8.20
Notes to the company financial statements
A. General
The company financial statements are part of the 2019 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 Dutch Civil Code. To set the principles for the recognition and measurement of assets and liabilities and the determination of the result for its company financial statements, Accell Group makes use of the option provided in section 2:362(8) of the Dutch 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 note 6.6 Notes to the consolidated financial statements for a description of these principles.
i. Result of participating interests
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.
Participations with a negative net asset value are valued at nil. If Accell Group N.V. guarantees the debts of the relevant participations, a provision is formed.
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.
8.20.1 Goodwill
Changes in goodwill were as follows:
| 2019 | 2018 | |
| € x 1,000 | € x 1,000 | |
| Cost | ||
| Balance at 1 January | 10,330 | 9,996 |
| Investments as a result of business combinations | - | - |
| Currency translation differences | 172 | 334 |
| Balance at 31 December | 10,502 | 10,330 |
| Accumulated impairments | ||
| Balance at 1 January | - | - |
| Impairments | - | - |
| Balance at 31 December | - | - |
| Carrying amount | ||
| Balance at 1 January | 10,330 | 9,996 |
| Balance at 31 December | 10,502 | 10,330 |
8.20.2 Deferred tax assets
Deferred tax assets mainly consist of € 21.4 million for a liquidation loss (see note 6.15.2 Deferred taxes of the consolidated financial statements).
8.20.3 Financial fixed assets
Changes in financial fixed assets were as follows:
| Notes | 2019 | 20181 | |
| € x 1,000 | € x 1,000 | ||
| Subsidiaries | |||
| Balance at 1 January | 417,200 | 385,036 | |
| Initial application IFRS 9 | - | -805 | |
| Revised balance at 1 January | 417,200 | 384,231 | |
| Profit of participating interests | -9,542 | 22,451 | |
| Investments (divestments) | - | 1,503 | |
| Received dividend participating interests | - | - | |
| Translation differences | 1,517 | -2,135 | |
| Actuarial gains and losses | 18 | 3,752 | |
| Legal restructuring | - | 2,381 | |
| Reclassification subsidiary to provision | 6.20.5 | 63,506 | 9,351 |
| Repayments of semi-permanent loans | -21,532 | 0 | |
| Other movements | 2,925 | -4,334 | |
| Balance as at 31 December | 454,093 | 417,200 | |
| Loans to group companies | |||
| Balance at 1 January | 43,127 | 18,665 | |
| Loans provided | 1,720 | 25,662 | |
| Loans repaid | -1,110 | -1,200 | |
| Translation differences | - | - | |
| Balance at 31 December | 43,737 | 43,127 | |
| Total financial fixed assets | 497,830 | 460,327 | |
The long-term loans to group companies are provided as long-term financing and are interest-bearing with an interest rate of 2.6% (2018: 2.4%).
The 2019 consolidated financial statements include Accell Group N.V., in Heerenveen, as well as the financial information of the following companies:
| Notes | Participation Percentage | |
| Consolidated subsidiaries | ||
| Accell Bisiklet Sanayi ve Ticaret A.S., Manisa, Turkey | 100% | |
| Accell Hunland Kft, Toszeg, Hungary | 100% | |
| Accell IT B.V., Heerenveen, the Netherlands | 100% | |
| Accell Nederland B.V., Heerenveen, the Netherlands | 100% | |
| Accell North America Inc., Kent, Washington, United States of America 1) | 6.16.1 | 100% |
| Accell Suisse AG, Alpnach Dorf, Switzerland | 100% | |
| Accell Asia Ltd (Taiwan Branch), Taipei, Taiwan | 100% | |
| Accell Asia Ltd, Hong Kong, People's Republic of China | 100% | |
| Babboe B.V., Amersfoort, the Netherlands | 100% | |
| Comet Distribuciones Commerciales S.L., Urnieta, Spain | 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% | |
| E. Wiener Bike Parts GmbH, Sennfeld, Germany | 100% | |
| Etablissement Th. Brasseur S.A., Liège, Belgium 2) | 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% | |
| Winora Staiger GmbH, Sennfeld, Germany | 100% | |
| 1) The business activities of Accell North America Inc. were sold in 2019 and the remaining positions are in run-off. | ||
| 2) The business activities of Etablissement Th. Brasseur S.A. were terminated or transferred to Accell Netherlands in 2018. | ||
| Delta Metal was sold on 1 December 2019. | ||
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.
