TKH N : Annual Report 2023

	INTRODUCTION	TECHNOLOGY COMPANY TKH	MANAGEMENT REPORT	GOVERNANCE	SUSTAINABLE PORTFOLIO	FINANCIAL STATEMENTS	OTHER INFORMATION

TKH Group

Annual Report 2023

European single electronic reporting format (ESEF) and PDF version

This copy of the annual financial reporting of TKH Group N.V. for the year ended 31 December 2023 is not presented in the ESEF-format as specified in the Regulatory Technical Standards on ESEF (Delegated Regulation (EU) 2019/815). The ESEF single reporting package is available at: https://www.tkhgroup.com/en/investors/annual-reports-presentations

TKH GROUP ANNUAL REPORT 2023 | 1

	INTRODUCTION	TECHNOLOGY COMPANY TKH	MANAGEMENT REPORT	GOVERNANCE	SUSTAINABLE PORTFOLIO	FINANCIAL STATEMENTS	OTHER INFORMATION

Contents

Profile	3	Management Report *	26	Financial Statements	99
Message from the CEO *	4	Business developments	27	Consolidated financial statements	99
Highlights 2023 *	6	Financial performance	29	Consolidated statement of profit and loss	100
Key messages	6	Group financial performance	29	Consolidated statement of comprehensive
Financial highlights	7	Developments per technology segment	31	income	101
Sustainability highlights	7	Acquisitions, divestments, and investments	34	Consolidated balance sheet	102
TKH worldwide	7	Outlook	35	Consolidated statement of changes in group
		Sustainability statements	36	equity	103
Technology Company TKH	8	General disclosures	36	Consolidated cash flow statement	104
Strategy *	9	Environmental	43	Notes to the financial statements	105
Who we are and what we do	9	Social	49
Core values	10	Governance	54	Company financial statements	142
Smart Technologies	11			Company statement of profit and loss	143
Group synergies	13	Governance	58	Company balance sheet	144
Accelerate 2025 strategic program	14	Members of the Executive Board *	59	Notes to the company financial statements	145
Strategic pillars and targets	15	Members of the Supervisory Board	60
The world around us	18	Report of the Supervisory Board	61	Other Information	151
Megatrends	18	Remuneration Report	68	Profit appropriation	152
Market drivers and position	19	Corporate Governance *	78	Proposal for profit appropriation	152
Competitive landscape	20	Risk Management *	80	Consolidated entities	153
Stakeholder analysis *	21	Management Statement *	89	Independent auditor's report	154
SWOT analysis *	23	TKH Shares	90	Assurance report of the independent auditor on
Long-term value creation *	24			non-financial KPIs	161
		Sustainable Portfolio	92	Stichting Administratiekantoor TKH Group	163
				Stichting Continuïteit TKH	164
				Non-financial reporting process and methods	165
				Alternative performance measures	171
				Ten years overview	174

The paragraphs marked with a * belong to the Management Report as defined in Title 9, Dutch Civil Code 2.

2 | TKH GROUP ANNUAL REPORT 2023

	INTRODUCTION	TECHNOLOGY COMPANY TKH	MANAGEMENT REPORT	GOVERNANCE	SUSTAINABLE PORTFOLIO	FINANCIAL STATEMENTS	OTHER INFORMATION

Profile

TKH Group N.V. (TKH) is a leading technology company.

We specialize in the creation of innovative, client-centric technology systems that drive success in automation, digitalization, and electrification. By integrating hardware, software, and customer-focused insight, our smart technologies provide unique answers to customers' challenges. In doing so, we work to make the world better by creating ever more efficient and more sustainable systems.

With more than 7,000 employees, TKH pursues sustainable growth in a culture of entrepreneurship, working closely with customers to create one-stop-shop,plug-and-play innovations combined with software for Smart Vision, Smart Manufacturing, and Smart Connectivity technology.

