20
05
AN
NU
AL
RE
PO
RT
Annual Report
2005
Contents
3
Profile
4
Key figures
5
Strategy
7
Management and supervision
8
Report of the Management Board
8
General
8
Highlights 2005
10
Financial results
10
Information per group activity
13
Market spread
14
Organisation and employees
15
Environmental care
15
External advisers
16
Risk management
17
Events after the balance sheet date
17
Profit appropriation
18
Outlook
19 Report of the Supervisory Board to the Shareholders
21 The Aalberts Industries N.V. Share
21
Listing
21
Price movement
21
Dividend policy
21
Shareholders’ interests
22
Stock exchange information
22
Options
22
Financial agenda
22
Further information
23 Corporate Governance
23
General
24
Decision-making
24
Information
25
Financial Statements 2005
28 Consolidated balance sheet
29 Consolidated income statement
30 Consolidated statement of changes in equity
31 Consolidated cash flow statement
32 Notes to the consolidated financial statements
54 Transition from Dutch GAAP to IFRS
58 Company financial statements
59 Notes to the company financial statements
64 Auditors’ report
66 List of group companies
DSI - Regulator
for dispense of
beverage with
CO2 and N2
2
Aalberts Industries N.V. is an international industrial group with two core activities,
Industrial Services and Flow Control, and occupies top positions in the market in each of
these activities. Aalberts Industries operates on the basis of a decentralised structure
with significant operational management responsibilities.
Profile
International
industrial group
Aalberts Industries is continuously strengthening its leading position in the market by
means of organic growth and acquisitions, the aim being to achieve continuous growth
in revenue and profit. Its top priorities in this respect are higher profit, higher net
earnings per share and healthy balance sheet ratios.
Aalberts Industries N.V.
Industrial Services
Flow Control
Industrial Services
Industrial Services consist of the development, production, processing and sale of
complex parts for high-grade industrial end products based on customer specifications.
The parts and services are supplied to a large number of market segments, such as
precision engineering, medical, automotive, electro-metallic, oil and gas, aircraft,
defence, aluminium, telecom and semiconductor industries.
These activities have their geographic centre of gravity in Europe.
Flow Control
Flow Control activities include the development, production and sale of products and
systems for connecting, distributing and regulating liquids and gases. The most
important areas of application include drinking water supply, heating, cooling and gas.
These products and systems are supplied worldwide to the wholesale trade, OEMs, gas
producers, utility corporations, laboratories and the beer and soft drink industries.
For a detailed description of the various group companies and product groups, please
refer to Aalberts Industries’ website: www.aalberts.com.
Mogema - Front
suspension for
Fennek
reconnaissance
vehicle
3
Key figures
2005
2004
2003
IFRS
2002
2001
Dutch GAAP
Results (in EUR X million)
Total operating income
1,064.6
903.7
775.1
715.2
614.1
Revenue
1,055.0
897.7
784.6
706.1
603.7
Operating profit (EBITA)*
120.4
106.5
88.1
84.2
68.9
Net profit*
83.1
70.8
53.7
47.0
37.8
Depreciation
46.7
40.4
41.7
39.4
32.9
Cash flow* (net profit plus depreciation)
129.8
111.3
95.3
86.4
70.6
Cash flow from operations
176.7
124.8
144.1
120.6
98.1
Intangible assets
288.6
228.6
201.7
199.4
95.6
Property, plant and equipment
321.6
269.9
226.5
240.1
205.2
46.4
Balance sheet (in EUR X million)
Capital expenditure
64.5
40.3
32.5
30.8
Total equity
302.2
226.8
213.3
181.5
90.9
Capital base
332.8
267.7
228.5
211.8
136.4
Interest-bearing debt
439.4
408.6
338.2
394.8
308.2
Total assets
978.0
823.7
699.2
735.7
536.4
The Netherlands
1,437
1,478
1,407
1,552
1,546
Other countries
6,580
5,653
4,918
4,833
4,037
Total
8,017
7,131
6,325
6,385
5,583
Number of employees at year-end
Ratios
Operating profit* as a % of revenue
11.4
11.9
11.2
11.9
11.4
Interest cover*
7.0
6.5
5.3
4.4
4.2
Net profit* as a % of revenue
7.9
7.9
6.8
6.7
6.3
Capital base as a % of total assets
34.0
32.5
32.7
28.8
25.4
Interest-bearing debt / Total equity
1.5
1.8
1.6
2.2
3.4
Ordinary shares (average)
24.4
24.2
23.7
21.9
19.5
Ordinary shares (at year-end)
24.4
24.2
23.7
23.2
19.5
Cumulative preference shares
2.10
2.10
1.95
1.95
1.80
Cash flow*
5.32
4.60
4.02
3.95
3.63
Net profit*
3.41
2.93
2.26
2.15
1.94
Dividend
0.85
0.70
0.56
0.50
0.48
44.85
35.70
20.53
14.80
22.05
Shares issued (x million)
Figures per ordinary share
Share price at year-end
* before amortisation
4
growth
Strategy
Continuity of
The strategy of Aalberts Industries focuses on continuity of growth at a rate above the
market average. Aalberts Industries has been successful in implementing this strategy
since its introduction onto the Euronext Securities Market Amsterdam (in March 1987),
in the interest of all the company’s stakeholders. The objectives in this respect have
remained unchanged:
Average growth
well above the
market rate
Growth in earnings per share
The strategy of Aalberts Industries
The primary objective is growth in
focuses on sustained and profitable
earnings per share. Since the share has
growth of the business. To this end,
been listed on the stock exchange, this
a number of financial and operational
growth has been well above average
objectives have been set. While the
market rates. In 2005, earnings per share
strategy to achieve these rests in part
grew by 16%. Over the past ten years,
on a number of central assumptions,
growth in earnings per share averaged
it is driven above all by the two core
18%.
activities, Industrial Services and Flow
Control.
Continuous growth in revenue
In the longer term, growth in revenue is necessary to secure the company’s leading
market positions and thus achieve continuous growth in profits. Growth in revenue is
Organic growth
achieved through organic growth as well as acquisitions. Both are of equal importance
and acquisitions
to continuity of growth.
Balanced distribution of revenue
The balanced distribution of revenue across the various activities of the group, with a
Limited
dependence
very large number of products and production processes, and revenue that is widely
Accurate Brazing -
spread among a very large number of customers and countries, contribute significantly
Honeycomb
to continuity. This reduces dependence on customers and on developments in any one
tacking for
market sector.
turbines
Leading positions in the market
To be able to achieve Aalberts Industries’ growth objectives on a
sustainable basis, it is essential that it occupies leading positions
in the many markets in which it operates. Aalberts Industries
seeks to be among the top providers in all the markets it serves.
Its acquisition policy, too, supports this aim. In principle, Aalberts
Industries will only enter new niche markets where such a
Market leader
position can be attained. The Aalberts Industries Group is market
leader in many of its markets.
Sound balance sheet ratios
Optimum return
on capital
invested
Given the strongly expansionist strategy and the high priority
that is given to growth in earnings per share, optimum use is made of Aalberts
Accurate Brazing -
Industries’ borrowing capacity. The aim in this regard is a capital base of not less than
Miniature tube
25% of total assets, an interest cover of at least 4, and a gearing (interest-bearing
assembly for
debt/total equity) of about 2. This enables the capital invested by shareholders to be
portable
used to best advantage with no more than a healthy exposure to risk.
environmental test
equipment
5
Strategy
The Aalberts Industries strategy has been designed per group activity and this enables
Top-down /
each group company to identify with it. Based on this strategy, each group company
Bottom-up
formulates its own operational objectives. These objectives contribute in turn to further
development of strategy.
Overeem Roll forming
Industrial Services
process
On the one hand, Industrial Services focuses its strategy on
High-grade
supplying the market with specialised state-of-the-art
technologies
technologies for the production of complex customer-specific
products and systems. Technology takes precedence over the
offering of plain production capacity.
On the other hand, it focuses its strategy on the creation of a
full European and American network of service centres for both
European and
standard treatments and highly specialised applications, and on
American network
building clusters of businesses around a number of uniquely
of service centres
specialised production technologies.
Flow Control
The strategy for Flow Control addresses three separate factors.
Meibes -
The first of these is volume growth through organic developments and acquisitions
Solar station valve
in order to achieve an even better utilisation of both total production capacity and
technique
Volume growth
the international distribution network so as to achieve further cost savings and
improvements in productivity.
The second part of the equation is strengthening the position in
Niche markets
niche markets. This involves advanced products and systems that
complement the existing basic product ranges. New technologies
are initially applied in these niche markets in particular. Ongoing
product development and innovating market formulas play an
essential part in this.
The third factor in the strategy of Flow Control is the
High-quality
development and distribution of sophisticated, complex products
dispense products
for dispense systems. This increasingly enables Aalberts Industries
to serve the top end of the various markets and reduce its
dependence on standard products. The result is improved
revenue quality and profit potential.
6
With due consideration for the interests of all stakeholders and the position of the
Méthaterm -
business in its respective markets, the Management Board endeavours to provide
Vacuum heat
information on its strategy, objectives and policies as clearly and openly as possible.
treatment process
Management and supervision
Supervisory Board1
Pieter Niessen, Chairman
Cor Brakel
Andrew Land
Dries van Luyk
Management Board
Jan Aalberts, President & CEO
Bert Bolkenstein, Managing Director
John Eijgendaal, Financial Director
VTI - Valves for
natural gas for
automotive
purposes
Group Company Management2
Industrial Services
Industrial Products
Erik Zantinge
Material Technology
Peter Kopp / Helmut Nolte
Metalis
Pierre Petitjean
Flow Control
Broen
Mogens Laursen
Dispense Systems Europe
Thomas Wollschlaeger
Dispense Systems United States
Craig Swanson
Flow Control Benelux
Wim Pelsma
Flow Control Germany
Norbert Reinhardt
Flow Control South Europe
Mark Holladay
Flow Control United Kingdom/United States
Malcolm Beardall
Raufoss Water & Gas
Lars Ølstad
1
See page 63 for more details.
2
See page 66 and 67 for more details on the group structure.
Méthaterm Batch of parts
ready for
casehardening
treatment
7
Report of the Management Board
To the General Meeting of Shareholders of Aalberts Industries N.V.
We have the honour to present the 2005 financial statements of Aalberts Industries N.V. for adoption by
the General Meeting of Shareholders. PricewaterhouseCoopers Accountants N.V. audited these financial
statements and issued an unqualified audit report on them. We invite you to adopt the 2005 financial
statements in accordance with the documents as submitted, which adoption will serve to endorse the
conduct of affairs of the Executive Board and the supervision exercised by the members of the Supervisory
Board in conformity with article 29, under 6 of the Articles of Association.
Upon adoption of the financial statements and the profit appropriation included in them, a dividend for
the 2005 reporting year will be distributed amounting to
nominal value of
EUR
EUR
0.85 per ordinary share, each having a
1.00. At the option of shareholders, the dividend can be paid either fully in cash,
or in shares chargeable to the tax-exempt share premium account or to the unappropriated profit.
General
Following on from the strong performance of 2004, Aalberts Industries delivered on its
growth objectives in 2005 as well. Earnings per share grew more than 16% to
Net profit advanced to
EUR
ed the 2004 figure by more than
EUR
Highlights 2005
Revenue in excess of
Net profit up 17% to
EUR
1 billion
EUR
83.1
million (7.9% of revenue)
Earnings per share of
EUR
3.41,
an increase of 16%
Cash flow (net profit plus
depreciation) rose by 17% to
EUR
129.8 million
Cash flow from operations went
up 42% to
176.7 million
Dividend increased 21% to
EUR
EUR
Growth
EUR
1 billion mark, after
1 billion five years earlier in 2000.
Aalberts Industries’ second half growth
NLG
3.41.
157 million (18%). For the first time in Aalberts
Industries’ history, this boosted its revenue to beyond the
having reached
EUR
83.1 million, a rise of 17%, while the rise in revenue exceed-
0.85 per ordinary share
Capital base rose to 34% of the
balance sheet total
was significantly higher than in the first
six months of 2005. Its performance in
terms of both revenue and profit
improved by more than 10% in the latter
half of 2005. Organic growth in revenue
for the whole of 2005 accordingly reached
some 3%, with organic growth in virtually
all countries well in excess of this.
Measured over the last two years, this
resulted in average organic growth
reaching more than 5% (2004: 7%).
Meibes With these organic developments and Aalberts Industries’
Decentralised
consistent acquisition strategy it continues to set its own growth
system for heating
path even in conditions of modest economic growth in most
and hot drinking
countries in which the group operates. It is precisely in moderate
water
market conditions that the decentralised structure of the group has proved time and
time again that it provides local operational management with the leeway necessary to
take advantage of market conditions flexibly, rapidly and effectively, thus creating and
utilising their own growth possibilities. In virtually all countries this resulted in the
group reinforcing its positions in the various markets.
The high degree of autonomy of the entities enables them within the various activities
of the group to achieve the necessary collaboration with other group companies on an
ongoing basis. The emphasis in this regard is still the utilisation of Aalberts Industries’
joint international distribution network and the exchange of complementary products
and services. This collaboration focuses increasingly on product development and
production technology as well. The continuous acquisition activities also contribute to
more intensive collaboration in the field of production. In this connection, economies
of scale in production, such as in automation and enhanced efficiency in capacity
utilisation, play a significant role. Collaboration in the field of production also impacts
on the group’s capital expenditure policies. Short payback periods and the prevention
of duplications are important themes in this regard.
8
Collaboration
Report of the Management Board
The traditional intensive collaboration in the field of purchasing plays a role of extra
importance in these times of ever-rising raw material and energy prices. Based on its
strong market positions and the quality of its operational management, the group as a
whole continues to be able to pass on the strongly rising raw material and energy prices
to the market. As was the case in 2004, this led to several necessary price hikes during
the year under review.
New and
In 2005, too, Aalberts Industries’ innovative strength led to a flow of new and improved
improved
products and processes. Not only does the development of new technologies as such
products and
processes
testify to the group’s innovative capacity, so does the speed at which these technologies
are converted into marketable products and processes. Customer-specific solutions as
well as the development of generic new products still constitute an important part of
the group’s product development activities.
Acquisitions
A total of eight acquisitions with a combined annual revenue of some
of which
EUR
EUR
118 million,
68 million has been consolidated in 2005, were completed in that year.
In the Flow Control sector, two smaller companies were taken over and integrated into
the existing organisations in Norway (Kirsebom) and Germany (Kall) respectively. In
addition, two substantial companies were acquired, one in the United Kingdom (Pegler)
and one in Spain (Hidroaplicaciones). These latter acquisitions provided Aalberts
Industries with new complementary market positions and product groups in the
Pegler -
respective countries.
Thermostatic
Four strategic acquisitions were made in the field of Industrial Services. The takeover of
in-line mixing
Société de Galvanoplastie Industrielle (SGI) in France and Industrias Tey (Basque, Spain)
SGI - Civil aircraft
means that Aalberts Industries has substantially strengthened its position in the
landing gear
valve
European aerospace market. SGI is market
leader in France in the field of surface
treatments for the aircraft manufacturing
industry, while Industrias Tey is one of
Spain’s leading heat treatment companies
for both the Spanish and French
aerospace markets. Dassault and Airbus
are two of their large customers.
With the takeover of Accurate Brazing
(United States) Aalberts Industries is
taking the next modest, yet high-quality
step in the context of its Industrial Services
strategy there. The takeover is the start of
a network of service centres in the United States, which currently consists of three
establishments.
IFRS
As of 1 January 2005, Aalberts Industries switched to the International Financial
Reporting Standards (IFRS). The preparations for the implementation of IFRS started in
mid-2003 and the transition was completed within the planned time frame. For more
details on the application of IFRS we refer to the financial statements. The 2004 figures
have been adapted to IFRS for comparative purposes.
9
Report of the Management Board
Financial results (before amortisation)
Net profit for 2005 rose by 17% to
ciation) amounted to
EUR
EUR
83.1 million. The cash flow (net profit plus depre-
129.8 million, which is 17% more than in 2004. The cash flow
from operations increased 42% to
EUR
176.7 million. The operating profit, which closed
at
EUR
120.4 million, was up by 13% on 2004. The earnings per ordinary share amounted
to
EUR
3.41, up by 16%. Revenue reached
EUR
1,055 million, an increase of 18%.
The return on capital employed amounted to some 15%, as it did in 2004. Total equity
at the end of 2005 amounted to
EUR
302.2 million while the capital base reached 34% of
total assets (EUR 332.8 million compared to 267.7 million as at the end of 2004).
Interest-bearing debt increased to
EUR
439.4 million (EUR 408.6 million at the end of
2004).
