2323 NWS jrvrslg`05 3-62 ENG

CONTENTS
Company profile
4
List of operating companies and their activities
5
Key developments in 2004
6
The Neways group in the last five years
8
Strategy and objectives
9
Risk factors
11
Corporate governance
13
Information about Neways shares
20
Supervisory directors, Board of Directors and management structure
23
Report of the Supervisory Board
24
Report of the Board of Directors
26
- General business performance
..........................................................................................................................................................
- Developments in the operating companies
28
..........................................................................................................................................................................................................
- Dividend proposal
- Net turnover
33
..............................................................................................................................................................................................
33
- Purchasing and logistics
- Investments
.....................................................................................................................................................................
34
35
...............................................................................................................................................................................................
- Financial structure, liquidity and cash flow
..............................................................................................................................
35
35
..................................................................................................................................................................................................
- Trade unions and Works Councils
- Organisation and management
..................................................................................................................................................
36
........................................................................................................................................................
37
- IFRS publication obligation (2005)
................................................................................................................................................
- Changeover to lead-free production (2006)
38
...............................................................................................................................................
38
..................................................................................................................................................................
40
- Market trends and competitiveness
- Outlook for the year 2005
37
...............................................................................................................................
Statement by the Board of Directors on internal control
41
Annual accounts
42
- Consolidated balance sheet (after profit appropriation)
.......................................................................................................
43
............................................................................................................................................
44
..................................................................................................................................................
45
- Consolidated profit and loss account
- Consolidated cash flow statement
- Notes to the consolidated balance sheet and the consolidated profit and loss account
......................................
46
..............................................................................................................
56
...................................................................................................................................................
57
- Company balance sheet (after profit appropriation)
- Company profit and loss account
- Notes to the Company balance sheet and profit and loss account
.................................................................................
Other data
- Auditor’s report
57
60
.......................................................................................................................................................................................
- Commercial Register
.............................................................................................................................................................................
- Profit appropriation as laid down in the articles of association
- Profit appropriation proposal
......................................................................................
60
60
60
............................................................................................................................................................
- Special controlling rights conferred by the articles of association
.................................................................................
This annual report is a translation of the Dutch annual report. In cases where textual inconsistencies
between the Dutch and English versions occur, the Dutch version will prevail.
61
61
2 0 0 4
- Employees
33
..................................................................................................................................................................................
N E W A Y S
- Results
26
................................................................................................................................
3
C O M PA N Y P R O F I L E
Neways Electronics International N.V., a company listed on the
Neways develops and produces customised electronic products
Euronext Amsterdam Exchanges, is an internationally operating
for the industrial and professional markets in close consultation
supplier of industrial and professional electronics. Neways is
with the customer, focusing on smaller specialised series and
established at the Science Park Eindhoven in Son (Netherlands).
with an emphasis on flexibility, delivery reliability and product
The company posted turnover of EUR 189.7 million in 2004. The
quality.
Netherlands accounted for 66% of this turnover, Germany for
16%, the rest of Europe for 13%, and countries outside Europe
As well as the production and assembly of PCBs and cable
for 5%. Neways has ten operating companies in the Netherlands,
assemblies, Neways is concentrating more and more on
two in Germany, two in China and two in Eastern Europe. At the
development, systems assembly, testing, and service and repair.
end of 2004 Neways had 1,891 employees, of whom 1,220 in the
Neways delivers its products and services to Original Equipment
Netherlands and Germany and 671 in Slovakia and China.
Manufacturers, such as, for example, Philips, ASML and Lucent,
and to industrial suppliers in various market sectors. Neways
Neways operates in the market for Electronic Manufacturing
products are used in sectors such as semiconductors, medical
Services (EMS). Its core activities are assembly processes
equipment, telecommunications and the automotive industry.
involving the placement of electronic components on printed
Neways seeks to work with its customers on the basis of
circuit boards (Printed Circuit Board Assembly, or PCBA) and
intensive, long-term relations.
systems assembly.
Neways has eight operating companies specialising in PCBA,
each having its own characteristics and concentrating on one or
a few precisely defined product/market combinations. Component
assembly is carried out both mechanically and manually.
Mechanical placement enables electronic components to be
mounted at high speed. Manual placement is used for small
series involving special components and sometimes for the
construction of prototypes.
Three Neways operating companies are active in the field of
systems assembly. Systems assembly involves customised work
for the introductory and production phases of sophisticated
control systems. The wide diversity and the great complexity of
the electronic and mechanical components in these systems make
considerable demands in terms of both technology and logistics.
Neways is able to meet customers’ technical needs in relation to
these systems, as well as providing the supply chain
management to meet their logistical demands and requirements.
Two Neways operating companies specialise in the development
and production of microelectronics and three are engaged in the
development and production of cable systems.
To facilitate effective contact with its customers, Neways has a
number of units close to their locations. Significant cost
reductions are achieved by outsourcing work to operating
N E W A Y S
2 0 0 4
companies in Eastern Europe and China.
4
L I S T O F O P E R AT I N G C O M PA N I E S A N D T H E I R A C T I V I T I E S
PCBA
Development Engineering
& Prototype
assembly
Neways Industrial Systems
Neways Advanced Applications
•
Ripa
•
•
Neways Leeuwarden
•
Evic Electronics
•
Systems
assembly
Electronics
assembly
Micro
electronics
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Evic Service & Repair
•
Hymec
•
Ximec
•
•
•
•
Neways Kassel
•
•
Neways Neunkirchen
•
•
Q-Nova
•
•
•
•
•
•
•
•
2 0 0 4
•
Neways Heerlen/Si-Lectron
Styl (partner-firm)
•
N E W A Y S
Neways Wuxi
Service &
Repair/
EMR
•
•
•
Hoyte
Cable
assembly
5
KEY DEVELOPMENTS IN 2004
• After three years in which the EMS market shrank, there was a
• In 2004, Neways once again devoted a lot of attention to
slight recovery in 2004. In the course of the year, customers
reducing costs, improving the efficiency of the purchasing and
gradually showed a greater willingness to invest. In the first
logistics processes and improving the working relationship
half of the year, growth was mainly driven by an upswing in
between the Neways operating companies in the commercial
demand from the semiconductor industry. From the beginning
field. This resulted in a definite improvement in delivery
of the second half of the year, demand from other sectors also
reliability and customer satisfaction. Both are now well above
showed a hesitant upturn. Helped by these market
90%.
developments, autonomous growth of turnover of 11% was
posted in 2004.
• To improve competitiveness, the outsourcing of production to
cheaper production countries has been further extended. In this
• After three loss-making years in which a thorough
connection, a second production facility came on stream in
restructuring of the Company took place, Neways made a
Slovakia last year. The number of Neways employees in
profit again in 2004. Much-improved competitiveness and
Eastern Europe and China increased by 14% last year to a total
greater customer orientation meant that the Company was able
of 671 at the end of the year. As a consequence of the
to bounce back as market conditions improved slightly. The
acquisition of Stork Electronics there was also a net increase in
operating result (excluding special income and expenses)
the number of employees in Western Europe, which went up by
climbed to EUR 9.3 million in 2004 (2003: a loss of EUR 0.5
24% to 1,220, bringing the total number of Neways employees
million). The net result also showed a marked improvement,
at year-end 2004 to 1,891. In 2004 the operating companies in
from a loss of EUR 6.3 million in 2003 to a net profit of EUR
Slovakia and China were for the first time included in full in
4.6 million, with an effective tax rate of 44%, due to an once-
the consolidated Neways accounts.
only downward revaluation of the deferred tax benefit.
Without this write-down because of the reduction of the tax
• In November it was announced that there will be a phasing-
rate pevailing in the Netherlands, the net result was EUR 5.2
out of the mobile telephone service and repair business of the
million.
operating company Evic Service & Repair in Echt
(Netherlands). This affects a total of approximately 55
• The last major reorganisation still in progress at Neways was
other Neways facilities and other firms in the sector. As part of
transfer of the production of cables and cable systems to the
this phasing-out operation, the 55% interest in Evic Service &
Slovakian affiliated company Q-Nova. This more or less
Repair Hungary Kft. at Budapest has also been sold. The
brought to a close the far-reaching programme of restructuring
facility in Hungary employed 25 persons. Mobile telephone
that has taken place at Neways over recent years.
service and repair is not a core activity of Neways.
• Stork Electronics was acquired halfway through the year, and
investment policy and proper control of working capital,
This takeover will enable Neways to give a powerful impulse to
Neways succeeded in generating in 2004, as in the preceding
the further expansion of key strategic competencies like the
year, a positive net cash flow (cash flow from operational and
engineering of electronic components and systems assembly.
investment activities, excluding the financing of the
The takeover was partly financed by a private placement of
acquisition of Stork Electronics) of EUR 9.2 million. Under the
760,000 ordinary shares at a price of EUR 4.00. The new
impact of the inclusion in the balance sheet for the first time
operating company, which was included in Neways’ accounts
of the operating companies in Eastern Europe and China, the
from 1 July under the name Neways Advanced Applications,
acquisition and consolidation of Stork Electronics and the
had 323 employees (including contractors) at year-end 2004
posting of autonomous growth, the balance sheet total
and contributed extra turnover of EUR 42.9 million.
increased by 45%. The solvency percentage remained with
In combination with the autonomous growth of turnover that
32.2% at a good level.
EUR 189.7 million for the year 2004 as a whole, compared
2 0 0 4
with EUR 136.5 million in 2003.
N E W A Y S
• Partly thanks to the profit that was posted, a restrictive
this represented an important step in Neways’ growth strategy.
was achieved, this meant that turnover increased by 39% to
6
employees, some of whom have already been transferred to
completed in Heerlen in the course of 2004. This involved the
Neways is already involved in its customers’ projects at an
early stage. Reaching clear understandings and regular
monitoring of compliance with these understandings
and of the progress of projects is the way to ensure
a successful end-result.
THE NEWAYS GROUP IN THE LAST FIVE YEARS
Amounts x EUR 1,000,000 unless otherwise stated
2004
2003
2002
2001
2000
Net turnover
189.7
136.5
154.7
201.9
219.9
Value added
81.1
57.9
64.2
83.9
101.9
Operating result excl. special income and expenses
9.3
(0.5)
(1.2)
2.4
6.0
Operating result
9.5
(7.4)
(2.9)
(2.6)
6.0
Net result excl. special income and expenses
4.5
(1.7)
(2.9)
0.3
3.1
Net result
4.6
(6.3)
(4.0)
(21.1)
3.1
Net cash flow *)
Shareholders’ equity
Guaranteed equity **)
Balance sheet total
5.2
9.4
(18.2)
(26.0)
20.4
(4.1)
13.1
18.7
20.7
39.4
33.1
23.8
31.3
29.8
48.5
102.9
71.1
86.8
112.0
133.6
Capitalised goodwill (with effect from 2001)
0.0
0.0
0.2
0.3
0.0
Interest coverage ratio ***)
5.8
(0.3)
(0.5)
1.1
4.1
Debt/EBITDA ratio
2.3
8.3
9.7
15.6
2.7
Shareholders’ equity as % of balance sheet total
19.8
18.4
21.6
18.5
29.5
Guaranteed equity as % of balance sheet total
32.2
33.5
36.1
26.6
36.3
22.1
(12.9)
(15.7)
1.3
7.9
Solvency
Profitability ratios ***)
Return on shareholders’ equity
Operating result as % of net turnover
4.9
(0.4)
(0.8)
1.2
2.7
Net profit as % of net turnover
2.4
(1.2)
(1.9)
0.1
1.4
23.2
(2.0)
(3.5)
6.1
9.8
Operating result as % of capital invested
Data per employee
Average number of employees (on full-time basis) incl.
subsidiaries consolidated from 2004
1,836
1,563
1,638
1,837
2,030
Average number of employees (on full-time basis) excl.
-
1,075
1,240
1,497
1,744
Net turnover per employee (x 1,000)
subsidiaries consolidated from 2004
103
127
125
135
126
Value added per employee (x 1,000)
44
54
52
56
58
0.53
Data per ordinary share in euros
Net profit
0.54
(0.81)
(0.57)
(3.28)
Net profit ***)
0.53
(0.22)
(0.41)
0.04
0.53
Shareholders’ equity
2.39
1.69
2.65
3.22
6.66
Net cash flow
(0.48)
0.67
1.33
(2.83)
(4.39)
Dividend
0.00
0.00
0.00
0.00
0.16
Dividend as % of net profit ***)
0.00
0.00
0.00
0.00
30.20
8,526
7,766
7,066
6,426
5,919
5.41
2.65
6.20
10.15
14.50
Number of shares at year-end x 1,000
N E W A Y S
2 0 0 4
Highest share price
8
Lowest share price
2.40
1.50
2.00
4.30
6.25
Closing price on 31 December
5.05
2.40
2.50
4.99
6.45
*)
In 2004 including the acquisition of assets and liabilities of Stork Electronics totalling EUR 13.3 million
**)
Including subordinated loans from lending institutions
***) Not taking into account the special income and expenses
S T R AT E G Y A N D O B J E C T I V E S
Strategy
production is increasingly being outsourced to cheaper-
Neways’ strategy is aimed at developing strong positions in
production countries.
attractive niche markets. Neways’ main consideration in its
An important pillar of Neways' strategy is therefore the creation
choice of niche markets is the fact that it is a supplier to Original
of production capacity in Eastern Europe and China, where costs
Equipment Manufacturers, but is not itself an OEM. Neways
are appreciably lower than in Western Europe. Larger and stable
operates in niche markets characterised by specialised small and
volumes involving a relatively large amount of manual work can
medium-size volumes, mainly in the professional market, though
be produced more cost-effectively in Eastern Europe and China.
also smaller volumes in the market for consumer products.
We shall work more and more with local customers and local
Customer orientation and the creation of long-term relations
suppliers in those regions.
with customers have a high priority in Neways’ strategy. Neways’
customers concentrate on their core activities and make
Neways' strategy is focused on growth of turnover and net
increasing use of outsourcing, whether it be the outsourcing of
profit. Not only our shareholders demand this, but our customers
development and engineering, production and assembly, systems
too. Many of them are increasingly operating internationally
assembly or service and logistics. Important aspects of customer
and want suppliers who are able to follow their growth on all
orientation are (production) costs, time to market, quality and
continents. Autonomous growth of about 10 to 15% per year is
delivery reliability. Neways’ customers are also asking for service
essential, since this demonstrates the Company's internal
and repair capacity to be increased. If electronic components can
strength. However, this level of internal growth is not sufficient
no longer be supplied, Neways has the engineering capacity to
for us to achieve our long-term growth objectives, and so we
redesign the product and to replace those components with new
also seek growth by means of acquisitions.
or different types (life cycle management). In this connection, the
expansion of the Electronic Mechanical Repair (EMR) activities is
The quality of employees and management plays an important
part of Neways’ strategy for the coming years.
role in the formulation and fulfilment of the strategy. They are
the ones who have to give substance to the strategy and have to
Neways is very much dependent on its relations with its
determine and execute policy. Good internal working
suppliers. These are specialist distributors, or manufacturers of
relationships and mutual respect between all levels of the
components. The right cost prices and flexible terms of delivery
organisation are essential in this connection. The management
are essential aspects of the relationship. Optimisation of the
plays a crucial role here. Managers are appraised on the basis of,
purchasing and logistics processes is crucial to this. Neways
and are accountable for, the results they achieve, their customer
seeks long-term partnerships with a number of carefully selected
orientation and their ability to solve problems together with
suppliers.
others. Neways seeks to create scope for career development for
everyone in the Company. Neways wants to display a high
A key element of Neways' strategy is the co-development of
degree of openness towards shareholders and to provide the
electronics. In this way it is responding to market trends,
latter, whether (large or small) private investors or institutional,
developing electronics with and on behalf of customers. The
professional investors, with the greatest possible say in the
outsourcing of development has been made possible by the
running of the company.
availability of powerful, standardised software packages,
facilitating simple exchange of data between customer and
Financial objectives
supplier. The actual form of cooperation depends very much on
Neways aims at an average annual growth in profit per share of
the product to be developed and the customer's wishes and
at least 10%. This is to be achieved through turnover growth and
capabilities. Some customers develop the electronics in detail
improved profit margins. Turnover growth should be a
themselves, whereas others concentrate only on the general
consequence of autonomous growth and targeted acquisitions.
product design. In all cases Neways can offer considerable added
Margins are to be improved by focusing strongly on the market
value. Examples include the choice of components, the design of
and paying constant attention to cost control. Other cornerstones
the layout, checking makeability and testability, the rapid
of the financial policy are:
production of prototypes, and the reduction of production costs.
• an operating margin of more than 7%
• a solvency percentage of more than 35%
Germany has a high priority. Germany is the most important
market for the electronic assembly of industrial products in
Western Europe. To enhance the Company’s competitiveness,
2 0 0 4
expansion of the commercial and industrial activities in
• a dividend payment of approximately 30% of net profit.
N E W A Y S
Neways has a good market position in the Netherlands. The
9
In these times the relationship with the customer
is more important than ever. Neways is well aware
of this. There is regular consultation with
customers in order to be able to empathise fully
with their wishes and demands.
RISK FACTORS
Neways is faced with a number of internal and external risk
Risk in relation to inventory
factors. Its policy is aimed at identifying such risks and
The total inventory position can be divided into free stock,
managing them as effectively as possible. Risk management is a
order-related stock and work in progress. The main risk is with
subject that is regularly discussed between the Board of Directors
the free stock, as this is not covered by concrete, definite orders.
and the Supervisory Board.
Free stock comes into being as a result of the fact that the
minimum order size for components is sometimes greater than
Market risks
required for a particular order. Free stock can also arise as a
Neways is a supplier of industrial electronics and thus operates
result of cancellations of customer orders. It is often possible to
in the Electronic Manufacturing Services (EMS) market. Market
use the free stock in future orders for existing or new
fluctuations can cause demand for Neways’ products and services
products/customers, though the problem may occur that identical
to stagnate. Such a period of stagnation is characterised by great
components often have separate coding according to customer,
uncertainty, by circumstances in which the "time constants" are
which means that there is limited exchangeability. The
shorter than in a period of growth: orders are confirmed,
introduction of the UAC system (uniform article coding) in 2002
cancelled or brought forward at the last moment. This can create
contributed significantly to managing the inventory risks.
a sudden shortage or overcapacity of personnel, parts and
Intensive monitoring of the free stock is a prerequisite for
machinery. In these circumstances, regular consultation is
reducing the risk of components becoming obsolete.
necessary at all hierarchical levels between the customer and
Neways in order to be able to anticipate changing schedules.
