Back to Top

5 Financial statements

5.1 Consolidated balance sheet

(in thousands of euro)

  notes 31-12-16 31-12-15
 
ASSETS
 
Property, plant and equipment 8 71,672 69,771
Goodwill 9 59,102 58,189
Other intangible fixed assets 10 44,857 45,056
Equity-accounted investees 11 6,947 4,981
Net defined benefit asset 17 14,489 20,186
Deferred tax assets 1) 19 7,142 8,669
Other financial assets   538 -
Non-current assets   204,747 206,852
       
Inventories 12 321,553 338,684
Trade receivables 13 137,855 134,570
Current tax assets   7,661 9,899
Other receivables   14,527 21,452
Other financial instruments 22 6,049 6,048
Cash and cash equivalents 2) 14 49,421 172,479
Current assets   537,066 683,132
 
Total assets   741,813 889,984
1) The presentation of the defered tax assets and the deferred tax liabilities is adjusted in the comparative figures 2015 for presentation purposes.
2) As a result of a clarification of the IFRS Interpretation Committee (IFRIC) in April 2016 the balances in the notional cash pooling arrangements are presented gross as of 2016; this change in accounting policy is applied retrospectively.

The figures following the various items refer to the notes

  notes 31-12-16 31-12-15
 
EQUITY
 
Share capital 15 258 253
Share premium   43,734 44,264
Reserves   275,388 261,424
Total equity   319,380 305,941
 
LIABILITIES
 
Interest-bearing loans 16 47,173 58,963
Net defined benefit obligation and other long-term employee benefits 17 8,861 8,647
Deferred tax liabilities 1) 19 13,334 11,576
Provisions 20 4,044 4,186
Deferred revenue 21 1,201 2,005
Non-current liabilities   74,613 85,377
       
Revolving credit facility and bank overdrafts 2) 16 136,951 300,844
Interest-bearing loans 16 12,569 12,641
Current tax liabilities   9,879 19,821
Trade payables   153,198 135,585
Other current liabilities   27,322 19,776
Provisions 20 4,826 5,880
Deferred revenue 21 1,313 910
Other financial instruments 22 1,762 3,209
Current liabilities   347,820 498,666
 
Total liabilities   422,433 584,043
 
Total equity & liabilities   741,813 889,984
1) The presentation of the defered tax assets and the deferred tax liabilities is adjusted in the comparative figures 2015 for presentation purposes.
2) As a result of a clarification of the IFRS Interpretation Committee (IFRIC) in April 2016 the balances in the notional cash pooling arrangements are presented gross as of 2016; this change in accounting policy is applied retrospectively.

The figures following the various items refer to the notes

5.2 Consolidated income statement

(in thousands of euro)

  notes 2016 2015
 
Net turnover 1 1,048,152 986,402
       
Cost of changes in inventories of finished goods and work in progress   33 1,310
Raw materials and consumables   -733,380 -673,412
Personnel expenses 1) 2 -121,781 -122,894
Depreciation, amortization and impairment losses 3 -10,340 -10,058
Other operating expenses 1) 4 -122,287 -122,814
Operating result   60,397 58,534
       
Financial income 5 679 616
Financial expenses 5 -8,952 -9,689
Net finance cost   -8,273 -9,073
Income from equity-accounted investees and impairments thereof, net of tax 11 571 -930
       
Profit before taxes   52,695 48,531
       
Income tax expense 6 -20,403 -16,245
       
Net profit   32,292 32,286
 
Earnings per share (in euro)
Earnings per share 7 1.26 1.26
Weighted average number of issued shares   25,623,405 25,116,249
Earnings per share (diluted)   1.25 1.25
Weighted average number of issued shares (diluted)   25,790,571 25,267,645
1) The presentation of the personnel cost and other operating expenses are adjusted in the comparative figures 2015 for presentation purposes.

The figures following the various items refer to the notes

5.3 Consolidated statement of comprehensive income

(in thousands of euro)

    2016 2015
 
Net profit   32,292 32,286
       
Items that will never be reclassified to profit or loss
Remeasurement of the defined benefit liability (asset) 17 -3,675 -1,858
Related tax and change in income tax rate 19 -1,798 622
 
Items that are or may be reclassified subsequently to profit or loss
Foreign operations - foreign currency translation differences   -6,359 4,069
Cash flow hedges - effective portion of changes in fair value   1,666 8,817
Cash flow hedges - reclassified to profit or loss   1,182 -10,433
Related tax 19 -712 380
       
Total comprehensive income   22,597 33,883

The figures following the various items refer to the notes

5.4 Consolidated cash flow statement

(in thousands of euro)

  notes 2016 2015
Cash flows from operating activities
Profit for the period   32,292 32,286
Adjustments for:      
- Depreciation, amortisation and (reversal of) impairments 3 10,348 10,085
- Net finance cost 5 8,273 9,073
- Income from equity-accounted investees, net of tax 11 -571 930
- Equity-settled share-based payment transactions   -61 239
- Gain on sale of property, plant and equipment 3 -8 -27
- Tax expense 6 20,403 16,245
    70,676 68,831
Change in:      
- Inventories   13,532 -83,485
- Trade and other receivables   -4,766 -7,073
- Trade and other payables   17,390 23,577
- Provisions, employee benefits and deferred revenue   7,149 -1,284
Cash flows from operations   103,981 566
Interest paid   -9,342 -9,976
Taxes paid   -19,162 -9,750
Cash from operating activities   75,477 -19,160
Cash flow from investing activities
Interest received   556 707
Dividends received 11 218 292
Proceeds from sale of property, plant and equipment   111 385
Acquisition of subsidiaries, net of cash acquired   -681 -1,819
Acquisition of property, plant and equipment 8 -11,598 -10,529
Acquisition of intangible fixed assets 10 -1,192 -1,082
Acquisition of other financial fixed assets   -1,597 -
Development expenditure 10 -33 -
Net cash from (used in) investing activities   -14,216 -12,046
       
Free cash flows 1)   61,261 -31,206
Cash flow from financing activities
Repayment of interest-bearing loans 16 -12,632 -12,631
Dividends paid   -8,793 -8,654
Proceeds from (repayment of) revolving credit facility 16 -65,950 48,706
Net cash from (used in) financing activities   -87,375 27,421
Net increase (decrease) in cash and bank overdrafts   -26,114 -3,785
Cash and bank overdrafts at 1 January 14 -13,365 -10,416
Effect of exchange rate fluctuations on cash and bank overdrafts held   999 836
Cash and bank overdrafts at 31 December 14 -38,480 -13,365
1) Free cash flows is defined as the balance of net cash from operating activities and net cash used in investment activities

 

 

 

The figures following the various items refer to the notes

5.5 Consolidated statement of changes in equity

(in thousands of euro)

  Share capital Share premium Hedging reserve Translation reserve Other legal reserve Other reserve Total equity
Balance as at 1 January 2015 249 44,384 2,315 -6,542 5,105 235,596 281,107
               
Total comprehensive income
Net profit - - - - - 32,286 32,286
Other comprehensive income - - -1,236 4,069 -80 -1,156 1,597
Total comprehensive income - - -1,236 4,069 -80 31,130 33,883
 
Transactions with owners of the Company
Dividends paid - - - - - -15,172 -15,172
Stock dividends 4 -4 - - - 6,518 6,518
Share-based payments - -116 - - - 355 239
Other changes - - - - -20 -614 -634
Total 4 -120 - - -20 -8,913 -9,049
               
Balance as at 31 December 2015 253 44,264 1,079 -2,473 5,005 257,813 305,941
  Share capital Share premium Hedging reserve Translation reserve Other legal reserve Other reserve Total equity
Balance as at 1 January 2016 253 44,264 1,079 -2,473 5,005 257,813 305,941
               
Total comprehensive income
Net profit - - - - - 32,292 32,292
Other comprehensive income - - 2,136 -6,359 - -5,473 -9,696
Total comprehensive income - - 2,136 -6,359 0 26,819 22,597
 
Transactions with owners of the Company
Dividends paid - - - - - -18,215 -18,215
Stock dividends 5 -5 - - - 9,422 9,422
Share-based payments - -525 - - - 464 -61
Other changes - - - - 1,975 -2,278 -303
Total 5 -530 - - 1,975 -10,607 -9,157
               
Balance as at 31 December 2016 258 43,734 3,215 -8,832 6,980 274,025 319,380

5.6 Notes to the consolidated financial statements

For the financial year ended 31 December 2016

1. General information

Accell Group N.V. (“Accell Group”) in Heerenveen, the Netherlands, is the holding company of a group of legal entities. An overview of the data required pursuant to articles 2:379 and 2:414 of the Netherlands Civil Code is enclosed in note 11. Subsidiaries of the financial statements. Accell Group with its group of companies is internationally active in the design, development, production, marketing and sales of innovative and high-quality bicycles, bicycle parts and accessories.

2. Basis of preparation

A. Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRSs) and with Section 2:362(9) of the Netherlands Civil Code.

The consolidated financial statements were authorized for issue by the Board of Directors on 9 March 2017.

B. Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following items, which are measured on an alternative basis on each reporting date:

  • derivative financial instruments measured at fair value: measured at fair value through other comprehensive income: measurement at fair value;
  • the net defined benefit obligation (asset): measured at the fair value of plan assets, less the present value of the defined benefit obligation.

C. Functional and presentation currency

These consolidated financial statements are presented in euro, which is Accell Group’s functional currency.

D. Use of estimates

In preparing these consolidated financial statements, Accell Group has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 December 2016 is included in the following notes:

  • Note 17 – measurement of defined benefit obligations: key actuarial assumptions;
  • Note 19 – recognition of deferred tax assets: availability of future taxable profit against which tax losses carried forward can be used;
  • Notes 9 and 10 – impairment test: key assumptions underlying recoverable amounts, including the recoverability of development costs;
  • Note 20 – recognition and measurement of provisions: key assumptions about the likelihood and magnitude of an outflow of resources.

Measurement of fair values

A number of Accell Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. When measuring the fair value of an asset or a liability, Accell Group uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

  • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
  • Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
  • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. Accell Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in the following notes:

  • Note 18 – share-based payment arrangements;
  • Note 22 – financial instruments.

E. Changes in accounting policies

Other than the change in accounting policy related to ‘Offsetting of financial assets and financial liabilities’, as described below, there were no changes in accounting policies, effective from 1 January 2016, that materially impact Accell Group.

Offsetting of financial assets and financial liabilities

IAS 32 ‘Financial instruments: Presentation’ prescribes that a financial asset and a financial liability shall be offset and the net amount shall be presented in the statement of financial position when, and only when, an entity (a) currently has the legally enforceable right to set off the recognized amounts and (b) intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

In April 2016, an Agenda Rejection Notice (‘ARN’) was published by the IFRS Interpretations Committee (IFRIC) on balance sheet offsetting of notional cash pooling products. The issue in the ‘ARN’ relates to the question whether certain cash pooling arrangements would meet the requirements for offsetting under IAS 32. IFRS itself is principle-based and does not describe in which manner the intention to settle on a net basis shall be demonstrated. In the ‘ARN’ IFRIC provided for further clarification that the transfer of balances into a netting account should occur at the period end to demonstrate an intention to settle on a net basis.

As a result of the ‘ARN’ Accell Group as of 2016 reports gross the cash balances and bank overdrafts within the notional cash pooling arrangements. Accell Group has the legally enforceable right to offset the balances in the notional cash pooling arrangements, but has not settled all balances at the period end and as result could not demonstrate the intention to settle on a net basis.

Accell Group applies the change in accounting policy retrospectively; the comparative figures have been adjusted. At balance sheet date both cash and bank overdrafts include balances of € 38.4 million (2015: €158.2 million) for which offset arrangements apply, but for which no offsetting is allowed based on the ‘ARN’. Cash, bank overdrafts, total assets and total liabilities as result increase with € 38.4 million in 2016 (2015: € 158.2 million). Accell has settled a significant part of the outstanding balances at period end 2016; a result there are significant smaller balances compared to 2015.

The change in accounting policy results in increased balance sheet totals, but has no impact on Accell Group’s equity or the financial covenants in the financing agreement. For this reason Accell Group qualifies these changes not as material and therefore did not include an additional opening balance sheet of 1 January 2015.

3. Significant accounting policies

Accell Group has consistently applied the following accounting policies to all periods presented in these consolidated financial statements.

