C o n t e n t s
Company profile 3
Key figures and indicators 4
Report of the Board of Directors 5
- the year 2006 in brief 5
- Financial developments 7
- operational developments 0
- organisation, management and employees 9
- safety and the environment 2
- Market trends and competitiveness 22
- outlook 25
Information on management of the Company 26
- organisational structure 26
- supervisory directors, directors and management 27
- strategy and objectives 28
- Corporate governance 3
- Risk factors and risk management 37
- Information for shareholders 39
Report of the Supervisory Board 42
Financial statements 46
- Consolidated balance sheet 46
- Consolidated income statement 48
- Consolidated cash flow statement 49
- Consolidated statement of changes in equity 50 - notes to the consolidated financial statements 5 - separate financial statements (before profit appropriation) 80 - notes to the separate financial statements 8
Other information 83
- Auditors’ report 83
- events after the balance sheet date 85
- trade register 85
- Profit appropriation according to the articles of association 85 - Proposed appropriation of the profit 85 - special controlling rights conferred by the articles of association 85 - List of terms and abbreviations used 87
- Company addresses 88
Even a correct decision is wrong when it
is taken too late.
C o M P A n y P R o F I L e
neways is active in the electronic Manufacturing services (eMs) market. Its major customers are multinational original equipment Manufacturers (oeMs), such as Philips and AsML, while it also serves a wide range of smaller industrial suppliers. the Company’s solutions are used in sectors such as the industrial sector, the automotive sector, the semiconductor industry and the medical sector, as well as in the defence and telecommunications industry. they often involve control and operating systems, sub-systems or specific electronic components for such systems.
support activities such as service & maintenance and re-engineering enable the Company to
undertake the complete life cycle management of electronic components and systems for its customers. this involves customised work which, because of the considerable diversity and complexity of the components, is highly demanding both technologically and logistically. neways can meet customers’ technical needs, as well as meeting their logistical requirements and wishes in relation to these systems. In this way neways is able to take on the whole project management, including both complete development, prototyping and engineering projects up to and including first-off batches and also broader one-stop-provider projects in which more than one operating company within the neways Group each contributes its own specific competency in the building of complete electronic systems.
neways posted turnover of € 238.6 million in 2006. the netherlands accounted for 64% of this turnover, other eU countries for 29.8%, and countries outside the eU for 6.2%.
neways’ head office is situated at the science Park eindhoven in son (netherlands). the Company has operating companies in the netherlands, Germany, slovakia and China. to be able to offer the highest possible added value, the operating companies in Western europe work in the closest possible proximity to, and as closely as possible with, their customers. neways’ operating companies in eastern europe and Asia focus mainly on the manufacture of larger, less complex, stable batches, often on behalf of their sister companies in Western europe. this enables the neways Group to produce at a lower cost and hence improve its competitiveness. At the end of 2006, neways employed 2,205 people, of whom ,29 in the netherlands and Germany and 94 in slovakia and China.
neways electronics International n.V. (euronext Amsterdam; neWn) is an international one-stop-provider of advanced integrated components, assemblies and systems, offering solutions for the development, engineering, testing and manufacture of small to medium high-tech and high-quality batches of (micro-) electronics, printed circuit boards (PCBs) and cables into complete electronic ‘box-built’ systems.
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K e y F I G U R e s A n d I n d I C A t o R s
dutch dutch dutch
IFRs IFRs IFRs GAAP GAAP GAAP
Amounts x € ,000,000 unless otherwise stated 2006 2005 2004 2004 2003 2002
turnover 238.6 207.9 89.7 89.7 36.5 54.7
Gross margin 98.6 84.3 78.9 8. 57.9 64.2
operating result excl. special income and expenses ***) 6.7 9.5 9.3 9.3 -0.5 -.2
operating result 6.7 9.0 9.8 9.5 -7.4 -2.9
net result excl. special income and expenses ***) .2 5.4 4.5 4.5 -.7 -2.9
net result .2 5. 4.7 4.6 -6.3 -4.0
net cash flow *) 4.6 .5 -4.4 -4. 5.2 9.4
shareholders’ equity 37.6 23.7 8.0 20.4 3. 8.7
Guaranteed equity **) 43.3 35. 30.9 33. 23.8 3.3
Balance sheet total 05.8 87.9 02.0 02.9 7. 86.8
Capitalised goodwill 0.7 0.6 0.0 0.0 0.0 0.2
Interest coverage ratio ***) 9.9 6.7 5.4 5.8 -0.3 -0.5
debt/eBItdA ratio ***) 0.7 .6 2.4 2.3 8.3 9.7
Solvency
shareholders’ equity as % of balance sheet total 35.5 27.0 7.6 9.8 8.4 2.6 Guaranteed equity as % of balance sheet total 4.0 40.0 30.3 32.2 33.5 36. Profitability ratios ***)
Return on shareholders’ equity 29.7 22.7 24.8 22. -2.9 -5.7
operating result as % of turnover 7.0 4.6 4.9 4.9 -0.4 -0.8
net result as % of turnover 4.7 2.6 2.3 2.4 -.2 -.9
operating result as % of capital invested 36.8 28.2 26.0 23.2 -2.0 -3.5
Data per employee
number of employees (on full-time basis)
incl. subsidiaries consolidated from 2004 2,097 ,85 ,836 ,836 ,563 ,638 number of employees (on full-time basis)
excl. subsidiaries consolidated from 2004 - - - - .075 .240
turnover per employee (x .000) 4 2 03 03 27 25
Gross margin per employee (x .000) 47 46 43 44 54 52
Data per ordinary share in euros (based on number of shares at year-end)
net profit .2 0.59 0.56 0.54 -0.8 -0.57
net profit ***) .2 0.63 0.52 0.53 -0.22 -0.4
shareholders’ equity 4.08 2.78 2. 2.39 .69 2.65
net cash flow 0.50 .35 -0.5 -0.48 0.67 .33
dividend 0.36 0.0 0.00 0.00 0.00 0.00
dividend as % of net profit 30.0 6.8 0.00 0.00 0.00 0.00
number of shares at year-end x ,000 9,202 8,526 8,526 8,526 7,766 7,066
Highest share price 9.75 6.80 5.4 5.4 2.65 6.20
Lowest share price 6.26 5.05 2.40 2.40 .50 2.00
Closing price on 3 december 9.75 6.20 5.05 5.05 2.40 2.50
*) net cash flow is understood to mean cash flow from operating activities, plus cash flow from investment activities. In 2004 including acquisition of assets and liabilities of stork electronics totalling € 3.3 million.