Internationalisation and delocalisation
OEMs increasingly wish to produce closer to their customers and,
Risks in relation to customer orders
on the other hand, are seeking cheap alternative production
The conditions in regard to deliveries to customers are laid down
locations. Each OEM makes his own choices, and the
in customer orders. As well as prices and the product
considerations on which they are based may change over time.
specifications, other elements such as schedules and the
Neways wishes to, and must, follow the OEM in this regard. It is
associated flexibility are also laid down. This is in order to
essential to properly weigh up all the economic and financial
guarantee as far as possible the delivery reliability and the
risks before making a decision to invest. Frequent, regular
quality of the products supplied. The policy is aimed at working
discussion between OEMs and Neways at management level
as much as possible on the basis of make-to-order, which means
should guarantee the right decision at the right time.
that all activities in the purchasing and production process are
only set in motion when the customer has placed a firm order
Risks in relation to ICT systems
quantity. In the event of a cancellation the expenses incurred,
Nearly all the Neways operating companies are connected to a
such as the inventory expenses of purchased components, are
central server at the head office in Son. This guarantees the
spread in the supply chain. This procedure means that the
standard organisation of the logistical and financial processes.
financial risks for Neways are minimal. Often, however,
The possible failure of these (BaaN IV) systems represents an
purchasing activities are carried out on the basis of a customer
operational risk, though Neways has covered and therefore
forecast, without a firm order. If the forecast is not converted
minimised this risk in various ways, for instance via a back-up
into a firm order, or if the firm order is deferred, Neways incurs
system.
a financial risk. This risk relates mainly to inventory expenses
and/or expenses for the obsolescence of particular components.
Risks in relation to environmental requirements
As far as possible, understandings are always reached with both
Environmental legislation and regulations are developing very
the supplier and the customer in this regard.
quickly. Thus, under the regulations of the European Union it
have to be modified to a certain extent, not only at Neways, but
and profits in a period of stagnation. And they in turn have to
throughout the chain of companies in the electronics industry.
deal with customers who are experiencing more difficult
Last year, Neways already carried out the necessary inventories
financial circumstances. Consequently, there is increased pressure
and made preparations for lead-free soldering. Good
in the chain to pay later than has been agreed. There is then a
understandings have also been reached in this context with
growing likelihood of parties getting into financial difficulties.
suppliers and customers. All Neways units will change over to
Neways gives a high priority to managing this risk, keeping a
this alternative method of production in the course of 2005.
close eye on bad debts and the accounts receivable portfolio. In
addition, credit insurance was taken out in November 2004 for
the whole accounts receivable portfolio.
N E W A Y S
2006. This means that logistics and production processes will
Many of Neways’ customers are affected by declining turnover
2 0 0 4
will no longer be permitted to use lead for soldering from 1 July
Risks in relation to accounts receivable
11
Financial risks
Managing financial risks is essential for any company. The
reporting system is of vital importance in this connection. The
operating companies report on a weekly basis their figures for
turnover and orders received. The profit and loss account for
each operating company is prepared and discussed between the
Board of Directors and the management boards of the operating
companies on a monthly basis. The Board of Directors visits the
operating companies every two months. Every month a
consolidated report is prepared in which the main financial and
operational indicators are recorded, such as turnover, profit and
loss, orders received, investments, employees, accounts
receivable, inventory levels, delivery performance and efficiency.
Every quarter a consolidated balance sheet is prepared with a
statement of the key financial figures, including a statement of
cash flows. A copy of the consolidated monthly and quarterly
reports is sent to the directors of the operating companies and to
the Supervisory Board. In this connection, a consortium of banks
stipulates requirements, as a condition for the provision of
finance, as regards the minimum solvency ratio and a maximum
debt/ebitda ratio on certain reporting dates.
Reporting risks
Incorrect application of centrally issued group guidelines relating
to the accounting principles may result in incorrect valuation of
certain items in the internal and external reporting. Insufficient
knowledge and know-how with regard to the IFRS guideline that
will be compulsory from 2005 may lead to inaccuracies in the
annual accounts. Neways has begun making an inventory of the
consequences of IFRS at an early stage. Internal manuals and
reporting systems have been modified and responsible employees
have been trained in the application of the new accounting
N E W A Y S
2 0 0 4
principles.
12
C O R P O R AT E G O V E R N A N C E
Neways attaches importance to good corporate governance, key
the votes cast. In order to perform its function, the Stichting
concepts of which are openness and shareholder involvement. In
Prioriteit holds 10 priority shares. For the composition of the board
the past year Neways has been reviewing the existing corporate
of the Stichting, please refer to page 23.
governance policy in the light of the publication, in December
2003, of the final version of the Corporate Governance Code of the
Board of Directors
Tabaksblat Committee (the Code).
The Board of Directors is responsible for the strategy and the
By way of conclusion it can be stated that Neways subscribes to the
management of Neways and its activities and for the result that is
new Code in essential points and already complied with a large
achieved. It is also responsible for compliance with all relevant
number of the guidelines before the publication of the Code. It can
legislation and regulations and the operation of the risk
also be concluded that in most of the points where Neways did not
management and internal control system.
comply, changes were made in the past year or proposals for
The Board of Directors reports on the Company’s strategy and
changes were made. However, Neways regards some of the
objectives on page 9. The implementation of this strategy and the
guidelines of the Tabaksblat Committee as less relevant to a small
progress and results achieved in the reporting period are dealt with
cap.
in the Report of the Board of Directors, which begins on page 26.
The main points of Neways’ corporate governance policy are
More information about the main risks and the management thereof
outlined in this section with reference to each aspect of the Code.
can be found in the description of the risk factors on page 11. The
Where Neways does not apply the Code’s best practice provisions,
Board of Directors reports on risk management and the operation of
this is explicitly indicated, and the reason for this is also given. The
the internal control systems by means of a statement on page 41.
corporate governance policy will periodically be evaluated and,
where necessary, modified.
The Board of Directors carries out its duties under the supervision
of the Supervisory Board. The Board of Directors provides all
For a complete picture of Neways’ corporate governance policy, the
information in good time and makes available the resources
reader is referred to the appropriate reports and regulations drawn
necessary for proper performance of the Supervisory Board’s
up by the Supervisory Board in consultation with the Board of
supervisory duties.
Directors. These reports and regulations can be viewed on Neways’
Since July 2003 the Board of Directors has been composed of two
corporate website and are also available for inspection at Neways’
members. Members of the Board of Directors are not permitted to
head office in Son. The whole corporate governance policy,
have more than 2 supervisory directorships and must not hold the
including the changes and required alterations of the articles of
position of chairman of the supervisory board of other companies.
association in connection with the new legislation on the “structure
For the composition of the Board of Directors, please refer to page
regime” that came into force on 1 October 2004, will be submitted
23.
to the next General Meeting of Shareholders, which is to be held on
The present remuneration package of the members of the Board of
22 March 2005.
Directors falls well within the guidelines of the Code and consists of
a basic salary and variable remuneration (a bonus). On the proposal
Structure of control over the Company
of the Supervisory Board, the members of the Board of Directors
Neways does not have an “administratiekantoor” (“administration
also receive each year a number of stock options. These options
office”) and does not therefore split the legal and beneficial
cannot be exercised until three years after they have been issued. In
ownership of shares. There are, however, 3,000,000 outstanding
the event of termination of employment before the expiry of this
preference shares held by the former incorporator of Neways, Mr
three-year period, the options are cancelled. The contractually
G.H. Meulensteen. The preference shares carry the same voting
agreed severance payment is a maximum of one year’s salary.
rights as the ordinary shares. Including the preference shares, Mr
Neways has no outstanding loans to members of the Board of
G.H. Meulensteen holds 45.5% of the outstanding shares carrying
Directors. Nor have any guarantees been provided to them.
voting rights.
More information about the remuneration of members of the
accounts on pages 54 and 55.
International N.V.", which, under the articles of association, has the
More information about the remuneration policy to be adopted by
right of approval of resolutions relating to the issuance of shares,
the coming General Meeting of Shareholders can be found on the
the exclusion of the pre-emption right upon the issuance of
corporate website (www.neways.nl). This also contains the
ordinary shares, the acquisition by the Company of shares in its
Supervisory Board’s proposal to the General Meeting of
own share capital, the cancellation of shares, the distribution of
Shareholders with regard to the number of stock options to be
profits and the alteration of the articles of association. Resolutions
granted to the members of the Board of Directors.
of the Stichting Prioriteit are adopted by an absolute majority of
N E W A Y S
Neways also has a Stichting Prioriteit "Neways Electronics
2 0 0 4
management board can be found in the notes to the annual
13
Non-applications of the Code’s best practice provisions
II. Management board (Board of Directors)
II.1 Role and procedure
Non-application
Reason
A management board member is appointed for a maximum
Management board members are
Periodic appointment implies a
period of four years. A member may be reappointed for a term of
appointed for an indefinite
risk to the execution of the
not more than four years at a time.
period of time.
Company’s policy, which is of a
II.1.1
long-term nature. The
performance of the management
board members is regularly
evaluated by the supervisory
directors. We see no reason
either to revise the existing
contracts for an indefinite
period of time.
II.1.3
The company shall have an internal risk management and
There is compliance with (a), (c)
A written code of conduct does
control system that is suitable for the company. It shall, in any
and (d). A code of conduct as
not fit into the Company
event, employ as instruments of the internal risk management
referred to in (b) is lacking.
culture, which is characterised
and control system:
by an attitude of integrity on
a) risk analyses of the operational and financial objectives of
the part of the management of
the Company and its employees.
the company;
b) a code of conduct which should, in any event, be published
on the company’s website;
c) guides for the layout of the financial reports and the
procedures to be followed in drawing up the reports; and
d) a system of monitoring and reporting.
II.1.6
The management board shall ensure that employees have the
“Arrangements for
The culture that prevails within
possibility of reporting alleged irregularities of a general,
whistleblowers” are lacking.
the organisation is open in such
operational and financial nature in the company to the chairman
a way that irregularities can be
of the management board or to an official designated by him,
raised without risk to the legal
without jeopardising their legal position. Alleged irregularities
position of the person
concerning the functioning of management board members shall
concerned.
be reported to the chairman of the supervisory board. The
arrangements for whistleblowers shall in any event be posted on
N E W A Y S
2 0 0 4
the company’s website.
14
II.2 Remuneration
Non-application
Reason
The supervisory board shall draw up regulations concerning ownership of and
There are no regulations
The Company regards this
transactions in securities by management board members, other than securities
concerning transactions
as a personal
issued by their ‘own’ company. The regulations shall be posted on the
in securities by
responsibility of the
company’s website. A management board member shall give periodic notice,
management board
management board
but in any event at least once a quarter, of any changes in his holding of
members in other Dutch
members concerned.
securities in Dutch listed companies to the compliance officer or, if the
listed companies.
II.2.6
company has not appointed a compliance officer, to the chairman of the
supervisory board. A management board member who invests exclusively in
listed investment funds or who has transferred the discretionary management
of his securities portfolio to an independent third party by means of a written
and any changes herein. The Supervisory Board appoints a
The role of the Supervisory Board is to supervise the policies of
chairman and a vice-chairman from among its members. The
the management board and the general affairs of the company
chairman is not a former member of the Board of Directors.
and its affiliated enterprise, as well as to assist the management
Because of the small size of the Supervisory Board it is
board by providing advice. In discharging its role, the
considered that it does not make sense to establish sub-
Supervisory Board is guided by the interests of the company and
committees.
its affiliated enterprise, and takes into account the relevant
The composition of the Supervisory Board and the expertise
interests of the company’s stakeholders, taking as its guideline
embodied in it provide a sufficient guarantee of adequate
the basic principles of responsible entrepreneurship.
supervision of the general aspects of policy and Neways’
In line with the changes in the corporate governance policy and
financial reporting.
in the framework of the recent changes in the law on the
For more information about the composition and relevant other
“structure regime”, it will be proposed to the coming General
positions of the Supervisory Board, please refer to page 23 and
Meeting of Shareholders that the articles of association be altered
to the corporate website. The Profile Sketch of the Supervisory
accordingly. After alteration of the articles, the power to appoint
Board, which will be discussed at the coming General Meeting of
members of the Supervisory Board will lie with the General
Shareholders, can also be found on the corporate website.
Meeting of Shareholders under the new regime.
The Supervisory Board and its members are individually
Following alteration of the articles, the Supervisory Board will
responsible for demanding from the Board of Directors and the
have the right of nomination for a new appointment based on
external auditor all information which the Supervisory Board
the Profile Sketch of the Supervisory Board which it has itself
deems necessary for the proper performance of its supervisory
drawn up. The Works Council will be given a reinforced right of
role. In this connection it may also obtain information from
recommendation for one-third of the number of supervisory
officers and external advisors of the Company or from its own
directors. This recommendation may be adopted by the
advisors. The Company is expected to provide the necessary
Supervisory Board. The General Meeting of Shareholders may
funds for this.
reject the Supervisory Board’s nomination. For the retirement
Under the new “structure regime” and following the alteration of
roster of the supervisory directors, please refer to page 23 and to
the articles of association, the General Meeting of Shareholders
the corporate website.
will be given the right to dismiss the whole Supervisory Board.
The Supervisory Board of Neways is composed of three members
Individual supervisory directors cannot directly be dismissed by
and satisfies the independence criteria contained in the Dutch
the General Meeting of Shareholders.
Corporate Governance Code. Also in accordance with the Code,
The Supervisory Board’s power to appoint, suspend and dismiss
the members of the Supervisory Board are not permitted to hold
the members of the Board of Directors is unchanged. The General
more than five supervisory directorships with listed Dutch
Meeting of Shareholders must be notified of a proposed
companies. A chairmanship counts double in this connection.
appointment.
Each member of the Supervisory Board must report to the
The Supervisory Board is also responsible for resolving conflicts
Chairman of the Supervisory Board what other positions are held
of interest between members of the Board of Directors, members
N E W A Y S
Supervisory Board
2 0 0 4
mandate agreement is exempted from compliance with this last provision.
15
of the Supervisory Board and the external auditor in relation to
Directors. Such an emolument is not related to the Company’s
the Company. Potential conflicts of interest must immediately be
results. Shares in the Company held by members of the
notified by the individual members of the Supervisory Board, the
Supervisory Board are long-term investments.
Board of Directors and the external auditor to the chairman of
More information about the remuneration of supervisory
the Supervisory Board. The chairman of the Supervisory Board
directors and share ownership by supervisory directors and
reports any conflict of interest affecting himself to the vice-
members of the Board of Directors can be found in the notes to
chairman. The Supervisory Board must judge whether there is
the annual accounts on page 54.
indeed a conflict of interest and take appropriate measures,
The proposal for the remuneration of the Supervisory Board can
which will be stated in the annual report. The procedures of the
be found on the corporate website.
Supervisory Board to be adopted by the coming General Meeting
The Report of the Supervisory Board on its activities in the past
of Shareholders are discussed in the Regulations for the
year is contained on pages 24 and 25 of this annual report.
Supervisory Board and can be found on the corporate website.
The coming General Meeting of Shareholders has the right to
adopt the remuneration policy for the Board of Directors that has
been prepared by the Supervisory Board.
The Remuneration Report outlining the remuneration policy for
the Board of Directors can be found on the corporate website.
The remuneration of the individual members of the Board of
Directors will be determined by the Supervisory Board within the
parameters of this policy.
The General Meeting of Shareholders may, on the proposal of the
Supervisory Board, award an emolument to the Supervisory
Non-applications of the best practice provisions of the Code
III. Supervisory Board
III.3 Expertise and composition
Non-application
Reason
After their appointment, all supervisory board members
There is no formal
In view of the size of the Company, a
shall follow an introduction programme, which, in any
introduction programme for
formal introduction programme is not
event, covers general financial and legal affairs, financial
supervisory directors.
considered to be necessary. Newly
III.3.3
reporting by the company, any specific aspects that are
appointed supervisory directors take
unique to the company and its business activities, and the
cognisance of, among other things, the
responsibilities of a supervisory board member. The
general company brochure and the
supervisory board shall conduct an annual review to
financial management reports, as well as
identify any aspects with regard to which the supervisory
paying visits to some of the operating
board members require further training or education
companies.
during their period of appointment. The company shall
play a facilitating role in this respect.
III. 3.5
The Company is of the opinion that the
of membership of the
experience of supervisory directors and
Supervisory Board.
their knowledge of the Company must
2 0 0 4
There is no maximum term
maximum of three 4-year terms.
determine the term of membership. After a
N E W A Y S
A person may be appointed to the supervisory board for a
may, following careful consideration, be
16
term of four years a supervisory director
reappointed for four years.
III.4 Role of the chairman of the Supervisory Board and the
company secretary
Non-application
Reason
The chairman of the Supervisory Board shall see to it that:
There is no supervision in
In view of the Company’s size, a
a) the supervisory board members follow their introduction and
respect of an introduction
formal introduction programme
programme.
for supervisory directors is not
III.4.1
education or training programme;
b) the supervisory board members receive in good time all
considered necessary.
information which is necessary for the proper performance of
their duties;
c) there is sufficient time for consultation and decision-making
by the supervisory board;
d) the committees of the supervisory board function properly;
e) the performance of the management board members and
supervisory board members is assessed at least once a year;
f) the supervisory board elects a vice-chairman;
g) the supervisory board has proper contact with the management board and the works council (or central works council).
III.5 Composition and role of three key committees of the
Supervisory Board
Non-application
Reason
The supervisory board shall draw up a set of regulations for each
No establishment of separate
The size of the Supervisory
committee. The regulations shall indicate the role and
committees.
Board does not justify separate
III.5.1
responsibility of the committee concerned, its composition and
committees.
the manner in which it discharges its duties. The regulations
shall in any event contain a provision that a maximum of one
member of each committee need not be independent within the
meaning of best practice provision III.2.2. The regulations and
the composition of the committees shall, in any event, be posted
on the company’s website.