Certain comparative amounts in the consolidated balance sheet and income statement have been reclassified or re-represented, either as a result of a change in the intention to settle certain deferred tax assets and deferred tax liabilities simultaneously (refer to note 19 Deferred taxes) or a change in the classification of certain personnel expenses during the current year (refer to note 2. Personnel expenses and note 4. Other operating expenses). The comparative figures in the information on reportable segments (refer to note 1. Operational segments) are reclassified and re-represented as well due to changes. As of 2016 equity-accounted investees and the related income are allocated to the operational segments. The financing on the other hand is no longer allocated to the operational segments.

A. Basis of consolidation

i. Business combinations

Accell Group accounts for business combinations using the acquisition method when control is transferred to Accell Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.

Any contingent consideration payable is measured at fair value at the acquisition date. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognized in profit or loss.

ii. Subsidiaries

Subsidiaries are entities controlled by Accell Group. Accell Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

iii. Loss of control

When Accell Group loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, and any non-controlling interests and other components of equity. Any resulting gain or loss is recognized in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

iv. Interests in equity-accounted investees

Accell Group's interests in equity-accounted investees comprise interests in associates and a joint venture.

Associates are those entities in which Accell Group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which Accell Group has joint control, whereby Accell Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Interests in associates and the joint venture are accounted for using the equity method. They are recognized initially at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include Accell Group’s share of the profit or loss and OCI of equity-accounted investees, until the date on which significant influence or joint control ceases.

v. Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of Accell Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

B. Revenue

Revenue from the sale of goods is recognized when the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. Revenue is measured net of returns, trade discounts and volume rebates.

The timing of the transfer of risks and rewards varies depending on the individual terms of the sales agreement. For sales of bicycles, parts and accessories, usually transfer occurs when the product is delivered to the customer’s warehouse; however, for some international shipments the transfer occurs on loading the goods onto the relevant carrier at the port. Generally, for such products the customer has no right of return.

C. Finance income and finance costs

The Group’s finance income and finance costs include:

  • interest income;
  • interest expense;
  • bank fees;
  • dividend income;
  • the foreign currency gain or loss on financial assets and financial liabilities;
  • the gain on the remeasurement to fair value of any pre-existing interest in an acquiree in a business combination;
  • (reversal of) impairment losses recognized on financial assets (other than trade receivables).

Interest income or expense is recognized using the effective interest method. Dividend income is recognized in profit or loss on the date that Accell Group’s right to receive payment is established.

D. Foreign currency

i. Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of group companies at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated into the functional currency at the exchange rate when the fair value was determined. Foreign currency differences are generally recognized in profit or loss. Non-monetary items that are measured based on historical cost in a foreign currency are not translated.

However, foreign currency differences arising from the translation of qualifying cash flow hedges to the extent the hedges are effective are recognized in OCI.

ii. Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into euro at exchange rates at the reporting date. The income and expenses of foreign operations are translated into euros at the exchange rates at the dates of the transactions.

Foreign currency differences are recognized in OCI and accumulated in the translation reserve, except to the extent that the translation difference is allocated to non-controlling interests.

When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If Accell Group disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When Accell Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

If the unwinding of a monetary balance, which is either collectable from or payable to a foreign operation is neither planned nor probable in the foreseeable future, than the foreign currency differences of this monetary balance is considered part of the net investment in the foreign operation. Accordingly these currency differences are included in other comprehensive income and recorded in the translation reserve.

iii. Hedge of a net investment in foreign operation

Accell Group applies no hedge accounting to foreign currency differences arising between the functional currency of the foreign operation and Accell Group’s functional currency (euro).

E. Employee benefits

i. Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if Accell Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

ii. Share-based payment transactions

The grant-date fair value of equity-settled share-based payment awards granted to employees is generally recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

iii. Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.

iv. Defined benefit plans

Accell Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for Accell Group, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurement of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in OCI. Accell Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. Accell Group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

v. Other long-term employee benefits

Accell Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss in the period in which they arise.

F. Income tax

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.

i. Current tax

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

Current tax assets and liabilities are offset only if certain criteria are met.

ii. Deferred tax

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:

  • temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
  • temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
  • taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the probability of future taxable profits improves.Unrecognized deferred tax assets are reassessed at each reporting date and recognized to the extent that it has become probable that future taxable profits will be available against which they can be used.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which Accell Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset only if certain criteria are met.

G. Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the first-in first-out (fifo) principle. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

H. Property, plant and equipment

i. Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

ii. Depreciation

Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognized in profit or loss. Land is not depreciated.

The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

Buildings 40 year        
Plant and equipment 3 - 12 year        

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

I. Intangible assets and goodwill

i. Recognition and measurement

Goodwill

Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.

Trademarks

Trademarks, commonly arising on the acquisition of subsidiaries, are measured at cost less accumulated impairment losses. The acquired trademarks are positioned in the middle and upper segments and mostly have a long history and tradition in the local and international markets in which they operate. The trademarks have an indefinite useful life; based on an analysis of all the relevant factors there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for Accell Group.

Research and development

Expenditure on research activities is recognized in profit or loss as incurred. Development expenditure is capitalized only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and Accell Group intends to and has sufficient resources to complete development and to use or sell the asset. Otherwise, it is recognized in profit or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost less accumulated amortization and any accumulated impairment losses.

Other intangible assets

Other intangible assets, including customer relationships, patents and trademarks, that are acquired by Accell Group and have finite useful lives are measured at cost less accumulated amortization and accumulated impairment losses.

ii. Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

iii. Amortization

Amortization is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognized in profit or loss. Goodwill and trademarks are not amortized.

The estimated useful lives for current and comparative periods are as follows:

Customer lists 10 - 20 year        
Licenses 10 year        
Patents 5 year        
Software 3 - 5 year        
Development expenditure 3 - 5 year        

 

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

J. Financial instruments

Accell Group classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, held-to-maturity financial assets and loans and receivables.

Accell Group classifies non-derivative financial liabilities into the following categories: financial liabilities at fair value through profit or loss and other financial liabilities.

i. Non-derivative financial assets and financial liabilities – recognition and derecognition

Accell Group initially recognizes loans and receivables and debt securities issued on the date when they are originated. All other financial assets and financial liabilities are initially recognized on the trade date when Accell Group becomes a party to the contractual provisions of the instrument.

Accell Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognized financial assets that is created or retained by Accell Group is recognized as a separate asset or liability.

Accell Group derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire.

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, Accell Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

ii. Non-derivative financial assets – measurement

Financial assets at fair value through profit or loss

A financial asset is classified as at fair value through profit or loss if it is classified as held for trading or is designated as such on initial recognition. Directly attributable transaction costs are recognized in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein, which takes into account any dividend income, are recognized in profit or loss.

Held-to-maturity financial assets

These assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method.

Loans and receivables

These assets are initially recognized at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method.

iii. Non-derivative financial liabilities – measurement

Non-derivative financial liabilities are initially recognized at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortized cost using the effective interest method.

iv. Derivative financial instruments and hedge accounting

Accell Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Derivatives are initially measured at fair value; any directly attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognized in profit or loss.

Cash flow hedges

When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognized in OCI and accumulated in the hedging reserve. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss.

The amount accumulated in equity is retained in OCI and reclassified to profit or loss in the same period or periods during which the hedged forecast cash flows affects profit or loss or the hedged item affects profit or loss. In the event that the hedge results in the inclusion of a non-financial asset or non-financial liability, then the amounts that were included in OCI are transferred to the initial cost of the related asset or liability (IAS 39.98b).

If the forecast transaction is no longer expected to occur, the hedge no longer meets the criteria for hedge accounting, the hedging instrument expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the amount accumulated in equity is reclassified to profit or loss.

v. Share capital

Ordinary shares

Incremental costs directly attributable to the issue of ordinary shares, net of any tax effects, are recognized as a deduction from equity. Income tax relating to transaction costs of an equity transaction are accounted for in accordance with IAS 12.

K. Impairment

i. Non-derivative financial assets

Financial assets not classified as at fair value through profit or loss, including an interest in an equity-accounted investee, are assessed at each reporting date to determine whether there is objective evidence of impairment.

Objective evidence that financial assets are impaired includes:

  • default or delinquency by a debtor;
  • restructuring of an amount due to Accell Group on terms that Accell Group would not consider otherwise;
  • indications that a debtor or issuer will enter bankruptcy;
  • adverse changes in the payment status of borrowers or issuers.

For an investment in an equity security, objective evidence of impairment includes a significant or prolonged decline in its fair value below its cost.

Financial assets measured at amortized cost

Accell Group considers evidence of impairment for these assets at both an individual asset and a collective level. All individually significant assets are individually assessed for impairment. Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet individually identified. Assets that are not individually significant are collectively assessed for impairment. Collective assessment is carried out by grouping together assets with similar risk characteristics. In assessing collective impairment, Accell Group uses historical information on the timing of recoveries and the amount of loss incurred, and makes an adjustment if current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested by historical trends.

An impairment loss is calculated as the difference between an asset's carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account. When Accell Group considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, then the previously recognized impairment loss is reversed through profit or loss.

Equity-accounted investees

An impairment loss in respect of an equity-accounted investee is measured by comparing the recoverable amount of the investment with its carrying amount. An impairment loss is recognized in profit or loss, and is reversed if there has been a favorable change in the estimates used to determine the recoverable amount.

ii. Non-financial assets

At each reporting date, Accell Group reviews the carrying amounts of its non-financial assets (other than biological assets, investment property, inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and trademarks are tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash generating units. Goodwill arising from a business combination is allocated to (groups of) cash generating units that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash generating unit.

An impairment loss is recognized if the carrying amount of an asset or cash generating unit exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the cash generating unit, and then to reduce the carrying amounts of the other assets in the cash generating unit on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

L. Provisions

Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

4. New and revised standards not yet adopted

A number of new standards are mandatorily effective for accounting periods beginning after 1 January 2016 and early adoption is allowed. In respect of these consolidated financial statements Accell Group decided not to opt for early adoption for the following standards:

  • IFRS 9 Financial Instruments (effective from the year ending 31 December 2018);
  • IFRS 15 Revenue from Contracts with Customers (effective from the year ending 31 December 2018);
  • IFRS 16 Leases (effective from the year ending 31 December 2019).

The new standards IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue from Contracts with Customers’ are expected to have no material impact on the valuation and classification of assets and liabilities of Accell Group nor on its income statement or cash flows. IFRS 16 ‘Leases’, replacing IAS 17 ‘Leases’, will primarily affect the accounting of leases, and will result in the recognition of almost all leases on the balance sheet.

5.7 Notes

1.  Operating segments

Accell Group has the operational segments Bicycles and Parts & accessories. The risk and return profile of each segment is determined by the nature of the activities and products that are produced.

Information related to each reportable segment is set out below. The earnings before interest and taxes is used to measure the performance because management believes that this information is the most relevant in evaluating the results of the respective segments relative to other entities that operate in the same industries.

A. Information about reportable segments

  Bicycles Parts & accessories
  2016 2015 2016 2015
  € x 1,000 € x 1,000 € x 1,000 € x 1,000
External revenues 785,536 719,021 262,616 267,381
Inter-segment revenue 32,243 25,825 19,958 22,033
Segment revenue 817,779 744,846 282,574 289,414
Segment profit (loss) before interest and tax 1) 56,385 60,537 17,493 15,622
Depreciation and amortization 7,350 6,916 2,901 2,529
Share of profit (loss) of equity-accounted investees 571 282 - -1,212
Segment assets 1) 537,171 549,078 146,508 170,834
Equity-accounted investees 6,947 4,981 - -
Capital expenditure 9,876 6,883 1,639 5,036
Segment liabilities 1) 187,126 165,314 33,865 35,070
1) The presentation of the comparative figures is adjusted in the comparative figures 2015 for presentation purposes. A reference is made to the significant accounting policies for a note on these changes.

B. Reconciliations of information on reportable segments

  2016 2015
  € x 1,000 € x 1,000
i. Revenues    
Total revenue of reportable segments 1,100,353 1,034,260
Elimination of inter-segment revenue -52,201 -47,858
Consolidated revenue 1,048,152 986,402
 
ii. Profit before tax    
Total profit (loss) before interest and tax of the reportable segments 1) 73,878 76,159
Unallocated amounts:    
- Interest income 679 616
- Interest expenses (incl. financing cost) -8,952 -9,689
- Other corporate expenses -12,910 -18,555
Consolidated profit before tax 52,695 48,531
 
iii. Assets    
Total assets for reportable segments 1) 683,679 719,912
Other unallocated amounts 1) 58,134 170,072
Consolidated total assets 741,813 889,984
 
iv. Liabilities    
Total liabilities of reportable segments 1) 220,991 200,384
Other unallocated amounts 1) 201,442 383,659
Consolidated total liabilities 422,433 584,043
1) The presentation of the comparative figures is adjusted in the comparative figures 2015 for presentation purposes. A reference is made to the significant accounting policies for a note on these changes.

