Annual report 2016 Short version excluding 2014 figures

1 · Annual report 2016 Contents

Management report

Business 3 We design to shape light 4 2016 at a glance 5 A year of great progress 6 Key figures and ratios 8 Developments in 2016

Corporate 10 Corporate information 13 and world-class craftsmanship 15 Risk management

Governance 17 Statutory report on corporate governance 17 Statutory report on corporate social responsibility 18 Statutory report on the underrepresented gender Financial statements

Consolidated 20 Income statement for 2016 20 Balance sheet at 31.12.2016 21 Statement of changes in equity for 2016 22 Cash flow statement for 2016 22 Notes to consolidated financial statements

Parent 26 Income statement for 2016 26 Balance sheet at 31.12.2016 27 Statement of changes in equity for 2016 28 Notes to parent financial statements

Accounting policies and statements 30 Accounting policies 36 Statement by Management on the annual report 37 Independent auditor’s report We design to shape light

Louis Poulsen is a Danish lighting manufacturer found- ed in 1874 and born out of the tradition where form follows function. The function and design of our products are tailored to reflect and support the rhythm of natural light. Since our first collaboration with in 1924, his views on the dualities of design and light have influenced our light philosophy. Every detail in the design has a purpose. Every design starts and ends with light.

We believe in passionate craftsmanship that produces quality lighting and appealing design products. In close partnership with world-class designers, archi- tects and other talents, we have established Louis Pouls- en as one of the key global suppliers of architectural and decorative lighting across the professional and private lighting markets for both indoor and outdoor applica- tions. has a global distribution network, 12 subsidiaries and dedicated showrooms in Copenha- gen, Stockholm, Miami, Oslo, Los Angeles, Tokyo and Dusseldorf.

Our means are simple and beautiful design. Our purpose is to create an attractive ambience with a positive influ- ence on people and spaces.

We design to shape light.

3 · Annual report 2016 2016 at a glance

Exciting news and updated icons Steady growth and strong profitability We launched our new light philosophy – design to shape We continued Louis Poulsen’s steady revenue growth light – and completed a series of successful product and increased profitability significantly despite sizeable launches across customer segments and geographies investments in sales and marketing as well as new shop- during the year. in-shops in 2016.

We saw good results of the efforts in 2016 with prestig- Our investments in research and development were ious design awards for Øivind Slaatto’s Patera pendant boosted, and we made targeted efforts to improve our and Clara von Zweigbergk – the designer behind the design and manufacturing process to reduce time-to- Cirque pendant. market and enhance efficiency.

At the same time, perspectives for the coming years are Efforts made in 2016 and previous years paid off, and we promising with a strong product pipeline in place and initiated further efficiency measures in the areas of inter- the acquisition of manufacturing rights for ’s nal logistics, quality, assembly and painting to continue designs. the positive trend. In 2016, our product launches included: • Clara von Zweigbergk’s Cirque series inspired by Our financial and operational progress included: • Revenue growth of 5% to DKK 750 million based • The Three Pendant series by Julie Richoz, Christian mainly on record sales in and . Flindt and Øivind Slaatto presented at light+building • A 17% increase in earnings (EBITDA) to DKK 104 in Frankfurt million corresponding to an EBITDA margin of 14%. • ’s VL45 Radiohus pendant and VL38 • Establishing 50 new shop-in-shops with a view to table, wall and floor lamp add another 100 in 2017. • The colourful Panthella Mini table lamp • Reducing average time-to-market by 65% in product • Limited copper versions of the classic PH 3½-2½ development and launch process. floor lamp

Revenue split 2016 Revenue and profitability

750 716

13.9 Scandinavia (51%) Revenue (DKK’m) EBITDA margin (%) Rest of Europe (16%) 12.4 Rest of World (33%)

2015 2016

4 · Annual report 2016

A year of great progress

2016 was a year of great progress for Louis Poulsen. Denmark or at trusted partners abroad with hand-picked Building on our company’s legacy, we launched our new components from all around the world. This approach is light philosophy – design to shape light – and a host applied whether we produce a classic Albertslund post, of new exciting products and limited editions of com- upgrade a PH Artichoke with LED components in Den- mended design icons. These efforts were supported by mark or get the complex hand painting work just right on significant organisational and operational improvements a new Cirque pendant in China. as well as strong financial performance. We have been fortunate enough to secure the rights for We continued to grow revenue steadily, while investing acclaimed Danish architect Finn Juhl’s designs, and we significantly in accelerating growth in the coming years. will pass on his legacy with great diligence and care, too. Our organisational setup was streamlined in several mar- Going forward, Louis Poulsen will thus produce the de- kets, and we expanded our sales force and established sign of the five iconic Danish designers Poul Henningsen, a new residential shop-in-shop concept with 50 new , , Vilhelm Lauritzen and distribution points added during 2016 – and 100 more to Finn Juhl. come in 2017. We saw good effects of our efforts with record sales across Sweden and Denmark as well as Indeed, the future seems bright for Louis Poulsen with growth in the German market, which has been chal- a solid point of departure for further development of our lenged for years. exciting product range and a positive business outlook for the coming years with favourable market projections While we did spend substantial resources on building a in the high-end segment in mature and growth regions stronger business, we managed to simultaneously boost alike. We will build on our success and win market shares profitability based on successful strategic initiatives with- by continuing the work to upgrade our distribution point in design, manufacturing and sourcing. We reduced our network for residential sales and strengthen our profes- time to market for new products, allowing us to offer cus- sional sales to retail chains and in the outdoor market in tomers new light fixtures at a faster pace and optimising particular. the allocation of resources for design and manufacturing with a shorter running-in period. I would like to take the opportunity to thank all of our talented colleagues, designers and business partners for Our work is guided by four values – quality, passion, making our progress possible. To quote Poul Henningsen humanise and ambience – which are all reflected in the – “The future is inevitable, progress is not.” unique products designed in Denmark and manufac- tured by skilled craftspersons either at our own facility in Christian Engsted, CEO of Louis Poulsen

5 · Annual report 2016 Key figures and ratios

2016 2015 DKK’m’ DKK’m’

Financial highlights Key figures Revenue 750 716 Gross profit/loss 319 281 EBITDA (Earnings before depreciations and amortisation) 104 89 EBITA (Earnings before amortisation) 74 45 Operating profit/loss 62 33 Net financials (20) (11) Profit/loss for the year 27 13 Total assets 671 699 Investments in property, plant and equipment 22 12 Equity 278 247 Net working capital 0 26 Cash flows from (used in) operating activities 99 85 Cash flows from (used in) investing activities (38) (17) Cash flows from (used in) financing activities (227) (52)

Ratios Gross margin (%) 42.5 39.2 Net margin (%) 3.6 1.8 EBITDA ratio (%) 13.9 12.4 EBITA ratio (%) 9.9 6.3 Return on equity (%) 10.3 5.6 Solvency ratio (%) 41.4 35.3

Financial highlights are defined and calculated in accordance with “Recommendations & Ratios 2015” issued by the Danish Society of Financial Analysts. Ratios Calculation formula Ratios Gross profit/loss x 100 Gross margin (%) Revenue The entity’s operating gearing. Profit/loss for the year x 100 Net margin (%) Revenue The entity’s operating profitability. EBITDA x 100 EBITDA ratio (%) Revenue The entity’s profitability before depriciation and amortisation EBITDA x 100 EBITA ratio (%) Revenue The entity’s profitability before amortisation Profit/loss for the year x 100 Average equity incl minority Return on equity (%) interests The entity’s return on capital invested in the entity by the owners. Equity x 100 Solvency ratio (%) Total assets The financial strength of the entity

6 · Annual report 2016 Original Coffee and bespoke lighting

The quality-conscious team behind acclaimed coffee- house chain Original Coffee place great emphasis on ambience and interior design. The individual premises for each of the eight coffeehouses in the area have been carefully selected and furnished to suit both the local residents and the general atmosphere while re- specting the chain’s focus on relaxed simplicity.