**) Including subordinated loans from lending institutions.
***) Indicators are based on figures not taking account of special income and expenses.
these impressive results derive from the strategy that was adopted some years ago, with a sharp focus on positioning neways more clearly as a one-stop-provider and increasing the added value for the customer. In the past years this led to a drastic reorientation and reshaping of the neways organisation that had an impact on virtually all aspects of the Company’s operations. For instance, the cost basis was considerably reduced and cost control was tightened in numerous areas. A rigorous efficiency campaign was waged in purchasing, logistical and production processes, resulting in such things as a much stricter management of working capital and an expansion of production activities in low-wage countries. the knowledge-intensive activities, such as development, engineering and systems assembly, have been strengthened. the pooling of knowledge and strengths among neways operating companies, such as joint approaches to potential customers and cooperation with suppliers and customers in the business chain, has considerably improved.
neways’ starting position at the beginning of 2006 was greatly improved both operationally and financially and was much more homogeneous than some years ago. In 2006, neways entered
longer characterised so much by major new interventions in the organisation, but rather by the further strengthening of its positioning as a one-stop-provider. neways is increasingly becoming a market player that can help its customers throughout the whole spectrum of development, engineering, testing, manufacture and after-sales service. Important areas on which to focus in this connection are improving the cooperation among the neways operating companies and enhancing the service provided to customers. An additional focus in this phase is further reducing neways’ vulnerability to market fluctuations. the Company is being organised and where possible made more flexible so as to make profitability more resistant to a downturn in market demand.
A crucial aspect in this regard is that the operating companies cooperate more and more intensively and increasingly approach potential customers jointly. to this end, the product/market combinations of the various operating companies were more sharply defined in 2006, so that they complement one another better and competition among the operating companies is reduced. In addition, the emphasis in the business chain, both with suppliers and customers, will be on R e P o R t o F t H e B o A R d o F d I R e C t o R s
Following a number of years of volatility in the electronic Manufacturing services (eMs) market, there was an upturn in demand in 2006. neways was able to benefit strongly from this.
With the highest turnover and profit in the Company’s existence, 2006 was a top year. net turnover showed fully autonomous growth of more than 4% to € 238.6 million, while net profit more than doubled to € .2
million.
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With regard to suppliers, for example, the aim will be to have better purchasing conditions and preferred supplierships, above all with a view to criteria such as quality, flexibility and delivery reliability. As regards customers, the focus will be on better utilisation of opportunities for the provision of additional services in the framework of the one-stop-provider concept and continual improvement of the level of service. In this respect, the trend towards more and more outsourcing by oeMs and the more stringent redefinition of their core activities continue to offer a company like neways new opportunities.
Abridged Consolidated Financial Statements
In € millions 2006 2005
net turnover 238.6 207.9
Gross margin 98.6 84.3
operating results 6.7 9.0
Profit before tax 5.2 7.5
net profit .2 5.
Turnover
Gross turnover increased by 7.6% to € 258.7 million. there was a notably sharp rise of 67.5% in internal turnover. this was due to the substantial increase in the number of orders jointly executed by more than one operating company, which shows that neways is operating more and more as a one-stop-provider.
Gross turnover vs Net turnover
In € millions 2006 2005
Gross turnover 258.7 29.9
Internal turnover 20. 2.0
net turnover 238.6 207.9
Annual net turnover grew by 4.8% to € 238.6 million. this growth was of a completely
autonomous nature. there was increased demand across the whole range of activities. Because of the anti-cyclical nature of the defence sector, the growth in the number of defence orders is particularly positive. neways considers further growth in this sector to be of strategic importance in obtaining a more balanced order portfolio and thus at the same time becoming less vulnerable to the cyclical movements of the semiconductor sector.
Turnover by market segment
In € millions 2006 2005 Industrial 73 65 semiconductors 65 54 Medical 64 59 Automotive 2 0 telecom 7 5 defence 5 3 other 3 2 Gross margin
the gross margin increased by 7% in 2006 to € 98.6 million. As a percentage of turnover it rose from 40.5% to 4.3%. this increase in the added value is due to a combination of factors arising from the more active profile as a one-stop-provider. this led to a shift in the product mix to activities with a higher added value, such as development, prototyping and engineering and relatively more orders involving the combining of neways’ various disciplines. Furthermore, better use was made of purchasing benefits through closer cooperation with suppliers.
Operating expenses
the operating expenses largely relate to personnel charges, which showed an increase in absolute terms, but fell as a percentage of gross turnover from 25.% to 23.3%. one of the reasons for this is the relatively marked increase in the number of employees in low-wage countries in relation to those in Western european countries. the number of employees in eastern europe and China went up on average by 24% in 2006 to 885. of the neways workforce, 4% is now working in these regions and this figure is expected to grow further in the coming years.
the other operating expenses, consisting of such items as accommodation expenses, production expenses, selling expenses and consultancy expenses, showed a slight increase, but fell slightly as a percentage of the gross turnover from 7.2% to 6.8%.
Depreciation and amortisation
the level of depreciation and amortisation remained reasonably stable in the reporting period at € 3.8 million and related mainly to tangible fixed assets.
Operating profit and operating margin
As a consequence of the higher turnover, the improvement in the gross margin and the relatively lower personnel charges, the operating profit increased by 86% to € 6.7 million. Almost all the operating companies posted an operating profit in 2006.
the operating margin rose to 7,0%, compared with 4.3% in 2005. the sizeable improvement in the margin in the year under review is due to the reshaping of the organisation that took place in the
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strong operating leverage. With the operating margin that has been achieved, neways has for the first time met its target of a minimum of 7% per year.
Interest expenses and similar costs
Interest expenses were 3% lower than in 2005. the conversion of a convertible subordinated bond loan into shares in April of the year under review had a positive effect on interest expenses. the average debt position was also appreciably lower than in 2005. Furthermore, interest expenses include the additional consideration that was paid, over and above the nominal value, for the repurchase of all 3 million outstanding preference shares.
Taxes
the effective tax rate was 26.7% in 2006, compared with 32.7% in 2005. the effective tax rate is thus appreciably lower than the prevailing corporate income tax rate in the netherlands of 29.6%. Because of the good business performance in Germany the loss still available for offset has been revalued slightly upwards, thus giving rise to a negative effective tax rate in Germany. the profit before tax came to € 5.2 million.
Net profit and profit per share
net profit came to € .2 million, more than double the net profit for 2005. net profit per share in 2006 also increased by more than 00% to € .2 per share. As a result of the conversion of a convertible subordinated bond loan with a nominal value of € 3.0 million into shares in April, stock dividend and the exercise of options, the total number of outstanding ordinary shares rose from 8,526,456 at year-end 2005 to 9,202,5 at year-end 2006.
Dividend
It will be proposed to the General Meeting of shareholders to distribute a dividend of € 0.36 per ordinary share for the financial year 2006, to be paid in cash. the distributable dividend corresponds to 30% of the net profit for 2006.