Changes in the principal financial ratios were as follows:
Debt service ratio (interest-bearing debt/EBITDA) from 2.8 to 2.6
Interest cover (EBITA/net finance cost) from 6.5 to 7.0
Gearing (interest-bearing debt/total equity) from 1.8 to 1.5
Capital expenditure in 2005 amounted to
EUR
64.5 million, which was some 60% higher
Capital
than in 2004 (EUR 40.3 million). This included capital expenditure on replacement and
expenditure
expansion, as well as ongoing capital expenditure on environmental and information
technology in respect of financial as well as production systems. Substantial capital
expenditure in 2005 included the initial production on the new press fittings for the US
market and the new production facility for high-tech surface treatments in Southern
Germany.
Revenue
Operating profit*
Cash flow*
(in
(in
(in
EUR X
million)
EUR X
million)
(in
EUR X
(in
million)
1.100
130
130
1.000
120
120
110
110
100
100
90
90
700
80
80
600
70
70
500
60
60
50
50
40
40
30
30
20
20
10
10
900
800
400
300
200
100
2001
2002
2003
2004
2001
2005
2002
million)
EUR X
Capital expenditure
Net profit*
2003
2004
2005
million)
EUR X
2001
2002
2003
2004
2005
*before amortisation
Information per group activity
Key figures Industrial Services
(in
EUR
2004 Difference
The growth in revenue of Industrial
Limited organic
410.2
394.3
4%
Services was driven largely by the
growth
45.9
45.0
2%
acquisitions in France, Spain and the
x million)
Revenue
Operating profit* (EBITA)
United States. Organic growth was
Operating profit* (EBITA) as a
percentage of revenue
limited owing to the less auspicious
11.2
11.4
Capital expenditure
40.1
23.5
71%
Depreciation
25.7
24.6
5%
market conditions prevailed in the
4,014
3,715
8%
last months of 2005, however.
Average number of employees (x1)
* before amortisation
10
Industrial Services
2005
market conditions in 2005. Improved
Report of the Management Board
France
The Industrial Services activities in France were able to grow substantially, both
organically and through acquisitions. Orders for large product packages were again
secured from leading customers in the automotive, aerospace and electrotechnical
industries. Preparations for the expected revival in the production of parts for nuclear
installations started at the end of 2005. In the biomedical
industry, progress was made in strengthening our market
position in the field of prostheses.
The two acquisitions in the area of material technology increased
the service centre network in France by six additional locations.
The acquisition of SGI has made Aalberts Industries the market
leader in France in the field of surface treatments for the aerospace industry specialised in the treatment of very large aircraft
components (including wings for Dassault and Airbus parts).
Apart from the aerospace industry, SGI will strengthen Aalberts
Industries’ position in the French automotive industry as well.
This is also true of the C.G Industrie group taken over in 2005,
which is established in the industrial area around Lyon.
SGI - Civil aircraft
engine housing
Netherlands
C.G Industrie will be expanded in the coming years into an important service centre for
both heat and surface treatments.
While the Industrial Services activities in the Netherlands had to contend with a quiet
market in the first nine months of the year, they experienced an upward trend, notably
in the last three months of 2005. Industrial Products secured orders for large product
packages in the defence, oil and gas, and semi-conductor industries. Developments in
2005 confirmed the need for the strategy since put in place to
cluster Industrial Services around sophisticated, specialised
technologies, and use these clusters as a platform from which to
build strong positions in the market based on sophisticated
technologies.
Poland
Business in Poland is promising and the Industrial Services
activities in this country are set to grow significantly in the years
ahead. The dearth of high-tech subcontractors in Poland who can
serve the growing assembly needs of important customers offers
Aalberts Industries good opportunities. A start will accordingly
be made on new production facilities in Poland in 2006.
Spain
The Spanish heat treatment activities were expanded through the takeover of Industrias
Mifa - Guide rail
Tey. The company has high-tech knowledge, notably in the area of vacuum heat
for cardio-vascular
treatments and is one of the main suppliers to the Spanish, and to a lesser extent the
X-ray camera
French, aerospace industries.
(General Electric
Medical Systems)
Germany
Steady progress was made with the realisation in Southern Germany of the largest
production facility in the field of surface treatment, with the first production series
starting in early January 2006.
H&ST - Afterburner of a F-16
Capital
expenditure
Capital expenditure on Industrial Services in 2005 amounted to some
EUR
40 million,
fighter
which is some 70% more than in 2004. For the coming years, too,
an ambitious capital expenditure programme is to be implemented
to provide continuous support to growth based on specialised
unique production technologies.
11
Report of the Management Board
Flow Control
Key figures Flow Control
The revenue of Flow Control was up by
(in
EUR
more than 28%. In all regions, with the
Revenue
exception of Germany, increase in
Operating profit* (EBITA)
revenue amounted to at least 9%.
Operating profit* (EBITA) as a
Organic growth in revenue was well
percentage of revenue
over 5%, and was boosted by the
Capital expenditure
acquisitions’ contribution to revenue.
Depreciation
Average number of employees (x1)
The drop in revenue in Germany,
2005
2004 Difference
644.8
503.4
28%
74.4
61.5
21%
11.5
12.2
23.5
16.8
40%
20.0
15.4
30%
3,688
3,055
21%
x million)
*before amortisation
attributable in part to the disposal of a
number of product groups, was larger than planned. This was due to the weak market
conditions during a large part of 2005. An upward trend set in by the end of that year.
The consistently implemented combined multi-brand strategy (combination of strong
Multi-brand
local/regional trade name with relevant brand names) contributed also in 2005 to
strategy
further strengthening the market position in various countries. Aalberts Industries’
product portfolio, which is still growing, makes it one of the few international providers
of a broad, complementary package of Flow Control products for drinking water, gas
and heating applications.
Growth in high-tech steel and stainless steel products in 2005 was spectacular, and this
trend may well continue in the years ahead. This growth is supported by a substantial
capital expenditure programme that has provided Aalberts Industries with fully
automated production facilities for these products. Not only does this yield considerable
efficiency benefits, it also ensures constant high product quality.
In the United Kingdom and the United States, significant efforts were spent on meeting
United States
the 2005 fourth quarter delivery deadline to supply the new products to the American
market. In addition to significant marketing efforts in the United States, this also meant
extra pressure on both product development and product organisation in the United
States, the United Kingdom and Hungary. The first products were supplied to the US
market by the end of 2005. These products have already achieved wide market
acceptance, and prospects for 2006 are good.
In the United Kingdom, the takeover of Pegler strengthened Aalberts Industries’ position
United
and added a full, complementary product package in the field of heating (thermostatic
Kingdom
radiator valves) and drinking water (sanitary fittings). The close collaboration in the area
of sales between Pegler and Yorkshire Fittings adds to the market penetration of both
organisations. Collaboration in the production sphere should produce efficiency
improvements and purchasing benefits that will become apparent in 2006.
The German Flow Control organisation was under pressure from the market and had to
Germany
implement significant cost savings programmes, which went hand in hand with a
Pegler - Sanitary
tap
substantial reduction in the number of employees. The extra costs of these organisational
adjustments depressed the results of the German Flow Control activities. A clear
improvement in operations became evident in the last quarter.
Implementation of the adjustments has put the German activities
in a good position to improve their results, even in moderate
market conditions. The enhanced integration of the sales
organisation in particular will play an important part in this
respect.
With the takeover of Hidroaplicaciones (Spain), Aalberts
Industries has distinctly broadened its market in Spain. The
takeover means that the group has become a significant player
in the Spanish utility market (water supply and gas companies).
Organic developments in this market were positive as well, thanks
in part to the introduction of a number of new product lines.
12
Spain
Report of the Management Board
Eastern Europe
In terms of size, revenue in Eastern Europe still constitutes a modest slice of total Flow
Control revenue, yet growth in both revenue and profitability was above average.
The main markets in Eastern Europe (Poland and Russia) again achieved significant
increases in revenue. In a growing number of other Eastern European markets, the
group was able to build market positions that can be enlarged in the years ahead.
China
Aalberts Industries started her own purchasing organisation in China in the first half of
2005. It provides group companies with support in their purchasing activities in China.
This includes direct support, including logistics issues, as well as selecting suppliers on
the basis of quality, reliability and continuity. The Chinese team carried out a large
number of supplier audits in 2005 and provided the companies with assistance in price
negotiations.
Broen was able to expand the sale of its products in China and strengthened its
position, albeit to a limited extent, in the Chinese market. In the coming years, the
activities of Flow Control in China will be focusing more strongly on the sale of the
group’s total product range. Other than the two Broen sales outlets, preparations for
the first steps in this regard were undertaken in 2005 and will be completed in 2006.
Dispense systems
The dispense activities were consolidated through the takeover of Kall Kühl- und
Schanksysteme (Germany). It provides the group with its own cooling technology that is
applied in the dispense systems for low-alcohol beverages (beers) and soft drinks.
Growth in the dispense systems for the automotive industry (natural gas) moved ahead
well in 2005. VTI, our German subsidiary that developed these patented systems, will be
expanding its production capacity considerably in the coming years to be able to meet
the demand. The first long-term contacts for the supply of these
systems were concluded in the second half of 2005.
These positive developments signal the completion of VTI’s
transformation into a producer of high-tech systems and have
enabled the organisation significantly to improve the quality of
its market position.
With an amount of some
Capital
expenditure
EUR
24 million in 2005, Flow Control
exceeded its 2004 capital expenditure by nearly 40%.
Among the large capital expenditure projects were the
development and production of the new fittings for the US
market and the long-term capital expenditure programme for
steel and stainless steel fittings.
Kall - Beer cooler
and tap for
Market spread
Geographic
spread of revenue
instant use
A well-balanced geographic distribution of revenue is one of Aalberts Industries’
operational objectives. While in the main this distribution is aimed at the principal
European markets, the aim includes such growth in revenue on the American continent
so as to diminish dependence on the
Eurozone. The acquisitions in the
Geographical spread
United Kingdom and France boosted
of revenue
the relative share of these countries in
(in
Aalberts Industries’ combined revenue.
2005
%
2004
%
Germany
243.1
23.1
257.8
28.7
United Kingdom
160.4
15.2
128.9
14.4
Benelux
147.8
14.0
150.4
16.7
United States
127.2
12.1
56.7
6.3
France
116.4
11.0
100.4
11.2
Eastern Europe
65.5
6.2
45.8
5.1
Scandinavia
56.1
5.3
48.6
5.4
Spain and Portugal
54.3
5.1
44.8
5.0
Other
84.2
8.0
64.3
7.2
1,055.0
100
897.7
100
EUR
Total
x million)
13
Report of the Management Board
Organisation and employees
The group’s continuous dynamic growth carried by both organic developments and
acquisitions demands high standards on the part of operational management and
employees. Prompt anticipation of the ever-changing market circumstances, combined
with growth ambitions require a continuous process of adjustment at all levels of the
group’s organisational structure.
The quality and flexibility of both management and employees are decisive in this
respect. In the opinion of the Management Board, the decentralised organisational
Decentralised
structure, which leaves all operational responsibilities in the hands of local manage-
organisation
ment, is still the best way for the growth of the group as a whole to be managed at
holding company level.
In the eyes of the Management Board, quality, speed, flexibility and own initiative are
key elements in this regard. For the Management Board, stimulating mutual
collaboration in the market, in product development, production and purchasing is also
one of its most important challenges.
Management and control of the decentralised structure has the continuous attention of
Management and
the Management Board, and with this in mind the holding company’s financial staff
control
was strengthened in 2005.
In 2005, too, various locations saw a change in management, while the tasks of a
Management
number of coordinating directors increased, partly as a result of acquisitions. The
changes
periodic analysis of the various management teams took place in 2005. This analysis
provides the Management Board with additional insights into the performance and
quality of senior management, and into the potential available within the management
teams. As is the custom, the outcome of the analysis is taken into account for the
benefit of the organisation’s further development.
The number of employees rose from more than 7,100 to 8,000 in 2005. This increase is
Number of
due to the eight acquisitions completed in 2005 and a considerable increase in the
employees
number of employees in Eastern Europe. For several activities, the number of jobs was
reduced thanks to efficiency improvements and adjustments to market conditions. The
largest reduction took place in Germany where various companies were streamlined. It
has put them in a better position to operate successfully, even under difficult market
conditions, and make the most of their enhanced efficiency once the German economy
shows an upward trend.
Seppelfricke Ball valve for gas
The geographic spread of employees in 2005 was as follows:
Geographic spread of employees
2005
%
2004
%
29
Germany
1,974
25
2,082
Benelux
1,444
18
1,485
21
United Kingdom
1,361
17
897
13
France
1,141
14
856
12
United States
825
10
708
10
Eastern Europe
559
7
445
6
Scandinavia
396
5
400
6
Spain and Portugal
291
4
234
3
26
–
24
–
8,017
100
7,131
100
Other
Total
TTI - Electric door
lock for
automotive
purposes
The permanent training and education of employees is a focal point in the group’s
personnel policy. The expansion and updating of professional know-how is of primary
concern. This is done through external and internal training courses and on-the-job
training. In addition to professional training courses, employees are also offered
training courses to develop their overall (management) skills.
14
Training
know-how
Report of the Management Board
Interchange of
Growth in the number of companies and activities increase the possibilities of businesses
and employees to benefit from the intensive interchange of knowledge. This interchange
not only involves technical expertise but, at the international level, also includes general
know-how and experience. Insight into the specific features of distinct geographic
markets and regions constitutes an important element of the international interchange
of expertise.
Environmental care
Minimal environmental impact
Aalberts Industries is fully aware of the fact that a number of its production methods
can be a burden on the environment. It considers it its social responsibility to restrict the
impact on the environment to a minimum. The basic principles in
Environmental care forms an integral
part of Aalberts Industries’ operations.
this context are the legal regulations at the international,
national and local levels which amply provide for the importance
Significant amounts are invested each
of environmental care and conservation. Where available
year in the ongoing improvement and
technologies and techniques make this possible within the
expansion of environmental care.
Much attention is devoted to energy
economic parameters of the business, Aalberts Industries will not
restrict its care of the environment to the legal standards alone.
savings. In this respect, cost savings
Clean production methods, safe and durable use of all
and environmental care go hand in
production resources, energy savings and recycling of basic
hand.
materials not only have a positive environmental impact, they
also have direct economic benefits for the business.
Aalberts Industries’ policy also focuses on fostering awareness among all its employees
Education
of the permanent attention environmental care requires, and the fact that to be
environmentally conscious is relevant at all levels of production and constitutes a
permanent element of ordinary business operations. For virtually all production
facilities, environmental plans have been drawn up and are in place.
Safety
As in past years, much attention was devoted in 2005 to the safety of personnel in the
workplace. The attention to safety and a stimulating working environment forms part
of the integral quality system within the group.
External advisers
Segregation of
advice and
auditing
It has been the practice at Aalberts Industries for many years to restrict the number of
external advisers as much as possible. Apart from the advisers who assist the various
companies forming part of the group with their specific expertise, external services are
used on a modest scale. In this respect, the principal areas of advisory services are
segregated.
The external auditor, PricewaterhouseCoopers Accountants N.V., took care of the audit
covering the 2005 financial year, and is involved in converting the accounting and
reporting systems to comply with the new IFRS. For the rest, the external auditor does
not provide the company with advisory services of any significance. For tax matters, the
HSF - Mirror
company makes use of the services of Deloitte, while corporate legal advice is provided
welding of gas
by one of the leading law firms in the Netherlands (Stibbe). In addition, Aalberts
pipe elements
Industries works with a network of
independent law firms in the countries in
which it operates.
15
Report of the Management Board
Risk management
The Management Board of Aalberts Industries sees the management of all risks
associated with the business as one of its basic management tasks. The perception of
the various risks to which the business is exposed, and the manner in which these risks
are addressed, form an integral part of the operational management tasks and are
recognisable as such in different parts of this annual report. Risk spreading and risk
management continue to be central themes in the company’s strategy and policy.
The risk management systems in place at Aalberts Industries are adequate.
Based on the assessment of risks to which Aalberts Industries is exposed as well as on
the existing management framework, financial reporting contains no inaccuracies of
material importance. The risk management and auditing systems functioned properly in
the year under review and there is no reason to believe that this will not be the case in
the coming year.
The systems that have been implemented at all levels of the organisation are geared to
the prevention or elimination of identified risks. Where this turns out to be impossible,
the systems focus on managing the risks in such a way that they are acceptable to the
company. The financial consequences of a large number of these risks are covered by
appropriate insurance policies.
In the opinion of the Management Board, there are no specific risks of such magnitude
as to qualify as exceptional. In the reporting year, extra attention was paid, however, to
developments in the various currencies and raw material prices, and the inherent risks
associated with these developments are the subject of continuous attention.
