Financial Review

IFRS

We report in accordance with the International Financial Reporting Standards that have been accepted and declared applicable by the European Union (EU IFRS). In 2008, the IASB proposed a large number of changes that will apply to financial years starting on or after 1 January 2009. A number of changes are allowed to be applied earlier, but Batenburg Beheer N.V. has not made use of this option. Changes in accounting standards and interpretations have therefore not had any significant impact on the 2008 annual figures of Batenburg Beheer N.V. or on their presentation.

Turnover

Revenue for 2008 amounted to EUR 156.0 million, which is 6% lower than for 2007 (EUR 165.6 million). Growth in relation to continuing operations from 2007 came to more than 8%. Of the total turnover, 96% was achieved in the Netherlands (EUR 149.3 million) and 4% outside the Netherlands (EUR 6.7 million), most of it within the European Union. The share of installation engineering in the total turnover was approximately two-thirds and that of technical trading approximately one-third.

Staff costs

Average costs per employee rose by 4.6% in 2008. This includes the CAO (Collective Bargaining Agreement) adjustment of 3.5% and two nonrecurring payments. The rise in youth wages, too, was relatively steeper in 2008. The number of employees remained virtually the same as in 2007. As a percentage of turnover, staff costs increased from 27% to 30%.

Other operating expenses

These include accommodation, distribution and travel and accommodation expenses, administrative and general overheads, and other staff costs. As in 2007, these expenses amounted to 11% of turnover.

Depreciation

The total depreciation charge increased from EUR 1.5 million in 2007 to EUR 2.0 million in 2008. The increase was due to higher capital expenditure on ERP systems, office equipment and computers, and machines used in various workshops at the subsidiary companies.

Operating income

Operating income for 2008 amounted to EUR 7.3 million, EUR 0.6 million down on 2007 (EUR 7.9 million). Compared to the continuing operations from 2007, operating income was up by EUR 0.5 million. Operating income for 2008 includes a small book profit on the sale of the activities of Hoogendoorn Projects. Operating income for 2007 included various nonrecurring items, whose net effect was virtually zero.

Financial income

At EUR 0.1 million, interest income was less than in 2007 (EUR 0.2 million). The average balance of cash and cash equivalents was lower than in 2007. This was attributable above all to the less than buoyant conditions in the installation sector in the first half of 2008, and a poorer work-in-progress financing position. It took until the latter quarter of 2008 for cash and cash equivalents to be restored to a position comparable to that at the end of 2007.

Corporate income tax

The actual tax burden was slightly greater than the year before. The small book profit on the sale of the activities of Hoogendoorn Projects is taxable because it was an asset transaction.

Net income and earnings per share

Net income came to EUR 6.0 million, or 9% lower than in 2007 (EUR 6.6 million). Net income for 2008 is, however, EUR 0.5 million higher than the net income on the continuing operations from 2007. Earnings per share came to EUR 2.50 (2007: EUR 2.75, continuing operations EUR 2.30). Earnings per share for 2007 have been restated to take account of the share split in 2008. The net return on turnover was 3.9% (2007: 4.0%).

Dividend

It is proposed to keep the dividend unchanged at EUR 1.20 per ordinary share for the year under review. This makes for a payout of 48% of net income (2007: 44%) and a dividend yield of 6.3% on the closing price of the Batenburg Beheer N.V. shares as at 31 December 2008. Pursuant to article 33 of the Articles of Association, 5% or EUR 0.12 per share is also being distributed as dividend on the priority shares. Provided the General Meeting of Shareholders adopts the financial statements and approves the dividend proposal, the dividend of EUR 1.20 per ordinary share will be made payable on 7 May 2009. This means that an amount of EUR 2.9 million will be distributed and an amount of EUR 3.1 million will be added to the other reserves.

Equity

Until the proposed dividend has been approved by the General Meeting of Shareholders it will be included in the unappropriated result forming part of equity. At 2008 year-end, solvency thus amounted to 61%. In a balance sheet adjusted for capitalised goodwill, solvency would amount to 54%.

Working capital and capital invested

Total assets at 2008 year-end were virtually the same as at 2007 year-end, namely EUR 75.2 million. Net working capital was up EUR 3 million and amounted to EUR 22.2 million at 2008 year-end. The increase is due mainly to a lower balance of accounts payable. Work in progress at 2008 year-end amounted to EUR 35.2 million as against EUR 29.9 million at 2007 year-end. This is an increase of 17.5%. Capital invested rose in 2008 from EUR 44.4 million to EUR 47.5 million. The net return on average capital invested came to 13.1% (2007: 15.3%).

Cash flow, financing and capital expenditure

At EUR 8.0 million, cash flow (net income plus depreciation) was virtually the same as a year earlier (2007: EUR 8.2 million). Cash flow from operating activities amounted to EUR 5.1 million (2007: EUR 5.7 million). Capital expenditure in 2008 was restrained. An amount of EUR 1.9 million was invested in property, plant and equipment, with the largest amount going to machines and ERP systems. After allowing for capital expenditure and financing activities, (mainly dividend distribution of EUR 2.9 million) cash and cash equivalents increased by EUR 0.5 million in 2008 compared to the end of 2007.