associated weavers international n.v. report...associated weavers international n.v. registered...

Associated Weavers International N.V.

Registered Office:Industriepark ‘Klein Frankrijk’ 1, B-9600 Ronse, BelgiumTel.: +32 (0)55 23 02 11Fax: +32 (0)55 21 55 51Website: www.associatedweavers.net

BTW: BE 426 487 026H.R. Oudenaarde: 28 923

annualreportof the 2004 financial year

BalsanNeuvy-St-Sepulchre – France

2 / a n n u a l r e p o r t 2 0 0 4

I N T E R N A T I O N A L N.V.

PradoKuurne – Belgium

Associated WeaversRonse – Belgium

BalsanArthon – France

Associated WeaversLiberec – Czech Republic


3 / a n n u a l r e p o r t 2 0 0 4

Message of the Chairman and Managing Director 5

Strategic Profile 6

Structure of the AWI Group 8

Consolidated key figures 9

Corporate Governance and Management 12

Report of the Board of Directors to the

Annual General Meeting of 4 April 2005 18

Comments on results by division 26

Environment 34

Human Resources 35

The AWI share 37

Financial Report 41

General information on the Company 68

index

employees who have had a hand in achieving

this.

But 2004 was far from perfect and the future still

holds many challenges. For the Weaving Division

2004 was a year to forget as fast as possible, or

better: from which to draw as many lessons as

possible to do better in the future. But in the

same year we laid the foundations for recovery:

we have an agreement for reducing personnel

and have also introduced our Papilio line of

imported hand-made rugs, of mainly Asian origin,

with which we are looking to exploit changing

market conditions to the full.

For the Tufting Division 2004 was also marked by

the vagaries of transportation in the United King-

dom. Here too in 2004 we have, at considerable

cost in cash and hard work, laid the basis for a

stronger future by setting up our own outsourced

transport system which should drive growth

further in the United Kingdom.

H. Van DierdonckManaging Director

2004 – a successful year!

It is not without pride that we present to you the

results for 2004.

In the globally relatively neutral external condi-

tions which marked the greater part of 2004, the

Group’s strong profit potential became clearly

apparent. But for the sudden worsening of condi-

tions in the final quarter (sharp increase in raw

materials prices, slowing market demand, fall of

the British pound), 2004 would have been an

absolute record year for the Group. This was not

ultimately to be, but the results are the best since

the group was listed in 1997.

These good results do not come as a surprise.

They are the outcome of years of constant prod-

uct renewal, marketing effort and striving for

internal performance improvement. These have

strengthened our market position and raised our

profit margin. I would like at once to thank all our

4 / a n n u a l r e p o r t 2 0 0 4

P. VermautChairman

Message of the Chairman and the Managing Director


5 / a n n u a l r e p o r t 2 0 0 4

Balsan / Perla AW / Duo

But the challenge for the future consists of retain-

ing the winning hand in the difficult sector of tex-

tile floor coverings.

The overall European market is still trending

slightly downwards, and competitors are still

many. These conditions do not make it any easier

to absorb and digest changes in external circum-

stances. Such circumstances clearly manifested

themselves in the last quarter of 2004, and the

reverberations will be felt well into 2005. In other

words, 2005 does not look like being an easy year.

Despite this we look to the future with confi-

dence.

The Group still has considerable internal potential

for improvement, and our design team is bursting

with creativity. The Group’s financial position is

also strong, allowing the Group to look to the

future either under its own steam or as a strong

partner in a larger whole.

But above all it is acts, not words, that count. As

the best proof of the sustainable recovery and our

belief in the future we are pleased to announce

that the Group will be once again paying a divi-

dend, for the first time in 6 years.

The AWI Group is a leading pro-ducer(1) of tufted and woven carpet.Associated Weavers International N.V. is the par-

ent company of the Group. It is responsible for

general management and sales coordination.

The Group consists of twodivisions:

– The Tufted Division designs, manufactures and

sells tufted carpet. This is by far the Group’s

largest activity, representing 91.9% of its con-

solidated turnover in 2004 which is in line with

previous years.

– The Weaving Division produces woven carpets,

representing 8.1% of consolidated Group

turnover. In addition to carpets produced in his

own plants, the Weaving Division also began in

2004 to import and market its own collection

of hand-produced carpets under the Papilio

brand name. The Weaving Department also has

a polypropylene yarn extrusion department,

the entire production of which is used inter-

nally, mainly in the Tufting Division.

In 2004 the AWI Group sold 51.6 million m2, gen-

erating a consolidated turnover of EUR 269.5 mil-

lion, making it one of the largest European pro-

ducers in its sector, ranking within the top three

companies in each of its European markets

alongside groups like Balta, Beaulieu Wielsbeke,

Condor, Domo , Ideal and others(1). The Group

employs 1,181 people in 5 production plants

(Ronse and Kuurne in Belgium, Arthon and

Neuvy St. Sépulchre in France and Liberec in the

Czech Republic) and 6 sales offices. Its products

are exported worldwide, but with a strong

emphasis on Western Europe.

46,5 %(43,7 %)

12,8 %(14,0 %)

17,5 %(17,6 %)

6,6 %(6,4 %)

6,9 %(8,3 %)

AW / Contessa

6 / a n n u a l r e p o r t 2 0 0 4

9,7 %(10,0 %)

P rof i le o f the Group

Strategic profile

Geographic

breakdown of

consolidated

turnover in 2004

United Kingdom

France

Germany

East Europe

Rest of Europe

Rest of the World

1 On the basis of studies undertaken by Intercontuft Carpet Management.

(2003)

The Group’s mission statement is:

‘To contribute to our clients’ success by offeringthem floor covering solutionswhich make the places where people live andwork more pleasant and morecomfortable.’

In carrying out this mission, our employees areguided and inspired by the following values:

Integrity – Creativity – Customer Focus – Care

– Integrity: we act always in an ethical fashionand with respect for every aspect of theenvironment (social, legal, ecological, etc.) inwhich we operate.

– Creativity: we leave room for creativity. We arealways ready to give an opportunity tocreativity in a thought through and preparedfashion.

– Customer focus: customers are the key to oursuccess. We attempt to exceed our clients’expectations. Everything we do, must ultimately,be done in order to serve our clients.

– Care: the Group cares for its employees andpartners and vice versa. This care is marked bycommitment and trust.