 

Geographical information

Geographical segments are based on the physical location of the assets. The sales to external customers reported in the geographical segments are based on the geographical location of the customers. 

  Net turnover Non-current assets 1)
  2016 2015 2016 2015
  € x 1,000 € x 1,000 € x 1,000 € x 1,000
 
The Netherlands 223,608 222,366 33,792 31,677
Germany 265,937 227,271 50,394 50,188
Other Europe 404,719 367,634 73,556 72,249
North America 118,577 138,308 14,787 13,265
Other countries 35,311 30,823 10,588 10,618
Total 1,048,152 986,402 183,117 177,997
1) The deferred tax assets and the net defined benefit asset are, in accordance with IFRS 8.33b, excluded from non-current assets.

 

2.  Personnel costs

Personnel costs are comprised of the following:

  2016 2015
  € x 1,000 € x 1,000
 
Wages and salaries 96,457 97,849
Social security charges 13,649 13,600
Pension contributions 6,344 5,305
Profit sharing 985 2,211
Share based payments 464 355
Other personnel costs 1) 3,882 3,574
Personnel expenses 121,781 122,894
1) The comparative figures 2015 have been adjusted due to a presentation adjustment from other operating expenses to personnel expenses.

 

3.  Depreciation

Depreciation comprise the following:

  2016 2015
  € x 1,000 € x 1,000
 
Depreciation of intangible assets 909 964
Impairment losses on intangible assets 669 546
Depreciation of property, plant and equipment 8,770 8,575
Capital gain on sale of tangible fixed assets -8 -27
Depreciation costs 10,340 10,058

4.  Other operating expenses

  2016 2015
  € x 1,000 € x 1,000
 
Selling expenses 65,754 65,179
General and administrative expenses 18,245 20,810
Lease and contingent rent 7,825 8,013
Research & delelopment expenses 1,770 1,179
Other 28,693 27,633
Other operating expenses 1) 122,287 122,814
1) The comparative figures 2015 have been adjusted due to a presentation adjustment from personnel expenses to other operating expenses. The one-off expenses Taiwan of € 4 million is included in other operating expenses as well.

 

5.  Net finance cost

Financial income and expenses comprise the following:

  2016 2015
  € x 1,000 € x 1,000
 
Interest income -679 -616
Interest expenses 7,502 7,650
Bank fees 2,334 2,272
Currency results -884 -233
Net finance cost 8,273 9,073



The policy regarding interest and currency risks is covered in note 22. Financial instruments - fair values and risk management.

6.  Taxes

The effective corporate income tax charge comprises the following:

  2016 2015 2016 2015
  € x 1,000 € x 1,000 % %
 
Current taxes 18,973 17,085    
Deferred taxes 1,430 -840    
Taxes in income statement 20,403 16,245    
         
Taxes based on the weighted average applicable rate 13,158 12,108 25.0 24.9
Non-deductible amounts 1,259 1,411 2.4 2.9
Participation exemption -199 -106 -0.4 -0.2
Benefits from tax facilities -1,284 -1,029 -2.4 -2.1
Deferred tax assets not carried forward 5,214 4,988 9.9 10.3
Adjustment of current taxes of prior years 465 -51 0.9 -0.1
Adjustment of deferred taxes of prior years 1,790 -1,076 3.4 -2.2
Taxes in income statement 20,403 16,245 38.7 33.5


The effective tax rate consists of the reported tax charge for the current year, divided by the profit before taxes. The effective tax rate in 2016 amounts to 38.7% (2015: 33.5%). The tax rate was negatively impacted by not recognizing deferred taxes assets from new tax losses and the derecognition of deferred tax assets carried forward in North America.

7.  Earnings per share

The calculation of earnings per share and of diluted earnings per share is based on the following data:

  2016 2015
 
Profit for earnings per share (net profit accruing to Accell Group N.V.'s shareholders) € 32,292,400 € 32,286,000
     
Number of issued shares as per balance sheet date 25,834,236 25,270,327
     
Weighted average number of shares for the earnings per share 25,623,405 25,116,249
Potential impact of share options and conditional shares on the issuance of shares 167,166 151,396
     
Weighted average number of issued shares (diluted) 25,790,571 25,267,645
     
Reported earnings per share € 1.26 € 1.29
Reported earnings per share (diluted) € 1.25 € 1.28
     
Adjustment factor according to IAS 33 1.0000 0.9792
     
Earnings per share financial year € 1.26 € 1.26
Earnings per share financial year (diluted) € 1.25 € 1.25


8.  Property, plant and equipment

Changes in property, plant and equipment are as follows:

  Land and buildings Machinery and equipment Total property. plant and equipment
  € x 1,000 € x 1,000 € x 1,000
Cost
Balance at 1 January 2015 65,234 105,258 170,492
Investments 445 10,084 10,529
Investments as a result of business combinations - 292 292
Divestments -920 -180 -1,100
Currency translation differences 316 238 554
Balance at 1 January 2016 65,075 115,692 180,767
Investments 1,157 10,441 11,598
Investments as a result of business combinations - - -
Divestments -5 -102 -107
Currency translation differences -587 -233 -820
Balance at 31 December 2016 65,640 125,798 191,438
 
Accumulated depreciation
Balance at 1 January 2015 19,837 82,584 102,421
Depreciation 1,198 7,377 8,575
Balance at 1 January 2016 21,035 89,961 110,996
Depreciation 1,236 7,534 8,770
Balance at 31 December 2016 22,271 97,495 119,766
 
Carrying amount
Balance at 1 January 2016 44,040 25,731 69,771
Balance at 31 December 2016 43,369 28,303 71,672

9.      Goodwill

Changes in goodwill are as follows:

  2016 2015
  € x 1,000 € x 1,000
Cost
Balance at 1 January 60,495 57,867
Investments as a result of business combinations 315 1,021
Currency translation differences 598 1,607
Balance at 31 December 61,408 60,495
Accumulated impairments
Balance at 1 January 2,306 2,306
Impairments - -
Balance at 31 December 2,306 2,306
Carrying amount
Balance at 1 January 58,189 55,561
Balance at 31 December 59,102 58,189

 

Goodwill is tested annually for impairment or more frequently if there are indications of impairment losses. For the purposes of this test, goodwill is allocated to cash-generating units. Allocation is made to the (group of) cash-generating units that is expected to benefit from the business combination from which the goodwill arose. The cash-generating units used in the assessment correspond with the operational segments.


The carrying amount of goodwill (with an indefinite useful life) on segment level is divided as follows:

  2016 2015
  € x 1,000 € x 1,000
 
Bicycles 41,181 40,494
Parts & accessories 17,921 17,695
Balance at 31 December 59,102 58,189

 

The following main assumptions are used in determining the value in use of the segments Bicycles and Parts & accessories and are based on historical experiences in specific markets and countries:

  • turnover growth, based on the historical average of the last 3 years, for Bicycles respectively Parts & accessories of 10.0% (2015: 10.1%) respectively of 5.4% (2015: 3.8%);
  • operating margin, based on the average of the last 3 years or current year if lower, for Bicycles respectively Parts & accessories of 6.8% (2015: 5.7%) respectively of 4.5% (2015: 4.1%);
  • working capital, based on the historical average ratios in relation to turnover in the last 3 years or current year if better, for Bicycles respectively Parts & accessories of 29.5% (2015: 34%) respectively of 25.5% (2015: 27%);
  • a perpetual growth rate of 1.4% (2015: 1.7%) is used for the estimates of the future cash flow after the initial period of 5 years;
  • a post-tax weighted average cost of capital of 7.6% (2015: 7.4%) was used for the discounting of the cash flows. The discounting rate applied corresponds with a pre-tax weighted average cost of capital of 9.8% (2015: 9.6%). 

The impairment test in 2016 shows a substantial headroom in goodwill. Accell Group believes that any reasonably possible change in the key assumptions on which the recoverable amount is based would not cause the carrying amount to exceed the recoverable amount of the cash-generating units.

10.      Other intangible fixed assets

The changes in other intangible fixed assets are as follows:

  Trademarks Customer lists and licenses Other Total other intangible assets
  € x 1,000 € x 1,000 € x 1,000 € x 1,000
Cost
Balance at 1 January 2015 39,162 6,045 3,929 49,136
Investments - - 1,082 1,082
Investments as a result of business combinations - - - -
Currency translation differences 2,671 -186 42 2,527
Balance at 1 January 2016 41,833 5,859 5,053 52,745
Investments - - 1,225 1,225
Investments as a result of business combinations - - - -
Currency translation differences 319 -192 27 154
Balance at 31 December 2016 42,152 5,667 6,305 54,124
Accumulated depreciation
Balance at 1 January 2015 2,804 562 2,813 6,179
Depreciation - 396 568 964
(Reversal of) Impairment losses 546 - - 546
Balance at 1 January 2016 3,350 958 3,381 7,689
Depreciation - 105 804 909
(Reversal of) Impairment losses -73 742 - 669
Balance at 31 December 2016 3,277 1,805 4,185 9,267
Carrying amount
Balance at 1 January 2016 38,483 4,901 1,672 45,056
Balance at 31 December 2016 38,875 3,862 2,120 44,857


As per 31 December 2016 trademarks mainly consist of the valuation of the brands Raleigh and Diamondback from the acquisition of Raleigh Cycle (€ 24.4 million) as well as Ghost (€ 9.4 million). Furthermore brands of SBS, Brasseur, Hellberg, Currie and Van Nicholas are valued for a total amount of € 5.1 million.

 

The carrying amount of the trademarks (with indefinite useful life) at segment level is specified as follows:

  2016 2015
  € x 1,000 € x 1,000
 
Bicycles 38,375 37,983
Parts & accessories 500 500
Balance at 31 December 38,875 38,483


The trademarks are tested annually for impairment, or more frequently if there are indications of impairment losses. The principal assumptions used in the annual impairment test include the budgeted expectations regarding the turnover of the trademarks, royalty fees of the trademarks and discounting of the cash flows applying the post-tax weighted average cost of capital of 7.6% (2015: 7.4%), which corresponds with a pre-tax weighted average cost of capital of 9.8% (2015: 9.6%). For the trademarks generating cash flows in North-America a post-tax weighted average cost of capital of 8.4% (2015: 8.3%), which corresponds with a pre-tax weighted average cost of capital of 9.6% (2015: 9.4%). This testing has led to no impairment loss in 2016.

The customer lists and licenses consist of the customer list of Comet, the Turkish dealer network and an extension of a licensing agreement. The useful life of these respective assets is estimated at 20 years, 20 years and 10 years and are amortized as from 2015, 2012 and 2013 onwards. During the year an impairment loss amounting to € 0.6 million was recognized in respect of the Finnish customer relationship; due to a change of ownership the business ceased.

The other intangible fixed assets relate to development expenditure in connection with the patents and development, which mainly relate to development of electric bicycles and software.

Amortization expenses and impairment losses are accounted for in the income statement within depreciation.

 

11.      Subsidiaries

The consolidated financial statements 2016 include Accell Group N.V., in Heerenveen, as well as the financial information of the following companies.

  Participation Percentage
Consolidated subsidiaries
Accell Bisiklet A.S., Manisa, Turkey 100%
Accell Hunland Kft, Toszeg, Hungary 100%
Accell IT Services B.V., Heerenveen, the Netherlands 100%
Accell Nederland B.V., Heerenveen, the Netherlands 100%
Accell North America Inc, Kent, Washington, United States of America 100%
Accell Suisse AG, Alpnach Dorf, Switzerland 100%
ATC Ltd (Taiwan Branch), Taipei, Taiwan 100%
Comet Distribuciones Commerciales S.L., Urnieta, Spain 100%
Currie Tech Corp., Simi Valley, Californië, United States of America 100%
Cycle Services Nordic ApS, Odense, Danmark 100%
Cycles Lapierre S.A.S., Dijon, France 100%
Cycles France-Loire S.A.S., Saint-Cyprien, France 100%
Delta Metal Technology Ltd, Shenzhen, China 100%
E. Wiener Bike Parts GmbH, Sennfeld, Germany 100%
Etablissement Th. Brasseur S.A., Liège, Belgium 100%
Ghost-Bikes GmbH, Waldsassen, Germany 100%
Raleigh UK Ltd, Nottingham, United Kingdom 100%
Swissbike Vertriebs GmbH, Alpnach Dorf, Switserland 100%
Tunturi-Hellberg Oy Ltd, Turku, Finland 100%
Vartex AB, Varberg, Sweden 100%
Von Backhaus ApS, Odense, Denmark 1) 100%
Winora Staiger GmbH, Sennfeld, Germany 100%
1) As of April 2016 Von Backhaus ApS is a consolidated subsidiary (before an associate of 40%).


