Equity and liabilities
2.2.6.1 26. Equity
A. Share capital and share premium
Ordinary shares (number) | Amount in euro | |||
31 December 2017 | 31 December 2016 | 31 December 2017 | 31 December 2016 | |
Ordinary shares – par value €0.01 | 106,261,040 | 106,261,040 | 144,617 | 144,617 |
Priority share – par value €0.01 | 1 | 1 | - | - |
In issue at 31 December – fully paid | 106,261,041 | 106,261,041 | 144,617 | 144,617 |
On 15 April 2016, it was resolved to amend the Articles of Association of the Company, to change the legal form of the Company into a public limited company, and the par value of the shares was reduced from €1.00 to €0.01 per share with an effective date per 23 May 2016. As at 31 December 2017, the share capital consists of 106,261,040 ordinary shares and 1 priority share. At balance sheet date the shares were issued and fully paid up. The share premium consists of the positive difference between the issue price and the nominal value of the issued shares.
On 26 April 2017, the Annual General Meeting of Shareholders authorised ForFarmers to initiate a programme to repurchase its own shares for a period of 18 months for (a) an amount between €40 million and €60 million and (b) in addition to purchase shares for the implementation of employee participation plans in 2017. ForFarmers repurchased 5,747,993 shares for a total amount of €56.7 million (including purchasing costs) in the period from 2 May 2017 through 31 December 2017. From the total number of repurchased shares 358,465 at an amount of €3.0 million are reissued as certificates for employee participation plans, bringing the balance of repurchased shares to €53.7 million (including purchasing costs).
(i) Ordinary shares
All ordinary shares have equal rights. Holders of these shares are entitled to dividend as declared from time to time, and are entitled to one vote per share at annual general meetings of shareholders of the Company. All rights attached to the Company’s shares held by the Group are suspended until those shares are reissued.
(ii) Priority share
The priority share is held by Coöperatie FromFarmers U.A. As a result of the treasury shares held by the Group Coöperatie FromFarmers U.A., on the latest reference date of 1 January 2018, could exercise the voting right for 51.9% of votes to be cast on the total of ordinary shares on the shares it holds. Furthermore, the Coöperatie FromFarmers U.A. could give voting instructions with regard to the shares held by the Trust Office Foundation, which would give Coöperatie FromFarmers U.A. 60.0% of voting rights. As priority share holder Coöperatie FromFarmers U.A.:
(i) has a recommendation right for four of the six members of the Supervisory Board;
(ii) may appoint a member of the Supervisory Board as Chairman after consultation with the Supervisory Board;
(iii) has an approval right as regards the decisions of the Executive Board regarding:
- moving the Company’s head office outside the east of the Netherlands (Gelderland and Overijssel);
- an important change in the identity of nature of the Company or its enterprise as a result of (1) transfer of the enterprise or practically all of the enterprise to a third party or (2) entering into or breaking off a long-term partnership of the Company or a subsidiary thereof with another legal entity or company, or as fully liable partner in a limited partnership or general partnership, if such partnership or its termination represents a fundamental change to the Company;
- taking or disposing of a participating interest in the capital of a company to a value of at least a third of the amount of the Company’s equity according to the balance sheet with explanatory notes or, in the event the Company draws up consolidated balance sheets, according to the consolidated balance sheet with explanatory notes, according to the most recently adopted annual accounts of the Company, or any of its subsidiaries;
- changes to the Company’s articles of association;
- affecting a merger or division.
Please refer to the Corporate Governance Statement for the conditions for holding the priority share and the special control rights associated thereto if that voting right and/or voting instruction can be exercised or given for 50% or less.
The priority share is classified as equity, because the share does not contain any obligations to deliver cash or other financial assets and does not require settlement in a variable number of the Group’s equity instruments.
