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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