The ever-rising prices of raw materials and energy in particular required extra attention
Raw materials
and are expected to do so in the coming period as well.
and energy prices
Currency fluctuations only have a limited impact on the company’s results. Insofar as
relevant, currency flows are coordinated at the holding company level in order to
Currency
neutralise as much as possible the consequences of currency fluctuations. Aalberts
Industries tries to control currency risks by creating what are known as natural hedge
positions, the idea being to try to denominate revenue and costs in the same currency.
In 2005, the authorisation structures and control measures were again tested and
Authorisation
adjusted where necessary. The group’s dynamism and the constant stream of
structures and
acquisitions mean that a good management and testing framework for the formal
control measures
allocation of powers within the group and its individual companies is indispensable to
be able to monitor and evaluate the rapid changes on an ongoing basis.
The external auditor reviews the financial reporting twice a year. The findings of this
Financial
review are discussed at all levels of management, with adaptations and improvements
reporting
in the reporting being agreed where necessary.
In 2005, improvements related in particular to the implementation of IFRS as of
1 January 2005.
Pegler Thermostatic
radiator valve
16
Intention takeover
Comap
Early January 2006 Aalberts Industries announced the intention of acquiring a
100% stake in the French company Comap S.A. from the also French company Legris
Industries S.A.
Comap, with a revenue in 2005 of approximately
EUR
180 million and about 1,100
employees, is one of the leading players in the European market for Flow Control
products. With its head office in Lyon, it has eight production units spread over France,
Italy, United Kingdom and Brazil. It also has an extensive sales network anchored in
Comap - Floor
heating system
Southern Europe. Comap’s activities are divided into two main categories: water
products (about 80% of revenue) which include fittings, radiator valves, water
control/quality systems and ready-to-install solutions for the
installer and gas products (about 20% of revenue) which include
pressure control systems and tank connection sets for LPG.
The takeover of Comap fits into the long-term strategy of
Aalberts Industries, which is aimed at strengthening the group’s
position in the Flow Control sector. The takeover creates a (for
Europe, unique) network of cooperating companies within the
Aalberts Industries Group, which will jointly assume a leading
Report of the Management Board
Events after the balance sheet date
market position in almost all European countries.
In order to finance this acquisition Aalberts Industries has already
arranged the necessary loans to this end.
The takeover will be completed in the first quarter of 2006,
subject to approval from the regulatory authorities.
Profit appropriation
Earnings per share
EUR
3.41
The stock dividend increased the number of ordinary shares as at the end of 2005 to
24.4 million. Based on the number of shares in circulation, earnings per ordinary share
(before amortisation) amounted to
EUR
3.41. In accordance with Aalberts Industries’
consistent policy of appropriating some 25% of the profit achieved to dividend
Dividend proposal
EUR
0.85
distribution, the General Meeting of Shareholders will be invited to adopt a dividend
for 2005 of
EUR
0.85 per ordinary share of
EUR
1.00 nominal value, payable either in cash
or, at the option of shareholders, in ordinary shares chargeable to the tax-exempt share
premium account, or to the unappropriated profit. This means a dividend increase of
21%. The stock dividend will be determined after trading on 17 May 2006 based on the
volume weighted average price of all Aalberts Industries N.V. shares traded on 11, 12,
15, 16 and 17 May 2006, in such a way that the value of the dividend in shares is
substantially the same as the value of the cash dividend.
Earnings per ordinary share*
(in
EUR
Dividend
)
(in
3.50
EUR)
0.90
0.80
3.00
0.70
2.50
0.60
2.00
0.50
0.40
1.50
0.30
1.00
0.20
0.50
0.10
2001
2002
2003
2004
2005
2001
2002
2003
2004
2005
*before amortisation
17
Report of the Management Board
Outlook
The good results for 2005 confirm that, even under moderate general economic
conditions, the group is able year after year and under its own steam to achieve healthy
Organic growth
growth both organically and by means of acquisitions. The capital expenditure in 2005
and growth
directed at the market as well as at products and production resources and the full
through
consolidation of the eight acquisitions will contribute to continuation of this growth in
acquisitons
2006.
The takeover of Comap (France) announced early 2006 will exert a positive influence on
Comap takeover
growth.
The strong market positions Aalberts Industries occupies in many countries means that
Strong market
the group is set to benefit from the expected revival in the overall economic conditions
positions
in the various regions. Moreover, based on its healthy financial position, the company
Sound financial
will continue to pursue its acquisition policy unchanged in 2006.
position
Barring unforeseen circumstances, the Management Board accordingly expects earnings
per share in 2006 to increase in line with the average growth of the past years.
Langbroek, 27 February 2006
Jan Aalberts, President & CEO
Bert Bolkenstein, Managing Director
Mifa - Frame for
Stokke Xplory
stroller
18
Report of the Supervisory Board to the Shareholders
In conformity with article 29 of the Articles of Association, the 2005 financial statements
were drawn up by the Management Board of Aalberts Industries N.V. The financial
Annual audit
statements were audited by PricewaterhouseCoopers Accountants N.V., who issued an
unqualified audit opinion on them, and were then signed by all the members of the
Supervisory Board and of the Executive Board. The Executive Board will table the
financial statements at the General Meeting of Shareholders for adoption, which
adoption will serve to endorse the policy pursued by the Executive Board during the
financial year, where this policy is apparent from the financial statements or insofar as
it has been the subject of announcements in the General Meeting of Shareholders.
Adoption of the 2005 financial statements also serves to endorse the supervision over
this policy exercised by the Supervisory Board.
The Supervisory Board met on six occasions in 2005. All the board members were
Business visit
present at all but one of these meetings. One of the meetings took place at Mifa
Aluminium in Venlo (the Netherlands). This meeting was combined with a visit to the
Mifa and Adex businesses, a review of its operations with management and a discussion
about the group’s strategy. In addition, ample time was devoted to the developments
in new markets, products and processes. This business visit is in line with the Supervisory
Board’s policy also to exchange ideas directly with operational management from time
to time.
Supervision
In the past financial year, too, the Supervisory Board closely followed developments
within the Aalberts Industries Group. The company’s good performance also in 2005
Strategy
confirms the opinion of the Supervisory Board that the strategy which the Management
Board followed in recent years and the manner in which it has been put into practice is
making a powerful contribution to the company’s continuous growth and that it should
basically be carried on unchanged. The Supervisory Board accordingly gives its full
backing to this strategy and continues to support the Management Board by critically
reviewing at all times the main aspects of the policies being pursued in relation to this
strategy.
Acquisitions
All acquisition proposals were considered during the year. Much attention was devoted
to the takeover of Comap announced early January 2006, including the Supervisory
Board’s discussion with the Management Board regarding the financial analyses and
especially the integration of this substantial acquisition into the group structure.
Organisation
The organisation of the company as a whole demands the continuous attention of the
Board, both in the operational and the legal fields. The Management Board, in
consultation with the operational management teams, has developed a long-term plan
for better streamlining the various group activities and creating the right organisational
structure for continued growth. The Board regularly consults with the Management
Board on the progress made with the long-term plan. The Board devoted specific
attention to the analysis of operational management, which was executed by the
Management Board.
Simplex Baseboard system
Corporate
Governance
Ample attention was paid to the working of the Corporate Governance Code approved
for heating tubes
by the shareholders. The Board ascertained that, within the body of rules and
and fittings
procedures as they apply at Aalberts Industries, the code
operates well and does not need any adjustment for the time
being.
Auditing and
About the tasks concerning auditing and remuneration
remuneration
specifically allocated to the Board as a whole, the Board reports
below. The Supervisory Board met on two occasions without the
Management Board attending. The topics considered during
these discussions included the functioning of the Management
Board, management development, remuneration policies and the
Supervisory Board’s own functioning.
19
Report of the Supervisory Board to the Shareholders
During the period under review, the external auditor took part in the deliberations
External
twice. On both occasions, a comprehensive exchange of ideas took place on the figures
auditor
to be published, with the auditor providing a detailed account of its findings. Also
discussed were tax policies and the progress made with the implementation of IFRS.
The manner in which the Supervisory Board exercises its supervisory task and the role of
the auditor were also evaluated. The Supervisory Board devotes close attention to the
external auditor’s reporting to ensure, now and in the future, that the company
continues to report on its activities in an adequate manner.
The objective of the remuneration policy is to attract and retain the best persons for
Remuneration
the Management Board and keep both the Management Board as a whole as well as
policies
its individual members focused on the main corporate objectives, particularly on
continuous growth and on earnings per share. Relevant in this respect is the basic
principle which Aalberts Industries applies to its entire staff, namely that the
remuneration must do justice to the performances produced, must be stimulating,
flexible and in line with the market.
The emoluments of the Management Board consist of a number of fixed components
(such as salary and pension contribution) and a variable component (bonus). The bonus
is directly related to the earnings per share, with a maximum of 75% of annual salary.
For the Supervisory Board, the remuneration for 2005 was set by the General Meeting
Emoluments of
of Shareholders on 21 April 2005. In view of the greatly increased size and complexity
Supervisory Board
of the business, and the implementation of the Corporate Governance Code with its
members
enhanced responsibilities, the General Meeting of Shareholders has agreed to adjust the
emoluments of the members of the Supervisory Board.
At the General Meeting of Shareholders, the Supervisory Board will propose to the
shareholders that the emoluments for 2006 be continued unchanged.
The Management Board and senior management may be granted long-term options on
Options policy
Aalberts Industries N.V. shares. The business pursues a restrictive options policy in which
the number of options is limited at any given time to 1% of the total ordinary shares in
circulation. The granting and exercising of options are subject to strict rules laid down
in option regulations checked by the Netherlands Authority for the Financial Markets
(AFM). For the exact amounts of the 2005 emoluments of the members of the
Management Board, reference is made to the notes to the financial statements. There
are comparable schemes in place for senior management, with bonuses related to
annual salary and being dependent upon a number of specific corporate objectives and
challenges relating to the businesses in question and for which the management
concerned is responsible. These are set by mutual consultation from year to year.
For reasons of business economics, no further disclosures are made about these to the
outside world.
The composition of the Supervisory Board did not change in 2005. In accordance with
Composition of
the roster, no changes are foreseen for 2006 either.
the Supervisory
Broen Quick connect
flow adjustable
laboratory fittings
Board
The Supervisory Board hereby expresses its appreciation for the dedication of the
employees and the Management Board, who in the 2005 reporting year again put in
their best efforts with a high degree of flexibility and creativity and without whom the
results achieved would not have been possible.
Lastly, the board also wishes to thank the shareholders of
Aalberts Industries for their continued belief and trust in the
company in 2005.
Langbroek, 27 February 2006
Pieter Niessen, Chairman
Cor Brakel
Andrew Land
Dries van Luyk
20
AMX index
Aalberts Industries has been part of the AMX index of Euronext Securities Market
Amsterdam since 2 March 2005. The Aalberts Industries share accordingly forms part of
the 50 most traded shares on the Amsterdam stock exchange. Besides Euronext.liffe
Options
announced to intend to launch equity options on Aalberts Industries shares from 6 April
2006. This decision was made because of the public interest and the positive development in trades of Aalberts Industries shares issued at the Euronext Securities Market.
As at the end of 2005, 24,407,897 ordinary Aalberts Industries N.V. shares of
Market
capitalisation
EUR
1.00
nominal value each were in circulation with market capitalisation amounting to
EUR
1,095 million.
Price movement
Price movement in ordinary shares
Price movement in ordinary shares
2001 - 2005
in the 2005 reporting year
50,00
50,00
47,50
40,00
45,00
42,50
The Aalberts Industries N.V. Share
Listing
30,00
40,00
20.00
37,50
35,00
10,00
32,50
30,00
0,00
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
2001
2002
2003
2004
2005
Dividend policy
Aalberts Industries intends to continue its dividend policy for the year 2005. This means
that some 75% of the profits achieved will be earmarked for further growth and to
strengthen the financial position of the business, while some 25% will be distributed to
the shareholders by way of optional dividend. This policy enables sound financing of
the business, as well as providing a market-related return to the shareholders on the
capital they invested in the company.
At the option of shareholders, the dividend can be received fully in cash or distributed
in ordinary shares chargeable to the tax-exempt share premium account or to the
unappropriated profit.
Shareholders’ interests
More than 85% of the ordinary shares are freely marketable. The other ordinary shares
are in the hands of management.
The 2.1 million Aalberts Industries N.V. cumulative preference shares are held by
Stichting Administratiekantoor Financieringspreferente Aandelen Aalberts Industries,
which has converted them into depositary receipts for shares. The depositary receipts
for shares are held by a limited number of institutional parties.
Based on the Disclosure of Major Holdings in Listed Companies Act (WMZ) which
requires, among other things, that shareholders notify any ownership of more than 5%
of the ordinary shares in circulation, the following holder of ordinary shares is known:
Aalberts Beheer B.V. (13.83%), notification dated 10 May 1996. At the end of 2005,
Aalberts Beheer B.V. / J. Aalberts held 14.05% of the ordinary shares. In the course of
21
The Aalberts Industries N.V. Share
the past few years, a number of other interests came below the 5% threshold owing to
stock dividends and the issue of new ordinary shares, as a result of which these are no
longer disclosed.
The cumulative preference shares are held by: New NIB Partners LP (10.75%), notification dated 14 December 2005 and Fortis Verzekeringen Nederland N.V. (6.59%),
notification dated 19 December 2000. These percentages are in relation to the entire
issued share capital at the time of the notification. As of the end of 2005, 525,000
cumulative preference shares were repurchased by the business, which means that the
notification of F. van Lanschot Bankiers N.V. (5.16%) of 18 December 2002 is lapsed. At
the General Meeting of Shareholders to be held on 25 April 2006, Aalberts Industries
will ask for permission to withdraw these cumulative preference shares. Also in 2006,
the cumulative preference shares purchase programme will be continued, and 525,000
shares are expected to be repurchased.
Stock exchange information
2005
2004
2003
2002
2001
46.50
35.70
21.75
22.44
27.25
33.35
20.36
10.25
11.06
15.50
44.85
35.70
20.53
14.80
22.05
13.2
12.2
9.1
6.9
11.4
58,157
67,565
33,411
34,997
24,958
Number of shares in issue at year-end (in millions)
24.4
24.2
23.7
23.2
19.5
Average number of shares in issue (in millions)
24.4
24.2
23.7
21.9
19.5
1,095
865
488
344
429
Highest price in
Lowest price in
EUR
EUR
Closing price at year-end in
EUR
Price / earnings ratio
Average stock exchange revenue (number of shares)
Market capitalisation at year-end (in
EUR
x millions)
Options
Aalberts Industries has an option scheme for its management which has been checked
by the Netherlands Authority for the Financial Markets (Autoriteit-FM). Under this
option scheme, 8,300 options were outstanding at the end of 2005 (2004: 15,450).
For more details, please see the ”Notes to the company financial statements”.
Financial agenda (subject to change)
25 April 2006
General Meeting of Shareholders to be held at the
Okura Hotel in Amsterdam. Starting at 14.00 hours
27 April 2006
Ex-dividend listing
27 April to 16 May 2006
Option period stock dividend or cash dividend
17 May 2006
Fixation of stock dividend exchange ratio (after trading)*
22 May 2006
Payment of dividend and transfer of new ordinary shares
11 August 2006
Publication of semi-annual figures for 2006 (before trading)
Methaterm -
*The stock dividend exchange ratio is determined on the basis of the volume weighted
Stamping parts in
average price of all the Aalberts Industries N.V. shares traded on 11, 12, 15, 16 and 17
a belt furnace
May 2006, in such a way that the value of
the dividend in shares is equal to the
value of the dividend in cash.
Further information
The most recent press releases and the
annual and semi-annual figures may be
found on the website www.aalberts.com.
The information from this annual report
and the previous years’ annual reports
can be viewed and downloaded.
22
Aalberts Industries adopted a Corporate Governance Code based on the general
corporate governance code that applies to all companies listed on the Amsterdam stock
exchange.
The Management Board regards the code adopted by the shareholders as a formal
confirmation of its values of openness, dynamism and integrity - values the Management
Board has upheld since the group was first listed on the Amsterdam stock exchange.
The Corporate Governance Code now in force can be found in its entirety, along with
www.aalberts.com
an extensive explanatory note, on the website of Aalberts Industries. The website also
contains all the special schemes and regulations drawn up as a result of the code.
Aalberts Industries has made minor amendments to the general code in order to tailor
the code to its own circumstances. In the explanatory note referred to above, the group
Corporate Governance
General
clarifies why it believes that the general code had to be amended.