8.20.4 Shareholders' equity
The movement schedule of shareholders’ equity for 2019 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 2019 | 266 | 42,468 | 2,644 | -22,184 | 3,273 | 275,653 | 20,271 | 322,391 |
| Net profit | - | - | - | - | - | - | 2,804 | 2,804 |
| Other comprehensive income | - | - | -3,076 | 9,577 | - | 18 | - | 6,519 |
| Total comprehensive income | - | - | -3,076 | 9,577 | - | 18 | 2,804 | 9,323 |
| Transfer to other reserve | - | - | - | - | - | 20,271 | -20,271 | - |
| Dividends paid | - | - | - | - | - | -13,302 | - | -13,302 |
| Stock dividends | 2 | -2 | - | - | - | 4,770 | - | 4,770 |
| Share-based payments | - | -152 | - | - | - | 192 | - | 40 |
| Other changes | - | - | - | 1 | -658 | 630 | - | -27 |
| Balance at 31 December 2019 | 268 | 42,314 | -432 | -12,607 | 2,615 | 288,232 | 2,804 | 323,196 |
The movement schedule of shareholders’ equity for 2018 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 2018 | 263 | 43,219 | -7,074 | -22,483 | 2,704 | 272,191 | 10,501 | 299,321 |
| Initial application IFRS 9 | - | - | 2,615 | - | - | -805 | - | 1,810 |
| Revised balance as at 1 January 2018 | 263 | 43,219 | -4,459 | -22,483 | 2,704.00 | 271,386 | 10,501 | 301,130 |
| Net profit | - | - | - | - | - | - | 20,271 | 20,271 |
| Other comprehensive income | - | - | 7,103 | -1,921 | - | 3,752 | - | 8,934 |
| Total comprehensive income | - | - | 7,103 | -1,921 | - | 3,752 | 20,271 | 29,205 |
| Transfer to other reserve | - | - | - | - | - | 10,501 | -10,501 | - |
| Dividends paid | - | - | - | - | - | -13,141 | - | -13,141 |
| Stock dividends | 3 | -3 | - | - | - | 5,770 | - | 5,770 |
| Share-based payments | - | -748 | - | - | - | 182 | - | -566 |
| Other changes | - | - | - | 2,220 | 569 | -2,797 | - | -8 |
| Balance at 31 December 2018 | 266 | 42,468 | 2,644 | -22,184 | 3,273 | 275,653 | 20,271 | 322,391 |
Accell Group has issued share options (note 6.17.4 Share-based payments of the consolidated financial statements).
Ordinary shares
On 31 December 2019 the authorized capital consists of 55,000,000 ordinary shares, 5,000,000 cumulative preference shares F and 60,000,000 cumulative preference shares B, each with a nominal value of € 0.01. Of these, 26,802,751 (2018: 26,597,354) ordinary shares have been issued and duly paid at 31 December 2019, as a result the issued and paid-up share capital amounts to € 268,028.
Share premium reserve
The share premium is the income from the issuing of shares in so far as this exceeds the nominal value of the shares (above par income).
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.
Translation reserve
The legal translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. In 2019 there has been a reclassification of € 7,888 to the income statement regarding the US discontinued operations.
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 amounted to € 1.9 million (2018: € 1.4 million), 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 € 0.7 million (2018: € 1.9 million) has been recognized for capitalized development in the Netherlands.
Proposal for profit appropriation (Unappropriated result)
The Board of Management proposes to the General Meeting that the result after tax for 2019 of € 2.8 million (profit) should be allocated as follows: to pay out an amount of € 8.0 million as an optional dividend, equivalent to € 0.30 per share (2018: € 0.50) and to retrieve the remaining amount of € 5.2 million from the other reserves. The 2019 result after tax is presented as unappropriated profit in shareholders' equity.
Dividend
The Board of Management proposes to make available to the shareholders a dividend with stock option of € 0.30 per share with respect to the current year. The dividend proposal of € 8.0 million is subject to approval by the General Meeting of Shareholders on 22 April 2020 and is not reflected as a liability in these financial statements. The dividends have not been provided for and there are no income taxes consequences.
The dividend in respect of the financial year 2018 was determined at € 0.50 per share or as stock dividend during the General Meeting of Shareholders of 24 April 2019. After the period in which shareholders could report their preference, 36% of the shareholders opted for the stock dividend. On 17 May 2019 € 8.5 million was distributed as cash dividend and 196,691 shares were issued as stock dividend and added to issued share capital.
8.20.5 Provisions
In 2019 and 2018 the negative net asset value of Accell North America Inc. was included under the provisions.
8.20.6 Receivables from and liabilities to group companies
The receivables from and liabilities to group companies are current receivables and current liabilities (no interest).
8.20.7 Loans to and from group companies
The short-term loans to and from group companies relate to current accounts arising from cash management within Accell Group N.V.. The loans are interest-bearing (3 months Euribor plus margin).
