TKH Group N.V.

Earnings Release • Aug 31, 2007

press release

TKH Group N.V. (TKH) First-half 2007 results

Net profit TKH Group up 14% in 1st half

• Increase in turnover in 1 st half 2007 with 20.7% to 384.8 million, of which 16.1% organic and 4.6% through acquisitions.
• Increase in operating result by 10.0% to 25.7 million.
• Strong profit growth Cable Group (+27.7%) and Technical Trading Group (+ 17.6%) through turnover growth and rise in contribution from system deliveries.
• High start-up costs in 2nd quarter relating to large share of innovations reduce profit Machinery Group (-42.1%).
• Acquisitions mark key step in growth strategy.

Outlook

Expected growth in net profit for the full year 2007 between 15 and 20% according to previous announcement.

Key figures first half 2007

(in million unless otherwise stated)

	st half 1	st half 1	Difference
	2007	2006	in %
Turnover	384.8	318.7	+ 20.7
Operating result (EBIT)	25.7	23.4	+ 10.0
Net profit	17.4	15.3	+ 13.6
Net earnings per ordinary share (in )	0.51	0.46	+ 10.9
Solvency	46.3%	47.3%
ROS	6.7%	7.3%

Key figures second quarter

(in million unless otherwise stated)
	Q2	Q2	Difference
	2007	2006	in %
Turnover	187.0	168.0	11.3 +
Operating result (EBIT)	13.0	14.0	- 7.4
Net profit	9.2	9.1	+ 1.3
ROS	7.0%	8.4%

Alexander van der Lof, CEO of TKH: TKH, supplier of technical solutions, took important steps in the progress of its strategy in the first half of the year with the acquisitions announced. This has further strengthened the technology component in important growth segments within our portfolio. The Cable Group and Technical Trading Group recorded strong turnover and profit growth. The market approach of the three business segments, Telecom, Building and Industrial Solutions, is clearly bearing fruit and TKH has been successful in its transformation into a solution supplier.

The innovations in the field of tyre building systems, such as flexible manufacturing systems, strengthen our prominent position with advanced solutions in the tyre manufacturing industry. In the short term, this meanshigh costs, but within a number of years this should result in a breakthrough in the further outsourcing of the production of tyre manufacturing systems which is currently still being produced by tyre manufacturers.

Financial developments

Turnover in the first half of 2007 increased by 66.1 million (+20.7%) to 384.8 million (H1 2006: 318.7 million). Organic growth was 16.1%, while growth from acquisitions realised in the second half of 2006 and first half of 2007 was 4.6%.

The gross margin as a percentage of turnover fell from 39.0% to 37.1%, largely due to the increased raw material prices. Despite the strong rise in innovation costs, TKH was able to limit the increase in operating costs to 15.7%. Depreciations, at 6.5 million, were above the 5.4 million recorded in the first half of 2006.

The operating result was up 10.0% to 25.7 million in the first half of 2007, from 23.4 million in the first half of 2006. The Cable Group in particular contributed to the positive development of the results due to an increase in the contribution from specialty cables and system deliveries. The Technical Trading Group also saw its results improve, largely due to the increase in the contribution from deliveries with high added value in the form of systems. The results of the Machinery Group dropped due to high start-up costs relating to the very high contribution from innovations in the turnover.

Financial income and expenses dropped to 1.6 million in the first half of 2007, from 2.1 million in the same period last year. The tax burden increased slightly to 28.8% (H1 2006: 28.4%).

Net profit in the first half of 2007 rose to 17.4 million, an increase of 13.6% compared to 15.3 million in the comparable period of 2006. Earnings per share came in at 0.51 (H1 2006: 0.46).

Net bank debt increased by 31.5 million compared with year-end 2006, largely as a result of the turnover growth and ensuing need for working capital and investments. Expressed as a percentage of turnover, working capital increased slightly to 22.9%, from 22.7% in the first half of 2006. Solvency was down slightly at 46.3% (H1 2006: 47.3%).

The number of employees (FTE) as per 30 June 2007 was 3,074, (30 June 2006: 2,714).

Strategy progress

In terms of the geographical market development of the TKH group, we made an important move with the acquisition in July 2007 of the French CAE Groupe, with an annual turnover of more than 120 million. In addition, we acquired USE System Engineering, Transmea and New Electronic Technology (NET) with a joint annual turnover of around 20 million. These companies have further boosted the technology component within the TKH Group, particularly in the field of information systems and security systems. TKH sees these segments as important growth segments within its portfolio.