Abridged Consolidated Balance Sheet
In € millions 2006 2005
shareholders’ equity 37,6 23,7
Guaranteed equity 43,3 35,
Balance sheet total 05,8 87,9
Shareholders’ equity, guaranteed equity and solvency
shareholders’ equity increased by 58.6% to € 37.6 million. In April a convertible bond loan with a nominal value of € 3.0 million was converted into shareholders’ equity at a conversion price of € 5.25 per share. In december a motion was approved by the extraordinary General Meeting of shareholders to repurchase and cancel all 3 million outstanding preference shares, on which 25% had been paid up, at their nominal value plus an additional consideration of € 0.4 million. In this way the transparency of neways’ financial structure has been improved.
the guaranteed equity (shareholders’ equity plus subordinated loans) increased to € 43.3 million. the solvency ratio (guaranteed equity/balance sheet total) came to 4.0% at year-end 2006 (40.0% at year-end 2005). Adjusted to take account of the deferred tax benefit and goodwill, the solvency was 39.6%, well above the minimum target of 35%.
Net debt position and interest coverage
the interest-bearing long-term liabilities and the short-term liabilities decreased in total by € 7.2 million to € 5.7 million and € 8.2 million
respectively at year-end 2006. After the deduction of cash and cash equivalents this results in a healthy net debt position of € 3.6 million (year-end 2005: € 2.0 million).
the debt/eBItdA ratio came to 0.7 and the interest coverage ratio increased to 9.9, compared with 6.7 in 2005. A ratio of .5 is regarded as the minimum.
Working capital
Working capital (inventories plus receivables minus trade creditors and other debts) showed a sharp 25% increase to € 42.6 million (year-end 2005: € 34.0 million). the inventory position and the outstanding accounts receivable went up as a result of an increase in turnover and the number of orders. Inventories in days of sales stood at 6 days at year-end 2006 (62 days at year-end 2005). the objective is to reach a rate of inventory turnover of 60 days of sales. the free stock went up slightly in 2006 to € .6 million, but fell in relation to the order-related stock. Inventories In € millions 2006 2005 Free stock .6 .5 order-related stock 34.3 29.9 semi-manufactures .9 8.0 Total 47.8 39.4
In days of sales, accounts receivable stood at 48 at year-end 2006( 50 at year-end 2005). the total provision for bad debts was € .6 million at the end of 2006 (€ .5 million at year-end 2005).
In a market in which flexibility and delivery times play a crucial role, strict control of working capital in combination with high delivery reliability is one of the most important factors in the success of a business operation. With net turnover growth of more than 4%, we have succeeded in maintaining delivery reliability at the same level as in 2005, above 90%.
Abridged Consolidated Cash Flow Statement
In € millions 2006 2005
operational cash flows 9.9 2.5
Investment cash flows -5.3 -.0
net cash flow 4.6 .5
Financial cash flows -5.7 -6.
Movements in cash and cash equivalents -. 5.4
Net cash flow
the net cash flow (net profit plus depreciation adjusted for investments and changes in provisions and working capital) was positive in 2006, totalling € 4.6 million (2005: € .5 million).
Investments and return on investments
Appreciably larger sums were invested in 2006 than in the preceding years. As well as replacement investments, there were investments for targeted expansion in test equipment and production capacity in eastern europe and China. Investments were also made in the logistical processes for the changeover to lead-free production that will be a legal requirement from mid-2006. there were no acquisitions in 2006.
total investments in tangible and intangible fixed assets amounted to € 5.3 million (2005: € 2.7 million). For the first time in years they exceeded the depreciation of € 3.8 million.
despite the increase in investments compared with 2005, the return on investments in 2006 (operating profit as a percentage of capital invested) increased to 36.8% (2005: 28.2%).
Financial cash flow and net liquidity position
the financial cash flow was € 0.4 million higher than in the previous year. the negative cash flow is mainly the consequence of repayments of long-term loans.
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o P e R A t I o n A L d e V e L o P M e n t s
Western Europe
At present, neways has operating companies in the netherlands and Germany. the operating companies each have a unique positioning within the neways Group, thus ruling out competition among them and facilitating cooperation.
the activities of the Western european operating companies are characterised by a relatively strong knowledge component and high added value. Activities range from development, prototyping, engineering and high-grade, specialised batch production of complex electronic components to systems assembly and after-sales service and maintenance.
Within the neways Group the Western european operating companies have an important customer relations and service function. Partly for this reason they are also located in close geographical proximity to customers from manufacturing industry.
Evic Electronics
evic electronics is based in echt (netherlands) and specialises in the development, assembly and testing of sophisticated industrial control electronics and provides services both to large enterprises and to small and medium-sized companies. evic electronics’ products are used in electronic industrial control systems, for instance in door management systems, building automation, gas chromatography, security systems and engine control systems.
In addition to the development and assembly of new electronic components and assemblies, evic electronics is engaged in the further development and improvement of existing electronic control systems. these activities have resulted in, among other things, more intensive customer relationships and a nomination for the MKB-Limburg-Innovation Prize 2006.
the launching of the electronic Mechanical Repair (eMR) activities in 2005 has enabled evic electronics to meet better the wishes of customers throughout the neways Group with regard to life cycle management. the expansion of these activities proceeded less rapidly in 2006 than expected. the market in which these activities were successfully undertaken by evic electronics in the past year is characterised by a high standard of technology.
evic electronics’ turnover fell in 2006 by 8%, from € 5 million in 2005 to € 3.8 million in 2006. this decrease was mainly due to lower demand in the first months of the year. demand picked up again in the second half of the year, though it was not possible to fully offset the initial decline. the number of employees at year-end 2006 was , compared with 6 in 2005.
the commercial activities undertaken for the Belgian market in 2005 led to the first modest successes last year. the number of customer contacts in Belgium was increased considerably in 2006 and provides a good basis for further expansion of the activities in this market. In 2007 the further expansion of the activities in the German market, often in close cooperation with the German sales organisation, will also be continued.
Neways Advanced Applications
neways Advanced Applications, based in son (netherlands), specialises in the development, product improvement, assembly and maintenance of PCBs, sophisticated functional modules and (sub-) systems, and high-tech cleanroom assembly. neways Advanced Applications’ products are used in such areas as X-ray and MRI equipment and in equipment for semiconductor fabrication.
the past financial year was again a good one for neways Advanced Applications. Both the medical and the semiconductor sector benefited from the economic upturn. In mid-2006 a successful start was made with cleanroom activities, involving the sophisticated assembly of highly sensitive electronic components and assemblies in completely
dust-free conditions. these activities make it possible to broaden the provision of services to existing customers in the medical sector and the semiconductor industry and to serve potential new customers in other market segments better. Various products both for existing and for new customers are now being assembled in the cleanroom. the commercial strength has been enhanced and the cooperation with other operating companies has been further extended in order to ensure optimum attention to existing customers and to give substance to the one-stop-provider concept for these customers.
turnover in 2006 came to € 8 million, an increase of .3% compared with 2005 (€ 72.8 million).
the number of employees at year-end 2006 was 323, of which 30% consisted of temporary personnel (2005: 279, of which 22% temporary). In 2007, neways Advanced Applications will focus on the further extension of its activities, expansion of the cooperation with other operating companies and further strengthening of the relations with customers and suppliers.