B. Nature and purpose of reserves
(i) Treasury share reserve
The reserve for the Company’s treasury shares comprises the cost of the Company’s (depositary receipts) shares held by the Group. The treasury shares are accounted for as a reduction of the equity attributable to the owners of the parent.
Treasury shares are recorded at cost, representing the market price on the acquisition date, where the par value of treasury shares purchased is debited to the treasury share reserve. When treasury shares are sold or re-issued, the par value of the instruments is credited to the treasury share reserve. Any premium or discount to par value as result of the market price is shown as an adjustment to retained earnings.
During the reporting period the Company purchased 5,747,993 of its shares as part of the share buy-back programme and to be able to re-issue the depositary receipts in relation to the employee participation plans. Besides the repurchase of the abovementioned number of shares, the 358,465 treasury shares, which were obtained on behalf of the previous liquidity provider agreement (SNS) which ended on May 24 2016, were used for the purpose of employee participation plans. At 31 December 2017, the Group held 5,469,292 of the Company’s shares.
In 2016 the Company purchased 400,000 of its (depositary receipts) shares to be able to re-issue the depositary receipts in relation to the employee participation plans. At 31 December 2016, the Group held 77.580 of the Company’s shares.
The movement of treasury shares | ||||
Number of shares | Amount par value in thousand euro | |||
2017 | 2016 | 2017 | 2016 | |
Balance at 1 January | 77,580 | 399,429 | 1 | 399 |
Repurchase Employee participation plan | 301,560 | 400,000 | - | 189 |
Re-issuance Employee participation plan | -358,465 | -455,664 | - | -5 |
Share buyback | 5,446,433 | - | 54 | - |
Adaptation par value shares | - | - | - | -314 |
Other movements | 2,184 | -266,185 | - | -268 |
Balance as at 31 December | 5,469,292 | 77,580 | 55 | 1 |
The other movements 2016 relates to depositary receipts sold by the previous liquidity provider (SNS) independently from the Company.
(ii) Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. The decrease in this reserve as at 31 December 2017 is due to the devaluation of the Pound sterling.
(iii) Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments used in cash flow hedges pending subsequent recognition in profit or loss as the hedged cash flows affect profit or loss.
(iv) Other reserves and retained earnings
Other reserves are held by the Company for statutory purposes. Retained earnings comprise the balance of accrued profits that have not been distributed to the shareholders.
A reference is made to the section Other information regarding the result appropriation scheme under the Articles of Association.
For a further clarification of the other reserves and retained earnings a reference is made to Note 47 Shareholders’ equity of the Company financial statements.
C. Dividends
The following dividends were declared and paid by the Company for the year:
In thousands of euro | 2017 | 2016 |
€0.24 per qualifying ordinary share (2016: €0.23) | 25,716 | 24,734 |
25,716 | 24,734 | |
After the respective reporting date, the following dividends were proposed by the Executive Committee. The dividends have not been recognised as liabilities and there are no tax consequences.