III.7 Remuneration
Non-application
Reason
The supervisory board shall adopt a set of regulations containing
There are no regulations
The Company regards this as a
rules governing ownership of and transactions in securities by
concerning transactions in
personal responsibility of the
supervisory board members, other than securities issued by their
securities by supervisory board
supervisory board members
‘own’ company. The regulations shall be posted on the
members in other Dutch listed
concerned.
company’s website. A supervisory board member shall give
companies.
III.7.3
periodic notice, but in any event at least once a quarter, of any
changes in his holding of securities in Dutch listed companies to
the compliance officer or, if the company has not appointed a
investment funds or who has transferred the discretionary
management of his securities portfolio to an independent third
party by means of a written mandate agreement is exempted
from compliance with this last provision.
N E W A Y S
supervisory board member who invests exclusively in listed
2 0 0 4
compliance officer, to the chairman of the supervisory board. A
17
General Meeting of Shareholders
General Meetings of Shareholders are held at least once a year.
• Adoption of major changes in the Company’s corporate
governance policy;
All resolutions are adopted in accordance with the principle of
• Appointment of members of the Supervisory Board;
‘one share, one vote’. Shareholders are entitled – singly or jointly
• Dismissal of the whole Supervisory Board;
representing at least 1% of the issued share capital – to request
• Adoption of the remuneration policy of the Board of Directors;
the Board of Directors or the Supervisory Board to place certain
• Determination of the remuneration of the individual members
items on the agenda. Such requests will be honoured if they are
submitted in writing by shareholders at least sixty days before
of the Supervisory Board;
• Taking decisions with regard to the issuance of shares,
the date of the General Meeting of Shareholders and may only
granting rights to take shares (options) or to designate the
be refused by the management board if they are contrary to an
Board of Directors to adopt resolutions to that effect during a
important interest of the Company.
particular period, if necessary with the exclusion of the preemption right accruing to shareholders;
The articles of association confer special powers on the meeting
• Appointment of the external auditor
of holders of priority shares, as set forth on page 61. For certain
• Resolutions to alter the articles of association on the basis of a
resolutions the Stichting Prioriteit must give its approval prior to
proposal by the Board of Directors that has been approved by
the discussion thereof at the General Meeting of Shareholders.
The board of the Stichting Prioriteit is deemed to be independent
in accordance with the provisions of the Listing and Issuing
the Stichting Prioriteit;
• Authorisation of the Board of Directors to purchase shares in
the Company’s own capital.
Rules (Appendix X) of Euronext Amsterdam N.V.
Neways attaches considerable importance to maintaining open
Important management board resolutions which involve a
and transparent communication with its financers and the
change in the identity or the character of the Company have to
financial community in general. Neways maintains regular
be approved by the General Meeting of Shareholders. Such
contact with analysts and investors, as well as with the financial
resolutions include in any event those relating to the transfer of
media that form the main source of information for private
the whole Company or almost the whole Company, entering into
investors. Neways bases its communications with these target
or discontinuing long-term alliances or partnerships and
groups on information that is made public by means of press
acquiring or disposing of participating interests to the value of at
releases.
least one-third of the consolidated balance sheet total.
Additional information is also provided to shareholders
The policy regarding distribution of the profits and dividend will
throughout the year via the annual report, the corporate website,
be included as a separate item on the agenda with effect from
the General Meeting of Shareholders and the annual visit to an
the coming General Meeting of Shareholders, as will the dividend
operating company.
proposal. With effect from the coming General Meeting of
Shareholders, substantial changes in the corporate governance
Because of cost considerations, Neways does not consider it
policy, including changes in the remuneration policy of the
worthwhile to make all meetings with the press, investors and
Board of Directors, will also be submitted to the shareholders.
analysts available to the broadest possible public via a webcast.
The presentations that Neways gives to these target groups can,
To sum up, the General Meeting of Shareholders of Neways
however, be accessed by everyone via the corporate website from
Electronics International N.V. will, with the consent of the
the time of the presentation. The minutes of the General Meeting
coming General Meeting of Shareholders to the required
of Shareholders are also posted on the corporate website.
alteration of the articles of association, have the following
important powers:
• Approval of the annual accounts;
• Discharging the Board of Directors from liability for the
performance of its management duties;
• Discharging the Supervisory Board from liability for its
N E W A Y S
2 0 0 4
supervision of the management;
18
• Adoption of the distribution of profits and the dividend;
• Approval of resolutions of the Board of Directors regarding a
major change in the identify or the character of the Company;
Non-applications of the best practice provisions of the Code
IV. The shareholders and the general meeting of shareholders
IV.1 Powers
Non-application
Reason
The voting right on financing preference shares shall be based
The voting right on financing
This understanding was reached
on the fair value of the capital contribution. This shall in any
preference shares is not based
at the time when the preference
event apply to the issue of financing preference shares.
on the fair value of the capital
shares were granted and is laid
contribution, but on the
down in the Company’s articles
nominal value.
of association.
Non-application
Reason
Meetings with analysts, presentations to analysts, presentations
Meetings with analysts, press
For reasons of cost, it is not
to investors and institutional investors and press conferences
conferences and other
considered that this
shall be announced in advance on the company’s website and by
presentations cannot be
recommendation makes sense
means of press releases. Provision shall be made for all
followed by means of
for smaller companies.
shareholders to follow these meetings and presentations in real
webcasting or telephones, etc.
IV.1.2
IV.3 Provision of information to and logistics of the general
meeting of shareholders
IV.3.1
time, for example by means of webcasting or telephone lines.
After the meetings, the presentations shall be posted on the
company’s website.
Audit of financial reporting
performance of his duties is regularly assessed. Neways
Neways demands that all its organisational units, the
subscribes to the recommendations in the Corporate Governance
management and the workforce should at all times behave in an
Code with regard to matters such as the presence of the external
ethically responsible manner and adhere to Neways’ norms and
auditor at the General Meeting of Shareholders and the
rules. The way in which financial reports are generated is laid
possibility of questioning him there and the number of meetings
down in internal procedures.
that the external auditor must attend in determining the annual
figures.
The external auditor is appointed by the General Meeting of
Shareholders. The Supervisory Board ensures that auditor’s
Non-applications of the best practice provisions of the Code
V. The audit of the financial reporting and the position of the
internal auditor function and of the external auditor
V.3 Internal auditor function
Non-application
Reason
The external auditor and the audit committee shall be involved
There is no work schedule for
In view of the size of the
in drawing up the work schedule of the internal auditor. They
the internal auditor.
Company, there is no internal
auditor function.
N E W A Y S
shall also take cognisance of the findings of the internal auditor.
2 0 0 4
V.3.1
19
I N F O R M AT I O N A B O U T N E WAY S S H A R E S
Stock market listing
The greater part of the outstanding ordinary shares are held by
The ordinary shares of Neways are listed on Euronext
investors in the Netherlands. 5.1% of the shares are held by
Amsterdam N.V. in Amsterdam. In 2004, SNS Securities acted as
members of the Supervisory Board, the Board of Directors and
liquidity provider for the Neways shares. This cooperation will be
other officers of Neways. The percentages relate to the total
continued in 2005.
issued share capital of 11,526,466 as at 31 December 2004.
Neways does not have a collective (optional) share savings
Share price
scheme for its employees.
In 2004 the Neways share price showed an upward trend.
Dividend policy
1 January 2004
EUR 2.40
Neways aims for a dividend of roughly 30% of the net profit. It
Lowest price
EUR 2.40
is a condition for the distribution of a dividend that the solvency
Highest price
EUR 5.41
(guaranteed equity adjusted to take account of deferred tax
31 December 2004
EUR 5.05
benefits/total equity) should be 35% or higher. This year, Neways
does not yet meet the latter condition. It will therefore be
Development in the value of ordinary Neways shares
proposed to the General Meeting of Shareholders that no
31 December 1994 - 31 December 2004
dividend should be paid for the financial year 2004.
Options
Options are granted to the members of the Board of Directors
and other officers as part of their remuneration package under
the terms of a resolution adopted by the Supervisory Board with
the prior approval of the Stichting Prioriteit.
This resolution will be submitted to the General Meeting of
Shareholders for its approval. Targets that have been met and
Share capital
targets that are to be met in the future by the individual
In July 2004, 760,000 new ordinary shares were issued in
manager’s operating company, as well as the manager’s
connection with the acquisition of Stork Electronics. This
individual performance, are taken into account in decisions on
represents 9.8% of the total number of outstanding ordinary
the granting of options.
shares before issue. Otherwise there have been no changes in the
issued share capital compared with year-end 2003. The following
The exercise price is equal to the stock market price on the date
table indicates the number of shares issued as at 31 December
on which the options are granted. The term of the outstanding
2004.
options is at least 3 years. An option entitles the holder to an
ordinary Neways share. Neways’ options policy does not make
Number
Nominal value
Ordinary shares
8,526,456
EUR 0.50
dilution as a result of the exercising of options. In 2004, 15,000
Preference shares
3,000,000
EUR 0.50
options were granted to each of the members of the Board of
10
EUR 0.50
Directors, with an exercise price of EUR 3.60 and a term of five
Priority shares
provision for buying shares in order to offset the effect of
years. No options were exercised in 2004. The effect on the
The preference shares are 25% paid up and are held by Mr G.H.
number of outstanding shares was therefore zero. More
Meulensteen. The priority shares are held by the Stichting
information about the options granted to the members of the
Prioriteit "Neways Electronics International N.V."
Board of Directors can be found on page 54.
Shareholders / Share ownership
In connection with the Disclosure of Major Holdings in Listed
Companies Act, the following shareholders are known to have an
equity participation of more than 5%:
10.4%
2 0 0 4
45.5%
F.P.B.L. Zweegers
VDL Beleggingen B.V.
7.2%
N E W A Y S
G.H. Meulensteen
Otterbrabant Beheer B.V.
6.3%
Todlin N.V.
6.0%
20
Financial calendar / Important dates
trading and changes in Euronext have resulted in increased
bureaucracy and higher costs. This has made stock market listing
1 March 2005
Publication of annual figures for 2004
less attractive for "small caps". However, the advantages still
22 March 2005*
General Meeting of Shareholders
outweigh the disadvantages, and Neways is trying to respond
30 August 2005
Publication of half-year figures for 2005
pro-actively to the new conditions. The obligations that a stock
7 March 2006
Publication of annual figures for 2005
market listing entails act as a stimulus, while critical scrutiny by
shareholders, analysts and the press provides the motivation to
* The General Meeting of Shareholders for the financial year 2004
be extra thorough in the way one conducts business. A stock
will be held at the Evoluon in Eindhoven, beginning at 2 p.m.
market listing also has definite commercial advantages, since
greater openness means fewer risks for customers.
Prevention of the misuse of inside information
The existing regulations, as contained in the Model Code, with
New legislation and regulations such as the coming mandatory
regard to both the internal and the external treatment of price-
reporting standards of IFRS and the Corporate Governance Code
sensitive information are periodically reviewed and, if necessary,
of the Tabaksblat Committee must not inhibit relations between,
tightened by the addition of internal guidelines. The regulations
and communication with, (potential) shareholders, analysts, the
relate not only to the Supervisory Board and the Board of
financial press and Neways. That would be a retrograde step. The
Directors, but also to the management level below the Board of
basic principle should be optimum communication without
Directors and all staff officers who have access to price-sensitive
providing inside information.
information. Neways has a compliance officer to ensure that the
regulations are adhered to.
We thank all our shareholders for their support in the past year.
This support motivates us to pursue energetically the course we
Investor Relations
have taken.
In the year under review, Neways did a lot to inform private
(small and large) and institutional investors about Neways’
More information about Neways shares is available on our
business performance. On 7 September an open day for
website www.neways.nl. You may also contact us via
shareholders was organised for the fourth time, with a tour of
info@neways.nl or by telephone (040 267 92 01).
the new operating company Neways Advanced Applications
(NAA; formerly Stork Electronics) in Son, on which occasion
some presentations were also given on Neways’ strategy and
more specifically on the characteristics of NAA and hence the
added value of the acquisition for the Neways group. More than
60 guests attended, including the members of the Board of
Directors and all the supervisory directors of Neways. In
addition, there was an intensive discussion of the Company’s
policy with large shareholders on 7 September, with all the
members of the Supervisory Board also present. The management
and the supervisory directors of Neways set great store by good
contacts with our shareholders – the owners of the Company and
the providers of risk capital.
The key terms of Corporate Governance, namely openness (i.e.
transparency and accountability) towards the shareholders and
involvement in the Company by those shareholders, are central
to Neways’ policy. In this connection it is important to provide
the shareholders with the information needed to be able to
appraise and, if necessary, correct the quality of the
making proceeds.
Life has not become any easier for "small caps" in the last few
years. National and international scandals involving insider
N E W A Y S
about the Company’s strategy and the way in which decision-
2 0 0 4
management. Also important to shareholders is information
21
For more than 10 years now Neways has increasingly been
outsourcing production to its operating companies in China
and Slovakia. We are also working hard in China on
developing our own position in the local market.
SUPERVISORY DIRECTORS, BOARD OF DIRECTORS AND MANAGEMENT STRUCTURE
Situation as at 31 December 2004
Supervisory Board
Dick Boers RA (1947)
Chairman
Wim van der Leegte (1947)
Theo van Deursen (1946)
* Dick Boers
Nationality:
First appointment 2002
Present appointment until 2006
Dutch
Present position:
Partner/chairman of the board of Govers Accountants/Consultants
Additional positions:
Supervisory Director of Wessem Holding B.V.
Member of Supervisory Board of GGzE - Eindhoven
• Wim van der Leegte
Nationality:
First appointment 1997
Present appointment until 2005
Dutch
Present position:
Managing director of VDL Groep B.V.
Additional positions:
Member of Supervisory Board of EMA Holding B.V.
Member of Supervisory Board of PSV Voetbal N.V.
* Theo van Deursen
First appointment 2000
Present appointment until 2008
Nationality:
Dutch
Present position:
President & Chief Executive Officer Philips Lighting Holding B.V.
Additional positions:
Chairman of the Board of Lumileds Lighting, San José, California, U.S.A.
Stichting Prioriteit
Dick Boers (1947)
Chairman
Wim van der Leegte (1947)
Gerard Meulensteen (1943)
Board of Directors
Vincent de Bok (1956)
Huub van der Vrande (1955)
CEO/CFO
CEO/COO
The members of the Board of Directors do not have additional positions.
Group controller
Peter Wisse (1959)
Members of the Neways management team
Adrie van Bragt (1965)
Neways Advanced Applications – Son
Jean Daenen (1945)
Evic Electronics – Evic Service & Repair – Echt
Martin Fiddelaers (1948)
Q-Nova – Nová Dubnica (Slovakia)
Alois Fuchs (1950)
Neways Neunkirchen
Jan Herps (1952)
Ripa – Son
Keimpe van der Hoeven (1961)
Neways Leeuwarden
Nick Klein (1958)
Corporate Director Strategy & Business Development
Jack Kromhof (1951)
Neways Heerlen – Si-Lectron
Johan Lecoutere (1958)
Hymec – Sittard
Frans Smulders (1954)
Director Foreign Operations
Tom van Wanrooij (1958)
Hoyte – Son
Sytze Westerhof (1962)
Neways Industrial Systems - Son
2 0 0 4
Neways Electronics Production – Kassel
N E W A Y S
Lothar Auerswald (1953)
23
REPORT OF THE SUPERVISORY BOARD
Annual accounts
are a number of strategic interventions, such as the
The annual accounts for 2004 drawn up by the Board of
reorganisation at Neways Heerlen, the phasing-out of the mobile
Directors have been examined by Ernst & Young Accountants,
telephone repair business and the expansion of the production
registered accountants, who have issued an unqualified report.
organisations in Eastern Europe and China.
The auditor’s report appears on page 60 of this annual report.
The annual accounts have been discussed by the Supervisory
In the year under review the Supervisory Board again devoted a
Board in the presence of the Board of Directors and Ernst &
lot of time to discussing operational and financial progress at
Young Accountants. The Supervisory Board recommends that the
Neways. The supervisory directors subscribe to the main
annual accounts be adopted by the General Meeting of
priorities for the reporting period, namely the improvement of
Shareholders. The Supervisory Board agrees to the proposal of
the financial position and the improvement of delivery
the Board of Management not to distribute a dividend for the
performance. A properly functioning organisation with a strong
financial year 2004 and recommends that the General Meeting of
balance sheet is the basis for healthy long-term development at
Shareholders vote accordingly.
Neways.
Composition of the Supervisory Board
Management of the business risk factors (see also the list on
The Supervisory Board has three members. In relation to the
page 11) was another important point on which the Supervisory
Company’s current size and complexity, this is considered to be
Board focused its attention. The Supervisory Board has an
sufficient. In the Supervisory Board’s opinion, the composition of
important role in the adoption of the budget for the coming year.
the board is balanced and in accordance with the board profile
The procedure within the Company for preparing the budgets of
sketch that has been drawn up.
the operating companies and the consolidated budget is relevant
in this connection. The budget for 2005, as prepared by the
Mr W.G.S.M. van der Leegte will retire by rotation on
Board of Directors, the main sections of which are targets for
22 March 2005. Mr van der Leegte has indicated that he is
turnover and profit, investments and the general level of costs,
available for reappointment. The Supervisory Board intends to
was discussed intensively and approved.
nominate Mr van der Leegte for reappointment by the General
Meeting of Shareholders as a supervisory director for the next
Corporate Governance
four years until the General Meeting of Shareholders to be held
The Corporate Governance Code of the Tabaksblat Committee
in 2009.
was finally adopted in December 2003. On the basis of the
guidelines contained in the Code, Neways’ present corporate
The work of the Supervisory Board
governance policy was critically examined in the reporting
Supervisory directors have two tasks under Dutch law. The first
period. During the year the final recommendations were
is to supervise the policy pursued by the Board of Management
intensively discussed both on the Supervisory Board itself and
and the company’s general business performance. It is stipulated
with the Board of Directors.
in the articles of association that the Supervisory Board’s formal
Neways already complied with the essential points of the Code.
approval is required for a number of resolutions. The supervisory
Where relevant, standpoints have been revised, brought into line
directors are also available to give advice to the Board of
with the Code and anchored in the desired regulations and
Directors. The law prescribes that supervisory directors must be
reports. More information about Neways’ corporate governance
guided by the company’s interests.
policy can be found on pages 13 through 19 of this annual
report.