Segmentation solutions

TKH approaches the market on the basis of three business segments: Telecom, Building and Industrial Solutions. Within the solutions segments, Building Solutions once again developed positively. The development of the system activities and innovations in the field of cable, security solutions and automation in buildings in particular resulted in turnover growth in this segment.

The Telecom Solutions segment showed limited growth. The outdoor telecom market was still experiencing a reduced investment level. Investments in the upgrading of network capacity were a low priority, while the demand for conventional technology is falling.

The Industrial Solutions segment benefited from a higher level of investments in the industry. Turnover increased mostly in the field of systems for machine building, the medical industry and the shipbuilding industry.

In the first half of 2007, innovations accounted for 23.4% of the turnover, which was well above the target of at least 15%.

Developments per group

Technical Trading Group

The Technical Trading Group turnover increased to 123.7 in the first half of 2007, up 8.5% on 114.0 million in the first half of 2006. Of this amount, 6.0 million came from the acquisitions Schneider Intercom and Funea. Organic turnover growth was 3.2%.

Turnover growth was realised primarily in Germany and Poland in the Building and Industrial Solutions segments. The Telecom Solutions segment showed a drop in turnover. The investments in the upgrading of copper networks remained limited in the first half of the year, which meant it was not possible to offset the drop in demand for conventional systems for telecom networks.

The operating result increased to 11.4 million in the first half of 2007, up 17.6% from 9.7 million in the first half of 2006. The growth of the share of deliveries with a high added value in the form of systemshad a positive impact on the operating result. Good progress was made in technical solutions for the elderly-care sector, as well as the security sector, which further strengthened the market position of TKH in these

segments. The margin (ROS) increased to 9.2% in the first half of 2007, from 8.5% in the same period of 2006.

Cable Group

The turnover of the Cable Group increased to 189.9 million in the first half, up 25.9% from 150.8 million. Organic turnover growth was 20.8%, with 4.6% of this due to increased raw material prices. This organic turnover increase was partly the result of various new market positions taken in eastern and western Europe. In addition, positive market conditions in the construction and installation sector and the growing demand for Fibre-to-the-Home solutions also contributed to the turnover growth.

The operating result rose to 14.8 million in the first half of 2007, up 27.7% from 11.6 million in the first half of 2006. The increase in the operating result was in line with the increase in turnover. Due to actions undertaken in 2006 to improve efficiency and expand capacity, the capacity utilisation remained stable at around 90%.

Due to the development of new market positions, the improvement of ROS in the Cable Group was limited. This ROS improved slightly to 7.8%, from 7.7%.

Machinery Group

The Machinery Group saw its turnover increase to 74.1 million in the first half of 2007, up 32.6% from the 55.9 million recorded in the same period of 2006. The turnover growth was a result of the strong increase in demand for tyre building systems in 2006. More than 60% of the turnover realised consisted of innovations in the field of tyre building systems. These newly introduced solutions, including modules to make tyre manufacture production more flexible, respond to the demand within the tyre manufacturing industry for the implementation of further efficiency improvements and for an improvement in the quality of car tyres.

Due to the fact that a large number of these new systems were still in the prototyping stage, with ensuing high start-up costs, the operating result dropped to 3.4 million in the first half of the year, down 42.1% from 5.9 million. In addition, extra costs were incurred due to the limited availability of qualified technical personnel in the United States. The centralisation of machinery building activities in the Netherlands to a single location also resulted in temporarily higher costs. The order intake is irregular due to the project character of the contracts. The order intake started off slowly in the first half but has recovered strongly from July 2007 as a result of a number of larger projects.

The ROS dropped to 4.6% in the first half of 2007, from 10.6% in the first half of 2006. As noted earlier, we expect a margin of 6 to 7% for the full year 2007. The average margin target for this segment in the coming years is around 10%.

Outlook

The activities in the Technical Trading Group and the Cable Group are developing positively, particularly in the Building and Industrial Solutions segments.

For the Machinery Group, we expect the higher cost levels to normalise in the course of the second half of the year. On the one hand, because the prototyping stage of a large number of projects will be completed and we will be able to benefit more from series-size advantages, while on the other hand the realised capacity expansion in China will reduce production costs.