In thousands of euro | 2017 | 2016 |
€0.30 per qualifying ordinary share (2016: €0.24) | 30,238 | 25,715 |
30,238 | 25,715 | |
2.2.6.1.1
D. Other comprehensive income accumulated in reserves, net of tax
Attributable to shareholders of the Company | |||||||
In thousands of euro | Note | Translation reserve | Hedging reserve | Other reserves and retained earnings | Total | Non- controlling interest | Total OCI |
2017 | |||||||
Remeasurement of defined benefit liabilities | 15B , 16B | - | - | 4,168 | 4,168 | - | 4,168 |
Foreign operations – foreign currency translation differences | 16B | -2,083 | - | - | -2,083 | - | -2,083 |
Cash flow hedges - effective portion of changes in fair value | 16B | - | 6 | - | 6 | - | 6 |
Cash flow hedges - reclassified to statement of profit or loss / statement of financial position | 16B | - | -33 | - | -33 | - | -33 |
Equity-accounted investees - share of other comprehensive income | 16B | - | - | 5 | 5 | - | 5 |
Total | -2,083 | -27 | 4,173 | 2,063 | - | 2,063 | |
2016 | |||||||
Remeasurement of defined benefit liabilities | 15B , 16B | - | - | -210 | -210 | - | -210 |
Foreign operations – foreign currency translation differences | 16B | -8,114 | - | - | -8,114 | - | -8,114 |
Cash flow hedges - effective portion of changes in fair value | 16B | - | 493 | - | 493 | - | 493 |
Cash flow hedges - reclassified to statement of profit or loss / statement of financial position | 16B | - | -466 | - | -466 | - | -466 |
Equity-accounted investees - share of other comprehensive income | 16B | - | - | -1 | -1 | - | -1 |
Total | -8,114 | 27 | -211 | -8,298 | - | -8,298 | |
2.2.6.2 27. Capital Management
For the purpose of ForFarmers’ capital management, capital includes share capital, share premium and all other equity reserves attributable to the equity holders of the parent. The Executive Committee monitors the average capital ratio as well as the level of dividends to be distributed to ordinary shareholders.
The Executive Committee has presented the performance measure 'underlying EBITDA' as they monitor this performance measure at a consolidated level, and they believe this measure is relevant to understand the Group’s financial performance. Underlying EBITDA is calculated by adjusting operating profit to exclude the impact
Underlying EBITDA is not a defined performance measure in IFRS. The Group’s definition of underlying EBITDA may not be comparable with similarly titled performance measures and disclosures by other entities. ForFarmers has earlier issued its guidance for the medium term of an on average annual EDITDA growth in the mid single digits at constant currencies.
2.2.6.2.1
In thousands of euro
Note
2017
2016
Operating profit (EBIT)
74,022
67,833
Depreciation and amortisation (including impairment loss)
27,627
26,044
EBITDA
101,649
93,877
Gain on sale of investments(1)
10
- 363
- 1,152
Gain on property, plant and equipment(1)
10
-
- 103
Gain on sale of assets held for sale(1)
10
,
25
-
- 900
Gain on sale of investments and assets held for sale
- 363
- 2,155
Restructuring cost
160
1,887
Total
- 203
- 268
Underlying EBITDA(2)
101,446
93,609
Foreign currency effect
1,664
Underlying EBITDA, at constant currencies(2)
103,110
93,609
Growth ratio underlying EBITDA(2)
10.1%
3.6%
(1) Incidental items as per the definition of the Group
(2) Underlying' means excluding incidental items
2.2.6.2.2
ForFarmers’ monitors capital using a ratio return on average capital employed (ROACE). This ratio is defined as the underlying EBITDA to average capital employed (the 12-month average of the sum of equity and non-current liabilities adjusted for cash and cash equivalents, bank overdrafts, assets held for sale and interests in equity-accounted investees). For this purpose, underlying EBITDA is applied and average capital employed is consisting of the average balance of capital throughout the year. The average capital employed for 2017 was €417.0 million (2016: €415.4 million) and the ROACE was 24.3% (2016: 22.5%).
Funding
ForFarmers’ long term target is to have a net debt to normalised EBITDA ratio of maximum 2.5. Normalised EBITDA is defined as agreed in the covenant guidelines of the bank
facility, a reference is made to Note 28. ForFarmers’ net debt to normalised EBITDA ratio at 31 December 2017 and 31 December 2016 was as follows:
2.2.6.2.3
In thousands of euro | Note | 2017 | 2016 |
Loans and borrowings | 28 | 44,536 | 45,778 |
Bank overdrafts | 24 | 49,690 | 45,535 |
Less: cash and cash equivalents | 24 | -161,297 | -152,854 |
Net debt | -67,071 | -61,541 | |
Operating profit before depreciation, amortisation and impairment (EBITDA) | 101,649 | 93,877 | |
Adjustments as per financing agreement | 142 | 3,207 | |
Normalised EBITDA | 101,791 | 97,084 | |
Leverage ratio (net debt to normalised EBITDA ratio) | -0.66 | -0.63 | |
Interest coverage ratio (operating profit to net financing costs) | -31.18 | -19.23 | |
2.2.6.2.4
The long term target is lower than the ratios in credit facility, see Note 28. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.