Subsidiaries that are immaterial to the consolidated financial statements are not included in the overview above. A complete list of subsidiaries is filed with the Trade Register of the Chamber of Commerce in Leeuwarden, the Netherlands.

  2016 2015
Equity-accounted investees
Jalaccell OÜ, Tallinn, Estonia (i) 35% 35%
Babboe B.V., Utrecht, the Netherlands (ii) 38% 38%
Atala SpA, Monza, Italy (iii) 50% 50%
Raleigh SA (Pty) Ltd, Kensington, South Africa (iv) 20% 20%
Beeline Bikes Inc., Delaware, United States of America (v) 19% 0%
(i) Jalaccell OÜ is a joint venture of Accell Fitness Division B.V. set up for the assembly and storage of fitness equipment.
(ii) Babboe B.V. is an associate that is active in the marketing and sales of carrier bicycles.
(iii) Atala SpA is a joint venture active in the development and sales of bicycles under its own brands.
(iv) Raleigh SA (Pty) Ltd is an associate that is active in the marketing and sales of bicycles.
(v) Beeline Bikes, Inc. is an associate that is active in the reparing and sales of bicycles

 

These associates and joint ventures are of strategic nature; the voting rights are equal to the percentage interest held.

The changes in the non-consolidated companies are as follows:

  2016 2015
  € x 1,000 € x 1,000
 
Balance at 1 January 4,981 4,991
Investments 1,516 -
Dividend -218 -292
Net income 571 282
Currency translation differences 97 -
Balance at 31 December 6,947 4,981


Summary of the financial data for the interests in non-consolidated companies:

  2016 2015
  € x 1,000 € x 1,000
 
Total assets 12,262 14,341
Total liabilities 7,973 10,722
Total turnover 24,222 20,132
Total share in net income and impairments thereof 571 -930

 

12.      Inventories



  2016 2015
  € x 1,000 € x 1,000
 
Components for the purpose of production 145,460 164,374
Work in process 2,882 3,091
Trading and finished products 173,210 171,219
Balance at 31 December 321,553 338,684


During 2016 inventories were written down by € 5.2 million to lower net realizable value (2015: € 3.3 million). At balance sheet date inventories with a carrying amount of approximately € 16,6 million (2015: € 10,5 million) are valued at lower net realizable value. Inventories furthermore include goods in transit of € 62.2 million (2015: € 59.3 million) related to shipped goods for which Accell Group had acquired the economic ownership, but which have not yet been received.

 

The costs of inventory that are recorded as an expense during the financial year amounts to € 778.9 million (2015: € 719.2 million).

13.      Trade receivables


  2016 2015
  € x 1,000 € x 1,000
 
Trade receivables 147,371 142,542
Provision for impairment of receivables -9,516 -7,972
Balance at 31 December 137,855 134,570


The nominal value of the trade receivables is considered close to equal to the fair value. Trade receivables are non-interest-bearing and, depending on the season, are governed by a 30-150 day term of payment. The provision for credit losses is determined on the basis of an individual assessment of overdue trade receivables. The policy regarding credit risks is covered in note 22. Financial instruments - fair values and risk management.

14.      Cash, cash equivalents and bank overdrafts

  2016 2015
  € x 1,000 € x 1,000
 
Cash and cash equivalents 49,421 172,479
Bank overdrafts -87,901 -185,844
Cash and bank overdrafts in the cash flow statement -38,480 -13,365


Accell Group has a global cash-pooling programme in place. Both cash and bank overdrafts include € 38.4 million (2015: € 158.2 million) subject to offset-arrangements under this programme. Based on a clarification of the IFRS Interpretation Committee (IFRIC) offsetting of these balances is not allowed.

 

15.      Equity

The consolidated equity is equal to the equity in the company financial statements. The notes and movement schedules of equity are included in the company financial statements.

16.      Interest-bearing loans

This note provides information about the contractual terms and conditions of the outstanding interest-bearing loans and borrowings. For more information about Accell Group’s exposure to interest rate risk a reference is made to note 22. Financial instruments – fair values and risk management.


  2016 2015
  € x 1,000 € x 1,000
 
Secured bank loans 47,158 58,888
Other bank loans 15 75
Non-current interest-bearing liabilities 47,173 58,963
Current portion secured bank loans 12,500 12,500
Current portion other bank loans 69 141
Total current portion of interest-bearing loans 12,569 12,641
Revolving credit facility 49,050 115,000
Bank overdrafts 87,901 185,844
Total other interest-bearing liabilities 136,951 300,844
Current interest-bearing liabilities 149,520 313,485


In 2013 Accell Group concluded a financing agreement with a syndicate of six (international) banks for a total group financing. The participating banks in the syndicate are ABN AMRO Bank, Deutsche Bank, ING Bank, Rabobank, BNP Paribas and HSBC. The original financing consisted of € 125 million of secured bank loans and a revolving credit facility of € 175 million (working capital financing), of which € 65 million was a season facility. In the period 2015-2016 the working capital financing has been extended with € 50 million from the so-called ‘accordion facility’, which is part of the financing agreement. On a portion of the secured bank loans regular installments are made of € 12.5 million per annum.

Existing guidelines for financial ratios are:

  • Leverage ratio, that is determined by net debt divided by normalized EBITDA. The leverage ratio shall not exceed 2.25 (quarterly).
  • Solvency ratio, that is determined by net assets divided by balance sheet total, both adjusted for intangible fixed assets and the related deferred taxes. The solvency ratio shall equal or exceed 30% (semi-annually).
  • Interest coverage ratio, that is determined by operating result (EBIT) divided by net interest expense and shall not be-between zero and 5.5 (quarterly).

Net debt means the total amount of interest-bearing loans via banks or other financial institution’s, the revolving credit facility and bank overdrafts less cash and cash equivalents.

EBITDA means operating result (EBIT) after adding back any amount attributable to the amortization or depreciation of assets and including income from equity-accounted investees. Normalized EBITDA, in respect of a relevant period, EBITDA for that relevant period adjusted by:

  • including EBITDA of a business combination acquired during the relevant period for that part of the relevant period­ prior to its becoming a business combination;
  • excluding EBITDA attributable to any member of Accell Group (or to any business) disposed of during the relevant period­ prior to its disposal;
  • including, at the election of Accell Group, extraordinary costs incurred in the relevant period including reorganization expenses, impairments of fixed assets and expenses related to the disposal of assets of discontinued operations.

Net interest expense means the net amount of financial income and expense less interest, commission, fees, discounts and other finance charges accrued in accordance with the applicable accounting standards during that relevant period.

Accell Group fully complies with the terms and conditions of the covenants as per 31 December 2016 as well as per 31 December 2015.

The terms and conditions of outstanding interest-bearing bank loans are as follows:

          2016   2015
  Currency Nominal interest rate Year of maturity Face value Carrying amount Face value Carrying amount
        € x 1,000 € x 1,000 € x 1,000 € x 1,000
Secured bank loan EUR 2.6% 2018 45,750 44,908 58,250 56,688
Secured bank loan EUR 5.8% 2022 15,000 14,750 15,000 14,700
Other bank loans EUR 3.0% 2018 84 84 216 216
Total interest-bearing loans       60,834 59,742 73,466 71,604

 

The provided securities concern the trade receivables and inventories of the Dutch, German, English and US group companies to the lenders. The provided securities are equal to the sum of the secured bank loans (nominal value), the revolving credit facility and the (net) bank overdrafts held at the syndicate bank totaling to €146.6 million. Accell Group is not allowed to pledge these assets as security for other borrowings or to sell them to another entity as method of raising financial indebtedness.

17.      Defined benefit pension plans and other long-term employee benefits

  

  2016 2015
  € x 1,000 € x 1,000
 
Net defined benefit asset -14,489 -20,186
Total employee benefit asset -14,489 -20,186
Net defined benefit obligation 6,583 6,170
Other long-term employee benefits 2,278 2,477
Total employee benefit liabilities 8,861 8,647

 

Defined benefit plan

Accell Group funds defined benefits for qualifying employees. The main defined benefit plan is the plan in the United Kingdom (UK), which accounts for approximately 92% of the defined benefit obligation and for more than 99% of the plan assets. The UK plan is subject to UK laws and is administered by a separate fund that is legally separated from the UK group company. The trustees of this fund are appointed by the company. Pension benefits are related to the member’s final salary at retirement and their length of service. Since December 2002, the defined benefit section of this pension scheme has been closed to future accrual. On the basis of the deed and rules of the UK plan the company has an unconditional right in the form of refunds when there is a surplus and the fund has no further obligations or in case when there is a surplus at the time when the plan is wound up.

The UK plan exposes the company to actuarial risks such as market risk, interest rate risk and inflation risk. The scheme does not expose the company to any unusual scheme-specific risk. The scheme’s investment strategy is to invest approximately 25% in matching assets (index related UK government bonds gilts and investment property bonds) and approximately 75% in return seeking assets (being diversified growth funds and bond portfolios). This strategy reflects the scheme’s risk profile and the trustees’ and company’s attitude to risks. The returns from the return seeking assets are not achieved solely by direct investment in return seeking assets, but the equity linked bond portfolio allow exposure to equity type returns using futures backed by collateral in the form of index-linked UK government bonds.

In addition, Accell Group sponsors funded defined benefit plans for qualified employees in Taiwan, a fixed unfunded defined benefit plan in Germany and an unfunded defined benefit plan in Hong Kong. The defined benefit plans of Accell Group have no contributions from employees anymore, because the plans are mainly frozen.

The actuarial calculations pursuant to IAS 19 were carried out at 31 December 2016 by actuaries of certified actuarial firms. The principal assumptions used for the purposes of the actuarial valuations are based on the following weighted averages:

  2016 2016 2015 2015
  UK plan Other UK plan Other
 
Discount rate 2.6% 1.8% 3.5% 2.7%
Expected rates of salary increase 3.5% 0.5% 3.3% 0.3%
Inflation 2.7% 1.8% 2.5% 1.9%
Average longevity at retirement age for current pensioners (years):        
Males 21.2 18.4 21.0 19.7
Females 23.3 21.7 23.2 22.6
Average longevity at retirement age for current employees (years):        
Males 23.3 20.5 22.4 21.2
Females 25.6 23.8 24.7 24.0

Amounts recognized in the income statement in respect of these defined benefit plans are as follows:

  2016 2015
  € x 1,000 € x 1,000
 
Current service cost 19 56
Past service cost and losses (gains) from settlements 527 -
Administration expense 177 337
Net interest expense (income) -519 -597
Total expenses defined benefit plans 204 -204


Amounts recognized in other comprehensive income in respect of these defined benefit plans are as follows:

  2016 2015
  € x 1,000 € x 1,000
 
Remeasurement on the net defined benefit obligation (asset):    
Return on plan assets (excluding amounts included in net interest expenses) -7,059 -264
Actuarial losses (gains) from changes in demographic assumptions 374 -1,952
Actuarial losses (gains) arising from changes in financial assumptions 10,741 -237
Actuarial losses (gains) arising from experience adjustments -33 595
Adjustments for restrictions on the defined benefit asset - -
Prior year(s) presentation adjustment -348 -
Remeasurement net defined benefit plans 3,675 -1,858

 

The defined benefit obligation and fair value of plan assets are specified as follows:

At 31 December 2015 UK plan Other Total
  € x 1,000 € x 1,000 € x 1,000
 
Present value of funded pension obligation 78,220 6,072 84,292
Minus: Fair value of plan assets -98,406 -6,261 -104,667
Deficit/ (surplus) -20,186 -189 -20,375
Present value of unfunded defined benefit obligations - 6,359 6,359
Funded status -20,186 6,170 -14,016
Restrictions on assets recognised - - -
Net defined benefit obligation (asset) as per 31 December 2015 -20,186 6,170 -14,016
 