Listed on Euronext Amsterdam, we operate globally and focus our growth across Europe, North America, and Asia.

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	INTRODUCTION	TECHNOLOGY COMPANY TKH	MANAGEMENT REPORT	GOVERNANCE	SUSTAINABLE PORTFOLIO	FINANCIAL STATEMENTS	OTHER INFORMATION

Message from the CEO

We are committed to deliver strong results on the back of our innovative technologies with high attractiveness and efficiency for our customers.

With passion and dedication, we have focused on the execution of our strategy and the targets we have set. We made good progress in implementing the strategy and all the action plans. Many milestones were reached related to market positioning and the R&D roadmap, including the realization of our € 200 million strategic investment program.

More than 200 new employees have seamlessly joined our team, bolstered by TKH's reputation as an appealing employer, in alignment with our strategic investment program. Our focus on employee satisfaction has proven to be of great value in creating ambassadors to support recruitment, and we are enthusiastic about the fact that we were able to further improve our employee satisfaction score from 7.6 to 7.8 in 2023. We believe that dedication and passion, combined with a high satisfaction score, make a difference in achieving our targets. The same applies to our customer satisfaction score, which remained at the very high level of 8.6.

Beyond this, our innovative power and high-quality service delivered a level of performance that in many cases exceeded customer expectations. As a result, we continued to gain market share in most of the markets in which we operate. Innovation remained at a high level, with 16.1% of our turnover coming from new product introductions in the last two years.

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	INTRODUCTION	TECHNOLOGY COMPANY TKH	MANAGEMENT REPORT	GOVERNANCE	SUSTAINABLE PORTFOLIO	FINANCIAL STATEMENTS	OTHER INFORMATION

We continued to invest in our software capabilities with a strong focus on artificial intelligence (AI), for which we established a hub in Amsterdam to centrally develop AI software solutions for the TKH group entities. AI provides an additional opportunity to create solutions for our customers that deliver maximum performance and efficiency in their processes. Many AI positioning projects were initiated, and the first projects have already been completed.

ESG continued to be a high priority in our activities, as reflected in the significant improvement of several ESG ratings and dashboards. We made good progress against ESG goals, in particular increasing investments to reduce our carbon footprint in relation to scopes 1 and 2. Our technologies help to create a better and more sustainable world. It is in our DNA to recognize the importance of Environmental, Social, and Governance (ESG) as well as the United Nations Sustainable Development Goals (SDGs). Sustainability is embedded in our strategy and is seen as an opportunity to develop our technology to have a positive impact on our customers and the use of scarce energy resources.

The megatrends of automation, digitalization, and electrification continued to support our growth, but the impact of destocking in Smart Vision and Smart Connectivity systems led to a decline in demand in the second half of the year. A very strong performance in Smart Manufacturing systems compensated for the destocking effects, resulting in a better result in the second half of the year compared to the first half. In 2023, we achieved organic turnover growth of 3.2%, with added value increasing from 47.2% to 49.8%. We are enthusiastic about the progress of our Accelerate 2025 strategic program. The drive and passion we see in our operations and among our more than 7,000 employees globally to deliver results is extremely high. We continued our divestment program successfully completing the transaction to sell our commodity connectivity activities in France and our remaining interest in CCG. The one-off net profit related to these transactions was € 54.8 million, demonstrating that we created value during the time the activities were part of TKH. It is good to see that the new environment for these activities brings new opportunities for growth and good prospects for continuity.

We reinvested part of the proceeds from the divestments in two share buyback programs of € 25 million each and in the acquisition of Euresys, which we acquired to strengthen our Smart Vison segment. TKH's transformation has continued, increasing its value-creation potential as we focus on activities in high-growth markets. In the second half of the year, we decided to accelerate the divestment program we initiated, confirming our aim to achieve

the upper range of the previously communicated target. The proceeds will be used primarily for share buyback programs and acquisitions that fit into our core business.