Based partly on the realised result in the first half of 2007 and barring unforeseen circumstances, we expect net profit for the full year 2007 to exceed the net profit in the full year 2006 by 15 to 20%, according to previous announcement.

Haaksbergen, 31 August 2007

Executive Board

For further information: J.M.A. (Alexander) van der Lof MBA, Chairman of the Executive Board tel. + 31 (0)53 5732901 Website: www.tkhgroup.com

Calendar

22 November 2007 Trading update Q3 2007
12 March 2008 Publication annual results 2007
6 May 2008 Trading update Q1 2008
7 May 2008 General Meeting of Shareholders

Profile

Technical solutions provider, TKH Group NV (TKH) is an internationally operating group of companies specialised in creating and supplying innovative Telecom, Building and Industrial Solutions.

The activities in the form of technologies, know-how, products and added value such as consulting, development, assembly and delivery of systems, form the building blocks for innovative solutions. These activities are concentrated in three groups: the Technical Trading Group, the Cable Group and the Machinery Group. At TKH the solutions play the central role, not the kind of activity (group).

The Telecom Solutions consist of solutions ranging from basic infrastructure to home networking applications, for both the outdoor and indoor telecom (ICT) -markets.

The Building Solutions comprise solutions ranging from efficient electrical engineering to ICT systems for the health care sector. In this segment TKH concentrates on cable systems and networks, intercom systems, nurse paging systems, access control and electricity distribution.

The Industrial Solutions consist of advanced solutions for production automation, car and truck tyre building systems and industrial applications in the field of speciality cable and cable accessories.

The 39 companies in the TKH Group are active all over the world. Its growth is concentrated on North West and Eastern Europe and Asia. In 2006 TKH secured a turnover of 686 million with 2,961 employees.

Consolidated Profit and Loss Account

in thousands of euros

	st half 2007 1	1	st half 2006
Net turnover	337,114		296,674
Changes in inventory of finished goods
and work in progress		47,080	20,802
Other operating income		586	1,191
Total operating income	384,780		318,667
Costs of raw materials, consumables, trade
products and subcontracted work	242,219	194,275
Personnel expenses	76,041	64,782
Depreciation	6,494	5,416
Other operating expenses	34,281	30,789
Total operating expenses	359,035		295,262
Operating result		25,745	23,405
Financial income and expenses		-1,566	-2,083
Share in result of associates		246	31
Result before tax		24,425	21,353
Tax on profit		7,045	6,054
Net result		17,380	15,299
Attributable to:
		17,387	15,214
Shareholders of the company		-7	85
Minority interest
		17,380	15,299
Earnings per share
Weighted average number of shares (x 1,000)		33,981	33,232
Weighted average number of shares for the		34,294	33,880
purpose of diluted earnings per share (x 1,000)
Ordinary earnings per share ( )		0.51	0.46
		0.51	0.45
Diluted earnings per share ( )

Consolidated balance sheet

in thousands of euros

	30-06-2007		31-12-2006
Assets
Non-current assets
Intangible non-current assets	47,895		44,320
Tangible non-current assets	130,299		121,838
Financial non-current assets	2,901		2,850
Deferred tax assets	4,272		4,384
Total non-current assets		185,367		173,392
Current assets
Inventories	136,473		119,750
Receivables	166,082		155,921
Cash and cash equivalents	5,626		9,970
Total current assets		308,181		285,641
Assets held for sale		2,490		5,534
Total assets		496,038		464,567
Liabilities
Group equity
Group equity	228,506		219,932
Minority interest	1,268		1,294
Total group equity		229,774		221,226
Long term liabilities
Long term liabilities	26,107		26,031
Deferred tax liabilities	18,012		18,335
Other provisions	11,761		12,208
Long term liabilities		55,880		56,574
Short-term liabilities
Trade debts and other payables	193,891		171,302
Current tax liabilities	11,200		9,288
Provisions	5,293		6,177
Total short-term liabilities		210,384		186,767
Total liabilities		496,038		464,567