The Group’s strategy of extending its position as aleading European producer of textile floorcoverings is based on the following key points:– Innovative design and product development: in

both the Tufted and Weaving Divisions, theGroup is recognised as a trendsetter in productdevelopment and design. The Group hasspecialist development teams in both divisions.Not being a vertically integrated producer allowsthe Group to take advantage of newdevelopments offered by its suppliers ordeveloped together with them. Innovative designand product development gives Group products

an added value that distinguishes them fromcompeting products.

– Customer focus: with its years of experience, theGroup understands the needs of its various saleschannels in terms of product, service, marketingand commercial approach. The diversity of itssales channels is reflected in the various aspectsof its business, including marketingorganisation, brand policy and cutlengthservice. This approach places AWI in theposition of preferred supplier to a diverse rangeof customers.

– Use of scale size and total product range: withseveral manufacturing units, AWI is one of thefew producers large enough to offer every kindof textile floor covering for the middle andupper market segments. This is particularlyimportant given the increasing concentration onthe buyer side.

In this connection the Group’s concrete objectivesare:– to extend into products offering higher levels of

finishing and service (e.g.: finished rugs andtufted carpets, stair runners, cutlength sales, car-pet tiles);

– to increase overall production flexibility andextend total quality control;

– to inculcate a continuous improvement perspec-tive among our employees, supported by per-formance measurement at various levels;

– to strengthen its position in the contract market(carpeting for offices, hotels, etc.);

– to optimise synergies and strengths between thevarious production units, sales teams and divi-sions.


7 / a n n u a l r e p o r t 2 0 0 4

Strategic profile

Miss ion s tatement , va lues and s t rat eg y

8 / a n n u a l r e p o r t 2 0 0 4

Associated

Weavers

Europe N.V.

Balsan

S.A.

Prado

Tuft

N.V.

Prado

Rugs

N.V.

Associated

Weavers

(Europe)

Ltd. U.K.

Associated

Weavers

France

S.A.R.L.

Associated

Weavers

Deutschland

GmbH.

Associated

Weavers

Scandinavia

A.p.s.

Associated

Weavers

C̀́eská

Republica

sr.o

Associated Weavers International N.V.

Associated Weavers Coordination Center N.V.(2)

Balsan

Polska

SP.z.o.o.

100 %

100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 %

60 %

100 %

40 %

4.7 %

Holding/Coordination

Tufting Division

Weaving Division

2 Under current fiscal legislation, Associated Weavers Coordination Center N.V. is notrecognised as a coordination centre.

Structure of the AWI GROUP

On 30 November 2004 the AWI Group was

structured as follows:


9 / a n n u a l r e p o r t 2 0 0 4

Consolidated key figures of AWI as at 30 November

Consolidated key figures per share as at 30 november

2004 2003 2002 2001 2000

OPERATING RESULTS

Sales volume (x 1.000 m2) 51,630 48,871 52,039 51,184 48,694

Turnover 269.53 254.32 270.26 248.22 212.89

EBITDA(3) 19.30 13.75 19.91 12.17 8.63

Operating profit 16.68 9.54 16.15 6.58 5.28

EBIT (4) 10.95 4.78 10.24 2.05 (0.47)

RESULTS

Result before taxes 8.57 0.98 5.34 (4.31) (5.03)

Net result 7.28 1.22 4.70 (3.65) (3.87)

Net current result(5) 6.61 1.32 4.15 (1.97) (2.35)

BALANCE SHEET STRUCTURE

Shareholders’ equity 51.88 45.38 44.56 39.55 40.08

Net financial debt(6) 10.98 22.25 33.70 58.38 47.69

Working capital(7) 26.08 19.69 22.98 17.15 18.54

CASH FLOW AND CAPITAL EXPENDITURE

Net current cashflow(8) 14.99 9.89 12.66 7.43 6.22

Depreciation 8.38 8.57 8.51 9.41 8.58

Investments 4.24 5.92 4.51 22.93 4.78

Personnel (in units) 1,181 1,204 1,241 1,244 1,161

RATIOS (in %)

Return on shareholders’ equity (9) 13.6 2.9 9.9 (5.0) (5.6)

Liquidity (10) 1.4 1.3 1.3 1.2 1.2

Solvency (11) 40.3 35.4 31.1 24.3 28.1

Payout ratio (12) 9.8% - - - -

2004 2003 2002 2001 2000

EBITDA (3) 5.43 3.87 5.60 3.56 2.86

Operating result 4.70 2.69 4.55 1.93 1.74

EBIT(4) 3.08 1.35 2.88 0.60 (0.16)

Net current result(5) 1.86 0.37 1.17 (0.58) (0.79)

Net result 2.05 0.34 1.32 (1.07) (1.29)

Net current cash flow(8) 4.22 2.78 3.56 2.17 2.06

Gross dividend 0.20 - - - -

Net dividend 0.15 - - - -

Number of shares(13) 3,552,673 3,552,673 3,552,673 3,415,685 3,026,348

(in EUR millions unless otherwise indicated)

(In EUR)

Consolidated key figures

3 Earnings Before Interest, Taxes, Depreciation and Amortization = earnings from ordinary business operations before taxes + interest charges – income from current assets + net depreciationand amortisation + reductions in value on stocks and trade receivables – capital gains on the sale of own shares + reductions in value on own shares

4 Earnings Before Interest and taxes = earnings from ordinary business operations before taxes + interest charges – income from current assets – capital gains on the sale of own shares +reductions in value on own shares

5 Net result + extraordinary charges – extraordinary income – capital gains on sale of own shares + reductions in value on own shares6 Short and long-term financial debts – short-term investments – cash at bank and in hand.7 Current assets – short term creditors – accrued charges and deferred income.8 Net current result + net depreciation and amortisation.9 Net current result ((shareholders’equity at beginning of the year + shareholders’equity at end of the year)/2).

10 Current assets

Short term debts + accrued charges and deferred income

11 ( Shareholders’equity ) x 100Balance sheet total

12 Gross dividend

Consolidated net result13 Excluding 173.652 own shares.