Amendments
The main amendments adopted by Aalberts Industries to the general Corporate
Governance Code are as follows:
1. Management Board: Members of the Management Board may be appointed for an
unlimited time. They require the approval of the Supervisory Board before
accepting positions on the supervisory boards of other companies. They need not
disclose private investments. If they leave the employment of Aalberts Industries
N.V., existing terms of employment and regulations will be taken into account.
This will also apply to new appointments. The group considers it important to be
able to offer terms of employment that attract the right people to the right
positions.
2. Supervisory Board: Members of the Supervisory Board will not be prohibited from
owning shares in Aalberts Industries. Former members of the Management Board
will be permitted to join the Supervisory Board and become chairmen of it. As to
expertise, the Supervisory Board must be composed in such a way that its members
can perform their responsibilities jointly. The maximum term will be three periods of
four years, but this rule may be deviated from in the group’s interest. Aalberts
Industries does not stipulate a maximum number of supervisory positions that a
member of the Supervisory Board may hold, aiming in this respect to apply
qualitative criteria. Before accepting an appointment or re-appointment to the
supervisory board of another company, every member will consult with the
Supervisory Board and the chairman of the Management Board of Aalberts
Industries to establish whether accepting such an appointment or re-appointment is
compatible with his membership of the Supervisory Board of Aalberts Industries.
3. Neither the nature nor the size of the group justifies creating the position of
company secretary.
4. The provision of information: new information must be distributed equally at the
same time. Information must be provided to individuals on the basis of the
principles referred to above. Unless the Supervisory Board decides otherwise or
legislation requires it, the auditor will not be invited to attend the General Meeting
of Shareholders. Prior to the meeting, however, the group will make it possible for
written questions concerning auditing activities to be submitted.
The Management Board is of the opinion that, with its explanatory note as posted on
the website, it is complying amply with the main criterion of the general Corporate
Governance Code: ”apply or explain”.
All the code’s provisions on reporting and the openness of information that apply to
Aalberts Industries have been incorporated into this annual report and the website of
Aalberts Industries.
The complete Corporate Governance arrangements valid for Aalberts Industries in 2005
remained unchanged. Under the present circumstances these arrangements will
remain applicable for 2006.
23
Corporate Governance
Decision-making
The tasks and powers of the General Meeting of Shareholders, the Supervisory Board,
the Executive Board and Stichting Prioriteit ”Aalberts Industries N.V.” have been so
defined that a well-balanced allocation has been achieved as regards control and
influence of the respective constituent bodies of the company. In doing so, Aalberts
Industries has ensured, to the extent possible, that in the decision-making process
concerning vital decisions, account is taken of the interests of all the company’s
stakeholders and that decision-making can proceed in a prudent manner at all times.
Information
The Aalberts Industries website, under the menu heading Investor Relations, contains
Mifa - Steering
damper for highperformance
motorcycle (WP
Suspension / KTM)
24
full information on corporate governance, including:
Information on
the full text of the Aalberts Industries Corporate Governance Code
website
a profile of the Supervisory Board
the Supervisory Board regulations
the rotation system for retirement from the Supervisory Board
the Management Board regulations on conflicting interests
the stock option scheme
the full text of the Articles of Association
the so-called whistleblowers scheme
Financial Statements 2005
2005
26
Note
28
1 Consolidated balance sheet
29
2 Consolidated income statement
30
3 Consolidated statement of changes in equity
31
4 Consolidated cash flow statement
32
5 Notes to the consolidated financial statements
32
6 Accounting policies
39
7 Financial risk management
41
8 Segment reporting
43
9 Intangible assets
44
10 Property, plant and equipment
45
11 Inventories
45
12 Trade receivables
45
13 Other current assets
45
14 Derivative financial instruments
46
15 Equity
46
16 Borrowings
47
17 Deferred income tax
48
18 Provisions
49
19 Other current liabilities
49
20 Other income
49
21 Personnel expenses
50
22 Other operating expenses
50
23 Net finance cost
50
24 Income tax expenses
51
25 Earnings per share
51
26 Contingencies
51
27 Operational lease and rent commitments
51
28 Business combinations
53
29 Events after the balance sheet date
54
30 Transition from Dutch GAAP to IFRS
58
31 Company balance sheet
58
32 Company income statement
59
33 Notes to the company financial statements
62
34 Special controlling rights under the articles of association
63
35 Personal particulars of the members of the Supervisory Board
64
36 Auditors’ report
Contents of financial statements 2005
Page
27
Consolidated balance sheet
1 Consolidated balance sheet
notes
31-12-2005
31-12-2004
Goodwill
9
249,495
216,831
Other intangible assets
9
39,104
11,772
10
321,641
269,923
98
99
6,910
6,221
617,248
504,846
(in
EUR
x 1,000)
Assets
Property, plant and equipment
Investments in associated companies
Deferred tax assets
17
Non-current assets
Inventories
11
195,771
183,276
Trade receivables
12
146,346
117,729
Other current assets
13
18,506
17,741
154
111
Current assets
360,777
318,857
Total assets
978,025
823,703
Cash and cash equivalents
Equity and liabilities
Shareholders’ equity
3
298,440
224,509
Minority interests
3
3,729
2,305
302,169
226,814
Total equity
Non-current borrowings
16
255,158
197,573
Cumulative preference shares
16
30,630
40,840
Employee benefit plans
18
28,207
28,124
Deferred tax liabilities
17
9,587
8,731
Other provisions
18
4,771
4,137
328,353
279,405
Non-current liabilities
Current borrowings
16
88,349
115,927
Current portion of non-current borrowings
16
65,223
54,284
103,656
70,789
90,275
76,484
Current liabilities
347,503
317,484
Total equity and liabilities
978,025
823,703
Trade and other payables
Other current liabilities
28
19
(in
EUR
x 1,000)
notes
Revenue
Other income
20
Total operating income
Raw materials and work subcontracted
2005
2004
1,055,019
897,711
9,538
5,960
1,064,557
903,671
364,364
296,830
Personnel expenses
21
331,045
288,705
Depreciation of property, plant and equipment
10
46,683
40,440
9
4,354
2,175
22
202,052
171,207
Total operating expenses
948,498
799,357
Operating profit
116,059
104,314
17,117
16,335
98,942
87,979
19,022
18,160
79,920
69,819
78,767
68,657
1,153
1,162
Amortisation of intangible assets
Other operating expenses
Net finance cost
23
Profit before tax
Tax expenses
24
Profit after tax
Consolidated income statement
2 Consolidated income statement
Attributable to:
Ordinary shareholders
Minority interest
Earnings per ordinary share (before amortisation)
25
Basic
3.41
2.93
Diluted
3.40
2.92
29
Consolidated statement of changes in equity
30
3 Consolidated statement of changes in equity
Other Retained
Total Minority
Total
capital premium translation reserves earnings
Share
Share
interests
equity
160,744
account
(in
EUR
adjustments
x 1,000)
As at 1 January 2004
Currency
23,739
149,683
–
(55,571)
42,511
160,362
382
–
–
–
42,511
(42,511)
–
–
–
463
(463)
–
(2,753)
–
(2,753)
(13)
(2,766)
Issue of share capital
12
102
–
–
–
114
–
114
Profit for the period
–
–
–
12,313
56,344
68,657
1,162
69,819
Profit appropriation
Dividends
Exchange rate differences
–
–
(632)
1,339
–
707
(162)
545
Other movements
–
–
–
(2,578)
–
(2,578)
–
(2,578)
Acquisitions
–
–
–
–
–
–
936
936
24,214
149,322
(632)
(4,739)
56,344
224,509
2,305
226,814
–
–
–
56,344
(56,344)
–
–
–
181
(181)
–
(9,992)
–
(9,992)
Issue of share capital
13
146
–
–
–
159
–
159
Profit for the period
–
–
–
–
78,767
78,767
1,153
79,920
As at 31 December 2004
Profit appropriation
Dividends
(24) (10,016)
Exchange rate differences
–
–
2,811
562
–
3,373
295
3,668
Other movements
–
–
–
1,624
–
1,624
–
1,624
Acquisitions
–
–
–
–
–
–
–
–
24,408
149,287
2,179
43,799
As at 31 December 2005
78,767 298,440
3,729 302,169
(in
EUR
x 1,000)
2005
2004
116,059
104,314
46,683
40,440
Cash flows from operating activities
Operating profit
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Changes in provisions
Changes in inventories
4,354
2,175
(1,427)
(2,707)
2,563
(18,650)
Changes in trade and other receivables
(2,273)
(373)
Changes in trade and other payables
10,759
(426)
Changes in working capital
11,049
(19,449)
176,718
124,773
Cash flow from operations
Finance income received
4,367
3,917
Finance expenses paid
(20,873)
(20,252)
Income taxes paid
(14,267)
(10,720)
Net cash from operating activities
145,945
97,718
Acquisition of subsidiaries
(93,355)
(70,033)
Capital expenditure
(60,339)
(40,457)
(1,517)
(1,702)
3,024
2,707
(4,036)
2,541
(156,223)
(106,944)
Consolidated cash flow statement
4 Consolidated cash flow statement
Cash flows from investing activities
Purchases of intangible assets
Proceeds from sale of equipment
Other movements
Net cash from investing activities
Cash flows from financing activities
159
114
Proceeds from non-current borrowings
Proceeds from issue of share capital
112,539
60,941
Repayment of non-current borrowings
(77,625)
(67,019)
Dividends paid
(9,992)
(2,752)
Other movements
12,817
(5,612)
Net cash from financing activities
37,898
(14,328)
Net increase/(decrease) in cash and current borrowings
27,620
(23,554)
Cash and current borrowings at beginning of period
Cash and current borrowings at end of period
(115,815)
(92,261)
(88,195)
(115,815)
31
x 1,000)
EUR
(in
Notes to the consolidated financial statements
5 Notes to the consolidated financial statements
Aalberts Industries N.V. and its subsidiaries (together these are referred as the Group) with two core activities,
Industrial Services and Flow Control, occupies top positions in the market in each of these activities.
Industrial Services consist of the development, production, processing and sale of complex parts for high-grade
industrial end products based on customer specifications. The parts and services are supplied to a large number
of market segments, such as precision engineering, medical, automotive, electro-metallic, aircraft, defence,
aluminium, telecom and semiconductor industries.
Flow Control activities include the development, production and sale of products and systems for connecting,
distributing and regulating liquids and gases. These products and systems are supplied worldwide to the
wholesale trade, OEMs, gas producers, utility corporations, laboratories and the beer and soft drink industries.
Aalberts Industries N.V. is a publicly traded company incorporated in Utrecht and domiciled in Langbroek, the
Netherlands. The consolidated IFRS financial statements of the company for the year ended 31 December 2005
comprise the company and its subsidiaries. The statements include also the Group’s interest in associates and
jointly controlled entities. The financial statements have been prepared by the Management Board and released
for publication on 28 February 2006. The financial statements have been adopted by the Supervisory Board on
27 February 2006 and will be submitted for approval to the General Meeting of Shareholders on 25 April 2006.
The European regulation number 1606 came into force on 1 January 2005 and consequently the Group has
adopted the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards
Board (IASB) and endorsed by the European Community for the preparation of consolidated statements. These
are the Group’s first consolidated financial statements in accordance with IFRS. The Group has applied IFRS 1,
‘First Time Adoption’. The reporting date for the Group’s first IFRS financial statements is 31 December 2005. It
has been decided to present comparative information in the financial statements for one year only. Therefore,
the date of transition to IFRS is 1 January 2004. An explanation of how the transition from Dutch GAAP to IFRS
has affected the reported financial position, financial performance and cash flow is provided in note 30.
6 Accounting policies
6.1 Basis for preparation
The financial statements are presented in
EUR
x 1,000, unless mentioned otherwise. The financial statements are
prepared on the historical costs basis except financial instruments which are stated at their fair value. Employee
benefits are based on the projected unit credit method. The areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 7.3.
6.2 First time adoption
The Group uses the same accounting policies in its opening IFRS balance sheet and throughout all periods
presented in its first IFRS financial statements. Those accounting policies comply with each IFRS effective at the
reporting date for the first IFRS financial statements. All subsidiaries will adopt IFRS at 1 January 2005. There
are no exceptions. The Group uses the following exemptions from IFRS 1:
6.2.1 Business combinations
There will be no restatements of business combinations prior to 1 January 2004. The net book amount of
goodwill is its net book amount under Dutch GAAP at the date of transition. The goodwill was tested for
impairment at the transition date, however, no impairment losses were recognised.
6.2.2 Property, plant and equipment
The Group has elected to continue Dutch GAAP value of property, plant and equipment under IFRS. A few lease
contracts for properties which were presented as operational lease under Dutch GAAP, have been classified as
finance lease under IFRS. Finance lease costs are classified under depreciation and net finance cost. All property,
plant and equipment are stated at their historical cost less accumulated depreciation and impairment
charges.
32
EUR
losses are subject to the corridor approach that leaves some actuarial gains and losses unrecognised. This
method applies to all plans.
6.2.4 Cumulative translation differences
The cumulative translation differences for all foreign operations are deemed to be zero at the date of
transition to IFRS. The gain and loss on a subsequent disposal of any foreign operation exclude translation
differences that arose before the date of transition to IFRS and include later translation differences.
6.2.5 Goodwill
Goodwill will no longer be amortised, but will be tested on impairment as of 1 January 2004. As of 2004, assets
and liabilities of acquired companies are accounted for at fair value. Goodwill, i.e. the remainder of acquisition
costs less fair value of net assets is stated at cost less any accumulated impairment losses. Goodwill is allocated
to the Group’s cash-generating units identified according to country of operation and business segment.
6.2.6 Software
Software, formerly presented as property, plant and equipment, has been reclassified to intangible assets.
6.2.7 Financial instruments
The standards IAS 32 and IAS 39 ‘Financial Instruments’ may be applied as of 1 January 2005, while application
to the figures of 2004 is not mandatory. The Group applies these standards as of 1 January 2004 to obtain the
best possible comparisons. For the Group this implies that the cumulative preference shares will be accounted
for as debt instead of as equity. Dividend paid on these shares will be included in net finance cost and will have
no impact on net profit for ordinary shareholders. The fair value of interest swaps have been stated on the
x 1,000)
All cumulative actuarial gains and losses are recognised in equity at transition date. Later actuarial gains and
Notes to the consolidated financial statements
(in
6.2.3 Employee benefits
IFRS opening balance sheet.
6.2.8 Share based compensation
The Group operates an equity-settled, share option compensation plan. These options have been granted
before 7 November 2002 and are therefore not recorded. Share options are granted to selected employees. The
exercise price of the granted options is equal to the market price of the shares. The share options are settled in
cash or in shares.
6.3 Basis for consolidation
6.3.1 Subsidiaries
Subsidiaries are those entities controlled by the company. Control exists when the company has the power to
govern directly or indirectly the financial and operational policies of an entity to obtain benefits from its
activities. The financial statements of subsidiaries are included in the consolidated financial statements from the
date that control commences until the control ceases.
6.3.2 Investments in associated companies
Associates are those entities in which the Group holds, directly or indirectly, significant influence, but no
control, over the financial and operating policies. Associates are initially valued at cost and subsequently valued
using the equity method. The consolidated financial statements include the Group’s share of the total recognised
gains and losses of associates based on the equity method accounting, from the date that significant influence
commences until the date that significant influence ceases. When the Group’s share of losses exceeds the net
book amount of the associate, the net book amount is reduced to zero and recognition of further losses is
discontinued except to the extent that the Group has incurred obligations in respect of the associate. If the
associate subsequently reports profits, the Group resumes recognising its share of those profits only after its
share of the profits equals the share of losses not recognised.
6.3.3 Business combinations
Newly acquired group companies are included at their fair value upon consolidation as from the time the
power of control was acquired, taking into account the fair value of the assets, liabilities and contingent
liabilities. All the identifiable intangible assets of the acquired business are recorded at their fair values.
Intangible assets are separately identified and valued. An asset is identifiable when it either arises from
33
x 1,000)
EUR
(in
Notes to the consolidated financial statements
contractual or other legal rights, or is separable. An asset is separable if it could be sold, on its own or with
other assets. The purchase price is then allocated across the fair value of all assets and liabilities with any
residual allocated to goodwill. Excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets,
liabilities and contingent liabilities over cost (negative goodwill) is recognised immediately in the income
statement. Minority interests in group result and equity are stated separately.
6.3.4 Intercompany transactions
Transactions between group companies including unrealised gains on these transactions are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred.
6.4 Segment reporting
A business segment is a distinguishable component of an entity that is engaged in providing products or
services that are subject to risks and returns that are different from those of other business segments.