Consolidated cash flow statement

in thousands of euros

	st half 1 2007	st half 1 2006
Cash flow from operating activities
Operating result	25,745	23.405
Depreciation	6,494 -1,362	5.416 -1.883
Changes in provisions Changes in working capital	-31.051	-20.255
Cash flow from operations	-174	6.683
Interest received/(paid)	-1.313	-2.053
Income tax on profit received/(paid)	-5.209	-4.058
Net cash flow from operations (A)	-6.696	572
Cash flow from investing activities
Dividends received from non-consolidated associates	135	135
Investments in tangible fixed assets and assets held-for-sale	-14,864	-4,893
Disposals in tangible fixed assets and assets held-for-sale	3,319	0
Acquisition of subsidiaries	-2,387	-3.389
Acquisition of associates	0	-391
Acquisition of other intangible non-current assets	-1,886	-769
acquisition of other financial non-current assets	-186	0
Net cash flow from investing activities (B)	-15,869	-9.307
Cash flow from financing activities
Dividends paid	-7,960	-5.196
Purchase of shares	-1,414	0
Share and option schemes	-457	1.518
Receipts from long term finance facilities	76	0
Repayment of long-term debts	0	-241
Net cash flow from financing activities (C)	-9,755	-3.919
Net decrease in cash and cash equivalents (A+B+C)	-32,320	-12.654
Exchange differences	813	1.685
Change in available funds	-31,507	-10.969
Cash and cash equivalents at 1 January	-43,138	-23.134
Cash and cash equivalents at 30 June	-74,645	-34.103
The balance of cash and cash equivalents at 30 June consisted of:
* Cash and cash equivalents	5,626	7.504
* Bank overdraft	-80,271	-41.607
Balance of cash and cash equivalents	-74,645	-34.103

Consolidated statement of changes in group equity

In thousands of euros

	share capital Issued	premium Share	reserve Revaluation Statutory	reserve	reserve hedge reserve Translation flow Cash	reserve Other	Total	interest Minority	equity Total
Position as at 1 January 2006	8,467	6,233	893	21,687	7,539 -11	142,175	186,983	188	187,171
Profit in financial year Changes in cash flow hedges Revaluations Change in tax rates Exchange differences				1,484 790	194 -1,465	35,043 491	35,043 194 1,975 790 -1,465	323	35,366 194 1,975 790 -1,465
Share and option schemes Total profit	0	0	0	2,274	-1,465 194	830 36,364	830 37,367	323	830 37,690
Dividends paid Share and option schemes Capitalised development costs Acquisitions Other changes Position as at 31 December 2006	165 8,632	-165 6,068	1,601 2,494	23,961	6,074 183	-5,245 827 -1,601 172,520	-5,245 827 0 0 0 219,932	783 1,294	-5,245 827 0 783 0 221,226
Profit in financial year Changes in cash flow hedges Exchange differences Share and option schemes					302 716	17,387 175	17,387 302 716 175	-7	17,380 302 716 175
Total profit	0	0	0	0	716 302	17,562	18,580	-7	18,573
Dividends paid Purchase of shares Share and option schemes Capitalised development costs	119	-119	1,166			-7,960 -1,414 -632 -1,166	-7,960 -1,414 -632 0		-7,960 -1,414 -632 0
Acquisitions Position as at 30 June 2007	8,751	5,949	3,660	23,961	6,790 485	178,910	0 228,506	-19 1,268	-19 229,774

Notes to the interim financial report

1 Accounting principles for financial reporting

The interim financial report has been prepared in accordance with IAS 34 Interim Financial Reporting. The accounting policies are disclosed in the annual financial statements 2006.

The following reclassifications have been made in the balance sheet, and the comparable figures have also been amended:

• * Reclassification of the active deferred asset ensuing from sell-off losses to payable taxes for an amount of 12,885,000 (2006: 12,200,000) relating to completed liquidations * Reclassification of assets held for sale from non-current assets
• * Reclassification of provisions to long-term and short-term debts.

2 Statutory capital

On 24 April 2007, the General Meeting of Shareholders approved a change to the articles of association to split the (depositary receipts of) shares, from one (1) (depositary receipt of) share with a nominal value of 1, into four (4) (depositary receipts of) shares with a nominal value of 0.25. The split was effected as per 14 May 2007. The number of outstanding (depositary receipts of) shares as per 31 December 2006 was the equivalentof 33,730,520. As a result of the exercise of options rights and share schemes, on balance 23,840 (depositary receipts of) shares were delivered and sold. In addition, a stock dividend of 477,779 (depositary receipts of) shares was paid out from the share premium reserve. As a result, the number of (depositary receipts of) shares outstanding with third parties as per 30 June 2007 was 34,232,139.