1 0 / a n n u a l r e p o r t 2 0 0 4

2000 2001 2002 2003 2004

270.00

250.00

230.00

210.00

190.00

170.00

150.00

2000 2001 2002 2003 2004

25.00

20.00

15.00

10.00

5.00

0

2000 2001 2002 2003 2004

20.00

16.00

12.00

8.00

4.00

0.00

in EUR millions

Turnover

EBITDA

Operating result

E volut ion of key f igures 2000-2004

in EUR millions

in EUR millions

1 1 / a n n u a l r e p o r t 2 0 0 4


5.00

0.00

-5.00

2000 2001 2002 2003 2004

26 %

28 %

32 %

34 %

36 %

2000 2001 2002 2003 2004

22 %

120.00

100.00

80.00

60.00

40.00

20.00

0

24 %

30 %

2000 2001 2002 2003 2004

20.00

16.00

12.00

8.00

4.00

0.00

40 %

Consolidated

key f igures

Net current

result

in EUR millions

Financial

structure

in EUR millions

Shareholders’ equity (in EUR millions)

Net financial debt (in EUR millions)

Shareholders’ equity/Balance total (in %)

Net current

cash flow

in EUR millions

No major new initiatives were taken in 2004 in

the field of Corporate Governance. The Board of

Directors believed that, until such time as the

announced new guidelines and legislation are

published, the current Corporate Governance reg-

ulations which apply within the Group, if not

exemplary, are largely sufficient in terms of the

Group’s size and capacity. This is expressed in:

– the composition of the Board of Directors, a

majority of whom are independent members;

– Directors’ terms of office. These are limited to 3

years in order to provide an additional guaran-

tee that the composition and operation of the

Board will be assessed in a timely manner;

– the splitting of the functions of Chairman of the

Board (an independent director) and Managing

Director;

– the active involvement of the Audit Committee

within the Board of Directors. According to the

by-laws, this committee consists of 3 non-

executive directors, at least two of whom are

independent. The committee works on the

basis of an ‘Audit Charter’;

– the active involvement of the Remunerations

Committee, made up of the Chairman of the

Board, the Managing Director and one non-

executive director. This Committee oversees the

appointment and remuneration of executive

managers.

The Board of Directors has, after the balance

sheet date, acknowledged the Belgian Corporate

Governance Code, which was published on 9

December 2004.

The Board believes that the rules which currently

apply within the Group already conform with the

principles of the Code. In the course of 2005 the

Board will be discussing the introduction of the

various provisions and guidelines set out in the

Code as well as the preparation of the Corporate

Governance charter. In accordance with the Code

a “Corporate Governance” item will be added to

the agenda of the General Meeting.

1 2 / a n n u a l r e p o r t 2 0 0 4

Corporate governance and management

Corporate Gove rnance

Associated Weavers Ronse – Belgium

I N T E R N A T I O N A L N.V.I N T E R N A T I O N A L N.V.

1 3 / a n n u a l r e p o r t 2 0 0 4

Corporategovernance and management

BalsanArthon – France

Prado Kuurne – Belgium

The Board will of course check its Corporate

Governance policy against any binding or guiding

rules once these have finally come into force.

Separate from the operation of its governing bod-

ies, but as an expression of good Corporate Gover-

nance, the Group has decided to begin reporting,

in the 2005 financial year, in accordance with IFRS

rules. Given the Group’s 30 November closing

date, the obligation begins only from the finan-

cial year starting on 1 december 2005. The Board

however believes that following the IFRS rules

already in 2005 will promote transparency, by

making the group figures at 30 November 2005 as

comparable as possible with those of other com-

panies which close their books on 31 December.

Statutory provisions

The Company’s by-laws state, with regard to the

composition of the Board of Directors:

‘The Board of Directors shall consist of at least

three members, who are not required to be share-

holders, appointed by the General Meeting.

Their terms of office may not exceed six years. As

long as the General Meeting has not, for whatever

reason, provided for a replacement, directors whose

terms of office have expired remain in their func-

tion.

Departing directors may be reappointed.

The terms of office of departing directors, who

have not been re-elected, end immediately after the

general meeting which elects their successors. Direc-

tors reaching the age of seventy during their terms

of office are required to tender their resignation at

the next following general meeting.

The general meeting may suspend or dismiss a

director at any time.’

1 4 / a n n u a l r e p o r t 2 0 0 4

Composi t ion of the

Board o f D i rec tors

Above from left to right: Julien Smets, Raf Decaluwé, Dries Bossuyt, Michel Denys and Bruno Lambert.Under from left to right: Pierre Vermaut, Henri Van Dierdonck, Adeline Simont and Gilles Guillaume.


Composition

Honorary Chairman

– Mr Leo Thielemans (14),

Mierenberg 80 – 1500 Halle

Chairman

– Mr Pierre Vermaut, Route de Lessines 35 –

7911 Frasnes-Lez-Anvaing, companies’ director.

Managing Director

– Mr Henri Van Dierdonck,

A. Herbertstraat 11 – 8500 Kortrijk.

Directors

– Mrs Adeline Simont, Ancien Dieweg 36 – 1180

Brussels, Managing Director, Degroof Corporate

Finance.

– Mr Dries Bossuyt, Beeklaan 54 – 8500 Kortrijk.

– Mr Raf Decaluwé, Ruitersweg 28, 8520 Kuurne,

companies’ director.

– Mr Michel Denys, Bruyère 69 – 7890 Ellezelles,

companies’ director.

– Mr Gilles Guillaume, Chemin des Rivières 14 –

36330 Arthon, France.

– Mr Bruno Lambert, Trevor Place 8 – SW7 1LA

London, U.K., director of Société Générale Euro-

pean Private Equity Capital, London.

– Mr Julien Smets, Hoogvorstweg 15 – 3080 Ter-

vuren, companies’ director.

Messrs Henri Van Dierdonck, Dries Bossuyt and

Gilles Guillaume represent the day-to-day

management.

Mrs Adeline Simont and Messrs Bruno Lambert,

Pierre Vermaut, Julien Smets and Raf Decaluwé

are non-executive independent directors.

Mr Michel Denys is a non-executive and

non- independent director. Until June 2003

he was a member of the Tufting and Weaving

Divisions Management Committees.

Messrs Pierre Vermaut, Henri Van Dierdonck and

Bruno Lambert are members of the Remunera-

tions Committee.

Messrs Pierre Vermaut, Raf Decaluwé and Michel

Denys form the Audit Committee.

The terms of office of all directors run until after

the Annual General Meeting of 2006.