Share buy-back programme own shares
On 26 April 2017, the Annual General Meeting of Shareholders authorised ForFarmers to initiate a
2.2.6.3 28. Loans and borrowings
In thousands of euro | 31 December 2017 | 31 December 2016 |
Unsecured bank loans | 44,429 | 45,564 |
Finance lease liabilities | 79 | 88 |
Total non-current | 44,508 | 45,652 |
Current portion of finance lease liabilities | 28 | 126 |
Total current | 28 | 126 |
The financing arrangement, concluded in 2014, has no short term repayment obligations as at 31 December 2017 (nor as per 31 December 2016). For information regarding the financing, please refer to the subsection 'multicurrency revolving facility agreement'.
Information about the Group’s exposure to interest rate, foreign currency and liquidity risks is disclosed in Note 31.
2.2.6.3.1
A. Terms and repayment schedule
The terms and conditions of outstanding loans are as follows:
Currency | Nominal interest rate | Year of maturity | Face value 31 December 2017 | Carrying amount 31 December 2017 | Face value 31 December 2016 | Carrying amount 31 December 2016 | |
In thousands of euro | % | ||||||
Unsecured bank loan (floating rate) | GBP | LIBOR + 0,7% | 2020 | 45,086 | 44,429 | 46,718 | 45,564 |
Finance lease liabilities | GBP | 4% - 4.4% | 2017-2021 | 147 | 107 | 228 | 214 |
Total interest-bearing liabilities | 45,233 | 44,536 | 46,946 | 45,778 | |||
2.2.6.3.2
B. Unsecured bank loans
(i) Multicurrency revolving facility agreement
In 2014, the Group concluded a financing agreement (multicurrency revolving facility agreement) with ABN AMRO Bank, Rabobank, Lloyds Bank and BNP Paribas, that is free from securities. The agreement has a term up to 31 January 2020. The amount of the facility amounts to a maximum of €300 million, consisting of €200 million loan facility and €100 million bank overdraft facility, of which a total nominal amount of £40.0 million (€44.4 million) (31 December 2016: £40.0 million (€46.7 million)) was used as at 31 December 2017. The applicable interest is based on Euribor and/or Libor (depending on the currency in which the facility is drawn) plus a margin between 0.7% and 2.1%. The margin depends on the leverage ratio; on the basis of the 2017 ratio the said margin amounts to 0.7% (2016: 0.7%).
Covenant guidelines
Existing guidelines for financial ratios
- Leverage ratio, that is determined by net debt divided by normalised EBITDA. The leverage ratio shall not exceed 3.0; whereas in a maximum of three relevant but not consecutive periods during the duration of the agreement the leverage ratio is allowed to be between 3.0 and 3.5.
- Interest coverage ratio, that is determined by operating profit (EBIT) divided by net interest expense and shall not be between zero and 4.0.
Net debt means the total amount of all debts to credit institutions and other financial institutions (including financial lease commitments) less cash and cash equivalents.
EBITDA means operating profit after adding back amortisation and depreciation of assets.
Normalised EBITDA means, in respect of a relevant period, EBITDA for that relevant period:
- 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 the Group (or to any business) disposed of during the relevant period prior to its disposal unless the purchase price in relation to such disposal has not yet been received during the relevant period, in which case EBITDA of the disposed member of the Group or business shall be included in normalised EBITDA provided that, in the event that the purchase price is partially (and not fully) received during the relevant period, EBITDA attributable to that member, calculated on a pro-rata basis, shall be included in normalised EBITDA.