Examples of resolutions that require the formal approval of the
The recommendations of the Code to which Neways does not
Supervisory Board include: the issuance of shares (and other
subscribe are specifically outlined together with the reasons for
forms of equity capital), acquisitions, longer-term cooperation
not applying them.
with other companies, major investments, major reorganisations
and dismissals, and far-reaching changes in working conditions.
The whole corporate governance policy will be submitted to
shareholders at the General Meeting of Shareholders to be held
In the reporting period the supervisory directors had talks with
2 0 0 4
their advice. For instance, there were intensive talks on the
N E W A Y S
the Board of Directors on a number of specific issues and gave
benefits and the desired financing.
24
takeover of Stork Electronics, regarding both the strategic
Other specific issues that the Supervisory Board has dealt with
on 22 March 2005.
Meetings
Remuneration
The Supervisory Board met with the Board of Directors seven
The members of the Supervisory Board receive a regular
times in 2004. In addition, there were regular oral consultations.
emolument which is not related to the Company’s results. One of
The Supervisory Board met without the Board of Directors on
the members of the Supervisory Board holds, either directly or
one occasion. The Stichting Prioriteit "Neways Electronics
indirectly, 543,345 ordinary shares and convertible subordinated
International N.V." met on two occasions.
debentures with a conversion value of 286,508 shares. More
details can be found in the notes to the annual accounts on
Investor relations
page 55.
The supervisory directors support the Board of Directors’ policy
of maximum openness towards, and involvement of, all
Final observations
shareholders, both institutional and private, both large and small.
After three consecutive loss-making years, 2004 was a very
Contacts with the shareholders are mainly via the Board of
encouraging year for all those involved with Neways. The
Directors, but it is also important that shareholders have the
restructuring carried out in recent years and the associated sharp
opportunity to meet the supervisory directors regularly and
reduction in the cost base meant that the hesitant recovery of the
exchange views with them. The General Meeting of Shareholders,
market was directly translated into a gratifying profit. This has
held in 2004 on 22 March, was the main opportunity for the
created a good basis for a sustained recovery, something which
supervisory directors to have a formal and informal exchange of
gives us a lot of confidence for the future.
views with shareholders. In addition, last year there was an
Extraordinary Meeting of Shareholders held on 27 May to
The Supervisory Board would like to express its appreciation to
discuss the takeover of Stork Electronics and the associated share
the Board of Directors, the management boards of the operating
issue. The entire membership of the Supervisory Board was also
companies, the Works Councils and all employees for their
present at an open day for shareholders held on 7 September.
dedication and motivation in the past year.
These meetings were very open and motivating and it is a cause
for satisfaction that so many shareholders attended them. It
remains a challenge to maintain balanced contact with all
Son, 28 February 2005
shareholders.
The Supervisory Board
ir. Dick Boers RA
Wim van der Leegte
N E W A Y S
2 0 0 4
ir. Theo van Deursen
25
REPORT OF THE BOARD OF DIRECTORS
General Business Performance
Net turnover
In the 2003 annual report the possibility of an initial recovery of
the EMS market in 2004 was forecast. That recovery did
219.9
201.9
189.7
gradually take place in 2004. Neways’ actual results are in fact
154.7
far better than expected. The past year has thus created a solid
basis for a sustained recovery.
136.5
113.8
101.9
77.7
69.0
71.7
Following three difficult years in which the Company was
radically restructured, Neways finally experienced growth again
in 2004. The restructuring process was almost completely
finished in the first half of 2004. Shortly afterwards a big
strategic step forward was taken with the acquisition of Stork
Electronics.
2000
2001
2002
2003
2004
Net turnover x EUR 1,000,000
Net turnover first halfyear x EUR 1,000,000
Accordingly, Neways is in much better shape at the beginning of
2005. The Company has carried out an efficiency programme, the
cost basis has been sharply reduced and the whole organisation
is much better attuned to current market demand and the
customers’ wishes and requirements, which means that our
competitiveness has definitely improved.
Turnover and profits
In 2004 we posted autonomous growth of turnover of 11%. This
growth was driven in the first half of the year mainly by greater
demand from the semiconductor industry. In the second half
there was also a definite increase in demand from the other
sectors, such as the industrial, medical and automotive sectors.
Net result
4.6
Net turnover for the year as a whole came to EUR 189.7 million,
an increase of 39% compared with 2003. The strategically
3,1
3.1
3,1
1,0
1.0
0.53
1,0
1.0
0.54
important acquisition of Stork Electronics in mid-2004 provided
an extra boost in the second half of 2004.
With an appreciably lower cost basis, much-improved
2000
2001
competitiveness and greater customer orientation, Neways was
2002
(0.57)
2003
2004
(0.81)
able to bounce back as market conditions improved slightly. The
operating result (excluding special income and expenses) climbed
to EUR 9.3 million in 2004 (2003: a loss of EUR 0.5 million). The
net result also showed a marked improvement, from a net loss of
(3.28)
(3.6)
(4.0)
EUR 6.3 million in 2003 to a net profit of EUR 4.6 million. Stork
(4.0)
(6.3)
Electronics began to contribute to Neways’ net profit and profit
per share as soon as it was acquired.
Net profit per share in 2004 was EUR 0.54, compared with a net
(17.9)
loss of EUR 0.81 in 2003.
2 0 0 4
Starting on 1 January 2004, the operating companies Q-Nova of
N E W A Y S
Financial position
full in the Neways consolidated balance sheet for the first time.
26
Slovakia and Ximec and Neways Wuxi of China were included in
The strategically important acquisition of Stork Electronics also
(21.1)
Net result x EUR 1,000,000
Net result first halfyear x EUR 1,000,000
Net result per share x EUR 1.00
had a strong impact on Neways’ financial position. The takeover
various synergy benefits can be obtained in areas like business
was partly financed by a private placement of 760,000 ordinary
development, purchasing and overheads. It will also be possible
shares at a price of EUR 4.00. In addition, the guaranteed equity
to achieve significant cost and efficiency benefits by moving to
was strengthened by a convertible subordinated debenture loan
Neways’ own production facilities in Eastern Europe and China
of EUR 1.5 million (with a term of 4 years and a conversion
production that at present is outsourced. In addition, the existing
price of EUR 4.50) and a subordinated loan of EUR 1.5 million.
close ties with the former associated company Stork Industrial
The remaining portion was financed by means of an increase in
Modules, which since July has been part of VDL Groep, offer
existing credit facilities. The total amount of finance that
good possibilities for stepping up the commercial cooperation
Neways required was EUR 13.3 million. Starting on 1 July 2004,
with this company. Fairly soon after the takeover the name Stork
Stork Electronics was included in the Neways accounts under the
Electronics was replaced with the new name Neways Advanced
new name Neways Advanced Applications.
Applications. At the end of 2004, Neways Advanced Applications
employed 323 persons (incl. contractors). The integration process
The complete consolidation of the operating companies in
began straight after the takeover.
Slovakia and China and the acquisition and consolidation of
Stork Electronics in combination with the autonomous growth in
To improve competitiveness, the transfer of production to
turnover that was achieved resulted in a 45% increase in the
cheaper production countries was continued. In that context a
balance sheet total. The solvency ratio (guaranteed equity as a
second Neways production facility was put into commission in
percentage of the balance sheet total) at year-end 2004 came to
Slovakia last year. Neways has been operating in Eastern Europe
32.2% (year-end 2003: 33.5%).
for more than 10 years now and therefore has considerable
experience of setting up and managing the growth of such
The cash flow from operational activities was EUR 11.1 million.
facilities in these countries. The number of Neways employees in
Partly thanks to a restrictive investment policy a positive net
Eastern Europe and China increased last year by 14% to 671 at
cash flow, excluding the financing of the takeover of Stork
year-end 2004. As a consequence of the takeover of Stork
Electronics, of EUR 9.2 million was posted for the year as a
Electronics the number of employees in Western Europe also
whole, compared with EUR 5.2 million in 2003. This was
showed a net increase, rising by 24% to 1,220, bringing the total
achieved entirely in the second half of the year. As a result, the
number of Neways employees to 1,891 at year-end 2004.
short-term and long-term loans totalling EUR 10.3 million
obtained for the takeover of Stork Electronics were recouped to a
Good progress was made throughout the year as regards
large extent.
customer satisfaction, operational efficiency and commercial
cooperation between the Neways companies. Several Neways
Strengthening of strategic position
companies further optimised their organisation, in particular the
A number of steps were taken in the reporting period to
purchasing and logistics processes. As a result, there was a
strengthen Neways’ strategic position. The underlying principle
definite improvement, right across the board, in delivery
here is the strategy as set out on page 9.
reliability, one of the most important indicators of customer
satisfaction in the EMS market. The commercial cooperation
In the first half of 2004 the transfer of the production activities
between the Neways companies was also further intensified and
of Neways Heerlen & Si-Lectron to Q-Nova was completed. Since
improved in recent months, as was the cooperation between the
the reorganisation, the operating company is fully concentrating,
development and assembly companies, which led to several new
in a considerably slimmed-down form, with approximately 70
customers and concrete new orders. In the coming years Neways
employees, on the development, engineering, prototyping,
will focus more strongly on the expansion of its Electronic
marketing and sale of cable systems and cable solutions. Almost
Mechanical Repair activities and thus meet the growing customer
the entire production activities have been transferred to Q-Nova
demand for life cycle management.
and the strategic partner Styl in Eastern Europe.
Repair in Echt (Netherlands) will be phased out. The servicing
and production of electronic components and systems. This
and repair of mobile telephones is not a core activity for
acquisition gave a strong boost to Neways’ policy of further
Neways. Neways’ policy is to focus on smaller series for the
expanding its development activities and its systems assembly
industrial and professional market, distinguishing itself from its
business. In this way, moreover, Neways can enlarge its
competitors by virtue of things such as flexibility, complexity
European network, existing customers can be better served and
and specialist expertise. In this connection, the mobile telephone
N E W A Y S
and repair business of the operating company Evic Service &
takeover of Stork Electronics, a company involved in the design
2 0 0 4
In November it was announced that the mobile telephone service
A very important strategic step was taken in mid-2004 with the
27
activities of Evic Service & Repair will be completely phased out
Guaranteed equity
in the first half of 2005. This also applies to employment. Some
members of the workforce have already been transferred to other
48.5
Neways facilities and firms in the same sector. In this
connection, Neways’ 55% interest in Evic Service & Repair
Hungary Kft. (Budapest) has also been sold. This facility in
39.4
Hungary employed 25 people. A once-only charge of EUR 1.9
million was taken last year for the phasing-out of the activities.
29.8
33.1
31.3
Neways is operating in a market in which, viewed in the long
term, the outsourcing of production, development and systems
20.7
assembly by OEMs is steadily increasing. In this regard the
23.8
18.7
20.4
13.1
customer relationship is usually a long-term one. A significant
proportion of these customers wants ever-greater flexibility in
combination with a lower cost price. For Neways this means that
2000
2001
2002
2003
2004
its role as a partner of these companies, based on mutual
dependence and trust, will become increasingly important over
the years. To operate successfully, it is crucially important to
Guaranteed equity x EUR 1,000,000
Shareholders' equity x EUR 1,000,000
have intensive communication and to strengthen relations, not
only with customers but also with all those involved in the
"chain" of companies in which one is cooperating, such as
systems houses, other firms in the sector and suppliers of
components. Neways is fully aware of this and again devoted a
lot of attention to this in the past year.
Developments in the operating companies
Neways Industrial Systems
Neways Industrial Systems (NIS) specialises in supplying and
testing total electronic systems for the industrial market. The
main core competencies are systems assembly, testing, optimum
Net cash flow
supply chain management, engineering and the development of
9.4
test protocols.
5.2
NIS largely serves customers in the semiconductor industry.
There was a definite revival in this sector in 2004. On this basis,
2000
2001
2002
2003
NIS was able to widen its customer base, while turnover rose
(4.1)
sharply compared with 2003. In 2004, NIS’s turnover went up by
49% to EUR 26.0 million (2003: EUR 17.4 million).
The “value engineering” activities that were started in 2003 were
further developed in 2004. This resulted in significant cost
reductions for a number of existing products. This project-based
approach was also adopted last year for the development and
(18.2)
introduction of new products. As a result, NIS is able to give
2 0 0 4
N E W A Y S
customers better support in the timely launching of their
products on the market. Together with the further
delivery reliability, this has resulted in a marked improvement in
28
professionalisation of the business processes and the increased
the operating result.
2004
(26.0)
Net cash flow x EUR 1,000,000
The number of employees at the end of the year remained the
partnership relation with important customers like ASML and
same at 80 (year-end 2003: 80 employees).
Philips Medical Systems. It should also result in strengthening
NAA’s positioning as a major supplier of life cycle management
In 2005, NIS will focus on enlarging the customer base in order,
for existing product portfolios of new customers and for support
among other things, to further reduce its dependence on the
in the development of new products.
semiconductor industry. The value engineering activities will be
expanded. NIS will also strive to increase flexibility by
Ripa
outsourcing production and engaging in closer cooperation with
Ripa specialises in solutions in the field of electronics assembly,
the other Neways operating companies.
such as the assembly of advanced small and medium-size
volumes of printed circuit boards (PCBAs). Ripa mainly serves
Neways Advanced Applications
customers in the industrial, the medical and the semiconductor
Neways Advanced Applications (NAA) is a full-service provider,
sectors.
from design, engineering, production of electronic components
and modules to the assembly of complete systems. NAA
After 2003, a year in which there was a definite profit recovery,
(formerly Stork Electronics) has been part of Neways since
Ripa posted slightly higher turnover in 2004, namely EUR 30.7
1 July 2004.
million compared with EUR 30.1 million in 2003.
NAA works mainly for customers in the semiconductor industry
Efficiency improvements were carried out last year in the
and the medical sector, and in 2004 was able to benefit from the
logistical processes. As a result, production lead times were
upturn in demand from the semiconductor industry. In the six
further shortened, thus enabling the inventory position to be
months that NAA has been part of Neways it posted turnover of
further reduced. A lot of time was invested in intensifying the
EUR 42.9 million.
partnerships with important customers in the electronics market,
Commercially, a lot of attention is being devoted to acquiring
ensuring such things as earlier involvement and support of the
new customers from other market sectors, in order in this way to
customer in the development stage of printed circuit boards. At
create a more balanced customer portfolio. Operationally, last
the same time, the cooperation with other Neways operating
year saw a reduction of the cost basis and a further increase in
companies was also further developed. In the second half of the
the organisation’s flexibility.
year a start was made on cooperating in the production field
with the new associated company Neways Advanced
After the takeover by Neways an immediate start was made on a
Applications.
large-scale integration process, which involved such things as
On the basis of all these efforts, a better result was achieved in
matching the business processes of Neways and NAA to one
the second half of the year following a moderate result in the
another and replacing NAA’s ERP systems with the BaaN IV
first six months. At year-end 2004, Ripa had 162 employees
system in use at Neways. A start was also made on identifying
(year-end 2003: 164 employees).
the possibilities for pooling resources in fields such as business
development, purchasing and commercial operations. Where
One of the spearheads for 2005 is the further development of the
possible, these benefits are already being utilised. In addition, the
cooperation with Neways Advanced Applications, in both the
current expenditure with outside companies will be identified
production and the commercial field.
and if possible diverted to Neways’ own production facilities, for
instance in Slovakia. The integration process is making excellent
Hoyte
progress and is expected to be completed at the beginning of the
Hoyte is an operating company specialising in the development
second half of 2005.
of customised electronics.
The number of persons employed at year-end 2004 was 323, of
Hoyte made good progress last year. Turnover of EUR 2.0 million
whom 24% were temporary employees. NAA made a direct
was posted in 2004 (2003: EUR 1.1 million). Important factors
contribution to the profit per share in the first six months in
that contributed to the increase in turnover were the higher
which it formed part of Neways.
demand by OEMs for the development of prototypes and the
software system. The transfer of the four mobile CAD layouters
seek in 2005 to strengthen its competitiveness through more
from Evic to Hoyte in March of last year also contributed to the
effective cost control in the life cycle of complex industrial
increased turnover. The reason for the transfer was that this
products. This should lead to a further strengthening of the
service fits in better with Hoyte’s business.
N E W A Y S
As well as the completion of the integration process, NAA will
2 0 0 4
successful market launch of the Component Management
29
The intensified cooperation with other Neways operating
market with various new prospects, a number of which are
companies that started in 2003 translated in 2004, above all in
already in the tendering stage.
the German market, into concrete orders for the development of
As well as with Hymec, the working relationship with other
specialised hardware and software from customers in, for
Neways operating companies has also been developed. Thus,
example, the automotive and the medical sector.
intensive cooperation has been started with Hoyte in the field of
mechanical engineering and Neways Leeuwarden was able to
Much attention was focused last year on the issue of lead-free
benefit from the x-ray competencies of the new Neways
production. Lead-free production will be required by law from
operating company NAA. The outsourcing of production to
1 July 2006. To prepare for this changeover, several customers
Q-Nova was also expanded in 2004.
with prototypes wanted to have lead-free soldering of all their
new designs. More information about the changeover to lead-
At year-end 2004, Neways Leeuwarden had 86 employees (year-
free production can be found on page 38.
end 2003: 86 employees).
Last year’s result represented a definite improvement on 2003. At
In 2005 there will continue to be a strong focus on improving
year-end 2004, Hoyte had 18 employees (year-end 2003: 14
profitability through efficiency improvements. Growth is
employees).
expected to be sustained in 2005.
To make better use of synergy benefits, a lot of attention will
Evic Electronics
continue to be devoted in the coming years to the working
Evic Electronics is engaged in the development and assembly of
relationship with the other Neways operating companies and the
control electronics and repair activities.
further broadening of the portfolio by means of new
development techniques that meet customer demand better.