Neways Cable & Wire Solutions
neways Cable & Wire solutions is based in sittard (netherlands) and is engaged in the development, production and marketing of electronic cables and cable systems. this operating company’s products are used in things such as X-ray and MRI equipment, defence systems and equipment for semiconductor fabrication. the final merging of neways Cable & Wire solutions (formerly neways Heerlen) and si-Lectron took place at the beginning of 2006. this merger was completed with an official opening of the new premises.
neways Cable & Wire solutions positions itself as a full-service provider of cables and cable systems for the eMs market. neways Cable & Wire solutions operates as a competence centre for development, testing and manufacture of prototypes.
the company enters into the development process with the customer at an early stage. Prototypes are tested and further developed. Actual batch production takes place largely at Q-nova in slovakia and at styl, a partner firm of neways, in the Czech Republic.
In 2006, neways Cable & Wire solutions was affected by price pressure in the market. turnover rose nevertheless by 32.2% to € 24.2 million. As well as achieving increased turnover with existing customers, the company also acquired various new customers. With the start of the Hägglunds project, for which neways Cable & Wire solutions supplies the cable systems, demand from the defence sector gave a significant boost to growth.
At the end of 2006, neways Cable & Wire solutions had 04 employees, an increase of 50.7%
compared with year-end 2005.
With a view to being able to offer the desired flexibility and growth of its activities, neways Cable & Wire solutions carried out several
offer customers flexibility continues to be of great importance in 2007.
Neways Electronics Production
neways electronics Production of Kassel (Germany) is engaged in the (re-)engineering, testing and assembly of advanced PCBs and systems assembly for applications in sectors such as the industrial and the medical sector. Its products are used in electronics for measurement and control systems. turnover in 2006 showed a 37.0% increase to € 24.8 million. Growth was achieved mainly as a result of increased demand from the medical market. the number of employees went up by 3.3% to 47 at year-end 2006.
Cooperation with the various neways operating companies has enhanced neways electronics Production’s strength. such cooperation proved its success in 2006. In 2007 the focus will again be on improving efficiency by means of these working relationships and on being able to offer customers the one-stop-provider concept.
A start will be made this year on the construction of new premises in Kassel, which should make the production processes more efficient.
Neways Industrial Systems
neways Industrial systems, based in son
(netherlands), specialises in developing, supplying and testing complete electronic modules and systems for the industrial sector. the main areas of knowledge and expertise are the development of electronic systems and test protocols, engineering and systems assembly, with the ability to take on the complete project management.
neways Industrial systems’ products are used in high-tech microscopes, in equipment for semiconductor fabrication and in high-tech control electronics.
the industrial sector on which neways Industrial systems focuses showed growth in 2006. Partly because of this, turnover grew by 4.6% last year to € 23.6 million. the workforce increased by 2.8% to 97 employees at year-end 2006.
neways Industrial systems became stronger on several fronts last year. For instance, the customer base was broadened with the winning of orders
The value of the result lies in the achievement of it.
considerable attention was devoted to adopting a higher profile as a builder of complete electronic systems. on the commercial side, intensive talks were held with existing customers and potential customers on the progress of, and possibilities for, cooperation in the coming years, with discussion of such matters as the developments in the customer’s business, the strategy as regards outsourcing and neways’ role and development in this.
Project management has now developed into a fully-fledged core activity of neways Industrial systems and as such has also proved itself in the market. Project management comprises both complete projects involving development, prototyping and engineering up to and including first-off batches, and also broader one-stop-provider projects. several operating companies within the neways Group, each with its own specific competency, are involved in the construction of complete electronic systems, a good example being the project-based cooperation with other operating companies in supplying the swedish company Hägglunds with electronic control systems for the netherlands Army’s new Infantry Fighting Vehicle. the defence sector’s interest in neways’ activities has shown a marked increase as a result of this substantial project.
the further development of the activities in the field of systems assembly and project management will again be the defining task of the year 2007. Neways Leeuwarden
neways Leeuwarden is engaged in the development, (re-)engineering and electronics assembly of PCBs and in systems assembly. Another activity is service and repair. neways Leeuwarden’s products are used in, for example, devices for telecom applications and military control systems.
the upward trend continued in 2006. turnover rose by 29.3% to € 9.0 million. this growth was driven mainly by increased demand from the telecom sector and by the defence order from Hägglunds for the delivery of electronic control systems for the netherlands Army’s new Infantry Fighting Vehicle. neways Leeuwarden had 06 employees at year-end 2006, of whom 8 were working on a temporary basis. At year-end 2005, neways Leeuwarden employed 94 people.
Growth is expected to continue in 2007. the main focus at neways Leeuwarden will be on further strengthening the internal organisation and increasing efficiency and quality. A closer working relationship will be created with other operating companies for specific projects for some large customers, because of the scale of these projects and the specialisation they require.
Relocation to newly-built business premises at a new business park in Leeuwarden is expected to take place in december 2007. the present premises have to make way for urban development. the new building will create optimum conditions for production and logistics and also an efficient and prestigious office environment.
Neways Micro Electronics
neways Micro electronics (formerly Hymec), based in sittard (netherlands), specialises in microelectronics. this operating company is engaged in the development of hybrid and microelectronic modules based on thick-film technology. Batch production is outsourced to Ximec, a Chinese subsidiary of neways Micro electronics. neways Micro electronics’ products have medical applications and are used in semiconductor equipment and in various sensor technologies.
the past financial year was again an excellent one for neways Micro electronics. In particular, neways Micro electronics strengthened its position in the industrial market by winning a number of multi-year orders from new large customers.
neways Micro electronics’ turnover increased by 5.3% in 2006 to eUR 2.8 million.
the number of employees went up to 80 at year-end 2006, an increase of 4.3% compared with year-end 2005.
there was higher demand from almost all customers. thanks to the excellent working
relationship with other operating companies, neways Micro electronics was able to concentrate even more on its own core activities, notably development and manufacture based on thick-film technology and the placement of microchips on PCBs and hybrids. the logistical and production processes were further improved in 2006. delivery reliability was increased and delivery times were drastically reduced.