- Including, at the indication of the Group, extraordinary costs incurred in the relevant period related to the integration of business combinations acquired in the relevant period, or the disentanglement after disposal of members of the Group provided that the aggregated amount of such costs does not exceed €25 million at any time during the life of the agreement, and €10 million in any financial year of the Group. In such event, the Group shall deliver a compliance certificate that specifies any such extraordinary costs.
As per 31 December 2017 and per 31 December 2016, the leverage ratio and interest coverage ratio amount both negative in accordance with the applicable accounting standards. Herewith ForFarmers fully complies with the terms and conditions of the covenants as per 31 December 2017 as well as per 31 December 2016.
(ii) Other unsecured loan facilities
ForFarmers Thesing, Germany, has an unsecured financing agreement with Bremers Landesbank, with a maximum amount of €6 million. This facility is not used at the balance sheet date (31 December 2016: idem).
2.2.6.3.3
C. Finance lease liabilities
Finance lease liabilities are payable as follows:
31 December 2017 | 31 December 2016 | |||||
In thousands of euro | Future minimum lease payments | Interest | Present value of minimum lease payments | Future minimum lease payments | Interest | Present value of minimum lease payments |
Less than 1 year | 39 | 11 | 28 | 132 | 6 | 126 |
Between 1 and 5 years | 108 | 29 | 79 | 96 | 8 | 88 |
More than 5 years | - | - | - | - | - | - |
Total | 147 | 40 | 107 | 228 | 14 | 214 |
The decrease of the future lease payments has been caused by assets that were leased in the past, are now being purchased by the Company. This mainly concerns vehicles.
D. Reconciliation of movements of liabilities to cash flows arising from financing activities
In thousands of euro | Note | Other loans and borrowings | Finance lease liabilities | Reserves | Other reserves and retained earnings | Unap- propriated result | Non- controlling interest | Total |
Balance at 1 January 2016 | 45,564 | 214 | -3,583 | 229,816 | 53,260 | 4,880 | ||
Changes form financing cash flows | ||||||||
Proceeds from purchase and sale of treasury shares | - | - | -54 | -53,504 | - | - | -53,558 | |
Proceeds from sale of treasury shares relating to employee participation plan | - | - | - | 2,335 | - | - | 2,335 | |
Repurchase of treasury shares relating to employee participation plan | - | - | - | -3,151 | - | - | -3,151 | |
Payment of finance lease liabilities | - | -130 | - | - | - | - | -130 | |
Dividend paid | 26 | - | - | - | -24,672 | - | -1,000 | -25,672 |
Total changes form financing cash flows | - | -130 | -54 | -78,992 | - | -1,000 | -80,176 | |
The effect of changes in foreign exchange rates | -1,628 | -7 | - | - | - | - | -1,635 | |
Changes in fair value | 493 | - | - | - | - | - | 493 | |
Other changes / Liability related | ||||||||
Acquisition of subsidiary, net of cash acquired | 6 | - | 30 | - | - | - | - | 30 |
Total liability-related other changes | - | 30 | - | - | - | - | 30 | |
Non cash settled dividend | - | - | - | -1,044 | - | - | -1,044 | |
Total equity-related changes | - | - | -2,110 | 58,098 | 5,294 | 749 | 62,031 | |
Balance as at 31 December 2017 | 44,429 | 107 | -5,747 | 207,878 | 58,554 | 4,629 | ||
2.2.6.4 29. Provisions
2017 | ||||||
In thousands of euro | Soil deconta-mination | Demolition costs | Restructuring | Onerous contracts | Other | Total |
Balance at 1 January 2017 | 791 | 371 | 1,518 | 583 | 2,082 | 5,345 |
Provisions made during the year | - | 129 | 344 | 414 | 275 | 1,162 |
Provisions released during the year | -100 | - | -46 | -53 | -41 | -240 |
Provisions used during the year | -7 | -117 | -1,386 | -380 | -953 | -2,843 |