In 2004, turnover again grew by 23% from EUR 13.9 million in
Hoyte’s twentieth anniversary will be celebrated in 2005.
2003 to EUR 17.1 million in 2004. The increase in turnover was
mainly attributable to existing customers and was related both to
Neways Leeuwarden
existing products and to improvements to, and further
Neways Leeuwarden is engaged in the development, engineering
development of, these products.
and electronics assembly of printed circuit boards and in the
assembly of apparatus. Another activity is service and repair.
Improvement of the logistical processes made it possible to
reduce inventories and shorten delivery times, thus making a
After an extremely difficult 2003, demand picked up again in
significant contribution to the greatly improved profit.
2004. However, there was still pressure on prices and pressure on
delivery times. As a consequence, turnover came to EUR 12.6
To further increase flexibility, the preparations for outsourcing
million, an increase of 26% (2003: EUR 10.0 million). The growth
some of the production activities to Neways Leeuwarden were
was mainly due to successful acquisition activities with both
completed last year. In 2004 a start was also made on an order
existing and new customers.
acquisition programme for the Belgian market and the provision
of technical services was expanded.
In spite of the sharp increase, the level of turnover was still too
low in 2004, resulting in a profit which, although better, was
Evic Electronics will also focus on the market for Electronic
certainly not satisfactory. Cost control and cash flow
Mechanical Repair (EMR). By building up these EMR activities,
management were therefore once again important watchwords
Neways can also meet more effectively its customers’ wishes in
throughout the year. Various improvements were also carried out
the field of life cycle management.
turnover rate of inventory and an improvement in delivery
At year-end 2004, Evic Electronics had 114 employees (year-end
reliability.
2003: 113 employees).
Commercially, Neways Leeuwarden focused more strongly last
In 2005 the emphasis will continue to be on closer customer
year on the market for defence-related compensation orders. This
relations and on intensifying the order acquisition programme in
2 0 0 4
has already resulted in a concrete order for the delivery of 122
Belgium. Improvement of the lead time for the engineering
tank howitzer control systems, which will be executed in the
projects and control of the logistical processes will continue to
N E W A Y S
in the logistical processes, which helped to bring about a higher
coming years in cooperation with the associated company
be other points for special attention in 2005.
30
Hymec. Furthermore, contacts were built up last year in this
Evic Service & Repair
In 2004, turnover rose by 25% to EUR 1.5 million (2003: EUR
In November 2004 it was decided to completely phase out the
1.2 million). There was a sharp increase both in turnover related
main activity of Evic Service & Repair, namely the servicing and
to the European market and turnover related to the local market.
repair of mobile telephones, in the course of 2005. In this
connection, Neways’ 55% interest in the Hungarian facility was
Because of the rapid growth of the organisation, Ximec once
sold at the end of 2004. Market conditions were extremely
again carried out a quality campaign last year. Thus, partly as a
difficult in 2004 and prices were under strong downward
result of the introduction of an improved logistics system, the
pressure, which resulted in a loss-making situation. Moreover, as
process of materials management was simplified and the cash
mobile telephone service and repair is not regarded by Neways
flow was improved.
as a core activity, it has been decided to discontinue this activity.
At Ximec there were 193 employees at year-end 2004 (year-end
Evic Service & Repair posted turnover of EUR 4.1 million in
2003: 240 employees). In 2005 a major focus will be the further
2004 (2003: EUR 7.2 million). In line with the phasing-out of the
expansion of Ximec’s activities for the European market, and the
mobile telephone service and repair activities, this turnover will
company will continue working on building up a position in the
completely disappear in 2005.
local market.
Hymec
Neways Wuxi
Hymec specialises in microelectronics.
Neways Wuxi started in August 2001 as a spin-off of Ximec and
The operating company focuses on the design and production of
specialises in electronics assembly of PCBs, originally targeting
microelectronic modules based on thick-film technology. Hymec
the local Chinese market. Production is now both for its own
has two subsidiaries in China, namely Ximec and Hykong.
local customers and for Western European customers, the latter
often in close cooperation with Neways’ Dutch and German
The past year was an excellent one for Hymec, in particular with
operating companies. In 2004 the first prototypes and batch
a further strengthening of its position in the important medical
production volumes for export were delivered.
sector. New orders were won, for example, in the area of
microelectronics for hearing aids and blood pressure meters.
As in 2003, Neways Wuxi experienced growth in 2004, posting
turnover of EUR 0.3 million (2003: EUR 0.2 million).
Hymec posted turnover of EUR 11.0 million in 2004, an increase
of 43% (2003: EUR 7.7 million). There was an increase in
To be able to meet the growing demand, the production facility
demand from all customers. In 2003 three customers accounted
has been expanded and good progress has been made across the
for 80% of turnover, whereas in 2004 twelve customers
board in areas such as technical know-how and expertise,
accounted for this percentage, even though turnover with the
purchasing and engineering. The number of employees went up
largest three customers increased.
by 62% to 147 at year-end 2004 (year-end 2003: 91 employees).
In the coming years Hymec will continue to seek to meet its
Here too the rapid growth reflects Neways’ strategy of
customers’ changing demand. Demand is becoming increasingly
transferring more production to countries where wages are
complex in terms of functionality, breadth of technology and
substantially lower than in Western Europe. In this regard,
logistical flexibility. To serve the market in optimum fashion,
production in China will make a positive contribution to the
Hymec will continue trying to anticipate this in 2005. At Hymec
competitiveness of the Neways operating companies in Western
in Sittard there were 72 employees at year-end 2004 (year-end
Europe.
2003: 65 employees).
Ximec, Hymec’s Chinese subsidiary, which celebrated its tenth
customers and following customers to their new markets and
anniversary in 2004, assembles hybrids and microelectronics
sales channels, so as to be the same reliable supplier there as in
designed by Hymec. These modules are mainly intended for the
the present home market. Priority will be given in 2005 to
European market. In line with Neways’ strategy of outsourcing
expanding the export activities. These markets, which are
more production to low-wage countries, Ximec again underwent
relatively new to Neways Wuxi, should make a strong
strong growth in 2004.
contribution to the organisation’s growth and profitability in the
coming years.
N E W A Y S
but also very much at stimulating exports to Western European
2 0 0 4
The policy is aimed not only at meeting local market demand,
Ximec
31
Neways Heerlen & Si-Lectron
Good progress was made from a commercial point of view in the
Neways Heerlen and Si-Lectron were merged in 2003 at a single
past year. Cooperation in sales with Neways Neunkirchen
location and are engaged in the development, production and
enhanced NEK’s strength in 2004, while the closer cooperation
sale of cables and cable systems for applications in the medical,
with the development engineers at Hoyte and the increased
semiconductor and industrial sectors.
contracting-out of production activities to Q-Nova have given
NEK a much better negotiating position in relation to potential
2004 was an excellent year for Neways Heerlen & Si-Lectron. As
customers.
a consequence of a sharp increase in demand, mainly from the
medical sector and the semiconductor industry, turnover
At year-end 2004, NEK had 107 employees (year-end 2003: 124
increased by 10% to EUR 22.7 million
employees).
(2003: EUR 20.7 million). Accordingly, various successes were
also achieved on the commercial side, for instance as a result of
In 2005, NEK will continue the policy aimed at widening its
the working relationship with Neways Leeuwarden, with whom
customer base and strengthening the cooperation with Neways’
talks are held several times a year on joint new prospects.
other operating companies.
Neways Neunkirchen
The unexpectedly strong increase in demand coincided in part
Neways Neunkirchen is engaged in the engineering, prototyping
with the transfer of the production activities in Heerlen to
and assembly of PCBs, principally for a number of reputable
Q-Nova’s new production facility in Slovakia, which had started
German OEMs with whom the unit has built up good relations
in September 2003 and was still continuing in 2004. This
over the years.
resulted, especially in the first half of 2004, in extra pressure on
capacity, the quality and the delivery times of the products,
As a consequence of orders from some new customers and
which in turn meant extra costs and hence a reduction of the
strong demand from the automotive sector in particular, turnover
profits.
showed a marked increase of 16% from EUR 10.7 million to EUR
12.4 million. Higher turnover meant that cost savings and
To provide a better guarantee of flexibility in what is still a
internal improvements impacted the result more quickly.
rather fickle market, also in the months following the completion
of the transfer of production, ten employees have been kept in
The customer base was widened in 2004, resulting in a much
Heerlen for the time being. Q-Nova’s new production facility has
more balanced distribution of customers among the various
been operational since 2004.
sectors. As regards the management of the business, Neways
Neunkirchen changed over in 2004 to a more process-oriented
As a consequence of the transfer of production and the merging
organisation. As a result, employees are involved more in the
of the two companies, the number of employees decreased to 69
ongoing process of efficiency improvement of both the logistical
at year-end 2004 (year-end 2003: 150 employees).
and the commercial processes.
Neways Electronics Production (NEK)
The number of employees at year-end 2004 was 54 (year-end
Neways Electronics Production, (NEK) is engaged in the
2003: 52).
engineering, prototyping, testing and assembly of advanced PCBs
and systems assembly for applications in various sectors in the
Neways Neunkirchen will continue to work on widening its
German market.
customer base in 2005. The policy of improving the internal
processes will also be consistently pursued. Increasing customer
In 2003 NEK was faced with very poor market conditions, which
necessitated a reorganisation. This resulted in a structurally
lower cost basis, which NEK was able to benefit from in 2004.
With much-improved orders both from existing and from new
customers, a tighter organisation and a shorter production lead
N E W A Y S
2 0 0 4
time, 2004 was a year of recovery of turnover and profits for
32
NEK. Turnover rose by 15% and totalled EUR 18.1 million in
2004 (2003: 15.7 million).
satisfaction is central to this.
Q-Nova
A profit was posted both in the first half (EUR 1.0 million) and
Q-Nova, which celebrated its tenth anniversary in 2004, is
in the second half of 2004 (EUR 3.6 million).
engaged in the electronics assembly of PCBs and the production
of cable systems. Last year the Slovakian operating company
Even excluding the acquisition of Stork Electronics in the second
again underwent strong growth, benefiting in particular from the
half there was a definite improvement in the result compared
increased contracting-out of production activities by Neways’
with the first six months.
Dutch and German operating companies. Q-Nova achieved a
28% increase in turnover in 2004 from EUR 2.9 million in 2003
Dividend proposal
to EUR 3.7 million in 2004.
We propose to the General Meeting of Shareholders that no
In the first half of 2004 the transfer of the cable production
dividend be paid for this year. Dividend policy is aimed at
activities from Neways Heerlen to Q-Nova was completed. This
distributing approximately 30% of the net profit, provided that
transfer of activities had already been started at the end of 2003
the solvency percentage, defined as equity capital adjusted for
and fits into Neways’ policy of producing more competitively as
deferred tax benefits as a percentage of the balance sheet total, is
a group.
35% or higher.
Because of the Q-Nova’s strong growth in recent years, it was
necessary in 2004 to physically separate the two different
Net turnover
production activities. A new production facility has been started
Net turnover increased in 2004 by 39% from EUR 136.5 million
up for the production of cable systems. The organisational
to EUR 189.7 million. The increase was due to the slight upturn
structure has been adapted to this and a new director has been
in market demand and the acquisition of Stork Electronics.
appointed to take general charge of Q-Nova. The splitting-up of
Autonomous growth came to 11%. In 2003 there was an
activities offers sufficient scope for expansion, so as to be able to
autonomous decline in turnover of 10%. The increase in turnover
meet the expected demand for both electronics assembly and the
that was achieved was largely attributable to existing long-term
production of cable systems in the coming years.
customers. The portion of the turnover attributable to newly
The number of employees went up by as much as 41% to 331 at
acquired customers was, however, significantly higher than in
year-end 2004 (year-end 2003: 234 employees).
2003.
Styl (strategic partner)
Neways Heerlen and Si-Lectron have for more than ten years
been outsourcing the production of cables and cable systems to
Styl in the Czech Republic. In this period, Styl has developed
into a reliable strategic partner capable of combining high
quality with low costs. The company offers Neways extra
flexibility in its production activities. Part of the cable
production of Neways Heerlen was transferred last year to Styl.
Results
The upward trend in the results for 2004 was stronger than
expected. The operating result (excluding special income and
expenses) was EUR 9.3 million (2003: a loss of EUR 0.5 million).
This corresponds to an operating margin of 4.9%.
Apart from Evic Service & Repair, all the group companies
posted an operating profit. The profit before tax in 2004 came to
EUR 8.2 million, of which EUR 0.2 million represents special
items. The effective tax rate was 44%. This high rate of tax was
due to a once-only downward revaluation of the deferred tax
a consequence, net profit came to EUR 4.6 million, compared
with a net loss of EUR 6.3 million in 2003. Without the onceonly write-down, net profit in 2004 was EUR 5.2 million.
N E W A Y S
Netherlands from 34.5% to 31.5% in 2005 and 30% in 2007. As
2 0 0 4
benefit because of the reduction of the rate applicable in the
33
Turnover in
millions of EUR
inventories and accounts receivable were higher in absolute
2004
2003
Industrial
63
64
Semiconductors
terms at year-end 2004 than at year-end 2003.
48
15
However, inventories in days of sales were quite a bit lower at
Telecom
6
10
year-end 2004, namely 68 days, compared with 76 days at year-
Medical
49
20
end 2003. The free stock was also reduced last year by 27% and
9
12
is at an acceptable level. Strict control of both the order-related
Automotive
Banking
2
1
and the free stock continues to be of great importance, however.
Agriculture
2
2
The objective is to achieve a rate of inventory turnover of 60
11
12
190
136
Miscellaneous
Total
days of sales.
Inventories at 31/12
2004
2003
The increase in turnover in the semiconductor and medical
Free stock
1,711
2,345
sectors was largely due to the acquisition of Stork Electronics.
Order-related stock
32,208
20,211
8,932
5,783
42,851
28,339
Work in progress
The decline in turnover in the telecom sector is mainly
Total
connected with the significant changes in the market and
increasing downward price pressure on activities in the field of
The logistical system and the logistics organisation play an
servicing and repair of mobile telephones. These activities will
important role in the management of inventory. The individual
continue to be phased out in the coming months, which will
operating companies are responsible for their own logistical
exert downward pressure on turnover in the telecom sector also
performance. The coordination of the purchasing and logistical
in 2005.
activities takes place at the level of the holding company.
Purchasing and logistics
An essential element of inventory control and of an optimum
In the EMS market, purchasing and logistics are processes that
purchasing policy is the policy with regard to article coding. The
are crucial to operating successfully as a supplier. This is
various parties within the chain often use different codings for
emphasised by Neways’ purchasing percentage, which was
the same type of component. Each customer has his own coding
roughly 58% in 2004. The Company is therefore heavily
system, thus rendering difficult the exchange of identical
dependent on supplies of electronic and other components.
components among different customers. This results in additional
inventory risks. For a number of years now Neways has had a
The reliability of Neways’ deliveries to its customers is largely
system of uniform article coding (UAC) within the majority of its
determined by the quality of the deliveries of components to
operating companies. In 2004 this UAC system was extended to
Neways. The market is setting increasingly high requirements as
the other operating companies and so is now in use throughout
regards flexibility and delivery times. Customers reschedule
Neways, with the exception of Neways Advanced Applications,
orders at the last moment and often will not accept any increase
which was taken over last year and where this system will be
in costs for this. In such cases Neways, in turn, has no choice
introduced in 2005.
but to cancel or reschedule orders already placed for
components, or even to return components to the supplier.
In days of sales, accounts receivable decreased in the reporting
period from 53 days at year-end 2003 to 50 days at year-end
Effective management of these processes requires clear
2004. The total provision for bad debts was EUR 1.7 million at
agreements, open communication and a flexible attitude between
the end of 2004 (year-end 2003: EUR 1.4 million).
Neways and its suppliers. This process merits continual attention
and a good understanding between the parties. In this regard,
Investments
Neways is very grateful to its suppliers, because last year they
Investments in tangible fixed assets totalled EUR 2.3 million
too made maximum efforts to provide optimum service to
(2003: EUR 1.2 million). This is noticeably less than the
Neways and hence to our customers.
depreciation of EUR 4.6 million (2003: 4.0 million). As in 2003,
2 0 0 4
In this connection, the control of inventories and credit
of them being replacement investments. A limited portion of the
management again had a high priority in 2004. Under the impact
investments was connected with the preparations for, and
N E W A Y S
investments were deliberately kept at a low level in 2004, most
of the full consolidation of the operating companies in Eastern
modification of, the logistical processes for changing over to
Europe and China and the takeover of Stork Electronics,
lead-free production.
34
Neways had a high level of investments in the years before 2002.
satisfaction and forms a good starting point for bringing about a
As a result, we have modern machinery. Accordingly, the
stronger improvement in 2005.
restrictive investment policy does not have any adverse
consequences for the management of the business in the longer
There were regular meetings with the banks in the reporting
term.
period. Intensive talks were held on the financing requirements
for the takeover of Stork Electronics, and new understandings
Financial structure, liquidity and cash flow
also were reached on the financial policy and objectives. The
In July, 760,000 new ordinary shares were privately placed at a
talks with the banks – ABN AMRO, F. van Lanschot Bankiers and
price of EUR 4.00 per share to finance the takeover of Stork
the NIB Capital Bank – were always held in a constructive
Electronics. This represented 9.8% of the total outstanding
atmosphere. Neways thanks the banks, therefore, for their
ordinary shares. The shares were placed with existing large
support and critical pro-active attitude.
shareholders. A subordinated convertible debenture loan of EUR
1.5 million (with a term of 4 years and an exercise price of EUR
Employees
4.50) and a subordinated loan of EUR 1.5 million were also
At the end of 2004 Neways had 1,891 employees (year-end 2003:
issued to finance the takeover.
1,570 employees), of whom 121 were from employment agencies
(2003: 34).
A further depreciation of the US dollar against the euro meant
The increases are mainly attributable to the takeover of Stork
that an exchange-rate loss of EUR 0.4 million was incurred on
Electronics, which at the end of the year had 245 permanent
the investments in the subsidiaries in China, which amount was
employees and roughly 78 temporary employees.
charged direct to shareholders’ equity. The exchange-rate loss in
2003 was EUR 0.8 million.