Luminaires have been hand-picked to underpin the spe- cial character of each location and provide pleasant illu- mination to create the perfect ambience. In collaboration with Louis Poulsen, Original Coffee has skilfully selected AJ Royal pendants for the intimate coffee bar on Øster- bro, the elegant PH 3½-3 lamp for the bright and airy set- ting at newly refurbished department-store Illum and the sparkling Cirque.

7 · Annual report 2016 Developments in 2016

Primary activities Louis Poulsen Holding A/S’ share capital is not divided The Louis Poulsen group manufactures and sells lighting into classes. fixtures to private consumers and professionals at home and abroad. The group is internationally recognized for Management regularly assesses whether Louis Poulsen providing exclusive lighting fixtures of high quality and Holding A/S has an adequate capital structure, the Board functional design. The products primarily serve the upper of Directors continuously assesses that the group’s cap- segments of the professional and private consumer mar- ital structure is consistent with the group’s and its stake- kets that attach great importance to the unique lighting holders’ interests. The overall objective is to ensure a cap- and the high quality levels. Louis Poulsen´s products fulfil ital structure that supports a profit- able long-term growth. the most stringent international demands for energy op- timisation and at the same time they meet the demand The group had net interest bearing debt of 110 million for a unique design as well as comfortable and glare free DKK as per December 31, 2016, which is a sufficient level lighting. to ensure financial flexibility. There are no changes to the Group’s guidelines and procedures for managing the cap- Development in activities and finances ital structure in 2016. The consolidated revenue amounts to 749.9 million DKK. The gross profit came to 318.9 million DKK in 2016 which In connection with Polaris Private Equity’s acquisition of is above expectations. The positive development derives the LP Group in 2014, the purchase price was partly fi- from profitability improvements in the production and a nanced by a loan from Sydbank. As per December 31, shift in the sales mix. 2016, this loan represents a total outstanding debt of 168 million DKK, of which 58 million DKK is located in the par- Operating profit (EBIT) reached 62 million DKK. The result ent company, Louis Poulsen Holding A/S. Management of 27 million DKK is in line with expectations. The man- believes that the current capital structure provides suffi- agement considers the financial development to be sat- cient flexibility to address the future strategy of the Group. isfactory. Further information on the financial development for the Events after the balance sheet date subsidiaries is available in the annual report of Louis No events have occurred after the balance sheet date to Poulsen A/S. this date, which would influence the evaluation of this an- nual report. Financial resources Outlook At year-end 2016 cash and non-utilized drawing facilities Louis Poulsen Holding A/S expects an increase in turno- in credit institutions amounted to app. 50 million DKK. ver in 2017 followed by increasing capacity costs to cover Capital structure new initiatives. Increased activities in sales are expected to deliver a positive development in the primary result.

8 · Annual report 2016 Location, location, location. And lighting...

A beautiful apartment in a renovated factory complex at- tractively located on Vesterbro in Copenhagen offers great views of the industrial urban meat packing district – as well as carefully selected lighting fixtures creating an inti- mate and comfortable atmosphere.

The lighting is comprised of a series of independent light points to provide both atmospheric and decorative ele- ments. Function, atmosphere and decoration are key- words behind the selection of fixtures, which have been fitted with dimmers to allow for adjustment to any mood and occasion.

A dimmable Wohlert pendant pleasantly illuminates an oval dining table, ensuring that the mood is always perfect and the atmosphere warm. In the bedroom, the AJ Floor ensures proper reading light, while the PH 3/2 contributes to the room’s ambience

9 · Annual report 2016 Corporate information

Intellectual capital resources to reduce energy consumptions in 2016. The total energy Group relations The group has a both experienced and competent staff consumption increased from 2015 to 2016 – this relates to The consolidated financial statements comprise the par- working with lighting technology. It will continue to attract an increase in the total activity level. ent company, Louis Poulsen Holding A/S, and subsidi- and retain highly skilled staff with expertise in the devel- aries and are incorporated in the annual report of Louis opment of lighting to ensure future growth. Great demand Products from the existing product portfolio are continu- Poulsen Holding A/S. The consolidated accounts include is placed on the employees’ technical and craftsman skills ously being adapted to the new energy efficient LED light the profit and loss for all subsidiaries. and their ability to engage in a logistically demanding pro- sources. As of 2016, Louis Poulsen offers a full range of duction process. LED products across the entire product port- folio. Fur- Louis Poulsen Holding A/S owns 100% of Louis Pouls- thermore, the product portfolio is continuously being en A/S. All other subsidiaries are 100% owned by Louis To ensure high product quality and competitive production up-dated with the latest LED technologies to optimize Poulsen A/S. the group continuously optimizes production. This de- light versus energy consumption without compromising mands a high level of competence, and the group there- the company’s lighting philosophy. The private equity fund Polaris owns 69% of Louis Pouls- fore continuously invests in competency development. It en Holding A/S through P-LP 2014 A/S. Polaris is a mem- is however just as important for Louis Poulsen Holding Products from the existing product portfolio are continu- ber of the Danish Venture and Private Equity Association A/S to attract and retain both skilled and unskilled workers ously being adapted to the new energy efficient LED light (“DVCA”) and hence compliant with the DVCA-guidelines; and employees with medium to higher education level. sources without compromise on the company’s lighting please see www.DVCA.dk . These guidelines, published philosophy. Furthermore, there is a daily focus on test and in June 2015, recommend a thorough review in particular During 2016 Louis Poulsen Holding A/S has recruited development of products with prolonged lifetime. regarding corporate governance, financial risks, employ- competencies within the area of business development ee relations and strategy. with focus on growth and the development of new prod- Research and development activities ucts. In addition, the company has increased its compe- Louis Poulsen continuously invests in development, up- tencies within the area of sales and marketing. dates and improvements of its product portfolio. Costs related to development of products are expensed in the Environmental performance income statement, or accounted for as an asset following Following substantial investments in energy optimization/ the accounting policies. reduction in 2014 there have been no specific investments

10 · Annual report 2016 Corporate information

Louis Poulsen’s sales organisation is based in Copen- hagen, whereas the company’s production facilities are based in Vejen. The daily management is carried out from Denmark in a close cooperation between the executive management and the company’s Board of Directors.

Sales and distribution outside Denmark are carried out through the 10 subsidiaries or through agents and distrib- utors operating on behalf of Louis Poulsen Holding A/S globally. During 2016 local Sales Representation Offices were established in Austria and Italy.

The Louis Poulsen group has 393 employees plus 137 employees in the subsidiaries. The majority of the Danish employees are engaged in the company’s production in Vejen

Development in staff: Denmark Subsidiaries Number of employees beginning of 2016 280 138 Recruited during 2016 34 34 Resigned during 2016 -58 -35 Number of employees end of 2016 256 137

Board of Directors in Louis Poulsen A/S

Apart from subsidiaries, Louis Poulsen established local Sales Representation Offices during the year in Italy as well as Austria.

11 · Annual report 2016 Timeless designs by Vilhelm Lauritzen

Influential Danish architect Vilhelm Lauritzen collaborat- ed closely with Louis Poulsen on the development of his light fittings in the 1930s and 1940s. Louis Poulsen sub- sequently marketed a number of his designs for years, in- cluding luminaires customised for the building in 1945. These light fittings gained iconic status over the years and were relaunched in 2016 under the names VL38 table, wall and floor lamp, and VL45 Radiohus pendant. The Vilhelm Lauritzen products are just as relevant today as they were when they were originally created 75 years ago.