At 31 December 2016 UK plan Other Total
 
Present value of funded pension obligation 77,210 916 78,126
Minus: Fair value of plan assets -91,699 -594 -92,293
Deficit/ (surplus) -14,489 322 -14,167
Present value of unfunded defined benefit obligation - 6,261 6,261
Funded status -14,489 6,583 -7,906
Restrictions on assets recognised - - -
Net defined benefit obligation (asset) as per 31 December 2016 -14,489 6,583 -7,906



The movement in the present value of the defined benefit obligation is as follows:

  UK plan Other Total
  € x 1,000 € x 1,000 € x 1,000
 
Balance at 1 January 2015 75,348 13,592 88,940
Current service cost - 14 14
Interest cost 2,543 351 2,894
Actuarial (gains) and losses arising from changes in demographic assumptions 1,952 75 2,027
Actuarial (gains) and losses arising from changes in financial assumptions 354 -131 223
Actuarial (gains) and losses arising from experience adjustments -635 75 -560
Exchange differences on foreign plans 4,697 -298 4,399
Benefits paid -6,039 -1,247 -7,286
Defined benefit obligation at 31 December 2015 78,220 12,431 90,651
Current service cost - 19 19
Interest cost 2,404 136 2,540
Actuarial (gains) and losses arising from changes in demographic assumptions 370 4 374
Actuarial (gains) and losses arising from changes in financial assumptions 10,720 21 10,741
Actuarial (gains) and losses arising from experience adjustments - -33 -33
Liabilities extinguished on settlements - -5,094 -5,094
Exchange differences on foreign plans -11,022 58 -10,964
Benefits paid -3,482 -365 -3,847
Defined benefit obligation at 31 December 2016 77,210 7,177 84,387


 

The movement in the fair value of the plan assets is as follows:

  UK plan Other Total
  € x 1,000 € x 1,000 € x 1,000
 
Balance at 1 January 2015 95,111 6,971 102,082
Interest income 3,246 244 3,490
Remeasurement gain (loss):      
Return on plan assets (excluding amounts included in net interest expense) -194 115 -79
Contributions from the employer 623 436 1,059
Administration expense -271 -156 -427
Exchange differences on foreign plans 5,930 -361 5,569
Benefits paid -6,039 -988 -7,027
Fair value of the plan assets at 31 December 2015 98,406 6,261 104,667
Interest income 3,051 8 3,059
Remeasurement gain (loss):      
Return on plan assets (excluding amounts included in net interest expense) 7,062 -3 7,059
Plan assets distributed on settlements - -5,627 -5,627
Contributions from the employer 513 18 531
Administration expense 177 - 177
Exchange differences on foreign plans -14,028 41 -13,987
Benefits paid -3,482 -104 -3,586
Fair value of the plan assets at 31 December 2016 91,699 594 92,293


The fair value of the plan assets is categorized as follows:

  2016 2015
  € x 1,000 € x 1,000
 
Index-linked gilts 20,334 41,896
Liability driven investment 8,812 -
Corporate bonds 5,621 94
Property bonds 11,201 12,932
Absolute return bonds 21,652 17,913
Diversified growth funds 21,084 25,030
Other equity investments - 432
Cash and cash equivalents 3,589 6,370
Total debt securities and equity investments 92,293 104,667


The fair values of the above equity investments and debt securities are determined based on quoted market prices in active markets. The actual return on plan assets was €9.8 million in 2016 (2015: € 3.4 million).

The average duration of the defined benefit obligation is 16 years as per 31 December 2016 (2015: 16 years).

Significant actuarial assumptions for the determination of the defined benefit obligation are the discount rate and the expected salary increase. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions at the end of the reporting period. In the analyses the interdependence of inputs has not been considered.:

  • if the discount rate is 1 % higher, the defined benefit obligation would decrease by € 11.1 million (2015: € 11.1 million);
  • if the discount rate is 1 % lower, the defined benefit obligation would increase by € 12.4 million (2015: € 13.5 million);
  • if the expected salary growth increases by 1%, the defined benefit obligation would increase by € 0.5 million (2015: € 0.5 million);
  • if the expected salary growth decreases by 1%, the defined benefit obligation would decrease by € 0.6 million (2015: € 0.6 million).

The sensitivity analyses are prepared at the end of the reporting period using the same methods as applied in the defined benefit obligation in the balance sheet. The sensitivity analyses may not be representative of the actual change in the defined benefit obligation. It is unlikely that the changes in the assumptions would occur in isolation of one another as some of the assumptions are correlated.

Accell Group expects to make a contribution of € 0.5 million in 2017 with regard to the defined benefit plans.

Other long-term employee benefits

Other long-term employee benefits relate to the provision for future anniversary bonuses and resignation payments in some countries. The provision is based on contractual obligations and assumptions with respect to expectations of death and resignation. Provisions for deferred employee benefits and warranty obligations are expected to have a duration between one and five years.

18.      Share-based payments

Accell Group has a restricted share plan and an option plan.

Restricted share plan

Accell Group has a restricted share plan whereby conditional shares can be granted to the members of the Board of Directors and to directors of subsidiaries who contribute significantly to the result of Accell Group. Both share plans are share-based payments plans with non-vesting conditions. The grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. The conditions have been incorporated into the fair value at grant date by applying a discount to the valuation obtained.

The shares that have been conditionally granted are comprised of the following:

  Number Granting date Expiry date Share price at granting date Fair value at granting date
Conditional shares
Conditional shares granted in 2014 39,142 26-2-2014 2 jaar € 14.13 € 230,000
Conditional shares granted in 2015 46,069 4-3-2015 2-3 jaar € 15.92 € 381,000
Conditional shares granted in 2016 47,301 24-2-2016 2-3 jaar € 18.96 € 468,000

 

The fair value will be charged to the income statement according to the straight-line method spread over the period between grant date and the time that the shares become unconditional, whereby adjustment will be made for the expected number of shares to be distributed.

Option plan

The Supervisory Board awards options to the directors based on the realization of targets set in agreement with the Board of Directors and the expected contribution that the members of the Board of Directors will make to the further development of the company. After granting, the stock options are unconditional.

Below an overview is provided on the number and movement in stock option entitlements:

  Number at 31-12-15 Number at 31-12-16 Granting date Expiry date (years) Exercise price Fair value at granting date Average exercise price
Options
Granted in 2011 24,480 24,480 24-02-11 3-5 € 19.39 € 3.57 n/a
Granted in 2014 7,950 7,950 26-02-14 3-8 € 14.13 € 2.13 n/a
Granted in 2015 28,150 28,150 4-03-15 3-8 € 15.92 € 1.90 n/a
Granted in 2016 - 37,700 24-02-16 3-8 € 18.96 € 2.39 n/a


The options granted are specified in note 26 Related parties. Only the options granted in 2011 are exercisable at 31 December 2016.

The fair value of the employee share options has been measured using an option valuation model (Black-Scholes-Merton). Service and non-market performance conditions attached to the transactions were not taken into account in measuring fair value.

The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans were as follows:

  2016 2015
 
Expected volatility (weighted-average) 23.84% 25.53%
Expected life (weighted-average) 3.8 3.8
Expected dividends 3.40% 4.50%
Risk-free interest rate (based on government bonds) 0.28% 0.42%

 

Expected volatility has been based on an evaluation of the historical volatility of the Accell Group N.V.’s share price, particularly over the historical period commensurate with the expected term. The expected term of the instruments has been based on historical experience and general option holder behavior.

The reconciliation to personnel expenses is as follows:

  2016 2015
  € x 1,000 € x 1,000
Conditional shares management 2012 - 22
Conditional shares management 2014 49 49
Conditional shares management 2015 52 -
Conditional shares Board of Directors 2013 - 115
Conditional shares Board of Directors 2014 116 116
Conditional shares Board of Directors 2015 156  
Options Board of Directors 91 53
Total expense recognized in personnel expenses 464 355

 

In the event of full exercise of the option entitlements granted to date and the vesting of the conditional shares the number of issued shares would increase by 0.6%. According to company policy, the options and shares granted are not covered by the company’s purchase of its own shares. In case of equity-settlement new shares are issued by the company at the moment options are exercised.

19.     Deferred taxes

Deferred taxes comprise the following:

  2016 2015
  € x 1,000 € x 1,000
 
Deferred tax assets 1) 7,142 8,669
Deferred tax liabilities 1) 13,334 11,576
Net deferred taxes -6,192 -2,907
1) The comparative figures of the deferred tax assets and deferred tax liabilities are reclassified and re-presented due to a change in the intention to settle certain deferred tax assets and deferred tax liabilities simultaneously.

 

The movement in the deferred tax assets and deferred tax liabilities is as follows:

  Loss carry forwards consolidated companies Other deferred taxes Total deferred tax assets Revaluation of property. plant and equipment Financial instruments Trademark valuation Other deferred taxes Total deferred tax liabilities
  € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000
 
Balance at 1 January 2015 7,410 633 8,043 -1,793 -740 -6,488 -4,333 -13,354
Added through business combination - - - - - - -100 -100
Charged through other comprehensive income - - - - 380 - 622 1,002
Charged through income statement -1,829 1,199 -630 18 - 254 1,198 1,470
Change in income tax rate - - - - - - - 0
Transfer from/to current tax 678 - 678 - - - - 0
Currency translation differences 394 184 578 -12 - -208 -374 -594
Balance at 31 December 2015 6,653 2,016 8,669 -1,787 -360 -6,442 -2,987 -11,576
Added through business combinations - - - - - - - 0
Charged through other comprehensive income - - - - -712 - -1,798 -2,510
Charged through income statement -3,638 1,907 -1,731 38 - -39 302 301
Change in income tax rate   - - - - - - 0
Transfer from/to current tax 19 - 19 - - - 2 2
Currency translation differences 107 78 185 12   -11 448 449
Balance at 31 December 2016 3,141 4,001 7,142 -1,737 -1,072 -6,492 -4,033 -13,334

 

At 31 December 2016 deferred tax assets are recognized in respect of carry forward losses of € 3.1 million (2015: € 6.7 million) and temporary differences of € 4.0 million (2015: € 2.0 million). Accell Group’s projections support the assumption that it is probable that sufficient future taxable profits will be available to realize the related tax benefits. For North-America these projections include the change in strategy and the sales and distribution of other bicycle brands of Accell Group into the North-American market as well as tax planning.

For some subsidiaries Accell Group has insufficient assurance that future taxable profits will be available to realize the related tax benefits of carry forward losses of € 78.9 million (€ 61.1 million). As a result no deferred tax assets are recognized for these carry forward losses. These unused carry forward losses are carry forward losses in North-America and the United Kingdom and partially relate to the global results of the Raleigh group before the acquisition by Accell Group in 2012. The carry forward period of these unused tax benefits is limited for € 42.5 million (1 – 20 years) and indefinite for 36.4 million.

20.     Provisions


  Warranties Other provisions Total
  € x 1,000 € x 1,000 € x 1,000
 
Balance at 1 January 2016 7,310 2,756 10,066
Provisions used during the year -2,282 -1,655 -3,937
Provisions made during the year 2,360 825 3,185
Provisions reversed during the year -73 -366 -439
Currency translation differences -10 5 -5
Balance at 31 December 2016 7,305 1,565 8,870
 
Non-current 3,392 652 4,044
Current 3,913 913 4,826


Warranty provisions represent the estimated costs under warranty obligations for goods delivered and services rendered as at balance sheet date. The provision is based on estimates using historical warranty information. The provision for warranty obligations are expected to have a duration between one and five years. Other provisions mainly relate to a customs claim, an environmental provision and a number of small provisions with a duration of less than one year.

 

21.      Deferred income


  Deferred income
  31-12-16 31-12-15
  € x 1,000 € x 1,000
 
Non-current 1,201 2,005
Current 1,313 910
Balance at 31 December 2016 2,514 2,915


Deferred income consists of receipts in respect of extended warranty to be realized in the coming five years.