A geographical segment is a distinguishable component of an entity engaged in providing products or services
within a particular economic environment that are subject to risks and returns that are different from those of
segments operating in other economic environments. The Group’s primary format for reporting segment
information is the business segment, the Group’s secondary segment for reporting segment information is the
geographical segment.
6.5 Foreign currency transactions and translation
6.5.1 Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of
the primary economic environment in which the entity operates (functional currency). The consolidated
financial statements are presented in euros, which is the functional and presentation currency of the Group.
6.5.2 Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at
the dates of the transactions (spot rate). Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement as finance cost. Non-monetary
assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate at the date of transaction. Non-monetary assets and liabilities denominated in foreign currencies
that are stated at fair value are translated to euros at foreign exchange rates effective at the date the values
were determined. A summary of the main currency exchange rates applied in the year under review and the
preceding year reads as follows:
CURRENCY EXCHANGE RATES
1 British Pound (GBP) =
1 US Dollar (USD) =
EUR
EUR
2005
2005
2004
2004
Year-end
Average
Year-end
Average
1.45
1.46
1.41
1.47
0.84
0.80
0.73
0.80
6.5.3 Group companies
The results and financial position of all the group entities that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;
Income and expenses for each income statement are translated at average exchange rates.
All resulting exchange differences are recognised as a separate component of equity.
34
EUR
Goodwill represents the excess of the costs of an acquisition over the fair value of the Group’s share of the net
identifiable assets of the acquired subsidiary at the date of acquisition. All business combinations are accounted
for by applying the purchase accounting method. Goodwill is allocated to cash generating units and is not
amortised but is tested annually for impairment. In respect of associated companies, the net book amount of
goodwill is included in the net book amount of the investment in the subsidiary.
6.6.2 Software
Acquired software is capitalised and stated at cost less accumulated amortisation and impairment losses.
Software is amortised, normally over 3 years.
6.6.3 Research and development
Expenditure on research and development activities, undertaken with the prospect of gaining new technical
knowledge and new commercially feasible products is recognised in the income statement. Given the difficulty
of determining future benefits from the development activities, development costs are expensed as occurred.
6.6.4 Other intangible assets
Other intangible assets include brand names and customer base. Intangible assets that are acquired through
acquired companies are initially valued at fair value. This fair value is subsequently treated as deemed cost.
These identifiable intangibles are then systematically amortised over the expected useful life with a maximum
of 10 years.
6.6.5 Subsequent expenditure
x 1,000)
6.6.1 Goodwill
Notes to the consolidated financial statements
(in
6.6 Intangible assets
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.
6.6.6 Amortisation
The straight-line amortisation method is used taking into account a period of maximum 10 years. The
amortisation period is based on the estimated useful life of the intangible asset. The amortisation period and
the amortisation method have been reviewed at least at each financial year-end. If the expected useful life of
the intangible asset was significantly different from previous estimates, the amortisation period has been
changed accordingly. Goodwill is not subject to amortisation.
6.7 Property, plant and equipment
6.7.1 Valuation
Property, plant and equipment are stated at cost less accumulated depreciation based on the estimated useful
life of the assets concerned and impairment losses. The cost of self-constructed assets includes the cost of
materials, direct labour and an appropriate proportion of directly allocated overheads.
6.7.2 Finance lease
The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the
Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are
capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present
value of the minimum lease payments. Each lease payment is allocated between the liability and the finance
charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental
obligations, net of finance charges, are included in other non-current liabilities. The interest element of the
finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate
of interest on the remaining balance of the liability for each period. The property, plant and equipment
acquired under finance leases is depreciated over the shorter of the useful life of the asset or the lease term.
6.7.3 Subsequent expenditure
The Group recognises in the net book amount of an item of property, plant and equipment the cost of
replacing part of such an item when that cost is incurred if it is probable that the future economic benefits
embodied with the item will flow to the Group and the cost of the item can be measured reliably. All other
35
x 1,000)
EUR
(in
Notes to the consolidated financial statements
costs such as repair and maintenance costs are recognised in the income statement as an expense as incurred.
Depreciation is not applied to property, plant and equipment in progress. The difference between opening and
closing balance of this category will usually consist of capital expenditure and of transfers to other categories
of property, plant and equipment.
6.7.4 Depreciation
For depreciation, the straight-line method is used. The useful life is reviewed periodically through the life of an
asset to ensure that it reflects current circumstances. The useful lives of the following categories are used for
depreciation purposes:
Category
Useful life (minimum)
Useful life (maximum)
Land
Infinite
Infinite
Buildings, installations and emplacements
5 years
40 years
Machinery
5 years
15 years
Other factory equipment
3 years
10 years
Office equipment
3 years
5 years
Computer hardware
3 years
5 years
Company cars
3 years
5 years
Commercial vehicles
3 years
6 years
6.8 Impairment
Circumstances may arise where the net book amount of an asset may not be economically recoverable from
future business activity. Although future production may be technically possible and for commercial reasons
necessary, this may be insufficient to recover the current carrying value in the future. Under these circumstances,
it is required that a write-down of the net book amount to the recoverable amount (the higher of its net
selling price and its value in use) should be charged as an immediate impairment expense in the income
statement. Assets with indefinite lives should be tested for impairment annually, whereas other assets should
be tested when circumstances indicate that the carrying amount may not be recoverable. For the purpose of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
flows (cash-generating units). Intangible assets and property, plant and equipment have been tested for
impairment at 1 January 2004, the date of transition to IFRS. An impairment loss will be reversed if there is a
change in the estimates used to determine the recoverable amount of the assets since the last impairment loss
was recognised. The net book amount of the asset will be increased to its recoverable amount. Goodwill is
never subject to reversion of impairment losses recognised.
6.9 Investments in associates
Investments in companies whose financial statements are not included in the consolidation are valued based on
the equity method. This implies that the associate is initially recognised at cost and the net book amount is increased or decreased to recognise the Group’s share of profit or loss of the associate after the date of acquisition.
6.10 Inventories
Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated
selling price in the ordinary course of business less the estimated costs of completion and the estimated costs
necessary to make the sale. Cost includes all costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and condition. The cost of inventories, other than those for
which specific identification of costs are appropriate, is assigned by using the first-in, first-out (FIFO) or
weighted average cost formula. The costs of work-in-progress and finished goods comprise raw materials,
direct labour, other direct costs and related production overheads. Borrowing costs are excluded.
6.11 Trade receivables
Trade receivables are initially recognised at fair value and subsequently valued at amortised cost, taking into
account unrecoverable receivables.
36
EUR
form an integral part of the Group’s cash management and are included as a component of cash and current
borrowings for the purpose of the statement of cash flows.
6.13 Share capital
Share capital is classified as equity. The Group has issued cumulative preference shares which are recognised as
non-current liabilities.
6.14 Derivatives and borrowings
Interest swaps are stated at fair value and the change in fair value is included in net finance cost. Borrowings
are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at
amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is
recognised in the income statement over the period of the borrowings using the effective interest method.
Cumulative preference shares are classified as non-current liabilities. The dividends on these cumulative
preference shares are recognised in the income statement as finance cost. Borrowings are classified as current
liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.
6.15 Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences arising between
x 1,000)
Cash and cash equivalents comprise cash balances and deposits. Bank overdrafts that are repayable on demand
Notes to the consolidated financial statements
(in
6.12 Cash and cash equivalents
the tax bases of assets and liabilities and their net book amounts in the consolidated financial statements.
However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction affect neither accounting nor taxable profit or
loss, it is not accounted for. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability is settled. The deferred tax asset is recognised
for the carry-forward of unused tax losses and unused tax credits to the extent that it is probable that future
taxable profit will be available against which the unused tax losses and unused tax credits can be utilised.
6.16 Employee benefit plans
The Group has a number of pension plans in accordance with local conditions and practices. Group companies
operate various pension schemes. The schemes are generally funded through payments to insurance companies
or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined
benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Group
pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay
further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to
employee service in the current and prior periods. In the UK, Germany, France and partly in the Netherlands,
the plans are defined benefit plans. Typically, defined benefit plans define an amount of pension benefit that
an employee will receive on retirement, usually dependent on one or more factors such as age, years of service
and compensation. The defined benefit obligations are measured at present value, taking into account
actuarial assumptions; plan assets are valued at fair value. The net periodic pension costs (consisting of service
costs, interest costs and expected return on assets) are recognised as personnel expenses.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of
the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with
adjustments for unrecognised actuarial gains or losses and past service costs. The defined benefit obligation is
calculated annually by independent actuaries using the projected unit credit method. The present value of the
defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates
of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and
that have terms to maturity approximating to the terms of the related pension liability.
37
x 1,000)
EUR
(in
Notes to the consolidated financial statements
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess
of the greater of 10% of the value of plan assets or 10% of the defined benefit obligation are charged or
credited to income over the employees’ expected average remaining working lives.
Past-service costs are recognised immediately in income, unless the changes to the pension plan are conditional
on the employees remaining in service for a specified period of time (the vesting period). In this case, the
past-service costs are amortised on a straight-line basis over the vesting period.
For defined contribution plans, the Group pays contributions to publicly or privately administered pension
insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations
once the contributions have been paid. The contributions are recognised as personnel expenses when they are
due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the
future payments is available.
6.17 Provisions
A provision is recognised in the balance sheet when the Group has a legal or constructive obligation as result
of a past event, and it is probable that an outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and, where appropriate, the risks specific to the
liability. Provisions have been made in connection with liabilities related to normal business operations. These
comprise mainly restructuring costs and environmental restoration. The provisions are mainly non-current.
6.18 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services
in the ordinary course of business. Revenue includes the proceeds of goods and services supplied, excluding
VAT and net of price discounts and bonuses. The proceeds of goods supplied are recognised as soon as all
major ownership rights and risks in respect of the goods have been transferred to the buyer. Sales of services
are recognised in the accounting period in which the services are rendered on the basis of the actual service
provided as a proportion of the total services to be provided. Royalty income is recognised on an accruals basis
in accordance with the substance of the relevant agreements.
6.19 Other income
Other income is income not related to the key business activities of the Group or relates to incidental and/or
non-recurring items, like income from the sale of non-monetary assets and or liabilities, commissions from third
parties and government grants. Grants from the government are recognised at fair value where there is a
reasonable assurance that the grant will be received and the group will comply with all related conditions.
Government grants relating to costs are deferred and recognised in the income statement over the period
necessary to match the costs they are intended to compensate. Government grants relating to the purchase of
property, plant and equipment are included in current liabilities as deferred government grants and are
credited to the income statement on a straight-line basis over the expected life of the related assets.
6.20 Net finance cost
Interest expense and income on current and non-current borrowings, dividend on cumulative preference shares
and gains and losses on hedging instruments are recognised in the income statement as it accrues.
6.21 Taxation
Tax is based on the pre-tax profit at the ruling tax rate, taking into account any tax-exempt profit, tax losses
carried forward and fully or partly deductible costs.
38
EUR
the profit realised on the disposal of associated companies.
6.23 Notes to the consolidated cash flow statement
The cash flow statement is drawn up using the indirect method. The cost of the acquired group companies,
less the available cash, is recorded under cash flow from investing activities. The changes in assets and liabilities
as a result of acquisitions are eliminated from the cash flows arising from these assets and liabilities. These
changes have been incorporated in the cash flow from investment activities under ‘Acquisition of subsidiaries’.
The net cash flow consists of the net change of cash and current borrowings in comparison with the previous
year under review.
7 Financial risk management
7.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate
risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The Group uses derivative financial
instruments to hedge certain risk exposures. Risk management is carried out by a central treasury department
‘Group Treasury’ under policies approved by the Management Board. Group Treasury identifies, evaluates and
x 1,000)
This item represents the share in the net profit of associated companies not included in the consolidation, and
Notes to the consolidated financial statements
(in
6.22 Share in result of associated companies
hedges financial risks in close co-operation with the Group’s operating units. The Board provides principles for
overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate
risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and the
investment of excess liquidity.
7.1.1 Market risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the US dollar and the British pound. Foreign exchange risk arises from
future commercial transactions, recognised assets and liabilities and net investments in foreign operations.
Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are
denominated in a currency that is not the entity’s functional currency. Group Treasury is responsible for
managing the net position in each foreign currency. The Group is exposed to commodities price risk because of
its dependence on certain raw materials especially copper.
7.1.2 Credit risk
The Group has no significant concentrations of credit risk. It has policies in place to ensure that wholesale sales
of products are made to customers with an appropriate credit history. Derivative counterparties and cash
transactions are limited to high-credit-quality financial institutions.
7.1.3 Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability
of funding through an adequate amount of committed credit facilities and the ability to close out market
positions. Due to the dynamic nature of the underlying businesses, Group Treasury aims to maintain flexibility
in funding by keeping committed credit lines available at a number of well-known financial institutions.
7.1.4 Cash flow and interest rate risk
As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are
substantially independent of changes in market interest rates. The Group’s interest rate risk arises from noncurrent borrowings. Borrowings issued at floating rates expose the Group to cash flow interest rate risk.
Borrowings issued at fixed rates expose the Group to interest rate risk. Group policy is to maintain approximately
75% of its borrowings in floated rate instruments. The Group manages its cash flow interest rate risk by using
floating-to-fixed interest rate swaps and are mainly used in borrowings which are denominated in non-euro
39
(in eur x 1,000)
Notes to the consolidated financial statements
currencies. Such interest rate swaps have the economic effect of converting borrowings from floating rates to
fixed rates. Generally, the Group raises non-current borrowings at floating rates and swaps them into fixed
rates that are lower than those available if the Group borrowed at fixed rates directly.
7.2 Accounting for hedging activities
Cash flow risks from non-current borrowings are hedged by using interest rate swaps. Changes in the fair value
of interest rate swaps are recognised immediately in the income statement. Hedge accounting is not applied by
the Group.
7.3 Critical accounting estimates and assumptions
The preparation of financial statements in accordance with IFRS requires management to make judgments,
estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities,
revenues and expenses. The estimates and assumptions are based on experience and factors that are believed
to be reasonable under circumstances. Estimates and assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only
that period or in the period of the revision and future periods if the revision affects both current and future
periods. The accounting policies have been consistently applied by Group entities to all periods presented in
these consolidated financial statements and in preparing an opening balance sheet as at 1 January 2004 for the
purposes of transition to IFRS.
7.3.1 Estimated impairments of goodwill
The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting
policy stated in note 6.8. The recoverable amounts of cash-generating units have been determined based on
value-in-use calculations. The impairment model used is the discounted cash flow method using a weighted
average cost of capital (WACC) of 8%. These calculations require the use of estimates.
7.3.2 Pension plans
Since the Group is dealing with long-term obligations and uncertainties, assumptions are necessary for
estimating the amount the Group needs to invest to provide those benefits. Actuaries calculate the defined
benefit obligation partly based on information from management such as future salary increase, the rate of
return on plan investments, mortality rates, and the rates at which plan participants are expected to leave the
system because of retirement, disability and termination.
7.3.3 Taxes
The Group is subject to taxes in numerous jurisdictions. Judgement is required in determining the worldwide
provision for taxes. There are many transactions and calculations for which the ultimate tax determination is
uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax issues
based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the company tax and
deferred tax provisions in the period in which such determination is made.
40
EUR
x 1,000)
8.1 Primary reporting format - business segments
As at 31 December 2005, the Group is organised on a worldwide basis into two main business segments,
Industrial Services and Flow Control. Other group operations mainly consists of supporting activities at holding
level. Any inter-segment revenue has been eliminated.
2005
Other
Total
644,827
–
1,055,019
74,449
18
120,413
11.2
11,5
–
11.4
Capital expenditure
40,108
23,549
801
64,458
Depreciation
25,703
19,985
995
46,683
Amortisation
1,607
2,729
18
4,354
Average number of employees (x1)
4,014
3,688
16
7,718
Number of employees at year-end (x1)
4,002
3,998
17
8,017
406,536
569,202
2,287
978,025
Industrial Services
Flow Control
Other
Total
394,270
503,441
–
897,711
45,016
61,453
20
106,489
11.4
12.2
–
11.9
Capital expenditure
23,483
16,786
21
40,290
Depreciation
24,562
15,369
509
40,440
Amortisation
1,218
937
20
2,175
Average number of employees (x1)
3,715
3,055
15
6,785
Number of employees at year-end (x1)
3,736
3,380
15
7,131
359,435
461,585
2,683
823,703
Revenue
EBITA
EBITA as % of revenue
Assets
2004
Revenue
EBITA
EBITA as % of revenue
Assets
Industrial Services
Flow Control
410,192
45,946
Notes to the consolidated financial statements
(in
8 Segment reporting
Inter-segment transfer or transactions are entered into under transfer pricing terms and conditions that are
comparable with terms and conditions with unrelated third parties. Segment assets consist primarily of
intangible assets, property, plant and equipment, inventories, trade debtors and other current assets.