From Albertslund to Miami

Our product portfolio combines high and low lighting in an architectural design that easily and harmoniously fits into various urban projects – and continue to do so for dec- ades. Our Albertslund product suite dates back 50 years and includes wall, bollard, ceiling, pendant and post mod- els. The original Albertslund post fixture was developed for a residential project in Albertslund, Denmark. Since then, the products have remained popular, and they are still ordered in Denmark and abroad – from Albertslund to Miami.

12 · Annual report 2016 Danish design and world-class craftsmanship

Louis Poulsen has designed and manufactured hand- natural Fibonacci spiral pattern and Poul Henningsen’s made lighting systems since 1874 and collaborated with brilliant light designs. The Patera is a modern successor influential Danish and international thinkers, designers, to the legendary PH Artichoke, and its complex geome- architects and creatives for decades. The company has try combines perfectly the direct and indirect light based amassed a vast and valuable body of competence and on state-of-the-art 3D programming and tailored physical experience within the design, development and manufac- models developed for the occasion. turing of luminaires. During the year, we secured the right to the designs of Over the years, Louis Poulsen has earned a reputation one of the most renowned Danish architects, Finn Juhl. for quality, which we safeguard by adhering to our four We have initiated the product development process and values – passion, quality, humanise and ambience. It is aim to launch several pieces from his immense body of critical that we are continuously able to attract and retain work in the coming years to fortify and strengthen Louis highly skilled employees with respect for these values and Poulsen’s leading global market position within the niche the necessary understanding of a technically and logisti- of Danish lighting design. cally complex production process. In addition, it is para- mount that our collaboration partners and carefully vetted Regardless of any specific designer’s or employee’s na- suppliers adhere to the same values and set equally high tionality, Louis Poulsen’s products are based on our val- standards for their work. We place great emphasis on en- ues, designed in Denmark and manufactured by skilled suring this whether we recruit and train employees, enter craftspersons at the most suitable location with quality into exciting new collaborations with world-class design- components. The product launches in 2016 aptly illustrat- ers or cooperate closely with our hand-picked suppliers ed this – from the assembly of the Patera in Denmark over and business partners providing unique components or the three layer mouth-blown PH 3½-2½ glass shades diligently assembling our products. produced in Murano in Italy to the complicated painting technique applied on Cirque in China. Our requirements Building on our historic collaborations with iconic Danish for craftsmanship, design and quality do not take location designers, we have continuously expanded Louis Pouls- or nationality into consideration as we do not compromise en’s collaborations to draw on the inspiration from a host on these core parameters. of international contemporary designers as well. In 2016, a new edition of Øivind Slaatto’s Patera was launched based on a combination of Slaatto’s inspiration from the

13 · Annual report 2016 Humanising light and transcending traditions

We focus on humanising light to make environments where people can thrive – and some of our products thus transcend traditional segments and categories. The NJP lamp designed by Oki Sato is a prime example of a fixture that easily follows the human from the relaxed home set- ting to any professional office location.

In 2016, the NJP table lamp was supplemented by a floor and two wall-mounted versions, further underlining the new interpretation of the classic anglepoise lamp in a con- temporary design adapted to modern working life.

14 · Annual report 2016 Risk management

Particular risks Market risks

The group’s products are primarily positioned in the high end markets. The economic development in the profes- sional and private consumer markets will affect the finan- cial results.

Currency risks

Due to sales activities in foreign markets, cash flow and equity are influenced by changes in interest levels and ex- change rates for a number of currencies. It is group policy to cover commercial exchange risks. Hedging is primarily used to cover open foreign exchange positions related to trading activities, not lone in foreign currencies, in the next twelve months based on the budget. The group does not use speculative hedging.

Credit risks

The group’s credit risks relate to trade receivables includ- ed in the balance sheet. The group has no vital risks relat- ed to a single customer or business partner. The compa- ny’s credit risk policy involves assessing creditworthiness of all major customers and business partners. This is done on a regular basis.

15 · Annual report 2016 Taking Louis Poulsen icons into the future

Louis Poulsen accommodates demand from customers around the world for upgrading iconic light fixtures such as the PH Artichoke, Albertslund, Toldbod and Kipp for current and future LED sources. The future-proofing of these icons requires targeted design work and countless trials to maintain the luminaires’ respective identities and qualities.

Existing PH Artichokes can be adapted for dimmable LED lighting with the purchase of a new driver and light unit that provide energy savings as wattage has fallen from 500W to 96W. And Albertslund, Toldbod and Kipp, among others, can be easily upgraded with bespoke LED up- grade kits, also offering significant energy savings.

The LED technology is developing at the speed of light and will continue to do so in the future. We remain focused on delivering flexible new light systems and upgrades of Louis Poulsen’s iconic product range that do not leave customers with outdated fixtures and excessive energy consumption.

16 · Annual report 2016 Governance

Statutory report on corporate governance The Board of Directors of the company meet at least four The environmental policy is split into a product philosophy The Board of Directors and the Executive Board constant- times a year. Furthermore, information about the company and an operational philosophy. The product philosophy is ly strive to ensure that appropriate and sufficient control and the Group’s results and financial position is shared to develop lighting fixtures of high quality, long life time systems are in place managed by a robust management with the Board of Directors on a regular basis (monthly). If and long product cycles. The operational philosophy is team structure. The Board of Directors and the Executive relevant, extraordinary meetings are held. built on continuous improvement of the daily operation Board have a number of duties being defined in, amongst with focus on waste, scrapping, energy losses and con- others, the Companies Act, the Annual Accounts Act, the Audit Committee sumption. Articles of Association and good practice for companies of the same size and with the same international scope as There is not established an audit committee due to the The employment policies contain a list of initiatives to im- Louis Poulsen Holding A/S. On this basis, an ongoing se- modest size and complexity of the company. prove the working environment, health and staff retention. ries of internal procedures are developed and maintained The policies comprise diversity policies, drug/alcohol, to ensure active, reliable and profitable management of Remuneration to management staff, smoking, senior and health policies. Furthermore the the company. company is conscious of its obligation to educate trainees To attract and retain Louis Poulsen Holding A/S’ manage- and apprentices. Board of Directors ment competencies, the remuneration of management and senior employees is based on tasks, value creation Louis Poulsen Holding A/S wants to create a healthy and The Board of Directors ensures that the Executive Board and conditions in comparable companies. An incentive desirable physical and psychological working environ- complies with the approved objectives, strategies and program is implemented in the form of bonus schemes ment with focus on the well-being of the employees in- business procedures. The information to the Executive and share and warrant-based incentive programs cluding sickness absenteeism. The policy regarding sick- Board is provided systematically before and during meet- ness absenteeism covers on the one hand follow up on ings as well as through written and oral reports. These the presence and behaviour of the employee and on the reports includes market development, the company’s de- Statutory report on corporate social responsibility other hand expression of the company’s compassionate velopment and profitability. The Board of Directors and Policies interest in the employee. the Executive Management have overall responsibility for risk management and internal controls related to financial The policies of Louis Poulsen Holding A/S in relation to reporting. CSR contain an environmental policy and various employ- ment policies.