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knowledge improved, resulting in a lower level of costs.
together with neways technologies, the operating company last year designed new test systems in order to broaden the business for existing customers. together with neways Advanced
Applications, various new customers were acquired, thus creating the basis for further growth in the coming years. neways Micro electronics will continue to meet continually changing demand from its customers in 2007. demand is becoming increasingly complex in terms of functionality, breadth of technology and logistical flexibility and transparency. neways Micro electronics will continue to make changes to its organisation in 2007 in order to be able to serve the market in optimum fashion.
Neways Neunkirchen
neways neunkirchen of Germany is engaged in the engineering, prototyping and assembly of PCBs, principally for a number of reputable German oeMs – large multinationals operating in sectors such as the automotive and the industrial sector. Its products are used for instance in the automobile sector for sensors for safety applications and control and drive technologies.
As a result of extra turnover generated by existing customers and also additional orders placed by some new customers in the industrial sector, neways neunkirchen increased its turnover in 2006 by 22.5% to € 22.9 million. the number of employees at year-end 2006 was up 3.2% to 0. Cooperation with other neways operating companies led to an improvement in logistical processes and the transfer of some of the sMd production to Ripa. In 2006 various investments were made in new technologies and in broadening the service offering. this involved modifying an sMd production line for lead-free production, as well as new technologies for automatic moulding and ultrasound welding, making it possible to work faster and more accurately and hence improving quality and delivery times. Good progress was made in this regard last year. neways neunkirchen will seek further growth in 2007 by widening its customer base and further extending cooperation with other neways operating companies in general and with Ripa in particular. the policy of improving the internal logistical and production processes will be consistently pursued.
Neways Technologies
At the beginning of 2006 the development department of neways Advanced Applications and the operating company Hoyte merged to form neways technologies. neways technologies, which is based in son (netherlands), specialises in the complete development of advanced electronic components and assemblies. Its products are used in such things as autogas control systems, door and archive systems, semiconductor equipment and electron microscopes.
the first benefits of the successful integration were reaped in the past year. With neways technologies, neways is more clearly positioned in the market as a developer of high-grade electronic components and assemblies. specialist knowledge and
expertise in the development field enables neways technologies to make a definite contribution to neways’ one-stop-provider concept and to provide customers with high added value.
In the commercial field neways technologies works closely together with the other neways operating companies. Furthermore, various orders were obtained last year in both the German and the dutch market as a result of its own order acquisition efforts. new orders and follow-up orders were executed for a number of customers in the industrial sector, in particular. there was also increased demand in other market segments. turnover increased last year by 4.3% to € 2.4 million. the number of employees at year-end 2006 was 27, which was a 3.6% decrease.
the present components management system forms a good basis for the neways Group and further extends the services and value engineering projects of neways technologies. Further growth of business, often in cooperation with other neways operating companies, is expected in 2007. Ripa
Ripa, based in son (netherlands), specialises in solutions in electronics assembly. Following the reorganisation in the second half of 2005, the commercial focus was further sharpened at the beginning of 2006. Ripa’s products are used in various control systems, for instance for filling stations, in semiconductor equipment and in the automotive industry. In 2006 a replacement investment was made in a number of sMd production lines. these sMd lines have a shorter
The most important thing in
communication is to hear
what isn’t being said.
6
changeover time and a higher production volume. In this way Ripa has strengthened its position as a european production partner for its own customers and also for other neways operating companies. In view of the clear trend for customers to have development and production handled by a single company, the cooperation with neways technologies was stepped up considerably last year.
Riga’s turnover rose last year by 5% to € 26.9 million. the number of employees at year-end 2006 was 54, an increase of 9.2%.
In 2007, Ripa will focus on further intensifying cooperation within the neways Group and in
particular with neways technologies. In addition, the organisation will be made more flexible in order to be able to respond better to the needs of the other neways operating companies where higher volumes of PCBs are concerned.
Eastern Europe and Asia
neways’ operating companies in slovakia and China specialise in batch production of electronic components which are been further developed and are sufficiently stable to be suitable for production in low-wage countries.
the operating companies produce mainly on behalf of the neways operating companies in Western europe and are experiencing strong growth. As a result, neways is able to achieve significant cost benefits. the number of employees (in Ftes) in eastern europe and China is now 94, which is approximately 4% of the total neways workforce. this ratio has remained constant in relation to year-end 2005.
Neways Wuxi
neways Wuxi, based in Wuxi (China) specialises in electronics assembly of PCBs and systems. this operating company often works on behalf of the neways companies in Western europe. It also produces for the local Chinese market. Local sales to Western european customers with sites in China showed particularly strong growth last year.
driven by increased demand, the strong expansion that neways Wuxi displayed in the past few years was continued in 2006. this resulted in an increase in the number of employees from 203 to 278 at the
end of 2006. turnover more than doubled, from € .0 million in 2005 to € 2.2 million in 2006. neways Wuxi invested last year in the development and quality of various technologies such as lead-free soldering and the implementation of test systems. It also standardised certain procedures and work processes. As a consequence, fully developed electronic components and assemblies can be transferred more efficiently from Western european operating companies to China for batch production. Further integration of the logistical processes will be realised in 2007.
Furthermore, in view of the strong growth,
considerable attention will again be devoted to the development of management capabilities and the creation of management styles that match neways’ method of work and vision.
Q-Nova
Q-nova, based in nová dubnica, slovakia,
specialises in the electronics assembly of PCBs and also in the production of cables and cable systems. It produces mainly for the neways operating
companies in the netherlands and Germany. Q-nova’s turnover increased last year by 33.3% to € 5.2 million.
thanks to greater demand from the neways operating companies in Western europe and the broader customer base, there was a sharp increase in the volume of production of both PCBs and cables last year. this more than offset the somewhat lower demand from Q-nova’s direct customers.
Various expansion investments were made in 2006 in order to optimise the production capacity and to broaden services. For instance, a varnish facility was installed and Q-nova now has at its disposal a lead-free sMd production line, alongside the already existing sMd production lines.
the number of employees went up by 9.2% to 428. the strong growth in industry in slovakia and the related increase in the value of the slovak koruna have resulted in a relative increase in personnel costs and labour market shortages. However, Q-nova has more than sufficient expertise and experience and will again focus in 2007 on consolidating the cooperation with other neways operating companies, for instance by exchanging personnel for training programmes. the focus in
2007 will also be on further improving the internal logistical processes.
Ximec
Ximec, based in Wuxi (China), mainly engages in batch production of the hybrids and microelectronics designed by neways Micro electronics. these modules are intended for the Western european customers of neways. In addition, Ximec also develops and produces for the local Chinese hybrid market. In January 2006, Ximec relocated to new premises at a high-tech business park.
As well as the growing production for the european market, local production remained stable last year because a number of non-hybrid projects were transferred to neways Wuxi.
the number of people employed by Ximec increased last year from 93 at year-end 2005 to 208 at the end of 2006. In 2007 it is expected that there will be further growth of production activities for Western european customers. It is also the aim to further expand activities for the local Chinese hybrid market. turnover last year remained at the same level as in 2005, at € .0 million.