In the first half of 2004, Neways completed the restructuring at
Neways Heerlen. In November 2004, Neways announced that the
The net cash flow (net profit plus depreciation adjusted for
mobile telephone service and repair activity of Evic Service &
investments and changes in provisions and working capital) was,
Repair would be phased out and the number of employees at
excluding the takeover of Stork Electronics, positive in 2004,
Evic Service & Repair in Echt would be reduced in phases by 55.
totalling EUR 9.1 million (2003: EUR 5.2 million). The working
In the meantime, a limited number of them have been transferred
capital (inventories plus receivables minus trade creditors and
to other Neways facilities and other firms in the sector. The
other debts) increased in absolute terms by EUR 11.1 million as a
possibilities of a transfer are still being considered for others.
result of the takeover of Stork Electronics, the autonomous
Neways’ 55% interest in Evic Service & Repair Hungary has been
growth and the inclusion in the balance sheet for the first time
sold. This affected 25 employees.
of the operating companies in Eastern Europe and China, and
totalled EUR 37.2 million (2003: a reduction of EUR 8.4 million).
As a result of the transfer of production to cheaper production
For the same reasons, the long-term debts and the short-term
countries, last year once again saw a shift in employees from
debts to lending institutions also increased in the reporting
Western Europe to Eastern Europe and China. This has meant the
period, rising by EUR 3.1 million to EUR 22.2 million and EUR
loss of various jobs in the Netherlands and Germany and their
10.1 million respectively at year-end 2004. Altogether this
transfer to other operating companies in the cheaper production
resulted in a 45% increase in the balance sheet total to EUR
countries Slovakia and China. Last year the number of Neways
102.9 million.
employees in Eastern Europe and China increased by 14% to 671
at the end of the year. This figure represents more than 35% of
The solvency percentage (guaranteed equity as a percentage of
the whole Neways workforce.
the balance sheet total) stood at 32.2% at year-end 2004 (yearend 2003: 33.5%). The guaranteed equity is the sum of the
In 2004 the restructurings and transfers again resulted in the loss
shareholders’ equity of EUR 20.4 million (2003: EUR 13.1
of work, which can sometimes have considerable consequences
million) and the subordinated loan stock of EUR 12.7 million
for the employees concerned and their families. The Neways
(2003: EUR 10.7 million).
management is more than aware of this and tries to soften the
blow as much as possible within the existing financial
of Stork Electronics, 2004 was a very important, demanding and
encouraging year for Neways. In that light the progress achieved
in 2004 as regards the financial position is a cause for
2 0 0 4
ongoing priority. With the return to growth and the acquisition
constraints.
N E W A Y S
The improvement of the Company’s financial position is an
35
Neways is a supplier company that needs to be driven by a
Sick leave can often be prevented by daring to discuss working
service mentality. Customer orientation is what matters.
and living conditions with one another; further optimising
working conditions; making people aware of the advantages and
In 2004 the management again devoted a lot of attention to the
disadvantages of particular lifestyles; the importance of healthy
change process within the Company, with the aim of making the
food and physical fitness; making an open discussion possible
organisation more efficient through greater customer orientation
where there is dissatisfaction, paying a compliment.
and thus enhancing the delivery performance and customer
In short, illness can have a cause that may or may not be
satisfaction and safeguarding the Company’s future. Good
connected with one’s work. There is attention for some time to
progress was made in this regard throughout the Neways
causes that might lie within Neways.
organisation.
Trade unions and Works Councils
For most employees the pressure to perform well has increased in
In 2004 there was again regular consultation with trade union
recent years, partly because of the aforementioned change
organisations and Works Councils. As well as the statutory
process, partly because of the adverse economic conditions and
obligations under the Works Councils Act and the periodical
partly as a result of critical, demanding customers.
information meeting with trade union organisations, more
specific intensive talks were held with the appropriate Works
The average level of absenteeism within the Dutch Neways
Council and the trade union organisation in 2004 on the
operating companies in 2004 was 5.5%, which was slightly down
takeover of Stork Electronics and the phasing-out of the
on 2003 (6%).
activities of Evic Service & Repair. With regard to the latter,
agreement was reached in December on a social compensation
Absenteeism remains an important focus of attention at Neways.
plan, Neways having committed itself in advance to make efforts
Within the Neways-group there are units with a low level of
for the possible transfer of the employees affected to other
absenteeism, but unfortunately there are still some poor
Neways facilities.
examples, and in 2005 the combating of absenteeism will be
high on the management agenda in these units in particular.
In the Netherlands there are seven operating companies with a
Planning difficulties are a major problem in connection with sick
Works Council. The chairmen of these Councils meet on several
leave. This kind of absence comes unexpectedly and so cannot
occasions each year with the Board of Directors at the Joint
be scheduled and can therefore disrupt our work processes. And
Meeting of Works Council Chairmen (GOVOR). The German
this can only be bad for our customers.
operating companies each have their own Works Council.
Efforts to reduce absenteeism will continue in 2005 and in this
context we shall talk in our Company more often about health
management rather than the combating of absenteeism.
The best way to combat absenteeism is to pursue a policy of
prevention, aimed at managing the employees’ health.
In the future Neways shall also, however, look more closely at
external influencing factors.
Employees at year-end
2004 payroll
2004 hired
2003 payroll
2003 hired
Netherlands
927
104
759
34
Germany
172
17
190
-
Eastern Europe
331
-
256
-
China
N E W A Y S
2 0 0 4
Total
36
340
-
331
-
1,770
121
1,536
34
Organisation and management
Q-Nova, Mr Martin Fiddelaers has been appointed as the new
Neways has a decentralised organisation consisting of a holding
director and thus has responsibility for the whole day-to-day
company and sixteen operating companies. Each operating
operations of this company. Some members of the Management
company is active within a particular sector and works on a
Team of the former Stork Electronics have joined Neways,
number of product/market combinations. The strategy and
managing this operating company under the new name of
objectives are drawn up with the management team of each
Neways Advanced Applications and under the leadership of
operating company with regard to profit margin, profitability,
Mr Adrie van Bragt.
solvency and liquidity, and these must be in line with the
At the beginning of 2004, Mr Paul Cramer, director of Hymec,
strategy and objectives at holding company level (see page 9.
was succeeded by Mr Johan Lecoutere. In September, Mr Sytze
The policy in respect of the following matters is also discussed:
Westerhof was appointed as director of NIS, where he succeeded
- The choice of markets to be worked in;
Adrie van Bragt, who became director of NAA.
- The choice of product/market combinations;
Neways’ policy continues to be aimed at appointing internal
- The distinguishing features of the services offered;
candidates to key positions.
- The nature of the working relationship with customers,
suppliers and other Neways companies;
IFRS publication obligation (2005)
- The corporate image that is to be conveyed;
The introduction of the new International Financial Reporting
- The desired growth and the desired market share.
Standards (IFRS) regulations in 2005 will lead to changes in the
accounting policies with regard to valuation and determination
The strategy at operating company level is concretised down to
of the result, the presentation and the explanatory notes. Neways
the level of process parameters. This enables the operating
has already made the necessary adjustments and the whole
companies to identify shortcomings at an early stage and, if
organisation is therefore as good as ready for the changeover to
necessary, to make adjustments. These built-in control
IFRS.
mechanisms are a good way of safeguarding the continuity of an
operating company. Furthermore, this mode of operation gives
The effect on the comparative figures for 2004 will be limited as
the operating companies an insight into the action that has to be
regards the profit and loss account. There will be some
taken in order to continue to operate successfully in their
accounting and presentation differences in the balance sheet
markets.
which will result in a decrease in the guaranteed equity. The
opening balance at 1 January 2004 has been restated on the
As well as maintaining contacts with the stakeholders, such as
basis of the IFRS principles.
shareholders, providers of loan capital, customers, suppliers and
employees, it is an important task of the holding company to
After recalculation of the balance sheet as at 31 December 2004
encourage cooperation between the operating companies and to
in accordance with the IFRS guidelines, the guaranteed equity
promote the exchange of knowledge and expertise. Partly in this
will decrease by approximately EUR 2.0 million and the solvency
context, there has been a much more operational focus on the
percentage will be just over 30%. On the basis of the Dutch
part of the holding company in the past year, and consequently
accounting principles that are followed, this is 32.2% at 31
the working relationship between the holding company and the
December 2004.
operating companies in purchasing, logistics and production, as
well as at a commercial level, has been intensified, efficiency
The main effects of the recalculation on the opening balance
benefits within the Neways group are being better utilised and
sheet are shown below.
risks are being spread more. Within the agreed frameworks,
The 3,000,000 outstanding preference shares described as
strategy and financial constraints imposed by the holding
shareholders’ equity are regarded as debt under IFRS. The
company, the management teams of the operating companies
convertible debenture loan has a shareholders’ equity component
retain considerable freedom in conducting their own operational
under IFRS. The inventory value is approximately EUR 1.4
and commercial policy.
million lower on the basis of the new accounting principles.
protected assets can be capitalised. With regard to the pensions
The management of Neways Heerlen was taken over at the
and early retirement pensions, there is an increase of EUR 1.3
beginning of this year by Mr Jack Kromhof, who is also director
million on the basis of the new actuarial calculations under the
of Si-Lectron. Following the physical separation of cable
defined benefit plan.
production and the assembly of electronic components at
N E W A Y S
intangible fixed assets is necessary, because under IFRS only
the reporting period.
2 0 0 4
Furthermore, a limited downward value adjustment of the
There were a number of changes at the level of management in
37
Starting in the financial year 2005, Neways will report in
permits the screening, conversion and testing of customers’
accordance with IFRS. The first full report on the basis of IFRS
production processes, enables Neways to meet this demand.
will be the publication of the half-yearly figures for 2005. The
comparative figures based on IFRS for the first half of 2004 will
In addition to this, Neways will continue to work in 2005 on its
also be published then.
own changeover to Pb-free production. This is expected to
involve extra investments in an order of magnitude of EUR 1.5
Changeover to lead-free production (2006)
million. Neways Neunkirchen switched over completely to lead-
For reasons of environmental protection the European Union has
free soldering at the beginning of 2005. A number of Neways
decreed that from 1 July 2006 all electronic equipment put on
operating companies, including Q-Nova and NEK, have
the market must be lead-free. This means that the whole
meanwhile made the changeover in part. Most Neways operating
electronics industry is on the eve of a revolutionary change.
companies are expected to have switched over completely by the
end of 2005.
Neways will also have to meet this deadline and make radical
adjustments in the production processes of the various operating
Market trends and competitiveness
companies. The main process affected at Neways is soldering,
Many of the market trends outlined below are medium- to long-
which hitherto has been performed with a mixture of tin and
term trends, whereas the market threats often relate to the short
lead.
to medium term.
The project is being supported and managed by Neways right
In regard to Neways’ competitiveness, good progress was made
across the Company. Neways Neunkirchen acted as the pilot
last year in various respects. The competitive disadvantages listed
facility for this in 2004. Specifically, what is involved in
below will continue to be points for attention in 2005. The same
changing the production processes is the use of different
applies to the optimum utilisation of the competitive advantages
soldering mixtures and the introduction of a different method in
that are listed.
which soldering has to be carried out at higher temperatures. In
some cases it will also be necessary for suppliers, insofar as they
do not yet do so, to supply different (lead-free) components. A
start has already been made within all the Neways units on the
inventory and preparations for changing over to lead-free
soldering.
In this connection, Neways Advanced Applications has developed
together with the Delft-based company Mat-Tech a new process
called ‘Green Solutions’. The Process Innovation Prize was
awarded for this new process at the biennial Industrial Week in
Utrecht last October. The use of ‘Green Solutions’ permits
efficient production of lead-free electronics without prejudice to
the quality and reliability of the product. This process involves
the use of a combination of tin, silver and copper. According to
the innovation prize jury, the invention by Neways and Mat-Tech
provides the right answer for the changeover to lead-free
products and no comparable alternatives are yet available in
Europe.
The newly developed process meets all the requirements of the
new EU legislation. Neways regards the adoption of this process
as a professional contribution towards socially responsible
N E W A Y S
2 0 0 4
production.
38
Several customers of Neways already indicated in the past that
they were interested in possibly outsourcing the whole issue of
lead-free production. The ‘Green Solutions Program’, which
Market trends
Threats
• A policy of more outsourcing by OEMs, both in assembly and
• A low exchange rate of the dollar;
in development and (sub) systems;
• Further consolidation within the EMS industry: economies of
scale and internationalisation;
• Larger OEMs are rapidly expanding their international
presence;
• Growing need of larger OEMs for producers who can manage
• Globalisation and increasing transparency by competitors
make it necessary to be more creative with the available
gross margin in the relationship with the customer;
• If the economy picks up, an allocation of components will
again take place;
• Emergence of Chinese and Asian competitors.
the whole life cycle of a product (‘life cycle management’);
• Increasing pressure on right balance between flexibility, on
the one hand, and efficiency and cost reductions, on the
other;
• Further expansion of production facilities in Eastern Europe
and China;
• Globalisation and increasing transparency in the sector as a
result of modern means of communication;
• Provision of early information throughout the chain of
suppliers.
Competitive advantages
Competitive disadvantages (to be overcome)
• Ever better utilisation of possibilities for offering life cycle
• We are a medium-size player in the EMS market and
management through closer cooperation within the group;
customers may sometimes place orders with smaller
• Strong focus on the industrial and the professional market;
competitors because of their strong customer orientation and
• Extensive experience with internationally operating high-tech
very close customer relationship, while larger competitors
OEMs;
• Competence centres and production capacity in countries like
may be chosen because of their low cost structure;
• The switchover from product- and industry-oriented
Germany, Slovakia, the Czech Republic (partner company)
mentality to a service mentality that is more suited to these
and China;
times has not yet been achieved in all layers of the
• An experienced development/engineering department that
has the most up-to-date development resources at its
disposal;
• Solid, stock market-listed company with a clear and open
organisation;
• Opting to broaden activities (life cycle management) entails
extra risks in areas like purchasing and development that
have to be managed properly.
policy and strategy;
• A clear business concept consisting of:
- Operating companies that are close to the customer;
- Production facilities in Eastern Europe and China;
- Holding company structure for synergy in logistics,
purchasing and information systems;
- Centralised business development.
N E W A Y S
2 0 0 4
• Leading position in lead-free soldering.
39
Outlook for the year 2005
In the first two months of 2005 the effect of falling demand
from the semiconductor industry has been noticeable, as
expected, and Neways’ order portfolio has declined somewhat.
Future market trends are at present still uncertain and, partly in
view of the relatively short timeframe of no more than a few
months and the fickle nature of demand from the semiconductor
sector, it is still too early to say anything about the profit trend
for 2005.
At the beginning of 2005, Neways is, however, in much better
shape than it was a few years ago. Our competitiveness has
improved and our greater customer orientation fits in well with
market demand.
The important process of integration of NAA is proceeding very
well. Various initiatives have been developed for cooperation
with other Neways operating companies in areas such as
production technology and business development. A start has
been made at the beginning of 2005 on one of the main
programmes, the replacement of the old ERP system by the BaaN
IV system used at Neways. The coming months will also see the
completion of the phasing-out of the mobile telephone service
and repair business at Evic Service & Repair.
The improvement of efficiency in several operating companies
and the intensification of cooperation between the Neways units
will continue to receive a lot of attention in 2005. This should
lead to a further improvement of innovative capability and
flexibility. At the same time, on the basis of the restrictive
investment policy and stringent control of the cash flow, close
attention will again be paid to improving the financial position.
Understandings were reached with the banks at the beginning of
2005 regarding a refinancing of the Company. This represents a
marked increase in the total credit facilities. As a result, Neways
will be better able to meet its strategic objectives.
In the course of the first quarter of 2005 these new
N E W A Y S
2 0 0 4
understandings will be set out in a new credit agreement.
40
S TAT E M E N T B Y T H E B O A R D O F D I R E C T O R S O N I N T E R N A L C O N T R O L
During the reporting period we closely monitored our Company’s
internal risk management and control systems. We thereby
gained an insight into significant risks that are specific to our
Company. These risks and the associated policy are described on
pages 11 and 12 of this annual report in the section on risk
factors.
We carry out our own assessments together with the
managements of the operating companies. The standards of the
COSO model are used as the frame of reference for our
evaluations.
However well designed our internal risk management and control
system is, it can never provide absolute certainty that objectives
relating to strategy, operations, reporting and compliance with
legislation and regulations will always be achieved. Reality
teaches us that human errors of assessment can be made when
decisions are taken, that cost-benefit considerations are always
made when risks are accepted and control measures are taken,
that as a result of human error even simple mistakes can have
major consequences, that conspiracy by officers can lead to the
circumvention of internal control measures and that the
management of the operating companies may ignore
understandings that have been reached with us.
Taking into account the above constraints which are necessarily
attached to all internal risk management and control systems
and having regard to the ways that have been identified for
improving these systems, our Company’s internal risk
management and control systems give us a reasonable degree of
certainty that:
• we are aware of the degree to which our Company’s strategic
and operational objectives are being achieved;
• the internal and external (financial) reporting is reliable; and
• the organisation complies with the applicable legislation and
regulations.
The whole of our work regarding the internal risk management
and control systems is regularly discussed by us with the
Supervisory Board.