17 · Annual report 2016 Louis Poulsen Holding A/S is continuously working on a Results facilitate this development a recruitment policy has been formal policy for human rights. Within the above-men- implemented in relation tioned policies, there are areas of focus on maintaining a A proactive approach to sickness absenteeism combined to leadership positions according to which at least one positive working environment and avoidance of harass- with ongoing support and guidance of the employees to female applicant must be admitted to job interview as- ment of any kind. develop and maintain a healthy lifestyle has contributed suming qualified female applicants are available. to a decline in absenteeism for production workers from Education 5.2% in 2011 to 4.2% in 2016. Absenteeism for office Through this policy and an ongoing focus on development workers has declined from 2.3% in 2011 to 1.5% in 2016. of employees at all levels of the organisation irrespective Louis Poulsen Holding A/S assume responsibility for ed- of age and gender Louis Poulsen A/S wishes to contrib- ucating both younger and more experienced employees. The employees are offered counselling and assistance to ute to the education and development of potential female During 2016, the Company offered internship to a num- abandon smoking. A variety of physical exercise is made board members. ber of people seeking asylum in Denmark (refugees) and available to the staff. The company continuously sup- participated in programs helping vulnerable employees ports new health promoting initiatives from the employ- Target figure for the share of the under-represented gen- on in the form of flexible jobs. During 2016 Louis Poulsen ees. Work place exercise has become a natural part of the der in the Board of Directors employed 2 new adults as respectively metal press and working day. painter apprentice, in addition, one young painter’s ap- Currently The Board of Directors consists of 0% women prentice and one economics student in education. Louis Poulsen’s working environment organisation contin- and 100% men. It is the goal to recruit 1 female board uously works to secure a sound working environment and member by the end of 2019 to increase the female share In 2016, a former unskilled employee completed his ap- to minimize the number of work related injuries. In 2016 to 25%. The Board will follow up on the implementation prenticeship in the warehouse area being specialized in a total of 6 work related injuries were recorded of which of this goal on a yearly basis and is constantly seeking storage and logistics, and has subsequently been offered only 2 resulted in absenteeism for more than a week. The candidates with both relevant competencies and experi- permanent employment. company has thus successfully avoided injuries resulting ence. Relevant knowledge and professional experience in extended absenteeism. are key parameters when nominating new board mem- During the year, four refugees were employed in work bers. No candidates met these criteria’s in 2016, which placement, of which 2 are extended into 2017 and 2 in Statutory report on the underrepresented gender is the reason for the Board of Directors not achieving the flex jobs. Louis Poulsen Holding A/S wants to give equal access to recruitment goal during this year. leadership positions for members of both genders. Again in 2016 the Company offered training to all man- agers and employees in the culture of changing – “The The share of women in leadership positions with staff re- Green Lane”. Purpose is to create awareness of the im- sponsibility represented 19% as of 1st January 2009. This portance of culture to achieve the goal through common share was 24% in 2016. The company wishes to continue language and behavior. increasing the share of women in leadership positions. To

18 · Annual report 2016 Consolidated financial statements

20 Income statement for 2016 20 Balance sheet at 31.12.2016 21 Statement of changes in equity for 2016 22 Cash flow statement for 2016 22 Notes to consolidated financial statements

19 · Annual report 2016 Income statement Balance sheet for 2016 at 31.12.2016

Notes 2016 2015 Notes 2016 2015 DKK’m DKK’m DKK’m DKK’m

Revenue 1 750 716 Completed development projects 18 10 Production costs 2, 3 (431) (435) Acquired licences 5 6 Gross profit/loss 319 281 Acquired trademarks 107 115 Acquired rights 26 28 Distribution costs 3 (188) (169) Goodwill 221 233 Administrative costs 3 (69) (79) Development projects in progress 4 4 Operating profit/loss 62 33 Intangible assets 8 381 396

Other financial income 4 1 0 Plant and machinery 42 38 Other financial expenses 5 (21) (11) Other fixtures and fittings, tools and equipment 9 9 Profit/loss before tax 42 22 Leasehold improvements 7 7 Prepayments for property, plant and equipment 3 4 Tax on profit/loss for the year 6 (15) (9) Property, plant and equipment 9 61 58

Profit/loss for the year 7 27 13 Deposits 4 4 Deferred tax 17 20 Fixed asset investments 10 21 24

Fixed assets 463 478

Raw materials and consumables 28 39 Work in progress 11 14 Manufactured goods and goods for resale 29 24 Inventories 68 77

Trade receivables 75 87 Other receivables 15 15 Receivables 90 102

Cash 50 42

Current assets 208 221

Assets 671 699

20 · Annual report 2016 Balance sheet Statement of changes at 31.12.2016 in equity for 2016

Notes 2016 2015 Contributed Retained Total DKK’m DKK’m capital earnings DKK’m DKK’m DKK’m Contributed capital 3 3 Retained earnings 275 244 Equity beginning of year 3 244 247 Equity 278 247 Exchange rate adjustments 0 3 3 Fair value adjustments of hedging 0 1 1 Deferred tax 38 40 instruments Other provisions 11 23 25 Provisions 61 65 Profit/loss for the year 0 27 27 Equity end of year 3 275 278 Bank loans 0 191 Non-current liabilities other than provisions 0 191 The company has issued a total of 438,780 warrants for which the company has received 4.4 million DKK. Each warrant gives the warrant holder a right, but not an obligation, to subscribe Current portion of long-term liabilities other than provisions 0 37 for one share in the company of nominally DKK 1 against payment to the company of an ex- Bank loans 174 4 ercise price, which amounts to 10 DKK added a hurdle rate of 10 per cent p.a. Trade payables 99 57 Income tax payable 0 2 Other payables 59 96 Current liabilities other than provisions 332 196

Liabilities other than provisions 332 387

Equity and liabilities 671 699

Unrecognised rental and lease commitments 13 Contingent liabilities 14 Mortgages and securities 15 Group relations 16 Subsidiaries 17

21 · Annual report 2016 Cash flow statement Notes to consolidated for 2016 financial statements

Notes 2016 2015 2016 2015 DKK’m DKK’m DKK’m DKK’m 1. Revenue Operating profit/loss 62 33 Scandinavia 386 369 Amortisation, depreciation and impairment losses 42 41 Rest of Europe 117 109 Working capital changes 12 28 35 Rest of World 247 238 Cash flow from ordinary operating activities 132 109 750 716

Financial income received 1 0 2. Staff costs Financial income paid (21) (11) Wages and salaries 212 210 Income taxes refunded/(paid) (13) (13) Pension costs 13 14 Cash flows from operating activities 99 85 Other social security costs 15 18 240 242 Acquisition etc of intangible assets (14) (9) Acquisition etc of property, plant and equipment (22) (8) Number of employees at balance sheet date 393 420 Sale of property, plant and equipment (2) 0 Cash flows from investing activities (38) (17) Average number of employees 406 442

Instalments on loans etc (227) (34) Remuneration Remuneration Repayment of debt to group enterprises 0 (35) of management of management Cash increase of capital 0 18 2016 2016 Cash flows from financing activities (227) (52) DKK’m DKK’m

Increase/decrease in cash and cash equivalents (166) 16 Executive Board 5 6 Board of Directors 1 1 Cash and cash equivalents beginning of year 42 26 6 7 Cash and cash equivalents end of year (124) 42 2016 2015 Cash and cash equivalents at year-end are composed of: DKK’m DKK’m Cash 50 42 Short-term debt to banks (174) 0 3. Depreciation, amortisation and impairment losses Cash and cash equivalents end of year (124) 42 Amortisation of intangible assets 29 45 Depreciation on property, plant and equipment 13 11 42 56