How many things are looked upon as quite impossible
until they have been actually effected?
o R G A n I s A t I o n , M A n A G e M e n t A n d e M P L o y e e s
Organisation
neways has an integrated organisational structure with strong decentralised powers and bottom-line responsibility for each operating company. each operating company has one or more specific product/market combinations with a clearly demarcated field of operations within the eMs market. the positioning of each operating company was redefined in 2006 in such a way that the activities of the operating companies overlap less and are better matched to one another. the aim here is to facilitate the cooperation among the various operating companies and hence reinforce neways’ position as a one-stop-provider.
neways has a relatively small and efficient holding company that acts as the pivot of the whole neways organisation. It takes the initiative with regard to matters such as positioning, strategy, organisation, financing, investments, appointments and information technology. However, it is not only a strategic and financial holding company, but also a managerial holding company with a high degree of involvement in things such as the pooling of resources and exchange of knowledge among the operating companies and the adoption of a joint approach to suppliers and customers. For instance, under the responsibility of the holding company the purchasing policy has become increasingly centralised in the past few years and the holding company has an important role in the management of the larger accounts.
Employees
neways expects its employees to meet high standards. the quality of the employee determines the end result. In a market and an organisation that are changing very much neways requires of its employees at all levels of the organisation that they are capable of adapting and responding to changes. this involves such characteristics as thinking in a more customer-orientated way, sharing knowledge properly and opting for smart solutions. training programmes, opportunities for career development and promotion and an appropriate remuneration policy are important means of achieving this. the structure of the neways organisation and the employee mix have altered in recent years because of the changes in market demand. the complexity of customers’ problems is increasing and so the number of neways employees with higher education
longer restricted to a specific discipline, such as PCB assembly. With the increase in outsourcing by large oeMs, neways is being asked more and more to take responsibility for the design, the prototyping and the testing or the whole life cycle management of particular electronic components and systems. the number of employees with higher education is therefore expected to increase further in the coming years.
At the same time, neways wants to operate as competitively as possible in the eMs market. As with other companies in manufacturing, parts of the production operations are being transferred more and more to low-wage countries. neways has been doing this for more than 0 years now, but the last few years have seen a marked expansion in the activities in eastern europe and Asia. We now have more than 900 employees in slovakia and China together, which represents 4% of the total neways workforce, and this figure is expected to further increase in the future.
As regards the allocation of production capacity, neways seeks an optimum distribution among the sites in Western europe, on the one hand, and eastern europe and China, on the other. this means a balance between () sufficient capacity in Western europe for more complex components and systems that are produced in close proximity and in close cooperation with the customers, and (2) less complex, fully developed and stable electronic components and systems that can be batch-produced by the operating companies in eastern europe and China.
20
the average level of absenteeism in 2006 was, at 6%, slightly higher than in 2005 (5.5%).
A lot of attention is devoted to the prevention of absenteeism. neways’ policy is to pursue as far as possible an integrated approach to absenteeism, which means not only focusing on work and working conditions, but also trying to have an insight into, and influencing, aspects of personal life and lifestyles that might affect absenteeism. neways expects the employees to assist in this regard, as the prevention of absenteeism is a joint responsibility of employer and employee.
If absenteeism due to sickness nevertheless occurs, close attention is paid to absent employees, who are not left to slip into anonymity by the management, the P&o department and the occupational health (Arbo) department. Good and frequent consultation between the aforementioned parties and the employee concerned ensures that sick leave is kept as short as possible.
Trade unions and Works Council
Consultation took place with the trade unions at set times in the past year. Among the matters discussed was the implementation of job evaluation, which was successfully introduced in two operating companies in 2005/2006.
In the netherlands almost all the units have their own Works Council. As well as employee involvement at plant level, there is also an employee involvement structure at group level (within the netherlands) in the form of the “Centraal overleg neways” (Con), a body on which the chairmen of the various Works Councils are represented. the Con meets a number of times per year with the Board of directors. once a year the chairman of the supervisory Board also attends this meeting.
Employees at year-end 2006 payroll 2006 hired 2005 payroll 2005 hired
netherlands 847 83 80 95
Germany 73 88 78 22
eastern europe 428 -- 359
--China 486 -- 395
neways is conscious of its responsibility with regard to safety and the environment and will not only comply with the relevant statutory regulations, but will also respond as effectively as possible with its own initiatives.
Safety
strict safety regulations apply to virtually all neways activities, such as the development of microelectronics, the engineering of electronic components and the placement of components on PCBs. they relate not only to fire prevention, but also to protection against possible injury, for instance by means of rules on protective clothing. the function of the clothing regulations is twofold: to keep the cleanrooms in which testing and production takes place free of dust and to guarantee and optimise the quality of the products that are delivered.
since 2005 all the neways operating companies in the netherlands have been employing a “prevention officer”. this is a legislative initiative that ties in with neways’ focus on prevention. In the course of 2006 an evaluation took place with the Prevention team (consisting of the prevention officers of the various neways enterprises). this first evaluation shows that organisations have to become accustomed to the position of the prevention officer, who has an important role in the preventive improvement of working conditions, the fitting-out of the workplace and the prevention of unsafe situations.
A large part of the responsibility for a safe working environment lies, of course, with the employees themselves. the prevention of accidents, through such things as keeping workplaces fitted out in an appropriate way, is a responsibility that is incumbent on every employee.
Environment
For environmental reasons it will no longer be permissible to produce electronics containing lead in certain sectors of the eMs market in the european Union with effect from July 2006. neways anticipated this at an early stage and the majority of its operating companies have now switched completely to lead-free production. neways operating companies that deliver to sectors which have been granted a delay, such as the semiconductor industry, are ready for the changeover to lead-free production.
In this connection, neways has developed in
collaboration with the delft-based company Mat-tech a process for the changeover to lead-free production that was deployed in several businesses in 2005 and 2006. this innovative process, known as Green solutions, comprises the screening, conversion and testing of the production process and devotes great attention to the quality and reliability of the product. Last year various customers of neways made use of the knowledge and expertise available at neways in this field and outsourced the issue of lead-free production to neways.
neways regards this approach to production processes as an important step and a professional contribution to achieving more environmentally-conscious production.
22
M A R K e t t R e n d s A n d C o M P e t I t I V e n e s s neways operates as a niche player in the electronic Manufacturing services (eMs) market, a dynamic market with cyclical segments characterised by product-specific demand that is constantly changing and becoming more and more complex.
Major players in this market are the multinational original equipment Manufacturers (oeMs), such as Philips and AsML. the acute competition and the ongoing technological developments mean that oeMs face increasing time pressure in launching new and fully developed end products on the market.