In 2004 the executive directors together received

a total remuneration of EUR 1.16 million and the

non-executive directors a total remuneration of

EUR 0.27 million.

The remuneration of the executive directors con-

sisted of EUR 0.87 million in fixed amounts and

EUR 0.29 million in variable amounts. For the

non-executive directors there is only a fixed

amount.

Board members hold directly or indirectly

961,504 shares of the Company.

A total of 127,500 warrants have been allotted to

the present members of the Board of Directors.

1 5 / a n n u a l r e p o r t 2 0 0 4


14 Protocol mandate of indefinite duration.

Directors’ powers are determined in line with the

Belgian Code of Company Law and with the Com-

pany’s by-laws.

The Board defines Group strategy and supervises

the day-to-day management of the Company and

its subsidiaries.

The consolidated reporting package is sent

monthly to each Board member.

Regular ad hoc contact also exists between the

executive and independent directors.

The Board met 9 times during 2004.

As in every year, the Board monitored monthly

earnings figures, endorsed the half-yearly and

annual earnings announcements and approved

the annual accounts and the budget. In its deci-

sion on the appropriation of the results, the

Board paid particular attention to the financial

balance and the financial needs of the Group.

The Board also paid close attention during 2004

to:

– examining group strategy. This included setting

up a provisional strategy committee;

– monitoring progress in productivity and effi-

ciency;

– monitoring progress in the development of Cor-

porate Governance rules;

– analysing the competitive position of the vari-

ous Group divisions and discussing conditions

in the relevant business sectors.

– monitoring the measures taken to maintain

and extend the transport system in the United

Kingdom;

– discussing and ratifying the proposals put for-

ward by the Audit Committee, and in particular

those concerning the introduction of IFRS

reporting rules.

The by-laws require Board Decisions to be taken

by a majority of votes. In fact, all decisions are

customarily taken on a consensus basis.

The Remunerations Committee set up within the

Board of Directors met twice to assess and, where

necessary, adjust the remuneration of executive

managers. In this they were guided by the general

development of executive salaries and obviously

by the specific achievements of each executive

manager.

The Audit Committee met 3 times. The first meet-

ing examined the results of the year-end audit

and the annual figures. The second meeting

looked at the half-yearly figures and the approach

to be taken to the 2004 audit. The third meeting

served to discuss the impact and timing of the

introduction of the IFRS reporting rules.

S tatutory audi tor

The consolidated annual accounts of the AWI

Group and of the Group’s Belgian subsidiaries are

audited by Deloitte & Partners Bedrijfsrevisoren, a

civil company represented by Mr Gino Desmet.

1 6 / a n n u a l r e p o r t 2 0 0 4

Funct ioning of theBoard o f D i rec tors

Two Management Committeesoperate within the Group:one for the Tufting Division andone for the Weaving Division.

These Committees are in charge of day-to-day

management under the direction of Managing

Director Henri Van Dierdonck and General Man-

ager Dries Bossuyt. These committees meet on a

regular basis.

The Management Committees make sure that the

strategic guidelines defined by the Board of Direc-

tors are applied in day-to-day management. The

presence of Executive Directors in these Manage-

ment Committees ensures an optimal flow of

information.

More specifically the Management Committees

work out strategies for developing new product

ranges, set sales targets, prepare budgets and cap-

ital expenditure and financing plans, analyse the

monthly results from each division and ensure

optimal cooperation between the main functional

areas.

Management Committee members received in

2004 a total remuneration of EUR 2.82 million.

Management Committee members own directly

or indirectly 727,770 shares and 182,000 warrants

of the Company.


1 7 / a n n u a l r e p o r t 2 0 0 4

The present Management Committees are not executive com-

mittees within the meaning of article 524bis of the Company

Code.

A. Tufting Division

Henri Van Dierdonck Chairman of the Committee

Serge Bellflamme Product Development Manager

Dries Bossuyt General Manager Group

Steve Elliott Sales Manager U.K.

Gilles Guillaume General Manager Balsan

Jean-Marie Linskens Sales Manager non U.K.

Guy Vanderhaegen Financial Manager Group

Guido Vanrysselberghe Production Manager

B. Weaving Division

Henri Van Dierdonck Chairman of the Committee

Dries Bossuyt General Manager Group and

General Manager Weaving Division

Carlos Courtens Sales Manager

Kelly Durieu Design and Development Manager

Rik Pappijn Weave Department Manager

Guy Vanderhaegen Financial Manager Group

Jan Vandevijvere Product Development Manager

Paul Vangheluwe Production Manager

Management committees (AT 30 .11 .2004 )


ACTIVITIES REPORTAssociated Weavers International NV (AWI) closes

its 2004 financial year with a net profit of EUR

7.28 million. The net current profit amounts to

EUR 6.61 million (compared with EUR 1.32 mil-

lion in 2003). The group therefore achieved its

best figures since 1997, the year of the stock mar-

ket flotation.

The strong growth in profit compared with last

year is primarily due to the difference in result

during the first half year. In the second half, a rise

in profit from ordinary activities of 25.80% com-

pared with the same period last year was offset by

an increase in corporate income taxes.

The following features characterise 2004:

– A rise in volumes and turnover of 5.6% and

5.9% respectively.

– A relatively stable, neutral business climate dur-

ing the first three quarters. However, this was

1 8 / a n n u a l r e p o r t 2 0 0 4

unsettled during the last quarter by sharply

increasing raw materials prices, weaker demand

and the falling exchange rate of the British

pound.

– A good performance by the Tufting division, but

a disappointing showing by the Weaving divi-

sion.

– A further reinforcement of the group’s financial

position through an additional reduction in the

debt position. This has led to a noticeable drop

in the financing costs.

– A EUR 1.08 million write-back on own shares

following the rise in the share price from EUR

3.70 on 30 November 2003 to EUR 9.89 on 30

November 2004.

- 4

2

4

8

10

- 6

1-2002 2-2002 1-2003 2-2003 1-2004 2-2004

- 2

0

145

140

135

130

125

120

115

110

0

6

12

Management report of the

Board of Directors to the Annual General Meeting of 5 April 2004

Evolution per half-year (in EUR millions)

turnover

net current cash flow

operating result

net current result

Key figures on an annual basis (in EUR millions)

AWI Group 2004 2003 2002

Turnover 269.23 254.32 270.26

Net current cash flow 14.99 9.89 12.66

Operating result 16.68 9.54 16.15

EBITDA 19.30 13.75 19.91

Net current result 6.61 1.32 4.15

Net result 7.28 1.22 4.70

Turnover and volumes rose by 5.9% and 5.6%

respectively, bringing them back to 2002 levels.