4. Other financial income Interest income 1 0 1 0

22 · Annual report 2016 Notes to consolidated financial statements

2016 2015 Development DKK’m DKK’m projects 5. Other financial expenses Goodwill in progress Interest expenses 21 11 DKK’m DKK’m 21 8. Intangible assets 6. Tax on profit/loss for the year Cost beginning of year 245 4 Tax on current year taxable income 17 13 Transfers 0 (4) Change in deferred tax for the year (2) (4) Additions 0 4 15 9 Disposals 0 0 Cost end of year 245 4 7. Proposed distribution of profit/loss Retained earnings 27 13 Amortisation and impairment 27 13 losses beginning of year (12) 0 Amortisation for the year (12) 0 Completed Reversal regarding disposals 0 0 development Acquired Acquired Acquired Amortisation and impairment losses end of year (24) 0 projects licences trademarks rights DKK’m DKK’m DKK’m DKK’m Carrying amount end of year 221 4 8. Intangible assets Cost beginning of year 14 11 124 31 Other fixtures Prepayments Transfers 4 0 0 0 Plant and and fittings, tools Leasehold for property, plant Additions 8 2 0 0 machinery and equipment improvements and equipment Disposals 0 (1) 0 0 DKK’m DKK’m DKK’m DKK’m Cost end of year 26 12 124 31 9. Property, plant and equipment Amortisation and impairment Cost beginning of year 46 11 8 4 losses beginning of year (4) (5) (9) (3) Additions 12 5 2 3

Disposals (6) (7) (1) (4) Amortisation for the year (4) (3) (8) (2) Cost end of year 52 9 9 3 Reversal regarding disposals 0 1 0 0 Depreciation and impairment Amortisation and impairment losses beginning of the year (8) (2) (1) 0 losses end of year (8) (7) (17) (5) Depreciation for the year (8) (3) (2) 0 Reversal regarding disposals 6 5 1 0

Carrying amount end of year 18 5 107 26 Depreciation and impairment losses end of the year (10) 0 (2) 0

Carrying amount end of year 42 9 7 3

23 · Annual report 2016 Notes to consolidated financial statements

Deposits Deferred tax 15. Mortgages and securities DKK’m DKK’m The share capital of Louis Poulsen A/S’ 10 million DKK, with a carrying amount of 373 million DKK are provided as collateral for the parent company’s bank loans. 10. Fixed asset investments Cost beginning of year 4 20 The parent company has issued a guarantee of payment regarding the subsidiary Louis Poulsen A/S’ Disposals 0 (3) bank loans amounting to 113 million DKK at 31 December 2016. Cost end of year 4 17 16. Group relations Carrying amount end of year 4 17 Name and registered office of the Parent preparing consolidated financial statements for the largest group: P-LP 2014 A/S, Malmøgade 3, 2100 København Ø, CBR. 11. Other provisions No.: 35 86 20 48 Other provisions mainly consist of provisions regarding unfavourable lease contracts on prem- ises in Vejen in order to reach a fair market value. Provisions on lease contracts are amortised Name and registered office of the Parent preparing consolidated financial statements for the smallest over the lifespan of the lease contract. group: P-LP 2014 A/S, Malmøgade 3, 2100 København Ø, CBR. 2016 2015 No.: 35 86 20 48 DKK’m DKK’m 17. Subsidiaries Registered in Corporate Equity Equity Profit/loss 12. Change in working capital form interest % DKK’m DKK’m Increase/decrease in inventories 9 11 Increase/decrease in receivables 12 16 Louis Poulsen A/S Copenhagen, Denmark A/S 100 111 33 Increase/decrease in trade payables etc 5 2 Louis Poulsen U.S.A Other changes 2 6 Inc Fort Lauderdale, USA Inc. 100 40 3 28 35 Louis Poulsen Asia Pte. Ltd. Singapore, Asia Ltd. 100 1 0 2016 2015 Louis Poulsen DKK’m DKK’m GmbH Düsseldorf, Germany GmbH 100 13 1 13. Unrecognised rental and lease commitments Louis Poulsen Hereof liabilities under rental or lease agreements 90 100 Sweden AB Stockholm, Sweden AB 100 6 3 until maturity in total Louis Poulsen Norway AS Oslo, Norway AS 100 3 1 2016 2015 Louis Poulsen DKK’m DKK’m Finland Oy Helsinki, Finland Oy 100 4 0 14. Contingent liabilities Louis Poulsen Recourse and non-recourse 5 5 UK Limited London, Great Britain Limited 100 (1) 0 guarantee commitments Louis Poulsen Contingent liabilities in total 5 5 Japan Ltd. Tokyo, Japan Ltd. 100 26 0 Louis Poulsen Louis Poulsen Holding A/S is in a Danish joint taxation arrangement in which P-LP 2014 A/S Switzerland AG Zürich, Switzerland AG 100 3 (1) serves as the administration company. According to the joint taxation provisions of the Danish Louis Poulsen Corporation Tax Act, the Entity is therefore liable from the financial year 2013 for income taxes Holland B.V. Amsterdam, Holland B.V. 100 2 0 etc for the jointly taxed entities, and from 1 July 2012 for obligations, if any, relating to the with- holding of tax on interest, royalties and dividend for the jointly taxed entities. The total known net liability of the jointly taxed entities under the joint taxation arrangement is evident from the administration company’s financial statements.

24 · Annual report 2016

Parent financial statements

26 Income statement for 2016 26 Balance sheet at 31.12.2016 27 Statement of changes in equity for 2016 28 Notes to parent financial statements

25 · Annual report 2016 Income statement Balance sheet at for 2016 31.12.2016

Notes 2016 2015 Notes 2016 2015 DKK’m DKK’m DKK’m DKK’m

Administrative costs 1 (9) (19) Investments in group enterprises 332 339 Other operating income 11 14 Fixed asset investments 3 332 339 Operating profit/loss 2 (5) Fixed assets 332 339 Income from investments in group enterprises 28 20 Other financial income 1 2 Receivables from group enterprises 9 13 Other financial expenses (5) (5) Other receivables 1 1 Profit/loss before tax 26 12 Income tax receivable 1 1 Prepayments 4 1 1 Tax on profit/loss for the year 1 1 Receivables 12 16

Profit/loss for the year 2 27 13 Cash 3 1

Current assets 15 17

Assets 347 356

26 · Annual report 2016 Balance sheet at Statement of changes 31.12.2016 in equity for 2016

Notes 2016 2015 Contributed Retained DKK’m DKK’m capital earnings Total DKK’m DKK’m DKK’m Contributed capital 3 3 Retained earnings 275 244 Equity beginning of year 3 244 247 Equity 278 247 Exchange rate adjustments 0 3 3 Fair value adjustments of hedging instruments 0 1 1 Other provisions 5 0 3 Profit/loss for the year 0 27 27 Provisions 0 3 Equity end of year 3 275 278

Bank loans 17 64 Non-current liabilities other than provisions 6 17 64

Current portion of long-term liabilities other than provisions 6 40 32 Other payables 12 10 Current liabilities other than provisions 52 42

Liabilities other than provisions 69 106

Equity and liabilities 347 356

Contingent liabilities 7 Mortgages and securities 8 Related parties with controlling interest 9

27 · Annual report 2016 Notes to parent financial statements

2016 2015 DKK’m DKK’m

1. Staff costs Wages and salaries 7 11 Pension costs 0 1 7 12

Average number of employees 4 5

Remuneration of management 2016 2015 DKK’m DKK’m

Executive Board 5 6 Board of Directors 1 1 6 7

2016 2015 DKK’m DKK’m

2. Proposed distribution of profit/loss Retained earnings 27 13 27 13

Investments in group enterprises DKK’m 3. Fixed asset investments Cost beginning of year 412 Cost end of year 412

Impairment losses beginning of year (73) Exchange rate adjustments 4 Adjustments on equity 1 Share of profit/loss for the year 28 Dividend (40) Impairment losses end of year (80)

Carrying amount end of year 332 Hereof non-amortised goodwill 221 million DKK.

