, did Almere choose TKF? Partly
because of the Modular Cable System (MCS), combined with a unique 576-fold optical fibre cable. MCS
is an intelligent tube system which is placed in the
ground and can later be filled with the desired optical fibre. The 576-fold optical fibre cable links the
SARA centre (an advanced computer and network
centre) with a concentration point from where the
various homes and companies will be connected.
Surely that must be a big cable! On the contrary, it’s
tight 2 centimetres thick ...
Project
Fibre-to-the-Home
in Almere
TKH-company
Twentsche
Kabelfabriek (TKF)
Super-fast internet,
radio/television and
digital telephony for
everyone in Almere
Personnel and organisation
Number of
employees per group
1500
The profit improvement programme developed in late 2002 demanded an extra effort from our
employees in 2003 to ensure the success of the programme. In many cases, these activities had to
be combined with the normal work responsibilities. The entire organisation worked in an extremely
positive manner to implement all profit improvement plans. The completion of the reorganisations
aimed at adapting capacity to market conditions resulted in a reduction of the number of employees
to 2,213 at year-end 2003, from 2,402 a year earlier. In addition to the plans developed earlier, TKH
had to make a reduction of staff related to the product handling systems segment. This resulted in a
reduction of the personnel in this segment by 39 FTEs. We regret to note that forced redundancies
could not be avoided in this context.
1200
The transformation of TKH into a coherent group of companies that increasingly offers market-focused
solutions demands an ever higher quality performance from the organisation. In view of the emphasis
on the growth and expansion of the technical trading activities, Mr. P.G. Visser, previously Managing
Director of the Isolectra group, was appointed as President Technical Trading and given responsibility
for the development of the result, the portfolio and the coherence of the Technical Trading companies.
900
600
300
Machinery group
2002
Cable group
Technical Trading group
0
2003
Innovative strength
is growing in importance and is an
issue which will be
a focal point of
attention for TKH
in the coming years
28
Innovative strength is growing in importance and is an issue which will be a focal point of attention
for TKH in the coming years. Our objective is to generate 15 to 20% of our turnover from innovations
introduced in the two previous years. Our annual management conference for all board members and
strategic management was themed ‘creative entrepreneurship’ and provided handles for the development of market opportunities from alternative angles. In addition, we devoted considerable attention
to sales and product training courses and to increasing the effectiveness of our sales organisation.
In 2003, TKH began reviewing its Management Development programme to safeguard the quality
and continuity of its (strategic) management. By charting high potentials and launching personal
development plans, TKH is aiming to fill vacancies in key positions as much as possible through internal appointments. In the year under review, Mr D.W.S. Gigengack, Managing Director of bv Elspec,
was made responsible for HRM matters within the TKH group.
The Strategic Committee devoted attention to the strategic development of TKH, the profit improvement
programmes, acquisitions and divestments, portfolio management, account management and
management development. The effectiveness of the operations and the support from the organisations
for the desired changes has improved considerably since the formation of the Strategic Committee.
In view of the increasing importance of the Industrial Solutions segment within TKH, Mr J.J. Spanjer,
Managing Director of VMI Epe, has joined the Strategic Committee.
Controlling absenteeism due to illness was once again a focal point within the TKH companies in
2003. At a number of companies, piloting incentives to reduce absenteeism have been introduced. This
has had a positive effect, as overall absenteeism due to illness within the TKH group dropped by 4.2%.
Mr C.L.F. Vrins has retired as a member of the Supervisory Board as per the 2003 General Meeting
of Shareholders, as he had reached the age limit laid down in the articles of association. Before joining
the TKH Supervisory Board, Mr Vrins had already been active within the group in a number of
positions, including Chief Executive Officer. We are very grateful to Mr Vrins for his high level of
commitment and the manner in which he fulfilled his role as member of the Supervisory Board. We
are particularly grateful to Mr Vrins for the careful and professional way in which he acted as delegate
member of the Supervisory Board for nine months in 2001.
TKH held open and constructive talks with the Central Works Council about current issues, such as
the profit improvement programmes, the annual report, the annual budget and the investment plan.
A representative from the Supervisory Board attended a number of meetings. TKH attaches great
importance to the talks with the Central Works Council and great value to an open dialogue.
The entire organisation worked in an
extremely positive
manner to implement all profit
improvement plans
29
BUILDING SOLUTIONS
Comfort and
security within reach
TAKING CARE OF CARE
‘Insert your access card in the card reader next to the
front door. As soon as you enter, the ceiling lights in
hallway and living room will switch on automatically.
The thermostat will move to 21 degrees Celcius and
the personal alarm will switch to stand-by. And you
are home safely.’
This excerpt from the user manual of Realive® shows
exactly what living will be like in the future. It will
be more comfortable. And it has to be safer, more
controlled. Because we are ageing, we live at home
longer and we have less health care capacity.
So Isolectra’s technology provides a solution in
facilities such as the Arie Kepplerhuis in Amsterdam.
This facility provides the latest domotica applications
for 38 homes for senior citizens and partially-handicapped people.
The residents are assured of every comfort, preprogrammed or easily adjustable with the remote
control for their TV sets. Heating up a notch, lowering the blinds, switching lights on or off: they never
have to leave their seats.
The Realive®-concept also has a personal alarm
facility. One push of the ‘panic button’ in case of
emergency, or after a certain period of inactivity, sets
off the alarm at the connected home care service
provider and immediate action can be taken. In the
near future, it will even be possible to provide longdistance care, once webcams link every home to care
providers. This means that nurses can stay at home
and the customer simply has to follow the instructions given by the physician.
Project
Domotica for
Arie Kepplerhuis
TKH-company
Isolectra
(the Netherlands)
Corporate Governance
We analysed the
best practice
stipulations of the
code compared to
the TKH situation
extensively
TKH strives to operate its business in a structured, transparent and responsible fashion. Following
the presentation of the definitive code Corporate Governance in December 2003, we analysed the
best practice stipulations of this code compared to the TKH situation extensively. In anticipation of
the definitive code, TKH has updated the regulations related to Supervisory Board, including profile
descriptions as well as the regulations related to Executive Board.
TKH aims to conform to the greatest possible extent with this code as soon as possible. We will
devote attention to this issue in the 2004 General Meeting of Shareholders and will provide insight
into the status and further actions in the context of the code by means of a document drawn up
seperatly regarding the Corporate Governance structure within TKH. This document will be enclosed to
the annual report.
Outlook
The market conditions in the telecom, construction and installation sectors are expected to remain
difficult. This will particularly affect the Cable group, which will face further pressure on margins in the
aforementioned sectors, partly due to the rise in the prices of raw materials. The specialty cable sector,
with innovations for the industry sector, has a strong basis for further growth.
Within the Technical Trading group, the innovations on solutions in the fields of communications,
security, comfort and care will have a positive impact on the development of the results, which will
reduce the effects of the difficult market conditions for this group.
The order portfolio of the Machinery group has increased compared with the previous year. On this
basis, we expect continued growth in turnover and profit of this group.
At this moment it is too early to make further statement about the 2004 net profit.
32
Overview per group
Technical Trading group
Cable group
Machinery group
INDUSTRIAL SOLUTIONS
All parts are put
in high-gloss from
top to bottom
CABLING PAINT ROBOTS FOR DÜRR
In all respects, factories of modern automobile
manufacturers are worthy to be seen. Almost everything happens automatically – from body construction
up to side mirror installation and human work is
reduced to a minimum.
But, nevertheless the most beautiful aspect in that
automated lines is surely the paint shop with its
robots.
It is as beautiful as impressive to see how these –
often meters long – constructions for mass production paint finishing put all parts in high-gloss from
top to bottom. Movements of these robots are
flowing and tender– so human, thus you nearly forget
watching a high-tech system.
Since the late nineties, DÜRR have been very successful in delivering tailor-made paint shops to all leading
automobile manufacturers and their component
suppliers around the world. A market share exceeding
85% tells its own story.
Over many years, Ernst & Engbring (E&E) has been a
supplier of various types of cables as sensor cables,
hybrid cables and control cables for different applications to DÜRR.
That extensive knowledge combined with a distinct
quality management established the basis for a
long-lasting, successful business relationship.
Due to that E&E has been appointed to be the new
supplier of cable systems for paint robots cabling. In
2004, E&E will start with producing about 3,500 of
these tube packets.
Generally, such cabling consists of seven so called
tube packets. The configuration of each package
depends on the robot’s function. Related to that such
a tube packet can include up to 30 different media
tubes and electrical cables as power cables, pressure
tubes, control cables and data cables.
In consequence of the different applications there are
approx. 200 varieties – from a really simple cabling
through trailing-suites packages up to the painting
packages.
Project
Cabling paint robots
for DÜRR
TKH-company
Ernst & Engbring
Technical Trading group
• Turnover
Profile
•
€ 131 million
• Operating result
€ 11 million
• Number of
•
•
employees 549
•
The Technical Trading group trades a wide range of components and systems for cable and data
communications, telecom, ICT and electrical engineering applications, as well as industrial automation. It also designs and supplies networks as well as operating and control systems.
The group provides added value in the form of advice, development and delivery of total systems,
often in cooperation with the Cable group.
The strategy is aimed at further growth in all three segments, Telecom Solutions, Building Solutions
and Industrial Solutions, by introducing new technologies and increasing added value for our
clients. Combining technologies into total solutions, chain management, reduction of the total cost
of ownership, the optimal application of technical know-how and cost reductions as a result of
increases in scale are all strategic spearheads. Geographically, the focus is on north-western and
eastern Europe, as well as Asia.
The number of employees at year-end 2003 totalled 549 (2002: 579).
Developments in the year under review
General
The turnover of the Technical Trading group fell by 6.1% in the year under review to € 130.7 million
(2002: € 139.2 million). Currency effects had a negative impact of € 4.9 million on turnover. Excluding
currency effects, the group’s turnover fell by 2.6%. The drop in turnover was due to the difficult market
conditions in the construction and industry sectors. The introduction of new products, mainly in the
Telecom Solutions segment, compensated in part for the difficult market conditions. Innovations in
the form of new products and services introduced over the past two years accounted for 24% of turnover. Due to the cost-cutting measures and an increased share of innovations with a higher added
value, the operating result rose to € 11.0 million in 2003, from € 7.0 million in 2002.