3 Dividend

At the General Meeting of Shareholders the dividend was declared at 2.10 per (depositary receipt of) ordinary share. The dividend was proposed at the option of shareholders in cash or as a stock dividend. The dividend on the priority shares was declared at 0.05 per share. These figures are before the share split. The total amount in dividends paid in the first half of 2007 was 7,959,743 and this amount was charged to the other reserves. For stock dividend an amount of 119,434 was charged against the share premium reserve.

4 Information by segment

	st half 1	st half 1	nd half 2
	2007	2006	2006
Turnover
Technical Trading Group	123,703	114,044	125,570
Cable Group	189,905	150,829	176,917
Machinery Group	74,085	55,856	66,677
Eliminations	-2,913	-2,062	-2,339
Total turnover	384,780	318,667	366,825
Operating result
Technical Trading Group	11,436	9,722	12,713
Cable Group	14,774	11,565	14,544
Machinery Group	3,436	5,938	6,697
Non-allocated income and expenses	-3,901	-3,820	-3,780
Total operating result	25,745	23,405	30,174

5 Acquisitions

During the first half of 2007, TKH acquired the following interests:

		Ownership and	Consolidated	Activity
Name participation	Country	control	as from
USE System Engineering B.V.	Netherlands	75%	1 January 2007	Technical trading
Transmea B.V.	Netherlands	80%	1 June 2007	Technical trading

The transactions in which a majority interest was acquired have been accounted for through the purchase method of accounting. Goodwill in the amount of 1.5 million was paid for the acquisitions, in which net assets with a value of minus 0.1 million were acquired. The acquisitions have not yet made a contribution to the results in the first half of the year. The minority shareholders in the above-mentioned companies have granted TKH an option to acquire the remaining shares. In addition, TKH has an obligations to purchase the shares if the local management offers these shares for sale. The option rights can be exercised in early 2009 and early 2010 respectively. The sum of the rights and obligations is dependent on future results. In view of the fact that future results cannot be reliably determined, the rights and obligations have not been valued.

6 Contingent liabilities

The contingent liabilities which are not reflected in the balance sheet, as reported in the financial statements for 2006, have not essentially changed in the first half of 2007.

7 Events after balance sheet date

On 6 July 2007, TKH has expanded its 30% minority stake in New Electronic Technology (NET) GmbH in Germany to a majority stake of 84%. NET has 28 employees (FTEs) and realises annual turnover of around 17 million.

On 30 July 2007, TKH reached agreement on the acquisition of 100% of the shares in CAE Groupe in France. The fixed purchase price of the CAE Groupe shares is 75 million. Depending on the results development in 2007, an additional payment of 15 million may be payable. To finance the acquisition, TKH has issued 400,000 (1.14%) new (depositary receipts of) shares which have been placed with the management and the other former shareholders of CAE Groupe. In 2006, CAE Groupe recorded turnover of 122.1 million with a normalised operating result of 12.0 million. The company employs a staff of 300.

With the exception of the aforementioned acquisitions, no events took place after the balance sheet date that significantly impact the insight into the recent most recent interim period.

8 Signature of semi-annual report

Haaksbergen, 30 August 2007

Executive Board J.M.A. van der Lof MBA, chairman J.E. Vaandrager

To the shareholders and Supervisory Board of TKH Group NV

Review report

Introduction

We have reviewed the attached consolidated interim financial information for the six-month period ended June 30, 2007 of TKH Group N.V., Haaksbergen, which comprises the condensed consolidated balance sheet as at June 30, 2007, the condensed consolidated income statement, the condensed consolidated statement of changes in equity and the condensed consolidated cash flow statement for the six-month period then ended. Management is responsible for the preparation and presentation of this consolidated interim financial information in accordance with IAS 34 Interim Financial Information as adopted by the European Union. Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope

We conducted our review in accordance with Dutch law including standard 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity . A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review nothing has come to our attention that causes us to believe that the attached consolidated interim financial information as at June 30, 2007 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Information as adopted by the European Union.

Enschede, 30 August 2007

Deloitte Accountants B.V.

A.J.E. Jansman