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TKH Group N.V.

Earnings Release Mar 12, 2008

3889_iss_2008-03-12_a0629978-e04b-4d10-b05b-d73b9a0c5b4f.pdf

Earnings Release

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Press Release

TKH Group N.V. (TKH) Annual Figures for 2007

TKH Group's operating result up 18% Acquisitions strengthen TKH's strategic position

  • Increase in turnover with 22.2% to € 837.8 million, organic growth accounting for 11%.
  • Operating result improves by 18.4% to € 63.4 million.
  • Net profit up 27.5% to € 45.1 million.
  • Strong fourth quarter where by the Machinery Group's margins returned to normal.
  • Again innovations account for substantial part of turnover: 25.2%.
  • TKH innovations and the outsourcing trend in the industrial sector represent a significant engine for organic turnover growth.
  • Strong year in terms of acquisitions with eight takeovers strengthening TKH's strategic position.
  • Proposed dividend of € 0.66 per (depositary receipt of) ordinary share.

Outlook

  • TKH expects further growth of turnover and profit in 2008.
  • Transition to reporting based on solutions segmentation as of 2008.

Key figures

(in millions of € unless otherwise stated) 2007 2006 Change (%)
Turnover 837.8 685.5 + 22.2
Operating result (EBIT) 63.4 53.6 + 18.4
Net profit 45.1 35.4 + 27.5
Net earnings per ordinary share (in €) 1.31 1.06 + 23.6
Solvency 40.4% 47.5%
ROS 7.6% 7.8%
ROCE1 15.5% 17.1%
Proposed dividend (in €) 0.66 0.53 + 24.5

Key figures fourth quarter

(in millions of € unless otherwise stated) Q4
2007
Q4
2006
Change (%)
Turnover 244.1 198.0 + 23.3
Operating result (EBIT) 22.8 18.3 + 25.1
Net profit 18.9 13.0 +
45.5
ROS 9.4% 9.2%

1 When the acquisitions are included on a full year basis, ROCE would amount to 16.5%.

Alexander van der Lof, CEO of TKH: "TKH is developing as a technology company in segments offering significant potential for growth. In this respect our focus on total solutions is capitalising on the trend towards outsourcing and the need for efficiency solutions. In the past year this has translated into strong organic growth in excess of market growth. This strategy holds the prospect of enabling us to achieve growth also in more difficult market conditions. The innovative products which we have introduced are a significant engine for growth in the years ahead. Thanks to the businesses which we acquired in 2007 our technological component as well as our geographical position in Europe have been strengthened considerably."

Financial developments

Turnover amounted to € 837.8 million in 2007 (2006: € 685.5 million), an increase of 22.2% compared with 2006. Our acquisitions during 2007 have made a major contribution to this increase in turnover. Organic growth accounted for 11.0%.

Added value rose by € 45.1 million or 17.1% to € 309.5 million. Expressed as a percentage of turnover, added value declined to 36.9% (2006: 38.6%) due to an increase in the proportion of work that was outsourced compared to own production.

Operating profit increased by € 9.8 million to € 63.4 million, an increase of 18.4%. Expressed as a percentage of turnover (ROS), the Cable and Technical Trading Groups' operating result rose thanks to improved efficiency and a focus on solutions. In the Machinery Group ROS declined as a result of the considerable costs involved in the large proportion of innovations and prototyping. As a result, overall ROS declined to 7.6% (2006: 7.8%).

Net financial expenditure rose by € 2.5 million to € 6.2 million (2006: € 3.7 million) as a result of the acquisitions and the increase in working capital due to the expansion of operations. The company's tax burden dropped to 21.7% (2006: 29.3%). This was due on the one hand to a lower tax rate in the Netherlands and on the other hand to the settlement of tax returns dating from previous years. Adjusted to reflect normal conditions, the company's tax burden would have been 28.0%.

Net profit rose by 27.5% to € 45.1 million in 2007 (2006: € 35.4 million). As a result ordinary earnings per share amounted to € 1.31, an increase of 23.6% (2006: € 1.06).

During the year under review the company's balance sheet total rose by € 193.3 million as a result of acquisitions (€ 166.7 million), investments in non-current assets and also an organic increase in net working capital. Expressed as a percentage of turnover, working capital edged up slightly from 20.7% to 20.9% partly because the acquisitions did not yet contribute to turnover throughout the year. Adjusted to reflect this, working capital would amount to 18.6% of turnover.