8.2 Secondary reporting format - geographical segments
The Group’s two business segments operate in nine geographical areas. Revenue is allocated based on the
geographical location of the customers.
REVENUE
2005
%
2004
%
Germany
243,155
23.0
257,743
28.7
United Kingdom
160,375
15.2
128,885
14.4
Benelux countries
147,818
14.0
150,380
16.8
United States
127,206
12.1
56,747
6.3
France
116,420
11.0
100,371
11.2
Eastern Europe
65,490
6.2
45,841
5.1
Scandinavia
56,089
5.3
48,563
5.4
Spain & Portugal
54,291
5.1
44,843
5.0
Other
84,175
8.1
64,338
7.1
Total
1,055,019 100.0
897,711 100.0
41
x 1,000)
EUR
(in
Notes to the consolidated financial statements
Assets are allocated based on the country in which the assets are located:
TOTAL ASSETS
2005
%
2004
%
Germany
276,340
28.3
273,692
33.2
United Kingdom
199,705
20.4
123,433
15.0
Benelux countries
144,179
14.7
146,630
17.8
89,919
9.2
62,918
7.6
113,216
11.6
96,233
11.7
Eastern Europe
34,549
3.5
34,070
4.1
Scandinavia
45,766
4.7
42,472
5.2
Spain & Portugal
69,654
7.1
41,058
5.0
4,697
0.5
3,197
0.4
United States
France
Other
Total
978,025 100.0
823,703 100.0
Capital expenditure and purchases of intangible assets are allocated based on the country in which the assets
are located:
CAPITAL EXPENDITURE AND PURCHASES OF INTANGIBLE ASSETS
Germany
2005
%
2004
%
23,255
35.2
7,465
17.8
United Kingdom
6,372
9.7
5,901
14.1
Benelux countries
14,554
22.1
14,744
35.1
United States
7,013
10.6
1,125
2.7
France
5,348
8.1
4,404
10.5
Eastern Europe
3,808
5.8
2,676
6.4
Scandinavia
4,250
6.4
3,755
8.9
Spain & Portugal
1,313
2.0
1,893
4.5
62
0.1
30
–
Other
Total
65,975 100,0
41,993 100.0
8.3 Analyses of revenue by category
REVENUE
2005
%
2004
%
Sales of goods
839,428
79.6
689,079
76.8
Services
214,833
20.3
207,750
23.1
758
0.1
882
0.1
Royalties
Total
42
1,055,019 100.0
897,711 100.0
EUR
Software
Other
As at 1 January 2004
Cost
225,585
11,871
–
Accumulated amortisation
(23,872)
(9,085)
–
Net book amount
201,713
2,786
–
201,713
2,786
–
1,694
1,702
–
Year ended 31 December 2004
Opening net book amount
Additions
Disposals
Acquisition of subsidiaries
Amortisation
Exchange differences
Closing net book amount
–
(41)
–
13,500
88
9,412
_
(1,783)
(392)
(76)
_
_
216,831
2,752
9,020
As at 31 December 2004
Cost
240,640
14,024
9,412
Accumulated amortisation
(23,809)
(11,272)
(392)
Net book amount
216,831
2,752
9,020
216,831
2,752
9,020
417
1,517
–
Year ended 31 December 2005
Opening net book amount
Additions
Disposals
Acquisition of subsidiaries
Amortisation
Exchange differences
Closing net book amount
–
(129)
–
30,630
433
29,387
–
(1,809)
(2,545)
1,617
5
473
249,495
2,769
36,335
x 1,000)
Goodwill
Notes to the consolidated financial statements
(in
9 Intangible assets
As at 31 December 2005
Cost
273,592
16,590
39,389
Accumulated amortisation
(24,097)
(13,821)
(3,054)
Net book amount
249,495
2,769
36,335
Goodwill is not amortised and has an indefinite useful life at the time of recognition. Other intangible assets
include brand names and customer base. Software, previously classified as property, plant and equipment, is
reclassified. Separate recognition of intangible assets, previously included in goodwill is only applied on business
combinations that were recognised after the date of transition. A segment level summary of the goodwill
allocation is presented below:
GOODWILL ALLOCATION 2005
Germany
Industrial
Flow
Total
Services
Control
Group
72,406
28,027
100,433
United Kingdom
3,829
80,076
83,905
Benelux countries
3,932
1,310
5,242
United States
2,583
11,905
14,488
18,780
–
18,780
–
112
112
Scandinavia
6,276
770
7,046
Spain & Portugal
5,832
13,657
19,489
113,638
135,857
249,495
France
Eastern Europe
Total
43
x 1,000)
EUR
(in
Notes to the consolidated financial statements
GOODWILL ALLOCATION 2004
Germany
Industrial
Flow
Total
Services
Control
Group
72,406
27,901
100,307
United Kingdom
3,731
63,183
66,914
Benelux countries
3,931
1,310
5,241
–
10,379
10,379
16,735
–
16,735
5,862
648
6,510
–
113
113
1,854
8,778
10,632
104,519
112,312
216,831
United States
France
Scandinavia
Eastern Europe
Spain & Portugal
Total
10 Property, plant and equipment
Land and
Plant and
buildings
equipment
Other
Under
Total
construction
As at 1 January 2004
Cost
162,058
476,854
43,510
1,889
684,311
Accumulated depreciation
(60,009)
(345,796)
(37,598)
–
(443,403)
Net book amount
102,049
131,058
5,912
1,889
240,908
102,049
131,058
5,912
1,889
240,908
Year ended 31 December 2004
Opening net book amount
Additions
7,720
24,930
2,529
5,111
40,290
Disposals
(1,191)
(1,119)
(356)
–
(2,666)
Acquisition of subsidiaries
15,732
16,082
774
204
32,792
Depreciation
(5,990)
(31,249)
(3,201)
_
(40,440)
(78)
(879)
(18)
14
(961)
118,242
138,823
5,640
7,218
269,923
Exchange differences
Closing net book amount
As at 31 December 2004
Cost
191,782
543,058
47,354
7,218
789,412
Accumulated depreciation
(73,540)
(404,235)
(41,714)
–
(519,489)
Net book amount
118,242
138,823
5,640
7,218
269,923
269,923
Year ended 31 December 2005
Opening net book amount
118,242
138,823
5,640
7,218
Additions
15,051
35,642
3,116
10,649
64,458
Disposals
(842)
(1,688)
(365)
–
(2,895)
Acquisition of subsidiaries
10,947
20,943
988
40
32,918
Depreciation
(8,465)
(35,315)
(2,903)
–
(46,683)
208
3,359
65
288
3,920
135,141
161,764
6,541
18,195
321,641
Exchange differences
Closing net book amount
As at 31 December 2005
Cost
224,247
641,986
51,414
18,195
935,842
Accumulated depreciation
(89,106)
(480,222)
(44,873)
–
(614,201)
Net book amount
135,141
161,764
6,541
18,195
321,641
At year-end, group companies had investment commitments outstanding in respect of property, plant and
equipment to an amount of
EUR
22,439 of which
EUR
18,195 has been capitalised on the balance sheet as advance
payment. Finance leases concerning property, plant and equipment had a net book amount at year-end of
EUR
28,947. The real estate of some German and French group companies as well as some machines in France are
encumbered by a mortgage.
44
EUR
2004
Raw materials
46,905
45,355
Work in progress
42,647
43,153
Finished goods
94,340
85,818
Other inventories
11,879
8,950
195,771
183,276
Total
The costs of inventories recognised as an expense and impairment losses on inventories are included in ‘raw
materials and work subcontracted’. There are no inventories pledged as security for liabilities.
12 Trade receivables
Trade receivables
Less: provision for impairment of receivables
Trade receivables - net
2005
2004
149,849
120,587
(3,503)
(2,858)
146,346
117,729
There is no concentration of credit risk with respect to trade receivables, as the Group has a large customer base
which is internationally dispersed. Impairment losses on trade receivables are included in the ‘other operating
expenses’.
x 1,000)
2005
Notes to the consolidated financial statements
(in
11 Inventories
13 Other current assets
2005
Prepaid and accrued income
Other receivables
Total
2004
7,665
5,444
10,841
12,297
18,506
17,741
14 Derivative financial instruments
Assets
Assets
Liabilities
Liabilities
2005
2004
2005
2004
Non-current
–
–
581
1,292
Current
–
–
12
23
Interest rate swap:
–
–
593
1,315
Foreign exchange contracts
167
–
–
_
Total
167
–
593
1,315
The principal amounts of the outstanding interest rate swap contracts at 31 December 2005 were
(2004:
EUR
114,618) and for foreign exchange contracts
EUR
EUR
101,186
5,228.
45
x 1,000)
EUR
(in
Notes to the consolidated financial statements
15 Equity
The total number of ordinary shares outstanding at year-end is 24.4 million shares (2004: 24.2 million shares)
with a par value of
EUR
EUR
1.00 per share. In addition, there are 100 priority shares issued with a par value of
1.00 per share.
15.1 Share options
Share options are granted to selected employees. The exercise price of the granted options is equal to the
market price of the shares. The number of share option rights outstanding at year-end was 8,300; none of
these options were in the hands of the Executive Board. These options have a term of five years. During the
year under review 7,150 options were exercised and no options expired. No new options were allocated.
Date of issue
Expiring date
Exercise price
As at 1
Exercised
Expired
January 2005
As at 31
December
2005
04-04-2001
04-04-2006
22.25
15,450
7,150
–
8,300
Bank
Finance
Total
Cumulative
borrowings
leases
16 Borrowings
16.1 Non-current borrowings
preference
shares
As at 31 December 2004
230,696
21,161
251,857
40,840
New borrowings
105,214
7,325
112,539
–
15,030
880
15,910
–
(65,427)
(1,988)
(67,415)
(10,210)
7,490
–
7,490
–
293,003
27,378
320,381
30,630
Acquired borrowings
Repayments
Translation differences
As at 31 December 2005
The current portion of non-current borrowings amounts to
EUR
65,223 (2004:
EUR
54,284) and is presented within
the current liabilities. A number of financial covenants related to bank borrowings were entered into with
financial institutions and mainly relate to interest cover and debt-service ratio (net debt/EBITDA). The average
interest rate for bank borrowings was between 3% and 5%.
The Group issued 2,100,000 cumulative preference shares of
EUR
3.00 par value each.
As of December 2005, 25% of the shares were redeemed at par value for
EUR
10,210. The Group has the option
to redeem 25% of the shares at par value at the end of 2006, 2007 and 2008 respectively. The average dividend
on the cumulative preference shares in the year under review amounted to 4.9% (2004: 4.9%).
The maturity of bank borrowings is as follows:
MATURITY
Within 1 year
Between 1-5 years
Over 5 years
Total
46
2005
2004
65,223
54,284
189,125
165,286
38,655
11,126
293,003
230,696
EUR
x 1,000)
BANK BORROWINGS
Euro
2005
2004
172,329
162,839
US Dollar
48,985
45,452
British Pound
69,061
20,355
2,628
2,050
293,003
230,696
Other currencies
Total
16.2 Current borrowings
Current borrowings are short-term credit facilities given by a number of credit institutions. The total of these
facilities at year-end 2005 amounted to
EUR
259 million, of which
EUR
88.3 million was used.
17 Deferred income tax
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority.
Particularly in Germany, Aalberts Industries has carry-forward tax losses amounting to some
EUR
68 million.
The related deferred income tax assets have not been recorded, since future usage is depending on, among
other things, profit-earning capacity.
DEFERRED INCOME TAX
2005
Notes to the consolidated financial statements
(in
The Group’s bank borrowings are denominated in the following currencies:
2004
Movement of deferred tax liabilities
Opening balance
8,731
7,876
Receipts from tax authorities
2,834
3,873
(6,220)
(312)
Charges in income statement (current)
Charges in income statement (deferred)
(895)
(315)
Exchange differences and other movements
5,137
(2,391)
Closing balance
9,587
8,731
6,221
5,223
Movement of deferred tax assets
Opening balance
Receipts from tax authorities
(207)
–
Charges in income statement (current)
(257)
–
Charges in income statement (deferred)
1,193
998
(40)
–
6,910
6,221
Exchange differences and other movements
Closing balance
47
x 1,000)
EUR
(in
Notes to the consolidated financial statements
18 Provisions
18.1 Retirement benefit obligations
RETIREMENT BENEFIT
Germany
France
OBLIGATIONS
United
Norway
Kingdom
Nether-
Total
lands
Present value of funded obligations
1,336
2,188
91,763
141
1,747
97,175
Fair value of plan assets
(986)
(582)
(74,580)
15
(1,806)
(77,939)
350
1,606
17,183
156
(59)
19,236
Present value of unfunded
obligations
Unrecognised actuarial gains and losses
Liability in the balance sheet
AMOUNTS RECOGNISED IN
10,691
719
–
–
–
11,410
(1,662)
(59)
(686)
(91)
59
(2,439)
9,379
2,266
16,497
65
–
28,207
Germany
France
United
Norway
Nether-
Total
INCOME STATEMENT
Current service cost
Kingdom
lands
97
99
3,617
6
99
Interest cost
501
82
4,491
8
82
3,918
5,164
Expected return on plan assets
(37)
(27)
(4,986)
–
(82)
(5,132)
Net actuarial losses recognised
during the year
Past service cost
Total, included in personnel expenses
MOVEMENT OF LIABILITY
–
–
31
6
–
37
–
–
–
3
48
51
561
154
3,153
23
147
4,038
Germany
France
United
Norway
Nether-
Total
RECOGNISED ON THE BALANCE SHEET
Kingdom
lands
As at 1 January 2005
9,517
1,357
16,679
186
385
28,124
Exchange differences
–
–
469
2
–
471
–
761
–
–
–
761
4,038
Liabilities acquired in business
combinations
Total expense charged in the
income statement
561
154
3,153
23
147
(75)
–
(690)
–
–
(765)
Contributions paid
(584)
(3)
(2,724)
(20)
–
(3,331)
Other movements
(40)
(3)
(390)
(126)
(532)
(1,091)
9,379
2,266
16,497
65
–
28,207
Germany
France
United
Norway
Nether-
Additions to plan assets
As at 31 December 2005
ACTUARIAL ASSUMPTIONS
48
Kingdom
lands
Discount rate
4.00%
5.00%
4.75%
5.00%
4.75%
Expected return on plan assets
4.00%
5.00%
7.08%
6.00%
4.75%
Rate of inflation
2.50%
2.00%
2.75%
3.00%
2.00%
Future salary increases
2.50%
2.30%
3.25%
3.00%
2.50%
EUR
2004
Opening balance
4,137
6,820
Additional provisions
1,165
782
Acquisitions
Used during year
Unused amounts reversed
Closing balance
400
–
(833)
(3,465)
(98)
–
4,771
4,137
The other provisions have been made in connection with liabilities related to normal business operations, which
include legal claims and restructuring.
19 Other current liabilities
Social security charges and taxes
Value added tax
Current company tax payable
Accrued expenses
2005
2004
13,085
10,994
6,047
4,778
9,631
5,569
22,995
20,032
Amounts due to personnel
25,190
20,917
Other
13,327
14,194
Total
90,275
76,484
x 1,000)
2005
Notes to the consolidated financial statements
(in
18.2 Other provisions
20 Other income
Other income is income not related to the key business activities of the Group or relates to incidental and/or
non-recurring items, like income from the sale of non-monetary assets (EUR 1,551) and government grants
(EUR 1,688).
21 Personnel expenses
2005
2004
266,674
232,636
42,684
35,135
Defined benefit plans
4,038
3,671
Defined contribution plans
8,768
8,575
8,881
8,688
331,045
288,705
Wages and salaries
Social security charges
Pension expenses
Other expenses related to employees
Total
In the year under review, the average number of full-time employees amounted to 7,718 (2004: 6,785).
The remuneration of the Executive and Supervisory Board is disclosed as part of the company financial
statements.
49
x 1,000)
EUR
(in
Notes to the consolidated financial statements
22 Other operating expenses
2005
Production expenses
2004
105,402
87,914
Selling expenses
28,033
21,480
Housing expenses
18,650
17,949
General expenses
48,096
42,361
1,871
1,503
202,052
171,207
Warranty costs
Total
Production expenses comprise mainly energy costs, repair and maintenance costs and freight and packaging
costs.