Hence there is a growing need for technological partners who at an early stage can be pro-active in meeting the logistical and production requirements and wishes of the oeMs. on top of this, oeMs are defining their core activities ever more closely, with the result that more processes and sub-processes are being outsourced.
this means that, on the one hand, neways has to be a company that operates in close proximity to the customer with sites in Western europe and, on the other hand, it has to offer sufficient flexibility with the production capacity of its sites in eastern europe and Asia.
With the specialist know-how and economies of scale that it has built up, neways is able to respond to these trends. At the same time it can meet the increasing demand for more complete solutions to the problems facing oeMs.
Innovative capability, quality, flexibility, delivery reliability and level of service are aspects in which neways successfully distinguishes itself in a changing market.
Market trends
• speeding-up of policy of outsourcing by oeMs, both in assembly and 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 handle 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.
• Mobility of the individual and participation in labour processes are making outsourcing more and more virtual.
Threats
• A low exchange rate of the dollar;
• 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, with more than just production capacity.
Competitive advantages
• ever better utilisation of possibilities for offering life cycle management through closer cooperation within the group;
• strong focus on the industrial and the professional market;
• extensive experience with internationally operating high-tech oeMs;
• Competence centres and production capacity in countries like Germany, slovakia and China; • An experienced development/engineering
department that has the most up-to-date development resources at its disposal;
• solid, stock market-listed company with an open policy and a clear 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.
• support for both lead-free and lead-containing soldering processes for market sectors.
Competitive disadvantages (to be overcome)
• the switchover from product- and industry-oriented mentality to a service mentality that is more suited to these times has not yet been achieved in all layers of the organisation; • opting to broaden activities (life cycle
management) entails extra risks that have to be managed properly in areas like purchasing and development.
Boldness has genius, power and
magic in it.
Johan Wolfgang von Goethe, 749-832, German poet and novelist
o U t L o o K the priority for neways in the coming years is to
further strengthen its positioning as a one-stop-provider. to this end the activities with a greater knowledge component and higher added value, such as development and engineering, will be given greater emphasis by the Company.
At the same time, the focus will be on reducing neways’ vulnerability to market fluctuations. the Company will be organised in such a way that margins are maintained better at times when there is a decline in market demand. Further intensification of cooperation and communication are key words in this connection, both among the neways operating companies and with the suppliers and customers in the business chain. enhancing the innovative capability and further improving delivery reliability should also make a contribution to this.
In the coming years neways’ strategy will remain focused on autonomous growth supplemented by appropriate acquisitions and a further increase in added value and profitability. In this connection the outsourcing of production activities to the neways operating companies in eastern europe and China will be further extended in the years ahead. In the meantime neways has also started developing a supplier portfolio, on the basis of which the potential for buying more cheaply in China can be better utilised.
expectations for the first half of 2007 are good. the order portfolio at year-end 2006, at eUR 65.9 million, was 27% higher than at the end of 2005. However, developments in the eMs market present an unclear picture and so it is too early to say anything about profit expectations for 2007 as a whole.
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evic electronics evic service & Repair neways Micro electronics neways Advanced Applications neways Cable & Wire solutions neways Industrial systems
neways technologies neways electronics Production
neways Leeuwarden neways neunkirchen neways Wuxi Q-nova Ripa Ximec styl (partner firm)
PCB production/ assembly development engineering/ Prototyping Cable production/ assembly Micro-electronics development/ production systems assembly Life Cycle Management/ eMR
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I n F o R M A t I o n o n M A n A G e M e n t o F t H e C o M P A n yneways has an organisational structure with strong decentralised powers and bottom-line responsibility for each operating company. the holding company acts as the pivot of the whole neways organisation. It is not only a strategic and financial holding company, but also a managerial holding company with a high degree of involvement in things such as the pooling of resources and exchange of knowledge among the operating companies and the adoption of a joint approach to suppliers and customers.
All the operating companies have their own specific knowledge and expertise and have, within the eMs market, a clearly demarcated field of operations that reduces competition among one another and facilitates cooperation.
o R G A n I s A t I o n A L s t R U C t U R e
s U P e R V I s o R y d I R e C t o R s , d I R e C t o R s A n d M A n A G e M e n t
Situation as at 31 December 2006
supervisory Board
dick Boers (947) Chairman
theo van deursen (946) Vice-chairman
Wim van der Leegte (947)
Dick Boers First appointment 2002 Present appointment until 2010
nationality: dutch
Present position: Partner/former chairman of the board of Govers Accountants/Consultants Additional positions: supervisory director of Wessem Holding B.V.
Member of supervisory Board of GGze - eindhoven Member of board of stichting eMA Beheer of eindhoven
Theo van Deursen First appointment 2000 Present appointment until 2008
nationality: dutch
Present position: executive Vice President / Member of the Board of Management Royal Philips electronics nV
Chief executive officer Philips Lighting B.V.
Wim van der Leegte First appointment 1997 Present appointment until 2009
nationality: dutch
Present position: Managing director of VdL Groep B.V.
Additional positions: Member of board of stichting eMA Beheer of eindhoven Member of supervisory Board of PsV Voetbal n.V. stichting Prioriteit
dick Boers (947) Chairman
Wim van der Leegte (947) Board of directors
Vincent de Bok (956) Ceo/CFo
Huub van der Vrande (955) Ceo/Coo
the members of the Board of directors do not have additional positions. Group controller
Peter Wisse (959)
Members of neways management team
Lothar Auerswald (953) neways electronics Production - Kassel Adrie van Bragt (965) neways Advanced Applications - son
Jos Curvers (964) director Human Resources
Jean daenen (945) evic electronics - evic service & Repair - echt Martin Fiddelaers (948) Q-nova - nová dubnica (slovakia)
Alois Fuchs (950) neways neunkirchen
nick Klein (958) Corporate director strategy & Business development Jack Kromhof (95) neways Cable & Wire solutions - sittard
Johan Lecoutere (958) neways Micro electronics - sittard Frans smulders (954) director Foreign operations
Geert Valckx (963) Ripa - son
Peter Visser (950) neways Leeuwarden
28
s t R A t e G y A n d o B J e C t I V e s As a one-stop-provider of customer-specific
industrial and professional electronic components, assemblies and (sub-) systems, neways focuses on niche markets in electronic Manufacturing services (eMs) which are characterised by specialist
small and medium batches with a relatively large knowledge component and high added value.
Added value
the eMs market is an extremely dynamic market in which the complexity of the demand from the large original equipment Manufacturers (oeMs) in terms of innovation, technology, quality, delivery reliability and level of service is increasing. oeMs are concentrating more and more on their core activities, which means that there is a continual redefinition of those core activities and they are outsourcing more and more activities to specialist companies like neways.