Net cash flow from operating activities rose to € 36.5 million compared with € 18.6 million in 2006.

At the end of 2007 the company's net bank debts totalled € 163.7 million. This was € 95.6 million more than at the end of 2006 largely as a result of the acquisitions which occurred in 2007 and the increase in working capital.

During the year under review committed credit facilities up to € 100 million were arranged with a five year duration. In total TKH has committed facilities amounting to € 125 million and uncommitted facilities of € 225 million.

The company's solvency rate fell from 47.5% to 40.4%.

The number of staff (FTEs) amounted to 3,577 at year-end 2007 (2006: 2,961). Of which 362 FTEs came with acquisitions.

Progress in achieving targets and implementing strategy

Significant progress has again been made with regard to the development of the TKH group. TKH is well on its way achieving the goals for 2009 as set out in March 2007: ROS of 8% to 9% and ROCE of 18% to 20%. Thanks to the steps that were taken as part of its strategic development the TKH group is confident that it will achieve these targets. In 2007 ROS and ROCE amounted to 7.6% and 15.5% respectively. Both ROS and ROCE were affected by one-off issues in 2007. ROCE was affected by the fact that the results achieved by the businesses that have been acquired were only consolidated for part of the year (1.0%).

The completion of eight acquisitions in 2007 – USE (75%), NET (84%), Transmea (80%), CAE Group (100%), Observision (49%), KLAN (100%), SecurityWorks (80%) and Pantaflex (92%) – has strengthened the technology component within the TKH group and has accelerated the geographical spread of its turnover. These acquisitions tie in well with TKH's strategy to offer total solutions and hold prospects for the achievement of a healthy increase in turnover and result.

A great deal of attention was devoted to transformation of TKH. As a result, the decision to express the focus on solutions by a transition to reporting entirely based on the solutions segmentation as of 2008, has been implemented a year ahead of the original schedule. As such, we have taken final leave of our former breakdown into groups. We anticipate that TKH is more transparent as a result and that it is clearer as to where the focus of its strategy lies.

Solutions segmentation

Industrial solutions

The Industrial Solutions segment has grown more rapidly than the other segments. As a result the proportion of overall turnover rose to 53.0% (2006: 50.4%). The growing trend towards outsourcing in the industry results in a boost of size and potential of market for this segment. By anticipating on this demand for outsourcing, TKH's portfolio of products and services expands, resulting in a broader array and a higher turnover per contract as a result. This allowed TKH to grow more rapidly than the market in 2007.

This trend has been particularly strong in the tyre manufacturing industry, the medical sector and the robot industry. The miniaturisation of cable solutions and the potential for innovation play a major role in these segments.

The high priority within the European industry towards efficiency and productivity improvement constitutes also an important factor for the growth achieved within the Industrial Solutions segment. The innovative concepts of the TKH group in the form of plug and play cable systems closely addresses the growing demand for complete modules within the industrial sector. The further development of high-end operating systems within TKH also constituted a good response to these trends. Apart from this, the acquisitions also contributed to the increase of the Industrial Solutions share.

Investments were at a high level in the tyre manufacturing industry. Considerable pressure on further outsourcing by the tyre manufacturing industry has challenged TKH to address specific requirements in relation to new tyre manufacturing technology within an extremely short period of time. TKH has seized on this momentum to develop new technology for a large number of customers and to supply systems ready for production. Our customers greatly appreciate these exceptional efforts and this performance. This translated into a large number of orders as of the third quarter.

Building Solutions

The proportion of total turnover accounted for by the Building Solutions segment edged up to 30.8% (2006: 29.7%). The increase in turnover within the Building Solutions segment was partly due to acquisitions. The proportion of solutions provided at an early stage of the product life cycle increased further in 2007. Many new solutions were developed and introduced especially for the security and elderly care markets. A new dimension for growth has arisen with the addition of highly advanced security concepts to the TKH portfolio thanks to our shareholdings in Observision, KLAN, NET and SecurityWorks. TKH is striving to boost the proportion of security solutions from 5% of overall turnover to at least 20% in the next three to five years. There is a great deal of interest in the elderly care market for new alarm systems, video communication and domotics, for which various pilot projects have been launched.