23 Net finance cost
2005
2004
19,488
18,254
1,996
1,998
(3,478)
(3,087)
Interest-rate swaps
(722)
(830)
Foreign exchange contracts
(167)
–
17,117
16,335
2005
2004
98,942
87,979
Interest expenses:
Bank borrowings and finance leases
Dividend on cumulative preference shares
Interest income
Fair value gains on financial instruments:
Total
24 Income tax expenses
Profit before tax
Expenses not deductible for tax purposes
Taxable profit
4,540
2,390
103,482
90,369
Tax calculated at domestic rates applicable to profit in the
respective countries
33,393
29,787
(9,068)
(6,562)
Utilisation of previously unrecognised tax losses
(5,303)
(5,065)
Tax charge
19,022
18,160
18.4%
20.1%
Tax relief facilities
Effective tax burden
50
EUR
Net profit before amortisation
Weighted average number of ordinary shares in issue (x1)
83,121
70,832
24,407,897
24,214,217
3.41
2.93
Basic earnings per ordinary share
Net profit before amortisation
Weighted average number of ordinary shares in issue (x1)
83,121
70,832
24,407,897
24,214,217
Share options outstanding at year-end (x1)
Weighted average number of shares for diluted earnings per share (x1)
2004
8,300
15,450
24,416,197
24,229,667
3.40
2.92
Diluted earnings per ordinary share
26 Contingencies
The Group has contingent liabilities in respect of bank and other guarantees arising in the ordinary course of
business. It is not anticipated that any material liabilities will rise from the contingent liabilities. The Group has
given guarantees in the ordinary course of business amounting to
EUR
4,693 (2004:
EUR
3,323) to third parties.
27 Operational lease and rent commitments
It has been agreed with banks that no security will be provided to third parties without the banks’ permission.
The real estate of some German and French group companies as well as some machines in France are
x 1,000)
2005
Notes to the consolidated financial statements
(in
25 Earnings per share
encumbered by a mortgage. In connection with recent acquisitions, there are commitments to make additional
payments, depending on the future financial developments of the companies concerned.
OPERATIONAL LEASE AND RENT COMMITMENTS
2005
2004
Due in less than 1 year
16,307
13,845
Due between 1 and 5 years
32,878
34,731
Due from 5 years or more
19,462
29,354
68,647
77,930
Total commitments
28 Business combinations
The Group acquired the following entities during 2005:
Group company
Head office in
Consolidation as from
Group activity
Société de Galvanoplastie Industrielle
France
1 April
Industrial Services
Kall Kühl- und Schanksysteme GmbH
Germany
1 April
Flow Control
Kirsebom & Ims Salg A.S.
Norway
1 June
Flow Control
Industrias Tey, S.L.
Spain
1 May
Industrial Services
Groupe C.G Industrie
France
1 May
Industrial Services
Accurate Brazing Corporation
USA
1 July
Industrial Services
Pegler Holdings Limited
United Kingdom
1 July
Flow Control
Hidroaplicaciones S.L.
Spain
1 August
Flow Control
51
x 1,000)
EUR
(in
Notes to the consolidated financial statements
28.1 Société de Galvanoplastie Industrielle
On 20 April 2005, the Group has announced to take over 100% of the share capital of Société de
Galvanoplastie Industrielle (SGI), a specialist in surface treatment with the aerospace industry as its most
important market. SGI is based in France. The acquired business has an annual revenue of
EUR
20 million.
28.2 Kall Kühl- und Schanksysteme GmbH
On 20 April 2005, the Group announced to take over all the assets of Kall Kühl- und Schanksysteme, which
specialises in cooling technology for dispense systems. Kall Kühl- und Schanksysteme is based in Germany.
The acquired business has an annual revenue of
EUR
3 million.
28.3 Kirsebom & Ims Salg A.S.
On 20 May 2005, the Group announced to take over all the assets of Kirsebom & Ims Salg, a fittings
manufacturer operating in Norway. The acquired business has an annual revenue of
EUR
2 million.
28.4 Industrias Tey S.L.
On 20 May 2005, the Group announced to take over 100% of the share capital of Industrias Tey, which
specialises in vacuum heat treatment processes. Its operations are located in Spain. The acquired business has
an annual revenue of
EUR
5 million.
28.5 Groupe C.G Industrie
On 20 June 2005, the Group announced to take over 100% of the share capital of Groupe C.G Industrie (CGI),
a company with two major specialisations: surface treatments (BMG SA for paints and coatings) and heat
treatments (ThermoTech TTG SA for high frequency induction heat treatment) operating in France. The
acquired business has an annual revenue of
EUR
4 million.
28.6 Accurate Brazing Corporation
On 14 July 2005, the Group announced to take over 100% of the share capital of Accurate Brazing. Accurate
Brazing, based in the United States of America, is a heat treatment company specialising in applications using
high-grade vacuum soldering technologies in the semiconductor, turbine and aerospace industries. The
acquired business has an annual revenue of
EUR
4 million.
28.7 Pegler Holdings Limited
On 26 August 2005, the Group announced to take over 100% of the share capital of Pegler. Pegler, based in
the United Kingdom, manufactures thermostatic radiator valves. It also has a comprehensive range of other
Flow Control products in its portfolio, including valves and sanitary fittings for the public sector. The acquired
business has an annual revenue of
EUR
70 million.
28.8 Hidroaplicaciones S.L.
On 15 September 2005, the Group announced to take over 100% of the share capital of Hidroaplicaciones,
which is specialised in Flow Control products and systems for gas and water distribution works.
Hidroaplicaciones is based in Spain. The acquired business has an annual revenue of
52
EUR
10 million.
EUR
x 1,000)
Industrial
Flow
Total
Services
Control
Group
Cash and cash equivalents
2,090
2,478
4,568
Property, plant and equipment
8,712
24,036
32,748
Intangible assets
8,608
22,150
30,758
Investments in associated companies
Inventories
51
3
54
548
14,511
15,059
Receivables and other current assets
9,954
17,156
27,110
Payables and other current liabilities
(9,985)
(19,489)
(29,474)
Employee benefit plans
(1,177)
–
(1,177)
(569)
(398)
(967)
(4,864)
(10,988)
(15,852)
1,137
(755)
382
14,505
48,704
63,209
23,113
68,731
91,844
(2,090)
(2,478)
(4,568)
(3,400)
(1,546)
(4,946)
17,623
64,707
82,330
8,608
20,027
28,635
Other provisions
Borrowings
Net deferred tax assets / (liabilities)
Net assets acquired
Purchase consideration settled in cash
Cash and cash equivalents in subsidiaries
acquired
Purchase consideration outstanding at
year-end
Cash outflow on acquisition
Goodwill
Notes to the consolidated financial statements
(in
The fair value of assets and liabilities arising from acquisitions are as follows:
The acquisitions of Industrias Tey (Industrial Services) and Pegler (Flow Control) contributed to the majority of
the total consideration paid.
29 Events after the balance sheet date
Early January 2006 Aalberts Industries announced the intention of acquiring a 100% stake in the French
company Comap S.A. from the also French company Legris Industries S.A.
Comap, with a revenue in 2005 of approximately
EUR
180 million and about 1,100 employees, is one of the
leading players in the European market for Flow Control products. With its head office in Lyon, it has eight
production units spread over France, Italy, United Kingdom and Brazil. It also has an extensive sales network
anchored in Southern Europe. Comap’s activities are divided into two main categories: water products (about
80% of revenue) which include fittings, radiator valves, water control/quality systems and ready-to-install
solutions for the installer and gas products (about 20% of revenue) which include pressure control systems and
tank connection sets for LPG.
The takeover of Comap fits into the long-term strategy of Aalberts Industries, which is aimed at strengthening
the group’s position in the Flow Control sector. The takeover creates a (for Europe, unique) network of
cooperating companies within the Aalberts Industries Group, which will jointly assume a leading market
position in almost all European countries.
In order to finance this acquisition Aalberts Industries has already arranged the necessary loans to this end.
The takeover will be completed in the first quarter of 2006, subject to approval from the regulatory authorities.
53
Transition from Dutch GAAP to IFRS
30 Transition from Dutch GAAP to IFRS
In preparing its opening IFRS balance sheet, the Group has adjusted the amounts reported previously in financial
statements prepared in accordance with Dutch GAAP. An explanation of the impact of IFRS on the Group’s
financial position and financial performance is set out in the following tables. Notes to the opening balance
sheet of the transition from Dutch GAAP to IFRS are presented in note 6.2. The IFRS transition has no impact on
the cash flow.
30.1 Consolidated opening balance sheet
31-12-2003
IFRS
01-01-2004
Dutch GAAP
adjustments
IFRS
201,713
–
201,713
–
2,786
2,786
226,492
14,416
240,908
1,033
–
1,033
Deferred tax assets
–
5,224
5,224
Non-current assets
429,238
22,426
451,664
Inventories
147,615
–
147,615
Trade receivables
105,877
13
105,890
16,332
142
16,474
89
–
89
Current assets
269,913
155
270,068
Total assets
699,151
22,581
721,732
212,900
(52,538)
160,362
382
–
382
Total equity
213,282
(52,538)
160,744
Non-current borrowings
182,956
16,027
198,983
–
40,840
40,840
Employee benefit plans
9,021
14,735
23,756
Deferred tax liabilities
7,876
–
7,876
Other provisions
6,820
–
6,820
206,673
71,602
278,275
(in
EUR
x 1,000)
Assets
Goodwill
Other intangible assets
Property, plant and equipment
Investments in associated companies
Other current assets
Cash and cash equivalents
Equity and liabilities
Shareholders’ equity
Minority interests
Cumulative preference shares
Non-current liabilities
54
Current borrowings
92,350
–
92,350
Current portion of non-current borrowings
62,930
519
63,449
Trade and other payables
63,770
788
64,558
Other current liabilities
60,146
2,210
62,356
Current liabilities
279,196
3,517
282,713
Total equity and liabilities
699,151
22,581
721,732
(in
EUR
x 1,000)
31-12-2004
IFRS
31-12-2004
Dutch GAAP
adjustments
IFRS
214,230
2,601
216,831
–
11,772
11,772
255,397
14,526
269,923
Assets
Goodwill
Other intangible assets
Property, plant and equipment
Investments in associated companies
99
–
99
Deferred tax assets
–
6,221
6,221
Non-current assets
469,726
35,120
504,846
Inventories
183,276
–
183,276
Trade receivables
117,677
52
117,729
17,764
(23)
17,741
111
–
111
Current assets
318,828
29
318,857
Total assets
788,554
35,149
823,703
267,677
(43,168)
224,509
2,305
–
2,305
Total equity
269,982
(43,168)
226,814
Non-current borrowings
181,005
16,568
197,573
Other current assets
Cash and cash equivalents
Transition from Dutch GAAP to IFRS
30.2 Consolidated closing balance sheet
Equity and liabilities
Shareholders’ equity
Minority interests
Cumulative preference shares
–
40,840
40,840
Employee benefit plans
9,181
18,943
28,124
Deferred tax liabilities
8,731
–
8,731
Other provisions
4,137
–
4,137
Non-current liabilities
203,054
76,351
279,405
Current borrowings
115,927
115,927
–
Current portion of non-current borrowings
53,733
551
54,284
Trade and other payables
70,703
86
70,789
Other current liabilities
75,155
1,329
76,484
Current liabilities
315,518
1,966
317,484
Total equity and liabilities
788,554
35,149
823,703
55
Transition from Dutch GAAP to IFRS
30.3 Equity and net profit
EQUITY
31-12-2004
01-01-2004
Equity based on Dutch GAAP
267,677
212,900
Employee benefits
(13,142)
(10,198)
(in
EUR
x 1,000)
Business combinations
Cumulative preference shares
Finance leases
–
(40,840)
87
(41)
(894)
(1,459)
Net effect on equity
(43,168)
(52,538)
Equity based on IFRS
224,509
160,362
Financial instruments
NET PROFIT
(in
EUR
2004
x 1,000)
Net profit based on Dutch GAAP
Employee benefits
Business combinations
Cumulative preference shares
56
11,621
(40,840)
56,344
–
11,621
–
Finance leases
128
Financial instruments
564
Net effect on net profit
12,313
Net profit based on IFRS
68,657
2004
IFRS
2004
Dutch GAAP
adjustments
IFRS
897,711
–
897,711
3,576
(3,576)
–
5,912
48
5,960
907,199
(3,528)
903,671
Raw materials used and work subcontracted
300,405
(3,575)
296,830
Personnel expenses
288,705
–
288,705
41,825
(1,385)
40,440
12,013
(12,013)
–
–
2,175
2,175
Other operating expenses
172,330
(1,123)
171,207
Total operating expenses
815,278
(15,921)
799,357
Operating profit
91,921
12,393
104,314
Net finance cost
14,522
1,813
16,335
Profit before tax
77,399
10,580
87,979
Tax expenses
17,895
265
18,160
Profit after tax
59,504
10,315
69,819
1,998
(1,998)
_
57,506
12,313
69,819
56,344
12,313
68,657
1,162
–
1,162
Basic
2.82
0.11
2.93
Diluted
2.82
0.10
2.92
(in
EUR
x 1,000)
Revenue
Changes in inventories of finished products
and work in progress
Other income
Total operating income
Depreciation of property, plant and
equipment
Amortisation of goodwill
Amortisation of other intangible assets
Dividend on cumulative preference shares
Net profit
Transition from Dutch GAAP to IFRS
30.4 Consolidated income statement
Attributable to:
Ordinary shareholders
Minority interest
Earnings per ordinary share (before amortisation)
57
Company financial statements
31 Company balance sheet
(in
EUR
x 1,000)
notes
31-12-2005
31-12-2004
17
34
16
28
420,348
337,999
420,381
338,061
Fixed assets
Intangible fixed assets
33
Other intangible fixed assets
Tangible fixed assets
33
Other tangibile fixed assets
Financial fixed assets
33
Investments in associated companies
Current assets
Debtors
Receivables from group companies
377
502
6,225
9,013
6,602
9,515
426,983
347,576
Other debtors, prepayments and accrued income
Total assets
Liabilities
Shareholders’ equity
33
Ordinary shares
24,408
24,214
149,287
149,322
Other reserves
45,978
(17,684)
Retained earnings
78,767
68,657
298,440
224,509
30,630
40,840
4,661
5,231
90,857
71,997
Share premium account
Non-current liabilities
Cumulative preference shares
33
Provisions
Deferred taxation
Current liabilities
Credit institutions
Trade creditors
33
73
263
226
2,099
4,700
93,252
76,996
426.983
347,576
Taxation and social security charges
Other payables, accruals and deferred income
Total equity and liabilities
32 Company income statement
(in
EUR
x 1,000)
Profit from subsidiaries after tax
Other income and expenses after tax
Profit of the Group
58
2005
2004
76,937
68,540
1,830
117
78,767
68,657
EUR
x 1,000)
33.1 Accounting principles
The company financial statements of Aalberts Industries N.V. are prepared in accordance with Generally
Accepted Accounting Principles in the Netherlands and compliant with the requirements included in Part 9 of
Book 2 of the Netherlands Civil Code.
As from 2005, Aalberts Industries N.V. prepares its consolidated financial statements according to International
Financial Reporting Standards (IFRS) as adopted by the European Union.
Use has been made of the possibility to apply the accounting policies used for the consolidated financial
statements to the financial statements of the company. These accounting policies have been used as of
1 January 2004 and the differences resulting from the change in accounting policies are recorded in equity.
The company income statement has been drawn up using the exemption of article 402 of Part 9, Book 2 of the
Netherlands Civil Code.
The associated companies are stated at net asset value in accordance with the accounting policies applicable to
the consolidated financial statements.
33.2 Fixed assets
Other tangibles
Software
fixed assets
As at 1 January 2005
Cost
538
54
(510)
(20)
28
34
Additions
–
–
Disposals
–
–
(12)
(17)
Accumulated depreciation
Net book amount
Notes to the company financial statements
(in
33 Notes to the company financial statements
Movements 2005
Depreciation
As at 31 December 2005
Cost
Accumulated depreciation
Net book amount
400
54
(384)
(37)
16
17
33.3 Financial fixed assets
Investments in associated companies
As at 1 January 2005
Share in 2005 profit
Increase in capital
Acquisitions
Dividends paid
Exchange differences and other movements
As at 31 December 2005
337,999
76,937
–
422
–
4,990
420,348
59
x 1,000)
EUR
(in
Notes to the company financial statements
33.4 Shareholders’ equity
Share
Share
Currency
Other
Retained
capital
premium
translation
reserves
Earnings
Total
account adjustments
As at 1 January 2004
23,739
149,683
–
(55,571)
42,511
160,362
–
–
–
42,511
(42,511)
–
(2,753)
Profit appropriation
Dividends
463
(463)
–
(2,753)
–
Issue of share capital
12
102
–
–
–
114
Profit for the period
–
–
–
12,313
56,344
68,657
Exchange rate differences
–
–
(632)
1,339
–
707
Other movements
–
–
–
(2,578)
–
(2,578)
24,214
149,322
(632)
(4,739)
56,344
224,509
–
–
–
56,344
(56,344)
–
181
(181)
–
(9,992)
–
(9,992)
13
146
–
–
–
159
As at 31 December 2004
Profit appropriation
Dividends
Issue of share capital
Profit for the period
–
–
–
–
78,767
78,767
Exchange rate differences
–
–
2,811
562
–
3,373
Other movements
–
–
–
1,624
–
1,624
24,408
149,287
2,179
43,799
78,767
298,440
As at 31 December 2005
The authorised share capital amounts to
36,000,000 ordinary shares of
24,999,900 preference shares of
100 priority shares of
EUR
EUR
EUR
61 million divided into:
1.00 par value each
EUR
1.00 par value each
1.00 par value each
The issued share capital increased in the course of the year under review by 193,680 ordinary shares as a result
of payment of stock dividend for the year 2004 and the exercise of share option rights.