In the year under review, the group booked good progress in the further development and international
gearing of the portfolio and the introduction of a number of TKH brands. For instance, the group
introduced a complete Home-networking portfolio under the name Eminent® and launched the Dect
telephone brand I-Tech. In addition, successful solutions from other companies within the group were
added to the portfolios of various group companies.
Telecom Solutions
Turnover in the Telecom Solutions segment in 2003 was virtually unchanged from 2002. Spearheads
for future turnover growth within the Technical Trading group include the development and broader
positioning of the programmes in the field of professional communications. The increased demand
for ADSL seen in the past year had a positive impact on TKH’s results. Responding to the need for
broadband solutions, TKH added a number of products to its range, including solutions for ADSL
connections and Home-networking concepts, under the name Eminent®. The Eminent® computer
supplies are available via 400 sales points in the Netherlands. Eminent® products target primarily the
numerous communication possibilities via computer or other new technologies.
The Technical Trading group’s product portfolio also includes various network components for VDSL,
WiFi, WLL and Fibre-to–the-Home (FTTH). The latter concept is an Operator Independent Network,
which allows various operators to offer their services to end-users across the same infrastructure.
This concept has already proven itself internationally in various profitable FTTH projects. The concept
differentiates itself by the fact that it is not based on the products itself but rather on the operational
processes surrounding the construction and maintenance of a network.
36
In addition, 2003 saw the successful launch of RIT Pair View, a system for tests on connection networks.
In the context of the supply of a broad range of wired and wireless telephones for Primafoon shops,
2003 saw the launch of I-Tech: a range of wireless telephones for the fixed line network. In 2003, 43%
of turnover in this sector came from products introduced in the same financial year. In addition, 31%
of the turnover came from products introduced in 2002. These results demonstrate the innovative
character of this sector within the Technical Trading group.
Indonesia saw a positive development in the delivery of turnkey solutions for GSM base stations.
These activities consist of the radio planning, engineering and location of the base stations, plus the
delivery and installation of all materials. In 2003, TKH developed a mobile site for this market, which
can be put into operation within two weeks.
Building Solutions
The turnover in the Building Solutions segment was down compared to 2002 as a result of the negative economic developments. The construction sector in particular saw low investment levels. Within
TKH, this was partly offset by the introduction of new products in the field of structured computer
network cabling and light switches.
TKH delivered key components of the electrical installation, including the Isoswitch system for the
Prinsenhof in The Hague, a construction project consisting of seven connected 14-floor towers and
one 28-floor tower. The Isoswitch installation make it possible not only to ‘swipe’ lighting centrally,
and consequently book considerable energy savings. It is also possible to adapt the lighting switch
installation easily, without requiring installation work, when the inner layout of the building is changed.
This flexibility offers great added value for the user in the shape of 80% reduction in installation time
and, therefore, a direct saving on the total installation costs.
In the year under review, TKH delivered a large number of intercom systems in Asia, a very interesting
growth market for the company. In Singapore, a flight information system for Singapore Changi Airport
was delivered and a communications concept for LRT, the Light Rapid Transit (a light-rail transport
link) was implemented (see page 15). In addition, TKH executed an important project for the Ministry
of Justice in the Netherlands, related to internet telephony for cell communications in prisons.
2003 saw a rise in demand for domotica system Realive® and TKH continued the development of this
concept (see page 31). TKH also started a pilot project, Homecare online (‘Thuiszorg online’), in the
care sector which enables elderly people to have video conference with each other and with their
doctor via an easy-to-use system.
37
Industrial Solutions
The Technical Trading group devoted a great deal of attention to the development of the Industrial
Solutions segment in 2003. In this segment, the Technical Trading group is aiming for a role as a
‘System Integrator’, with as its core activity the design and installation of advanced steering systems
for the machine construction and processing industries.
Turnover in this segment was down slightly due to delays in and postponement of investment projects
in the market. The operating result in the segment rose as a result of an improvement in the market in
the second half of 2003 and higher gross margins due to alterations in product mix and efficiency.
TKH also invested in the further development of its trading portfolio and expertise in the field of MES
(Manufacturing Execution Systems). MES are steering and information systems which connect the
various functions within a production environment. MES replaces paper flows and makes all data on
product, process and quality available immediately.
38
Cable group
Profile
•
•
•
•
•
•
The Cable group strives for a position as a niche player and is shifting its focus increasingly towards
solutions in the form of total systems, in cooperation with the Technical Trading group.
The Cable group focus on the supply of systems and networks for the ICT and telecom sectors. The
group also produces and sells a broad range of specialty cables and cable accessories for industrial
applications, including machine construction, the automotive industry, the computer and robotics
industries, the medical industry, as well as the energy, building and installation sectors.
The focus in terms of turnover and results growth is in the segment Telecom Solutions and specialty
cable (Industrial Solutions). Geographically, the focus is on north-western and eastern Europe, as
well as Asia.
Production is concentrated in six locations. In addition, the Cable group has four cable trading companies, with a target of around 30% of trading turnover of those companies being purchased from
production companies belonging to the group.
The Cable group provides added value through the in-house development and production of
customer-specific cables. Delivery within 24 hours of a broad range of cables and cable accessories
with a high service quality and a high level of services provided are key contributors to the success
of TKH.
The number of employees at year-end 2003 totalled 1,240 (2002: 1,390).
• Turnover
€ 175 million
• Operating result
€ 7 million
• Number of
employees 1,240
Developments in the year under review
General
The turnover of the Cable group remained virtually unchanged and came in at € 175.0 million (2002:
€ 176.4 million). The telecom, construction and installation sectors saw continuing difficult market
conditions. The volume in the telecom sector rose compared to the level seen in 2002, but turnover
was depressed by continued price pressure. The construction and installation sectors saw market
volume fall by roughly 10%, while price levels were also pressured. On the other hand, there was
growth in the specialty cable sector with solutions for the industry sector and TKH was able to further
expand its position outside the Netherlands. Innovations played an important role in the development.
The Cable group’s operating result rose to a positive € 7.0 million in the year under review from a
loss of € 5.8 million 2002. This rise was achieved through a shift in product mix towards products and
systems with higher added value, as well as reorganisation measures and cost-cutting programmes
implemented in 2002.
Telecom Solutions
Investment levels in the telecom sector for outdoor networks were comparable to those seen in 2002.
The demand for optical fibre networks rose slightly, but remained at a low level. The continued overcapacity on the world market for optical fibre pushed price levels down by 20% compared with levels
at year-end 2002. The depreciation of assets for the optical fibre activities in 2002 gave the TKH group
the opportunity to strengthen its competitive position.
In China, the plant for the production of optical fibre improved its results considerably compared with
2002. The optical fibre production volume doubled from the previous year. Due to extremely low price
levels and investments in product developments, however, it was not yet possible to book a positive
result.
The interest in FTTH (Fibre-to-the-Home) solutions increased in the year under review. Optical fibre is
still seen as the best medium to meet the future demand for broadband services. A number of new
FTTH pilot projects have been launched in the Netherlands, such as those in Almere, Eindhoven, the
39
Vathorst area in Amersfoort and Roombeek area in Enschede. The Netherlands is currently European
leader in terms of pilot projects. Interest is also on the rise outside the Netherlands. The modular
cable system gives TKH an in-house state-of-the-art solution. This has enabled TKH to capture a market
share in the Netherlands of more than 40%, which means TKH will be able to play an important role
when the market recovers.
In the fourth quarter of 2003, TKH made a start on the production of multimode optical fibre. The
overcapacity in this segment is considerably less than in the segment for single mode fibre for outdoor
networks, as the number of manufacturers is more limited. Unlike many players in the optical fibre
market, TKH has production facilities that are also well-equipped for the production of multimode
optical fibre.
The demand for more bandwidth has given rise to a need for the expansion of the capacity for copper
cable in existing networks and partial replacement of same with cables suitable for broadband services.
The utilisation of the production facilities for these products remained at a low level.
Among the product innovations that showed a positive development in the past year were:
• EPFU – a miniature optical fibre unit for FTTH solutions;
• Miniature optical fibre cables;
• New generation broadband copper telecom cables;
• OPGW cables – optical fibre combined with ground wire for application in high-voltage networks.
Building Solutions
In partnership with the Technical Trading group, TKH further defined the Building Solutions segment
and launched a programme to develop total solutions for installations for the interiors of buildings.
An important development in this context is the delivery of a total system for fire-resistant and
function-durable cable systems. Solutions for the rapid transformation of supermarkets and shops and
a durable infrastructure for domotica are examples of solutions in which there is great interest and for
which TKH has introduced new products.
The continuing reluctance to invest in the construction sector in the Netherlands led to a drop of
around 10% in market volume for TKH’s most important segment, the market for installation cable.
However, TKH was able to maintain its market share in this segment. Strong competition put margins
under pressure. TKH was able to increase its turnover share outside the Netherlands through efforts in
promising new fields and cooperation with major European players.
Expansion of the product range with new types of cable for ships’ installations, the offshore industry
and applications in which fire-safety is a high priority partly compensated for the shrinking Dutch
market. On balance, this resulted in moderate growth in this segment. TKH made substantial investments in product and market development in the year under review. This has created a good basis for
turnover growth in the coming years under continuing difficult market conditions.
The market for power cable in the Netherlands, TKH’s main market for these products, once again
dropped considerably. This also had an effect on TKH’s turnover. This was partly compensated in
markets outside the Netherlands. In addition, the application of power cable in windmill parks
developed positively. In the context of reduced environmental pollution, TKH introduced a new generation of low voltage cable which contains polypropylene as an insulation and protection material
instead of PVC.
40
Industrial Solutions
The turnover of specialty cable solutions for the Industrial Solutions segment progressed well, with the
(trading) activities in Germany in particular booking considerable growth. The TKH group’s most
important specialty cable segments, medical, automotive, robot and machine construction sectors, all
realised increased turnover.