22.      Financiële instrumenten - reële waarden en risicobeheer

A. Accounting classification and fair values

The following table shows the carrying amount and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

    2016        
    Carrying amount Fair value
    Fair value - hedging instruments Loans and receivables Other financial liabilities Total Level 2
  notes € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000
Interest rate swaps used for hedging   -     - -
Forward exchange contracts used for hedging   6,049     6,049 6,049
Financial assets measured at fair value   6,049 - - 6,049 6,049
 
Trade and other receivables   - 152,382 - 152,382 -
Cash and cash equivalents 14 - 49,421 - 49,421 -
Financial assets not measured at fair value   - 201,803 - 201,803 -
 
Interest rate swaps used for hedging   1,762     1,762 1,762
Forward exchange contracts used for hedging   -     - -
Financial liabilities measured at fair value   1,762 - - 1,762 1,762
 
Revolving credit facility and bank overdrafts 16 - - 136,951 136,951 -
Secured bank loans 16 - - 59,658 59,658 -
Other bank loans 16 - - 84 84 -
Trade and other payables   - - 180,520 180,520 -
Financial liabilities not measured at fair value   - - 377,213 377,213 -

    2015        
    Carrying amount Fair value
    Fair value - hedging instruments Loans and receivables Other financial liabilities Total Level 2
    € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000
Interest rate swaps used for hedging   -     - -
Forward exchange contracts used for hedging   6,048     6,048 6,048
Financial assets measured at fair value   6,048 - - 6,048 6,048
 
Trade and other receivables   - 156,022 - 156,022 -
Cash and cash equivalents 14 - 172,479 - 172,479 -
Financial assets not measured at fair value   - 328,501 - 328,501 -
 
Interest rate swaps used for hedging   3,209     3,209 3,209
Forward exchange contracts used for hedging   -     - -
Financial liabilities measured at fair value   3,209 - - 3,209 3,209
 
Revolving credit facility and bank overdrafts 16 - - 300,844 300,844 -
Secured bank loans 16 - - 71,388 71,388 -
Other bank loans 16 - - 216 216 -
Trade and other payables   - - 155,361 155,361 -
Financial liabilities not measured at fair value   - - 527,809 527,809 -

 

B. Measurement of fair values

i. Valuation techniques

The fair value of the other financial instruments is determined on the basis of other inputs than quoted rates/prices that are observable (level 2). For the determination generally accepted valuation methods are used. The determined value in this way is equal to the price at which the derivative can be sold in a transparent market.

Forward exchange contracts

Forward pricing is used a valuation technique. The fair value is determined using quoted forward exchange rates at the reporting date and present value calculations based on high credit quality yield curves in the respective currencies.

Interest rate swaps

Swap models were used as valuation technique. The fair value is calculated as the present value of the estimated future cash flows. Estimates of the future floating rate cash flows are based on quoted swap rates, futures prices and interbank borrowing rates. Estimated cash flows are discounted using a yield curve constructed from similar sources which reflects the relevant benchmark interbank rate used by market participants for this purpose when pricing interest rate swaps. The fair value estimate is subject to a credit risk adjustment that reflects the credit risk of Accell Group and of the counterparty.

Other financial liabilities

Discounted cash flows are used as valuation technique. The valuation model considers the present value of expected payment, discounted using a risk-adjusted discount rate.

 
ii. Transfers between Level 1 and 2

There were no transfers from Level 1 to Level 2 or from Level 2 to Level 1 in 2016 (and 2015).

 

C. Financial risk management

Accell Group has exposure to the following risks arising from financial instruments:

  1. credit risk;
  2. liquidity risk;
  3. market risk.
Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of Accell Group’s risk management framework. Accell Group’s risk management policies are established to identify and analyze the risks faced by Accell  Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and Accell Group’s activities. Accell Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Audit Committee oversees how management monitors compliance with Accell Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by Accell Group. Accell Group's Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures; the results are reported to the Audit Committee.

i. Credit risk

Credit risk is the risk of financial loss to Accell Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from Accell Group’s receivables from customers. The carrying amount of financial assets represents the maximum credit exposure.

Trade and other receivables

Accell Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk of the industry and country in which customers operate. Further details of concentration of revenue are included in note 1. There is no significant concentration of credit risks within Accell Group, as Accell Group has a large number of customers. No customers comprise 10% or more of the turnover.

Accell Group has established a credit policy under which sales to large customers must be insured with an external credit insurance company. Smaller customers are analyzed individually for creditworthiness before Accell Group's standard payment and delivery terms and conditions are offered and a credit limit is established. Any sales exceeding those limits require approval of the Board of Directors.

In general goods are sold subject to retention of title clauses, so that in the event of non-payment Accell Group may have a secured claim. Accell Group does not otherwise require collateral in respect of trade and other receivables.

Accell Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables.

At 31 December 2016, the ageing of trade receivables that were not impaired was as follows:

  2016 2015
  € x 1,000 € x 1,000
Neither past due nor impaired 112,901 109,116
Past due 1-90 days 12,954 11,029
Past due 90-150 days 2,476 2,336
Past due more than 150 days 3,262 5,031
Total at 31 December 131,593 127,512

 

Accell Group has agreed various specific and, to a limited extent, individual terms of payment with its customers that differ depending on the nature of the goods delivered and that can also differ per country. Due to the seasonal nature of the activities, customers are offered so-called winter terms, whereby the customer can opt for an extra payments discount or a longer payment period. This is customary in the business.

Management believes that the unimpaired amounts that are past due days are still collectible in full, based on historic payment behavior and extensive analysis of customer credit risk, including underlying customers’ credit ratings if they are available.

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

  2016 2015
  € x 1,000 € x 1,000
Balance at 1 January 7,972 7,368
Amounts written of -1,889 -1,578
Impairment losses recognized 3,348 2,151
Effect of movement in exchange rates 85 31
Balance at 31 December 9,516 7,972


At 31 December 2016, there is an impairment loss of € 1.6 million related to two multi-sport chains in North-America that were declared bankrupt during the year. Although the goods sold to the customer were subject to a retention of title clause, Accell Group has no indication that the customer is still in possession of the goods. The remainder of the impairment loss at 31 December 2016 relate to several customers that have indicated that they are not expecting to be able to pay their outstanding balances, mainly due to economic circumstances.

Cash and cash equivalents

Accell Group held cash and cash equivalents of € 49,421 thousand at 31 December 2016 (2015: € 172,479 thousand). The cash and cash equivalents are held with bank and financial institution counterparties, which are rated B+ to AA-, based on S&P ratings.

Derivatives

The derivatives are entered into with bank and financial institution counterparties, which are rated BB to A, based on S&P ratings.

Guarantees

Accell Group’s policy is to provide financial guarantees only to subsidiaries. At 31 December 2016, Accell Group has issued a guarantee to the trustees of the UK defined benefit plan a group guarantee, whereby in case of a bankruptcy of the UK subsidiary, Accell Group will guarantee possible deficits in the UK scheme to a maximum amount of £ 8.7 million. Furthermore Accell Group has issued a rental guarantee, whereby in case of a bankruptcy of the Dutch subsidiary, Accell Group will guarantee possible lease payments to a maximum amount of € 4.0 million.

ii. Liquidity risk

Liquidity risk is the risk that Accell Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Accell Group’s approach to managing liquidity is to ensure, as far as possible and taking into account the seasonal nature of its business, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to Accell Group’s reputation.

In the funding of Accell Group, a distinction is made between long-term (core) funding and the seasonal credit facility. The solvency and liquidity of Accell Group are ensured all times by rolling liquidity planning and a liquidity reserve in form of cash and cash equivalents and €225 million revolving credit facility that is secured. Interest would be payable at the rate of Euribor plus 100-180 basis points.

Exposure to liquidity risk

The following are the remaining contractual maturities of the non-derivative financial liabilities and the derivative financial assets and liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments on interest-bearing loans and excluding the impact of netting agreements:

    2016        
      Contractual cash flows
    Carrying amount Total < 1 year 1-5 year > 5 year
    € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000
Revolving credit facility 16 -49,050 -49,050 -49,050 - -
Bank overdrafts 16 -87,901 -49,527 -49,527 - -
Secured bank loans 16 -59,658 -63,538 -13,947 -33,721 -15,870
Other bank loans 16 -84 -84 -69 -15 -
Trade and other payables   -180,520 -180,520 -180,520 - -
Non-derivative financial liabilities   -377,213 -342,719 -293,113 -33,736 -15,870
             
Interest rate swaps used for hedging (net)   -1,762 -803 -799 -4 -
Forward exchange contracts used for hedging (net)   6,049 6,049 6,049 - -
Derivative financial liabilities (assets)   4,287 5,246 5,250 -4 -

    2015        
      Contractual cash flows
    Carrying amount Total < 1 year 1-5 year > 5 year
    € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000
Revolving credit facility 16 -115,000 -115,000 -115,000 - -
Bank overdrafts 16 -185,844 -185,844 -185,844 - -
Secured bank loans 16 -71,388 -77,666 -14,128 -46,798 -16,740
Other bank loans 16 -216 -216 -141 -75 -
Trade and other payables   -155,361 -155,361 -155,361 - -
Non-derivative financial liabilities   -527,809 -534,087 -470,474 -46,873 -16,740
             
Interest rate swaps used for hedging (net)   -3,209 -1,674 -871 -803 -
Forward exchange contracts used for hedging (net)   6,048 6,048 6,048 - -
Derivative financial liabilities (assets)   2,839 4,374 5,177 -803 -

 

The inflows/(outflows) disclosed in the above table represent the contractual undiscounted cash flows relating to derivative financial liabilities held for risk management purposes and which are not usually closed out before contractual maturity. The disclosure shows net cash flow amounts for derivatives that are net cash-settled.

As disclosed in note 16. Interest-bearing loans, Accell Group has a secured bank loan that contains a loan covenant. A future breach of covenant may require Accell Group to repay the loan earlier than indicated in the above table. The interest payments on variable interest rate loans in the table above reflect market forward interest rates at the reporting date and these amounts may change as market interest rates change. Except for these financial liabilities, it is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

iii. Market risk

Market risk is the risk that changes in market prices – such as foreign exchange rates and interest rates – will affect Accell Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

Accell Group uses derivatives to manage market risks. All such transactions are carried out within the guidelines set by the Board of Directors. Generally, Accell Group seeks to apply hedge accounting to manage volatility in profit or loss.

Currency risk

Accell Group is exposed to currency risk to the extent that there is a mismatch between the currencies in which sales, purchases and borrowings are denominated and the respective functional currencies of Group companies. The functional currencies of Group companies are primarily the euro (EUR) and the US Dollar (USD). The currencies in which these transactions are primarily denominated are EUR, USD, JPY, TWD, GBP and CNY.

At any point in time, Accell Group hedges 80% of its estimated foreign currency exposure in respect of forecast sales and purchases over the season (July-June). Accell Group uses forward exchange contracts to hedge its currency risk, all with a maturity of less than one year from the reporting date. Such contracts are generally designated as cash flow hedges.

Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of Accell Group, primarily EUR, but also USD and GBP. In addition, interest on borrowings is denominated in the currency of the borrowing. This provides an economic hedge without derivatives being entered into and therefore hedge accounting is not applied in these circumstances.

In respect of other monetary assets and liabilities denominated in foreign currencies, Accell Group’s policy is to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

Accell Group’s investments in subsidiaries are not hedged.

Interest rate risk

Accell Group adopts a policy of ensuring that the interest rate risk exposure of its interest-bearing secured bank loans and part of its revolving credit facility is at fixed rate. This is achieved by borrowing at a float rate and using interest rate swaps as hedges of the variability in cash flows attributable to interest rate risk.

The interest rate risk exposure of the other interest-bearing financial instruments (cash and cash equivalents, bank overdrafts and the remainder of revolving credit facility) is at a float rate.

Sensitivity analysis

A reasonably possible strengthening (weakening) of the USD, JPY and TWD against all other currencies at 31 December would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amounts shown below. The analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

A reasonably possible change of 100 basis points in interest rates at the reporting date would have affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.

  Profit and loss Equity. net of tax
  Strengthening Weakening Strengthening Weakening
  € x 1,000 € x 1,000 € x 1,000 € x 1,000
  2016      
USD (5% movement) 901 -996 3,932 -4,346
JPY (5% movement) 135 -150 2,305 -2,547
TWD (5% movement) - - 671 -742
Unhedged variable interest rate instruments (100 basis point movement) -900 900 - -

 

D. Derivative assets and liabilities designated as cash flow hedges

The following table indicates the periods in which the cash flows associated with cash flow hedges are expected to occur and the carrying amounts of the related hedging instruments.