Turnover was not influenced by currency rate fluc-

tuations, as the average rate for the British pound

remained almost unaltered compared with 2003.

Operating profit rose sharply from EUR 9.54 mil-

lion in 2003 to EUR 16.7 million in 2004. This

increase can be ascribed primarily to the rise in

the gross margin. The other major cost compo-

nents developed in line with the increased

turnover and volumes, with the exception of the

sharply increased energy costs and higher trans-

port costs. The increase in operating profit com-

pared with last year was principally recorded dur-

ing the first half of the year.


1 9 / a n n u a l r e p o r t 2 0 0 4

EBIT and EBITDA also rose substantially from EUR

4.77 million and 13.75 million respectively in

2003 to EUR 10.95 million and 19.30 million in

2004.

Financial charges fell due to lower interest rates

and a lower average funding requirement (gross

figure, including factoring). The financial result

was also positively influenced by a EUR 1.08 mil-

lion (2003: EUR – 0.17 million) write-back on own

shares reflecting the rise in the share price.

Corporate income taxes rose sharply from

EUR -0.24 million in 2003 to EUR 1.29 million in

2004, principally due to changes in deferred taxa-

tion as positive results in the past three years

have sharply reduced recoverable carried-forward

losses.

Net current profit rose from EUR 1.32 million in

2003 to EUR 6.60 million in 2004, which is the

highest level in the past seven years. Net profit

increased six-fold compared with 2003, from EUR

1.22 million to EUR 7.28 million.

The group’s net financial position was further

improved by the repayment of long and short

term debt. The net financial debt position was

EUR 12.70 million on 30 November 2004 com-

pared with EUR 22.90 million one year previously.

Management repor t of the Board of Directors to the Annual General Meeting

Financial structure

Summary consolidated balance sheet (in EUR millions)Assets 30/11/04 30/11/03 30/11/02 Liabilities 30/11/04 30/11/03 30/11/02

Fixed assets 34.43 39.84 42.98 Shareholders’ equity 51.88 45.38 44.56

Current assets 91.28 84.11 98.22 Financial debts 14.10 26.39 35.85

Own shares 1.72 0.64 0.82Other liabilities and

Cash at bank and in hand 1.40 3.50 1.33 provisions 62.85 56.32 62.94

Total 128.83 128.09 143.35 Total 128.83 128.09 143.35

2 0 / a n n u a l r e p o r t 2 0 0 4

The marked improvement in the balance sheet

over the past three years is clearly demonstrated

by the following ratios:

2004 2003 2002

Liquidity 1.4 1.3 1.3

Financial debt / equity 0.27 0.58 0.81

At the end of 2004 the Group had a healthy bal-

ance sheet with room for future investments.

Capital expenditure

Total capital expenditure during the financialyear amounted to EUR 4.19 million.

The majority of capital expenditures were for

replacement investments or for investments to

raise the efficiency of existing production equip-

ment.

The main individual investment project was the

automation of the colour kitchen, permitting

improved quality and greater flexibility.

(in EUR millions) 2004 2003 2002

Tangible fixed assets

Belgium – Tufting Division 3.22 3.43 3.06

Belgium – Weaving Division 0.24 0.97 0.33

Czech Republic - - 0.04

France 0.73 1.41 0.77

Intangible fixed assets

Brands, goodwill and other - - -

Software - 0.11 0.31

TOTAL 4.19 5.92 4.51

2004 2003 2002

Liquidity 1.4 1.3 1.3

Financial debt / equity 0.27 0.58 0.81

Solvency 40.3 35.4 31.1

Research and developmentResearch and development of new products and

designs are of strategic importance for the Group,

and efforts were systematically continued in this

area.

Both the Weaving and the Tufting Divisions have

active development units with the latest equip-

ment and laboratories for producing test

products. AWI also cooperates closely with its sup-

pliers in developing new products.

Over one third of the entire product range was

renewed in 2004, with the Tufting Division pre-

senting more than 60 totally new products at the

Domotex 2005 trade fair.

Total research and development costs amounted

in 2004 to EUR 2.41 million, as against EUR 2.23

million in 2003.

Hedging transactions– The Group realizes 46.5% of its turnover in the

United Kingdom. This turnover is invoiced in

Sterling pounds. In order to reduce the

exchange risk, it is the policy of the Group to

continuously hedge te estimated turnover of

the next 3 to 5 months; this is done by single

forward contracts or with the use of future

options.

– At the end of the financial year, the Group had

rights for an amount of EUR 10,07 millions and

obligations for an amount of EUR 12,23 mil-

lions related to the hedging policy.

Except for the Sterling pound, the group does

not have any importand exchange risk.

Equity transactionsNo transactions affecting equity, strictu sensu,

were undertaken during 2004. It should, however,

be pointed out that:

– the Board of Directors cancelled 1,000 warrants

on 30 March 2004. These warrants had been

issued on 1 December in the context of the

2003 warrant plan, but were subsequently not

allotted. No new warrants were issued during

the past financial year;

– the Extraordinary General Meeting of 11 May

2004 expressly authorised the Board of Direc-

tors to increase the issued capital in one or

more instalments, as from the date of notifica-

tion to the company by the Banking, Finance

and Assurance Commission of a public takeover

bid for the shares of the company, through con-

tribution in cash with the suspension or limita-

tion of the preferential rights of existing share-

holders or through contribution in kind in


2 1 / a n n u a l r e p o r t 2 0 0 4


compliance with Article 607 of the Code of

Company Law. This authorisation was granted

until 5 October 2006 and may be renewed;

- the number of issued warrants has fallen by

50,000 compared with the same period last

year. This reduction relates to warrants issued

under the 2000 warrant plan to employees who

are no longer on the Group’s payroll and who

could therefore exercise their warrants only

between 15 and 30 April 2004, which did not

happen.