28 · Annual report 2016 Notes to parent financial statements

4. Prepayments Prepayments comprise incurred marketing costs and other costs relating to subsequent financial years.

5. Other provisions Other provisions mainly consist of provisions regarding unfavourable lease contracts on premises in Vejen in order to reach a fair market value. Provisions on lease contracts are amortised over the lifespan of the lease contract.

Instalments Instalments Instalments within 12 months within 12 months beyond 12 months 2016 2015 2016 DKK’m DKK’m DKK’m 6. Liabilities other than provisions Bank loans 40 32 17 40 32 17

7. Contingent liabilities Louis Poulsen Holding A/S is in a Danish joint taxation arrangement in which P-LP 2014 A/S serves as the adminis- tration company. According to the joint taxation provisions of the Danish Corporation Tax Act, the Entity is therefore liable from the financial year 2013 for income taxes etc for the jointly taxed entities, and from 1 July 2012 for obliga- tions, if any, relating to the withholding of tax on interest, royalties and dividend for the jointly taxed entities. The total known net liability of the jointly taxed entities under the joint taxation arrangement is evident from the administration company’s financial statements

8. Mortgages and securities The share capital of Louis Poulsen A/S’ 10 million DKK, with a carrying amount of 332 million DKK are provided as collateral for the parent company’s bank loans.

The parent company has issued a guarantee of payment regarding the subsidiary Louis Poulsen A/S’ bank loans amounting to 113 million DKK at 31 December 2016.

9. Related parties with controlling interest Related parties with controlling interest: PLP 2014 A/S, Malmøgade 3, 2100 København Ø CBR. No.: 35 86 20 48

29 · Annual report 2016

Accounting policies

Reporting class Income is recognised in the income statement when This annual report has been presented in accordance earned, whereas costs are recognised by the amounts with the provisions of the Danish Financial Statements attributable to this financial year. Act governing reporting class C enterprises (big). Consolidated financial statements The accounting policies applied to these consolidated The consolidated financial statements comprise the financial statements and parent financial statements are Parent and the group enterprises (subsidiaries) that are consistent with those applied last year. controlled by the Parent. Control is achieved by the Par- ent, either directly or indirectly, holding more than 50% of Recognition and measurement the voting rights or in any other way possibly or actually Assets are recognised in the balance sheet when it is exercising controlling influence. probable as a result of a prior event that future economic benefits will flow to the Entity, and the value of the asset Basis of consolidation can be measured reliably. The consolidated financial statements are prepared on the basis of the financial statements of the Parent and its Liabilities are recognised in the balance sheet when the subsidiaries. The consolidated financial statements are Entity has a legal or constructive obligation as a result prepared by combining uniform items. On consolidation, of a prior event, and it is probable that future economic intra-group income and expenses, intra-group accounts benefits will flow out of the Entity, and the value of the and dividends as well as profits and losses on transac- liability can be measured reliably. tions between the consolidated enterprises are eliminat- ed. The financial statements used for consolidation have On initial recognition, assets and liabilities are measured been prepared applying the Group’s accounting policies. at cost. Measurement subsequent to initial recognition is effected as described below for each financial statement Subsidiaries’ financial statement items are recognised in item. full in the consolidated financial statements.

Anticipated risks and losses that arise before the time Investments in subsidiaries are offset at the pro rata of presentation of the annual report and that confirm or share of such subsidiaries’ net assets at the acquisition invalidate affairs and conditions existing at the balance date, with net assets having been calculated at fair value. sheet date are considered at recognition and measure- ment.

30 · Annual report 2016

Accounting policies

Foreign currency translation When recognising foreign subsidiaries that are integral On initial recognition, foreign currency transactions are entities, monetary assets and liabilities are translated translated applying the exchange rate at the trans- action using the exchange rates at the balance sheet date. date. Receivables, payables and other monetary items Non-monetary assets and liabilities are translated at the denominated in foreign currencies that have not been exchange rate of the time of acquisition or the time of settled at the balance sheet date are translated using any subsequent revaluation or write-down. The items of the exchange rate at the balance sheet date. Exchange the income statement are translated at the average rates differences that arise between the rate at the transac- of the months; however, items deriving from non-mone- tion date and the rate in effect at the payment date, or tary assets and liabilities are translated using the histori- the rate at the balance sheet date are recognised in cal rates applicable to the relevant non- monetary items. the income statement as financial income or financial expenses. Property, plant and equipment, intangible Derivative financial instruments assets, inventories and other non-monetary assets that On initial recognition in the balance sheet, derivative have been purchased in foreign currencies are translated financial instruments are measured at cost and subse- using historical rates. quently at fair value. Derivative financial instruments are recognised under other receivables or other payables. When recognising foreign subsidiaries and associates that are independent entities, the income statements are Changes in the fair value of derivative financial instru- translated at average exchange rates for the months that ments classified as and complying with the requirements do not significantly deviate from the rates at the transac- for hedging the fair value of a recognised asset or a tion date. Balance sheet items are translated using the recognised liability are recorded in the income statement exchange rates at the balance sheet date. Goodwill is together with changes in the value of the hedged asset considered belonging to the independent foreign entity or the hedged liability. and is translated using the exchange rate at the balance sheet date. Exchange differences arising out of the Changes in the fair value of derivative financial instru- translation of foreign subsidiaries’ equity at the beginning ments classified as and complying with the requirements of the year at the balance sheet date exchange rates as for hedging future transactions are recognised directly in well as out of the translation of income statements from equity. When the hedged transactions are realised, the average rates to the exchange rates at the balance sheet accumulated changes are recognised as part of cost of date are recognised directly in equity. the relevant financial statement items.

Exchange adjustments of outstanding accounts with For derivative financial instruments that do not comply independent foreign subsidiaries which are considered with the requirements for being treated as hedging in- part of the total investment in the subsidiary in question struments, changes in fair value are recognised currently are classified directly as equity. in the income statement as financial income or financial expenses.

31 · Annual report 2016

Accounting policies

Changes in the fair value of derivative financial instru- Administrative costs ments applied for hedging net investments in inde- Administrative expenses comprise costs incurred for pendent foreign subsidiaries or associates are classified the Entity’s administrative functions, including wages directly as equity. and salaries for administrative staff and Management, stationery and office supplies as well as amortisation, Income statement depreciation and impairment losses relating to intangi- Revenue ble assets and property, plant and equipment used for Revenue from the sale of manufactured goods and administration of the Entity. goods for resale is recognised in the income statement when delivery is made and risk has passed to the buyer. Income from investments in group enterprises Revenue from the sale of services is recognised in the Income from investments in group enterprises comprises income statement when delivery is made to the buyer. the pro rata share of the individual enterprises’profit/loss Revenue is recognised net of VAT, duties and sales dis- after full elimination of internal profits or losses. counts and is measured at fair value of the consideration fixed. Other financial income Other financial income comprises dividends etc received Production costs on other investments, interest income, including inter- Production costs comprise expenses incurred to earn est income on receivables from group enterprises, net revenue for the financial year. Production costs comprise capital gains on securities, payables and transactions direct and indirect costs for raw materials and consum- in foreign currencies, amortisation of financial assets as ables, wages and salaries, rent and lease as well as well as tax relief under the Danish Tax Prepayment amortisation, depreciation and impairment losses relating Scheme etc. to intangible assets and property, plant and equipment included in the production process. In addition, the item Other financial expenses includes ordinary write-down of inventories. Other financial expenses comprise interest expenses, including interest expenses on payables to group en- Distribution costs terprises, net capital losses on securities, payables and Distribution costs comprise costs incurred for sale and transactions in foreign currencies, amortisation of distribution of the Entity’s products, including wages financial liabilities as well as tax surcharge under the and salaries for sales staff, advertising costs, travelling Danish Tax Prepayment Scheme etc. and entertainment expenses, etc as well as amortisation, depreciation and impairment losses relating to intangible assets and property, plant and equipment attached to the distribution process.