In the year under review, the group set up various partnerships to outsource complete solutions within
the TKH group. In addition to the expansion of the assembly capacity in Germany, the group set up an
assembly unit in Poland in cooperation with the Technical Trading group, where tailor-made solutions
for cable systems can be produced in smaller series.
Cable system deliveries for toll bridges in Germany also reached a peak, which made a considerable
contribution to the turnover growth.
Various new developments were prepared and launched into the market, and we expect this to give
us a sound growth perspective for the specialty cable segment for the coming years. The high level
of service and solution focus and, most importantly, innovative effectiveness put TKH in a strong
position to further expand these activities.
The special department for the production of miniature cables at TKH company Ernst & Engbring in
Germany has proven a great success. Further investments will be made in this field in the coming
years and these will be a high priority in the Cable group’s investment programme.
41
Machinery group
• Turnover
€ 80 million
• Operating result
Profile
•
•
€ 11 million
• Number of
employees 424
•
The Machinery group specialises in the development and assembly of tyre building systems for cars
and trucks and automated flexible product handling systems.
The activities are aimed at providing total solutions to increase efficiency in a select number of
industries, while striving for market leadership, as well as realising an attractive return on investments for the client. The group aims to achieve an economic scale that can offset cyclical effects and
realise a stable growth of profitability.
The development and assembly of systems as well as outsourcing of machine activities has fulfilled
one of the key conditions for the reduction of cyclical effects in turnover and result.
The number of employees at year-end 2003 totalled 424 (2002: 433).
Developments in the year under review
General
The turnover of the Machinery group rose 4.2% to € 79.6 million, from € 76.4 million in 2002.
The segment tyre building systems accounted for the growth in turnover, while the product handling
systems segment recorded reduced turnover. The operating result in the Machinery group rose
considerably as a result of the increase in turnover, combined with a greater contribution from new
products and cost reductions. Despite one-off reorganisation costs of € 0.9 million, the operating
result rose to € 11.0 million, from € 5.6 million in 2002.
Industrial Solutions
The trend in the tyre industry towards the outsourcing of the development and manufacturing of tyre
building systems to specialists continued in the year under review. This has increased TKH’s market.
In addition, new trends in the field of car tyre designs are sparking investments in new machine
technologies. The development of tyres for evergreater rim diameters plays a key role in this, as does
the development of new tyre constructions (run-flat tyres), which render spare tyres unnecessary.
The expansion of the product range with truck tyre building systems has also had a positive impact on
the growth in activities and considerably reduced cyclicality.
These trends have had a positive impact on the order intake in the tyre building segment. Our market
leadership has been boosted by several years of investment of more than 6% of turnover in new
developments. These investments have also resulted in the realisation of highly innovative solutions
which allow for a high return on the investments for tyre building systems.
Based on the confidence seen developing in the tyre building sector and consequently rise of demand,
TKH will expand the range of solutions for this sector. As a first move in that direction, TKH added a
unique concept for the vulcanisation of tyres to the range in the year under review. The fact that a
major part of the machine park in the tyre building industry is more than 15 years old also boosts the
prospects of high investment levels. In addition, Asia is a key growth market for car and truck tyres
which will be manufactured locally and will require substantial investments in tyre building systems.
In the product handling systems segment, we noted a strong drop in investments at a number of
customers. In the first half of the year we decided to implement a reorganisation to bring the cost
levels in line with the lower level of activity.
The positive outlook for the coming years for tyre building systems and contribution of these
activities to TKH’s turnover and profit have contributed TKH to incorporate the Machinery group in
the Industrial Solutions segment and to mark these as core activities.
42
Annual Accounts 2003
Consolidated balance sheet
(before appropriation of profit)
2003
in euro thousands
2002
Assets
Fixed assets
1 Intangible fixed assets
2 Tangible fixed assets
3 Financial fixed assets
Total fixed assets
Current assets
4 Inventories
5 Receivables
6 Cash
5,946
125,737
727
2,620
118,916
545
132,410
122,081
87,284
94,799
7,143
71,195
79,716
7,866
Total current assets
158,777
189,226
Total
280,858
321,636
156,269
142,645
0
22
8 Provisions
18,425
22,314
9 Long-term liabilities
26,812
74,338
79,352
82,317
280,858
321,636
Liabilities
7 Group equity
Minority interest
10 Current liabilities
Total
44
Consolidated profit and loss account
Net turnover
Changes in inventory of finished goods and
work in progress
Other operating income
11 Total operating income
Cost of raw materials, consumables and
subcontracted work
12 Personnel expenses
13 Depreciation
14 Other operating expenses
Extraordinary depreciations
2002**
377,589
386,888
386,888
5,307
997
2,036
1,138
2,036
1,138
383,893
390,062
390,062
229,485
97,843
18,599
42,960
58,000
214,162
89,912
13,907
41,993
0
Total operating expenses
Operating result
15 Financial income and expenses
Profit from ordinary operations before tax
16 Tax on profit from ordinary operations
Profit from divestments
Profit before extraordinary income and expenses
Minority interest
Extraordinary income
Extraordinary expenses after taxes
2002*
2003
in euro thousands
359,974
446,887
23,919
(56,825)
1,175
(4,040)
(5,273)
(5,273)
19,879
(62,098)
(4,098)
7,961
0
2,613
10,114
2,613
0
388,887
(54,597)
11,918
11
0
0
0
0
Net result
229,485
97,843
18,599
42,960
11,918
(6,711)
11
10,114
(58,000)
11
(54,586)
(47,875)
(54,586)
* Adapted on the basis of the alterations of the Guidelines for the Annual Reporting 2003.
** As published in the Annual Accounts 2002.
Note: The ratio’s calculated elsewhere in the annual report are based on a operating result before extraordinary depreciations.
45
Consolidated cash flow statement
2003
in euro thousands
2002
Cash flow from operating activities
Operating result
23,919
(56,825)*
Depreciation
Extraordinary depreciations
Changes in provisions
Changes in working capital
13,722
0
(3,889)
14,237
19,559
58,000
(7,427)
41,344
Cash flow from operations
47,989
54,651
Result non-consolidated subsidiaries
Interest paid/received
Income tax on profit
(102)
(5,174)
(1,042)
78
(4,271)
(1,609)
41,671
48,849
(8,367)
0
508
(3,288)
10,158
(517)
(7,859)
6,353
(2,420)
0
(47,526)
(2,088)
(2,028)
(476)
4,206
3,616
C
(52,034)
5,318
A+B+C
(18,222)
60,520
Balance of available funds:
• cash
• funds owed to credit institutions
7,866
(18,945)
7,143
0
Balance as of 31 December
(11,079)
7,143
Cash flow from operating activities
A
Cash flow from investments
Investments less disposals in tangible fixed assets
Acquisition/sale/results of participations
Acquisition of other financial fixed assets
Cash flow from investments
B
Cash flow from financing activities
Dividends paid
Purchase of own shares
Increase of long-term debts
Other value variances including exchange rate differences
Cash flow from financing activities
Changes in available funds
46
* Result inclusive extraordinary depreciations in accordance with the Guidelines for the Annual Reporting 2003.
Accounting principles
Consolidation
The consolidated annual accounts have been drawn up using the full consolidation method, applying
the same accounting principles for the valuation of assets and liabilities and the determination of the
result.
Included in the consolidation are those legal entities which are directly or indirectly controlled by
TKH. Please refer to page 70 for a detailed list.
The results of the acquired companies are accounted for in the year of acquisition in accordance with
the period during which financial risk is borne.
Foreign currencies
The translation of the assets and liabilities of foreign group companies and participations occurs at
the currencies’ exchange rates on the closing date.
The profit and loss accounts of foreign group companies and participations are converted using the
monthly weighted average currency exchange rates.
Differences due to translation are charged to the other reserves. All the other exchange rate differences
have been incorporated in the profit and loss account.
Valuation of assets and liabilities
Unless otherwise stated, assets and liabilities are included at face value.
Intangible fixed assets
Goodwill, as the difference between the purchase price and net asset value of acquired participations,
are capitalized starting in 2001 and charged to the result in no more than 20 years.
Depreciation occurs for the first time in the financial year following the year of acquisition.
Tangible fixed assets
The policy for the valuation of these assets is the historical cost, with the exception of land, buildings
and living accommodation, which are based on the current value.
The current value of tangible fixed assets is based on the replacement cost less depreciation.
The replacement cost is derived from the most recent appraisal reports.
Depreciation is calculated using the straight-line method
The other assets for operations are inventories, transport equipment and cars. The assets not used for
operations refer to business premises and houses.
Financial fixed assets
Participating interests in whose policies the company cannot exercise control are shown at purchase
price. Participations where there is at least significant influence on the policy are included at the net
asset value in accordance with the accounting principles customary at the company.
47
Inventories
Raw materials and consumables are stated at the lower of purchase price or market price at year-end.
Work in progress and finished goods are stated at full cost. Full cost being direct material costs and
wages, as well as a charge for indirect production costs.
Long-term projects are allocated a share in the result in proportion to the progress, taking into
account potential risks.
Purchased finished products are stated at the lower of purchase price or market value.
Provisions deemed necessary are deducted.
Receivables
Receivables are stated at face value less any required provisions for bad debts. Unless otherwise
stated, the remaining term for receivables is less than one year.
Revaluation reserve
The revaluation realised with regard to the normal depreciation of tangible fixed assets is released to
the result.
Minority interest
Minority interests in group companies are valued at the net asset value in accordance with the
accounting principles customary at the company.
Provisions
The provisions are formed for reasonably quantifiable obligations and losses that are present on
balance sheet date. Provisions are included at nominal value, with the exception of the provision for
pensions which is determined on the basis of cash value in accordance with actuarial principles.
The provision for future tax liabilities results from the differences between commercial and fiscal
valuation of certain assets and liabilities in as far as these differences will be involved in taxation in
the future. The provision calculated in this way is deducted from the deferred fiscal debt due to fiscal
losses to be compensated in the future, in as far as the duration and nature of the facility correspond
with the deferred receivables.
48
Determination of Results
General
The amounts included in the profit and loss account represent the historical cost, with the exception
of a part of the depreciation on tangible fixed assets which is included on the basis of current value.