We were able to pass on cost inflation related to wage and energy expenses quite well, and we saw an increase in the added value as a percentage of turnover to cover inflation. The ROS was at 12.8%. The supply chain issues in the first half of the year, along with the necessary costs related to the roll-out of the strategic investment program, compounded by the underutilization within Smart Vision and Smart Connectivity systems due to destocking in the second half of the year, had a strong temporary negative effect on ROS. We decided to maintain the cost level and capacity in Smart Vision and Smart Connectivity systems at higher turnover levels in anticipation of market opportunities when the destocking effects are over.

Supply chain constraints required close cooperation with our suppliers and the creativity of our procurement teams to find solutions to material and component shortages. Inefficiencies and shortages eased during the course of the year.

We continue to see great opportunities for further growth and we are on the right track with our investments in these exciting segments. We are confident about the anticipated recovery of Smart Vision, the rebounding of the energy market conditions in the Netherlands and

a good order book for Subsea cables, but due to the headwinds, in combination with the costs and the strategic investments to capture future growth, the 17% ROS target might take longer to realize. We expect further growth of revenues and EBITA for 2024, and are well positioned to benefit from the great opportunities that will arise from the megatrends automation, digitalization, and electrification.

A special word to our team in Ukraine, who have managed to work under difficult circumstances. We have great respect for the way they are coping with the challenges in their daily lives.

We would like to thank our stakeholders for their trust and cooperation, which have been instrumental in achieving our current results and laying a solid foundation for the years ahead. In particular, we would like to thank our employees for their dedication, passion, and commitment to achieving the best possible results in sometimes challenging situations!

On behalf of the Executive Board,

Alexander van der Lof, Chairman

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INTRODUCTION

TECHNOLOGY COMPANY TKH

MANAGEMENT REPORT

GOVERNANCE

SUSTAINABLE PORTFOLIO

FINANCIAL STATEMENTS

OTHER INFORMATION

Highlights 2023

Key messages

Increase of turnover, EBITA and added value

• Organic turnover growth of 3.2%
• EBITA grew to € 237.0 million
• Added value increased substantially to 49.8% (2022: 47.2%) underlying the strength of our businesses

Many strategic milestones reached, related to

• Market positioning
• R&D roadmap
• Investments into software expertise with strong focus on artificial intelligence (AI)
• Two large divestments completed in 2023, resulting in a total one-off net profit contribution of € 54.8 million
• Two share buyback programs of € 50 million in total

Strategic Investment Program of € 200 million nearing completion

• New inter-array cable facilities in Eemshaven starting operational production in Q2 2024

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Good progress on ESG

• High-priorityinvestments resulted in 64.3% reduction of CO2e footprint (scopes 1 and 2)
• Diversity ratio increased to 19.2% (females in executive and senior management teams)
• Employee satisfaction rate at all-time high of 7.8
• Improved ESG ratings
• Approximately 70% of turnover linked to SDGs

High innovative power, with innovations contributing 16.1% of turnover

Proposed dividend of € 1.70 (2022: € 1.65)

	INTRODUCTION	TECHNOLOGY COMPANY TKH	MANAGEMENT REPORT	GOVERNANCE	SUSTAINABLE PORTFOLIO	FINANCIAL STATEMENTS	OTHER INFORMATION

Financial highlights

Sustainability highlights

TKH worldwide

Turnover by region

Turnover in € millions

1,847.5

2022: 1,816.6

Added value

49.8%

2022: 47.2%

Return on Sales (ROS)

12.8%

2022: 12.9%

EBITA in € millions

237.0

2022: 234.8

Return on Capital Employed (ROCE)

19.8%

2022: 23.2%

Dividend proposal in € per share

1.70

2022: 1.65

Net CO2e footprint reduction (scopes 1 and 2)

64.3%

2022: 42.7%

Diversity female executive and senior management

19.2%

2022: 18.4%

Turnover linked to SDGs

70%

2022: 68%

Accident rate (LTIFR)