    2016      
      Expected cash flows
    Carrying amount Total < 1 year 1-5 year
    € x 1,000 € x 1,000 € x 1,000 € x 1,000
Forward exchange contracts          
USD Put   7,241 -94,006 -94,006 -
JPY Put   -1,909 -53,114 -53,114 -
GBP Call   -10 7,000 7,000 -
CNY Put   59 -5,377 -5,377 -
TWD Put   598 -13,447 -13,447 -
TRY Put   -80 -1,500 -1,500 -
SEK Call   150 5,850 5,850 -
Interest rate swaps          
Interest rate swaps - liabilties   -1,762 -1,652 -1,348 -304
Total   4,287 -156,246 -155,943 -304

    2015      
      Expected cash flows
    Carrying amount Total < 1 year 1-5 year
    € x 1,000 € x 1,000 € x 1,000 € x 1,000
Forward exchange contracts          
USD Put   5,376 -126,267 -126,267 -
JPY Put   1,086 -27,631 -27,631 -
GBP Call   118 -3,600 -3,600 -
CNY Put   -76 -7,317 -7,317 -
TWD Put   -305 -10,128 -10,128 -
TRY Put   -85 -2,950 -2,950 -
SEK Call   -66 3,870 3,870 -
Interest rate swaps          
Interest rate swaps - liabilties   -3,209 -3,073 -1,421 -1,652
Total   2,839 -177,096 -175,444 -1,652

 

E. Capital management

There were no major changes in Accell Group's approach to capital management during the year. The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital as well as the level of dividends to ordinary shareholders.

In order to achieve this overall objective, the Accell Group’s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.

23.      Dividend

The dividend in respect of financial year 2015 was determined at € 0.72 per share or as stock dividend during the General Meeting of Shareholders of 26 April 2016. After the period in which shareholders could report their preference, 52% of the shareholders opted for the stock dividend. On 18 May 2016 € 8,793,000 was distributed as cash dividend and 536,296 shares were issued as stock dividend and added to issued share capital.

The Board of Director proposes to make available to the shareholders a dividend with stock option of € 0.72 per share with respect to the current year. The dividend proposal is subject to approval by the General Meeting of Shareholders on 25 April 2017 and is not reflected as a liability in these financial statements.

24.      Off-balance sheet commitments

The total off-balance sheet commitments consist of:

  Total < 1 year 1-5 year > 5 year 2015
  € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000
Operational lease commitments 30,805 9,826 19,187 1,792 37,666
Property, plant and equipment ordered 145 136 9 - -
Other off-balance sheet commitments 5,045 2,843 2,127 75 3,800
Total 35,995 12,805 21,323 1,867 41,466


Accell Group has financial commitments arising from operational lease agreements on land and buildings,  IT equipment, machinery and cars for use in de ordinary course of business. The other off-balance sheet commitments include among other financial commitments in respect of marketing and merchandising.

Next to the guarantees as disclosed in note 22 Financial instruments - fair values and risk management Accell Group holds no contingent assets or contingent liabilities. 

25.      Related parties

 
Identification of related parties

Accell Group has related party relationships with its associates and joint ventures (refer to note 11. Subsidiaries) and with the Board of Directors and Supervisory Board. 

Remuneration of the Board of Directors and the Supervisory Board

Board of Directors

The remuneration of the individual members of the Board of Directors is as follows:

  Salary Bonus Pension contributions Share-based payments Total
  in € in € in € in € in €
R.J. Takens 471,000 136,119 144,801 129,849 881,769
H.H. Sybesma 362,000 108,600 62,370 99,740 632,711
J.M. Snijders Blok 297,000 82,863 72,941 81,892 534,697
J. Both 297,000 88,209 58,418 51,269 494,896
Total 1,427,000 415,791 338,531 362,750 2,544,072

 

The company’s remuneration policy is reflected in the remuneration report that has been presented to the General Meeting of Shareholders for approval. The bonuses reflected in the financial statements relate to the financial year and depend on the targets set by the Supervisory Board. For 2016 a bonus varying between 28% and 30% of the salary has been paid out.

The stock option entitlements that have been granted comprise of the following: 

  Number at 01-01-16 Issued in 2016 Expired in 2016 Number at 31-12-16 Average exercise price beginning of period Average exercise price at year-end Weighted average term at year-end
R.J. Takens 25,050 12,450 10,000 27,500 € 17.07 € 17.08 6.5
H.H. Sybesma 19,490 9,550 7,940 21,100 € 17.10 € 17.08 6.5
J.M.Snijders Blok 16,040 7,850 6,540 17,350 € 17.10 € 17.08 6.5
J.J. Both - 7,850 - 7,850 n/a € 18.96 7.17
Total 60,580 37,700 24,480 73,800      

At the end of 2016 Mr. Takens holds 110,338 shares, Mr. Sybesma holds 10,000 shares and Mr. Snijders Blok holds 32,343 shares and Mr. Both holds 750 shares.

Supervisory Board

The remuneration of the individual members of the Supervisory Board is as follows:

  in €
A.J. Pasman 52,488
J. van den Belt 40,730
P.B. Ernsting 40,730
A. Kuiper 40,730
Total 174,678

 

Associates and joint ventures

The transactions during the financial year and balances outstanding at year-end between group companies and associates and joint ventures are presented below:

  Transaction values for the year Balance outstanding at year-end
  2016 2015 2016 2015
  € x 1,000 € x 1,000 € x 1,000 € x 1,000
Sale of goods and services        
Atala SpA 2,269 3,585 51 541
Von Backhaus ApS - 1,175 - 260
         
Purchase of goods        
Atala SpA 2,881 1,541 20 247
Beeline Bikes Inc. 6 - - -
         
Dividends received        
Atala SpA 50 120 - -
Babboe B.V. 168 149 - -
Jalaccell OÜ - 23 - -
         
Loan and related interest        
Jalaccell OÜ - - - 828

 

The amounts outstanding are not provided for and will be settled in cash and cash equivalents. No guarantees have been given or received. No expense has been recognized for bad or doubtful debts in respect of the amounts owed by related parties. All sales and purchases are prices on an arm’s length basis. Transactions and balances between Accell Group and its non-consolidated companies have not been eliminated for consolidation purposes.

26.      Auditor fees

The total costs for the services rendered by KPMG Accountants N.V. consist of:

  KPMG Accountants N.V. Other KPMG network Total KPMG Deloitte Accountants B.V. Other Deloitte network Total Deloitte
      2016     2015
  € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000
Audit of the financial statements 373 494 867 389 277 666
Other audit assignments - - - 28 129 157
Tax services - 23 23 - 14 14
Other non-audit services - - - - - -
Total costs 373 517 890 417 420 837

 

5.8 Company balance sheet

Before profit appropriation (in thousands of euro)

  notes 31-12-16 31-12-15
ASSETS
Property, plant and equipment   867 192
Goodwill 27 10,939 4,342
Other intangible assets   317 308
Financial fixed assets 28 448,088 383,737
Non-current assets   460,211 388,579
Receivables from group companies 32 2,856 5,027
Current tax assets   2,862 2,807
Other receivables   7,831 9,192
Other financial instruments 31 6,049 6,048
Cash and cash equivalents   26,904 123,688
Current assets   46,502 146,762
Total assets   506,713 535,341
 
EQUITY
Share capital   258 253
Share premium   43,734 44,264
Hedging reserve   3,215 1,079
Translation reserve   -8,832 -2,473
Other legal reserve   6,980 5,005
Other reserves   241,733 225,527
Unappropriated result   32,292 32,286
Total equity 29 319,380 305,941
PROVISIONS
Provisions   545 1,081
LONG-TERM LIABILITIES
Interest-bearing loans 30 47,158 58,888
Loans to group companies 32 23,659 2,916
Deferred tax liabilities   1,283 607
Long-term liabilities   72,100 62,411
CURRENT LIABILITIES
Bank overdrafts   35,744 22,198
Revolving credit facility 30 49,050 115,000
Interest-bearing loans 30 12,500 12,500
Liabilities to group companies 32 11,181 3,858
Other current liabilities   4,451 9,143
Other financial instruments 31 1,762 3,209
Current liabilities   114,688 165,908
Total equity and liabilities   506,713 535,341




The reference numbers following the various items refer to the notes to the company financial statements.

5.9 Company income statement

(in thousands of euro)

  notes 2016 2015
 
Net turnover 33 3,576 3,200
       
Other expenses 34 -7,045 -10,079
Total operating expenses   -7,045 -10,079
       
Operating profit   -3,469 -6,879
       
Financial income   2,179 2,023
Financial expenses   -1,365 -3,384
Net finance cost 35 814 -1,361
       
Profit before taxes   -2,655 -8,240
       
Income tax expense   222 1,196
Income from subsidiaries, net of tax 28 34,725 39,330
       
Net profit   32,292 32,286


The reference numbers following the various items refer to the notes to the company financial statements.

 

5.10 Notes to the company financial statements

 

 

A. General

The company financial statements are part of the 2016 financial statements of Accell Group N.V..

B. Basis of preparation

The company financial statements have been prepared in accordance with Title 9, Book 2 of the Netherlands Civil Code. For setting the principles for the recognition and measurement of assets and liabilities and determination of the result for its company financial statements, Accell Group makes use of the option provided in section 2:362(8) of the Netherlands Civil Code. This means that the principles for the recognition and measurement of assets and liabilities and determination of the result (hereinafter referred to as principles for recognition and measurement) of the company financial statements of Accell Group are the same as those applied for the consolidated EU-IFRS financial statements. A reference is made to paragraph 5.6 Notes to the consolidated financial statements for a description of these principles.

i. Participating interests in group companies

Participating interests in group companies are accounted for in the company financial statements according to the net equity value, with separate presentation of the goodwill component under intangible fixed assets.

ii. Result of participating interests

The share in the result of participating interests consists of the share of Accell Group in the result of these participating interests. Results on transactions involving the transfer of assets and liabilities between Accell Group and its participating interests and mutually between participating interests themselves, are eliminated to the extent that they can be considered as not realized.

 

27.  Goodwill

Changes in goodwill are as follows:

  2016 2015
  € x 1,000 € x 1,000
Cost
Balance at 1 January 4,342 3,321
Investments as a result of business combinations - 1,021
Legal restructuring 5,059 -
Currency translation differences 1,538 -
Balance at 31 December 10,939 4,342
Accumulated impairments
Balance at 1 January - -
Impairments - -
Balance at 31 December - -
Carrying amount
Balance at 1 January 4,342 3,321
Balance at 31 December 10,939 4,342

 

The increase in goodwill is the result of a legal restructuring, in which a number of group companies have become direct interests of Accell Group N.V. and the number of intermediate holdings has been reduced.

 

28.  Financial fixed assets

Changes in financial fixed assets are as follows:

  2016 2015
  € x 1,000 € x 1,000
Subsidiaries
Balance as at 1 January 280,824 221,699
Profit of participating interests 34,725 38,967
Investments (divestments) 62,055 43,225
Received dividend participating interests -13,603 -21,001
Translation differences -8,118 -248
Other comprehensive income -5,830 -1,583
Legal restructuring -2,078 -
Other movements 2,079 -235
Balance as at 31 December 350,054 280,824
Receivables from group companies
Balance as at 1 January 102,913 110,180
Loans provided 52,303 16,688
Loans repaid -57,946 -28,231
Translation differences 764 4,276
Balance as at 31 December 98,034 102,913
Total financial fixed assets 448,088 383,737

 

29.  Shareholders' equity

The movement schedule of shareholders’ equity is as follows:

  Share capital Share premium Hedging reserve Translation reserve Other legal reserve Other reserve Unappropriated result Total equity
  € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000
Balance at 1 January 2015 249 44,384 2,315 -6,542 5,105 209,096 26,500 281,107
Net profit - - - - - - 32,286 32,286
Other comprehensive income - - -1,236 4,069 -80 -1,156 - 1,597
Total comprehensive income - - -1,236 4,069 -80 -1,156 32,286 33,883
 
Transfer to other reserve - - - - - 26,500 -26,500 -
Dividends paid - - - - - -15,172 - -15,172
Stock dividends 4 -4       6,518 - 6,518
Share-based payments - -116 - - - 355 - 239
Other changes - - - - -20 -614 - -634
Balance at 31 December 2015 253 44,264 1,079 -2,473 5,005 225,527 32,286 305,941

  Share capital Share premium Hedging reserve Translation reserve Other legal reserve Other reserve Unappropriated result Total equity
  € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000 € x 1,000
Balance at 1 January 2016 253 44,264 1,079 -2,473 5,005 225,527 32,286 305,941
Net profit - - - - - - 32,292 32,292
Other comprehensive income - - 2,136 -6,359 - -5,473 - -9,696
Total comprehensive income - - 2,136 -6,359 - -5,473 32,292 22,596
 
Transfer to other reserve - - - - - 32,286 -32,286 -
Dividends paid - - - - - -18,215 - -18,215
Stock dividends 5 -5       9,422 - 9,422
Share-based payments - -525 - - - 464 - -61
Other changes - - - - 1,975 -2,278 - -303
Balance at 31 December 2016 258 43,734 3,215 -8,832 6,980 241,733 32,292 319,380

 

Accell Group has issued share options (refer to note 18 of the consolidated financial statements).