The depreciation on tangible fixed assets is calculated on the basis of the estimated useful economic
life.
Operating income
Operating income comprises the net turnover, change in finished product and work in progress as well
as other operating income.
Net turnover comprises the proceeds from goods and services rendered to third parties during the
reporting year less discounts and taxation levied on turnover.
Operating expenses
The cost of production and expenses directly related to ordinary operational activities which underlie
the operational proceeds, are presented as operating expenses or costs.
Financial income and expenses
Interest income and expenses in the period under review concern the interest from or paid to third
parties respectively.
Taxes
In addition to the taxes owed or to be claimed for the year under review, the changes in deferred tax
claims and obligations are also included. The calculation of the tax claims and obligations occurs at
the rates that apply at the end of the year under review.
Minority interest
This includes the minority interests in the results of the group companies.
Extraordinary result
The items that were accounted for as extraordinary income and expenses last year have now been
included in the operating profit and as a seperate item ‘profit from divestments’, respectively.
Cash flow statement
The cash flow statement has been drawn up using the indirect method. With this method, the net
result is adjusted for items on the profit and loss account that do not have an impact on the income
and expenses in the year under review and changes in items on the balance sheet and profit and loss
account whose income and expenses are not considered to belong to the operational activities.
The cash position in the cash flow statement consists of the cash assets minus bank credits.
Changes in exchange rates are directly processed in the items in question. The purchase price of
acquisitions is included in the cash flow from investment activities.
Transactions whereby no exchange of cash occurs are, where possible, not included in the cash flow
statement.
49
Notes to the consolidated balance sheet
in euro thousands
1
Intangible fixed assets
Balance as of 1 January
Changes in the book value
Goodwill paid
Other changes 1)
Depreciation
Total changes
Balance as of 31 December 2003
Historical cost
Sum of revaluation
Sum of depreciation
Actual book value
Financial fixed assets
Balance as of 1 January
Acquisitions
Other changes
Balance as of 31 December
5
50
5,429
610
204
(297)
517
5,946
2,620
Tangible fixed assets
Balance as of 1 January 2003
Book value
Changes
Investments
Acquisitions
Divestments
Revaluations and other changes
Depreciation
4
5,946
(3,326)
Balance as of 31 December
3
2002
0
(2,974)
(352)
Total of changes
2
2003
Inventories
Raw materials and consumables
Work in progress
Less: invoiced in advance
Finished goods and commercial goods
Receivables
Trade accounts receivable
Deferred tax debit
Other receivables and prepayments
1) Correction due to the adjustment to the definitive purchase price.
Buildings
and land
Machinery
and
equipment
Other
capital
equipment
Operating
assets in
progress
Not used
for
operations
Total
83,482
18,911
14,357
7,279
1,708
125,737
1,993
0
(686)
(6,585)
(3,656)
2,868
0
(288)
3,747
(4,826)
2,543
0
(581)
84
(4,738)
3,294
0
(317)
(4,415)
0
29
0
(486)
5,701
(502)
10,727
0
(2,358)
(1,468)
(13,722)
(8,934)
1,501
(2,692)
(1,438)
4,742
(6,821)
93,531
26,704
(45,687)
137,915
5,205
(122,708)
53,899
271
(42,505)
5,841
0
0
7,865
1,006
(2,421)
299,051
33,186
(213,321)
74,548
20,412
11,665
5,841
6,450
118,916
727
0
(182)
771
160
(204)
545
727
16,206
61,566
(50,423)
43,846
16,680
53,115
(34,655)
52,144
71,195
87,284
64,996
11,150
3,570
75,786
11,420
7,593
79,716
94,799
6
in euro thousands
2003
2002
Cash
Balance of cash in hand and bank balance
7,866
7,143
8,585
2,005
7,835
7,754
1,750
12,810
18,425
22,314
26,812
74,338
18,945
31,276
7,181
21,950
0
36,355
11,012
34,950
79,352
82,317
7
Group equity
Group equity is equal to shareholders’ equity.
For further details, please refer tot the notes to the company balance sheet.
8
Provisions
Taxes
Pensions
Other
Changes in other provisions
Balance as of 1 January 2003
Withdrawal
Reversal
Addition
Balance as of 31 December 2003
12,810
(5,673)
(179)
877
7,835
The provisions for pensions consists of € 1,943,000,- obligations under
own management and for the remaining of back-service obligations of
pensions insured with third parties, both calculated on the cash value using
the current actuarial principles.
Withdrawals have been made from the other provisions in accordance with
the purpose designated in the past when they were formed. The other
provisions relate to reorganisation costs, warranties and price risks
purchase obligations.
9
Long-term liabilities (term till 5 years)
Credit institutions and others (interest rate 5,77%)
No special securities have been provided for these loans.
10
Current liabilities
Amounts owed to credit institutions
Accounts payable
Other taxes and social security premiums
Other liabilities
Liabilities which are not reflected in the balance sheet
Multi-year agreements have been entered into with regard to the availability
of a number of important raw materials.
In behalf of third parties, warranties have been issued to the amount of
€ 16 million. Capital commitments in the capacity of assets ordered
amounted € 1.6 million at year-end 2003. Liabilities in the capacity of
operational and lease agreements amounted € 11.3 million, of which
€ 2.5 million is less than 1 year and € 2.2 million is longer than 5 years.
51
Notes to the consolidated profit and loss account
in euro millions
Technical
Segmented information
11
Operating income
Machinery
Holding
Trading group
Cable group
group
& Elimination
Total
2003 2002
2003 2002
2003 2002
2003 2002
2003 2002
130.7 139.2
175.0 176.4
79.6
76.4
11.0
5.6
166.0 185.4
50.6
49.8
7.5
Operating result
11.0
7.0
Assets as per 31 December
56.7
54.6
Investments
0.5
2.7
8.0
14.2
1.9
1.6
0.3
3.7
10.7
22.2
Depreciation
1.4
1.8
10.2
14.8
1.7
1.8
0.3
1.2
13.6
19.6
Liabilities as per 31 December
22.1
24.4
23.7
23.8
20.0
25.7
13.5
8.4
79.3
82.3
Personnel as per 31 December
549
579
1,228 1,373
424
433
12
7.0
(5.8)
in euro thousands
12
(1.4) (1.9) 383.9 390.1
Personnel expenses
Salaries and wages
Social security expenses
(5.1) (5.7)
23.9
1.1
31.8 280.8 321.6
17 2,213 2,402
2003
2002
71,844
18,068
78,494
19,349
89,912
97,843
An amount of € 4,458,000 for pension cost has been included in the
social security expenses (2002: € 3,439,000).
Remuneration Executive Board
Basic salary
Bonus
Pension costs
Total
Executive Board:
J.M.A. van der Lof
J.E. Vaandrager
290
250
97
83
64
55
451
388
Total
540
180
119
839
Remuneration 2002
407
90
110
607
Remuneration policy
The Supervisory Board determines compensation for members of the Executive Board based on recommendations by the
Appointment & Remuneration Committee. The policy aims at providing a competitive compensation package to attract,
motivate, and retain qualified management for a publicly listed internationally active company, while considering TKH’s size
and unique characteristics. The compensation package is measured periodically against market trends using information
provided by external experts. The compensation package is structured so that both short- and long-term goals are maintained.
With respect to the year under review the basic salary of the members of the Executive Board has been reviewed and adjusted
to market standards based on specialised external research and the recommendations of the Appointment & Remuneration
Committee. As of 2003, a new plan with regard to bonuses has come into effect. This plan consists of a short term cash
bonus arrangement, based on pre-determined targets.
52
The cash bonus is to be no more than 50% of the basic salary. In addition, the plan provides for the possibility, within one
month after announcement of the annual results, to grant shares on the basis of long term targets, in return for which the
members of the Executive Board are required to purchase the same number of shares for the price quoted on the stock
exchange at that moment. These shares cannot be sold for a period of three years. As of the financial year 2004 shares can be
granted under the terms of this new plan. This share plan replaces the existing stock option plan.
Remuneration Supervisory Board
The remuneration of the chairman of the Supervisory Board amounts to € 22,690.-, the members of the Supervisory Board
receive a remuneration of € 20,420.-.
Remuneration policy
As recent as 2001, the General Meeting of Shareholders approved compensation for Supervisory Board members.
Compensation for a Supervisory Board member is not dependent on company results. No option rights are allocated to the
member of the Supervisory Board.
Shares held by the Executive Board and Supervisory Board
In the Executive Board, at the end of 2003, Mr J.M.A. van der Lof held 10,252 (certificates of ) shares and Mr. J.E. Vaandrager
held 10,815 (certificates of ) shares. In the Supervisory Board, at the end of 2003, Mr A.J. Driessen held 521 (certificates of )
shares. The other Supervisory Board members did not hold any shares at the end of 2003.
2003
13
Depreciation
Depreciation on intangible fixed assets
Revaluation realised
Depreciation on tangible fixed assets
Result from divestment of tangible fixed assets
Depreciation on the basis of historical cost price
14
Other operating expenses
Other operating expenses include amongst others general,
sales, housing and production costs.
15
Financial income and expenses
Result from participations
Financial income
Financial expenses
16
352
(270)
2002
297
(1,010)
13,722
103
19,559
(247)
13,907
18,599
17,061
18,070
(102)
124
(4,062)
78
465
(5,816)
(4,040)
(5,273)
Taxes
The tax burden is calculated using the rates which apply per country,
taking into account permanent differences between commercial and fiscal
appreciation and losses.
Company profit and loss account
The company profit and loss account has been presented using the
exemption referred to in ex. article 2: 402, Titel 9, Book 2 of the Dutch
Civil Code.