32 · Annual report 2016

Accounting policies

Tax on profit/loss for the year tual property rights, acquired intellectual property rights Tax for the year, which consists of current tax for the year and prepayments for intangible assets. and changes in deferred tax, is recognised in the income statement by the portion attributable to the profit for Development projects on clearly defined and identifiable the year and recognised directly in equity by the portion products and processes, for which the technical rate attributable to entries directly in equity. of utilisation, adequate resources and a potential future market or development opportunity in the enterprise can The Entity is jointly taxed with its ultimate owner and all be established, and where the intention is to manufac- Danish subsidiaries. The current Danish income tax is ture, market or apply the product or process in question, allocated among the jointly taxed entities proportionally are recognised as intangible assets. Other development to their taxable income (full allocation with a refund con- costs are recognised as costs in the income statement cerning tax losses). as incurred. When recognising development projects as intangible assets, an amount equalling the costs incurred Balance sheet Goodwill is taken to equity under Reserve for development costs Goodwill is the positive difference between cost and that is reduced as the development projects are amor- value in use of assets and liabilities taken over as part tised and written down. of the acquisition. Goodwill is amortised straight-line over its estimated useful life which is fixed based on the The cost of development projects comprises costs such experience gained by Management for each business as salaries and amortisation that are directly and indirect- area. Useful life is determined based on an assessment ly attributable to the development projects. of whether the enterprises are strategically acquired enterprises with a strong market position and a long- Indirect production costs in the form of indirectly attrib- term earnings profile and whether the amount of goodwill utable staff costs and amortisation of intangible assets includes intangible resources of a temporary nature that and depreciation on property, plant and equipment used cannot be separated and recognised as separate assets. in the development process are recognised in cost based If it is not possible to estimate the useful life reliably, it is on time spent on each project. set at 10 years. Useful lives are reassessed on an annual basis. The amortisation periods used are 20 years. Completed development projects are amortised on a straight-line basis using their estimated useful lives which Goodwill is written down to the lower of recoverable are determined based on a specific assessment of each amount and carrying amount. development project. If the useful life cannot be esti- mated reliably, it is fixed at 10 years. For development Intellectual property rights etc projects, protected by intellectual property Intellectual property rights etc comprise development projects completed and in progress with related intellec-

33 · Annual report 2016

Accounting policies

rights, the maximum amortisation period is the remaining For leasehold improvements and assets subject to fi- duration of the relevant rights. The amortisation periods nance leases, the depreciation period cannot exceed the used are 5 years. contract period.

Intellectual property rights acquired are measured at cost Estimated useful lives and residual values are reassessed less accumulated amortisation. Patents are amortised annually. over their remaining duration, and licences are amortised over the term of the agreement, but over no more than Items of property, plant and equipment are written down 20 years. to the lower of recoverable amount and carrying amount.

Intellectual property rights etc are written down to the Investments in group enterprises lower of recoverable amount and carrying amount. Investments in group enterprises are recognised and measured according to the equity method. This means Property, plant and equipment that investments are measured at the pro rata share of Plant and machinery as well as other fixtures and fittings, the enterprises’ equity value plus or minus unamortised tools and equipment are measured at cost less accumu- goodwill and plus or minus unrealised intra-group profits lated depreciation and impairment losses. or losses.

Cost comprises the acquisition price, costs directly Group enterprises with negative equity value are meas- attributable to the acquisition and preparation costs of ured at DKK 0. Any receivables from these enterprises the asset until the time when it is ready to be put into are written down to net realisable value based on a operation. specific assessment. If the Parent has a legal or con- structive obligation to cover the liabilities of the relevant The basis of depreciation is cost less estimated residual enterprise, and it is probable that such obligation is value after the end of useful life. Straight-line depreci- imminent, a provision is recognised that is measured at ation is made on the basis of the following estimated present value of the costs deemed necessary to incur to useful lives of the assets: settle the obligation.

Plant and machinery 5 years Upon distribution of profit or loss, net revaluation of Other fixtures and fittings, investments in group enterprises is transferred to Re- tools and equipment 2-5 years serve for net revaluation according to the equity method Leasehold improvements 5-14 years under equity.

34 · Annual report 2016

Accounting policies

Goodwill is calculated as the difference between cost The net realisable value of inventories is calculated as the of the investments and fair value of the pro rata share estimated selling price less completion costs and costs of assets and liabilities acquired. Goodwill is amortised incurred to execute sale. straigth-line over its estimated useful life, which is fixed based on the experience gained by Management for Receivables each business area. Useful life is determined based on Receivables are measured at amortised cost, usually an assessment of whether the enterprises are strategi- equalling nominal value less writedowns for bad and cally acquired enterprises with a strong market position doubtful debts. and a long-term earnings profile and whether the amount of goodwill includes intangible resources of a tempo- Cash rary nature that cannot be separated and recognised as Cash comprises cash in hand and bank deposits. separate assets. If the useful life cannot be estimated reliably, it is fixed at 10 years. Useful lives are reassessed Deferred tax annually. The amortisation periods used are 20 years. Deferred tax is recognised on all temporary differences between the carrying amount and tax-based value of Investments in group enterprises are written down to the assets and liabilities, for which the tax-based value of lower of recoverable amount and carrying amount. assets is calculated based on the planned use of each asset. Inventories Inventories are measured at the lower of cost using the Deferred tax assets, including the tax base of tax loss FIFO method and net realisable value. carryforwards, are recognised in the balance sheet at their estimated realisable value, either as a set-off against Cost consists of purchase price plus delivery costs. Cost deferred tax liabilities or as net tax assets. of manufactured goods and work in progress consists of costs of raw materials, consumables, direct labour costs Other provisions and indirect production costs. Other provisions comprise anticipated costs of non-re- course guarantee commitments, returns, loss on con- Indirect production costs comprise indirect materials tract work in progress, decided and published restructur- and labour costs, costs of maintenance of, depreciation ing, etc. of and impairment losses relating to machinery, facto- ry buildings and equipment used in the manufacturing process as well as costs of factory administration and management. Financing costs are not included in cost.

35 · Annual report 2016

Accounting policies

Other provisions are recognised and measured as the Cash flows from operating activities are presented using best estimate of the expenses required to settle the lia- the indirect method and calculated as the operating prof- bilities at the balance sheet date. Provisions that are es- it/loss adjusted for non-cash operating items, working timated to mature more than one year after the balance capital changes and income taxes paid. sheet date are measured at their discounted value. Cash flows from investing activities comprise payments Operating leases in connection with acquisition and divestment of enter- Lease payments on operating leases are recognised on a prises, activities and fixed asset investments as well as straight-line basis in the income statement over the term purchase, development, improvement and sale, etc of of the lease. intangible assets and property, plant and equipment, including acquisition of assets held under finance leases. Other financial liabilities Other financial liabilities are measured at amortised cost, Cash flows from financing activities comprise changes which usually corresponds to nominal value. in the size or composition of the contributed capital and related costs as well as the raising of loans, inception Income tax receivable or payable of finance leases, instalments on interest-bearing debt, Current tax payable or receivable is recognised in the purchase of treasury shares and payment of dividend. balance sheet, stated as tax calculated on this year’s taxable income, adjusted for prepaid tax. Cash and cash equivalents comprise cash and short- term securities with an insignificant price risk less short- Cash flow statement term bank loans. The cash flow statement shows cash flows from oper- ating, investing and financing activities as well as cash and cash equivalents at the beginning and the end of the financial year.