As at 31 December 2005, 24,407,897 ordinary shares and 100 priority shares were issued.
The currency translation adjustments are not to be used for profit distribution.
33.5 Cumulative preference shares
The Certificates of Preference Shares issued against financing preference shares are held by the ‘Stichting
Administratiekantoor Financieringspreferente Aandelen Aalberts Industries’. The aim of the foundation is the
acquisition by title of trust and administration of registered cumulative preference shares in the capital of the
company. The foundation was incorporated on 12 March 1999 under Dutch law, and has its registered office in
Utrecht. As of December 2005, 25% of the shares were repurchased at par value for
EUR
10,210. The Group has
the option to repurchase 25% of the shares at par value at the end of 2006, 2007 and 2008 respectively. The
average dividend on the cumulative preference shares in the year under review amounted to 4.9% (2004: 4.9%).
33.6 Profit appropriation
In accordance with the resolution of the General Meeting of Shareholders held on 21 April 2005, the profit for
2004 has been appropriated in conformity with the proposed appropriation of profit stated in the 2004
Financial Statements.
The net profit for 2005 attributable to the ordinary shareholders amounting to
accordance with Article 30, paragraph 3 of the articles of association.
60
EUR
78,767 shall be available in
EUR
0.85 in cash per ordinary share of
EUR
1.00 par value,
be charged to the retained earnings or to the tax-exempt share premium account. Any residual profit shall be
added to reserves.
33.7 Remuneration of the Executive and Supervisory Board
In 2005, total remuneration of the Executive Board amounted to
received a salary of
EUR
412 (2004:
EUR
EUR
1,358 (2004:
412) and a bonus amounting to
EUR
EUR
205 (2004:
1,242). Mr. J. Aalberts
EUR
169). At year-end he
held a total of 3,430,230 ordinary shares (2004: 3,430,056) in Aalberts Industries N.V. Mr. B.P. Bolkenstein also
received a salary of
EUR
412 (2004:
contribution amounting to
EUR
EUR
412) and a bonus amounting to
124 (2004:
EUR
EUR
205 (2004:
EUR
169). A pension
80) was also paid on his behalf. At year-end he held a total of
34,863 ordinary shares (2004: 427,098) in Aalberts Industries N.V.
The following fixed individual remunerations were paid to members of the Supervisory Board:
(in
EUR
x 1,000)
2005
2004
P.W.A. Niessen, Chairman
35
25
C.J. Brakel
30
22
A.H. Land
30
22
A.B. van Luyk
30
22
125
91
Total
x 1,000)
EUR
or, at the discretion of the shareholders, in ordinary shares. At the shareholder’s option, payment in shares will
Notes to the company financial statements
(in
The Executive Board proposes to declare a dividend of
No loans, advances, guarantees or options have been granted to the members of the Supervisory Board.
At year-end, no members of the Supervisory Board held shares in Aalberts Industries N.V.
33.8 Related parties
The Executive Board and the group companies have been identified as related parties.
33.9 Liability
The company has guaranteed the liabilities of most of its Dutch group companies in accordance with the
provisions of article 403, paragraph 1, Book 2, Part 9 of the Netherlands Civil Code. As a consequence, these
companies are exempt from publication requirements. The company forms a tax unity with almost all of its
Dutch subsidiaries.
Langbroek, 27 February 2006
The Executive Board
The Supervisory Board
Jan Aalberts, President & CEO
Pieter Niessen, Chairman
Bert Bolkenstein, Managing Director
Cor Brakel
Andrew Land
Dries van Luyk
61
Notes to the company financial statements
34 Special controlling rights under the articles of
association
One hundred issued and paid-up priority shares are held by Stichting Prioriteit ”Aalberts Industries N.V.”,
whose executive committee consists of Management Board and Supervisory Board members of the company
and an independent third party. Every executive committee member who is also a member of the Management
Board of Aalberts Industries N.V. has the right to cast as many votes as there are executive committee members
present or represented at the meeting who are also members of the Supervisory Board of Aalberts Industries
N.V. Every executive committee member who is also a member of the Supervisory Board has the right to cast as
many votes as there are executive committee members present or represented at the meeting who are also
members of the Management Board of Aalberts Industries N.V. The independent member of the executive
committee has the right to cast a single vote.
The following principal powers are vested in the holders of priority shares:
authorisation of every decision to issue shares,
authorisation of every decision to limit or exclude the preferential rights of shareholders in the event of an
issue of ordinary shares,
authorisation of every decision to buy paid-up shares in shareholders’ equity or certification thereof
without payment or subject to conditions,
authorisation of every decision to dispose of shares held by the company,
authorisation of every decision to reduce the issued capital through the cancellation of shares or through a
decrease in the par value of shares by amending the articles of association,
authorisation of the transfer of preference shares,
determination of the number of members of the Executive Board,.
to make a binding nomination to the General Meeting of Shareholders concerning the appointment of
management and supervisory board members,
to approve the sale of a substantial part of the operations of the company,
to approve acquisitions that would signify an increase of more than 15% in the company’s revenue, or that
would involve more than 10% of the company’s balance sheet total,
to approve the borrowing of funds that would involve an amount of
to recommend to the General Meeting of Shareholders a change in the Articles of Association, a legal
EUR
100 million or more,
merger, a split-up or the dissolution of the company.
The full text of the Articles of Association of Aalberts Industries N.V. may be found on its website:
www.aalberts.com.
62
Pieter Niessen, Chairman
Male. Born 1937. Dutch nationality.
Entrepreneur
Appointed 1991. Present term until 2008.
Supervisory Board memberships: Member Supervisory Board Meyn Foodsystems B.V., Bhold Company B.V.,
Telecombine B.V. and TTA B.V.
Cor Brakel
Male. Born 1937. Dutch nationality.
Former President & CEO of Wolters Kluwer N.V.
Appointed 1999. Present term until 2007.
Supervisory Board memberships: Chairman Supervisory Board Athlon Holding N.V., Berlage Winkelfonds
Duitsland N.V. and USG People N.V. and Member Supervisory Board PCM Uitgevers B.V.
Andrew Land
Male. Born 1939. Canadian nationality.
Former President & CEO of Hagemeyer N.V.
Appointed 2000. Present term until 2008.
Supervisory Board membership: Member Supervisory Board Hal Holding N.V.
Dries van Luyk
Male. Born 1945. Dutch nationality.
Notes to the company financial statements
35 Personal particulars of the members of the
Supervisory Board
Former Managing Director Division Passage Koninklijke Luchtvaart Maatschappij N.V.
Appointed 1996. Present term until 2007.
Additional functions: President Advisory Council Key Technology, Inc. and member Advisory Council Deerns
Group.
63
Auditors’ report
36 Auditors’ report
To the General Meeting of Shareholders
Introduction
In accordance with your assignment we have audited the financial statements of Aalberts Industries N.V.,
Langbroek, for the year 2005 as set out on pages 25 to 61. These financial statements consist of the
consolidated financial statements and the company financial statements. 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
presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Opinion with respect to the consolidated financial statements
In our opinion, the consolidated financial statements give a true and fair view of the financial position of the
company as at 31 December 2005 and of the result and the cash flows for the year then ended in accordance
with International Financial Reporting Standards as adopted by the EU and also comply with the financial
reporting requirements included in Part 9 of Book 2 of the Netherlands Civil Code as far as applicable.
Furthermore, we have to the extent of our competence, established that the annual report is consistent with
the consolidated financial statements.
Opinion with respect to the company financial statements
In our opinion, the company financial statements give a true and fair view of the financial position of the
company as at 31 December 2005 and of the result for the year then ended in accordance with accounting
principles as generally accepted in the Netherlands and also comply with the financial reporting requirements
included in Part 9 of Book 2 of the Netherlands Civil Code.
Furthermore, we have to the extent of our competence, established that the annual report is consistent with
the company financial statements.
Utrecht, 27 February 2006
PricewaterhouseCoopers Accountants N.V.
P. Jongerius RA
64
List of group companies
Aalberts Industries N.V.
(t) +31 (0) 343 565 080
Sandenburgerlaan 4, 3947 CS LANGBROEK
(f) +31 (0) 343 565 081
P.O. Box 11, 3940 AA DOORN
(e) info@aalberts.nl
Netherlands
(w) www.aalberts.com
The following significant group companies are included in the consolidated financial statements of Aalberts
Industries N.V. It concerns wholly owned subsidiaries, unless indicated otherwise.
Industrial Services
Company name
City/country
Website (www)
Adex B.V.
Venlo, NL
adex-dies.com
Bloemen Verspanings Techniek B.V.
Ootmarsum, NL
Industrial Products
Machinefabriek Dedemsvaart B.V.
’t Harde, NL
Eurocast B.V.
Apeldoorn, NL
Fijnmechanische Industrie Venray B.V.
Cuijk, NL
fivbv.nl
Germefa B.V.
Alkmaar, NL
germefa.nl
eurocast.nl
Hartman Fijnmechanische Industrie B.V.
Groenlo, NL
Kluin Wijhe B.V.
Wijhe, NL
kluinwijhe.com
Machinefabriek Van Knegsel B.V.
Vessem, NL
vanknegsel.nl
Leco Products B.V.
Ede, NL
lecoproducts.nl
Mifa Aluminium B.V.
Venlo, NL
mifa.nl
Mogema B.V.
‘t Harde, NL
mogema.nl
Nowak S.A.S.
Pancé, F
nowak-sa.com
Overeem B.V.
Ede, NL
overeembv.nl
Machinefabriek Technology Twente B.V.
Hengelo, NL
technologytwente.nl
Material Technology
Accurate Brazing Corporation
Goffstown, USA
accuratebrazing.com
AHC Oberflächentechnik GmbH
Kerpen, D
ahc-surface.com
AHC Oberflächentechnik Special Coatings GmbH
Kerpen, D
ahc-surface.com
AHC-Surface Technology S.A.R.L.
Faulquemont, F
ahc-surface.com
AHC Tratamento de Superficies Lda
Setúbal, P
ahc-surface.com
BGT B.V. (h.o.d.n. AHC Oppervlaktetechnieken)
Eindhoven, NL
ahc-surface.com
BMG SA
Thyez, F
H&ST Heat & Surface Treatment B.V.
Eindhoven, NL
Hærderiet A/S
Skanderborg, DK
Härterei Hauck Süd GmbH
Gaildorf-Großaltdorf, D
Härterei Hauck GmbH
Remscheid-Lüttringhausen, D
haerterei-hauck.de
Imecotec GmbH
Kerpen, D
imecotec.de
Ionic Technologies Inc. (94%)
Greenville SC, USA
ionic-tech.com
J:son Härd AB
Värnamo, S
jsonhard.se
KTS Gruppo AHC srl (90%)
Opera MI, I
ahc-surface.com
Mamesta B.V.
Lomm, NL
mamesta.nl
h-st.nl
haerterei-hauck.de
Metalografica de Aragon, S.A. (77,5%)
Zaragoza, E
trateriber.es
Métatherm S.A.S.
Vermondans, F
metatherm.fr
RIAG Oberflächentechnik AG
Wängi TG, CH
ahc-surface.com
Société de Galvanoplastie Industrielle
Plaisir, Fr
Stålservice i Anderstorp AB
Anderstorp, S
Industrias Tey S.L.
Atxondo, E
stalservice.se
infonegocio.com/
industriastey
ThermoTech TTG SA
Thyez, Fr
Sociedad de Herramentistas y Tratamentistas S.A. (88,82%)
Amorebieta, E
trateriber.es
Industrias Traterh S.A.
Madrid, E
trateriber.es
Traitesa Catalunya S.L.
Barcelona, E
trateriber.es
TTI Group
Luton, Beds., UK
ttigroup.co.uk
Metalis S.A.S.
Vermondans, F
metalis.fr
Metalis Polska Sp.z.o.o.
Zabkowice Slaskie, PL
metalis.fr
Sud Découpage Antibes S.A.S.
Antibes, F
sud-decoupage.com
Metalis
66
Company name
City/country
Website (www)
Broen A/S
Assens, DK
broen.com
Broen Valves Ltd.
Tipton, West Midlands, UK
broen.co.uk
Broen Malaysia Sdn Bhd
Selangor, MY
broen.com.my
Broen S.A.
Dzierzoniow, PL
broen.pl
Broen
Broen Singapore Pte Ltd
Singapore, SG
broen.com.sg
Broen, Inc. (50%)
Birmingham AL, USA
broeninc.com
Broen-ADL OOO
Moscow, RU
broen.ru
Broen Production OOO
Moscow, RU
broen.ru
Broen Raufoss AB
Hisings Backa, S
broen.se
Clorius Controls A/S
Ballerup, DK
cloriuscontrols.com
efka-GAM Armaturen GmbH
Gernsheim, D
efkagam.de
List of group companies
Flow Control
Dispense Systems Europe
Dispense Systems International B.V.
Hilversum, NL
dispensegroup.com
DSI Getränkearmaturen GmbH
Hamm, D
dispensegroup.com
Kall Kühl- und Schanksysteme GmbH
Haiger-Weidelbach, D
kall-schank.de
VTI Ventil Technik GmbH
Menden, D
vti.de
North American Dispense Systems, Inc.
San Antonio TX, USA
nadsinc.com
Taprite-Fassco Mfg., Inc.
San Antonio TX, USA
taprite.com
Dispense Systems USA
Flow Control Benelux
Conti Sanitärarmaturen GmbH
Wettenberg, D
conti-armaturen.com
HSF Samenwerkende Fabrieken B.V.
Duiven, NL
hsfbv.nl
VSH Fittings B.V.
Hilversum, NL
vsh.nl
VSH Flow Control B.V.
Almere, NL
vsh.nl
VSH Flow Control N.V.
Wijnegem, B
vsh.nl
VSH Italia s.r.l.
Bregnano, I
vsh.nl
Meibes System-Technik GmbH
Gerichshain, D
meibes.de
Meibes s.r.o.
Prague, CZ
meibes.de
Meibes Metall-Technik Sp.z.o.o. (60%)
Gorzów, PL
meibes.de
PUZ Meibes Sp.z.o.o. (80%)
Leszno, PL
meibes.de
Flow Control Germany
Roßweiner Armaturen und Meßgeräte GmbH & Co. OHG
Roßwein, D
rossweiner.de
Melcher & Frenzen Armaturen GmbH
Velbert, D
seppelfricke.com
Seppelfricke Armaturen GmbH & Co. OHG
Gelsenkirchen, D
seppelfricke.com
Simplex Armaturen + Fittings GmbH & Co. KG
Argenbühl/Allgäu, D
simplex-fit.de
Aquatis France S.A.S.
La Chapelle Saint-Mesmin, F
aquatis.fr
Hidroaplicaciones S.A.
Pinto, E
hidroaplicaciones.com
Standard Hidráulica S.A.
Montcada i Reixac, E
standardhidraulica.com
Elkhart Products Corporation
Elkhart, Indiana, USA
elkhartproducts.com
Elkhart Products Limited
Burlington, Ontario, CND
elkhartproducts.com
Pegler Limited
Doncaster, GB
pegler.com
Yorkshire Fittings Ltd.
Leeds, GB
yorkshirefittings.co.uk
Yorkshire Fittings Gyártó Kft.
Budapest, H
yorkshirefittings.co.uk
Flow Control South Europe
Flow Control UK/USA
Raufoss Water & Gas
Isiflo S.A.S.
Molsheim, F
isiflo.com
Raufoss Water & Gas AS
Raufoss, N
isiflo.com
Raufoss Metall GmbH
Hemer-Becker, D
isiflo.com
67