N E W A Y S
Board of Directors
2 0 0 4
Son, 28 February 2005
41
ANNUAL ACCOUNTS
1. Consolidated balance sheet (after proposed appropriation of result)
Amounts x EUR 1,000 at year-end
2004
2003
Land and buildings
3,774
2,921
Machinery and equipment
8,906
4,671
Fixed assets
Tangible fixed assets (4.3)
Other fixed assets
290
718
12,970
8,310
Participating interests
0
2,254
Receivables from participating interests
0
699
7,148
10,724
7,148
13,677
33,919
22,556
Financial fixed assets (4.4)
Deferred tax benefits
Current assets
Inventories
Raw materials and consumables
Work in progress
8,932
5,783
42,851
28,339
38,433
20,196
1,381
567
39,814
20,763
89
38
102,872
71,127
Accounts receivable (4.5)
Trade accounts receivable
Other receivables and prepaid expenses
N E W A Y S
2 0 0 4
Cash
42
1. Consolidated balance sheet (after proposed appropriation of result)
Amounts x EUR 1,000 at year-end
2004
2003
20,374
13,110
Group equity
Shareholders’ equity *) (4.6)
Minority interests
(68)
(17)
20,306
13,093
2,213
2,172
Provisions (4.7)
Pension provision
Reorganisation provision
2,611
3,615
4,824
5,787
Long-term liabilities (4.8)
Subordinated debt to lending institutions *)
8,230
7,702
Subordinated convertible debenture loan *)
4,500
3,000
Other debt to lending institutions
9,459
8,922
22,189
19,624
Debt to lending institutions
10,068
9,578
Trade creditors
15,030
3,975
2,866
Other liabilities and accrued expenses
8,321
5,149
55,553
32,623
102,872
71,127
33,104
23,812
*) Guaranteed equity
N E W A Y S
33,189
Tax and social insurance
2 0 0 4
Short-term liabilities (4.9)
43
2. Consolidated profit and loss account
Amounts x EUR 1,000
Net turnover (4.12)
Change in work in progress and finished products
136,485
(57)
(1,186)
86
Total operating income
191,780
135,385
110,696
77,476
51,092
46,231
4,598
4,018
Depreciation of intangible and tangible fixed assets
Other write-downs of intangible and tangible fixed assets
95
718
206
167
Other operating expenses
15,592
14,224
Total operating expenses
182,279
142,834
Special write-down of current assets
Operating result
9,501
(7,449)
Interest expenses and similar expenses
(1,359)
(1,561)
Group result on ordinary activities before tax
8,142
(9,010)
Tax on result on ordinary activities (4.14)
(3,559)
2,945
Result from other participating interests
Group result on ordinary activities after tax
Minority interests
2 0 0 4
189,713
2,124
Personnel costs (4.15)
N E W A Y S
2003
Other operating income
Costs of raw materials and consumables and other external costs
44
2004
0
(289)
4,583
(6,354)
45
45
Net result
4,628
(6,309)
Weighted average number of outstanding shares (x 1,000)
8,108
7,096
Net result per share
0.57
(0.89)
Diluted net result per share
0.53
(0.89)
3. Consolidated cash flow statement
Amounts x EUR 1,000
2004
2003
9,501
(7,449)
4,598
4,018
95
718
Operational cash flows
Operating result
Adjustments for:
Depreciation
Other write-downs of tangible and intangible fixed assets
Special write-down of current assets
Changes in provisions
Result from disposal of participating interest
Changes in working capital *)
Cash flows from operating activities
206
(3,432)
167
1,188
0
72
1,496
8,374
12,464
7,088
Interest paid
(1,359)
(1,561)
Operational cash flows
11,105
5,527
(13,250)
1,100
(2,334)
(1,215)
Investment cash flows
Sale/(acquisition) of group companies
Investments in tangible fixed assets
Disposals of tangible fixed assets
327
Changes in participating interests
0
(872)
Other financial fixed assets
0
(161)
(15,257)
817
(331)
Financial cash flows
Revenue from long-term debt
4,500
Repayments from long-term debt
(2,107)
(4,502)
Issue of new shares
3,040
1,540
Other changes
Change in cash
251
(368)
(104)
5,065
(2,815)
913
2,381
(1,324)
6,257
Accounts receivable
(5,331)
5,167
Trade creditors
8,027
(2,764)
Other liabilities
125
(286)
1,496
8,374
N E W A Y S
Inventories
2 0 0 4
*) Other changes in working capital
45
4. Notes to the consolidated balance sheet and the
consolidated profit and loss account
4.1 General
4.1.1 Principles of consolidation
The consolidated annual accounts contain the financial data of Neways Electronics International N.V. and the companies in
the group. These data have been accounted for using the full consolidation method on the basis of uniform principles of
valuation and result determination. Consequently, the financial data relating to these group companies are included in full in
the consolidation. Minority interests in group equity and in the group’s result are stated separately.
Group companies are considered to be those companies which belong to the economic entity of Neways Electronics
International N.V. and in which the latter exercises a controlling interest by virtue of its influence on commercial and
financial policies. A new group company is included in the consolidated accounts from the time when this controlling
interest is actually exercised.
On this basis, the consolidated annual accounts comprise the financial data of Neways Electronics International N.V. and
also the financial data of:
% participation
Neways B.V.
100
Son
Neways Industrial Systems B.V.
100
Son
Ripa B.V.
100
Son
Hoyte B.V.
60
Son
Neways Heerlen B.V.
100
Heerlen
Neways Leeuwarden B.V.
100
Leeuwarden
Si-Lectron B.V.
100
Heerlen
Neways Advanced Applications B.V.
100
Son
Hymec Holding B.V.*
100
Sittard
Evic Electronics B.V.
100
Echt
Evic Service & Repair Center B.V.**
100
Echt
Neways Belgium N.V.
100
Hasselt, Belgium
Neways Holding GmbH***
100
Kassel, Germany
Q-Nova a.s.
65
Nová Dubnica, Slovakia
Neways Wuxi Electronics Co. Ltd.
100
Wuxi, China
* with the following subsidiaries
N E W A Y S
2 0 0 4
**with the following subsidiaries
46
registered office
***with the following subsidiaries
100
Hymec B.V., Sittard
100
Hymec Facilities B.V., Sittard
100
Hymec Hybrid Circuits B.V., Sittard
100
Hykong Ltd., Hong Kong
100
Hykong Offshore Ltd., Hong Kong
90
Ximec Electronics Co. Ltd., Wuxi (China)
100
Cereon Service Provider B.V., Amsterdam
100
Evic S&R Center Belgium BvbA, Opglabbeek (Belgium)
100
Neways Verwaltungs GmbH, Kassel (Germany)
100
Neways Electronics Production GmbH, Kassel (Germany)
100
Neways Neunkirchen GmbH, Neunkirchen (Germany)
100
Neways Vertriebs GmbH, Kassel (Germany)
With effect from 2004 the participating interests in Ximec Electronics Co. Ltd., Neways Wuxi Electronics Co. Ltd. and
Q-Nova a.s. have been included in the consolidated accounts. They were recorded under the financial fixed assets at the end
of 2003. The acquisition of the assets and liabilities of Stork Electronics is subsumed under Neways Advanced Applications
and included in the consolidated accounts with effect from 1 July 2004.
With respect to the profit and loss account, the annual accounts of Neways Electronics International N.V. have been
compiled in accordance with the exemption granted under Section 402, Book 2 of the Netherlands Civil Code.
4.1.2 Consolidated cash flow statement
The consolidated cash flow statement has been prepared on the basis of the indirect method. The cash balances shown in the
statement comprise cash and debts to lending institutions recorded under short-term liabilities. Cash flows in foreign
currencies are converted at the average rate of exchange. Exchange rate differences in respect of cash balances are shown
separately in the cash flow statement. Interest received and paid and profits taxes are recorded under operational cash flows.
The cash flow statement also takes account of effects arising from the sale and acquisition of group companies, and the
participating interests included in the consolidated accounts for the first time.
4.2 Principles of valuation and determination of the result
General
The annual accounts have been prepared in accordance with generally accepted accounting principles in the Netherlands.
The reporting currency is the euro. Assets and liabilities are stated at nominal value, unless a different valuation principle is
indicated.
The principles applied for the valuation of assets and the determination of the result are unchanged from the previous
accounting period.
Segmentation
As a supplier of industrial electronics, Neways’ organisation is tailored to this primary segment. The geographical spread is
regarded as a secondary segmentation.
4.2.1 Tangible fixed assets
Tangible fixed assets are valued on the basis of the acquisition price, less the applicable depreciation. Depreciation is
calculated as a fixed percentage of the acquisition price, based on the estimated depreciable life. Land is not written off.
Special write-downs of assets expected on the balance sheet date are taken into account.
4.2.2 Financial fixed assets
Majority interests and other participating interests where significant influence can be exercised are stated at net asset value.
Net asset value is calculated in accordance with the principles used for the preparation of these annual accounts.
Participating interests where no significant influence can be exercised are valued at the lower of acquisition price or real
value. If the valuation of a participating interest in accordance with the net asset value is negative, it is valued at zero. If
Neways Electronics International N.V. is liable for the debts of the participating interest in such a situation, a provision is
created.
4.2.3 Inventories
Inventories of raw materials and consumables are valued on the basis of the last purchase price paid (based on FIFO), plus
a charge for purchasing expenses.
Work in progress and finished products are valued at cost price. The cost price comprises all costs related to purchase or
4.2.4 Accounts receivable
Accounts receivable are stated at nominal value, after deduction of provisions deemed necessary for bad debts.
N E W A Y S
orders. Insofar as is necessary, a provision is made for obsolescence.
2 0 0 4
manufacture, including a charge for indirect costs related to production. Revenue is realised at the time of delivery of the
47
4.2.5 Provisions
The pension provisions largely relate to commitments funded by the company on behalf of the employees of its German
subsidiary. These commitments are stated at cash value on the basis of actuarial principles. The interest rate that is applied
in this connection is 6%.
Other provisions are established to cover commitments and losses the scale of which is uncertain, but can be estimated with
reasonable accuracy. In addition, provisions are established to cover risks in respect of expected commitments and losses,
insofar as their scale can be estimated with reasonable accuracy. Other provisions are stated at nominal value.
4.2.6 Deferred tax benefits and liabilities
A provision has been established to cover deferred taxes arising from temporary differences between the valuation of assets
and liabilities in the annual accounts and the valuation for tax purposes. Deferred taxes are calculated on the basis of the
tax rates prevailing from 2005. Deferred tax benefits arising from tax loss carryforwards are recognised if it can be assumed
beyond reasonable doubt that they will be realised. Deferred taxes are stated at nominal value.
4.2.7 Principles used in determining the result
The result is determined as the difference between the realisable value of the services provided and the costs and other
expenses incurred throughout the year, valued at purchase price.
Net turnover is understood to mean amounts charged to third parties for goods and services supplied in the accounting
period, excluding turnover tax. Revenue from the supply of goods and services is accounted for as soon as all major rights
and risks in respect of ownership of the goods have been transferred to the purchaser.
Costs of raw materials and consumables and other external costs are understood to mean the direct and indirect costs
allocated to turnover.
Costs are determined on a historical basis and are allocated to the accounting period to which they relate.
The pension commitments on behalf of the employees in the Netherlands are funded by the Pensioenfonds Metaal en
Techniek (“Kleinmetaal”) and by Bedrijfstak pensioenfonds Metalektro (“Grootmetaal”). Both are classified as defined
contribution schemes. Of the premium that is set annually, 50% is payable by the Company and 50% by the employees.
Special items are items which form part of the result on ordinary activities, but which for the sake of comparability are
disclosed separately because of the nature, scale or incidental character of the item.
The tax payable on the results comprises the tax amount calculated on the pre-tax commercial result in accordance with the
applicable taxation rate, taking account of tax-free profit elements and non-deductible cost elements.
4.2.8 Foreign currencies
The conversion of transactions in foreign currencies is accounted for in the annual accounts at the rate of settlement.
Monetary assets and liabilities are converted at the balance sheet rate. Exchange rate differences that occur in relation to
monetary items are accounted for in the profit and loss account.
Exchange rate differences on long-term loans relating to the financing of foreign participating interests are credited or
charged direct to the stockholders’ equity account.
The assets and liabilities of foreign participating interests denominated in foreign currency are converted at the balance
sheet rate, and income and expenses at the average rates in the financial year. The resulting exchange rate difference is
recognised directly in the shareholders' equity account.
4.2.9 Net result per share
The diluted net result per share is calculated as follows:
Result accruing to shareholders of ordinary shares, adjusted to take account of interest expenses (after tax) of the
2 0 0 4
outstanding shares, including the number that would be issued upon conversion of this debenture loan and exercise of the
N E W A Y S
subordinated convertible debenture loan (EUR 140,000). This result is divided by the weighted average number of
Where there is a negative result (loss) per share, the diluted result per share will not show any improvement.
48
outstanding option rights (a total of 934,000 shares).
4.3 Tangible fixed assets
Changes in the tangible fixed assets during 2004 are summarised in the following table:
x EUR 1,000
Total
Land
Machinery and
Other
and
equipment
fixed
buildings
assets
Situation as at 1 January
Acquisition price
32,281
4,804
25,563
1,914
Cumulative depreciation
(23,971)
(1,883)
(20,892)
(1,196)
8,310
2,921
4,671
Book value
718
Increases (decreases) in book value
- Investments
2,334
89
2,245
0
- New consolidations
7,346
1,165
6,167
14
- Disposals
(327)
0
(327)
(4,598)
- Write-downs
(95)
0
(95)
0
4,660
853
4,235
(428)
Balance
(401)
(3,755)
0
- Depreciation
(442)
Situation as at 31 December
Acquisition price
49,981
6,465
41,588
1,928
Cumulative depreciation
(37,011)
(2,691)
(32,682)
(1,638)
Book value
12,970
3,774
8,906
290
4-10%
10-33%
20-33%
Depreciation percentages
The insured value of the tangible fixed assets is EUR 76 million (2003: EUR 43 million).
4.4 Financial fixed assets
Participating interests and receivables from participating interests
The item Participating interests and Receivables from participating interests showed the following changes:
x EUR 1,000
Participating interests
Receivables from
Total
Participating interests
Situation as at 1 January 2004
2,254
699
2,953
New consolidations
(2,248)
(699)
(2,947)
Write-downs due to reduction of tax rate
Situation as at 31 December 2004
(6)
(0)
(6)
(2,254)
(699)
(2,953)
0
0
0
The following subsidiaries which are included in the new consolidations are included in the consolidation from
1 January 2004:
- Neways Wuxi Electronics Co. Ltd., Wuxi, China
65%
90%
100%
2 0 0 4
- Ximec Electronics Co. Ltd., Wuxi, China
N E W A Y S
- Q-Nova a.s., Nová Dubnica, Slovakia
49
Deferred tax benefits
This item showed the following changes:
x EUR 1,000
2004
Situation as at 1 January
2003
10,724
7,877
0
2,847
Withdrawals
(2,976)
0
Write-downs
(600)
0
Additions
Situation as at 31 December
(3,576)
2,847
7,148
10,724
This item is a deferred tax benefit of EUR 7.1 million (31-12-2003: EUR 10.7 million), representing total operating loss
carryforwards of EUR 24.0 million (31-12-2003: EUR 32.7 million). Of this amount, 19.8 million (31-12-2003: 28.5 million)
relates to operating loss carryforwards in the Netherlands and 4.2 million (31-12-2003: 4.2 million) in Germany. The
realisation of this tax benefit partly depends on the market recovery being sustained in the coming years. No tax benefit has
been included in the balance sheet in respect of this, as it is not certain whether this will be realised in the near future.
4.5 Accounts receivable
Recorded under trade accounts receivable are receivables totalling EUR 44,000 (2003: EUR 284,000) with a term to maturity
of more than one year.
4.6 Shareholders’ equity
The changes in the shareholders’ equity as part of group equity are as follows:
x EUR 1,000
Shareholders’ equity as part of group equity at 1 January
Consolidated net result
Exchange rate differences, foreign participating interests
Total result
Share issue
Shareholders’ equity as part of group equity at 31 December
2004
2003
13,110
18,711
4,628
(6,309)
(404)
(832)
4,224
(7,141)
3,040
1,540
20,374
3,110
Pension-
Reorganisation
provision
provision
4.7 Provisions
This item showed the following changes in 2004:
x EUR 1,000
Total
Situation as at 1 January
5,787
2,172
3,615
Newly formed/increases
1,854
165
1,689
Withdrawals
(2,766)
(124)
(2,642)
Reversal
Situation as at 31 December
(51)
4,824
0
(51)
2,213
2,611
N E W A Y S
2 0 0 4
Of the total provisions, an amount of EUR 2.5 million is regarded as long-term (longer than one year).
50
4.8 Long-term liabilities
The details of the long-term liabilities are as follows:
x EUR 1,000
Subordinated debts to
lending institutions
Interest
Term
Term
31-12-2004
31-12-2003
rate
1 – 5 years
> 5 years
Total
Total
1.75%-4% and 5.5%
8,230
0
8,230
7,702
5.5%
4,500
0
4,500
3,000
7,033
0
7,033
7,244
1,530
896
2,426
1,678
21,293
896
22,189
19,624
Euribor plus
Subordinated convertible
debenture loans
Debts to financial
institutions
Other debts to
lending institutions
Euribor plus
1.2%-2.4%
Euribor plus
1.25% and 4.6%
Of the subordinated debts of EUR 8.2 million to lending institutions, EUR 6.2 million represents an AA loan received in 1998
from the Nationale Investeringsbank N.V. with a term of 10 years, of which the first three years were redemption-free. The
other EUR 2.0 million relates to subordinated loans obtained from ABN-AMRO Bank N.V. The repayments for 2005 included
in these long-term liabilities amount to EUR 1.5 million.
The subordinated convertible debenture loans consist of a loan of EUR 3.0 million with a conversion price of EUR 5.25 per
share and a conversion right that runs from 2 April 2003 to 2 April 2006 and a loan of EUR 1.5 million with a conversion
price of EUR 4.50 per share and a conversion right that runs from 9 June 2005 to 9 June 2008.
The demands for repayment of the principal of the subordinated loans have been subordinated to all other existing and
future demands.
The repayment commitments for 2005 for the other long-term liabilities, totalling EUR 2.2 million, are included in the shortterm liabilities.
4.9 Other liabilities and accrued expenses
Included here at year-end 2003 is an amount of EUR 482,000 representing debts to unconsolidated participating interests.
4.10 Security for debts
The credit lines available on 31-12-2004 (current account and exposure) total EUR 21,7 million.
Excluding the 2004 repayment obligations for the long-term liabilities, EUR 9,9 million of this sum had been used on the
balance sheet date.
A pledge has been established on the machinery and equipment, inventories, accounts receivable, and shares of
participations as security for the repayment of the debts to financial institutions. On behalf of the Company, all group
companies have issued a declaration of joint and several liability to the financial institutions.
Understandings were reached with the banks at the beginning of 2005 regarding a refinancing of the Company. This
represents a marked increase in the total credit facilities on improved conditions. In the course of the first quarter of 2005
N E W A Y S
2 0 0 4
these new understandings will be set out in a new credit agreement.