53
Company balance sheet
as of 31 December before appropriation of profit
2003
in euro thousands
2002
Assets
Fixed assets
1 Intangible fixed assets
Tangible fixed assets
2 Financial fixed assets
Total fixed assets
Current assets
Receivables from group companies
Other receivables
Cash
5,946
368
56,499
2,620
382
75,117
62,813
78,119
95,274
1,070
34,670
114,556
1,420
8,999
Total current assets
124,975
131,014
Total
203,094
193,827
Liabilities
3
4
5
6
Shareholders’ equity
Issued share capital
Share premium
Revaluation reserve
Other reserves
Undistributed profit
156,269
142,645
Long-term liabilities
25,000
32,179
7 Short-term liabilities
21,825
19,003
203,094
193,827
Total shareholders’ equity
Total
54
8,467
6,233
25,459
157,072
(54,586)
8,467
6,233
29,282
100,369
11,918
Company profit and loss account
2003
2002
Company result
(1,840)
8,256
Result of participations
13,758
(62,842)
11,918
(54,586)
in euro thousands
55
Notes to the company balance sheet and
the company profit and loss account
in euro thousands
For the valuation principles please refer to the notes to the consolidated annual accounts.
1
Intangible fixed assets
For the note to the intangible fixed assets, please see the note to the consolidated balance sheet.
2
Financial fixed assets
The financial fixed assets consist of shares in the capital of participations and long-term loans to participations.
3
Participations
Other
Total
Balance as of 1 January 2003
Changes resulting from:
• acquisition of new participations
• disposal of participations
• result
• finance and other changes
• revaluations
• exchange rate differences
56,337
162
56,499
Net asset value as of 31 December 2003
75,115
Issued share capital
The authorized share capital consists of:
Ordinary shares
Cumulative financing preference shares
Cumulative convertible financing preference shares
Cumulative protection preference shares
Priority shares
each with a nominal value of € 1,Not issued
Paid-up and called-up share capital*
13,918
(2,428)
7,431
(143)
(160)
2
0
0
13,758
(2,428)
7,431
(143)
75,117
2003
2002
35,000
26,533
35,000
26,533
8,467
8,467
9,996,000
5,000,000
5,000,000
15,000,000
4,000
*4.000 priority and 8.462.928 (certificates of ) shares
The company has granted the Stichting Continuïteit TKH an option of taking protection preference shares to a maximum of
50% of the sum of the other outstanding shares at the time that the protection preference shares are issued or 100%
of the sum of the other outstanding shares at the time that the protection preference shares are issued when limitation of the
cancellation option disappears which will occur if and as soon as the Executive Board of the company so decides and files a
statement to this end with the trade register.
This already existing option was brought into line with an amended Appendix X to the Funds Regulations of Euronext
Amsterdam N.V. No special rights have been allocated to the priority shares.
56
Option scheme
Option rights have been granted to the management of the company and group companies, giving the right to buy (certificates
of ) ordinary shares in N.V. Twentsche Kabel Holding. The rights can not be exercised before publication of the annual results of
the company, after a waiting period of three calendar years (one calendar year till 2000), following the year in which the rights
have been allocated. The duration is four or five years at the discretion of the person holding the option rights.
The conditions for participation have been recorded in internal regulations, partly to prevent insider trading and have been
accepted in writing by the participants.
The number of outstanding rights of the Executive Board at the end of the financial year amounted to 37,000.
Overview of number of outstanding rights of the members of the Executive Board and of other persons holding the option rights.
J.M.A. van der Lof
J.E. Vaandrager
Year of
allocation
Exercise
rate
in euros
1998
1999
2000
2001
2002
2003
37.39
26.50
42.90
32.10
19.25
6.65
2,000
4,200
2,800
2,800
2,800
2001
2002
2003
28.70
19.25
6.65
1,600
2,800
sub
Other persons holding
the option rights
1998
1999
2000
2001
2002
2003
1 January
2003
19,000
37.39
26.50
42.90
32.10
19.25
6.65
Allocated
during
the year
Withheld
during
the year
Exercised
during
the year
31 December
2003
Exercise
period
10,000
0
4,200
2,800
2,800
2,800
10,000
1999-2003
2000-2004
2001-2005
2004-2006
2005-2007
2006-2008
10,000
1,600
2,800
10,000
2004-2006
2005-2007
2006-2008
-2,000
20,000
-2,000
51,575
-22,730
-1,650
-3,350
-4,075
-4,275
-750
22,730
34,300
43,625
45,125
57,025
0
37,000
0
32,650
40,275
41,050
52,750
50,825
sub
202,805
51,575
-36,830
0
217,550
Total
221,805
71,575
-38,830
0
254,550
1999-2003
2000-2004
2001-2005
2004-2006
2005-2007
2006-2008
No option rights are allocated to the members of the Supervisory Board.
As per 1 January 2004, the Executive Board’s options scheme was replaced with a share scheme.
57
4
in euro thousands
2003
2002
Share premium
Balance as of 1 January
Stock dividend
6,233
0
6,233
0
Balance as of 31 December
6,233
6,233
The share premium reserve is fully exempt from Dutch taxes on distribution.
5
Revaluation reserve
Balance as of 1 January
Revaluation during financial year
Addition of deferred taxes
Translation differences
Release of realised revaluations
Other changes
1,089
(277)
(2,519)
(2,117)
(59)
0
Balance as of 31 December
6
Other reserves
Balance as of 1 January
Dividend paid out
Result previous financial year
Purchase of own shares for option rights granted
Other changes
3,823
(3,883)
29,282
25,459
Balance as of 31 December
Short-term liabilities
Amounts owed to credit institutions
Income tax
Other liabilities
150,630
157,072
(2,028)
(2,420)
(54,586)
9,647
(476)
(701)
0
303
(56,703)
7
29,342
25,459
1,488
(330)
3,078
(413)
6,442
100,369
157,072
16,500
2,535
2,790
0
8,681
10,322
21,825
19,003
Liabilities which are not reflected in the balance sheet
On the basis of Article 2:403, Section 1f Civil Code, the company has assumed joint and several liability for the debts of a
number of subsidiaries ensuing from legal acts. The statements to this end have been made available for inspection at the
offices of trade register where the legal entity for which the declaration of liability was given, has its registered office.
The company is formally a guarantor for a total sum of € 35 million for bank credit facilities provided to a number of foreign
participations. This credit facility was called on for the sum of € 13 million at the end of 2003.
Haaksbergen, 17 March 2004
Executive Board
J.M.A. van der Lof, chairman
J.E. Vaandrager
58
Supervisory Board
R.B. Lenterman, chairman
A.J. Driessen, vice-chairman
P. Morley Msc.
A. van der Velden
A.C.H. van der Wolf
Other information
Regulation under the articles
of association concerning the
appropriation of profit
As in the year under review no protection
preference and financing preference shares have
been outstanding or were issued, as meant in
articles 30.1, 3, 4, 5, 6 paragraph b and c, 8 and 9,
below only articles are shown about the profit
appropriation which relate to the outstanding
shares.
Article 30 of the articles of association reads as
follows:
2. The company can only make payments to
shareholders and other parties entitled to the
profit eligible for payment if the group equity is
greater than the amount of the paid up and
called-up part of the capital increased by the
reserves which in accordance with the law or the
articles of association have to be kept.
6. From the profit that remains after application
of the previous paragraphs, if possible, five
percent (5%) of the nominal amount is paid out
on the priority shares. No further payment shall
be made for the priority shares.
Then, if possible, a dividend is paid, equal to a
percentage of the sum effectively paid up on the
financing preference shares of the series in question or the convertible financing preference
shares of the series in question respectively
during the first issue of the series in question on
the financing preference shares of every series or
the convertible financing preference shares of
every series respectively, including any share premium reserve, which percentage is related to the
average effective return on ‘general state loans
with a duration of 7-8 years’.
7. If in any financial year, the profit is not sufficient to make the payments as meant above in
paragraph 6 of this article, in the following financial years the provisions of paragraph 6 and paragraph 10 shall not be applied until the deficit is
cleared up. The Executive Board is authorised,
subject to approval by the Supervisory Board, to
decide to pay out a sum equal to the deficit
meant in the previous sentence from the
reserves, with the exception of the reserves which
have been formed as share premium reserves on
60
the issue of financing preference shares or convertible financing preference shares respectively.
If the provision in this paragraph is applied, the
holders of the series of financing preference
shares and convertible financing preference
shares are treated in the same way.
10. The Executive Board shall reserve as much of
the profit that remains as it feels is necessary,
subject to approval by the Supervisory Board. In
as far as the profit is reserved without application
of the previous sentence, it is at the disposal of
the general meeting, either wholly or partly for
the reserves, or wholly or partly to be paid out to
the holders of ordinary shares in ratio to their
holding of ordinary shares.
11. Without prejudice to the provision in article 7,
the Executive Board, subject to approval by the
Supervisory Board, always eight years after the
day of issue, propose to the general meeting to
withdraw with repayment as meant in article 7,
of every series of financing preference shares or
every series of convertible financing preference
shares respectively, as long as those series are
withdrawn at the same time.
Proposal for profit appropriation
in euros thousands
Net profit
11,918
In accordance with article 30 of the articles of association, we propose to pay the holders of (certificates of ) ordinary shares a dividend of € 1.00 per (certificate of an) ordinary share (with withholding of
the dividend tax owed). The dividend will be payable in cash.
The dividend for 4,000 priority shares has been set at € 0.05 per share of € 1.00.
61
Auditor’s report
We have audited the accompanying 2003 financial statements of N.V. Twentsche Kabel Holding at
Haaksbergen. These financial statements are the responsibility of the company’s management. Our
responsibility is to express an opinion on these financial statements based on our audit.
Scope
We conducted our audit in accordance with auditing standards generally accepted in the Netherlands.
Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statements presentation. We believe that our audit provides a
reasonable basis for our opinion.
Opinion
In our opinion, the financial statements of N.V. Twentsche Kabel Holding give a true and fair view of
the financial position of the entity as of December 31, 2003 and of the result for the year then ended in
accordance with accounting principles generally accepted in the Netherlands and comply with the legal
requirements for financial statements as included in Part 9, Book 2 of the Netherlands Civil Code.