36 · Annual report 2016 Statement by Management on the annual report

The Board of Directors and the Executive Board have today considered and approved the annual report of Louis Poulsen Holding A/S for the financial year 01.01.2016 - 31.12.2016.

The annual report is presented in accordance with the Danish Financial Statements Act.

In our opinion, the financial statements give a true and fair view of the Entity’s financial position at 31.12.2016 and of the results of its operations and cash flows for the financial year 01.01.2016 - 31.12.2016.

We believe that the management commentary contains a fair review of the affairs and conditions referred to therein.

We recommend the annual report for adoption at the Annual General Meeting.

Copenhagen, 03.04.2017

Executive Board

Christian Engsted Peter le Fèvre CEO CFO

Board of Directors

Thomas Voss Per Olle Håkan Borgvall Dario Carlo Fumagalli Chairman

Allan Bach Pedersen Kurt Grüner Vacker Lars Stilling Pedersen

37 · Annual report 2016

Independent auditor’s report

To the shareholders of Louis Poulsen Holding A/S in the Auditor’s responsibilities for the audit of the con- continue as a going concern, for disclosing, as appli- Opinion solidated financial statements and the parent financial cable, matters related to going concern, and for using We have audited the consolidated financial state- statements section of this auditor’s report. We are the going concern basis of accounting in preparing the ments and the parent financial statements of Louis independent of the Group in accordance with the Inter- consolidated financial statements and the parent finan- Poulsen Holding A/S for the financial year 01.01.2016 national Ethics Standards Board of Accountants’ Code cial statements unless Management either intends to - 31.12.2016, which comprise the income statement, of Ethics for Professional Accountants (IESBA Code) liquidate the Group or the Entity or to cease operations, balance sheet, statement of changes in equity and notes, and the additional requirements applicable in Denmark, or has no realistic alternative but to do so. including a summary of significant accounting policies, and we have fulfilled our other ethical responsibilities in for the Group as well as the Parent, and the consolidated accordance with these requirements. We believe that the Auditor’s responsibilities for the audit of the consol- cash flow statement. The consolidated financial state- audit evidence we have obtained is sufficient and appro- idated financial statements and the parent financial ments and the parent financial statements are prepared priate to provide a basis for our opinion. statements in accordance with the Danish Financial Statements Act. Our objectives are to obtain reasonable assurance about Management’s responsibilities for the consolidated fi- whether the consolidated financial statements and the In our opinion, the consolidated financial statements nancial statements and the parent financial statements parent financial statements as a whole are free from and the parent financial statements give a true and fair Management is responsible for the preparation of material misstatement, whether due to fraud or error, view of the Group’s and the Parent’s financial position at consolidated financial statements and parent financial and to issue an auditor’s report that includes our opinion. 31.12.2016, and of the results of their operations and the statements that give a true and fair view in accordance Reasonable assurance is a high level of assurance, but is consolidated cash flows for the financial year 01.01.2016 with the Danish Financial Statements Act, and for such not a guarantee that an audit conducted in accordance - 31.12.2016 in accordance with the Danish Financial internal control as Management determines is necessary with ISAs and the additional requirements applicable Statements Act. to enable the preparation of consolidated financial state- in Denmark will always detect a material misstatement ments and parent financial statements that are free from when it exits. Basis for opinion material misstatement, whether due to fraud or error. We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional require- In preparing the consolidated financial statements and ments applicable in Denmark. Our responsibilities under the parent financial statements, Management is re- spon- those standards and requirements are further described sible for assessing the Group’s and the Entity’s ability to

38 · Annual report 2016

Independent auditor’s report

Misstatements can arise from fraud or error and are • Obtain an understanding of internal control relevant report. However, future events or conditions may cause considered material if, individually or in the aggregate, to the audit in order to design audit procedures that are the Group and the Entity to cease to continue as a going they could reasonably be expected to influence the appropriate in the circumstances, but not for the purpose concern. economic decisions of users taken on the basis of these of expressing an opinion on the effectiveness of the consolidated financial statements and parent financial Group’s and the Entity’s internal control. • Evaluate the overall presentation, structure and content statements. of the consolidated financial statements and the parent • Evaluate the appropriateness of accounting policies financial statements, including the disclosures in the As part of an audit conducted in accordance with ISAs used and the reasonableness of accounting estimates notes, and whether the consolidated financial statements and the additional requirements applicable in Denmark, and related disclosures made by Management. and the parent financial statements represent the under- we exercise professional judgement and maintain profes- lying transactions and events in a manner that gives a sional skepticism throughout the audit. We also: • Conclude on the appropriateness of Management’s true and fair view. use of the going concern basis of accounting in prepar- • Identify and assess the risks of material misstatement ing the consolidated financial statements and the parent • Obtain sufficient appropriate audit evidence regard- of the consolidated financial statements and the parent financial statements, and, based on the audit evidence ing the financial information of the entities or business financial statements, whether due to fraud or error, de- obtained, whether a material uncertainty exists related activities within the Group to express an opinion on the sign and perform audit procedures responsive to those to events or conditions that may cast significant doubt consolidated financial statements. We are responsible for risks, and obtain audit evidence that is sufficient and on the Group’s and the Entity’s ability to continue as a the direction, supervision and performance of the group appropriate to provide a basis for our opinion. The risk going concern. If we conclude that a material uncer- audit. We remain solely responsible for our audit opinion. of not detecting a material misstatement resulting from tainty exists, we are required to draw attention in our fraud is higher than for one resulting from error, as fraud auditor’s report to the related disclosures in the con- We communicate with those charged with governance may involve collusion, forgery, intentional omissions, solidated financial statements and the parent financial regarding, among other matters, the planned scope and misrepresentations, or the override of internal control. statements or, if such disclosures are inadequate, to timing of the audit and significant audit findings, includ- modify our opinion. Our conclusions are based on the ing any significant deficiencies in internal control that we audit evidence obtained up to the date of our auditor’s identify during our audit.

39 · Annual report 2016

Independent auditor’s report

Statement on the management commentary consolidated financial statements and the parent finan- Management is responsible for the management com- cial statements and has been prepared in accordance mentary. with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement of the Our opinion on the consolidated financial statements management commentary. and the parent financial statements does not cover the management commentary, and we do not express any Kolding, 03.04.2017 form of assurance conclusion thereon. Deloitte In connection with our audit of the consolidated financial Statsautoriseret Revisionspartnerselskab Central Busi- statements and the parent financial statements, our re- ness Registration No: 33963556 sponsibility is to read the management commentary and, in doing so, consider whether the management com- mentary is materially inconsistent with the consolidated financial statements and the parent financial statements or our knowledge obtained in the audit or otherwise Suzette Demediuk Steen Nielsen appears to be materially misstated. State Authorised Public Accountant

Moreover, it is our responsibility to consider whether the management commentary provides the information required under the Danish Financial Statements Act. Anders Rosendahl Poulsen Based on the work we have performed, we conclude that State Authorised Public Accountant the management commentary is in accordance with the

40 · Annual report 2016 Louis Poulsen Holding A/S Gammel Strand 28 1202 København K Central Business Registration No. 35659021 Tel. +45 70 33 14 14 Mail [email protected] www.louispoulsen.com