 

Ordinary shares

On 31 December 2016 the authorized capital consists of 55,000,000 ordinary shares, 5,000,000 preference shares F and 60,000,000 preference shares B, each with a nominal value of € 0.01. Of these, 25,834,236 (2015: 25,270,327) ordinary shares have been issued and duly paid at 31 December 2016, as a result the issued and paid-up share capital amounts to € 258,342.

Share premium reserve

The share premium concerns the income from the issuing of shares in so far as this exceeds the nominal value of the shares (above par income).

Translation reserve

The legal translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.

Other legal reserves

Other legal reserves consist of a legal reserve for participating interests and a legal reserve for capitalized development costs.

The legal reserve for participating interests, which amounts to € 6,947 thousand (2015: € 4,981 thousand), pertains to participating interests that are accounted for according to the equity accounting method. The reserve represents the difference between the participating interests’ retained profit and direct changes in equity, as determined on the basis of Accell Group’s accounting policies, and the share thereof that Accell Group may distribute. The legal reserve is determined on an individual basis.

In accordance with applicable legal provisions, a legal reserve for the carrying amount of € 33 thousand (2015: € 24 thousand) has been recognized for capitalized development.

Proposal for profit appropriation (Unappropriated result)

The General Meeting will be proposed to appropriate the profit after tax for 2016 as follows: to pay out the amount of € 18,601 thousand, reflecting € 0.72 per share, as dividend and to add the remainder of € 13,691 thousand to the retained earnings. The 2016 result after tax is presented as unappropriated profit in shareholders' equity. The dividends have not been provided for and there are no income taxes consequences.

30.  Interest-bearing loans and revolving credit facility

A reference is made to notes 16 and 22 of the consolidated financial statements for the note on interest-bearing loans of € 59.7 million (2015: € 71.4 million) and the revolving credit facility of € 49.1 million (2015: € 115 million). For the note on Accell Group’s policies in respect of liquidity risk and market risk, consisting of currency risk and interest risk, a reference is made to note 22 of the consolidated financial statements.

31.  Other financial instruments

A reference is made to note 22 of the consolidated financial statements for the note on other financial instruments; other financial instruments consist of forward exchange contracts of € 6.0 million (2015: € 6.0 million) and interest rate swaps of € 1.8 million (2015: € 3.2 million), both used for hedging purposes.

32.  Loans to, receivables from and liabilities to group companies

The loans to group companies relate to numerous loans with differing durations. The average interest rate of all loans is 3.0 % (2015: 3.0%). The receivables from and liabilities to group companies are current receivables and current liabilities (no interest).

33.  Net turnover

Net turnover comprises charges to group companies with regard to management fees.

34.  Other expenses

Other expenses amount to € 7.0 million (2015: € 10.0 million) and comprises among others personnel expenses, IT-related expenses, advisory expenses, auditor fees, treasury income and expenses and travel expenses.

Accell Group N.V. has an average number of 33 employees in 2016 (2015: 30). Wages and salaries, social security charges and pension contributions amounts to € 4.6 million, € 0.3 million and € 0.6 million in 2016 (2015: € 4.1 million, € 0.2 million and € 0.5 million).

35.  Net finance cost

Financial income amounts to € 2.2 million (2015: € 2.0 million) and mainly comprises interest income related to loans to group companies. The financial expenses amount to € 1.4 million in 2016 (2015: € 3.4 million) and include interest expenses, currency results and bank fees.

36.  Off-balance sheet assets and liabilities

Several liability and guarantees

The legal entity Accell Group N.V. has issued declarations of joint and several liabilities for debts arising from the actions of Dutch consolidated participating interests. Notices to that effect have been filed with the chamber of commerce where the legal entity on whose behalf the notice of liability has been given is registered.

In addition, at 31 December 2016 guarantees for approximately € 14.2 million (2015: approximately € 11.8 million) on behalf of consolidated participating interests.

Fiscal unity

The Company constitutes the fiscal unity ‘Accell Group N.V.’ with its subsidiaries for corporate income tax purposes and value added tax; the standard conditions prescribe that each of the companies is liable for the corporate income tax payable by all companies belonging to the fiscal unity.

37.  Remuneration of the Board of Directors and the Supervisory Board

The emoluments, including pension costs as referred to in Section 2:383(1) of the Netherlands Civil Code, charged in the financial year to Accell Group and group companies amounted to € 2,544 thousand (2015: € 2,435 thousand) for the Board of Directors, and € 175 thousand (2015: € 173 thousand) for supervisory directors. For details on the remuneration of the Board of Directors and Supervisory Board a reference is made to note 26 of the consolidated financial statements.

The remuneration also includes employee options granted to managing directors amounting to € 91 thousand (2015: € 53 thousand). A reference is made to note 18 of the consolidated financial statements for a note on the option plan.

 

Supervisory Board
A.J. Pasman, voorzitter
J. van den Belt, vice-voorzitter
P.B. Ernsting
A. Kuiper

Board of Directors
R.J. Takens, CEO
H.H. Sybesma, CFO
J.M. Snijders Blok, COO 
J.J. Both, CSCO

Heerenveen, March 9, 2017

5.11 Other information

Profit appropriation pursuant to the Articles of Association

Article 25 (partial)


Paragraph 4
The Board of Directors, subject to the approval of the Supervisory Board, is authorized to determine which part of the profit shall be allocated to the reserves, after payment of dividends to the holders of both ‘B’ preference shares and ‘F’ preference shares.

Paragraph 5
The profit then remaining shall be at the disposal of the general meeting of shareholders for the holders of ordinary shares. Pursuant to a proposal of the Board of Directors that has been approved by the Supervisory Board, the general meeting of shareholders may resolve that all or part of a dividend distribution to the holders of ordinary shares shall be made in shares in the share capital of the company instead of cash.

Independent auditor’s report


To: the General Meeting and the Supervisory Board of Accell Group N.V.

Report on the accompanying financial statements 2016

Our opinion

In our opinion:

  • the accompanying consolidated financial statements give a true and fair view of the financial position of Accell Group N.V. as at 31 December 2016, and of its result and its cash flows for 2016 in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Netherlands Civil Code;
  • the accompanying company financial statements give a true and fair view of the financial position of Accell Group N.V. as at 31 December 2016, and of its result for 2016 in accordance with Part 9 of Book 2 of the Netherlands Civil Code.

What we have audited

We have audited the financial statements 2016 of Accell Group N.V., based in Heerenveen. The financial statements include the consolidated financial statements and the company financial statements.

The consolidated financial statements comprise:

  1. the consolidated balance sheet as at 31 December 2016;
  2. the following consolidated statements for 2016: the income statement, the statement of  comprehensive income, changes in equity and cash flows; and
  3. the notes comprising a summary of the significant accounting policies and other explanatory information.

The company financial statements comprise:

  1. the company balance sheet as at 31 December 2016;
  2. the company income statement 2016; and
  3. the notes comprising a summary of the accounting policies and other explanatory information.

Basis for our opinion

We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the ‘Our responsibilities for the audit of the financial statements’ section of our report.

We are independent of Accell Group N.V. in accordance with the Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics).

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Audit approach

Summary

 

 

Materiality

Based on our professional judgment we determined the materiality for the financial statements as a whole at EUR 2.6 million. The materiality is determined with reference to profit before tax (5%). We consider profit before tax as the most appropriate benchmark as the main stakeholders are primarily focussed on profit before tax. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for qualitative reasons for the users of the financial statements.

We agreed with the board of directors and the supervisory board that misstatements in excess of EUR 130,000, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.

Scope of the group audit

Accell Group N.V is head of a group of entities. The financial information of this group is included in the financial statements of Accell Group N.V.

Based on the size and/or risk profile of the group components or activities, we have performed full scope audit procedures on the financial information for the key group components in the Netherlands, Germany, France, the UK, Turkey and Taiwan. For group components in the United States, Spain, Hungary, Sweden, Denmark, Belgium, Finland, Taiwan and France, we have performed specified audit procedures. In addition, we have performed specific audit procedures at group level aimed at goodwill, trademarks, current and deferred taxes and derivatives. Overall, this has resulted in a coverage of 85% of the total revenue and 89% of the balance sheet total. The remaining 15% of the total revenue and 11% of the balance sheet total concern a number of reporting components, each accounting for less than 5% of the total revenue or balance sheet total. For these remaining components, we have performed a number of procedures, including analytical reviews, to substantiate our judgment that there are no relevant risks of material misstatement.

The group audit team provided detailed instructions to all component auditors who were part of the group audit, covering the significant audit areas, including the relevant risks of material misstatement and set out the information required to be reported back to the group audit team. The group audit team has made site visits to Germany, Taiwan and the United States and has audited the Dutch group component. Regardless of whether group components were visited, there have been telephone conferences with the local auditors for most group components and, where considered necessary, with local management. During the site visits, the planning of our audit, our risk assessment, our audit approach and the key audit findings and objectives were discussed. In Germany, Taiwan and the United States file reviews were performed.

 

By performing the procedures mentioned above at group and local entities, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to provide an opinion about the financial statements.

Initial audit

Initial audit engagements involve considerations in addition to recurring audits. During initial audit engagements we have to gain sufficient knowledge about the company, its business, control environment and application of accounting principles in order to perform our initial audit risk assessment and planning of audit activities.

A detailed transition plan was prepared prior to the start of the audit. We started our transitional procedures in May 2016 to gain an understanding of Accell and its business, including its control environment and accounting policies. We have been in close contact with the predecessor auditor and have performed reviews on their audit files.

 

Our key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the board of directors and the supervisory board, but are not a comprehensive reflection of all matters discussed.

These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Report on the other information included in the annual report

In addition to the financial statements and our auditor’s report thereon, the annual report contains other information that consists of:

  • board report, contains chapters 1. At a glance, 2. Looking to the future, 3. Progress and performance, 4. Supervision and Risk Management;
  • other information.

Based on the below procedures performed, we conclude that the other information:

  • is consistent with the financial statements and does not contain material misstatements;
  • contains the information as required by Part 9 of Book 2 of the Netherlands Civil Code.

We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.

By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Netherlands Civil Code and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements.

Management is responsible for the preparation of the other information, including the management board’s report in accordance with Part 9 of Book 2 of the Netherlands Civil Code and other information pursuant to Part 9 of Book 2 of the Netherlands Civil Code.

Report on other legal and regulatory requirements

Engagement

We were appointed as auditor of Accell Group N.V. by the General Meeting of Shareholders on 26 April 2016. The audit of the 2016 financial statements was our first year’s audit.

Description of the responsibilities for the financial statements 

Responsibilities of the Board of Directors and the Supervisory Board for the financial statements

The Board of Directors is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and with Part 9 of Book 2 of the Netherlands Civil Code. Furthermore, the Board of Directors is responsible for such internal control as the Board of Directors determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to errors or fraud. 

As part of the preparation of the financial statements, the Board of Directors is responsible for assessing the Company’s ability to continue as a going concern. Based on the financial reporting framework mentioned, the Board of Directors should prepare the financial statements using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Board of Directors should disclose events and circumstances that may cast significant doubt on the Company’s ability to continue as a going concern in the financial statements. 

The Supervisory Board is responsible for overseeing the Company’s financial reporting process.

Our responsibilities for the audit of financial statements

Our objective is to plan and perform the audit to obtain sufficient and appropriate audit evidence for our opinion. Our audit has been performed with a high, but not absolute, level of assurance, which means we may not have detected all material errors and fraud during the audit.

Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.

For a further description of our responsibilities in respect of an audit of financial statements we refer to the website of the “Nederlandse Beroepsorganisatie van Accountants” (NBA). https://www.nba.nl/Documents/Tools%20Vaktechniek/Standaardpassages/Standaardpassage_nieuwe_controletekst_oob_variant_%20Nederlands.docx

Amstelveen, 9 March 2017

KPMG Accountants N.V.

 

T. van der Heijden RA

Bewaren

Bewaren