The construction and installation market expanded by more than 5%. Because order portfolios in the construction and installation sectors are well-filled for the longer term, the market did not weaken in the second half of the year. The high capacity utilisation rate within the cable industry made it possible to improve prices in a number of markets. Demand again increased sharply in the power cable market in the Netherlands, which is TKH's most important market for these products. A number of energy companies made an effort to catch up in terms of upgrading and expanding the capacity of their networks. It was possible to increase margins due to the scarcity of power cables within Europe.

Telecom Solutions

Due to the rapid growth of the Industrial and Building Solutions activities the proportion of the Telecom Solutions segment in TKH's overall turnover fell to 16.2% (2006: 19.9%). Most network operators postponed the upgrading of their copper telecommunications networks, on the one hand due to uncertainty as to whether the suppliers of active components would be able to implement the relevant technical specifications and, on the other hand, because of new views regarding accelerated investments in fibre-optic infrastructure as an alternative to upgrading their copper networks. They also adopted a wait-and-see approach, because proceedings in the EU concerning the opening-up of networks to competitors are still ongoing. However, the rapid growth in the demand for bandwidth allows little scope for any further postponement.

The global market for fibre networks expanded by 13%. Europe, the most important market for TKH in this segment, grew in line with increased demand throughout the world. Consequently, many new projects were again launched for investments in fibre networks in Europe, especially on the part of new players wishing to gain a position in the communications infrastructure. New services which require considerable bandwidth, such as IPTV, video on demand and care-related solutions are boosting the demand for fixed connections. In TKH's case this was expressed in the form of an increase in orders received for Ocilion IPTV solutions in the fourth quarter. In addition several large 'Fibre To The Home' projects were secured in Europe.

Developments by group

As of 2008 TKH will focus its business segmentation on solutions instead of on the three groups mentioned hereafter. As a result, from 2008 there will no longer be financial reporting based on the segmentation below.

Technical Trading Group

The Technical Trading Group's turnover rose by 25.7% to € 301.1 million in 2007 (2006: € 239.6 million). Acquisitions (Funea, Schneider, CAE, NET, Transmea, KLAN and USE) accounted for 23.0% of this. Organic growth amounted to 2.7%. This organic growth was negatively impacted by a change in the manner in which outsourced sales are accounted for, which had an effect of 2%. In addition, less profitable turnover was abandoned, which had a negative impact of another 2%.

There was an increase in turnover in both the construction and installation sector, and the industrial sector. In particular, the building technology and security systems segments grew within these sectors. Increased investments in new technologies in the telecommunications sector could not make up for the decline in investments in conventional technology. Turnover rose in Germany, France and Poland.

Operating profit rose by 32.8% to € 29.8 million (2006: € 22.4 million). Thanks to an ongoing focus on solutions yielding greater added value there was an increase in gross margins expressed as a percentage of turnover. As a result, operating profit rose more sharply than sales. ROS increased to 9.9% (2006: 9.4%). Innovations accounted for 18.5% of turnover.

Cable Group

The turnover of the Cable Group surged by 21.2% to € 397.2 million in 2007 (2006: € 327.7 million). Organic growth of turnover amounted to 15.0%. The acquisition of Schrade, KCI, part of CAE, and Pantaflex accounted for 6.2% of the increase in turnover. The price of copper fell in the fourth quarter, which had a negative effect of about 2% on the turnover growth for the entire year.

Above-average organic growth occurred in Germany, Eastern and Southern Europe, and Asia. In particular, sales of industrial applications did well, especially as a result of using cable systems to capitalise on the trend towards outsourcing in the industrial sector.

Innovations accounted for a proportion of turnover amounting to 24.9%. The Cable Group's high level of innovation served as an important engine driving its growth.

The Cable Group's operating result rose by 30.8% to € 34.2 million (2006: € 26.1 million). A higher capacity utilisation rate, improved efficiency and a relatively large proportion of innovations meant that its operating result increased more rapidly than its turnover. As a result ROS climbed to 8.6% (2006: 8.0%).

The capacity utilisation rate of the plants exceeded 90%. Capacity was expanded predominantly by raising productivity. In particular, the capacity utilisation rate of specialty cable production was high again. In August 2007 it was decided to establish a new manufacturing plant in Germany in order to expand production capacity for specialty cable further. Production will commence in this new plant in April 2008, which will increase production capacity by more than 30%.