Effect of discounting | - | - | - | 8 | - | 8 |
Translation difference | - | - | -32 | - | -19 | -51 |
Balance as at 31 December 2017 | 684 | 383 | 398 | 572 | 1,344 | 3,381 |
Non-current | 534 | 129 | 2 | 450 | 1,134 | 2,249 |
Current | 150 | 254 | 396 | 122 | 210 | 1,132 |
Balance as at 31 December 2017 | 684 | 383 | 398 | 572 | 1,344 | 3,381 |
2016 | ||||||
In thousands of euro | Soil deconta-mination | Demolition costs | Restructuring | Onerous contracts | Other | Total |
Balance at 1 January 2016 | 923 | 623 | 254 | 638 | 2,086 | 4,524 |
Provisions made during the year | 18 | - | 2,288 | 86 | 324 | 2,716 |
Provisions released during the year | -4 | - | -559 | -10 | -100 | -673 |
Provisions used during the year | -146 | -252 | -402 | -131 | -103 | -1,034 |
Effect of discounting | - | - | - | - | - | - |
Translation difference | - | - | -63 | - | -125 | -188 |
Balance as at 31 December 2016 | 791 | 371 | 1,518 | 583 | 2,082 | 5,345 |
Non-current | 541 | 371 | - | 530 | 1,853 | 3,295 |
Current | 250 | - | 1,518 | 53 | 229 | 2,050 |
Balance as at 31 December 2016 | 791 | 371 | 1,518 | 583 | 2,082 | 5,345 |
2.2.6.4.1
A. Soil decontamination
The soil decontamination provision relates to the expected unavoidable costs of cleaning polluted sites. The Group conducts periodical assessments to ascertain whether sites have been polluted. At the moment pollution has been determined the unavoidable costs to clean the site are estimated and provided for. The release is related to a location in the Netherlands where the soil related activities have been completed.
B. Demolition costs
A provision for demolition costs was recognised in prior years resulting from the closure of a site in the Netherlands. Based on the estimated period during which the remaining provision will be utilised, it is classified as current. The non-current provision for demolition costs is recognized for assets in use and will be utilized at the end of the useful lifetime of these assets.
C. Restructuring
Upon the integration of several acquisitions, the Group decided to centralize accounting activities in Germany/Belgium, United Kingdom and the Netherland in shared service centres. Following the announcement, the Group recognised a provision for expected restructuring costs, including contract termination costs, consulting fees and employee termination benefits. Estimated costs were based on the terms of the relevant contracts.
D. Onerous contracts
In prior years, the Group entered into a non-cancellable lease for office space. Due to changes in its activities, the Group stopped using the premises during 2012, resulting in surplus storage space. The lease will expire in 2023. The obligation for the discounted minimum future payments, net of expected rental income, has been provided for.
E. Other
The other provisions mainly relate to legal disputes and claims.
2.2.6.5 30. Trade and other payables
In thousands of euro | 31 December 2017 | 31 December 2016 | |
Trade payables due to related parties | 36 | 1,893 | 2,123 |
Other trade payables | 109,927 | 82,267 | |
Accrued expenses | 88,814 | 70,553 | |
Trade payables | 200,634 | 154,943 | |
Taxes (other than income taxes) and social securities | 6,348 | 6,383 | |
Contingent consideration | 6A | 8,255 | 7,660 |
Other payables | 14,603 | 14,043 | |
Total | 215,237 | 168,986 | |
Non-current | 8,255 | 7,660 | |
Current | 206,982 | 161,326 | |
Total | 215,237 | 168,986 | |
The increase in other trade payables is mainly caused by an extension of payment terms as part of the project harmonisation of purchasing conditions.
The accrued expenses are, amongst others, related to invoices to be received and accrued personnel expenses.
Information about the Group’s exposure to relevant currency and liquidity risks is disclosed in Note 31C.