DividendsGiven the sustainable recovery of profitability in

the group and the good financial position, the

Board of Directors will be proposing to the Gen-

eral Meeting of Shareholders that a dividend of

EUR 0.20 per share be paid in respect of the 2004

financial year. The proposed allocation of profit is

therefore:

Profit for 2004 6,412

Profit brought forward from 2003 3,867

Profit available for appropriation 10,279

- Allocation to the legal reserve 321

- Profit to be carried forward 9,213

- Dividends 745

2 2 / a n n u a l r e p o r t 2 0 0 4


2 3 / a n n u a l r e p o r t 2 0 0 4


Conflicts of interest

No events occurred during the past financial year

giving rise to a conflict of interest.

Significant events since thebalance sheet date

No significant events have taken place since the

balance sheet date.

Agenda of the general meeting

Statutory appointments

No directors’ or other mandates need to be rati-

fied or extended at the General Meeting of 4 April

2005.

Empowerment of the Board of Directors to

purchase and sell own shares – amendment

of Article 12 of the by-laws

The Board of Directors will be proposing to the

Extraordinary General Meeting of 4 April 2005

(second meeting as the one of 4 March 2005 did

not reach the required quorum) that it authorises

the Board of Directors, pursuant to Article 620 of

the Code of Company Law, for 18 months from

the Extraordinary General Meeting deciding on

such authorization, to acquire own shares of the

company by purchase or exchange, directly or via

an intermediary, or to dispose of

the same, at a price of at least EUR 1.00 per share

and with a ceiling of 10% more than the average

stock market price for the 10 working days pre-

ceding the acquisition or disposal, so that the

Company at no time holds own shares with a

fractional value higher than 10% of the issued

capital of the company.

This authorisation can also be used for the acqui-

sition or disposal of shares of the Company by

direct subsidiaries within the meaning of Article

627 of the Code of Company Law.

2 4 / a n n u a l r e p o r t 2 0 0 4

OtherThe statutory auditor’s fees for auditing the con-

solidated annual accounts of the Company as well

as the unconsolidated accounts of all Belgian

Group companies amount to EUR 147,000.

The auditor received also EUR 28,760 of other

fees. These fees relate mainly to services and

trainings rendered with respect to the planned

implementation of IFRS.

During the past financial year charges of EUR

52,000 were recorded in respect of work carried

out by persons having a relationship of profes-

sional collaboration with the statutory auditors.

These consist mainly of tax consultancy fees.

Outlook2004 was a successful year for the group. The

good results in a globally stable, neutral economic

climate (except for the fourth quarter) bear wit-

ness to the group’s enhanced performance. The

group is also convinced that the difficult and tur-

bulent conditions which began in the last quarter

of 2004 and which are still apparent will only

temporarily disrupt the Group’s growth trend.

The group views the future with complete confi-

dence despite the difficult situation in the textile

floor coverings market.

AW / Solitaire

2 6 / a n n u a l r e p o r t 2 0 0 4

The Tufting department produces tufted carpets

using various processes:

– the tufting of white yarn which is then printed

on rotary print lines. This process allows a wide

range of patterns and colour combinations to

be printed on the same white carpet. This

largely volume-driven production process is

applied at the Ronse (B) plant;

– tufting of pre-dyed yarns. This process, in which

the carpet immediately takes on its final uni-

form colour, is used in particular for yarns that

are unsuited to continuing dyeing or printing

(polyproplylene, wool and mixed yarns). This

process is applied at the Kuurne (B) facility;

– the tufting of white yarns which are then

coloured on a dye line, producing a uniform

coloured product. This process, which offers the

advantage of a broad range of colours, is

applied at the Arthon (F) and Ronse (B) plants;

– the tufting of white yarn which is then printed

on an ink jet printing line. This process offers

almost the same possibilities in terms of pat-

terning and colour combinations as printing on

rotary printing lines. It is more flexible, but also

more costly. It is applied at the Arthon (FR)

plant.

2000 2001 2002 2003 2004

in EUR millions

Turnover

250.00

200.00

150.00

100.00

50.00

0.00

Comments on results by division

Tuft ing Div i s ion


2 7 / a n n u a l r e p o r t 2 0 0 4

The majority of production is sold for use as

broadloom carpeting, either in full rolls or as cut-

lengths.

The remaining portion is processed further:

– into runners or rugs: in this case the roll is cut

and the individual pieces edged and packed.

This is done at the Liberec (CZ) plant;

– into carpet tiles: carpet tiles are produced by

providing the tufted material with a special

backing on a specialised tile line, and then cut-

ting. The Group has a tile line at its Neuvy St.

Sépulchre (FR) plant.

Key figuresin EUR millions unless otherwise indicated 2004 2003 2002 2001 2000

Turnover 247.50 230.31 245.78 218.21 190.16

Sales volume (in ’000 m2) 50,155 47,346 50,614 49,500 47,291

EBITDA 18.94 11.14 17.97 9.20 6.40

Operating result 17.39 7.88 15.23 4.41 3.80

People employed at 30/11 987 1.001 1.039 1.043 963

Turnover per employee 0.25 0.23 0.23 0.21 0.20

Capital expenditure during the year 3.95 4.95 4.18 20.55(15) 3.82

Commentson results by division

AW / Cheops

Balsan

15 Includes a one-off EUR 16.26 million investment in Balsan.

2 8 / a n n u a l r e p o r t 2 0 0 4


Market evolutionOverall demand for tufted carpet in Europe is esti-

mated to have remained unchanged in 2004. The

German and French markets continued to shrink,

the UK market remained stable, and the Central

European market grew slightly. Export opportuni-

ties outside the European Union were hampered

by the high euro exchange rate.

Tufting Division volume and turnover both rose,

by 5.9% and 7.5% respectively. With EUR 247.5

million, the Tufting Division represents 91.9% of

Group turnover.

Geographic distribution of salesThe primary growth areas in 2004 were the

United Kingdom and France. Growth in the

United Kingdom was boosted by the exit of a

competitor in autumn 2003. Growth in France

was driven by the Balsan subsidiary, with strongly

rising sales of carpet tiles in the office market seg-

ment. Turnover growth in Central Europe began

in earnest only several months after the region’s

accession to the EU.

Moving ahead on the same pathConditions in the Tufting Division’s markets were

not essentially different in 2004 from earlier

years, i.e. stiff competition in a slightly receding

market characterized by overcapacity.