8.20.8 Other financial instruments
See note 6.12 Derivatives and hedge accounting, note 6.13 Financial risk management and note 6.14 Fair values measurement of the consolidated financial statements for the note on other financial instruments; other financial instruments consist of forward exchange contracts (net financial asset) of € 2.9 million (2018: € 8.5 million) and interest rate swaps (financial liabilities) of € 1.9 million (2018: € 1.0 million), both used for hedging purposes.
8.20.9 Borrowings and revolving credit facility
See note 6.9 Net debt, note 6.13 Financial risk management and note 6.14 Fair value measurement of the consolidated financial statements for the note on borrowings of € 73.7 million (2018: € 98.6 million) and the revolving credit facility of € 110.0 million (2018: € 40.0 million). For the note on Accell Group’s policies in respect of liquidity risk and market risk, consisting of currency risk and interest risk, see note 6.13 Financial risk management of the consolidated financial statements.
8.20.10 Net turnover
In 2018 the net turnover comprised charges to group companies with regard to management fees.
8.20.11 Personnel expenses
Personnel expenses pertain solely to the Board of Management. The remuneration of the Board of Management, including pension charges as referred to in Section 2: 383, subsection 1 of the Dutch Civil Code, charged in the financial year to Accell Group N.V. amounted to € 1.9 million (2018: € 3.5 million) and to € 0.2 million (2018: € 0.2 million) for the members of the Supervisory Board. For details on the remuneration of the Board of Management and the Supervisory Board see note 6.17.5 Remuneration of the Board of Management and the Supervisory Board of the consolidated financial statements.
Personnel costs also include an amount of € 54 thousand (2018: € 92 thousand) for conditional shares and nil (2018: € 38 thousand) for social security costs for directors of group companies. For details on this conditional share plan, see note 6.17.4 Share-based payments of the consolidated financial statements.
8.20.12 Other expenses
In 2019 the other expenses include IT costs, consultancy costs, audit costs and travel expenses. In 2018 there were also strategy implementation costs.
8.20.13 Net finance cost
Financial income amounted to € 4.9 million (2018: € 9.9 million) and mainly comprises results from treasury activities for group companies and interest income related to loans to group companies. The financial expenses amounted to € 1.9 million (2018: € 2.8 million) and included interest expenses, bank fees and currency results on bank balances and overdrafts.
8.20.14 Contingent 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.
At 31 December 2019, Accell Group N.V. holds a group guarantee to the trustees of the UK defined benefit plan, whereby in the event of a bankruptcy of the UK subsidiary, Accell Group N.V. guarantees any deficits in the UK pension scheme up to a maximum of £ 8.7 million. In addition, Accell Group has provided a rental guarantee, whereby in the event of a bankruptcy of the Dutch subsidiary, Accell Group guarantees any rental income up to a maximum of € 1.3 million. The other contingent liabilities consist of a number of smaller customs guarantees, bank guarantees and rental guarantees totalling € 4.5 million.
In addition, declarations of joint and several liability have been issued for debts to suppliers arising from the purchase transactions of consolidated participating interests.
Earn-outs
Per 31 December 2019 Accell Group holds a contingent liability for a conditional compensation for post combination services, with a maximum of € 1.5 million, which is payable to Velosophy management. The compensation is conditional on certain revenue and EBITDA targets for the start-ups Centaur Cargo and Carqon.
In the Stock Purchase Agreement between Accell North America and Beeline Bikes Acquisition Company, LLC is included an earn-out arrangement of 10% of the Operation Profit for each calendar year during the term 01.01.2021 - 31.12.2024.
In the Asset Purchase Agreement between (amongst others) Accell North America and Alta Cycling Group LLC is included an earn-out arrangement of 15% of the for each calendar year during the term 01.01.2022 - 31.12.2026, with a maximum amount of US$ 15 million.
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.
8.20.15 Subsequent events
Corona virus outbreak
The full impact of the Corona virus outbreak on our business is unclear yet and we are monitoring the situation closely. Risk mitigating actions are being taken. Our current inventory levels provide for some buffer but we anticipate longer delivery times for certain components which may delay the introduction of several new innovative bike models.
New long term incentive plan
At 1 January 2020, 15,291 Accell Group N.V. shares were conditionally granted under a new long term incentive plan for a selected group of executives. The costs will be expensed in the income statement on a linear basis during the vesting period.
Supervisory Board
R. ter Haar, chairman
G. van de Weerdhof, vice-chairman
P.B. Ernsting
D. Jansen Heijtmajer
Board of Management
A.H. Anbeek, CEO
R.S. Baldew, CFO
J.J. Both, CSCO
Heerenveen, 5 March 2020