0.75

2022: 0.78

Employee satisfaction score

7.8

2022: 7.6

Customer satisfaction score

8.6

2022: 8.6

The Netherlands

€ 455 million

Europe (other) € 717 million

Asia

€ 353 million

North America

€ 240 million

Other

€ 83 million

TKH GROUP ANNUAL REPORT 2023 | 7

	INTRODUCTION	TECHNOLOGY COMPANY TKH	MANAGEMENT REPORT	GOVERNANCE	SUSTAINABLE PORTFOLIO	FINANCIAL STATEMENTS	OTHER INFORMATION

Technology company TKH

Strategy	9
Who we are and what we do	9
Core values	10
Smart Technologies	11
Group synergies	13
Accelerate 2025 strategic program	14
Strategic pillars and targets	15

The world around us	18
Megatrends	18
Market drivers and position	19
Competitive landscape	20
Stakeholder analysis	21
SWOT analysis	23
Long-term value creation	24

8 | TKH GROUP ANNUAL REPORT 2023

INTRODUCTION

TECHNOLOGY COMPANY TKH

MANAGEMENT REPORT

GOVERNANCE

SUSTAINABLE PORTFOLIO

FINANCIAL STATEMENTS

OTHER INFORMATION

Strategy

Who we are and what we do

TKH's strategy focuses on expanding our technology leadership in the markets in which we operate, where automation, digitalization, and electrification are driving future growth.

We specialize in the creation of innovative, customer-centric technology systems for high- growth markets where our differentiating technologies can make an impact.

We believe that innovation drives progress and success. By integrating our proprietary technologies with internally developed software and customer-focused insights, we develop Smart Technologies that create unique answers to our customers' challenges, helping them to work smarter, more successfully, and more sustainably. In doing so, we work to make the world better by creating more efficient and more sustainable systems.

TKH aims to be an attractive and responsible employer for our more than 7,000 employees globally. We encourage our people to take the initiative in a culture of entrepreneurship. Working together with passionate, talented, and qualified people is vital to achieving our mission of creating best-in-class Smart Technologies.

Mission

Creating Smart Technologies for sustainable value creation

Vision

Together with our customers, we develop innovative technologies

that make the world more efficient and more sustainable

Core values

entrepreneur-

customer-

responsible

transparency

integrity

ship

focused

Group synergies

Smart

Smart Vision

Smart Manufacturing

Smart Connectivity

Technologies

systems

systems

systems

Strategic pillars

Innovation

Sustainability

Passionate,

Solid financial

and targets

and technology

talented, and

position

leadership

qualified people

We operate in a socially responsible manner, continuously seeking to strengthen our contribution to a sustainable society. Socially responsible business practices with a strong environmental awareness are at the heart of everything we do. Almost 70% of our turnover relates to at least one UN Sustainable Development Goal. Our portfolio of smart technologies supports our customers in meeting their sustainability targets. And we continue to integrate sustainability policies into the business decision-making processes.

Built on a decentralized operating model, striving for a high level of entrepreneurship and a winning culture, our strategy is focused on accelerating growth in our three core market segments, Smart Vision, Smart Manufacturing and Smart Connectivity systems.

Strategic pillars

Innovation and	Sustainability	Passionate, talented, and	Solid financial position
technology leadership		qualified people
Innovation is essential, so we continuously	By integrating sustainability into our portfolio,	We empower our committed, ambitious,	We focus on resilience and sustainable long-
term continuity through healthy balance sheet
innovate to maintain our leading positions in	operations, and supply chain, we contribute	passionate, talented, and qualified people to
ratios. Strong cash flow from our operations
the markets we operate in and to drive growth.	to the sustainability issues where we have the	take the initiative that is vital to achieving our
enables us to create added value for all key
	greatest impact and enable our customers to	goals.
	stakeholders, while providing a sound invest-
	improve their sustainability performance.
		ment for shareholders.
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