Amersfoort, 17 March 2004
Deloitte Accountants
62
Stichting Administratiekantoor van
Aandelen N.V. Twentsche Kabel Holding
(Foundation Administration Office for Shares of N.V. Twentsche Kabel
Holding)
In accordance with the provisions of article 11 of the Administration conditions for the Shares of
N.V. Twentsche Kabel Holding dated 8 June 2001, we would like to announce the following:
• that the activities during the year under review 2003 were exclusively related to the administration
of shares for which depositary receipts have been issued;
• that the nominal value of the ordinary shares N.V. Twentsche Kabel Holding taken in the administration amounted to € 8,373,580.00 as of 31 December 2003, in exchange for which 8,373,580 depositary receipts for shares at € 1.00 nominal value have been issued in CF form.
The objective of the foundation is, in exchange for issuing exchangeable depositary bearer receipts for
shares, to acquire and administrate registered shares in N.V. Twentsche Kabel Holding to hold them
for management. The foundation shall exercise the rights attached to the shares in such a way that all
the interests involved with the company and its enterprise are guaranteed as effectively as possible.
Hollandsch Administratiekantoor B.V. in Amsterdam is the administrator of the foundation.
The board of the foundation met twice in the year under review, among other things to prepare the
company’s General Meeting of Shareholders. In accordance with the foundation’s retirement rotation
schedule, Mr P.J. Dortmond was due to step down and eligible for re-election. Mr Dortmond was reappointed for a four-year period.
In view of recent developments, there was a discussion regarding the independence of the board of
the foundation. In anticipation of possible stipulations in law, Mr Van der Lof is due to step down the
coming year, from the Stichting Administratiekantoor in the context of the objective of independence
of the foundation’s board members vis-à-vis the company.
The foundation ’s board currently consists of Messrs:
P.J. Dortmond, chairman
J.W. Termijtelen
M.J. Brugma
R.B. Lenterman
J.M.A. van der Lof
Statement of independence
The Executive Board of N.V. Twentsche Kabel Holding and the board of the Stichting Administratiekantoor van Aandelen N.V. Twentsche Kabel Holding hereby declare that in their joint opinion, the
requirements with regard to the independence of the officers of the foundation as meant in Appendix X
of the Fund regulations of Euronext Amsterdam N.V. have been met.
Haaksbergen, 15 April 2004
The Board
63
Stichting Continuïteit TKH
(Foundation Continuity TKH)
The Stichting Continuïteit TKH, seated in Haaksbergen, is charged with representing the interests of
the company and all its enterprise in such a way that these interests are guaranteed to the greatest
possible extent and to resist as much as possible any influences which could affect the independence,
continuity or identity of the company and its enterprise, as well as carrying out anything related to the
above or which can beneficial to it.
The Stichting Continuïteit met once in 2003. The meeting amongst other things concerned the
recent discussions about and intentions with regard to new guidelines and regulations for protection
constructions.
In accordance with the foundation’s retirement rotation schedule, Mrs S. Drion was due to step down
and was eligible for re-election. Mrs Drion was re-appointed for a four-year period.
The foundation ’s board is formed by:
Mr G.W. baron van der Feltz, chairman
Mr S.E. Beelaerts van Blokland esquire
Mrs S. Drion
Mr H.M.N. Schonis
Mr R.B. Lenterman
Statement of independence
The Executive Board of N.V. Twentsche Kabel Holding and the board of the Stichting Continuïteit TKH
hereby declare that in their joint opinion, the requirements with regard to the independence of the
officers of the foundation as meant in Appendix X of the Fund regulations of Euronext Amsterdam N.V.
have been met.
Haaksbergen, 15 April 2004
The Board
64
Committee of Shareholders
During the past year, the Committee of Shareholders was made up of the following members:
Mr H.G.B. Spenkelink, chairman
Mr E.P. Krudop, vice chairman
Mr J. Bel, secretary
Mr A. Hulshof
Mr C. van Spronsen
Mrs R. Dieperink acts as deputy secretary.
The Committee met on 28 March 2003 and on 23 October 2003, both privately and with the
Executive Board.
During the meeting of 28 March, subjects discussed included the retirement rotation schedule of the
committee. During the meeting of 23 October, Mr H.G.B. Spenkelink was appointed as chairman of the
committee and Mr E.P. Krudop as vice chairman.
In accordance with the committee’s retirement rotation schedule, Mr J. Bel will be due to step down
this year and is not eligible for re-election. The committee is greateful to Mr Bel for his contribution
and proposes to appoint Mr J.H.A. ten Hag, residing in Haaksbergen in the vacancy.
The Committee of Shareholders expresses its gratitude to Mr Vrins for his contribution during his
years as a member of the company’s Supervisory Board.
The Committee of Shareholders attaches great importance to Corporate Governance and the results of
the Tabaksblat Committee and is awaiting the implementation of the code within TKH with interest.
Haaksbergen, 31 March 2004
H.G.B. Spenkelink, chairman
J. Bel, secretary
65
Overview press releases 2003
Annual results 2002:
TKH improves results in second half
Turnover in 2002 was € 390 million, down 33% or € 196 million compared to 2001. The divestment of
electrical engineering wholesaler EAS and the partial divestment and cessation of activities of PIC in
the United Kingdom resulted in a drop in turnover of € 84 million. The operating result dropped to �
1.2 million in 2002, from € 33.8 million in 2001. The measures introduced to bring operating costs in
line with the activities began to contribute to an improvement in the operating result in the course of
the second half of 2002. As a result, TKH was able to book a positive operating result for the full year
2002, despite an operational loss of € 3.8 million in the first half of the year. The 2002 net loss before
extraordinary income and expenses was € 6.7 million, compared with a profit of € 18.7 million in
2001. In addition, there was an extraordinary charge of € 58 million after tax for the write-down of telecommunications assets. The net loss (after extraordinary income and expenses) for 2002 was € 54.6
million, compared with a net profit of € 9.6 million in 2001.
14 March 2003
TKH results first quarter 2003
The positive development of TKH’s results in the final months of 2002 has continued in the first
months of 2003. As a result of cost measures introduced and a more favourable product mix, TKH was
able to realise an operating profit (EBIT) of € 6.0 million in the first quarter of 2003 (Q1 2002: a loss
of € 2.4 million), despite the continued difficult market conditions. Turnover in the first quarter of
2003 fell slightly to € 95 million (Q1 2002: € 98 million). Solvency increased from 44% at year-end
2002 to 47% as a result of a further reduction of debt.
22 March 2003
Results first half 2003:
Product innovations and cost measures lead to strong recovery of TKH results in first half 2003
Turnover in the first half of 2003 came in at € 190 million, a modest drop of € 2 million compared
with the first half of 2002. Currency effects (€ 5 million), as well as the market conditions in the
industrial and construction sectors had a negative impact on turnover. This drop in turnover was
largely offset by the product innovations introduced in 2002 in fields such as intercom and security
systems, ADSL solutions for broadband internet, together with increased demand for specialty cables
and tyre building systems. The operating result rose to a profit of € 10.6 million in the first half
of 2003, compared with a loss of € 3.8 million in the first half of 2002, an improvement of
€ 14.4 million. This strong improvement in operating profit was the result of measures taken to bring
operating costs down, as well as the improved margin due to a change in the product mix. Net profit
came in at € 4.3 million, up from a loss of € 5.5 million before extraordinary income of € 10.2 million
from divestments in the same period last year.
5 September 2003
66
TKH results third quarter 2003:
Positive development continued in third quarter 2003
In the third quarter of 2003, TKH realised an operating profit (EBIT) of € 4.4 million (third quarter
2002: a loss of € 2.5 million). Turnover totalled € 89 million in the third quarter 2003 and was virtually at the same level as in 2002 (third quarter 2002: € 90 million). Traditionally, the third quarter is
the weakest quarter in the year due to seasonal effects. Following further debt reduction, the solvency
ratio increased to 50%.
Over the first nine months of 2003 operating profit (EBIT) came in at € 15.1 million (first nine months
2002: a loss of € 6.3 million), with turnover amounting to € 279 million (first nine months 2002:
€�282 million).
27 November 2003
Annual results 2003:
Strong rise in net profit TKH
Turnover in 2003 came in at € 383.9 million, a drop of 1.6% compared to 2002 (€ 390.1 million).
Excluding the currency effect of € 8.3 million, turnover rose by € 2.2 million. The measures taken
to bring operating costs down and the reorganisations implemented resulted in a drop in total
operating costs of € 13.6 million or 8.5%. Due to higher added value and the clear reduction in costs,
the operating result rose by € 22.7 million to € 23.9 million in 2003, compared to € 1.2 million the
previous year. The 2003 net profit totalled at € 11.9 million, an improvement of € 18.6 million compared with the previous year (20021): a net loss of € 6.7 million). Earnings per share were € 1.48 in
2003 (20021): a loss per share of € 0.83).
18 March 2004
1) Before extraordinary income and expenses.
67
Group companies / Management / Addresses
Technical Trading group
C&C Partners Telecom
Cable group
• Javocom B.V.
P.T. Isindo Interbuana
J.A.M. Vonk
Louis Yee Pee Hung
M. Niemczyk
Middelweg 27
Riady Armansyah
B.V. Twentsche Kabelfabriek
B. Babiak
6191 NC Beek
Menara Duta Building
A.J.M. van Schie
ul 17 Stycznia 119, 121
the Netherlands
7th Floor, Wing D
J.G. Bezemer
64-100 Leszno
T +31 46 474 65 56
Jl. HR. Rasuna Said Kav. B-9
Spinnerstraat 15
Poland
E [email protected]
12910 Jakarta
7481 KJ Haaksbergen
Indonesia
the Netherlands
T +48 65 525 55 55
F +48 65 525 56 66
• Inec NV
T +62 21 252 29 33
T +31 53 573 22 55
E [email protected]
Kapellei 56
F +62 21 252 29 34
F +31 53 573 21 84
I www.ccpartners.pl
2980 Sint-Antonius-Zoersel
E [email protected]
E [email protected]
Belgium
I www.tkf.nl
EKB Industriële
T +32 3 385 10 92
Isolectra Malaysia Sdn Bhd
Automatisering B.V.
E [email protected]
Zainal Abidin Bin Abas
Electro-Draad B.V.