Machinery Group

The Machinery Group saw its sales rise by 19.1% to € 145.9 million (2006: € 122.5 million). The tyre manufacturing systems segment accounted for the bulk of this increase in turnover. The trend towards further outsourcing on the part of the tyre manufacturing industry was responsible for a sharp increase in the orders received for tyre manufacturing systems in the second half of the year.

The Machinery Group's operating profit fell by 41.6% to € 7.4 million (2006: € 12.6 million). This drop was largely due to the large proportion of turnover accounted for by prototypes, which required considerable costs during the start-up stage. Innovations which were launched during the past year accounted for 42% of sales. Although ROS dropped to 5.1% (2006: 10.3%), it was up to about 10% again in the fourth quarter.

Thanks to additional capacity for the production of tyre manufacturing systems and can washers in China being put into service in 2007, it was largely possible to complete the phasing out of capacity in the USA in the fourth quarter. The additional costs which arose from the fact that it was impossible to built up the capacity in the USA that had been originally envisaged, had a negative impact on results in 2007.

It has been decided to proceed with the further integration of the product handling systems with the other operations of the Machinery Group. This will improve cooperation and will allow us to join forces in order to ensure the better utilisation of existing capacity. The product handling operations were relocated to Epe for this purpose in 2007.

Dividend proposal

At the General Meeting of Shareholders to be held on 7 May 2008, TKH will propose a dividend of € 0.66 per (depositary receipt of) share (2006: € 0.53). This represents a pay-out ratio of 50.2%. In order to support the financing of the growth that is envisaged the shareholders will be offered the option of a stock dividend or a cash dividend charged to the reserves. The stock dividend will be determined one day after the end of the option period and will be based on the average share price of the last five trading days of the option period, which will expire on 27 May 2008. The dividend will be made available for payment, either in cash or stock, on 2 June 2008.

Appointment member of Executive Board

Mr J.E. (Jan) Vaandrager, member of the Executive Board and CFO of TKH Group NV, will be retiring at the end of the General Meeting of Shareholders on 7 May 2008, because of reaching retirement age. On the same date the Supervisory Board will appoint Mr E.D.H. (Elling) de Lange to serve as a member of the Executive Board and as TKH's CFO. Mr De Lange is 42 years of age and has been employed by TKH since 1998, his last position being that of chairman of the Cable production group Netherlands-China.

Outlook

The Telecom Solutions segment is well-positioned for the growing level of investments in fibre networks and active network solutions. However, there will be a further reduction of investments in copper networks. On balance it is anticipated that the operations of Telecom Solutions will expand.

The Building Solutions segment focuses predominantly on the utilities market and building environment, where order books are well-filled. In addition, the security, care and domotic segments offer the prospect of a faster growth rate thanks to the developments and demands which are specific to these segments.

The Industrial Solutions segment is well-positioned for further growth thanks to its focus on efficiency solutions. In addition, the trend towards outsourcing in the industry represents an important driver of growth potential of these operations. The lower cost levels in the tyre manufacturing systems segment will boost the ROS of these operations.

In light of the developments outlined above, the TKH group is confident of further growth in turnover and results.

Haaksbergen, 12 March 2008

Executive Board

For more information: J.M.A. (Alexander) van der Lof, Chairman of the Executive Board Tel.: (+31)(0)53 573 2901 Website: www.tkhgroup.com

Timetable

6 May 2008 Trading update Q1 2008
7 May 2008 2008 Annual General Meeting of Shareholders
29 August 2008 Publication half-year results 2008
20 November 2008 Trading update Q3 2008
28 April 2009 2009 Annual General Meeting of Shareholders

Profile

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

At TKH the solutions play the central role, not the kind of activity. In the business segments Telecom Solutions, Building Solutions and Industrial Solutions, basic technologies in the field of ICT and electro technology from the various business units, often in partnership with suppliers, are consolidated into total solutions.

Specialists in the field of marketing, process development, design, engineering and logistics add consultancy and project implementation to offer a tailor made solution. These locally developed concepts are subsequently offered internationally, in order to optimally capitalize on the expertise and knowledge within TKH.

The Telecom Solutions consist of solutions ranging from basic infrastructure to home networking applications, for both the outdoor and indoor telecom (ICT) -markets. TKH Telecom Solutions can be divided into three sub segments: Fibre Networks, Copper Networks and Indoor Telecom Systems.

The Building Solutions comprise solutions ranging from efficient electrical engineering to ICT systems for the care sector. Building Solutions can be divided into three sub segments: Building Technologies, Security Systems and Connectivity Systems.