AW / Libra


2 9 / a n n u a l r e p o r t 2 0 0 4


Margins remained relatively steady during the

first three quarters, but then came under strong

pressure in the fourth quarter from a combina-

tion of sharply rising raw materials prices and a

weakening pound. Measures were immediately

taken to pass on the rising raw materials prices in

sales prices, in order to keep margins up. Given

the extent of the price rises (10% to 30% for the

most used raw materials) and the uncertainty as

to future raw materials prices, margins are

expected to stabilise fully at former levels only in

the course of the first half of 2005.

Rising energy prices have also led to an increase

of other cost components, including transport.

The latter is also influenced by the change of

transport system in the United Kingdom. Since 1

January 2005 the group has had its own transport

system, which it has outsourced to a specialist

transport company. Rising transport costs, includ-

ing all the costs involved in maintaining trans-

portation and changing the transport system in

the United Kingdom, had an impact in 2004 of

around EUR 1.5 million.

Tufting Division

turnover by

geographical

market

49.2 %(46.6 %)

17.1 %(17.4 %)

13.2 % (14.4 %)

4.3 % (3.5 %)

United Kingdom

France

Germany

East Europe

Rest of Europe

Rest of the World

6.9 %(8.6 %)

9.2 % (9.5 %)

(2003)


Cautious optimism for the futureThe difficult and turbulent circumstances which

began in the final quarter of 2004 and are still

apparent mean that margins can be expected to

stabilize fully at their former levels only at the

end of the first half of 2005.

We are convinced however that this disruption of

our growth path will be only temporary and look

to the future with complete confidence.

AW / Fancy

Production facilities and salessubsidiaries

Production facilities Sales subsidiaries

Ronse (B) Halifax (VK)

Kuurne (B) Salzkotten (D)

Arthon (F) Copenhagen (DK)

Neuvy-St.Sépulchre (F) Praag (CZ)

Liberec (CZ) Paris (F)

Poznan (PL)

3 0 / a n n u a l r e p o r t 2 0 0 4



The Weaving Division has three activities, which

are located at the Prado Rugs company on the

Kuurne site. These are

– the weaving of carpets;

– the extrusion of polypropylene yarns;

– the importing and marketing of hand-made rugs

and carpets of mainly Asian origin.

The extrusion division produces solely for the

Group’s Weaving and Tufting divisions.

The Weaving Division operates entirely out of

Kuurne (B), though with sales representatives in

various countries.

We aving Div i s ion

in EUR million unless otherwise indicated 2004 2003 2000 2001 2000

Turnover 28.73 30.50 31.43 36.22 30.07

of which – weaving 21.73 24.01 24.49 30.00 24.10

– extrusion 6.64 6.49 6.94 6.22 5.96

Sales volume, weaving (in ‘000 m2) 1,475 1,525 1,425 1,684 1,400

EBITDA 0.36 2.61 1.94 2.97 2.23

Operating result -0.71 1.66 0.93 2.17 1.47

People employed at 30/11 194 203 202 201 198

Turnover per employee 0.15 0.15 0.16 0.18 0.15

Capital expenditure during the year 0.24 0.97 0.33 2.38 0.97

Key figures

3 1 / a n n u a l r e p o r t 2 0 0 4

Prado Kuurne – Belgium

We aving Div i s ion

Developments in 2004Global market conditions remained extremely dif-

ficult for the Weaving Division, with:

– falling volumes and margins on exports to dol-

lar countries;

– the accelerated contraction of the machine

woven wool carpet segment;

– increased competition from alternative prod-

ucts (hand-made carpets imported from Asia)

and machine woven carpets from low wage

countries.

The new collections introduced in early 2004 did

not offer a sufficient response to these challenges.

Various measures were therefore taken in 2004:

– Adapting production equipment to the chang-

ing product mix, with increased automation

and a social agreement allowing a reduction in

headcount.

– Accelerating efforts to enable the machine

woven carpet range to be adapted faster to

demand.

– Setting up the Papilio department, with a signa-

ture collection of hand tufted and hand woven

carpets of mainly Asian origin.

These efforts produced a marked improvement in

volumes in the final quarter of 2004, and will be

continued unabated in 2005.

2000 2001 2002 2003 2004

in EUR millions

Turnover

50.00

40.00

30.00

20.00

10.00

0.00

Prado / Papilio / Loom Class

3 2 / a n n u a l r e p o r t 2 0 0 4



Weaving division turnover bygeographical marketSales fell in almost all geographic markets, except

for France and Eastern Europe, where turnover

stabilised.

A challenging futureNo improvement in the external environment can

be expected in 2005. Continuation of the meas-

ures begun in 2004 (rationalisation of production

equipment, personnel cuts, development of

Papilio) should enable to Group to confront the

difficult situation and restore profitability.

3 3 / a n n u a l r e p o r t 2 0 0 4

Prado / Adagio

Weaving Division

turnover by

geographical

market

22.5 %(19 %)

15.7 %(15 %)

1.6 %(4 %)

Germany

France

United Kingdom

Rest of Europe

East Europe

North-America

Far East

Rest of the World

22 %(23.8 %)

6.7 % (6.8 %)

8.8 %(10.6 %)

16.2 %(15.8 %)

(2003)

6.5 %(5.0 %)

Prado / Beetle

3 4 / a n n u a l r e p o r t 2 0 0 4

Environment

Other waste prevention measures were:

– installing yarn winder to reduce yarn waste;

– adaptations in the compounding department in

order to recover latex waste water;

– specific training courses to increase employee

awareness of the importance of waste preven-

tion.

EnergyFollowing AWE’s signing up to the ‘Energy Effi-

ciency in Industry Benchmarking Covenant’, the

Ronse site was inspected in 2004 by a recognized

energy expert. This resulted in an energy plan for

2004 to 2007 setting out a number of profitable

energy investments to be undertaken. These

include the installation of frequency controls on

pumps and ventilators, developing a plan to limit

compressed air losses and the installation of

equipment to control the burners on dryers on

the basis of humidity measurements.

In addition to annual tasks like controlling water

and air emissions and checking noise levels, the

Group focused, as in 2003, on the two themes of

waste and energy.

WasteDuring the summer months the colour kitchen on

one of the print lines at Ronse was fully con-

verted. In addition to preparing baths more flexi-

bly and efficiently, the goal was to obtain an

installation that can ensure maximum repro-

ducibility and minimum loss when preparing

colour paste baths. Technically the project

included installing various dissolving installations,

replacing a number of larger paste tubs with sev-

eral smaller tubs and adding measuring and con-

trol equipment to permit extensive automation.