No. 18 Jalan Astaka U8/83
F. van der Sanden
Seksyen U8 Bukit Jelutong
Branskamp 7
ing. M.N.A. van Leuven
ing. D. Huisman
• Intronics
Wijkermeerweg 29-31
C/eslovenia, Nave 72
40150 Shah Alam
6014 CB Ittervoort
1948 NT Beverwijk
P.I. guadalhorce
Selangor Darul Ehsan
the Netherlands
the Netherlands
29004 Malaga,Spain
Malaysia
T +31 475 56 67 67
T +31 251 22 90 89
T +34 952 24 55 57
T +60 378 46 99 88
F +31 475 56 50 05
F +31 251 22 43 48
E [email protected]
F +60 378 46 98 98
E [email protected]
E [email protected]
I www.eldra.nl
E [email protected]
I www.ekbgroep.nl
• Intronics GmbH
I www.isolectra.com.my
Modecenterstrasse 14
• Capable B.V.
bv Elspec
A-1030 Wien, Austria
VMC Elteknik AB
M.W.C. van Tilburg
ir. D.W.S. Gigengack
T +43 1 79 82 51 00
S. Christensen
Rudonk 25
Bedrijvenweg 14
E [email protected]
Ekhovs Herrgård
4824 AJ Breda
64721 Mariefred
the Netherlands
1424 PX De Kwakel
the Netherlands
Isolectra bv
Sweden
T +31 76 541 64 56
T +31 297 33 03 00
N. Bikker MBA
T +46 159 35 00 10
E [email protected]
F +31 297 32 55 08
Rivium Boulevard 101
F +46 159 133 55
I www.capable.nl
E [email protected]
2909 LK Capelle a/d IJssel
E [email protected]
I www.elspec.com
the Netherlands
I www.vmc.se
• Techno Specials
L. Lysmont
T +31 10 28 55 103
Intronics Barneveld B.V.
F +31 10 28 55 403
VMC Elteknik a/s
Rudonk 25
H. Möhle
E [email protected]
J.R. Hansen
4824 AJ Breda
Hermesweg 22
I www.isolectra.nl
Rugmarken 27A,
the Netherlands
3520 Farum
T +31 76 544 91 75
E [email protected]
3771 ND Barneveld
68
Production
Sp. z o.o.
the Netherlands
Isolectra Far East Pte. Ltd.
Denmark
T +31 342 40 70 40
Roy Teo Lee Jin
T +45 44 342 342
F +31 342 41 21 14
Louis Yeo Pee Hung
F +45 44 342 343
Ernst & Engbring
E [email protected]
Alexandra Distripark
E [email protected]
GmbH & Co. KG
I www.intronics.nl
Blk 2, #10-18
I www.vmc.dk
L. Klick
Pasir Panjang Road
Industriestraße 9
Singapore(118481)
45739 Oer-Erkenschwick
T +65 6 27 22 371
Germany
F +65 6 27 89 019
T +49 2368 69 01 - 0
E [email protected]
F +49 2368 69 01 - 35
I www.isolectra.com.sg
E [email protected]
I www.EuE-Kabel.de
Machinery group
Twentsche (Nanjing) Fibre
Trading
Optics Co. Ltd.
Witt+Arnold Spezial-Kabel
EBM Techniek B.V.
GmbH & Co. KG
ing. M. Dannenberg
C.F. Liao
Jobarco B.V.
M. Witt
‘t Zwarte Land 16-18
E.D.H. de Lange MBA
H.P. van der Meer
Zollhausstraße 6
3925 CK Scherpenzeel
Nanjing New & High Technology
Verbreepark 15
58640 Iserlohn
the Netherlands
Industry Development Zone
2731 BR Benthuizen
Germany
T +31 33 277 93 33
Pukou Nanjing 210061
the Netherlands
T +49 2371 43 5 - 0
F +31 33 277 14 54
Jiangsu Province
T +31 79 331 93 13
F +49 2371 43 5 - 500
E [email protected]
P.R. China
F +31 79 342 35 72
E [email protected]
I www.ebmtechniek.nl
T +86 25 5884 48 88
E [email protected]
I www.witt-arnold.com
F +86 25 5884 48 58
I www.jobarco.com
E [email protected]
I www.tfo.com.cn
• EBM Technology Inc.
4485 Allen Road
HPM Kabel GmbH
Stow, Ohio 44224
W. Breuer
USA
Zhangjiagang Twentsche Cable
An der Kleinbahn 16
T +1 330 929 89 29
Co. Ltd.
41334 Nettetal
F +1 330 929 72 54
M. Chen
Germany
Sanxing Economic and
T +49 21 57 89 79 0
VMI Epe Holland B.V.
Technology Development Zone
F +49 21 57 89 79 89
ir. J.J. Spanjer
Sanxing Town West
E [email protected]
Gelriaweg 16
Zhangjiagang 215624
I www.hpm-kabel.de
8161 RK Epe
Jiangsu Province
P.R. China
• HPM Cables Sarl.
the Netherlands
T +31 578 67 91 11
T +86 512 585 711 88
14 Rue du Bon Repos
F +31 578 62 13 17
F +86 512 585 705 92
41600 Chaon
E [email protected]
E [email protected]
France
I www.vmi-group.com
I www.cablemaker.net
T +33 254 95 88 00
E [email protected]
• VMI Americas Inc.
C. Fritz
Kabel Wächter GmbH & Co.KG
4485 Allen Road
J. Neumann
Stow, Ohio 44224
Karl-Benz-Straße 20
USA
72124 Pliezhausen
T +1 330 929 68 00
Germany
F +1 330 929 72 54
T +49 71 27 81 04 01
E [email protected]
F +49 71 27 81 04 20
E [email protected]
I www.kwf.de
• KAWEFLEX Wire and Cable Inc.
• VMI (Yantai) Machinery Co. Ltd.
Xu Kanguan
886 Yongfu Yuan Road
Fushan High & New Tech
3546 Burch Ave.
Industrial Park
Cincinnati, OH 45208
Yantia, Shandong 265500
USA
PR China
T +1 513 232 93 00
T +86 535 630 01 39
E [email protected]
F +86 535 630 01 36
E [email protected]
69
Participations
The following significant direct or indirect participations have been included in the
consolidation.
Capable B.V.
bv Elspec
B.V. Twentsche Kabelfabriek
EBM Techniek B.V.
EKB Industriële Automatisering B.V.
Electro-Draad B.V.
Intronics Barneveld B.V.
Isolectra Holding B.V.
Javocom B.V.
Jobarco B.V.
VMI Epe Holland B.V.
Ernst & Engbring GmbH & Co. KG
HPM Kabel GmbH
Kabel Wächter GmbH & Co. KG
TKD Logistics GmbH
Witt+Arnold Spezial-Kabel GmbH & Co KG
VMC Elteknik AB
VMC Elteknik a/s
C&C Partners Telecom Sp. z o.o
Twentsche (Nanjing) Fibre Optics Co. Ltd.
Zhangjiagang Twentsche Cable Co. Ltd.
70
Breda
The Netherlands
De Kwakel
The Netherlands
Haaksbergen
The Netherlands
Scherpenzeel
The Netherlands
Beverwijk
The Netherlands
Ittervoort
The Netherlands
Barneveld
The Netherlands
Rotterdam
The Netherlands
Geleen
The Netherlands
Benthuizen
The Netherlands
Epe
The Netherlands
Oer-Erkenschwick
Germany
Nettetal
Germany
Pliezhausen
Germany
Nettetal
Germany
Iserlohn
Germany
Mariefred
Sweden
Farum
Denmark
Leszno
Poland
Nanjing People’s Republic of China
Zhangjiagang People’s Republic of China
Central Works Council
The Central Works Council of N.V.Twentsche Kabel Holding comprises the following members:
Mr
Mr
Mr
Mr
Mr
Mr
Mr
Mr
Mr
Mr
G. Töpfer (VMI), chairman
G. Roolvink (TKF), secretary
F. de Carpentier (VMI)
N. Demmendaal (Isolectra)
H. Hennen (Eldra)
G. van Manen (EBM)
L. Scholten (TKF)
E. Scharrenborg (TKF)
A. Wonink (TKF)
R. Ooijevaar (EKB), auditor
71
Ten year overview
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
Net turnover
Changes to inventory of finished
products and work in progress
378
387
588
585
489
455
408
351
309
182
6
3
1
35
14
7
8
3
1
Total operating result
Cost of raw materials, trading products
and work contracted out
Personnel costs
Depreciation
Other operating costs
384
390
586
586
524
469
415
359
312
183
214
90
14
42
229
98
19
43
362
118
20
52
347
122
18
48
308
108
14
47
277
95
15
42
249
80
12
37
210
70
11
30
179
61
12
28
88
43
9
18
Total operating costs
360
389
552
535
477
429
378
321
280
158
in euros millions
Consolidated
profit and loss account
(2)
Operating result
Financial income and expenses
24
(4)
1
(5)
34
(7)
51
(5)
47
(2)
40
(1)
37
0
38
0
32
2
25
2
Result on ordinary actvities
before taxes
20
(4)
27
46
45
39
37
38
34
27
8
3
8
15
15
13
13
13
12
10
12
(7)
19
31
30
26
24
25
22
17
0
0
(48)
0
(9)
0
0
0
0
0
0
0
21
0
0
0
0
0
0
0
12
(55)
10
31
30
26
45
25
22
17
Operating result as % of the total
operating income (ROS)
6.2
0.3
5.8
8.6
8.9
8.6
8.9
10.5
10.3
13.7
Return as % of the shareholders’ equity
(ROE)1)
8.0
-3.9
9.5
17.1
17.6
15.9
16.2
19.3
17.0
13.6
10.4
0.4
10.1
17.1
18.2
18.8
20.8
24.8
22.4
18.2
3.1
-1.7
3.2
5.2
5.7
5.6
5.7
6.9
6.9
9.5
Taxes
Result on ordinary actvities
after taxes
Extraordinary income and expenses
Minority interest
Net result
Highlights
Operating result as % of the average
capital invested (ROCE)
Net profit as % of the total
operating income 1)
1) Before extraordinary income and expenses.