The Industrial Solutions consist of advanced manufacturing systems for the car and truck tyre manufacturing industry and connectivity systems for the medical, robot, automotive and machine building industry.

Continuous focus on research and development provides a product and services portfolio that safeguards technologically advanced solutions. With its group companies, TKH group is active all over the world. Its growth is concentrated on Northwest, Central and Eastern Europe and Asia. In 2007 TKH secured a turnover of € 837.8 million with 3,577 employees.

Consolidated Profit and Loss Account

2007 2006
Net turnover 818,469 653,699
Changes in inventory of finished goods
and work in progress 15,918 30,379
Other operating income 3,425 1,414
Total turnover 837,812 685,492
Costs of raw materials, consumables, trade
products and subcontracted work 528,330 421,109
Personnel expenses 158,388 136,361
Depreciation 14,903 9,550
Other operating expenses 72,776 64,893
Total operating expenses 774,397 631,913
Operating result 63,415 53,579
Financial income and expenses -6,199 -3,747
Share in result of associates 419 174
Result before tax 57,635 50,006
Tax on profit 12,529 14,640
Net result 45,106 35,366
Attributable to:
Shareholders of the company
44,918 35,173
Minority interest 188 193
45,106 35,366
Earnings per share
Weighted average number of shares (x 1,000) 34,185 33,239
Weighted average number of shares for the purpose of diluted
earnings per share (x 1,000)
34,606 33,937
Ordinary earnings per share (€) 1.31 1.06
Diluted earnings per share (€) 1.30 1.04

Consolidated balance sheet

2007 2006
Assets
Non-current assets
Intangible non-current assets 147,110 44,040
Tangible non-current assets 142,473 121,838
Investment property 2,549 2,509
Financial non-current assets 3,517 2,850
Deferred tax assets 4,853 4,384
Total non-current assets 300,502 176,621
Current assets
Inventories 144,759 119,750
Receivables 202,464 155,921
Cash and cash equivalents 9,653 9,970
Total current assets 356,876 285,641
Assets held for sale 1,240 3,025
Total assets 658,618 465,287
Equity and liabilities
Group equity
Equity
264,648 220,584
Minority interest 1,205 642
Total group equity 265,853 221,226
Long-term liabilities
Long-term liabilities
86,306 26,031
Deferred tax liabilities 28,820 18,335
Provision for pensions 13,144 12,208
Other provisions 4,457 720
Total long-term liabilities 132,727 57,294
Current liabilities
Borrowings 87,864 53,108
Trade and other payables 148,222 118,194
Current tax liabilities 5,629 9,288
Provisions 18,323 6,177
Total short-term liabilities 260,038 186,767
Total liabilities 658,618 465,287

Consolidated cash flow statement

2007 2006
Cash flow from operating activities
Operating result 63,415 53,579
Depreciation 14,962 11,477
(Gain)/loss on sale or disposal of tangible assets -59 -1,927
Changes in provisions -2,453 -3,512
Changes in working capital -20,543 -19,544
Cash flow from operations 55,322 40,073
Interest (paid)/received -5,867 -3,727
Income tax (paid)/received -12,962 -17,796
Net cash flow from operating activities (A) 36,493 18,550
Cash flow from investing activities 369
Dividends received from non-consolidated associates
Purchases of tangible non-current assets
-29,396 174
-18,007
Disposals of tangible non-current assets 629 1,471
Disposals less purchases of investment property 217 5,011
Disposals of assets held for sale 3,025 0
Acquisition of subsidiaries -97,353 -20,323
Acquisition of associates -2,026 -276
Acquisition of intangible non-current assets -4,298 -3,156
Net cash flow from investing activities (B) -128,833 -35,106
Cash flow from financing activities
Dividends paid -8,406 -5,245
Issue of new shares 7,000 0
Sold less purchased shares for share and option schemes -452 3,639
Share and option schemes -1,232 -1,982
Proceeds from long-term debts 60,097 0
Repayment of long-term debts 0 -538
Proceeds from borrowings 34,756 23,753
Net cash flow from financing activities (C) 91,763 19,627
Net increase/(decrease) in cash and cash equivalents (A+B+C) -577 3,071
Exchange differences 260 678
Change in cash and cash equivalents -317 3,749
Cash and cash equivalents at 1 January 9,970 6,221
Cash and cash equivalents at 31 December 9,653 9,970