51
Furthermore, the banks consider it necessary that the guaranteed equity (adjusted to take account of the deferred tax benefit)
should be at least 25% of the corrected balance sheet total of 31-12-2004 and at least 30% of the corrected balance sheet
total of 31-12-2005. The guaranteed equity adjusted to take account of the deferred tax benefit is 27.1% as at 31-12-2004
(31-12-2003: 21.7%). So long as the corrected guaranteed equity is less than 35%, no distributions may be made in any
form whatsoever. In addition, the banks consider it necessary that the debt/ebitda ratio (interest-bearing debts, including
subordinated loans, divided by the result before interest, tax and depreciation) should be a maximum of 4.5 as at
31-12-2004 and a maximum of 3.0 as at 31-12-2005. At 31-12-2004 the debt/ebitda ratio was 2.3.
Furthermore, the interest coverage ratio must at all times be at least 1.5. At 31-12-2004 the interest coverage ratio was 5.8.
As security for the repayment of the other debts to lending institutions, a first right of mortgage on real estate has been
granted.
4.11 Rights and commitments not appearing in the balance sheet
Under the terms of, amongst others, lease and rental agreements, commitments have been entered into for a total amount of
approximately EUR 29.6 million (2003: EUR 17.1 million).
The details of the amounts arising from these commitments are as follows:
x EUR 1,000
Term
Term
Term
Term
Total
< 1 year
1 – 5 years
> 5 years
Lease agreements
1,630
751
879
0
Rental agreements
27,852
3,818
11,251
12,783
Others
78
31
47
0
29,560
4,600
12,177
12,783
In relation to the normal business operation the Company is involved in some legal proceedings. The results thereof are not
expected to have a material effect on the equity and results.
4.12 Segmentation
The primary segment is the industrial electronics sector. The secondary segmentation according to geographical spread is as
follows:
x EUR 1,000
Netherlands
other EU
non-EU
countries
countries
Total
125,127
49,316
15,270
189,713
82,678
16,980
3,214
102,872
1,388
637
309
2,334
2004
Turnover
Total assets
Investments in tangible fixed assets
2003
Turnover
83,636
36,535
16,314
136,485
Total assets
56,346
12,438
2,343
71,127
915
300
0
1,215
N E W A Y S
2 0 0 4
Investments in tangible fixed assets
52
4.13 Special income and expenses in the result
x EUR 1,000
Personnel expenses due to reorganisations
2004
2003
(728)
(4,506)
Other write-downs of intangible and tangible
fixed assets include:
- Downward revaluation of assets due to transfer of activities
- Downward revaluation of assets due to discontinuation of an activity
0
(523)
(95)
(195)
(206)
(167)
(621)
(576)
Downward revaluation of inventories and accounts receivable
included in special write-downs of current assets
Other operating expenses include:
- Results in connection with the discontinuation of activities
- Results due to transfer/discontinuation of activities
0
(915)
(260)
(72)
Total special expenses
(1,910)
(6,954)
Reversal of badwill included in other operating income
2,088
0
178
(6,954)
- Book loss of the divestment of a participating interest
Balance of special income and expenses
Tax on special income and expenses
Net effect of special income and expenses
(61)
117
2,329
(4,625)
4.14 Tax
For the purposes of corporation tax, the Company forms a fiscal entity together with the 100% participations in the Netherlands.
Together with these participations the Company is jointly and severally liable for obligations relating to corporation tax.
The effective tax rate was 43.7% (2003: 32.7%). The difference compared with the rate of corporation tax of 34.5% payable in
the Netherlands in 2004 is almost entirely due to the downward revaluation of the deferred tax benefit at the rates prevailing in
the Netherlands from 2005, which will decrease to 30% in 2007.
4.15 Employees
During 2004 the Neways group employed an average of 1,836 persons (2003: 1,075, excluding the employees of
unconsolidated companies), including the employees of companies consolidated for the first time in 2004.
Wages and salaries
2004
2003
42,357
37,958
Pension costs
3,995
3,299
Other social security charges
4,740
4,974
51,092
46,231
N E W A Y S
x EUR 1,000
2 0 0 4
The cost of wages and salaries, pension costs and other social security charges in the accounting period were as follows:
53
4.16 Remuneration of directors and members of the Supervisory Board
The remuneration of the members of the Board of Directors consists of a basic salary, an annual bonus and employee
options. The Supervisory Board determines the remuneration each year within the framework of the remuneration policy. An
automatic increase under the terms of the Collective Employment Agreement (CAO) is not applied to the basic salaries.
A bonus calculation is adopted annually for the current year by the Supervisory Board. The bonus scheme is linked to the
achievement of quantitative performance targets set in advance. The bonuses granted are reported in the current year.
Payment is made after the adoption of the annual accounts.
The following bonuses will be paid for 2004:
H. van der Vrande
EUR 118,000
V. de Bok
EUR 109,000
No bonuses were paid for 2003 and both members of the Board of Directors received an ex-gratia payment of EUR 25,000.
The pensions of Messrs Van der Vrande and De Bok are funded by the pension fund of MN-services (the “Kleinmetaal”
sector). This pension, including pre-pension, is based on the average pay. As well as this, Messrs van der Vrande and De Bok
have an additional pension based on a defined-contribution plan.
The salaries and pensions of the members of the Board of Directors were as follows:
2004
Basic salary
2004
2003
Pension costs
Basic salary
(employer’s share)
2003
Pension costs
(employer’s share)
B. Doorenbos
(incl. severance payment)
297,139
57,971
H. van der Vrande
158,823
28,102
158,823
27,798
V. de Bok
147,479
27,138
147,479
26,834
306,302
55,240
603,441
112,603
The following table shows the options held by the members of the Board of Directors and other officers. These are both
employee options and options otherwise acquired or purchased.
Employee options are granted to the members of the Board of Directors and other officers pursuant to a proposal by the
Supervisory Board, which proposal is submitted, with the prior consent of the Stichting Prioriteit, to the General Meeting of
Shareholders for its approval The exercise price is equal to the price quoted on the stock exchange on the date on which the
options are granted.
The options policy does not include the buying-in of shares in order to counteract the effect of dilution as a result of the
exercising of options. The option rights outstanding at 31 December 2004 are not covered by bought-in shares.
OPTIONS
N E W A Y S
2 0 0 4
H. van der Vrande
54
Number as at
Granted in
Due
Number as at
Exercise price
31-12-2003
2004
2004
31-12-2004
in EUR)
41,250 *
(41,250)
169,375 *
(169,375)
Term
11,000
11,000
8.02
15,000
15,000
4.75
04/2006
03/2007
15,000
15,000
1.99
03/2008
03/2009
15,000
15,000
3.60
125,000 *
125,000
4.00
07/2009
58,125 *
58,125
9.00
02/2008
OPTIONS
Number as at
Granted in
Due
Number as at
Exercise price
31-12-2003
2004
2004
31-12-2004
in EUR)
V. de Bok
5,000
(5,000)
5,000 *
(5,000)
Term
10,000
10,000
7.20
01/2006
10,000
10,000
5.05
10/2006
15,000
15,000
4.75
03/2007
03/2008
15,000
15,000
1.99
15,000
15,000
3.60
03/2009
21,875 *
21,875
9.00
02/2008
Other officers
10,000
(10,000)
employed
17,500 *
(17,500)
by the
4,500
(2,000)
2,500
8.02
04/2006
Company
7,500
(2,500)
5,000
4.75
03/2007
(1,000)
03/2008
7,000
Former members of
6,000
1.99
8,500
8,500
3.60
03/2009
40,000 *
40,000
9.00
02/2008
30,000
7.15
01/2006
30,000
the Board of Directors
*) Options on shares held bij large shareholders
The members of the Board of Directors jointly hold 50,000 shares (2003: none).
Members of the Supervisory Board receive a fixed emolument that is not related to the Company’s results. One of the
members of the Supervisory Board holds directly or indirectly, 543,345 ordinary shares (2003: 433,345) and convertible
debentures with a conversion value of 286,508 shares (2003: 47,619).
The members of the Supervisory Board received the following remuneration:
2004
2003
D. Boers (chairman)
17,000
17,000
Th. van Deursen
12,000
12,000
W. van der Leegte
12,000
12,000
41,000
41,000
4.17 Transactions with affiliated parties
Transactions with affiliated parties relate to the supplying of goods and the leasing of property and take place on market
conditions.
4.18 Financial instruments
The book value of the financial instruments approximates to the market value.
N E W A Y S
2 0 0 4
There are no significant credit risks other than those appearing in the annual accounts.
55
5. Balance sheet (after proposed appropriation of result)
Assets x EUR 1,000 as at 31 December
2004
2003
Fixed assets
Financial fixed assets (7.2)
Participating interests in group companies
1,158
1,621
Accounts receivable from group companies
3,213
2,618
4,371
4,239
Current assets
Accounts receivable
Accounts receivable from group companies
18,572
6,615
2,051
2,943
20,623
9,558
Cash (7.3)
24,575
24,405
Total
49,569
38,202
2004
2003
Other accounts receivable and prepaid expenses
Liabilities x EUR 1,000 as at 31 December
Shareholders’ equity*) (7.4)
Issued and paid-up share capital
4,638
4,258
Share premium reserve
25,122
22,462
Other reserves
(9,386)
(13,610)
20,374
13,110
5,144
9,702
Provisions (7.5)
Long-term liabilities
Subordinated debt to lending institutions*)
8,230
7,702
Subordinated convertible debenture loans*)
4,500
3,000
12,730
10,702
10,500
4,000
821
688
11,321
4,688
Total
49,569
38,202
*) Guaranteed equity
33,104
23,812
Short-term liabilities
Debts to lending institutions
N E W A Y S
2 0 0 4
Other liabilities
56
6. Profit and loss account
x EUR 1,000
2004
2003
Result from participating interests after tax
4,446
(6,980)
182
671
Other results after tax
Result after tax
4,628
(6,309)
7. Notes to the balance sheet and profit and loss account
7.1 General
The annual accounts of Neways Electronics International N.V. have been included in the consolidated annual accounts. The
group companies have been valued on the basis of the net asset value.
The assets and liabilities were valued in accordance with the valuation principles as stated in the notes to the consolidated
accounts. This also applies with respect to the method used to determine the results. This means that the equity and the net
result of Neways Electronics International N.V. are equal to those included in the consolidated annual accounts. Reference
should be made to the notes to the consolidated balance sheet and the consolidated profit and loss account.
7.2 Financial fixed assets
Participating interests in group companies
The changes in the participating interests in group companies are as follows:
x EUR 1,000
2004
2003
Situation as at 1 January
1,621
2,611
4,446
(6,980)
Increases (decreases)
Result from participating interests after tax
Exchange rate differences
Investments
(351)
0
Others
(4,558)
Situation as at 31 December
1,158
(463)
(747)
1,370
5,367
(990)
1,621
The 100% participating interest in Neways B.V. that is included here was valued at year-end 2004 at EUR zero (year-end
2003: EUR zero). This participating interest is included in the consolidated accounts. A declaration of liability has been
issued by Neways Electronics International N.V. for this company.
Accounts receivable from group companies
The changes in this item were as follows:
x EUR 1,000
2004
2003
Situation as at 1 January
2,618
2,876
Investments
1,048
735
Repayments
(400)
Situation as at 31 December
(908)
(53)
(85)
595
(258)
3,213
2,618
N E W A Y S
Exchange rate differences
2 0 0 4
Increases (decreases)
57
7.3 Cash
This is not freely disposable as it forms part of the group financing agreement.
7.4 Shareholders’ equity
The changes in equity items during 2003 and 2004 can be detailed as follows:
x EUR 1,000
Issued, paid-up
Share premium
Other
capital
reserve
reserves
3,908
21,272
350
1,190
Situation as at 1 January 2003
(6,469)
Total
18,711
Increases (decreases) 2003
Share issue
Result in book year
(6,309)
Dividend 2002
(6,309)
0
Exchange rate differences
Situation as at 31 December 2003
1,540
0
(832)
(832)
350
1,190
(7,141)
(5,601)
4,258
22,462
(13,610)
13,110
380
2,660
Increases (decreases) 2004
Share issue
Result in book year
Dividend 2003
4,628
0
Exchange rate differences
Situation as at 31 December 2004
3,040
4,628
0
(404)
(404)
380
2,660
4,224
7,264
4,638
25,122
(9,386)
20,374
The authorised capital is EUR 15,000,000, divided into 15,000,000 ordinary shares, 14,999,990 preferences shares and 10
priority shares, with a nominal value of EUR 0.50 each. Of these shares, 8,526,456 ordinary shares, 3,000,000 preference
shares (25% paid-up) and 10 priority shares were issued and fully paid up as at 31 December 2004, so that the paid-in
capital is EUR 4,638,233. In the reporting period, 760,000 new ordinary shares were privately placed and fully paid up,
at an issue price of EUR 4.00 per share.
7.5 Provisions
The provision for participating interests relates to the Company’s share in the negative net asset value of Neways B.V. of
Son, in view of the fact that a declaration of liability has been issued by the Company for Neways B.V.
7.6 Obligations not appearing in the balance sheet
In accordance with Section 403 of Book 2 of the Netherlands Civil Code, the Company has assumed liability for debts arising
from the legal acts of the Dutch group companies, with the exception of Evic Service & Repair Center B.V. At the same time,
the Company has committed itself to provide financial support, insofar as necessary, to the German subsidiary Neways
Verwaltungs GmbH and to Hykong Trade Ltd in Hong Kong. The Company has provided bank guarantees totalling
EUR 2.1 million (2003: EUR 2.2 million) for long-term loans from foreign banks and for rental obligations.
Supervisory Board
Board of Directors
2 0 0 4
ir. D. Boers RA
drs. V.B.M. de Bok
W.G.S.M. van der Leegte
ing. H.W.T. van der Vrande
N E W A Y S
Son, 28 February 2005
ir. Th.W.H.P. van Deursen
58
From 1 July 2006, electronic products will no longer
be allowed to contain lead. In this connection,
Neways Advanced Applications has developed
together with the Delft-based company Mat-Tech a
unique process for the lead-free
production of electronics. The Process
Innovation Prize was awarded for this
invention at the biennial Industrial
Week in Utrecht last October.
O T H E R D ATA
Auditor’s report
Commercial Register
The company is listed in the Commercial Register of the East
Introduction
Brabant Chamber of Commerce in Eindhoven under number
We have audited the financial statements of Neways Electronics
17036989.
International N.V., Son for the year 2004. These financial
statements are the responsibility of the company’s management.
Profit appropriation as laid down in the articles of association
Our responsibility is to express an opinion on these financial
Article 25 of the company’s articles of association stipulates that
statements based on our audit.
profits can be paid out in so far as the shareholders’ equity is
greater than the share of the capital paid in and called up plus
Scope
the legal reserves. The profits available for distribution will be
We conducted our audit in accordance with auditing standards
used first of all to pay a dividend to the holders of preference
generally accepted in the Netherlands. Those standards require
and priority shares.
that we plan and perform the audit to obtain reasonable
The percentage of the dividend to be paid out on these shares is:
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
* Preference shares: deposit interest rate of the European Central
Bank plus 3.25 percentage points up to a maximum total
percentage of 10%.
* Priority shares: statutory rate of interest.
management, as well as evaluating the overall presentation of
the financial statements. We believe that our audit provides a
With the prior approval of the priority shareholders, the Board of
reasonable basis for our opinion.
Directors may appropriate all or part of the remaining profit to
the reserves. The profit not allocated to the reserves is at the
Opinion
disposal of the General Meeting of Shareholders.
In our opinion, the financial statements give a true and fair view
On the basis of a proposal from the Board of Directors approved
of the financial position of the company as at 31 December 2004
by the priority shareholders, the General Meeting of Shareholders
and of the result for the year then ended in accordance with
may decide to distribute the profits in the form of shares in the
accounting principles generally accepted in the Netherlands and
company, without prejudice to the stipulation in the company’s
comply with the financial reporting requirements included in
articles of association regarding share issues.
Part 9, Book 2 of the Netherlands Civil Code.
Eindhoven, 28 February 2005
N E W A Y S
2 0 0 4
Ernst & Young Accountants
60
Profit appropriation proposal
The consolidated profit and loss account shows that the profits
for 2004 amount to EUR 4,628,000. It is proposed that no
dividend be paid for the financial year 2004 and that the entire
profits be added to the other reserves.
Special controlling rights conferred by the articles of
association
The articles of association confer certain special powers on the
meeting of priority shareholders. Resolutions on the issue of
shares, the purchase and sale of own shares, the alteration of the
articles of association and the distribution of profits require,
among other things, the prior approval of the priority
shareholders.
The priority shares are held by the Stichting Prioriteit "Neways
Electronics International N.V." in Eindhoven. This foundation
holds 10 priority shares.
The board of this foundation is made up of Messrs D. Boers RA,
W.G.S.M. van der Leegte and G.H. Meulensteen.
The Board of Directors of Neways Electronics International N.V.
and the board of the Stichting Prioriteit "Neways Electronics
International N.V." hereby state that, in their joint opinion, the
requirements regarding the independence of the board members
of the Stichting Prioriteit "Neways Electronics International N.V.",
as referred to in annex X to the Listing and Issuing Rules of
Euronext Amsterdam N.V. of Amsterdam, have been complied
N E W A Y S
2 0 0 4
with.
61
L I S T O F A B B R E V I AT I O N S U S E D I N T H E A N N U A L R E P O R T
COSO
Committee of Sponsoring Organisations of the Treadway Commission
(non-profit commission that in 1992 established a common definition of internal control and created a
framework for evaluating the effectiveness of internal controls)
EMS
Electronic Manufacturing Services
IFRS
International Financial Reporting Standards
OEM
Original Equipment Manufacturer
PCB
Printed Circuit Board
PCBA
Printed Circuit Board Assembly
SMD
Surface Mounted Devices
SMT
Surface Mounted Technology (production line/machine)
COLOPHON
Design and production:
Apex marketing en
communicatie, Uden
Photographic:
Van Assendelft Fotografie,
N E W A Y S
2 0 0 4
Uden
62
Printing:
Drukkerij Offset Service,
Valkenswaard