72
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
Intangible fixed assets
Material fixed assets
Financial fixed assets
3
119
1
6
126
1
5
197
1
0
174
1
0
133
1
0
110
9
0
91
1
0
85
11
0
74
6
0
62
5
Total fixed assets
122
133
203
175
134
119
92
96
80
67
Inventories
Receivables
Securities and cash
71
80
8
87
95
7
124
109
8
117
134
4
108
110
15
75
84
24
63
75
42
56
61
17
45
54
28
34
33
45
Total current assets
159
189
241
255
233
183
180
134
127
112
Total assets
281
322
444
430
367
302
272
230
207
179
Shareholders’ equity
Minority interest
156
0
143
0
204
0
187
0
174
1
165
2
163
0
133
0
121
0
135
0
Group equity
156
143
204
187
175
167
163
133
121
135
18
27
19
60
22
74
0
83
22
70
62
86
10
42
74
117
19
32
55
86
14
12
40
69
14
9
11
75
14
8
4
71
12
8
3
63
7
0
2
35
281
322
444
430
367
302
272
230
207
179
56
11
14
48
44
22
20
55
46
26
21
49
43
59
21
62
47
40
15
26
55
30
16
33
60
16
12
32
58
15
12
41
58
15
12
39
76
10
9
31
8,069
8,069
8,112
7,952
7,844
7,789
7,770
7,781
7,707
7,632
Net result per share of € 1.00
1.48
(0.83)
2.30
3.87
3.80
3.40
3.07
3.17
2.80
2.28
Dividend per share
1.00
0.30
0.93
1.36
1.25
1.11
1.00
0.91
0.74
0.54
Highest share price during year under review
19.45
21.50
38.45
48.50
35.50
46.74
53.32
41.97
26.55
21.60
Lowest share price during year under review
5.08
6.01
17.00
32.00
22.00
24.14
37.71
24.87
19.60
15.61
17.90
9.60
18.60
35.00
34.90
26.46
45.60
40.84
25.05
20.60
in euros millions
Consolidated balance sheet
Provisions
Long-term liabilities
Credit institutions
Accounts payable
Total liabilities
Other information
Solvency percentage
Investments
Depreciations on tangible fixed assets
Cash flow form operating result
Number of shares outstanding and held by
third parties at year-end (x 1.000)
Share price at year-end
73
Glossary
access network: cable infrastructure between the telephone exchange
data communication: communication of digital information between
and the subscriber.
computers
ADSL (Asymmetric Digital Subscriber Line): a modem technology
dect: the standard for wireless communication with a limited range.
in which use is made of the infrastructure of the standard telephone
This technology makes wireless telephony possible in and around the
network which transforms an ordinary analog or ISDN telephone line
home.
into a high-speed digital line for ultra fast Internet access whereby the
analog and ISDN line remains available.
bandwidth: the transmission capacity of a media, expressed in the
number of bits per second, The maximum transmission capacity is 1
Gigabit per second for copper and 600 Gigabit per second for optical
fibre.
operation systems: systems for sending, regulating and controlling
industrial processes, of which the system’s intelligence consists of
PLCs (Programmable Logical Computers) or CNCs (Computerised
Numerical Controls).
Blue Tooth: a standard developed by Ericsson for wireless connections
between peripherals at home or in the office with a limited range of
ephone, television (set-top box) and security.
DSL technology (Digital Subscriber Line): DSL is a broadband technology that makes use of the existing copper wires over which telephone
traffic currently occurs. By placing a modem at the location of the end
user and connecting it with the nearest local exchange, the existing telephone line is upgraded to a so-called broadband connection.
electronic: the part of the technology relating to control and automation technology.
electrical engineering: the part of technology that deals with the distribution and supply of electricity.
about 10 meters.
energy distribution cable: cable for the transfer of energy.
broadband connection: a collective name for a connection with a high
ERP-system (Enterprise Resource Planning): An ERP-system supports
transport capacity. Technically, such a connection can be made with a
all kind of processes within the organisation such as purchase, sale
coax modem, an ADSL modem or with the aid of a Fiber-to-the-Home
and administration, as where an exchange of information will take
connection. The latter solution currently offers the fastest (Internet)
place between departments.
connection, with a transport capacity of at least 10 megabits per
second symmetric it is many times faster than connections with ADSL
and coax modems.
building solutions: internal telecom, ICT and electrical engineering
solutions
cable accessories: products with a direct relation to cable and the
installation of cable. For example attachment materials (cable caterpillars, turnbuckles, cable lugs, connectors), coding and marking systems
Fibre-To-The-Home: the last piece of the network to the user is fitted
with fibre optic cable.
fibre optic cable: cable with one or more coated conductors of very
pure glass for the transfer of signals on a carrier wave of light; applied
in data and telecommunication.
fibre optic production: optical fibre is produced in a 25-meter high
drawing tower in conditioned ultra-clean conditions.
(markers, shrink stiffeners, connectors) and tools (cutting, stripping,
GSM (Global System for Mobile telecommunication): Global standard
pressing cable lugs).
for mobile telephony.
CAD system: computer system with which drawings and designs can
ICT (Information and Communication Technology): at present, rapidly
be made.
progressing integration is occurring between information technology,
CDMA (Code Division Multiple Access): a transmission technique in
which the frequency spectrum of a data-signal is spread using a code
uncorrelated with that signal and unique to every addressee. As the
applied codes are selected for their low cross-correlation values, it is
possible to make a distinction between the different signals. An initia-
74
domotics: in-house automation for amongst other things light, tel-
that is to say computers, and data and telecommunication.
indoor telecom: telecommunication facilities in the home.
industrial solutions: advanced solutions for operating systems and the
manufacturing of tyre building systems.
tor knows the code of the intended addressee and so is capable of
installation cable: cable for installations for power supply with a ten-
activating the desired communication link.
sion of maximum 1,000 Volts.
coax cable: coax cable consists of a copper core (the inside conductor)
Internet: world-wide computer network for the exchange of informa-
which is covered by an insulating layer and which transports the signal
tion.
of networks for radio and television, wireless telephones, etc.
Isonet data cabling system: total concept for structured cabling, devel-
SOHO (Small Office Home Office): with respect to the developments
oped and to be delivered by Isolectra bv. in Rotterdam.
in computer technology and the resultant growth in the number of
Isoswitch Detect: light switch system with alert detection
liquidity provider: purchase and sale agent in the trading system of
Euronext Amsterdam N.V. The liquidity provider undertakes to maintain a liquid market so that the constant issue of offered and selling
prices with a certain limit can be guaranteed.
medium-tension cable: cable for transmitting power with a tension
between 1,000 and 50,000 Volts.
Internet users, the demand for increasingly high-quality connection
components rises. SOHO is a concept which meets this need by
means of a large number of products and systems.
specialty cable: cable for specific applications or custom-made for the
client. These cables are often highly flexible, resistant to chemicals or
combine different kinds of optical fibres with copper conductors.
SMS (Short Message Service): sending text messages via a mobile network. In the mean time, SMS functionality is also available on the fixed
Manufacturing Enterprise Systems (MES): steering and information
telecommunication networks, amongst others in the Netherlands on
systems which connect the various functions within a production envi-
the KPN network.
ronment. MES replaces paper flows and makes all data on product,
process and quality available immediately.
mobile telecom traffic: mobile communication (often voice and data)
via a fixed network of transmission and receiver installations connected with each other.
modem: a device for modulation/demodulation. It is a card in or a
little box near your computer with which you can make a connection
between your computer and an ordinary telephone line. In this way
you can make a connection from your computer to the Internet or a
system concepts: TKH increasingly specializes in the integration of
individual components into total systems. Such systems offer the
client a lot of added value and operational safety.
telecommunication network: network for the transport of voice and
digital information between computers.
telecommunication infrastructure: the entity of cables, plugs, cabinets,
etc. that is required to connect telephone, Internet, mobile phone
exchanges.
network.
Telecom Solutions: telecom and ICT total solutions
Modular Cable System (MCS): a flexible pipe system into which optical
total solution: by acting as a one-stop-shopping supplier for projects,
fibre units can be blown at a later date depending on need.
the subsidiaries of TKH deliver a complete packet of products, includ-
Next Prime: stocks listed on the Euronext can qualify for the market
segment Next Prime or Next Economy, whereby Prime focuses on the
more traditional sectors.
outdoor telecom: telecommunication facilities outside the home.
passive and active components: in data and telecommunication a
difference is made between components which do and do not need
power.
PDA (Personal Digital Assistant): a digital agenda.
Product handling systems: automated flexible product handling
machines.
PC: personal computer
ing advice, project management, installation, training and maintenance.
transmission capacity: the number of information units which can be
sent through a conductor or fibre.
tyre building systems: systems for the manufacturing of car and truck
tyres.
value-added reselling: distribution activity in which use is made of
added value as a distinguishing feature.
Video conferencing: communication of images.
VDSL (Very High Bitrate Digital Subscriber Line): offers higher capacity
as ADSL. The theoretical maximum at ADSL, from the operator to the
end-user, is 8 Megabit per second (Mbps). VDSL on the other hand
perform: optical fibre is drawn from performs. These are glass con-
achieves in practice even 30 to 40 Mbps. This is approximately thou-
figurations with a length of 1 metre and a diameter of 60 to 80 mil-
sand times more than a connection through ordinary telephone line.
limetres. Fibres of many hundreds of kilometres are drawn from one
perform.
Run flat tire: a tyre which if it is punctured, can still drive about 100
WiFi (Wireless Fidelity): a relatively new standard for wireless data
communication with a relatively large bandwidth and range. Is applied
in the office and at home.
km (a spare tyre is no longer needed).
75
N.V. Twentsche Kabel Holding
Spinnerstraat 15
P.O. Box 5
7480 AA Haaksbergen
Tel +31 53 573 29 00
Fax +31 53 573 21 80
e-mail: [email protected]
internet: www.tkh.nl
Design
Studio Roozen, Amsterdam
Printing
Kunstdrukkerij Mercurius, Wormerveer
This annual report is a translation.
76
In case of doubt the original Dutch text prevails.
om Solutions Telecom Solutions Tel
s Building Solutions Building Solut
strial Solutions Industrial Solution