Consolidated statement of changes in group equity

2007 2006
Balance at 1 January 221,226 187,171
Profit for the year 45,106 35,366
Change in cash-flow hedges 1,185 194
Revaluations 781 1,975
Change in tax rates 42 790
Exchange differences -108 -1,465
Share and option schemes -1,232 -1,982
Total result 45,774 34,878
Dividends -8,406 -5,245
Issue of new shares 7,000 0
Sold less purchased shares for share and option
schemes -452 3,639
Acquisitions 711 783
Balance at 31 December 265,853 221,226

Notes to the consolidated financial statements

1. Accounting principles

For the accounting principles of the financial statements of TKH Group N.V. we refer to the annual report of 2006 with the exception of the following changes in the accounting principles and applied reclassifications.

Change in accounting principles

As of 2007, TKH has changed the accounting policy for put options of minority shareholders that have rights to sell their minority interest to TKH. Under the new policy, pursuant to these put options granted to certain minority shareholders, TKH recognises an obligation to buy the minority shares instead of classifying them as minority share in the balance sheet and to disclose the liability as an off balance sheet obligation. The effects of this change of accounting policy are set out below.

Reported
2006
Restatement Restated
2006
Balance sheet
Goodwill 39,531 720 40,251
Equity – legal reserve 2,494 652 3,146
Minority interest 1,294 -652 642
Other provisions 6,177 720 6,897
Net result attributed to:
Shareholders of the company 35,043 130 35,173
Minority interest 323 -130 193
Earnings per share
Ordinary earnings per share (in €) 1.05 0.01 1.06
Diluted earnings per share (in €) 1.03 0.01 1.04

Reclassifications

In the balance sheet the following reclassifications have been carried out, for which the comparative figures have been changed:

  • Reclassification of deferred tax assets to current tax liabilities regarding liquidation losses that have been settled before 31 December 2006.
  • Reclassification of assets held for sale from tangible non-current assets
  • Reclassification of provisions to long-term and current liabilities.

The effects of the reclassifications are set out below:

Reported
2006
Reclassifications Restated
2006
Deferred tax assets 16,584 -12,200 4,384
Current tax liabilities 21,488 -12,200 9,288
Investment property 5,534 -3.025 2,509
Assets held for sale 0 3,025 3,025
Provisions 36,720 -36,720 0
Long-term liabilities 26,031 30,543 56,574
Current liabilities 192,790 6,177 198,967

2. Segmentation per group

in thousands of euros 2007 2006
nd half
2
st half
1
total 2ndhalf st half
1
total
Turnover
Technical Trading Group 177,404 123,703 301,107 125,570 114,044 239,614
Cable Group 207,331 189,905 397,236 176,917 150,829 327,746
Machinery Group 71,810 74,085 145,895 66,677 55,856 122,533
Intercompany deliveries -3,513 -2,913 -6,426 -2,339 -2,062 -4,401
Total turnover 453,032 384,780 837,812 366,825 318,667 685,492
Operating result
Technical Trading Group 18,365 11,436 29,801 12,713 9,722 22,435
Cable Group 19,386 14,774 34,160 14,544 11,565 26,109
Machinery Group 3,949 3,436 7,385 6,697 5,938 12,635
Other -4,030 -3,901 -7,931 -3,780 -3,820 -7,600
Total operating result 37,670 25,745 63,415 30,174 23,405 53,579

3. Annual report

The Consolidated profit and loss account, Consolidated balance sheet, Consolidated statement of changes in group equity and Consolidated cash flow statement, as included in this press release, are based on the annual accounts prepared as of 31 December 2007, which have not yet been published in compliance with legal requirements. In accordance with Section 2:395 of the Dutch Civil Code, we report that our auditor, Deloitte Accountants B.V., has issued an unqualified auditor's report on the annual accounts dated March 11, 2008. For the understanding required to make a sound judgement as to the financial position and results of TKH Group N.V. and for a satisfactory understanding of the scope of the audit by Deloitte Accountants B.V., this press release should be read in conjunction with the annual accounts from which this press release has been derived, together with the auditor's report thereon issued by Deloitte Accountants B.V. We expect to be able to publish these documents at the beginning of April 2008. The annual accounts will be submitted to the General Meeting of Shareholders on 7 May 2008 for approval.

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