This investment also reduces pressure on the

existing water treatment station.


3 5 / a n n u a l r e p o r t 2 0 0 4

Human resources

Human resources

The Group’s human resources policy is inspired by

the ‘care’ principle. The Group strives to create a

long-term relationship of trust with its employees

by treating them with ‘care’ and giving each of

them the opportunity to develop according to

their ability and capacity. The Group expects in

turn a long-term commitment from its employees

and a concern for the well-being of the Group.

Indifference is not tolerated.

The headcount per activity as of30 November 2004 breaks down as follows:

16 Including 24 in polypropylene extrusion.17 Including staff in the coordination centre,which provides services to other Group

members.

Hourly-paid workers

Tufting Division 725

– Belgium 511

– Czech republic 80

– France 134

Weaving Division (16) 168

Total hourly-paid workers 893

Salaried employees

Tufting Division 262

– Belgium (17) 109

– Czech Republic 13

– France 71

– Foreign sales subsidiaries 69

Weaving Division 26

– Belgium 24

– Foreign sales subsidiaries 2

Total salaried employees 288

Total headcount 1,181

A formal anchoring point of the Group’s human

resources policy is the annual interview with all

employees and managers, which serves to assess

the past year and to set concrete objectives for

the future.

Situation at 30 November 2004

At 30 November 2004 the AWI Group employed

1,181 people, 812 of them in Belgium and 369

abroad.

Evolution of the workforce

The headcount reduced slightly in 2004, mainly

because of the restructuring undertaken in the

Czech Republic at the end of 2003. Headcount

also dropped in the Weaving Division, owing prin-

cipally to lower volumes.

Employment in France rose with the growth of

our Arthon facility.

3 6 / a n n u a l r e p o r t 2 0 0 4

2000 2001 2002 2003 2004

Number of employeesin the various

countries since 2000

Other

France

Czech Republic

Belgium Weaving

Belgium Tuft

in units

Warrant plan

The number of issued warrants has fallen by

50,000 compared with the same period last year.

This reduction relates to warrants issued under

the 2000 warrant plan to employees who have

since voluntarily left the group, and who could

therefore exercise their warrants only between 15

and 30 April 2004. None of these warrants were

exercised.

On 18 March 2005 the following warrants were

outstanding under the annual warrant plans:

Number Exercise price

Warrant Plan 2000 129,250 9.95

Warrant Plan 2001 67,000 3.34

Warrant Plan 2002 62,750 3.29

Warrant Plan 2003 65,500 3.57

1400

1200

1000

800

600

400

200

0

Since 2000 the headcount has evolved as follows:


3 7 / a n n u a l r e p o r t 2 0 0 4

AWI shares

No new shares were created during 2004. All

shares are identical in nature, and carry the same

rights. All AWI shares are listed and can be traded

on Euronext Brussels.

On 29 January 2004 AWI concluded a liquidity

agreement with Bank Degroof, under which Bank

Degroof regularly intervenes to place purchase

and selling orders for the AWI share in order to

promote the share’s liquidity.

Stock exchange listing

AWI shares were introduced onto the first market

of the Brussels Stock Exchange in October 1997.

The share is currently listed on Euronext Brussels

on the ‘double fixing’ market.

18 At 30 November, excluding own shares.

2004 2003 2002 2001 2000

Gross dividend yield

Gross dividend/lowest price 5.7 - - - -

Gross dividend/highest price 2.0 - - - -

Price/earnings ratio

Lowest price/net earnings 1.7 8.9 1.5 - -

Highest price/net earnings 5.0 15.4 4.5 - -

Price/cashflow ratio

Lowest price / net current cashflow 0.8 1.1 0.6 1.0 3.0

Highest price / net current cashflow 2.4 1.9 1.7 3.5 7.3

Market price Euronext Brussel (in EUR)

Lowest price 3.52 3.02 2.00 2.20 6.10

Highest price 10.25 5.24 5.99 7.50 14.95

Price on 30 November 9.89 3.69 4.70 2.36 6.75

Average price 7.67 4.09 4.00 4.54 10.73

Total number of shares outstanding(excluding own shares) 3,552,673 3,552,673 3,552,673 3,552,673 3,026,348

Market capitalisation (in EUR millions)(18) 35.1 13.11 16.70 8.38 20.43

Average daily transaction volume

• in number of shares 2.023 676 1.067 1.272 2.612

• in value (in EUR) 15.242 2.766 4.196 5.948 27.990

The table below gives the main stock exchange

statistics for the AWI share over the past five years.

3 8 / a n n u a l r e p o r t 2 0 0 4

Evolution of share priceThe graph below shows the evolution of the AWI

share price, against the Brussels all shares, BEL

20, VLAM 21 and Small Caps indexes:

BEL20

VLAM21

Small Caps

AWI

10

8

6

4

2

in EUR

Euronext Brussel

1 Dec

-01

1 Dec

-04

1 Mar-

02

1 Jun

-02

1 Sep

-02

1 Dec

-02

1 Mar-

03

1 Jun

-03

1 Sep

-03

1 Mar-

04

1 Sep

-04

1 Dec

-03

1 Jun

-04

1 Jan

-05

Brussels all shares

AWI shares


3 9 / a n n u a l r e p o r t 2 0 0 4

17.73 %

6.46 %

6.07 %

6.23 %

47.10 %

4.14 % 4.29 %

Group H. Van Dierdonck

Bank Degroof

Shopinvest N.V.

Fortis

Group M. Denys

Own shares

Croft Settlement

Public

ShareholdersBased on the numbers of

shares specified in the trans-

parency declarations received

by 18 March 2005, and taking

into account the potential

effects of the warrants, the

shareholder structure of AWI is

as follows (19):

Shareholders’ diary

• Extraordinary General Meeting 4 April 2005

• 2004 Annual General Meeting 4 April 2005

• Announcement of the half-yearly results (31 May 2005) 30 June 2005

• Announcement of the annual results (30 November 2005) 27 January 2006

• 2005 annual report available 18 March 2006

• 2005 Annual General Meeting 3 April 2006

19 Percentages calculated on the total number of current and future voting rights:3,726,325 shares plus 324,500 alloted warrants.

7.98 %

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