Whereas in the past this often involved the outsourcing of batch production orders, such as PCB assembly, customers are nowadays asking neways to act as more than a tactical or strategic partner and to be much more closely involved with the whole life cycle of a specific electronic component or system. this means that, as well as production, innovative capability is required more and more, with neways being asked to take responsibility for (part of) the development, engineering and testing, and thus the complete process management.
three phases can be distinguished in the innovation process, namely the idea phase, the concept phase and the time-to-market phase. some customers largely execute the first and second phases themselves. other customers concentrate solely on the framework of the product design. In these phases neways can advise and provide added value on various fronts. For example, it can advise on the raw materials and components to be used, the design of the layout, verifying makeability and testability, the production of prototypes and advice on reducing production costs per unit or per batch. neways’ role has changed, therefore, and the Company is increasingly growing from a pure supplier to a tactical and strategic partner for its customers, developing electronics and building complete electronic systems for them and together with them and thus being able to deliver more added value. In this role neways increasingly
seeks to take responsibility for the entire project management from development through batch production and further development of components, assemblies and complete systems.
Competitiveness
to improve competitiveness, increasing use is being made of the production and assembly facilities of our own operating companies in low-wage countries. neways aims for a balanced mix of production capacity, in Western europe on the one hand and in eastern europe and Asia on the other hand, which enables the Company to meet its customers’ needs in optimum fashion, irrespective of the complexity of the product. that means that batches of more complex and knowledge-intensive electronic components and systems can be developed and produced close to, and in close cooperation with, the customers and that fully developed, stable and less complex batch production can be contracted out to slovakia and China. As a rule, the operating companies in the low-wage countries produce on behalf of the neways operating companies in Western europe, though neways is also working more and more with local customers and local suppliers in those countries.
At the same time, things like strict cost control, management of working capital and the improvement of purchasing, logistical and production processes are continually monitored in order to achieve further improvements in efficiency.
Employees
the quality of employees and management plays a crucial role in the fulfilment of neways’ strategy. that is why employees are expected to meet high standards. they are the ones who have to give substance to the strategy and have to determine and execute policy. the ongoing improvement of the internal working relationships and mutual respect among all levels of the organisation are essential in order to operate as a homogeneous, integrated group and more and more as a specialist one-stop-provider in the eMs market.
However beautiful the strategy,
you should occasionally look at the results.
30
neways’ strategy also requires employees to intensify relations in the business chain with suppliers and customers. the closer the working relationship, the better the information and the sooner and the more often neways will be involved in new initiatives by the customer. A further advantage is that, on this basis, processes in the business chain can be better managed, ultimately resulting in better service for the customer. In times when the complexity of market demand is increasing in terms of technology, logistics and level of service, the gathering and prompt exchange of information, both internally and in the business chain, becomes increasingly important. At that time, real added value can be provided.
the management has a crucial role to play here. Managers are appraised on the basis of, and are accountable for, the results they achieve, their flexibility, their customer orientation and their ability to cooperate, to transfer knowledge and to solve problems jointly. In the dynamic market in which neways operates, these are essential attributes for managers. selection, recruitment and remuneration policy is geared to this. everything is done to create the framework for talented employees to advance professionally within the Company.
Growth
neways concentrates on those activities that offer the best possibilities for growth and the addition of value. At the same time it seeks ways of reducing its vulnerability to market fluctuations in the eMs market. on that basis, neways makes conscious choices to expand specific disciplines and to focus on particular market segments. this policy is pursued in part autonomously and in part via targeted acquisitions.
neways is a one-stop-provider, which means that customers can be offered a total package. In order to be able to assess this added value and customer satisfaction, the neways management directs the organisation on the basis of qualitative and partly quantitative performance indicators which also form the basis for neways’ potential profit growth. they are, respectively:
• Purchase and sales price management • Product quality and delivery reliability • Level of service
• Innovation management
neways’ principal financial objective is an average annual operating margin of at least 7%.
of the net profit, approximately 30% is distributed as dividend, on the assumption of a solid financial position, including a solvency rate of at least 35%.
In the past few years this annual report has devoted considerable attention to the dutch Corporate Governance Code of the tabaksblat Committee (the Code). Good corporate governance is important to neways. the Company is committed to compliance with the Code and the central aspects of
transparency and shareholder involvement. A detailed review of neways’ corporate governance policy, including the relevant regulations and reports, can be found on the Company’s website. the corporate governance policy is periodically evaluated in all its points and where necessary is modified.
Non-applications of the Dutch Corporate Governance Code
neways applies almost all the provisions of the Code. the main non-applications of the best practice provisions of the Code are:
• Members of the Board of directors are appointed for an indefinite term. Appointment for a fixed term as prescribed by the Code implies a risk for the implementation of the Company’s policy, which is of a long-term nature. (Best practice II..). Moreover, contractual arrangements entered into with members of the Board of
directors before the coming into force of the Code are maintained by neways.
• Because of the scale of the Company and the related size of the supervisory Board, no specific committees have been established within the supervisory Board. (Best practice II.5.)
• the Company has an open culture that makes it possible to report possible irregularities without jeopardising the legal position of the person concerned. there is therefore no whistleblowers charter. (Best practice II..6)
• Provision is not made by neways to follow presentations to analysts or investors via webcasting. (Best practice provision IV.3.) • neways does not have written regulations
governing ownership of shares and transactions in securities in other listed companies by board members and supervisory directors, as this is regarded as the personal responsibility of the members of the Board of directors and the members of the supervisory Board. (Best practice II.2.6, III.7.3)
Repurchase of preference shares
In line with the recommendations of the Corporate Governance Code, neways proposed to the extraordinary General Meeting of shareholders in december 2006 to repurchase and cancel all 3 million outstanding vote-carrying financing preference shares at their nominal value of € 0.50 per share plus an additional consideration of € 40,000. this proposal was adopted by the extraordinary General Meeting of shareholders on 20 december 2006.
these preference shares, on which 25% had been paid up, were held by Mr G.H. Meulensteen, incorporator and former chairman of the Board of directors of neways. the transparency of neways’ financial structure has hereby been improved. this brought the number of vote-carrying outstanding shares at year-end 2006 to 9,202,25.
Protective measures
neways is a company that is subject to the two-tier rules (structuurvennootschap), but does not have an administratiekantoor (“administration office”) and does not therefore split the legal and beneficial ownership of shares.
neways has a “stichting Prioriteit” which holds 0 priority shares and, under the articles of
association, has the right of approval of resolutions relating to the following matters:
• the issuance of shares
• the exclusion of the pre-emption right upon the issuance of ordinary shares
• the acquisition by the Company of shares in its own share capital
• the cancellation of shares
• the distribution of profits and the alteration of the articles of association.
Resolutions of the stichting Prior
